Too stupid to know you are stupid

The Dunning-Kruger effect - our incompetence masks our ability to recognise our incompetence. Excerpt from The Anosognosic's Dilemma: Something's wrong but you'll never know what it is:

Dunning and Kruger argued in their paper, “When people are incompetent in the strategies they adopt to achieve success and satisfaction, they suffer a dual burden: Not only do they reach erroneous conclusions and make unfortunate choices, but their incompetence robs them of the ability to realize it. Instead, like Mr. Wheeler, they are left with the erroneous impression they are doing just fine.”

Migration versus currency deflation

Interesting thoughts from a blog post about economic coping mechanisms: American inter-state migration, Australian currency deflation, but European economic implosion?

Australia has a really effective adjustment mechanism to a decline in demand for its product. When metals prices/demand falls the Australian dollar falls. ... Suddenly Australian labor can (again) produce commodities profitably…

America is a large country with many sub-economies on different cycles but with a common currency. If terms of trade move against Texas (as happened in the mid 1980s when the oil price collapsed) you can’t have the Texas Dollar fall because there is no Texas dollar. Houston – we have a problem.

[T]he American solution to (say) a recession in Houston is for people to move out of Houston. America has an amazingly mobile population – with almost all of the world’s busiest airports inside the US. Almost nobody seems to live in the town in which they are born. ... because people in the US move when one part of the economy is struggling. ...

Alas Europe has neither much internal migration nor any ability for say the Greek or Spanish Euro to devalue against the German Euro.

War

Post traumatic stress is a well known by product of mass massacres. A recent article describes the effect of Afghanistan on the warrior who brought down the Taliban - Andy Kubik.

In the olden wars, pre-WW1, the strategy creators and executors were substantially the same persons and experienced war in a visceral manner that shaped their thinking forever, eg Ashoka at Kalinga.

WW1 changed that. War was now an activity suitable for mass production. No longer was it necessary or practical for the thinkers and doers to be the same people. Napoleon was probably the last of the old warriors in the West.

The separation of the tactical fighting and killing from the strategic aspects of thinking and planning may be more efficient for the prosecution of the war but it short circuits the feedback loop from the battlefield to the command and control center.

The notable points are twofold:

1. Modern rulers and elite learn precious little from the massacres they orchestrate, whether Mao, Stalin, Hitler or American Presidents.
2. The fighters on the front go mad, bearing the burden of responsibility for events over which they have no real control.

The national deficit

[The public debt] does not have to be repaid, and in practice it will never be repaid.

That's the economics of reality, as opposed that of the textbooks. Quote from that article:

,,, foreigners do us a favor by buying our bonds. To acquire them, China must export goods to us, not offset by equivalent imports. That is a cost to China. It's a cost Beijing is prepared to pay, for its own reasons: export industries promote learning, technology transfer and product quality improvement, and they provide jobs to migrants from the countryside. But that's China's business.

For China, the bonds themselves are a sterile hoard. There is almost nothing that Beijing can do with them. China already imports all the commodities and machinery and aircraft it can use--if it wanted more, it would buy them now. So unless China changes its export policy, its stock of T bonds will just go on growing. And we will pay interest on it, not with real effort but by typing numbers into computers. There is no burden associated with this, not now and not later.

That concept is exactly the title of this blog!

The modern economic dilemma: Everything is free, but no one has a job.

Excerpt from the The Google decade:

... consider all the mortal foes Google has racked up in the last decade. Microsoft. Amazon. Viacom. News Corp. AT&T. Every publishing house and newspaper in America. That’s quite a list for two men who once merely aspired to put the Gettysburg Address on your screen in a microsecond or two. What other businesses will they disrupt in the coming years? ... In industry after industry, by offering services for nothing, Google has metastasized the modern economic dilemma: Everything is free, but no one has a job. This was probably inevitable, and maybe we should thank Google for forcing us to face reality now, and in such a dramatic fashion.

WiFi disconnects every 5-10 minutes when laptop runs on battery

A possible solution:
The problem isn't interference, it isnt the router. The problem has to do with the power settings for the wireless card itself.

To *attempt* to fix it:
1. Right click on "My Network Places" and hit properties.
2. Right click on your wireless connection icon and hit properties.
3. Under the "General" tab, click on the Configure button next to the device description (the button next to the box with the label "Connect Using:"
4. Click on the "Advanced" tab
5. Click on "Power Management" in the list box and then uncheck the "Use Default Value" box and set the slider to "highest".

You may need to update your drivers before you can get to these menus, to do that, go to the Intel website and search their support for drivers for the Intel Pro/Wireless 2100 series. They should only have a couple drivers to choose from.

The state of computer science

On why MIT switched from Scheme to Python:

In 1980, good programmers spent a lot of time thinking, and then produced spare code that they thought should work. ... But programming now isn’t so much like that ... . Nowadays you muck around with incomprehensible or nonexistent man pages for software you don’t know who wrote. You have to do basic science on your libraries to see how they work, trying out different inputs and seeing how the code reacts. This is a fundamentally different job. ...

Comment #1: 

So the reason, basically, is that software today is a train wreck, and you might as well embrace helplessness and random tinkering from the start?

More insightful words have not been uttered about the state of computer science.

That's capitalism

Excerpt from an interesting post about hedge fund replication:

If you are one of the best doctors in the country, chances are you are working somewhere like the Mayo Clinic. Or perhaps you may be at Johns Hopkins, UCSF, or even the Cleveland Clinic. But it is rather unlikely (as much as Michael J Fox would have you believe in Doc Hollywood) that you will be the family practicioner in Grady, SC. (And that’s no knock on SC!)

Simply, the top talent in each in industry gravitates to where the best compensation is. That’s capitalism.

Alan Greenspan did not believe in regulating fraud.

Fascinating documentary on Frontline (PBS) - The Warning about the CFTC's efforts under Brooksley Born to prevent fraud in the derivatives markets, and to regulate it. A quote:

"We didn't truly know the dangers of the market, because it was a dark market," says Brooksley Born, the head of an obscure federal regulatory agency -- the Commodity Futures Trading Commission [CFTC] -- who not only warned of the potential for economic meltdown in the late 1990s, but also tried to convince the country's key economic powerbrokers to take actions that could have helped avert the crisis. "They were totally opposed to it," Born says. "That puzzled me. What was it that was in this market that had to be hidden?"

The so called scarcity of scientists

There is a lot of hand wringing about how wall street drains the real economy of bright people who might otherwise have become scientists. See for instance this recent article. An excerpt:

"Graduates in these three fields all too frequently choose careers in finance rather than the real economy because the financial sector provides far greater executive compensation"

That is pure baloney.

I am one of those persons "with strong mathematical, engineering, and scientific backgrounds" with a PhD from a top university.

The sub sector of the industry I worked in was dominated by 2 billion dollar companies. First Company C announced they were shutting down all R&D operations to cut costs. Within weeks, company S followed suit by shutting down their R&D department as well. The day to day work at both places has gotten to be mind numbingly boring with 0 innovation.

Where should people like me find interesting, challenging and rewarding work that involves Mathematics, Sciences and Engineering? I will give you a clue - there are no high paying technical jobs outside of finance in America.

Stop paying the lawyers, sportsmen and Hollywood stars so much and pay more to scientists - you will immediately see a large number of scientists and technologists. This has happened only twice in 20th century America - the post Sputnik era was the first and the tech boom of the late 90's was the second.

Enough of this "we need more scientists" nonsense. The highly trained scientists are willingly walking to Wall street because this society does not value science. People like me are in no mood to ruin our life and health slaving away at unappreciated technology jobs when society pays us neither good money nor social respect. Put your money where your mouth is or else shut up.

Here is a simple proposition: if you want me to work in science instead of on Wall Street, then pay me more on Main Street.

Why I do not like the Kindle

I will not tolerate Borders walking into my house and removing a book from my bookshelf, unless they show a search warrant from a magistrate. Why should it be any different with any other bookstore?

Such an event was only bothering me as a theoretical possibility but now it appears that something like this actually transpired: Amazon deletes purchased copies of 1984 from Kindle users' devices - it would have been even more ironic if the book in question had been Fahrenheit 450.

From Citibank to the administration...

Read and weep:
Rubin's shameless interview justifying being paid $115 million for being a director without control over operations, policy or risk.

In other news, Rubin protégés to head top economic posts in the new administration.

With the foxes guarding the hen house, is the financial crisis about to get much bigger/worse?

What Part of Legal Immigration Don't You Understand?

Originally appeared at Reason.

Donating your time to charity

Donating your time to charity - it is just waste of your own time in the delusion that you are being helpful to society. It is no different from burning stacks of cash in front of the eyes of poor starving people. It might give you a lot of pleasure but it is of no use to them.

I would rather that you spent your time in what you are good at rather than delude yourself that you are helping a charitable cause by volunteering for menial $8/hour labour. If you want to spend a day in the soup kitchen say that you are doing it for your own selfish reason, rather than bragging about volunteerism. You are contributing exactly $64 to the charity by 8 hours of minimal wage labour dispensing soup. Meanwhile, I'll be donating a day's worth of my pay and making a far greater difference to the charity. My sense of accomplishment will be 100x that of yours.

Similarly, running a marathon for a cause - I refuse to subsidise someone who wants me to pay for him to waste his time running - instead he could easily have worked the extra 10 hours a week for 25 weeks and donated the 250 hours of pay to a charity. This would FAR exceed what he might raise in a lifetime of "running for a cause".

Of course I am talking of highly paid professionals here. For a burger flipper at MacDonalds, it is probably a better use of their time running to raise money for cancer than to flip more burgers.

MBAs

MBAs probably make good money for themselves. I don't think MBAs make money for the organization they are in. Any organization that has a large influx of MBA managers (replacing people actually competent and willing to do real work) begins to drown in procedural morass and a sea of paper shuffling. A fantastic example was Dell. It was completely taken over by the consultants from Bain, who ran the company into the ground. Google is the next example - it has been named as "most desired place to work" for MBAs, ahead of Mckinsey and Goldman Sachs. Luckily they had the common sense to insist that their CEO will be a person with scientific education, rather than merely bean counting, oops, MBA education.

---

The problem with a lot of MBAs - they are often competent enough to be useful members of society, but instead prefer to not do anything with their abilities. The confidence projected by a typical McKinsey consultant stems from their arrogance at being in McKinsey, not from their knowledge. One such person I met even went so far as to admit "I did a Phd in Philosophy and had no career option except to be a Management Consultant."

---

Jim Simons who is probably the most successful and richest hedge fund manager has started publishing papers in topology once again, at the age of 60. On his deathbed his main concern will not be that he did not do an MBA.

The casino on wall street

The whole thing came about because I was thinking how exactly are people making money. I don't mean salaries, I mean the firms paying the salaries and bonuses, where is all that coming from?

My model is to divide the world into two groups -

Group (1) includes banks and equity research groups who design the structured and complicated products, and then use that model to get some one to buy some thing and another person to whom they can sell something that is very similar, so they are then perfectly hedged and need accurate pricing, but they don't need price forecasting models because they don't care which way the market goes. Say you have an ideal IB, then this IB buys a bunch of mortgages from BofA, charges BofA a commission for that, then makes some complex model and sells packaged parts of it to, say pension funds, takes fees from all of those as well for providing them with investment vehicles, and all the while it is also enjoying the spread between how much it bought the mortgages from BofA for and how much it sold the components to the pension funds. So really what this IB is selling to its customers is the promise that "we are removing your risk" which is true - BofA got a lumpsum and removed the risk it had that mortgages would be worthless. Similarly the 3 funds that bought the 3 tranches got investments at their selected risk levels, so they are happy to pay fees also for "removing undesirable risk". So the IB only needs to make sure that what it takes on left side it can sell on right side for approx same amount. Today it might take a 500k mortgage and sell it in 3 tranches for 510k, tomorrow if that market crashes then it buys the 300k mortgage and sells it to someone at 305k. A glorified e-trade so to speak. IB doesn't care for the market direction just that there should be enough players in it, so the focus here is on designing more and more complex products to attract more and more players to try them out but not necessarily to accurately forecast anything because money making does not depend on forecast.

Group (2) are the poor fools who are actually trying to make real returns via trading/investing and have directional exposure. This includes all the 401k investors including you and me, as well as Warren Buffett as well a bunch of investment funds, mutual funds etc. These people might try to reduce their exposure to the direction of the market, but in the end they have to take a real position if they want to make real returns. Exposure to market risk is what creates returns in the long run. So here hedging is not enough, you need to model the whole universe and everything that goes on in it. The promise of the players here is "we will work hard for you to increase your money". The work hard part consists of econometric analysis, sifting through 10s of years of price data, volume and volatility data etc. to find "opportunities", as well as studying fundamentals to put into the models etc.

(1) is a glorified casino selling newer and fancier kinds of chips, (2) are the bettors. (1) will always make money because the rules are in its favor, (ie fees, spreads will always earn it money) whereas (2) will have a few people that are very good/lucky/both who make all the money and most will go bust.

All said and done, it is better to be a casino operator than a bettor; it may be boring but you make guaranteed return as long as you have visitors.

Block popups, underlining, banner ads on yahoo websites

Run mozilla and just add this to your adblock Advertisement filter:
"fe.shortcuts.search.yahoo.com/script?fr=csc_fin_pf"
That is it - no more underlining, no more stupid popups on double clicking a word etc. on yahoo websites.

Remove banners on Yahoo Finance by adding this to the Element Hiding Rules:
"finance.yahoo.com#DIV(style=height: 90px; width: 728px;)"

Be careful who you learn from...

from Comics.com.

Barrack Obama vs. Hillary Clinton

On the major issues, there is no real gulf separating this two.

The difference according to Larry Lessig:

(1) Character - Bill and Hillary Clinton have shown in the past that principles are expendable. One minor example - she refused to endorse the call to make presidential debates free from copyright, fearing that it might hurt her fundraising efforts from big business.

(2) Integrity - Hillary Clinton blatantly lies about Barrack Obama.

(3) Ideals - Hillary is "good enough" to continue the current divisive politics that everyone hates, Obama inspires change and peace.

Remove those annoying ads from Yahoo Messenger.

http://googlesystem.blogspot.com/2006/05/no-more-ads-in-yahoo-messenger.html

http://www.helpbytes.co.uk/noads.php