The importance of feng shui at MIT

Feng shui really has a lot to do with promoting innovation.  Just by looking at a map, I can tell you that NYU is going to come up with more mathematical finance innovations than MIT (because the Stern School and Courant Institute are right next to each other at NYU, whereas Building 4 and E52 are on opposite sides of the campus at MIT). Similarly, there is a reason why the Laboratory of Finance Engineering at MIT has a lot of interaction with the electrical engineering and cognitive sciences people, but practically none at all with the math and physics people.

This is all explanable via Feng Shui.  LFE is the way that it is because the energy of the cognitive sciences people mixes with the finance people which mixes with the electrical engineering people.  People have offices next to each other.  They pass each other in the hallway.  They start interacting.  Ideas form.
The thing that concerns me is that the new buildings at MIT have significantly worse feng shui than the old buildings.  The two buildings that IMHO are destroying the feng shui of MIT are the Whitiker Building and the Media Lab.  The Whitiker Building is this huge barrier that divides the Sloan school from the engineering parts of the campus.  The Media Lab is totally unconnected with the rest of the campus.  What also concerns me is that new buildings are designed as refurnished corporate offices which also tend to destroy communications.  Corporate offices are designed with gatekeeppers to control access and are intended to guard secrets, and this lowers the about of innovation that is possible.

The non-existence of a Chinese world view

An interesting thing happens when people start talking about Chinese civilization, in that people add certain things and leave out certain things and what they add and leave out tells you more about them, than about the thing they are describing.  For example, in talking about an “Chinese world view” people often talk about spirituality and anti-materialism, and leave out things like a scientific and technological viewpoint.  This is because the people who are doing the talking are usually disenchanted with science and technology and so look for something that is anti-science and anti-technology, and they find it in “Eastern phliosophy.”  However, this misses that they are focusing in part of the whole, and the part that the focus on is as much about them as about the “East.”

The problem with this view is that it associates cultures with certain ideas which has the effect of limiting that culture.  If someone finds something in Chinese civilization which is appealing to them because of its otherworldliess, its mysticism, and its appeal to anti-materalism, that’s fine, but that shouldn’t be taken to say that there aren’t philosophies within the Chinese traditions that are completely different, and that adherents to those philosophies are somehow less Chinese.  For example, the philosophical tradition that I’m an heir to (the Evidental school of Dai Zhen), puts a lot of  emphasis on rational investigation of nature which is why I’m interested in both astronomy and economics.  It’s a *different* set of philosophical assumptions than a lot of the things associated with Chinese philosophy, but it’s not somehow “less Chinese” or “more Western” because of it.

What I mean by the non-existence of a Chinese world view is that one of the nice things about Chinese world views is that they are so many of them that contradict each other.  This is good because one can choose which one works for one’s situation, and it is also good because it means that with so many different conflicting ideas, it is likely that someone has something close to the truth.

The Tortoise and the Hare

Also, I disagree with Lardy as far as pace of changes. The Chinese economy has enough moving parts and unexpected things, that I think it is a very bad idea to move suddenly. Since 1978, China has tried to do everything slowly rather than to do “big bangs” so that any sort of unexpected consequences can be handled.

A sudden one-time revaluation (say 20%) of the RMB is such a large shock to the system, that I believe it would have had very, very bad effects that would have left much China worse off than it is now. Having seen examples of big bang changes, I’m skeptical of *any* dramatic and sudden policy changes, which is why I don’t accept the conclusion of Lardy that the Chinese government is moving too slowly. One thing to remember is that this is a government that thinks in terms of hundreds and thousands of years, and a change that takes two to five years is lightning quick.   It’s much better to phase in the revaluation over a number of years.

I think the reason people think in terms of sudden moves is with the belief that if you don’t do things suddenly, then this gives “opponents of reform” time to regroup and water down the changes. However, this presupposes a late-Soviet model of government, which isn’t applicable in the Chinese case.

The big problem with sudden changes is summarized by Aesop’s the tortoise and the hare.

One answer from two papers

Here is something that bothers me….

http://www.rgemonitor.com/blog/setser/154535/

you have two papers one by Nicholas Lardy and one by the Goldman-Sachs research group that come to opposite conclusions about the Chinese economy.  One argues that China is over-investing while the other argues that it isn’t.  Yet they seem to come up with the same policy recommendations.

Why?

Anatomy of a Fiasco….

Charles Krauthammer wrote an interest piece in which he argues that Japan should be allowed to get nukes…..

http://www.washingtonpost.com/wp-dyn/content/article/2006/10/19/AR2006101901271.html
It’s a very interesting piece since it shows a lot of the blind spots that got us into the Iraq mess.  First of all, it neglects to consider how complex the world is.  If you do A, it will trigger reaction B, which will cause counterreaction C.  There is also this seeming inability to think more than one move ahead.

Yes, Japan is a very close ally to the United States, but much of these alliance is due to the fact that Japan is dependent on the US for military protection.  With nuclear weapons, Japan is no longer dependent on the US, and there is no reason to think that Japan and the US would have similar strategic interests.
The other problem is that any sort of strategic calculus has to deal with the fact that you have conflicting goals, and any sort of strategic planning has to include admiting this and trying to figure out how these goals interact.  There isn’t that sort of tradeoff thinking present.

There is also the question of what do you do if something goes wrong.  What do you do if people act differently than you think they will, or if one of your beliefs turns out to be incorrect.  There is nothing in that article that suggests that this has been thought through.

Fiasco

Can we look beyond the fall elections a moment…..

One of the interesting feelings is to look at something that happened in history, and think to yourself.  “How could they be so stupid?”  You look at things like Napoleon’s decision to invade Russia, or the Japanese decision to bomb Pearl Harbor, or the madness to led to World War I, and you wonder “what amount of self-destructive idiocy led people to do what they did?”

I think that someday historians will be asking the same thing about the US decision to invade Iraq.  At this point, victory in the sense of creating a democracy revolution throughout Middle East is impossible.  The choice at this point is between a bad outcome and a catastrophic one.  The decision to invade Iraq violated three tried and true historical rules:

• people who start a war, almost always regret it
• wars always take longer and are more costly than people originally expect

and most importantly

• never think that you are immune from the lessons of history

So at this point, things need to be done to avoid a catastrophe.  It is plainly obvious to anyone that sees the situation that insuring an outcome that is “merely bad” is going to require a continued US troop presence for five to ten years at considerable cost in lives and money.  The dilemma is this, for this to happen, you need popular support for a continued US presence in Iraq, but to get that support, the political leadership needs to be honest with the US public about what the costs are.  The trouble is that people are deathly afraid that this sort of straight-talk is going to cost them the next election, and they are right, but some things are more important than winning the next election, and in a very large sense, it really doesn’t matter who wins the next election since the issues are going to be the same.

I think that when people try to understand how the United States in the early 21st century undertook such destructive policies, part of the blame will be placed on the triumph of image over reality.  The reality is that there are limits to the costs that the US public are willing to bear and the inability to discuss these costs and limits rationally has led to some irrational decisions.

In all of this, I have to reaffirm my faith in American democracy and the common sense of the common man.  Part of what I see to be frustrating is that the common man is nowhere as stupid as the political ads make him out to be, and the only thing that is going to save us is if we put aside tabloid television, gotcha ads, and all of the nonsense that has infected political discourse and try to discuss the situation calmly, civilly, and rationally.  Forget about trying to sell an idea or policy.  The situation is such a mess that no one knows what the right idea or policy should be.

Political shocks

I heard the expression a “bomb without a fuse” which I think accurately describes the situation with the US current account deficit. The thing that makes the US different from Argentina and Mexico is that the United States effectively is the worlds policeman, and pretty much all of the actors involved are willing to prop up the US economy in order have the US play this role.

The scenarios that bother me involve a political shock of some sort which radically changes the political dynamics of the situation. The obvious trigger (Taiwan) has pretty much been defused, but I’m worried about North Korea. Suppose NK were to go nuts and invade SK, or if there is a coup in NK that deposes Kim.

I think the big limit is not the willingness of China, Russia, and the Gulf States to fund the United States as world police, but the willingness of the American voter to continue to do so. One thing that scares me is that it is plainly obvious that avoiding disaster in Iraq is going to require a “butchers bill” that is going to be borne by middle America. At some point (and I’m looking at 2012 and 2016), the American voter may grow tired of its Empire the way that the British grew tired of its. However, if the US does not serve as world policeman, then China, Russia, and the Gulf States have no reason to continue to fund US military expenditures.

Utter dreck….

It’s rare that I read an article that almost makes me ill, but Rolling Stone has done it…..

http://www.rollingstone.com/politics/story/11943112/the_low_post_how_the_media_lies_about_china

What is happening is that people in China are taking awful jobs in order that are less awful than the alternative, and in the process, hundreds of millions of people have been lifted out of poverty.  If Rolling Stone can think of a better way of getting people living at decent standards of living, they should mention it, but they don’t.

The fact is that we live on one planet, and middle America is starting to be affected by the fact that a small fraction of the planet lives at much better standards of living than most of the remainder, and this is what is causing jobs to leak from Michigan to rural China.  In the long run, there is only one possible solution, and that is to boost standards of living throughout the world.

Back from NYC and Boston

I have about fifty pages of notes which I’ll begin to transcribe over the next two or three weeks.  What I’d like to do is to scan them into a file and then add a lot of commentary to them.  Overall, I learned a huge amount during the trip, everything from the intricacies of the Swiss mortgage market to the use of warrants in Shanghai.  The trip has given me enough stuff to follow up on for the next three months.

One thing that I did find is how Austin is has a somewhat quicker adoption rate than NYC when it comes to new technology.  In NYC I had difficulty finding a free indoor Wifi spot, whereas in NYC free wifi is everywhere.  When I did find wifi (like in the public parks), getting a wall outlet was difficult, and it occurred to me that indoor businesses in NYC seem to restrict the outlets which might be because NYC is crowded and they don’t want you to stay there forever.  Also, in Austin you can’t go ten feet before you trip over someone who can set up wifi for you, whereas in NYC that didn’t seem to be the case.

Also, I do think that I can be useful if I blog more conferences, and I’ve been thinking about how to do that more effectively.  Right now, I’m using a paper notebook, but it would seem like it would be more effective if I used a Nokia 770.

I love this business

A comment on Brad Setsers blog….

I’m starting to dislike the word “liberalization” since it is becoming one of those vague feel good words whose meaning is fuzzy. When someone talks about financial system liberalization, what do they mean? End of capital controls? Floating currency? Remove restrictions on foreign ownership? Market based interest rates? What?

Also, I just finish a conference at MIT by the Chinese Financial Association and I’m about to head to NYC for another conference on Chinese banking by the Asia Society. I think that there is a consensus among most people (including people in China) that China needs to appreciate the RMB. The question right now is timing, pace, and sequence. Does floating the currency go before or after relaxing capital controls, for example?

Paulson (unless he is radically different from everyone else in finance I’ve talked to) is *not* happy about global imbalances. It worries anyone who has thought of it.

About Democrats, Wall Street is more partial to Democrats than one might otherwise expect. There are a lot of “Rubin Democrats” on Wall Street, and my general impression is that the campaign contributions people make are because they really believe in the policies rather than for tactical reasons.

The other thing is that is refreshing about Wall Street is that people are much more “big picture” than most people I’ve met elsewhere (including frighteningly, Washington DC). Part of it may have to do with the fact that a lot of them are pension fund managers that have to think 25 to 50 years ahead.

Goldman-Sachs *does not care* whether the Chinese government increases the limit on bank investment in the next year or two. It’s looking 25 to 50 years ahead.

Long term greed. It’s quite refreshing.