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Belmont Club

The Banker and the Boxer

August 18th, 2013 - 2:51 pm

Those of you who have purchased my pamphlet, The War of the Words (for $3.99 at Amazon) may already know my answer to the problem posed by the New York Times. James Glanz asks “Is Big Data an Economic Big Dud?”

If pencil marks on some colossal doorjamb could measure the growth of the Internet, they would probably be tracking the amount of data sloshing through the public network that spans the planet. Christened by the World Economic Forum as “the new oil” and “a new asset class,” these vast loads of data have been likened to transformative innovations like the steam locomotive, electricity grids, steel, air-conditioning and the radio. …

What is sometimes referred to as the Internet’s first wave — say, from the 1990s until around 2005 — brought completely new services like e-mail, the Web, online search and eventually broadband. For its next act, the industry has pinned its hopes, and its colossal public relations machine, on the power of Big Data itself to supercharge the economy.

There is just one tiny problem: the economy is, at best, in the doldrums and has stayed there during the latest surge in Web traffic. The rate of productivity growth, whose steady rise from the 1970s well into the 2000s has been credited to earlier phases in the computer and Internet revolutions, has actually fallen. The overall economic trends are complex, but an argument could be made that the slowdown began around 2005 — just when Big Data began to make its appearance.

Just a week ago I regained contact with an old friend — a sometime boxer with a degree in mathematics at Gottingen — and sent him a copy of War of the Words. He thought it excellent and replied with some thoughts of his own, a few of which I have made so bold as to reproduce that may shed light on why Big Data isn’t all it has been cracked up to be.

The Duc d’Orleans, like other royalty of his times, employed court alchemists in the hope that they would produce gold, with which he could pay off his debts. But when the Duke attracted Scottish financier John Law to his court in 1716, he promptly dismissed his alchemists because the paper money scheme introduced by Law, commonly known as the inventor of paper money, was a more effective way to redeem his debts.

The economists gradually replaced the alchemists at Europe’s courts. Their goal, however, remained the same – to create wealth. And so did the transformation process of what had hitherto been economically worthless into something economically valuable, such as turning worthless paper into valuable money – by its very nature, an alchemistical act …

John Law’s new invention – the paper note issuing bank – was a spectacular success, until it collapsed after a bank run in 1720 and Law became the most hated and most wanted man in the whole of France. He had to make a run for his life. However, it is fair to say that, so far, economics seems to work better than alchemy.

Given my cultural background, I will call on Goethe’s Faust to illustrate my point. Faust certainly represents modern man in his fascination with the act of creation through the economy, the fascination of the infinitely augmentable, that is, of eternal progress, and the fascination of order as compared to nature’s chaos.

I am trying to get his permission to print the rest of his response. And if his prose seems a little stilted, remember he’s German writing in English. One of his references, though is in open source, Baudillard’s Simulacra and Simulations.

If we were able to take as the finest allegory of simulation the Borges tale where the cartographers of the Empire draw up a map so detailed that it ends up exactly covering the territory (but where, with the decline of the Empire this map becomes frayed and finally ruined, a few shreds still discernible in the deserts – the metaphysical beauty of this ruined abstraction, bearing witness to an imperial pride and rotting like a carcass, returning to the substance of the soil, rather as an aging double ends up being confused with the real thing), this fable would then have come full circle for us, and now has nothing but the discrete charm of second-order simulacra.

Abstraction today is no longer that of the map, the double, the mirror or the concept. Simulation is no longer that of a territory, a referential being or a substance. It is the generation by models of a real without origin or reality: a hyperreal. The territory no longer precedes the map, nor survives it. Henceforth, it is the map that precedes the territory – precession of simulacra – it is the map that engenders the territory and if we were to revive the fable today, it would be the territory whose shreds are slowly rotting across the map. It is the real, and not the map, whose vestiges subsist here and there, in the deserts which are no longer those of the Empire, but our own. The desert of the real itself.

I daresay my friend’s version is better, having stripped Baudillard of what he calls its “philosophical opulence” and it gets to the heart of the argument. I argue in the War of Words that while the Narrative has its uses you can’t live in it. Nor can you substitute a hologram, however beautiful,  for the real thing. Not everyone sees the danger. The Times article quotes more sources.

Some economists argue that it is often difficult to estimate the true value of new technologies, and that Big Data may already be delivering benefits that are uncounted in official economic statistics. Cat videos and television programs on Hulu, for example, produce pleasure for Web surfers — so shouldn’t economists find a way to value such intangible activity, whether or not it moves the needle of the gross domestic product?

The ultimate value of data lies in helping us work the real world. It is valuable, but not an end itself. For while knowing how to bake a cookie is useful; for that usefulness to be manifest you have to put the dough in the oven.  Perhaps key problem of today’s elites is they know all the recipes but will bake all the cookies tomorrow. They are using the Narrative to cover the deficiencies of actuality. As my pamphlet puts it:

To a degree unprecedented in human history, money, security and politics have been reduced to abstractions. There is nothing wrong with that as long as the abstractions are faithful representations of the underlying reality. Unfortunately the elites have found they could cheat on the representations to hide their mistakes and use it to amass wealth and power.

Money was the first Big Data. The first imago mundi. It’s instructive to note that John Law later become involved in America. “Law would become the architect of what would later be known as “The Mississippi Bubble”; an event that would begin with the consolidation of the trading companies of Louisiana into a single monopoly (The Mississippi Company), and ended with the collapse of the Banque Générale and subsequent devaluing of the Mississippi Company’s shares. The company’s shares were ultimately rendered worthless, and initially inflated speculation about their worth led to widespread financial stress, which saw Law dismissed from his post as Chief Director of the Banque Générale at the end of 1720.”


Did you know that you can purchase some of these books and pamphlets by Richard Fernandez and share them with you friends? They will receive a link in their email and it will automatically give them access to a Kindle reader on their smartphone, computer or even as a web-readable document.

The War of the Words for $3.99, Understanding the crisis of the early 21st century in terms of information corruption in the financial, security and political spheres

Rebranding Christianity for $3.99, or why the truth shall make you free

The Three Conjectures at Amazon Kindle for $1.99, reflections on terrorism and the nuclear age

Storming the Castle at Amazon Kindle for $3.99, why government should get small

No Way In at Amazon Kindle $8.95, print $9.99. Fiction. A flight into peril, flashbacks to underground action.

Storm Over the South China Sea $0.99, how China is restarting history in the Pacific

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Top Rated Comments   
I think it all is a farce. Big data to me means that a customer requires that I have a tradesman spend an hour filling in forms in the process of submitting an invoice. I charge our standard rate. What data do they get? Nothing a clerical worker paid $12 per hour couldn't enter, we charge $85. They don't track assets, they have some absolutely stupid facebook like rating system on the work that gets done.

Another Big Data that I deal with is a remote monitoring system for grocery stores. Big name company runs them, they have people in the southern US who phone in alarms to the stores. Frozen food warm, produce too cold. Far too many calls, most of them spurious causing everyone to ignore them. The funny thing is that the important alarms happen once and have to be dealt with quickly, and the low paid folks on both ends don't know what 'refrigerant leak alarm' means. All told an utter waste of time and money.

Big data has allowed the establishment of procedures that wouldn't have been dreamed of if it had to be done manually. Lots of cost, lots of hours, but no return, in fact probably a negative return on most of them.

These firms selling this stuff appeal to the inner totalitarian that everyone has, and stupid managers who can't handle the information and decisions that they already face listen to these sales pitches, then get deluged with mounds of useless information. All at a cost.
49 weeks ago
49 weeks ago Link To Comment
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All Comments   (31)
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One of the things that entrepreneurs and big corporations alike have in common is the feeling of fraudulent promises regarding the economic benefits of Big Data.

The tech industry made a lot of promises regarding just how much money they could save the business community, primarily in terms of reducing personnel required. At some point in the late '90's the business community said, "Where are the big savings you promised, why do I still need THIS many employees?", and the tech industry replied, "That's it! Guess we were off a little....".

Add to that the need to have people maintain the tech, the inevitable bugs and problems, and, most damaging, the built in, purposeful, and officious lack of backward compatibility in both hardware and software.

While there was a lot of improvement which occurred, it was never as much as the business community felt they were promised. Businesses soured on tech and came to distrust it and its promises of money saved/number of employees eliminated, and this was one of the factors (probably not the major one) in the tech bubble bursting.

The tech industry did manage to reinvent itself as a means of bringing entertainment and communication capability to individuals and recovered. But the business community still has distrust of promises made by the IT industry regarding how many workers tech can eliminate and how much money can be saved. There are now guys who are propped up by Silicon Valley who own consulting firms and do lectures on how tech employees are a profit center and not a cost. Yup. Sure.

Profit for one industry, no doubt.

Personally, I have a love/hate relationship with tech and have become a late adopter, something I was not 20 years ago, because the results rarely live up to the advertisement.
49 weeks ago
49 weeks ago Link To Comment
I read some wag the other day who described the economics behind Big Data as the theory that if you got a big enough pile o manure there would have to be a pony in it somewhere. My professional experience with data tells me that most of it is unreliable and that most of what is collected is not collected for its utility but rather because it is easy and or cheap to collect. Yeah the manure came from a horse but if you got a mountain of it you can be sure the horse is long dead.
49 weeks ago
49 weeks ago Link To Comment
John Law was a anglo-saxon cheater, like many cheaters today operate in our world, but when these kind of people faile, you have such Madoff ponzi shemes that are unveiled... and how many of them are still operating without that any law suit wouldpursuit them?

John law didn't inventeted the fiat currency, nor lettres de creances, he was more effectie to blur his clients into falsh premises of gains

49 weeks ago
49 weeks ago Link To Comment
John Law was a Scotsman and the Scotch are decidedly not Anglo-Saxon. Just because you are forced to live in a barn called the UK doesn't make you a horse :-)
49 weeks ago
49 weeks ago Link To Comment
R Daneel:

(from below) I seem to remember from Quantitative Analysis--a chem course--that precision refers to the amount of variation among repeated measurements of something.

My guess is that accuracy has to do with whether the measurement is ''right'' or not.
49 weeks ago
49 weeks ago Link To Comment
Greenwald:
"...when they engage in behavior like what they did today - all they do is helpfully underscore why it's so dangerous to allow them to exercise vast, unchecked spying power in the dark."

***

Data gives them clues on who to harass, "reasons" for doing so, and the infringement of personal freedom marches on.
49 weeks ago
49 weeks ago Link To Comment
The partner of the Guardian journalist who has written a series of stories revealing mass surveillance programmes by the US National Security Agency was held for almost nine hours [http://www.theguardian.com/world/2013/aug/18/glenn-greenwald-guardian-partner-detained-heathrow]
on Sunday by UK authorities as he passed through London's Heathrow airport on his way home to Rio de Janeiro.

David Miranda, who lives with Glenn Greenwald, was returning from a trip to Berlin when he was stopped by officers at 8.05am and informed that he was to be questioned under schedule 7 of the Terrorism Act 2000. The controversial law, which applies only at airports, ports and border areas, allows officers to stop, search, question and detain individuals.

The 28-year-old was held for nine hours, the maximum the law allows before officers must release or formally arrest the individual. According to official figures, most examinations under schedule 7 – over 97% – last less than an hour, and only one in 2,000 people detained are kept for more than six hours.

Miranda was released, but officials confiscated electronics equipment including his mobile phone, laptop, camera, memory sticks, DVDs and games consoles.

---

Glenn Greenwald: detaining my partner was a failed attempt at intimidation [http://www.theguardian.com/commentisfree/2013/aug/18/david-miranda-detained-uk-nsa]

Before letting him go, they seized numerous possessions of his, including his laptop, his cellphone, various video game consoles, DVDs, USB sticks, and other materials. They did not say when they would return any of it, or if they would.

This is obviously a rather profound escalation of their attacks on the news-gathering process and journalism. It's bad enough to prosecute and imprison sources. It's worse still to imprison journalists who report the truth. But to start detaining the family members and loved ones of journalists is simply despotic. Even the Mafia had ethical rules against targeting the family members of people they felt threatened by. But the UK puppets and their owners in the US national security state obviously are unconstrained by even those minimal scruples.

If the UK and US governments believe that tactics like this are going to deter or intimidate us in any way from continuing to report aggressively on what these documents reveal, they are beyond deluded. If anything, it will have only the opposite effect: to embolden us even further. Beyond that, every time the US and UK governments show their true character to the world - when they prevent the Bolivian President's plane from flying safely home, when they threaten journalists with prosecution, when they engage in behavior like what they did today - all they do is helpfully underscore why it's so dangerous to allow them to exercise vast, unchecked spying power in the dark.
49 weeks ago
49 weeks ago Link To Comment
But Big Data allows you to do so many things. I recall seeing a chart somewhere that showed the correlation between the murder rate in the US over time as compared with the percentage of internet users who used Internet Explorer as their browser. It correlated very well. The murder rate dipped pretty much in proportion to IE's shrinking popularity. Of course it is absurd to think that there could be any cause and effect there. There is a big different between correlation and cause and effect but this is a concept that seems to be lost on lots of people, most of whom should know better.

But if you're willing to disregard that difference somewhere in Big Data there's a basis to "prove" anything you wish to prove at all. Because after all, graphs and pie charts don't lie, right?
49 weeks ago
49 weeks ago Link To Comment
Gag correlations and Photoshops are the plague of our time.

With Big Data comes Digitized Fraud.

49 weeks ago
49 weeks ago Link To Comment
With Big Data comes Big Fraud. We are about to reap the fruit of said Big Fraud.

John Law was a con man extraordinaire.
49 weeks ago
49 weeks ago Link To Comment
Time Magazine concludes "Egypt no longer matters".

Maybe that's because Obama is on the verge of losing it. Coming soon, "the Suez Canal no longer matters", "Syria no longer matters", "Israel no longer matters", "the Middle East no longer matters" and finally from Queen, "nothing really matters, anyone can see, nothing really matters to me".

http://world.time.com/2013/08/18/egypt-no-longer-matters/
49 weeks ago
49 weeks ago Link To Comment
I remember a line from "South Park": "You can't be a non-conformist if you don't drink coffee." And these days you can't be a member of the elite unless you have faith in the current Theory That Explains Everything. Only rubes don't have all the answers. For the most part the Narrative is merely the practical explication and application of the Theory to the current state of the world. To the extent that reality conflicts with the theory it must be disregarded or removed from the premises like a loud unruly drunk being ejected from a bar.

Because you can't question the Theory. If it was wrong it would mean that the best and brightness who believe it and act on it were and are just a pack of fools. And since that cannot be the case, the Theory must be right.
49 weeks ago
49 weeks ago Link To Comment
And it really doesn't matter if
I'm wrong I'm right
Where I belong I'm right
Where I belong.

WASHINGTON — Vacation over, President Barack Obama returned to the White House late Sunday after a weeklong getaway to the Massachusetts island of Martha´s Vineyard.

Before returning, the president squeezed in one final round of golf, his sixth of the vacation, before boarding Air Force One on Cape Cod, Mass., for the trip home with his wife, Michelle, and daughters Malia and Sasha.

His golf foursome at Vineyard Golf Club in Edgartown included World Bank President Jim Kim, New York lawyer and Obama fundraiser Eunu Chun, and aide Mike Brush, the White House said.
49 weeks ago
49 weeks ago Link To Comment
Perhaps they're engaging in projection: DC no longer matters.

It's collectively out to lunch and on vacation.
49 weeks ago
49 weeks ago Link To Comment
Alaska Paul

Dead right about back of the envelope thinking. Nobody is taught now to do the back of the envelope calculations before they start a project or a complex calculation. The point of the back of the envelope is to figure what is approximately right. If you don't know what's approximately right then how can you tell if your very precise answer is dead wrong?

"The magic words are taken for the thing" because people have come to believe that the world is just another big video game. Video games are reality; right?

Big data is like Big Sound - a billion mouths opening and closing and making a sound. A billion sounds that have no meaning. With Big Data it's a billion numbers that have no meaning.

When the noises carry meaning, when the numbers coalesce to make information, those things are worth having.

To do something well you have to work to understand it and work to practice it. It's called learning a basic skill. Simply standing in a garage doesn't make me into an automobile. Living inside a video game doesn't make me into a real person.



49 weeks ago
49 weeks ago Link To Comment
"Dead right about back of the envelope thinking. Nobody is taught now to do the back of the envelope calculations before they start a project or a complex calculation. The point of the back of the envelope is to figure what is approximately right. If you don't know what's approximately right then how can you tell if your very precise answer is dead wrong? "

Profoundly wise. A lesson I hammered into my new engineers all those years ago.
49 weeks ago
49 weeks ago Link To Comment
When we have new, freshly minted and graduated engineers one of the first things I like to ask is for them to explain the difference between accuracy and precision. Few can.
49 weeks ago
49 weeks ago Link To Comment
I can't either; please tell me!
49 weeks ago
49 weeks ago Link To Comment
A result calculated to 8 significant figures is precise but can be entirely inaccurate.
49 weeks ago
49 weeks ago Link To Comment
If you had training as a machinist you would be able to...

49 weeks ago
49 weeks ago Link To Comment
I seem to remember from Quantitative Analysis--a chem course--that precision refers to the amount of variation among repeated measurements of something.

My guess is that accuracy has to do with whether the measurement is ''right'' or not.
49 weeks ago
49 weeks ago Link To Comment
Modern Economics my be the inversion of Buddhism. Wealth is caused by satisfying desire. Desire is measured differently for each person in utliles. Education can alter to some extent a person's desires. While a poor education can increase the desire to consume easily measured goods, the kind that generates Big Data, it also depresses efficiency. The ability of a few to create a more efficient data storage and analysis system has been accompanied by the debasement of the native Western population, their exposure to competition from marginally educated labor abroad or imported, and the increase in measurable trash data.

IOW the Innertubes are clogged with Dancing With the Stars or worse. The less tangible wealth of the educated generates simpler desires and produces less data. In the past landed wealth and conventional trade generated wealth that was consumed as leisure and education. The education generated increased trade and wealth satisfying measurable desires that were to some extent congruent with education.
49 weeks ago
49 weeks ago Link To Comment
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