Archive for the ‘Business’ Category
I don’t think that “They’re doing it, too” is much of a defense for a wrongful act, but the fact that Shkreli is correct in pointing out that other companies are also profiteering by jacking up prices of drugs people must buy is an argument that government regulation is required. The free market will not fix a problem created by the free market.
UPDATE: Read this Atlantic report about Shkreli’s appearance before the House committee.
Robert Langrath and Rebecca Spalding report in Bloomberg Business:
After Martin Shkreli raised the price of anti-parasitic drug Daraprim more than 50-foldto $750 a pill last year, he said he wasn’t alone in taking big price hikes.
As it turns out, the former drug executive was right. A survey of about 3,000 brand-name prescription drugs found that prices more than doubled for 60 and at least quadrupled for 20 since December 2014.
Among the biggest increases was Alcortin A, a combination steroid and antibiotic gel to treat eczema and skin infections: The price soared 1,860 percent, or almost 20-fold, during the period. And a vial of Aloprim, a Mylan NV drug for cancer complications, more than doubled, according to the survey by DRX, a provider of price-comparison software to health plans.
Skyrocketing prices are getting increased scrutiny ahead of a U.S. congressional hearing this week: Democratic Representative Elijah Cummings, ranking member on a committee that is probing drug pricing, said Tuesday that pricing “tactics are not limited to a few ‘bad apples,’ but are prominent throughout the industry.”
Even after soaring prices became an issue in the U.S. presidential campaign, the cost of many drugs has continued to rise at annual rates of more than 10 percent. Drugmakers raised the prices of products as wide-ranging as erectile dysfunction drug Viagra, heart treatments, dermatology medicine and even brands that long have lost their patents. While specialty companies have had the steepest hikes, giants such as Pfizer Inc. and GlaxoSmithKline Plc kept pushing through smaller rises.
“The data shows that price increases are an integral part of the business plan,” said Jim Yocum, executive vice president at DRX.
Pharmaceutical companies often boost prices around the end and the start of the year, and the scale of recent increases was higher than what Yocum has seen in the past few years. About 400 formulations of brand-name drugs went up at least 9.9 percent since early December, according to DRX. . . .
Cabe Metz reports in Wired:
Yesterday, the 46-year-old Google veteran who oversees its search engine, Amit Singhal, announced his retirement. And in short order, Google revealed that Singhal’s rather enormous shoes would be filled by a man named John Giannandrea. On one level, these are just two guys doing something new with their lives. But you can also view the pair as the ideal metaphor for a momentous shift in the way things work inside Google—and across the tech world as a whole.
Giannandrea, you see, oversees Google’s work in artificial intelligence. This includes deep neural networks, networks of hardware and software that approximate the web of neurons in the human brain. By analyzing vast amounts of digital data, these neural nets can learn all sorts of useful tasks, like identifying photos, recognizing commands spoken into a smartphone, and, as it turns out, responding to Internet search queries. In some cases, they can learn a task so well that they outperform humans. They can do it better. They can do it faster. And they can do it at a much larger scale.
This approach, called deep learning, is rapidly reinventing so many of the Internet’s most popular services, from Facebook to Twitter to Skype. Over the past year, it has also reinvented Google Search, where the company generates most of its revenue. Early in 2015, as Bloomberg recently reported, Google began rolling out a deep learning system called RankBrain that helps generate responses to search queries. As of October, RankBrain played a role in “a very large fraction” of the millions of queries that go through the search engine with each passing second.
As Bloomberg says, it was Singhal who approved the roll-out of RankBrain. And before that, he and his team may have explored other, simpler forms of machine learning. But for a time, some say, he represented a steadfast resistance to the use of machine learning inside Google Search. In the past, Google relied mostly on algorithms that followed a strict set of rules set by humans. The concern—as described by some former Google employees—was that it was more difficult to understand why neural nets behaved the way it did, and more difficult to tweak their behavior.
These concerns still hover over the world of machine learning. The truth is that even the experts don’t completely understand how neural nets work. But they do work. If you feed enough photos of a platypus into a neural net, it can learn to identify a platypus. If you show it enough computer malware code, it can learn to recognize a virus. If you give it enough raw language—words or phrases that people might type into a search engine—it can learn to understand search queries and help respond to them. In some cases, it can handle queries better than algorithmic rules hand-coded by human engineers. Artificial intelligence is the future of Google Search, and if it’s the future of Google Search, it’s the future of so much more.
Sticking to the Rules
This past fall, I sat down with a former Googler who asked that I withhold his name because he wasn’t authorized to talk about the company’s inner workings, and we discussed the role of neural networks inside the company’s search engine. At one point, he said, the Google ads team had adopted neural nets to help target ads, but the “organic search” team was reluctant to use this technology. Indeed, over the years, discussions of this dynamic have popped up every now and again on Quora, the popular question-and-answer site.
Edmond Lau, who worked on Google’s search team and is the author of the book The Effective Engineer, wrote in a Quora post that Singhal carried a philosophical bias against machine learning. With machine learning, he wrote, the trouble was that “it’s hard to explain and ascertain why a particular search result ranks more highly than another result for a given query.” And, he added: “It’s difficult to directly tweak a machine learning-based system to boost the importance of certain signals over others.” Other ex-Googlers agreed with this characterization.
Yes, Google’s search engine was always driven by algorithms that automatically generate a response to each query. But these algorithms amounted to a set of definite rules. Google engineers could readily change and refine these rules. And unlike neural nets, these algorithms didn’t learn on their own. As Lau put it: “Rule-based scoring metrics, while still complex, provide a greater opportunity for engineers to directly tweak weights in specific situations.”
But now, Google has incorporated deep learning into its search engine. And with its head of AI taking over search, the company seems to believe this is the way forward.
It’s true that with neural nets, you lose some control. But you don’t lose all of it, says Chris Nicholson, the founder of the deep learning startup Skymind. Neural networks are really just math—linear algebra—and engineers can certainly trace how the numbers behave inside these multi-layered creations. The trouble is that it’s hard to understand why a neural net classifies a photo or spoken word or snippet of natural language in a certain way.
“People understand the linear algebra behind deep learning. But the models it produces are less human-readable. They’re machine-readable,” Nicholson says. “They can retrieve very accurate results, but we can’t always explain, on an individual basis, what led them to those accurate results.”
What this means is that, in order to tweak the behavior of these neural nets, . . .
One problem is that Obama decided that the best person to be in charge of the SEC is a Wall Street defense lawyer whose livelihood is protecting Wall Street firms, a position to which she will undoubtedly return once her term as SEC chair is over, much as Eric Holder returned to his Wall Street law firm once his term as Attorney General was over, a term that included zero indictments of Wall Street criminals. (These are examples of how the game is rigged, in this instance with Obama’s cooperation.)
Pam Martens and Russ Martens report in Wall Street on Parade:
Last night ABC began its two-part series on the Bernie Madoff fraud. Viewers will be reminded about how investment expert, Harry Markopolos, wrote detailed letters to the SEC for years, raising red flags that Bernie Madoff was running a Ponzi scheme – only to be ignored by the SEC as Madoff fleeced more and more victims out of their life savings.
Today, there are two equally erudite scribes who have jointly been flooding the SEC with explosive evidence that some Exchange Traded Funds (ETFs) that trade on U.S. stock exchanges and are sold to a gullible public, may be little more than toxic waste dumped there by Wall Street firms eager to rid themselves of illiquid securities.
The two anonymous authors have one thing going for them that Markopolos did not. They are represented by a former SEC attorney, Peter Chepucavage, who was also previously a managing director in charge of Nomura Securities’ legal, compliance and audit functions. We spoke to Chepucavage by phone yesterday. He confirmed that two of his clients authored the series of letters. Chepucavage said further that these clients have significant experience in trading ETFs and data collection involving ETFs.
Throughout their letters, the whistleblowers use the phrase ETP, for Exchange Traded Product, which includes both ETFs and ETNs, Exchange Traded Notes. In a letter that was logged in at the SEC on January 13, 2016, the whistleblowers compared some of these investments to the subprime mortgage products that fueled the 2008 crash, noting that regulators and economists were mostly blind to that escalating danger as well. The authors wrote:
“The vast majority of ETPs have very low levels of assets under management and illiquid trading volumes. Many of these have illiquid underlying assets and a large group of ETPs are based on derivatives that are not backed by physical assets such as stocks, bonds or commodities, but rather swaps or other types of complex contracts. Many of these products may have been designed to take what were originally illiquid assets from the books of operators, bundle them into an ETP to make them appear liquid and sell them off to unsuspecting investors. The data suggests this is evidenced by ETPs that are formed, have enough volume in the early stage of their existence to sell shares, but then barely trade again while still remaining listed for sale. This is reminiscent of the mortgage-backed securities bundles sold previous to the last financial crisis in 2008.”
The authors also note in this same letter that they have been presenting their evidence of “significant red flags” and “fundamental flaws” to the SEC since March 2015 and that the industry has not disputed the evidence. However, disclosures of these risks in the product offerings has not been forthcoming either.
To underscore to the regulators just how serious they are about cleaning up the ETP market, in a cover letter dated March 24, 2015, Chepucavage copied every member of the Financial Stability Oversight Council (F-SOC), the body created under the Dodd-Frank financial reform legislation to monitor financial stability in the U.S., including Federal Reserve Chair Janet Yellen, U.S. Treasury Secretary Jack Lew, and SEC Chair Mary Jo White.
The detailed March 24, 2015 letter from the whistleblowers pointed out that the very act of allowing some of these illiquid product offerings to be listed on U.S. stock exchanges is lending an air of legitimacy to them since stock exchanges in the U.S. are also mandated to police their own markets. The whistleblowers wrote:
“Whether it is realized or not, authorizations to trade exchange traded products by exchanges/self-regulatory organizations (‘SROs’) suggests legitimacy of the product to investors, which is evidenced by the growing interest in ETFs (supplemented through the massive ETF advertising campaigns to investors…)”
The whistleblowers noted:
“The market trading discussed herein… is being executed between investors and counterparties mostly consisting of Authorized Participants, market makers or clearing firms (which may be the same firms), which in many cases is not causing a net creation of shares (purchasing underlying assets) for certain important ETFs. In some ETPs, there is a conflict of interest between the investor and the contra parties in the secondary market.
“Anyone that has been critical of ETPs has been immediately attacked by the industry, without any factual data from the industry to support their positions. The strategy has simply been ‘attack the messenger,’ which does not address the underlying problems within ETPs.”
The most recent letter from the whistleblowers to the SEC came just nine days ago in advance of the SEC holding a February 2 meeting of its Equity Market Structure Advisory Committee to discuss the bizarre collapse in market prices in the opening minutes of stock market trading on August 24, 2015. In their latest letter, the whistleblowers detailed the role of Exchange Traded Products on that day, writing: . . .
In The Intercept David Dayen points out one good resource:
Say you’re the newly elected president of the United States, and you want to make prosecuting corporate crime a top priority.
Where do you start? Here would be good.
A new group called Bank Whistleblowers United have just pushed out a comprehensive plan they think would put the executive branch back in the business of enthusiastically identifying, indicting, and convicting financial fraudsters — restoring accountability while protecting the public.
The cumulative credibility of the group’s four founders is extremely strong. Richard Bowen is the Citigroup whistleblower who unsuccessfully warned top management about the rotten condition of loans inside mortgage-backed securities. Michael Winston spoke out about similarly corrupt practices at non-bank mortgage originator Countrywide. Gary Aguirre, a Securities and Exchange Commission attorney, was fired for refusing to let a Wall Street banker out of an insider trading investigation.
And their ringleader is William Black, an outspoken fraud-fighter and longtime white-collar criminologist who was a two-fisted bank regulator during the savings and loan crisis and now teaches at the University of Missouri–Kansas City (UMKC).
“The common theme,” Black said with characteristic bluntness, “is the unbelievably pathetic job of the Department of Justice and the FBI.”
One of the first steps the group proposes – echoing the recommendations Senator Elizabeth Warren made last week – involves appointing aggressive leadership at federal agencies with no conflicts of interest with the entities they regulate, and hiring enough staff trained in criminology and financial fraud to attack the problem.
“You don’t have to reinvent the wheel,” said Black. “The Justice Department forgot there was a wheel.”
The template for the plan is the saving and loan crisis of the late 1980s, when just one federal agency, the now-defunct Office of Thrift Supervision (OTS) issued over 30,000 criminal referrals and over 1,000 major bank executives went to prison.
By comparison, in the 2008 financial crisis, OTS and their bank regulator counterparts made zero outside criminal referrals on financial crimes. And more recently, the rate of corporate prosecutions has been pathetic.
The whistleblowers would restore a job position from that earlier era: Criminal referral coordinators at every federal agency to meet with their counterparts in law enforcement to press for prosecutions and continually improve the process. They would also issue monthly referral reports to make the process more transparent. George W. Bush eliminated criminal referral coordinators in his first term.
Federal agencies would also be required to create a “Top 100” list of elite fraud schemes in their jurisdiction, borrowing another successful technique from the S&L crisis. These top 100 schemes would hold priority over small fry prosecutions that look good on a tally of convictions but don’t attack the most damaging fraud.
“When we created the Top 100 project,” said Bill Black, “the assistant U.S. attorney had to report every month to someone who got on your ass if the cases weren’t progressing.”
Black says the Top 100 list led to prosecuting 300 savings and loans and 600 officials. “And despite the banks having the best lawyers in the world, we still got a 90 percent conviction rate.”
The proposal would end the emphasis on deferred prosecution agreements that let corporations and individuals get away with paying a fine or agreeing to independent monitoring instead of facing a criminal conviction.
It would end prosecutions of mortgage fraud “mice” – cases against people who defraud banks – and transfer the resources to financial fraud “lions” – when banks defraud people.
It would end an existing partnership with the Mortgage Bankers Association trade group. “In essence,” the Bank Whistleblowers Group writes, “DoJ has made itself the collection agency for the worst criminal enterprises in the nation.”
The whistleblowers even believe that quick action could lead to immediate indictments. For instance, they call for the public release of the still-secret reports from Clayton Holdings, a third-party due diligence firm that tested mortgage loans from practically every major bank during the housing bubble, and told the banks that 1 in 3 were improperly made. Financial Crisis Inquiry Commission chair Phil Angelides this week identified the Clayton reports as the key to a “last chance for justice.” The statute of limitations on the final securitizations doesn’t end until 2017.
“It’s already baked in that this will be the biggest strategic failure of DOJ in history,” said Black. “But they could still indict the top ten frauds.”
Another novel technique would be . . .
Twitter won’t take action for death threats, but make fun of Twitter and you’re suspended immediately.
Unbelievable. Or, sadly, believable. We have constructed a strange society and culture. That corporate sensitivity to the slightest affront is one example. Another: There’s a Super Bowl in Palo Alto, and apparently football fans are coamping out in little tents in the area reserved for them close to their cars. Meanwhile, police are chasing away homeless simply trying to camp in tents on an asphalt area. A cop threatened them with, “Those tents had better be off that asphalt in ten minutes or I’m arresting you all,” so the homeless picked up their tents and held them over their heads. Stand-off.
But the clear message is that the exact same thing that is okay for people with money to do is forbidden to people without money, the homeless. It’s a new take on Antaole France’s famous statement, “In its majestic equality, the law forbids rich and poor alike to sleep under bridges, beg in the streets, and steal loaves of bread.” Though nowadays it’s been updated: though the poor still are forbidden to sleep under bridges, beg in the streets, and steal loaves of bread, it’s perfectly okay for the rich to do those things. We’ve abandoned any pretense of an egalitarian society.
Kevin Drum gets down into the nitty-gritty of evaluating costs of proposed plans. And it’s quite interesting, showing how two people looking at the same plan can differ greatly in their estimation of costs—and thus in answering two key questions, “Is it worth it? and is it fiscally sustainable?”
Jeanna Laughlin reports in The Intercept:
Bring technologists and members of the intelligence community together to figure out what to do about unbreakable encryption and guess what they conclude?
They conclude that they don’t really need to worry about it.
Unbreakable encryption—which prevents easy, conventional surveillance of digital communications—isn’t a big problem for law enforcement, says a new report published by Harvard’s Berkman Center for Internet and Society on Monday. The report, titled “Don’t Panic”, finds that we are probably not “headed to a future in which our ability to effectively surveil criminals and bad actors is impossible” because of companies that offer end-to-end encryption, such as Apple.
That’s because the technology isn’t universally marketable and there are so many other spying options on the table, as everything from fitness trackers to fridges is getting hooked up to the Internet and transmitting vast amounts of data about our everyday lives.
The Berkman Center convened a diverse group of technologists, cryptographers, and former and current government officials—from think tanks, universities, the NSA, FBI, ODNI, and others— to hold meetings over the course of a year to discuss encryption privately, and then publish their conclusions.
A very public debate over encryption was taking place simultaneously. FBI Director James Comey, in hearings and speeches, has repeatedly stressed the dangers of “going dark”—saying that law enforcement is losing the ability to get its hands on digital evidence because end-to-end encryption scrambles messages for everyone except for the sender and the receiver. Even the company that sends the message can’t decrypt it when served with a warrant.
The public response from scientists and privacy advocates has largely focused on the technological impossibility of creating a secure way to give law enforcement special access to those communications without tearing a hole in the protection encryption provides.
While the signers of the report (excluding government attendees, who were unable to sign on “because of their employment”) mention this cybersecurity risk—the bigger takeaway is about why end-to-end encryption, likely here to stay, doesn’t pose an existential threat to law enforcement investigations.
First, the signatories conclude, not every company is going to jump on the end-to-end encryption bandwagon, because it’s not going to make them money. . .