Broken Symmetry

Tech Transfer "Professional"?

I wish I could say that the author means the whole thing tongue in cheek, but he appears to actually mean it:

It is super easy to spot the overtly "bad" academic inventors: no funding, no data, surly disposition, body odor, etc. Even a brand new technology commercialization professional can spot these jokers their first week on the job.

The overtly bad inventor is also great because no one blames you for not working with him/her. Their chairperson things that he/she is a mediocre scientist --- a true "hiring mistake" --- and wishes they would go away. And, you don't have to worry about them complaining to the upper university administration because they hate the guy/gal too.

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Even though you won't have any creative control, you should protect their idea because (a) it is a good idea and (b) a technology commercialization person has never lost their job for patenting inventions from well-regarded faculty members who publish is great journals.

One could not fabricate a better piece of evidence that we are wrongly managing the disclosures, patenting, and marketing of university technology. Supreme Court, are you listening?

Mechanisms for Cultural Evolution

From Lesley Newson and Peter J. Richerson:

The basic cultural evolutionary mechanism is a “teaching bias” in the terms of Boyd and Richerson (1985). Most people normally espouse values, norms, and behaviors similar to those held by others in their community. Thus, younger people’s values, norms, and behaviors substantially refl ect those of the previous generation, and culture includes an inertial effect simply by consequence of people learning from each other. However, the same people when communicating with a close relative are slightly more likely to express variants of conventional norms that favor reproductive success, while those communicating with a friend, coworker, or other non-relative are slightly more likely to emphasize other goals. Newson et al. (2007) report role-play experiments that show this effect and also present a theoretical model that indicates how a decrease in the ratio of relatives to non-relatives in a social network can lead to the decline of norms favoring inclusive fi tness derived from the biased teaching effect. The rate of decline depends upon the strength of the teaching bias and on the ratio of kin to non-kin in social networks. But, even if the change in network structure is rapid and the teaching bias is quite strong, it is still likely to take several generations for a population to approximate a new equilibrium in norms related to reproduction.

Via @GarrettJones on Twitter. The paper is interesting throughout.

This Day in History: University Research and the Internet

From the Computer History Museum:

March 16, 1990

Internet Extends Beyond U.S. to Europe

The National Science Foundation announces it will extend its network with a high-speed data link to Europe. Five years earlier, the Internet in its modern form had started to develop rapidly thanks to the formation of the NSFNET, which linked five supercomputer centers in the United States. Later in 1990, Europe contributed to the growth of the Internet when CERN's Tim Berners-Lee developed HTML, the language used for the World Wide Web.

Has any technological development done more to change the world in the same period of time? Why do some folks seem to have forgotten how the Internet got started? There were lots of venture capital funds around in 1990. How many were ponying up to fund a transatlantic link between NSFNET and Europe?

FTC issues Report on the Patent System

From the FTC press release:

A new Federal Trade Commission report recommends improvements to two areas of patent law policies affecting how well a patent gives notice to the public of what technology is protected and remedies for patent infringement. The report, The Evolving IP Marketplace: Aligning Patent Notice and Remedies with Competition, emphasizes that the patent system and competition policy share the goal of promoting innovation that benefits consumers.

Available here. My letter comment posted here was cited in a few places in the report. In general, I like what I'm reading. I'm disappointed that the report wasn't issued sooner given the imminent passage of reform legislation. Kudos to the authors for completing such a formidable task.

The Future of Technology Transfer in the United States

-- hanging in the balance. From yesterday's transcript in Stanford v. Roche:

JUSTICE BREYER: My point is that it's somewhat remarkable because of this new statute, now that happens to only to inventions in those areas that are inventions of the contractor who, by the way, invents nothing. Human beings invent things, not entities like universities.

MR. FLEMING: That's quite so.

Based on the transcript, I am hopeful that the Supreme Court gets what is so important about this case. So much hangs in the balance.

For a good background on the case, see this note by Ronald Mann on the Scotusblog.

Pam Karlan taught me Constitutional Law at Stanford Law School. I spent an uncomfortable amount of time arguing with her in front of the class. I have the highest respect for her advocacy, but evenhandedness was not one of her strengths, at least when I took her class.

Symmetry and Entropy in Market Bubbles and Crashes

From Dion Harmon, Marcus A. M. de Aguiar, David D. Chinellato, Dan Braha, Irving R. Epstein, Yaneer Bar-Yam:

Predicting panic is of critical importance in many areas of human and animal behavior, notably in the context of economics. The recent financial crisis is a case in point. Panic may be due to a specific external threat, or self-generated nervousness. Here we show that the recent economic crisis and earlier large single-day panics were preceded by extended periods of high levels of market mimicry --- direct evidence of uncertainty and nervousness, and of the comparatively weak influence of external news. High levels of mimicry can be a quite general indicator of the potential for self-organized crises.

Via Physics arXiv blog.

What I like about this work is how at the conceptual level it fits with other theories of markets making phase transitions between high and low entropy states, with symmetries breaking as the transition begins and picks up steam.

There is a lot of talk about whether Quantitative Easing has done much. Folks like Scott Sumner seem to be arguing that it has not because market expectations were adjusted at the moment QE was announced (or quickly thereafer). I'm more skeptical about that claim because I imagine that it takes more than days or even weeks for organizations to propagate new information about prospective rates through their entire ranks, such that there remains an impedance mismatch between Fed signals and market reactions. But at an even more fundamental level, the market response to Fed signals does not appear to be linear within some regimes, including the one we live in now, which looks to me like a liquidity trap, albeit not homogeneously sticky for all industries and firms. (Consumer internet, in particular, seems to be attracting capital investment at an accelerated pace compared even with hardware and software solutions providers.)

When have undergraduates ever had more privileges than faculty?

From Tusher Rae at the Chronicle of Higher Education:

An iPhone app designed by a team of students for a contest at the University of Missouri at Columbia has helped lead the institution to rewrite its intellectual-property policies.

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Mr. Brown and his team, made up of fellow students Zhenhua Ma, Dan Wang, and Peng Zhuang, decided to stay in, despite their concerns. When they won the competition with an app called NearBuy, the students decided to contact the university to assert their ownership and to ask the university to waive any intent to assert ownership.

...

Michael F. Nichols, vice president for research and economic development for the Missouri system, led the initiative to rewrite the rules, and he found that his peers at other institutions had little advice on how to deal with student work.

Via AUTM Newsbrief.

Paul Samuelson the Investor

From Economic Principals:

It turns out that the great MIT economist was influential in the creation of one of the earliest and most influential hedge funds. Launched in 1970, Commodities Corp. blazed a trail of extremely high returns throughout the 1970s and early ’80s, before disappearing in various pieces into Bermuda mailboxes and Goldman Sachs. Many of its star traders – Bruce Kovner of Caxton and Paul Tudor Jones, chief among them—formed successful hedge funds of their own. Samuelson thus had a ringside seat at the birth of an influential industry that is still only poorly understood.

About the same time, he invested a substantial amount in shares of Warren Buffet’s Berkshire Hathaway Inc. It was in 1970, too, that he won the Nobel prize in economics, the second to be awarded. Long famous for the fortune that his pioneering textbook earned him after 1948, it turns out that Samuelson may have made more money as an investor than as an author. He was both smarter and richer than is generally understood: as an investor, a bigger winner, perhaps, than the more volatile John Maynard Keynes.

Via Tyler Cowen at MR. More evidence for the Paul-Samuelson-as-Isaac-Newton theory?

Remember MLK Jr.

Evidence of strategic periodicities in collective conflict dynamics

From Simon DeDeo, David C. Krakauer, and Jessica C. Flack:

We analyze the timescales of conflict decision-making in a primate society. We present evidence for multiple, periodic timescales associated with social decision-making and behavioral patterns. We demonstrate the existence of periodicities that are not directly coupled to environmental cycles or known ultraridian mechanisms. Among specific biological and socially-defined demographic classes, periodicities span timescales between hours and days, and many are not driven by exogenous or internal regularities. Our results indicate that they are instead driven by strategic responses to social interaction patterns. Analyses also reveal that a class of individuals, playing a critical functional role, policing, have a signature timescale on the order of one hour. We propose a classification of behavioral timescales analogous to those of the nervous system, with high-frequency, or alpha-scale, behavior occurring on hour-long scales, through to multi-hour, or beta-scale, behavior, and, finally gamma periodicities observed on a timescale of days.

Via Physics arXiv blog.

Tyler Cowen on Methodological Individualism

Over at MR, Tyler offers some thoughts and a wealth of interesting links on the subject.

Foucault understood how actual historical explanation relies on the use of broad categories, classes, and exemplars, and in a manner which is not logically reducible to statements about individual beliefs and desires. The writer (theorist) has nothing close to a complete mental model of how the interacting categories reduce to component individual parts, and so some or most of the moving parts of the explanation retain their autonomy at a partially macro level. The Austrians will kick and scream on this one, but if you combine imperfect information and the sense/reference distinction, methodological individualism ends up as more of a slogan than anything else. There is a reflective equilibrium to the explanatory process, and micro relies on some macro foundations, not just vice versa, and individuals rely on the social for some of their cues. Atomistic reduction to the level of the individual in general will not succeed.

For earlier posts on the horribles that result from methodological individualist theory in antitrust law, see here. Also note that Kenneth Arrow has expressed at least strong skepticism about methodological individualism. The picture that develops is of a feedback loop between individuals, groups, and the set of formal rules and procedures for encoding and transmitting them. We can't understand the behavior of the system with a myopic focus on any single part.

Facebook and Ennui

Rick Bookstaber gives an interesting take on the alternative trajectories of society and Facebook over the next few decades:

I am not going to enter the discussion of how secure Facebook's position is, or how much advertising it can generate. Insread, I am going to discuss the implications of Facebook for our individuality as we increasingly embrace Facebook and similar systems that replace real interaction with the virtual, and the implications of this world for the success of Facebook.

The basic point is that either the world changes and Facebook become marginalized, or Facebook continues [to] thrive and we live in a world of existential alienation. ...

Interestingly, Facebook wins relatively few friends in Japan. I wonder how Bookstaber would interpret this in view of his thesis.

Move Bankrupty-Remote Entities Back on the Balance Sheet?

Fascinating interview of Gary Gorton re: the gory details of the credit crisis in late 2008, which continues to present:

Securitization basically allows the traditional banks to finance their loans by selling them rather than holding them on balance sheet, and the source of value here is avoidance of bankruptcy costs. A firm that originates loans does so by lending money to any number of borrowers—both corporate and consumer—and it then selects a large portfolio of its loans to sell, in a very specific legal sense, to a “special purpose vehicle,” an entity it creates for that very precise reason. The main advantage of doing so—of establishing the SPV and legally selling the loans to it—is that this arrangement circumvents the costs associated with bankruptcy.

Via Alex Tabarrok at MR.

I understand why Gorton is in favor of innovation in revenue generation, and I even understand why he considers shadow banking an inevitable next step given the amount of institutional money moving around now. I even understand why there need to be bankruptcy remote entities -- there should be a spread of higher and lower-risk vehicles.

What I don't understand is how or why these special purpose vehicles get to stay off the balance sheet.

What Your Computer Does While You Wait

Great piece of educational blogging by Gustavo Duarte:

Normally when the CPU needs to touch the contents of a memory region they must either be in the L1/L2 caches already or be brought in from the main system memory. Here we see our first major hit, a massive ~250 cycles of latency that often leads to a stall, when the CPU has no work to do while it waits. To put this into perspective, reading from L1 cache is like grabbing a piece of paper from your desk (3 seconds), L2 cache is picking up a book from a nearby shelf (14 seconds), and main system memory is taking a 4-minute walk down the hall to buy a Twix bar.

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Sadly the southbridge hosts some truly sluggish performers, for even main memory is blazing fast compared to hard drives. Keeping with the office analogy, waiting for a hard drive seek is like leaving the building to roam the earth for one year and three months. This is why so many workloads are dominated by disk I/O and why database performance can drive off a cliff once the in-memory buffers are exhausted. It is also why plentiful RAM (for buffering) and fast hard drives are so important for overall system performance.

...

Finally, the diagram has various real-world throughputs for networking and other buses. Firewire is shown for reference but is not available natively in the Intel X48 chipset. It’s fun to think of the Internet as a computer bus. The latency to a fast website (say, google.com) is about 45ms, comparable to hard drive seek latency. In fact, while hard drives are 5 orders of magnitude removed from main memory, they’re in the same magnitude as the Internet. Residential bandwidth still lags behind that of sustained hard drive reads, but the ‘network is the computer’ in a pretty literal sense now. What happens when the Internet is faster than a hard drive?

High-Frequency Trading Fact of the Day

From an interesting paper on the flash crash by Easley, Mailoc Lopez de Prado, and O'Hara:

Since 2009 high-frequency trading firms, which represent approximately 2% of the nearly 20,000 trading firms operating in the U.S. markets, have accounted for over 73% of all U.S. equity trading volume.

Via Computational Legal Studies

Chicago Innovating in Technology Transfer

From the UChicagoTech blog:

One of the biggest challenges to early stage innovation is that it most needs experienced advice when it is least able to attract it, says Alan Thomas, director of UChicagoTech, the University of Chicago’s Office of Technology and Intellectual Property. “A structural problem in Chicago is that at this embryonic point there have been very few resources to turn to,” he says.

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Start-up ventures are more likely to thrive when advised by multiple mentors with proven skills and experience. “Collectively we are stewarding discoveries flowing from between a billion and a billion and half dollars per year of basic research,” Thomas says.

Thomas and his team have a more clear-eyed view of the landscape than some of the more established tech transfer offices. The potential weak points I see in the plan are (1) that mentors won't have enough skin in the game to do more than provide very early and general advice; and related: (2) adverse selection resulting from more experienced inventors and mentors never opting into the program. Both might be alleviated if they can get a handful of high-profile anchor tenants signed up immediately. Still, it looks promising, and I look forward to hearing more as the plan is implemented.

Are Biological Systems Poised at Criticality?

From Thierry Mora and William Bialek:

The first question is why biological systems should be nearly critical. What benets does operation at this special point in parameters pace provide for these systems? For birds, we have seen that criticality confers high susceptibility to external perturbations, and this enhanced reactivity endows them with a better defense mechanim against predators. Similarly, in the auditory system, being close to a bifurcation point allows for arbitrarily high gains and accurate frequency selectivity in response weak sounds.

In neural populations, the naive idea underlying the theory of branching processes makes criticality seem almost inevitable, a middle point between death and epilepsy. However, the function of neural networks is not only to be reactive, but also to carry and process complex information in a collective manner through its patterns of activity. The observation and analysis of metastable states, both in retinal acitivity analyzed within the maximum entropy framework [20] and in the activity of cortical slices analyzed with the theory of branching processes [79], suggest that criticality may be coupled to the explosion of these states, allowing for a wider set of coding options.

Via the Physics arXiv blog.

Fiber to the Neuron?

arXiv blog provides a great summary of exciting new lines of research into how human neurons communicate with light:

In recent years, a growing body of evidence shows that photons play an important role in the basic functioning of cells. Most of this evidence comes from turning the lights off and counting the number of photons that cells produce. It turns out, much to many people's surprise, that many cells, perhaps even most, emit light as they work.

For me this ranks among the most exciting new discoveries in biology. We have incredibly sophisticated tools for manipulating and measuring these signals. What is science-fiction today (see, for example, Avatar), could be reality in our lifetime. In part because of the severe capital costs and regulatory hurdles to implementing any of these new technologies, however, I suspect that patents will play a key role in their commercialization.

Fixed Points in the Publishing Industry

From an interview of Lonely Planet's Gus Balbontin on O'Reilly Radar:

The essence of what the print people have known for 500 years is still the same in the digital world: you still have to publish great content. Yes, the tone may change a little. Yes, the experience might be slightly different. But at the end of the day, the people creating the content are humans. The people consuming it are also humans. The same humans that consume print consume digital. It's not different.

...

In terms of the next 10 or 20 years, the essence of what publishers are doing won't change at all. This is what should make publishers feel comfortable about the future. The reason why you're there and the problems that you can solve for customers won't change. That's what you need to keep focusing on.

Henry Manne on the Limitations of Behavioral Economics

Here:

The problem in traditional economics style (I think “style” a more appropriate word here than “methodology”) is a general failure to keep separate that part of economic assumptions which pertains to individual behavior and that which properly pertains to aggregate behavior. About the latter, BE has very little to say (here I am talking exclusively abut microeconomics, as I am really not sure how much relevance BE, aka psychology, has to macro areas), and Alchian simply carries the day.

Part of a Truth on the Market Symposium on the same.

The Coase Theorem Does Not Apply to Multilateral Agreements

In The Problem of Social Cost (available here), Ronald Coase presented the case for what became his eponymous Theorem. In short, Coase argued that in the absence of transactions costs, parties would contract around default legal rules to achieve an economically efficient allocation of resources. As a result, in the absence of transactions costs, lawmakers should only need to ensure a clear definition of property rights and the enforcement of contracts, without worrying too much about who starts off with the property rights. The Coase Theorem has been on my mind a bit lately thanks, in part, to the Supreme Court grant of certiorari in the Stanford v. Roche case. If transactions costs could be ignored, then (according to Coase) none of the stakeholders in the tech transfer system should worry too much about a reallocation of ownership rights by the Supreme Court. An economically efficient bargain would always be reachable under a new allocation of rights -- assuming the transactions costs can be ignored.

But can they? Of course not. The uncertainty associated with tech transfer investments is often so great as to swamp the costs of negotiating these agreements. In this post, however, I want to abstract away from the specific economics of tech transfer, mortgage finance, corporate chartering, insurance, derivatives, or any other economically multilateral agreement in order to emphasize just how limited the Coase Theorem is in its general applicability to the analysis of large-scale social costs.

The Problem of Social Costs makes its case using a hypothetical example of a negotiation between a rancher and a farmer over who should have to pay for a fence and/or crop damage. That archetypical case comes in the first main section of the paper, titled "The Reciprocal Nature of the Problem." Coase's hypothetical is explicitly a bilateral agreement. Coase's emphasis of the "reciprocal" nature of the problem is implicitly bilateral in its symmetry.

So what? Consider the graph below, which compares how the transactions costs of bilateral contracts and the transactions costs of trilateral contracts add up as a population of parties increases. The calculation of both is based on the assumption that each party to an agreement (whether bilateral or trilateral) will pay the same fee for entering into an agreement. The calculation of both is made assuming every party in the population will enter into a single agreement with every unique combination of counter-parties. (In detail, these are total unique combinations of two and three picks from a population of n graphed as a function of n.) The graph shows how the relative difference in transactions costs diverges dramatically even for a population of 15 parties.

The difference is even more dramatic for a population of 100 parties.

What does this mean? At the very least it means that in policy debates about the allocation or reallocation of resources whose use involve three or more distinct economic interests (i.e., stakeholders), the Coase Theorem should not be invoked, or at the very least invoked only after everybody is satisfied that the transactions costs are completely overwhelmed by the economic benefits of a bargain.

But nearly every policy question involves more than two stakeholders. Even consumer transactions -- which seem like the quintessential bilateral agreement -- have indirect effects, compensated for through indemnifications and warranties. In other words, the Coase Theorem simply doesn't apply to any practical policy problem of interest.

At the same time, the Coase Theorem was very useful because it focusses our attention on transactions costs. In many cases, it may be easier to lower transactions costs than to decide how rights should be allocated. My point in this post is not to say that The Problem of Social Cost was fundamentally wrong, or even useless. Rather, I want to point out that we can usefully analyze transactions costs by breaking them out according to the number of parties necessary to an agreement.

This point gains strength as the number and variety of multilateral agreements increases. Nothing much at all seems to happen in our economy without getting buy-in from a host of stakeholders, either formally or informally. And the biggest economic issues of our day -- from Fed policy, to mortgage financing, to tech transfer models -- are all examples of vast, multilateral negotiations. Our world is no longer Coasean.

Positional goods present an especially interesting application of this analysis of transactions by number of parties. A positional good, by definition, is a good whose value depends both on the supply available and on the demand for the good by other consumers. Every transaction involving a positional good is at least a trilateral agreement, and arguably much more multilateral than that since the other consumer might not be based on the activity of a particular person, but rather on a general perception of the activity of an entire group of other consumers. The Coase Theorem simply doesn't apply to positional goods.

Square Cofounder an Omitted Coinventor of Patent Apps Owned by Wash. U. Professor?

Techcrunch reports:

In or about February 2009, Mr. McKelvey contacted his friend of 20 years, Mr. Robert Morley, Jr., to help build a prototype magnetic card reader that could be plugged into a cell phone input jack. Mr. Morley, a professor at Washington University, had previous experience working with magnetic card readers.

Over a period of several days, working in Mr. McKelvey’s glass studio and Mr. Morley’s laboratory at Washington University, Mr. McKelvey and Mr. Morley exchanged ideas regarding the design of the prototype card reader.

Square is one of the hottest startups in Silicon Valley, backed by Khosla Ventures GP (and former Facebook and YouTube CFO) Gideon Yu, and cofounded by Twitter cofounder Jack Dorsey. A recent hire was Keith Rabois, an early PayPal exec who had a successful exit at Slide most recently. Keith was also an IP litigator back in the day.

Based only on the allegations in the complaint, it looks to me like Square has a potentially viable claim for co-inventorship and co-ownership here. I got curious to see just how deep the rabbit goes by looking up to see whether Morley had any federal funding for his research at Wash U. His CV doesn't show any recent federal funding, which is lucky for him, since whatever he might get from Square in resolving this dispute could escheat to Wash. U. depending on how Stanford v. Roche gets decided.

Robert Martin on University-Industry Relations

From Inside Higher Ed:

Rather than a commercialization model to explain higher education’s woes, a better analogy is a political campaign, where the focus is to raise all the money you can and spend all the money you raise to create an image that may or may not accurately reflect reality. The conflict of values is between public relations expediency and the academy’s traditional regard for quiet substance. As faculty, we acquiesced in this takeover because it was in our financial interest to comply; more fund-raising meant more money for salaries and perks.

...

An individual faculty member’s ability to influence governance is dependent on his or her academic reputation and alternative employment opportunities. Established scholars have alternatives; they can vote with their feet. Established teachers have little opportunity to vote with their feet.

Very interesting and candid take. [This Robert Martin is of no relation. -MFM]

Networks of Economic Market Interdependence and Systemic Risk

by Dion Harmon, Blake Stacey, Yavni Bar-Yam, and Yaneer Bar-Yam:

The dynamic network of relationships among corporations underlies cascading economic failures including the current economic crisis, and can be inferred from correlations in market value fluctuations. We analyze the time dependence of the network of correlations to reveal the changing relationships among the financial, technology, and basic materials sectors with rising and falling markets and resource constraints. The financial sector links otherwise weakly coupled economic sectors, particularly during economic declines. Such links increase economic risk and the extent of cascading failures. Our results suggest that firewalls between financial services for different sectors would reduce systemic risk without hampering economic growth.

Via Brandon Keim at Wired.

Tim O'Reilly's Hymn for Open Government

A bit more poetic than usual, even for him:

There is a greater and greater gap between the systems used to manage complexity in the private sector and the same systems in the public sector. An average citizen carrying an iPhone has access to real-time "situational awareness" that outstrips military systems costing millions of dollars. From WalMart to Wall Street, from Google to the next generation of personal robotics, intelligent algorithms process massive amounts of data in real time, and respond automatically in close to real time. Meanwhile, government regulators too often rely on paper-based processes and reports that trail events by months, if not years.

...

The idea of building a platform, rather than building all of the end user applications yourself, turns out to be surprisingly relevant for government, allowing the private sector to build applications that the government might never have imagined, or been able to budget for if they did. As governments open their data and services to developers, we're seeing an explosion of innovation, and the development of new citizen services by the citizens themselves.