On investment bankers

Management of risk is a valuable social function.  However, there must be risk to be managed, and

one must have insurable interest in the risk being managed. Also, banking and insurance can not be

co-mingled.

Investment banking performs a marketing function and also an insurance function. In the old days, the two

used to be separate and the companies did not always buy insurance from investment banks (many of us

remember subscriptions receivables). Nowadays, at least in the United States, the two come bundled,

just as IBM bundled hardware and software. And we all know what happened with lease accounting then.

Because the two are DISTINCT functions, it makes sense in financial disclosures for stockholders to know, for any issuance of stock, how much was paid for marketing and how much was paid to insure the issue sold.

As far as I know, Google was the only stock that was sold directly. They did make a mistake in estimating the

price at which the issue would be sold out.

In credit default swaps, the transfer of risk is legitimate, but calling it NOT insurance is not. Also permitting insurance-like contracts when insurable interest does not exist is gambling, pure and simple. 

Similarly, short sales of stock performs a socially beneficial function by providing liquidity, but naked short selling does not. Naked short selling is gambling, pure and simple.

Merely disseminating "fail to execute" orders is not enough.  It is like publishing a roster of gamblers in Las Vegas who failed to pay. In Las Vegas it would probably be easier to  find them in the obituary columns, making the roster superfluous.  But on Wall Street, on the other hand, gamblers who don't  pay can borrow from our government for almost free and pay themselves hefty bonuses.

Don't debtor's prisons, chain gangs, and a hat-less highway garbage detail in the middle of the summer day look an attractive payback  for these swindlers in suits? 

On rock musicians looking back.

Mick Jaeger didn't look back, but Brian May (lead guitarist of Queen) did. Long after the Queen boke up since Freddie Mercury's passing (Queen with Paul Rogers is non-queen, he is like Wayne Newton in a sombrero subbing for Mick Jaeger), Brian May went back to school, completed his PhD in Astrophysics (dissertation on Inter-planetary dust) at the Imperial College, and is currently the Chancellor of Liverpool John Moores University.

There have been others who did not look back, like drummer Roger Taylor (dentistry), bass guitarist John Deacon (engineering),..

A few years ago I went all the way back to Bombay for Rollingstones "forty licks" concert. He was then close to qualifying for social security in Britain, and yet could gallop around the large stage at Brabourne stadium like plucked chicken. Amazing.

On auto safety.

IIHS has set certain benchmarks for "Good" safety based on actuarial assumptions. I am pretty sure they were set based on further assumptions regarding accident probabilities among others.

Both Subaru and Mercedes meet it. Mercedes probably exceeds it a little bit at enormous cost. However, since Mercedes is bought usually by the well-heeled (or Wall Street bonus-mongers), the  higher profit margins for the premium brands jack up the prices still more. The whole thing is not so relevant because the demand for

products bought by the well-heeled is likely to be price-inelastic. I guess the not-so-well-heeled-safety-freaks go for Volvos or Saabs rather than Mercedes. The truly well-heeled, on the other hand would probably sneer at a Mercedes and go for Bentleys or Rolls Royce or a Bugatti (or Lamborghinis or Ferraris if younger).

Mercedes would probably be ashamed if they were required to disclose in their ads by how little they had reduced the probability of losses for the enormous increase in price.

I doubt the Mercedes crowd buys them because they are that safe.  They buy because they can flaunt their wealth at least in their neighbourhood (after all Mercedes ownership is a signal of wealth);  Veblen called it conspicuous consumption. My colleague and good  old friend Bill Danko (he coauthored a popular book "The Millionnaire  next door") was very proud to be the owner of a very old beat up used  Mercedes jalopy. Perhaps not that he could not afford a new one, just  that when he bought it he could not afford a new one. The point he was trying to make in his book was that ordinary people become rich if they are frugal; inheritance is not the only way up.

Free markets give us a wide choice all the way from Bugatti Royale Kellner coupe ($9 million +) to Kia (or should I say Yugo?) for a few thousands.  We all make choices based on our situation. But I doubt safety is the  first concern of the buyer of an expensive car. If safety were the prime factor, Hummer would still be alive.

On Auditing

Mere presence in audit market entails enormous fixed costs (to maintain competence and to cover liabilities). That being the case, I am not sure cutting back on clients is an option; cutting back would amount to digging one's own grave. In fact, the situation leads to a premium on size, which might explain the concentration of large firms in the audit profession and also the flight of smaller firms from auditing.

At some point, there is probably a flight from auditing, and the plausible  formal model might be that of catastrophe theory (a point of singularity at which firms switch out of auditing), or the models that were popular 

in the sixties and seventies in sociology to explain ":white flight" from urban areas in the US or in the US Army. However, I do not know of any such study. Perhaps the reason is the accountics fixation on regression:

such models do not lend themselves to regressions. And dynamic modeling has never been the strong suit of accountics.

Another possibility is the use of the kinds of actuarial-Game theoretic models that Karl Borch pioneered, but his untimely and premature passing deprived us all of his profound wisdom. 

In any case, "understanding" or "knowing" of the accounting phenomena has, to my  knowledge, has never been an objective of accountics research, which has been satisfied with mere  "explaining". That suits it because of its 

pretentions to a "scientific" attitude (Physics-envy).

On American and International Stusents

Having been a student from India once, I think this direct comparison between American and non-American (Indian, Chinese, Brazilian,...) students is patently unfair.

First, most international students have self-selected to be here, and  have assumed incredible risks monetarily to be in an alien environment. (I for one came to this country with the clothes on my back and a debt of a thousand dollars.) They realise that should they fail they  will have to ship back empty-handed to where ever they came from.  As Samuel Johnson once said, nothing concentrates a mind as the  immanence of one's hanging.  Failure, for these people,  is not an option.  For American students, on the other hand, failure can be an option. 

Because of this, international students are ripe for picking up the  Vince Lombardi philosophy.

Second, you can survive as a failure far more comfortably in the United States than you can as a success in many countries. This introduces one more issue. American students often lack the motivation to succeed

well. The differences between the two populations is probably related to motivation  more than anything else.

Third, it is usually only the cream of the crop elsewhere that comes to the  United States for studies. To compare the average American student with the  best from elsewhere is not fair, and does no one any good. When I compare the cream of the crop among American students and the international students, I do not find a great difference. It is foolish to opine on the quality of international students based on their presence during instructor's

office hours.

While I would agree that the international students are better motivated (they don't have a choice), my experience has been less dismal. I have found American students in general more ethical, better disposed to working in

groups (no shirking of individual responsibilities, better at accepting leadership,...). I have spent infinitely more time arguing with international students on grading, cheating, plagiarism, resolving issues of working in groups,

and the like. While some times this is due to cultural differences, usually it is due to blatant disregard for fairness towards fellow students and the lack of a moral compass.

I have found preparation for college of the bottom half of the American students to be abysmal. Having seem two of my children go through the public school systems here, this does not surprise me at all. I think my wife (and our parents) has been far more responsible for the  success of my  children's education that the schools. This is especially so for  studies in science and mathematics, without which critical thinking skills can not be honed.

On the other hand, I have found American students to be far more responsible, disciplined, and fair. They have a broader perspective on life well beyond Lombardi. They also tend to be innovative, and more prone to thinking out of the box.

Karl Pearson and Accounting Research

The great statistician Karl Pearson once took a bunch of skeletons, mixed up the bones randomly to recreate new skeletons. Then he asked anthropologists to tell whether the bones from these mixed-up skeletons were all from the  same persons; ie., that the bones had not been mixed up.

The anthropologists measured the length of the bones and the length of the skeletons they came from and based on the study of those ratios concluded that the mixed up skeletons had not indeed been mixed up.

From this rather bizzarre experiment (bless those skeletons whose identities had been stolen) led him to come up with the idea of  "spurious correlations". It has widely been known that that spurious correlations almost always exist when your variables in regressions are ratios.

The use of ratio variables is rampant in financial accounting so called "archival" research. I don't know if they have considered this aspect. If they have not, their results are probably spurious too.

On Physics envy in Accounting.

In the natural sciences, stripped of the details, most profound ideas can be explained to any one with a high school education. The objective of the  details in such sciences is to ensure the integrity of the statements, and the objective of the experimentation is to ensure the validity of the statements.

I can give two examples:

1.

The great American sociologist George Homans, a long ago, did profound work on  motivation and cohesion in human groups. You do not see a single mathematical symbol in most of his works. Yet the beauty of his generalisations is stunning. Herb Simon, in one of the articles in "Models of Man", derived the same generalisations by studying the stability of a dynamical system described by a system of   differential equations. The lack of mathematics in Homan's own work does not  make his contributions any less profound, and Simon's mathematicising of it  does not add much to what we already knew from Homans.  However, Simon's 

work enables us to rely on the veracity of Homan's conclusions without having to  depend on Homan's credibility as a social scientist.

2.

Arguably one of the greatest biologists of the 20th century, JBS Haldane wrote a very simple but profound book titled "On Being the Right Size", meant to be read by union workers in England with little education (nowadays many college students  probably would have as much problems appreciating it as the then union workers would have had with today's popular music). One sentence says it all (he is trying to describe that  size of an animal usually determines the anatomy):   "Insects, being so small,  do not have oxygen-carrying bloodstreams. What little oxygen their cells require  can be absorbed by simple diffusion of air through their bodies. But being larger 

means an animal must take on complicated oxygen pumping and distributing  systems to reach all the cells."

A modern systems biologist would explain the same with a mathematical model.

In accountics, it is not sure to me what the objectives are, but I suspect they are not the same as in the natural sciences. I think the main problem with accountics research is the pervasiveness of Physics envy. Giving the appearance of being a "science" is more important than  having the scientific spirit. That being the case, use of quantitative methods in general has assumed a theological orientation.

As I see it, the veracity of most accountics generalisations depend almost entirely on the credibility of the authors, and the "system" rather than the mathematisation or experimentation provides it. Since the assertions are rarely, if ever, questioned (the only questioning is by the referee gatekeepers with vested interest in perpetuating

their version of the "truth"), the whole enterprise  resembles a religion more than it does a "science".

The credibility of the entire accounting academia is at stake. We are to the accounting profession what Physicists are to engineering. Just as engineers not paying heed to physicists would indicate lack of relevance (and possibly coherence) of Physics, the accounting profession not paying heed to what ever it is we do is symptomatic of the lack of relevance (and possibly coherence) of what we research. It does no one service for us to pretend that what ever it is that we do is more profound than the rest of the world (particularly the profession) is willing to admit. It only signals our autistic tendencies.

On stock buybacks by IBM in 2009.

Earnings manipulation may not be at the top of the list of reasons for  IBM's stock  buy-back. Lack of investment  opportunities in the current market may be a good reason. 

Ever since IBM transformed itself from a manufacturing giant to a global "services"  company it has found itself flush with cash it did not know what to do with.

Thanks to the chinese, the returns on manufacturing have plummeted in the  US while relatively muted competition in the global services markets  (after all our competitive advantage is in human capital) has kept  the returns high.

The company alludes to this saying that  spending on technology is "stabilising".

As far as I know, trading in equity is a relatively recent phenomena in history and reflects the sophistication of markets. If the markets are dumb enough not to recognise the games that the companies play, we have no right to look for an earnings-terrorist behind every corporate move.

On university teaching.

In most professions, practitioners welcome "stress" of certain kinds on the job, and value the independence

that the job provides.

I, for example, left industry for the academia for the following reasons

1. 

I am the boss, no one tells me when to do my work and what to work on (except for the teaching).  I work on what ever is my passion. Not many professions can claim that (the only exceptions in industry that I can think of is working at Bell Labs, old Xerox-PARC, Bill Labs, IBM-Watson Labs,...)

2. 

Except for teaching/office hours, I can work from anywhere I want. Nowadays I don't even have to go to the library, it comes home to me

3.

I do not have a boss in the traditional sense (most faculty are self-reporting), hence the expression that

getting faculty together is like herding cats 

4. 

June, July, and August (also good part of december and january)

The above make for ideal life. Almost all the stress I have is self-imposed; the stress of the best kind; the challenging research problems we tackle.

As to software developers. Having taught software  development for many years, I know that most in this field

love stress of having to make things work when they don't. They don't look at debugging as a chore to be endured, but challenge to be met, just as you want to climb the  Everest because it is there. I have had some of my best students turn down promotions because accepting would put them

in desk jobs where they do not have such challenges.

In a sense, we teachers are all software developers, our msoftware is the mind of our students. Unfortunately, I find that many of us do not like debugging.

On Econometric and Statistical Research in Accounting

Statistical methods are not inherently faulty. But they can be, and  far too frequently are, misused. So, to turn your metaphor on its head, much accountics econometrics work is more like spraying manure in a perfumed room, or more like a skunk spraying in a perfumed room.

Statistical methods are used for classifying, associating, predicting, infering (causally as well as associatively), organising, and  learning.  It is important to always keep in mind in which context you are using  statistics. 

1. 

In the accountics stuff I am familiar with, determining association is the avowed objective, but the language subtly takes a predictive turn in discussions. The reason usually is the positivist dogma having to do with absence of causation in a naive positivist's lexicon.

I have been stunned by well known accounticians professing that we do not study causes because there are no statistical methods for causal inference. And to the last person, these folks have not heard of modern statistical tools for the study of causation in statistics. Ignorance is bliss in this wonderland. Social scientists, however, have used them for a long time. Theological commitments are dangerous for  ANY "science".

2.

Classification is the first step in learning. It is only VERY recently that accounting folks have started talking about the use of classification by use of clustering, support vector machines, neural nets, etc., but most of these discussions take place in non-mainstream contexts.

3.

Many of the techniques in 2 are nowadays considered part of the  field of machine learning, a hybrid between statistics and computing. I am sure one of these days, when they have become stale elsewhere, they'll be used in accounting. Mainstream accountics academics  are far too conservative to accept any statistical method unless they have been certified stale.

4.

Often, in conversations, accountics folks revert to counterfactual statements. That is natural in the sciences. Underlying such statements are usually causal inferences. It is in this context that I had made observation 1 above.

Building a better mousetrap is a legitimate objective   of sciences, and therefore predictive models are essential component of any science. Accountics' theological commitment to positivist dogma makes them schizophrenic in that they can not admit causality without jeopardising their philosophical suppositions and yet can not ignore it if they are to  maintain their credibility as scientists.

On the So-called Principles based Accounting Standards.

Having been a student of legal theory, I find this whole debate on principles-based v. rule-based standards quite

strange.

Pure Rule-based standards with no principles would be like a regime where we have lots of statutes but no constitution. On the other hand, pure principles-based standards would be like a regime where we have a constitution but no statutes.

Both principles and rules are needed for any normative system  to work. Principles are of necessity always conflicting, and therefore their application usually requires weighing/trade-offs; and principles provide a framework in which rules are evaluated. 

Application of rules, on the other hand, is usually an all-or-nothing proposition in that a rule either applies or does not in a specific situation.

Rues are interpreted IN THE CONTEXT of principles in order to provide a coherent conception of what the society considers fair.

These are basic things that legal theory teaches us. I think we accounting academics have our heads buried in the sand. Perhaps a reading of Ronald Dworkin's 'Taking Rights Seriously' or 'Law's Empire' would clear the air.

On Administration as a Career Path in the Universities.

Top administrative appointments at one time used to be rewards for life-long scholarly achievements. Now
it has become merely another career path.

When administrative positions are regarded rewards for lifetime scholarly achievement, the incumbents have a
short half-life and long-time tenure at the school implies loyalty. Therefore, decisions are taken for the long term good of the institution.

On the other hand, when administrative positions become an alternative career path to scholarship, the incumbents look upon the position as just a stepping stone to a higher position elsewhere. And the utility function demands making hay while the sun shines.

When university administration becomes a career path, greed for money and perks takes over.

Should we be surprised that the half-life of business school Deans is just a few years (4-5), and we have deans who are businessmen first and scholars last.

At Albany we had a strange situation some years ago when the dean candidate did NOT want tenure coming in. Obviously the guy looked at Albany as just a stepping stone. The school foolishly bought the idea, and he was soon gone. We felt like the hero in a Greek tragedy.

On the other hand I know of schools (I went to one) where the same person was the dean for  over 25 years and the school went from a mediocre school to a well-known one today during his tenure.

I know assistant professors who already are planning (I am tempted to say scheming) to be administrators,
and for them, obtaining tenure is merely a hurdle to be negotiated and not a recognition to be sought for scholarly work done.

Academia has made this possible by proliferating journals just to support such a "business model".

On Teaching Accounting in one's Native Tongue.

English has become the lingua franca of business as well as the scientific world whether we (non-native English speakers) like it or not.  English is only the fourth most spoken language in the world.  Mandarin, Hindi/Urdu, and Spanish are the top three. (I think this ranking is fake because most rankings include ALL languages spoken in China (including Tibetan and Uyghur) for Mandarin; Hindi/Urdu include all dialects (BrijBhasha, Khariboli, Maithili, Mumbaiya); Spanish includes Spanish-Spanish as well as that spoken in Latin America,... My hunch is that if these statistical concoctions are ignored, English might be the first or the second.

That being the case, inventing vocabulary in your non-English language just because you want to be different is, in my opinion, silly.  I remember growing up in India right after independence when inventing non-English  vocabulary for everything was politically correct. One can appreciate the silliness (and awkwardness) of invented transliterations  in Hindi such as hawai adda for airport (hawai is air, adda is a congregation of people, 

usually referring to shady people!; awkward but may be appropriate post 9/11),  dopahar ka khana for lunch (dopahar ka for afternoon's, khana for meal).  Most Indians I know use English words for these; I hear these strange concoctions only in announcements on airlines.

Once the technical words are borrowed from English, it really doesn't matter in what language accounting is taught.

What we should be concerned with is the wildly different meaning for the  same words in English. Inventories in the US are Stock in UK, and  stock in the US is share capital in the UK. Accounts receivables in the US are Sundry Debtors in the UK, and so on.

English has become the dominant language simply because it has been the most open language with no trace of nationalistic chauvinism. There are well over a dozen varieties of English but people can understand each other (except for pronunciations). And many refer to RP (Received pronunciation, that we call BBC English) 

nowadays as RIP. RP was considered so important in my childhood that my school hired an Indian teacher who had spent most of his life in England to teach us RP;  it didn't help. Even after having spent most of my adult life in the US, my English pronunciation is as if I just got off the boat.

And nowadays even grammatical correctness is not required :-))  In some sense English is to a PC as French (or any other language you fancy)  is to Apple Mac. Macs may be cute, but PC sells.   

I feel sad when immigrants in the US resist learning English.  And, English is my THIRD language and not the second.

On Books

I posted this a few months ago on AECM:

I have been visiting India the past three weeks. I carried with me two books to read: 1. Plutocrats by Chrystal Freeland and 2. Regenesis by George Church and Ed Regis. However be fore I could finish both I picked up a third (at a local bookstore), probably ONE OF the best books I have read in my life: "The Great Arc" by John Keay. I have put aside the other two books until I finish the Keay book.

It deals with one of the largest scientific expeditions of the 19th century, of survey measurement of the Indian sub-continent by William Lambton (the first Superintendent of the Great Trigonometrical Survey of India) and his successor Colonel George Everest (after whom Mt. Everest is named, its real name being 'Sagar mata' or 'mother of oceans' in Nepalese or Chomolungma in Tibetan, the mountain straddling Nepal and Tibet). William Lambton is buried at a place (Hinganghat) in central India  close to which I used to work 45 years ago.

I am posting this tidbit since much of the book deals with the discovery of Mt. Everest via survey measurements and the controversies surrounding them. I could very easily draw parallels between this and preparing measurements/disclosures in financial statements. It is a shame I had not come across this book a few decades ago, for I would have been a lot wiser.

I very strongly recommend this book, and if I ever teach a graduate accounting theory course I'll make it a highly recommended (almost required reading). I'll definitely include it in my doctoral seminar on Information Theory next fall (a course where we do deal with measurements with triangulation in Geographic Information systems).

On the last Mughal Emperor of India, Bahadur Shah Zafar

My favourite epithaph, by the last Mughal emperor, Bahadur Shah Zafar, written upon his exile to Burma by the British colonialists (in their East India Company incarnation)  after the First War of Indian Independence in 1857. You can find a talk on it by the wellknown Mughal historian William Dalrymple, at http://www.bl.uk/onlinegallery/whatson/downloads/files/zafar.mp3 

It is a pathetic lament of an emperor who can't find two yards of land to be buried in his own land. The translation below does grave injustice to the beauty of Urdu poetry, but is the best I could find.

The British buried him in the dark, near the Shwedagon pagoda in Rangoon, Burma (now Myanmar). Is it surprising that the Indian politician and ambassador to the United Nations, Krishna Menon, when told that the sun never set on the British empire, retorted, because God does not trust Englishmen in the dark.

Here it is:

Lagtaa nahin hai dil meraa ujday dayaar mein
kis ki bani hai aalam-e-naa_paayedaar mein
(My heart can't find peace, in this ruined land

Who has ever felt complete in this fleeting world)

kah do in hasraton se kahin aur jaa basein
itani jagah kahaan hai dil-e-daagdaar mein
(Tell these gentlemen, they should go live somewhere else

There is no space left for them in this broken heart)

umr-e-daraaz maang kar laaye they chaar din
do arzoo mein kaT gaye do intezaar mein
(I had asked for a long life, a life of four days. 

I got two spent in hoping, and two in waiting)

kitnaa hai bad_naseeb "Zafar" dafn key liye
do gaz zamin bhi na mili kuu-e-yaar mein
(How unfortunate is 'Zafar', that to be buried

He can't find two yards of land, in his beloved land)

___________________________________________

On Bayesian Statistics

The following quote from Judea Pearl is far more eloquent than I can ever be:

___________________________________________________

"I turned Bayesian in 1971, as soon as I began reading Savage’s monograph The Foundations of Statistical Inference [Savage, 1962]. The arguments were unassailable: (i) It is plain silly to ignore what we know, (ii) It is natural and useful to cast what we know in the language of probabilities, and (iii) If our subjective probabilities are erroneous, their impact will get washed out in due time, as the number of observations increases.

Thirty years later, I am still a devout Bayesian in the sense of (i), but I now doubt the wisdom of (ii) and I know that, in general, (iii) is false. Like most Bayesians, I believe that the knowledge we carry in our skulls, be its origin experience, schooling or hearsay, is an invaluable resource in all human activity, and that combining this knowledge with empirical data is the key to scientific enquiry and intelligent behavior. Thus, in this broad sense, I am a still Bayesian. However, in order to be combined with data, our knowledge must first be cast in some formal language, and what I have come to realize in the past ten years is that the language of probability is not suitable for the task; the bulk of human knowledge is organized around causal, not probabilistic relationships, and the grammar of probability calculus is insufficient for capturing those relationships. Specifically, the building blocks of our scientific and everyday knowledge are elementary facts such as “mud does not cause rain” and “symptoms do not cause disease” and those facts, strangely enough, cannot be expressed in the vocabulary of probability calculus. It is for this reason that I consider myself only a half-Bayesian."

From:  "Bayesianism and Causality, or, Why I am Only a Half-Bayesian"  by Judea Pearl, , In D. Corfield and J. Williamson (Eds.) Foundations of Bayesianism,  Applied Logic Series Volume 24, Kluwer Academic Publishers, the Netherlands, 19--36, 2001.

http://ftp.cs.ucla.edu/pub/stat_ser/r284-reprint.pdf

__________________________________________________________

Pearl has developed a coherent theory of causality that integrates Bayesian ideas with what he calls do-Calculus. All his papers can be accessed at http://bayes.cs.ucla.edu/csl_papers.html

2.

Philosophy and the practice of Bayesian statistics,
Andrew Gelman, Cosma Rohilla Shalizi

http://arxiv.org/abs/1006.3868

On Education and Passion

At my daughter's graduation a few years ago at University of California at San Diego the keynote speaker was one her professors, the noted neuro-scientist/behavioural neurologist V.S. Ramachandran (http://en.wikipedia.org/wiki/Vilayanur_S._Ramachandran). The speech was short, and the only point he made was the importance of one following his/her passions. I do not know if it made an impression on her, but one started freshman year as a molecular biologist she became a journalist.

One example of some one who blended passion with decent living is the developer of my favourite band, the Preservation Hall Jazz Band in New Orleans, the late Alan Jaffe. He graduated from the Wharton School, but his passion was the tuba (his father had been a tubist). See http://en.wikipedia.org/wiki/Allan_Jaffe

On Mathematics and Understanding

Since we are at this, I wanted to send the following just to illustrate the way Physicists think: You can use equations to your heart's content, but you must be able to explain them in terms your grandma can understand.

1. (Source: https://www.facebook.com/UniverslingsForScienceAndReason)

 

2.

E=mc² is wrong? - Sixty Symbols

http://www.youtube.com/watch?v=mkiCPMjpysc

On Sugar Substitutes

After trying all sorts of these sugar substitutes, I have at last switched to unprocessed (raw) honey. Must seem strange since I have been a severe diabetic for over 20 years. When the blood sugar is high, I either forego sweetness or occasionally use splenda which also I think is very bad.

You never know what these chemicals with fancy names do to you. If you knew, you wouldn't let then get close to you.  I have had problems with every one I have used. The worst was aspertame, which led to temporary loss of short term memory to such an extent that while lecturing to class I would have to stop mid-sentence since I would forget the first half of the sentence. Very embarrassing. That was years ago.

Processed sugar is the biggest culprit. How many of us know that formaldehyde (yes, the same thing used in embalming to kill microbes) is used in processing sugar (to get rid of microbes) and so is chlorine? I have heard of studies that show that incidence of diabetes and tooth decay are far less in sugar growing areas in the world because the people there chew sugar cane and have sugarcane juice and unprocessed molasses rather than sugar. When I was growing up, sugar was a rarity in the house. Always had unprocessed molasses or honey, even in coffee and tea.

In the US, I have found that rapadura sugar is the healthiest. It is basically evaporated sugarcane juice with NOTHING else in it. Don't fall for the ads for brown sugar, it is just white sugar spiked with molasses, and so is demerera or turbinado sugar.

On XBRL again!

I have a hypothesis why XBRL has not been as successful as it should have been. I have said that might be a possibility many times before, on AECM and at many conferences where many XBRL advocates, myself one of them, spoke.

When XBRL was designed, the initial taxonomies were based on the audit manuals of the big accounting firms. Accountants have a fetish for numbers, and therefore the taxonomy was far too numbers oriented, and had a lot less semantic data than what the users were demanding. The designers were looking through a rear-view mirror and not what was happening in the real world.

I had suggested over a decade ago that the taxonomies should be empirically derived, ie., based on a statistical analysis of the text in the standards, news reports, and footnotes. Unfortunately, I was not able to convince any one. I applied for funding many times (NCAIR, NSF, PWC, ...), but was denied. Ultimately, I wanted to do it on my own, but around 2005 I got stuck with administrative responsibilities as department chair and I had to put the project on a back burner. Then I moved on to Computing, discouraged that the possibility of research funding in accounting (other than navel-gazing)  was non-existent. I also was unable to convince my doctoral students that it is a great topic.

I remember watching the roundtable of SEC a few years ago when the CEOs, especially Nooyi  (Pepsi), flatly declared that they would not be interested in implementing the footnotes part of the taxonomies. One only has to look at the taxonomy to realise why not.

The analysts have a way of statistically analysing the numbers in financial statements to squeeze out of them the last ounce of information; you can not squeeze blood out of a turnip. On the other hand, analysts would love a way to extract information out of the footnotes. Studies have suggested that the accuracy of  fraud classification using the textual data in the footnotes and other non-numeric information may be superior.

It is tragic that XBRL chose to bark the wrong tree. Even now it is not too late, but if we choose to redo the taxonomies, it will be a major disruption. However, the world has moved on. Semantic web was just an idea those days, but is now close to reality. The same analysis I am suggesting can enable us to build empirically determined ontologies for accunting. And that will be an exciting development since it also facilitates communicating systems to operate with less human intervention.

On PPS (Probability Proportional to Size) sampling

I hate to throw cold water on this PPS sampling invention theory. The originator of PPS sampling was not Ken Stringer, also one of my heroes.

PPS was originally suggested by M.H. Hansen and W. N. Hurwitz in their work "On the Theory of Sampling from Finite Populations" in the Annals of Mathematical Statistics,  way back in 1943. They were also among the first to address the issue of non-response in sample surveys. They published the classic tome, two volume "Sample Survey Methods and Theory"  in the early 1950s. Hansen is considered the most influential statistician of the twentieth century in the area of sampling. Like in most sciences, names are generally forgotten. Hansen is best remembered by the Hansen-Hurwitz estimator for PPS sampling without replacement. By the time I was an undergraduate in the early sixties in Bombay, PPS sampling was a part of the lore of statistics (my undergraduate  text for sampling was the classic "Sampling theory of surveys with applications" by P.V. Sukhatme).

Hansen too was NOT a professor (he also never did his doctorate, a graduate of U of Wyoming). He worked for the US Census. He was the President of the prestigious Institute of Mathematical Statistics and also the President of the American Statistical Association. He also was the person responsible of introduction of computers in the US Census. For a biographical sketch at the National Academies Press seehttp://www.nap.edu/readingroom.php?book=biomems&page=mhansen.html 

I am pretty sure Stringer would have been aware of the Hansen-Hurwitz work.

On the US Postal Service

USPS has been one of the success stories in the public sector. It is playing the game with its hands tied behind its back, thanks to the government. That too during the financial crisis and the development of the internet and email communications.

It is the only agency in the US that MUST fund all its future retiree healthcare benefits WITHIN 10 YEARS FROM the enactment of the  Postal Accountability and Enhancement Act of 2006 (PAEA). Try convincing the congressmen that this rule also must apply to all private sector undertakings.  Watch if Walmart and other companies embrace the idea.

It also MUST provide service to the entire population of the country AT THE SAME RATES irrespective of where they live, unlike other private services.


And postal service has been a free-standing agency that does not get a penny from the US Government at least since 1980 or so. Try convincing the congress that this rule also must apply to the sleazy Banks and investment banks. Try telling the farmers in the Carolinas and Iowa that they are on their own; no support prices, no subsidies.

And I doubt they can raise the postal rates. For that they have to beg the same congress that would rather have them shut down even though it delivers their junk mail to all of us (let them send it by Fedex).

USPS precedes USA. It was established by the continental congress in 1775. And it is one of the few agencies that appears on the US Constitution (Postal clause, Article I, Section 8, Clause 7: "The Congress shall have Power To...establish Post Offices and post Roads....").

On Fair Trade

Having been brought up on coffee/cardamom/cocoa experimental plantations in India I have great sympathy for the Fair trade concept, and was a subscriber for years to Green Mountain Coffee at work.

I am not sure what the minimum economically viable plantation size in Latin America and Africa are, in India it is around 20+ acres. That being the case, most plantations are family or company owned where the labour, usually seasonal (except for a few), are the ones who may have to starve during the hiatus in non-season. I am not sure how exactly FT works, but I know that it assures a minimum price on the coffee. That probably is good for the family or company that owns the plantation, not necessarily the labour. It would probably have been more beneficial for the labour if Fair trade funneled the funds to directly benefit the labour (schools, hospitals, etc.)  rather than funnel it through the price paid to the plantation owners. 

I was in India during october/november and travelled extensively through the coffee growing area (especially Coorg, in my mind one of the places on earth closest to heaven, see http://en.wikipedia.org/wiki/Kodagu_district) where I saw small children walking in batches along the highway through forests for miles to go to school (the plantation families send their children to fancy boarding schools or have them chauffeured to the local schools). There are no health facilities except at the county seats, unless the plantation owner is a physician (many are) and provide help.

Cooperatives are an excellent idea, but I doubt they are that popular in coffee plantations. They have had much better luck in dairy farming in third world countries.