Category / Media and Popular Culture

News of the day March 14, 2014 at 12:31 am

Copper is limit down in Shanghai, Ukraine is getting hotter again, and investment bank profits are thought to be tumbling, so of course I am writing about baked goods. The important update is that I tried a crothingy this morning and really, as Bill hinted in his comment to my earlier post, they are not worth it. A St. John egg custard donut, yes; a cro, no. On the basis of this one data point I declare baked goods officially in bubble territory and demand macro-prudential intervention including but not limited to cocoa percentage floors, minimum custard-to-value ratios, and bans on little bits of pistachio that look good but taste of grit.

Pausing (not Rushing) September 30, 2013 at 10:17 pm

I’m doing a big piece of analytical work at the moment, and it’s swallowing blogging time, so my apologies but DEM is going to be quiet for a while. At the moment for instance I don’t have much more to say than that it is amazing how much like James Hunt Chris Hemsworth can be made to look, and that I’m currently unconvinced by certain aspects of Hull & White volatility scaling. Which of these two topics gets blogged about first is a toss up right now…

James and Chris

That baby July 23, 2013 at 8:47 am

Given that the news seems to be wall-to-wall royal baby, can I suggest that we call it ‘Rehypothecation’?

Update… talking of which, Bloomberg reports that One in three financial institutions would accept “low-quality, complex and opaque” collateral to back trades provided that it’s “cheap,” according to a survey from SIX group. Clearly they caught the other two thirds on a good day…

Too hot to blog July 16, 2013 at 8:50 pm

Apparently the answer is an Aperol Spritz

Read this, though, in the meantime from the FT, on why rising bank profits are a PR disaster: it’s interesting. If, that is, you can bear to be close to a computer in whatever weather you are having.

BTW, are the temperatures in NJ similarly elevated? I only ask because I read from Krugman

he’s been such a good guy over time that I’m just going to let this one drop

Obviously I almost fell off my chair. If I’d had an aperol spritz, I would have dropped that too. Krugman? Let it drop?? Spanish practices are indeed coming to us all.

For once, a tumblr that is not full of grumpy cats June 9, 2013 at 9:52 pm

OK, it has one, but still, check out FT Alphaville’s hipper version of the blog.

The sad state of the Guardian December 4, 2012 at 12:38 pm

Five sad stories

These are the top five stories on the Guardian website at the moment. Three about two young people who seem to have done something quite a few young people are reasonably adept at, one speculated about the future of a football manager, and one a story about a unicorn. The Guardian was a serious paper once but goodness me if any evidence was needed that that is no longer true, surely this is it. The Guardian website has become a mediocre media hub, less good at everything than the specialist press (for music, go to Pitchfork; for technology, go to Ars Technica; and so on), and with a nugatory amount of news. Instead we have endless live blogs where the reader has to try to pick the facts out of a morass of breathless but mostly inconsequential reporting. It’s sad to see a once great newspaper — a paper I bought most days for more than half my life — turn into this.

In praise of Matt Levine November 14, 2012 at 10:42 am

I think Matt might be the best journalist writing about the capital markets at the moment. Read this on some recent Bank of America/MBIA shenanigans: it’s well-informed, novel, and funny. He is an ex-equity derivatives guy and it really shows in his understanding of what’s important and how to explain it*.

*Plus I have an uncommon fondness for footnotes, and he uses even more of them than I do.

The pizza system May 20, 2012 at 3:07 pm

One of the inspirations for this blog was Italian coffee. I mean that both literally – quite a lot of my posts are written with the aid of an espresso – and more theoretically; coffee in Italy is wonderful, cheap, and available very widely. I was curious how they managed it, and that lead to the very first post on this blog, over six years ago.

Today an article in the Guardian made me think about another incredibly efficient system in Italy, that of pizza. Again we have something that is cheap, readily available, and world-beatingly good*. Indeed, some of the finest pizza is also the cheapest. A meal and drink at the multi-award-winning Da Michele in Naples, for instance, will cost you less than ten euros. If you are anything like me, you will also think that this is the best pizza you have ever tasted.

The Guardian now says that there is a trend for gourmet pizza with exotic ingredients; figs, for instance, or truffle oil. That’s fine. People will always try to find a way to charge more for something that is less good. It worked pretty well for Starbucks, after all, so it might work for some of these ‘ultra-pizza’ chefs. But I strongly doubt that it will influence true Italian pizza, just as I doubt Starbucks will ever make much money in Italy. The original is just too good for a challenger to be that successful.

This robustness is a characteristic of good socio-economic systems. So too is the property that everyone profits, but no one makes too much. There isn’t much growth – a small town only needs one decent pizza joint – but there is solid demand for good quality. Tasty tomatoes and buffalo mozarella goes in, pizza comes out, and everyone – including the tomato grower and the cheese maker – is happy. Moreover, because everyone knows what good pizza is like, there is little demand for bad pizza. Thus there is a positive feedback loop which keeps average quality high, at least in much of Southern Italy.

Another good thing about the pizza system is that it is democractic. You can’t get a better pizza at Da Michele by paying more; you can’t jump the queue by slipping the Maitre d’ a hundred, not least because there isn’t a Maitre d’. The system serves a broad spectrum of interests, not a narrow one. Long may it continue.

*One of the most absurd claims I ever heard was that there was better pizza made in Brooklyn than in Naples. This is akin to claiming that the AMC pacer is a better looking car than the Ferrari F12 Berlinetta.

The old and the new February 26, 2012 at 12:57 pm

Back to finance tomorrow I promise but meanwhile… I love the fact that someone is thinking of using Kickstarter to fund a new translation of Antigone. OK, she might not have a novel take on the Tycho von Wilamowitz-Moellendorff problem (you knew I had to hit up the big T W-M, right?), but using a four year old technology to raise money to work on a 2,500 year old book is a lovely juxtaposition.

Leaving (Blair behind) January 28, 2012 at 8:49 am

Radio 4 has rebroadcast Václav Havel’s Leaving. It’s a play nominally about the chancellor of an ex-soviet state, perhaps Havel’s own Czeck republic, who is leaving office. But about ten minutes in, Havel in uncomfortable self-parody has the Chancellor say something that could have been Tony Blair (or David Blunkett):

I have always placed great importance on human rights. In the name of freedom of expression, I imposed significant limits on censorship. And during my term fewer than half of all public demonstrations were broken up by the police.

There is a certain contemporary resonance too…

Corporate psychiatry September 4, 2011 at 10:50 pm

There has been a meme floating around in the last few years of corporate psychopathy. Actually there are two ideas here: co-workers as (potential or actual) psychopaths; and corporations as psychopaths. It is the latter I find interesting.

Let me explain. In the US at least, corporations have had many of the rights of natural persons for many years. The most famous example of this is the recent supreme court decision relating to election funding (specifically striking down provisions in the McCain–Feingold Act that prohibited all corporations and unions from broadcasting “electioneering communications”).

So, if corporations benefit from many of the rights of people, shouldn’t they be similarly judged by their acts?

DSM V, the latest edition of the American Psychiatric Associations’ Diagnostic and Statistic Manual for Mental Disorders, proposes a number of criteria for antisocial personality disorder:

  1. Significant impairments in personality functioning manifest by:

    1. Impairments in self functioning (a or b):

      1. Identity: Ego-centrism; self-esteem derived from personal gain, power, or pleasure.
      2. Self-direction: Goal-setting based on personal gratification; absence of prosocial internal standards associated with failure to conform to lawful or culturally normative ethical behavior.


    2. Impairments in interpersonal functioning (a or b):
      1. Empathy: Lack of concern for feelings, needs, or suffering of others; lack of remorse after hurting or mistreating another.
      2. Intimacy: Incapacity for mutually intimate relationships, as exploitation is a primary means of relating to others, including by deceit and coercion; use of dominance or intimidation to control others.
  2. Pathological personality traits in the following domains:
    1. Antagonism, characterized by:

      1. Manipulativeness: Frequent use of subterfuge to influence or control others; use of seduction, charm, glibness, or ingratiation to achieve one’s ends.
      2. Deceitfulness: Dishonesty and fraudulence; misrepresentation of self; embellishment or fabrication when relating events.
      3. Callousness: Lack of concern for feelings or problems of others; lack of guilt or remorse about the negative or harmful effects of one’s actions on others; aggression; sadism.
      4. Hostility: Persistent or frequent angry feelings; anger or irritability in response to minor slights and insults; mean, nasty, or vengeful behavior.
    2. Disinhibition, characterized by:
      1. Irresponsibility: Disregard for – and failure to honor – financial and other obligations or commitments; lack of respect for – and lack of follow through on – agreements and promises.
      2. Impulsivity: Acting on the spur of the moment in response to immediate stimuli; acting on a momentary basis without a plan or consideration of outcomes; difficulty establishing and following plans.
      3. Risk taking: Engagement in dangerous, risky, and potentially self-damaging activities, unnecessarily and without regard for consequences; boredom proneness and thoughtless initiation of activities to counter boredom; lack of concern for one’s limitations and denial of the reality of personal danger.
  3. The impairments in personality functioning and the individual’s personality trait expression are relatively stable across time and consistent across situations.
  4. The impairments in personality functioning and the individual’s personality trait expression are not better understood as normative for the individual’s developmental stage or socio-cultural environment.
  5. The impairments in personality functioning and the individual’s personality trait expression are not solely due to the direct physiological effects of a substance (e.g., a drug of abuse, medication) or a general medical condition (e.g., severe head trauma).

OK, let’s do some diagnosing.

A1 is pretty straightforward. Most corporates pass a or b or both.

A2a is slightly more difficult, but again many corporates pass, while A2b is pretty much the definition of being an employee.

B1 is harder. A diagnosis for a corporate would have be based on a or c, but certainly many PR/investor relations/government affairs groups have an element of B1a about what they do, while B1c can be met simply by the pursuit of profit at the expense of (most) other things.

I would not argue B2a or b are common in corporates, so we need B2c to get a diagnosis. Sadly (or fortunately depending on your point of view), that is not easy either. Yes, corporations take risk, but typically not unnecessarily’ and without regard for consequences. Moreover, while some display ‘a lack of concern for [their] limitations’, they at least try not to. That is what risk management is about. So it seems we stumble on the requirement for disinhibition in our diagnosis.

C and E are straightforward passes for many corporates, but D is difficult too as, frankly, the way corporates behave is normative, at least in North American culture. So, reluctantly, while I think that a lot of what corporates do is antisocial, it would be hard to make a case for involunatry commitment (or sectioning, as we call it in the UK) under the DSM V criteria for antisocial personality disorder. Badly behaved, yes; psychopaths, (mostly) no. Before you get too comfortable though, check out the criteria for Narcissistic Personality Disorder and Personality Disorder Trait Specified: these are a lot easier for corporates to pass…

Lady Spam May 2, 2011 at 3:19 pm

One of the most irritating forms of spam I get is web ‘publishers’ wanting to resyndicate the contents of Deus Ex. Typically the gig is that they make money from the advertising and their ‘contributors’ don’t get a cut. This, needless to say, is not my model. Deus Ex doesn’t carry advertising because advertising irritates me, and I don’t think you, dear reader, want to read it. Hence I use a Creative Commons license: this means that I have a decent shot at suing anyone who does resyndicate my stuff without permission.

Anyway, usually the bottom feeders usually go away if you ignore them, but I currently have one that is unusually persistent. I’m hoping that the wave of spam that will hit her once her email address is up for the bots to find will at least be partial recompense for the annoyance she is causing. The address is – please feel free to treat her, Nimble Publishing, and Forex Traders (with which she claims some association) with utter disdain. I know I do.

Word of the day February 20, 2011 at 8:25 am

Agnotology. From this Wired article, via Crooked Timber (where I was reading an excellent account of the goings on in Wisconsin. Go Dems go.)

Systems thinking, people thinking August 25, 2010 at 8:32 pm

I was going to amuse myself this morning taking apart a truly awful Felix Salmon posting on the use of the normal distribution in finance. (That’s what it is really about – it isn’t what Felix thought it was about when he wrote it, which is part of the problem.) But instead I am going to praise an insightful article by Chrystia Freeland in the NYT.

First she highlights an important cognitive bias:

Most of us respond better to personal stories than to impersonal numbers and ideas.

Then she discusses one of the consequences:

that same bias means we are drawn to stories about people, not systems. When it comes to the financial crisis, we want heroes and villains and what-he-had-for-breakfast narratives; we are less enthralled by analytical accounts of the global financial system and the cycle of boom and bust.

Chrystia is nice enough to suggest that this is the age of the systems thinker, that those of us who can do it – and if there is one thing that this blog is about, it is systems thinking – are the new upper class. Sadly I think she is wrong. Systems thinking has the potential to be a very powerful tool, and it has had many successes. But cognitive bias means that it is always fighting an uphill battle against personality-driven narratives. Systems thinking has a marketing problem which it needs to solve before it can become the new black.

Update. This comment from Ashwin is so pertinent that I am going to hoick it up to the main text (and edit it to remove the references).

John Sterman in his book Business Dynamics says the following: “A fundamental principle of system dynamics states that the structure of the system gives rise to its behavior. However, people have a strong tendency to attribute the behavior of others to dispositional rather than situational factors, that is, to character and especially character flaws rather than the system in which these people are acting. The tendency to blame the person rather than the system is so strong psychologists call it the “fundamental attribution error”. In complex systems, different people placed in the same structure tend to behave in similar ways. When we attribute behavior to personality we lose sight of how the structure of the system shaped our choices. The attribution of behavior to individuals and special circumstances rather than system structure diverts our attention from the high leverage points where redesigning the system or government policy can have significant, sustained, beneficial effects on performance. When we attribute behavior to people rather than system structure the focus of management becomes scapegoating and blame rather than the design of organizations in which ordinary people can achieve extraordinary results.”

Education today… March 22, 2010 at 11:07 pm

Is it really old fashioned of me to be depressed at having found two grocer’s apostrophes in the abstract of a Harvard paper? Now admittedly it is only an undergraduate paper, but really, whatever our view of CDOs, we definitely should not tolerate CDO’s.

Content may or may not want to be free January 12, 2010 at 6:54 am

I recently had an email suggesting that I might like to republish Deus Ex on another website. The deal on offer involved no money, but more readers. Moreover, given the other content on the website concerned, those new readers would be less erudite than you, and I would be making money for the website owner. Why on earth would I want to do this?

A rejection was clearly unexpected to the proposer. He evidently expected me to acquiesce with a few grateful words. Undoubtedly some bloggers take the view that any publicity is good publicity — and that’s fine. But I think a number of more nuanced models of web content can coexist.

Paid for content makes sense in some situations: as an author, I certainly support it, and I find Google’s attempts to scan everything they can lay their hands on rather troubling.

Free content but with restricted rights – as in the particular creative commons license I use – is also a useful model. And of course much free content is in practice restricted by how hard it is to find. If someone in the know does not tell you that it is there, you are unlikely to ever come across it.

If you want the maximum number of readers, and you don’t care about their quality, or the amount of spam, idiotic, or otherwise dubious comments you get, then completely free content with copious redistribution is the way to go. But that does not suit every blog, let alone every form of online content. Like most evangelists, the content wants to be free mob have an overly simplistic view of the web. Some of us are perfectly happy in our little corners far from the crowds.

The types of instability June 26, 2009 at 7:16 am

Money market funds were one of the more minor vectors of the crunch. Since they did not want to break the buck, and as they had rather limited loss absorption capability (thanks to the lack of anything akin to equity), they were sellers of the debt of any institution rumoured to be in trouble. In other words, they exacerbated funding liquidity risk but helping to turn a rumour into reality.

Belated the SEC has proposed revisions to the regulatory framework for funds: see here for a prospectus.

What these proposals will do is turn a nasty dynamic destabiliser into a static one. Since funds will be unable to invest in low quality instruments, they will not be able to fund lower quality firms at all. In effect the barrier to entry for the big boys club will get higher.

Make a leftie your leader December 2, 2008 at 6:46 am

Bloomberg has an interesting argument. They suggest that the right wing media are reluctant to criticise companies in general. And the left wing media are reluctant to criticise companies headed by prominent lefties. So, for an easy ride, make the most visible symbol of the company a figure from the centre left. I’m available if Jon Crudas’s rates are too steep for you.

The new treasury secretary November 6, 2008 at 9:24 am

Bloomberg is suggesting Tim Geithner or Larry Summers. Personally I like President Servalan for the role. She has the right qualities for the role. In particular she knows how to get rough with rebel organisations, like the banks. Just ask Roj Blake…

Peston picked off October 21, 2008 at 7:48 am

Robert Peston, it seems, may be getting a dose of the scrutiny he has been afforded to the banks. The Observer reported on Sunday that Serious Fraud Office could launch an inquiry into his recent scoops. I don’t have anything against Peston personally, but I do think he has shown a persistent lack of judgment in both his language and the amount of due diligence he has done before breaking stories. We’d all be staring into the abyss was his characterisation of the failure of the Lloyds/HBOS merger, for instance; while his first account of the Lloyds/HBOS deal suggested the price would be £3 a share (it turned out to be close to two). His accounts of government intervention into Northern Rock and into the wider banking system were market-moving: but did they amount to shouting `fire’ in a crowded theatre? I definitely think there is a case to be answered, and I hope that he is forced to answer it. Responsible financial journalism is important; telling truth to power, more so. But telling half truths in purple prose for the purposes of self-aggrandisement is not a good thing, especially for someone with the broadcasting power of the BBC’s business editor. He’s also far too close to Gordon Brown to be clearly whiter-than-white independent. This is not a good state of affairs for the BBC.