10 Monday AM Reads

Back to the workweek! Start it out properly with the finest morning train reads in the land:

• The Ballad of the Breakaway Broker (Reformed Broker)
• Lowenstein: Why Americans Don’t Trust the Fed (WSJsee also Ben Bernanke, the Grown-Up in the Room: At a time of shrill politics, the former Fed chief reminds us of what mature leadership is about. (Politico)
• Nice compare & contrast: Coin Flippers Drenched in Alpha (Irrelevant Investor)
• Coincidence? China Economic Growth Falls Below 7% for First Time Since 2009 (WSJand coincidentally Report Warns of Chinese Hacking (WSJ)
• Why Is the CBO Concocting a Phony Debt Crisis? A simple accounting trick is arming austerity hawks with a powerful, phony weapon. (The Nation)

Be sure to check out our Masters in Business interview this past weekend with Jeremy Siegel professor at University of Pennsylvania Wharton School and author of the classic book Stocks for the Long Run.

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  1. rd commented on Oct 19

    Re: An Engineering Theory of the VW Scandal

    This is a plausible explanation. As an engineer who deals with the technical side of the business, I can assure you that a) most managers have little technical knowledge; b) most managers don’t want to have any technical knowledge; and c) in management’s view, its the results that are important anyway – the details of how you got there are largely irrelevant and uninteresting.

    An important thing to understand is that “failure” is usually not an on-off light switch – it is usually a dimmer switch. You need to shift the mean of the (assumed) normal distribution well away from the calculated failure value so that the tail of the distribution has only a very few incidents that overlap with the “failure” value. This is because a 50% failure rate if the mean is just above failure is pretty much always completely unacceptable. So usually, acceptable failure rates start in the single digit percentage range and go down to much smaller values. In the case of things like aircraft structures, it has to get to the point where it is millions of loadings that would cause something to fail in fatigue.

    So almost by definition, failure of an engineered thing is something most engineers and managers rarely see outside of the laboratory or very large quantities of things manufactured where the statistics dictate a certain quantity will come back. I have been pressured myself over the years about factors of safety and calculated failures because “it worked fine before” and in some cases engineers themselves start to disbelieve the calculations because they didn’t have failures (or they didn’t measure failure) previously..In fact, I am in the middle of some meetings on the forensics of something like this right now that happened with some other engineers. This was part of what happened with Challenger in 1986.

    However, the VW emissions scandal is a different animal because this means that there would have had to be significant corporate pressure to produce a clean diesel engine with “No” not being considered an acceptable answer by management. This would then have had to be overlaid on a culture that could simply view emissions standards as bureaucratic standards with little actual purpose instead of having a real environmental goal with real impacts if not met. This would be rising to the level of things like the Big Branch coal mine types of management practices.

    So, I disagree with Kedrosky that this would have just occurred in the bowels of an engineering organization within an overall corporation as an isolated thing. It would only have occurred if the fundamental codes of ethics had already largely been over-ridden by actual management practices.

    • willid3 commented on Oct 19

      the VW scandal is all based on corporate organization. because failure to accomplish the impossible meant being fired, the only option available to the engineers and managers was to cheat. the failure was caused by the top not accepting reality. sounds like some congress critters

    • DeDude commented on Oct 19

      Yes when bean-counters manage something they don’t understand their standard procedure is to demand that it gets done 20% faster and 20% cheaper. They beat the crap out of those doing the work, and usually congratulate themselves if it actually comes out 10% faster or cheaper. However, if “the managed” revolt and say this can NOT be done, then they will threaten with “finding someone else who can get the job done”. Having your livelihood threatened by some clueless boss, gets real old, real fast. It quickly destroy any loyalty you had to the company and makes you much more likely to do something that is a short-term solution for yourself, even if it has serious longer-term risks for the company.

      I can certainly believe that this was done without the knowledge of top management. However, they are still responsible for building a management structure where bean-counters are put in charge of the technical experts. Bean-counters should be service people for the product experts, not the other way around.

    • VennData commented on Oct 19

      In Illinois it is a slipshot Illinois Policy Institute, the Tribune editorial page and Sam Zell who say it will be easy to cut 10% off the state budget.

      …because putting our taxes back up to where they were for a few years as recently as last December is simply unacceptable.

      Top down bean counters.

    • thegonch commented on Oct 19

      The US may work that way. Germany does not. You can’t fire someone on a whim. It may be comforting to tell oneself it is a simple case of corporate greed, but the truth will be much more complicated.

  2. rd commented on Oct 19

    Re: CBO Debt Crisis

    It is ironic that money that can’t be paid under current law is counted as future debt while two entire wars were fought “off-budget” and therefore the debt incurred for those is generally blamed on other government spending funded by laws that pre-dated the decision to declare war.

  3. willid3 commented on Oct 19

    does t5he SCOTUS actually follow the Constitution they say they do?
    maybe not

  4. brianj997 commented on Oct 19


    Today is the first day of Sy Harding’s “favorable season”. I first read about Sy Harding after you endorsed his work on this blog. As you may know, Sy passed away earlier this year. The results of his seasonal strategy have blown it out of the water in recent years on risk-adjusted basis.

    RB Johnson

    • willid3 commented on Oct 19

      thats just one of the reliable things we can depend on him for

      after all, those people shouldnt matter right?

  5. Jojo commented on Oct 19

    12 October 2015
    Robots are coming for your job. That might not be bad news
    The problem with automation isn’t technology. The problem is capitalism.

    By Laurie Penny

    Do androids dream of a three-day week? This week, Professor Stephen Hawking weighed in on the topic that’s obsessing technologists, economists and social scientists around the world: whether a dawning age of robotics is going to spell mass unemployment. “If machines produce everything we need,” Hawking wrote in an “Ask Me Anything” session on Reddit, “everyone can enjoy a life of luxurious leisure if the machine-produced wealth is shared – or most people can end up miserably poor if the machine-owners successfully lobby against wealth redistribution.”

    As technology advances, the question is no longer whether or not robots are coming for your job. The question is whether or not you should let them take it.

    According to two new books by Silicon Valley entrepreneurs, the automation of up to 60 per cent of current jobs in America, and by extension other nations, is all but inevitable. This time, as Martin Ford argues in Rise of The Robots, education and upscaling won’t help us. There will simply be fewer jobs to go around, as everything from accountancy to journalism will be done faster, cheaper and more efficiently by machines. The result, as Jerry Kaplan agrees in Humans Need Not Apply, is that billions will be left destitute – unless we radically rethink our way of keeping people fed.


  6. Jojo commented on Oct 19

    ‘When we told them we were Jews from Israel, they kissed us’
    Amid tragic circumstances, Israeli boaters save 11 Syrian and Iraqi refugees drifting off the coast of Turkey and trying to make their way to Europe

    By Tamar Pileggi October 18, 2015

    An Israeli yacht crew rescued a group of Syrian and Iraqi refugees clinging to a capsized rubber dinghy adrift in the water in the Eastern Mediterranean Sea Sunday morning.

    The group, sailing off the coast of Turkey, pulled 11 refugees from the water, in addition to a dead infant.


  7. rd commented on Oct 19

    Hillary is not alone. A high school student who smokes weed hacked the CIA Director’s private AOL e-mail account (I didn’t know people still had AOL e-mail accounts) which contained sensitive information. At what point in time will the US government understand that they are in a cyber war with just about everybody on the planet and people with access to sensitive information need to have the entire lives electronically secured by the government in a way that actually works (i.e. no OPM IT contractors allowed).


    • VennData commented on Oct 19

      Legalize it. Tax it. And Register weed sales via drone.

      Stop allowing kids access to computers!

      Put the Bengazi committee AND the Hillary Clinton Fraudulent Email Committee off-budget and do not allow government to negotiate prices with weed dealers.

      Stuff happens

      – Jeb 2016.

  8. VennData commented on Oct 19

    Lowenstein: “Why Americans Don’t Trust the Fed” – WSJ

    If you didn’t fight the Fed for the last six years your investments did great.

    If you listened to the WSJ you got dowsed.

    That article should be “Why Smart Americans Don’t Read the Wall Street Journal.”

  9. Robert M commented on Oct 19

    As to Bernake’s book: The problem with this is the FED has acted as a bastion of racism for America w/ its redlining policies. To dismiss as propaganda suitable only for the direst conspiracy theorists is to ignore reality given their past.

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