26 April 2014

Guys and Dolls

When I was just a little boy, I asked my mother what will I be? Will I be pretty... Well, wrong musical. It was actually written for a Hitchcock film ("The Man Who Knew Too Much")! Who knew Hitchcock did songs? Not all that much.

In any case, I'm going more the Nathan Detroit, "Guys and Dolls", route. Some way to get Nate into the stream of consciousness. You may know that Nate Silver left the NYT for other parts, ESPN for the moment, so the Times have built an in-house version of Nate.

This is where the link goes from the RA piece.

What's cute is the RA piece describes the process as "...a similar poll-aggregation methodology to that used by Silver". There's been very few times that Nate/538 have been accurately characterized. Most often Nate is lauded as Saint Statistician, and while he's been good at what he does, he ain't a math stat. Having made his first splash in baseball, and given that baseball zealots were among the first groups to co-opt the word "statistics" to describe any numeric display, I suppose it was inevitable.

Kind of like what RM supporters have to deal with: any bytes stuffed into a relational engine is a "database", just because the coders say it is.

25 April 2014

The Problem With Slavery

This essay has been simmering for quite some time. Recent events and others' essays have proven too much. It will out.

Let's start with the head exploding op-ed page of today's dead trees NYT: in the left column is the Right Wing Brooks and in the right column is the Left Wing Krugman, whilst in the center is one Evan Mandery. The Wingers have different, surprise, takes on Piketty, and Mandery takes on the furtherance of privilege ensconced by the Roberts courtiers.

Not very surprisingly, I've mulled writing about Piketty, but most of what I have to say has been said by the mainstream pundits. The privilege of legacy, strengthened by Roberts, was about to emerge from these fingers, until Mandery did the work. I wouldn't have gotten into the Times, not a known pundit of course.

Another piece which is part of the stew is this discussion of Simpson's Paradox. I was moved to comment, not to question Simpson one way or the other, but rather choice of data. Not my most literate comment on record. The UCB data is built into the R distribution, so has been used many times. The piece, however, committed Type III error, and my error was in not being clear about that. Too often, stats/quants are applied to human events as if those events were existentially equivalent to events in the natural world. The natural world, chemical or physical or animal, obeys God's/Nature's rules and the participants don't have the option to amend the rules to suit. Human participants can and do change the rules to suit. Quant modeling, with the notable exception of those now labeled Behavioral Economist, remains wedded to the notion that the rules of engagement are external. They're not. As I've stated oft many times: when policy conflicts with data, data loses. We see this in the Right Wing reaction to Piketty's book, Roberts' increasingly transparent perfidy, and in the insistence in using the UCB data to make inferences about college students. Mandery's piece eviscerates one of the forks in that road.

The notion of black swans is instructive. To beings of the time, the asteroid slamming into the Yucatan was a black swan, an entirely unpredicted catastrophic event. Were an asteroid of that size to put the Earth in its crosshairs today, we'd have plenty of notice. And, if Bruce Willis isn't making some other movie, we would deal with it. On the other hand, the Great Recession isn't really a black swan event. Not least because some of us predicted it and said why. But more to this missive's point, the housing collapse happened because some humans decided to change the rules of mortgaging and securitization. God didn't do that, nor did Nature (for those not of the Deist persuasion).

So, why the title of this missive? How do we travel from the cites to slavery? Follow the Yellow Brick Road.

Aside from the moral issue, why is slavery a problem? After all, those who would rather that working folk get no more than subsistence wages (which is the essence of slavery, don't you know) quote from The Bible. And up through the middle of the 19th century USofA, slavery made some economic sense. It's not often discussed, but at the time of the American Revolution and for some decades hence most hard currency in the colonies came as the result of Southern plantation exports to Britain and Europe.

Exports, get it? With goods nearly wholly from pre-industrial agriculture. In capital lite production, slavery (and its first cousin, indentured servitude) is perfectly sensible. The goods are not to be consumed by the labor, or even for the most part, within the producing economy. What China does today with rather primitive capitalism, the USofA did in the early 19th century: make stuff, mostly from the ground, to ship to Europe to get hard currency. Did I mention that the head of Foxconn, when the suicides became such a distraction (oh why won't they live like slaves quietly?), announced that he was going to replace as many humans as possible with robots. Since Foxconn didn't, and still mostly doesn't, depend on domestic consumers, this makes perfect sense.

For modern uses of capital, all things compute related in particular, universal slavery is a problem just because it kills the consumer goose needed to lay all them golden eggs. While soft currency nations like China can engage in what amounts to wage arbitrage, the gag ultimately (and since the world isn't linear, 'ultimately' is closer than it appears in the mirror) collapses since there are no longer consumers for the burgeoning output. Piketty makes the point that returns on capital have outstripped overall growth, and thus powered concentration. There will come an inflection point, already passed in my estimation with regard to compute related capital, where capital ceases to have value since value is grounded in consumption, said consumption provided by a consumption (middle) class. And without consumption, there's no return on capital. Kind of like petro; you can't eat it or drink it or wear it. Its value is derivative. One capitalist can gain, momentarily, advantage by replacing humans with robots. But, as your Good Mother used to say to you, "what would the world be like if everybody behaved like you?" Bad grammar aside, the answer of course, is collapse. Capital requires consumers, and the mass of them work for wages. Get over it. But capitalists, and the quants and economists who churn the data for them, are basically knuckleheads. The obvious idea that the well goes dry if everyone pumps it furiously is quite beyond them. The micro(math)-economists are heavily to blame for this, in that they've implemented the naive` notion of dog-eat-dog which they base on Adam Smith (the real one), which he mostly disavows within his text. That is to say, he wasn't all that happy with capitalists.

There isn't any new continent, laden with resources as North America was in 1800, to exploit. What you see is what there is. Well, in a diminishing sort of way. There's a summer replacement TV series (CBS, if I recall) which I've only seen the promos for, "Under The Dome". The conceit is that some town wakes up one morning to find itself sealed in by a transparent bubble. A closed system. Well, the world economy is just that. We're likely, save great political will on the part of the hoi polloi (most of whom worship at the feet of God and guns), in a world of a few masters and many slaves. Just don't get uppity. The problem for capital is going to be ever diminishing returns: there's no New World to export from to the Old World. Mercantilism worked well for the Brits for a couple of hundred years, as well as various other European monarchies, not so much today.

Recent reports are that "some" want to replace the Almighty Dollar as reserve currency with some other, likely bundle, currency(ies). The problem for China, should we assume that the renminbi displaces the Almighty Dollar, is that it instantly loses the ability to attack the ROW. Now, it has to depend on its domestic market to absorb output. The best it can hope for is to get back alien renminbi for its exported output, of which there currently isn't all that much. The shoe will be firmly on the other foot. The days of collecting somebody else's reserve currency are over. All those Foxconn slaves become an instant problem, since their output no longer brings in hard currency from ROW, and they don't earn enough to clear burgeoning output. Oops.

Sometimes it makes more sense to be the mouse that shuts its damn mouth.

17 April 2014

oRacle, Not of Omaha

I'm not a particular fan of Oracle; my list of databases goes: DB2/LUW, SQL Server (when I'm on a Windoze machine), and Postgres. Oracle isn't on the list. Until now. After PG.

Why? They've come out of the closet. Not that Oracle's R support has been hidden on purpose, near as I can tell. But this is the first explicit discussion I've seen. Of course, you have to buy up the fancy version of Oracle to get R. Kinda ironic, what?
Oracle recognized the need to support data analysts, statisticians, and data scientists with a widely used and rapidly growing statistical programming language. Oracle chose R - recognizing it as the new de facto standard for computational statistics and advanced analytics.

C'mon MicroSoft and IBM, it ain't all that difficult.

15 April 2014

Java Apostasy

My most rancorous moments have been when listening to java folks rant about impedance mismatch and object hierarchies and such like. So, it came as a bit of a shock to see that a publishable java geek would actually put a spike in the ORM meme.
The ORM era may have ended. Why? Because using functional expressions to transform data sets is one of the most powerful concepts in software engineering. Functional programming is very expressive and very versatile. It is at the core of data and data streams processing. We Java developers already know existing functional languages. Everyone has used SQL before, for instance. Think about it. With SQL, you declare table sources, project/transform them onto new tuple streams, and feed them either as derived tables to other, higher-level SQL statements, or to your Java program.

If only the mass of java lemmings figure this out: java (or any client side code) need only format the screen, accept input, edit it against the database, and ship it off to such database. Back in 2000, the disconnected nature of http made everything webby antagonistic to *nix/RS-232/database/VT220 of the time. One couldn't, reasonably, have a persistent connection to the persistent datastore. So, all that data management went to the disconnected client. Didn't actually mitigate the problem, since the web servers were also disconnected clients to the databases. Thus, the insanity of "eventual consistency" was born. Gad!!

With today's innterTubes, the PC can function as a VT-220 and the innterTube connection as RS-232. Thin is in.

10 April 2014

Freud May Get Really Rich [update]

That didn't take long. Yesterday, it was reported that Colbert was the odds on favourite to replace Letterman, now today CBS announces it. Colbert, the real one, is a flaming left wing pansy. Colbert, of the Report, is a flaming right wing Nazi. Some number of his fans are going to be disappointed. Either that or he plays both ends against the middle, and his psych bill is going to be through the roof.

Letterman was 46 when The Late Show With... began. Colbert will be 50, if Letterman continues to the end of his contract. While NBC went with Fallon (39) and ABC Kimmel (36), although his show didn't start in the 11:35 slot at first. Perhaps old folks should pursue late night emcee as the pre-retirement vocation, after all.

08 April 2014

Shine That Apple, or It Won't Sell

Once again, here's Apple's fundamental problem:
Outside of the physical construction of the device, the Galaxy S5 continues to ship the latest and greatest hardware for its time.

Apple, on the other hand, is the Olde IBM; a marketing behemoth which ships cheap goods sold dear. What?? You're a fanboi and take umbrage?? Then, do tell, how else can Apple sit on $159 billion in retained cash? Gross margin, is where.

And, there's this:
Another e-mail exchange, detailed here by Business Insider's Jay Yarow, displays the tense relationship between Schiller [Apple marketing chief] and TBWA's Apple account lead, James Vincent. In it, Schiller e-mails Vincent a Wall Street Journal story asking "Has Apple Lost Its Cool To Samsung?" along with a note stating "we have a lot of work to do to turn this around."

Apple's gotten used to charging lots o bucks for so-so pieces (just look at the upcharge for more memory/storage, on any device), relying on The Bling Story to keep sheeple buying. "You won't get fired for buying IBM" has become "You won't find prettier bling than Apple".

And, no, the A7 isn't some magical part which emerged from the Brains of Apple. All they did, while not entirely trivial but not fundamental hardware design, was assemble more ARM IP blocks than anyone else. And added needed glue logic to keep it all together. 64 bit on a 1 gig phone? I don't think the quants will be doing their MCMC runs on a 5S whilst taking the A train and reading the Post. Or that Woody Allen will make his next movie on one, either.

07 April 2014

About Your Mule...

There's that old, and continuing, adage: "you can't beat Mr. Market". Well, baloney. You sure can beat Mr. Market like a rented mule. For some definition of 'you', of course.

If you've billions in moolah, it does get a little harder, from one point of view; yet even easier from another. Warren Buffett is a case in point. The piece exposes him as merely mortal the last few years. May be. Then again, may be not.

Mr. Market is kind of, sort of, Dr. Jekyll and Mr. Hyde. If you've got $100,000 in moolah, then turning it into $1,000,000 is certainly feasible. If you've got billions, turning that into tens of billions, not so easy. Or may be it is.

There are only two factors which cause capital gains in stocks: real events, and real events. (If that sounds familiar, recall this old canard: "there's the three killer apps of the PC; word processing, spreadsheets, and word processing". Still true today, which is why phones and tablets have inhaled the consumer space.) So, Mr. Market is either equities (narrowing focus a bit) across the board, or a particular corporation. For equities, Ukraine is the current event driving his angst. Earlier, it was the tsunami of moolah from The East (more on this later). For the ABC Corporation, it's... who knows?
Mr. Buffett's talents are widely known. But despite his celebrated past performance, his returns since the beginning of 2009 have been disappointing.

He's too big to hit a grand slam.

What's happened since 2009? A so-so stimulus, followed by a number of QEs. And, let's not forget, The Giant Pool of Money still looking for 10%, risk-free returns (the expanding Chinese housing bubble is a chicken come home to roost). In all, Mr. Market, in the large (Mr. Hyde) is floating on helium. In such a situation, Mr. Buffett can't do well, since productive value becomes unstuck from fiduciary value.

Could it be that the Fed's pushing a string? The idea with the QE exercises was to make physical investment desirable, by lowering the cost of money to do so. More investment in physical production, yields more employment, which yields more income, which yields more demand, and around we go. If only we give the carousel enough oomph to turn on its own. Hasn't worked out that way.

On the other hand, the others with moolah piles of Mr. Buffett's sort, can do quite well. Here's where quants can earn their keep (if you assert that money manipulation is 'work') since the tactic is to track gross money flows and move ahead of the lemmings. Since Mr. Buffett chooses to make long-term bets on, often, whole companies, moving in and out of positions is difficult, if he attempted that. Paulson, with a little help from being inside, did just that. So did Jamie Dimon.

What quants aren't very good at, since it's outside their purview, is understanding catalyzing events of individual companies, the Dr. Jekylls of this tale. This is where the lonely $100,000 has the advantage. Did deep into ABC Corporation, tech or biotech these days, and you'll find some type of "innovation" about to be birthed in the next X months or Y years. Buy up a bunch of ABC, and wait for the catalyst. It helps a whole lot to understand the venue in which ABC operates, of course. Buffett's billions are too big to get away with that; the ABC's of the world tend to be, at most, small-cap outfits. The Baker Bros. funds have managed to pull it off with some consistency in bio.

The string pushing hasn't worked out as planned.
According to a report by Moody's Investors Service, American companies outside the financial industry were sitting on a combined $1.64 trillion of cash by the end of 2013. And tech giants like Apple, Google and Microsoft had the most.

That's a really big number. And doesn't include the Too Big to Fail cabal. Is it any wonder that the QEs have had little effect? Other than the ABC Corporations converting old high cost debt into new lower cost debt.

Speaking of Big Numbers, Krugman shares the page with a piece taking the Big Data meme to task. Two doses of reinforcement.

Many people understand that a falling price level is a bad thing; nobody wants to turn into Japan, which has struggled with deflation since the 1990s. What's less understood is that there isn't a red line at zero: an economy with 0.5 percent inflation is going to have many of the same problems as an economy with 0.5 percent deflation. That's why the I.M.F. warned that "lowflation" is putting Europe at risk of Japanese-style stagnation, even though literal deflation hasn't happened (yet).

Here, I still find he's too Pollyanna about the whole thing; there are folks who'd love a Japan. The cash hoarding by the .1% is clearly a move to get deflation up and running; they've run out of ways to productively convert fiduciary capital to real capital, and having no income generating skills, "[We] have always depended on the kindness of strangers." Deflation, while it might not get them 10%/annum, is totally risk free returns. Who can turn that down? "Turning Japanese I think [we're] turning Japanese I really think so" (The Vapors, 1980)

In my dead trees version, more than half the page (less Krugman's full length column) is devoted to a take down of Big Data. Again, comforting to know that some who can finagle a piece on the NYT have figured it out.
The first thing to note is that although big data is very good at detecting correlations, especially subtle correlations that an analysis of smaller data sets might miss, it never tells us which correlations are meaningful. A big data analysis might reveal, for instance, that from 2006 to 2011 the United States murder rate was well correlated with the market share of Internet Explorer: Both went down sharply.

Makes sense to me!

But how to explain this non-sequitor?
FINALLY, big data is at its best when analyzing things that are extremely common, but often falls short when analyzing things that are less common.

Fact is, it's the outliers that Big Data allows us to find, as the murders and IE example (OK, it's not likely causative), or that Target customer that found out his daughter was preggers. Now, their examples are a bit off target, so far as I'm concerned. The issue with Big Data has always been a cost/benefit one: collecting enough of the right data to find black swans early enough to profit is difficult to calculate, especially if you don't know which particular, very valuable, swan you're expecting. That's part of what makes them black. The Great Recession was a black swan to many, simply because they'd ignored the data which really mattered. As lemmings, they all ran over the cliff. Not so black for a few who paid attention. Big Data didn't help them, rather Econ 101.
About a year after Pole created his pregnancy-prediction model, a man walked into a Target outside Minneapolis and demanded to see the manager. He was clutching coupons that had been sent to his daughter, and he was angry, according to an employee who participated in the conversation.

"My daughter got this in the mail!" he said. "She's still in high school, and you're sending her coupons for baby clothes and cribs? Are you trying to encourage her to get pregnant?"

Dancing belly to belly.

03 April 2014

Fiber Art

A long ago friend decided to go into the fiber art business, after being a bureaucrat and educator. I guess there's art to be found in fiber. Just not in North Carolina. That happened nearly three years ago. And the innterTubes cartel is still at it.

It was, therefore, with some amusement that I read up this Times story on how innterTubes pioneers are moving house to have really (by US standards, anyway) high speed broadband. The piece goes on and on about how behind the curve the US is, mostly in fact due to monopolistic rent-seeking private capital, with regard to innterTubes service.
"I just returned from Stockholm where fiber connections are cheap and as available as running water," said Susan Crawford, a visiting professor at Harvard Law School and author of "Captive Audience: The Telecom Industry & Monopoly Power in the New Gilded Age." As a result, she said, developers there have "a digital sandbox to play in," which means they are more likely to develop the next generation of software and hardware.

Ah, it must be all that midnight sun that has addled the psyches of Swedes to make them hate the Free Market. Fact is, the Damn Gummint (DoD and NSF, mostly) created the backbone. And it was academics, mostly, that figured out the tech. Only later, once the heavy lifting was done, did the Daddy Warbucks folks say, "gimme, gimme".

What's truly remarkable, and must be due to denseness on the part of the writer and/or editors:
It's why Brad Kalinoski and Tinatsu Wallace moved from Los Angeles to Wilson, N.C. The husband-and-wife team co-own Exodus FX, a company that provides special effects for commercials, television and feature films like "The Black Swan" and "Captain America."

The reason that bit is remarkable: North Carolina has paid off the ISPs by banning municipal broadband service, fiber generally. I guess irony is lost in the Times. This is a state by state list.
"In New York, I pay four times as much as someone in Stockholm would pay for a connection that is 17 times as slow on the download and 167 times as slow on upload," [Crawford] said. "Most of us are paying enormous rents for second-class service."

Well, corporations are people, too. And they need big houses to hold all those big ideas they have.

02 April 2014

Bigger is Better

I don't have the original location, just got it from here (The original ref site is back up.)

How Sweet It Is

One of the more interesting escapades in the bio-stuff sector over the last couple of years has been the effort by MannKind to get its version of inhaled insulin, named Afrezza, approved (no, I don't own any or short any). Before yesterday, that'd gotten them two CRLs (complete response letter, aka rejection) from FDA over the course of a few years. So, they tried a third time. The company is backed by one Al Mann (yes, he bought a company and changed its name to include his), who invented an insulin pump. He and his researchers devised a nano-particle (or nearly so, at least) carrier for a particular type of insulin, and an inhaler for delivery.

Seemed like a good idea, but there were various stumbling blocks along the way to yesterday (insert Beatles' tune snippet).

The two previous submissions were direct: MannKind sent the data and FDA sent back the rejections. This third try was going along similarly, until a few months ago when FDA said it would convene an Advisory Committee (aka, adcom) panel to review the submission prior to the decision date (called PDUFA, which you can Wiki if you're interested; not germane to this tale). Adcoms are, supposedly, panels made of outside experts to review the submission as filtered into a Review Document which the FDA distills from the submission and its staff review. Companies don't get to choose any of the panelists, and each adcom can have a different number of members with differing areas of expertise. Having a drug required to go before an adcom is generally considered an additional risk to approval, as opposed to a coronation. The review documents are (nearly) universally snarky. Managements get Tight Sphincter Syndrome as a result.

So, yesterday rolls around, and the panel takes seriously the review doc point of view that may be Afrezza doesn't work quite as well as the company asserts. This issue comes down to a quant question: is an average from the control better than the average from Afrezza? The measure is A1c (again, Wiki if need be) for Type 1s. The panel was viewable for $200, but I didn't have a ox in the ring, so I did not pass GO and pay $200. But Adam Feuerstein, as he often does, devoted his blog to commentary on the proceeding in real time (the replay is still up, if you're interested).

In the end, from Feuerstein's feed, it didn't seem that MannKind and FDA ever addressed the core issue with A1c and Type 1s. Which I thought was rather odd.

One of the benefits of Afrezza (again, according to the company) is that both the type of insulin used and its method of delivery yield fewer and less severe hypoglycemic events. In other words, blood glucose levels will have smaller excursion when compared to either a placebo or other drugs (insulins or not). The data which caused the kerfuffle was that Afrezza had a slightly higher A1c than control. It's easy to see, absent specific data of course, that with fewer outliers, particularly hypo crashes, A1c for Afrezza would calculate higher than controls which do evidence crashes.

Yet, from Feuerstein's feed, neither MannKind, the panel, nor FDA presented any data to confirm or refute the obvious arithmetic. Very odd. In the end, the panel accepted the *idea* that Afrezza produced fewer hypos and said yes with only 1 NO vote. Let the partying begin.

Quants talk about Type I and Type II errors (again, run to the Wiki). But there is another, much less discussed, variety sometimes called Type III error. This is the error of asking the wrong question. Nobody, apparently, asked the right question: "show my the numbers". Now, quantifying hypos in field trials is not trivial, but still...

One of the side effects of the adcom approval (not to be confused with FDA approval, which awaits) is a flurry of postings on message boards and blogs of all kinds. Including this one. One of the notions that got mentioned was whether, or not, the apocryphal Apple iWatch could include glucose monitoring. When I read that, my immediate reaction: "wrong question, dude". The issue isn't whether Apple can build some silicon and software to display a glucose level; it certainly can. Most anyone could.

And, it turns out, it's been tried for more than a decade.

The issue is: how to measure glucose, accurately, externally with a constantly moving device on a constantly moving body part. Turns out, not so easy. ARM and Intel won't be of much help. Boston Scientific or Novo or Pfizer, could be. There have been health metric measuring watch-like devices for some years. That's not new. What hardware Apple might control which would be useful and moated in the watch sector? No idea. But the iPhone certainly proved that having exclusive access to the signal bit of hardware makes a big difference.

01 April 2014

April Fool's is a Week Late This Year

Pundits have their heads up their sphincters more often than not. Humble self not included, of course.

As the Drop Dead Day approaches, not a day goes by (or so it seems) that one of the lemming pundits feigns bafflement that 25% (or thereabouts) of PCs still run XP. "Why oh why!!??!" they wail.

Here's why:
To upgrade to Windows 8.1 from Windows Vista or Windows XP, you'll need to install it from a Windows 8.1 DVD and perform a clean installation. This means you won't be able to keep any files, settings, or programs when you upgrade.

How many folks still have any installation discs? Or know where the various data files are stored? Or have sufficient backup space for them? Or have USB ports (machines of that vintage ran CD-ROM, or may be DVD)?

If M$ were serious, they'd have made an install-in-place version of 8.x, or even 7.x. But, of course, they don't want to do that. They want to extort folks into buying new machines they don't actually need. Most will likely segue to an iPad, since they're almost certainly only using the machine for infotoyment purposes, anyway.

And even then, this assumes that your decade old (or older) machine has big enough gonads to actually run 8.x. Which it likely doesn't. A $100 carrot to buy a new PC with 8.x isn't going to help. And then there's the not so widely understood fact that a considerable number ATMs are old XP machines. That should make you feel secure.
Windows XP end-of-life support is just a week away and a stunning 95 percent of ATMs around the world haven't made any changes to their platform or updated the soon to be outdated Operating System (OS). According to a recent ATMIA (ATM Industry Association) survey, only 15 percent of financial institutions are expected to react before the April 8 cut off.

I'm not at all convinced of the 95% number, if only because OS/2 was the OS of choice for ATMs. But still...