61. Rant: LHC, global crisis and switchers
HEP-TH/PH — By Dmitry Podolsky on October 24, 2008 at 3:33 pm
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1. LHC and the reason for this rant
As we know, LHC currently stands broken – 5 quadrupole and 24 dipole magnets are broken (out of 392 and 1232, correspondingly) due to the famous incident with liquid helium (see Lubos’ coverage of the incident). User uzhas_sovka, former physicist, currently financial analyst, yet to gain his MBA, is making fun of LHC team to my severe disappointment (unfortunately to you, my dear reader, you will be able to appreciate his irony only if you know Russian a bit).
Instead of explaining why people in LHC team are actually much more competent in accelerator physics than the user uzhas_sovka - in financial analysis , let me play on this guy?s field for a bit and represent my current view on financial crisis. But before that I would like to say a couple of words about?
2. Switchers
I have an impression that the main reason why US together with the other world is entering the (probably long) period of stagnation is inadequate people. While the statement is short, its expanation is going to be somewhat extended, and I beg your pardon for that.
You see, the field of academic science, physics in particular, is very competitive. If you are not good enough in your business, or your motivation is insufficient, or you did not learn the art of applied politics properly in your high school, it is going to be really hard for you to get your PhD, even harder – to find your first postdoc, harder – second one, almost impossible – to get a tenure track. The estimation goes as follows: number of PhD students is exponentially larger than the number of postdocs, and the number of postdocs is exponentially larger than the number of professors. While it is so hard to get to the top of the foodchain, the prize is well worth it – you are leaving the Sansara Wheel of job hunting forever. And believe me - one who was able to reach the top of the foodchain is quite a shark 
.
Many people (including uzhas_sovka himself) fail at early stages of their academic careers eaten on the way to the top of the foodchain. Many of those who don?t survive the competition leave for, say, finances, Wall Street, PWC, etc. etc. That is Life, since Wall Street is always in need of youngsters able to quickly calculate something more complicated then 1+1.
However, I cannot stand the impression that those who left the competition are potential failures. Indeed, they have already failed once when they were not able to pursue their academic career further and were forced to leave it. Am I wrong? Please, correct me if I am, but honestly I would not hire a switcher, there is a too damn good chance that the switcher will switch again.
3. One necessary condition to become a switcher
It is extremely simple – one is going to switch if he is not able to separate objective reality from his wrong cognitive model of objective reality. Do you like to bullshit at a seminar? Are you able to fully accept the fact that you were wrong after a discussion with colleague? Are you prepared to meet the consequences of your wrong strategy or you think that you will deal with problems after they come? All this has something to do with deviations between reality and your cognitive model of reality.
4. Global crisis, finally
Now, we are ready to go back to the point – to the issue of global financial crisis. Since there are too many switchers=inadequate people, working in finances, and not surprisingly some of them reach the top of the corresponding foodchain. They become fat cats and sometimes fat cats make wrong decisions.
Several of them were in place that led to the present crisis, the most essential of them made around
1. Aug 1971, when the president Nixon refused to pay the famous French bill – about 280 million onces of gold remained in US possession at that moment. Later US dollar was accepted for international trade as if it was gold, in particular, oil prices were nominated in US dollars.
2. Mar 2006, when the Federal Reserve ceased to publish M3 data – roughly, ceased to say how many US dollars are in circulation in the world.
While I am preparing the second part of this post, would you be so kind to explain in comments how these two issues may be related to the present financial crisis from your point of view?
11 Comments
Wild guess:
If we don’t know how fast dollars are being printed and if the dollar is accepted for international trade, does that mean that the US can increase their own (percieved) internal worth as a whole as much as they want? If so, that over rating of worth of the country must be reflect as an over rating of the worth of its components which for some reason happened to be the houses.
No?
Hi EG
The internal worth of the US economy is overestimated, that is for certain, but I think that this explanation, while being correct, is not complete. One would also want to explain the cause of bubbles on markets and why the crisis started at the house market. Kindly see the next post
hi
I think the ultimate flow in your logic is that you can become a switcher yourself as I understand after reading your CV
Would not you than hire yourself?
And congratulations to you, your wife and daughter!
Hi Sam
Thanks! No, I don’t think there is a flow of this kind. This is true that I can easily become a switcher myself, but than there will be a good chance that I will switch again. I was carefully trained to become a theoretical physicist for more than 10 years. Starting a new career, I will be in a weaker position than I am now simply due to the lack of proper education and training.
Cheers
I surely agree with you that switchers – people who haven’t not successfully gone through a sufficiently stringent filter of skills in their newest occupation – are an important part of the problem.
Unfortunately, switchers and “interdisciplinary people” and “smart people who decide to do something practical” are extremely fashionable or politically correct or whatever it is – which is essentially equivalent to the previous statement that they haven’t gone through a serious competition.
It is not clear whether successful academics would be likely to lead the financial world more sanely but despite their idiosyncrasies, I think it is a better assumption than to believe the switchers.
OK, I am not sure how these two events are important. 1971 could be too far to return to. The world would be completely different if major financial policy decisions in 1971 were done differently. They were using different knowledge and brains to do their decisions. I don’t have the courage to speculate how the world would look alternatively. The world economy can adapt to any kind of dominant currency or many currencies. Some of the setups might be more efficient but the efficiency also depends on human assumptions and conventions – it’s not quite an objective question to ask which system (gold-backed, commodity-backed, single-currency, multi-currency, floating, pegged etc. etc.) is better. Some local ability to float is always good for the countries and local regions to adapt. Too much floating brings chaos to the picture, and irrational profits and losses based on coincidences.
2006 is closer and I tend to agree that it should be known how much of each currency there is in circulation. The whole modern economy is based on money and a large problem with money is that its value is not quite well-defined – for example because it’s not known how much of it there is.
Still, it is probably more relevant for the present crisis that there were many more complex and vague papers besides money whose value was completely misunderstood, partly because of the inadequacy of the people mentioned above.
Dear Lubos
Thank you so much for a detailed comment! Regarding switchers, I did not expect to hear any other opinion from you
> It is not clear whether successful academics would be
> likely to lead the financial world more sanely but despite
> their idiosyncrasies, I think it is a better assumption
> than to believe the switchers.
I think this assumption is at least meaningful, if not correct. Recall Jim Simons in this respect. I think I will a post write about him in a not so distant future.
> The world economy can adapt to any kind of dominant
> currency or many currencies.
I don’t argue with that, but from my point of view there is important question: what is the policy of an institution in control over the printing service, are they going to exploit their power or not.
> it?s not quite an objective question to ask which system > (gold-backed, commodity-backed, single-currency, multi-
> currency, floating, pegged etc. etc.) is better.
In essence, my answer is above. In other words, it is important to take into account the fact that _human beings_ work in the institution responsible for monetary policy, with all their weaknesses, etc. Illustration: I respect the Code of Laws accepted in United States very much because these laws take into account that a human being is not perfect. Compare, say, with the constitution or the Code of Laws of the former USSR, where a human is generally thought of as a perfect member of the society.
Anyway, from my point of view, after US dollar ceased to be backed up by gold, certain opportunity appeared for FED, and they were not able to resist it.
Tonight I was glad to see that neqnet was updating again after the fall hiatus… until I saw your “switchers” rant.
Now I doubt that I’ll ever come back again. Life’s too short to waste on such delusional arrogance.
Get a clue: http://membracid.wordpress.com.....is-a-cult/
Dear Disappointed
I hope you did not decide to leave yet. If you did not, that kindly see the reply tomorrow here: http://www.nonequilibrium.net/.....emia-cult/.
Cheers,
Dmitry.
Dear anonymous Disappointed
Thanks for the link and comment. You are the 4th person currently to send it to me, so, as I decided, I shall have to argue why the Bug Girl is not quite right.
Regarding “delusional arrogance” – I think you have to admit a priori that I am an intelligent person, aware of issues related to the presented point of view and had my reasons to write what I wrote.
As for your intention to leave, I hope that you will reconsider, otherwise – I have to say that I will always express my personal point of view honestly on this blog irrespective to opinions of other people.
Hope to see you again,
Cheers.
Dmitry.
Hi,
you should probably read this
“?К сожалению, мы не можем до конца выяснить, каково качество образования уезжающих за границу молодых людей, закончивших вузы. Это те, кто не смогли себя реализовать в стране?, ? сказал Якеменко, очевидно, намекая на то, что за рубеж уезжают худшие из молодых россиян.”
http://www.gazeta.ru/politics/.....2976.shtml
exactly the same idea, exactly the same level of arrogance. Hope you enjoying being in such a good company.
Hi Rico
Thanks for the comment. Actually, my level of arrogance is only seemingly high — and it was designed to be seemingly very high for this particular post. I think, the post perfectly reached the goal.
Cheers,
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