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Doug Casey on D’s and R’s

The Democrats have an overt philosophy of collectivism — but you’ve at least got to respect the fact that they are consistent about it. The Republicans don’t really have any philosophy at all, unless you could call saying, ‘We won’t go as far as the Democrats’ a philosophy — so, although they’re arguably less evil, they have to be totally disrespected as spineless hypocrites.

— Doug Casey

Iain M. Banks “Culture” Novels

Several years ago, my friend Kansu gave me the book Excession by Iain M. Banks. I very much enjoyed the book, and I ended up reading it a second time a while ago. While it was good the second time as well, I realized that the book was part of a larger series of books Banks has written about the Culture, a future human-machine post-scarcity space-faring race.

Since re-reading Excession, I have purchased and read several more Culture books:

  • Use of Weapons (Finished in Australia)
  • The Player of Games (just finished)
  • Consider Phlebas (about to start)

All of the ones I have read I have very much enjoyed. I would suggest the series to anyone who enjoys Sci-Fi. I’m happy to share the books I’ve finished with friends, as long as I eventually get them back.

On Password Restrictions

Websites should list their password restrictions on their login pages. Sometimes I run into the following problem:

I try to use a password generated by my “standard model” — ie, a standard prefix depending on the nature of the site and some salt determined by the website itself. However, some sites have stupid rules on their password requirements. In real life, I have encountered a wide variety of password requirements:

  • A requirement of an exactly 6-character password
  • A prohibition on “special characters” like any of !@#$%^&*()+=></?{}[]|\/.
  • A requirement for a special character that happens to be one of !@#$%^&*()
  • A requirement for numbers, uppercase, and lower case in the password
  • A requirement for two sets of letters and numbers in the password — ie, fit the regex /([a-zA-Z]+[0-9]+){2}/

When my standard model password doesn’t fit into one of the more esoteric requirements, I have to modify it to fit. Fortunately, I find that on this subject at least, I tend to think the same way over time, so, given the standard model and a set of constraints, I will usually come up with the same password. However, it is uncommon for websites to list their password constraints on the log-in page. Therefore, I will usually try the standard model password first, and only when that fails twice (in case I mistyped the first time), and I’m down to one more try, do I realize that this website might be “special.”

Then I have to go to the trouble to find out what the password requirements are. This is not difficult — usually it involves clicking the “sign up button” and reading a little bit — but it does take some time and it is very annoying. Listing the password requirements at the login screen would make for a much better user experience (since it is so easy to find this information, not displaying it on the login screen can’t be interpreted as a security measure either).

Of course, the real solution is for websites to get rid of their inane password requirements, so I never have to deviate from the standard model.

Safety Agains Reopen

What does this comment in the MySQL source mean? (log.cc, currently line 2295 in 5.1)

{ // Safety agains reopen

I think I understand what it’s supposed to mean — the writer is pointing out that the code is checking again, to be double sure that the log is still open (although, if it can close between this call and the last call to is_open(), I’d be worried about it closing after this call too… note that both checks are after LOCK_log has been acquired).

What I’m more interested in is what the comment, as written, actually means? The grammar is very odd. I’m open to suggestions.

Grey Swans

Scott posted a link to an article (text below). I found it interesting and with some good ideas, but also woefully misguided at some points.

Ten principles for a Black Swan-proof world

By Nassim Nicholas Taleb

1. What is fragile should break early while it is still small. Nothing should ever become too big to fail. Evolution in economic life helps those with the maximum amount of hidden risks “and hence the most fragile” become the biggest.

This is easy. Nothing is ever too big to fail. That is a term invented by bankers and politicians to justify taxpayers supporting banks. Taleb is on to something about hidden risks, though.

2. No socialisation of losses and privatisation of gains. Whatever may need to be bailed out should be nationalised; whatever does not need a bail-out should be free, small and risk-bearing. We have managed to combine the worst of capitalism and socialism. In France in the 1980s, the socialists took over the banks. In the US in the 2000s, the banks took over the government. This is surreal.

Nothing actually ever has to be bailed out, or nationalized, but I suppose nationalization would be preferable to the current trend of just giving bad companies money.

3. People who were driving a school bus blindfolded (and crashed it) should never be given a new bus. The economics establishment (universities, regulators, central bankers, government officials, various organisations staffed with economists) lost its legitimacy with the failure of the system. It is irresponsible and foolish to put our trust in the ability of such experts to get us out of this mess. Instead, find the smart people whose hands are clean.

No arguments here. It is interesting that the government, the media, and probably most people still view the ones who created this mess “financial experts”.

4. Do not let someone making an “incentive” bonus manage a nuclear plant or your financial risks. Odds are he would cut every corner on safety to show profits while claiming to be conservative. Bonuses do not accommodate the hidden risks of blow-ups. It is the asymmetry of the bonus system that got us here. No incentives without disincentives: capitalism is about rewards and punishments, not just rewards.

I think this is sound advice to financial companies. I see no need to legislate this opinion, however. Rather, get rid of the corporate safety net, and companies will shape up or fail and die, and the problem will fix itself.

5. Counter-balance complexity with simplicity. Complexity from globalisation and highly networked economic life needs to be countered by simplicity in financial products. The complex economy is already a form of leverage: the leverage of efficiency. Such systems survive thanks to slack and redundancy; adding debt produces wild and dangerous gyrations and leaves no room for error. Capitalism cannot avoid fads and bubbles: equity bubbles (as in 2000) have proved to be mild; debt bubbles are vicious.

Seems to be sound advice again, for me and for you. Again, I don’t see any need to mandate this sound advice in law. But some people see the need to outlaw salt, so probably not everyone agrees with me.

6. Do not give children sticks of dynamite, even if they come with a warning . Complex derivatives need to be banned because nobody understands them and few are rational enough to know it. Citizens must be protected from themselves, from bankers selling them “hedging” products, and from gullible regulators who listen to economic theorists.

The world somehow survived 4 billion years without banning complex financial derivatives. I know that many people think regulation solves everything (it doesn’t), but I really think the world will survive this too. Let those who learned from this go on without blowing themselves up. Again, I see no need to open the door to unintended consequences by trying to set up rules (that will be circumnavigated) to prevent a one-time occurrence from happening again.

7. Only Ponzi schemes should depend on confidence. Governments should never need to “restore confidence”. Cascading rumours are a product of complex systems. Governments cannot stop the rumours. Simply, we need to be in a position to shrug off rumours, be robust in the face of them.

Many banks were robust in the face of these rumors. They are the ones not receiving any money from the government (That’s why I “love” the bailout(s)). Most of the economy is still fine and has proven to be robust in the face of tempestuous times.

8. Do not give an addict more drugs if he has withdrawal pains. Using leverage to cure the problems of too much leverage is not homeopathy, it is denial. The debt crisis is not a temporary problem, it is a structural one. We need rehab.

I agree. Many people seem to be under the impression that the legal and economic system we currently have — progressively more regulations outlawing progressively more things and creating progressively more perverse incentives — makes sense, and that it only fails occasionally. Well, it doesn’t make sense, and it is always going to fail.

Of course, many people disagree with me about what constitutes a fix. So I say to them, go ahead and try out your ideas, just don’t force me to be a part of your fix. Then we can both be happy.

9. Citizens should not depend on financial assets or fallible “expert” advice for their retirement. Economic life should be definancialised. We should learn not to use markets as storehouses of value: they do not harbour the certainties that normal citizens require. Citizens should experience anxiety about their own businesses (which they control), not their investments (which they do not control).

This is very bad advice. Citizens should make this choice themselves, depending on how much risk they are willing to take on. I think it is generally good to have people invested in a market economy — it is one of the best financial engines ever developed.

10. Make an omelette with the broken eggs. Finally, this crisis cannot be fixed with makeshift repairs, no more than a boat with a rotten hull can be fixed with ad-hoc patches. We need to rebuild the hull with new (stronger) materials; we will have to remake the system before it does so itself. Let us move voluntarily into Capitalism 2.0 by helping what needs to be broken break on its own, converting debt into equity, marginalising the economics and business school establishments, shutting down the “Nobel” in economics, banning leveraged buyouts, putting bankers where they belong, clawing back the bonuses of those who got us here, and teaching people to navigate a world with fewer certainties.

I like the voluntary part. Market capitalism itself has never been broken. It is the continuous political patching of perceived flaws in the that has created the many perverse incentives of our current wonderful system, somewhere in the murkiness between fascism and capitalism and socialism and stupidity.

Then we will see an economic life closer to our biological environment: smaller companies, richer ecology, no leverage. A world in which entrepreneurs, not bankers, take the risks and companies are born and die every day without making the news.

In other words, a place more resistant to black swans.

Humans have used their intelligence to out-compete the rest of the natural world. I don’t see why we should model one of the best wealth production mechanisms we have developed yet — the market-based capitalist economy — on a biological world that will continue to become less relevant as technology progresses. This is just useless sentimentalism.

The writer is a veteran trader, a distinguished professor at New York University’s Polytechnic Institute and the author of The Black Swan: The Impact of the Highly Improbable

The writer calls himself a “veteran trader” — ie, a “financial expert”, and wonders if maybe we should take the part of  advice where he says we shouldn’t take the advice of financial experts. As a fellow beneficiary of a relatively free, relatively stable, capitalist market economy, I would urge you to not make the situation any worse.

Blogging is Hard

I decided to write a blog post this evening, and I have discovered that it is hard.

I have five or so unfinished drafts. Some of them have really good titles:

  • Time Horizon
  • Tags
  • Is Antitrust Regulation Harmful to Consumers?
  • (no title), but the content seems to be a fairly well thought-out post about the “black swan effect”

Maybe I should try finishing these articles.