"Tivo-ifies the web" Paul Kedrosky

3rd Avenue El

A short film made in the early 1950s about the elevated rail line that traveled from the base of Manhattan, up the Bowery and 3rd Avenue, to Gun Hill Road in the Bronx.

New Yorkers, how many places do you recognize as they zoom by? What brewery was that on 3rd Avenue?

The characters are an arty type, a drunk, a little girl, a young couple, and the drama or plot, such as it is, revolves around a nickel stuck in the wooden floorboards of the train (also notice the padded seats). The main characters here are really the subway and the city.

(via The Prelinger Archives)

5 comments business, history, New York City, nostalgia, society, talks

Darwin in the Financial Markets

If you can overcome the fact that Niall Ferguson seems to have slowed his metabolism to alter his rate of speaking to avoid any exertion whatsoever in the summer heat that this talk was delivered, then it’s interesting – interesting because it is dull and obvious but wrong.

Darwinian Natural selection takes a minute to grasp and a lifetime to misunderstand, as Ferguson demonstrates – his premise is that markets might be Darwinian. Perhaps the reason he is appears so cautious, is that accepting that greed driven markets are Darwinian is one step away from politically unacceptable Social Darwinism.

Maybe it was for this reason that Paul Kedrosky originally put up the clip with the disclaimer: “I’m skittish about the over-application of neo-Darwinian thinking to everything in sight , but this talk by Niall Ferguson is worth a look”

Since neo-Darwinism refers to a strict interpretation of Darwin’s exact description of Evolution, Niall Ferguson’s market evolution is nothing of the sort – it could equally be saying that markets are Lamarckian and not Darwinian, since successful market strategies are passed on during the lifetime of those who develop them.

This is the problem with applying Darwin to everything. Clearly all order is ultimately self-emergent, it is a meta law that must therefore apply to every collection of interacting systems but unless you describe the mechanism you aren’t saying much.

For example, Darwinism requires a finite environment (creating the constraints for competition), mutation (to create new things to select) and inheritance (to create a cycle for rules of selection to apply). The rules of selection themselves are defined by the interaction of a specific system and specific environment. Capitalist markets are based upon growth markets where supply and demand are elastic and where advantage comes from invention – or ideas. The genes are memes and there is no proof yet that memetic Darwinism is more than analogy.

Ferguson is surprised that when he showed a slide of Dawkins and Gould to an audience of bankers at a conference organized by Goldman Sachs, not a single person could identify them. However, Ferguson may be able to recognize evolutionists and evolution in the colloquial sense but not Darwin and his theory. Understanding the exact mechanism of evolution is the contribution that Darwin made and is often misunderstood because the idea of natural selection is so easy to grasp in a general form.

That markets are Darwinian in the colloquial sense of survival of the fittest, is obvious but unfashionable. That markets are truly Darwinian means that they are not Lamarckian and that a business advantage cannot be transferred during the lifetime of the system that Darwinian rules are operating on – that would be remarkable. Just as there is some debate about whether memes are really Darwinian, its not clear that markets are, but not for the reasons that Ferguson argues.

[ I suspect that memes are in fact really Darwinian and that the way that the Lamarckian problem is removed is to figure out what the equivalent of an organism is for memes.

Organisms themselves are persistent features which remain after all their constituent molecules are replaced through eating and pooping. In this way, organisms are actually like ideas or rather a specific message containing ideas.

In the generalized world of any type of idea or information, memes are ideas contained in messages and memetic organisms are a specific example of a message, for example in the binary encoding of a computer, the pen marks in a letter or a business transaction.

The life cycle that makes this non Lamarckian is the successful or unsuccessful application or transmission of an idea or collection of inseparable ideas from one message encoding to another. This could be from a computer to a print out or even a collection of neurons in someone's head, in every case the message idea is contained within a new message medium.

Reproduction of animals through transfer of an idea of how to build that animal (contained in its DNA) from one animal to its offspring is a specific case of memetic transfer. ]

via Paul Kedrosky

8 comments business

Kramer vs Kramer vs Kramer vs Everyone vs Cramer vs Stewart

What is it with these Kramer people?

1 comment business

Jon Stewart’s Defining Moment.

Sometimes truth is no stranger to fiction. America’s only serious news comes from a comedy channel.

US network and cable news are an embarrassment, a children’s view of the world based upon geographical and historical ignorance delivered by people who look like Long Island realtors and whose opinions should be deemed equally suspect.

In print form, U.S. newspapers make up for relatively poor coverage of world news with advanced level business news – this is capital C Capital-ism after all. However, the same sophistication does not apply to cable business news, and this is best exemplified by CNBC.

CNBC covers the industry that makes money, the industry that has recently lost 30% of the notional moolah created from everything humans have made, planet-wide, since Tutankhamun. It is watched by Wall street professionals from large screens which hang over trading floors, and during the collapse of Lehman, the employees were looking at CNBC to see what was happening in their own building. In other words, it is not just a consumer product but one used by the billionaire pros who can afford anything. Yet it looks and feels like a cheap toy.

The fact that this financial channel of record looks like a low-rent hybrid of a shopping channel and pro-wrestling match, with ads for gold coin collections and get rich quick books and set designs comprised of embossed metallic, swooshing titles and plasticky red white and blue, certainly does not spell money. And yet I am gripped by it.

For three years I have been going to the gym across the street from the stock exchange and pumped or, more accurately, schlepped iron in front of CNBC. I have nothing to do with manipulating money for a living, I have little of it and don’t understand how it works, but am overwhelmed by a morbid obsession with cable financial news while working out. It fires me up with primeval anger and makes my veins bulge like a steroid addled bodybuilder.

Sadly, I was in London, when the most egregious CNBC moment took place and the one that Jon Stewart takes CNBC to task over: Rick Santelli’s Mercantile Exchange uprising – at the least that was how it was pumped up on Drudge.

The Rick Santelli uprising comprised a televised football coach style rant. Santelli complained that home owners were being bailed out, and this was yelled from the floor of the Chicago Mecantile New York Stock Exchange, where his fellow libertarians, presumably working for financial institutions bailed out by tax payers, rallied round, failing to see the pitiful hypocrisy of it all.

London was a strange place to watch this, because there the libertarianism of ‘don’t let the government bail out the people’ would have been crushed, despite the fact that Britain’s endemic culture of home equity greed outstripped the worst avarice of the financiers. In the UK, the prevailing mood on TV was unanimously, ‘hang the bankers, don’t screw the home owners’.

I put this difference down to culture, but Jon Stewart has proven me wrong by bookending a relentless series of clips of CNBC editorial failure with the Rick Santelli uprising and an interview with the world’s second best conman, the sweaty, pie-faced, cricket playing Texan, Allen Stanford. It is a withering attack on CNBC but possibly more than that.

In fairness to CNBC, three of the clips concern reporting of other people’s mistakes, for example one shows Merril Lynch saying they were adequately capitalized not CNBC, and one shouldn’t shoot the messenger. But in the grand scheme of things both the originator and the messenger were at fault and there is evidence to prove it.

The degree of this financial implosion makes the once epic ambitions of Bonfire of the Vanities seem inadequate, yet to my mind the scale of the tragedy has ironically been best captured, to date, by a ten minute comedy piece.

Watch it in its entirety and see what Stewart has to say about Allen Stanford at the end. A must see.


14 comments business, comedy, the smashing list

CNBC – House of Cards

The first batch of documentaries featuring analysis of the financial meltdown has started to appear on TV screens. Following Frontline, here is CNBC’s take, by David Faber.

Commentary cannot keep up with events, however, and as the crisis spreads globally and moves into the political unrest phase, these documentaries may eventually seem almost quaint by comparison with what is surely coming.

(Hulu video, available in US only)

9 comments business

Frontline: Inside the Meltdown

Frontline is the only documentary series on American television where the information density doesn’t leave you feeling you are watching something in slow motion. They don’t disappoint with this solid but uninspired piece on last October’s crash. It would be unfair to ask for more, however, so soon after the event, and this is a subject that will eventually require something truly epic in scope to capture. Even Bonfire of the Vanities seems tame in comparison with the magnitude of current events.

Nice to see that highbrow thinkers such as John Cassidy and Paul Krugman were core interviewees. Its also refreshing to see an officially endorsed embed, and one that works across countries, unlike the BBC iPlayer or Hulu. I’m putting this in the Smashing List.

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Breaking the American Oligarchs

External Video link – Bill Moyers Interviews Simon Johnson

America likes democracy and i’m quite fond of it too. But a portion of America’s interests are controlled by the equivalent of Oligarchs – the heads of financial corporations. This used to be a belief held only by idiots, but its now a reasonable way of looking at things, given the natural coagulation of banks into a too-big-to-fail sticky mess.

Bank heads like BofA’s Ken Lewis are not bad people per se, I like them more than politicians, but they are part of a web of interest with natural loyalty to give proceeds to the worker (bank executives) rather than the owner (taxpayer), they are communists, if you like. As a result, money will flow into these institutions, which will eventually return large profits benefiting workers with options and current losses will be picked up by future taxpayers.

This is Simon Johnson’s, former chief economist of the IMF, premise. His proposed solution is one that I’ve noticed has been gaining traction lately, to break up the big banks into smaller ones. This seems so obviously a good way to flush out bad assets, remove undue political influence and maintain what is good about free markets that I cannot see a downside. And politically you could even persuade the French left of something like this: instead of bad=capitalism, good=privatization think bad=giant bank, good=family boulangerie. In America, selling this to voters would be trivial: would you rather be in a Rock and Roll band (small private enterprise) or behind a desk at the DMV (public state bank)?

The problem is that nobody in elected government dares to suggest it, which does look awful like an Oligarchy.

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Goodbye Dubai

Short of opening a Radio Shack in an Amish town, Dubai is the world’s worst business idea, and there isn’t even any oil. Imagine proposing to build Vegas in a place where sex and drugs and rock and roll are an anathema. This is effectively the proposition that created Dubai – it was a stupid idea before the crash, and now it is dangerous.

Dubai threatens to become an instant ruin, an emblematic hybrid of the worst of both the West and the Middle-East and a dangerous totem for those who would mistakenly interpret this as the de facto product of a secular driven culture.

The opening shot of this clip shows 200 skyscrapers that were built in the last 5 years. It looks like Manhattan except that it isn’t the place that made Mingus or Van Allen or Kerouac or Wolfe or Warhol or Reed or Bernstein or any one of the 1001 other cultural icons from Bob Dylan to Dylan Thomas that form the core spirit of what is needed, in the absence of extreme toleration of vice, to infuse such edifices with purpose and create a self-sustaining culture that will prevent them crumbling into the empty desert that surrounds them.

Dubai is a place for the shallow and fickle. Tabloid celebrities and worn out sports stars are sponsored by swollen faced, botox injected, perma-tanned European property developers to encourage the type of people who are impressed by fame itself, rather than what originated it, to inhabit pastiche Mediterranean villas on fake islands. Its a grotesquely leveraged version of time-share where people are sold a life in the same way as being peddled a set of steak knives. Funny shaped towers smatter empty neighborhoods, based on designs with unsubtle, eye-catching envelopes but bland floor plans and churned out by the dozen by anonymous minions in brand name architects offices and signed by the boss, unseen, as they fly through the door. This architecture, a three dimensional solidified version of a synthesized musical jingle, consists of ever more preposterous gimmickry – an underwater, revolving, white leather fuck pad or a marina skyscraper with a product placement name that would normally only appeal to teenage boys, such as the preposterous Michael Schumacher World Champion Tower.

But if there is one problem with the shallow and the fickle, its that they are shallow and fickle, they won’t put down deep roots and they won’t remain loyal to Dubai. The people who appear in People magazine need to be told what is cool by Wallpaper magazine who in turn will discover something after the hipsters have moved on. The problem is that Dubai was never hipster-cool and is no longer Wallpaper-cool. This realization will have the same impact as suburbanite bachelorette party in a Wallpaper-cool nightclub. It will spread like the sighting of a floating turd in a public pool, flushing people to the exits with silent panic, unacknowledged for fear of embarrassment.

As people scramble for the exits in Dubai, there is no ‘key mail’, like in America, where people can often mail back their house keys and walk away from a mortgage without the immediate threat of jail. People are literally fleeing this place, to date leaving 3000 cars stranded at the airport with keys still in the ignition. And the reason for this is that if you default on your Dubai mortgage, you can end up in a debtors prison. Perhaps Dubai will at least create a new Dickens?


277 comments business

Felix Salmon Scotches the Kanjorski Financial Armageddon Myth

Remember the point last September where treasury secretary, Paulson delivered a ‘secret’ message to congress that was designed to scare them into action? Many people have now seen the infamous clip where Democratic Representative Kanjorski explains what Congress was told (2 mins 20 secs into this clip):

“by 2pm that afternoon [18th September 2009], $5.5 trillion would have been drawn out of the money market system of the U.S., would have collapsed the entire economy of the U.S., and within 24 hours the world economy would have collapsed. It would have been the end of our economic system and our political system as we know it.”

Like the myth of Popeye’s spinach, which was due to a decimal point error in its iron content at a Chicago food fair, Kanjorski’s armageddon myth which will, no doubt, form a part of every conspiracy theorist’s armory for years to come, is based upon a quote of a misquote which exagerates the truth by a factor of ten and which Felix Salmon wisely and definitively demolishes:

“This is all, frankly, fiction, and it’s not clear where most of it came from, although maybe Kanjorski’s “friends” on Wall Street are the same people as Michael Gray’s sources at the New York Post. Thinking back to that crazy week it’s easy to get details wrong, especially when you’re speaking off the cuff on a call-in show. But let’s stop treating it as though there’s any substance to it.”

Thanks Brian Donovan.

Update: The FT’s Alphaville team are suggesting that there is substance to the Kanjorski meme, and that truth is somewhere in the middle i.e. $500 billion in panic redemptions were requested but Paulson persuaded them to be stalled.

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Soros and Reflexivity

George Soros is the economics equivalent to Stephen Wolfram and physics. Wolfram is a wealthy businessman who discovered a big idea independently of others, that isn’t new or original but that appears to be correct – that the world is based upon algorithmic feedback loops rather than equations. Soros’ equivalent idea is Reflexivity a model of economics based upon feedback loops in an open system – money flows into a system held far from equiibrium which grows, becomes more complex and has periods of turbulence.

Until recently, Soros was considered a maverick, at least academically, proposing that the economy was an open system regulated by events which are provably unpredictable, if deterministic. The alternative and wideley accepted system of economics that people like Greenspan practiced was based on the idea of economics as a closed system which would tend to equilibrium in a free market. It assumed that turbulence was the result of external impediments to smooth free market influences.

When I found out that this was the case, I nearly fell off my chair. It meant that the economy was being run based upon scientific ideas that come from the age of steam engines.

The economy is an open system with a scale free system of interconnected attractors. It means, among other things that the current crisis was a statistically innevitable event and that another crash crash capable event is just as likely to happen tomorrow (just like having thrown a six in a dice throw does not reduce the chances of throwing a six again). This counterintuitive notion, is the same for earthquakes which were found to follow a pattern which was not the result of the release of built up tension and suggests that the economy is similarly susceptabe to events which are removed from simplistic chains of direct cause and effect.

Understanding these phenomena are crucial to our survival as a species, so we shouldn’t waste time even listening to people who are unaware of them. People like Greenspan or many other practitioners of economics, the dismal pseudo science. Soros, on the other hand, has economics ideas that are at least based on science which is less than 100 years old. Here he is at Davos, where James Bond villains hang out and decide how to run the world.

7 comments business