That's Okay; I Don't Like You, Either

2011-09-17T17:06:00.000-05:00

This is just a reminder that I'm published on both Amazon and Barnes & Noble. The real point is to give me a page that has links to both that I can use as a homepage whenever I make blog posts. Still, if you haven't bought them yet . . .

Amazon
B&N

The only thing there at the moment is Rethinking the Corporation, but I hope to have more soon in a series I'm calling Ask Yourself Why: A Guide to Fundamental Questions All Business Leaders Should Consider.

What Is Ethics?

2011-09-08T02:17:00.001-05:00

If we are going to teach ethics, or learn ethics, we need to know what ethics is. I’m sure everyone has an idea about it that they might be able to articulate when they are asked. For the purposes of education, however, the sort of vague concepts we carry around in our head are not very useful, even individually. It gets worse, since in any group there won’t be a consensus about the proper expression of what ethics is.

To establish a consensus, we can turn to dictionaries. Excluding definitions of the branch of philosophy, these are the sorts of answers that we find:

1. a. A set of principles of right conduct.

b. A theory or a system of moral values.[1]

moral principles, as of an individual[2]

the principles of conduct governing an individual or a group[3]

ethics refers to well-founded standards of right and wrong that prescribe what humans ought to do, usually in terms of rights, obligations, benefits to society, fairness, or specific virtues[4]

These are not very helpful in terms of establishing what and how to learn how to be an ethical person or to apply ethics in our own lives. At a minimum, they require the definition of at least one more term in order to get started.
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Given that we are looking specifically at how ethics are applied in a business setting, we can try to find a definition of “business ethics.” Here, we get:

The study of proper business policies and practices regarding potentially controversial issues, such as corporate governance, insider trading, bribery, discrimination, corporate social responsibility and fiduciary responsibilities. Business ethics are often guided by law, while other times provide a basic framework that businesses may choose to follow in order to gain public acceptance.[5]

Business ethics are ethics that refer to the moral rules and regulations governing the business world. In other words, they are the moral values that guide the way corporations or other business make decisions.[6]

The application of a moral code of conduct to the strategic and operational management of a business.[7]

These tend to be wordier, but not any more practical. The first gives lots of examples, but doesn’t get to what ethics is rather than telling us what we will use them to examine. The second and third are as vague as the definitions of “ethics” more generally. They simply prompt us to ask, “What are morals?”

There is another online definition that provides much better guidance:

"Business Ethics" can be defined as the critical, structured examination of how people & institutions should behave in the world of commerce. In particular, it involves examining appropriate constraints on the pursuit of self-interest, or (for firms) profits, when the actions of individuals or firms affects others.[8]

This has some meat on it. The first sentence gives a framework similar to those that we’ve seen already, though more rigorous, but it’s the second sentence that is key. It gives us a specific criterion for evaluating ethics, both for understanding it and for looking at ourselves and measuring whether we have behaved ethically.

It is the inclusion of self-interest that is the key. We’ll discard the elements that refer to the ethics of firms, as they are not moral actors and cannot be either ethical or unethical. Only individuals can make those choices.

This definition is good, but not quite tight enough for our specific purposes in teaching ethics. Instead, we will define “ethics” as:

the ability to know when we should make decisions that are contrary to our self-interest and the willingness to do so when it is appropriate.

Business ethics, then are the application of this definition when engaged in business.

This definition would not withstand the scrutiny of a philosopher. For one thing, it’s too narrow. Clearly, it’s possible to behave ethically and in one’s self-interest at the same time. However, we want a definition that is useful, not one that is complete or even entirely accurate. We need something we can use without getting into long discussions about deontological vs. consequentialist ethics or other questions that would be addressed in the Introduction to Ethics class taught by the philosophy department at your local university. This is not meant to disparage such a class. In fact, if you have the time, it can be very useful in helping to ground your ethics and allowing you to understand them better.

Another thing that this definition leaves out is our emotions. It does not address those situations where we behave improperly because of some passion. This is deliberate. Learning how to moderate our emotions and not let them control us is important, but it is beyond the scope of this discussion. We are focusing on making choices rationally. Emotions obviously come into play but only to inform purposeful decisions. We might rationally decide that we need to attend anger management classes because we too often find ourselves making irrational decisions while in a rage, but for now, we are focusing on

We are both time-constrained and in need of something practical to use. For these purposes, the above definition will suffice. The instances where the ethical decision also works to your advantage are easy. You don’t need a class to help you with those, so we are better with a definition that causes us to focus on the times it’s hard.

Placing self-interest at the center of our working definition of ethics allows us to challenge ourselves to be more ethical. We can do this within the framework of understanding our values. They help us to determine when we should act against self-interest. Knowing what we believe also informs our conscience and hopefully makes us more likely to do so.

This definition is values free. It establishes that for most of us, knowing when it is appropriate, or necessary, for us to act counter to our self-interest requires knowing our values. There are a few individuals who correctly make this decision instinctually, but they are rare.

It applies no matter what our values are. The definition remains the same in the case of someone whose only value is to make as much money as possible. Such a person would simply say that the appropriate time to act counter to his self-interest is, “Never.” That makes the second element of the definition irrelevant, but not the definition as a whole.

The set of instances when one should act against one’s self-interest cannot be defined objectively, save in theoretical extreme cases such as the person whose only value is making money. There are four major components that make it impossible. The first is familiar to all of us since it applies to so many more things in life. Even if one sets out to make that decision whenever the benefits to others of doing so greater than the benefits to oneself of not, it is usually impossible to measure those amounts. If one does come up with a way, it will merely push the subjectivity back a step to the valuations. How does one compare the values of making a million dollars to the value of not subject 25 people to mental anguish? There’s no objective way to set them next to each other.

The second reason is that in most instances, there will be more than two possible choices to make. In fact, the number of possible decisions will usually approximate infinity. Obviously, we must simplify the process and not actually consider all of them. Which possible choices we opt to evaluate has a huge impact on which way we decide to go.

The third reason such decisions cannot be made objectively is because, within a business context, most significant choices affect a large number of people, not all of whom are helped by making the choice against self-interest. This can range from one’s own family members to coworkers to employees to their families. There are usually second order effects on people whom the decision maker can’t identify or even count.

We can only estimate, often crudely enough to be described as guessing, who will be affected by our choices and to what extent. The effort one puts into trying to determine this will vary, depending upon a number of conditions. In the end, the answer won’t be objectively accurate, but this does not relieve us from the need to make the decision. In this endeavor, there is no such thing as not making a choice.

It is important to consider which way one would prefer to err in. One can slide the threshold for determining whether it is best to act counter to one’s self-interest. It does not need to be in the same direction with every call. There are cases where the harm done in one direction has the potential to be so great that we simply shouldn’t risk mistakenly choosing that way, even if your best estimate is that it would likely cause much less harm than another choice.

We are going to make errors in this process. It’s inevitable and we need to be able to move beyond these errors while still learning from them. Don’t allow the possibility of being wrong cause paralysis when making a decision.

The fourth reason we cannot objectively define correct choices is the most important for us. Our values do not become relevant singly very often. Instead, multiple values are involved, often pulling in different directions. This is where it is most important to have studied our beliefs. Too often, we stop thinking about our dilemmas after we have evaluated how they interact with the one or two most obvious values we hold. All of the other ways in which they implicate our morality don’t become apparent until after the decision has been made, if at all.

The two components of our definition of ethics work in different ways. Sometimes, it’s easy to know whether or not we should act contrary to our self-interest but very difficult to find the will to do so. Other times, it would be easy to make the call if only we could figure out which one was right. Most often, the latter category consists of cases in which it is impossible to satisfy all of the components of our morality.

This can be particularly hard for executive level corporate officers. Lower level employees of a firm need only contemplate whether a decision would cause so many problems for the firm they work for and the people within it that it is not worth making a decision that would produce a minor benefit to others, even if providing that benefit is worthy. This is not true for executives. They have a legally imposed and defined fiduciary duty to the shareholders of the company to produce the most profits possible. There are good reasons for this imposition upon them. Without that duty, they could easily run the corporation for their own benefit and not those of the owners. This happens too easily even with a heavy responsibility to investors.

Nevertheless, this duty should not be used as a magic force field, protecting the executive from all other moral considerations. That the fiduciary duty is very important does not mean that it trumps everything else, unless that is your only value. Most corporate officers have a more complicated morality then that, and that must be reflected in their decision making. While it might often be for the best to state publicly after a controversial decision that this responsibility was the only thing that was important, that should never be true for the internal thinking.

Do not let one of your values become an excuse for acting in your own self-interest. The word “cynicism” has taken on ugly connotations in contemporary usage. It invokes the idea of suspecting that other parties are going to make decisions to their own benefit, in short, to behave unethically by our definition. The problem is that there is already a perfectly good word in English to express this idea: suspicion. Cynicism is really something else.

The Cynics arose in Greece during the 5^th century BCE. Their overall beliefs are more complex than merits even an overview here. Instead, just one aspect is important to us. The Cynics believed that human beings are driven by self-interest. Current usage posits that an uncynical view would be that the object of approbation would act contrary to their own self-interest. A Cynic would argue that this is highly unlikely, and that as a matter of course we should assume that that person will act in their own interests.

Fortunately, the Cynics also believed that a proper education[9] could allow one to move beyond this boundary. Cynicism, properly speaking, is not to be skeptical of another’s future actions, as it is commonly used, but to be suspicious of their motives for those actions. However they might justify them, it was really self-interest that caused them to do what they did.

The most important element of cynicism, that most of its modern practitioners ignore, is that one should be especially skeptical of one’s own motives. We must be cognizant of the way that we satisfy our own desires and not be fooled by our own rationalizations for why we took certain actions. The Cynics went a step beyond this and demanded that we root out all self-interest and never let ourselves be motivated by it. This led them to an extreme form of asceticism.

We won’t take that root, despite the fact that it does allow us to make objective decisions about what proper choices are. What it does not do is allow one to accumulate any wealth or power. So, even if the Cynics were fundamentally correct, by discussing business ethics we are necessarily rejecting their ideas of what constituted an ethical life. Again, it is important for us to have a definition of “ethics” that is useful. Therefore, we should not follow the Cynics into the sort of extremism that ancient Greek philosophers were so prone to extolling.

Regardless, it is important to always keep the tendency to self-interest in our minds as we make decisions. This is not to say, as a Cynic would, that it is improper to ever make choices that benefit us, or even that it is improper to make a choice because it benefits us. Not only will we all make decisions for the purpose of advancing our own cause, we should do so. That is not only proper, it is necessary for most us to do so unless we want to entirely rebuild our society from the ground up.

Our self-interest should be held in balance with all of our other values. Determining what constitutes a proper balance is the aim of teaching ethics in this fashion. We need not arrive at a consensus as to what that balance is. Doing so would require all of us to hold the same values and to weight them identically. Whether or not that is desirable it is definitely impossible.

This discovery can only be done by understanding what it is that we value, why we value it and how much. Listing five values and evaluating them in a classroom setting will not truly accomplish this. It might provide guidance on how to do it, but to really accomplish it will require a lot of pondering.

[1] http://www.thefreedictionary.com/ethics

[2] http://dictionary.reference.com/browse/ethics

[3] http://www.merriam-webster.com/dictionary/ethic

[4] http://www.scu.edu/ethics/practicing/decision/whatisethics.html

[5] http://www.investopedia.com/terms/b/business-ethics.asp#axzz1XKJyokgT

[6] http://www.yourdictionary.com/dictionary-articles/Define-Ethics.html

[7] http://www.applied-corporate-governance.com/define-business-ethics.html

[8] http://www.businessethics.ca/definitions/business-ethics.html

[9] Which, of course, required an extended period of being male and one of the idle rich.

Woo hoo! I'm rich!

2011-09-08T01:19:00.000-05:00

So far, I've made $1.20 in royalties that Amazon and B&N will pay me in 3 months or so. For those not aware, I'm now published. Find my masterpiece either here:

For Kindle

or:

For Nook

Please note that I am not the Michael J. Neal who publishes long texts on pharmacology. I'm the J. Michael Neal who posts short essays with pretentious titles.

Isolated Amidst the Crowd

2011-09-02T22:32:00.000-05:00

This post is very different from the other essays I've posted. It's very personal and not at all having to do with business or economics or politics. It's just me.

I was 42 when my therapist and I concluded that I have Asperger’s Syndrome. The most unfortunate part of this diagnosis is that there is little research on adults that have it, and even less on therapies for adults. If you’re over the age of 15 when you’re diagnosed, the suggested course of treatment is that you’re on your own.

Asperger’s is defined by a lack of empathy. This does not mean that Aspies, as we call ourselves, don’t care about other people’s feelings. Like many others, I care desperately about the mood of those around me. I just have a hard time telling what it is.

The Failure of Business Schools

2011-09-02T22:30:00.000-05:00

There is a crisis in the quality of education provided by American business schools. This is especially unfortunate since the graduates of these schools have largely taken over the running of American businesses. The classes, taken as a whole, are insufficiently rigorous, but this is hardly the only problem. The failure comes at all levels, from the overarching philosophy that informs strategic decisions to the nature of the classrooms. Business schools have become platforms for lazy teaching, irrelevant research and a thorough corruption of the academic mission.

The root of all of their evils is the amoral pursuit of money. Business schools are floating in money. Cries of poverty from deans and the institutions at large should be treated with ridicule. They receive donations from alumni at a rate and size unimaginable to other parts of the university, save the athletic department. Recently, the University of Michigan’s business school received a gift of $100 million and used it to build a new building. The schools lose track of their mission both when acquiring money and when spending it.

Winston Churchill & Herbert Hoover: Their Finest Hours

2011-09-02T22:25:00.000-05:00

Judging people by how they perform in the most visible job they have performed also causes problems in assessing the competence of the individual. People do not perform as well in all kinds of roles, and they do not perform as well across time. Focusing purely on how successful they are in any one position, or how they do in one task, can leave an evaluator with a distorted view of the overall performance of an individual.

Two people who demonstrate this are Winston Churchill and Herbert Hoover. They were contemporaries, and each served in the top political office in their respective countries. That service has come to define the way that people look at them, and yet the performance in that office stands out as an abnormal period in their careers.

Performing on the Big Stage

2011-08-11T19:07:00.000-05:00

In our culture, there is a premium placed upon what is called, “performing on the big stage,” or, “performing in the spotlight.” It ranges from sports to business to the arts and permeates everywhere else. In sports, almost the only thing that matters is winning the playoff tournament that follows the regular season. In the NHL, it was once the case that winning the President’s Trophy, for the best record in the regular season, meant a great deal. Teams hung banners to celebrate it. Now, it’s largely an afterthought and teams would rather make sure that they are ready for the Stanley Cup playoffs than fight to win it.

NASCAR used to decide its champion based upon performance across the entire season, but switched to a system in which the top ten drivers in August compete for the title based upon their performance over the last ten races. They found that fans were losing interest in the races in cases where one driver had built up a huge lead halfway through the season and was almost certain to end up winning. They did not care enough about each individual race to watch to see who won. Only the grand championship mattered enough.[1]

Here's Harry

2011-08-05T13:33:00.002-05:00

It's been a while since I posted cat pics. This is Harry. In the first picture, he's enjoying the very exciting Women's World Cup match between Japan and Germany. He has correctly identified that the Japanese team was a lot of fun to watch. We agreed that they looked a lot like the Red Wings, with their ball control style of play, but I don't think Harry has ever seen the Red Wings play, so his judgment might be considered suspect.

The second is of Harry lounging in one of Dirk's favorite spots to hang out. Dirk is asking me to clear him out. I told Dirk he needs to solve his own problems.

Corporations Aren’t People

2011-08-04T17:11:00.000-05:00

When the U.S. Supreme Court ruled for the plaintiffs in Citizens United vs. FEC, it held that corporations have full First Amendment rights to free speech, and that they cannot be subject to restrictions on political campaign spending that human beings are not. Contrary to most liberals, I was neither surprised by the majority’s opinion nor very critical of its legal reasoning. Based upon precedent, it was hard to see what other conclusion the Court could have come to.[1]

The legal doctrine that corporations are persons predates the American republic, dating back to Renaissance era rulings in England. There was no particular reason it needed to be imported to the U.S., but it was. It is the concept underlying several key elements of the corporate form of doing business. These include limited liability and a perpetual existence beyond the lives of its founders. Other bases could have been constructed, but they weren’t.

Pause

2011-07-24T00:43:00.000-05:00

I'm working on things to post. I intended to go with a different essay next, but I was not happy with how it's coming out, so I set it aside to do something else. Also, I've been struggling with, and losing to, some severe depression lately. That tends to cut into my productivity. I'll keep them coming as I get them done.

Masaharu Homma and the Doctrine of Command Responsibility

2011-07-24T00:41:00.000-05:00

To the extent that he is known in the United States at all, Lieutenant General Masaharu Homma is known as the commander of the 14^th Area Army of the Imperial Japanese Army during the Japanese invasion of the Philippines in December, 1941. In a four month campaign, he defeated Douglas MacArthur’s American and Filipino troops on the island of Luzon, forcing their surrender on the Bataan Peninsula. A month later, the last Allied forces in the Philippines, save for those that escaped to become guerrillas, surrendered on the nearby island of Corregidor.

After the war, Homma was tried for war crimes stemming from the aftermath of the Bataan campaign. Around 76,000 malnourished and diseased American and Filipino prisoners were force marched 56 miles to a railhead at San Fernando without provisions, stuffed into overcrowded railcars and taken to Corpas. From there, they were marched another nine miles to a POW camp. Almost 11,000 prisoners died along the way.

Shareholders vs. Stakeholders

2011-07-06T19:32:00.001-05:00

One of the most basic principles of capitalism as practiced in the Anglophone countries is that those who own the equity in a company, as represented by shares of the company’s stock, own the whole company.

Ultimately, they control all of the decision making in the firm, as exercised in shareholder meetings and through the board of directors. In theory, the board, as elected by the shareholders, chooses the executives. For the moment, I’m going to assume that this theory holds true, though I’ll revisit it before I’m done.

Because they control the company, business decisions are made in the interests of shareholders. In fact, the management of a corporation are required by law to do so. Legally, they have no obligation to anyone else save to obey the law. Shareholders can and do sue alleging breach of this fiduciary duty.

Who Knows How Long It Will Last . . .

2011-07-05T22:45:00.002-05:00

Yes, this thing has gone live again. I make no promises as to how long I will keep at it this time.

Implicit Messaging Means More Than You Think

2011-07-05T21:40:00.002-05:00

Everything we say or do contains both explicit and implicit meaning. Explicit meaning is the plain meaning of the words used. This meaning can often be determined objectively, though the vagaries of language make this not always the case. The actor or speaker intends for the explicit meaning to convey what it does, unless they blunder in using language.

Implicit meaning is much more slippery. It is the meaning that observers draw from the unspoken aspects of communication or action. It is often unintended and cannot be derived objectively. Every observer must derive meaning for themselves, though they can obviously assist each other in arriving at a meaning. In fact, it is rare for there to be only one implicit meaning to any statement or action. Different people can derive different, even contradictory, meaning from the same thing, without any of them necessarily being wrong. It is important to understand that the implicit meanings that someone attaches to a communication are frequently more powerful in determining their reaction than the explicit meaning.

Capitalist Valuation

2011-07-05T21:36:00.003-05:00

In capitalism, goods and services are freely traded in a market, sometimes for other goods and services, but usually for a medium of exchange known as money. I state the obvious not as a lead in to a critique of the truth or falsehood of that statement. Rather, I want to focus on an implication of it that often gets overlooked, or even denied.

Once all economic transactions are reduced to exchanges involving money, money becomes not only the medium of exchange, but also the expression of the value that the buyer places on the good or service purchased. So far, pretty much everyone would agree. However, the unspoken implication of this is that money also becomes the expression of the value that the buyer places on the seller. I intend to argue that, writ large, this is also a measure of the value that society as a whole places upon the individuals within it.

The amount of money that a person has dictates much of the way that they lives his life. It affects the quantity and quality of the food they eats. It controls what they might have for living space. It limits possible entertainment options. It even plays a large role in determining what friends, companions and mate they will have. There are other components to determining how happy a person is, but money is the dominant factor in establishing the environment in which that search takes place.

Teaching Ethics

2011-07-05T21:23:00.001-05:00

Thanks to the recent push to produce more ethical people, you’ve probably had to take a course in the subject in the not too distant past. In my profession, accounting, the Minnesota Society of CPAs now requires that every member take eight hours of ethics training annually. According to the theory, unethical behavior among accountants should be a thing of the past any day now.

I am skeptical that these classes are producing any valuable change at all. Most of the attempts to teach ethics with which I am familiar involve a large dose of case studies and role plays. The students are required to study the case from all of the relevant viewpoints that they can identify and reason out what an ethical choice should be. Then everyone sits around and discusses the case, sometimes with students acting out the various parts. If you’re still in school, you’ll probably have to write it up as a paper. The premise is that this approach gives students the tools they need in order to figure out what the ethical choice is in situations they will face in everyday life.

Test

2011-07-05T19:23:00.000-05:00

Test And here is the rest of it. Test

Job Situation

2010-02-01T10:44:00.003-06:00

Bleh. I actually got an interview from the round of applications I blogged about a month ago. It was my first in about 18 months. It even was with a firm that specializes in forensic accounting, which is the part of the field I'd most like to get into. I wanted that job. They never even called back to let me know whether or not they wanted me to come back for a second interview. Granted, that is its own answer, but it's a particularly rude way to deliver it. As for where I go, I guess there's no alternative but to keep applying. It's tough, though. I can't imagine an entry level accounting position that would play better to my resume, maximizing my strengths and minimizing its weaknesses, than that one. If I can't even get a second interview for the job that most meets those criteria, it's probably a complete waste of time to apply for anything else. Update: I had another position, a quarter time appointment as a TA for the MAcc program director, I was hoping to get. That didn't work out, either.

Cricket Update

2010-01-31T21:57:00.003-06:00

I just got done watching the last Pakistan/Australia ODI on the TiVo. Trying to stay up to watch them live has become impossible. At least this one was close, but it ended the same way all of the others did: an Australian victory. Fittingly, it ended with Nathan Hauritz being caught in the last over, but it was ruled a no ball, producing the last run of the chase. During the match, the commentators praised how well Pakistan had played, saying that they deserved at least one win. I'm a complete neophyte at this game, but I have to disagree. The last time I saw anyone in sports as bent on self-destruction as the Pakistanis were, I was watching Greg Norman melt down on the back nine at Augusta. It was nice to see Ricky Ponting reach 55, because, ever since I praised him, he produced 43 runs in three innings. In fairness, I thought his decision making was pretty good, and his fielding was very good, so it's not like he was worthless. Oh, and the less said about Gopher hockey this season, the better.

Forgiveness

2010-01-31T21:55:00.002-06:00

Forgiveness is giving up all hope for a better past. - Rev. Justin Schroeder The services at church have a theme every month. For January, it was forgiveness. The above definition struck a real chord with me. I was intending to write a lengthy post on what the sermons this month have meant to me, but i couldn't put it into words, so you're spared. I will say that it has been a very positive experience.

On a Brighter Note

2010-01-22T18:11:00.002-06:00

Boy, Cameron White can pound the ball. This whole Pakistan tour of Australia has been an exercise in watching a side of competent professionals beating up on a side that's clearly not ready for prime time. It isn't like the test I saw between Australia and the West Indies, where there was a feeling of the losing side playing its best and just not being good enough. Pakistan has some nice looking young bowlers, but, collectively, they have no idea what they are doing. I generally mock the idea of a team in sports needing to "know how to win." It's a cliche used by sportswriters to cover up for the fact that there is luck involved in outcomes, as well as lots of little things that are hard to observe or impossible to quantify. It's a crutch. Pakistan, though, really need to learn how to win. It doesn't pain me that much, because I have somehow concluded that they are the side that is right up there with the English on my list of who I want to see lose. (It has something to do with the level of corruption and outright violence connected to Pakistani cricket that, to my limited reading at least, seems to dwarf even that of Indian cricket and just makes them unappealing, even though I have nothing against the team itself.) Towards the end of the fourth test, I really meant to write something about Ricky Ponting. He had a brilliant second innings in Hobart, made some good captaincy choices, and was named the Cricketer of the Decade right in the middle of the test. I probably would have gone with Jacques Kallis, but that's quite a set of feats for one week. It also stood in direct opposition to my personal take on Ponting, at least until the commentary surrounding the award got me to take a closer look. Through the miracle of small sample sizes, from the period before I started staying up way too late at night to actually watch the game, I always managed to catch Ponting at his worst. My image of him was formed by following (on the Live Scorecards at Cricinfo.com) a string of innings where he got out quickly and ignominiously, and looked comically ineffectual as captain. All I could see was a guy who clearly wasn't up to the job of running the team, and let the pressure of that ruin the rest of his game. For the life of me, I couldn't figure out why the Australian side didn't replace him as captain and see if he could go back to just scoring runs. That lasted until the first innings of the last test. Australia again got off to a poor start. I tuned in when they were 61/2, and Michael Hussey promptly lost his wicket. At that point, Ponting and Michael Clarke simply took over. They batted, and batted, and then it was stumps, and then they came back the next morning and batted some more, until Clarke finally fell for 166 more than 122 overs after the partnership began. Ponting soon followed, with a double century, but by then it didn't matter. The two of them had taken over the match, and, unlike the Pakistanis in the second test, the Australians never had any intention of letting go. It wasn't like Watching White's electric century last night, which, as is fitting for one-day cricket, was a quick and thorough beatdown. Once they gained confidence, it was like watching the tide come in. It was slow, it was grinding, it was relentless, and you knew that, by the time it was done, your elegant sand castle was going to be a shapeless mound of wet dirt. It wasn't just that they kept scoring runs. It was that they constructed a psychological aura of complete invincibility. The commentators got themselves into a bit of a panic on the morning of day five, when Khurram Manzoor played defense for five hours and they started talking about a draw, but I never felt that. The test was over in the afternoon of the first day, when the Pakistani bowlers started pitching so wide that Ponting and Clarke had to just watch balls sail by that were impossible to hit, and had zero chance of getting them out. It was an admission of defeat, and the Pakistanis never recovered. So, I admit it. I was wrong about Ricky Ponting, though I don't think I ever shared that opinion with anyone. It's been a fascinating tour to watch, at least in the clinical sense that, if you're going to watch a boy pull the wings off of flies, it's best to watch one who is really, really good at it.

Democrats

2010-01-22T14:46:00.003-06:00

I really can't describe just how disgusted I am with the Democratic Party right now. It isn't just that they fell asleep and did nothing while a ridiculously bad candidate managed to lose a safe Senate seat; it's inexcusable, but it happens. It's the complete and utter panic and uselessness with which they have responded to that loss that has me more angry with them than I've ever been. Given that we're talking about Democrats here, that was a pretty high bar to clear. It isn't just that they are exhibiting a ridiculous amount of political cowardice, putting their chances of getting re-elected above every goal of improving policy. It's that they are being stupid as well as cowardly. Anyone who thinks that their electoral chances will be improved by letting health care reform die with nothing passed is too dumb for their career to live. All that does is make them look weak. Voters don't give you a large majority in the expectation that you will give up on your most central priority from the last campaign. If that's what you accomplish, the message you send is that you are useless, and they might as well elect your opponent. It isn't even going to protect them from attacks. Both houses already passed a bill. Every Senate Democrat voted for it already. Voters aren't going to care that they voted for slightly different bills, and Republicans sure as hell aren't going to make that distinction. The Democrats waffling now already own all of the downside to passing health care reform, and now they seem determined to make sure that they don't get any of the upside. They're all at fault here. The House Democrats need to suck it up and pass the Senate bill. I agree that they've been shafted. The House actually did its job. They had a bill ready to go before the August recess, and waited for the Senate to do the same. And waited. And waited. And waited some more. Now that we are overwhelmed by crisis, the Democrats in the Senate have managed to become even more useless by declaring that they aren't going to deal with it any more. I've heard a lot of criticism of Nancy Pelosi, but she got a bill through her chamber on time and under budget. So, yeah, the House Democrats have a good reason to feel like they've been hung out to dry. But you know what? Someone has to be the adult. It sure as hell isn't going to be Evan Bayh or Mary Landrieu taking up that role, so the House is the only one left. Just pass the damned bill. The White House doesn't get a pass, either. I've defended Obama for months, saying that there was a good reason for a hands off approach, and that playing it cool was the way to go. I think that I may have been wrong all along, but, at the time, I still think it was a reasonable approach that just turns out to have not worked. Regardless, that time is past. He needs to step up and drag Congress over the finish line if he has to. His continued refusal to take charge, and instead to say that it is up to Congress has gone from reasonable but wrong in hindsight to sheer folly in the moment. For god's sake, do something. This week has confirmed suspicions that the Democratic Party is morally unfit to govern. They do not take the job seriously. Their primary characteristic is fear, and you can't run a country if you are scared of everything. In fact, the only responsible choice for a voter is to prevent you from having the opportunity to run the country. Unfortunately, the only alternative is even less morally fit to run the government, not because they are feckless, but because they are actually immoral. It's beyond depressing. I've called both of my Senators, my Representative, and the White House, asking where they stand. The answer, in all cases, is that they are standing in the corner, waiting for someone else to make the decisions for them. In response, I tell them how disgusted I am. Well, not really, because I don't fell comfortable using the language necessary to convey how disgusted I am when talking to strangers and hapless staff people who answer the phone. I then also tell them that I simply can not vote for, or donate to, or work to re-elect anyone who is too gutless to step forward at this point. Sigh. This country is completely fucked. In a lot of ways, it goes back to the voters. There's a lot of truth to the statement that, in a democracy, the people get the government they deserve. Of course, we also have to deal with the problem that the Supreme Court just opened the doors to unlimited amounts of corporate cash in the electoral process. I'm completely demoralized, and feel like giving up right now. Glen, how easy is it to emigrate to Australia, and can I bring cats? Update: Tom Toles nails this with today's cartoon:

More Cricket

2010-01-06T02:08:00.000-06:00

Is cricket always this exciting, or did I just step in at the right moment? 24 hours ago, Australia was dead in their second test against Pakistan. Not wounded. Not on life support. Dead. Australia won the toss, and captain Ricky Ponting sent his side in to bat. Two days later, the question was whether that would go down as one of the monumental blunders in cricket history, as his side went all out for 127 runs. When they Aussies finally bowled the Pakistanis out early on Day 3, they were 206 runs behind. The opening partnership of the second innings did fine, with Shane Watson and Philip Hughes generated 105 runs before Danesh Kaneria made a nice catch to retire Hughes off of his own bowling. Ponting continued to struggle after getting hit in the elbow against the Windies. After his wicket, Michael Hussey replaced Ponting. Hussey only recently returned to the Australian side after being dropped for what the announcers described as poor play. He started plugging along, but Michael Clarke added few runs after Watson was dismissed, and when he went down, Marcus North, Brad Haddin, Mitchell Johnson, and Nathan Hauritz lasted a total of 40 runs and less than 18 overs. Australia was 8/257, leaving them only 56 runs ahead with two wickets left and the whole Pakistani innings to go. As I said, dead. Sure, Peter Siddle came in and survived to stumps, dragging the lead to 80 runs, but Siddle isn't much of a batsman. Sure, Kamran Akmal had a horrible innings defensively, dropping Hussey three times when he should have been out, but it didn't matter. Dead. Then, this morning (Australia time; it started about 6pm for me, but I didn't tune in right away), Peter Siddle simply refused to acknowledge that he was dead. He didn't score much, setting his career test record with a grand total of 38 runs, but he survived. Meanwhile, Michael Hussey, who I don't think is in danger of being dropped again after this performance, chipped away. By the time Siddle finally became Mohammad Asif's eighth victim of the match, it no longer mattered that Dougie Bolinger couldn't survive the first ball he saw. At that point, Australia was 175 runs ahead. The consensus view in the broadcast booth was that the pitch had deteriorated to the point that this set Pakistan a very difficult chase and Australia was the favorite. That's how it turned out. There was a point where Pakistan was 6/130 when it looked like there was the possibility of another reversal, but that didn't last. After Mohammad Sami was retired, the last three wickets followed in the next four overs, for a total of 6 runs. As I said, dead. Meanwhile, there was, for me at least, a very amusing set of events in the third England/South Africa test. The cameras caught several instances of English players doing things that would alter the ball. Stuart Broad, rather than bending down to stop a slow moving ball, caught it with his foot and then ground his spikes into the surface. Another English player, I can't remember which one, deliberately picked at the surface of the ball, roughening it up. The commentators were suitably outraged, but also a bit mystified. They were adamant that this sort of behavior is just, "not on," but were also skeptical that sticking one's spikes into the ball would really have enough of an effect to be worth the possibility of being caught. Their verdict was that the match referee would have to step in and take action, which would amount to . . . issuing a stern warning that England had better stop. I just about fell out of my chair. My experience is all with baseball, and I'll get to why that might mislead me, but all I can say is that, with a system of approved ethical behavior any more lax than that of what cricket apparently used to be, you'd have to be a moron not to be doing this sort of thing if the consequence of being caught for the first time is just a warning. The culture of baseball is very different. There, you get away with everything you can, and, if you get caught, you take your suspension with a combination of grace and lame excuses for why you weren't really guilty. Gaylord Perry made it to the Hall of Fame despite a career in which he illegally doctored the baseball continuously, but skillfully enough that he was only caught once, late in his career. Everyone knew exactly what he was doing, but no one could ever amass enough evidence to convict him. As an aside, don't give any of the moral scolds who tut tut at things like Sammy Sosa being caught with a corked bat seriously. Aside from the fact that there is zero evidence that corking a bat has any value to a hitter, that's the nature of the game. I like the fact that cricket has very high ethical standards of what is acceptable, and regret that some of that has been lost as the game becomes more professional, that's not the only acceptable culture. Baseball has always celebrated the rogue, and don't let any of the moralists convince you otherwise. This is one of the main reasons why my feelings about steroid use are pretty complicated, but maybe I'll go into that some other time. Consequently, there is large body of work with regards to doctored baseballs. It is pretty much agreed that with a couple good swipes from a razor blade, any pitcher at the professional level can make the ball tap dance the Hallelujah Chorus. Apparently, one of the classic spring training rituals with a pitcher new to the system who is destined to be buried in A-ball (in other words, a long way away from the major league level) for the upcoming season, is to hand him a doctored ball and ask him what he can do with it. All of the commentary I've seen from the contingent that had never tried it on their own is that they are amazed at how much more movement they get on their pitches that way. Cricket is a different game. With a baseball, Stuart Broad would have produced so much change to the ball that no one would question that it would give a huge advantage to the bowler. It's not really the same thing. A bowler gets less spin on the ball because they aren't allowed to snap their wrist, like a pitcher does. Much more of the change of direction comes from the spin on the ball interacting with the ground when it bounces. Consequently, one would expect that altering the ball would have less effect, since it's value comes from producing break in the air through the variation in air pressure that a deformed ball produces. So, there is good reason to think that a given amount of deformity in a ball would provide less difference on each delivery in cricket than in baseball. Of course, giving that as a rate per delivery is misleading itself. The two games have very different philosophies about replacing the ball. In baseball, at least at the major league level where the expense of going through lots of balls is negligible, the rule is that every pitch must be made with an unaltered ball. If the umpire ever thinks that the current ball has been deformed somehow, he tosses it out and pulls a new one out of his pocket. If someone hits a ground ball that scuffs across the dirt of the infield, its major league career is over. The average lifespan of a MLB ball is less than six pitches. In cricket terms, that means that you are getting a new ball at least once an over. If a pitcher's game plan is built around throwing a scuffed ball, he must have the capacity to keep scuffing balls over and over without getting caught. Cricket is an entirely different matter. In a test, the ball can only be replaced after 80 overs, barring a decision that it is unplayable. It gets soft, and it gets marred. Disfigurement that occurs naturally is perfectly acceptable. This has two consequences. The first is that, if you can disfigure a ball early in its life, you get to keep bowling with it for a long time. The second is that it's much easier to hide the evidence. In baseball, the mere fact that a ball is marked in certain ways is a prima facie case of illegal manipulation. In cricket, that happens. So, it was sort of touching that the booth commentators were so bewildered at the English actions. (Assuming that they were, and weren't being disingenuous.) I have no doubt that not only were the English actions deliberate, but that they also knew the value of what they were doing, rather than just being caught up in the moment.

Blech

2010-01-01T04:20:00.001-06:00

I spent all afternoon, and part of the evening, applying for jobs. I'm not sure that there is a more loathsome way to spend one's time. I would rather pull out my own fingernails than hunt for a job, and, unlike most people, I have actually pulled out my own fingernails, so I can make an informed comparison.

Banks (What Are They Good For?)

2009-12-30T22:56:00.000-06:00

As a part of going through the bank bailouts, I'd like to go back a few steaps and start with laying out what a bank is. I've gotten the impression that there are people who don't know exactly what they are or what they do, and thus don't understand why bailing them out is important or how it can be done. I'm writing this on a pretty basic level, so bear with me. There are actually a number of different types of banks, only two of which I'm going to get into here. The first is the commercial bank. This is what most people think of when they think "bank." They have branches, and collect deposits, and make loans. Their purpose is as aggregators of capital. It's more efficient for them to collect a lot of small deposits and make one loan than it would be for a small business or prospective homebuyer to connect with enough individuals with money to lend to meet their needs. They make their money on the spread between the interest rates they can borrow at (by collecting deposits) and what they can charge in loans, less expenses, including loans defaulting. This is true for all of the normal reasons for economies of scale, but also two additional ones. The first is risk diversification. By despoting money with a bank, you get a small piece of every loan they make, rather than lending to just one person. You aren't at the risk of one loan defaulting and losing everything. The other function they serve is time shifting. One problem with the credit markets is that people with money usually want to lend it short term in order to preserve liquidity. People who borrow money generally want to do it for the term of the project, such as paying off an entire house, for the same reason. This leads to a mismatch. It would be difficult to deploy capital if ultimate borrowers and ultimate lenders had to agree on terms. So, a commercial bank steps in. They can offer lenders a variety of different products, with different terms. These include a checking account, which is essentially a perpetually rolling loan with an infinitely short term, since you can withdraw your money at any time; you receive a correspondingly low interest rate. Savings accounts generally have some restrictions on withdrawals, such as a minimum balance, and pay higher rates. You can get certificates of deposit in a variety of terms. The bank turns around and lends that money for a duration that is tailored to meet the need of the borrower. All of this means that it would be very difficult to finance small businesses without access to equity markets without commercial banks acting as middlemen. Free Bonus Material: Fractional Reserve Banking: You will periodically hear some crank, be it a relative at a holiday meal or someone on an internet chat board, going on about the evils of fractional reserve banking. They tend to be right wing nuts, engineers, or both, and often pause long enough to regale you with stories about how we need to get rid of fiat money and return to the gold standard. Unsurprisingly, most of them voted for Ron Paul. I'm not going to get into the gold standard right now, but the attacks on fractional reserve banking are, if anything, even dumber. All fractional reserve banking means is that a bank collects deposits, and then only keeps a fraction of them in its vaults as reserves. It lends the rest of them out. You may notice that that's the entire business model of a commercial bank. If we prohibited fractional reserve banking, it would mean the end of banking as we know it. That's really not a good idea. It's certainly worth talking about how much of their deposits banks should be required to keep on hand, how we measure it, and what they can do with them, but we need fractional reserve banking. The second type of bank is an investment bank. Investment banks don't collect deposits, and don't make most of their money by lending. They provide services to business, and the business model is to collect fees for doing so. "Investment bank" is something of a misnomer, because they don't typically make investments; they make it easier for other people to do so. Many of the services they provide are more complex than I really want to get into, but they include being the underwriters for issuing securities and providing bridge loans for mergers and acquisitions. The business model is, in some ways, the exact opposite that of a commercial bank. Rather than lenders coming to the bank and depositing money, which the bank then loans out, people that want to borrow money go to an investment bank to get it, and the bank then finds people who want to loan the money. In most instances, the loan is on the books of the investment bank, at least technically, before it gets sold off. For true investment banks, though, there is no desire for the loan to stay there. They want to sell it off and use that capital again. Sometimes, though, they find that they can't unload the asset, and are stuck with it; if this happens with a bridge loan, it becomes known as a pier loan, as in, a bridge to nowhere. (Maybe we should call them a Palin.) This started happening a lot during 2007 and 2008, and was a major feature of the crisis. Over recent decades, the large investment banks started deliberately taking actual trading and lending positions. It's important to emphasize that this was a move away from actual investment banking into a completely differednt business model. I'll get back to this more in my next post on the subject, Regulation and Its Discontents, but much of what was going on under the umbrella of investment banking really wasn't. Much like commercial banking, investment banking is critically important to the functioning of the economy.

Between the Exams, Tests!

2009-12-20T21:31:00.002-06:00

After watching sporadically for the last three months, I finally put my DirecTV CricketTicket to the (ahem) test this last week. There were two tests that started Tuesday night, my time, and I watched a lot of cricket while not studying. Both were quite interesting. Overall, I caught most of the West Indies/Australia match, largely because it was at a more convenient time: it started about 7:30pm and ran until about 4:00am. England in South Africa didn't start until 2:30am, and that's too bizarre a schedule, even for me. I DVRed the first day and watched it later, but I would have been busy about twenty hours a day just with cricket had I tried that the whole way. So, some observations from a complete amateur at watching the game. First, things I need to learn. I've read David Morgan-Mar's treatise on the game, but that can only take one so far; I just need to watch. I'm starting to figure out why fielders are placed where they are. A lot of it still comes off as strange to someone used to baseball; the slips strike me as being far too close together. The biggest part, though, is trying to figure out the method behind the madness of bowling strategy. Things that the announcers described as obvious completely eluded me. I console myself that they probably have no idea how to watch a breakout up the left wing boards, or what the hell a neutral zone trap is. (The trap in hockey is absolutely nothing like an offside trap in football/soccer.) The Australia/West Indies test was a roller coaster. At the end of each of the first four days, there was a different feeling about where it was going. After Day 1, Australia was clearly going to win. After Day 2, it was up in the air. Halfway through Day 3, Australia again was clearly going to win. Then they collapsed, and it was up in the air again. Day 4 was wildly entertaining, and ended with the Windies needing 51 runs to win, but having only one wicket left. They closed it to 35 runs on the last morning before succumbing. There was, by cricket standards, a good deal of ugliness over the course of the match. Sulieman Benn was suspended for two one-day games and Mitchell Johnson and Brad Haddin fined for one incident that involved physical contact. (And I can't quite figure out the disparity in punishments.) Two other Australians were disciplined, including Shane Watson for an outburst that would have been inappropriate in pretty much any sport. I thought that Chris Gayle did a good job of retaining his composure, though he slipped in a couple of good barbs in the press conference. I'm not that familiar with cricket, but this fit the perception I have formed that the Australian side has a tendency to look like the Oakland Raiders of cricket, though, to the best of my knowledge, they've never left an opponent paralyzed from the neck down. I'm happy to see the West Indies with an exciting young squad. As something of the underdog of the cricket world, they are my choice to root for. I think I need to order myself a Chris Gayle jersey at some point. I lost track of the England/South Africa test over the middle few days, but it sounds like it was close the whole way. According to the commentary, the test was England's to lose, as the South Africans were missing Dale Steyn and Jacques Kallis unable to bowl. It didn't quite work out that way. South Africa hung tough. I came in this morning, with Kevin Pietersen and and Jonathan Trott at the bat. At that point, England was collecting runs at a quick enough rate that it looked like they had a chance to catch the target for the win. Then Pietersen, who may well be more likely to completely fuck up than any other elite athlete in the world, basically committed suicide and got run out. It just seemed like the psychology changed on both sides in that instant; cricket doesn't strike me as a game of momentum, but it sure was today. England pretty much stopped scoring right there. It took another twenty overs for the hosts to knock out Trott, but they only gave up 29 runs over the interval, and it became obvious that we were headed for a draw. Then Friedel de Wet went bananas on England's batters, and all of a sudden, they had to hang on to survive, and just barely managed. Graham Onions (and is there a more English name imaginable?) was forced to defend for two of the last three overs. It would have been a great story if Makhaya Ntini had celebrated his 100th test by taking Onions' wicket in the last over, but it wasn't to be. As an aside, where would the poms be if they had to use actual Englishmen to make up their side? Of the eleven they played, four of them are South African, who scored almost half of England's runs in the test.

Personal Update

2009-12-20T17:32:00.000-06:00

It's been a season of ups and downs, though the downs are weighing pretty heavily. The job search is going absolutely nowhere. It's been depressing watching my classmates get offers while my resume can't draw flies. I have to tell them that it isn't that I'm not happy for the, just that it's hard to get excited about someone else getting a job at this point. Admittedly, though, the offers aren't as good for the 24-year olds around me as it usually is, either. Mostly, the job environment just sucks. The dating search isn't going any better. One woman on E-harmony contacted me and we had a couple of beers once, but that was it. There was a young woman in one of my classes with whom I had plans to go get coffee, but then she said that a meeting had come up, and she has stopped returning my e-mails since then; I'm thinking that that's not a good sign. I've been thinking seriously about going into a PhD program, and I've found a professor to work with on a research interest I have. Unfortunately, I need to talk to some of the other tenure track faculty about my plans. Trying to contact them is like sending my resume to prospective employers: neither set of people send a response. Professor Isseivitch is the only one of the eight tenure track faculty I've tried to contact that even answers my e-mails. On the positive side, I got an A in both of my core classes. I liked them, and the professor, so that was very pleasing. The depressing part is that the classes are over. I realized the last week that those classes had become almost all of my social life. Without having them on my schedule for the next few weeks, there's a giant hole that I don't have anything to fill. I sat in the halway outside the classroom after the second final, feeling old and lonely, with nothing but an empty house to return to. One classmate stopped to talk with me, and we might get together for dinner. There are a couple of other people I want to send e-mails to to try to get together with over break. My ex-wife decided to lob an emotional hand grenade into the middle of this mess just to top it off, and I had a nasty cough for a couple of weeks. All aorund, it's been a bleah month.

Depraved Indifference to Human Life

2009-12-14T10:27:00.003-06:00

Joe Lieberman has decided that he simply won't vote for a health care reform package that contains . . . well, that's not entirely certain. He's saying that it can't include a public option, and it can't include a Medicare buy-in. The problem is that he's been wildly inconsistent on the subject, having indicated in the past that he's in favor of things he's now against. His explanations for his opposition are largely nonsensical, in that they are often factually inaccurate descriptions of the proposals, mischaracterize statements from the Congressional Budget Office, and frequently contradict themselves. It's becoming increasingly likely that he just doesn't want anything to pass. All of that is also true of Ben Nelson, but he's decided to take his rhetorical last stand on the issue of abortion. Olympia Snowe has been more consistent, though that's not saying much, and her arguments still don't make a lot of sense. Blanche Lincoln, I think, just isn't very bright and doesn't quite understand either what's going on, or what her own crass political interests are. All of these people have indicated that they think that there is a very serious crisis in the health care system. All of them have said that reform is desperately needed. I'm going to take them at their word on that; these aren't the crazed bulk Republican party that simply has no contact with reality and opposes health care reform on some crocked definition of principle. They know that there is a problem. Given the complete incoherence of their positions, I can't really attribute their opposition, except maybe Lincoln's use of the ignorance defense, to sincere belief in the idea that the proposed bills actually make things worse than they are now. If that were the case, then they would be able to make a case that was consistent, both logically and rhetorically. We wouldn't get Joe Lieberman's seeming membership of the Excuse of the Month Club, trotting out something different every four weeks. It's more likely that their opposition is some sort of need to be different, rather than following the party line. They are moderates, dammit, and no one gets known as a moderate, with the accompanying glowing stories in the Washington Post and invitation to Meet the Press, by agreeing with the liberals. You can't do that and be a Very Serious Person. These are people who acknowledge that there is a crisis. This is a crisis in which ~~hundreds of thousands~~ [Edit: I exaggerated/misremembered the number from the study. It's actually about 25,000 per year. I think that that still justifies my point.] of Americans die every year due to a lack of proper health care. Faced with the knowledge that they could vote for a bill that would reduce the number of people dying AND SAVE MONEY FOR THE FEDERAL GOVERNMENT (which, after all, is one thing they claim is a primary motivation for them), they choose to express a fit of pique. Because no one will give them the perfect bill, which they define in an ever shifting fashion, they would prefer to vote for no bill at all, and allow those hundreds of thousands of people to continue to die. There's a phrase for this, and I used it in the post's title. On a moral level (legally it's a bit more complicated, given that there is rarely an affirmative duty to save someone else's life, no matter how easy it would be for you), this is a classic case of second degree homicide. They know that they are condemning people to death (which is why the real nutjobs get exempted from this charge), but they are choosing to do it anyway to stroke their own egos, and, in Lieberman's case, because liberals were mean to him in 2006. (I hope the voters of Connecticut are satisfied with what they have wrought; think Ned Lamont would be on board with health care reform?) This is the behavior of deeply sociopathic people. Matt Yglesias has written several times about how we, and the political press in particular, have come to accept as perfectly legitimate behavior on the part of legislators things that are really deeply immoral. He generally uses global warming as his example. Colin Peterson, a representative from rural Minnesota, recognizes that global worming is a serious problem and that it poses potentially disastrous consequences for people around the world. Despite that, the Washington Post editorial board finds it acceptable that he made the energy bill less effective at dealing with the problem in order to capture more money for soybean farmers. That is, they tell us, his job. Morally, it isn't really any different than going to Bangladesh, looting their villages, and delivering the spoils to his constituents. Fred Hiatt and his merry band of elves would be appalled if he did that, I think, but they are all in favor of the extortion racket that he is running. Damaging other people out of self-interest is not moral behavior. It doesn't matter if your job description says that you are supposed to be representing the interests of a small set of people; it's still immoral. Unless you work in the US Congress.

In Which I Rant About a Guest Speaker

2009-12-09T17:00:00.001-06:00

We had five guests speakers in my Internal Control class last night, conducting something of a roundtable discussing various aspects of control and internal auditing. I had a number of disagreements, most of which I didn't bring up at the time. Of course, I feel compelled to share them anyway. In order not to be completely negative, I want to say that a senior internal auditor from US Bank gave the best answer I've received to a question I've asked every relevant speaker all semester. I am very interested in how companies assess risk. In particular, I am curious as to how they assess the likelihood and magnitude of known risks that are extremely difficult (perhaps, as I'd like to research, even impossible) to accurately measure. It's my belief that there are a lot of risks out there that depend upon so many different variable inputs strung out in chains that no estimate of their danger has any useful informational value. I plan to discuss that more in another post. This guy started by admitting the obvious: if you have a hundred trained auditors with knowledge of the subject matter, and ask them to estimate the likelihood of a given risk blowing up and the magnitude if it does, you're probably going to get two hundred different answers. He didn't have a whole lot else to add that really advanced the discussion, though some of it was interesing. This, though, is the admission I've been looking for all semester, and he's the first one who gave it. It leaves open the topic of what, exactly, you do about this unknowability, but I never expected any of our guests to be able to answer that. I asked the question more to see how they approached answering it, rather than the specific answer they gave. The discussion got started on a sour note. One of the guests was running late because of traffic, and walked in just as the introductions were concluded. As he entered, he said that you should make sure never to get stuck behind a hybrid. Now, I'm hardly one to object to the witty quip in class, so no big deal. I only rate it as a four out of ten on the scale of funny, but sometimes your jokes fall flat. No big deal, had that been where it ended. Unfortunately, he had to add, "Hybrids with Obama stickers." I don't object to politics entering classroom discussions. In fact, I think that there needs to be a lot more discussion of politics in classes like accounting, particularly of the sort I'm taking now, and finance. Americans have this irrational desire to pretend that politics can be kept separate from everything else in life. It isn't. Much of the underpinnings of accounting are intensely political, and teaching them as if they aren't is a part of how our national discourse is horribly warped. You simply can not discuss something like Sarbanes-Oxley intelligently without looking at the political motives of those pushing various arguments. However, it's too controversial to do this, so teachers tend to excise it, and teach it in a technocratic fashion. This is sad. With no discussion of motives, you can't effectively address the underlying question of whether SOx is a good thing. This became apparent in the poverty of the discussion that evolved last night, because it meant that one particular implicit argument of this speaker in particular made with all of his comments, namely that efficiency is the only goal to which we should be striving. This post is going to be long enough that Ill set aside those underlying arguments. In fairness, Professor Kallio is much less guilty of this particular sin than most of my instructors. For reasons that I completely understand, he really doesn't want to get into particular sorts of discussions, because the systemic incentives for a teacher these days weigh heavily against it; this is a systemic problem. He has also never stopped me from interjecting my own views into discussions, though I've tried to be careful not to overstep certain boundaries. I would, however, like to know what he actually thinks, and a free discussion of our views would be very enlightening. There is, however, a very large gap between sharing your views in class and defending them, and making the sort of gratuitous comment that this guest speaker did. Such a comment can, in no way, add value in a classroom setting, and it was completely inappropriate. Keep in mind that my take on everything this man said over the course of the evening is colored by his attempt to joke. I'm biased. He has spent his career working with start up companies, and pretty much the only thing he had to say last night was that Sarbanes-Oxley imposes intolerable burdens on small companies. He talked about working with Seymour Cray, and how he was afraid that SOx would prevent the introduction of the next generation of computers, or the next generation of software, or anything else. It was a pretty standard comlaint about regulation stifling innovation. I don't want to imply that there isn't a real concern here. Of course there is. More regulation will, to some extent, stifle innovation. Nothing in life is free. I have several problems, though. One is the one-sided nature. The argument created a perception that the regulation brings no benefit; it bordered on the Randian in its implication that Washington in the source of all the problems. This isn't true. Regulation has costs, but it also has benefits, and the discussion in weighing them is complicated, and touches on some very political issues. I'm also struck by the belief that we should view government regulation as the enemy in allowing companies access to the public markets, as if government regulation wasn't an inherent part of functioning public equity markets and that there is an inherent natural right to be allowed to trade on them that Washington is interfering with. I don't think this guy really understood Thomas Hobbes. Part of my reaction is that I also don't trust him when he starts throwing around numbers. He talked about having just raised $6 million in a public offering, and that imposition of SOx rules (which are not all currently in force for small companies) would cost about $400,000, and that this isn't a good trade off. To start with, when someone who is obviously opposed to a regulation on ideological rather than, or in addition to, practical considerations, I tend to be suspicious of any cost evaluations they casually throw around. I know that makes me a small, suspicious person, but I can't help it. I also question whether a company that needs $6 million of additional capital really should be going to the public markets. He, and others, talk about how they need access to easy money. They complain about the kinds of restrictions that bankers would impose before lending money, or the fact that a venture capitalist would actually want control of the company if they invested. (Good God, you mean the owners of a company would actually want say in how it's run?) What they want is a lot of money with no questions asked. Quite aside from my bigger concerns as to whether the underlying questions as to what sort of society is desireable are being ignored, or whether the value of regulations is really being addressed, this argument always makes me want to bang my head on my desk. Has he not paid any attention to the various disasters of the last decade? Do they not make him ponder, at all, whether we should really want small, risky companies to have access to lots of easy money? Let's set aside all of the places where outright fraud occured, and just ask whether it improves society that Pets.com and Fremont Financial have access to big piles of money. Yes, innovation brings lots of improvements, but it can also lead to giant bubbles and collapsed financial systems. Let's slow down for a moment. There were also several places where the evidence he marshelled to support his position was very weak, or even where it implied the exact opposite of what he was saying. The obvious case was his invocation of Seymour Cray as his icon. There are two problems with this, one of which he actually cited as if it supported him. He talked about how Cray built companies from the ground up, and then got frustrated after they became a certain size and he had to follow all sorts of rules that people imposed on him. However, it should be noted that this was decades before Sarbanes-Oxley was passed. The problem is that, as organizations grow, freewheeling individualists feel increasingly constrained and want to leave. This isn't the result of SOx; it's the result of having lots of people involved. Note, of course, that this never stopped Seymour Cray from innovating; he just went on and started a new company. Innovaters today still have this option: get something going to the point that it needs a lot of people to keep going, then leverage your talents doing what you do best by leaving the company and starting again. Sure, it's das that you have to leave your creation behind, but, once you need other people's money, it isn't really yours any longer anyways. The other problem is that using Cray as evidence that we need to keep from stifling the currently existing access to public capital markets is dishonest. A lot has changed over the last two decades, and a part of that is that it is much easier to take a company public than it was when Seymour Cray was inventing supercomputers. To say that Sarbanes-Oxley will keep companies from getting access to that money is not to say that they will be more restricted than Cray was. The bigger problem right now is that no one wants to lend money to anyone, entrepreneur or not. Assuming we can fix the mess that the credit markets are in, that will free up a lot of cash. My guess is that the post-SOx, post financial crisis equilibrium will end up with fewer small public companies than we've had recently, but more access for innovators to those markets than existed in the 1950s. Scare tactics invoking Seymour Cray don't copnvince me otherwise. As I said, my argument isn't that regulation in general, and Section 404(b) in particular, doesn't stifle innovation. My argument is that the discussion is much more complicated and deep than presented by some of its participants. Then again, I'm a liberal, and you know how we are about nuance.

Being Passionate About Your Job

2009-12-09T16:59:00.000-06:00

We had some speakers in classd last night. I'm working on a longer post addressing some of their comments on internal control and Section 404 of Sarbanes-Oxley. It's not going to be technical, and addresses broader, in some cases very political, issues. First, though, a completely tangential observation. Of course, just because it's tangential doesn't mean that I plan tov keep it short. I was struck, in one instance, by the extent to which it's important to guage your audience when answering questions, because an answer that is perfectly accurate and appropriate in one setting is neither in another. The last thing they addressed was a question as to what advice they would give to someone trying to get started in the accounting/auditing profession. Unanimously, their response was to say that you need to find something that you are passionate about and enjoy doing. Given that the class is mostly people in their early and mid 20s, armed with freshly minted accounting degrees, this makes sense. As someone in his early forties, unemployed for four years and struggling to get started all over again, that same advice comes off as condescending. Sure, I'd like to get a job that I'm really passionate about. I even have some ideas along those lines. More importantly, though, I just need a job. I don't need to be able to be passionate about it. I need to be able to pay my mortgage. As an aside, there is a huge class component to that comment. I know that, in America, we're not supposed to believe that there are class divides. That's so European. Ignore that we actually have less socioeconomic movement over the course of our lives than Europeans do. We're all one class here. The whole concept of making sure that you do something about which you are passionate and enjoy is very upper middle class. For us, it's true. Not only will we be happier if we find a job which we really enjoy, but we'll probably do a better job of enriching society. The reason this works, though, is that almost all upper middle class jobs are ones that a sufficient number of people are going to be passionate about and enjoy. Sure, I may think that being a surgeon sounds like a perfectly hideous way to spend my life, but there are enough others that disagree with me that we can fill the ranks with people who want to fix my heart when it goes bad. This isn't true in all walks life. I doubt that there are that many people that are passionate and love cleaning toilets or doing routine data entry or selling you a hamburger. Good luck building a functioning society if you don't fill those roles. The ability to find a job that you love is a luxury, and my guess is that a majority of the people sitting in front of the class, and probably a majority of my fellow students, don't appreciate that. That the people in these positions don't appreciate this is painfully apparent in our public discourse. It's is implicitly said every time someone argues that everyone could get a good job if only they'd get a better education. I'm as big a believer in universal education being something that enriches the life of everyone that undertakes it, but that statement is wrong. The unlikeable jobs still need to be done. If every person in the country got a good education, you'd have a lot of well educated janitors. Sure, they'd probably be happier knowing that they can appreciate a really good novel when they get home, rather than staring at American Idol but they're still going to have a crappy job. It is true that, if everything else stays the same, a particular individual can get a better job by learning skills, but that doesn't scale to be being true of everyone. (Of course, the inability to distinguish between individual effects and societal effects is the hallmark of a certain sort of myopia Americans are rpone to.) It's also apparent in the extent to which the well-off frequently express a kind of contempt for those who are poor. There are various forms of beliefs that it's their fault for being poor. There is a complete lack of concern for their well-being in political discussionsa. What there is not is any recognition that, without the janitors, the data enterers, and the short order cooks, their own lifestyles wouldn't be possible. These people really need to develop a sense of empathy and leave a better tip for their waitress.

Job Search

2009-12-07T17:17:00.000-06:00

It's going nowhere. A bunch of us from class went to the Gopher hockey game Friday night (they lost), and several were talking about the job offers they had from places like KPMG. I had to explain to them that it isn't that I'm not happy for them; it's just that I have a hard time not feeling a bit bitter. I thought their innocence was rather touching: they're always surprised when I tell them I can't find anything. They insist on telling me how smart I am. I try to explain that someday they might learn that being smart doesn't get you as far as they think it does. I know that one of the reasons I entered this program is so that I could use the career center. That turns out to have been a poor calculation. They're fucking worthless. I just got home from another meeting there. The woman I met with doesn't know anything about the MAcc program, including its name or how many years it takes to finish. She can't identify any jobs in accounting; she kept asking me to list what kind of jobs I was looking for, and couldn't follow my answers. She kept suggesting various things I could try, to half of which, I had to respond that I'd already told her that I'd done exactly that and it hadn't helped. My mother said that these people really know what they're doing, but all I can conclude is that the Michigan Business School Placement Center hires out of a completely different gene pool. Her repeated suggestion was that I needed to network. I asked, "How?" She responded by telling me that it's very important. I said, "That's nice, but how do I do it?" She told me that I needed to talk to people that I know at different companies. I told her that I don't know anyone at these companies. She then said that I should look up company directories and find someone who worked in accounting and ask them about the job. I said, "Seriously?" She then hedged, and said that I needed to find someone that I had someone in common with. I asked, "How?" This got us back to my calling people that I know at these companies. She also told me that I should be signing up for their workshops. I asked her where, because I couldn't find them on the career center's website. She said she didn't know how to use their system, and I should ask someone at the front desk. No one at the front desk knew how to use it, either. I asked her if being 42, unemployed for four years and trying to start in a new profession was part of the problem. She avoided giving an answer to that one. I then went and talked to Professor Kallio, telling him I needed a pep talk. He said that I'm not the only one having a problem, and that everything has completely dried up. He said that the firms he's talked to said that they don't think that they are going to need any full time hires until the fall of 2011. He said that I should try the temp places, because there were still companies trying to fill outsourcing needs. He winced when I said that they won't call me back, either, and said that he hadn't talked to them in a couple of months. He winced again when I told him that they haven't called me back for a couple of years. He at least would agree that being 42, unemployed for four years and trying to start a new career probably made it a lot harder. I'm trying to be funny, but I'm really down about this. I have no idea what to do. I put in eight more applications this morning. The best advice I've gotten lately has been from the cats, and, since I don't need food in my bowl, I guess that means it's time for a nap.

It's All About Joe

2009-12-07T10:10:00.002-06:00

When you see Joe Lieberman's name, along with his identification as a US Senator, you will often see (I-CT), signifying that he is an Independent from Connecticut. This is not really accurate. In Connecticut, you can't run as an independent; you have to have the endorsement of a political party. Joe Lieberman actually ran on the ticket of a party called Connecticut for Lieberman. As you may guess, he was the only candidate that the party endorsed. This has led to some amusement, as well as a lot of hair pulling frustration. You see, while Lieberman created his own political party, he didn't bother to staff it. This led to one John Mertens filing the paperwork to join Connecticut for Lieberman. He voted for himself to be the party chairman, and won unanimously, since he is the only actual member. In case you were wondering, based upon the public statements of the chair, it is unlikely that Connecticut for Lieberman will be nominating Joe Lieberman for the Senate in 2012. The party has issued its first political ad since the 2006 campaign:

YouTube Madness

2009-12-04T09:18:00.003-06:00

First, the cutest 17 seconds you've ever seen, as Surprised Kitten is surprised: Second, we have Douchebag Solidarity, which is not entirely safe for work:

Government Accounting

2009-12-03T09:01:00.001-06:00

I've intended to write about a couple of things for a while, but a combination of laziness and a lack of conviction as to what order to tackle them in has kept this on the shelf for a while. I've finally decided to bite the bullet. This post is mostly about laying some groundwork. It is, of course, a subject I find fascinating, but the rest of you probably do not. The next two in the series, "Borrowing from the Future" and "About that Social Security Shortfall" will deal with specific points. This is more background. It is a long post, though there's a Sarah Palin joke towards the bottom to look forward to. One thing you will periodically hear a certain type of right winger (usually the sort that likes to call themselves a libertarian without understanding that means opposing habeas violations) argue that, if the government used "honest" accounting, we'd see that the unfunded liabilities of future policies mean that the company is bankrupt. There are a number of flaws with this argument, not the least of which is that most of this same set of people seem to believe that money spent on blowing shit up doesn't count as deficit spending. The most obvious flaw, to anyone familiar with GAAP, is that you don't get to put together the parts of the financial statements that support your arguments and call it a day. The FASB and the SEC have lots and lots of rules that govern everything a company needs to include so as not to provide investors a misleading picture of the company's true financial position. The glibertarians generally don't follow this prescription. Let's take a look at applying some of the broadest principles of GAAP to the US government. Don't worry. I don't plan to get too far into the weeds, because it doesn't take a lot of detail for their arguments to fall apart. The basic accounting equation is that Assets = Liabilities + Owners' Equity. The argument that is made focuses like a laser on the liabilities part of the formula, and skips over the other two portions. The easy one to deal with is Assets. In order for a company to be insolvent, liabilities have to be greater than assets. To really be bankrupt, the general consensus has to be that there's no likely way for the company to change that in the near future. (Bankrputcy can also be caused by liquidity problems, but the entity that controls the Treasury, by definition, can't experience liquidity problems; it's effors to deal with liquidity issues can expose it as being insolvent, but that's not quite the same thing.) What the glibertarians do to reach their conclusion that the US government is bankrupt is to ignore a lot of assets that would go on the balance sheet if it were a company. How much do you think the interstate highway system is worth? (Thanks go to Charles Franklin for bringing up this specific example.) The fact that the federal government doesn't charge people to use it doesn't mean that it couldn't charge people to use it, or sell the right to collect such fees to someone else. That's a lot of money. My guess is that this one asset alone would more than cover the projected Social Security deficit. How about the air traffic control system? How about all of the land, and the associated mineral rights, that the federal government owns? I find it highly implausible that the federal government is even close to being insolvent if you total up all of the things that it could be making money on, but chooses not to. This is going to be a recurring theme of this post: it's stupid to argue that the government should do its accounting in the same way as a private business, because it's not a private business. Profit maximization isn't its reason for existence. That cuts the heart out of the whole purpose of GAAP. That brings us to the income statement, and the largest single asset the federal government has: the power to tax. The bottom line of the income statement (well, not quite; there's the per share information on many of them) is net income. That's why "the bottom line" has become such a widely used metaphor in communication. What is the net income of the government? I'm not asking for a specific number; I want someone to be able to define what numbers would go into computing it. Revenues less outlays isn't any good. That's more comparable to the cash flow statement, and, even then, how do you plan to separate out cash from operations from cash from investing activities and cash from financing activities? I'm reading papers right now (more about that in another post) that note that the fuzziness as to what constitutes a capital expenditure and what constitutes a current expense makes a company's reported capital investment for any given period an extremely imprecise measure of how much they've really invested. Sorting this out for a governmental entity is far more difficult. I'll get back to this point in "Borrowing from the Future," but this confusion makes trying to put together GAAP-compliant financial stqatements for the federal government impossible. Let's look at the power to tax. Clearly, that is an asset of the government. How much is it worth? No one knows. Unless you're one of the Laffer idiots, actual revenue maximization is well down the list of priorities when setting tax rates. If the government were run like a company, I guarantee you that they'd be a lot higher than they are in reality. So, do we value the power to tax by estimating what the revenue maximizing rate would be and calculating what could be raised if taxes were at that level? Do we value it at what we think rates should be if all of government's interests in addition to raising revenue were maximized? Do we take the GAAP approach and value it at currently enacted tax rates, even though the power to change those rates lies with the entity for whom we are doing the accounting? How about the power of the printing press? The ability to actually make money is very valuable. For a very long time, governments supported themselves largely by selling this authority to either the highest bidder or to well connected cronies. Of course, trying to value this power has to include possible inflationary (or deflationary) effects of actually using it. The problem with treating the government as a business is not only one of type, it's also one of scale. Things get pretty screwy when you try to value an entity large enough to take actions that have macro as well as micro effects. GAAP values assets and liabilities (at least until FAS 157, for most assets) at the lower of cost or market. The US government bought Alaska for $7.2 million. What should it carry the portions of Alaska it still owns at on its books? If we sell Alaska to Canada and get the Maritime Provinces in compensation (yes, I'm desperate to make Sarah Palin some other country's problem), do we have to recognize a gain on the transaction? In the end, the most difficult section of the financial statements to try to mimic for the federal government is that of owner's equity. Who is a shareholder in the federal government? How many shares do they own? Does every citizen have one, equally valued share? That seems to be what the Framers intended, though one would think that such a bunch of geniuses would have been smart enough to incorporate in the state of Delaware, rather than a swamp. However, I have no idea how to measure the equity contribution of every citizen. (Do non-citizens that pay taxes get an equity stake? I assume that it can't be common stock, since they have no voting rights, but it's also not preferred, since there's no guaranteed dividend. It's not debt, because lord knows they don't go to the front of the line of creditors in the case of a Chpater 11 filing.) I'm pretty sure that the equity contribution of each citizen is not equal. Neither are the dividend payouts. Access to the board of directors (Congress, I guess) is not equal among all shareholders. Given the way that Senate seats are allocated, each citizen doesn't have equal voting power in electing the board, either. The same is true for electing the CEO. Hell, the shareholders in Nebraska and Maine even have different rules for determining what class of shares they hold than everyone else does. It may seem that I've descended to being silly, but that's exactly my point. GAAP isn't constructed the way it is because it is superior to any other approach to accounting in any sort of abstract way. (You supporters of IFRS should pipe down right now.) GAAP exists because there are specific objectives that need to be met that derive from the specific way that companies are owned and managed. Government has entirely different reasons for existence, so GAAP doesn't make any sense. I'll be the first one to tell you that the method of government accounting is badly flawed. Unlike most of you, I have at least studied fund accounting (used by governments and many non-profits), at least enough to pass the CPA exams. It's annoying, it's problematic, and it isn't as revealing as I would like. That's not because government is trying to hide the truth of its insolvency from the general public. It's because no one really has any idea how government accounting should look.

The Time Traveller's Wife

2009-11-24T10:27:00.001-06:00

Time is a fascinating subject for me. I love to think about what it really is, and why it works the way it does. Indeed, I wonder whether it really does work the way it seems to. Relativity makes this even more true. That a photon, travelling at the speed of light, does not experience time at all is fascinating. The three dimensions of space feel like they can be comprehended, even though our Newtonian concepts of them are wrong. Part of this stems from my depression. I desperately, if irrationally, wish that I could go back and do my life differently. Knowing what I know now, I'm convinced, probably incorrectly, that I'd get high school right this time. This leads to speculation on what time would have to be for that to happen, which probably says more about the way my mind wanders than anything else. The Time Traveller's Wife is a fantastic book, and I have no desire to see the movie, because I can't see how it would add anything. The characters are very well drawn and interesting. They behave in ways that are believable, including the different way they react to things at different ages. Clare is a child is both the same person and someone different than she is as an adult. By themselves, they probably would have riveted me to the book, since that's what I want from a story, far more than plot. What really hooked me is that, unlike so many time travel stories, it takes the idea of time very seriously. Audrey Niffenegger plays with it in the mundane ways we all experience time as well as the fantastic element of travelling through it. She draws a contrast between those long stretches when time seems to drag as we wait for something, and those periods when it seems that we don't have enough time to experience what we want to. It is about fate. Without getting into any discussion as to whether there is any outside origin for it, we will do what we are fated to do. It may be the sole creation of human agency, and there may be free will (the book doesn't address these questions at all), but looked at from outside the normal flow of time, everything is fixed. Henry has no control of when he travels in time, when he travels to, or where he travels to. He is drawn to moments of significance in his life, and there is one particularly traumatic event of his childhood that, as he tells Clare, if you took a photo of the scene from the air, you would see a couple of dozen of Henrys in different places looking on. With the time travel, Niffenegger comes down solidly on the side of saying that history is immutable. Henry can't change things that he knows happened when he travels to the past, even when he desperately would like to. In the same way, Clare can't change what she knows will happen even though a Henry from the future has told her what to expect. At one point, she deliberately avoids really testing this because she doesn't want to not have the things she gets in the future, leaving open the question of whether or not she even could have carried through on the experiment. Niffenegger also cheerfully allows for circular action. Henry learns how to pick pockets and locks from an older version of himself since he will need these skills to survive. It is immaterial that there doesn't appear to be any outside source of the knowledge. That an adult Henry does travel back and teach himself as a child is fact. Having established that it will happen, and it did happen. Outside agency is not required. The author does a tremendous job of keeping the extremely distorted chain of events straight. It would be interesting to see both a timeline of the order of scenes in normal time (which includes the way that Clare experienced them) and a timeline of the order in which things happened for Henry. Not all of Henry's trips are to places, times, or people that have great meaning to him, but those that are never happen before that meaning is created on the normal timeline. None of his trips to Clare's childhood occur before he met her in normal time. When they finally meet, Clare has known him almost her whole life, while Henry has never met her at all. It is a great book. I wouldn't really call it science fiction, even though there is a scientific explanation for Henry's plight. It is built around an obviously fantastic idea, but it is really a book about the people. I would think that it would be accessible to anyone, even those who do not read science fiction or fantasy.

The Purpose of Pork

2009-11-23T09:26:00.003-06:00

To echo Matthew Yglesias, there is a very real purpose for pork barrel spending. It greases the skids to get legislation passed. Take health care reform. If the Democratic leadership in the Senate believes that the bill is already weaker than it should be, and any further compromise would only serve to make it substantially worse, it's time to stop trying to fin d further compromises that would make, say, Olympia Snowe willing to vote for it on the merits. Instead, ask her how much the lobster industry needs to help it out, and whether Augusta needs a new courthouse.

Finding My Religion

2009-11-22T22:16:00.001-06:00

I am increasingly convinced that the Universalist Church was the right choice for me. It has the liberal tradition (in the theological sense) that I am comfortable with and need. It is also much more spiritually oriented than the Unitarian congregations I'm familiar with. When Julian and I got married, the ceremony was performed by the local Unitarian minister. He refused to deliver it as we wrote it, because he wasn't comfortable invoking God, which we wanted to do to make her family, a bunch of Lutherans, more comfortable. That wouldn't happen with either of the ministers at First Universalist. They talk about God all the time. They define it very broadly, to the point that it isn't necessarily recognizable as God, since it includes whatever spiritual feeling one might have inside. An actual deity is not necessary to qualify. That's exactly what I want, though it is also amusing. They installed a new minister the third week I attended, the same week they celebrated the 150th year of the congregation. The installation ceremony, which included Rev. Schroeder's ordination, was two very moving hours. One of the speakers was a Universalist minister from a congregation in Tulsa, Oklahoma. One thing he made a point of, which I very much agree with, is that UU churches have a tendency to be very welcoming of all beliefs *except* orthodox Christians. There is a tendency to make them feel unwelcome, and that this is something that needs to change. There is absolutely no reason why a believing, practicing Christian shouldn't fit in with a Universalist, or even a Unitarian, church. I had a chance to talk with him between the morning service and the installation ceremony. He looks like he should be the fixer for a Chicago alderman, but it was a very interesting conversation. A Pentecostal minister in Tulsa that he worked with frequently eventually converted to Universalism. He brought about 200 of his congregants with him. It was a black church that they came from, with the exuberant ways of celebrating their religion so typical of black churches. He talked about how the merger had changed the way that his congregation celebrated as well. If nothing else, I now know that if I'm ever stuck in Tulsa, there is at least one place I can go. The spiritualism of the services feels very comfortable to me. My father and I are alike in so many ways that it is sometimes hard for me to comprehend the ways in which we aren't. This is one of them. As far as I can tell, he doesn't experience spritual needs the way most people do. (He should correct me if I'm wrong , as he reads the blog.) If he does have them, he never talks about them. For him, the intellectual humanism of Unitarianism in its most austere form suffices for him. (The politics of a Unitarian church, on the other had, drive him away.) It's taken me a long time to realize that that's not true of me. I need something to fill that hole, even if I have to create it in the absence of any god or exterior spiritual existence. For me, an internal spiritual existence may be sufficient. Being among people who feel the same way is an aid in that.

Back to the Bailout

2009-11-22T22:14:00.001-06:00

Inspector General for the financial bailout Neil Barofsky released a report on the AIG bailout last week. It's main thesis was that the government got screwed by not getting enough from the AIG counterparties in the case that their shares bounced back. It's secondary purpose was to perform a hatchet job on then President of the New York Fed, and current Secretary of the Treasury, Timothy Geithner. I am broadly sympathetic to the idea that the government did not secure enough upside in the various bailouts. I am less sure of that in the specific case of AIG, largely because it didn't have a lot of leverage. The attack on Geithner was dishonest and worthless. I don't know whether Geithner is a good head of the Treasury, because both the nature of the problems we face and the general attitude of Barack Obama and his administration mean that he's playing his cards close to the vest, and we really don't know what his long term plans are. You may consider that to be a problem, but it's a different problem than screwing up the AIG bailout. Let's go through some of the reasons. 1) The key decision was that it was impossible to simply let AIG go bankrupt. One can agree or disagree with that decision, but it was clearly made at a level above that of Geithner. He may have handled the negotiations over how the situation would be dealt with, but it was under the instructions that AIG going bust was not a possible outcome. This wasn't a secret; it was the basic premise of the talks, and all of the people on the other side of the table knew it. This tied his hands, because he couldn't make a credible threat to walk away from the table. That's a tough way to negotiate. 2) It's important to understand what happened that put AIG on the brink of insolvency. They wrote a lot of credit default swaps, which meant that they would have to pay out large sums of money if various companies or other debtors defaulted on their bonds. The key part is that most of these were secured by collateral pledged by AIG that would be due if the relevant bonds dropped in value, or showed signs of possib le default. The worse they got, the more collateral AIG needed to post. Under the Gramm-Leach-Bliley Act of 1999, these postings were privileged in the event of bankruptcy. When a company files for Chapter 11, its assets are normally frozen and all the debtors have to get in line. Thanks to the change in the law, this was not true of CDS counterparties. In the event of a bankruptcy filing, they could go ahead and seize the collateral. AIG wrote far more swaps than it could possibly cover in the event of a large number of the bonds defaulting. As things went south over the summer of 2008, the bonds collapsed in value and the counterparties demanded that AIG post collateral. The reason AIG collapsed was that it reached the point where it had posted almost all of the assets of the whole company as collateral, and was unable to pay its bills with what was left. A Chapter 11 filing was imminent. If that had happened, it would have been the counterparties that ended up with substantially all of the assets of the company. There are a number of things about Gramm-Leach-Bliley that have turned out to be a bad idea, some of which I supported at the time, some of which I opposed, and someof which, like this provision, that I hadn't read the Act closely enough to know about. All of the other creditors would have received essentially nothing, including everyone who had a life insurance policy or an annuity with AIG. The counbterparties had the upper hand. The negotiations started from that point. 3) This was a foreign relations problem as well as a financial one. One of the passages of Barofsky's report that was quoted by a lot of outraged bloggers should have made this clear if they had stopped to read carefully before piling on. The very same paragraph that served up the goods that Geithner negotiated with the evil Goldman Sachs (with whom he is clearly in collusion) also mentioned that he received urgent and angry calls from the top French bank regulator demanding that the swaps be paid out in full. This arose because a large number of very important European banks were among the counterparties, and they would have collapsed had AIG done so. This was a major crisis in cross-Atlantic relations. I don't know about you, but I don't want the President of the New York Fed to be the guy deciding whether or not we should wreck relations with Europe. That call belongs within the administration, and, if they didn't clear not paying off the swaps, it was none of Geithner's business to do so. 4) Some people have argued that he should have negotiated to pay off certain counterparties, such as the Europeans, while stiffing others, like Goldman. That would have been illegal. Short of banklruptcy, with all of its problems, you can't decide to pay off some contracts while deciding not to pay off other, perfectly legal, contracts. Goldman would have gone to court, and it would have won. 5) The worst part of the report was Barofsky's recommendations for what Geithner should have done to overcome his lack of leverage. Barofsky basically thinks that Geithner should have threatened the counterparties with regulatory action beyond that the Fed is authorized by statute. He argues that Geithner should have abused his legal authority to achieve his goals. Didn't we have enough of that during the last administration? I want to to see Goldman Sachs crushed as badly as anyone. This wasn't a place where Geithner had that ability.

The Road

2009-11-21T14:40:00.003-06:00

The Road is interesting. I'm not sure that I'd call it good, but I'm definitely glad that I read it. McCarthy uses a style unlike anything I've read before. To call it stark doesn't really do it justice. We never learn the name of either of the two main characters. We never learn the nature of the apocalypse that they survived. The sentence structures and vocabulary match this. I'm just not sure what the point is. I don't mind books (or movies) where nothing happens. I love character studies. Here, though, we not only don't get a plot, we also don't get any characters. The man and the boy are as tight lipped about themselves as the author is about the world. We don't get to know any of them. That leaves me wondering what the purpose of the whole exercise is. I do want to read something else by Cormac McCarthy; I may go with No Country for Old Men. I have no idea how anyone is going to make a movie of it. I suspect that we're going to get something that features a man, a boy, a post-apocalyptic world, and nothing else taken from the book.

Republicans are Cowards

2009-11-17T23:28:00.002-06:00

Khalid Sheik Mohammed is going to be tried in federal court in New York. Gitmo is going to be closed and the prisoners moved to a prison in northwestern Illinois. Most Republicans are up in arms, afraid that they might be acquitted (won't happen), or that it's going to cause al Qaeda to attack these locations. It's not even worth responding to the specifics of their complaints. Instead, I'd just ask, when did the Republican Party became the home of bedwetting, gutless, cowards? Apparently, all you need to do is grow a long beard and learn speak Arabic, and all of those manly conservatives cower in fear at what might happen if they lock you up in solitary confinement. Given the strength of the women I know, I wouldn't even want to insult them (the women, that is) by calling these Republicans girly.

Okay, Very Funny

2009-10-20T23:26:00.001-05:00

To whichever one of you jokers signed me up to be a representative to the 5th Congressional District Republican convention, I will find you, and you will regret it.

Sociopaths in Austin

2009-10-14T21:55:00.002-05:00

There's a horrifying story unfolding in Texas. That link is to a New Yorker article laying out the case that the prosecution of Todd Willingham for killing his three children by arson in 1992 was thoroughly flawed. It examines the usual problems with eyewitness testimony, which is shockingly unreliable. The core, though, is an examination of the determination that the fire was the result of arson. It quotes several top fire experts, several of whom studied the case files in great depth, as saying that all of the testimony from the investigators was based upon methods that have been discredited by scientific investigation. None of this does Willingham much good; he was executed in 2004. Depressingly, this much isn't that shocking. Given the number of death row inmates who have been exonerated very late in the process in ways that mean they could easily have slipped through the cracks, it's pretty much a certainty that multiple innocent people have been executed. At this point, it's only holdouts that insist that it hasn't happened. For those people, however, Willingham's case could be the one that finally forces them to admit the obvious. No, what's horrifying is the reaction among Texas Republican politicians. A panel established to examine convictions based upon forensic testimony after some major scandals, particularly in Dallas, was set to hold a hearing including testimony from Craig Beyler, one of the experts who has concluded that there was no evidence of arson. Several days before that hearing, Texas governor Rick Perry, who signed the final order for Willingham's execution despite a detailed study on the lack of evidence being delivered to him before that decision, refused to reappoint several of the commissioners, denying it the ability to form a quorum and hold a hearing. His explanations have been rather less than convincing. In addition, two different commissioners have spoken of pressure put upon them by the governor's office to direct the conclusion in the direction of finding that the conviction was accurate. That's not the most distressing part of the story. As appalling as I find the lack of intellectual honesty on the part of Rick Perry, it's at least possible for me ti understand why someone would want to avoid having to confront the fact that he ordered the murder of an innocent man. More sordidly, Perry is running for re-election, and such a finding could impair his ability to win. No, the most distressing part of the story is the reaction of Perry's opponent in the Republican primary, Kay Bailey Hutchinson. Here is her quote, from her official campaign web site: “As hard as Rick Perry’s office and his campaign may try to divert from the issue, this is not about one man or one case. The issue is Rick Perry’s heavy-handed politicization of a process and Commission established by the legislature to provide critical oversight. First, Rick Perry delayed the formation of the Texas Forensic Science Commission, then he tried to ensure it didn’t have funding and when all else failed, he fired everyone he could." Hey, that's far more rational than I had expected from someone trying to get the votes of Texas Republicans. She even seems to realize that there's a serious problem here. Oh, wait, there's more to the statement: "The only thing Rick Perry’s actions have accomplished is giving liberals an argument to discredit the death penalty. Kay Bailey Hutchison is a steadfast supporter of the death penalty, voted to reinstate it when she served in the Texas House and believes we should never do anything to create a cloud of controversy over it with actions that look like a cover-up.” That is the ugliest, most morally abhorrent part of this sorry spectacle. Faced with strong evidence that the state of Texas killed an innocent person, Kay Bailey Hutchinson's concern is that Rick Perry's actions might discredit the state's ability to kill more people. I wish I could say that I'm surprised, but I'm not. One of the two major parties in this country has become morally and mentally unhinged. In order to win the votes of its loyalists, you can't stop to recognize that pumping lethal chemicals into the bloodstream of a man who didn't kill his kids is evil.

The Problem of Evil

2009-10-13T17:42:00.001-05:00

In my last post, I discussed the epistemological reasons that I have trouble believing in God. There is, however, one logical problem I have with God as the Christians understand him. There is one theological problem that I've never seen anyone manage to resolve. That problem, of course, is the existence of evil. The existence of evil is problematic for Christian theology. I break it into three questions, of which you only see the first two discussed most often: What is Evil? Why does Evil exist? How does Evil come into being? The answers to the first two that I've seen only push the ball down the road. Addressing what evil is, Christians are forced to deny that it is any sort of positive thing. It must be a negative thing, much as there is no positive thing "cold" or "darkness," merely the negative things "lack of heat" and "lack of light." Evil must be the absence of Good. This requirement stems from the twin facts of Christian theology that God is entirely good, and that he brought all things into being. God could not have created anything such as evil, because there is none of it within Him. Ergo, it is a negative thing. The why of evil is that human beings have free will. They have the power to choose or reject God. If they reject Him, and move away from Him, then evil results. As all good is represented by God, moving away from Him means that there comes into being an absence of good, which is evil. That gets us to the question of how evil comes into being. This is the part to which I've never seen a satisfying answer. In addition to being omniscient, omnipotent, and omnibenevolent, God is also omnipresent. He is everywhere. Christian doctrine insists on this. God has no center; He is spread evenly throughout all of existence. In fact, He is existence, physical, spiritual, and metaphorical. So, how is it possible for an absence of God to come about? Humans may have free will, but the impulse to reject God must come from somewhere. An impulse is a positive thing, which means that God must have created it. How can God have created an impulse to reject Him without having created evil? In fact, how can He create an impulse to reject Him when He is everything? Put another way, how can it be possible to turn away from God? Where else is there to go? There has to exist a spiritual space in which God does not exist for a human to get there. That space must be created by someone or something. If God created everything, how could He create a space where He does not exist? Would that not mean that He has created an absence of God, which is the same thing as creating evil? If someone else created it, then God can't have created everything. In the end, there is no way to define evil as a purely negative thing. If you do, you merely create something else that must be a positive thing that allows evil to exist. You can't get from here to there. Christian theology poached much of this background from neo-Platonism, which was somewhere between a philosophy and a religion. Neo-Platonism avoids this particular problem by relaxing the assumption that God (which is better called the First Mover) is equally present everywhere. This allows for a doctrine of emanation, and God is weaker the farther away from His center you are. It also relaxes the assumption that God is necessarily aware and intelligent. For neo-Platonists, existence just happened as a necessary consequence of the existence of the First Mover, which is something else Christianity denies. However, it should be pointed out that neo-Platonism lost the intellectual war for religious supremacy because it really isn't very satisfying. All of the things that make the existence of evil logically problematic are required before you can get the masses interested in belief.

Crisis of a Lack of Faith

2009-10-13T17:41:00.000-05:00

Look! Blog posts! I'm having what I've decided to call a crisis of a lack of faith. In short, I don't believe in God. Actually, I go the whole Humian nine yards and think that it is not possible to know anything for certain given the human capacity for knowledge. Everything devolves back to first principles that are impossible to test. In short, when I say that I know that the sun is going to rise in the east tomorrow, what I really mean is that I think that it's so extremely likely that the sun is going to rise in the east tomorrow that I may as well accept it as knowledge. The number of assumptions that go into believing that there is an entity of the sort that Christians call "God" is truly heroic.* *I do recognize the apparent contradiction in claiming to know that it is impossible to know anything. I resolve the contradiction by admitting that even this is not certain. It is possible that other human beings have experienced something in a way that gives them certain knowledge of something. I'm pretty sure that I have never experienced such enlightenment, however. Nevertheless, I have come to the conclusion that I wish I did believe in God. There are a number of ways that such a belief would improve my life. However, wishing doesn't make it so, and I suppose one of the problems with having thought a lot about what I think is true and what isn't, is that I've ended up in a box where there's no real flexibility on a question like this. Just because I want to believe doesn't mean I can. I am thinking about joining a church, though. On Sunday, I attended the First Universalist Church of Minneapolis, and I'm going to do it again this coming Sunday. I was raised Unitarian, but I'm trying the Universalists first. My problems can't really be solved by rationally thinking about things. If they could, I'd have managed it by know. The more spiritual approach of the Universalists appeals to where I am right now. If there's a way out of the multiple boxes I'm in, I think that's more likely to work for me.

Code of Ethics

2009-09-28T15:32:00.004-05:00

Update: I'm putting this first, because it's important. I'm leaving the original post as is, but the fact is, I defamed my teammates, and I apologize for that. We had a discussion, and there was no objection to putting my answers into the memo. We decided to put both in, one as an example of procedural things that should be done, and the other as a statement of the ethics that go into the Code. I really like this particular team. The other two members are thoughtful, diligent, and relentlessly polite. We work well together, and it's more their effort that makes it so. End Update One of the memos we were supposed to write for my Internal Control class this week was about various aspects of the Sarbanes-Oxley Act. The last question was,"List 5 key provisions or attributes that you believe are critical to a successful Code of Ethics." My group opted not to use any of my suggestions, which disappoints me. My disappointment involves three separate but related aspects: that ethics is something I have thought about a lot; that I don't think what is included really gets to the heart of what a code of ethics needs to be about; and that I disagree with the business school on what the content of a code of ethics should be. I'm sure that all of these things come as a surprise to all of you. Here are the answers we're putting into the final memo. I opted not to make a fuss over this, both because it would have entailed a lot more arguing than it's really worth, and because I am fighting for a completely different point.* These are entirely procedural, and I really don't think that these sorts of procedural questions are really as important as they are said to be: 1) Tailor-make your code. Ideally, a Code of Ethics should be custom-made for your organization. Is there anything that differentiates it from similar documents devised other firms in your field, or in other fields? Don’t just use a generic code that loosely fits what your organization does. 2) Be clear about enforcement. Will there be specific penalties for violating the Code, or is the Code merely there to provide guidance? Who will decide when an employee has violated the Code, and who will provide the punishment? 3) Be specific about implementation. Decide how the Code will be implemented, and once it’s written, will it gather dust, or will it influence policy and practice? 4) Be clear about its Scope. The Code should make clear who within your organization will be governed by it. Does it cover everyone from the mailroom through to the boardroom? Only senior managers? Who has to sign off on it? You have to keep in mind that lower-level employees may not take very seriously a document that senior managers either aren’t bound by, or take lightly. 5) Specify a “sunset date” when the code will be reviewed and updated. Because times change, and new issues come to light, you have to consider specifying a date for revising and refreshing your Code Yawn. In addition to being fundamentally wrong, there is nothing here that is going to make our answer stand out. The creativity level is zero. Here are my answers. I give you one guess as to the primary source for them, some directly lifted, and others inferred from that source (I have six): a. Officers and supervisors must be required to lead by example. They must demonstrate their adherence to all of the provisions of the Code, in spirit as well as letter. b. All those in the company must be committed to providing accurate information to those above them, below them, and around them. A ruthless honesty is necessary to success. c. It is the responsibility of all officers and supervisors to take care of the needs of their subordinates. In addition to ensuring that all employees are provided with sufficient training and equipment needed to succeed, their interests must be considered and respected at all times. One critical aspect of this is that credit for success must be shared widely, and criticism for failure be directed at those in charge. An ethical and successful enterprise can only be based upon high morale, and letting everyone share in the credit for success is the most important element to building morale. d. By the time most people reach adulthood, they know what constitutes ethical behavior and what doesn’t. Do not depend upon any specific rule being in this Code, because you will encounter far more situations than it can cover. If you find yourself in a scenario that isn’t addressed, think about it, and you will generally arrive at knowledge of what ethics requires. e. Everyone must truly believe in, and be committed to the goal of, ethical behavior. If they are, then proper conduct with almost always result. If they are not, then this Code is useless. The Code must be enforced, up to and including a willingness to fire any individual who demonstrates an unwillingness or inability to follow it. f. Writing a Code of Ethics for the purpose of avoiding legal liability is itself an unethical act. There are times when the only ethical response to a situation is to open yourself to liability. *In an equally shocking development, the matter I am fighting over is a mathematical one. One of the other questions was to say which type of fraud prompted the most SEC enforcement actions over a five year period and why it was the most frequent. The answer to the first half is matters of revenue recognition. There are all sorts of answers that people will come up with as to why management engaged in revenue recognition fraud, but the obvious answer is in the numbers. Revenues and assets make up one half of the balance sheet and income statement. If you combine the other types of fraud involving the statements themselves, you get the other half. There were 126 actions involving revenue recognition, and 124 actions involving other types of balance sheet fraud. That looks to me like exactly what you would get if management is equally likely to commit any type of fraud.

Gee, Who'd Have Guessed a GOP Congressman Was Morally Bankrupt?

2009-09-23T23:14:00.001-05:00

Rep. Eric Cantor, the Republican Whip, demonstrated the complete and utter intellectual and moral bankruptcy of the GOP's opposition to health care reform. At a town hall meeting with his constituents, a woman got up, and told him the story of a close relative of hers. This relative had a good paying job with good insurance. Then, she was laid off. Since then, she has been diagnosed with stomach cancer, and needs all sorts of expensive treatment. The woman at the meeting asked Cantor how she was supposed to obtain it. If Cantor had any honesty and courage, he'd have told her that, if her relative had no health insurance, and couldn't afford to pay for treatment, then she would have to die. That is the Republican health care plan. Instead, he told her that the relative should try to qualify for a government program like Medicaid, or look for charity. How gutless. A man who is leading the charge to prevent giving this woman a government option for health insurance is telling her that she should try to qualify for a government program to treat her cancer. For all of the vile lies that have been told over the last three months on this subject, this may be the most appalling. (I have no doubt that Michelle Bachman will top it by this weekend.) Eric Cantor is fine with telling people that they should live in a free market system, right up to the point where he has to look someone in the eye and tell them that the free market system means they are going to die. It's a pity no one stood up and yelled, "You lie!"

Me Update

2009-09-23T23:13:00.000-05:00

I'm still around. I'm definitely doing the amount of writing I promised myself I'd do. I'd even post some of it here, except that I can't imagine I have any readers interested in a comparison of the anti-fraud provisions in Statement on Auditing Standards 82 and those in SAS 99. I'm enjoying the two core courses in the masters program. Those are the ones that are actually demanding. It's several hundred pages of reading plus about five of writing every week, but I'm keeping up. I'm turning into a much better student, at least for those two classes. The two MBA classes I'm taking, on the other hand, I blow off routinely. Actually, I'm a bit nervous spending this much time around MBA students, just in case it's contagious. Mentally and emotionally, I'm doing as well as I have in a long time. I'm not only feeling fully productive, but but my intellectual arrogance is back in full force. Personality wise, it does have some downsides, behaviors that I'm not exactly proud of. On the whole, though, I'm much happier like this.

It's an Interesting Time to Be Studying the SEC

2009-09-23T23:12:00.000-05:00

In the middle of all the other events going on, something happened last week that didn't get a lot of coverage. Jed Rakoff, a federal district judge, rejected a settlement between the SEC and Bank of America over the bonuses paid to Merril Lynch employees around the time of the merger. To say that this is unusual is an understatement; I have classmates who didn't realize that a judge could throw out a settlement. Judge Rakoff has made biting comments from the bench on a number of occasions since the financial crisis began, so, if someone was going to do this, it's not a surprise that he's the one. His ruling had two particularly interesting elements: 1) One part of the SEC's commentary on the settlement was that they couldn't prosecute any individuals, because they claimed that they were just following the advice of their lawyers. Rakoff's reasonable query was, then, why aren't you prosecuting the lawyers? Here, he's taking aim at what has become the all-purpose excuse in white collar investigations, and needs to be dealt with. 2) He took direct aim at the portion of the agreement that specified that BoA did not admit to any wrongdoing. He wondered about this, since it implies that BoA could just do it again. This stipulation is in every such agreement because if a company did admit wrongdoing in a settlement, Usain Bolt couldn't beat the class-action lawyers to the courthouse as they filed a shareholder lawsuit. In principle, I agree with everything Rakoff wrote. He basically told the SEC that, unless Bank of America agreed to be treated as a guilty party in a settlement, they were going to have to go to trial. (In theory, the SEC could drop the charges, but the chances of that happening were zero.) Yesterday, the two parties announced that that was what was going to happen. In a fit of pique, BoA also announced that they were paying the US Treasury about $420 million in order to end the government's guarantees on $18 billion in debt they acquired in the takeover. Think about that for a second: the are paying for the privilege of being responsible for those assets being bad. All of a sudden, that deal the Treasury cut last year looks pretty good, doesn't it? In practice, there's a serious problem with Rakoff's ruling. Contrary to what some of my fellow lefties believe, the SEC doesn't regularly enter into such lenient agreements because they are in the tank for the bankers. They do it because they're desperately short staffed. They couldn't possibly take more than a small fraction of their investigations to trial. If this is going to be the new world, and I'm all in favor of it, Congress must dramatically increase the SEC's budget.* As usual, responsibility ends up back in the lap of the legislature. *It says something about my life that I find amusement in contemplating the fallout of an SEC lawyer standing up in front of Judge Rakoff, and saying, "Your honor, we can't follow your order because we don't have the staff necessary to prosecute. I'm imagining some sort of Separation of Powers crisis as Rakoff orders Congress to provide enough funds for the SEC to do the job Congress told it to do.

Doctor Emilio Wyvern's Carnival of Discovery

2009-09-06T22:11:00.002-05:00

With all due apologies to Ray Bradbury. And many thanks to Miss Beatrice Black for providing the inspiration. The carnival was in town. I got excited every time one showed up. I love the smells and the noises and the crowds. Oh, and I love the carnival games. I'm never very good at them. The skills atrophy between arrivals, and I still can't break all of those plates. This time, there was something different. Even the entrance was unlike anything I had seen before. "Doctor Emilio Wyvern's Carnival of Discovery," read the sign over the admissions booth, lurid colors swirling in surreal patterns. No, really, they were swirling. Not when you looked at them, but when you looked down the midway, out of the corner of your eye, you could see the purples and yellows and greens move, emphasizing some other part of the title. I swept past the admissions booth, and closed my eyes. One deep inhalation, and they were there. The smells of popcorn with real butter, hot dogs with mustard, and that hint of a rotting odor you get anywhere there is a large gathering and inadequate garbage disposal. It was intoxicating. I wandered at first. It was an impressive show, surpassing any carnival I could remember. It had a ferris wheel, and the sound of a caliope told me there was a carousel over to my left somewhere. It had rides. I would have to try them all, but first, the games. I walked down the alley with all the booths. I let anticipation build. My fingers itched with desire to hold the wooden rings that the woman in the booth swore would fit over the necks of the bottles, if only you threw them just right. I never had, but someday, I would. I held off, though. Gratification delayed is gratification multiplied. That's my motto. I intended to look at everything before indulging. I needed to look at all of the stuffed animals I could win, especially the ones overhead, as big as myself. I reached the end of the first aisle, and stopped. Around me, things were different. My fellow customers were somehow grayer. Less substantial. The colors of the carnival were more vivid, the sounds more enticing. The townsfolk, those people among whom I had spent my whole life, seemed insubstantial. They lacked desire, I thought. They were just themselves, nothing more. Then I saw him. Behind a podium stood stood the epitome, almost a caricature, of a carnival barker. A florid shirt in a color I couldn't name, striped pants, a top hat, and a huge, white, handlebar mustache. He looked right at me. "Come," he cried, pointing his cane at me, "play Anderson B. MacGillicuddy's Games of the Self. Become the person of your dreams, or win the prize that you've always craved. Everyone's a winner. Satisfaction guaranteed, but you get nothing back." It was irresistable. Before I knew it, I was in front of the man. To the left, there was a spinning wheel, but with out the colored sections I expected. It was solid green. I tried to read what prize it offered, but my eyes slid off of it before it could register. "But, sir," I said, "it only has one prize, and I can't read it." This seemed a deficient game, unworthy of the presence of its proprietor. He leaned forward, and an aroma of cigar smoke filled my nostrils. "That's because it's not a wheel of fortune. It's the Wheel of . . . Destiny!" he shouted. "There's no need for a second prize, because there's only one destiny per person. Spin the Wheel of Destiny but once, and you will get to experience your own." "Or," he exclaimed, turning to one side, pointing behind him, "take a walk through the House of Truth. Go in with the face you present to the world, come out the you that you really are." I looked at the flimsy structure he indicated. Its front was in stark colors, separated by sharp lines. Forbidding and uncompromising. "Last, you may choose the third option." He pointed to a pool of water covered by a fotilla of toy ducks. "Take your pick at the Fountain of Desire." He winked at me. "You'll have to imagine the fountain. The hydraulics are out." I nodded absently. "If you select right, you will receive your most deeply held wish. Select wrong, and you will be a part of someone else's deepest wish." My gaze was drawn back to his face. There was no escape from it. Anderson B. MacGillicuddy had my attention, and he would get my business. "These games cost no money, though they are hardly free. You can only play once, but why would you want to do so again? All you have to do is choose. Destiny? Truth? Desire? Which of these will define your future?" I swallowed. I wanted each, in their own way, but choosing wasn't hard. It was obvious which I wanted/ I opened my mouth. "I am going to . . ." As a roleplay exercise, it comes with a questionnaire, to sort out the worthy from the unworhty: To enter Doctor Emilio Wyvern's Carnival of Discovery, you must answer five questions. Not everyone is fit for Anderson B. MacGillicuddy's trials. Only those of exceptional character (or at least those who are exceptional characters) hold the interest of the management. Everyone has a Destiny, a Truth, and a Desire, but those that are mundane can be achieved without assistance. Doctor Wyvern and Mr. MacGillicuddy reserve their attention for those who need assistance in achieving what they might. Who - Who are you? This may (or may not) start with a name and physical description, but it hardly stops there. If Anderson MacGillicuddy asked you who you are, what would you tell him? He has a way of extracting full answers. Dig down. Only those who bare their souls can go from what they are to what they could be. What - What are your dreams? Not your daydreams or your fantasies. Those are unimportant. When the lights go out, and your head hits the pillow, what are the thoughts and images that snake, uncontrolled and uninvited, into your mind? Turned loose from the strictures of logical thinking, what do you imagine? Where - Where are you now? Doctor Emilio Wyvern's Carnival of Discovery has wandered from town to town across the breadth and length of America since . . . well, no one can remember a time when it did not wander across the land. Maybe it started somewhere else before it came here? Who knows. Everyone resides in a time and place; it's a universal law. Where are you? When - When will you go? Just because someone is in a place and time doesn't mean that they're in the right place and time. When you leave the Carnival is not a deterministic function of where you enter. Time and space are flexible, if you know how to bend them. Anderson B. MacGillicuddy prides himself on knowing when you should be, and delivering you there. Why - Why will you choose? Most people walk to the end of the aisle of carnival games and never see Mr. MacGillicuddy. They simply turn right, and there is the booth with the water pistols that you shoot to race your horse to win mundane prizes. It is only those who crave, with an intense, burning desire they likely never noticed before, to achieve their Destiny, their Truth, or their Desire that find themselves drawn to the Games of Self. Those who see the carnival barker invariably choose one of his three games. Which one will you choose, and why must you choose it?

I Have Been Writing, Honest

2009-09-06T22:02:00.003-05:00

Just not here. I've been working on fiction, and I found a new website: www.elliquiy.com. It's a site for adult/erotic roleplaying, but a lot of it is more like storytelling than roleplaying. I'm enjoying myself immensely there. I've made a couple of . . . well, I hesitate to call anyone a friend after knowing them for four days, but certainly friendly acquaintances. I'm also feeling more confident in my writing than I ever have. I've found it much easier to re-read my own writing and work on it. Normally, I hate re-reading my own stuff. It's like listening to a recording of your own voice. So, my fiction (as well as some of my school papers) remains in what would be best described as a rough draft, though I edit a lot in the process of the first go 'round. Not now. I keep going. Looking it back over. It's a wonderful feeling. I apologize that there are fewer long winded posts here, but, rest assured, I'm actually being productive. I have produced an intro for a one-on-one roleplay at Elliquiy, which I will be sharing. It is extremely versatile, and I like it a lot. Sure, I couldn't post the things I'm doing with it over there, but it has plenty of non-naughty applications as well.

I Passed

2009-09-04T00:32:00.001-05:00

I got the notice that I passed the last of the CPA exams today. Yay, me!

I Orientated

2009-09-02T23:40:00.000-05:00

I picked up my materials for my two core classes today. A very nice tote bag. A cap. All sorts of glossy intro literature. A nice fleence pullover. The business school should charge less tuition and give out less stuff. And binders in which to put in the material for the two classes. Eleven 3-inch binders. I bet all that stuff is going to be very exciting, too.

The Myth of German Military Superiority: Blitzkrieg

2009-08-28T18:57:00.002-05:00

I'm going to digress for a bit, and discuss Blitzkrieg before I do tanks, as there's some carryover. Blitzkrieg isn't a myth, really, but it has been systematically overrated. It worked very well in some situations, and was superficially impressive in others despite having some rather huge flaws. It basically took the Americans to make it run right. This is the place where the politics of historiography I talked about a long time ago come into play. The earliest advocates of the basic ideas that led to Blitzkrieg were British: J.F.C. Fuller and B.H. Liddell-Hart. They were a part of the Tank Corps during the First World War. Even at the time, they passionately argued that all of the tanks should be kept together for one spearhead rather than being distributed evenly throughout attacking forces as support for the infantry. The latter approach was derided as breaking the tanks up into "penny-packets." The theories developed into a full blown theory of offensive warfare. The infantry should pierce the first couple of lines of an enemy defense, and then an armored column should attack through that hole. The tanks should exploit the opening all the way into the strategic depth of the enemy. In doing so, they would not only capture territory and potentially surround enemy units, but they would also completely disrupt the enemy's command and control by advancing faster than they could react. The resulting confusion would cause more damage to the enemy than even the extra casualties would. Within the context of the First World War, Fuller and Liddell-Hart were simply wrong. At that time, tanks were too slow, too prone to mechanical breakdown, and too easy to destroy to have been successful as the basis of an attack. They were very effective as infantry support, however. They provided mobile firepower, but the single biggest effect they had was cutting barbed wire. Much of the war had been spent trying to figure out how to use artillery to make it possible for infantry to get through the increasing densities of wire used to protect the trenches. Many, many attacks came to grief when infantry hit the wire, and could not get through. Tanks, assuming that they manaed to get all the way across no man's land without breaking down, were ideal for the task. The debate turned into real controversy between the wars. Fuller and Liddell-Hart lost the fight within the British Army, and tanks were relegated to the role of supporting the infantry. Interestingly, the first military to adopt their ideas was the Red Army. They developed the theories and produced the equipment to base their offensive capabilities around the tank. Then Stalin killed off all of the leaders of the school in the purges, and it became dangerous to espouse the concepts. A number of officers in the German Army became passionate followers of Fuller and Liddell-Hart. Heinz Guderian published a book, Achtung, Panzer!, which laid out the basis of what became blitzkrieg. It should be noted, though, that the opponents of this approach actually retained control of the Wehrmacht. The trump card was that the proponents of independent armored action had to admit that Germany simply didn't have the tanks necessary for their ideas. Until they could build up a heavy industry capable of supporting an advanced military machine, they were stuck. The opening of the war came, and Germany quickly overran Poland. Contrary to popular belief, this was not an exercise in Blitzkrieg. The panzer forces were not concentrated, but rather folded into the general formations. The Polish campaign was run by the standard German theories of offensive dating back to the 19th century, just with added elements. Poland fell as quickly as it did because the Polish Army turned out to be much weaker than everyone had realized. The first true use of Blitzkrieg was the campaign against France in May, 1940. It came about in a bass-ackwards kind of way. The original conception for the campaign was a repeat of 1914, with combined arms forces attacking through the plains of northern Belgium. This was exactly the attack the Allies predicted, and had it been used, the outcome would almost certainly have been very different. Unfortunately, what initially appeared as a stroke of good fortune led to disaster. In December, 1939, a small plane crashed in Belgium, carrying a complete set of orders for the German offensive. At that point, Hitler was won over by the arguments of Erich von Manstein for a completely different approach. Manstein was not one of the dedicated disciples of Blitzkrieg, but he was more open to it than many high officers. It was his ability to catch the ear of the Fuehrer that gave them their openng. I intend at some point to look at the campaign that ensued, so I won't go into details here. The German plan worked because they caught just about every break conceivable. Blitzkrieg worked fabulously. The armored spearhead broke through the French lines, and then caused utter havoc by rolling up the Allied lines of communications. They achieved results all out of proportion to their numbers because of the confusion they sowed among the Allies. This campaign showed Blitzkrieg at its best. It also did not expose one of the huge flaws in the German approach because of the geography involved. Only a very small portion of the Wehrmacht was motorized. The rest of the army walked, and used horse drawn carts for supply. The distances between the Meuse and the Channel coast were small enough that the tanks never outran the bulk of the infantry, and so gaps didn't develop in their lines. Then came Russia. There is a popular perception that Blitzkrieg was a smashing success in Operation Barbarossa. Indeed, the Germans captured enormous territories and millions of prisoners. Blitzkrieg again did everything it advocates had conceived of. That the Red Army was completely unprepared to fight made the paralyzing effects of tanks running around in their rear area even more effective. Soviet command and control effectively disappeared for a while, though not for as long as many think. All of Blitzkrieg's flaws were also evident to anyone who cared to look past the huge advances. This time, the panzers and the mechanized infantry advanced so quickly that they completely lost contact with the foot infantry coming behind them. Much of the territory shown as having been captured by the Wehrmacht in fact had no German troops for hundreds of miles. Hundreds of thousands of Soviet troops that were nominally cut off an isolated simply walked out of the encirclements because there was no one keeping them in. These forces became the core of the partisan movement that would bedevil the Germans for the rest of the war. In addition to the vertical separation caused by the different speeds units were capable of, there was also a huge amount of horizontal separation. The two panzer groups of Army Group Center lost touch with Panzer Group 4 in the Ukraine because of the Pripet Marshes. They lost touch with Army Group North because they were headed straight east, while AG North headed northeast towards Leningrad. These gaps, too, were exploited by the Soviets. The inability of the panzer forces to cover the breadth of the front exposed the other huge problem with Blitzkrieg. Left to cover these stretches, once they caught up, were the foot Landsers. The determination to create an armored spearhead for the attack meant that there weren't any tanks divided up into penny packets to support the infantry. Even in the opening days of Barbarossa, there were already ominous signs for those who chose to look, a group that did not include most of the German high command. From the beginning, casualties among the infantry were far higher than had been anticipated. Unlike the Soviets, the Germans couldn't absorb these losses. By August, 1941, most of the divisions in the Wehrmacht were understrength, and few would ever recover over the course of the war. The standard reading of the war in the east was that the Germans lost the war either at Stalingrad in 1942-43, or in front of Moscow in December, 1941. However, a plasible argument can be made that their defeat was already fated by that August. At that time, the panzers of Army Group Center peeled north and south to clean up the flanks. I also plan to deal with the necessity of these controversial moves in another post. Here, it suffices to say that this left the foot infantry to hold the line around Smolensk for a period of six weeks. The area became the Yelnya Salient, a bulge in the front that the Germans defended becuase it was a necessary jumping off point for the resumption of the attack on Moscow. It was also poorly suited to conducting a defense. Though the line was never ruptured, a resurgent Red Army battered these troops for a month, demonstrating along the way that Germany infantry wasn't much better at dealing with enemy tanks than the men of any other country. Eventually, the Germans were forced to bow to reality and increase production of armored assault guns (essentially tanks with no turret and the main gun in the bow)in order to stiffen their infantry units.By that time, the damage was done and the Wehrmacht remained desperately short of troops for another three and a half years. The Soviets eventually put together an approach that solved these problems by expecting less out of the spearheads. They never stripped all armored support from the infantry, though there was a huge disparity. They also shortened the expected extent of their offensives. They aimed for shallower penetrations, smaller pockets, and carefully measured when it was time to bring an attack to a halt. The huge separation between tanks and infantry didn't develop. The Americans did what Americans do, and threw more stuff at the problem. Not enough tanks to both produce a spearhead and support the infantry? Build more tanks. The tanks outrun the infantry? Build enough trucks that every body gets to ride. The US Army, along with the British we helped to arm, was the first truly mechanized force in the world. In the end, the idea of keeping tanks together in dedicated units really just amounted to the millennia old doctrine of concentrating force at the point of attack. It didn't matter so much that it was the tanks that were concentrated, but rather the firepower that the tanks represented. The exploitation phase of Blitzkrieg turned out to cause serious degradation to the attacker as well as the defender. There were valuable principles at work, but the Germans didn't recognize limits.

Guilty Pleasures: Kim Harrison Novels

2009-08-28T17:43:00.003-05:00

This post got moved up in the queue at the rather insistent request of one of the two most important commenters on the blog. She's been a big help with a separate project, so I owe her. If you wander through the science fiction section at Barnes & Noble (they're in the horror section at Border's), about the time you hit the "H" section, you find a whole lot of books with covers that have pictures of the lower halves of sexy women carrying a gun or a stake, or some other vampire fighting paraphernalia, surrounded by lurid colors, titles trying to be funny, and the author's name. That name is inevitably female, and usually starts with the letters "Ha." You can blame someone named Laurel K. Hamilton for this trend. She has written God only knows how many books in the "Anita Blake: Vampire Hunter" series. I have been told by a reputable source that, if you want to write a series of books featuring a sexy female protagonist in a modern setting fighting supernatural menaces, you need to use a pen name that starts with "Ha." I'm not joking. If you write it with a sexy male protagonist, you can have a name like, say, Jim Butcher, to pick something at random. I have for years watched this spreading plague in the science fiction with, appropriately enough, horror. It rivals the deep fears I have over all of the Mercedes Lackey imitators, but at least it mostly contains itself to one section of the racks, and clearly identifies itself. That damned romantic fantasy crap lurks everywhere, and the covers are sufficiently like decent books that you might accidentally pick one up. I have heard that the Anita Blake novels are borderline pornographic, and I like porn about as much as the next frustrated single guy. I still have no interest. Part of it is that I'm desperately tired of vampires. I worked in a game store in the early 1990s, right when the White Wolf game Vampire: The Masquerade came out. It was the era of The Vampire Lestat. You didn't need to hunt vampires; you couldn't walk a block without running into one. They got old very quickly, and they took werewolves with them. Look, folks, they're played out. There's really nothing left to do with vampires. Let them go. The other reason I stayed away is that, due to the aforementioned romantic fantasy, I'm extremely leery of any sci fi/fantasy subgenre written exclusively by women, or people with female pen names. Sorry for the bias, but there it is. It's unfortunate, because some of my favorite authors are female. C.J. Cherryh is at the top of the list. Chris Moriarty will be if she can follow up Spin State and Spin Control with equal quality. I really need to read more Ursula K. LeGuin. Lois McMaster Bujold's Miles Vorkosigan books, though not so much her other stuff. Regardless, there's whole shelves of female authors I avoid. So, a couple of years ago, I was wandering through the bookstore, and I saw another entry in the genre, this one with a redhead on the cover, and the titles trying to be clever were twisted titles of Clint Eastwood movies. They were written, of course, by Kim HArrison. I kept looking at them. I don't know why. Maybe it was the redhead. I have a thing for redheads. I don't know. I can't tell you why, after several months of looking, I actually bought the first one, Dead Witch Walking. I liked it. Quite a bit. It dispensed with some of the tropes of vampires that drive me most buggy. It didn't all take place in the dark after someone turned on the fog machine. The vampires actually had jobs. The narrator isn't a vampire; she's a witch. No one is hunting vampires, per se. It's an alternate history where witches, vampires, werewolves, banshees, gargoyles, and who knows who many other critters have always been living among us. Not elves. Elves are thought to be extinct. Demons don't live among us, really, but they can be summoned. Forty years ago, genetically altered tomatoes caused a disease that wiped out about 40% of humanity, but all of these races were immune, and their presence became obvious. So, now they live openly. Thus, they need jobs. It also came up with some interesting ideas. The protagonist's . . . well, I don't know that I'd call her her best friend. It's a complicated relationship. Regardless, she's a living vampire. If you create a vampire, it's a living vampire until it dies the first time, when it becomes undead. If two living vampires have a kid, it's a living vampire. It's something I hadn't seen before. Harrison has also done some interesting things with vampire psychology. They aren't just like the vampires I've seen elsewhere. Sure, Ivy is, indeed, a brooding, beautiful head case who always wears black, but her kid sister is a bright, cheery, well adjusted teenager who won't stop chatting. What makes it work, of course, is that it's simply well written. There are some weaknesses which sometimes make me shake my head, but it has really interesting characters. I will always take good characters over a good plot. Have interesting (which does not necessarily mean sympathetic; I can like a book even if I hate everyone in it) characters, and I don't care if nothing actually happens. I'm willing to forgive all sorts of lameness if the characters are good. These characters are good. There have been a couple of disappointmens along the way. The big revelations about the protagonist, Rachel Mariana Morgan, are hit and miss. A crucial element of her history has led to some very interesting places, but something she learned about her parentage fell kins of flat. A plotline that wove through three of the books ended really weakly, too sudden, and too random. The little everyday things, though, are marvelous. I'd say that reading about Rachel doing her laundry would be interesting, but it's even odds on whether a demon will interrupt her in the process. I do note that the quality of this series hasn't made me any more likely to get involved in any of the others. I got really, really lucky on the book that I picked up. That's my story, and I'm sticking to it.

The Myth of German Militiary Superiority: Equipment, Part 1

2009-08-26T20:36:00.000-05:00

The Germans have the same reputation for building the best in military equipment as well as producing the best soldiers. It isn't any more deserved. The biggest component of this reputation is in the tanks they used during World War II. I'll deal with them in another post There were some things the Germans used that were the best. At the top of the list is the outstanding machine guns they made. First the MG34, and then the MG42, were very well designed weapons. At their best, they were the best light machine guns in the world. Portable. Reliable. They put plenty of lead on target. Unlike other countries, which built separate light, medium, and heavy machine guns, the Germans used the same barrel for all three roles. On a bipod, it was a light mahine gun. On a tripod, it was a medium. Give it telescopic sights and a different ammunition feed, and it was their heavy. While it wasn't the best at either the second or third role, that was made up by the fact that having just one basic frame made supply and maintenance much easier. This made it quite unlike anything else the Germans used. The standard Mauser infantry rifle was perfectly serviceable, but not as good as the British Lee-Enfield. The US M-1 was a completely different beast, semi-automatic where everyone else used bolt-action rifles. The additional firepower the standard rifleman could produce compensated for the fact that the Americans didn't have a real squad light machinegun, which was the basis around which everyone else's squads were built. The famous MP-40 submachinegun (often misnamed the Schmeisser) was not a good weapon. It was as complicated as the US .45 caliber tommy gun while not being able to deliver more firepower than the British Sten gun or the Soviet SMG, both of which had the advantage of remaining operable under any conditions. Airplanes ended up being a disaster for the Germans. At the start of the war, the Stuka dive bomber was already obsolete; without air superiority, it was a death trazp for its pilots. The same was true of the twin-engined Bf-110 fighter. The Ju-88 was probably the best medium bomber in mass use at that time. The Bf-109 was one of the best fighters in the world. The Ju-52 was a fine transport, though it suffers from being in the same category as the DC-3, which was probably the most successful aircraft of all time; the damned things are still in use. And then, nothing. The Germans introduced the FW-190 fighter around 1941. Other than that, and a few bombers that never saw huge usage, they didn't introduce any new planes until the very end of the war. From early on, they put all of their eggs into the basket of jets. Predictably, it took years longer to put them into service than anticipated, at which point it was too late. Everything else the Germans made were variations on airframes already in use. Already by the Battle of Britain, the Bf-109 was outclassed, not only by the Spitfire, but also by the underappreciated Hurricane. While it was highly maneuverable, it suffered from being chronically undergunned. It's lightweight frame could only accomodate one weapon in each wing, so it's heaviest armament was two wing mounted 7.92mm machine guns (about .30 caliber) and two 20mm cannons firing through the propeller. By contrast, all Allied fighters from early in the war carried at least six .50 caliber or eight .30 caliber machine guns. When it was introduced, the FW-190 easily outperformed anything the Allies could fly. It was a feared, fast, maneuverable machine. Unlike the Bf-109, it was adequately armed. It had a big weakness, though. Above 15,000, it's performance declined dramatically. As the focus of the air war shifted from tactical ground support to strategic bombing by four engined bombers at high altitude, the usefulness of the FW-190 waned. It was left to the undergunned Bf-109 to try to bring down the huge B-17s and B-24s. As horrifying as the loss of American bomber crews was through 1943, it would have been much worse had the Germans had a fighter with sufficient firepower to deal with the dicke Autos. On the other hand, the Allies produced a plethora of versatile aircraft over the course of the war, even ignoring the fine planes used exclusively by the Navy, almost entirely in the Pacific. The aformentioned American strategic bombers were pretty much a category of their own, dramatically superior to their British counterparts; no one else even tried to build anything like them. The B-25 and B-26 medium bombers were huge improvements on anything the Germans had in the category. On the Russian Front, the Shturmovik was inadequate in a number of ways, but it had the virtue of being almost indestructible, a veritable tank with wings. AAlmost all other It was in fighters, though, that the Allies truly dominated. It doesn't get much coverage in the West, but the Soviets produced several fighters the equal or better of anything the Germans had. However, Britain produced one truly remarkable fighter, and the Americans two. The British Mosquito was the first in a series of planes that eventually led to the U-2 spy plane. Twin-engined, made all of wood, it was the fastest plane in the world when it was introduced. It couldn't go hunting enemy fighters, but was murder on those that hunted it. It was used as a night fighter, a medium bomber, a photo-reconaissance plane, the pathfinder leading British nighttime bombing raids to their targets, and as a naval bomber, including the capacity to carry a torpedo. It's all wood design was harder to detect on radar, and it had the range to fly anywhere. The American P-51 Mustang was the plane that allowed the USAAF's daylight bombing campaign to succeed. It began life as a completely unpromising airframe, until someone tried mating it with the British Rolls-Royce Merlin engine, the same power plant that the Mosquito had two of. All of a sudden, the Americans had a plane with the performance to dogfight anything in the air, and the range to escort the bombers all the way to their targets. Consider that the Bf-109 and the Spitfire, with which it was comparable, didn't have enough endurance to do much more than cross the English Channel, fight briefly, and get back. The P-51 was one-half of the attack that destroyed the Luftwaffe. The other half of that attack was the monstrous Republic P-47 Thunderbolt. Almost all other fighters in the world were built around in-line engines in order to produce a streamlined effect. Designed by two escapees from the Soviet Union, the P-47 mounted a Pratt & Whitney radial engine. The plane had to be enormous just to contain this monster. Where other fighters operated with speed and maneverability, the Thunderbolt went with speed and brute force. It mounted eight .50 caliber machine guns that chewed up anything in its path. The first models were sluggish because of the weight, but the change to a wide-bladed propeller too heavy to contemplate marrying to any other fighter, improved its performance, particularly in a climb. Contrary to images, most fighting in World War II was not the sort of swirling dogfights common in World War I. Instead, it was all about having an altitude advantage on your opponent and diving through their formation, shooting as you went. With the ability to climb with any plane in the world, the bulk to take an enormous amount of damage, and the ability to dive that only five tons of airplane could provide, the P-47 was lethal in aeriel combat. It was also a tremendous fighter-bomber. The Allies made such strides in fighter aircraft that the first generation of German jets, particularly the Me-262, were only marginally superior in combat. In the meantime, they eliminated the Luftwaffe as a serious fighting force.

In Which I Engage in Self Pity

2009-08-23T15:06:00.001-05:00

I'm feeling depressed today. I went to the gym, but the humidity meant that I could hardly exercise at all. I was on the eliptical machine for 12 minutes, at a much slower pace than I'm used to, and had to give up. It just hurt too much to go any farther. For most of this month just climbing to the top of the stairs has left my legs burning, so I've been fairly sedentary. Still, given how much effort I've put into this diet, finding out that I've lost a whole pound and a half was very discouraging. Really, though, that was all secondary. I've been depressed since waking up, which was a couple of hours before I got out of bed. I had a dream last night. There was some sort of event in Ann Arbor, maybe a class reunion, and I was talking with a woman I knew from high school. This is someone that I really wanted to date at the time, but she was involved with a friend of mine. (Frankly, the friend treated her like shit, and it was the first set of events that led me to conclude that I didn't really like the guy. That was only relevant to the dream in background.) She and I had a good talk. I had a chance to tell her things that I'd wanted to say 25 years ago. And we hugged. In the dream I told her that it was the first time I'd hugged anyone other than family members in about two years. Then I woke up. It was all fiction, other than the part about not hugging anyone, which was at least a decent approximation. In reality, she has rebuffed all three of the attempts I've made to contact her in recent years. Given what actually happened, I can certainly understand her wanting to move on and have nothing to do with any of us, but it still hurts. As I've said before, the lack of touching people is what I miss most about no longer being married. Snuggling with the cats helps, but it's not really the same. Even Eddie. I'm depressed. I'm lonely. And I'm writing this from the local Chilis, because it's the closest I can come to hanging out with people I know.

How You Deal with Insane People If You're a Gay Jew from Boston

2009-08-22T15:44:00.001-05:00

Congressman Barney Frank held a town hall meeting, and was confronted by a nutter asking him a question. Hilarity ensues:

Agency, or the Insidious Usage of the Passive Voice

2009-08-22T15:23:00.002-05:00

Senator Max Baucus, the chairman of the Senate Finance Committee, said recently that Democrats should give up on a public option for the health care reform bill because, in his words, "the votes aren't there in the Senate." There are roughly six billion people on the planet who would be perfectly honest in saying this. I'm one of them. I'm pretty certain that anyone reading this blog is another. We can say, with the passive voice, that the votes aren't there in the Senate for a public option, at least if it has to get through the Finance Committee and survive a filibuster. Max Baucus is not among this group of six billion people. He is, in fact, a part of the very small group of people on the planet, which may range from six up to a couple hundred depending upon how you want to define it, for whom that is an incredibly dishonest statement. Max Baucus is not a passive observer of these events; he's actively involved. The biggest reason that there are not enough votes in the Senate to pass a public option is that Max Baucus wouldn't vote for it. If he would vote for it, we'd be watching this spectacle playing out very differently. Among other things, we'd probably have a bill passed out of the Finance Committee by now. The thing is that Max Baucus doesn't want to say out loud that he wouldn't vote for a public option. That might spur Harry Reid to finally decide to ignore the Finance Committe altogether, and just bring the HELP bill to the floor, or perform some other parliamentary procedure. There are some available. Lyndon Johnson and Mike Mansfield used them to bypass the committees when they wanted to pass civil rights legislation and the relevant committees were chaired by segregationists. Really, this is put up or shut up time. Health care reform is not only the signature piece of legislation for a Democratic administration, it's been the core of the Democratic platform for decades. Quite simply, if you are not for it, you have no business in the Democratic Party. Reid should be telling anyone chairing a committee dealing with the bill, i.e. Max Baucus, that if he continues to slow roll it, this will be his last session wielding a gavel. Any Democratic Senator that votes to sustain a filibuster of the bill on the floor should find themselves without any committee assignments come 2011. There is always tension between wanting your party to have large majorities in Congress and enforcing party discipline. At the moment, the two parties are swimming at entirely opposite ends of the pool. The Republicans are about nothing but party discipline; they're now completely dependent upon the crazies who demand that their representatives join them in the craziness. The Democrats don't seem to have any ability to enforce discipline at all. That's not healthy, either, and their is a point where you have to risk seats in order to get everyone on the same page. The health care bill is as close to a confidence motion as we have in American politics. It should be treated as such. What's Max Baucus going to do if we kick him out? Join the Republicans? Just because he's too conservative to be a Democrat doesn't mean that he's crazy enough to be a Republican. If you think Arlen Specter is struggling after a party switch, wait until you watch how quickly Baucus would end up with a primary opponent in the GOP. Put up, or shut up.

Maybe Tomorrow

2009-08-21T20:07:00.003-05:00

I was going to write a couple of posts, but I've got a splitting headache that Excedrin hasn't gotten rid of, so I'm going to bed. Here's some of the things you might get if I feel better tomorrow: Agency, or the Insidious Usage of the Passive Voice How You Deal with Insane People If You're a Gay Jew from Boston Guilty Pleasures: Kim Harrison Novels Part I of German Military Hardware There. That takes care of my two sentences for today.

Enterprise Risk Management

2009-08-20T18:38:00.003-05:00

I'm trying to get most of the books for my Internal Control and SEC Standard Setting classes read before the start of the semester. Naturally, I'm running into things that I object to. Sarbanes-Oxley for Dummies wasn't too bad, but the next one picked up, COSO Enterprise Risk Management is driving me crazy. To start with, the copy editing is terrible. On page 205, we have: The use of "nonmaterial." This is probably a losing fight, but there is a perfectly good word already for this concept: immaterial. I'm not opposed to creating words out of thin air when necessary. I don't get hung up on semantics. This, though, is a profession that obviously doesn't know the English language. There are no spaces between the end of one sentence and the start of the next. There is a statement that, under the new, stronger SOx standards, "information is now generally considered material if there is a substantial likelihood that a "reasonable investor" would consider it unimportant in making an investment decision." Guys, I think you have this backwards. That's just one page. At one point, explaining the high inflation of the early 1980s, the author attributes it to too much regulation on energy supplies. This is true if you define that as the Iranian government refusing to sell us oil. However, it's Chapter 2: Risk Management Fundamentals that really has me exercised. It uses numbers very poorly. One step in the risk management process is to identify your risks and determine how severe they are. The book recommends that, once you have risks identified, you have the people in the group rank them on a scale of 1 to 10 for both how likely they are to occur, and how severe the consequences would be if the downside occurred. It then says that, if you have a lot of risks, you may find them bunched up on the graph of the results. If that happens, have the people redo it, but going with numbers from 1 to 100. This is called false precision. Even on a 1 to 10 scale, the people are largely guessing. With ten times as many choices, the results are going to be random. There isn't any difference between someone giving a value of 68 and someone else giving a value of 73. The reason everything gets lumped together is because the people in the group are over anxious. I know this, because we performed this exercise in my internal auditing class. Everything was crowded into the top right corner of the graph, indicating that the average picked for all of them was high on both likelihood and severity. It was also clear to me that people weren't really differentiating between the two categories, because there was a very high correlation between the two scores. If one got a 9 in likelihood, the average for severity was between 8.5 and 9.5. All people are thinking is, "That would be bad," and going high. Another problem is when the book compares risks after that exercise is performed. It gives a little bit of probability theory, and screws it up. The author states that the likelihood of both of two different risks going bad is the likelihood of the first times the likelihood of the second. This statement has an implicit assumption behind it that probably doesn't hold. That's only the probability of both events happening if they are independent of each other. If one risk blowing up on a company makes another risk more likely to occur, the probability of both events happening is greater than the exercise indicates. I have a feeling that a lot of business risks are not independent of each other. Still, the math problems pale before the ethical one the chapter has. As one of the examples for why a corporation needs a risk management assessment and action plan, the author cites Union Carbide's release of a cloud of poisonous gas near the city of Bhopal in 1984. It killed 20,000 people. The author gives us all of the ways that this hurt Union Carbide, and warns us of what could happen to your company. I'm sorry, but anyone who studies the Bhopal disaster and starts from the premise that we are concerned with the costs to Union Carbide has already demonstrated that they are a moral failure. Twenty thousand people died. That's more than six times as many as died in the World Trade Center, over which we went to war. It's 40% of the number of Americans that died in the Vietnam War, in one afternoon. The proper response to that isn't to worry about your PR, and it does not involve doing your best to minimize legal liability. The proper response is, "We killed 20,000 people because we were careless. What can we do to help the survivors?" If that's not your answer, I don't trust anything else you have to say on the risk management process, because your priorities are unconscionable. It's going to be a long semester.

Eddie Update

2009-08-20T18:35:00.002-05:00

Eddie is doing very well. He falls over sometimes, and when he runs on the hardwood floor, he generally ends up using his chin to come to a stop. On the whole, though, he's great. It's been almost a year since we first found the tumor, though without knowing what it was. There's no sign of it having spread anywhere. This week was Everybody Go to the Vet to Get Shot Week, and the vet didn't think any of his lymph nodes were swollen. Getting him into the box to go to the vet was a struggle, and, unlike the rest of them, I have a lot of sympathy for Eddie. His fear of the box is actually rational.

Justice and Mercy

2009-08-20T14:51:00.002-05:00

Josh Marshall put up a clip of Scotland's Justice Secretary Kenny MacAskill announcing his decision to allow one of the Lockerbie bombers to return to his family in Libya to die of terminal prostate cancer. It is five minutes long, with the actual decision coming in the last ten seconds. It is an extremely powerful statement on the nature of upholding Justice and Mercy at the same time. I would give a lot to find an American official with the courage to take this sort of compassionate step. Hell, I'd give a lot just to have an American official explain any of his policy choices in a way that gets to the underlying philosophy that motivates his choice. Not the bogus, faux philosophy we get so much of, but the stuff that leaves me feeling that the official has read and understood some of the great thinkers of history. MacAskill never phrases it this way, but the heart of what he says is that we define who we are. Laying it off on someone else, saying that this other person has behaved in a way that makes it so we must take some action is false. If we enact a policy, it's because we chose to do so, and it speaks to what we are, not anyone else. Kenny MacAskill has chosen to define himself, and his nation (and he very much attributes it to the Scottish nation, rather than Britain) by the rule that Justice must be tempered by Compassion. It doesn't matter that Abdelbaset Ali al-Megrahi chose to define himself, and whatever set of people he represents, as having no Compassion at all. Kenny MacAskill has the courage not to care how al-Megrahi defines anything. This argument is slightly different from the claim that we don't do certain things that our enemies do because we're better than they are. It's certainly a subtext to the message, though. In this case, it's even true. Once again, I am proud that, when I went through a legal name change, I chose to adopt the name of the side of my family that is Scottish.

Sigh

2009-07-25T22:56:00.002-05:00

Let's try this again, shall we? My goal is to write two sentences a day. Some of them will be here. Others will be writing some fiction that I have no intention of posting here. At least one of my parents reads this blog, and my fiction is as much for exorcising demons as anything else. Most of it is pretty ugly. Think Columbine ugly. So, the vast majority of you don't want to read it. Don't worry; I've got a couple of people that do read it, so I at least get feedback. News. I passed the first three CPA exams, and took the last one on Wednesday. I'm starting grad school in the fall. I need to lose weight. Doctor's orders, finally. I should lose 40 lbs. My goal is to lose 30. I'll settle for 20 if I have to. I'm a week into this diet, and everything's good so far.

Risk Management

2009-06-23T23:53:00.002-05:00

I'm taking Internal Auditing this summer, and a large part of that is evaluating your company's risk management. We get all sorts of fancy graphics, jargon, and acronyms about how to define both the problems and the solutions. (The COSO Cube counts as all three.) It's enough to keep an army of consultants employed for decades, and I'm sure you can put together a knockout Powerpoint presentation with it. I had the same reaction to this that I have to the Business Ethics class that the MBA students have: it's pointless. None of this crap is either necessary nor sufficient for a company to manage its risk properly. Six Sigma, or Total Quality Management, or whatever is on the bestseller list right now, might help out on the margins, but it won't do the job by itself. There's really only one thing necessary for a business to be ethical, or to manage risk, and, if the company has it, everything else will follow. The people who run the company have to believe in ethics or risk management, and they have to demand it of their employees. That's it. It's very simple, and depressingly rare. If the people in charge of an organization really take something seriously, that something will happen. They will figure out what system will make it work. It might not be best practices, but it will be enough, assuming they have time to weed out the employees who don't get it. I don't often say this, but in this instance, it's true: what's important here is the will to do it. Whether the boss in innovative or not, it will happen. If the people in charge don't really believe in it, or won't enforce it, then no set of processes will really do the job, no matter how clever they sound. They can say all the right things. They can put a whizbang system into place. They can fool the auditors, but risk management and ethics are the kind of things that are good to have in general, but really matter at the extremes. Practicing good risk management in normal times isn't that hard. It requires thought, and effort, and there is always the temptation to let it slide, but most intelligent people can do it. It's when there's a gigantic housing bubble, and clods everywhere are making a fortune doing stupid things that it gets tested. You have to have someone in charge who can say no to everyone who is clamoring that you MUST get on this gravy train, or the world's going to end, or the analysts will downgrade you, or something. It's not a test of brains. It's a test of character. As much as a lot of self-aggrandizing fools want you to believe otherwise, those aren't the same things. In fact, there's just about zero correlation between good character and high intelligence. Eddie is as dim as they come, but it's hard to be a better person. Six Sigma doesn't build moral courage; it just produces large bills from Accenture. If anything, the people who make it to the top of large corporations are selected for *not* having this virtue. (I think that they are also less likely to be particularly ethical, but that's another rant.) Even if they have an inclination that way, the incentives facing them tend to discourage it. All of the biases are towards excessive risk taking. The behavior that produced the financial meltdown isn't acute; it's systemic. Look at the career path you have to follow to become a Fortune 500 CEO. You have to work very hard, and I'll accept, for argument's sake if nothing else, that you have to be very smart. You have to be extremely successful at everything you do along the way. You are way out on the right tail of good results. That means that you were someone who took large risks along the way, and that they almost all worked out. Someone who doesn't take big risks can't be a complete failure, but they can't be the big winner, either. Of course, they never think of themselves being lucky, though they are. In most cases, it's easy to attribute all of the positive outcomes to skill, rather than luck. It probably did take skill, but fortune also smiled on the successful. Unless you believe that some people actually are inherently lucky, though, there's no reason to think that the people who have gotten away with big risks in the past are any more likely to get away with them in the future than the rest of us. This can be extremely difficult to see from the inside. One way to demonstrate it is with a scam that the guys you see in infomercials hawking their sports betting, or stock picking, system, except that it works through mailings. What you do is send, say, 128 people a free newsletter telling them to put their money on Team A; send a different 128 people a free newsletter telling them to bet on Team A's opponent. (The illustration works best with a power of 2, but it isn't necessary.) Guess what? You're guaranteed to have successfully predicted the winner for 128 people. Ditch the losers. Break the winners up into two groups of 64. Do the same thing again, with two groups of 32. Keep whittling it down until you have four people left for whom you have SUCCESSFULLY PICKED SIX CONSECUTIVE WINNERS! (That part has to be said in All Caps.) Those are your marks. You demonstrated your prognosticating powers for them, for no money, just to demonstrate your ability. Now hit them up for money. It's best to ask for a lot up front, because you're 50% likely to get every game you pick going forward wrong, and they probably won't pay you too many more times. From the outside, it's easy to see what is happening. It's a mathematical certainty that someone in your initial pool is going to be really lucky. There's just no way to know in advance who it's going to be. If you're the person receiving the newsletter, though, it looks entirely different. All you see is that this genius is right every single time. Obviously, success on the way up the corporate ladder doesn't have the mathematical precision or certainty that the scam does, but there are so many ambitious risk takers who start out corporate careers that it's inevitable that some of them are going to take 8-10 big risks along the way, and get good results on all of them. Some of it is skill, but there's plenty of luck, too. Those are the people who become CEOs. They are conditioned to think that taking risks is always a good thing, at least when they do it. It can work sub-consciously, even if they know better. Some of them are just colossal egos, though, who will flat out tell you that. Modesty is not a good way to get the key to the executive bathroom. Natural selection weeds out the character trait necessary to take risk management seriously. Then there are the incentives. For all the talk about how we are going to change things around, so that executives get rewarded for something other than short term profits, I don't believe that it's really possible. We could make a lot of improvements on executive compensation, but the fundamental fact of the matter is that making profits are the goal, and human beings have a very strong tendency to think that small samples of results have big meaning for overall trends. Ask your friend whether or not the manager should pinch hit with the guy who is 8 for his last 12, because he's the hot hand, despite being a career .230 hitter with no power. I should note that I'm not even talking about cooking the books, or doing anything notably unethical to pump up the stated profits. Executives aren't really long the stock price the company they work for. They're long the volatility of the stock price of the company they are working for. For them, the rewards of big time success are greater than the costs of big time failure. Stock option compensation plans and large severance bonuses make this worse. They're going to go all in, because a lot of the money they are playing with belongs to the house. With very rare exceptions, you aren't going to be able to teach a CEO to really care about your fancy methods of making sure that no one takes risks that are too large. They may say they do, and they may even think that they do, but most of them don't. It's not nefarious on their part, really; they can't help it. This is not to say that I don't think a bunch of them are sociopaths, because I think exactly that; it's just hard, in the big picture, to blame the sociopath for ending up that way. They're kind of like rabid dogs. In the end, they don't really care about it, and they'll find ways to circumvent it right when they need most to avoid it. Really, it has to be a societal change. Over the last thirty years, the United States has taken to worshiping the innovator. The entrepreneur. The risk taker. The guy who drops out of college and starts a computer company in his garage. The guy who takes over a moribund company, and turns it into the year's biggest success story. Very clearly, this has produced a lot of good. The kinds of technological innovation we've seen wouldn't have happened without it. We are, in a number of ways, better off for shedding the risk averse mindset of the 50s and 60s. But it certainly hasn't been an unalloyed good thing. I'm not convinced that it has, on the whole, been a positive. Like a lot of things, I think the benefits of this change were apparent long before the pitfalls. We're now seeing the ladder. One of them is that we have institutionalized to big an appetite for risk. It's a cycle we continually tread, and it may be that we just have to live with it. I'm just afraid that the costs of the risky parts of the cycle are getting larger, and that we may do ourselves permanent harm one of these times. To close, if you've been following this blog long enough to remember my lengthy post on William Slim, and think that there's a connection between my thinking about him and the first half of this post, you're right.

Iran Thoughts

2009-06-20T20:17:00.004-05:00

This post is not original to here. It was a comment I posted on Balloon Juice, in a thread on the Iranian protests. Its genesis is that I've been getting very annoyed with people who insist: 1) that there is no difference between the candidates, and 2) that we should shut up because we shouldn't encourage the Iranian people to get massacred. I've left it as I posted it, so it will seem a bit odd without its antecedents.

Dude, they’re contesting a practically meaningless election. When it’s all over they’ll still be an oppresive Islamic regime.

That’s what this was eight days ago. Not now. You can’t get those kinds of demonstrations, of that size and intensity, over a meaningless election. If that’s what it was before, the demonstrations themselves make it more than that. As I’ve said before, even if all that were to happen is to install Moussavi as president and someone else as Supreme Leader (there’s zero possibility of Khamenei surviving this if the demonstrators win), this changes Iran in fundamental ways. Moussavi’s power base has changed. It’s no longer a clique of the mullahs; it’s now the people he can bring out to the streets. He’s had to promise them too much to be able to go back now, unless he’s prepared to call out the tanks to crush them. He’s Gorbachev: a man who wanted only to change the system a bit from within, but who let loose far more than he intended, and wasn’t willing to shoot the people down to stop what was happening. But I’ll go even farther. Even if all that were implemented were what Moussavi promised on the campaign trail, Iran would be changed in positive ways. It would be much more open, to freedom of expression, to women, and to ethnic minorities. It wouldn’t be insane on foreign policy. All of these things alone are positive. It may not mean much to Americans, or the US government, but it means a hell of a lot to Iranians. There’s a bigger picture involved, too. Frankly, I think we’d all be better off if the change does happen within the system of the Islamic Republic. First, I don’t think that there’s anything particularly wrong with that structure, given the other alternatives in the region. Sure, I’d never want it here, but public opinion is in a different place in the Middle East. If that’s what happens, we have an officially Islamist state operating based upon popular sovereignty, offering freedom of expression, and other liberties. That would send shockwaves through the region. Not the sort that Bush produced in Iraq, but a real development. As for all of the moaning about encouraging the Iranians to go to their slaughter, give it up. They aren’t being pushed by us. Believe it or not, they are full-fledged moral actors of their own, and are capable of making the decision to risk their lives themselves. If there is a massacre, it isn’t the responsibility of anyone over here, no matter what they’ve posted. The blame goes to the people that conduct the massacre, and the decision to put themselves in a position to be massacred belongs to the people who do that. I plan to do what I can to show my support for that decision in every way that I can. As I’ve said before, I would never, ever urge someone to put themselves in that position (save for the unlikely scenario where I ever am in a position to take the risk myself). It’s their risk, not mine, and so it would be wrong for me to push them into it. However, if they are brave enough to do so, then I believe that that is the right decision. Systems of oppression will never be overthrown without people who are willing to make that choice. Lots of them. The chances to mobilize enough of them don’t come along very often, so I would like to see the people seize it. No decision of this sort is ever wasted. If nothing else, courage and decency on the individual level are laudable in and of themselves. Beyond that, they can’t help but have a positive effect on the world. The Prague Spring was crushed brutally, but it left a memory that inspired later. I still think a better example is Poland in 1980, because crushing the Czechoslovaks was done by an outside country. Here, as in Warsaw, it will have to be the their own countryman that commence the slaughter. I don’t believe the rumors of Lebanese being imported; if they had been, there would be evidence from Lebanon, and not just tweets from Tehran. Even if they are there, the orders would still have come from Iran’s own leadership, and that will wipe away their legitimacy no matter who does the killing. No government survives in the long run if they are forced into the level of internal repression that this would take. The protests in Burma last year, or Tiananmen Square, didn’t involve anything like the proportion of the population that has been marching in Tehran, and there was no evidence that unrest ever spread to the outlying regions, as it so clearly has to Tabriz, Isfahan, and Shiraz. The only way the current incarnation of the Islamic Republic survives the next decade is if Moussavi, and the protesters back down. If that’s the decision they make, there will be no criticism from me. I have no idea if I could make the choice to stand in front of the Basij without flinching, and there would be nothing shameful if I couldn’t. Getting beaten to death is a price no one should ever be forced to pay. I hope they don’t, though. I hope that they have the courage that I might not have. The only way to beat Khamenei is to take him on.

2009-06-20T20:11:00.002-05:00

Sorry for disappearing for so long. I can only muster the energy to pursue a couple of lines of effort at a time, and blogging lost out over the last month. I've taken three of the CPA exams, and passed one; I'm still waiting for my scores on the other two. I've been admitted to the Masters of Accountancy program at the University of Minnesota's Carlson School of Management. I'm volunteering two hours a week tutoring math to students at the International Institute of Minnesota. And, I'm taking a class in internal auditing. I'm going to try to be better, though. I finally broke down and installed the air conditioner. It's been 85 and humid here lately, so I know what it must have felt like working on the bridge over the River Kwai.

Movie Trailer Mashups

2009-05-10T01:51:00.002-05:00

Thanks to Balloon Juice, I discovered a new art form today: the remixed movie trailer. Here are some I particularly like: Taxi Driver as a romantic comedy: Office Space as a psycho killer flick: Dirty Dancing as directed by David Lynch: Ferris Bueller's Day Off as serious drama: Sleepless in Seattle as Fatal Attraction: The Shining as lighthearted family comedy:

Alone

2009-05-09T15:34:00.003-05:00

I am not in touch with anyone I went to high school with. I'm not in touch with anyone I went to college with. With minimal exceptions, I'm not in touch with anyone I've ever worked a job with. I probably haven't tried as hard to stay in contact with people as others do, but it isn't that I've put no effort into it. On several occasions, I've tracked down the e-mail or phone number of someone from my past, and said hello. When I ran into people from college at a Gopher football game a few years ago, I gave them my phone number. I just never hear back from them. Of the people from work, Dave lives downstairs, and I go to lunch with him once a week and see him on plenty of other occasions. There are two people from Citigroup that I still exchange messages with, but one of them is phenomenally busy with law school and a toddler. The other agrees we should go out sometime, but never gets pinned down on a time. I have a few other friends, but really only three people that I could call up and say, "Let's do something," with any confidence that it will actually happen. Dave lives downstairs, and, in one of life's strange coincidences, a couple that I knew growing up in Ann Arbor happen to live five houses down the street. Beyond that, nothing, really. It's not that I think that no one likes me. I'm pretty sure that there are all sorts of people in my past that did, and probably still do. It's just that it seems that I'm not important enough to any of them to remember. It's sort of reverse paranoia: I'm dead certain that no one is out to get me, for good or for ill. In gaming terms, I feel like an NPC in my own life. Like a lot of things, I'm sure I exaggerate this in my own mind. I probably haven't tried as hard to stay in touch with people as it feels like I have. Even at that, I know that I haven't gone too far out of my way. Still, it's one of those things where the reality isn't as important as my perceptions of that reality, and those perceptions leave me feeling very lonely. This is all magnified at the moment. A couple of weeks ago, I had a date. This wouldn't be monumental news for most people, but it is for me. Previous to this, I've only dated three women in my life, and that's probably stretching it in one case. (I'm sure you won't ever see this, but sorry, Weatherley. I was a bit of a cad.) It went really well. I had a good time. She said she had a good time. We agreed to do it again. Then . . . nothing. She hasn't returned any of my messages. At this point, twelve days after the last communication, I have to assume that it's dead. That feels like the same story as always, written in small print. I'm just feeling very tired.

The Myth of German Military Superiority: Combat Troops

2009-05-09T00:27:00.000-05:00

Back to the subject. Along with the officer corps, the Germans are also usually credited with having the best soldiers, man for man, in the world throughout the World Wars. I think that this is probably true, but by a much narrower margin than most people appreciate. One element is that, just as with the officers, people making this claim are usually defining "soldier" very narrowly. They mean combat infantrymen and tank crewmen, and sometimes combat pilots, though other countries produced plenty of these that were at least as good as the Germans. On this definition, they were the best soldiers in the wars. They were very tough, very disciplined, and very skilled. However, there's more to soldiering than just infantry and tanks. Here again, the Germans channeled all of their best troops into one area. It sounds like a good idea to make sure that the actual combat personnel are the very best men that you can produce. They are, after all, the ones doing the fighting. In practice, it doesn't work out that way. Even right at the front, German artillery was frequently less effective than their enemies'. Here is where I'm going to bring in the comparison with the US Army. During World War II, it was often the case that, if they could pull any strings, soldiers tried to get out of front line duty. This meant that you had highly qualified men working in supply, and maintenance, and other support roles. This means the job got done better. On top of this, Americans were simply better mechanics than the Germans were. The size of the US market allowed for mass manufacturing that the Germans couldn't match. By the outbreak of the war, there were close to 30 million automobiles in America, something the Germans couldn't hope to match. (The vaunted Volkswagen program was, in fact, a complete flop.) This meant that there were millions of GIs with experience tinkering with their cars. This training came in handy in the effort to keep tanks, halftracks, trucks, planes, and ships operational. There's another problem with putting all of your best men on the firing line. Casualties among combat infantrymen and tankers are frighteningly high. Even if you give them an edge by only using the highest quality troops, they are going to die in large numbers. If an army's best men suffer casualties at a disproportionately high rate, the quality of that army is going to decline. You can see this effect during the later stages of World War One. As someone mentioned in one of my posts on the Western Front, the Germans adopted the tactics of Stosstruppen, or Stormtroopers. They identified their best infantrymen, and moved them to elite units. These troops were trained in infiltration tactics, and used at the leading edge of offensives, often without much artillery preparation in order to maintain surprise. These tactics were initially used against the Russians, and perfected. Then, the Germans launched their first major offensive in the West in two years in the spring of 1918. A major reason why the Kaiser's Offensive was such a success was that, here, the British really were inept. Since Verdun had been entirely fought by the French, the British hadn't been subjected to any significant attacks since Ypres in 1915, which was before they had a mass army. They had perfected the art of attacking a trench system under cover of artillery. They had no idea how to defend anything. Attacking these unprepared lines, the Stosstruppen were hugely successful. At first. The casualties among the Stosstruppen were astronomical, much higher than was typical among British assault troops. Overall, German casualties weren't particularly heavy by the standards of the Western Front, but the attrition ate away at the Reichswehr's operational effectiveness since it was concentrated among key personnel. The offensive eventually ran out of steam, and the Germans had nothing left. All of their best troops were gone. Something similar happened in World War Two. Perhaps the most effective small units in the war were the German Pionieren, a group of elite assault engineers. They were a bit different than US combat engineers, because they weren't trained in bridge building, or the other construction skills these American troops, or even regular German combat engineers had. They were skilled in demolitions, flamethrowers, and blowing things up in close quarters. Huge numbers of them died in Stalingrad, trying to root the Red Army out of the rubble and cellars. Again, the German approach to solving a problem was specialized infantry, and, again, they ran out of men before they ran out of jobs for them. All this said, even the gap between German and American combat troops wasn't as great as usually thought. Like the Wehrmacht, the US military had a force made up of all volunteers, put through initial training that went beyond brutal into the realm of sadism. Like their German counterparts, these Americans emerged from that training an elite, tough, and skilled, and were used at critical points when no one else would do. The difference is how these troops were equipped and used. The Waffen SS was made into heavy armor, and fought toe to toe with equally heavily armed Russians, British and Americans wherever German lines were most threatened. The US Marine Corps became light infantry, and stormed beaches in the Pacific. They never fought the Germans at all, so it isn't quite fair to compare the Wehrmacht, including the best units they had, with American forces whose best units were literally on the other side of the world. For all of the talk of German tactical skill, the Marine Corps solved a tactical problem far more difficult than anything the Wehrmacht ever looked at. The Germans barely figured out how to get on boats, let alone back off of them under fire. They were defeated by the English Channel. I just got done reading Utmost Savagery: The Three Days of Tarawa. It's a recent analysis of that battle, using sources, particularly Japanese, not available when the standard histories were written shortly after the war. It's well written, and manages not only to explain the tactical problem, but also convey some of the horror involved. Ignore all of the problems that are unique to the logistics and planning of amphibious assaults, and you're still left with a nightmare. Somehow, you have to get off the boats and onto land, while the enemy is shooting at you. The coral atolls of the South Pacific presented an additional obstacle not present at Normandy: the reef. At Tarawa, this reef varies from 500 to 800 yards away from the actual beach. The tide was too shallow to allow landing boats to cross it. The innovation the 2nd Marine Division came up with, entirely on its own and against the resistance of pretty much everyone else involved, was to use amphibious tractors designed for carrying cargo to bridge that gap from boat to beach. The gamble was a success, and incorporated into general doctrine, but at a very high price. The combination of an ineffective preliminary naval bombardment with the basic unsuitability of the vehicles, slow and thin skinned, for combat operations meant that accurate Japanese fire destroyed them in huge numbers. The intention was for the LVTs to make repeated runs from the reef to the beach, but this didn't happen. By the morning of the second day, fewer than ten of the original 83 tractors were still in service. This produced a problem for the first wave, and a related problem for the rest of them. Another of the things that makes opposed landings so difficult is the complete chaos the descends on the attackers instantly upon the start. LVTs tried to dodge fire, so many of them hit the beach somewhere other than where they were supposed to. Between those shot down getting to the beach, and the extreme vulnerability of troops as they got out of the tractors, the initial assault companies suffered casualties far over 50% within the first minutes of the battle. The survivors were shocked and demoralized, and unit cohesion was shattered by the casualties and the intermingling of different units in the confusion. Most of the officers were dead. An offensive is just like the balls you study in physics class. An attack in motion tends to remain in motion; an attack at rest tends to never get back underway. The Marines hit the seawall, and stopped dead. The attempt to restart the momentum had a difficulty beyond the disintegration of the chain of command and the shock. A crucial part of military campaigns is operational depth. Having space to the rear allows the opportunity to regroup, and to move around to find a weak spot in the enemy front. In normal offensives, the area utilized is miles deep. At Tarawa, it was measured in feet. Any regrouping would need to be done under fire, and the only maneuver room was salt water. For the successive waves of Marines, with the losses among the LVTs, the only way to get to the beach was to walk. They had to move the 500-800 yards beyond the reef on foot, under fire, rifles held over their heads to keep them sort of dry. It was like attacking on July 1, 1916, except through four feet of water. This was the problem the Marines faced. Through sheer determination, they got off the beach and destroyed the Japanese. Ten weeks later, they demonstrated that they had learned the lessons needed to keep casualties down when they invaded Kwajalein.

Update

2009-05-08T22:59:00.001-05:00

I haven't had the motivation to write lately. Studying for the CPA exams has been taking up most of the energy I can generate. They are going well. I took both FAR and AUD, and I'm pretty sure I passed both of them. BEC is on the 27th, but I could pass it if I had to take it tomorrow. I did get out and go to a class on salsa dancing last night. An online friend suggested that that was a good way to meet people. It seems like it'll work out. I should also have a couple of posts up in the next couple of days.

Cathy

2009-05-01T14:13:00.000-05:00

Cathy, if you're reading the blog, please check your e-mail.

Greed and Morality

2009-05-01T13:39:00.002-05:00

In our capitalist society, we recognize that greed is an inherent part of human nature, and try to provide incentives to channel it in socially productive ways. This has led to a sensibility that greed is not simply inherent, but actually moral. The crudest form of this sensibility, which you heard a lot in the 1980s, but less so now, is, "Greed is good." I've actually had people tell me that this was Adam Smith's position, which indicates that the speaker has never read The Theory of Moral Sentiments. What has become, if anything, more common is a subtle conflation of what is legal with what is moral. Matt Yglesias has a post today, not his first on the subject, making the argument that people enforcing contracts in a way that maximizes their profit is not necessarily moral behavior. In fact, such greed can be extremely immoral, even though we allow it. Roughly speaking, I agree with Yglesias. I think that there is another element to it, which hearkens back to my point in the Arlen Specter post that moral imperatives are not the same for all actors, or even for the same actor in different roles that they play. I think that a case can be made that, for a publicly held corporation, the moral imperative is to maximize profit regardless of other consequences. Of course, corporations aren't people, except in the most narrow legal sense, and so they can't have moral imperatives. They devolve to the corporate officers, such as the CEO and the board of directors. For these officers, there is an ethical requirement to be greedy. This extends beyond just publicly held corporations. The hedge funds Yglesias discusses have the same issue, because their reason for existence is to maximize returns for their investors. Just as with the politician in my last example, though, these officers are also individual human beings. As such, they are also subject to the same moral imperatives that the rest of us are, in which greed is not a virtue, but rather a flaw that we tolerate. What has happened is that this second set of moral imperatives have been lost in the fog of the first. We have built an ethos in which we pretend that a CEO, or the manager of a hedge fund, should behave under a system of ethics that sees that role as the only role that the human being in question plays. This is destructive. Balancing different sets of imperatives is complicated, hard, and extremely difficult to evaluate. Tough. It needs to be done. We can't have powerful individuals operating as if the morality of individuals does not apply to them. Life is full of balances and trade offs that must be made. This is one of them. Of course, this also touches on a complaint I made here a while back that Greed, or Avarice, if you prefer, is the only one of the deadly sins that free market absolutists want to take into account in their system. They sometimes make room for Wrath, but that's not enough. This is warped, and produces a society that is inherently unstable. (It's also an example of how my posts can ramble and escape the original subject matter, but let that pass.) Sloth needs to be accounted for. This is, in the small world way that posts unintentionally relate back to each other, a part of that whole hatred of Europe that the right wing has. By building a system around greed, we have exalted GDP growth above all other measures by which we measure societal success. Europe, on the other hand, has made a fairly conscious decision to exchange some potential economic growth for things like longer vacations and shorter work weeks. Some of the wealth they have accumulated is additional leisure time, and, make no mistake, this is a form of wealth, even though it doesn't get measured as a positive in typical economic statistics. I won't really get into Lust, because its opponents generally don't argue against it on economic grounds. I don't want to stray too far from my original purpose. The most important of the sins, in an economic sense, that needs to be accommodated is Envy. Like it or not, Envy is a very real part of human nature. I can put together some practical reasons why excessive disparity in wealth and income is a bad thing. Beyond those, though, is that Envy must be accounted for. The have-nots are going to envy the haves. If you let this build up enough, it can and will tear society apart. Even if it doesn't lead to violent revolution, it can produce some extreme economic inefficiencies as the haves spend a lot of money, not on anything productive, but simply protecting what they have from those that don't have it. Leftist governmental impulses are the most obvious way to take Envy into consideration. Envy is best dealt with in the political sphere. Anyone who believes in the free market because it turns a vice into something that benefits society really should, if they are intellectually honest, recognize that they have to make other concessions to human nature. An awful lot of them don't, though, and consider any such concession as tolerance of evil. One might think that they have a Greed inspired motive for thinking that only their own sin should get a pass. For my own part, I try to be flexible on everyone else's sins in the hopes that they will reciprocate on my big one, which is neither Greed nor Envy.

Constitutional Monarchy

2009-05-01T00:44:00.002-05:00

I stopped by the local game store to buy a couple of miniatures today, and overheard a couple of people discussing a number of subjects. Keep in mind that game stores are inhabited by cranks, who tend to lean glibertarian. They mangled several subjects, but one that got them very exercised was the fact that George Washington turned down an opportunity to be king when the United States was being formed. They declared that we were very, very fortunate that he turned it down. Now, I'm a pretty big fan of the American political system (though I could do with a Senate that was somewhat more equally proportioned). Let's be serious for a moment, though. It's not like anyone was considering giving King George the First the powers of Louis XIV or anything. The alternative to our purely representative democracy was along the lines of Great Britain. Even 220 years ago, they had a system that we would pretty much recognize as a functioning parliamentary system. At the time, the king retained a large share of the foreign policy portfolio, splitting executive duties with the Prime Minister. However, the Patriots considered making Washington a non-hereditary king. In a lot of ways, it would have been very similar to the current office of President, except with a very long term. I think we're better off the way we ended up, but don't go overboard exaggerating the alternatives. This is related to something that really annoys me about the current Republican party, though it's way down the list of their problems. If you listen to them, when they declare that Barack Obama is a socialist, they inevitably say that he wants to make the US just like Europe. This is said in tones indicating that this would mean turning our fair country into a living hell. Visions of tyranny and poverty abound. I've been to Europe several times. The places I've stayed have uniformly been pretty nice. I've even noticed that the natives usually seem happy. I've only run into the secret police on one occasion. The stores were well stocked, public transportation works, and people have fairly nice living accommodations. I could even, god forbid, imagine myself living there, so long as I can bring my cats with me. There are really only two exceptions to my general good feelings about the continent, though I've never been to the center of evil, France: 1) The Dutch carbonate their iced tea. This means that they don't qualify as civilized. However, for being out in the barbarian wilds, it wasn't too bad. 2) The one time I ran into the secret police was in an honest to god socialist hell hole. I spent two days in East Berlin back when there was such a place. I can compare the Republicans' rhetoric to the real thing, and officially come to the conclusion that they have no idea what they are talking about.

Good News for McCain

2009-04-28T13:43:00.002-05:00

Arlen Specter becomes a Democrat. I'm really pleased about this. Don't get me wrong; I don't have any more respect for Arlen Specter the human being today than I did yesterday. He's still spineless, weaselly, and motivated entirely by self interest. The only reason he switched parties is because a poll came out last week that showed him 21 points behind his Republican primary challenger. The chances of him winning were slim, and only became possible by doing things that would have ensured losing the general election. Arlen wants to remain a Senator, and this was his only shot. So what? Look, the entire point of representative democracy is that politicians should respond to the incentive of getting re-elected. It's a perfect example of Machiavellian ethics, which I'm actually a believer in. (I think that Machiavelli gets an unfair rap by popular understanding.) Machiavelli was talking about the state, but the same thing holds here. Individuals operate under different moral imperatives than politicians do. A certain amount of craven self interest is moral behavior for a US Senator*, because we want them to represent their constituents. In Specter's case, it's pretty clear that his constituents don't really want a Republican representing them. My biggest problem with regards to the Senate is that I have little to no respect for the voters of Maine, who are unwilling to put the fear of losing an election into their two Senators, and so Snowe and Collins get away with pretending that they are moderates when they consistently vote otherwise. Perhaps the best part of this is that it is clear that the GOP hierarchy had absolutely no clue that this was coming. How's that party purity coming along, Senator McConnell? *Of course, Arlen Specter is both an individual human being and a US Senator. This means that he operates under different, and sometimes contradictory, moral imperatives. It's tough to sort out, and it is why there is also value in sometimes sticking to your beliefs even if they are unpopular with your constituents.

New .sig File

2009-04-26T18:32:00.002-05:00

I have a new .sig file for my e-mail. It's longer than net etiquette really allows, so I may cut it down in the future, but it has so much meaning for me that I'm using it in full for the moment. It's from Spin State, a book I recommended on here a while back, and at least one reader picked up.

"And why the hell should I trust you?" He shrugged. "There's no should about it. You either do or you don't. You have a lot to learn about life if you think people have to earn your trust." "You can't talk your way around this one, Cohen." "You don't trust people because they're a sure bet, or even a good risk. You trust them because the risk that you'll lose them is worse than the risk that they'll hurt you. That took me a few centuries to learn, Catherine, but I did learn it. And you'd better catch on faster than I did. The way things are going right now, I don't think you have a century to spare."

That puts into words something I've grasped at trying to explain about myself for a long time. At least for me, people don't earn trust. I go a bit farther. My default setting is that I trust pretty much everyone to start with. I may stop trusting someone, and I may have learned enough about someone before I meet them not to trust them at all, but those are changes from my initial assumption. I would rather someone hurt me because I trusted them when I shouldn't than that I hurt someone because I didn't trust them when I should.

Broderism Most Foul

2009-04-26T02:15:00.002-05:00

With David Broder's column in this morning's Washington Post, I hope we can put to rest any last thoughts that he is a reasonable individual. "Moral monster" is closer to the mark today.

But now Obama is being lobbied by politicians and voters who want something more -- the humiliation and/or punishment of those responsible for the policies of the past. They are looking for individual scalps -- or, at least, careers and reputations. Their argument is that without identifying and punishing the perpetrators, there can be no accountability -- and therefore no deterrent lesson for future administrations. It is a plausible-sounding rationale, but it cloaks an unworthy desire for vengeance.

Yes, that's right. My desire that the people who ordered their subordinates to torture people, in some cases to death, in flagrant violation of both the law and all human decency, is an unworthy desire for revenge.

The memos on torture represented a deliberate, and internally well-debated, policy decision, made in the proper places -- the White House, the intelligence agencies and the Justice Department -- by the proper officials. One administration later, a different group of individuals occupying the same offices has -- thankfully -- made the opposite decision. Do they now go back and investigate or indict their predecessors? That way, inevitably, lies endless political warfare. It would set the precedent for turning all future policy disagreements into political or criminal vendettas. That way lies untold bitterness -- and injustice.

Yes, that's exactly what they should do. The best way to avoid criminalizing policy is not to engage in criminal policies. The memos may have been , "deliberate, and internally well-debated, policy decision, made in the proper places," though I doubt it, but they were also illegal and immoral. No amount of deliberation can change that fact. We now see the level to which David Broder will go in his quest for "reasonableness." Apparently, there is nothing that a President can do that merits discarding the attempt for us all to get along. (Well, except for getting a blow job. That's worthy of impeachment.) This is the logic of a moral imbecile. We can't have bitterness. That would be intolerable. Prosecuting people who ordered the deliberate infliction of pain on other people, and parsed words in an attempt to pretend that it was legal, would be an injustice. David Broder has joined the list of people who should be shunned by polite society.

Shepard Smith Is Trying to Get Fired

2009-04-22T22:01:00.003-05:00

Shepard Smith is an anchor on Fox News. A most unusual anchor at Fox News. When Fox declared that the Friday a few weeks ago was Glenn Beck Day, Smith openly mocked the whole idea on the air. Today, he was involved in a discussion on the torture memos, and saying the word "fucking" on the air was not his most serious offense against the sensibilities of his boss. Update: Unfortunately, it turns out that this was a web broadcast, not something that went out over the air. It's still good stuff, but it seems that Fox won't actually let their staff call it torture on the network.

Best. Toy. Ever.

2009-04-19T12:07:00.002-05:00

Periodically, a mouse makes its way into the house. Unlike many homeowners, I don't worry about this, because I have four mobile mouse traps. One got to the kitchen this morning. Dirk and Eddie are busy playing with it.

Twenty20

2009-04-19T01:03:00.002-05:00

Cricket question. Are the rules for Twenty20 different somehow? The first matches from the IPL were not only low scoring, but wickets fell like crazy. I realize that Anil Kimble's performance was extraordinary, but even the other bowlers were collecting. Given how short the match is, I can certainly see the batsmen taking more chances, but I would expect that run rates would be higher, and these seem pretty low relative to what I was expecting. Getting bowled out in less than 20 overs just seems foreign to my expectations.

Back to Cars

2009-04-18T00:33:00.002-05:00

Over last weekend, between hockey games, my father and I talk about all sorts of things. One of the subjects this year was the state of Michigan and the state of the auto industry. One of Dad's points was that it isn't a good idea to cling to low value added, low wage industries. His example was the textile industry, and the absolutely correct argument that New England would have been foolish to hold onto it when competition arose in the south early in the 20th century. In the same way, it isn't smart, and hasn't been smart for a while, for Michigan to cling to the auto industry. It needs to move on, and become a place where new industries are developed. It seemed to me that there was a problem with this argument, but I couldn't come up with it. So, I just sounded a tiny bit foolish taking a lame position, then let it drop. I'm blaming the alcohol. Tonight, I realized what the problem is: cars aren't textiles. Textiles are very much a low value added, low wage industry. It's where just about every country that industrializes starts, from Britain in the 18th century to Burma today. They are very easy factories to build, primitive and cheap, so it's a business that absolutely relies on being able to pay its workers next to nothing. Today, China has moved past the point where it can truly be competitive in the textile business. None of that is true of cars. Think about the foreign countries that produce any significant number of vehicles that are driven in the US: Germany, Japan, Korea, and Sweden. There's not a low wage, developing country among them. In fact, one of the telling things is looking at where a country is in the development process when it becomes able to successfully export cars to industrialized countries. Japan achieved it in the 1970s, Korea in the 1990s. Having a functioning auto industry is the last stage of industrial development, not the first, like textiles are. China and India are at the stage of trying to create domestic car industries. As of now, and for the foreseeable future, no one here is going to want to buy their products. Large scale auto factories are an order of magnitude more complex than what they do now. Computer chip manufacturing has very large economies of scale, but you can still compete with pretty small assembly facility. Making steel, at least at the technology level they are at, is best done in huge facilities, but they don't need to be very complex. Car plants are both big and complex. China and India are going to get there, but it isn't going to be soon. If the competition in the car industry is the four countries mentioned above, it is not the case that autos are low value added, low wage products. Quite the opposite. Cars are made by people who are paid enough to have solid middle class lives in fully developed countries. Uncompetitive wages is not why the US auto industry is in such trouble. Its problems are specific to the particular companies, not the industry in general. There is no reason we can't have a healthy auto industry. I would advise Michigan to avoid becoming so dependent upon it as it was in the past, but I'd say that about any industry. Diversifying an economy is as important as diversifying an investment portfolio. There is another element to this. As I have posted in the past, one of the underlying dysfunctions in the world economy is that too many countries have built their economies around the idea of exporting lots of stuff to the United States. As an American, that was really nice while it lasted, but it isn't sustainable. The world has to reorient a lot of its trade. Americans need to consume less relative to what they make. Japan, Korea, China, Germany, and some others, have to decide whether they want to keep making as much stuff, in which case they have to start buying more of it themselves, or start making less stuff. Given that, the United States needs to start making a rather large amount of stuff that has recently been made elsewhere. The alternative is to come up with a whole lot of new things that no one has made before that people in other countries are going to want in exchange for the stuff that they make. This is, essentially, my father's argument. I'm very skeptical. I don't think that we can come up with that much new stuff. Green energy technology is a nice idea, and it has the potential to be pretty big, but not that big. It has the additional problem that, if the environment that led to the big trade imbalances doesn't change, there's no reason to think that these new industries won't flow overseas in exactly the same way. It turns into an treadmill where you have to keep coming up with that much new stuff on an ongoing basis. In the end, we're going to have to replace current imports with domestically manufactured goods. The trade flows don't work any other way. This means that observing that an industry is currently being run more successfully in foreign countries is not a sufficient argument that it is something that America is better off letting go. There must be something for which that is not true. It doesn't necessarily have to be cars, but it has to be something, and I'm not sure what a better candidate is. Now, all of this is a completely separate argument from whether or not particular car companies should be bailed out. There are all sorts of ways that we could get the American auto industry healthy again. Ford is actually doing fairly well. At some point, its survival does depend on dealing with its legacy costs. Creating a rational health care system would go a long way towards doing this.

Sleep Deprivation

2009-04-16T21:23:00.002-05:00

Here is a quote from one of the OLC memos released today:

Sleep deprivation may be used. You have indicated that your purpose in using this technique is to reduce the individual's ability to think on his feet and, through the discomfort associated with lack of sleep, to motivate him to cooperate. The effect of such sleep deprivation will generally remit after one or two nights of uninterrupted sleep. You have informed us that your research has revealed that, in rare instances, some individuals who are already predisposed to psychological problems may experience abnormal reactions to sleep deprivation. Even in those cases, however, reactions abate after the individual is permitted to sleep. Moreover, personnel with medical training are available to and will intervene in the unlikely event of an abnormal reaction. You have orally informed us that you would not deprive Zubaydah of sleep for more than eleven days at a time and that you have previously kept him awake for 72 hours, from which no mental or physical harm resulted.

I have a sleep disorder. I've been on a bunch of medications to help me get to sleep over the years. Sometimes, when one starts to lose its effect and you need to transition to a new one, you have to wait up to a week to let the old drug get out of your system before you can start taking the new one. They give me Ambien when they do, but it might as well be sugar pills for all that it helps to put me to sleep. On one of these occasions, I was unable to get to sleep for about 83 hours. That's torture, trust me. Under the conditions that it was used here, it wouldn't have to be nearly that long. To prevent prisoners from falling asleep, they are forced to sit on a narrow stool, or hung suspended from the ceiling and made to stand up the whole time. This is disgusting.

A Change in Minnesota

2009-04-16T18:02:00.002-05:00

Over the past week, both GM Doug Risebrough and coach Jacques Lemaire have left the Minnesota Wild. In the decade of the team's existence, they are the only coach and GM the Wild have had. Lemaire is famous (or notorious, if you wish) for being a coach that puts defense before offense. Completely. His team's always are among the league leaders, and often the actual leader, in goals allowed. They are also always near the bottom in goals scored. His system involves non-stop trapping in the neutral zone. Working for GM Lou Lamierello in New Jersey, he won a couple of Stanley Cups with it. I predicted from the very beginning of this team that Lemaire was a horrible choice. What I said at the time was that his system was going to do a good job of making a bad team look better than it really was, and that it would prevent the development of a really good team. You don’t lose if you never give up a goal, but you never win if you don’t score any. For a variety of reasons, in just about every sport where players play both offense and defense, it’s much easier to find guys that play good defense than it is to find guys that can score. Hockey is no exception. The innate abilities needed to defend is a shorter list than those needed to score goals. Speed helps and size helps, but the only qualities really needed, for those that have the minimum skills needed to even be considered for NHL duty, is positional smarts and willpower. That’s it. You don’t need good hands. You don’t need outstanding peripheral vision. One of my favorite college players ever was David Huntzicker, at Michigan. I saw him play four times as a freshman: the Showcase games, and the Frozen Four games. I was instantly wowed by him. My father, who had watched Michigan all year. didn’t see it at first. He was big, slow, and had no scoring touch whatsoever. What struck me was that he was never out of position. He had the foot speed of a possum, but forwards rarely beat him to the outside. My father saw it by the next year, and we still talk about him. (The 1998 final was one of the most interesting tactical games I’ve ever seen; I’ll have to write about it on my blog sometime.) He had reconstructive knee surgery, twice, so he only got slower over his career, but he was still good. By the time you’re at the NHL level, smarts and dedication aren’t in short supply. That means that it isn’t hard to put together a team that can play great defense. Lemaire did that. Putting together a good offensive team, now that’s hard. In addition to being rarer, good offensive players don’t want to play on defense first teams. This shouldn’t surprise anyone. Not only is playing offensive hockey more fun, but people everywhere prefer to work somewhere that takes advantage of the things they do well. Athletes aren’t any different. Offensive players want to play in offensive systems.* They don’t want to play for Jacques Lemaire. Lemaire and Loophole Lou won with an all defense team in New Jersey a decade ago because they had a new way to play defense: all trap, all the time. No one knew how to beat it, and it shifted the balance between offense and defense. But guess what? Coaches adapt. They figured out how to beat it. Not perfectly, of course. Every team has adopted some of the Lemaire system into their game. Now, what differentiates them is whether or not they can score as well as trapping. The all defense approach won’t work right now, and it won’t again until someone finds a new way to implement it. Lemaire isn’t that guy. *As with this entire post, football is a different beast. By having one set of players that play only offense, and another set of players that play only defense, it has a completely different dynamic.

Frozen Four Wrap Up

2009-04-12T21:15:00.003-05:00

It was, by far, the wackiest NCAA hockey tournament ever. Three of the #1 seeds lost in the first round, with BU being the only one to escape. Minnesota Duluth scored two goals in the last 40 seconds of their first round game, one with 0.8 seconds left, to send it to overtime, where they won. New Hampshire decided that UMD left far too much time on the clock, tying their game with North Dakota with 0.3 seconds left. Cornell won their first round game with 15 seconds left, as did BU in their second round game. I described the Air Force/Vermont game previously. Two #4 seeds, Miami and Bemidji State went to the final four. The last three games fit right into the general mayhem. Miami 4 - Bemidji State 1 Miami just throttled the Beaver's offense. The game probably wasn't as lopsided as the score, as the play was fairly even. However, there was never any sense the Bemidji was going to be able to tie it up once Miami got ahead. In this case, a small difference in ability sucked all the drama out of this game. Going into the tournament, I said that Miami was the one team that I thought could give BU real trouble. After this game, I let other people convince me that they were going to get killed in the final. As it turned out, I should have stuck to my guns. Boston University 5 - Vermont 4 On the other hand, this game wasn't as close as the final score, despite Vermont being ahead with eight minutes left in the game. BU's goalie, Kieran Millan, had a horrible game, letting in three very soft goals. Other than that, Vermont got waxed. They were unable to stop BU from wandering around with the pucj in the offensive zone, and it left you with the feeling that, as soon as the Terriers decided to really get going, a succession of goals was inevitable. BU runs an interesting offense. They don't park anyone in front of the net, but have guys cut through the slot constantly. Vermont was unable to win battles along the boards, and the cutters were open, but BU kept just missing with their passes. It was a matter of time. I developed a dislike for BU during this game. They are chippy, and take all sorts of swings after the play. They took a lot of dumb penalties. It's too hbad, because the style they play is fun to watch, but the team turned me off. BU 4 - Miami 3 OT So very, very close. This was not like the Vermont game. Miami was legitimately in this game. For most of it, they were the better team. The first period was evenly played, but BU got the lead on a fluky goal that pinballed off a defenseman right to a Terrier forward who put it in. That was a recurring theme. Miami tied it up early in the second, and then started to take control of the game. From my seat about three miles from the ice, it looked like BU was the bigger team, but Miami won all the physical battles. They ran a very effective defense. A lot of people have complained that they play a very boring trapping system, but that's not what I saw. It seemed to me that they were sometimes trapping, and sometimes forechecking fairly aggressively. They seemed to change up on a possession by possession basis, and it gave BU fits. When BU did get the puck into the zone, the Redhawks refused to let them get off the boards. The third period was astonishing. For 18 minutes, Miami completely dominated the game. I don't think that BU even came close to having a scoring chance over that stretch. For the most part, they couldn't get the puck through the neutral zone. Miami capitalized on turnovers and took the lead with 7:30 to play, and made it a two goal lead three minutes later. With just over four minutes to go and an offense that had done nothing for a half an hour of play, the Terriers looked dead. They pulled their goalie with three to go, and it almost resulted in an empty net goal a minute later. Then . . . collapse. With 90 seconds left, Miami suddenly got scared. They backed into their zone far more passively than they had up to that point, and stopped contesting pucks along the boards. It was one of those moments that makes you remember that these are 22-year old kids, not hardened professionals. At 19:51, BU scored a goal that I still have no idea how they got in. I thought Cody Reichard had the 5-hole completely closed, but somehow, it trickled through. At that point, it almost seemed inevitable that BU would tie it up, which they did with 19 seconds left. BU then controlled the overtime, scoring yet another fluky goal to win it when Kevin Roeder went down to block a shot from the point, and it caromed off his shin pad and over Reichard's shoulder into the net. I really developed an affection for the Redhawks. They didn't let BU goad them into taking stupid penalties. They played hard, fast, and physical. They weren't nearly as boring as I'd been led to believe. Looking over their roster, they should have most of their team back, but who knows if they can repeat this run.

Catholics Win a Sign War

2009-04-08T14:54:00.003-05:00

Viva la Vida or Death and All His Friends

2009-04-08T00:01:00.002-05:00

I was noodling around on YouTube last week, and checked out some Coldplay videos. One of the first things I discovered is that they did a sing that I've loved for years, but had no idea what it was called, or who made it. It turns out that it was "Clocks." I listened a bit more, liked it, and ordered several of their albums. The first one arrived today, their most recent, Viva la Vida or Death and All His Friends. It is rare that an album grabs me this hard on just the first listen. One thing that helps is that I can't think of anything I've listened to that's like it. They do some things differently. The lyrical structures are very distinctive. The instrumentation is both unusual, and sometimes hard to figure out. Some of the time, I'm pretty sure that Jonny Buckland is getting sounds out of his guitar that I've never heard before. This is a band that I think really deserves the term "alternative." The first word that comes to mind to describe the music is "delicate," but that makes me think Vivaldi, and that isn't it at all. So I'll go with "fragile." It's spun together like a fragile crystal snowflake. There are some fabulous piano riffs, particularly on "Lovers in Japan." The percussion gives it form. And Chris Martin's voice is perfect. It wouldn't be perfect for everything, but it is for this. His voice is also clear. I have no trouble following the lyrics. In this case, that's a good thing. In addition to having an odd structure, and some very interesting meters, they are rich with historical and religious allusions. Unsurprisingly, given the title, it juxtaposes life and death, though I find a lot about love in there as well. Note: There's a plagiarism lawsuit underway over the song "Viva la Vida", which Joe Satriani claims was stolen from his piece "If I Could Fly." I'm not taking a position on that, and evaluating this album on its own. Listening to them, they are awfully similar, but I've also heard a string of songs going back to the sixties that do as well, so where they all come from, I have no idea.

Zack Greinke

2009-04-07T12:24:00.001-05:00

Joe Posnanski has a fabulous human interest story on Zack Greinke, a pitcher for the Kansas City Royals. After a successful debut in the major leagues in 2003-04, Greinke melted down in 2005. He was diagnosed with social anxiety disorder and clinical depression.

ROLcats

2009-04-07T12:21:00.002-05:00

You may be familiar with the concept of LOLcats: pictures of cats, or other animals, with amusing captions. Someone has an interesting take on this: Russian LOLcats, with the captions "translated" into English. Cat: My spirit is being crushed within the machinery of industrial society Mouse: Your failing is lack of hard work and diligence

Grooming Eddie

2009-04-06T23:01:00.002-05:00

I've been trying to get video of this for weeks. Whenever I pick up the camera, Dirk stops whatever he is doing, and sticks his face in the lens. This time, for whatever reason, he went back to licking Eddie. As you can tell, Dirk is of the opinion that Eddie doesn't keep his ears clean enough.

If You Own GM Stock . . .

2009-04-02T00:14:00.003-05:00

. . . I have a way for you to make guaranteed money. I checked a few days ago, and found that GM was on the RegSHO list. That means that it's hard to borrow, which means that it is very difficult to short. I just did some calculations, though, and it is very clear that it has gone beyond this. It must be absolutely impossible to short it right now. There's a concept in options trading called put-call parity. Roughly what it translates to is that options pricing can't express an opinion as to whether or not a stock is going to go up or down. (Yeah, yeah, as soon as you introduce skew, this isn't an accurate description, but bear with me.) If you know the price of a call option, you can derive the value of the put option of the same strike and maturity, and vice versa. One can't be, relatively, more expensive than the other. This is because if you buy a call and sell a put of the same strike and duration, you have a forward contract on the stock of that maturity. Since you can either buy or sell a share of stock, the call+put position has to have the same price as that forward. Let's assume, for the moment, that interest rates are zero, because they're close enough to still work. In that case, the forward price of a share of stock is going to be the same as the price it's trading at right now. At the close today, GM was trading at $1.93. The January, 2011 $2.50 call is selling for $0.50, and the put is selling for $2.05. Thus, you can buy the January, 2011 $2.50 forward for -$1.55. That means that, in January, 2011, you'd have to buy a share for $2.50, no matter how much it is worth. You could offset that position by selling the actual forward contract, which would allow you to sell a share of GM stock for $2.50 at the same time. Now, that forward contract doesn't actually trade. There's a way to replicate it using a bond and a share of the stock, but we don't actually need to do that, because the pricing right now is so ridiculous. Create that synthetic long forward contract, by buying the call and selling the put; you just added $1.55 to your bank account. Now, offset it by selling a share of the stock; you just added another $1.93 to you account, for a total of $3.48. Leave that money in the bank until 2011, then use $2.50 to buy a share of stock, satisfying your option position. Even if your bank is giving you zero interest, you just made $0.98. No risk. None. It's free money. THIS CAN'T HAPPEN. People on Wall Street like free money. They should be all over this, buying calls, selling puts, and shorting the stock. Leave these prices here, and they'd do it an infinite number of times. Long before that, you're going to drive the price of the call up and the price of the put down until there's no more free money to be made. Clearly, there is something preventing them from doing it. The only thing that can be is that they can't short the stock. Only people that already own it can do this. You'll actually end up with a goofy looking position, where you don't have offsetting contracts, because, effectively, you'll still be long just as many shares of GM as you were before, but you'll have made 98 cents for each one you convert. Also, if you're daring enough to want to buy GM stock, don't. Buy the synthetic position, because it's cheaper than a share. This sort of gap in put-call parity is mind boggling.

Eddie Wins the Scavenger Hunt

2009-04-01T18:28:00.002-05:00

Eddie has discovered that having one of his shoulder blades removed means that he can fit through the small cat sized hole in the box covering Monster's food bowl. So, keeping him on a diet just became more challenging. In other news, Cheyenne Jackson sent a gift to the cats. She got a foil covered blanket for Christmas from her grandparents that was intended to provide a puzzle. It makes a loud crinkly sound when you move on it, which was supposed to keep her from jumping on her mother's bed. The puzzle, of course, was how to defeat it, and make the bed safe for sleeping on. Apparently, the puzzle has been definitively solved. Knowing how much cats like walking around on things that crinkle, she sent it to my kids. Monster and Dirk love it so much that they can't be bothered to get off it to write her a thank you note. Eddie doesn't like it at all. He wishes the others would stop playing with it.

Freakish

2009-03-30T12:05:00.002-05:00

The NCAA hockey tournament has been fantastic if you like upsets, not so good if you like the set of teams I do. Michigan lost in the first round to Air Force, though I think they outplayed the Falcons and lost due to officiating. All told, three of the #1 seeds lost in the first round, as did three of the #2 seeds. Bemidji State, the lowest seeded team in the tournament and by far the least accomplished one, is headed to Washington after beating #1 Notre Dame and #3 Cornell. If you had told me before the tournament that Air Force would beat Michigan, and it wouldn't be the biggest upset, I'd have told you to get lost. What was really weird, though, was the end of the East Regional final between Air Force and Vermont. With about 3 minutes left to go in the second overtime, there was a scrum in front of the Air Force net, with goalie Andrew Volkening covering up. Then the refs went to the replay booth. And they stayed there. The TV showed replays of the scrum, and those of us watching were wondering what the hell they were doing, because there was nothing to review. The puck certainly never entered the net. Then one of the cameramen focused on what the refs were actually looking at, which they can do given the set up. It turned out that they were looking at an entirely different play, which had happened two minutes before the scrum, which was the first stoppage of play after it. One of the Vermont players took a shot from the blueline that caromed off the backboards and back into play. It just missed the net, but clearly wasn't a goal. Except . . . The net rippled. The overhead camera is very fuzzy*, but it appears to show the puck going just inside the goal post, and then out through the back of the net. It definitely captures the net billowing out as if the puck hit it from the inside. The camera at the other end of the ice shows the shot clearing traffic in front, and it appears to be headed for the top corner, but then THE PUCK DISAPPEARS. You see it next a few frames later, ricocheting off the boards. I have no idea what sort of illusion made this happen. Then, as if this wasn't already deeply into UFO territory, they show a picture of the net while the refs are looking at the replay, and there's no hole in it. The mesh of a goal net is too tight for a puck to go through it unless one of the strings is broken, but they are all intact. After 12 minutes of looking at the replays, the refs ruled it a goal. I'm at least 80% certain that they got the call right, but we'll never be entirely sure. It was, quite possibly, the strangest play I've ever seen in any sport. *It isn't a part of the standard TV angles, and usually doesn't have to be very sharp. It was, for instance, good enough to tell that the puck didn't go in with three seconds left in the first OT, when an Air Force forward knocked it back out when it was halfway over the goal line, out of mid air. If you had told me after that freakish play that there would be a goofier one, I'd have told you to get lost.

More Cats!

2009-03-29T22:16:00.003-05:00

I don't know why the camera has everything looking yellow today. The room is a mess, but it isn't jaundiced. The first one is Monster and Dirk. Monster is, once again, glaring at me because she's not in my lap. Dirk is thinking about rushing the camera, like he always does. The second one is Eddie. As you can see, his fur is finally starting to fill back in. Last, I have some video of Eddie, so people can see how he gets around. It's still a bit painful to watch, for me, but he's doing all right.

Marvin

2009-03-26T00:01:00.002-05:00

I have a rule that you just shouldn't freelance with "The Star Spangled Banner." It's a difficult song as it is, and most people singing before a sporting event butcher it even when they stick to the book. God created Marvin Gaye to break whatever damned rules he pleased.

The Myth of German Military Genius: Officer Corps

2009-03-25T18:03:00.000-05:00

Okay, enough important stuff. Back to my hobby horse. Probably the center of the popular perception of the Germans as particularly good at war stems from their officer corps, particularly at the top. There are other parts, but they revolve around this, in one way or another. Where it misses the mark isn't so much about what the Germans did well. The problem is that the conventional wisdom ignores the things they did poorly. By the middle of the 19th century, German officer training strongly emphasised individual initiative. Junior officers were supposed to evaluate the situation before them and improvise if they thought their orders were sub-optimal. To a certain extent, all armies did this, but the Germans emphasized it to a greater degree than anyone else. As far as it goes, this is both a true observation about them, and a positive trait. The Americans did the same thing, though not as successfully. The Soviets, for obvious reasons of educational level, emphasized it the least. The British were closer to the Soviets, which was largely the result of needing for one set of guidelines for officers in charge of a myriad of nationalities; all of British tactical doctrine was more rigid. It should be obvious that the ability to be extremely flexible is both desirous, and reflactive of a high level of quality. German unit commanders were the best in the world. You can see this from any number of situations. What most people miss is the downside of this approach. There are two main problems. The first is that this high level of autonomy often meant that, once they reached higher levels of command, senior German officers frequently had personality clashes that spilled over into operational dysfunction. They had a tendency to pull in different directions. This was particularly an issue during the most critical campaign of the war: Operation Barbarossa. Army Groups North and Center pulled apart from each other early on. To some extent, this was necessitated by geography; if you look at a map, you'll notice that the front from, say, Tallinn to Odessa is a lot longer than that from Königsberg to central Romania, where they started. Still, they didn't coordinate well, and this allowed a lot of Red Army troops to escape that probably shouldn't have. I'll have a post specifically about Blitzkrieg, which will look more deeply at Barbarossa. The larger fault, though, was that this huge emphasis on tactical and operational capability left a vacuum in many of the other roles officers need to fill. All of the best candidates in officer school were funneled into the command track. This meant that the officers who tracked into staff roles were decidedly inferior. The two largest gaps were in logistics and intelligence. German military intelligence during both world wars was a disgrace, truly deserving the oft used designation of a contradiction. The most awe-inspring example of complete incomepetence was the way that they fell for Patton's fake army that was supposed to land around Calais, rather than the real force that went to Normandy, but it wasn't unique. The Red Army consistently surprised the Wehrmacht with its operations, while rarely being fooled itself, at least after the opening days. Amassing the forces that cut the Sixth Army of at Stalingrad in secret was par for the course. As for logistics, the Germans were far behind the curve. Historians have had a tendency to just attribute this to inherent conditions, and talk about how they were hamstrung by things beyond their control. This is bullshit. Logistical problems are never beyond an army's control. The Germans simply wished the bottlenecks away, and planned as if they weren't an issue. (This is something else I'll return to in a different post, as it touches on one of the reasons the German generals can't be absolved of complicity in atrocity.) As with other things, this is one place where the postwar consensus of the generals themselves was to blame everything on Hitler. According to this line of argument, it was because of his orders that the Wehrmacht didn't receive winter clothing before the Soviet counterattack. Again, bullshit. The generals made that decision. Faced with a shortage of trains, they just planned to have the campaign over by autumn, and so declared that cold weather gear wasn't necessary. Hitler actually stayed out of most of the planning for Barbarossa, and only significantly intervened once, and he was right when he did so. (This was the decision to send Panzer Group II south to the Ukraine in August.) The German command had a strong tendency to assume the best, and not bother planning for contingencies. Again, this was true during the First World War as well. When the Schlieffen Plan failed to knock France out of the war, von Moltke and then von Falkenhayn had to scramble, because they had counted on the troops in the west going east to fight the Russians. They were fortunate that the Russian army turned out to be less competent than they had thought, or they'd have been overrun. Anyone who blames Douglas Haig for being overly optimistic, but gives the Germans a pass, hasn't looked at it very closely. Yes, Haig was always planning for the breakthrough that never happened, but he also never left himself in a position where a failure to achieve it left him at a serious disadvantage. One thing you could always count on was that the Germans were going to overreach. It's easy to see how military history buffs fall into the trap of overrating the Germans. Aside from Liddell-Hart screwing up his research, being very good at making command decisions appeals to the romantic in most of the armchair generals. Pushing units around a map and setting elaborate traps for the enemy is cool. Supply chain management is boring. Being the operational commander is what most people envision themselves doing when they read history, so they tend to forget about the other stuff. It's the same impulse that leads them to overrate Robert E. Lee and underrate Ulysses Grant. While understandable, this trait also leads to some very inaccurate analysis. On average, the German officer corps was just about as good as anyone else's. It was just very skewed in terms of its competencies.

The Geithner Plan, Preliminary Comments

2009-03-23T00:43:00.003-05:00

Okay, I'm writing this, despite knowing perfectly well that all anyone has to go on at this point is incomplete press leaks. Until Geithner actually lays out the plan tomorrow, we don't really have enough specifics to comment in detail. Given past unveilings, we may not have enough even then; this may be an effort to avoid making a decision until he is in a better position. Still, I have a couple of observations. A lot of people, not surprisingly, are claiming that this is a nefarious bailout of already wealthy people. This really is too simplified. There are several different categories of already wealthy people affected, and it's important to keep them distinct. There are the counter-parties to derivative trades such as CDS. There are other creditors of the banks. There is management of the banks. There are the hedge fund managers and investors who are going to be asked to participate in the public/private partnership to buy up toxic assets. You may notice that I left out bank stock shareholders. That's because they aren't among the wealthy any longer; their stock is already near worthless. Take the first two, first. As I've said before, whether or not to bail these people out is really orthogonal to the question of whether or not we nationalize. I'm torn on it. On the one hand, I don't want to be bailing out people who made risky bets. (Though, keep in mind that not all of the creditors and counter-parties were making risky bets; a lot of them were hedging.) On the other hand, I think that there is legitimate fear that if you make them realize their losses, they take the global financial system down with them. That's too high a price for avoiding all moral hazard. Better, as I said before, to let them off the hook, and write new regulations reflecting the fact that they are all backstopped by the government. I'd like to see all of the management go. Vikram Pandit, for instance, should join John Thain in obscurity. However, I don't think this is quite as easy as it sounds. Figuring out who to replace them with isn't easy, and it's one of those things that is probably on the back burner due to the rather severe staffing problems at the Treasury Department. As for the hedgies being brought on board, I think that it's important to keep in mind the conditions under which they benefit. They only make money if, in fact, the assets are worth more than they are trading for. If that happens, it means that the plan worked. If so, then the benefit is worth the cost. The troublesome part is that they get a bunch of upside without taking on much risk. In an ideal world, this is a bad thing. As I'll discuss in just a moment, though, this isn't an ideal world. Relative to what we have now, it's probably better. As things stand, if we are going to pay off the creditors, the government already has all of the risk, but without a good way to profit. This plan doesn't change that. The reason for this, and my second general observation, is that the alternative that people like Paul Krugman are pushing, wholesale nationalization of insolvent banks, is not actually an option at the moment. One thing that recent discussions about it have made clear is that the administration doesn't actually have the power to nationalize them. The FDIC has the authority to take depository banks into receivership. AIG isn't a bank at all. Citigroup, Bank of America, and the rest of the motley crew are vastly more than depository banks. They are holding companies, some of whom own a depository bank, but who also own insurance companies, hedge funds, investment banks, brokerage houses, and plenty of other odds and ends. These are outside the remit of the FDIC, and none of the other regulatory agencies have that kind of authority, either. That's all before we get into the thorny problem that these are all global companies, with subsidiaries and branches all over the world. This adds enormous complications. Many countries have laws that foreign governments are not allowed to own banks; so, what do we do about the subsidiaries that are chartered as banks in these countries? You may be familiar with the US objections to Hugo Chavez nationalizing foreign owned operations within his country. How are governments going to feel about the US appropriating operations within their countries? So, we need to negotiate all of this with other governments. More, the administration needs Congress to pass legislation giving it the authority to nationalize the banks. Just how useful do you think Congress is going to be? Even among the Democrats, Evan Bayh is going out of his way to be as obstructionist as possible. Do you think that Republicans are going to turn down the opportunity to filibuster such a bill? Do you think that they'll be willing to not filibuster anything that isn't a complete mess? You don't go to war with the regulatory authority you wish you had; you go to war with the regulatory authority you actually have. The Geithner plan is crafted the way it is because it gets around that lack of authority. Crucially, it doesn't force anyone to do anything they aren't willing to do. That's a weakness, really, butthe administration can't force anyone to do the sorts of things they won't want to do. We don't know what Geithner and the rest are really thinking. For anumber of reasons, they really can't be very open about it. So, we're left guessing. Among the possibilities that I see is that this plan is actually designed to fail, in that it may turn out that, even with government backstopping, no one is willing to pay the banks enough for the assets to get them to sell. In which case, it goes nowhere. However, that provides more ammunition to take to Congress to get something passed. It may take a failure so spectacular that the markets plunge another 10% to get them off their ass. Who knows. Maybe we'll get that.

Gopher Hockey Final

2009-03-22T01:11:00.002-05:00

I said a few weeks ago that the Gophers needed to win their last four regular season games, and the two first round playoff games. They didn't do it, dropping an ugly game to Michigan Tech, and getting a tie against Duluth. They almost got their way into the NCAA tournament anyway. Despite losing to Duluth in the Final Five play-in game on Thursday, as late as this afternoon there was an unlikely set of events in the other conference tournaments that would have meant they got in, but it didn't happen. I still think that we are a better team than a couple of the ones that are getting the last at large bids, particularly Ohio State, but we didn't win the games we had to. End of story. I'm now pulling for Michigan and Minnesota-Duluth. However, the Gopher baseball team is doing very well. For the first time I can remember, we had a winning record on the annual spring break trip through Texas. We've got some high quality wins on our record, including Hawaii, UC-Santa Barbara, TCU, and Dallas Baptist. (There are strong NCAA Div 1 programs at schools that, even as a hockey fan I find unlikely.) Now it's on to Big 10 play.

Hallelujah!

2009-03-22T00:46:00.002-05:00

Everyone else is talking about the NY Times report on the plan Tim Geithner is supposed to announce on Monday. My take is that it's less than optimal, but not really the complete disaster that many are saying. I'd like to see nationalization, but I think that that would require Congress appropriating more money, so good luck with that. The howler monkeys were too busy obsessing about $200 million in bonuses and taking their eye off the $1 trillion problem of actually dealing with the banks. Way to take your eye off the ball by a factor of 5,000, guys. Still, what intrigues me more is this other NY Times story. Of course, they completely bury the lead. It's billed as being about tightening the rules on executive pay. It even sounds like some potentially good ideas. That's about the fourth most important thing in the story, though. 1. It will propose that many kinds of derivatives and other exotic financial instruments that contributed to the crisis be traded on exchanges or through clearinghouses so they are more transparent and can be more tightly regulated. 2. Officials said the plan would also call for increasing the levels of capital that financial institutions need to hold to absorb possible losses. In a sign of the economic system’s fragility, officials said the administration would emphasize that those heightened standards should not be imposed now because they could discourage more lending. Rather, they would be put in place after the economy began to rebound. 3. A broad consensus has emerged among regulators and administration officials that hedge funds must be registered and more closely monitored, probably by the Securities and Exchange Commission. This is the start of the long term changes we need to implement. These three hit the sweet spot. They cover three of my four biggest wants going forward, and might also include a decent second best option on the fourth. I'd like to see credit default swaps regulated as insurance, but, if they are on the list of things that will be exchange traded, I can live with that. Putting securities on the exchanges is a big deal. Trades are much more transparent, including the fact that, while we don't necessarily know any particular entity's position, we do have a record of how much of a given security has traded. No more guessing on the size of the markets. If things are traded on an exchange, then it has a standardized contract. No more trying to guess the specific clauses of a deal. If something trades on an exchange, you eliminate counter-party risk. If you make a trade, it's effectively with the exchange, not the other side. If they can't pay up, it's the exchange that takes the hit. As a consequence of that, margin rules on the exchanges are far more substantial that they seem to have been on the over-the-counter trades. It works with #2 in reducing the amount of leverage anyone can have. All of this works because, if something trades on an exchange, then it's illegal to trade it over-the-counter. Your trades must be on the exchange. One thing that will be key here is what the rules are on new great ideas that the financial wizards come up with. The government needs to have the authority to mandate that they also have to be exchange traded. No getting around the exchanges by coming up with something exotic. Among other things, that will limit the incentive to come up with new ideas. The second point, as I said, is about limiting leverage. This needs to apply to everyone, including the hedge funds. This is the biggest reason that what should have been an ordinary wipeout of the financial institutions has turned into such a disaster. They were able to borrow too much money against the capital they had. If we can keep the leverage ratios down to 10-1, we should be okay going forward. The third part is also important. One of the things that happened over the last decade is that a lot of what is, properly speaking, banking moved into a shadow world. Hedge funds and investment banks operated in an extremely opaque world, and built up ridiculous positions which then caused so many problems. If it forces them to reveal proprietary positions, that's a feature, not a bug. All three of these steps would be more effective at reducing ridiculous compensation schemes than direct caps. All of them work towards the goal of making asset trading much less lucrative. You can't trade more than your leverage limits. Everyone can get a pretty good idea of what your positions are, so you can't build something up quietly; everyone else will be able to figure out the good thing you have going, which will drive margins down. Margin requirements don't let you keep trading until you're in an AIG sized hole. I'm swooning over this. If the administration is serious about this, and can force it through Congress, I'll be willing to forgive a lot of things on the bailout.

Outrage Overload

2009-03-19T18:10:00.002-05:00

The AIG bonus story distresses me, not only for what is behind it, but also because the populist outrage forces me at least partially defend the actions behind it. Everyone is letting their outrage overwhelm their common sense. Here are some things to keep in mind: 1) Stop directing your anger at Edward Liddy. He didn't become CEO until last September, at the time of the first government injection of money. Before that, he wasn't even employed by AIG; he was retired, after being CEO of All state. It's not that I think he's a victim here; he made a lot of money being the CEO of Allstate. Attacking him as if he is in any way to blame for driving AIG into the ground betrays a lack of knowledge of what's going on that makes it hard to take people seriously on any part of this mess. 2) Liddy didn't have a choice about paying the bonuses. Every lawyer that I have read says that the contracts are airtight. As a legal matter, there was no option not to pay them. It's wrong and offensive that they are being paid, but the offense was inflicted by the previous management, not the current one. 3) In the same way, the Fed and the Treasury Department didn't have any option but to let AIG pay the bonuses. They bungled the PR of it, but the government doesn't have the authority to just override valid contracts. Even in the position of owning 80% of AIG, they couldn't stop them. Shareholders don't get to revise compensation contracts at will, either. 4) I'm appalled at the number of people in Congress voting for the special tax to get the bonuses back. This is a bill targeted at a small, and very specific, set of individuals. If it's written properly, it can probably avoid being considered a bill of attainder, but it's on a technicality. It's also largely pointless, because most of the people receiving bonuses aren't American, and don't work in America. They aren't subject to US tax law. Look, I want the bonus money back, too, but was anyone paying attention over the last eight years? I would think that anyone with any sense would not want to have an administration that reserves the right to void contracts as it pleases. You shouldn't want a government that sees the Constitution as an obstacle to be skirted by semantics. God forbid, I'm actually agreeing with the House GOP leadership on this one, and you have no idea how much that distresses me. Outrage is fine. Hell, it's healthy. Don't let outrage narrow your focus to the point that your willing to do illegal things to deal with it. There are a lot of things we can do to prevent something like this from happening in the future. At some point, though, you have to acknowledge the reality that things that happened in the past can't be changed. These bonuses fall into that category.

Sen. Richard Shelby to the White Courtesy Phone . . .

2009-03-16T08:47:00.002-05:00

I am anxiously awaiting the outrage among Republican lawmakers about the bonuses being paid to AIG's employees, including $450 million to the 370 person Financial Products Unit. Sure, these bonuses are written into the contracts with the employees, but when a company is struggling, and needs government money to survive, one of the conditions of receiving that assistance should be that the company unilaterally renegotiates such contracts to suit itself and avoid overpayment. Unless, I guess, the employees in question don't belong to a union that you want to destroy in order to benefit non-unionized competitors in your own district.

Stewart Vs. Cramer

2009-03-13T15:34:00.002-05:00

Following up on my post from last week about Jon Stewart roasting CNBC, Jim Cramer was on The Daily Show last night. The pie fight continued almost non-stop, with CNBC people going on all sorts of shows to try, lamely, to defend themselves. Cramer took the lead, going on a number of talk shows, including Today and Morning Joe. Stewart responded with another rant earlier this week. The people at CNBC need to realize that you shouldn't get into a pie fight with a comedian. Stewart kicked them all over the schoolyard like a 5th grade bully. It is also true that Stewart is right, which probably helps his arguments, but he just killed them. Here are the clips from Cramer's appearance last night:

The Daily Show With Jon StewartM - Th 11p / 10c

Jim Cramer Unedited Interview Pt. 1

Daily Show Full Episodes
Important Things w/ Demetri Martin

Political Humor
Jim Cramer

The Daily Show With Jon StewartM - Th 11p / 10c

Jim Cramer Unedited Interview Pt. 2

Daily Show Full Episodes
Important Things w/ Demetri Martin

Political Humor
Jim Cramer

The Daily Show With Jon StewartM - Th 11p / 10c

Jim Cramer Unedited Interview Pt. 3

Daily Show Full Episodes
Important Things w/ Demetri Martin

Political Humor
Jim Cramer

It's worth watching the whole thing. Jon Stewart conducts the sort of interview that Jim Cramer and his comrades should have been conducting for years. Granted, you should save actual profanity, which Comedy Central did not bleep out of the broadcast, for special cases, but this is one. Cramer whines that he had CEOs on his program all the time, and they lied to him. Well, sure, Jim, because they knew that you wouldn't press them. You are in the fucking news business, Cramer. Figuring out when someone is lying to you is your job. If you are incapable of doing that, then get off of a news channel and get into the PR business, because issuing press releases is what you are doing. Stewart crucifies Cramer with some old clips that show him telling an interviewer how to manipulate the markets. In them, he almost brags that he was doing it. Illegal stock manipulation, though the statute of limitations had expired. Cramer barely defends himself. Beyond saying that he called some people a liar and opposed the bailout, he mostly issues mea culpas. His response at times borders on Maoist re-education apologies. Whether he's sincere or not, I have no idea, but I also don't care. Cramer sold his soul years ago, and meek apologies on a satire show don't cut it. He needs to vanish down a very deep hole, and never be seen again. CNBC is a giant clusterfuck. It's business model, at the pinnacle of which stands Jim Cramer, is to be a full time, get-rich-quick infomercial. It really is no different than that guy you can see on the local UHF station on Saturday afternoons, trying to sell you his book on how to make money through collectible coins, except that they do it for 17 hours a day, every weekday. (They fill the rest of the time with lame infomercials, so it's sometimes hard to tell the difference.) The whole thing is no less of a fraud than a traveling snake oil salesman. A fair chunk of the blame goes to the viewership. They are sufficiently gullible (or, perhaps, sufficiently desperate) that they believe a clown who tells them how they can make 30% returns a year. I categorically disagree with the claim that you can't cheat an honest man. In fact, it's often pretty easy to do so. The viewers of CNBC, though, really did think that they could get huge returns with little risk. They bought the snake oil that Jim Cramer sold. The difference is that Jim Cramer is a professional. He's worked in the financial industry for three decades. Where most people should just be suspicious of these claims as a matter of course, Cramer should fucking know damned well that it's impossible. I have no idea whether he was lying, or whether he really believed his own sales pitch, but the latter is every bit as damning as the former. It would mean that he has no critical faculties. Of course, he's not alone. The whole industry became based off of the same ideas. Still, had Cramer really been listening, he'd have known that there was a problem. I knew that, and I have never been nearly as plugged in as he is. This is beyond the fact that, as some of you can attest, I recognized the existence and the magnitude of the problem two years ago. I also heard one of the individuals involved in the products that brought us to this point say that there was something wrong with it. When I say, "heard," I literally mean that I heard it. When I was a trader at Citigroup, a team of guys flew in from New York one day, and held a meeting. The purpose of it was that we were trying to come up with a way to correlate the performance of corporate bonds with the proper prices for the options we were trading. At the time, I thought it was too complicated to pull off. I still think that, but it's also clear that corporate bonds weren't any less misleading in the big picture than anything else. In retrospect, the most useful part of their visit came after their presentation. A few of us were just hanging around, asking them some questions. Well, other people were asking questions; I just stood there listening, because they were all way ahead of me. These guys told us about credit default swaps. They also laughed, because they pointed out some of the ways in which the whole market was a complete scam. They didn't phrase it quite that way, but it was easy to tease that out of what they did say. They thought of it as free money. We all laughed, because that is, theoretically, absurd. The entire trading industry is premised on the idea that there is no arbitrage.* It can't exist, because it would be instantly pounced upon, and vanish as prices re-converge. In practice, you can see a few things that look like they are capable of being exploited as arbitrage, but you can't, because the transaction costs of making the trades are greater than the price differential. Free money can't exist in anything resembling an efficient market. Yet, here these guys were, telling us about how they were engaged in a way of making free money. They as much as said that it couldn't last, but not because it would bring about catastrophe. No, they thought that the markets would eventually catch up, and eliminate the price differentials they were exploiting.** As far as I can tell, it didn't occur to them that the whole thing was a house of sand. It smelled fishy to me, though. It turned out, not that the markets would catch up, but that these guys were colossally mispricing the risk involved. If I could hear things like that, as a junior trader at a shop in Minnetonka, MN for 18 months, then Jim Cramer sure as hell could have heard them. Actually, I'm sure he did hear people describe these things. He's been in the business long enough to know that free money doesn't exist. Had he, and the shills like him treated what they heard with the skepticism that a journalist should, they'd have caught on years before the collapse. But what's the fun in that? Explaining that the profits are a fiction doesn't lend itself to stupid sound effects, and yelling, "Buy! Buy! Buy!" You can't call your show Mad Money if you're going to be sensible about it. Bye, Jim. Take your network with you. *Arbitrage: The simultaneous purchase and sale of an asset in order to profit from a difference in the price. It is a trade that profits by exploiting price differences of identical or similar financial instruments, on different markets or in different forms. Arbitrage exists as a result of market inefficiencies; it provides a mechanism to ensure prices do not deviate substantially from fair value for long periods of time. **Not surprisingly, those differentials were very complicated. I wasn't able to follow it closely enough to be able to lay it out, but it involved credit default swaps, the bonds that the CDS insured, and nickel puts as bankruptcy protection.