Once upon a time there were people who worked in the insurance office and you could talk to them on the phone or even in person (annoying emphasis intentional).
Now everything is online and you need to call an automated call center to try to conduct business if there’s been an accident or they made a mistake or if you have a question which isn’t “how much do I owe the insurance company?”.
Recently my friend Becky got stuck in the penetralia of an automated call center and she likened the experience to the life of an ant and specifically to the “superorganism hypothesis” of myrmecologist E. O. Wilson (BTW, who here doesn’t love the word “myrmecologist”?). Her description:
Whether or not this is an accurate representation of their inner state, ants have long been described as having an automaton’s machine-like nature, one in which individual identity is subsumed under the totalitarian will of the collective in Borg-like, Communist wetdream fashion.
That’s how I feel when I’m lost in the labyrinthine bowels of automated customer service hell. I’m part of a network that works profitably at the superorganism level, but doesn’t serve the interests of the individual in the slightest, nor cares to nor purports to, driven as it is by the spare logic of collective efficiency.
Question: what is less human than the rigid caste societies of Army ants marching hollowly and inexorably on their prey, driven by the dictates of their genes?
Answer: only the hollowed-out computer-generated voice of the quasi-British phone operator who demands that you enter your social security number over and over again as an exercise in surrendering your will to a corporation whose power role in the financial arrangement is made ever more apparent to both parties by the dawning impossibility of ever speaking to a human at the end of the interminable and ultimately futile phone call.
Powerful analogy; I’ve tended to use the herded cows analogy myself. To entertain myself in the painful waits, I often emit audible “moos” to emphasize the forced passivity I object to. It sometimes backfires and interprets my sounds as a menu choice, though, so I’m thinking of going with the ants, who I don’t think make much noise.
A few thoughts:
- If you know you need to talk to a person eventually and that there’s no point going through all the stages, sometimes just dialing “0 0 0 0 0 0 0 0″ a bunch of times will put you straight through. I usually try this straight away the first time I call. Sometimes it works, sometimes it totally fails and I have to call back. Worth a try.
- I wonder how efficient these call centers really are. I have a theory that people simply give up and pay (or default on) their incorrect bills rather than having to deal with this irredeemably opaque system.
- I also wonder what the built-up learned passivity does to us as a society. Having worked as a customer support person myself, I know that there are probably nice people at the other end of the system, and if I could only get through to them, which is a big if, they’d be super informed and helpful. But most people probably don’t think of it that way.
Maybe I’m the last person who’s hearing about the Citigroup “plutonomy memos”, but they’re blowning me away.
Wait, now that I look around, I see that Yves Smith at Naked Capitalism posted about this on October 15, 2009, almost three years ago, and called for people to protest the annual meetings of the American Bankers Association. Man, that’s awesome.
So yeah, I’m a bit late.
But just in case you didn’t hear about the plutonomy memos (h/t Nicholas Levis), which were featured on Michael Moore’s “Capitalism: a Love Story” as well, then you’ll have to read this post immediately and watch Bill Moyer’s clip at the end as well.
The basic story, if you’re still here, is that certain “global strategists” inside Citigroup drafted some advice about investing based on their observation that rich people have all the money and power. They even invented a new word for this, namely “plutonomy.” This excerpt from one of the three memos kind of sums it up:
We project that the plutonomies (the U.S., UK, and Canada) will likely see even more income inequality, disproportionately feeding off a further rise in the profit share in their economies, capitalist-friendly governments, more technology-driven productivity, and globalization… Since we think the plutonomy is here, is going to get stronger… It is a good time to switch out of stocks that sell to the masses and back to the plutonomy basket.
The lawyers for Citigroup keep trying to make people take down the memos, but they’re easy to find once you know to look for them. Just google it.
Nothing that surprising, economically speaking, except for maybe the fact that their reaction, far from being outrage, is something bordering on gleeful. But they aren’t totally complacent:
Low-end developed market labor might not have much economic power, but it does have equal voting power with the rich.
This equal voting power seems to be a pretty serious concern for their plans. They go on to say:
A third threat comes from the potential social backlash. To use Rawls-ian analysis, the invisible hand stops working. Perhaps one reason that societies allow plutonomy, is because enough of the electorate believe they have a chance of becoming a Pluto-participant. Why kill it off, if you can join it? In a sense this is the embodiment of the “American dream”. But if voters feel they cannot participate, they are more likely to divide up the wealth pie, rather than aspire to being truly rich.
Could the plutonomies die because the dream is dead, because enough of society does not believe they can participate? The answer is of course yes. But we suspect this is a threat more clearly felt during recessions, and periods of falling wealth, than when average citizens feel that they are better off. There are signs around the world that society is unhappy with plutonomy – judging by how tight electoral races are.
But as yet, there seems little political fight being born out on this battleground.
This explains to me why Occupy was treated the way it was by Bloomberg’s cops and the entrenched media like the New York Times (and nationally) – the idea that people are opting out and no longer believe they have a chance of being a Pluto-participant is essentially the most threatening thing they can think of. Interestingly, they also say this:
A related threat comes from the backlash to “Robber-barron” economies. The
population at large might still endorse the concept of plutonomy but feel they have lost out to unfair rules. In a sense, this backlash has been epitomized by the media coverage and actual prosecution of high-profile ex-CEOs who presided over financial misappropriation. This “backlash” seems to be something that comes with bull markets and their subsequent collapse. To this end, the cleaning up of business practice, by high-profile champions of fair play, might actually prolong plutonomy.
This is what Dodd-Frank has done, to some extent: a law that makes things seem like they’re getting better, or at least confuses people long enough so they lose their fighting spirit.
Finally, from the third memo:
➤ What could go wrong?
Beyond war, inflation, the end of the technology/productivity wave, and financial collapse, we think the most potent and short-term threat would be societies demanding a more ‘equitable’ share of wealth.
Note the perspective: what could go wrong. Lest we wonder who inititated class warfare.
I know I’m not alone when I say, thank god school starts next week. These kids need to be back in school.
Not that I don’t adore the little lovemuffins, or that I don’t enjoy spending time with them, or that I enjoy hearing them whine about homework. It’s been great, and we’ve watched quite a few good movies in the past few days (for some reason they didn’t enjoy “12 Angry Men” or “Contact” as much as they should have, though).
Don’t get me wrong, I am happy for them to have summer vacation. I just wish we could all take a pill about a week before school actually starts that puts us in a coma for exactly one week. Is that too much to ask?
It wouldn’t help to make summer one week shorter, either. That would just move up the insanity one week sooner. No good. We need that pill.
I’m not employed right now, and I’m trying to find time to write and to plan my future. But it’s kind of hard to do that when my three sons are actively coming up with ways to simultaneously talk louder than anyone knew was humanly possible and to fight ferociously about such things like who gets to play with the cardboard boxes from the last Fresh Direct delivery.
I’m not gonna lie, I’ll be glad when they’re gone. I’m counting the hours. T minus 166.
Yesterday I finished reading Chris Hayes’s book “Twilight of the Elites,” and although I enjoyed it, I have to say it was more about the elites than about their twilight.
He focused on the enormous distance between people in society, how the myth of meritocracy is widening that gap (with healthy references to Karen Ho’s book Liquidated, which I blogged about here), and how, as the entrenched elite get more and more entrenched, they get less and less competent.
But Hayes didn’t really paint a picture of how things would end, although he mentioned the Tea Party and Occupy as possible important sources of resistance, not unlike Barofsky’s recent book Bailout (which I blogged about here), in which Barofsky appealed to the righteous anger of the people to whom government is no longer accountable.
Well, I guess Hayes did add one wrinkle which surprised me. He said it would be the upper middle class, educated class that actually foments the coming revolution. Oh, and the bloggers (because the mainstream media is so captured they’re useless). So me and my friends.
His argument is that we are the ones sufficiently educated and sufficiently insiderish that we will be at the window, with our faces pressed against the glass, looking in at the true insider elites, and seeing how stupid and incompetent those guys are, and how they are rigging the system against the rest of us, and we’ll eventually explode with disgust and righteous anger and that will signal the end.
Kind of feels like that’s already happened, but maybe I’m being impatient.
Two things I really enjoyed about his book:
First, the fact that practically everyone thinks they’re an underdog and has fought tooth and nail to succeed in this world. Absolutely true, including the guys I worked with in finance. I think the phrase he used is “people born on third base think they hit a triple”.
Second, he does a really good job describing the never-can-be-too-rich culture of our country; his example of going to Davos is an excellent one and brings that concept to life perfectly.
It’s enough to get you kind of depressed overall, though. If we are to believe this book’s thesis, our entrenched elite and dysfunctional political structure and economic system are doomed to fail at some future moment, and the best we can hope for is a moment where the hypocrisy collapses in on itself. What is there to look forward to exactly?
I asked that of a friend of mine, and how it was getting me down. His advice to me was to own it more. To make the coming apocalypse an event, kind of like the 4th of July or a vacation, that you plan for and enjoy thinking about.
He said plenty of people do this, it’s in fact a huge industry of doom and gloom. The country is going to hell, whaddya gonna do, he said, might as well have some fun with it.
What? Who are these doom and gloom people? Start here, where Dmitry Orlov compares the preparedness of the US to the former USSR for the coming inevitable apocalypse. He calls this the “Collapse Gap”.
It’s got some great points (although he can’t both say that lawlessness ensues and people take what they want, and also say that people behind in their mortgages will be homeless) and it’s really funny as well, in a completely cynical, Russian way of course. My favorite lines:
One area in which I cannot discern any Collapse Gap is national politics. The ideologies may be different, but the blind adherence to them couldn’t be more similar.
It is certainly more fun to watch two Capitalist parties go at each other than just having the one Communist party to vote for. The things they fight over in public are generally symbolic little tokens of social policy, chosen for ease of public posturing. The Communist party offered just one bitter pill. The two Capitalist parties offer a choice of two placebos. The latest innovation is the photo finish election, where each party buys 50% of the vote, and the result is pulled out of statistical noise, like a rabbit out of a hat.
I recently finished a book that made rethink being fat, and the cause of the worldwide “obesity epidemic”. Rethink in a good way.
Namely, it suggested the following possibility. What if, rather than getting fat because we are overeating, we overeat because we are getting fat? Another way of thinking about this is that there’s something going on that makes us both store fat away and overeat – that they are both symptomatic of some other problem.
In particular, this would imply that the fact of being fat is not a moral weakness, not a mere lack of willpower. Since I long ago dismissed the willpower hypothesis myself (I don’t seem to have trouble with other aspects of my life which require planning and willpower, why do I have so much trouble with this even though I’ve seriously tried?), this idea comes as something of a “duh” moment, but a welcome one.
To get in the appropriate mindset for this idea, think for a moment about all of the studies you hear about feeding animals such as rats, rabbits, monkeys, pigs, etc. different diets, and noting that sometimes the diet makes them super fat, and sometimes it doesn’t. Sometimes the animals are bred to have a genetic defect, or a pituitary or other gland is removed, and that has an effect on their fatness as well. In other words, there’s some kind of internal chemical thing going on with these animals which causes this condition.
Bottomline: we never accuse the fat mice of lacking will power.
So what is this thing that causes overeating and fat accumulation? The theory given in the book is as follows.
Fat cells are active little chemical warehouses which accept fat molecules and allow fat molecules to leave in two separate (but not unrelated) processes. Rather than thinking of fat as being stored there until the moment it is needed, instead think of the flow of fat molecules both into and out of each fat cell as two constant processes, so it’s actually better to consider the rate of those flows, the inward rate and the outward rate.
Suppose the outward rate of the fat molecules is somehow suppressed compared to the inward rate. So the fat molecules are being allowed into the fat cells just fine but they aren’t leaving the fat cells easily. What would happen?
In the short term, this would happen: lacking the appropriate amount of energy, the overall system would feel internally starved and get super hungry and quickly cause the animal to overeat to compensate for the lack of available energy.
In the longer term, the number of fat cells (or maybe the size of the average fat cell) would increase until the energy flow is sufficient to satisfy the internal needs of the system. In other words, the animal would gain a certain amount of weight (in the form of fat) and stay there, once the internal equilibrium is reached. This jives with the fact that people seem to have a certain “set point” of weight, including overweight. Indeed the amount of fat an animal has in equilibrium allows us to estimate how suppressed the outward flow of energy is.
What causes this suppressed outward rate? The book suggests that it’s elevated insulin. And what causes chronic elevated insulin? The book suggests that the main culprit is refined carbohydrates.
In particular, the author, Gary Taubes, suggests that by avoiding refined carbohydrates such as flour, sugar, and corn syrup, we can bring our insulin levels down to reasonable levels and the outward rate of fat from fat cells will no longer be suppressed.
Not everyone reacts in exactly the same way to refined carbs (i.e. not all insulin responses are identical) and scaled definitely matters, so eating 180 pounds of sugar a year is worse than 90 pounds a year, according to the theory. Moreover, things get progressively worse over time and it takes about 20 years of carb overloading to have such effects.
It’s easier said than done to avoid such foods as an individual living in our culture (nothing at Starbucks, nothing at a newsstand, almost nothing at a bodega), but one thing I like about this theory is that it actually explains the obesity epidemic pretty well: as the author points out, massively scaled refined carbohydrates have only been consumed at such rates for a short while, and the correlations with weight gain are pretty high.
Moreover, and I know this from personally avoiding most carbs for the past 6 months (which I started doing for another, related reason – I hadn’t read the book yet!). I’ve lost weight easily, and I haven’t ever been hungry, even compared to what I used to experience when I wasn’t dieting at all. According to the theory, my fat cells are releasing fat easily because my insulin levels are low, which means I don’t have internal starvation, which in turn explains my complete lack of hunger.
Also in the book: he claims we don’t actually know eating saturated fat raises cholesterol, nor that high cholesterol causes heart disease except when it’s super high, but then again it also seems to be bad to have super low cholesterol. I gotta hand it to this guy, he’s not afraid of going against conventional wisdom, at the risk of being ridiculed, which he most definitely has been.
But that doesn’t make me dismiss his theories, because I’m pretty sure he’s right when he says epidemiology is fraught with politics and bad selection bias.
It’s certainly an interesting book, and who knows, he may be right on some or all scores. On the other hand, maybe it doesn’t matter that much – not many people want to or are willing to avoid carbs, and maybe it’s not environmentally sustainable, although I don’t eat more meat than I used to, just more salad.
We are now ruling out the idea that people don’t exercise enough as the cause for being fat, and as we’ve attempted to follow the advice of the so-called experts, everyone seems to just get fatter all the time. As far as I’m concerned, all conventional bets are off.
I’m happy to show you that Alternative Banking now has a working blog, thanks to a newer member Nicholas Levis. He blogged recently about a Reality Sandwich event I went to last Wednesday, where David Graeber, author of Debt: the first 5000 years was speaking. Interesting and stimulating.
We also have a playing card project called “52 Shades of Greed” which is coming out soon. Check out some of the amazing art here.
Finally, we are about to launch a Kickstarter campaign for our “move your money” app, as soon as I figure out how to accept the money without doing something illegal. Please tell me if you have experience with such things!
More exciting things in the works which I can’t talk about yet. I’ll keep you updated.
When I was a promising young mathematician in college, I met someone from the NSA who tried to recruit me to work for the spooks in the summer. Actually, “met someone” is misleading- he located me after I had won a prize.
I didn’t know what to think, so I accepted his invitation to visit the institute, which was in La Jolla, in Southern California (I went to UC Berkeley so it wasn’t a big trip).
When I got to the building, since I didn’t have clearance, everybody had to stop working the whole time I was there. It wasn’t enough to clean their whiteboards, one of them explained, they had to wash them down with that whiteboard spray stuff, because if you look at a just-erased whiteboard in a certain way you can decipher what had been written on it.
I met a bunch of people, maybe 6 or 7. They all told me how nice it was to work there, how the weather was beautiful, how the math problems were interesting. It was strangely consistent, but who knows, perhaps also true.
One thing I’d already learned before coming is that there are many layers of work that happen before the math people in La Jolla are given problems to do. First, the actual problem is chosen, then the “math” of the problem is extracted from the problem, and third it’s cleansed so that nobody can tell what the original application is.
Knowing this (and I was never contradicted when I explained that process), I asked each of them the same question: how do you feel about the fact that you don’t know what problem you’re actually solving?
Out of the 6 or 7 people I met, everyone but one person responded along the lines, “I believe everything the United States Government does is good.” The last guy said, “yeah, that bothers me. I am honestly seriously considering leaving.”
Needless to say, I didn’t take the job. I wasn’t yet a major league skeptic, but I was skeptical enough to realize I could not survive in such an environment, with colleagues that oblivious. They also mentioned that I’d have to stop dating my Czech boyfriend and that I’d need to submit information about all my roommates for the past 10 years, which was uber creepy.
Nowadays I hear estimates that 600 mathematicians work at the NSA, and of course many more stream through during the summer when school’s not in session, both at La Jolla and Princeton. Somehow they don’t mind not knowing how their work actually gets used. I’m not sure how that’s possible but it clearly is.
William Binney, a mathematician, was working on Soviet Union spying software that got converted to domestic spying after 9/11. In other words, they used his foreign spying algorithm on a new data source, namely American citizen’s raw data. He objected to that, so strongly that he’s come out against it publicly.
The big surprise is how come they let him know what they were actually up to. My guess is he was high enough up the chain that they thought he’d be okay with it – he’d been there 32 years, and I guess he was considered an insider.
In any case, watch the video: this is a courageous man. The FBI came into his house with guns drawn to intimidate him against his whistleblowing activities and yet he hasn’t been cowed. Indeed, after getting dressed (he was coming out of the shower when they exploded into his house), he explained to them the crimes of George Bush and Dick Cheney on his back porch.
As he explains, “the purpose is to monitor what people are doing”. He explains how people’s social media data and other kinds of data are linked over domains and over time to build profiles of Americans over time: “you have 10 years of their life that you can lay out in a timeline, that involves anybody in the country”.
Describing the dangers of this program, Binney was extremely articulate:
- “The danger here is that we could fall into a totalitarian state like East Germany”
- “We can’t have secret interpretations of laws and run them in secret and not tell anybody. We can’t make up kill lists and not tell anybody what the criterion is for being on the kill list”
- “Just because we call ourselves a democracy doesn’t mean we will stay that way.”
There you have it. The good news is that that guy is no longer helping the NSA do their thing.
But the bad news is, plenty of mathematicians still are. And if you want to find a community more trusting and loyal than mathematicians, I think you’d have to go to a kindergarten somewhere. Not to mention the fact that, as I described above, the problems are intentionally cleaned to look innocuous.
Another example, possibly the most important one of all, of mathematics being manipulated to potentially evil ends. We will have trouble proving actual evil consequences, of course, since there’s no transparency. The only update we will get is via the next whistleblower who can handle guns pointed at him as he leaves his shower.
When you find a website that claims to be free for users, we should know to be automatically suspicious. What is sustaining this service? How could you possibly have 35 people working at the underlying company without a revenue source?
We’ve been trained to not think about this, as web surfers, because everything seems, on its face, to be free, until it isn’t, which seems outright objectionable (as I wrote about here). Or is it? Maybe it’s just more honest.
When I go to the newest free online learning site, I’d like to know how they plan to eventually make money. If I’m registering on the site, do I need to worry that they will turn around and sell my data? Is it just advertising? Are they going to keep the good stuff away from me unless I pay?
And it’s not enough to tell me it’s making no revenue yet, that it’s being funded somehow for now without revenue. Because wherever there is funding, there are strings attached.
If the NSF has given a grant for this project, then you can bet the project never involves attacking the NSF for incompetence and politics. If it’s a VC firm, then you’d better believe they are actively figuring out how to make a major return on their investment. So even if they’re not selling your registration and click data now, they have plans for it.
So in other words, I want to know how you’re being funded, who’s giving you the money, and what your revenue model is. Unless you are independently wealthy and want to give back to the community by slaving away on a project, or you’re doing it in your spare time, then I know I’m somehow paying for this.
Just in the spirit of disclosure and transparency, I have no income and I pay a bit for my WordPress site.
I get lots of emails nowadays from quantitative people who are unhappy in academics, or in finance, or in tech, and want to know what they should do next, and specifically if they should quit their job. Most of them have Ph.D.’s or are even professors or well-established in their profession. They’re interested in switching fields, or at least jobs, and they want advice.
Maybe I get so many emails like this because they’ve read my advice post and realize I’m all about these three rules:
- Go for it! (this usually is all most people need, especially when talking about the crush type of advice)
- Do what you’d do if you weren’t at all insecure (great for people trying to quit a bad job or deciding between job offers)
- Do what a man would do (I usually reserve this advice for women)
I’m going to concentrate mostly on rule #2 today in giving job advice.
Most of the time, the people who ask me are in pretty darn shitty situations and really want to quit, and really want to be able to say to themselves that they deserve better, but are kept from doing so from some kind of fear that there are no better jobs out there or that they deserve to be treated badly. It’s really surprising and annoying that they are so afraid to ask for and demand more. Why are nerds always underselling themselves?
Here are things I hear people complain about that make me want to punch them (or really, give them encouraging hugs and then kicks in the pants):
- My brain is rotting. Why on earth would you stay in a job where your brain rots? Don’t you realize that, as Ph.D.’s in math or stats or physics or whatever, our brains are our main tools? That’s why we get paid, that’s why we will always be able to get a job, but only if we don’t let them rot. It’s kind of like an athlete saying, yeah I’m on this professional team but I spend all day lying around watching TV so my muscles have completely atrophies. Guess what, athlete, that’s no good!
- I’m isolated and nobody ever talks to me. If teamwork is important to you, this is a dealbreaker. Get your ass up and look around. Are there other people in your field/ department/ group who have similar skills as you but who are working with other people? How did they get that set up? Can you get that set up? If you have a boss, can you tell your boss you need to work with other people?
- I’m being used by my company – they pay me well but they don’t give me real work to do. I’m mainly here for them to show clients they have a Ph.D. working in the back. This is pretty common and really terrible, because it leads to brainrot as well as isolation, and moreover your name is attached to what is probably a shitty business model and product. I say demand to get in on the business for real or leave. Simple as that, you don’t want to collude in fraudulent business offerings.
- The pace and politics of academics drive me nuts. I totally get this, personally, because these are also things that led me to leave academics. On the one hand, I’m super glad I left because those things really did drive me nuts. On the other hand, let me just say, you never get rid of your problems, you just get new ones. You have to be prepared for fast-paced but still political problems outside of academics.
My theory is that people are way too slow to quit a job, or at least to agitate for a better position within their workplace. And keep in mind I’m saying this to you as an unemployed person, so you know I know how to quit a job – I’m a pro! The truth is, though, that I quit each job knowing there are lots of juicy jobs out there for people with quantitative skills.
First find out what you’re worth on the open market. Look at job listings, talk to people, mention that you’re open to talking to people, find out what else is out there. You may realize you have it pretty good after all, or that it’s worth talking to people inside your company or department about changing your position slightly that would help out your mental state a lot.
Second, you could do the above and then end up saying to yourself, “What the fuck! They’re either promoting me/ moving me or else I’m quitting!”. This is a perfect moment to make demands you wouldn’t normally have the balls to make, and they often work. In fact you should keep in mind that it’s most companies’ policy to generally underpay and underappreciate their employees until they demand better, and then to give in to those demands. True fact.
Next, if you do decide to leave, do a budget on your finances and figure out how many months you can afford to be unemployed. It turns out that people are always very conservative about this (understandably) and it takes them quite a bit of emotional turmoil to even make that calculation with hard numbers. But it’s a good idea, because you’ll often find that you actually have enough money to quit your job and spend a few months learning skills and networking to get a job that you actually think might be a better fit for you.
You can also try to get another job while you’re working, but it’s really hard to be sure you’re not just embarking on a rebound relationship. I prefer being unemployed for a while myself, but it’s all about personality.
Good luck, and remember rule #2!
So there’s this guy named Benjamin Lawsky, and he’s the New York State Superintendent of Financial Services. Last week he blew open a case against a British bank named Standard Chartered for money laundering and doing business with Iran.
The other regulators don’t like his style one bit, even though he managed to force Standard Chartered to pay $340 million for their misdeeds, as well as look like bad guys. I’ll get back to why the other regulators are pissed but first a bit more on the settlement.
What’s not cool about a fine is that nobody goes to jail and they continue business as usual, hopefully without the money laundering (their stock has mostly recovered as well).
What is cool about the $340 million fine is that it took almost no time compared to other settlements with banks (a nine month investigation before the blowup last week) and that it’s actually pretty big – bigger, for example, then the proposed settlement SEC is making with Citigroup which judge Rackoff blocked for shorting their clients in 2008 and not admitting wrongdoing.
In this case of Standard Chartered, they may not be admitting wrongdoing but we’ve all already read the evidence, as well as the smoking gun email:
The business chugged along even after the banking unit’s chief executive in the Americas warned in a 2006 memo that the company and its management might be vulnerable to “catastrophic reputational damage” and “serious criminal liability.”
According to the regulatory order, a bank official in London replied: “You f- Americans. Who are you to tell us, the rest of the world, that we’re not going to deal with Iranians.”
[Aside: do you think, being a polite Brit, that this guy actually wrote "f-" in his email?]
Back to the other regulators. They are so used to working for the banks, it is inconceivable to them to publicize damning evidence before giving the heads up to the bank in question looking for a quiet settlement. That’s the way they do things. And then they never get much money, and nobody ever goes to jail. Oh, and it takes forever.
They argue that this is because they don’t have enough resources to go the distance with lawyers, but it’s also because their approach is so weak.
So naturally they’ve been pretty upset that Lawsky has balls when they don’t, especially since he doesn’t have nearly the resources that the SEC has.
My favorite ridiculous argument against Lawsky and his approach came from this article I read yesterday on Reuters. It stipulates that Lawsky is creating an environment where there’s a possibility of regulatory arbitrage. From the article:
But a central lesson of the financial crisis was the need for regulators to better cooperate and share information. Working at cross purposes creates opportunities for what’s known as “regulatory arbitrage,” whereby banks circumvent regulations by exploiting rivalries among their various overseers.
Um, what? That whole mindset is clearly off.
The goal would be the regulators get to decide who’s the bad guy, not the banks. And don’t tell me loopholes in the regulatory structure are introduced by having a regulator willing to do his job without sucking everybody’s dick first. Please.
And if I’m a regulator, and if it would work better to share my information with Lawsky to do my job as a regulator, you better believe I’m willing to share it with him if I can get credit alongside him for exposing illegal activities. That is, if I really want to expose illegal activities.
It occurs to me, when reading Treasury’s latest excuse for the unbelievably shitty performance of HAMP, that Treasury has been a really crappy baby daddy. From a recent New York Times article (also see this):
Mr. Summers declined to comment on the record, but other current and former officials echoed Mr. Geithner’s view that the administration had done well under the circumstances. Some said they underestimated the complexity of helping millions of people. Some said they tried too hard at first to protect taxpayers from unnecessary losses. But they agreed that the most important problem was beyond their control: the mortgage industry was set up either to collect payments or to foreclose, and it was not ready to help people.
“They were bad at their jobs to start with, and they had just gone through this process where they fired lots of people,” said Michael S. Barr, a former assistant Treasury secretary who served as Mr. Geithner’s chief housing aide in 2009 and 2010. “The only surprise was that they were even more screwed up than the high level of screwiness that we expected.”
I mean, let’s say I have a whining teenager who I’ve just realized has stolen my money, signed my name to various notes to the principal, and has been playing hooky for months or even years. I might not ask that same kid to help his friends with their college applications unsupervised.
I might think he needs to be watched, and that I’d keep in mind the selfishness and immaturity that he’s already exposed as I watch him, to make sure he doesn’t end up plagiarizing his best friends’ college essay, or steal the application fees, or something else I hadn’t even thought of.
What I wouldn’t worry about is the possibility that he’s not smart enough to help his friends – he’s already shown me how manipulative and clever he can be when it benefits him.
Moreover, if I didn’t supervise that kid, then after none of his friends get into college I’d blame myself, and not the kid, for my failing. Because he’s only a kid, and I’m supposed to be the grownup. I’d be a bad baby daddy.
That’s what Treasury is doing. Those guys knew better than to trust the banks with something like HAMP, which was essentially unsupervised and had too many conflicting incentives for the banks to ever be expected to actually help people in trouble with their mortgage. They set it up terribly, looked the other way when the banks did nothing (and as Barofsky explained to us, this was intentional – they were foaming the runway for the banks to recover), and now they’re trying to say it’s because the banks were screwed up.
Not good enough, Treasury.
Yesterday my friend and fellow Occupier Suresh sent me this article from the New York Times.
It’s something I knew was already happening somewhere, but I didn’t know the perpetrators would be quite so proud of themselves as they are; on the other hand I’m also not surprised, because people making good money on mathematical models rarely take the time to consider the ramifications of those models. At least that’s been my experience.
So what have these guys created? It’s basically a modern internet version of a credit score, without all the burdensome regulation that comes with it. Namely, they collect all kinds of information about people on the web, anything they can get their hands on, which includes personal information like physical and web addresses, phone number, google searches, purchases, and clicks of each person, and from that they create a so-called “e-score” which evaluates how much you are worth to a given advertiser or credit card company or mortgage company or insurance company.
Some important issues I want to bring to your attention:
- Credit scores are regulated, and in particular the disallow the use of racial information, whereas these e-scores are completely unregulated and can use whatever information they can gather (which is a lot). Not that credit score models are open source: they aren’t, so we don’t know if they are using variables correlated to race (like zip code). But still, there is some effort to protect people from outrageous and unfair profiling. I never though I’d be thinking of credit scoring companies as the good guys, but it is what it is.
- These e-scores are only going for max pay-out, not default risk. So, for the sake of a credit card company, the ideal customer is someone who pays the minimum balance month after month, never finishing off the balance. That person would have a higher e-score than someone who pays off their balance every month, although presumably that person would have a lower credit score, since they are living more on the edge of insolvency.
- Not that I need to mention this, but this is the ultimate in predatory modeling: every person is scored based on their ability to make money for the advertiser/ insurance company in question, based on any kind of ferreted-out information available. It’s really time for everyone to have two accounts, one for normal use, including filling out applications for mortgages and credit cards and buying things, and the second for sensitive google searches on medical problems and such.
- Finally, and I’m happy to see that the New York Times article noticed this and called it out, this is the perfect setup for the death spiral of modeling that I’ve mentioned before: people considered low value will be funneled away from good deals, which will give them bad deals, which will put them into an even tighter pinch with money because they’re being nickeled and timed and paying high interest rates, which will make them even lower value.
- A model like this is hugely scalable and valuable for a given advertiser.
- Therefore, this model can seriously contribute to our problem of increasing inequality.
- How can we resist this? It’s time for some rules on who owns personal information.
So I’m back from some town in North Ontario (please watch this video to get an idea). I spent four days on a tiny little island on Lake Huron with my family and some wonderful friends, swimming, boating, picnicking, and reading the Omnivore’s Dilemma by Michael Pollan whenever I could.
It was a really beautiful place but really far away, especially since my husband jumped gleefully into the water from a high rock with his glasses on so I had to drive all the way back without help. But what I wanted to mention to you is that, happily, I managed to finish the whole book – a victory considering the distractions.
I was told to read the book by a bunch of people who read my previous post on organic food and why I don’t totally get it: see the post here and be sure to read the comments.
One thing I have to give Pollan, he has written a book that lots of people read. I took notes on his approach and style because I want to write a book myself. And it’s not that I read statistics on the book sales – I know people read the book because, even though I hadn’t, lots of facts and passages were eerily familiar to me, which means people I know have quoted the book to me. That’s serious!
In other words, there’s been feedback from this book to the culture and how we think about organic food vs. industrial farming. I can’t very well argue that I already knew most of the stuff in the book, even though I did, because I probably only know it because he wrote the book on it and it’s become part of our cultural understanding.
I terms of the content, first, I’ll complain, then I’ll compliment.
Complaint #1: the guy is a major food snob (one might even say douche). He spends like four months putting together a single “hunting and gathering” meal with the help of his friends the Chez Panisse chefs. It’s kind of like a “lives of the rich and famous” episode in that section of the book, which is to say voyeuristic, painfully smug, and self-absorbed. It’s hard to find this guy wise when he’s being so precious.
Complaint #2: a related issue, which is that he never does the math on whether a given lifestyle is actually accessible for the average person. He mentions that the locally grown food is more expensive, but he also suggests that poor people now spend less of their income on food than they used to, implying that maybe they have extra cash on hand to buy local free-range chickens, not to mention that they’d need the time and a car and gas to drive to the local farms to buy this stuff (which somehow doesn’t seem to figure into his carbon footprint calculation of that lifestyle). I don’t think there’s all that much extra time and money on people’s hands these days, considering how many people are now living on food stamps (I will grant that he wrote this book before the credit crisis so he didn’t anticipate that).
Complaint #3: he doesn’t actually give a suggestion for what to do about this to the average person. In the end this book creates a way for well-to-do people to feel smug about their food choices but doesn’t forge a path otherwise, besides a vague idea that not eating processed food would be good. I know I’m asking a lot, but specific and achievable suggestions would have been nice. Here’s where my readers can say I missed something – please comment!
Compliment #1: he really educates the reader on how much the government farm subsidies distort the market, especially for corn, and how the real winners are the huge businesses like ConAgra and Monsanto, not the farmers themselves.
Compliment #2: he also explains the nastiness of processed food and large-scale cow, pig, and chicken farms. Yuck.
Compliment #3: My favorite part is that he describes the underlying model of the food industry as overly simplistic. He points out that, by just focusing on the chemicals like nitrogen and carbon in the soil, we have ignored all sorts of other important things that are also important to a thriving ecosystem. So, he explains, simply adding nitrogen to the soil in the form of fertilizer doesn’t actually solve the problem of growing things quickly. Well, it does do that, but it introduces other problems like pollution.
This is a general problem with models: they almost by definition simplify the world, but if they are successful, they get hugely scaled, and then the things they ignore, and the problems that arise from that ignorance, are amplified. There’s a feedback loop filled with increasingly devastating externalities. In the case of farming, the externalities take the form of pollution, unsustainable use of petrochemicals, sick cows and chickens, and nasty food-like items made from corn by-products.
Another example is teacher value-added models: the model is bad, it is becoming massively scaled, and the externalities are potentially disastrous (teaching to the test, the best teachers leaving the system, enormous amount of time and money spent on the test industry, etc.).
But that begs the question, what should we do about it? Should we well-to-do people object to the existence of the model and send our kids to the private schools where the teachers aren’t subject to that model? Or should we acknowledge it exists, it isn’t going away, and it needs to be improved?
It’s a similar question for the food system and the farming model: do we save ourselves and our family, because we can, or do we confront the industry and force them to improve their models?
I say we do both! Let’s not ignore our obligation to agitate for better farming practices for the enormous industry that already exists and isn’t going away. I don’t think the appropriate way to behave is to hole up with your immediate family and make sure your kids are eating wholesome food. That’s too small and insular! It’s important to think of ways to fight back against the system itself if we believe it’s corrupt and is ruining our environment.
For me that means being part of Occupy, joining movements and organization fighting against lobbyist power (here’s one that fights against BigFood lobbyists), and broadly educating people about statistics and mathematical modeling so that modeling flaws and externalities are understood, discussed, and minimized.
Like all good New Yorkers, I’m going away for a week’s vacation in August. I’ll be on a tiny island on Lake Ontario with no internet connection. I’ll miss you guys! See you in a week!
I’m a huge fan of public transportation, mostly subways. I used the New York City subway system on average three times a day, especially now that I’m not working. And I like to observe people on the subway, and the sometimes strange etiquette that you see there.
Specifically, I am interested in how people break what I call the two cardinal rules of public transportation:
- No eye contact or conversations with people you didn’t get on the subway with. Exceptions when, as described here, somebody incredibly smelly or incredibly sick leaves, or the subway gets irretrievably stuck in the tunnel.
- No doing anything weird, even by yourself, to attract undue attention. Things like reading, playing games on your phone, and pretending to sleep are OK, things like eating smelly food or humming or whistling: not okay.
Most people who break these rules I get – they are trying to get you to give them money, or they’re slightly to totally insane, or both. Fair enough, that’s part of the fabric of life in a big city.
But there’s one category of people I just don’t get, namely the women who put outlandish amounts of makeup on while sitting on the subway.
I’m not talking about a dab of lipstick, which seems fine and comparable to chapstick or something. I’m talking about the women who come with a complete set of foundation, eyeliners, mascara, the works. They sit there peering intensely into their tiny mirrors, creating a new persona, utterly absorbed in their transformation, and completely oblivious to the mesmerizing effect that it has on everyone.
Or maybe not, maybe it’s performance art – sometimes I think so. Or perhaps they are actually insane in a small way.
Because otherwise it seems like a contradiction in terms to me. From my perspective, wearing that much makeup usually indicates a willingness to conform at the highest level (these are usually young women, so the idea that they are actually in need of makeup to cover sun spots or wrinkles does not apply), but then the willingness to break the second cardinal rule of subway riding seems to be in direct conflict with that religion of conformism.
For example, whenever I see one of these 25-year-old foundation appliers, I’m wondering, who are you becoming? From whom are you hiding your real face? If it’s your coworkers, what if one of them is on this train right now? Then they’d see the real you in the before shot, at the beginning of your ride. Wouldn’t that defeat the purpose of the makeup? Isn’t that too large a risk to take for you?
Since I don’t wear makeup myself, I’m also wondering if I’m just not understanding the goal of that much makeup. Maybe if I understood more deeply why women wear these masks, I’d also understand why they’re willing to apply them in front of a crowd of strangers.
I’ll be a data ambassador at an upcoming DataKind weekend, working with a team on New York City open government data.
DataKind, formerly known as Data Without Borders, is a very cool, not at all creepy organization that brings together data nerds with typically underfunded NGO’s in various ways, including datadive weekends, which are like hack-a-thons for data nerds.
I have blogged a few times about working with them, because I’ve done this before working with the NYCLU on stop-and-frisk data (check out my update here as well). By the way, stop-and-frisk events have gone down 34% in recent months. I feel pretty good about being even tangentially involved in that fact.
This time we’re working with mostly New York City parks data, so stuff like trees and storm safety and 311 calls.
The event starts on Friday, September 7th, with an introduction to the data and the questions and some drinks, then it’s pretty much all day Saturday, til midnight, and then there are presentations Sunday morning (September 9th). It’s always great to meet fellow nerds, exchange technical information and gossip, and build something cool together.
Registration is here, sign up quick!
My friend Nik recently sent me a PandoDaily article written by Francisco Dao entitled Looterism: The Cancerous Ethos That Is Gutting America.
He defines looterism as the “deification of pure greed” and says:
The danger of looterism, of focusing only on maximizing self interest above the importance of creating value, is that it incentivizes the extraction of wealth without regard to the creation or replenishment of the value building mechanism.
I like the term, I think I’ll use it. And it made me think of this recent Bloomberg article about private equity and hedge funds getting into the public schools space. From the article:
Indeed, investors of all stripes are beginning to sense big profit potential in public education.
The K-12 market is tantalizingly huge: The U.S. spends more than $500 billion a year to educate kids from ages five through 18. The entire education sector, including college and mid-career training, represents nearly 9 percent of U.S. gross domestic product, more than the energy or technology sectors.
Traditionally, public education has been a tough market for private firms to break into — fraught with politics, tangled in bureaucracy and fragmented into tens of thousands of individual schools and school districts from coast to coast.
Now investors are signaling optimism that a golden moment has arrived. They’re pouring private equity and venture capital into scores of companies that aim to profit by taking over broad swaths of public education.
The conference last week at the University Club, billed as a how-to on “private equity investing in for-profit education companies,” drew a full house of about 100.
[I think I know why that golden moment arrived, by the way. The obsession with test scores, a direct result of No Child Left Behind, is both pseudo-quantitative (by which I mean it is quantitative but is only measuring certain critical things and entirely misses other critical things) and has broken the backs of unions. Hedge funds and PE firms love quantitative things, and they don't really care if they numbers are meaningful if they can meaningfully profit.]
Their immediate goal is out-sourcing: they want to create the Blackwater (now Academi) of education, but with cute names like Schoology and DreamBox.
Lest you worry that their focus will be on the wrong things, they point out that if you make kids drill math through DreamBox “heavily” for 16 weeks, they score 2.3 points higher in a standardized test, although they didn’t say if that was out of 800 or 20. Never mind that “heavily” also isn’t defined, but it seems safe to say from context that it’s at least 2 hours a day. So if you do that for 16 weeks, those 2.3 points better be pretty meaningful.
So either the private equity guys and hedge funders have the whole child in mind here, or it’s maybe looterism. I’m thinking looterism.
I’ve already written about high frequency trading here, and I came out in favor of a transaction tax to slow that shit down a little bit. After all, the argument that liquidity is good so more liquidity is better only holds to a point – we don’t need infinite liquidity. It makes sense to actually have a small barrier to trade – you actually have to think it’s a good idea one way or another, otherwise you have no incentive not to do something dumb.
And as we’ve seen recently with Knight Capital, dumb things definitely are likely to happen.
It’s been interesting to see the media reaction. On the one hand, the Room for Debate over at the New York Times has a bunch of people discussing high frequency trading (HFT), and the most pro-HFT guy essentially says that the SEC should keep up technology-wise with these guys, and everything will be ok. That’s called living in a fantasy world.
More interesting to me was Felix Salmon’s post yesterday, where he rightly complained that, all too often, journalists dumb down and simplify reporting on these things, and then he proceeds to dumb down and simplify reporting on this thing.
Specifically, he complains that no “little guys” were hurt in Knight’s crash, even though the press is always looking for the little guy that gets hurt. [Side note: he also complains about the LIBOR manipulation not hurting municipalities, which is false, it did hurt them. He needs to understand that better before he dismisses it.]
But, if I’m not dreaming, Fidelity was one of the large customers of Knight that’s pulled out, and if I’m not unconscious, Fidelity manages quite a few of my many 401K accounts, as well as a huge proportion of the 401K accounts in this country. So it’s quite possible that my retirement money was part of that massive screw-up which is now owned by Goldman Sachs, not that I’ve been notified by Fidelity of any harm (but that’s another post).
As for small investors vs. little guys, there’s a difference. If you have enough money that you’re investing it through brokers, I personally don’t count you as small, even if you appear small to Goldman Sachs. So I’m not interested in whether the small investor was all that harmed by Knight’s meltdown, but I’m pretty sure the small investor was scared away by it.
But looking at the larger picture, I’d definitely say this is an indication of the outrageous complexity of the financial system, which most definitely is hurting the little guy, i.e. the taxpayer. This complexity is why we have the government guarantee in place, the Too-Big-and-Too-Complex-To-Fail banks and markets, and the little guy on the hook when things melt down. Moreover, there’s a direct line from that whole mess to the destruction of unions and pension programs, even if people don’t want to draw it.
So if you want to be myopic you can say that this was one firm, making one major blunder, and it’s self-contained and that firm is failing just like it should. But if you take a step back you see they were doing this as part of a larger culture of competition for speed and technology that they are so focused on, they threw risk to the wind in order to achieve a tiny edge over NYSE.
That laser focus on having a tiny edge really is the underlying story, and will continue to be, at the expense of risk, at the expense of our retirement funds trading for us, without regard to unnecessary complexity or, yes, the little guy, until our politicians and regulators grow some balls and put an end to it.
There’s something people don’t like about whistleblowers. I really don’t get it, but I know it’s true (I’m looking at you, Obama).
In particular, I hear all the time that you’re giving up on your career if you’re a whistleblower, that nobody would ever want to hire you again. But if I’m running a company, which I presumably want have run well, without corruption, and be successful, then I’m totally fine with whistleblowers! They will tell me truth and expose fraud. To say out loud that I don’t want to hire someone like that is basically admitting I’m okay with fraud, no?
I’m really missing something, and if you have an explanation I’d love to hear it.
In the meantime, though, I’ll say this: the web is great for anonymous whistleblowing (if anyone pays attention and follows up). Science Fraud is a great one that tells about scientific publishing fraud in the life sciences - see the “About” page of Science Fraud for more color. See also Retraction Watch for a broader look.
But then there’s another issue, which is that some people won’t seriously consider whistleblowers unless they identify themselves! What up? Facts are facts – if someone has given good evidence that can be checked independently, why should also submit themselves to being blacklisted for their efforts?
I recently described (here) a proof to be a convincing argument of why you think something is true. I’ll stick to that definition in spite of a few commenters who want there to be axioms or postulates, because I really don’t think that’s what happens in real life (which is a good thing! It would be an incredibly boring life!). Since I’m a utilitarian, I only care about and only want to discuss what actually happens.
The above definition immediately begs the question, convincing to whom? Can a proof to someone be a non-proof to someone else? Absolutely, proofs are entirely context-driven. If I’m trying to prove something to you and you remain unconvinced, then it is no proof, even if I’ve used the same argument before successfully.
This brings me to my first main point, which is that it the responsibility of the person proving something to convince his or her audience that it’s true. Likewise, it is the responsibility of the audience to remain skeptical (but attentive) and be open to being convinced or to finding a flaw in the argument.
Things get trickier when it’s not a live interaction, but when things are written down, like in published articles. On the one hand, written proofs give the audience more time to understand the reasoning and to come up with problems, but on the other hand there’s no opportunity to say “I just don’t get what you’re talking about,” which is the feeling one typically has at least 85% of the time.
In an ideal world, those who write proofs understand the goal to be that the reader should be able to understand the argument, and thus make the arguments coherent and understandable to their “typical reader.” Who is this typical reader? Someone who is probably relatively fluent in the basic objects of the field, say, but hasn’t recently thought about this problem.
Now that I’ve described the ideal situation, I’ll rant for a bit about how people game this system. There are two things that creep into the system that give rise to its gaming, and those two things are status and credit. People like to be high status (and like to signal high status even more), and of course people like to take credit.
First, status. It turns out that people often really want to explain their reasoning no to the typical audience, but to the expert audience. So they don’t give sufficient context, and they are lazy reasoners, because the experts can be expected to understand how to fill in the details.
It’s not only insecure young mathematicians that are guilty of this – there are plenty of experts who themselves fall prey to this habit (thus the signaling). I think it’s driven by a combination of feeling kind of smug and smart when people who are trying to follow your conversation leave because they’re exhausted and confused (and possibly ashamed), and the echo chamber that remains after people who don’t get it (or who admit to not getting it) leave. Whatever the reason, there are plenty of experts who get less and less understandable over time, in person and in print.
The other side of this status play is those experts get away with it. The papers written by these people are often accepted in spite of the fact that they are nearly unreadable to all but the 5 people in their field for whom they have been written, since after all, these guys are experts.
But does this approach constitute a proof? I claim it doesn’t, not if I have to be one of 5 people to read and understand it. The writer has choked, bigtime, on his or her responsibility to convince the reader.
Second, the credit thing. People want to get credit for proving things, because that’s how they get high status. But they don’t always want to prove everything they claim, because it’s hard work. So sometimes you see people proving something and then claiming an even more general thing is true, and giving a “sketch of a proof” for that more general thing (this is one example where “sketches” come up, but actually there are plenty of them).
Let’s examine that concept for a moment, the “sketch of a proof.” Usually this implies that the basic outline is there, but many details of how to rely on so-and-so’s theorem or what’s-his-name’s method are left out. It’s a proof lying in the shadows, and we’ve only seen it highlighted every few feet or so to wend our way through it.
Is a sketch a proof? No, it’s not. Best case scenario, it would take a typical reader a few minutes, maybe up to two hours, say, to turn that sketch into a proof.
But what if the typical reader can’t do it in two hours?
The problem with the concept of a sketch of a proof is that it’s too difficult to refute. If I am a reader and I say, “this is a false sketch” then I could just be opening myself up to people who tell me I didn’t spend my two hours wisely, or that I’m not good enough to complain about it. They may even expect me to prove that that method cannot be used to prove that result.
But that’s bullshit! As far as I’m concerned, if you claim to have sketched a proof, and if I’ve tried to prove it using your notes and I’ve failed, then that’s your fault, not mine. It’s your responsibility to prove it to me, and you haven’t.
Conclusion: let’s all remember when you claim a result, you are claiming credit, and it’s your responsibility to convince the audience it’s true – not just 5 experts. And second, if you aren’t willing to actually prove something, don’t claim it as a result. Instead, say something like, “this may generalize using so-and-so’s theorem or what’s-his-name’s method….”. Consider it a gift to the next person who reads your paper and wants to prove something new.