Professor Hanson has never learned any philosophy?

Monday, June 28th, 2010

I found Mencius Moldbug’s latest piece uninspiring. Like a media-savvy fighter, he tries to build up hype around his not-really-personal conflict with Professor Robin Hanson:

It is small wonder that Professor Hanson has never learned any philosophy.

This is the wrong insult to fling at Hanson, Aretae notes:

I ran into Robin Hanson the first time in ’95 or ’96, when Jimmy Wales was just a stocks guy who ran an internet philosophy discussion list (MDOP). Back then, Larry Sanger (the other founder of Wikipedia) was starting up a philosophy discussion group dedicated to foundationalist philosophy, and I joined.

Unless my memory is weaker than I think it is, over the course of a year or two, I became quite impressed with the insight and breadth of knowledge of one of the most insightful commentators on that list: Robin Hanson.
Of course, as I look up Robin’s CV, I see why he was on the philosophy list I was on. He has a masters in philosophy of science, and a master’s in physics.


When Capitalism Meets Cannabis

Monday, June 28th, 2010

When capitalism meets cannabis, zany hijinks ensue:

Since [the Farmacy, a medical-marijuana dispensary in Boulder, Colorado] opened in January, it’s been one nerve-fraying problem after another. Pot growers, used to cash-only transactions, are shocked to be paid with checks and asked for receipts. And there are a lot of unhappy surprises, like one not long ago when the Farmacy learned that its line of pot-infused beverages could not be sold nearby in Denver. Officials there had decided that any marijuana-tinged consumables had to be produced in a kitchen in the city.

“You’d never see a law that says, ‘If you want to sell Nike shoes in San Francisco, the shoes have to be made in San Francisco,’ ” says Ms. Respeto, sitting in a tiny office on the second floor of the Farmacy. “But in this industry you get stuff like that all the time.”

One of the odder experiments in the recent history of American capitalism is unfolding here in the Rockies: the country’s first attempt at fully regulating, licensing and taxing a for-profit marijuana trade. In California, medical marijuana dispensary owners work in nonprofit collectives, but the cannabis pioneers of Colorado are free to pocket as much as they can — as long as they stay within the rules.

The catch is that there are a ton of rules, and more are coming in the next few months.

Americans spend roughly $25 billion a year on marijuana, according to the Harvard economist Jeffrey Miron, and investors are starting to see opportunities.

As in the past, the real money is in gaming the system:

If there is a historical precedent for what’s now happening in Colorado, it could be the 1920s and the era of Prohibition. During America’s dry age, the federal alcohol ban carved out an exemption for medicinal use, and doctors nationwide suddenly discovered they could bolster their incomes by writing liquor prescriptions.

Pharmacies, which filled those prescriptions, and were one of the few places whiskey could be bought legally, raked it in. Through the 1920s, the number of Walgreens stores soared from 20 to nearly 400.

Gaming the modern system means winning customers’ caregiver rights:

First is the importance of nabbing a lot of “caregiver rights,” which every person with a medical marijuana certificate can assign to a seller of choice. The caregiver rights of each patient, as customers are universally known, allow a dispensary to sell the marijuana of six plants, though the pot can be sold to anyone with a certificate. So the more caregiver rights a dispensary collects, the more pot it can sell.

The second essential: grow your own. A pound of marijuana can be sold at retail for somewhere between $5,500 and $7,500. To buy that quantity wholesale will cost about $4,000. Grow it yourself and the same pound will cost just $750 to $1,000.

Are those wholesalers operating legally?

It doesn’t look like Colorado has levied any excise or “sin tax” on marijuana:

Pot sales so far are expected to generate about $2.7 million in license fees, in addition to the more than $681,000 in sales tax collected from July 2009 to February 2010. These figures seem a decent-enough start, but are far less than the $15 million in annual taxes predicted by some of the state’s more optimistic lawmakers.

Naturally, regulators work with established businesses to crush competition:

A batch of regulations known as Amendment 1284, signed by the governor on June 7, is expected to put many dispensaries out of business, eliminating the amateurs and semipros who jumped in because there was nothing to stop them, but greatly strengthening those who have the wherewithal to remain standing.

Qualifying for medical marijuana means “passing” a medical exam:

And that exam, surprisingly enough, might be the easiest money in this aromatic field.

To see why, visit the office of Dr. James Boland, about nine miles outside of Boulder, in a strip mall in Broomfield. The place is a marvel of work-flow efficiency. In a matter of minutes, patients are greeted by a secretary, have their papers notarized by a notary public and are escorted to a waiting room — which on this day has a TV playing an instructional video on making your own hash.

“Today, I saw about 40 patients, but sometimes we’ll have 100 patients come through here,” Dr. Boland says, sitting in his small examination room.

He is dressed in dark green scrubs, like a man on a work break from a MASH unit. Until last year, he earned a modest income handling worker’s comp claims for a local furniture manufacturer.

Then he decided to enter medical marijuana full time, and he opened this place, which technically isn’t a doctor’s office, but a “managing/marketing firm” called Relaxed Clarity. His employees are allowed to do what he can’t — show up in dispensaries to pitch his services.

And when patients arrive, they find a highly streamlined operation. Each examination lasts three to five minutes.

“All you’re doing is answering the narrow question: does this person have a condition that qualifies them?” says Dr. Boland. “And do they have anything else that would place them at risk for an adverse outcome if they use medical marijuana?”

Yes to the first question, no to the second — those are the answers about 90 percent of the time, he says. And he stands by every one of those decisions.

By the standards of a workaday medical practice, this is simple and headache-free work, according to Dr. Boland, unless you count the hidden-camera TV journalists who have dropped by hoping to find misconduct, or the lingering fears that if you’re too liberal with your signature, the state’s medical board might discipline you. A very small number of doctors approves a majority of certificates, and Dr. Boland is one of the most prolific of them all.

In one year alone, working just three days a week at Relaxed Clarity, he’s seen 7,000 patients, each paying an average of $150 for a visit. He takes out a calculator and does some quick arithmetic. That’s more than $1 million, grossed in 12 months.

“There’s no waiting for an insurance company to pay you a fraction of what you billed,” Dr. Boland says. “It’s just boom, you know, cash on the spot. So you can make a significant amount of money doing this.”

Airships With Unblinking Eyes

Monday, June 28th, 2010

Northrop Grumman has been awarded a $517 million contract to provide the U.S. Army with three airships with unblinking eyes:

LEMV will sustain altitudes of 20,000 feet for a three-week period, and it will operate within national and international airspace. It will be forward-located to support extended geostationary operations from austere operating locations using beyond-line-of-sight command and control.

Northrop Grumman is using an old aircraft research project to get all this design, manufacturing and testing done in time:

LEMV is based on the existing (and tested) Hybrid Air Vehicle (HAV), which was an aerodynamic blimp built to transport cargo. HAV looks like a flattened blimp, a wide airship with much better handling qualities. LEMV is an unmanned blimp that can carry 1.1 tons of sensors, stay aloft for 21 days at a time, supply 16 kilowatts of power and move at up to 148 kilometers an hour at 6,400 meters (20,000 feet) altitude.

Inside Pixar’s Leadership

Sunday, June 27th, 2010

Martin Giles from The Economist interviews Ed Catmull, the president of Pixar:

[At Pixar] there is very high tolerance for eccentricity, very creative, and to the point where some are strange, but there are a small number of people who are socially dysfunctional [and] very creative. We get rid of them. If we don’t have a healthy group then it isn’t going to work. There is this illusion that this person is creative and has all this stuff, well the fact is there are literally thousands of ideas involved in putting something like this together. And the notion of ideas as this singular thing is a fundamental flaw. There are so many ideas that what you need is that group behaving creatively. And the person with the vision I think is unique, there are very few people who have that vision, but if they are not drawing the best out of people then they will fail.

We will support the leader for as long and as hard as we can, but the thing we can not overcome is if they have lost the crew. It’s when the crew says we are not following that person. We say we are director led, which implies they make all the final decisions, [but] what it means to us is the director has to lead, and the way we can tell when they are not leading is if people say, “We are not following.”

Return to the Valley of Death

Sunday, June 27th, 2010

When Sebastian Junger returned to the valley of death — the Korengal Valley in Afghanistan — his luck almost ran out:

Bad weather had grounded the resupply helicopters, so I hitched a ride with a 20-truck convoy that took two days to make the drive from Jalalabad Airbase. I was in a lead Humvee when it hit a pressure cooker packed with TNT buried in the road about a mile short of the main base. It was detonated by a man who touched two strands of regular electrical wire to an AA battery from behind a rock a hundred yards away. I happened to have my video camera running at the time, and on tape the explosion looks like a sheet of flame and then an abrupt darkening. The darkening was from dirt that landed on the windshield and blocked the light. The gunner dropped out of his turret and sat next to me, unhurt but scrambled by the blast, and someone came up on the convoy radio yelling, “we just hit an i.e.d.e front of!”

The bomb had detonated under the engine block and completely destroyed the front of the Humvee. The cabin immediately started filling with smoke. I adjusted the filter on my camera to compensate for the new darkness and braced for more impacts—rocket-propelled grenades, probably, or heavy machine gun. We were sitting ducks. Behind us, another Humvee opened fire on the ridgeline with a grenade machine gun: blap-kachunk, blap-kachunk. The turret gunner finally stood up and started firing his .50-caliber into the draw to our right. Big, hot shells clattered next to me into the cabin.

When the smoke became overwhelming, the captain gave the order to bail out, and we stumbled out into the fresh, cold air. There was a lot of gunfire, but I couldn’t tell where it was coming from, so I just sprinted for cover behind another Humvee and waited for it to be over. Even when we were in the burning vehicle I’d been oddly unafraid, as if everything were happening a long way away and had nothing to do with me. The fear came later: I tried to watch the footage that night, but when I got to the part where we were about to get hit, my heart rate shot through the roof. It was a delayed reaction that I recognized from talking to soldiers who had been in attacks.

Lecturing Professionalism While Practicing Bureaucracy

Friday, June 25th, 2010

Maj. Fernando Lujan argues that West Point lectures cadets on professionalism but practices bureaucracy:

Consider this: From day one at the academy every possible situation that a cadet could conceivably encounter is accounted for by strict regulations. Not sure how many inches should be between your coat hangers, whether you can hold your girlfriend’s hand on campus, or how your socks should be marked? Consult the regulations. Moreover, all activity is subjected to the cadet performance system, which essentially assigns a grade to every measurable event in a cadet’s life (think shoe shines, pushups and pop quizzes) then ruthlessly ranks the entire class from first to last. Cadets at the top of the list get the jobs and postings they want after graduation. Those near the bottom end up driving trucks at Fort Polk, Louisiana.

The result is two-fold: First, cadets have very little experience adapting to unfamiliar environments. After all, what happens when the regulations don’t describe what’s going on around you? Second, cadets devote zero attention to activities that “don’t count.” If it’s not on the syllabus, and it’s not for a grade, the cadets aren’t learning it. Ask a cadet to spend a few minutes writing up a list of the skills, traits, and knowledge that he wishes he’d have when he finally takes over his first platoon in combat. Then compare this to his four-year curriculum and summer training plans. There will be surprisingly little overlap between the two lists, and the cadet has neither the time nor the incentive to learn what’s missing. In the end, we graduate far too many cadets that are more bureaucrat than professional, lacking the expert knowledge of their trade and the flexibility to be effective in the complex environments they’ll soon encounter.

Unfortunately, wars — particularly the types of wars we’re currently involved in — are very unforgiving of bureaucrats.

(Hat tip to Cameron Schaefer.)

Why Fred Wilson Doesn’t Like Stock Buybacks

Friday, June 25th, 2010

For a VC in NYC, Fred Wilson demonstrates a remarkably unsophisticated understanding of stock buybacks:

I don’t remember the exact details of the buyback at but we started buying the stock and it kept going down. [...] Eventually the market came back and the stock rose. And the company started making money and its reported earnings per share were higher as a result.

But I don’t view that stock buyback as successful. It didn’t fundamentally change the company in any way. We just gave back a lot of cash to the investors.

Um, Fred, that’s the explicit goal of a stock buyback. If the firm can use the cash productively — on positive-NPV projects — then it keeps the cash to invest in itself. If it can’t, it returns the cash to its shareholders — via a dividend or a share buyback.

The dividend indiscriminately gives all shareholders some cash, while the stock buyback gives shareholders the choice of selling their shares for cash or holding their shares, which should appreciate in value, as the bought-back shares are retired.

Either way, it’s not the kind of thing a growth-oriented firm should be doing — which Fred didn’t realize at the time:

With our stock buyback we were signaling to the market that we had no good ideas about how to spend that cash. We were signaling that we didn’t see much of a future in our business. And smart investors bet against those kinds of companies, managements, and boards.

Smart investors realize that a stock buyback signals a lack of growth opportunities, which is a terrible portent for a tech startup’s future — but just fine for a mature cash cow’s.

Whooping Cough Kills 5 in California

Friday, June 25th, 2010

California has a whooping cough epidemic, with 910 confirmed cases and five deaths:

Five children — all Latino and all under the age of 3 months — have died since the beginning of the year, Dr. Chavez said.

Dr. Chavez said that lack of information and inoculations in agricultural regions in the state’s Central Valley — home to many Latino farm workers — might be a culprit in the high incidence in that community. And indeed, Fresno County — in the heart of the valley — has the highest number of cases in the state, with 72 reported in May alone.

Apple’s Darwinian Queues

Thursday, June 24th, 2010

The Economist describes the insane hours-long iPhone 4 lines in the blazing summer heat:

The queue are resigned and grumpy. Man-from-Norway says he can’t understand why it is so badly organised. “They know how many people have reservations, they know how many people they can process in an hour, why can’t they just tell us when to come?” He has a point. You would think, wouldn’t you, that for a company that can design and build a cutting-edge mobile phone, one that Changes everything. Again. that it might be able to figure out how to serve a known number of customers without any one of them having to wait for ten hours. “How do you pee?” I ask the woman next to Man-from-Norway. “You don’t,” she says with a grimace, “and I need to go.”

And it’s all very Darwinian. There is nobody old, obviously pregnant or infirm in the queue. Just fit young customers able to slug it out on their feet all day, with bladders like leather sacks. All Apple would need to do would be to organise them to come back at times of the day when they could serve them, or on another day. It wouldn’t be rocket science. I could do better.

Which makes me think that Apple must not want to. Because if it did, there would be no queue round the corner. Nothing for the television networks to film for the evening news and for the passers-by to marvel at. Apple’s Darwinian queues of the young and the fit are the best advertising that it can have. All these people are unpaid actors in Apple’s advertising machine, showing the world how badly some people want an iPhone. All to make them wonder whether, maybe, they might need one too. It is hard to know which other company would be allowed get away with treating customers it has agreed to serve so badly. I’ll buy a new iPhone when I can find a civilised way of doing so. But I’m afraid the magic of Apple just died for me today.

The Unbearable Whiteness of Soccer

Thursday, June 24th, 2010

Watching the World Cup, it’s hard not to notice what Steve Sailer calls the unbearable whiteness of soccer:

I’ve been following the World Cup since Pelé went out with a bang in 1970. Over the decades, the rhetoric that quadrennially accompanies the soccer championship has grown ever more strident in its insistence that the reason most Americans find soccer less than galvanizing as a spectator sport is that they… fear diversity!

In reality, soccer, both at the international superstar level and at the park league level in America, is whiter than football, basketball, or baseball.

For example, the last World Cup was won by Italy’s all white team. In America, this would be considered scandalous.

Let’s look at ESPN’s list from earlier this year of the “Top 50 players of the World Cup.” The five best players in the world — Lionel Messi of Argentina (who is of Italian descent), Christiano Ronaldo of Portugal (a Tim Tebow-lookalike), Wayne Rooney of England, Kaka of Brazil (who is from an upper middle-class family), and Xavi of Spain — are white.

Out of the top 10, eight are white and two from West Africa. Out of the top 50, the proportions look similar. Judging from their pictures, I would say 10 are black, one is mostly white but clearly part black, and the other 39 look more or less white. None of the top 50 are East Asian or South Asian, and I don’t see any that are as mestizo-looking as, say, Diego Maradona, the star of the 1986 World Cup.

In contrast, only one American-born white guy has been selected to the NBA All Star game in the last half dozen years. Most of the prestige positions in the NFL other than quarterback are dominated by blacks.

Of the soccer top 50, 24 are white guys from the six sunny powers of Spain (9 of the top 50), Italy, Portugal, Argentina, Brazil, and Uruguay. In other words, almost half of the global soccer superstars are Southern Europeans. As baseball discovered back in the days of Joe DiMaggio, it doesn’t really hurt your sport’s popularity to have stylish Mediterranean guys as stars.

Whiteness is even more predominant in American soccer participation rates. From the late 1960s onward, white middle-class parents started to notice that soccer was a fine sport for their children to play, especially now that football and basketball were coming to be dominated at the highest levels by, well, by… uh, you know… And at this point countless conversations I’ve had over the years with very nice liberal white soccer parents typically break down into uncomfortable gesticulations as they try to not quite come out and say that soccer in America has been, to a large degree, White Flight in Short Pants.

Into the Valley of Death

Thursday, June 24th, 2010

Sebastian Junger (The Perfect Storm) embedded himself with the soldiers holding the Korengal Valley in Afghanistan — the Valley of Death:

The 20 men of Second Platoon move through the village single file, keeping behind trees and stone houses and going down on one knee from time to time to cover the next man down the line. The locals know what is about to happen and are staying out of sight. We are in the village of Aliabad, in Afghanistan’s Korengal Valley, and the platoon radioman has received word that Taliban gunners are watching us and are about to open fire. Signals intelligence back at the company headquarters has been listening in on the Taliban field radios. They say the Taliban are waiting for us to leave the village before they shoot.

Below us is the Korengal River and across the valley is the dark face of the Abas Ghar ridge. The Taliban essentially own the Abas Ghar. The valley is six miles long, and the Americans have pushed halfway down its length. In 2005, Taliban fighters cornered a four-man navy-seal team that had been dropped onto the Abas Ghar, and killed three of them, then shot down the Chinook helicopter that was sent in to save them. All 16 commandos on board died.

Dusk is falling and the air has a kind of buzzing tension to it, as if it carries an electrical charge. We only have to cover 500 yards to get back to the safety of the firebase, but the route is wide open to Taliban positions across the valley, and the ground has to be crossed at a run. The soldiers have taken so much fire here that they named this stretch “the Aliabad 500.” Platoon leader Matt Piosa, a blond, soft-spoken 24-year-old lieutenant from Pennsylvania, makes it to a chest-high stone wall behind the village grade school, and the rest of the squad arrives behind him, laboring under the weight of their weapons and body armor. The summer air is thick and hot, and everyone is sweating like horses. Piosa and his men were here to talk to the local elder about a planned water-pipe project for the village, and I can’t help thinking that this is an awful lot of effort for a five-minute conversation.

I’m carrying a video camera and running it continually so that I won’t have to think about turning it on when the shooting starts. It captures everything my memory doesn’t. Piosa is about to leave the cover of the stone wall and push to the next bit of cover when I hear a staccato popping sound in the distance. “Contact,” Piosa says into his radio and then, “I’m pushing up here,” but he never gets the chance. The next burst comes in even tighter and the video jerks and yaws and Piosa screams, “A tracer just went right by here!” Soldiers are popping up to empty ammo clips over the top of the wall and Piosa is shouting positions into the radio and tracers from our heavy machine guns are streaking overhead into the darkening valley and a man near me shouts for someone named Buno.

Buno doesn’t answer. That’s all I remember for a while—that and being incredibly thirsty. It seems to go on for a long, long time.

John Robb Interview

Thursday, June 24th, 2010

John Robb made a name for himself explaining how global guerrillas could use open source warfare to bring down powerful foes:

Back in 2004, the US military was getting trounced in guerrillas in Iraq. Worse, the US military establishment didn’t know why. Didn’t have a clue. To correct this, I began to write about how 21st Century warfare actually worked on my blog, Global Guerrillas. Essentially, I concluded that guerrilla groups could use open source organizational models (drawn from the software industry), networked super-empowerment (freely available high tech tools, network information access, connections to a globalized economy), and systems disruption (the targeting of critical points on infrastructure networks that cause cascading failures) to defeat even the most powerful of opponents, even a global superpower.

The new theories of warfare I developed on the blog proved both predictive and very popular. As a result, I spent a lot of time on the speaking circuit in Washington DC (DoD, CIA, NSA, etc.).

Making your name by explaining how ruthless thugs can extort vast wealth from the civilized world raises some moral red flags:

Of course, since my work was on a blog everyone could read it, even the guerrillas themselves.So, it was a little surprising although not unexpected when I got an e-mail in 2009 from Henry Okah, a leader of MEND (the Movement for the Emancipation of the Niger Delta). He invited me to Nigeria and stated that he was an avid reader of my blog.

It was a moment out of history, as if the UK’s General Liddell Hart (the originator of blitzkrieg armored warfare) got a note from Germany’s tank General Heinz Guderian in 1939, thanking him for his work. Here’s why: MEND’s campaign against Shell (the oil company) and the Nigerian government between 2006 and 2008 was a great example of how I thought 21st Century warfare would be fought. The organization structure was loose and organized along the lines of an open source movement. Lots of small autonomous groups joined together to take down the country’s oil infrastructure by targeting vulnerable points in the network (Nigeria is a major global oil exporter). During 2007, they were able to take out one million barrels a day of oil production. This shortfall was the reason oil prices rose to $147 a barrel. Those high prices had a negative global economic impact: the start of a global recession and a spike in default rates in US sub-prime mortgages (due to higher driving and food costs). That spike in sub-prime mortgage default rates radically accelerated the demise of our grossly over leveraged global financial sector, which in turn led to the financial panic of 2008.

In short, MEND’s disruption campaign, yielded tens of trillions of dollars in global economic damage for tens of thousands of dollars spent on making the attacks. That’s a return on investment (ROI) of 1,000,000,000%. How do nation-states survive when an unknown guerrilla group in a remote corner of the world can generate returns on that magnitude? They don’t.

Um, thanks, Robb. You’re a genius. The global guerrillas couldn’t have achieved that amazing destruction-ROI without you.

People Who Don’t Care

Thursday, June 24th, 2010

A sad truth about most traditional b2b marketing, from Seth Godin:

“People who don’t care, selling products to people who care less.”

Old Wall Street Discusses the New

Wednesday, June 23rd, 2010

Christian Wyser-Pratte, a retired investment banker, sends a note to Floyd Norris, the chief financial correspondent of the New York Times, discussing kids these days:

The old pay system (era of John Whitehead): you work at an investment bank for 30 years, have a reasonable draw and cash bonus, build up stock in the firm as most of your bonus, and when you decide to retire you request of the partners their permission to go limited. If they assent, you get to withdraw your money over five years, all the while continuing to expose the balance to the risks of the enterprise.

The new pay system post-Donald Lufkin Jenrette’s original I.P.O.: you’re a young 29-year-old punk playing with OPM (Other People’s Money), taking huge risks for which you get huge bonuses, while the outsiders shoulder the losses on your bets. You make all the money you’ll ever need in three years, stay around 15 years to pile up five times as much as you need, and then you retire with your cash hoard, buy a winery in Napa/Sonoma or a huge farm in Connecticut, living above the fray for the rest of your life.

Which system, do you think, makes people consider the downside of their actions?

How to Train an Animator

Wednesday, June 23rd, 2010

In 1935, Walt Disney wrote a letter to Don Graham, an art teacher from the Chouinard Art Institute on how to train an animator. This passage stood out to me:

The first duty of the cartoon is not to picture or duplicate real action or things as they actually happen — but to give a caricature of life and action — to picture on the screen things that have run thru the imagination of the audience to bring to life dream fantasies and imaginative fancies that we have all thought of during our lives or have had pictured to us in various forms during our lives. Also to caricature things of life as it is today — or make fantasies of things we think of today.

The point must be made clear to the men that our study of the actual is not so that we may be able to accomplish the actual, but so that we may have a basis upon which to go into the fantastic, the unreal, the imaginative — and yet to let it have a foundation of fact, in order that it may more richly possess sincerity and contact with the public.