Gladwell on Nassim Taleb

Sanjay pointed me to this article, which is a great read, and a good expose on how Taleb works. Taleb of course, was the guy who wrote Fooled by Randomness, which I reviewed last year. Gladwell's article is even more insightful than Taleb's book.

Empirica has done nothing but lose money since last April. "We cannot blow up, we can only bleed to death," Taleb says, and bleeding to death, absorbing the pain of steady losses, is precisely what human beings are hardwired to avoid. "Say you've got a guy who is long on Russian bonds," Savery says. "He's making money every day. One day, lightning strikes and he loses five times what he made. Still, on three hundred and sixty-four out of three hundred and sixty-five days he was very happily making money. It's much harder to be the other guy, the guy losing money three hundred and sixty-four days out of three hundred and sixty-five, because you start questioning yourself. Am I ever going to make it back? Am I really right? What if it takes ten years? Will I even be sane ten years from now?"

Al Gore on the Climate Crisis

Al Gore came to Google yesterday to give his slideshow/movie preview on the climate crisis. I notice that both Vinod Khosla and Gore are now referring to global warming as the Climate Crisis rather than Climate Change, which is accurate. His presentation of the problems facing us is scientifically accurate, according to the work I've done myself. His presentation is impressive and entertaining and I really like it, though apparently less scientifically inclined sources find it devoid of hope. Then again, I'm very much an engineer and think the challenges that climate change presents are things we can do something about.

The problem is convincing the same majority of Americans who believe in intelligent design that the climate crisis is real, and solving it is essential. Getting rich off oil won't do anyone any good if there's no planet left to enjoy. Our science education in this country is so mediocre and our media is so irresponsible about reporting scientific theories that basic facts like evolution are considered controversial.

Movie Review: Howl's Moving Castle

I don't think anyone watches a Miyazaki film without knowing what they're in for: a quirky, unique view of the world, a well-defined message telling you what the film is about, and gorgeous animation.

Howl's Moving Castle definitely delivers on all three, but where does it rank in the pantheon of Miyazaki's movies? While it's much better than the over-bearing Princess Momonoke, and more comprehensible than the enigmatic Spirited Away, it's nowhere close to the top 3 of his great works:

1. Nausicaa of the Valley of the Wind
2. Kiki's Delivery Service
3. Tonari no Totoro

In terms of the quality of the English translation, it's quite obvious that Cindy & Donald Hewitt aren't Neil Gaiman. The language is stilted and stiff, and lacks the flow and lyricis of Gaiman's adaptation. (Or the Burgess translation of Cyrano de Bergerac)

It's worth watching, but probably worth finding the original Japanese version with English subtitles.

My Endorsement: John Forester

I endorse John Forester as League of American Bicyclists director for region 6. I know both John Forester and Amanda Eichstaedt (née Jones) quite well. I interviewed Forester in 1992 for my Bike Path and Bike Lanes article, and Amanda Eichstaedt was in my LCI certification class. While I very much like Amanda as a person and she's done great work in the past organizing BikeEd courses here in the Bay Area, there is no doubt in my mind that there is no one as qualified as John Forester to represent the needs of cyclists at the National level.

Forester (yes, he's one of C. S. Forester's sons) wrote the essential cyclists' reference: Effective Cycling, was a previous League president, and developed most of the theory and practice behind vehicular cycling, and fought most of the battles against the highway establishment for cyclist's rights to belong on the road. The fact that Foothill Expressway, Central Expressway, and many of the roads we ride on in the Bay Area today are available to cyclists is due to his work as an advocate for cyclists' rights in the country.

Conventional financial planning might be bad for your financial health

Professor Laurence J. Kotilikoff analyzes conventional financial tools and finds them wanting:
Although mathematicians, economists, and engineers are well versed in dynamic programming, the architects of traditional financial planning software are not. Or, if they are, they are constrained by their superiors to keep things simple, which, in this context, means failing to elicit much of the information...

...None of us would go to a doctor for a 60 second checkup. Nor would we elect surgery by meat cleaver over surgery with a scalpel. And any doctor who provided such services would be quickly drummed out of the medical profession. Financial planning, like brain surgery, is an extraordinarily precise business. Small mistakes and the wrong tools can just as easily undermine as improve financial health.

Yet is the fault really with the financial planner? Or is it really with the typical consumer? Very few folks enjoy playing with spreadsheets and doing the tedious work of say, rebalancing your portfolio. It's also amazing how much resistance people have towards managing money --- one engineer I spoke with a few years ago told me that tax planning meant that he was working for money, and that if he just worked hard, the money would come and he wouldn't have to "work for money." So it's not surprising that financial planners give such customers exactly what they want: a painless 60 second questionnaire that doesn't do any one much good.

Ultimately, perhaps it's no coincidence that the best site for financial planning I've seen was done by an engineer. It's very much do-it-yourself, but it has one thing that no other financial planner will give you: research backed by someone who's staking his own retirement on the results!

(Note: a tip of the hat to Scott Burns who pointed me at this study)

The Redwoods on Steep Ravine

This was a fantastic time on Steep Ravine. So much water that the creeks and streams were gushing like jets, and the roar of the water was so loud we couldn't hear each other and had to shout! 

Climbing out of Stintson Bach

 

Lisa & Patti enjoy Stintson Beach

 

Lisa on the Matt Davis Trail

Yes, the wildflowers are out! 

Review: The Cosmic Landscape

Leonard Suskind is one of the co-inventors of string theory, but this book is not, strictly speaking, an explanation of string theory. Rather, Suskind uses the book as a platform to explain and evangelize the Anthropic Principle as an explanation of why the world we exist is the way it is.

What's wierd about modern physics is that it seems to be exceedingly complicated. Considering that up till the invention of quantum mechanics, all the physics that was known were really short and simple, this is a strange turn of events. Suskind deserves kudos for not attempting to oversimplify string theory, Feynman diagrams, or the strange world of quantum mechanics. In fact, he has one of the best explanations of Feynman diagrams I've read to date. His explanation of the many-worlds interpretation and the megaverse/multiverse is also thorough, fair-minded, and extremely well put. Science Fiction fans will find a lot to enjoy in this book.

Ultimately, though, my recent foray into modern physics is disappointing. There are no deep insights, no grand theories that explain anything. String theory itself makes no predictions:

Throughout this book I have dismissed beauty, uniqueness, and elegance as false mirages. The Laws of Physics (in the sense that I defined them in chapter 1) are neither unique nor elegant. It seems that the world, or our part of it, is a Rube Goldberg machine...

... I often joke that if the best theories are the ones with the minimum number of defining equations and principles, String Theory is by far the best --- no one has ever found even a single defining equation or principle! String Theory gives every indication of being a very elegant mathematical structure with a degree of consistency far beyond any other physical theory. But nobody knows what its defining rules are, nor does anyone know the basic "building blocks" are.

Review: Superman: Secret Identity

I seem to be on a Kurt Busiek binge lately. This little piece was a four part mini series focusing on the life of a Clark Kent who was teased as he was growing up and then discovers to his surprise that he does have the power of Superman. This is, of course, the ultimate adolescent fantasy, and Kurt Busiek is well aware of it and plays on it quite well. His aim, which he discloses in the foreward, was to use Superman as an icon to reflect on the various phases of a man's lifecycle, so he has this Superman age, so he deals with the problems of being an adult, becoming a father, having children, and then faced with losing his powers as he ages.

Overall, the topics are handled quite well, and the book is a good read, but rather lightweight. The topics are breezed through rather cursorily, though the art is gorgeous and lovely to look at. Recommended, but not nearly as insightful as Alan Moore's Miracleman. Read that first, if you can get a hold of it.

2006 Book Reviews

If you're just looking for reading materials, I've recently posted the 2006 books of the year.

Fiction

• The Algebraist
• Einstein's Dreams
• Ammonite
• The Merchant Princes Trilogy
• Coraline
• Singularity Sky
• Marooned in Realtime
• The Man Who Folded Himself
• The Curse of Chalion
• The Developers
• The Paladin of Souls
• The Hallowed Hunt
• A Long Way Down
• Anansi Boys
• Tomorrow Happens
• Accelerando
• Rainbow's End
  

Non-fiction

• Hiding in the Mirror
• What's the matter with Kansas
• Unconventional Success
• Perfectly Legal
• The Cosmic Landscape
• Everything Bad is Good For You
• The Four Pillars of Investing
• Alan Moore's Writing for Comics
• The Undercover Economist
• The Two Income Trap
• The Pollysyllabic Spree
• The Omnivore's Dilemna
• Kingdom Coming
• Making Globalization Work
• Warped Passages
• The Long Tail
• The Way to Win
  

Graphic Novels (aka Comic Books)

• Local Heroes
• Shock Rockets
• Akira
• Superman: Secret Identity
• Tales of the Slayers
• Trinity
• Wonder Woman: Second Genesis
• Castle Waiting
  

Review: The Algebraist, Iain M. Banks

Banks is not exactly a hard science fiction writer, even though his novels have a veneer of it. Typically, he leaves the hard science exposition really empty (unlike Stephen Baxter) and concentrates on the characters. In this book, however, he plays a joke on long time readers of his, and writes a book that is more mystery than science fiction or character exposition.

The main plot revolves around Fassin, a delver, a member of a class of scholars who have been privileged to interact directly or through telemetry with the denizens of his local system's gas giant, creatures who call themselves Dwellers. The Dwellers are a really long-lived species, dating back several billion years, but seem to have dropped themselves out of interacting with other species that they call "The Quick".

Several hundred years ago,Fassin accidentally discovered a piece of Dweller text that implies that the Dwellers have a secret wormhole network that permeates most star systems in the galaxy, and when word of that leaked out a war was started. Now Fassin must once again delve into the local gas giant and find the secret key to the wormhole network before invaders take over his home. The mystery to be solved by the reader is the nature of the wormhole network and what the key is. Clues are scattered throughout the novel, which has the structure of a repeated quest.

Distractions are provided through descriptions of a number of Fassin's friends and their relationship to him. This piece of misdirection worked incredibly well --- for instance, Banks spends page after page building up a particularly dastardly villain, only to dispatch him in less than a paragraph near the end of the book, which meant that I didn't concentrate on the mystery at all. There's no physics knowledge or higher mathematics needed to solve the mystery --- all the bits are provided there right in the book for you.

My only complain about the book, then, is that Banks needed to say, "Mystery! Mystery!" all over the frontipiece of the book instead of "Science Fiction!" Recommended, but I would not buy the hardback.

Rebalancing a Portfolio is hard...

So I finally sat down and systematically rebalanced my portfolio. From when I started to when I finished was about one and a half hours. My primary tools were Vanguard's web-site and Excel (any spreadsheet will do, but when you copy and paste a table from a web browser into Excel, it does the right thing and numbers stay numbers, which is very important for fast imports).

Vanguard offers a unified account consolidation view (including all your bank accounts, savings accounts etc), so when I selected and pasted that into Excel, I got all my financial data in one easy place (I don't trust my quicken accounts, since it's not completely up to date). I then create a table with my ideal asset allocation (I use the table provided at The Retire Early Home Page to set up my allocations).

After that, it's a matter of systematically assigning allocations to my existing investments, and adding up all my assets. (Don't forget to subtract your liabilities!) Then you figure out how far each asset class deviates from your ideal, and rebalance. In my case, there were a few items I didn't want to touch, so I over-rode my ideal allocation and went with something less than ideal (isn't that life?). For each asset class, you might want to sub-divide the allocation. (For instance, for domestic stocks, you might want to divide into small cap/mid cap/large cap, or for maximum convenience just use a "Total Stock Market Index")

Then another visit to the Vanguard web-site to perform the asset re-allocation.

A few things to watch out for:

1. When allocating assets, if possible move stuff around in retirement accounts for the rebalancing. That allows your rebalancing to be tax-free to the largest extent possible.
2. Consider the size of the re-allocation. If it's large enough, ETFs might make more sense than index funds. If it's too small, then mutual funds are more efficient.
3. If you're going to take a loss from a re-allocation, depending on your circumstance, it might make sense to try to make it a long term loss rather than a short term loss, or vice-versa. (one tax management trick I've done in the past is to harvest a loss by exchanging one fund for another fund of the same asset class, thus staying invested while getting a capital loss for tax purposes --- but obviously, that's not as good as having lots of capital gains everywhere in your portfolio!) Note that such tax tricks are better off done closer to the end of the year when your overall tax picture is closer.
4. Your tax situation should only dictate which particular vehicles you want to use for your asset classes, not which asset classes you want to be in.
   

How often should you rebalance? Well, if you're David Swensen managing the Yale endowment portfolio, every day! If you're the typical individual investor, then once a year is what's typically recommended. Of course, your circumstances can vary!

Interestingly enough, if Vanguard is your employer's 401(k) manager, the on-line tool gives you a one-button rebalancing option (it rebalances to your 401(k) new money allocation, which is what you want if the 401(k) is your primary investment asset). That's very nice, but can't take into account your overall financial situation. Nevertheless, for those whose primary investment assets are in their 401(k) and are lucky enough to have Vanguard as the 401(k) trustee, it's a very nice button. Just push it and you're done! No spread-sheets, no tax consequences, and no hard thinking.

Trouble comes in threes

On Sunday, my network hard drive (a Ximeta NetDisk) died a horrible death, taking all the data on it with it. And of course, I did not have an adequate backup plan. So off to Fry's again, where I bought a replacement IDE drive for the Ximeta enclosure (which was fine and serves quite well) and an external USB drive to back up the Ximeta disk.

Then today, my laptop hard drive died. Fortunately, it's a corporate machine so it's backed up by IT (I think!).

Finally, on my way home, I got a flat. Let's hope that's the end of my troubles this time.

Review: Hiding in the Mirror

Laurence Krauss wrote The Physics of Star Trek, which despite its lightweight nature, was good reading and accurate. This book, a non-technical treatise on string theory and superstring theory, is a good enough book for someone with very little understanding of Physics or Mathematics, but unfortunately, string theory and all of its variations are such a complex subject that I barely gained an understanding of what it was by the end of the book.

The first half of the book is about dimensionality, which includes one of the best explanations of Einstein's theory of relativity in layman's form that I have read. This part is easy going and a good refresher even for those of us who've covered the material before. The second half bogs down in attempts to explain Mathematical concepts in English, which of course is very hard, especially since string theory appears to be an entirely mathematical concept --- there has not been any successful attempts to prove it correct or wrong, which means that the theory has made no useful predictions. Of course, that doesn't mean it's not elegant mathematics, but it does mean that it's an incomplete story. I hope Krauss is around to explain the story when the Physicists finally figure it out one way or another.

More views from the road up Fremont Peak

 

Views from the road to Fremont Peak

 

Harvey Wong at the top of Fremont Peak

 

More beautiful green hills