Tuesday, September 16, 2014

Two Sidelights on Short-Termism

I've often referred to the empirical work of Haldane & Davies and the theoretical work of Farmer and Geanakoplos, both of which suggest that investors using Discounted Cash Flow (DCF) to decide whether an investment now is justified by returns in the future are likely to undervalue the future. This is a big problem in areas, such as climate change and digital preservation, where the future is some way off.

Now Harvard's Greenwood & Shleifer, in a paper entitled Expectations of Returns and Expected Returns, reinforce this:
We analyze time-series of investor expectations of future stock market returns from six data sources between 1963 and 2011. The six measures of expectations are highly positively correlated with each other, as well as with past stock returns and with the level of the stock market. However, investor expectations are strongly negatively correlated with model-based expected returns.
They compare investors' beliefs about the future of the stock market as reported in various opinion surveys, with the outputs of various models used by economists to predict the future based on current information about stocks. They find that when these models, all enhancements to DCF of one kind or another, predict low performance investors expect high performance, and vice versa. If they have experienced poor recent performance and see a low market, they expect this to continue and are unwilling to invest. If they see good recent performance and a high market they expect this to continue. Their expected return from investment will be systematically too high, or in other words they will suffer from short-termism.

Yves Smith at Naked Capitalism has a post worth reading critiquing a Washington Post article entitled America’s top execs seem ready to give up on U.S. workers. It reports on a Harvard Business School survey of its graduates entitled An Economy Doing Half Its Job. Yves writes:
In the early 2000s, we heard regularly from contacts at McKinsey that their clients had become so short-sighted that it was virtually impossible to get investments of any sort approved, even ones that on paper were no-brainers. Why? Any investment still has an expense component, meaning some costs will be reported as expenses on the income statement, as opposed to capitalized on the balance sheet. Companies were so loath to do anything that might blemish their quarterly earnings that they’d shun even remarkably attractive projects out of an antipathy for even a short-term lowering of quarterly profits.
Note "Companies were so loath". The usually careful Yves falls into the common confusion between companies (institutions) and their managers (individuals). Managers evaluate investments not in terms of their longer-term return to the company, but in terms of their short-term effect on the stock price, and thus on their stock-based compensation. Its the IBGYBG (I'll Be Gone, You'll Be Gone) phenomenon, which amplifies the underlying problems of short-termism.

Tuesday, September 9, 2014

Tuesday, September 2, 2014

Interesting report on Digital Legal Deposit

Last month the International Publishers Association (IPA) put out an interesting report about the state of digital legal deposit for copyright purposes, with extended status reports from the national libraries of Germany, the Netherlands, the UK, France and Italy, and short reports from many other countries. The IPA's conclusions echo some themes I have mentioned before:
  • "It is clear that the more voluntary a digital legal deposit scheme is at the outset, the better."
  • "The best schemes are those where an emphasis has been put on publishers and librarians collaborating to address key concerns"
My reason for saying these things is based on experience. It shows that, no matter what the law says, if the publishers don't want you to collect their stuff, you will have a very hard time collecting it. On-line publishers need to have robust defenses against theft, which even national libraries would have difficulty overcoming without the publishers' cooperation.

The publishers' reason for saying these things is different. What are the publishers' "key concerns" on which voluntary collaboration is needed?
  • "copyright protection, digital security and monitored access"
  • "clear, mutually agreed and flexible rules on access which protect publishers' normal exploitation; who is authorized to use deposited material, where they can access it and what they can lawfully do with it."
In other words, they are happy to deposit their content only under conditions that make it almost useless, such as that it only be accessible to one reader at a time physically at the library, just like a paper book.

Given that the finances of many national libraries are in dire straits, the publishers have a helpful suggestion:
"Countries might usefully consider other models, such as larger publishers self-archiving material, agreeing to make it available on request to libraries."
Or, in other words, lets just forget the whole idea of legal deposit.

Note: everything in quotes is from the report, emphasis in the original.

Friday, August 22, 2014

"Cloud Storage Is Eating The World Alive" Really?

I'm naturally happy when someone cites my blog and uses my data, as Alex Teu did in his post Cloud Storage Is Eating The World Alive on TechCrunch. I'm less happy with the some of the conclusions Alex drew. Below the fold, I argue with him.

Thursday, August 21, 2014

Is This The Dawn of DAWN?

More than three years ago, Ian Adams, Ethan Miller and I were inspired by a 2009 paper FAWN: A Fast Array of Wimpy Nodes from David Andersen et al at C-MU. They showed how a fabric of nodes, each with a small amount of flash memory and a very low-power processor, could process key-value queries as fast as a network of beefy servers using two orders of magnitude less power.

We put forward a storage architecture called DAWN: Durable Array of Wimpy Nodes, similar hardware but optimized for long-term storage. Its advantages were small form factor, durability, and very low running costs. We argued that these would outweigh the price premium for flash over disk. Recent developments are starting to make us look prophetic - details below the fold.

Tuesday, August 19, 2014

TRAC Audit: Do-It-Yourself Demos

In my post TRAC Audit: Process I explained how we demonstrated the LOCKSS Polling and Repair Protocol to the auditors, and linked to the annotated logs we showed them. These demos have been included in the latest release of the LOCKSS software. Below the fold, and now in the documentation, are step-by-step instructions allowing you to replicate this demo.

Thursday, August 14, 2014

"National Hosting" of archives

The LOCKSS team are working with some countries to build in-country Private LOCKSS Networks (PLNs) to preserve the content such as e-journals and e-books that they pay for. Other countries are considering outsourcing their national archive of this content to foreign providers. One of the questions that countries ask about these efforts is "where is the data stored?" Recent developments in the US and the UK mean that this is no longer the right question to ask. Follow me below the fold to find out what the right question has become.