Gianluca Marcellino - appunti personali

Solid performance - first public one for this particular band. Looking forward to more practice, fun, covers and original features. 

Citazione

YouTube - 'ROUND MIDNIGHT - heart shaped box
  

Three key things are happening, I wrote.

The first is the so-called credit crisis – really a crisis in market-based assessment of credit risk.

The second: colonialism is over. Economic, too.

Here is the third: when the economy will exit this crisis, we will have adjusted to a different state, hopefully a more stable one, by most measures a “lower” one for most western economy citizens. The process will be different from a cyclic swing from boom to bust and back.

This statement is certainly the most speculative of the three, a projection of what is happening more than an interpretation. It stems quite naturally from the two previous statements.

What in the crisis of credit risk assessment mechanisms makes it so uniquely disruptive to drive a permanent adjustment rather than a contingent swing? It’s the fact that these mechanisms as have now collapsed evolved as an extension to finance of the communication-intensive and computation-intensive mechanisms that successfully enabled globalization of markets for tangible assets. These mechanisms have allowed markets for tangible assets to extract from the knowledge of individual market players a vast quantity of information that helped us all deal with the equally vast amount of uncertainty global markets must present to any one player, however resourceful.

Applying these effective mechanisms to the financial market, a meta-market if there ever was one, has implicitly driven us all to neglect the second order effects that theory and practice have long proven are specific to the financial market, and are the ultimate justification of its special regulation. When the assumption proved wrong that what had successfully managed uncertainty in markets could apply to the meta-market, we found we had lost our tools to assess risk, or rather had been lacking any for a long time.  

Can this assessment be a natural delusion caused by the fact I am observing the cycle from within, missing the cyclic component? Sure. What would prove we are still in a cyclic downturn? New tools for credit risk assessment in a global credit market including multilevel derivatives. Most importantly, evidence that these tools indeed can manage uncertainty as we thought the failed ones did. Until that happens, the world we will live in will need different financial regulation to cope with the newly discovered degree of uncertainty in the financial market.  The end net effect will be more difficult access to more scarce credit. For good.

A very similar reasoning applies to the end of colonialism: the imbalance of power that helped nimbler “western” economies outperform and exploit others has now been reduced significantly: We now see Japan in stagnation was really the first truly western economy to get there, rather than a truly non-western economy revealed by its failure to pursue western growth,

The most likely outcome is a truly multi-polar world, with western economies having to come to terms with the greater relative power other ones have acquired. The net effect will be a higher cost of international trust and safety (defence, negotiation) and most importantly forfeiting much of the western privilege the former unbalance allowed.

To undo this, and bring us back to a cyclic contingency situation, our western economies will need to come up with a new trick to sustain geographic power unbalance. Feels even less likely than new tools to assess credit risk in the global financial market.

Here’s why I think things have indeed changed for good.

Now for the good news. Our earlier ways have likely been so far from being sustainable that a chance to change them, however difficult, is bound to be welcome. That is indeed what makes this crisis, more than cyclic ones, too precious to waste.

Originally posted on http://gmindshare.spaces.live.com.

I have just had the privilege to celebrate with my wife our anniversary in Turin.

It’s so close to our home town – an easy daily commute, a convenient one-day trip allowing leisurely depart in the morning and touching a few bases across the town before heading back for dinner.

The two towns have had similar business and social evolutions for centuries, have been part of a same country for some 150 years, seamlessly connected their regions by rail in 1864. They have exchanged ideas, people, endeavours from car-making to book fairs daily since, well, ever.
Moreover, globalization has mercifully and wickedly wiped out cultural differences far broader than these across far longer distances.
Or has it?

So, just what makes a walk across the centre of one so different from daily acquaintance with the other? 

Granted, Turin was long a European capital city, if minor, and working hard to convey that perception. Milan has been – indeed, was – a bustling regional business hub with more economic clout nationally and in Europe than political.

That would explain differences in squares and boulevards, and could go some way towards accounting for different attitudes and approaches, just as French influence in one and Austrian in the other may.
Still, what about bars and cafés, and the apparent much higher number in Turin of older, smaller retail shops? What makes the university neighbourhoods so much more apparent in Turin than their correspondents in the centre of Milan, giving it the feeling of an university city like Bologna, Padua or Paris?

Looking forward to the opportunity of having similar experiences with friends from across the pond – who will soon be kindly returning the courtesy of visiting us.

How best to help them perceive small important differences among neighbouring towns?
How best to get their help in appreciating such differences?

Originally posted on http://gmindshare.spaces.live.com.

Sunday, a master and good friend offered friends and me the opportunity and pleasure to visit an exhibition in Padua about the current and future value of Galileo Galilei’s achievements.

The very following night, L’Aquila and the Abruzzo region in Italy were struck by a relatively strong earthquake, with relatively very high damages and casualties.
A very strong connection ties Galileo’s achievements to methods and politics to manage natural disasters.

Italy’s popular history has Galileo as pretty much the single-handed founder of modern science. The show does a good job of vindicating this and pointing to how Galileo’s original findings still are relevant to today’s science and the future.

Current consensus ascribes the severity of damages caused by earthquakes in Italy to lower than possible preparation especially in architecture.

The immediate aftermath of the event saw an online and media debate about “predictions” of the quake and quakes in general and how they were turned down as quack by the country’s general field safety (“protezione civile”) officer.

Both this lack of preparation and the online debate strongly connect to the exhibition’s messages. They bolster the exhibition’s point that Galileo’s original results are key to our modern, scientific view of the world and essential to address our future now.

Here are the reasons.

The exhibition highlights four revolutionary and future-relevant legacies of Galileo’s work:

1. Astronomy, revolutionized through courage to trust empirical observation: a telescope was an obviously unreliable tool showing things that “obviously” contradicted common, revered wisdom. Still, those observations compelled us – in the end – to change our world view with far-reaching practical, economical, philosophical and political impacts.
   Ever since, science has been about the courage to trash earlier wisdom based on careful scrutiny of evidence, however dubious and counterintuitive.
2. Dynamics: simple observations, smart quantitative modeling and a thought experiment demolished an understanding of motion that rested on both a thousand years of authoritative study and perceptions honed in millions years of primate evolution.
   Within this, the revolutionary experiment of different objects falling at the same speed in “vacuum”. As vacuum at the time was empirically impervious and theoretically debatable and challenged, this may have been the most innovative thought experiment ever.
3. Relativity: generalizing the result above into a world view that inherently challenges any and all philosophical absolutes – based on such obvious “facts” as objects in a ship that moves smoothly behaving as if it were static.
4. Materials science: first the basic intuition that deep quantitative reasons prevent scaling up designs sustainably – when the scale of a structure grows, weights and stresses grow with the cube of the scale. From this intuition, precious tools emerged to assess and estimate the quantity of material and size of pillars and braces required to sustain different structures.
   This was a key step in opening the way to taking guesswork out of the art of designing and building, ultimately allowing to build the notion, practice and mystique of engineering that all but defined modern western civilization before and after the industrial revolution.

The debate about earthquake prediction began as crowd-pleasing, sensation-seeking pseudoscience. Then, thanks to wiser popular science commentaries, a more constructive discussion about preparing for disasters.

The earthquake happened days after a scientist announced a method for “predicting” such events, and the head of public field safety (“protezione civile”) rebuked it as unreliable and unactionable pseudoscience.

When a (different) earthquake actually took place, the knee-jerk reaction was to regard the prediction as vindicated and challenge how it was managed.

The exhibition shows how Galileo’s revolutionary achievements are essential to criticizing similar approaches, and so still warrant daily rehearsal, popularization and application. 
Indeed, however tempting the conclusion may have felt, and however valid the earthquake prediction method may have been, a severe earthquake following a public prediction of something similar has nothing to do with scientific validation of a scientific prediction or method.

The prediction method and related scientific model of earthquakes may sometime be validated with appropriate application of scientific method – Galileo’s approach, ultimately. Still, regarding them as proven today and useful tomorrow based on the events is as sterile as it is delusive.

Far more important for the well being and happiness of our community is a thoughtful, rational application of statistical analysis and economical decision methods that are ultimately rooted in the same fundamental achievements by Galileo that the exhibition highlights. These methods can be used to support the political, social, economical, ethical and business case to direct significant community resources to preventing building failures and their consequences when earthquakes will happen. And happen they will, and well within the planning horizon of most voting citizens alive, dead or wounded in a quake-prone country like ours.

Thankfully, public debate has moved on to this, leaving behind the quarrel about authorities neglecting warnings from a scientist supposedly proven right.

May this help our country address natural disasters we know will occur, mitigate damages and reduce suffering in the future, sustain our happiness and prosperity. This will be the greatest relief to people living there and in similar regions, beyond immediate rescue.

Originally posted on http://gmindshare.spaces.live.com.

Three key things are happening, I wrote. The first is the so-called credit crisis – really a crisis in market-based assessment of credit risk.

Here is the second: colonialism is over. Now, in the economic sense, too. 

One of the driving factors supporting the development of capitalism centuries – long before industrial revolution in fact – has been the disparity between some communities with open access to market and some with none, limited or disfavoured access.
Take it as fact, ethical undertones aside; for example:

• prosperity of cities was built (also) leveraging relative strength of in-city consumers and value-added producers compared to out-of-the-walls agricultural producers
• prosperity of countries was built (also) leveraging a similar relation with other countries – colonies first, then competing countries having lost short- and long-term supremacy wars. The latter has included top economic and political global players, notably China, India, then Russia and a bunch of Eastern and Western Europe countries.
• prosperity of global economic organizations, including financial systems and enterprises, has been built also leveraging the disparity in economic strength across economies. This for example has – reasonably - driven savings from many economies to few more productive, stable and most importantly hosting efficient markets.

This is now over, for two complementary and related reasons:

1. The last and most important economies that were prepared or forced to accept a subordinate economic role are now able or forced to challenge that balance. Think BRIC, or oil producers. Or, the colonies are over.
2. The huge effectiveness advantage Western financial markets had sported has been challenged, possibly for good, by their (our) failure to assess credit risk in their (our) own economies. Or, the Western market supremacy is doubtful.

What will happen? We’ll see. Some obvious trends:

• cost of food is rising. The share of personal income to be devoted to feeding has decreased for centuries in the global market. This is likely over now that the last and largest food “colonies” are changing status. See a recent comment on The Economist.
• cost of defence is rising again. The number of top-rank countries (or nations, or other communities) that can afford defending themselves and consider challenging others is increasing from an amazing low (one or two or three) in the last few decades.
• cost of keeping social order is rising. Many generations have implicitly defined affluence or at least social comfort and peace as individual access to cheaper and cheaper food, then more and more goods and services beyond that. Many of those who now see that receding will – reasonably – look for a different social order or strive to preserve the existing one. Violence becomes a much more appealing option, at many levels. Authoritarian, xenophobic regimes are just one level.

Amazingly, each of these developments can – or rather may, with the greatest of luck – drive great improvements in the current status of things. For instance:

• cost of food – think water – rising again may nudge us towards a sustainable business and social model that keeps us alive within existing physical and biological limits of our ecosystem. The sooner the better.
• cost of defence rising again – think 9/11 and new economies reaching leadership in critical military technology plus economic clout to grow their weapon stocks – may nudge us towards reviewing and strengthening political mechanisms for conflict management. As complex in today’s world compared to the Cold War as the many-body celestial dynamics problem is compared to the two-bodies.

So, colonialism is over. At last.

Originally posted on http://gmindshare.spaces.live.com.

Two world wars, her country down the drain and back.

And the brains to see it back in trouble, and the steely politeness to do conversation, which requires more suitable subjects than politics.

And the brawn to drive a family of, what… 50, 60, 100? When you and your children and grandchildren have a few children, and early, you get to look at dozens of people across 4 generations.

Driving that family, that is quite another matter.

And driving she did. Till the end, in her way.

The stronger you are, the luckier you get. She felt lucky, I trust.

Three days ago.

From the initial “subprime crisis” on, challenges to financial institutions and their viability have been called a credit crisis.

Now that governments have stepped in to support financial institutions and their management – the archetipal fat cats – many look for a drastic review of the “market-state balance” and reining in the market. A simple enough reasoning: the market is needing us (our taxes monies) to help, so we are better and stronger than it is. Besides, we pay the pipers now, so let’s choose the tunes.

This assumes a crisis of the market as a mechanism to make financial business decisions – even business decisions altogether.
One simple question drives a completely different conclusion, with a very sobering answer.

What has happened in “the market”, starting from the financial market?

From what I see, everything is still there except for the assumption we know how risky credit is. For decades, banks and exchanges, working as a market, have been pricing lower and lower the risk of credit. Now their assumed effectiveness has been proven majestically wrong – at one topical time. As a result, the same banks and exchanges, now seen as businesses, and all other businesses, see their credit worthiness in question.

In this perspective, governments have stepped in as assumed credit worthy payers, or lenders of later resort. Being an assumed better payer is very different from being better at assessing risks, or making decisions. It is even farther away from being a stronger financial institution.

In fact, we all can remember when markets have been quicker, wiser, and mightier than governments at bets. One wrong bet does very little to change this, however majestically wrong. Markets will certainly be again better decision makers sometime in the future. Or, if one prefers, governments will certainly be worse decision makers.

Even more importantly, governments have proven poor payers, if seldom. Governments have failed as debtors, including those of “big” or “serious” countries.
This is the real risk to bear in mind and focus our citizens’ minds on as we watch our watchwomen and watchmen.

The conclusions appear to be: let’s

• keep apart markets as businesses (the financial services institutions) from markets as decision makers. When we own a financial institution, we own that business, while the decision making market still remains free and unreined
• keep using the tried and tested mechanism of independent authorities (national banks, commissions) to monitor the decision mechanisms (markets, especially financial) and tune rules as economy goes on
• keep using the tried and tested mechanism of markets (decision makers) to assess risks and make decisions, even financial decisions
• if anything, improve the meta-decision making mechanism of independent authorities so they can help markets adapt. Let them alone now at their job of fixing rules for financial markets, and keep watching governments that watch the.

Most importantly, let’s brace for when the political decision making systems of governments will be under as much stress as the financial strength of governments and the economical decision making systems of markets; that’s when democracy is at a test.

History shows we have failed that, too, and can easily do the same again.

Having commuted on public transportation for the best part of my life, I have often smiled at travelers building up in their minds their own stories about fellow travelers – and sometimes looked down at them.

Well, now that I have one, I thought I’d share it. Carefully keeping to facts as much as possible.

As public transportation folklore and stereotype would have it it, I have serendipitously stumbled upon this story due to a slight change in my daily routine: for utterly unrelated reasons I’ve happened to take a slightly earlier bus than usual for few days.

Here’s the facts: a person gets off at my same stop, greets and hugs another who has been waiting there. The second person appears to have some disadvantage or challenge the first is addressing. Oh, and one of them is a somewhat pretty young lady. I am sure this has played a role in my noticing the story in the first place.

My elaboration now: I like to suppose the two meet regularly, then move on to whatever they do together. I love to suppose this is about kindness, and support, and caring and sharing.

That’s as much as I wish to know – and to elaborate.

The lesson I’m drawing: the world must be teeming with great little stories few of us will ever even begin to see. Stories that keep it together and make it go round, I like to think. To have a chance to witness some, you need to get in touch with it. Busses, trains, public transportation give you that chance.

Broader economy lesson I like to draw: one of the externalities of private transportation has been cutting down on contacts with important strangers, relatively different from you: the whole category of fellow travelers.

Altri due giorni in un gruppo di lavoro ‘convocato spontaneamente’ con mezza dozzina di operatori che hanno ruoli diversi in organizzazioni diverse, tutte imprese private, e un docente e ricercatore universitario a tenerci insieme.

Il che è bello, e istruttivo, come scriveva un autore importante nelle biblioteche giovanili dei genitori. dei baby boomer in Italia.

Questo fine settimana ho avuto un’esperienza gradevole e positiva di collaborazione con ‘colleghi’ di formazione e retroterra molto diversi – per la verità soprattutto dal mio.

Siamo riusciti a chiarire sia punti di principio, sia punti molto concreti. Due generazioni, quattro discipline accademiche – per la verità la mia poco – cinque modi diversi di lavorare e soprattutto di coinvolgere gli altri.

Cinque persone di buona volontà che trovano un obiettivo comune compatibile con quelli di ciascuno.

I believe some features of the current economic situation are as important as they are implicit or forgotten in most daily discussions – or at least in those few I do follow.

I will spell out these features as best I can. I rely much more on my personal world view as built over a few decades than on study and analysis, or competence in business, economic and social studies.

Here is what I think is happening:

1. Crisis of the market-based approach to assess credit risk (the “credit crisis”)
2. End of colonialism (at the hands of the market-driven “globalization”)
3. Deep, long-term adjustment of the economy (the “downturn” and the “paradox of thrift”)

I shall articulate each separately.

• the breathtaking simplicity of this ancient music and somehow also of the underlying text
• the richness of the text, as concise and dense as Latin is when carefully crafted for education, so much more than today's Italian and comparable to the tersest English
• The setting, to the accompaniment to neighing horses, in a cascina which is indeed the latest evolution of the eminently catholic land management form St. Bernard of Clairvaux and his order brought to the Po river valley

Beyond this all, I do feel the most amazing is the message that these religious songs, addressing each moment of the roman catholic mass per the Ambrosian rite, are more than a piece of Milan's cultural heritage. Promoters, including Milan's town government, argue and recommend to continue using them daily in catholic mass ritual in the region. Bold, and challenging, both for the flavour of this ancient music and the arcane density of the foreign language, similar to Italian and still known to few.

1. he sure had the best band of the day accompanying him, and that still leaves him the jerk he is.
2. And the other way round: you can be the best session man in the evening, your job can still get you to have to play for obnoxious jerks. Think a whole tour with that kind of person.

Sobering - strengthens your character.