A musical selection

Since I gave up posting a musical selection every week, I changed the title. I still intend to post selections occasionally. Here is Joseph Haydn’s Quartet in E-flat major, Op. 33, No. 2, nicknamed “The Joke”, played by the Ariel Quartet. Make sure you listen to the end. I could think of nothing more appropriate for our times.

 

Insider trading

I think one of the main things that has fueled a backlash against the global elites is the (correct) perception that they play by different rules. When they make financial mistakes, they get bailed out with taxpayer dollars with no consequences. Gains are privatized and losses are socialized. Another example is insider trading where people profit from securities transactions using nonpublic information. While there have been several high profile cases in recent years (e.g. here is a Baltimore example), my guess is that insider trading is rampant since it is so easy to do and so hard to detect. The conventional wisdom for combating insider trading is stronger enforcement and penalties. However, my take is that this will just lead to a situation where small time insider traders get squeezed out while the sophisticated ones who have more resources will continue. This is an example where a regulation creates a monopoly or economic rent opportunity.

Aside from the collapse of morality that may come with extreme wealth and power (e.g. listen here), I also think that insider traders rationalize their activities because they don’t think that it hurts anyone even though there is an obvious victim. For example, if someone gets inside information that a highly touted drug has failed to win approval from the FDA then they can short the stock (or buy put options), which is an agreement or opportunity to sell the stock at the current price in the future. When the stock decreases in value after the announcement, they just buy the stock at the lower price, resell at the higher price, and reap the profits. The victim is the counter party to the trade who could be a rich trader but could also be someone’s pension fund or employees of the company.

Now the losing party or a regulatory agency could suspect a case of insider trading but to prove it would require someone confessing or finding an email or phone recording of the information passed. They could also try to set up a sting operation to try to catch serial violators. All of these things are difficult and costly. The alternative may seem ridiculous but I think the best solution may be to make insider trading legal. If it were legal then several things would happen. More people would do it which would drive down the prices for the trades, the information would more likely be leaked to the public since people would not be afraid of sharing it, and people would be more careful in making trades prior to big decisions because the other party may have more information than they do. Companies would be responsible for policing people in their firms that leak information. By making insider information legal, the rent created by regulations would be reduced.

The US election and the future

Political scientists will be dissecting the results of the 2016 US presidential election for the next decade but certainly one fact that is likely to be germane to any analysis is that real wages have been stagnant or declining for the past 45 years. I predict that this trend will only worsen no matter who is in power. The stark reality is that most jobs are replaceable by machines. This is not because AI has progressed to the point that machines can act human but because most jobs, especially higher paying jobs, do not depend heavily on being human. While I have seen some consternation about the prospect of 1.5 million truck drivers being replaced by self-driving vehicles in the near future, I have seen much less discourse on the fact that this is also likely to be true for accountants, lawyers, middle managers, medical professionals, and other well compensated professionals. What people seem to miss is that the reason these jobs are well paid is that there are relatively few people who are capable of doing them and that is because they are difficult for humans to master. In other words, they are well paid because they require not acting particulary human. IBM’s Watson, which won the game show Jeopardy and AlphaGo, which beat the world’s best Go player, shows that machines can quite easily better humans at specific tasks. The more specialized the task, the easier it will be for a machine to do it. The cold hard truth is that AI does not have to improve for you to be replaced by a machine. It does not matter whether strong AI, (an artificial intelligence that truly thinks like a human), is ever possible. It only matters that machine learning algorithms can mimic what you do now. The only thing necessary for this to happen was for computers to be fast enough and now they are.

What this implies is that the jobs of the future will be limited to those that require being human or where interacting with a human is preferred. This will include 1) jobs that most people can do and thus will not be well paid like store sales people, restaurant servers, bar tenders, cafe baristas, and low skill health workers, 2) jobs that require social skills that might be better paid such as social workers, personal assistants, and mental health professionals, 3) jobs that require special talents like artisans, artists, and some STEM professionals, and 4) capitalists that own firms that employ mostly robots. I strongly believe that only a small fraction of the population will make it to categories 3) and 4). Most people will be in 1) or not have a job at all. I have argued before that one way out is for society to choose to make low productivity work viable. In any case, the anger we saw this year is only going to grow because existing political institutions are in denial about the future. The 20th century is over. We are not getting it back. The future is either the 17th or 18th century with running water, air conditioning and health care or the 13th century with none of these.

Revolution vs incremental change

I think that the dysfunction and animosity we currently see in the US political system and election is partly due to the underlying belief that meaningful change cannot be effected through slow evolution but rather requires an abrupt revolution where the current system is torn down and rebuilt. There is some merit to this idea. Sometimes the structure of a building can be so damaged that it would be easier to demolish and rebuild rather than repair and renovate. Mathematically, this can be expressed as a system being stuck in a local minimum (where getting to the global minimum is desired). In order to get to the true global optimum, you need to get worse before you can get better. When fitting nonlinear models to data, dealing with local minima is a major problem and the reason that a stochastic MCMC algorithm that does occasionally go uphill works so much better than gradient descent, which only goes downhill.

However, the recent success of deep learning may dispel this notion when the dimension is high enough. Deep learning, which is a multi-layer neural network that can have millions of parameters is the quintessence of a high dimensional model. Yet, it seems to be able to work just fine using the back propagation algorithm, which is a form of gradient descent. The reason could be that in high enough dimensions, local minima are rare and the majority of critical points (places where the slope is zero) are high dimensional saddle points, where there is always a way out in some direction. In order to have a local minimum, the matrix of second derivatives in all directions (i.e. Hessian matrix) must be positive definite (i.e. have all positive eigenvalues). As the dimension of the matrix gets larger and larger there are simply more ways for one eigenvalue to be negative and that is all you need to provide an escape hatch. So in a high dimensional system, gradient descent may work just fine and there could be an interesting tradeoff between a parsimonious model with few parameters but difficult to fit versus a high dimensional model that is easy to fit. Now the usual danger of having too many parameters is that you overfit and thus you fit the noise at the expense of the signal and have no ability to generalize. However, deep learning models seem to be able to overcome this limitation.

Hence, if the dimension is high enough evolution can work while if it is too low then you need a revolution. So the question is what is the dimensionality of governance and politics. In my opinion, the historical record suggests that revolutions generally do not lead to good outcomes and even when they do small incremental changes seem to get you to a similar place. For example, the US and France had bloody revolutions while Canada and the England did not and they all have arrived at similar liberal democratic systems. In fact, one could argue that a constitutional monarchy (like Canada and Denmark), where the head of state is a figure head is more stable and benign than a republic, like Venezuela or Russia (e.g. see here). This distinction could have pertinence for the current US election if a group of well-meaning people, who believe that the two major parties do not have any meaningful difference, do not vote or vote for a third party. They should keep in mind that incremental change is possible and small policy differences can and do make a difference in people’s lives.

What liberal boomers don’t get

Writer Lionel Shriver recently penned an opinion piece in the New York Times lamenting that the millennial penchant for political correctness is stifling free speech and imposing cultural conformity the way the conservatives did in the 60’s and 70’s. The opinion piece was her response to the uproar over her speech at the 2016 Brisbane Writer’s Festival instigated by a young woman named Yassmin Abdel-Magied, who walked out in the middle and then wrote a commentary about why she did so in the Guardian. You can read Shriver’s piece here, Abdel-Magied’s here, and a blog post about the talk here. The question of cultural appropriation, identity politics, and political correctness is a major theme in the current US presidential election. While there has always been conservative resentment towards political correctness there has been a recent strong liberal backlash.

The liberal resentment has been spurred mainly by two recent incidents at two elite US colleges. The first was when Yale’s Intercultural Affairs Council recommended that students not wear Hallowe’en costumes that might offend other students. Lecturer and associate master of one of Yale’s residential colleges, Erica Christakis, wrote an email questioning the need to regulate student’s clothing choices and that students should be allowed to be a little offensive. This triggered a massive reaction from the student body strongly criticizing Christakis. The second incident occurred at Bowdoin College in which there was a “tequila” themed party at a College Residence, where students wore sombreros and acted out Mexican sterotypes. Two members of the student government attended the party and this led to a movement by students to have the two impeached. Both of these incidents led to pretty uniform condemnation of the students by the main stream media. For example, see this article in the Atlantic.

The liberal backlash is based on the premise that the millennial generation (those born between 1980 and 2000) have been so coddled (by their baby boomer parents, born between 1945 and 1965, I should add) that they refuse to be exposed to any offensive speech or image. (Personal disclosure: I am technically a boomer, born in 1962, although by the time I came of age the culture wars of the 60’s had past. I’m a year younger than Douglas Coupland, who wrote the book Generation X, which was partially an anthem for neglected tail-end boomers who missed out on all the fun and excitement of the cohort a decade older. The cruel irony is that the term Generation X was later appropriated to mostly mean those born in the 70’s making us once again, an afterthought.)

My initial reaction to those incidents was to agree with the backlash but the contrast between Ms. Abdel-Magied’s thoughtful heartfelt comment and Ms. Shriver’s exasperated impatient one made me realize that I have underestimated the millennials and that they do have a point. Many liberal boomers believe that while full racial equality may not yet exist, much of the heavy lifting towards that end was done by the Civil Rights Movement of the 60’s, which they supported. What these boomers miss is that the main reason that full racial equality has not been reached is because of cultural biases and attitudes that many of them may even possess. The millennial approach may be a little heavy handed but they at least recognize the true problem and are trying to do something about it.

The plain truth is that just being black does carry an extra risk of being killed in an encounter with law enforcement. Whites and blacks still live in segregated neighborhoods. Even in the so-called liberal enclave of academia, minorities are underrepresented in high level administrative positions. There are just a handful of East Asian women full professors in Ophthalmology in all US medical schools. Hollywood executives do believe that movies cannot be successful with Asian lead actors and thus they still cast white actors for Asian roles. Asians are disadvantaged in the admissions process at elite American schools. Racial stereotypes do exist and pervade even the most self-professed liberal minds and this is a problem. This is not just a battle over free speech as liberal boomers have cast it. This is about what we need to do to make society more just and fair. Shriver thought it was ridiculous that people would be upset over wearing sombreros but it does indicate that there are those that automatically associate a Mexican drink with a Mexican stereotype. Some of these students will be future leaders and I don’t think it is too much to ask that they be aware of the inherent racial biases they may harbour.

Arsenic and Selenium

You should listen to this podcast from Quirks and Quarks about how University of Calgary scientist Judit Smits is trying to use selenium rich lentils from Saskatchewan, Canada to treat arsenic poisoning in Bangladesh. Well water in parts of rural Bangladesh have high levels of natural arsenic and this is a major health problem. Professor Smits, who is actually in the department of veterinary medicine, has done work using arsenic to treat selenium poisoning in animals. It turns out that arsenic and selenium, both of which can be toxic in high doses, effectively neutralize each other. They each seem to increase excretion of the other into the bile. So she hypothesized that selenium might counter arsenic poisoning but the interaction is nontrivial so it is not a certainty that it would work. Dr. Smits organized a study to transport ten tons of lentils from Canada to Bangladesh this past summer to test the hypothesis and you can hear about the trials and tribulations of getting the study done. The results are not yet in but I think this is a perfect example of how cleverness combined with determination can make a real difference. This study is funded entirely from Canadian sources but it sounds like something the Gates and Clinton foundations could be interested in.

2016-9-26. Corrected a typo, changed Saskatchewan to Bangladesh

New Papers

Li, Y., Chow, C. C., Courville, A. B., Sumner, A. E. & Periwal, V. Modeling glucose and free fatty acid kinetics in glucose and meal tolerance test. Theoretical Biology and Medical Modelling 1–20 (2016). doi:10.1186/s12976-016-0036-3

Katan, M. B. et al. Impact of Masked Replacement of Sugar-Sweetened with Sugar-Free Beverages on Body Weight Increases with Initial BMI: Secondary Analysis of Data from an 18 Month Double–Blind Trial in Children. PLoS ONE 11, e0159771 (2016).

These two papers took painfully long times to be published, which was completely perplexing and frustrating given that they both seemed rather straightforward and noncontroversial. The first is a generalization of our previously developed minimal model of the fatty acid and glucose as a function of insulin to a response to an ingested meal, where the rate of appearance of fat and glucose in the blood was modeled by an empirically determined time dependent function. The second was a reanalysis of the effects of substituting sugar-sweetened beverages with non-sugar ones. We applied our childhood growth model to predict what the children ate to account for their growth. Interestingly, what we found is that the model predicted that children with higher BMI are less able to compensate for a reduction of calories than children with lower BMI. This could imply that children with higher BMI have a less sensitive caloric sensing system and thus could be prone to overeating but on the flip side, can also be “tricked” into eating less.