Disaster Housing: Solutions Conceived by the Hexayurt Project

Vinay Gupta of the Hexayurt Project has done much work in the area of emergency housing, something I have explored in some postings here at Bubbleconomics — see “MSF’s ‘Plug and Play Hospital’ in Haiti,” “Haiti Disaster: Housing for When the Bubble Pops,” and “Where will people live after the Big Bubble pops?

Gupta articulates the need for inexpensive, rapidly-deployable solutions for housing in emergencies in his article “Hexayurt Country.”

In an infographic called “Six Ways to Die,” he sketches out a map of the infrastructures that keep us all alive and illustrates how lives are threatened when those infrastructures fail or are disrupted.

Built around that “Six Ways to Die” framework is a presentation called “Dealing in Security: Understanding Vital Services and How They Keep You Safe.”

The Hexayurt is a sheltering solution made from flat panels that can be quickly and cheaply constructed but are much more durable than emergency tents. Here is a very useful video, “Ending Poverty With Open Hardware,” in which Gupta explains some important concepts about how to prevent loss of life using open technology.

AB — 23 January 2010

Haiti Disaster: Housing for When the Bubble Pops

Seeing the devastating effects on the lives of the people in Port au Prince, Haiti, in the wake of the recent earthquake emphasizes the potential value of emergency housing solutions for recovery.

In such a disaster, survivors are thrust into chaos and forced to live in unstable, unsanitary conditions, seeking out housing any way they can. It seems to me this suggests a need and opportunity for emergency housing solutions that can be quickly and massively deployed by governments or NGOs.

An article in Wired from October 2007 includes a gallery of interesting designs for such situations — see “Instant Housing and Designing for Disaster.”

Just having the housing technology, though, isn’t enough, as demonstrated by the difficulties of getting medical and food assistance to the people in Port au Prince. The problem isn’t necessarily getting relief resources in the first place, but in getting them implemented and distributed.

Deploying emergency housing for potentially hundreds of thousands of people would require a tremendous amount of advance expenditure and organizational infrastructure. So the solution that’s called for is more along the lines of an urban-planning project rather than just an architectural problem.

Suppose it were possible to manufacture in advance the components of a massive portable community that could be stored in advance and deployed rapidly anywhere in the world?

Just thinking out loud — see my previous article, “Where Will People Live After the Big Bubble Pops?

AB — 19 January 2010

How the Wall Street Boom Went Kablooey

Reading Barbara Ehrenreich’s new book Bright-Sided recently, I became aware of Michael Lewis’s November 2008 article for Portfolio, “The End of Wall Street’s Boom,” which offers a fascinating inside look at how bubbles develop, sustain themselves, and then collapse.

Lewis makes an interesting connection with the delusional “positive thinking” mode that seems to be an important component of economic bubbles. This is the source of Ehrenreich’s interest in what Lewis has to say.

The main character of Lewis’s story is Steve Eisman, who built a busines toward the end of the bubble short-selling mortgage originators and homebuilders riding the subprime boom, as well as Wall Street firms and even rating agencies that were complicit.

Lewis relates that Eisman said something both interesting and funny to Brad Hintz, a prominent financial analyst at a conference in spring of 2007. Eisman told Hintz that his group had just shorted Merrill Lynch. Hintz wanted to know why.

“We have a simple thesis,” Eisman explained. “There is going to be a calamity, and whenever there is a calamity, Merrill is there.” When it came time to bankrupt Orange County with bad advice, Merrill was there. When the internet went bust, Merrill was there. Way back in the 1980s, when the first bond trader was let off his leash and lost hundreds of millions of dollars, Merrill was there to take the hit. That was Eisman’s logic—the logic of Wall Street’s pecking order. Goldman Sachs was the big kid who ran the games in this neighborhood. Merrill Lynch was the little fat kid assigned the least pleasant roles, just happy to be a part of things. The game, as Eisman saw it, was Crack the Whip. He assumed Merrill Lynch had taken its assigned place at the end of the chain.

Lewis is a former Wall Street hack who wrote the 1989 expose Liar’s Poker about his experiences in the industry in the 1980s.

His 2008 article ends on a curiously touching note as he recounts his recent lunch meeting with John Gutfreund, the ex-CEO of Salomon Brothers who took the company public and then led it during its period of prominence in the 1980s.

In relating his meeting with Gutfreund, Lewis offers an interesting analysis of the shift that took place in the 1980s, led by figures such as Gutfreund:

You can’t really tell someone that you asked him to lunch to let him know that you don’t think of him as evil.

Nor can you tell him that you asked him to lunch because you thought that you could trace the biggest financial crisis in the history of the world back to a decision he had made. John Gutfreund did violence to the Wall Street social order—and got himself dubbed the King of Wall Street—when he turned Salomon Brothers from a private partnership into Wall Street’s first public corporation.

… From that moment … the Wall Street firm became a black box. The shareholders who financed the risks had no real understanding of what the risk takers were doing, and as the risk-taking grew ever more complex, their understanding diminished.

The moment Salomon Brothers demonstrated the potential gains to be had by the investment bank as public corporation, the psychological foundations of Wall Street shifted from trust to blind faith.

AB — 15 January 2010

‘The whole economy is a pyramid scheme’

That was a quote I picked up from the recently-posted trailer for a documentary called Collapse, which features the ideas of Michael Ruppert, an independent journalist who predicted the current financial crisis in his newsletter From the Wilderness. The movie opens in theaters Nov. 6, 2009.

From the trailer I picked up an interesting quote from Ruppert in the movie:

It’s not that Bernie Maddof was a pyramid scheme. The whole economy is a pyramid scheme.

The mortal blow to human industrialized civilization will happen when oil prices spike and nobody can afford to buy that oil, and everything will just shut down.

Watch the trailer here:

AB — 28 Oct. 2009

Do happy faces cause dumb investments?

Could an investor be prompted to make a more risky financial decision when exposed to positive, optimistic stimuli, such as a smile on the face of someone recommending or selling an investment?

That’s the implication of research by Julie L. Hall, a doctoral student in personality and social psychology in the Cognitive Science & Cognitive Neuroscience Program at the University of Michigan.

Hall and colleagues studied investment decisions made by 24 research subjects during a market simulation game. Some choices were high-risk and some were low-risk. Participants were shown pictures of happy, angry, or neutral faces before they carried out investment decison-making tasks.

Researchers also used fMRI (functional magnetic resonance imaging) during the tasks to see which areas of the brain “lit up” while participants were deciding which investments to follow.

Writing for New Scientist, Peter Aldhous describes how the game was set up (“Cheery Traders May Encourage Risk Taking,” April 7, 2009):

For every round of the game, the bond paid out $3. One of the stocks paid out $5 half of the time, while the other lost $5 at the same rate. At the start of the game, the players were told the rules but didn’t know which of the stocks was good and which was bad: that only emerged as the game unfolded. As with real-world investments, the good stock became bad at certain points during the game, and vice versa.

As Hall and colleagues anticipated, the positive stimuli caused increased activity in areas of the brain associated with anticipation of a reward and correlated with risky decision-making.

In introductory material to her March 23, 2009, presentation at the annual meeting of the Cognitive Neuroscience Society (“Put Your Money Where Your Heart Is: An fMRI Investigation of Affective Influences on Financial Investment Decisions,” Julie L. Hall, Richard Gonzalez, Oliver C. Schultheiss, Cognitive Neuroscience Society Annual Meeting Program 2009):

As predicted, participants showed greater NAcc activation and were more likely to make risky investment decisions after happy versus neutral face primes in both the subliminal and supraliminal presentation conditions. In addition, participants also showed greater anterior insula activation and made slightly less risky investment decisions after angry versus neutral face primes during supraliminal presentation conditions.

Hall concludes that

… facial expressions of emotion, even when they are not consciously perceived, can influence investment decisions and suggest that the inclusion of affect may lead to more accurate models of economic decision making, which better explain irrational financial behavior. They also suggest that affective states during pre-choice stages of the decision making process may alter the perception of benefits relative to costs, leading to changes in financial risk taking depending on whether the affective state is positive or negative.

Brian Knutson, a psychologist at Stanford University, has done similar research. He acknowledges, writes Aldhous, that “it is hard to determine the extent to which real financial markets are driven by similar emotional factors.”

However, Knutson has found that “the nucleus accumbens,” the brain area associated with risky investment decisions, “is activated when we are anticipating a reward.” For example, “showing men erotic pictures leads to similarly risky investment decisions.”

This fits with the Bubbleconomics proposition that infectious optimism contributes to economic bubbles and to the disastrous results.

Hall tells Adhous,

When risk-taking is a good thing, it’s good to be in a positive mood. When risk-taking is a bad thing, it’s not good.

AB — 7 April 2009

Defining terms in Bubbleconomics

I wanted to take a shot at defining some Bubbleconomics terms:

  • Bubbleconomics: The study and investigation of economic bubbles, their characteristics, their causes, and especially the hypothesis that the entire global economy is an economic bubble.
  • Economic bubble: An economic condition under which untoward optimism leads to an inflation of value of key commodities and assets.
  • The Big Bubble: The overall global economy viewed as an economic bubble, fueled by bubbling optimism and the assumptions that rapid growth is sustainable and an affluent lifestyle is feasible for many people.
  • Bubbling optimism: An overly optimistic attitude on the part of large numbers of economic stakeholders, leading to an economic bubble.
  • Bubble blindness: The inability of many stakeholders to recognize an economic bubble while it is taking place. Under the influence of bubble blindness, stakeholders maintain a “bubbling optimism,” invest more in the bubble, and thus make it worse. (See “Disaster myopia in the economy.”)
  • Personal bubble: The condition of an individual stakeholder (whether a major or minor player or simply a citizen/consumer) during an economic bubble, consisting of all of the forces and attitudes that keep the person immersed in the bubble and continuing to manifest personal behaviors that contribute to the expanded condition of the bubble. From the individual point of view, the stakeholder might be simply trying to maintain a reasonably comfortable and sustainable lifestyle.

 (All of these definitions need work!)

AB — 6 March 2009

Disaster myopia in the economy

In an article yesterday in the Financial Times“Error-laden machine,” John Plender in part blames a phenomenon called “disaster myopia.”

Plender defines disaster myopia as “the tendency to underestimate the probability of disastrous outcomes, especially for low frequency events last experienced in the distant past.”

This sounds like a good term to describe the reason people live next to volcanos or in Los Angeles, as well as the thinking of many 23-year-olds who brag, “Don’t preach to me. I’ve been driving this way all my life, and I haven’t had an accident yet!”

But according to Plender, it also explains investor behavior over the past several years:

The risk of falling victim to this syndrome was particularly acute in the recent period of unusual economic stability known as the “great moderation”. Investors were confronted by falling yields against a background of declining volatility in markets. Many concluded that a new era of low risk and high returns had dawned. Their response was to search for yield in riskier areas of the market and then try to enhance returns through leverage, or borrowings.

Equally popular were trading strategies such as carry trades, which involved borrowing at low interest rates and investing at higher rates, especially via the currency markets. Favourite trades included borrowing in Japanese yen to invest in Australia or New Zealand, and borrowing in Swiss francs to invest in Icelandic assets.

This was dangerous because the interest rate spread could be wiped out in short order by volatile currency movements. Yet because volatility remained low for so long, disaster myopia prevailed. Carry traders were lulled into a false sense of security, while more sceptical competitors joined in for fear of underperforming.

Plender says disaster myopia is a term used by academics, which got me curious. Along with other references, I found that disaster myopia is covered in Asset Price Bubbles, edited by William C. Hunter, George G. Kaufman, and Michael Pomerleano.

AB — 4 March 2009