David Foster

Nancy Pelosi and I Have Something in Common

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…both of us will benefit from increases in the price of Nvidia stock.

Paul Pelosi acquired 20,000 shares of NVDA (via a call option exercise) in June of this year.   I’ve been an NVDA shareholder for several years, and sold part of the position at prices considerably more favorable than today’s price of $178/share.

Given that the CHIPS act, which is intended to benefit the US semiconductor industry, is now before Congress, concerns have been raised about whether Paul Pelosi’s purchase might have been influenced by insider information related by his wife.

I note that Nvidia is not thrilled with the bill as currently drafted: it provides benefits for semiconductor manufacturing companies, and Nvidia is not a manufacturer…it is a   ‘fabless semiconductor company’, ie, a design, software, and marketing house.   The actual manufacturing is done by contract manufacturers, especially Taiwan Semiconductor Manufacturing Company.   Some market participants do,   however, have hopes that in the final version of the bill the subsides will be expanded to encompass chip-design companies.

The bill would include ‘guardrails’ to prohibit recipients of the subsidies from making investments to expand chip manufacturing capacity in countries of concern, namely China. There may be an exemption for countries-of-concern whether that chips being made are at >28nm notes, ie, a long way from high-end.   But one industry analyst said:

The guardrail doesn’t change that most of Intel’s or Texas Instruments’ test and packaging is done in China and will continue to be done in China. What use are new fabs for national security if they have to go to China for test and packaging anyways?

I think there are a couple of issues here.   First is the issue of Congresspeople potentially profiting from inside information.   The Pelosi buy does look very bad from this standpoint, especially when there are headlines associating Nancy Pelosi’s support for the CHIPS bill with increases in certain stocks–which include NVDA.   It’s quite possible that this particular transaction is an innocent one, given that the bill as it stands is not one that Nvidia would have preferred, and also that NVDA price is now low enough, in the context of recent history and the general excellence and positioning of the company, that one could develop an entirely reasonable ‘buy’ case without benefit of any inside information.   But the issue of officeholders profiting from inside information is a serious one, and becomes more serious with every further entwinement of government into the details of the economy.

But there is an even more important issue: Do we really want the level of investment in particular industries to be largely controlled by government?   It is true that the semiconductor industry is vital to the US economy and to US national defense…but this is true of a lot of other industries as well.   How about pharmaceuticals and their precursor materials, for example?…I seem to remember threats from Chinese sources to let American burn in the fire of Covid by withholding pharmaceuticals.   What about large transformers, which are vital to the electrical grid and take a long time to manufacture?   What about key minerals, many of which are in fact present in the United States but are mostly sourced from elsewhere because of legal and cultural hostility toward mining?   What about machine tools?

I have low confidence in the ability of Congress, or of government in general, to determine what industries and what specific segments of those industries are truly vital.   There are many complex interconnections which are not easily understood.   I remember that during the pandemic, GE Healthcare was asked to produce a large number of ventilators in an accelerated timeframe. It turned out that they were using a very small contractor…a 3D printing shop, IIRC…which had been shut down as ‘nonessential’.

I’d prefer to see legislative solutions which improve the US business climate for manufacturers in general and for ‘thing’ businesses in general, to the crafting of specific ‘solutions’ for specific industries.   Legislation should deal with the general case as much as possible, rather than functioning as a Reverse Bill of Attainder.   But developing such legislation requires ability to think in abstract terms, and is not a comfortable to politicians who think mainly in terms of interest groups to be used or placated.

Here is the text of the CHIPS bill.

There is also a proposed broader US competitiveness bill, the United States Innovation and Competition Act.

Here’s a WSJ Opinion piece on the CHIPS bill and its proposed galactic expansions.

And here’s Intel CEO Pat Gelsinger and Ford CEO Jim Farley arguing the case for semiconductor subsidization.

Thoughts?

 

 

 

 

 

Extremely Cool

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An animated explanation of how a mechanical watch works.

Starvation and Centralization

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It’s now well-known that the nation of Sri Lanka has been reduced to poverty, hunger, and chaos by top-down policies requiring organic farming and forbidding the use of artificial fertilizers.  Western ‘experts’ who encouraged them onto this path are nowhere to be seen, and some of their historical posts/tweets have been deleted.

I’m reminded of a passage in Arthur Koestler’s novel Darkness at Noon.  The protagonist, Rubashov, is an Old Bolshevik who has been arrested by the Stalinist regime, and the book represents his musings while awaiting trial and likely execution.

A short time ago, our leading agriculturalist, B., was shot with thirty of his collaborators because he maintained the opinion that nitrate artificial manure was superior to potash. No. 1 is all for potash; therefore B. and the thirty had to be liquidated as saboteurs. In a nationally centralized agriculture, the alternative of nitrate or potash is of enormous importance : it can decide the issue of the next war. If No. 1 was in the right, history will absolve him.  If he was wrong…

Note that phrase in a nationally centralized agriculture.  When things are centralized, decisions become overwhelmingly important. There will be strong pressure against allowing dissidents to ‘interfere with’ what has been determined to be the One Best Way.

Of course, it is theoretically possible for a maker of centralized decisions to decide that parallel and differing paths must be pursued.  This even sometimes happens in practice.  In the Manhattan Project to develop the atomic bomb, designs were developed for use of two different types of fissionables (Plutonium and U-235) and three or four different methods for the separation of Uranium isotopes were pursued.

But the multiple-paths approach rarely seems to happen in practice.  The kind of people who rise to become key decision-makers in government rarely possess a great depth of nuance, and they are greatly influenced by confirmation bias, motivate reasoning, and political marketing considerations.

And even the most brilliant and thoughtful individuals can be wrong in a big way.  Vannevar Bush, who was FDR’s science advisor during WWII, was an unquestionably brilliant and creative man who, along with his many other contributions, invented the mechanical analog computer and envisaged the concept of hypertext, long before the Internet and the World Wide Web.  Yet, regarding the prospect of intercontinental ballistic missiles, he wrote in 1945:

The people who have been writing these things that annoy me have been talking about a 3,000-mile, high-angle rocket, shot from one continent to another, carrying an atomic bomb, and so directed as to be a precise weapon, which would land exactly on a certain target, such as a city. I say, technically I don’t think anybody in the world knows how to do such a thing, and 1 feel confident it will not be done for a very long period of time to come. I wish the American public would leave that out of their thinking.

If Dr Bush had had complete control over American defense and aerospace research, it is likely that the US would have been much later in ICBM deployment than it in fact was.  We cannot know what the consequences of such lateness would have been, but it’s safe to say that they would not have been good.

And how likely is it that any significant number of our current experts in economics, social sciences, and various other sciences–and their political sponsors and makers of relevant decisions in various countries–are anywhere near as perceptive and forward thinking as Dr Bush was?…let alone more nearly infallible?

Want to bet your and your family’s food supply on it?

Screen Size and Depth of Dialogue

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Via Instapunit, here is an article about online motorcycle forums, which says that there used to be many of these but that they have been drying up and going away.   Why?

In January 2014, desktop internet use was overtaken by mobile internet use in America. This means screens got smaller, layouts moved primarily from horizontal to vertical, and physical keyboards were largely unavailable.

This means writing a longer post was more difficult. Formatting it to appear nicely with photos in line with the text became more difficult. Reading a post that was text-heavy became more onerous. As people drifted away from their desktop computers, they began to drift away from forums.

The post goes on to note that “social media sure is easy” and that many people tend to prefer getting information in social media form and “being served interesting things all the time with cross-pollination all in a one-stop dopamine hit. Do you love golf, Audi cars, retro-cafe motorcycles, and sushi? Social media can easily serve that up to you in a seemingly constant stream.”

and

You may be saying, “Hey, it’s easier to consume, but it’s a pain to create content on Insta or Facebook.” I’d agree with you. I’d also argue it’s going to be much harder to find great content in the future (if it even exists) because traditional social platforms like Twitter and Facebook are designed to deliver the latest content, not the deepest.

Also, these platforms seems specifically designed for distraction. If you’re trying to compose a reasonably long post on Facebook, you will likely be constantly interrupted by messages informing you that some person (who you may barely know or remember) liked or commented on some post that you did or commented on previously.

People do seem to like the Walled Gardens of social media, even though these gardens come complete with serpent.   The author of the linked article seems to feel that the eclipsing of forums by social media was inevitable, like the replacement of printed motorcycle magazines…and seems OK with it:

The forum, which was somewhat asynchronous and perhaps more demanding of users’ time, whether giving or receiving information, has been supplanted by a much faster mode of communication. Some quality of the exchange probably suffers, but the volume has probably increased by more than the quality of post content has slipped.

The issue here goes far beyond the motorcycle community.   Technologies, especially communications technologies, do affect thought processes and social interactions.   The runaway success of social media…especially as combined with the tendency for the phone to become the universal device…has discouraged connected thought and discussion in ways that cannot be good either for our political culture or for the ability of people who have grown up in this environment to do complicated work.

Thoughts?

Brian Deese — The Musical Tribute Continues

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I first heard of Brian Deese during the Obama administration, when he was appointed as one of the ‘Czars’ for the auto industry…and I was inspired to write this little song.   (with apologies to Gilbert & Sullivan)

I see that Mr Deese–now the Director of the National Economic Council–is much in the news lately, most recently for this interchange:

CNN: “What do you say to those families that say, ‘listen, we can’t afford to pay $4.85 a gallon for months, if not years?'”
BIDEN ADVISOR BRIAN DEESE: “This is about the future of the Liberal World Order and we have to stand firm.”

So, I saw no alternative other than to resort again to a musical form of expression.   Here, to be sung to the tune of “I’ve been working on the railroad”, is the next song in my continuing tribute to Mr. Deese:

I’ve been workin’ up at Blackrock
All the livelong day
Hung out there during the Trump years
Yeah, I really liked the pay!

Had to package those investments
Rise up so early in the morn
Hear the other partners shouting
‘Brian, blow our ESG horn’

Now I’m back here in the government
Washington, DC
Surely speaks well for Joe Biden
That he’s impressed with me

I explain that economic problems
Are surely not our fault at all
Whatever it may be the numbers say
Or those charts up on the wall

Someone’s in the kitchen with the data
Someone’s in the kitchen I know-o-0-0
Someone’s in the kitchen with data
Watching the inflation quickly grow

And singing
Fee-Fi-Fiddly-I-O
CPI and PPI up wo-wo-wo-wo
Fee-Fi-Fidly-I-O
Watching the inflation quickly grow

What you going to do about it, Brian?
What are you and Biden going to about it woo-woo-woo-woo
What you going to do about infla-tion
Seems like the folks are getting a clue

They’re singing
Fee-Fi-Fiddly-I-O
Can’t afford to drive or eat wo-wo-wo-wo
Can’t afford to pay our rent or mort-gage
Watching the inflation quickly grow

Need to polish up that narrative
Why there’s nothing we could do
Have to let the prices rocket up
Or the Liberal World Order is so screwed

We’re singing
Fee-Fi-Fiddly-I-O
Nothing we could do about it wo-wo-wo-wo
Fee-Fi-Fiddly-I-O
It’s best to let those energy prices grow