Fund Creator

The New Yorker reports that hedge funds charge more in fees than the value they add :

“It is possible to design mechanical futures-trading strategies which generate returns with the same, and often better, risk-return properties as hedge funds,” [Kat] said. “This means investors can have hedge-fund returns but without the massive fees and all the other drawbacks that come with the real thing.”

What you need to replicate this : a highly trained British trader-turned-academic and a graduate student in finance trained in computer programming. And Voila! You can create or replicate as many hedge funds as you wish, with no fees to boot.

"If you are really convinced that you can find those super managers, then don’t waste your time with our stuff. Go look for them. But if you are a bit more realistic, if you know that eighty per cent of hedge-fund managers aren’t worth the fees they charge, then the rational thing to do is to give up trying to find a super manager, and just go for a good, efficient diversifier instead."

Does watching TV make us happy?

... individuals with incomplete control over, and foresight into, their own behavior watch more TV than they consider optimal for themselves and their well-being is lower than what could be achieved.

-- Recent paper from the Journal of Economic Psychology, Vol 28, Issue 3, June 2007

Remembering and forgetting

At least under clinical conditions,

sometimes we're more likely to remember words that we were instructed to forget, while being more likely to forget words that we were instructed to remember. How can this be?

Thus begins the interesting Remembering can lead to forgetting, recent research reported by the British Psychological Society from the Quarterly Journal of Experimental Psychology.

Convergence and Divergence.

Excerpt from an post predicting the imminent failure of the iPhone:

In the high-tech world, divergence devices have been spectacular successes. But convergence devices, for the most part, have been spectacular failures.

The first MP3 players (the Diamond Rio, for example) were flash-memory units capable of holding only 20 or 30 songs. The first iPod, on the other hand, had a hard drive and could hold thousands of songs. Now there were two types of MP3 players, a classic example of divergence at work.
...

The first computer was a mainframe computer, followed by the minicomputer, the desktop computer, the laptop computer, the handheld computer, the server and other specialty computers. The computer didn't converge with another device. It diverged.

When the cellphone was first introduced, it was called a "car phone" because it was too big and heavy to lug around. You might have thought it would eventually converge with the automobile. It did not. Instead it diverged and today we have many types of cellphones.

... a host of other divergence devices that have been enormously successful: the digital camera, the plasma TV, the wireless e-mail device, the personal video recorder, the GPS navigation device.

And an entertaining defense of the Apple Phone:

As comedian Ricky Gervais recently put it in one of his stand-up routines, we don't need to be able to take a piss in the washing machine because we've already got toilets. Yet, every time I pack my iPod, phone, BlackBerry and laptop into my travel bag, along with all their various chargers, I find myself wishing I had one mobile device. Call me irrational, but I'm willing to believe the iPhone might be the one.

The best vs. Doing your Best

Question from the author of The Dip:

"if you accomplish that, will you be seen by your audience as the best in the world, or will you be seen as doing your best?"

If you're doing your best, only your AYSO soccer coach cares. If you're the best in the world, the market cares. The secret, if you have limited resources (don't we all) is to make 'world' small enough that you can actually accomplish that.

Soldier's low pay

Insightful excerpts from a recent blog post:

The compensating wage for bearing risk varies, obviously, with the risk, and the risk in turn depends on efforts that are and will be made to minimize the risk, including body armor, rescue, medical treatment, and so forth. Knowing that one's fellow soldiers do not just abandon one when the cost of rescue would be disproportionate to any tactical value of the rescue reduces the wage that a volunteer army has to pay to attract soldiers of the quality it wants. ...

Persons who join the military to obtain or exercise technical skills have civilian alternatives, so the military has to compete with civilian employers for the services of such persons. But if you want to be a combat soldier, there is only one possible employer (if you are an American) and that is the U.S. government. So the government can pay a low wage to persons desiring that employment--in fact it seems that it can pay a lower wage than it does to its military technicians (adjusting for the value of the technical training that the latter receive) even though the latter are less exposed to combat risks.

Big Brother -- real time monitoring of gunshots

Excerpts from a funding report:

When a gun goes off, wireless sensors spread throughout a neighborhood register the instant the sound wave reaches them, using GPS to pinpoint the moment to within 20 nanoseconds. The sensors then transmit the timing data to a server within the police department’s control. This server makes the calculations necessary to triangulate the source of the sound and, within 5-10 seconds of the shot being fired, specially-equipped police cars on patrol get both the precise origin of the shot and a playback of its audio signature, allowing the officers to determine how many shots were fired and make a tactical decision from there.

The technology ... is deployed in neighborhoods throughout 15 American cities, including Chicago, Los Angeles, Oakland, and DC.

Management personality

Excerpts from a summary of the NYT Magazine "Boss Science":

It’s much more important to be open than to be intelligent if you want to succeed as a leader. And conscientiousness is good for being the person who does stuff, not the person who leads. Agreeable is a good trait for a great team player, bad trait for a boss. Neuroticists are good when you need to hear about the worst-case scenarios, all the time.

Blowback

Blowback is the name used by the CIA for the Law of Unintended Consequences. Examples:

1. Encourage and arm Hussein in Iraq, leading to an oil crisis in the Persian Gulf.
2. Subsidize corn production and lead to American obesity and illegal immigration from Mexico.

Internet speels doom for Merchants selling access.

The telecom industry collapsed with cheap bandwidth.

The Recording Industry and Motion Pictures industry found their business models outdated with the advent of MP3s, Napster and P2P file sharing.

The publishing industry is struggling in the wake of the onslaught of blogs and online newscasts.

The next casualty is going to be the mortgage industry -- Prosper, Zopa, Lending Club and others are making it easy to borrow small amounts of money. How long before greedy realtors, who merely "provide access to money with no fiduciary responsibility", are out of business?

Value of Software..

Software itself violates the free market. For an item to have value, it must have utility and scarcity. As the marginal cost of production of a unit of software is damn near 0 (it is fractions of a penny of electricity), software does not have scarcity. Thus it has no value. The rules of economics don't apply to it, or more correctly, an entirely new model needs to be created, but does not currently exist.

Oil prices...

If diesel is less than regular unleaded, then there is a shortage of refinery capacity - which primarily drives up gasoline prices.

If diesel is more than regular unleaded, then the price of crude oil is driving the prices.

alcoholism and obesity

Q: What is the common link between alcoholism, an American problem of the past several decades, and obesity, the central problem of the next few decades?

A: The federal subsidy for corn is the common cause.

Google vs. memory...

This post says Google is making us dumber.

Unfortunately, that is the curse of all technology -
First we do not bother to remember small things.
Since we cannot recall small things quickly, we lose our edge.
Then we lose our ability altogether in that domain.

Google is to human memory what the calculator was to arithmetic ability -- replacement.

Losing "Being Lost"

Some musings from a post on Shaping the future --

Right now, Nokia is designing global positioning system receivers into every new mobile phone they plan to sell. GPS receivers in a phone SIM card have been demonstrated. GPS is exploding everywhere. It used to be for navigating battleships; now it's in your pocket, along with a moving map. And GPS is pretty crude — you need open line of sight on the satellites, and the signal's messed up. We can do better than this, and we will. In five years, we'll all have phones that connect physical locations again, instead of (or as well as) people. And we'll be raising a generation of kids who don't know what it is to be lost, to not know where you are and how to get to some desired destination from wherever that is.

"Being lost" has been part of the human experience ever since our hominid ancestors were knuckle-walking around the plains of Africa. And we're going to lose it — at least, we're going to make it as unusual an experience as finding yourself out in public without your underpants.

Predicting the future is tough business, and anyone might get lost in the eddies of time, but not in 3D space anymore, it would seem. Another one: driverless cars.

They're going to redefine our whole concept of personal autonomy. Once autonomous vehicle technology becomes sufficiently reliable, it's fairly likely that human drivers will be forbidden, except under very limited conditions. After all, human drivers are the cause of about 90% of traffic accidents: recent research shows that in about 80% of vehicle collisions the driver was distracted in the 3 seconds leading up to the incident. There's an inescapable logic to taking the most common point of failure out of the control loop — my freedom to drive should not come at the risk of life and limb to other road users, after all. But because cars have until now been marketed to us by appealing to our personal autonomy, there are going to be big social changes when we switch over to driverless vehicles.

Once all on-road cars are driverless, the current restrictions on driving age and status of intoxication will cease to make sense. Why require a human driver to take an eight year old to school, when the eight year old can travel by themselves? Why not let drunks go home, if they're not controlling the vehicle? So the rules over who can direct a car will change. And shortly thereafter, the whole point of owning your own car — that you can drive it yourself, wherever you want — is going to be subtly undermined by the redefinition of car from an expression of independence to a glorified taxi.

One thing is fairly clear - dreamers will never be out of business!

France+ US = Canada ?

Saw this blog post today ad it set me thinking...

France is very socialist and the US is very capitalist; time-wise, the French value leisure, the US, work; the French emphasize equal society, the US, meritocracy; the French take care of their poor but shun the immigrant (an immigrant is a foreigner even if legal and 3rd generation, there is no way to ‘become French’), the US welcomes immigrants (comparative to almost any western nation) who want to work and embrace our values but we don’t take care of our poor. We both, however, tend to be nationalistic, arrogant, deeply politically divided, and idealists about our countries’ history and founding values of freedom and equality.

As France has moved left, the US has moved right, and it seems that both countries are having a little buyer’s remorse. Wanted: A country with lofty goals, a society that recognizes that hard work is the force that creates a civilized world, but also that it isn’t worth much if you don’t take the time to enjoy and think about the civilization you’re working so hard to create, one that wanted to include all members of it’s society no matter race or social class, but also kept a strong sense of identity and individual freedom. Let’s see, a cross between the US and France. Hmmm…Canada, anyone? Yeah, really friendly people would be a plus, too.

false positive vs. false negative

Recently saw this great post on Slashdot by an anonymous author:

To Google, hiring is mathematically equivalent to Information Retrieval, except that they only care about "precision" not "recall".

What that means to lay-people is that so long as they can maintain 10,000 applications coming through per-month, false negatives (passing on a suitable applicant) do not matter because there'll be another candidate along in a minute. False positives (hiring an unsuitable applicant) are all they need to focus on. The "fit factor" is effectively the search string of traits; however, with such a large candidate pool, they can focus their "hiring algorithm" entirely on rejecting candidates where it is even slightly difficult to ascertain whether they fit or not.

So, their advertising blitz "aren't we a great place to work for" is a part of what lets them keep their hiring process easy. If they get bad PR and applications fall, then they'll need to worry about recall as well as precision.

Also, read Two Kinds of Judgement, which discusses this issue in some depth.

Cubicles, not walls in offices..

The law of unintended consequences strikes again. Joel Spolsky explains why companies cram employees into cubicles rather than private offices, despite lower productivity of the former. In short, the government has defined what a business may define as a deductible business expense in favor of cubicles!

We're going to need a much bigger space now: on the order of 15,000 square feet. To build that much office space could cost a couple of million dollars. With the lack of deductibility, your bank account goes down by three million dollars. The landlord will pay a fraction of that, but not enough to make it affordable.

There's a loophole. Office furniture can be depreciated much faster than leasehold improvements, over 7 years. So for $20 of office furniture you can deduct about $3 a year: better than nothing. Even better, office furniture is a real asset, so you can lease it. Now you're not out any cash, just a convenient monthly payment, which is 100% deductible.

This is why companies build cubicle farms instead of walls, even though the dollar cost is comparable.

Not all beauty is in the eye of the beholder!

Excerpt from an essay on the inherent (non-subjective) quality of art:

My main point here is not how to have good taste, but that there can even be such a thing. And I think I've shown that. There is such a thing as good art. It's art that interests its human audience, and since humans have a lot in common, what interests them is not random. Since there's such a thing as good art, there's also such a thing as good taste, which is the ability to recognize it.

Art is man-made. It comes with a lot of cultural baggage, and in addition the people who make it often try to trick us. Most people's judgement of art is dominated by these extraneous factors. ... So it turns out you can pick out some people and say that they have better taste than others: they're the ones who actually taste art like apples.

... the people [with good taste are the ones] who (a) are hard to trick, and (b) don't just like whatever they grew up with. If you could find people who'd eliminated all such influences on their judgement, you'd probably still see variation in what they liked. But because humans have so much in common, you'd also find they agreed on a lot. They'd nearly all prefer the ceiling of the Sistine Chapel to a blank canvas.

Software Development at Microsoft.

Ever wondered why Microsoft Windows is so horrible to use? Here is a description of how the "Shutdown" option was coded. Excerpts from The Windows Shutdown Crapfest:

... that nets us an estimate ... of 24 people involved in this feature. Also each [of the three teams] was separated by 6 layers of management from the leads, so let's add them in too, giving us 24 + (6 * 3) + 1 (the shared manager) 43 total people with a voice in this feature. Twenty-four of them were connected sorta closely to the code, and of those twenty four there were exactly zero with final say in how the feature worked. Somewhere in those other 19 was somebody who did have final say but who that was I have no idea

[H]ere's how the design process worked: approximately every 4 weeks, at our weekly meeting, our PM would say, "the shell team disagrees with how this looks/feels/works" and/or "the kernel team has decided to include/not include some functionality which lets us/prevents us from doing this particular thing". And then in our weekly meeting we'd spent approximately 90 minutes discussing how our feature -- er, menu -- should look based on this "new" information. Then at our next weekly meeting we'd spend another 90 minutes arguing about the design, then at the next weekly meeting we'd do the same, and at the next weekly meeting we'd agree on something... just in time to get some other missing piece of information from the shell or kernel team, and start the whole process again.

Windows has a tree of repositories: developers check in to the nodes, and periodically the changes in the nodes are integrated up one level in the hierarchy. At a different periodicity, changes are integrated down the tree from the root to the nodes. In Windows, the node I was working on was 4 levels removed from the root. The periodicity of integration decayed exponentially and unpredictably as you approached the root so it ended up that it took between 1 and 3 months for my code to get to the root node, and some multiple of that for it to reach the other nodes.

So in addition to the above problems with decision-making, each team had no idea what the other team was actually doing until it had been done for weeks. The end result of all this is what finally shipped: the lowest common denominator, the simplest and least controversial option.