Leaked email from United Airlines CEO blames passenger for violent removal

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Oscar Munoz, the CEO of United Airlines, is doubling down on his support for United employees who had a doctor dragged off of a flight kicking and screaming.

In an email to employees obtained by CNBC –presumably from an employee who received the email — Munoz said he “deeply regret the situation arose,” but said he “emphatically stand[s] behind all” of the employees of the company, and added that he “want[ed] to commend” airline workers for “continuing to go above and beyond to ensure we fly right.”

CNBC’s Ryan Ruggiero tweeted screenshots of the letter, which included Munoz’s version of events, worded in a way that blamed the victim for the incident. In the minutes preceding the video of the event, which went viral on Monday morning, United Airlines workers asked for four passengers to volunteer to leave the plane and board another flight to make room for United staff members on the plane, as the airline overbooked the flight. When nobody volunteered to give up their seats, flight crew members randomly selected the 69-year-old man — who was a doctor on his way to see patients — to be removed.

“When we approached one of these passengers to explain apologetically that he was being denied boarding, he raised his voice and refused to comply with crew member instructions,” Munoz wrote in his email to employees. “He was approached a few more times after that in order to gain his compliance to come off the aircraft, and each time he refused and became more and more disruptive and belligerent.”

“Our agents were left with no choice but to call Chicago Aviation Security Officers to assist in removing the customer from the flight. He repeatedly declined to leave,” Munoz added. “Chicago Aviation Security Officers were unable to gain his cooperation and physically removed him from the flight as he continued to resist – running back onto the aircraft in defiance of both our crew and security officials.”

The man running back on the flight “in defiance” of United Airlines workers and Chicago Airport Police officers was also caught on camera, where the man, visibly upset, kept saying “just kill me” with a bloodied face:

While Munoz issued a boilerplate statement in response to the viral video of the man’s removal from the plane, notably absent from the statement was an apology to the paying customer who was roughed up at the behest of the airline he gave his money to. An initial statement from a company spokesman also lacked an apology to the customer.

“We followed the right procedures,” a corporate spokesman said shortly after the video started spreading on social media. “That plane had to depart.”

The officer who removed the passenger has since been placed on leave.

Read the letter below, initially made public by CNBC assignment editor Ryan Ruggiero:

 

Tom Cahill is a senior editor for the Resistance Report based in the Pacific Northwest. He specializes in coverage of political, economic, and environmental news. You can contact him via email at [email protected], or follow him on Facebook by clicking here.



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Kase Capital Short Wingstop Presentation

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Whitney Tilson's hedge fund firm Kase Capital has released a slide deck on its short position in Wingstop (WING).  This is Kase's largest short position.

He notes that while the company is growing rapidly, the stock's valuation is "absurd", trading at 52x trailing EPS and 29x trailing EBITDA.

Tilson points out that same store sales growth is decelerating and the company's gross margin has also declined significantly. 

Embedded below is Kase Capital's presentation on why they're short Wingstop:



You can download a .pdf copy here.



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Nami Corp.: $1.1 Billion Market Cap That Is Worth Zero

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Nami Corp. (OTCQB:NINK), previously known as Pack Fuerte, was founded in 2012 and is based in Las Vegas, Nevada. Up until late 2016, the company was looking for backers to fund a business plan to produce a locked compartment inside backpacks and general luggage. The company's latest business plan du jour is to acquire assets in the form of profitable companies throughout the Asian region. This is just vaporware, as the company has no money and just one manager with no relevant experience in acquiring assets or even running a company.

Mr. Ong Tee Keat has been Chairman, Chief Executive Officer, Secretary and Treasurer at Nami Corp. since December 2016. He served as Political Secretary to the then Housing and Local Government Minister, Datuk Lee Kim Sai, since 1986, and was a Member of the Parliament of Malaysia until 2013 (see here for more information). Prior to 1986, he was a mechanical engineer and wrote a column in a local Chinese newspaper. Mr. Keat may have been a credible political figure for most of his career, but his business experience is lacking, to say the least.

On October 31, 2016, Mr. Keat acquired 60.22% of the company's shares from Bunloet Sriphanorm, constituting his entire position. Mr. Sriphanorm was the former majority owner of Pack Fuerte, and he subsequently resigned. This was part of reverse takeover, where the surviving company was Nami Corp. On the same day, the company filed a Certificate of Amendment with the Nevada Secretary of State to: a) increase the Company's authorized number of shares of common stock from 200 million to 5 billion; and b) institute a 7-for-1 stock split of all issued and outstanding common shares. Subsequently, Mr. Keat owned 425.250 million shares, equating to 60.22% of the 706.125 million shares outstanding. As of a February 13, 2017, filing with OTCQB, Mr. Keat still owned 60.22% of the outstanding shares of Nami.

NINK shares opened on the OTC Pink Sheets on December 16, 2016, at $0.10 and closed at $0.12 on 4,000 shares. The stock skyrocketed on higher volumes to the $0.65-0.85 range in the ensuing weeks. NINK shares then went quiet for a few months on lower trading volume, before recently going parabolic again to close at a record high of $1.49 on Friday, March 31st.

NINK stock is currently valued at $1.052 billion, but is fundamentally worth zero. The company has no revenues and a last-reported loss of -$14k. It is delinquent in filing with the SEC, with the last filing being for the quarter ended August 2016. As of August 2016, cash was at zero and current liabilities amounted to $46k. There is no formal business plan, and only one manager without business experience.

This is purely a manipulated stock price and market value. The usual players are there. Knight (KCG Americas) is on the best bid (1.50) and ask (1.99). In a pure conflict of interest, Knight is also a lender in some of the stocks it makes a market in. So, a risk for investors is that Knight widens the bid-ask even more, and then may be able to increase the borrow rate, which is currently 14% per annum. Nami's securities lawyer (Booth, Udall Fuller / W. Scott Lawler) and auditor (AMC Auditing, LLC) work with a number of other questionable OTC stocks, many of which are delinquent in their SEC filings. But all are a fraction of Nami's valuation.

Currently, there is no shorting activity listed on these shares besides a small number of shares that Quan shorted last week.

If no substantial shorting pressure is put on these OTC bubble stocks, these stocks can linger at these extreme overvaluations for an extended period. Eventually, gravity brings these stocks down to earth.

Disclosure: I am/we are short NINK.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.



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Masters 2017: Look closely at Rickie Fowler's yardage book and the amount of detail is amazing

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AUGUSTA, Ga. -- The average golfer tends to keep things simple when standing over a shot. You might confirm that the hole is a par 4. Or if there's water down the left side, you'll want to know that. Once in a while, you might get super fancy trying to determine which side of the green you want to it.

The tour player speaks an altogether different language, as confirmed by this photo Golf Digest's Ben Walton took of Rickie Fowler and caddie Joe Skovron looking over their notes of Augusta National's fifth hole in their yardage book.

On the surface level, we know the fifth at Augusta is a 455-yard par 4 that climbs uphill and bends left, with two fairway bunkers on the left side. But zoom in on the picture and Fowler and Skovron have notes on various yardages from the landing area, as well as from different trees.

And they also have an understanding of even the slightest undulation on the fifth green.

Even for a feel player like Fowler, you can't escape a decent amount of math.


WATCH: GOLF DIGEST VIDEOS

Snoop Dogg Plays Golf in Augusta



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Apple admits the Mac Pro was a mess

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Apple hasn’t been paying much attention to its pro users lately, and the company finally seems to be owning up to it.

Speaking to a small gathering of news outlets yesterday, including BuzzFeed, TechCrunch, and Daring Fireball, Apple acknowledged that it had been a while since the company put a focus on pro desktops, announced minor spec updates to the existing Mac Pro, and said that a new Mac Pro model is in the works.

But perhaps most importantly, Apple admitted that its flashy 2013 Mac Pro redesign was a mistake, and executives indicated that Apple intends to better support its professional users in the future.

“Can't innovate anymore, my ass” has not aged well

“I think we designed ourselves into a bit of a thermal corner, if you will,” one of Apple’s top executives reportedly said.

The small, trash can-shaped Mac Pro — which Apple marketing VP Phil Schiller once touted as evidence that the company could still innovate — was designed to fit two smaller graphics chips, but the industry didn’t move in that direction.

“Being able to put larger single GPUs required a different system architecture and more thermal capacity than that system was designed to accommodate,” the exec is reported as saying. “So it became fairly difficult to adjust.”

That seems to explain why the Mac Pro, until today, went more than three years without spec refresh — an entirely unworkable situation for pro users who need top-of-the-line hardware.

Schiller told reporters that the Mac Pro’s thermal issues “restricted our ability to upgrade it” and that Apple is “sorry to disappoint customers who wanted that.”

While Apple clearly wants to focus on the future, the fact that it called together a small group of media to discuss the state of the Mac Pro — without having anything truly new to show just yet — is telling of what this meeting was really for: an apology, and an early attempt at restoring trust with Apple’s most demanding customers.

Pro users have felt rejected by Apple

Apple’s pro users have felt increasingly alienated and underserved. Apple hadn’t only ignored the Mac Pro for three years, it had barely mentioned the computer.

At the same time, Apple’s pro software has increasingly felt like an afterthought — with the widely maligned release of Final Cut X and the discontinuation of Aperture, it may as well have handed pro photo and video editors to Adobe. And the company’s only other recent Pro hardware release, the MacBook Pro, disappointed on power and expandability.

That’s what really brought pro users to a fever pitch. Toward the end of 2016, Apple started seeing complaints from even its most loyal defenders and skepticism from pro users that it would ever offer products for them again. (Its response, at the time, was to discount some dongles.)

Mac developer Michael Tsai has kept up an extensive and long-running list of complaints about the new MacBook Pros and the state of pro Macs, which includes more than three dozen updates since October. The complaints have been scathing: it isn’t just that people take issue with the MacBook Pro, its that pro users feel altogether rejected by Apple.

Ignoring pros was a mistake

Apple could have continued to ignore this — it’s rare that the company goes public with its plans for future products — but evidently, executives felt they couldn’t wait. That may be because there’s still no firm date for when Apple will have new hardware ready for pro users: “pro” iMacs are promised for later this year, but the redesigned Mac Pro isn’t getting released until next year or beyond. That’s another year to go without a Mac Pro update.

By going public with this information now, Apple can at least quell concerns that it’s decided to ignore the pro market entirely — something that seemed plausible enough. TechCrunch and Daring Fireball report Apple saying that the Mac Pro represents only a “single-digit percent” of total Mac sales. And given that Mac sales account for only 10 percent of Apple’s revenue as a whole, it’s hard to imagine the Mac Pro is a particularly profitable investment.

While it’ll take more than a single press junket and a few somewhat-apologetic quotes to really prove to pro users that Apple cares about them, today’s announcement could at least keep the company’s computers in the running for any user thinking about jumping ship during an upcoming upgrade.

Although pro users may be a minority of Apple’s buyers, Apple’s focus on pros is important for its consumer line, too. It isn’t even that innovations Apple develops higher up could work their way down the line later on — it’s that Apple needs pro users to give the Mac its reputation. It’s pro users who make Macs known as the go-to computers for creative work. And if Apple lets all those users go, PCs may start to pick up the mantle.



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How to Leverage Ugly Net Nets to Time the Market

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Investing in net nets was my bread and butter back in 2008-2010.

I call it the glory days.

Everything was so darn cheap, it was like taking candy from a baby. Not that I would know.

The glory days are long gone and I eagerly wait for the next.

I love net nets because they are easy to invest. It’s an objective approach to investing. You don’t have to think about a narrative or future earnings power. Barely have to do any complex valuation or what if analysis like what we do with EBIT multiples valuation.

Focus on strong balance sheets, low cash burn rates, somewhat decent management and trust that the sentiment will go from pessimistic to average. I listed 7 things to look at when analyzing a net net.

Then buy a basket of the “safest” and walk away.

The US net net arena has dried up like sour anchovies – but there are always net nets lurking around.

But what I want to cover here is to use net nets as a way of gauging market sentiment.

Note that I say sentiment and not market valuation. Market valuation is useful when used correctly, but rarely is.

On the other hand, sentiment is broader but helps you see the forest.

First, let’s put net nets into perspective.

The Net Net Report

Back in 1986, Henry R. Oppenheimer wrote a paper titled Ben Graham’s Net Current Asset Values: A Performance Update.

Excellent paper.

The paper studied the number of net nets that existed from 1970 to 1982 and its performance. The main objective of Oppenheimer was to see how NCAV stocks performed. To verify whether Ben Graham was telling the truth.

(Net Current Asset Value is defined as Total Current Assets minus Total Liabilities)

The stocks used for testing and performance were based on those that met the core Graham criteria of being priced below 2/3 of NCAV. NCAV is a very conservative measure even back then, today, it’s even more stringent.

Historical performance isn’t what I’m interested in because I know that NCAV stocks beat the market, but I have included it to provide a bigger picture.

What I do want to focus on is the number of net nets in any given year.

Time the Market like Ben Graham

Ben Graham’s Net Current Asset Values: A Performance Update

Performance as calculated by Oppenheimer | Enlarge

The performance table is hard to understand at a glance so here’s a better view.

A Better View of the Chart

Look at the NYSE and AMEX columns first.

Under the NYSE totals, 1973, 1974 and 1975 were clearly the cheapest years.

As I look at this table, a new revelation is that looking at the NYSE stocks makes for a better indicator of market conditions.

If larger stocks are suddenly becoming net nets and the number of such stocks are increasing, that’s a clear sign of market cheapness.

Despite the savage beat down of large retail stocks in Q1 of this year, such stocks don’t show up because their debt levels are too high. One of the reasons why I take fancy to net nets because tangible assets set the floor.

When it comes to smaller stocks, there are always going to be cheap OTC and small caps. But when the number of large cap net nets increase, it’s time to jump in.

The table isn’t obvious though. Under AMEX and OTC, from 1973 to 1979, it’s difficult to figure out which year was cheap or cheaper. The sum of NYSE and AMEX totals provide mixed results, making some years hard to figure out.

Here’s a better chart to get a sense of the number of net nets.

Total number of net nets with and without OTC stocks

For extra reference, here’s information of USA recessions between 1969 to 2009.

Compare the recession time periods with when the market was cheap according to Graham.

USA Recessions Between 1969 – 2009

The 1973 to 1975 market is the only one that syncs up with the Oppenheimer report.

What this shows is that a recession does not equate to a cheap market.

Sounds counter intuitive, but a recession doesn’t necessarily equate to a market crash. Markets are forward looking and resilient. The current bull market is a reminder of this.

For a market to be cheap, there has to be a stock market crash, and that’s what happened during 1973 – 1975.

The Vietnam war and 1973 oil crisis only heightened the severity.

Graham Created a Market Timing System Using Net Nets

Maybe I should credit Oppenheimer.

Seeing how the data ends at 1982 with Oppenheimer, what about today?

That’s what I wanted to figure out.

The results I showing you is not scientifically or systematically accurate as Oppenheimer. I’m eyeballing it here with standard data sets.

However, you should be able to see what I’m trying to prove.

I ran some numbers to calculate the number of true net nets (2/3 of NCAV) and net nets where the NCAV was greater than the market cap.

The number of nets nets in this table include all sectors – financials, miners and utilities which I normally exclude for investment reasons.

The pink rows are recessions. To make it quick and easy, the totals are taken at the beginning of each year.

Net Nets Per Year

Total Net Nets 1999 – start of 2017 | Recessions Highlighted Pink

When you put this all together, you get a graphical picture of when markets were cheap.

Net Nets Per Year

Indicator of Market Cheapness

The clear signal is that 2001 – 2003 and 2009 were the best years in the past 20 years to be buying hoarding.

It was also the scariest.

When I originally wrote this article many years back, I was able to break down stocks by the index. Unfortunately, no longer able to do that, so the two categories are either OTC or non OTC. Previously, what I saw was that there were literally zero stocks from the NYSE that met the 2/3 NCAV criteria, even during the cheapest years.

What this says is that the information and tech we are surrounded by helps the market to be more efficient and the inefficient areas cloud over small caps.

So the next best thing I came up with is to simply count the number of companies trading at less than NCAV.

Not 2/3 of NCAV, just < NCAV.

What is the Average Number of Net Nets in a Bull Market?

One of the reasons why I went through this in the first place was to answer somebody’s question: what is the number of net nets in a bull market?

As it turns out, this question is  irrelevant.

The average number doesn’t matter.

The key is to look for the total count in relation to the previous years. Because we are looking at sentiment and not market valuation, this is a relative process or a “comp” to previous years.

Starting 2017, this basic table shows that we aren’t in a horrible situation. Shiller ratio

Imagine this was 2009 all over again, panic is everywhere. From 2005 to 2008, the number of net nets were in the single digits. Now the number of net nets has doubled or tripled.

How Does it Compare With Other Market Valuations?

  • The Shiller P/E ratio is at 29 which is 74% higher than the historical mean of 16.7
  • Barrons says to use “extreme caution”
  • Market Cap to GDP says it’s extremely overvalued
  • US Cape and q chart says non-financial stocks are overvalued by 74%
  • you get the dire picture

On the other hand, the Graham Net Net Market model is saying that fundamentally, and not on a short term day to day basis, the markets are comparable to 2011 and the past 3 years.

Which one is right?

I don’t know.

But no economist has correctly predicted any recession or major event.

Warren Buffett: “US Stocks Not in Bubble Territory”

In Feb 2017, Buffett is on the record saying that stocks are not in a bubble. With all the AAPL shares he is buying, he is betting on a growing economy and America. Actually, he has said the same thing for decades.

Investors would be very sorry they didn’t buy stocks if the 10 year Treasury yield were to stay at around the current 2.3 percent for the next decade, Buffett said. “If interest rates were 7 or 8 percent, then these [stock] prices would look exceptionally high.”

Don’t bet against the US. The US market is very resilient.

In the following post, I’ll share a list of current net nets and how we find them at old school value.

This post was first published at old school value.
You can read the original blog post here How to Leverage Ugly Net Nets to Time the Market.



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The Spiritual, Reductionist Consciousness of Christof Koch

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Consciousness is a thriving industry. It’s not just the meditation retreats and ayahuasca shamans. Or the conferences with a heady mix of philosophers, quantum physicists, and Buddhist monks. Consciousness is a buzzing business in neuroscience labs and brain institutes. But it wasn’t always this way. Just a few decades ago, consciousness barely registered as a credible subject for science.

Perhaps no one did more to legitimize its study than Francis Crick, who launched a second career in neurobiology after cracking the genetic code. In the 1980s Crick found a brilliant collaborator in the young scientist Christof Koch. In some ways, they made an unlikely team. Crick, a legend in science, was an outspoken atheist, while Koch, 40 years younger, was a Catholic yearning for ultimate meaning. Together, they published a series of pioneering articles on the neural correlates of consciousness until Crick died in 2004.

WHAT’S THE BUZZ: Bees have all the complicated brain components that humans have, but in a smaller package. “So yes, I do believe if feels like something to be a honey bee,” Christof Koch says.Pixabay

Koch went on to a distinguished career at Caltech before joining the Allen Institute for Brain Science in Seattle. Today, as the president and chief scientific officer, he supervises several hundred scientists, engineers, and informatics experts trying to map the brain and figure out how our neural circuits process information. The Institute recently made news with the discovery of three giant neurons connecting many regions of the mouse brain, including one that wraps around the entire brain. The neurons extend from a set of cells known as the claustrum, which Crick and Koch maintained could act as a seat of consciousness.

Koch is one of the great thinkers about consciousness. He has a philosophical frame of mind and jumps readily from one big idea to the next. He can talk about the tough ethical decisions regarding brain-impaired patients and also zoom out to give a quick history of Christian thinking on the soul. In our conversation, he ranged over a number of far-out ideas—from panpsychism and runaway artificial intelligence to the consciousness of bees and even bacteria.


You’ve said you always loved dogs. Did growing up with a dog lead to your fascination with consciousness?

I’ve wondered about dogs since early childhood. I grew up in a devout Roman Catholic family, and I asked my father and then my priest, “Why don’t dogs go to heaven?” That never made sense to me. They’re like us in certain ways. They don’t talk, but they obviously have strong emotions of love and fear, hate and excitement, of happiness. Why couldn’t they be resurrected at the end of time?

Are scientific attitudes about animal consciousness simplistic?

The fact is, I don’t even know that you’re conscious. The only thing I know beyond any doubt—and this is one of the central insights of Western philosophy—is Cogito ergo sum. What Descartes meant is the only thing I’m absolutely sure of is my own consciousness. I assume you’re conscious because your behavior is similar to mine, and I could see your brain if I put you in an MRI scanner. When you have a patient who’s locked-in, who can’t talk to me, I have to infer it. The same with animals. I can see they’re afraid when it’s appropriate to be afraid, and they display all the behavioral traits of being afraid, including the release of hormones in their bloodstream. If you look at a piece of dog brain or mouse brain and compare that to a piece of human brain the same size, only an expert with a microscope can tell for sure that this is a dog brain or a human brain. You really have to be an expert neuroanatomist. 

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We share much of our evolutionary history with dogs and even dolphins. But what about lizards or ants? What about bacteria? Can they be conscious?

It becomes progressively more difficult. The brain of a bird or a lizard has a very different evolutionary history, so it becomes more difficult to assert without having a general theory. Ultimately, you need a theory that tells us which physical systems can be conscious. By the time you get to a worm, let alone to bacteria, you can believe that it feels like something to be a worm because that’s ultimately what consciousness is. If it feels like something to be a worm, then it’s conscious. Right now, most people believe it doesn’t feel like anything to be my iPhone. Yet it may well be true that it feels like something to be a bee. But it’s not easy to test that assertion in a scientific way.

What do you mean when you say “it feels like something?”

It feels like something to be you. I can’t describe it to you if you’re a zombie. If you were born blind, I can never describe what it means to see colors. You are simply unable to comprehend that. So it is with consciousness. It’s impossible to describe it unless you have it. And we have these states of consciousness unless we are deeply asleep or anesthetized or in a coma. In fact, it’s impossible not to be conscious of something. Even if you wake up discombobulated in a dark hotel room, you’re jet-lagged and your eyes are still closed, you are already there. Before there was just nothing, nada, rien. Then slowly some of your brain boots up and you realize, “Oh, I’m here. I’m in Beijing and I flew in last night.” The difference between nothing and something is a base-level consciousness.

Is this self-awareness?

It’s even much simpler. I might not even know who I am when I’m waking up. It takes time to boot up and realize who you are, where you are, what time of day it is. First, you open your eyes and just see darkness. Darkness is different from nothing. It’s not that I see darkness behind my head; I just don’t see at all. That’s what consciousness is. It’s a basic feeling.

We might be surrounded by consciousness everywhere and find it in places where we don’t expect.

You said bees could be conscious. They do amazing things, and yet they have tiny brains.

Yes, they do very complicated things. We know that individual bees can fly mazes. They can remember scents. They can return to a distant flower. In fact, they can communicate with each other, through a dance, about the location and quality of a distant food source. They have facial recognition and can recognize their beekeeper. Under normal conditions, they would never sting their beekeeper; it’s probably a combination of visual and olfactory cues.

Their brains contain roughly a million neurons. By comparison, our brains contain about 100 billion, so a hundred thousand times more. Yet the complexity of the bee’s brain is staggering, even though it’s smaller than a piece of quinoa. It’s roughly 10 times higher in terms of density than our cortex. They have all the complicated components that we have in our brains, but in a smaller package. So yes, I do believe it feels like something to be a honey bee. It probably feels very good to be dancing in the sunlight and to drink nectar and carry it back to their hive. I try not to kill bees or wasps or other insects anymore.

You’re talking about the consciousness of an individual bee—not the hive, which has another level of complexity.

I’m talking about the potential for sentience in individual bees. Would we exclude them because they can’t talk? Well, lots of people can’t talk. Babies can’t talk, impaired patients can’t talk. Because they don’t have a human brain? Well, that’s completely arbitrary. Yes, their evolution diverged from us 250 million years ago or so, but they share with us a lot of the basic metabolism and machinery of the brain. They have neurons, ionic channels, neurotransmitters, and dopamine just like we have.

So brain size is not the key factor in consciousness?

That’s entirely correct. In fact, there’s no principal reason to assume that brain size should be the be-all and end-all of consciousness.

We also know Neanderthals had bigger brains than the Homo sapiens who lived near them in Europe. Yet we survived and they didn’t.

Their brain was maybe 10 percent larger than our brain. We don’t know why we survived. Did we just outbreed them? Were we more aggressive? There’s some research showing that dogs play a role here. At the same time when Homo neanderthalensis became extinct—around 35,000 years ago—Homo sapiens domesticated the wolf and they became the two apex hunters. Homo sapiens and wolves/dogs started to collaborate. We became this ultra-efficient hunting cooperative because we now had the ability to be much more efficient at hunting down prey over long distances and exhausting them. So the creature with the larger brain didn’t survive and the one with the smaller brain did.

FATAL INTELLIGENCE: Given the probable existence of trillions of planets, why haven’t we detected life elsewhere? It’s likely, Christof Koch says, that sufficiently complex and intelligent life would destroy itself.NASA

Why were humans able to create civilizations that have transformed the planet?

We don’t have a precise answer. We have big brains and are, by some measure, the most intelligent species, at least in the short term. We’ll see whether we’ll actually survive in the long term, given our propensity for mass violence. And we’ve manipulated the planet to such an extent that we are now talking about entering a new geological age, the Anthropocene. But it’s unclear why whales or dolphins—some of which have bigger brains and more neurons in their cortex than we do—why they are not called smarter or more successful. Maybe because they have flippers and live in the ocean, which is a relatively static environment. With flippers, you’re unable to build sophisticated tools. Of course, human civilization is all about tools, whether it’s a little stone, an arrow, a bomb, or a computer.

So hands are crucial for their ability to manipulate tools.

You need not only a brain, but also hands that can manipulate the environment. Otherwise, you can think about the world but you can’t act upon it. That’s probably why this particular species of primate excelled and took over the planet.

There are fascinating questions about how deep consciousness goes. You’ve embraced the old philosophy of panpsychism. Isn’t this the idea that everything in nature has some degree of consciousness or mind?

Yes, there’s this ancient belief in panpsychism: “Pan” meaning “every,” “psyche” meaning “soul.” There are different versions of it depending on which philosophical or religious tradition you follow, but basically it meant that everything is ensouled. Now, I don’t believe that a stone is ensouled or a planet is ensouled. But if you take a more conceptual approach to consciousness, the evidence suggests there are many more systems that have consciousness—possibly all animals, all unicellular bacteria, and at some level maybe even individual cells that have an autonomous existence. We might be surrounded by consciousness everywhere and find it in places where we don’t expect it because our intuition says we’ll only see it in people and maybe monkeys and also dogs and cats. But we know our intuition is fallible, which is why we need science to tell us what the actual state of the universe is.

The Internet and runaway AI will not have our value system. It may not care at all about humans. Why should it?

Most scientists would dismiss panpsychism as ancient mythology. Why does this idea resonate for you?

It’s terribly elegant in its simplicity. You don’t say consciousness only exists if you have more than 42 neurons or 2 billion neurons or whatever. Instead, the system is conscious if there’s a certain type of complexity. And we live in a universe where certain systems have consciousness. It’s inherent in the design of the universe. Why is that so? I don’t know. Why does the universe follow the laws of quantum mechanics? I don’t know. Can I imagine a universe where the laws of quantum mechanics don’t hold? Yes, but I don’t happen to live in such a universe, so I believe our universe has certain types of complexity and a system that gives rise to consciousness. Suddenly the world is populated by entities that have conscious awareness, and that one simple principle leads to a number of very counterintuitive predictions that can, in principle, be verified.

So it all comes down to how complex the system is? And for the human brain, how its neurons and synapses are wired together?

It comes down to the circuitry of the brain. We know that most organs in your body do not give rise to consciousness. Your liver, for example, is very complicated, but it doesn’t seem to have any feelings. We also know that consciousness does not require your entire brain. You can lose 80 percent of your neurons. You can lose the little brain at the back of your brain called the cerebellum. There was recently a 24-year-old Chinese woman who discovered, when she had to get a brain scan, that she has absolutely no cerebellum. She’s one of the extremely rare cases of people born without a cerebellum, including deep cerebellar nuclei. She never had one. She talks in a somewhat funny way and she’s a bit ataxic. It took her several years to learn how to walk and speak, but you can communicate with her. She’s married and has a child. She can talk to you about her conscious experiences. So clearly you don’t need the cerebellum.

Yet the cerebellum has everything you expect of neurons. It has gorgeous neurons. In fact, some of the most beautiful neurons in the brain, so-called Purkinje cells, are found in the cerebellum. Why does the cerebellum not contribute to consciousness? It has a very repetitive and monotonous circuitry. It has 69 billion neurons, but they have simple feed-forward loops. So I believe the way the cerebellum is wired up does not give rise to consciousness. Yet another part of the brain, the cerebral cortex, seems to be wired up in a much more complicated way. We know it’s really the cortex that gives rise to conscious experience.

It sounds like you’re saying our intelligence comes from this wiring, not from some special substance in the neurons. Could a conscious system be made of something totally different?

That’s correct. There’s nothing inherently magical about the human brain. It obeys all the laws of physics like everything else in the universe. There isn’t anything supernatural that’s added to my brain or my cortex that gives rise to a conscious experience.

Is it like a computer?

A computer shares some similarities with the brain, but this is a metaphor and that can be dangerous. One is evolved, the other one is constructed. In the one case you have software and hardware. It’s much more difficult to make that distinction in the brain. I think we have to be cautious about comparisons between a brain and a computer. But in theory, a system that’s complex enough could be conscious. It may be possible that human-built artifacts would feel like something and would also experience the world.

The Internet is an extremely complex system. Could it feel happy or depressed?

If a computer or the Internet has sentience, the challenge is how we relate its conscious state to ours because its evolutionary history is radically different. It doesn’t have our senses or our reward systems. Of course, this is also a threat. The Internet and runaway AI will not have our value system. It may not care at all about humans. Why should it? We don’t care about ants or bugs. Most of us don’t even care about chickens or cows except when we want to eat them. This is a concern moving forward if we endow these entities not just with consciousness but intelligence. Is that really such a good idea?

We’re not the dominant species on the planet because we are wiser or swifter or more powerful. It’s because we’re more intelligent and ruthless. If we build intelligent systems that exceed even our intelligence, we may believe we can control them. “Oh yeah, I always have this kill-switch. Don’t worry, it’ll be OK.” Well, one day somebody’s going to say, “Oops, I didn’t want that. I didn’t mean that to happen.” And it may be our last invention.

I’m not a mystic. I’m a scientist. But this is a feeling I have. I find myself in a wonderful universe with a very positive and romantic outlook on life.

That’s the scenario in a lot of science fiction. But you really believe artificial intelligence could develop a certain level of complexity and wipe us out?

This is independent of the question of computer consciousness. Yes, if you have an entity that has enough AI and deep machine learning and access to the Cloud, etc., it’s possible in our lifetime that we’ll see creatures that we can talk to with almost the same range of fluidity and depth of conversation that you and I have. Once you have one of them, you replicate them in software and you can have billions of them. If you link them together, you could get superhuman intelligence. That’s why I think it behooves all of us to think hard about this before it may be too late. Yes, there’s a promise of untold benefits, but we all know human nature. It has its dark side. People will misuse it for their own purposes.

How do we build in those checks to make sure computers don’t rule the world?

That’s a very good question. The only reason we don’t have a nuclear bomb in every backyard is because you can’t build it easily. It’s hard to get the material. It takes a nation state and tens of thousands of people. But that may be different with AI. If current trends accelerate, it may be that 10 programmers in Timbuktu could unleash something truly malevolent onto mankind. These days, I’m getting more pessimistic about the fate of a technological species such as ours. Of course, this might also explain the Fermi paradox.

Remind us what the Fermi paradox is.

We have yet to detect a single intelligent species, even though we know there are probably trillions of planets. Why is that? Well, one explanation is it’s just extremely unlikely for life to arise and we’re the only one. But I think a more likely possibility is that any time you get life that’s sufficiently complex, with advanced technology, it has somehow managed to annihilate itself, either by nuclear war or by the rise of machines.

JUST LIKE HEAVEN: “In a cathedral, I get a feeling of luminosity out of the numinous,” says Christof Koch. Gaudi’s La Sagrada Familia is seen above. “You can get that feeling without being a Catholic.”Pixabay

You are a pessimist! You really think any advanced civilization is going to destroy itself?

If it’s very aggressive like ours and it’s based in technology. You can imagine other civilizations that are not nearly as aggressive and live more in harmony with themselves and nature. Some people have thought of it as a bottleneck. As soon as you develop technology to escape the boundary of the planet, there’s an argument that civilization will also develop computers and nuclear fusion and fission. Then the question is, can it grow up? Can it become a full-grown, mature adult without killing itself?

You have embraced Integrated Information Theory, which was developed by your colleague Giulio Tononi. What can this tell us about consciousness?

The Integrated Information Theory of consciousness derives a mathematical calculus and gives rise to something known as a consciousness meter, which a variety of clinical groups are now testing. If you have an anesthetized patient, or a patient who’s been in a really bad traffic accident, you don’t really know if this person is minimally conscious or in a vegetative state; you treat them as if they’re conscious, but they don’t respond in any meaningful way.

How can you be sure they’re conscious?

You’re never really sure. So you want a brain-based test that tells you if this person is capable of some experience. People have developed that based on this integrated information series. That’s big progress. The current state of my brain influences what happens in my brain the next second, and the past state of my brain influences what my brain does right now. Any system that has this cause-effect power upon itself is conscious. It derives from a mathematical measure. It could be a number that’s zero, which means a system with no cause-effect power upon itself. It’s not conscious. Or you have systems that are “Phi,” different from zero. The Phi measures, in some sense, the maximum capacity of the system to experience something. The higher the number, the more conscious the system.

So you could assign a number to everything that might have some degree of consciousness—whether it’s an ant, a lizard, bacteria, or a vegetative human being?

Yes, you or me, the Dalai Lama or Albert Einstein.

The higher the number, the more conscious?

The number by itself doesn’t tell you it’s now thinking, or is conscious of an image or a smell. But it tells you the capacity of the system to have a conscious experience. In some deep philosophical sense, the number tells you how much it exists. The higher the number, the more the system exists for itself. There isn’t a Turing Test for consciousness. You have to look at the way the system is built. You have to look at the circuitry, not its behavior, whether it’s a computer or a biological brain. This has now been tested and validated in many patients, including locked-in patients who are fully conscious, people under anesthesia who are not conscious, people in deep sleep, and those in vegetative states or minimal-conscious states. So the question now is whether this can be turned into something practical that can be used at every clinic in the country or the world to test patients who’ve just been in a bad traffic accident.

Obviously, there are huge implications. Do you turn off the life-support machines?

First, does the patient suffer or is nobody home anymore? In the famous case of Terri Schiavo, we could tell the brain stem was still functioning but there wasn’t anybody home. Her consciousness had disappeared 15 years earlier.

Isn’t there still the old “mind-body problem?” How do three pounds of goo in the human brain, with its billions of neurons and synapses, generate our thoughts and feelings? There seems to be an unbridgeable gap between the physical world and the mental world.

No, it’s just how you look at it. The philosopher Bertrand Russell had this idea that physics is really just about external relationships—between a proton and electron, between planets and stars. But consciousness is really physics from the inside. Seen from the inside, it’s experience. Seen from the outside, it’s what we know as physics, chemistry, and biology. So there aren’t two substances. Of course, a number of mystics throughout the ages have taken this point of view.

It does look strange if you grew up like me, as a Roman Catholic, believing in a body and a soul. But it’s unclear how the body and the soul should interact. After a while, you realize this entire notion of a special substance that can’t be tracked by science—that I have but animals don’t have, which gets inserted during the developmental process and then leaves my body—sounds like wishful thinking and just doesn’t cohere with what we know about the actual world.

It sounds like you lost your religious faith as you learned about science.

I lost my religious faith as I matured. I still look fondly back upon it. I still love the religious music of Bach. I still get this feeling of awe. In a cathedral, I can get a feeling of luminosity out of the numinous. When I’m on a mountain top, when I hear a dog howling, I still wake up some mornings and say, “I’m amazed that I exist. I’m amazed there is this world.” But you can get that without being a Catholic.

Does that experience of awe or the numinous feel religious?

Not in a traditional sense. I was raised to believe in God, the Trinity, and particularly the Resurrection. Unfortunately, I now know four words: “No brain, never mind.” That’s bad news. Once my brain dies, unless I can somehow upload it into the Cloud, I die with it. I wish it were otherwise, but I’m not going to believe something if it’s opposed by all the facts.

A few years ago, you and some other scientists spent a week with the Dalai Lama. Was that a meaningful experience?

Yes, it was. There were thousands of monks in the Drepung Monastery who were listening to our exchange. This particular Tibetan Buddhist tradition is quite fascinating. I’m not a scholar of it, but they view the mind primarily from an interior perspective. They’ve developed very sophisticated ways of analyzing it that are different from our way. We take the external way of Western science, which is independent of the observer. But ultimately, we’re trying to approach the same thing. We’re trying to approach this phenomenon of conscious experience. They have no trouble with the idea of evolution and other creatures being sentient. I found that very heartening—in particular the Dalai Lama’s insistence on the primacy of science. I asked him, “What happens if science is in conflict with certain tenets of Buddhist faith?” He laughed and said, “Well, if this belief doesn’t accord with what science ultimately discovers about the universe, then we have to throw it out.”

But the Dalai Lama believes in reincarnation.

We talked about that. In fact, I said, “Well, I’m really sorry, Your Holiness, but I think we just have to agree that Western science shows that if there’s no physical carrier, you’re not going to get a mind. You’re not going to get memory because you need some mechanism to retain the memory.” I asked him, “Were you not reincarnated from the previous Dalai Lama?” And he just laughed and said, “Well, I don’t remember anything about that anymore.”

Has this scientific knowledge helped you sort out the deep existential questions about meaning, about why we’re here?

My last book is titled Confessions of a Romantic Reductionist. I’m a reductionist because I do what scientists do. I take a complex phenomenon and try to pull it apart and reduce it to something at a lower level. I’m also romantic in the sense that I believe I can decipher the distant contrails of meanings. I find myself in a universe that seems to be conducive to life—the Anthropic Principle. And for reasons I don’t understand, I also find myself in a universe that became conscious, ultimately reflecting upon itself. Who knows what might happen in the future if we continue to evolve without destroying ourselves? To what extent can we become conscious of the universe as a whole?

I don’t know who put all of this in motion. It’s certainly not the almighty God I was raised with. It’s a god that resides in this mystical notion of all-nothingness. I’m not a mystic. I’m a scientist. But this is a feeling I have. I find myself in a wonderful universe with a very positive and romantic outlook on life. If only we humans could make a better job of getting along with each other.


Steve Paulson is the executive producer of Wisconsin Public Radio’s nationally syndicated show To the Best of Our Knowledge. He’s the author of Atoms and Eden: Conversations on Religion and Science. You can subscribe to TTBOOK’s podcast here.

Lead image: Courtesy of Allen Institute



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What We're Reading ~ 4/5/17

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Modern Monopolies: What It Takes to Dominate the 21st Century [Alex Moazed]

How moats make a difference [Intrinsic Investing]

Boyar Research's thesis on QVC and Madison Square Garden [Barrons]

Autonomous cars and second order consequences [Benedict Evans]

The hardest question in portfolio management [A Wealth of Common Sense]

Diversification, adaptation, and stock market valuations [Philosophical Economics]

Noise: how to overcome the high, hidden cost of inconsistent decisions [Harvard Biz Review]

How Domino's built a $9 billion empire [Bloomberg]

How do winning consumer goods companies capture growth? [McKinsey]

Airlines make more money selling miles than seats [Bloomberg]

At Blackrock, machines are rising over managers to pick stocks [NYTimes]

What's next for malls? [Fashionista]

Andrew Ng on what AI can and can't do [Harvard Business Review]

Margin debt hit all time high in February [WSJ]

The 1% rule: why a few people get most of the rewards [James Clear]



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Joel Greenblatt's Talk at Google

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Joel Greenblatt is the founder of Gotham Capital and also author of the book The Little Book That Beats the Market.  He recently gave a talk at Google and here are the takeaways:


Joel Greenblatt's Talk at Google

- He thinks the vast majority of investors should index rather than pick stocks.  That said, he doesn't index and Warren Buffett doesn't either.

- Greenblatt said people are still crazy (human behavior) and the market has wild rides (50% drops in recessions, tripling in value afterwards, etc).  So there's an opportunity.  The key is obviously to buy when valuations are below average and sell when they're above average.

- He tells his MBA students at Columbia Business School: "If they do good valuation work, I guarantee the market will agree with them... I just don't know when."

- "Stocks are ownership shares in businesses."  Looks at how relatively cheap they are compared to other businesses, to history, etc.  Measure in absolute and relative value.

- Emphasizes being patient; market oscillates back and forth over the years.  Time horizons are shrinking so we're playing time arbitrage. 

- "Almost never have I bottom-ticked a stock."  That means most of the time he'll be down on a stock at some point.  There's two reasons why: he's either wrong or just needs more time for the thesis to play out.

- Greenblatt also wrote a book called The Big Secret that he joked is still a secret since no one read it.  But he's also authored a wildly popular investing book with a cheesy title: You Can Be a Stock Market Genius

- "To beat the market you have to do something different."

- Runs 100% net long but it's typically achieved via 170% long and 70% short.  They determined the leverage amount based on returns.

- The market's been cheaper 83% of the time based on current valuations.  Based on this, market could see 3-5% returns over the next year and then 8-10% over the next two.  Not a prediction though he said.

- "Stock investing is figuring out what a business is worth and paying less."

- Harped on the importance of compound interest tables.  Start investing as early as possible.

- Thinks there's still a lot of groupthink going on.  If you're good at taking 'unfair bets' in obscure places that other people aren't looking, you can do well.  But eventually you'll have too much money to play in that arena anymore to have it move the needle.

- On Apple (AAPL): "I think it's cheap relative to other choices right now."

- "Your job is to be cold and calculating, and unemotional.  Unfortunately, people are human.  That's good news for us, but the stats are against you."

- "The last man standing is patience.  We call it time arbitrage.  That's in really short supply.  It's not getting better, things are moving faster... and less patience." 

- For more from this investor, we've also posted up Greenblatt's interview with Consuelo Mack

Embedded below is the video of Joel Greenblatt's talk at Google:



We've also posted a bunch of other investor talks at Google, including:

- Howard Marks' talk at Google

- Michael Mauboussin's talk at Google

- Jim Grant's talk at Google



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