Bootstrapping an entirely new global payment network is quite an undertaking. To do that while also creating a new currency would be an astonishing feat. It would involve overcoming hard chicken-and-egg challenges, strongly-seated incumbents, geopolitics, and so on.
Here are the questions that have come to mind as I ponder over Libra, its apparent strategy, and the challenges ahead:
Does Libra have any actual competitive advantage? What FB brings to payments that could allow them to somehow leapfrog the incumbents?
How to deal with governments? The Libra Reserve system is a monetary and fiscal attack on governments. What is Libra’s strategy to lure them?
What are the incumbents doing there? Mastercard and Visa are joining Libra as founding members. How come?
Should anyone believe the cryptocurrency hype? Why is FB framing Libra as a blockchain-based cryptocurrency?
What if it works? If we time travel decades into the future, what is the best-case scenario for Libra?
What FB brings to payments that could allow them to somehow leapfrog the incumbents?
Facebook will certainly seek to leverage the reach of mobile phones to grow the Libra. Mobile chat apps — WhatsApp, Messenger, and others — have spread out across the globe and now reach a far wider audience than the current banking and payment systems.
Chat apps can be exceptional channels for distributing the Libra, but I don’t think that alone is enough for it to succeed. Building a new payment network that seeks to reach beyond current ones comes with at least two hard-to-crack nuts: (1) compliance to governmental regulations and (2) proper management of transaction disputes.
To put it simply, compliance to regulations encompasses know your customer (KYC) and anti-money laundering (AML) procedures. Governments require them as a way to cope with criminals. It’s lots of checkpoints and paperwork — e.g. documents proving customer identities, forms with the origin of their funds, etc.
The other hard-to-crack nut is about disputes. As anyone with a credit card knows, things often go sideways in real-world transactions, causing disputes to arise. For instance, some transactions may need to be canceled; refunds may be requested; fraudsters may spend your money; and so on. Management of disputes is the set of processes and systems that includes customer support, legal-related work, and much more. These are unsexy yet essential ingredients of payment systems.
I could not find relevant information about how Libra plans to tackle these challenges. They are too vague in their white paper (a). There, they simply state that “[we will be] innovating on compliance and regulatory fronts to improve the effectiveness of anti-money laundering.”
In its launch website, Facebook says Libra will target the underbanked in lower income countries. If that is the plan, cost-efficiency will be critical, and the question then becomes: Can Libra handle regulation and disputes efficiently enough to keep costs much lower than incumbents?
Given the lack of information on Libra’s strategy, it might be informative to examine how Bitcoin addresses these two nuts
(sidenote: One could say Bitcoin is not your usual payments network. After all, it is, strictly speaking, just self-contained software and computing resources.
That might also be the whole point of why Bitcoin can be so disruptive. It clearly is an asymmetric competitor to existing solutions.) .
Bitcoin’s solutions are radically simple: it ignores all governmental regulations and user disputes. If you own and control your private keys, there is no one to sue nor anyone to ask for regulatory compliance. Disputing transactions in Bitcoin is impossible, because, by design, transactions are final.
In other words, the responsibility of protecting against fraud and plugging to existing KYC-AML systems is left to users themselves — or to the third parties users eventually hire, like Coinbase, Ledger Wallet, etc.
At the end of the day, unlike Bitcoin, Libra seems to be a bet that it is possible to comply with governmental rules while also being much cheaper than payment incumbents.
I find it hard to believe that the Libra could be successful unless they come up with something very smart to tackle the two nuts. One possible strategy would be to reach massive end-user adoption as fast as possible and then leverage it to lobby for regulatory changes. This is from Uber’s playbook, but could that work in payments?
Facebook surely knows that cracking these nuts is a crucial. They must be working on something and I am curious to find out what they come up with.
The Libra Reserve system is a monetary and fiscal attack on governments. What is Libra’s strategy to lure them?
For every unit of Libra circulating, Libra says there will be a correspondent 1-to-1 reserve denominated in a basket of low-volatility, low-inflation currencies — likely the dollar, euro, and other similar fiat currencies. Their monetary policy will thus resemble the gold standard era, in which countries held gold bars as a guarantee that the national currency they issued had any value.
The obvious challenge about monetary policy is the following. If Libra is successful, say, in Brazil, then citizens will rely on a currency that is not controlled by their national central bank. No sane state will give up on their existing monopoly on domestic currency without getting something absurdly good in exchange.
In other words, if a government monopoly on currency breaks apart, fundamental issues (and maybe even the national states themselves) would need careful rethinking. Things like taxes, government funding, and interest rates would need to be reexamined.
Is it possible for Libra to make an offer that any given government could not refuse? I cannot think of anything.
If no acceptable offer seems viable, then the question is: What is, after all, Libra’s strategy on this front? Speed? Deception? Something else?
By speed I mean, could Libra move to spread faster than governments’ reaction time? Will governments be that slow to act about something so “dangerous”? Deception would be the Libra avoiding any frontal attack. If that is the strategy, then what kind of sheep’s clothing could Libra wear to deceive a national government?
Mastercard and Visa are joining Libra as founding members. How come?
Let’s take a look at the initial group of founding members of Libra Association
(sidenote: Update — June 2021
It is clear that the Libra Association (now rebranded as Diem Association) was designed after the original Visa network.
Marc Rubinstein explains it well (a):
“[Facebook] recruited 28 organisations from different industries to form the Libra Association. The association would be a not-for-profit in the mould that Dee Hock first envisioned when he set up Visa over sixty years ago (a). And just as Bank of America agreed to seed Visa in anticipation of capturing a small piece of a larger, open network, Facebook thought the same about Libra. It would sit on top of the network with its wallet Calibra, now called Novi, in the same way Bank of America cards sit on top of the Visa network.”) . What kind of short- and mid-term incentives do they have?
It is evident that Internet-based businesses, especially marketplaces like Uber and eBay, would benefit a lot from cheaper and widespread payment systems. One of the challenges to their continued growth is the lack of seamless payment solutions in poorer countries. The alternative to seamless payments is cash, which is harder to scale; involves more frauds; makes the user experience worse; and so on. Even in richer countries, if something cheaper than the current credit card fees existed, it would reduce their costs of doing business. So one can easily understand why Internet-based companies are supporting the Libra. No surprises there.
The fact that venture capital firms, like a16z and USV, are part of the initial group seems very reasonable as well. Simply put, they are in the business of making very-out-the-money bets that could become huge, if correct.
I find quite puzzling though that Visa and Mastercard are also said to be joining the Libra Association. I could not come up with a compelling explanation for that.
Are such powerful incumbents really helping kickstart a potential disruptor?
My best (yet admittedly dull) guess is as follows. Visa and Mastercard are joining in as a defensive move. They will try to steer the Libra far from their profitable, existing businesses. Maybe by keeping it focused on the unbanked for the foreseeable future.
Why is FB framing Libra as a blockchain-based cryptocurrency?
For starters, it is debatable if Libra is a cryptocurrency in the first place.
Even if we concede that it intends to use technologies similar to Bitcoin and Ethereum, Libra will not be an open network. It says it plans to become more open in the future, but who knows?
It also is not clear from the Libra Blockchain technical paper what type of control end users will have over private keys. If there is no exclusive control over a private key, then there is no real ownership of anything that is based on asymmetric cryptography.
The best theory that I have for why they are positioning themselves as a cryptocurrency is to surf the zeitgeist, especially with software engineers. They seem interested in attracting developers’ goodwill and (ideally free) contributions.
It feels similar to the open-source playbook that many tech companies have applied to parts of their recent launches with “platform” ambitions — think of Google’s TensorFlow, Apple’s Swift, Facebook’s React, etc.
If we time travel decades into the future, what is the best-case scenario for Libra?
The best possible outcome for Libra is becoming the de facto universal currency. This is a wildly speculative idea, but in the future, a new currency could make today’s US dollar look small.
Over a long enough time scale, it is plausible that some currency could be more universal than the US dollar is nowadays. If that happens, I have no idea though if it will be the Libra, the Chinese Renminbi, Bitcoin, or something else.
In any case, with the emergence of a universal currency or not, software will continue its “attack” on money. And, as the saying goes, constant dripping of water wears away the stone…
]]>There we have a social phenomenon that is able to push the right buttons of our nervous system and produce a response that is similar to drugs. Tempting, isn’t it?
I believe every nation state is guilty of exploiting this mechanism to their own benefit.
First, here is a demonstration of the haka, a cerimonial dance by the Māori people from New Zealand:
The haka can be so impactful on spectators that it has been adopted by New Zealand national teams and has been performed before their matches over the years.
Here is a recent video of the NZ national rugby team performing it against Tonga’s. Incidentally, Tonga also has their own intimidation ritual, a dance called sipi tau:
Next, here is something more cheerful. While waiting for a Green Day concert to begin, a crowd of 60,000 people in Hyde Park, London, started (spontaneously) to sing Queen’s Bohemian Rhapsody:
Finally, take a look at these soccer fans, supporters of Wydad Casablanca in Morocco:
I could go on and on with examples of similar phenomena. They are situations in which a crowd acts in the same rhythm, usually supported by music or chants.
By merely watching the videos above it is likely that many would get goose bumps. Our response would be even more profound if we were present in the actual demonstrations. On top of the physiological arousal, being there would deliver the good, transcendental feeling of belonging to something larger than ourselves.
Azim Shariff, a psychology professor, said in a recent podcast interview:
There is this work on what is called synchrony — which is engaging in actions at the same pace, in the same rhythm, of others. You have this in terms of hymn singing, but you also have this in terms of marching, that is often used in military drills, for the same the reason. When you’re engaging in an action in rhythm with somebody else, that creates the psychological connection that makes people feel fused as a group.
In the same podcast episode, Shubha Pathak, a historian of religions, adds:
Often a text or a chant, a mantra, will start with the syllable om. And I think the reason why that is, not only does it have the significance of standing for a particular god in his totality or her totality, but you have this column of sound that gives you a sense of vastness.
I think it is sort of similar to what happens when you have two singers singing at the exact same frequency. You start to have these beats in the room. With om, it creates something around you that makes you feel like you are part of something.
A basic description of what is happening neurologically comes from a story about musical arousal by David Shariatmadari with the neuroscientist Jessica Grahn:
[According to her, this is] a form of autonomic nervous system arousal, the evolutionarily ancient preparation for fight or flight. As well as piloerection (those hairs standing on end), if I’d been hooked up to medical monitors, they would have detected increased heart rate, perspiration and faster, deeper breathing.
Researchers have shown that activity in the nucleus accumbens, deep inside the brain, increases during chills. “What’s interesting about this is that it’s what we call a reward structure. So it responds to all sorts of biological rewards like food, or sex or drugs. And the chemical that’s released during musical chills, dopamine, is one that is also acted on by things like cocaine or amphetamine or other intensely pleasurable experiences.”
Anyone who’s felt musical chills will instinctively recognise this. They are among the most instantaneously exciting sensations you can experience. They involve the body and the mind together, and often seem deeply significant: giving you access to something bigger than yourself, something ineffable.
If I were to tell you that there is a social phenomenon that is able to manipulate our nervous system to produce a response that is similar to drugs, would you be interested in making use of it?
You can bet you are not the only one.
For instance, I believe it is no accident that every nation state has an anthem. National anthems seem like the ultimate exploitation of this phenomenon. Think about it, first, they have the anthem repeated to you as frequent as possible. You probably started listening to it in early childhood and have been revisiting it again and again, hundreds of times over your lifetime. As they become completely ingrained into our memories (and thus identity), listening and singing the anthem along with your fellow citizens is guaranteed to be a cathartic experience.
Nice and useful, right?
]]>While violence and accidents are in principle avoidable, nature is merciless. Fortunately, humankind has been making great progress against death by nature over the centuries. We have been solving, at scale, the menace of wild animals, the perils of being exposed to the elements, and even hunger.
The only cause of death that still has an air of mystery and unavoidability to it is aging and disease. But even with diseases, remarkable progress has been made against infections. Progress because of vaccines, antibiotics, and sanitation.
I can’t help but to look at this progress and extrapolate that we will eventually escape the remaining “traps” set by nature — aging and the so-called age-related diseases.
Many different things kill people: cancer, heart attack, other people (murders), people themselves (suicides), car accidents, etc. The list goes on and on. By collecting every possible cause of death, one can group them into three categories:
Violence — the act of humans intentionally killing humans (e.g., war, crimes, suicides)
Accidents — the unintentional deaths, usually due to the failure of a man-made machine (e.g. car accidents, electric shocks, plane crashes)
Nature — which consists of all other causes of death (e.g. animals, microorganisms, diseases, etc)
We, as a society, have been trying to manage the first one, violence between humans, for a long time. In many ways, several of our social institutions exist as an attempt to mitigate the violence that occurs between humans. Think of the legal system, the police, the prisons. While it is tricky to draw definitive conclusions about our progress, it seems fair to say that the average citizen in most modern societies feels safer than their counterparts centuries ago.
We also have reasonably good cope mechanisms for accidents. To a great extent, we can prevent them by managing our behavior and improving the safety of our systems. Take electric shocks for instance. Conductor insulation and grounding surely avoid a lot of them. Or consider car accidents. They can be far less lethal because of speed limits, seat belts, and no drunk driving.
Violence and accidents seem somewhat avoidable — at least in principle. Death by nature, on the other hand, is merciless.
To examine in more detail what I mean by death by nature, let’s divide it further:
Now, you may be looking at these four items and asking yourself, where does aging come into play? Isn’t it missing here? Personally, I believe aging should be in the same subtype as diseases. I subscribe to the hypothesis that aging can be seen as a slow and progressive biological process that is not unlike chronic illness. Nevertheless, if you strongly disagree with this view about aging, just create a fifth subtype in your head and call it death by aging. It won’t change the argument I am about to make.
As humankind has come to understand more of how nature works and how to manipulate it, we have been progressively solving the subtypes of death by nature. In doing that, we have also, quite interestingly, removed the veil of mystery that used to confuse us about nature itself.
Take the elements for example. Try to imagine how hard it was for ancient civilizations to comprehend and cope with droughts, floods, and wildfires. For many centuries, there was nothing they could do but blame the gods — despite it not being an effective solution.
Or look at hunger. We have solved hunger on a large scale with the invention of agriculture millennia ago. Due to innovations in recent times, food for billions of people is now a reality (sidenote: See, for example, the work of Norman Borlaug and the Green Revolution circa 1950-1960. There was also the so-called British Agricultural Revolution in the 1700-1800s.) . It is a reality that we not only take for granted but one that is such a reliable default that we mistake it for trivial. We may not realize, but feeding billions is an astonishing achievement that was unimaginable just a few hundred years ago.
As for death by animals, urbanization and firearms have made the menace of wild animals, like bears or large felines, much less relevant in our modern lives.
Looking to all things that kill people, it seems fair to say that the only one that still remains a mystery is disease. There are still major challenges with hunger and the elements, we must improve our human systems to better cope with them — and also with violence and accidents, of course. My point is just that there is no veil of mystery around them anymore.
Fortunately, despite the air of mystery around it, we have made progress against diseases too. During the 20th century, we made impressive headway in figuring out how to neutralize several of the most relevant invaders — viruses and, especially, bacteria — that plagued humanity for centuries. These invaders caused the Black Death, which devastated 75-200 million people in just 10 years in the 1300s; and diseases like tuberculosis and pneumonia, that killed millions of people worldwide per outbreak. Ever since the invention of antibiotics, vaccines and sanitation these invaders are much less of a widespread problem (sidenote: For a nice (and recent) overview on the topic, check out Our history is a battle against the microbes: we lost terribly before science, public health, and vaccines allowed us to protect ourselves by Our World in Data.) .
Today most people assume that death ~100 years after birth is inevitable and unavoidable. An assumption that is very reasonable given the fact that, up until now, every single human have died before their 123rd birthday.
Nevertheless, I can’t help but look at our progress and extrapolate that in the future we will develop reliable solutions to the age-related diseases that we currently face. As a result, billions of people will have the opportunity to live much longer, healthier lives.
For one thing, we are guaranteed to keep trying.
There seems to be a human imperative to reduce suffering. And very few things cause more suffering than disease and death. This human imperative will continue to push us forward. In due time, we will come up with solutions for the yet-to-be-solved diseases.
Finally, let me acknowledge that the consequences of postponing death will be radical and far-reaching. Examples of potential consequences that come to mind: it will change how evolution “works”; it will affect resource consumption and planet exhaustion; it could lead to social stagnation; etc, etc. Needless to say, we will need to address all these issues if we are to continue to endure as species. And I am optimistic that humankind will also succeed against these new challenges.
As I reread this essay today, I feel I should clarify my current thinking. I do not believe that the human bodies, as we have them nowadays, could eventually go on forever. Forever is just too much time.
My current belief is as follows.
I think aging and age-related diseases are not something fundamentally inescapable. As far as I can tell, we should be able to slow them down and eventually reverse them without violating any fundamental law of nature.
I do believe that in due time we will be able to turn aging and age-related diseases into “manageable” issues — just like we did with microbes throughout the 20th century. The very-best-case scenario is to reach the stage of “manageability” in a few decades. More realistically, because there are still so many unknowns, humankind will still need centuries before being able to “manage” them well enough.
When we eventually turn the challenges we currently face into more amenable problems, we should be able to live longer lives, but I do not think we will be able to live forever.
Why not forever?
Because from what we have inferred about how nature works, it just seems that there will be some other barrier. Of course this is just me speculating wildly, but it feels like there is a fundamental rate-limit to multicellular organisms. It does seem that no complex natural phenomena goes on indefinitely. Thermodynamics eventually catches up.
]]>In part one we have explained why discomfort (not desire) is the trigger for healthcare. I argued there that the reasons anyone buys healthcare are either to restore the well-functioning of mind and body or to get peace of mind against future health issues.
Next, in part two we have discussed two facts that lay at the foundations of healthcare:
Now, let’s consider the patient.
The patient is, in principle, all of us. Almost every single human being will, sooner or later, consume healthcare. Some lucky ones will need it only mildly and occasionally. The ones living with a chronic condition will need it intensively and continuously, throughout their lifetimes.
Every patient finds herself across spectrums of helplessness and uncertainty. Take, for instance, a youngster with a cold. She faces a level of helplessness and uncertainty of a different kind than a senior lady with a metastatic cancer tumor. Nevertheless, both need help — they need care.
The child may be taken care of by her relatives and be cured in just a few days. The lady is fighting for her life, hopefully with the support of a competent medical team in a cancer center.
With all that in mind, I would say that four elements shape the context and the needs of patients:
Let’s unpack each one of these four elements:
Helplessness without others — patients are unable to solve most of their healthcare needs by themselves. Even if they are technically competent — say, they are doctors themselves —, they are often hindered by a physical and or psychological condition (remember: discomfort). They may also depend on specific equipment only available at certain locations — e.g., sterilized material found in hospitals.
Uncertainty as to when — the moment in time in which the patient may need healthcare is largely unpredictable. Scheduled preventive visits do remove some element of the unpredictability, but not completely — after all, there is no way to know if some issue will be detected in an exam or lab test.
Uncertainty about success — it is clear that many diseases have no reliable cure. Even in the case that the perfect intervention is well known, there is always a chance that something could go wrong — e.g., acting too late, human misjudgments, contamination.
Chance of relevant losses — by definition, if the patient is in need of healthcare, his or her “ability of functioning well” (or living at all) is probably under assault and can be lost. Since life is considered highly valuable, there are chances of relevant losses for patients themselves — and for their loved ones.
Since the patient is the ultimate beneficiary of healthcare, I posit these four elements not only shape the patient’s state of affairs, but also play a central role in how healthcare systems come together — as the rest of this series will show.
December 2018
Series about the fundamental reasons why healthcare systems are so convoluted, and why that is unlikely to change in the near future:
We look forward to visiting family and friends, going shopping, or watching a movie. We dream about houses, cars, wedding parties, and trips. Healthcare is not something we long for.
There is no pleasure sparked by healthcare, there is no desirable reason to keep coming back to it. In fact, if healthcare is to work really well, it is by quickly repairing an undesirable state and then fading away. Even better is to not need any healthcare in the first place.
Let’s acknowledge it. Nobody wakes up and think to themselves, “Oh, I miss visiting my doctor, I should go there soon,” nor would they say, “It’s been a while since I have been to the hospital, I should add that to my bucket list for this year.”
We look forward to visiting family and friends, going shopping, watching a movie. We dream about houses, cars, wedding parties, and trips. But healthcare is not something we long for.
As a general rule, feeling of discomfort must exist for a patient to seek out a healthcare professional or institution. Discomfort as a trigger for healthcare can be understood in two manners, the patient either is experiencing an actual tangible discomfort — like pain, disability, and mental health issues — or fears the chance of tangible discomforts in the future.
In fact, the reasons anyone buys healthcare are either to restore the well-functioning of their mind and body or to get “peace of mind” (that one is protected against negative events that could happen down the road).
Scheduling preventative visits, for example, can be seen as a deliberate action to avoid future discomfort, and thus get some peace of mind now. Going into the ER for a surgery after a car accident aims, of course, to restore the well-functioning of mind and body.
Contrast, again, our purchase intentions in healthcare with what is observed in most other industries we consume. Since there is no pleasure associated with healthcare (only the opposite), there is no desirable reason to keep coming back to it.
If healthcare works properly, it is supposed to repair the undesirable disease state quickly and then vanish. In fact, healthcare that works perfectly well is healthcare that is not needed at all.
December 2018
Series about the fundamental reasons why healthcare systems are so convoluted, and why that is unlikely to change in the near future:
If the patient is the ultimate beneficiary of healthcare, then a healthcare system should exist, first and foremost, to address the patient’s needs. Right?
Medical workers, hospitals, health insurers, and pharmaceutical companies make up most of healthcare systems. But how does one map from patient’s needs to healthcare institutions?
I believe that the elements that shape the patient’s needs are a useful guide for understanding why healthcare is the way it is. I have put forward there that these elements are helplessness without others, uncertainty as to when, uncertainty about success, and chance of relevant losses.
In healthcare systems, these four elements are addressed by two actors, each actor tackling a pair of elements:
Dependable expert? Risk bearer?
I have taken the liberty to create new terms to describe two very familiar actors in healthcare. My intention is to trigger a new perspective for a subject that is so commonly overlooked.
The dependable expert helps the patient overcome immediate discomfort and/or reduce the chances of future discomfort. It’s a role held by physicians and related professionals. The dependable expert helps the patient in their time of trouble, and thus addresses the helplessness without others. They are the others that come to help.
Since the dependable experts are the ones performing the actual care, they are also deeply connected to the uncertainty about success. In fact, this is one of the good reasons for the patient to seek experts.
A risk bearer is someone who takes on the risk for someone else. In the case of healthcare, the risk bearer is either a private health insurance company — as for most Americans — or a government-related institution — as in Medicare, Medicaid, and Veterans Affairs. The risk bearer plays the role of an insurer, and thus is responsible for helping the patient cope with the chance of relevant losses and the uncertainty as to when incidents could happen.
Insurance, in a nutshell, consists of (A) an insured trading the chance of a substantial financial loss to (B) the certainty of a more affordable payment that covers against the event of such loss. For example, in healthcare, one might pay a monthly bill to a health insurer — the “affordable payment” — in order to be covered against the event of a hospitalization, surgery, etc — the “loss event”.
To make this seemingly magical exchange economically viable, the insurer first aggregates payments from many diverse insureds. Then, because the substantial losses are expected to not happen at the same time, the insurer is able to reimburse the ones that happen and still profit with the remainder — i.e., the insured events that did not happen.
The risk bearer, by providing insurance, helps to make the financial side of the patient’s risk more manageable. That is why, in many ways, the risk bearer lightens the burden of uncertainty for the patient.
As with everything in real life, there are trade-offs and profound dilemmas to this multi-actor arrangement. I will explore them in a future essay.
To be continued.
December 2018
Series about the fundamental reasons why healthcare systems are so convoluted, and why that is unlikely to change in the near future:
Healthcare, as an industry, is ubiquitous — we’re all patients — but its complexity confuses most of us. There are several moving parts, many of which are unique and not found anywhere else. In addition to the numerous actors in the industry, there are also moral imperatives and dilemmas spread out throughout their interactions.
I believe though that two fundamental facts precede everything else in healthcare. It is as if they lie at the foundation of healthcare, and everything else is a consequence.
Sooner or later, we will all face a disease and healthcare will play a role in our lives. Despite such universality, healthcare systems are poorly understood — healthcare is everywhere but its complexity seems to confuse us.
There are several moving parts within the system, many of which are unique and not found anywhere else — like the level of government regulation and the peculiar relationship between patients and doctors. In addition to the numerous actors, there are also moral imperatives and dilemmas spread out throughout the interactions between actors.
I believe that two fundamental facts precede everything else in healthcare. It is as if they lie at the foundation of healthcare, and everything else is a consequence of them. They are:
Each one of us is irreplaceable because there is no way to duplicate our genetics and personal experiences. There is no way to copy ourselves — there is only one, single, unique you.
The gigantic uniqueness that is attached to each one of us has all sorts of consequences. It is a moral imperative to protect human life at (almost) any cost. In other words, we confer enormous value to each and every human life — and this reality permeates healthcare. The emotional burden over healthcare professionals, for example, can be overwhelming — their everyday decisions have direct impact on the most valuable thing on earth.
With the exception of having a habitable planet, I know of no other major human endeavor where scarcity is so fundamental and pervasive. We are able create and recreate most of the things that we need — from shelter to any mode of transport, from food to any computing device — but we cannot recreate a human being.
The other fundamental fact is that we have not found reliable solutions for several devastating diseases — they are still unsolved problems. Problem because these devastating diseases bring profound suffering to humankind, and unsolved because, despite remarkable technological advances in medicine, many diseases are still without a cure.
Disease can be seen as our bodies not functioning well, but the human body is by far the most complex thing we have ever dealt with. What makes solving diseases such a hard problem is that the inner workings of a living human are hard to access and modify without making things worse. We lack both methods to gather fine information on what is going on and non-disruptive ways to fix what went wrong inside us.
It may sometimes be difficult for us, laymen, to really appreciate how complex human biology is. For instance, there are trillions of cells in a single human being, each of them carrying out, independently, an intricate web of stochastic interactions at a blazing speed. Most of these molecular interactions are neither observable nor easily modifiable by us.
It is very fortunate that, despite the challenges, we have been making progress against disease over time. Nevertheless the sad truth is that our current healthcare system is not yet able to stop disease. We, as patients, have no option but to accept work-in-progress solutions to many terrible maladies. Most of the time the solutions are good palliatives, although they often are worthless or even harmful — because of side effects and unintended consequences.
As much as I would describe myself as an optimist, who is confident that we will eventually have broadly available cures for all deadly diseases, I believe this will take, at the very minimum, several decades.
December 2018
Series about the fundamental reasons why healthcare systems are so convoluted, and why that is unlikely to change in the near future:
When considering college education, one must consider the quality of the “bundle” that is being bought. The package that is bought goes beyond just classes and diploma.
College is better understood if seen as a club. A special kind of club that bundles together three things: content, social experience, and badge. Content usually comes from classes, but the social experience and the badge are features more akin to exclusive clubs. The more desirable and selective they are, the better.
People may think one attends college to learn a profession. They seem also to consider the content taught in classes is the most important part of what college is.
I believe this is a naïve point of view. Content plays only a minor role and college should, instead, be seen as a special club that bundles together content, social experience, and badge.
A club is any social organization with the following two features:
The trigger for a club to form can be common ancestry, geographical proximity, specific shared interests, etc. There are several examples of clubs in society. The typical workplace is a club. The same can be said of military service, sports clubs, and so on.
Clubs vary both in terms of the criteria for the filtering process and the meaningfulness of the time together. For instance, during war, members of the military club face life-or-death experiences. A good portion of their strong sense of camaraderie stems from having shared such impactful experiences.
In the bundle offered by colleges to their members, the social experience are the several opportunities to spend time with other members over the course of 4+ years.
In terms of meaningfulness of time spent together, college ranks very high. It is a rite of passage that marks the beginning of adulthood and brings profound changes to life. It also often involves moving out of home and forging lifelong relationships.
If we had all classes removed, and if there was no formal content left, but if we still kept a similar social experience in those formative years, I believe such club would still be very relevant in society.
The badge is the club’s “acceptance” of someone as a member. The badge is not, as one could expect, the diploma. In fact, for any famous college, the actual filtering step is admissions, not coursework. Take look at the acceptance rates vs. the graduation rates across some of the most famous US institutions
(sidenote: Harvard and Stanford acceptance rate is around 5%. Harvard’s graduation rate is circa 85%; Stanford, 75%.
In other words, the real filter happens before college itself.) . It is clear that being accepted by one of them is the step with the most signaling value.
A club is really successful if:
Society perceives the club as highly desirable
The more widespread and deep-seated the recognition is, the better. Successful colleges draw their notable-ness from being associated with famous people (e.g., faculty, alumni, donors) and making progress against some of the hardest problems humankind face (say, conducting scientific research to fight cancer).
The club is highly selective
Imagine if anyone in the street could say that they went to Harvard. The value of the Harvard badge would decrease a lot because it would signal less information. A significant part of a club badge lies in its scarcity, and that’s why clubs try to be exclusive.
Note that because a large pool of high quality candidates is required in the first place, a club can only be highly selective if it is also highly desirable.
The key mechanism for increasing how desirable a college is relies on the badge and its remarkable characteristics.
Firstly, the badge is publicly visible. The badge everyone holds is exposed to the world over their entire life (and afterwards). We are trained to know the alma mater of not only our friends, but also from several high-status people. You are certainly aware that Bill Gates and Mark Zuckerberg went to Harvard as undergrads, right?
The badge is also highly conductive. It acts like a sponge for success and status. Take a person who is somehow connected to some school. Any impressive feat of that person is magically absorbed by the badge and transmitted to newer members.
For example, the fact Richard Feynman and many other Nobel Laureates are (or were) lecturers at Caltech somehow accrues prestige to their newest freshman. Their young students don’t need to do anything themselves (beyond getting admitted).
If we can agree that famous colleges are elite clubs, then we may get insights about why they can get away with being so expensive. If college provides its members with prestige and access, how much is it worth? Hard to tell exactly, but this hints us on why the riches seem to buy it at (basically) any price.
Well-off people spending money on their kids’ college tuition is not all that bad.
Much worse is people in severe debt to pay for education at poorly regarded institutions. They mistake a diploma for the badge! That misunderstanding makes them significantly overpay for the anemic bundle they get.
September 2018
Series of essays deconstructing what higher education is really all about, and how its future might look like:
Unfortunately, the performance of X is impractical in most settings. We need to rely, instead, on further abstractions of someone knowing X.
Diplomas, for example, are very useful shortcuts for society. They enable us to operate at scale. Imagine how less efficient the world would be if there were no easy way to “know” that your doctor can perform that a bariatric surgery. But, despite their vast usefulness, keep in mind that diplomas are not perfect. Diplomas are not the actual skill. Nor should they be the only goal in education.
On its most fundamental level, learning seems to happen via modifications of brain circuitry — but we cannot really inspect what is going on in there. An obvious consequence is that learning and knowledge are not directly observable.
We cannot observe the precise modification process taking place in the neuronal networks involved. Nor can we tell how the I-have-learned-X state of the brain looks like once it is reached.
In other words, no one today can look at you standing still and tell, “You have learned X” or, for that matter, “You know X.” There is no machine and no human being that could remotely tell any of that.
Having learned something is a latent property. We believe it must be there, but we can only be sure indirectly. So, what? Well, one must perform the actual thing for others to verify that one actually knows that thing.
This need for actual performance has profound consequences in society. For instance, in many settings, it may not be practical. The performance might take too long or put people irresponsibly at risk. This is why, in modern education, there are a myriad of ways of testing if learning seems to have occurred.
In fact, diplomas and accreditations exist to make the task of indirect verification even easier. They attest for the world that some amount of learning could be expressed by the beholder in a sequence of mock tests, usually at multiple points in time.
Despite being powerful abstractions that help our society operate at its current scale and speed, we should keep that in mind that any abstract, indirect verification cannot be perfect and act accordingly.
]]>Famous universities are exceptional institutions in society. They are highly revered — one could say, they’re almost worshiped. They’re also very long-lived. Many of the famous universities were founded several centuries ago. And, in many ways, these institutions are indeed bastions of modern civilization.
I believe that a particularly strong self-reinforcing feedback loop is behind what makes them so special. I have written before that college is better understood as a club that offers a bundle of content, social experience, and badge. It turns out there is a feedback loop that ties them together and makes it all clearer.
Here it is step-by-step:
More visually:
And there is more. The core feedback loop is made even stronger by two side loops.
The first side loop is based on the fact that alumni, old and new, help each other. They network and exchange professional opportunities. Incidentally, that’s exactly what you would expect to happen in a club.
The second side loop relates to what universities do beyond undergraduate education. Their most relevant secondary activity is scientific research. Every famous university is home to dozens of research labs. Doing science and contributing to progress are great ways to raise any institution’s profile, and they sure do. Call this the brand side loop.
Here is the full diagram expanded with the two side loops:
If universities have such well-protected stronghold in society, will there ever be worthy alternatives or substitutes? We dabble at this question in the next piece of this series, What will render colleges obsolete?.
September 2018
Series of essays deconstructing what higher education is really all about, and how its future might look like:
If we were to see glimpses of the future of higher education, what are the initiatives to keep an eye on?
In comparison to media and commerce, higher education has seen little change due to new technologies over recent decades. It is not to say that nothing has changed, of course. Classes, for example, have been widely available on the internet for many years now. Anyone can watch a true master class on any subject for free on YouTube today. But, despite the abundance of high-quality content online, the “college industry”, in general, doesn’t seem to have changed much.
Why there hasn’t been much change? What ingredients are missing?
It is not a coincidence that colleges have endured for so long. They take advantage of a strong feedback loop that strengthens their position in society.
I believe classes belong to the content “portion” of the “college bundle”. But there is more to the bundle than just classes. Two other parts of it are as essential as classes themselves. They are the social experience and the badge. And the truth is that, so far, these two have not been implemented well enough by “competitors” to colleges.
Take Coursera, for example. Their badges — which are, basically, certificates for LinkedIn profiles — just aren’t compelling enough. It could be a matter of time before they start to become more relevant, but I am not bullish. I think we need more creative attempts to reinvent both the social experience and the badge.
Interesting new badges based out of Computer Science have emerged in the last 10 or so years. Some examples are: Kaggle, HackerRank, GitHub, and Stack Overflow. These are communities open for anyone to join that offer leaderboards where top-ranked participants get rewarded for their achievements. They are twists to the classic college badge.
For starters, because these initiatives are online and software-based, their “funnel” of applicants is wide open. Being permissionless and highly scalable makes it possible for the “best” to rise from anywhere in the world. Contrast that with the classical admission committees, which have intrinsic scale limitations and are known for their biases.
Secondly, achievements are more legible. It is much easier to verify if the holder of a certain badge really knows his stuff by looking at his code (already publicly available on, say, GitHub). Another advantage of these achievements is that they are not an A in, say, a Linear Algebra exam. They are actual projects, things out there in the real world.
There are other initiatives where the filtering process still relies on centralized committees, but that nevertheless seem very worthy competition to famous universities. In this category, the Thiel Fellowship and the Y Combinator come to mind.
From what I can tell from afar, these two do seem to have more powerful feedback loops than the “mere” online badges. They do feel like fully-featured clubs themselves. I guess that might be the case because:
They offer deeper social experiences for participants (that likely result in stronger networks)
They may do a better job in the promoting their brand across society (beyond just a community of, say, developers). They often get the media to talk about their members; have the members to proactively shout out to the world that they have that badge; get high-profile people to endorse them and their members; etc.
To me, it does feel like the next generation of “education clubs” will combine it all. Cast the net wide open in an online and highly scalable way, while also allowing for meaningful social experiences. And then, over time, build a strong brand.
Update — September 2018
After first writing this piece, I have come across Pioneer. They seem to be working on the exact problem of creating a new kind of club. Most of it is online and software-based but they are also being very thoughtful about the social experience, brand and network dimensions. It seems like a fantastic initiative, one that I am already cheering for.
Update — June 2021
Maven is a new platform for cohort-based courses started by the founders of Udemy, altMBA and Socratic. We partner with the world’s best instructors to offer live, online, community-driven courses to transform your career.
September 2018
Series of essays deconstructing what higher education is really all about, and how its future might look like:
Similar line of thinking would apply to rituals as well. Participating in them could be seen as a proof that someone can be trusted. The more extreme the ritual is, the harder it would be to fake one’s commitment to the faith.
As much as one should keep in mind though that there is no definitive evidence to support these hypotheses, they might get you reflecting on interesting questions about human civilizations.
What is the “job” of religion? Why have religions been so widespread? Are there alternatives? What competes with it? What has been changing? What is invariant?
I first came across these hypotheses while listening to an episode of a podcast by NPR. The episode is titled Creating God. I have compiled below the most interesting excerpts. Enjoy!
Azim Shariff, a psychology professor at the University of British Columbia, said:
For the vast history of our species, we didn’t live in large groups. We lived in very small groups of about 50 people, groups that never really got larger than 150.
And the reason for that is because, from a genetic standpoint, we are only built to be able to cooperate with as many people as we can know well. When you start having anonymous strangers in groups, when you start having people whose reputation you are unfamiliar with, people can free ride on the group. They can cheat on the group with impunity. And when you start having large groups of free riders and cheaters in a group, it cannot sustain itself. You need a level of cooperation between the people in a group for it to act and to work harmoniously.
It was only in the last 12,000 years that we started getting groups that bubbled up from beyond 100-150 people to 1,000-10,000 people. What that means is that it needed something more than just our genetic inheritance. It needed a cultural idea. It needed a cultural innovation to allow us to succeed in these larger groups.
One of the things that my colleagues and I have been arguing is that religion was one of these cultural innovations.
Shankar Vedantam, the podcast host, added:
And not just religion in general. It was one specific aspect of religion — the idea of a supernatural punisher also known as God.
For additional detail on this idea, see this 2016 paper, Moralistic gods, supernatural punishment and the expansion of human sociality by Benjamin Grant Purzycki et al.
Later on the conversation, Shankar Vedantam provoked:
One of the challenges, of course, is that, if I am a religious person, I now think of religion as being a marker of my willingness to trust the next person who’s also a religious person. [Because of this] there is an incentive for people to cheat.
For people to say, “I’m actually a religious person, I deeply believe in this God”, when in fact they don’t, because they just want to take all these [trust] advantages that come from religious faith.
And this brings us to the idea of rituals and the idea of costly rituals. […] Why would you have the development of costly rituals, in some ways, as a precondition to how religion ends up enforcing cultural norms?
To which Azim Shariff answered:
This is one of the really great examples of how evolutionary theory can inform our understanding of religion. Things that were previously mysterious about religion now make sense from an evolutionary perspective.
In evolution, there is this concept of costly signaling. They have a hard-to-fake signal which serves as a reliable cue of something you’re trying to demonstrate. The classic example of this is peacock feathers, which is a sexual display. Only the healthiest [male] peacocks can have the large plumage because of how costly it is to other aspects of the peacock’s life. It can’t fly very fast, can’t run away very much. It [also] makes it very visible to other predators.
That may be seen as an unrelated example but, if you look at the costly rituals that happen in religion, those are indications to other people in your group that you are a true believer. You are showing a costly indication that you are a believer. It is a hard-to-fake signal. If you weren’t a true believer, you wouldn’t go through all that effort.
They then mentioned a few other examples:
Effort like following the vows of chastity, poverty, and obedience in Catholicism. “We don’t see them as restrictive rules, we see them as freeing”.
Keeping kosher in Judaism. “When I eat I know that I am a Jew”
And wearing a veil or headscarf in Islam. “I use it to identify myself. I use it to be a symbol of who I am”
You have trustable cues, credibility-enhancing displays of people’s genuine religiosity, which indicates that you actually can trust them.
Shankar Vedantam says he came by two interesting studies on rituals:
One of them by Nicholas Hobson, he found, along with other colleagues, that if you ask for a group of people to perform a novel ritual — even when they are completely meaningless — it has the power to increase trust among fellow members who are performing this novel ritual. (My note: here is another follow-up paper by the same group).
The other study is by Panagiotis Mitkidis and he showed along with his colleagues that extreme rituals often a bigger effect on promoting moral behavior, not among the performers of the ritual but on observers.
Azim Shariff comments:
And so you would ask: why did fire-walking emerge? Why did circumcision emerge? Why did any of these painful rituals? There are many, many more examples of really terrible painful rituals. Why did they emerge? It’s not random. The ones that have been preserved exist because they have this impact on our psychology that allows groups to cohere around each other. That allows this communication between members of the group that encourage trust between them.
Shankar Vedantam then explores the conflict between what evolutionary thinking says are the motives to be religious and what religious individuals say are their own reasons:
I want to take a closer look at one of these rituals. To underscore the difference between the way believers think about religious practices and Azim’s theory.
Jainism, a small South Asian religion, has lots of rituals that ask for sacrifices, like fasting. Jainism is somewhat similar to Hinduism and Buddhism, in that one of its core tenets is non-violence. Jains are strict vegetarians and each year they observe a holiday called Paryushana. It is a week-long practice where practitioners limit their consumption of both food and water. The purpose of Paryushana is to repent for one’s sins over the past year. These are seven days when he nourishes his soul, rather than his body.
[Believers report] it gives [them] a better perspective on the struggles other people face in the world. “I can feel that without food we are nothing, so that way I can help other people when they are hungry”.
Now, of course, most religious people who make such sacrifices don’t see what they are doing as costly signaling. She is not fasting in order to communicate to other jains that she is a trustworthy member of the group. She is saying, “I’m a devoted person, my religion calls on me to make the sacrifice.”
So I asked Azim about the difference between an evolutionary theory of rituals and how believers think about their behavior.
Azim Shariff:
Again, I just want to clarify the difference between how people think in an individual way and the effect this has at a group level. For example, let’s say your religion commands you to take a very costly and difficult pilgrimage, for example, that involves maybe physical difficulties or, you know, financial difficulties. The people who are embarking on that pilgrimage are not thinking to themselves, “What I am doing is a costly signal to other members of my religion”. They are saying, “I am just a devout person, my religion calls on me to do this thing, and that’s why I am doing it”.
So there is a difference between how this might work in some ways at a community level, at a society level and how the individual practitioner thinks about it. The individual practitioner, the individual peacock isn’t thinking, let me grow beautiful feathers because that sends a costly signal.
This is something we can call functional opacity. People are not aware of these ultimate reasons, the ultimate evolutionary reasons why they are engaging in this behavior. They are aware of what we could call the proximate reasons, the immediate reasons, what they believe is the reason they are doing it for.
They are doing because their god asks them to do it, but, really, the reason that there is a belief that god would ask you to do that, the reason why that belief exists in the first place is because it serves that functional purpose.
They are in acting rituals that serve larger hidden purposes that are very functional for their societies but to them is just what their religion tells to do.
Next, anthropologist Scott Atran talks about extremists:
What we find, and this is not just true for the Islamic State, this is true for people who are willing to sacrifice their lives and kill others at the same time across the board. It is also true for movements that are peaceful but where the people who are driving these movements are willing to shed their own blood — for example, the civil rights movement or movements like Gandhi’s movement in India.
They are committed to a set of values which are sacred, values which are immune to tradeoffs. For example, you would not trade your children or your religion or your country for all the money in China.
And when you have these kinds of values which you will not trade off and which are not subject to the standard constraints of material life, things that occurred in the distant past (or in distant places that are sacred) are actually more important than things in the here and now.
They are also oblivious to quantity. It doesn’t matter if I kill one or a thousand or no one, as long as my intention is good and righteous. Once they lock into these values, they are immune to social pressures. These values are not norms. That is, even if your best friends, your family, your loved ones are against you, you will not see an exit strategy.
They have only one identity. They will fight and die not just for that group but for every single individual in that group. Once this happens, we also have other measures which show they develop a sense of invincibility and actually perceive themselves, their own bodies, to be much bigger than they actually are. And they perceive the other group to be much weaker.
Azim Shariff adds:
We engage in wars. The question is, does religion enhance your side’s ability to triumph in those wars? And the thing that religion adds is more than any other factor I can think of aside from perhaps family.
Religion allows people to be bound together in a way that allows them to die for and kill for each other. This ability to form very cohesive, very tight coalitions, as well as to introduce sacred values, things that people are willing to fight for beyond all “utilitarian” or “rational” calculus, allows religion to make people better fighters. So, yes, religion does contribute to our warlike nature, but it does so in a very culturally adaptive way.
Shankar Vedantam:
When I think about what will cause people to fight and die, you no longer need religious faith. You can have nationalism. You can have patriotism — people willing to die for the flag.
When it comes to trust, you and I don’t have to belong to the same religion anymore. We can both agree — you can sell a house to me and I can buy a house from you — because we both believe that there are institutions organized by the state that will ensure that you will actually sell the house to me and I will actually give you money for it.
I put my money in a bank every month, and I actually only see a bunch of digits on a piece of paper. But I trust that the bank at some level is actually holding onto my money. And I have absolutely no idea what religion the bankers belong to. Are these all examples of how modern societies have come to essentially displace the need for religion?
Azim Shariff:
Yes, I think so.
In terms of these other -isms that people are willing to fight and die for, it is important to know that the idea of sacred values extends beyond just religious values. There are non-religious things that we sacralize. As soon as you sacralize something, it allows people to fight and die for it, right?
We have a fertile psychological meadow that’s ready to sacralize things. And you just have to find the right key to fit into that lock.
Personally, I don’t take at face value all the ideas defended by the speakers in the episode. As much as they sound very plausible at surface, solid inference in social science and history is very hard — and I haven’t read all their papers yet.
Assuming they are pointing in the right direction, the concept of functional opacity, for instance, should give everyone pause for thought. That humankind may be engaged in such massive collective delusion must be sobering!
If true, is this collective delusion simply accidental? That is to say, a convenient and useful accident at the societal scale that emerged from the faith of individuals. Or is the collective delusion actually necessary for society to function properly? In other words, believers must be deceived as individuals otherwise the whole schema would not be as effective? The fact that there is a conflict between what their theory professes and what religious individuals think they are doing sounds to me as evidence to the argument of an accident.
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