Allison's Ode to the Second Moment


Welcome to the 68th issue of Allison’s Ode to the Second Moment, a newsletter about the tools that reduce risk—but offers no guarantees if you use the wrong tool for the wrong job.


This may surprise some of you to hear, but I actually love regulation. I think it is critical for a functioning economy. There are many market imperfections that require intervention. The imperfections might be naturally occurring or the result of some external distortion—but they exist. Regulations play an important role in terms of correcting imperfections and simply helping markets work better. However, regulations are a tool, and you need to be sure that you’re using the right tool for the right job. Otherwise you might create new distortions that cause even bigger problems.

Any discussion of using the right tools for the right job is missing from the break-up tech fervor that is sweeping both the nation and the world. Most people can agree that there are problems with big tech. The sheer size of some tech firms raises the level of risk. They have all of our data, which they don’t always use responsibly. Big tech also contributes to an anti-competitive environment. And all of this is bad. Some of it even justifies government intervention in order to fix it.

Still, I’m not convinced (though I could be, if I heard a good argument) that anti-trust, or breaking up big tech, is the solution to these problems. Anti-trust won’t necessarily address our issues with data or security. And in a global economy in which scale matters, I’m not sure that it will help with competition, either.

Anti-trust is a useful, powerful tool, and it works pretty well if the problem to solve is that monopolies are taking advantage of customers by charging them huge mark-ups. The weird thing about tech today is that their services are free, or result in lower prices. Yes, yes, I know, I’ve heard the argument that data is valuable, and that how many steps I walked yesterday is apparently worth more than the value I derive from using Google Maps. But I’m not buying that argument. Aggregate data is valuable, but individual data is worthless. And even if you divided up the value of big data and distributed it to every individual who contributed to it, you still would not get the value that I feel from using Google Maps and search. But that’s my welfare calculation.

The weird thing about anti-trust today is that rather than lowering consumer prices, its objective appears to be to increase prices. And while I’m all for regulating tech, we need to first identify the exact problems that we’re concerned about, because only then can we determine the regulatory framework that would best address those problems.

So, what should we do? To be honest, I’m not sure. I suggest reading my interview with Jean Tirole (who knows more about market structure than anyone!) about how to think about the problem. Then, maybe we’ll find the answers.

My personal trainer is the future of labor

I suppose this means that you could call me a techno-optimist. I remain convinced that humans will have jobs in the future. Take the example of the industrial revolution, which completely changed the nature of work. The creation of a power loom still required workers to make cloth, but you needed fewer people—and you needed people with stronger skills to manage the new technology. The remaining workers became more productive, as fewer people were able to make a lot more fabric. Fabric also became cheaper. Of course, this also meant that some people lost their jobs, and the skills they had developed were no longer valuable in the workplace. This created a long, messy, and painful transition that lasted for centuries before humans finally adjusted to their new role in the industrial economy. But in the end, people still had jobs.

I think the same thing is happening now. Take, for example, my new personal trainer, who lives 3,000 miles away. He fulfills the primary benefits of training—he makes me go to the gym by sending reminders and then being disappointed in me if I don't go, and he also tells me what to do when I get there. But because he’s remote, he can train more than 30 people per week. He’s more productive than my in-person trainer, and his services are a fraction of the cost. He makes training more cost-effective and available, even if I end up missing out on some the luxuries of an in-person trainer, such as someone watching my form so that I don’t hurt myself.

In theory, the text message reminders and the detailed work-outs could all come from a bot. But the motivation element would not work with a machine. The fact a real-life person checks up on me is why I go to the gym. And this is where the future of labor could be. Technology has increased the productivity of labor-intensive services, and it also makes these services cheaper. We’ll see more of these hybrid models in which we can get the human touch at scale. Services that once were only available to the wealthy—such as financial planning, luxury vacations, and personal training—will become increasingly more accessible.

And it’s true that this would mean that there would be fewer service workers. But it also means we aren’t cutting humans out of the equation entirely.

And you thought public pensions had bad accounting

There are many reasons to worry about the Chinese economy, including lots of debt coupled with some headwinds, which is never a good combination. Throw in unreliable data and politicians under pressure to deliver consistent, high growth, and there’s definitely reason for concern. That’s the thing about a managed economy—sometimes it works, but when it goes wrong, it goes really wrong.

And it turns out there’s another weakness that’s getting less attention: pensions. Indeed, it always comes down to pensions. In a recent poll, Chinese citizens listed pensions among their top 3 concerns. China has an aging population, as well as a fragmented and under-funded pension system. People often cite inadequate pensions for the high rates of saving, but even that high propensity for saving may not be enough in the end.

In other news

What's in my wallet
For all their whinging, people really love big tech
The case for worrying about debt

Until next time, Pension Geeks!