This week I saw the excellent documentary Particle Fever, about the discovery of the Higgs particle by physicists at CERN. It's an absorbing story about a few personalities involved, and along the way they provide meaning and context to the discovery for viewers like me who do not know much about particle physics. The editor is the extraordinary Walter Murch (edited Apocalypse Now, The Godfather, English Patient, and more) and it shows - see my post about him from March 2, 2014. The film is another instance where the filmmakers have taken a very complex and abstract topic and opened it up to a wider audience.
60 years at the top of his game
French movie director Alain Resnais died this weekend aged 91. He has been making international hits since the 1950s and he was making movies till the end. Imagine being at the top of the game for 60 years! I think he is the most intellectual filmmaker of all time. I have only seen a few of his films, but I was dazzled and moved by these ones in the past year: You Ain't seen Nothing Yet (2013), Last Year at Marienbad (1961), and Night and Fog (1955) . (The trailer below for the documentary Night and Fog has no English subtitling but the quality of the film is the best I could find and conveys a sense of the film's visual and audio poetry.)
Walter Murch and some things don't change
Walter Murch is one of the most famous film editors alive. His films include Apocalypse Now (1979), The Unbearable Lightness of Being (1988), and The English Patient (1996). Here is a talk he gave last year about the art and science of editing, in the context of his latest film which is his first documentary called Particle Fever (2013).
Among the many interesting moments was a description of how he combined film for The Unbearable Lightness, with 1960s documentary footage of the Soviet invasion of Czechoslovakia. Eerie parallels is this footage (25 mins in) with Russia now in Ukraine.
Nearly 70 million Americans don't have bank accounts
A report by the Office of the Inspector General (OIG) of the U.S. Postal Service shows a shocking number of Americans don't have a bank account:
“...about 68 million Americans — more than a quarter of all households — have no checking or savings account and are underserved by the banking system. Collectively, these households spent about $89 billion in 2012 on interest and fees for non-bank financial services like payday loans and check cashing, which works out to an average of $2,412 per household. That means the average underserved household spends roughly 10 percent of its annual income on interest and fees — about the same amount they spend on food.”
There's talk of the Post Office providing basic banking services. It has real estate everywhere, their mail service is fast becoming obsolete, and many postal workers might otherwise be out of a job. Some countries have a combined mail and basic banking in the past - but banking culture does not easily sit with postal culture. You would think there is some better, cheaper technology-based solution that can borrowed from developing countries. The Feds should call up the World Bank for ideas.
Value for money from banking chiefs?
The latest on pay for the titans of finance:
“European Central Bank President Mario Draghi was paid 378,240 euros ($518,264) last year, more than twice as much as the $201,700 Federal Reserve Chair Janet Yellen is set to receive.
While Draghi’s salary tops Haruhiko Kuroda’s 24 million yen ($235,400) for the year ending March 31, it is dwarfed by the 874,000 pounds ($1.46 million) Bank of England Governor Mark Carney is taking home in salary, housing and cash allowances.
By contrast, Lloyd C. Blankfein, the Goldman Sachs Group Inc. Chief Executive Officer who was the highest paid head of a U.S. bank in 2012, receives a $2 million salary and saw his bonus climb to $21 million for his work last year from $19 million previously. Anshu Jain and Juergen Fitschen, who became co-CEOs of Deutsche Bank AG in June 2012, will be paid a maximum of 9.85 million euros each for 2013, including base salaries of 2.3 million euros and bonuses capped at 7.55 million euros.”
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Winner-takes-all markets
In their new book The Second Machine Age by Erik Brynjolfsson and Andrew McAfee, mentioned in an earlier post, the authors warn that one downside effect of digitization will be a widening of the gap between superstars and everyone else. They explain:
“Digitization creates winner-takes-all markets because with digital goods capacity constraints become increasingly irrelevent.
When consumers care more about relative performance, even a small difference in skill or effort or luck can lead to a thousand-fold or million-fold difference in earnings. There were a lot of traffic apps in the marketplace in 2013, but Google judged only one, Waze, worth buying for over one billion dollars.”
Perhaps this also explains why Google has just paid $19 billion for WhatsApp. Writing in a similar vein about the implications of the MOOCS (Massive Open Online Courses) for superstar teachers, the Economist predicts:
“The market for instructors will... be transformed. The best teachers will be fabulously productive, reaching hundreds of thousands of students. There may therefore be far fewer of them, each compensated like superstars in the entertainment industry. ”
Bank paying for behavior
Barclays Bank is going out on a limb and changing the way it pays its financial advisers in an effort to clean up its image after various scandals, including rigging the benchmark LIBOR interest rates used to set mortgage rates:
“Advisers at the Barclays Wealth & Investment Management division in the Americas will no longer get paid solely on how much money they bring in. Going forward, their compensation could be docked for misconduct. While the size of any such cuts remains to be seen, the new policy already has spurred some of the firm’s roughly 275 U.S.-based advisers to look for jobs elsewhere, according to recruiters, and could make it harder for the firm to find new brokers.”
Cry for Argentina
When I was developing economic consciousness growing up in New Zealand I used to think the worst thing that could happen to my country was what happened to Argentina: a rich country at the beginning of the 20th century that went into long term decline because its political system was so dysfunctional. (At the start of the twentieth century we were both equally rich southern hemisphere countries exporting agricultural products a long way to northern markets.)
The Argentine analogy is back, in The Economist this week, with "lessons for many governments from one country's 100 years of decline":
“When people consider the worst that could happen to their country, they think of totalitarianism. Given communism’s failure, that fate no longer seems likely. If Indonesia were to boil over, its citizens would hardly turn to North Korea as a model; the governments in Madrid or Athens are not citing Lenin as the answer to their euro travails. The real danger is inadvertently becoming the Argentina of the 21st century. Slipping casually into steady decline would not be hard. Extremism is not a necessary ingredient, at least not much of it: weak institutions, nativist politicians, lazy dependence on a few assets and a persistent refusal to confront reality will do the trick.”
Luigi Zingales has an excellent book on how some of these risks play out in the US: A Capitalism for the People (2012). Zingales is an academic at the University of Chicago who left Italy to escape the corruption, drawn to America for its "meritocracy." Now he thinks America is heading down Italy's path.
Robots for builders
In another foretaste of the new machine age (and what it means for jobs), engineers at Harvard have programmed small robots to build like termites:
“Termites build air-conditioned mounds by taking cues from each other and the environment to tell them where to put the next bit of building material. The Harvard researchers wrote computer programs for their robots to mimic the insects’ behaviour and particularly their use of local information.
Though each robot knows only simple rules – such as when to pick up and put down a brick, turn around or climb one step up the structure – together they act in a quasi-intelligent way capable of completing a predefined structure.”
The Second Machine Age
A new book The Second Machine Age: Work Progress and Prosperity in a Time of Brilliant Technologies, by Erik Brynjolfsson and Andrew McAfee, of MIT's Center for Digital Business is making a splash.
The authors predict that digital technologies will soon take over many more jobs "once considered uniquely human," with a devastating impact on the labor market, unless people get ready for it. Intelligent technologies are developing at such a pace that they will soon take over the more routine, automatic tasks done by people ranging from lawyers and doctors to truck drivers.
One of the authors of this book, Andrew McAfee, talks his message on TED:
God to sanction bankers
To help clean up the banking system, bankers in the Netherlands now have to swear an oath to be good:
“Lloyd Blankfein, the chief executive officer of Goldman Sachs, once famously said he believed banks were doing “God’s work.” Now, the Netherlands is going one step further: starting later this year, all 90,000 Dutch bankers will have to swear an oath that they’ll do their “utmost to maintain and promote confidence in the financial-services industry. So help me God.
Board members of the banks have already been required to swear the oath since last year, but now it’s being expanded to cover everyone who works in the sector. It consists of eight statements, including promises not to abuse knowledge and “to know my responsibility towards society.” There’s also a new banking code, a special declaration of moral and ethical conduct that all board members are required to sign, a “treat your customer fairly” initiative, and a “suitability” test for executive and non-executive directors of supervisory boards.””
Quant life creates risk
Business Insider had a story recently about working life for quants, the people who write the algorithms for high frequency stock trading on Wall Street. Quoting former quant Jennifer Goldson:
““In my days as a quant, I sat behind a desk with two phones and eight computer screens towering over me. It’s very hard to draw yourself out of that world. You’re attached to the markets. You’re attached to your phones. You’re attached to your Excel spreadsheets and whatever else you’re building quantitatively. That’s all day, everyday.””
Wired recently explained how this can play out in financial markets:
“The reason the quants win is that they’re almost always right—at least at first. They find numerical patterns or invent ingenious algorithms that increase profits or solve problems in ways that no amount of subjective experience can match. But what happens after the quants win is not always the data-driven paradise that they and their boosters expected. The more a field is run by a system, the more that system creates incentives for everyone (employees, customers, competitors) to change their behavior in perverse ways—providing more of whatever the system is designed to measure and produce, whether that actually creates any value or not.
On a managerial level, once the quants come into an industry and disrupt it, they often don’t know when to stop. They tend not to have decades of institutional knowledge about the field in which they have found themselves. And once they’re empowered, quants tend to create systems that favor something pretty close to cheating. As soon as managers pick a numerical metric as a way to measure whether they’re achieving their desired outcome, everybody starts maximizing that metric rather than doing the rest of their job—just as Campbell’s law predicts.”
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Culture of finance
When I interviewed young investment bankers for my short film on the culture of banking, the majority disliked the behavior around them. Some talked of hazing. With banks still deeply in the doghouse over the financial crisis, debate about this culture, and the lifestyle of those who live in it, continues to bubble:
“For decades, junior bankers and Wall Street firms had an unspoken pact: in exchange for reasonably high-paying jobs and a shot at obscene wealth, young analysts agreed to work fifteen hours a day, and forgo anything resembling a normal life...
Grinding out hundred-hour weeks for years helps bankers think of themselves as tougher and more dedicated than everyone else. And working fifteen hours a day doesn’t just demonstrate your commitment to a company; it also reinforces that commitment. Over time, the simple fact that you work so much becomes proof that the job is worthwhile, and being in the office day and night becomes a kind of permanent initiation ritual. The challenge for Wall Street is: can it still get bankers to run with the pack if it stops treating them like dogs? ”
The Epicurean Dealmaker by contrast says the hours and lifestyle are part of the nature of the work and its "massively inefficient work processes":
“Rare is the analyst.. who rolls into the office before 9:30 or 10:00 am on a workday, and rarer indeed is the one who actually starts to do anything really productive prior to the time senior bankers begin streaming out of the office at 7:00 pm...This is not...due solely to the fact that senior bankers want to haze juniors like they were hazed in their youth, or that it is a conscious program of brainwashing designed to leach out whatever shreds of self-preservation and flimsy moral scruples said youngsters might have left after four years of elite higher education so they can promote our deviously immoral plots against all that is holy and good in society for senior bankers’ personal gain. Not solely, anyway...
Senior bankers like me, who are responsible for originating and closing all the deal revenues which pay for this goat rodeo, come in to a stack of presentations and models to review, a stack of emails and phone calls to and from clients and colleagues to reply to or initiate, and a calendar chockablock with conference calls and meetings with deal teams, colleagues from other departments (who actually do much of the work we get paid for), and, of course, the all-important client. And this is just on non-travel days, when we actually have a full day in the office to “catch up” on this shit. Rare is even the most well-intentioned senior banker who is able to carve out 20 or 30 minutes to review the presentation a junior banker turned overnight for him before his clients and capital markets colleagues leave work at the end of the day and the telephones stop ringing. Many a time have I rolled into the office at 7:30 am fully intending to turn my comments on an urgent pitch waiting for me on my chair by the time the Analyst or Associate comes in at 10, only to get to it for the very first time at 7:00 pm.
.......this massively inefficient workflow arises organically out of the nature of the work we do.”
The workflow torrent hitting managers sounds a bit like my work life at the World Bank, and probably for just about everyone else who is managing multiple projects under pressure. And it's fixable if management cares about the culture it is creating.
Rating the environment
Latest rankings of environmental and biodiversity health give Switzerland the top ranking, with the US in 33rd spot, and China at 118, out of 178 countries.
The Environmental Performance Index, produced by Yale and Columbia Universities and the World Economic Forum, periodically calculates then aggregates 20 sub indicators into global rankings and trends. Some sub indicators such as access to clean water show improvements, others such as fish stocks show the biggest declines. The indicators are still work in progress, as some ecosystems are hard to measure though technology is offering new options:
“A much wider array of tools for filling key measurement gaps is available now, compared to the 1980s and 1990s, when environmental indicators first entered the international spotlight. New technologies such as remote sensing and institutions in the form of third-party organizations have emerged, and the EPI makes use of these cutting-edge innovations. Fisheries measures, for example, do not come from traditional sources such as international organizations that aggregate national reports. Instead, fisheries data come from an independent academic watchdog group, the Sea Around Us Project, which uses diverse information streams to generate much more complete and accurate portrayals of fleet behavior than any single source. Air quality and forestry measures make use of satellite data to generate metrics that are far more comparable and comprehensive than what emerged from previous modeling efforts and national reports. New satellite data reveal the extent of forest loss and gain over the last decade, from 2000 to 2012”
Climate change vs jobs
The newest twist to the global energy story is the surge in US gas output, bringing tectonic shifts in relative gas and electricity prices. IEA data showing that 30 million jobs are at risk in European energy intensive industries (e.g., aluminium, cement, iron and steel, pulp and paper) because they now pay so much more for energy than their competitors in the US. The FT predicts this will change the politics of climate change policy.
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“Natural gas prices have fallen sharply in the United States, largely because of the recent shale gas boom, and today are about one-third of import prices to Europe and one-fifth of those to Japan. Electricity price differentials are also large, with industrial consumers in Japan and Europe paying on average more than twice as much for electricity as their counterparts in the United States; even Chinese industrial consumers pay almost double the US level.”
“A number of EU countries have embraced green energy subsidies, shunned nuclear power and resisted the shale exploration that has fuelled a manufacturing renaissance in the US, prompting growing anger among industry leaders who say this has been a recipe for competitive ruin.”
So as the FT points out, the worry is that in Europe climate change policies will be the easy target and get most of the blame, making the politics of addressing global climate change even harder.