Star Wars Battlefront

I haven't played a video game in years. I don't miss it, though some of the virtual reality games I've demoed recently are so immersive that the novelty could lure me back in. Console games, though? That time of my life may have passed for good.

But then I watched this promo video for Star Wars Battlefront with my brother, and, well, my heart started to race. And then at 4:34 of the video, something happens that made me gasp, and a few seconds later my brother and I were screaming like idiots and searching online for the best deal on a Playstation 4.

I'm setting aside a bond now as a reservation for down payment when the virtual reality version of a Star Wars game comes to pass and I don my goggles and hand controllers to march into a lightsaber battle. It may be the most enticing reason for me to maintain some level of flexibility and physical agility as the years go by.

In Star Wars™ Battlefront™ you can battle in epic 40 multiplayer battles reminiscent of The Battle of Hoth. As the Empire, you must accompany AT-AT walkers as they march towards the Rebel base to destroy it. And as a Rebel, you must do everything you can to stop them.

Warriors, come out to play

Coming off legacy stuff is complicated for customers. For something like an Oracle database, that software has all the financial information and is all but impossible to leave behind. When Oracle introduced its cloud and fast data analysis products, they were aimed primarily at those virtually locked-in legacy customers.
 
All that now looks shaky. At its annual customer conference, Amazon on Wednesday introduced new features and services aimed at offering legacy customers on all sorts of computing systems not just easy ways to get off the old technology, but also better and faster ways their old data can work on A.W.S.
 
Among the most notable, there was a 47-pound data storage device that A.W.S. would ship to a customer, and for $200 would suck down 50 terabytes of data, incidentally converting it from an older system to a more modern one. There was a service called Database Migration, which takes data in proprietary systems and converts their schema to open-source products.
 

Fun to see my old colleagues and friends at Amazon Web Services continue to move aggressively. Clever ideas here to minimize switching costs for customers on legacy systems.

First AWS was for individual developers, then for startups, then for some large scale technology companies. Now it's going after any company that needs computing. Up (down?) the ladder they go.

How to allocate subsidies most effectively

Sometimes you hear something that sounds so much like common sense that you end up missing how it overturns everything you were actually thinking, and points in a far more interesting and disturbing direction. That’s how I’m feeling about the coverage of a recent paper on student loans and college tuition coming out of the New York Federal Reserve, “Credit Supply and the Rise in College Tuition: Evidence from the Expansion in Federal Student Aid Programs,” by David Lucca, Taylor Nadauld, and Karen Shen.
 
They find that “institutions more exposed to changes in the subsidized federal loan program increased their tuition,” or for every dollar in increased student loan availability colleges increased the sticker price of their tuition 65 cents. Crucially, they find that the effect is stronger for subsidized student loans than for Pell Grants. When they go further and control for additional variables, Pell Grants lose their significance in the study, while student loans become more important.
 
There’s been a lot of debate over this research, with Libby Nelson at Vox providing a strong summary. I want to talk about the theory of the paper. People have been covering this as a normal debate about whether subsidizing college leads to higher tuition, but this is a far different story. It actually overturns a lot of what we believe about higher education funding, and means that the conservative solution to higher education costs, going back to Milton Friedman, will send tuition skyrocketing. And it ends up providing more evidence of the importance of free higher education.
 

Thus begins this piece by Mike Konczal, fascinating throughout. This is a true mystery, because why does tuition rise more student loans are available, and why doesn't it rise just as much if funding comes in the form of Pell Grants? Konczal explains why this is strange:

David Boaz at the Cato Institute has a snarky post in response to the study, saying that “[u]nderstanding basic economics” would have predicted it. This is false, because economics 101 would have predicted the opposite. Economists fight a lot about this [1], but the simple economics story is clear. According to actual economics 101, letting students borrow against future earnings should have no effect on prices.
 
This derives from something called the Modigliani-Miller Theorem (MM), the frustrating staple of corporate finance 101 courses. A quick way of understanding MM is that how much you value an asset or investment, be it a factory or higher education, should be independent of how you finance it. Whether you pay cash, a loan, your future equity, a complicated financial product, or some other means that doesn’t even exist yet, you ultimately value the asset by how profitable and productive it is. In this story, which requires abstract and complete markets, expanding credit supply won’t drive tuition higher.
 
Now what would change your valuation, according to this theorem, is getting subsidies, say in the form of Pell Grants. This would make you willing to buy more and pay a higher price. This is one of the reasons why so much of the economics research focuses on Pell Grants instead of student loans: the story about what is happening is clearer. But, again, extensions of the credit supply, not subsidies, are doing the work here.
 

Conservatives position an increase in the student credit supply as enabling them to borrow against future earnings. I even read somewhere last year about a company that wanted to allow actors or other celebrities to sell ownership of their future owners. You could become a shareholder of, say, Jennifer Lawrence by fronting her some cash now in exchange for her take from future Hunger Games and X-Men movies and whatever else she does.

In the case of education, this entire proposal doesn't work if the increase in credit supply is met with an equal increase in tuition. Why does tuition increase in lock step with credit supply? Konczal isn't sure, and it's the central mystery.

Note that it isn’t clear why students borrowing more against their future is driving increases in tuition they’ll pay. It could be “rational” under arcane definitions of that word. It could be that in a winner-take-all economy, in which those at the top do fantastically and those who don’t make it do not make it at all, leveraging up and swinging for the fences is a smart play. It could be that liquidity and credit are important determinants of the economy as a whole rather than a neutral veil over real resources. It could be as simple as the fact that 18-year-olds aren’t highly calculating supercomputers solving thousands of Euler equations of their future earnings into an infinite future, but instead a bunch of kids jacked up on hormones doing the best they can with the world adults provide them.
 

This article on public options dives in deeper on the topic.

So far, so familiar. The interesting question is what happens when we generalize this logic to other areas, like higher education. Imagine a state that's considering a choice between spending, let's say, $1 million either subsidizing its public university system, enabling it to keep tuition down, or as grants to college students to help them pay tuition. On the face of it, you might think there's no first-order difference in the effect on access to higher ed -- students will spend $1 million less on tuition either way. The choice then comes down to the grants giving students more choice, fostering competition among schools, and being more easily targeted to lower-income households; versus whatever nebulous value one places on the idea of public institutions as such. Not surprisingly, the grant approach tends to win out, with an increasing share of public support for higher education going to students rather than institutions.

But what happens when you bring price effects in? Suppose that higher education is supplied inelastically, or in other words that there are rents that go to incumbent institutions. Then some fraction of the grant goes to raise tuition for existing college spots, rather than to increase the total number of spots. (Note that this must be true to at least some extent, since it's precisely the increased tuition that induces colleges to increase capacity.) In the extreme case -- which may be nearly reached at the elite end -- where enrollment is fixed, the entire net subsidy ends up as increased tuition; whatever benefit those getting the grants get, is at the expense of other students who didn't get them.

Conversely, when public funds are used to reduce tuition at a public university, they don't just lower costs for students at that particular university. They also lower costs at unsubsidized universities by forcing them to hold down tuition to compete. So while each dollar spent on grants to students reduces final tuition costs less than one for one, each dollar spent on subsidies to public institutions reduces tuition costs by more.
 
The same logic applies to public subsidies for any good or service where producers enjoy significant monopoly power: Direct provision of public goods has market forces on its side, while subsidies for private purchases work against the market. Call it progressive supply-side policy. Call it the general case for public options. The fundamental point is that, in the presence of inelastic supply curves, demand-side subsidies face a headwind of adverse price effects, while direct public provision gets a tail wind of favorable price effects. And these effects can be quite large.

Chinese robber fallacy

Given the recent discussion of media bias here, I wanted to bring up Alyssa Vance’s “Chinese robber fallacy”, which she describes as:
 
..where you use a generic problem to attack a specific person or group, even though other groups have the problem just as much (or even more so)
 
For example, if you don’t like Chinese people, you can find some story of a Chinese person robbing someone, and claim that means there’s a big social problem with Chinese people being robbers.
 
I originally didn’t find this too interesting. It sounds like the same idea as plain old stereotyping, something we think about often and are carefully warned to avoid.
 
But after re-reading the post, I think the argument is more complex. There are over a billion Chinese people. If even one in a thousand is a robber, you can provide one million examples of Chinese robbers to appease the doubters. Most people think of stereotyping as “Here’s one example I heard of where the out-group does something bad,” and then you correct it with “But we can’t generalize about an entire group just from one example!” It’s less obvious that you may be able to provide literally one million examples of your false stereotype and still have it be a false stereotype. If you spend twelve hours a day on the task and can describe one crime every ten seconds, you can spend four months doing nothing but providing examples of burglarous Chinese – and still have absolutely no point.
 
If we’re really concerned about media bias, we need to think about Chinese Robber Fallacy as one of the media’s strongest weapons. There are lots of people – 300 million in America alone. No matter what point the media wants to make, there will be hundreds of salient examples. No matter how low-probability their outcome of interest is, they will never have to stop covering it if they don’t want to.
 

A fantastic and important post by Scott Alexander of the great Slate Star Codex: Cardiologists and Chinese Robbers.

This is why I'm so suspicious of anecdote-based journalism, especially when it comes from an outlet with a hallowed reputation. Think back to the piece on Amazon working conditions in the NYTimes, and see how much actual data backs up some of the generalizations made in the piece. I'm not saying that the individual stories of terrible managers don't matter, because each of those in and of themselves was terrible and worth deep investigation.

Many people I know just take it for granted that it's like that throughout the company, though. Take this op-ed from Joe Nocera. He felt comfortable enough, after reading that piece, to make sweeping statements like this:

It’s an enormously adversarial place. Employees who face difficult life moments, such as dealing with a serious illness, are offered not empathy and time off but rebukes that they are not focused enough on work. A normal workweek is 80 to 85 hours, in an unrelenting pressure-cooker atmosphere.
 

I will bet Joe Nocera his net worth that the average workweek at Amazon is not 80 to 85 hours. I don't think any company in the world with over 170,000 employees has an average work week approaching anywhere near 80 to 85 hours. But hey, it's just a NYTimes op-ed, let's just throw a crazy fact like that out there with no sourcing whatsoever, who's going to fact-check an op-ed anyhow?

What 170,000 employees and who knows how many former employees provides a reporter is a lot of people to mine for Chinese robbers.

[Incidentally, that large a sample should also provide plenty of counter-examples, but Amazon's restrictive, and in my opinion, short-sighted social media policy prevents folks like that from speaking out. One employee couldn't take the piece lying down and wrote a rebuttal on LinkedIn, and later other former employees came out in the company's defense, including one who felt her story was used in the piece in a misleading way. It doesn't have to work just in the company's favor, other stories like this one have come and added to some of the terrible anecdotes in the original NYTimes piece. However, since the social media policy restricts current employees from speaking out, it likely mutes the largest population of people who enjoy working there.]

I don't mean to wade back into the Amazon debate with this piece, and parts of it, even if rhetorically framed with bias, struck me as reasonably accurate. It just happens to be the most prominent recent example of Chinese robber fallacy that came to mind. Anyone who's been the subject of an anecdote-based journalistic piece should be suspicious of such pieces, yet so many people in and outside of tech took the Amazon piece as gospel.

The fact is, the Chinese robber fallacy really works. It must be so satisfying, as a reporter, to come across a source willing to go on the record with a dramatic narrative, even if it isn't statistically significant. That source also has spent their life looking for narrative patterns, and soon it's Chinese robbers all the way down.

Humans are wired to respond to narratives, to draw conclusions based on insufficient data. We're all looking for narrative shortcuts to the truth. When reporters give us a few carefully chosen examples, it's game over, regardless of whether or not it's a statistically significant sample, or whether or not the sample was plagued by selection bias.

Such journalism can be moving and hugely important. It can move people's hearts, and that's often what's needed to change the world. But it's also a dangerous weapon. Recall Janet Malcolm's opening line to her classic piece “The Journalist and the Murderer”:

Every journalist who is not too stupid or full of himself to notice what is going on knows that what he does is morally indefensible.
 

She meant it in a different context, but it echoes here.

Journalism with lots of data and statistics aren't sexy. They may not even require as much legwork as interviewing lots of people over long period of time, and it's not the type of journalism that gets dramatized in the movies. But there's a reason that science isn't based on a few good stories.