Ties

As mentioned a couple of days ago, I have been reading Enterprise 2.0 by Andrew McAfee and been inspired to get onto Facebook and WordPress (well, blogging in general; I just settled on WP). I am reading the book as part of the course requirement for my CIS class in the W. P. Carey MBA program. However, I find many of his points to be intriguing from a personal aspect in addition to his points on addressing issues inside a firm. For me, the important theme is Ties.

No, not this tie.

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Ties, as in the bond between people. Those that know me know I am very introverted. It takes a lot of energy for me to be around others. I generally also feel very uncomfortable in social settings. Its is not that I don’t care or that I am uninterested, but that is saps the energy out of me.

McAfee discusses research on social ties has indicated a correlation between the size of an animal’s neocortex and the number of social ties it can manage successfully. For humans, this number is around 165 +- 65.

Also, these ties have different strengths and serve different purposes. Those that are in our “inner” circle are our strong ties. Being strong, there is no need for bridges to keep the tie close.

There are also weak ties.  These are aquintances or formerly strong ties. These ties can be difficult to maintain due to many factors that contribute to them not being strong ties. Distance, time, and introversion, as well as many others, are a couple factors that keep these ties from becoming strong. Facebook helps people maintain those weak ties through status updates and broadly distributed messaging.

Next, there are potential ties. These ties span a “structural hole”. There exists some cause that needs a bridge in order to span across. Structural holes can be spanned by individuals within both non-intersecting networks.In addition, potential ties can become strong or weak ties through mutual interest via Web 2.0 applications, such as blogging. Viewed another way, when people search for information on the internet, they will find lots of information, but how valuable is it? But, if people search for other people who have information, then ties are created and the information possessed can be tailored to the searcher’s need.

For me, these simple principles have helped me to see how Web 2.0 applications, such as Facebook and blogging, can help me maintain my strong and weak ties, bridge the structural holes that pop up (due in no small part to my introversion) and build new ties that lead to mutual benefit. That I am a technology buff and enjoy the non-social aspects of these applications is icing on the cake.

*(Wal-Mart reserves all rights to this image in accordance with their Terms of Use)

Rationality

Several weeks ago, my economics professor described his view on rationality in the context of Keynesian vs. Austrian economics. Rationality, he said, meant that individuals use the information they posses to make decisions. Because individuals makes decisions in their self-interest, all decisions are rational. He contrasted that stance with Keynesian view that people do not make rational decisions, and thus, someone would know what is best for someone else.

The discussion on rationality is important when discussing the role in government intervention in our lives through tax, fiscal, and regulatory policy. The championed analogy is the broken window fallacy. For the baker, fixing the window is not the best use of his/her money. Yet, the baker is now forced to spend this money to fix the store window. Therefore, even though his/her friends console the baker that the spent money will do good for the community (the “seen” effect), they do not realize what better purposes the baker could have put that money (the “unseen” effect).

This is applied to government intervention in lives where taxation and regulations are forced upon the governed dictating how money is spent. This is the “seen” effect. Further, the government must be taking the arrogant stance that they, or most likely a small, but powerful lobby, know best how we should spend our money. 

The support for this view of rationality is based on the perceived arrogant view of the opposing view of rationality; that someone could know what is best for someone else. Austrians dismiss the Keynesian view of rationality and take the opposing stance. All decisions are rational ex ante. Viewing the results of the decision and weighing rationality ex post adds information not available at the time the decision was made. Therefore, this additional information is irrelevant to making the decision.

It so happened that this discussion occurred a couple of days after the shooting in Tuscon. The question: Was the shooting rational?

Yes, according to my professor. The shooter had information available to him and made a decision that the best use of his money was to buy a gun with some ammunition and then shoot others. Any evaluation of his decision ex post is just Monday-morning-quarterbacking.

Beyond this definition though is the implication that the information used to make the decision is not necessarily relevant to the choice. Making a choice vs. making a different choice is solely a decision on the best allocation of resources according to the individual making the choice. Since any amount of information may be discarded due to individual biases, the additional information gained ex post is not necessarily used to make the next decision ex ante.

Thus, the view of rationality in Austrian economics is boiled down to biases. The view of rationality in Keynesian economics is boiled down to arrogance. Which one is right?

Do I tell my kid how he should be making certain choices or not? Do I know better than him, or not? Are some people more knowledgable or wise than others? I certainly think that Austrian view is far too passive. Similarly, the Keynesian view is probably too extreme. I expect that on very narrow and clearly defined decisions, a central authority could specify decisions. For example, “Thou shall not murder.”

New to Blog

After resisting blogging for so long, I have come to realize how blogging helps to build bridges with individuals we might not otherwise be able to connect with.

This insight was a result of reading Enterprise 2.0 by Andrew McAfee. I have not completed it, but the information thus far flows well. While I do not agree with all points, I agree with the underlying premise the social networking is not just for extracurricular communication that I tend to shy away from.

Let us see how useful it is to me!