Sunday, September 28, 2008

Sarah Palin dumber than a pillar box - the case for the prosecution

My co-blogger has been overcome by ditzy-chick solidarity which has led her to try to defend Sarah Palin's performance in the infamous Katie Couric interview. I accordingly feel honour-bound to present the case for the prosecution.

1) The question that floored her (about Kissinger and Iran) was an easy question. It was a closed question that could be answered with a variant on "Yes" or "No". It was also one of the most likely questions to come up - after Iraq, Iran is the foreign policy question that has been getting most traction in the American media, as well as an issue on which McCain has been attacking Obama. Palin has had a month to prepare for this interview, and this question would have been one of three of four key questions she had prepared answers to.

2) Palin is an experienced politician. She wasn't cracking up under the pressure of a (remarkably soft by British standards, although apparently normal for America) interview. She has been here before, lots of times. She was cracking up because she was being asked difficult questions she didn't know the answer to. Besides, if she cracks up like that under soft questioning then she isn't up to a job which involves a lot of negotiation.

3) There is nothing in Palin's background to suggest that she can think. Her degree is in journalism (she switched from business administration, another easy subject) from a not particularly good university. She dropped out repeatedly and took 9 semesters to complete a 4-year degree. The only real jobs she did before becoming a full-time politician were sports journalist and fisherman's assistant.

4) Palin does not come from a working class background. Her father was a schoolteacher, and could afford to send her to out-of-state private universities. She will have grown up perfectly aware that there were countries outside the United States, that books existed, etc. Teacher's children are massively over-representd among first-generation Oxbridge students because they grow up in a pro-intellectual environemnt. If a teacher's kid is a know-nothing, it is either by choice or becuase she is chronically dim. Neither is acceptable in a potential leader of the free world.

Femme-de-R also tries to claim that a man would have got away with being utterly clueless by "going on the attack". She assumes Couric is an incomptent interviewer, rather than a merely easy-going one. If Joe Biden in the same position had laid into Kissinger without answering the question, he would have looked like an arrogant moron. If he had laid into Couric, she would have coped (she is a professional) and he would have looked like a big meanie beating up the cute blond girl.

I agree with Femme-de-R that a significant number of dumb voters would have been fooled by the bluster. But they would probably have been fooled by the ditzy-chick act as well, as Femme-de-R was. George W Bush didn't get a free pass on being dumb, despite being a lot brighter than Palin. It was known at the time that he was too dumb to be President, which is part of the reason why he lost the election.

Both Bush and Palin get a lot of sympathy votes from dumb Americans who feel "represented". This is a bug in democracy, not a feature. If these people end up with President Palin (and McCain isn't getting any younger), they deserve it.

Sarah Palin: How female politicians can't win

Female politicians suffer whichever way they play it. Hilary Clinton was dissed for being too masculine:

many of Hillary's attributes—toughness, control, emotional distance—are qualities that are sometimes admired in men but almost never in women.

And not a true female candidate. Yet Sarah Palin is suffering the opposite - the fact she acts like a woman is letting her down.

Palin was called to stand down by a conservative candidate after the latest in a line of 'media roasting'[s].

You can watch the offending interview with Katie Couric below:

Among the comments below the Youtube clip are this one by jlifegivingdeath:

I've seen rocks with more intelligence then Sarah Palin.

I don't agree. She doesn't sound dumb, just appallingly ill informed. And her interview responses on this and a previous clip explain why.

This is a lady from outside an urban elite who regularly travel outside America. This isn't unusual - as a Brit, I never travelled beyond France, Germany and Holland until I reached 21, and I still haven't set foot outside of Europe. If I had five children, I probably wouldn't before I reached Sarah Palin's age. If I were American, I doubt I would have a passport - America is far bigger than Europe. In contrast, my BF, who comes from an upper middle-class family, has been to South Africa, Singapore, America, etc.

Palin will not be alone among American voters in thinking what is outside of America is moderately unimportant. They too won't think there is anything wrong in suggesting that, as someone whose state borders a foreign country, this makes her better able to understand foreign policy than a former governor of Kansas. To a European, it sounds ridiculous. It's like a Councillor for Dover thinking they have a better grasp of foreign policy than someone from Derbyshire. Although her response sounds stupid to media commentators in New York and Europeans, I can imagine many small-town American voters were nodding their head in agreement.

So what has this to do with feminism? Well, a guy would have got away far better with being clueless than she did. Palin knew she was clueless and was flustered. Men in this position start attacking and, interestingly, this can cover up their ignorance to listeners who don't quite grasp what's going on. It can also shut-down an interviewer who is equally clueless. I suspect Couric was clueless because, faced with someone floundering like that during a hostile interview, I would have gone off-script and in for the kill. Couric didn't. I am sure Paxman could have reduced Palin to tears.

A clueless man, faced with the Kissinger question, wouldn't have floundered through it and been shown up as an idiot. He would have started attacking:

"I don't think Kissinger has much bearing on the foreign policy issues America faces today. He had his finger on the pulse of the situation, but times have changed. Given with the realities of the situation we face, it would be ridiculous and naive to suggest that..."

An unconfident interviewer will flounder under this sort of attack, giving an audience the impression that they are embarrassed to be shown up as holding truly heretical views. The guy would sound like he had authority, despite being equally at sea. In contrast, Palin showed her lack of confidence and became defensive. She looked clueless, even to an equally ignorant or unattentive audience.

So why do women sound like they lack authority? Women are dissed for being too masculine or aggressive, and praised for compliant and typically female behaviours. They get more attention from guys if their voice goes up an octave and they listen attentively while he mouths off. They are encouraged to seek approval and not power, and try to make others feel at ease by being open about their lack of confidence. This is great if you're trying to pull a bloke, but less good if you're attempting to be a professional politician.

Training aimed at encouraging women into politics is designed to help women adopt more masculine behaviours. Women are taught that men feel equally unconfident, but bluff through it rather than openly discussing it with others. Women are also taught that, however rude it feels to them, they have to shout over other people, interrupt and go on the offensive.

Of course, it's all a balancing act. Pull the aggressive trick too much and you start being attacked for being a non-woman or receive homophobic abuse. Women have a huge balancing act to do - they need to be attractive and feminine, while somehow not displaying any typically female traits. Men can be ugly and as aggressive as they want.

I think Sarah Palin represents the culture and views of a large number of poorer Americans, who may leave America once in a lifetime, if that. Many of those Americans believe 'foreign' is Alaska and New York. This is bad for Europe and the world, and I don't want McCain to win, but it is important that these people be represented.

In order to represent them better, Sarah Palin needs to act more like Clinton. She doesn't need to be a Mastermind candidate on the topic of Israel (does an encyclopedic knowledge of any topic make you qualified to lead?) She does need to be better briefed, and more prepared to cover up the gaps with a stronger, more forceful approach. Many male politicians get away with being entirely clueless much of the time. No one can be made to feel like an idiot without their consent.

Friday, September 26, 2008

US school kids warned off 'dangerous' chemical

More than half of US school kids support a ban on ubiquitous pollutant" dihydrogen monoxide, according to research published by the Dihydrogen Monoxide Research Division.

Full story in New Scientist.

Thursday, September 25, 2008

Ten signs you might be living in the Soviet Union

1. The commanding heights of the economy are taken into public ownership
2. Political opponents of the regime are subject to detention without trial
3. Ideological correctness and loyalty to the General Secretary are more important than competnence in determining who is promoted
4. The State rejects Darwin's theory of evolution and promotes bogus biology instead
5. You lose a war in Afghanistan
6. While spending so much money on weapons that it brings you country to the point of bankruptcy
7. At the climax of the resulting crisis the ruling party nominates a visibly senile fool to the highest office of State
8. Your leaders bang their shoes on the table at the UN but don't achieve anything
9. Botched government farm policies mean that ordinary people can't afford healthy food
10. The Party claims to speak for the Proletariat and against the Evil Elites, but in fact the proletariat is roundly shafted.

Any resemblance to George Bush's America is purely coincidental.

Wednesday, September 24, 2008

Three of the best iPhone apps for bloggers

I'm slightly sceptical about these '5 Must-have' or '10 Best' articles, because I don't 'Need' my iPhone to be a remote control for my computer and no one is going to try all the growing number of iPhone apps.

But here are three apps that I've tried and found useful for blogging on the go:

1. BlogPress (£5.99) allows you to easily update Blogger on the move. Previously, the only applications available were for TypePad and Wordpress bloggers. Alternatively, you could just use Safari to visit, saving you £6.

2. Twitterific (FREE) lets you 'Tweet', reply to other Twitterers, and view your Twitterfeeds online. You can use the iPhone GPS and camera to add the location of your 'Tweet' and photographs. However, you can't follow new people using Twitterific.

The free version of Twitterific has adverts on it so I bought Twitterific Premium (£5.99), which also allows you to change the background to white (but I prefer the black background).

If you don't fancy Twitterific, other popular alternatives are Twittelator(FREE) (which also has a 'Pro' version) and Twinkle (FREE). Twinkle apparently allows you to locate and 'Tweet' at other people who are close to you via the iPhone GPS.

I choice Twitterific because the iPhone apps store had a few complaints about Twinkle being unstable (e.g. by iPhone Faye) and a couple of people (e.g. Christian_BS) had complained that Twittelator had a confusing user interface.

If you haven't figured out why you want to use Twitter (I hadn't) then think of it like a cross between MSN and a blog. A blog is a way of publicly communicating thoughts of 100 - 1500 words long. MSN is a way of privately exchanging short, immediate messages with a few friends. In contrast, Twitter allows you to have an instantaneous, public chat with as many people as you like.

Unlike MSN, you can also get pithy news updates from, for example, the Mars Phoenix Probe.

This video tries to explain in plain English why you might want to use Twitter, but makes it sound really, really boring.

3. Manifesto (£1.19) is an excellent RSS feed. RSS feeds are, of course, great for following other blogs and news from your favourite websites. Manifesto allows you to import feeds from Google Reader, and view new feeds or feeds grouped by news source. Best of all, however, it allows you to view news stories you've flagged offline.

Byline does a similar job but is more expensive (£5.99). NetNewsWire (FREE) is a popular native iPhone version of the Mac desktop software, but has had a few users (e.g. MZ3791) complaining in the iTunes store that it has stability problems.

This is by no means a comprehensive review of this software since it just covers what I use regularly and what I do with it, so please add your thoughts.

On a lighter note, I've really enjoyed playing Touch 'em, Critter Crunch and Labyrinth. Touch 'Em is an utterly mindless, but strangely compelling, game which involves touching animals icons as fast as possible. Critter Crunch is hard to describe, but inexplicably reminds me of the wonderful Meteos on the Nintendo DS, while Labyrinth sounds and behaves just like a real wooden ball puzzle.

I deinstalled Tap Tap Revenge because the music was appalling and the game felt too easy even on extreme. However, it's FREE so simple to make up your own mind.

Hamlet (Facebook News Feed Edition)

Rosencrantz, Guildenstern and Hamlet are now friends.

Hamlet wonders if he should continue to exist. Or not.

Hamlet thinks Ophelia might be happier in a convent.

Ophelia removed "moody princes" from her interests.

Tuesday, September 23, 2008

They never learn, do they

In 2003, the Indy complained that the then Chancellor's tax credit system was too complex, meaning it was hard to administer. The Times, writing in 2007, said that:

Gordon Brown’s big idea looked good on paper but has become a byword for confusion, maladministration and misery for some claimants

So I'm shocked to find that Brown hasn't learned from his mistakes in five years. Yep, he's now creating another application procedure to give out an extra measly £700 [Hat tip to Obnoxio the Clown at Devil's Kitchen]

If families don't have the money to pay for an internet connection, why doesn't Brown just give poor people extra money directly? Why go through the palaver of having these poor sods:

who have been identified by local schools as having no access... apply for vouchers of up to £700 pound so they can get online.

Do you think any of them are going to bother? Especially after they've already navigated the tax credit system? Well, do you?

Maybe he's afraid if he gives people a pot of money to play with, they might not spend it on broadband and the collected works of Hemmingway. They might blow it all on chips, or something.

On the subject of chips, how many times do I need to say this? Rampant womens' clothing size inflation means a Size 4 is what a Size 10 was just a handful of years ago. So Reiss is just acknowledging that not all its customers are built like whales and might like some smartly tailored work clothing, instead of having to find something in TopShop that isn't a boob tube. Does eating disorder charity Beat want to make small, thin women illegal or something?

Monday, September 22, 2008

Update: A Nudge in the wrong direction

LibertyCat says he would have focused more on why Nudge wouldn't work. Tim Harford, for example, argue that people aren't always that easy to Nudge. Nudging only works if people have to make an important decision once or if the decision has a low cost (financial or otherwise). If someone makes an expensive decision numerous times, they learn from the experience and begin making increasingly rational choices.

So why are people obese? Well, perhaps being moderately overweight doesn't have many costs. If you are accepted by your partner and peers, and won't suffer unduly until you are in late middle age, then an extra chocolate bar looks like a rational decision. Many people don't care much about the cost to their health because they reason it's better to drop dead at fifty with a heart attack than get Alzheimers' at ninety. I can't say that's the wrong thing for them to think, although public health experts would disagree.

Another reason why Nudging doesn't work is drafting the legislation. Can you imagine drawing up rules to prevent shops strategically locating chocolate oranges? If the idea brings you out in a cold sweat, you wouldn't be alone.

Finally, to reiterate my point, widespread Nudging changes the relationship between the individual and the state. The Government no longer exists at the behest of the people because Nudging assumes they are irrational and cannot be trusted to act in their best interests.

Or, as LibertyCat put it, if democracy only gives you the choice about whether the state should be your father or your mother, then we're screwed.

More of a Shove than a Nudge

Nudge could be one of the most important books of the next ten years, given it has apparently inspired both Obama and Cameron.

I haven't read all the book yet, but I've seen enough to realise so-called libertarian paternalism isn't as benign as it initially sounds.

People are not rational and sometimes make bad decisions. But, instead of banning the bad choice, authors Thaler and Sunstein recommend setting things up so the unwary blunder into your preferred option. This, they term 'choice architecture' or giving people a 'Nudge' in the right direction. For example, since people tend to stick with the status quo, occupational pension schemes are better being 'opt-out' rather than 'opt-in'.

So far, so good. Well, maybe... The authors argue that since people are 'Nudged' by their surroundings, failing to intervene doesn't stop people making biased choices. It's just their choices are randomly biased by their environment, rather than them being 'Nudged' in the right direction. They give the example of children in a dinner queue. Children will preferentially choose the first thing they see. So, surely, it's better to put fruit first, rather than leave this to chance?

Well, sort-of. Government should 'Nudge' people if the alternative if banning something. But only in places where the Government should intervene and only where it's blatantly obvious which direction people should be 'Nudged' in. So I'm entirely happy for the state to 'Nudge' people towards paying their taxes or saving for retirement. The problem comes when the Government decides that no part of human society lies outside its remit.

Cameron is an indiscriminate 'Nudger'. Anyone remember his rant at WH Smiths about putting chocolate rather than real oranges close to the tills? It's a textbook example of Nudge. Two problems:
  1. Should the exact position of (legal, non-age-restricted) products in a shop be any of the Government's business?
  2. What should the Government do about it if it is?
Once you take the political position that people's choices are strongly influenced by powers outside of their control, and they often make ones that are bad for themselves and society, then no aspect of life is and should be outside of Government influence. I say 'political position' here - it's possible to believe this personally, but not believe it's a good idea for Government to get involved.

Furthermore, if people can be effectively 'Nudged' to make better choices without stirring up resentment by banning everything, then why not? Surely a little extra legislation to stop WH Smiths selling more chocolate oranges by putting them close to the till where people are bound to pick them up is better than mass obesity? Why not force retailers to put health foods in impulse-buying 'hot spots'?

You can see where this ends. And that's why 'Nudge' should be viewed with care. Not everyone is a zombie sleepwalking to the world of 'Wall-E'. And the Government doesn't necessarily know better than us which direction we need to be 'Nudged' in. Therefore, although it's useful to understand how to tailor public services better, we should give further state interference a good 'Shove'.

Sunday, September 21, 2008

Creationism row missing the point

I've just noticed this story (hat tip Crooked Timber) about the Royal Society sacking its director of education over remarks about creationism that were misinterpreted by the press.

Was this fair? Most of the defences of Reiss get the wrong end of the stick by defending Reiss' views as a legitimate alternative viewpoint that shouldn't be shouted down by the voice of authority. This is bogus. As a spokesman for the Royal Society, he isn't entitled to "freedom of speech" or "a respectful hearing". If he can't stick to the Royal Society party line in public then he shouldn't take their money. He is free to discuss heterodox viewpoints in his day job as a professor of education, where he is (quite rightly) protected by academic freedom.

If Reiss' actual words - which do not endorse the teaching of creationism in schools - reflect the Royal Society's official position then of course he should not have been sacked for being misinterpreted. But even this isn't the real issue.

The reason why people not usually given to media hysteria like Sir John Sulston (Nobel prize for his work on genomics, successfully navigated the row with Craig Venter over leadership of the human genome project without losing his cool) have lost patience with Reiss is that the row has exposed a much larger division between working scientists and the education establishment over the purpose of science education.

Science is an inherently elitist activity - and unlike other elitists scientists typically feel no shame about this, because the scientific elite (like the medical profession) still enjoys a measure of public trust and respect in a way that political and financial elites do not. From the perspective of a working scientist, the purpose of scientific education is to find and train future scientists, doctors, engineers etc. and science education is therefore almost as much of an elitist pursuit as science itself. As scientists, the Royal Society fellows calling for Reiss to go are assuming that the Royal Society should endorse this view and expect its Director of Education to do likewise.

Reiss is a member of the educational establishment. His day job is as a Professor of Education. His professional academic website does not mention any experience as a scientist or science teacher. Unless his first degree (which he does not mention) is in a hard science subject he is not qualified to engage in science or science education. It is a case of those who can't do, teach. Those who can't teach, write about teaching.

The educational establishment is anti-elitist - it has to be, because the political and media elites it truckles to use anti-elitism (largely unsuccessfully) as a device for deflecting well-deserved public derision. Reiss' article only makes sense from the perspective of a professional "educator" who thinks that science lessons should be "relevant" to people who will never study any real science.

Reiss admits that
Creationism can profitably be seen not as a simple misconception that careful science teaching can correct. Rather, a student who believes in creationism has a non-scientific way of seeing the world, and one very rarely changes one's world view as a result of a 50-minute lesson, however well taught.
To most working scientists, this begs the question Why are we wasting valuable classroom time on these losers?. Creationists are skilled trolls, and dealing with a bright creationist kid respectfully without making it look to the rest of the class that they might have a point would require all biology teachers to have extra training in rebutting creationist talking points, as well as enough time on the curriculum to go into far more detail than we do at the moment on the evidence. To make the moment teachable for the rest of the class, it would be necessary to humilitate the creationist in a manner that would send his parents to their lawyer crying religious discrimination.

Almost all scientists are, or have been, professional teachers at undergraduate level. There are plenty of school science teachers who have research experience, either because they did a PhD before going into teaching or because they took part in a scheme to provide such experience. These people are qualified to represent the views of working scientists on the nature and purpose of science education - surely the purpose of the Royal Society's Director of Education. Reiss is not. He should never have been allowed anywhere near the job in the first place.

Friday, September 19, 2008

Some hard questions

Another day, another 'how I regretted my abortion' story from the Daily Wail. Every time I read these articles, with a similar compulsive relish to Prescott in a Chinese restaurant, I always wonder - what is the Wail trying to achieve?

Is it just that women enjoy reading how other women regretted their abortion? So a simple case of selling more newspapers. Or does the Wail have an agenda? Do they seriously think that anyone is going to be dissuaded from an abortion by reading this stuff?

I've never quite *got* secular pro-lifers. I guess I must have missed the memo. I don't understand how you can be so fervent when the body spontaneously aborts 10 - 50 % of pregnancies. What should a woman do, beat herself with birch twigs for murdering her own babies?

Furthermore, do they think that women are going to stop doing icky things with suction pumps if the Government bans abortion? It is not a new development - women have been endangering their lives with coat hangers, knitting needles and herbs for centuries. Yet, secular pro-lifers seem to gloss over this sort of thing. Instead, they live in a rose-tinted world where, deprived of the abortion option, women will stop having risky sex, and where children are an unabashed pleasure that, once experienced, will never be regretted.

If we assume that unwanted children stay unwanted, I desperately want to ask them: do you think the world is a worse place for having fewer unloved children living in unstable circumstances? Especially since the human body is crueler and has less conscience over terminating pregnancies than a woman could ever be.

The FSA: Blindfolding the markets in a minefield since 2008

Short-selling: A practice by which speculators bet, often with good information, on who is going to go bust next and, by doing so, act a bit like a canary in a mine.

If someone takes away your canary, you won't stop being scared of gas. No, you will be scared of gas everywhere, rather than just in places where your canary is pushing up daisies.

Malicious short-selling is already illegal. Therefore, the FSA's decision will just make the credit crunch drag on, since rotten institutions won't be quickly put out of their misery by speculators.

You don't blindfold frightened people. Oddly enough, it doesn't calm them down.

Thursday, September 18, 2008

An unintelligent guide to the banking crisis

Oliver James strikes again with this howler:

we have many financial institutions that exist through lending borrowed money, rather than their own.

Private banks are not the Government. They cannot print money. Therefore, they need to get it from somewhere else, namely people who lend them it.

I'm also fascinated by the 2000 study he quotes, with its large sample size of 26 people. Did the brokers studied masturbate and fish simultaneously? Or were these hobbies mutually exclusive?

Wednesday, September 17, 2008

An introduction to the economic crisis: part 3

You'll remember from parts 1 and 2 that we've covered banks lending to people who can't pay and insurance companies encouraging them.

In part 3, we're going to talk about banks that aren't banks trying to do bank-ish things. This hasn't caused any big banks to go bust, but does explain why no one trusts them. Which is why, if you remember, we are all f****d.

No one down, but many scared

One of the services that commercial banks provide is converting short-term lending (you deposit money in your bank account and can draw it out instantly) to fund long-term lending (you don't have to pay your mortgage back for 25 years).

Since short-term interest rates are lower than long-term interest rates, this is usually profitable. It's also rather dangerous because, if everyone wants their money back at the same time, all your money is tied up in mortgages so you can't pay them.

This happened to Northern Rock.

SIVs: not just the monkey form of the AIDS virus

Since banking is dangerous, commercial banks are heavily regulated. But some clever people realised that if you set up something that looked and quacked like a bank, but wasn't legally a bank, you could take more risks than the regulators would allow a bank to take. This meant that you could make more money.

SIVs and Conduits are 'brass plate companies' controlled by commercial banks. A brass plate company, you will remember from CDOs, is a company that doesn't have any employees and isn't legally owned by anyone. It's called a 'brass plate company' because it's only real asset is a brass plate with its name on it.

These companies borrowed money by issueing very short-term bonds. If you remember, a bond is something like a loan or a mortgage. Whereas a normal mortgage takes 25 years to pay back, a very short-term bond might need to be paid in a fortnight.

They invested the money they borrowed in low-risk, but long-term, assets. This meant they could make a profit from the difference between the low interest rates on short-term bonds and the higher interest rates on long-term assets.

So they needed to find a low-risk, long-term asset that paid a high interest rate. You may know what I'm about to say. Yep, it's the return of our old favourite - the 'low-risk' CDO.

When investors realised that SIVs were full of dodgy CDOs, they stopped buying the short-term bonds. Unfortunately, because the long-term assets took so long to give them their money back, the only way the SIV or Conduit could pay back the short-term bonds was to issue a new set of short-term bonds every fortnight.

The commercial banks that controlled the SIVs and Conduits didn't want everyone to realise that they had been aiding and abetting unlicenced banks. Therefore, they had to buy the dodgy CDO bonds to give the SIVs the money to pay back the short-term bonds no one wanted anymore.

This means that the large commercial banks own lots of dodgy CDOs. This is why no one trusts large commercial banks. And this, in short, is why we are f***d.

An introduction to the economic crisis: part 2

To recap

If you remember back to Part 1, our current state of f****dness has three components:
  • Banks have been lending to all kinds of people who can't pay, not just sub-prime mortgage borrowers;
  • Investment banks and insurance companies have been doing naughty things with derivatives and;
  • Organisations that are not banks have been acting in bank-like ways without a banking licence.

We have covered the first of these, where the dastardly CDO causes all kinds of problems. However, the chaos didn't stop there...

What's a derivative?

The nature of a derivative is summarised by Eddie Murphy in Trading Places. On being introduced to the people who own the bank he cleans, he tells them: "You guys are bookies".

A derivative is basically a bet on the price of some other asset. An asset can be anything. In Trading Places, Eddie Murphy bets on the future price of orange juice.

There are good reasons to do this. For instance, it allows you to get a fixed price for your orange crop while it's still on the trees. If you are an orange grower and are concerned that your oranges will fall in price before you get them to the market, you can bet that the price of oranges will fall. If it does, the money you make winning the bet will make up for the money you would have lost on the oranges.

... But you can also use derivatives for straight-forward gambling too. The villains in Trading Places thought they had inside information that the orange crop would be ruined by the weather. They bet the price would go up because of scarcity of oranges, so they would make money.

Unfortunately, they had been stitched up by Eddie Murphy. The price went down and they lost their shirts.

One of the dangers of derivatives is that you don't have to put all your bet upfront. This means that you can lose more than your original bet.

So what do derivatives have to do with the credit crunch?

The type of derivative that has caused most trouble in the credit crunch is a credit default swap or CDS. Investment bankers are paid large amounts of money to not confuse CDOs with CDSs. The letters are very similar, but the financial product is rather different.

A CDS is a bet on whether someone will fail to pay back a bond. If you remember from Part 1, a bond is something like a loan. Using a CDS to bet that someone won't go bust is called 'selling protection', because taking the bet can be insurance against a company going bankrupt.

This is dangerous because, since a CDS is a derivative, you risk having to pay out a very large amount of money, while gaining a small profit if your bet comes off.

Things get fun when investment banks and insurance companies started selling CDS protection on the 'Senior' bonds of CDOs. If you remember CDOs, they are a financial product containing the mortgages of people with a bad credit record. The technical term for this is 'credit turd'.

Since the Senior bonds of CDOs had 'no risk', insurance companies sold huge amounts of protection very cheaply. Of course, when it became obvious that large numbers of people wouldn't be able to pay their mortgages, it became equally apparent that the insurance companies wouldn't have the money to pay their losing bets.

This is what did for AIG.

An introduction to the economic crisis: part 1

A short summary of where we're at

The economy depends on people thinking their money is safe in banks, and bankers thinking their money is safe outside banks. No one thinks their money is safe in banks and bankers don't trust each other anymore. Therefore, we are f****d, because no one can get access to money when they need it - including banks.

The reason why no one thinks their money is safe in banks is because banks have lost money in the credit crunch and no one knows: how much money; whether they are telling the truth about it; and whether they will be able to pay.

The first way banks lost money was sub-prime mortgages. A sub-prime mortgage is a loan to someone with a history of borrowing money and not paying it back. This is called 'having bad credit'. But, in fact, the problem is much larger.

This is because:

  • Banks have been lending to all kinds of people who can't pay, not just sub-prime mortgage borrowers;
  • Investment banks and insurance companies have been doing naughty things with derivatives (I'll explain derivatives in part 2) and;
  • Organisations that are not banks have been acting in bank-like ways without a banking licence.
So, to summarise this far: We know we are f***d, we don't know how badly f****d and we don't know who is f****d. Furthermore, no one knows exactly what to do about it.

A little background on banks

Banks provide money to people who need to borrow money, such as home buyers and businesses looking to expand.

Commercial banks take people's savings and lend out the money. They make a profit by charging a higher rate of interest on loans than they pay on savings. The largest commercial banks in the UK are HBOS and Lloyds TSB.

Northern Rock and HBOS got into trouble by offering mortgages to people who couldn't repay them. They did this because house prices were going up so they assumed if the person couldn't pay, they could sell the house at a profit. If the person did pay, they could charge them a high interest rate on their mortgage if they were at risk of not being able to pay.

Investment banks act as an intermediary, allowing the public to lend money to large companies directly by buying bonds. A bond used to be a piece of paper proving that you'd lent money to the company. Now, bonds are electronic. The investment bank makes money by charging the large company a fee for its services. The major surviving investment banks are Goldman Sachs and Morgan Stanley. Investment banks that have gone bust in the credit crunch include Bear Stearns and Lehmans.

Barclays and HSBC have both investment and commercial banking businesses.

Going back to bonds

In America, investment banks had found a way to do the same thing that they did with bonds, with mortgages. This is called 'securitisation'.

Securitisation means that an investment bank acts as an intermediary between the public and 'mortgage banks'. An example of a mortgage bank is Countrywide. Countrywide lends money to US home buyers and then immediately sells the loans to investment banks for onward sale to the public. The resulting bonds are called ABS, which stands for asset-backed securities. Each ABS contains bits of around 1000 mortgages.

So far, so non-toxic...

I do not like them, Broker Joe. I do not like your CDO!

Investment bankers thought they could make more money by convincing the public that investing in ABS, even ABS based on sub-prime mortgages, was never going to lead to them losing their money. Hence, the invention of the collateralised debt obligation or CDO. A CDO is a brass plate with the CDO's name on that is controlled by an investment bank.

A CDO bought a large number of ABS and turned them into new bonds of various levels of riskiness. I do not understand this bit either, but ask not how sausages are made!

The key point is that if you bought one of the less risky or 'Senior' bonds issued by a CDO, you couldn't lose any money at all until more than a certain number of people with mortgages in the ABS had failed to pay them.

If you could convince a credit rating agency, such as Standard & Poor's, that it was very unlikely so many people would fail to pay their mortgage, then they would give these 'Senior' bonds a 'triple-A' rating. This meant they were rated as safe as the American, Swiss and UK governments, and safer than large banks.

Unfortunately, the rating agencies were wrong...

A number of pension funds, which had invested in the 'safe' 'Senior' bonds lost money. A pension fund, of course, takes money from working people, invests it and uses it to pay their pensions when they are old and grey.

Bear Stearns also got into trouble because it was either hanging onto a lot of 'Senior' bonds in the hope of making money from them, or it had stockpiled ABS ready to package it into CDOs. Either way, it lost more money than it could afford.


Another problem with CDOs was that the legal paperwork was so complicated that it was often not clear who owned the underlying mortgages, which caused problems in court when the borrowers didn't pay.

Who owns the mortgage?
I don’t know
And you don’t either, Broker Joe
I would not know it here or there
I would not know it anywhere
I will not buy your CDO
I will not buy it, Broker Joe!

Details of my - currently tentative - NaNoWriMo entry

See previous post for details about NaNoWriMo.

Novel: Writer's Bloke
Genre: Chick Lit

'Back cover' blurb:

Aspiring feature writer Astrin Ghent is out of ideas. She's also out of cash, just moved to the big city and trying to kick off a freelance career. In short, writer's block couldn't have struck at a worse time. So when housemate, old friend and political apparatnik Terry suggests a party conference might get her creative juices flowing, she jumps at the chance... But that's where her problems really start.

How can she hope to focus on paying her rent by getting into print when she can't get hyper-brilliant, mega-arrogant and completely-out-of-her league political donor Anthony Havelock out of her head (and her bed)? Especially as they just can't stop running into each other. Soon Astrin has more than enough to write about.

But will she manage to apply fingers to keyboard and, more importantly, should she?

Three-line excerpt:

Cows are either very stupid or extremely laid back. The friesian was black, white and being sprayed green by two men wearing silly hats. But it was still chewing away happily. Astrin Ghent, unlike the cow, was not pleased, since she was standing calf-deep in manure.

Notes: 'Chicklit':

From the Urban Dictionary:

Books that are normally written by and for young women that are usually humorous.

From Wikipedia:

"Chick lit" is a term used to denote written for and marketed to young women, especially single, working women in their twenties and thirties.

Chick lit features hip, stylish female protagonists (usually in their twenties and thirties and in urban settings) and follows their love lives and struggles for professional success (often in the publishing, advertising, public relations or fashion industry). The books usually feature an airy, irreverent tone and frank sexual themes.

...the genre continued to sell well in the 2000s, with chick lit titles topping bestseller lists...

NaNoWriMo: Anyone fancy joining in?

In 2005, a friend joined 60,000 people worldwide all trying to write a 50,000 novel (or part of one) in only a month.

This ordeal, the condition for 'winning' National Novel Writing Month (NaNoWriMo) was long forgotten until I discovered NaNoWriMo was still tweeting away in cyberspace.

Far from being an isolated event, NaNoWriMo has apparently grown year-on-year until, last year, more than 100,000 people spent November ignoring their housework and wrecking their keyboards.

So, since November is only a month away, I'm debating whether to give it a try. My friend, whose unfinished reimagining of the Arthurian legend from Kay's point of view was a NaNoWriMo-beating 50,011 words, attributes his successful attempt to LiveJournalling.

He tells me that the fear of being berated by well-wishers if he failed to meet his approximately 1,667 words a day target drove him onwards over the finished line.

Me? I'm sceptical. I'm concerned readers stumbling upon my incoherent outpourings might think it's supposed to be any good since, as you may imagine, the complete-in-30-days approach to novel writing tends to focus on quantity at the expense of minor things like plot and believeable dialogue.

In the meantime, does anyone out there fancy joining me?

A simple guide to sub-prime

Microsoft have provided this helpful, animated guide to how mortgage bond trading triggered the current economic mess.

It's very cute - it has big, red arrows and everything!

Friday, September 12, 2008

Considering upgrading to a touch-screen smartphone

Believe nothing you read (especially this blog post!) In particular, if you are considering buying a mobile phone or other gadget, base your decision on technical specifications and online reviews at your peril. It may seem self-evident, but go into a shop and try before you buy.

I have had two mobile phones in the last fortnight. The first went back to the shop with much ranting after four days and a lot of frustration. I am delighted with the second. However, to read numerous mobile phone reviews, you'd think there was some sort of contest.

I didn't believe the hype over the iPhone, especially since I loved having a Nokia N73 with a 3.2MP camera and a Carl Zeiss lens, and was concerned about the iPhone's underpowered 2MP attempt. I also didn't fancy paying £100 on top of my existing contract.

After reading a number of reviews, I picked up a Samsung Omnia last Friday. In less than a week, I returned it to the shop. There is no point having 'everything', if getting to it makes you scream.

User interface

I found the user interface and controls on the Samsung i900 Omnia worse than the Nokia N73, something I would have previously believed impossible. There were several different home screens, which I could navigate between:
  • Apple iPhone-like screen with large buttons, which could be selected with my fingers
  • Standard Windows Pocket PC screen with a clock in the centre and tasks/calendar on the bottom
  • 'Widget' screen. This is shown on adverts for the Omnia. There was a limited choice of 'widgets', which could be pulled from a dock on one side of the screen using fingers
Navigating around these three menus to find what I wanted was confusing, and the 'widget' screen had so few widgets that it seemed to be merely a gadget.

The main problem, however, was that the finger-operated menus were just cosmetic. If I wanted to change settings or access folders, for example, I was thrown back to a standard Windows Mobile interface. This didn't seem to have changed since Cedric, the HP iPAQ Pocket PC I bought in 2000. The Windows Mobile menus had very small text and scroll bars, which needed a mouse or a stylus to operate.

Unlike Cedric, who had a sleek, silvery, in-built stylus, Samsung had included a stylus as an afterthought. It was a lipstick-like, telescopic thing that hung off the phone like a charm. In just two days, I had almost lost it twice.

Some of the scrollbars were so close to the edge of the touchscreen that they were hard to select with the stylus. Thoughtfully, Samsung had provided yet another control method for these occasions. The Omnia has a small, square optical mouse pad that I could use to control an onscreen cursor.

So, to recap, everytime I wanted to change a setting or access a file I had to use: 1) my finger, 2) a stylus and 3) a tiny optical mouse pad, in quick succession.


In bright sunlight, the screen became so faded it was almost unreadable. However, it seemed quite bright indoors and comparable with most portable devices I've owned, so I was reasonably happy with it until I put it side-by-side with a colleague's iPhone. Apple have a reputation for producing beautiful screens and, unfortunately for the Omnia, the quality bar is now much higher than it used to be.


Compared to my Nokia N73, photographs looked slightly blurred and washed out. I was disappointed because the Omnia's camera was 5MP. I suspect the lens wasn't as good quality as the Nokia.

Unfortunately, I can't show any example photographs because I didn't transfer the ones I took to my PC before taking the Omnia back.

Functions and software

Fans of Windows Mobile smartphones boast that there are hundreds of thousands of programs available for the operating system.

Unfortunately, as I found out, this isn't much use if they don't work. I spent most of Sunday attempting to a) sync the Omnia with my PC, b) change the background image to one I had created, c) download the Pocket Informant diary programme, d) change my ringtone and e) download some games.

This took around six hours, of which half an hour was spent looking for the stylus. Part of the problem was that syncing and changing settings was immensely frustrating due to the user interface problems.

The main problem, however, was that the Omnia has a non-standard sized screen (240 x 400, if you care about such things) and a confusing set of control options. When I downloaded one of my favourite Pocket PC games, Marble Worlds, for example, it didn't use the full screen and I couldn't control the ball. I could get the ball to bounce up and down on the spot but I couldn't move the ball despite pressing every button, wiggling the optical mouse, and prodding the screen with my fingers and the stylus.


I spent much of the summer of 1990 trying to install a 3-button mouse on MS-DOS. Admittedly, I might have been more successful if I wasn't aged 10 at the time. But, as the holder of a PhD in geoinformatics, I'm significantly more technical than the man in the street.

So, if I found this mobile phone virtually impossible to use, why are mobile phone pundits comparing it favourably to the iPhone? How can a 5MP camera, or the ability to prod and squint at MS Word documents, make up for the hours of time wasted trying to do the simplest thing?

It may be because the sort of people who write about mobile phones are also the kind of people who choose a mobile phone on its technical specifications and want to spend six hours of their weekend configuring it. It's a hobby, just like assembling a PC from scratch or building airfix kits, and it's not enjoyable unless it's a challenge. Alternatively, perhaps 'mastering' the Omnia is a status symbol, demonstrating technical prowess that resorting to an iPhone with its big, childishly coloured buttons does not.

For the rest of us, it's not surprising the iPhone has attracted so much praise if the Omnia really is the competition. Since I grew out of programming MS-DOS many years ago, I now have an iPhone.