Optimal Illusions: The False Promise of Optimization
Hello! Welcome to Slate Money, your guide to the business and finance news of the week.
I'm Felix Hammond of Axios. I'm here with Emily Peck of Axios.
Hello, hello.
Elizabeth Spires of Slate and the New York Times and places like that.
Hello.
And we have hand-rolled a very less than optimal episode of Slate Money this week.
And don't take that the bad way, take that the good way.
We have a special guest this week, Coco Kromy. Coco, welcome.
Thank you. Glad to be here.
Introduce yourself. Who are you and what book are you plugging?
Well, I happen to be plugging my own book this week.
It's called Optimal Illusions. It's out on Tuesday, September 12th,
and it's about how optimization became our modern gospel and the ways in which it's failed us.
So this is a wonderfully sort of meta episode of Slate Money because one of the things we do on
Slate Money is we use all manner of efficient modern technology to put this show together in a way
that people can be all over the planet and record it. And you, Coco, are on an island in the
Pacific Northwest with a bunch of less than optimized computer hardware, which we had to get
working. And it took a minute. So apologies if they're slightly weird audio, but it's partly
because of suboptimal recording devices. We're going to have Coco talking about her book and
artificial intelligence. We're going to have a conversation about China.
Without Coco, we're going to talk in Slate Plus about the city of Birmingham in the UK and
basically the whole question of whether and how women will ever be able to get
recompense for decades of being paid less than men coming up on Slate Money all about de-optimization.
So Coco, you have written what I thought was going to be a sort of hard charging manifesto
against optimization. I'm like, I hate optimization. This is what I want to read. Turns out to be a
bit more sort of elusive and literary and discursive. But maybe that's just right. Maybe like the
whole point about being against optimization is that we don't just get, you know, create these
beautifully linear arguments that come that land perfectly at a certain point. But in fact,
what we just need to do is get in our cars and drive around the country and wind up on our island
and like just discover other ways of thinking about the world. Yeah, well, I certainly wouldn't
recommend that as a practical end goal for most people, although it worked for me. I appreciate
you actually haven't read the book. Some of my interviewers haven't and I get immediately accused
of being a Luddite, which I refute that categorization. Well, I mean, we've known each other for many
years and we used to correspond from your MIT.edu address. And I'm not going to accuse anyone with one of
those email addresses of being a Luddite. Although I think when we first met Felix, I did have a
flip phone. So, and it wasn't that long ago. But yeah, I mean, my understanding of the Luddites is
that there was a decidedly political and activist bent to their beliefs. And I put my kind of
technological or semi slower semi anti technological preferences more in the aesthetic category rather
than the political one. I like Felix's question. Coco, so I'll ask it. Maybe I'll try and ask it
another way, but like the way to write a book that's sort of in opposition to optimization is to take
a more literary style to it or not to come out swinging with a manifesto, but to really sort of
explore different ideas and look at different areas where optimization has maybe not worked out.
You're looking at the food system and Amazon, you know, building not a warehouse.
distribution center. Yeah, I mean, can you talk a little bit about that? I mean, how do you optimize
writing a book when you're writing in opposition to optimization? I mean, one of the things I talk
about a bit later in the book is Silicon Valley's approach to the overreach of optimization,
which is to kind of seek to de-optimize in an optimal way. And obviously, I have
problems with that. So yeah, I think I was, you know, pushed by editors and so on and so forth
to be a little bit more prescriptive in, you know, what is the solution to optimization? And the truth
is I don't know that there is a solution or a singular solution. I think, you know, there are a lot
of things that optimization, both as a technology in a way of thinking has given us.
And there are also a lot of things we've lost. And I do think we will find our way kind of
out of this way or partially out of this way of thinking, but I don't think we'll do it programmatically
or in an optimal way. Can you just zoom back a bit and give us a quick sort of history of the
rise and maybe beginnings of a fall of optimization? What drove it? When can we date it back to?
And when would you date the sort of beginning of the embrace of de-optimization that, as you
say, has now even reached Silicon Valley? I think there are a few ways of dating it, you know,
in some sense, as humans, we've always been seeking to engineer and control the natural world
around us and to understand it. The story of the book is narrower than that, and it takes the
perspective that optimization, at least its modern instantiation, is a very western and specifically
an American concept. So I go back to some of the literature and history of kind of early colonial
America and then trace through the utilitarian movements in Britain and back to some of the work
around the Manhattan Project and the computing innovations that really helped bring the modern
version of optimization to fruition that's now seen, you know, in Silicon Valley and in our
many of our engineered systems from supply chains to transportation to agriculture. And then I
look at, you know, some attempts to de-optimize or kind of walk back some of these steps towards a
more efficient or optimized world. And like I mentioned, I look at Silicon Valley and that approach,
and I also look at approaches that are a little bit more puritanical in nature or kind of seek to
dismantle some of the too fast, too fragile systems that we have in place.
Is that the main criticism that you have or that people have over the optimized economies and
societies that they become too fast and too fragile? That's one of the criticisms certainly that I
have. I think I place the things that we've lost as a result of both the technologies of
optimization and the philosophies or the way of seeing of optimization. I place them into kind of
three buckets to simplify. The first is we've lost these redundancies, this I call it slack or
downtime. And that's what leads to fragilities. The second thing that we've lost as we optimize
is a sense of particulars or place, I call it place. So in order to optimize the system,
we often have to atomize its units, right? Make everything look the same so that the factory, you
know, if the factory is turning out widgets, you know, every step of the process has to be
atomized and automated. And we lose that the kind of diversity in the quirks of a handmade
process, for example, a handmade manufacturing process. And the third bucket is around scale.
So the more we automate systems, the more we abstract through algorithms, through vast
geographic distances that are now possible with, you know, global travel and supply chains,
the more we lose a sense of human scale and that connection, that integrity between
part and whole. So those are kind of the three very broad buckets that I see as the compromises
we've made. So how are you going about de-optimizing in your personal life? Felix mentioned that you
live on an island. So I would imagine that there are certain things that are de-optimized already for
you. Yeah, absolutely. I mean, things are slower here. I don't keep my macOS up to date. On an
island, you have this sort of natural buffer from the mainland, you know, returning to the mainland
is called going to America, right? Because the mainland is full of all these marvels like Costco
and Petco and movie theaters and bowling alleys. So I'll make two points here. The first is
it may not be particular to being on an island. Small communities tend to work differently than
than large ones, right? You know, social relations in small communities, not a scale-free kind of thing.
So there is a kind of resiliency here or a different kind of resiliency that you then you might
see in a big city. People know each other. A lot of food is actually produced very locally.
There are these informal barter systems that crop up. But, you know, a point I or realization I
come to in the book, I grew up in San Francisco kind of on the cusp of a tech boom and then returned
in early adulthood to a full-on tech boom. And, you know, I talk a little bit about my family history.
My parents really are in this country because of optimization. And, you know, even though I did
in as many would see it kind of quote-unquote opt out, I don't think there's such a thing as
really possible in kind of the modern west, right? I still have internet. Amazon still delivers
in 48 hours here if you want it. And just culturally and philosophically were tied into
streamlined mainland ways of seeing the world. And yeah, and you certainly don't prescribe
you know, small-town life as as any kind of broad-based solution that is good for most people.
This is this is a very personal thing. Correct. Yeah. Do you found for yourself? Do you think though
that US society as a whole is too optimized and that it behooves each of us in our own way to
de-optimize somehow? Yeah, I mean, that's a very difficult blanket statement to make. I think
for each of us, we sort of need to examine the level of abstraction that that we're comfortable with.
Modern life involves a huge number of abstractions, right? I don't know how my computer works, right?
I don't know how the trinket I order, you know, for whatever my fridge, like how it's made, where it's
made often. And I think in order to exist in a in an interesting way in in the modern world, you have
to be comfortable with with some of that abstraction. And everybody's level of comfort is going to be
different. So I wouldn't say as a blanket statement, we all need to slow down and de-optimize.
I certainly think that some of the malaise that societally we're experiencing comes in part from
not understanding how we're connected, whether it's to one another, to the things that we consume,
the foods we consume, the, you know, plastic and metal things that we use in our daily lives.
So that is certainly what I'm striving for is to feel more of that integrity and connection,
both human and material, rather than to de-optimize per se. I mean, I still love cities, I love the pace,
I, you know, don't know that I'll live in a small place the rest of my life, but I do think it's
a personal and kind of introspective choice. It's also worth just remembering that insofar as we care
about the environment and carbon footprint and that kind of stuff. Cities are pretty much the most
environmentally responsible place to live. They're sort of all the fashion dream of living outside
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I did want to sort of get a little bit more into the the big question of right now in the markets
and in Silicon Valley, which is AI and I know you've thought a lot about this and you talk about
a little bit in the book. Do you see the rise of AI as as part and parcel of this broader sort of
optimization trend and something that we might want to be worried about? Or do you think of it as
something sort of qualitatively different? I mean, for me, it's always helpful to to I'm just
going to peel the layers of the onion because there's I think there are a few layers there of
hype and fear that as onions do that make a lot of people cry and moan and I think once
we start cutting the onions, we'll like get some of those tears out of the way and realize like
the reality of AI is a little bit more shriveled and uninteresting than we had hoped or feared.
I'm a big fan of shriveled onions. You like suffering? I think that one thing that is qualitatively
different about AI where it is today is that our computing power is just orders of magnitude
greater than it was even just 20 years ago and even though the models themselves may not have
advanced all that much since really like the 1970s, the amount of compute power that you can
throw at them is just so vastly different than it was. So I do think that changes things.
What do you guys think? I know Elizabeth has opinions on this one. I think the AI fear is a little
overstated right now because I think of AI in the sense that everybody's been sort of playing with
it, you know, chat, GPT and incarnations like that as a sort of just someone described it as
more extensive autocorrect. And I think that's a good way to sort of think about large lake
which models in particular. And it also illustrates why AI is not particularly accurate in a lot of
cases, why it hallucinates, things like that. So I'm not a fear bunker around AI at least on
at this point. I'm kind of with you on that one. I think that AI does have a huge amount of
promise, but the LLMs in particular, I'm not convinced are where all of the promise lies. They
are a really impressive party trick, but they don't have the kind of accuracy that we have learned
to expect from anything sort of electronic and computer. And because of that, we really have to
retrain ourselves in pretty profound ways to use them in a very different way from the way in
which we have historically used computers to automate stuff. And it's going to be a sort of long
and rocky and painful path to do that. I think at the end of that path, we will be slightly more
productive, we will be slightly more efficient. And that will be good, but I don't see a revolution
and I think a lot of the rhetoric, which is coming from the Sam Altman's of this world,
basically saying that AI is going to eat the world and we are going to create some massive
new society that we can barely dream of. As a result of it is completely overblown,
certainly when it comes to LLMs, these large language models, in that part of AI. I do think that
there is a real possibility that some other avenue of research will create
some, something more akin to this sort of general intelligence that people have been seeking
for many decades. And I'm not saying that's not going to happen. I'm just kind of saying I don't
think it's going to happen through the LLMs. I think that looking through the lens of
Coco's book that AI is just the latest way that human beings are being separated from
the world. Like if you look at how companies and businesses are wanting to use artificial
intelligence, it is to replace some of the, some of the things that humans do, some of the work
that humans do. And it's just another step down the road of like separating people from,
from reality kind of. The work that's being replaced is not making pots with our hands.
You know, the work that's being replaced is, you know, sitting in front of computers and typing
words into boxes. It's not something that gives us humanity. It's separating us from experience.
Like one thing I wrote about was that there was some paper recently out of Stanford about using
AI at a call center. It was able to have knowledge that typically a very experienced call center
operator would have. So you could have like a new call center operator come on and they would be
able to work as if they had like two years of experience because they were able to use the AI
to help them problem solve. So it kind of like separates in that case humans from like learning
an experience. Yeah, I have a question for Coco is someone who spent a lot of this book
driving around the country. There has been a bunch of research about people
losing actual physical parts of their brain as we have moved from a world where people navigate
via paper maps to a world where we navigate via GPS. And so I'm super interested as a deoptimizer
when you were going around the country. Did you do a separate part of you saying like I should
be using paper maps? Yeah, I mean I used to, but I was a late adopter of a smartphone and I
definitely remember the days of I'm going to a party and I had to write down my walking
directions on a piece of paper. And there were times I tried to do that when I was driving as well
or just to turn off the GPS, especially if it was just a few turns. I want to comment quickly
on Emily's point because I think it's a good one. And I actually see a silver lining here.
I agree with Felix in a sense that, you know, I think at least in the first wave AI or chat GPT
like technologies are going to be replacing what David Graber called bullshit jobs. So they were,
you know, jobs that became filled by humans but didn't necessarily require a human or provide a
human with that much meaning. I mean, I think we all start to derive meaning from our work
whatever it is. But I wouldn't necessarily say that working in an anonymous call center
is like the most, you know, if a human being had the choice of different ways to spend their time
that would be the place that they might start to derive the most meaning. So I do think that's
kind of the silver lining is that where you're going to see these LOMs replace humans,
are the places where maybe humans are using their humanity, the least, and that will open up new
possibilities to, you know, make art, make crafts, you connect with, you know, do the jobs, the work
that requires connecting with humans directly. That's always been the argument, right? That's kind
of Marxian, like, we won't need to do as much labor. And so we can all like relax and like read
books, but that's just never how it goes. Well, I mean, Keynes was the guy who famously made
this argument, you know, when he was, he very accurately predicted the amount of economic growth
that we would have and the rise in incomes that would be associated with that economic growth.
And he basically said he did a bit big sort of back of the envelope calculation and said,
I think we're all going to work three hours a week, you know, that will satisfy our general
so human need for meaning in our lives and that we need to work something, but we're not going
to need to work more than three hours a week. And he was spot on when it came to economic growth
and he was just wildly off when it came to how much people are going to work. Yeah, I think,
I mean, Bertrand Russell also made this fabulously wrong arguments, but it's certainly appealing.
We see it now and that there's everyone wants a four day work week now. There's the constant
conversation about how this is the new, the new thing. And I'm just extremely skeptical about it
as much as we replace humans with computers or robots or whatever, the bosses will find other
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This is a perfect segue actually to our next segment which is about China moving away from
the capitalist model and trying to ask whether there are alternatives to growth. Emily,
I have seen probably hundreds of headlines at this point over the past couple of months basically
saying oh my god China's doing really badly. Is this something we should be worried about?
Yeah i mean China is the second largest economy in the world and if it's not doing well
i think there are reasons to to worry about it yeah because China's growth has helped drive
economic growth in the U.S. so if they're seeing less growth perhaps that's a reason to worry.
Secondarily maybe if China's not doing as well maybe that makes it more unstable and that's not
good either we don't want that either. I buy your first one more than the second one i have to say
I think that the Chinese embrace of capitalism really did cause a huge amount of economic benefit
for the world and the insiphares it is now retreating from that embrace or having second thoughts
about that embrace of capitalism that is not going to be good economically speaking for the rest
of the world. On the other hand when it comes to stability and the iron grip that the Chinese
Communist Party has over the country like i think the very the whole reason why they're doing this
is to make sure that the billionaires are much less powerful that the Chinese Communist Party
continues to be in complete control and that there's no question at all about internal stability.
I guess by stability i meant global stability not the stability of China but or maybe i miss
spoken said i meant the stability of China but what i meant was a China that cares less about
markets and cares less about being a capitalistic juggernaut maybe is going to care less about
having good relations with the United States and therefore that kind of contentious
relationship is not good for stability. Also to be clear you know if this is an economic catastrophe
but for the first time people are forecasting that China is not going to overtake the U.S. economy
at least that anytime soon. Yeah that kind of bragging right thing of which economy is bigger
always kind of leaves me cold i'm like who cares it doesn't really matter like we do want
China to get richer and it does have five times as many people as the United States so well you know
at least probably three or four times as many people as the United States so it kind of stands to
reason at some point it can and should be rich in the United States but you're right that this is
constant trope i hear over and over again the U.S. has to be number one economically i'm reminded
of a rather peculiar book by Matt Glacias called one billion Americans where like the whole
thesis of the book was basically we need to have a billion Americans so that we're not overtaken
by China. I'm like is it really so bad to be overtaken by China? Yeah but Felix I mean you don't
understand the American mindset I don't think. I really don't. And the American mindset is we're
number one. That's the whole thing unaware of this. After I don't know if you missed that I didn't
go to school here but like we are number one and we must maintain our number one ship and so.
This reminds me of a t-shirt that my friend Anthony has with a picture of great Britain on it
in silhouette and underneath it says were number one. Yeah that hasn't gotten that well for
for Britain. But yeah like how you know being the former number one country in the world like
I can tell you someone growing up in Britain it's it's fine it's it's nothing to be like terrified of.
So then maybe we should just talk about the first problem which is less growth in China means
less growth for everyone including in the United States. We should also talk about why less growth
is happening. So exports are tumbling and real estate market is in a slump. How does that affect us?
Do you have good reasons for either of those? I think the real estate one you know again we can
trace back to various government policies they're not you know they basically stopped throwing
cheap loans at property developers but what's your explanation as a bit of why exports are falling?
One explanation was that exports were hired during the pandemics people were buying more
manufactured goods and now they're sort of slowing up in that and starting to put money into
services instead and things like vacations. I think that's right I think that you you did see a big
pandemic spike in goods over services and the post pandemic spike in services over goods. I
feel like what we're seeing in China is is bigger than just that though. There's also this we've
talked about it before in the podcast there's a a decoupling trend happening where since the pandemic
the United States in particular has been talking about and wanting to reshore and have a supply chain
that is sort of closer to home and not as dependent on China and you could kind of see I mean you
could see in the import data that we are importing less from China although that might be part of
what Elizabeth was talking about but there is a a desire to do less business with China.
Nearshoring, friendshoring all of this kind of stuff there it does become this kind of vicious
cycle that the you know less that China exports and the more that people try to
de-risk their China exposure the more insular China becomes the more likely people
consider it that they will invade Taiwan which is the big thing that we're all sort of talking
around here and then that likelihood that increased likelihood in turn just causes more people to
pull out of China and de-risk and so you know it feeds on itself. Yeah and you there's a piece
in the FT I think Robin Wigglesworth he sort of like laid out how much de-investment there's been
in China in the past year with investors really pulling back and are much less optimistic about
you know investing in Chinese companies and which which I mean is is 100% true that the hot money
you could say the foreign investment capital had an opportunity to get into China for a while
got into China and is now flowing out but one of the interesting things about the Chinese
economy is that it has never been reliant on foreign investment capital and if foreign investors
are pulling their money out that's not going to have an effect on the Chinese economy in and of
itself it is however an indication of the vibe shift. The vibe shift and then there's also what
happened with Apple this past week. Yeah the Apple thing is super interesting Apple lost like
$200 billion worth of market cap which is almost big enough to be noticeable when the Chinese
government was reported to basically have this new policy saying that if you work for the central
government or various local governments you're not allowed to use an iPhone at work and this is not
going to have a major effect in and of itself on iPhone sales in China and China is Apple's second
biggest market for iPhone sales but it does kind of smell a little bit like the Chinese government
it might be cracking down on Apple. We've seen the US government crack down very aggressively on
Huawei which is one of the great Chinese national technology champions and if the Chinese
government starts cracking down on Apple which is you know this could be the first of many
subsequent steps then that could be huge because Apple not only makes insane amounts of money by
selling iPhones to Chinese people it also as we know is hugely reliant on China as a manufacturing
center for those iPhones and it's Macintosh and everything else. Also this week Huawei just came
out with a big fancy new smartphone so these things are kind of dovetailing at the same time.
So does China need Apple though? I mean a lot of Chinese people are working for Apple or for an
Apple supplier right? I mean there's a lot of jobs created by Apple in China when presumed
does China not care about that? I mean I think that's the this is the point at which the Chinese
Communist Party can do what they want right? If the CCP decides that China is going to lose Apple
then China will survive you know it's still going to be a massive economy it's still going to be
the middle kingdom people will lose their jobs people will be walking around China has
hundreds of millions of people who have iPhones and those people are going to be like
quietly pressured by the government to swap their iPhone for something else maybe. I don't think
we've reached that point yet and but certainly that's what certain stock market investors are worried
about and I'm sure that at various levels of the CCP they have talked about so you know they're
like can we do this should we do this is a good idea is a bad idea so far they've clearly decided
it's not a good idea Tim Cook was in China not so long ago and taking lots of smiley photos with
lots of important people so it's unlikely that's going to happen anytime soon but as I say like
there is this kind of weird vicious cycle going on and if the likelihood of that happening has
gone up from say 2% to 10% then that alone could justify the drop in the Apple share price.
Right and it does seem just every day there's another data point to the storyline and the
storyline is since the pandemic there's a decoupling and China is pulling back from its
place in the global order or the US and China are kind of like in breakup mode or the
marriage is on the rocks that's kind of the storyline that I'm getting from Bloomberg and FT
like the global order as we know it with China being like the factory of the world is changing and
people don't want China to be like that anymore and China doesn't want to be like that anymore maybe.
Yeah what China wants I think this is the the really core question like where do they see
themselves in the next 10 years is the massive question that I feel like no one's really been
able to answer I think they are clearly swinging away from the sort of more free willing capitalism
that we saw over the past couple decades towards a more centralized economy maybe they've just
kind of reached that point and it's like we are now rich enough we have enough home ownership
the home ownership rate in China is like 90% or something we have reached a level of technological
sophistication and quality of life that means we don't need to worry about growing anymore we can
concentrate on just like maintaining the control of the party and having a very uniquely Chinese
internal system and maybe we don't need economic growth and from the point of view of the CCP that
would be okay for them that's like heresy in the United States I mean and that that goes against
everything growth is everything right you can't not have growth that's the whole premise in the
United States economy let's have a numbers round someone's Emily so Elizabeth you first what's
your number my number is 25 and that's a percentage and that is the percent increase in demand for
silver items on Etsy thanks to Beyonce announcing to all of her fans that they needed to wear silver
to her concert so now apparently any sort of apparel or accessories that are silver are selling
very briskly because Beyonce has single-handedly increased the market for them is silver than you
pink possibly there's also one of the vendors said that she anticipated that her current inventory
of silver stuff was gonna go down next year because your people would be going to Burning Man there
would be no more Beyonce and potentially less Burning Man I will take the the other side of that
bet I see no indication that this year's Burning Man fiasco is going to reduce demand from Burning
Man although there is broadly reduced demand for Burning Man we saw that this year even before
the flooding fiasco there were lots of tickets available in the way they normally are not my number
is 1.5 billion which is the number of dollars that Ryan Salame has agreed to forfeit to the US
government as part of his guilty plea he was basically one of the very top executives at FTX
he is giving up 1.5 billion dollars to the government he's giving 5 million dollars to FTX's
creditors and this ratio kind of astonishes me but not quite as much as the fact that he managed
even with the implosion of the crypto winter and even with all of his FTT tokens and all of that
basically going to zero he's still managed to have 1.5 billion dollars lying around in his
personal bank account that he had available to forfeit he's giving up that and he's also giving
up his portrait and cocoa do you have a number my number is 42 million which is the number of
Americans who don't have access to broadband internet so I think that's it for us this week thanks
so much cocoa for coming on the show it's been great having you thank you all this was fun
and thanks to jasmine molly and ben richmond for throwing this show together somehow it's
an amazing feat we will be back next week with more slaked money