Hive Mind is, roughly speaking, about how IQ affects productivity, and in particular how this is more important for collectives than for individuals. Your nation's IQ is a stronger predictor of national GDP than your individual IQ is of your particular earnings/productivity. There is a discussion of the "O-ring" theory of economic development, an idea for which one of the 2019 Nobel recipients, Michael Kremer, was famous. The idea here is that you need a lot of really smart people working on a particular project, because any weak link is a possible point of failure. The "O-ring" part is a reference to the Challenger space shuttle explosion, in which a single point of failure, literally an o-ring, caused a massive engineering project to fail and killed several people in the process. New technologies are susceptible to many points of failure, so you need a lot of very highly skilled people working on them. You can't just hire two really good software engineers and then a bunch of B-level engineers to do the rest of the work. Nor can you hire ten mediocre software engineers and simply merge their output to be the same as that of one good engineer. If you're building something new and innovative, you need a bunch of top 1% people on your team. Skimping on talent introduces more points of failure, and these accumulate quickly. The chance of failure grows exponentially with the number of points of potential failure, so reducing the probability that any one point will fail is enormously valuable. This theory probably explains why all the really smart programmers go to Silicon Valley to work with other really smart programmers. It explains why some big cities are world hubs for particular industries rather than having the work be dispersed throughout the nation or the world. It could also explain why there might be a large quality gap between the very best and the second best product on the market. If all the top-tier people are working for the industry leader, the second-tier companies are trying to cobble together the same product out of second-tier talent. They produce something of value, but perhaps it's a distant second. (I'm thinking iPod vs. Zune, or the iPhone vs. its early competitors. Possibly Facebook vs. other social media or Google vs. other search engines, but these could be network effects rather than examples of quality differences.) I can't find it now, but I remember reading about the candidate cities for Amazon's upcoming new campus a few years ago. Chicago was briefly a candidate, but someone commented that the limiting factor was talent. Chicago, it seems, has a lot of "top 10%" people but not quite so many "top 1%" people. My midwestern blood initially boiled at the elitist comment, but I calmed down and recognized the point. Couldn't they have just hired more people at the 90th and 95th percentile and used whatever top 1% talent they could find? Apparently not. They were looking for very high concentrations of extremely skilled workers. Whoever was making that decision was engaging in some kind of "o-ring technology" thinking.
Shut Out is about dysfunctional housing markets in major population centers. Supply restrictions (mostly out-of-control zoning laws) in cities like San Francisco, Los Angeles, New York, and Boston lead to extremely high housing prices. Note that these cities are major centers of industry: tech in San Francisco, finance in New York, biotech in Boston. Erdmann's story is that, contra the dominant narrative, there was never a "housing bubble." Rather there was never enough housing in these major population centers. The price of housing rose so high in these "closed access" cities that they caused demand to increase in nearby regions. These nearby regions weren't as restrictive as closed access cities, but nevertheless failed to keep up with skyrocketing demand. Erdmann dubs these "contagion cities." In other words, supply restrictions in major hubs for highly skilled workers were so bad they caused knock-on effects in the rest of the nation. The standard narrative is that uncontrolled speculation drove up the price of housing until it eventually got completely unmoored from the fundamentals, until housing prices eventually crashed. That's kind of hard to swallow when you look at the growth trajectory of total housing. The "supply restrictions" story is a better explanation of the skyrocketing prices than the "artificially inflated demand" story.
What's the connection between these two books? Shut Out had me wondering, why doesn't someone just start a new city? Or start a tech hub in an open access city, where housing can grow without obnoxious restrictions? I think one would have to lean very strongly on a Hive Mind type of argument to explain this lack of new cities or new industry hubs. It kind of makes sense that a data scientist in Silicon Valley would not simply quit his job and go work for a company in Omaha, Nebraska. This person's skills might make him useful to just one employer in a city that isn't a tech- or finance-hub, but might present many more options in Silicon Valley. If the job in Omaha doesn't work out, the cost of job-switching is much higher. Maybe this isn't such a big deal to any one person. There may be many such people who are willing to move to a slightly more boring city with fewer colleagues of a similar skill level. But it definitely creates a friction. The city with the fewest frictions will likely attract a hugely disproportionate fraction of the top data scientists, because people aren't just evaluating cities in isolation. There are network effects. The city that first starts to attract lots of talented data scientists will tend to attract more talented data scientists. That first city is a focal point, and it's hard to simply designate some other low-cost city as a new focal point. Something has gone terribly wrong here in the sense that the major centers of productivity also have the worst zoning laws and nimby-ism. Parasitic local governments probably understand that their city's status as a hub is unlikely to change, so they don't have to worry too much about providing good government. They can indulge the locals' nimby-ism and economic populism to the hilt without much changing their tax base. Some kind of concerted effort, given enough political will, could conceivably fix their local housing market. But why bother?
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Scott Alexander recently wrote a post about billionaire philanthropy. In a post that is generally positive on philanthropy, he writes disparagingly that "...the George Kaiser Family Foundation has decided the best use of its $4.4 billion is to pay techies $10,000 each to move to Tulsa, Oklahoma." If they actually pulled this off and managed to create a second tech hub in the midwest, the benefits to society could be in the many billions of dollars. If it takes a few billion dollars to incentivize the initial movement to a new hub, that could be well worth it. Admittedly it's hard to understand the value of the George Kaiser Family Foundation's initiative in isolation, but it makes a lot more sense in light of Shut Out and Hive Mind.
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