August 31, 2009
August 30, 2009
....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
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.
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
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
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
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
August 17, 2009
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
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
August 13, 2009
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.
August 12, 2009
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
August 10, 2009
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.
Fat Tony wisdom, Aristotelian phronesis
Implicit , Tacit
Tinkering, stochastic tinkering
Epilogism (Menodotus of Nicomedia and the school of empirical medicine)
Historia a sensate cognitio
Bottom up libertarianism
Spirit of the Law
Letter of the Law
Cambridge, MA, and UK
Accident, trial and error
Ecological uncertainty, not tractable in textbook
Ludic probability, statistics textbooks
On-model, model based
Side effect of a drug
National Institute of Health