How many of our greatest minds have we lost?

From The Dream Machine (p50) on John Atanasoff:

He was determined to build a computing machine… But with all his teaching responsibilities, he’d had very little time to focus on the problem. Finally, however, on a bitterly cold winter night in late 1937, he just couldn’t take it anymore; he had to get away to concentrate. So he jumped into his car in Ames, Iowa, and drove east through the subzero temperature at more than eighty miles per hour. Almost three hours later, after he crossed the Mississippi River into Illinois, he stopped at a roadhouse to warm up. And there, somewhere between his first and second bourbons, he conceived four crucial ideas to make him computer work."

Incredible! Atanasoff was busy, but finally got down to doing the thing he really loved, the world recognized his genius, and he was given all the resources he needed to complete his work.

At least, that’s what would have happened in any reasonable society. Instead, we’re told:

Atanasoff didn’t develop his invention any further, as it happened. Soon after the United States entered the war, in December 1941, he went to the Naval Ordinance Laboratory in Washington, D.C., where he supervised the counting testing of mines. He never returned to computing.

Who knows what else he could have given us? Instead, his entire lifetime produces one brief period of real scientific producitivity, bookended by teaching responsibilities and war.

Once you start looking, these stories are everwhere. Here’s The Daemon, the Gnu and the Penguin on the invention of Unix:

In August 1969, Ken Thompson’s wife Bonnie took their year-old son on a trip to California to show off to their families. As a temporary bachelor, Ken had time to work. “I allocated a week each to the operating system, the shell, the editor and the assembler [he told me]… and during the month she was gone, it was totally rewritten in a form that looked like an operating system”

Maybe this is a greatly exaggerated myth, but how terrifying would it be if that was true? Is it possible that Thompson was burdened by responsibilities his entire life, and then in a brief moment of freedom did some of the most important work anyone has ever done?

And then from Wikipedia, on Wilbur Wright:

…Wilbur never flew again. He gradually became occupied with business matters for the Wright Company and dealing with different lawsuits. Upon dealing with the patent lawsuits, which had put great strain on both brothers, Wilbur had written in a letter to a French friend, “When we think what we might have accomplished if we had been able to devote this time to experiments, we feel very sad, but it is always easier to deal with things than with men, and no one can direct his life entirely as he would choose.”

But why on earth not? Why couldn’t Wilbur Wright, now admired as one of history’s greatest inventors, find time to continue his most important work? The story continues:

Wilbur spent the next year before his death traveling, where he spent a full six months in Europe attending to various business and legal matters… He was also constantly back and forth between New York, Washington and Dayton. All of the stresses were taking a toll on Wilbur physically. Orville would remark that he would “come home white”.

Then finally:

After returning to Dayton in early May 1912, worn down in mind and body, he fell ill again and was diagnosed with typhoid fever. He lingered on, his symptoms relapsing and remitting for many days. Wilbur died, at age 45, at the Wright family home on May 30.

These were some of the most brilliant minds we had, and they were each nearly unable to fulfil even a tiny fraction of their potential. We should ask how much more each of them could have accomplished, but also how much we’ve lost from would-be inventors unable to find even a month of genuine free time with which to pursue their dreams. And of course, how many have been effectively barred from research by poverty or discrimination.

What hits me hardest is not the material loss, but the squandering of human spirit. As Bret Victor once explained:

We recognize that a dog has to be allowed the full free expression of its entire range of capabilities. Sticking him in a cage or constraining his range of experience, you’re not letting him do all the things that dogs can do. And this is exactly what we’ve done to ourselves.

And so the stories above strike me not even as tragedies, but as something more inhumane.

My greatest fear is that intelligent life will arrive on earth. It won’t be an invasion, or colonization, or anything horrible. They’ll just sit us down, and ask about the lives of our heroes.

We’ll proudly tell them about this guy Wilbur Wright. How he and his brother invented a machine to fly in the sky as gods. We’ll tell them about our culture of research and innovation, and how Wilbur, self-taught engineer from Ohio, changed the entire world.

And then we’ll have to explain how gruesomely we murdered him.

Not with sticks and stones, but with a barrage of patent lawsuits. We will have to tell the aliens how we used this great system of socially legitimate torture to slowly wear him down over the years.

We will tell them how in the end, poor brilliant Wilbur became old and tired and incapable of producing anything beautiful ever again.

I do not think they will forgive us. I am not sure we should forgive ourselves.

See Also
Alexey – Reviving Patronage and Revolutionary Industrial Research
Gwern – On Stress

Yes, I understand that Wilbur also sued people. I’m not claiming that he was a good person. My point is that in a humane world, no part of this story would even be possible.

When people talk about incentive alignment, what they really mean is correlated returns.

Consider equity as a solution principal-agent problems. Since founders and employees are both paid as a percent of company valuation, their returns are correlated, and incentives are mostly aligned. [1]

But even where returns are perfectly correlated, there’s no guarantee that actors actually have each other’s best interests in mind. A more concrete way to think about this is: would you be willing to delegate your decisions to the other party? This is what I mean by “true alignment”.

This can go wrong in at least three ways:

1. Returns are correlated, but with different opportunity cost
2. Returns are correlated, but with different levels of risk
3. Returns are correlated, but with different second degree utility

1. Returns are correlated, but with different opportunity cost

Real estate agents are typically paid on commission of a home’s sale price. As a result, their returns are really well correlated with the homeowner’s:

In theory, this ought to mean that real estate agents and homeowners are truly aligned.

In practice, the real estate agent is the one doing work, which means that they’re the one paying opportunity cost.

Let’s say an agent can expect to earn $200/day, and gets paid 6% of home sale price. It’s not worth it for them to spend another 5 days of work pushing up your home price from $500k to $510k when this only nets them $600 against an opportunity cost of $1000.

In contrast, a homeowner would happily wait a week to get another $10k, or $9.4k after commission. Even factoring into account the time value of money, an additional 2% week-over-week is great.

If both sides were explicit about incentives and willing to broker a side deal, the homeowner would happily pay the full $1000 opportunity cost to get an extra $9000. But in the absence of transparency, the real estate agent will do their best to convince the owner to sell, even at net loss to their collective interests.

The result is correlated returns without true alignment. Neither side ought to trust the other.

2. Returns are correlated, but with different levels of risk

Another classic example is Venture Capitalists versus Founders. For any given startup, a founder might own 30%, and the VC 10%, so their returns are really well correlated:

In theory, this ought to mean that VCs and Founders are truly aligned.

In practice, VCs are massively diversified across startups, providing insulation against any one failure. As a result, they’re eager to push for riskier bets, even when it’s against the interests of an individual founder.

3. Returns are correlated, but with different second degree utility

Say you’re going out to dinner with a wealthier friend, and you’ve agreed to split the bill. No matter where you go, you’ll be paying the same amount, and getting the same consumption, so returns are really well correlated:

In theory, this ought to mean that wealthy and less wealthy diners are well aligned. You should be willing to let your friend pick the restaurant, and visa-versa.

In practice, each party may pay the same financial cost, but has a different marginal utility for their money. Assuming utility is something like log(wealth), the utility cost to a $100 dinner are far greater for you than for your wealthier friend.

Even assuming you have the same gastronomic tastes, your incentives are not actually aligned. You should not trust your friend to pick a restaurant. [2]

Conclusion

Taking “true alignment” to mean “would be willing to delegate decisions”, and “correlated returns” to mean “correlated first order financial returns”, everything I’ve said is true.

But in all these cases, the trick is just to think about the actual experienced utility rather than first order financial returns.

It’s presumably pretty straightforward to sell a home for a fair price, but much more work to sell for substantially more than what it’s worth. So the opportunity cost increases faster than the price of the home. Taking that into consideration, we can chart the agent’s returns with a consideration of non-linearly growing opportunity cost:

Which makes it clear that returns were never really correlated to begin with.

Similarly, risk-avoidance is a function of diminishing returns from wealth. As a result, founders would prefer a more certain return, while diversified VCs can afford to pay in risk for higher expected returns.

So the conclusion is not that something wacky is going on and alignment is impossible. It’s just that we have to take into account returns to actual utility rather than just naively looking at immediate finances.

Postscript

I framed these as three different examples, but in a sense, they’re all the same.

The Venture Capitalist is risk-indifferent because they’re diversified. The founder is risk-averse because they experience diminishing returns from wealth to utility. Otherwise, a 1% chance of a billion dollar exit would be just as good as a guaranteed $10 million exit. So this is outwardly about risk, but really about second degree utility.

Arguably, diminishing returns to wealth are also just a function of opportunity cost. The more money you have, the less consumption in one place becomes a substitute for consumption elsewhere. This is also the case of a concave production-possibility frontier: the more you produce one good, the more the opportunity cost increases. This gives us a sense of diminishing returns, even without appeal to the hedonic treadmill or other psychological effects.

[1] Note that this only works for early employees at startups. The more your compensation is defined by salary rather than equity, the more your returns are fixed, and the less aligned you’ll be with your founders.

[2] Unless of course, they offer to treat you.

Lambda School is the most incentive-aligned education in the world.

It is so incentive-aligned, that their fundraising announcement was titled “Lambda School Raises $74 million for Incentive-Aligned Education”. Another blog post, tilted “Taking Baby Steps Toward Incentive-Aligned Higher Education and Job Training” includes the phrases

• With incentive alignment, schools don’t succeed unless their students do.
• We’ll continue to share updates on incentive-aligned education
• Incentive alignment between schools and students is the objective.
• As long as the underlying principles of student protection and incentive alignment hold true, that’s what matters.
• …create an education model where the incentives of the school and student are aligned
• …keep financial risk low for students and maintain incentive alignment.

Lambda’s big innovation is the Income Share Agreement, a mechanism that allows students to pay the bootcamp as a percentage of their salary, rather than paying tuition upfront. This ensures that the bootcamp is free to attend until you get a job, and ensures that Lambda is extremely incentive aligned.

But is it actually?

Here’s the details of the Lambda deal:

1. Students pay 17% of their salary for 2 years,
2. Payments are capped at $30,000, no matter how much you’re making
3. Students only pay if they’re making over $50,000

With this information, we can graph Lambda School’s 2-year returns against raw student income:

Those flat lines represent the cap and floor. The section in the middle is where Lambda Returns grow as a function of Student Income.

But remember that these returns come out of student income. So account for Lambda payments and taxation, here’s the same chart, but now with another line for Actual Student Income.

(Source)

That huge drop at $50,000 is the point where tuition payments kick in, and Actual Student Income drops off.

This is a classic example of a perverse incentive: students would actually earn more with a lower salary [1]. As payments and taxes scale with earnings, students aren’t back to the actual income they had at a raw salary of $49,000 until they hit a raw salary of $67,000, nearly $20,000 later.

Accordingly, we can divide the graph into 4 segments, and for each, ask if incentives are actually aligned:

• 1) Not Aligned: Actual Student Income increases, but Lambda Returns do not.
• 2) Misaligned: Actual Student Income drops, but Lambda Returns grow sharply.
• 3) Aligned: Actual Student Income and Lambda Returns grow together.
• 4) Not Aligned: Actual Student Income increases rapidly, but Lambda Returns are flat.

To summarize, the actual incentive-alignment portion of this graph only happens in section 3 (when raw income is between $67,000 and $88,000). Despite their repeated claims, Lambda School is not actually incentive-aligned.

Okay, fine, but does this actually matter? Maybe all salaries fall in that incentive-aligned range, and so in practice, Lambda is effectively incentive-aligned.

We can test this hypothesis against Lambda’s table of reported student outcomes:

We want to know how many students make between $67,000 and $88,000. Using a naive assumption of uniform distribution within buckets, we get 47 students, or 26% of the total population. [2]

To make a closer approximation, we can estimate an underlying normal distribution.

The range we’re curious about ($67k - $88k) doesn’t align with the bucketing, but we can make an educated guess by estimating the underlying normal distribution:

That’s with mean $72,000, SD $26,000. This is still naive, but seems to be a decent approximation, and probably better than the uniform assumption. Using this model, we estimate that 31% of graduates are earning $67,000 - $88,000.

To sum up, Lambda School appears to be incentive-aligned with around one third of their students.

While Lambda School is not properly incentivized to improve income for the majority of its students, you might still argue that it is at least incentivized to get them a job.

This is fair, but also true of every other educational institution. Flatiron School releases data on job placement outcomes, as does General Assembly, and does every university. It doesn’t matter if you literally get paid as a portion of student income, every institution has a reputation to uphold, and a case to make for its value.

It is true that Lambda School only charges tuition if you get a job earning more than $50,000, and that’s great. For many students however, I expect this calculation to be dominated by the question of whether or not they’ll actually have a job at the end, a matter on which Lambda School has been notoriously deceptive.

[1] This concept of being punished for earning money is at the heart of the libertarian critique of taxes. It’s absolutely bizarre that Lambda has appropriated libertarian rhetoric without any of the accomplaying economics.

[2] (75 - 67) / 25 * 71 + (88 - 75) / 25 * 46