market design

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pages: 282 words: 80,907

Who Gets What — and Why: The New Economics of Matchmaking and Market Design by Alvin E. Roth

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Affordable Care Act / Obamacare, Airbnb, algorithmic trading, barriers to entry, Berlin Wall, bitcoin, Build a better mousetrap, centralized clearinghouse, Chuck Templeton: OpenTable, commoditize, computer age, computerized markets, crowdsourcing, deferred acceptance, desegregation, experimental economics, first-price auction, Flash crash, High speed trading, income inequality, Internet of things, invention of agriculture, invisible hand, Jean Tirole, law of one price, Lyft, market clearing, market design, medical residency, obamacare, proxy bid, road to serfdom, school choice, sealed-bid auction, second-price auction, second-price sealed-bid, Silicon Valley, spectrum auction, Spread Networks laid a new fibre optics cable between New York and Chicago, Steve Jobs, The Wealth of Nations by Adam Smith, two-sided market

Many people would find it repugnant to allow money to decide who gets a kidney or a seat in a sought-after public kindergarten. When there aren’t enough kidneys to go around (and there aren’t) or seats in the best public schools (there never are), scarce resources must be allocated by some kind of matching process. Market Design Sometimes a matching process, whether formal or ad hoc, evolves over time. But sometimes, especially recently, it is designed. The new economics of market design brings science to matchmaking, and to markets generally. That’s what this book is about. Along with a handful of colleagues around the world, I’ve helped create the new discipline of market design. Market design helps solve problems that existing marketplaces haven’t been able to solve naturally. Our work gives us new insights into what really makes “free markets” free to work properly. Most markets and marketplaces operate in the substantial space between Adam Smith’s invisible hand and Chairman Mao’s five-year plans.

When we originally proposed that kidney exchange would integrate cycles and chains, we didn’t anticipate that we’d have to start with simple two-way exchanges, or that when larger cycles and chains became possible, long nonsimultaneous chains would grow to play such an important role. Each of these developments involved a modification of the market design in response to changes in the conditions of the market and the behavior of the participants. The general lesson to keep in mind as we look at more usual markets is that not only do marketplaces have to solve the problems of creating a thick market, managing congestion, and ensuring that participation is safe and simple, but they also have to keep solving and re-solving these problems as markets evolve. And just as engineers learn a lot about how to build bridges by studying those that collapse, market designers can learn a lot about what makes markets succeed by studying those that fail. A bridge will collapse if its weakest part fails, and a market design won’t succeed unless it avoids each of the ways that it could fail.

But in the absence of sufficient pressure by regulators, a brand-new market design is seldom adopted before a market becomes so dysfunctional that its users grow desperate for something new (or until an entrepreneurial market maker sees a way to compete with existing markets by offering a better design). It’s not clear whether the financial markets have reached that state of dysfunction yet. As the tale of these financial markets makes clear, a superior market design isn’t always implemented. Building a better mousetrap isn’t always rewarded when the mice have a say in the matter. Financial markets are part of an enormous industry. The current winners in the race for speed were simply responding to the extant market design. They wouldn’t be happy if their big investments in faster microwave channels were rendered useless.


pages: 350 words: 103,988

Reinventing the Bazaar: A Natural History of Markets by John McMillan

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accounting loophole / creative accounting, Albert Einstein, Alvin Roth, Andrei Shleifer, Anton Chekhov, Asian financial crisis, congestion charging, corporate governance, corporate raider, crony capitalism, Dava Sobel, Deng Xiaoping, experimental economics, experimental subject, fear of failure, first-price auction, frictionless, frictionless market, George Akerlof, George Gilder, global village, Hernando de Soto, I think there is a world market for maybe five computers, income inequality, income per capita, informal economy, information asymmetry, invisible hand, Isaac Newton, job-hopping, John Harrison: Longitude, John von Neumann, Kenneth Arrow, land reform, lone genius, manufacturing employment, market clearing, market design, market friction, market microstructure, means of production, Network effects, new economy, offshore financial centre, ought to be enough for anybody, pez dispenser, pre–internet, price mechanism, profit maximization, profit motive, proxy bid, purchasing power parity, Ronald Coase, Ronald Reagan, sealed-bid auction, second-price auction, Silicon Valley, spectrum auction, Stewart Brand, The Market for Lemons, The Nature of the Firm, The Wealth of Nations by Adam Smith, trade liberalization, transaction costs, War on Poverty, Xiaogang Anhui farmers, yield management

They have, however, a deeply practical content.8 Exchange is “one of the purest and most primitive forms of human socialization,” the sociologist Georg Simmel wrote in 1900; it creates “a society, in place of a mere collection of individuals.”9 A market is a social construction. If it is to work smoothly, it must be well built. The term market design refers to the methods of transacting and the devices that serve to allow transacting to proceed smoothly. Market design consists of the mechanisms that organize buying and selling; channels for the flow of information; state-set laws and regulations that define property rights and sustain contracting; and the market’s culture, its self-regulating norms, codes, and conventions governing behavior. While the design does not control what happens in the market—as already noted, free decision-making is key—it shapes and supports the process of transacting.10 A workable market design keeps in check transaction costs—the various frictions in the process of making exchanges. These costs include the time, effort, and money spent in the process of doing business—both those incurred by the buyer in addition to the actual price paid, and those incurred by the seller in making the sale.11 Transaction costs are many and varied.

Some of the pieces of a market’s design are devised by the market participants themselves; other pieces are devised by the government. It is by spontaneous change, for the most part, that the rules of the market game develop, with the market participants designing better ways to transact. (I will refer to this aspect of market design as informal or bottom-up.) However, lowering transaction costs is a task not only for entrepreneurs, but also for public policy. The government has the responsibility to establish and maintain an environment within which markets can work efficiently. (I will refer to this aspect of market design as formal or top-down.) A basic part of the government’s role in market design is the defining of property rights. The surest way to destroy a market is to undermine people’s belief in the security of their own property. But the government’s role goes far beyond just assigning property rights.

Elementary as this point is, its importance cannot be overstated. There are gains from trade, and people are relentless in finding ways to realize them. From fine art to finance, from eBay’s online auctions to the Rwandan refugee-camp commerce, new markets are continually being built from the bottom up. Entrepreneurs, restlessly thinking up more efficient ways of transacting, play the part of market designers. It is not just entrepreneurs who act as market designers. Market design also comes from the top down, with the government taking the lead—sometimes, as we will see next, driven by pressure from their constituents. THREE He Who Can’t Pay Dies A horrifying AIDS epidemic engulfed Africa toward the end of the twentieth century. Of the 33 million people infected worldwide as of 2000, 23 million were in Africa. Every single day, AIDS was killing an average of 5,500 Africans.


pages: 662 words: 180,546

Never Let a Serious Crisis Go to Waste: How Neoliberalism Survived the Financial Meltdown by Philip Mirowski

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Alvin Roth, Andrei Shleifer, asset-backed security, bank run, barriers to entry, Basel III, Berlin Wall, Bernie Madoff, Bernie Sanders, Black Swan, blue-collar work, Bretton Woods, Brownian motion, capital controls, Carmen Reinhart, Cass Sunstein, central bank independence, cognitive dissonance, collapse of Lehman Brothers, collateralized debt obligation, complexity theory, constrained optimization, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, dark matter, David Brooks, David Graeber, debt deflation, deindustrialization, Edward Glaeser, Eugene Fama: efficient market hypothesis, experimental economics, facts on the ground, Fall of the Berlin Wall, financial deregulation, financial innovation, Flash crash, full employment, George Akerlof, Goldman Sachs: Vampire Squid, Hernando de Soto, housing crisis, Hyman Minsky, illegal immigration, income inequality, incomplete markets, information asymmetry, invisible hand, Jean Tirole, joint-stock company, Kenneth Arrow, Kenneth Rogoff, knowledge economy, l'esprit de l'escalier, labor-force participation, liberal capitalism, liquidity trap, loose coupling, manufacturing employment, market clearing, market design, market fundamentalism, Martin Wolf, money market fund, Mont Pelerin Society, moral hazard, mortgage debt, Naomi Klein, Nash equilibrium, night-watchman state, Northern Rock, Occupy movement, offshore financial centre, oil shock, Pareto efficiency, Paul Samuelson, payday loans, Philip Mirowski, Ponzi scheme, precariat, prediction markets, price mechanism, profit motive, quantitative easing, race to the bottom, random walk, rent-seeking, Richard Thaler, road to serfdom, Robert Shiller, Robert Shiller, Ronald Coase, Ronald Reagan, savings glut, school choice, sealed-bid auction, Silicon Valley, South Sea Bubble, Steven Levy, technoutopianism, The Chicago School, The Great Moderation, the map is not the territory, The Myth of the Rational Market, the scientific method, The Wisdom of Crowds, theory of mind, Thomas Kuhn: the structure of scientific revolutions, Thorstein Veblen, Tobin tax, too big to fail, transaction costs, Vilfredo Pareto, War on Poverty, Washington Consensus, We are the 99%, working poor

In particular the housing bubble would have been much less, and the investment bankers would not have been able to make such clever use of the rating agencies and create tens-of-thousands of senseless securities obfuscating prices. Even a tiny bit of good market design would have averted the financial crisis by preventing its root cause: the sale of subprime mortgages as near-riskless securities.143 . . . Calls for sensible regulation and market design were met with condescension before the credit crisis, a condescension that is being reevaluated now.144 Good auction design in complex environments . . . requires exploiting the substantial advances that we have seen in market design over the last fifteen years. The recent financial crisis is another example where the principles of market design, if effectively harnessed by regulators, could have prevented or at least mitigated the crisis.145 Of course, there is no record of any market designers having actually successfully intervened to prevent the crisis, or helped anyone else to ameliorate it, but historical accuracy was never the name of the game.

Therefore, there was no reason for any market participant to generalize from information released by getting the price “right” for one security to the thousands of others available. The market designers placed in charge of implementing the auction acknowledged, “the relevant issues could not be addressed directly with economic theory.”133 So much for the bracing clarification of microeconomics. The dispute over auction forms raised a second, more serious problem: there was no good reason to believe that the auctions would do what the market designers had said they would: namely, summon a chain of events that would eventually bring the economy out of crisis by, in the first place, aggregating dispersed information. After all, no work had been done previously by market designers on how to fix a collapsing economy. Since market designers could identify no single optimal auction, the Treasury decided to set up two teams and asked them to more fully develop their proposals.

They have almost always directed the pitch at cash-strapped governments, urging them in particular to sell off public assets to private oligopolistic concerns; in the case of toxic asset auctions one need only invert the logic. Unfortunately, no one could much be bothered to scrutinize the claims of market designers. After all, there was a crisis a-brewing. Only a relatively small coterie of market designers ever got invited to participate in market design exercises, and most were partners in a small set of firms with interlocking directorates. In the case of the toxic asset auctions, the job of judging the proposals was assigned to Jeremy Bulow and Paul Milgrom, both partners with Ausubel and Cramton in Market Design, Inc. So much for Chinese Walls and plausible deniability. It doesn’t verge on the wildly conspiratorial to suggest that such arrangements create some perverse incentives when it comes to reining in some of the more fantastical claims (gaining popular acceptance for them improves the firm’s prospects), a fact that has seemed only to encourage ever more extravagant claims: The crisis was caused by mispricing: investment bankers were able to sell poor securities for full value based on misleading ratings.


pages: 252 words: 73,131

The Inner Lives of Markets: How People Shape Them—And They Shape Us by Tim Sullivan

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Airbnb, airport security, Al Roth, Alvin Roth, Andrei Shleifer, attribution theory, autonomous vehicles, barriers to entry, Brownian motion, centralized clearinghouse, Chuck Templeton: OpenTable, clean water, conceptual framework, constrained optimization, continuous double auction, creative destruction, deferred acceptance, Donald Trump, Edward Glaeser, experimental subject, first-price auction, framing effect, frictionless, fundamental attribution error, George Akerlof, Goldman Sachs: Vampire Squid, Gunnar Myrdal, helicopter parent, information asymmetry, Internet of things, invisible hand, Isaac Newton, iterative process, Jean Tirole, Jeff Bezos, Johann Wolfgang von Goethe, John Nash: game theory, John von Neumann, Joseph Schumpeter, Kenneth Arrow, late fees, linear programming, Lyft, market clearing, market design, market friction, medical residency, multi-sided market, mutually assured destruction, Nash equilibrium, Occupy movement, Pareto efficiency, Paul Samuelson, Peter Thiel, pets.com, pez dispenser, pre–internet, price mechanism, price stability, prisoner's dilemma, profit motive, proxy bid, RAND corporation, ride hailing / ride sharing, Robert Shiller, Robert Shiller, Ronald Coase, school choice, school vouchers, sealed-bid auction, second-price auction, second-price sealed-bid, sharing economy, Silicon Valley, spectrum auction, Steve Jobs, Tacoma Narrows Bridge, technoutopianism, telemarketer, The Market for Lemons, The Wisdom of Crowds, Thomas Malthus, Thorstein Veblen, trade route, transaction costs, two-sided market, uranium enrichment, Vickrey auction, Vilfredo Pareto, winner-take-all economy

Credit cards, Facebook, your iPhone are all, each in its own way, carefully tended marketplaces that bring together various groups to transact: Visa cardholders and retail merchants, Facebook advertisers and the social network’s members, iOS app designers and iPhone users. The count of Champagne was, in his medieval way, a pioneer in market design. And the curious story of the merchant of Prato, his delinquent customer, and the count’s response illustrates some of the principles that make a market platform tick. As economists have focused their modeling efforts ever more on real world phenomena, leading researchers have turned their attention to platforms, bringing some much-needed clarity to the rules that dictate how these multisided markets work. As a result, we now have a deeper understanding of what makes a platform work and a set of guiding principles—many of which can be traced back to twelfth-century innovations in market design—that can help us build them better. Since platforms now encompass such significant parts of our lives, it’s important to understand the trade-offs that come with participating in them.

It happened to the market for slots at sororities, too, which used to be reserved for college seniors, until popular girls started getting invitations to join at the start of their junior, then sophomore, then freshman year. (According to market design guru Al Roth, one theory holds that the term “fraternity/sorority rush,” which today describes the process by which sororities and fraternities recruit new members, comes from the frenzied competition among sororities to lock in new members.4) It’s what prompted medical residency programs to develop a centralized clearinghouse in the 1940s to fend off students receiving exploding offers before they were done with their intro to anatomy course. These allocation problems all now have centralized clearinghouses, many designed with the basic deferred acceptance algorithm as their foundations. But that’s really all that Gale and Shapley provided: a conceptual framework that market designers have, for several decades now, been applying, evaluating, and refining.

Yet when high school assignments were handed out in his homeroom at the end of the year, all his students got funneled into the same low-performing neighborhood schools. When he went to work for the Department of Education’s central administration, hired by the reform-minded schools chancellor Joel Klein, he found himself part of a group tasked with resuscitating New York’s ailing school assignment process. At around the same time Dorosin and his colleagues were consulting with market design experts on fixing the situation in New York, school officials in Boston had started to look at market design as a solution to their own school-match woes—although the Boston school system only had a slight headache compared to NYC’s cardiac arrest. A mechanism design expert at Boston College, Tayfun Sönmez, had been hounding the city’s school board for years with proposals on how to improve student assignments using a match based on deferred acceptance.


pages: 119 words: 10,356

Topics in Market Microstructure by Ilija I. Zovko

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Brownian motion, computerized trading, continuous double auction, correlation coefficient, financial intermediation, Gini coefficient, information asymmetry, market design, market friction, market microstructure, Murray Gell-Mann, p-value, quantitative trading / quantitative finance, random walk, stochastic process, stochastic volatility, transaction costs

., almost all trade volume concentrated in one order) on the buy (bid) side, unless balanced by a similarly heterogenous sell (ask) side of the market, produces an imbalance which drives prices up, and vice versa. This effect is preset on both daily and hourly timescales. We show that a quotation market design (off-book or upstairs market), as opposed to a limit order design (on-book or downstairs market), helps limit the price impact of large orders causing the heterogeneity but does not remove it completely. In addition, the impact of a large order is limited in case the trading is done against similarly large orders, regardless of the market design. This fact seems to be at odds with the interpretation of information content of trades, and we propose it may be more liquidity that determines the impact of an order. The heterogeneity of order sizes present at the market seems to be a consequence of the fat-tailed distribution of order sizes: for the onbook market with a tail exponent equal to 3, for the off-book market equal to 3/2 (tail exponents are for the cumulative distribution). 7 Chapter 2 The power of patience: A behavioral regularity in limit order placement Published as Ilija I.

At the LSE, the on-book session is called the SETS (Stock Exchange Electronic Trading System), and the off-book session the SEAQ (Stock Exchange Automated Quotation System). The papers contained in the first two chapters of the thesis focus only on the limit order trade process and use only the on-book data. The last two chapters use also the off-book data and provide a comparison in some aspects of the two market designs. 1.1.1 Trading day For the FTSE 100 stocks, the on-book trading session starts at 8:50 with a 10 minute opening auction. During the auction traders place orders to buy and sell but no execution takes place. Orders are differentiated by their execution priority. For example, limit orders are executed depending on their distance from the resulting clearing price while market orders take priority in execution.

We also find that the time series of relative limit prices show interesting temporal structure, characterized by an autocorrelation function that asymptotically decays as C(τ ) ∼ τ −0.4 . Furthermore, relative limit price levels are positively correlated with and are led by price volatility. We speculate that this feedback may potentially contribute to clustered volatility. In Chapter 3 (Farmer et al., 2005) we turn our attention to market design and investigate a situation where the constraints imposed by market institutions may dominate strategic behavior of agents. We use the LSE limit order book data to test a simple model in which minimally intelligent agents place orders to trade at random. The model treats the statistical mechanics of order placement, price formation, and the accumulation of revealed supply and demand within the context of the continuous double auction, and yields simple laws relating order arrival rates to statistical properties of the market.


pages: 288 words: 16,556

Finance and the Good Society by Robert J. Shiller

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Alvin Roth, bank run, banking crisis, barriers to entry, Bernie Madoff, capital asset pricing model, capital controls, Carmen Reinhart, Cass Sunstein, cognitive dissonance, collateralized debt obligation, collective bargaining, computer age, corporate governance, Daniel Kahneman / Amos Tversky, Deng Xiaoping, diversification, diversified portfolio, Donald Trump, Edward Glaeser, eurozone crisis, experimental economics, financial innovation, financial thriller, fixed income, full employment, fundamental attribution error, George Akerlof, income inequality, information asymmetry, invisible hand, joint-stock company, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, land reform, loss aversion, Louis Bachelier, Mahatma Gandhi, Mark Zuckerberg, market bubble, market design, means of production, microcredit, moral hazard, mortgage debt, Myron Scholes, Occupy movement, passive investing, Ponzi scheme, prediction markets, profit maximization, quantitative easing, random walk, regulatory arbitrage, Richard Thaler, Right to Buy, road to serfdom, Robert Shiller, Robert Shiller, Ronald Reagan, selection bias, self-driving car, shareholder value, Sharpe ratio, short selling, Simon Kuznets, Skype, Steven Pinker, telemarketer, The Market for Lemons, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, Vanguard fund, young professional, zero-sum game, Zipcar

There is certainly a role for those who wish to enter the field of insurance to make this happen. Chapter 8 Market Designers and Financial Engineers Market designers, sometimes called mechanism designers, start with a problem—the need for a market solution to some real human quandary—and then design a market and associated contracts to solve the problem. They are using nancial and economic theory to create “trades” that leave people better o . In so doing they are humanizing nance and making it more relevant to human welfare. Sometimes these people are called nancial engineers, since what they do seems analogous to what mechanical or electrical engineers do. At their best, market designers have the same practical common sense and drive to create, and the same grasp of basic science, that successful engineers have. Alvin Roth is a professor specializing in market design in the Economics Department at Harvard University.

The beauty of creating market solutions to problems is that the markets themselves, once they are up and functioning, steadily generate exactly the right kind of focused attention among people who can actually provide solutions. Even so, the limits of Roth’s kidney transplant market are still apparent today, for such markets have not reached most of the people in need of transplants. The slowness with which nancial developments take place again re ects a demand for conventionality and familiarity and an overreliance on tradition, both of which continue to inhibit financial innovation. The Variety of Market Design Objectives Market design is becoming a lively eld. There are now, for example, mechanisms in place to help reduce the problem of global warming in an e cient manner, internalizing (making the emitters of greenhouse gases pay for) the damage they cause by contributing to global warming. The “cap and trade” system forces producers of CO2 emissions to buy permits to emit, as measured in certi ed emission reduction (CER) units, on an open market.

Governments would promise to buy and distribute for free drugs for major diseases, thereby creating market forces to motivate private enterprise to nd drugs that would cure the diseases.2 Ronnie Horesh has proposed “social policy bonds,” issued by governments, that would pay out more if certain social policy objectives were met, thereby creating a nancial incentive for free-market participants to buy the bonds and then figure out how to meet the objectives.3 Market-Design Solutions to Even the Most Personal Problems To appreciate the importance of market design, and how it can really contribute to the good society, it is helpful to think of a very personal problem that creates untold anxiety, yet for which a mechanism can be designed. Consider nding a mate, someone to live with in a close relationship, usually as husband and wife. It is indeed a sort of market problem, in that the issue is not just nding a satisfactory person but also nding someone, confronted with the same search problem, who is willing to consider you as his or her best choice.


pages: 226 words: 59,080

Economics Rules: The Rights and Wrongs of the Dismal Science by Dani Rodrik

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airline deregulation, Albert Einstein, bank run, barriers to entry, Bretton Woods, butterfly effect, capital controls, Carmen Reinhart, central bank independence, collective bargaining, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, distributed generation, Donald Davies, Edward Glaeser, endogenous growth, Eugene Fama: efficient market hypothesis, Everything should be made as simple as possible, Fellow of the Royal Society, financial deregulation, financial innovation, floating exchange rates, fudge factor, full employment, George Akerlof, Gini coefficient, Growth in a Time of Debt, income inequality, inflation targeting, informal economy, information asymmetry, invisible hand, Jean Tirole, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, labor-force participation, liquidity trap, loss aversion, low skilled workers, market design, market fundamentalism, minimum wage unemployment, oil shock, open economy, Pareto efficiency, Paul Samuelson, price stability, prisoner's dilemma, profit maximization, quantitative easing, randomized controlled trial, rent control, rent-seeking, Richard Thaler, risk/return, Robert Shiller, Robert Shiller, school vouchers, South Sea Bubble, spectrum auction, The Market for Lemons, the scientific method, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions, Thomas Malthus, trade liberalization, trade route, ultimatum game, University of East Anglia, unorthodox policies, Vilfredo Pareto, Washington Consensus, white flight

A pilot CCT program was even instituted in New York City under Mayor Michael Bloomberg. Three sets of economic ideas in three different areas: the world economy, urban transport, and the fight against poverty. In each case, economists remade part of our world by applying simple economic frameworks to public problems. These examples represent economics at its best. There are many others: Game theory has been used to set up auctions of airwaves for telecommunications; market design models have helped the medical profession assign residents to hospitals; industrial organization models underpin competition and antitrust policies; and recent developments in macroeconomic theory have led to the widespread adoption of inflation targeting policies by central banks around the world.1 When economists get it right, the world gets better. Yet economists often fail, as many examples in this book will illustrate.

The abstract of one paper in the field opens with this sentence: “We establish new characterizations of Walrasian expectations equilibria based on the veto mechanism in the framework of differential information economies with a complete finite measure space of agents.”16 One of the profession’s leading, and most mathematically oriented, journals (Econometrica) imposed a moratorium at one point on “social choice” theory—abstract models of voting mechanisms—because papers in the field had become mathematically so esoteric and divorced from actual politics.17 Before we judge such work too harshly, it is worth noting that some of the most useful applications in economics have come out of highly mathematical, and what to outsiders would surely seem abstruse, models. The theory of auctions, drawing on abstract game theory, is virtually impenetrable even to many economists.†† Yet it produced the principles used by the Federal Communications Commission to allocate the nation’s telecommunications spectrum to phone companies and broadcasters as efficiently as possible, while raising more than $60 billion for the federal government.18 Models of matching and market design, equally mathematical, are used today to assign residents to hospitals and students to public schools. In each case, models that seemed to be highly abstract and to have few connections with the real world turned out to have useful applications many years later. The good news is that, contrary to common perception, math for its own sake does not get you far in the economics profession. What’s valued is “smarts”: the ability to shed new light on an old topic, make an intractable problem soluble, or devise an ingenious new empirical approach to a substantive question.

Arthur, 32–33 “Life among the Econ” (Leijonhufvud), 9–10 Lincoln, Abraham, 52 Lipsey, Richard, 59 liquidity, 134–35, 155, 185 liquidity traps, 130 locational advantages, 108 London, England, congestion pricing and, 3 Lucas, Robert, 130, 131–32, 134–36 “Machiavelli’s Mistake: Why Good Laws Are No Substitute for Good Citizens” (Bowles), 71n macroeconomics, 39–40, 87, 102, 107, 143, 157n, 181 business cycles and, 125–37 capital flow and, 165–66 classical questions of, 101 demand-side view of, 128–30, 136–37 globalization and, 165–66 Madison, James, 187 Mäki, Uskali, 22n malaria, randomized testing and, 106, 204 Malthus, Thomas, 118 Manchester University, 197 Mankiw, Greg, 149, 150, 171n, 197 manufacturing: economic growth and, 163–64 exchange rate and, 100, 163 income inequality and, 141 marginal costs, 121, 122 marginalist economics, 119–22 marginal productivity, 120–21, 122–25 marginal utility, 121, 122 Mariel boatlift (1980), 57 market design models, 5 “Market for ‘Lemons’, The” (Akerlof), 69n market fundamentalism, 160, 178 markets: asymmetric information in, 68–69, 70, 71 behavioral economics and, 69–71, 104–7, 202–4 economic models and, see models economics courses and, 198 economists’ bias toward, 169–71, 182–83 efficiency in, xiii, 14, 21, 34, 48, 50, 51, 67, 98, 125, 147, 148, 150, 156–58, 161, 165, 170, 192–95, 196 general-equilibrium interactions in, 41, 56–58, 69n, 91, 120 in Great Recession, 156–59 imperfectly competitive types of, 67–69, 70, 136, 150, 162 incentives in, 7, 170, 172, 188–92 institutions and, 98, 161, 202 likely outcomes in, 17–18 multiple equilibria in, 16–17 perfectly competitive types of, 21, 27, 28, 47, 69n, 71, 122, 180 prisoners’ dilemma in, 14–15, 20, 21, 61–62, 187, 200 self-interest in, 21, 104, 158, 186–88, 190 social cooperation in, 195–96 supply and demand in, 13–14, 20, 99, 119, 122, 128–30, 136–37, 170 values in, 186–96 Washington Consensus and, 159–67, 169 Marshall, Alfred, 13n, 32, 119 “Marshallian Cross Diagrams and Their Uses before Alfred Marshall: The Origins of Supply and Demand Geometry” (Humphrey), 13n Marx, Groucho, 26 Marx, Karl, xi, 31, 116, 118 Massachusetts, University of (Amherst), 77 Massachusetts Institute of Technology (MIT), 107, 108, 165, 206 mathematical economics, 35 mathematical optimization, 30, 101, 202–3 mathematics: economic models and, 29–37, 47 social sciences and, 33–34 Maxwell’s equations, 66n Meade, James, 58 methodological individualism, 181 Mexico: antipoverty programs in, 3–4, 105–6 globalization and, 141, 166 microeconomics, 125–26, 131 microfounded models, 101 Miguel, Ted, 106–7 Milan, Italy, congestion pricing and, 3 Milgrom, Paul, 36n minimum wages, employment and, 17–18, 28n, 114, 115, 124, 143, 150, 151 Minnesota, University of, 131 Mishel, Lawrence, 124n models: authority and criticism of, 76–80 big data and, 38–39, 40 causal factors and, 40–41, 85–86, 99–100, 114–15, 179, 184, 200, 201, 204 coherent argument and clarity in, 80–81 common sense in, 11 comparative advantage principle and, 52–55, 58n, 59–60, 139, 170 compensation for risk and, 110 computers and, 38, 41 contextual truth in, 20, 174 contingency and, 25, 145, 173–74, 185 coordination and, 16–17, 42, 200 critical assumptions in, 18, 26–29, 94–98, 150–51, 180, 183–84, 202 criticisms of, 10–11, 178, 179–85 decision trees and, 89–90, 90 diagnostic analysis and, 86–93, 90, 97, 110–11 direct implications and, 100–109 dual economy forms of, 88 efficient-markets hypothesis and, 156–58 empirical method and, xii, 7, 46, 65, 72–76, 77–78, 137, 173–74, 183, 199–206 endogenous growth types of, 88 experiments compared with, 21–25 fables compared with, 18–21 field experiments and, 23–24, 105–8, 173, 202–5 general-equilibrium interactions and, 41, 56–58, 69n, 91, 120 goods and services and, 12 Great Recession and, 155–59 horizontal vs. vertical development and, 64n, 67, 71 hypotheses and, 46, 47–56 imperfectly competitive markets and, 67–69, 70, 136, 150, 162 incidental implications and, 109–11 institutions and, 12, 98, 202 intuition and, 46, 56–63 Keynesian types of, 40, 88, 101, 102, 127–30, 131, 133–34, 136–37 knowledge and, 46, 47, 63–72 main elements of, 31 mathematics and, 29–37, 47 neoclassical types of, 40, 88, 90–91, 121, 122 new classical approach to, 130–34, 136–37 parables and, 20 partial-equilibrium analysis and, 56, 58, 91 perfectly competitive markets and, 21, 27, 28, 47, 69n, 71, 122, 180 predictability and, 26–28, 38, 40–41, 85, 104, 105, 108, 115, 132, 133, 139–40, 184–85, 202 principle-agent types of, 155 questions and, 114–16 rationality postulate and, 202–3 real world application of, 171–72 rules of formulation in, 199–202 scale economy vs. local advantage in, 108 scientific advances by progressive formulations of, 63–72 scientific character of, 45–81 second-best theory and, 58–61, 163–64, 166 selection of, 83–112, 136–37, 178, 183–84, 208 simplicity and specificity of, 11, 179–80, 210 simplicity vs. complexity of, 37–44 social reality of, 65–67, 179 static vs. dynamic types of, 68 strategic interactions and, 61–62, 63 of supply and demand, 3, 13–14, 20, 99, 119, 122, 128–30, 136–37 theories and, 113–45 time-inconsistent preferences in, 62–63 tipping points arising from, 42 in trade agreements, 41 unrealistic assumptions in, 25–29, 180–81 validity of, 23–24, 66–67, 112 variety of, 11, 12–18, 26, 68, 72, 73, 114, 130, 198, 202, 208, 210 verbal vs. mathematical types of, 34 verification in selection of, 93–112 see also economics; macroeconomics; markets “Models Are Experiments, Experiments are Models” (Mäki), 22n monetary policies, 87 monopolies, 161 in imperfectly competitive markets, 67–68 in perfectly competitive markets, 122 price controls and, 28, 94–97, 150 Montesquieu, Charles-Louis de Secondat, Baron de La Brède et de, 196 mortality rates, 206 mortgage-backed securities, 155 mortgage finance, 39, 155 mosquito nets, randomized testing of, 106, 204 “Mr.


pages: 52 words: 14,333

Growth Hacker Marketing: A Primer on the Future of PR, Marketing, and Advertising by Ryan Holiday

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Airbnb, iterative process, Kickstarter, Lean Startup, Marc Andreessen, market design, minimum viable product, Paul Graham, pets.com, Silicon Valley, slashdot, Steve Wozniak

And by steadily increasing the number of invites allowed to its existing user base, Gmail spread from person to person until it became the most popular, and in many ways the best, free e-mail service. Enormous services launched from tiny, but incredibly explosive, ideas. That’s what we’re going to study in this book. The Rise of the Growth Hacker Since Hotmail, many others—particularly in the tech space—have begun to push and break through the limits of marketing. With a mind for data and a scrappy disregard for the “rules,” they have pioneered a new model of marketing designed to utilize the many new tools that the Internet has made available: E-mail. Data. Social media. Lean methodology. Almost overnight, this breed has become the new rock stars of the Silicon Valley. You see them on the pages of TechCrunch, Fast Company, Mashable, Entrepreneur, and countless other publications. LinkedIn and Hacker News abound with job postings: Growth Hacker Needed. Their job isn’t to “do” marketing as I had always known it; it’s to grow companies really fast—to take something from nothing and make it something enormous within an incredibly tight window.


pages: 209 words: 13,138

Empirical Market Microstructure: The Institutions, Economics and Econometrics of Securities Trading by Joel Hasbrouck

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Alvin Roth, barriers to entry, conceptual framework, correlation coefficient, discrete time, disintermediation, distributed generation, experimental economics, financial intermediation, index arbitrage, information asymmetry, interest rate swap, inventory management, market clearing, market design, market friction, market microstructure, martingale, price discovery process, price discrimination, quantitative trading / quantitative finance, random walk, Richard Thaler, second-price auction, selection bias, short selling, statistical model, stochastic process, stochastic volatility, transaction costs, two-sided market, ultimatum game, zero-sum game

The liquidity externality is a network externality. The attributes of liquidity just discussed are generally enhanced, and individual agents can trade at lower cost, when the number of participants increases. This force favors market consolidation, the concentration of trading activity in a single mechanism or venue. Differences in market participants (e.g., retail versus institutional investors), however, and innovations by market designers militate in favor of market segmentation (in this context, usually called fragmentation). The number of participants in a security market obviously depends on features of the security, in addition to the trading mechanism. If the aggregate value of the underlying assets is high; if value-relevant information is comprehensive, uniform, and credible; or if the security is a component of an important index, there will be high interest in trading the security.

Suppose that when the informed trader in the basic model puts in an order x, her broker simultaneously puts in an order x, with γx, with γ > 0. Solve for the model parameters (α, β, µ, λ) in terms of the inputs, σu2 , 0 , and γ. It turned out that the Bank Leu orders originated from a New York investment banker, Dennis Levine, who subsequently pleaded guilty to insider trading (see Stewart (1992)). 7.2 Multiple Rounds of Trading A practical issue in market design is the determination of when trading should occur. Some firms on the Paris Bourse, for example, trade in twice-per-day call auctions, others continuously within a trading session. What happens in the Kyle model as we increase the number of auctions, ultimately converging to continuous trading? We will consider the case of N auctions that are equally spaced over a unit interval of time. The time between auctions is t = 1/N .

Infotopia: How Many Minds Produce Knowledge by Cass R. Sunstein

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affirmative action, Andrei Shleifer, availability heuristic, Build a better mousetrap, c2.com, Cass Sunstein, cognitive bias, cuban missile crisis, Daniel Kahneman / Amos Tversky, Edward Glaeser, en.wikipedia.org, feminist movement, framing effect, hindsight bias, information asymmetry, Isaac Newton, Jean Tirole, jimmy wales, market bubble, market design, minimum wage unemployment, prediction markets, profit motive, rent control, Richard Stallman, Richard Thaler, Robert Shiller, Robert Shiller, Ronald Reagan, slashdot, stem cell, The Wisdom of Crowds, winner-take-all economy

It is important both for government and for outside observers to know the size of federal budget deficits. Government projections are greatly disputed, and some of them might well be self-serving. Prediction markets might provide more reliable estimates.54 3. Regulators might be concerned about the likely risks of a new disease, or of an old disease that seems to be growing in magnitude. To assess the risks, they might create a prediction market designed to project the 132 / Infotopia 4. 5. 6. 7. number of deaths that will be attributed to, for example, flu or mad cow disease over a specified period. Federal and state agencies monitor a range of institutions to ensure that they are solvent.55 One problem is that such agencies do not know whether insolvencies are likely to be many or few in a particular year; another is that the solvency of particular institutions can be difficult to predict in advance.

A prediction market might be used to make forecasts about the future progress of the disease.57 Such markets might generally be used to make forecasts about the likely effects of development projects, such as those involving vaccinations and mortality reductions.58 The Central Intelligence Agency might want to know about the outcome of elections in Iraq, or the likelihood of a feared event in the Middle East. The CIA might create an internal prediction market, designed to aggregate the information held by its own employees. The White House might seek to predict the likelihood and magnitude of damage from natural disasters, including tornadoes and earthquakes. Accurate information could greatly assist in advance planning. Prediction markets could easily be created to help in that task. Some of these examples involve private behavior. Others involve the judgments of public institutions.


pages: 289 words: 113,211

A Demon of Our Own Design: Markets, Hedge Funds, and the Perils of Financial Innovation by Richard Bookstaber

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affirmative action, Albert Einstein, asset allocation, backtesting, beat the dealer, Black Swan, Black-Scholes formula, Bonfire of the Vanities, butterfly effect, commoditize, commodity trading advisor, computer age, computerized trading, disintermediation, diversification, double entry bookkeeping, Edward Lorenz: Chaos theory, Edward Thorp, family office, financial innovation, fixed income, frictionless, frictionless market, George Akerlof, implied volatility, index arbitrage, intangible asset, Jeff Bezos, John Meriwether, London Interbank Offered Rate, Long Term Capital Management, loose coupling, margin call, market bubble, market design, merger arbitrage, Mexican peso crisis / tequila crisis, moral hazard, Myron Scholes, new economy, Nick Leeson, oil shock, Paul Samuelson, Pierre-Simon Laplace, quantitative trading / quantitative finance, random walk, Renaissance Technologies, risk tolerance, risk/return, Robert Shiller, Robert Shiller, rolodex, Saturday Night Live, selection bias, shareholder value, short selling, Silicon Valley, statistical arbitrage, The Market for Lemons, time value of money, too big to fail, transaction costs, tulip mania, uranium enrichment, William Langewiesche, yield curve, zero-coupon bond, zero-sum game

From the structural design of buildings and bridges, to the operation of oil refineries or power plants, to the safety of automobiles and airplanes, we learned our lessons. In contrast, financial markets have seen a tremendous amount of engineering in the past 30 years but the result has been more frequent and severe breakdowns. These breakdowns come about not in spite of our efforts at improving market design, but because of them. The structural risk in the financial markets is a direct result of our attempts to improve the state of the financial markets; its origins are in what we would generally chalk up as progress. The steps that we have taken to make the markets more attuned to our investment desires—the ability to trade quickly, the integration of the financial markets into a global whole, ubiquitous and timely market information, the array of options and other derivative instruments—have exaggerated the pace of activity and the complexity of financial instruments that makes crises inevitable.

We are faced with more pernicious problems, however, in attaining these goals. When the market ideals collide with the real world, with individuals who are not in control of full information, with institutions that do not act quickly or necessarily in anyone’s best interest, the result is like taking a race car for a spin off-road. In the face of progress and technological advances that have resulted in stability on many fronts, financial markets, designed to provide a mechanism for managing and addressing economic risk, have developed a structure that has made them inherently more risky. The irony is that this structure has features that at face value are desirable, in some cases approaching the essential elements of the ideal. As with many ideals, its origin is in academia, in this case a theoretical framework that underpins a half-century of work in financial economics called the perfect market paradigm.

The more closely we try to follow the ideal, thereby adding complexity and more tightly coupling the actions of the market, the more frequently crises will occur. Attempts at that point to add safety features, to layer on regulations and safeguards, will only add to the complexity of the system and make the accidents more frequent. And when blowups happen in the future I can guarantee that the focus will be directed improperly: not at the issues of market design but at hedge funds where the events are observed. They will be implicated for the simple reason that they are engulfing more and more of the risk-taking landscape. The perception of hedge funds being what it is, they will take the blame and become subject to increased regulation. But blaming hedge funds is a little bit like The Simpsons episode in which a meteorite hits Springfield and the townspeople gather, shouting, “Let’s burn down the observatory so this never happens again!”


pages: 523 words: 111,615

The Economics of Enough: How to Run the Economy as if the Future Matters by Diane Coyle

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accounting loophole / creative accounting, affirmative action, bank run, banking crisis, Berlin Wall, bonus culture, Branko Milanovic, BRICs, call centre, Cass Sunstein, central bank independence, collapse of Lehman Brothers, conceptual framework, corporate governance, correlation does not imply causation, Credit Default Swap, deindustrialization, demographic transition, Diane Coyle, disintermediation, Edward Glaeser, endogenous growth, Eugene Fama: efficient market hypothesis, experimental economics, Fall of the Berlin Wall, Financial Instability Hypothesis, Francis Fukuyama: the end of history, George Akerlof, Gini coefficient, global supply chain, Gordon Gekko, greed is good, happiness index / gross national happiness, Hyman Minsky, If something cannot go on forever, it will stop - Herbert Stein's Law, illegal immigration, income inequality, income per capita, industrial cluster, information asymmetry, intangible asset, Intergovernmental Panel on Climate Change (IPCC), invisible hand, Jane Jacobs, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, knowledge economy, labour market flexibility, light touch regulation, low skilled workers, market bubble, market design, market fundamentalism, megacity, Network effects, new economy, night-watchman state, Northern Rock, oil shock, Pareto efficiency, principal–agent problem, profit motive, purchasing power parity, railway mania, rising living standards, Ronald Reagan, selective serotonin reuptake inhibitor (SSRI), Silicon Valley, South Sea Bubble, Steven Pinker, The Design of Experiments, The Fortune at the Bottom of the Pyramid, The Market for Lemons, The Myth of the Rational Market, The Spirit Level, transaction costs, transfer pricing, tulip mania, ultimatum game, University of East Anglia, web application, web of trust, winner-take-all economy, World Values Survey, zero-sum game

Smith and others have demonstrated that markets frequently do deliver the efficient outcomes predicted by the theory, in effect through a process of trial and error.4 Participants do not consciously think of themselves as solving a theoretical economic model but nevertheless act as if they are following the laws of demand and supply—just as their physical movements show them acting as if they’re following Newton’s laws. The experimental research has also shed much light on the way the rules of engagement in markets affect the prices and quantities. This literature has led to the creation of a discipline of market design. Governments have been able to sell assets for which it would once have been hard to conceive of a market—radio spectrum, for example, or permission to emit pollutants like sulphur dioxide or carbon. Market design can also improve the way government licenses are issued and sold, the way regulations are imposed, or even the way trading can occur on financial markets. In short, it acknowledges that markets are designed, and this can either be accidental or more deliberate. Given that government rules and laws set the framework in which all markets operate, how much better it is to think explicitly about their impact.


pages: 421 words: 110,406

Platform Revolution: How Networked Markets Are Transforming the Economy--And How to Make Them Work for You by Sangeet Paul Choudary, Marshall W. van Alstyne, Geoffrey G. Parker

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3D printing, Affordable Care Act / Obamacare, Airbnb, Alvin Roth, Amazon Mechanical Turk, Amazon Web Services, Andrei Shleifer, Apple's 1984 Super Bowl advert, autonomous vehicles, barriers to entry, big data - Walmart - Pop Tarts, bitcoin, blockchain, business process, buy low sell high, chief data officer, Chuck Templeton: OpenTable, clean water, cloud computing, connected car, corporate governance, crowdsourcing, data acquisition, data is the new oil, digital map, discounted cash flows, disintermediation, Edward Glaeser, Elon Musk, en.wikipedia.org, Erik Brynjolfsson, financial innovation, Haber-Bosch Process, High speed trading, information asymmetry, Internet of things, inventory management, invisible hand, Jean Tirole, Jeff Bezos, jimmy wales, John Markoff, Khan Academy, Kickstarter, Lean Startup, Lyft, Marc Andreessen, market design, Metcalfe’s law, multi-sided market, Network effects, new economy, payday loans, peer-to-peer lending, Peter Thiel, pets.com, pre–internet, price mechanism, recommendation engine, RFID, Richard Stallman, ride hailing / ride sharing, Robert Metcalfe, Ronald Coase, Satoshi Nakamoto, self-driving car, shareholder value, sharing economy, side project, Silicon Valley, Skype, smart contracts, smart grid, Snapchat, software is eating the world, Steve Jobs, TaskRabbit, The Chicago School, the payments system, Tim Cook: Apple, transaction costs, two-sided market, Uber and Lyft, Uber for X, winner-take-all economy, zero-sum game, Zipcar

At the time of the sale, 70 percent of all eBay auctions accepted PayPal, and roughly 25 percent of closed auction purchases were transacted using the payment service. Today, PayPal produces a major portion of eBay’s revenues and profits while enabling hundreds of thousands of small merchants to conduct business online more easily, efficiently, and profitably than ever before. THE HEART OF PLATFORM MARKETING: DESIGNING FOR VIRAL GROWTH As the PayPal story suggests, building a platform business differs from traditional product or pipeline marketing in a number of ways. For starters, in the world of platform marketing, pull strategies rather than push strategies are most effective and important. The industrial world of pipelines relies heavily on push. Consumers are accessed through specific marketing and communication channels that the business owns or pays for.

The single most heavily cited article on corporate governance is a literature survey that considers only “the ways in which suppliers of finance to corporations assure themselves of getting a return on their investment.”17 The focus here is on the information asymmetry arising from the separation of ownership and control—a critical element of governance design, but far from sufficient.18 Information asymmetry between the community of users and the firm also matters, and their interests too must be aligned. Additionally, platform governance rules must pay special heed to externalities. These are endemic in network markets, since, as we’ve seen when examining network effects, the spillover benefits users generate are a source of platform value. Understanding this forces a shift in corporate governance from a narrow focus on shareholder value to a broader view of stakeholder value. Market designer and Nobel Prize-winning economist Alvin Roth described a model of governance that uses four broad levers to address market failures.19 According to Roth, a well-designed market increases the safety of the market via transparency, quality, or insurance, thereby enabling good interactions to occur. It provides thickness, which enables participants from different sides of a multisided market to find one another more easily.


pages: 565 words: 151,129

The Zero Marginal Cost Society: The Internet of Things, the Collaborative Commons, and the Eclipse of Capitalism by Jeremy Rifkin

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3D printing, active measures, additive manufacturing, Airbnb, autonomous vehicles, back-to-the-land, big-box store, bioinformatics, bitcoin, business process, Chris Urmson, clean water, cleantech, cloud computing, collaborative consumption, collaborative economy, Community Supported Agriculture, Computer Numeric Control, computer vision, crowdsourcing, demographic transition, distributed generation, en.wikipedia.org, Frederick Winslow Taylor, global supply chain, global village, Hacker Ethic, industrial robot, informal economy, Intergovernmental Panel on Climate Change (IPCC), intermodal, Internet of things, invisible hand, Isaac Newton, James Watt: steam engine, job automation, John Markoff, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, Julian Assange, Kickstarter, knowledge worker, labour mobility, Mahatma Gandhi, manufacturing employment, Mark Zuckerberg, market design, mass immigration, means of production, meta analysis, meta-analysis, natural language processing, new economy, New Urbanism, nuclear winter, Occupy movement, off grid, oil shale / tar sands, pattern recognition, peer-to-peer, peer-to-peer lending, personalized medicine, phenotype, planetary scale, price discrimination, profit motive, QR code, RAND corporation, randomized controlled trial, Ray Kurzweil, RFID, Richard Stallman, risk/return, Ronald Coase, search inside the book, self-driving car, shareholder value, sharing economy, Silicon Valley, Skype, smart cities, smart grid, smart meter, social web, software as a service, spectrum auction, Steve Jobs, Stewart Brand, the built environment, The Nature of the Firm, The Structural Transformation of the Public Sphere, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Thomas Kuhn: the structure of scientific revolutions, Thomas L Friedman, too big to fail, transaction costs, urban planning, Watson beat the top human players on Jeopardy!, web application, Whole Earth Catalog, Whole Earth Review, WikiLeaks, working poor, zero-sum game, Zipcar

,” Renewable Energy World, November 21, 2012, http://www.renewableenergyworld.com/rea/blog /post/2012/11/ppriorities-germanys-grid-and-the-market (November 1, 2013); Jeevan Vasagar, “German Farmers Reap Benefits of Harvesting Renewable Energy,” Financial Times, December 2, 2013, http://www.ft.com/intl/cms/s/0/f2bc3958-58f4-11e3-9798-00144feabdc0.html#axzz2nMj6ILk2 (accessed December 13, 2013). 41. Josiah Neeley, “Texas Windpower: Will Negative Pricing Blow Out the Lights? (PTC vs. Reliable New Capacity),” MasterResource, November 27, 2012, http://www.masterresource .org/2012/11/texas-negative-pricing-ptc/ (accessed August 2, 2013). 42. Rachel Morison, “Renewables Make German Power Market Design Defunct, Utility Says,” Bloomberg, June 26, 2012, http://www.bloomberg.com/news/2012-06-26/renewables-make -german-power-market-design-defunct-utility-says.html (accessed April 29, 2013). 43. Nic Brisbourne, “Solar Power—A Case Study in Exponential Growth,” The Equity Kicker, September 25, 2012, http://www.theequitykicker.com/2012/09/25/solar-powera-case-study-in -exponential-growth/ (accessed May 27, 2013). 44. Max Miller, “Ray Kurzweil: Solar Will Power the World in 16 Years,” Big Think, March 17, 2011, http://bigthink.com/think-tank/ray-kurzweil-solar-will-power-the-world-in-16-years (accessed June 1, 2013). 45.


pages: 589 words: 147,053

The Age of Em: Work, Love and Life When Robots Rule the Earth by Robin Hanson

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8-hour work day, artificial general intelligence, augmented reality, Berlin Wall, bitcoin, blockchain, brain emulation, business process, Clayton Christensen, cloud computing, correlation does not imply causation, creative destruction, demographic transition, Erik Brynjolfsson, ethereum blockchain, experimental subject, fault tolerance, financial intermediation, Flynn Effect, hindsight bias, information asymmetry, job automation, job satisfaction, John Markoff, Just-in-time delivery, lone genius, Machinery of Freedom by David Friedman, market design, meta analysis, meta-analysis, Nash equilibrium, new economy, prediction markets, rent control, rent-seeking, reversible computing, risk tolerance, Silicon Valley, smart contracts, statistical model, stem cell, Thomas Malthus, trade route, Turing test, Vernor Vinge

This reverses the trend in recent decades away from mass production and toward mass customization and flexible manufacturing. A return to mass production should result in more long-term growth, simpler and more standardized products, larger factories that achieve more economies of scale and scope, and better but more expensive tools. A return to mass production should also encourage organizational divisions centered less on types of customers and products and more on functions such as sales, marketing, design, production, and shipping (Salvador et al. 2009; Piller 2008). All these changes might be reduced, however, if parasites such as computer viruses can exploit mass-produced products, and so discourage them relative to other products. A shift toward mass production should modestly increase the value of automation and software tools, as for mass products the fixed cost of developing such tools is spread out over a larger scope of use of such tools.

Extropy 7(1): 30–31. Hanson, Robin. 1998. “Economic Growth Given Machine Intelligence.” October. http://hanson.gmu.edu/aigrow.pdf. Hanson, Robin. 2000. “Long-Term Growth as a Sequence of Exponential Modes.” October. http://hanson.gmu.edu/longgrow.pdf. Hanson, Robin. 2001. “How to Live in a Simulation.” Journal of Evolution and Technology 7(September). Hanson, Robin. 2003. “Combinatorial Information Market Design.” Information Systems Frontiers 5(1): 105–119. Hanson, Robin. 2005. “He Who Pays The Piper Must Know The Tune.” April. http://hanson.gmu.edu/expert.pdf. Hanson, Robin. 2006a. “Decision Markets for Policy Advice.” In Promoting the General Welfare: American Democracy and the Political Economy of Government Performance, edited by Eric Patashnik and Alan Gerber, 151–173. Washington D.C.: Brookings Institution Press, November.


pages: 461 words: 128,421

The Myth of the Rational Market: A History of Risk, Reward, and Delusion on Wall Street by Justin Fox

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activist fund / activist shareholder / activist investor, Albert Einstein, Andrei Shleifer, asset allocation, asset-backed security, bank run, beat the dealer, Benoit Mandelbrot, Black-Scholes formula, Bretton Woods, Brownian motion, capital asset pricing model, card file, Cass Sunstein, collateralized debt obligation, complexity theory, corporate governance, corporate raider, Credit Default Swap, credit default swaps / collateralized debt obligations, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, discovery of the americas, diversification, diversified portfolio, Edward Glaeser, Edward Thorp, endowment effect, Eugene Fama: efficient market hypothesis, experimental economics, financial innovation, Financial Instability Hypothesis, fixed income, floating exchange rates, George Akerlof, Henri Poincaré, Hyman Minsky, implied volatility, impulse control, index arbitrage, index card, index fund, information asymmetry, invisible hand, Isaac Newton, John Meriwether, John Nash: game theory, John von Neumann, joint-stock company, Joseph Schumpeter, Kenneth Arrow, libertarian paternalism, linear programming, Long Term Capital Management, Louis Bachelier, mandelbrot fractal, market bubble, market design, Myron Scholes, New Journalism, Nikolai Kondratiev, Paul Lévy, Paul Samuelson, pension reform, performance metric, Ponzi scheme, prediction markets, pushing on a string, quantitative trading / quantitative finance, Ralph Nader, RAND corporation, random walk, Richard Thaler, risk/return, road to serfdom, Robert Bork, Robert Shiller, Robert Shiller, rolodex, Ronald Reagan, shareholder value, Sharpe ratio, short selling, side project, Silicon Valley, South Sea Bubble, statistical model, The Chicago School, The Myth of the Rational Market, The Predators' Ball, the scientific method, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Thomas Kuhn: the structure of scientific revolutions, Thomas L Friedman, Thorstein Veblen, Tobin tax, transaction costs, tulip mania, value at risk, Vanguard fund, Vilfredo Pareto, volatility smile, Yogi Berra

These weren’t the questionnaires and what-if scenarios used by other social scientists, but actual markets—albeit artificial ones populated almost exclusively by college students. The study of finance was replete with experimental possibilities. When one designs a market experiment, it’s possible to know with certainty the intrinsic, fundamental value of the securities being traded. More often than not, in the markets designed by Smith, Plott, and others, prices converged toward that value—but not always. Bubbles developed; markets failed. Much depended on the rules that governed the market, and the greatest impact of experimental economics has been on market design. Plott had even grander ambitions. During an academic year spent at the University of Chicago in the late 1970s, he asked Eugene Fama for advice on testing his efficient market hypothesis in an experimental setting. “He said his theory has nothing to do with experiments; it has to do with the U.S. stock market,” Plott recalled.


pages: 504 words: 126,835

The Innovation Illusion: How So Little Is Created by So Many Working So Hard by Fredrik Erixon, Bjorn Weigel

Airbnb, Albert Einstein, asset allocation, autonomous vehicles, barriers to entry, Basel III, Bernie Madoff, bitcoin, Black Swan, blockchain, BRICs, Burning Man, Capital in the Twenty-First Century by Thomas Piketty, Cass Sunstein, Clayton Christensen, Colonization of Mars, commoditize, corporate governance, corporate social responsibility, creative destruction, crony capitalism, dark matter, David Graeber, David Ricardo: comparative advantage, discounted cash flows, distributed ledger, Donald Trump, Elon Musk, Erik Brynjolfsson, fear of failure, first square of the chessboard / second half of the chessboard, Francis Fukuyama: the end of history, George Gilder, global supply chain, global value chain, Google Glasses, Google X / Alphabet X, Gordon Gekko, high net worth, hiring and firing, Hyman Minsky, income inequality, income per capita, index fund, industrial robot, Internet of things, Jeff Bezos, job automation, job satisfaction, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, joint-stock company, Joseph Schumpeter, Just-in-time delivery, Kevin Kelly, knowledge economy, labour market flexibility, laissez-faire capitalism, lump of labour, Lyft, manufacturing employment, Mark Zuckerberg, market design, Martin Wolf, mass affluent, means of production, Mont Pelerin Society, Network effects, new economy, offshore financial centre, pensions crisis, Peter Thiel, Potemkin village, price mechanism, principal–agent problem, Productivity paradox, QWERTY keyboard, RAND corporation, Ray Kurzweil, rent-seeking, risk tolerance, risk/return, Robert Gordon, Ronald Coase, Ronald Reagan, savings glut, Second Machine Age, secular stagnation, Silicon Valley, Silicon Valley startup, Skype, sovereign wealth fund, Steve Ballmer, Steve Jobs, Steve Wozniak, technological singularity, telemarketer, The Chicago School, The Future of Employment, The Nature of the Firm, The Wealth of Nations by Adam Smith, too big to fail, total factor productivity, transaction costs, transportation-network company, tulip mania, Tyler Cowen: Great Stagnation, University of East Anglia, unpaid internship, Vanguard fund, Yogi Berra

Companies exposed to competition are always vulnerable to change, and when they become focused on finance rather than market contestability, they need to find other ways of protecting the boundaries of the firm and their market positions. That protection is increasingly about playing zone or company-to-company defense of markets. Those that have been around in corporate life know that, aside from specialization, there are several ways to do that. They include lobbying, branding, marketing, design, and incremental changes in products that give the pretense of development. Corporate social responsibility (CSR) and general public relations campaigns emerged later but are today part of the same toolbox. Together they all help to create customer loyalty and political protection. What used to be the icing on the cake – activities to support innovations and real business competition – have become more important than innovation itself to combat competitors.

In the production of a typical German car, for example, foreign value added increased from 21 percent in 1995 to 34 percent in 2008.44 A more famous example, from the really fragmented electronics sector, is Apple’s music player, the iPod.45 While an iPod – just like an iPhone – is “made in China,” only about 2 percent of the value added of an iPod is captured by China. In other words, 98 percent of the value of this particular export is generated abroad. The United States – where Apple has its headquarters and invests in marketing, design, R&D, and more – takes between one-third and one-half of the iPod value added. This is a familiar situation for many countries. East Asia’s magnificent rise in trade, for example, is closely tied to trade in global production networks, but the richer they have grown, the more important it has become to capture a larger part of the value-added content of traded goods.46 In Europe, too, the rise of cross-border production networks has transformed production and trade.


pages: 411 words: 80,925

What's Mine Is Yours: How Collaborative Consumption Is Changing the Way We Live by Rachel Botsman, Roo Rogers

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Airbnb, barriers to entry, Bernie Madoff, bike sharing scheme, Buckminster Fuller, carbon footprint, Cass Sunstein, collaborative consumption, collaborative economy, commoditize, Community Supported Agriculture, credit crunch, crowdsourcing, dematerialisation, disintermediation, en.wikipedia.org, experimental economics, George Akerlof, global village, Hugh Fearnley-Whittingstall, information retrieval, iterative process, Kevin Kelly, Kickstarter, late fees, Mark Zuckerberg, market design, Menlo Park, Network effects, new economy, new new economy, out of africa, Parkinson's law, peer-to-peer, peer-to-peer lending, peer-to-peer rental, Ponzi scheme, pre–internet, recommendation engine, RFID, Richard Stallman, ride hailing / ride sharing, Robert Shiller, Robert Shiller, Ronald Coase, Search for Extraterrestrial Intelligence, SETI@home, Simon Kuznets, Skype, slashdot, smart grid, South of Market, San Francisco, Stewart Brand, The Nature of the Firm, The Spirit Level, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Thorstein Veblen, Torches of Freedom, transaction costs, traveling salesman, ultimatum game, Victor Gruen, web of trust, women in the workforce, Zipcar

It designed its rankings system, then recommendations, and peer-to-peer support, and finally an easy way to download movies straight to the user’s computer. This gradual evolution of experience was managed in a way that didn’t lose or frustrate the user. To work within ever-changing sectors (and every business operates in one), the designer needs a holistic understanding of technology, behavioral science, and marketing. Designers can and must play a critical role in uncovering what people need and want from systems of Collaborative Consumption, ensuring that they gain enough critical mass to continue to improve and scale. Ezio Manzini is a professor of industrial design at Politecnico di Milano and a thought leader on strategic design for sustainability. He breaks down the process of designing what he calls collaborative service systems into four critical design components: fluidity of use, replication, diversified access, and enhanced communications support.8 Manzini is passionate about strategic design—finding solutions that work for consumers and can achieve widespread levels of use.


pages: 252 words: 70,424

The Self-Made Billionaire Effect: How Extreme Producers Create Massive Value by John Sviokla, Mitch Cohen

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Cass Sunstein, Colonization of Mars, corporate raider, Daniel Kahneman / Amos Tversky, Elon Musk, Frederick Winslow Taylor, game design, global supply chain, James Dyson, Jeff Bezos, John Harrison: Longitude, Jony Ive, loss aversion, Mark Zuckerberg, market design, old-boy network, paper trading, RAND corporation, randomized controlled trial, Richard Thaler, risk tolerance, self-driving car, Silicon Valley, smart meter, Steve Ballmer, Steve Jobs, Steve Wozniak, Tony Hsieh, Toyota Production System, young professional

The steps Jaharis took to save Key Pharmaceuticals reveal how a true Producer will reinvent seemingly small, fixed, and immovable aspects of the business design to extract the most value. Producers can think small—in Jaharis’s case by concentrating on how a medication is delivered—in order to capture something large—demand for a continuous-release nitroglycerin. We use the verb “design” in this context to describe the solutions to the problem of producing a new offering, and making the necessary deals to bring it to the market. Design takes into account multiple factors: the strategy and tactics, the terms of the sale and the deal, the ownership and distribution, the customer experience, and so forth. Producers alter or redesign any and every aspect of bringing a product to market. They will tackle physical product design, product delivery, pricing, the business model, and the sales pitch. Perhaps just as important is the fact that they will design the ownership and deal structure to best fit the opportunity.


pages: 247 words: 81,135

The Great Fragmentation: And Why the Future of All Business Is Small by Steve Sammartino

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3D printing, additive manufacturing, Airbnb, augmented reality, barriers to entry, Bill Gates: Altair 8800, bitcoin, BRICs, Buckminster Fuller, citizen journalism, collaborative consumption, cryptocurrency, David Heinemeier Hansson, Elon Musk, fiat currency, Frederick Winslow Taylor, game design, Google X / Alphabet X, haute couture, helicopter parent, illegal immigration, index fund, Jeff Bezos, jimmy wales, Kickstarter, knowledge economy, Law of Accelerating Returns, lifelogging, market design, Metcalfe's law, Metcalfe’s law, Minecraft, minimum viable product, Network effects, new economy, peer-to-peer, post scarcity, prediction markets, pre–internet, profit motive, race to the bottom, random walk, Ray Kurzweil, recommendation engine, remote working, RFID, Rubik’s Cube, self-driving car, sharing economy, side project, Silicon Valley, Silicon Valley startup, skunkworks, Skype, social graph, social web, software is eating the world, Steve Jobs, survivorship bias, too big to fail, US Airways Flight 1549, web application, zero-sum game

Of course we wanted them. We wanted to express our human emotions and this was what was available at the time. We had to have the latest widget of desire, see the show and participate in the fad. Fads were rad. They formed part of the lore that made our so-called community, a community that was a substitute for natural human inclinations. The selfish era Mass marketing was a selfish modality of marketing designed by and for the owners of capital, and not only financial capital, but mind capital. The average suburban dweller became everyone and no one. We had all loved and believed in average products with the edges rounded off. There are a lot of examples of selfish marketing occurring on a repetitive and formulaic level beyond that of the fads mentioned above. Some selfish industries are still getting away with it — for now.


pages: 209 words: 80,086

The Global Auction: The Broken Promises of Education, Jobs, and Incomes by Phillip Brown, Hugh Lauder, David Ashton

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active measures, affirmative action, barriers to entry, Branko Milanovic, BRICs, business process, business process outsourcing, call centre, collective bargaining, corporate governance, creative destruction, credit crunch, David Ricardo: comparative advantage, deindustrialization, deskilling, Frederick Winslow Taylor, full employment, future of work, glass ceiling, global supply chain, immigration reform, income inequality, industrial cluster, industrial robot, intangible asset, job automation, Joseph Schumpeter, knowledge economy, knowledge worker, labour market flexibility, low skilled workers, manufacturing employment, market bubble, market design, neoliberal agenda, new economy, Paul Samuelson, pensions crisis, post-industrial society, profit maximization, purchasing power parity, QWERTY keyboard, race to the bottom, Richard Florida, Ronald Reagan, shareholder value, Silicon Valley, sovereign wealth fund, stem cell, The Bell Curve by Richard Herrnstein and Charles Murray, The Wealth of Nations by Adam Smith, Thomas L Friedman, trade liberalization, transaction costs, trickle-down economics, winner-take-all economy, working poor, zero-sum game

Except it needed a greater degree of oversight and more in-house resources.”4 It is for these reasons that some companies, especially those based in South Korea and Japan, continue to keep a broad range of activities in house, although they were not immune from the consequences of global recession. Today, a key issue for all companies is how to connect profit centers, business units, product markets, design teams, suppliers, Managing in the Global Auction 103 franchisees, research centers, universities, licensees, business start-ups, and strategic alliances with competitor companies wanting to share the costs of research or business processes. The calculation of the costs and benefits associated with building these linkages, whether within the core business, through alliances, or through outsourcing or offshoring, is now an integral part of the corporate drive to competitive advantage.


pages: 273 words: 21,102

Branding Your Business: Promoting Your Business, Attracting Customers and Standing Out in the Market Place by James Hammond

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Albert Einstein, call centre, Donald Trump, intangible asset, James Dyson, Jeff Bezos, market design, Ralph Waldo Emerson, Steve Jobs, the market place

Last, but by no means least, a very special thank you must go to my wife, Mary, herself a successful marketing and public relations consultant, for putting up with a grumpy old man for months on end as he struggled to complete the manuscript within the deadline. (I would have mentioned my cats, Mr George and Tibbles, but they’re too busy eating or sleeping to care either way.) THIS PAGE INTENTIONALLY LEFT BLANK x About the author James Hammond has spent almost 30 years in advertising, marketing, design and branding. From his initial time as a graphic designer and copywriter, he progressed to heading up brand consultancies responsible for the brand management, sales and marketing, corporate identity and advertising for Top 100 companies including Yellow Pages, Virgin, Norwich Union, EMI and British Telecom. James has also worked with numerous blue-chip organisations as an independent brand consultant, as well as helping smaller businesses and notfor-profits to strengthen their branding and profitability.


pages: 202 words: 64,725

Designing Your Life: How to Build a Well-Lived, Joyful Life by Bill Burnett, Dave Evans

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David Brooks, fear of failure, financial independence, game design, Haight Ashbury, invention of the printing press, iterative process, knowledge worker, market design, science of happiness, Silicon Valley, Silicon Valley startup, Skype, Steve Jobs

Vicky, you had us at “Hello darlings…”—and it was one of the best things that ever happened to us. Thank you, thank you, Vicky. Notes Introduction: Life by Design 1. Jon Krakower, inventor of the Apple notebook configuration, see European Patent EP 0515664 B1, Laptop Computer Having Integrated Keyboard, Cursor Control Device and Palm Rest, and Artemis March, Apple PowerBook (A): Design Quality and Time to Market, Design Management Institute Case Study 9-994-023 (Boston: Design Management Institute Press, 1994). 2. Lindsay Oishi, “Enhancing Career Development Agency in Emerging Adulthood: An Intervention Using Design Thinking,” doctoral dissertation, Graduate School of Education, Stanford University, 2012. T. S. Reilly, “Designing Life: Studies of Emerging Adult Development,” doctoral dissertation, Graduate School of Education, Stanford University, 2013. 3.


pages: 269 words: 104,430

Carjacked: The Culture of the Automobile and Its Effect on Our Lives by Catherine Lutz, Anne Lutz Fernandez

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barriers to entry, car-free, carbon footprint, collateralized debt obligation, failed state, feminist movement, fudge factor, Gordon Gekko, housing crisis, illegal immigration, income inequality, inventory management, market design, market fundamentalism, mortgage tax deduction, Naomi Klein, Nate Silver, New Urbanism, oil shock, peak oil, Ralph Nader, Ralph Waldo Emerson, ride hailing / ride sharing, Thorstein Veblen, traffic fines, Unsafe at Any Speed, urban planning, white flight, women in the workforce, working poor, Zipcar

On one blue-skied day in June 2008, the “Lake” was dotted with orange cones delineating courses for acceleration, turning, and braking tests as GM employees prepared for the busload of journalists to whom they were about to introduce Chevy’s newest vehicle, the Traverse. Along with roughly a dozen automotive journalists, most from regional newspaper chains, we hopped off the courtesy bus, looped “All Access VIP” 178 Carjacked passes around our necks, and entered a hall where our group was greeted by at least as many members of Chevrolet’s marketing, design, and engineering staff before settling in for a PowerPoint presentation. Chevy executives enthusiastically touted the innovations and attractions of this, GM’s latest “crossover utility” (crossover being the marketing term invented to avoid calling a vehicle an SUV or a station wagon, even as consumers often cannot tell them apart). The Chevy team compared the Traverse continually and favorably to the Toyota Highlander, the category market leader.


pages: 406 words: 88,820

Television disrupted: the transition from network to networked TV by Shelly Palmer

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barriers to entry, call centre, commoditize, disintermediation, en.wikipedia.org, hypertext link, interchangeable parts, invention of movable type, Irwin Jacobs: Qualcomm, James Watt: steam engine, Leonard Kleinrock, linear programming, Marc Andreessen, market design, Metcalfe’s law, pattern recognition, peer-to-peer, recommendation engine, Saturday Night Live, shareholder value, Skype, spectrum auction, Steve Jobs, subscription business, Telecommunications Act of 1996, There's no reason for any individual to have a computer in his home - Ken Olsen, Vickrey auction, Vilfredo Pareto, yield management

Convergence The coming together of two or more disparate disciplines or technologies Coverage area A geographical area which defines the transmission coverage of a particular system. CRT Cathode Ray Tube. In this context it is referring to the picture tube of a traditional NTSC television set. DA Digital to Analog Converter (also DAC) Delphi One of the original online services. Demographics Classifications of populations according to sex, age, race, ethnicity, income, etc. Designated Market Areas A C. Nielsen’s geographic market designation which defines each television market exclusive of others based on measurable viewing patterns. Every county or split county in the United States is assigned exclusively to one DMA. Destination Television A marketing term that usually refers to scheduled, linear broadcast programming that people must watch at a certain time. Digital a method of storing, processing and transmitting information through the use of distinct electronic or optical pulses that represent the binary digits 0 and 1.


pages: 387 words: 110,820

Cheap: The High Cost of Discount Culture by Ellen Ruppel Shell

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barriers to entry, Berlin Wall, big-box store, cognitive dissonance, computer age, creative destruction, Daniel Kahneman / Amos Tversky, delayed gratification, deskilling, Donald Trump, Edward Glaeser, fear of failure, Ford paid five dollars a day, Frederick Winslow Taylor, George Akerlof, global supply chain, global village, greed is good, Howard Zinn, income inequality, interchangeable parts, inventory management, invisible hand, James Watt: steam engine, Joseph Schumpeter, Just-in-time delivery, knowledge economy, loss aversion, market design, means of production, mental accounting, Pearl River Delta, Ponzi scheme, price anchoring, price discrimination, race to the bottom, Richard Thaler, Ronald Reagan, side project, Steve Jobs, The Market for Lemons, The Wealth of Nations by Adam Smith, Thomas L Friedman, trade liberalization, traveling salesman, ultimatum game, Victor Gruen, washing machines reduced drudgery, working poor, yield management, zero-sum game

It seemed that almost all consumer good were cheap, like the Chinese boots, or extravagant, like the Italian boots. Where, I wondered, was the solid middle ground that offered safe footing not so very long ago? Ferreting out the answer to these seemingly simple questions led to a fascinating journey, from the hinterlands of Sweden to the back alleys of Shanghai to the shipyards of Los Angeles. I met with psychologists, economists, farmers, marketers, designers, historians, cultural theorists, mathematicians, and retailers large and small. I spent a couple of years wandering a world of consumer choices driven by a system that creates the desire it claims to sate. This book explores that world and what role we—as consumers and citizens—play in it. LIKE ALL sensible journeys, this one begins with a look backward to history. Retail giant John Wanamaker’s inventions from the white sale to the price tag changed forever the way we shop.


pages: 389 words: 98,487

The Undercover Economist: Exposing Why the Rich Are Rich, the Poor Are Poor, and Why You Can Never Buy a Decent Used Car by Tim Harford

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Albert Einstein, barriers to entry, Berlin Wall, collective bargaining, congestion charging, Corn Laws, David Ricardo: comparative advantage, decarbonisation, Deng Xiaoping, Fall of the Berlin Wall, George Akerlof, information asymmetry, invention of movable type, John Nash: game theory, John von Neumann, Kenneth Arrow, market design, Martin Wolf, moral hazard, new economy, Pearl River Delta, price discrimination, Productivity paradox, race to the bottom, random walk, rent-seeking, Robert Gordon, Robert Shiller, Robert Shiller, Ronald Reagan, sealed-bid auction, second-price auction, second-price sealed-bid, Shenzhen was a fishing village, special economic zone, spectrum auction, The Market for Lemons, Thomas Malthus, trade liberalization, Vickrey auction

Joskow, Richard Schmalensee, and Elizabeth Bailey, “The Market for Sulfur Dioxide Emissions,” American Economic Review 8, no. 4 (Sept. 1998): 669–85. The Chinese program is explained in “A Great Leap Forward,” The Economist, May 9, 2002. For a design intended to work on a global level see Peter Cramton and Suzi Kerr, “Tradeable Carbon Permit Auctions” (working paper, University of Maryland, 1998), http:// www.market-design.com/files/98wp-tradeable-carbon-permit-auctions.pdf. Paul Klemperer, the auction designer who features in chapter 7, helped to design an auction for the United Kingdom government to kick-start their program of tradable emission permits. Anyone doubting my statement that “economists have long been in the forefront of analyzing environmental problems” will be surprised to hear that one of the first environmentalists was also one of the first and most famous economists, Thomas Malthus, whose study of overpopulation was published in 1798.


pages: 240 words: 109,474

Masters of Doom: How Two Guys Created an Empire and Transformed Pop Culture by David Kushner

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Apple's 1984 Super Bowl advert, book scanning, Columbine, corporate governance, game design, glass ceiling, Hacker Ethic, informal economy, Marc Andreessen, market design, Marshall McLuhan, Saturday Night Live, side project, Silicon Valley, slashdot, software patent, Steve Jobs, Steven Levy, X Prize

Just doing this one thing will make me and Tom really happy with the design. This is really simple design-wise.” “Forget about it,” Carmack snapped. More new tensions began to surface. With the extra levels ordered by Scott, the id guys were putting in sixteen-hour days, seven days a week. Kevin and Jay did ease the burden somewhat. Kevin was able to assist Adrian with the character work, as well as help out with some packaging and marketing designs. As CEO, Jay’s main asset wasn’t so much strategizing the company as being the office “biz guy.” He made sure there was enough computer paper, enough disks, enough toilet paper, enough pizza. He made sure bills got paid. One of the reasons he got the job was he was the only one who balanced his checkbook. Despite the help of Kevin and Jay, though, nothing could dissipate the reaction everyone was having to the shenanigans of Romero and Tom.


pages: 422 words: 104,457

Dragnet Nation: A Quest for Privacy, Security, and Freedom in a World of Relentless Surveillance by Julia Angwin

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AltaVista, Ayatollah Khomeini, barriers to entry, bitcoin, Chelsea Manning, Chuck Templeton: OpenTable, clean water, crowdsourcing, cuban missile crisis, data is the new oil, David Graeber, Debian, Edward Snowden, Filter Bubble, Firefox, GnuPG, Google Chrome, Google Glasses, informal economy, Jacob Appelbaum, John Markoff, Julian Assange, Marc Andreessen, market bubble, market design, medical residency, meta analysis, meta-analysis, mutually assured destruction, prediction markets, price discrimination, randomized controlled trial, RFID, Robert Shiller, Ronald Reagan, security theater, Silicon Valley, Silicon Valley startup, Skype, smart meter, Steven Levy, Upton Sinclair, WikiLeaks, Y2K, zero-sum game, Zimmermann PGP

“Now imagine if a social network were to offer a comparable service, permitting advertisers to blend their spokesperson with the user’s own profile picture.” Calo doesn’t know of anyone using this technique. But he speculates that it is not a far leap from our current state of bathtub ads following us around. After all, if food engineers can design junk food to specifically target our taste buds in a way that makes us consume more and gambling companies can build slot machines that encourage us to play more, why won’t marketers design their online presence to manipulate us in new ways? Already, my privacy team had uncovered companies changing their prices based on a user’s location. And Calo speculates that companies will soon find ways to tailor prices based on when people are the most vulnerable—perhaps after a long day at work. People may also be manipulated into giving up more data than they want to. Companies can use that data to find out more about how to target that person.


pages: 292 words: 85,151

Exponential Organizations: Why New Organizations Are Ten Times Better, Faster, and Cheaper Than Yours (And What to Do About It) by Salim Ismail, Yuri van Geest

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23andMe, 3D printing, Airbnb, Amazon Mechanical Turk, Amazon Web Services, augmented reality, autonomous vehicles, Baxter: Rethink Robotics, bioinformatics, bitcoin, Black Swan, blockchain, Burning Man, business intelligence, business process, call centre, chief data officer, Chris Wanstrath, Clayton Christensen, clean water, cloud computing, cognitive bias, collaborative consumption, collaborative economy, commoditize, corporate social responsibility, cross-subsidies, crowdsourcing, cryptocurrency, dark matter, Dean Kamen, dematerialisation, discounted cash flows, distributed ledger, Edward Snowden, Elon Musk, en.wikipedia.org, ethereum blockchain, Galaxy Zoo, game design, Google Glasses, Google Hangouts, Google X / Alphabet X, gravity well, hiring and firing, Hyperloop, industrial robot, Innovator's Dilemma, intangible asset, Internet of things, Iridium satellite, Isaac Newton, Jeff Bezos, Kevin Kelly, Kickstarter, knowledge worker, Kodak vs Instagram, Law of Accelerating Returns, Lean Startup, life extension, lifelogging, loose coupling, loss aversion, Lyft, Marc Andreessen, Mark Zuckerberg, market design, means of production, minimum viable product, natural language processing, Netflix Prize, Network effects, new economy, Oculus Rift, offshore financial centre, p-value, PageRank, pattern recognition, Paul Graham, peer-to-peer, peer-to-peer model, Peter H. Diamandis: Planetary Resources, Peter Thiel, prediction markets, profit motive, publish or perish, Ray Kurzweil, recommendation engine, RFID, ride hailing / ride sharing, risk tolerance, Ronald Coase, Second Machine Age, self-driving car, sharing economy, Silicon Valley, skunkworks, Skype, smart contracts, Snapchat, social software, software is eating the world, speech recognition, stealth mode startup, Stephen Hawking, Steve Jobs, subscription business, supply-chain management, TaskRabbit, telepresence, telepresence robot, Tony Hsieh, transaction costs, Tyler Cowen: Great Stagnation, urban planning, WikiLeaks, winner-take-all economy, X Prize, Y Combinator, zero-sum game

Each employee crafts a Colleague Letter of Understanding (CLOU), which outlines how worker will meet the personal mission statement. Associates most affected by this person’s work must accept the CLOU before it goes into effect. What is the financial impact? The company has funded virtually all its growth from internal sources, which suggests it is robustly profitable. On the basis of its own benchmarking data, Morning Star believes it is the world’s most efficient tomato processor. FAVI (1960) – 440 employees Market: Designer and manufacturer of copper alloy automotive components How is the company organized? FAVI has no hierarchy or personnel department, and there is no middle management or formal procedures. Teams are organized around customers. Each team is responsible not only for the customer, but for its own human resources, purchasing and product development. What is the financial impact? In 2010 FAVI generated a turnover of €75 million, 80 percent of it automotive. 38 percent of personnel have been with the company for over 15 years.


pages: 398 words: 108,889

The Paypal Wars: Battles With Ebay, the Media, the Mafia, and the Rest of Planet Earth by Eric M. Jackson

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bank run, business process, call centre, creative destruction, disintermediation, Elon Musk, index fund, Internet Archive, iterative process, Joseph Schumpeter, market design, Menlo Park, Metcalfe’s law, money market fund, moral hazard, Network effects, new economy, offshore financial centre, Peter Thiel, Robert Metcalfe, Sand Hill Road, shareholder value, Silicon Valley, Silicon Valley startup, telemarketer, The Chicago School, the new new thing, Turing test

But I had a lingering sense that dramatic change was about to unfold for our young company, that the entrepreneurial adventure I naively joined as Peter and I strolled through San Francisco’s marina district many months earlier was now coming to an end. I left from the Arctic Circle’s back exit and steered clear of the T-shirt box. The day’s meeting marathon continued at three o’clock in Sacks’s office. The marketing, design, and international teams, about twenty people in all, packed into his sparse and functional workspace. Sacks began with a nervous chuckle and a couple of informal remarks. He then addressed the reasons behind his push to resume negotiations with eBay, characterizing them as a response to feedback from within the company. He shared that numerous employees had approached him following eBay Live and had encouraged him to make new overtures toward eBay after seeing its dynamic community and marketplace in person.


pages: 416 words: 106,582

This Will Make You Smarter: 150 New Scientific Concepts to Improve Your Thinking by John Brockman

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23andMe, Albert Einstein, Alfred Russel Wallace, banking crisis, Barry Marshall: ulcers, Benoit Mandelbrot, Berlin Wall, biofilm, Black Swan, butterfly effect, Cass Sunstein, cloud computing, congestion charging, correlation does not imply causation, Daniel Kahneman / Amos Tversky, dark matter, data acquisition, David Brooks, delayed gratification, Emanuel Derman, epigenetics, Exxon Valdez, Flash crash, Flynn Effect, hive mind, impulse control, information retrieval, Intergovernmental Panel on Climate Change (IPCC), Isaac Newton, Jaron Lanier, John von Neumann, Kevin Kelly, lifelogging, mandelbrot fractal, market design, Mars Rover, Marshall McLuhan, microbiome, Murray Gell-Mann, Nicholas Carr, open economy, Pierre-Simon Laplace, place-making, placebo effect, pre–internet, QWERTY keyboard, random walk, randomized controlled trial, rent control, Richard Feynman, Richard Feynman, Richard Feynman: Challenger O-ring, Richard Thaler, Satyajit Das, Schrödinger's Cat, security theater, selection bias, Silicon Valley, stem cell, Steve Jobs, Steven Pinker, Stewart Brand, the scientific method, Thorstein Veblen, Turing complete, Turing machine, Vilfredo Pareto, Walter Mischel, Whole Earth Catalog, zero-sum game

Yet it is this third stage—writing and rewriting life code—that is by far the most important and profound. Few realize, so far, that life code is spreading across industries, economies, countries, and cultures. As we begin to rewrite existing life, strange things evolve. Bacteria can be programmed to solve Sudoku puzzles. Viruses begin to create electronic circuits. As we write life from scratch, J. Craig Venter, Hamilton Smith, et al., partner with Exxon to try to change the world’s energy markets. Designer genes introduced by retroviruses, organs built from scratch, the first synthetic cells—these are further examples of massive change. We see more and more products derived from life code changing fields as diverse as energy, textiles, chemicals, IT, vaccines, medicines, space exploration, agriculture, fashion, finance, and real estate. And gradually, “life code,” a concept with only 559 Google hits in 2000 and fewer than 50,000 in 2009, becomes a part of everyday public discourse.


pages: 357 words: 95,986

Inventing the Future: Postcapitalism and a World Without Work by Nick Srnicek, Alex Williams

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3D printing, additive manufacturing, air freight, algorithmic trading, anti-work, back-to-the-land, banking crisis, basic income, battle of ideas, blockchain, Bretton Woods, call centre, capital controls, carbon footprint, Cass Sunstein, centre right, collective bargaining, crowdsourcing, cryptocurrency, David Graeber, decarbonisation, deindustrialization, deskilling, Doha Development Round, Elon Musk, Erik Brynjolfsson, Ferguson, Missouri, financial independence, food miles, Francis Fukuyama: the end of history, full employment, future of work, gender pay gap, housing crisis, income inequality, industrial robot, informal economy, intermodal, Internet Archive, job automation, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, late capitalism, liberation theology, Live Aid, low skilled workers, manufacturing employment, market design, Martin Wolf, mass immigration, mass incarceration, means of production, minimum wage unemployment, Mont Pelerin Society, neoliberal agenda, New Urbanism, Occupy movement, oil shale / tar sands, oil shock, patent troll, pattern recognition, Paul Samuelson, Philip Mirowski, post scarcity, postnationalism / post nation state, precariat, price stability, profit motive, quantitative easing, reshoring, Richard Florida, rising living standards, road to serfdom, Robert Gordon, Ronald Reagan, Second Machine Age, secular stagnation, self-driving car, Slavoj Žižek, social web, stakhanovite, Steve Jobs, surplus humans, the built environment, The Chicago School, The Future of Employment, Tyler Cowen: Great Stagnation, universal basic income, wages for housework, We are the 99%, women in the workforce, working poor, working-age population

One of the most serious (and intrinsically collective) crises of our times is thus effectively privatised. This personalised environmental ethic is exemplified in localist food politics – in particular, in the moral (and price) premium placed on locally grown food. Here we find ecologically motivated arguments (for reducing energy expenditure by reducing the distances over which food is transported, for example) combined with class differentiation (in the form of marketing designed to promote identification with organic food). Similarly, complex problems are condensed into poorly formulated shorthand. For instance, the idea of ‘food miles’ – identifying the distances that food products have travelled, so as to reduce carbon outputs – appears a reasonable one. The problem is that it is all too often taken to be sufficient on its own as a guide to ethical action. As a 2005 report by the UK’s Department of Agriculture and Food found, while the environmental impacts of transporting food were indeed considerable, a single indicator based on total food miles was inadequate as a measure of sustainability.79 Most notably, the food-miles metric emphasises an aspect of food production that contributes a relatively small amount to overall carbon outputs.


pages: 356 words: 105,533

Dark Pools: The Rise of the Machine Traders and the Rigging of the U.S. Stock Market by Scott Patterson

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algorithmic trading, automated trading system, banking crisis, bash_history, Bernie Madoff, butterfly effect, buttonwood tree, Chuck Templeton: OpenTable, cloud computing, collapse of Lehman Brothers, computerized trading, creative destruction, Donald Trump, fixed income, Flash crash, Francisco Pizarro, Gordon Gekko, Hibernia Atlantic: Project Express, High speed trading, Joseph Schumpeter, latency arbitrage, Long Term Capital Management, Mark Zuckerberg, market design, market microstructure, pattern recognition, pets.com, Ponzi scheme, popular electronics, prediction markets, quantitative hedge fund, Ray Kurzweil, Renaissance Technologies, Sergey Aleynikov, Small Order Execution System, South China Sea, Spread Networks laid a new fibre optics cable between New York and Chicago, stealth mode startup, stochastic process, transaction costs, Watson beat the top human players on Jeopardy!, zero-sum game

That meant the only way certain high-frequency firms—such as the scalper variety that profited on the difference between bids and offers—could make money was through maker-taker rebates, the fees they collected when other firms had to trade with them. The trouble for the exchanges: Everyone wanted to pocket the rebates. Every reasonably sophisticated firm, including Trading Machines, was putting orders into the market designed to earn the rebate. That posed a conundrum for the exchanges, Bodek theorized, because everyone couldn’t get the rebate. Everyone couldn’t win, because for every winner there had to be a loser. It was a zero-sum game—simple math. And so, Bodek reasoned, a complex system was designed to pick winners and losers. It was done through speed and exotic order types. If you didn’t know which orders to use, and when to use them, you lost nearly every time.


pages: 326 words: 106,053

The Wisdom of Crowds by James Surowiecki

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AltaVista, Andrei Shleifer, asset allocation, Cass Sunstein, Daniel Kahneman / Amos Tversky, experimental economics, Frederick Winslow Taylor, George Akerlof, Howard Rheingold, I think there is a world market for maybe five computers, interchangeable parts, Jeff Bezos, John Meriwether, Joseph Schumpeter, knowledge economy, lone genius, Long Term Capital Management, market bubble, market clearing, market design, moral hazard, Myron Scholes, new economy, offshore financial centre, Picturephone, prediction markets, profit maximization, Richard Feynman, Richard Feynman, Richard Feynman: Challenger O-ring, Richard Thaler, Robert Shiller, Robert Shiller, Ronald Coase, Ronald Reagan, shareholder value, short selling, Silicon Valley, South Sea Bubble, The Nature of the Firm, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Toyota Production System, transaction costs, ultimatum game, Yogi Berra, zero-sum game

But there’s reason to wonder if a market such as the betting market—one that allowed the people participating in it to rely on many different kinds of information, including but not limited to polls—might at the very least offer a competitive alternative to Gallup. That’s why the Iowa Electronic Markets (IEM) project was created. Founded in 1988 and run by the College of Business at the University of Iowa, the IEM features a host of markets designed to predict the outcomes of elections—presidential, congressional, gubernatorial, and foreign. Open to anyone who wants to participate, the IEM allows people to buy and sell futures “contracts” based on how they think a given candidate will do in an upcoming election. While the IEM offers many different types of contracts, two are most common. One is designed to predict the winner of an election.


pages: 372 words: 89,876

The Connected Company by Dave Gray, Thomas Vander Wal

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A Pattern Language, Albert Einstein, Amazon Mechanical Turk, Amazon Web Services, Atul Gawande, Berlin Wall, business process, call centre, Clayton Christensen, commoditize, complexity theory, creative destruction, David Heinemeier Hansson, en.wikipedia.org, factory automation, Googley, index card, industrial cluster, interchangeable parts, inventory management, Jeff Bezos, John Markoff, Kevin Kelly, loose coupling, market design, minimum viable product, more computing power than Apollo, profit maximization, Richard Florida, Ruby on Rails, self-driving car, shareholder value, side project, Silicon Valley, skunkworks, software as a service, South of Market, San Francisco, Steve Jobs, Steven Levy, Stewart Brand, The Wealth of Nations by Adam Smith, Tony Hsieh, Toyota Production System, Vanguard fund, web application, WikiLeaks, Zipcar

As the number of employees grows, the profit per employee shrinks. It’s a game of diminishing returns. Efficiencies of scale are balanced by the burdens of bureaucracy. Divisions become silos, disconnected from each other. Overhead costs increase with size. Eventually, the company reaches a point where the costs of control exceed the benefits of further growth, or the company becomes too internally focused and loses touch with the market. Design for Connection A connected company is a complex, adaptive system that functions more like an organism than a machine. To design connected companies, we must think of the company as a complex set of connections and potential connections: a distributed organism with brains, eyes, and ears everywhere, whether they are employees, partners, customers, or suppliers. Design for connection is design for companies that are made out of people.


pages: 327 words: 90,542

The Age of Stagnation by Satyajit Das

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9 dash line, accounting loophole / creative accounting, additive manufacturing, Airbnb, Albert Einstein, Alfred Russel Wallace, Anton Chekhov, Asian financial crisis, banking crisis, Berlin Wall, bitcoin, Bretton Woods, BRICs, British Empire, business process, business process outsourcing, call centre, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, Clayton Christensen, cloud computing, collaborative economy, colonial exploitation, computer age, creative destruction, cryptocurrency, currency manipulation / currency intervention, David Ricardo: comparative advantage, declining real wages, Deng Xiaoping, deskilling, disintermediation, Downton Abbey, Emanuel Derman, energy security, energy transition, eurozone crisis, financial innovation, financial repression, forward guidance, Francis Fukuyama: the end of history, full employment, gig economy, Gini coefficient, global reserve currency, global supply chain, Goldman Sachs: Vampire Squid, happiness index / gross national happiness, Honoré de Balzac, hydraulic fracturing, Hyman Minsky, illegal immigration, income inequality, income per capita, indoor plumbing, informal economy, Innovator's Dilemma, intangible asset, Intergovernmental Panel on Climate Change (IPCC), Jane Jacobs, John Maynard Keynes: technological unemployment, Kenneth Rogoff, knowledge economy, knowledge worker, labour market flexibility, labour mobility, light touch regulation, liquidity trap, Long Term Capital Management, low skilled workers, Lyft, Mahatma Gandhi, margin call, market design, Marshall McLuhan, Martin Wolf, Mikhail Gorbachev, mortgage debt, mortgage tax deduction, new economy, New Urbanism, offshore financial centre, oil shale / tar sands, oil shock, old age dependency ratio, open economy, passive income, peak oil, peer-to-peer lending, pension reform, Plutocrats, plutocrats, Ponzi scheme, Potemkin village, precariat, price stability, profit maximization, pushing on a string, quantitative easing, race to the bottom, Ralph Nader, Rana Plaza, rent control, rent-seeking, reserve currency, ride hailing / ride sharing, rising living standards, risk/return, Robert Gordon, Ronald Reagan, Satyajit Das, savings glut, secular stagnation, seigniorage, sharing economy, Silicon Valley, Simon Kuznets, Slavoj Žižek, South China Sea, sovereign wealth fund, TaskRabbit, The Chicago School, The Great Moderation, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, the market place, the payments system, The Spirit Level, Thorstein Veblen, Tim Cook: Apple, too big to fail, total factor productivity, trade route, transaction costs, unpaid internship, Unsafe at Any Speed, Upton Sinclair, Washington Consensus, We are the 99%, WikiLeaks, Y2K, Yom Kippur War, zero-coupon bond, zero-sum game

Instead of allowing for replacement based on failure or innovation, products were designed with a limited useful life so as to increase consumption. With the US car market approaching saturation, GM chairman Alfred Sloan initiated annual design changes to encourage drivers to replace their vehicles frequently. In his 1960 book The Waste Makers, Vance Packard coined the term “obsolescence of desirability”: marketing designed to wear out a product in the owner's mind. New technologies were promoted as superior or modern, creating demand. Gramophone records were replaced successively by cassette tapes, CDs, MP3s, and digital media such as iTunes and live streaming. Some thirty years after it was displaced, analog vinyl re-emerged as an expensive, fashionable niche product, completing the cycle. Although it made minimal difference to their enjoyment, people owned the same music in several different media, together with the associated paraphernalia, creating a peculiar form of economic activity.


pages: 302 words: 83,116

SuperFreakonomics by Steven D. Levitt, Stephen J. Dubner

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agricultural Revolution, airport security, Andrei Shleifer, Atul Gawande, barriers to entry, Bernie Madoff, call centre, clean water, cognitive bias, collateralized debt obligation, creative destruction, credit crunch, Daniel Kahneman / Amos Tversky, deliberate practice, Did the Death of Australian Inheritance Taxes Affect Deaths, disintermediation, endowment effect, experimental economics, food miles, indoor plumbing, Intergovernmental Panel on Climate Change (IPCC), John Nash: game theory, Joseph Schumpeter, Joshua Gans and Andrew Leigh, loss aversion, Louis Pasteur, market design, microcredit, Milgram experiment, oil shale / tar sands, patent troll, presumed consent, price discrimination, principal–agent problem, profit motive, randomized controlled trial, Richard Feynman, Richard Feynman, Richard Thaler, selection bias, South China Sea, Stephen Hawking, The Wealth of Nations by Adam Smith, too big to fail, trickle-down economics, ultimatum game, urban planning, William Langewiesche, women in the workforce, young professional

Crutzen, “Albedo Enhancement by Stratospheric Sulfur Injections: A Contribution to Resolve a Policy Dilemma?” Climatic Change, 2006. / 198 There is no regulatory framework: for further reading, see “The Sun Blotted Out from the Sky,” Elizabeth Svoboda, Salon.com, April 2, 2008. / 199 Certain new ideas…are invariably seen as repugnant: the dean of repugnance studies is the Harvard economist Alvin E. Roth, whose work can be see at the Market Design blog. See also: Stephen J. Dubner and Steven D. Levitt, “Flesh Trade,” The New York Times Magazine, July 9, 2006; and Viviana A. Zelizer, “Human Values and the Market: The Case of Life Insurance and Death in 19th Century America,” American Journal of Sociology 84, no. 3 (November 1978). / 200 Al Gore is quoted here and elsewhere in Leonard David, “Al Gore: Earth Is in ‘Full-Scale Planetary Emergency,’” Space.com, October 26, 2006. / 201–202 The “soggy mirrors” plan: see John Latham, “Amelioration of Global Warming by Controlled Enhancement of the Albedo and Longevity of Low-Level Maritime Clouds,” Atmospheric Science Letters 3, no. 2 (2002). / 201 Contrail clouds: see David J.


pages: 344 words: 96,020

Hacking Growth: How Today's Fastest-Growing Companies Drive Breakout Success by Sean Ellis, Morgan Brown

Airbnb, Amazon Web Services, barriers to entry, bounce rate, business intelligence, business process, correlation does not imply causation, crowdsourcing, DevOps, Elon Musk, game design, Google Glasses, Internet of things, inventory management, iterative process, Jeff Bezos, Khan Academy, Lean Startup, Lyft, Mark Zuckerberg, market design, minimum viable product, Network effects, Paul Graham, Peter Thiel, Ponzi scheme, recommendation engine, ride hailing / ride sharing, side project, Silicon Valley, Silicon Valley startup, Skype, Snapchat, software as a service, Steve Jobs, subscription business, Uber and Lyft, Uber for X, working poor, Y Combinator, young professional

It also leads the acquisition of promising digital start-ups, such as mobile fashion search app Stylr, and social recipe aggregator Yumprint, and works to integrate their technology and talent into Walmart’s digital offerings. It’s important to emphasize that even when teams are given independent authority, they need the strong backing of top management in order to navigate the internal sensitivities and frictions that can arise between product, marketing, design, and engineering specialists who have their own notions of what’s important and the “right way” to do things. MELDING MINDS AND DISMISSING LORE It’s not unusual for someone setting up a growth team for the first time within a company to encounter some initial resistance. For most companies—the exception being the earliest stage start-ups where organizational silos and norms have yet to crystallize—setting up a growth team, or set of teams, will involve either a significant realignment of personnel and reporting structures or a rededication of some of people’s time and shifting of their responsibilities, either in an ongoing capacity or for the duration of a specific growth mission.


pages: 385 words: 133,839

The Coke Machine: The Dirty Truth Behind the World's Favorite Soft Drink by Michael Blanding

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carbon footprint, clean water, collective bargaining, corporate social responsibility, Exxon Valdez, Gordon Gekko, Internet Archive, laissez-faire capitalism, market design, Naomi Klein, New Journalism, Ponzi scheme, profit motive, Ralph Nader, rolodex, Ronald Reagan, shareholder value, The Wealth of Nations by Adam Smith, Thorstein Veblen, union organizing, Upton Sinclair

People of all ages drink it. It has a bite and a distinctive taste. It comes in a contour bottle. It is modern, funny, emotional, simple, large, friendly, consistent, and everywhere.” Of course, such an approach to advertising raises the question: At what point are you anticipating customers’ needs and at what point are you creating them? Coke didn’t dwell on the ques­ tion long. For each attribute, the marketers designed a different ad, rolling them all together in a new campaign under the slogan “Always Coca-Cola” (which had the delicious double entendre of harkening back to Coke’s heritage while encouraging consumers to drink it at every occasion). At the same time, Zyman shook up Madison Avenue by spreading work among different agencies, having them compete for Coke’s vast advertis­ ing war chest. Along with Apple and Nike, Coke even began to contract out BIGGERING AND BIGGERING 71 to Hollywood powerhouse Creative Artists Agency, which created one of Coke’s most compelling symbols.


pages: 302 words: 82,233

Beautiful security by Andy Oram, John Viega

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Albert Einstein, Amazon Web Services, business intelligence, business process, call centre, cloud computing, corporate governance, credit crunch, crowdsourcing, defense in depth, Donald Davies, en.wikipedia.org, fault tolerance, Firefox, loose coupling, Marc Andreessen, market design, Monroe Doctrine, new economy, Nicholas Carr, Nick Leeson, Norbert Wiener, optical character recognition, packet switching, peer-to-peer, performance metric, pirate software, Robert Bork, Search for Extraterrestrial Intelligence, security theater, SETI@home, Silicon Valley, Skype, software as a service, statistical model, Steven Levy, The Wisdom of Crowds, Upton Sinclair, web application, web of trust, x509 certificate, zero day, Zimmermann PGP

In addition, he is one of Symantec’s primary spokespersons for communicating critical information about security outbreaks to the public. He holds a B.S. in electrical and computer engineering from Carnegie Mellon University and is a Certified Information Systems Security Professional (CISSP). B ENJAMIN E DELMAN is an assistant professor at the Harvard Business School. His research focuses on market design, particularly regarding electronic markets and Internet advertising. His recent work compares the revenue of alternative structures of pay-per-click advertising auctions, quantifying the losses caused by early, inefficient auction systems. He has also analyzed the stability and truth-telling properties of certain online advertising mechanisms, and he has designed a simulated bidding environment to evaluate bidding strategies empirically.


pages: 441 words: 136,954

That Used to Be Us by Thomas L. Friedman, Michael Mandelbaum

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3D printing, Affordable Care Act / Obamacare, Albert Einstein, Amazon Web Services, American Society of Civil Engineers: Report Card, Andy Kessler, Ayatollah Khomeini, bank run, barriers to entry, Berlin Wall, blue-collar work, Bretton Woods, business process, call centre, carbon footprint, Carmen Reinhart, Cass Sunstein, centre right, Climatic Research Unit, cloud computing, collective bargaining, corporate social responsibility, creative destruction, Credit Default Swap, crowdsourcing, delayed gratification, energy security, Fall of the Berlin Wall, fear of failure, full employment, Google Earth, illegal immigration, immigration reform, income inequality, Intergovernmental Panel on Climate Change (IPCC), job automation, Kenneth Rogoff, knowledge economy, Lean Startup, low skilled workers, Mark Zuckerberg, market design, mass immigration, more computing power than Apollo, Network effects, obamacare, oil shock, pension reform, Report Card for America’s Infrastructure, rising living standards, Ronald Reagan, Rosa Parks, Saturday Night Live, shareholder value, Silicon Valley, Silicon Valley startup, Skype, Steve Jobs, the scientific method, Thomas L Friedman, too big to fail, University of East Anglia, WikiLeaks

“What they have in common,” said Hogg, “is superb surgeons with high levels of skill, enthusiasm for the project, an interest in research, and reasonable costs.” What’s in it for America? As long as the venture money, core innovation, and key management comes from this country—a lot. If EndoStim works out, its tiny headquarters in St. Louis will grow much larger. The United States is where the best jobs—top management, marketing, design—and the main shareholders will be, said Hogg. Where innovation occurs and capital is raised still matters. To go from EndoStim to Eko India Financial Services—humming away in a garage in South Delhi—is to go from the most virtual of startups to the most conventional, but it is still striking how much they have in common. Eko’s founders, Abhishek Sinha and his brother Abhinav, started with the simplest observation: Low-wage Indian migrant workers flocking to Delhi from poorer regions had no place to put their savings and no secure way to send money home to their families.


pages: 479 words: 133,092

The Coke Machine by Michael Blanding

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carbon footprint, clean water, collective bargaining, corporate social responsibility, Exxon Valdez, Gordon Gekko, Internet Archive, laissez-faire capitalism, market design, Naomi Klein, New Journalism, Ponzi scheme, profit motive, Ralph Nader, rolodex, Ronald Reagan, shareholder value, The Wealth of Nations by Adam Smith, Thorstein Veblen, union organizing, Upton Sinclair

People of all ages drink it. It has a bite and a distinctive taste. It comes in a contour bottle. It is modern, funny, emotional, simple, large, friendly, consistent, and everywhere.” Of course, such an approach to advertising raises the question: At what point are you anticipating customers’ needs and at what point are you creating them? Coke didn’t dwell on the question long. For each attribute, the marketers designed a different ad, rolling them all together in a new campaign under the slogan “Always Coca-Cola” (which had the delicious double entendre of harkening back to Coke’s heritage while encouraging consumers to drink it at every occasion). At the same time, Zyman shook up Madison Avenue by spreading work among different agencies, having them compete for Coke’s vast advertising war chest. Along with Apple and Nike, Coke even began to contract out to Hollywood powerhouse Creative Artists Agency, which created one of Coke’s most compelling symbols.


pages: 484 words: 136,735

Capitalism 4.0: The Birth of a New Economy in the Aftermath of Crisis by Anatole Kaletsky

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bank run, banking crisis, Benoit Mandelbrot, Berlin Wall, Black Swan, bonus culture, Bretton Woods, BRICs, Carmen Reinhart, cognitive dissonance, collapse of Lehman Brothers, Corn Laws, correlation does not imply causation, creative destruction, credit crunch, currency manipulation / currency intervention, David Ricardo: comparative advantage, deglobalization, Deng Xiaoping, Edward Glaeser, Eugene Fama: efficient market hypothesis, eurozone crisis, experimental economics, F. W. de Klerk, failed state, Fall of the Berlin Wall, financial deregulation, financial innovation, Financial Instability Hypothesis, floating exchange rates, full employment, George Akerlof, global rebalancing, Hyman Minsky, income inequality, information asymmetry, invisible hand, Isaac Newton, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, laissez-faire capitalism, Long Term Capital Management, mandelbrot fractal, market design, market fundamentalism, Martin Wolf, money market fund, moral hazard, mortgage debt, new economy, Northern Rock, offshore financial centre, oil shock, paradox of thrift, Pareto efficiency, Paul Samuelson, peak oil, pets.com, Ponzi scheme, post-industrial society, price stability, profit maximization, profit motive, quantitative easing, Ralph Waldo Emerson, random walk, rent-seeking, reserve currency, rising living standards, Robert Shiller, Robert Shiller, Ronald Reagan, shareholder value, short selling, South Sea Bubble, sovereign wealth fund, special drawing rights, statistical model, The Chicago School, The Great Moderation, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions, too big to fail, Vilfredo Pareto, Washington Consensus, zero-sum game

CHAPTER THIRTEEN The Adaptive Mixed Economy Adaptive (adj): having a capacity for adjustment to environmental conditions . . . [The capacity] of an organism or its parts that makes it more fit for existence under the conditions of its environment. —Webster’s Dictionary CAPITALISM 4.0 WILL BE an adaptive mixed economy. But what does this really mean? First, it will be explicitly a mixed economy. It will combine government and business in partnership rather than opposition and deliberately mix normal competitive markets, designed to be as transparent and efficient as possible, with a smaller number of controlled markets, consciously regulated to limit their “efficiency” in the narrow and misleading sense of Capitalism 3. Second, Capitalism 4.0 will be an adaptive system, able and willing to change its institutional structure, its regulations, and its economic principles in response to changing events. The obvious examples of new interaction between governments and markets will be seen in the financial area, where more detailed and intrusive regulation is inevitable.


pages: 607 words: 133,452

Against Intellectual Monopoly by Michele Boldrin, David K. Levine

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accounting loophole / creative accounting, agricultural Revolution, barriers to entry, cognitive bias, creative destruction, David Ricardo: comparative advantage, Dean Kamen, Donald Trump, double entry bookkeeping, en.wikipedia.org, endogenous growth, Ernest Rutherford, experimental economics, financial innovation, informal economy, interchangeable parts, invention of radio, invention of the printing press, invisible hand, James Watt: steam engine, Jean Tirole, John Harrison: Longitude, Joseph Schumpeter, Kenneth Arrow, linear programming, market bubble, market design, mutually assured destruction, Nash equilibrium, new economy, open economy, peer-to-peer, pirate software, placebo effect, price discrimination, profit maximization, rent-seeking, Richard Stallman, Silicon Valley, Skype, slashdot, software patent, the market place, total factor productivity, trade liberalization, transaction costs, Y2K

See also non-compete clauses x-inefficiency, 68 tragedy of the commons, 156, 177 transaction costs, 254 Zimbabwe, 151–152 Document Outline Cover Half-title Title Copyright Contents Acknowledgments ONE Introduction Comments Notes TWO Creation under Competition Software �� �� Copyrightables: Books, News, Movies, and Music �� �� The Modern American Newspaper The World Before Copyright �� The Birth of the Movie and of the Recording Industries �� �� Comments Notes THREE Innovation under Competition World without Patent The Industrial Revolution and the Steam Engine Agriculture Spanish Hortalezas and Italian Maglioni Financial Markets Design Sports Profits without Patents Patent Pools Comments Notes FOUR The Evil of Intellectual Monopoly The Cost of Patent �� �� �� Undoing Progress �� �� �� �� �� Comments Notes FIVE The Devil in Disney Everlasting Copyright The Economics ofMusic The Digital Millennium Copyright Act Freedom of Expression From Policy Error to Policy Blunder: Mandating Encryption Rent Seeking and Taxes Notes SIX How Competition Works The Fruits of the Idea Tree Fixed Costs and Competition Indivisibility The Collaborative Advantage The First-Mover Advantage �� �� Ideas of Uncertain Value The Social Value of Imitation Notes SEVEN Defenses of Intellectual Monopoly Private Property and Public Goods Economic Arguments for Intellectual Monopoly Fixed Cost and Constant Marginal Cost �� The Imitative Externality Quantifying Unpriced Spillovers Secrecy and Patents Schumpeterian Good Monopoly The Idea Economy The Global Economy The Public Domain and the Commons Notes EIGHT Does Intellectual Monopoly Increase Innovation?


pages: 478 words: 126,416

Other People's Money: Masters of the Universe or Servants of the People? by John Kay

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Affordable Care Act / Obamacare, asset-backed security, bank run, banking crisis, Basel III, Bernie Madoff, Big bang: deregulation of the City of London, bitcoin, Black Swan, Bonfire of the Vanities, bonus culture, Bretton Woods, call centre, capital asset pricing model, Capital in the Twenty-First Century by Thomas Piketty, cognitive dissonance, corporate governance, Credit Default Swap, cross-subsidies, dematerialisation, diversification, diversified portfolio, Edward Lloyd's coffeehouse, Elon Musk, Eugene Fama: efficient market hypothesis, eurozone crisis, financial innovation, financial intermediation, financial thriller, fixed income, Flash crash, forward guidance, Fractional reserve banking, full employment, George Akerlof, German hyperinflation, Goldman Sachs: Vampire Squid, Growth in a Time of Debt, income inequality, index fund, inflation targeting, information asymmetry, intangible asset, interest rate derivative, interest rate swap, invention of the wheel, Irish property bubble, Isaac Newton, John Meriwether, light touch regulation, London Whale, Long Term Capital Management, loose coupling, low cost carrier, M-Pesa, market design, millennium bug, mittelstand, money market fund, moral hazard, mortgage debt, Myron Scholes, new economy, Nick Leeson, Northern Rock, obamacare, Occupy movement, offshore financial centre, oil shock, passive investing, Paul Samuelson, peer-to-peer lending, performance metric, Peter Thiel, Piper Alpha, Ponzi scheme, price mechanism, purchasing power parity, quantitative easing, quantitative trading / quantitative finance, railway mania, Ralph Waldo Emerson, random walk, regulatory arbitrage, Renaissance Technologies, rent control, Richard Feynman, risk tolerance, road to serfdom, Robert Shiller, Robert Shiller, Ronald Reagan, Schrödinger's Cat, shareholder value, Silicon Valley, Simon Kuznets, South Sea Bubble, sovereign wealth fund, Spread Networks laid a new fibre optics cable between New York and Chicago, Steve Jobs, Steve Wozniak, The Great Moderation, The Market for Lemons, the market place, The Myth of the Rational Market, the payments system, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Tobin tax, too big to fail, transaction costs, tulip mania, Upton Sinclair, Vanguard fund, Washington Consensus, We are the 99%, Yom Kippur War

The provision of low-cost funding to the banking system raises the profitability of banking, and increases in the supply of liquidity tend to push up asset prices, with significant distributional effects across income groups and between generations. Few of these effects are intended or desirable, and the notion that monetary policy is anonymous and impersonal is flawed. The thought experiment – suppose electricity were like finance – is not as fanciful as it might appear. In 1996 California began a process of deregulating its electricity industry, centred round the creation of a wholesale market in electricity. The market design retained a mixture of price caps and supply constraints but encouraged the entry of traders, including some with no, or only a negligible, interest in either the generation of electricity in California or the supply of electricity to the residents of the state. In the summer of 2000 and 2001 business and social life in California was disrupted by black-outs and price hikes in electricity. Enron traders were to the fore, implementing strategies described as ‘Death Star’ and ‘Get Shorty’.


pages: 442 words: 39,064

Why Stock Markets Crash: Critical Events in Complex Financial Systems by Didier Sornette

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Asian financial crisis, asset allocation, Berlin Wall, Bretton Woods, Brownian motion, capital asset pricing model, capital controls, continuous double auction, currency peg, Deng Xiaoping, discrete time, diversified portfolio, Elliott wave, Erdős number, experimental economics, financial innovation, floating exchange rates, frictionless, frictionless market, full employment, global village, implied volatility, index fund, information asymmetry, intangible asset, invisible hand, John von Neumann, joint-stock company, law of one price, Louis Bachelier, mandelbrot fractal, margin call, market bubble, market clearing, market design, market fundamentalism, mental accounting, moral hazard, Network effects, new economy, oil shock, open economy, pattern recognition, Paul Erdős, Paul Samuelson, quantitative trading / quantitative finance, random walk, risk/return, Ronald Reagan, Schrödinger's Cat, selection bias, short selling, Silicon Valley, South Sea Bubble, statistical model, stochastic process, Tacoma Narrows Bridge, technological singularity, The Coming Technological Singularity, The Wealth of Nations by Adam Smith, Tobin tax, total factor productivity, transaction costs, tulip mania, VA Linux, Y2K, yield curve

The artificial market project in particular focuses on the dynamics arising from interactions between human and artificial agents in a stochastic market environment in which agents learn from their interactions, using recently developed techniques in large-scale simulations, approximate dynamic programming, computational learning, and tapping insights in and resources from mathematics, statistics, physics, psychology, and computer science. This laboratory recently constructed an artificial market, designed to match those in experimental-market settings with human subjects, to model complex interactions among artificially intelligent (AI) traders endowed with varying degrees of learning capabilities [79]. The use of AI agents with simple heuristic trading rules and 132 chapter 4 learning algorithms shows that adding trend-follower traders to a population of empirical fundamentalists has an adverse impact on market performance, and the trend-follower traders do poorly overall.


pages: 422 words: 131,666

Life Inc.: How the World Became a Corporation and How to Take It Back by Douglas Rushkoff

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affirmative action, Amazon Mechanical Turk, banks create money, big-box store, Bretton Woods, car-free, colonial exploitation, Community Supported Agriculture, complexity theory, computer age, corporate governance, credit crunch, currency manipulation / currency intervention, David Ricardo: comparative advantage, death of newspapers, don't be evil, Donald Trump, double entry bookkeeping, easy for humans, difficult for computers, financial innovation, Firefox, full employment, global village, Google Earth, greed is good, Howard Rheingold, income per capita, invention of the printing press, invisible hand, Jane Jacobs, John Nash: game theory, joint-stock company, Kevin Kelly, laissez-faire capitalism, loss aversion, market bubble, market design, Marshall McLuhan, Milgram experiment, moral hazard, mutually assured destruction, Naomi Klein, negative equity, new economy, New Urbanism, Norbert Wiener, peak oil, peer-to-peer, place-making, placebo effect, Ponzi scheme, price mechanism, price stability, principal–agent problem, private military company, profit maximization, profit motive, race to the bottom, RAND corporation, rent-seeking, RFID, road to serfdom, Ronald Reagan, short selling, Silicon Valley, Simon Kuznets, social software, Steve Jobs, Telecommunications Act of 1996, telemarketer, The Wealth of Nations by Adam Smith, Thomas L Friedman, too big to fail, trade route, trickle-down economics, union organizing, urban decay, urban planning, urban renewal, Vannevar Bush, Victor Gruen, white flight, working poor, Works Progress Administration, Y2K, young professional, zero-sum game

Every currency embodies specific values through the nature of its design, which ignores certain things and elevates others. For example, the single largest sector of health care providers is never discussed in our health care debates because mothers don’t charge for their caregiving. Vital things such as breathable air and drinkable water have no monetary value until they become scarce. This is not an inherent behavior of markets, only for markets designed to revolve around artificially scarce currencies. Different currencies incentivize different behaviors and, hence, yield different economies. Information Age economies will replace commercial markets with more efficient, high-trust, self-organizing social networks that immediately channel appropriate resources where they are needed. Just as factories and finance were high-leverage tools of the Industrial Age, social software and reputation currencies that fuel these new social markets are the tools of the new economy.


pages: 466 words: 127,728

The Death of Money: The Coming Collapse of the International Monetary System by James Rickards

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Affordable Care Act / Obamacare, Asian financial crisis, asset allocation, Ayatollah Khomeini, bank run, banking crisis, Ben Bernanke: helicopter money, bitcoin, Black Swan, Bretton Woods, BRICs, business climate, capital controls, Carmen Reinhart, central bank independence, centre right, collateralized debt obligation, collective bargaining, complexity theory, computer age, credit crunch, currency peg, David Graeber, debt deflation, Deng Xiaoping, diversification, Edward Snowden, eurozone crisis, fiat currency, financial innovation, financial intermediation, financial repression, fixed income, Flash crash, floating exchange rates, forward guidance, G4S, George Akerlof, global reserve currency, global supply chain, Growth in a Time of Debt, income inequality, inflation targeting, information asymmetry, invisible hand, jitney, John Meriwether, Kenneth Rogoff, labor-force participation, labour mobility, Lao Tzu, liquidationism / Banker’s doctrine / the Treasury view, liquidity trap, Long Term Capital Management, mandelbrot fractal, margin call, market bubble, market clearing, market design, money market fund, money: store of value / unit of account / medium of exchange, mutually assured destruction, obamacare, offshore financial centre, oil shale / tar sands, open economy, Plutocrats, plutocrats, Ponzi scheme, price stability, quantitative easing, RAND corporation, reserve currency, risk-adjusted returns, Rod Stewart played at Stephen Schwarzman birthday party, Ronald Reagan, Satoshi Nakamoto, Silicon Valley, Silicon Valley startup, Skype, sovereign wealth fund, special drawing rights, Stuxnet, The Market for Lemons, Thomas Kuhn: the structure of scientific revolutions, Thomas L Friedman, too big to fail, trade route, uranium enrichment, Washington Consensus, working-age population, yield curve

In comparison, U.S. thinking about financial warfare did not take recognizable shape until ten years later, in 2009, in response to an even bigger shock, the global financial panic of 2008. By 2012, both China and the United States had engaged in extensive efforts to develop strategic and tactical financial warfare doctrines. It was in this context that our group was summoned to brief Andy Marshall and his team on the emerging threat. * * * Financial warfare has both offensive and defensive aspects. Offense includes malicious attacks on an enemy’s financial markets designed to disrupt trading and destroy wealth. Defense involves early detection of an attack and rapid response, such as closing markets or interdicting enemy message traffic. Offense can consist of either first-strike disruption or second-strike retaliation. In game theory, offense and defense converge, since second-strike retaliation can be sufficiently destructive to deter first-strike attacks.


pages: 504 words: 139,137

Efficiently Inefficient: How Smart Money Invests and Market Prices Are Determined by Lasse Heje Pedersen

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activist fund / activist shareholder / activist investor, algorithmic trading, Andrei Shleifer, asset allocation, backtesting, bank run, banking crisis, barriers to entry, Black-Scholes formula, Brownian motion, buy low sell high, capital asset pricing model, commodity trading advisor, conceptual framework, corporate governance, credit crunch, Credit Default Swap, currency peg, David Ricardo: comparative advantage, declining real wages, discounted cash flows, diversification, diversified portfolio, Emanuel Derman, equity premium, Eugene Fama: efficient market hypothesis, fixed income, Flash crash, floating exchange rates, frictionless, frictionless market, Gordon Gekko, implied volatility, index arbitrage, index fund, interest rate swap, late capitalism, law of one price, Long Term Capital Management, margin call, market clearing, market design, market friction, merger arbitrage, money market fund, mortgage debt, Myron Scholes, New Journalism, paper trading, passive investing, price discovery process, price stability, purchasing power parity, quantitative easing, quantitative trading / quantitative finance, random walk, Renaissance Technologies, Richard Thaler, risk-adjusted returns, risk/return, Robert Shiller, Robert Shiller, selection bias, shareholder value, Sharpe ratio, short selling, sovereign wealth fund, statistical arbitrage, statistical model, survivorship bias, systematic trading, technology bubble, time value of money, total factor productivity, transaction costs, value at risk, Vanguard fund, yield curve, zero-coupon bond

Brunnermeier, Markus, Stefan Nagel, and Lasse Heje Pedersen (2008), “Carry Trades and Currency Crashes,” NBER Macroeconomics Annual 23, 313–348. Brunnermeier, M., and L. H. Pedersen (2005), “Predatory Trading,” Journal of Finance 60, 1825–1863. Brunnermeier, M., and L. H. Pedersen (2009), “Market Liquidity and Funding Liquidity,” The Review of Financial Studies 22, 2201–2238. Budish, Eric, Peter Cramton, and John Shim (2013), “The High-Frequency Trading Arms Race: Frequent Batch Auctions as a Market Design Response,” working paper, University of Chicago. Buraschi, Andrea, Robert Kosowski, and Worrawat Sritrakul (2014), “Incentives and Endogenous Risk Taking: A Structural View on Hedge Fund Alphas,” Journal of Finance, forthcoming. Calvet, L. E., J. Y. Campbell, and P. Sodini (2007), “Down or Out: Assessing the Welfare Costs of Household Investment Mistakes,” Journal of Political Economy 115, 707–747.


pages: 391 words: 117,984

The Blue Sweater: Bridging the Gap Between Rich and Poor in an Interconnected World by Jacqueline Novogratz

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access to a mobile phone, Ayatollah Khomeini, Berlin Wall, business process, business process outsourcing, clean water, failed state, Fall of the Berlin Wall, half of the world's population has never made a phone call, Hernando de Soto, Kibera, Lao Tzu, market design, microcredit, out of africa, Ronald Reagan, sensible shoes, side project, Silicon Valley, Skype, The Fortune at the Bottom of the Pyramid, transaction costs, zero-sum game

I also thought of Yasmina Zaidman, a young heroine to many business school students because of her example of how to live a life. I believe this next generation will change the world. Everywhere I go, I meet young people who are hungry and ready to contribute. University students and freshly minted MBAs from across the globe ask me what skills they’ll need for meaningful work in serving the world. They should gain skills in the functional areas of business—marketing, design, distribution, finance—as well as in medicine, law, education, and engineering, because we need more people with tangible skills to contribute to building solutions that work for the poor. And they can be of service in this area by working for NGOs, progressive corporations, or governments. Our team has come to see the work not just as investing patient capital. Although this is at the center of our mission, we’ve learned repeatedly that money is not enough.


pages: 387 words: 120,155

Inside the Nudge Unit: How Small Changes Can Make a Big Difference by David Halpern

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Affordable Care Act / Obamacare, availability heuristic, carbon footprint, Cass Sunstein, centre right, choice architecture, cognitive dissonance, collaborative consumption, correlation does not imply causation, Daniel Kahneman / Amos Tversky, endowment effect, happiness index / gross national happiness, hindsight bias, illegal immigration, job satisfaction, Kickstarter, libertarian paternalism, light touch regulation, market design, meta analysis, meta-analysis, Milgram experiment, nudge unit, peer-to-peer lending, pension reform, presumed consent, QR code, quantitative easing, randomized controlled trial, Richard Feynman, Richard Thaler, Right to Buy, Ronald Reagan, Rory Sutherland, Simon Kuznets, skunkworks, the built environment, theory of mind, traffic fines, World Values Survey

Similarly, we know that ideas and practices spread through social networks, and yet that these networks often work to keep out new ideas, too. Even in science it’s often remarked that ‘science progresses one coffin at a time’, as people so rarely change their views within their lifetimes.12 So what are the best ways of spreading new ideas and better practices? Is it peer-to-peer learning, or new forms of online education? Can we reshape incentives and market designs to catalyse the spread of better practice? These might seem less grand questions than how to address disadvantage or conflict, but they are fundamental to economic and social progress. A linked issue is to focus behavioural science on to organisations and governments themselves. It’s a common question at seminars, to which we have only a partial answer, as to how behavioural science can make organisations work better.


pages: 464 words: 155,696

Becoming Steve Jobs: The Evolution of a Reckless Upstart Into a Visionary Leader by Brent Schlender, Rick Tetzeli

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Albert Einstein, Apple II, Apple's 1984 Super Bowl advert, Bill Gates: Altair 8800, Bob Noyce, Byte Shop, computer age, corporate governance, El Camino Real, Isaac Newton, John Markoff, Jony Ive, Marc Andreessen, market design, McMansion, Menlo Park, Paul Terrell, popular electronics, QWERTY keyboard, Ronald Reagan, Sand Hill Road, side project, Silicon Valley, Silicon Valley startup, skunkworks, Steve Ballmer, Steve Jobs, Steve Wozniak, Steven Levy, Stewart Brand, Tim Cook: Apple, Wall-E, Watson beat the top human players on Jeopardy!, Whole Earth Catalog

“He was working his ass off till the end, in pain,” remembers Eddy Cue. “You could see it in the meetings, he was taking morphine and you could see he was in pain, but he was still interested.” He did make some adjustments upon his return, most of which were simply extensions of the shifts in priority he’d made after his 2004 operation. He focused on the parts of the ongoing business he cared about most—marketing, design, and the product introductions—and he started to take active steps to ensure that he would leave Apple in good shape after his death. This was a process that had started earlier—Tim Cook says that Steve started thinking of succession and the post-Steve era of the company back in 2004—but everything accelerated now. He spent some of his time working with Joel Podolny, a professor he had hired away from the Yale School of Management, to develop the curriculum for an executive education program he wanted to create called Apple University.


pages: 515 words: 132,295

Makers and Takers: The Rise of Finance and the Fall of American Business by Rana Foroohar

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3D printing, accounting loophole / creative accounting, activist fund / activist shareholder / activist investor, additive manufacturing, Airbnb, algorithmic trading, Alvin Roth, Asian financial crisis, asset allocation, bank run, Basel III, bonus culture, Bretton Woods, British Empire, call centre, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, carried interest, centralized clearinghouse, clean water, collateralized debt obligation, commoditize, computerized trading, corporate governance, corporate raider, corporate social responsibility, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, crowdsourcing, David Graeber, deskilling, Detroit bankruptcy, diversification, Double Irish / Dutch Sandwich, Emanuel Derman, Eugene Fama: efficient market hypothesis, financial deregulation, financial intermediation, Frederick Winslow Taylor, George Akerlof, gig economy, Goldman Sachs: Vampire Squid, Gordon Gekko, greed is good, High speed trading, Home mortgage interest deduction, housing crisis, Howard Rheingold, Hyman Minsky, income inequality, index fund, information asymmetry, interest rate derivative, interest rate swap, Internet of things, invisible hand, John Markoff, joint-stock company, joint-stock limited liability company, Kenneth Rogoff, knowledge economy, labor-force participation, labour mobility, London Whale, Long Term Capital Management, manufacturing employment, market design, Martin Wolf, money market fund, moral hazard, mortgage debt, mortgage tax deduction, new economy, non-tariff barriers, offshore financial centre, oil shock, passive investing, Paul Samuelson, pensions crisis, Ponzi scheme, principal–agent problem, quantitative easing, quantitative trading / quantitative finance, race to the bottom, Ralph Nader, Rana Plaza, RAND corporation, random walk, rent control, Robert Shiller, Robert Shiller, Ronald Reagan, Satyajit Das, Second Machine Age, shareholder value, sharing economy, Silicon Valley, Silicon Valley startup, Snapchat, sovereign wealth fund, Steve Jobs, technology bubble, The Chicago School, the new new thing, The Spirit Level, The Wealth of Nations by Adam Smith, Tim Cook: Apple, Tobin tax, too big to fail, trickle-down economics, Tyler Cowen: Great Stagnation, Vanguard fund, zero-sum game

Princeton, NJ: Princeton University Press, 2010. Reich, Robert B. Supercapitalism: The Transformation of Business, Democracy, and Everyday Life. New York: Alfred A. Knopf, 2007. Reinhart, Carmen M., and Kenneth S. Rogoff. This Time Is Different: Eight Centuries of Financial Folly. Princeton, NJ: Princeton University Press, 2009. Roth, Alvin E. Who Gets What—and Why: The New Economics of Matchmaking and Market Design. Boston: Houghton Mifflin Harcourt, 2015. Rothkopf, David. Power, Inc.: The Epic Rivalry Between Big Business and Government—and the Reckoning That Lies Ahead. New York: Farrar, Straus and Giroux, 2012. Saval, Nikil. Cubed: The Secret History of the Workplace. New York: Doubleday, 2014. Scheiber, Noam. The Escape Artists: How Obama’s Team Fumbled the Recovery. New York: Simon & Schuster, 2012.

The Future of Technology by Tom Standage

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air freight, barriers to entry, business process, business process outsourcing, call centre, Clayton Christensen, computer vision, connected car, corporate governance, creative destruction, disintermediation, distributed generation, double helix, experimental economics, full employment, hydrogen economy, industrial robot, informal economy, information asymmetry, interchangeable parts, job satisfaction, labour market flexibility, Marc Andreessen, market design, Menlo Park, millennium bug, moral hazard, natural language processing, Network effects, new economy, Nicholas Carr, optical character recognition, railway mania, rent-seeking, RFID, Silicon Valley, Silicon Valley ideology, Silicon Valley startup, six sigma, Skype, smart grid, software as a service, spectrum auction, speech recognition, stem cell, Steve Ballmer, technology bubble, telemarketer, transcontinental railway, Y2K

In nature, that allows them to lock on to parts of invading pathogens, neutralising the invader. In the laboratory it means that biotechnologists can create antibodies with active sites tailored to perform particular tasks. One task they are often asked to perform is to attach themselves to a cancer cell. Genentech, the oldest biotechnology company around, has two therapeutic antibodies on the market designed do just that: Herceptin, which attacks breast cancer, and Rituxan, which attacks a form of cancer called non-Hodgkin’s lymphoma. The latest wheeze, perfected by idec, is to attach a radioactive isotope to an antibody, so that when the isotope decays, the target cell is destroyed by the radiation. This is the most precise form of radiotherapy imaginable. Rheumatoid arthritis is another target.


pages: 998 words: 211,235

A Beautiful Mind by Sylvia Nasar

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Al Roth, Albert Einstein, Andrew Wiles, Brownian motion, cognitive dissonance, Columbine, experimental economics, fear of failure, Gunnar Myrdal, Henri Poincaré, invisible hand, Isaac Newton, John Conway, John Nash: game theory, John von Neumann, Kenneth Arrow, Kenneth Rogoff, linear programming, lone genius, market design, medical residency, Nash equilibrium, Norbert Wiener, Paul Erdős, Paul Samuelson, prisoner's dilemma, RAND corporation, Ronald Coase, second-price auction, Silicon Valley, Simon Singh, spectrum auction, The Wealth of Nations by Adam Smith, Thorstein Veblen, upwardly mobile, zero-sum game

William Safire, “The Greatest Auction Ever,” New York Times, 3.16.95, as quoted by Paul Milgrom, Auction Theory’ for Privatization (New York: Cambridge University Press, forthcoming). 3. Edmund Andrews, “Wireless Bidders Jostle for Position,” New York Times, 12.5.94. 4. Milgrom, Auction Theory for Privatization, op. cit. 5. Michael Rothschild, dean of the Woodrow Wilson School, remarks at conference, “Market Design: Spectrum Auctions and Beyond,” Princeton University, 11.9.95. 6. Peter C. Cramton, “Dealing with Rivals? Allocating Scarce Resources? You Need Game Theory” (Xerox, 1994). Nash provided the fundamental theory used to analyze and predict behavior in simple games in which rational players have complete knowledge of each other’s preferences and abilities. Harsanyi, in papers published in 1967 and 1968, analyzed games in which some parties had private information.


pages: 701 words: 199,010

The Crisis of Crowding: Quant Copycats, Ugly Models, and the New Crash Normal by Ludwig B. Chincarini

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affirmative action, asset-backed security, automated trading system, bank run, banking crisis, Basel III, Bernie Madoff, Black-Scholes formula, buttonwood tree, Carmen Reinhart, central bank independence, collapse of Lehman Brothers, collateralized debt obligation, collective bargaining, corporate governance, correlation coefficient, Credit Default Swap, credit default swaps / collateralized debt obligations, delta neutral, discounted cash flows, diversification, diversified portfolio, family office, financial innovation, financial intermediation, fixed income, Flash crash, full employment, Gini coefficient, high net worth, hindsight bias, housing crisis, implied volatility, income inequality, interest rate derivative, interest rate swap, John Meriwether, labour mobility, liquidity trap, London Interbank Offered Rate, Long Term Capital Management, low skilled workers, margin call, market design, market fundamentalism, merger arbitrage, Mexican peso crisis / tequila crisis, money market fund, moral hazard, mortgage debt, Myron Scholes, negative equity, Northern Rock, Occupy movement, oil shock, price stability, quantitative easing, quantitative hedge fund, quantitative trading / quantitative finance, Ralph Waldo Emerson, regulatory arbitrage, Renaissance Technologies, risk tolerance, risk-adjusted returns, Robert Shiller, Robert Shiller, Ronald Reagan, Sharpe ratio, short selling, sovereign wealth fund, speech recognition, statistical arbitrage, statistical model, survivorship bias, systematic trading, The Great Moderation, too big to fail, transaction costs, value at risk, yield curve, zero-coupon bond

This was one of the many ideas that this joint collaboration would have achieved. It wasn’t a hedge fund and it was very innovative. LTCM didn’t see its hedge fund as the end product. Its goal was to apply quantitative and creative techniques to create an impressive financial company. Unfortunately, the hedge fund that would have provided the initial fuel to do this collapsed before it could be done. We were a couple of decades ahead of the market, designing solutions that now are being introduced for the first time: life-cycle savings and other innovations. Unfortunately, I don’t think the bank in Italy really understood this and caused negotiations to drag on. They were after the high returns of the LTCM fund at a time when stock markets were yielding double digits. That was of course the wrong attitude. Management in the bank was fearful that this partnership would cause them to lose control.