Posts from December 2021

It would be difficult to write a holiday wrap-up blog post series without a mention of inflation, which became the new boogieman in the latter half of 2021 as we’ve seen inflation rising steadily, with the rate in some categories exceeding 7% year over year.

That inflation is suddenly a problem is really quite remarkable given that 18 months ago everyone was terrified of a depression-level event as a result of mass illness, lockdowns, and so forth. But to the credit of our governments, while a lot of mistakes have been made, it’s pretty clear that many of the policies that were instituted–particularly the various financial aid packages that were put together–have done what, at the outset, would have seemed impossible: turned the threat of economic calamity into the kind of boom we all wished we could’ve seen after the 2008 crash.

But like so many of the other topics I’ve written about, this is just another example of an issue that, for my generation, is completely novel. The last time inflation exceeded 3% was way back in 1991! Meanwhile, the prime interest rate, which is a key tool for controlling inflation, is at historical lows (thanks 2008!).

For a generation that has never seen real inflation, this situation is novel, frightening, and deeply frustrating, upending yet another aspect of life that was previously familiar and consistent.

Continue reading...

In my introductory post for this series I rattled off a number of topics that seemed especially interesting to me in light of the last two years of COVID, one of which being the relationship between capital and labour. A light and simple topic, obviously, but it seemed worth a post.

Standing in the shower I was thinking about my way into this subject, and then it dawned on me that my post on supply chains, and in particular the topic of supply-demand dynamics, made for a very nice segue into this topic, particularly given the conversations I’ve been having this year regarding the labour market.

I’m going to start off with a basic thesis that I suspect some might find a bit controversial, maybe even mildly offensive, but that (as I understand it) is pretty well understood in the world of economics: Labour is a market, and salaries are our price for our labour. This means that, absent government intervention, salaries are a function of supply and demand, along with all the other forces that make a market function.

This is not what anyone deep down wants to believe!

Naively, I think we’d all like to believe that the value we pay for something reflects what that thing is, in some way, intrinsically worth.

But what makes an iPhone valuable? We know from Apple’s filings that they’re achieving something like 30% gross profit margins on their consumer devices. That means we’re paying over a third more for the device than is reflected in the total costs of raw materials, labour, shipping, and so forth. And yet people still buy those devices, believing them to be worth the additional cost.

What about, say, a collectible baseball card? Intrinsically, the card is worth pennies in paper and ink. And yet there is a market in which such a thing could sell for hundreds or thousands of dollars.

The reality is that prices reflect not just pure utility, but rather something more intangible.

To offer just a little taste of just how intangible, consider the idea of the Keynesian beauty contest:

This would have investors pricing shares not based on what they think an asset’s fundamental value is, or even on what investors think other investors believe about the asset’s value, but on what they think other investors believe is the average opinion about the value of the asset, or even higher-order assessments.

In other words, our estimate of the value of a good isn’t necessarily even based on our own idea of its intrinsic value, but rather our idea of what other people believe to be its intrinsic value.

Meta!

Well, the same is true of labour, and the forces unleashed by COVID that have turned markets for goods and services upside down have had similar impacts on the labour market as well.

Continue reading...

I’m going to preface this post by noting the obvious: I am not a trained economist or anything like that. While I do cover some of the nuts and bolts of the supply chain crisis as I understand it, I have no doubt there’s much I’m misrepresenting and even more I’m missing outright.

Now, with all that said, I’m gonna dive right in and hope I don’t get anything egregiously wrong. So, without further adieu…

Growing up in a place like Alberta, you’re never really that far from the agricultural sector. But, as a born and bred city boy from the bustling metropolis that is Edmonton, it’s not unusual to hear someone lament that folks really should have a better understanding of where their food comes from.

And I can’t help but agree!

Food is one of those many things many of us take for granted. If you’ve grown up in some of the more privileged places in the world (and there are plenty that are far less fortunate), it’s pretty normal to walk into a grocery story and just expect to find a huge range of products at affordable prices, many sourced from all over the world.

But it isn’t until times of crisis–usually a natural disaster of some kind–that we actually spend any time thinking about how that food travels from farm to grocery story to plate.

Oddly, I’ve rarely had that conversation about any other products that feature in our day to day lives. Until recently, who among us had spent any time wondering how our television or engine block or framing lumber ended up in our possession?

But, as with so many things, the pandemic has opened our eyes, forcing us to face these complex, interconnected systems that govern so much of our lives.

Continue reading...

I decided to search for the term “post-truth” before I starting writing this entry, as I wanted to confirm that I was using the right language. That took me to the Wikipedia page on the topic where I was a bit surprised to discover the term was coined over five years ago to describe a phenomenon whose consequences we’re only beginning to grasp today. And even then the term was describing something that, for years, we had all seen claw it’s way into the world, even if we couldn’t name it.

Facts. Truth. Reality. We used to collectively joke that the way you could tell someone was crazy or high was by whether or not they described the sky as blue. Today, it wouldn’t surprise me if there was some Telegram channel somewhere claiming the sky was actually red and that the United States was engaged in a massive psy-op to convince us otherwise.

It feels like, in the last four or five years, the rate of erosion of our shared understanding of reality has only accelerated. The Internet has served as fertile ground for a rotten crop of lies and conspiracy theories, egged on by corrupt politicians who recognize the manipulative power of such things.

But deep down I think there’s something more fundamental going on: I think people find themselves frustrated and bewildered by a world we don’t understand, and so they’re looking for certainty and simplicity in an increasingly uncertain, complicated, and rapidly changing world.

And into that confusion has come misinformation peddlers and conspiracy theorists who’ve learned how to weaponize the Internet, allowing them to exploit the vulnerable for personal gain.

Continue reading...

There really is something truly unique about “The Lord of the Rings” (hereafter to be abbreviated “LOTR” because I’m way too lazy to type that out over and over). It’s well recognized that without J. R. R. Tolkien we might not have Brandon Sanderson or Robert Jordon or George R. R. Martin. But, at least in my own experience, even within the annals of high fantasy, Tolkien’s work is something special.

It had been at least 25 years since I’d last read the book. But I’d just come off of re-reading the Stormlight Archives and was waiting for the ninth Expanse book to come out, so it seemed like as good a time as any to return to Middle Earth to see how it held up.

And I’ll be damned if it isn’t still one of my absolute favourite books.

I have to wonder, though, if I would’ve felt quite the same way had I not read the book at this particular time in my life. Like the people of Hobbiton, we find ourselves facing a vague threat that permeates our lives and has profoundly changed the world in ways we can barely understand. It’s dizzying! And, like the end of the Third Age of Middle Earth, while I know that eventually this threat will diminish, the world will never return to the way it was. And maybe that’s okay.

Continue reading...

We ask a lot of the human brain these days. For a species that evolved on the savannah of Africa, hunting and gathering in small social groups, we’re now a population of 8 billion people living and working together, tackling ever large and more complex problems. Through application of our incredible minds, unmatched in the rest of the natural world, we’ve managed to spread to every corner of the planet, plumbed the depths of the earth, dived to the bottoms of the oceans, and extended our reach into the solar system.

And yet, through it all, we find ourselves grappling with ideas that seems beyond the reach of our comprehension.

Let’s try a little Stoic exercise. First, visualize yourself from above in the room you’re sitting in now. Next, pull back, and try to visualize your home and your position in it. Now pull back again, visualizing the block on which your house sits. And again, but your quadrant of the city. Now the city itself.

Now consider how quickly you lose the ability to truly reason about size and distance. For me, beyond my local neighbourhood, I start to lose a sense of scale. When just thinking about my city, I can only picture my position on the map because of how often I’ve punched my address into a GPS.

Next imagine the scale of your country or the planet. Already we’re beyond the reach of the human mind to reason. Instead, we have to rely on relatable metaphors that connect our ground truths to these types of scales.

And the solar system? Our galaxy? Good luck. The universe? Impossible!

The same can be said of many concepts. I’ve long believed that the inability for humanity to truly rally together to address climate change is, to a great degree, a consequence of the inability of the human mind to truly understand the magnitude of aggregate human impact on the planet, or the timescales over which we’re changing it. Humanity itself has gotten so large that our collective behaviour is beyond our intuition.

Probability and statistics are another example of this phenomenon. The human mind is simply not wired to think in these terms–I suspect this is one of the many reasons why Dr. Richard Feynman is famously quoted as saying “If you think you understand quantum mechanics, you don’t understand quantum mechanics.”

Now, in the past, we mostly led our lives without spending a lot of time thinking about statistics. Rather, we’d use our intuition to make what we believed were sensible decisions every day; intuition that was often very wrong! But in the end, given the localized impacts of these decisions, that they were based on faulty reasoning didn’t matter all that much.

But, of course, the pandemic has upended things, turning normal uncertainty into life-or-death decision making. And we’re just not wired for it.

Continue reading...

There is no shortage of diseases in the world that regularly sicken or kill people. Diseases like Malaria, for example, continue to threaten people throughout the world and particularly in the global south. However, it wasn’t that long ago that the threat of communicable disease was simply part of everyday life. So prominent was disease in our lives that it has a special place in our myths, often presented as the wrath of angry gods. It even gets its a mention in the biblical prophesies of Revelations.

But today, communicable diseases, particularly in the privileged west, are largely seen as distant and manageable risks. Few go through their daily lives worried that they might be exposed to some deadly pathogen that might kill them or their friends or family.

Contrast this with the case of Smallpox. Just 400 years ago, to manage the disease, people in Asia and the Middle East developed the technique of variolation. Those practicing variolation would take the scabs or fluid from the pustules of the infected and would rub it into scratches on the skin of the well, in the hopes of triggering a minor infection that would impart immunity.

Imagine that! Imagine being so afraid of a disease that you’d scratch yourself and rub someone else’s pus into the wound.

It’s truly hard to fathom.

But such was the world before antibiotics and vaccinations, when communicable disease felled entire communities. Smallpox itself is thought to have killed between 300 and 500 million people before its eradication in the late 1970s.

The dual miracles of antibiotics and vaccination have made for a far far safer world. Yet it’s this very fact that has left so many of us so unprepared for the realities of a pandemic.

Continue reading...