Too Big to Fail

I read "Too Big to Fail" to see if I could learn a bit more about what happened on Wall Street and in D.C. during the financial crash. I wanted to add to the knowledge that I got from "Republic, Lost", "Capitol Punishment", and "The Innovator's Dilemma". I learned a lot. The book is filled with the real time interchanges among the players and with the sense of complete panic as 'solutions' to the crisis just exposed other problems. On this level, the book is a fascinating read.

Unexpectedly, I ended up learning something completely different--about agent based economics.

I found out that while supply and demand is a standard paradigm in understanding markets, to understand markets for financial instruments a person has to realize that there are very few players, who all know each other and who compete and cooperate in real time independent of much of supply and demand and who change sides constantly. In "Too big to Fail", one person is actually working for the government, for a brokerage house, and for a bank at the same time. Another person's ego drove his running of a big brokerage house and resulted in the loss of thousands of jobs when this brokerage house was allowed to fail as part of a complex government deal to support a financial system in which trust between brokers was lost. The actual interactions were not what my understanding of traditional economics would have suggested at all.

It seems that agent behavior is much more important in economics than I wanted to think it was and this book is a great case study.

Los Alamos Entrepreneur Network

I went to a surprisingly productive meeting last night of the Los Alamos Entrepreneur's Network. We met at the Hive and started to talk about how to use the Hive to get networking and products done in Los Alamos and independent of LANL and government grants.

The next meeting is at noon on 12 January and should be productive. It was productive for a while. I was the president for a while. I ran meetings with clear agendas. Then, in March 2012, the members had their first official election. They elected a guy who promised to do nothing entrepreneurial. He wanted to chat with people. They elected a vice president who had never come to any meetings. I did the entreprenuerial thing. I calculated my Return on Investment on going to the meetings or planning activities for the members. The ROI was strongly negative. The Entrepreneur's network had become a coffee klatch. So I did what any good entrepreneur should. I kept talking to the entrepreneurs that I had met and stopped doing anything with the Los Alamos Entrepreneurs' Network. I told my friends among the members that I would come back when my personal ROI exceeded 1.2. So far I seem to have made the right decision. Fascinating.

SUSY, the giant invisible rabbit

According to New Scientist a Higgs at 125 GeV may be very good for SUSY or at least for particle physicists.

SUSYs would now exist at mass ranges higher than what is accessible to the LHC.

SUSY requiem

From my Google reader of the day before yesterday, the AIP physicists working of supersymmetry are starting to be sure that supersymmetry ( SUSY ), in spite of its mathematical elegance, is wrong. By now with hundreds of trillions of collisions at the Large Hadron Collider--proton proton collisions and lead nuclei collisions--there should have been thousands of decays that showed the transient existence of supersymmetric particles. A sought after particle was the neutralino, the lowest energy member of the set of supersymmetric particles (squarks and selectrons are others) and a candidate for the particles of dark matter.
So far, no supersymmetric particles have been seen at all. So SUSY appears to be dead.

This leaves big problems in particle physics (not so much elsewhere where physicists and others assume that particles, atoms, and molecules are well behaved and do not spend much time wondering why).

In particle physics (please correct me when I am wrong and I will edit the post) the theoretical estimates of the Planck mass are wrong by 120 powers of ten, a serious discrepancy. SUSY was supposed to lessen this discrepancy by having particles from the Standard Model interact with supersymmetric particles and virtual particles as they moved about as modeled by Quantum Chromodynamics. If there are no supersymmetric particles, this method to get rid of the 10^120 is lost. Also, one of the candidates for dark matter does not seem to exist either.

This brings us to the Higgs, another necessary part of the Standard Model. I asked a colleague whether a particle such as a proton acquires mass by moving through a Higgs field or whether the Higgs field has to be populated with excitations (Higgs bosons) in order for the proton to have mass. She did not know so, with the help of Google and an AIP discussion group, I found a group of physicists talking about it. According to them, even if a Higgs boson exists, there are still lots of unresolved issues. First among them is the question of where a Higgs boson gets its own mass since it is not moving through a Higgs field to gain this mass. Second is the problem of the proton's mass. According to standard relativistic quantum mechanics, most of the proton's mass comes from the motions of the quarks that make up the proton. There is little left for the Higgs field to do. The puzzle of mass seems to extend far beyond the Higgs boson.

Which brings us to Lisa Randall, a theoretical physicist and clear writer. She said, in her book "Warped Passages", that for theorists one of the best results that could come from the Large Hadron Collider would be no new particles at all (Xb(3P) was predicted with the Standard Model but never seen and has been spotted). If there were no new particles, then there was something really inadequate about the Standard Model and theorists would have a lot of work to do. Apparently, they have a lot of work to do not only in new theories but also in proposing experimental tests of these new theories.

Republic, Lost

Every now and then you stumble onto a book that seems to make sense out of things that made no sense before. "Republic, Lost" by Larry Lessig is one such book.

Lessg claims that there are very few in Congress or the administration who are corrupt in the classic sense of taking bags of money or hiding money in a freezer. He claims that 'corruption' now arises from good people doing rational things within a system that encourages behaviors not in the best interests of America as a whole. Lessig gives lots of examples.

Lessig calls modern corruption the corruption of dependency--the desire, often unconscious, to continue to behave in a certain way in order to continue to receive certain benefits. In politics, Lessig lists Lyndon Johnson as the catalyst for this corruption. Lessig says that President Johnson pushed hard for civil rights legislation (a good thing) and in this pushing alienated Southern white Democrats. The alienation of Southern White Democrats put Congress back in political play because Republicans, for the first time in many years, had a way to gain control of the House of Representatives and the Senate from the Democrats. The Republicans capitalized on this opportunity, raised the appropriate campaign cash to win, and took control.

Then, because control was continually in play, each party had to raise more and more cash to win even a few seats to regain control. Congress went from the Legislating Congress to the Fund Raising congress. The leaders, in each party, were the people who could raise the funds necessary to win and no longer the people who would make the best legislative decisions for the country. The life of a Congressperson became dominated by fund raising with legislating as a hobby. The congresspeople were not corrupt in a traditional sense but needed to focus on fund raising if they wanted to remain as congresspeople. The people who could provide the funding to win were the lobbyists on K street whether they were lobbying for the dairy industry, the sugar industry, the teachers' union, the oil industry, the pharmaceutical industry, or the automotive industry. If you wanted to be re-elected, you had to accept money from these lobbyists. At some later time, you might vote for some legislation that a particular lobbyist desired. There was no direct quid pro quo.

Also, the funder who showed up with the critical million dollars late in a campaign was more likely to be listened to than the citizen who showed up with $1,000 early on.

The exchanges were gifts, not tied to specific legislation, not quid pro quo. But gifts are eventually exchanged in the other direction. Within a particular congressional district, a Congressperson would get more gifts by appealing to the single issue organizations than by appealing to the broad middle. So, pitches to the constituency became more extreme.

Lessig argues in detail that the real world rational dynamics of campaign financing is giving us the government that many are frustrated with. Why should we be proud when a presidential candidate says that it will take $1,000,000,000 in campaign funds to elect the next president, who will then let us down? The need for large campaign war chests however., according to Lessig, compel exactly this result.

At the end, Lessig is great. He proposes fascinating ways to make the system much less dependent on the gift economy. One of his suggestions is to have non-politicians run for multiple offices in a single state with the promise that if the non-politicians clear the primary and the election, they will not occupy the office and will go back to private life. Lessig claims that these candidates,without the need to win, will change the behavior of the politicians so that the system will improve dramatically.

Great book. Here is a review from the New Yorker and another from the New York Times.