In defense of the Google chef

I'm on the road with very limited internet connectivity so I can't do the homework I normally would before posting this, so it's possible that what I'm about to say is based on unreliable reporting. There is a lot of grumbling in the blogosphere in the last day or two about reports that Zynga is using strong-arm tactics to claw back employee stock options. Zynga's argument is that they don't want people who joined the company early to get disproportionately large rewards compared to someone who joined the company later but contributed more. CNET reports, citing the WSJ:

Zynga executives were especially concerned with not creating a "Google chef" scenario.

That reference relates to Google's 2004 IPO when one of the company's chefs, who was hired in the firm's early days, walked away with $20 million worth of stock after the shares went public.

This really bothers me. It presumes that a chef cannot be a significant contributor to the success of a company. As someone who was there in Google's early days I can tell you from firsthand experience that this is not true. If someone at Zynga actually did say this on the record, they owe Charlie Ayers an apology.

Working at a startup is hard. The hours are long, the stress can be brutal, and there is no guarantee of success. In fact, the odds for a raw startup (which is what Google was when Charlie joined) are very much against you. I have no idea what Google's deal with Charlie was, but typically you take a pay cut for a shot at the brass ring. Charlie didn't make $20M for cooking, he made $20M for taking the risk that the company he was joining would fail and that he could end up five years older, unemployed, and with nothing to show for his trouble.

But it is not Zynga's failure to grasp this basic fact of startup economics that bothers me, it is their singling out of Charlie in particular because he's a chef. As someone who was there in the early days I can tell you that Charlie Ayers contributed more to Google's success that I did, and I was a senior software engineer.

The unfortunate fact of the matter is that people get hungry, and when they do their productivity drops. As a company you have three options: make your employees deal with it themselves (bring sack lunches or go out), provide some basic but uninspiring food (stock the break room with snacks, have the odd pizza delivered), or you can, as Google did, provide them with really good food.

The latter option costs more, but it pays dividends. When the best restaurant in town is the company cafeteria it liberates your employees from having to worry about where their next meal is coming from (literally) and lets them focus on their work. For software engineering in particular, where getting into an uninterrupted mental "flow" is crucial to productivity, free quality food is a huge lever.

Providing quality food to an ever-growing roster of hungry engineers is not an easy task. Charlie and his staff worked harder on a light day than I ever did (or probably ever will). If you doubt me, take a job in a restaurant kitchen some time. Not only that, but the stakes are higher than most people realize. Feeding a few hundred people in a professional setting is not just taking the process of preparing a home-cooked meal and multiplying. If a software engineer screws up, the site goes down. But if a chef screws up, people get sick. In extreme cases, they die.

If I were to point out that no one ever got sick from eating Charlie's food most people would consider than to be damning with faint praise, but that is just a testament to how well Charlie did his job. Not only did he keep us well feed and free from salmonella, he inspired us. When I said that the best restaurant in town was Google's cafeteria that was no exaggeration. Charlies food was outstanding, day in and day out. (It still is. If you're in the Bay Area, do yourself a favor and have a meal at his restaurant.)

But Charlie's contribution to Google's early success went even well beyond that. Charlie was a friend and a cheerleader. Everyone at Google got to know him because everyone went through the lunch line, and Charlie was always there making sure everything was ship-shape. And Charlie got to know us, got to know our individual tastes and preferences, and bent over backwards to accommodate them, but never at the cost of compromising on his principles of making his offerings healthy and sustainable, principles he still adheres to. Being fed by Charlie was a privilege. It was inspiring. It was cool. It kept us going.

Don't tell me Charlie deserved his payday any less than the rest of us.

[UPDATE:] Found a link to the WSJ article that isn't behind a paywall. Just to be clear, I am not taking a position on Zynga's policy. I think renegotiating the compensation of underperforming employees could be a defensible practice (albeit fraught with all manner of peril). What I take issue with is citing Charlie in defense of such a policy. Here's the relevant passage:

Built into that arrangement [stock options] is the chance that ... some very early employees will end up with bigger windfalls than latecomers who contribute more to the company. Many in Silicon Valley cite an early-hired Google Inc. cook whose stock was worth $20 million after the firm's 2004 IPO.

Zynga attempted to avoid such pitfalls. In meetings last year, Zynga executives said they didn't want a "Google chef" situation, said a person with knowledge of the discussions.

So apparently it's not just Zynga casting Charlie as the poster child for the early employee who got more than he deserved. I do not doubt that some early employees end up not pulling their weight. But Charlie Ayers was not one of them.

Google ate my email address

Just now I did a routine Google search whose top result ended up being a thread on Google Groups. To my shock, when I tried to click on this link, Groups would not let me view the thread. Instead, I saw this message:

Update Email Address

You've changed the email addresses associated with your Google Account since the last time you visited Google Groups.
You need you to decide what to do with your subscriptions on your old email address.

Removed Addresses: ron [at] flownet [dot] com
Edit your Google Account Addresses
You can choose to re-add these addresses to this Google Account from the Google Account page.

Trick is, I hadn't made any changes to my account. Worrying that I'd been hacked, I started checking out all my settings but nothing seemed amiss. OK, no problem, I thought, I'll just add the flownet email back into my account. But when I tried that, I got this message:

There's already a Google Account associated with this email address. Please sign in; or, if you forgot your password, reset it now

Well, that's strange. Yes, there is an account associated with that address, but it's *my* account! Well, maybe this is just some kind of transient weirdness that will go away if I log out and log back in again. I tried that, and got this:

Your account has changed

This account has an alternate email address, ron@flownet.com. This address is no longer available because an organization has reserved this flownet.comemail address.

You are now signed in with your primary address. Except for the removal of the alternate email address, nothing has changed.

WTF?!? This address is not longer available? Because some (unnamed) organization has reserved it? How is that possible? I've owned the flownet.com domain since 1993. How can someone reserve a flownet.com address without my knowledge or approval?

This is a serious problem, because I am signed up to a ton of Groups under my flownet email. Until this gets sorted out I am completely cut off from all of these lists (including, ironically, a list of ex-Googlers who might be able to help me solve this problem).

I have been digging around trying to figure out what happened and how I can fix it for the better part of an hour now with no success. As best I can determine, it has something to do with Google plus (one of the help pages I landed on says, "If you signed up for Google+, your Accounts settings page might have been updated.") and the fact that I use Postini (now owned by Google) for spam filtering on flownet.com. (Since flownet.com is one of the older domains on the Internet it gets boatloads of spam.)

If anyone reading this can get the word to Google that they've screwed this up I'm sure many people would be very grateful. I can't be the only one having this problem.

Travelogue: The Grand Canyon of Jerusalem

A picture may be worth a thousand words, but there are some pictures that can't be fully appreciated without a few words of explanation. This is one of them:



What you are looking at is an aqueduct carved into granite bedrock by Herod the Great around 20 BC. But that is not the impressive part. The Mediterranean is lousy with aqueducts. To understand the significance of this one we have to start with the Temple Mount.

The Temple Mount is an enormous plaza, about 37 acres in all. Normally when you build a plaza you find a more-or-less flat space and pave it. But Jerusalem is built on rolling hills. It has no flat spaces to speak of, so Herod made one by leveling the top of one of the hills. This in itself was no mean feat because the hills are made of granite. But the mount extends well beyond the boundaries of the flattened hill top. To create the extra area, Herod built enormous stone walls and filled in the voids between the inner part of the walls and the hill. (The Mount is so vast, in fact, that it actually covers two hills, not one. The second one is Mount Moriah where tradition has it that Abraham offered his son Isaac as a sacrifice to God, and Mohammed ascended into heaven to receive the Holy Q'uran. The tippy top of Mount Moriah just barely juts out of the top of the Temple Mount where it is covered by the Dome of the Rock. Alas the Dome is nowadays closed to non-Muslims, but if you convert to Islam you can go inside and see it.)

The Temple Mount would be an audacious feat of engineering even by modern standards. In its day it was bordering on the miraculous. Alas, its glory was short-lived. In 70 AD the Romans squished a Jewish rebellion and in retaliation destroyed the Temple. They tried to destroy the Temple Mount as well, but it proved to be quite literally rock-solid. Since then, 2000 years of weathering, earthquakes, and neglect (in the Byzantine era the Mount was used as the city dump) have left it largely intact.

But not untouched. In the intervening 2000 years the city of Jerusalem literally grew up around it. New buildings were built on top of the ruins of old ones, and the street level rose to the point where today it is nearly level with the top of the Mount. The southern and eastern walls are still visible today, but the western wall is almost entirely buried underneath 2000 years of construction and brick-a-brack. (There is no northern wall because that part of the Mount sits on the bedrock left behind after the hill was leveled.)

After Israel gained control of the Temple Mount in 1967 it opened the area to archaeological research. One of the excavations is called the Kotel Tunnel ("kotel" is the Hebrew word for "wall") and it is pretty much what the name says: a tunnel that runs the entire length of the western wall, a few dozen to a few hundred feet below the current street level.

As you walk north along the tunnel, the bedrock beneath gradually rises up to meet you. Herod, being somewhat anal-retentive about architecture and not content to leave well enough alone, had the bedrock chiseled away so that it looked like a continuation of the wall. This boundary between the actual wall and the faux wall carved into the bedrock is one of the many archaeological wonders that have been unearthed in this excavation.

So you're walking along north along this tunnel. The Wall is to your right. At some point it transitions almost imperceptibly from stone wall to carved bedrock. And then you get to the base of the northern end of the Temple Mount, what started out as the interior of a granite hilltop, a sight that until a few years ago, human eyes had not beheld for some 2000 years, give or take. You are standing on what 2000 years ago was street level (and indeed, you are standing on the original paving stones), but is now a few hundred feet underground.

And in front of you is the aqueduct, carved by human hands out of solid granite over 2000 years ago, now completely covered by the city several hundred feet above your head. It's a serious Indiana-Jones moment.

To say that my mind was blown would be quite the understatement. If you are ever in Jerusalem, the Kotel Tunnel is a sight not to be missed (unless you suffer from claustrophobia). Tours are by appointment only. There isn't much room in there, and some parts of the tunnel are so narrow that traffic can only flow one way at a time so they have to limit the number of people. But it's mostly surprisingly roomy in there. In many places, you are walking through the interiors of old buildings that were later converted to basement water cisterns as the city grew above them. So if you don't mind the odd tight squeeze and low ceiling I cannot recommend it too highly.

Travelogue: The Roma in Rhodes

Met this kid on the island of Rhodes:



He is a Roma, commonly known as gypsies. He posed for me for a euro.

The picture I didn't get (and I'm still kicking myself) was of his younger sister, who I'm guessing was about three. We found her in a similar circumstance: on the street, cradling a tiny accordion in her lap, playing with the coins in the bowl in front of her as if they were toys (which to her they probably were). It was such a heartbreaking sight that it didn't even occur to me to take her picture until we'd gone well past her. When I finally came to my senses and returned to the spot, her older brother had taken over on accordion detail.

A conversation with God

I have long advocated the creation of an atheistic theology. Yes, I know it sounds like a contradiction in terms, but it's not. It is simply an expression of rational scientific thought using the language of myth. The reason for doing it is that, like it or not, myths are a very effective marketing tool, and it's high time that we rationalists availed ourselves of it. Our failure to create effective myths amounts to unilateral disarmament in the war of ideas.

There have been a few half-hearted efforts in this direction, including the Flying Spaghetti Monster and Raymond Smullyan's famous essay Is God a Taoist?. But these are self-identified as fiction and parody, and are therefore self-undermining. Even my own suggestion of adopting Loki as the foundation of an atheistic myth suffers somewhat from this problem.

Today I learned to my great delight that a fellow named Harry Stottle is in fact an atheist who has actually talked to God and written an account of his experience. Highly recommended reading. It is a rare privilege to have (from a cosmological perspective) a front-row seat to divine revelation.

RIP John McCarthy

John McCarthy, one of the most influential pioneers of computer science, has died. His main claim to fame was the invention (some would say discovery) of the Lisp programming language. It is hard to overstate the impact that Lisp has had on the programming world and on me personally. I discovered Lisp while I was still in high school (via P-Lisp running on an Apple ][ ) and it is one of the things that made me decide to pursue a career in artificial intelligence (a term that McCarthy coined). Even today it is with no small amount of regret that I note the ironic juxtaposition of two facts: 1) Lisp is one of the most influential inventions/discoveries in the history of mankind's intellectual progress, and 2) it is hardly ever used by anyone any more. Lisp is the Latin of computer science. Parts of its essence lives on in Python and Ruby and Javascript and Haskell and pretty much every other programming language in widespread use today (except C and C++). But Lisp itself is a mostly dead language [See update below]. I wish it were otherwise. The world would be a better place.

But McCarthy's legacy also has a little-noted dark side which also influenced my career, but in a much less positive way. McCarthy was not only one of the pioneers of the study of AI, but also an avid proponent of a particular school of thought about how human intelligence works. McCarthy believed that human intelligence could be modeled as a formal logic. That hypothesis turns out to be (almost certainly) wrong, and the evidence that it is wrong was overwhelming even in McCarthy's heyday. And yet McCarthy steadfastly refused to abandon this hypothesis. Well into his nominal retirement, and quite possibly to his dying day, he was still working on trying to formulate formal logics to model human thought processes.

The way human mental processes actually work, it turns out, is (again, almost certainly) according to statistical processes, not formal logics. The reason I keep hedging with "almost certainly" is that the jury is still out. We have not yet cracked the AI puzzle, but vastly more progress has been made in recent years using statistical approaches that has ever been made using logic. Very few (if indeed any) logic-based systems have ever been successfully deployed on non-toy problems. Statistics-based applications are being deployed on a regular basis nowadays, with Siri being the most recent example.

It took decades to make this switch, arguably due in no small measure to McCarthy's influence. One of the many consequences of this delay was the infamous AI-winter, which lead more or less directly to the commercial demise of Lisp. That the same person was responsible both for the invention of such a powerful idea and for its demise has to be one of the greatest ironies in human intellectual history.

It is important to remember that even great men can be wrong at times, sometimes spectacularly so. There is no shame in this. The human has yet to be born whose rightful epitaph is "He was right about everything." But John McCarthy's legacy in particular calls all of us mere mortals to a greater degree of humility. The world would be a better place if more people could acknowledge the possibility that even their most cherished beliefs might be wrong.

[UPDATE:] After posting this I felt the need to hedge my assessment of Lisp as "mostly dead." Lisp is not dead. In fact, it is probably more vibrant now than at any time in the last 20 years. But by comparison to other languages Lisp has a vanishingly small mindshare. To cite but one concrete example, of 300 or so Y Combinator companies there is (AFAIK) only one whose code is written in Lisp.

Notwithstanding all that, if you're interested in programming I really encourage you to learn Lisp. It is still the best programming language out there.

Travelogue: What's up with the splatty toys?

We've been seeing street vendors selling these things everywhere:



It's a toy that consists of a sphere of jello-like material. You throw it against a flat surface where it lands with a splat! and spreads out into a thin film. Then over the course of the next 10-20 seconds it slowly creeps back to its original spheroid shape. Some of them have little appendages like eyes and a nose so that they look kinda sorta like a face.

That's it. That's all these things do. Splat! Creeeeeeeeeee....eeep. There's not a single place we've been to that hasn't had at least one guy -- more often several -- standing there throwing these things at a board laying on the ground over and over and over again. I can't imagine what the appeal is. I have never seen anyone actually buy one. And yet we've seen dozens of people apparently trying to make a living by selling them, so the actual number of splatty-toy resellers is certainly much higher -- probably hundreds, perhaps thousands. How big could the market for these things possibly be?

It's baffling.

Woman arrested for reading the Constitution in an airport

Daily Kos has the first-person account in gory detail. The part that struck me most is near the end:

[My husband] has for years tried to cure me of my delusion that there is some democracy left in the United States.

I am beginning to be cured of that delusion myself. :-(

KC Fed President: Big banks are a threat to capitalism

Thomas Hoenig, president of the Federal Reserve Bank of Kansas City, says that big banks are a threat to capitalism.

The U.S. economy is the most successful in the history of the world. It achieved this success because it is based on the rules of capitalism, in which private ownership dominates markets and individuals reap the rewards of their success. However, for capitalism to work, businesses, including financial firms, must be allowed, or compelled, to compete freely and openly and must be held accountable for their failures. Only under these conditions do markets objectively allocate credit to those businesses that provide the highest value. For most of our history, the United States held fast to these rules of capitalism. It maintained a relatively open banking and financial system with thousands of banks from small community banks to large global players that allocated credit under this system. As late as 1980, the U.S. banking industry was relatively unconcentrated, with 14,000 commercial banks and the assets of the five largest amounting to 29 percent of total banking organization assets and 14 percent of GDP.

Today, we have a far more concentrated and less competitive banking system. There are fewer banks operating across the country, and the five largest institutions control more than half of the industry’s assets, which is equal to almost 60 percent of GDP. The largest 20 institutions control 80 percent of the industry’s assets, which amounts to about 86 percent of GDP.

...the problem with [Systemically Important Financial Institutions (SIFIs)] is they are fundamentally inconsistent with capitalism. They are inherently destabilizing to global markets and detrimental to world growth. So long as the concept of a SIFI exists, and there are institutions so powerful and considered so important that they require special support and different rules, the future of capitalism is at risk and our market economy is in peril.

Amen, brother Hoenig.

Politics: catching up on Glenn Greenwald

I'm using a rare bit of down-time to catch up on the news. I cannot recommend Glenn Greenwald highly enough. It sometimes seems that he is the only voice of sanity left in the whole of the news media. Time is tight, and internet connectivity is flaky, so I can't write much well-considered commentary. Instead, I'll just point to two particularly noteworthy recent items and encourage you to read them in their entirety:

A remaining realm of American excellence

When President Obama announced the killing of Osama bin Laden on the evening of May 1, he said something which I found so striking at the time and still do: “tonight, we are once again reminded that America can do whatever we set our mind to. That is the story of our history.” That sentiment of national pride had in the past been triggered by putting a man on the moon, or discovering cures for diseases, or creating technology that improved the lives of millions, or transforming the Great Depression into a thriving middle class, or correcting America’s own entrenched injustices. Yet here was President Obama proclaiming that what should now cause us to be “reminded” of our national greatness was our ability to hunt someone down, pump bullets into his skull, and then dump his corpse into the ocean.

What are those OWS people so angry about?

... growing wealth and income inequality, by itself, would not spark massive protests if there were a perception that the top 1% (more accurately thought of as the top .1%) had acquired their gains honestly and legitimately. Americans in particular have been inculcated for decades with the belief that even substantial outcome inequality is acceptable (even desirable) provided that it is the by-product of fairly applied rules. What makes this inequality so infuriating (aside from the human suffering it is generating) is precisely that it is illegitimate: it is caused and bolstered by decisively unfair application of laws and rules, by undemocratic control of the political process by the nation’s oligarchs, and by a full-scale shield of immunity that allows them — and only them — to engage in the most egregious corruption and even criminality without any consequence (other than a further entrenching of their prerogatives and ill-gotten gains).

Travelogue: I'm surrounded by Cretans!

Not to be confused with cretins :-) Yes, we're in Crete. Heraklion to be precise. Not much to say about this place. It's perfectly pleasant, but unremarkable compared to other places we've been. Its main claim to fame is the proximity of the ruins of a 3500 year old palace, which is, I must confess, amazingly old, but we're starting to get a little burned out on archaeology. Europe is lousy with antiquities. Really, the only reason I'm writing about Heraklion at all is that I couldn't resist the opportunity to write the headline :-)

Travelogue: More from the hidden-gems department

Today's hidden gem is Monemvasia, Greece, a tiny Byzantine fortress on the Mediterranean that is being lovingly restored to maintain its original look-and-feel. It's like stepping into a time machine. Motorized vehicles are not allowed. In fact, they are not physically possible. All the building materials (except the local stone) are carried in on horseback or by hand, as are all other supplies.

Monemvasia is situated on a giant rock that is connected to the mainland by a causeway. At the top are the ruins of another town that once housed 20,000 people. The view is nothing short of breathtaking.



I don't normally do commercial plugs here, but I'm going to make an exception for the Likinia hotel, a hidden gem within a hidden gem. The exterior looks like a medieval stone building (and it is) but the interior has been recently remodeled and looks like a top-flight modern boutique hotel. The proprietor is a very friendly old Greek woman who I have no doubt takes very good care of her guests. Her English was not the best, but it was a damn sight better than my Greek.

If you do decide to stay here, pack light. You'll have to carry all your luggage several hundred yards over uneven cobblestone alleys and staircases to get here. But I promise you it will be worth it.

Travelogue: All quiet on the eastern front

The country of Greece has been more or less shut down by a general strike as the country's economy teeters on a precipice that could plunge the Eurozone, and potentially the whole world, into a major economic depression. But you'd never know if from reading American news sources. The NYT front page, which includes a story about how Mitt Romney cared for his lawn (and no, I'm not kidding), makes no mention of it. I can find no mention of it on any other American news outlet. (CNN doesn't even mention it under World News!) The only coverage I can find at all is on Reuters and Al Jazeera. Reuters reports that there are 400 dock workers demonstrating outside the port, but I can neither see nor hear any sign of them. In fact, here in Piraeus everything is remarkably quiet. No ships are coming or going. (We had to leave our previous port two hours early so that we would make it in at 3AM before the strike began. It's unclear if we're going to be able to get out again.) There are no airplanes in the sky. There are a few cars on the road, but traffic is light. It is eerily reminiscent of the days following 9/11.

[UPDATE:] The story finally made the front page of the NYT.

In case you're wondering, we saw no hint of any violence. We did go into Athens on one of the hop-on-hop-off tour busses (which are apparently staffed by non-union workers). There we were able to visit a refreshingly crowd-free Acropolis, though we had to admire it from a distance because the site itself was closed. But the Acropolis is surrounded by a lovely park, which we had pretty much to ourselves.

Travelogue: the fine line between irony and serendipity

We had been having a stupendous run of luck with the weather. For two weeks we had nothing but clear blue skies. In fact, one day I got a sunburn. In Europe. In October.

Then two days ago our luck ran out. We arrived in Amalfi to some ominous looking clouds and a pretty good-sized swell. Some time later the captain announced that it was too rough to be able to operate the tenders to shore, that he was canceling the stop, and we would have a day at sea en route to our next destination, Taormina.

To describe my reaction to this news I have to rewind just a bit: we had actually been to Amalfi earlier on this same trip. We're on multiple legs of a cruise whose itinerary was really designed to be done one leg at a time, so we have a number of repeat destinations. The idea was to use our first stop to get an overview of the place, and then the second to do a deep-dive into whatever we had found most interesting the first time around.

On our first stop in Amalfi I found a secret route out of town. Yes, I know how weird that must sound, but only if you've never been to Amalfi. The town, you see, is quite literally built on a cliff. Actually, it's built into a little canyon carved into a cliff, but let's not quibble too much over semantics. The point is, there is absolutely no level ground around Amalfi. Nada. Zilch. Zip.

So at first glance it appears that there is exactly one way in and out of town. It's a road that was laboriously carved into the limestone in the 1800's, and is today occupied by vehicles that the road's designers could not possibly have imagined in their wildest dreams, everything from scooters to tour busses. Lots and lots of tour busses. So many, in fact, that they are constrained by law to only go one direction. There are many, many places along the Amalfi road where it would be physically impossible for two busses to pass one another.

All that diesel exhaust makes the Amalfi road a not-very-pleasant route to walk. But it has some of the most spectacular scenery in the world, and I really wanted to get some pictures without having to shoot through the window of a bus. So I decided to take my life in my hands and walk out of town.

A quarter mile or so out I noticed a footpath that crossed the road and decided on a whim to find out where it went. To make a long story short, it turned out to go back into town, and connect with a whole network of footpaths that criss-cross the slopes all along the Amalfi coast. The access to this path from the center of Amalfi is so well hidden that while I'm pretty sure I could find it again, I could not describe how to get there to anyone else.

So on the one hand, I was really looking forward to showing my discovery to Nancy and some other friends we have made on the boat. On the other hand, we had been touring non-stop for two weeks, and the pace was starting to get a little grueling. So part of me was disappointed, and part of me was relieved that we would get a much-needed vacation from our vacation.

So we headed South.

Those of you of a certain age will remember the theme song of a television series called "Gilligan's Island" with the line, "The weather started getting rough, the tiny ship was tossed." Except for the ship not being so tiny, that's pretty much what happened. The weather deteriorated rapidly, and long before we got to Taormina it was announced that that stop was being cancelled as well, and we would be heading instead for the safety of the deepwater port at Messina, where we finally arrived around 8PM after passing through one of the most spectacular lightning storms I have ever seen in my life.

Now, there is a reason that Messina was not on the original itinerary. It was once a charming Sicilian town, but then it was destroyed in an earthquake and rebuilt as a depressing modern monstrosity. There is graffiti everywhere. A few pre-earthquake buildings stand forlornly amidst a sea of utterly bland cinder-block apartments. It is hard to say which did more damage: the earthquake, or the urban planners who oversaw the reconstruction.

Oh well, at least it's not raining, I thought to myself as I stepped out onto the balcony to assess the weather. And then I heard a sort of "chuff" sound from down below. I looked over the railing, and there were two pilot whales right below me, almost close enough to touch.



Yeah, I know, the photo doesn't look like much. But you have to remember that this photo was taken well after their initial appearance, after I'd had a chance to get over the shock of seeing whales in an industrial harbor at all, let alone practically under my feet, and run inside and grab my camera.

It was by far the best look I've ever had at a whale. And but for some bad weather, I never would have seen them.

Postscript: we left Messina and promptly sailed into the gnarliest storm I have ever experienced. Chaise lounges were flying across the pool deck. We found out later that the wind had been a sustained 70 knots true. That put the storm solidly in the range of a category 1 hurricane. Not an experience I ever care to repeat.

Today the wind is down to a mere 40-50 knots, but the weather at our next port (Santorini) is looking dicey as well. And to top it all off, this leg ends in Athens, where a general strike is scheduled to begin the day we arrive.

I overheard a truly heartbreaking lament from one passenger who, along with his family, is only on board for this one leg. This was supposed to have been their trip of a lifetime. They scrimped and saved for years to be able to afford it. And now they will likely be spending more than half of their time stuck aboard the ship in the rain.

Sometimes Loki has a truly perverse sense of irony.

Travelogue: A 500 year old practical joke?

We did the whirlwind tour of Rome today, which included a tour of the Vatican museum and the famous Sistine Chapel. As I was looking at the famous Michelangelo frescos on the ceiling it suddenly occurred to me: that dude is mooning God!



I did a little research afterwards and it turns out that's not quite right. That dude is God, and He's mooning us. (You can tell because he's wearing (or not) the same pink robes and has the same grey hair that He has in all the other panels.) The best part: the title of the panel is -- and I am not making this up -- The Creation of the Sun and the Moon.

Michelangelo must have had a sense of humor.

What would you have done instead?

Christopher Hitchens, who is normally a rational and reasoned man, somehow manages to consistently lose his rudder when it comes to the war on terror. Not exactly his words, but the headline of his most recent piece in Slate is: Those who protest the killing of Anwar al-Awlaki have to say what they would have done instead.

Very well, I will tell you Mr. Hitchens.

I would have filed formal charges against Mr. al-Awlaki. I would have sought an indictment from a grand jury. I wold have given Mr. al-Alawki the opportunity to return home to answer the charges against him. If he failed to take advantage of the opportunity to defend himself (which he almost certainly would have) I would have tried him in absentia. I would have waited until a jury returned a guilty verdict. Then -- and only then -- I would have ordered him blown to kingdom come.

I would have done these things to show to the world that we are a nation of laws, not of the whims of men. I would have done these things to plant our flag firmly on the moral high ground. I would have done these things because they are the right thing to do.

Glen Greenwald said it best as he usually does:

[A]s the Bush years proved, the American population is well-trained to screech Kill Him!! the minute the Government points to someone and utters the word “Terrorist“ (especially when that someone is brown with a Muslim-ish name, Muslim-ish clothes, and located in one of those Bad Muslim countries). If Our Government Leaders say that someone named “Anwar al-Awlaki” — who looks like this, went to a Bad Muslim-ish place like Yemen, and speaks ill of America — is a Bad Terrorist, then that settles that. It’s time to kill him. Given those “facts,” only a “civil libertarian absolutist” would think that things like “evidence” and “trials” are needed before accepting his guilt and justifying his state-sanctioned murder.

...

The most ignorant claim justifying the Awlaki killing is that he committed “treason” and thus gave up citizenship; there’s this document called the “Constitution” that lays out the steps the Government is required to take before punishing a citizen for “treason” (“No Person shall be convicted of Treason unless on the Testimony of two Witnesses to the same overt Act, or on Confession in open Court“); suffice to say, it’s not met by the President secretly declaring someone guilty backed up by leaked, anonymous accusations to the press.

Worth reading the whole thing.

A final -- and telling -- quote from Hitchens:

Is a synagogue in town the next development you truly welcome in the spirit of “inclusiveness” and “diversity”?

Except he didn't use the word "synagogue" of course, he used the word "mosque." I suppose Mr. Hitchens thinks it's OK to make this invidious query about a mosque because terrorists are muslims or some such thing. Hitchens of all people should recognize this logical fallacy. Even if all terrorists are muslims (which they aren't but let's suspend disbelief for the sake of argument), it does not follow that all, or even most, muslims are terrorists, despite the fact that vast numbers of Americans are more than willing to draw that inference. Most of Hitchens's writings are dedicated to debunking such logical errors, which makes it all the more tragic that he of all people is promulgating it in this case.

Travelogue: more from the hidden gems department

Today's well kept Adriatic secret is the Croatian island of Korčula (pronounced KOR-chew-la).



If you want to get away from the touristic hordes, this is a good place to do it.

We interrupt this travelogue...

... to bring you the sad news of the death of the Constitution of the United States. The Constitution had been ailing for some time, with the extrajudicial arrest, imprisonment, and torture of people deemed by the President to be "enemy combatants." But never before has the U.S. actually executed one of its own citizens without even the pretense of due process. Until now.

Time to revisit one of the great literary quotes of all time, a sentiment that we ignore at our peril:

William Roper: So, now you give the Devil the benefit of law!

Sir Thomas More: Yes! What would you do? Cut a great road through the law to get after the Devil?

William Roper: Yes, I'd cut down every law in England to do that!

Sir Thomas More: Oh? And when the last law was down, and the Devil turned 'round on you, where would you hide, Roper, the laws all being flat? This country is planted thick with laws, from coast to coast, Man's laws, not God's! And if you cut them down, and you're just the man to do it, do you really think you could stand upright in the winds that would blow then? Yes, I'd give the Devil benefit of law, for my own safety's sake!

Travelogue: the best kept secret in Venice

... isn't in Venice. It's the nearby island of Burano.



It's about a quarter of a mile wide, has a population of under 3,000, and is accessible only by boat, which tends to keep out the much of the tourist riffraff. Burano is the very definition of charming. If you're ever in Venice I highly recommend hopping on the vaporetto and heading on over, especially if you get tired of the crowds in the Piazza San Marco.

[Administrative note: the cruise we're on is a little unusual in that it has no sea days at all, so finding time to write is going to be tough. I'm going to do my best to keep it up, but if the travelogue entries seem short and intermittent, that's why.]

Faster than light? Probably not. But you never know.

The scientific community is abuzz with news that neutrinos have been measured moving (very slightly) faster than the speed of light. Here's a quick explanation of why, if this discovery holds up under scrutiny, it would be Really Big News, and why my money is still on Einstein.

The speed of light has been dubbed the "cosmic speed limit" by the popular press, but this is not quite right. It is more like the cosmic speed reference. Imagine you're in a car driving due West on interstate 40. Your speedometer says 60 MPH. How fast are you really going? The answer depends on your point of view. Relative to the surface of the earth you are going 60 MPH (assuming your speedometer is working). But relative to the center of the earth you are actually moving East (which is to say, backwards) at several hundred miles an hour. This is why you see the sun set even though you are driving towards it.

If you could drive fast enough, you could actually match your speed to the rotation of the earth and "stand still" relative to the sun. The earth would be zipping by underneath you, but the sun would always remain in the same place in the sky. Go a little faster still and you could watch the sun rise in the West.

Now, suppose you set up an experiment in your car to measure the speed of light. You mount a long tube on the roof. On the front of this tube is a shutter than you can open and close to let light in. On the back is a light sensor. You open the shutter and measure how long it takes for the light to reach the sensor. The length of the tube divided by that time is the speed of light.

It turns out that when you do this experiment, the mind-boggling result is that you get the exact same speed measurement for light no matter how fast or in what direction you are driving. The reason for this (as far as we know) is that space and time are not the distinct things that we intuitively imagine them to be, but are rather two facets of a single underlying reality called spacetime. We intuitively think of moving through space as a fundamentally different kind of phenomenon than moving through time, but this turns out not to be true. When we move through space we change the way we move through time. In particular, the "faster" you move through space, the "slower" you move through time (a phenomenon known as time dilation). When you move through space at the speed of light you stop moving through time. From the point of view of a photon moving through the tube on the roof of your car, it is simultaneously at the beginning and the end of the tube, and at all points in between. (Another way of saying the same thing is that as you move faster and faster, the distances between things in the direction you are moving begin to shrink, a phenomenon known as Lorenzian contraction. When you move at the speed of light, the distance between all points along your trajectory becomes (from your frame of reference) zero, which is why you can be everywhere along your trajectory at once.)

Another way to think about this: everything is always moving at the speed of light through spacetime. When you "move" (through space) you aren't really changing your velocity (through spacetime), you are only changing your direction of motion. It's exactly the same as turning the steering wheel in your car. If you drive at, say, 60 MPH according to your speedometer but turn a little to the north, you are now going slower in the east-west direction but faster in the north-south direction. If you turn all the way north, you "stop moving" in the east-west direction. Moving through spacetime is exactly like that. There is no accelerator, no brakes, only a steering wheel. If you are moving zero miles per hour through space then you are moving 1 second per second (the speed of light) through time. If you "turn the wheel" and start moving through space (north-south) then you will be moving slower through time (east-west). At the extreme you move through space at the speed of light and move through time at zero seconds per second (or zero miles per hour -- same thing).

Every single experiment that has ever been done has supported this view of the world. Until now.

If these results hold up it would not just be a little loophole in the laws of physics that somehow allows some esoteric subatomic particles to sneak past the cosmic radar detectors. It would be a fundamental violation of one of the two pillars of modern physics. It would also have potentially profound philosophical consequences. On our current view of physics, it is not merely impossible to move faster than light, it is actually non-sensical. To "move" faster than light you would actually have to travel backwards in time, which has all kinds of paradoxical consequences according to our current understanding of reality. I'm not saying this outcome is impossible, but it's unlikely.

Much more likely is some kind of experimental error. The difference in velocity of the supposedly superluminal neutrinos is only a few parts per million. This is well within the capabilities of modern technology to measure but it's not easy to do, and there are a lot of places that mistakes could sneak in. So far they haven't found any mistakes despite very careful scrutiny but that doesn't mean they won't. The last time experimental results seemed to violate relativity it took thirty years to figure out what was going on.

So my money is still on Einstein. But I'm not betting my entire life savings on it.

Blood on our hands

If you are a citizen of the United States there is blood on your hands tonight. When seven of nine eye-witnesses recant, when some of them allege being coerced by the police, when three of the jurors recant, when there is no physical evidence, what you are left with is not reasonable doubt, it is in fact no evidence whatsoever that Troy Davis killed anyone.

But none of that matters. What matters is that a white policeman was murdered. What matters is that the family is grieving. That cannot be allowed to stand. So after twenty years of appeal after appeal after appeal standing in the way of "justice", now at long last the final i has been dotted and the final t crossed. All of the protocols have been followed, all of the safeguards adhered to. The sunk cost invested in getting "justice" for Mark MacPhail is so high that to let Troy Davis live would be an unacceptable admission of the failings of the system we have built.

Make no mistake: we have failed. Someone killed Mark MacPhail, and whoever it was will now almost certainly never be known. Despite the appeals and the safeguards, the procedures and process, we almost certainly got the wrong guy. If you are a citizen of a democracy you can't blame that on the process, because the process is you.

Neither Troy Davis nor Mark MacPhail will get justice. Because the cost of that justice would be for us to admit we were wrong. And that is, apparently, too high a price to pay.

Reinventing the training wheel

From the wish-they'd-had-these-when-I-was-a-kid department, i nominate this gyroscopic training wheel for the cool-hack-of-the-week award.

California sales tax fail

In July of this year I made a purchase from an on-line vendor. Yesterday I got this letter from them:




The legalities of the situation are this: although the company is headquartered in Minnesota, they have a presence in California and so technically I should have been charged sales tax by the vendor. Since they didn't, it is now technically my responsibility to pay the equivalent amount in use tax. The sales tax rate varies depending on exactly where you live but in my case it's 8.25%. So the amount due is $2.05.

Which I would happily pay. The government where I live actually works pretty well, and I'm happy to pay my fair share to keep it up and running. But the problem is this: this particular vendor normally doesn't sell to consumers, they sell to small businesses, in which case no sales tax is due. So instead of just paying the $2.05 and charging it to my credit card, they want me to fill out this form:



Let's do a little math here. There are at least three human beings involved in this process: me, whoever at the company has to process the form when I send it back, and the auditor. Let's suppose that we each bill at $60 an hour, and that it takes each of us one minute to do our respective task in this little bit of economic kabuki theatre. So we have just effectively spent $3 to generate $2.05 worth of tax revenue.

This is another example of the societal failure to understand the difference between money and wealth. Somewhere in the government some bureaucrat has been charged with the task of collecting the money which the state is legally due with (apparently) no regard for the cost of doing the collecting. So the government will get its $2.05, but society will be $3 poorer for it. At least.

If this were an isolated incident it would not even be worth the bother to write about. But it isn't. This sort of short-sightedness pervades American society at every level, from people who choose their credit cards on the basis of which ones give them the most frequent-flyer miles to the weenies of Wall Street who continue to promulgate the myth that everyone can get rich by playing the stock market. (Hey, it worked for them, didn't it?)

And now I have to stop writing because I need to fill out this stupid form.

History repeats: the infographic

Robert Reich in the NYT has a really good graphical summary of the historical trends in the U.S. economy. If there's any doubt in your mind that the U.S. is a stronger country when top marginal tax rates are higher, this should dispel it. This is about as close to a controlled experiment as you can get in macroeconomics.

Be sure to scroll all the way down, and pay particular attention to the middle of the chart, where the results are neatly summed up in one sentence:

"Great wealth for the top 1% was reversed by policy but then rose again." (Emphasis added.)

What Reich doesn't say, but I will, is that it rose again because of government policy. The chart makes an unfortunate concession to physical layout by putting the white line that separates the "great prosperity" from the "great regression" around 1978. But in fact if you look at the income disparity chart, the real divergence between the top 1% and the rest of the population didn't begin until about 1982, shortly after the Reagan tax cuts. That's either an extraordinary coincidence (one of these day's I'll do the math and figure out the actual odds), or there's a causal relationship.

The evidence could hardly be clearer: low marginal tax rates on top earners leads to massive income inequality, which leads to a collapse in demand, which leads to economic depression. At root the problem is, as I have been saying for a long time now, a fundamental failure at all levels of society to understand the difference between money and wealth, and in particular, a widespread belief that having more money is the same as having more wealth. It isn't. The end-game of our current trajectory is the devolution of the United States of America into a third-world country, complete with crumbling infrastructure, inflated currency, and ubiquitous poverty except inside the gated enclaves of the rich and powerful. Of course, these things take time -- decades -- to play out. But unless We (or perhaps I should say You) the People take steps to reel in the emerging American oligarchy, there is no reason to believe that it won't play out the same way it did the last time we did this experiment.

To paraphrase Yogi Berra, it's 1932 all over again.

Invasion of the killer crabs

It's a result of global warming:

Huge crabs more than a metre across have invaded the Antarctic abyss, wiped out the local wildlife and now threaten to ruin ecosystems that have evolved over 14 million years.

Three years ago, researchers predicted that as the deep waters of the Southern Ocean warmed, king crabs would invade Antarctica within 100 years.

But video taken by a remotely operated submersible shows that more than a million Neolithodes yaldwyni have already colonised Palmer Deep, a basin that forms a hollow in the Antarctic Peninsula continental shelf.

They are laying waste to the landscape. Video footage taken by the submersible shows how the crabs prod, probe, gash and puncture delicate sediments with the tips of their long legs. "This is likely to alter sediment processes, such as the rate at which organic matter is buried, which will affect the diversity of animal communities living in the sediments," says Craig Smith of the University of Hawaii at Manoa, whose team discovered the scarlet invaders.

Good news for seafood lovers is that king crab will be remaining on the list of politically correct seafood.

Terry Gilliam: Loki's prophet

A woman in Las Cruces. New Mexico with no criminal record was subjected by police to a forcible body cavity search. The search turned up nothing, and the woman was not arrested. But she was charged. $1122 to be precise.

Terry Gilliam saw this coming twenty five years ago.

A unified theory of idiocy

Following up on Don's post about religion-as-standard, it turns out that on a purely Darwinian analysis, group idiocy has survival value, and if there's enough of it around it can become an evolutionarily stable strategy. If idiocy exceeds a critical threshold, it can actually become irrational to act rationally. This should strike fear in the heart of Bayesians everywhere.

If ever there was proof that the hand of Loki is at work in the world, surely this is it.

Religion as a (hard to change) standard

[Guest post by Don Geddis]

Ron occasionally writes about religion (vs. atheism) on this blog. He's had at least two excellent insights: First, that "deconverting" a religious believer has much more in common with drug rehab for an addict than it does with a rational, scientific debate. And second, promoting the idea that perhaps there is an all-powerful supernatural being controlling influencing our fates, but perhaps it is Loki the Trickster rather than some more benevolent god.

In a related vein, Robin Hanson at Overcoming Bias suggests that a good analogy for the possibility of a (widespread) transition from religion to atheism is the changing of any existing widespread industry standard. And, as numerous startups have learned to their dismay, there is enough inertia behind any widespread standard, that it isn't sufficient that your new idea is objectively better. It must be enough better (perhaps an order of magnitude) that the effort involved in the change has enough payoff to make it worthwhile for the customer.

At the moment, atheism is "right", but the benefits of being "right" on this subject (vs. just being an average, typical member of your society) are so minor, that the cost is rarely worth it. QWERTY is a poor keyboard layout, but hardly anyone uses a different one. Metric is a much better measurement system than the old English units, but even though most of the world changed, the USA didn't quite make it over the bar (aside from the military and medicine, where it could be mandated top-down). In much the same way, religion and society have co-adapted to work well enough together, that "atheism is better" may be true, but it isn't (yet) enough better.

[Updated 9/3/2011: Incorporated Ron's corrections of his Loki suggestion.]

Why Amazon Can't Make A Kindle In the USA

I was going to make this a longer post but I've been swamped with other things and have had no time to write. But this article in Forbes is too important go unmentioned.

As long as I'm posting naked links, I will also note without further comment that Act 2 of this re-enactment of the Great Depression seems to be proceeding right on schedule.

Stock market reporting is broken

Actually, it's not just the reporting. Recommendations are broken too. Deeply. Fundamentally. It is a structural failure of the highest order.

In ninth grade civics class we we did a unit on the stock market. They taught us how to read the daily stock quotes in the newspaper (this was before the internet. Yes, I'm that old.) And our homework assignment was to take $10,000 in pretend money and put together a stock portfolio that we would track for a week. At the end of the week, whoever made the most "money" got some sort of a prize (I don't remember what it was. Yes, I'm that old.)

The kid who won got a 200% return in one week. He did it by "buying" a penny stock at 1/8 (they still used fractions in those days. Yes, I'm yada yada yada...) and "selling" it two days later at 3/8. It seemed like magic. If you could just figure out how to "pick the winners" you could make money. Lots and lots of money. Money money money money money. And so I, like so many before and after me, started looking at stock charts and thinking wistfully about how to obtain a copy of tomorrow's newspaper.

What they didn't tell us, and what I didn't figure out until many years and many lost dollars later, was that the stock market is (imagine this) a market, that is, a place where people come together to buy and sell stuff, in this case stocks. There is no magic. It's fundamentally no different than any other market. At root, the NYSE is just a bunch of folks with lemonade stands, except instead of lemonade they are selling stocks.

So what is it about the stock market that gets people so much more excited about it than lemonade stands? After all, you can make real money selling lemonade (or at least a synthetic brew that vaguely resembles lemonade, but that's another post). Two things. First, stocks are a virtual good, so they are mechanically and logistically easier to deal with than physical goods like lemons and sugar. You don't have to worry about transportation or storage. All you have to do is buy and sell. And this leads to the second attractive feature: price volatility.

Wait, what? Isn't price volatility a bad thing? Aren't we all getting nauseous from the market's recent roller coaster rides? Well, you might be getting nauseous, but I guarantee you that there are some traders out there -- the ones who have the balls or enough inside information to buy low and sell high -- who are making tons of money. And that is exactly what attracts people, the possibility of getting rich quick if you can just guess better than most people which way the market is going to move. Because of various logical fallacies that humans are chronically prone to (like confirmation bias) it is easy to convince yourself that you can do this. But by definition most people can't.

This fundamental irrationality is insidious. It has given rise to an entire industry carefully designed to take advantage of it. OK, maybe you aren't better than the next guy at predicting the market, but surely a professional who has studied the math can be, so if you can't call the market you can do the next best thing and hire someone who can. Vast numbers of people who would never dream of playing the market on their own hire self-styled "financial advisors" to do it for them. And it seems plausible that such talent should be available for hire. But the evidence is overwhelming that it isn't. Study after study has consistently shown that professional money managers cannot consistently beat the market, not even a little bit.

Here's why. Take a look at the two charts at the bottom of this page. (Go ahead and click on the link. It should open in a new window.) This site is a market for bitcoin but that's irrelevant for this discussion. What matters is the content of the graphs. The first one is a history of recent trades. This is the kind of chart that anyone who has ever followed the market is familiar with. It has the familiar ups and downs and twists and turns that make it oh so tempting to try to discern a lucrative pattern that everyone else has missed.

But the second chart is one that you probably haven't seen. It's a market depth chart. It shows a snapshot of the current order book for bitcoin on this exchange. It shows you how many bitcoins people are currently willing to buy and sell at various prices. The green bids on the left are the orders to buy, and the yellow asks on the right are the orders to sell. Notice that the order volume on both the buy and sell side taper off and fall to zero at the exact same price that the last trade of the day took place at (look at the extreme right hand side of the "recent trades" chart.) This is, of course, not a coincidence. If the two sides of the order book had any overlap, there would immediately be trades consummated that would eliminate it.

Now, it is important to note that the market depth chart is not a time history like the recent trades chart is. It is a snapshot of the state of the market at a particular instant in time. The actual history of the market is not the history of consummated transactions, but the history of the order book, which is vastly more information than the history of consummated trades. The American stock market generates terabytes of history data every single day.

And behind the order book there is an even bigger reservoir of hidden state, which is all of the market analysts and individual traders making decisions about whether to buy or sell.

(At this point stop an ask yourself: what would have happened if my ninth grade colleague had done his trading with real money.)

We are now in a position to understand why reporting on the stock market is so utterly broken. Let's start with the evening news. It's probably safe to say that there is not a single general news outlet that does not dutifully report the closing price of the Dow Jones Industrial Average every single day, and the absolute difference between that price and the previous day's closing price. Sometimes they'll leave out the price and only report on the difference. Even on NPR, which really ought to know better, you will hear regularly throughout the day, "The Dow is up by 27 points, the NASDAQ is down by 3." On tonight's evening news the 420 point drop in the Dow will almost certainly be the lead story, with commentators swooning over the fact that this is the ninth biggest point drop ever in the Dow's history or whatever it is.

All of this is almost completely bogus. For starters, the Dow is only a sampling (albeit a fairly representative one) of the overall market. For afters, the closing price is just the price at which the last trade of the day happened to take place. It is a single data point from a large collection of data points (the trade history) which in turn is driven by an even larger collection of data points (the order book and its history) which in turn is driven by an even larger collection of data points, many (most) of which are simply inaccessible.

The bogosity doesn't stop there. Tonight you will hear that so-and-so-many trillion dollars of wealth were "wiped out" by today's Dow drop or some such nonsense. No, they weren't. The value of the market is NOT the closing price multiplied by the number of shares. That assumes that you could sell all the shares for the closing price. If you did that experiment you would find very quickly that this assumption is false. Stock prices obey the laws of supply and demand just like everything else, and if you flood the market with product the price will inevitably go down.

If you wanted to mislead people about what really goes on in the stock market you could hardly do better than to focus their attention on the current state of the Dow relative to yesterday's closing price. And yet that is what every single news outlet does.

Why?

Well, part of it is simple inertia. Daily reporting of stock market closing prices goes back decades. I can remember watching the CBS Evening News with Walter Cronkite (when I was a kid -- I'm not that old ;-) and even Grandpa Walter was doing it, except that back then the mantra was, "The average price per share on the New York Stock Exchange gained an eighth of a point, and a quarter point on the American exchange." Today so many people pay attention to the Dow that it actually matters because of the psychological effects that big Dow swings have on people, which in turn can create market movement on its own. But the closing price of the Dow doesn't really matter. The Dow by now is kind of like Paris Hilton, famous only for being famous. If ever there was a tail that wagged the dog, the daily closing price of INDU is it.

But part if it is because there are people who make money off of your ignorance. Vast, vast piles of money. The "financial services industry" (I put it in scare quotes because it's quite possibly a net drain on the economy at this point) is about 20% of the U.S. economy. Not all of that is waste. You can't have capitalism without capital markets. But around the core capital markets that enable a modern industrial economy has grown a vast parasitic ecosystem of "financial advisors" whose livelihood depends on convincing you that they know more about the markets than you do.

And in fact they do know more about the markets than you do. They know that the best way to make money in the markets is to convince people that they know how to make money in the markets (whether or not it's actually true) so that they can play the market with your money instead of theirs. And collect fees from you.

To be fair, there is one -- and only one -- market strategy that does work. It's called asset allocation, and it can give you a small edge in terms of risk-reward over the market as a whole. The math behind this strategy is a little hairy, but not beyond the capabilities of any reasonably bright math undergrad. But anyone who tells you that they can do better than that is a flim-flam artist. (And anyone who gets a hundred million dollars a year to do this work is a crook.)

So all of those stock picks? Buy and sell recommendations? Almost entirely bogus. And you can tell that they're bogus by the form that they take: buy or sell. A recommendation to buy or sell is meaningless out of context. The only kind of recommendation that could possibly make sense is a recommendation to buy or sell within some particular time window, below (for buying) or above (for selling) some particular price. Every stock is worth buying at some price (unless the company is actually bankrupt). And every stock is worth selling at some other price. A stock recommendation that even had a chance of being worthwhile would take the form of "We believe the actual market value of this stock over a time interval T is between X and Y. So if during T the price is below X, buy. If it's above Y, sell. And if it's between X and Y hold." Or something like that. Whether or not you should actually buy or sell depends on a ton of other factors, like your tax situation, whether or not you need cash, your tolerance for risk, etc. etc. etc. But a naked buy/sell recommendation cannot possibly have any content, and study after study shows that this is so.

How about them Dodgers?

Really cute song about raising taxes on the rich.

It's getting crowded in here

The club of people noticing eerie parallels between 2011 and the 1930s welcomes its newest member, Paul B Ferrell from MarketWatch:

Listen to that hissing: The fuse is rapidly burning, warning us. Wake up before the rage explodes in your face. This firestorm is endangering America’s future. From forces outside, yes. But far more deadly, from deep within our collective psyche. We have lost our moral compass. We are self-destructing.

Crackpot warning? No. This warning comes from the elite International Monetary Fund. A recent IMF report looked at “the causes of the two major U.S. economic crises over the past 100 years, the Great Depression of 1929 and the Great Recession of 2007,” writes Rana Foroohar, an economics editor at Time magazine.

“There are two remarkable similarities in the eras that preceded these crises. Both saw a sharp increase in income inequality and household-debt-to-income ratios.” And in each case, “as the poor and middle-class were squeezed, they tried to cope by borrowing to maintain their standard of living.”

But the rich “got richer, by lending, and looked for more places to invest, bidding up securities that eventually exploded in everyone’s face. In both eras, financial deregulation and loose monetary policies played roles in creating the bubble. But inequality itself — and the political pressure not to reverse it, but to hide it — was a crucial factor in the meltdown. The shrinking middle isn’t a symptom of the downturn. It’s the source of it.” Today the consequences of the meltdown still haunt us — there’s more to come.

There’s a new bubble blowing. No one can stop it ... soon it will explode.

Worth reading the whole thing.

Karl Marx was right

So says Nuriel Roubini, the guy who called the 2008 crash.

[Businesses are] not adding workers because there’s not enough final demand, but there’s a paradox, a Catch-22. If you’re not hiring workers, there’s not enough labor income, enough consumer confidence, enough consumption, not enough final demand. In the last two or three years, we’ve actually had a worsening because we’ve had a massive redistribution of income from labor to capital, from wages to profits, and the inequality of income has increased and the marginal propensity to spend of a household is greater than the marginal propensity of a firm because they have a greater propensity to save, that is firms compared to households. So the redistribution of income and wealth makes the problem of inadequate aggregate demand even worse.

Karl Marx had it right. At some point, Capitalism can destroy itself. You cannot keep on shifting income from labor to Capital without having an excess capacity and a lack of aggregate demand. That’s what has happened. We thought that markets worked. They’re not working. The individual can be rational. The firm, to survive and thrive, can push labor costs more and more down, but labor costs are someone else’s income and consumption. That’s why it’s a self-destructive process.

Amateurs

From The Salt Lake Tribune:

The Lottery Economy

Here's how to solve all of the world's economic problems: invent a super-virulent strain of the ebola virus that will kill everyone on earth within a month or two. Voila! No more economic problems. You can't have economic problems without an economy.

What? Not the answer you were looking for? Not surprising. I put forth that extreme position to make this point: underlying any discussion of a solution to a problem are some tacit assumptions, like that you want to cure the disease without killing the patient. Yes, you can get rid of a whole host of problems (cancer, AIDS, hate crimes, athlete's foot) by exterminating humans from the planet, but surely everyone agrees that that is clearly missing the point?

Well, no. Not everyone. There are people who contemplate a planet devoid of humans with varying degrees of seriousness. And actively seeking a world devoid of one's own descendants (a.k.a choosing not to have children) is nowadays not uncommon. And there are a lot of people who argue in all seriousness that things would be better if there were fewer people, even if they stop short of advocating getting rid of them altogether.

Different people have different ideas of what constitutes a good outcome. Some people think that having a big family is the good life, others think it's a yacht and a private jet, and still others think that what really matters in life is getting right with Allah.

What I'm winding up to here is not the usual despair about the intractability of getting people to agree on fundamental issues, but wonder at the remarkable fact that we can afford to have these disagreements. Disagreement is a luxury that most creatures on this planet can't afford. You never see lions arguing about whether it is morally correct to eat wildebeests. They take what they can get or they starve.

It's important to keep things in perspective. Being able to get a banana any day of the year by going to the store and handing someone a piece of paper is not the natural order of things. It is only possible because we humans have built this thing called civilization, on which is layered the amazing system known as the global economy.

I have said in the past that one of the fundamental problems we are having in the U.S. today is that people have lost sight of the distinction between money and wealth. I think the problem actually runs even deeper than that. What people have lost sight of is the relationship between economies, civilizations, and quality metrics.

Civilization at root is based on division of labor. Some people do one kind of work, other people do other kinds of work, and so the overhead involved in learning how to do a particular task and become proficient at it is spread out over a population. Instead of everyone having to learn to do everything, an individual only has to learn to do one thing, and so the whole becomes greater than the sum of its parts.

It's a terrific theory, but it has two problems: first, how do you decide who has to do the dirty work? If everyone decides to be a lawyer and no one is left to fix the plumbing the system breaks down. And second, how do you decide how to distribute the proceeds of the system? And then there is the meta-problem of how to decide who makes the decisions. Obviously, being a decider is preferable to being a decidee (just ask George Bush), which leads to certain conflicts of interest.

In the very earliest civilizations, someone managed to convince everyone else that they should be the decider either by killing all the rivals or convincing people that they were anointed by God (sometimes both). But then we invented trade, which is even more powerful and amazing than division of labor. Division of labor produces dramatic efficiency gains but at the cost of having to solve the problem of decision-making. Trade allows for decentralized decision-making that results in improved outcomes even -- in fact especially -- in the face of different quality metrics. This is an amazing result. It means that you and I can interact in a way that we both agree is mutually beneficial even if we don't agree on what that benefit is! We can have completely different quality metrics and still cooperate to mutually agreed upon mutual benefit. Trade is white magic.

To complete the trifecta we invented money, which makes trade orders of magnitude more efficient. Before money, in order to trade you had to find another person who wanted what you had and who also had what you wanted. It was like dating, with all of its attendant difficulties. (In fact, the reason finding a mate is so troublesome is that it is one of the few kinds of exchange that cannot be facilitated by money.) With the advent of money that problem went away. With money you can buy and sell independently. You still need to find a corresponding seller or buyer depending on which you want to do. But it's a lot easier to find someone who wants to buy a goat and then someone else who wants to sell a pair of shoes than it is to find someone who wants to trade shoes for a goat. (It also solves the problem of how to make change for a goat.)

The upshot of all this is that you can go to the store and buy a banana for the equivalent of about 20 minutes of menial labor. It is truly an amazing thing. Our simian forebears would be incredulous.

Money, alas, is not quite as free of adverse side-effects as trade. The only way to conduct trade is through the provision of mutual benefit (otherwise it isn't trade). Alas, there are two ways to acquire money. One is to produce and sell valuable goods and services. This is the way of Jedi. The other is to game the system. That is the dark side.

There are lots of ways to game the system. You can sell snake oil. You can run a Ponzi scheme. You can acquire a monopoly which allows you to impose tolls.

In the absence of a mechanism to keep people from gaming the system, small disparities in economic power tend to be amplified through positive-feedback effects. If I have enough money I can buy media outlets through which I can influence your thinking. I can give money to government officials so that they will pass laws that unfairly benefit me. I can run my businesses in a way that makes it all but impossible for you to acquire any resources beyond what you need to subsist. The result is the creation of an oligarchy.

This is the problem we have today in the United States. Our country is no longer a democracy, it is a moneyocracy. One dollar, one vote. Which might be acceptable if all those dollars represented the creation of value, but they don't. By and large today, the people making the money are not the ones creating value, they are the ones who are gaming the system. There are, of course, exceptions. But they are a rapidly shrinking minority.

Aside from the fact that the diversion of money to non-productive activity is a drain on the economy, there is an even more insidious and corrosive effect. Those who have acquired money by gaming the system generally live in denial about this. People don't like to think of themselves as parasites, so they invent elaborate stories about how they are producing value by "providing liquidity" or some such bullshit. This begins a process of decoupling decision-making from reality. The end result of this process is a world where the most ridiculous nonsense becomes not just part of the debate but the prevailing view. It begins with investment bankers being in denial about the fact that they are parasites on society. It progresses from there to the belief that the best way to deal with a recession is to cut government spending. It ends with most of the presidential candidates from one of the two major political parties professing to believe in creationism.

Once upon a time we were a country where wealth was more or less correlated with the creation of value. Americans made money building railroads or making steel or inventing computers. There was a strong middle class, so even if you weren't extraordinarily talented you still had a pretty decent shot at a car and a house with a white picket fence if you showed up for work. We had a grip on reality. Science was cool. We invented the Internet and sent men to the moon.

There is still a slow trickle of innovation coming out of the U.S., but the defining themes of this country today are not the latest technological advances but rather shrill ideology about things like terrorism and drugs, epic fiscal irresponsibility, voters who say things like "get government out of my medicare" with a straight face, and political extremism that a few weeks ago very nearly sent us over a cliff.

Above all, we have a tiny minority of people who have won the lottery (myself included) and a huge majority of people who are somewhere between struggling to make ends meet and being on the street. It is no coincidence that gambling is on the rise in the U.S. The entire economy is shifting from merit-based capitalism to a lottery economy. Instead of a pension, you get a 401-K, which may or may not leave you with enough to retire depending on what the stock market does. Instead of a steady job, you get contract work, which may or may not be there next week. Instead of a social safety net, you get your share of a mortgage that you didn't sign up for and have very little hope of ever paying back.

Unless you win the lottery.

If you win the lottery, which nowadays pretty much means being an early employee at a company that goes IPO or making partner at Goldman Sachs, then you don't need a social safety net. You don't need a steady job. You don't need a pension. You get to be one of the people who makes the decisions, buys the politicians, bypasses the security lines at the airport.

But your odds are not good. The top 1% now own about 40% of the nation's wealth. Your odds of being in the top 1% are about 1 in 100. Are you feeling lucky? And do you want to live in a country where that question is the one that decides the fate of your children?

The reason I support raising taxes on rich people is not just because it has to be done to close the budget deficit. There's a much deeper reason than that. Taxing the super-rich provides a vital countervailing force to the natural tendency of money and power to concentrate in the hands of the few people who are most willing to game the system and most able to be in denial about it. The corrosive effects of the phenomenon on the fabric of society are evident everywhere today. Our infrastructure is crumbling. Our people are out of work. The middle class an endangered species. Our government is dysfunctional.

It doesn't have to be this way. We don't have to have a lottery economy. But the first step to recovery from any addiction is always the hardest: admitting to yourself that you have a problem.

[UPDATE: The lead story of the on-line edition of the NYT this morning is "Starved State Budgets Inspire New Look at Web Gambling."]

Three geopolitical oddities

Did you know that there is a part of the continental United States that it not actually connected to the rest of the continental United States? It's called Point Roberts and it consists of the southern part of a peninsula that sticks down off of southern Vancouver just below the 45th parallel, which marks the border between the U.S. and Canada. I've been there. There is an actual border crossing manned by actual border crossing guards whose salaries are paid for by your (if you're an American) taxpayer dollars. These guards defend the 2,739 residents of Point Roberts from invasion by Canadian militants. They don't do a very good job. I visited the place in 2009 and was able to walk right past the checkpoint from Canada into the United States unchallenged. It was not until I tried to get back into Canada from whence I had come that I was challenged by a guard on the Canadian side.

This bit of geopolitical weirdness is not unique. There is, according to Google maps, a tiny bit of Austria that juts out into Germany. This piece of Austria is technically contiguous with the rest of the country, but the place where it connects is only about 150 feet wide, and there are no road that go through it. To get from this part of Austria to the rest of the country without hiking you have to go through Germany.

But the weirdest example of bits of country in random places has to be Oman. There is an enclave of Oman called Madha that is completely encircled by Fujaira, one of the United Arab Emerates. And completely encircled by Madha is the enclave of Nahwa, which belongs to the Emirate of Sharjah, the main part of which is next to Dubai. And as if that weren't bad enough, there is a third discontiguous part of Oman called Musandam at the northern tip of the Arabian peninsula.

Go figure.

Is history repeating itself?

The NYT thinks so:

The events of the last few weeks — gridlock in Washington, brinksmanship over raising the debt ceiling, Standard & Poor’s downgrade of long-term Treasuries, renewed fears about European debt and a dizzying plunge in the stock market — bear an intriguing resemblance to some of the events of 1937-38, the so-called recession within the Depression, with a major caveat: it was a lot worse back then.

...

“The parallels to what is happening now are very strong,” Robert McElvaine, author of “The Great Depression: America, 1929-1941” and a professor of history at Millsaps College, said this week. Then as now, policy makers were struggling with how and when to turn off the fiscal stimulus and monetary easing that had been used to combat the initial crisis.

Are we at similar risk today? David Bianco, chief investment strategist for Merrill Lynch Bank of America, told me this week that “the market is collapsing faster than any fundamentals would warrant.” The possibility that the United States faces a recession as bad as 1937’s seems far-fetched. Nonetheless, Mr. Bianco notes that the market is now pricing in an 80 percent chance of recession, one likely to be more severe than in 1991.

Actually worth reading the whole thing. It's an interesting analysis.

Yes, software patents are evil (and what to do about it)

There's been a flurry of discussion on HN recently about patents. In particular, Paul Graham's 2006 essay on the topic is making the rounds again. As always, I have a lot of respect for Paul, and he usually gets things right, but not this time. He writes:

One thing I do feel pretty certain of is that if you're against software patents, you're against patents in general. Gradually our machines consist more and more of software. Things that used to be done with levers and cams and gears are now done with loops and trees and closures. There's nothing special about physical embodiments of control systems that should make them patentable, and the software equivalent not.

No, that's not true. It's a specific example of a more general fallacy which is sort of the inverse of the slippery-slope fallacy. (This version of the fallacy probably has a name too, but I can't find it.) The slippery slope fallacy argues against a small policy change on the grounds that it might lead to a larger policy change whose consequences are clearly undesirable. (This is used, for example, to argue against gay marriage because it might lead some day to people marrying their pet hamsters.) The inverse fallacy is that because we can't draw sharp lines dividing a continuum into discrete chunks that we should just give up and treat the entire continuum as if there were not distinctions to be made at all. This is Graham's version of the fallacy. Because our machines gradually consist "more and more" of software there's no point in trying to draw a line between inventions that consist of software and those that don't.

There are two reasons this is wrong. First, there is a sharp line you can draw between an invention that consists partly or wholly of software but where the complexity of the problem that the invention solves is driven by features of the physical world. For example, consider an algorithm for generating and recognizing QR codes. The reason this is hard is because to be useful a QR code has to be rendered on a physical medium, and then that image has to be captured by a camera. In that process, the original data can be obscured and corrupted in a large number of different ways. The image can be noisy or partially obscured. The camera can be rotated or held an an oblique angle. All of these things make dealing with QR codes hard. The reason the QR code algorithms are useful is that they solve these problems. That is what makes them worthy of being patented.

Contrast that with this patent on multiply-linked lists. This is a patent that clearly should never have been issued. The prior art goes back at least as far as 1970, probably as far back as 1959, and possibly even earlier than that. But independent of the prior art, it is a pure software patent. The problem it addresses (insofar as it addresses a problem at all) does not arise from the physical world. It is a problem and corresponding solution that exists entirely in the realm of software and abstract mathematics.

Now, there are some ideas in this realm that are also worthy of patents, like elliptic curve cryptography. The problem is that the patent office has shown itself to be singularly inept at distinguishing worthy software patents from worthless ones, and the worthless ones are doing serious damage to our economy. So this is the second reason that opposing software patents is not opposing patents in general. It is arguable that empirically software patents are doing more harm than good, that this is not the case (for whatever reason) in non-software patents, and so one can reasonably oppose software patents without opposing patents in general on purely practical grounds.

But I think there is a happy middle ground that would make everyone happy. I've proposed this before, I'll propose it again: simply open the patent issuing process up to public comment. Before a patent is issued, publish the patent and invite public comment. All the PTO needs to deny a patent is plausible deniability that it should not be issued, and I'm sure there are plenty of volunteers in the software world who would be more than happy to spend some time policing the system. It's a win-win. Which means it almost certainly won't happen.

Now I'm really worried

This made me laugh:

The heads of JPMorgan, Bank of America and Citigroup avow that a repeat of the 2008 financial crisis is not looming. The Dow falls 520 points.

How to fix the economic mess

One of my personal rules is that if you complain about a problem it's incumbent on you to propose a solution. So here goes:

1. Re-regulate investment banking. Investment banks should go back to being what they once were, small partnerships of high net worth individuals. They should not be public companies, and they should not be allowed to invest other people's money. Un-repeal Glass-Steagall. (Banking should be a commodity. No one should get rich from banking. That being a banker is one of the most lucrative careers a person can have nowadays is just one of the symptoms of how badly screwed up our priorities are.)

2. Institute patent reform. Specifically, institute a system of peer-review where the public is invited to comment on, cite prior art for, and opine on the obviousness of patents before they are issued. Most patents being issued today are bogus and only serve to feed patent trolls and stifle innovation. Patents on human genes should be eliminated entirely. These are clearly discoveries, not inventions.

3. Cut defense spending. The amount of money we spend on defense is just ridiculous. Spend the money instead on alternative energy research and development.

4. Let the Bush tax cuts expire. Even better, raise top marginal rates to 50% or more, but allow people to spread windfalls out over several years so that you only get pushed into the top brackets if you make obscene amounts of money on a sustained basis.

5. Raise the retirement age. Index it to life expectancy. Means-test social security.

6. Institute single-payer healthcare. (Hey, a boy can dream, can't he?)

7. Listen to this guy

Since none of these things are likely to happen any time soon (except maybe #7), I'm not going to spend much time elaborating on them. I just wanted to go on the record with my suggestions so that I can carry on complaining without feeling guilty about it ;-)