Mildly Piqued Academician Rants

Barack Obama kept the man that George Bush reluctantly appointed SecDef as his SecDef. This is truly a bizarre thing but I suspect that it will go down in history as one of the smartest things he did. I’m willing to believe news reports that Obama didn’t entirely want to do this either. Think about it, you’re basically saying “gosh, I have to keep the guy appointed to a key job by the deeply unpopular guy I’m replacing….” It doesn’t look pretty politically for all sorts of reasons. But whatever the politics of the decision, it seems that the two men have developed a very functional relationship, and not a moment too soon given the fact that, not to put too fine a point on it, we are in two wars and dealing with numerous other unpleasant contingencies that require attention from men with guns.

Take a look at Gates’ recent speech to the Air War College, though. For those of you who don’t know, the Air Force is one of the greatest bureaucratic warrior organizations around. They are fantastic at this, the acknowledged masters, so Gates pretty much has to win roll the USAF to win this. Anyway, the speech is worth reading in its entirety but I’ve extracted a few choice bits. It’s full of a refreshing empiricism that seemed lacking in Rumsfeld, e.g.,

Another theme underlying my recommendations is the need to think about future conflicts in a different way. To recognize that the black and white distinction between irregular war and conventional war is an outdated model. We must understand that we face a more complex future than that, a future where all conflict will range along a broad spectrum of operations and lethality. Where near-peers will use irregular or asymmetric tactics and non-state actors may have weapons of mass destruction or sophisticated missiles as well as AK-47s and RPGs. This kind of warfare will require capabilities with the maximum possible flexibility to deal with the widest possible range of conflict.

Another important thing I looked at was whether modernization programs, in particular ground modernization programs, had incorporated the operational and combat experiences of Iraq and Afghanistan. The problem with the Army’s Future Combat Systems vehicles was that a program designed nine years ago did not adequately reflect the lessons of close-quarter combat and improvised explosive devices that have taken a fearsome toll on our troops and their vehicles in Iraq, and now in Afghanistan.

We have to be prepared for the wars we are most likely to fight – not just the wars we’re best suited to fight, or threats we conjure up from potential adversaries with unlimited time and resources. And as I’ve said before, even when considering challenges from nation-states with modern militaries, the answer is not necessarily buying more technologically advanced versions of what we built – on land, sea, or air – to stop the Soviets during the Cold War.

Of course, a pretty speech doesn’t make reality. No plan survives contact with the enemy, and in Washington there are many: Contractors, the military itself (sadly), Congress, etc. But if the SecDef doesn’t make a real, realistic hard-nosed but not dictatorial, empirically-based start at reforming the Pentagon bureaucracy, who will?

Now it’s up to Obama to back Gates again. Choosing the right man for the job is probably the easier part.

Part of an arbitrarily continuing, i.e., when I feel like it, series on education….

One of my favorite books I read as a graduate student taking an economics class was 1970 title by the economist Albert O. Hirschman, Exit, Voice, and Loyalty: Responses to Decline in Firms, Organizations, and States. This is a very nicely written book that examines two possible responses of consumers (broadly defined) to a perceived decline in products consumed (again, broadly defined). In a nutshell, the logic of exit says “Let’s blow this popsicle stand” while the logic of voice decries the fact that the popsicle stand in question that it is “all f$%@ed up!” Both mechanisms have their virtues. Over the last few decades, market-driven exit has been much favored over the politics-driven voice in American life, but as Hirschman notes, exit at best tells an organization that there is a problem—assuming they’re looking, and all too often too late—while voice has the potential of providing information for a solution.

I already noted that the Panic of 2008 may (hopefully) lead to a rebalancing of priorities of smart people who were tempted by big dinero working on Wall Street. A cover story in The Atlantic a few months back discusses the effect on cities. (Yes, I read The Atlantic heavily, in case you hadn’t figured that out by now.)

Well this one is about the kiddies, or, more particularly, their parents. Aspiring parents have, over the last few decades, decided to exit the public schools, either by sending Junior to a private school or moving to a different town (which amounts to sending Junior to a private school, where tuition is known as “property tax”). This has left behind the parents least willing or able to say “all f$%@ed up!” and do something about it. In fact the school example is one in Hirschman’s book. Hirschman was a bright guy to have thought of all this forty years ago when exit, aka “white flight,” was at its peak and the consequences were not yet clear (as they would be ten years later in places like New York). Obviously proposals such as charter schools and vouchers are designed to make exit easier for all, not just those wealthy enough to afford to move to the district with, e.g., New Trier, where cities feeding the district have per capita incomes on par with pre-crash Manhattan(!). Like Hirschman, I muse whether more exit is really the right way to go, but I’ll leave that debate to some other rant.

Last year, before the scope of the Panic of 2008 had, the perspicacious and always a bit acerbic writer Sandra Tsing Loh, a fortysomething mom in Los Angeles, contributed this little piece to The Atlantic about how she stopped paying attention to Jonathan “Savage Inequalities” Kozol and got down to work, when she realized she couldn’t afford to live in LA and send her kids to private school. (I’m still bitter I was forced to read Kozol as an undergrad. Whatever the merits of his case, the writing is the non-fiction equivalent of a Lifetime made-for-TV movie.)

Well recently I noticed this about parents in Manhattan in the New York Times. Maybe, just maybe, the Panic of 2008 will lead to a regeneration of the public schools, when caring, reasonably affluent, and ever so obnoxious parents like Loh—the kind unwilling to take no for an answer when their kids have to use decrepit materials and facilities, taught by staff lorded over all too often by ossified bureaucracies—make a return, where they will rapidly realize that the problems now faced by Avery, Brock and Caleb are pretty much the same as those DeShawn, Esmerelda, and Frankie have been facing for quite some time now, and then start exercising some voice. Because, let’s face it, you don’t care so much about things in the abstract as you do when you’re being confronted by it on a day to day basis and have a personal stake in it….

Recently, I’ve decided to look back at old rants for inspiration for new stuff, bad or good. In this spirit, back after the election I wrote:

So, coming soon to a Diehard Republican—and, I think even more likely, the sorely disappointed “bake sale bomber” type progressives when Obama fails to deliver on the impossible things they’ve projected onto him—near you: Obama Derangement Syndrome…[.]

You can read the rest here. So, let’s just say I was “pleased” to see this.

Maybe “unsurprised” is the right word. Whatever. Is anyone really surprised? Back during the recent period of Republican dominance the backbenchers got kept in line by Tom “The Hammer” DeLay, but Dems haven’t been so good at that kind of strongarm for quite some time.

In war, truth is the first casualty. –Aeschylus

Not quite a year ago I waxed slightly poetic about the French Navy’s qualities in the Le Ponant mission. If you recall, this was the luxury yacht that was captured in the Gulf of Aden and then ransomed, and subsequently a commando mission of the style of a Charlie Sheen movie (but with less casualties) bagged pirates, who were triumphantly brought back to Paris to stand trial.

It seems that the devil is, in fact, in the details.

If William Langewiesche’s Vanity Fair story is to be believed, the much-applauded Le Ponant rescue mission seems to have been rather long on PR and rather short on actual heroics by les commandos francais. Basically, after some delaying and theatrics reminiscent of a Charlie Chaplin movie, the pirates got paid off—in fact paying them off is cost-effective by a long shot, possibly even profitable, or so the cited article claims—and a small proportion of the money was recovered. Three hapless pirates were purloined back to Paris. An SUV was destroyed with an anti-tank rocket which alone probably cost more than the recovered ransom. I have little doubt the entire military theater cost far more than the ransom. It’s not even clear that they were all even pirates; one may simply be a taxi driver. Of course, after perpetrating the Jessica Lynch fraud, it should be noted that the US military is in no position to talk, but nonetheless, the Le Ponant story has a peculiarly gallic je ne sais quoi? to it.

    The Wall Street meltdown might have a silver lining.

    No I’m not talking about the schadenfreude that many are experiencing now that the investment bankers are falling from their lofty heights. That might be fun, but it’s not a silver lining. No, I’m talking about the large amount of highly talented people who became “quants” aka mathematical modelers in the finance sector now having to seek employment elsewhere.

    Now don’t get me wrong, there’s a place for finance, but we as a society over-invested in it. One of the really sad things was that the greed led a lot of people to put deep and abiding faith in the models. Those of us involved in mathematical models for any length of time know from bitter personal experience: The last thing you should do is believe a model, especially if it’s your model. Models are useful, not true, and should be viewed with a great deal of skepticism, always. While I suspect that the “quants” knew this, the greedy, myopic twenty five year olds doing the trading—the ones with the right hair and a nice liberal arts degree from an Ivy or Duke—didn’t (they’re certainly not trained to evaluate such things), and given the almighty dollar coming their way I suspect a good number of the quants started believing too.

    If you want a case in point, I offer up Doctors Merton and Scholes, Nobel laureates in economics, 1997, and principals of Long Term Capital Management. LTCM was a hedge fund founded by the smartest guys in the room. Unfortunately, their model was predicated on some assumptions that turned out not to be true, most importantly one about lack of correlation in various investments. This assumed other people weren’t copycats on what LTCM were doing. Whoops, funny how when the smartest cats in the room seem to have found a burrow of endless mice every other cat starts copying.

    One of the giant market distortions engendered by the rise of Wall Street has been the shortage of scientists, broadly defined: Fewer Americans going to engineering, chemistry, math, statistics, economics (besides finance, that is), etc. Instead, far too many of the best and brightest young people go into finance and investment banking. Something like 20% of the graduating class of Harvard in recent years goes directly to investment banking. That’s right, a 22 year old is managing your money, hoping to retire by 35 or 40 to a house in the Hamptons, another house in Bermuda, and a third one in Tahoe, with a nice trophy wife on his arm, and the surplus of young ladies living in finance capitals are there hoping to be said trophy wife. One of the reasons to chase the Ivy degree so hard was the hope—not unreasonable—that an in would be available for Junior into a hedge fund, Lehman, etc. So this massively distorted the college admissions market, too, making otherwise solid schools seem like poor buys and encouraging many families to run up piles of debt on undergraduate educations, mostly in the hope that Junior would get the right contacts in Duke that he wouldn’t get at, say, Illinois.

    I recall taking real analysis back in the mid ’90s. Hands down the smartest guy in the class was a Cal Tech educated engineer getting a PhD in Finance. Now this was just before the big model finance mania. He’d worked for a big aerospace company but with the defense budgets going down, he realized that his future lay elsewhere. This is, of course, why so many physicists ended up on Wall Street, too. I’m sure he did well but you know, finance doesn’t actually produce anything, whereas airplanes are something. It was getting so bad near the end of my tenure in grad school that I’d see students trying to “stealth” their way into finance by applying to programs in one area but taking finance classes. Getting into an actual PhD finance program was tricky and often costly but most schools will let you take a few courses in another department….

    So if there is a silver lining, I hope it is this: Smart kids with math skilz considering careers in finance, please come back. The rest of the world needs you to help deal with things like, oh, climate change, looming mass extinctions, energy shortages, world hunger, transit and infrastructure, finding productive things to do now that we won’t make piles of dough on houses nobody wants, to say nothing of good old “basic science.”

    As for the Ivy league liberal arts major turned investment banker who ran my admittedly modest portfolio into the ground with $200K in student loans breathing down his neck… thanks but I don’t want aioli, arugula, sprouts, grape tomatoes or olive tapenade, I’ll enjoy my schadenfreude plain and unadulterated.

    For further reading:

    • Niall Ferguson, The Ascent of Money. Excellent and very lucid writing. I read this on a plane to Vegas (for business!), which seemed appropriate.
    • Nassim Nicholas Taleb, The Black Swan. Rather more personal pique than is really necessary and some excessively broad statements, but generally he’s right on, particularly about the excessive faith in the Gaussian error distribution when modeling extreme events, the so-called “tail risk” being too low. We’ve seen this in other areas as well.
    • Any others?

It was a little over a year ago I wrote about Ugo Chavez’s dramatic ability to run a fine country into the ground. Well the speculative bubble that held oil prices at record highs last year has popped and, with the global recession, oil is selling at $40/barrel, not the $80/barrel that Ugo needs to break even. (I don’t know about you but I make sure not to buy gas at Venezuelan-owned Citgo stations, to do my own nano-scale part to hasten Chavez’ demise.)

So today I wake up to snow, a cup of coffee and the Washington Post, and find this little gem by Edward Schumaker-Matos. Money quote:

Inflation in Venezuela is running at 31 percent, by far the highest in Latin America, and is expected to hit 45 percent this year. The official exchange rate is 2.15 bolivares to the dollar, but the black market is at more than 5 bolivares, a gap so large that the government will have no choice but to devalue the currency, which will cause local prices to rise still more. The government has enough reserves for the next year to continue subsidizing food prices, but that has caused food shortages. And the government is so far behind on payments to oil contractors that many have stopped working, cutting back production from the goose that lays the golden eggs. Oil accounts for 95 percent of Venezuela’s exports.

While I idly dreamed about a firing squad for Ugo, that reality may be closer than anyone thought. I doubt it, his pal Ah-ma-dinnerjacket will probably take him in, in style. Oh, wait, Ah-ma-dinnerjacket ain’t having so grand a time of it. Well there’s always, Tsar Vladimir, though he might not have too grand a time if oil stays down, either. If all else fails, they can always hot bunk on Radical Jack‘s couch….

Updates: Sigh.

And this.

Here’s a nice article on Tsar Vladimir’s current dilemmas.

So it was a bit over a year ago that one of our number waxed downright poetic over the OLPC—One Laptop Per Child—project.

Fast forward to now and we hear that OLPC is “smart sizing”, aka laying off staff, or whatever they want to tell themselves. The project appears to be in a death spiral, though of course who knows for sure. This nice post characterizes why but I’ll summarize it: The XO Laptop wasn’t something anyone actually wanted to use. Well anyone except tech geeks who like to play with tech toys. An example of the sort of person I’m talking about might be the very smug relative one meets at holidays who brags about running three different versions of Linux on their computer… and doesn’t mention the fact that he’s a UNIX sysad in real life. (This is definitely a “man” thing, though I’m sure there are a few female practitioners of the art, too.)

It was an example of an ivory tower proof of concept idea mixed with marketing hype that got too big for its britches. Having been involved in such things in the past (alas), I can attest that academics are good at coming up with ideas and prototypes and a small but non-trivial number are very good at the marketing pitch—OLPC is an MIT Media Lab spin-off project, after all—but implementation and product development really isn’t one of our skill sets. Furthermore, the tech world goes all Fox Mulder over this kind of thing, which basically tells them what they want to hear about how wonderful tech is (thus validating their own personal choices), complete with pictures of happy smiling brown kids holding a nicely colored gadget. What kind of cynical bastard wants to rain on that parade?

As the link above points out, one of the ironies of the OLPC project is that is spurred the development of the netbook, which is all the rage these days. So it might well be the case that the OLPC project does end up bringing laptops to the masses, and thus its purposes served, just not the way that the project organizers intended. Of course, as the link also points out, making smartphones more accessible in the Third World would have probably been more useful, as that would have reinforced an existing market development. Cell phones have really altered things, often for the better, in countries such as India—or for poor people in the USA as it happens—because they provide continuity of phone number, quick access to important information like commodity prices, etc. But One Cell Phone Per Villager just doesn’t have the same ring. Of course I hear clean water and a way to make a living—among other things—are pretty good things, too.

No, the sad and sorry truth of it is that we academics (like everyone else) tend to look in the mirror for priorities….

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