World Affairs – BTMJ.org

Neal Stephenson: Innovation Starvation

Today’s belief in ineluctable certainty is the true innovation-killer of our age. In this environment, the best an audacious manager can do is to develop small improvements to existing systems—climbing the hill, as it were, toward a local maximum, trimming fat, eking out the occasional tiny innovation—like city planners painting bicycle lanes on the streets as a gesture toward solving our energy problems. Any strategy that involves crossing a valley—accepting short-term losses to reach a higher hill in the distance—will soon be brought to a halt by the demands of a system that celebrates short-term gains and tolerates stagnation, but condemns anything else as failure. In short, a world where big stuff can never get done.

This was a great talk by Dennis Miller at the Reagan Library.

Economic medicine that was previously meted out by the cupful has recently been dispensed by the barrel. These once unthinkable dosages will almost certainly bring on unwelcome after-effects. Their precise nature is anyone’s guess, though one likely consequence is an onslaught of inflation.

Warren Buffet

Reading: The Story of the Malakand Field Force by Winston Churchill

The story of a young Winston Churchill in 1897 fighting fanatical tribal warriors in modern day Pakistan–see his chilling description of what we hear all too often in today’s news:

Every influence, every motive, that provokes the spirit of murder among men, impels these mountaineers to deeds of treachery and violence. The strong aboriginal propensity to kill, inherent in all human beings, has in these valleys been preserved in unexampled strength and vigour. That religion, which above all others was founded and propagated by the sword–the tenets and principles of which are instinct with incentives to slaughter and which in three continents has produced fighting breeds of men–stimulates a wild and merciless fanaticism.
Wikipedia

I haven’t read this book yet, but came across of a reference to it in my current team read at the office (The Mission, The Men and Me, more about that in a future post) and was delighted to find the free Kindle edition of the eBook on Project Gutenberg. I believe this is the hardcover edition depicted by the cover image above.

WSJ: In China’s Orbit

Interesting article about 500 years of western predominance, and China’s grand strategy. Some facts to get your attention:

China’s has been the biggest and fastest of all the industrialization revolutions. In the space of 26 years, China’s GDP grew by a factor of 10. It took the U.K. 70 years after 1830 to grow by a factor of four. According to the International Monetary Fund, China’s share of global GDP (measured in current prices) will pass the 10% mark in 2013. Goldman Sachs continues to forecast that China will overtake the U.S. in terms of GDP in 2027, just as it recently overtook Japan.

Tip of the hat to @rfallini.

People blame their plight on the government and its leaders, or to management and its leaders. They may be correct. But will a change in leadership assure better living? What if the new leaders are no better? How could they be? By what method could new leaders bring improvement in living? Will best efforts bring improvement? Best efforts and hard work, not guided by new knowledge, they only dig deeper the pit that we are in.

W. Edwards Deming

Reading: The Big Short

Ever since Moneyball, I’ve paid attention to what Michael Lewis writes about and have been looking forward to his new book, The Big Short: Inside the Doomsday Machine, about the subprime collapse and subsequent financial crisis. At long last, it was my weekend read and proved to be worth the wait.

In typical fashion, it’s well paced with great depictions of interesting people who see the world a little differently. He explains everything about as clearly as you can (when describing financial instruments intentionally named and designed to be difficult to understand), and undoubtedly oversimplifies some concepts and omits details of other (such as Paulson’s gigantic short). Overall, however, the narrative is engaging and insightful and seems to a layman such as myself to be fairly balanced.

As with Moneyball, I find myself wanting to know more about (if not meet!) some of the central figures who in this case brilliantly shorted the market. Colorful people like Michael Burry and Steve Eisman who rejected conventional wisdom and profited wildly.

He provides a suitable indictment of those who should have prevented the disaster, summed up like this (emphasis mine):

The people in a position to resolve the financial crisis were, of course, the very same people who had failed to foresee it: Treasury Secretary Henry Paulson, future Treasury Secretary Timothy Geithner, Fed Chairman Ben Bernanke, Goldman Sachs CEO Lloyd Blankefein, Morgan Stanley CEO John Mack, Citigroup CEO Vikram Pandit, and so on… With them were a handful of government officials… All shared a distinction: They had proven far less capable of grasping basic truths in the heart of the U.S. financial system than a one-eyed money manager with Asperger’s syndrome.

It’s of course the tangents like Mike Burry’s Asperger’s condition that are some of the best elements of Lewis’ writing. People who see the world differently, and in this case, put their money where they mouth is.

Lewis, Michael. The Big Short: Inside the Doomsday Machine.

The Los Angeles Convention Center. While I was there to learn about technology, I was most impressed with the enormous and stirring naturalization ceremony underway. It was a keen reminder of how desirable our nation remains, despite its challenges. It also brought to mind the experience of my forbears over a century ago.

Discovered that the Bloomberg TV stream available on the web carries Charlie Rose. A nice resource for those of us without cable.

Cass Sunstein and the University of Chicago Mind

This New York Times Magazine article has some interesting insight into the mindset of this administration:

The professors in Hyde Park believe in something called the University of Chicago mind. It runs cold and analytical when the rest of the culture runs hot. Chicago scholars tend to be social scientists at heart, contrarian but empirical, following evidence to logical extremes. They are centrally interested not in what it is like to be an individual within society but in how society washes over individuals, making and remaking them. During the campaign, when his former Chicago colleagues were asked to detail Barack Obama’s intellectual evolution, many of them described him in these terms. But they knew Obama, at best, only partly exhibited this tradition. His friend Cass Sunstein, who is certainly the most productive and probably the most influential liberal legal scholar of his generation, inherited it in full. “Cass has,” says Saul Levmore, a former dean of the law school, “the quintessential University of Chicago habit of mind.”

The value of a human life:

The office’s administrators require that federal agencies express the costs and benefits of their proposed rules (lives saved, swampland preserved) in dollars. Moral principles, filtered through this cost-benefit analysis, find their way into confounding little boxes. A human life, the E.P.A. figured in a 2001 rule about arsenic and drinking water, was worth $6.1 million. (If an environmental regulation would save one life but cost $4 million, it ought to be put into effect; if it cost $8 million to save that life, the regulation would be scuttled.) Each I.Q. point a child lost because of exposure to lead was worth $8,346 over the course of a lifetime. A lost workday was worth $83. Many of these estimates used data from surveys — taken at malls, among other places — that asked passers-by how much more they would need to be paid to take on a job that carried, for instance, a 1-in-10,000 risk of death. Richard Posner, who has the most magnificent and chilly mind in this realm, used similar projections to price the benefit of preventing the extinction of the human race at $600 trillion.

The power, and danger, of putting an academic in an applied setting:

“There’s a big difference between the role of an academic and the role of someone in government,” Sunstein told me when we spoke at the Au Bon Pain near the White House. “That’s a cliché, but in academic life if you say things that are common sense and people nod their heads, it’s not very useful. You’re not adding anything.” One of the changes in Washington, he said, was the pace: he could no longer take off the afternoons to play tennis. It was past dinnertime, and Sunstein was headed back to the office, to his memos. “When I was an academic, I’d sometimes get a little feeling of excitement when I had an idea that was, I hoped, fresh,” he said. “And whether anyone should act on that idea is a very different question.”

Indeed.