Mark Cuban on High Frequency Trading

The Wall Street Journal interviewed the brazen Mavericks owner Mark Cuban about his thoughts on high-frequency trading. His response is gritty:

WSJ: What do you say to the argument that high-speed traders provide liquidity to markets and narrow spreads? The argument is that those benefits outweigh the negative side effects that you’re talking about. If the HFTs are pushed out of the market, they say, regular investors will wind up paying more to buy and sell stocks.

Mark Cuban: That’s a bogus argument. By definition they can’t go into an equity unless there already is liquidity. To say they’re adding liquidity is like saying spitting in a thunderstorm is adding liquidity.

As far as narrowing spreads, that’s absolutely true, but in absolute terms what does it translate into? For the individual investor it might save them a quarter a month. So what? Relative to the risk that’s the worst tradeoff in the history of tradeoffs

And the argument is horrible for another reason. If you’re an investor you shouldn’t care if the spread widened by a penny, nickel dime or quarter. If you’re anything but a trader the change is of no impact to whether or not the company will be successful and create returns for investors. In fact, that anyone even considers this a valid argument is a red flag that the exchanges are more interested in traders than investors.

WSJ: What’s the solution? There have been some calls for a transaction tax recently for instance.

Mark Cuban: Public companies need to figure out what business the exchanges are in. Is the market supposed to be a platform for companies to raise money for growth and to create liquidity and opportunity for shareholders as it has been in the past? Or is the stock market a laissez-faire platform that evolves however it evolves? The missing link in all the discussions is: What is the purpose of the stock market?

Good stuff.

Your E-Book Is Reading You

With the increased proliferation of e-books, publishers are using data analytics to determine what and how people are reading on their e-book devices. The Wall Street Journal provides some detail:

Barnes & Noble, which accounts for 25% to 30% of the e-book market through its Nook e-reader, has recently started studying customers’ digital reading behavior. Data collected from Nooks reveals, for example, how far readers get in particular books, how quickly they read and how readers of particular genres engage with books. Jim Hilt, the company’s vice president of e-books, says the company is starting to share their insights with publishers to help them create books that better hold people’s attention.

Some details on which books tend to get dropped by readers:

Barnes & Noble has determined, through analyzing Nook data, that nonfiction books tend to be read in fits and starts, while novels are generally read straight through, and that nonfiction books, particularly long ones, tend to get dropped earlier. Science-fiction, romance and crime-fiction fans often read more books more quickly than readers of literary fiction do, and finish most of the books they start. Readers of literary fiction quit books more often and tend skip around between books.

Those insights are already shaping the types of books that Barnes & Noble sells on its Nook. Mr. Hilt says that when the data showed that Nook readers routinely quit long works of nonfiction, the company began looking for ways to engage readers in nonfiction and long-form journalism. They decided to launch “Nook Snaps,” short works on topics ranging from weight loss and religion to the Occupy Wall Street movement.

Not very surprising, I suppose. I’d be interested in finding out what the criteria for a drop are: is it starting to read another book? No change in page numbers in a week? Longer?

Another thing to consider: giving readers what they want based on analytics can backfire. Imagine someone who’s read a longer book than they otherwise would have and their sense of accomplishment after finishing versus a publisher that tells authors to limit how and what they put on the page. As one astute publisher noted: “We’re not going to shorten War and Peace because someone didn’t finish it.”

Gorillas in Our Midst

In a famous psychology experiment, participants watching a video of people passing a basketball around while moving missed a remarkable sight: Midway through the video, someone wearing a gorilla suit strolls through the exercise, pauses to beat his chest, and moves on. Participants were asked with a cognitive task: counting the number of passes made by players wearing white shirts, and the focus on one activity induced a kind of blindness to the extraordinary visitor.

A new study shows that inattentional deafness exists, too. Forty-five people listened to a 3D, stereo recording, lasting just over a minute, of two men and two women independently discussing preparations for a party. Half the participants were instructed to listen closely to the men’s conversation, half to the women’s. Halfway through the recording, a man moves through the audio landscape saying “I’m a gorilla. I’m a gorilla,” before exiting. This lasts 19 seconds.

Afterward, when asked if they heard anything odd, 90% of the participants who were attending to the male voices mentioned the gorilla-man — but only 30% of the participants focusing on the female voices did.

All but one of 45 people in a control group—they were asked simply to listen to the tape—mentioned the gorilla interloper immediately.

As it happens, the path the gorilla took, in this experiment, took him closer to the men than to the women—so spatial proximity to the male voices played some role. To test how great that role was, the researchers did a second experiment in which the male gorilla-voice appeared nearer to those of the women. That reduced the effect but hardly eliminated it: 55% of listeners told to pay close attention to the female speakers failed to notice the person saying, “I’m a gorilla.”

Very interesting how we can be dismissive of visual and auditory cues when we shift our attention.

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(via Wall Street Journal)

Nora Ephron on Reading

Reading is everything. Reading makes me feel like I’ve accomplished something, learned something, become a better person. Reading makes me smarter. Reading gives me something to talk about later on. Reading is the unbelievably healthy way my attention deficit disorder medicates itself. Reading is escape, and the opposite of escape; it’s a way to make contact with reality after a day of making things up, and it’s a way of making contact with someone else’s imagination after a day that’s all too real. Reading is grist. Reading is bliss.

That’s Nora Ephron writing in I Feel Bad About My Neck: And Other Thoughts on Being a Woman. She died last night at the age of 71 in Manhattan.

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(via Brain Pickings)

Using Neural Networks, Finding Cats on the Internet

You’ve gotta love neural networks. Google certainly does, as scientists at the secretive Google X laboratory taught 16,000 computers to recognize cats:

The neural network taught itself to recognize cats, which is actually no frivolous activity. This week the researchers will present the results of their work at a conference in Edinburgh, Scotland. The Google scientists and programmers will note that while it is hardly news that the Internet is full of cat videos, the simulation nevertheless surprised them. It performed far better than any previous effort by roughly doubling its accuracy in recognizing objects in a challenging list of 20,000 distinct items.

The research is representative of a new generation of computer science that is exploiting the falling cost of computing and the availability of huge clusters of computers in giant data centers. It is leading to significant advances in areas as diverse as machine vision and perception, speech recognition and language translation.

Although some of the computer science ideas that the researchers are using are not new, the sheer scale of the software simulations is leading to learning systems that were not previously possible. And Google researchers are not alone in exploiting the techniques, which are referred to as “deep learning” models. Last year Microsoft scientists presented research showing that the techniques could be applied equally well to build computer systems to understand human speech.

Don’t miss the accompanying video in the article.

Our Underground Future?

Buried nuclear plants? Underground stadiums? The next great frontier will be underground, especially if the human population can’t find a way, above ground, to house the estimated 9.3 billion people by 2050:

The federal government has taken an interest, convening a panel of specialists under the banner of the National Academy of Engineering to produce a report, due out later this year, on the potential uses for America’s underground space, and in particular its importance in building sustainable cities. The long-term vision is one in which the surface of the earth is reserved for the things we want to see and be around—houses, schools, yards, parks—while all the other facilities that are needed to make a city run, from water treatment plants to data banks to freight systems, hum away underground.

Though the basic idea has existed for decades, new engineering techniques and an increasing interest in sustainable urban growth have created fresh momentum for what once seemed like a notion out of Jules Verne. And the world has witnessed some striking new achievements. The city of Almere, in the Netherlands, built an underground trash network that uses suction tubes to transport waste out of the city at 70 kilometers per hour, making garbage trucks unnecessary. In Malaysia, a sophisticated new underground highway tunnel doubles as a discharge tunnel for floodwater. In Germany, a former iron mine is being converted into a nuclear waste repository, while scientists around the world explore the possibility of building actual nuclear power plants underground.

Very interesting, but consider the criticism:

But even the most avid proponents of underground development agree that it’s unlikely that underground housing or even office space will become common any time soon—too many people feel unsafe, claustrophobic, or disoriented spending extended periods of time underground. Indeed, being in a confined space can be risky when something goes wrong. One study found that although traffic accidents are less frequent in tunnels than on open roads, the chances of being killed in such an accident are higher. Fire can also be particularly perilous when it breaks out underground—a 2003 arson incident in a Seoul metro station left almost 200 dead—which means it’s crucial to have in place powerful ventilation systems, well-defined emergency procedures, and a high degree of compartmentalization, to prevent the spread of smoke and flames.

As for the more psychological effects of underground life, engineers and designers are chipping away at the problem of how to make underground facilities feel less alienating. Working on the design of an underground research laboratory in South Dakota, where scientists would be spending long hours 8,000 feet under the earth’s surface, Craig Covil—a principal at the engineering firm Arup, who is also working on the LowLine—said he and his team considered imaginative design techniques involving air flow, acoustics, and light that would essentially “trick” people’s senses and reduce the discomfort they might otherwise feel.

Good read.

Hidden Tokyo

I don’t remember how I stumbled upon this five-year-old New York Times article profiling hidden Tokyo, but it’s a good one:

Tokyo, especially after dark, is notoriously hard to penetrate. With its winding mazelike streets, the city is a challenge for even seasoned taxi drivers. (Many bicyclists have GPS devices on their handlebars.) So imagine hunting down the restaurants, bars and clubs that are stashed away in patchwork alleys, nondescript apartment buildings, faceless office towers and basement stairwells illuminated by red bulbs.

Discreet, out-of-the-way bars have been a staple of Japanese culture for decades. Before World War II, Tokyo was filled with these pocket-sized dives — called nomiya (counter bars) — with space for just six or seven stools. Behind the counter was a proprietor, whose role was both confidant and caregiver to the regulars. When the city was rebuilt, however, most were bulldozed in favor of larger, glossier, more Westernized offerings.

Now a younger, postwar creative class is reviving nomiya culture — with a decidedly modern spin.

There’s a store called Not Found:

Not Found, an appointment-only clothing boutique that opened last winter, is among the latest to play this card. Wander down a main thoroughfare in Azabu Juban near Roppongi and you might stumble across it. From the sidewalk, it looks like just another concrete office building with a signless door. The rail-thin space, which carries only a few articles of precious clothing hanging behind thick-glass displays, was opened by the 33-year-old founder of a tech company as a sort of luxe closet for his closest friends.

“Imagine trying to find the words ‘Not Found’ on Google,” Ms. Fall said. “There’s about a million entries. It’s brilliant camouflage. Japanese are hobbyists and obsessives. They’ll trek to a little town so they can eat a certain type of asparagus or mushroom that’s only available a few days out of the year because that’s when it’s in season.”

Whenever I make my first trip to Tokyo, I’ll come back to this article.