March 2014 Archives
Bloomberg has an infographic about how automation threatens various jobs. I think it captures some interesting categories, but I don't agree with the bottom line.
For "Manipulation"-type jobs, it is only a matter of time before automation miniaturizes and catches up to humans.
For "Creativity", internet distribution makes it possible for elite creative workers to share their products very widely and cheaply, thereby pricing middling/poor creative workers out of the market. Non-elite creative workers will only get paid for making unique creations, and the pay will be poor. Example: quilt-making.
The "Social/Perception" field is likely safe for the foreseeable future... but what does that mean? Humans will be better than automation at social interactions with other humans... but will there be any money in that when no one has any other jobs?
Obviously I don't think the future is that bleak. I believe that humans and machines will continue to cooperate in voluntary collaborations and we'll all be better off for it. The modern corporation is basically a massive human/machine hybrid.
This piece by Aswath Damodaran is a great explanation of why Facebook paid $19 billion for Whatsapp. There's a lot there, but it's an elegant read.
Returning to the Facebook/Whatsapp deal, it seems to me that Facebook is playing the pricing game, and that recognizing that this is a market that rewards you for having a greater number of more involved users, they have gone after a company (Whatsapp) that delivers on both dimensions. Here is a very simplistic way to see how the deal can play out. Facebook is currently being valued at $170 billion, at about $130/user, given their existing user base of 1.25 billion. If the Whatsapp acquisition increases that user base by 160 million (I know that Whatsapp has 450 million users, but since its revenue options are limited as a standalone app, the value proposition here is in incremental Facebook users), and the market continues to price each user at $130, you will generate an increase in market value of $20.8 billion, higher than the price paid. Are there lots of "ifs" in this deal? Sure, but it does simplify the explanation.
Bonus content: an explanation of the difference between how traders and investors see the world.
This week, I was at the Tuck School of Business at Dartmouth, talking about the difference between price and value. I built the presentation around two points that I have made in my posts before. The first is that there are two different processes at work in markets. There is the pricing process, where the price of an asset (stock, bond or real estate) is set by demand and supply, with all the factors (rational, irrational or just behavioral) that go with this process. The other is the value process where we attempt to attach a value to an asset based upon its fundamentals: cash flows, growth and risk. For shorthand, I will call those who play the pricing game "traders" and those who play the value game "investors", with no moral judgments attached to either. The second is that while there is absolutely nothing wrong or shameful about being either an investor (No, you are not a stodgy, boring, stuck-in-the-mud old fogey!!) or a trader (No, you are not a shallow, short term speculator!!), it can be dangerous to think that you can control or even explain how the other side works. When you are wearing your investor cape, you can be mystified by what traders do and react to, and if you are in your trader mode, you are just as likely to be bamboozled by the thought processes of investors. So, at the risk of ending up with a split personality, let me try looking at Facebook's acquisition of Whatsapp for $19 billion, with $15 billion coming from Facebook stock and $4 billion from cash, using both perspectives.
Cardinal Raymond Burke, formerly archbishop of St. Louis, is pushing back against the compartmentalization of religion in the public space. He asserts that free exercise of religion permeates society and is not confined to the walls of a church.
The former archbishop of St. Louis stated that Obama is trying to "restrict" religion.
"Now he wants to restrict the exercise of the freedom of religion to freedom of worship, that is, he holds that one is free to act according to his conscience within the confines of his place of worship but that, once the person leaves the place of worship, the government can constrain him to act against his rightly-formed conscience, even in the most serious of moral questions," Burke said.
UK hospitals have been burning aborted and miscarried babies for fuel in "waste to energy plants". May God bring an end to this evil and have mercy on the souls of these children.
One of the country's leading hospitals, Addenbrooke's in Cambridge, incinerated 797 babies below 13 weeks gestation at their own 'waste to energy' plant. The mothers were told the remains had been 'cremated.'
Another 'waste to energy' facility at Ipswich Hospital, operated by a private contractor, incinerated 1,101 foetal remains between 2011 and 2013.
They were brought in from another hospital before being burned, generating energy for the hospital site.
Many are comparing this atrocity to the practices of the Nazis, but it reminds me of earlier child sacrifices to Molech, Cronus, or Saturn.
Austin Bay has some suggested hard-power responses we can make to Russia's annexation of Crimea. I particularly endorse the expansion of fracking and the exporting of American natural gas to Europe.
Russian hard-power aggression, annexation and expansion require a hard-power response. Here are some I recommend: (1) We can't flip-flop NATO Article 5, NATO's commitment to mutual defense. The U.S. must demonstrate it takes its NATO obligations seriously. So, deploy U.S. troops to Poland. The U.S. withdrew its last tanks from Germany in 2013. The Poland garrison needs a U.S. armor brigade. (2) Cancel all defense budget cuts. Faculty club snark aside, peace through strength means something. (3) Open federal lands to natural gas "fracking" and start shipping gas to Europe. Undermining Russian gas sales is a real economic sanction. (4) Arm the Baltic nations. They are also NATO allies. And (5) deploy the GBI's to Poland, and build a more robust missile defense system. As for permanently deploying U.S. Patriot PAC-3 short-range anti-missile missiles in Poland -- that's an idea whose time has come.
On Monday Mitt Romney wrote an op-ed in the Wall Street Journal saying "I told you so" on Russia -- that they are our greatest geopolitical opponent. When he first said so during a presidential debate with President Obama, he was widely ridiculed and Obama riposted with "the 80s called, and they want their foreign policy back". Well, Romney was right, and now he gets to rub the President's face in it.
Why are there no good choices? From Crimea to North Korea, from Syria to Egypt, and from Iraq to Afghanistan, America apparently has no good options. If possession is nine-tenths of the law, Russia owns Crimea and all we can do is sanction and disinvite--and wring our hands.
Iran is following North Korea's nuclear path, but it seems that we can only entreat Iran to sign the same kind of agreement North Korea once signed, undoubtedly with the same result.
Our tough talk about a red line in Syria prompted Vladimir Putin's sleight of hand, leaving the chemicals and killings much as they were. We say Bashar Assad must go, but aligning with his al Qaeda-backed opposition is an unacceptable option.
And how can it be that Iraq and Afghanistan each refused to sign the status-of-forces agreement with us--with the very nation that shed the blood of thousands of our bravest for them?
Why, across the world, are America's hands so tied?
A large part of the answer is our leader's terrible timing. In virtually every foreign-affairs crisis we have faced these past five years, there was a point when America had good choices and good options. There was a juncture when America had the potential to influence events. But we failed to act at the propitious point; that moment having passed, we were left without acceptable options. In foreign affairs as in life, there is, as Shakespeare had it, "a tide in the affairs of men which, taken at the flood leads on to fortune. Omitted, all the voyage of their life is bound in shallows and in miseries."
Romney is right: the reason we have "no good options" now is that Obama's foreign policy didn't protect our decision space. If I were to play chess with Garry Kasparov it might look (to a naive observer) as if nothing much happened for a while... but then I'd quickly find myself with no good options. I wouldn't run out of good moves because of misfortune, acts of God, or inevitability -- I would run out of good moves because I would be outmaneuvered and outplayed. That's where America is now. We've been strategically outmaneuvered and outplayed by our geopolitical opponents, and it's only becoming obvious now that we're out of good moves.
Final thought: maybe we should try to get some Reagan-era foreign policy going?
I'm never swimming without my spear again.
The missing Malaysian airliner is quite a mystery and most likely a tragedy; our thoughts and prayers are with the victims and their families.
It appears that two passengers on the plane were flying with stolen passports, but it's unclear to me how common this is. The Malaysian Home Minister thinks that the security screeners should have noticed something amiss:
Malaysian Home Minister Ahmad Zahid Hamidi said the unidentified passengers appeared to be Asians, and blasted the border officials who let them through while carrying passports from Austria and Italy.
"Can't these immigration officials think? Italian and Austrian [passport holders] but with Asian faces," Hamidi fumed.
Security and Exchange Commission employees are required to sell any stock they own in a company when beginning an investigation into that company. Since such an investigation can only lead to bad or neutral results for the company in question, the requirement to sell naturally leads to employees making a boatload of money.
Here is an investment strategy for you:
Buy all the stocks in the S&P 500 index, weighted by market cap.
Any time the Securities and Exchange Commission opens an investigation into one of those companies, sell its stock.1
That's it! I feel like that would be a good strategy, right? All the benefits of indexing, plus you get to occasionally trade on inside information. Oh, right, for this strategy to work, obviously, you'd need to know about SEC investigations as soon as they start; you can't just wait until the investigations are public.
So I guess the downside of this strategy is that, to use it, you need to work at the SEC. The upside, though, is that if you work at the SEC, this strategy is totally fine!
More than "totally fine", this investment strategy is basically required.
It's obvious that SEC employees should not be allowed to own individual stocks, and I'm quite surprised to find out that isn't the case. Government regulators should in general be prohibited from benefiting from their insider knowledge.
This story by Dan Balz and Scott Clement about some midterm election poll results makes several errors in discussing some results as causes rather than effects. I believe this confusion of cause and effect is a result of the tendency for political reporters to view elections as sporting events, but a historical voting trend is very different from a batting average.
The first example is in the second paragraph:
Midterm elections generally favor the party that does not hold the White House, which gives the GOP a head start this year.
It is true that the party that doesn't hold the White House generally does better in midterm elections, especially if the President is in his second term. However, this historical fact doesn't "give the GOP a head start". The GOP's projected advantage lines up with this historical trend, but isn't caused by it. Both the historical trend and the GOP's projected advantage in 2014 are effects with common causes: inevitable dissatisfaction with whoever has been running the country recently.
In the next example, I will bold the confusion:
The poll shows broad dissatisfaction with Washington politicians. Just 22 percent say they are inclined to reelect their representatives in Congress. Almost seven in 10 Americans (68 percent) say they are inclined to look around for someone new this fall, the highest percentage recorded in a Post-ABC poll.
That does not mean the fall elections will mean defeat for significant numbers of House members, given the high reelection rates for incumbents and the polarized voting patterns of recent years.
As in the first example, high reelection rates for incumbents is a historical trend that is likely to continue in 2014, but the trend doesn't cause itself. The trend is an effect of "polarized voting patterns" as well as the human tendency to stick with "the devil you know".
With President Obama and Congress at loggerheads on major issues and little prospect for legislative action on major initiatives, the president's approval ratings have shown little change since earlier this year.
Here, it's not entirely clear if the authors are implying a cause-and-effect, or which way it's going. By my observation, it appears that the more President Obama "achieves" the less popular he becomes. That lowered popularity is partly the cause of the lack of legislative action, not the effect of it. If Obama were widely popular, he would have more success pressuring Congress.
All but about two-dozen House districts are occupied by someone from the same party as the presidential candidate who carried the district in 2012, which makes it harder for the opposing party to pick them off.
The fact that all but two-dozen House districts voted for a Presidential candidate of the same party as the Representative they elected doesn't "make" it harder to pick the Representative off. That the prior election and the upcoming election are likely to have similar outcomes is an effect of the voting preferences of the district.
Historical voting patterns are not like batting averages, and trends do not self-perpetuate in a causal fashion. Voting instances are reflections of underlying beliefs at a point in time.
A great run-down of how app stores have changed software, and mostly for the better. I agree with the author's conclusions as well.
You know you're a good parent when Homer Simpson makes a Spaceballs reference and your daughter gets it.
Waltern Russell Mead concisely explains the nuclear angle to the ongoing Ukrainian crisis. By failing to protect Ukraine's borders, America reinforces yet again the value to every country to be able to guarantee it's own security with nuclear weapons. That's a huge failure.
Here's the rub. When Ukraine escaped from the Soviet Union in 1990, Soviet nukes from the Cold War were still stationed on Ukrainian territory. After a lot of negotiation, Ukraine agreed to return those nuclear weapons to Russia in exchange for what (perhaps naively) its leaders at the time thought would be solid security guarantees from the United States and the United Kingdom. The "Budapest Memorandum" as this agreement is called, does not in fact require the United States to do very much. We can leave Ukraine twisting in the wind without breaking our limited formal obligations under the pact.
If President Obama does this, however, and Ukraine ends up losing chunks of territory to Russia, it is pretty much the end of a rational case for non-proliferation in many countries around the world. If Ukraine still had its nukes, it would probably still have Crimea. It gave up its nukes, got worthless paper guarantees, and also got an invasion from a more powerful and nuclear neighbor.
The choice here could not be more stark. Keep your nukes and keep your land. Give up your nukes and get raped. This will be the second time that Obama administration policy has taught the rest of the world that nuclear weapons are important things to have. The Great Loon of Libya gave up his nuclear program and the west, as other leaders see it, came in and wasted him.
I've been watching the uncontested annexation of Crimea by Russia over the past several days with astonishment. President Obama, America, and the rest of the world have basically shrugged the whole thing off. Obviously everyone is "deeply concerned", but apparently no one is going to actually do anything.
Obama expressed "deep concern" over Russia's moves, suggested Putin's troops leave and warned the occupation "would negatively impact Russia's standing in the international community." ...
Of course, it would be ridiculous to suggest Obama's passivity toward Putin is connected to the American's overheard promise of post-election "flexibility" to Putin's predecessor back in 2012. So, we won't.
Here's how Col. Putin responded to Obama's words of warning: He sent more Russian troops into Crimea.
Mead points out that Putin will probably keep Crimea and steal whatever aid the West gives to Ukraine.
Now Putin seems to be seizing the most important military assets Russia holds in the country and can reasonably hope to increase Russia's influence throughout the country as a weak government struggles with intractable problems. Meanwhile, he is probably licking his chops over the unpalatable choices Western statesmen now face. If the West doesn't ship billions of dollars to Ukraine, the current government will fail and national unity will fray. If the West comes across with the dough, Putin has a number possibilities for working the situation to his benefit. He can, for example, raise the natural gas price to a Ukraine flush with Western aid dollars, or demand repayment of Ukraine's existing debts to Moscow, transferring Western aid money into Russian pockets.
Maybe the calculation is that Russia is in a demographic death spiral anyway, so what's the point of fighting over territory that is full of people who seem to want to be a part of Russia.
It seems that Obama's calcuation in international crises is always to do nothing. Syria, Iran, Crimea, Snowden, Sudan, Egypt, Iraq.... It's hard to see how "do nothing" is always in the interests of the world's Superpower.