Microsoft files pay-per-use PC patent

Note to self: Microsoft files pay-per-use PC patent... What about Amazon's EC2 and S3 services? I assume they were able to patent some of it before launching. Is the only difference here that the MS patent applies to "personal computers" whereas Amazon's is for "servers"? Eeeeeenteresting. This may be relevant to me....

eBay: fall of an icon

I have always been huge fan of eBay. Actually not always. At first I was a fan of Onsale, the first auction site on the net! In fact I bought my first laptop in an auction on onsale.com, in late 1997. Later I bought their stock. Then they merged with egghead.com and then went out of business ages ago... While writing this post, I noticed there's a current website at onsale.com which seems to have nothing to do with the original. So anyway when I heard of eBay, I dismissed them as a copycat. But having a more than casual interest in auctions, inevitably I realized the main difference between onsale and ebay was huge.

Ebay had sellers! It's hard to appreciate today just how revolutionary that was kids.  Let's just say, in addition to the use of auctions, it presaged long-tails, user-generated content and many other things that we consider fundamental to the Internet today. Even amidst all the dot-com hype, eBay was definitely one of the truly revolutionary things about the Internet. And it was profitable! During the dot-com bust, and for years afterward, eBay shone ever brighter.

But for the last couple of years, I've become convinced that eBay has entered it's John Sculley era. Like Apple in the late 1980s, faced with a new wave of challenges, they have responded with a misguided strategy. I think they are neglecting their strengths and fighting from weakness, which  as we've known since Sun Tsu, is a path to likely defeat.  

Thus, in accordance with my rights and obligations as a blogger that no one reads, I hereby charge eBay Inc. with failure to fulfill it's destiny as an Internet icon, in ways that include but are not limited to:

1. Website suckage: Every time I've tried to buy or  sell stuff  on ebay in the last couple of years, I've been shocked by how cluttered, messy and unusable the site is. Three years after Ajax became the norm, ebay.com pages look like they are from cgi shell scripts written in 1996. 
   
2. Concentration on the fat head instead of the long tail: they changed the fee structure in a way that was widely interpreted as anti-small seller, anti-auction, pro-fixed-price.  They even shockingly removed the ability for sellers to leave feedback on buyers!
3. New management whose arrival coincides with moves betraying a  profound misunderstanding of their core value as a two-way marketplace.

To make a long story short, short EBAY, long AMZN.

NOTE: This post was first drafted in July 2008 but not posted until December.  Things have changed in the financial markets since but all of the above still applies IMHO.

Stealth bailout

A few days ago, I was shocked to find out that there's another bailout of a trillion dollars in loans by the Fed:

"The Fed's lending is significant because the central bank has stepped into a rescue role that was also the purpose of the $700 billion Troubled Asset Relief Program, or TARP, bailout plan -- without safeguards put into the TARP legislation by Congress.

Total Fed lending topped $2 trillion for the first time last week and has risen by 140 percent, or $1.172 trillion, in the seven weeks since Fed governors relaxed the collateral standards on Sept. 14. The difference includes a $788 billion increase in loans to banks through the Fed and $474 billion in other lending, mostly through the central bank's purchase of Fannie Mae and Freddie Mac bonds."

While we were debating the $700B bailout, there was a stealth bailout that was three times bigger!

Yin and yang of the greenback

China has a huge trade surplus with the US which has been growing since 1985. Normally, or in theory, exporters repatriate the money earned abroad, which makes their own currency rise and the importer's currency fall.

But in this case, for over 20 years, China has been keeping that money in dollars. Compare "Foreign Portfolio Holdings of U.S. Securities". Two countries stand out. Japan and China both hold huge amounts of US securities. (Actually the ones that really stand out are Cayman Islands and Luxembourg but that's another story!). Further down on the same page, see "U.S. Portfolio Holdings of Foreign Securities" which shows the US has a similar amount of Japanese securities. But that's not the case with China. There it's completely one-sided with China holding huge amounts of US debt. At some point they will need to sell those dollars right? That's the 1.4 Trillion dollar question. Basically China has been delaying its currency's rise in order to continue growing exports.

The current economic crisis changes things.

1. As US and Europe imports slow down, China might shift away from exports and more towards infrastructure and internal consumption. This means their reserve strategy might change to bringing money back home. 
2. A loss of confidence in the US financial system. 
3. A huge increase in US public debt from the bailout and the stealth bailout.

All three things imply China will want to sell dollars and dollar assets.

What else can we imagine? Weakening dollar will help American exports. Which may be critical for new energy technology products (in solar, wind, hydrogen  and who knows what else) to develop and succeed.

So here 4 bold predictions for this different world:

• USD vs CNY will go down,
• the US dollar will no longer be the world's primary reserve currency, but 
• America will do what it has historically done best -- create a new industry for the world,  meanwhile
• China's billion people will get an accelerated rise in standard of living. 

Manipulation of prediction markets

Nice post on manipulation of prediction markets: ...manipulation can improve (!) prediction markets - the reason is that manipulation offers informed investors a free lunch.

Nice also to see our old friend Hanson.

... the first casualty is causality

This week, like everyone, I had some thoughts about the $700B financial industry bailout. I put them in an email to some friends a few ago... Here they are (with some edits):

This bailout is looking more and more like a scam.   The fear-mongering about jobs sounds a lot like when the same folks were saying Saddam was about to nuke the USA in alliance with Al Qaeda. Just because it's scary, it's not automatically true, and it's not automatically the case that the proposed solution will avoid it. 

$25B for Detroit automakers slipped into the bailout? WTF? They would surely have been turned out if they had asked for it alone, but piggy-backed into the $700B... Recall how after Sept 11 all the airlines were begging for bailouts, and many of them got turned down. Imagine how many companies will try to jump onto this bailout like hungry vultures on fresh kill. 

Also, note that the relationship between Paulson and Goldman Sachs is eerily similar to the relationship between Cheney and Halliburton. Nothing against Paulson per se, I'm just pointing out the parallel. In any case, even if he's a saint, is any government capable of disbursing a freestanding $700B fund without massive corruption? Visions of scams with this bailout that'd make Halliburton's no-bid contracts for Iraq look like chump change....  In fact, this whole mass psychological phenomenon  looks more than a bit like an accelerated rerun recent history... With Fannie Mae-Freddie Mac-Lehman-AIG, in the role of Sept 11, and the Big Bad $700B as the Iraq Invasion of 2003,  the US congress as itself,  and special appearance by the Great Depression II as Saddam's WMD. I don't mean to compare the events of course, fundamentally different crises. But the the political and business dimensions sides are similar.

I'm also reminded of Russia in the early 1990s. The experts kept screaming that if this or that privatization didn't happen right away, the consequences would be severe, Russia would be come communist again, the 3rd world war would start immediately, etc etc. Guess what? Behind all the deadlines, and crises, rescues, etc., there were some dudes rigging privatization auctions. By the time people woke up to the game, seven gazillionaire oligarchs had ownership of more than 50% of the GDP of the ex Soviet Union, and the standard of living had dropped, life expectancy had dropped, the economy was in ruins... Basically the entire country got jacked by a few dozen people.

Back to USA 2008. The crisis  exists of course,  and ok let's agree something must be done [NOTE: this was written on Wednesday Oct 1, before the Trouble Asset Recovery Program (TARP)  bailout was approved by congress today].  But I'm skeptical about TARP.

So let's go to the root causes - not because I presume to know something more than the experts have been saying, but just to help me understand by summarizing. The crisis exists because:
1) we don't know how many more homes will foreclose, and what they will be worth when they do; which leads to
2) uncertainty in value of mortgage backed securities (MBS) which leads to
3) uncertainty about balance sheet of banks with lots of MBS, which leads to
4) unwillingness to lend i.e. credit crisis, which leads to loss of savings, loss of jobs, homelessness etc.

Now instead of injecting money at #3 which is what TARP (the current proposed bailout) does, why not inject it at #1? I think the government should just say it will buy the houses that are being foreclosed on rather than the securities derived from them. This seems better to me than TARP because:
a) the taxpayer is buying something whose valuation is better understood, and therefore taking less of a risk;
b) by having a buyer of last-resort for the houses and a known worst-case price, you're putting a floor under the value of these MBSes... this clears up the bank balance sheets, everyone will know which banks are solvent and not, and those that are can resume lending and that stops the credit crunch
c) the socio-political side-effects are better -- i.e. any bailout would not be for insolvent banks and poorly managed companies but for defaulting homeowners, by making them tenants instead of homeless, and the opportunities for corruption are greatly reduced
d) worst case in the long term, the government gets stuck with $700B of new public housing that's hard to sell (but has tenants), whereas the current bailout's worst case is just burning $700B on paper that ends up being worth $0.

I'm no expert but the more I read about this, the more I believe that it's better to solve the problem at the source, i.e. #1 and not #3.

I learned later that this is similar to something done in the 1930s called the Home Owners' Loan Corporation (HOLC), and has been advocated in the current context by Roubini. Some politicians have also called for it, but in addition to TARP!  The Washington  Post too  has a column proposing something along those lines.

In any case, TARP was approved today, so we'll see. If it gets implemented, I predict scandals and a blue ribbon inquiry comission circa 2010.  Hopefully it will work in spite of that, because alternatives are probably eliminated. 

Universal health care & AIG

The big problem with providing Canadian-style universal health care in the US is that it would basically nationalize a large part of the insurance industry (while also expanding it). Undeniably a huge disruption to a huge industry that employs many people. But now, the US government has, in effect, nationalised AIG", the biggest insurance company in the world. If the government ends up actually owning 80% of AIG, then why not use AIG to provide health insurance for the uninsured? Bang! Too good to be true, surely...

Letter to the editor

After reading this opinion piece from the Irish Independent News...

Date: Wed, 16 Jul 2008 00:22:44 -0400
From: "Nemo Semret" 
To: kmyers@independent.ie, letters@independent.ie
Subject: Re: Africa is giving nothing to anyone -- apart from AIDS

Dear Kevin Myers,

I agree wholeheartedly with your article.

Indeed, it is a melancholy object to those who walk through that
continent of Africa, when they see the streets, and "vast savanahs"
crowded with "sexualy hyperactive indigents" (as you so aptly put it),
importuning Europeans for aid every few years, generation after
generation. I agree with you that the prodigious number of children
they produce is, given the growing uncertainty of the global economy,
an unacceptable economic, environmental and aesthetic burden on the
lifestyles of the deserving people of the First World.

Ethiopia, as you point out is a particularly galling example. At 80M
population today, with a birth rate of  3-4% and a net population
growth of over 2%, the country is producing 1.6M new mouths to feed
per year. Of those, perhaps 100,000 have any chance of having a
lifestyle that you would consider decent. That leaves 1.5M useless
mouths to feed, 750,000 AIDS conveying organs of each gender, 3M
Kalashnikov wielding arms, etc.

At the same time, China and India are earning their place at the table
of the global economy, but in the process putting pressure on the
world's resources. In particular,  as has been well publicized, their
growing appetite for meat is driving up prices of meat, of soybeans
and corn further down the food chain, and even of oil and gas.

Having turned my thoughts for many years upon this important subject,
and maturely weighed the several schemes of other projectors, I have
always found them grossly mistaken in the computation.  The Gates
Foundation as you point out  is misguidedly deploying considerable
resources to make the problems worse by preventing malaria from doing
it's natural job. I would add that the US government, the United
Nations, the Global fund, and various and sundry funds dedicated to
enabling Africans with AIDS to continue spreading the disease are
tremendously counterproductive.

I shall now therefore humbly propose my own thoughts, which I hope
will not be liable to the least objection. I have been assured by very
knowing people of my acquaintance that a young healthy child well
nursed is at a year old a most delicious, nourishing, and wholesome
food, whether stewed, roasted, baked, or fried; and I make no doubt
that it will equally serve in a lo mein or a curry with rice.

I do therefore humbly offer it to your consideration that of the
previously computed 1.5M excess Ethiopians produced annually, 150,000
be kept for breeding, and the remaining 1.35M,  at a year old, be
offered in the sale to reputable global agribusiness corporations;
always advising the mother to let them suck plentifully in the last
month, so as to render them plump and fat for a good table. This
supply of about 15,000 metric tonnes per year of additional
high-protein food will, if appropriately marketed to the growing
markets of Asia, relieve global prices of a wide range of connected
commodities by up to 10%. Your average countryman stands to save at
least 100 Euros per year in gasoline alone!

I think the advantages by the proposal which I have made are obvious
and many, as well as of the highest importance. The risk of AIDS
bearing immigrants will be reduced, the reduction in civil wars in
Africa will free up more television time for entertainment in the
First World,  increasing not only viewing pleasure but also
advertising revenues and thus commerce and overall economic
well-being, and of course, the long-suffering consciences of the West,
rather than needing to be relieved by constant doses of aid-giving,
will be fully cured of  that most senseless and nagging feeling of
guilt. Many other advantages might be enumerated.

I profess, in the sincerity of my heart, that I have not the least
personal interest in endeavoring to promote this necessary work,
having no other motive than the public good of the deserving First
World, by advancing its trade, providing food for its growing
partners, and relieving its citizens. Though I am Ethiopian myself, I
have no children by which I can propose to get a single penny.

Sincerely,

Yonatan Fetanu

Electoral markets

In my last entry about prediction markets vs polls, I quoted and linked to some aggregate numbers from Intrade for the US presidential election. Now there's Electoral markets, a website called that displays the prediction markets at the state level. Cool stuff! I came across it in a blog entry that sums it up quite well.

Capital del mundo

A ride-by demographic study, one subway car:

Apophis & carpe diem & how to save the world with a billion keychains

There's a 0.0023% chance that asteroid Apophis will impact earth in 28 years. Who cares about a 1 in 45,000 chance? Believe it or not, it is useful information.

For example, you could use this information when negotiating a 30-year loan -- structure it so payments are more heavily weighted to the last two years! At what cost? Of course the world won't end, but if there's a chance... you can precisely calibrate your degree of carpe diem. You should be willing to pay up to $1 for every extra $45,000 (plus additional interest) that is deferred to the last two years. Many people spend $1 on a lottery ticket where you have a 1 in 689,065 chance of winning $10,000. And of course a big loan with a small chance you won't have to pay it back is the same as a lottery ticket -- in fact even better since a) this one pays upfront and b) the normal lottery ticket is overpriced by an order of magnitude.

Back to Apophis. Here's another, less selfish, example of how this information can be useful. We want to know how much money it makes sense for us (earth, one world united!) to spend defending against Apophis. The answer is 0.0023% times the present value of world GDP, cumulated from 2036 forward. Oops that's infinity... Wait not necessarily. If we assume GDP stops growing at some point (e.g. the point where all material needs of humanity would be easily met), and we assume a a discount rate strictly greater than zero, the present value of all future GDP is a finite number. So we should multiply that number by 0.0023% and invest it in a laser beam.

Laser beam schematic:



Take that, make it a billion times more powerful, with a nuclear battery, put it in a satellite with some stuff for aiming and we should be ok! Seriously though, we do have 28 years to work on the technology, so no biggie. But how do we create the political will to spend money on it now?

Societies seem to have a hard time making really long-term investments, whether they are democracies or whatever. But they all love lotteries! Let's revisit the deferment of debt idea. The borrower will be willing to pay a premium to take some debt and push it back past the 28th year. The lender is neutral since they get extra fees to compensate for the risk. Thus we have an efficient transaction between a rational borrower and a rational lender. OK and what has that got to do with asteroids? Recall this is essentially a lottery, one that's better than the usual ones, and we know people are willing to pay 10 times the rational price for lottery tickets. Therefore it should be possible to satisfy the lender with just 1/10th of the fee collected from the buyer! And the remaining 9/10th can be used to build a giant laser beam!!! Everyone's happy. In fact, since the beam also works to eliminate or reduce that very risk, the rational lender might even be willing to contribute part of their one tenth. And then everyone's even more happy. Let's call this the GAALBMF: global anti-asteroid laser beam mortgage fund.

Karma Tycoon

Due to a recent ahem... incident, I stumbled across some old press coverage for Karma Tycoon. Cool! Not just because it's a fun and educational game which anyone can play free (check out the the rave reviews), but because yours truly wrote the game server.

It was a one-off contract for Do Something. 9mmedia, developed the client-side and outsourced the server-side to me at IHN, back in 2006 when IHN needed some cash. It ended up being a pretty cool project... 9mmedia guys are great to work with. I highly recommend them.

The game was fun and interesting to design and implement (but not the schedule -- that was rough especially since I was also busy with some other stuff). We used red5 to interface between the java server and flash client. I was also able to use some components of Merkato too, which was nice.

Mars Landing

'Phoenix Mars Mission scheduled to land May 25, 2008, is the first in NASA's "Scout Program." Scouts are designed to be highly innovative and relatively low-cost complements to major missions being planned as part of the agency's Mars Exploration Program.'

Canary in a coal mine

pulse, naymz, doostang, fastpitch, ...

That is the list of new social networks I've received invitations to join just recently. Some are new, some are old websites recylcing themselves as social networks. Before that, there was ning, facebook, linkedin, geni.com, myspace, friendster, hi5... This is crazy. Have we reached the boo.com stage of facial neworking? (Oops. I just realized I wrote facial instead of social. That's hilarious).

Meanwhile, Blog Friends -- the one thing that I found most promising on Facebook (at least as an example of a feature that I could make use of, not necessarily a general killer app that would change the world) -- died an ominous death. Ominous for Facebook that is. But in it's last gasp, it inspired a useful cliche. The day it died, my status message: wondering if Blog Friends was like a canary in a coal mine.

Why that analogy? See what Blog Friends themselves said: "... we have been at the mercy of Facebook's frequent modifications of their Platform specifications, and that has also been another disabling factor for us." So I remain firmly in the camp of Facebook skeptics -- at best, it's the next AOL (which is still huge).

I remain however a huge fan of Geni.com. That one that should be good for generations.. literally.

Overall, I hope social networking becomes something that's not quite a separate app, and not just a feature, but a service/capability as ubiquitous, useful and unobtrusive as ... email! (Hey check that out: 3 "U"s! Now I sound like a cheesy business book). Somebody should create standard api and ... yeah! Something called Open Social... That would be pretty promising!

Of course, I've been wrong before on this kind of stuff.

Predictions, elections, polls, fractals, reflixivity & the kitchen sink

People argue about whether prediction markets do a better job of forecasting elections than polls, or it's an illusion due to timing.

Initially, I am inclined to believe this is one area where the market works better. This follows from their most basic properties. Let's assume both are mostly mediocre. That is many polls and prediction markets available, but just no good in general.

Now consider polls. If there was fewer of them, and they were well communicated, we could count on the fact that expert from all sides would scrutinize them and that they would thus be held to the highest standards. Or of course if you average a lot of polls, you should get a more accurate poll of polls, as errors cancel out. In both cases, centralization increases accuracy of polls. Conversely, when looking at any one poll alone chances are, the one you're looking at is a bad/biased one.

For markets on the other hand, even if you are looking at one market alone, if it was biased, all it would take is one person who has seen the other markets to arbitrage the bias away, in effect linking the two markets and making them two views of one more accurate underlying market. Two polls cannot get organically linked and become more accurate than each by itself. You have to add them up yourself. But two markets can! Thus any one market you stumble upon is more likely to be accurate than a poll you stumble across.

This argument seems particularly apt for the US presidential elections, since there's so much slicing and dicing... The polls are all complicated what-if scenarios. So anyway, according to Intrade, which I've written about before, here are the current probabilities for the next US President (taking bid prices, to get lower bounds):

• Obama: 55.6%
• McCain: 37.6%
• Clinton: 6.6%

And the Iowa Electronic Markets seem to agree. Thus, the above, in my humble opinion, is as close as you're gonna get to a prediction out there today.

But is it any good?

Getting back to the philosophical argument again... polls are trying to measure current feelings, i.e. they assume there's an underlying "true" preference of the public, and that they are an objective mechanism to reveal it, within a certain Gaussian error. But it could of course be that the error is much larger than we think possible, because the models are completely wrong. As Nassim Nicholas Taleb, the author of Black Swan, that I mentioned here a couple of posts ago, has argued, a lot of mistakes are due to imposing Gaussian models on a reality that has fractal or power-law or heavy-tailed scaling. For polls, if you think there is a true current preference, then I guess the error should be Gaussian (in other words, using Taleb's lingo, the preference is "in mediocristan"). But looking at it over time, as you must for a prediction, maybe a single poll of a few thousand people, even if it's not representing a wider reality, can have a fractal effect, replicating it's belief patterns at larger scales, through media. If that' s the case, most polls will be meaningless, some will be virally important. And prediction markets won't work well either. True the participants size can scale so maybe they can make fractal bets, but no matter how many expert bets the market brings in, it won't improve the information about a black swan type event which is what a fractally scaling popularity would be.

Some people, like George Soros in his recent book (that I just picked up this weekend) argue that, when it comes to human/social phenomena, the underlying reality doesn't exist separately, it is entangled with human attempts to understand it, and manipulate it (he calls it reflexivity). So taking his ideas to polls, are they measuring something that fundamentally may not actually exist? Probably, there's no objective public opinion that exists independently, waiting to be measured. But it exists reflexively (this is my interpretation/application of Soros idea here so sorry if it's wrong). The polls, even if totally arbitrary to start with, by being communicated, may induce the reality they purport to measure. People listen to the news, and the polls, and their future actions are affected in some way, may then come to act in the way that is suggested to them by the polls for people like them. It may or may not be controlled in concentrated way, but if we apply this theory, then polls are as much instruments of action as measurements, in robotic terms, as much actuators as sensors.

Drexler redux: nanotech

Blog: noun, abbrev. Etymology: Web log.

A year ago, I logged a note to revisit Hanson & Drexler. One day, I was at The Strand, actually remembered and ended up picking up K. Eric Drexler's Engines of Creation (I now see there's a new edition that's even available as an e-book, but I didn't know that at the time, and just got the original edition). Incidentally, that event proves this blog is serving it's purpose! If it wasn't for this blog, my faint connection to that book might have gradually faded into the past. I also picked up Black Swan, which I ended up really enjoying but I digress...

Engines of Creation is pretty cool. First surprise: It is perhaps the seminal work in Nanotechnology. In fact, Drexler coined the term. I didn't know that. I found Drexler interesting because of a paper he wrote with Bernardo Huberman on agent/market-based computing systems. But it turns out he is the Godfather of nanotechnology. Wow indeed. Second observation: considering it's a book about future technology published in 1986, just the fact that I was able to read most of it says a lot. Usually non-fiction books about future technology don't age well: either they were right and so what they contain is now obvious, or they were wrong and are now useless, except for a few predictions that live on as comedy. But not this one. It is still absolutely readable. It does waste a bit too many words on appeasing fears of doomsday scenarios, and has a bit too much juvenile moralization. Just a bit. But the 2/3rds or so that I did read closely was fascinating stuff which hasn't aged a bit. It's great, the first time I got some clue about how nanotechnology might work.

Indeed, I had always had a hard time bridging the gap between the fictional nanotech that I found so brilliant in Diamond Age by Neal Stephenson, and anything I knew about science or technology. Not surprising since it's sci-fi, you might say, but my point is that "nanotech" exists in real science yet I don't see no microscopic helicopters and infinite-dimensional interactive books being talked about in the newspaper. What you hear about is relatively mundane "nanotech" ideas. Relatively of course, because by normal standards, even "boring" nanotech's promises are huge ... Microscopic "hard disks", or carbon nanotubes that conduct electricity much better than wires, or can support structures that are impossible with steel like space elevators!

But the Drexler vision is much bigger than better construction materials. He imagines actual nano-machines that build stuff, actual mechanical assembly of atoms and molecules. If you accept that premise, it leads to gigantic consequences, essentially limitless food, energy, all our material needs becoming ... immaterial, so to speak. This is a big idea. And it turns out Mr Drexler has made it the work of his life.

Which brings us to the question... So how come his book is not obsolete? After twenty years f being the breakthrough birth of a new field, why are those ideas still not well known to the general public, when the buzzword they created seems to now mean something much less. Well it turns out Wired magazine has answered this question in a 2004 article on K. Eric Drexler entitled "The Incredible Shrinking Man". You can read the details in the article, but in short there's a great ideological divide in nanotech, and it looks like the "incrementalists" who focus on new nano-materials and so on won the research politics battles over Drexler who wants to build nano-machines.

Now I feel for Drexler in a different way. Not just as a fascinating guy who I should follow-up on but as a human story too. Could he be like Edwin Armstrong, who invented FM radio and many other great things, but lost all the crucial battles in his life? Or is it going to be a classic story of early brilliance, fall from grace, long struggle, and ultimate righteous triumph... Hmm I think that's classic but I can't think of any examples right now. Anyway here's a possible triumphant ending: nanobots win the prize for removing carbon from the atmosphere. Imagine a little machine made of a few atoms of X that uses solar power to move around and grab CO2 from the air, and then attaches the C to some part of itself, releases the O2, and then falls to earth as XC dust. It could even be called something cool, like photosynthesis.. haha. Who knows, if X is right, that XC might even be a source of fuel! So in the end, our hero stops global warming and saves the world! Good night kids.

Golgool -- Custom Ethiopian Search Engine

Golgool is my quick little exercise in creating a Google custom search engine. Check it out at www.semret.org/golgool.

For example, a search for [seeds export] on golgool yields more interesting results than a search for [ethiopian seeds export] on google.com.

Volunteers welcome! Send email to the address at the bottom of the Golgool pages and I'll send you an invitation to contribute (so you can add sites, search refinements, etc.)

How can carbon-offsets work?

What do Norway and the New Jersey Nets have in common? They are among the myriad entities declaring that they are or will be carbon neutral. That's is great but it reminds of one thing that has been bothering me for a while now. In a lot of these cases, they rely on "carbon offsets". And to me, well I have an issue with carbon-offsets -- they can't work. Here's a rant expanded from an email exchange I had back in November 2007.

First of it's not that I'm not green -- far from it, I even joined Greenpeace way back! Second, it's not that I don't believe in markets -- far from it! So now let's back up for a second and consider the common "green market mechanisms". As far as I know (which is not much but hey, who else is around?), there are four types of incentive-based mechanisms being suggested in the world with the goal of reducing the amount of carbon in the atmosphere due to human activity. Do they work? And what's wrong with carbon-offsets in particular?

My favorite is the carbon removal X-prize. A prize is a very efficient way of funding R&D. Basically you put up a $25M prize, and it might lead to 10 teams spending $24,999,999 each in parallel, and then one or more of them would actually solve it, while creating many useful partial solutions and spin-offs along the way! So from society's point of view, you get up to $249,999,999 worth of R&D using just $25M to stimulate it. But it's a long shot approach, excellent return, but high risk. Clearly, the world needs incremental approaches as well to balance our species-survival portfolio.

The popular incremental approach is cap & trade. That seems to work.. Sounds like the incentives are right on. Those who can figure out ways to reduce emissions get rewarded, and those who can't, pay for it. Both sides work incrementally thus, without any huge disruptions to society, we get gradual improvements. The only problem is that the cap levels are kind of arbitrary and could be changed by fickle and/or corrupt politics which might distort the incentives. Still given some consistency across time and space, the incentives should work as expected because both the reward and the penalty happen at more or less the same time.

If you really think about it, carbon tax is a simpler better version. It has the advantages of cap and trade with fewer costs, and it can work more widely since it wouldn't only apply to specific industries. The only downside is that its' tough to get people to support anything with the word "tax" in it. (So the difference in cost between "carbon tax" and "cap & trade" is simply the cost of weak leadership in democracy.

But really maybe there's a magic solution? One with no new taxes! Yay! No caps or limits! Yay! A win-win solution! Maybe... carbon offsets. Are they too good to be true? Yes. Here's the problem as I see it: If I want to build a carbon-belching factory or travel on a carbon-spewing jet plane, and then offset it by paying someone to plant a forest of trees, what will prevent the trees from being cut down in the future? When that tree will be cut down or die -- after 5 years or 20 years or 500 -- really changes the value of the offset and whether it truly cancels out my plane trip or my factory.

And here securing the tree is not just another implementation detail. It's a central, fundamental flaw of the market. Because the incentives are not there. If I'm the polluter and you're the off-setter, once I pay for the right to pollute, I will happily pollute and I don't care anymore about whether you truly keep the tree alive, I've already gotten the credit for it. You the seller can take my money and still cut the tree. This is not like normal uncertainty/risk about the value of a product or service. In a normal market, the buyer wants to get the stuff they bought, which is what keeps the seller from cheating. But in the carbon offset, the buyer has no incentive to care once they got the credit, and the seller, once they are paid for planting, has a huge incentive to just chop the tree and use the wood.

Of course people cheat in all markets. But enforcement, regulations etc. can only work if the vast majority of buyers and sellers have the basic incentives to make it work, and the law only has to deal with a small minority of cheaters. For example in stock markets or commodity markets, the buyers and sellers police each other because if one cheats the other loses. In the carbon-offset market, they can both cheat and not tell anyone. SO enforcement is going to be prohibitively expensive. Basically you have to set up a well-meaning intermediary like a fund that receives the money from the offset buyers and pays out the planters over the lifetime of the tree... That's a huge problem.

My guess is the offset market is of purely psychological value... It's very much like Catholic "indulgences" that you could buy from the church to cancel out your sins in exchange for some money. Clearly a very profitable scheme. If you're the church, it's just free money. It's better than free money: they give you money and they thank you and you increase your power over them! Which begs the question... Who is the church of carbon-offsets?

4-legged terminator

Researchers discover gene that blocks HIV

Isn't this kind of a big deal?

Researchers discover gene that blocks HIV.
Stephen Barr, a molecular virologist in the Department of Medical Microbiology and Immunology, says his team has identified a gene called TRIM22 that can block HIV infection in a cell culture by preventing the assembly of the virus.
[...]
"We are currently trying to figure out why this gene does not work in people infected with HIV and if there is a way to turn this gene on in those individuals," he added. "We hope that our research will lead to the design of new drugs, or vaccines that can halt the person-to-person transmission of HIV and the spread of the virus in the body, thereby blocking the onset of AIDS."


I remember around ten years ago, researchers had found a way to prevent the HIV from attaching itself to and attacking white blood cells by making another organism that would go and attach itself to the same geometric spot (or something like that). That sounded really promising. I wonder whatever happened to that....

Wiimote -- Go Johnny go!

This is truly amazing. http://www.cs.cmu.edu/~johnny/projects/wii/
I always had high hopes for the sony playstation running linux to do some fun unexpected revolutionary thing.. But this one takes the cake. Wiimote!

Obameme

I nominate for Meme of the year to date: barackobamaisyournewbicycle.com.
Barack Obama is your new icon.

Ethiopian Commodities Exchange

Ethiopundit has a very lame critique of the Ethiopian Commodities Exchange. It's basically that the government is so corrupt and the rule of law so non-existent that the exchange is like a Potemkin village and therefore can't possibly work. The prototypical player in the market that Ethiopundit wishes were possible: "one bright young fellow outsmarts some TPLF conglomerate by cornering part of the coffee market on his own or with a few daring foreign investors. " That is a hollywood-inspired vision of markets, and even what it tries to represent, the succesful high-risk speculator is not what makes markets work.

Indeed the critique ignores the necessity of bottom-up success. I have no inside information at all (even though I happen to know the person spearheading it from childhood), but I imagine that the exchange will tap into existing markets. The exchange should initially represent traders of the actual goods. These people already engage in buying and selling the stuff wholesale, but they do it by negotiating one-on-one or in a fragmented market. Everyone knows there's berberé tera, for example, the more or less centralized place where people buy and sell that particular commodity wholesale in Addis Abeba. An exchange can give those buyers and sellers a place where they are always guaranteed to find each other easily, i.e. create liquidity, and market prices. Second, the exchange generates reliable, centralized price information. That information is available down the chain all the way to the producer. Farmers, transporters, storage providers, all would benefit from improved liquidity and access to price information.

Only after the market succeeds by serving the primary players does it create a environment fertile enough for secondary players like arbitragers, speculators, and the hot-shot that our pundit friend envisions, to try their luck. These purely financial players add value too of course, they make prices more accurate by eliminating temporary gaps, and bring more flexibility to the primary players by allowing them to trade-off risk and reward. But if they come, it's not as a pre-requisite for success, on the contrary it means it's already a success.

Of course there are many reasons why the exchange could fail. For example there's what I would call the "user interface". Not necessarily with computers but in general the means by which traders interact with this market. Do they go in person and stand in a pit, do they talk to a professional in a booth who then goes on a floor to bid/ask, or do they sit at desks and punch in or speak their orders. Those are tough design issues and the answers cannot simply be copied from other exchanges elsewhere.

But to say, as Ethiopundit does, that it will fail because government interference will prevent secondary activity is putting the butter before the slice of bread (to coin a phrase!). Even if you accept the premise of interference and kleptocracy, which I don't know enough about to accept or reject, it's still not a reason why the primary layer, people who already trade these goods, cannot benefit from an exchange platform. It may be many years before (or if ever) we see commodities trading fortunes built on this exchange, and kleptocratic government going after them, but long before that Hollywood scenario, the exchange could very well make a lot of people who are currently dealing in commodities somewhat better off. And that deserves to be looked at on its own merits, not lumped with everything in the country as part of a general critique of the government.

Wisdom of crowds revisited: intrade

Aha! Search engine futures by Intrade. One year after Google and wisdom of crowds, the idea is catching on.