Involuntary terraforming

News that a new species of bacteria was found in two category 4 clean room facilities used for assembling payloads for space in two different parts of the World illustrate the difficulties of executing sterilized exploration. This coupled with the fact that earthly organisms were found on Mars probes indicate that the first inhabitants of the planet continue to fool their somewhat more evolved cousins. This is concerning, as humans have a forgettable history of negatively influencing areas they have explored in the past.

Physical exploration of space appears too archaic in the presence of improving technologies for remote viewing. More importantly, the fascination to physically explore the Solar system, apparently to find life, may have to be tempered based on the recent hypothesis that there are at least 8 billion Earth like planets orbiting Sun like stars in the Milky Way alone. Human exploration of the Solar system for extraterrestrial life is a bit like riding a bicycle around the house in an effort to find Lions or some other majestic animals. It is unlikely.

It is time we rethought micro space exploration. The expected information gain from such exploits is close to zero.

Maximum MOM

India’s successful launch of the Mars Orbiter Mission (MOM) is good news. After a few weeks in the Earth’s orbit, the orbiter will be heading out to the famed red planet. The journey, however, is fraught with danger with only the ESA making it in the first attempt.

Ref: NewScientist

A larger question is why India (and before that Japan, China and the ESA) attempted to develop their own technology for the Mars mission. After the US and Russia have already demonstrated viable technologies to reach the orbit and then land on Mars, it is unclear why reinventing such technologies is an economically good decision.

The utility a country derives from developing its own Mars mission may have four parts.

Public Pride (PuP) = Pride from achieving something for humanity

Private Pride (PrP) = Pride from showcasing the country’s accomplishments

Public Data (PuD) = Data and information that will be disseminated publicly

Private Data (PrD) = Data and information that will be held confidential

V = PuP + PrP + PuD + PrD

If the total cost of the mission is C, the the return to the country is (V-C)/C. However, since the true economic value of pride is close to zero, the country’s real return from such missions is low. It can, however, boost this return by acquiring such technologies from countries that have already demonstrated viability.

For example, in India’s case, if it is able to swallow the less valuable pride, then it could buy the technology (from the US or Russia) for just PrD. By doing so, it loses PrP but the selling country will likely subsidize PuP and PuD. In this case, its return from the mission is (PuP+PuD)/PrD. This is likely substantially higher than developing the technology on its own. At the very least, the cost will likely be an order of magnitude less.

More generally, society can maximize return on space investments if follower countries (after a single country has accomplished the goal) simply buys the technology from the leader to execute missions.

Behavioral flexibility

A recent study in The American Naturalist suggests that animals show an equal level of behavioral unpredictability as humans. Observations of adult male mosquitofish over a period of time also seem to indicate that some individuals are more unpredictable compared to others. The authors hypothesize that such unpredictability represents behavioral flexibility that facilitates learning or creates confusion for predators.

These observations have implications for modern organizations also. Large enterprises implement organizational constraints to reduce behavioral volatility of its employees – in how they work, execute tasks, get trained and deliver products and services. They also measure time and effort at detailed task level and they generally view volatility in such metrics as undesirable. These actions by companies may be decreasing the ability of their employees to experiment and learn. The long term impact of this could include declining innovation rate, lack of job satisfaction and stagnant productivity.

Unpredictability and behavioral flexibility may have a positive impact on the viability and growth of organizations.

Ref: Flexibility : Flexible Companies for the Uncertain World.

http://www.crcpress.com/product/isbn/9781439816325

NIFting LIFE

Recent news that the National Ignition Facility (NIF) has surpassed a critical benchmark – obtaining more energy than provided in a fusion experiment is a significant milestone toward free energy, an outcome that will help solve two tactical problems faced by the Earth, environmental degradation and colliding asteroid vaporization. No cost energy production has become a critical need in a system, wobbling toward extinction, either by the actions of its inhabitants or by space debris that envelop it like fruit flies around a rotten apple.

Lasers focused on a target container for hydrogen fusion – a mini Sun

Ref: BBC News

NIF, plagued by technical difficulties, has been behind on its own goals. But it seems to have accomplished what it set out to do a full year before. If the results are verified and replicated, they successfully demonstrate the concept of sustainable hot fusion with energy accretion. This should boost efforts to scale up fusion into practical power generation.

Ref: LIFE at LLNL

The aptly named, Laser Internal Fusion Energy (LIFE) at Lawrence Livermore National Laboratory (LLNL) has been making conceptual power plant designs based on NIF experiments and it appears that we are moving ever closer to reality. Although the goal is to deliver fusion based commercial energy by 2020, recent advancements may allow an accelerated deployment.

Fusion, the only known source for clean energy, may ultimately help humans sneak out of disaster, just in time.

Music to the inventors

Research from Michigan State University shows a high positive correlation between involvement in arts and crafts in childhood (<14 years) to innovation (measured by patents) and business creation later in life. Training and early participation in music, creative writing, photography and other such artistic areas appear to positively influence out-of-the-box thinking, a critical attribute of innovation and new business creation.

It has long been argued that the superiority of the US in innovation is related to its flexible education system that focuses more on whole brain development. Although US may not top other countries in test scores in hard sciences, it does produce a high level of creativity per capita, far in excess of any other country. There is a clear trade off between early specialization in sciences and later creativity. Well known technical institutes around the world, understandably proud of their ability to create a large number of engineers and doctors at will, may be missing a trick. The world may need less human robots in the future, highly efficient in applying what they are taught and it may need more creative individuals who can innovate and create new businesses. An education system focused on creating employees is significantly less valuable than one nourishing inventors and entrepreneurs.

Arts and crafts – that propelled the human psyche out of a dreadful life focused on food and sex – may ultimately give a more substantial makeover for humans.

Option value of organs

A recent study in the Clinical Journal of the American Society of Nephrology argues that assigning a benefit, say $10,000, to a kidney donor could increase available organs for kidney transplantation by 5%. Although the price elasticity of kidneys is unclear, it seems logical to assume a normal market equilibrium. Ethical issues aside, the owner of an organ may be sub optimizing decisions by not exercising the put option optimally.

Organs are wasting assets, the market value of which are declining over time. The utility one gains from her organs is a function of remaining lifetime – with the asset lost in a catastrophic end. The net value of the asset is the difference between the two, that may show a U shaped curve. The put option held by the owner on her organs has an optimal exercise horizon prior to death. This is especially true if the organ is not essential to life, or acceptable backups exist as in the case of donating one out of the two functioning kidneys.

Tangible economic incentives, if applied correctly, can induce optimal exercise, with beneficial societal impacts.

Lonely baby

Recent discovery of a lonely planet without a star, a mere 80 light years away from the Earth is interesting from many angles. The newborn, just 12 million years old, may indicate a failed star at six times the size of Jupiter. Although ejection theories are abound, this could be a case of star formation in zones not considered active. With this unexpected finding, the frenzy of extra solar planet discovery continues to increase.

However, we now know that planets are out there in large quantities and in every size, age and composition. One has to wonder if further exploration of these somewhat uninteresting objects is a good use of limited resources. It is unclear why so much passion exists in the identification and cataloging of planets. Is it the need to verify the already known structure of the universe or perhaps a desire to find life elsewhere. If it is the former, there is enough data to confirm that planetary systems are replicated across the universe. But if it is the later, then, it is advisable to look closer.

With limited understanding of all the life on planet Earth and possible life in close proximity in the solar system, it does not make sense to seek it elsewhere. If this is driving a good part of the thought processes of budding knowledge seekers, this has the potential for destroying further advances.

Efficient Chicago

The idea was simple but the implications are huge. It is clear to those who understand frameworks but less so to others. The notion that information is quickly reflected in the prices of traded assets, standardized and liquid, in markets that implement clear rules of engagement and property rights, is elegantly obvious. It is, however, singularly confusing to active investors, individuals and institutions, a sizable chunk of the US economy.

The dominance of the Chicago school in shaping economic thinking continues. Recently minted Nobel Laureates – Fama and Hansen, seem to complement wonderfully in the grand tradition of theorization and empirical support. Their work has direct practical consequences for investment decisions and asset pricing models. More importantly, they also provide guidance on resource allocation across the economy.

For example, efficient markets mean passive investing dominates, a conclusion that is robustly supported by empirical observations. Even though risk adjusted excess returns (alpha) is shown to be zero (after management and transaction costs) across investment managers (a direct conclusion of Fama’s Efficient Market Hypothesis), significant resources – money, people and time – are wasted across the world by actively managing liquid investments. One has to wonder why the venerable investment banks and financial institutions, filled to the brim with the brightest, engage in activities that add no value either to themselves or to the economy. To make matters worse, there are over eight million active traders in the US alone, ably assisted by the brokerage houses, pushing buttons and pulling levers arranged on multiple screens in such complexity that they rival the cockpit of the space shuttle. As the markets close every day, some rise like vampires – mad, fast and crazy - aiding and abetting the following day’s trades and newly emerging traders. This is a massive misallocation of capital across the entire economy. This is indeed a systemic issue for the economy where agents are engaged in value destroying activities for a large cohort of the economy, presumably because of monopoly rent and hidden options yielded from asymmetric information between the adviser and the client. Such a market failure, if corrected by appropriate policy actions, could significantly improve global productivity.

Hansen’s method of moments help mere mortals make reasonable models for complex macro phenomena. His focus on incorporating the agent’s thoughts, beliefs, doubts and learnings into modeling her actions and the systematic consideration of uncertainty that is evolving stochastically, is refreshing. Determinism has been the bane of theoretical finance for long and the incorporation of uncertainty in accepted models may help measure risk better – both locally and globally. Policy makers will benefit if they understand that flexibility embedded in policy decisions are valuable in the presence of uncertainty.

Chicago has had an unbelievable run – primarily because of its commitment to embracing unconventional ideas early and nourishing them over long periods of time. However, there are indications that the school is becoming more conventional and it is less inclined to accept emerging ideas. If it deviates from a formula that has been successful for nearly a century, it can quickly mean revert to mediocrity, ably demonstrated by its peers today.