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Archive for March 2005

Hard or soft?

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There’s been a lot of discussion in the blogosphere about whether the world economy will experience a hard or soft landing as currencies adjust to the US current account deficit. I recommend two particularly nice summaries of the soft and hard scenarios.

One point I think people may have missed is that whether there is a hard (disorderly or panic/crash/recession inducing) landing or a soft (gradual, Plaza Accord-like) landing, the dollar is set to decline substantially against many Asian currencies, and perhaps the Euro as well.

Here is a very nice comment on the soft scenario post I linked to above:

[Here’s how we worked our way out of the last current-account crisis (1984-88). The figures are what would be required in 2005, 2006 and 2007, to match the cumulative change in 1984-88.

Exports of Goods +9% p.a.
Export of Services +9.7% p.a.
Income Receipts –0.8% p.a.

Import of Goods +1.5% p.a.
Import of Services +3.7% p.a.
Income Payments +6.9% p.a.

Net Transfers –7.4% p.a.

Current Account Balance –9.4% p.a.
Nominal GDP Growth +3.9% p.a.

Net results: Current-Account Balance falls from 5.7% of GDP to 3.8% of GDP in 2007. Not quite as good (3.4%) as in 1988, but the Dubious Administration got us in a lot worse trouble this time around.

Other interesting things going on at the same (1984-88) time: The US dollar lost 60.7% of value against the Swiss Franc between 1984 and 1988, 51% against an artificial Euro, 85.5% against the Yen, and 38.5% against the Korean Won…]

See here, here and here for related comments and historical data.

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March 31, 2005 at 3:46 pm

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Tech gap

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Even Tech Execs Can’t Get Kids To Be Engineers (WSJ)  

Vinod Dham is among a growing number of technology executives warning that the U.S. faces an engineer shortage. To stay globally competitive, he says, the nation must do better at steering its youth toward engineering careers. Mr. Dham knows how hard that is: He can’t persuade his own kids to go into engineering.

The 54-year-old Mr. Dham would seem to be a prime role model. His engineering degree lifted him from his humble origins in India into a 16-year career at Intel Corp., where he became well-known for helping create the Pentium chip. His older son, 22-year-old Ankush, is studying economics, and that’s fine with Mr. Dham, who says he couldn’t get him interested enough to develop the rigor required for engineering. But ever since his younger son, 19-year-old Rajeev, was a boy, Mr. Dham has been urging him to pursue engineering — and he, too, is going into economics. Rajeev “doesn’t want to do electrical engineering,” the elder Mr. Dham laments. “He tells me the job will be outsourced.”

Silicon Valley is doing a lot of hand-wringing these days about a coming engineer shortage. Tech leaders such as Cisco Systems Inc.’s John Chambers and Stanford University President John Hennessey warn that the U.S. will lose its edge without homegrown talent. The U.S. now ranks 17th world-wide in the number of undergraduate engineers and natural scientists it produces, they point out; that’s down from 1975, when the U.S. was No. 3 (after Japan and Finland).

But some of the nation’s tech elite — including many immigrants who benefited greatly from engineering careers — are finding even their own children shun engineering. One oft-cited reason: concern that dad and his contemporaries will ship such jobs overseas.

Venture capitalist Promod Haque, for example, is in an ironic bind when it comes to advising his own kids. Like many other Silicon Valley financiers, Mr. Haque has recently begun funding tech start-ups in India and urging U.S. tech entrepreneurs to outsource from the start by forming companies that split operations between the U.S. and India. Mr. Haque chuckles about a recent dinner conversation with his college-age daughter, who he hoped would go into engineering just as he did. “She said, ‘Dad, I’m not going to take any more computer-science classes,’ ” he recalls. “I asked her why. She looked at me straight and said, ‘I don’t want to go to India to get a job.’ “

Experts cite a variety of other reasons for the U.S.’s engineer shortage, including poor math and science curricula in public schools. And there is also a persistent image problem. A recent study of 2,800 of Silicon Valley’s youth by consultants A.T. Kearney found that 73% were familiar with high-tech careers but only 32% wanted to pursue them. In describing tech careers, students in the study used a variety of unflattering terms, including “intimidating” and “uninteresting.” Others said they considered engineers to be “socially awkward” or “obsessed with work.” Some female respondents linked computer engineering with work that is “tedious” or “antisocial.”

That was the case for Susan Mason’s two stepdaughters, Alexandra and Joanna. Ms. Mason, a Silicon Valley venture capitalist with a background in computer engineering, says she urged the girls to consider engineering when they were in high school. They ignored her advice: Alexandra became an audiologist and Joanna went into nursing.

“They felt that engineering was too solitary, even if they were working in a team environment,” Ms. Mason recalls. “They wanted to have more interactions with people on a ‘human’ level,” she says…

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March 29, 2005 at 6:34 am

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How much information in the universe?

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Suppose the universe is described by a single wavefunction which evolves in time according to Schrodinger dynamics. In this framework remarkably little information is required to describe the universe as a whole.

Consider the sub-volume V, just after the big bang, which evolves into our observable 15 Gy universe. Now suppose there is an ultraviolet cutoff (or minimum resolvable length) given by the Planck length. Then the entropy (log of number of degrees of freedom) is of order V in Planck units. To neglect quantum gravity effects, we need to wait sufficiently long after the big bang that curvatures are small in Planck units, so this entropy is a large number, but still much smaller than the observed entropy of our current universe. Given the wavefunction over this large but finite Hilbert space, and the Hamiltonian, we can evolve this system forward in time until today. Neither the informational complexity (number of bits required to specify the initial state) nor the algorithmic complexity (length of program required to evolve the system) is very large. (Note that memory requirements could grow quite rapidly – especially in an expanding universe.)

If this confuses you, just imagine you had to write a computer program to evolve this finite system (remember, we have both UV and IR cutoffs) forward in time. How much input would your program need, and how long would the code be? Then compare the answer to what would be required, e.g., to simulate to just a small part of planet earth today.

So what is the origin of the apparent complexity of our world? The answer is that the wavefunction described above contains all branches of Everett’s many worlds (see previous post). In order to locate your particular branch (the one on which your consciousness resides), you have to specify the outcomes of the branchings in your past (or, at least, the important ones – I think Gell-Mann and Hartle refer to this as decoherent histories). The amount of information required to specify a particular history is related to the number of possible present universes, and is mainly responsible for the complexity we observe.

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March 27, 2005 at 7:15 pm

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Everett and many-worlds

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I recently found this wonderful biography of Hugh Everett III, the discoverer of the many-worlds interpretation of quantum mechanics. While its name suggests science fiction, one is naturally led to this interpretation by requiring completeness and economy of quantum mechanics.

In the usual formulation, an isolated system is described by a wavefunction which evolves unitarily in time according to the Schrodinger equation. When an external observer makes a “measurement” on the system, its state “collapses” into a particular eigenstate associated with the quantity (operator) that is measured, such as position, momentum, spin, etc. However, an astute thinker (like Everett) is led to ask why one has to introduce the rather mysterious concepts of measurement and collapse. Shouldn’t the universe as a whole be described by a single wavefunction, which evolves according to Schrodinger dynamics? In that case, a measurement is a process by which the state of the observer’s brain (or apparatus) becomes correlated with the state of the observed system. All possible outcomes are described by different “branches” of the universal wavefunction (hence the many-worlds description). Each of our consciousnesses is a particular semi-classical branch of the part of the wavefunction describing the atoms and molecules in our brains.

Everett’s interpretation doesn’t (as far as I know) make any new experimental predictions – it predicts the same probabilities as the old Copenhagen measurement-collapse description. (There is some debate over whether it gives a more satisfying explanation of how probability arises in quantum mechanics.) However, I and many others find it more intellectually satisfying and complete. The real argument starts over interpretation of the “other” branches of the wavefunction. Are they real, or just a mathematical abstraction? Can we ever detect their existence?

The biography I linked to fills in a number of the historical questions I had about many-worlds. Why is it that so many younger physicists (perhaps without thinking too deeply about it) accept many-worlds, while many (but certainly not all) of our elders regard it as nutty? Apparently the idea languished in obscurity for 20 years before being re-introduced into the physics community by Bryce DeWitt and others. Everett himself, obviously a first-rate intellect, left physics and worked in the defense and software industries, where he made important contributions and became a wealthy man. This story should be a cautionary note to academic scientists about ignoring the many creative and original thinkers who continue doing interesting things outside the academy.*

See here for a nice FAQ on many-worlds. See here for a letter to Physics Today from Murray Gell-Mann in which both he and Feynman are identified as believers in many-worlds.

* Only a small fraction of our students manage to stay in academic research – a quick calculation confirms this: we have zero population growth in academic science, but each professor produces several if not many PhD students in their career. One might argue that it is the best and brightest among our students who stay in academia, but even if true on average, that leaves many talented former-academicians in the real world!

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March 27, 2005 at 6:28 pm

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Times on hedge funds

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NYTimes: [The numbers are mind-boggling: 15 years ago, hedge funds managed less than $40 billion. Today, the figure is approaching $1 trillion. By contrast, assets in mutual funds grew at an impressive but much slower rate, to $8.1 trillion from $1 trillion, during the same period. The number of hedge fund firms has also grown – to 3,307 last year, up 74 percent from 1,903 in 1999. During the same period, the number of funds created – a manager can start more than one fund at a time – has surged 209 percent, with 1,406 funds introduced in 2004, according to Hedge Fund Research, based in Chicago…

“Hedge funds are an innovation of compensation,” said one fund-of-funds executive. “It’s a compensation system, not an asset class.”

…In the same way that there is no quelling the bulls, there will be no quieting of the critics. The Horvitz family of Cleveland, which made its fortune in road construction, media and real estate, started investing in hedge funds in the 1990’s. A decade or so later, it has virtually no money in such funds, said Jeffrey Horvitz, who oversees his family’s investments. Too often, he said, the funds produced disappointing returns.

“Hedge funds are no longer attractive,” Mr. Horvitz said, noting the influx of start-ups. “I see no relief in sight, especially for taxable investors like us.”]

See previous posts here and here, and many others 😉

Written by infoproc

March 27, 2005 at 7:05 am

Posted in Uncategorized

Gizmo report

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I promised I would report on the Aiptek DV5300 I ordered. So far I would have to say it performs well, considering how inexpensive it was (note, I seem to have gotten a good deal, as the typical street price is around $120 now).

I’ve posted some video here (mostly of our physics building and the Institute of Theoretical Science – if your player has trouble connecting to the stream, just right-click and download the whole file). It is shot in ASF, 352 x 288 pixels and 30 frames per second. You can see some pixellation when I move the camera too fast. VGA (= TV) quality is possible at 640 x 480, but only 11 FPS, so is jerkier. The next generation of cameras at this price point will do 30 FPS at VGA resolution. Note that ASF is a Microsoft MPEG4 variant, so you may have trouble viewing it on OS X or a unix machine. I think you’ll see manufacturers supporting more open MPEG4 formats like divX before long.

Ergonomically the camera is very easy to operate, with separate buttons for still photos and video capture. Still photos are not bad, but the optics are not as good as in my Sony Cybershot. I think digital video cameras using MPEG4 are the future – 1 GB of SD flash will store hours of fairly high quality footage, and units with 20-40GB hard drives aren’t far away. Image files upload to a PC using a USB cable.

Core technologies in these devices: the CMOS (or CCD, in higher end models) chips for image capture, image processing CPU, some simple software controlling camera functions, and flash memory. Aiptek, a small Taiwanese company, designed the camera, but it was assembled in China. The market for these devices is obviously very competitive and fast-moving. The next generation of cameras will be out within a year. Higher end devices are typically made by Japanese companies (Sony, Sanyo, Panasonic), but probably also assembled in China. I don’t see a big technology gap here – given slightly bigger R&D budgets and better distribution the little guys could easily out-innovate the bigger players.

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March 25, 2005 at 5:38 am

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China Development Forum

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Stephen Roach of Morgan Stanley on latest China Development Forum. He is not expecting any near-term drastic changes in RMB policy.

“My bottom line for the markets: With China’s risk-reward calculus acutely sensitive to the all-important stability constraint, I read the message from this year’s China Development Forum as pretty much a green light on the growth front. 

As always, the highlight of this conference is a private session with the Premier in the Great Hall of the People.   Not surprisingly, this year’s discussions were framed around the hot topic du jour — Chinese currency policy.  Our group of outside experts laid out both sides of the debate to Wen Jiabao.  He said nothing to tip his hand and simply reiterated that China continues to actively study the issue and is “now trying to select both the proper plan and timing for RMB reform.”  Here, as well, I suspect it will all boil down to stability.  In my own speech to the Forum, I stressed that the coming global rebalancing could have surprisingly important implications for Chinese stability — especially for a dollar-pegged currency that gets caught up in America’s long overdue current account adjustment (see “China’s Rebalancing Imperatives,” presented to the China Development Forum, 20 March 2005).  Because of its rapid integration into the global economy and world financial markets, China may well find that its stability anchor is less secure than widely perceived.

At the end of the meeting, the Premier shook his head and exclaimed, “I cannot sleep well at night with this issue of the RMB.”   He then glanced at his watch and politely excused himself.  As we left the Great Hall, a noisy motorcade rolled up to the official entrance.  We went out one door, and US Secretary of State Condoleezza Rice literally went in the other door.  There was a lot on Premier Wen Jiabao’s plate that day.  The growth and currency debates are only one piece in the big Chinese puzzle.  But in the end, always think stability when it comes to China — whether the issue is economic or geopolitical.  For that reason alone, and based on what I picked up at this year’s China Development Forum, I have little reason to doubt that China is once again going for growth.”

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March 23, 2005 at 6:16 pm

Posted in globalization

Chalmers Johnson on US-China-Japan relations

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No Longer the “Lone” Superpower: Coming to Terms with China

Johnson rightly focuses on the tensions building around the Taiwan strait, and notes that the US is pushing Japan into a dangerous military role in the region.

[ Let me make clear that in East Asia we are not talking about a little regime-change war of the sort that Bush and Cheney advocate. After all, the most salient characteristic of international relations during the last century was the inability of the rich, established powers — Great Britain and the United States — to adjust peacefully to the emergence of new centers of power in Germany, Japan, and Russia. The result was two exceedingly bloody world wars, a forty-five-year-long Cold War between Russia and the “West,” and innumerable wars of national liberation (such as the quarter-century long one in Vietnam) against the arrogance and racism of European, American, and Japanese imperialism and colonialism.

…The Bush administration is unwisely threatening China by urging Japan to rearm and by promising Taiwan that, should China use force to prevent a Taiwanese declaration of independence, the U.S. will go to war on its behalf. It is hard to imagine more shortsighted, irresponsible policies, but in light of the Bush administration’s Alice-in-Wonderland war in Iraq, the acute anti-Americanism it has generated globally, and the politicization of America’s intelligence services, it seems possible that the U.S. and Japan might actually precipitate a war with China over Taiwan.

Japan Rearms

…Since the end of the Cold War in 1991, the United States has repeatedly pressured Japan to revise article nine of its Constitution (renouncing the use of force except as a matter of self-defense) and become what American officials call a “normal nation.” For example, on August 13, 2004, Secretary of State Colin Powell stated baldly in Tokyo that if Japan ever hoped to become a permanent member of the U.N. Security Council it would first have to get rid of its pacifist Constitution…

America’s intention is to turn Japan into what Washington neo-conservatives like to call the “Britain of the Far East” — and then use it as a proxy in checkmating North Korea and balancing China… Japan has so far not resisted this American pressure since it complements a renewed nationalism among Japanese voters and a fear that a burgeoning capitalist China threatens Japan’s established position as the leading economic power in East Asia…

    Japan’s remilitarization worries a segment of the Japanese public and is opposed throughout East Asia by all the nations Japan victimized during World War II, including China, both Koreas, and even Australia. As a result, the Japanese government has launched a stealth program of incremental rearmament. Since 1992, it has enacted 21 major pieces of security-related legislation, 9 in 2004 alone.

    A New Nuclear Giant in the Making?

    Koizumi has appointed to his various cabinets hard-line anti-Chinese, pro-Taiwanese politicians. Phil Deans, director of the Contemporary China Institute in the School of Oriental and African Studies, University of London, observes, “There has been a remarkable growth of pro-Taiwan sentiment in Japan. There is not one pro-China figure in the Koizumi Cabinet.”

…Bush and Koizumi have developed elaborate plans for military cooperation between their two countries. Crucial to such plans is the scrapping of the Japanese Constitution of 1947. If nothing gets in the way, Koizumi’s ruling Liberal Democratic Party (LDP) intends to introduce a new constitution on the occasion of the party’s fiftieth anniversary in November 2005. This has been deemed appropriate because the LDP’s founding charter of 1955 set as a basic party goal the “establishment of Japan’s own Constitution” — a reference to the fact that General Douglas MacArthur’s post-World War II occupation headquarters actually drafted the current Constitution. The original LDP policy statement also called for “the eventual removal of U.S. troops from Japanese territory,” which may be one of the hidden purposes behind Japan’s urge to rearm.

    A major goal of the Americans is to gain Japan’s active participation in their massively expensive missile defense program. The Bush administration is seeking, among other things, an end to Japan’s ban on the export of military technology, since it wants Japanese engineers to help solve some of the technical problems of its so far failing Star Wars system. The United States has also been actively negotiating with Japan to relocate the Army’s 1st Corps from Fort Lewis, Washington, to Camp Zama, southwest of Tokyo in the densely populated prefecture of Kanagawa, whose capital is Yokohama. These U.S. forces in Japan would then be placed under the command of a four-star general, who would be on a par with regional commanders like Centcom commander John Abizaid, who lords it over Iraq and South Asia. The new command would be in charge of all Army “force projection” operations beyond East Asia and would inevitably implicate Japan in the daily military operations of the American empire. Garrisoning even a small headquarters, much less the whole 1st Corps made up of an estimated 40,000 soldiers, in a sophisticated and centrally located prefecture like Kanagawa is also guaranteed to generate intense public opposition as well as rapes, fights, car accidents and other incidents similar to the ones that occur daily in Okinawa.

    Meanwhile, Japan intends to upgrade its Defense Agency (Boeicho) into a ministry and possibly develop its own nuclear weapons capability. Goading the Japanese government to assert itself militarily may well cause the country to go nuclear in order to “deter” China and North Korea, while freeing Japan from its dependency on the American “nuclear umbrella.” ]

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March 23, 2005 at 5:14 am

Posted in globalization

Hypomanic entrepreneurs

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Hmm, this sounds a little like me… (at least, more so than autism or Asperger’s syndrome 🙂

hy·po·ma·ni·a: A mild form of mania, characterized by hyperactivity and euphoria.

From the intro to The Hypomanic Edge by J. Gartner, professor of psychiatry at JHU medical school.

“The 1990s will be remembered as the age of Internet mania, a time when entrepreneurs making grandiose claims for their high-tech companies swept up millions of Americans with their irrational exuberance, inflating the biggest speculative bubble in history. The idea that some entrepreneurs may be a little manic is hardly new. A Google search for “manic” and “businessman” yields more than a million hits. Entrepreneurs, as well as the markets they energized, were commonly described in the media as “manic.” Yet, until now, there has never been a serious suggestion that the talent for being an entrepreneur and mania, the genetically based psychiatric disorder, are actually linked. Perhaps because I am a clinical psychologist, it was clear to me that “manic” was more than a figure of speech in this case.

I called several reporters who had written profiles of these “manic” entrepreneurs and asked them, “Do you think he really was manic?” None said yes. “Not really manic; not clinically,” was a typical response. They resisted applying the psychiatric diagnosis because the entrepreneurs they had interviewed were boastful, hyperenergized, and zany, but they “weren’t crazy.” And the journalists were right. Their subjects were not manic. They were hypomanic. Hypomania is a mild form of mania, often found in the relatives of manic depressives. Hypomanics are brimming with infectious energy, irrational confidence, and really big ideas. They think, talk, move, and make decisions quickly. Anyone who slows them down with questions “just doesn’t get it.” Hypomanics are not crazy, but “normal” is not the first word that comes to mind when describing them. Hypomanics live on the edge, betweeen normal and abnormal.

…My new hypothesis became that American entrepreneurs are largely hypomanic. I decided to undertake what social scientists call a pilot study: a small-scale, inexpensive, informal investigation meant to test the waters. I placed announcements on several Web sites devoted to the technology business, expressing my interest in studying entrepreneurs and requesting volunteers. I interviewed a small sample of ten Internet CEOs. After I read them each a list of hypomanic traits that I had synthesized from the psychiatric literature, I asked them if they agreed that these traits are typical of an entrepreneur:

* He is filled with energy.
* He is flooded with ideas.
* He is driven, restless, and unable to keep still.
* He channels his energy into the achievement of wildly grand ambitions.
* He often works on little sleep.
* He feels brilliant, special, chosen, perhaps even destined to change the world.
* He can be euphoric.
* He becomes easily irritated by minor obstacles.
* He is a risk taker.
* He overspends in both his business and personal life.
* He acts out sexually.
* He sometimes acts impulsively, with poor judgment, in ways that can have painful consequences.
* He is fast-talking.
* He is witty and gregarious.
* His confidence can make him charismatic and persuasive.
* He is also prone to making enemies and feels he is persecuted by those who do not accept his vision and mission.

I feared they might find the questions insulting. I needn’t have worried. All of the entrepreneurs agreed that the overall description was accurate, and they endorsed all the hypomanic traits, with the exceptions of “paranoia” and “sexual acting out” (these traits in particular are viewed as very negative and thus may be more difficult to admit to). Most expressed their agreement with excitement: “Wow, that’s right on target!” When I asked them to rate their level of agreement for each trait on a standard 5-point scale, many gave ratings that were literally off the chart: 5+s, 6s. One subject repeatedly begged me to let him give a 7.”

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March 22, 2005 at 9:08 am

Posted in Uncategorized

Price to rent ratio

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When will this bubble burst? This is like deja vu for me. It reminds me of Nasdaq P/E ratios in the late 90’s when they were totally out of line with reality.

WSJ:”Since 1999 and 2000, the relationship between rents and home prices has “broken down,” says Mark Zandi, chief economist of With interest rates falling, it’s “not surprising that the relationship has changed,” Mr. Zandi adds. “What is surprising is that it has changed so much.”

In San Francisco, the monthly cost of renting an apartment is just 45% of the monthly cost of buying a home, down from 67% in 2001, according to an analysis of 21 key markets prepared for The Wall Street Journal by Torto Wheaton. In Washington, D.C., rental costs are now just 59% of the cost of owning, down from 82% in 2001. In Miami, rental costs are 63% of the cost of homeownership, down from 89% in 2001.”

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March 22, 2005 at 8:48 am

Posted in Uncategorized