What We’re Reading (Week Ending 13 August 2023) - 13 Aug 2023
Reading helps us learn about the world and it is a really important aspect of investing. The legendary Charlie Munger even goes so far as to say that “I don’t think you can get to be a really good investor over a broad range without doing a massive amount of reading.” We (the co-founders of Compounder Fund) read widely across a range of topics, including investing, business, technology, and the world in general. We want to regularly share the best articles we’ve come across recently. Here they are (for the week ending 13 August 2023):
1. Why Dying Industries Can Make Great Investments – Brandon Beylo
There were four leading players in the gasoline additives industry during the early 1970s:
- Ethyl
- Dupont
- PPG
- Nalco
These companies produced billions of pounds of chemical products (additives) and made decent profits. That all changed in 1975.
In 1975, the Environmental Protection Agency (EPA) started enforcing its 1970 “Clean Air Act.” The regulation’s goal was to slowly eliminate the need for gasoline additives in cars. In 1975, car manufacturers were required to install catalytic converters to reduce toxic emissions.
But there was a problem. The converters couldn’t operate properly with the current additive-filled gasoline. It was a death sentence for the entire industry…
…Billions of production were reduced to nothing in two decades. Here’s the most crucial part of this entire saga and why I draw a comparison to today’s oil and gas space (emphasis added):
“Barriers to entry are another story. An insurmountable barrier protected the four firms in the business. The EPA’s regulatory announcement in 1973 posted an unmistakable ‘Do Not Trespass’ sign for any firms contemplating entering the lead-based additive industry.” …
…External forces like the EPA set the death date for the industry. But instead of killing it, it gave the existing competitors a chance to milk their industry for every profit dollar possible…
…Ethyl also generated supernormal returns from its dying “no growth” additives business (emphasis added):
“In 1998, after its additive revenues had declined to $117M, Ethyl still made $51M in operating profits, a 44% margin. The rest of the company had operating margins of 11%.”
2. Can Robots Evolve Into Machines of Loving Grace? – Meghan O’Gieblyn
My talk was about emergent intelligence in AI, the notion that higher-level capacities can spontaneously appear in machines without having been designed. I’d focused primarily on the work of Rodney Brooks, who headed up the MIT Artificial Intelligence Lab in the late 1990s, and his “embodied intelligence” approach to robotics. Before Brooks came along, most forms of AI were designed like enormous disembodied brains, as scientists believed that the body played no part in human cognition. As a result, these machines excelled at the most abstract forms of intelligence—calculus, chess—but failed miserably when it came to the kinds of activities that children found easy: speech and vision, distinguishing a cup from a pencil. When the machines were given bodies and taught to interact with their environment, they did so at a painfully slow and clumsy pace, as they had to constantly refer each new encounter back to their internal model of the world.
Brooks’ revelation was that it was precisely this central processing—the computer’s “brain,” so to speak—that was holding it back. While watching one of these robots clumsily navigate a room, he realized that a cockroach could accomplish the same task with more speed and agility despite requiring less computing power. Brooks began building machines that were modeled after insects. He used an entirely new system of computing he called subsumption architecture, a form of distributed intelligence much like the kind found in beehives and forests. In place of central processing, his machines were equipped with several different modules that each had its own sensors, cameras, and actuators and communicated minimally with the others. Rather than being programmed in advance with a coherent picture of the world, they learned on the fly by directly interacting with their environment. One of them, Herbert, learned to wander around the lab and steal empty soda cans from people’s offices. Another, Genghis, managed to navigate rough terrain without any kind of memory or internal mapping. Brooks took these successes to mean that intelligence did not require a unified, knowing subject. He was convinced that these simple robot competencies would build on one another until they evolved something that looked very much like human intelligence.
Brooks and his team at MIT were essentially trying to re-create the conditions of human evolution. If it’s true that human intelligence emerges from the more primitive mechanisms we inherited from our ancestors, then robots should similarly evolve complex behaviors from a series of simple rules. With AI, engineers had typically used a top-down approach to programming, as though they were gods making creatures in their image. But evolution depends on bottom-up strategies—single-cell organisms develop into complex, multicellular creatures—which Brooks came to see as more effective. Abstract thought was a late development in human evolution, and not as important as we liked to believe; long before we could solve differential equations, our ancestors had learned to walk, to eat, to move about in an environment. Once Brooks realized that his insect robots could achieve these tasks without central processing, he moved on to creating a humanoid robot. The machine was just a torso without legs, but it convincingly resembled a human upper body, complete with a head, a neck, shoulders, and arms. He named it Cog. It was equipped with over 20 actuated joints, plus microphones and sensors that allowed it to distinguish between sound, color, and movement. Each eye contained two cameras that mimicked the way human vision works and enabled it to saccade from one place to another. Like the insect robots, Cog lacked central control and was instead programmed with a series of basic drives. The idea was that through social interaction, and with the help of learning algorithms, the machine would develop more complex behaviors and perhaps even the ability to speak.
Over the years that Brooks and his team worked on Cog, the machine achieved some remarkable behaviors. It learned to recognize faces and make eye contact with humans. It could throw and catch a ball, point at things, and play with a Slinky.
When the team played rock music, Cog managed to beat out a passable rhythm on a snare drum. Occasionally the robot did display emergent behaviors—new actions that seemed to have evolved organically from the machine’s spontaneous actions in the world. One day, one of Brooks’ grad students, Cynthia Breazeal, was shaking a whiteboard eraser and Cog reached out and touched it. Amused, Breazeal repeated the act, which prompted Cog to touch the eraser again, as though it were a game. Brooks was stunned. It appeared as though the robot recognized the idea of turn-taking, something it had not been programmed to understand. Breazeal knew that Cog couldn’t understand this—she had helped design the machine. But for a moment she seemed to have forgotten and, as Brooks put it, “behaved as though there was more to Cog than there really was.” According to Brooks, his student’s willingness to treat the robot as “more than” it actually was had elicited something new. “Cog had been able to perform at a higher level than its design so far called for,” he said.
Brooks knew that we are more likely to treat objects as persons when we are made to socially engage with them. In fact, he believed that intelligence exists only in the relationships we, as observers, perceive when watching an entity interact with its environment. “Intelligence,” he wrote, “is in the eye of the observer.” He predicted that, over time, as the systems grew more complex, they would evolve not only intelligence but consciousness as well. Consciousness was not some substance in the brain but rather emerged from the complex relationships between the subject and the world. It was part alchemy, part illusion, a collaborative effort that obliterated our standard delineations between self and other. As Brooks put it, “Thought and consciousness will not need to be programmed in. They will emerge.”
The AI philosopher Mark A. Bedau has argued that emergentism, as a theory of mind, “is uncomfortably like magic.” Rather than looking for distinct processes in the brain that are responsible for consciousness, emergentists believe that the way we experience the world—our internal theater of thoughts and feelings and beliefs—is a dynamic process that cannot be explained in terms of individual neurons, just as the behavior of a flock of starlings cannot be accounted for by the movements of any single bird. Although there is plenty of evidence of emergent phenomena in nature, the idea becomes more elusive when applied to consciousness, something that cannot be objectively observed in the brain. According to its critics, emergentism is an attempt to get “something from nothing,” by imagining some additional, invisible power that exists within the mechanism, like a ghost in the machine.
Some have argued that emergentism is just an updated version of vitalism, a popular theory throughout the 18th and 19th centuries that proposed that the world was animated by an elusive life force that permeates all things. Contrary to the mechanistic view of nature that was popular at that time, vitalists insisted that an organism was more than the sum of its parts—that there must exist, in addition to its physical body, some “living principle,” or élan vital. Some believed that this life force was ether or electricity, and scientific efforts to discover this substance often veered into the ambition to re-create it artificially. The Italian scientist Luigi Galvani performed well-publicized experiments in which he tried to bring dismembered frog legs to life by zapping them with an electrical current. Reports of these experiments inspired Mary Shelley’s novel Frankenstein, whose hero, the mad scientist, is steeped in the vitalist philosophies of his time.
When reading about Brooks and his team at MIT, I often got the feeling they were engaged in a kind of alchemy, carrying on the legacy of those vitalist magicians who inspired Victor Frankenstein to animate his creature out of dead matter—and flirting with the same dangers. The most mystical aspect of emergentism, after all, is the implication that we can make things that we don’t completely understand. For decades, critics have argued that artificial general intelligence—AI that is equivalent to human intelligence—is impossible, because we don’t yet know how the human brain works. But emergence in nature demonstrates that complex systems can self-organize in unexpected ways without being intended or designed. Order can arise from chaos. In machine intelligence, the hope persists that if we put the pieces together the right way—through ingenuity or accident—consciousness will emerge as a side effect of complexity. At some point nature will step in and finish the job.
It seems impossible. But then again, aren’t all creative undertakings rooted in processes that remain mysterious to the creator? Artists have long understood that making is an elusive endeavor, one that makes the artist porous to larger forces that seem to arise from outside herself. The philosopher Gillian Rose once described the act of writing as “a mix of discipline and miracle, which leaves you in control, even when what appears on the page has emerged from regions beyond your control.”
3. Only a cheaper rupee can spur Indian growth – Ashoka Mody
While other Asian policymakers, such as those in South Korea and China, have strategically used sizeable depreciations of their currencies to bolster export competitiveness, Indian elites bemoan every infinitesimal decline in the rupee’s value as a national humiliation. A unique economic and political confluence first entrenched this bogus pride in the country’s psyche in the mid-1960s. And since the 1990s, the country’s corporate leaders and new rich have wanted to maintain a strong rupee. As a result, the country’s export-based growth has suffered, as have jobs for low-skilled workers…
…In a rare sane moment in 1949, a newly independent India devalued the rupee from Rs3.3 to Rs4.8 per dollar, bringing relief to its uncompetitive economy. Indian manufacturers could earn profits even when they lowered dollar sale prices, which helped increase exports. Costlier imports slowed import growth, helping reduce the current-account deficit. But the task was never completed. With low productivity and high inflation, India could not match countries such as Japan in labour-intensive manufactured exports. The World Bank and the IMF financed India’s large current account deficit, creating the illusion that it did not need currency devaluation.
When those two institutions finally threatened to stop financing that deficit, the country’s officials foolishly negotiated the rate to Rs7.5 per dollar in June 1966. This too-little-too-late devaluation did not compensate for the rise in domestic production costs. Taiwan and South Korea raced ahead, helped by currency devaluations; Indian exports languished.
The perceived failure of the 1966 devaluation to spur exports forever tarnished Indian belief in an activist exchange rate policy. Rather than encouraging more aggressive nominal devaluation to offset the rise in production costs and thus achieve real depreciation, devaluation “by stealth” was always too little, too late. In the 1980s, China used aggressive exchange rate depreciation as key to its monumental export push…
…India’s accumulated cost-of-production disadvantage requires the rupee to drop to about Rs90 per dollar; Rs100 per dollar would provide an ideal cushion. But Indian authorities continue to avoid an activist exchange rate policy, and rely on dodgy policy tools:
4. The Infamous Coin Toss – Ole Peters
Imagine I offer you the following gamble. I toss a fair coin, and if it comes up heads I’ll add 50% to your current wealth; if it comes up tails I will take away 40% of your current wealth. A fun thing to do in a lecture on the topic is to pause at this point and ask the audience if they’d like to take the gamble. Some will say yes, other no, and usually an interesting discussion of people’s motivations emerges. Often, the question comes up whether we’re allowed to repeat the gamble, and we will see that this leads naturally to the ergodicity problem.
The ergodicity problem, at least the part of it that is important to us, boils down to asking whether we get the same number when we average a fluctuating quantity over many different systems and when we average it over time. If we try this for the fluctuating wealth in the Peters coin toss the answer is no, and this has far-reaching consequences for economic theory.
Let’s start with averaging wealth, xi(t) over an ensemble of many different systems. In our case this corresponds to N different players, each starting with xi = $100, say, and each tossing a coin independently. After the coins have been tossed, about half of the people will have thrown heads, and the other half tails. As the number of players goes to infinity, N→∞, the proportions of heads and tails will approach 1/2 exactly, and half the players will have $150, the other half $60. In this limit, we know what the ensemble average will be, namely ⟨x(1)⟩=1/2($150+$60)=$105. For historical reasons, this average is also called the expected value, and for the Peters coin toss, it grows by 5% in every round of the gamble so that
⟨x(t)⟩=$100×1.05^t…
…To see that the gamble is not ergodic, let’s now find the average value of wealth in a single trajectory in the long-time limit (not in the large-ensemble limit). Here, as T grows, again the proportions of heads and tails converge to 1/2. But, crucially, a head and a tail experienced sequentially is different from two different agents experiencing them. Starting at x1(0)=$100, heads takes us to x1(1)=$150, and following this sequentially with tails, a 40% loss, takes us down to x1(2)=$90 — we have lost 10% over two rounds, or approximately 5% per round. Since we lose 5% per round, averaged over time, individual wealth is guaranteed to approach zero (or negative infinity on logarithmic scales) in the long-time limit T→∞…
…We have thus arrived at the intriguing result that wealth averaged over many systems grows at 5% per round, but wealth averaged in one system over a long time shrinks at about 5% per round…
…The significance of this ergodicity breaking cannot be overstated… Third, one core problem of economics and politics is to address conflicts between an individual, for example a citizen, and a collective, for example a state. This is the question of societal organization, institutions, Rousseau’s social contract and so on. This problem can seem puzzling, and it often attracts naive answers, because the collective consists of individuals. How, then, can the interests of the individual be misaligned with those of the collective? One important answer is ergodicity breaking.
5. Samo Burja – The Great Founder Theory of History – Patrick O’Shaughnessy and Samo Burja
Patrick: [00:01:32] Samo, your writing has been amongst the most interesting that I’ve encountered in the last couple of years, just a tremendous variety of ideas and ways of looking at the world and history. One of the overarching things that you’re best known for is this lens on history, the called Great Founder Theory. I’d love you to just begin by laying out the core idea here how you came upon the idea and maybe what it opposes, the alternative view of history from the one that you’ve developed. I’d love to start there and then we’ll dive into lots of nooks and crannies together.
Samo: [00:02:03] To me, it seems that most of social science for the last 100 years has been focused on trying to find these macro deep patterns of human behavior, human history, sometimes being as hubristic to try to find immutable laws of history, such was the case in the early and the middle of the 20th century.
And while it certainly is the case that there are deep patterns that are worth studying in the nature of all civilization from the advent of agriculture to today, and while it certainly is true again that there is a deep current that’s changing our society that started with the Industrial Revolution 200 years ago, none of these patterns were set in stone. None of these patterns are fixed. So I think none of them really rise to the level of sociological loss.
And the reason why we can’t just predict future history for the next few hundred years isn’t people observe society and they come to alter it, exceptional individuals, great man’s theory of history says that perhaps don’t determine everything to how things transpire. But I think almost all of the exceptional institutions that have shaped human civilization, anything you can think of, be it organized religion, technological companies, political systems, they usually have an individual or a small group of people who deviate from the previous social norm, create a new type of organization, a new type of institution or honestly, just a new way of doing things as the old society fails.
And we see this over and over again. Again, to give historical examples, they might take a very religious and legible form such as creating, founding a new organized religion. Say, for example, Muhammad, reorganizing the tribal Arab societies into a cohesive, unified whole, ends up expanding and conquering most of the Middle East. They might take the form of, say, Confucius, who has this relatively modest social reform program, but ends up teaching something like 100 bureaucrats who travel the country and try to spread the so-called philosophy of reforming the dysfunctional Chinese states during the Warring States Period. And eventually, that comes to dominate their education system for the next 2,000 years.
Or it might be Charlemagne, refounding what is basically a tribal structure into something that ingests Roman law, creating the Frankish Empire as we think of it and laying the groundwork for Medieval European Feudalism. It’s not the case that Charlemagne or Muhammad or Confucius thought out the full effect of their reforms on society for 1,000 or 2,000 years, it’s just that it did shape human civilization for the next 1,000, 2,000 years. And if you removed any of them, history would have gone quite differently. Not necessarily because of their personal impact to winning to this or that battle, but from the perspective of reshaping the institutes that need to set the probabilities for these events…
…Patrick: [00:09:33] If you think about the power of that, predicting the future is basically today plus progress in the same direction, what are different directions that stand out most to you as possible futures that might surprise people? If you take that 50-year hence example, what are things, trends, great founders, people that you’re watching that might affect the way the world looks in 50 years that are very different than how it looks today?
Samo: [00:09:58] I think there are some interesting surprises where most of the Middle East will probably fail to properly industrialize and develop any sort of high-tech energy, any sort of transition away from oil. However, an interesting exception to this might be the United Arab Emirates. People a few years ago were surprised that there was an Emirati mission to Mars. Now of course, this was mostly done by the Japanese space agency, yet significant partnership existed within UAE.
People also might be surprised to learn that they are building nuclear reactors for civilian use. They also are starting to manufacture all sorts of other equipment within the country. So UAE might be a very successful, highly developed country 50 years from now, if basically the current monarchs, the successors continue to be relatively directed, well governing, if they continue to agentically adapt to economic changes.
It’s the same kind of transformation that perhaps we saw with Singapore over 50 years after its initial independence under Lee Kuan Yew, where he sort of broke the mold in a whole variety of ways, and the usual advice for how a country should develop was ignored. And most of the countries that followed that advice didn’t develop, meanwhile Singapore did.
The other important one is that I think that the European institutions will decay much more than people are even now assuming. I think that significant chunks of Europe might become somewhat impoverished. And the key reason for this is that there are very few live players that is exceptional people, who can adjust to their circumstances in any position of power in Europe in the European system. Be it in the economic domain, there are a few exceptional new companies.
There’s a reason that European tech stagnates so profoundly. Russia has more unicorns than Germany. And Russia is not a well-functioning economy, but for whatever reason, it’s easier to create a tech start-up in Russia than it is in Germany. Acquire like a large market and so on, a large user base. Unless someone actively refounds European governments, the EU supranational bureaucracy or even something like key industrial sector in Europe, Europe will continue to lose not like one or two percentage point a year away, where at first, it’s imperceptible, then 20, 30, 40 years on, it just seems a vastly different place. I think thinking of Europe as the formerly developed world will become common.
Patrick: [00:12:49] What about the United States?
Samo: [00:12:51] The United States has some similar problems to Europe, it just has them to a much lesser degree. There’s some discussion recently of American dynamism, of reindustrialization, of things like the CHIPS Act, they’re supposed to reshore certain kinds of manufacturing in the United States. Obviously, the U.S. has a relatively healthy start-up scene. Obviously, artificial intelligence is advancing most rapidly. It’s advancing most rapidly in the United States, here in the Bay Area.
But I think ultimately, core problems of the U.S. government have not been resolved. The U.S. government is less functional, is less competent, is less cost-effective than it was 40 or 50 years ago. Whatever we think of other social changes, it is hard to deny that a government-run project will just be run worse than it would have been in 1960 or 1940.
In addition to this, outside of artificial intelligence, software companies and tech companies have experienced a real slowdown. The reason that so much capital flowed into AI wasn’t just because AI was wonderful and exciting, it’s because there was nothing else around. There’s a real, genuine breakthrough with ChatGPT, but what else is happening? What happened to cryptocurrencies? What happened to software is eating the world? All of that? Those mantras that created many, many new companies value the economic add of those companies was smaller. U.S. economic growth, I think, is somewhat overstated but real. Meanwhile, in Europe, I think we are already seeing the beginnings of just a contracting economy.
In some ways, Japan is a good example of where our future is going, both the United States, Europe and lots of the developed East Asian economies and some semi-developed ones like that of China are experiencing a massive demographic transition. And some of these things are very much exponential where, for example, when your population starts aging at first, you might even have an increase in total population. Since while a fewer people are born, previous generations are still alive and working. Eventually, you start to see a decrease in population and in 1 year is the population shrinking by 100,000, in a few years, might be 2 million, 3 million, 4 million just because it’s already baked in so deeply.
These are all compounding effects. So ultimately, that demographic headwind is something that only the United States is outrunning a little bit with the help of immigration, however, mostly it’s from rising productivity in the tech sector. And then the tech sector itself, it’s making a big bet on AI. If AI doesn’t work out, that is the big, economy-transforming bet, I think the U.S. will also slip into this kind of decaying state.
Patrick: [00:15:51] If you think about some of the key terms that you’ve mentioned, I want to pick on two, concept of a great founder and the concept of a live player, which is a term I love. I’ve sort of adopted my own version of it in lots of conversations. Maybe define what both of those terms mean and help us understand the relative frequency of those. How many great founders have there ever been in history? How many live players are there alive at any given time in your estimation? Give us your definition of those two terms and how common they are.
Samo: [00:16:20] Okay. I think every time a founder creates a new organization, this is a singular act of social creation. Even if it’s something relatively boring, like a technology company or a nonprofit organization, their peculiarities and who they pick as staffing, what the decisions that they’re making are.
Similarly, what would the great founder be, well, they’re the creator of a key new social institution. We think — one way to think of civilizations is that civilization isn’t a single organism. It’s less a tree and more a forest, where many individual institutions can be replaced, and it still is recognizably the same civilization, the same ecological pattern.
Say, if you were to look at Western civilization and observe that — I don’t know, say, the Catholic Church is much less important now than it was 100 years ago. Just because society secularized doesn’t mean it’s a different civilization yet. When exactly does the forest transform into savanna or something like that, we can have those discussions. But it is true that some institutions vastly more influential than others.
So having said that, how many unique pieces of — let’s think of it as social technology or unique civilization-defining institutions — are there per civilization? Well, I think that most civilizations have sort of like five to maybe eight unique things that they’re doing. So the total number of distinct and this macro historical sensibilizations for human history that we know of, I would say that it’s about 30 or so different civilizations. Most of them, of course, are long gone. No one is very much interested in Sumerian civilization. Except as a historical case study today, it doesn’t impact us in a new, profound way, except perhaps, in some ways, influencing biblical myths of the great flood and so on.
So then let’s say that about 30 civilizations, some of them still relevant, some of them ancient history, each of them having probably something like 10 or so great founders. So I think for all of human history, if you were to chart the impact of these individuals — and again, I want to emphasize, sometimes, it’s a small group of people. It might be an individual plus a few very close allies. Or it might be a partnership of two lawgivers or anything like this. Such small human clusters, you think we’re talking about 500 people at most. 500 people at most for human history.
And then for the term live player, all great founders are live players, not all live players are great founders. A live player is someone that is not operating off of an inherited script. An inherited script might be something like professionalism, political tradition. It can be anything. It can be a very successful script.
If I am a surgeon, and I worked exactly as I was trained, I’ll be doing a fairly good job. And I can repeat this exact program, this recipe that I’ve been taught and of course, apply it in my domain with some creativity. And society basically functions on the top of such roles, on surgeons, engineers, plumbers but also lawyers, politicians, priests.
A live player though is someone that can on the spot improvise, develop and create new social roles. And one of the surest indicators that someone is a live player is the ability to jump multiple industries. So if you see someone that succeeded in one industry and gone to a totally unrelated field of activity and succeeded there as well and then gone again and succeeded as well, it’s very unlikely that’s luck, and it’s very unlikely that they’re using the same recipe or the same insights for all three domains. And I think that’s sort of the strongest evidence that some individuals can recreate patterns of behavior and improvise, essentially, in a way that’s basically just very deep, very groundbreaking.
And I think the total number of live players in the world, probably right now is closer to about 50,000 or so. So it’s actually still extremely rare. A fun, historical example might be Arnold Schwarzenegger, who rebrands from being a weight lifting champion to being an actor to being a politician. Well, look, while he was an actor starring in blockbuster movies, people said, “Oh, he’s not really an actor.” And as soon as he became a politician, people said, “He’s not really a politician. He’s just an actor.” So it’s that kind of jump to a different activity that demonstrates an aliveness and adaptability.
Patrick: [00:20:58] I have so many questions about both. Maybe starting with great founder since there’s so many — fewer of them. What’s an example of somebody that we all might have the inclination as a great founder I’m going to make one up like Napoleon or something that is, in fact, not one and why. Like I just want to use an example or two to really drive home the point that potentially so few people have effectively driven what happens in the lives of how many billions of people that have lived through human history.
Samo: [00:21:27] For Napoleon, he won many battles. He was an exceptional general. But if he were to become a great founder, I’m not yet convinced that he is even, it would mostly be through the military and legal reforms that he instituted. Now when it comes to military reforms, I think that is a method of directing battles and so on with the general staff and everything. And that was somewhat influential I think it was over determined to have developed in that direction even without Napoleon.
The interesting thing though is that his code of law that’s spread across Europe, that could be argued to be profoundly influential. That was actually the moment when Europe stepped away from feudalism. We adopted a very different legal framework, say, deals were outlawed in Lat Europe. There would be an exaggeration to same markets were opened, but it would not be an exaggeration to say that people from all walks of life could suddenly enter positions in not just the French state, but all of these Puppet Republics and kingdoms that were set up.
Even in countries that were strictly opposed to Napoleon who are only coerced into alliances such as Austria and Prussia, some of these reforms were imitated because they were so administratively and politically successful. Now having said all of this, it’s still not clear Napoleon is a great founder. It might turn out that, in fact, the civil code in this reform is much more important than we think.
However, it seems to be a fairly short chapter in European history with it being not directly related to the industrial revolution as such. It doesn’t seem like Napoleon’s reforms were particularly conductive that France is becoming a great industrial power, 50 or 80 or 90 years later…
…Patrick: [00:36:36] Another thing you’ve written about that I find fascinating, if a lot of people think about history, they might think of it as the march of hard technology. In this example I used earlier, ideas, building on ideas in a very kind of hard math and science way. Your idea is that these social technologies, which are installed by these great founders are actually upstream of hard technology and innovation. Can you describe that mechanism as you see it? And why you think the world works that way?
Samo: [00:37:05] I think the material technology that is hard technology that you described when social technology are intensely mutually symbiotic. You can’t have one without the other. Everything from, say, a Bronze Age Empire relying on the infrastructure of bringing copper from the Eastern Mediterranean and tin from the British Isles or Afghanistan, melting them down into weaponry. There’s a real technological and infrastructure base there. So Bronze Age Empires rely on that.
Everything from that to modern chip fabs where we need a planet’s worth of economies of scale so that a small island off the coast of China, we invest hundreds of billions of dollars into what, four factories who make the chips that are in every device we all have and carry with us daily, that’s crazy. That’s a crazy technological dependency from our society, but it goes the other way, too. The technology depends on the social.
I described global trade, well, the global trade rests on the chip fabs themselves. No, not really. Maybe you could say that, oh, it rests on the hard technology of the U.S. Navy. But wait, what is the U.S. Navy? If the U.S. Navy is keeping the world’s ocean safe and navigable for trade and then the U.S. has supported a system of free international trade, et cetera, et cetera, it becomes very murky. It becomes very hard to arrive at this phenomenon of the technology itself.
Most importantly, if the technology itself, the material technology was all that was driving forward human history, it would look much more like a ratchet. It wouldn’t look like this thing with fits and starts, this thing that has a rise and fall of very advanced civilizations all the time. It wouldn’t have civilizations going down behind alleys. Consider 16th Century Japan, very adept at gun powder warfare, very adapted using the gun. The gun is outlawed after Japan is unified.
When Japanese gun stagnate for the next 200 or 300 years, look, if it was just you introduced the gun to society and then modern warfare starts to develop, Japan wouldn’t have fallen behind the Western world. We often talk about, again, in the American methodological context. If you introduce personal firearms, that’s a force for liberty. Yet in much of Asia actually, in the 18th and 17th century, the introduction of firearms empowered large, centralized militaries. The rifle, in the hands of a Napoleonic soldier can be either a tool of despotism or a tool of liberation. It’s a mass exercise, not an individual exercise.
We’re discussing guns. What about the printing press? I mentioned Martin Luther earlier. Honestly, the first thing that was printed on the printing press wasn’t Martin Luther’s bible. It was indulgences. So it’s first used as a financial mechanism to fund the papacy and strengthen the papacy. It only later comes to be adopted to — into bibles, in German that is. And also, there were variants of the printing press that were introduced in Chinese society, in Korean society long before the printing press was invented in Europe. So a simplistic story where you say, “Oh, guns lead to personal liberation or printing press leads to information liberation, these are not org, these are possible routes you can go down with that technology.
And then finally, there are clear examples of technology advancing and then regressing. If it was purely the growth and development of a technical base with no social factor whatsoever, the Roman Empire would never have fallen or if it did fall, we wouldn’t have lost technologies such as Roman Concrete or Heron’s steam engine, which was a primitive steam engine used in Alexandria. We wouldn’t have lost mathematics, significant chunks of mathematics that were forgotten for 1,000 years.
People understood quite well in 200 BC, the earth is round. This was known. Eratosthenes calculated the size of the earth. So there are all sorts of interesting examples where we can show that scientific knowledge advances and regresses and more importantly, when we can show technology advances and then regresses. I feel like a lot of the advocates of a more hard technology view want to have it both ways.
They want technology to be all important, but they will acknowledge if press the technology is fragile. Some like wait, which is it. If technology is all important, except for it being very fragile. Wait maybe we should study the societal causes of that fragility. And they do acknowledge these are societal causes, they’re not like material causes. That’s the way to think about it. It’s that social organization is a prerequisite for technologies for material technologies and material technologies are a prerequisite for many kinds of social organization…
…Patrick: [00:58:51] If you were to imagine someone extremely smart, thoughtful who you respect very deeply, who most disagrees with your world view. Curious, if like any actual person comes to mind, but also just like generically, like what you think the most different version of a world view is from your own that you find interesting for some reason?
Samo: [00:59:13] It’s an interesting and it’s a difficult question. I think that Peter Turchin has an interesting approach. He is an American not quite historian more like complex systems theorist. He’s founded his field called cliodynamics. You could think of it as almost Harry Seldon like.
Patrick: [00:59:31] It’s like a history.
Samo: [00:59:33] Yes, to produce like a macro mathematical model of history. He ends up finding what I think our patterns of distribution of elites applies this old sociological theory that’s actually from the 1900s. Wilfried Pareto already spoke of it, the idea of elite over production, where elites and societies stacked indirect surplus to achieve certain goals. However, people aspire to join the elites, eventually, there are too many elites for the society to sustain itself and the elites start fighting each other as to who gets to stay elite and that this is kind of the cycle of violence and piece and that you can pop these cycles over a long period of time.
It’s not so much that I think he is wrong in some of the patterns that he observes, and it’s just that I think that patterns hold until they don’t. These are long patterns that break. There is no clear statistical way to predict when these patterns break. And the breaking of the patterns we think sometimes is due to the work of great founders, where they might take a civilization that was on terminal decline which leads to self-destroy and emulate in like interminable civil wars and reorient a totally different political system directs those energy outward or you might have the periphery of declining Empire that manages to break away from that Empire to ban its independence, develop a whole new difference of social norms and it becomes the core of a totally new civilization.
These are the things that are not really well captured by these statistical models, and these are things that are not, I think, over determined. Now ultimately, we can get into debates of free will and you can say, “Oh, but every individual is a deterministic product of their society.” And sure, that’s true. If the fate of the society actually depends on a few individuals then it is not possible to study those individuals sociologically.
What’s happening inside my brain, it doesn’t make sense to use theories of the lead over production for that. Then it becomes maybe a psychological or biological question. And you know what, the brains of the great founders that shaped our world, they’re long decomposed. So we can’t actually study that. So we have to acknowledge the limits of our sociological knowledge, and it’s almost kind of like an event horizon consideration, even if theoretically, it’s fully deterministic.
So I would say that this leads me to my second disagreement. I think we lose far too much information about past societies to be able to develop such highly accurate quantitative models. We have decent quantitative information on, say, the economy of the last 100 years. And if you’ve ever tried to study even, say, economics or politics of 18th century Europe, you realize there’s all kinds of data that are really hard to access. And if you go even further back to the 14th Century, it gets even more difficult.
So really, we are operating with a very sparse data set. So yes, Peter Turchin, is very interesting. Maybe Steven Pinker rather well known. He thinks I completely disagree with the idea of a linear ratcheting development of human progress over time. I think that progress is always bounded by the civilization you find yourself in, and with these civilizations tend to be models. So there will be progress for a civilization until there’s not. And then this civilization fails.
And perhaps there’s a new civilization that picks up at a more advanced level, perhaps the new civilization is actually more primitive than what came before. I think that my view of history would not be that it’s exactly cyclical, not at all. There’s further evolution. We do think that the idea that we’ve been on a curve of very compounding material and moral progress for the last 10,000 years. I think that can be easily disproven.
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