I have a lot of friends and acquaintances who think I am rather smart, even very smart. And with the exception of this post, I'm even considered rather modest. I have an MA in Economics. I've worked as an economist in the Canadian Ministry of Finance and Statistics Canada. I've been paid more than a million dollars as a business and data analyst at Morgan Stanley in Manhattan. But no one ever listens to my financial advice.
When I've told friends they should sell at least some of their dot com stock, they've hung on, sure it was going to go up to peaks again, instead of down to nothing. When I've told my friends, at just the right times, they should sell their houses and rent, they just tell me there's one more special deal to do, or it is not the lifestyle they want. When I've told them they should get out of the US economy and enjoy the 80%+ returns in India and China, they've ignored me. And when I told them I was selling everything and holding cash, they've stuck with their portfolios. To be honest, I don't really bother anymore. No one listens. But it irks me.
But I do want to point out one unassailable fact for those who never listened. On January 17th, 2008, I sold all my retirement investments and put it in cash (sometimes diversified into multiple currencies). It is what I told anyone who would listen to do. I wasn't giving radical advice, or risky advice (like shorting). If I had been wrong, all I was going to give up was what was clearly going to be modest growth at best. I actually would have done it sooner, but Fidelity blocked trades for weeks while they processed a request to transfer from a 401k to an IRA. That simple, simple, simple little action put my wealth 82% higher today than it would have been if I had done nothing.
Avoiding a loss may not be sexy, but the counterfactual return I've just quoted is just as real as a gain. In fact, human psychology is such that we feel a loss far more than a missed gain.
A lot of people read this blog. But I think most of my friends rarely do. I rather hope they're not reading this. I know many are suffering. I don't want them to suffer. I want to protect them, like I protect myself. In fact, I want everyone I come in contact with to be ok. I'm not perfect. I'm often wrong, especially about timing (I expected the economy to collapse years ago). But for their own good, I wish people listened more.
So, is this the bottom? Is it time to get back in? I'm sorry to say, but I think we are not even half way through the tough times. However much you have lost so far, there is more to lose. Look, I hope I'm wrong; but nothing about our economic situation suggests that. About two thirds of spending in the US economy comes from consumers, and they have only just begun to start feeling the real pain of this recession. I don't think every investor really understands that, especially individual investors. This will become clear to them in time, and this will drive stocks, and the economy, even further into negative growth.
Look, I'm not a financial advisor. This is just advice from someone who cares. Don't blame me if I'm wrong. But there is no way on earth I would buy now, and that means if you have any equities you could probably cut your losses substantially by selling now too. But I'm all too aware of the old adage, "you can lead a horse to water, but you can't make it drink".
TOKYO -- I had an eleven hour layover in Narita airport, so I decided to take the train to Tokyo and check out the city. I've passed through Japan countless times since I was child, but have never had the opportunity to see Tokyo.
But first, one note on the airport. For the first time, I found an ATM. And a Citibank one at that. That probably doesn't sound like a big deal to most of you, but Tokyo airport is famous for its lack of ATMs. And you need to get cash, because you need Yen, because credit cards are not used widely in Japan.
Going down to the get the express train to Tokyo, I made the mistake of following the crowd and ended up back giving up my $37 train ticket and going back into the airport. My first sign that something was wrong was when I got asked for my passport. I thought "mmmh, that's strange, they ask for a passport when you enter a train station?!" Well, no one objected when I went backwards through all the security checks and gates, and when I explained my problem, they gave me my ticket back and pointed me in the right direction. Very nice.
The train ride was about an hour long. It was not as interesting as the Heathrow Express into Paddington station. But it was pleasant and gave me a good view of the countryside and secondary cities leading up to Tokyo. No wifi. There is a surprising amount of pretty countryside in Japan. It was a beautiful day, with clear skies, a warm sun balancing a slightly crisp temperature (I believe about 10C in the forecasts).
Someone in a suit came up to the train station riding a bicycle. He quickly hopped off at a section of other bikes just like his. With a quick turn on a key, he left his bike, presumably for the day, with little more than a spoke lock. The bike wasn't attached to anything. None of the bikes were attached to anything. And none of the bikes I saw anywhere were. Even in the quiet suburbs of Canada thirty years ago, a bike would never have lasted the day with so little protection. But apparently there was no need for concern here.
My first big surprise was when I arrived in Tokyo. It was quiet. The streets were almost empty. The traffic was mild. Everything was very peaceful. If this had been Manhattan, there would have been an intense wall of people, traffic, horns, and noise of all kinds. Today was like Manhattan on Christmas morning, not a regular Tuesday. Maybe today was a national holidy in Japan?! Most of the people on the streets were wearing the same generic dark suit, white shirt and tie. Maybe these were just the few incredibly dedicated employees coming in on a holiday. That would explain the feel.
There is such uniformity and conformity among businessmen here. That is to be expected. But after the chaos of Ho Chi Minh City just a few hours ago, it was an especially stark contrast. I was particularly impressed by one businessman in his standard dark suit. He was standing at attention, legs and arms straight, heels lined up next to each other, waiting alone at a do not walk sign. This sign was at a little alley street about ten feet wide, and there was absolutely no traffic. I just walked past him, dragging my luggage across the little street. No experience in my life, either San Francisco, Manhattan, or Saigon, would allow me to do such a thing. What strict, oppressed, obsessive compulsive, orderly, fearful or other mind would stand like that at a light? But clearly, I was the deviant here. I felt bad walking past the guy at the intersection, almost feeling I was snubbing him in that act; but I just could not join him. Folks here were kind enough to ignore my behaviour.
Women seemed to have escaped from some of the conformity. They had far more varied and individual clothing. And some were really quite funky and outrageous. I understand that, within groups, there is quite a rigid style. But those I saw together seemed quite unique. I started to notice some diversity among the businessmen. For example, sometimes they wore different types of shoes, such as black shoes with buckles rather than laces, or slip ons. But in groups waiting for the train together, I noticed that everyone wore buckles, or everyone wore slip ons. So even among diversity, there was conformity.
Having walked around a bit, my next focus was coffee and Internet. Actually, neither left my mind after having been offline for several hours, and after having had only two hours or so of sleep on the flight to Narita. I found a couple coffee shops. But none of them, even the Starbucks, offered any kind of Internet access. There was plenty of wifi, but all of it was locked (with passwords I couldn't guess in a couple tries). I've been a bit disappointed with the lack of wifi so far; I expected better from Japan. I do not really understand the logic for this situation. There is excellent 3G phone service, so Internet on the train should have been easy to set up. Internet is supposedly 100mbps quite regularly here, so it should not be a problem to share some of that or provide it to customers. They do not even sell wifi, but that makes sense due to the economy still being quite cash based. Perhaps the 3G phone remains so dominant here, that there is no demand for wifi?
Actually, having not found much to do in Tokyo, the draw of the 100mbps Internet in the Japan Airlines business class lounge (and a bit of a nap) is starting to draw me. I had hoped to send a quick email to friends and acquaintances in Tokyo, on the off chance I might get to meet up with them. But without any Internet, that already remote chance had faded. Being in Japan is always like being in darkest Africa: no phones work, no Internet, no credit cards, few english speakers. I am so much more connected when in China, Vietnam, Cambodia, or Lao.
"Effectively Destroys a Wide Range of Household Pets"
I do not know quite what to make of it, but people seem to have lost interest in online data. There is a consistent multi-year trend that shows a decline in online searches for "data". Interest is approaching half the level seen in 2004. At the same time, there has been a consistent increase in references to data in online news over the same period.
A similar, though more seasonal, trend is seen with the term "analysis": a decline in searches, but a steady increase in references in the news. And the formerly hot data analysis topic "datamining" has also seen a steady loss in interest in searches (and news).
My best hypothesis at the moment is that people are losing interest (or no longer need) to find primary information through data, and analysis, and datamining, and similar subjects because they are increasingly getting richer information fed to them through a media that increasingly uses "data" and "analysis" to support its reporting. A more pessimistic interpretation would be that people are increasingly less interested in, or capable of solving problems for themselves, and happy to be spoon fed. Take your pick.
Lie while you can, because technology may soon make lies untenable.
fMRI (functional Magnetic Resonance Imaging) will soon allow a scan on a person's brain, which can tell if they are lying. The areas of the brain related to emotion, conflict, and cognitive control, the amygdala, rostral cingulate, caudate, and thalamus, become highly active when lying, but remain relatively inactive when telling the truth. This difference can be measured during an fMRI brain scan and are visually evident in the resulting heat map of the brain.
As things stand right now, the technology is no doubt somewhat clumsy, hard to administer and expensive. But that will change in coming decades and generations.
Imagine this future, where fMRI declarations are as easy and cheap as an ATM transaction. The IRS just asks you to declare, under fMRI, that you've paid all the taxes you owe.
When there is a crime, the perpetrator is found easily by asking every suspect, under fMRI, if they did it. No one gets away with a crime for long if everyone is asked to declare annually, under fMRI, that they have not broken the law. A bit like filing one's annual tax return. Maybe it will just be added to the tax filing fMRI. "Did you declare all your income?" And by the way, "have you committed any crimes we don't know about?"
But forget past, this technology could allow societies to control the future through managing intentions. Individuals on probation could be regularly asked, under fMRI, "do you have any intention to commit a crime in the future?" If they reveal an intention they can be put back in jail.
With a future like this Americans must be especially happy to have the Fifth Amendment, protecting them from being asked to incriminate themselves.
The technology could change social and work interaction as well. Prospective employers could ask, "if we offered you less, would you still be willing to take this job?" "Did you do your best?" Partners could ask, "have you cheated on me?" "Do you love me?" "Do I look fat in this?"
Inevitably, this technology will not work on some people, either through disposition or intent. I can imagine Woody Allen types who are so neurotic, that they fail every questions, even when they are telling the truth. Others might deliberately game the system by always lying to some degree, so nothing can trusted as the truth. Always commit some petty crime that can't be pinned on you. Become devoutly Buddhist, kill an ant, and start to believe that is murder. Being a pathological lyer might become the ultimate social protest against The System.
See Also
http://www.wired.com/wired/archive/14.01/lying.html.
NoLieMRI
Cephos
You can tell a lot about a man by the way he twitters. Or so the saying might be.
Consider the following charts showing tweets by day of week and time of day (here in Vietnam, not for the user). The larger the bubble, the more tweets. Light gray indicates outgoing tweets, and the (usually smaller) dark circle indicates tweets that are replies.
Here is a hard working person, active seven days a week. You can tell this from the fairly uniform volume of tweets each day. But he does take it easy (or at least spends less time on his phone and computer) on Sundays, and Thursdays. He tweets a lot, but also spends some intense periods focusing on replying to others. He sleeps a fairly normal seven hours a night. This is venture capitalist, and famous twitter investor/twitterer, Fred Wilson.
This last person tweets throughout the day, but has a big empty period of sleep. Because he has at least some tweets at just about every hour, he either stays up all night occasionally, or else tweets while traveling in very different time zones. Tweeting is focused and deliberate work for him. He sits down at the same time Wednesday through Saturday, and sends a lot of outgoing tweets, with a much smaller number of replies. This is New York political technologist, Sanford Dickert.
These great visualizations are the result of creatively combining Twitter, Yahoo! Pipes, and Google App Engine by xefer.com.
A couple weeks ago, I pointed out that a tie remained a possibility in the 2008 Presidential Election. That was never a serious possibility, and after two weeks it becomes even more clearly a negligible outcome. FiveThirtySeven puts the probability at 0.29% as of October 16, 2008. The same analysis estimates that Democratic Party candidate Barak Obama as having a 91% chance of winning the popular vote in the election, and a 95% chance of winning the election in one way or another. While the chances of Republican John McCain winning are a slim 5%, they should not be discounted, but it would be a once in a century upset. Speaking of upsets, the chance of one of those recount fiascos remains more than 2%.
During the election, there are some key states to watch, according to FiveThirtySeven simulations. If McCain loses Ohio, the chance of a Republican winning the election drops to virtually nil (0.08%, or 1 in 10,000). If Obama loses both Ohio and Florida, the race becomes a "toss up" (like the outcome of a 50:50 coin toss) with Republican John McCain's chance of winning the election rising to 42%.
FiveThirtySeven ("electoral projections done right") does the sort of analysis of this situation that I love and highly respect (thanks to C.J. for bringing them to my attention). Figuring out who wins in a US election is not as simply as counting the votes of citizens and pointing to the candidate with the highest number. There is a very complicated process with an intermediary, the "electoral college", standing in between. The electoral college is a temporary assembly of representatives who are expected to vote in accordance with the wishes of the majority of those voters in their constituency (usually a State). This introduces a number of complexities: (1) not all citizen votes have the same weight depending on how many members they contribute to the electoral college, (2) outcomes can be volatile because a tiny number of votes could make the difference between which party an electoral vote (or block of electoral votes) gets allocated, and that could change the outcome of an entire election, and (3) electoral college members could potentially not vote in the way that citizens in the district they represent did. The US electoral college system makes US electoral outcomes work out much like a Canadian or British parlimentary system. FiveThirtySeven looks at a vast number of scenarios with some serious statistical analysis and consideration of most of the details of the complex details of an actual US election. A selection of some of those scenarios and their outcomes appears below.
As I discussed in my last post, a tie could happen in the upcoming US Presidential. And things get very complicated, controversial, and interesting in that case. In the one scenario I examined closely, a tie leads to the Presidency going to the Republicans.
ABC News reports that a possible tie is being taken quite seriously by the Democrats, reporting that "according to the Obama campaign, there are at least 19 plausible scenarios in which Obama and McCain could each have only 269 electoral votes after Election Day -- one short of the 270 needed to win the presidency."
I was fiddling around with the LA Times' cool interactive US electoral voting map today. Applying what looked reasonable based on past outcomes, the first scenario I came up with was a 269 to 269 electoral vote tie for the presidential election. And apparently there are many other tie scenarios thought possible by others.
I am starting to get a deeper understanding of what defines political parties and their platforms. A lot of that insight comes from thinking about the way computers automatically generate decision trees to classify data.
Imagine you have a set of questions. They could be about anything that people care about. Do you like pineapple on your pizza? Do you support free access to abortion? The only important thing about the questions is that answering them consistently maximizes the seperation of people into groups within which answers are as homogenous as possible. The set of questions that achieve this end is what we call a "party platform" or a "political platform".
If the number of members in each party platform group are about the same, you have a natural two party system. There are enough supporters to elect either party, and luck or political winds will dictate the actual outcome. If there is a big difference in membership size, evolutionary forces will drive change.
Big parties will tend to break apart if a smaller branch of the decision tree is more homogeneous than the larger party, and also large enough to assume more power going alone than within the existing party system.
Parties that are too small to win power will change their platforms to maximize their inclusion of members from other parties. They will be limited in this effort in their need to retain internal homogeneity sufficient to stand out in the political landscape.
Whenever you run a machine based learning algorithm to create a decision tree, the outcome is not entirely predicatable and depends to some degree on the order in which questions get applied. Is the first branch in the tree "Are you Catholic?" or is it "Are you a minority?" or "Are you middle class?". When many candidate questions achieve the same level of separation into large evenly sized groups, it becomes a bit arbitrary which one you choose. But the choice greatly affects the resulting set of questions used to create the resulting homogeneous group - the resulting political platform, and who gets driven to most associate with what party.
The fun outcome of this thinking is that you could create artifical political platforms using machine based learning. You could create nonesense parties based on trivial questions like "do you like pineapple on your pizza?" Or you could take all the most pressing questions of the day and generate new political platforms whose members are more homogeneous in their beliefs (less fractious) and at the same time large enough in membership to win a political contest.
Who would win? The CART party? Or the Republican party?
