Short-termism is a kind of contagion

An emphasis on short-term performance does not always produce a long-term viable strategy. That looks obvious enough when typed out. But short-termism has become the prevailing logic of many American institutions, none more radically than those institutions that make up its financial sector. As Sheila Bair noted in an op-ed on her last day as chairman of the FDIC, our media, political institutions, and businesses fall victim to this tendency, and it has begun to undermine our long-term stability.

To persist in acting this way would require a kind of insane faith that what’s good for now is good for tomorrow. It’s the story of how every tragedy of the commons ends badly. These attitudes, however, persist less because of any rational deliberation than because institutions can easily devolve toward incentives that reward short-term results.

One principal reason for this is that short-term strategies have a tendency to spread. In a way, this might even be a more general feature of unrestrained competition. I want to make a slightly tenuous comparison to evolution before returning to the more general point.

Assume there is a small plot of land with two unrelated breeds of plant. If plant A can absorb soil nutrients faster and outbreed plant B, it will proliferate and might eventually displace plant A entirely. This is known as exploitation competition. The evolutionary pressures on A become: 1) either depend on fewer nutrients, 2) develop a some alternate replication strategy, or 3) simply beat B at its own game, by reproducing faster and extracting nutrients more quickly. The last of these is the one I want to emphasize: Short-termism is self-reinforcing and it is contagious. When B’s reproductive strategy is on short-term success, it redefines the game for A. Eventually it becomes the only game left. This is what kudzu did when introduced in the southeastern United States. Taken to an extreme, quite literally, this is the logic of cancer.

In other words, if B chooses to play a shorter-term game than A, that redefines the game A must play to survive. Market competition is also susceptible to this dynamic, and in many ways it may account for some of markets’ successes. The process can weed out under-performers and produce more efficient manufacturing processes. But it also weeds out other business models that under other conditions would be perfectly viable and sustaining.

This fact alone should also provide a compelling reason for market regulations—something I’ll write about another time—but this dynamic also means the following: If a business starts engaging in rent-seeking activities (i.e. attempting to influence government into creating a legislative or regulatory playing-field more favorable to its interests), then quickly other competitors, other businesses, and even entire sectors may be forced to follow suit.

To make the link now to the financial sector: Incentives in the financial community have become tied closer than ever to short-term performance. Such incentives have the potential to reward speculation, and the 2008 crisis revealed that these incentives have the potential to reinforce bubble-generation. Extreme short-termism redefined the terms of competition. It drove firms that emphasized longer-term performance and responsible practices to obscurity and irrelevance, and it drove many organizations into riskier positions to remain competitive (e.g. the decision at Fannie Mae to get into subprime mortgages in 2007). It should not be surprising that given the ways that incentives were linked to performance that the terms of competition became what they did.

Nor is it surprising, as Bair notes, that short-termism has come to characterize many of Wall Street’s interactions with Congress and other regulators. Rent-seeking through lobbying and other activities directed toward obtaining a favorable regulatory playing-field have now become part of the ways that businesses in America compete. To take one easy example, provisions of Dodd-Frank that were seen as restraints on business were cut, watered down, and those that were left in have been implemented half-heartedly. And that happened despite a general consensus that Dodd-Frank was not aggressive enough in providing the US the framework it would need to respond to another financial crisis.

[Legislators are now plagued by a similar dynamic of having to fund-raise to keep up with each other, with a short-term focus on reelection rather than on governance. This further exacerbates the influence Wall Street spending can have].

Given the various ways in which Wall Street successfully defeated attempts to impose new regulations after the 2008 crisis, we would expect that the financial sector would be well-positioned for the coming decade or to handle another crisis. But this hardly seems to be the case. The shadow banking system, probably the single largest accelerator of the crisis’ spread remains largely unregulated. Banks are fighting tooth and nail against hightened capital requirements. And the fact that large financial institutions pushing for austerity measures is so shorted-sighted as to ignore any possible interdependence between growth and a healthy middle class. Etc. etc.

Perhaps the most insane thing about all of this is that large financial institutions and proponents of deregulation are so short-sighted that they believe this kind of game is actually serving their interests. [Or maybe the game is just to be the last one standing?]

To quote a post at Digby’s blog about Murduch’s ability to rapidly corrupt the WSJ, one of the world’s “most important sources of financial news”:

I think this may be the best sign yet of just how crippled our institutions have become. If there is one group in the world who should demand unadulterated facts and data it is the financial community. Sure, they’ll play it to their advantage, and care not a whit about how it affects our democracy. That’s not their job (although it is their duty as citizens.) But they simply cannot function properly if their information is tainted.

The ‘invisible hand’ produces races to the bottom just as often as it produces self-regulating systems. We have failed utterly to keep the terms of this game from keeping this short-term contagion in check. When that happens, even the winners are at risk.

Photo credit: Galen Parks Smith.

Stray dogs in Moscow have learned to use the subway

The Financial Times ran an article on the exploding population of stray dogs in Moscow.  According ot the article, hundreds of dogs live in the subway system.  Many of them scavenge and beg for food on the trains and platforms, and a few dozen have learned to get on and off the trains at specific stations based on sound and smell cues.

photo by Maxim Marmur

photo by Maxim Marmur

A biologist named Andrei Poyarkov spent years following these dogs around, studying their behavior and trying to document the evolutionary pressures on urban stray dogs.  Apparently the animals, originally descendant from domesticated dogs, are behaviorally starting to resemble wolves.  And the stray population is converging on a certain physical appearance “with thick fur, wedge-shaped heads and almond eyes. Their tails were long and their ears erect.”

There’s an article here about another Russian scientist, Balyaev, who was interested in the origins of the domestic dog and basically provides the inverse data set to these urban strays.  Balyaev bred and studied wild silver tail foxes for over 50 years and eventually produced a completely domesticated fox.  He managed to domesticate them by breeding only the most docile and human friendly foxes over generations until many of them had no desire to go back into the wild.  What is even more incredible is that the foxes underwent physiological changes over generations as well, developing softer features and losing their natural camouflage.  The article draws parallels from Balyaev’s work on foxes to the history of the domesticated dog, and the Wikipedia entry on the orgins of the domestic dog is pretty interesting.

The fact that the stray population in Moscow is essentially rewinding the domestication process and that wolf traits are reemerging seems pretty significant for anyone interested in evolutionarily stable strategies or behavioral equilibrium.  There seem to be two alternate canine behavioral strategies that behavior coalesces around.  And both suggest that dogs are deeply social animals.

In the case of domestic dogs, it’s still mind-blowing that they develop real emotional attachments to their owners.  I have no doubt that this goes beyond dependence for food or attention (in a way I suspect is less true for cats and other pets), and those feelings are genuinely reciprocated.  But even beyond the origins of this human-dog emotional interdependence, the evolutionary history of dogs since their encounter with humans would be a fascinating subject for a book.  It could illuminate a number of interactions between biology and human cultural practices and a lot of sociological issues as well.  Maybe Richard Dawkins could write his next evolution pamphlet using dogs as his only evidence.  I think it would be more convincing and identifiable than the militant atheism approach.

With over 35,000 strays with insufficient food and a high mortality rate, Russia has a number of urban safety concerns to worry about, not to mention the travesty the stray population has to confront daily.  Considering that people created this situation and the environment these dogs live in, these dogs deserve better than to die on the streets.

Mixed signals

Judith Donath gave a presentation for the Berkman Cooperation group that I went to on Monday.

Basically, Judith is interested in using insights from signaling theory to help create richer online communities and to facilitate online communication.  She’s currently writing a book on the subject.

Signaling theory is a rapidly growing sub-discipline in evolutionary biology, but it has really fascinating implications and applications throughout the human social world.  The basic idea is that organisms evolve in all kinds of ways to send signals, with the purpose of altering behavior of other organisms in their environment.  The signals could be anything from a brightly colored tree-frog signaling that it is poisonous to avoid predation, to a peacock signaling its fitness to a mate, to a human signaling wealth via conspicuous consumption.  Pheromones, birdsong, coloration, fashion — nearly everything in nature signals something to some organism.


Sexual selection can drive signals to some really absurd lengths.  Peahens drove male peacocks to evolve completely gaudy and useless plumage (this photo is incredible) even though this actually puts the peacocks at a greater risk for predation.  I remember as an undergrad reading that female bullfrogs will choose a mate based on the pitch at which the male bullfrog croaks, and evolution is pushing them toward a particular pitch and vibrato.

Because signals have survival value and are crucial within sexual selection, it is often worthwhile for organisms to signal dishonestly, which also sets of some really fascinating arms races.  There are a number of non-poisonous butterflies, for example, that have adapted to match the color scheme of poisonous butterflies so that predators will ignore them.  Judith gave the example of tigers, who claim territory and attract mates scratching trees to demonstrate their height.  Taller tigers frighten away potential competitors and attract mates in this way.  But some shorter tigers have discovered that they can jump and claw trees at a higher point than even the tallest tigers can normally reach, making the signal less reliable.

Humans have come up with all kinds of ways to signal that they’re more fit or attractive than they actually are (lies, make-up, surgery, conspicuous consumption, status markers, etc.), and these signals produce real social and biological consequences.  Easy to copy social signals sometimes get paired with high sanctions to keep people honest (counterfeit money gets you sent to jail, faked diplomas get you fired, etc.).

Because dishonest signals are all over nature, and organisms (and humans) tend to develop signals that are harder to reproduce or falsify.  Amotz Zahavi was the first to formalize this observation in the handicap principle, which states that in order for a signal to be reliable, that signal has to be costly, i.e. either risky or hard to replicate.  In order for signals to have any adaptive benefit and become prevalent through evolution, they have to communicate something that is hard to fake.  More recently, mathematical models have been developed to model and express concept more precisely.

Valentino: The Last Emporer

The examples multiply almost endlessly when you start considering human signaling.  Judith Donath devoted a large portion of her presentation to showing that fashion serves as a signaling system that communicates leisure, taste, wealth, attractiveness, one’s attitude toward risk/convention, and a number of other traits with social and sexual significance.  Because keeping fashionable requires a lot of inside knowledge and money, it’s a pretty reliable indicator.

What’s interesting about this is that the fashion industry is able to very successfully capitalize on people’s underlying desire to signal these traits. Because novelty is so crucial to this process, however, fashion has a forever shortening half-life. For people who really care, even something from a year or a season ago is terribly dated and unappealing. In itself that’s a fine way to signal wealth and taste, but this signaling system produces a staggering amount of waste.

I want to give some more thought (maybe in a paper?) to what signaling theory means for the legal system.  I can imagine a pretty interesting anthropological account of how one purpose of legal systems is to keep signals honest (money should indicate legitimate earning, it should be costly to replicate/imitate authority figures, etc).  There are probably a lot of legal rules that could be explained sensibly through the signaling theory language, which could provide a lot of interesting sociological/biological context.

Ducks in a row

I took a research assistant job this semester that’s recently given me an opportunity to refamiliarize myself with Konrad Lorenz’s On Aggression.  I remember thinking when I first read the book as an undergraduate that the early chapters were some of the best pieces of science writing I’d ever come across.  Lorenz writes about the ritualized intra-species aggression in tropical fish in beautiful, colorful language, told from his perspective as a diver.  And at the same time he precisely documents the territorial, evolved motivations underlying their behavior.

Lorenz is arguably the founder of ethology and his work was crucial to the development of biological psychology (he also has the unfortunate legacy of having been a Heidegger-type Nazi sympathiser). One of his more famous findings was about critical period imprinting in geese and ducks — he showed that freshly hatched geese will identify any stimulus as their mother and follow it around as long as it’s there during the first few days of their lives.

Konrad Lorenz

In researching this topic (aggression), I’m still constantly surprised at how little of the psychological literature takes into account the biological underpinnings of such an obviously evolved behavior.

David Barash wrote an amazing article called The Targets of Aggression for the Chronicle Review a few years back, which also suggests ways in which aggression is a coping mechanism for intense stress or pain.  Unfortunately, they now require subscription to access, but I did find this quote:

Place a rat in a cage with an electrified floor and subject it to repeated shocks. Not surprisingly, the poor animal will show many signs of stress, at first flinging itself against the walls with each shock. But after a while, it just sits there apathetically, showing no inclination to escape from its painful prison. When autopsied, the animal will be found to have oversized adrenal glands and, frequently, stomach ulcers, both indicating serious stress.

Now repeat the experiment, but with a wooden stick in the cage alongside the rat. When shocked, the rat chews on the stick, and as a result, it can endure its experience much longer without burnout. Moreover, at autopsy, its adrenal glands are smaller, stomach ulcers fewer. The rat buffered itself against the stress merely by chewing on the stick, even though doing so does nothing to get it out of its predicament.

Finally, put two rats in the electrified cage. Shock them both. They snarl and fight. Do it again, and keep doing it; they keep fighting. Yet at autopsy, their adrenal glands are normal, and, moreover, even though they have experienced numerous shocks, they have no ulcers. When animals respond to stress and pain by redirecting their aggression outside themselves, whether biting a stick or, better yet, another individual, it appears that they are protecting themselves from stress. By passing their pain along, such animals minister to their own needs. Although a far cry from being ethically “good,” it is definitely “natural.”

The Nectar of the Gods

I watched a short from Wholphin No. 5 yesterday called Drunk Bees. Humans have been making mead from honey for thousands of years, but it turns out bees are also aware of ethanol. They appear to like it (they exhibit Pavlovian conditioning) and can even get addicted. Buzzed bees (sorry) become more aggressive and show impaired flight patterns, strangely conforming to expectations.

A few flower species have taken advantage of bees’ alcoholic tendencies and evolved fermented nectar that a subset of bees are drawn to. Bees that have been ousted from their hives for repeat drunkenness abandon their social role at the colony and spend their days flying between these alcohol-bearing flora. The attraction is strong enough that these flowers manage to get pollinated and reproduce.

Bee picture from wikipedia, probably sober

This is fascinating for all kinds of reasons, but I am especially amazed at what it says about alcohol and neural circuitry. Despite the enormous differences, bee brains appear to be affected by alcohol in many of the same ways human brains are. This suggests that alcohol affects both vertebrate and invertebrate brains at some very basic levels and that our neural circuits have more commonalities than we might have expected.

Bees do have dopamine regulated feedback loops, and some scientists are looking at the way alcohol interacts with that mechanism. It’s also possible that alcohol’s effects come from altered functioning at the cellular and molecular level.  Gene and protein expression are almost certainly affected by the presence of alcohol. And the mechanism underlying alcoholism in bees is probably very analogous to human alcohol addiction. The BBC ran this a few years back.

I’m also really interested in the evolution of social insects and the fact that bees either excommunicate or eat the legs off of drunken hive-members, but I can hold those thoughts for now.