The paradox of tolerance (1/n)

From Wikipedia (highlights my own): 

Philosopher Karl Popper defined the paradox in 1945 in The Open Society and Its Enemies Vol. 1 (in note 4 to Chapter 7).

"Less well known is the paradox of tolerance: Unlimited tolerance must lead to the disappearance of tolerance. If we extend unlimited tolerance even to those who are intolerant, if we are not prepared to defend a tolerant society against the onslaught of the intolerant, then the tolerant will be destroyed, and tolerance with them. — In this formulation, I do not imply, for instance, that we should always suppress the utterance of intolerant philosophies; as long as we can counter them by rational argument and keep them in check by public opinion, suppression would certainly be unwise. But we should claim the right to suppress them if necessary even by force; for it may easily turn out that they are not prepared to meet us on the level of rational argument, but begin by denouncing all argument; they may forbid their followers to listen to rational argument, because it is deceptive, and teach them to answer arguments by the use of their fists or pistols. We should therefore claim, in the name of tolerance, the right not to tolerate the intolerant."

This is a subject that has come up repeatedly in my discussions with friends and family over the past couple of years. Two distinct societal movements have brought me back to this question:

1. Immigration of societies with different cultural "values" into European societies
2. Feminism and other identity driven groups

In simple terms, the argument Popper makes is that if we aren't all operating by the same set of foundational rules, then a society cannot be fully tolerant without sowing the seeds of its own demise. The argument can be split into the question of what and how are foundational rules established on one side and what constitutes intolerant behavior. 

Starting with the second question (which is the easy one of course), any intolerant behavior can be deemed as behavior that threatens the viability of the set of foundational rules. Using the recent immigration crisis as an example, if we agree that one rule of the set of European/Western foundational rules is "women have the same rights as men", then tolerating migrants that abide by the foundational rule that "women should be the property of men" puts into question the viability of European/Western societies.

So if the set of foundational rules U1 which includes n rules has any rule that is opposite to the set of foudational rules U2 which includes m rules then U1 and U2 are mutually exclusive. Any individual that would want to  adhere to the set U1 cannot at the same time adhere to the set U2. He can though create a new set U3 which includes some rules from U1 and some rules from U2. But this will again be mutually exclusive with U1 and U2. 

Of course, this is obviously the easy part of the argument. The tough parts are 1) how do you identify rules that are part of a set U(i) of foundational rules? 2) how do you communicate those rules? 3) how can those rules be modified? 

The fraud triptych: Bad blood, Black Edge and Billion Dollar Whale (3/n)

The third and final common thread or theme one can pick up reading these books is the amount of energy spent avoiding getting caught. I find it incredible that they were all able to avoid getting caught for years and the only reasonable explanation is that they put an inordinate amount of energy into the endeavor. Should they be commended for that? Absolutely not. But not recognizing that they are "good" at hiding in plain sight would also be avoiding an inconvenient truth. They are obviously crafty individuals with an uncanny capacity for 1) controlling the message and 2) controlling the feelings of others towards them.

On the issue of "controlling the message", we can discern two types of methods used. The first is being a real PR machine and making sure to be one step ahead of any reporters question. This is what Theranos did. Instead of waiting for the press to come to her, Elizabeth Holmes went straight after the press and exploited the laziness / credulity of reporters covering her company. She did check all the boxes that made a good story from a journalists perspective: young, check, woman, check, mission to save the world, check. The second method is to operate in the shadows. This is what Mathew Martoma of SAC and Jho Low of the 1MBD fund did so effectively. They were able to control the message by operating in an entity that itself carried the message: a hedge fund out to make its investors rich and a sovereign wealth fund making sure the future of the country was secure.

On the issue of "controlling the feelings of others towards them" each of them manufactured trust with the individuals surrounding them. The method through which they created trust was different of course: appearing like the long lost daughter for Elizabeth, being a reliable money maker for Mathew or promising re-election to the prime minster for Jho. They were able able to create trust with people that would open doors for them to perpetrate their fraudulent scheme. In a way they were aided / sponsored by these individuals to go down the route of fraud, either in an interested or disinterested fashion. 

The obvious question one asks after reading each of these books is "What if they had put all their energy into doing something non-fraudulent?". I actually think that is the wrong question to ask. Rather the question that should be asked is "Why weren't they able of doing something non-fraudulent?". The three parts of this brief essay try to outline the reasons: 1) a broken moral compass from an early age, 2) operating in an environment that rewards ends and not means 3) an uncanny capacity for building trust and controlling that trust. And yes of course, they all have sociopathic tendencies in the sense that they are selfish, egocentric individuals using any means necessary to get their needs (power and money) fulfilled. 

The fraud triptych: Bad blood, Black Edge and Billion Dollar Whale (2/n)

The second common thread or theme one can pickup while reading these books is that, despite the early disappearance of their moral compass, each of these individuals operated within an environment that either explicitly or implicitly promoted an "any means to an end" mentality. The end of course is money and power (loosely defined) so that of course is definitely less interesting to analyse than the environment they operated in. Luckily for me, the three books provided me with three different types of environment to analyse:

1. Black Edge and the high finance environment: this is by far the most commonly understood environment of the three and probably the one that has spilled the most ink since the GFC (and even before that, starting maybe with Michael Lewis' book Liars Poker). It's no surprise that a phrase like "You are only good as your last trade" ornate traders' desk. I like to say finance is "amoral", meaning it's an environment where morality is non-existent, not to be confused with an immoral environment, requiring self conscious or external actors making a subjective judgement. Moral assessment is either a waste of time or cause for a dual personality diagnostic by a psychiatrist (George Soros for example). Full disclosure, I work in this environment and can share some stories. In 2011, during the Arab spring, I was working as a trader for a London hedge-fund. As violence was starting to erupt, my boss came in and told me to buy as much corn and wheat as I could get my hands on. His reasoning: "war and hungry people make commodity prices go up". That an amoral yet legal action. During the Ukrainian crisis, I saw my boss and another trader discuss one of the leading agricultural companies in the country. The trader, originally from Ukraine, mentioned something about the earnings result of the company, but then both of them decided to take the conversation elsewhere. When they came back from a prolonged coffee break, the instructed us to buy the bonds of the company. A couple of traders questioned the move ahead of the earnings release and we were given some story about "core product" demand. Now, that to me again seems amoral and maybe illegal.
2. Billion Dollar Whale and the political environment: again, a somewhat rather well understood environment which seems to affect any political system both past and present. I don't have much to add about this one.
3. Bad Blood and the innovation environment: to me this is the most fascinating of the three. The two hacker ethos of "better to ship something half done and update it later" and "fake it until you make it" are the two driving forces of this environment. I still haven't thought through the implications and mechanisms but I have one initial comment to make. This type of environment seems to work well when attached to the digital sphere as the capacity to change the product once delivered is high and the actual return on investment of modifying the product post launch is high. The product is obviously not finished when they ship it out either by design ("We have a shipping date we need to adhere to") or by ignorance ("We didn't know this problem would exist"). Think of all those Microsoft update you have to do. The product has a release schedule but it also benefits from the data users create once using the product which can then be translated into a better software. This of course breaks down when you enter the physical sphere as there is both a high cost to modifying the product once it is out in the open and a blunt physical limitation to doing it. Theranos is a prime example of that. But I can think of others, like Tesla for instance.

The fraud triptych: Bad blood, Black Edge and Billion Dollar Whale (1/n)

I've been somewhat obsessed with reading books about frauds lately. Actually obsessed isn't the correct word as I only realized the common theme after I was finished with the second of the three books highlighted in the title. 

1. Bad Blood, John Carreyrou: investigation into the company Theranos and its founder Elizabeth Holmes. Turns out you can't really "fake it til you make it" in the physical world. Seems this only works in the digital world. Double thumbs up on the quality of the writing
2. Black Edge, Sheelah Kolhatkar: my least favorite of the three as it touches an area I'm more familiar with. Reads like a mob story, the mob being SAC Capital, dominated by Steve Cohen and a cast of underlings. In the end, their macho balls all shrank to peanut size once the Feds came knocking. 
3. Billion Dollar Whale: had a hard time believing this was a non-fiction book the whole way through. Follows a Malaysian schmoozer who through sheer will (and a lot of lying) gets his hands on a newly created sovereign wealth fund. Uses the money to buy Champagne to the tune of several million $ per year.

I might have to write several notes on this subject as there is much to unpack.

Let's start with commonalities between the main characters of each book. The first one that comes to mind is that they all started their career of deception and lies at a very young age. I won't detail what each of them did (h/t to Mathew Martoma for getting kicked out of university for lying on his transcripts and then creating a company to exonerate him of his deeds) but suffice to say they all displayed an uncanny ability to constantly lie from a young age. Now, it could be that the authors wanted to paint a picture of sociopaths never caught or it could just be that people develop bad character from an early age.

To say we all lie is the easiest of observations. What distinguishes each of them from say my childhood, is that when they got caught, there were no repercussions for their actions or worse, they were somehow commended for being "innovative". I remember lying about going to fencing classes with my best friend Thomas when I was 15. I would leave the house every Wednesday and Friday afternoon with my gear, go meet up with Thomas and proceed to either smoke cigarettes or play video games at the local arcade (which Thomas was kind enough to finance since I had no money). My parents started getting suspicious when they realized that my cloth were neither smelly no damp with sweat. So I even went to the length of humidifying my clothes and letting them rot a bit in my bag so that they would smell. Then one day, maybe two months after we had started this little routine, I came home and my father asked how fencing had gone. I said it was tiring and was hungry. He then started yelling at me that he'd been at the club and they hadn't seen me for a few months.

Now did I feel bad looking back on what I did? Not really. But I suffered the consequences and had my computer and outings privileges stripped from me for a couple of months. The fact that I still remember the event vividly is a testament in and of itself that I "learned" a lesson that day. Of course I would unlearn and relearn this lesson at least once more over the course of my teenage years. But more on that tomorrow.

What if we didn't need to live in clusters?

I wonder what the effect of not living in clusters / cities would have on our well being, our productivity at work and our relationships.

Imagine for instance that we invent a new way to commute rapidly from say four hours outside of a major city in less than the time it takes to snap your fingers (teleportation) or that we invent a new way to have shared work-spaces without physically being in the same place (like virtual reality).

I think virtual reality seems like the more plausible first step. You would wake up, have your breakfast and then just plug into your virtual reality headset and be "beamed" to your share office space. 

From the perspective of the office space, space, as in the amount of room you can allocate to an individual worker or a group of worker would no longer have any real meaning. You would make a scarce (and thus expensive) resource widely available. 

From the perspective of the worker, commute time and the associated ills would no longer be a concern.

Now the real question is, if these barriers exploded, would we still decide to live outside of clusters? 

I think there are several things we can observe:

1. This would no longer be a constraint, so while some individuals, especially those looking to foster physical relationship with unknowns will probably still elect to live in clusters, those that have already found the most meaning full relationship in their lives (wife/husband + kids) or prefer to live surrounded by "nature" (whatever is left of it at least after we "colonize" these new areas) would no longer be constrained by the necessity to live close to your job.
2. From an employer perspective, this would create the possibility to search for skills beyond borders whether local or national, as anyone could immediately connect to the space. You would actually question the validity of national borders and national employment laws if such a technology existed.
3. By making the space required for work not scarce, we would make the space available for "living" plentiful as well.
4. I'm not sure this would have an immediate impact on productivity. Rather, we would see progress over time with probably less sick leave and less general stress resulting from the commute. Quantifying those effects is probably a bit hard.

I'm especially interested in what would make people stay in cities / clusters if you were able to work virtually from anywhere. Is it as simple as the necessity to have physical interactions with other individuals, or would we rapidly evolve to having those relationships in a similar virtual format. I think what we are seeing with current young individuals shows that the evolution can be quite sudden once the technology is available. Or is there something more else that we seek when we live in clusters such as security, availability of experiences, general economies of scale?

The question of the economies of scale to living in clusters is quite interesting I think. Does it actually cost more or less to live in clusters? I would tend to think you actually save energy overtime but expend more initially. If we were to live far away from clusters then we would necessarily have decentralized infrastructures, from energy distribution to medical care.

In essence, I think the problem with not living in clusters is that we don't currently have the technology to enable us to have a similar lifestyle outside of a cluster at a similar cost. This is for the moment only available to individuals with enough wealth to create this infrastructure for themselves, or individuals willing to trade "down" their way of life both in terms of physical and psychological comfort. 

But again, these seem like easily resolvable "problems" if you take a long enough perspective on technological improvements.