Friday, November 30, 2012

What I've Been Reading

On Anger by Lucius Annaeus Seneca. I am not qualified and don't even feel like commenting on someone like Seneca - I wish... I started reading him sooner...but it's never too late.

Believe me, the things which cause us such great heat are trifles, the sort of things that children fight and squabble over: there is nothing serious, nothing important in all that we do with such gloomy faces. It is, I repeat, the setting a great value on trifles that is the cause of your anger and madness.

A message to remember until the last breathe:

Nothing will be of greater service than to bear in mind that we are mortal: let each man say to himself and to his neighbour, "Why should we, as though we were born to live forever, waste our tiny span of life in declaring anger against any one? Why should days, which we might spend in honourable enjoyment, be misapplied in grieving and torturing others? Life is a matter which does not admit of waste, and we have no spare time to throw away.


This breath that we hold so dear will soon leave us: in the meantime, while we draw it, while we live among human beings, let us practice humanity: let us not be a terror or a danger to anyone. Let us keep our tempers in spite of losses, wrongs, abuse or sarcasm, and let us endure with magnanimity our shortlived troubles: while we are considering what is due to ourselves, as the saying is, and worrying ourselves, death will be upon us.


Anger: The Misunderstood Emotion by Carol Tavris is sort of a modern critique of Seneca.

Check out Alain de Botton's brilliant documentary (Seneca, On Anger) based on his book The Consolations of Philosophy.




The Ultimate Disrupter - Profile of Jeff Bezos

Fascinating profile of Jeff Bezos on Fortune Magazine - A must read !!

Jeff Bezos likes to read. That's a dog-bites-man revelation if ever there was one, considering that Bezos is the cerebral founder and chief executive of a $100 billion empire built on books. More revealing is that the Amazon CEO's fondness for the written word drives one of his primary, and peculiar, tools for managing his company: Meetings of his "S-team" of senior executives begin with participants quietly absorbing the written word. Specifically, before any discussion begins, members of the team -- including Bezos -- consume six-page printed memos in total silence for as long as 30 minutes. (Yes, the e-ink purveyor prefers paper. Ironic, no?) They scribble notes in the margins while the authors of the memos wait for Bezos and his minions to finish reading.

Amazon executives call these documents "narratives," and even Bezos realizes that for the uninitiated -- and fans of the PowerPoint presentation -- the process is a bit odd. "For new employees, it's a strange initial experience," he tells Fortune. "They're just not accustomed to sitting silently in a room and doing study hall with a bunch of executives." Bezos says the act of communal reading guarantees the group's undivided attention. Writing a memo is an even more important skill to master. "Full sentences are harder to write," he says. "They have verbs. The paragraphs have topic sentences. There is no way to write a six-page, narratively structured memo and not have clear thinking."



Quote of the Day

At no point in history have so many non-risk-takers, that is, those with no personal exposure, exerted so much control. The chief ethical rule is the following: Thou shalt not have antifragility at the expense of the fragility of others.

- Nassim Nicholas Taleb,  Antifragile: Things That Gain from Disorder

Thursday, November 29, 2012

The Case for a VAT

A common conservative argument is that holding down taxes will somehow starve the beast and automatically lead to lower spending. Not only is there no evidence supporting this belief, recent research argues that it is perverse. By reducing the tax-cost of spending, starve-the-beast theory has actually caused spending to rise.

Those who oppose big government would do better to concentrate their efforts on actually cutting spending. Holding down taxes or insisting that we keep a ridiculously inefficient tax system because that will give us small government is juvenile and bad for the country.

If people want small government, there are no shortcuts. Spending has to be cut. But if spending isn't cut, then I believe that we must pay our bills. I think it's better to do so as painlessly and efficiently as possible. Those who complain most about the VAT generally oppose all tax increases no matter how large the budget deficit is. They imagine that the fiscal crisis their opposition to higher taxes will help to create will lead to massive spending cuts that would be politically impossible otherwise. This cannot happen, however, because Congress is never going to enact a large deficit reduction package that has no tax increases; historically, such packages have aimed for a 50-50 split between spending cuts and revenue increases.

It is my observation that ideological dogmatism, rather than serious analysis, underlies the vast bulk of opposition to a VAT among conservatives. When, eventually, economic conditions force them to live in the real world, instead of a fantasy world where the budget can be balanced by abolishing Medicare, I think they will support a VAT just as European conservatives did. The longer they wait to do so, the greater the economic pain we will have to go through before conservatives bow to reality and support a VAT. 


- David Frum on Bruce Bartlett's newest policy paper which calls for a Value Added Tax


National Entrepreneur Day !

Naseem Taleb in his new book Antifragility: Things That Gain From Disorder dreams of a National Entrepreneur Day with the following message:

"Most of you will fail, disrespected, impoverished, but we are grateful for the risks you are taking and the sacrifices you are making for the sake of the economic growth of the planet and pulling others out of poverty. You are at the source of our antifragility. Our nation thanks you."


Want to help someone? Shut up and listen!

First principle of aid - RESPECT them and leave them alone if they don't want help.

And more importantly Ernesto Sirolli highly recommends reading the book Dead Aid: Why Aid Is Not Working and How There Is a Better Way for Africa by Dambisa Mayo.





Quote of the Day

Had Prozac been available last century, Baudelaire’s “spleen,” Edgar Allan Poe’s moods, the poetry of Sylvia Plath, the lamentations of so many other poets, everything with a soul would have been silenced.…

- Nassim Nicholas Taleb,  Antifragile: Things That Gain from Disorder

Wednesday, November 28, 2012

The Wild Life Of Our Homes

Few months ago, I had signed-up for NC University study of The Wind Life Of Our Homes and received my kit last week. I took samples of my front door (outside and inside), kitchen counter and pillow case; filled out the questionnaire of their website and will be mailing out the samples tomorrow.

I am a big fan of Rob Dunn author of a brilliant book The Wild Life of Our Bodies: Predators, Parasites, and Partners That Shape Who We Are Today (review here) and he is the one who is conducting this study. I am so glad to be part of their study and now waiting eagerly (and little petrified) for the results !!

Excerpts from Rob Dunn's book The Wild Life of Our Bodies: Predators, Parasites, and Partners That Shape Who We Are Today:

It is sometimes suggested that what we need to do in cities is to restore “nature.” A body of literature and theory often referred to as “biophilia” posits that we have an innate fondness for nature, and so restoring nature to our lives makes us happier and healthier. I disagree for what might seem to be (but is not) a subtle reason. Namely, by any reasonable definition, the species that have filled in around us in cities are nature. The species that live on our bodies are also nature, as are both smallpox and toucans. What is missing from our lives is not nature, but instead a kind of nature that most benefits us. By that same token, the life we love to have in our neighborhoods and daily lives (bio = life, philia = to love) is not all life, but the life that benefits us in some way. When tigers chased us, we had no innate love for them. When diseases killed our families, we had no love for them either. And so what we need in our cities and suburbs as we move forward is not simply “more nature.” More rats would be more nature, as would more roaches and mosquito-vectored diseases. No, what we need are more of some aspects of nature, its richness and variety and, more pointedly, its benefits.

When we think about benefits, we cannot think simply about what our eyes tell us. The species that benefit us in the future may well include worms, ants, and our gut microbes. They may include, in other words, a much more burgeoning ark of life than we tend to consider when we plan parks and gardens. In our guts, we may really need to give ourselves worms. That we hesitate at this point is largely a function of what our eyes tell us, not of clinical results. We do not yet understand the way worms work as a treatment, but neither do we understand the ways in which most of our modern medicines work. Ask a researcher how Ritalin or pain medication works. In most cases, no one knows. We just know that when taken, a symptom or even a disease goes away. So it is, for now, with the worms.





What I've Been Reading

How Much is Enough?: Money and the Good Life by Robert Skidelsky and Edward Skidelsky. The first six chapters are sprinkled with age old wisdom distilled into contemporary format and also, they (rightly) bash both extremes - the religion of invisible hand and environmental fear mongers of climate change. But in the disappointing final chapter (a.k.a remedies), the authors retract to the extreme left wing rhetoric... if only...

Adam Smith thought that “frugality” was part of self-interest, and that laws restraining luxury spending were therefore unnecessary. What he failed to foresee was that, in affluent societies, the competitive spending on luxuries previously confined to the very rich would become universal, resulting in the endless postponement of plenty.

Seven basic criteria's for a good life:
  • Health - Health means a happy obliviousness of one’s own body, as of a tool perfectly fitted to its tasks. In the words of French physician René Leriche, it is “life lived in the silence of the organs.” Health looks outwards. Illness throws one back upon oneself.
  • Security - An individual’s justified expectation that his life will continue more or less in its accustomed course, undisturbed by war, crime, revolution or major social and economic upheavals.Those who cannot find work locally are urged to relocate, those whose talents have become redundant to “retool.” This is to get things precisely backwards. It is not human beings who need adapting to the market; it is the market that needs adapting to human beings. That was the guiding principle of the early twentieth-century social liberals, whose enlightened efforts to minimize the insecurities of capitalism have now largely been jettisoned.
  • Respect - Suppose (what is not too implausible) that persistent unemployment were to lead to the division of society into two hereditary castes, a working majority and a jobless minority. It would then be all too easy to enshrine this de facto distinction in law, with differential civil and voting rights. Democracy as we know it would cease to exist. It is also important for mutual respect that inequality not exceed certain bounds.
  • Personality - Personality implies a private space, a “room behind the shop” as Montaigne called it, in which the individual is at liberty to unfurl, to be himself. It denotes the inward aspect of freedom, that which resists the claims of public reason and duty. A society devoid of personality, where individuals accepted their social role without tension or protest, would scarcely be human. It would be more like a colony of intelligent social insects, of the sort envisaged in certain science-fiction films.
  • Harmony with Nature - A sense of kinship with animals, plants and landscapes is hardly a Western peculiarity. The abundance of nature poetry in Sanskrit, classical Chinese and other languages around the world is sufficient proof of that.
  • Friendship - Why do we speak of “friendship” instead of “community,” a word that has become horribly popular in recent decades? Our concern has to do with reification. It is all too easy to talk about the “good of the community” as though this were something over and above the good of its constituent members. The term “friendship” is not open to this kind of abuse. If we could learn to think of communities in this fashion, as networks of friends, one notorious source of political oppression would be removed.
  • LeisureIn contemporary parlance, leisure is synonymous with relaxation and rest. But there is another, older conception of leisure, according to which it is not just time off work but a special form of activity in its own right. Leisure in this sense is that which we do for its own sake, not as a means to something else. The philosopher Leo Strauss wrote of his friend Kurt Riezler that “the activity of his mind had the character of noble and serious employment of leisure, not of harried labor.”

Money is the one thing of which there is never enough, for the simple reason that the concept “enough” has no logical application to it. There is perfect health and happiness, but there is no perfect wealth.
We do not want to banish the engineers of growth only to see them replaced by the engineers of bliss.






Quote of the Day

It is ultimately the ‘same’ human being who meets us again and again in a thousand manifestations and in a thousand masks.

The Logic of the Cultural Sciences: Five Studies by Ernst Cassirer

Tuesday, November 27, 2012

A Market For Lemons - George A. Akerlof

George A. Akerlof's 13 page paper "A Market for Lemons" was awarded Nobel for economics in 2001 - read the whole thing - it's enlightening and wiki summary here:

Imagine that owners of lemons are willing to sell for $1000 and owners of plums are willing to sell for $2000. Imagine that purchasers are willing to pay up to $1200 for a lemon and up to $2400 for a plum. Assume that sellers know what kind of car they have, but buyers can't tell. All buyers know is that half of all used cars are lemons. Therefore, based on the expected probability that a given car is a lemon, they will pay only up to $1800 for any car (1/2*1200 + 1/2*2400). But plum owners aren't willing to sell for only $1800, so only lemon owners will sell. The logical conclusion is that only the lemons will be sold, and the equilibrium price will be between $1000 and $1200. The mere presence of inferior goods destroys the market for quality goods (an externality problem) when information is imperfect. Plum owners need some way of signaling their car's quality.

Possible market solutions: 

warranties/guarantees (shared risk), iterated interaction (brand names, chains), certification (diplomas, JD Powers, credit reporting). Possible non-market solutions: government certification agencies (FDA), licensing.To put this in terms of X and Y, asymmetric information (X) leads to adverse selection (Y).

  • Asymmetric information: The buyer and seller have unequal information about the vehicle's type.
  • Adverse selection: The buyer risks buying a car that is not of the type he expects--e.g. buying a lemon when he thinks he is buying a plum.
Basically, the "lemon principle" is that bad cars chase good ones out of the market. This is related to Gresham's law (bad money drives out good money through mechanism of exchange rates).


Apprenticeship - Value Lesson Over Money

It is a simple law of human psychology that your thoughts will tend to revolve around what you value most. If it is money, you will choose a place for your apprenticeship that offers the biggest paycheck. Inevitably, in such a place you will feel greater pressures to prove yourself worthy of such pay, often before you are really ready. You will be focused on yourself, your insecurities, the need to please and impress the right people, and not on acquiring skills. It will be too costly for you to make mistakes and learn from them, so you will develop a cautious, conservative approach. As you progress in life, you will become addicted to the fat paycheck and it will determine where you go, how you think, and what you do. Eventually, the time that was not spent on learning skills will catch up with you, and the fall will be painful.

Instead, you must value learning above everything else. This will lead you to all of the right choices. You will opt for the situation that will give you the most opportunities to learn, particularly with hands-on work. You will choose a place that has people and mentors who can inspire and teach you. A job with mediocre pay has the added benefit of training you to get by with less— a valuable life skill. If your apprenticeship is to be mostly on your own time, you will choose a place that pays the bills—perhaps one that keeps your mind sharp, but that also leaves you the time and mental space to do valuable work on your own. You must never disdain an apprenticeship with no pay. In fact, it is often the height of wisdom to find the perfect mentor and offer your services as an assistant for free. Happy to exploit your cheap and eager spirit, such mentors will often divulge more than the usual trade secrets. In the end, by valuing learning above all else, you will set the stage for your creative expansion, and the money will soon come to you.


- Tim Ferriss


Quote of the Day

Take care not to casually discuss matters that are of great importance to you with people who are not important to you. … Most people only know how to respond to an idea by pouncing on its shortfalls rather than identifying its potential merits. Practice self-containment so that your enthusiasm won’t be frittered away.

- Epictetus, Art of Living: The Classical Manual on Virtue, Happiness, and Effectiveness

Monday, November 26, 2012

What I've Been Reading

The Signal and the Noise: Why So Many Predictions Fail-but Some Don't by Nate Silver. Silver is one of those people who has given immense hope to the future of AI in abstract fields as politics; cannot think of better person to gauge the present and future of AI in predicting earthquakes to economic growth. The book is packed with information and demolishes any preconceived notions (your weatherman is not a moron) - A must read!!

"Distinguishing the signal from the noise requires both scientific knowledge and self-knowledge: the serenity to accept the things we cannot predict, the courage to predict the things we can, and the wisdom to know the difference."

The Noise:
  • Men may construe things after their fashion / Clean from the purpose of the things themselves,” Shakespeare warns us through the voice of Cicero— good advice for anyone seeking to pluck through their newfound wealth of information. It was hard to tell the signal from the noise. The story the data tells us is often the one we’d like to hear, and we usually make sure that it has a happy ending.
  • We face danger whenever information growth outpaces our understanding of how to process it. Data-driven predictions can succeed— and they can fail. It is when we deny our role in the process that the odds of failure rise. Before we demand more of our data, we need to demand more of ourselves.
  • The problem, Poggio says, is that these evolutionary instincts sometimes lead us to see patterns when there are none there. “People have been doing that all the time,” Poggio said. “Finding patterns in random noise."
  • We need to stop, and admit it: we have a prediction problem. We love to predict things— and we aren’t very good at it.
  • The most calamitous failures of prediction usually have a lot in common. We focus on those signals that tell a story about the world as we would like it to be, not how it really is. We ignore the risks that are hardest to measure, even when they pose the greatest threats to our well-being. We make approximations and assumptions about the world that are much cruder than we realize. We abhor uncertainty, even when it is an irreducible part of the problem we are trying to solve.
  • Our brains, wired to detect patterns, are always looking for a signal, when instead we should appreciate how noisy the data is.
The Signal:
  • It is forecasting’s original sin to put politics, personal glory, or economic benefit before the truth of the forecast. Sometimes it is done with good intentions, but it always makes the forecast worse. The Hurricane Center works as hard as it can to avoid letting these things compromise its forecasts. It may not be a concidence that, in contrast to all the forecasting failures in this book, theirs have become 350 percent more accurate in the past twenty-five years alone.
  • It’s easy for climate systems, if they want to see what’s happening in the atmosphere, they just have to look up. We’re looking at rock. Most events occur at a depth of fifteen kilometers underground. We don’t have a hope of drilling down there, realistically— sci-fi movies aside. That’s the fundamental problem. There’s no way to directly measure the stress. Without that theoretical understanding, seismologists have to resort to purely statistical methods to predict earthquakes. Even if we had a thousand years of reliable seismological records, however, it might be that we would not get all that far. It may be that there are intrinsic limits on the predictability of earthquakes.
  • Economics is a much softer science. Although economists have a reasonably sound understanding of the basic systems that govern the economy, the cause and effect are all blurred together, especially during bubbles and panics when the system is flushed with feedback loops contingent on human behavior.
  • Mathematics classrooms spend more time on abstract subjects like geometry and calculus than they do on probability and statistics. In many walks of life, expressions of uncertainty are mistaken for admissions of weakness.
  • You will need to recognize that there is wisdom in seeing the world from a different viewpoint. The more you are willing to do these things, the more capable you will be of evaluating a wide variety of information without abusing it.
We have big brains, but we live in an incomprehensibly large universe. The virtue in thinking probabilistically is that you will force yourself to stop and smell the data— slow down, and consider the imperfections in your thinking. Over time, you should find that this makes your decision making better.






Sebastian Thrun - #4 On Top 100 Global Thinkers!


Thrun thinks the cars could halve the number of annual road deaths, now at more than 1.2 million worldwide. And because the safer driverless vehicles could be built smaller and lighter, they could also radically reduce fuel use and greenhouse gas emissions.

- More Here

Andrew NG and Daphne Koller are #37 !!


Quote of the Day

The major difference between a thing that might go wrong and a thing that cannot possibly go wrong is that when a thing that cannot possibly go wrong goes wrong it usually turns out to be impossible to get at or repair.

-  Douglas Adams, The Hitchhiker’s Guide to the Galaxy


Sunday, November 25, 2012

And This Much Is Enough

I need a jug of wine and a book of poetry, 
Half a loaf for a bite to eat, 
Then you and I, seated in a deserted spot, 
Will have more wealth than a Sultan’s realm.

- Omar Khayyam

More Antifragility

Taleb's Antifragility: Things That Gain From Disorder has unleashed polarizing reviews - here, here, here, here, here, here and here. Well, either way I am gonna start reading tomorrow and probably will love it.

I lift stones and do weightlifting. I don’t go to the doctor except when I’m very ill, and when I go to India, I drink a drop of local water. Things like this harness the body’s antifragility. I have never had personal debt and never will. I also picked a profession in which I am antifragile, because any attack makes me stronger. When I write about something, I have skin in the game, and I have benefitted more from attacks on The Black Swan than been harmed by them.

What we do today has nothing to do with capitalism or socialism. It is a crony type of system that transfers money to the coffers of bureaucrats. The largest “fragiliser” of society is a lack of skin in the game. If you are mayor of a small town, you are penalised for your mistakes because you are made accountable when you go to church. But we are witnessing the rise of a new class of inverse heroes – bureaucrats, bankers, and academics with too much power. They game the system while citizens pay the price. I want the entrepreneur to be respected, not the CEO of a company who has all the upsides and none of the downsides.


I no longer care about the financial system. I gave them my roadmap. OK? Thanks, bye. I've no idea what's going on. I'm disconnected. I'm totally disengaged. People read 3m copies of The Black Swan. The bulk of them before the crisis. And people love it. They agree with it. They invite me to dinner. And they don't do anything about it.


- Interview Here and Here

In 1987 he made a great deal of money shorting the financial crash, and millions more during the 2008 meltdown. It's his "fuck you" money that allows him to do exactly what he wants, when he wants, beholden to no one.

Life of Pi - Novel vs Movie

After reading the novel, it’s hard to believe that the film adaptation is rated PG. With four animals, including two carnivores, stuck on a small lifeboat with no food, it’s safe to assume that nature will eventually take its course. After a few a days on open water, the hyena attacks the injured zebra, and the novel graphically describes how the hyena eats the zebra alive and eventually kills Orange Juice as well. Pi is also forced to hunt despite being raised vegetarian and is even desperate enough to try and eat Richard Parker’s feces as well. The book isn’t for those with weak stomachs, but the film spares viewers all the blood and guts.

Towards the end of the book, Pi loses his vision when he runs out of food and fresh water and he begins to have a conversation with a voice he believes belongs to Richard Parker. The two discuss their favorite foods, and it becomes clear that Pi is losing his mind. He then has an unlikely encounter with another man who is stranded at sea. Desperate for food, the man attacks Pi but he is killed by Richard Parker. The sequence didn’t make the film and probably wouldn’t have translated to the big screen. But it is a pivotal chapter in the book as it is the least probable part of Pi’s story and is the first time the reader sees Pi as an unreliable narrator.


- More Here

Read Yann Martel's novel Life of Pi and decide for yourself.


Quote of the Day

What we suffer from today is humility in the wrong place. … A man was meant to be doubtful about himself, but undoubting about the truth; this has been exactly reversed. … The old humility made a man doubtful about his efforts, which might make him work harder. But the new humility makes a man doubtful about his aims, which will make him stop working altogether.

GK Chesterton

Saturday, November 24, 2012

The Financial Crisis and the Free Market Cure

Arnold King review of The Financial Crisis and the Free Market Cure: Why Pure Capitalism is the World Economy’s Only Hope by John A. Allison.

In Allison’s view, it was misregulation, not deregulation, that caused the crisis. At a deeper level, Allison believes that collective efforts at financial regulation are doomed to fail, and that free markets are the only solution.

In my view, banking and financial intermediation pose a difficult problem. The challenge is that it is difficult to distinguish a prudent, competent banker, who is managing money responsibly, from a banker who is incompetent or a banker who takes risks irresponsibly, expecting to profit if things go well while expecting others to bear most of the loss if things go poorly. In good times, good bankers and bad bankers may be indistinguishable. Only under stress does it become clear which is which.

Allison is very good at criticizing the conventional approach. However, his description of the libertarian approach does not confront the obvious challenges involved. In particular, if ordinary individuals must bear the risks of failure to distinguish good bankers from bad bankers, are they not likely to place very little trust in financial intermediaries? Does this not imply a greatly diminished financial sector, reducing overall investment and growth in society?

If left to themselves, ordinary individuals will want experts to help them find the best banks in which to deposit funds. Experts can enhance their credibility by offering guarantees. Thus, consumers will be attracted to schemes that insure against loss. In other words, consumers will seek out the same sorts of services that government provides with bank regulation and deposit insurance. Perhaps these services will be provided effectively by market institutions. However, Allison fails to offer convincing evidence that this is the case. If there is a successful example of a modern industrialized country with a libertarian financial system, I am not aware of it. This fact does not prove that the libertarian approach is unworkable, but it puts a burden on Allison to go into greater depth to explain what he thinks would emerge to address these problems.



How To Motivate People?

By far the best way to motivate your employees is to find ways that they can take pride in their skills and their knowledge. When you do this, you very quickly discover that people stop being passive followers and start to share their insights and ideas. Instead of being loyal to their pay checks they become loyal to the company.

- More Here

Wisdom Of The Week

For instance, Ayn Rand novels like The Fountainhead and Atlas Shrugged have spread an ethic of hard-core individualism through American culture, inspired the Tea Party, influenced the Federal Reserve (Alan Greenspan was a Rand disciple), and made the rise of politicians like Ron and Rand Paul possible.

How can fiction—the fake struggles of fake people—transform the real world? Until recently we have had no idea.  But in the last several decades psychology has begun a serious study of story’s effects on the human mind.  Fiction teaches us facts about the world, influences our morals, and marks us with fears, hopes, and anxieties that alter our behavior. As the psychologist Raymond Mar writes, “Researchers have repeatedly found that reader attitudes shift to become more congruent with the ideas expressed in a [fiction] narrative." In fact, fiction seems to be more effective at changing beliefs than non-fiction, which is designed to persuade through argument and evidence.
What is going on here? Why are we putty in a storyteller’s hands? The psychologists Melanie Green and Tim Brock argue that entering fictional worlds “radically alters the way information is processed.” Green and Brock’s studies shows that the more absorbed readers are in a story, the more the story changes them.  Highly absorbed readers also detected significantly fewer “false notes” in stories—inaccuracies, infelicities—than less transported readers.  Importantly, it is not just that highly absorbed readers detected the false notes and didn’t care about them (as when we watch a pleasurably idiotic action film). They were unable to detect the false notes in the first place.

And, in this, there is an important lesson about the molding power of story.  When we read non-fiction, we read with our shields up. We are critical and skeptical.  But when we are absorbed in a story we drop our intellectual guard. We are moved emotionally and this seems to leave us defenseless. Anecdotes about those rare ink people—like Rand’s John Galt or Stowe’s Uncle Tom--who vault the fantasy-reality divide to change history are impressive. But what is more impressive, if harder to see, is the way our stories are working on us all the time, reshaping us in the way that flowing water gradually reshapes a rock.


Jonathan Gottschall

Also check out Jonathan Gottschall's brilliant new book The Storytelling Animal: How Stories Make Us Human


Quote of the Day

What has always made the state a hell on earth has been precisely that man has tried to make it his heaven.

- Friedrich Höderlin quoted in The Road to Serfdom by F.A. Hayek

Friday, November 23, 2012

A New Immigrant-Group In The Immigrant-Dominated Tech World

A study released last month by AnnaLee Saxenian of Berkeley and Vivek Wadhwa of Duke found that 43.9 percent of Silicon Valley startups launched in the past seven years had at least one key founder who was an immigrant. That’s a big number, but it’s a drop from 2005, when 52.4 percent of startups were immigrant-founded.

The composition of immigrants in the Valley has shifted a bit, too. In Saxenian and Wadhwa’s ranking of countries that produced the most U.S.-based techies, Taiwan fell from fourth to 23rd. (The reasons for that drop—and the decline of immigrant-founders across the board—can be attributed in part to U.S. visa issues and burgeoning opportunities abroad.) At the same time, though, some tech insiders have seen Latin American-born entrepreneurs, a previously invisible cohort, begin to make their presence known in Silicon Valley.

Their numbers don’t come close to the Indian, Chinese, or even U.K. diaspora, and as of yet, our southern neighbors haven’t produced a nerdy-household name like India native Vinod Khosla of SunMicrosystems or Jerry Yang, the Taiwanese-born founder of Yahoo. There is, however, a nucleus of innovators from places like Argentina, Chile, and Colombia who have started companies aiming to create customized travel advice, digital wallets, and more. Like the Chinese and Indian entrepreneurs who came before, they are fostering interconnectedness between the United States and their native countries. And that’s going to have an impact on the tech scene in both places.


- More Here



Beasts of the Southern Wild

Beasts of the Southern Wild -  liked it but not a big fan of this movie. Having grown up in India, had more than enough dose too many depressing award winning "realistic" movies. This one makes me even more depressed since it based on "contemporary" American. But yet this is a monumental piece of film making and I think each American should watch it for two reasons:
  • If water is taken out the frames, one wouldn't see much difference between sub-Saharan African and the hidden American. This is sad and real. Wake up my dear countrymen - give a hand to cultivate humanity. 
  • Brilliant performance by that little gal Hushpuppy (Quvenzhané Wallis)
"The whole universe depends on everything fitting together just right. If one piece busts, even the smallest piece... the whole universe will get busted."




Quote of the Day

We do live in a fragile world, vulnerable to extreme shocks. But antifragility is not the solution. It is too crass an idea, and Taleb, for all his vaunted intellectual curiosity, is not really curious about the lives of anyone who doesn't live like him. He says it's better to be a taxi driver than a stockbroker, because you are less exposed to the whims of others. Let him try it. He thinks it's better to be a mafia hard man than a tenured academic. Again, let him try it. The problem with Antifragile is that it is a deeply antisocial book. I am pretty sure people will still be reading Taleb's two previous books in 10 years' time. But I'd be surprised if they are still reading this one.

- Review of Antifragile: How to Live in a World We Don't Understand by Nassim Nicholas Taleb

Thursday, November 22, 2012

An Algorithm For A Successful Recipe

It predicts with nearly 80 percent accuracy how many stars your mother's cranberry recipe will receive on allrecipes.com. Plus, it can recommend ingredient replacements to make your pie crust and potatoes more healthful. She and her team took nearly 50,000 recipes and 2 million reviews from allrecipes.com and then hacked up an algorithm to extract out all the ingredients, cooking methods and nutritional profiles. With just these items, her algorithm could predict the recipe's rating with an accuracy of about 70 percent.

But the magic happened when Adamic built a "social network" for the ingredients. She looked at how often two ingredients appear in the same recipes. Those that frequently show up together — milk and butter, nutmeg and cinnamon, basil and rosemary — sit close to each other in the network, but those that rarely appear in the same dish, such as coconut and parsley, are far from each other. ... Adamic's network analysis boosted the accuracy of her recipe recommendations by about 10 percent.


- PDF here,  via Andrew


What I've Been Reading

The Willpower Paradox: Why we evolved to have less willpower than we need by Geoff Alexander. Simple and well written focusing precisely on the psychology of willpower - great read.

Willpower:
Willpower is a form of mental strength drawn upon to put plans or ideas into action, or to abstain from action, for some form of perceived net benefit, and to overcome emotions and feelings which may be in the way of doing so. To do things which one has not attempted before, willpower is often required (via deferred gratification).
Willpower is not merely required to enact a complex plan, it is required ti implement a difficult plan in terms of emotional or sensory resistance - even if it is only one or two steps.

Freedom Inefficiency & Willpower Paradox:
The inconsistency between the potential actions or omissions of actions which one perceives as most preferential, and those actions or omissions of actions which one performs in reality.
If everyone always want what is most preferential, so how is it possible that freedom inefficiency exists? It is logically unjustifiable to ever act another way. It seems on the surface that it is a paradox. Freedom inefficiency is not a paradox, it just appears that way. It exists because the conscious mind is not the only force to hold sway our actions. We are also influenced by our subconscious mind influencing our instincts and habits. We are not holistic entities even though we may think of ourselves as such.

Mental Capability vs. Intelligence:
Mental capability is the quality of ones thinking taking into account intelligence and knowledge. High mental capability equates to maximizing the benefits of intelligence (but correlation between willpower and mental capability is distorted than it seems to be).

Meditation vs. Media:
Meditating can prove significant stress release and is generally perceived very positively, and as such, may be one of the the most hassle free ways to boost ones willpower.
It is possible that a limited exposure to media is useful for growing the willpower.

Improving Willpower:
  • The closest terminology that can be used to describe what we need to do to increase our willpower is trust. We need to get our subconscious mind to trust that our conscious mind is a responsible steward of our actions in comparison to acting directly out of instinct or habit.
  • When wilful activity leads to positive experiences that are the intended result of a initial wilful activity, the growth of willpower will be the greatest. This shows the subconscious brain that the conscious brain can accurately predict the consequences of its plans.
  • Our conscious mind is just one of many that our subconscious mind can listen to, but it is the one that is always with you and it is the one which almost guaranteed to be thinking in our best interests.
  • Unless you have strong will power like few do, your emotions doesn't always allow you control, it overwhelms you, it runs in unwanted directions at times. Train your emotional predispositions as best you can (by forming advantageous habits) and don't expose yourself to contexts where you are emotionally pre-disposed to want to do things against your interests.
  • Willpower is not a muscle - The growth of willpower depends on the perceived results of the use of willpower, not merely its use.
  • Low future expectations are perhaps optimal for willpower growth but may have some negative consequences. On the other hand, because people have a willpower deficit, a unrealistic concrete belief in a future outcome is likely to motivate one to attempt to achieve it more than otherwise.

Incredible Journey - Can We Reach The Stars Without Breaking The Bank?

Lee Billing's must read post on technological and economical hurdles of building a Starship:

Given the magnitude and number of extreme technological and economic challenges that must be overcome to achieve starflight, it's difficult to imagine what, in fact, a civilization capable of interstellar travel would look like. Probably not much like us--more than anything else, projects like Icarus and Daedalus seem to tell us that we are presently as distant from interstellar travel as the stars are from Earth. And, at least until our culture's prioritization of short-term profit once again aligns with pushing the limits of the ultimately possible, that's likely to remain the case.

Perhaps someday one of these starship designs will take us out of the solar system on voyages to other living planets, other cosmic oases, strewn among the stars. Or maybe all the methods conceived today will in the fullness of time bear no more resemblance to actual starships than airplanes have to birds. Either way, it's worth remembering that the 100,000-year duration of interstellar voyages we can undertake right now is but the blink of an eye in cosmic terms. It may actually be more effective to adapt our expectations to those timescales, and to attempt to master such long-term planning rather than trying to brute-force our way to Alpha Centauri.

In expanding outward into space, patience, not velocity, may be the greatest virtue. After all, we're already on an interstellar spacecraft called the Earth, sailing with the Sun and its retinue of other planets around the Milky Way in circuits lasting 250 million years. Only by carefully preserving and cultivating the relatively bountiful and accessible resources of our planet and the solar system will we ever escape their confines. For now, it's wise to reflect that in our headlong rush to go ever faster and farther, we may only be fooling ourselves.

Quote of the Day

This Being of mine, whatever it really is, consists of a little flesh, a little breath, and the part which governs.

- Marcus Aurelius, Meditations

 

Wednesday, November 21, 2012

Quote of the Day

Rumors are nearly as old as human history, but with the rise of the Internet, they have become ubiquitous. In fact we are now awash in them. False rumors are especially troublesome; they impose real damage on individuals and institutions, and they often resist correction. They can threaten careers, policies, public officials, and sometimes even democracy itself.

- Cass Sustein, On Rumors: How Falsehoods Spread, Why We Believe Them, What Can Be Done

Tuesday, November 20, 2012

The Future Of Lying - Jeff Hancock






College of Future Could Be Come One, Come All

No one knows just how these massive courses will evolve, but their appeal to a broad audience is unquestioned:retirees in Indiana see them as a route to lifelong learning, students in India as their only lifeline to college-level work.

The professors involved face new challenges. “It was really intimidating at the beginning to do these lectures with no live audience, no sense of who was listening and how they were reacting,” Professor Duneier said. “I talk about things like racial differences in I.Q., Abu Ghraib and public bathrooms, and I worried that my lectures might come across as examples of American ethnocentrism.” Feedback came quickly. When his first lecture went online, students wrote hundreds, then thousands, of comments and questions in online discussion forums — far too many for Professor Duneier to keep up with. But crowd-sourcing technology helped: every student reading the forum could vote questions and comments up or down, allowing him to spot important topics and tailor his lectures to respond.


Professor Duneier has been thrilled. “Within three weeks, I had more feedback on my sociological ideas than I’d had in my whole teaching career,” he said. “I found that there’s no topic so sensitive that it can’t be discussed, civilly, in an international community.”


The online discussion forum spawned many global exchanges. Soon after Professor Duneier talked about social norms, using as his example the lack of public restrooms for street vendors — including an embedded video of New York vendors — students in Hong Kong, India, Russia and elsewhere commented on the situation in their own cities.


- More Here

Check out the Mitchell Duneier's online Sociology class @ Coursera

Quote of the Day

Not that she’s proselytizing: “I’m not trying to dictate what foods are important or what foods you should like or dislike,” Alpert maintains. “I’m saying, ‘Look at it differently.’” To that end, she’s given everything from chocolate cake and candy to radishes and coffee beans the microscopic treatment, in the hopes of underscoring how natural and processed foods differ not only in their nutritional value but in their chemical structures. “If you start to look at what’s in the photos, like the pineapple leaf, there’s such a complicated scenario happening right on the leaves of the plant,” she says. “Conversely, the Lifesaver shows how our food is being changed so much in processing that it is not reminiscent of anything.”

An Electron Microscope Reveals The Hidden Horrors Of Processed Foods


Monday, November 19, 2012

How India Mistreats Kashmir

People in abusive relationships must adopt such displays of intense loyalty, and Kashmiris have been in an abusive relationship with the Indian state for more than two decades. What’s striking, particularly in a country that takes so much pride in its democracy, is the refusal of a large number of Indians even to acknowledge this reality. India’s much-revered public intellectuals and its voluble news media maintain a near total silence on the subject. Insulated from any serious debate on New Delhi’s conduct in Kashmir, many Indians fall back on old shibboleths to make sense of what is happening there. In these uncomplicated narratives, Kashmiri Muslims who speak up against New Delhi are naturally Pakistan-sponsored jihadis; Indian armed forces are incapable of wrongdoing; and Kashmir, without exception, is an “integral part” of India.

It’s a belief system that asserts India’s ownership of Kashmir by effectively disenfranchising Kashmiris. Kashmiris are demonized as fifth columnists and denied the treatment extended to “fellow citizens” in other parts of the country. But they are expected, in all circumstances, to pledge constant allegiance to India.

India advertises itself to the planet as the world’s largest democracy, a nation of laws, but consider the plight of the Kashmiris who are persecuted on the mere presumption of being enemies of Indian democracy – and then denied the legal remedies of democratic India to challenge that premise. The Indian government has invoked the AFSPA in more than 40 instances to prevent soldiers from being prosecuted for crimes ranging from torture and murder to rape.


- More Here

Quote of the Day

Slogans like “practice random acts of kindness” feel good and are easy to put into practice. But if we don’t take our activism more seriously than that, our motive is probably a desire to feel good about ourselves, to help ourselves or those close to us, or to act out our self-identity. The endpoint of authentic compassion is a desire to do the most good that one can, to be as effective as possible in creating a world with less suffering and destruction and more joy. Figuring out how we can do the most good takes careful thought over a long period of time, and it means moving into new and possibly uncomfortable areas of advocacy. But the importance of taking our activism seriously and approaching it from this utilitarian perspective cannot be overstated. It will mean a difference between life and death, between happiness and suffering, for thousands of people, for thousands of acres of the ecosystem, and for tens of thousands of animals.

- Nick Cooney, Change of Heart


Sunday, November 18, 2012

Antifragility - Learning To Love Volatility

Taleb's brilliant talk on his new book, Antifragile: Things That Gain from Disorder.

We all know that the stressors of exercise are necessary for good health, but people don't translate this insight into other domains of physical and mental well-being. We also benefit, it turns out, from occasional and intermittent hunger, short-term protein deprivation, physical discomfort and exposure to extreme cold or heat. Newspapers discuss post-traumatic stress disorder, but nobody seems to account for post-traumatic growth. Walking on smooth surfaces with "comfortable" shoes injures our feet and back musculature: We need variations in terrain.

Modernity has been obsessed with comfort and cosmetic stability, but by making ourselves too comfortable and eliminating all volatility from our lives, we do to our bodies and souls what Mr. Greenspan did to the U.S. economy: We make them fragile. We must instead learn to gain from disorder.


-
More Here






What Do Animals Want? - On Animal Consciousness

There are some people who feel you don't actually need evidence. All you need is a kind of relationship with animals, such as your dog, and you just know that it's conscious. You don't need any evidence. Anybody who says the dog isn't conscious is just blurring the issues and hindering progress. So it's a kind of given. I think that people like Marc Bekoff actually feel that all you need, and if you deny that, you are doing something as a disservice to animals. My argument is exactly the opposite way around.

My argument is saying, because we don't understand animal consciousness, we ought to be opening our eyes to the possibility that a great range of animals, not just mammals, not just birds, maybe invertebrates are conscious as well. It seems to me that by saying we don't understand consciousness, you're not closing off animals' consciousness. You're not denying animal consciousness altogether. You're just simply saying we don't know and therefore it might exist in a much wider range of animals.

It's a difference between saying it's a kind of gut feeling, that's all you need, and anything else is to be anti-animal welfare, or it's saying well, no, wait a minute, we don't know that. We don't know that in any animal. We don't even know that in humans. And it's much better to acknowledge our ignorance and to rest our case on things that we can actually find out; namely, the science of what actually affects animals' health and animal well fair as well.


-More Here


 




Quote of the Day

What is a country? A country is a piece of land surrounded on all sides by boundaries, usually unnatural. Englishmen are dying for England, Americans are dying for America, Germans are dying for Germany, Russians are dying for Russia. There are now fifty or sixty countries fighting in this war. Surely so many counties can't all be worth dying for.

- Catch-22

Saturday, November 17, 2012

Wisdom Of The Week

The work shows that camels can withstand massive blood glucose levels owing in part to changes in genes that are linked to type II diabetes in humans. The Bactrians' rapidly evolving genes include some that regulate insulin signalling pathways, the authors explain. A closer study of how camels respond to insulin may help to unravel how insulin regulation and diabetes work in humans. “I’m very interested in the glucose story,” says Brian Dalrymple, a computational biologist at the Queensland Bioscience Precinct in Brisbane, Australia.

The researchers also identified sections of the genome that could begin to explain why Bactrian camels are much better than humans at tolerating high levels of salt in their bloodstreams. In humans, the gene CYP2J controls hypertension: suppressing it leads to high blood pressure. However, camels have multiple copies of the gene, which could keep their blood pressure low even when they consume a lot of salt, suggest the authors of the latest work.

This rough analysis is only the start of the investigation into the camel genome. “There are interesting titbits for future work,” says Max Rothschild, an animal genomicist at Iowa State University in Ames.


- Bactrian Camel Genome Holds Survival Secrets



Quote of the Day

Be your gender what it may, you will certainly have heard the following from a female friend who is enumerating the charms of a new (male) squeeze: “He’s really quite cute, and he’s kind to my friends, and he knows all kinds of stuff, and he’s so funny … ” (If you yourself are a guy, and you know the man in question, you will often have said to yourself, “Funny? He wouldn’t know a joke if it came served on a bed of lettuce with sauce béarnaise.”) However, there is something that you absolutely never hear from a male friend who is hymning his latest (female) love interest: “She’s a real honey, has a life of her own … [interlude for attributes that are none of your business] … and, man, does she ever make ‘em laugh.”

Now, why is this? Why is it the case?, I mean. Why are women, who have the whole male world at their mercy, not funny? Please do not pretend not to know what I am talking about.


- Christopher Hitchens

Friday, November 16, 2012

Vulnerablity of American Electric Grid

Hurricane Sandy wasn’t a “sophisticated physical assault,” but it still did the job. The study was written in 2007 and classified by the Department of Homeland Security, but, in a new foreword, scientists say that its findings are still relevant:

We believe that we have a responsibility to make this report available to the public. Major cascading blackouts in the U.S. southwest in 2011, and in India in 2012, underscore the need for the measures discussed in this report. The nation’s power grid is in urgent need of expansion and upgrading. Incorporating the technologies discussed in the report can greatly reduce the grid’s vulnerability to cascading failures, whether initiated by terrorists, nature, or malfunctions.


- More Here


Quote of the Day

Mr. Obama’s more than three-to-one edge in exit polls among the 5 percent of voters who identified as gay, lesbian or bisexual was more than enough to give him the ultimate advantage, according to the study, by Gary J. Gates of the Williams Institute at the U.C.L.A. School of Law, in conjunction with Gallup. The results are consistent with earlier research on the size and political beliefs of gay voters.

- Nate Silver

Thursday, November 15, 2012

What I've Been Reading

Bull by the Horns: Fighting to Save Main Street from Wall Street and Wall Street from Itself by Sheila Bair. This book was "instantly" delivered to my kindle the moment I read Tyler Cowen stating that he learned something on virtually every page. They say that the devil is in the details - this book nothing but first hand details and more details.

The Fix:
Yes, it had come to that: the government of the United States, the bastion of free enterprise and private markets, was going to forcibly inject $125 billion of taxpayer money into those behemoths to make sure they all stayed afloat. Not only that, but my agency, the FDIC, had been asked to start temporarily guaranteeing their debt to make sure they had enough cash to operate, and the Fed was going to be opening up trillions of dollars’ worth of special lending programs. All that, yet we still didn’t have an effective plan to fix the unaffordable mortgages that were at the root of the crisis.

In retrospect, the mammoth assistance to those big institutions seemed like overkill. I never saw a good analysis to back it up. But that was a big part of the problem: lack of information. When you are in a crisis, you err on the side of doing more, because if you come up short, the consequences can be disastrous.


A lesser known fact:
The FDIC has never been funded by taxpayers. Even though the FDIC’s guarantee is backed by the full faith and credit of the U.S. government, it has always charged a premium from banks to cover its costs. However, in 1996, banking industry trade groups convinced the Congress to prohibit the FDIC from charging any premiums of banks that bank examiners viewed as healthy, so long as the FDIC’s reserves exceeded 1.25 percent of insured deposits. This essentially eliminated premiums for more than 90 percent of all banks, which in turn created three problems.
First, because of those limits, the FDIC was unable to build substantial reserves when the banking system was strong and profitable so that it would have a cushion to draw from when a downturn occurred without having to assess large premiums. 
Second, it created a “free rider” problem.
Finally, it did not allow us to differentiate risk adequately among banks.

Another lesser known fact:
Once the crisis hit, the myth that large banks were less risky because they had diversified loan portfolios proved to be just that: a myth. All of their portfolios suffered losses. And as it turned out, the quality and performance of the commercial real estate loans made by the smallest community banks were better than those originated by larger institutions. That was a prime example of how regulatory policy can have a disproportionate competitive impact on the industry. As examiners began enforcing the guidance, smaller banks were required to either reduce their CRE concentrations or put in better risk management controls. Meanwhile, the larger banks with which they had to compete for CRE loans did not come under the same scrutiny because they did not have CRE concentrations.

Fixed Rate vs Hybrid ARMs:
While on the one hand bashing subprime borrowers, the lobbyists also complained that by tightening standards on hybrid ARMs, we would be constricting credit to lower-income borrowers. They argued that the lower interest rate subprime borrowers received during the two- to three-year introductory period qualified more low-income borrowers to buy homes. I had heard the same argument from the Fed and OCC, and it really sent me through the roof. We had closely analyzed the terms sheets of several of the mortgage bankers and found that the thirty-year fixed rate they offered subprime borrowers was typically lower than or about the same as the so-called teaser rate they offered on hybrid ARMs.

Many of the bloggers obviously viewed subprime borrowers as flippers and speculators, not families trying to hold on to their homes. That was an erroneous perception. Indeed, our data showed that more than 93 percent of subprime loans had been made to individuals or families occupying their homes. Professional investors and speculators generally opted for the NTM loans— option ARMs— that provided extremely low payments for five years. Real estate professionals were too smart to take out the abusive 2/ 28s or 3/ 27s. Those, for the most part, were marketed to lower- and moderate-income people who lacked financial sophistication.



Failure of FED:
The subprime lending abuses could have been avoided if the Federal Reserve Board had simply used the authority it had since 1994 under the Home Ownership Equity Protection Act (HOEPA) to promulgate mortgage-lending standards across the board. The Fed was the only government agency with the authority to prescribe mortgage-lending standards for banks and nonbanks. The Financial Crisis Inquiry Commission (FCIC) concluded in its 2011 report:

"There was an explosion in risky subprime lending and securitization, an unsustainable rise in housing prices, widespread reports of egregious and predatory lending practices, dramatic increases in household mortgage debt... Yet there was pervasive permissiveness; little meaningful action was taken to quell the threats in a timely manner. The prime example is the Federal Reserve’s pivotal failure to stem the flow of toxic mortgages, which it could have done by setting prudent mortgage-lending standards. The Federal Reserve was the one entity empowered to do so and it did not."

(Lack of) Skin in the game:
Economic incentives to assure good-quality underwriting were weak because the banks were selling the loans and passing on the risk of future default to investors through securitizations. Regulators and accountants also gave banks incentives to securitize loans. If they kept the loans in their own portfolios, they would have to hold capital and reserves against them to protect against potential losses. If, on the other hand, they sold them into securitizations, the regulators and accountants assumed that the risk had been transferred, so there were no capital and reserve requirements.  

Why wouldn’t investors tell the servicers to modify loans? After all, if a foreclosure cost more money than a modification, it was the investors, not the servicers, who took the loss. But in point of fact, just the opposite happened, with some investors threatening to sue servicers over modifying loans. Why would investors want to sue servicers for trying to rehabilitate delinquent loans? After all, that would usually save them money over the cost of foreclosure. The answer to that question goes to the heart of what I believe was probably the single biggest impediment to getting the toxic loans restructured: the conflicting economic incentives of investors themselves.


The culture was for the servicers and the investors they worked for to squeeze every penny they could out of borrowers, and that meant that they would negotiate loan by loan. “These guys will step over a dollar to pick up a nickel,” said George Alexander, our most seasoned securitization expert. No truer words were ever spoken.


In making our financial institutions work better, I have long believed that the most successful regulations are those that create the right economic incentives and let market forces do the rest. That is why I like skin-in-the-game requirements— because they force market participants to put their own money at risk and su
ffer the consequences if their actions result in financial loss.


So much for self regulating market:
I finished my speech, and the lackluster applause spoke volumes. I looked over the crowd of predominantly thirty-something white male Wall Street deal makers, and those who weren’t glaring at me were casting sideways glances at each other or rolling their eyes. I thought they were going to throw rotten eggs and tomatoes at me. Then the question-and-answer session began. 

A hand shot up in the back of the room. The gentleman started lecturing me about how it wasn’t possible to help “these people,” referring to subprime borrowers. “You give them a break,” he said, “and they will just go out and buy a flat-screen TV.” So why, I asked, if he felt that way about “these people,” did he extend mortgage loans to them to begin with? I will never forget his answer: “Bad regulation.” So there you had it, straight from the heart of U.S. capitalism. It had been okay for the masters of the universe who filled that conference room to shovel out millions of mortgages to people who clearly couldn’t afford them because no one in the regulatory community had told them to stop. And if there was a problem now, it was because regulators hadn’t protected these securitization whiz kids from their own greed and corruption. So much for the self-regulating market.


Citi a.k.a dissonance:
Citi had not had a profitable quarter since the second quarter of 2007. Its losses were not attributable to uncontrollable “market conditions”; they were attributable to weak management, high levels of leverage, and excessive risk taking. It had major losses driven by their exposures to a virtual hit list of high-risk lending: subprime mortgages, “Alt-A” mortgages, “designer” credit cards, leveraged loans, and poorly underwritten commercial real estate. It had loaded up on exotic CDOs and auction-rate securities. It was taking losses on credit default swaps entered into with weak counterparties, and it had relied on unstable, volatile funding— a lot of short-term loans and foreign deposits. 
If you wanted to make a definitive list of all the bad practices that had led to the crisis, all you had to do was look at Citi’s financial strategies.
I would later read in Ron Suskind’s book Confidence Men: Wall Street, Washington, and the Education of a President that Tim
Geithner had consulted with Vikram Pandit prior to our call and had talked with him again afterward about where things stood. Looking back, I have to wonder. Tim Geithner seemed to view his job as protecting Citigroup from me, when he should have been worried about protecting the taxpayers from Citi.By January, they were announcing bonuses that rivaled the amounts they had paid before the crisis. It made me wonder whether all of the bailout measures had been to protect the system or make sure those guys didn’t have to skip their bonuses.  
As John Reed, the well-regarded former CEO of Citigroup, stated at the time, “There is nothing I’ve seen that gives me the slightest feeling that these people have learned anything from the crisis. They just don’t get it. They are off in a different world.”

The La-La Land:
But finally, and perhaps most important, Tim Geithner wanted leverage against us. That is because he and some of the Republicans, while calling the resolution fund a “bailout fund,” were proposing that the fund be replaced by a line of credit with the Treasury Department. That’s right: they were arguing that our proposed resolution fund, which would be built from assessments on big hedge funds, investment banks, nonbank mortgage lenders, and others, would be a “bailout fund,” but that giving the FDIC a line of credit from taxpayers to support resolution activities would be fine. Got that? It was an argument straight out of George Orwell’s 1984. Big Brother couldn’t have said it better.Already amnesia was setting in about how bad the crisis had been. 

The Tea Party— born of outrage over the 2008 bailouts— was redirecting its ire toward government. Instead of providing political support for commonsense measures such as higher capital requirements, resolution authority, and mortgage-lending reform, it was bashing government and regulations for impeding the economic recovery, forgetting that the recession had been caused by the excesses of many large financial institutions. That, of course, was playing into the hands of industry, and it frustrated me no end.


As a market-oriented Republican, I was outraged at the way some of the big firms had come running to Washington to be bailed out of problems of their own making. They had been worse than the proverbial welfare queen. Yet the narrative in some (not all) conservative circles was becoming that the crisis had been the government’s fault; folks at those poor big financial firms had been forced to do all those stupid things and be paid all of those big, multimillion-dollar bonuses because the government had wanted poor people to have mortgages. Right
.


The Remedy:
Below is my list of reforms that I think are the most important to ensuring the stability of our financial system. I’ve divided them into three categories:
  • Things that will make our financial institutions work better.
  • Things that will make our regulators work better.
  • Things that will make our entire financial system work better. 
In making our financial institutions work better, I have long believed that the most successful regulations are those that create the right economic incentives and let market forces do the rest. That is why I like skin-in-the-game requirements— because they force market participants to put their own money at risk and suffer the consequences if their actions result in financial loss.

With resolution authority, Dodd-Frank was designed to make clear to stakeholders— the shareholders and creditors— that they will absorb the attendant losses if the institution they have invested in fails. It also makes clear to boards and management that they will lose their jobs and that those executives materially responsible for the failure will lose their last two years’ worth of compensation. In that way, we created stronger economic incentives for investors as well as boards and executives to monitor and control excessive risk taking in their institutions. 


Similarly, with higher capital requirements, the bank’s owners— for whom the bank’s board and executives work— are forced to put more of their own money at risk, which again will give them more incentives to monitor risk taking. In addition, risk retention requires securitizers to absorb some percentage of the loss each time a loan they have securitized goes bad. Knowing that they will be responsible for future losses, the securitizers will exercise more care in the quality of the loans they securitize.






Quote of the Day

Never have I been more impressed with the advice I once received: "You cannot be sure that you are right unless you understand the arguments against your views better than your opponents do."

The Indispensable Milton Friedman: Essays on Politics and Economics


Wednesday, November 14, 2012

Quote of the Day

If incompetence is the disease of the novice, overconfidence is the disease of the expert.

- Malcolm Gladwell

Tuesday, November 13, 2012

Wake Up To A Volatile World & Deal With It !!

That's the Times review of Taleb's new book Antifragile: Things That Gain from Disorder coming out in two weeks - November 27th.

Saudi Arabia looks stable because the government never changes. But when it does, expect the change to be violent and traumatic. An individual does not achieve health by the paranoid avoidance of "stressors" such as fear, hunger, germs and exhaustion. In fact, the body addles when it is deprived of hormesis (the strengthening process that follows an endurable amount of stress). Conclusion: "no stability without volatility". Taleb has long argued that modern finance generates instability by artificially constraining natural volatility. In Taleb;s ideal world, banks should go bust without damaging the rest of the sector - as restaurants do.


Antifragile broadens and extends the logic he used in The Black Swan and applies to everyday living. So how we can make our lives more antifragile? First stop bringing up children in a sealed vacuum of frantic social ambition.

From parenting to diplomacy: instead of trying to predict everything, we should take more antifragile position of acknowledging uncertainty. The US spends a fortune trying to monitor and "predict" what will happen in Arab world - and yet entirely missed the Arab uprising. This is not just money wasted but the construction of false confidence based on an erroneous focus.



Quote of the Day

There are so many people right now who have meat-eater’s remorse — people who eat meat and feel kind of bad about it, but they’re not actually going to stop. Or they’re vegetarians and their bodies actually crave meat. But there’s so much awareness about what’s wrong with the mainstream food system — and they haven’t known what to do about that. The beautiful thing about hunting, especially invasive species, is it’s a way of dropping out of the mainstream meat paradigm, where so many of the ethical and health problems associated with eating meat arise.

- Eating Aliens: One Man's Adventures Hunting Invasive Animal Species by Jackson Landers (via Andrew)


Monday, November 12, 2012

Animal Morality

The crux of this issue has as much to do with humans as it does with animals. When humans act morally, what is it we are doing? Traditionally, the philosopher’s answer has been an intellectualist one: acting morally requires the ability to think about what we are doing, to evaluate our reasons in the light of moral principles. But there is another tradition, associated with the philosopher David Hume and developed later by Charles Darwin, that understands morality as a far more basic part of our nature — a part of us that is as much animal as it is intellectual. On this ‘sentimentalist’ account of morality, our natural sentiments — the empathy and sympathy we have for those around us — are basic components of our biological nature. Our morality is rooted in our biology rather than our intellect.

If this is true, then the reasons for thinking that animals cannot act morally dissolve before our eyes. What is left is a new understanding of what we are doing when we act morally and, to that extent, the sorts of beings we are. Those beings are, perhaps, just a little more biological and a little less intellectual, a little more animal and a little less spiritual, than we once thought.


- Mark Rowlands


The Greatest Life Advice From Kurt Vonnegut

“I urge you to please notice when you are happy, and exclaim or murmur or think at some point, ‘If this isn’t nice, I don’t know what is.’” 
- Knowing What’s Nice, an essay from In These Times, 2003

“What should young people do with their lives today? Many things, obviously. But the most daring thing is to create stable communities in which the terrible disease of loneliness can be cured.”
- Thoughts of a Free Thinker commencement address, Hobart and William Smith Colleges, 1974

- More Here

Also check out Kurt Vonegutt's two books, Kurt Vonegutt: Letters and We Are What We Pretend To Be.



Quote of the Day

For Buddhists and ecologists alike, we are all created from spare parts scavenged from the same cosmic junk-heap.

- Buddhism and Ecology

Sunday, November 11, 2012

Why You Can't Make a Computer That Feels Pain? - Daniel C. Dennett

Daniel C. Dennett's brilliant 1978 paper here:

The research strategy of computer simulation has often been misconstrued by philosophers. Contrary to the misapprehensions innocently engendered by Turing's classic paper, 'Computing Machinery and Intelligence,'2 it is never to the point in computer simulation that one's model be indistinguishable from the modelled. Consider, for instance, a good computer simulation of a hurricane, as might be devised by meteorologists. One would not expect to get wet or wind-blown in its presence. That ludicrous expectation would be akin to use-mention error, like cowering before the word 'lion.' 

A good computer simulation of a hurricane is a program which, when you feed in descriptions of new meteorological conditions, gives you back descriptions of subsequent hurricane behavior. The descriptions might be in roughly ordinary English, dealing with clouds, waves and tides, or in some arbitrary notation, dealing with barometric pressure, wind velocities, and yet more esoteric (but measurable) features of hurricanes. The goal is to devise a program that will give you good 'predictions' of what a hurricane will do under a great variety of highly complex conditions. Such a program is tantamount to an immense conjunction of complicated conditionals: 'if conditions A, B, C, . obtain, then R will result; and if conditions D, E, F,... obtain, S will result; and .. .' Obviously the only way to populate that conjunction reliably is by deriving the particular conditionals from general covering laws, all properly meshed and coordinated. So in order to write a good simulation program one must have a theory of hurricane behavior, and it must be a good theory.