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What's in President Obama's Portfolio?

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Last week, President Obama said that buying stock is a "potentially good deal if you've got a long-term perspective on it." So, the question is, what is the President investing in?

The answer: we don't know.

But then again, neither does he.

The Obamas' investments are held in something called a "blind trust." This type of trust is constructed so that the President and First Lady have no knowledge of what they're actually investing in, thereby eliminating possible conflicts of interest. Prior to his run for the presidency, the then-Senator put all of his family's stock investments in a trust that was overseen by an independent trustee. Once in the trust, the Obamas could make no special buy or sell requests. The trustee/advisor could buy and sell stocks independently, without telling the Obamas the details of the transactions, leaving the President in the dark about his investments.

The purpose of such a trust is pretty obvious.

Would you trust a President to fix healthcare if he had millions of dollars invested in Merck, Pfizer, and Aetna? How about trusting him to oversee an organized bankruptcy of the Big Three while he owned 10,000 shares of GM? One could see inherent conflicts of interest in almost every policy decision.

Historical Precedent

This isn't a new phenomenon. The first presidential blind trust was established for Lyndon Johnson in 1963. The Johnsons owned a radio and television station in Austin, TX, and were pressured to sell it by advisors to avoid potential conflicts. The President wasn't too keen on selling an asset that he and Lady Bird had held for over 20 years. Instead, he put the ownership of the station in the hands of Sheldon Cohen, a 36-year-old tax attorney.

Cohen had set up the first-ever blind trusts for a few undersecretaries in the Kennedy administration who had some ownership stakes in Latin American companies. The trusts seemed to work, so Sheldon wound up doing the same thing with LBJ's station. Johnson was so pleased in not having to sell the station that he made Cohen the head of the IRS.

Despite this rather successful use of the blind trust, and the adoption of similar trusts by subsequent Presidents, the use of such instruments by the chief executive has never been mandatory. The only laws pertaining to these presidential trusts state that the trustee/advisor must be completely independent of the executive branch, and that the trust must be free of restrictions regarding the sale or transfer of individual assets. So, basically, you can't say, "Here are all my stocks, George, do what you will, but don't sell the Disney stock because the little girls just love that Goofy."

bush_cheney.jpgThere are some inherent dangers in the blind trust, of course. For example, President Bush and Vice President Cheney had their stock portfolios in blind trusts during one of the steepest stock market dips in decades. Odds are that they both probably received a bit of a shock when they cracked open those accounts on the day after Obama's inauguration. Being blind might be a great asset as a politician, but it's tough when you're an investor.

On the flip side, Hillary Clinton, a little tired of having her investments out of sight and out of mind ever since her White House days, dissolved her and her husband's blind trust in 2007 and converted all the stock investments to cash and treasuries. Estimates put the trust's worth anywhere from $5 million to $25 million. Seeing as how markets have declined over 50% since Hillary's move from stocks to fixed, it's no wonder she's seemed so upbeat lately. You'd be too if you had saved yourself upwards of $10 million in a well-timed market move.

Try This at Home

So, thinking about starting your own blind trust? You're not alone. Polls show that more and more Americans aren't opening their financial account statements when they get them in the mail. So if you've got a pile of statements from your brokerage firm piled up on your hall table, you're already investing the presidential way.

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iStock // Ekaterina Minaeva
Man Buys Two Metric Tons of LEGO Bricks; Sorts Them Via Machine Learning
May 21, 2017
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iStock // Ekaterina Minaeva

Jacques Mattheij made a small, but awesome, mistake. He went on eBay one evening and bid on a bunch of bulk LEGO brick auctions, then went to sleep. Upon waking, he discovered that he was the high bidder on many, and was now the proud owner of two tons of LEGO bricks. (This is about 4400 pounds.) He wrote, "[L]esson 1: if you win almost all bids you are bidding too high."

Mattheij had noticed that bulk, unsorted bricks sell for something like €10/kilogram, whereas sets are roughly €40/kg and rare parts go for up to €100/kg. Much of the value of the bricks is in their sorting. If he could reduce the entropy of these bins of unsorted bricks, he could make a tidy profit. While many people do this work by hand, the problem is enormous—just the kind of challenge for a computer. Mattheij writes:

There are 38000+ shapes and there are 100+ possible shades of color (you can roughly tell how old someone is by asking them what lego colors they remember from their youth).

In the following months, Mattheij built a proof-of-concept sorting system using, of course, LEGO. He broke the problem down into a series of sub-problems (including "feeding LEGO reliably from a hopper is surprisingly hard," one of those facts of nature that will stymie even the best system design). After tinkering with the prototype at length, he expanded the system to a surprisingly complex system of conveyer belts (powered by a home treadmill), various pieces of cabinetry, and "copious quantities of crazy glue."

Here's a video showing the current system running at low speed:

The key part of the system was running the bricks past a camera paired with a computer running a neural net-based image classifier. That allows the computer (when sufficiently trained on brick images) to recognize bricks and thus categorize them by color, shape, or other parameters. Remember that as bricks pass by, they can be in any orientation, can be dirty, can even be stuck to other pieces. So having a flexible software system is key to recognizing—in a fraction of a second—what a given brick is, in order to sort it out. When a match is found, a jet of compressed air pops the piece off the conveyer belt and into a waiting bin.

After much experimentation, Mattheij rewrote the software (several times in fact) to accomplish a variety of basic tasks. At its core, the system takes images from a webcam and feeds them to a neural network to do the classification. Of course, the neural net needs to be "trained" by showing it lots of images, and telling it what those images represent. Mattheij's breakthrough was allowing the machine to effectively train itself, with guidance: Running pieces through allows the system to take its own photos, make a guess, and build on that guess. As long as Mattheij corrects the incorrect guesses, he ends up with a decent (and self-reinforcing) corpus of training data. As the machine continues running, it can rack up more training, allowing it to recognize a broad variety of pieces on the fly.

Here's another video, focusing on how the pieces move on conveyer belts (running at slow speed so puny humans can follow). You can also see the air jets in action:

In an email interview, Mattheij told Mental Floss that the system currently sorts LEGO bricks into more than 50 categories. It can also be run in a color-sorting mode to bin the parts across 12 color groups. (Thus at present you'd likely do a two-pass sort on the bricks: once for shape, then a separate pass for color.) He continues to refine the system, with a focus on making its recognition abilities faster. At some point down the line, he plans to make the software portion open source. You're on your own as far as building conveyer belts, bins, and so forth.

Check out Mattheij's writeup in two parts for more information. It starts with an overview of the story, followed up with a deep dive on the software. He's also tweeting about the project (among other things). And if you look around a bit, you'll find bulk LEGO brick auctions online—it's definitely a thing!

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Name the Author Based on the Character
May 23, 2017
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