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Tuesday, September 30, 2008

Reading List: Basic Economics

Sowell, Thomas. Basic Economics. 2nd. ed. New York: Basic Books, [2004] 2007. ISBN 978-0-465-08145-5.
Want to know what's my idea of a financial paradise? A democratic country where the electorate understands the material so lucidly explained in this superb book. Heck, I'd settle for a country where even a majority of the politicians grasped these matters. In fewer than four hundred pages, without a single graph or equation, the author explains the essentials of economics, which he defines as “the study of the use of scarce resources which have alternative uses”. While economics is a large and complex field with many different points of view, he argues that there are basic economic principles upon which virtually all economists agree, across the spectrum from libertarians to Marxists, that these fundamentals apply to all forms of economic and social organisation—feudalism, capitalism, fascism, socialism, communism, whatever—and in all times: millennia of human history provide abundant evidence for the functioning of these basic laws in every society humans have ever created.

But despite these laws being straightforward (if perhaps somewhat counterintuitive until you learn to “think like an economist”), the sad fact is that few citizens and probably even a smaller fraction of politicians comprehend them. In their ignorance, they confuse intentions and goals (however worthy) with incentives and their consequences, and the outcomes of their actions, however predictable, only serve to illustrate the cost when economic principles are ignored. As the author concludes on the last page:

Perhaps the most important distinction is between what sounds good and what works. The former may be sufficient for purposes of politics or moral preening, but not for the economic advancement of people in general or the poor in particular. For those willing to stop and think, basic economics provides some tools for evaluating policies and proposals in terms of their logical implications and empirical consequences.

And this is precisely what the intelligent citizen needs to know in these times of financial peril. I know of no better source to acquire such knowledge than this book.

I should note that due to the regrettably long bookshelf latency at Fourmilab, I read the second edition of this work after the third edition became available. Usually I wouldn't bother to mention such a detail, but while the second edition I read was 438 pages in length, the third is a 640 page ker-whump on the desktop. Now, my experience in reading the works of Thomas Sowell over the decades is that he doesn't waste words and that every paragraph encapsulates wisdom that's worth taking away, even if you need to read it four or five times over a few days to let it sink in. But still, I'm wary of books which grow to such an extent between editions. I read the second edition, and my unconditional endorsement of it as something you absolutely have to read as soon as possible is based upon the text I read. In all probability the third edition is even better—Dr. Sowell understands the importance of reputation in a market economy better than almost anybody, but I can neither evaluate nor endorse something I haven't yet read. That said, I'm confident that regardless of which edition of this book you read, you will close it as a much wiser citizen of a civil society and participant in a free economy than when you opened the volume.

Posted at 22:12 Permalink

Monday, September 29, 2008

Lignières: Désalpe 2008 Photos Posted

Last Saturday was the Désalpe de Lignières, with the customary magnificent weather (wishing works). Fourmilog was there, as usual, to cover the parade. Last year I led with the cows, so this time, let's go with the goats.

chevres.jpg

Click on the image above for the complete photo gallery.

This year's chronicle includes embedded audio clips of musical and joyfully noisy participants in the parade. These were recorded with an M-Audio MicroTrack II digital recorder. Photographs were taken with a Nikon D300 camera with the 18–200 mm VR zoom lens which performed so well in the more demanding environment at the North Pole.

Update: I have added three videos from the Désalpe taken by Marcel Fleury. No, you're not dreaming—embedded Flash videos at Fourmilab! What's next: the Dow closing under 10,000? (2008-10-06 21:05 UTC)

Posted at 23:09 Permalink

Wednesday, September 24, 2008

Takes one to know one...

Frank Tipler calls crackpot on Laurence Tribe's “Curvature of Constitutional Space” paper. I've done much the same on earlier publications by Tipler here, here, and here.

Posted at 23:53 Permalink

Tuesday, September 23, 2008

Gnome-o-gram: Economic Dictatorship and Short Selling

I'm still digesting the details of the US$700 billion bailout plan floated over the week-end. Perhaps 700 billion may actually be a lot less than the ultimate damage were the credit markets allowed to collapse (which may, of course, happen sooner or later anyway, and may not have happened this time, but nobody knows—the fact that nobody knows being a direct result of the lack of transparency which contributed to this unfolding calamity).

But what really bothers me is that in less than a week the U.S. appears to have adopted, without any public or congressional debate or a single vote in congress, a system amounting to absolute economic dictatorship not seen since the age in which the treasury of the realm was the personal piggy bank of the king. Now Gosplan was a bureaucratic nightmare, but at least decisions were made on a collective basis and accountable to the Politburo, not at the whim of a single unelected official with sovereign power across the economy.

But now, the chairman of the Fed and the Secretary of the Treasury need but speak:

According to the bailout plan, the Wirtschaftsführer—excuse me—Secretary of the Treasury, is to be granted absolute discretion over the disposition of US$700 billion with:

Sec. 8. Review.
Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.
What monarch or dictator since the Renaissance had such power? This is 50% larger than the Pentagon budget for 2009! Imagine the reaction were it proposed to place that entire budget at the sole discretion of the Secretary of Defense.

The short selling decree is just insane—sometimes you want to just sigh. Now, I don't want to take the time here to explain short selling in detail, but basically it's a way to speculate on a fall in the value of a security by borrowing shares from another investor and selling them. (In the case of a naked short you sell without even borrowing them, but this is a family publication and we'll avoid such risqué transactions here.) If the speculator's prediction is correct and the price of the security falls, then he or she can buy it back at the lower price, return the borrowed shares, and pocket the difference between the higher sale and lower purchase price. It's just the flip side of “buy low; sell high”—in the mirror universe of short selling, “sell high, buy low” works just as well.

And if the stock goes up? Well, then the short seller has to either put up more and more margin to cover the trade or give up, buying the stock back at the higher market price and delivering it against the borrowed shares. Unlike an investor who is “long”: an outright owner of the stock, who can, in the absolute worst case lose the entire investment if the stock goes to zero but has an unlimited upside if the stock climbs to the sky, the investor who's short has the inverse prospects. The profit potential is limited to the price at which the stock was shorted, but the losses are unlimited, as the stock may climb arbitrarily high from the level at which it was so unwisely shorted. While the investor who is long can hang onto the stock for an arbitrarily long time, the short seller, when things go sour, must keep in mind that:

He who sells
what isn't his'n,
must buy it back
or go to prison.

Now consider: who is the one guy, the only guy, who you know is going to buy a stock in the future? The guy who's short. If the stock goes down, he buys to cash out, supporting the price when it's under pressure, and if it goes up, he's squeezed and buys to limit the damage, furthering the ongoing rally. One can argue for the “uptick rule” to avoid positive feedback (although now that we have penny-precise pricing instead of ticks it doesn't make much difference), but banning shorts is just pulling one of the feedback plugs in the market and that's usually a bad idea.

But short sellers are perceived as vultures who profit from stocks falling, and hence they're a perennial target of politicians when markets encounter turbulence. And, like most things politicians uninformed about markets and basic economics do, banning short selling has precisely the opposite outcome of that intended—it removes a moderating influence from the market and accentuates volatility.

Gnome-o-gram archives

Posted at 00:18 Permalink

Monday, September 22, 2008

Equinox

Equinox: 2008-09-22 15:44 UTC
Click image for larger map from Earth and Moon Viewer.

At 15:44 Universal Time today the Sun crosses the Equator heading south, marking the start of autumn in the Northern Hemisphere and spring in the Southern.

Posted at 13:24 Permalink

Sunday, September 21, 2008

Reading List: Boeing 377 Stratocruiser

Veronico, Nicholas A. Boeing 377 Stratocruiser. North Branch, MN: Specialty Press, [2001] 2002. ISBN 978-1-58007-047-8.
The Boeing 377 Stratocruiser, launched in November 1945, with its first flight in July 1947 and entry into airline revenue service with Pan Am in April 1949, embodied the vision of luxurious postwar air travel based on the technological advances made in aviation during the war. (Indeed, the 377 inherited much from the Boeing B-29 and was a commercial derivative of the XC-97 prototype cargo aircraft.) The Stratocruiser, along with its contemporaries, the Lockheed Constellation and Douglas DC-7, represented the apogee of piston powered airliner design. This was an era in which air travel was a luxury indulged in by the elite, and passengers were provided amenities difficult to imagine in our demotic days of flying cattle cars. There was a luxury compartment seating up to eight people with private sleeping berths and (in some configurations) a private bathroom. First class passengers could sleep in seats that reclined into beds more than six feet long, or in upper berths which folded out at nighttime. Economy passengers were accommodated in reclining “sleeperette” seats with sixty inches seat pitch (about twice that of present day economy class). Men and women had their own separate dressing rooms and toilets, and a galley allowed serving multi-course meals on china with silverware as well as buffet snacks. Downstairs on the cargo deck was a lounge seating as many as 14 with a full bar and card tables. One of the reasons for all of these creature comforts was that at a typical cruising speed of 300–340 miles per hour passengers on long haul flights had plenty of time to appreciate them: eleven hours on a flight from Seattle to Honolulu, for example.

Even in the 1950s “flying was the safest way to fly”, but nonetheless taking to the air was much more of an adventure than it is today, hence all those flight insurance vending machines in airports of the epoch. Of a total of 56 Boeing 377s built, no fewer than 10 were lost in accidents, costing a total of 135 crew and passenger lives. Three ditched at sea, including Pan Am 943, which went down in mid-Pacific with all onboard rescued by a Coast Guard weather ship with only a few minor injuries. In addition to crashes, on two separate occasions the main cabin door sprang open in flight, in each case causing one person to be sucked out to their death.

The advent of jet transports brought the luxury piston airliner era to an abrupt end. Stratocruiser airframes, sold to airlines in the 1940s for around US$1.3 million each, were offered in a late 1960 advert in Aviation Week, “14 aircraft from $75,000.00, flyaway”—how the mighty had fallen. Still, the book was not yet closed on the 377. One former Pan Am plane was modified into the Pregnant Guppy airlifter, used to transport NASA's S-IV and S-IVB upper stages for the Saturn I, IB, and V rockets from the manufacturer in California to the launch site in Florida. Later other 377 and surplus C-97 airframes were used to assemble Super Guppy cargo planes, one of which remains in service with NASA.

This book provides an excellent look into a long-gone era of civil aviation at the threshold of the jet age. More than 150 illustrations, including eight pages in colour, complement the text, which is well written with only a few typographical and factual errors. An appendix provides pictures of all but one 377 (which crashed into San Francisco Bay on a routine training flight in 1950, less than a month after being delivered to the airline), with a complete operational history of each.

Posted at 22:49 Permalink

Friday, September 19, 2008

Gnome-o-gram: Financial Derivatives II: Counterparty Risk

Much of the discussion in the legacy media of the bailout of financial institutions caught in the financial derivatives meltdown, such as AIG, about which I wrote yesterday, predictably misses the point of why these bailouts are being done and, as a result, fails to explain just how dire the risk is to the economy as the mountain of junk derivatives is unwound. The key phrase in understanding this is one which you may not have heard before, but are almost certain to hear many, many times from all sides before this mess is finally sorted out: “counterparty risk”.

Our previous discussion of derivatives used exchange-traded wheat futures as an example, but at the heart of the present problem are “over the counter” or privately negotiated derivative contracts between two parties. Consider, for example, an airline who wishes to lock in the price of the Jet A fuel its planes will require in the next year. Knowing the price it will pay, and being therefore insulated from fluctuations in the price of fuel, allows the airline to budget and pre-sell seats at a known price without having their profit margin depend upon whatever fuel happens to be selling for when the flight actually departs. There are actually now exchange-traded futures contracts for Jet A, but they are a recent innovation and still thinly traded, so the airline looking to hedge its fuel requirements may prefer to conclude a private forward purchase contract with a financial institution such as AIG. (An earlier pioneer in such contracts was Enron, which gives you a sense of how rapidly the financial community learns from experience.)

There are two parties to such a contract: the airline and the financial institution. Each is thus the “counterparty” to the other. To the airline, the financial institution is its counterparty and vice versa. The financial institution does not, of course, manufacture or sell jet fuel, so in assuming the risk of a rise in price of that commodity, it will usually balance its exposure on the contract with its own hedge, for example by concluding a forward sale contract of about the same quantity and delivery date with a refiner of Jet A or (since it's unlikely a precisely balancing contract can be made) by buying crude oil futures based upon a model of the relationship between the price of crude and that of jet fuel worked out by all of the erstwhile string theorists in the back room who didn't get tenure at the university. The cost of putting on the countervailing hedge is priced into the premium the airline pays for the forward purchase contract.

Unlike exchange-traded derivatives such as futures and options, these private derivatives are bespoke contracts between the two parties—they can be (and often are) arbitrarily complicated, incorporating aspects of futures, options, and insurance, and bewilderingly difficult to completely hedge. They are also exempt from regulatory scrutiny and, unlike exchange-traded contracts, not marked to market until the contract comes to term and the settlement payment between the parties is computed and paid. This means that there is almost complete opacity about the obligations undertaken by an issuer of derivative contracts, and that their financial situation can deteriorate to the brink of insolvency without any indication of the approaching crisis until a payment comes due and there isn't any money to make it.

Let's go back to the simple case of the airline with the forward contract for jet fuel. Suppose the forward was made when fuel was 50 dollars a barrel and when the contract expires a price spike had doubled the price to 100 dollars a barrel. The airline is counting on the profit from the forward contract to compensate for increased price it will have to pay when purchasing fuel on the open market. If it has presold seats and budgeted based on the locked-in 50 dollars per barrel fuel price, having that price suddenly double may push it over the edge into bankruptcy, but the forward insulates it from that risk.

But only if the counterparty pays up! Suppose that, the night before the settlement date on the forward contract, the financial institution goes belly up due to something entirely unrelated to the jet fuel contract: for example, a contract with a major computer manufacturer denominated in the user satisfaction level with Windows Vista. Now the airline has a contract which covers the increased price it will have to pay for fuel, but the financial institution, the counterparty, is bankrupt and cannot pay. That's counterparty risk. It's like having all your assets in bearer bonds in your safe deposit box and a meteor hits your bank: you did everything right and now you're wiped out. The airline, faced with twice the fuel price and no forward contract profit to cover it, files for bankruptcy, lays off employees, shrinks its fleet, and the economy as a whole takes a hit.

Much of the legacy media coverage of the recent bailouts has followed the usual populist narrative that the bailout is a rescue of the fat-cat shareholders and the miscreant executives who ran the institution into the ground while collecting their unconscionable salaries and bonuses. Now, I am not here to defend either investors stupid enough to buy a piece of a company with an opaque and unquantifiable exposure to who-knows-what, nor the idiots in the executive suite who assume such risk without thinking “what if”. But they aren't the reason for the bailout! In fact, in the recent rescues of Fannie Mae, Freddie Mac, and AIG, the investors were essentially wiped out even before the bailout, and the executives are soon to be cleaned out, both from their offices and in the financial sense by shareholder suits and prosecutions. No, the reason for the bailout is the consequences of default on all of the counterparties of the derivatives they had written. In the case of a company like AIG, they are all over the economy and all around the world, and even compiling a list of them, no less assessing the consequences of a default, is a major undertaking. For example, there are bonds whose rating is based on insurance from AIG. Take away that insurance, and the current value of the bond plummets. Now who owns those bonds, and what happens when they have to report their holdings at the end of the quarter? This is not a made-up example; if you've been reading these gnome-o-grams for some time, you've probably gotten a sense of how sceptical of the financial conventional wisdom and careful I am of the assets I hold, but my portfolio includes one such bond insured by AIG, and had I sold it on Monday, it would have been at about 40% of face value. (Got better—come on November!)

That's the nature of counterparty risk, and why it poses such a peril to the global financial system. I've been expecting FNM, FRE, and AIG (and several more, which I won't name here to avoid being accused of precipitating a bank run among my dozens of readers) to inevitably pack it in for over a year: the fundamentals were obvious, and the only question was when. So certainly, I wouldn't go anywhere near securities issued by these politically driven hollowed out accidents waiting to happen. But gotcha, counterparty risk from AIG that I never knew I had more than halved the value of a bond I owned overnight. That's counterparty risk, even though I wasn't the direct or a knowing indirect counterparty.

When regulators have to decide whether to bail out a financial institution or let it fail, they aren't thinking of the shareholders or management. Instead, they're trying to assess the hit to other enterprises and the economy as a whole of of the counterparty risk if the derivative contracts written by the institution on the brink are defaulted upon. “Too big to fail” is a real phenomenon, but the legacy media often assume “big” is measured by assets, employees, or some other irrelevant quantity. In the age of derivatives, and at the moment they are brutally being marked to market and rendered visible by insolvency of those who wrote them, “big” is measured by counterparty risk, and that's why that if you've just encountered the term for the first time here, you're sure to be tired of hearing it everywhere within the next six months.

Other gnome-o-grams

Posted at 00:37 Permalink

Wednesday, September 17, 2008

Gnome-o-gram: The AIG Takeover and Bankruptcy Socialism

We've now entered into the early phases of the grand liquidation of financial derivatives I wrote about last June. The most stunning—indeed flabbergasting—event so far has been the “rescue”, or more precisely effective takeover, of AIG, the largest insurance and financial services company in the United States by the Federal Reserve, which granted a two year credit line of US$85 billion secured by all of the assets of AIG. In return, the U.S. government receives a 79.9% share of AIG's equity, diluting existing shareholders' stake in the company by 4/5.

To my knowledge, nothing like this has ever happened before in U.S. financial history, at least not in the last century (you always wonder about railroad deals in the 19th century, but I don't know if precedent exists there; in any case that was before the Federal Reserve was founded, and the financial system worked very differently in that era). Certainly there have been bailouts before, such as that of Chrysler in 1980, but even that deal, controversial as it was at the time, was, in inflation-adjusted dollars, less than one twentieth the size of the credit line provided to AIG and was a pure government loan guarantee: the government took no equity stake in Chrysler at all. In the case of AIG, the U.S. now has effectively nationalised the largest insurance company in the country, with not just a controlling interest but an overwhelming ownership stake of around 80%, and the whole deal was done overnight without, as was the case of the Chrysler loan guarantee, extensive debate in the Congress and the enactment of a bill explicitly granting the guarantee.

Now the thing about government actions, however exceptional, is that they have a tendency to become a precedent for future actions, and what I want to discuss here is what that could mean. I'll leave to other commentators the details and immediate ramifications of this event, but here I'd like to ponder the potential consequences of the precedent created here, should this deal go through unchallenged (which is the way to bet, since there's little political benefit to be had in appearing to oppose a rescue presented as averting a financial calamity).

Suppose you were a stealth candidate for the U.S. presidency who had carefully concealed your radical beliefs and connections. Suppose your election came during, and was in part due to, a growing financial crisis, perceived as spreading beyond the mortgage market and financial sector into the economy as a whole. Suppose your advisers envisioned a very different organisation of the U.S. economy than its present structure?

Well, all you'd have to do after taking office is to let the economy go over the edge, which could be blamed on the previous administration, which would force many large U.S. companies, heavily leveraged and hard hit by the ongoing derivatives collapse, to the brink of bankruptcy. No problem: the Federal Reserve steps up with an AIG-style “rescue” plan for all comers, creating the credit lines out of thin air and the government picking up an 80% equity stake in each. Without a single vote being taken in Congress, large sectors of the economy are effectively nationalised, with existing shareholders seeing 80% of their equity effectively expropriated by dilution. And the whole scheme is presented by the legacy media as a grand bailout, with the government stepping in to avoid a collapse resulting from excesses of the market system. Maybe they'll call it the “Newer Deal”.

Now, isn't this about the cleverest way you've heard to socialise a free market economy almost overnight? And do you want to be a shareholder of any U.S. company which would be vulnerable to such a “rescue” in the case of a sharp economic downturn?

I am presenting this as a cautionary scenario, which popped into my head as I was recovering from the initial shock of learning the details of the AIG deal. I do not mean to suggest that any existing candidate or political party in the U.S. envisions such a plan, only to observe that it now appears to be possible, and hence something the prudently paranoid investor should bear in mind. Neither do I intend to imply that Barack Obama is the “stealth candidate” I refer to above. Warren Buffett is about the shrewdest investor of modern times; I don't think he'd be backing Obama if he believed Obama would contemplate such a thing.

Update: Yes, I am aware that the AIG deal does not involve direct transfer of 80% of the company's equity to the government, but rather warrants which, if exercised, cause issuance of common stock with that effect. The presumption is that should AIG be able to raise sufficient funds to retire the credit line with interest, the government would let the warrants expire unexercised. But note that the Fed, in their press release, said “The U.S. government will receive a 79.9 percent equity interest in AIG and has the right to veto the payment of dividends to common and preferred shareholders.”, and AIG, in theirs, said “In return for providing this essential support, American taxpayers will receive a substantial majority ownership interest in AIG.”, both statements treating the warrant issue as an effective transfer of equity to the government. But even should the warrants expire unexercised in this case, an administration bent on a strategy of “bankruptcy socialism” (a term for which this article is presently the number one hit on Google) would certainly exercise the warrants to obtain the outright equity stake. They could, however, strategically do warrant deals with the pretense of allowing them to expire when the “present difficulties” were over and the credit lines retired, then exercise them all as the “Next Deal” (alternative name to that suggested above) was rolled out in an address to a joint session of Congress. (2008-09-17 21:19 UTC)

Other gnome-o-grams

Posted at 19:32 Permalink

Tuesday, September 16, 2008

Autodesk: Interview on AutoCAD Application Development

Last September 4th, I did a four hour interview with Kean Walmsley of Autodesk Neuchâtel about the history of AutoCAD application development and the evolution of the “ecosystem” (developers, educators, authors of books, etc.) who contributed so much to the initial success of AutoCAD and continues to account today for much of Autodesk's position in the CAD market. Kean is releasing the interview over the next month as a serial feature on his Web log “Through the Interface”, with one part posted every Friday (just like the latest serial feature at Fourmilab!). The first installment is now posted, and you can read subsequent parts as they become available from the links within that document.

Bloviating on things that happened two decades and change ago is an interesting experience, especially when you go through the transcript and try to fact check everything you said off the cuff. This text has been through that filter, but in some cases the documentary record is scanty and I may have mis-remembered some events.

Posted at 23:18 Permalink

Saturday, September 13, 2008

Reading List: Timeline

Crichton, Michael. Timeline. New York: Ballantine Books, 1999. ISBN 978-0345-46826-0.
Sometimes books, even those I'm sure I'll love, end up sitting on my bookshelf for a long time before I get to them. This novel, originally published in 1999, not only sat on my bookshelf for almost a decade, it went to Africa and back in 2001 before I finally opened it last week and predictably devoured it in a few days.

Crichton is a master storyteller, and this may be the best of the many of his books I've read. I frequently remark that Crichton's work often reads like a novelisation of a screenplay, where you can almost see the storyboards for each chapter as you read it, and that's certainly the case here. This story just begs to be made into a great movie. Regrettably, it was subsequently made into an awful one. So skip the movie and enjoy the book, which is superb.

There's a price of admission, which is accepting some high octane quantum flapdoodle which enables an eccentric billionaire (where would stories like this be without eccentric billionaires?) to secretly develop a time machine which can send people back to historical events, all toward the end of creating perfectly authentic theme parks on historical sites researched through time travel and reconstructed as tourist attractions. (I'm not sure that's the business plan I would come up with if I had a time machine, but it's the premise it takes to make the story work.)

But something goes wrong, and somebody finds himself trapped in 14th century France, and an intrepid band of historians must go back into that world to rescue their team leader. This sets the stage for adventures in the middle ages, based on the recent historical view that the period was not a Dark Age but rather a time of intellectual, technological, and cultural ferment. The story is both an adventurous romp and a story of personal growth which makes one ask the question, “In which epoch would I prosper best?”.

Aside from the necessary suspension of disbelief and speculation about life in the 14th century (about which there remain many uncertainties), there are a few goofs. For example, in the chapter titled “26:12:01” (you'll understand the significance when you read the book), one character discovers that once dark-adapted he can see well by starlight. “Probably because there was no air pollution, he thought. He remembered reading that in earlier centuries, people could see the planet Venus during the day as we can now see the moon. Of course, that had been impossible for hundreds of years.” Nonsense—at times near maximum elongation, anybody who has a reasonably clear sky and knows where to look can spot Venus in broad daylight. I've seen it on several occasions, including from the driveway of my house in Switzerland and 20 kilometres from downtown San Francisco. But none of these detract from the fact that this is a terrific tale which will keep you turning the pages until the very satisfying end.

Spoiler warning: Plot and/or ending details follow.  
The explanation for how the transmitted people are reassembled at the destination in the next to last chapter of the “Black Rock” section (these chapters have neither titles nor numbers) seems to me to miss a more clever approach which would not affect the story in any way (as the explanation never figures in subsequent events). Instead of invoking other histories in the multiverse which are able to reconstitute the time travellers (which raises all kinds of questions about identity and continuity of consciousness), why not simply argue that unitarity is preserved only across the multiverse as a whole, and that when the quantum state of the transmitted object is destroyed in this universe, it is necessarily reassembled intact in the destination universe, because failure to do so would violate unitarity and destroy the deterministic evolution of the wave function?

This is consistent with arguments for what happens to quantum states which fall into a black hole or wormhole (on the assumption that the interior is another universe in the multiverse), and also fits nicely with the David Deutsch's view of the multiverse and my own ideas toward a general theory of paranormal phenomena.

Spoilers end here.  

Posted at 22:20 Permalink

Thursday, September 11, 2008

Reading List: Metamorphosis

[Audiobook] Kafka, Franz. Metamorphosis. (Audiobook, Unabridged). Hong Kong: Naxos Audiobooks, [1915] 2003. ISBN 978-9-62634-286-2.
If you're haunted by that recurring nightmare about waking up as a giant insect, this is not the book to read. Me, I have other dreams (although, more recently, mostly about loading out from trade shows and Hackers' conferences that never end—where could those have come from?), so I decided to plunge right into this story. It's really a novella, not a novel—about a hundred pages in a mass-market paperback print edition, but one you won't soon forget. The genius of Kafka is his ability to relate extraordinary events in the most prosaic, deadpan terms. He's not just an omniscient narrator; he is an utterly dispassionate recorder of events, treating banal, bizarre, and impassioned scenes like a camcorder—just what happened. Perhaps Kafka's day job, filling out industrial accident reports for an insurance company, helped to instill the “view from above” so characteristic of his work.

This works extraordinarily well for this dark, dark story. I guess it's safe to say that the genre of people waking up as giant insects and the consequences of that happening was both created and mined out by Kafka in this tale. There are many lessons one can draw from the events described here, some of which do not reflect well upon our species, and others which show that sometimes, even in happy families, what appears to be the most disastrous adversity may actually, even in the face of tragedy, be ultimately liberating. I could write four or five prickly paragraphs about the lessons here for self-reliance, but that's not why you come here. Read the story and draw your own conclusions. I'm amazed that younger sister Grete never agonised over whether she'd inherited the same gene as Gregor. Wouldn't you? And when she stretches her young body in the last line, don't you wonder?

Kafka is notoriously difficult to translate. He uses the structure of the German language to assemble long sentences with a startling surprise in the last few words when you encounter the verb. This is difficult to render into English and other languages which use a subject-verb-object construction in most sentences. Kafka also exploits ambiguities in German which are not translatable to other languages. My German is not (remotely) adequate to read, no less appreciate, Kafka in the original, so translation will have to do for me. Still, even without the nuances in the original, this is a compelling narrative. The story is read by British actor Martin Jarvis, who adopts an ironic tone which is perfect for Kafka's understated prose. Musical transitions separate the chapters.

The audible.com audiobook edition is sold as a single download of 2 hours and 11 minutes, 31 megabytes at MP3 quality. An Audio CD edition is available. A variety of print editions are available, as well as this free online edition, which seems to be closer than the original German than that used in this audiobook although, perhaps inevitably, more clumsy in English.

Posted at 01:58 Permalink

Monday, September 8, 2008

New Serial Feature: Allied Radio 1930 Catalogue

It's been a while since we've had a serial feature here at Fourmilab, so this week I'm rolling out the latest: a week by week posting of the Allied Radio Corporation catalogue for 1930. If, like me, you were an electronics nerd in the 1960s, the Allied catalogue was the ultimate wish book: Knight kits, all the components you'd need to build your giant electronic brain for world domination, and cutting edge things you didn't remotely understand (MECL III, anyone?), but wished you did (and that you could afford to play with them).

But let's flash back three decades and a tad, to 1930. The stock market had crashed the previous October, but the impact of that event wasn't at all clear: after all, it had crashed from an unprecedentedly high level, obviously the popping of a bubble, but surely before long the correction would be over and prosperity would return. After all, the great engineer was in the White House, and the wisest minds were advising him how to mitigate the consequences of the present difficulties while waiting for the market to set everything aright.

Still, there was a sense that something wasn't right. And so, even as the golden age of radio was still building momentum toward creating the first continental scale shared popular culture, the preeminent vendors of the one-to-many connectivity technology of the epoch, AM radio, led their pitch with price.

Welcome to 1930. Well, I hope, only in this document, not that we're re-living the events of that year and its sequelæ, although that may regrettably come to pass. But anyway, direct from 1930, here's the Allied Radio Catalogue for that year. I've started with eleven pages as a teaser: from now on, I'll post four additional pages each Friday, with perhaps a few more on holidays and special occasions. The entire catalogue is about two hundred pages, so it'll take a while to work through, but it will be worth it. Trust me; the initial pages are somewhat tedious—obviously the same radio chassis sold in a variety of different cabinets—but when we get to the bits and pieces, it's fascinating, at least if you're a nerd who's fond of vintage technology—guilty as charged! Wait until we encounter the page of components for bleeding edge early adopters experimenting with mechanical scanning disc television.

Posted at 22:21 Permalink

Friday, September 5, 2008

The Hacker's Diet in Hungary

Ákos Maróy gave a presentation on The Hacker's Diet at the Budapest New Technology Meetup in August 2008. He kindly provided links to the slides (OpenOffice Impress document) and video (scroll down) of the presentation (both in Hungarian).

Note the before and after pictures—congratulations!

Posted at 23:44 Permalink

Wednesday, September 3, 2008

Reading List: Cod

Kurlansky, Mark. Cod. New York: Penguin Books, 1997. ISBN 978-0-14-027501-8.
There is nothing particularly glamourous about a codfish. It swims near the bottom of the ocean in cold continental shelf waters with its mouth open, swallowing whatever comes along, including smaller cod. While its white flesh is prized, the cod provides little sport for the angler: once hooked, it simply goes limp and must be hauled from the bottom to the boat. And its rather odd profusion of fins and blotchy colour lacks the elegance of marlin or swordfish or the menace of a shark. But the cod has, since the middle ages, played a part not only in the human diet but also in human history, being linked to the Viking exploration of the North Atlantic, the Basque nautical tradition, long-distance voyages in the age of exploration, commercial transatlantic commerce, the Caribbean slave trade, the U.S. war of independence, the expansion of territorial waters from three to twelve and now 200 miles, conservation and the emerging international governance of the law of the sea, and more.

This delightful piece of reportage brings all of this together, from the biology and ecology of the cod, to the history of its exploitation by fishermen over the centuries, the commerce in cod and the conflicts it engendered, the cultural significance of cod in various societies and the myriad ways they have found to use it, and the shameful overfishing which has depleted what was once thought to be an inexhaustible resource (and should give pause to any environmentalist who believes government regulation is the answer to stewardship). But cod wouldn't have made so much history if people didn't eat them, and the narrative is accompanied by dozens of recipes from around the world and across the centuries (one dates from 1393), including many for parts of the fish other than its esteemed white flesh. Our ancestors could afford to let nothing go to waste, and their cleverness in turning what many today would consider offal into delicacies still cherished by various cultures is admirable. Since codfish has traditionally been sold salted and dried (in which form it keeps almost indefinitely, even in tropical climates, if kept dry, and is almost 80% protein by weight—a key enabler of long ocean voyages before the advent of refrigeration), you'll also want to read the author's work on Salt (February 2005).

Posted at 22:55 Permalink