How Would Friedrich Hayek PPC?

Friedrich Hayek will always have a place in my heart. When I first read the Road to Serfdom, in my 20s, I thought it was a book of penetrating insight, and the winning example of how an intellectual could write for a mass audience. Now, too long later, I revisit those same ideas and they feel obvious to me, they feel partially misleading, and partially I feel like the ideas were never quite as popular as I imagined. This is, however, more a symptom of me growing up in a little intellectual bubble than anything else.

Let’s recap Hayek’s most influential idea. In his era, there was a debate raging among the intellectuals and economics, a mostly forgotten albeit interesting footnote that was called the “socialist calculation debate.” It asked: “imagine there was a super-smart computer that could manage the economy, doing things like distributing work and making resource allocation decisions. What would the algorithm that would power this hypothetical computer look like?” This question was interesting on many levels, including if you’re going to debate the classic “socialism vs capitalism” question, socialism starts with the assumption that the government can do a good job of figuring out how to manage and allocate the factories, production, distribution, and so on. And this question asks, “well, if the government were to do all that, what’s the formula or process it would use to come to its decisions on the tiny little details?”

And Hayek had the smack-down answer (years later, I realize that  a lot of the credit goes to his even-more-obscure mentors and intellectual influences upon him, like the secret giant of Ludwig Von Mises). That answer is two words: “local knowledge”. That is to say if you don’t think about it from the guys at the top (building the super-powerful computer to make decisions) but instead at the other end of the spectrum, the little factory workers or the guy in the street who is at the final point interacting with and implementing the smallest details. These guys will always have the on-the-street, real-life knowledge of how things work in reality, that can never be accurately captured by any algorithm or computer, no matter how complex. Life, and getting s— done, is too complex. Maybe he knows that you work around a system like this, or that at this partner there is one friendly person who is the one he always needs to approach, or if you word that request in that way it’s more likely to happen. Or he knows this material doesn’t hold up as much as it should so he always needs to improve and hack this other solution, or that this form is always delayed by the authorities but that other version that is theoretically slightly imperfect but goes near-infinitely-faster, and so forth. There are endless ways were that guy’s “local knowledge” lets the whole system work, that no super-computer can capture. And thus, capitalism has to win, because capitalism encourages and rewards local knowledge in a way that the top-down approach can’t. The little factory worker who improves a solution on his own to make it 10x better can go start his own company that produces the same thing but at 1/10th of the cost! At least in theory!

Now, let’s apply this theory to PPC. Part of the genius of Hayek’s local knowledge insight is it makes formal and compelling an intuitive observation, in the PPC world: your client will always know his business better than you know it. Your client is a guy or girl with local knowledge about how things work in his industry.

So Hayek’s PPC strategy would never be, “let’s create the perfect AI machine learning to make all the decisions, so our algorithm can make all the decisions while you hang out on the beach”. (I know PPC-s like that–there are a lot–and that is indeed the way that Google is pushing the whole industry towards.) Rather, he would be the much more old-fashioned type of PPC to work with those as closest to the end-user as people, as “local” as possible, to get the best knowledge from them. And then to do so not just in a one-time setup sort of way, but in an endless feedback look with them, deeply incorporating their sort of knowledge into his processes. Indeed, this is just about his core idea in and of itself!

So the question as to how good he would be as a PPC boils down to, which PPC approach do you prefer. The AI super-intelligence so the campaigns can run smoothly on their own? Or the human working closely on the details with the client? PPC-s tend to be split somewhat evenly down the two sides, so your answer would be which style you prefer as a PPC. And since I’m the one writing this analysis, I’ll tell you that my preferred style is–by far–the human, local knowledge style so, as such, I’ll choose Hayek as a PPC any day.

Footnote: when I was in college and first discovered Hayek, I thought this web page was the funniest web page ever.

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