Why knowledge and ignorance are not always moving in opposite directions

Last night, the news showed a group of climate change activists blocking traffic in Oxford Circus causing havoc, while a tv commentator was saying that if instead of disturbing the shoppers, which did not improve climate, the protesters had instead persuaded the shoppers to stop eating meat they would be contributing to improve the climate.

The level of silliness shown by the protesters and the commentator could be looked at with benevolence and a smile if they were from a primitive tribe dancing or fasting to ask the gods for rain. But, in XXI London, where most population is well educated and there are some top universities this seems at odds with normal expectations.

Unfortunately, this is not an isolated case and we see a rise of such phenomenon worldwide in many other spheres. For instance, in politics one of the most advanced democracies elected one of the stupidest presidents. But, interestingly, this president now plays the role of the child shouting “the king is naked” in relation to the climate change activists.

So, why aren’t science and ignorance moving always in opposite directions?

There are at least two reasons for that.

First, just because we now know how to develop models showing how the movement of a butterfly in Asia can cause a hurricane in the Caribbean, it does not follow that there is significant chance of that happening. That is, simple minded people are prone to confuse theoretical possibilities with likely occurrences.

Second, humans seem to have a need to stand out in a crowd. This is now exacerbated by social media. And, if someone gets recognition by an exotic behaviour or stance others immediately follow a similar conduct. Again, politics gives us a good example. The rise of a silly Trump was not followed by the rise of a wise Democrat but by the emergence of an equally foolish representative Ocasio-Cortez.

Should wise people despair because we live in such a world? Of course not. The voyage of humankind from primitive predators to civilized people is a long journey on a tortuous road. We simply need to avoid crashing out while enjoying the diversity.

Fake news: To ban or not to ban?

Following the revelation that Cambridge Analytics used Facebook to define personal profiles to be targeted in the Trump election campaign, there are now “calls for more transparency on the internal algorithms that internet platforms use to promote stories, limits on the “harvesting” of personal information for political purposes, and disclosure by tech companies of who funds “sponsored content” on their websites (FT, 31-3-2018)”.

The emergence of accessible and free (cheap) information through social media created a situation similar that in the XIX Century when cheap printing made a daily occurrence the proliferation of all kinds of pamphlets promising miracles or disasters. Like many today believe without reserve what is said in the press or shown on TV, our ancestors believed in the written word.

Obviously, like cheap printing, social media attracts all types of crooks and loonies as well as politicians. What is different this time is that state-sponsored organizations are taking a greater advantage of the naivety of social media users. But even this is not entirely new. In the past foreign governments have also sponsored radio and press sympathetic to their propaganda.

Fortunately, our ancestors did not impose a ban on printing otherwise we would live in a different world. They simply waited patiently that the general public learned to distinguish the fake from the true and that a more trustworthy press emerged.

Likewise, we should resist any bans on social media. Otherwise, we would end up as in China, Russia or Turkey where only social media acceptable to the respective governments is tolerated.

This is not equal to a complete lack of regulation. Indeed, a soft type of regulation similar to what applies to the advertising industry is more than enough. One should distinguish between what is an acceptable exaggeration, or a non-harmful lie, from those that should give grounds to liability.

For the later, one needs to have rules on secrecy and sponsored messages that strike the right balance between privacy and responsibility.

Likewise, in what concerns the right to use personal information to build profiles and marketing strategies one should not go beyond what now distinguishes what is proprietary or public information used in market studies.

Finally, in what concerns forcing the social-media to provide tools that allow its users to protect against lack of privacy or to avoid spam from fake news, these are necessary but should be solved by business competition. It is desirable that more social networks other than Facebook flourish to provide less or greater degrees of secrecy.

For instance, among my Facebook friends there is one keen to share theories of conspiracy as well as Putin’s and communist propaganda. Now I have only two options, either to block him completely or to block one by one the sites he shares. However, it makes sense for Facebook to add an extra option to block everything that he shares. But this should not be enforced by regulation. I simply need to wait that Facebooks realizes that it risks losing members like me and come up with a solution out of their business sense.

In choices between regulation and liberty one should generally err on the liberty side. So, let us not rush into too much regulation of the social media.

Globalization and winner-takes-all

The globalization of markets and capitalism has increased the opportunities for businesses with a winner-takes-all model. Such business are characterized by high cost of entry once a dominant player has acquired the bulk of the market. Their rise is explained by the benefits of one-stop-shop found in many services.

For instance, in social media users value the opportunity of having all their friends in the same platform (e.g. Facebook). Typically the providers of such services compete by offering a loss-making free service until they manage to establish a quasi-monopoly. Once they have achieved that, they can monetize their dominant position through advertising or by other means. This is not a natural monopoly nor is it protected by any entry barriers other than capital resources.

This strategy is only possible because of the existence of venture capital funding willing to bet on the various contenders for the market, but once one has been established as dominant it is no longer profitable to try to dislodge him.

Similar cases occur when, due to locational or brand recognition advantages, some businesses rely on the captivity of the final consumer to transfer to their suppliers any demand adjustment costs. These situations occur in industries as disparate as publishing and groceries. For instance, during economic crisis supermarket chains force their suppliers to cut prices or offer discounts to sustain consumer demand.

A somewhat similar situation, but less stringent, occurs in the so-called 20/80 sectors where 20% of the producers have 80% of the market and vice versa. Here, removing the entrenched incumbents is difficult because the market may overvalue them and the entry costs are too high. It usually takes a long period and some new technology to achieve that.

These conditions are more common in global businesses ranging from soft drinks to computers. For instance, Microsoft dominance of operating systems was only challenged by the arrival of the smartphones and tablets.

With the globalization of capitalism these conditions become more common but once the globalization process has been completed their number will subside.

Therefore, overall, globalization and winner-takes-all business models are not lethal capitalism and must be seen simply as a temporary nuisance to market capitalism.