Michael H. Goldhaber

Item: In certain places, bar and bat mitzvah celebrations had become intensely competitive, with parents generally responding to kids’ needs to up the ante by spending ever-more money on more lavish and far-out parties. According to a recent report on the public radio program, Marketplace, that included having the celebrant jump through a hoop of fire or be escorted thorough a Polynesian -themed entrance by scantily clad dancing girls. In this competition for attention, the rising sensationalism meant on average no kid would get more attention than before, but the arms race was hard to stop.

And all that spending, mostly on locally provided services, was stimulative to the American (money) economy. Now, however, just when more stimulation is apparently needed, it has become more attention-getting to desist from the arms race and offer an obviously less lavish and expensive and altogether more sober sort of event, one that seems to fit the down-sized times. It just does not do to be too ostentatious in spending in the current recession (or depression). From the point of view of the capitalist economy, this is too bad. Now is when a stimulus is certainly most needed, and people who can spend, it could be argued, have a good citizen’s responsibility to do so.

Item:As the shenanigans in Washington over the stimulus package reveal, plenty of people still can’t get their minds around the idea that spending is needed to revive the economy — assuming it can be revived. President Obama, in my estimation, is himself only partially convinced of this necessity, and therefore has yet not done an effective job of convincing the wider public. He keeps appointing people who also are more culpable than corrective in changing the tide. The dual (if absurd) messages that people on Wall Street deserve high pay for their hard work —much higher of course than many other hard workers — and that saving is better than spending, that in fact too much spending seems to be what got us into this mess, collide and produce cognitive dissonance that leads to fear and inaction.

Item: workers of all kinds in China will work for much less than their US counterparts. Why shouldn’t the banks set up all their operations in China, and why shouldn’t President Obama hire Chinese economic advisors? I’m sure the latter can give just as mediocre advice as he’s getting at higher prices now.

Item: as I just said, workers of all kinds, including high qualifications are available in China and can do anything American workers can do. It’s great for the Chinese if they are employed even at their low wages, but it would be horrible and impossible for Americans to try to get by on such small wages. This is the folly of globalization. It wouldn’t be folly if there were an unlimited need for workers, but rising productivity means that is not so.

One of the things that makes the typical American economist so mediocre is the assumption that we can “get back” to steady growth for all infinity, if we only correct for ecological problems (that part’s ok). This hope ignores that we cannot sensibly consume infinitely much, so that rising productivity eventually has to cause problems. Even in a world in which everyone has a good income, in which institutions and cultural preferences and technical limitations do not limit consumption, the scarcity of attention eventually would do so. But in the real world, where incomes are already decidedly unequal, where most of the world has in fact lost ground as a result of the breakdown of ordinary agriculture as more productive western agriculture has replaced it, and where factories , etc,. get more highly productive all the time, the limiting consumption point has quite possibly already been reached. The average Chinese probably would not want to consume at the American level, or even imagine doing so, and all sorts of barriers anyway prevent that. For the world’s devalued peasants, the idea of huge consumption is still further off scale.

Actually, the turning point was some time ago, I suspect. What kept us from noticing was precisely the overheated financial sector here in the US. The Internet and the like have greatly speeded the rise of the attention economy (in my sense) but it has also made possible a vastly overheated financial sector in which large volumes of money running through could be slightly diverted in order to set up apparently substantial profits that were little more than gimmicks, even if unintentional ones, but these gimmicks for awhile were also justified in issuing mountains of loans that allowed the average person to buy much more than the average declining income would have made possible. That fed, for instance, the credit card binge and the mortgage binge that led to ever higher home prices, leading to ever more toxic mortgage deals, etc. But the collapse of that house of cards just reveals the deeper underlying problems of a bereft capitalist economy. As US consumption was what kept the entire world economy afloat at the level it was, our fall now cascades into others’ economies as well. Pulling the whole world out of it is going to take much more than has ever been seen before, and I don’t see how that more can be more capitalism as usual.

As stock prices sink and profits plunge, the firms that survive will be the ones that continue to increase productivity the fastest, which means shedding even more jobs.

Item: The bailed-out banks have been loathe to lend money to ordinary consumers, because most of them are maxed out on their credit anyway. But the same banks were willing to form a consortium to lend bailout money to Pfizer to buy Wyeth, which will lead to 14,000 layoffs, and that fact might be just waht gave the banks the confidence to lend. So much for the bailout helping keep jobs.

Many economists cheerfully believe that the US can recover its former more advantaged position by developing a more educated workforce which will more design rather than produce goods. However if the idea is that these designers will be able to command a premium for their services on the world market, that can only come about if their designs all get attention from a large part of the rest of the world. In other words, to have what passes for a high material income in an attention economy you have to rreceive a good deal of attention, in this case thorugh your designs or for your share of whatever project you are involved in designing. And there may not be (or, rather, isn’t) enough attention to go around, doing that). Actually, of course these high attention-receiving workers need not be designers; they can be novelists, movie directors, singers, sports stars, and so forth, just as well. But still, comparatively very few of these will get the bestseller kind of attention that is needed.

And other countries’ citizens will be good at starring in these ways too.

The more the old economy sinks under the weight of too high productivity and thus tremendous overcapacity, the faster will be the move towards the attention economy, as more and more people make use of the Internet to vie for attention in new ways. The vast majority of people will find themselves, in effect, to be fans, if they are not chiefly that already. But they will sink in to despair even as fans unless they feel the stars will somehow take care of them. So it is incumbent upon stars who want any kind of a stable world to worry about a pattern of goods distribution that continually improves life for those at the bottom, and does so in more or less sustainable ways. This is what we must try to flesh out, I think, if there is going to be any sort of desirable human future.

There has been much discussion of leadership at Apple recently. Is Steve Jobs indispensable? Short answer: “yes” In fact: “absolutely.” Jobs is the star we pay attention to through all Apple outpourings. Even in the unlikely even that an Apple user or would-be user, or even hater, has not heard Jobs’s name, or seen him on video or in a photo, what that person would most likely align to as special behind Apple products is clearly Jobs’s sensibility, his outlook towards the world, his remarkable vision and foresightedness, his particular aesthetic, his contact with the zeitgeist and so on.

I wish Jobs the best of health and a long life, of course. He has done so much to affect  so many current experiences, even of those who have never once used and Apple product. Still, though Apple Computer, Inc. might persist and possibly even do well without Jobs at the helm, I suspect it is only likely to flourish under his continued leadership. Without him, even with some other visionary at the helm, the strong alignment we have with Jobs – for those of us who do — will dissipate over time. The urgency of buying or checking out the latest Apple products and services just will not be the same.

In an article in Sunday’s NY Times (1/18/09), Steve Lohr oddly quotes two different musicians, one of whom is now a corporate “innovation  consultant” to the effect that this is not so, that Jobs has solid people in place to continue the company without hIm.

“ ‘Nobody is indispensable indefinitely,’ said John Kao, a jazz musician and innovation consultant to corporations and governments. ‘The “great man” theory does hold water, but mainly at times of transition when a charismatic leader lends what psychologists would call an individual’s ego strengths to the organization or country as a whole, to allow it to regroup and move forward.’ ”

AND

“ ‘As special as Steve is, I think of Apple as like a great jazz orchestra,’ said Michael Hawley, a professional pianist and a computer scientist who once worked for Mr. Jobs. ‘Steve did a superb job of recruiting a broad and deep talent base. When a group gets to be that size, the conductor’s job is pretty nominal — mainly attracting new talent and helping maintain the tempo, adding bits of energy here and there.’”

Bull. I submit that these musicians don’t understand their own fields, much less the secret of contemporary management.  Quite the contrary of what they say, the larger a musical ensemble, the more crucial is the conductor. This is especially true of jazz orchestras, which is one reason the great ones of the past — such as  Duke Ellington’s or the two of the Dorsey brothers — are no more. When even a standard, classical symphony orchestra changes conductor, the whole sensibility and a good deal of the fan base changes, and these are orchestras who, to a large extent, keep playing music by the same few composers. The conductor doesn’t just choose the musicians and the pieces to be played, but approaches them with a style and sensibility and a personality that the musicians as well as the audience must respond to.

I have no doubt that Jobs is gifted at spotting and nurturing talent, but that is not his only role at Apple (nor was it at Pixar or NeXT). People in the company might come to him with many wonderful ideas, and it’s possible he initiates few innovations these days. But he very clearly exercises remarkable powers of selection in choosing what should go forward — and when — and what should not. (Sometimes he makes poor choices, and he probably ignores certain areas, but that’s inevitable.)

Looking at the way Apple spokespeople (who are sometimes managers of one area or another)  dress makes it clear they follow Jobs slavishly. I very much doubt that among the talents Jobs has nurtured or could nurture is another Steve J. Such a person would almost certainly be at sharp odds with Jobs and would have gone his or her own way. And of course that person would be very unlikely to share Jobs’s exact style or vision. By way of analogy, think of a great dramatist or novelist or painter (or a great conductor to stick to the musical metaphor). Such a person might mentor another but not in any way someone who would draw the same set of fans, or resonate with similar enthusiasm.

And Other Companies?

What has all this to do with corporations in general? Quite a lot, I think. Companies that lack strong vision and can thus draw and keep consumer attention are going to have an increasingly hard time staying afloat as they encounter others that compete in one area or another. Any area that begins to be lucrative under current conditions will quickly engender competition from others who will pour into the field. The only moderately long term success will be among those who develop the kind of fan base few besides Apple have now. When the original leader quits for whatever reason, any such company will face an increasingly perilous transition. A new charismatic leader will be needed for the long term if the company is to continue to prosper, not just for the supposed transition period. Generic executives such as John Sculley and Gil Amelio were no good at running Apple. They will be less good in general anywhere, I suspect. (Though Bill Gates is more of shrewd businessman than a Jobs-like visionary, he is enough of a visionary and inspirer that Steve Ballmer, his hand-picked successor,  has been unable to replace him at Microsoft.)

Of course, though I hope that like Elliott Carter, the composer, Steve Jobs stays healthy and at work past 100, that doesn’t mean that Apple or any other particular corporation is likely to survive that long. Even if he remains that vibrant, Jobs will at some point perhaps not be so good at responding to the zeitgeist. Keynes famously said that “in the long term we will all be dead,” and that’s true of companies too. In fact, their life expectancy is growing ever shorter, I think, even as that of humans increases.

Subtleties to Bear in Mind

However, 2 caveats: (1) Just as Elvis still has fans long after his death, fans of Jobs would certainly continue to have an interest in Apple products for a long time should Jobs leave the Co. for whatever reason. Still, in the fast-moving world of computers, etc., oldies but goodies are not of much value, so a Jobs-like vision would still have to be in effect.

(2) Still more germane, the visionary behind a line of products or services need not be the CEO. Consider Google in this regard, where Larry Page and Sergey Brin are sill very active despite not being the CEO.

(Disclaimer: I own some Apple stock.)

How should companies operate when appearing to be an attention payer as well as being an attention getter is crucial for their survival. Not this way. A service that shall remain nameless sent me a notice that I would soon be billed for year’s worth of service I had already paid for. The very lengthy “chat”  recorded   here ensued.  Here are some observations of how not to pretend to pay attention that this expereince reminded me of.

1. The more “agents are protected from actually revealing their identity, the less they seem to be human beings, and the more they are likely to elicit anger. You can hardly feel someone is paying you attention if they are operating in this veiled way, as if they are machines and not persons.

2. These days, a chat box is a silly way to pretend to provide service. Why not use voice and show the agents on live video? That way a more personal relationship could be built. If further contacts were needed the customer could request  who ever gave good service before. If necessary, an appointment could be made.

3. Agents should certainly be authorized to handle reasonable requests, such as sending a confirmatory e-mail and revealing at the very least an identification number. If a company values efficiency, they should value the cusomer’s efforts as well, and should seek to  minimize the attention that must be paid on both ends. My experience is that much attention is often wasted because agents keep saying they are not authorized to do something they reasonably should be able to do. Maybe many customers give up in frustration, but they will also seek to avoid this bad service by choosing other suppliers when they can.

Thoughts emerging from a conversation with Sandra Luft of San Francisco State U (who bears no responsibility though):

“Who am I?” Or, “Who are you?“ How we answer such questions clearly changes over time. One of the main ways, though, has been with a narrative, a personal story that describes how one ended up where one is and who one is now. The story takes in the key experiences that seemed to cause one to veer in some new directions, the milestones one passed, the actions, the forks in the road that could have led one elsewhere, the feelings that propelled one in one way or another, the chances encountered and taken or not. In these stories, at least since Freud, the earliest experiences and memories of family life have a particular place in indicating who we have become. If one chooses a more biological approach, putting genetics in a starring role, or even if one puts an emphasis on culture handed down, the story becomes interwoven with an even longer history of the family, the tribe or society. To live is to have a history, to unfold, to evolve, or perhaps to revolt against the given, by turning some corner which leads to new discoveries about oneself.

Discoveries about oneself suggest an inward quest or adventure, also taking place through the passage of time, to discover who one perhaps has been, unbeknownst to oneself, all along. Again, that is  a personal history extended over time, however, a path to a full discovery that possibly can only be completed at one’s death.

That at least is the old way of self-description and self-feeling. The new way, with and through the Internet, is not diachronic, it would seem, so much as synchronic. You are your current set of interests, contacts, Twitter postings, Facebook postings, blog postings, listserv controversies, your latest images, and YouTube videos — trapped in an eternal but changing present that gives no sense of birth or death or growing up, or even growing at all. (I’ve also touched on this in my article on the “Mentality of Homo interneticus” ) You are tied to others and you are only defined in some sort of interaction with them, but only as now. (This also ties to the notion of superself I posted before.)

How would you respond, then, to the question,  “Who are you?” — assuming it still has meaning at all? Is it an impertinence, would it simply be answered by listing all your current contacts, your recent google searches, and maybe a few of the items you have around the house or have recently purchased? Would you describe your ambitions, past achievements, etc.? Or would these be just window dressing for the sake of providing a resume? Are you just something floating in the now — a list of current attention paid and received and nothing really more?

What is the role of your physical body in all this? Is the body more than the sum of yoga classes, gyms you frequent, sexual liaisons, recent or anticipated, foods you have scarfed down in the past few weeks or recipes you plan to try soon, restaurants you plan to eat at or have reservations for? Are you the trips you already have tickets for? Or is your body merely what is on show in the photos and videos that appear on the various websites you connect to? The fact is that it becomes ever easier to present an instantaneous photo or video record of our current surrounds, physical attitudes and appearances, so  that the past is lost in “old” photo “albums” which we have no attention  to waste on excavating.

Is this simply the self of existentialism, as would be familiar to Sartre in Being and Nothingness? Yes and also no, because what gives us our immediacy, what focusses us on the now is as much as anything the inrush from many others, the constantly changing environment on the Net in which so much of life is now spent.

Who are we now? Who are we becoming?

In yesterday’s (12/28/08) NY Times “Week in Review” section, two articles (on the same page) are worth comment.

“Boobs”

The first is “Contemplating the Boobs We Were” by Peter Applebome. He argue correctly that Americans don’t understand enough about economics. Then he suggests that this topic should be taught in high school, or at the very least students should be taught of the joys of compound interest in savings, and the pitfalls of it as debt.

There are several flaws in these proposals. While it would be salutary for students to learn the dangers of indebtedness, how many of them are likely to learn this complex lesson when the joys of credit cards seem self-evident. If one’s parents or other close adults have gotten into serious debt trouble, that might be convincing, but a lesson in class on such a subject is likely to be seem sanctimonious, stilted, boring, or ignorant of reality. Should schools teach students to forego college to avoid college loans? Can teachers — who probably have a dim grasp of this, and, in many cases, can’t get by without loans themselves — successfully get it across?

A worse problem is the supposed benefit of compound interest on savings. If everybody saves and no one spends, and few go into debt, compound interest cannot materialize as promised. Numerous presumably intelligent people now tell us we should all invest our money and not spend it, but clearly, under such circumstances there would nothing worthwhile to invest it in. This is the macroeconomic reality hidden when only the microeconomics of individual cases is discussed.

Of course, if economics became a curriculum subject for high school, what would be taught would be even more wated-down and tendentious than what is now taught as history. “Patriots” would insist on the full nine yards of total “free-market” nonsense; even Keynesianism would be too vaguely taught, because too few professional economists, much less high school teachers grasp it today.

Macroeconomics itself is far more complex, if evaluated correctly, for it should mean nothing other than the total evolution of societal interconnections. Most scholars, even of macroeconomics, do not get this, because they act as if economics as a whole is a fixed subsystem. They forget that it is subject to historical change. (In truth, they don’t so much forget this. Rather, they simply have never considered it in the first place.) That’s why it is beyond their ken that the money-market-industrial economy could give way to something else, which I of course suspect will be the Attention Economy as I have defined it in this blog and elsewhere.

Books

That brings us to the second article, “Bargain Hunting for Books, and Feeling Sheepish About It” by David Streitfeld. He argues that bookstores are disappearing, and cites  a case in which he bought a like-new book online for “25 cents” (plus, of course, “shipping and handling”) so that the author got absolutely no money.  She points out to him that she did get attention, though without using the word.

If they were in it primarily for the money, the vast  majority of authors would always have been  fools , though a tiny few have made a pretty good living at times. The main goal, I argue, has always bee seeking attention for oneself or —what amounts to the same thing — for what one thinks or has to say. Today, as competition for attention rises, and ways to seek increase too, that is even more likely to be the case.

None of this is to argue that the landscape for books, including bookstores, publishers, etc., is not undergoing rapid and in  many ways disturbing changes. As a book lover and erstwhile bookstore haunter, I am saddened at the demise of such places a Cody’s, mentioned in the article. It is possible to find many more books on line than you would in even the largest bookstore, but browsing them at present remains far from easy. Serendipity still operates, but is quite different in detail from what happens in an actual bookstore. And young people’s attention is now often subdivided in such a way that they see no reason to immerse themselves in an actual book to such a degree that they really do begin to feel the author’s way of thinking — at least partially — from the inside.

As long as we still do have something of a money economy, we should seek — and probably will find — new ways to make sure that authors we like get some support. Some of this will be semi-automatic; some of it may require new social inventions. But I don’t think we should spend too much time mourning the profit-centered kind of publishing that now seems to be perishing.

In ancient Athens’s Agora, in medieval Venice’s Rialto neighborhood, and in small village market squares everywhere, the marketplace for ideas — that is where attention was exchanged —commingled with the market for goods. Socrates wandered around the Agora talking with his disciples and enemies, according to Plato. But he and they spent little time trying out or examining the wares, or in bargaining over goods. Others, say in Cairo’s souks up until today, spend much time engaged in conversation and in bargaining, and would be shocked and disturbed to have their first price accepted by  customer. In these cases attention and shopping are intermingled, but still separate kinds of activity. Today, in more westernized places the relationship is different but still crucial.

Consumer spending is what is said to keep the American — and therefore the world’s — market economy afloat. In recent years this has required most consumers to go into debt, either through home loans, credit cards or both. Today it is increasingly hard to get such loans, because all the banks are afraid of lending. Meanwhile,  a substantial and growing  proportion of Americans have no way to take on more debt and still pay it back. But even if that were not so, consumption might not head up forever. In a previous post I discussed the attention costs of consumption. But there is another side to consuming, which helps explain why Americans have loved to shop. It can be described as simply this: Shopping is an avenue for getting attention. At, least, it seems to be that, sometimes even when it’s not. Let me list some of the ways shopping offers attention.

Illusory Attention

Yesterday I went to the hub of shopping in the Bay area, the few blocks around Union Square, SF. Within fairly easy walking distance is everything from the extremely downscale Burlington Coat Factory to the upscale Barney’s New York. Also, Bloomingdales, Nordstrom’s, Macy’s, Nieman-Marcus, H & S, and Saks Fifth Avenue, along with Crate and Barrel, Apple, Virgin Records, Border’s Books and many other name-brand chain stores, along with a number of discount jewelry stores and many others. Together these emporia function as a kind of gigantic museum of what designers have designed, technologists have implemented, musicians and artists and jewelers and writers have created— all as curated by the store’s buyers and display managers. Plenty of things to pay attention to, but by the same token a great deal of illusory attention. (Illusory attention is the attention you feel you are getting, as if in direct address to you, when in fact the creator in question is unaware of your specific existence or very nearly unaware of it.) You could receive illusory attention by going to an actual museum, say, but you get much of the same just by looking around in stores and shops, or eating in restaurants, especially those with notable restaurateurs or chefs behind them.

Being Attended to While Shopping

Another thing happens, at least minutely, when you shop. The salespeople pay at least a little and sometimes a lot of attention to you. You expect to be noticed and perhaps cosseted; you expect to be smiled at, thanked, perhaps complimented on your taste, told what you should and should not buy, offered reassurances that the possible recipient of your purchase will love it. (It doesn’t seem to matter that the clerk offering such assurances knows absolutely nothing about the intended recipient of a gift; they just know the recipient will love it, and sometimes this remarkable knowledge evidently seems compelling and reassuring to the customer.

Attention Paid to Gift-Givers

A high proportion of all purchases are made around the now traditional gift-giving holidays, and many  — though by no means all –are actually bought as gifts. Some of these gifts were requested, but many are shots in the dark, which may or may not turn out to be something the recipient actually wants or is happy to have. Many such gifts end up never used, instead stored away and forgotten, a kind of Keynesian boost to the world’s market economy, but still hoped to bring about some kind of gratitude and attention paid to the giver. This is so even if the giver is merely fulfilling what she or he takes to be an expectation. The recipient will probably also give a gift in return, unless she is a child or if some other inequality makes reciprocation difficult. Thus many gifts can be viewed as a frilly, inarticulate form of exchange of attention, a concrete demonstration of love, or something of the sort.

Shopping as Part of a Creative (and Therefore Potentially Attention-Getting) Act

A large number of things purchased are for display to others in some form. Such is obviously the case with many clothes, those not purely utilitarian, or maybe even those. But this also holds for furniture for electronic devices, for foods, whether to be combined into something cooked for others or merely as a display as the purchaser herself eats them in semi-public. Cars are also in this category. Sometimes the way things bought are combined is intended to be a kind of artistry, and of course our bodies and what we have on them have been the main way we get direct attention in the world,. This accounts for gyms, cosmetic surgery, ordinary cosmetics, jewelry, shoes,  diet foods, tattoos and more.

Purchasing of the Means for Expression that Will (It is Hoped) Get Attention.

Here I mean everything from art supplies to iPhones, including cameras, musical instruments, computers and much software, even sound and video systems for home use but also to show off our discoveries to friends and others. Even a substantial portion of business-related (and thus deductible) purchases are in this category. In addition to giving such things to ourselves, we can also give them to others with the intent that we will share in some sense in the attention that goes to the expression thereby made.

Attention-Seeking in Other Ways Competes with Shopping and Will Do So More

As I have discussed before, the act of shopping itself of course takes up the shoppers attention, and so the extent it can be done is limited. Further, as I also pointed out, making any use of anything one buys requires further attention. But shopping also takes money, and with money growing increasingly questionable and perhaps hard to get hold of, means of seeking attention that rely less extensively or not at all on shopping would be much sought substitutes. They are certainly available, at least for those who have Internet or cell phone access and the like, and I think that if and when the smoke clears for the money-market economy, non-monetary attention- seeking  activities will be more prominent. The advantages of shopping as a means of getting attention will quite probably permanently lessen.

The Challenge

Less shopping equals less employment, barring massive government intervention. That would yield lowered money incomes for many. That too will make the Attention Economy more important. But just as the musicians and writers of today want to be heard and read as much at least as they want to be paid, the technologists and designers and so forth will want their works widely distributed if possible, so that they can be appreciated.   I f life is not to get totally imbalanced, ways must be found to see that the good things in life are not reserved for only a small group that has managed to hold onto money or have good money incomes.  Plenty of attention will go to whoever figures out how to make this work. The time to start thinking about it is now.

A couple of years ago, I pointed out that in some ways money was losing its hold on reality. Routine activities and producing things to which can be assigned some relatively stable amount of money now occupy far less than majority of human effort — while more and more energy goes into the new attention economy, which is only loosely connected with money or markets. At the same time, the growing financial sector takes on the possibility of treating money as a pure symbol, without any underlying or inherent meaning. Financial money can grow or shrink, and this has real effects in what is left of the market economy, but many of the shenanigans within finance do not really do anything beyond the purely symbolic.

Now the future of money has become more imbued with the excesses of money’s dream life. To the extent that markets do require money, they also require mechanisms for the insertion of money where needed, and that depends on trust, which is the basis of all loans, investments, etc. Trust is now rapidly leaving the system. The mysteries of derivatives, of the vast variety of new financial instruments, and of things like hedge funds are a perfect cover for the most rudimentary sorts of scams, including the recently unveiled Ponzi scheme of one Bernard Madoff. (A Ponzi scheme requires ever-more investment into it, as current investments are used to pay earlier participants, though this is only necessary if the early investors actually take money out. Like roulette bettors who just let their money ride on a certain bet as winnings pile up, investors in a Ponzi can be fooled by entirely fictional increases in their holdings to leave all their theoretical winnings in, and they might also be likely to add more to the fund, and tout it to their friends. )

Madoff, who caught many who should have known better, as well as a considerable number who could not have been expected to see through his deviousness, was actually apparently quite limited in his methods of covering up his scheme. To whit: he claimed nearly the same yearly growth from one year to the next, which after a few years becomes statistically very unlikely. A more astute Ponzi scheme could vary the growth. This has its limits, of course. You wouldn’t want your Ponzi scheme to issue reports that are too downbeat, because then investors might leave. Still, greater sophistication in reporting incomes so as to evade questions certainly seems possible. Thus, how do you know that your next investment vehicle will not turn out to be a Ponzi scheme or something perhaps honest but hare-brained?

The obvious answer might seem to be to diversify investments. But in the Madoff case, some investors thought they were investing in different funds entirely. Any company can do what it likes with any extra cash on hand, so how do  you know that an apparently reliable company that makes what seems like a real and straightforward product is not investing in some other dubious scheme? Even a company which does nothing of the sort must take increasing risks in new investments as the climate of creativity heats up. You cannot rely on this year’s popularity to get a company through competition that might not even exist yet but will be quite evident in a few years. The speed at which new kinds of products and services can be put on offer renders the “long term” increasingly short. This past year also shows that such supposedly safe and durable investments such as land and raw materials like petroleum can be highly speculative, because speculating on futures in all such areas can play havoc with the prices there too, if at a high enough level.

The net result of all this is that trust has fallen to lows not seen since the Great Depression.

But new means of speculation, based on the likes of the Internet and advanced computation are not likely to disappear. Thus a return to “fundamentals” cannot be counted on — ever again. Regulation is unlikely to be astute enough to keep track of all the new means of engaging in new kinds of investment, and nothing can stop these except a complete freeze of the monetary system. That’s where we may well be headed. Alternatives to money and the wide-open market are likely to proliferate.

I have long maintained that paying attention to someone (or that person’s expression) amounts to aligning your mind to that someone’s. In seeing the world from their point of view, you partially “become” them. This can be through listening to and trying to understand their sentences, through reading something they have written, through looking at a picture or work of art that they have created, through watching them play a game such as golf or football, etc. To the extent you do take on their viewpoint,  you want what they want. And so on.

Recently, an experiment (reported by Benedict Carey in the NY Times) was described in an online science journal under the title  “If I Were You: Perceptual Illusion of Body Swapping” that demonstrates the ease with which seeing (in this case literally from another’s point of view) makes you feel you are they. A commenter, Alan Peters, said the following: “I have been doing research at Johnson Space Center in Houston with the NASA Robonaut robot for a number of years. One way that the robot can be controlled is through direct telepresense.{sic} That is, the operator dons a VR helmet, data gloves, and some other sensors. The operator sees through the robot’s stereo camera “eyes”. Any motions the operator makes with his/her arms and hands are reflected by the robot. In that way it is possible to control the robot in highly dexterous manipulation tasks. After operating the robot for a short period of time, one feels quite like the robot is one’s self. At least that’s how it felt to me. It was interesting to watch the world through the robot’s eyes. The first time I operated the robot, I could see this bearded, out-of-shape, older guy with a potbelly, sitting on a chair, wearing a helmet, and moving his arms around. It was me, of course. Didn’t seem like it though. And frankly, I didn’t look so good to me. I feel much better than I look! After having finished operating the robot, I always watch myself taking the VR helmet off. I am in the robot until the *instant* my eyes loose contact with the display. Then I have the uncanny sensation of snapping back into my own body. It’s quite an odd feeling, not unpleasant, but unlike anything else I’ve experienced.”

All this demonstrates how fully, and yet how easily we can take on the persona of another, or as I put it aligning our minds to that other. No other model of attention paying makes much sense.

We can expect our ever-greater immersion in the web and the Internet to alter our psyches —and so, our world. [These thoughts were engendered by my nearly simultaneous reading of Jaques Lacan’s Ecrits and the book, “The Hyperlinked Society” that I mentioned in earlier posts Michel Bauwens had asked me to read, as well as an article by Clive Thompson that I alluded to earlier. Each book/article was only vaguely suggestive at best, so don’t blame any for this.]

Almost a quarter century ago, Sherry Turkle presciently described the personal computer in the title of her book “the Second Self.” This was before the graphical user interface and before the web, when  most computers still had green or black screens in which text appeared in one typeface. Those early personal computers responded to and seemingly added to the manipulations  or programming attempts of their users — especially the children that were Turkle’s focus, in such a way that they seemed to be an extension of self, yet not quite the same as oneself.

The second-self notion is now even more apt, except that the connection between device and (first) self is even tighter than that.  Like mirrors, one’s computer — along with PDAs, smart phones, etc. — is a projection and reflection of oneself, a kind of necessary auxiliary to one’s own memory, personality and intentions. Certainly today, all sorts of one’s preferences and personality are reflected back to one.

Taking in Our “Objects”

As psychoanalysts understand, those we pay attention to end up becoming part of us, what they call our objects. Everyone has some internalized image or model of primary caregivers, the first people to whom we paid attention, the ones to whom we generally paid most attention in our most formative years, and also those to whom we primarily looked for attention. But we also introject in this way everyone we pay attention to, whether in direct conversation, in the classroom, by reading, on the stage or movie or TV screen or whatever.  Since each person’s world is formed by her own patterns of attention paying and desires for attention, the self as a psychological phenomenon is largely composed of the taking in and partial integration of all these moments.

Unconsciously at least, there is no sharp division between yourself and your “objects.” Your parents and everyone else you pay significant attention to shape you to some degree, and in ways you cannot easily be aware of. You  take in attitudes, emotional stances, ideas, ways of speaking and moving, and much else. You react also, and those reactions of loyalty, love, anger, fear, disgust, need,  hate — and, as a result of the latter ones, guilt — also form you.

Now comes the computer, (along with smart phones, PDAs, and such) which greatly integrates both your own sense of self, through mastery of various computer skills, through your own attempts at expressions, through lists such as address lists of who is important to you, and in the case of the Web, your bookmarks, hyperlinks, your connections through e-mail, blogs, comments, multiplayer games, virtual worlds such as Second Life, lists, social networks, etc. You are tied through attention and partial attention to and from a wide range of others. As Clive Thompson points out this now means that through such services as Facebook newsfeeds, Twitter (and, I would add, e-mail, listservs, text messaging and cell-phoning) you are quite constantly in a mode of attention paying with many ”objects.”

What happens here, fairly clearly is that the boundaries of self change. You draw in others, and you too are drawn in. What was your introjected object, the set of conscious and repressed impressions of those close to you, is extended now through the immediacy of what is stored in your hard drives or on the Internet. What is inside your own mind and what is in your computer becomes less and less clear sharply separated, less and less permanently one or the other. Likewise,the boundaries between your own computer and the entire Internet keep becoming more and more permeable, so that the difference between your world and yourself, between your objects and yourself becomes less and less evident.

Dwelling

An analogy to bear in mind is home (and sometimes workplace as well). One of the main reasons it is important not to be homeless is that home is a place full of resonances of our attachments to others, from those who live with us there, to the evidence of the attention we have paid and of those who have paid attention to us, in photos, in books, in all manner of artifacts we associate with one person or another. Home is also, ideally a place of refuge and insulation in which to sort through and revisit the various interactions we have had in the wider world. It is also a place to which those who seek our attention, want to pay attention to us,  or — most often— both, know how to at least attempt to reach us. So your home also represents or extends yourself, or that of all the selves who share this space with you — usually your family.

To a considerable degree, one’s neighborhood and larger community are an external extension of this, an area where selves merge and boundaries are somewhat fuzzy. Roughly speaking, the farther from home you go, the sharper the boundaries between self and others. On the Internet, however, distance as such is irrelevant. Even such boundaries as exist we easily move across when we so desire. We are more and more part of a single super-self, at the same time attempting, at least if old enough, to maintain our individuality through exclusion of real attention to certain others, in fact most others. In sizing and shaping our world to our own internal rhythms, we enlarge and entangle ourselves, until self and effective world become nearly one.

The Superself in Action

People today constantly check to  see whether anyone is remembering them at the moment, paying them attention through trying to contact them, while in so doing these others are to receive attention at the same time. The computer or smartphone is an extension of oneself, far more, say than an old-fashioned telephone or an actual mailbox, and the other appears within this “second self” this extension of self, this hyper mirror, or, one could say this portable parent, the partially introjected mother. The other appears then, already introjected, already swallowed, as it were into the complex interiority one now feels. Further moving in this direction are the social networking sites, the virtual worlds one might inhabit,the blogs one regularly receives or reads, the comment lists to the blogs, etc. If the laptop or desktop or smart phone is in effect within the boundaries of oneself, then paying attention becomes an increasingly internal kind of act.

I have previously described the act of paying attention as aligning with the mind (or even the bodily movements or emotions ) of the attention receiver. This alignment is now even more apparent, occurring as it does within the extended confines of one’s own minds. Attention becomes a relationship with one’s own objects, even though there is a mutuality which also allows these objects to represent real others.

Onwards

As I suggested before, with its constantly added affordances, the Internet draws more and more of us in, and draws each of  us in further and further, tying us more and more directly to the others who in some way connect to us, in some way gain our attention and vice versa. Our social networking pages, such as Facebook, for instance,  come to resemble a partial census of our internalized objects, both reminding us of them when we check out our own pages, and revealing part of our superself to others who care to check. Those who do will overlap their own superself, so that the Net becomes an ever tighter set of pseudo-synapses that ultimately join us all.

New political loyalties as well as other convictions about how the world must change will grow out of this, and already are doing so. The Obama campaign and the widening commitment to oppose global warming are examples. Increasingly, I suspect, a new kind of psyche emerges from all this, and with it a new way of interacting with, and in fact defining, the world.

A superself in some ways is the essence of a god, the shared, communal transcendent sense of what is good, right, mete, just, and at the same time unstatable, mystical. So in all likelihood, the Internet will not only be the basis of a new economy but the holy space of a new, empowering and powerful religion that will draw more and more of us in.

Having discussed the new strangeness of money as such, I will now turn the most money-dependent sector— finance. But before getting into details, let me make a point about banks and attention. Money flows in the same direction as attention does, and so, right now stars — that is, large scale attention getters — generally have high monetary incomes. But having money incomes doesn’t lower the net attention they have, because attention itself can be thought of as being “stored” in the memories of those who pay it. The more attention you pay someone the more you remember and the more likely you are to pay additional attention. And whenever you do pay attention you tend to have a certain urge to satisfy the attention-getter’s wants.

So despite their high money incomes, stars do not really require conventional banks, because their attention is stored in others’ minds, to be tapped more or less at will. The more attention you have gotten in the past, the easier it is to do this. At the same time, if you have never had attention, your money is not a very good guarantee that you will get attention when you need it. So, as attention transactions gain increasing prominence, the entire financial sector will have a less and less important real role to play. But instead of shrinking, this sector has burgeoned of late, which brings up a second mystery.

The Banking Mystery and the Suspects

In the next-to-last post, I discussed the rapid growth of productivity in typical industries that provide standardized goods and services. The financial sector, you would think, is among the most amenable to automation, since all that is involved is handling and recording the digits that represent money. And that has happened in practice:ATMs; automated credit card accounting; electronic stock exchanges and brokerage services; online banking: etc. In other words, most parts of normal financial transactions are exceedingly automated and require very little actual human attention.

However, the relative size, income, and employment of the financial sector — in this country and others — has grown and grown. Investment banks now spend an increasing portion of their efforts on trading for their own accounts. As with most hedge funds, this typically involve using sophisticated computer programs to find ways to cash in on slight fluctuations or small trends in the financial markets. Banks also package and trade in derivatives that are connected by complex algorithms to the underlying investments in such entities as standardized goods-producing companies, government bonds or real estate.

Derivatives are supposedly financial instruments intended to help minimize risk. If risk really were minimized, the possibility of gaining vast profits would presumably disappear, since profit is supposedly a reward for successful risk taking. To put it another way, if risk were so minimal, many would enter the market for the relatively small gains, which then become even smaller on average. But risk is of course not actually minimized. One reason is that the mathematics of risk minimization, like other mathematical economics, assumes that the basic conditions they describe or even just assume are somehow fixed and unchanging, or that everything had been taken into account in finite equations. Of course everything has never been taken into account; soothing generalities stop working; small risks can add up to huge ones; and risk takers, on average end up with what they came in with or less.

These risks can be taken only because the huge fund of worldwide savings that have no reasonable way of being invested in safe industrial growth  still search for growth somehow. The financial manipulations offer the appearance of such growth, even though it would certainly seem that unless they create money out of nothing, all they earn is merely taken in a game of poker in which someone else — someone with less good financial choices — actually loses.

I am agnostic about whether money is or is not in fact created, since central banks can increase the money supply through lending, and the financial houses who sometimes obtain amazing-appearing returns do so by being highly leveraged, hugely borrowing. Of course, if money can be created out of nothing, it can also disappear just as easily, and there is no reason to suspect that on net that does not happen, so as to balance everything out. (One way it disappears is when overall markets —whether of stocks or housing —  fall, certainly wiping out “paper gains.” A recent report I saw stated that two trillion dollars worth of “actual wealth” has been wiped out with declining real estate prices? Actual wealth? The houses of course are still there, for the most part, and standard economics teaches that the actual value of something is the current market value, so of course the wealth that disappeared was entirely notional, even though it was a notion central to many people’s financial planning. So much for finance, I guess.)

Of course, even if the money that is destroyed equals the money created, most players do not end up even. The banks, hedge funds, and brokerage houses probably have enriched their shareholders, and certainly their main partners and and a large subset of their employees, essentially by grabbing for themselves an ever-larger share of total incomes in each country. These unequal shares of income then head back into the global money fund, for they mostly are not used for buying things.

The Home-Run Kings

A considerable proportion of people employed as “quants,” analysts, traders, and brokers receive many times the monetary income of others with similar talents employed outside finance. They receive much of this in bonuses, supposedly connected with the profits of the firms or the departments of firms they work for. Yet, of the hundreds of billions of dollars made in the last few years by the major investment banks, even more has been lost this year alone. Nonetheless, far from being expected to pay back their past years’ oversize earnings, those still employed might even be paid similar bonuses this year. Some percentage of these bloated bonuses are however used for buying luxuries of all sorts, which does increase employment and to an extent greater than the mass-produced goods sector can do does spread wealth around a bit. (As I discussed last time, luxuries are highly attention-related.)

To some extent the financial stars seem to think of themselves in a manner analogous to sports superstars. The latter generally sign multiyear contracts with teams that offer high remuneration even if the player or team should experience a prolonged “slump.” Similarly, financial stars, good at playing a game of their own, think they deserve healthy bonuses even if they have lost fortunes instead of  gaining them.

Another way to look a the rococo rise of the financial sector and its complex and unstable “products” and its “masters of the universe” is in the same terms as that of the nobles in say the period of Louis XIV of France. He had inherited a country full of the heirs of actual fighting feudal nobles, but he confined them to Versailles and turned them into dandies who did his bidding as they vied with each other for the most luxurious and remarkable clothes and hairdos, the best coaches and castles, etc. The competition that had taken the form of fighting was now both exaggerated and highly artificial. As they strolled through Versailles and its environs , the nobles wore bejeweled and beauteous swords and daggers, and in some cases knew how to use them, but these swords were no match for the muskets, pistols, and cannons in use by that time by actual armies. We can think of the stars of the financial sector as for the most part playing comparably decorative roles, even though apparently involved in what is most central and important for the old economy, namely money.

“Safe as Houses”

I think the complicated play-acting of the financial sector was bound to lead to an eventual fiasco, many orders of magnitude larger than, say, the Long-Term Capital Management fall of 1998 or the Enron catastrophe of 2001. As the finance sector continued to grow in apparent wealth,  more and more people would have come to depend on its inherent fallacy, until some point was reached where it proved quite incapable of actual delivery. However, the fact that the actual fiasco involved ordinary people’s homes and their putative value only helped both prolong an untenable situation and led to the effects oft ultimate crash being far more far-reaching.

If someone were to tell you that some standardized kind of good — whether it be a car, a computer or a corkscrew — could never go down in price but will always grow in value, you would consider them insane. After all, ordinary industrially produced goods become ever easier to replace,  wear out, become obsolete, or just lose their panache. But for some reason when similar optimism was expressed about very nearly mass-produced homes, too many people were willing to take the pronouncement as quite sane. “Real property” requires land, and supposedly “they aren’t making land anymore.”  Unfortunately, that statement is nonsense in several ways.

In the first place — as anyone who has ever looked at open houses offered by realtors or developers should know — much more than with ordinary mass-produced goods, they aren’t selling material objects, they are selling dreams. These are dreams of refuge, privacy, independence, marital concord, healthy and happy children, visits by friends and family, comfort,  warmth, praise from one’s friends, attention from strangers, beauty, ease, neighborhood, community, good schools, convenience — along with other emotionally tinged and historically contingent prospects. Dreams are subject to change, and the reality that supposedly underlies them can easily change too. An easy commute can become congested and overlong; neighbors can turn out not be nearly as nice as the ones one left, community spirit may not exist or may not welcome one; or an area with enough water for nice lawns can be affected by permanent shortages, especially as climate changes. And the gadgets, appurtenances, style and substance of a house or condo can become obsolete, come to seem ugly, or just fall apart.

What about that idea that the amount of land is fixed and invariable, so that, with a growing world population it is in increasingly short supply, and therefore intrinsically worth more and more? It just doesn’t hold water. The value of land, quite obviously, depends on where it  is and how it is looked upon, and both those things are subject to change, down as well as up. Land that was once highly desirable can become noisome and polluted, or just out of fashion, as home designs or sub-divisions can.  And, in effect, new land can be created every time it seems desirable — say — to live closer in to other people — perhaps in high-rise buildings rather than in a suburban houses. (Some land actually is “reclaimed” — created— from bodies of water or marshland, and though ecologically that might be undesirable, it still happens.)

Clearly though, real estate and housing related securities have a certain aura of security among people who don’t stop to think “concretely” of how very abstract the notion of ever-rising home prices is and always has been. The twenty-somethings who serve as the basic laborers in the field of investment banking may have had no knowledge or experience of land bubbles, but more mature people in those businesses seem to have been equally willing to be fooled by what they should certainly have understood better.

What makes mortgages even less reliable investment was little examined: in a typical case of foreclosure,the costs and right offs apparently can amount to upwards of 30% of the face value of the mortgage. The sliced, diced packages of mortgages seemed to lower the chances of such danger, while in fact making any analysis of risks much harder. The invention of newer and newer mortgage “products” that allowed introductory teaser rates with later sharp rate increases simultaneously gave investors the feeling that they would get good returns while greatly enlarging the pool of new home buyers. This further inflated housing prices, making the investments seem even more reliable. The chances of catastrophic failure grew ever larger.

And of course, all this would not have happened had it not been that all this funny money were chasing good investment opportunities while actual industrial growth could not offer nearly enough of an outlet. At the same time, the mortgage mess, etc.,would have been much less problematic if incomes had been less unequal. In that case, there would have been less money chasing investments, but more chance for ordinary people to pay more ordinary mortgages. That, however, is just what things once were like, in the US anyway. Whether they can be like that again, I tend to to doubt.

In a subsequent post, I will add to the prognostications and solutions I offered earlier.