Simultaneous buying and selling makes the economy extremely efficient. But in our overconnected world, it may also force us into a race to the bottom.
If you want to succeed in an Internet-driven, overconnected world, you must arbitrage.
If you don't, you will become prey to those who do. But in an Internet-driven,
overconnected world, arbitrage may also force us into a race to the bottom.
makes the economy extremely efficient. In the commodity world, arbitrage can be
a miraculous transaction, yielding an infinite rate of return. The arbitrager
buys a commodity in one market and sells it instantly at a higher price in
another. In a perfect arbitrage, the arbitrager collects the money from the
sale before paying for the original purchase. For example, sell a bushel of
wheat for $7.00 and collect the money instantly; buy the bushel in another
market for $6.75 and pay later.
Of course, perfect arbitrage seldom exists. Speculators quickly root out opportunities,
and prices converge. The sale price, for example, drops to $6.85 and the
purchase price rises to $6.84. Of course, the sale price could drop below the
purchase price to, say, $6.75, and the arbitrager would lose 9 cents on every sale.
In the past, the term "arbitrage" was used in conjunction with financial and
commodity transactions, but now it is used more broadly. For instance, people
talk about arbitraging labor costs, referring to using cheap labor in a distant
location to substitute for more expensive local labor.
Successful arbitrage depends on strong and efficient connections. You have to be able to move products from where you buy them to where you sell them. Transaction costs
and other logistics must be kept to a minimum. And in order to find the best
arbitrage opportunities, you have to have good information about markets.
This is where the Internet comes in. Not only does it reduce the cost of
finding opportunities, but it greatly increases the efficiency of doing so. As
a result, the universe of arbitrage opportunities has expanded. Name something
that can be bought or sold, and there may a way to arbitrage it: stocks, bonds,
commodities, precious metals, labor costs, taxes, regulatory environments,
credit card debt, retail shopping experiences.
In 2004, commenting on slow job growth in the U.S., Stephen Roach of Morgan Stanley cited "global labor arbitrage" as the main
reason growth had slowed. Roach predicted that global labor arbitrage was
likely to be an enduring feature of the economy. Our experiences over the past
seven years have certainly proven him right.
Most people might think Roach was referring to factory workers and customer
support workers in India who answer calls in heavily accented English. But
because of the power of the Internet, information-intensive jobs of almost any
type are subject to labor arbitrage. Teleradiology Solutions, a company located in Bangalore, reads X-rays for patients in the U.S. and Singapore. Jobs we thought
were safe are safe no longer. More and more companies are employing engineers
and programmers in India, Russia, and the Balkans. Businesses must either
arbitrage and succumb to the unrelenting pressure to cut costs or face the
prospect of becoming uncompetitive.
Non-traditional arbitrage lurks in some surprising places. Consider retailing. Physical retailers add value by providing a retail experience. Some people enjoy shopping. One of the most important services retailers provide is the opportunity to experience the merchandise. Test drive a Ferrari. Try on a pair of jeans. Then go to an online retailer and arbitrage out the added value and the local taxes as well. Many of us do this without giving it a second thought. We find what we want at the shopping center and then rush home to buy it on Amazon. If we're shameless, we do our online shopping on our smart phone a few seconds after leaving the store.
In financial markets, arbitrage has run rampant. Transaction costs facilitated by
the Internet have plummeted. It has become possible to collect massive amounts
of information inexpensively. As computation power has increased and data sets
have grown, computers can now uncover more and more arbitrage opportunities.
traders use computers to scan the market to scout out the tiniest mispricings. If
a computer can discover an index made up of a few hundred stocks that is priced
too high, traders sell the index short and buy the stocks, making pennies per
share on billions of shares--pennies that add up to hundreds of millions in
profits. Is it any wonder that high-frequency trading now accounts for nearly two
thirds of the trading volume?
arbitrage adventures aren't just for the big guys. I was amazed to learn about
credit card arbitrage. Get a low-interest introductory loan for signing up for
a new credit card, invest that money in a high-interest account, and pray.
The Internet makes it easier to get around financial regulations and circumvent jurisdictions. If regulators in the UK or USA get too tough, the Internet can help: when data flows so efficiently, it's a lot easier to move the regulated entity from London or Wall Street to a more understanding jurisdiction.
If I can arbitrage a growing number of financial transactions, both low-skilled
and high-skilled jobs, and then throw in retailing, what's left? A lot, as it
turns out. Ask people in Hollywood about movies and recordings. Talk to the
newspapers. As bandwidth increases, opportunities to arbitrage will continue to
grow as well. Maybe the only things that will be safe are meals in restaurants
and trips to the hair salon.
Arbitrage is an economist's dream. It squeezes out inefficiency. It creates an intensely price-competitive world. Consumers benefit big time, because they have access to high quality goods at low prices.
But arbitrage has its downside as well. I used to love to travel. I even looked
forward to the flight. I could sit in peace and quiet and catch up on my
reading. Today I can fly for less money, but I also fly less. The qualitative
experience is so poor that it has reduced my interest in traveling.
Price is one of the most powerful motivators known to humankind. Nobody wants to pay
more. When the focus is exclusively on price, qualitative aspects often suffer,
and in many situations that is too high a price to pay. If only arbitragers could find a way to squeeze out
costs while maintaining quality. Now that
would be the perfect arbitrage.="http:>
A Hillary Clinton presidential victory promises to usher in a new age of public misogyny.
Get ready for the era of The Bitch.
If Hillary Clinton wins the White House in November, it will be a historic moment, the smashing of the preeminent glass ceiling in American public life. A mere 240 years after this nation’s founding, a woman will occupy its top office. America’s daughters will at last have living, breathing, pantsuit-wearing proof that they too can grow up to be president.
A Clinton victory also promises to usher in four-to-eight years of the kind of down-and-dirty public misogyny you might expect from a stag party at Roger Ailes’s house.
You know it’s coming. As hyperpartisanship, grievance politics, and garden-variety rage shift from America’s first black commander-in-chief onto its first female one, so too will the focus of political bigotry. Some of it will be driven by genuine gender grievance or discomfort among some at being led by a woman. But in plenty of other cases, slamming Hillary as a bitch, a c**t (Thanks, Scott Baio!), or a menopausal nut-job (an enduringly popular theme on Twitter) will simply be an easy-peasy shortcut for dismissing her and delegitimizing her presidency.
The talk-radio host claims that he never took Donald Trump seriously on immigration. He neglected to tell his immigration obsessed listeners.
For almost a decade, I’ve been angrily documenting the way that many right-wing talk-radio hosts betray the rank-and-file conservatives who trust them for information. My late grandmother was one of those people. She deserved better than she got. With huge platforms and massive audiences, successful hosts ought to take more care than the average person to be truthful and avoid misinforming listeners. Yet they are egregiously careless on some days and willfully misleading on others.
And that matters, as we’ll come to see.
Rush Limbaugh is easily the most consequential of these hosts. He has an audience of millions. And over the years, parts of the conservative movement that ought to know better, like the Claremont Institute, have treated him like an honorable conservative intellectual rather than an intellectually dishonest entertainer. The full cost of doing so became evident this year, when a faction of populists shaped by years of talk radio, Fox News, and Breitbart.com picked Donald Trump to lead the Republican Party, a choice that makes a Hillary Clinton victory likely and is a catastrophe for movement conservatism regardless of who wins.
Practices meant to protect marginalized communities can also ostracize those who disagree with them.
Last week, the University of Chicago’s dean of students sent a welcome letter to freshmen decrying trigger warnings and safe spaces—ways for students to be warned about and opt out of exposure to potentially challenging material. While some supported the school’s actions, arguing that these practices threaten free speech and the purpose of higher education, the note also led to widespread outrage, and understandably so. Considered in isolation, trigger warnings may seem straightforwardly good. Basic human decency means professors like myself should be aware of students’ traumatic experiences, and give them a heads up about course content—photographs of dead bodies, extended accounts of abuse, disordered eating, self-harm—that might trigger an anxiety attack and foreclose intellectual engagement. Similarly, it may seem silly to object to the creation of safe spaces on campus, where members of marginalized groups can count on meeting supportive conversation partners who empathize with their life experiences, and where they feel free to be themselves without the threat of judgment or censure.
The San Francisco quarterback has been attacked for refusing to stand for the Star Spangled Banner—and for daring to criticize the system in which he thrived.
It was in early childhood when W.E.B. Du Bois––scholar, activist, and black radical––first noticed The Veil that separated him from his white classmates in the mostly white town of Great Barrington, Massachusetts. He and his classmates were exchanging “visiting cards,” invitations to visit one another’s homes, when a white girl refused his.
“Then it dawned upon me with a certain suddenness that I was different from the others; or like, mayhap, in heart and life and longing, but shut out from their world by a vast veil. I had thereafter no desire to tear down that veil, to creep through; I held all beyond it in common contempt, and lived above it in a region of blue sky and great wandering shadows,” Du Bois wrote in his acclaimed essay collection, The Souls of Black Folk. “That sky was bluest when I could beat my mates at examination-time, or beat them at a foot-race, or even beat their stringy heads.”
Which is a different way of asking: Can a bot commit libel?
Facebook set a new land-speed record for situational irony this week, as it fired the people who kept up its “Trending Topics” feature and replaced them with an algorithm on Friday, only to find the algorithm promoting completely fake news on Sunday.
Rarely in recent tech history has a downsizing decision come back to bite the company so publicly and so quickly.
Like a little white Lazarus with red eyes, the paralyzed mouse was walking again.
A few days earlier, the mouse had been sprawled on an operating table while two Chinese graduate students peered through a microscope and operated on its spine. With a tiny pair of scissors, they removed the top half of a fingernail-thin vertebra, exposing a gleaming patch of spinal-cord tissue. It looked like a Rothko, a clean ivory rectangle bisected by a red line. Cautiously—the mouse occasionally twitched—they snipped the red line (an artery) and tied it off. Then one student reached for a $1,000 scalpel with a diamond blade so thin that it was transparent. With a quick slice of the spinal cord, the mouse’s back legs were rendered forever useless.
A new anatomical understanding of how movement controls the body’s stress response system
Elite tennis players have an uncanny ability to clear their heads after making errors. They constantly move on and start fresh for the next point. They can’t afford to dwell on mistakes.
Peter Strick is not a professional tennis player. He’s a distinguished professor and chair of the department of neurobiology at the University of Pittsburgh Brain Institute. He’s the sort of person to dwell on mistakes, however small.
“My kids would tell me, dad, you ought to take up pilates. Do some yoga,” he said. “But I’d say, as far as I’m concerned, there's no scientific evidence that this is going to help me.”
Still, the meticulous skeptic espoused more of a tennis approach to dealing with stressful situations: Just teach yourself to move on. Of course there is evidence that ties practicing yoga to good health, but not the sort that convinced Strick. Studies show correlations between the two, but he needed a physiological mechanism to explain the relationship. Vague conjecture that yoga “decreases stress” wasn’t sufficient. How? Simply by distracting the mind?
His latest ugly truth came during a Bloomberg TV interview last Friday, when he said George W. Bush deserves responsibility for the fact that “the World Trade Center came down during his time.” Politicians and journalists erupted in indignation. Jeb Bush called Trump’s comments “pathetic.” Ben Carson dubbed them “ridiculous.”
In the name of emotional well-being, college students are increasingly demanding protection from words and ideas they don’t like. Here’s why that’s disastrous for education—and mental health.
Something strange is happening at America’s colleges and universities. A movement is arising, undirected and driven largely by students, to scrub campuses clean of words, ideas, and subjects that might cause discomfort or give offense. Last December, Jeannie Suk wrote in an online article for The New Yorker about law students asking her fellow professors at Harvard not to teach rape law—or, in one case, even use the word violate (as in “that violates the law”) lest it cause students distress. In February, Laura Kipnis, a professor at Northwestern University, wrote an essay in The Chronicle of Higher Education describing a new campus politics of sexual paranoia—and was then subjected to a long investigation after students who were offended by the article and by a tweet she’d sent filed Title IX complaints against her. In June, a professor protecting himself with a pseudonym wrote an essay for Vox describing how gingerly he now has to teach. “I’m a Liberal Professor, and My Liberal Students Terrify Me,” the headline said. A number of popular comedians, including Chris Rock, have stopped performing on college campuses (see Caitlin Flanagan’s article in this month’s issue). Jerry Seinfeld and Bill Maher have publicly condemned the oversensitivity of college students, saying too many of them can’t take a joke.
Former U.S. Secretary of Education Arne Duncan examines the issues at the heart of the charter-school debate.
In the field of education, success is too often an orphan while failure has many fathers. The stories of the high-performing charter-school networks featured in Richard Whitmire’s important new book, The Founders: Inside the revolution to invent (and reinvent) America’s best charter schools, provide a welcome antidote to the pernicious notion that high-performing schools for disadvantaged students are isolated flukes, dependent on a charismatic educator or the cherry-picking of bright students. Whitmire’s account reveals the secret of the sauce: What is it that schools can do at scale for children to close achievement gaps, even in the face of the real burdens of poverty?
As the CEO of the Chicago Public Schools, and later as the U.S. Secretary of Education, I had the good fortune to visit dozens of gap-closing charter schools, including many of the charter-school networks featured in Whitmire’s account. I always came away from those visits—as I do when I visit any great public school—with both a sense of hope and a profound feeling of respect and gratitude for the school's educators and school leaders.