Ve Half Spies Efreyvare, Und You Vil Lak It

The problem with quants, well among many problems, is that they tend to be disassociated from the real world. What's worse, so are their managers. The Great Recession happened just because neither the quants nor their managers paid any attention to the basic metric: the ratio of median house price to median income ranges over a very small interval in a stable economy. Deviation from this interval is prima facie evidence for either bubble or bursting. There is no middle ground.

We saw this play out, as it still does. Today's NY Times Magazine carries a long form article of another aspect of quants living in a bubble (Maher variety; if you don't watch Maher, you're missing the best 60 minutes of the week). This time, it's the quant's (the story is about a single individual) isolated self-interest and that of his bosses' which lead to problems. Not so bad as The Great Recession, although possibly worse. Let me explain.

In writing "1984", Orwell told a tale of gummint intruding on the lives of citizens. "RoboCop", on the other hand, tells the tale of corporations establishing de facto control of society. The Right Wingnuts' boogeyman is Washington, DC, while the Left Wing points (when it bothers to respond) to corporations. The Right Wingnuts complain about activist, unelected judges, but install those which promote the corporation at every opportunity. There is no constitutional advantage to corporations in either the original text or amendments. The "rights" of corporations to act as persons were not enacted, but granted by fiat by various Supreme Courts. It's no secret that Mussolini enshrined this process in the word fascism.

What we have with Target is an example of corporate data gathering and computing power turned against citizens. Is that too strong? I think not. Manipulation of consumers is not something envisioned by the apotheosis of Right Wing theology, Adam Smith (the real one). They lay claim to Smith, but ignore his notion of smallness. His notion was that each player in the economic game could only affect a limited number of other players, and that concentration of power wouldn't, and couldn't, happen due to capital and labor shifting to revealed profitable venues. Smith would today be considered a micro-economist; where the unit of interest is the individual, company or landlord or worker. The notion that there is such a thing as macro-economics came later with Fisher (mostly of the crackpot strain) and Keynes. When I was a grad student, the "macro is just the sum of the micro actors" notion had infiltrated, largely as a result of mathification of the study. It's much easier to build math models when the object of interest is some notion of individual; aggregation thus becomes macro-economics. That's poppycock, and the main reason I ran for the exits without the Ph.D.

If one reads the business literature (I use the term broadly), the most important advantage to be sought isn't a better mousetrap, but rather a deeper and wider moat around one's existing business. The intellectual property and patent regimes are clearly out of control when Apple can be granted a patent for a rectangle; yes, that is true.

I abide a deep ambivalence for the hero of the Times' article. On the one hand, using data to solve problems is a really neat job. When I was a Fed in the 1970's, working for what is now the Office of Personnel Management, we were tasked to devise a quantitative measure of discrimination in Federal civilian employment. McElhone, who ran the group and had the Ph.D. in math stats, told the Suits that we would need some number from them to use as the benchmark for discrimination. They didn't like the question, and my recollection is that it ended the project. Similarly with Target; what is the acceptable intrusion into the lives of "customers"? To what extent do such quant programs aid the customer? Or do they just reduce customers to lab rats, changing the reward to induce them to tap the lever ever more frequently? So, on the other hand, does solving such problems only aid those who seek to tie our fetters ever tighter?

The Tea Baggers rail against the gummint, but blithely ignore where intrusion really comes from. Psychologists call such behaviour cognitive dissonance.

Target erred in not even considering that what they were doing was an implicit invasion of privacy. McNealy and Zuckerberg, of two different generations, have disparaged privacy. When will the backlash arrive? Probably never. Once corporations gain control, they won't be forced to relinquish for the simple reason that they will have been aided and abetted by the very institution, gummint, which has the power to rein them in. It is a brave new world.