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March 16, 2006

What is a designer doing writing about economics?

What is a designer doing writing about economics? I've faced some variety of this question from the first time I've talked about it publicly, and to be honest I've never had a great answer beyond "it's what I've interested in, it doesn't have much to do with design'.

Often the question is nested inside one about my graduate program, NYU's Interactive Telecommunications Program. What does it have to do with ITP? There are a variety of ways I've tried to answer that. For one no one really knows what ITP is, its an ever evolving experiment in technology education, so it's often easy to just say "why not?" Or I can tell a personal story, I have a range of interests, design, tech theory, physical computing, and ITP is the space where more of them intersect than most. A nomad economics certainly isn't at the core of ITP, but it comes in on multiple peripheries, Art Kliener's study of management and organizations, Douglas Rushkoff's investigations into the pragmatics of consumer choice, Clay Shirky's "network economics", Steven Johnson's emergence, Alex Galloway's protocols... The one answer that almost got me to a real one was originally a throwaway phrase, "economics is the original mediated interaction".

It took a while to make that something clear and cohesive though. It came at one of those moments, I suspect I'm not alone in having them, where you've been studying something for a while, in depth, perhaps in too, and all of a sudden you pull back and say "what is this stuff anyway?"

So what is economics anyway? It's one of those questions that rarely gets bothered to be answered. We all have some sense of it, but economics text books tend to rush past in a page and practitioners are in way too deep to care about such a simple thing. But in a moment of vertigo, I found myself pulling back and needing to answer it.

economics: noun a social science concerned chiefly with description and analysis of the production, distribution, and consumption of goods and services. (Merriam-Webster Online)

The dictionary definition wasn't bad and this one better than some, but it was also unsatisfying, all of them. Some unpacking was in order. A social science means it's concerned with humans, but it's rather telling that most definitions tend to obscure that fact. First and foremost economics is about humans. It's about humans and the "production, distribution, and consumption of goods and services". Now goods and services can roughly be broken down to two more elementary particles, materials and information. And "production, distribution and consumption" can similarly be reduced down to movement and transformation.

Economics then can be defined as the study of the relationship of humans to the movement and transformation of materials and information.


Let that one sit for a second, definitions are important.

Humans, materials, information, the moment I had that definition everything made a little bit more sense, the definition of economics was startlingly familiar, and more than anything else it was nearly identical to how I would define the practice of design. The relationship of humans to materials and information this is exactly where any design practice begins. On a textual level at least design and economics are practically identical!

Of course this isn't true in reality, as disciplines design and economics are radically different, with only rather rare and limited points of explicit crossover. The two disciplines are standing at nearly the exact same intersection, yet they want nothing to do with each other. Quiet honestly they don't even see to realize they are standing at the same place. And more than anything this thought struck me as intensely familiar.

As an undergraduate I studied anthropology. Or at least I started studying anthropology, by the end, while I had learned a few important things, I was mainly just frustrated by it. What had intrigued me about it, made me excited, made me want to charge into the classroom and learn, was how it sat at the juncture of so many disciplines. Biology, language, history, culture, theory, psychology, and yes even occasionally economics and nearly everything else short of physics. What could be a more fascinating and rapturous place than the intersection of these intensely human things?

Except.... well, when I got to that place something was horribly wrong. Here they were, biological anthropologists, psychological anthropologists, linguists, cultural anthropologists, there offices all lining the same hallway next to each other, all standing in the same place. Yet somehow they all were facing away from each other, ignoring each others words, preaching different gospels. As a student I felt completely lost, I wanted nothing more than to sit down at a table and launch a conversation between them all, but it just wasn't happening. Today I would have gotten angry not frustrated, and then I'd set about trying to change things. But back then I just settled on graduating and setting off into the world, leaving anthropology behind, although not necessarily what you could call the "anthropologist's eye".

Today the intersection of anthropology and design is a hot little field, the two go hand in hand it seems sharing the same obsession with humans and their objects and their information. Back then though it was a whole new world for me to become a designer, and after a quick detour through the bond trading floors of Wall Street, I set to work teaching myself the trade. Looking back it's clear I was just tackling the exact same problem from another angle. Design takes a far more pragmatic approach, it starts from the objects and works back and forth with the human side of things, but always ending up with a something as the result. Some of these things are more tangible than others, a hammer or a cellphone, as opposed to the bits of a website, the ink on paper of a poster or the light on a screen of motion graphics. But it's always a thing in the end (although recent events are threatening to change that.) Anthropology has always been about people first, the things are tools to learn more about the people. Economics isn't super concerned with either, but instead tends to focus on the movement between the two, the transactions that occur when people and objects meet in motion.

Transactions is a careful chosen word because it's always been a curious trait of neoclassical economics that while it's always about the movement of goods, services and wealth, it always wants to talk about them statically, in equilibrium. A nomad economics is about the movement, the connections, the circulation between humans and objects, money and information. Call it flow, to use an already overused yet under-appreciated term.

It is also at this point where design is moving ever so slightly closer to economics. In a move rather parallel to the way the "big five" accounting firms moved into consulting, leading design firms, IDEO and frog namely, are pushing towards the consulting business as well. "Design thinking" is the buzzword, but how and why its happening is I think a legitimate story. Consulting is a practice I like to think of as "pragmatic economics". It's concerned with the actual economy, with how firms are run, with how business gets done. Not with models and theories of economy, but with actual practice. And management consulting has for a long time been tightly interrelated with another site of pragmatic economics, accounting. A one point the "big eight" (at the time) accounting firms did just one thing, they came in and they audited the books, they ran the numbers from an outsiders perspective and then left. But coming in from the outside and looking at the numbers gives the account a rather remarkable perspective on how a business gets done. Being able see all the numbers of competing firms sure didn't hurt either, and it was only a matter of time before a significant amount of the accounting firms business came from consulting.

For a long time a designer's job was to make things. And when those things had pages or screens with was to organize information. Make the object, shape the information, cash the check and go. But to properly design a thing, to really do it right requires an intense understanding of the context. How does it get made? Who is the audience? What do they expect? How does it get sold? By whom? Where? Questions that sound a whole lot like economics. The questions might be similar but the approach is radically different. Design in this sense is moving towards another state of consulting, another state of pragmatic economics.

A nomad economics is in many senses a pragmatic economics as well, but it can not be limited solely to it. Instead it needs to reach towards the abstract, towards theory, but in doing so it must remain pragmatic. A pragmatic theory of economics, or better yet pragmatic theories of economics. It is in this space, where business practice meets anthropological understanding, meets the motion and transformation of materials and information that a nomad economics emerges from, evolves from, becomes cohesive. Accounting, anthropology, design, management consulting, materials in motion, information in circulation, this is where we begin, a nomad economics.

Quick while the door is still open...

Would Steven Levitt get into MIT today?

March 06, 2006

the Nomadic Threshold of Money, part 1 (updated)

The idea of non-metric money is about as counterintuitive as you can get. Money after all exists primarily if not solely because it can be calculated. Yet a non-metric, lets call it nomadic, money does exist. Pinning it down of course is a whole other story though...

Lets start with a small experiment. Without looking how much cash are you carrying on you? Or if the answer is currently nothing, how about the last time you went out?

Now count the cash, get an exact figure, down to the pennies. Odds are it's not exactly the same as the first answer is it? Do the math, figure out the difference, this is a very rough indicator of what your own personal nomadic threshold might be. Maybe it's a few pennies, maybe its a few bucks, maybe its a million dollars, in a dream that is.

The nomadic threshold is a phase change, a point where the behavior of money changes, much the way the properties of water transform as it turns from liquid into ice. On one side of the threshold is money as a number, as something you calculate, or at least try too. On the other side is liberation, money that you don't even think about, money whose metric value is just something you might notice in passing as you hand it over. Money you forget is in your pocket, handbag, sock or where ever else you may keep it. Money that's not worth your time to think about, but may well be worth a candy bar or a beer.

For most people the nomadic threshold is far too low. In Williamsburg, Brooklyn there is a bum who hangs out by a freeway exit, begging for change. Walk past him and you'll notice something odd though, the entire sidewalk shimmers with the copper glow of pennies. As the bum collects share change he sorts out the pennies and tosses them on the ground. The pennies lie so far bellow his nomadic threshold he'd rather not even deal them. And if the multitude of "give a penny, take a penny" jars found at cash registers across the country are any indications, plenty of other Americans agree.

Thankfully your own threshold is probably more than a penny, you can probably buy a candy bar or cup of coffee without much of a thought, nor will you need to go to ATM after that purchase, unless you already had need to make that visit. Some people though have much higher thresholds. Prince Jefri of Brunei may well be the most blatant example, his playboy adventures at one point squandered nearly half of his countries fantastic oil wealth on luxuries like a stable of 40 prostitutes kept year round in a London luxury hotel. Odds are he was buying sports cars the way you might by a pack of M&Ms, without much concern as to the cost.

In a classic experiment first conducted over 50 years ago psychologists asked subjects to draw a circle the size of a quarter (an American coin for those of you in other countries), without actually looking at one. What they found was a direct correlation between the size of the drawn circle and the economic status of the subjects. The smaller the circle was the richer the illustrator. The quarters just didn't seem as big in the richer kids minds as they did to the poorer ones. This wasn't exactly the expected result, but its not a particularly surprising one either, money is a much bigger deal when you don't have it than when you do. Money just doesn't mean the same thing to a rich person as it does to a poor one.

While the results were statistically valid, it's important to note they are not an ironclad law. You can't ask people to draw quarter sized circles and then figure out their net worth off that drawing. Some rich people draw huge circles, money is still a big deal for them, while some poor people draw small circles, perhaps they don't care too much about how much money they don't have. Legend has it F.W. Woolworth once kept his secretary overtime for an hour to look for a quarter he had lost in his office. That office was in the tallest building in the world at the time, and Woolworth was one of the country's wealthiest individuals. Still I suppose its shouldn't shock us that a man who built his fortune on "five and dime" stores clearly did not see a quarter as being below his nomadic threshold.

So how does one move a nomadic threshold? Clearly having more money helps. Sometimes it helps to much, there are plenty of stories of lottery winners who find themselves broke and destitute a few years later. A sudden influx of cash into your life or a sudden increase in the numbers in your bank statement can skyrocket your nomadic threshold to a dangerous space. In the case of the unlucky lotto winners they may well have thought they had more money than they'd ever need. A sports car, free drinks for you friends, a trip to Europe... It must be marvelous, until that morning you wake up and realize it's all gone.

If you've ever gotten a large check and then a short while later found yourself wondering "where did it all go?" you've experienced a small version of this first hand. And the answer to the question is simple, it all slipped away beneath your nomadic threshold. And then once you realize it your threshold will come crashing back down to earth, hopefully before you run out of money for the rent.

So money itself can move the threshold, the more money you have the less you need to worry about it, that's pretty much common sense. But money alone can not be the only factor, or else we'd never find a millionaire (from the times when that meant something) on the floor of his office with his secretary looking for that lost quarter. Nor would you have someone like the legendary miser Hetty Green. Adjusted for inflation she may well have been the wealthiest woman ever, yet she lived in the cheapest boarding houses and ate the cheapest meals of beans or pie she could find. She wore the same dress for decades, with various stocks and loans to the city of New York hidden in secret pockets. She owned several railroads, but rode only in her ancient carriage. When her son broke his leg she pulled him out of the hospital out of fear they might charge her for his medical care. He ended up with gangrene and an amputated leg. Clearly money alone can not move the threshold, there is a personal psychological component as well.

Even the stingiest of people have their week points though, Hetty Green's was apparently her dog, who it was only half joked she fed far better than herself. The nomadic threshold moves not just with money itself or within the realms of psychology, but also from place to place, circumstance to circumstance. One of the more pleasant manifestations is vacation, something perhaps you'd like to be taking right now. Vacation is great precisely because it produces circumstances where you do things you'd never do in your day-to-day. Maybe it's lie on the pristine white sands of a Carribean beach, or climb the steps of an ancient Cambodian temple, or maybe its just spending money on things you'd never even consider...

It's a classic tourist moment, your are standing in a store, the owner speaking to in an alien tongue. In your hands is a pile of coins and bills, funny colors, different shapes. How much do you owe her? How much is this stuff even worth? You don't really know and for a second at least you don't really care. You hold your hands out to the owner, and let her pick the right amount out for you. Trusting, hoping or perhaps not even caring if it's the right amount.

Nothing can me more nomadic, more liberating than being able to not care about how much money you are spending. Yet being able to not care is not the same thing as not caring. Hetty Green shows us the stingy side, while lottery winners sometimes end up on what could be called the overconfident side. If you don't care how much money you are spending you might have an enjoyable run, a few days, weeks or perhaps even years of a life in flow. But if you are spending more than you are taking in in the process you just might find yourself lying on the wrong side of the nomadic threshold in the worst way. Perhaps not all nomadic thresholds are created equal. Some are sustainable, no matter how little you think about those purchases below the threshold, they'll never add up to enough to drain your resources away. Others are perhaps dangerous, a nomadic threshold of money that sits too high will inevitably collapse, unless of course and unexpected infusion of money props it up.

A credit card is a tool for shifting the nomadic threshold, often in the wrong direction. It almost certainly was not originally designed as such, but it certainly has taken on the function with a gusto. What's so devious about the credit card is the way it completely divorces the need to calculate from the act of purchasing. You swipe the card, some program on a server across the country runs the numbers and either authorizes or declines. You sign the slip a month later the numbers confront you.

Of course it doesn't force you not to calculate. You could keep a mental note of how much you've run up on the card this month, cross reference it with your household budget and your anticipated income. I'm sure that's what the credit card people would say you should do, and some people probably do something of the sort. But being capable of doing something just is not the same as actually doing it, and problems of this sort are often best addressed through potential and probability. Credit cards create the potential to enter what could be called a false nomadic state of money, and the probability of entering it is high enough for it to be a real issue for a decent amount of people.

A false nomadic state of money is one which is produced via the application of an outside force, a factor independent of you and your money. It is important to note that there is no value judgement to the "false", for say a shopaholic it's probably negative, but for someone like Hetty Green it may well have done her a world of good. There is also no direct correlation between a false nomadic state and a sustainable one, although by looking at both you may well be able to make out at least the beginnings of a value judgement, a false nomadic state that pushes someone into an unsustainable one is, let's say, problematic.

The credit card is only one of many ways to enter a false nomadic state. A smooth salesman, a couple beers, an attractive member of the sex of your choice, so many things can do the trick. Sometime the item itself, the object of purchase, can do it. Maybe it "calls you", "speaks your name", maybe you need to have it. Maybe you've done all the calculations and its too much, yet somehow when you come back to your senses you've pulled the trigger, you own that beautiful thing, at the expense of your bank balance.

March 05, 2006

Critical Traps

The more I present and write about this nomad economics, the more convinced I am that one of the core challenges is the escape from what could be called the critical trap. It's all too easy to try and define what it is in relation to existing reference points, to present the ideas in contrast to existing ones, neoclassical economics, post-autistic economics, marxism, behavioral economics. But in doing so you are already half way into the trap. The conversation is no longer about the subject at hand, but instead is cleaved in half. It's about the subject still, if you are lucky, but it also about the contrasting object, and objects have gravity, distortive gravity.

Few things can be as damaging to a creation, particularly a young creation, as getting sucked inside the gravity of another. The idea itself might get lost, forgotten, surrendered to the forces. Or the idea might change, warp, become as much about the object it opposes as it does about itself. There is something of a cherished notion of intellectual combat, idea versus idea, in western thought, and it is not without merit. But it is not the only way. Concepts are rarely as oppositional as they are made out to be. A nomad economics does not need to take space from the neoclassicals or marxists in order to exist, it can happily swarm around them, find new grounds and continue to grow. There are points of course were conflicts may rise up, but to get caught up, to focus too hard on those points, that is a path away from creation and towards the defeats of conflict. And there are many defeats in conflict.

It is not that all critique is bad, used properly in the right circumstances it can work wonders, transform good ideas into bad and separate the meat from the flab. But like a sharp blade it's uses vary tremendously. All to often nowadays critique resembles something more like a battleax or broadsword than the chef's knives and surgeon's scalpels we need. A nomad economics needs to grow not be defended, to learn not to critique, evolve onward not hold its ground. A nomad economics is not a reactionary economics, although indeed it sometimes looks to the past for insights.

I can't deny having certain critiques of neoclassical economics and marxist political economy, critiques I find valid and could well serve as justifications for the need for a nomad economics. In the short run too, these critiques seem to work rather well a explaining my position. But each critique in the end is as much an attack on a nomad economics as it is on its "opponents". Needless to say these are needless attacks, for a nomad economics is strong enough to grow on its own, to develop without fighting, to evolve, to create. To multiply possibilities, a better world is possible if we can just avoid the critical traps...