In an earlier blog I named a few of my heroes in the cause of rational thinking. One of those is Michael Shermer who writes the Skeptic column every month for Scientific American. His latest in the December 08 issue talks about the penchant for us mere mortals to seek meaningful patterns in the random cacophony of news and events that bombard us every day. This is called patternicity.
As examples Mr. Shermer asks why do people see faces in nature, hear voices in electronic white noise, or images of the Virgin Mary in coffee stains and dirty windows. The answer he effectively argues is that we are programed by evolution to do so because sensing and reacting to patterns is at the very least a competitive advantage and in some cases a survival mechanism.
It is a competitive advantage because it provides for greater efficiency. For example early humanoids that were able to detect and then predict patterns of movement of game would be more efficient hunters. Similarly the ability to recognize patterns in the behavior of predators would clearly lead to a greater probability of survival and thus would be a genetic trait that would be reinforced in subsequent generations.
Mr. Shermer refers to work done by Harvard University biologist Kevin R. Foster and University of Helsinki biologist Hanna Kokko who have put forth the notion that whenever the cost believing a false pattern is real (i.e. a false positive) is less than the cost of not believing a real pattern (i.e. a false negative) natural selection will favor the development of patternicity.
A real life example that we can all identify with is how we react to a sudden change in our environment. Be it a loud noise or a surprise encounter with another person most people would describe their reaction as being startled - or some might say that (or you) gave me a fright. In other words we are programed to react to such situations as potential threats. You can see how the above theory works in this situation. Clearly the risks of reacting to a non-threat situation as if it were real are low, but the risk of not reacting to a real threat situation are very high.
The problem - As Mr. Shermer points out - is that we are not very good at figuring these probabilities so our tendency to see all sorts of weird patterns in non-meaningful data is usually a harmless low-cost artifact of our evolved need to detect and react to non-weird patterns. So keep on looking for UFO's and messages in tea leaves. For the most part it won't hurt anyone, but don't quit your day job.
Wednesday, November 26, 2008
Tuesday, November 18, 2008
The Auto Industry Dilemma
When is a "bailout" not a bailout? When it isn't. The choice of the loaded word "bailout" to describe the recent $700B TARP legislation and now being used in the context of the US auto industry travails is both unfortunate and inaccurate.
First a few facts. As previously explained in this blog we got into this mess because the dems in congress and their activist legal pit bulls cajoled and threatened banks to lend money to people who couldn't afford it to buy houses. Then they compounded the problem by strong arming Frannie and Freddie into guaranteeing those loans so that they could be packaged and sold as high quality investments. This whole house of cards was working fine until the housing bubble popped and folks who had no business being in homes they couldn't afford in the first place were under water and facing higher interest rates as their "teaser" mortgage rates began to reset to market values.
If this weren't bad enough a few "too clever for their own good" insurance industry types created the Credit Default Swap (CDS) product which basically became a naked short vehicle for investors to bet that there would be a higher than normal default rate. This proved to be like throwing gasoline on a fire. The result is history.
So when the media and some in congress referred to the TARP as a Wall Street bailout they were flat out wrong and in some cases purposely disingenuous. The TARP was absolutely necessary to protect Main Street from a complete lock up of the credit markets. Furthermore the way the TARP funds have been used to date is anything but a taxpayer funded bailout of the financial industry. The TARP funds have been used to purchase preferred stock in banks and other financial institutions. These purchases are time bound with respect to when they have to be liquidated and the taxpayers made whole, and in the meantime Joe and Jane taxpayer get to earn a very nice interest rate to boot. Not a bad deal for anyone.
Now to the auto industry discussion. There are people out there that just have it in for Detroit. I am not sure why but just as inexplicable as the left's hatred of Bush there are people who perceive the US auto industry as venal, corrupt and incapable of producing a quality product. I'm not saying the execs in the US industry are angels but let's face it, the real problem with the US auto industry is the legacy of the gold plated union contracts that were cut back in the 50's when the US auto industry was the only game in town. And as far as quality is concerned, I have owned both Ford and GM products for the last 16 years and I would match their quality with any of the foreign competition. The fact is that public perception of the quality of US manufacturers is a decade or more behind the reality. Now this is a legacy that the auto makers have to take ownership of because of all the crap cars they produced in the 70's and 80's. Trust lost is very hard to regain.
The US needs a strong domestically owned auto industry. It's not just jobs but also technology development and manufacturing process improvements. Furthermore once again whatever package is ultimately approved by congress it will not be a "bailout." It will have all kind of hooks to ensure that the taxpayers are repaid (remember we did this once before with Chrysler on Lee Iacoca's watch) and that executive compensation is moderate. My only concern at this point is that in pandering to the enviro-nazi movement the democratic controlled congress may try to dictate products that must be built rather than letting consumers drive that decision.
Bottom line - I am for helping the US auto industry through this trying and temporary situation and I hope you are too.
First a few facts. As previously explained in this blog we got into this mess because the dems in congress and their activist legal pit bulls cajoled and threatened banks to lend money to people who couldn't afford it to buy houses. Then they compounded the problem by strong arming Frannie and Freddie into guaranteeing those loans so that they could be packaged and sold as high quality investments. This whole house of cards was working fine until the housing bubble popped and folks who had no business being in homes they couldn't afford in the first place were under water and facing higher interest rates as their "teaser" mortgage rates began to reset to market values.
If this weren't bad enough a few "too clever for their own good" insurance industry types created the Credit Default Swap (CDS) product which basically became a naked short vehicle for investors to bet that there would be a higher than normal default rate. This proved to be like throwing gasoline on a fire. The result is history.
So when the media and some in congress referred to the TARP as a Wall Street bailout they were flat out wrong and in some cases purposely disingenuous. The TARP was absolutely necessary to protect Main Street from a complete lock up of the credit markets. Furthermore the way the TARP funds have been used to date is anything but a taxpayer funded bailout of the financial industry. The TARP funds have been used to purchase preferred stock in banks and other financial institutions. These purchases are time bound with respect to when they have to be liquidated and the taxpayers made whole, and in the meantime Joe and Jane taxpayer get to earn a very nice interest rate to boot. Not a bad deal for anyone.
Now to the auto industry discussion. There are people out there that just have it in for Detroit. I am not sure why but just as inexplicable as the left's hatred of Bush there are people who perceive the US auto industry as venal, corrupt and incapable of producing a quality product. I'm not saying the execs in the US industry are angels but let's face it, the real problem with the US auto industry is the legacy of the gold plated union contracts that were cut back in the 50's when the US auto industry was the only game in town. And as far as quality is concerned, I have owned both Ford and GM products for the last 16 years and I would match their quality with any of the foreign competition. The fact is that public perception of the quality of US manufacturers is a decade or more behind the reality. Now this is a legacy that the auto makers have to take ownership of because of all the crap cars they produced in the 70's and 80's. Trust lost is very hard to regain.
The US needs a strong domestically owned auto industry. It's not just jobs but also technology development and manufacturing process improvements. Furthermore once again whatever package is ultimately approved by congress it will not be a "bailout." It will have all kind of hooks to ensure that the taxpayers are repaid (remember we did this once before with Chrysler on Lee Iacoca's watch) and that executive compensation is moderate. My only concern at this point is that in pandering to the enviro-nazi movement the democratic controlled congress may try to dictate products that must be built rather than letting consumers drive that decision.
Bottom line - I am for helping the US auto industry through this trying and temporary situation and I hope you are too.
Thursday, November 6, 2008
A Historic Election
Much to my chagrin the American electorate has confounded traditional political expectations. I say that not because Obama is 50% African-American, but because for the very first time ever they have elected a truly blank slate. This result can only be explained as the triumph of mindless hope over objective evidence of any significant executive or legislative ability or experience.
I now must revert to hoping that the trust the American people have placed in President-elect Obama turns out to be justified. Unlike the Bush-hating left who wanted to see Bush and all of his policies fail regardless of their consequences for our troops and our future, I truly hope that Obama succeeds beyond my wildest imagination. I will keep an open mind and should he be able to hold to the center and support substantive and beneficial policies he might even win my vote in 2012. If on the other hand he becomes the tool of the hard core left wing of the Democratic party - exemplified by Ms. Pelosi - then not only will the country be worse off but our current problems will only magnify in severity.
I am somewhat amused, however, at the off noted reaction from the black community and its angst-ridden caucasian sympathizers that now for the first time they can actually tell their children that anything is possible. As if that weren't the case before. What nobody talks about is that the only reason Obama got to this point was that he was raised and nurtured by white grandparents. In other words his color was never an issue. It was his policies, values and ideas. This is something that the black community doesn't want to hear. They would prefer to blame any and all individual failure to move up the social and political ladder on racism - either overt or latent.
The fact is that America has moved beyond race but still is rooted in its core values. A black culture that revels in misogynistic hip-hop, thinks ebonics is equivalent to standard english, and is dismissive of excellence in education will never produce a viable presidential candidate. It took a mixed race gentleman with a solid educational and outstanding communication skills to make the breakthrough. Let's hope that's a lesson learned.
Please feel free to let me know what you think.
I now must revert to hoping that the trust the American people have placed in President-elect Obama turns out to be justified. Unlike the Bush-hating left who wanted to see Bush and all of his policies fail regardless of their consequences for our troops and our future, I truly hope that Obama succeeds beyond my wildest imagination. I will keep an open mind and should he be able to hold to the center and support substantive and beneficial policies he might even win my vote in 2012. If on the other hand he becomes the tool of the hard core left wing of the Democratic party - exemplified by Ms. Pelosi - then not only will the country be worse off but our current problems will only magnify in severity.
I am somewhat amused, however, at the off noted reaction from the black community and its angst-ridden caucasian sympathizers that now for the first time they can actually tell their children that anything is possible. As if that weren't the case before. What nobody talks about is that the only reason Obama got to this point was that he was raised and nurtured by white grandparents. In other words his color was never an issue. It was his policies, values and ideas. This is something that the black community doesn't want to hear. They would prefer to blame any and all individual failure to move up the social and political ladder on racism - either overt or latent.
The fact is that America has moved beyond race but still is rooted in its core values. A black culture that revels in misogynistic hip-hop, thinks ebonics is equivalent to standard english, and is dismissive of excellence in education will never produce a viable presidential candidate. It took a mixed race gentleman with a solid educational and outstanding communication skills to make the breakthrough. Let's hope that's a lesson learned.
Please feel free to let me know what you think.
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