Written with Claude

The challenges facing the adoption of autonomous vehicles are largely self-inflicted. Rather than redesigning our transportation infrastructure and systems around the capabilities of autonomous vehicles, we have insisted on maximum backward compatibility with the existing system centered around human drivers. This insistence on backward compatibility is severely hampering the progress and adoption of autonomous vehicles.

If we had taken the same approach when automobiles were first introduced and insisted on maximum compatibility with horse-drawn carriages, the transition to cars would have been far more difficult and taken much longer. Instead, we redesigned our roads, built gas stations and repair shops, implemented new traffic laws, and made many other changes to accommodate and optimize the automobile. All of this required collective action and investment, but it paid off tremendously in the long run with vastly more efficient transportation.

With autonomous vehicles, we have not been willing to make the same types of investments and changes. We expect autonomous vehicles to seamlessly integrate into a system built around human drivers, rather than building a new system optimized for the unique capabilities of autonomous vehicles. This means autonomous vehicles have to be designed to handle all the complexity and unpredictability of human drivers, which is an extremely difficult problem that slows progress.

If we redesigned our roads, traffic systems, and infrastructure with autonomous vehicles in mind, they could operate much more efficiently. We could have dedicated lanes for autonomous vehicles, smarter traffic management systems, and roads designed for optimal autonomous vehicle functionality. New business models like autonomous vehicle subscription services and on-demand autonomous shuttles could also emerge.

But instead, we remain stuck in a system designed for the limited capabilities of human drivers and vehicles from over a century ago. The challenges of building autonomous vehicles to handle this outdated system are enormous, and it is seriously delaying their mass adoption. Overcoming this failure of collective action to optimize for autonomous vehicles may prove critical to achieving their potential benefits. With a fresh approach to transportation infrastructure tailored around autonomy, autonomous vehicles could transform mobility. But insisting on backward compatibility with human drivers threatens to hold the technology back indefinitely.

https://conversationswithtyler.com/episodes/garett-jones/

One early insight [from Gary Miller’s Managerial Dilemmas: The Political Economy of Hierarchy] is that Arrow’s impossibility theorem applies to any kind of decision within a firm. If you have three top managers who are trying to decide the strategy of the company, and they disagree slightly on where the company should be taken — wow, that can lead to classic preference cycling, a classic Condorcet paradox.

“The only thing that can solve this problem is to realize that firm culture is basically an equilibrium to a repeated prisoner’s dilemma, a long-run cooperation game.”

why are smarter groups of people more cooperative, on average?

Axelrod’s Evolution of Cooperation really had a huge influence on how I think about the hive mind. The three traits that turned out to be especially crucial are what I call the three Ps of the repeated prisoner’s dilemma, the RPD. It turns out that intelligent people are more patient, they are more pleasant, and they are more perceptive.

In order to get good cooperation in groups, it helps to have people who are focused on the long run, who are willing to take a little risk today in order to get back some return to their cooperation in the future, so they need to be more patient.

They need to be more pleasant. They need to be more willing to start off cooperating, to take a chance on cooperation early in the game. It turns out, experiments showed that they, in fact, do that on average. And they need to be more perceptive. They need to keep track of the fact that they’re playing a game and that there are payoffs happening. Remembering the history of a game — and life is a game in many ways — is important to generating cooperation.

So smarter people tend to have all three traits in greater degree: more patient, more perceptive, more pleasant. And those three Ps of the repeated prisoner’s dilemma are crucial for group cooperation.

COWEN: In some studies, the personality psychology trait called conscientiousness doesn’t seem to predict cooperation at all. Why is that? How do you make sense of that result?
JONES: I think, partly, it’s because it’s none of the three Ps of the RPD. But to go beyond that to real substance, it’s that cooperation is pretty dangerous. A person who’s conscientious in trying to make sure that they’re watching out for their themselves or their loved ones should be a bit reluctant to just jump into a pro-social, pro-cooperation relationship because a lot of people get ripped off.
So a prudent person who isn’t able to tell whether you’re dealing with someone who’s trustworthy, should best respond in an untrustworthy way. If I don’t know whether I’m surrounded by scoundrels or saints, it’s probably a little safer to assume that I’m surrounded by scoundrels. And a person who is conscientious will be more likely to just notice that fact.

I think part of this is that the way jobs are constructed is that jobs are constructed to be, in many ways, foolproof, so that a person can’t screw it up that much. So being the very smartest person in a particular job category might not make you that much more productive than being the worst person in that job category, but that’s partly because that job category was created so people couldn’t screw it up that much.

Investors price an asset by predicting the free cash flows (FCF) that the asset generates. Even if you expect to sell the business at some point, if you commit to the decision rule that you never sell unless the returns from a sale are greater than that from the FCF, then the FCF analysis is all you need to proceed - you do not need to worry about what other people think the asset is worth. The asset is priced as if held to maturity.

Speculators price an asset without such a simplifying assumption. It's just buy low and sell high. Speculators care intimately about what other people think an asset is worth. Speculation is a shorter-term activity because in the shorter term the net present value (NPV) of carry is small relative to that of the sales event.

Interest rates can change what it means to be short-term. When interest rates are low, the carry matters a lot less. When carry matters less, it is not possible to rely purely on FCF analysis, because the uncertainty in your predictions of what happens in ten years doesn't get discounted away, and has material impact on the NPV estimate. We are all speculators now.