Blog Ipsa Loquitur

Premise: hedge funds are usually a waste of money. Hedge funds are, almost without exception, unable to pick winning stocks for more than a year or two in a row. Worse, the hedge fund managers charge you to let them play with your money. If they lose your money, you pay their salary. If they win you money, you pay them a bonus.

From where I’m sitting, the smarter play is to just invest in all the stocks, because over the long term, the stock market goes up even if individual stocks go down. This is the sort of strategy that investment firms like Vanguard use. Here’s Ben Carlson noting that major universities’ endowment funds have chosen… poorly:

Vanguard beat the average [university’s fund] over the past 5 years for every endowment size and came up just shy of the ‘$1 billion and over group’ over 10 years while besting the rest of the group averages. Think about these results for a minute — these endowment funds hire the biggest investment consultants, have huge investment committees, connections with alumni at some of the best money managers in the world and fully-staffed investment offices in many cases.

All that work, all of those due diligence trips, all of those extra fees paid to money managers and the majority of these funds still couldn’t beat a low-cost Vanguard index portfolio that was simply rebalanced once a year.

It could be worse, though. Take New York City’s pension fund: that’s the money used to pay 715,000 current and future retirees. The city can make each employee’s savings go farther if, instead of letting that money sit around, it invests the money while waiting for employees to retire. By and large, the Wall Street firms paid to invest that money on NYC’s behalf do an okay job.

Until NYC gets the bill:

Over the last 10 years, the return on those “public asset classes” has surpassed expectations by more than $2 billion, according to the comptroller’s analysis. But nearly all of that extra gain — about 97 percent — has been eaten up by management fees, leaving just $40 million for the retirees, it found.

Pretty amazing coincidence that the cost of making $2.5 billion was almost exactly $2.5 billion, eh?

Super PACs, man

But finance isn’t the only industry in which you can pay lots of money to get almost nothing in return. David Frum, former speechwriter for President George W. Bush, wrote a great article in February on what he sees as a slight issue with Republican political spending:

Increasingly, super PACs look like the political world’s equivalent of hedge funds: institutions that charge vastly above-market fees to deliver sub-market returns. […] In an interview on election night 2012, Chris Wallace challenged Karl Rove: “[American] Crossroads, which you helped found, spent—what?—$325 million, and we’ve ended up with the same president, the same Democratic majority in the Senate, and the same Republican majority in the House. Was it worth it?”

Now, most of that money was spent by Karl Rove’s 501c4, which is forbidden under federal law from supporting or opposing a specific candidate. But virtually all of the $110 million spent by Karl Rove’s Super PAC supported losing candidates and/or opposed winning candidates. It’s left as an exercise for the reader to determine whether the c4 backed the same horses.

Frum notes that it’s not just Karl Rove and it’s not just the 2012 election:

Late Sunday night, CNN reported a remarkable allegation. An anonymous Jeb Bush bundler estimated that Mike Murphy, the director of Bush’s Right to Rise, had billed the super PAC $14 million for his services—more than 10 percent of all the super PAC’s revenues. Murphy fiercely disputed the claim, and the next day CNN updated the original post with additional information.

Sidebar: “Jeb” is actually J.E.B.: John Ellis Bush. When you call him Jeb Bush, it’s John Ellis Bush Bush. It’s like saying PIN Number or ATM Machine. That always bothered me.

Realistically, though? Saving $14 million for more ads probably wouldn’t have helped Jeb. There’s no limit to the amount of money a Super PAC can take from donors, so if Right to Rise was doing well, they probably could just have raised more money from the same crop of investors.

Which brings me to maybe my favorite bit of Frum’s column:

A long time ago, I wrote a history of the 1970s. One of its sub-themes was the emergence of the post-Watergate campaign-finance system. I was surprised to learn that some of the strongest proponents of limits on campaign donations were the donors themselves. Many had felt extorted by the 1972 Richard Nixon re-election campaign.

That campaign had targeted executives in federally regulated industries, notably aviation, with a strong message of “Nice little price-regulated airline you have here, it would be a shame if the president’s appointees disapproved your requests for fare increases to keep pace with inflation.”

You know, it’s this sort of Machiavellian maneuvering that really threatens to tarnish Nixon’s legacy.

It certainly sounds like the 1970s were a nightmare for our most vulnerable citizens: the extremely wealthy. Thank goodness we as a society have done away with unlimited political spending, and the rich no longer get fleeced by unscrupulous political operatives.

Filed on under This Doesn’t Add Up

Jonathan Zdziarski, on how badly the FBI bungled the investigation into the San Bernardino shooting by (1) resetting Syed Farook’s iCloud password and (2) powering down his phone:

  1. [It prevented the FBI from] talking directly to Siri, and asking her to display call records, contacts, email, and other information.

  2. If the iOS was 9.0.1 or lower, a known lock screen bypass bug would have potentially allowed them access to a significant amount of data on the device (data that is unlocked “after first user authentication”)

  3. Dozens of known vulnerabilities exist for older firmware that may have been able to penetrate the device with a PoC, that otherwise couldn’t be used if the encryption is locked. Simply reading Apple’s release notes would have provided contact information for a number of researchers and universities who likely had PoC exploit code they would have loaned to FBI.

He goes on like that for quite a while, and explains what the FBI should have done in this case. Zdziarski isn’t an armchair expert on this stuff: he literally wrote the book on iPhone forensics back in the day, and still consults with law enforcement agencies who want to break into phones. What the FBI missed is absurd.

Look, if local police in a tiny town in the middle of nowhere had screwed up this badly, we’d wonder why the FBI wasn’t entrusted with this. But the FBI made their jobs a lot harder; this can’t be their first time at the iPhone Evidence Rodeo, so how could they have locked themselves out of the phone?

Filed on under The News

How a Single Mechanical Failure Sparked 625 MTA Delays:

The train’s operator called in to the Rail Control Center, the MTA’s mission control, located on a high floor of a skyscraper in midtown. Unlike much of the MTA’s century-old infrastructure, it’s modern looking, with a bit of a Star Trek vibe, ludicrously high ceilings, and lots of people on computer consoles staring at large screens. RCC dispatchers are essentially the air-traffic­ controllers of the subway system, and their challenge is often as complex. When faced with an incident, they must decide — in consultation with four levels of supervisors — whether to hold a train while the problem is resolved, allowing other trains to stack up behind it, or begin rerouting trains, which can prevent a backup but only by throwing thousands of commuters off their routes. And the dispatchers must choose in which way they’ll inconvenience commuters as quickly as possible. […]

To make matters even more complicated, the RCC has to order service changes without being able to detect precisely where every train is at any given moment. Calandrella calls that “the shocking part” of the place. “For 67 percent of the railroad” — that is, every lettered train line except the L — “we don’t actually see train movement or control any signals and switches from the control center.” Instead, they do it the same way they’ve been doing it for decades: train crews communicating by radio with a dispatcher. If there’s a delay, the dispatcher phones it in on the “6 wire,” an open party line, and awaits instructions.

I can’t imagine life in New York City without the subway, even in its current state of disrepair. This is a harrowing look at just how embarrassingly low-tech many of their systems are. It’s a miracle the whole thing hasn’t broken down already.

Filed on under Nightmare Fuel

Margaret Talbot’s brief note on the death of Jusice Scalia is a postscript to her decade-old profile of him. In that profile, Scalia was the man. This was before his most apoplectic dissents in the Obamacare cases, as well as the Windsor and Obergefell cases, which ultimately recognized the universal right to marry. (He was pretty irate in Babbitt, though.)

That profile of Justice Scalia is a wonderful glimpse at Scalia near the zenith of his legal career, but this bit from the postscript really resonated with me:

I saw Justice Scalia speak a number of times, when I was profiling him for the magazine, in 2004 and 2005, and the question he hated most was how he would have ruled on Brown v. Board of Education. Scalia was committed to an originalist approach to jurisprudence, but a literal reading of the Fourteenth Amendment’s guarantee of equal protection would not seem to require a ruling to desegregate schools. […]

To law students who pointed out that it was the flexible, not the originalist approach that enabled Brown and other civil-rights breakthroughs, he’d reply that “Even Mussolini made the trains run on time,” or “Hitler developed a wonderful automobile. What does that prove? I’ll stipulate that you can reach some results you like with the other system. But that’s not the test.” In short, he never did reconcile originalism with Brown. And any legal philosophy that cannot be squared with that moral high point of the modern Supreme Court is fatally flawed.

That’s as a beautiful and succinct a metric for any judicial philosophy as I’ve ever read. Of course, sometimes people also reach conclusions you like by appliying a philosophy you may not like. As my friend Keith reminded me the other day, I concurred with Scalia’s recent raft of Fourth Amendment opinions. And in law school, there were certainly a handful of opinions in which I agreed with Scalia. It was always traumatic.

Jeffrey Toobin—also in the New Yorker—pulls fewer punches about Scalia’s philosophy and legacy. After a positively scathing indictment of the justice’s neolithic views on homosexuality, Toobin gets to Heller, a gun control case where Scalia read the original text of the Consitution and neatly sidestepped the whole bit about militias:

Scalia spent thousands of words plumbing the psyches of the Framers, to conclude (wrongly, as John Paul Stevens pointed out in his dissent) that they had meant that individuals, not just members of “well-regulated” state militias, had the right to own handguns. Even Scalia’s ideological allies recognized the folly of trying to divine the “intent” of the authors of the Constitution concerning questions that those bewigged worthies could never have anticipated.

None of this would have been remarkable if not for Scalia’s lifelong obsession with the plain language of the Constitution, and the legitimacy which he pretended that lent his legal opinions. But his inability to explain why an originalist justice would have been on the right side of Brown, and the fact that Scalia abandoned that philosophy when the stakes were highest, mar his legacy.

Regardless, constitutional law classes will be less exciting for want of more Scalia dissents.

Filed on under The News

You may have heard that Google’s DeepMind, an artificial intelligence, has mastered Go. This is a big deal, because it’s hard to build a computer that’s good at games. In video games, there’s always one particular move that confuses the AI opponent: football games fall for trick plays over and over, racing games have AIs that don’t understand how to overtake other cars safely, and so on. Games are hard, humans are smart, and computers aren’t. Note that computers were perfectly average at traditional games like Chess for literally decades.

Sure, computers are great at chess now. Everyone knows that IBM’s Deep Blue supercomputer won a chess match against the reigning world champion Garry Kasparov, but that game was a rematch. The year before, Kasparov handily won his match against Deep Blue. The Deep Blue machine only won the rematch after literally doubling its computing power to improve its brute-force analysis of the outcome of nearly every possible move at once. Deep Blue was one of the the 250 most powerful supercomputers in the world at the time. A little more than a decade later, this underwhelming smartphone could run a chess program capable of trouncing all but a handful of players on the planet. Computers got way smarter in a hurry.

So what happened with this Go thing? Are we in the ‘supercomputer ekes out a win’ stage, or the ‘cellphone checkmates you in thirty seconds’ stage? And how do machines go from one stage to the other?

Filed on under Well They Sound Harmless

Today, we have two different post-mortems of the mansplaining that occurs after a woman expresses an opinion. The first is a statistical analysis of the mansplaining prompted by Holly Wood’s rebuttal of some rich guy’s defense of income inequality. You should read Wood’s essay, as well as the analysis which includes dialetical gems like this:

What is the best way to look like the smartest person in the room without actually saying anything worth noting? Say that both sides are wrong and that having a strong opinion is for overly passionate losers. This is often mixed with tone-policing and repeated efforts to make sure everyone understands they’re not on anyone’s side. You can’t be on a side in a public debate. That’d mean having an opinion that is potentially not just regurgitating the status quo!

“Both sides” is usually just intellectual cowardice disguised as nuance.

The second post-mortem, by Rebecca Solnit, is no less scathing. Solnit wrote an article called Men Explain Lolita to Me; men were apparently honor-bound to educate Solnit after she picked on Esquire for publishing a list of 80 Books Every Man Should Read. A full 79 of those books were written by men, and Solnit pointed out that this:

seemed to encourage this narrowness of experience and I was arguing not that everyone should read books by ladies—though shifting the balance matters—but that maybe the whole point of reading is to be able to explore and also transcend your gender (and race and class and nationality and moment in history and age and ability) and experience being others. Saying this upset some men. Many among that curious gender are easy to upset, and when they are upset they don’t know it (see: privelobliviousness). They just think you’re wrong and sometimes also evil.

It’s tempting take the cheap shot, the sarcastic nihilistic poke and say “well, of course. It’s Esquire. This is par for the course.” You could even link to something actually educational about Esquire’s sordid history to prove your point. But that’s still the lazy way out, and Solnit isn’t lazy. This is much better:

Scott Adams wrote last month that we live in a matriarchy because, “access to sex is strictly controlled by the woman.” Meaning that you don’t get to have sex with someone unless they want to have sex with you, which if we say it without any gender pronouns sounds completely reasonable. You don’t get to share someone’s sandwich unless they want to share their sandwich with you, and that’s not a form of oppression either. You probably learned that in kindergarten.

But if you assume that sex with a female body is a right that heterosexual men have, then women are just these crazy illegitimate gatekeepers always trying to get in between you and your rights. Which means you have failed to recognize that women are people, and perhaps that comes from the books and movies you have—and haven’t—been exposed to, as well as the direct inculcation of the people and systems around you. Art matters, and there’s a fair bit of art in which rape is celebrated as a triumph of the will. It’s always ideological, and it makes the world we live in.

Delicious.

Filed on under It’s a Man’s World