Category Archives: What Would Spinoza Do?

Apfel hat Logistikproblem! (probably)

Yo Bento. Explain this, you Apple fanboy. You know I am not a great fan of Apple, nor the iPhone as a business proposition. I think this handset venture will prove an expensive white elephant; I think it blow up Apple stock eventually. I vastly prefer Research in Motion and, until recently, Nokia, as investment ideas.

Everyone is telling me that you can’t get iPhones for love or money in Apple shops in the US, and that indeed, there’s a 5-7 day waitlist. But not to worry, there’s no component issue or supply cock-up, they are just destocking because of the imminent launch of the 3G iPhone. In the words of one inveterate Apple shill:

Folks, we’re in April. May is just around the corner. Same with June [sic]. Apple’s worldwide developer conference is on June 9 in San Francisco. It stands to reason that if a new 3G iPhone is on the way, then why in the world would Apple continue to manufacture and then stock older versions that would just collect dust on store shelves?

 So then today, basking in the warm glow of an absolutely killer RIMM quarter, calculating my vast profits, rubbing my hands and cackling, I see this: in Germany not only can you get an iPhone, absolutely no problem, but now it comes at a special price for you mein Freund. T-Mobile cut the price to 99 Euros with the top rate monthly contract of EUR89/month, and the handset goes up in price by EUR50 for every tariff plan below that.  

The article (which I won’t translate for you) says “there are only 2 possible explanations”, mentions the imminent 3G iPhone launch as one, and then points out what I have been saying all along: the demand has just not been there in Europe. So let’s get this straight: in the biggest, most loyal market for iPhones, in the most profitable channel where you don’t have any payaway and have no rivals in stock, Apple has organised it so there’s no actual stock. In the most sceptical market where demand is lowest, they have so many they need to discount. Hmm. Maybe Steve Jobs just wants Euros, like Jay-Z. Or maybe this handset business isn’t quite as easy as Apple thought. 

There are a few other issues: Continue reading

Am I bad?

Dear agony aunt Baruch,

So I meet this girl, she appears nice, and she suggests we meet again next week — she’ll send me the invite. I’m all eager to see more of her, until I see the invite:

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No, I am not alone in the big city, and I am _never_ bored, and I already have it together, thanks for asking, and a life too. But above all I cringe at the prospect of being in the company of people who think this is a cool flyer, who think those people in the pictures are archetypes of interesting potential, erm, soul mates. Double cringe.

What I want, Baruch, is my own little circle of fellow collegiants, just like Spinoza had. What’s the chances of that you think, in a country where 99% of respondents in a recent Pew poll on religiosity say you must believe in God to be moral? Here’s the chart from the PDF, page 37:

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It turns out my move from Sweden to Egypt was across the biggest God-gap on Earth. No wonder I’m feeling naughty. Maybe I should go meet and greet after all. What would Spinoza do, you think?

On moral instincts

Dear Baruch,

So there I was, eight days into a two week trek through Ethiopia, staying in Axum in the North, when I had my breakdown. I just couldn’t go on like this, so removed from the internet for so long. I headed up the road, entered the nearest telecenter, and surfed.

That in itself was an adventure, what with a 56K modem and a spotty phone connection. Most web pages took actual minutes to download. But I persevered, and an hour later had paid $10 to a happy proprietor to print out 35 pages of interesting articles, which I took to the hotel to devour greedily.

The article that made most of an impression on me in that bunch was Steven Pinker’s The Moral Instinct, in the New York Times. It is a good overview of what psychologists, philosophers and evolutionary biologists have been working on recently to better understand the phenomenon of morality. In particular, Pinker talks about the work of a Jonathan Haidt, who counts five basic moral principles that all humans possess: “harm [avoidance], fairness, community (or group loyalty), authority and purity”. While we all subscribe to these principles, we can rank them differently, and a society’s overall moral compass is determined by how its members predominantly rank them.

The “Do unto others as you would have them do unto you” prescription that guides my morality is thus one that prioritizes harm avoidance and fairness over the others. But other societies, such as the one in Tigre that I found myself in as I read the article, might value a sense of community and authority more than I do.

I found this fascinating, as it offers an explanatory framework for comparing and contrasting the dominant moralities of the world’s different societies without requiring us to enter into the moral relativism trap. We can now presumably start to discuss which of these principles are the most useful in a world that is growing increasingly connected and technologically advanced. For example, I believe that blind obeisance to community, authority and purity is dangerous in a globalizing world (heck, it was dangerous in the first half of the last century too).

But is an absolute aversion to harm and a love of fairness also dangerous? Haidt’s talk at the just-ended TED argues that we should at least consider the possibility. Via Ethan Zuckerman’s notes:

Why should liberals care about these other three moral values? Because there’s a tendency for social order to decay. [Haidt] shows us the Hieronymus Bosch “Garden of Earthly Delights” – reading from left to right, we see purity, then sexual excess, then hell. This is true artistically, but it’s also true in terms of behavioral economics – research shows that cooperation in games delays without punishment. We may need authority and purity to maintain social order.

[I think he means that positive sum games don’t work if you don’t punish defectors.] It’s too soon for me to come out with conclusive statements about all this, but that is why I’m blogging it, so you can destroy any faulty logic. For example, I’m thinking that an obsession with purity makes sense in poorer societies, where contagious and infectious diseases are an ever-present danger, but that as we grow more well off, the usefulness of this impulse fades. And some of these moral precepts are surely there through a process of “natural” selection: More militant “patriotic” societies would tend to wipe out, over time, societies attaching less importance to militantly defending the community.

I’m sure Spinoza would have been intrigued by the notion of a taxonomy of moral principles. He came up with something similar, and also from the psychological perspective, but never really extended his work from the individual to the sphere of comparative sociology. At the same time, I’m not sure if Haidt’s taxonomy is complete. How would he explain mob rule, of the kind that tore Spinoza’s friends the de Witts to shreds? Community minus order minus authority? And is my strong belief in freedom of speech truly just a lack of regard for authority, or might it be a positive value, let’s call it tolerance? Might an affinity for rationality not be a moral precept? It’s the bedrock of the scientific method, after all. Your thoughts, Baruch?

Category Error

So Baruch was having his introductory session with the new Head of Risk at his beloved employer, when he was posed the following question: “what would you do if 80% of the fund was in ‘Momentum’?”

“Well,” said Baruch, desperately trying to think of what the right answer was, “erm that would be good, wouldn’t it? I mean, ‘momentum’ would mean the stocks were going up, which would mean that all our picks were working, which would mean we were making money!” he concluded, with a cheerful, hopeful grin.

A chill settled over the assembled colleagues. A faint whistling sound was heard in the background. Tumbleweeds rolled through the room. Baruch’s more experienced colleague and Dear Leader leant forward. “Obviously,” he said, “Baruch is joking. In that case we would work immediately to reduce the preponderance of that style in the portfolio.”

Shouting in Tights

Ooh Bento! Look at this! The meme started by Rebecca Goldstein propagates! A Broadway production about Spinoza’s trial! I wonder how long the run will last; is a broadway audience able to put up with an hour and a half of fairly dense, if suprisingly approachable, Spinozist philosophy? I hope so.

The NYT reviewer, one Charles Isherwood, does not endear himself to me. “You may have no idea what he’s going on about,” he writes of Spinoza’s philosophy, “Spinoza’s work is famously dense.” So evidently is this Isherwood person, who has clearly not been reading UB. But he manages to make the play sound pretty interesting.

Normally I abhor the theatre, which to me is all shouting in tights, as someone put it (but is of course not as bad as ballet). However, I would definitely see this. Bento, when you have finished tramping around Ethiopia, maybe we could meet up where it is playing and see it together! Or perhaps one of our readers, based in NY (if we have one), could see it and write a guest review for us.

Malayse

Baruch, my work has taken me to Kuala Lumpur. Malaysia, I am surprised to learn, does not allow assemblies of more than two people without a permit. Human rights activists assembling to protest this violation of a basic human right are (ironically?) arrested. In another case, a Hindu activist is arrested for sedition for using the words “ethnic cleansing” to describe the policy the Malaysian government is pursuing towards Hindus. I have no idea whether that’s accurate or not (it’s probably not that bad), but whatever happened to the freedom to hold opinions not to the liking of the government in power?

But my wrath this morning is not really against the government; it is aimed squarely at that sorry excuse for a propaganda organ masquerading as a serious mainstream newspaper, the New Straits Times. Check out their front page this morning. It left me gasping:

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Click to enlarge

Yes, it is the usual suspects, and they are protesting too much, and they’re doing it in the name of democracy no less! (The alleged bit policeman was of an undercover cop, we find. He bares his arm on page two, and I looked in vain for bite marks).

On page three, a full page ad for Lexus. Not that there was any danger of me ever buying a Lexus, but I can assure you that if we asked what Spinoza would do, he would be boycotting Lexus (and Honda, the other major multinational advertising in the New Straits Times).

An Immanent Age

Baruch, you may well already be aware of Charles Taylor’s book A Secular Age, which regards the perceived retreat of religion from the public sphere in the west as a regretful trend. Obviously, we do not (nor am I convinced that in the US this is the case). A great post by The Immanent Frame looks at how Taylor (mis-)characterizes Spinoza’s views when evaluating our hero’s contribution to secularism. Well worth a read for Spinoza aficionados out there.

Teaching free speech

Dear Baruch: So Gillian Gibbons, the British teacher in Sudan convicted to 15 days in prison for allowing her students to name a teddy bear “Mohammed” after one of the students, has been pardoned by Great Leader El-Bashir himself and is now safely home in the UK, reports the BBC.

She makes all the right comments, bravo, very sporting of her: “I am very sorry to leave Sudan. I had a fabulous time. It is a beautiful place and I had a chance to see some of the countryside. The Sudanese people I found to be extremely kind and generous and until this happened I only had a good experience. I wouldn’t like to put anyone off going to Sudan.”

Some commentators still don’t get it. The idea that you can “accidentally insult” something is just a bizarre notion to me. How can there be insult without intent? I am also worried that now, back in the West, there is a sense that a line will be drawn beyond which civil society cannot tread for the sake of interfaith respect or somesuch — as now we know that if we name inanimate objects after Mohammed we insult Islam, and so we have been warned, and any repeat of this insult would no longer be accidental, but intentional.

In Sudan, of course, calling teddy Mohammed may well result in lashes if you are lucky enough to avoid a mob of ultimi barbari. I just want to go on the record stating my continued support for the right to call teddy Mohammed in the UK, regardless of whether this can be construed as an insult or not. Irreverence, mockery and irony must remain tools of the free speech trade, especially when used in the service of lampooning irrational beliefs such as those of religious people. In other words, a Muslim Life of Brian must remain a viable option, should anyone choose to make one.

SchmApple.

My notional Long RIMM Short AAPL trade from mid-September is still on, and I think it will make me figuratively rich. I was up 20% on this at one point, but only 4% or so now, my RIMMs having been the victim of a Piper Jaffray downgrade today, and are down almost 7% at the time of writing. Still, never say die, and I would now like to double up on my invisible AAPL short and add another offsetting imaginary long, this in Nokia. So I will be 2x short AAPL, and be 1x long RIMM and 1x long Nokia in my little make-believe world. 

There’s nothing like a good anti-Apple screed to scandalise people. Bento, you know I hate Apple smugness, and that I think Apple is an anti-Spinozist company. But I like to think my concerns for the stock are reality-based. The way things seem to be turning out, I think the iPhone will prove to be the best thing that has happened to Apple’s handset competitors in a long time. RIMM and Nokia will be the real winners. For Apple, iDoom follows as the iPod franchise withers, and the “halo effect” (people buy Macs because they like their iPods and iPhones) goes into reverse. Also, Apple is much more sensitive to a consumer recession in the US.

Now, this is not an actual trade I can do in my non-imaginary tech fund, as we are “long only” and cannot go short. However I can underweight stocks in my benchmark, and in point of fact we are really mildly underweight AAPL, and mega overweight RIMM and Nokia. There is real money behind this, I am not just making odd noises.

Why do I, Baruch, flout conventional wisdom in such a way? On the advice of my lawyer, please note at this point that nothing in this post constitutes investment advice. He further suggests that anyone who invests money based on the insane jottings of some anonymous blogger deserves to lose their shirt anyway; are you completely stupid?. Continue reading

Plus ça change

Something for everyone who reads this blog, Bento, for the money-grubbing, “econoblog”-reading crowd, as well as the student of Spinoza. Get this: a book by a contemporary of Spinoza, a fellow Portuguese Jew no less, living in Amsterdam, writing about investing!

Published in 1688, Joseph de la Vega’s Confusion de Confusiones (here reprinted as a “B-side” to Extraordinary Popular Delusions) is a book in the now neglected dialogue format, between a know-it-all “shareholder”, who takes it upon himself to educate a naive “philosopher”, and a wily but uninitiated “merchant”, in the treacherous mysteries of the Amsterdam stockmarket of the time.

I mention it not just as an interesting curio, but also to make a serious point. Contra the otherwise reasonable and only-a-little-bit-wrong Richard Bookstaber, we are not living in a time of unprecedented innovation, sophistication and complexity in financial markets. We are living in a time of unprecedented market depth, breadth, and liquidity it is true, enabled by IT, globalisation, etc. This is not new, however; we have always been living in a time of unprecedented market depth, breadth, and liquidity. To say that we are more innovative and sophisticated in terms of the financial products we create — outside what is enabled by technology –than at anytime in the past seems to me to sell very short those who came before us, and who were able to devise working, complex financial products without the vast benefit of computers, but rather with nothing more than pen (quill?), paper, abaci, applied arithmetic and ink.

Indeed Taleb (hat tip to Felix) makes reference to de la Vega in his latest broadside against Black-Scholes-Merton, the “inventors” of the “formula” that “prices” options. His point is that high volumes of derivative products were traded and priced before the evil Gaussians got their hands on them, and that what we call the BSM model was in any case derived from someone else’s work. Options are and have always been priced by traders just like anything else, say Taleb and Haug: according to the laws of supply and demand, and you don’t need a clever formula for that. The options market in C17th Amsterdam was probably priced as “accurately” as our own. More so, perhaps, due to its pristine, pre Gaussian state.

I have my own theory about option pricing: option are priced by whatever the market makers think they can get away with, the dogs. I know this from bitter, recent experience, having probably made a few of the ones running the market in TomTom very rich indeed. Continue reading