The Daily Parker

Mondays are Economist days over here. I've got myself into a rhythm of travel, school, work, and keeping sane that requires me to put things in small boxes of time; on Mondays I read the latest Economist. This week had two unusually interesting (and short) articles in the "Finance and Economics" section[1].

First, a report that numeracy predicts mortgage defaults better than any other variable:

Even accounting for a host of differences between people—including attitudes to risk, income levels and credit scores—those who fell behind on their mortgages were noticeably less numerate than those who kept up with their payments in the same overall circumstances. The least numerate fell behind about 25% of the time. For those who did best on the test, the number of payments they missed was almost 12%. A fifth of the least numerate group had been in foreclosure, but only 7% of those who were more numerically adept had.

Surprisingly, the least numerate were not making loan choices that differed much from their peers. They were about as likely to have a fixed-rate mortgage as the more numerically able. They did not borrow a larger share of their income. And loans were about the same fraction of the house’s value.

They've even got a handy quiz of the type the researchers used. Two pages on, in the "Economics Focus" column, the newspaper reported on the FCC's decision two weeks ago to treat ISPs as common carriers for their last-mile service. This is a big deal:

A medieval innkeeper, for example, often offered the only lodging in town; a boatman could cross only with the king’s writ. Second, the state sometimes offers favours of its own to transporters—public lands and roads, say, or the seizure of private property to make way for new infrastructure—and expects a certain level of public service in return. Third, transport is essential to commerce. It represents an input cost to almost all businesses, and to restrict access or overcharge is to burden the entire economy.

All these arguments applied in spades to 19th-century rail. Like a medieval town’s sole inn, a railway line is a perfect example of a natural monopoly: it is tremendously expensive to build and it is difficult to justify more than one set of tracks on any route just to guarantee competition. ...

Telecoms operators argue that America does not need common carriage for internet access, because the country’s unique network of local cable monopolies competes against its last-mile copper-wire monopolies. ... The FCC’s current plan—to ask last-mile providers to subsidise rural service, and to ensure equal treatment of packets of information—is a mild intervention by global standards.

Time now to review, once again, the team's finance assignment due tonight, and then collapse in a heap. The Daily Parker will probably continue to have slightly less velocity than usual for a week or so as I twist myself into a small knot of anxiety over my finance midterm. If only it could be as engaging as a class as it is in a newspaper.

[1] Yes, the topic interests me in the abstract, but at the same time I can't wait until the end of doing concrete finance—e.g., working out CAPM calculations—once my finance class ends next month.

Waaaaay back in ancient history, I actually reported a Nigerian scammer to the FBI. This was, oh, 1997 or so, maybe 1998. The FBI already had a cybercrimes unit in San Francisco, and I had a half-hour conversation with one of the agents there about a bizarre email I'd received from a Nigerian IP address. We actually did some IP tracing and header analysis on the email to determine its origin. Yes, the scam was that new.

Who was it that said, the more things change, the more they stay the same? Right:

OFFICER IN-CHARGE:
NAME: Mr. Robert Stephen Sien @
FBI UK Internet Fraud Watch/Alert
Phone: +44 792 457 7408

We are writing in response to our track light monitoring device which we received today in our office about your transactions.

The Federal Bureau Of Investigation (FBI) Washington DC, in conjunction with the Scotland Yard, Has screened through our various Monitoring Networks also our German counterpart the anti fraud unit reported that your identity/information was used to dupe a German Business man to the tune of $5 Million USD by some Africa/Nigerian Fraudsters.

After all the series of investigations conducted here in our office we tracked your record and we found out that you have never had any fraudulent case that may jeopardize your image and personality.

We have concluded our investigation and you have been approved to be compensated from the total amount recovered for scam victims compensation. So all you need to do right now in other to receive your compensation and clear your name from the list of these Con Men which has already been forwarded to our office is to secure the CLEAN BILL CERTIFICATE immediately.

This Certificate will clear your name from the scam list which will enable you receive the sum of $500,000.00 Usd compensation fund.

You are required to contact Robert S. Sien by email: rssien@aol.com with your full name and contact details for easy communication also to guild you on how to secure the CLEAN BILL CERTIFICATE and claim your money.

THANKS FOR YOUR CO-OPERATION.

Robert Stephen Sien.
FBI SPECIAL AGENT

You know what tipped me off? What made me certain this was a 419 scammer? Because, you can see, it's quite well crafted, no loose ends, nothing to arouse suspicion.

What tipped me off was this:

When real FBI agents refer to their employer, they never capitalize "of".

It's obvious when you look at it.

So, with a project running somewhere around 105%, an old and patient client that predates my current employment waiting for some updates, Global Financial Management requiring that I figure out the combined beta of two companies about to merge, Foundations of Strategy expecting a transaction cost analysis Saturday morning, and an overwhelming anticipation of seeing Diane and Parker tomorrow after almost two weeks, I find myself completely out of creativity. Heaven bless my winter office (probably, now that the pizzeria around the corner has left, simply "my remote office").

Fortunately, other people on the Intertubes have plenty of it. Creativity, I mean. Here is a quorum, mostly pinched from Sullivan:

• The Washington Post has a list of twelve things to toss out this spring, as written by Elizabeth Warren, Karl Rove, and Onion editor Joe Randazzo. (The last is an indictment of Internet memes.) There's also a bit on virginity.
• Writer Andrea Donderi posits a dichotomy between Asker and Guesser cultures. In Cultures, Civilization, and Leadership (one of the CCMBA's core classes) we'd look at this in terms of ICE profiles, which I would explain if I could find the link. (See above re: being overloaded.) This comes via The Guardian, who have the distinction this week of having endorsed for prime minister the guy who became deputy PM. By the way, this kind of embarassment (two guys running against each other only to have to work together as #1 and #2) hasn't happened in the US since 1800. But that's not important right now.
• While on the subject, it's a little daunting that we haven't had our midterms yet and I've made no progress on the video, but there are only 50 days until our next residency starts. (See above re: being really overloaded.)
• Finally, Sam Harris has a new demolition of the Catholic Church Good line near the top: "This scandal was one of the most spectacular 'own goals' in the history of religion, and there seems to be no need to deride faith at its most vulnerable and self-abased." (I would explain that my views are probably more moderate than Harris's, and yet I enjoy his writing, but see above re: being really monster raving loony overloaded.)

Shannon has brought my last drink and my check, my teammate KW is busy compiling all of our notes for Strategy, and Parker, I expect, is getting a relaxing belly-scratch from Diane 1,000 km away. I think we're all OK with this, but Parker has the best deal.

Also, for those of you watching in real time, yes: I posted this blasted entry five times in quick succession, because I kept finding typos. This should come as great news to the people currently engaged in Scrabble games with me on Facebook.

Before going to Shanghai, I picked up James Fallows's Postcards from Tomorrow Square, a collection of his essays from living there 2006-2009. (Yes, he lived in the building that houses the hotel where our CCMBA cohort stayed.)

First, I'd like to call attention to page 76:

The easier America makes it for talented foreigners to work and study there, the richer, more powerful, and more respected America will be. America's ability to absorb the world's talent is the crucial advantage no other culture can match—as long as America doesn't forfeit this advantage with visa rules written mainly out of fear.

Second, the book should be required of CCMBA students visiting Shanghai to complement Travels of a T-Shirt in a Global Economy, which we had to read for our Global Markets and Institutions (GMI) class. In the essay "China Makes, the World Takes" (available at The Atlantic.com in shorter form), Fallows looks at the Chinese side of Livoli's traveling t-shirt. Computer accessories, for instance:

The other facility that intrigued me, one of Liam Casey’s in Shenzhen, handled online orders for a different well-known American company. I was there around dawn, which was crunch time. Because of the 12-hour time difference from the U.S. East Coast, orders Americans place in the late afternoon arrive in China in the dead of night. As I watched, a customer in Palatine, Illinois, perhaps shopping from his office, clicked on the American company’s Web site to order two $25 accessories. A few seconds later, the order appeared on the screen 12,500 km away in Shenzhen. It automatically generated a packing and address slip and several bar-code labels. One young woman put the address label on a brown cardboard shipping box and the packing slip inside. The box moved down a conveyer belt to another woman working a “pick to light” system: She stood in front of a kind of cupboard with a separate open-fronted bin for each item customers might order from the Web site; a light turned on over each bin holding a part specified in the latest order. She picked the item out of that bin, ran it past a scanner that checked its number (and signaled the light to go off), and put it in the box. More check-weighing and rescanning followed, and when the box was sealed, young men added it to a shipping pallet.

By the time the night shift was ready to leave—8 a.m. China time, 7 p.m. in Palatine, 8 p.m. on the U.S. East Coast—the volume of orders from America was tapering off. More important, the FedEx pickup time was drawing near. At 9 a.m. couriers would arrive and rush the pallets to the Hong Kong airport. The FedEx flight to Anchorage would leave by 6 p.m., and when it got there, the goods on this company’s pallets would be combined with other Chinese exports and re-sorted for destinations in America. Forty-eight hours after the man in Palatine clicked “Buy it now!” on his computer, the item showed up at his door. Its return address was a company warehouse in the United States; a small Made in China label was on the bottom of the box.

Finally, a bleg: what book or books do you think, dear reader, should be required reading for visitors to your city? For example, I'd say Nelson Algren's prose-poem City on the Make and Mike Royko's Boss for Chicago. Thoughts?

We all scratched our heads today as the Dow plunged almost 1,000 points in 15 minutes...then rebounded. Still no explanation:

Traders and Washington policy makers struggled to keep up as the Dow Jones industrial average fell 1,000 points shortly after 2:30 p.m. and then mostly rebounded in a matter of minutes. For a moment, the sell-off seemed to overwhelm computer and human systems alike, and some traders began referring grimly to the day as “Black Thursday.”

But in the end, Thursday was not as black as it had seemed. After briefly sinking below 10,000, the Dow ended down 347.80, or 3.2 percent, at 10,520.32. The Standard & Poor’s 500-stock index dropped 37.75 points, or 3.24 percent, to close at 1,128.15, and the Nasdaq was down 82.65 points, or 3.44 percent, at 2,319.64.

But up and down Wall Street, and across the nation, many investors were dumbstruck. Experts groped for explanations as blue-chip stocks like Procter & Gamble, Philip Morris and Accenture plunged. At one point, Accenture[1] fell more than 99 percent to a penny. P.&G. plunged to $39.37 from more than $60 within minutes.

More:

The height of panic on Thursday was reached shortly after lunchtime in the United States. First some currencies began to fall rapidly, with the euro suffering especially against the Japanese yen.

That could have been an indication that some large traders were unwinding positions. It has been popular to borrow yen at low interest rates and then use the money to speculate in higher yielding assets denominated in other currencies. Anyone unwinding such a trade would buy yen to repay the loan.

Then there's the U.K. election, which didn't go as planned for the Liberal Democrats:

The swing so far from Labour to Conservatives with 250 results in the bag is a little lower than before, at 5.6%. The Tories' share of the popular vote is 34.9%, Labour is on 28.3% and the LibDems on 21%. Compare that with the average of nine main pollsters' final predictions before the elections: 35.6% for the Tories, 27.6% for Labour and 27.4% for the Liberal Democrats. The Tories a little down, Labour a little up and Lib Dems bafflingly down. Still more than half of all seats to go, though.

That was about an hour ago. It's dawn in London right now, and no one knows who'll be in Number 10 at dusk. If no party has an outright majority in Parliament at the end of voting, Gordon Brown will have the right to form another government—but you can bet the UK will have elections again in a few months. This is the most exciting UK election since 1974.

[1] Disclosure: Accenture owns most of Avanade, my employer.

Bruce Schneier gives three main reasons:

One, terrorist attacks are harder to pull off than popular imagination -- and the movies -- lead everyone to believe. Two, there are far fewer terrorists than the political rhetoric of the past eight years leads everyone to believe. And three, random minor terrorist attacks don't serve Islamic terrorists' interests right now.

... So, to sum up: If you're just a loner wannabe who wants to go out with a bang, terrorism is easy. You're more likely to get caught if you take a long time to plan or involve a bunch of people, but you might succeed. If you're a representative of al-Qaida trying to make a statement in the U.S., it's much harder. You just don't have the people, and you're probably going to slip up and get caught.

Via one of my classmates, an graphic depiction of the differences between Germany and China by graphic designer Yang Liu. For example, the evolution of transport over the last 40 years:

Brilliant:

If the TSA Were Running New York

- All vans or SUVs headed into Midtown Manhattan would have to stop and have their contents inspected. If any vehicle seemed for any reason to have escaped inspection, Midtown in its entirety would be evacuated;

- A whole new uniformed force -- the Times Square Security Administration, or TsSA - would be formed for this purpose;

- The restrictions would never be lifted and the TsSA would have permanent life, because the political incentives here work only one way.

... The point of terrorism is not to "destroy." It is to terrify. And for eight and a half years now, the dominant federal government response to terrorist threats and attacks has been to magnify their harm by increasing a mood of fear and intimidation. That is the real case against the ludicrous "orange threat level" announcements we hear every three minutes at the airport. It's not just that they're pointless, uninformative, and insulting to our collective intelligence; it's that their larger effect is to make people feel frightened rather than brave.

It always strikes me that Israel, which has actual, ongoing terrorism, doesn't x-ray people's shoes.

For some reason, the Cultural Disconnect I just wrote for the Shanghai residency was the hardest. I don't know if that's good or bad.

Full text follows:

Cultural connect?

I reviewed my ICE profile and the regional Cultural Dimensions the week before arriving in China. What interactions should I worry about? Where would the disconnections come from? China has high in-group collectivism, high power distance, and relatively low uncertainty avoidance, contra the U.S. My ICE profile spells out a hybrid Midwestern-East Coast sensibility, being across-the-board direct in the relationship context, having a mixed direct-expressive communication style, and an almost completely reserved space context. (My time context is all over the place, but that’s a different essay.)

I expected China would bang away on my communication style and space contexts especially. From everything I’d read about them, I expected Chinese people to be much more reserved in communication style but much more expressive in space context than I am. I looked forward to being trampled by the teeming masses in the Metro and engaging in indirect negotiations that never quite began, and never quite ended.[1]

As soon as I got onto the China Eastern airplane at Narita (as alien a place to me as I had ever experienced, at least since leaving O’Hare a few hours earlier), I started looking for Cultural Disconnects. OK: there’s a sullen-looking Chinese person already sitting in my seat on the plane! That’s because of the expressive...because the attitude towards...because she just didn’t know that A is the window and B is the aisle? Point, point, shrug, shrug, we’re in our correct seats. It differed from similar interactions I’ve had on American Airlines only because I can usually communicate orally in the U.S., even though pointing and shrugging politely and with good humor works just as well as saying “I’m sorry, you seem to be in my seat.”

Next opportunity: Passport control. OK, looks a little different than the U.S. Much better run than Miami, less crowded than O’Hare...short, orderly lines...signs in English. Huh. The immigration officer and I had a brief conversation in English, she stamped my passport, and I left. In the annals of culturally distinctive immigration experiences, this rated somewhere between Dublin and Schiphol.[2]

Next: navigating Pudong Airport to find the Maglev. Huh. More signs in English. Many of them say “Maglev” with arrows pointing to, I found out, the Maglev station. That the signs also had Chinese characters on them doesn’t really have ICE or CD significance, does it? It looked cool, though.

Buying a Maglev ticket: with the RMB I’d bought at an offensive markup in the terminal (again, pretty common in airports world-wide), I whipped out my Mandarin phrase-book and walked up to the ticket counter. “One way or return?” she asked, in perfect English, before I’d even opened the book. She could have been selling tickets at Penn Station, except that no train leaving Penn Station has ever got up to 430 km/h. Security screening to get on the train: now we’re getting somewhere. I’ve never had my bags X-Rayed before getting on a train, let alone a Metro. But does this fit into the definition of “cultural disconnect?” It’s a different trade-off between security and convenience than we make in Chicago, sure. But Shanghai was just a week from opening the World Expo, so heightened “security theater” should be expected. The police at least looked at the X-Ray monitor, unlike in Dubai where one screener was actually asleep when I put my bags through.

Getting out of the Metro at People’s Square, I got accosted by a pimp. Cultural disconnect? I could argue that my expressive “avoid disagreement” and “avoid conflict/tension” communication styles, not to mention my direct “ambiguity in communication” style, explains my clearly disagreeable, tense, unambiguous response; and maybe it was his in-group collectivism (I wasn’t “one of us” and therefore a target) that made him follow me halfway to the hotel even after I’d told him where he should go instead. But no, I think he was just a pimp harassing a traveler and got told off. I’ve spent nearly my entire life in the three largest cities in the U.S.; I can assure doubters that his was not culturally-distinctive behavior, nor was my response.

Next day: a nice-looking young couple “on vacation” chatted me up “to practice their English” and, inevitably, invited me to a tea ceremony. How droll. Again: where there are tourists, there are scammers, only this time I told them “I am afraid it will not be possible to go with you at this time” instead of what I told the pimp. (Ah, but how did I know they were scammers? Could my wariness have been a cultural disconnect? Or might I have read about the “tea ceremony” scam in the Lonely Planet guide on the flight over?)

On and on it went for 10 days. Cultural disconnects just didn’t seem to happen. Of course, I’m sure I had dozens of them—but I wasn’t aware of them. I think, instead, that consciously looking for cultural disconnects dissipated them before they could start. I anticipated things being radically different in China, so maybe I kept looking for big disconnects like I had in Dubai and Delhi and missed the countless little ones in Shanghai. Or maybe I should have gotten farther away from Shanghai than Zhouzhuang.

The last is the most likely. And there are compelling historical reasons for this. Shanghai has had an openness to foreigners (not, of course, entirely voluntarily) for centuries. Western interests in particular dominated Shanghai from the 1800s until the Japanese turfed them out in the 1930s. Flash forward to the more open economic policies of Deng Xiaoping starting in the 1980s continuing through Hu Jintao’s today: China’s desire to prove itself equal to the West, and Shanghai’s historical Western orientation (occidation?), led to a conscious effort to develop Pudong as a modern city center. Puxi, with its Victorian and Third Republic architecture, benefitted as well. Shanghai’s growing reputation as a Chinese city with Western sensibilities encouraged more Western visitors to Shanghai, which made it a more Western-feeling place. In short, a virtuous cycle.

Still, I think Shanghai was simultaneously too alien and too similar for me to experience differences as disconnects. Alien, because forget it, Jake, it’s China.[3] In Shanghai, the thick language barrier prevented me from taking any communications for granted, and kept me so focused on the instant conversation that I forgot about the larger cultural context. Cultural disconnects disappeared from my forebrain when I had trouble saying “forty five” without it sounding like “death decade company.”

Similar, because for innumerable reasons, Shanghai felt like Chicago—except when it felt like New York. Sure, people do things differently in Shanghai than we do here, but people do things differently everywhere. But people in large, cosmopolitan cities have ways of behaving that are more similar than not. I’m not really joking when I say Raleigh sometimes feels more alien to me than Shanghai did. My disconnects in North Carolina come not from my direct-expressive communication style and time context smacking into their reserved Southern counterparts, but rather from thinking, because we’re all from the same country, we should all act the same, and then being surprised when we don’t. That was not a possibility in China.

[1] Most of my cultural priming came from James Fallows’ Postcards from Tomorrow Square. Fallows spent three years in Shanghai as the Atlantic’s Asia correspondent. The book collects and extends the columns he wrote about living in China for the magazine.

[2] In fact, my two most unusual interactions were at a land crossing into Canada, where I had my car searched, and at De Gaulle, where the immigration officers had to deal with simultaneously arriving flights from Boston and Nigeria. The solution in the latter case was to shout, in perfect English, “Americans, British, Canadians, EU, this way please” and then shoo the European-looking folks past the counters without a second glance or even a look at our passports. I will leave to the reader to sort out what may they may have been thinking, and if this is really the way we want cops to behave.

[3] Cf. Nicholson, Polanski, et al., 1972.

I haven't had a lot of time to go through all the Shanghai photos. These two caught my eye, though. First, the Urban Planning Museum in People's Square:

And, just because I thought it looked cool, Terminal 2 at Pudong International Airport: