Just make a shell and leave all else to Google

Yeah, that’s what I thought after reading Simson Garfinkel in MIT technology review.

“Android is not the "Google phone" that rumor suggested before the software was launched. Indeed, the company doesn't really want to own your phone. It just wants to be sure that no other company does. If Android succeeds, it will keep the wireless world safe for Google and whatever services it might seek to offer in the future. Today there are a billion Internet users but nearly three billion people with mobile phones. That's a lot of eyeballs, and Google is first and foremost an advertising firm. And so it is not surprising that Google may do more than build a new operating system in its effort to entrench itself in the wireless world. At press time, the company was in the process of bidding for wireless-­spectrum licenses being auctioned by the Federal Communications Commission.

If Android succeeds, it will have a major impact on wireless carriers. A phone running Google's component-based operating system, after all, would treat wireless operators like Verizon and AT&T as just another way to reach data services on the Internet. Such a phone could turn today's wireless providers into commodity data communications networks that also happen to carry voice….

Just as Google's place in the wireless world is a work in progress, so too is Android, which I suspect will not be limited to cell phones. If it's successful, we're likely to see Android as the basis of other handheld devices: digital cameras, GPS receivers, or even lightweight tablet computers. If Android really works, it's going to change the face of mobile computing.”

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"Go build memories" - Jeff Hawkins

The more they innovate, more they are challenged. Chip designers received an interesting challenge this month from Jeff Hawkins, the famous founder of Palm and Handspring and an expert on the human brain: If they really want to design something intelligent, they shouldn't be doing processors. They should be making memories.

At the International Solid State Circuits Conference in San Francisco, Hawkins addressed the question of "Why can't a computer be more like a brain?" He has been preoccupied with that question for decades and recently has been working on the answers for his new start-up, Numenta. Broader story here.

Hawkins said computers today are fast at solving calculations but terrible at doing things that children can do, like understanding simple stories or recognizing the difference between a cat and a dog. That's because computers are designed with Von Neumann architecture, with a processor connected to memory. The brain, by contrast, has a very different design. It is a "hierarchical memory system." At the lowest level, the brain's neural connections store memories such as the shape of an object. At the next level up, the pattern associated with a human form is stored. And at the highest level, the brain recognizes the person as Bill Clinton.

The brain operates on the same formula, or algorithm, in every region, according to Hawkins. It doesn't have one algorithm for processing vision or a different one for processing sound. Each part of the brain is also self-training. You are born with nothing and learn. Each part of the brain learns based on what information is passing through it.

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A twenty something for President...?

Who could be a President with experience? Hillary claims she has experience. But she has never been President before. Hell, does it really matter? Scott `Dilbert’ Adams engages a lively debate. Scott says experience is useful only in select fields – say, while undergoing a by-pass surgery, it’s vital to go with a surgeon that has held a scalpel before.

Then I read Ben Casnocha tips his hat to Jeff Nolan and poses a query – Is there a negative correlation between experience and success?

I wanted to disagree without denying the role of youthful derring-do in crafting many a success stories – especially in the world of IT startups. I suggest a peep into the Nobel hall of fame where seniors score. But before I could delve any further, I spotted this fantastic comment by Paul Freet under Jeff Nolan’s post here. I quote –

“Jeff, I think I know the fallacy of this argument. Young entrepreneurs, who have little experience, shoot for the moon. The vast majority of those efforts fail spectacularly. But, statistics demand that a few, slip through the cracks and succeed in a big way. Seasoned entrepreneurs, with their experience, make safer bets, and have a much higher success rate, but do not create world-changing products. It is he naiveté of youth that does change the world. We just don’t hear about the hordes of abject failures that accompany the few that make a difference.”

I couldn’t have put it better. Thank you, Paul.

Structured finance needs fixing

John K Galbraith, like many left-wing critics of capitalism, has a keen eye for interesting facts. It is gross credit excess that is fueled the recent stock market bubble. The obverse side of credit is debt, and that is precisely where the problem rises. As credit expands, debt expands with it, especially bad debt. Eventually, the bad debt leads to a crisis; if a sizeable amount of debt cancellation occurs, you get deflation and a crisis of epic proportions.

Then I read this piece by Dr.Alok Sheel in ET. He figures amongst the rare breed of civil servants with a very sharp mind.

“Driven by complex mathematical engineering securitized structured finance is a modern financial marvel that has deepened capital markets through greater dispersal of risk, contributed to higher growth by intermediating access to large amounts of low-cost funds generated by global imbalances, and made development more inclusive by giving previously excluded groups access to assets like residential property. It has also spawned a new breed of highly paid graduates well versed in mathematics and calculus, but alas, quite divorced from the real world of old-fashioned finance with its putative sixth sense of sniffing out risk through a deep appreciation of human psychology, market sentiment and moral hazards.

In A Short History of Financial Euphoria, Galbraith advanced the rather depressing theory that finance did not lend itself easily to innovation, since at the end of the day all credit is secured on some asset, no matter how much it is repackaged and sliced. It is undoubtedly true that excessive liquidity that went beyond what would be expected based upon existing assets was a necessary condition underlying the subprime crisis.”

It’s a long article. I’d distill a few steps outlined in there –

a) Basle capital adequacy norms should limit off balance-sheet exposures. This should help confine contingent risks to the originating bank, though there could be some shrinkage in credit supply.

b) The originating bank could be required to retain a ‘fraction’ of the original portfolio (“fractional banking”). This would address the moral hazard inherent in the ‘originate and distribute’ lending model where there is little incentive for the loan originator to adhere to prudential lending and monitoring standards.

c) The Basle norms to address liquidity risks arising from maturity mismatches. This risk is presently handled through state-funded deposit insurance and central bank/ government bail outs. Universal banking also faces liquidity risks arising from positions taken in (non-money creating) investment. The subprime financial crisis was not escalated by large-scale loan defaults but because assets became illiquid as credit markets simply froze. Short-term debt raised to fund long-term investments could not be rolled over.

d) Review the banking business model. Presently the traders split a good slice of profits as commission but in case of a loss, they kick it back to the shareholder. Adopt the private equity model where the players, having a more direct stake, move nimbly to hedge their positions better.

e) Regulate the regulators.

An ad in good taste ?

Next time you pick up a soggy journal at your nearby clinic, get yourself sterilized.

Talk of revolutionary marketing. Getting people to use multiple senses to process ads is a good way to build a stronger connection with consumers, ad experts say. "It's hard to forget whose brand you are licking," says Lisa Haverty, a cognitive scientist who works in the marketing field.

Welch's (grape juice) is taking out full-page print ads in People magazine this month that give readers a chance to sample its grape juice by licking the ad. The front of the advertisement shows a huge bottle of the juice, while the back has a strip that peels up and off, with text that reads: "For a TASTY fact, remove & LICK."
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Print ads present a unique challenge for marketers because they don't typically have "sound or motion," the two things that tend to make ads stand out, says Paul Caine, president of Time Inc.'s Entertainment Group, which includes People magazine. Adding taste is one way to create a new way to grab reader attention, he says. People has experimented with adding sound chips to some print ads.

Get it all here.

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Life ain't easy for central bankers

The primary role of a central bank in a modern advanced economy is to set the price of money – the interest rate. Large commercial banks are generally compelled to hold a certain proportion of assets at the central bank and in return receive risk-free central bank money, the equivalent of large bundles of notes and coins.

What’s the big deal…? I ask.

All the major central banks are now beset by the issue of “moral hazard” – the concern that their actions in offsetting market turmoil might prompt investors to take even bigger risks in future, with potentially catastrophic consequences.

In a crisis, central banks have enormous firepower to drown financial institutions in cash. But if they throw money at a crisis, they face two risks.

First, they send the overnight interest rate tumbling because banks have too much cash and all try to lend it out. Inflation follows. Second, they send the signal they are always ready to bail out banks and encourage riskier practices in future.

Choose your devil. Easier said.

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Aircraft engineers are still birdwatchin'....

University of Michigan researchers explain why aircraft engineers are still bird-watching....

A Blackbird jet flying nearly 2,000 miles per hour covers 32 body lengths per second. But a common pigeon flying at 50 miles per hour covers 75.

The roll rate of the aerobatic A-4 Skyhawk plane is about 720 degrees per second. The roll rate of a barn swallow exceeds 5,000 degrees per second.

Select military aircraft can withstand gravitational forces of 8-10 G. Many birds routinely experience positive G-forces greater than 10 G and up to 14 G.

And you wonder why brilliant financial engineers over engineered mortgage derivatives that led to a global credit crisis. Nothing to beat plain common sense and keen observation of simple things around. You agree...?

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