Scientific Sense Podcast

Saturday, July 26, 2014

Inefficient accounting

Recent research that shows conflicting and confusing but significant impact on stock prices during policy discussions around a suggested change in the “Fair Value Accounting,” rule, is puzzling at the very least. Common sense should indicate that the value of a firm and thus the prices of securities that subdivide that value do not change by accountants moving money around or changing reports. Hence, the change in prices of certain securities due to an anticipated accounting rule change could only happen if the policy forced a transfer of value from one set of stakeholders to another. Regulatory bodies, apparently in an attempt to “fix the economy,” through creative accounting, were overactive in policy-making during the financial meltdown. A deeper dive into basic economics may be the least one could do before heading out to Washington to engage in such activities.

Value is never generated by moving money around or by reporting financial statements differently. Value is only created by innovation and that happens only in real markets. Accounting, a necessary evil, should be as simple as possible, so that policy makers do not have to burn the midnight oil in the next crisis trying to “relax” and “tighten” accounting rules to save the economy. Simple accounting, however, could substantially increase the unemployment rate as it will flush out the value destroying activities in the financial sector, that is growing like cancer on real productive parts of the economy.

The prescription to grow the economy is simple – let entrepreneurship thrive in a regime of simple and consistent reporting of financials.

Friday, July 25, 2014

Autoimmune games

Recent news from Johns Hopkins that game theory could have applications in cancer treatment is in a profitable direction. Windows of predictable regime switching by cancer cells appear to be the optimal time to attack them – by disrupting the lactate transport mechanism, slowing down cooperation. It is further proof that there are common foundational aspects to the behavior of complex systems. Those able to step out of the dogma of disciplines are more likely to invent in any field.

Biological systems, a complex dance among symbiotes, parasites and own cells, are not well understood by modern medicine. Although it has been easy to kill the invaders that are mutating slowly, other valiant attempts at controlling system behavior seem to have failed. This is because medicine has been a closed science that perpetuate ideas from ancient times. Humans have been humble enough to accept that they are unable to understand the work of God fully and thus set out to mend the components of their bodies by selectively intervening on organs and other components. Such intervention, however, is fundamentally symptomatic with no implications for long term welfare, happiness or utility.

Medicine could benefit significantly if it can shed dogmatic views and look outside their opaque walls for new ideas.

Monday, July 21, 2014

Data neutrality

As the “net neutrality” debate kicks in – effectively forced by a handful of monopolistic companies who almost already control the internet in an attempt to make it even less accessible, it is encouraging to see that the city of San Francisco (SF) is heading in the other (and correct) direction. The recently appointed Chief Data Officer (CDO) of SF is initiating a strategic plan for making data open. Data, the only remaining valuable raw materials in the world, are largely locked up by a handful of companies, generating monopoly profits for them.

It is high time that data are democratized. As the economy shifts into making every decision data driven, delegating the meaning of the phrase “gut feel,” to the pain one gets after a heavy and unpleasant meal, existing and antiquated monopoly laws need to be rewritten. The industrial revolution is over and today’s economy is not driven by the manufacturing of nuts, bolts and automobiles – it is driven by information and intellectual property (IP). Real monopolies of today are those who are hoarding data and those who have unfair advantages in the use of the central nervous system of the economy, the internet, to create and lock up IP. The fact that the regulators are even considering the argument that the internet needs to be subdivided, providing more skewed advantages to those who already operate as monopolies indicate that they are completely out of touch. A congress, filled with octogenarians and a bureaucracy, only slightly younger, are in no position to make laws in the information age.

Net neutrality and democratized data are necessary conditions for unbridled innovation and economic growth. Anything less will be a step back – something regulators are well advised to stay as far away as possible.

Sunday, July 13, 2014

Don’t cry for me

It was an enjoyable spectacle – something that lifted the spirit of at least half the world. Sport, perhaps the only human invention, that may provide a safe outlet for the clan like behavior that is integral to the human psyche. It is much less expensive – even a dozen billion $ invested in the recently concluded famous ball game, is a mere drop in the bucket, if it can keep the testosterone laden humans under control and perhaps avoid other more expensive endeavors, grown men and women engage in around the world. Some sport, however, still suffer from hooliganism, an expression of the same ideas that have kept humanity under check from advancing further.

Real champions are sportsmen – they play the sport seriously and accept victories and defeats as part of the game. They do not attempt to win at any cost and they lift mere humans from despair and afford them abundant joy. They move whole countries, something their mediocre leaders simply cannot do and they unite them – not to war against others but to see how unity could add value to entire societies, countries and humanity itself. They script beautiful stories on the field – some tragedies, some even comedies but always engaging.

It is important to nourish truly global sport – something that could engage large swaths of the world population. If we do, perhaps, we can alleviate the pain and tribulations served every day by ego and ignorance around the world.

Saturday, July 12, 2014

Engineers discover uncertainty

A recent paper in Science describes simulations and systematic analyses of uncertainty as a way to simplify predictions of material properties such as density, hardness and reactivity for so called “designer materials.” Conventional engineering – in education and in practice – focus too much on deterministic methods of evaluation and design, an artifact of the use of traditional materials that are well understood. But such designs are of little use in the modern world, already replete with ugly structures and weak materials. Additionally, most of the traditional engineering designs could be fully handled by computers.

The next frontier for engineering has been designer materials that could substantially change industry, electronics, energy and drug design. The use of deterministic and antiquated tools of yesteryear have been successful in slowing down innovation for the past several decades. Precision has to be abandoned and faster experiments with approximations have to be embraced. Trends need to be evaluated, hypotheses need to be formed, tested and proved and errors are to be expected. Once variations are accepted, then it is easier to predict, test, refine and retest. These techniques have been in use in many areas and it is time that such ideas entered engineering and materials science.

Materials scientists and engineers, laggards of the technology cornucopia, need to come to the party soon.

Sunday, July 6, 2014

The end of mind?

In a recent study (1), the authors seem to have made the following interesting observation:

“In 11 studies, we found that participants typically did not enjoy spending 6 to 15 minutes in a room by themselves with nothing to do but think, that they enjoyed doing mundane external activities much more, and that many preferred to administer electric shocks to themselves instead of being left alone with their thoughts. Most people seem to prefer to be doing something rather than nothing, even if that something is negative.”

Most of the study subjects appear to be men. Does this indicate a systematic atrophy of the human mind? Is this the end of thoughts? Is this the beginning of regression to nothingness?

Humans have been busy most of their evolutionary history – they had to sense and avert danger in every corner, hunt for food incessantly and later fight other clans constantly for superiority and survival. Humans have been both tacticians and a strategists, adept at maximizing within the constraints presented. They even ventured into abstract realms – philosophy, art and mathematics – that provided little direct utility to the problems at hand. Some even had visions of space travel and rocketed to nearby pebbles as a precursor. The human mind has been active – perhaps till very recently.

Now, we find ourselves unable to think and preferring electric shocks to boredom. How did we get here? Where do we go from here? Is this a segregation of mind share? What role do society, education and industrial organizations play?  Humans, the most unlikely species to dominate the World, may have overshot their own capabilities.

(1) Just think: The challenges of the disengaged mind

Timothy D. Wilson1,*,
David A. Reinhard1,
Erin C. Westgate1,
Daniel T. Gilbert2,
Nicole Ellerbeck1,
Cheryl Hahn1,
Casey L. Brown1,
Adi Shaked1

Friday, July 4, 2014

The education gap

A recent article in NY times points out correctly that there is a subtle difference between the statement that “the US has the best universities” and “of the top 25 universities, most are in the US.” Indeed, an education gap has opened up between the very top and the average available college education in the US. Many believe that the recently fashionable online education trend will even out the field, making college education fully democratic. Educators, policy-makers, rating agencies and the public appear to be missing several important considerations here.

Before one can measure and rate the outcome of a process, one has to define the objectives of the process itself. In the last century, education was supposed to train graduates for “jobs.” However, in an economy that does not create many jobs, the objective of education has to be fundamentally redefined. Today, education has to be something that prepares graduates for the non-jobs – add value to society through innovation and advancement of knowledge and ideas. These are volatile endeavors – most offering no stability and often result in catastrophic failures. In a jobless economy, the next generation has to be taught skills that are not necessarily related to parroting out standardized answers to Arithmetic, Physics, Chemistry and Biology questions (PISA scores, for example) – or churning out engineers and doctors like perfectly predictable stack of pancakes in the “International house of pancakes.”  High scores in standardized exams and high graduation rates in environments that are designed to create “bricks in the wall,” are not good metrics for the success of education.

It is important to fully redefine the objectives of modern education before one could conclude on its effectiveness. The content drilled into the brains of the merry college goers of today, is largely a commodity and it generally correlates badly to eventual success. It is the ability to look outside the content and find relationships among apparently disconnected fields that will hold the key for future success. On that measure, the US schools, still offer much higher flexibility than the antiquated systems of the East. Further, the top schools in the US continue to command the lion’s share of innovation in the world – a true measure of how good education is.

Thursday, July 3, 2014

Stupidity of the crowds

Recent research from the Max Plank Institute for Psycholinguistics in the Netherlands show that Chimpanzees quickly copy arbitrary behavior of others in close proximity. The researcher noticed how a female chimp named Julie repeatedly put a blade of grass for no apparent reason in her ears and that behavior was copied rapidly by other chimps who observed it. This has implications for humans, who share most of the genetic make-up of chimps. Copying observed behavior of others may have had some evolutionary advantage for humans – at the very least it may have allowed them to experiment. It appears that such a notion is now built into the psyche of humans. This may have some negative consequences in the modern world.

For example, in the financial markets – there appears to be a tendency to follow arbitrary behavior of others, however stupid that could be. It has been established that in large markets, outcomes are generally efficient even though individual participants could be irrational and stupid. However, if copying is an in-built behavior pattern of the closest cousins of the chimps, then one could envision persistent excursions away from efficiency. Hedge funds, for example, may arbitrarily attempt a trade that could be replicated by many others – not because they understand it but because it is compelling to copy. The short term volatility in the market could be explained by such chimp-like behavior.

This behavior is equally apparent in real markets. For example, it is often observed that in large meetings within operating companies in which the participants are ambivalent as to the choices presented, a preemptive selection decision by one is quickly followed by many. In such experiments, the crowd could reach diametrically opposite decisions just because the first mover had preferences in one direction or another. Large companies are generally managed by chimp-like instincts exhibited by one and quickly adhered to by others.

It is ironic that large-brained animals – chimps and humans – may be more prone to group-think than others such as cats, who exhibit more individualistic preferences.