Author Archives: theusernamewhichismine

Have IPOs become more speculative?

This post is very late because I didn’t feel good about my conclusions, but here it is.

I’ve been wondering if IPOs have become more speculative of late. Rumors abound that OpenAI (makers of ChatGPT) may IPO soon and they’ve been quoted as having a billion dollars in revenue and a valuation of 80 billion. 80 times profit is already a pricey valuation, 80 times revenue is even moreso. And other even more speculative IPOs have happened in recent memory. Companies like CRISPR Therapeutics and Beam Therapeutics IPO’d when they have essentially no revenue, just patents.

It was once said to me that IPOs are “supposed” to be for a company that is profitable. The company shows the world that it is profitable and can thus afford to pay a dividend. The investors of the world will then pay for stock in the company in order to grow their money. So the company gets a big pile of cash by selling shares, and the investors get shares which pay a dividend and may grow in value also.

The above is a very 20th century view of investing, these days dividends aren’t all that popular to begin with. So too does it seem that many companies will IPO long before they can afford a dividend, and long before they are profitable at all, so why are investors investing and buying these stocks?

It isn’t necessarily a bad move for investors to buy stock in OpenAI if it does IPO. The investors are speculating that while it’s not profitable now, it will be in 10 or 20 years. In essence, an IPO like this lets investors play the role that venture capitalist play. Venture capitalists invest in many startups long before they see revenue or profit, and they bank on the fact that while 10 startups may fail, the 1 that succeeds will let them see more than 10x gains. With companies IPOing early, normal investors can now also play this game. Beam Therepeutics, CRIPSR Therapeutics, and OpenAI may all fail, but if you invest in them and 10 other speculative companies, then maybe 1 will succeed which will give you gains that wipe away all your loses.

So I can’t say that companies IPOing earlier and earlier is a bad thing. As long as they don’t lie on any of their forms, then investors know exactly what they’re getting into. Investors know that they’re buying into a very speculative, pre-profit, maybe even pre-revenue company. But if it works out, they can make big gains. And remember that “investors” here isn’t just faceless, deep pocketed billionaires. Investors is also every person with a 401k or IRA. They too can buy into these companies using their own money and play at being venture capitalists. And if its so profitable for venture capitalists to do this, then why shouldn’t the rest of us do the same?

But while I cannot say this is a bad thing, I also cannot say if this trend is even happening. Remember I started this story by asking if IPOs are happening earlier and earlier. Is it true that in the 20th century, most IPOs were of profitable companies, and in the 21st century most IPOs are of unprofitable ones? Or is that simply recency bias at work? I tried and tried but couldn’t find hard numbers on this kind of thing, which is why it took me so long to write this post.

Either way, if OpenAI does IPO I might toss a few dollars their way. Intellectually I know I probably can’t beat the market, but emotionally it’s fun to pretend I can. And where’s the harm in that?

I don’t normally play ironman games

I’m not sure if everyone calls it this, but to me “ironman” games are those that don’t let you save and reload whenever you want. 30 years ago these games were the norm because most gaming was done either at arcades (which demanded quarters, so letting you save and reload anywhere hurt their business) or on rather weak computers (which didn’t have the memory for dedicated save slots). But for the most part, “ironman” seemed like a quaint 20th century style of gaming that was thrown own when computers got stronger and arcades died. Recently there’s been a resurgance of games that don’t let you save and reload, not for technical reasons, but for the personal reasons that the devs or power-gamers think it’s “cheating.” I normally don’t play ironman games, my time is worth more than that, but I received For the King as a gift and so decided to give it a go.

I decided to try For The King single player.  It was going ok, until I tried to fight my first battle 1 level higher than me (level 5 vs my level 4). First turn, the boss enemy confused my whole party.  Confusion rarely “wears off” in this game, so from then on the battle was auto-piloted into a total party kill.   And a total party kill would have been game over, 3 lost lives.

I don’t like ironman because it heavily discourages experimentation.  I decided to try this fight because my friend had told me that For the King doesn’t have the Divinity 2 problem of “battles at a higher level are impossible.”  And yet the way this battle went heavily teaches the player “never ever fight enemies higher level than you” because I barely scratched the enemies and the entire battle was decided on a single move from the first turn of the boss.

Of course, I said to hell with that and End-Task’d the game instead of letting it end in defeat.  And since the autosave was right before I tried the battle… I just went and tried again.

The battle went a hell of a lot better the second time.  The total-party-confuse still happened, but this time it didn’t occur until the enemy’s 3rd turn.  And also one of my characters switched to his gun, fired, and then snapped out of confusion (as I said, a rare occurrence).  I was actually able to reload and fire to kill the enemy myself.

This single battle teaches the player 2 entirely different lessons based on a single dice roll.  If the confusion comes out first turn, the lesson is “gtfo, high level enemies will kill you.”  If confusion comes out later, the lesson is simply that some enemies are powerful and have party-wide attacks.  In a normal game, the player can reload when killed and try again.  They can  see how the game “really” works, ie “are higher level enemies impossible or was I just unlucky?”  In ironman games, the player cannot learn how the game works in game.  It heavily encourages meta-gaming (looking everything up online) and discourages experimentation.

When you load up the game, it starts immediately with what feels like a developer having a hissy-fit over people complaining about randomness.  When I loaded the game for the first time, it forced me to accept what was essentially an in-game EULA saying “don’t think you’ll defeat the evil your first try, more powerful heroes than you have tried and failed.”  That same sentence loads up every time you start the game.  It REEKS of a dev being very angry at people complaining about the randomness and lost runs, and so trying to force the players to accept the “correct” way of thinking, ie that the game will happily waste your time with a bad roll. 

I on the other hand will continue to think my time is far more important than any game.  This is the kind of game I will never buy for myself, I’m a busy man and don’t want to spend hours on a game only to get kicked back to the beginning by a single bad roll.

But I can still see the appeal.  The systems are quite good, the focus is fun, and I’m loving my little cross-classing that I’ve been able to do.  I got a Goblin Bow in this game and handed it to both my Bard and Scholar at different points because it was stronger than their normal attacks and had pierce.  I handed the Bard a Magic Book weapon later because I hadn’t found good bard weapons and she had decent intelligence.  There’s a lot to like here, but the game would definitely be improved by having a non-ironman game mode.  It doesn’t hurt the ironman people’s fun and lets folks like me enjoy it too. 

Crying over Cryo-EM

OK so the title is hyperbole, but I’ve definitely struggled recently with my cryo-electron microscopy. I guess here I’ll give an overview of what exactly electron microscopy is and why I’ve struggled.

Professor Jensen of CalTech has a great series of videos on Cryo-EM. Why we use it, how we use it, and what it is. Anyone interested in the technology should watch it, but for my own purposes:

  • Cryo-electron microscopy consists of freezing a sample and then shooting electrons at it to see the 3d structure of it at the smallest atomic scales.
  • We’re using it to study a number of proteins that cause diseases. In particular we want to know how the 3d shape of a certain protein creates that protein’s function. And how that function can then go on to cause a disease.
  • So we purify a specific protein, make a cryo-grid from that purified protein, and then look at that cryo-grid under electron microscopy hoping to get a good 3d structure.

But that’s where the problems start. First of all, purifying a protein to 99.9% purity is no small feat, especially when you’re taking proteins out of actual patient samples. I’ve dearly struggled to get the required purity that would be needed to make good grids for imaging.

But once I have some “pure” protein, I need to add it to a grid to image it. A cryo-grid is a 1 millimeter by 1 millimeter circle about 1 micrometer thick. On that grid are cut out many 1 micrometer by 1 micrometer squares. And in each square are a mesh of 100 nanometer by 100 nanometer holes. When I add a tiny drop of my protein sample (which is in water) onto the grid, the hope is that the proteins will settle down into the holes. I will then “blot” the sample by pressing some paper onto both sides of the sample, which wicks away all the water not in the holes. I then instantly plunge the sample into liquid ethane, freezing all the liquid in the holes in an instant.

What you get is supposed to be a grid covered in a tiny thin layer of ice, and in each hole the ice contains your proteins of interest. Since they were flash frozen in ethane, the ice here is “vitreous,” which means glass-like. It’s see-through just like glass. And so a beam of electrons can pass into the ice to create an image of the proteins inside the ice.

But there’s problems. Let’s get back to making the grid: most proteins are hydrophilic which means water-loving. The opposite of hydrophilic is hydrophobic which mean water hating, like oil. Oil and water don’t mix, and neither do hydrophobic and hydrophilic things. Our grids are made of copper covered in a layer of carbon, and that stuff is naturally hydrophobic, meaning it doesn’t interact well with the hydrophilic proteins (and the water they are in).

So before adding proteins we have to glow discharge our grids. This means putting them in a machine that shoots broken-up water molecules at them. Those broken-up water molecules have oxygen in them, and some of them will bind to the grid creating oxygen-containing compounds. Those compounds are very hydrophilic, so the whole grid becomes hydrophilic enough for the proteins to interact with it.

At some point we got a new glow discharger, and I swear that it started destroying my grids. Like I said the grids are tiny and fragile, 1 millimeter across, 1 micrometer thick! This glow discharger shoots water at them, and the new one shot the water so hard that it was punching through my grids and destroying them completely at the microscopic level. I couldn’t see the damage because it’s microscopic, but after adding the protein to my grids and flash-freezing them, I’d look at them under a microscope and see nothing but a completely destroyed grid. I finally just stopped trusting it completely and moved on to using a new glow discharger that’s a bit weaker.

So OK I solved the glow discharge problem, but now here comes the ice problem. Like I said above, you want the proteins to be encased in glass-like vitreous ice. If you have no ice, well you have no proteins. And if the ice is too thick, it’s no longer glass-like and you can’t see through it. I kept being on both sides of those extremes, first I had ice so thick I couldn’t see anything, then I had no ice at all. You are supposed to manage this problem by configuring your blotting time, which is how long you wick away the water before plunging the grid into the liquid ethane. Shorter blot time, thicker ice, longer blot time, thinner ice or no ice at all. Try long and short times to get the ice just right.

And yet I was using ultra-short blot times and still getting thick and thin ice sometimes at random. On the balance I got more grids with no ice at all, so I kept thinking I needed to drop the blot time more and more. My adviser said that there is a minimum blot time of about 2 seconds and you never want to go lower than that, but I tried 2 seconds and the ice was still way to thin or non-existence. That seems to say that my blot time is still too long, yet 2 seconds is as short as I can go.

I finally asked an expert in the chemistry department who suggested I used their facilities instead. He also suggested that 1 second of blot time is perfectly fine, and so that was what I did. I FINALLY seemed to start getting good grids, so let’s hope it hold out.

So I’ve struggled with glow discharging, and then blot times, as well as protein purity. I’ve finally got some good grids, and I hope I can collect a lot of data on them. If I do that, I may be able to get 3d structural information using AI and a whole bunch of analysis. We’ll see though, we’ll see.

Shadow boxing the NIMBYs again: luxury vs low income apartments

Warning, this post is longer than usual.

NIMBYs will give any excuse to block housing. There’s two examples of this I’d like to discuss, one is the “luxury vs low income” false dichotomy. The other is when NIMBYs try to change the subject and ban corporations or foreigners from owning housing.

Let’s get one thing clear: affordable market-rate housing is just housing that has been on the market for a while. Houses built in the 80s are affordable now, even if they weren’t affordable when they were built in the 80s. Houses built this year generally aren’t affordable, but will be in 40 years. In economics you’d generally assume that products will be built for every level of customer. For rich customers, expensive products with expensive material are built. And for poor customers, cheap products with cheap material. Housing doesn’t follow this because of a few reasons.

The first reason is that for the past 50 years, much of the cost of building a house comes simply from getting permission to do so. There is a huge barrier to making housing whether you’re trying to make cheap or expensive housing. Cheap products can usually make up the different by being mass produced, but these barriers to housing (aka zoning etc) excise most of the benefits of mass production. That means there’s no point trying to mass produce houses anymore and make up in quantity, you can only produce quality houses and make up the difference using high prices.

The other reason that housing doesn’t follow the pattern is because it’s a good that lasts so long. Food is gone very quickly, whether it’s expensive or cheap. But an expensive or cheap house can last a hell of a long time with regular repair. Of course it slowly degrades, but that just means an expensive house slowly becomes a cheap house as its value on the market declines (or this is what you’d expect to happen, but if housing supply is constricted, price remains elevated). So again, a developer isn’t incentivized to mass produce cheap housing because anything built more than a decade ago has already become cheap housing, a developer of cheap housing is thus competing with the entire city’s housing stock.

For those two reasons, developers like to build “luxury” housing, including condos and apartments. Whenever these things are built, certain NIMBYs come out of the woodwork to protest the housing using vaguely left-of-center vocabulary. They’ll say things like “these expensive apartments are only for rich people! That won’t help the housing crisis for poor people!” Then they try to stop development with their economic illiteracy.

Those NIMBY arguments are just plain wrong. ANY increase in housing supply will lower the cost of housing in the market, even if it’s luxury housing being built. If this luxury housing isn’t built, then the rich people are forced to compete with the middle class people for the middle-income housing. The rich can afford to spend more, and so they drive up the cost of middle-income housing. If instead the luxury housing gets built, then the rich are spending their money on that, so there’s less demand for middle-income housing. Now more middle class people can afford middle-income housing, so they don’t have to compete with poor people for cheap housing. All this means lower prices for the middle class and the poor as less people are competing for the same amount of housing, and it happened because the rich were able to move in to those new luxury units.

So stop protesting luxury apartments, they lower the cost of housing just as much as cheap affordable apartments. And in 40 years those luxury apartments will have worn down a bit and will now become affordable so anyone can move into them.

The other thing I’d like to hit out against is people trying to ban foreigners and corporations from owning homes. Canada recently enacted a ban on foreign home buyers, and I have two problems with this. One: it will not do anything for affordability, foreigners make up a tiny percentage of Canadian home buyers. Number 2 ties into the ban on corporations, so let me discuss that.

There’s a knee jerk reaction by some that corporations and investors are at fault for driving up the price of houses. But corporations don’t live in houses, people do. A corporation only buys a house because they think they can make back their money by selling or renting it to another person. This implicitly requires that corporations think the value of houses will continue to go up, and monumentally so, otherwise they’d lose money on this transaction. So are you angry at corporations buying houses? Then the solution is to build more houses so the market is flooded and the corporations lose out on their investment.

The second part of this knee-jerk is an economically illiterate idea that corporations are just vampires sucking value out of the economy. If only we banned corporations, then all the prices would go down due to less competition and there’d be no downsides whatsoever. But if you think about it economically you’d realize that corporations are providing a form of service by being in the housing market: they are providing liquidity to the housing market.

Liquidity is most well-studied in places like the stock market. A lack of liquidity can lead to wild swings in prices, both up and down, and is generally regarded as a bad thing for the market as it hurts both buyers and sellers. When you want to buy shares of stock, you don’t need to match yourself to a single individual who wants to sell the same number of shares you want to buy, at the same price you want to buy them at. Instead, market makers create the liquidity by buying and selling lots of stocks. The market makers don’t want to hold any stocks for long, they just want to buy and sell them.

When I buy a stock, the market maker is immediately able to get it for me, as much as I want, and at the market price. When I sell a stock, the market maker immediately takes it, and again they take as much as I give them, at the market price. I don’t have to find an individual buyer and seller, everything can happen through a single market maker who is interacting with not only me but every other buyer and seller in the market. This is actually much more efficient than if every buyer and seller had to go out and find someone to trade with, we all just go to a single person, the market maker, and get the market price from them.

The market makers are in turn taking on a lot of risk, and using a lot of stats and technology to mitigate that risk. When I sell them some Apple stock, they are willing to buy it immediately on the assumption that somewhere out there someone will buy it from them for more. They take a small cut, usually a cent or so per share, which helps hedge against falling prices in the few milliseconds it takes them to find a new buyer. But there’s a risk that if Apple stock falls fast, they’d be left holding my stock which is now worth less than I sold it to them for. But market makers are large and invest in a lot of technology and statistics to be able to take on that risk.

But now imagine there were no market makers, the stock market would have a lot less liquidity. Any time I wanted to sell Apple stock, I’d need to find an individual who was a willing buyer. But if the price of Apple is falling fast, investors will get skittish, they’ll be worried about getting caught out, and most of them won’t have statistics and technology that the current market makers have. Thus they may not be willing to buy from me, thus I’ll have to lower my price even more to find a buyer, but that makes the price of the stock fall even faster, meaning that investors get even more skittish and even less willing to buy…

This is what’s called a liquidity crisis, it can happen to stocks moving both up and down. Lack of liquidity leads to wild swings in prices which hurt both buyers and sellers and generally mean people lose more money from the market than if it were liquid. But these days liquidity is generally smoothed out by the market makers. For all that conspiracy theorists hate them, the market makers are why buying and selling stock is so seamless, easy, and reliable these days. Large price movements are smoothed out by liquidity, and any buyer can find a seller and vice versa so people can enter and exist the market whenever they wish.

Now let’s say for a moment that corporations are prevented from buying any housing. Let’s even take the more radical proposal I’ve seen that says no one should be allowed to own more than 1 house. And let’s see the results this would have on the housing market. Spoiler alert: a lack of liquidity in the housing market would hurt both buyers and sellers.

So when you want to sell a house, you have to find a buyer. In our theoretical “no corporations, 1 house per person” market, you’d need to find someone who actually wanted to live there. Someone who wants to live exactly in your area and in your house. If your house is a fixer-upper, you need to find someone who is willing to buy and fix a house. The need to find someone willing to immediately live in your house, right now severely limits your potential pool of buyers. Maybe people just don’t want to fix a house these days, so even thought the repairs aren’t that bad, you’d now have to either do them yourself or lower your price by a lot in order to find a buyer.

Now when corporations are allowed to buy homes you can find a buyer immediately. The corporations then takes on the risk of finding people to buy the house, they take the cost of showing buyers around, of fixing up the house if need be, of advertising it, etc. Corporations are providing liquidity to the housing market, which prevents giant movements in price. Someone who needs to sell their house in a hurry might otherwise be forced to cut the price 20%, 30%, 50% if they just can’t find a buyer within a month or two. But a corporation can buy the house at its full price and can then afford to sit on it for a few months waiting for a new buyers to come along. So people selling their house get the best price possible because corporations are providing liquidity.

If you want to buy a house, you also have to find a seller. Most houses aren’t for sale at any one time. But it would be a nightmare without corporations because then you would actually have to find someone who is actively moving out of their current house. Very few houses are being built (thanks again, NIMBYs), so any house you want to buy will be pre-owned. And remember we’ve banned corporations and multiple home owners, so that house isn’t being kept empty, it’s lived in. That then means that you have to move in at precisely the time they want to move out, otherwise either you’ll be caught homeless for a time or they’ll run afoul of the law because they’ll own more than 1 house at a time. It would be difficult, maddening even to line up your schedules.

This maddening scenario is exactly what’s going on in Britain right now. The British housing market is extremely illiquid not because there are corporations but just because there is an extreme shortage of houses period. The UK has the largest housing shortage of any member of the G7 or G20, meaning that there’s basically no houses anywhere sitting empty. In America, about 9% of homes aren’t currently lived in. Some are dilapidated, but some are just being held while buyers and sellers find a price. In the UK, that number is around 3%, and again many of those are dilapidated and unlivable.

The lack of empty homes in the UK means that anyone looking to move in must first wait for the owners to move out. Of course no one wants to be left homeless, and no one wants to own two homes at once and be forced to pay taxes on both, so Britain has an insane system found no where else in the world called “chains.” In a chain, every property sale has to execute at exactly the same time so that multiple people can all move into/out of houses at the same time. These chains can have over a dozen links, and so of course you can imaging getting a dozen families to all agree on a move date is a nightmare. This system is basically completely unique to Britain, I haven’t heard of it anywhere else, and it is all due to a lack of liquidity in the market, although here brought on by comical undersupply and not the banning of liquidity-assisting corporations.

The chain system is an absolute mess, you can search social media for the horror stories of people losing jobs because move-ins were delayed, or losing money because they had to expedite a move-out. Nothing works the way it is supposed to because the market is so illiquid, and everyone in the British housing market is tangibly worse of because of it. And that’s exactly what we’d get if no one were allowed to own a home they didn’t actively live in.

Corporations and home investors, foreign or native supply liquidity to the housing market, they do not make house prices go up. House prices go up because there is a lack of housing supply. If you’re tired of corporations owning homes and want to force them to lose money, then you should demand your city allow anyone and everyone to build a house on any plot of land that they own. Yes even your neighbor. If your neighbor wants to subdivide his house to build a duplex, let them. If they want to sell to a builder who will demolish the house and build an apartment block, let them. If some developer wants to buy the vacant lot across the street to build condos, let them. If a big developer wants to buy the convenience store down the street and build a 5-over-1, let them. Only by having more housing in everyone’s back yard will the cost of housing go down.

Why is it every time I sit down to write, I suddenly can’t write?

I am unfortunately not writing a real post today, rather a post about what I wish I were writing about. Every time I sit down to write anything these days I get bad writer’s block and so I end up not writing or banging out something really mediocre. But I want to write down some of the topics I’d like to write and hope to write about soon as a way to remember them and push me to write about them.

So I’d like to write some posts about the following:

My work using HuggingFace and some other tools to try to fine-tune a large-language model (LLM). I hope one day to get an LLM that can read earnings statements for me and parse out anything interesting. I would go through step by step what I did, and maybe also have a separate post for all the things that really annoyed me (no one would tell me how to make a dataset!)

“Shadow Boxing NIMBYs again” where I talk about why NIMBYism and zoning are bad. This post would in part take in the idea of “people should be allowed to build things on their property,” which is surprisingly controversial. Also tearing about common NIMBY arguments about how corporations and foreigners owning homes are the “real” problem rather than the simple fact that there aren’t enough homes. Also would talk about the insanity of the British “chains” system.

My recent successes and failures in cryo-EM, including the glow discharger destroying my grids and how my ice has been misbehaving. Also the fact that 2 similar samples are acting in completely opposite ways.

Building on the green belt

Kier Starmer wants to build houses on the green belt. For those of you who don’t know, the “green belt” is an area around some English cities where house-building is heavily restricted. It’s name conjures images of pristine creeks and primeval forests, land that has been protected since the dawn of time and must remain so. But nothing could be further from the trust, most of the green belt is monoculture farms and car parks. The only thing “green” about it is the branding. Which is exactly why the Green Party and other self-proclaimed “environmental” groups are so heavily opposed to Kier Starmer’s plan.

In far too many cases, I’ve seen that “Green” and “Environmental” groups are really just NIMBYs. High rise development is far more efficient than spread out housing, but green groups in my city are opposed to it. The German Greens are famously anti-nuclear, but pro-coal; or rather national Greens are fine with coal away from them but local Greens hate coal in their backyard. And in California, CEQA and other environmental regulation has destroyed the state’s ability to build nearly anything. The state has decided to little by little allow special carve-outs to CEQA for projects of dire need (or good kickbacks) but has still refused to just scrap CEQA for good.

But to bring it back to housing, I think the utter lack of housing in most of the Western world is a damn crime, and the entrenched groups opposed to housing must be fought at every turn.

Just take the Green Belt, a quick search of social media shows that many self-proclaimed leftists are up in arms about it. But what is so wrong with a car park being replaced by houses? And the Tories are against it as well, but why should a supposed party of free market economics forbid people from building what they want on their property? If I want to turn my house into an apartment block, why should Big Government forbid me?

The reason is of course NIMBYs, and there’s an entire Maginot Line of mottes and baileys that the NIMBYs have constructed to defend their arguments and their property values. The most baffling is their claim that more supply doesn’t lower prices. In fact some go so far as to claim that a new apartment will raise housing prices in the area through some mechanism heretofore unknown to economics. But think for even half a second: when there was a shortage of eggs just this year, what happened? The price of eggs rose, yes? And when the egg shortage was alleviated by more production, then what happened? The price fell, just as supply and demand says it will. When there is more of stuff, prices go down.

If a brand new high-priced apartment gets built, then a rich lawyer and family can move out of his luxury apartment from the 90s which is sort of grotty after 30 years of use. Now a young couple can move into that apartment from the 90s, moving out of their tiny apartment in the suburbs. And now someone who was homeless or living with family can move into the tiny apartment vacated by the couple. New housing, even ultra-expensive luxury housing, lowers the price of all housing as people move into it and move out of where they currently are.

Another NIMBY motte is the demand that instead of building new houses, we should implement a policy that is utterly useless. Usually they demand that we should have rent control, or forbid foreigners from owning houses, or forbid corporations from owning them. Absolutely none of these things help in the slightest, in fact rent control is actively harmful. Yet NIMBYs will claim we should never ever build a single new home until these useless policies are implemented.

I saw a truly mask-off moment on social media when talking about Boulder Colorado. I wasn’t aware, but Boulder is one of the most unaffordable cities in America. And on a news story talking about such, the response from Boulder residents was clear: “you don’t have a right to live in Boulder, if it’s too expensive then get richer or leave. We don’t want more houses or apartments because it would change the character of Boulder.” You could very easily see George Wallace saying the same thing.

At the end of the day, NIMBYs think that they, personally, should be immune to market or government forces. Their neighbor should not be allowed to build a bigger house on his land because it would affect them personally. And the government should not be allowed to build houses either because again it would affect them personally. NIMBYism is a blight upon capitalism and a war against the poor. I think anyone on the Left, Right, or Center should oppose it.

So god-speed Starmer, and please build 10 million houses on the green belt you beautiful centrist bastard you.

Good idea: financially supporting workers displaced by AI. Bad idea: taxing companies when for displacing workers with AI.

AI is again the topic of the day and people are discussing what to do about the coming “job-pocolypse.” It seems AI can do anything we humans can do better and so 30% or more of jobs will be destroyed and replaced by AI. Leaving aside how accurate that prediction is, if 30% of all jobs will be impacted then it does warrant a public policy response. Everyone’s got their own personal favorite, but one I see come up again and again is that companies should face a hefty tax any time they replace a worker with AI.

To be blunt, taxing companies for replacing workers with AI is a terrible idea. Let’s leave aside the argument of “how do you prove it,” and cut straight to the fact that the government should not be taxing technological progress. Just to start with some history, how many farmers were displaced by tractors? Millions. In 1900 40% of Westerners worked on farms, now it’s less than 5%. Tractors meant that a single farmer could do the labor of tens or hundreds of men, and so they could fire many of their farm hands to be replaced by tractors. But does anyone reading this wish nearly 1/2 of us were still farmers? Should the government have heavily taxes tractors to preserve the idyllic rural farm life?

The argument in favor of taxing companies that replace workers with a machine is that the company is becoming more profitable at the expense of the worker, and they should pay it back. The current hullabaloo is about being replaced by AI, but in the 20th century similar calls were made when factory workers were being replaced by robots. The problem with this argument is that ignores society. The worker and the company are not the only 2 pieces of the equation, society in general benefits when companies become more efficient. Technology is deflationary, and it has allows many products to drop or price or not increase as rapidly as wages in general. Food today costs less as a percent of annual income than at nearly any time in history, and a large part of that is because the cost of food is decoupled from the cost of labor. So farm hands being replaced by tractors helped all of society by giving us cheaper food, and all of society would have been harmed if taxes had been instituted to prevent tractors from becoming commonplace.

Are the workers harmed when their jobs are replaced by AI? Yes of course. But society itself is helped and so all of society should bear the costs of helping the workers. We should of course offer unemployment benefits and job retraining to those affected. We should not let them go by the wayside the way we did to blue collar factory workers in the 20th century.

But neither should we shoot society in the foot by blocking technological progress that will help all of us. AI replacing jobs will mean products will become cheaper relative to wages, just as what happened with food. A lot of people also spread nonsense that unemployment will skyrocket as the displaced workers can’t find other jobs. They misunderstand economics, there will always be demand for more jobs. The price of some goods will decrease thanks to AI, but that means that people can buy more of those goods or buy more of others goods that they put off buying because they were forced to choose and only had so much money. As prices fall, demand will rise, raising demand for labors in other areas, and a new equilibrium will be reached. Those jobs lost due to AI don’t mean the workers will be forever jobless, any more than 35% of the population displaced by tractors meant that unemployment skyrocketed in the 20th century. Time and time and time again technology has replaced the jobs of workers, and the workers have found new jobs. It will happen again with AI.

The Many Failures of Industrial Policy

“Industrial policy” is once again the word of the day. Much like how Margaret Thatcher’s greatest triumph was Tony Blair, Donald Trump’s greatest triumph will be Joe Biden. Thatcher forced her opponents to change their policy, socialism was nixed from Blair’s Labour, and Starmer it seems unlikely to bring it back. So too did Donald Trump make free trade into a dirty word for Democrats and American politicians in general. Whereas Obama, Clinton, and 2 Bushes all championed free trade agreements, Biden increased tariffs on everyone he could (even Canada). And instead of free trade and free competition, he has made directed subsidies of domestic industry his main economic plank.

Tariffs and subsidies make up the economic policy known as “industrial policy” and to be blunt, I hate it. Industrial Policy exactly what Servan-Schreiber proposed in his book “The American Challenge,” and I think looking at that book with a modern lens outlines industrial policy’s biggest flaws. You can’t predict the future, and so a government that tries to force its economy in certain directions often winds up funding dead ends and missing out on the next big thing. Look at what Servan-Schreiber thought governments should fund (supersonic planes, space industry), and look how much of it was bunk. Now look at all the things Servan-Schreiber didn’t think were worth a mention (genetics, the Internet, renewable energy) and look at how they’ve transformed our modern economies. And Servan-Schreiber wasn’t some rando, he was a French politician who could make actual decisions on French industrial policy.

The government just isn’t as good as the market in actually innovating. And a hands-on government is more likely to try to smother innovation to protect jobs rather than allow creative destruction to increase productivity and national happiness.

There’s also the inherent corruption that comes with the government funding industries. Why is Intel given so much money for making microchips when there are plenty of other chip companies out there? The excuse is that Intel is making “more important” chips, but it looks to me like they’re just plowing government subsidies right back into their dividend, handing that money to their billionaire share-holders. So billionaires receive billions of Federal Dollars, and we’re supposed to assume this isn’t corruption?

I don’t like the government giving handouts and bailouts to their favorite, politically connected billionaires. I’d prefer companies be forced to stand up on their own 2 feet like the workers have to. You want to corner the chip industry? Do it by providing a better product, don’t just demand ever more subsidies and protectionism.

This sort of policy is exactly the kind of failure that we learned about in Latin American history as well. Many countries in the 20th century instituted a policy of “imports subsidizing industrialization,” where they raised tariffs on foreign goods to subsidize domestic industry. This led to political capture by the industrialist however, as they realized it was far easier to protect their profits by demanding ever higher tariffs and subsidies rather than investing in producing better products. In the end these countries were left with bloated, uneconomical industrial sectors giving sub-par products to customers. The customers lost as they got less for their money than if they could just buy foreign products without the tariffs. Even today Brazil has extortionate prices on consumer electronics, higher than any other country, and the prices only go down on the rare occasions when the tariffs get cut.

So I don’t want industrial policy, and I want it even less knowing that my political opponents can control it. America currently has a divided government, but a united government that engage in industrial policy is by far the most likely to simply hand the money to the most politically connected industrialists at the expense of everyone else. If you’re a Democrat, would you want Trump to be handing billions of taxpayer’s dollars to his favorite industries?

And I don’t want the government to subsidize dead end industries at the expense of growing ones. I don’t want them to cut off creative destruction and leave us with hand-weavers instead of looms. I don’t want them to protect domestic manufacturers and leave consumers worse off. I don’t like industrial policy, and I think Biden’s greatest failure is that he has become Trump’s greatest triumph.

Quantum Computers: Hype or Hopeless?

I’m not an expert on quantum computers by any means, but I do like to blog about things I know a little about. So bear with me.

One of the funnest seminars I ever attended wasn’t even in my major. I’m a biologist by trade, but occasionally in grad school I’d wonder over to the physics department to eat their pizza and have a gander at the science they were touting (they occasionally came for our pizza too so fair’s fair). On one occasion, the CEO of a quantum computer (QC) company (formerly a professor of physics) came by to talk about the exciting new happenings in QC and give us some history.

At that point I had only a surface understanding of QC, and so I had a lot of fun learning how his QC worked and the challenges he’d overcome. He also had a great sense of humor and a fun presentation. At the end he took lots of questions, and so I was also impressed by how he didn’t really sugarcoat or overhype anything. He was very open and honest that the field still had work to do and that working QCs weren’t just around the corner, whereas reading news articles you’d think they were 5 years away at most.

When it came time for my question, I asked the only thing that I, a biologist could think of: “when will we have logical qubits?”

To back up a big, just as classical computers store information in bits, QCs store information in qubits. Classical bits are binary, existing as either 1 or 0. Qubits are quantum mechanical in nature, and they exist as a superposition of states so that every time you measure them they have a probability of being either 1 or 0. This superposition is why QCs can do all those amazing things that people talk about like breaking encryption or what have you.

But this superposition is also highly unstable. Any interaction with the outside world at all will destroy the superposition, rendering it useless. This has long been the bane of QC companies and researchers, how do you make a qubit that doesn’t fall apart before you can usefully use it? When the superposition falls apart, it leads to an error, and error correction in QC is all the tricks and ways that researchers are trying to either keep the superposition stable or rebuild it if it fails.

The holy grail of error correction is the “logical qubit.” A single qubit can of course fall apart at any time so it is a poor store of information. But what if many qubits could be networked together in some way, such that if one fails the others will correct it back to its previous information value. Together, all these qubits would allow the information to be held indefinitely, even if the superposition in 1 or many of the qubits fails individually. And so together these qubits would act as a single “logical qubit,” that is a stable qubit that perfectly holds information, as opposed to the normal qubits that fall apart when you look at them funny.

It has been theorized that a thousand or more qubits will be needed to make a logical qubit, and that the technology for networking qubits to create logical qubits is still not fully formed. So when I asked the seminar speaker how far off logical qubits were, he humbly said that they may not even be possible. From his research, quantum computers may be useful but their utility and longevity will always be undercut by the fragility of the qubit superposition.

I was kind of stunned because in my readings on the field it was taken as writ that as soon as you can produce 1 qubit, you can scale up and produce thousands. Once you produce thousands, you now have logical qubits which will make all our QC programs work perfectly.

What’s interesting is that IBM is now saying it will make a QC with over 1000 qubits, which is around about the number is supposed to be needed to make 1 logical qubit. Yet by in large I haven’t seen much talk about having our first crack at producing a logical qubit.

So again I’d like to ask the question: how long until we have a logical qubit? If qubits will always be unstable superpositions, then I doubt a mass market consumer QC will ever be workable. And while the hype for logical qubits seemed ever-present when they were still a far-off dream, it seems to have subsided as they get closer to being tested for validity. I wonder if they were always nothing by hype.

Fitch Downgrades America’s credit rating

I’ve spoken before about how credit rating agencies are downgrading the debt of nations. Now, Fitch has downgraded America’s credit rating from AAA to AA+. Once again I’m seeing a lot of conspiracy theories about this and I thought I’d take a moment to hit back against them.

The first conspiracy is the common one that the financial system is conspiring against the common man. This sort of conspiracy is no different from the old “evil bankers control the world” trope, but it gets a lot more traction online when it’s framed with a leftist slant. To be blunt, the financial system is competing with itself more than it is conspiring with itself. Fitch is competing with the other credit rating agencies (Moody’s, S&P) and if it downgrades America’s credit for no reason, it would lose trust in the eyes of the financial institutions which pay for its ratings.

Ratings agencies rate all kinds of debt, not just sovereign bonds. And financial institutions will pay for those ratings so they know where to invest and where to avoid. Trust is key to this, and without trust, Fitch would die. If financial institutions don’t trust Fitch’s ratings, they simply won’t pay for them and will take their business elsewhere. So Fitch cannot in any way downgrade ratings in a way that the broader financial market would not agree with, otherwise it would destroy trust and tank its business model.

In this, there is a common chicken and egg problem with ratings agencies in that they usually only change their ratings when the broader market is already leaning in a certain direction. IE they are followers, not leaders. But that that just lends more credence to their ratings. The market was already very willing to believe that America needed a downgrade, so Fitch isn’t doing anything out of the ordinary. It’s the politicians who have screwed the people on this one, not the ratings agencies.

The other, similar conspiracy I’ve seen is that the ratings agencies are conspiring to undermine Biden and tank his presidency. Biden has been trying to tout the strong economy, and some liberal commentators have been upset that the public doesn’t always buy it. So of course this must be just another GOP plot to brainwash the voters that the Biden economy isn’t awesome.

I would point out however that American real wages are still below where they were when Biden took office. Note for example that real wages declined 3.6% from June 2021 to June 2022. That’s a big dip, and people notice it. People’s ambivalence about the economy isn’t some nefarious plot, it’s very clear when listening to people’s complaints (inflation) and looking at the data (real wages dropping). It’s also quite understandable that ratings agencies have looked at this very same data, as well as the rising debt amid partisan bickering over how to pay it. From this, they might reasonable downgrade America’s credit rating. Not everything is a conspiracy against one’s favorite politician.

Many people will point to 2008 and the financial crisis about why we can never trust ratings agencies again. But that was over a decade and a half ago and every country added new laws to constrain financial institutions. Saying you can’t trust Fitch because of 2008 is like saying you can’t trust the Labour Party because they were in charge during 2008.

So Fitch has downgraded America’s credit rating, and it seems the financial markets were broadly ready to believe them. Rather that stew in conspiracies, it is better to take these criticisms to heart and find a way to fix them.