Sunday, February 8, 2015

[REVIEW] The End of Power

DISCLAIMER: I will be judging Moises Naim's The End of Power separate from my problems with the book presented here and here. While my contentions there remain, I will try to judge The End of Power separate from those issues.

The End of Power by Moises Naim is the first pick in Facebook founder Mark Zuckerberg's Year of Books. The book purports to explain and explore the changes in power during recent decades- "From boardrooms to battlefields and churches to states, why being in charge isn't what it used to be", as the cover states.

The model he proposes for examining power and the decay of power is perhaps the best part of the book. First, he defines power. 'Power is the ability to direct or prevent the current or future actions of other groups and individuals.' As he states in the text, this is similar to political scientist Robert Dahl's definition of power given in The Concept of Power. "A has power over B to the extent that he can get B to do something that B would not otherwise do." He identifies what he calls the four channels of power- the means through which power is expressed and employed. They are The Muscle, The Code, The Pitch and The Reward. This is a clean and simple division that really does encapsulate most options and doesn't require much explanation. Even if we were to try and introduce another 'channel' into this model (say, The Drive for the use of intrinsic motivation) it could easily be explained away as a synthesis of two 'basic' channels of power- in that case, The Pitch and The Code.

He goes on to analyze the accumulation and distribution of power from an economics perspective, using the idea of 'barriers to entry' and 'market power'. I am always fond of the use of Economics as Universal Toolkit and Moises Naim does this well. He then explains why 'big' became almost synonymous with 'powerful'. Ranging from Max Weber's belief in the power of bureaucracy to Ronald Coase's Nature of The Firm and his elucidation of economies of scale and transaction costs, his analysis is sharp and edifying.

He then proposes why the nature of power is changing- why large actors seem more constrained and less effective than their smaller competitors. His economic analysis is important here; he identifies the changing nature of transaction costs, the existence of 'diseconomies of scale' (my terminology) and, ultimately, the lowering of barriers to entry in nearly all fields. He tends to downplay the Internet as the primary game changer in the structure of power. He considers it only one factor among many, which is refreshing. He identifies three 'revolutions' affecting the employment of power- More, Mobility and Mentality. The More Revolution: 'Overwhelming the means of control.' The Mobility Revolution: 'The end of captive audiences'. The Mentality Revolution: Taking nothing for granted Anymore.' This is an intuitive and flexible model- and better yet, it is simple and can be universally applied without much problem. Each of these is tied to his earlier use of 'barriers of entry' and to his 'channels of power' to show how each one complicates the exercise and accumulation of power.

It is after the demonstration of his model that the book really declines in quality. Editing is extraordinarily poor for a book of this type. For one example, he continually hints at an analysis of education using his model in the earlier chapters. He ends a later chapter with, and I'm paraphrasing: This chapter could have been about education. His charts and visual aids are even worse- I had to wonder if his publisher gave him a quota. One of his charts is a U-curve he uses to explain that too much power and too little power have their own problems. The X axis is labelled (confusingly) Decay of power and the Y axis is labeled with the practically non-descript phrase political and social stability, economic vitality. It is a completely worthless chart, dropped into the middle of the text without reason and without any basis in fact.

The quality of his commentary on the 'decay of power' and the examples he chooses to prove his thesis are equally poor. In the military focused chapter, I found his emphasis on 'drones' to be particularly jarring and a waste of space. One line stuck out in particular: "More disturbing, ordinary hobbyists and private users abound: in the United States in 2012 a group called DIY Drones had twenty thousand members." He isn't the only one to get scared about drones since we stopped calling them RC planes, but there were infinitely better examples that could have been used. He never talks about the massive deployment of Palestinian rockets and Israel's construction of the Iron Dome, for example. He doesn't talk about denial-of-service attacks done in conjunction with rocket strikes or about the terrifying rise of 'armchair jihadists' as even a concept, much less a reality. (I said I wouldn't use his poor citation of sources in this review but it bears mentioning: when talking about the possible use of drones by terrorist groups and about a confirmed use by Hezbollah of drone use in 2004, he instead cites this article- which is about the use of drones by Israeli security forces and the culture of fear it has created among Palestinians.)

He promises at the beginning of The End of Power that "this is not a call to feel sorry for those in power." He presumably forgot that promise somewhere in the editing process, because his entire section on what is to be done about the decay of power as well as his commentary on the negative effects of the decay of power is impossible to read as anything but "a call to feel sorry for those in power." He argues that democratic societies need to give their governments more power over their lives- and while he's not alone in this contention, it is nothing more than the final lament of a 20th century technocrat at the dawn of the 21st. There are some good points to his final analysis, but they don't outweigh the bad.

The End of Power presents a useful model for understanding power's changing nature in the modern day. Moises Naim then proceeds to do nothing useful or thought-provoking with that model for 200 pages. I would recommend this book only for those interested in the model and nothing else. The flaws outside of his model-building portions make this book not worth the effort.

Final musing- Why Mark Zuckerberg Picked This Book: References to Facebook and the tech industry abound throughout The End of Power and well they should. (Moises Naim often says they succeed for the same reasons al-Qaeda did, which is useful for grabbing attention if nothing else.) The tech industry's 'disruption' of various industries are the David vs. Goliath struggles that many now imagine when talking about the changing nature of power. The nimble startup fending off the industry giant is ingrained into the public consciousness and is brought up everywhere, critically or no, from Uber's fights with taxi companies to Kodak's replacement by Instagram. We live in a world where private companies such as SpaceX and Virgin Galactic define space travel more than NASA. Mark Zuckerberg picked this book because the rise of Silicon Valley is just one expression of the end of power.

UP NEXT: The Better Angels of Our Nature: Why Violence Has Declined, Steven Pinker, A Year of Books' 2nd pick

Saturday, February 7, 2015

[MUSING] Why Wall Street Is Excited About Cable Companies Being Treated As Utilities

As detailed in Kevin Drum's Mother Jones article here, the stock prices for major cable companies went up following the FCC's proposal to enforce strict net neutrality rules. Why? After all, regulation is bad, right?


I don't believe Kevin Drum got it right anymore than I think the high paid analysts at BTIG got it right. The analysts believe it was because price regulation wasn't mentioned- and it never has been, except by the internet service providers themselves. Kevin Drum believes it is because Wall Street doesn't know what it is doing. (Efficient market hypothesis notwithstanding, that is not the case)

Regulation of internet service providers is a net good for the business of internet service providers and anyone with a modicum of common sense (read: not the internet service providers themselves) realizes this. That is why the content creators of the Internet lined up almost universally on the side of net neutrality.

The thing that sells a utility is not the product itself- its the possibilities. We don't buy electricity because we like electricity and want to keep turbines somewhere spinning. We buy electricity because it enables all of our other wondrous, modern devices. It is the same with the internet. We don't buy internet packages because we love the idea of cables transmitting 1s and 0s. We buy internet access from the internet service providers because it gives us access to all of the many wondrous services available on the internet. And many of those services would not exist if internet service providers had anything to say about it. Remember the Netflix-Comcast feud?

If internet service providers are given the ability to decide what services will run through 'their' internet, the Internet as we know it will cease to exist. The reasons people would have to buy internet access would dwindle and the internet service providers would ultimately suffer. What would be the valuation of General Electric if they had to produce a new product for every power provider? What would the valuation of electric power generation be? Would it have ever become ubiquitous?

Regulation is, in this case, good. Wall Street has long followed Silicon Valley's lead (see: the tech bubble of the 90s) and this is just an extension of that.

[REVIEW] Problems With The End Of Power (Update)

187 pages late, Moises Naim does properly cite Spirit and Power- A 10-Country Survey of Pentecostals correctly. It is a segment that is almost directly copy-pasted from his earlier statement on pages 8-9. (My original problems with this are detailed here; my problems with The End of Power's editing will be covered in a future blog post.)

As detailed in that blog post, a lack of proper citation is not the only problem with the way Moises Naim uses this study. While he adopts the terminology of the survey ("Renewalist") he never explains to the reader that this umbrella term, for the purposes of the survey, happens to include a fair number of Catholics. This has a direct impact on his argument.

What's worse is that India was omitted from his earlier passage, but not in this later segment. Moises Naim writes on page 195, "Even in 'non-Christian' India, renewalists make up 5 percent of the population."

From the Survey Methology section of Spirit and Power: "In India, the survey was conducted in three states believed to have among the highest percentage of Christians in India: Tamil Nadu, Kerala and Meghalaya. Within the three selected states, districts with the highest proportion of Christians were first selected, and then sampling points were randomly selected from these districts. This survey is NOT representative of the general population of India, nor is it representative of the population of the three Indian states in which it was conducted." My emphasis is in bold. Total Christian share of the Indian population (all denominations) is likely to be substantially less than 5%. In 2001, it was only 2.4%. The 2011 Indian Census Data on religion has not yet been released- although forecasts emphasize the growth in Muslim's share of the population, not that of Christians.

Moises Naim's publisher has still not answered my email about why this study was not properly cited at its first appearance in the text, nor have they explained where the 5% number for 1960 comes from and what it was actually measuring.

Some may say I am nitpicking, but small things like this make me think there is either shoddy research in his book or, worse, an intentional reworking of facts to fit his thesis. Religious demographics may just be the one thing I could catch him on.

Monday, February 2, 2015

[REVIEW] Problems with The End of Power (Already)

On pages 8-9 of The End of Power by Moises Naim, he writes "Similarly the long-entrenched power of the major organized religions is decaying at a remarkable pace. For instance, Pentecostal churches are advancing in countries in countries that were once strongholds of the Vatican and mainline Protestant churches. In Brazil, Pentecostals and Charismatics made up only 5 percent of the population in 1960- compared to 49 percent in 2006. (They comprise 11 percent in South Korea, 23 percent in the United States, 26 percent in Nigeria, 30 percent in Chile, 56 percent in Kenya, and 60 percent in Guatemala.)"

There is no citation given for these assertions. There is no footnote explaining where these numbers come from. However, the numbers given by Moises Naim in the text are identical to the numbers found in a Pew Research Center study entitled 'Spirit and Power- A 10-Country Survey of Pentecostals'. Of the 10 countries in that report, Moises Naim lists 9. I am going to be contacting the publisher shortly to determine if they can shed any light on this issue. It is a pretty grievous error if they had no knowledge of this study being used and not being cited.

However, it is a troubling sign for this book regardless of whether the citation was merely overlooked. Using the study that he did and framing it in the way he did above is intentionally misleading. I can't determine if the "5 percent of the population in 1960" refers only to Pentecostals or if it derives from the Brazilian census because, as said, there are no citations and such a number does not appear in the Pew Research Center study above. What is likely that it did not include "Charismatics", as the identification of non-Pentecostal Christians as Charismatics would post-date any 1960 report. (Source)

If he had used only the Pentecostal numbers, he would have stated that 15% of the Brazilian population is Pentecostal, which would still support his thesis, just not as strongly. As the Pew Research Center Study states "most charismatics are members of mainstream Protestant, Catholic and Orthodox denominations." That is in direct contradiction to the way he introduces this data- as a sign that the Catholic Church and the mainstream Protestant churches are failing. If they are adopting Charismatic practice and doing well with it, that is clearly not the case. Using their share of the population as an argument to the contrary is dishonest and misleading to the reader.

I will continue to read The End of Power, but with a much more critical eye. I will post any updates or clarifications from the publisher as I receive them.

Sunday, February 1, 2015

[REVIEW] Capitalism, Socialism and Democracy

Capitalism, Socialism and Democracy is widely considered Joseph A. Schumpeter's magnum opus. The book truly is deserving of the title of great work- it is a sprawling economics text that explores the topic of capitalism's survival from a strangely modern, interdisciplinary viewpoint.

I believe before going on I should state that Capitalism, Socialism and Democracy is written FOR ACADEMIC EYES ONLY. It is a very heavy and trying read and I don't say that about many texts. This may be the age of the text itself (it was written in 1942, after all) but I feel the book was often written in an unnecessarily complicated and obtuse manner, even when compared to the book's contemporaries. I couldn't complete the book in one go and that is a rarity for me.

Capitalism, Socialism and Democracy is broken up into five distinct chapters. I won't bore you with the table of contents but, in reality, it often reads more as a collection of books than one single work. Each one could have been an enjoyable book on its own. I found this did help to reduce some of the burden of reading such a text- there was the relief of a different topic always on the horizon.

The first part deals with the importance of Marx in his roles as prophet, sociologist, economist and teacher. This part is hugely uninteresting to those who have no interest in Marx and Schumpeter says as much in his introduction. However, for those who have an interest in Marxist or Marxian thought, it is an interesting analysis, especially coming from a writer who disagrees so vehemently with Marxists and their ideological successors. I found his evaluation of Marx to be roughly in-line with my own. His was an opinion I hadn't often seen stated, so I quite enjoyed this chapter. It was among the hardest to read, as anyone well-versed in Marxism could probably guess.

The second chapter deals with what could be called the central theme of Capitalism, Socialism and Democracy. Schumpeter asks the reader "Can capitalism survive?" His answer is as clear as it is shocking. "No. I do not believe it can." This is perhaps the best part of the book. Schumpeter outlines how capitalism destroys the very social structures it relies on for its existence. This is reminiscent of the historical viewpoint that it was capitalism that destroyed feudalism- only Schumpeter shows capitalism does the same to itself. Capitalism, through the creation of the intellectual class, creates a class intrinsically opposed to capitalism and its structures. Capitalism, relying on the process of "primitive accumulation" by entrepreneurs and other entrants to the bourgeoisie, slowly creates roadblocks for the process of primitive accumulation. Capitalism, having created the modern state out of convenience, now finds itself "fettered" by the very type of state it helped to birth. Capitalism, relying on principles of enlightened self-interest, creates a class of administrators who have no personal stake in the very property they manage. This is a really enlightening part of the book and certain portions seem oddly prescient.

For example, he discusses how modern capitalism destroys the pre-modern bourgeois family ideal as well as "dematerializing" property ownership. Writing as he was in 1942, he discusses how the declining importance of the home has opened up certain segments of the economy once contained in the household- hospitality, specifically- to the market at large. The result is the ascendancy during the post-War period of restaurants and the hospitality sector. The economic rationale behind aspiring to a "manorial" way of living disappeared, taking to market one aspect of home life no longer economica;. I find this a really interesting idea to explore- just look at how modern services like Zipcar and other sharing economy startups "outsource" the economic costs of owning and maintaining a car. The fact that such a thing is even considered a viable business is a definite effect of our changing relationship to property and a change in our aspirations towards ownership of property.

This is also the part of the book where he discusses "creative destruction", the modern conception of which we owe to him. (It is often known as Schumpeter's Gale.) This part of the book should be of great interest to anyone interested in the tech industry- where disruptive innovation is very much in vogue and which is, in reality, just another expression of creative destruction.

The third part deals with whether socialism, conceived as bureaucratic control of the economy, can work. Schumpeter believes that it could, in fact, work. Writing as he was before the realities of the Soviet system were revealed, he can be forgiven for some of his errors here, but the primary point of this chapter was merely as a proof-of-concept. He believes that rational price markers could still be expressed through a bureaucratic means- a denial of Ludwig von Mises' Economic Planning In The Socialist Commonwealth. Those familiar with Alvin Toffler's works will likely see the parallels with his much later "economy as switchboard" metaphor. It makes a certain sort of sense in the time, as industrial consolidation and bureaucratization of management were alive and well even in the most avowedly of capitalist countries. Realistically, one could presume that socialist management would not look much different. He also opines on the ability of a socialist state to instill discipline in the populace in excess of the means available to a capitalist state- a chapter that he readily admits is chilling, even as we have the advantage of having seen the limits of such 'discipline'.

The fourth part deals with the relationship of socialism to democracy. This is yet another prescient and thoroughly enjoyable part of the book. He savages the idea of democracy as an ideal or a goal and makes the reader look at it for what it is- a method, bound to produce any manner of undesirable results. In a surprisingly forward-thinking interdisciplinary stroke, he looks at examples of crowd psychology to explain the problems democracy as a system has in working. Many of the passages seem eerily prophetic as in his depiction of capitalism's demise earlier in the book. It is hard to imagine a politics of trivialities and division, ruled by lobbyists and propagandists, truly described the politics of the United States in the forties, but it is easy to imagine those words being written today. (And in fact, he is still cited today, although not often for his critiques of democracy.) Unlike many other writers I am aware of, he insists such an evolution is an inevitability of democracy, which is a darkly pessimistic view to take, no matter how well-founded.

The fifth part deals with the history of socialist parties in Europe and the United States. This chapter is primarily of interest to the sorts of people who were interested in the first chapter. If you aren't a student of Marxism, most of this chapter could be skipped. This is also where Schumpeter reveals some shortsightedness- particularly in his predictions of what would happen in the United States following World War II. Despite seeming like a prophet of the modern day in his earlier chapters, here he fails completely to recognize what would happen in the post-War period. He isn't even close to the mark.

Overall, Capitalism, Socialism and Democracy was a worthy read. Trying at times, but the moments of brilliance were well worth it. I would highly recommend it to anyone interested in economics and willing to persevere.

Final thought: "Assassinations might be futile and productive of nothing but repression but there was not much else to do." That sentence is probably the best description of late 19th-early 20th century Russian political violence ever written.

UP NEXT: The End of Power, Moises Naim (A Year of Books' 1st pick)