Friday, November 15, 2019

To Infinity and Beyond

This is a bit of a followup to the Dracula post from earlier this year. 

Foundations and endowments DO NOT have infinite time horizons. Technically speaking, nothing does. But I would argue they don't even have extremely long time horizons. 

These types of entities have no reason to believe they will exist into the long, far future. At the very least they will transform so dramatically the future them is not the current them--donors, beneficiaries, and employees will all be different as will its mandates, goals, and mission. Over very long periods of time slight changes to average inflation or average rates of return very significantly affect the purchasing power of assets. These are highly uncertain variables where the difference between phenomenal growth and permanently impaired capital is almost imperceptibly small to a current observer. The tax structure governing these entities over the long-term future is also highly uncertain. A related but independent threat is if the powers that be and the powers that will be even allow the entity to exist . . . forever.

Perhaps despite all of this they should act as if they have infinite time horizons? Let's assume a few conditions: 
  1. Foundations and endowments in at least some cases are the best available option to serve a desired purpose. (If you simply take this for granted, you probably are not thinking hard enough. These entities may not be the best way to accomplish the goals they ostensibly are designed for.)
  2. It is desirable for foundations and endowments in some cases to exist into perpetuity. 
  3. It is possible to design and implement an external and internal governing structure and to craft a mission statement conducive for the first two conditions. (This might be where this entire process deviates too far from reality.)
For those entities where a perpetual time horizon is appropriate, we obviously do not want them to engage in behavior that unreasonably jeopardizes that goal. One quick and tempting way to jeopardize it is to spend too much money.* Another is to invest poorly. Notice that this bad behavior is a bit murkier. Investing could qualify as being done "poorly" in a number of contradictory ways. Defining it as taking the wrong risk(s) in the wrong way(s) doesn't provide any clarity other than to suggest how complex and complicated the error can be. 

Tying this back to the question at hand, should they act as if they have infinite time horizons, begs the question: what exactly does that mean? How would they be different as compared to acting as if they had long, but limited time horizons? Let me describe the difference in terms of a couple of problems I can foresee:
  • Doing too little good now (spending too little!) so as to safeguard sustainability. Yes, this cuts a bit against the grain of what I've said and implied above. But it is a real risk especially for a perpetuity mindset. Doing more now might solve a problem that wouldn't otherwise exist in the future--keep in mind that our descendants are very likely to be extraordinarily wealthier than us with entirely different problems (even if they aren't that much richer). 
  • Investing in a manner that jeopardizes near-term access to sufficient capital. If you have an infinite horizon, what do you care that your 5-year or 10-year or even 20-year returns are very bad as long as the long-term expectation is high enough? In fact, let's tie that money up in illiquid assets if that is the trade-off for above-market performance. Unfortunately, simple beats complex in almost all categories but not in the competition of hope. Which is why a perpetual outlook fosters an esoteric investment strategy. I think these entities should push back against this natural inclination to invest in opaque, illiquid, and non-benchmarkable assets. Any investment that is not accessible (lock-up periods), marketable (secondary market discount), or verifiable (Internal Rate of Return (IRR) is a useful fiction) for a period of time longer than the expected tenure of the investment staff recommending it is highly suspect. I would suggest the same evaluation against the average board member's remaining term. And this is all before we begin a discussion of manager selection and dispersion risk--alternative investing is not about asset allocation; it is about finding the best and avoiding the worst. Good luck with that. 
What about governments? Should they act like they will be around forever? Again, let's consider what this means by jumping to potential problems:
  • A government that behaves as if it cannot fail to be or should not cease to be risks being way, way to aggressive--both to its own people as well as others. 
  • This encourages disruptive experimentation since the government can simply outlast any temporary ill effects. Normally, disruptive experimentation is my jam, but not for government. Government lacks the proper incentives and the rightful decision makers. 
  • Paradoxically this perpetuity outlook also encourages extreme neglect as any problem today will either be solved tomorrow or be some future government administrator's problem.
I think the assumption that foundations, endowments, governments, et al. should behave as if they have unlimited time horizons is sloppy at best and dangerous at worst. Long time horizons are appropriate and very useful for these entities, but there is a big gap between a long time and forever. 

My thoughts for this were spurred in part by listening to this episode of Macro Musings

*I will leave for another day further discussion on the well-debunked conventional wisdom that a 5% or even 4% spending rule is likely sustainable in real terms. 

Monday, November 11, 2019

In The News . . .

A vivid childhood memory for me that I think about every time I hear the phrase "in the news" are the shorts CBS used to run during Saturday morning cartoons during commercial breaks. Here is a long compilation.

Generally these bugged me--I didn't want to hear what they had to say and wanted my cartoon back on.

Something I've been thinking about is what does it take for something to be news.

Perhaps a measure of the relevancy and importance of something that is "news" (newsworthiness) is the answer to this puzzle: Imagine rescuing someone from a desert island. How long could they have been there such that a particular piece of news is still topical and worthy to tell them?

Given enough time anything of great importance in the moment will eventually fade into the background of oblivion. Its relevance will disappear.

I would suggest that 90% of news is entertainment and 90% of that entertainment is to one degree or another proverbial porn. On balance the most popular sources are simply NDDs (nonsense delivery devices), GDDs (gossip delivery devices), or PDDs (propaganda delivery devices).

Consider this a corollary to this post.

Another Newspaper Makes Its Inability to Turn a Profit an Asset

I was recently asked my opinion on the announcement of the Salt Lake Tribune being granted approval to become a nonprofit by the IRS. Specifically, the question was "What do you think of this model for newspapers?"

My quick answer:

For newspapers it is a lost cause—like all you can drink water for someone drowning in a river. Newspapers are a dead medium. Journalism is potentially a different story.
This is an old idea as indicated in the story. I think Tampa [Bay Times] went this route about 10 years ago. The Poynter Institute has advocated this for longer than that. On the one hand I like it from the standpoint of independence; however, I don’t think pragmatically it can be sustainable. It is just too expensive to fund journalism without advertising. And it doesn’t sound like they have any intention of giving up advertising.
On the other hand I don’t like it because I don’t think we should have a tax system that plays favorites (non-profit versus for-profit).
Here is a little more coverage from Nieman Lab. Unlike previous versions, this move to non-profit status is somehow more completely nonprofit. I am not quite clear if there is a material difference. I do find the appeal for charitable donations interesting in a kinda gross sort of way. Remember that every time you grant one entity tax-favored status, you increase the burden on all other tax-paying entities. Undoubtedly, many find this to be just fine.

In the religion of journalism, newspapers are a metaphorical holy land. There is a great sense that without them we cannot have credible news. Within this belief is a zealotry proclaiming local newspapers as the glue binding local society together. This like so many things in religion is not based on fact.

Our access to vacuous gossip and shallow conjecture is greater now than ever--we just don't have to pay so dearly for it and wait for it to be hand delivered to our doorstep. Newspapers like most of "professional" journalism have always delivered an array of facts that deserve more scrutiny and a biased narrative. That bias comes in one of three varieties: intentional slant to protect a powerful interest, unintentional slant repeating mistaken conventional wisdom, or simple ignorance introducing the ailment knowing enough to be dangerous.

I'm not saying non-professional journalism is better in any of these regards. I'm just pointing out that the only difference by and large is that being a professional really just meant you could (in some cases still can) get paid for it.

Friday, November 1, 2019

On The Cusp

In my experience some of the greatest happiness is found on the cusp of new plateaus. 

These are pictures of my kids in the Lufthansa lounge of Houston International Airport from our vacation in the summer of 2018. We were on our way to New York City and Washington, D.C. This was their first time in an airport luxury lounge. 

I’m glad my kids don’t feel entitled to that treatment. And I am glad they aren’t so used to that luxury that they can’t find the enjoyment in it. They felt like they were, at least for that moment, “big time”. 

One way to help others feel loved and important is simply to find ways to give them the feeling of being "big time". I am thinking in particular people who are in a position to really appreciate it meaning it, whatever "it" may be, is out of the ordinary for them. 

It's hard to appreciate what we see every day. I want to do more to feel and appreciate the amazement of the world around me. I want to be amazed and I want to help other people be amazed. The downside of progress is that a world more beautiful than the one we just left eventually becomes banal. There is an ever-present tension between reaching new heights and the last ratchet up not being enough. Once luxury becomes ordinary, there is much less if any room for more excitement--the thrill is gone. One way to recapture the thrill is to increase the luxury. But I’m not sure that’s the best choice. 

The best choice from the moral or ethical consideration might rather be to bring that same luxury to someone else. Rather than try to capture the joy all to myself, I should find joy in seeing someone else experience the same first thrill that I had experienced. And of course this is more of a gift when it is not one's own kids who are receiving the new-found joys--this is just my example. This is the virtue and the selfish pleasure in sharing, and I’m sure I don't do enough of it. I am not entirely to blame because the world is not quite effectively set up to enable that sharing. There are too many institutions and norms and attitudes that serve as obstacles to the sharing I describe. 

A new goal for myself is to try to do more to increase my sharing. This is not limited to sharing stuff, although that is usually easiest, but it also includes experiences. Some of this will be charity, but a larger portion will just be finding ways to expand opportunities and extend courtesies. And make no mistake; this is all apart from the very important question of how to add meaning to peoples' lives. Generally I think the answer here is simply to get out of their way. Help them by not helping. Let them do as they want as long as it is peaceful. If there is something for you to do, discover it with them not for them. Trust and respect their decisions.

Friday, October 25, 2019

What Do Weddings and College Football Have in Common?

Besides not going together as in: do not schedule your wedding in conflict with an OU football game and expect me to attend (the wedding).

Weddings, sporting events, and so much more are all subject to alternatives for the audience. And that competition is demanding that average is over.

Consider weddings first. They have to be getting more and more expensive and outlandish just to keep up--not just with each other but with the opportunity costs for the guests. The explicit cost of attending a wedding is time, travel, and gift. Since there is no admission fee to reduce, the only way a wedding can become more attractive is along the quality dimension (differentiation). In the extreme think about trying to get people to attend a Manhattan wedding. Of course it would have to be fabulous! The opportunity cost for guests would simply be too high to allow otherwise.

Now consider sporting events. They face opportunity costs from far substitutes (other leisure and non-leisure activities) and near substitutes (watching the game at home or a friend's house on a giant high-definition TV with no traffic, weather, cheaper food and drink, etc.). Sporting events do have admission fees which means these competitive forces are at work making college football et al. choose a strategy of differentiation (high quality, value-added experiences for select audiences) or low price (mass market to fill enormous venues). Over the long-term the latter strategy probably is suboptimal if not outright unfeasible given competitive pressures and expense demands. It might all become various first-class seating only at the highest levels of various sports.

Thinking back to weddings, people don't need the superficial opportunity to stay in touch that weddings once offered. Social media now provides this. With sports feeling like you are there and a part of it can be closely simulated through viewing on TV, interacting with others via social media or texting, and all the other media/internet follow up.

This goes a long way to explaining the wedding-industrial complex I pondered previously.

Like A Boss: Universal Rules For Looking The Part

Robin Hanson & Kevin Simler may understand this... 

Borrowing heavily from my memory of an article I believe I read in Fortune ("acting like a CEO" or something) about 15+ years ago. You can take this as advice, observation, criticism, or any way you like. I am not singling anyone out in particular, but if the shoe fits...
  1. Laughter is poor form. Shows a lack of control. At best smirk with a "hmph", which could be mistaken for a throat clear. If a slight chortle escapes, shake your head as if to deny the appropriateness of it. Any accidental laughter should leave witnesses unsure if you thought it humorous or thought it humorous that one would think it to be humorous. Never, NEVER giggle.
  2. Avoid any hint of sarcasm and give no indication of any appreciation or even perception for it. 
  3. Refrain from eating sweets in front of others. Act as if to show the slightest attraction to a dessert is to yield to all childish pleasures and reveal a total lack of control. 
  4. Your enthusiasm is just matter-of-fact support for those things self-evidently worthy of praise. You are a charter member of Team Winners. If "they" fail to succeed, it is simply due to some lack of confidence they shamefully did not possess--a concern you had all along. 
  5. In circumstances when normal humans are overcome with visible worry or anxiousness, you are overcome with calm. Emotions are for the weak. You are a stoic. 
  6. If asked to give a solution to a hypothetical problem, instead of a direct answer just reflect poignantly on how you would build a process for avoiding such dilemmas from the start. If asked to give advice, challenge the presumptions behind the question. Never waste an opportunity to obfuscate and go meta.
  7. Never bring your own copies of materials to a meeting. If it is important enough for you to need it, it is important enough that someone will provide it. 
  8. Play dumb if you can use that to your advantage to put an adversary or underling on edge. 

An Idea Ahead of Its Time Is a Bad Idea

Is Alexandria Ocasio-Cortez (AOC) simply way ahead of her time

If someone came back from the future to tell us that in her time (our future) fossil fuels had been successfully banned (first nationally and then worldwide), this would have to be taken as exceptionally good news. 

At the same time if we were to implement a first national and then worldwide ban on fossil fuels today, it would be colossally bad news.  

It is overwhelmingly likely that a ban on fossil fuels sometime in the future can only happen in a remarkably wealthy world. Ironically it will be built on the back of the use of fossil fuels that we will be wealthy enough to eventually ban them.

Religious leaders like AOC don't understand the subtle yet critical difference between our legitimate aspirations and our binding realities.

Politicians follow rather than lead. Perhaps we should be grateful for this when it holds true.

Wednesday, September 11, 2019

How Good Will Trump Turn Out To Be?

Is the Trump presidency?
  • A bad aberration
  • A good aberration
  • An extreme version of the norm
  • Just the norm
Be careful how you answer. The is no individually complete and correct answer, and all of the answers have their own negative implications for the U.S. presidency.

Consider the list below an incomplete treatment of the effective progress report. By this I mean what is the practical result rather than how should Trump (and presidency) be rated.
  • His best accomplishments are greatly overshadowed by his bad policies leaving them largely unblemished by the Trump stain. Namely: deregulation (he might be the best deregulator since Carter), tax reform, criminal-justice reform, and court appointments (SCOTUS et al.; these various appointees will soon enough stand on their own records, and I believe they are largely good to very good). 
  • He is moving the Overton Window on questioning those in power while demystifying and deglorifying public office and the presidency in particular. 
  • He is tarnishing if not absolutely destroying the political positions of protectionism, strict immigration restriction, and general intolerance for others. Perhaps once he is done, the mere appearance of being against free trade, immigration, etc. will be political poison for fear of being branded another Trump. Obviously, this is an optimistic take.
  • He has been only as bad if not better than Obama and certainly better than Bush Jr. on war and conflict. 
  • On the other hand . . .
    • He is morally ugly, hateful, and gross.
    • His behavior is embarrassing and insulting.
    • He seems to inspire our lesser selves.
    • He is dangerous in different ways than the recent and possible alternatives--understand this to be far-left tail risk very much including war along many dimensions.
    • He risks giving free-market capitalism and traditional American (aspirational) values a lasting, negative connotation. 
Thinking about The Big Five, here is how I would rate the Trump presidency:
  1. Drug Prohibition - 1.75 out of 4 stars (this improves to 2.75 stars if he legalizes marijuana)
  2. Education - 2.5 out of 4 stars
  3. Immigration - 0 out of 4 stars
  4. Taxation - 3 out of 4 stars
  5. War - 2.25 out of 4 stars 
For a very good related post, check out Fake Nous.

Wednesday, September 4, 2019

Partial List - Turning the Other Cheek Edition

Partial list of things most humans are too intellectually or morally weak to do (by not doing):
  1. In the face of hostile foreign trade actions (tariffs, quotas, regulatory requirements, etc.), taking no action. 
  2. In the face of violent, atrocious actions in a foreign land, taking no action. 
  3. In the face of financial hardship of well-known large firms and other popular organizations, taking no action. 
  4. In the face of people engaging in activities that are peaceful (not harming others) but nonetheless self destructive, taking no action.
  5. In the face of opportunity to anonymously exploit a faceless entity for personal gain, taking no action.
If we were composed of stronger fibers, the desire to act would be appropriately tempered and "don't just do something, stand there!" would resonate.

[see the sister post "Do the right thing"]

Partial List - Do The Right Thing Edition

Partial list of things most humans are too intellectually or morally weak to do:

  1. When among a crowd engaging in bad behavior, walking away.
  2. When opinions of hatred and cruel intolerance are expressed, stating firmly but kindly that you do not assent and may in fact condemn such thinking.
  3. When points of view and arguments you disagree with intellectually are offered, constructively and honestly expressing a counter view.
  4. When hearing of dreadful behavior by one's government (one's own party or favored politicians especially), behavior one would never themselves engage in, peaceably but forcefully and actively condemning and denouncing the behavior. 
  5. When witness to unethical actions by one's employer or close associates, calling out the misdeed and refusing to participate in it.

If we were composed of stronger fibers, the desire to act would be appropriately stimulated and we would refuse to turn a blind eye.

[see the sister post "Turning the Other Cheek"]

On the Matter of Carts and Horses

I want to be wealthy.

The wealthy take fabulous vacations, drive expensive sports cars, and surround themselves with luxury.

Therefore, I am going to New York for a week at The Plaza. While there, I will do some amazing shopping; eat at Tavern on the Green, The Russian Tea Room, et al.; and take in some fabulous theater. Upon my return, I am buying a Ferrari.

Of course . . . it doesn’t work that way.

Will someone please tell local governments that? PleasePleasePleasePlease?

Tuesday, September 3, 2019

Partial List of (additional) Low-Hanging Public Policy Fruit

These are addenda to The Big Five

While The Big Five were largely federal issues, these (2/3) are largely state and local issues.

They are based on simple principles allowing for straightforward application if we would be so bold. Alas, the incumbent, vested interests would resist with every fiber of their selfish being. 

But I for one will keep fighting the good fight with hope that reason and justice will prevail. 

Monday, September 2, 2019

Partial List of Political/Ideological Religious Symbols

The Left (progressive minds):
  • Bike lanes (inspired by this)
  • Organic food
  • Recycling logo
The Right (conservative minds):
  • War memorials that honor battles, victory, and the nobility of soldiers
  • Flags
  • "Buy American" & "Made in the USA" labeling and sloganeering*
*Yes, this puts labor unions (the organizations rather than the members, per se) on the right, where they have always been--a backwards-looking mindset focused on protecting the status quo.

Related: The right has its own political correctness.

Sunday, August 25, 2019

Honesty versus Politeness in a 2x2 Grid

I have a number of things I've been thinking about in the form of a 2x2 grid for comparison and contemplation. This is the first of these: honesty against politeness.

Examples of each of the four resulting categories (one fictional character and one real-life one): 

Dishonest Bugs Bunny, Donald TrumpEddie Haskell, Barrack Obama
HonestColonel Nathan Jessup, Ayn RandAtticus Finch, Abraham Lincoln

Monday, August 12, 2019

What I'm Listening To (Podcast Rundown) circa August 2019

This is an update to my prior list of podcasts I am currently listening to. No comments this time, but after listing my favorites, I will group them into those I listen to every episode and those I listen to occasionally (alphabetical after the favorites). Just because one is listed under "occasional" doesn't mean you should dismiss it--there are gold in some of those occasions.

Thinking about the list today I notice that there have been many that have come and gone--some were just tried on for size and others were one-time staples. I think this has been healthy turnover.

Every Episode (favorites):
Conversations with Tyler
Reason Podcast
The Fifth Column - Analysis, Commentary, Sedition
Free Thoughts
The Fribrary Podcast
The Way I Heard It with Mike Rowe

Every Episode (others):
30 Animals That Made Us Smarter
50 Things That Made the Modern Economy
99% Invisible
Against the Rules with Michael Lewis
Akimbo: A Podcast from Seth Godin
Animal Spirits Podcast
Building Tomorrow
Cato Daily Podcast
Dan Carlin's Hardcore History
Dan Carlin's Hardcore History: Addendum
Darknet Diaries
Economics Detective Radio
Every Little Thing
Freakonomics Radio
Grammar Girl Quick and Dirty Tips for Better Writing
It's Not What It Seems with Doug Vigliotti
Kibbe on Liberty
Macro Musings with David Beckworth
Made You Think
Make No Law: The First Amendment Podcast
Mercatus Policy Download
More or Less: Behind the Stats
Oklahoma Sooners Postgame
Oklahoma Sooners Unofficial 40
Pessimists Archive Podcast
Rationally Speaking
Reason Video
Revisionist History
Science Salon
Science Vs
So to Speak: The Free Speech Podcast
The Anthropocene Reviewed
The Curious Investor
The Emergent Order Podcast
The Long View
The Political Orphanage
The Remnant with Jonah Goldberg
The Subgame Perfect Podcast
Words & Numbers


Saturday, August 10, 2019

The Beary Best

Partial list of the best bears:

My strange mind had thought of this some time ago, but it was Bearmageddon's appearance on The Remnant Podcast with Jonah Goldberg that inspired me to post it.

Not All That Glitters . . .

Related image

What does it take to be rich? 

Consider this thought experiment:

Imagine an island where the trade winds and the sea currents effectively prevent any ships from reaching it. On this island is a tiny mountain of gold about 10-feet high and 10-feet wide at its base. The value of this gold at today’s price of $1,500/troy ounce is about $6.89 billion.  But it is the 1800s, and this island is completely uninhabited and never discovered. Is this island rich?

Now suppose a big storm causes a ship to go off course and wreck into the island. There are 30 survivors of the shipwreck cast away on the island. The island has a minimal amount of resources to sustain these shipwrecked survivors. They live for a few years and then sadly perish having not been found. Before their deaths, are the shipwreck survivors rich?

Now suppose that modern air travel has revealed this island's existence. The shipwreck is discovered decades after its occurrence, and no one since the wreck has come upon the island. Although all of the survivors have a long died, the direct descendants of the survivors (some of them had children before having left on the final voyage) are tracked down and happen to be a limited number of people--about 1,000. It is determined that the shipwreck survivors were the first to stake claim on the island and are thus the rightful owners. By inheritance the 1,000 descendants are equal owners of the island and all its possessions. Are these descendants now rich?

Tuesday, August 6, 2019

We're Doomed, I say. DOOOOOMED!

Is humanity doomed? We certainly don’t lack apocalyptic scenarios: nuclear war, a robot uprising, out-of-control climate change. Unlikely, far-fetched? Not according to scientists and mathematicians who, in recent decades, have found a surprising new source for anxiety about the long-term survival of the human race: probability theory. The so-called “doomsday argument” holds that there is a 50% chance that the end of human life will come within 760 years.
That is the opening paragraph from an essay by William Poundstone in the Wall Street Journal. He also was a recent guest on Michael Shermer's Science Salon podcast discussing the wide implications for this elegant theory.

Also from the essay:
Since it is equally likely that those of us living today are in the first or second half of all past and future human births, let’s say that we are in the second half—which would mean that there are no more than 100 billion births yet to come. There is a 50% chance that is true, which at the current global birthrate (about 131 million a year) translates to a 50% chance that we have at most 760 more years of births. A changing birthrate would modify that estimate, but the calculation is that simple.
A friend forwarded the original link to me and we had a bit of discussion on it basically agreeing that the math and process is compelling, but that it seems to be missing something to make it as much as it seems to be. Specifically, I find it very interesting, but it seems to me like a confusion between or muddling of two different concepts.

One (German tanks) is like a kid turning to a football game on TV randomly and guessing about how much longer in real time (not game time) the game will last. The other (humanity) is like being a kid on vacation who wakes up in a car wanting to know "are we halfway there yet." The second case is much harder to answer if we include a key condition that the destination distance is not known by the kid. Even if he knows he is 100 miles from his house in OKC, he doesn’t know if the destination is Branson or New York City or elsewhere. It is much easier to ascertain where he might be in the football game as opposed to the vacation. A score of 14-7 and a flash of the scoreboard showing "3rd Quarter" is much more revealing than a road sign that has a highway number inside a Missouri silhouette. While he can apply the analysis in both cases, his prediction revisions will be orders of magnitude different as time passes for the vacation as compared to the football game.

Another problem I have is that the time frame is inversely proportionate to the future population growth rate. If we slow birthrates down to just above replenishment (about 2.1 births/woman), then we extend the time between now and the next 100 billion people. Thomas Malthus and Paul Ehrlich might agree, but Jean-Baptiste Say and Julian Simon (and I myself) would not.  So my complaint boils down to: that when applied to something like humanity and it’s future, this doomsday calculation is not telling us as much as it is purporting to.

Thursday, August 1, 2019

Top 100 Movies - Required Viewing

This is my partially complete list of "classic", right-of-passage movies everyone should see. I had my kids in mind when crafting this list. I drew from a much larger list of movies I want them to experience wanting to cull it down to an elite must-see list. 

It is partially complete because while it is a top 100, I am open to changing what makes the list. But I do feel that 100 is a sufficient number such that to be added to the list a new entrant would need to bump a movie from the list. 

Do not confuse this with a “greatest 100 movies” as this is not a measure of cinematic excellence or advancement of the medium. It is closer to a kind of most culturally important list, which overlaps largely but not entirely with a most popular list. Case in point: no one would list Caddyshack as a movie that set a bar artistically. However, it’s influence on and depiction of the subculture of golf has been phenomenal. I would bet that virtually everyone who has played a round since the movie came out roughly 40 years ago has during a golf outing made or heard a reference (if not many) to that movie. 

Additionally, there are other criteria or factors that to some degree contribute to a movie’s inclusion on the list including: I enjoy the movie/it has some nostalgia value for me, it is a movie that speaks to an important truth/it teaches something about the time it is set in or its genre or its underlying story, and it has cultural importance. Being culturally important and being on the list means that you can’t just read a synopsis of the movie to fully understand the cultural importance. You have to see it to get it.

The list in alphabetical order (sorry about "The" titles):

2001: A Space Odyssey
A Christmas Story
A Few Good Men
A League of Their Own
Anchorman: The Legend of Ron Burgundy
Apocalypse Now
Apollo 13
Back To The Future
Christmas Vacation
City Slickers
Close Encounters of the Third Kind
Cool Hand Luke
Dead Poets Society
Die Hard
Dirty Dancing
Duck Soup
Ferris Bueller's Day Off
Field of Dreams
Fight Club
Forrest Gump
Good Will Hunting
Groundhog Day
Happy Gilmore
Home Alone
It's A Wonderful Life
Jurassic Park
Karate Kid
Lethal Weapon
Life Is Beautiful
Match Point
Men in Black
Monty Python and the Holy Grail
Mr. Mom
Mrs. Doubtfire
Napoleon Dynamite
North By Northwest
O Brother, Where Art Thou?
Office Space
Old Yeller
One Flew Over The Cuckoo’s Nest
Planes, Trains, and Automobiles
Psycho (1960)
Raiders of the Lost Ark
Rain Man
Raising Arizona
Remember the Titans
Star Wars: Episode VI - Return of the Jedi
Spies Like Us
Star Wars: Episode IV - A New Hope
The Bad News Bears
The Big Lebowski
The Blues Brothers
The Breakfast Club
The Dark Knight
Star Wars: Episode V - The Empire Strikes Back
The Godfather I
The Godfather II
The Goonies
The Jerk
The Lord of the Rings: The Fellowship of the Ring
The Matrix
The Princess Bride
The Royal Tenebaums
The Sandlot
The Shawshank Redemption
The Shining
The Silence of the Lambs
The Sixth Sense
The Terminator
This Is Spinal Tap
Three Amigos!
Top Gun
Trading Places
War Games
Weird Science
When Harry Met Sally
Young Frankenstein
You've Got Mail

On Stowaways and Hostages

Consider the following hypothetical situations and associated questions. Some time in the 1800s . . .
  • A captain of a ship discovers a young boy (perhaps 9 years old) has stowed away on the ship once it is far out to sea. He will consume resources and be a distraction. Should dangerous events unfold such as bad weather, he will be an added liability. What duty of care does the captain have to the child? Can he force him to work on the ship—to what degree? Must he make him comfortable—to what degree? Can he put him in a lifeboat with small rations and send him adrift where he will likely suffer and quite possibly die before rescue? Can he ethically toss him overboard where he will certainly perish? What duty does the captain owe the boy?
  • Same thought experiment but now assume the boy was accidentally trapped on the ship while in port through no fault of anyone in particular. It was simply and definitively an innocent mistake. Consider the same questions. 
  • Same thought experiment but now assume the boy was accidentally trapped on the ship at port through the direct and certain fault of the captain. The captain was negligent by any reasonable measure. Consider the same questions. 
  • Same thought experiment but now assume the boy was deliberately kidnapped by the captain and brought aboard for the purpose of working for the captain. Once the captain tires of the boy or has no further use of him, consider the same questions as before. 
  • Same thought experiment but now assume the boy is the captain’s child, was deliberately and willingly brought aboard, and the child’s mother is deceased. Consider the same questions as before.

Tuesday, July 9, 2019

The Rational Fan: Managing Hopes and Constantly Adjusting Expectations

(I love the mirror image below the bars hinting at the symmetrical negative to any observable outcome.)
Consider the analogy of graphic equalizer meters on a old 70s-80s-era stereo--the ones that would show the recent high-point marks. I think this is a good symbol of the high-water-mark thinking that commonly clouds the judgment of sports fans. Specifically, an irrational (typical?) fan mistakes the best performance for the expected performance. The rational fan thinks in realistic terms where future expectations are influenced by past achievements but not set by them and mean reversion is always expected (eventually).

This would include updating for new information (e.g., a recent trend of wins or losses) when projecting the long-term expectation of winning. (i.e., Is recent performance simply an aberration and regression to the historic mean should be expected? Alternatively, has a new plateau been reached and future expectations must be appropriately adjusted?)

Consider also the emotional impact of a team's performance on a fan. The rational fan must contend with and accept the great irony that the more one's team wins, the more the wins tend to run together and the losses stand out, and vice versa. This is simply the law of diminishing marginal utility (not to be confused with the law of diminishing returns).

Irrational fan foresight is almost always myopic as they only see one side of what could be and probably do so in a vacuum. When an irrational fan imagines a play executed, he imagines an outcome determined by his conviction of the play’s potential success or failure. His judgment is probably additionally clouded by the play's potential excitement. If he would like to see a particular play call, he envisions a successful, if not the perfectly successful, outcome. If he disagrees with a play, he conceives of only its failure. A coach doesn’t get that luxury. Coaches should rationally weight the probability of success and the degree of success with the probability of failure and the degree of failure—what could be and how likely it is. Fans are allowed to dream, coaches are required to calculate. For coaches, magnitude matters.

So on any given play fans are liable to be deeply unsatisfied while coaches see the outcome as satisfactory toward a larger goal. But as should be expected, this is subject to error and unintended consequences. The error can be that coaches have bad incentives leading them to take less risk than they should (another example). The error can also be that fans expect too much. Back to the equalizer analogy, setting expectations on the abnormal high point causes fans to demand an unreasonable level of success. Fans can also be subject to what I would term conventional-wisdom bias--the primary source driving coaches to be overly conservative.

Also, when is a fan a true fan? Consider a convert. As opposed to religion, there is no long process filled with sacrifice and commitment culminating in a grand ceremony to becoming a team's fan. But perhaps there is such a process for becoming a "true" fan. Hence, the concept of bandwagon fans as illegitimate. It is only those who have been there through the tough times who can claim righteousness. For my teams I certainly feel this way.

Perhaps another way to look at it is that to be a true fan you have to feel physical pain when your team loses. Alternatively, you're not a team's true fan until the opponent's pain is your pleasure.

One more nostalgic image:

Thursday, June 6, 2019

Ethical Free Riding

Partial list of ethical ways to free ride (enjoy positive externalities). Free riding is generally economically destructive and potentially unethical. For example, if paying for national defense is voluntary, the risk is that we get too little of it as many people attempt to free ride off of the benefit of everyone else paying for it. (Note: don't too easily accept this theoretical argument when applied to so many so called "public goods" such as roads and lighthouses.) While free riding off of others is unethical when you are taking resources from others, there are many examples of free riding that are ethically fine:
  1. Mayberry - Because so many people (especially helpful if it is your neighbors) are so very active in their home security (setting burglar alarms, using Ring doorbells, etc.), you don’t have to be. You just need for your place to look like the kind of place that does.
  2. Speed Racer - Because everyone wants to drive so fast, you can go above the speed limit safely and stay behind the fastest drivers who can run interference with Smokey. Defensively keeping pace with traffic is the safer way to drive. 
  3. Quantum Leap - Be on time and keep your promises and you will exceed most people's general expectations. This is basically just capitalizing on other people’s inability to do the right thing. 
  4. Gotham - The benefits of big-city life are great for both individuals as well as society at large. Not only are you doing good by the environment living in a big city, you are doing well for yourself in many ways. For you this means access to amenities that are less expensive and of greater scope in type and richness.
  5. Quiz Show - When information is expensive, trust the wisdom of the crowd. Visiting a new town and looking for a good restaurant? Trust the one that is popular with locals--all the more so if it has other impediments to overcome like a poor location. 
  6. The Matrix - There is basically no excuse for doing something new or difficult by winging it from scratch. Research and learn using Google searches, YouTube, blogs, et al. Somebody somewhere has been there, failed, corrected, and left it all waiting for you to discover. 

Monday, May 27, 2019

Don't Let the Ideal Be the Enemy of Improvement

This recent Scott Sumner post got me thinking about a truism I like to follow: 

Don't let the ideal be the enemy of improvement--my take on don't let the perfect be the enemy of the good. 

Perfect is overrated. While I might be a libertarian idealist at heart, I have always striven to be a directionalist rather than a destinationist. And I certainly don't want to fall victim to the Unicorn Fallacy.

Consider The Big Five and reasonable milestones of progress to be aiming for.
  • Drug prohibition - Marijuana tolerance is gaining. This is largely good (movement in the right direction). However, it probably will have unintended byproducts like legalization = authority endorsement leading to overuse as well as even stronger resistance to decriminalization, legalization, and tolerance for other illicit products (cocaine, heroin, LSD, etc.) and services (sex work, price "gouging", etc.). Reasonable near-term aspiration: Federal action decriminalizing if not descheduling marijuana despite the before-mentioned byproducts.
  • Education - School choice is on a gradual but tepid rise. Reasonable near-term aspiration: A popular civil-rights figure strongly advocating for a voucher or charter school experiment in a major inner city. 
  • Immigration - These seem to be dark times. Yet I see two aspects of optimism. First, Democrat rhetoric is improving as they attempt to draw a distinction from Trump--this isn't faith in Democrat dogma but rather faith they will paint themselves into a good corner. Second, Republicans will likely need to soften the stance Trump has defined lest they risk losing demographically--this isn't faith in Republican virtue but rather faith in their ability to see a self-serving means to an ends. Reasonable near-term aspiration: A compromise solution to allow much-greater levels of H1B visas and higher levels of "desirable" immigrants (where desirability comes from greater restrictions on immigrant access to benefits or sponsorship by entities such as employers or charities or sanctuary cities).
  • Taxation - The biggest recent improvement has been in this category with the Tax Cut and Jobs Act of 2017. By far the two benefits of this mixed bag of tax changes were the reduction in the corporate tax rate and the increase in the standard deduction. The latter should enable future tax simplifications such as removing deductions and allowances much easier to accomplish. Reasonable near-term aspiration: Increases in tax-deferred savings limits.
  • War - This is the most stagnant category. Across the globe we are still explicitly overtly at war (Afghanistan, Iraq, et al.), implicitly covertly at war (Yemen, Syria, et al.), and potentially at war (Iran, North Korea, et al.). Reasonable near-term aspiration: A critical mass within the electorate of direct opposition to each of these three types of bellicosity. Even if it is a selfishly-derived opposition (stop wasting our resources on lost causes, don't fight other people's battles, regroup in case we need to fight a big enemy), it would be helpful. 

Saturday, May 18, 2019

What Are You Signaling By Your Sport of Choice?

This is meant to be primarily tongue-in-cheek, but if the shoe fits...
  • Football - I am in the tribe of macho
  • Basketball - I am a socialite sports fan
  • Soccer - I am worldly and sophisticated
  • Baseball - I am in love with Americana and yearn for the ways of the past
  • Golf - I am elitist (by desire/choice or caste)
  • Hockey - I am accepting of violence to solve problems
  • NASCAR - I am intolerant
  • Formula 1 - I am tolerant, no really, I swear I am
  • Horse racing - I am superstitious
  • Boxing and MMA - I am accepting of violence as an ends in itself
  • Wrestling - I am in the true tribe of macho
  • Tennis - I am a true socialite sports fan
  • Olympics - I am a fan of theater
I don't know enough to hazard a guess on these: Cricket, Rugby (probably the same as American football), Field Hockey, et al.

Partial List of Wax On Wax Off

Partial list of things I believe to be waxing and waning in the popular sense of moral, civilized taste. To be clear morality is not determined by vote. And also notice this is not a list of things peak/not peak. This is more a prediction of long-term trending.

  • Marijuana
  • Basketball (as a share of sports-fan attention)
  • Virtue signalling to strangers through condemnation (you shouldn't do this or believe that)
  • Factory farming/eating animals/hunting
  • Tobacco
  • Football
  • NCAA student-athlete amateurism
  • Fossil fuel energy (both superficial (electric cars are ~25% coal cars) and actual)

Partial List of Serious Problems We Won't Solve

Partial list of serious problems where too many of us are unreasonably unwilling to accept the clearly best solutions*: 
  • Climate change/energy efficiency - nuclear power
  • The need for kidney transplants - a free market in organ transfers
  • Higher levels of economic growth -  free movement of people across borders
  • Too little affordable housing - allowing more housing to be built
  • Inner-city education failure - getting government out of the provision and design of schooling via vouchers (case in point of why this is on the list)
  • Health care cost - removing regulation against competition in insurance provision and required components of insurance along with removing tax advantage for employer-provided insurance (updated to add: eliminating at least FDA's efficacy requirements if not the FDA altogether and allowing unencumbered competition in health care supply (i.e., eliminating certificate of need laws, et al.))
  • High unemployment and underemployment within the underclass - remove occupational licensing (also helps in health care and legal work markets among others)
  • Social Security insolvency - sun setting of future obligations by means (for near claimants) and age (ending the scheme for all those below a certain age)
  • Drug-related crime, violence, and social disruption - full legalization of all currently illicit narcotics
  • Geopolitical conflict (aka, war) - embrace and default to pacifism
  • Taxation distortions and inequalities - Replacing income-based and all other resource-creation-based taxation with consumption-based taxation such as a VAT
*These are not necessarily completely sufficient solutions, but they are at least the most complete way these problems could be greatly alleviated.

Sunday, May 5, 2019

Why Might Good News Make Stocks Go Down?

This runs the risk of being the most ill-timed post I've made since current recession risk is probably elevated. Don't take this as direct investment advice or as timely commentary on the current market. 

Consider a hypothetical couple planning for retirement and in the midst of that plan they are considering the upcoming year's vacation options. They can either have a staycation with peanut butter and jelly sandwiches and TV watching or a blowout Hawaiian vacation. 

As they consider which vacation they can afford, I arrive at their door having traveled from the future. Don't get caught up in the unrealistic assumption of time travel. The point is that I can credibly tell them the future looks very bright--perhaps I'm just Carnac the Magnificent. I tell them their investments will do well and times ahead are very good. How will they react? They go on the Hawaiian vacation. In other words they sell or forego savings (investments) and buy current consumption. 

The more technically accurate but less intuitive way of looking at it is the following. To get them to forgo enjoying the vacation now opting instead to save/invest, the market would need to pay them a higher rate of return (their discount rate, required rate of return, has increased). In order for current assets to have higher future returns, prices today must decline. Here is a fuller explanation from John Cochrane. His main point is that positive news can make market prices suddenly decline (if profit expectations stay the same but discount rates increase) but also negative news can make market prices suddenly decline (if profit expectations decline). 

If you find an unanswered question in this analysis, you are on to something. Good news can make the market decline but so can bad news. What exactly makes stock market prices suddenly go up? New, higher profit expectations could be the answer. Unfortunately, this is harder to come by than might be assumed. Remember, we are talking about long-term profit expectations. Those are tied to fundamental growth rates of ideas (innovation/productivity) and market size (population as well as density--a million people in a city are more productive than a million people spread sparsely over a large space). Moving that needle positive is much, much harder than negatively shocking it.

Saturday, May 4, 2019

Can Trump Be The Solution To Trump?

As faithful readers know, I have been ambivalent on the Trump presidency. From the beginning I thought there were reasons to be optimistic and pessimistic on it. Those are proving fairly prescient in some cases, gratefully off in others:
Optimistic - Shows why we should lose (and should have lost a long time ago) our reverent awe for the U.S. Presidency; prevents major government action/intervention/meddling on any number of issues by being a circus act writ large (his administration's priorities will be prestige and showmanship rather than policy accomplishment); forces a meaningful debate and action on limiting executive power (a little bit in tension with the previous prediction as this one mitigates a Trump administration that is actually trying to do something).
Pessimistic - Engages in major international war actions (beyond the high amount the each of his opponents would do anyway); sets back trade freedom and immigration substantially; creates strong racial, ethnic, nationalistic, and gender divides.
I have expanded on this upon Trump taking office and one-year in. Part of my analysis has been optimism that Trump will bring sanity to how we look upon the U.S. presidency.
  • Lost Respect for the Sanctity of the Office - yes this is a feature--let the scales fall from your eyes, the emperors have never been well dressed. But . . .
A recent episode of the always rewarding Something's Off with Andrew Heaton featured Rob Montz discussing his excellent Trump as Destiny: Why the Reality Show Presidency Was Inevitable. This is a great piece that I hope gets as much traction as possible. It resonates with me. I hope it does so for others.

We've gone from George Washington supposedly declining the offer to be king (even if this is apocryphal, the fact that it is part of the legend strongly implies we at least once held this to be a virtue) through John Kennedy embracing the image of being our king to genuine concern that Trump would take us up on the offer.

The course of history has been decidedly against my vision for the U.S. presidency. What makes me think I should be optimistic about Trump changing that? Indeed that is a question that troubles me. I'm not sure I have a good answer. The source of my optimism has been based largely on Trump as such an extreme example of the problem that those in Congress would find it their own interest to change course and the American people would see the office (not just the man who happens to be occupying it) as run amok. Unfortunately, our growing tribalism thwarts this on both sides--many or most Democrats don't allow themselves to see a connection between the office and this president and many or most Republicans don't allow themselves to admit there is a problem at all. Somehow we need to make fear of Trump lead to limitations on the presidency going forward.

I think Trump certainly could legitimately be impeached, and I would prefer this if it was at least neutral to the bigger hope that Trump will significantly erode presidential power and image. I fear it would not be constructive to that larger goal. Once he is out, the problem is "solved", and we are back to business as usual. Of course, we have that same problem in an election of a new president in 2020 or (more likely not until) 2024, but at least then there would not be the cleansing event that allows continued blindness to the bigger problem.

Here is my curve-ball solution: Get Trump to bring the limits we want. He can't make us think less of the office. We have to do that on our own if we are willing to take the red pill. But he can put into place strong limits on what his successors may do. Why would he do such a thing? Because he is vain and doesn't believe anyone else can be trusted with power. The best prospect of this might be as a 2024 election approaches and a Democratic victory looks imminent. Perhaps then a Republican-lead Congress brings strong legislation to Trump's desk and the lame duck sings a wonderful swan song.

Unlikely? Probably about as likely as Kim Kardashian and Kanye West getting Trump to enact criminal justice reform.

Help Me Find a Difference

What is the logical difference in the following statements. In other words, why should I agree with some but not all or disagree with some but not all? 

To my children’s teachers: I really appreciate the service you provide, but your pay should be limited to a figure well below the result of the competitive market.

To my garbage manI really appreciate the service you provide, but your pay should be limited to a figure well below the result of the competitive market.

To my dentist: I really appreciate the service you provide, but your pay should be limited to a figure well below the result of the competitive market.

To my favorite restaurant’s cooking and waitstaff: I really appreciate the service you provide, but your pay should be limited to a figure well below the result of the competitive market.

To my favorite college team’s athletes: I really appreciate the service you provide, but your pay should be limited to a figure well below the result of the competitive market.

To my favorite college team’s coaches: I really appreciate the service you provide, but your pay should be limited to a figure well below the result of the competitive market.

To tease this out explicitly - being consistent would require either market-based wages for coaches and athletes or highly-restricted wages for both. Perhaps Dabo Swinney should make as much (and only as much) as the lowest-paid college football coach.

Also, arguments about the "competitive market" being an unrealistic ideal compared the "real world" are not relevant for the point I am making here. Yes, there are all kinds of problems with wages being less than optimal from an idealized competitive market perspective. So one could easily use this same implied argument to rally against the state's monopolistic control of education, cronyistic contracts for municipal sanitation, medical and other occupational licensing laws, minimum wages, etc.