Who Will Prosper in the New World?

Tyler Cowen, writing in The New York Times, hypothesizes on who will prosper in the next generation. This is a very good post in entirety, but my favorite three points below:

THE CONSCIENTIOUS Within five years we are likely to have the world’s best education, or close to it, online and free. But not everyone will sit down and go through the material without a professor pushing them to do the work.

Those who are motivated to use online resources will do much, much better in the generations to come. It’s already the case that the best students from India are at the top in many Coursera classes, putting America’s arguably less motivated bright young people to shame. “Free” doesn’t really help you if you don’t make an effort.

 Your smartphone will record data on your life and, when asked, will tell you what to do, drawing on data from your home or from your spouse and friends if need be. “You’ve thrown out that bread the last three times you’ve bought it, give it a pass” will be a text message of the future. How about “Now is not the time to start another argument with your wife”? The GPS is just the beginning of computer-guided instruction.

Take your smartphone on a date, and it might vibrate in your pocket to indicate “Kiss her now.” If you hesitate for fear of being seen as pushy, it may write: “Who cares if you look bad? You are sampling optimally in the quest for a lifetime companion.”Those who won’t listen, or who rebel out of spite, will be missing out on glittering prizes. Those of us who listen, while often envied, may feel more like puppets with deflated pride.

We are used to thinking in terms of rich, poor and middle class, but those categories will change. Berlin’s eastern neighborhoods and Williamsburg, Brooklyn, are a window onto our future. These urban areas are full of people who are bright, culturally literate, Internet-savvy and far from committed to the idea of hard work directed toward earning a good middle-class living. We’ll need a new name for the group of people who have the incomes of the lower middle class and the cultural habits of the wealthy or upper middle class. They will spread a libertarian worldview that working for other people full time is an abominable way to get by.

Read the rest here.

Tyler Cowen: New Rules for Foodies

In his new book, An Economist Gets Lunch: New Rules for Everyday Foodies, Tyler Cowen argues that while Americans often pay to eat well, expensive food isn’t always the best. Cowen shares his tips on eating food that’s better for you, your wallet, and the environment:

1. Embrace imported food

“The locavore movement claims local food is better for the environment, but food from far away is often transported by boat, which actually costs very little in terms of energy. If you purchase something from a farmer who has to drive hours to reach distant markets that call themselves ‘local,’ that’s not very fuel efficient.”

2. Break your habits.

“After a certain age, most people have a very set supermarket routine that keeps them from trying new foods. For one month, try an ethnic or new supermarket. Even the simple act of learning a new store layout will force you to change your habits and consider alternative products–which can actually end up helping you save money.”

3. Eat regional, not local.

“Consider what your environment is good at. For example, the United States is very good at mixing–cultures, workers, ideas, and food. Composition-intensive dishes will be most satisfying. In contrast, simpler is better in places such as Italy, where recipes have been the same for years. Less immigration can mean less innovation in food.”

I am not much of a foodie, but the book looks intriguing. The second tip is something I am going to put into action.


(via Fast Company)

The Problem with Buying Sports Experiences

Tyler Cowen and Kevin Grier argue that when people are buying a sports experience, they let emotions get in the way, and end up making poor judgments. Their examples:

    • A fan goes to StubHub to buy a ticket to a big basketball game and shells out $125 for the best seat she can afford. The logic here is understandable: More money seems like it should give you a better view of the action and a better fan experience. But in practice, the worst seats in the highest-priced section are often no better, or are even worse, than the best seats in the next lower-priced section. But the seller is not going to tell you that.
    • When customers sign up for a gym, they’re typically given two options: an all-inclusive membership or pay-by-the-visit. Studies from economists Stefano DellaVigna and Ulrike Malmendier have shown that even though it would be cheaper for most customers to pay by the visit, they almost always choose the unlimited plan, losing (on average) $600 for their trouble. Gym owners do not advertise this proudly, nor do they usually encourage you to take the cheaper deal.
    • A fan scans the upcoming schedule of his local (lousy) NBA team and has to pick an upcoming game — so naturally he goes for one featuring a star team or a star player. (Our editor-in-chief has been known to do exactly that when, say, the Thunder come into town to play the Clippers.) But more often than not, an unbalanced game results, one with little drama and that sees the star play only 27 minutes, much of it at half-speed. You expect a ticket agency to point that out before you shell out hundreds of dollars? Yeah. We thought not.

When I visit a new city and if there is a sports event that I can attend, I do my best to get tickets. I am surprised the authors purely focus on the experience of the game, when it’s so much more than that. It’s the walking to/from the event, interacting with the fans, trying out the food at the ballpark. Often, these other experiences more than compensate if one observes a lackluster game.

Thought Experiment: The End of the NFL

The NFL season may be over, but the conversation on the growing phenomenon of head injuries and cognitive problems among football players will continue. Tyler Cowen and Kevin Grier contemplate a thought experiment on the demise of the NFL:

Before you say that football is far too big to ever disappear, consider the history: If you look at the stocks in the Fortune 500 from 1983, for example, 40 percent of those companies no longer exist. The original version of Napster no longer exists, largely because of lawsuits. No matter how well a business matches economic conditions at one point in time, it’s not a lock to be a leader in the future, and that is true for the NFL too. Sports are not immune to these pressures. In the first half of the 20th century, the three big sports were baseball, boxing, and horse racing, and today only one of those is still a marquee attraction.

The most plausible route to the death of football starts with liability suits. Precollegiate football is already sustaining 90,000 or more concussions each year. If ex-players start winning judgments, insurance companies might cease to insure colleges and high schools against football-related lawsuits. Coaches, team physicians, and referees would become increasingly nervous about their financial exposure in our litigious society. If you are coaching a high school football team, or refereeing a game as a volunteer, it is sobering to think that you could be hit with a $2 million lawsuit at any point in time. A lot of people will see it as easier to just stay away. More and more modern parents will keep their kids out of playing football, and there tends to be a “contagion effect” with such decisions; once some parents have second thoughts, many others follow suit. We have seen such domino effects with the risks of smoking or driving without seatbelts, two unsafe practices that were common in the 1960s but are much rarer today. The end result is that the NFL’s feeder system would dry up and advertisers and networks would shy away from associating with the league, owing to adverse publicity and some chance of being named as co-defendants in future lawsuits.

They contemplate it might take some time, at least ten years:

Imagine the timeline. A couple more college players — or worse, high schoolers — commit suicide with autopsies showing CTE. A jury makes a huge award of $20 million to a family. A class-action suit shapes up with real legs, the NFL keeps changing its rules, but it turns out that less than concussion levels of constant head contact still produce CTE. Technological solutions (new helmets, pads) are tried and they fail to solve the problem. Soon high schools decide it isn’t worth it. The Ivy League quits football, then California shuts down its participation, busting up the Pac-12. Then the Big Ten calls it quits, followed by the East Coast schools. Now it’s mainly a regional sport in the southeast and Texas/Oklahoma. The socioeconomic picture of a football player becomes more homogeneous: poor, weak home life, poorly educated. Ford and Chevy pull their advertising, as does IBM and eventually the beer companies.

Very interesting read. Will the day ever come when Americans refer to soccer when they say football?

Why Young People go into Finance, Law, and Consulting

Tyler Cowen has a simple theory why young people tend to go into law, finance, and consulting:

The age structure of achievement is being ratcheted upward, due to specialization and the growth of knowledge.  Mathematicians used to prove theorems at age 20, now it happens at age 30, because there is so much to learn along the way.  If you are a smart 22-year-old, just out of Harvard, you probably cannot walk into a widget factory and quickly design a better machine.  (Note that in “immature” economic sectors, such as social networks circa 2006, young people can and do make immediate significant contributions and indeed they dominated the sector.)  Yet you and your parents expect you to earn a high income — now — and to affiliate with other smart, highly educated people, maybe even marry one of them.  It won’t work to move to Dayton and spend four years studying widget machines.

You will seek out jobs which reward a high “G factor,” or high general intelligence.  That means finance, law, and consulting.  You are productive fairly quickly, you make good contacts with other smart people, and you can demonstrate that you are smart, for future employment prospects.

Combined with the fact that these jobs tend to be higher-paying than anything else available, and we’ve got a recipe for young people to pass opportunities in technology, public service, and the like. This New York Times piece sheds some data on percentage of people from Ivy League schools that directly entered finance jobs. For example, those graduating from Harvard were more likely to enter finance than any other career (in fact, 17 percent of new grads did so in 2010, which is down from 28% in 2008, just before the financial crisis).