August 31, 2009

What is Wrong With Us?

In his new book The Prodigal God, Pastor Timothy Keller lays out what I believe is one of the most challenging and awe inspiring aspects of the message of our Lord and Savior Jesus Christ. Keller uses the story of the Prodigal Son to define how Christ viewed and continues to view sin:

Here, then, is Jesus's radical redefinition of what is wrong with us. Nearly everyone defines sin as breaking a list of rules. Jesus, though, shows us that a man who has violated virtually nothing on the list of moral misbehaviors can be every bit as spiritually lost as the most profligate, immoral person. Why? Because sin is not just breaking the rules, it is putting yourself in the place of God as Savior, Lord, and Judge just as each son sought to displace the authority of the father in his own life.

The OC

Whenever I start feeling down about property values being down here in Nashville by anywhere from 30% - 50% from the 2006-2007 highs, I read something like this about California's market and it helps keep things in perspective. From the Studley Report:

Property owners, while trying to avoid holding fire sales, are aggressively disposing of distressed office buildings. Maguire Properties is one landlord unloading properties in earnest, recently selling the three-building City Parkway Towers complex. Other recent sales include Maguire Company’s sale of 3161 Michelson Drive to Emmes & Co. and Ford Motor Co.’s sale of One and Three Premier Place to Transpacific Development. Overall, properties are trading at 80 to 90 percent less than at the height of the investing frenzy in 2007.”


I don't know if you can feel it like I can feel it, but College Football is here. It's GAME WEEK!!!!!!!

August 30, 2009

Daniels Blasts His Own Generation

I have definitely learned my lesson about getting too excited about any politician. However, I did find this recent commencement speech at Butler University by Governor Mitch Daniels of Indiana extremely powerful, entertaining, and prescient.

The money sections:

....Along with most of your faculty and parents, I belong to the most discussed, debated and analyzed generation of all time, the so-called Baby Boomers. By the accepted definition, the youngest of us is now forty-five, so the record is pretty much on the books, and the time for verdicts can begin.

Which leads me to congratulate you in advance. As a generation, you are off to an excellent start. You have taken the first savvy step on the road to distinction, which is to follow a weak act. I wish I could claim otherwise, but we Baby Boomers are likely to be remembered by history for our numbers, and little else, at least little else that is admirable.

We Boomers were the children that the Second World War was fought for. Parents who had endured both war and the Great Depression devoted themselves sacrificially to ensuring us a better life than they had. We were pampered in ways no children in human history would recognize. With minor exceptions, we have lived in blissfully fortunate times. The numbers of us who perished in plagues, in famine, or in combat were tiny in comparison to previous generations of Americans, to say nothing of humanity elsewhere.

All our lives, it's been all about us. We were the "Me Generation." We wore t-shirts that said "If it feels good, do it." The year of my high school commencement, a hit song featured the immortal lyric "Sha-la-la-la-la-la, live for today." As a group, we have been self-centered, self-absorbed, self-indulgent, and all too often just plain selfish. Our current Baby Boomer President has written two eloquent, erudite books, both about..himself.

As a generation, we did tend to live for today. We have spent more and saved less than any previous Americans. Year after year, regardless which party we picked to lead the country, we ran up deficits that have multiplied the debt you and your children will be paying off your entire working lives. Far more burdensome to you mathematically, we voted ourselves increasing levels of Social Security pensions and Medicare health care benefits, but never summoned the political maturity to put those programs on anything resembling a sound actuarial footing.

In sum, our parents scrimped and saved to provide us a better living standard than theirs; we borrowed and splurged and will leave you a staggering pile of bills to pay. It's been a blast; good luck cleaning up after us.

.....Among the reasons I usually duck commencements is the danger of lapsing into clichés, and I'd bet that no cliché is more worn out on these occasions than the phrase "standing on the shoulders of giants." Like all such phrases, it was inventive and interesting when Sir Isaac Newton coined it, but centuries later it's overdue for retirement. In one commencement speech I read about, our current Secretary of State managed to use it twice in a single paragraph.

Today, if you are thinking about standing on the shoulders of the past generation, I'd say "Please don't."

August 26, 2009

Peter Leeson on Pirates and Self Regulation

I have been dying to read economist Peter Leeson's newest book The Invisible Hook: The Hidden Economics of Pirates.

The book is in my que and will have to wait until my reading habits kick back up, but in the meantime, I did get to read an article in Forbes by Leesson about Pirates, self-regulation, and financial instituations.

I would recommend you read the entire article, but here a few of my favorite parts:

Self-regulation sounds nice, you might say, but what incentive do greedy businesses have to create rules controlling their own behavior?

Plenty, actually. Even the most unethical and avaricious actors often benefit from regulating themselves. History's most notorious criminals--early 18th-century Caribbean pirates--relied entirely on self-regulation for their business--and they were violent thieves. The reason for this is simple: Privately created regulations often enhance productivity rather than stifling it, and tend to be good for the bottom line.

To maximize profits, pirates, for example, required rules and regulations to constrain their criminal inclinations among one another. They needed to prevent violence among one another, prohibit inter-pirate theft, and regulate activities--such as gambling, drinking and fraternizing with the fairer sex--that were likely to instigate conflicts. Pirates couldn't rely on government to create such rules and regulations for them; they were outlaws and therefore had to regulate themselves.

.......Legitimate modern firms also have more local knowledge about what kinds of regulations they require, and what kinds of regulations are unnecessary and might stifle productivity, than outsiders do. But government often ignores this fact and acts as if bureaucrats have better information about what firms need than the firms themselves do.

When this happens, regulations may not only fail to have the desired effect, they may also backfire and have exactly the opposite effect. That's what the Americans with Disabilities Act did when government introduced it in 1990: In an effort to boost employment for Americans with disabilities, the federal regulation forbade employers from firing an employee because he or she had a disability.

As a 2001 study by MIT economists Daron Acemoglu and Joshua Angrist showed, by making it harder to fire a disabled worker for reasons totally unrelated to his or her disability, the ADA caused employers to hire fewer workers with disabilities, reducing, rather than increasing, disabled Americans' employment.

.....Public-sector decision makers, on the other hand, don't have such strong incentives to avoid mistakes. Unlike their private-sector counterparts, public-sector decision makers don't pay for regulatory oversights or backfires through reduced profits. Thus, in addition to having a weaker ability to get regulations right because of a lack of local knowledge, public-sector decision makers have a weaker interest to do so as well.

August 25, 2009

My Automatic Brain Sucks Except When It Doesn't

"A bat and a ball cost $1.10 total. The bat costs a dollar more than the ball. How much does the ball cost?"

If your automatic brain is as stupid as mine, you immediately answered $0.10. Since $1.10 +0.10 = $1.20, I think we can all agree that my automatic brain gets an F on this one.

The above question is from the book How We Decide by Jonah Lehrer. I just finished this book ten minutes ago and would highly recommend it to anyone who wants to learn to think better.

The point Lehrer makes with the above question is that our automatic brains suck at crunching numbers. It's often the simplest of problems and decisions that require just a bit of deliberation to find the right answer or make the right decision.

However, when it comes to complex problems and decisions involving a variety of factors (like picking out a new car), our automatic brains and emotional responses are just what we need to rely on.

For example, Ap Dijksterhuis, a psychologist at the University of Amsterdam, conducted an experiment in which he presented two sets of car buyers with twelve categories of information about four different types of cars.

Based on the information provided, there was an objectively ideal car choice. The first set of buyers were given as much time as they wanted to contemplate all the information and use their rational mind and deliberative powers to pick the ideal car given the 48 pieces of information on hand. When the results were in, the first set of buyers chose the objectively ideal car less than 25% of the time. This is worse than random chance.

The second set of car buyers were presented with the exact same information, but shortly after reviewing the information, they were presented with a few simple word games and then forced to make a snap decision about what car to buy. This second set of buyers chose the ideal car nearly 60% of the time.

Lehrer's book is full of extremely interesting stories and experiments like the one discussed above. I will be writing a full review of this book in the coming weeks and will post it as soon as it is finished.

Go Friend Yourself

I can say with 99.99% certainty that I am the only commercial real estate broker in Nashville who doesn't own a blackberry or blackberry-esque devise.

I can also say with 99.99% certainty that I am on the only citizen of the United States of America who has sent less than ten text messages in the last 365 days (six to be exact).

Finally, I can say with 99.99% certainty that I will never have a Facebook page.

I am not claiming to be a Luddite or a technophobe (I don't know many technophobes who have blogs). However, I am trying to say that from my observations and experiences with blackberrys, texting, and social media, I think the costs outweigh the benefits and the risks outweigh the rewards.

This article from the WSJ entitled How Facebook Ruins Friendships is probably the best article I have read on the risks and costs of social media.

Some of the highlights of the article:

Here's where you and I went wrong: We took our friendship online. First we began communicating more by email than by phone. Then we switched to "instant messaging" or "texting." We "friended" each other on Facebook, and began communicating by "tweeting" our thoughts—in 140 characters or less—via Twitter.

....But there's a danger here, too. If we're not careful, our online interactions can hurt our real-life relationships.

Like many people, I'm experiencing Facebook Fatigue. I'm tired of loved ones—you know who you are—who claim they are too busy to pick up the phone, or even write a decent email, yet spend hours on social-media sites, uploading photos of their children or parties, forwarding inane quizzes, posting quirky, sometimes nonsensical one-liners or tweeting their latest whereabouts. ("Anyone know a good restaurant in Berlin?")

.....But let's face it, the problem is much greater than which tools we use to communicate. It's what we are actually saying that's really mucking up our relationships. "Oh my God, a college friend just updated her Facebook status to say that her 'teeth are itching for a flossing!'" shrieked a friend of mine recently. "That's gross. I don't want to hear about what's going on inside her mouth."

That prompted me to check my own Facebook page, only to find that three of my pals—none of whom know each other—had the exact same status update: "Zzzzzzz." They promptly put me to "zzzzzzz."

This brings us to our first dilemma: Amidst all this heightened chatter, we're not saying much that's interesting, folks. Rather, we're breaking a cardinal rule of companionship: Thou Shalt Not Bore Thy Friends.

"It's called narcissism," says Matt Brown, a 36-year-old business-development manager for a chain of hair salons and spas in Seattle. He's particularly annoyed by a friend who works at an auto dealership who tweets every time he sells a car, a married couple who bicker on Facebook's public walls and another couple so "mooshy-gooshy" they sit in the same room of their house posting love messages to each other for all to see. "Why is your life so frickin' important and entertaining that we need to know?" Mr. Brown says.

August 24, 2009

Hoover - Free Marketeer?

Here is a letter economist and blooger Donald Boudreaux sent to NY Times in response to an article about Hoover's "free market" approach to the "Great Depression".

Suggesting that President Herbert Hoover followed laissez-faire policies, David Leonhart writes that “we can’t rerun the past year with a Hooverite economic strategy” to see what its outcome would have been (”Theory and Morality in the New Economy,” August 19).

No need to do so, for the past year was run “with a Hooverite economic strategy.” From Pres. Hoover’s 52 percent increase in government spending to his running the third-largest budget deficit then in U.S. history – and from his creation of the Reconstruction Finance Corporation to his signing of the Federal Home Loan Bank Act – Hoover’s hyperactive intervention nearly 80 years ago was not very different from Bush’s and Obama’s hyperactive interventions today. Hoover himself, campaigning for re-election in October 1932, bragged of rejecting the advice of “reactionary economists [who] urged that we should allow the liquidation to take its course until it had found its own bottom.”

Donald J. Boudreaux

Were the Pilgrims Socialists?

It seems as though they were until they realized they couldn't afford to be.

This is a fascinating bit of history from Burt Fulsom:

Current polls seem to suggest that between 20 and 25 percent of Americans prefer socialism to capitalism. What’s interesting is that the Pilgrims who settled America in 1620 had some of the same socialist ideas. After arriving on the Mayflower, the Pilgrims (sometimes called separatists) decided to practice socialized agriculture. They took the available cleared land and had the whole community (of about 100 settlers) work the land and divide the profits as each family (or individual) had a need.

The result was disaster–widespread starvation occurred and only help from some nearby Indians kept the community going. As Governor William Bradford reported, without private property, the Pilgrims became lazy and selfish. Young men complained “that they should spend their time and strength to work for other men’s wives and children without any recompense. The strong, or man of parts, had no more in division of victuals and clothes than he that was weak. . . .”

Next year Governor Bradford, after seeking advice from leading Pilgrims, “assigned to every family a parcel of land.” Now America had a system of private property. What happened? According to Bradford, “This had very good success, for it made all hands very industrious.” The result was “much more corn was planted” and “some of the abler sort and more industrious had to spare, and sell to others; so as any general want or famine hath not been amongst them since to this day.” He describes all this in his book entitled Of Plymouth Plantation.

If socialism can’t work in a close-knit Super-Christian community, it probably can’t work anywhere. But the larger point is that our early Americans tried socialism; it didn’t work and they made a quick adjustment to free markets. That did work and the private property order became part of American history.

August 18, 2009

Advancing Towards the Bottom?

According to a recent report by Swiss-based Partners Group, the U.S. real estate market is in an "Advanced Downturn" state.

"Advanced Downturn" is described as a period when market participants “broadly acknowledge” that a correction is underway. However, the extent of the re-pricing is still unclear because the transactions market has not yet recovered.

Based on my experience here in Nashville, I would have to completely agree with the description above.

According to Partners Group, the U.K. real estate market is the closest to reaching a bottom followed by the U.S. and France.

August 17, 2009

Playing Out Your Hand

Some great stuff on leverage here from value investor Guy Spier of Aquamarine Capital:

I was actually levered to 110% of the value of equities, so 10% levered in 1998, as I purchased more securities during the Asian crisis. I was very lucky, because everything worked out for me and I made a little bit more return as a result. Since then, the fund has never been leveraged for a very good reason. Most of the people that you and I know, the readership of your fine publication, will be in trades that will make them money provided they can play out their hands.

We know that leverage can prevent you from playing out your hand because exactly the time when markets go into crisis is when your credit gets called. I am aware of funds that had their credit lines pulled at the most inconvenient times and suffered catastrophic losses which would not have been suffered had their credit not been pulled.

It is worth saying that except in the case of a very large fund that can arrange for some kind of long-term loan from their broker, the loans tend to be overnight. You get money overnight and the trades can usually be liquidated within a very short period of time. Good investment ideas usually take months, if not years, to play out. I would argue that levering up an investment portfolio, even if it is composed of liquid securities, is a profound mismatch of assets and liabilities.

I think that the experience of Bear Stearns and Lehman Brothers exemplifies this case. They were borrowing money short-term and the investments they were making were liquid, so from the perspective of the lender they were not bothered because they knew they could force the brokerage firm to liquidate in order to pay their short-term funding. The reality was that the bets that they were making needed time to play out and to the extent that those firms didn’t have the time to let those bets play out, they suffered insolvency, and that is not something that I am about to do for my investors.

The Bulldog

From an excerpt from Max Hastings' new book Finest Years: Churchill As Warlord:

A Lancashire housewife named Nella Last wrote in her diary: 'If I had to spend my whole life with a man, I'd choose Mr Chamberlain, but I think I would sooner have Mr Churchill if there was a storm and I was shipwrecked. He has a funny face, like a bulldog living in our street who has done more to drive out unwanted dogs and cats than all the complaints of householders.'

TJ's 10

Thomas Jefferson's 10 Rules of living as outlined in a letter to the son of a close friend:

A Decalogue of Canons for observation in practical life.

1. Never put off till to-morrow what you can do to-day.

2. Never trouble another for what you can do yourself.

3. Never spend your money before you have it.

4. Never buy what you do not want, because it is cheap; it will be dear to you.

5. Pride costs us more than hunger, thirst and cold.

6. We never repent of having eaten too little.

7. Nothing is troublesome that we do willingly.

8. How much pain have cost us the evils which have never happened.

9. Take things always by their smooth handle.

10. When angry, count ten, before you speak; if very angry, an hundred

August 15, 2009

Dear Queen

Last November, during a visit to the London School of Economics, Her Majesty the Queen of England asked why so few economists had foreseen the situation we now find ourselves in.

The Queen received an official response from the British Academy from Professors Besley and Hennessey, but it is not that letter I want to focus on.

The letter that has caught my attention was written by Professor Geoffrey Hodgson of the University of Hertfordshire.

Please read the entire letter. Here are few of the sections that really hit home for me:

The letter by Professors Besley and Hennessey does not consider how the preference for mathematical technique over real-world substance diverted many economists from looking at the vital whole. It fails to reflect upon the drive to specialise in narrow areas of enquiry, to the detriment of any synthetic vision. For example, it does not consider the typical omission of psychology, philosophy or economic history from the current education of economists in prestigious institutions. It mentions neither the highly questionable belief in universal ‘rationality’ nor the ‘efficient markets hypothesis’ – both widely promoted by mainstream economists. It also fails to consider how economists have also been ‘charmed by the market’ and how simplistic and reckless market solutions have been widely and vigorously promoted by many economists.

What has been scarce is a professional wisdom informed by a rich knowledge of psychology, institutional structures and historical precedents. This insufficiency has been apparent among those economists giving advice to governments, banks, businesses and policy institutes. Non-quantified warnings about the potential instability of the global financial system should have been given much more attention.

We believe that the narrow training of economists – which concentrates on mathematical techniques and the building of empirically uncontrolled formal models – has been a major reason for this failure in our profession. This defect is enhanced by the pursuit of mathematical technique for its own sake in many leading academic journals and departments of economics.

Models and techniques are important. But given the complexity of the global economy, what is needed is a broader range of models and techniques governed by a far greater respect for substance, and much more attention to historical, institutional, psychological and other highly relevant factors.

After reading this letter, I immediately thought of a statement Charlie Munger recently made in a blog interview.

"If you totally divorce economics from psychology, you've gone a long way toward divorcing it from reality."

August 14, 2009

Something to keep in mind......

Larry Reed, President of the Foundation for Economic Education, in a recent interview reminds us of the three lessons of freedom we are dangerously close to forgetting:

1. Government can provide you with absolutely nothing except that which it has first taken from somebody else.

2. A government big enough to give you want you want, is big enough to take everything you have.

3. A free people are not economically equal, and an economically equal people are not free.

August 13, 2009

Every Word $Counts$

From the blog of marketing guru Bob bly:

A bank was offering home equity loans through direct response newspaper ads.

They tested 2 ads with different themes:

A — “Fix up your dream home at a competitive rate.”
B — “Fix things around the house that are bugging you.”

One ad generated 41% more loan business than the other.

Which do you think was the winning ad — A or B? And why?

Source: “PitchPerfect Message Strategy” by Barry Callen (McGraw-Hill, 2009).

If you answered B, you are correct!

I find it pretty amazing that changing around a few words can alter the response rate to an advertisement by 41%.

In all of our communications (advertisements, newsletters, emails, phone calls, face-to-face presentations, blogs, Facebook, etc., etc., etc. ), it is important to remember that every word counts.

It is also important to remember the power of simple words and the power of words and phrases that people can genuinely relate to.

Two Things

1) I am about fifty pages into Jonah Lehrer's book How We Decide, and I came across a line in his chapter on the importance of dopamine that I just had to share:

"Unless you experience the unpleasant symptoms of being wrong, your brain will never revise its models. Before your neurons can succeed, they must repeatedly fail. There are not shortcuts for this painstaking process."

I am going to post this quote on my wall at work and stare at it for thirty seconds every morning before I start my day. It is so cliched, but the only way we can ever become an expert in something is, to paraphrase the great physicist Niels Bohr, "...make all the mistakes that can be made in a narrow field."

Lehrer's quote also reminds me of some advice Charlie Munger often gives folks. He recommends that everyone keep a "Wall of Shame" as a constant reminder of the mistakes they have made.

When you combine Munger's advice with Bohr's quote, it's easy to see that making mistakes and focusing on the when, where, why, and how of those mistakes is the only real way to ever "revise our models."

2) I am about 100 pages into Ian Plimer's book Heave and Earth: Global Warming the Missing Science. I wanted to share a passage I read late last night:

"Those who claim the Earth is suffering human-induced global warming cite NASA's Goddard Institute of Space Studies (GISS) as an authority to support their beliefs. The GISS director claimed that nine of the ten warmest years in history have occurred since 1995, with the warmest being 1998. This was accompanied by a huge media fanfare. When NASA had to reverse its position on the basis of the work undertaken by Toronto-based statistician Steve McIntyre, there was no fanfare. NASA now states that the four years of high temperatures are from the 1930s (1934, 1931, 1938, and 1939). The warmest ever year was 1934. The years 1998, 1921, 2006, 1999, and 1953 were also warm. Several previously alleged warm years (2000, 2002, 2003, and 2004) are now cool years. Similarily, the UK's Meteorological Office has now confirmed a fall in average global temperatures since 1998, despite a 25% increase in the burning of coal, oil, and natural gas, which produced voluminous CO2 additions to the atmosphere.

August 12, 2009

Back Up from the Ledge Deutsche Bank

Deutsche Bank's Richard Parkus recently said the following about commercial real estate:

"Rents will be back to where they were in 2017," Parkus said. Building prices also will take six to eight years to recover, he said.

Now, Parkus' colleague Karen Weaver, global head of securitzation research for Deutsche Bank, said this about the residential market:

"Currently we estimate that 14 million homeowners have negative equity. However, based on our home price forecast, as prices continue to fall we think that number could reach 25 million, or 48% of all mortgagors."

The depressing Kool-Aid must be flowing out of the water fountains at the Deutsche Bank offices these days.

Leasing 101 - Part 10

10) Numbers: Crunch ‘em

  • Go analytical early and often.
  • Know what’s in the lease and what exactly you are and are not paying for.
  • If you are paying for utilities, have your broker find out what average utility bills are for the building. If you are paying a pro rata share of taxes, insurance, and operating expenses over a base year, find out what those costs are and how they have been escalating over the last five years.
  • What effect does free rent and other incentives have on the bottom line of the deal. Always figure out your effective rate.
  • Rates are not always the best indicator of a good deal. It’s the final numbers that count.

August 11, 2009


Maguire Properties, a Real Estate Invesment Trust (REIT), recently notified the holders of $1.06 billion of its debt that it may not exactly be able to pay the next note payment.

The following analysis from Seeking Alpha brings to light the idea of GARBAGE-IN-GARBAGE OUT. This is also why investors like Warren Buffett constantly talk about having a margin of safety when you invest.

"Obviously, those REIT's whose assumptions were most favorable going into these deals are the ones getting burned right now. Maguire and many others examine a property from the front-end using a pro forma that includes future assumptions about market rents. Usually these assumptions end up as a linear, positive function; that is, rents are assumed to rise steadily and incrementally throughout the first 10 years of the building's life. The result is inevitably a model which indicates steadily higher levels of free cash flow, after paying for the building's management and dropping some maintenance dollars into the escrow of course. Obviously, the closer to the peak of the commercial real estate market a building was financed/modeled, the quicker it will approach the "danger zone". This is a term that I'm completely making up, but it refers to the point at which a commercial building's cash flow is insufficient to service its debt. This ends up being a function of the severity of declines in market rents, the viability/solvency of the individual lessee's, and the level of financing secured for the property relative to its value (LTV)."

This is probably the tenth time I have stated this on this blog, but this story is just begging me to once again quote Oatkree Capital's Howard Marks, who said:

Leverage + Volatility = Dynamite

August 10, 2009

Teaching Birds How to Fly?

Nassim Taleb, best selling author of Fooled by Randomness and The Black Swan, has a new entry on his amazingly eclectic and often bizarre blog. Taleb, in the mold of thinkers like Malcolm Gladwell, is one of those rare people in life you must study. If nothing else, his thoughts will make you think about your thoughts.

His latest post is about knowledge, how we acquire and use it, and the error of rationalism:

The greatest problem in knowledge is the "lecturing birds how to fly" effect.

Let us call it the error of rationalism. In Fat Tony’s language, it would be what makes us the suckers of all suckers. Consider two types of knowledge. The first type is not exactly “knowledge”; its ambiguous character prevents us from calling it exactly knowledge. It's a way of doing thing that we cannot really express in clear language, but that we do nevertheless, and do well.

The second type is more like what we call “knowledge”; it is what you acquire in school, can get grades for, can codify, what can be explainable, academizable, rationalizable, formalizable, theoretizable, codifiable, Sovietizable, bureaucratizable, Harvardifiable, provable, etc.

To make things simple, just look at the second type of knowledge as something so stripped of ambiguity that an autistic person (a high functioning autistic person, that is) can easily understand it.

The error of rationalism is, simply, overestimating the role and necessity of the second type, the academic knowledge, in human affairs. It is a severe error because not only much of our knowledge is not explainable, academizable, rationalizable, formalizable, theoretizable, codifiable, Sovietizable, bureaucratizable, Harvardifiable, etc., but, further, that such knowledge plays such a minor life that it is not even funny.

We are very likely to believe that skills and ideas that we actually acquired by doing, or that came naturally to us (as we already knew by our innate biological instinct) came from books, ideas, and reasoning. We get blinded by it; there may even be something in our brains that makes us suckers for the point. Let us see how.



Know how

Know what

Fat Tony wisdom, Aristotelian phronesis

Aristotelian logic

Implicit , Tacit


Nondemonstrative knowledge

Demonstrative knowledge



Experiential knowledge

Epistemic base


Propositional knowledge




Directed research


Targeted activity







Tinkering, stochastic tinkering

Directed search

Epilogism (Menodotus of Nicomedia and the school of empirical medicine)

Inductive knowledge

Historia a sensate cognitio

Causative historiography



Austrian economics

Neoclassical economics

Bottom up libertarianism

Central Planner

Spirit of the Law

Letter of the Law



Brooklyn, Amioun

Cambridge, MA, and UK

Accident, trial and error






Ecological uncertainty, not tractable in textbook

Ludic probability, statistics textbooks



Parallel processing

Serial processing


On-model, model based

Side effect of a drug

National Institute of Health