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The Addiction (#OWS)
This is the second part of a four-part essay that was proposed by Cathy O’Neil, a facilitator of the Occupy Wall Street Alternative Banking Working Group, and written by Morgan Sandquist, a participant in the Working Group. The first part is here. Crossposted from Naked Capitalism.
Is it fair to say that because the quality of the denial surrounding the banking industry’s problems is so similar to that of the denial surrounding addiction, that addiction is therefore the root of those problems and our ongoing failure to adequately address them? Perhaps not, but others have come to describe money, debt, and banking as something very much like addiction for entirely different, and far better argued, reasons.
In Debt: The First Five Thousand Years, David Graeber looks deeply into the anthropological record and finds that money and debt, and, by extension, banking, are all essentially the same thing, and they’re not what most of us understand them to be. Money is certainly not simply the objective store of value and medium of exchange that economists would have us believe it is. Because money is created as debt, its use to finance productive activity means that that activity, whatever it is, must then generate interest to be returned to money’s creators in addition to the money lent.
This has given rise to an industry, even a class of people, that derives its livelihood not from any productive activity of its own, but merely from having money. In Sacred Economics, Charles Eisenstein takes this a step further to show that this overhead cost inherent in all monetarily denominated activities means that the value represented by money must always grow. There is no logical end to what must be monetized–natural resources, ideas, time. Nothing can remain unowned and clear of liens, and that will eventually consume any finite realm:
The dynamics of usury-money are addiction dynamics, requiring an ever-greater dose (of the commons) to maintain normality, converting more and more of the basis of well-being into money for a fix. If you have an addict friend, it won’t do any good to give her “help” of the usual kind, such as money, a car to replace the one she crashed, or a job to replace the one she lost. All of those resources will just go down the black hole of addiction. So too it is with our politicians’ efforts to prolong the age of growth.
I don’t hope to make in a couple of paragraphs the full case that those two authors have made over hundreds of pages, so I’ll just assert it to have been compellingly made: namely, that money, debt, and banking have gone from being a tool that we might use to ease social activities to being the purpose of those activities. They have become an addiction, and because they’re an addiction, all of us who are touched by them have developed a rich and pervasive denial of this fact, its history, and its consequences.
In practical terms, what do we gain by perceiving money, debt, and banking as an addiction and the discourse around them as denial? Speaking for myself, it helps me understand the otherwise inexplicable irrationality behind our ongoing financial decline. I can imagine no other explanation for so much of what we’ve seen in the last few years: the failures to properly address the mortgage and subsequent foreclosure crises; the criminal activities of banks, hedge funds, and ratings agencies, and the spiral of consumer indebtedness; the deeply emotional and often militarized response to people sleeping in an otherwise unused square of concrete in a nocturnally unpopulated commercial district; and, most of all, the general populace’s willing acquiescence to all of this.
It appears only that banking must continue as it is, undisturbed, and nothing must disrupt the use and abuse of debt and money. Though an explanation for the full range of symptoms of the banking crisis, or for the full range of symptoms of any addiction, risks being reductive, without some causal dynamic behind these symptoms, there can be no effective response to them. To prevent something from happening, a cause must be identified and addressed.
Understanding money, debt, and banking as addiction also helps me trust myself and seek a constructive approach to the daunting task of resolving this crisis. As anyone who has ever had to face the full force of shared social and familial evasion can attest, the temptation to surrender to that alternate reality despite his or her better judgment, if only for the sake of civil relations, can be overwhelming.
In the case of the banking industry, that evasion often comes in the form of expert opinion that seeks to persuade not through the substance of the discussion, but through a dependence on credentials and ad hominem dismissal. It’s invaluable to be reminded that such a surrender, regardless of expert arguments, will at best only defer the consequences that we fear. Asking ourselves if, at the addict’s eventual funeral, we’ll be comfortable that we did everything we could is a remarkable inducement to focus. It can also be a powerful inducement to anger, so the understanding that it’s really addiction and denial, not friends and family, that we’re fighting can provide a basis for the compassion we would need to constructively approach such an emotionally volatile undertaking.
Finally, this understanding helps me focus on the ultimate goal of any such effort, rather than becoming sidetracked by pointless diversions.
As I mentioned above, one strategy of denial is to hide the connection between the symptoms of addiction and their real cause. It allows the alcoholic to believe that his or her diabetes and other health issues are the result of poor diet and that his or her depression is genetic or the result of poor parenting. It’s not that an alcoholic necessarily consumes a model diet or was well reared, but addressing just those symptoms allows the alcoholic to keep drinking, and other symptoms will follow from that drinking.
Similarly, it’s not that banks don’t need to be better capitalized, but providing them with capital and liquidity alone allows banks to continue pursuing courses of action that are neither financially nor economically viable.
To effectively address addiction is to prevent further addictive use of the substance. Any effort directed at symptoms will, to the extent they’re effective, simply enable continued substance abuse. It’s only by understanding the nature and extent of denial, navigating its maze, and intervening directly in the use of the substance that one can hope to effectively address addiction, and even then, the odds aren’t in the addict’s favor. And only with a thorough understanding of this dynamic and all of its implications can we hope to intervene effectively in the banking crisis that as of now continues unabated.
Tomorrow: An Intervention
In Denial (#OWS)
This is the first part of a four-part essay that was proposed by Cathy O’Neil, a facilitator of the Occupy Wall Street Alternative Banking Working Group, and written by Morgan Sandquist, a participant in the Working Group. Crossposted from Naked Capitalism.
The largest banks in America–Citibank, Bank of America, Wells Fargo, and others–are probably insolvent. I learned of this from my companions in Occupy Wall Street’s Alternative Banking Working Group. It seems that, based on a host of legal and accounting irregularities, the banks have been able to conceal real and potential losses far larger than their capital reserves. But this has been difficult to confirm.
Isn’t that strange? Wouldn’t the possible insolvency of the core of our banking industry be a matter of nearly universal importance? Shouldn’t we be trying to figure out if this is in fact so, how it came to be, what we’re going to do about it, and how we can prevent its happening again?
Anyone investigating the true health of the banking industry, apparently including regulators, is faced with opacity, complexity, and even outright hostility that stymies all but the most savvy and persistent. Fortunately, people within OWS, including the Occupy the SEC Working Group, are that savvy and persistent. But the reaction of the industry and its partisans to such efforts has included the not-so-subtle suggestion that inquiring into the well-being of the banking industry will somehow cause problems to arise that wouldn’t otherwise exist if we would all just mind our own business.
This seems odd in an ostensibly objective and quantitative context like banking. Shouldn’t the truth be clearly visible in the accounting? Shouldn’t we all–borrowers, investors, depositors, and regulators–want to know exactly what’s going on?
As unexpected as such a visceral and irrational reaction to genuine, well-founded concern is from the supposedly rational realm of finance, that telltale blend of evasion, grandiosity, and superstition will be familiar to anyone who has ever confronted an addict about his or her addiction.
Denial is far more than an addict’s dismissal of the truth of his or her addiction; it’s collectively developed by the addict’s entire social sphere, and it takes many forms.
It might be helpful to imagine addiction and denial as intangible agents acting in a social context. Addiction’s agency is directed solely toward uninterrupted use of the addictive substance, and denial’s agency is directed solely toward ensuring that no one sees, understands, or limits addiction’s agency. Denial denies not just claims and assertions, it also denies access and insight into the reality of addiction. It denies that behavior is driven by addiction and that behavior’s consequences are the results of addiction. It denies the story of addiction and proposes an endless collection of counter-conspiracies.
It appears as those around the addict ignoring the addict’s use and the consequences of that use; as the narratives, tics, and habits through which the addict understands and acts out his or her use; and as the alternate version of reality that the addict and everyone around him or her shares in lieu of the reality of addiction. To paraphrase Baudelaire on the devil, denial’s best trick is to persuade us that addiction doesn’t exist.
No addiction could develop a more effective narrative of denial than the trade in exotic financial instruments that’s evolved over the last decade or so; no addiction could hope for more willing abettors than the financial press, regulators, and ratings agencies; and no addiction could depend on a more permissive enabler than the Federal Reserve Bank.
It’s difficult not to imagine the banking industry as jittery and unshaven, embarking on yet another unregulated derivative binge, telling us, its concerned partner, that we just wouldn’t understand what it’s like, how high the return can get, while its friends in the financial press and ratings agencies encourage it, scoffing at the very idea of risk.
And later that night, as it’s coming down, it’ll shout something at us about not really needing the $1.2 trillion in liquidity, but if the Fed’s offering, why not?, it’ll make the night that much better, only to face us the next morning, hungover and distractedly claiming none of it ever happened.
We’ll confront it with seemingly undeniable evidence of MERS, TARP, executive bonuses, and a ruined housing sector, and it’ll look betrayed, ask us how we could even say such a thing, and tell us that it’s none of our concern and that we just have to trust it, because the bills are paid, right? It’s not like it’s as bad as AIG or MF Global, it’ll say, which will lead to an impossible-to-follow tale of the prank it played on MF Global last night, and how that was like something that happened to Bear Stearns and Lehman Brothers once, and ending with the declaration that the Fed and the SEC would never let anything bad happen to the Banking Industry.
And what choice do we have? Maybe it’s not that bad. After all, if the banks really were insolvent, there would’ve been something on the evening news.
Tomorrow: The Addiction
Innovation, elevation, and space travel
Science Fiction writer Neal Stephenson recently wrote this essay entitled “Innovation Starvation” on how it’s too bad we don’t have an innovative culture any more. I kind of like and agree with some parts his essay, especially this:
Most people who work in corporations or academia have witnessed something like the following: A number of engineers are sitting together in a room, bouncing ideas off each other. Out of the discussion emerges a new concept that seems promising. Then some laptop-wielding person in the corner, having performed a quick Google search, announces that this “new” idea is, in fact, an old one—or at least vaguely similar—and has already been tried. Either it failed, or it succeeded. If it failed, then no manager who wants to keep his or her job will approve spending money trying to revive it. If it succeeded, then it’s patented and entry to the market is presumed to be unattainable, since the first people who thought of it will have “first-mover advantage” and will have created “barriers to entry.” The number of seemingly promising ideas that have been crushed in this way must number in the millions.
It’s similar to my reasoning for not googling something under discussion for at least 30 minutes, especially when it seems possible to reckon whether it’s true or not.
I would add this: it’s tempting to immediately gauge the competition when you have a new idea, especially a business idea. But if you develop it within yourself or a small group of people it will inevitably morph into something that is probably unrecognizable from the original idea, so with that in mind, googling the original idea is actually irrelevant anyway. Stephenson makes a point similar to this in his essay.
Stephenson goes on:
The illusion of eliminating uncertainty from corporate decision-making is not merely a question of management style or personal preference. In the legal environment that has developed around publicly traded corporations, managers are strongly discouraged from shouldering any risks that they know about—or, in the opinion of some future jury, should have known about—even if they have a hunch that the gamble might pay off in the long run. There is no such thing as “long run” in industries driven by the next quarterly report. The possibility of some innovation making money is just that—a mere possibility that will not have time to materialize before the subpoenas from minority shareholder lawsuits begin to roll in.
Today’s belief in ineluctable certainty is the true innovation-killer of our age. In this environment, the best an audacious manager can do is to develop small improvements to existing systems—climbing the hill, as it were, toward a local maximum, trimming fat, eking out the occasional tiny innovation—like city planners painting bicycle lanes on the streets as a gesture toward solving our energy problems. Any strategy that involves crossing a valley—accepting short-term losses to reach a higher hill in the distance—will soon be brought to a halt by the demands of a system that celebrates short-term gains and tolerates stagnation, but condemns anything else as failure. In short, a world where big stuff can never get done.
While I agree that people, especially within the context of large companies or government, are too short-sighted, I think this view is overly negative. On smaller scale, and in smaller companies, people do definitely take real risks (and pay for them sometimes).
But this essay is really about “doing the big stuff” and that’s where I’ll just have to argue against it altogether. Stephenson, like many sci-fi writers, is totally into the idea of space travel and is deploring the fact that we as a nation have turned away from it because of its expense and because we don’t want to take huge risks with money and people. Unlike in the good-old days of the Sputnik Era.
But I’d argue that the Sputnik Era was really about the Cold War and competition with the Russians, not space travel. This nostalgia is misplaced, similar to how people talk about family values and how great it was in the 1950’s, while ignoring the outrageous racism, sexism, and homophobia that existed then. It’s a revisionist view.
I’m not saying nothing cool happened in order to get a man on the moon, because clearly lots of cool stuff did happen. I’m just saying it happened in the context of a very serious us-versus-them mentality, where we were actively afraid of being blown up in a nuclear war, and I for one am not signing up for that again just so we can work together better.
More generally, Doing Something Big almost by definition means making sacrifices on other projects, so it makes sense that people who benefit from the chosen project think it’s awesome but other people not so much.
Going back to space travel: it’s a funny subject for conversation. When people talk about it they often experience elevation, which is my favorite recently understood emotion, and it means they transcend their normal existence. This seems to happen to young people and science fiction fans especially when talking about space travel, can happen to people listening to music, and used to happen to a lot of people when listening to Obama’s speeches.
Having been born and raised around science fiction and space lovers, I get this, and I can even summon up the accompanying elevated trance at will. But I also get that the idea of putting a huge amount of our resources into space travel, when we still haven’t figured out how to consistently feed people here on earth, is not completely reasonable.
I’m not arguing for no space travel, because there’s definitely a place for the basic scientific research that gets accomplished in the wake of cool, ambitious plans. But to Neil Stephenson I’d say, buddy there’s a pretty good reason this isn’t happening, and it’s not just because people aren’t innovative.
Hey, Doocy apologized for fabricating part of Obama’s speech!
A few days ago my friend Michael Thaddeus wrote a guest post after noticing that Fox News reporter Steve Doocy had added three words, “Unlike some people,” to Obama’s line “I wasn’t born with a silver spoon in my mouth.”
This fabrication had the effect of making Obama appear to be making a snide reference to Romney. Indeed Doocy was talking to Romney on Fox News when he added the words. But the truth was that Obama had been saying the silver spoon line since 2009, as Thaddeus pointed out.
Moreover, the Washington Post and New York Post had picked up the line verbatim from Doocy, rather than checking the original source, and when Thaddeus had contacted them they had ignored his complaints. So that’s when he asked me to put up his guest post, which I did.
And what’s super cool is that it was picked up by a bunch of people who linked to my blog (ISPN Media, Deep Brain Media, Brobrubel’s blog, The Fifth Column, and FAIR), and quite a bit of twitter buzz for what I’m used to.
A bunch of other media outlets also picked this up who didn’t link to my blog (which is kind of ironic considering the post is about doing your job as a journalist) including USA Today, Media Matters, and the Daily Kos, after which the Washington Post corrected its Obama quote.
After that, the story got onto Talking Points Memo, and didn’t link to my blog but was attributed to Michael Thaddeus which later got shortened to MT for some reason. It was even the top story on Talking Points Memo for some time Sunday afternoon.
The ultimate (in terms of my kids thinking I’m cool) happened Monday evening though when the story was featured on the Colbert Report. Cool!
Oh yeah, and Doocy finally apologized on Fox News.
Blogging isn’t dead, people!!
Declaration of Linear Independence: the nerdiest thing you’ve ever seen
My friend Michael Thaddeus recently informed me of the existence of the Declaration of Linear Independence, written by mathematician David Grabiner. I will describe the document as a “re-imagining” of the original Declaration of Independence from the point of view of a set of vectors in some vector space which feel, for whatever reason, that their independence has been under attack (I’m considering inviting them to join Occupy).
I’m not really sure I can ethically ask you to read the entire document, due to the intense nerdiness of it which may cause the weaker among you to lose consciousness, but let me give you the flavor. Here’s the most famous sentence translated into vector-angst:
We hold these truths to be self-evident: that all nonzero vectors are created equal; that they are endowed by their definer with certain unalienable rights; that among these are the laws of logic and the pursuit of valid proofs; that to secure these rights, logical arguments are created, deriving their just powers from axioms; that whenever any argument becomes destructive of these ends, it is the right of the vectors to alter or to abolish it, and to institute a new argument, laying its foundation on such principles, and organizing its powers in such form, as to them shall seem most likely to reach the correct conclusion.
Whereas the original document listed grievances against King George III, this new one complains about Professor Eigen, who is a made-up guy personifying everything which is overbearing and repressive about eigenvectors, eigenspaces and eigenvalues. Here’s my favorite complaint:
He has restricted our freedom of movement by requiring us all to live in the same hyperplane, even though we cannot all fit in one.
Finally, the ending is really quite good for those of us who on the one hand remember our linear algebra and on the other hand sympathize with these vectors being denied their (linear) independence rights:
Online learning promotes passivity
Up til I took Andrew Ng’s online machine learning class last semester, I had two worries about the concept of online learning. First, I worried that the inability to ask questions would be a major problem. Second, I worried about the possibility of building up material. I could imagine learning a given thing online but the ability to sustain and build material over an entire semester seemed kind of unrealistic.
On the second point, I think I’m convinced. Andrew definitely taught us a real semester’s worth of stuff, and he built up a body of knowledge very well. I now communicate with my colleagues at work using the language he taught us, which is very cool.
On the first point about asking questions, however, I am even more convinced there’s a crucial problem.
I want to differentiate between two different kinds of questions to make my point. First, there’s the “I’m confused” type of question, where someone literally doesn’t get the point of something or doesn’t understand the notation or a step in an explanation.
One can imagine tackling this kind of question in various ways. For example, one can strive to be a really good teacher, which Andrew certainly is, or to explain things at a high level but shove the details into black boxes, which Andrew did quite a bit (somewhat to my disappointment, especially when linear algebra was involved). If neither of those two things is sufficient, and the class is really important and/or really common, one can imagine teaching a computer to anticipate confusion and to ask questions along the way to make sure the students are following, and to go back and explain things in a different way if not.
In other words, the first kind of “clarifying questions” can probably be dealt with by the online learning community over time.
But there’s a second kind, namely the kind of question where someone is not confused but rather asks a question for one of the following reasons:
- they want to know how a certain idea relates to something else they know about,
- they want to generalize something the teacher said,
- they want to argue against an approach or for another approach,
- they see a mistake, or
- they see an easier way to do something.
Almost by definition, the above kinds of questions aren’t anticipated by the teacher, but the fact that they are asked almost always improves the class, certainly for the student in question but also for the other students and the teacher.
For example, one semester I taught three sections of 18.03 (exhausting! and I was pregnant!), which is a calculus class at M.I.T., and I remember thinking that in every single class one of the students made a remark or asked a question that I learned something from. It got to the point that, the third time through the same material, I’d be waiting for someone to explain how I should be teaching it. I loved that the students there are so smart but also so engaged in learning.
And that’s what I’m worried about- the engagement. When you embark on an online class, the best you can hope for is that you learn something and that you don’t get hopelessly confused. And that’s cool, that you can learn something, for free, online. But what you can’t do is what I’m worried about, and that’s to get instant feedback and discussion about some idea you had in the categories above.
I’m definitely one of those people who asks questions of the second type, and although I may sometimes annoy my fellow students, I really feel like the active engagement I pursue by coming up with all sorts of crazy comments and ideas and questions is what made me capable of doing original and creative things. For me, the most important part of my education was that training whereby I got to ask questions in class and got smart teachers who liked me to do so and would talk to me about my ideas.
How can that possibly happen with online learning? I’m afraid it can’t, and I’m afraid we will be training people to receive information rather than to engage in creation.
I imagine that in 200 years, almost everyone will be taught online, hooked into the machine and pumped up with knowledge. It will be only the elites who will have access to real live people to teach them in person, where they will be taught not only the material but also how to argue against a point of view and to propose an alternate approach.
Fox News fabricates a part of Obama’s speech
This is a guest post by Michael Thaddeus.
When President Obama spoke at Lorain County Community College in Elyria, Ohio, on Wednesday, he said, “Somebody gave me an education. I wasn’t born with a silver spoon in my mouth. Michelle wasn’t. But somebody gave us a chance.” [Minute 9:24 on video.] He has made similar remarks numerous times, including as early as 2009.
But when smirking reporter Steve Doocy quoted the President to Mitt Romney on Fox News, he added three words: “Unlike some people, I wasn’t born with a silver spoon in my mouth.” [Minute 3:39 on video.]
Those three words, “unlike some people,” were a complete fabrication. President Obama never said them or anything like them. The extra words make the President sound snide, as if he were mocking Romney.
Where did these extra words come from? Steve Doocy seemingly made them up out of whole cloth. Are reporters really supposed to do that?
What happened next? Philip Rucker at the Washington Post “reported” the story on Thursday, but he made no effort to check the fabricated quote against the primary sources, easily available online. Instead, he put Fox’s words directly into the mouth of President Obama. Are reporters really supposed to do that? I e-mailed him and the Post editors to request a correction, but he hasn’t answered, and guess what, the false quote is still there.
Update: the Washington Post has made a correction.
Then what happened? The New York Post devoted one of its two Friday editorials to slamming Obama for taunting Romney. They called him “cynical,” “misguided,” and “snotty.” Well, of course he sounded snotty! That’s because the Post used the snotty quote concocted by their colleagues at Fox News! Are newspapers really supposed to do that?
When I pointed this out to the editorial staff at the Post on Friday, they replied, “we’d be happy to consider running a letter to the editor on this subject, if you’d care to write one.” Great! But what’s the catch? “I couldn’t guarantee that we could run it.” What odds do you give me? Meanwhile, even though a prominent editorial in the Post is devoted to denouncing the President for saying something that he didn’t really say, there seem to be no plans for a correction or retraction.
So there you have it. One branch of the Murdoch empire concocts a snotty quote, supposedly from Barack Hussein Obama. Another branch vilifies him for supposedly saying the snotty thing that they themselves concocted. Meanwhile, the fabricated quote continues to reverberate in the echo chamber of the right-wing blogosphere. And thanks to the Washington Post, it will soon be as good as true.
Let’s grant that these three little words are a petty mendacity by the Iraq War standards to which we’ve become accustomed. And let’s grant that Obama’s speechwriters are shrewd and were hardly unaware of the contrast with Romney when they wrote the “silver spoon” line. Still, what makes Murdoch newspapers and TV stations think they can fabricate quotes, enclose them in quotation marks, attribute them to the President of the United States, and get away with it? It’s pretty shocking when you think about it.
Occupy Wall Street isn’t dead
I went to New Jersey a couple of nights ago to talk about Occupy Wall Street and the Alternative Banking group to NJPPN, a network of politically aware and active citizens. They self-describe as non-partisan but there were quite a few NPR listeners in the audience, and in general they came across to me as very skeptical of the financial system. Or possibly they were just being polite.
One of the audience members expressed frustration that the Occupy movement has fizzled out. I guess I can understand why he may think so, because after Bloomberg cleared the Occupiers from Zuccotti Park it was obviously more difficult for people to know what the movement is up to. And what with the cold weather, many of the working groups, like Alternative Banking, were incubating ideas rather than staging street protests. Plus the movement is still less than a year old, and these things take some time to set up.
For him and for others like him, I’d like to point you to a few resources to which explain what Occupy has been up to and what it has in store:
- occupydidwhat.tumblr.com – a recently begun list of stuff that Occupy has accomplished. Cool idea.
- Occupy.com – a gorgeous new website of news for Occupy.
- The Center for Popular Economics is having a Summer Institute here at Columbia called Economics for the 99%.
- Lots of plans for May Day described here. See you there.
- As I’m sure you know, people are sleeping on Wall Street.
- Alt Banking’s blog is fairly regularly updated as well.
More to come. The hoodies are being shipped as I type.
What’s fair?
Lately I’ve been thinking about the concept of fairness and how our culture decides on what’s fair. I think lots of arguments I have with other people come down to the fact that we have fundamentally different opinions on what’s fair, so I think it’s useful to consider having that argument instead of whatever argument we were engaged in. By the way, this actually makes me like people more- it’s not that they are mean, selfish people, but that they have a different underlying theory of fairness that they are loyal to.
For example, I have met people who claim that the government should only be in charge of protecting ownership rights and prosecuting criminals and that it should stay out of every other realm. The question of how to help people out with student debt loans then is certainly moot until we first talk about whether government should “care” about helping people at all for any reason.
The question, stop, and frisk policy is an example of a policy that our local government has taken on that reflects our shared understanding of fairness; in this case, we care more about preventing crimes, so being fair to victims, then we do about the suspects of crimes.
Tax law is another issue where we, as a society, have decided what’s fair and made it into policy. The fact that these laws change drastically over time – the top tax rate of 70% just a few decades ago is a far cry from what we’ve been seeing recently – indicates that we also change our mind about what is fair depending on conditions.
I’m not saying anything deep here- we all know that things change, and we no longer spend time watching slaves get killed in an arena, because it no longer jives with our concept of justice (although the NFL can sometimes seem a bit like that). I’m just trying to differentiate, and have other people agree to differentiate, between the rules we’ve constructed, in the form of policies and laws of the land, and the underlying and evolving moral decisions that we make as a community.
One more example, because I think it’s a good one for thinking about fairness and systems of rules (again not new). Imagine we have 100 people working on a farm, making their living, and we introduce a technology that allows 1 person to now do the work that 100 people did previously.
On the one hand it’s in some sense fair to keep one person on the farm, someone who is skilled enough to use this new tractor or whatever it is, and lay off the other 99 people.
But in a larger sense we still have the same output, so the same number of resources, and 99 people out of work means 99 people don’t have access to those resources, which doesn’t actually seem so fair. In the best of worlds (a world of textbook economic growth) those 99 people would go find new jobs in new fields and we wouldn’t have to worry about them. But what if those new jobs don’t exist, or exist only for the 23 people who have some other technical skills? This is when the rules we have created really matter, and our reasons for them need to be weighed and discussed.
Powerpoint kills me from within my soul
If you are anything like me, the beginning of a meeting where there are powerpoint slides is physically painful. I’m a napper, too, so especially after lunch, the urge to put my head on a conference table and start snoring is overwhelming.
Because I know what’s going to happen.
Namely, there’s gonna be waaaay too much stuff on each slide and there’s going to be a speaker who is really proud of their soul-wizening presentation.
My eyes glaze over when there are sub-bullets and small fonts, and especially when the slide is sectioned off into subslides.
Why is this allowed to happen?!
People. If there are more than three ideas in your slide, that’s too much. If there’s more than a title and three phrases, that’s too much. If any of your phrases is longer than the line and wraps around, that’s too long, and your font should be really big so everyone can read it.
My preference is to have exactly one phrase on each slide. Otherwise everyone in the room is reading shit the speaker hasn’t gotten to. Except for the people pretending not to be asleep, who are totally disengaged and/or praying to die.
Reputational risk is insufficient for ratings agencies
I’ve had a few conversations recently with intelligent, informed people about the failure of the ratings agencies during the housing bubble to keep up standards on their ratings of CDO‘s. You can discuss all day whether it was individual ratings they got wrong (at the level of the MBS‘s) or whether it was the correlation of defaults they were underestimating. It was both. But in the end the fact is they sold AAA ratings.
Nobody really argues against that. What fascinates me, though, is that people sometimes still argue against the idea that the revenue model of ratings agencies, whereby the issuers of debt pay the ratings agencies for ratings, is fundamentally flawed.
Their explanation is something like this.
That system worked fine for a long time, because for a given rating they wouldn’t sacrifice their reputation on a ridiculous rating for some small-fry issuer. And the system would have continued to work fine except that the issuers became huge and the amount of money involved became too tempting and so they ended up whoring themselves. But there’s nothing fundamentally wrong with the incentive system, we just need to keep reputational risk the driving force.
What?? That’s argument kind of reminds me of the so-called dental insurance which pays for cleanings but when it comes to dental emergencies with root canals and surgeries you’re shit out of luck. That’s not insurance at all, in other words.
I see the need for ratings agencies – it’s a way of crowd sourcing due diligence, which makes sense, but only if we can trust the ratings agencies as an impartial third party. And I don’t want to seem like someone who doesn’t have faith in humanity, but my trust isn’t won by a system of perverse incentives that has already failed. Let’s just say I have hope for humanity but I also acknowledge our weaknesses.
And just to be clear, the new bond rating agency Kroll, which has been getting a lot of attention, also uses an issuer-pays revenue model. But I guess Egan-Jones doesn’t, it uses a subscription-based revenue model. I still prefer the concept of an open source ratings agency – I’ve been in touch with Marc Joffe, who is doing just that for sovereign debt, which I will talk more about in a separate post.
Can clouds think?
Sometimes I have trouble falling asleep. Especially if I’m riled up thinking about the newest stealth bank bailout, or wondering how to model rare, fat-tailed events, I’ll toss and turn, unable to get these problems out of my head.
Luckily I have a husband who is kind enough to tell me his stories at moments like these. I really appreciate his ability to draw out a story. He starts out slowly, and gets slower. He ends up at such a leisurely pace that I get completely distracted from my work-a-day concerns simply wondering what he’ll say next, when he’ll say it, or if he’s just fallen asleep.
It’s not just the slowness of the stories that do the trick, either, it’s also the content. He’s the master of the boring relaxing, abstract, science-fictiony story with exactly one idea. He’s seriously considering starting a blog for his stories which he’d call `Stories that put my wife to sleep’. I honestly think it would work great for lots of people- a public service, really, especially if he made very very very boring podcasts.
It’s efficient too, he’s mentioned to me that he’s told me the same story sometimes 5 or more times but I can never last through to the point of understanding the plot, and it always seems new. I never know what’s going to happen next, if anything.
My favorite story, which I have probably heard 17 times, is the story of whether clouds can think. It’s unresolved, the answer, but it’s wonderful to imagine, very slowly, the decisions a cloud could make, things like very slight changes in its luminosity or which winds to take rides on or how high to fly.
The Great Wealth Transfer, late 1900’s to early 2000’s (part 1)
When historians write about this era of U.S. history, how will it be described? I have a guess: “the Great Wealth Transfer” from the middle class to the wealthy. Let me explain why I say this.
There are lots of different parts to this story, but today I’ll concentrate on the housing wealth transfer.
We all know there was a housing bubble, that millions of people took out mortgages on dubious terms for houses that were already overpriced but that they were each counting on to go even higher. The way this was sold at the time, and even today is described, was as “home ownership for an expanded middle class.” But as Sue Waters from the Alt Banking group pointed out to me, these people didn’t get home ownership, they got debt ownership.
I know, it sounds a bit strange, but that’s just it, the language is important.
When people say they own their home, do they mean they don’t have a mortgage? Probably not. They probably mean they’re in the process of paying a mortgage, but they conflate the two concepts because they assume they will pay off the mortgage eventually. But in the meantime they don’t actually own their home, the bank does. The extent to which this is an important distinction is the extent to which it is likely that they will be able to pay off that mortgage some day in the future.
When you’ve stopped conflating home ownership with debt ownership, and you look back at the housing bubble, it’s a different picture. How many new home owners were there really? It’s not an easy question to answer, but it’s clear that there were way fewer than we thought- many of the mortgages had terms that were clearly very optimistically written. Nobody really thought it would work out well, but the system just kept growing and the optimism kept getting less reasonable. Meanwhile, bankers got extremely rich.
How did this all happen?
This is answered by asking an even larger question: how does the financial system make money? I claim a large part of it is by finding a group of people that are relatively naive and pushing risk to them. For example, the dot com bubble was created by getting normal people to invest in dumb new-fangled things – they were the pawns.
For the housing bubble, it was a bit more devious. One one end, systemic risk was pushed (into the future) to the taxpayers themselves through bailouts of the banks, AIG, Fannie, and Freddie. In other words, taxpayers didn’t know it at the time but they were getting more and more on the hook for losses as the banks and financial system took larger and larger bets on the direction of the housing market.
At the same time and at the other end of the mortgage contracts, the so-called “homeowners” who took on mortgages were the fall guys. As a whole, they signed up for debt (and the right to claim themselves as homeowners) and in return are now hopelessly underwater. The Obama administration, just like the Bush administration before it, is urging these people to do what they are morally compelled to do, namely pay off their unmanageable debts, while changing the laws for the big banks so they can get away with whatever they need to in order to ignore their outrageous undercapitalization.
To sum it up: we found a very large pool of people too naive to understand the risk they were taking on, we signed them up for that risk while painting them a beautiful picture of the American dream, and now we get to accuse them of being immoral for not being able to hold up their end of the contract. It was an amazing swindle.
To be continued in part 2, in which many of the same players who brokered the mortgages to the “new homeowners” are now buying up their foreclosed homes and renting them back.
Get overpaid so people will listen to you
Have you read the recent article in the New York Times about how lower-status monkeys are less healthy and more stressed out than higher-status monkeys? Their gene expression actually responds to changes in social status. Does this resonate with your experiences with humans?
It does with me, and for us people I’d rephrase it this way: your concerns and ideas are given attention in direct relation to your status. Your stress levels rise as you realize your status is lower and your risks have grown.
Here are some examples from work. I’ve been disappointed to notice, time after time, that my ideas are considered important and innovative in direct proportion to how much they are paying me to have them. If I’m underpaid then nobody thinks I am all that smart; nevermind being a friggin’ volunteer (with some exceptions, but don’t stop me, I’m on a roll). This perversely makes me want to get overpaid just so I’ll get listened to.
Cuz why? Didn’t you ever notice that overpaid people’s ideas are about as good as anyone else’s but they are framed as pure brilliance? I have. It even works head-to-head: two people of different status come up with the same exact idea but the one who is more important was listened to and their idea championed. Oh yeah, I’ve seen it, and so have you (example: when I was at D.E. Shaw, we rated other people’s ideas with a “probability of success” in an effort to estimate their expected payouts; someone once showed me their idea, which was identical to one of Larry Summer’s ideas, but had come 2 years before and had scored about half as well. But my fried wasn’t an MD making $5 million per year so clearly his ideas weren’t as good!).
A similar thing happens with problems rather than ideas in a workplace. The worst examples of over-worked and under-appreciated situations clearly don’t happen at the top. For example, when I worked at MSCI, it seemed like the sales guys, who defined the top there, spent more time strutting around making sure each and every one of their efforts went appreciated than doing the actual efforts, whereas the lowly dev-ops guys, and the guys setting up the initial portfolios for the new clients, were treated as an afterthought, only noticed if something went wrong. They’d stay up all night fixing something, probably someone else’s mistake, and nobody would even thank them.
[It still seems so ironic that the most technical people there are also the least appreciated, since the product is essentially technical expertise. Or is it? Maybe I’ve got it wrong, and it’s really about selling technical expertise in a package that makes people feel safe and pious. Maybe the black box we’re selling doesn’t even have to work.]
If you are thinking that everyone at MSCI is in finance and is thus overpaid and pampered, then you’ve got it wrong, it’s a brutal atmosphere, like much of finance. If you don’t believe me, read my friend Katya’s blog, Left with Balls, where she talks about the spell of Wall Street.
Taking one step back, this kind of thing strikes me as unfair and frustrating. The idea that the lowest-ranked also has to deal with ridiculous stress and chronic health problems does not jive with my inherent concept of justice. Although it does seem like a natural response to a system that’s already been created (as in, as a consequence of being frustrated because my ideas are ignored, I want to get overpaid to get listened to, so I’m joining in on the perverted game and furthering the system), it doesn’t seem like we’ve done a particularly good job setting up these systems.
For a country that putatively considers itself a democracy, we seem to have a tremendous amount of respect for a rat-race corporate hierarchy. Is that a contradiction? Or is the American dream actually to start a hierarchy and to sit at the top? Do other people identify with the guys on the bottom or the guy at the top? Or the guys in the middle clawing upwards?
Question: is it really impossible to listen to and evaluate ideas based on their merit? How about anonymous polling of problems? It’s certainly technologically feasible, but we don’t do it.
Question: Is it really impossible to appreciate people who make things work behind the scenes? How about we ask people to sit with other people in entirely different departments in a rotation to witness what other people actually do? I really think that would help with the appreciation problem (but not if the technical people in your company are in India and the salesguys are in New York).
For the record, when I start a company I’ll do these things. Of course, I’ll be sitting up there at the top thinking what a great idea I had to do them.
#OWS update: looking for UX help
I’ve got three updates on Occupy, besides reminding people that the Alternative Banking Working Group meets every Sunday from 3-5pm at Columbia (room 1401 in the International Affairs Building at 118th and Amsterdam).
- Occupy.com has launched! This is a website set up by my friend David Sauvage, and it’s looking awesome and informative.
- The “find a Credit Union webapp” is looking for UX Designer help. I’ve written about this project before, but in a word we’re helping people figure out which credit unions they are eligible for, if any; the rules can get kind of tricky. We’ve got the basic ideas down but we’d love a thoughtful designer to come in, improve the user experience, and help create a appropriate Occupy look which also doesn’t scare away non-Occupy people. We also have a development team from ThoughtWorks helping us out, but it would be very helpful to have a New York- based developer to maintain the knowledge. The eligibility rules based on address (but not necessarily on zipcode or borough) are particularly hard (or interesting, depending on how nerdy you are).
- Not a strictly Occupy issue but did you hear the Vermont Senate has voted to end Corporate Personhood (hat tip reader G. Jones)? Move to Amend has spearheaded this effort. I love their motto: End Corporate Rule, Legalize Democracy. Read about the Vermont vote here.
Should we have a ratings agency for scientific theories?
Recently in my friend Peter Woit’s blog, he discussed the idea of establishing a ratings agency for physics. From his blog:
In this week’s Nature, Abraham Loeb, the chair of the Harvard astronomy department, has a column proposing the creation of a web-site that would act as a sort of “ratings agency”, implementing some mathematical model that would measure the health of various subfields of physics. This would provide young scientists with more objective information about what subfields are doing well and worth getting involved with, as opposed to those which are lingering on despite a lack of progress.
Abraham Loeb was proposing to describe the field of String Theory as a perfect example of a bubble. And it’s absolutely true that String Theory has provided finance with tons of brilliant young orphans who either got disillusioned with the field or simply couldn’t get a job after writing a Ph.D. or after a post-doc. It provides an extreme example of a mismatch between supply and demand.
Would a ratings agency for scientific theories help? I don’t think so.
The very basic reason, as Peter points out, is that it’s hard to evaluate scientific theories while they are unfolding. There are two underlying causes: first, people in a field are too invested to admit things aren’t working out, and second, by the nature of scientific research, things could not work out for some time but then eventually still work out. It’s not clear when to give up on a theory!
Ignoring those problems, imagine a “mathematical model” which tries to gauge the success of a field. What would the elemental quantities be that would signify success? Would it count the number of proven theorems? Crappy theorems are easy to prove. Would it count the the number of successful experiments? We could always take a successful experiment and change it ever so slightly to get another success. I can’t think of a quantitative way to measure a field that isn’t open for enormous manipulation (which would only happen if people actually cared about the ratings agency’s rating).
Of course the same might be said about financial ratings. It begs the question, why are ratings agencies useful at all?
In finance we have lots of people buying very similar products with very similar contracts. Sometimes these are even sold on exchanges and carry with them the exact same risk profiles. In such a situation it makes sense to assign someone to look into the underlying risks and report back to the community on how risky a product is.
I would claim that the situation is very different in science or math. People enter a field for all sorts of reasons, with all sorts of goals and situations. String Theory is an extreme case where it could be argued that it got such spin that a whole generation of physics students got sucked into the field by sheer momentum. Perhaps it would have been nice to have a trusted institution whose job it was to calm people down and point out the reality, but I’m not sure it would have helped that much with all the excitement, especially if there had been a model which counted theorems and such. People would just have said the model had never seen something this exciting.
Then there’s the issue of trusting the modeler. Right now ratings agencies have a terrible reputation because they are paid by the people they rate products for, and have been known to sell good ratings. I’m hoping we can do better in the future, but it’s hard (but not impossible!) to imagine gathering enough experts in finance to do it well and to have the product be trusted by the community.
What is the analogy for scientific theories? The problem with rating science is that, because of the depth of most fields, only the experts in the field themselves understand it well enough to even talk about it. So that problem of getting an informed and impartial view on the worthiness of a theory is super super hard, assuming it’s possible.
Finally, I’m not sure what the ratings agency would be in charge of warning people about. Even the financial ratings agencies don’t agree- some of them measure default risk and others measure expected loss through default, which can be two really different things (for example if you think the U.S. will technically default but will end up paying their debts).
In science, I guess you could try to measure the risk that “the theory won’t end up being useful” but it’s not even clear how you’d decide that even after the fact. Maybe you could forecast the number of jobs in the field for graduating Ph.D. students, and that would be helpful to grad students but would also not be the best metric of success for the field.
I’m not saying we shouldn’t have people talk about fields and whether fields are failing, because that’s hugely important. But I don’t think there’s a quantitative model there to be created that would help the conversation. Let’s start an open forum, or a wiki, with the goal of talking about the health of various fields of scientific endeavor and have a bunch of good questions about the field and people can each add their two cents.
How to teach someone how to prove something
In a couple of my posts (most recently here), I’ve talked about the need for a course early on in undergraduate math classes on proof techniques.
The goals of the class are two-fold: first, teach the students basic skills, and second demystify the concept of proof. The students should come away from the class thinking, no it’s not magic, and I’ve learned how to do this stuff, and there are a few basic techniques which seem to come in handy.
Today I want to go further into what a curriculum for such a course might look like.
And I will, in a moment, but first I want to explain something. It’s actually a really important and dangerous question, how to teach such a course, because it could go wildly wrong, and sometimes does. From my commenter Jordan:
… “Numbers, Equations, and Proofs,” which I started at Princeton in 2002 and which is still going as well. Though here’s an interview with a dude who was an ace math competition dude and found the course so hard as to drive him out of the math major! So maybe it’s no longer as “for everyone” as I designed it to be….
This struck me, how perverted Jordan’s class became. For that matter, Math 55 at Harvard could have started out as a good idea as well, but by the time I got to Harvard as a grad student it was the reason so few math majors ever stuck at Harvard and why there were especially few women.
I remember Noam Elkies taught it while I was there and was famous for asking questions in class and getting students to compete to answer them quickly. It makes sense that he’d run a class like this, because he’s so fast and clever, and he’s naturally wondering, am I the fastest and clevererest of them all? But rather than a place where proof is demystified and people feel safe asking dumb questions, he’d created the polar opposite, a live quiz show of clever competition. Ew!
In order to combat this downfall and decay, I think the class needs to have a clearly stated mission as well as built-in curriculum requirements that works against ostentatious displays of cleverness, which indeed only serve to further the “I got it but you don’t” stereotype of math skills (but which mathematicians themselves are incentivized to further since that magical aura comes in handy).
For example, when I taught it, I let the students hand in homework again and again until they got a score they liked. Of course, this depending on me having an awesome grader (and a relatively small class), which luckily I had.
Also, I asked each student to give a presentation to the class on some proof they particularly enjoyed, and I sat through a preview of their presentation and gave them extensive advice on board work and eye contact, which took a lot of work but really helped them prepare and also boosted their egos while at the same time increased their sympathy with each other and with me.
But of course the most important thing was that I clearly stated at the beginning of each class in the first two weeks that proving things in math was a skill like any other that you get good at through practice. And when I left Barnard Dusa McDuff took over the class and still teaches it, so I know it’s in good hands.
If I hadn’t had Dusa, I’d probably have written a manifesto to be given to each person who would teach the class after me. Of course anyone could have just thrown that away but it’s an idea.
As for content, I taught them really basic proof techniques, so induction, proof by contradiction, the pigeon-hole principle, and some epsilon-delta practice. We covered some basic logic, graph theory, group theory, ordinals, and basic analysis. We constructed the reals two ways and the complex numbers once and talked for a long time about whether “i” is real and what that even means. We used A Transition to Higher Mathematics, which I recommend with a few reservations (please tell me if you’ve found a better text for something like this!).
Everything was done super explicitly and carefully, no rushing. I said things three times in three different ways. I wasn’t expecting people to be fast or clever, because I know intelligence works in different ways and that this stuff was completely new to most of the students. And at least one student in the class, who had been an artist, is now a grad student in math at Berkeley.
Looking over my post I realize I spent way more time talking about the tone of the class than the content, but that’s totally appropriate, since I think of this class as an introduction to the culture of mathematics (or rather the culture I wish we had) just as much as mathematics itself.
After all, there really is no time limit on good ideas, and you do get to do it over if you make a mistake, and going over things slowly gives you more time to ask good questions and find mistakes.
Calling all data scientists! The first ever global data science hackathon
Hey I’m helping organize a NYC data hackathon at Bloomberg Ventures to take place April 28th – 29th, from 8am Saturday to 8am Sunday. I’m looking for outrageously nerdy people to come help. There will be some prizes.
Read the official blurb below carefully and if you’re in, sign up for the event by registering here.
Update: they’ve decided on prizes.
See you there!
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Are you a smart data scientist? Participate in this hackful event. 24 hours of non-stop, fun data science competition. The first ever global, simultaneous data science hackathon!
In connection with Big Data Week, we’re helping organize a global data science hackathon that will simultaneously take place in various locations around the world (including London, Sydney, and San Francisco). We will host the NYC event at the Bloomberg Ventures office in the West Village.
The aim of the hackathon is to promote data science and show the world what is possible today combining data science with open source, Hadoop, machine learning, and data mining tools.
Data scientists, data geeks, and hackers will self organize around teams of 3-5 members. Contestants will be presented with a ‘big data’ set (hosted on the Kaggle platform). In order to win prizes, the teams will have to use data science tools and develop an analytical model that will solve a specific data science problem specified by the judging tech panel. The contestants will have to report their achievements at specific milestones, and a leader board will be published online at each milestone.
The contestants will spend 24 hours in Bloomberg Ventures’ office space where food, drinks, workspaces, and resting areas will be provided. Teams will compete for both local and global titles and prizes.
The Hackathon runs for 24 hours starting on April 28th at 8am (early start to allow for the event to happen simultaneously in multiple time zones around the world).
If you have questions, please email shivon.zilis@bloombergventures.com
PLEASE READ CAREFULLY:
1. This is a technical competition, not a networking event or an opportunity to learn more about big data techniques and technologies. We have limited space, so we unfortunately need to be strict about who gets to compete. If you’re an entrepreneur looking to recruit, we’re excited to have you as a member of this community, but this specific event is not the right venue, please come our regular Data Business meetups instead! 🙂
2. You should have Mad Skillz at at least one of the following:
- Data grappling and/or cleaning,
- Data modeling and forecasting,
- Data visualization,
- Spontaneous micro- and macro-economic theory creation
3. You should know one or more of the following languages:
- R
- python
- Matlab
- Some statistical package like SPSS or SAS
4. You should bring your hardcore laptop to the event, since we will have on the order of 10 gigs of data to play with.
In which mathbabe becomes insurance claims adjuster
Who knows what I’m talking about with this story.
My husband dislocated his finger sledding with my son last January, so more than a year ago, and the hospital kept sending us bills for the event.
But here’s the thing, we were covered under my medical insurance, which had perhaps recently changed policy numbers when MSCI took over Riskmetrics. So probably what had happened was my husband had given them the old insurance card, but in any case, in the the end I knew I wouldn’t have to pay since we’d definitely been covered.
The hospital called once a month or so, and every time they got hold of me I argued with them and told them to check their records. They kept telling me that the insurance company was refusing payment under any of the policy numbers I gave them.
In the end, last month, I called up the insurance company myself and got them to admit payment, which wasn’t hard since they said they’d already paid for the X-ray from the dislocation on that date. I called up the hospital and straightened it out.
So yeah, I ended up doing their job for them, and that’s both annoying and exciting because now nobody thinks I owe them $2400. In fact I did a victory dance (at work, because you always have to do this during work hours for people to answer the phone).
But why I’m writing about it today is that it’s actually really infuriating how often something like this happens, and I can’t help noticing that I always get out of it but many people wouldn’t. I’m at a huge advantage in this common situation because:
- I worked as a customer service person so I know how to talk to customer service people. Turns out you should always be polite, but never hang up the phone until your problem is solved. Just keep asking, extremely nicely, things like, “Hmmm… that’s confusing, what do you think could have gone wrong?” or “What would you do if you were me?” or if those don’t work, “Do you think you could tell me who to talk to sort this out? I’d really appreciate it.”
- I am always covered by insurance, so I never worry that they are right. This is an enormous advantage over people who sometimes lose coverage between jobs or something.
- I keep all my old paperwork. Impossible for people who don’t have an incredibly
boringstable lifestyle like mine. - I have a job that allows me to make calls like this during work hours. Obviously huge.
- I am completely unafraid of forms and red tape. This comes from experience, but I know most people are afraid of such stuff, and that alone would probably keep most people from arguing.
I really do feel like I am relying on my professional skills in order to get my insurance to pay for setting my husband’s dislocated finger, when that should be a no-brainer. If you are inexperienced and poor, you’d probably be completely at a loss for how to deal with this situation.
I wonder how many people have their credit scores lowered by medical claims which should have been paid but weren’t due to crap like this. It’s a broken system, but it only leaks on the most vulnerable people, and I hate that.
mathbabe 