Sunday, March 3, 2019

Sports betting sites sell the ability to tell your own story

See Will Sports Betting Transform How Games Are Watched, and Even Played? After decades of resistance to sports gambling, team owners and state officials are laying the groundwork for it — with potentially huge implications by Bruce Schoenfeld in the NY Times. Excerpts:
"For decades, sports gambling tended to be a static experience. You bet on a team and handed money to somebody, and maybe got a slip of paper in return. Then you waited to find out if you were right. That changed when three American options traders moved to Antigua in the mid-1990s to create an online gambling business they named World Sports Exchange. Instead of offering point spreads, World Sports Exchange operated like a commodities market. Before tipoff, options on the favored Lakers, for example, might cost $60 each. Options on the Knicks, the underdogs, might sell for $40. At the end of the game, the options on the losing team would become worthless, while the options on the winning team would each pay out $100.

But here was the novelty: You didn’t have to wait until the game was over to cash in. If the Lakers scored the first eight points, the value of that $60 option might grow to, say, $72. You could sell it and pocket your $12 gain. You might then invest in the Knicks at a discount. Or you might wait for the price to fall and buy another option on the Lakers. You could buy and sell options, on either team or both, throughout the game. Once you’d started, it was hard to stop until the game ended. It was exhausting. It was also great fun. And even more than the other bookmakers operating beyond U.S. borders, which were handling traditional bets, it seemed to threaten the monopoly on sports gambling that Nevada’s casinos had long enjoyed."

"“Ted was able to articulate the value proposition of not just the betting, but the deepening of the engagement,” Guber says. Rather than customers, Leonsis thinks of fans as an audience. “He understood that audiences want experiences,” Guber says. “This gives them a chance to walk away telling their own story — ‘I saw this opportunity, I recognized what this player would be able to accomplish.’ When you have a tool that makes an audience more of a participant than a passenger, it’s a very vital and vibrant element.”"

"DraftKings and FanDuel, whose valuations are both estimated to exceed $1 billion, were founded on the same idea: curate a limitless number of fantasy leagues for profit, generated by participation fees, and let customers choose new players every day. For many fans, watching games quickly became the equivalent of monitoring their investment portfolios, except the investments were bets on individual players."

Saturday, March 2, 2019

Entrepreneurs, heroes and the 1893 World's Fair in Chicago (Columbian Exposition), Part 2

See the book Chicago's White City of 1893 by David F. Burg. Excerpt:  
"The most American city and yet unique, Chicago finally both defies and invites summation. As a microcosm it may explain the values, concerns, problems, and expectations of the urban-centered culture of America that rose to dominance in the nineties. But even as a microcosm it resists analysis. Often it is easier for poets or novelists to evince succinct interpretation than it is for historians. And it is certainly true that, whether they were patronized or not, Chicago writers of the 1890s and the years leading up to the World War, distilled from the city's atmosphere a new kind of literature that was at once distinctly American, prophetic of the dominant subject-matter of our modern literature, and revelatory of our society's commercially dominated, urban-centered values. It was in Chicago that the view of the city in our literature became that of the city-dweller rather than that of the writer of rural prejudices. "The creation by the Chicago writers of a common perspective on urban life was a major achievement in American letters.,, Subjects for this city literature were the Great Fire, money, social classes, commerce, politics. The exposition would provide still another subject. Since rebuilding after the fire made architecture so prominent, architects were frequent heroes of Chicago novels. But the prevailing hero, the hero discovered and interpreted by Chicago writers, was the businessman. "A new hero type in American culture, the 'business man,' emerged in Chicago . . . . Chicago writers faced the task of creating a 'society' life based on business because business was the main concern of chicagoans." As the exemplary American city Chicago revealed with a vengeance the new commercial ethic. Though Stead's view was somewhat skewed, it nevertheless contained a large kernel of truth, when he wrote, "It is impossible to describe Chicago as a whole. It is a congeries of different nationalities, a compost of men and women of all manner of languages. It is a city of millionaires and of paupers .... This vast and heterogeneous community, which has been collected together from all quarters of the known world, knows only one common bond. Its members came here to make money. They are staying here to make money. The quest of the almighty dollar is their Holy Grail." Again, it is a judgment that must be taken with a grain of salt-even Stead would admit that there were many in Chicago, like Jane Addams of Hull House, who labored selflessly and praise them for that fact. But it is true that Chicago was heterogeneous, that she owed her present fate and her future to commerce, upon which everything from her fine arts to her politics depended. Chicago was, after all, a genuine Horatio Alger city-enterprise was her gospel. 

Probably no other writer has been more enthralled by nor written more evocative paeans to the spirit of American enterprise that Chicago symbolized than Theodore Dreiser. One of his most ebullient evocations of the city which so fascinated him appeared in The Titan, the second volume of his trilogy based upon the life of Charles T. Yerkes-the Cowperwood of the novels. Cowperwood came to Chicago in 1873 to seek a new life and immediately relished the spirit of the place. Returning in 1913 to study the city while writing his novel, Dreiser recollected the lure of Chicago: "This singing flame of a city, this all America, this poet in chaps and buckskin, this rude, raw Titan, this Burns of a city! By its shimmering lake it lay, a king of shreds and patches, a maundering yokel with an epic in its mouth, a tramp, a hobo among cities . . . . Take Athens, oh, Greece! Italy, do you keep Rome! This was the Babylon, the Troy, the Nineveh of a younger day .... Here hungry men, raw from the shops and fields, idyls and romances in their minds, builded them an empire crying glory in the mud.,, If such extravagant words were appropriate to the Chicago of 1873, when Cowperwood arrived, then they became doubly appropriate to the Chicago of 1893, when the World's Columbian Exposition opened. 

It was ironic but certainly apt that one of the members of the board of directors of the World's Columbian Exposition Corporation was that rapacious businessman Charles T. Yerkes. For it was he and his fellow titans of commerce who made possible the creation of the exposition, a world that for millions of visitors would make tangible the poetry and energy of Chicago's spirit. Within the reclaimed miry wastes of Jackson Park on the shore of Lake Michigan near the heart of her teeming, striving commercial empire, Chicago would build for herself and for the world a smaller but more harmonious empire. And the White City would cry forth a still more eloquent glory in the mud."

Wednesday, February 27, 2019

Entrepreneurs, heroes and the 1893 World's Fair in Chicago (Columbian Exposition)

 See the book Chicago's White City of 1893 by David F. Burg. Excerpt: 
"It was industrialization that created America's giant cities. And that creation in turn has had pervasive results. "It is impossible to exaggerate the role of business in developing great cities in America, and it is impossible to exaggerate the role of the cities in creating our business culture .... Creating a national market for standardized goods, they also created a national model of the successful man: the thrifty, shrewd, and practical clerk or mechanic who rose from the ranks to leadership."  Probably the single industry most responsible for the evolution of the cities and the model successful man was transportation, namely, the railroads. "If the late nineteenth century [in America] is to be named for any aspect of its technology, there is not a doubt in the world that it should be called the railroad age."  The period was the great age of "railroad imperialism." The rate of growth of the nation's railroads after the Civil War was nothing short of spectacular, in spite of recessions, and "by 1893 ... 150,000 miles [of track] had been laid since the war. Capital invested in American railroads jumped ... from two to nearly ten billion dollars. Though most of this mileage and most of this capital went to complete old trunk lines and their links to new centers in the valleys of the Ohio, Mississippi, and Missouri, the most spectacular of all the roads and perhaps the most important were the transcontinentals." The growth of these roads gave the nation its heroes, and its villains as well.  It was the railroads that secured the commercial future of such cities as Chicago, Saint Louis, Omaha, and Kansas City by making them into gathering places and distribution centers for the nation's wealth of lumber, iron, wheat, cattle. For close upon the heels of railroad development followed the burgeoning of other gigantic industries in steel, oil, sugar, meat-packing. This was the age of giant trusts which created the fortunes of such incomparable entrepreneurs as steel magnate Andrew Carnegie and oil magnate John D. Rockefeller, prime examples of the rags-to-riches gospel of hard work, thrift, and determination that was preached in the best-selling novels of Horatio Alger. And it was the age of holding companies which were based upon the expertise, machinations, and fortunes of men like the banker John Pierpont Morgan. In short, it was an age in which the industrialist and the banker were the monarchs. "Outside steel and oil, similar combinations were being pushed to completion by Armour and Swift in meat packing, Pillsbury in flour milling, Havemeyer in sugar, Weyerhauser in lumber. By 1893 all had become leaders of great corporations composed in part of shoestring competitors that had fallen in every financial storm." During the thirty years leading up to the World's Columbian Exposition the number of millionaires in the United States had increased from a mere handful to over 4,000.

Not only was the late nineteenth century the age of consolidation, monopoly, multimillionaires; it was also the age of America's rise to industrial supremacy among the nations of the world. By 1893 that supremacy had been achieved. "In the manufacture of timber and steel, the refinement of crude oil, the packing of meat, the extraction of gold, silver, coal, and iron the United States surpassed all competitors. America had more telephones, more incandescent lighting and electric traction, more miles of telegraph wires than any other nation. In specialties like hardware, machine tools, arms and ammunition, she retained the leadership assumed before the Civil War, while her pianos as well as her locomotives had become the best in the world." It would be a few years yet before this rapid and exultant ascent to the pinnacle of industrial might was translated into imperial muscle-flexing; but its internal effects, its influences upon American culture, were pervasive. Most notably, industrial supremacy made secure the power and position of the entrepreneur not only in commerce and finance but also in politics and society, and even in the fine arts. The entrepreneur's public image, his extreme wealth and his conspicuous taste, made him a genuine American hero. The self-made multimillionaire was the man to emulate. He had power, status, mobility; he built mansions and collected artworks; he dominated industries and politicians-and all by means of money. "Thus the ideals of our business leaders became the ideals of the great majority of the people, though only a few were themselves endowed with talent for leadership." Thus also by 1893 America, now primarily a business culture, had attained that orientation which allowed Calvin Coolidge years later to assert, "The business of America is business." The "money ethic" had become a respectable value. "The American people subordinated religion, education, and politics to the process of creating wealth. Increasing production, employment, and income became the measures of community success, and personal riches the mark of individual achievement.,,  The acquisitive society-given to conspicuous consumption and devoted to the Gospel of Success-had taken form, already augmented by a superabundance of goods and by that transformed and growing institution of affluence, advertising. "The Tenth United States Census gives the value of advertisements in the American press in 1880 at $39,136,306, and the next census shows that these figures had increased in 1890 to $71,243,361-a gain of eighty-two per cent in ten years." Moreover, the nature and quality of advertising had changed. It now appeared in streetcars and large billboards; it contained illustrations; the use of color printing was appearing. While modern advertising is quite different, an industry of astronomically greater wealth, than that of the 1890s, its future was already clear.

As the hero of the era, the entrepreneur set the standard of munificence in residential architecture, cultural aspiration, and social pretension. His wealth conferred responsibility. Andrew Carnegie, more enlightened than many of his compeers, had in 1889 already begun to preach what William T. Stead, editor of the Pall Mall Gazette, labeled "The Gospel of Wealth"-Carnegie's belief that the rich should live simply and frugally, regarding themselves as caretakers of personal fortunes which they should use for the commonweal. And some titans of wealth were, like Carnegie, often philanthropic, endowing libraries, universities, observatories, museums; but many were given to ostentatious self-aggrandizement. They hired the most prestigious architects to design for them the most renowned residences of the era-indeed,  of any era in American history, for the 1880s and 1890s witnessed a style of residential grandeur that remains unsurpassed. As the palace of a prince made his power readily evident to his subjects, so the mansion of the entrepreneur, the prince of late-Victorian America, revealed his stature. Nor was opulence confined to the houses of the wealthy-on their own scale the middle class displayed their more modest wealth in their residences.

The two sites for the most conspicuous and most profuse display of palatial residences were New York City and Newport, Rhode Island. At both sites the architect nonpareil was the grand old man of American architecture, Richard Morris Hunt. He was the first American architect to be trained in Europe, at the Ecole des Beaux-Arts. And it was in his office that the American Institute of Architects was founded in 1857. He was at the height of his fame in the 1880s and early 1890s. He designed more of the great mansions of his time than any architect. His forte was the style of the French Renaissance. Deviating from this style was one of Hunt's most renowned houses, the Breakers, designed in the Italian Renaissance style and constructed in the years 1892-1895 at Newport for railroad tycoon Cornelius Vanderbilt. But nearly as famed were several mansions in his favorite style, such as Belcourt, built in 1892 for Oliver H. P. Belmont, son of banking magnate August Belmont, who was one of the few Jews to win acceptance in American society. Also at Newport was Marble House, the Roman-style mansion Hunt designed for William K. Vanderbilt. The same patrons and others besides had hired Hunt to design their New York houses. But Hunt's most imposing and notable work was Biltmore, begun in 1890 and finished in 1895, the Asheville, North Carolina, palace of George Vanderbilt. Designed in the French (Francrois I) chateau style, measuring 500 feet in length, containing 250 rooms, and located on a 120,000 acre tract of land that was laid out by Frederick Law Olmsted, America's greatest landscape architect, Biltmore was a triumph of size and sumptuousness. It was Hunt's masterpiece. Hunt's residential work was confined to the East, but architects and entrepreneurs in other areas of the nation contracted to erect original mansions or imitative versions of Hunt's Newport "cottages." Among them were such nationally known residences as the Charles Crocker house in San Francisco and the Potter Palmer house in Chicago. These great mansions of the age of energy, especially those designed by Hunt, laid claim to international repute and respect."

Sunday, July 15, 2018

Can the right story increase your income or help the poor?

See Think Positive, Climb Out of Poverty? It Just Might Work by Seema Jayachandran in The NY Times. Even if these programs work, they raise an important question: if everyone gets the "right" story told to them, would we all become richer?


"In Kampala, Uganda, students who watched a feel-good movie about a chess prodigy improved their academic results. In Oaxaca, Mexico, clients of a microcredit organization were successfully trained to have greater aspirations for the future. And in Kolkata, India, sex workers in brothels were imbued with a sense of empowerment that helped them to take concrete steps to improve their lives."

"In Kampala, Uganda, for example, a study by Emma Riley, a graduate student at the University of Oxford in Britain, examined the effects on students of watching a movie, “Queen of Katwe,” starring Lupita Nyong’o and David Oyelowo. The Disney movie is based on the life of Phiona Mutesi, a girl from a poor township in Kampala, whose father died of AIDS when she was young.

Ms. Mutesi went on to become a champion chess player, representing Uganda in international competitions, an achievement that exceeded what many students in Uganda had expected for themselves or even thought possible.

To encourage them to aim higher, students preparing for their national exams were shown the movie. When they took the exams, they performed better than a control group that instead watched a Hollywood fantasy movie, “Miss Peregrine’s Home for Peculiar Children,” that did not feature an appropriate role model. Significantly more of the “Queen of Katwe” movie watchers had scores high enough to gain admission to a public university."

"The Kolkata, India, experiment, conducted by five scholars based in the United Kingdom and India, ran a short course on personal growth for 264 sex workers, who had often felt stigmatized and powerless. After participating, the women had measurably greater self-esteem and a stronger belief that they could determine the course of their lives. More concretely, they began saving more money and getting more frequent health checkups.

These successes suggest that even traditional anti-poverty programs work partly because they lift people up psychologically. For example, a program designed by a nonprofit in Bangladesh that has also been used in India, Ethiopia, Peru and other countries has given poor people livestock plus training on how to care for the animals.

This aid package has raised participants’ incomes more than might have been expected, based on the direct monetary value of the animals and the education. What helps to explain the outsize impact is that participants started working more hours."

Critics of anti-poverty aid have charged that it encourages laziness, but in this case, the opposite happened. The assistance motivated people to work harder. The extra work was partly a rational calculation: Productive assets like cows or goats magnified the payoff from labor. But it’s also true that participants’ mental health improved, which likely made them able to work more.

Better mental health is also one of the striking benefits of the cash grants that the American nonprofit, GiveDirectly, has given to poor households in Kenya."
"Hope isn’t a cure-all. In none of these examples can we be certain that it actually explains the gains in people’s income or education. And instilling hope without skills or financial resources is unlikely to be enough to lift people out of poverty."
"unrealistically high aspirations can be so discouraging that they are harmful. Repeatedly falling short can deplete motivation.

Still, it is welcome news that poverty-alleviation programs can amplify the good they do just by making a better life seem — and actually be — within reach."

Monday, July 2, 2018

Economists as Storytellers

By Donald J. Boudreaux. Excerpts:
"Paul Heyne (1931-2000), who taught for most of his career at the University of Washington, was one of the 20th century’s greatest teachers of economics. He excelled in the classroom, in popular writings, in public lectures, and in his indispensable textbook, The Economic Way of Thinking.
Paul made economics relevant and, hence, interesting. And perhaps the single best piece of advice that he offered to his fellow economists is to tell what he called “plausible stories.”

Far too many professional economists today ignore this advice, even when teaching an introductory class to freshmen. Indeed, wrongly thinking it to be hostile to scientific rigor, they hold this advice in contempt."

"My own take on economic methods is deeply influenced by Hayek. It is influenced also by Deirdre McCloskey who insists that whatever methods work to further our understanding are legitimate methods."

"Although verbal stories have nothing of the appearance of Science, they are a legitimate and scientific method of gaining – and of sharing – understanding. In fact, for some purposes, verbal stories are by far the method that works best. 

Consider Leonard Read’s famous story “I, Pencil.” In unassuming prose, Read revealed the surprising though indisputable truth that the amount of knowledge necessary to make an ordinary commercial-grade pencil is inconceivably greater than is the amount of knowledge that can be comprehended by a single individual or by a committee of even the most genius of individuals. (In 1776, Adam Smith told a similar, although much shorter, story about an ordinary woolen coat.)"

"Leonard Read’s long-time secretary, Jeanette Brown, told me that Read one day in 1958 squirreled himself away, alone in his office at the Foundation for Economic Education, and for hours did nothing but contemplate a pencil. This contemplation – combined with Read’s extensive reading of great economics texts – is what Jeanette believes to be the source of Read’s insight as told in “I Pencil.”  

If Jeanette is correct – as to me she seems to be – in what way is Read’s pondering a pencil and thereby discovering the insights that he shared in “I, Pencil” less deserving of the label “scientific inquiry” than is, say, an astronomer pondering the night sky through a telescope and thereby discovering a previously unknown star? 

Both inquiries uncover truths that are objective in the sense that they can be conveyed to other people, each of whom is free not only to challenge or to accept the claimed truths, but also to use those truths as tools in the search for other truths.

Economics, when done well, is the telling of such stories. The stories told are not fantasies or fictional. They are, a Paul Heyne said, plausible. And they are fascinating!"
See also Economists Love Fables And Parables (Or, What Is The Essence Of Economic Analysis?)

Economics resembles storytelling more than mathematics

Wednesday, June 13, 2018

Even Nobel prize winning economists are talking about narratives

See Narratives, Imperatives and Moral Reasoning by Armin Falk and 2014 Nobel economics winner Jean Tirole.

This paper provides a theoretical framework to explain recent empirical findings on the malleability of morality, and suggest new testable implications. Building on a basic model with image concerns, we introduce the concept of narratives that allow individuals to maintain a positive image when in fact acting in a morally questionable way. We show how narratives, however feeble, inhibit moral behavior in downplaying externalities, magnifying the cost of moral behavior, or in suggesting not being pivotal. We further show that narratives spread virally when negative, but not when positive. We then turn to imperatives, i.e., moral rules or precepts, as a mode of communication to persuade agents to behave morally, and identify the conditions under which Kantian behavior will emerge in an otherwise fully utilitarian environment. We also show how an unwillingness to engage in trade-offs can arise, with implications for the elicitation of moral preferences. Finally, we study how collective decision making and organizational design produces a sub-additivity of responsibility."

Sunday, April 29, 2018

Moralizing gods help societies cooperate

See Why You Just Helped That Stranger by Robert M. Sapolsky. According to Wikipedia, "He is currently a professor of biology, and professor of neurology and neurological sciences and, by courtesy, neurosurgery, at Stanford University." Cooperation may be important for economies. How do you get a large number of people in a factory to work together, for example? Excerpts:
"When do religions tend to invent such moralizing gods? A number of researchers—such as Carlos A. Botero of Washington University in St. Louis and his colleagues—have shown that moralizing gods become more common in large-group cultures.

Why? Psychologist Ara Norenzayan of the University of British Columbia (UBC), looking at the size of groups, proposes that as cultures grow, something uniquely human emerges—opportunities to act anonymously. To Dr. Norenzayan, that’s when moralizing gods become useful to maintaining the social order. Even if you do something rotten and no one knows, there’s a Someone who does."

"people who play an economic game anonymously, whether they are religious or not, become more pro-social when unconsciously primed to think about God (by having to unscramble jumbled sentences that make religious references)."

"people in cultures with moralizing gods tend to be more pro-social—a hypothesis tested in a recent paper in the journal Nature by psychologist Joe Henrich of UBC and collaborators, including Dr. Norenzayan. The researchers surveyed nearly 600 people around the world, believers in such faiths as Christianity, Hinduism, Buddhism, animism and ancestor worship.

Subjects had to deal with a simple economic scenario: Here is X amount of money. Divide it between yourself and a geographically distant co-religionist whom you don’t know. Or divide it between that distant co-religionist and a local co-religionist whom you do know. Subjects then answered questions about their religion.

After controlling for various economic and demographic variables, back came a clear answer—the more that people considered their god(s) to be moralizing and punitive, the more generously they divvied up money with that stranger. Thus, the threat of moralizing gods may help to explain some of the human capacity for pro-social cooperation among strangers."