Oct 022008

While a money-economic downturn would have happened anyway, it need not have hit with the precipitousness it did. That has to be blamed quite substantially on the combination of cupidity and stupidity of the elite bankers. Here’s why.

The sub-prime mortgage meltdown began months ago. As more foreclosures are instigated, the adjacent homes lost value, helping lead to still further foreclosures — thus lowering the value of the collateralized debt obligations that include “tranches” of these mortgages. It seems it should have been obvious to any sophisticated banker that preventing foreclosures through renegotiating terms of loans  or even a simple moratorium would have caused less damage to the banks’ portfolio. But it would seem that nothing was done. Of course, the CDO involve mortgages that have been sliced and diced, so that no one debt-holder has control over the actual mortgages or is in a clear position to hold off on any particular foreclosure. Still  a process of acting in coordination and “walking back the cat” to reassemble a say over individual mortgages should have been possible with enough computer power. So one has to conclude that the fact that it apparently was not tried indicates that the the so-called “masters of the universe” were more clueless than their vast compensation would suggest they should be. Once the sub-prime mortgages turned sour,there was still time to act, and the banks didn’t.

(If the cat trick wouldn’t have worked, or was going to be too slow, the big banks’ lobbyists could have been sent to support a government-backed foreclosure moratorium. This has still not happened. That too is immensely short-sighted.  )

One must also ponder that the Senate and House did so little to stop the meltdown. Why did they have to wait for Paulson’s bad scheme? Why couldn’t’ they have invited in experts and crafted some other plan much earlier? It is true that often only the appearance of an extreme emergency causes politicians to act. But it is  a sad commentary on the quality of political leadership in this country (and perhaps in others) that is the case.

Finally, the fact that even the bailout bill contains no moratorium on foreclosures indicates extreme and probably ideologically-based stupidity as well as lack of sympathy on the part of the political elite. Even now, ending foreclosures would help stabilize housing prices, preventing a further meltdown, as well as keeping many deserving people in their homes.

Of course the reliance by ordinary people on credit and on rapidly growing real-estate valuations over the last few years was partly caused by extreme income imbalances. These imbalances have several sources. Among them  certainly were the efforts by the wealthy to hold down others’ wages and their own taxes while simultaneously striving to  increase returns from credit cards and low-income mortgages in their own fat paychecks and bonuses. This mistake did part of the damage that is now coming back to haunt these same people, as well as the less well off. As I wrote before, having much more money than you need is pointless except to impress others.

Sep 292008

It seems to me unlikely that the financial crisis now will not lead to a full-fledged economic crisis, nor that there is much the government can really do about it. The Paulson plan was at best a Hail-Mary  pass that incidentally preserves much of the hyper-inflated Wall Street which gave him his own half-billion dollar nest egg.

I will write more about all this and its connection with the rising Attention Economy soon. Meanwhile here is my own “bailout” prescription — unlikely to be adopted and certainly not enough for a full  turnaround, but at least a tourniquet on the bleeding—  perhaps. Rather than buying up “toxic” assets of the investment banks, leave them to stew in their own juices. Instead do all the following:

1. Freeze all foreclosures for six months. Mandate that no adjustable-rate mortgages increase current rates for that period, and reduce current rates to no more than one-third of actual full-tine residents’ (whether owners or renters) income. Freeze all personal and small business bankruptcy processes and loan collection activities for the same period. Require that no employer lay off workers for the same period, instead ,if necessary, reducing hours across the board. Mandate a six-month holiday for repayment of student loans.

2. Start a new bank to speedily lend businesses  who have a five year track record of overall  profitability ninety-percent of the the short term loans they can document they have already applied for. Help them with suggestions on how to work out credit deals with suppliers, etc., for the rest. Do this in such away that documentation needed is both reliable (tax records, say) and minimal. Back these with government guarantees, and encourage investors to add to funds. Make this a revolving loan bank.

3.  Start a second new bank to aid businesses with poorer records obtain enough loans to stay in business, based on some minimum criteria of the promise they show.

4. Immediately increase taxes by 33% on upper 5% of incomes to help pay for the above.

Over this six-month period new steps will have to be envisioned and thrashed out, with a possible continuance of some of these provisions if no better solutions are found.

Sep 272008

In response to my comment on Kelly’s  blog post he asked:

“Michael, do you have a sense of under what conditions attention does not pull money along? You mentioned infants and terrorists. Don’t infants eventually get money from their parents, and wouldn’t terrorists get money if there was an easy way to pay them?”

I replied

Kevin, in reply to your question about when money does not follow attention: when money is not especially wanted or sought; when there is no suitable channel by which to convey money; when the person getting attention — JS Bach, say, or a suicide bomber — is dead.

In general, attention is often desired for its own sake; if you go to a karaoke bar with friends and start singing very entertainingly, you may get attention and applause, very gratifyingly, but not usually money.  In any circle of friends or colleagues, a few may get a lot of attention, but this does not generally translate into money, though non-monetary favors of various sorts would be common.

As new forms of interpersonal connection on the Internet and the like  (texting and Twitter, e.g.) proliferate, I think more and more of those we pay attention to will be hard to distinguish from friends, and handing over money to where our attention goes may seem increasingly odd under normal circumstances.


Sep 262008

Kevin Kelly’s blog recently cited my work, in piece called “Where Attention Flows, Money Follows”

My comments:

“HI Kevin,

“Thanks for the citation of my work. You always find neat ways to put things. As the old adage goes ‘Build a better mousetrap, and the world will beat a path to your door.’ People who want to see more recent thoughts of mine can start with my blog http://www.goldhaber.org  Details on what attention is and how it works can be found at http://www.goldhaber.org/wp-contents/uploads/2007//Chap_3_3.19.07.pdf

“A few caveats on your piece:

“1. Money doesn’t always follow attention, and often people just want attention for its own sake, not money. For instance, they write letters to the editor. Or they comment on others’ blogs. Babies are very good at getting attention; money doesn’t necessarily follow. Terrorists get lots of attention, which gives them followers, but not necessarily money. And so on.

“2. Consuming stuff takes attention. The more attention we pay to messages that are not related to selling us stuff, the less ability to and interest in consuming more things.

“3. Ads work only when they get us to buy something. As the Internet grows and captures more of our attention (see my ‘The Web as Black Hole’ http://www.goldhaber.org/blog/?p=127 ) ads will eventually not bring enough money to cover everything, or not very well. Many web sites just ask for money directly.

“4. I still think money is not fundamental to the pure Attention Economy to which we still seem to be headed. I have attempted to develop an index that allows comparison of different types of economy, according to which the AE is already much bigger than the money economy. See http://goldhaber.org/blog/?p=80 . Also, the money econmy is now in trouble. See http://goldhaber.org/blog/?p=129 .



Sep 262008

When I wrote about Palin shortly after McCain chose her, I said she did not have enough time to gain fan loyalty in order to have a significant positive effect on McCain’s votes. I think I was right on that, despite her obviously having gotten a big bump in popularity, simply by being a novel sort of candidate. I wouldn’t be surprised, after seeing her disastrous interview with Katie Couric on CBS news, if she in fact does what was bruited about during the Republican convention, namely resign from the candidacy. Maybe McCain could now pick Lieberman.

But McCain has said he is suspending campaigning, ostensibly because of the looming financial mess. He has not said that he will restart his campaign,and perhaps he won’t. This may turn out to become one of the oddest elections in US history, a candidate essentially giving up.

In the Couric interview, Plain did not come across as someone one can easily align one’s mind or emotions with, since she bordered on incoherence of a depth far beyond the worst George W. Bush ever offered, and she looked continually scared, while pretending to be confident, not a winning combination, nor one that it is easy to identify with. I think few people will be won over to her, rather than seeing her as more of an object than a person.

McCain cannot have failed to note that Palin is a disastrous candidate, how cannot keep his campaign afloat. (He would have not gotten much bounce in the polls at all, had he not chosen this unconventional candidate, so he was counting on her for a lot. Barring a disastrous mistake by Obama, McCain probably knows he now cannot win. His choice is get rid of Palin and take a gamble on Lieberman, or just forget the whole thing. I suspect he will find losing badly to be highly humiliating, so he might take the former course, though the precedent (McGovern’s dropping Eagleton in ‘72) is not hopeful for him.

If it does happen, you read it here first. And, by the way, McCain might do really badly in debate himself.

Sep 152008

American and probably world financial institutions continued to reel today as an outcome of the credit collapse that began with the sub-prime mortgage mess. Because primary and secondary mortgages and other forms of personal and institutional debt were completely essential for whatever economic strength the old economy has shown since 2001, it seems probable to me that the latest failures are just a harbinger of worse money-economy times to come. However this plays out in detail, it is very likely that the new Attention Economy will grow in importance, and possibly irrevocably take the lead over the old economy, in more and more visible ways.

The facts remain that

1. the money economy is fundamentally an industrial-market economy, based on the production and sale of standardized goods, which

2. due to growing productivity continues to require a decreasing fraction of the world’s potential workforce.

Since 2001, the US economy kept going fitfully, through creating further inequality, through purely financial maneuvering, such as by hedge funds, through consumers’ making ends meet by cashing in on higher home prices through second mortgages, through added construction both residential and commercial, and through a growing luxury market to tend to the newly rich and superrich. That was clearly destined to come undone at some point, and now the point has been reached.
The lack of safeguards in investments, speculation and debt creation allowed the 2001-07 “growth”, and without it the old economy would have gotten anemic that much sooner.

But now, unstable debt instruments piled one on top of the other have led to a disaster that will extend far beyond the financial sector. Pension funds and mutual funds will mostly have dismal or negative returns, which will in themselves affect buying power for many retirees. Businesses will be unable to obtain loans they need to even maintain current efforts. Layoffs and declining work weeks will spread to many sectors. Construction — both residential and commercial — will be curtailed for some time to come. Housing prices will continue to fall as new would-be buyers will find it hard to obtain even prime mortgages. Tax revenues will decline, leading, very likely to government layoffs. And further cuts will arise because of these curtailments in consumer wealth.

More people without work, and finding it difficult, for instance, to afford college or medical care and the like will further involve themselves with the Attention Economy, especially online. As I mentioned in the previous post, the Internet draws in in new modes of attention- seeking and paying, and these in turn draw in more people more tightly to this instantiation of the Attention Economy.. Sooner or later, probably, the monetary economy will revive to a degree, but the growth meanwhile of the Attention Economy will make it less central and less necessary.

Given all this, what can government do, and what kind of program should Obama be putting forth if he hopes to win now? ( I am not yet sure how much government can do, or how much Obama is likely to propose or actually do, but I am pretty sure a McCain triumph would be by far the worse possibility.)
Here are some obvious steps:
1. Take steps to increase and universalize access to the Internet, by a combination of regulation, tax policy and direct subsidy. See to it that affordable and usable two-way Internet connections, including wi-fi, high speed, etc. spread access to all. Encourage easy to use versions of hardware and software, so more can be online. Increase transparency and responsiveness of government agencies at all levels to Internet communications, and make sure what is done online by government is archived permanently. Modify intellectual property laws to allow easier sharing of good ideas and expressions.

2. Devise formulas to modify tariff agreements so that too cheap foreign labor is discouraged in favor of policies that promote decent pay. Also improve environmental standards and working conditions for foreign factories, etc. If done right, these new requirements should aid ordinary people on both sides.

3. Press for a wide range of energy- and resource-saving inventions and practices, and see that they are put into effect. Develop renewable energy methods and devices, and try to sell these abroad, offering them at reduced cost to the neediest countries.

4. Put out-of-work construction workers to work rebuilding some infra-structure such as certain bridges, and making other infrastructure, such as airports and roads more energy conserving.
Vastly increasing educational opportunities in ways that genuinely fit possible careers to to talents and proclivities. That would include new medical and nursing schools.

5. New regulation for financial sector that is robust enough to prevent the equivalent of the curent boom-bubble-bust cycle and ove -generous rewards to bankers who are and financial officers doing little but taking money out one pocket and putting it in another (sometimes known as theft)

…More later…..

Sep 122008

The Hyperlinked Society, the book I’ve referred to before, is a  book which shares the common faults of printed versions of conferences. Though the very word “conference” suggests the possibility of a rich dialogue among participants, the printed version tends to suggest no attention paid to each other. Here, for instance, there are two chapters on maps and the Web — the second much better than the first — each covering much the same topics, but not noticeably referring to the other.

What makes all this more problematic than it might be is that the stated subject is poorly chosen. Hyperlinks are ways to move attention from one web page to another. They are vital for the web crawlers or spiders that allow search engines to work, and without them the web as it was about 20 years ago would never have come into being. But what about everything besides hyperlinks that go along with them? Compare this topic with having a conference on the effect of screw threads on society. It would be hard to imagine modern life without the use of screws, bolts, threaded pipes, and threaded jar caps, but, still, singling out this one invention used in so many different ways would not really get you too far. Watches and plumbing both relied on screw threads, but that connection is not very revealing about how watches or plumbing affected modern society.

Likewise, from the very first, the hyperlink was merely one link in the chain of inventions that have made the Web significant. Hyperlinks would not have been of much use had they not been preceded by the personal computer, the graphical user interface, the computer mouse, packet switching and the Internet backbone. Since Tim Berners-Lee came up with the Web framework, tens of thousands more software innovations have come pouring forth. These include browsers, bookmarks, bookmark bars, cookies, java, mp3’s, file sharing, php, SQL, pdf’s, web portals, blogging software, easy to use listservs, community sites (Craigslist), on-line auctions, a whole series of search engine algorithms, e-Bay, Amazon, Yahoo! and Google, WordPress, quicktime, social media, multiplayer games, Wikipedia and wikis in general, SecondLife, VOIP, cloud computing, etc. Plus the negatives such as computer viruses, worms, spam, phishing, etc. And all sorts of hardware innovations in connections to the Internet at both ends, such as cable modems, wi-fi, smart phones, digital cameras, search-engine server farms, and so considerably on. Some of this depended on the hyperlink, and some did not. Singling out this one invention leads only to murk.

Tighter and Stronger

Attention is basically not mentioned in the conference report, even though changing the direction of our attention is what selecting a hyperlink most universally does. It is much more fundamental to see the Web in terms of attention than in terms of the technical device of hyperlinks. As each new invention of software or any other form of expression is added via the Web, the resources that can be used or rearranged for future additions grow, and the more people will find some way to channel their attention through it, leading to still more inventions, which, not so incidentally, are modes of attention getting in their own right. As is also not said, as this goes on, the effect is that new modes of attention getting and attention paying are added. No matter what personal tastes, styles, predilections, attitudes, and forms of comfort someone has, some aspect of the Web is likely to be able to fit with them, to provide channels of attention highly suited to all that. And the fit will continue to get better and better. (Even those now not linked at all, with no computers or modems, for instance, will be pulled in through new hardware initiatives and inventions as well as more complelling software of all sorts.An interesting example of how the attraction increases and changes with new resources such as Facebook and Twitter and continuous updating of minor news of each person involved is offered in “I’m so Totally, Digitally Close to You,” by Clive Thompson in the NY Times.)

These reflections suggest a key prediction, not found in the book, of course. The Internet, which encompasses the Web and more, and its attendant devices and software together are like a single giant and growing Black Hole, pulling us all in faster and faster, and ending up much more attractive than all else. And just as light is not released by an ordinary black hole, attention is more and more tightly held through this all, where instant or very fast responses are the standard. (More than ever, traveling far away in space, say to Mars, would put one out of the loop, and probably unacceptably so. While the real worlds of the Internet expand to include all sorts of “virtual worlds,” the reality of the planets fades in importance. When we travel inward to virtual worlds, we find many others there; by comparison the planets are barren, devoid of anyone who can pay us attention, and far less evocative.)

But What About the “Real World”?

David Weinberger, at the end of his piece in the book, comments on people who fear that Web users will ignore “the ‘real’ world,” and then he adds a footnote to point out that he puts quotes around “real” because there is “only one world.” His point of course is that there is nothing unreal about the Web. I wouldn’t say it is much use to assert, for these purposes, that there is only one world, for each person has a certain horizon of attention the uniquely defines what, practically speaking is this person’s world. Seeing the Internet as black hole means that the parts of it that each person connects to more and more tightly is an increasing part of that person’s reality.

The word “real,” as in “get real” is of course often used pejoratively, to imply someone is not dealing with “reality.” Reality in that formulation can mean “economic reality — i.e. the old money economy — or simply material reality, as in, say, tables, chairs and breakfast cereal. But in fact reality for each person not only continually changes but is refracted an reflected through the minds of other people. The growing Internet is increasingly the channel of that refraction and reflection, that re-pointing of attention to what now becomes most real.

“Real,” then suggests a contrast with “unreal,” but the latter can mean ideal or abstract, as in mathematical truths, or wishful thoughts, hallucinations, paranoid fears, or simply works in progress, (not yet “realized”) or simply the so-called virtual worlds instantiated by such “games” as SecondLife. If each person has in effect her own world defined by the reaches of her attention, it will contain some elements of all of these, but the parts that can be viewed as real are the parts that cannot be changed purely by that person’s wishes or emotional changes without the intervention of others, but can be changed when others agree. Within the new black hole of the web, even mathematics (or religious truths) ceases to be purely an unchangeable ideal but rather depends on agreement among a circle of others. Some supposed “real world” entities, such as prices, lose a clear claim to reality, while other entities, like global warming, which cannot be individually perceived, increase in reality, because they emerge in a new consensus. We —or rather, some of us— are more and more in touch with aspects of the old “concrete reality” that we would be kept from were it not for the Net.

How that effects our psyches I will say more of in the next installment.

Sep 092008

In the book, “The Hyperlinked Society,” which I read at Michel Bauwens’ urging, there is an article by Martin Nisenholtz of the NY Times extolling that publication’s all-out push to integrate with the Web. To some degree they have done a good job, but one thing they do terribly badly is exactly their use of hyperlinks.

I do not know the mechanism, — it could be ten-year -old children of the webmaster, underpaid workers in India, or some completely automated process —  but the results are evident. In every online Times article you can find  a sprinkling of hyperlinks that, if you follow them, lead you completely astray, having nothing useful to do with the article in question.

Case in point: Clive Thompson has an interesting article in this week’s Magazine:“I’m so Totally, Digitally Close to You,” (though the web title is “Brave New World of Digital Intimacy” —much worse). It is about the ways in which Facebook’s newsfeeds and services such as Twitter allow wide circles of friends and acquaintances to update you in tiny bites about their latest doings, such as making sandwiches, and about the effects of all this in increasing a sense of intimacy. One sentence reads: “Ambient intimacy becomes a way to ‘feel less alone,’ as more than one Facebook and Twitter user told me.” The word “ambient” is used here as an adjective, indicating the enveloping quality of these new connections. But in the Times online, it is hyperlinked. To a definition? No. Rather to articles in the Times on a company called Ambient Corporation that is engaged in trying to make the electricity grid more responsive and green.

This is annoyingly stupid. Why would authors want to have attention turned away in this manner from what they are writing?  A simple solution would be to give each article’s author veto power over these argbitrary links. At present they are just a minefield readers should avoid. If the Times is patting itself on the back for this egregious and ongoing blunder, it shouldn’t.

Sep 052008

Dear Readers,

For too long, comments have not worked on this site. That happened because of my lack of technical knowledge and too much comment spam coming in. I think I’ve fixed those problems. So please comment now. (I will still moderate comments.)



Sep 052008

Hillary Rodham Clinton, speaking at the 2008 Democratic Convention, asked whether her supporters backed her just as a person or because of the issues she embraced, implying that of course they should answer: “the latter.” But we know that is not in truth the case. All candidates “flip-flop” to some degree on issues that might be important to their voters, and since no one can foresee exactly what will face successful candidates during the term of office in question, we have to embrace the person over the issues to a considerable extent. But what makes the embrace much stronger now is that the main candidates who received so much exposure and large audiences through the primaries and possibly before are all clearly stars. (The US is by no means the only country in which star power has become highly necessary for political success. The examples of Blair in England, Sarkozy in France, Berlusconi in Italy and Koizumi in Japan all used their ability to come across to large audiences as an essential part of their pull. And of course, actual celebrities like Schwarzenegger and Reagan have done well at times in the US. )

Stars, as I define them, are people who get much more attention than they give, and to whom, as a result, we offer up our loyalties in highly personal ways. Once someone is a star her or his fans feel a strong pull to that person, to refuse to substitute anyone else, and to identify with the vicissitudes of the star. People who are for Hillary may transfer their loyalites to Obama if she says so, because they want to please her, though this is not likely to be an easy or complete process. They are now loyal to him to a degree, but he still has to deepen that loyalty, by making it seem he notices and values them.

Meanwhile, of course, the Republicans decry Obama for being a celebrity, as if McCain were not, and then McCain chooses a vice-presidential candidate as much for personal traits as anything else. Now Sara Palin has appeared on the scene and received thundrous applause for her red-meat, rabid speech at the Republican Convention. Meanwhile people watching at home get more of a sense that she is worthy of attention because of the applause of that celebratory crowd in the hall.

So is Palin now a star who is likely to make much difference in the Presidential vote? I very much doubt it. One exposure in the political arena does not turn an unknown into a star for whom a great number of people are likely to work or to change their vote. In the condensed two months before the election, to make a real difference, Palin would have to open herself up to the public to a remarkable degree, and voters would have swoon over what they see. Furthermore, they would have to vote overwhelmingly with heart not head. I strongly suspect that Palin cannot make this work, because she really has little to offer that is positive, beyond a buoyant personality compared with her negative approach on most issues, and her too right-wing stance.

Does this mean Obama will win automatically? No. He has always had an uphill struggle. McCain has some crowd pleasing traits and his POW story. If Obama continues to seem high-minded and presidential, while at the same time emphasizing his own plans to turn the country around, and emphasizing that McCain is just copying his lines out of political expediency, he stands a good chance. The key point is that we have to believe in him, have to feel a deep tug based on his story, on his steadiness, his youth, and the rest.