Author Archives: theusernamewhichismine

The danger of small patterns

As I’ve probably said before, I work as a researcher. When you’re doing difficult or expensive research, you don’t usually have the time or money to do a whole lot of replications. That goes doubly if you’re working with patients or patient samples. But since science is all about finding patterns, how can you find patterns in a small dataset?

There are statistical tools that can help with this, but even before you get to the hypothesis testing phase, you need to know which direction your hypothesis will go in. For that, we tend to look at the small patterns which aren’t yet statistically significant and try to see what they mean. The danger here is when you don’t get data in a reasonable amount of time, you want to work on your project but you don’t have data to work on. So you go back to whatever you have, the “small patterns” and start extrapolating from there. “If this pattern holds, what could it mean for this disease?”

Then you can start getting attached to a hypothesis that has no data to back it. When you do get data, you may start to interpret it in light of the small pattern you already detected, a pattern which may not even hold. That’s the problem with small patterns, you get to thinking they mean more than they do.

The human brain is a pattern matching machine. Our first calendars came about from noticing that the seasons of a year came in patterns, and that certain stars in the sky could be seen during the hot season while others could be seen during the colder one. But people also thought they detected patterns about how certain things happened on earth when certain stars were seen in the sky. One pattern between stars and the sky held true, there is a correlation between which stars you can see and the season in your local area. But another pattern was false. Yet both patterns were studied and believed for thousands of years.

I hope I don’t get attached to bad patterns for quite so long as that, but it’s hard to avoid. When you’ve got all the time in the world and not enough data, you get attached to these small patterns that you think you detect. And that can hold true even when the pattern is no longer real.

Joel Kurtzman is the opposite of Richard Heinberg

I just wanted to start by saying I’ve become much more lackadaisical about these posts recently. My work is getting interesting, so I’m not putting as much time and effort into my research prior to posting. I’m mostly shooting from the hip based on whatever comes to mind. I still enjoy this though so I’ll keep doing it, and I hope my couple of readers don’t mind the decline in quality.

With that said, it’s so interesting that Joel Kurtzman detects the exact opposite problem as Richard Heinberg. For those who remember, Richard Heinberg wrote “The End of Growth” in which he posited that there would be no more economic growth after 2010 (lol, lmao even). He claimed that this was because the world had entered an inextricable supply crunch, there just wasn’t enough stuff to go around (especially oil!) and our economy was already well past the carrying capacity of the planet. This meant that we couldn’t keep growing, because without more stuff to put in our factories we couldn’t make products to sell to people. We would all have to get by with less.

Hilariously, Joel Kurtzman detects the opposite problem from his vantage point in 1987. He detects a severe overproduction of commodities and finished goods caused by the industrialization of the global south and its competition with America, Europe and Japan. In Kurtzman’s thesis, we are entering an inescapable race to the bottom where wages will continue to fall further and further as companies try to make money while the prices of goods fall. Not only that but the nations of the world have financed their overproduction through the accumulation of debt, which they won’t be able to pay off as prices fall meaning there will be a debt collapse and further unemployment.

I’m sure both authors would think me uncharitable towards their theses, but that was my reading from their books.

The point is, I think both of them are suffering from extreme recency bias. Heinberg was writing after a decade of constricted oil supply had caused a rise in prices and had been followed by an economy crash. He thought the constricted supply would continue forever and the low-growth era following the crash was permanent.

Kurtzman was writing after a supply crunch had turned into a supply glut. OPEC’s oil embargo of the 70s had forced the world’s economies to become more efficient and induced many companies to step up their own oil production. In the late 80s, rising oil investment turned into an oil boom, and to maintain market share OPEC countries increased production without the consent of the entire group. This, alongside new technologies to make oil use more efficient, led to an oil glut and depressed prices. Add to this that prices were falling in other sectors, and Kurtzman thought this trend would continue forever.

Both Kurtzman and Heinberg astutely identified trends in their immediate present, and then extrapolated those trends infinitely into the future to arrive at their desired policy goals. For Heinberg: it was degrowth. For Kurtzman: it was protectionism. Both of them failed to understand that actions change with changing conditions. Heinberg didn’t realize that a rise in oil prices would spur investment into new extraction methods (fracking) and more efficient usage of oil (hybrid/electric cars). Kurtzman didn’t understand that falling commodity prices allows companies to produce more for less, nor did he understand that the American economy didn’t need manufacturing jobs to stay highly paid. If more stuff is being produced while still profitable, then consumers win because prices go down. And American consumers won most of all because tech jobs were replacing laborious manufacturing jobs.

I know pontificating is a hard job, I think all the pontifications I’ve made on this blog have been off the mark (though I don’t ask for money). But I find it fascinating that these two authors erred in exactly the same way to arrive at completely divergent answers. I’d love to have Kurtzman from 1987 debate Heinberg from 2010. Don’t let them use historical data, just explain to each other why will commodity prices have to remain high/low for the foreseeable future? I wonder whose head would explode first.

Follow up: what did Joel Kurtzman think of the 90s and 2000s?

I wrote a post last week about Joel Kurtzman’s “The Decline and Crash of the American Economy,” a book from the 80s that posited that America’s best days were behind it. Kurtzman’s central thesis appears to be:

  • Manufacturing is moving overseas, causing America to run a trade deficit
  • To buy foreign goods, America and Americans are becoming indebted to the rest of the world
  • Foreign investment is flooding into American stocks and American debt, causing us to lose control of our own economy
  • The much touted “service jobs” and “information age economy” are a mirage
  • As a result of the above four facts, the American economy is entering a period of decline and crash which can only be solved by strong protectionism and government control of the economy

This was all written in the 80s, and to an old-school leftists I guess it all seemed very sensible. I could imagine Jeremy Corbyn or Bernie Sanders making these exact arguments in 1980, while adding a few more worker-centric chapters of their own. The problem is that this thinking has largely been supplanted by modern economics.

Manufacturing is not the only thing an economy does. The knowledge economy, which Kurtzman scoffed at as the “information age economy,” has rapidly eclipsed all the manufacturing that came before it and continues to propel American forward. Likewise foreign investment flooding into America is by no means bad, as it allowed American companies and the Government to finance themselves with debt or equity. If foreign investment was fleeing America, that would be cause for concern. Being in debt is not a biblical sin for an economy. We all take on debt all the time because the value of having a car or a house now is greater than the value of the money we will use to pay off that debt over 5 to 20 years. The same is true for companies expanding, and foreign investment flooding into America means companies can issue debt much more cheaply than they could otherwise.

Furthermore Kurtzman’s prescription was largely abandoned in the 90s. Both Republicans and Democrats largely made peace with free trade (although the 2 most recent presidents have bucked this trend). There is a strong argument to be made that tariffs on foreign goods hurt the American economy as much as they do the foreign economy for a number of reasons. Tariffs create a walled garden for certain goods, allowing noncompetitive industries to remain in business for longer than they should. In turn these noncompetitive industries suck up investment and compete for resources, making it harder for actually competitive companies to expand as they should be able to. There is only so much supply of money, parts, and workers, if Ford was heavily subsidized by tariffs, would Tesla have been able to take off? Finally tariffs alter the incentive calculus for a company because once tariffs are part of the political equation, companies can increase their profits more by demanding higher and higher tariffs from the government than they can by actually improving production. This caused some Latin American countries to enter a tariff spiral where goods became more and more expensive because rather than compete with the rest of the world, companies put their effort into demanding higher and higher tariffs.

In the 90s and the 2000s America largely abandoned Kurtzman’s thesis and his prescriptions. Angst and newsrooms aside, the trade deficit kept expanding, NAFTA remained in place, the service and information sector were seen as avenues of growth, and debt kept piling up. If Kurtzman then thought the Financial Crisis was proof of his theory, he would have been rather sad that America came out of the crisis much better than most of the nations he said it was indebted to, such as Japan, Latin America, and Europe.

Reading Kurtzman’s book is like reading politics from a bygone age. I once read a book about “the Crime of ’73,” a much maligned bill which removed the right of silver-bullion-holders to have their silver minted into dollars. Pro-silver advocates despised this bill so utterly that it eventually launched William Jennings Bryan as a presidential candidate, a candidacy he might not have gained had the silver movement not been so motivated and powerful. Yet reading it today, it’s hard to understand why this economic debate was filled with such hatred and vitriol. It’s hard to understand the motivations behind the players, and how for them this was the defining issue of their age. Because honestly, America has moved past that debate long ago: silver isn’t money and neither is gold, dollars are. I almost feel the same way with Kurtzman’s book. The last 2 presidents notwithstanding, most of my adult life has been shaped by a bipartisan agreement on free trade and the importance of the information economy over traditional manufacturing. I just wonder what Kurtzman would think now.

Was the Crash of 1987 all that important?

America has had a lot of recessions, depressions, and financial crises. Every country has of course, but since America has been the world’s largest economy for well over 100 years, ours get more press and reverberate more strongly throughout the world. But the crash of 1987 is one that I rarely see talked about, and I thought that was with good reason. On October 19th 1987, stock prices worldwide crashed by double digits in a single day. But the effects on the wider economy were not so severe, and the US economy still grew by 3.5% that year.

The Crash of 1987 is a good reminder that the stock market is not identical to the “real” economy. Now, they are not wholly diverged either, and if stock prices crash companies will find it harder to use their stock to finance expansion. But they aren’t tightly coupled and the Crash of 1987 is one of the many events that proves it. However I’m reading a book now called “The Decline and Crash of the American Economy” that appears to posit more from 1987 than was warranted.

The author, Joel Kurtzman, tells you his thesis on the cover of the book, and the inside jacket makes special note of how 1987 heralded deep problems that would not be fixed without his preferred policies being implemented. But Kurtzman is basically a left-protectionist who blames Nixon and Reagan for ending the gold standard/Bretton Woods and liberalizing American trade. Kurtzman’s policies were by no means implemented, but the 90s were hardly a decline and crash by anyone’s definition. It feels to me like Kurtzman had a thesis already in place, and simply used the crash of 1987 as ex post facto proof of what he already believed.

I’ll try to write more about this book in the coming days, but I don’t think 1987 was an important as Kurtzman thinks.

Do momentum strategies beat buy-and-hold?

This post has been a LONG time coming, but a while ago I wrote about the rate of return for investing in the S&P 500. In that article, I compared the returns of someone executing a buy-and-hold strategy starting in a certain year and ending 10 years later. Unsurprisingly, the best time to start a 10-year investment was in 1990 or early 1991, as the peak of the DotCom bubble happened 10 years later and you could sell out at the top.

Figure 1: Return over 10 years of a $10,000 investment, assuming buy-and-hold strategy

But what about someone who wants a more sophisticated strategy than simple buy-and-hold? The reason people day-trade is that they hope to beat the market, not just match it. One strategy that I have seen genuine, peer-reviewed literature discussing is the so-called “momentum” strategy of buying while the market is going up and selling while it’s going down. In this way you should avoid big loses (like the DotCom bust) but still have big gains (like the DotCom bubble).

Now, a momentum strategy can be done in different ways. It can look at specific time periods, it can include shorting, it can include sector rotation, etc. But the simplest momentum strategy I found was to simply sell out whenever the market dropped by 20%, and then buy back in when it recovered 20% from the bottom. This is intended to stop loses on the way down and avoid FOMO-ing back in during a bull trap, only buying stocks during a true bull market.

I wrote a program to calculate the return on a $10,000, 10-year investment using that strategy.

Figure 2: Return over 10 years of a $10,000 investment, assuming 20% momentum strategy

The results are fairly discontinuous because of the rigidity of the 20% cutoff, but some patterns do emerge. The return is almost identical for people who invested in 1990, because for that 10-year period the market never dropped 20%. Once you get into 1991 however, this strategy would have allowed some people to avoid the worst of the DotCom crash, as they would have sold out when the market dropped hard. In that case they would have done better than a buy-and-hold strategy.

However that’s just an example of the strategy working at it’s best. I decided to compare the two strategies. I simply subtracted the two graphs from each other, creating the below figure as a result. Any dot that is on the zero line is a point in which buy-and-hold performed identically to momentum. Any dot below is where momentum performed worse, and the few dots above are where it performed better.

Here, we see some interesting patterns, the momentum strategy actually performed pretty poorly for anyone who started a 10-year investment in the 2000s. The peaks in the early 90s are people who sold out during the DotCom bust and missed the worst of the loses. The peak around 1999 is people who sold out during the Financial Crisis and missed the worst of the loses. But the declining valley during the 2000s is the result of people who would have sold out during the Financial Crisis, but then waited for the market to get above where they had sold before buying back in.

Remember that the momentum strategy involves selling when the market has lost 20% and only re-buying when it’s regained 20% off the bottom. Less than 20% off the bottom and you can argue (as some have this year) that it’s just a “bull trap” and the market still has “another leg down” ie much further to fall. This can result in standing on the sidelines with your cash while the market makes money without you. And using this momentum strategy, that’s exactly what can happen.

I use this to illustrate a point I’ve talked about before, it’s not usually smart to just sit on cash waiting for the market to fall further. Sure the market can fall further, but it can also rise and leave you behind. Time in the market beats timing the market. Furthermore, this experiment is as generous as possible to the momentum strategy: there are no transaction costs (the bid-ask spread is an unavoidable real-world cost) and we ignore dividends (which further rewards time in the market at the expense of timing the marker). If total returns were taken into account along with transaction costs, it’s debatable as to whether any 10-year momentum investment would have beaten buy-and-hold. Even as it stands now, only a very few lucky investment windows would have benefited from momentum strategies, most would do best with buy-and-hold.

Just for kicks, I reran this data with a 10% momentum strategy instead of 20%, and the results were even worse for momentum. Selling out at the first sign of trouble, FOMO’ing back in to the first recovery, and then losing all over again makes for a terrible strategy and that can basically be what momentum trading is.

I can go forward and look at more exotic momentum strategies some other time (for example short stocks that are falling and long stocks that are rising), but for now I think I’ve proven my point.

Technical analysis and fundamental analysis cannot both be true

I’ve said before about how I’m not sold on technical analysis being viable, but I’ve seen counter-arguments floating around that say “it doesn’t matter if TA doesn’t make sense, if people believe it and act on it then it will still move the markets.” In this case, knowing TA yourself lets you read the minds of all the other TA-knowers and join in their pumps and their dumps, making money by being part of the crowd. Yet fundamental analysis says that there is an underlying “fair value” for an asset, and good investing is about going long on undervalued assets and short on overvalued ones. Fundamental analysis accepts the possibility of hype and speculation, “the market can stay irrational longer than you can stay solvent” etc, but it requires that at SOME point things fall back to earth and assets reach their fair value.

Technical analysis on the other hand implies that the future price of a stock is most strongly connected to its previous prices, not to the value of the underlying asset. This means that previous highs, lows, and averages give a kind of momentum that can be predicted and traded on.

My question is, how can these both be true? Technical analysis assumes that the price reflects all available information, otherwise past trends cannot predict future prices. Fundamental analysis assumes that the price does not reflect all available information, otherwise there are no over-valued or under-valued stocks and all stocks are at their fair value.

How can the price of a stock be dependent both on the analysis of the underlying asset AND on the previous prices of the stock, since those can easily move in opposite directions? If there is a conflict between the TA and the FA, who wins? Well if you believe the Efficient Market Hypothesis, neither win because the winning move is to buy once and hold forever. But if you believe FA then FA wins and the price must go up, if you believe TA then TA wins, but I don’t think both can be true in all or most cases.

I’d like to know if anyone believes both TA and FA can be true and if so why.

As an aside, Wikipedia explicitly labels Technical Analysis as a pseudoscience.

So who’s still sitting on cash?

A couple of months ago people were clambering that anyone holding stocks was a moron and it was better to be sitting on cash. Where are those people now?

This time December, the S&P 500 was hovering around 3800 and we had just emerged from the S&P’s worst performing year since the Great Recession. With the Federal Reserve continuing to tighten plenty of folks were scrambling to say that the worst was yet to come and everyone needed to get out of stocks NOW.

Since then, the market has recovered, the FTSE in particular has hit all-time-highs, and sentiment is strengthening. Is there still a case to be made that the market will drop another 20% from here? If there is, I’m not seeing it get made. If you pulled everything out of the market in December, well you missed the upswing. Cash isn’t without its downsides.

This was supposed to be a bigger post, but frankly I just don’t have much else to say. Don’t be like this guy, just because stocks can go up as well as down doesn’t mean your best bet is to sell everything and put it under a mattress. On average, the people who make the least amount of trades have the best portfolios, and that means buying once and never selling.

Rimworld: a game of entropy

Rimworld is a very popular colony sim game.  I’ve seen a number of other games paint themselves with it’s brush, aping its style and mechanics, and yet none have come close to offering what Rimworld offers.  Rimworld puts you in the shoes of 3 survivors who crashland on a sparsely populated world at the edge of human habitation.  The survivors must immediately get to work building shelter, growing food, and finding some way to escape their new home.  The planet is also home to hostile pirates, insane robots, and murderous bug creatures, so the deck is stacked against you.  But if you can learn to grow and manage your colony, you can survive, thrive, and escape.

This basic outline of growing a colony and surviving against enemies and nature alike is used in a number of other games I’ve played. But none of them really offer the same experience that Rimworld does. Now, cards on the table, I think Rimworld is good-not-great, and I enjoy some of those other games a lot more. But I wanted to examine why it is I think that Rimworld is offering such a rarified experience when the basic outline is so widely used.

One of the things to understand about Rimworld is that this is a game of entropy.  Your position in the world is always decaying and you need to work just to maintain it.  You’re fighting an uphill battle just to survive, so growing and prospering is going to be pretty hard.  Food is not plentiful, so your first job is to immediately start farming, foraging, and hunting for raw food.  But raw food isn’t healthy or fun to eat, so you also need to set up a cooking station to make meals.  Meals spoil quickly so you need a refrigerator to store them in.  And unsanitary conditions lead to disease so you need to keep your food areas as clean as possible.  

Keeping your colony fed it a hell of a lot of work on its own, and that isn’t even getting into all the other entropy the game has, like how clothes degrade and need replacing, or how electric appliances short circuit, or how your colonist will eventually age and acquire new ailments that need treatment.  Surviving on a barren world is hard, and Rimworld wants you to realize it.

Now, other games I’ve played have included some amount of survival mechanics.  Kenshi and Oxygen Not Included both include the need for food.  But in those games I never really felt like I struggled to survive.  The games were tuned so that keeping everyone fed felt like an occasional annoyance, not a difficult necessity like it is in Rimworld.  

SURVIVAL IS DIFFICULT

In Rimworld, there’s a lot to do and only so much time in the day.  At the start of the game your colonists might spend half of their day on basic needs (eating, sleeping, etc) and a third of their day doing the work needed for the colony (cooking, getting food).  That leaves just ⅙ of their day to work on expanding and improving the colony, doing things like making new weapons or building better living quarters.  

You can try to finagle the numbers a but, but they’re pretty tight.  If you have your colonists work less on the colony’s needs, you might run out of food and starve.  If you don’t let colonists sleep, they’ll have a mental break and stop working for you.  Mental breaks and dead colonists decrease the total amount of work you have available, so it’s best to err on the side of caution and not rush towards colony expansion.

So in Rimworld, playing the game “well” involves making the colony run as efficiently as possible so you can get as much work out of your colonists as possible.  If the beds and food storage are near the dining halls, colonists don’t have to walk as far for breakfast.  And if you make sure the skilled planter does the farming and the skilled builder does the building, basic necessities will get done a lot faster than they would otherwise.  This lets you siphon off more and more of your colonists’ day towards expansion and improvement.

But this is where the “storytellers” of Rimworld come in.  At semi-regular intervals, the game will drop some crisis in your lap that needs solving.  Maybe half your colonists get sick and need healing, maybe space pirates start attacking your colony.  Either way you now have to drop what you’re doing and fight for survival.  

These crises are multifaceted in how they test you: first of all your colony needs to be well enough run that you can drop everything for a day without your colony going to crap.  Secondly, these crises will often bleed you of scarce resources, such as medicine or single-use-items.  Thirdly, you rarely come out of these crises unscathed.  Even if no colonists die, Rimworld battles tend to include long-term and even permanent injuries that not only need to be treated but can also make your colonists less efficient for the rest of their lives.  

These crises are an excellent way to test your colony and see how well you’re managing your supply of “work.”  If space pirates kill your best planter, can you still grow enough food to survive?  If half your colonists get space-flu, can the other half take care of them?  And after you’ve spent your resources and lost your colonists (or your colonists have lost their arms), can you build yourself back up and continue?

So survival is very hard, and the storyteller makes it harder, but even that’s not the end.  I said before that expanding your colony is part of the goal of getting off-planet, well Rimworld makes sure that expansion is even harder than survival.  

COLONY EXPANSION

To expand your colony you’re going to need new colonists, but while Rimworld is a war-torn backwater there aren’t just plenty of people wandering around happy to join your dirt farm.  There’s a few different ways to get new colonists:

First, you can incapacitate enemies who attack you, lock them in a jail cell, and then persuade them to join your colony.  This will require you to spend a lot of work feeding your prisoner and keeping them alive, as well as dealing with the occasional jailbreak.  For a colony just barely scraping by, a single extra mouth to feed can be the breaking point, so this method isn’t easy.  Also the game makes sure that the vast majority of enemies will die rather than surrender, so the Stockholm Syndrome route isn’t very productive.

The second option is to rescue colonists as part of a quest, at which point they will join you in gratitude.  This option is a gamble itself since the quests usually involve a lot of fighting, and as I said above Rimworld’s combat is a huge test to your colony’s survival.  Still, if you can manage it, this is usually the quickest route to growing your colony.  

Finally, you can sometimes pay to have a colonist join you, but this usually costs an exorbitant amount of money, way more than an early game colony can afford and way more than a mid-game colony would usually spend.  These opportunities are also few and far between, so even if you are rolling in cash this option isn’t a given.  

Finally, in all three of these options you don’t have the ability to “pick and choose” what type of colonist you want, you get what you get.  And if you end up with 4 artists who your single planter/chef/doctor struggles to keep alive, then oh well.

Expanding your colony is the easiest way to have more “work” available to do things.  The game knows this, and will fight you to prevent it.  As stated above, the game is finicky about giving you new colonists, but that’s not the only trick up its sleeve.  If you do luck into a big colony, you’ll find you don’t have as much extra work available as you might think.  This is because the game increases the difficulty as your base gets larger, and always keeps you in check to make things challenging.

NEVER SATISFIED

The game measures how much “wealth” your colony has.  Wealth includes the rooms your colonists sleep in, the food in their pantry, and the number and abilities of the colonists themselves.  As your colony expands, it has more wealth.  As it has more wealth, the colonists will get more and more picky.  

Remember what I said about mental breaks, they are one of the ways that the game forces you to look after your colonists’ needs.  If you don’t keep them happy, colonists may hide in their room, start setting fire to things, or start taking drugs in order to cope.  When you’ve just crashlanded on the planet, the colonists are happy just to be alive, and their mood will be high enough that they’re unlikely to break over little things like not having good food or clothing.  As your colony expands, your colonists’ needs expand too.  They’ll want more entertainment, better living quarters, more time to themselves.  As colonists’ needs increase, you need to spend more and more of their labor on meeting those needs, having less and less available to do other things.  

So growing your colony isn’t always going to give you more available “work.”  With 3 colonists, you can perhaps use ⅙ of their daily labor to do your own things, while ⅚ are needed for their survival.  If 3 more colonists are added, everyone may suddenly demand more niceties such that all their daily labor is spent keeping themselves alive and happy.  If another 3 colonists join, maybe people will demand so much stuff that you can’t keep all of them happy.  Again, good play means making your colony efficient enough that each new colonist gives you enough labor to offset the expense of keeping them alive and happy.

And even that’s not the end of it!  Your colony’s wealth will also determine the difficulties of the challenges that your colony faces.  Your crashlanded survivors will only be attacked by small animals or single, melee-armed humans.  A large and wealthy colony will be attacked by wasting diseases, herds of wild megafauna, killer robots and more.  The game is constantly testing you, and the tests get harder as you get better.

So that’s what Rimworld is.  I may not have explained it well but it is a game of entropy.  Every day is a fight for survival, your position in the world is always moving backwards.  You need to struggle to keep what you have and struggle harder to get anything more.  Even as you run forward, the game ups the speed on the treadmill giving you harder and harder challenges so you’re always struggling.

THE UNIQUENESS OF RIMWORLD

This contrasts pretty strongly with the other games that I’ve been told are “colony sims” and “like Rimworld.”  Now to lay my cards on the table, I like these other games a hell of a lot more than I like Rimworld. But I don’t like them for their “Rimworldness,” in fact I’d say I like them because they do a lot of things better than Rimworld, and their “Rimworldness” often holds them back. But these games keep being talked about in the same breath as Rimworld and I’d like to discuss why I think they really aren’t like it at all.

The closest approximation of Rimworld I’ve played is Oxygen Not Included.  Like Rimworld it gives you a few colonists and tells you to keep them alive and grow your colony.  Unlike Rimworld, keeping them alive isn’t the hard part.  I haven’t played more than 20 hours of Oxygen Not Included, but I don’t think I’ve ever had a mental break or been close to starvation.  Dirt and water on their own can be turned into cheap food, and a single skill can turn that food into something the colonists actually enjoy.  You don’t have to put a huge amount of energy into farming, fueling your stoves, or even keeping your food clean.  Food is very cheap and a simple CO2 trap keeps it fresh and unspoiled forever.

Not only that, Oxygen Not Included isn’t shy about giving you more resources.  Every hour or so of game time it gives you a new colonist for free.  You don’t have to take the colonist mind, but unlike Rimworld I was struggling to keep my base small, not struggling to grow it.  Before I knew it I had more labor than I knew what to do with, and half my colonists were wandering around aimlessly.  In Rimworld this is usually a sign of a very efficient colony, in Oxygen Not Included it was a sign that I didn’t really know what else I should be doing. 

Kenshi is a game I like much more than Rimworld, but again I think comparing the two is unfitting.  Kenshi will also let you set up a colony to farm, grow, and survive, but it’s not hard for the reason Rimworld is hard.  In Rimworld it’s hard to stay fed and clothed, and the random events add spice to your entropy sandwich.  In Kenshi it was very easy to stay fed and clothed, I found a single farmer and a single cook could keep 20 people fed no problem.  The difficulty in Kenshi is entirely in the politics and combat.  

Everywhere you can settle in Kenshi is already “owned” by some organization, either a nation or a bandit tribe, and so if you set up a dirt farm the owners will come to collect.  Sometimes they’ll demand tribute, sometimes they’ll ransack your storage, sometimes they’ll try to kill you, but keeping them assuaged or fighting them off is the real test of your colony.  

Unlike Rimworld and its “wealth” system though, Kenshi doesn’t have a way to scale these challenges up or down.  The same horde of bandits will descend upon a dirt farm as will descend upon a thriving metropolis with harpoons guarding the doors.  Once you’re strong enough to fight off the attacks, nothing else can touch you.  

Furthermore, Kenshi isn’t shy about giving you colonists either.  You can pay for people to join, but unlike in Rimworld the costs isn’t that great compared to the amount of money you can expect to have on hand.  It’s not difficult to fill your ranks in Kenshi, and as I said it’s not difficult to keep a large horde of people healthy and happy.  The difficulty is because (in true action movie fashion), untrained mooks are useless in combat while trained swordsmen cleave through them like butter. Kenshi rewards you for your skill, not your numbers.

So Rimworld is a game that’s all about Entropy, and I think that makes it different to every other “colony” sim I’ve ever played, including several I haven’t mentioned here.  It’s difficult to survive in Rimworld, most of your time will be spent on bare necessities with little left time over for expansion.  And even if you do expand, you’ve only increased the challenges you’ll face and the needs of your people, so they game ensures you’ll always struggle.  I’ve stopped playing Rimworld, but I think this is what people need to understand if they want to make a game to challenge it.  It’s not about adding farming and a “mental break” mechanic, it’s about making the mere act of existing a genuine struggle.  That’s what Rimworld is really about.

Energy Return on Energy Investment, a very silly concept

Today I’d like to address one concept that I read about in Richard Heinberg’s The End of Growth, Energy Return on Energy Investment or EROEI. The concept is an attempt to quantify the efficiency of a given energy source, and in the hands of Heinberg and other degrowthers it is a way to “prove” that we are running out of usable energy.

EROEI is a simple and intuitive concept, taking the amount of energy produced by a given source and dividing by the amount of energy it costs to set up and use that source. Oil is a prime example. In the beginning of the 20th century oil extract was easy since it just seeped out of the ground in many places. Drilling a small oil well won’t cost you that much, hell you can probably do it with manpower alone. In that case the oil gushing forth will easily give you a good energy return.

In the 21st century however, things have become harder. Oil wells require powerful machines to drill (which costs energy), and the amount and quality of the oi you get out is often lower. Add to that the fact that modern wells require huge amounts of metal and plastics, all of which cost energy to produce and even more energy to transport to their location, then add the energy it took to find the oil wells in the first place using complex geographical surveys and seismographic data, and taken together some people claim that the EROEI for a modern oil well is already less than 1, meaning that more energy is being put in than the energy we get out.

And oil isn’t the only fuel source heading towards and EROEI of less than 1. Modern mining techniques for coal require bigger and bigger machines, natural gas requires more and more expansive facilities, even solar panels require minerals that are more and more difficult to acquire. It seems everything but hydro power and (perhaps) nuclear power are becoming harder and harder to produce, sending energy returns down further and further.

This phenomenon, where the EROEI for our energy sources is less than 1, is supposed to presage an acute energy crisis and the economic cataclysm that degrowth advocates have been warning us about. If we’re getting out less energy than we’re putting in, then we’re really not even gaining, aren’t we? The problem is, I’m struggling to see how EROEI is even a meaningful way to look at this.

First let me note that not all energy is created equal. Energy in certain forms is more usable to us than in others. A hydroelectric dam holds water which (due to its being elevated above its natural resting place) acts as a store of potential energy. The release of that water drives a turbine to produce electricity. But you can’t fly a plane using water power nor keep it plugged in during flight. Jet fuel is another source of potential energy, and it has a number of advantages versus elevated water. Jet fuel is very easy to use and transport, you can fill a tank with it and move it to wherever your plane is, then fill the plane’s tanks from there.

If the only two energy sources in the world were jet fuel and hydroelectric power, we would still find it beneficial to somehow produce jet fuel using hydroelectric power even though that would necessity an EROEI of less than one. Because although this conversion would have less total energy, the energy would be in a more useful form. People would happily extract oil using hydroelectric power, then run refineries using hydroelectric power, because jet fuel has so much utility. This utility means that (supply being equal), jet fuel would command a higher price than hydroelectric power per unit of energy. And so the economic advantages would make the EROEI disadvantages meaningless.

This is the fatal flaw of EROEI in my mind. The fact that some forms of energy are more useful than others means we can’t directly compare energy out and energy in. The energy that is used to run a modern oil well comes to it from the grid, which is usually powered by coal, solar, wind, or nuclear, none of which can be used to fuel a plane. Converting these forms of energy into oil is an economic gain even if it is an energy loss. Furthermore EROEI estimates are generally overly complex and try to account for every joule of energy used in extraction, even when those calculations don’t really make sense. Let me give you an example:

A neolithic farmer has to plow his own fields, sow his own seeds, reap his own corns. Not only that, but the sun’s rays must shine upon his fields enough to let them grow. Billions of kilocalories of energy are hitting his plants every second, and most of then are lost during the plants’ growth process because photosynthesis is actually not all that efficient to begin with. The plant will have used billions of kilocalories of energy, and from them the farmer gets a few thousands of kilocalories of energy. Most of the energy is lost.

This is the kind of counting EROEI tries to do, applied to farming. When you count up every joule of energy that went into the farmer’s food, you find his food will necessarily provide him with an EROEI of less than one thanks to the first law of thermodynamics. But this isn’t a problem because Earth isn’t a closed system, nor are our oil wells. We are blasted by sunlight every minute, our core produces energy from decaying nucleotides, our tides are driven in part by the moon’s gravity, there is so much energy hitting us that we could fuel the entire world for a thousand years and never run out. The problem is that there are some scenarios where that energy isn’t useful. You can’t fly a plane with solar or geothermal or gravitational energy, but you can power an oil well. So we happily use the energies we have lots of (including our use of solar power to grow useful plants and animals!) and use that energy to help us extract the energies with greater utility.

I think EROEI failed from the very beginning for this very reason. It ignores economic realities and the massive amount of energy that surrounds us, and instead argues from the first law of thermodynamics. Yes in any closed system energy eventually runs out, but it isn’t even clear that our universe is a closed system, and the earth definitely is not, so we need to face up to economic reality on this.

Interesting notes about ChatGPT

I know I’m about 2 months late to the party, but I just looked into ChatGPT and I was interested in what I found. These will be some random assessments since I don’t have the energy for a full post. Obviously they keep updating the model so some of this may no longer be true, but here is what I found.

  • The model says its data only goes to 2021 and is coy about exactly when its data ends, but I was to be able to pin it down to mid-2021 some time right before the Olympics. The model is unaware of anything about the 2021 Olympics, but believes Naftali Bennet is the current Prime Minister of Israel. Bennet became PM in July 13th 2021, the Olympics began July 23rd. Since the Olympics are always such a media frenzy, I find it hard to believe that ChatGPT would not have been trained on at least a few articles about the 2021 Olympics if its training dataset included dates after July 23rd, so I estimate that its dataset cuts off in mid-July 2021 between the 13th and the 23rd.
  • As a topic becomes more in depth, the quality of the answers decreases. It has some amazingly esoteric “surface level” knowledge (ask it what the capital city was for some ancient, long dead nation/civilization), but has a harder time with the kind of deep knowledge that makes one an expert in a field. I asked it to explain how Isoelectric Point relates to pH, and while it gave all the right words it came up with an answer that is the opposite of reality (see image below). For reference if the pH is higher than the pI, the protein will have a positive charge due to deprotonated amino acids. This answer would be like someone giving you a a very deep description of an electron but ended up saying it always has a positive charge. Sounds good! But wrong answer.
  • The math update has fixed some of the fun, dumb responses you used to be able to get, and it can now give some strong answers for your physics homework like calculating the speed and trajectory of a baseball. But it still has some weird hangups though and I don’t know why. Complex word problems usually seem ok but simple math is much trickier. I’ve heard tell that the language processor will (somehow) be hooked up to Wolfram Alpha to get solutions to math problems, but it seems like that’s not the case yet.
  • As an aside, when ChatGPT gives me a wrong answer, I find myself doubtful and second guessing myself. It gives blatantly wrong answers with the exact same cadence that it tells you all the correct things, so I find myself wondering if I’m the dumb one and my college degrees are all a lie. I guess it proves the maxim that if you just say things confidently people will believe you.
  • I wondered if ChatGPT would work as an ad supported model. This may be dumb, but hear me out. Say Khan Academy wants to advertise itself, and they already know students are looking up homework answer on ChatGPT (just like they used google before) so this is the perfect opportunity. A submodel could be trained using Khan Academy-approved language, such as testimonials from happy parents and children about how great Khan Academy is. Then when ChatGPT’s language model starts using words associated with Khan Academy topics (calculus, biology, physics etc) it can insert a canned tagline for Khan Academy and follow it up with words chosen based on the Khan Academy-approved text. So in my pI question above, it could add a snippet somewhere which would go “isoelectric point and pH [tagline starts here] are also taught as part of the Khan Academy course on Chemistry. Parents and students love Khan Academy because blah blah blah [end advertisement] oh by the way deprotonated amino acids are negatively charged.” Inserting ads into your searches is basically Google’s whole business model, and I’d certainly prefer this over a paid version of ChatGPT.
  • The non-deterministic nature of the answers makes it sometimes hard to gauge the overall “quality” of the model. I’ve had days where every answer seemed right and days where everything was a shambles. I’ve seen people complain that certain tricks don’t work while others post snapshots showing that they do. I think the output is at least partly determined by previous parts of the conversation but it also just seems semi-random (would love to know if it IS semi-random!). Either way, it makes it hard to judge without doing some statistics that I don’t feel like doing.

Anyway those are my impressions of ChatGPT so far. Fun timewaster, MUCH less toxic than spending all day on Twitter.