30 January 2015

Grist For The New Mill

My kindred soul amongst the highly paid curmugeons remains Nick Carr (not Cage, as my independent fingers sometimes say). Had I started these endeavors long before I did, I might be he. Sort of, of course, in a metaphorical sense. Today brings further evidence.

Susan Pinker reports the obvious: that, given the opportunity, even kiddies will while away time being frivolous.
"Students who gain access to a home computer between the 5th and 8th grades tend to witness a persistent decline in reading and math scores," the economists wrote, adding that license to surf the Internet was also linked to lower grades in younger children.

Why should we be surprised? Their parents are busy doing Angry Birds on their mobiles and slurping up porn on their PCs.

The problem is the differential impact on children from poor families. Babies born to low-income parents spend at least 40 percent of their waking hours in front of a screen -- more than twice the time spent by middle-class babies. They also get far less cuddling and bantering over family meals than do more privileged children. The give-and-take of these interactions is what predicts robust vocabularies and school success. Apps and videos don't.
The Wife spent a year or two as a middle school teacher (it was Just What I Want To Do, until it wasn't) and learned the most important lesson that early childhood professionals have known for, at least, decades: if little Billy is going to be a thug, little Billy will have arrived by five or six years of age. Raise disassociated kids and we're Shocked, Shocked I Say to find them growing up anti-social cretins. My, my.

If anything, reliance on The Network (in all its omniscience) leads to a shallow brain. Not to suggest we should just go back to Readin, Ritin, and Rithmetic of our grandparents. But the skull of a juvenile will fill up, nature abhoring a vacuum and all that, and we may as well fill it up with reasoning and base knowledge to support reasoning. Knowing how to code PHP or javascript doesn't aid that.

23 January 2015

The End of the Road, Part the Second

It was some time ago, in fact my SlickEdit told me I had already a file with the title (I had forgotten, and fortunately tried the same title. phew.), that "The End of the Road" appeared in these endeavors. And the last offering made reference to the subject with the words, "we humans are on the ever flattening asymptote of knowledge of the real world". Both pieces sprang from some part of the lower brain stem of memory. I always suspected that some famous writer had figured it out. But, try as I might, I never found patient zero, so to speak.

Well, I tried again a few minutes ago, and there it was, right at the top of the search list. Damn. That's patient zero from the point of view of nowadays innterTubes. The piece is a ten year retrospective of his book, "The End of Science". I recall reading neither before typing the first End of the Road piece. The book was the better part of two decades ago, so it is possible that I've read it. If so, lost to the bowels of that lower brain stem.

The arguments in his 10 year article are completely in line with my conclusion. For the quants out there, it matters for this reason. Economic evolution, particularly in the USofA in the 19th century through WWII, was built on resource discovery, exploitation of said resources, and scientific expansion of knowledge to make further use of said resources. Without them stuff in the ground, we'd still be hunter-gatherers on the plains. You may notice that there are places on the planet without them stuff in the ground, and the folks live pretty much as hunter-gatherers. It's not that they're backward. It's that Mother Earth gives them so little.

Without the science and engineering of organic chemistry, including figuring out the periodic table and such, that black goo at Titusville would be no more than nasty dirt on Momma's carpet. But we know all that now. Back then, scientists knew that they didn't know what physical matter consisted of. It was this ignorance that propelled us to the Bohr model. That was 1913; a rather long time ago.

While Horgan never uses these words, the point of new discovery in science or engineering is whether there will be commercial use of same. In the 19th century, sure. Today, not so much.

Here's a history of element discovery. Note how dominant the 19th century is. One could argue that plutonium (1940) was the last element of consequence. Boom?

For the macros, what all this means: that rising tide isn't out there anymore. Tracing economic history up to 1950, mid-century, or perhaps to 1970, one could argue that progress in science and engineering led to old materials, methods, and product being displaced by newer. And thus, expanding economies and employment. That's not true now. Ok, some might waffle and say, "not so much". The point is: new science and engineering means new industries. Name one since WWII? You can't. All you can do is name industries that have been miniaturized by silicon and software. The growing industry is finance, and that's a zero-sum game (or less, if CDSs dominate); skimming its revenue and profit off the real economy.

22 January 2015

Ain't No Science Like Old Science

What has become a recurring theme, or warning, in these endeavors: it is foolish to view the future as pure extension of the past. This is particularly true of anything science or engineering related. As I have described more than once (and referenced the writings of those more famous than I), we humans are on the ever flattening asymptote of knowledge of the real world. We already know, pretty much, exactly how the (macro) world works. We even know, pretty much, how the molecular (atomic) world works. We may have some things to learn about the cosmologic and sub-atomic worlds, but I'm not sure even there that anything we do learn will be economically significant. The upshot of that: there are fewer and fewer groundbreaking discoveries to be discovered. In other words: those quants/micros out there thinking they can extend their financial models based on the last X years in Y industry are morons. It ain't 1850 with a vast land of resources and new science to be uncovered.

There is no Mr. Fusion sitting the back of a DeLorean in our collective future.

One the sectors of the economy I find fascinating, which perplexes me still since I abhored biology in high school and never took such a class in college, is biopharma (or, whatever they call it these days). There are two aspects of the sector which have emerged in the last few years. One is the exploitation of the orphan drug act, where companies spend money to garner approval for drugs which may, or may not, make much difference to patients with "rare" diseases (the legal definition makes rare not so rare; that's part of the problem) at exorbitant prices. The HepC arena is gaga over the issue as we speak. And, how much of that accounting number assigned to a drug's existence was actually spent in the lab? Hmmm?

The other, more pernicious perhaps, is the active destruction of what R&D is left in companies as motivation for M&A. Derek Lowe (who merely has some of his blogging copied) has a piece on SA today, bemoaning recent events. One of the excuses given, no cite off the top of my head on offer, for the rush to China for manufacturing is that the USofA no longer has the feeder companies necessary to support large scale assembly/manufacturing, and China does. Of course, which is the chicken and which the egg? Here in South Butt Plug CT, the small metal working companies died out when the large companies to which they had been selling decamped for The Red States and The Red Country. It wasn't the other way around.

Turning all American corporations into financial firms will, sooner or later (and, be prepared for sooner) fail. Financial services is merely a matter of moving moolah from one pocket to another, or robbing Peter to pay Paul. It is non-productive. All value derives from some underlying activity. All finance profit derives from skimming off some part of that activity's value. We saw with the Great Recession that moving massive amounts of capital to housing failed because the underlying "asset" produces no saleable product, so the vig had to be paid out of the real earnings of mortgage holders. Since said earnings have been, at best, stagnant for at least a couple of decades, the whole edifice had to fall. The banksters got to keep most of what they'd taken, of course. The large builders made out like bandits, since they got the moolah up front. Once sold, the house and mortgage were somebody else's problem.

For the STEM folks? Well, some say we should be making more of them in school. But, why would a kid sign up for the brain warping hell of electrical engineering, in the face of such jobs being shipped to India (or some such)? The alternative, of course, is to do Business Administration and learn how to design the next liar loan!! Not so much strain on the brain cells, and lots more moolah for the effort. Kids may be high on dope all day, but that doesn't mean they have lost all touch with reality. They, by and large, aren't dumb enough to take out loans (which all but the top .001% of students have to) to learn an occupation which will never employ them. And, we know what happens when a country generates more STEM graduates than it has jobs for: Eastern Europe is the center of cyber crime for a reason.

Obambi said that all kids should learn to code? Yeah, right. Just what we need; a bunch of kids dreaming of grabbing the brass ring (look it up) of WhatsApp (they'll end up finding their wage driven down by IIT kids in Mumbai). Could that be worse than dreaming up liar loans? Or will we just build a domestic cyber mafia? Stay tuned.

10 January 2015

In Praise of Free Enterprise

As reported today:
Meanwhile, Transportation Minister Ignasius Jonan cracked down on five airlines Friday, temporarily suspending 61 flights because they were flying routes on days without permits. Earlier, all AirAsia flights from Surabaya to Singapore were stopped after it was discovered that the low-cost carrier was not authorized to fly on Sundays.

Jonan also sanctioned nine more officials for allowing the AirAsia plane to fly without permits, bringing the total to 16.

Governments only interfere with profit making. Fie on them.

07 January 2015

Fly Like an Eagle

Plummet like a turd. Too strong? May be. Here's another attempt to explain the bond and interest rate problem.

Here's what the Right Wing used to say, this from the St. Louis Fed:
The cost of government borrowing is the "crowding out effect": Investment funds mobilized by the government cannot be used in the private sector.

Of course, now these morons want "risk free" interest to be higher, since the Masters of The World can't figure out how to turn fiduciary capital into real capital.

None of these folks address the obvious question: why are corps accumulating so much moolah, and demanding that the taxpayer send them more in interest? If they were really of Darwin, Smith, and Rand (sounds like a bad law firm?), they'd be happy that the opportunity cost (buying Treasuries instead) of building new real capital was so unprofitable. Low government interest rates, which are determined at auction by the way, should be the life-blood of a True Capitalist.

I guess not.

06 January 2015

Early Adapters

No, that's not a typo. It's a pun. Here's the punch line.

The plummeting of oil shares, with the attendant fall in the price of crude, distillates, and such should give the quants, micros, and macros pause. Yet again.

The notion of an unfettered Rand-ian society rests on a basic assumption: that humans can adapt to any change before it's too late to avoid catastrophe. Yet, each time there's been a popping oil bubble, due to a miraculous (that's sarcasm, just so ya know) increase in supply, Mr. Market and his attendants go berserk within weeks, if not merely days. "We can't live with $X dollar oil!!! We need $Y dollar oil!!! We'll lose so much profit!!!" And so on. X < Y, of course. The same thing, in the other direction, happens whenever the Peak Oil Pundits appear to be right. Wealth share flows to the Oil Patches, just as now it is flowing to everybody else. The best thing that could happen for Apple, and such, all that more discretionary moolah in what's left of the middle class. All those Red States that have been living high on the hog for the last decade or so, not so much. Does it really make sense to pay some knucklehead in North Dakota tons of money to do brain dead manual labor? Of course, all those knuckleheads getting paid tons of money drives up the price of whatever it is they want to own. Localized inflation is a real phenomenon. Ask anyone's who's lived in the DC area. May be not Congresspeople and lobbyists, of course; they get to not only live high on the hog, but own most of them too.