XMAS 2010

It is well known that Winston Churchill was bipolar. When he experienced his so-called black dog days, he would trot down to the pigsty and converse with the animals. Not for him supercilious cats who look down on you, or dumb, obedient dogs who look up to you. Only pigs treat you as an equal. That's not, I suppose, ABSOLUTELY relevant as regards the Haagen year, but I thought I'd mention it nevertheless.

The only PIGS of at least some relevance might be the unfortunate European countries whose elected governments have spent the last 30 years with their snouts in other people's savings, giving nothing back while consuming vast amounts of perfectly good oxygen, but even that situation was elegantly sidestepped by our firm BTG Pactual. We were in the press only last week: a group of investors pulled out the 12-inch chequebook, poured half a pint of ink in their fountainpens, and wrote a rather large cheque for a minority stake. With characteristic Brazilian understatement, our CEO was quoted in the Chinese press saying "the first generous deal is a sign of a new financial order. The deal means a valuation of 100 million billion." I have to say I used a low-grade translation software, but I'm warming to it; coming up with statements like that I'm not going to upgrade any time soon. It also translated our firm's name to Brazil Brazil Butterfield, which frankly I couldn't have come up with in a million years; I suspect the little Google gnome sitting in my compiler was smoking some pretty serious designer weed. But I digress.

Irene is in danger of losing her amateur status as an artiste: a similar bidding frenzy took place a little while ago for lot #29 at the annual ICM Banquet:

Bubble, Bubble, Toil and Trouble

"I drink it when I’m happy and when I’m sad. Sometimes I drink it when I’m alone. When I have company I consider it obligatory. I trifle with it if I’m not hungry and drink it when I am. Otherwise, I never touch it – unless I’m thirsty."

12 bottles of Bollinger Special Cuvee champagne and an original Davincino 3ft * 2ft, framed oil-painting titled "Bubbles"

Donated by www.davincino.com

The girls are as happy as clams at high tide, nobody more so than the little Chuckles & Trouble act we call Kit Kat who seems quite pleased with the fact that we didn't call it quits after Storeslem and Lilleslem (Google Translate required). I must of course apologize to you other inhabitants of our good old planet; you have a right to expect more responsible behaviour but heck, we just couldn't help ourselves. I’ll buy carbon credits, so there.

And let me finish by quoting the immortal words of John Lennon:

You may say I’m a Dreamer

But I’m not

Patent Pending (World Peace)

Title: Noise-Cancelling Project For Purposes of Global Peace
Executive Summary:

1. A noise-cancellation speaker emits a sound wave with the same amplitude but with inverted phase to the original sound. The waves combine to form a new wave, a process called interference, and effectively cancel each other out. The sound must be either a constant - such as the humming of a jet engine - or repeating itself in a recognizable pattern, such as Ringo Starr's drumming.

2. There exists within the realms of religion oft-repeated accusations, chants, prayers and other auditory disturbances whose sole purpose is to aggravate members of the out-groups, and which on a net basis causes more harm than good.

3. We propose to refine the noise-cancellation technology, define a series of inverted sounds so as to neutralize the more egregious of such utterances (see Appendix A), and distribute these appliances throughout the Middle East starting in Jerusalem.

Discussion

Most of the utterances are really mind-burps, or rationalizations of negative brain impulses originating in the limbic system, caused by fear of strangers or other such basic instincts. They serve no purpose, and have an intellectual content equivalent to "Your Momma!" Consider an example: a black man is elected president of a country populated predominantly by white folks. Every time a white person of limited education and world-view sees the black person, a burp of fear bubbles up from the amygdala, passes through the pre-frontal cortex where it is rationalized in the conscious brain, modified by the prevailing political correctness module, and comes out sounding like "He is un-American." The person will then take the utterance and re-rationalize, finding a narrative that fits the "un-Americanism" of the black person. But I digress.

The lack of intellectual content makes the mind-burps undebatable. As Jonathan Swift said: "It is useless to attempt to reason a man out of a thing he was never reasoned into." A constructive dialogue between two theists who both believe they know the Truth is a contradiction in terms. The only response available when a proposition cannot be rationally analyzed is to raise one's voice, ultimately leading to other, often violent manifestations of frustration, all to no avail.

We are certain, sirs, that you will agree that a public noise-cancellation system is a solution devoutly to be wished, and will grant us the global intellectual property rights.

Opportunities for expansion are endless : iPad Apps for personalized elimination of specific words and phrases (Example: "?hguone dah ouy t'nevah"), a special Washington DC App off-setting lobbyists whining (mandatory, I think you would agree, for a well-functioning democracy), the only condition for the technology to be successful is that the original sound follows a predictable pattern. As an aside, I believe my daughters have undergone an evolutionary adaptation of this nature, constantly emitting the inverse of "Have you done your homework?" ("?Krowemoh ruoy enod uoy evah").

Note: this PP replaces previous application FF63-T209 titled Soundproof Plexiglass Dome To Be Placed Over Middle East For The Benefit of Mankind. We feel this new technology is more humane.

-----

APPENDIX A - The Jerusalem List:

1. My book is truer than your book (and variations)

2. I am pious, you are misguided, he is infidel (and variations)

3. I have a God-given right to this land

4. Because my book says so

5. Allah-u-Akhbar (and variations)

6. There is no god but [ABC/XYZ etc] and [123, 987, etc] is his prophet (the system could possibly allow the first four words)

24 November 2013 UPDATE: I was ahead of my time.

Philippines Travel Post

Summer Holiday to Boracay

HKGMNL uneventful.

From Ninoy Acquino International Airport, taken to Manila Airport Hotel where I had made reservation. Note to fellow travelers: there appears to be two Airport Hotels; one is a big four star joint, the other, well, not so much. Linoleum floors. Main occupants: dust mites. Plenty of in-room massage service options available from Caress Spa (no, really), and loud music thumping through the night from next door place of debauchery.

NAIA domestic in the morning. Security check then luggage screening then check-in then boarding pass check then security check then passport check. Also extra screening of carry-on luggage. And one more x-ray screening for the road. Approximately thirty-five security personnel involved. Announcements that flight to Cataclan is on time. Until five minutes before boarding: flight delayed by ninety minutes due to late arrival of aircraft. Ninety minutes later we board a steaming hot plane on which air-condition had just been switched on. I found this surprising since plane had just arrived, but decided against making inquiry. Twenty minutes into forty-five minute flight the captain announces that due to slight technical malfunction we have to return to Manila; passengers' safety is their only concern. Back in MNL we pick up three passengers who look slightly embarrassed, and resume flight on a new plane.

Arrival, further transport and actual holiday uneventful.

Had carefully booked a twelve-thirty flight back to MNL knowing the difficulty of transferring from Boracay to Cataclan Airport as well as my family's dislike of early mornings. Received email during the week from PAL Express saying we were rebooked to morning flight nine-thirty. Computer generated message, do not reply and no phone number listed.

Wake up five-thirty to make way to airport. Kids not so happy. Arrive at first security check where a printed e-ticket is required before entry into terminal. Showing e-ticket on blackberry is not acceptable. Family not so happy. Me not so happy. Locate airline office where am informed that we are booked on next flight twelve-thirty. Brief and given the circumstances reasonably civil exchange of opinions follows. Airline office strikes compromise, and issues e-tickets for previously unannounced flight at ten-forty. Departure hall is full. Cafe has space. Cafe doubles as smoking room. Plenty of Korean tourists. Board plane at eleven forty-five. Plane departs twelve-thirty.

Arrival NAIA uneventful.

End.

How (Financial) Times Change

One Day in Frankfurt, the year 2000.

Knocknock.

“Kommen Sie in, please.”

“Herr Schmidt, I am delighted to see you, and I want to express my personal gratitude to you for seeing me, and for taking time to evaluate my proposal.”

“Not at all. So what is your proposal, Minister Rastapostorous?”

“I would like to apply for a 1 bio loan for my country, to be repaid in 10 years.”

“And how do you propose to invest the funds so as to generate the return that allows you to service the loan, and presumably create some additional value for you and your countrymen?”

“First, I am planning to pay out higher pensions and salaries to the civil servants, also to retire them at 55. Next we have ordered 26 million state of the art hammocks for our people. Finally we want to hand out a special edition Demis Roussos Greatest Hits Sony Walkman to every living Greek voter.”

“But Minister Rastapostorous, that doesn’t seem to create any revenue stream. How do you propose to repay me?”

“Haha, I was only kidding, Herr Schmidt, in ten years time I’ll issue another bond to repay your fine institution.”

“Right you are. And I just got eine shitload of iuroes in from China, they have money coming out of their yazoos, so I guess this is as gut as anything. I sign – here?”

----------------
One Day in Frankfurt, the year 2010.

Knocknock.

“Kommen Sie in, please.”

“Herr Schmidt, I am delighted to see you, and I want to express my personal gratitude to you for seeing me, and for taking time to evaluate my proposal.”

“Oh it’s you. So what is your proposal, Minister Rastapostorous?”

“I would like to apply for a 2 bio loan for my country, to be repaid in 10 years, partly to repay you the 1bio you so kindly lend us ten years ago, partly to fund our new plans.”

“And how do you propose to invest the funds so as to generate the return that allows you to service the loan, and presumably create some additional value for you and your countrymen?”

“First, I am planning to pay out even higher pensions and salaries to the civil servants, also to retire them at 50. Then we plan to create a Venus exploration vehicle, in marble, to show what a prosperous country we are. Finally we want to hand out a special edition Demis Roussos Golden Oldies iPod Touch to every living Greek voter.”

“That sounds suspiciously like what you proposed in 2000, only then you said you were kidding. Please tell me you were kidding.”

“Herr Schmidt, I am not known for my sense of humour.”

“Neither am I, Minister Rastapostorous, neither am I. Jürgen, can I trouble you to throw Minister Rastapostorous out on the street and set the dogs on him, bitte? Yes, the schtarved Rottweilers. Danke schön.”

Jobs in the World of Finance

I had this dream the other day: Steve Jobs conducts a Senate Hearing with Lloyd Blankfein of Goldman Sachs.

SJ: Mr Blankfein, I want to thank you for graciously agreeing to appear here today to discuss the role of the financial sector in today's economy, and I want to emphasize that whatever is said here does not concern you personally, nor does it specifically refer to the conduct of your firm, Goldman Sachs.

LB: Thank you, Senator Jobs. It is my pleasure.

SJ: First of all I should like to bring your attention to this handy chart:

Basically, from 1973 to 1985, the financial sector never earned more than 16 per cent of domestic corporate profits. In 1986, that figure reached 19 per cent. In the 1990s, it oscillated between 21 per cent and 30 per cent, higher than it had ever been in the postwar period. Only a couple of years ago, it reached 41 per cent.

LB: Wow.

SJ: Wow, indeed. Today, I am going to represent the other side of that red line. That would be the makers of your Lincoln town cars, your Gulfstream jets, the builders of your condominiums and beach houses at the Hamptons. We massage cows so you can enjoy your Wagyu cheeseburgers. We dig diamonds out of mile-deep shafts for your wives. We have invented your iPhones and your blackberries, your surround sound 3D home cinemas, we have provided medical advances that will increase your lifespan by 10 years, we have made global agriculture efficient enough to provide food for 9 billion people thereby reducing the risk of World War III. Our military and police force provides the protection and stability you now enjoy. Our legal system protects your property rights. I represent all of us that have invented and manufactured these goods and services that have improved your quality of living beyond measure.

LB: Gee, thanks, Senator. I hadn't thought about it that way.

SJ: So what I should like to ask you is what exactly you and your industry has given us in return.

LB: The economy needs firms like ours, or capital wouldn't be allocated efficiently.

SJ: My firm had to borrow money from our biggest competitor at penal terms while your geniuses were out lending money to people without the ability to repay, while building houses nobody can afford to live in. The financial crisis we're living through was caused by a misallocation of capital on an epic scale. The only worse use of our capital I can imagine would be to cut dollar bills into confetti and sprinkle them over Milwaukee. But excuse me, I can see that you have found a better response.

LB: We provide market-making services to investors.

SJ: You what? LB: Without people like us providing price discovery the markets would be totally unpredictab -- um wait -- that's not what I wanted to say -- without us, you would be unable to invest your savings successfully. SJ: Sir, with the best will in the world, I can't see how our savings aren't in fact worth less by about the $20 bio per year that your traders make. If that's the price of your fabled liquidity, I think we can do without that service.

LB: You see, people really don't understand us. We also help governments raise financing.

SJ: For borrowed money, Lloyd. You just earn the vig. I could have a team spend one day setting up a sub-section on eBay where China can bid for treasury bills for a nickle a trade. And advising Greece to write a swap with you that upfronted lots of cash while pushing the cost down into the future in a way that didn't appear in the official budgets is not offering advice, it is borderline criminal. So I ask you again, is that it?

LB: Err, we provide good employment opportunities for graduates?

SJ: You may approach the bench.

[WHACK!]

LB: Ouch!

SJ: You may sit down again.

LB: Thank you, Senator.

SJ: So do you have anything sensible to say before I open the envelope I have in front of me?

LB: But Senator, we only make ten per cent of our revenues in proprietary trading and stuff.

SJ: Mr Blankfein, your latest quarterly results shows you made seventy-eight per cent of your $3.5 billion dollars in trading. Do you want to approach the bench again?

LB: Nono.

SJ: So please explain again which part of the economy received services worth revenues of $25 billion in 2009. I can assure you my clients know perfectly well what they got in return for Apple's revenues, and they actually feel they got the better deal.

LB: Well, we - err - our high-frequency trading programs and dark pools provide liquidity so investors can always get a price --

SJ: You may approach the bench.

[BLAM!]

SJ: Your HFT made $5 billion last year. That's the market paying you to provide a service? Who wrote you that cheque? And when your high-frequency trading programs clashed with others' high-frequency trading programs last Thursday causing a 9% drop in the stock market and NO liquidity available you still want to stand here and say you provided a quality service that justifies getting your firm paid a cool $5billion? If my products fail to deliver quality, we withdraw them, reimburse our customers and issue a public apology.

In fact you steal from us, the civilian users. The so-called liquidity is offered at a price that suits you. I fail to see why that is a service we would demand. Your structured products serve no other purpose than providing a vehicle for lower IQ investors to pass vast amounts of money to higher IQ investors. In fact I have the greatest difficulty understanding the value of financial innovation, with perhaps the exception of the ATM. And yet you insist on being treated as an industry worthy of our trust and our help when you cock up. Well, I haven't heard a word of sense from you, sir. Your industry has turned our economy into a casino where we are forced to play, and you represent the house. This is no longer acceptable. By the powers vested in me, I'll proceed and open this envelope.

The verdict from us, the people, is this: from this year onward you must deposit every penny of your bonus pool with the Inland Revenue Department, who in return will give you personal tax credit certificates dollar for dollar. You may award these tax certificates to your staff in lieu of bonus. Your staff may use these tax credits against income earned in our world, i.e. outside of financial services. Please remember that these certificates are not transferable. Is that quite clear?

LB: Well, yes, but --

SJ: Do you want to approach the bench, I can't hear you?

LB: No, it's ok. Sorry.

SJ: FURTHERMORE, it is agreed that your proprietary traders, both high and low frequency, are allowed to trade only with other proprietary traders in other institutions in a completely closed market where no real money is involved. Proprietary trading is a competition for bragging rights among young, testosterone crazed males, and the public purse must be shielded from it. In addition, we will pass your structured derivatives activities to Phillip Morris. Your CDOs, Accumulators, Mini-bonds all belong in the same category as cigarettes, and we need to protect the people from their own folly in much the same way. You should also be aware that we have taken the opportunity to make a small change to that regulation, to the effect that lawyers representing those industries cannot be compensated more than $100,000 per year. Finally, however, we want to demonstrate that we are not heartless, so we have built in a few caveats to help your business gain back our trust. The tax credits may be exchanged for real dollars IF within your firm you resolve some urgent issues that we believe we could have overcome long since if it wasn't for your industry seducing the best and the brightest of the past twenty years to work for you in the casino, despoiling our savings accounts. They are as follows: (a) a cure for cancer, Aids and Alzheimers, (b) a reversal of the emission of CO2, and (c) development of alternative energy from a source freely available to all nations.

This concludes today's proceedings. You may take your leave.

LB: Thank you, Senator.

Political Science @ Harvard Business School

Welcome back from your holidays. I'm happy that so many of you took on the challenge offered by our sponsor the Chinese Communist Party - and just to recap, I asked you to work on the following assignment:

How should China deal with the 180mio 15-29 year old men brimming with testosterone and in the idealistic age where they want to change the world?

And I gave you some boundaries, since we don't want negative social utility associated with the solution:

(1) Don't do lasting damage to the environment

(2) Don't consume non-renewable resources

(3) Don't consume non-domestic resources

(4) Don't allow them to be too united

And importantly (5): project should be self-financing, so women and the older generation are not forced to share their rice, figuratively speaking, although that sacrifice may be done if the pressure is of sufficient force.

Before I send your papers to our sponsor, I thought I would recap some of your recommendations, with my marks. Don't be discouraged by those, it's not a simple equation to solve!

Now, some of you have suggested solutions actually carried out by regimes of the past :

1. Build Pyramids or Great Walls (no, fails on 5)

2. Conduct limited warfare (no, fails on 1 and 5 - and possibly 4)

3. Educate them in large numbers (no, fails on 4 in a big way)

4. Force a religion upon them (no, also fails on 4, but not bad)

5. Send them abroad to conquer new worlds (not bad, actually)

I commend you on your knowledge of history, and at least nobody suggested a Ramses II inspired solution. But you have overlooked the fact that the numbers we are solving for are several orders of magnitude higher than they were in the past, and what worked for 100,000 individuals will not be manageable for 180,000,000.

Re 2: I said you should not be discouraged by my marks; well, one of China's finest political thinkers of the modern era Deng Xiao Ping was of course the father of the one-child policy, and once remarked that "now that is has been implemented, I don't have to invade Siberia." Dip your stick in that remark, sir. Even if he had attempted this - and one must assume his Russian counterpart would encourage a manageable skirmish for exactly the same reasons - it would not have addressed the numbers and it would as a minimum have left an ugly splodge of grease on Mongolia.

I must admit these rather myopic suggestions made me chuckle:

6. Build toys and electronic goods for the clients of credit card companies in the West and in the process pick up vast amounts of IOUs in their currencies. Declare that to be rich is glorious. (NO, fails on 1, 2, 3, and 4, although 5 makes up for some of this damage. It does scale well, though, and has had some success for a decade or two. Deng was evidently not a tree-hugger).

7. Put lots and lots of the young thugs in a uniform, and let them bully their younger brethren. One peasant in a uniform is one less on the street within spitting distance of a pitchfork. (No, fails on 5, but more emphatically on the numbers: the Chinese army currently numbers 3,000,000, and that is but a drop in the ocean. Besides, the rest of the world would not be all that impressed if China grew the army to a relevant proportion of the 180mio).

8. Build regional baseball leagues; fans are by nature loyal to their own teams, and will therefore have other out-groups to oppose than the state government (ok, I get that, and I have never heard of a group of football hooligans overthrowing a government, so maybe it has a lot going for it. Hey, maybe the rest of society may even enjoy the games so it would satisfy all 5 boundaries. But it doesn't feel right - or maybe I just don't care for baseball).

Some of the most exciting and truly scaleable suggestions are based in the virtual world made possible by recent technological advances. In no particular order:

9. Introduce a countrywide monthly Tetris competition with grand prizes (nice, but may create too many sulking losers)

10. Give away free iPhones preset to transmit historical Chinese soap operas (nice, but what about 3 and 5? Still, very scaleable)

11. Give all boys a free Lenovo desktop computer with a preset login to Second Life (spot on, in my opinion)

I believe the next generation of testosterone taming political initiatives will be found among those ideas although more work is required.

Finally, and perhaps I am unduly influenced by a recent trip down the YangTze River, I want to mention this suggestion:

12. Engage them to clean up the country, to re-plant trees, to learn the science and equip them with the tools required to clean the rivers, filter the air, recycle the mountains of styrofoam lunchboxes (optically it fails on 5, but in truth it is a very good investment for generations to come.) 

I want to thank you all for sharing your imaginative ideas, and welcome you back to campus for the last push.