Confessions of a researchaholic

August 20, 2011

Chinks on the armor

Filed under: Real — liyiwei @ 10:23 pm
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Two landmark stores in my neighborhood Borders (Palo Alto) and Andronico (Stanford), closed shops recently.

I used to think that the Bay Area is so different from the rest of the America (and the rest of the world). It is the cream of the crop. It seems invulnerable. It felt almost nothing has changed, even after the dot com bubble, which it triggered. When America and the rest of the world set into recession after 2008, it managed to come up with a bubble on social networks. Companies are still hiring, and well paid jobs are plenty. It even landed several friends of mine who recently graduated from top Asian schools.

But I am not so sure now. The closure of these 2 shops, which I thought will be there forever, just felt different. Something has changed.
Are those the natural parts of relentless creative destructions, or signs of more ominent things to come?

September 25, 2010

Charlie Munger speech

Filed under: Real — liyiwei @ 11:52 am

Charlie Munger probably does not have as much publicity as Warren Buffett, but he is definitely no less witty. See here for a few excerpts from a recent speech at the University of Michigan. I particularly like the part on success:

The best way to get what you want in life is to deserve what you want. How can it be otherwise? It’s not crazy enough so that the world is looking for a lot of undeserving people to reward.

September 19, 2010

China’s one-child policy

Filed under: Real — liyiwei @ 3:43 pm
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Among all the major policy mistakes the Chinese government has made over the last century, I would say the one-child policy hurts the most, much more than the culture revolution, great leap forward, and various others. It is true that over-population can be a problem, but it can be better addressed by sounder policies. It could even be naturally resolved by market economy and Darwinian competition. As evident in other places such as Japan, Taiwan, and Hong Kong, excessive population growth over economic capacity will eventually cause lower birth rate. Forcing every family to have at most one child takes away the natural force of competition, resulting in less fit offspring not only in the Darwinian sense but also other problems such as gender disparity and potential spoils a single child is likely to receive from his or her family.

An even more serious problem is that China’s population growth rate already falls below 2 children per family (see an excellent article here). Population is power, especially in this age of knowledge economy. Japan is a vivid example of how much damage a shrinking population can do to a country’s economy and overall strength. One of India’s main competitive advantages over China is actually its growing population (aside from democracy, English speaking, and friendlier relationships with the Europeans and American, all much more ephemeral factors in my opinion; see an excellent article here).

In some sense, population growth is like monetary growth; neither too much nor too little is good. But deflation is much worse than inflation.

If the Chinese economy follows the path of the Japanese, it will be a disaster not only for China but the entire world. It is time to abolish this communist-era thinking, and write off the one-child policy into the history book.

July 22, 2009

The randomness in life

Filed under: Real — liyiwei @ 10:43 am
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The Drunkard’s Walk: How Randomness Rules Our Lives
by Leonard Mlodinow

Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets
by Nassim Nicholas Taleb

Thanks to the advances of probability theory and quantum physics, most people today would have no problem accepting the fact that the physical world we inhabit is subject to randomness and the future cannot be predicted deterministically. However, we tend to associate this randomness with the microscopic atomic world and under-estimate the role randomness plays in our macroscopic daily lives. In a nutshell, due to evolutionary reasons, human minds tend to rationalize events that are random, often trying to find patterns, rules, or causalities that really do not exist.

Two books render this point excellently; one by Taleb that I read a while ago, and another by Mlodinow that I just finished yesterday.

Mlodinow is a scientist turned writer, and thus his book is written in a popular science fashion, with plain English descriptions (no single equation is shown in the book) of the basic probability and statistical theories, their historical progressions, and anecdotes of peoples involved in their discoveries. Based on these scientific expositions, Mlodinow ventured into a few more philosophical suggestions, such as that life is more random than we intuit and thus we should not interpret too much rules or causalities, as well as the suggestion that the best strategy to overcome this randomness is the law of large numbers, i.e. keep trying and never give up easily.

Overall, this is a highly entertaining book, and I particularly enjoy the anecdotes of these scientists and mathematicians involved in the evolution of the probability and statistical theories. (It appears that their lives and discoveries are also subject to randomness.) I also concur with the moral lessons that Mlodinow suggested (anyone with enough experience in scientific publications, or more precisely, rejections, ought to be able to appreciate the meaning of the law of large numbers).

Taleb, on the other hand, is a philosopher turned trader (or the other way around; I cannot really tell). Thus, even though sharing a similar central theme with the book by Mlodinow, the one by Taleb is filled with stories and observations he made from his trading desk (or pit) interspersed with either philosophical statements or scientific statements made by a philosopher. The book is also highly entertaining but in a way different from Mlodinow’s; it is more sarcastic (in a good way) and the anecdotes are about the financial rather than the scientific world.

I highly recommend both books, and suggest reading them in succession for extra fun. (I read Taleb’s book so long ago that my memory for it already fades when writing this article.)

July 10, 2009

The free price for search

Filed under: Real — liyiwei @ 10:29 am
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Many people, including myself, observe that Bing produces better search results than Google. But this does not mean that people will switch. Techcrunch has a recent article on this subject. There are various potential reasons behind this unwillingness to switch, such as brand loyalty or the improvement of Bing over Google is not enough.

I wonder if the fact that search is free also plays a role here. In his book Predictably Irrational, Dan Ariely has shown that giving something for free could distort peoples incentives and judgments, making them abandon their usual (more rational) thinking for non-free products. So under the hypothetical situation that people will have to pay to use search engines (either a flat rate or a usage charge or a combination), will this make them more likely to switch to a better product?

Of course, as long as Google stay pat and not charging for the use of its search engine, this may never be an issue. But we never know; Google already started to charge for some of its previously free products.

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