4 min read

Beijing's greatest test

China's rebalancing will be economically brutal and politically disruptive; the death of telephone polling; paying for the pandemic through lower real wages; and the chess detective on cheating.

1—Beijing's greatest test

The rumour mill was running in overdrive on Friday amid speculation that Beijing was about to soften its 'dynamic zero-COVID' policy, perhaps even providing a timeline towards reopening. Alas, state media quickly shut that down over the weekend:

"But authorities poured cold water on the speculation, with National Health Commission (NHC) spokesperson Mi Feng confirming on Saturday that Beijing would 'stick unswervingly to ... the overall policy of dynamic zero-COVID'.

'At present, China is still facing the dual threat of imported infections and the spread of domestic outbreaks,' Mi said at a press briefing.

'The disease control situation is as grim and complex as ever,' he said. 'We must continue to put people and lives first'."

But how it unwinds the disastrous COVID policies may not be Beijing's biggest test. According to Michael Pettis:

"I've long argued that the only sustainable way China can manage its economic rebalancing and resolve its bad debt is by forcing local governments to absorb the costs by transferring or liquidating assets... This process is only beginning, but I expect it to accelerate over the next few years. That's because there is no other sector that can absorb rebalancing and bad debt costs without further undermining an already strained economy.

But this doesn't mean the process will be easy. It will involve a substantial re-ordering of business, financial, and political institutions and will seriously undermine local political and business elites, while creating new centers of power.

You can't transfer huge amounts of economic resources, after all, without also reorganizing political power. In my opinion this will be by far the greatest test the Beijing government will face, especially as it must occur in the context of rapidly-slowing economic growth."

You can read Pettis' full Twitter thread here (~3 minute read), in which he cautions that China will change significantly over the next decade because the rebalancing will be "economically brutal and politically disruptive".

2—The death of telephone polling

How do phone polls work when the vast majority of people – 99.6% – are for various reasons uncooperative when called by pollsters? The NYT's pollster Nate Cohn explains:

"The Times has more resources than most organizations, but this is getting pretty close to 'death of telephone polling' numbers. You start wondering how much more expensive it would be to try even ridiculous options like old-fashioned door-to-door, face-to-face, in-person interviews."

Four out of five people screen their calls "almost 100 percent of the time", which poses some sampling problems even when the pollster gets through:

"What do we do to account for this? The main thing is we make sure that the sample of people we do reach is demographically and politically representative, and if not, we adjust it to match the known characteristics of the population. If we poll a state where registered Democrats outnumber Republicans by two percentage points, and our respondents wind up being registered Democrats by a four-point margin, we give a little less weight to the Democratic respondents.

We make similar adjustments for race; age; education; how often people have voted; where they live; marital status; homeownership; and more. As I explained last month, we believe our polls provide valuable election information. Is all of this enough? After 2020, it's hard not to wonder whether the people who answer the phone might be more likely to back Democrats than those who don't answer the phone."

The NYT is trying to figure out how its polls have gone wrong by "conducting some expensive multi-method research". You can read Cohn's full article here (~4 minute read).

3—Paying for the pandemic

We're all poorer because of the pandemic. The government's pandemic debt will be paid with some combination of inflation (including via lower real wages) and higher taxes.

4—Chess detective

How much has cheating in chess risen over the past few years? By about a third, according to Kenneth Regan, a professor of computer science known as the 'chess detective':

"Players have been caught consulting cell phones in bathrooms, hiding devices in their clothes, and receiving coded signals from collaborators. In one case, a co-conspirator moved around the room, standing behind different chairs to represent squares on the chess board."

Those are all physical ways of cheating. But it's also commonplace online, as highlighted by the recent Magnus Carlsen / Hans Niemann Chess.com saga. But having analysed Niemann's recent play, Regan said it "looked normal":

"Sure, Niemann had played more aggressively than the other players, but–while Regan was not exonerating him–he found that Niemann's performance was within the expected range for someone of his rating. Regan was 'dismayed,' therefore, when Carlsen went after Niemann without apparent statistical evidence. 'It was disappointing,' he says.

At the same time, Regan was frustrated that Niemann’s lawsuit had 'overstretched' Regan's statements to suggest that he disagreed with the Chess.com report, which he largely endorsed. If the lawsuit proceeds to a trial, Regan could be called to testify by either side. 'I do have to get my ducks in a row,' he says."

That doesn't mean Niemann didn't cheat. Experts – and Regan himself – have long admitted that Regan's test isn't sensitive enough, meaning:

"A player who cheats only once or twice per game could still gain an advantage without tripping his wires. Likewise, a single game doesn’t contain enough data to catch a cheater; Regan typically needs to review at least four games to spot a pattern."

You can read the write-up in Time here (~8 minute read).

5—Further reading...

👷‍♀️ The productivity decline explained: "If you look at the plot of productivity in levels, we are now basically in line with pre-pandemic trend. We are about 4% above pre-pandemic (q4 2019) vs 1.5% before the new data and revisions, which is pretty normal growth for an (almost) 2 year period."

🎢 Stripe CEO Patrick Collison on adapting to the tech crunch: "The world is now shifting again. We are facing stubborn inflation, energy shocks, higher interest rates, reduced investment budgets, and sparser startup funding. (Tech company earnings last week provided lots of examples of changing circumstances.) On Tuesday, a former Treasury Secretary said that the US faces 'as complex a set of macroeconomic challenges as at any time in 75 years', and many parts of the developed world appear to be headed for recession. We think that 2022 represents the beginning of a different economic climate... To adapt ourselves appropriately for the world we’re headed into, we need to reduce our costs."

🙊 Whoops: After sacking half of its workforce, Twitter has asked some to return because they were laid off by mistake, or "management realised that their work and experience may be necessary to build the new features Musk envisions".