Rise of the Machines

Friday, March 27th, 2009

Cringely takes us back to the era of the day trader:

A successful day trader in the late 1990s could gain a following over Internet chat then use that following to make money by becoming an alpha trader. He’d say “I’m selling this” or “I’m buying that” and copycat day traders would do the same. If enough of them acted they could influence the price down or up and — since the leader was leading — he could almost always liquidate his position with a profit. The quickest of his acolytes would make profits, too. Those who didn’t profit weren’t seen as exposing the inherent flaws of this system, they were just viewed as too slow.

To a certain extent, the heirs of day trading have taken the lessons of that earlier era and applied them with devastating effect in the Twitter Age.

If a bunch of wealthy traders get together at Starbucks and agree to short-sell a company or a financial instrument, driving down that price ideally to the point where it never recovers, well that’s against the law. But with trading automation and the Internet as a platform it is possible to accomplish this same end without it being explicitly illegal.

Think about piranhas:

These little guys with their big teeth travel in large schools. They kill and eat their prey, which can be as large as cattle drinking in the river. Piranha, too, take advantage of force times acceleration. The trick is getting a lot of fish — hundreds of fish — to attack at exactly the same time.

How do they do it? How do the piranha know to attack? They don’t wait to bump into a cow leg under water. They don’t sniff for the smell of blood in water. Both of those responses are too slow and would lead to too many victims escaping. Force equals mass times acceleration, remember? And besides, piranhas have tiny little brains to go with their big teeth, so don’t look for any insight there. These are just violent little eating machines.

Piranhas hunt as a school and take all their cues from the fish beside them. Only one fish has to smell blood or bump into some food for the entire school to reflexively attack.

Now we’re back on Wall Street in today’s era of hedge funds and genetic trading algorithms. At any given moment in the market there is more than a $1 trillion in cash that can be brought to bear in seconds by computers that are functioning essentially like piranhas. The cash isn’t held in a few funds or hidden behind some mainframe interface — it is held by hundreds of workstations each operating independently yet as part of a global economic system — conscious or not.

These trading workstations are running in hundreds of offices, all scanning the same data. They have learned over time that certain signals lead to certain outcomes. They may be following an alpha trader but they don’t have to because at some point the market signal, itself, is going to be too strong to ignore.

Here it comes. An alpha trader makes a bold move against a firm or, more likely, against one or more of that firm’s financial products. Say the firm is big stupid AIG, an insurance company, and the instrument is a credit default swap sold by AIG.

Though AIG seems to have forgotten or ignores it, Credit Default Swaps act like insurance and are treated by the market like insurance, but they technically aren’t insurance. They are ultra-hyper-purified demonic risk and nothing else. That’s because CDS’s are not regulated (they are in fact immune to regulation — funny that), they can be shorted without having to ever actually own the underlying security (naked shorts of CDS’s are perfectly legal), because they don’t have to be owned the volume available to be shorted isn’t limited, and — here’s the best one of all — there’s no requirement that the trader have any causal, custodial, or familial relationship with the covered debt. In other words, while most credit default swaps are intended to hedge debt defaults, they don’t have to be. It’s like buying a life insurance policy on the guy down the hall because you hear him coughing at night. His death is meaningless to you so buying the policy is just a gamble, not insurance.

Here’s how it works in practice. The alpha trader senses, guesses, or maybe just wishes for weakness on the part of AIG and its particular CDS issue, so he shorts that mother. The signal from that short (it is big and aggressive, having as much force as possible) is detected by 500 trading workstations running genetic algorithms — workstations that are not regulated in any sense whatsoever. AIG’s CDS begins to glow in front of 500 junior traders. Some programs kick-in automatically and sell, too. The CDS glows even brighter and begins to throb as if its heart was beating. Traders pile-on like piranhas, sensing opportunity, smelling blood, until the CDS is oversold to nothing, until it is dead.

What we’ve accomplished here, through the miracle of synthetic derivatives, is buying a $1 billion insurance policy on a $10 million asset.

A Stunningly Poor Source of Expertise

Thursday, March 26th, 2009

Nicholas Kristof notes that experts are often a stunningly poor source of expertise:

The expert on experts is Philip Tetlock, a professor at the University of California, Berkeley. His 2005 book, Expert Political Judgment, is based on two decades of tracking some 82,000 predictions by 284 experts. The experts’ forecasts were tracked both on the subjects of their specialties and on subjects that they knew little about.

The result? The predictions of experts were, on average, only a tiny bit better than random guesses — the equivalent of a chimpanzee throwing darts at a board.

“It made virtually no difference whether participants had doctorates, whether they were economists, political scientists, journalists or historians, whether they had policy experience or access to classified information, or whether they had logged many or few years of experience,” Mr. Tetlock wrote.

Indeed, the only consistent predictor was fame — and it was an inverse relationship. The more famous experts did worse than unknown ones. That had to do with a fault in the media. Talent bookers for television shows and reporters tended to call up experts who provided strong, coherent points of view, who saw things in blacks and whites. People who shouted — like, yes, Jim Cramer!

Mr. Tetlock called experts such as these the “hedgehogs,” after a famous distinction by the late Sir Isaiah Berlin (my favorite philosopher) between hedgehogs and foxes. Hedgehogs tend to have a focused worldview, an ideological leaning, strong convictions; foxes are more cautious, more centrist, more likely to adjust their views, more pragmatic, more prone to self-doubt, more inclined to see complexity and nuance. And it turns out that while foxes don’t give great sound-bites, they are far more likely to get things right.

This was the distinction that mattered most among the forecasters, not whether they had expertise. Over all, the foxes did significantly better, both in areas they knew well and in areas they didn’t.

Other studies have confirmed the general sense that expertise is overrated. In one experiment, clinical psychologists did no better than their secretaries in their diagnoses. In another, a white rat in a maze repeatedly beat groups of Yale undergraduates in understanding the optimal way to get food dropped in the maze. The students overanalyzed and saw patterns that didn’t exist, so they were beaten by the rodent.

I’ve discussed Tetlock’s work before.

Komodo dragons kill Indonesian fisherman

Thursday, March 26th, 2009

Komodo dragons killed an Indonesian fisherman trespassing on their remote island:

Muhamad Anwar, 32, bled to death on his way to hospital after being mauled by the reptiles at Loh Sriaya, in eastern Indonesia’s Komodo National Park, the park’s general manager Fransiskus Harum told CNN.

“The fisherman was inside the park when he went looking for sugar-apples. The area was forbidden for people to enter as there are a lot of wild dragons,” Harum said.

Other fisherman took Anwar to a clinic on nearby Flores Island, east of Bali, but he was declared dead on arrival, he added.

Attacks on humans are rare — but they do happen:

Last month a park ranger survived after a Komodo dragon climbed the ladder into his hut and savaged his hand and foot. In 2007 an eight-year-old boy died after being mauled.

In June last year, a group of divers who were stranded on an island in the national park — the dragons’ only natural habitat — had to fend off several attacks from the reptiles before they were rescued.

Park rangers also tell the cautionary tale of a Swiss tourist who vanished leaving nothing but a pair of spectacles and a camera after an encounter with the dragons several years ago.

An endangered species, Komodo are believed to number less than 4,000 in the wild. Access to their habitat is restricted, but tourists can get permits to see them in the wild within the National Park.

All visitors are accompanied by rangers, about 70 of whom are deployed across the park’s 60,000 hectares of vegetation and 120,000 hectares of ocean.

Despite a threat of poachers, Komodo dragon numbers are believed to have stabilized in recent years, bolstered by successful breeding campaigns in captivity.

On Monday, a zoo in Surabaya on the Indonesian island of Java reported the arrival of 32 newborn Komodos after the babies all hatched in the past two weeks, the Jakarta Post reported.

I want to see a fair fight, giant lizard versus giant ape.

(Hat tip to Todd.)

Risk is usually defined as volatility

Thursday, March 26th, 2009

Risk is usually defined as volatility, Less Antman says, but he defines it slightly differently:

I define financial risk as the probability of not being able to pay for something you need. If someone saves 10% of every paycheck over a 40-year working life and keeps it in the bank, they will have seen virtually no volatility, but will only have around 4 years of income in the bank, since bank accounts typically offer a return after inflation and taxes of nothing, or even a little less than nothing. If they put 10% of every paycheck into a US-only diversified equity portfolio, they would have seen wild volatility, and while an average portfolio would be at 15 years of income, the worst case scenario was only 7 years of income.

Now, even assuming the absolute worst result (and notice I’m not even considering the diversification benefits of international stocks, REITs, and commodity futures, which would have raised the worst case considerably), 7 years of income is still better than 4. Who is in more danger of not being able to pay their bills or running out of money? Who is more at risk as a result of their investments?

Here’s the thing. Over periods of time up to around 7 years, the worst performance of stocks has been worse than the worst performance of cash or bonds. Over longer periods, the worst case scenario for stocks has been better than the worst case for cash or bonds. My last newsletter noted that the decade ended 2008 was the worst ever for US stocks, with a 35% real loss, but that T-bills lost 41% in their worst decade. T-bonds lost 43% in theirs.

Over 17 or more years, US stocks have NEVER had a negative real (after-inflation) return, while bonds have earned negative returns after inflation in time periods as long as 56 years. The worst 40 years for bonds lost 60% after inflation (but still before taxes), and it was starting from a low yield comparable to today’s pathetic Treasury yield.

The point is that you need growth in a portfolio unless you are so wealthy that a slightly negative annual return won’t drain all your resources over time. So investments with lower expected returns expose you to the risk of not having adequate growth, which is, in my view, more important to most investors than the risk of a bad year or two.

Antman’s an interesting character with an interesting lifestyle:

I’ve been semi-retired since graduating from college, never working more than 20 hours a week. Except when traveling, my normal wake time is 3 pm in California, after the market has closed, and my afternoons and evenings are spent with Diane, reading, and browsing the Internet. My feeds on Google Reader often lead me to interesting research, and I usually move around the web without plan to confirm or debunk interesting ideas. Sometimes, that’ll get me doing a little spreadsheet work to test out theories or something along those lines. If I’m writing articles, it is usually then.

My actual workday starts close to midnight: I check my email and respond to all correspondents, aiming to zero out my inbox every day (of course, I don’t always succeed). I delegate everything that isn’t advice-related to my wonderful administrative assistant, Jessica, whom my clients adore. Most days I then work on one client, keeping in mind that I’m a comprehensive advisor and may not be working on their investments. My total work day averages 2 hours a day, 7 days a week, but is flexible based on what needs doing that day. When I’m finished, Diane and I practice our ballroom dancing, I take my run, then I read to her while she goes through her nighttime routine. We usually get to bed around 6 am or so.

Needless to say, my clients don’t pay me by the hour, or I’d starve to death. They only care that I make their lives better and let them forget about money.

(Hat tip to David Henderson, who was surprised by Antman’s recommendation of commodity futures.)

Regulation is a chess mid-game

Thursday, March 26th, 2009

Regulation is a chess mid-game, Arnold Kling says, not a math problem:

With a math problem, once you solve the problem, it stays solved. In a chess mid-game, new opportunities and threats arise constantly. You try to plan ahead, but your plans inevitably degrade over time.

Another insight:

We tend to think of the task of regulation as one of making systems hard to break. An alternative to consider is making systems easy to fix.

The devalued Prime Minister of a devalued Government

Thursday, March 26th, 2009

A couple days ago, Daniel Hannan declared Gordon Brown the devalued Prime Minister of a devalued Government:

The real news is that it went viral:

The internet has changed politics — changed it utterly and forever. Twenty-four hours ago, I made a three-minute speech in the European Parliament, aimed at Gordon Brown. I tipped off the BBC and some of the newspaper correspondents but, unsurprisingly, they ignored me: I am, after all, simply a backbench MEP.

When I woke up this morning, my phone was clogged with texts, my email inbox with messages. Overnight, the YouTube clip of my remarks had attracted over 36,000 hits. By today, it was the most watched video in Britain.

How did it happen, in the absence of any media coverage? The answer is that political reporters no longer get to decide what’s news. The days when a minister gave briefings to a dozen lobby correspondents, and thereby dictated the next day’s headlines, are over. Now, a thousand bloggers decide for themselves what is interesting. If enough of them are tickled then, bingo, you’re news.
Breaking the press monopoly is one thing. But the internet has also broken the political monopoly. Ten or even five years ago, when the Minister for Widgets put out a press release, the mere fact of his position guaranteed a measure of coverage. Nowadays, a politician must compel attention by virtue of what he is saying, not his position.

It’s all a bit unsettling for professional journalists and politicians. But it’s good news for libertarians of every stripe. Lefties have always relied on control, as much of information as of physical resources. Such control is no longer technically feasible.

(Hat tip à mon père.)

Why Foreign Aid Is Hurting Africa

Wednesday, March 25th, 2009

Kibera, the largest slum in Africa, “festers” outside of Nairobi, the capital of Kenya, a country that has one of the highest ratios of development workers per capita. Dambisa Moyo (Dead Aid: Why Aid Is Not Working and How There Is a Better Way for Africa) explains why foreign aid is hurting Africa:

Over the past 60 years at least $1 trillion of development-related aid has been transferred from rich countries to Africa. Yet real per-capita income today is lower than it was in the 1970s, and more than 50% of the population — over 350 million people — live on less than a dollar a day, a figure that has nearly doubled in two decades.
The most obvious criticism of aid is its links to rampant corruption. Aid flows destined to help the average African end up supporting bloated bureaucracies in the form of the poor-country governments and donor-funded non-governmental organizations. In a hearing before the U.S. Senate Committee on Foreign Relations in May 2004, Jeffrey Winters, a professor at Northwestern University, argued that the World Bank had participated in the corruption of roughly $100 billion of its loan funds intended for development.

As recently as 2002, the African Union, an organization of African nations, estimated that corruption was costing the continent $150 billion a year, as international donors were apparently turning a blind eye to the simple fact that aid money was inadvertently fueling graft. With few or no strings attached, it has been all too easy for the funds to be used for anything, save the developmental purpose for which they were intended.

In Zaire — known today as the Democratic Republic of Congo — Irwin Blumenthal (whom the IMF had appointed to a post in the country’s central bank) warned in 1978 that the system was so corrupt that there was “no (repeat, no) prospect for Zaire’s creditors to get their money back.” Still, the IMF soon gave the country the largest loan it had ever given an African nation. According to corruption watchdog agency Transparency International, Mobutu Sese Seko, Zaire’s president from 1965 to 1997, is reputed to have stolen at least $5 billion from the country.

It’s scarcely better today. A month ago, Malawi’s former President Bakili Muluzi was charged with embezzling aid money worth $12 million. Zambia’s former President Frederick Chiluba (a development darling during his 1991 to 2001 tenure) remains embroiled in a court case that has revealed millions of dollars frittered away from health, education and infrastructure toward his personal cash dispenser. Yet the aid keeps on coming.
A constant stream of “free” money is a perfect way to keep an inefficient or simply bad government in power. As aid flows in, there is nothing more for the government to do — it doesn’t need to raise taxes, and as long as it pays the army, it doesn’t have to take account of its disgruntled citizens.
It is no wonder that across Africa, over 70% of the public purse comes from foreign aid.

How (and Why) Athletes Go Broke

Wednesday, March 25th, 2009

Pablo Torre looks at how (and why) athletes go broke — and they do go broke:

  • By the time they have been retired for two years, 78% of former NFL players have gone bankrupt or are under financial stress because of joblessness or divorce.
  • Within five years of retirement, an estimated 60% of former NBA players are broke.
  • Numerous retired MLB players have been similarly ruined, and the current economic crisis is taking a toll on some active players as well. Last month 10 current and former big leaguers — including outfielders Johnny Damon of the Yankees and Jacoby Ellsbury of the Red Sox and pitchers Mike Pelfrey of the Mets and Scott Eyre of the Phillies — discovered that at least some of their money is tied up in the $8 billion fraud allegedly perpetrated by Texas financier Robert Allen Stanford. Pelfrey told the New York Post that 99% of his fortune is frozen; Eyre admitted last month that he was broke, and the team quickly agreed to advance a portion of his $2 million salary.

Athletes aren’t rich because of their business acumen. They’re more like lottery winners. The article dances around it, but athletes are often really, really stupid and make really, really stupid decisions:

You might say Ismail had a run of terrible luck, but the odds were never close to being in his favor. Industry experts estimate that only one in 30 of the highest-caliber private investment deals works out as advertised. “Chronic overallocation into real estate and bad private equity is the Number 1 problem [for athletes] in terms of a financial meltdown,” Butowsky says. “And I’ve never seen more people come to me about raising money for those kinds of deals than athletes.”

For the risk-averse investor, an adviser such as Butowsky would suggest allocating 5% to private equity, 7%–12% to real estate, 50%–65% to a mix of public securities (stocks, mutual funds and the like) and the rest to alternatives such as gold and hedge funds. Yet with athletes, who are often uninterested in either conservative spending or the stock market, those percentages are frequently flipped. Securities are invisible, after all, and if you don’t study them, they’re unintelligible. Not to mention boring. Inventions, nightclubs, car dealerships and T-shirt companies have an advantage: the thrill of tangibility.

Many players, consequently, are financial prey. “Disreputable people see athletes’ money as very easy to get to,” says Steven Baker, an agent who represents 20 NFL players. In May 2007 former quarterbacks Drew Bledsoe and Rick Mirer and five other NFL retirees invested at least $100,000 apiece in a now-defunct start-up called Pay By Touch — which touted “biometric authentication” technology that would help replace credit cards with fingerprints — even as the company was wracked by lawsuits and internal dissent. (The players later sued the financial-services firm UBS, which had encouraged its clients to invest in Pay By Touch, for allegedly withholding information about the company founder’s criminal history and drug use.)

About five years ago, Hunter says, he invested almost $70,000 in an invention: an inflatable raft that would sit under furniture. The pitch was that when high-rainfall areas were flooded, consumers could pump up the device, allowing a sofa to float and remain dry. “The guy I invested with came back and wanted me to put in more, about $500,000,” Hunter says. “Then I met [Butowsky], who just said, Hell no! I wound up never seeing that guy — or any of my money — again.”

Clever as a Fox

Wednesday, March 25th, 2009

In Clever as a Fox, Geoffrey Milburn asks, What do all these domestic animals have in common?

All of these domestic animals have large white patches in their coats — areas where they’ve lost normal pigmentation — which is extremely common in domestic animals and not at all common in wild animals. Floppy ears are similar.

The Russian farm fox experiment demonstrated how piebald coats and floppy ears come along with domestication:

[Dmitri Belyaev] lost his job as head of the Department of Fur Animal Breeding at the Central Research Laboratory of Fur Breeding in Moscow in 1948 because he was committed to the theories of classical genetics rather than the very fashionable (and totally wrong) theories of Lysenkoism.

So instead, he started breeding foxes. Well, it was technically an experiment to study animal physiology, but that was more of a ruse to get his Lysenkoism-loving bosses off his back while he could study genetics and his theories of selecting for behavior.

He started out with 130 silver foxes. Like foxes in the wild, their ears are erect, the tail is low slung, and the fur is silver-black with a white tip on the tail. Tameness was selected for rigorously — only about 5% of males and 20% of females were allowed to breed each generation.

At first, all foxes bred were classified as Class III foxes. They are tamer than the calmest farm-bred foxes, but flee from humans and will bite if stroked or handled.

The next generation of foxes were deemed Class II foxes. Class II foxes will allow humans to pet them and pick them up, but do not show any emotionally friendly response to people. If you are a cat owner, you would call the experiment a success at this point.

Later generations produced Class I foxes. They are eager to establish human contact, and will wag their tails and whine. Domesticated features were noted to occur with increasing frequency.

Forty years after the start of the experiment, 70 to 80 percent of the foxes are now Class IE — the “domesticated elite”. When raised with humans, they are affectionate devoted animals, capable of forming strong bonds with humans.

These “elite” foxes also exhibit domestic features such as depigmentation (1,646% increase in frequency), floppy ears (35% increase in frequency), short tails (6,900% increase in frequency), and other traits also seen frequently in domesticated animals.

Belyaevn passed away in 1985, but he was able to witness the early success of his hypothesis, that selecting for behaviour can cause cascading changes throughout the entire organism. For instance, the current explanation for the loss of pigment is that melanin (a compound that acts to color the coat of the animal) shares a common pathway with adrenaline (a compound that increases the “fight or flight” instinct of an animal). Reduction of adrenaline (by selecting for tame animals) inadvertently reduces melanin (causing the observed depigmentation effects).

Frankly, I’m astonished that Paris Hilton isn’t running around with a tame silver fox — yet.

The Obama Rosetta Stone

Wednesday, March 25th, 2009

Daniel Henninger calls Figure 9 of A New Era of Responsibility The Obama Rosetta Stone:

Barack Obama has written two famous, widely read books of autobiography — Dreams from My Father and The Audacity of Hope. Let me introduce his third, a book that will touch everyone’s life: A New Era of Responsibility: Renewing America’s Promise. The President’s Budget and Fiscal Preview(Government Printing Office, 141 pages, $26; free on the Web). This is the U.S. budget for laymen, and it’s a must read.

Turn immediately to page 11. There sits a chart called Figure 9. This is the Rosetta Stone to the presidential mind of Barack Obama. Memorize Figure 9, and you will never be confused. Not happy, perhaps, but not confused.

One finds many charts in a federal budget, most attributed to such deep mines of data as the Census Bureau or the Bureau of Labor Statistics. The one on page 11 is attributed to “Piketty and Saez.”

Either you know instantly what “Piketty and Saez” means, or you don’t. If you do, you spent the past two years working to get Barack Obama into the White House. If you don’t, their posse has a six-week head start on you.

Thomas Piketty and Emmanuel Saez, French economists, are rock stars of the intellectual left. Their specialty is “earnings inequality” and “wealth concentration.”

Messrs. Piketty and Saez have produced the most politically potent squiggle along an axis since Arthur Laffer drew his famous curve on a napkin in the mid-1970s. Laffer’s was an economic argument for lowering tax rates for everyone. Piketty-Saez is a moral argument for raising taxes on the rich.

As described in Mr. Obama’s budget, these two economists have shown that by the end of 2004, the top 1% of taxpayers “took home” more than 22% of total national income. This trend, Fig. 9 notes, began during the Reagan presidency, skyrocketed through the Clinton years, dipped after George Bush beat Al Gore, then marched upward. Widening its own definition of money-grubbers, the budget says the top 10% of households “held” 70% of total wealth.

Alan Reynolds of the Cato Institute criticized the Piketty-Saez study on these pages in October 2007. Whatever its merits, their “Top 1%” chart has become a totemic obsession in progressive policy circles.

Turn to page five of Mr. Obama’s federal budget, and one may read these commentaries on the top 1% datum:

“While middle-class families have been playing by the rules, living up to their responsibilities as neighbors and citizens, those at the commanding heights of our economy have not.”

“Prudent investments in education, clean energy, health care and infrastructure were sacrificed for huge tax cuts for the wealthy and well-connected.”

“There’s nothing wrong with making money, but there is something wrong when we allow the playing field to be tilted so far in the favor of so few. . . . It’s a legacy of irresponsibility, and it is our duty to change it.”

Mr. Obama made clear in the campaign his intention to raise taxes on this income class by letting the Bush tax cuts expire. What is becoming clearer as his presidency unfolds is that something deeper is underway here than merely using higher taxes to fund his policy goals in health, education and energy.

The “top 1%” isn’t just going to pay for these policies. Many of them would assent to that. The rancorous language used to describe these taxpayers makes it clear that as a matter of public policy they will be made to “pay for” the fact of their wealth — no matter how many of them worked honestly and honorably to produce it. No Democratic president in 60 years has been this explicit.

(Hat tip to David Henderson.)

Solving the Mystery of the Vanishing Bees

Wednesday, March 25th, 2009

There may be no easy remedy to the colony collapse disorder (CCD) affecting bees:

The bee loss has raised alarms because one third of the world’s agricultural production depends on the European honeybee, Apis mellifera the kind universally adopted by beekeepers in Western countries. Large, monoculture farms require intense pollination activity for short periods of the year, a role that other pollinators such as wild bees and bats cannot fill. Only A. melliferacan deploy armies of pollinators at almost any time of the year, wherever the weather is mild enough and there are flowers to visit.

Our collaboration has ruled out many potential causes for CCD and found many possible contributing factors. But no single culprit has been identified. Bees suffering from CCD tend to be infested with multiple pathogens, including a newly discovered virus, but these infections seem secondary or opportunistic much the way pneumonia kills a patient with AIDS. The picture now emerging is of a complex condition that can be triggered by different combinations of causes. There may be no easy remedy to CCD. It may require taking better care of the environment and making long-term changes to our beekeeping and agricultural practices.

Even before colony collapse, honeybees had suffered from a number of ailments that reduced their populations. The number of managed honeybee colonies in 2006 was about 2.4 million, less than half what it was in 1949. But beekeepers could not recall seeing such dramatic winter losses as occurred in 2007 and 2008. Although CCD probably will not cause honeybees to go extinct, it could push many beekeepers out of business. If beekeepers’ skills and know-how become a rarity as a result, then even if CCD is eventually overcome, nearly 100 of our crops could be left without pollinators and large-scale production of certain crops could become impossible. We would still have corn, wheat, potatoes and rice. But many fruits and vegetables we consume routinely today such as apples, blueberries, broccoli and almonds could become the food of kings.

The EcoDrain Cuts Water Heater Use by 40%

Tuesday, March 24th, 2009

People seem to instinctively yearn for impractical but impressive new energy technologies, when what they really need is simple way to use energy more effectively, like the EcoDrain heat-exchanger, which cuts water heater use by 40% by capturing some of the heat that goes down the drain.

The Kindness of Strangers

Tuesday, March 24th, 2009

Security guru Bruce Schneier points out that we routinely rely on the kindness of strangers, and that’s not a bad thing:

When I was growing up, children were commonly taught: “don’t talk to strangers.” Strangers might be bad, we were told, so it’s prudent to steer clear of them.

As it turns out, this is profoundly bad advice. Most people are honest, kind, and generous, especially when someone asks them for help. If a small child is in trouble, the smartest thing he can do is find a nice-looking stranger and talk to him.

The advice in each of these paragraphs may seem to contradict each other, but they don’t. The difference is that in the second instance, the child is choosing which stranger to talk to. Given that the overwhelming majority of people will help, the child is likely to get help if he chooses a random stranger. But if a stranger comes up to a child and talks to him or her, it’s not a random choice. It’s more likely, although still unlikely, that the stranger is up to no good.

Another example:

If you’re sitting in a café working on your laptop and need to get up for a minute, ask the person sitting next to you to watch your stuff. He’s very unlikely to steal anything. Or, if you’re nervous about that, ask the three people sitting around you. Those three people don’t know each other, and will not only watch your stuff, but they’ll also watch each other to make sure no one steals anything.

Again, this works because you’re selecting the people. If three people walk up to you in the café and offer to watch your computer while you go to the bathroom, don’t take them up on that offer. Your odds of getting three honest people are much lower.

This concept also works in computer security.

Archives shed light on Darwin’s student days

Tuesday, March 24th, 2009

Some recently uncovered archives shed light on Darwin’s student days at Cambridge — particularly for those with a dim understanding of economic history:

Six leather-bound ledgers unearthed in the university archives reveal how he lived in the most expensive rooms available to a student of his rank from 1828 to 1831.

He hired a battery of staff to help him with the daily chores, including a scullion (dishwasher), a laundress and a shoeblack (someone who cleans shoes).

A tailor, hatter and barber made sure he was well presented, while a chimney sweep and a coalman kept his fire going. He even paid five and a half pence extra each day to have vegetables with the basic ration of meat and beer at Christ’s College.

Peter Griffiths breathlessly calls this “the sort of pampered university life that today’s debt-laden British students can only dream about” — which is really missing the point. Today’s debt-laden students wouldn’t even be going to school under 19th-century conditions, because no one would have lent them to money.

Darwin’s father paid £636 — 636 actual (troy) pounds of silver — to Cambridge over the three years his son spent there, so that his son could live materially almost as well off as a modern debt-laden student, who has technology to take the place of servants.

China calls for new reserve currency

Tuesday, March 24th, 2009

China is calling for a new reserve currency “that is disconnected from individual nations and is able to remain stable in the long run, thus removing the inherent deficiencies caused by using credit-based national currencies”.

Inconceivable. If you could find such a thing, it would be worth its weight in gold.

China is recommending a basket of currencies:

To replace the current system, Mr Zhou suggested expanding the role of special drawing rights, which were introduced by the IMF in 1969 to support the Bretton Woods fixed exchange rate regime but became less relevant once that collapsed in the 1970s.

Today, the value of SDRs is based on a basket of four currencies — the US dollar, yen, euro and sterling — and they are used largely as a unit of account by the IMF and some other international organisations.

China’s proposal would expand the basket of currencies forming the basis of SDR valuation to all major economies and set up a settlement system between SDRs and other currencies so they could be used in international trade and financial transactions.

Countries would entrust a portion of their SDR reserves to the IMF to manage collectively on their behalf and SDRs would gradually replace existing reserve currencies.