LOOKING FOR THE YELLOW BRICK ROAD

October 13, 2015Bruce Yandleyandle@bellsouth.net

Can Eureka Moments Help?

Exports Decline!Canada in Recession!

Fed Indecision!Political Crazy Season!Stock Market Collapse!China in the Basement!

“I am describing the outlookI see as most likely, but based on many years of forecasting, I can assure you that any specific projection I write down will be wrong, perhaps markedly so.”

Janet Yellen

Business Insider, Myles Udlandhttp://finance.yahoo.com/news/janet-yellen-just-made-one-180927211.htmlMay 23, 2015.

How’s the U.S. economy doing?

I think we are on the Yellow Brick Road…, but I am a bit

nervous!

-10.0

-8.0

-6.0

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

10.0

Real GDP Growth 1Q2000 - 2Q2015(est)

(4-Quarter Moving Average)

3.17%3.9%

2.7%

-10.0

-8.0

-6.0

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

10.0

Real GDP Growth 1Q2000 - 2Q2015(est)

(4-Quarter Moving Average)

3.17%3.9%

2.7%

Expect 2.2% to 3.0% real GDP growth, 2015-2018.

Recession in 2019.

The Housing Boom?

QUESTIONS?

PART IIThree-Legged Chickens, Creativity & Eureka Moments

Let’s talk about

creativity.

• Recognition of a practical problem to be solved.

• Eureka! An idea emerges.• Experimentation by people

closest to the problem, Indigenous innovation.

• Potentially game-changing, but disruptive, technology emerges.

How to get from repetitive learning to idea generation and creation of new intellectual wealth?How do we get from fountain pens to ball point pens to typewriters to digital communication to thought transmission?

EUREKA!

• The Creativity puzzle.

• Human progress is driven by creativity.

• It’s magic. Metaphysics. Some people can take the same ingredients, the same inputs, and magically produce brilliant, beautiful, or spectacular outcomes.

• Where others produce the same old same old.

• Do Eureka Moments exit? What explains?

Exploring Creativity & Eureka Moments

• Taking a glance at human flourishing since 1300.

• Creative minds and innovation. Is it will power?

• Is it some component of the mind or brain?• What do creative people say?• Do economists have Eureka moments?

“From the 1820s to the 1870s, Britain, America, France, and Germany broke out of the pack one by one. The trajectory of these countries’ two indicators—output per head and the average real wage—was a phenomenal development in the history of the world.”

Edmund Phelps. Human Flourishing. Princeton: Princeton University Press, 2013: 5.

Edmund Phelps1933 -

Most people are common men. They do not have thoughts of their own; they only receive. They do not create new ideas; they repeat what they have heard and imitate what they have seen. If the world were peopled only by such as these, there would not be any change and any history.

What produces change is new ideas and actions guided by them. What distinguishes one group from another is the effect of such innovations. These innovations are not accomplished by a group mind; they are always the achievement of individuals.

Ludwig von Mises. Theory and History. Auburn, AL: Mises Institute, 2007: 191-192.

Convergent versus Divergent Thinking

Ludwig von Mises1881-1973

[W]orking within an established field is both empowering and restricting at the same time. Stay within the boundaries of your discipline, and you will have an easier time making incremental improvements, opening the doors of the adjacent possible that are directly available to you given the specifics of the historical moment. But those disciplinary boundaries can also serve as blinders, keeping you from the bigger ideas that become visible only when you cross those borders.

Steven Johnson. How We Got to Now. New York: Riverhead Books, 253.

Steven Johnson1968 -

The Adjacent Possible

John Maynard Keynes1883 - 1946

The difficulty lies, not in the new ideas, but in escaping from the old ones, which ramify, for those brought up as most of us have been, into every corner of our minds.J.M. Keynes. The General Theory of Employment, Interest, and Money. London: Macmillan, 1936. vii.

Capitalism, then, is by nature a form or method of economic change and not only never is but never can be stationary. And this evolutionary character of the capitalist process is not merely due to the fact that economic life goes on in a social and natural environment which changes and by its change alters the data of economic action; this fact is important and these changes (wars, revolutions and so on) often condition industrial change, but they are not its prime movers. Nor is this evolutionary character due to a quasi-automatic increase in population and capital or to the vagaries of monetary systems, of which exactly the same thing holds true.

The fundamental impulse that sets and keeps the capitalist engine in motion comes from the new consumers, goods, the new methods of production or transportation, the new markets, the new forms of industrial organization that capitalist enterprise creates.

Joseph SchumpeterCapitalism, Socialism and Democracy. New York: Harper, 1975, 82

Joseph Schumpeter1883 - 1950

Is it being connected to other creative brains?

Brilliant people, be they anthropologists, psychologists or economists, assume that brilliance is the key to human achievement. They vote for the cleverest people to run governments, they ask the cleverest experts to devise plans for the economy, they credit the cleverest scientists with discoveries, and they speculate on how human intelligence evolved in the first place.

They are all barking up the wrong tree. The key to human achievement is not individual intelligence at all.

Human achievement is based on collective intelligence - the nodes in the human neural network are people themselves. By each doing one thing and getting good at it, then sharing and combining the results through exchange, people become capable of doing things they do not even understand. As the economist Leonard Read observed in his essay "I, Pencil' (which I'd like everybody to read), no single person knows how to make even a pencil - the knowledge is distributed in society among many thousands of graphite miners, lumberjacks, designers and factory workers

Matt Ridley. Collective Intelligence on Edge. Matt Ridley On-Line, March 14, 2012. http://www.rationaloptimist.com/blog/collective-intelligence-on-the-edge.aspx.

Matt Ridley1958 -

The Sharing EconomyThe Sharing Economy

Daily Shot. 3/5/15. Banksy

Is it just hard work?

It is impossible for a hockey player, or Bill Joy, or Robert Oppenheimer, or any other outlier for that matter, to look down from their lofty perch and say with truthfulness, “I did this, all by myself.” Superstar lawyers and math whizzes and software entrepreneurs appear at first blush to lie outside ordinary experience. But they don’t. They are products of history and community, of opportunity and legacy…The outlier, in the end, is not an outlier at all.

“No one who can rise before dawn three hundred sixty days a year fails to make his family rich.”– Saying of penniless Chinese rice farming peasants.Malcolm Gladwell. Outliers. 285 and 249.

Malcolm Gladwell1963 -

Or something about the brain and how it works?

As for how these ideas emerge, almost all of my subjects confirmed that when eureka moments occur, they tend to be precipitated by long periods of preparation and incubation, and to strike when the mind is relaxed—during that state we called REST. “A lot of it happens when you are doing one thing and you’re not thinking about what your mind is doing,” one of the artists in my study told me. “I’m either watching television, I’m reading a book, and I make a connection … It may have nothing to do with what I am doing, but somehow or other you see something or hear something or do something, and it pops that connection together.”

Random Episodic Silent ThoughtSecrets of the Creative Brain, Nancy C. Andreasen, July/August 2014http://www.theatlantic.com/features/archive/2014/06/secrets-of-the-creative-brain/372299/

Nancy Andreasen1938 -

What do creative people say?

Spencer Silver spent years trying to get his colleagues at 3M excited about his low-tack, pressure-sensitive adhesive. The world yawned.

But one day another 3M scientist was in church, not a bad place for a eureka moment, and came up with a use for Dr. Silver's glue.

Arthur Fry was annoyed that the bookmarks in his hymnal wouldn't stay put. He thought adding Dr. Silver's adhesive to some paper might do the trick. Not only was he right, but people have been coming up with uses for the Post-Its ever since.

Spencer Silver1941 -

Hermann Von Helmhotz1821 - 1894

Often [ideas] arrived suddenly, without any effort on my part, like an inspiration. They never came to a fatigued brain and never at the writing desk. It was also necessary, first of all, that I should have turned my problem over on all sides to such an extent that I had all its angles and complexities “in my head.”

Then, there must come an hour of complete physical freshness and quiet well-being, before the good ideas arrived. Often they were there in the morning when I first awoke… But they liked especially to make their appearance while I was taking easy walk over wooded hills in sunny weather.John Kounios and Mark Beeman. The Eureka Factor. New York: Random House, 2014: 29.

Dicky Betts1943 -

Like almost every fiction writer, I'm sometimes asked where I get my ideas. It's a reasonable-enough question, one asked by nonwriters who are curious about the creative process. When I answer that "I have no idea," my questioner assumes my answer is a feeble attempt at wit, which it is, but I'm also telling the truth. Furthermore, even if ideas were gettable—say, stacked in a secluded cave like the Dead Sea scrolls—I wouldn't go there. An "idea," especially one adhered to from start to finish, can be disastrous for a compelling piece of fiction. Ron Rash, In the Beginning, Wall Street Journal, March 8, 2013http://online.wsj.com/articles/SB10001424127887323494504578340212931392312

Ron Rash1953 -

When I write songs, it’s never a conscious decision—it’s an idea that floats down in front of me at four in the morning or in the middle of a conversation or on a tour bus or in the mall or in an airport bathroom. I never know when I’m gonna get an idea and I never know what it’s gonna be.John Kounios and Mark Beeman. The Eureka Factor. New York: Random House, 2014: 65.

Taylor Swift1989 -

VernonSmith1927 -

‘‘Experimental economics started at Purdue in the late fall of 1955. . . . Ihad insomnia one night, and . . . I found myself thinking about the classroom experiment that Ed Chamberlin used to perform with the Harvard graduate students to prove the impossibility of perfect competition.

So there I was, wide-awake at 3 am, thinking about Chamberlin’s sillyexperiment… This led to two ideas: (1) why not use the double oral auction procedure, used on the stock and commodity exchanges? (2) why not conduct the experiment in a sequence of trading ‘days’ in which supply and demand were renewed to yield functions that were ‘daily flows.‘

“The following January, I carri ed through my insomniacal plan. . . . I amstill recovering from the shock of the experimental results. The outcomewas unbelievably consistent with competitive price theory. “Ted Bergstrom. “Vernon Smith’s Insomnia and the Dawn of Economics as Experimental Science" Scandinavian Journal of Economics 105.2 (2003): 181-205, at 182-183.

So we have these two basic mind-sets for solving problems—insight and analytic. Shifting your attention more inwardly or outwardly can help you to engage one or the other. But in situations calling for outside-the-box ideas…you can use sensory deprivation to help you focus inwardly. The missing ingredient needed to realize a great idea could be as simple as a little solitude and inner attentiveness to minimize the distractions that might be blocking an idea from bubbling up.

John Kounios and Mark Beeman. The Eureka Factor. New York: Random House, 2014: 91.

John Kounios1957 -

Mark Beeman1960 -

Payoffs always matter. If payoffs from successfully influencing regulation is greater than from bringing a newly improved product to market, then Eureka actions may bring private gain but public pain.

EUREKA!