Tag Archives: creativity

The Art of Economics

What can art teach us about economics?

Portrait of Joseph Haydn. Source: Royal College of Music

People often discuss the economics of art – how supply and demand can raise the prices of Renaissance or Impressionist works to insane levels, or how ironic it is that great paintings can’t be sold for much while the artists are still alive. But art has something else to tell us about the productive process. There’s a lot that we just don’t understand.

For example, in history we see artistic centers grow and develop – like 5th century BC Athens, or 15th century Florence, or 18th century Vienna – whose artistic achievements have endured for centuries and have had a lasting cultural impact. These communities weren’t highly populous. They had, at their peak, perhaps 100,000 people. But they produced sculpture and paintings and music that billions have enjoyed over the centuries and that have retained an enduring market value.

“Water Lilies” by Claude Monet. Source: Wikipedia

Now, naïve theories of economics say this should not be possible. They didn’t design a more efficient plow or invent anything that improved our economic productivity. Economic value is supposed to reside in the ability to produce a stable and growing cash flow. But there’s something different about the arts where small numbers of highly gifted people can come together in a white-hot center of creativity and innovation that explodes outwards to change the world – arguably more than assembly lines and smart phones.

If we’re trying to figure out what makes Silicon Valley work or how to turn around Detroit or how to maintain London as a financial hub in a post-Brexit UK, we should try to understand Pindar’s Athens or Monet’s Normandy or James Joyce’s Dublin. Because before we can manage wealth, someone has to create it. And creation is a miracle.

Douglas R. Tengdin, CFA

Will Robots Eat Our Jobs?

“I’m sorry Dave. I’m afraid I can’t do that.”

HAL 9000 Interface. Illustration Grafiker61. Source: Wikipedia

That’s what the HAL 9000 computer says to Dr. David Bowman when he tells HAL to “Open the pod-bay door.” HAL had gone rogue and Bowman was in an EVA pod outside the spacecraft.

And that’s what a lot of people are worried about in our current robotic revolution. Robots have replaced workers in a whole host of industries, especially in manufacturing. Look at the way factories are depicted in movies from the ‘80s: they seem almost quaint in the way they depict a factory floor, with installations and product finishing being done by hand. Robots have been taking over a lot of repetitive manual labor for a long time.

But now software and mobile technology is proposing to automate what used to be safe, middle-class service jobs. Robo-advisors are impacting the investment management industry; write-bots now author company press-releases; driverless cars and on-demand ride-sharing threaten to upend the taxicab industry. Already, the value of taxi medallions in New York City has fallen by almost 50%.

Taxi medallion prices. Source: AEI

But should we be alarmed by the rise of the machines? Are we nearing some sort-of 2001-like outcome, where AI and automation take over? Alarmism is counterproductive. There’s no shortage of work that can be done only by people right now – work that involves planning, problem-solving, creativity, leadership, and teamwork. And computers are far more likely to aid, rather than take over, those tasks.

An analogy can be seen in modern chess. For decades people were obsessed with whether a computer program could beat a grand master. In 1997 world champion Gary Kasparov lost to IBM’s program Deep Blue in a highly publicized match-up. But Kasparov went on to invent “Advanced Chess,” in which humans and computers cooperate rather than compete. In an Advanced Chess game, the humans are in charge during the entire match and are free to play any move, but the competitors get analysis and suggestions from fast PCs of equal hardware strength. Advanced Chess players can typically beat both grandmasters and computer programs, because they optimize what humans and computers do best.

In the same way, people and machines can cooperate and be more productive than either human labor or automated machines could be working alone. Komatsu and Scania are making driverless trucks to transport rubble in open-pit mines, overseen by a control center that manages a fleet. The controllers are far more productive and in safer work environments than truck operators used to be.

Source: Komatsu

Transitions matter, and the factories of the late 19th century gave rise to populism and revolutions in the early 20th century. But HAL isn’t taking over our spaceship – at least, not yet. All the blacksmithing jobs that were lost when cars came onto the landscape were more than replaced by car-makers and auto repair shops. The marketplace can sort this out, if it’s allowed to. The important thing to remember about artificial intelligence is that it’s artificial. Real productivity growth requires creativity. And that’s the most human thing about us.

Douglas R. Tengdin, CFA

Creativity, Inc.

Why do our best ideas often come to us in the shower?

Photo: Jonathan Sautter. Source: Pixabay

Creativity is a funny thing. Creative people are at the heart of technological innovation, whether it’s science, engineering, or finding the right music to energize your workout. Ancient cultures saw inspiration as a gift from the gods, a literal bolt from the blue. That’s why Homer and Hesiod start their great works with a prayer to the Muse. But creativity is also a disciplined process, where people have to exercise their craft and the focus on the nuts and bolts of writing, drawing, or coding. Which is it?

Increasingly, scientists who study the creative process believe that it’s both. Often focusing hard on a problem yields nothing but frustration. It’s like banging your head against a wall. What you need to do is go for a walk in the woods—although that may only give new insight into tree roots and birds’ songs. It’s in the transition times, between work and play, where people frequently get their “aha” moments. It helps to be in a good mood, to be engaged in a routine task like bathing or doing the dishes, and to have your mind primed with fresh content. But then, especially if you’re just a little tired, the pieces can come together.

Setting up the proper conditions for original ideas is like arranging lightning rods for your brain. But in order to get that jolt of mental energy, the weather still has to cooperate.

Douglas R. Tengdin, CFA

Chief Investment Officer

Portrait of an Innovator

How do we innovate?

Our economy runs on creativity and innovation. Innovation created light bulbs. It inspired the internet. It allows new ideas to flourish, like transistors, integrated circuits, and laser beams. But where does innovation come from?

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Inventor Art Fry with Post-It note. Source: Wikipedia

Innovators often feel guilty, because they didn’t really do anything. They just connected a couple of ideas and saw something new. It seemed obvious at the time. A specific problem went searching for a solution—and that solution was adapted and generalized.

A great example is the post-it note. In 1968 a scientist at 3M—makers of Scotch Tape—was trying to develop a super-strong adhesive. Instead, he accidentally created a reusable, pressure-sensitive, low-tack bonding agent. The new product went practically undeveloped within the company for five years until another scientist—Art Fry—used it to anchor bookmarks in a hymnbook he used in the church choir. Now 3M sells over $1 billion of sticky notes per year in over 100 countries.

The best innovations are often staring us in the face. People just need the freedom to tinker, experiment, and fail—because a new recipe never comes out perfect the first time. Bill McKnight, an early leader at 3M, said that if you put fences around people you get sheep—and sheep never come up with new ideas. What innovators need is room.

Douglas R. Tengdin, CFA

Chief Investment Officer

Creativity, Inc.

Why do our best ideas often come to us in the shower?

Creativity is a funny thing. Creative people are at the heart of technological innovation, whether it’s science, engineering, or finding the right music to energize your workout. Ancient cultures saw inspiration as a gift from the gods, a literal bolt from the blue. That’s why Homer and Hesiod start their great works with a prayer to the Muse. But creativity is a disciplined process as well, where people have to exercise their craft and the focus on the nuts and bolts of writing, drawing, or coding. Which is it?

Increasingly, scientists who study the creative process believe that it’s both. Often focusing hard on a problem yields nothing but frustration, while going for a walk in the woods may only give new insight into tree roots and birds’ songs. It’s in the transition times, between work and play, that people frequently get their “aha” moments. It helps to be in a good mood, to be engaged in a routine task like bathing or doing the dishes, and to have your mind primed with fresh content. But then, especially if you’re a little tired, the pieces can come together.

Setting up the proper conditions for original ideas is like arranging lightning rods for your brain. But in order to get that jolt of mental energy, the weather still has to cooperate.

Douglas R. Tengdin, CFA

Chief Investment Officer

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