If I can get it together, this will be done by the weekend. Cheers!

And third, you will see at least one fantasti-magical example of lateral thinking (in part 7.

The setup: the adventurers have found themselves on a nether plane. They discovered a semi-docile hell-cow, wandering about, chewing on some volcanic rock. The hell-cow delivered them to the mouth of a castle, where they spend their time attacking the baddies. One of the characters (Mike Krahulik, who does the art behind Penny Arcade), sees a minion running away with a chest of jewels. He initially thinks about trying to cast a spell to control the beast. But then he does something very different. Instead of casting a control spell on the beast, he decides to cast a prestidigitation spell on the minion running away, making him appear to be volcanic rock, hell-cow’s favorite food.

The description doesn’t do it justice. Take a watch from about 7:44 to about 11:38.

I’ve been thinking a lot about the prestidigitation play, it connects with some of my interests in automated trading, algorithms, and data mining. With regard to financial markets, as Felix Salmon reports, we are living in an computer-driven, algorithm world (“We may be able to slow it down, but we can never contain, control, or comprehend it. It’s the machines’ market now; we just trade in it”). But it is more than this, I think. Data-driven analysis, the strategy manifestation of quantification, is a force to be reckoned with.

But data-driven analysis can also be stupid. That is to say, data-driven analysis – what Hans Peter Luhn dubbed “business intelligence” in 1958 – has become more intelligence in the ‘fact gathering’ sense than intelligence in the lateral thinking sense.

This sets the context for speaking about this post on business intelligence and human-centric analysis, but as my brain power is working at 35% nowadays, I’m separating this into a couple/few posts before I can make a point.

He thinks it’s possible that his huge appetite for work – for juggling a publishing company with philanthropy and writing – comes from a sense of how short life is. His parents were in their 50s when they died; his older sister, Beth, killed herself when she was 33. “Having lost people when they were young, you feel intimately acquainted with mortality, I guess. Though I procrastinate worse than anybody.” Writing is so hard. “I need eight hours to get maybe 20 minutes of work done. I had one of those yesterday: seven hours of self-loathing. I used to write in the middle of the night. I suppose I was surprised by the sedentary nature of writing: like, wow, most of this is sitting down and typing! So I used to add a bit of adventure by starting at midnight and working until five. That was excitement! But now I have two kids [he is married to the novelist Vendela Vida, with whom he wrote the screenplay for the Sam Mendes film, Away We Go; she also edits another of their projects, The Believer, a literary magazine]. So it’s bankers hours for me.”

At home, where he writes, he no longer has internet access. A four-month stint with wi-fi proved “deadly” for his productivity and having no access at all ensures that he is not tempted to “look at Kajagoogoo videos and old ads for Wrigley’s Spearmint Gum” on YouTube. “Writing is a deep-sea dive. You need hours just to get into it: down, down, down. If you’re called back to the surface every couple of minutes by an email, you can’t ever get back down. I have a great friend who became a Twitterer and he says he hasn’t written anything for a year.”

I’m in that distracted world now, but less because of technology and more because of a changed family situation. But still I like the imagery of a deep-sea dive. I have had the idea of a long-form article about the importance of creativity and lateral thinking in the emerging world of data-modeling and -mining. But every time I go to write it, I’m distracted by my RSS feed reader…

The second, more positive piece of the article comes a bit later, in talking about the 826 stores. We live down the block from the superhero supply shop (826 Brooklyn), and it’s pretty cool:

When Eggers and his team signed the lease at 826 Valencia Street in 2002, the landlord told them the building was zoned for retail; they could put their tutoring centre at the back but out front they would have to sell something. Eggers hit on the idea of pirate store. Not a kitschy place about pirates; a store for pirates. Every 826 now has a shop up front: they’re welcoming, the children love them and they raise funds (in Brooklyn, it’s a superhero supply store; in Boston, it’s a Bigfoot research centre).

I love the make lemonade element of this anecdote. The ability for some people to transform obstacles into opportunities is something I kind of suck at, but want to get better about. The turning of the tutor centers into a retail store with a secret tutoring back entrance makes my heart sing a little.

In New York City, these stores are Fairway Market, B&H Photo, Jack Rabbit Sports. Abt Electronics and Appliances, in Glenview, outside Chicago, is the same way. I swear, I’ve ordered a microwave from Abt while I lived in New York, because it was cheaper than buying one here.

What’s remarkable about these stores is that they are not super-high end or in industries where there is lots of Blue Ocean. Grocery, electronics, sporting goods, appliances. These are businesses competing with bigger stores, mom & pop stores, the internet. And they are better in every way. They are more knowledgeable, more appealing to shop in, more efficient, and price competitive.

I went to B&H to buy a camcorder, pre-Christmas, and here’s what you get: a slew of people enter the store, and they are directed to a specific area where your particular products are on display. Branching, and winnowing, until you are in front of a kiosk with dozens of camcorders. 5-6 experts are there, not to sell anything, but simply there to be experts and tell you about the various camcorders. Virtually no wait to speak to an expert.

Once you choose one, they send you to a desk around the edge of that area. There a salesman will help you with any additional peripherals you might want. So far, you haven’t held a box at all. Sometimes you might bring a camera bag or tripod to the desk, but mostly they just want the item number/description. Then, magically, a bin arrives under the desk with all of the things you’ve just ordered. Honestly, it’s like they have Oompa Loompa’s working there. You confirm your items, then the salesperson prints out a receipt.

Still carrying nothing, you go to a single line (yay, single lines!!), that branches out to 10 or so payment cashiers, to pay for your items. They give you a ticket, which you take to another single line (yay, single lines!!), branching out to another 10 desks. Where your order is magically waiting, wrapped up in a bag and ready to go. Seriously, their setup is out of control.

It’s so clear that the management of B&H has put orders of magnitude more thinking into their operations and user experience than any other electronics store in NYC. And despite what seems like a ton of employees, their prices are virtually always the cheapest or close to cheapest you can find. Period.

The other stores have similar stories, but not similar enough to say that it’s always about operations. Jack Rabbit Sports has a treadmill where you put on the shoes you are contemplating, and they analyze your gait. Fairway has the freshest and best vegetables without the astronomical Whole Foods mark-up. It’s sometimes about customer service (Zappos), sometimes about operations (B&H), sometimes about better suppliers (Fairway). But always different enough to make it hard to generalize.

And yet, this leaves the question, why are these stores able to constantly stand head and shoulders above their competitors? Is it just willingness to put in the work? Assumedly other stores are profit-seeky as well. What gives?

We were pre-qualified for a loan; with two professional incomes, good credit and enough cash for a 20 percent down payment, that would not be our problem. Yet two mortgage companies turned us down. The first did so after its investors – big banks with household names – rejected our application. The second mortgage company’s internal underwriters also rejected us. Their reasons were the same: The home, a customized modular house of internationally acclaimed design, built in 1989, is . . . round.

Being “unusual” or “unique,” it was deemed “not marketable.” Despite its evident worth and multiple independent appraisals, the lenders said they could not assign a value to the house because there were no comparable properties. And, with no “value,” there was insufficient collateral for a loan.

This is a kind of obvious example of how different qualities matter to different constituencies, but also that some interests are able to assert themselves a little bit more than others. If they can be believed, it was investors in two mortgage companies “big banks with household names” who turned their application down.

There is something banal here, of course. The models require data, and a small number of like houses make the risk too volatile. And when they say things like “The mortgage industry apparently only wants us to buy what everyone else has (or had),” it makes me think these two authors are kind of assholes who are deliberately taking potshots at what is an obviously more complicated issue than what “the mortgage industry” wants. Institutions are desperately seeking ways to manage their risks; in the face of massive criticisms over decades of old-fashioned, face-to-face treatment of clients, the industry moved to more formal risk models; the quantitative and data turn in finance meant that these models have more than a skosh of seemingly inflexible, rules-based tint to them.

What is interesting, however, is the inability for individual discretion to intervene. Though of course, I suspect that within hours/days/weeks of this article being written, the poor professionals were able to purchase their dream house, because of – what? – individual discretion. In the mortgage industry, for good and bad (and bad), evaluating individual level risk is hard, and in absence of the ability to sort through a client’s biography, instead the client is reduced to a case. And then the circular house becomes a problem.

I was initially a bit worried, since I went with a colleague in my department, whose expertise is not finance and whose grasp of the financial crisis was layman-fuzzy. But she understands a lot more about what happened. Don’t be put off because you don’t know your CDS’s from your CDO’s. It’s as clear as anything I’ve seen or read or heard about the crisis, including my favorite, the Giant Pool of Money (really, take an hour and go listen to that). The movie works on a lot of levels, and it is incredibly satisfying, for a number of reasons. Most importantly I think, the director (Charles Ferguson) treats the crisis a result of people doing stuff. It’s not just disembodied institutional actors. It is absurdly highly paid people perpetrating fraud and negligence; it is regulatory overseers failing not just failing to do their jobs but actually making many people’s lives worse in order to enrich a small number of finance folks; it is academics who max out on a clueless/self-importance 2×2 to a shocking degree.

That no one has been prosecuted is such an outrage. And because we’re usually treated to the usual high-rolling assholes getting the microscope (which they do get here, and how), I am glad to see that a number of financial economists in government and in the private sector also get served a good helping of scorn. If there is justice they will be remembered in history as amoral apologists and intellectual architects of a stupid and corrupt financial system. To have so much to say, and yet so little to say. I would be ashamed to be an economist working in finance. The entire discipline is tainted by these (possibly) few people. Frederic Mishkin’s moment comes when, after being asked a tough, non-fawning question about how to justify not disclosing his financial ties to entities who have a direct stake in his research, sneered “you’ve got three minutes…take your best shot.” Lawrence Summers comes off as a horrible, horrible person. So does Martin Feldstein. Columbia and Harvard Business schools, rather than taking up a defensive stance (which I predict they will do), should take this as an opportunity to do a little soul searching. To this smug little corner of the academic world, I honestly can only say: shame. Shame.

I’m also mostly devastated by how little economic sociology has to say here. I say this, knowing that Donald MacKenzie is coming to town pretty soon to talk about electronic trading and the financial crisis: a sociological perspective. The thing is, you know how you think the thing you’re studying is about one thing, but turns out to be not about that at all? That’s what is happening here. It’s not performativity, or embeddedness, or social movements, or cultural institutionalism. It might be a little about these things, but all around the edges. The financial crisis is about fraud, and greed, and a naked power grab. Economic sociology should pick up The Power Elite.

As you can see, the film has got me riled up. It’s not a perfect movie, but if the powers that be can please get it into more than two movie theaters, it would certainly be worth your time.

Also, yes, that’s right, I did both the yellow circle image and the tight-roping stick figure. And the tiling, I remember being so happy about the marble tiling.

Finally, there’s an end-of-year picnic in West Wilshire park. It’s on May 4, 1996. Please RSVP.