Dadamotive: Human value: December 2008 Archives

Unconscious

Posted by Herman | December 31 | 2008 12:44 PM | permalink

Our model of our brain assumes that the conscious mind is the decisionmaker. Logic and reasoning lead to hypotheses, conclusions and actions. Our subconscious mind is only messing things up.

Well, it seems that everyone who has thought differently has had a point.

Alex Pouget, associate professor of brain and cognitive sciences at the University of Rochester, has shown that people do indeed make optimal decisions--but only when their unconscious brain makes the choice."A lot of the early work in this field was on conscious decision making, but most of the decisions you make aren't based on conscious reasoning," says Pouget. "You don't consciously decide to stop at a red light or steer around an obstacle in the road. Once we started looking at the decisions our brains make without our knowledge, we found that they almost always reach the right decision, given the information they had to work with."

Pouget has run a series of tests determining the way people get to a decision.

Subjects in this test performed exactly as if their brains were subconsciously gathering information before reaching a confidence threshold, which was then reported to the conscious mind as a definite, sure answer. The subjects simply "realized" suddenly what was the "right" answer.

Wobble

Posted by Herman | December 19 | 2008 12:34 PM | permalink

We all known that soldiers must pass a bridge walking out-of-sync. You don't want to trigger and amplify a vibration that could destroy the bridge.

So when the Millenium Bridge was opened and people complained about a wobble scientists expected to see a rythm in the way people walked across the bridge. To their surprise they found that the wobble could be generated by people walking out-of-sync. It appears that the human mind has a certain "algorithm" that directs how your legs and feet will behave when walking on a more or less flexible surface. It appears to be possible that the reaction of the bridge to a person walking on it can create a feedbackloop through that "algorithm", amplifying the wobble.

Agile

Posted by Herman | December 18 | 2008 7:34 AM | permalink

Today our politicians are debating the purchase of a new fighter jet (again). The JSF, Saab or an updated F-16 are being compared. Technology, trade politics and power play, in an explosive package.

At the same time it is good to take a broader view. Our Russians neighbours (the competition?) have a tradition of excellent fighter jet design based on a keen grasp of aerodynamics. Look at the SU-30 doing some incredible acrobatics at very low or even zero airspeeds.

But neither of them is an answer to the question Gunnar Heinhson poses.

Softwear

Posted by Willem | December 16 | 2008 11:16 PM | permalink

So now Microsoft is starting to think that they are cool as well and belong to the history of software. As of December 15 they have launched their own collection of t-shirts called Softwear by Microsoft, A Clothing Line (so that you definitely understand what it is all about). On the t-shirts among others police mugshots of a really young Bill Gates, old Microsoft logo's and bits and bytes. Just interesting enough to check it out here. Oh, they also had a serious launch party!

Important

Posted by Herman | December 15 | 2008 5:27 PM | permalink

There are a lot of different pension systems in the world. The Netherlands have big private pension funds with a lot of assets and a relatively minor contribution from taxes. The OECD tracks the various pension systems and compares them. The statistics tell a very clear story about the different choices made in securing our old age income.

The gross replacement rate is the percentage of a normal pension paid by taxes levied on people who work (like the "AOW" in the Netherlands). The rest is paid for by a pension fund. The sheer size of accumulated assets in pension funds as a % of GDP is shown on the x-axis. The graph below accentuatues the enormous amount we Dutch have saved in our pension funds.

It is interesting to see what the investment choices have been, given the current drop in share prices, The OECD report does not give detailed information, only that in most countries pension fund managers have chosen bonds over equity (shares): except Belgium, where equities are held ahead of bonds by 48% to 21.5%; Canada by 50% to 34.4%; Germany by 31.3% to 28.8%; and the United States by 59.2% to 22.4%.

The report does report the trend over the last couple of years. The Dutch lead the pack in going away from shares (equity) to bonds and other investments.

Blind spot

Posted by Herman | December 15 | 2008 7:59 AM | permalink

Our governments are investing billions in the financial sector to keep our economy going. The main objective is to keep the supply of badly needed credit lines open so trade continues as before.

It is therefore amazing to observe that (at least in the Netherlands) they do not see the second big blockade in trade: credit insurance. Atradius, the former NCM ("Nederlandse Credietverzekerings Maatschappij") is one of the major insurers of trade credits. In a highly unusual and abrupt manner Atradius has informed its clients by email of the severe reduction of credit limits, mostly for a large number of small companies.

How does this credit insurance work? Lets take a machine builder who can export a machine to another country. The buyer does not pay 100 % in advance ofcourse. A 100 % garantuee of payment by a Dutch bank (letter of credit) is often difficult to get because the buyer has to garantuee the payment for 100 % with a local (foreign) bank. The machine builder must invest in raw materials and components, time of his staff and runs a risk that the machine is not paid for when completed. Enter the credit insurance company. They insure the risk for non-payment by the foreign company, up to a certain limit, the so-called credit limit. The combination of the credit insurance and a certain amount of prepayments by the buyer gives the bank of the machine builder the comfort to finance the work-in-progress.

The same more or less applies to transaction within the Netherlands.

So when Atradius suddenly reduced the credit limits on many (foreign) companies the direct effect was that banks will not finance new orders any more.

Another variation is experienced by a friend of mine. He imports textiles. They are manufactured for him in Turkey, shipped to Romania for processing and imported to the Netherlands for the big retailers. Everything suddenly stops. The Romanian factories will go bankrupt. My friend is contemplating to stop his business.

It is frustrating to see that in most cases the market demand is still there. Bankruptcies caused by shifting consumer demands or lousy management is part of our system.

Bankruptcies caused by removal of the "oil" out of the system is bad public policy.

Factcheck.org

Posted by Herman | December 14 | 2008 9:04 PM | permalink

For anyone who cares for debunking of spin based on good investigative journalism this site Factcheck.org is a breath of fresh air. Well balanced, thorough, factual.

Their latest gem: do autoworkers in Detroit really make USD 70/hr or almost 3 times as much as other workers, as the Heritage Foundation (a conservative thinktank/action group) claimed?

No.

" The automakers say that the average wage earned by its unionized workers is about $29 per hour. So how does that climb to more than $70? Add in benefits: life insurance, health care, pension and so on. But not just the benefits that the current workers actually receive - after all, it's pretty rare for the value of a benefits package to add up to more than wages paid, even with a really, really good health plan in place. What's causing the number to balloon is the cost of providing benefits to tens of thousands of retired auto workers and their surviving spouses. "

Chasing cheap labor

Posted by Herman | December 14 | 2008 9:00 PM | permalink

Proponents of "Lean" manufacturing remind us time and again that chasing cheap labor is a stupid strategy. The hidden costs of quality problems, of training new staff with a high turnover, of large batches and long lead times that make you very inflexible, of capital tied up in long supply chains are often bigger than the perceived labor savings.

TXM in Australia has made the comparison between local lean sourcing and outsourcing to China with realistic data. The results confirm what everybody has been saying: lean local is cheaper.

Simple minds

Posted by Herman | December 11 | 2008 4:20 PM | permalink

One must be very carefull with interventions in complex systems. Beware of what you wish for.

A storm is brewing in the USA after Congress and Senate passed a bill almost unanimously. This bill was a knee-jerk reaction after lead contamination was discovered in toys imported by Mattel from China. Protecting children from contamination is laudable but the cure has devastating side-efects. The problem was imports from China, the solution destroys a wide range of small manufacturers in the West (including the EU).

Evolving Excellence has an excellent overview of how bad the legislative design is.

Lead levels must be reduced to 600ppm within 180 days of when the Act is enacted on February 10th, then down to 300ppm in a year and 100ppm in three years. This is not really a problem with the vast majority of products, which typically have about 6ppm.
This is not just toys, it is any type of product that could come into contact with kids... so clothing, car seats, you name it.
Problem #1: certification testing must be done by a lab on a "certified list". This list isn't exactly long, and their are hundreds of thousands of products. Guess what is happening to those labs: the waiting list for lab work extends out months and the cost per lab workup has gone from $200 to as much as $6000... per sample.
Problem #2: testing must be done at the product level, not the component level. So a common component used in multiple types of products must be tested multiple times. What does this mean? Each SKU must be tested separately, even if they are virtually identical. One pair of jeans and a slightly different pair of jeans, both using the exact same raw denim, must be tested separately. See the video below, where a manufacturer of science kits has 40,000 SKU's... and is looking at a $20 million dollar cost for initial certification testing. This is why many products, and companies, will simply cease to be sold.
Problem #3: testing must be done by the final manufacturer, and supplier certification cannot be used. So if a company supplies the same denim to a variety of manufacturers, then each final manufacturer must test and certify their product... which has the exact same raw material. Companies are allowed to use supplier certification for attributes such as flammability, but not lead.
Problem #4: ongoing final product testing, which is different than the initial product certification test, must be done by batch. Guess what will happen: batch sizes will increase and the companies that leverage speed and small batch sizes will have to give up that competitive advantage.
Problem #5: even large manufacturers use bank lines of credit to handle long lead inventory purchases through cash generation after payment. Banks can only issue credit to "legal" activities (obviously), so on February 10th many types of products will cease being legal and credit will dry up.

With friends like this....

Compassionate ruthlessness

Posted by Herman | December 11 | 2008 11:08 AM | permalink

Frank Herbert is the author of one of the best SF books ever, "Dune", renowned for his intelligent and deep exploration of ecology, dependence on a rare substance (like oil), ethics and religion. In one of his books he introduced the ethical concept that in a truly civilized society compassionate ruthlessness needs to have its (carefully managed) place. The alternative may lead to much more human suffering.

The report released today about the relative "high" mortality rates of newborn babies in the Netherlands reminded me of this idea. According to the press the researchers believe that the cause of this relative position might be related to the higher age of the pregnant women and the hesitation of Dutch doctors/midwifes to keep babies that are born very premature alive at all costs.

A member of my family works in an institution that cares for handicapped children. She has seen a major change in the last 25 years: the number of children that have multiple handicaps has risen dramatically. These handicaps are directly related to premature birth.

Maybe the advances in technology create the need for our doctors and midwifes to consider compassionate ruthlessness. Ethics is never simple when put to practice.

Precision

Posted by Herman | December 09 | 2008 11:46 PM | permalink

Our mental models of technology often are too simple. Another example is shown in Vanity Fair. In 2006 two airplanes crashed into each other over the Amazon. If your really drill down to the cause? The accuracy and reliability of guidance systems has increased over time to a level where two arrows indeed will meet head-to-head.

In the old days the inaccuracies would almost garantuee that two planes would never meet head-to-head, and the relative unreliability of systems would make pilots more alert.

Follow me

Posted by Herman | December 08 | 2008 7:27 PM | permalink

We rely upon a lot of sophisticated technology in our daily life. Unfortunately a lot of people (and politicians) do not understand the background and limitations of the systems we rely on. Or even worse, take pride in the fact that they do not understand technology. Not very smart, as a recent example shows.

People assume that navigation systems (satnav) like Garmin, TomTom, Route66 and others work identical. After all, the road is the same and the satellites are the same. Wrong.

There have been some serious accidents with motorcyclists touring in the countryside and crashing into each other because the satnav systems gave different instructions. One said "go straight", the other said "go left". Differences in software, hardware, or which satellites are being used can lead to different directions. Currently motorcyclists who use satnav in touring clubs are instructed to drive behind each other to prevent these kind of accidents.

Police Car, the Italian way

Posted by Willem | December 07 | 2008 2:32 PM | permalink

Is this possible in any other country than Italy? The police of Sant'Agata-Bolognese have just taken into operation a new car: a Lamborghini Gallardo. 325 km/hr and 0-200 in 11.8 seconds. The good news it that tha car contains a defibrillator and has just enough space in the trunk for a cool-box with a donor organ. Provided the organ is not too large... See for some more pictures, including the organ-box, this link.

Money for nothing

Posted by Herman | December 06 | 2008 11:47 PM | permalink

As we see the ruins created by banks acting as speculators around us the question arises how to improve our financial system and prevent a recurrence.

In cases like this it pays to go back to the fundamentals. Gunnar Heinsohn has a simple example. If you own a piece of land and grow food on it, you have possession. If you put a fence around the piece of land and start borrowing things with the land as collateral, you have an economy and money.

Paul Grignon's animated presentation of "Money as Debt" tells in very simple and effective graphic terms what money is and how it is being created. Great for everyone who has started to ask him/herself how we got into this mess.

Dinousars

Posted by Herman | December 06 | 2008 11:15 PM | permalink

The proposed bailout of the Big Three (GM. Ford, Chrysler) is considered by many to be highly questionable given their lousy trackrecord compared to other (profitable) car manufacturing plants in the USA. GM alone has destroyed a staggering 1.5 billion USD per month (!) the last 10 years

The political cartoonists however have a field day. Check out this cartoon, (Copyright restrictions do not allow me to show it here) and the other 20 in the series.

Physicists and Economists

Posted by Willem | December 04 | 2008 1:34 PM | permalink

The other day I was in a conversation with a physicist and an economist. The physicist tried to explain the theory of sources and sinks, as used in physics a lot for e.g. energy, current and turbulence. He claimed that the financial crisis could be explained using this theory. Banks are sources of money when they provide credit. Houses or stocks are sinks when they drop in value. In his opinion a lot of trouble could have been avoided if more physicists would have worked in financial institutions.

The economist countered this argument with proof that in the last 10-15 years a lot of smart physicist had entered financial institutions. She claimed that because of their complex calculations involving a lot of non-linear differential equations (OK, it was an econometrist) which no manager could understand they provided the foundation for the current crisis. Because the real issue is that common sense had disappeared from the banking industry, hidden behind mathematical equations. I think she actually has a point. Additional proof for this comes from China, where illegal banks prosper. They are solely based on trust. Trust that the bank will provide you with the money and trust that the other side will pay back in time, because the banker knows him as a good citizen and a hard worker. Banking is too simple for physicists.

A video of Stuff?

Posted by Herman | December 03 | 2008 7:51 AM | permalink

The Story of Stuff shows how the price of a good does not reflect all the costs that are carried by society as a whole. A very well made piece.

BoingBoing points to a series by the BBC, following goods shipped by a container around the world. Seems like the interest in externalities is picking up.

Too big to fail = only ER

Posted by Herman | December 02 | 2008 6:55 PM | permalink

The ever-sharp Tom Evslin argues that yes it sometimes can be necessary to support institutions who are too big too fail. The collateral damage on innocent citizens and society as a whole can be too big to let that happen.One should try to prevent the creation of these single-points-of-failure, a more distributed system would have ideally no entity "too big to fail".

His new point is that bail-outs are a sign of weakness of the big institution and constitute a big threat to its competitors who are better managed and do NOT get support. Shoulder the weak and destroy the strong in one go is bad policy.

Therefore a bailout should mean only protection of society and a soft landing of the institution. Let the better competitors take over the business.

Too big to fail SHOULD mean too big for life support. Emergency collateral damage control is sometimes necessary; perpetuating the failed institutions only causes cascading failures among their competitors.

Very challenging, I like the idea.