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In Defense of Bad Ideas

surjan.substack.com

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Re: In Defense of Bad Ideas

#41

Post by homeless_engi »

projektfu wrote: post #24
thaumasiotes wrote: post #18

Earlier quoted context omitted.

No, short means your position is predicated on the idea that the future price of something will be lower than the current price. Owning a positive number of put options makes you short the underlying stock, which is presumably why the comment upthread described put options as "short put options". Selling put options gives you a long position, not a short position. I wanted to analyze this in terms of the original com…

You have to think of the futures definition of long and short, not the equities definition of short. In every futures contract, the long is paying money and the short is receiving it for the contract. Every options contract has a short, the writer, and a long, the buyer.

In this case, the original commenter explicitly (erroneously) stated "options". Options cannot have unlimited downside; you can always choose not to exercise the option.

Re: In Defense of Bad Ideas

#42

Post by pdonis »

darkerside wrote: post #27
adwn wrote: post #22

The article assumes that SpaceShipOne's design was actually a good design. It wasn't. To be precise, it was a good design to satisfy the artificial requirements of the prize, but nothing else. The design doesn't scale. The hybrid rocket motor has been the source of countless headaches, lousy performance, and more than a decade of delays, the feathering mechanism has already cost the life of a test pilot, and the need…

It's a great example. The only reason these factors clearly outweigh the positives is because the benefit of hindsight. Or do you imagine the brightest minds of NASA just weren't thinking clearly for decades? The killer feature of the shuttle was supposed to be the cost savings from being able to make multiple trips using the same equipment (sound familiar?). It turned out not to be a feasible solution from a technic…

> It turned out not to be a feasible solution from a technical cost standpoint

The shuttle turned out not to be a feasible solution because it was loaded down with other requirements that had nothing to do with the killer feature you describe. A key one was the requirement from the US Air Force that the shuttle have enough cross range capability to be launched into a polar orbit and then return to the launch site after one orbit [1]. That was what drove costs up to the point where the shuttle wasn't feasible any more in terms of the killer feature.

[1] https://history.nasa.gov/sts1/pages/scota.html

Re: In Defense of Bad Ideas

#44

Post by tonyhb »

bmmayer1 wrote: post #43

I wonder if "Abolish the police" is one of these ideas.

Notwithstanding the political debate that you're enticing, I believe "abolish the police" is shorthand for "abolish the current police system/qualified immunity and replace it with something more humane".

I strongly believe that no one is saying "let's have no judicial system".

Re: In Defense of Bad Ideas

#45

Post by projektfu »

homeless_engi wrote: post #41
projektfu wrote: post #24

Earlier quoted context omitted.

You have to think of the futures definition of long and short, not the equities definition of short. In every futures contract, the long is paying money and the short is receiving it for the contract. Every options contract has a short, the writer, and a long, the buyer.

In this case, the original commenter explicitly (erroneously) stated "options". Options cannot have unlimited downside; you can always choose not to exercise the option.

If you write a put option, it has downside limited only by the underlying zero price of the security minus the premium. If you write a call option, your downside is theoretically unlimited. If you buy a put or a call your downside is limited to the option premium.

edit: i should say writing a put option (short put) your potential downside is the difference between the strike price of the option and the premium, if the underlying security goes to zero.

Re: In Defense of Bad Ideas

#46

Post by dognotdog »

Cthulhu_ wrote: post #28
bluedino wrote: post #25

I've always wondered how terrible automotive designs make it to production. Engines or transmissions that quickly fail, cars that are just garbage in quality...nobody along the years of development stopped to say "maybe we shouldn't build this..", or perhaps someone did? Did the company building this get their moneys worth when it comes to lessons learned?

When it comes to mechanical failures like that, it's never due to incompetence; it's due to cost cutting concerns (e.g. using less material, cheaper / inferior material) and / or planned obsolescence. Automotive engineers are highly competent, and most will have had a lot of education when it comes to materials, strengths, stresses, wear and tear, etcetera. And car companies build up that knowledge over the decades.…

I'd say it is due to incompetence, but not as much the individual engineer's as failures of the organization, though I have seen plenty of people not doing the job they're qualified for. These failures stem from plain mis-management, political turf wars, and misaligned incentives -- cost-cutting being the most obnoxious driver, causing a landscape of balkanized teams to fight for resources and engineering concerns becoming an aftertought.

Re: In Defense of Bad Ideas

#47

Post by surjansingh »

adwn wrote: post #22

The article assumes that SpaceShipOne's design was actually a good design. It wasn't. To be precise, it was a good design to satisfy the artificial requirements of the prize, but nothing else. The design doesn't scale. The hybrid rocket motor has been the source of countless headaches, lousy performance, and more than a decade of delays, the feathering mechanism has already cost the life of a test pilot, and the need…

As the author of the article, maybe I can explain why I think it’s a good example. I’ll just say - I absolutely could have chosen something that was more of a slam dunk great idea (in hindsight) with tons of follow-on success. I mostly chose it because the Rotary Rocket and SpaceShipOne sit next to each other in Mojave and got me thinking about this in the first place.

As you said yourself, it was a good design to win the prize. That to me is the key. It did everything it set out to accomplish. Your comments all relate to the scaled up SpaceShipTwo - a completely different vehicle - which I agree that the jury might still be out on. But to me, that’s like saying that a hang glider is a bad idea if someone tries to make a hang glider for ten people. Is it the hang glider that’s the bad idea or the fact that someone’s trying to scale something that maybe doesn’t scale well?

That it was the first private crewed spaceflight shouldn’t be underestimated either. I think this list of human spaceflights really puts it in context: https://en.wikipedia.org/wiki/List_of_human_spaceflights

Thanks for reading and for your perspective.

Re: In Defense of Bad Ideas

#48

Post by surjansingh »

jkhdigital wrote: post #5

Bad ideas are magical when they come in the form of long call options (bounded cost, unlimited upside). Bad ideas destroy companies/nations/civilizations when they come in the form of short put options (bounded benefit, unlimited downside).

Great point. I wasn't even thinking of this in a larger context. I wonder if the downside is more important than the upside. So if it's just me trying to build an experimental aircraft, at worst I die. If I'm a city planner, I can make a bunch of lives miserable. Not sure what the upsides would be in either case, but the number of people affected by the downside is pretty easy to tell. So maybe the fewer people affected by a bad outcome, the more radical your ideas can be.

Re: In Defense of Bad Ideas

#49

Post by thaumasiotes »

projektfu wrote: post #45
homeless_engi wrote: post #41

Earlier quoted context omitted.

In this case, the original commenter explicitly (erroneously) stated "options". Options cannot have unlimited downside; you can always choose not to exercise the option.

If you write a put option, it has downside limited only by the underlying zero price of the security minus the premium. If you write a call option, your downside is theoretically unlimited. If you buy a put or a call your downside is limited to the option premium. edit: i should say writing a put option (short put) your potential downside is the difference between the strike price of the option and the premium, if th…

If the underlying security goes below zero, that doesn't increase your potential downside. The option you sold will force you to buy the security, but it won't force you to sell it.

Re: In Defense of Bad Ideas

#50

Post by thedufer »

thaumasiotes wrote: post #18
brewmarche wrote: post #17

Earlier quoted context omitted.

Short just means they have a negative amount of that, in this case a negative amount of options.

No, short means your position is predicated on the idea that the future price of something will be lower than the current price. Owning a positive number of put options makes you short the underlying stock, which is presumably why the comment upthread described put options as "short put options". Selling put options gives you a long position, not a short position. I wanted to analyze this in terms of the original com…

> short means your position is predicated on the idea that the future price of something will be lower than the current price.

Yes, but in this case the "something" is the option, not the underlying. This is completely standard use of the word "short" in the finance industry.

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