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Thursday, May 24, 2012

Low Profile Warming

In a recent speech at a conference on global warming sponsored by the Heartland Institute, climate skeptic Vaclav Klaus say he thinks that climate alarmists are changing their approach (emphasis added by Klaus):
Let me, therefore, start by thanking you for keeping the global warming issue alive. This is an important achievement in a moment when it has already become half-forgotten. It has not happened accidently, it was and is planned. It is a part of a carefully prepared tactic of global warming alarmists how to – once and for all – win their case. In the past two decades, they tried to do the opposite. They wanted to be as loud as possible to arouse our fears, now – when the whole issue becomes more and more suspicious – it is in their interest to stop any public discussion. This is the reason why they try to pretend that “the science is settled”, that the debate is over. We should not let them do it. [...]

The undeniable fact is that almost from one day to the next the global warming debate ceased to be fashionable. It disappeared from the headlines. It may weaken the position of the global warming fundamentalists but it makes it more difficult for us, the “deniers” or “skeptics”, as they call us, to motivate people to think about this issue and to openly and politically express their views about the irrational, human freedom curtailing, human prosperity undermining measures and policies introduced by the political establishments in most of the countries of the world in the last two decades, not to speak about the measures prepared for the future. We have to keep repeating that our planet is determined not only by anthropogenic influences but dominantly by long term exogenous and endogenous natural processes and that most of them are beyond any human control.

The alarmism has subsided, they want to make it “low profile”.
The general idea is that the alarmists have already succeeded in indoctrinating a whole generation of children and have already gotten many crazy regulations in place so now it is time to work the back channels: the politicians and the courts.

Wednesday, May 23, 2012

Might Makes Right: God

The construct of God in many religions is the single most blatant appeal to Might Makes Right.  After all, it's not "god, kinda wimpy who'd sorta prefer things be done a certain way, but hey, if not don't sweat it", but rather "God Almighty Who Commands Us and Judges Us with Tremendously Horrible Consequence Should We Disobey (that burning in hell for all of eternity sort of thing)!".  Things are good and right because God who's infinitely powerful says so and when we question Him we are told that He works in mysterious ways beyond our comprehension.

While I'm not personally religious, it's clear to me that various manifestations of gods exist in the minds of believers. There are, for example, more than one billion Roman Catholics in the world, the vast majority of which believe in their God and put some level of effort into following His Word.  So their God, even if He is completely fictitious and intangible, really is amazingly powerful and mighty in that He substantially affects the feelings, thoughts, behaviors and actions of a huge number of people, both individually and collectively.

Since humans seem to have evolved a proclivity to believe in god(s), my guess is that belief was directly helpful in the survival of the fittest competition.  The primary mechanism by which it made believers more fit is that it provided an organizing principle and social cohesion that not only transcended individuals, but whole tribes, the leaders of those tribes, and even whole generations (in other words, god, being immortal, transcends time).

Whether or not god exists in reality (natural or supernatural) in this context is immaterial.  The difference between a real god who once created the universe but is now taking a more hands off and judging approach versus one who exists solely in the minds of believers has the identical tangible effect here on earth.

God's might is used to enforce god's word (either interpreted or made up) which acts as an organizing principal and creator of social cohesion which then creates real power.

In other words, Might Makes Right Makes Might.

Monday, May 21, 2012

Intelligence: Muscles of Thought

When I watch a hand pick a piece of fruit, I marvel at the intelligence exhibited.  It doesn't matter if it's a human hand or the hand of another primate.  I find it exquisite to watch the coordination of countless neurons carefully controlling a huge number of individual muscle fibers within the numerous muscle groups of the fingers purposely grabbing the fruit, exerting just enough force to remove it from the tree, but not so much force as to crush it.  The movement is purposeful, controlled, and coordinated.  In other words, it's intelligent.

E-mails are dispatches without the physical form of mail. Somewhat analogously, e-motions are dispatches or signals without the physical motion, and in fact emotions are often coupled with actual motion (fear->fight or flight, happiness->smiling, anger->violence, etc.).  As the brain processes get more and more decoupled from motion, those processes are less emotional and more what we think of as thoughts.  Even these thoughts are generally coupled, at least loosely, with emotion and sometimes motion.

When I look at the numerous theories (all unproven) of how the brain is fundamentally structured, I personally find the analogy of the brain being the muscle of thought the most compelling:
...that cognition is a phylogenetic outgrowth of movement and that cognition utilizes the same neural circuitry that was originally developed for movement.

Movement relies on the deliberate, smooth, properly sequenced and coordinated, graded, contractions of selected ensembles of discrete muscles. Therefore, the neural circuitry of movement was specialized for this purpose. Soon, a new design possibility emerged: the elaborate neuronal machinery of movement control could be applied to brain tissue itself. In particular, discrete brain structures, modules, emerged that could be controlled exactly like individual muscles. ... By manipulating these modules in properly coordinated 'movements' (thought processes), valuable information processing (cognition) could be carried out – thereby further enhancing animal competitive success and diversity. 
From this point of view, intelligence in thinking is little different than intelligence in controlling motion.  In other words, it's the ability to coordinate the actions of different muscles groups, but in this case, without the muscles.

Tuesday, May 15, 2012

The Demons of Volatility

Do speculators increase market volatility?  Our president claims to think that:
"President Barack Obama on Tuesday asked Congress for $52 million in new federal funding to boost oversight of oil markets, increase penalties for price manipulators and raise margin requirements to reduce market volatility."
On the other hand, many economists claim the volatility is not increased by speculation.  Here is one example:
"And yet even with no traders to blame, the volatility in onion prices makes the swings in oil and corn look tame, reinforcing academics' belief that futures trading diminishes extreme price swings."
I've been doing the speculating thing for decades now and I'm certain that  both Obama and the economists are confused, misleading and/or just plain wrong.

Speculators absolutely increase price volatility but that volatility is an important feature of the speculator's function in the market that ultimately, over time, benefits the consumer.

Speculators' trades push the price up and down in a given market.  That's inherent in the whole concept of trading.  Activity moves prices.  No activity implies stable/stagnant prices.

So how is the price movement beneficial?  Many price movements either are proxies of actual information or beget real information that can and should cause changes in economic activities and allocations.  There are myriad mechanisms for this, but I'll describe one of them.

Actually, I'll let our president describe the first one:
"The problem is ... speculators and people make various bets, and they say, you know what, we think that maybe there's a 20 percent chance that something might happen in the Middle East that might disrupt oil supply, so we're going to bet that oil is going to go up real high. And that spikes up prices significantly."
Obama is a pretty confident guy and is probably certain that his brilliant and flawless foreign policy will prevent any middle eastern oil supply disruptions.  But let's say, just hypothetically of course, that instead of a perfect and all-powerful United States government under a president who can slow the rise of the oceans and heal the planet and apparently keep the oil flowing, we lived in a world where there really was a chance of a supply disruption.

In that case, the price increases and extra volatility due to speculators and people making "various bets" can be quite beneficial.  First, if the supply disruption occurs, we will already be partially adapted to the higher prices that will result from the disruption.  Second, the oil is still currently being extracted and the higher prices mean that more is being currently stored, so if a disruption happens, there will be more stored oil available.  Third, because demand is already lower and storage is higher, when the disruption of middle eastern oil occurs, the ensuing gap between supply and demand will not be as large and the smaller gap will attenuate the price spike and/or shortages and therefore reduce the negative impact on the rest of the economy.  Fourth, current higher spot and future prices of oil stimulates more drilling and reserves all over the world, which, as they come on line, mitigate the future impact of any disruption of the middle eastern oil supply.

Yet Obama is absolutely correct in that the speculators' activities are spiking "up prices significantly", at least in the short term, and perhaps needlessly should a supply disruption never occur.

If a supply disruption never materializes, what happens?  Most likely, the price will drop substantially over time.  After all, new supply has been stimulated, storage has been increased, and demand has been reduced.  All of these typically lead to lower prices.  Assuming that the price drops substantially, the speculators lose a ton of money.  The speculators, as a group, only make money if the price goes higher.
But if the price does go higher because of a disruption, instead of thanking them for blunting the effect of the disruption, we become even angrier at them because they're making tons of money while we're feeling pain at the pump.  It's far less pain than we would've felt without the activity of the speculators, but we won't know and/or understand that as the gasoline purchase drains our wallets.

In my personal experience and observing other speculators, significant money is only made on about one in ten trades.  The rest of the trades either lose money or more or less break even.  Each of those trades adds volatility to the price action.  The losing ones add unnecessary volatility but the benefit from the winning trades makes the entire economy better off in the long run by anticipating and blunting the negative effects of future events.

Speculators are very important for the economy, but they're damned if the prices rise and screwed if the prices fall and demonized in either case.

Saturday, May 12, 2012

Might Makes Right: The Bully and the Bully Pulpit

Much has made of Romney's alleged bullying when he was in high school.  He has apologized.  If it had been me, I wouldn't have been able to keep a straight face while apologizing.  It's hard to take it seriously given that the time elapsed since the event is measured in significant fractions of a century.

Really?  That's the best they can do?  Find (or possibly make up) an incident half a century ago in order to identify character flaws?  As a teenager?  Surely there's something more recent (other than the dog thing) for which one can criticize Romney?

I was a fairly small kid and subjected to plenty of bullying.  As a result, I'm rather an expert at being on the receiving end and from that I have a lot of experience observing bullies.

Unless one is a masochist (which I am definitely not), being on the receiving end is universally bad.  But in observing it, I noticed that the lead bullies were actually exhibiting leadership skills and getting practice wielding power.  In their limited sphere of the moment where their "might makes right", if due to teenage hormonal overload or significant brain dysfunction or both they decided it was right to do the bullying, then that's simply the way of the world and hardly the most egregious infraction against morality.

Sure, if half a century later the person was still an arrogant bully, then we'd know it was brain dysfunction and we'd want to keep him away from the Bully Pulpit.  If not, then the negative aspects of the bullying are long gone, and the leadership and wielding power experience remain.  As a result, I find the story a positive for Romney, not a negative.  I'm apparently the only one.

Being president of the United States isn't all fun and games.  Occasionally, the president needs to be ruthless and perhaps even cruel.  With Romney, I'm actually sort of relieved that maybe, just maybe, he might be able to reach deep inside and be able to be sufficiently ruthless for certain situations that will almost certainly present themselves during his term.  That capability might well have faded with his teenage years, but maybe there's still some remnant.

Obama's kowtowed and bowed and groveled at the feet of every ruthless leader in the world.  Not a good idea in my opinion.  Maybe Romney can do better.

Friday, May 11, 2012

A Conflict of Inference

Lately, my favorite saying has been:
The curse of authorship is that the information conveyed is not necessarily what the writer intended, but rather what the reader chooses to infer.
As someone who attempts to write, both for fun on this blog and the technical, management, and business documents as part of my work, I'm often flummoxed and bemused by the apparent lack of clarity in my writing when a reader ends up inferring meaning that not only didn't I intend, but would've never guessed in a million years that's how they would interpret what I had written.

The only thing that keeps me from feeling totally humiliated by my inability to write clearly is that it happens to real authors as well.  I recommended  Sowell's "A Conflict of Visions" to a friend and when he wrote a summary/critique of what he had read, I was wondering if he had read a different "A Conflict of Visions" than I did.  It turns out it was the same book, but we had just interpreted it completely differently.

Poor Sowell, either my friend or I or both have completely misinterpreted his work.  But that's the curse of authorship.

Thursday, May 10, 2012

Nevada Issues License for Autonomous Car

I occasionally give talks on the future of robotics and since about 2000, I've been predicting that the technology required for cars to drive themselves would be feasible around 2020 or so.  My definition of feasible for this means robust enough, safe enough, and inexpensive enough that a manufacturer could sell autonomous vehicles to willing buyers.

However, I always added the following caveat: while the technology would be there, it might take decades before the public accepts autonomous vehicles.  This acceptance would include social tolerance of the whole concept of driverless cars, liability laws, and vehicle licensing.

In some sense social tolerance might be the biggest issue as it is an important driver of the other issues.  As an example of resistance to this sort of thing is that while airplanes could fly themselves, virtually nobody (including me) is willing to get on an airplane with no pilot, and most of us are uncomfortable (to say the least) with the concept of large, potentially explosive aircraft cruising around above our heads with no human guidance or backup.

On the other hand, cars are not aircraft, the cost of a pilot or two or three relative to the overall cost of operating an airline is relatively small, and autonomous cars seem more like robots and lots of people think that robots are cool. Furthermore, there are several very difficult tradeoffs regarding driving that society has and is increasingly being faced with.

For example, the fatal accident rate per mile driven for drivers over 75 goes way up and our society is aging rapidly.  This leaves the unfortunate choice of either limiting the mobility of many older drivers by taking away their licenses or allowing them to continue to drive and risk them killing themselves and others.  The autonomous car provides a third, and likely preferable, option.

Liability laws are a tough issue as well.  I wrote a humorous post about an early accident involving an autonomous research vehicle, but more seriously, if a manufacturer, with deep pockets until bankrupt, is liable for every accident, it's a huge disincentive to produce robotic cars.  While I used to think that this would be the biggest stumbling block, now I'm not so sure.  With Toyota being scapegoated and incurring massive costs when some drivers couldn't remember which pedal was the gas and which the brake, and others committing fraud to ride on that wave, perhaps the impact won't be as bad as I thought relative to what reality currently is.

So that leaves licensing.  Governments are generally slow to respond, so I figured it would take forever for the government innovations required for licensing driverless cars.  But I was wrong.  Nevada has just issued the worlds first license for an autonomous car!  And California might do the same soon!

So at this point, I'm definitely encouraged, and I think there could be some sort of licensed autonomous vehicle available for purchase sometime early next decade.

Wednesday, May 09, 2012

Government Is Ugly

My kids are always trying to determine my favorite color.  That's a difficult task since I point out that I find blue a rather nice color for the sky and green a good color for plants, but if it was instead a green sky and blue plants I would find that ugly.  Nonetheless, they persevere, and through a series of questions about whether I'd rather paint a given wall Color A or Color B, they've determined, beyond a shadow of a doubt, that my favorite color is blue and that I definitely find pink ugly (at least when considering painting walls).

It's true.  I do find pink ugly.  I don't know why and there's probably no rational reason for it.  And even if you could prove to me that pink was objectively a great color, that if I painted my walls pink the world would be a better place, that I'd be healthier with pink walls, etc., I'd still rebel against having my walls painted pink.

To me, government is ugly.

Unlike pink, for which I can give no rational reasons why I find it ugly, I can spew forth many supposedly objective reasons why I find government ugly: the corruption, the lies of politicians, the inefficiency, the waste, etc., etc., etc.

Yet even if you could prove to me with certainty that all of my reasons for finding government ugly are wrong, I would still find government ugly.  Even if you could prove that government is perfect, that it can solve all of our problems, that an ever bigger government makes the world an ever better place, I would still find government ugly and I'd still want to shrink government as much as possible.

It's part of my nature.

Just like I inherently find pink ugly, I inherently find government ugly.

Which means that my supposedly objective reasons for government being ugly are not objective at all.  Or perhaps at least some of the facts are objective, but my specific collection of those facts and reasons only exists because I'm just a matched filter designed to specifically collect facts and reasons to match my inherent subjective preferences.

My collection of facts and reasons therefore shouldn't convince anybody else of anything.  If you share my view that government is ugly, then you'll probably find my collection of reasons appealing.  If you inherently think government is beautiful, you won't be convinced by my arguments and there's no reason that you should be.  My arguments are incomplete and just happen to match what I like and dislike.

So there's not much to debate.  You won't somehow convince me that government is not ugly and I shouldn't be able to convince you that government is ugly if you don't already believe that.

Tuesday, May 08, 2012

I Had a Pretty Good Streak...

... until Oroborous broke it.

I only ever lost one bet where the bet was a personal bet about a real-world prediction (as opposed to games of chance or general investment and speculation).  Not that I bet very often.  Nor do I bet much money - as shown in the picture above, a dollar is my favorite amount.  (That plaque was created by a guy who watched me win a long streak of bets, then bet against me and also lost.)

The vast majority of the bets I've taken were against gloom and doom scenarios where given objective market prices and volatility the odds were at least three-to-one in my favor.  In these case, either a whole lot of people are quite wrong and are going to lose a lot of money, or the person I've taken the bet against was a little bit over passionate about how bad things are going to be.  In many of these cases, if the bet was large enough, I could literally cover my position with puts or calls and guarantee myself profit whether or not I won the bet!  The bets were never large enough to do that, but it's still a good bet.

So along comes Oroborous, once a co-blogger at The Daily Duck, and just before the collapse of the housing bubble and resulting financial crisis he states that the stock market is going to drop precipitously.  I look at the S&P500 index and its volatility and calculate 95% confidence bands for various time frames (that effectively gives me 20-to-1 odds).  Oroborous picks a time frame and its associated index level, takes the bet, and the day before time is up the S&P500 drops below that level.

So I finally lost one. This is old news in that I lost this bet over 3 years ago. However, Oroborous seems to have dropped off the face of the earth so I've been unable to pay him.  Recently, Hey Skipper (a one-time co-blogger of Oroborous) gave me Oroborous' email address and I sent Oroborous an email asking how I should pay but got no response.  Perhaps he'll show up again one day.

At 3-to-1 or even 20-to-1 odds it was inevitable that I'd eventually lose.  I'll have to admit that I'm surprised that I lost because of something Oroborous foresaw.  Usually such losses are caused by random, or nearly random events and/or fluctuations.  Like a war starting.  Or a particularly bad set of politicians being elected.  Or an Oil embargo.  Or something like that.

That it was foreseeable and only Oroborous and a relatively small number of others foresaw it is remarkable.  He's either amazingly lucky or incredibly prescient.  Or both.

Tuesday, May 01, 2012

Part of the official Britain's Met Office forecast for April: "...drought impacts in the coming months are virtually inevitable...".  So confident were they in those predictions that they plastered ads on the sides of buses.

The following picture is the result.

Turns out this picture is not an isolated rainstorm.  Rather, there's been flooding across Britain.  In fact, April was the wettest month for 100 years.