That Facebook IPO, in full

I’m not the first to say the obvious, but the FT appears to have misunderstood the world:

Some investors accused Facebook of taking advantage of enormous demand to sell at an inflated price it says, commenting on the way FB’s shareprice dropped from $38-ish to $34-ish. To which the answer is… WTF do you think FB is, a charity? If you’re overwhelmed by people desperate to hand over cash in exchange for your shares, then of course you raise the price.

Back in the dotcom bubble era it was fashionable to IPO at well below what you hoped the shares would trade up to. But, that was a bad thing, not a good one. Not just because the companies weren’t getting their money’s worth, but more because it was a sign of bubbliness and, effectively, dishonesty: people who knew (not me, I hasten to add; I fell for the hype too; I was much younger then), knew the kind of valuations being posed were meaningless, and they knew that no-one knew how to value them, and they knew that the best guarantee of the shares going up, was for the shares to go up, because people had no other measure of value than a relative one.

[BTW, we’re very close to the great switch-over to WP, this post may oscillate, who knows…]

Refs

* Explaining Facebook’s IPO: The Greenshoe – from Timmy, in the old comments. Fascinating bit of detail. Basically the backing banks shorted the IPO, and this is commonplace, and there is a good reason for it. Finance can be almost as complex as interrupt-driven code sometimes.
* Facebook and the sad case of ethical investment bankers – Bronte agrees with me 😉 but has a probably more astute take on the ’90s IPOs.
* TED is very rude about Bronte, but he is wrong, as Bronte patiently explains.

Lack of caution

I finally decided to write this after reading Oregon County Decides to Go Native by DA. My thesis is: we’re too confident of our ability to survive changes, and are too inclined to make risky changes, or fail to invest is safety.

This might surprise some of you who misread Economics and Climatology? or On getting out more. In some senses, “economics” is the full-throttle never-mind-the-dangers end of the spectrum, though you could argue that, at least in theory, it builds in some caution. But, as usual, it isn’t the economics, its the politics that is the problem. Which inevitably comes round to “its the electorate that is the problem” as DA’s story nicely shows.

What I was thinking was that in the “Goode Olde Dayes” of grinding rural poverty on the land for 80% of the population, anyone or any region who got too carried away trying out exciting new ideas without a decent backstop stood a fair chance of starving to death when their new crop failed. We’ve pretty well lost that caution: few people think we’re in any danger of starving to death, and those who do are generally treated as wild-eyed wackos. I don’t think its particularly likely myself, at least not any time in the near future. The danger is more that we have an apparently resilient society, but perhaps it isn’t as resilient as we think. There is a finance analogue to this too, in that people have somehow come to believe that the Euro mess will have a happy ending, possibly if everyone keeps insisting that All Will Be Well. But it might not be.

But there is safety in diversity. The residents of Josephine County (pop: 83,000), in southwestern Oregon are safe (in the long term, as a bloc; possibly not in the short term as individuals). If their experiment goes horribly wrong they can leave, or the Feds will step in. And it will be an interesting experiment, for good or ill.

A Dear John Letter From The Heartland Institute's Joe Bast?

From BigCityLib comes this gem from Bast: Joe Bast’s Response to Scholars Feeling Pressure After Attacks on Heartland.

Since this is denial-world, everything is appropriately topsy-turvey. The “attacks” he is talking about are not plural but singular, and is the disastrous billboard campaign, which even Heartland has admitted was a mistake – though not very sincerely, and Bast clearly doesn’t agree; he is still defending them here.

Bast is writing to his pet scholars, and begins

For 28 years, The Heartland Institute has tried to stay “above the fray,” producing high-quality research and commentary and staying focused on the issues, even as the political dialogue became more and more polarized and corrosive. Almost alone among think tanks, we focus on communicating with people who do not already agree with us. We rely on research and reason, not rhetoric and emotion, and still do.

It is pretty hard to reconcile those claims about reason and research rather than rhetoric and emotion with the billboard campaign. Bast doesn’t even try to; he just says the billboards were “punching back”, errrm, i.e. using emotion and rhetoric. Never mind; his job depends on him being able to believe incompatible things.

There are also (in another fine display of rhetoric and emotion) a couple of paragraphs of attacks on Peter Gleick, then some ranting about the mainstream media, then the obligatory attack on Michael Mann.

It doesn’t look convincing to me. But Lindzen and Landsea [*] are still onboard (current URL here, webcited here in case that changes). Pielke is gone, though, so belated credit to him.

[*} See comments. BCL thinks this is Heartland’s fault, not Landsea’s. Looking again 6h after first posting, Landsea is now gone entirely.

On getting out more

No, not physically, alas. Though I did go to Oxford. This post is about people getting too stuck in their own comfort ghetto. Not me, obviously – plenty of people are attacking me :-).

This is thrown up by comments at my Economics and Climatology? post, though I’ve been thinking this for a while.

So, if you make the mistake of visiting the cess-pit that is WUWT, you’ll find a cloistered worldlet full of septics. Visitors with an interest in the truth (as opposed to the Truth) are welcome, but only as long as they can be shouted down or allow themselves to be sidetracked into the odd issues that interest that worldlet. Anyone who sticks to pointing out basic truths is made very uncomfortable, and if they’re too good at it, they get banned. Because its a walled garden, and the regulars really don’t want to be too disturbed, nor do the management (in fact in many ways its better thought of as a daily comic editon, there to confirm prejudices not provide new facts, but that’s quite another matter). The downside of that, though, is that they have a mindset and words that can’t survive contact with the real world. Try and discuss, perhaps, the Greenhouse effect and you’ll get nutters who don’t believe it exists at all, and who prove this by hand-waving about “the second law of thermodynamics”; the conversation degrades into irrelevancies. That’s the low end, but try and talk about really any aspect of climatology and you encounter yawning gaps of understanding. Another example is their common use of “CAGW” – this is “catastrophic anthropogenic global warming”, which we “warmistas” are all supposed to believe in. Apparently the IPCC believes it too. Its never really defined though, but that hardly matters, because they have no interest in discussing the details. Or talk about temperature trends, and they will confidently tell you that the temperature is going down. Present them with the obvious – a graph of the temperature, which is going up – and it doesn’t affect them in the least. Its the wrong temperature record. Or suddenly, they don’t believe the record at all. Or they want to look over a different period. But again, none of that matters to them – what they have in their heads is this idea – “temperature is going down”, or perhaps more accurately “all this climate science is wrong”. They “know” this, as a general principle; any individual isolated disproof just bounces off, and of course the form of debate makes going through the entire catalogue impossible. Another nice feature is that they have traditional posts which are “known” to demonstrate certain ideas. They’ve never read, or thought about, these posts, or they’d know they’re trash: all they done is read the headlines, seen they fit their worldview, and internalised them.

All these problems, which are so obvious to anyone from the outside, seem to go unnoticed by the inhabitants. Because they never see anything different.

Which brings me to the economics discussed on climate blogs, which is similar. Not (I hasten to add) to the same degree; and the people (of course) are all Nice rather than Nasty. But the same problems exist: people talking about things they don’t understand; people continually re-presenting memes that they’ve accepted but never challenged; woolly thinking; and just a lack of taking these ideas out into the real world and getting them challenged.

So – naming no names, but you know who you are – people might try to say “Ricardo has been disproved for the modern world!” apparently unaware that this makes as little sense as stating that 0.999.. != 1 in the modern world. Or arguing that economists, by building in concepts like “discount rate”,… limit our choices. Or conflating politics and economics. Or “JP Morgan just lost $2b” as though it dealt a body-blow to modern banking.

I could write more, but I suspect you get the point now, and don’t agree, so I won’t bother.

[Update: thank you for your various comments. Having read them, my opinions haven’t altered. There is too much wishful thinking, too much reliance of alternative sources as mainstream. The difference in language between those who know some economics and those who don’t is both obvious and painful.]

Refs

* Bringing the Denialist Faith to the next Generation

Economics and Climatology?

Reading P3 and mt I got stuck at

…economics makes grandiose claims to be the science of collective behavior, or even the science of collective happiness. Yet it dismisses any philosophically interesting aspects of these questions in favor of counting dollar-denominated transactions. Nevertheless, it claims for itself a unique position among the sciences, as the crux, the central weighing mechanism, for all public decision-making.

Leaving to the side, if I can for the moment, the “philosophically interesting” aspects I’m interested in the “central weighing mechanism” point.

It isn’t clear to me if mt is rejecting (a) the idea of having a weighing mechanism, or (b) the idea that economics is it?

I don’t think (b) is plausible – economics is, pretty well by definition, the weighing mechanism. Assuming you believe in one.

That leaves (a) (I think. Are there other options?). I think that’s a bad choice – the only alternative to a central mechanism is a decentralised mechanism, where everyone uses their own prejudices. Which is the bad bits of the current political mess (if you want an example of decision-making not based on economics, then try this or more generally). I think you want more economics, not less, but done properly.

Once upon a time I think I would have rejected (a), or perhaps I would have not got past my reservations over it. There are still immense problems with reducing everything to a common monetary unit (e.g. Stern is broken). But I now think that to refuse to accept (a) is just to stick your head under a blanket. These decisions and trade-offs will be made anyway; its impossible not to make them. So they should be made in the best way.

[Update: if you want an example of why doing things non-economically is a bad idea, try this].

Refs

* Carlyle and the Racist Origins of the Idea that Economics was “the Dismal Science”
* The crash wasn’t derivatives and it wasn’t big banks: as Spain shows
* Covered in Bees finds mt a bit hand-wavy too.

Counting animals: written in blood?

Interesting article from The Economist science section about establishing the presence of shy animals in rainforests by examining leech blood.

A highlight comes from one of my relatives:

They also found genetic material from the… small-toothed ferret-badger, which is (apparently) impossible to distinguish from the related Burmese ferret-badger without getting close enough to handle it.