The Hidden Cost of Credit Ratings

justice

The NY Times’ “The Hidden Cost of Trading Stocks” paints a concise and damning picture of yet another malpractice in financial services.  This has been a recurring theme.   

Another storm may be brewing – this time for the credit ratings industry.  

It is standard practice for issuers to hire ratings agencies to rate their securities.  This practice has lead to incentives to give higher ratings when trying to get business from securities issuers, putting the ratings agencies in the position of representing the issuers when they are given special status to serve and protect investors.  They are not even required to disclose the conflict of interest.  The closest we get to protection is a lawsuit when they explicitly advertise objectivity.

It now looks like 16 states will each get their chance to sue individually.  This may be the beginning of a big and positive change.  If conflicts of interest did influence credit ratings, it would shift capital and damage economic efficiency even when it is not misdirecting pension money into a mortgage bubble.  I wonder if we will see a social media movement to influence reform like we are seeing with network neutrality and “common carrier” status.  I hope so.

 

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A carbon solution

Aligned Carbon Nanotubes3D printing may be a long term solution to the carbon problem.

Carbon fiber is a mechanical engineer’s dream.  It has great properties for building physical things.  3D printers will improve toward using carbon fiber and substrates because of the combination of physical properties and the simplicity of a supply of carbon.

Imagine a world in which we can have carbon fiber skyscrapers and vehicle parts — buildings and physical things that cost little to produce from carbon collected from the environment, possibly the air.

MIT is already able to print a building with a sandwiched layer of concrete and insulation.  In a decade, this will be possible on a commercial scale.  In two decades, smart machines will offer choices of building materials and be easily customizable from libraries of public designs.

I’m not suggesting that we should ignore the carbon problem.  I’m suggesting that a good solution might be to invest in carbon demand.  Specifically:

  • Carbon collection system: collect, purify, and prepare carbon fiber from CO2.
  • Carbon fiber printing system: build up structures with fibers running in the right directions.

How is it possible that radio ads are unsearchable?!

All the incentives are aligned: advertisers want to connect with customers and customers are typing search terms, hunting for the phone number of web site of the radio ad they just heard. What was that special deal they said to mention? Where can I hear the ad again?

Google should open “ad search” and let advertisers submit audio, video, transcriptions, and links along with optional metadata like format, media outlets, etc.

Then search could handle things like ‘radio ad’, ‘tv commercial’, etc.

The advertisers do the work of populating the content and everybody wins.

Gallery

Boston has grown on me

This gallery contains 11 photos.

Longstanding commitment to learning and teaching Museum of Science delivery, 1984 . . . World class institutions of learning MIT Media Lab, 2013 . . . Curious and brilliant people New England AI . . . Fresh, clear thinking A … Continue reading

Private drones

Private droneIt’s becoming easy; we’re on the cusp. Soon, you will be able to assemble or buy a private drone that can go anywhere, record video, deliver a payload, retrieve a thing, whatever. Land, sea, and sky. Automated surveillance systems can be easy to control. Can you click on a spot on a map? That’s pretty much all you need.

How do we respond as a society when anyone can spy or kill as easily as clicking an app? How do you trace an attack that is delivered from the sky from anyone anywhere? How do you handle alibis when you can schedule a crime with cron?

I don’t know the answer, but it’s a continuation of a long trend toward putting more lethal power into more hands. I hope some smart people are thinking well about this.

Somehow, I don’t think a drone shield is going to be enough.

No Brain Required

I was watching a PBS special on how plants, through their roots, compete with other species and sometimes support their own relatives. The narrator and some of the scientists hinted at plant cognition and asked the viewer how plants think. Observing analogous dynamics in software, it’s clear that there is no brain or thinking required.

These types of behaviors can have local (cellular) controls and do not require central planning. Coordination emerges from the cells’ common responses. All plant roots produce chemicals and these chemicals can promote or inhibit growth, trigger other chemicals, etc.

This leads me to point out another widespread misunderstanding or miscommunication about how human behavior. A lot of what we do is conditioned or innate, and does not require or use the brain. Our bodies have nervous tissue throughout, and muscle stimulation originates all over the nervous system. The brain gets too much credit for the complex system of cells that in many cases are doing their own thinking in their own simplistic way.

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Anticipating the Singularity

If you don’t know about the singularity, here is some background and context.

I love Ray Kurzweil.  I saw him once in a diner but I’ve never met him. I feel like I know him, though, and have benefitted so much from his published work.

However, I’m confused by this update on his new job with Google.  Maybe he is simplifying for the interview, but his focus on language seemed off target.  I also believe in Marvin Minsky’s “Society of Mind“, and see language as a small piece of the big picture.

I think the information architecture (how concepts are defined and connected) is much more important, and distinct from the language used to represent it.  In other words, the reality is distinct from the words used to describe it.  If you are a programmer, you might draw an analogy to the MVC framework, where the Model is the information architecture and the View is the language.  If you are bilingual, you feel this.

If Kurzweil and his team focus on language, I hope they do so merely as an interface.  They can look through the lens of language to build the AI, and users will use language to interact.  But language seems like just an interface to the actual interesting work to be done building the singularity.

Maybe this is what he meant.  It probably is.