Tuesday, April 30, 2019

Quantum mechanics and why Elon Musk's IQ is below 130

In Q1 of 2019, Tesla reported a loss of $702 million, far worse than all estimates, and this number is still a euphemism for the financial reality because if we omitted some sales of $200 million worth of carbon indulgences, the loss would be $918 million per quarter (or $1,140 million in cash). And there were apparently other "stretching cosmetic fixes" that have made the situation of Tesla at the end of March look better than the natural picture of the reality.

The cash dropped from almost $4 billion at the end of 2018 to $2.2 billion at the end of March – a part of the drop was the $920 million bond. The cash burn rate almost certainly accelerated dramatically in April – see e.g. the 80% drop of sales in Norway between March and April – which indicates that the company could run out of cash in May or early June. Meanwhile, it's being debated whether Tesla may collect new cash. There seem to be obstacles and given the decreased stock price, it would be more expensive than months ago.

What the 97% consensus looks like: 100 kids (metaphor of Tesla bulls) vs 3 professional soccer players (Tesla bears). If someone doesn't have good arguments or skills, a high number of 100 or more such people just doesn't help, an elementary point that the people from "Modia" don't seem to get. Goals are near 1:42 and 2:57. Watching it is actually more entertaining for me than a regular adult soccer match.

I am often looking at TSLAQ posts on Twitter. Most of the Tesla skeptics who use the $TSLAQ hashtag in their tweets are extremely reasonable, insightful, and quantitative. Many of them have studied the Tesla financial reports with a microscope and their detailed understanding of the company's situation is plain amazing. And most of their opponents are irrational bullies with low intelligence who only know how to talk badly about others but who have nothing to contribute. These people only know "Tesla fan good, Tesla skeptic bad". There seems to be nothing else in their brain whatever. The difference boils down to the integrity of TSLAQ.

Meanwhile, Tesla is traded at $240 per stock or so (after setting a 2-year low at $231.13 on Friday – the huge margin call could occur near $213, a new guess), about 37% below the all time high of $380. Lots of new bulls are added every day – currently about 150,000 have long Tesla positions on Robinhood. If and when the company goes bust, these people should lose tens of billions of dollars in total and I became certain that virtually all of them deserve it. The world would – and hopefully will – become a substantially better place when the people of this kind, a violent herd that is never willing to listen to any rational arguments let alone numbers, gets significantly poorer.

Meanwhile, Tesla CEO Musk is changing cartoons as his avatar, posts cartoons and fake pictures of spaceships on Mars, posts other memes, and sometimes he wants to sound "high-brow". And that's what I chose in the title of this blog post. OK, someone wrote that Musk got a double degree from University of Pennsylvania in 1994 – economics and physics. What was the hardest course, Mr Musk?

OK, can you tell us how it has affected your life?

Fine, I had something more technical or quantitative in mind, Mr Musk:

Nice. There's a poll in the last tweet – one, 14 million, or infinity? With 70% of votes, "infinity" unsurprisingly wins because that answer contains the maximum amount of Kool-aid. You know, I am amazed by the people who say that Musk is unusually intelligent because the man whom I can observe is clearly a poseur who is near-average in intelligence. And I am rather confident that this mediocrity is one of the basic traits that makes him so popular among certain people.

OK, undergrads in physics probably had the highest IQ among the majors, with the average IQ about 130. That's 2 standard deviations above the mean IQ, 100, and about 2.5% of the people are above 130 – by the definition of the IQ and due to the basic properties of the Gaussian distribution. None of the classmates in Musk's QM classroom is as famous as he is but most of them are or were smarter!

Now, Musk had a combined degree. In principle, that could mean that he was good both in physics and economics although most of us surely think that this isn't really what the double major means. It means that the person doesn't really have to be excellent in either subject – he gets a degree for being not quite hopeless in either, so the degree is partially for some versatility.

But let's think about Musk's thinking about the quantum mechanical course.

First, he says that it was difficult – and more difficult than other courses combined. That surely sounds reasonable from some perspective. Quantum mechanics courses are surely those that make the physics specialization inaccessible for most of those 97.5% of undergrads because the subject is hard for them. However, it's exactly the perspective that the good students of a quantum mechanical course don't have. Those just master the material of the course – it doesn't look particularly difficult to them. Many of them are ready for harder courses whose very existence is unknown to Mr Musk. So good students wouldn't really use the adjective "harder". In fact, many mundane courses may be "harder" for good students because these mundane courses demand something ordinary, boring, and good students in QM courses simply may have a hole or two in such things.

That's the first indication that Musk was actually worse-than-the-average student in that QM course, and therefore probably a worse-than-the-average undergraduate student of physics. That's the precise enough reason why I wrote his IQ is below 130, the previously quantified average IQ of undergraduate physics majors.

Second, note that he has used the past tense. Quantum mechanics "was harder", we were told. This is also something that the students who actually "get it" wouldn't really say. The past tense indicates that for Musk, quantum mechanics wasn't something he should actually learn or he did learn – so that it affects his understanding of the world throughout his life. Instead, for Musk, quantum mechanics was all about the course or two, a one-time experience that is analogous to smoking a substance or a bungee jump. And Musk is proud of having gone through this particular stunt, a quantum mechanics course, proud of having participated at all, aware of having hit the personal limits. It's the past now.

People who have really understood how quantum mechanics works – and that our world is governed by its laws – would simply avoid sentences of the kind "quantum mechanics was" that describe their relationship with quantum mechanics because for them, "quantum mechanics still is". You could suggest that Elon Musk is "brilliant" in other things than quantum mechanics. The problem is that he did choose economics+physics and those indeed seem relevant for what he's doing now. Comparing him to other physicists and other economists is the exactly relevant comparison here – and I think he ends up below the average in both.

Elon Musk finds QM counterintuitive. Whether QM deserves this adjective depends on one's intuition, however, and the more intelligent one is in the physical direction, the less counterintuitive QM seems to him or her.

And it gets worse. The "elaboration" of his ties with quantum mechanics is about a cat named Schrödinger – and about the counting of the Universes, among other things. Here the contrast with good students of physics is even more striking because people who think about "a cat named Schrödinger" when someone says "quantum mechanics" don't really belong to a proper college at all. This is a childish stuff from popular books addressed to the most inclusive masses and claiming to be about physics – which aren't really about physics at all. The idea that quantum mechanics is about cats, their life, and their names is a silly part of the mass culture, not a part of physics.

To a lesser extent, this may be said about the counting of the worlds or the "futures", too. Counting "many worlds" and similar things may be associated with quantum mechanics in the popular books or the mainstream and tabloid press but it's simply not what the actual quantum mechanics – and even the quantum mechanics courses at University of Pennsylvania – are all about. Look at a Upenn QM syllabus to see the actual content of such a course. There are no cats and multiple worlds there. So even that tweet about the "many futures" indicates that Musk is actually clueless about quantum mechanics. He is associating himself with the seemingly hard phrase "quantum mechanics" to make himself look smarter, but it only works for the readers who are actually not smart themselves at all. Clearly, that impression on these not very smart people is enough to misallocate tens of billions of dollars these days.

It has become a mandatory religious ritual to say that Musk is a visionary, a genius, or very smart. Even people who are very skeptical about the finances of Tesla often repeat this kind of a strange prayer. Well, I find it obvious that there's nothing extraordinary about Elon Musk's intelligence. He's close to an average man, in fact, his thinking about many difficult things may be said to be utterly childish, and all the legends about his unusual skills and thinking are just religious superstitions, on par with the legends in the standard religions.

In the West, the standard Christianity has been disappearing for some time. But there's some irrational tendency in all the humans that can't quite disappear and this tendency is responsible for the rise of similar "Ersatz religions" such as the hardly defensible idea that Elon Musk is a genius. Or the climate change hysteria – and these things, along with many others, are correlated with each other. I think that an overwhelming majority of the people who would agree that "Elon Musk is a genius" would also agree with the claim that "the Earth is facing a looming catastrophic climate change".

People posting and "liking" stupid memes on social networks often think that they're near the cutting edge of technology etc. if they "like" or retweet the right things. In reality, as the video above shows, playing with the Instagram is something accessible to chimpanzees, too. The idea that the social interactions between Musk and his fans betray some unusually high intelligence of either side conflicts with the basic reality.

Let's hope that this ecosystem of people – who have been increasingly nasty in their treatment of the smart or rational people, the "infidels" – will at least see the remaining $40 billion evaporate from the Tesla value soon. Such a bankruptcy wouldn't be a universal cure for all diseases of the contemporary mankind. But it would be a nontrivial addition, a welcome dietary supplement. Note that Soros owns $8 billion because the extra $32 billion belongs to the Open Society Foundation, no longer under his control.

In total, this is also $40 billion. Soros+OSF and Tesla are similar types of evil – systems of people that suppress the people's independent thinking, among other good things from the old-fashioned world – with a similar financial size – $40 billion – so I find it tempting to think that the Tesla bankruptcy could reduce the influence of the evil, assertively "progressive" and pro-group-think people, by a similar amount as the hypothetical disappearance of Soros and the Open Society Foundation. And that's a way of thinking about the possibly coming event that makes me a slightly more optimistic about our deeply troubled world.

P.S.: I've seen various videos related to progress in recent days. In 2010, some of our conversations with Peter Thiel were about the speed of progress, singularity etc. I thought he was brilliant yet reasonable. But when I listen to some comments now... Here is a 2012 exchange with Eric Schmidt of Google – hat tip to someone at TSLAQ. Thiel complained that Google, Apple etc. weren't tech companies because they had lots of cash and didn't know what to do with it – e.g. how to employ lots of people. So as the providers of search engines, ads, iPhones etc., they became "like banks". Amazon was the only good one because it reinvested all profit and employed lots of people.

I just can't believe it. It's so missing the point, all of the key ones. Amazon reinvested everything because Bezos had a simple plan to create a very large company – some world-wide shops – that would make him the richest man on Earth. Shops and warehouses employ lots of people. That's why. But some other kinds of business don't. Indeed, "tech" usually means that the human labor becomes unimportant and not too many employees are needed!

And the dividends. Dividends are ultimately the regular, controllable motivation why a rational investor owns any kind of stock (although sometimes the dividends expected in a rather distant future may be what matters). If you insist that tech means "low dividends", be my guest, eliminate some companies from your list of "tech companies". But producing profits is still ultimately more important than being in some arbitrary list of "tech companies". At the end, it's silly to define "tech companies" according to the dividend policies. "Tech company" used to mean that the company was dealing with fancy enough engines – today it means it's dealing with some "software" at some important level. But what a company does with the profit is a financial decision, not a decision that determines the "kind of industry".

Banks are a different "industry" and there's nothing wrong about it.

This Thiel's obsession with "technological progress" is ultimately completely irrational and, in some sense, it makes Thiel a "progressive", too. The progress has probably slowed down since the 19th century etc., we agreed, but that's how the world works. It has various reasons. Some of them are objective, not due to people's degeneration. Some low-hanging fruits have been picked. Talking about some unrealistic rate of progress ends up as hype that is disconnected from any reality. The progress is whatever it is and simply by pushing some large companies to reinvest everything won't make progress faster. Reinvestment of profits simply isn't a universal recipe to accelerate progress of the mankind. There are lots of advantages of having cash reserves. The owners may be more resilient towards shocks; or ready for an opportunity when some great idea that leads to progress actually emerges.

Thiel seemed to place some arbitrary "moral obligations" above the people's and companies' common-sense ideas how to do well. There's nothing "universally good" about paying low or no dividends. Google, Samsung, Nokia etc. whose profits sank in the recent quarterly reports could tell you a lot about the disadvantages of low profits! Some investment is desirable for profit but some "would-be moral rules" for every "good" company to do such things (reinvest everything) is completely undermining capitalism and ultimately hurts the whole. And the progress promoted while "having no or negative profits" is almost guaranteed to be hype without substantial beef, like in Tesla's case. It's wrong, wrong, wrong and in this sense, the business-as-usual must still be the default approach, otherwise the world is in trouble.

Innovators are some people and companies, they may be old or legacy companies or new ones. But you know such companies by their fruits, the actual advances, not according to their having no dividends. There may be a correlation, and I agreed when Thiel was saying that to me. But correlation isn't causation. Paying no dividends is just an easy-to-do decision which doesn't guarantee that big inventions are being made! In most cases, it ends up being an empty gesture, and if you promote this behavior to a moral virtue, most people will just do empty gestures. But investing into random nonsense is usually an extremely bad idea and indeed, Tesla is a great example of that point.

No comments:

Post a Comment