A Collossal Failure of Common Sense

Review of A Colossal Failure of Common Sense: The Incredible Inside Story of the Collapse of Lehman Brothers by Larry McDonald with Patrick Robinson

This is really just a collection of notes on an interesting example of a kind of secondary historical source closely linked to a potential primary source. My primary conclusion is that I hope his ghost writer kept the notes, because those may well have some real historical value, but this book itself is way too slanted and defensive to take at 'face value'. My current hypothesis is that a lot of the juiciest bits are actually the result of the ghost writer combing through his recorded interviews looking for eye-catching and memorable snippets.

Therefore I'm going to focus mostly on the evidence of the slants in this review. The particular slant that really started to grate on my nerves was the dislike of poor people, which is interesting since the author includes a couple of brief biographical episodes involving his own experiences of poverty, and in those places the themes were that it wasn't his fault and that his poverty didn't mean he was stupid or a bad person or anything like that. However, when he's talking about OTHER poor people he says things like "NINJA" (for No Income, No Job, no Assets) (frequently used throughout the book), "betting the farm on poor people making their mortgage payments" (p. 172), "guys who haven't got any bread" (p. 172), "bush telegraph of the poor" (p. 174), "out-of-work no-hopers" (p. 200), and the stuff about "firebrand official Roberta Achtenburg" (p. 243), who briefly worked in the Clinton administration advocating against racial considerations in housing loans. I think this last one was actually part of an intended slant to blame it on Clinton, since he went out of his way to introduce her in the the prologue. I'm sure there were lots of other examples, but it took a while for the anti-poor-people thing to become annoying enough to start tagging it.

Another slant that bothered me was the strong assumption that greed is basically natural and good. I think it underlies the book to the degree that a better title would have been The Most Colossal Failure of Selfish Greed--So Far. The evidence is actually confused on this point, since sometimes he's criticizing it, while in other places he's praising it, especially when he's on the receiving end. A sampling of the mixed evidence includes "rabid desire for some decent yield" (p. 141) and "grotesque personal greed that has slithered through Wall Street" (p. 141), showing that he (or his ghost?) can talk about the unfair aspects, but most of the examples were on the other side of the ledger in terms of huge profits and bonuses. I guess the part of this that annoyed me most was the long passage on page 209 where he projects his own flaws on other people. The specific target in this passage was the slimy salesmen who were using high-pressure tactics to sell the bad mortgages in the first place. He never bothers to consider the mitigating factors there, most importantly that any poor suckers who were smart enough to think ahead would have been told that they could get out from under by selling the house at a higher price or just walk away in the worst case. Of course, most of the poor suckers were just too trusting and not even thinking that much--but he doesn't consider that aspect of it. However, the real hook is that the author's OWN work was focused around distressed assets and short selling. He even describes himself as a vulture and proud of his super-bear father. Hey, fool. You can't fairly criticize other people for profiting from the suffering of innocent people when you have been making millions of dollars doing it. Big time projection there, but at least he (or his ghost) sort of knows it's wrong.

In many places in the book he's trying to show how clever he is about catching onto scams and swindlers. Examples include "in its wisdom" (p. 171) where he is sarcastically attacking Congress for the Commodities Futures Modernization Act that legalized many of the most dangerous practices (but without ever mentioning any Lehman-supported lobbying for the law), "a red flag to a bull" on his own acumen in spotting troubled companies, and the passage on page 235 where he's trying to link himself into an early warning discussion with the then Secretary of the Treasury Henry Paulson. However, I think his claims of any cleverness collapse with statements like the page 43 claim that Bill Gates was deeply knowledgeable about computer programming (when actually Gates' main programing experience was just helping with an early BASIC interpreter for PCs), calling Time Magazine a "bastion of reality" (p. 157), and "beyond the pull of gravity" to demonstrate a total misunderstanding of how gravity works.

That gravity thing was actually in connection with one of his rather feeble attempts to provide conceptual scaling for large amounts of money, which also convinced me he isn't much of a mathematician. For that sort of thing you need to start by scaling the problem. I haven't run the numbers, but I suspect you could have made it work with a large office building gradually filling up with $100 bills, though you'd probably want to imagine the building as not tapering as you filled it up from the lower stories. Also contributing to this theme was his mention of large essentially imaginary debts of money that never existed, such as $26 trillion (p. 169) (for the CDS market in 2006) and $13.4 trillion (p. 201) (for mortgage-backed securities issued from 2001 to 2006). If scaling was his concern, I'd have expected some comparison to the relatively piddling national debt, but he didn't even consider the illusory nature of these valuations. You'd expect him to say it clearly, because he seems to understand there's a problem there, but he just doesn't get around to saying that the fundamental problem there is that you can always imagine an arbitrary price--but that doesn't mean anything if the actual value of the assets cannot possibly justify the speculative so-called prices. It really is amusing how they tried to insure themselves for the payment of impossible valuations, and then they acted so surprised when the entire bubble burst. Oh wait. He was so wise that he knew it all along, sort of...

Actually, as of this writing I've only read as far as page 246, but I'm quite confident the book isn't going to improve in the stretch run. This is mostly just a good example of why the participants in historical events can't really be trusted. One of the things the book establishes very clearly is that the author is a hustler, and this is the kind of book whose value falls off very rapidly over time, so the hustle in publishing it was justified (from his greedy perspective).

The Goldilock Enigma

Targeted Review of The Goldilocks Enigma: Why is the Universe Just Right for Life? by Paul Davies

My original intention was to review this book as a comment appended to my earlier review of The God Delusion, where Professor Dawkins mentioned in passing that Professor Davies was a winner of the Templeton Prize. However, my intention for brevity got carried away, and the comment ran too long, resulting in this new post. (Comments are limited to 4,000-odd characters.)

In his book Professor Dawkins criticizes scientists who accept such prize money from the Templeton organization. He basically feels that such scientists are giving an aura of scientific credibility to religion, and that this is basically harmful. Based on this newer book I doubt that Professor Davies would receive the award at this late date, though they probably won't try to revoke it. He basically includes a fuzzy and weak god hypothesis as one of the possible 'ultimate explanations' for the universe, but merely as one of the options on a long list of possible ultimate explanations--and he explicitly states that he does not favor it.

However, my main reason for reacting to the book is that I feel I have to reject several points of the book rather strongly. Overall, the book is a good overview of modern astrophysics and the current theories of the early universe, but I think it mostly fails in its largest purposes for two major reasons.

The first reason is that there is some serious confusion about cause and effect. Or perhaps it should be dismissed as a form of circular reasoning? The central enigma of the book is that the universe is just right for life, and that seems amazing to Professor Davies. Actually, it works the other way around--life is adaptive and will attempt to adapt as well as possible to the universe as the universe is. He actually doesn't do a very good job of explaining all of the remarkable fits, but he does acknowledge the problem in a couple of places where he remembers to say "life as we know it" or something along those lines. That's exactly the point and the problem. If the universe were different, then life would also be different--but that life would still evolve to become extremely well adapted to that changed universe. It is not that the universe is trying to be perfect for life, but rather that evolutionary pressure drives life to be as perfect as possible for its environment in THIS universe.

The second major reason I think he fails in his search for the ultimate origins is even harder to describe succinctly... Should I call it projection? It is a fundamental human characteristic to seek explanations even where NO explanation exists, but he simply wants to assume that there is some deep explanation for the universe. Actually, the assumption of causation is just a useful heuristic that helps humans deal with the excessive complexity of the real world. We try to seek meanings in things because that helps us deal effectively with the world. This is a pragmatic justification, because much of the time the assumption of causation is useful. (In accord with the Dawkins book, it is precisely when such a search for causation fails that we wind up with such things as irrational and unprovable religious explanations.)

My constructed example begins with his own example of the birds. If we see a live bird fly by, we can reasonably assume that the bird is behaving in the way that birds do and for the reasons that the bird has. We might not fully understand the 'causation' of the bird's precise path, but we understand it well enough for our purposes, such as hunting the bird. However, when a dead bird 'flies' past us, we quickly realize there is something wrong, and there must be some other cause at work here. In the real world, the dead bird fails the test as the cause of its own flight, but we quickly understand we need to consider the situation more carefully. Much more important to our lives if, rather than a bird, the flying object is something dangerous like a stone. Did the stone fall off of a cliff? If so, we should move away from the cliff, because gravity might cause another stone to fall. Did the stone come from where another person is standing? Maybe the stone was actually thrown as an attack, and the real cause is that the thrower is planning to kill me and take over my cave and spouse? Though I deliberately picked a negative example, you can just as well argue that this is the ultimate source of Kant's Categorical Imperative and the deeper source of ethical behavior. It is actually quite reasonable to assume that other humans are similar to us and that they share our own motivations and will act in similar ways for similar reasons. However, though it makes sense to assume other humans might share our motives and that this causes them to behave in ways that we think we can explain, it is a very strong form of projection to assume that the universe as a whole has to have such a motivation.

Part of his attempt to justify his position on this issue involved observer effects, but this was one of the places where the book didn't do a very good job. In particular, his attempt to argue that the observer could force the photon to choose its displayed nature struck me as very unpersuasive. Perhaps my technical background is just too weak, but he didn't convince me that any choice was needed, and I'm still willing to believe that the photon can be both a particle and a wave at the same time.

Another area (but less important) where his presentation struck me as weak was his treatment of velocity in expanding space. I felt like he needed to at least acknowledge the effects of the expansion of space on the distance traveled... The space that the light wave passed through at some past time was much smaller, and that space has since expanded, but he seemed to be treating it as a linear constant relative to the present time.

However, as already noted, I felt the book was mostly a good overview of modern cosmological theories. It was mostly in the 'ultimate' speculations of the last few chapters that things seemed to break down for me.