Twofish's Blog

March 18, 2008

Getting old….

Filed under: china, new york city, tibet — twofish @ 2:08 am

One thing that should catch your eye is that the people throwing rocks in Lhasa are 20-something.  I’m a close to 40-something, and close to 40-somethings just don’t throw rocks at tanks.  I have my share of youthful activism around the time of Tiananmen when I was trying to overthrow the Chinese government.

What happens when you grow old is not that you really lose the enthusiasm of youth, it’s that you just get tired.  When I was 18, it was “YES a chance for me to CHANGE THE WORLD” whereas now it is “good grief, someone wants to me change the world YET AGAIN.”  I’ve been through too many screaming arguments, and I’m just a little (actually more than a little) world weary, and I just want the world to quiet down a bit so that I can get a good nights sleep.  It’s not that I’ve lost my youthful enthusiasm, more accurately, its that I’ve burned out on youthful enthusiasm.

It’s also not that I’ve lost the will to change the world.  When you are 20, the only way you see yourself changing the world is by *MAKING A LOT OF NOISE*.  By the time you are 40, you figure out that you get more done by attending the right meetings and talking in a calm tone of voice.  The other thing is that when you are 20, you aren’t really part of the power system and so you can scream at power.  By the time you are 40, you stand a good chance of being within the systems of power, and once you are in a big giant bureaucracy, you can’t start screaming any time you feel like it, and you become trusted with a lot of sensitive and secret (and really, really juicy) information which you just can’t go randomly posting on some blog somewhere.

About a eight months ago, I made a set of radical decisions, and time has proven that they seem to be really good ones.  You decide to do something that seems innocous at the time, and then in a very short time later, you find that the world has changed around you in some massive ways, and you figure out the scary implications of the decisions you made.  In this case, it’s more scary good than scary bad, but even scary good decisions are scary.

I’m cursed to lead an interesting life.  My life has been much more interesting than I’ve ever wanted it to be, and sometimes I hate it.   So I decided that I would try to put myself in the center of things, because if interesting things are destined to happen to me, I might as well be in the center of things exploding so that I might get something out of it, if that is only a good story.

And I got my wish……

March 17, 2008

Things fall apart….

Filed under: china, new york city — twofish @ 4:47 am

This has been an exhausting week news-wise. You have the resignation of the governor of New York, Tibet is on fire, and then you now have the purchase of Bear-Stearns by JP Morgan. And then next week is the Taiwan presidental elections. I’m trying to remain as calm as I can through these events. I’ve been cursed with having to live an interesting life in interesting times.

I really don’t have that much to say about the Tibet situation. You can find your standard predictable flame war all over the internet,
and I try to avoid making points that have been made in other places. Also usually I end up being something of the voice of reason, and you sometimes just need to have people get tired of screaming at each other before you can say something sensible, and I’m just too exhausted to scream.

About Taiwan. I make no predictions about who will win. I made the mistake in 2004 of going to sleep sure that Lien Chan would win, and then being surprised in the morning when he didn’t. If Frank Hsieh wins, it will be one of the biggest surprising political upsets in politics, but big surprising political upsets do happen. About Bear-Stearns, I do have some things to say that are different.
As I mentioned in Brad Setser’s blog, this really isn’t a bailout, rather its a reaction to the fact that Chapter 11 bankruptcy law
doesn’t work for large financial institutions. The main economic purpose of Chapter 11 is to save as much as can be saved from
companies in trouble, so the first thing that a bankruptcy judge will do is to freeze debt collection and give companies even working capital so that they can keep running while everyone figures out what to do, and this can take several months.

This works well for most companies, but it works very, very badly for financial companies. The problem is that finance is a fast moving web in which people owe each other money. If you freeze one part of the web, then everything falls apart very, very quickly. Taking weeks or months to sort things out works if you are making pencils, but in finance where everything takes place in minutes or seconds, you just don’t have the time. Also if you are running a pencil factory, you still have a factory and pencils and workers and they aren’t going anywhere. In finance, all you have is trust, and trust takes years, even decades to build, and trust can disappear in an instant.

So what is happening is that the Federal Reserve is basically taking the role that would be played by bankruptcy court, it gave
Bear-Stearns an emergency blood transfusion that could get it to the emergency room. This is quite unique and it is something that was done in the case of Long Term Capital Management. It’s really breaking new ground here, and what happens will be studied as a guide for what happens the next time this happens (which I hope will be a long, long time from now, but who knows).

One group that comes out of this looking really bad is CITIC Securities. JP Morgan ended up paying $270 million for all of Bear Stearns and total control, whereas CITIC was about to pay $1 billion for six percent with no management control. It’s fortunate that the Chinese securities regulators failed to approve the deal otherwise, CITIC would have ended up burning $5 billion.

I think the one common thing that Spitzer, Tibet, and Bear-Stearns have in common is that it shows how quickly things can fall apart.

January 15, 2008

The Wrong Conspiracy

Filed under: china, finance, globalization, new york city, taiwan — twofish @ 6:11 am

Something that I find rather amusing is how people focus on the wrong conspiracy and miss things that are happening under their noses.  Tenement palm talks about a “China threat” writer that warns about the Chinese conspiracy to attack the West via nanotechnology, while missing completely the true devious and underhanded plans Beijing really has.  The real conspiracy is that China plans on becoming a great power by convincing people that they will become very rich and benefit them personally if they help China become a great power.  The most devious and sneaky part of the plan is that the easiest way that Beijing can convince people that a rich and powerful China will make them rich and powerful is to undertake policies that will actually make people rich and power if China becomes rich and powerful.

Beijing figures that if most people have their interests aligned with China’s, that there will be much less resistance to China becoming a great power.  So it is useful to Beijing to have lots and lots of cash to shower on people.  Now in order to have lots and lots of cash, you need a good economy, so part of this underhanded and devious plan is to restructure the economy so that China generates lots and lots of wealth.  This is where Wall Street comes in.  Since people on Wall Street know how to make money, China is bringing in lots of expertise so that it can figure out how to create wealth that will make lots of people rich.

Of course the China threat theorists would have us believe that China is really intent on using military force on destroying the West and taking over the world.  This notwithstanding the fact, that China is in no position to undertake an arms race with the United States, and history has shown that more weapons often leads to less security, both by diverting money that could be used to fund civilian ventures, and by scaring away your potential allies.  By contrast, you make more friends by smiling and throwing around a lot of cash, and if your friends can figure out ways that you end up with even more cash…. Well so much the better….

China does have this advantage of having had people think about how to structure a state for several thousand years.  The notion that the basis for a powerful state is strong economy rather than a strong military can be found in pretty much any writer from the Warring States period.  There has been several thousand years of discussion on exactly what economic and political policies are most beneficial and the latest discussions are part of a conversation that has been going on for a long, long time.  There is a similar body of knowledge in the Western canon, which unfortunately seems to be unused.  All of the stuff that is happening in the news today would have been familiar to Confucius, Sun Zi, Aristotle, and  Thucydides.  The difference is that in developing and thinking about grand strategy, the Chinese leadership does try to make use of history, while I don’t think that similar discussions are happening in Washington.

October 2, 2007

Dark matter – What the trade data doesn’t show

Filed under: economics, globalization, international law, internet, new york city — twofish @ 12:35 am 

Someone is typing in NYC. The computer that they are typing into is located in Hong Kong (or quite possibly in some data center in India). While they are typing, they are instant messaging and on the phone with people in London This is all happening real time, and I’d be curious how this gets reflected in the trade data.

My guess is that it doesn’t, and where is where “dark matter” comes in. This also explains a lot about why I don’t think that there is such a anti-globalization backlash. When you get to work, and you start e-mailing and IM’ing people around the world as part of your daily routine, the idea of anti-globalization seems rather quaint…….

As far as fear of job losses…… Well you can move an individual programmer from NYC to India. You can’t easily move Columbia University, NYU, about a hundred skyscrapers in midtown, all of the computers, all of the support staff, all of the headhunters, etc. etc. to India. It’s easier and a lot cheaper to move someone from India to NYC. A tree you can move easily. An entire ecosystem is hard to move. Even convincing people to move thirty blocks from midtown Manhattan to downtown Manhattan is proving to be a challenge.

September 29, 2007

Caveat Emptor

Filed under: academia, Career, china, ghosts, gifted children, mental health, new york city — twofish @ 11:42 am

One of the things that I’ve learned is that history doesn’t end, and problems don’t end.  You get what you want, and that resolves some problems, but the world changes, and you end up with new problems.  They might be better problems.  But unlike a movie or a novel where you reach the end, there is end to history.

One new problem that I’ve found is that I’m now in a position that I’ve giving advice to people, mostly about careers and strategy.  That worries me a lot because anything that I say is going to be incomplete, and I hope it is not incomplete in a way that will get people into trouble or which is misleading.  People thing in terms of “scripts” and “stories.”  There’s the “American dream” script, the “model student” script, the “patriotic overseas Chinese” script, and what I’m often asked to do is to basically help people conform their lives and efforts to a script.  Recently, it’s usually the “successful person in business” script.  What worries me is that a script is an incomplete description of a human being.

What I found is that sometimes you get a better idea of reality by asking the right question. If you ask enough questions and design an experiment well, you get answers. If enough people ask the right questions, you can make a huge amount of progress.

And sometimes the right question is something completely obvious?  Why do I write some much?  Why do I have such a strong urge to help people in their careers?  I think I have a vague understanding of my motives, and it’s a story I don’t want to tell you, and in some ways I can’t tell you.  But it’s something that doesn’t quite fit into the “successful person in business” script or in the “classic immigrant story” script.  Behind my motives, there is a lot of things that most people would consider “negative.”  There is fear, pain, anger, hate, shame, sadness, and guilt.  There are shadows all around me.  When you have lots of bright lights in the big city, shadows are difficult to avoid.

Let me talk about a recurring nightmare that I often have…..

There is a brick floating in mid-air.

That is frightening to me.  Brick don’t float in mid-air, they fall to the ground.  Maybe, one day I will see a brick floating in mid-air, and if that happens, then there is something very, very wrong.  That’s why I care a lot of about physics, math, economics, and law.  They provide certainty or at least the illusion of certainty.  If I see something, it should explainable by the laws of conservation of mass and energy, or it should be consistent with the Peano axioms of natural numbers, or it should be explainable via judicial precedent and constitutional law.  But what it doesn’t.  What if I see a brick floating in mid-air without any explanation.  They I know something is very wrong with the world, and it’s a deeply uncomfortable feeling.  If a brick floats in mid-air, and the laws of physics no longer hold, then what keeps me from falling into the center of the earth.  If I’m in a situation where there is no constitutional, legal  or economic framework, then what keeps “them” from doing nasty, unspeakable things to me.

I want to know that I’m sane, and that the world around me is sane.  That’s why it is important that 2+2 keep adding up to be 4, because if it ends up adding to be something else, then I’m not safe any more, and much of my life has been to deal with the horrible reality that things are not as safe and secure as I would like them to be.  And if they world starts going crazy, at least I want to know how crazy it is.  Maybe when I add 2+2 I don’t get 4.  Do I get 3.99999, 1, -2, or is the answer that I get when I add 2+2, magenta elephant or something that else that is not even a number.

The annoying thing is that the world being as confusing as it is, that I often don’t get 4 when I add 2 and 2.  Sometimes I get 3.999, sometimes I get nothing.  Sometimes I get -3.   Maybe I added wrong.  Maybe there is something I’m ignoring.  I don’t know.  But I find those moments very frightening and disturbing, because when I add two numbers and they don’t come out exactly right, I get the glimpse of that brick floating in mid-air.  And my strange insecurities and frustrations about numbers, gets me to the social embodiment of numbers….. Money…..

Money is a funny thing in that I found that people who seem to care a lot about money, really care about something else.  I care a lot about money.  For me, money is a sign that I am sane and that the world is sane.  In business there are so many things that can go wrong, and it is a constant struggle against chaos.  Being able to make money is hard, and making a profit demonstrates that in some way, you are connected to the rest of the world, and that you aren’t in your own little reality disconnected from the reality in the rest of the world.  Having money and making money allows me to convince myself that I am sane.

I say this because one day I might end up labeled as a “business success” and that happens, your story gets repeated, and like all stories, it is incomplete.  Descriptions of reality are always incomplete, but they can be incomplete without being misleading.  Just be aware that there are shadows following me.  I don’t want to tell you what they are, and pretty much everyone who finds out wishes that they didn’t know.  Just be aware that they are there…….

August 28, 2007

Mellow in Brooklyn

Filed under: Career, china, finance, new york city — twofish @ 3:44 am

Looking out at the harvest moon, I’m in a calm mood which is quite unusual for me.  It’s a cool evening, and it looks like it will be unnecessary for me to get that air conditioner.  It’s amazing how much my life has changed over the last year, and the one thing that the last year has cured me of is the fear that things won’t change.  Things have changed, and will continue to change, for the better or worse I do not know.  Also whatever happens it was the result of a conscious decision on my part to change things.

I’ve found that it is important to write things down because it is difficult often to remember how something felt when time passes.  As time passes old memories fade and new memories are recreate, and the past becomes transformed.  But the written word fixes a moment in time, and one can record feelings and thoughts that would otherwise disappear.  I was walking down Soho, and thinking about what it must have been like before the condonmiums and the upscale restaurants, when it was a gritty, more creative place.  That place is gone, but in between looking at that place and reading the history books, I think I have some sense of what that place *felt* like when Andy Warhol lived there.

I grew up in the 1970’s when New York City was the symbol of urban decay and hopelessness.  The snippets of information that I got about NYC was that it was a den of sin and crime.  It took New York a while to pull itself out of the pit, and it took me a while to get rid of my stereotypes.  One of the mental blocks that I had was that with my background, I’d associated suburbs and exurbs with escape from the city, and when I grew dissatisfied of where I was, I was terrified that there wasn’t anything more than where I was.  People change.  Things change.  Neighborhoods change.  Now that I’m here, I think I know a bit what it felt like for someone to arrive here in 1850 or in 1920, the idea that there was something somewhere here to look forward to.

August 26, 2007

Moved in

Filed under: academia, china, new york city, personal — twofish @ 1:32 am

I moved out of my summer sublet into a more permanent apartment in one of the outer boroughs of New York.  It’s a nice neighborhood, not too shabby but at the same time not gentrified.  The weird thing about walking around in the neighborhood is that it makes be realize how bizarre my life is, and by extension how bizarre I am.  This is the “real world” far away from the halls of academia, and just looking at the pizza place and the cheap restaurants and the people on the sidewalk talking. the physics department of a major university and the subtle academic hierarchies seems like a strange bubble.

I’ve been thinking about theories of warfare as I’ve been lugging stuff across New York City.  One important element of warfare is to establish a base area and to maintain lines of supply with that base area.  Without a base area, you are constantly on the move, and being without a place that you can sit down and think this becomes very exhausting, as does trying to move furniture from one place to another.  One reason I haven’t been blogging much is that my access to computers has been limited because I haven’t had a semi-permanent room of my own for the last several months.  I’ve also been thinking about Anthony Cordesman’s point in the CSIS that even if the US wanted to pull out of Iraq, this would take time because there is simply so much stuff there.

One other thing.  Books are heavy.  Also without an address, you  can’t have people send you books.

So now that I have a base area.  What do I want to think about…..  Let’s try with out to destablize the academic systems.  When I was in high school, I absolutely hated the cliques and the social ladders.  Little that I know that I was going to be part of a system of cliques and social ladders that was every bit as pernicious as the ones I saw in high school.  The thing that I find disturbing about academic cliques and social ladders is that I think something has been lost, which is the idea that social hierarchies are tools that should be used to help people reach their potential and improve society.  The problem with academic hierarchies is that I think they have become too closed and too engrained and too out of touch with the real world to have social usefulness.

The reason I find this particularly scary is that we are moving to a “knowledge society” where wealth and power are determined by access to education.  What I find frightening is that the rigid and disfunctional class system that one sees in academia will spead to the rest of society, and the scary thing is that I think I’m seeing a lot of this.

July 9, 2007

Working for Trans-United Global MegaCorp

Filed under: new york city — twofish @ 1:24 am

I’m working in New York, with my new job for Trans-United Global MegaCorp, a huge multi-national corporation.  One of the things that I’ve found missing from the internet are voices like mine that go to work for a big multi-national corporation, and actually like it.  Part of the problem is that big corporations really don’t like it if you talk too much about them, which leaves the field of internet-discourse to people who think multi-nationals are the scourge of the earth.  This is unfortunately, because there really are a lot of good things that happen in multi-national corporations, and that point of view needs to be stated somewhere.

The main reason I’m working for Trans-United is that I actually believe that what I’m doing is the most useful thing that I can to for the world.  Trans-United sees China as a major opportunity, and that is one reason I’m interested in them, and they are interested in me.  I’m working with smart, ethical people, and looking on the corporate intranet, I can actually see the world changing.  The one thing that large bureaucracies don’t like is if you talk too much, even if what you have to say is largely positive.  For very good legal reasons, the company saves all e-mail going out, and there is a corporate firewall that filters out some websites.  I can’t mention the real name of Trans-United, and I’m a little stand off-ish about mentioning my real name.
The nice thing about Trans-United is that they are profit focused.  They see me and judge me based on how much money they think I can make for them.  That’s fine with me.  Looking around, you see people from all over the world.  They really don’t care what you look like, what language you speak, what citizenship you are, or who you sleep with.  It’s all about the money.  The money is nice, but I wouldn’t be working there if I didn’t think that there wasn’t something else besides the money.  There is the challenge, and the idea that I’m really doing some good in the world.

May 19, 2007

Jim Mann’s commentary on Washington Post

Filed under: china, new york city, politics — twofish @ 3:43 pm

A few comments:

1) First of all, it isn’t clear to me that people who believe that markets and capitalism will lead to political liberalization are wrong.  Something that Mann doesn’t mention is that during the 1970’s, economic growth in Latin America, South Korea and Taiwan managed to increase the power of the authoritarian governments there.  What happens is that either the economic growth continues (South Korea and Taiwan), in which case you end up with a middle class which pushes for political liberalization, or it stalls (Latin America) in which case you end up with demands for political change.  There is one example where economic growth *didn’t* lead to political change and that is Singapore.

My own belief is that history is not determinstic, whether mainland China ends up with a multi-party political system like Taiwan or a one-party authoritarian system like Singapore will be determined by accidents and choices that cannot be forseen.  What I’m trying to do is to do whatever little part I can to develop institutions and frameworks so that whatever happens, mainland China will be able to cope with whatever history throws at it without falling apart.

2) I think that Mann for overestimates the degree to which the rhetoric of democracy has actually influences US foreign policy.  Sure there are a lot of people who were arguing that trade will advance democracy in China, but there were equally large numbers of people who were arguing that trade would retard democracy in China.  The interesting thing is that for the most part, these groups were just putting a spin on their own self-interest.

Mann has been criticized (rightly) for not presenting any concrete policies.  He argues that he is calling for the US to merely interact with China on the basis of self-interest rather than flawed abstract ideas.  I don’t see how this is fundamentally different from the policies that the US has followed for the last hundred years.  People figure out what their self-interest is, and then adopt “democracy” and “freedom” to sell their self-interest.

Take Mann’s suggestion that the US should be tougher about the revaluation of the RMB.  This neglects the fact that there are some groups in the United States that benefit from a cheap RMB, the housing market, Walmart, the electronics industry.  There are also groups in the United States that lose from a cheap RMB, organized labor, manufacturing states, and so forth.  When you add together all of these different interests together, I don’t think that you end up with a policy that is very different than what the US has been doing.  This is because US policy *has* been based largely on self-interest, and the democracy and freedom talk is there just for marketing.

However, Mann misses the *real* problem with US foreign policy and that is that by using the concepts of “democracy” and “freedom” to justify self-interest, the US has brought those concepts into disrepute.  US interests in the Middle East are to prevent a terrorist attack on the American homeland, and to insure a secure supply of oil to the US economy.  These are basically self-interested goals.  Nothing wrong with a little self-interest.  But by trying to *deny* that those are self-interested goals and by using the democracy and freedom to justify that, the US has damaged those ideals globally.

Let me give an example, of how national self-interest makes the US look bad.  Cheney’s justification of the Iraq War that we are fighting in Iraq so that we don’t have to fight on the streets of NYC.  Can you imagine how awful that sounds to the typical Iraqi?  The elaborate lengths that the Bush administration has gone through in order to make sure that the detainees in Guantanamo don’t have the legal protections of American citizens.  What is the average Zimbabwean supposed to make of that?  And then the US talks about democracy and freedom?

So what do I think the United States should do?  I think that first of all, the United States should stop talking about democracy and freedom.  At this point, anything the United States does to *talk* about democracy and freedom is just going to make the situation worse.  Rather, I think that the United States should act in ways that are consistent with its stated principles.  People are smart and if the United States acts in a way that protects democracy and freedom within the United States, there is no need to promote oneself.   Resolving the Guantanamo detainees is a good start.  Having a real national debate on what to do with the mess in Iraq in which the common man in the United States is treated intelligently is another.

Finally, I leave with one troubling question.  One crucial difference between China and the old Soviet Union is that China has no interest in exporting it’s political model.  Yes, China deals with dictators in Burma, but it also deals with democracies like Japan.  It tries to have good relations with North Korea, but it also tries to have good relations with South Korea.  China claims that it’s system is the best system for China, but it’s ideology explicitly states that different countries have different historical circumstances and that the political system of a country must respect those different historical circumstances.  Even within its borders, China “practices what it preaches” and has a political system in Hong Kong which is very different from the one in Shanghai which it justifies based on special historical circumstances.

Meanwhile, the United States insists that the only correct development model is one that involves multi-party democracy and that the rest of the world has to adopt a political system similar to the United States in order to be considered civilized.

So I ask this question.  Which viewpoint is more consistent with the ideals of freedom and democracy?

May 7, 2007

Returning to New York City

Filed under: new york city, quantitative finance — twofish @ 4:32 am

Back in New York City after travelling from MIT via FungWah Bus.  I’ve been rather quiet about what has happened to me over the last month, and that’s because adjusting to a new life is difficult and stressful (although it’s mostly fun difficult and fun stressful).  The other thing is that the rules about what I can say and what I can’t have changed a bit, and while I’m figuring out what the new rules are, I’d like to stay on the quiet side about my work.  Once things settle down a bit more, I’ll talk more.

One of the things that struck me as I saw Manhattan from the Triborough Bridge this morning is how the City has an entirely different character on bright, beautiful days like today than it does on rainy days or at nights.  Most of the previous times that I’ve gone back to NYC it was on an airport shuttle from JFK or transferring from the Newark PATH train at Penn Station in the middle of the night, and the City has an omnious overwhelming feel.  Something similar akin to the movie Blade Runner.  When it rains, there is a sad grey pale over the City.  Today was one of the first times I’ve entered the City in mid-day in good weather, and from a distance the buildings of Manhattan appear in light pastel colors, mostly blue, and the City was beautiful and optimistic.  It’s been said that Superman’s Metropolis is New York in the day, and Batman’s Gotham is New York after dark, and this is rather accurate for how drastically the mood of the City changes.

When I was growing up in the 1970’s, New York City was in the depth of financial crisis, and the talk there was about “urban decay” and “suburban flight.” Before my latest series of trips here, the last time I came was in 1989 which was right before the urban renaissance.  I suppose some of the fear that I had in coming here was related to these childhood and college associations.

One curious thing is that how the internet has actually caused more centralization in some cities.  Because the world is flat, industries that require a lot of close social interaction, like finance, tend to attract people from across the world.  The internet has made it easier to transmit information, but easy transmission of information has also made it easier and more efficient to transport people and physical objects, and this
causes some centralization rather than decentralization.

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