Local Supermarkets

Early this year one of the supermarkets near my townhouse, the Super Fresh in Plainsboro, closed.  This didn't bother me much as I think I had only shopped there once.  However this week I learned the Stop&Shop a few miles up Route 1 is also going to close.  This is more bothersome as I had shopped there fairly often and will miss it.  According to the article at the Stop&Shop link there are plans to build a Shop-Rite supermarket a bit south on Route 1 (which would be closer to me) so maybe things will eventually work out for the better.

Apparently the Stop&Shop is the third supermarket to fail at that spot in a 20 year period.  This is a bit surprising as it seems like a good location with easy access to Route 1.   But perhaps the population density in the immediate vicinity is not as high as it could be.  I hadn't seen any indications of distress at the store, although in hindsight perhaps the fact that (at least at the times I was there) most of the checkout stations did not need to be staffed was a bad sign.    

The Signal and the Noise

I recently read "The Signal and the Noise" by Nate Silver.  Nate Silver became well known because of the political analysis and generally accurate election predictions in his blog 538.  Earlier he had developed a successful system, PECOTA, for predicting the development of minor league baseball players.  In this book he attempts a general survey of forecasting.  I found the book a bit disappointing (perhaps in part because I had excessively high expectations).

One problem with the book is that when Silver moves away from his specific areas of expertise he makes mistakes showing he has failed to completely grasp the material.  On page 110 Silver writes:

... They are hot: the 77 trillion calculations that the IBM Bluefire supercomputer makes every second generate a substantial amount of radiant energy.  They are windy: all that heat must be cooled, lest the nation's ability to forecast its weather be placed in jeopardy, and so a series of high-pressure fans blast oxygen on the computers at all times.  ...

Here "radiant energy" is at best a confusing way of saying heat.  And I had never heard of oxygen (as opposed to simple air) cooling.  In any case according to NCAR:

Bluefire relies on a unique, water-based cooling system that is 33 percent more energy efficient than traditional air-cooled systems. Heat is removed from the electronics by water-chilled copper plates mounted in direct contact with each POWER6 microprocessor chip. ...

The chess diagram on page 271 is obviously wrong (the pawn on g2 should be on g3) and the related statement on page 270:

These databases relied on the assumption, however, that Kasparov would respond as almost all other players had when faced with the position, by moving his knight back out of the way. ...

is simply false, the usual move is bg2, retreating the knight would be very weak.

On page 374 Silver writes:

The greenhouse effect is the process by which certain atmospheric gases - principally water vapor, carbon dioxide (CO2), methane and ozone - absorb solar energy that has been reflected from the earth's surface.  ...

Here "reflected" should be "absorbed by and re-radiated".  The key point is because the sun is hotter than the earth solar radiation has shorter wavelengths than the earth's heat radiation.  Greenhouse gases absorb more strongly at longer wavelengths hence block more of the outgoing radiation as compared to the incoming solar radiation.  The effect is to warm the earth's surface.  On the other hand sunshine reflected from the earth's surface remains shortwave and leaves as easily as it arrived.

These (and other similar) errors aren't critical to Silver's arguments and could be fixed without too much trouble but they diminish the reader's general confidence in the author's reliability.  Silver would have done better to have had subject matter experts check for this sort of thing. 

The book has other problems.  At 454 pages it is quite long and there are things like the chapter on the Kasparov - Deep Blue match which could have been cut without too much loss. 

I didn't care for the analysis of the failure of the rating agencies prior to the recent financial crisis.  Silver discusses technical issues but the real problem is the agencies are paid by the people selling the securities they are rating.  This gives them an obvious incentive to fudge their ratings.  Silver understands this when it comes to political polling, polls paid for by a candidate will generally report more favorable results for the candidate than neutral polls.  In the case of political polls the amount of fudging is limited by the existence of neutral and opposition polls.  There were few such countervailing forces when it came to rating complex mortgage backed securities and the rating agency fudging got totally out of hand.  At the end nearly worthless securities were being given AAA ratings.  Silver largely ignores the bad rating agency incentives which remain in place and seem likely to cause similar problems in the future.

I don't want to be too negative, the book contains some interesting material and I agree with a lot of Silver's conclusions.  But I can't really call it a must read.      

Yarnell Hill Fire

On June 30, 2013 a crew of 19 firefighters was killed by the Yarnell Hill Fire near Yarnell Arizona.  Recently a report was released on an investigation of this event.  In my view the report is seriously flawed, showing an undue reluctance to criticize the decisions that led to 19 deaths.  The report claims it is trying to avoid hindsight bias, the tendency to label decisions as wrong when they work out badly even if they were actually reasonable under the circumstances.  This is a commendable goal but it has to be balanced against the need to identify avoidable mistakes.  Simply refusing to judge decisions is not the proper balance.

The report refers to decisions made by the crew and speculates about the thinking behind them.  But I expect the crew as a whole was not making decisions, instead the decisions were made by the crew's leaders (who appear to have been two men which the report does not name).  If 19 people are killed in plane crash the investigation will naturally focus on the pilots.  What was their training, experience, reputation?  Similarly one would expect this report to discuss the background of the fire crew leadership but in fact it provides no information at all.  Also in recent years there has been much attention paid to cockpit dynamics.  For example if the pilot makes a mistake does the co-pilot feel free to object.  Again this report does not discuss the analogous fire crew dynamics at all.      

The fire crew was killed while apparently attempting to move from one safe area to another (perhaps as the report speculates because they felt the second area would leave them better positioned for further firefighting efforts, although it should be noted the overall leadership did not expect or particularly want them to do this).  In doing so they chose a route that placed them in mortal danger.  Initially they moved on a two track road along a ridge.  This seems to have been reasonably safe at least at first as they had a view of the fire and various retreat options if it moved towards them.  However they then left the road (which would have eventually taken them to their apparent goal) to descend off the ridge through a box canyon directly towards their destination (a ranch with a cleared area).  Although this was a shorter route than continuing along the road it probably wasn't quicker as it was much heavier going.  The report speculates that the ranch appeared closer than it was and that they didn't realize how slow the going would be.  The real problem however was once they left the ridge they lost sight of the fire and (according to the report) the ability to perceive the wind shift that drove the fire towards them.  By the time they realized they were in danger it appears it was too late to do anything.  The report lists some of their options at the point they left the ridge but does not discuss one possibility.  Why didn't they leave a scout on the ridge to keep watch on the fire and warn them if it started to move towards them?  They had utilized a scout earlier in the day in what seems like a less dangerous situation so why not here?  The report doesn't discuss this.

The report doesn't want to admit that any mistakes were made.  This makes it hard to identify problems and make improvements going forward.  The report's view is that firefighting is inherently dangerous and that these 19 deaths were just one of those things.  I am not convinced.

Added 12/25/2013:  I fixed the link to the report.  Some other material including a video was also released.

Flu Shot

I got my annual flu shot last Saturday.  They have started offering a version with a shorter needle.  I tried it last year but it didn't seem any less painful, if anything it was more painful.  So this year I reverted to the standard shot which was fine.

Tax update

As noted earlier I filed an amended New Jersey state income tax return last month claiming an additional refund.  The check arrived Friday.  So it only took New Jersey about a month to process the amended return as opposed to over 3 months for the original return.  Hopefully I am now done with my 2012 taxes.

A Colossal Failure of Common Sense

I recently read "A Colossal Failure of Common Sense - The Inside Story of the Collapse of Lehman Brothers" by Lawrence G. McDonald (with Patrick Robinson).  Lawrence McDonald had a mid level job at Lehman Brothers for four years ending in 2008 (he was fired a few months before Lehman went bankrupt).  This 2009 book gives his view of the place near the end.  McDonald shares the copyright with professional writer, Patrick Robinson (who I know nothing about), but the writing is not polished.

This book is seriously flawed but it held my interest for a while (I found it dragging a bit near the end).  What value the book has is that of chronicling one person's experience and perspective, it is not good for an overall big picture view of the financial crisis or even of Lehman's collapse.  For this reason I think the complaint in the WSJ journal review that the book devotes too much space to McDonald's earlier career and background is wrongheaded.  I think it is useful to know that his parent's divorce led to a period of (at least relative) economic deprivation, that he had to make an extraordinary effort (taking a job selling pork chops just to establish that he could sell and then studying for and passing the securities exam on his own) just to get an opportunity for a Wall Street career and that he resented the rich private school kids who appeared to have an easier path.  I found McDonald's personal story of some interest and some of his anecdotes illuminating although perhaps not always in the way the author intended.  For example McDonald tells the story of a gambling trip in which one of his co-workers goes down $160,000 playing blackjack.  When McDonald sensibly suggested that perhaps it wasn't his night the co-worker gave him a "quitters never win" lecture and continued playing.  In this case his luck did turn and according to McDonald he ended up $475,000.  McDonald appears to feel this depiction of his co-worker is highly favorable but I would draw different conclusions.

The book does have numerous problems.  It is not very well written.  The explanation of some of the complex financial products Lehman dealt with is muddled at best (perhaps in part I suspect because McDonald didn't really understand them himself).  McDonald isn't very revealing about his personal finances.  At an earlier point in his career he and a friend founded a website devoted to convertible bonds which (by his account) was quite successful leading to its purchase by Morgan Stanley.  But McDonald doesn't tell us the sales price or his cut.  At Lehman he receives a bonus he is happy about but then is disappointed by his bonus the following year.  But again he does not reveal the actual amounts (perhaps he suspects many readers will be unsympathetic to complaints about a $700,000 (or whatever) bonus).  The details of his bonus are important because a large portion was in the form of Lehman stock which he was not allowed to sell for several years.  This means his opinion that the government should have bailed Lehman out is not disinterested.  In general McDonald appears to have a number of biases which I suspect color his account.  Also McDonald was not high ranking enough to have personal knowledge of top level internal conflicts and in addition he left Lehman some months before the end.  So the book's version of the key events in Lehman's collapse is third hand, poorly sourced and probably not completely reliable.  And in my view the book doesn't have much of interest to say about the larger context, the financial crisis that precipitated Lehman's collapse.

So in summary while I found this book interesting in places for the view it gives of an aspect of Wall Street I can't really recommend it.

Completely worthless

As I expected,  my Eastman Kodak stock became completely worthless last week when the company emerged from bankruptcy and the old stock was cancelled.  So I will be able to write off my loss on my 2013 taxes.

It is perhaps of some interest that although every informed person knew the stock was about to become worthless, trading continued (valuing the stock at a few cents a share) right up to the  end.  So the stock market is not perfectly efficient.

I contributed to this inefficiency in a small way by not selling my shares last year.  This was a result of my natural sloth and the fact that the proceeds would have been small relative to the hassle involved (given that I was holding paper certificates).  As it turned out this worked out well as the recent raise in the federal capital gains tax rate means the write off will be worth more to me in 2013 (although this is just luck, I wasn't considering it at the time).