Wednesday, January 27, 2010

Hand in hand

Wow.

Yes, the link is safe for work. It's ballet. A very special ballet.

And to the person who forwarded this to me - thank you for a tremendous five minutes of inspiration. This is beautiful.

Sunday, January 24, 2010

4th edition... oh dear

Why?

That's the main question that has been running through my mind since last night, when I got back home after getting my first actual play exposure to the newest edition of D&D (that's Dungeons & Dragons).

Seriously, why?

Faithful to the brand, I had bought the core books when they came out, then shelled another $60 or so on a full case of the character cards for good measure. Yes, I know, it's been out for over a year now, but I never got around to playing it until now. When I was invited for a one-off session, I jumped at the opportunity to get firsthand experience with what looked like more than an update of good ol' D&D, which all previous editions had been to some degree or other.

I must note that having played all of them, I had considered each new edition up to and including 3.5 an improvement over previous ones, streamlining rules and introducing others without hurting the core beauty of the system. Skimming the 4th edition books gave me a bit of an uneasy feeling, because for the first time after 25 years, I found myself frequently lost. Sure, at a basic level the terminology was more or less the same, but anywhere I read the details were very different. Still, I was excited about the revision, hoping against hope that in actual play, it would deliver on the big promise of 3.5 - streamlined mechanics without sacrificing the flavor.

Trouble started as soon as I set down to try and create a character. No matter how I approached it, I kept getting confused; pretty much nothing works the same way anymore. Eventually I downloaded some software to help me through it, which is when I began noticing a very worrying trend: the variety was gone.

No matter where I went, even though the designers went to obvious lengths to give things a lot of variance in look&feel, the underlying mechanics have become extremely rigid. For example, the various magical implements all work the exact same way, whether they are rods, wands or staves. Sure, they have different names, and sure, their descriptions are a little different, but when you examine the detail, you quickly note that there is no actual variance between them; a +1 rod of whatever will cost the exact same amount as a +1 staff of whichever, and do the exact same thing, which is to improve the wielder's magical attack rolls by 1. The side effects will add another die to the damage on a critical hit or have a minor effect. That's it. Nothing special, nothing quirky, nothing strange or unexpected or tricky or fun. The same goes for every other class of magic item - weapons, armor, and so on. The only place where they have preserved a tiny amount of interest is in the wondrous item category, but it has been shrunk considerably and made as boring as humanly possible in order to "fit" it into the new structure.

This was greatly disturbing to me. Part of D&D's strength has always been the variance in the system, its ability to handle pretty much any crazy thing that you would throw at it reasonably well, thereby supporting oodles of crazy things that people have thrown at it. Sure, some of them ended up having unexpected influences on the game, but the mechanics were always able to handle it with grace. They were accommodating. In 4th edition everything is so rigid you can easily memorize the entire magical item cost table by remembering about 30 entries, because all items have "levels" that are strictly defined, and they all have a "+" and a side effect which is also strictly defined, cost the exact same amount based on the level, and... well, it's just boring.

I chose a wizard because I've always liked D&D's magic system (I know, I'm weird), and since I rarely ever get to play (as opposed to DM), I figured why not. So I got to work through the spell selections, and they also seemed to suffer from the same problem; all the fun and unusual spells in the old spell lists was gone, replaced by a similar kind of attitude. Spells are broken into rigid components and otherwise straightjacketed so tight you can't even imagine sticking in something kooky. All the fun stuff is either gone or moved into a new class of stuff called "rituals", which seems to include the very few things that the designers simply could not get rid of but had no way to "fit" into the new magic system (e.g. the Knock spell). Magic seems to have lost its magic. And everyone can have rituals.

Bland.

Sure, it's all so simple, easy to understand, easy to acquire if you are new to the game. I know many people who have been playing D&D for years and are still learning the basics of the system, because it has always been rather complex, what with all its twists and turns and dark corners and exceptions and ways to handle other exceptions that nobody thought of... but it was all necessary to allow flexibility, which has always been its strength. And it didn't matter, because the rules were layered, and you knew that no matter what you wanted, it would be handled and someone would know how to do it. So you went along and picked up stuff along the way. As long as you had a good DM, you would be fine. Here... I was running out of interesting things to examine in the first half hour of character creation.

It went on and on. By the time I ended I had a somewhat hollow sense that I had just wasted 4 hours doing nothing but an accounting task. I was worried, but I still hoped I would enjoy the game itself. Maybe all this simplicity would help in streamlining combat, allowing us to roleplay more. That would be good, because anyone who has played D&D can remember combats that just lasted forever and a day, as people were looking for rules for special situations, or trying somehow to hold on as their magic and healing was being depleted, thus taking actions designed to maximize their advantage and preserving their hides. It could take a long time in real life. 4th edition combat sounded pretty straight forward, with powers that could be reused at will, or once per encounter, or what have you, and every character could heal themselves by foregoing an attack, making the cleric a bit less critical. Or at least so I hoped.

So we started our adventure and... our first combat lasted 4 hours, and was boring as hell. Why? for several reasons. First of all, no criticals anymore. If you roll a 20, you get maximum damage, but that's it. That's no fun; big critical damage has always been part of the excitement, the breaker of tense moments... if you've been playing for a while, you must remember plenty of times where the party's life is hanging in the balance, and someone rolls that magical "20" and everyone screams and hollers because as stupid as it is, you know a crit will change things. Not anymore. I saw three "20"s being rolled in the first half hour and it was entirely "ho hum"; weapon does maximum damage, thank you, good bye. Heck, at least three other attacks ended up doing the same thing without a crit. Where's the fun?

Then it was the powers - the mightiness of renewing powers between encounters. That was the big promise of the new system after all; a wizard doesn't lose all their powers in one combat, people can heal more rapidly with healing surges, and so on. Except that the important spells have daily use so they suffer the same limitations, and healing surges are pointless because everything has so many hit points it just takes longer to kill. In fact, as I was slogging through I realized that the entire system has been recalibrated to be far less random and chaotic; no instant deaths, no big upsets, no rapid changes in momentum... it is perfectly designed for larger scale faceless mini combat, where you don't care about any particular participant as long as you win the battle. That's great and all, except D&D is not Warhammer; it's always been about the party, and the characters, and they mattered individually.

In 4th edition everything is evened out, you always know what to expect, nothing gets killed in one shot, weapons are reliable in the damage they give out to the point of being infuriating, and it gets to the point where there is no tension. "Oh, here's a goblin, it will take 2-3 hits to kill; the elite ogre will probably take 8-9; I can soak 4 hits before I need to surge". The variances are so small they become meaningless, and the game truly does degenerate into rolling dice hoping to hit target numbers. No excitement. Tactical warfare? baloney. When variances are so small, the DM's task is reduced to making sure the opposing parties are well-matched. I cannot imagine major upsets ever happening, because even if a 5th-level PC scores a lucky crit against that 10th-level monster, the latter would shrug it off as the weapon bites for max damage - just another in a series of endless scrapes and cuts. What's the point? and there is no advantage to the streamlining, either, because things just take longer, as you are required to go through the motions more times, make more die rolls, and so on. No special power that can break the rules momentarily. No big spell or item or weapon or whatever. It's all so damn structured.

It then dawned on me that the whole notion of renewed powers was to allow groups to go into multiple battles in a game day. Since when did this ever trouble anyone? it's not like sleeping overnight in D&D takes more than 1 minute in game time. In a dungeon? lock the door of the room you're in and sleep. 60 seconds later you're ready for action. What's the big deal? it's as if somebody started believing the fantasy timeline somehow mattered in real life, and literally dismantled the entire system just to accommodate a supposedly more "realistic" approach to time - in a fantasy role playing game... not to mention that this is all nonsense anyway, as my group has had no trouble at all "clearing out" entire dungeon levels or sections without "rest" even at low levels, since by the time 3.5 rolled around, wizards could do a lot more than "magic missile and rest", just as clerics could do much more than be a traveling band-aid dispenser.

Speaking of wizards, and going back to my game yesterday... magic is not only much less varied, but also much less interesting and powerful. Clean out a room full of goblins with a fireball? no can do, mister. See, all them goblins have 60 hit points, and you do too, but fireball is still 3d6 plus your modifier, so... what about lightning bolt? magic missile? wait a second, how come all my spells have the same attack values and damage modifiers? what? it's because it's all a function of my implement? so... if my wand is a +2 wand, and my INT modifier is +5, then ALL my spells will have an attack of +9 damage of +5? that's IT? sure, it's easy to remember, but what exactly is the point? can I find an edge anywhere?

No, I suppose not. What a disappointment. In fact, by the time our big combat was done, I felt nothing at all except that all characters are so well "balanced" that they were completely interchangeable. Everything anyone did ended up with the same end result, delivered by different box texts. And I think that summarizes 4th edition pretty well in general.

I will not play 4th edition again, nor will I run it. And I mourn future generations of kids who will be taught this as "D&D", because I predict that in the long run D&D is destined to become a dying breed, for they have murdered its soul. I did learn one very valuable thing yesterday - I had never credited the D&D system itself enough, always focusing on the role-playing aspect of the game. Now I know better. Because what I experienced yesterday reminded me of just how useful all these strange little mechanics are in translating the danger and excitement and sense of wonder and helplessness and magic and curiosity from our minds onto a workable social experience. And if you take away this engine - the engine that supports this translation from imagination into dramatization - then you end up losing the purpose of the game. And I suppose that it was worth 12 hours of my life, between character creation and the play session, to learn this lesson.

Monday, January 18, 2010

Best cars I've rented in 2009

So I travel a lot, and as a result get to drive a new model or type of car practically every week. This isn't going to be long, but I was ruminating today about last year and the cars I've driven, and came up with a surprising conclusion, or maybe an impression, I wanted to share with you.

The best brand? by far, Ford. Every single car I've driven made by these folks exceeded my expectations. The company has really gotten its shit together, people. I was most impressed by the Flex, which is head and shoulders above anything in and around its segment, that when we do replace our Honda Odyssey minivan, I'm buying one of those. Talk about a shift in attitude.

The best car? this was my biggest shock. I've been a huge fan of german brands for years, and have been driving either a Bimmer, Audi or Benz as my main car for a long time now (haven't owned a Porsche yet). I despise the luxury Japanese segment, and Lexus in particular, as they are completely soulless and at least in my view no more than toasters on wheels. I could go with a Jaguar, but those folks had lost their way for a while now. Koreans? who?

So imagine my surprise when the car that delighted me most in 2009 was... the Hyundai Genesis. Somehow, somewhere, someone out there in Seoul has managed to figure out how to merge Toyota and Mercedes. They have taken the former's inspiring sense of simplicity, quietness and confidence, and the latter's even more inspiring sense of luxury, comfort, and... soul. The Genesis manages to be like... like a sub-Lexus-priced Benz that actually still knows how to speak to you.

I've heard that the folks at Hyundai plan to make a premium car (Equos?) that will attempt to do the same but going after the S-class, much as the Genesis tries to go after the E-class. If they make it as good as - dare I say better than? - the Genesis, I may well end up with one down the road. Hyundai should really be commended; I remember my first experience with their cars, a 97 Hyundai Accent, which was horrendous. I hated every moment I spent in it, and when I was scheduled to receive a company car later that year, I ended up choosing to contribute an extra $100 a month out of my salary towards a Peugeot 206 instead of having to drive the Accent. The Genesis simply blew me away.

Sunday, January 17, 2010

The great moral hazard fallacy

I would like to spend a few minutes advancing an argument against the number one "reason" policy makers are touting against mandatory principal writedowns for mortgages. Note that pretty much all economists agree that this is the easiest, cheapest, and most effective approach to solving the current housing crisis, and that if structured in such a way that lenders still share the upside when houses eventually get resold down the road, the cost will be cheaper still.

But what they all say - and what many people get upset about - is the idea that by doing so, one is helping careless home buyers who have "taken a risk" and "should now pay for it" rather than "get rewarded" through a writedown. It's simply unfair, or so goes the argument.

Absolute, utter, complete hogwash.

Not only is this nonsense, it's dangerous nonsense, because it sounds "right" so it's very convincing. Sort of like a post-hoc fallacy.

Let me explain why. It really won't take long... the simple reason is that... drumroll please...

The homeowner doesn't gain from it!

I am now going to wait patiently for you to cease from your paroxysm of hysterical laughter. No worries, go ahead, enjoy it, there is a lot of research pointing to the health benefits of a good belly laugh ever so often.

Ready?

Good. Let's proceed.

The basis for my argument is simple: the one and only person that has gained from the inflated price at which the house was originally sold is - this should not come as a great surprise to you - the seller.

That's the guy that pocketed the inflated gain. That's the guy that got money on paper converted into actual paper money (I love bad puns; this one was for you fiat money haters).

The side that will lose some money in this equation is not the buyer, but the lender. They are the ones that completely ignored asset valuation and risk management practices and lent money at much, much higher valuations than the underlying assets were ever worth - even though they knew better. Brent White in his excellent piece entitled "Underwater and Not Walking Away" (Google it, or visit my previous posting on the topic), explains it a lot better than I ever could:

At a basic level, sound underwriting of mortgage loans requires lenders to ensure that a loan is sufficiently collateralized in the event of default. In other words, in appraising a home the lender should ensure that the loan amount, at the least, does not exceed the intrinsic market value of the home.
As discussed above, a textbook premise of economics is that a home’s value, even an owner occupied one, is “the current value of the rent payments that could be earned from renting the property at market prices.” As such, historical home prices have hewed nationally to a price-to-annual-rent ratio of roughly 15-to-1. At the peak of the market, however, price-to-rent ratios reached 38-to-1 in the most inflated markets, and the national average reached 23-to-1. If personal responsibility is the operative value, then lenders who ignored basic economic principles (of which they should have been aware) should bear at least equal responsibility to homeowners for issuing collateralized loans that were far in excess of the intrinsic value of the home.

So. We have the seller on one side, who has made some nice moolah, and the bank on the other, having lost that same amount of moolah. Yes, I am simplifying, in reality many loans got sliced and resold but the principle of my argument remains the same, so I will conveniently gloss over these details.

I ask you to note the mysterious absence of the buyer in this equation.

I am not going into the argument for strategic defaults (Google it too), but they all seem to fail to hone in on this point. Let me state this again: the buyer has not really been a participant. As is typical in a real estate transaction, the money goes straight from the buyer's lender to the seller, and the buyer signs a promissory note promising that they will do their best to repay that money to the bank, with some interest tacked on. It used to be that buyers had to actually put some money on the table too - you know, those pesky down payments - thus giving them skin in the game, but lenders decided at some point to not only give sellers a lot more cash than could ever be justified for the asset, but cut out the buyer's participation entirely by not demanding down payments from them, effectively turning them into... can you guess?

Yes, renters.

Their thinking: our middle man - that buyer - will flip the thing in a couple years and we'll make decent interest in the mean time on this "low risk" investment. And that's what the good lenders thought, the one that actually kept the loans on their books. The vast majority simply repackaged the whole thing and resold it, making their money back right there and then with some nice fees attached. Anyway, that sordid part of the tale is also far too long to get into in this post.

But note that the buyer did not, at any point, actually get any money. They moved to a new house, and are paying a mortgage. Now they are paying a mortgage that makes no sense to pay anymore, hence strategic defaults and the whole nasty cycle that we are experiencing due to negative equity. Also note that the subprime folks have been mostly washed out by now; the crisis is now squarely in the prime arena. The people we're talking about are not speculators, they are the upstanding middle-class citizens who are the backbone of this country.

Now here is what happens if you write down principals: the buyer still isn't getting any money. Really, they are not. The seller already got it, and made out with it; you can't catch those folks anymore, they are long gone. Actually, most of their profits have probably been "reinvested" along the way in speculative real estate deals, where again one bank transferred money to another with a middle man being that seller who is now the buyer using those quick gains to try and make more quick gains. I wish someone actually tallied up how much of those paper property value profits were actually simply the same money constantly moving between financial institutions determined to make as many fees as possible on the process of moving those digits from one institution to the other using middle men "sellers and buyers". That would a fascinating study, I'm sure. Sort of like the paper profits of the dotcom era.

But back to my point. The buyer hasn't made anything. The don't suddenly get all this money in their bank account to spend on lavish vacations and new cars. They never see any real benefit from it, because the house will never be worth enough for this to register in their bank account - and if it is, then by having a clawback provision in the mandatory writedown concept I've described above ensures that this does not happen. The seller already had their cake, and ate it too. That monetary benefit is already long gone.

But what will happen is that the buyer now has an incentive to keep making payments, making the loans perform. The lender will "lose" money, but it's money they already lost when they gave it to the seller. It is not money they can realistically recoup from the middle man - that buyer - because although many of us our sheep, we are not that stupid of sheep, and many folks are making the decision not to pay double the price of anything just for shits and giggles. So the bank ain't seeing this cash back, not because the buyer is being mean, but because the guy who ripped the bank off - that original seller - already took the money and ran.

Thus the moral hazard argument is misleading. If any moral hazard is to be discussed, it's the one that applies to sellers who sold before the crash, managed to somehow be smart enough not to buy back in, and are now sitting on a pile of cash they got for free (because the buyer's lender threw caution to the wind by financing an asset at inflated prices). But guess what; those folks were not morally corrupt at all, rather they were smart and benefited from reading the market properly. Just like those folks crying "moral hazard" on Wall St, in fact... interesting, no? these smart sellers will tend to view this as having been real lucky, and gotten a once in a lifetime financial opportunity. Some of them may be spurred on to start a business with some of this money. Some of them might spend it recklessly, of course. Who knows? the point is that this part of the deal is long ended.

No buyer that "benefits" from this, however, will ever see this cash. No way, no how. All they will "gain" is a sense of fairness, where they are making a normal payment for their house, and will still be in worse shape than other buyers, because they will not benefit from any appreciation unless houses magically top their previous peaks (in 40 years, maybe).

This is so obvious I am wondering who, exactly, is advancing the moral hazard argument. Oh, wait...

Friday, January 15, 2010

Can I sue myself too?

I laughed... I cried... I laughed some more.

Sunday, January 03, 2010

Strategic defaults - I love this blog post

It's just too brilliant to pass up. Funny, too.

Also, this one reinforces the last... I am adding because of the second part, with it's delightful 50-year-old Time article link.