The importance of population mobility

Population mobility is very important in my opinion because I believe that population mobility determines the efficiency of resource reallocation. In the real world, we often see many people move from poorer areas to richer areas to seek better opportunities. Richer areas are more likely to have greater economic opportunities available for more people. When more people move into richer areas, more resources are also likely to be reallocated to these richer areas. However, the resource growth rate in these richer areas is likely to diminish after the resources accumulate to a certain level, because one place cannot contain all resources due to its natural constraints, such as land constraint. When the population growth rate exceeds the resource growth rate, people will gain fewer resources on average, so they will be worse off. Under such circumstance, the original locals will try to block people from other areas from entering their areas in order to maintain their current economic benefits. This will lead to increasing opposition to immigration.
Then is it possible to mitigate the opposition to immigration? It is possible. When the resource growth rate in the richer areas is diminishing, it means the resource outflow rate in the poorer areas is also diminishing. Then the people in the poorer area should enjoy more resources when many people move to the richer area. If the people in the richer area find that they enjoy fewer economic benefits than those living in the poorer area, they will move from the richer people to the poorer area, including those who originally live in the richer area. The reason that we do not often see people living in the richer area move to the poorer area is because maybe those who live in the richer area do not enjoy as many economic benefits as previously, they still enjoy more than they will enjoy if they move to the poorer area. To reduce this problem, we need to reduce the transportation cost and improve the returns in the poorer area. The latter point means that when people take resources from the richer area to the poorer area, the return of investing in the poorer area is higher than the return of investing in the richer area. This is not too difficult. Because the competition in the poorer area is relatively low and people can borrow successful business models from the richer area and apply them in the poorer area.
Overall, better population mobility and narrower wealth gaps across areas can reduce the problem of opposition to immigration and improve social stability.

Platform and Content

Huawei just released its OS, HarmonyOS on its developer conference; based on the presentation, HarmonyOS is a very powerful and cutting edge operating system. Since I am not an expert in computer science (and also I have not accessed to this new OS), I cannot judge whether it is a good or a bad operating system. There is one thing gaining my attention in the developer conference that Huawei is making its IDE much more user friendly that developers can use the IDE to develop their softwares for this OS faster and more easily. Not only Huawei is making its IDE for developers to create contents on its platform more easily, other companies are also doing the same thing. For example, Apple has also made its IDE more user friendly and even developed an application to teach children about how to use its programming language to write codes.
Not only the companies which develop operating systems value the contents in their operating systems more and more, other platforms are also valuing their contents more and more. For example, Netflix, YouTube and other companies are also trying to improve the qualities of the contents on their platforms. Why has content become so important now? First, good environment for content creators including software developers can bring in better contents including software, more and better contents will help to attract more users to the platforms. Secondly, more users will also attract developers, because developers will see there is a bigger market. So this can create a multiplier effect. Thirdly, the competition between similar platforms is increasing. To win the competition, they have to use their contents to gain more market shares. Fourthly, different types of contents can help to attract different types of users, firms can differentiate the contents on their platforms from each other’s to avoid price competitions and make everyone happy.
Overall, if there are more platforms appearing, the competition for content creation will increase significant, because only those with the best contents will survive at the end. People may still remember Windows Phone, why does it fail? It fails partially because the number of contents on this platform is nowhere near the numbers on IOS or Android.

Partnership between large firms

The share price of the chipmaker, AMD, was up by more than 15% after it listed Alphabet and Twitter as its clients (especially Alphabet). In addition, Microsoft’s share price also jumped significantly after it announced its partnership with AT&T. Yesterday, Samsung also announced its partnership with Microsoft, despite we have not seen any significant change in either company’s share price. While having competitions, firms are also forming partnerships in the market. Firms do not tend to form partnerships within their own sectors, they generally seek partnerships outside their own sectors. This is because of several reasons.

First, forming partnerships within their own sectors could have some legal problems that it can violate anti-trust laws. Secondly, firms from same sectors are often competing for more market shares, it is difficult for them to form any kind of partnership when they are fighting for the same goal. Thirdly, the partnership between firms from different sectors is a little bit like a merge between firms from different sectors that they can take advantage of each other’s unique advantages and strength. Fourthly, sometimes it is just better for them to cooperate. They may produce complimentary products, so they can sell their products together and promote both firms’ products at the same time. Fifthly, partnership is very flexible, unlike merge, firms can choose when and how they want to end a partnership. Sixthly, forming a partnership with another firm is a way of saying having this firm as my client now.

Overall, I think that we are going to see more partnership among firms, especially when the development of cloud and IOT makes the barriers between different sectors thinner.

Cause and Effect

When we are studying a problem, we always want to know the cause and the effect. It seems really easy to find causality that people just need to follow the logic; however, in reality, it is much more difficult because there are so many ways to explain what is happening in the real world, and most of the explanations can be reasonably accepted, people can find different causalities based on the explanations they choose. People have proposed various ways to identify a causality.

Some people look at the timeline that the cause comes before the effect. Is this a valid solution? Yes, it is. The problem is that we have to identify the cause and the effect are actually the cause and the effect that the two objects do have a correlation between them. For example, recently some US politicians suggest that the video games are the cause of increasing number of mass shootings in the US. Is this claim reasonable? It follows the pattern that the cause comes before the effect that the video games appeared much earlier than the significant increase in mass shootings in the US (of course, the politicians also provide the explanations of how video games contribute to increasing mass shootings) . However, there are a lot more things which happened before the significant increase in mass shootings, can we say all these things are the causes of increasing mass shootings? Obviously we cannot, we have to find the significance of the correlation between these two objects first, then look at the causality.

Of course, there are other ways to help identify causality which I will talk about later.

Why is theory important?

Nowadays more information become available and more accessible, big data analysis becomes very popular. Sometimes people can spot a phenomenon first through data analysis, then try to create a theory to explain this phenomenon. However, sometimes people use empirical study and/or experiments to test whether a newly developed theory works in the real world or not. Therefore, we can say that there is an undirected link between theory work and empirical work (and experiment work).

Theory is very important for us to understand the world. It helps us to understand the world. Theory and model often simplify the real world problem. More importantly, theory can help us to open the black box. When we observe a relationship between two objects, it is hard for us to draw a conclusion about the causality behind the relationship; then here comes the help from theory. From the mathematics and logic inside theory, people can understand the phenomenon better.

However, it does not mean theory is always correct. Especially in social science, for one thing, there are multiple theories to explain; all the theories seem legit. Sometimes theories are different because they are looking at the problem from different angles; sometimes they are different because they include various factors. When we face such differences, we do not need to worry too much, we just need to apply different theories based on the circumstances we face. However, when the logics behind them are different, then we should be very careful, because the two theories are possible to contradict each other.

Machine learning and other methods may be able to help us to solve problems, but theory will help us to look into the black box and gain better understanding.

Bear oil market

The oil market has been into the bear zone since early June and the price has fallen below $60 per barrel. The oil market has been closely correlated with the expectation of the world future economic performance. The falling oil price implies that the market is losing confidence in the world economy to some degree. It is not surprising to see people losing confidence, since it seems the trade tension between the US and China is not going to be resolved in any near future even after the two presidents met in the G20 summit. In addition, the UK is near its Brexit deadline and has a new Prime Minister, people are also wondering how the UK is going to leave the European Union and what consequences might be brought by Brexit. People do have good reasons to worry about the world future economic performance.

The oil market is dragged back by other factors in the world economy; however, some industries are dragged back by the falling oil price. Of course, the oil companies are suffering from the lower oil price that the share prices of oil companies fall sharply in general. In addition, other energy industries are also suffering from the lower oil price, including the solar industry. Furthermore, since the lower oil price is also driven by the weak demand, it means those who produce oil related products do not perform very well, although the costs for their raw materials decrease.

Overall, I do not see the oil market can climb out of the bear zone any soon, given the increasing uncertainty in the world economy. Moreover, I think that the market will keep pressuring the oil companies, despite their internal conditions, as the environment matters more in this case. 

Some thoughts about data

These are just some of my personal thoughts about the current data world. First, it will make data analysis a lot easier if observations can have uniform ID numbers despite their sources. At the moment, observations which come from different sources tend to have different ID numbers; for example, one individual whose information is included in two databases usually has two ID numbers if the two databases do not belong to one source. When doing data analysis, one database is sometimes not enough given the question we want to answer. If observations can have uniform ID numbers across databases, it will be much easier to merge different databases and carry out the data analysis we want. However, having a uniform ID number can make data analysis easier but is problematic. Firms and individuals do have their unique IDs which help to identify them (for example company registration numbers and individuals’ passport and driving license numbers). However, these unique ID numbers, especially individual ID numbers,  are not included in most databases to protect the observed targets. Data are powerful and misusing data is dangerous. This is why large tech companies should be regulated for how they handle the data they collected from their users. Therefore, I think that when it comes to individuals’ information, to protect individuals’ privacy, databases should not include individuals’ ID numbers; but when it comes to some certain information, such as publicly listed companies’ information, we should have a uniform ID system for databases across the world.

A uniform ID system for publicly listed system is as easy as it sounds. Yes, publicly listed companies have their unique ID numbers, but these numbers merely show very limited information. For example, if one publicly listed companies acquire another publicly listed company, the ID number only shows the acquirer’ identity after the acquisition and the acquired company just disappear in the database. An ID number can be seen as a spot on a graph, and a spot can only included very limited information, which may be not even enough to trace back to its original company. What I think may work is to create a form of multiple dimension ID number. Multiple dimensions can help to contain sufficient information to identify the companies.