Category: From the Old Server

Items imported from Manila, one of whose many bad features was a lack of categorization.

Dumping money blindly into index funds?

by philg

If you put money blinding into stock index funds, you’re helping managers steal from America’s public corporations, according to a special issue of Fortune magazine (start here and then click on the other articles under “special package”).  Could it be that the great investing lesson we learned from the last few decades, i.e., that index funds outperform managed mutual funds, will turn out to be inapplicable to the changed environment of the 21st century?

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Give Fs to your best customers?

by philg

Here’s a portion of the “to the instructor” blurb of Internet Application Workbook:



The daily cost of attending a top university these days is about the same as the daily rate to stay at the Four Seasons hotel in Boston, living on room-service lobster and Champagne. It is no wonder, then, that the student feels entitled to have a pleasant experience. Suppose that you tell a student that his work is substandard. He may be angry with you for adversely affecting his self-esteem. He may complain to a Dean who will send you email and invite you to a meeting. You’ve upheld the standards of the institution but what favor have you done yourself? Remember that the A students will probably go on to graduate school, get PhDs, and settle into $35,000/year post-docs. The mediocre students are the ones who are likely to rise to high positions in Corporate America and these are the ones from whom you’ll be asking for funding, donations of computer systems, etc. Why alienate paying customers and future executives merely because they aren’t willing to put effort into software engineering?


In teaching with Internet Application Workbook you have a natural opportunity to separate evaluation from teaching. The quality of the user experience and solution engineered by a team is best evaluated by their client and the end-users. If the client responds to the questionnaire in Exercise 3 of the Planning Redux chapter by saying “Our team has solved all of our problems and we love working with them”, what does your opinion matter? Similarly if a usability study shows that test users are able to accomplish tasks quickly and reliably, what does your opinion of the page flow matter? During most of this course we try to act as coaches to help our students achieve high performance as perceived by their clients and end-users. We use every opportunity to arrange for students to get real-world feedback rather than letter grades from us.

The principal area where we must retain the role of evaluator is in looking at a team’s documentation. The main question here is “How easy would it be for a new team of programmers, with access only to what is in the /doc directory on a team’s server, to take over the project?”


America’s most grade-inflated schools tend to be its most expensive, e.g., Harvard.  Assuming a 5 percent annual increase the cost of education at a top school will top $1 million within 40 years.  Are the employee-teachers really going to give Fs to people donating $1 million to the institution?  Is there any way to maintain academic excellence and good relations with our wealthy patrons (the students)?


Suppose that there were a set of standardized problem sets and tests, shared among groups of universities.  A student at School A would have his or her work graded by teachers at Schools B,C, and D.  The relationship between students and staff at School A would therefore be more akin to that of athlete and coach, people working together to achieve great results, never having opposed interests.


This idea might be tough to implement in advanced courses in very rapidly changing fields but should be easy for old standbys such as undergrad physics, chemistry, math, etc.

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Biographical Focus: Jeffrey Amherst, the first biowarrior

by philg

It’s Sunday, a time for looking at inspiring biographies.  Today we consider Lord Jeffrey Amherst, commander of the British forces in North America during the French & Indian War (1754-1763).   The town of Amherst, Massachusetts is named after this pioneer in the field of biological warfare.  It was Lord Amherst who came up with the idea of giving smallpox-infested blankets to the Indians.  This theme is explored in a bit of detail on this page at UCLA and more profoundly in tonight’s highly recommended episode of South Park (rebroadcast from Wednesday):  “Red Man’s Greed”.

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A silent PC

by philg

http://www.hushtechnologies.net/ shows a reasonably fast (933 MHz, up to 1 GB of RAM) reasonably cheap (under $1000) WinXP machine that is cooled via heat sinks rather than fans.  Another very quiet PC option is the Gateway Profile, which looks like half of a laptop computer mounted on a small pedestal.  My friend Doug and I removed the (pretty quiet) fans from a couple of old ones (500 MHz Celerons) and they continued to run just fine.


 

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Wall Street gets fined

by philg

The Wall Street firms will pay $1.4 billion for their sins of the 1990s, under a settlement reached yesterday.  It seems that they instructed their analysts to recommend buying the stocks that their investment bankers were taking public (for a fixed 7 percent share of the proceeds that seems to have been as unaffected by competition as the 6 percent collected by realtors).  This happy marriage resulted in an explosion of profits for Wall Street throughout the 1990s.


How discouraged from defrauding investors are they going to be in the future?  According to the New York Times, Citigroup paid $400 million or 0.2 percent of their organization’s value (about $200 billion according to finance.yahoo.com).  Merrill Lynch paid $100 million or about 0.25 percent of its market capitalization.


Let’s figure out what this would be like for the average American family, whose median wealth was $63,000 in 2001 (before the economy collapsed).  0.2 percent of $63,000 would correspond to one of the family members being fined $126, less than one-third the cost of the average speeding ticket (including insurance hikes) in the U.S.

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Harry Potter and the $100 million/year manager

by philg

Yesterday’s posting raises the question “if an executive can’t do a good job for $2 million/year, will he do a good job when paid $20 million/year?”  The moribund U.S. economy seems to suggest that paying out huge sums to managers is not effective.  The Israel Essay questions whether our current economic slump may not be due to the fact that companies can’t afford to invest profits in technology and equipment because they’ve paid out all of their profits to senior managers.  Today we’ll try to figure out if, even if cash were free, it is a smart idea to make corporate managers as rich as Rockefellers.


Suppose that you owned a small company and had a money tree in the back yard.  You can now pay your managers as much as you want without reducing profits.  Should you advertise for a CEO at $75 million/year?  On the plus side this is more than most American CEOs earn (see http://www.forbes.com/ceos) and therefore you should be able to recruit someone good.  On the minus side, however, think about how focussed on work you’d be if someone handed you a $75 million check tomorrow.  You’d probably move into a bigger apartment and redecorate.  And wouldn’t it be nice to have a few vacation houses?  You know that you’ll be traveling by private jet from now on, but to which of the 50 fractional jet ownership plans should you subscribe?  You’re going to get invited to a lot of fun charity events so you’ll need a new wardrobe.  In short, living like a rich person is very time-consuming.


Getting back to the owner’s perspective…  perhaps an investment would be best managed by a comfortably well-off manager, rich enough to afford a new car that won’t break down and be a distraction from her duties but not rich enough that she spends several days per week shopping for private islands.


Has this experiment been done?  Absolutely.  Consider the Harry Potter books.  As our friend Jin says, it is a mistake to compare Harry Potter to Shakespeare:  “Harry Potter is a fictional character; J.K. Rowling is the modern equivalent of Shakespeare.”  Unlike the Bard, however, J.K. Rowling was not perennially short of funds.  Let’s look at her productivity:



  • 1997:  Harry Potter and the Philosopher’s Stone published; the American rights are eventually worth enough that Rowling can quit her day job (teaching high school)
  • 1998: Harry Potter and the Chamber of Secrets published
  • 1999: Harry Potter and the Prisoner of Azkaban published; all three books are on the New York Times bestseller list.
  • 2000:  Harry Potter and the Goblet of Fire published, movie rights to first book sold; Rowling ascends to the “movie rich” class of authors.
  • 2003: Harry Potter, Book 5 completed.  Thanks to merchandising, Rowling is now richer than the Queen of England.

One year per book while Rowling’s financial condition ranged from struggling to sort-of rich.  Three years per book after Rowling became rich enough to buy castles, private jets, etc.

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Iraqis running the U.S. airlines?

by philg

American soldiers uncover nearly $1 billion in cash in Baghdad.  Former leaders such as Saddam probably have at least $5-10 billion more in their Swiss bank accounts (even the minor Arab dictators are among the world’s wealthiest people, e.g., Yasser Arafat is estimated to have a personal checking account containing $1.3 billion siphoned from Western aid).  Meanwhile we were told throughout the 1990s that Iraqi children lacked food and medicine.


Is there an analogous situation right here at home?  Hmm… the Board and managers of American Airlines helped themselves back in October 2002 to $41 million to guarantee their personal pensions while CEO Don Carty was stating that “Shared sacrifice has to lead to shared success…”.  Thousands of workers were being laid off, thousands more taking pay cuts from what in some cases were very modest salaries.  In theory you’re not supposed to start spiriting away a company’s assets or giving them to your pals before you file for Chapter 11 bankruptcy protection from your creditors.  In practice the lawyer’s for American’s executives managed to construct a trust from themselves that would be unassailable and to hide the trust from their workers, creditors, and the public until a recent mandatory SEC disclosure.


http://www.governancemetrics.com rates American’s parent company, AMR, as “above average” in corporate governance.


Meanwhile US Airways emerged from bankruptcy.  The creditors got 2 cents for every dollar that they were owed.  The managers who drafted the reorganization plan decided that their shareholders, the folks who’d paid their salary to manage their investment, were entitled to 0 percent of the new company.  They themselves, however, felt that their hard work and dedication entitled them to 8 percent of the shares in the reorganized enterprise.  The theory here is that it is tough for a manager to do a good job if he or she is paid only a straight cash salary of several million dollars; the manager also needs to get an additional $10-20 million per year in stock.  Business school professors who’ve studied this question find that managers who don’t get any stock or stock options do just as good a job as those who transfer a substantial portion of the company into their pockets.


US Airways likes to pay their executives even when they don’t work.  Three top executives offered themselves $45 million in the event that they decided to stay at home instead of working at a merged US Air/United Airlines.  The merger never went through but the guys took home an extra $35 million for failing.  How did the US Airways workers fare by comparison?  Nearly 20,000 have lost their jobs entirely; the rest have taken pay cuts (a US Airways flight attendant earned between $18,000 and $38,000 per year before the cuts).


How is this situation different from other industries in the U.S.?  Isn’t it very common for managers and their cronies on the Board to steal from the shareholders?  Of course.  But the airlines are different because their executives have bludgeoned their shareholders so badly that there is nothing left to steal.  The airline execs are taking hundreds of $millions in salary out of the $6.9 billion in federal aid that has come out of taxpayers’ pockets since September 11.

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Outlining and the presidential campaign

by philg

We’re about to roll into another U.S. Presidential campaign.  The mass media tends to cover such events in an “issue of the week” style.  Thus one can read a newspaper and learn a candidate’s position on the current hot issue but it is very difficult to form a comprehensive picture of what a politician has said and done on the campaign trail (note the avoidance of the phrase “what the politician stands for” because this presumably shifts with opinion poll results).


Could the Internet be usefully applied to the challenge of informing voters?


Idea 1 (not mine):  every resident of New Hampshire sets up a blog and, if he or she encounters a Presidential candidate, writes down what happened.  Aggregation tools enable those of us who don’t live in New Hampshire, and whose vote is not therefore worth personal attention, to get glimpses of the real men and women running for office (imagine if Gennifer Flowers and Paula Jones had been running blogs back when Bill Clinton was on the campaign trail; that would have been all-too-real :-)).


This idea, powerful though it might be, would not seem to help voters grapple with the challenge of forming a comprehensive picture of any one candidate.


Idea 2:  Build a dynamic outline of all the political issues that are on citizens’ minds in 2004.  Have people in New Hampshire and other campaign-heavy states augment this outline with real-time reports of personal interactions with politicians.  By November 2004 this outline should be filled with information, presented in a way that is useful for making decisions, all stuff that voters could never get from the mass media.


What would it take to make this happen?  A bit of database programming for a Web server and a small team of part-time editors whose job would be to remove/suppress duplicate reports and off-topic postings, i.e., ones that go beyond a factual report of “Jane Candidate said X on Date Y”.

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Breaking Up Countries Where Citizens Hate Each Other

by philg

The only thing more shocking than the airplane engine control falling apart that happened during the trip south was reading an editorial in the Washington Post by Ralph Peters entitled “Must Iraq Stay Whole”.  This is the first time that I’ve seen any sign in the mass media that anyone else has the same thoughts that occurred to me last year regarding Afghanistan (see the Boston-Alaska-Baja-Boston trip report) and this year regarding countries such as Nigeria and the Sudan (see the Israel essay).


In the old days a good argument for being large would have been that a country could thereby defend itself against aggression by other large countries.  In today’s world, however, where even the most armed-to-the-teeth Third World government can be unseated in a few weeks by the U.S. military, it doesn’t make sense for people who hate each other to live together in one country.


Peters makes the seemingly obvious points that (1) the Kurds hate their Arab conquerors, (2) the Kurds demonstrated during the 1990s that they can govern themselves quite nicely, (3) giving the Kurds their own country would really irritate the Turks, which is just what they deserve for not supporting the U.S. [Peters doesn’t say this but presumably it would be a powerful example to foreign governments if the Turks’ biggest nightmare came true as a consequence of their failure to obey U.S. instructions], and (4) the Sunnis and Shiites Muslims don’t seem to like each other.


Follow-Up (Responses to Comments)


To judge by the volume of comments that this posting elicited it is indeed an issue worthy of debate, which was my main point:  “Why doesn’t this question ever come up in the mass media when it seems so obviously debate-worthy?”


Most of the comments point out that the India -> India/Pakistan/Bangladesh split was a failure in their opinion.  From this we can conclude that splitting up a country into the smaller chunks advocated by anthropologists (the book A Pattern Language recommends that countries be no larger than 2 to 10 million inhabitants, and they are talking about developed countries with good road and communication networks) is not necessarily a complete solution to Islamic violence.  However, nobody mentions the successful splits throughout history:  Czech and Slovak from each other, the U.S. from Britain, the former Soviet republics and satellites from each other, Canada and Australia from Britain.  Nor does anyone mention that one can combine political independence with economic and monetary union, thus combining the efficiencies of a large market with the comfort of knowing that the supreme leader of your country is not supremely distant from your local concerns.  I’m not advocating splitting Afghanistan and Iraq before giving them independence, merely advocating a serious debate on the question.


Dimitri asks a good question: “if a country is punished for that (“a consequence of their failure to obey U.S. instructions”) what remains of the democratic ideals and liberty and rest of BS that U.S. tells us time and time again that it stands for?”  The answer to this would seem to be threefold:  (a) the U.S. must have some reason for maintaining the world’s largest military and the most obvious explanation is that we like to be able to push foreigners around whenever we feel like it, (b) the democratic ideals and liberty are for U.S. citizens only; if we cared about foreigners’ welfare we’d be feeding Africans, preventing malaria, getting medical care to the poor in India, removing generic dictators (e.g., nearly any head of government in Africa or the Arab Middle East) rather than only the ones who insist on thumbing their noses at the U.S. (e.g., Saddam), etc., and (c) our politicians like to lay on the syrup just as thick for foreign audiences as for domestic and the result is a perception of insincerity, i.e., the U.S. could have said “We’re removing Saddam because he doesn’t follow our instructions and because we can” but presumably W and Co. thought that it sounded better to paint Saddam as terrifyingly bad and heavily armed.

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Teaching them to become lawyers

by philg

This evening we showed our 6.002 students the Ken Burns PBS documentary Empire of the Air.  This was adapted from a book of the same name by Tom Lewis.  Here are the facts that were related in two hours:


Lee De Forest, who did much to publicize the idea of using radio for broadcast rather than point-to-point communication, claimed credit for other peoples’ inventions and, through good luck and great legal talent, managed to prevail in a decades-long lawsuit against Major Edwin Armstrong, the true inventor of most of the important technologies behind radio broadcasting.  De Forest ridiculed America’s entry into World War I and then became a profiteer.  On the cusp of his 60th birthday, De Forest married Wife #4, a beautiful 21-year-old actress who remained devoted to him until his death at age 88.  As an old man, De Forest wrote a book entitled The Father of Radio and unsuccessfully encouraged his wife to write a book entitled I Married a Genius.


Edwin Armstrong worked hard and labored through formal electrical engineering training at Columbia University, the very sort of EE torture that our students are getting in 6.002.  Armstrong developed the circuits that enable using a vacuum tube as a radio transmitter and the superhet receiver, which together made it practical to transmit music and voice over AM radio, rather than Morse code.  A staunch patriot, Armstrong donated a royalty-free license to all of his patents to the U.S. government for use in World War II and served in that war by designing communications systems including that used during the invasion of Normandy in 1944.  Armstrong developed frequency modulation (FM), which was suppressed by David Sarnoff at RCA because it would threaten revenues from his AM radio monopoly and the emerging television.  RCA eventually was forced to use FM for the federally mandated NTSC television system but they refused to pay Armstrong royalties on his patents.  Armstrong committed suicide while embroiled in lawsuits attempting to force RCA to stop infringing.


David Sarnoff had no formal technical training.  Through ruthless business dealings and manipulation of the federal government managed to create and sustain a magnificently profitable enterprise that included the RCA radio and TV manufacturing company and the NBC radio and TV networks.  Though Armstrong’s widow eventually made him pay up a bit for his flagrant infringement of the frequency modulation patents, Sarnoff sailed unscathed through a sea of lives that he wrecked.  He died an old and rich man.


The only people in the drama who made millions without taking tremendous risks, working very hard, and occasionally going bankrupt, were … the lawyers in the patent and regulatory disputes.


What are our students to make of all this?  It can’t be that working hard as an MIT electrical engineering student and contributing useful innovations to society will be rewarded.  If you’re walking your dog in the Harvard Law School Yard four years from now and you run into our 6.002 alumni, tell them “hi” from me.


[The video also made one wonder for whom public television programs are made.  Despite having two hours the show did not attempt to explain even the simplest physics or engineering behind radio or any of the inventions that were the subject of the disputes chronicled.  The biographical and historical information was narrated so slowly that it could have been sped up 3X without approaching the speed of dialog on the Simpsons, which most people seem to have no trouble following.  It seems as though public TV is designed for people whose minds are not quick enough to handle the quick pace and intellectual challenge of commercial TV shows.]

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