Locklin on science

Michael Lewis: shilling for the buyside

Posted in finance journalism, microstructure by Scott Locklin on April 4, 2014

Journalism, in the ideal world, is supposed to inform the citizenry of facts important to their well being. Modern journalism seems to involve issuing press releases from the oligarchical reptiles who are destroying Western Civilization. Maybe I am a naive fool, and it was always thus. Either way, Michael Lewis’s latest book lends credence to the view that he is a very modern journalist.

lewis_a

lookin a bit scaly, bub

Lewis’s book purports to be about high frequency trading. He manages to write several hundred pages of gobbledeygook without actually speaking to a High Frequency Trader (unless you count his incongruous encounter with poor Sergey Aleynikov ). The story Lewis actually tells is one of incompetent sell side traders who started an exchange which serves the interests of wealthy buy siders and shady brokers.

Brad Katsuyama is the hero of the book. Lewis’s recent books use the dreary trope: the band of clever and plucky outsider misfits who take on the establishment. Katsuyama’s misfittery is he’s an Asian who is good at sports, bad at math and computers; and even though he worked for a Wall Street bank, he went to a crappy Canadian school instead of Yale-vard. Among his misfit sidekicks are a potato-wog who is good at network ops, but who could never get a break on the street (I can relate). Also, a fat grouch from Brooklyn, a computer genius, a puzzle wizard and a few other guys who fade into the woodwork. They worked for RBC: a Canook bank which is supposedly the least Wall Streety place on the Street.

The plucky outsiders in this story are not portrayed in a particularly flattering way. In fact, they come off as  dimwitted incompetents. Katsuyama was an old school block shopping sell side trader. If you remember my previous pieces on  HFT nay sayers: Joe Saluzzi was also a sell side block shopper. Old fashioned sell side guys have obsolete jobs. Their jobs are to find liquidity for “buy side” customers buying into or liquidating a large position. Katsuyama’s anger at the idea that “the market is rigged” seems the simple rage of a man who has been assigned a task he is not qualified for. There are tales of he and his team wasting hundreds of thousands in RBC money executing bad trades to see what happens. They seemed shocked, shocked, that the market would move away from their ham-fisted dumpings of huge blocks of shares to someone else’s routing system.

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Lewis keeps going on about how “nobody understood” any of this back in 2009, except for his plucky outsider heroes. If “nobody” understood it, how was I was able to write about it on my blog in 2009? Over 100,000 people read my various blogs on HFT that year.  If you were not among the elite group of more than 100,000 insiders who read blogs, any punter could have purchased the Larry Harris book “Trading and Exchanges” available on Amazon.com for $71.58 + tax. This is how I originally clued myself in (thanks FDAX-H). Larry’s book was published in 2002.  In early 2010 Barry Johnson published the book, “Algorithmic Trading and DMA” which explains the profession dedicated to getting a good fill on the modern electronic trading landscape. So, in 2010, there was not only a  job description, “algorithmic trader,” for getting a good buy-side fill, there was also a “how to” book on the subject.  Such people perform the function that used to be done by sell side people like Katsuyama and Joe Saluzzi. Lewis repeatedly states that this was a mysterious topic and nobody was talking. Actually, it is an extremely well understood topic;  library shelves groan with volumes dedicated to the subject.

No books were really needed; history and experience should suffice. Back in the days of pit traders, if you threw a huge order at the pit, you might get a fill on a couple of round lots. The rest of the pit is going to change their prices, because they figure anyone swinging 10,000 or 100,000 share orders around must be informed traders. If they’re informed traders, they need to pay for their immediacy. Informed traders may be criminal insider-trader creeps,  they may be people with really good trading strategies; it doesn’t matter -they’re informed somehow: they know stuff. If the market maker doesn’t adjust their prices in front of an informed trader, the market maker will go bankrupt. That’s market economics 101. As I previously described it in 2009 in the Three Stooges of the High Frequency Apocalypse;

What happens when you buy something? …  If you want it for cheap, you sit around and look at different markets (ebay, amazon, craigslist) until someone displays a price you find acceptable. If you want that “something” right now, you drive to a store and buy it. You’ll almost certainly pay a little more at the store, because they need to make enough money to pay employees to prevent barbarians from stealing everything, and to keep the lights on and other such things for your convenience. You can also generally return what you bought to the store much easier than to ebay or amazon. You’re paying for the immediacy (buy it now!) and liquidity (buy as many as you want!) provided by the store. This is a service which costs money.

Immediacy costs money. Markets have always moved prices away from large orders. Market participants  have always been able to cancel or move a limit order. That’s one of the features of the limit order. If  Katsuyama didn’t understand these simple facts, he had no business collecting a $2 million a year paycheck shopping blocks for his customers, because he didn’t understand the basics of his profession. It’s  possible that Lewis simply misunderstood something Katsuyama explained to him. It’s also  possible that Katsuyama is a shark who told Lewis a lot of bullshit to get good press for IEX.  This leaves only two possibilities: either Lewis is a credulous idiot who is not competent as a journalist, or Katsuyama is an idiot who was not competent as a trader. Take your pick.

 

CBOTpit1900-GB

They made their money trading flow as well

Where it gets interesting is where Lewis claims bigshot buysider crybabies like Loeb and Einhorn  never heard of any of this. They made it sound as if, back in the day when Loeb and Einhorn were paying 1/8 of a dollar spreads to knuckle-dragging pit orcs, no rock-ribbed he-man trader with 10lbs of undigested beef in his lower intestine would would dare move his price away from where Loeb and Einhorn wanted it. Why, moving the price away from a big order: that’s un-American!

So … these “plucky underdogs” helped Katsuyama form a new stock exchange, IEX. They claim that no sort of nefarious activity is possible on IEX, because, well, “trust us!”  Liquidnet’s average cross is 45,000 shares; over 100 times the vaunted liquidity figures provided by IEX.  If I traded stocks, why should I trust IEX over Liquidnet? Because Michael Lewis says they’re honest guys? If I believe the tales of Michael Lewis, the founders of  IEX are a collection of “traders” who do not know how to trade, and the market itself is owned by … buy side traders. He seems to give IEX sloppy wet kisses for honesty, yet sees nothing wrong with the fact that they’re owned by a bunch of buy side guys. They’re also owned by some unknown buy side guys, which does not inspire confidence. Buy side guys, if they’re good at their jobs are informed traders.  Nobody wants to trade against informed traders. Everyone wants to trade against noise traders.

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IEX  has simple order types; limit, midpoint, fill or kill and market: I  approve of this. On the other hand:

“IEX follows a price-priority model first, then by displayed order second. Then comes broker priority, which means a broker will always trade with itself first, which Katsuyama described as “free internalization.” He explained that brokers do not pay IEX to trade should an order be matched against another order from that same broker. This, he added, offers brokers incentive to trade in IEX.”

Hey now, wait a minute. Internalization and broker priority is pretty much the same thing as dark crossing, which Lewis was trying to tell us was bad. Now it’s supposed to be OK when Goldman does it?  Later, Lewis actually quotes Katsuyama saying there were only a few brokers acting in their customer’s interests:

“Ten,” Katsuyama said. (IEX had dealings with 94.) The 10 included RBC, Bernstein and a bunch of even smaller outfits that seemed to be acting in the best interests of their investors. “Three are meaningful,” he added: Morgan Stanley, J. P. Morgan and Goldman Sachs.

I think this is the crux of this story: according to Michael Lewis and Katsuyama, we’re supposed to trust people like Einhorn who have been convicted of insider trading, people who are suspected of insider trading (buy side is by definition rife with this; particularly firms that do merger arb and special events), J.P. Morgan, Goldman and Morgan Stanley: we’re supposed to trust these guys more than we’re supposed to trust a bunch of tiny little market making firms who had been inconveniencing them by taking away some of their flow. Lewis tries to make this seem like a battle between the underdog “good guys” and the evil establishment. To believe this, you’d have to believe that Goldman Sachs and people like Einhorn are underdogs, rather than the actual establishment. To believe this, you’d have to believe the tiny industry of HFT traders actually rules the world and buys off congressmen and the SEC more than … J.P. Morgan and Goldman.

To give you a sense of scale: the largest HFT firm I know of, KCG, has operating cash flows of $140 million a year and a  modest market cap of $1.4 billion (betcha didn’t know it was a publicly traded company: Lewis certainly doesn’t mention it). JPM has operating cash flows of  $100 billion a year, almost a trillion on the balance sheets, and a quarter trillion or so in market cap. David Einhorn is personally worth $1.25 billion dollars. KCG’s entire market cap is only slightly more than that, and it employs 1200 people. Yet, somehow the HFT firms are the evil establishment, and JPM and Einhorn are … the plucky underdogs standing up for truth, justice and market makers not changing their quotes when some reptilian oligarch dumps 200,000 shares of YoyoDyne on the market.

Yeah, I might believe that. I might believe that if I were a dribbling retard.

they-live-16

Put down Lewis’s book; read one by Bernays

Doing a bit of investigation into who owns IEX: we have the $13.2 billion  activist shareholder fund Pershing Square, owned by Bill Ackman, another “underdog” worth $1.2 billion. We have the $6.7 billion Senator Investment Group. Scoggin Capital is only worth $1.8 billion; they do distressed debt and mergers, and have managed to only have one down year in 25. Another investor is venture capitalist  Jim Clark, net worth $1.4 billion. He is particularly noteworthy as being a pal of Michael Lewis, and almost certainly the guy who made the introductions to the “flash boys” at IEX. Brandes Investment Partners is an old $29 billion AUM politically influential money management firm doing value investments, and is run by another billionaire. Third point, a hedge fund with $15 billion, also working in special situations aka “distressed debt and mergers,” run by  Danny Loeb (who also miraculously has only one down year). Another investor in IEX is a little place called  Capital Group Companies, one of the biggest buy side investors in the world, with $1.15 trillion AUM. Capital Group has been more or less scientifically proven to be one of the most powerful and influential corporations in the world.

You get the idea: IEX is not owned by plucky underdogs. It is owned by very rich and powerful “buy side” people. People who find the present system of liquidity provision inconvenient.  Buy side has always found liquidity providers inconvenient; they had to pay old school “sell side” traders like Katusyama to work the trades for them at the very least. There wasn’t much they could do about it until now. Now that they own  almost everything, they can open their own damn stock exchange and buy some cheap brokerage flow. That and unleash Michael Lewis, the FBI and New York Attourney General on the peasants who make them pay for liquidity.

TheyLive1

IEX … little investor… blah blah blah

I  don’t think IEX and their investors represent the interests of “the little guy” at all. The actual little guy (aka people like me) does pretty well making small orders with the present system. If you  believe Lewis’s book, the thing we’re supposed to be worried about is telegraphing a big buy or sell by routing  your order to several different exchanges. The thing is, “the little guy” doesn’t make large buy or sell orders, and unless he does, what Lewis describes is impossible. The people IEX benefits are exclusively preposterously wealthy buy side people. That and the brokerages who get to trade against the pieces of their flow that they want. Pardon me if I notice that such people aren’t exactly tribunes of the people. What’s actually going on here is the brokers are, as usual, taking the flow. They’re giving up some of the leftovers to the buy side guys, who also pocket the exchange fees. If you’re worried about flow or think the present system of liquidity provision is somehow predatory: this is a buzzard and a hyena sharing a carcass.

I have no dog in this race: I’m not a HFT, I have never taken a dime from any exchange, and I haven’t so much as executed a stock trade in 4 years.  Everything I’ve read, and all the traders (buy side and otherwise) I’ve spoken with seem to think that HFT market makers have improved things from the pre-decimalization bad old days of pit traders who got their jobs because they went to the right New York City high schools.  I know for a fact that HFT market making as a business is nowhere near as profitable as it was even a few years ago. This is exactly what you would expect when you have lots of smart people competing in a not-so profitable business. I don’t think the use of computers makes markets any more inherently dangerous, any more than the use of computers in automobiles makes them  more inherently dangerous. If you asked me what I thought the worst thing about the present system was, it would be the profusion of weird order types. Something that IEX, to their credit, gets right.  There are actual frauds in HFT, just like there are in any other business involving money, from the Avon lady on up the food chain. The worst HFT tort I can think of is the practice of “quote stuffing.”  Lewis (of course) never mentions this, and I have read nothing which indicates IEX is ready for it.

I know a few HFT type people. One of ‘em might be even be as rich as Michael Lewis.  So far, all the ones I have met are clever and decent people, and I figure whatever they’ve managed to earn by the sweat of their brows, they deserve it. I’m not real pleased with the idea of a small group of decently paid, politically helpless nerds being the fall guys for a bunch of crooked oligarchs who don’t want to pay for their liquidity.

Speaking of which: FREE SERGEY

 

sergey-aleynikov-1.png

despite the awesomeness of his pantaloons, this man’s legal problems are a bad sign for America

 

Edit Add:
This review by a trader lists 15 more technical inaccuracies in the book. He also noticed that broker priority is shady business if we’re talking about helping “the little guy” here.

Edit Add2:

This trader gives a really great review.

Bad models and the end of the world

Posted in econo-blasphemy, stats jackass of the month by Scott Locklin on March 23, 2014

I loathe journalism as a profession: a claque of careerist whores, half-educated back-slappers and propagandists for the oligarchical lizard people who are ruining civilization. I loathe “science journalism” particularly, as they’re generally talking about something I know about, and so their numerous impostures are more obvious.

Journalists: they're mostly like this

Journalists: they’re mostly like this

Today’s exhibit, the “NASA study predicting the end of Western Civilization.” The actual study can be found in PDF format here. If you read the “journalism” about this in the guardian, cnet, or wherever else, it’s all about our impending doom. Not only do scientists tell us we are doomed, fookin’ NASA scientists tell us we are doomed.

The authors of the study are not NASA scientists. The NASA subcontractor  associated with this paper would like you to know this; probably because NASA was annoyed their name was associated with this paper. The only contribution NASA made was in partially supporting an institution which partially supported one of the three authors for one semester. The author in question,  Safa Motesharrei is a grad student in “public policy” and “mathematics” at U Maryland. The other two authors are also not NASA scientists. One is allegedly a professor of … political science in Minnesota -and more recently some cranky looking outfit called “Institute of Global Environment and Society.” The other one is a professor of the U Maryland department of Oceanic and Atmospheric sciences. Unless you consider the partial ramen noodle stipend one grad student received for one semester to be “funding,” or you consider NASA’s subcontractor to be liars, NASA did not fund or endorse this study in any meaningful way. Journalism 101, failed before even getting to the content of the article.

The three authors of this study

The three authors of this study

For what it is worth, had I published anything my sophomore year of grad school instead of trying to build a crazy vacuum chamber and catch a venereal disease, I’d have had some words in my paper thanking NASA for their support as well. This is despite the fact that most of my money came from the NSF and the University I was attending. I wasn’t in any way a NASA scientist. My institution wasn’t NASA affiliated. But we did get a NASA grant that paid for at least a month’s salary for me over the course of a year. When you get those grants, you say “thank you.”

Nafeez Ahmed, the imbecile at the Guardian who broke the story, continues to insist that NASA funded this study, despite the fact that they didn’t. I guess when someone Discovers you are a shoddy journalist, the accepted thing to do these days is doltishly double down on your error. Ahmed, of course, works for some preposterous save-the-world outfit, which apparently means he can pretend he is a journalist and doesn’t have to tell the truth about anything.

Journalistic failure is to be expected these days, and NASA scientists say stupid things all the goddamned time. Still, reading the paper itself was informative. Had anybody bothered to do so, the story would have been murdered in infancy. It’s one of the godawful silliest things I have ever read.

There is a fairly standard model from ecology called the “predator prey” model. Predator/prey models were  mostly developed to model exactly what it sounds like: things like wolf and moose populations in a National Park. The model makes assumptions (that predators are always hungry,  the prey will never die of old age, and  there are no other predators or prey available, for just a few examples of the limitations of the model), but if you set these equations up right, and the parameters and conditions are non-degenerate, it can model reality reasonably well. It’s really no good for predicting things, but it’s OK for modeling things and understanding how nature works.  The equations look like this, where x(t) is the predator population, y(t) is the prey population and a is predator birth rate, b is the predator death rate, c is the prey’s birth rate, and k is the predation rate; all rates are constant.

\frac{dy}{dt} = ay(t)x(t) -bx(t)

\frac{dx}{dt} = cy(t) -kx(t)y(t)

The predator/prey model is elegant, concise, and in some limited circumstances, occasionally maps onto reality. It is, of course, a model; there is no real reason to model things using this set of differential equations, and a lot of reasons not to. But sometimes it is useful. Like most good models, it is simple and doesn’t have too many parameters. Everything can be measured, and interesting dynamics result; dynamics that we can observe in nature.

The authors of this doom-mongering paper  have  transformed that relatively simple set of equations; a set of equations which, mind you, produces some fairly complicated nonlinear dynamics, into this rather un-handy mess, known as HANDY (for “Human And Nature DYnamics”):

\frac{dx_c}{dt} = \beta_c x_c(t) - \alpha_c x_c(t)

\frac{dx_e}{dt} = \beta_e x_e(t) - \alpha_e x_e(t)

\frac{dy}{dt} = \gamma (\lambda -y(t)) y(t) - \delta x_c(t) y(t)

\frac{d \omega}{dt} = \delta y(t) x_c(t) - C_c(t) - C_e(t)

In this set of equations, x_c(t) is the productive peasant population, x_e(t) are the population of parasitic elites, y(t) is “natural resources” and w(t) is “wealth.” \lambda is a “saturation of regrowth of nature rate.” \gamma is an “exponential growth of nature rate.” \delta is a “depletion of nature” rate term. C_c(t), C_e(t) are wealth consumption rates.

to make it even more complex: \alpha_c(t), \alpha_e(t), C_c(t), C_e(t) are all functions of \omega(t), x_c(t), x_e(t)

C_c(t) = min(1,\frac{\omega(t)}{poor(t)}) s x_c(t)

C_e(t) = min(1,\frac{\omega(t)}{poor(t)}) \kappa x_e(t)

poor(t) = \rho x_c(t) + \kappa \rho x_e(t)

poor(t) is some threshhold wealth function, below which you starve, and allegedly \rho is supposed to be a minimum consumption per capita, but it really makes no sense based on the equations. s is some kind of subsistence level of wealth and \kappa is the multiple of subsistence that elites take.

Instead of contenting themselves with constant predation or death rates, this train-wreck insists on making them the following:

\alpha_c(t) = \alpha_m + max(0,1-\frac{C_c(t)}{s x_c(t)}) (\alpha_M - \alpha_m)

\alpha_e(t) = \alpha_m + max(0,1-\frac{C_e(t)}{s x_e(t)}) (\alpha_M - \alpha_m)

Where \alpha_m, \alpha_M are constants for a normal death rate and a death rate where you have a high death rate, where, and I quote the paper directly: “when the accumulated wealth has been used up and the population starves.”

It’s worth a look at what they’re implicitly modeling here by adding all this obfuscatory complexity. All of the following assumptions are made by this model. Very few of them are true in reality. Most of these assumptions are designed to get the answer they did.

  1. The natural resources of the earth is well modeled by the prey equation
  2. The natural resources of the earth regenerate themselves via a logistic function
  3. There are two classes of humans
  4. There is a thing called “wealth” that is consumed by the two classes of humans at different rates
  5. The elite class of humans preys on the peasants and produces nothing
  6. The peasant class is all equally productive
  7. Wealth comes from peasants exploiting nature
  8. Elites all have \kappa times a subsistence income, rather than a smooth distribution of incomes
  9. Peasants all have s , a subsistence income, rather than a smooth distribution of incomes
  10. An extra variable called “wealth” is needed to make sense of these dynamics, and this variable maps onto the thing known in common parlance as “wealth.”
  11. The wealth factor could sustain a human society for centuries after ecological collapse (page 18)
  12. Death rates increase as natural resources are consumed at a faster rate (everything about modern civilization indicates the exact opposite is true)
  13. The peasants get nothing from the elites except population control
  14. Technological change is irrelevant (yes, they argue this; page 7)
  15. This ridiculous spaghetti of differential equations actually models something corresponding to Human Civilization

There are more assumptions than this, but you get the idea: this model is ridiculous, over parameterized, and designed to get the answers that they did. If you assume parasitic non-productive elites, you get the situation where social stratification can help “cause” collapse. Of course, if you assume parasitic non-productive elites, you’re assuming all kinds of ideological nonsense that doesn’t map well onto reality.

If you assume natural resources also act like prey, you can get situations where the natural resources collapse, then the society collapses. This is no big surprise, and you don’t need these obfuscatory complications to say this: it’s in the predator-prey equations already. Why didn’t they just model humanity and nature as simple “predator/prey” above? I am guessing, because nobody would buy it if you say things that simply, and it wouldn’t be an original paper. It also doesn’t allow them to pontificate on egalitarian societies.

As for the additional “wealth” factor these clowns use to distinguish themselves from an earlier bad model; as far as I can tell, the only purpose served by this degree of freedom is making it easier to mine way more natural resources than we actually need to support a population (something that wouldn’t happen in a standard predator-prey model). It also doesn’t make any sense, modeled in this way, unless you believe grain silos contain centuries worth of corn, or that people can eat skyscrapers. That’s how their wealth equations work; they actually assume you can eat wealth.

sandwich-board-man-warns-us-of-impending-doom

Dr. Nafeez Ahmed: Guardian columnist who broke this story

I actually feel a bit sorry for these guys, even though they are unashamed quacks. They didn’t ask to become this famous. Somehow the zeitgeist and some imbecile activist newspaper reporter decided to make them famous as people who are really bad at modeling anything. God help these people if they attempt to model something real, like chemical reaction dynamics, or, say, the earth’s atmosphere.

Returning to the mendacious loon, Ahmed, who brought this paper to world fame and attention. He asserts that the paper actually compares historical civilizations using this model. It does nothing of the sort. The paper mentions historical civilizations, but they don’t even make legalistic arguments that, say, the ancient Egyptians, whose civilization lasted for thousands of years, somehow follow these equations.  All they say is, ancient cultures were cyclical; they rise and fall; something everyone has known from the time of Heraclitus. Cyclical behavior does not imply this complex pastiche of differential equations; there are cyclical behaviors in nature which can’t be modeled by any differential equations. Finally, Ahmed asserts that the model predicts things. It doesn’t; nor does it claim to. It claims to model things. Modeling things and predicting things are very different.

The model itself was bad enough. What the activist-reporter said about it is inexcusable. The fact that everyone credulously picked up on this nonsense without questioning how Nafeez Ahmed made his living is even worse. Science by activist press release. Yeah, thanks a lot, “science journalists.” Nobody even noticed the clown who broke this story is a goddamned 911 truther.

A more reliable narrator than the Ahmed bozo who broke this story

A more reliable narrator than the Ahmed bozo who broke this story

I find all this intensely sad. I’m sad for the boobs who wasted their lives cranking out a model this useless. I’m sad for our civilization that it is possible to make a living publishing rubbish, and that talented people can’t make a living doing interesting and correct research which will benefit humanity. I’m also sad that journalists aren’t fired over their credulity regarding this fraud. I’m sad that ideological hogwash is published in all the papers as some kind of scientific truth, while nobody notices simple things, like the fact that the world fisheries are presently undergoing collapse, or the fact that there are no more rhinos because Chinese people haven’t discovered viagra yet.

I’m also sad that people are so obsessed with the end of the world. Maybe some day we’ll experience some kind of ecological apocalypse, or the imbeciles in the White House will nuke the slightly less stupid cavemen in the Kremlin. Chances are pretty good though, that before these things happen, we will all be dead. Wiser men than me have pointed out that anxiety about the end of the world is a sort of transference for anxiety about their own impending demise. As Spengler put it, “perhaps it is not the end of the world, but just the end of you.”

Anatomy of a Fusion press release

Posted in big machines, Design by Scott Locklin on March 5, 2014

Listening to the nonsense mindlessly parroted  by media outlets, you’d think we were a few months away from limitless fusion power. I’d like to believe that. I’d like to believe my country was still capable of making important technical breakthroughs. Just as I’d like to believe my country’s foreign policy isn’t run by simpering baboons who don’t know a Cossack from a cassock.

Unfortunately, I went to college, and I once worked in a government lab, so I know better. The actual news behind the recent fusion press release is no cause for rejoicing. NIF isn’t be something we should be lionizing in the press; it’s a national embarrassment. The people who made the press release certainly know this. Unfortunately, the people who read the press release couldn’t be bothered to understand anything about it.

NIF1

What is NIF? NIF, or “national ignition facility,” is a bunch of  big lasers, designed to implode a pellet of deuterium and tritium well enough to achieve fusion “ignition.” Ignition means, the reaction is self sustaining; the fusionables burn after you light them on fire, so to speak; just like the regular-world definition of ignition. LLNL had hoped to have achieved ignition by now, but they haven’t. NIF construction also took about four times what it was supposed to cost, and was turned on five years behind schedule. The original management team (including perennial presidential candidate Bill Richardson) was excoriated in the GAO report. This is a terrible record, even for a government program. But it gets worse…

In 2012, Congress reviewed the project, wondering why the project had not yet achieved ignition. They’re in deep shit with their paymasters. It’s now 2014, and they still haven’t achieved ignition. Hence this press release, just in time for the 2014 fiscal year.

NIF2

What did they announce in this press release? Well, they claimed a kinda-sorta “scientific break even.” Supposedly, they got 5×10^15 neutrons out, which somehow is higher than the energy they managed to impart on the actual target. This is, to say the least, deceptive. The energy obtained in this reaction was allegedly as high as 14KJ. The energy put into the reaction was 1.8MJ. Their “break even” assertion is that the 1.8MJ laser flash managed to put slightly under 14KJ on target. An article in science magazine mentioned this back in 2013, when the first press release hit; mentioning that the 1.8MJ pulse is about the same as a two-ton truck going 100mph, and the imparted result was something like a baseball going 50mph. The author didn’t mention that the energy required to generate the two-ton truck laser pulse required a few hundred two ton trucks worth of energy input, because the laser system uses old school flash-tube pumped YAG technology, but that’s a factor also. All this totals to around 3 * 10^-5 away from true break even. Unfortunately, LLNL made another press release a week or two ago, essentially repeating the September 2013 press release, and nobody bothered checking with a grown up.

NIF as an engineering project actually does what it promised; it consistently delivers 2MJ UV laser pulses. Laser inertial confinement is an old idea at LLNL, and it was an ambitious engineering job to get to this point. As an engineering project, I have to admit it’s pretty cool; the high energy pulse control, the giant KDP crystals  and the deformable mirror optics is all good stuff. It ought to be, considering it cost 4X what it was supposed to, but the engineering of the device  is blameless. It’s the physics that failed.

While the history of NIF is marred by some lousy management, we have a pretty good idea of why it has failed to do what it is supposed to do. The computer models used to calculate the physics of a laser pulse hitting a target: they don’t work. They’re making a prediction which is at least a factor of 5-10 off from what is observed, in terms of energy absorption.  Worse; the  material used to compress the fuel seems to have unpleasant characteristics which tend to snuff out the fusion reaction, slowing the neutrons and generally behaving differently than it is supposed to (as documented in this review PDF) and nobody understands that either.

So, the actual fuel doesn’t work like it’s supposed to, and neither does the “match” which is supposed to light it on fire. This should not be a great surprise. Computer simulation works fairly well when you understand all the physics, and when the equations are well behaved. It doesn’t work at all when you leave out important physics, or when the equations are badly behaved. I’d expect something like a highly focused megajoule nanosecond UV laser pulse on exotic materials to be something which falls into the “not so well behaved” class of physical models. I’m guessing the recommendations in the review article are being followed, and the NIF folks are attempting to adjust their models using some indirect observations and calibrations. I think they’re also taking a punt by fiddling with beam pulse shape. It appears the “good” result of September 2013 happened via the latter technique.

nif_1a

One of the saddest things about this debacle is the JASON committee recognized problems with the computer models back in July of 2005 (see page 44-48 of this report). The same group has also pointed out that, one of the alleged benefits of NIF, that of stockpile stewardship,  is a mirage, as tiny little explosions don’t have a whole lot to do with great big explosions. That would be true, even if the thing worked.

Sadder still, we didn’t need the JASON committee to tell us this sucker was going to fail. The history of inertial confinement fusion at LLNL provided ample evidence that NIF would fail. Consider the last laser inertial confinement project at Livermore: the NOVA project. It, too, claimed that it would achieve ignition, and using a much smaller laser. They claimed you’d only need tens of kilojoules to achieve ignition. Its performance as far as break-even goes was approximately the same as what NIF has done so far (I think it released 10^13 neutrons, which is about what you’d expect from a laser which generates two orders of magnitude less power). It did so with a much lower energy laser pulse. They blamed all kinds of stuff for its failure, but at the end of the day, the physics of the laser/plasma and “shell/fuel” interaction is poorly understood. This was somewhat known back in the 1980s with the results of the Halite-Centurion experiments. These test results, classified and done with nuclear weapons, seemed to indicate that the implosion approach might need as much as 100MJ laser pulses to achieve the goals of NIF.

Following “current events,” while the thing was being built would also have been instructive. Our media class seem to enjoy making fun of the corruption among the ruling classes of Slavic countries. I figure it is a fair cop; those places are pretty blatant in their corruption, at least looking at things from over here, but the media also almost always overlook corruption in America. This is inexcusable, as this is their job. I can laugh at the Rooskie without any assistance from the tittering pustules in the New York Times. Their only excuse for taking up space is to unearth corruption in America. They don’t do this very well. Here’s a few little pieces of information about NIF from way back in 1999-2003; mostly ignored by the media, yesterday and today.

  1. The review committee responsible for signing off on this project was widely viewed as stacked in LLNL’s favor. Having witnessed a few DoE national lab committees; this is fairly common, and a really bad idea if you think the idea of “peer review” is useful. There are also rumors that a certain DoE bigwig (one who got his job via bribery; common enough for political appointees these days) who engineered this, hoped to profit from NIF, as he owned a laser optics company. I  have been unable to verify it with DoE old timers, but if it’s true, well, I’m not a reporter, but someone should have noticed …
  2. The associate director of NIF in 1999, E. Michael Campbell, had to resign, as it was revealed that he never got a claimed Ph.D. in physics from Princeton. He had a soft landing; he got a job at General Atomics afterwords, and eventually got a Ph.D. from some lesser school. I hear he was a decent physicist; you don’t need a Ph.D. to be good at this kind of work. But this is shady business. It was a scandal at the time, but somehow nobody thought to investigate whether or not this fraud’s main project was also a fraud.
  3. A NIF whistleblower, Lee Scott Hall, was brutally stabbed to death in 1999. Hall was one of the NIF designers. I didn’t know him, but I know people who knew him. He definitely wasn’t into any shady business, and by all accounts was a straight shooter and a decent guy. This … really looks like a man was stabbed to death for pointing out that NIF couldn’t work (or any number of other things). Sure, nobody knows who killed him, but this is at least as shady as anything I’ve heard of happening in Russia. This sort of thing has happened quite a few times to whistleblowers at the Department of Energy.
  4. Two NIF whistleblowers who didn’t die, Les Mikolsy and Luciana C. Messina, were ignored, then fired in 2003. They were involved in the code that controlled the giant contraption, and pointed out some serious problems with it, including problems with safety implications, and the management of the project. Not a peep from anyone about their assertions or the lawsuit they filed against LLNL (it was dismissed; yay objective and completely non-corrupt court system!).

One of the greatest problems with the United States of America right now is a complete lack of accountability among our ruling classes. People still get fired; never the managers who break things. Maybe patience is necessary in this instance, and that inertial confinement fusion is “coming real soon now.” Maybe Ed Moses should be frog marched to the firing squad, or made to peel potatoes until he pays the taxpayer back the billions his gizmo cost. One thing is certain though: NIF, and all who are involved with it (heroic whistle blowers excluded), are presently national embarrassments. They have failed, and they should be roundly mocked for it. This isn’t a matter of, “gee, we should wait a little longer,” this is a matter of, “they promised it would work factors of 100 or 1000 better than it does several years ago, and they have failed repeatedly.”

Wanna know why human progress has slowed? Talented people wasting their lives on crap like NIF, which only exists because of corrupt empire builder bureaucrats in white laboratory jackets.

Interesting links:

http://www.nrdc.org/nuclear/nif2/findings.asp

http://spectrum.ieee.org/energywise/energy/nuclear/national-ignition-facility-mother-of-all-boondoggles

The most beautiful rocket

Posted in big machines by Scott Locklin on November 14, 2013

Rocketry is a field which peaked in the 1960s, probably never to improve appreciably. The space shuttle? A flying brick. The attempted replacement for the space shuttle, the Ares is a piece of junk. They originally tried to base it on shuttle technology “to save money” -a lovely demonstration of the sunk cost fallacy, but inexorably, fundamental systems (like the upper stage engines) were  replaced by 1960s era technology. The thing was such a piece of junk, it would have been more aerodynamically stable if it were flying backwards. Most flying machines are supposed to have more drag at the rear end then at the front end; otherwise they want to tumble. It looks wrong, because it is wrong. You could tell it was going to fail just by looking at the mock ups.

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What a pogo stick looking piece of junk

Rockets are interesting in their simplicity. In liquid fueled form, they’re at their most complex, but they’re still pretty simple. There are some pumps to pump the liquid fuel and oxidizers into the combustion chamber. Inside the combustion chamber are some nozzles to squirt the stuff around and mix it together. There may or may not be a sparkplug to light it on fire. Once it is on fire, the gas gets very hot and squirts out a nozzle. The whole thing is essentially tank + pump + nozzle to burn it all in. There are gimbals and steering jets to keep the thing on its path, but the real business of the rocket is pretty simple. The rocket moves forward by flinging things out the back end of the rocket really fast. There is nothing complicated about rockets; they’re all nozzles and pumps and pipes and tanks. Really, they’re just a complicated spray can.

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Spray can

One of the amusing subtleties of rockets: ever wonder why the exhaust nozzles are there? Why not just have a big hole at the business end? You may think it is to prevent flames from licking up the rocket’s side or something like that, but the reality is more interesting. The angle of the nozzle is necessary to extract the maximum energy from the burning gasses. Part of the extracted energy comes from the gas expanding as it leaves the combustion chamber. This is captured by the nozzle. The expanding gas pushes on the nozzle, effectively. The shape of the nozzle is dictated by the heat capacity of the fuel used, and the pressure that the nozzle works at. So a nozzle designed to work at sea level looks quite different from one which is supposed to work in space, where there is no ambient pressure. The thermodynamics for this is quite cute; I had no idea until I read a book on rocket science (Rocket Propulsion Elements by Sutton; PDF link here). You can figure out optimal nozzle shapes using simple ideas like the ideal gas equation and some calculus.

Titan2_color_silo

My favorite rocket is the Titan II. The Titan II was the first military ICBM that was worth a tinkers damn. It carried a giant nuclear warhead, meant to wipe out large cities in one shot with a 9 megaton yield. It was the heaviest payload carried by an American ICBM, and as such, it was kept in service until 1987. As a NASA launch vehicle, it lasted over 40 years, and would still be used, but America is no longer an industrial power, so we no longer make the fuels for it in enough quantity to make it cost effective. Its fuel consists of a toxic brew of caustic, poisonous hydrazines and for an oxidizer, nitrogen tetroxide, which turns into nitric acid when exposed to water. Nasty stuff, but very practical nasty stuff compared to what most liquid fueled rockets use, since it is all liquid at room temperature. Cryogenics like liquid oxygen and liquid hydrogen (more common liquid rocket fuels) were more difficult to handle; and they take a long time to load into a rocket. For military applications this was important, as you want to be able to launch at a moments notice. These fuels were also hypergolic, meaning they light on fire when they touch each other: not having a spark plug means one less thing to fail. Astronauts loved these fuels also, as they meant for quick countdowns, rather than sitting on top of an explosive firecracker while fueling up with cryogenic fuels. I love these fuels because of their toxic insanity. The real chemistry of rockets is more insane than any science fiction.



What lights my jets about the Titan II; its symmetry. It doesn’t have a dozen engines at the business end: just two, and they look damn cool, like dual quads on a fast car. The ratio of diameter to over all length is 1:10, which is a ratio evocative of viking broadswords. Not squat and ugly like the Polaris or the early Soviet launchers. Nor does it have the ugly staggered cone shape of the Saturn-V. Nor did it lumber and loiter at the launchpad like so many launch vehicles; it shot into space with dispatch and purpose. Even the exhaust plume is more beautiful than other rockets; it’s orange, and the two engines make a dignified narrow column of fire as it hurtles up to space. It looks like a rocket should. It is a graceful design, and they didn’t ruin it by putting cowlings over the interesting looking combustion chambers and elegant exhaust nozzles. Even the second stage engines are partially exposed to the air, like the engine in a top fuel dragster. It looks like it means business. It looks like the type of thing which could flatten a city, or lob a Freemason or two into orbit. It sent men into space, and was a genocidal trump card in protecting the formerly Free World from communism. As a cold war aesthetic artifact it has few equals.


“The Titan took off quickly!”


“It also looked good in its roll over and second stage activation; like a real space ship; most rockets look ugly doing this”

“watch the whole thing from another angle”



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