ATOM Award of the Month, May 2018

For the May 2018 ATOM AotM, we will visit a technology that is not a distinct product or company, but rather is a feature of consumer commerce that we would now find impossible to live without.  This humble yet indispensable characteristic of multiple websites has saved an incalculable amount of frustration and productivity loss.  I am, of course, referring to web-based reviews.  

Lest you think this is a relatively minor technology to award an ATOM AotM to, think again, for a core principle of technological progress is that a technology is most successful when it is barely even noticed despite a ubiquitous presence.  

Part of what has enabled eCommerce to siphon away an ever-rising portion of brick and mortar retail's revenue is the presence of reviews on sites like Amazon.  Beyond eCommerce, sites like Yelp have greatly increased the information access of consumers seeking to patronize a low-tech business, while media sites permit a consumer to quickly decide which films and video games are worthwhile without risking a blind purchase.  While false reviews were a feature of the early Internet for over a decade, now there is considerable ability to filter those out.  

I recall a frustrating episode that a friend and I experienced in 1999.  We wanted to rent a film from Blockbuster videos, but did not know which one.  We found one that had familiar actors, but the movie was extremely subpar, resulting in a sunk cost of the rental fee, transportation costs, and time spent on the film and two-way transit.  When returning to Blockbuster to discharge the VHS Cassette of the film, we selected another, based on the same criteria.  It was even worse.  We had rented two separate films over two separate round trips to Blockbuster, only to be extremely unsatisfied.  Movie review sites like IMDB did exist at the time, but my friend did not have home Internet access (as his Internet activities were restricted to his workplace, as was common at the time).  

Now, in this anecdote, just list the number of ATOM disruptions that have transpired since :

1. There is no longer a 'Blockbuster Video' that rents VHS Cassettes, as films are rented online or available through a Netfilx subscription.
2. Everyone has home Internet access, and can see a film's reviews before ever leaving home.

Hence, it is no longer possible to waste hours of time and several dollars on a bad film.  The same goes for restaurants, and in this case, both the consumer and the business are shielded from an information mismatch on the part of the consumer.  I have always felt that it was unfair for a patron to judge a restaurant negatively if they themselves did not order what they might have liked.  Now, with Yelp, in addition to reviews, there are pictures, enabling a vastly more informed decision.  

Even higher-stakes decisions, such as the selection of a dentist or auto-mechanic, has slashed the uncertainty that people lived under just 12 years ago.  The better vendors attract more business, while substandard (or worse - unethical) vendors have been exposed to the light of day.  This is a more powerful form of quality control than has ever existed before.

Now, to see where the real ATOM effects are found, consider the value of the data being aggregated.  This drives better product design and better marketing.  This also expands the roadmaps of accessory products or complementary products.  The data itself begins to fuel artificial intelligence, for remember that any pile of data of sufficient size tends to attract artificial intelligence to it.  This leads to a lot of valuable analytics and automation.  

If one were to rank the primary successful Internet use cases to date, the ability to see reviews of products and services would rank very high on the list.  For this reason, this receives the May 2018 ATOM AotM.  

 

 

 

Comments

[Geoman]

I've found something related, which I think is important. And that is the availability of parts and youtube videos.

I have found over the last 5 years or so, that I am quite capable of repairing most things in my home. A big part of this is Youtube videos showing exactly how things are taken apart and put back together, and, most importantly, the ability to order small parts on-line.

My fridge broke. Rather than call a repair man, or buy a new one, I went on line. I found out that 1) the problem is a common one with this make and model of fridge, 2) A company had crafted a small part that could be used to fix the flaw in the design.

My bar-b-que broke - the burners corroded. I went on line and found that new burners could not only be purchased, cheaply, with free shipping, but they were specifically manufactured to be identical to the one's that broke. A 15 minute repair with the right parts.

My dishwasher started leaking. What have I got to lose? After finding the broken part, I got a new one in three days for $17. Works like a charm.

Those three examples, as well and a half dozen more I'm not listing, have saved me thousands of dollars over the last 5 years. I'm not especially mechanically inclined. But cheap, readily available parts, and instructional videos, make everyone a repair genius.

Even in the cases that failed - I failed to repair a cell phone dunked in water, and failed to repair a problem with my car, the loss was <$50 in each case. In a third case, I repaired my computer, then decided a better model might be worth it anyway. The process is low risk, high reward.

This may seem like something different, but it really is the same thing - information. I can now obtain information on where and what part to buy very easily, and information on what is wrong and how to fix it. I'm avoiding unnecessary purchases, just like I would avoid unnecessary purchases of bad movies.

[Kartik Gada]

Geoman,

Yes, that is a good one that we have discussed before. I will award it one of the awards in a future month, once I figure out how to describe the marriage of parts + Youtube instructional videos as a major deflationary force enabled by information democratization.

My own anecdote was a cracked bumper cover. The body shop said $1000 plus keeping the car over there two days. Instead, a brand new part was available from Amazon for just $220, and YouTube instructional videos showed how easy it was to replace it (literally 10 minutes of work even for a first-timer). And the $220 was for a brand-new part delivered to my door. On Craigslist, scratched-up but still usable parts were available for as little as $10. Compare that to $1000 from the body shop.

I have also changed timing belts and spark plugs for a tenth of the price a mechanic would charge. Sure, Chilton manuals existed back in the day, but YouTube videos are exponentially easier to follow.

[Geoman]

Sorry if I repeat myself.

But to the topic at hand, would you say that as a result, movies and TV shows have gotten better? We are experiencing the golden age of television. Many people believe it is because there are new avenues and monetary sources willing to take chances on more creative offerings. Perhaps. But I believe it is because, especially for TV, it is extremely hard to hide a bad show. No amount of advertising can overcome crappy reviews, which are readily available.

The same thing is happening to movies, albeit more slowly.

[Fatcat]

Here is a study that attributed 1 percent inflation decrease due to online shopping.
It alone well with ATOM deflationary impact

https://marginalrevolution.com/marginalrevolution/2018/06/the-internet-and-inflation.html#comments

[Kartik Gada]

Geoman,

I would say that reviews have slowed the overarching decline in the quality of TV shows.

The golden age of (American) TV was 1970-99. A lot of this was due to the fact that there were only 3 networks during the earlier part of this period, and people didn't have VCRs so the theater was the only place to see new movies. After that, one had to wait for movies to come on TV.

Since the 3 networks had so many eyeballs, they aggregated the best talent in one place. I remember when top shows of the 80s and 90s had 25M viewers. Now, there is so much fragmentation that most shows can barely exceed 3M viewers.

Add to that the aggressive pushing of the SJW agenda, which has also wrecked most TV shows.

Internationally, however, the review effect has been useful. The quality of films produced in India has risen. In the old days, disgruntled movie-goers used to take it upon themselves to do the legwork to deface posters of substandard films with words like 'Flop' and 'Bomb' written across the posters to warn others not to waste time and ticket money on bad films. Now, this manual effort is obsolete, and market punishes bad films more quickly.

[Kartik Gada]

Fatcat,

Good find. Note that eCommerce is still only 9% of total US retail, so much more is yet to come.

[Fatcat]

And yet another article mentioning that major economists don't know why the inflation is low

https://www.armstrongeconomics.com/world-news/central-banks/making-sense-of-the-federal-reserve/

[Palamas]

Kartik,

I stumbled again across your site and posts: interesting ideas.

In particular, I watched your Google chat video from Dec 2016. Not that I want to diminish ideas, but I'm far more interested in predictions as I see that they indicate a grasp of the goings on vs strict speculation or bloviation. It's been a year and a half since that video, and the beginnings of what you thought would transpire didn't come to pass. What's more, it seems that they'll be delayed quite a bit longer. I do agree with many of your premises or inclinations, let me say. However, it seems to me that the USA will continue to draw investment and ride current economic waves throughout the Trump presidency, which after its end in 2025 will coincide with major pension and national entitlement crises. Is there any change in your feelings as of June 2018? Why do you think you were too early in your predictions back in December 2016?

Thanks for your time.

[Kartik Gada]

Palamas,

Trump, as a complete surprise to everyone, has delayed the recession, which was already imminent in late 2016. But note that the ^vix bottom was in 2017 and has not been revisited. Plus, the stock market top was in January 2018, so even Trump may not have delayed things by much.

Remember that when Obama become imminent around August 2008, the entire curve shifted downward. That negative influence continued for 8 years, and the expectation of Hillary kept things on that trajectory. Instead, the removal of the Obama-Hillary weight enabled the trajectory to get back to what it was before August 2008.

Another factor is that I said the 2017 crisis will happen *if* countries don't make printing permanent. China and Japan seem to have figured out that the imaginary inflation specter will never arrive, so are profiting greatly from this. These two countries can print enough to keep the entire world afloat.

[Palamas]

Just a few things:

There were two large VIX spikes from 2010 to 2012, and the S&P continued to climb. Both were more than double the value of the early 2018 spike you refer to. Now we are back at near 2017 lows, though of course I won't say that it won't revisit a spike here or there.

I foresee the markets rallying into the Dow 40k range, which is funny, but I think you could see that too, I'm guessing.

My most interesting question for you is regarding the USD as the world reserve currency. That is my current speculation as to the next big economic and/or market crash, and I foresee it in the mid to late next decade, as above. Do you have thoughts on that (Triffin Dilemma/World reserve status of the USD)?

A final inquiry that I'd like to offer up is that of the human element some have mentioned before, regarding your DUES suggestion. Won't the people lose confidence in the currency? I think you might underestimate that. There seem to be many factors we are really not aware of that are playing into this kicking the can down the road phenomenon, and that many are "getting away wit it" currently --- but I suspect it's not all just technological deflation.

Fundamentally, I do not see the purpose in taxing anyone if you are OK with running deficits and have that huge of a debt (it's a joke). It's weird that people never say this out loud or in public, that is, "Why the F are we even paying taxes?". I am sympathetic to your ideas for this reason, and I do also agree that they are going to wait too late when bond BS manipulation can't save the next crash.

But I don't think there is no cost to inflating the currency, at least in the minds of the citizens where confidence in it is everything. I think you underestimate how hard it will be for people to buy in, as I've noticed that you realize there are examples in the past of this (notes first, credit cards later, etc) ... but we've never run these types of joke deficits and had this high of a debt before. It's actually pretty funny, when you think about it. You should see the way people look at me when I tell them there's no point in paying taxes, since mathematically our taxes (and that of the "1%") do NOTHING to make any of it remotely "better."

I always appreciate your thoughts,

P

[Palamas]

By the way, do you have an official explanation of what is referred to consistently here as the "singularity"? And what happens in 2050 ...

Thanks

[Geoman]

If I may....

To understand the singularity, you need to understand where an how the name originated. It is based on astronomical phenomena - a black hole. The singularity represents a point where physical properties takes an infinite value, especially in space-time when matter is infinitely dense. We cannot see into the singularity, nor predict what occurs within it. The laws of physics, and reality, are thought to break down.

Verner Vinge, and science fiction author, popularized the term. It was his observation that the future was becoming increasingly difficult to predict. He realized this was because technological progress was not linear, but exponential. This was because computers, via Moore's law, were increasing capabilities. Eventually humans would construct AI, which would evolve at digital speed to a super intelligence would continue to upgrade itself and would advance technology at an incomprehensible rate.

The technological singularity, by definition, is where we can no longer see into or predict the future. Change, being exponential, becomes infinitely fast. Everything that can be known, will be known. Everything will happen, all at once.

2030 to 2050 is where it is generally predicted that AI will evolve into super intelligence. When and how it happens is anyone's guess.

Again, what exactly this entails is hard to fathom. Will there me money? an economy? jobs? Humans? Will the AI be malevolent? will the earth be converted to a giant computer? or will everything stay pretty much the same for us - the AI is just running everything in the background?

We are already well down the road.

I have always liked the analogy of dogs, who have already undergone their own singularity with humans. I assume we'll be kept on as beloved and well cared for pets.

By the by, one of Musk's aims to get to Mars in a hurry is to get some small group of humans off the earth before this happens. So there are a lot of bright people taking this very seriously.

[Kartik Gada]

Hi Geoman,

Yes, that is a very good description.

After a long time of thinking about it, I think ~2045 is where the 'pre-singularity' begins, where most things are difficult for humans to comprehend, and AI is involved in most decisions and prediction. The fact that the prediction wall remains at ~2040, just ~22 years away, is a prelude to this.

But the true Singularity is only in 2060-65.

http://www.singularity2050.com/2009/08/timing-the-singularity.html

The analogy of pet dogs is a good one. Pet monkeys perhaps even more precise. I think humans will be well taken care of, but directly disincentivized to reproduce (Total Fertility Rate of 0.1 or so).

[Geoman]

Well I differ slightly - I think we are already in the pre-singularity.

A trip to the NYSE is very illuminating - there is almost no one there, most of the time. Machines are largely driving the stock market, not humans. Computer programs execute buy and sell orders based on complex algorithms and formulas, without a human involved in the process. On a typical trading day, computers account for 50% to 60% of all market trades. When the markets are extremely volatile, they can make up 90% of trades.

90%. So when things go wrong, humans are basically letting go of the steering wheel.

May I suggest - that is part of the singularity, right there?

What we will see is more and more of this happening. Next I imagine AI taking over medicine. Sure there will be a person in the room, but he will be just collecting data to feed into an electronic doc for diagnosis. That will be more and more of our job - data collectors.

Google has customer support services that are AI - most people don't even know they are not talking to a real person. That will be an $600 billion market by 2020. In 2 years.

AI is already deeply entrenched in banking - monitoring accounts, determining loans.

In 2015 they predicted AI would beat a Go champion by 2027. It was accomplished in 2018.

AI is what allows Space X rockets to work and land. There is a whole fascinating history to what Musk has done - his ideas wee never original, he just was the first to realize that modern senors and AI could make it possible. he solved the pogo problem that plagued rockets from the beginning.

I lot of the weirdness we are seeing in the world is part of the pre-singularity. Things will keep getting stranger and harder to understand. The economy will do weird things - surge forward, then stall, then surge again even faster.

[Kartik Gada]

Geoman,

The reason I think the pre-singularity is in 2045 is due to the prediction wall effect that we are familiar with.

In addition to that, the examples you mention are good ones, but have to be contrasted against the extremely low productivity of very large sectors. Construction productivity (in the US) has outright fallen 50% over the last 50 years. Government is one-third of the world economy and is easily a half-century behind in productivity.

As of 2018, many technologies have still not diffused at all to the bottom 3 billion people. They still live a 19th century life outside of their cellphones, perhaps. Hence, some sectors (and countries) are decades ahead of others, which makes the full aggregate average not quite that advanced. World per capita GDP is still just $12,000/yr nominal and $15,000/yr PPP.

Another way to look at it is that the technological component of GDP is still just 2%, as per the ATOM. If it were higher, the effect of halting (or even failing to increase) world QE would manifest much sooner and more sharply. It may reach 4% by 2024-25.

By 2045, it will be 20-22%, with the 50% mark hitting in 2060-65.

If we were already in the pre-singularity, we would have a lot more commenters here :). Other websites around this subject are under similarly low commenter volume relative to the frequency of articles. The masses still have no curiosity about accelerating change.

A final caution is that near the top of business cycles, people are prone to overrating the rate of future progress (see the dot-com era predictions of where things would be by 2020, including by Ray Kurzweil). In recessions, they go too far in the other direction and say everything was just smoke and mirrors (even as real innovation sans dollars still happens during recessions).

[Geoman]

True, all of it.

Yet the essence of the singularity is unpredictability. And here we are trying to predict it.

In evolution it is called punctuated equilibrium, where species evolve in steps, with periods of quiescence and slow evolution, and periods of rapid evolution.

[Fatcat]

Hi Kartik,

As of 2018, many technologies have still not diffused at all to the bottom 3 billion people. They still live a 19th century life outside of their cellphones, perhaps...

They might be a few decades behind but nowhere in 19 century. The fact that the general productivity is extremely high and there is some exchange with the rest of the world means that they can benefit from all the progress, albeit in an indirect way.

[Fatcat]

Kartik, Geoman

It is hard to define the singularity in terms of human comprehension. For Aztecs the incomprehensible technologies aside appeared in IV century... And they got wiped or assimilated.

Now we have so much knowledge that a single person cannot encompass it. In fact, the rate of creation of knew knowledge long ago surpassed the rate at which a single human can learn.
One can still follow a species area but with time the areas split into even more specialized topics so we have increasingly really on executive summaries and even profanation but we don't call this singularity

[Kartik Gada]

Fatcat,

They might be a few decades behind but nowhere in 19 century. The fact that the general productivity is extremely high and there is some exchange with the rest of the world means that they can benefit from all the progress, albeit in an indirect way.

SS Africa has the same life expectancy as in the 19th century.

Rural India, while higher in life expectancy, still is extremely low-tech and barring the cellphone, has little-to-no diffusion of 20th-century technologies (let alone 21st).

[Joe Blow]

Not sure if it has been mentioned here but there was an interesting article recently in the Economist on the possibility of central banks opening accounts for all citizens and regularly injecting small (and growing) amounts of digital cash into them. Importantly the cash would be new money, not backed by debt! Sounds like the beginnings of the ATOM! The article can be found online at https://www.economist.com/finance-and-economics/2018/05/26/central-banks-should-consider-offering-accounts-to-everyone

[Kartik Gada]

Joe Blow,

Yes, this is exactly what we want them to do. It is good that someone at The Economist is coming to a similar conclusion.

[fatcat]

A small step in the right direction : https://money.cnn.com/2018/07/09/technology/stockton-california-basic-income-experiment/index.html . UBI for 100 people. However, the sample size is quite small to make any definitive conclusions it will bring the idea to mainstream.

[Kartik Gada]

Hi Fatcat,

An experiment like that one, unfortunately, does more to discredit UBI than anything else.

i) It is only for 100 people, who still live in a broader society.
ii) It is temporary.
iii) It is not holistic, as they still are eligible for other government monies, and pay taxes.

Such an experiment is almost designed to fail.

UBI can only work if :

i) It follows the first letter 'U' and is *Universal*. Only then does the entire society's behavior change.
ii) It replaces all other wealth transfers.
iii) It is paired with a lowering and elimination of income tax (which is why ATOM-DUES is the only way it can work). High taxes to pay for it is just socialism.

[sheriyar]

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