Monday, February 28, 2022

Economic Sanctions - Failure in Theory and Practice

Imagine you are trying to change someone's mind. How would you go about it? What techniques would be effective? 

Imagine now you are trying to change a group of people's minds. The difficulty multiplies. 

Now imagine you are trying to get a group of people to change their behavior or worse yet to get them to make active changes in their own status quo implementing changes that put them at high risk or involve great hardship. 

For instance, suppose you are strongly opposed to abortion. You believe it is morally wrong--it is the taking of a human life. Suppose you took political power and while you could not yet overturn the legalization of abortion, you could impose sanctions on those who engage or enable it. To bring about change you would like to cut off access to credit for those who have been a customer of or worked for an abortion clinic. This can't be done, though, because you cannot identify those individuals nor can you legally target them. But you do find a technicality in the law allowing you to target an area that has an abortion clinic. All those who live and work in that area suddenly cannot access credit or the banking system. This is crippling.* 

Do you think this would be constructive to your ultimate cause? Think of those marginal or median voters. While they don't have a strongly-held position on abortion, they are not just caught in this crossfire--they are the target. You are aiming to harm them so as to bring about change. At the very least you are willingly harming them because the shotgun approach you are limited to forces the collateral damage.

If that is too politically charged for you, consider this. You are the mayor of Shelbyville. One of the things that really irks you is how many of your citizens root for the nearby town of Springfield's baseball team, the Isotopes. This isn't just a minor annoyance. Your administration is trying to support the local team and economy by building a huge new stadium complex for the home team. The lack of hometown support, though, is making this quite difficult. So what to do? You institute a blackout zone through an indirect tax. All broadcasters are subject to the onerous tax, $10,000/minute of broadcasting, for any broadcast of a sporting event of a team located more than 20 miles from the Shelbyville town center. Viola, problem solved, right? 

The desire to have people change what sports team they root for is not going to be solved by force. Many people who never watched a single game before are likely to take up the cause against you. 

Want to increase vaccine acceptance and injection rates? Well, you could . . . oh, we've been doing that experiment. I don't think it moved many needles [pun intended].

We can extend this hypothetical to all kinds of causes: disuse of fossil fuels, antipornography, zipper merging, etc.

The result is consistently and predictably emboldened and extended resistance. It is not human nature to succumb to external pressure. Any parent knows reverse psychology and distraction are the keys to getting a young child to change course. Tell them they can't, and the deviant battle begins. 

This thought experiment alludes to why economic sanctions applied by governments so often fail to achieve their desired ends. 

Setting aside all of the very important concerns about moral authority and moral culpability given who is actually harmed by sanctions, consider just if they should work to begin with. Stated differently, why do they so often completely fail? The do so because that's not how people change or how they are made to change.

So why do we do it? Partially it is action bias, the fallacy of . . . something must be done . . . this is something . . . therefore, do it!

Perhaps more importantly it relies on social desirability bias. It seems like a strategy that is more humane than active warfare. However, it is arguably much less noble and less morally defensible as it targets noncombatants attempting to turn them into double agents. In an age of high-precision bombs, economic sanctions are carpet bombing combined with landmines. 






*Arguably the linked (trucker convoy and Canada's emergency response to it) is an example of sanctions that worked! But only in the narrow sense of getting the result of disbanding the convoy. I am not sure it won any hearts and minds on net. Rather I think it turned a lot of people against the government of Canada. It also was an arguably more harmful action than simple police action would have been. The greater harm is in the threat and concern of it being used going forward as a regular tool. In this way the actions of the Canadian government are not analogous to economic sanctions but rather analogous to escalating hot-war conflict.

Saturday, February 26, 2022

Resistance to Coercion versus Fighting for Freedom - Dimension Analysis

What do you do when confronted with someone wanting to have you do something you don't want to do? In fewer words, how do you respond to oppositional, hostile force? 

Of course, the force in question is probably a key to your response. Is someone trying to manipulate you into taking an unfair deal, or is someone trying to steal your car, or is someone threatening your life or way of life? Importantly your alternatives matter greatly as well. Can you delay, demur, deflect? Can you exit the situation with grace or perhaps with just some slight shame? Must you submit or resist perhaps with violence?

Let's focus on serious conflict where the stakes are relatively high if not exceptionally high. And in doing so we will think about situations from the standpoint of the victim or person under threat/attack. Therefore, this will be about degrees of losing where the best case outcome is the status quo.

I see the options being somewhere between resistance to coercion and fighting for freedom. In a sense this is passive versus active or reactive versus proactive. Take the recent actions in Ukraine with Russia threatening and then attacking. As I write on February 26, 2022, Russia has invaded and is actively attacking various areas within Ukraine including the capital city Kyiv. It is very ugly, as war always is, and the initial news is likely sketchy and subject to revision. 

That said, we can assume some basic facts to explore the implications. The Ukrainian government has not been friendly to Russia. This is a government the U.S. helped install and support going back to Obama administration. Long before that under the Clinton administration and then continuing into G.W. Bush's administration were numerous political moves and positioning to expand NATO including potentially adding Ukraine at some future date. Regardless of the likelihood of that officially happening, the support for Ukraine from NATO and its member countries as well as the outright enlargement of NATO to include former eastern-block nations in 1999, 2004, 2009, 2017, and 2020 have presented an expanding defensive/threatening position vis-a-via Russia. 

This is not an apology piece for Russia or especially Putin. It does potentially give us some understanding for what Putin is doing and how he at least tries to defend it. The Russian government is a threat to its neighbors and NATO interests. But from the standpoint of Russia, the same can be said of NATO and actions the U.S. in particular has pursued. What is interesting to me is how the perspective of both sides can be used in this dimension analysis.

As Russia engages in violent acts harming and killing people, one could label it as "fighting for freedom"--just not in the noble sense we typically use that phraseology. They have turned from resistance to coercion as an option to actively striking out (I very deliberately don't say "striking back" since Russia has not been attacked). 

Similarly the Ukrainian position has been resistance to coercion and especially the threat of future coercion by building an alliance with the West. Was this the only or best way to resist coercion? I would say probably not. Rather building ties economically and politically with Russia might have been a better strategy. In this I envision taking on an active Swiss-like neutrality while developing economic co-dependence through trade. NATO and the U.S. itself might have been much wiser to not expand NATO nor threaten to do so. Perhaps NATO should have deescalated following the fall of the Soviet Union in stages negotiating further and further withdrawal and peace leading potentially to eventually dissolving NATO altogether. This is my view, but this is not aimed at being an advocacy post nor a criticism. Rather I want to suggest that in light of these alternatives the geopolitical moves in Ukraine were in actuality fighting for freedom disguised as resistance.

Consider an analogy: A man and his family live and work in a dangerous community subject to high violent crime rates. While moving would be a great solution in theory, exit is not practicable for them. Whether they are correct or not, they feel trapped. Recently they have noticed that there are increasing incidences of violence in places they must frequent like the local grocery store and their workplace. So the man decides to start carrying a gun. Because he lives in a state that allows open carry, he can make visible his choice. [NB: This is not a post about the 2nd amendment, etc.] 

Carrying a gun in this case could be thought of as resistance to coercion, but it also can be escalatory. The thugs in the neighborhood also feel trapped--they can't take their violent ways to another place. This is where they "work". So the thugs now consider their options. They could increase their own muscle/firepower. They could target others who look less capable of defending themselves. They might even consider tactics that amount to negotiating territory and room to operate like co-opting the shopkeeper or threatening more while accepting less. 

But carrying a gun could also be fighting for freedom. The man is taking a stand and putting himself in harms way to the degree this act is escalatory or empowers him to take more risk. As an alternative or complement, he could advocate for more policing or security guards. If he didn't have an open-carry option, this advocacy might actually be more difficult if it puts him at greater risk when he carries a gun. Even if he can carry a concealed gun legally, the advocacy still pushes back on his own fighting for freedom option forcing him to be much more passive.

Sturdy doors with good locks, bars on windows, and burglar alarms are tools of coercion resistance for this family. But so too are guns, knives, big dogs, and baseball bats. The latter can easily become the tools of freedom fighting or outright aggression. The former might not have direct offensive capabilities, but they do invite suspicion as well as stronger opposition when opposition does come knocking. You're probably better off bringing no gun to a gun fight than bringing an unloaded gun and no ammo. 

The point I'd like to make with the analogy is that it is hard to see where the lines are between what is resistance and what is fighting. Active resistance (e.g., carrying a gun) can be a threat, and that can be good, justifiable, and peacekeeping. It can also enable a fight where flight would otherwise be the better course of valor.

While it might be socially desirable to align with fighting for freedom, this positioning is antagonistic with unintended consequences. While it might feel noble to claim the mantle of resistance to coercion, this can be a provocative self-deception. Think how many so-called freedom fighters were either defending a brutal regime or whose actions lead to tyranny. Consider how often a resistance movement became offensive destruction. Once put into motion, forces opposing change or pursing change can be very hard to control.

George Washington fought for freedom, but so supposedly did Che Guevara. Washington's legacy was not a fight for complete freedom (see slavery), but I think his value alignment was much, much closer to virtuous than was Che's. It is hard to know where freedom fighters might lead us.

There is no left or right monopoly with either resistance or fighting. Easily I can think of resistance to coercion as being a conservative position as when something is threatening the status quo or tradition. I can also see how people could decide to resist being victimized by traditional norms--for example, racism, homophobia, etc. Fighting for freedom is on the other side of the axis where "Hell no! We won't go!" becomes "Come and take it." with no natural political connotations.

Neither motives nor outcomes can be determined based on which of these strategies is employed. Both methods can have a claim on the moral high ground as well as disastrous pitfalls if not evil ulterior motives. The non-aggression principle (NAP), a founding concept of libertarianism and classical liberal philosophy, implies strong constraints on both ends of this spectrum lest we become that which we seek to avoid. 





Friday, February 25, 2022

What All The Pundits Are Getting Wrong About CFB Playoff Expansion

In the subculture that is major college football, big news broke earlier this month that the championship playoff at the sport's highest level, FBS, would not be expanding from the current 4-team format for the duration of the current contract.

from CBS Sports:

Many of us who follow the sport found this disappointing. In fact almost everyone weighing in on it including the people who decided the matter by voting against expansion expressed disappointment. So what's going on here?

Most pundits write it off as simply a group of people too petty and short-sighted to get past themselves and grasp the bigger picture. To be sure, that might actually be true. However, I think there may be something else at play. 

College football is in incredible flux. From the rise/revolt of the student athlete finally demanding and getting a fairer seat at the table to competitive pressures to realign into better and better deals, there is much uncertain about its future. 

I think it is fairly obvious that the current arrangement in college football is not sustainable. There are currently 130 teams in the division with four more planning to make the upgrade from the lower-division FCS. This is a league that ranges from Alabama to Kansas (winningest to losingest over the past 10 seasons). That is a big range.* The bottom of the league would typically be an extreme underdog to any opponent from the top of the league--perhaps on average a matchup between a top 20 team and a bottom 20 team would imply a +90% likelihood the favorite would prevail.

This is not a league with any sense of balance. Frankly, somebody has gotta go. Most of the members of the major conferences, the so-called Power Five, know this. As a group their teams are much better than the rest of the league, the so-called Group of Five. While some of the weakest teams are found in the Power Five (e.g., Kansas and Vanderbilt) and some of the strongest teams are found outside the Power Five (e.g., Central Florida, Boise State, and independent Notre Dame), these are exceptions. 

It is my contention that the major stumbling block to expansion of the CFP before 2026 is what kind of deal the Group of Five would get in the arrangement. If those conferences were granted slots in the playoff, they would hold a lot of bargaining power going forward. The teams within those conferences, especially the very good teams, would have much less incentive to move into a power conference. If nothing else, the buyout of those rights would grow astronomically. 

It has been at least rumored that the Power Five have offered to buy out the Group of Five from the CFP. This would line up with my hypothesis nicely. The elite teams and conferences see the writing on the wall. They know, I believe, that the highest division of college football should have perhaps 64 or so teams in it. 

They also know, I believe, that even if a field of ~130 teams continues, it very well might be one with a de facto two divisions (upper and lower). The lower teams would be there as sort of a relegation à la soccer. By no means in this arrangement should a lower-division team have anything but the slimmest of chances at a playoff berth. 

Any concession made today to a lower-tier team/conference, is very risky. As talent accumulates into the better teams/conferences, those entities have the luxury of wanting a bigger share of the spoils. Negotiations while the future of the league is still sorting itself out means deals can't come together--the lower-level teams/conferences want more than they can offer and the upper-level teams/conferences need more than they can get. 

I didn't see this clearly at first and expected an expansion to happen before the current contract's expiration in 2025. Now I understand it better if for no other reason than having to look hard to understand why a deal fell through. 







*If you don't agree that Kansas isn't a serious team (Texas Longhorns probably don't), then consider the other doormats over the past decade: UMass, New Mexico State, Connecticut. 

Sunday, February 20, 2022

Mr. Blandings Builds His Dream Portfolio


Imagine being an architect for a couple wanting to build a dream house. Their sentiment and emotions would influence what they asked for, but your job  includes a need to keep them within reason (not too big (or fancy) and not to small (or modest in terms of amenities)—basically Goldilocks).

Now image that they want to argue with you about how certain features should look, about how large certain rooms need to be, about what it takes to be within code and best practices, even about structural and engineering issues. Now complicate it by making yourself somewhat unsure about some of these answers and downright ignorant about the underlying truth of, say, why certain designs will likely work better for structural integrity than others. You must win the initial bid and keep their confidence throughout the project without misleading them or giving them what they think they want without regard to the tradeoffs, the downsides.

Financial management and financial planning is a lot about being the architect and general contractor for some principal (individuals, families, organizations, et al.) who probably wants more than they can reasonably afford and wants to achieve it with unreasonable certainty. Being a financial advisor means always having to say you're sorry.

This is not a rant. Clients are trusting you with their money--potentially all of their financial wealth. For many like individual retirees this will be all their potential wealth too because they are no longer able to work. For others their capacity not to mention willingness to go back into the workforce would leave them only with a fraction of the wages they are entrusting you to earn for them with, let me remind you, their money. They may not know what they do not know, but part and parcel with that is they do not know it. 

Oh, and one more thing: you as their advisor may not know what you think you know about them. It is a continual discovery process seeking to learn and refine and revise what goals they are trying to achieve and what constraints and risk tolerances they are subject to. 

Good car mechanics know a lot about fixing cars and keeping them running well. They know basically nothing about where you should drive. London cabbies know how to get you where you want to go (in London). They cannot know if you should want to go there.

Humility and honesty are essential attributes of a good advisor (financial and otherwise). They are among the necessary conditions for potential success along with actual skill in the area of advisement, good communication, and ability to establish and keep trust. Most clients are know they want the latter qualities in an advisor (skill, communication, trust), but in many cases they give little to no importance to the former (humility and honesty). In fact those often repel rather than attract clients. Add overcoming this bias to that which separates beneficial, successful advisors from charlatans and quacks. 

Saturday, February 19, 2022

Rather Sorry Than Safe



When friends who are interested in "prepping" ask me about planning for doomsday scenarios, I love the looks on their faces when I reply, "I'm planning on being one of the attacking barbarians ravaging the countryside. Thanks for telling me about your hideout." 

Let's consider the perspective of a prepper in regards to prepping for financial disaster. There are always reasons to be fearful about the future, and it doesn't take too much imagination to spin these true risks into worry of cataclysm. As I write, worries about the COVID-19 pandemic are gradually fading only to be replaced by concern of war with Russia vis-à-vis Ukraine.* 

If you don't have a back-up plan, you are naively gallivanting about while the asteroid circles the planet. Yet if you always hunker down in the bomb shelter, you are letting your fears prevent you from enjoying life. Risk inconsistency can be worse than consistent, willful exposure to high risk. If you are prepared for and understand that actions you are taking are likely risking bankruptcy for the chance to strike it rich and possibly very rich, then the risk you are taking may very well be prudent and necessary. Extremely few entrepreneurial efforts with appropriate upside potential do not inherently contain that kind of downside risk. But if you are running a decent risk of bankruptcy just through your spending patterns and arbitrary investment decisions, you are likely not getting enough reward for the risk. In a more technical sense you are not matching potential return with the level of risk. 

Return is the expected compensation for risk taken. It is not guaranteed nor predetermined. A lot can get in the way and almost always it is a spectrum of potential returns (some of them low if not negative) that result in the expected return. Sometimes we qualify return compensation in terms of a required rate of return. Required can really be thought of as minimum acceptable expected return. In highly efficient markets this required return becomes equal to the expected return as any potential return above this required level gets competed away.

Successful decision making in life as with successful investing is not about avoiding risk or taking risk. It is about understanding and managing the many varied risks one is exposed to while getting the proper potential compensations. 

We simply cannot predict the future nor can we entirely remove our exposure to it as good and bad as it will be. Well, I guess there is one way, but if that is your solution, this post isn't for you at all. For those of us who want to go prudently into that good night, remember the old adage:

Don't try to hedge the end of the world. It's only gonna happen once, and regardless of what you do, it won't work out too well for you.



*Calvin: You're sure?

Adam: Positive. The Soviet Union collapsed without a shot being fired. The Cold War is over.

Calvin: That's what everybody believes?

Adam: Yes, sir. It's true.

Calvin: What? Did the Politburo just one day say, "We give up?"

Adam: Yes. That's kind of how it was.

Calvin: Uh-huh.

Calvin: My gosh, those Commies are brilliant! You've got to hand it to 'em! "No, we didn't drop any bombs! Oh yes, our evil empire has collapsed! Poor, poor us!" I bet they've even asked the West for aid! Right?

Adam: Uh, I think they have.

Calvin: Hah! Those cagey rascals! Those sly dissemblers! Those, uh... They've finally pulled the wool over everybody's eyes!

--"Blast From The Past" via IMDB

Tuesday, February 15, 2022

Don't Confuse Poverty For Inflation

Just when they said it was dead and gone, inflation is back loud and clear. The latest reading of the CPI for January 2022 is 7.52%! We haven't seen these levels since the early 80s, or is it since the mid 70s thinking that this is the upswing with more to come? That is a scary thought as inflation didn't peak until 1980 at 14.6%. 


While I believe the Fed has the resolve and know how to tame inflation, that indeed does remain to be seen. However, that isn't the point of this post. 

What is on my mind is a mistake I hear being made often as an apology/excuse for Biden. Since Biden is currently the President, it is the left who is offering this excuse. Had Trump won, I would fully expect the right to be making the same mistake. 

The mistake is thinking Biden (like Trump before him only more so with Biden) does not bear some blame for the inflation numbers we see. The short version is: "It's not Biden's fault; it's the pandemic's." 

Had the apologist said instead, "It's not Biden's fault; it's the Fed's," I would have cut them some more slack. The Fed is ultimately the reason we do or do not have true inflation (a sustained increase in the overall price level relative to the medium of account, USD). 

The pandemic and the policy responses to it have generated enormous supply and demand disruptions. The magnitudes here quite certainly matter. But the price affect from all of that is not inflation. It is a change in relative prices--dramatic as they are, they cannot result in an inflationary outcome without the Fed as an accomplice. Relative prices are the market adjusting to reality finding new price and quantity equilibria. This very necessary process is why price controls don't work causing painful problems themselves.

Here is the thinking that leads the apologist astray: 
  • The pandemic messed everything up where we couldn't work as much, killing production, etc. (negative supply shock).
  • It is no surprise the shelves are bear. (scarcity at current price levels)
  • With fewer things to buy and all the money still out there including all the government support, prices had to go up--same/more dollars chasing fewer goods and services . . . I thought you understood economics, Winkler? 
One problem with that story is that it neglects half of the equation--income. When we produce less, we have less income. We are poorer than before (the economy's output and perhaps its potential output is now materially lower). Understanding that is a glimpse into how a bad event like a pandemic cannot by itself cause inflation--another problem with that story. Inflation comes if the monetary authority, the Fed in our case, fails to properly adjust monetary policy adjusting it downward. 

Negative supply shocks like pandemics increase poverty--or reduce wealth depending on your framing. They make us poorer. Poorer might look like inflation, but it isn't. Consider this:

 

In this chart the farther to the right and/or the lower on the chart a country is, the wealthier it is in terms of how much it works (average annual working hours on the y-axis) for the income it generates (GDP per person on the x-axis log scale). Notice this data is for 2017. For example, Brazil has a per capita GDP of about $14,500 with the average worker working about 1,710 hours per year. The United States enjoys a per capita GDP of about $60,100 with very similar average worker hours, about 1,760. People in America are a lot more productive than people in Brazil.*

Along the vertical we can make another comparison between Hong Kong (GDP = $59,800 & Hours = 2,190) and the U.S. (GDP = $60,100 & Hours = 1,760). Again the U.S. has higher productivity generating about the same income as HK for considerably fewer hours worked. 

Ultimately time is the common currency all humans deal in as it is the one truly binding constraint. Looked at this way we can consider what a really bad supply shock might look like for the U.S. Imagine our total production went from $60,100 all the way down to Brazil's level but hours worked stayed the same. Suddenly the cost of our income (cost being hours worked) is much, much higher. Alternatively, if we now had to work as much as Hong Kongers do for the same income, the cost of our income is again much higher. We are working the same for less income in the first case and working a lot more for the same income in the second. In terms of hours worked is this inflation? No, it is an increase in poverty/massive reduction in wealth. 

Think about it this way: If you suddenly were relocated from the U.S. to Brazil doing the same job, you'd immediately notice that your pay was lower. If you were purely on the average, you'd notice that working your regular 1,700 hours per year only allowed you to buy about a quarter of the goods and services you enjoyed in the U.S. ($14,500/$60,100). You might say, "Wow! Things sure are expensive in Brazil." And you'd be right. But if you then concluded, "They must have had a crazy amount of inflation," you'd be quite wrong obviously. You personally experienced what looks like inflation to you but is really just a negative wealth effect due to the relocation.

People instinctively but mistakenly think bad events will cause inflation by assuming their incomes will remain the same while there will be fewer goods available. But for the entire economy incomes must go down if production goes down since they are the same number. 

So what did Biden (and Trump and Congress) do? Biden trumped Trump by helping Congress to spend a LOT OF MONEY.

Source

The reason spending during Biden's term has been so problematic is that we were largely exiting the pandemic at that time. You don't have to become an adherent to or expert on the fiscal theory of the price level to understand the issue. These greater and greater levels of government spending put more and more pressure on the Fed to constrain monetary policy so that the excess spending did not induce inflationary effects. So far the Fed has not been able to fully offset that spending.

Is the Fed to blame? Yes. Was its job made much harder by what the fiscal authorities (Congress and the President) did? Also, yes. Are there other knock-on effects from the spending and associated government programs the pandemic gave cover to? You bet, and they are likely worse than inflation [please, God, don't let the Fed now say "hold my beer".]


*There is a subtle pro immigration word choice I made here. Notice I didn't say "Americans" or "Brazilians". It is not the people so much as it is the economy they are working in. Relocate those same Brazilians to the United States, and their productivity would magnificently rise as if by magic even though it would for a time still be below current American rates. 

Monday, February 14, 2022

Three Things I Learned from My Favorite Podcasters

As a follow up to my favorite bloggers post, I select here a few of the many, many podcasters I have followed to identify those that I love the most.

Here are three things I've learned from my favorite podcasters (in alphabetical order):

  • Ask questions driven more by genuine curiosity rather than an agenda. 
  • Let the answerer answer and with limited exception let the answer stand without challenge.
  • Explore and consider loosely connected ideas and hypotheses. There is often more to learn in doing so even in the actually rare event there is not a strong connection after all. 

  • There probably is a conflicting precedent and there likely are anticipated consequences that a policy's advocate may not like.
  • He continually reminds me that the Law is more nuanced than I or the common commenter appreciates. 
  • The history behind a law, rule, or norm is very often fascinating.

Jason Feifer (Build for Tomorrow):
  • When it comes to change and people's reaction to it, there is truly nothing new under the sun.
  • Release your clutch of the pearls; whatever it is, it ain't that bad. 
  • These are the good ol' days.

Tim Ferriss (The Tim Ferriss Show):
  • High performers have a lot to share that you can profit from even if you cannot fully emulate it. 
  • Thoughtful, honest questions of an open-ended nature are the best method for a meaningful interview-style conversation. There is no reason to try to impress an impressive guest, and he never makes this mistake. 
  • There are always other methods to learning a skill or achieving an outcome including near mastery-level advancement. The obvious path is often not the best path to choose nor typically the one chosen by true masters. It isn't a "hack" in the derisive sense one should seek--you have to put the work in. Rather it is a constant questioning and willingness to find alternatives.

Kmele Foster (The Fifth Column):
  • Race as a social construct should not be given special identification status or importance--doing so is harmful to all individuals and to disadvantaged groups in particular.
  • Strong talk when backed up by strong reasoning is a persuasive and welcomed trait.
  • Tell people what you think and leave it to them to have an emotional reaction (if any), and realize the emotional response is theirs to own not yours to manage.

Nick Gillespie (The Reason Interview & The Reason Roundtable) - in the second case credit goes to the entire group as they all demonstrate the qualities below:
  • Postmodernism is a very useful way to view and evaluate the world with much to offer especially to libertarian or classical liberal perspectives.
  • A mix of irreverent humor skillfully layered in does not simply lubricate a conversation, but it can actually succinctly add information content--a picture is worth a thousand words, and a well-placed comedic side crack is worth at least 250. 
  • We are and have been in a Libertarian Moment. It is just taking longer to develop and be fully realized than he and Matt Welch originally projected.

Malcolm Gladwell (Revisionist History):
  • We can hold in high confidence only our principles, but not so much our evaluations based on those principles. Time and again our judgements don't hold up upon closer and still closer examination.
  • The overall narrative of a well-told story will stay with you long after all of the related facts of the story have faded from memory.
  • We should always question the past.

Jonah Goldberg (The Remnant):
  • The proper evaluation of a President while in office is not relative to the hypothetical Presidency of the most recent also-ran nor the upcoming opponent(s). Rather the proper evaluation is against the high standard of an absolute scale of desired quality.
  • Humans must believe in something. If they do not have a traditional, formal religion, they will invent one or behave in a way that de facto creates one.
  • There is still hope for the principles of conservatism to endure all the challenges it faces from within. Much like Colonel Jessep, deep down in places D.C. socialites don't talk about at parties, we want him on Chesterton's Fence. We need him on that fence. 

Tim Harford (Cautionary Tales, 50 Things That Made the Modern EconomyMore or Less, et al.):
  • A well-told story is one of the most effective ways to convey complex ideas and important truths.
  • Statistics and data are underused and underappreciated.
  • A devilish caveat: Beware simplistic answers when persistently offered; they are usually wrong. Beware complex answers when insistently provided; they are often hiding some important truth.

  • Be of good cheer in all cases and including in political argumentation.
  • A comedic approach to contentious positions (political and otherwise) can be very disarming if not downright charming as well as effective (meaning winning over the opposing side) when well executed through good-natured humor that is neither derogatory nor abrasive.
  • You shouldn't bring your own horse to a horse-themed diner where the waitstaff all ride horses. There is a deeper metaphor here for those willing to face challenging truths--I'm sure there is . . . just keep looking.

Penn Jillette (Penn's Sunday School):
  • You aren't just capable of being wrong; you are wrong. We all are. Our memories are wrong. Our explanations are wrong. Our viewpoint and narrative is wrong. But through all that, we can still get it mostly right.
  • He is one of the wisest people I follow on understanding life. In this respect I have learned a lot about what to prioritize.
  • There is no good reason to be emotionally dishonest--especially with yourself.

  • Delivery is more important than content--this is by no means a knock on his content.
  • Even comedy experts, masters of the craft, cannot always predict what will and what will not work in comedy.
  • Smart balance including a great straight man is essential to a comedic performance.

Aaron Ross Powell & Trevor Burrus (Free Thoughts):
  • Honest inquiry using the "devil's advocate" method is a useful way to interrogate one's own side.
  • The motivation and arguments offered by both anti-gun and anti-immigrant proponents are very similar in their style and substance with both having the same problematic faults.
  • Mindfulness can help heal our harsh political divide.

Russ Roberts (EconTalk):
  • Be intellectually honest with yourself and others.
  • A more fruitful conversation can come by allowing opposing views to lie unchallenged. 
  • The point of economics and the desire for the good life is about happiness AND meaning--two deep, rich, nuanced concepts that are poorly understood.

P.S. Mike Munger is my favorite podcast guest. 

On a sappy note there is a bit of trepidation I carry considering the many podcasters that I follow and very much enjoy. There is a certain human connection to someone whose voice you often hear. While this would be true of any person you know in your everyday life, there are few of these people whom you seek out in a friendship-like regard. Some day one of my my favorite podcasters will suddenly be gone. Not through a proper retirement or move to a new thing, as much as that itself would represent a loss, rather I am thinking about ... well, . . . Do You Realize? . . .









Sunday, February 13, 2022

Three Things I Learned from My Favorite Bloggers

There are many, many thinkers I have followed. Among the many, an elite few have earned the status from me of devoted readership. I don't always agree with them, fortunately. But I almost always find them some combination of insightful, provocative, and worthy of my attention. The lists below are certainly not exhaustive. While in many cases I learn things from those I follow that change my mind, in many other cases but equally as important I learn more about things I thought I already knew.

Here are three things I've learned from my favorite bloggers* (in alphabetical order):

Scott Alexander (Astral Codex Ten & formerly Slate Star Codex):
  • Thinking out loud (in writing) can be a very productive way to both discover truth and convey good ideas.
  • Embrace your mistakes and learn/teach from them.
  • The realm of psychiatric conditions is vast, nuanced, and very much misunderstood.

Don Boudreaux (Cafe Hayek):
  • There is value in repetition. (He even recognizes this and is, rightly, proud of it.) 
  • There is always an audience for hearing arguments on first principles: free trade, trust in free markets, freedom of movement across borders, anti-cronyism, ...
  • Liberty not only deserves a passionate and wise defense; it requires it for its preservation and advancement. A role for which he is very suited. Before COVID I did not appreciate this nearly enough. His continual presence in the space of defending rational positions and freedom has taught me much about what is needed.

Jason Brennan (200-Proof Liberals):
  • Strongly expressed and even provocative facetiousness can very succinctly convey an argument. But...
  • You don’t have to mince your words. Just come out and state your point of view. 
  • If you may do it for free, you may do it for money.

Bryan Caplan (EconLog (UPDATED: and now Bet On It)): 
  • Friendly curiosity is the most constructive way to engage disagreement and is a valuable route to learning. Test your arguments' strength by assuming the premises of your opponent and see if your position still stands (or at least stays strong with a minor need to relax the opponents assumptions). Also, focus on achievable goals. To change minds, one needs to work on minds with which one shares connections and communication--you need to speak their language. Therefore, work on your in-group despite your desire to focus on the out-group.
  • Education is mostly about signaling, most of the value of it is captured by the individual, and as a result we have an economically destructive arms race. 
  • Open borders is an enormously important idea that stands up against all attackers. 

John Cochrane (The Grumpy Economist):
  • Don't be too quick to dismiss that which the market is pervasively and perpetually providing. There just might be a rational reason you are overlooking that explains the perplexity. Give heed to Chesterton's Fence. For me this would be investment active management (active stock and bond picking), real estate agents, extended warranties, etc.
  • The market can (and in the past did) take care of the preexisting conditions concern in health care insurance.
  • When it comes to the important issues of economic policy, economic growth IS IT. And it could very well be meaningfully higher than it persistently is.

Tyler Cowen (Marginal Revolution)
  • Be succinct. It is undervalued and under practiced.
  • Be curious and take risks. 
  • Read and write. Everyday and more than before. 

Robin Hanson (Overcoming Bias):
  • Do not let the conventional wisdom or the fear of shallow sensibilities hold you back from exploring ideas and asking good questions.
  • Prediction markets are an excellent method for discovery that are very much underused. As Alex Tabarrok says, "Betting is a tax on bullshit".
  • The stories we tell ourselves are often not the full story or truth--X isn't about X. Robin better understands the human world than any one I follow or know of, and that is a high bar.
For a primer on Hanson see this.

David Henderson (EconLog):
  • You can blog with a smile on your face (in stark contrast to Paul Krugman, who often writes as if someone is fiercely pinching his inner thigh).
  • Always look for opportunities in everyday life to apply basic economic lessons (the economic way of thinking). For example, focus on the incentives, ignore the sunk costs, think on the margin, etc.
  • Be optimistic about changing minds and give those who disagree with you the benefit of the doubt. As a corollary when you’re going to disagree with someone, look for points they make that you agree with at the same time. For instance if you’re going to disagree with someone’s arguments in an article, find other points in the article where you do agree. (I’m glad he didn’t lose his optimism in that 2007 fire.)

Michael Huemer (Fake Nous):
  • The thinking and arguments of elite intellectuals can be as hollow and problematic as that for simple elites in general. In short, don’t fall for the appeal to authority fallacy.
  • Don't seek expecting to find philosophical nirvana in any philosopher's arguments.
  • Common sense is a strong and underrated pillar of sound thinking.

Arnold Kling (askblog & In My Tribe):
  • He exudes the quintessential “on the other foot” point of view. He sees things from another dimension entirely. 
  • Find a way to succinctly communicate your ideas—in his words, "Klingisms". For example, easy to fix versus hard to break, …
  • Follow and emulate those who deliberately and consistently speak with the other side rather than about or at the other side. This goes along with his idea of being charitable in argumentation and debate.

Steven Landsburg (The Big Questions):
  • Think deeply continually asking "why would that be?" and "does this explanation survive through last contact with the enemy?".
  • Build simplifying models that give definitive answers—especially interesting when the answers are counter intuitive.
  • Of everyone I regularly read, he posts the most things that are the most challenging to my priors in a way that leaves my priors in smithereens—and that is a very good thing even though it is quite frustrating for my contentment! And that is despite the fact that our views on the world, intuitions about morality, and priors generally seem quite aligned. 

Phil Magness (AIER):
  • Persistent and thorough scholarship is the antidote to resistance and rejection of unpopular positions especially when the opposition is driven by social-desirability bias and mood affiliation.
  • The wealth and success of the early United States including the Southern U.S. was not the result of slavery. 
  • No one actually paid the astronomically high marginal tax rates supposedly targeting the highest earners in the U.S. during the mid 1900s.

Michael Munger (AIERKids Prefer Cheese, & EconLogthere is not always a consistent home base for his writings):
  • There is often a more intriguing and insightful other, other side. He is a three-handed economist. 
  • True open-mindedness is a wonderful but rare quality. He has it and conveys it splendidly. 
  • Re-examined knowledge yields improvement--even third and fourth derivatives. His latest insight is always either a new, deeper wrinkle on a previous insight or a way he had been wrong all along in how he previously understood something.

Matt Ridley (Rational Optimist):
  • Innovation is unpredictable, depends on trial and error, but once started, is so inexorable it looks inevitable.
  • Human culture and technology grows through the magic of exchange, whereby ideas have sex creating offspring that are combinatorial advancements.
  • The more you look, the more obvious and undeniable the relentless betterment of the world is revealed.

Scott Sumner (EconLog & The Money Illusion):
  • Never reason from a price change.
  • The market should guide monetary policy and the Fed needs to be (and can be) structured to follow the market’s guide.
  • The middle class in America is not on the list of important things to be worried about.

Alex Tabarrok (Marginal Revolution):
  • There is a very straightforward explanation for why the prices of many things today (health care, education, et al.) are so d*mn high--the Baumol effect. While I quibble with how complete this explanation is (70-80%?), it is obvious once [he makes] you think about it.
  • We need more police. And better policing to be sure, but more police is an obvious answer once you look at the evidence.
  • Dominant Assurance Contracts can solve the public good problem and "open the provision of public goods to entrepreneurship, innovation, and the market discovery process".

*I make no distinction for columnist or other such titling as I believe that the term blogger is the best all-encompassing word for those who write of their own opinions and expertise. 

P.S. Richard Hanania and the Resident Contrarian, relative newcomers to those I dedicatedly follow, will make this list once I learn 3 distinct things--it won't be long. They are both excellent.




Tuesday, February 8, 2022

How To Succeed In Business Trying Really Hard

I just stumbled upon something I wrote about 15 years ago--at least that was when it was saved last. I thought I would share it here. Many of these were things I learned and many of them the hard way in my first job as a financial analyst at the Oklahoma Publishing Company (OPUBCO) where The Oklahoman newspaper was the flagship product.

Some of these have a touch of Grayson Moorhead Securities to them, but you don't have to be that cynical. I have witnessed many times people roll their eyes at advice like this only to then make the very mistakes these are addressing.

How to Succeed in Business Trying Really Hard

  1. Be a solution provider. While it is important to have the intellect and experience to identify problems, the ability to create and the courage to suggest solutions is a higher skill.
  2. Make conscious efforts to avoid digressions into the minutia. Keep communications only at the greatest level of detail necessary for meaningful ideas.
  3. On the other hand, don’t hesitate to consider the depth of an issue. Neglecting the full implications of the subject can easily lead to poor decisions.
  4. Balance work and rest in the following manner. If you find yourself looking for excuses to take breaks often or find yourself taking long breaks and feel that you can’t focus on the work at hand, make strides to commit yourself to the work. In this case you are resisting the desire to avoid the work. However, if you find yourself unable to break away from the endeavor despite having toiled for a considerable period, force yourself to step away. In this case you are resisting the desire to trade quality for completion. The result could be an eventual disappointment and may require more work to correct. A well-placed retreat can pay dividends in the form of a new perspective and fresh ideas.
  5. Don’t burn undeveloped bridges. It is easy to see existent relationships you would like to preserve. It is much harder yet still vital to long-term success that you develop and nurture relationships that you cannot yet foresee.
  6. Don’t build a house in which no one will live. Don’t expend resources toward a goal with high theoretical promise but little practical use.
  7. Don’t confuse clichés with sound arguments.
  8. Don’t be a Monday-morning quarterback on Sunday afternoon. The time for second guessing is after the fact not during the game. Corollary: Save your nostalgia for Sunday morning brunch. Make today the good old days.
  9. Take on the mentality of a librarian rather than a firefighter. Where a fireman does a heroic task in a place he has probably never been before doing the work of saving what he can only to leave once the need is extinguished, a librarian begins work everyday doing the same thing as the day before. A fireman eliminates the need for his services. The librarian creates and enables those needs. Business success is built with librarians not firefighters.
  10. Idolize the objective not the process.
  11. Continually work to find the right price. Consider the two major risks a salesperson runs. Both involve leaving money on the table. The first is the risk of selling too few for too much—a price point that is excessively high results in unnecessarily low sales volume and hence revenue. The second is the risk of selling too many for too little—a price point that is unnecessarily low results as well and obviously in unnecessarily low sales revenue. This all seems and is (or should be) obvious. Yet time and again businesses opportunities fail on the basic matter of getting price right including adjusting to new realities.
  12. Don’t try to live in fantasy land. Good business decisions are bounded by practicality. However, don’t let this go so far as to stop trying things that will fail. Just put practical limits on the extent of the possible failures. Success is built on a thousand small failures. Complete failure comes from one or two unbearable risks that go bad.
  13. Understand the Law of Categorical Gravity: Firms within the same industry or complementary industries tend to locate near one another in time and space. And as they get closer and closer they are attracted to one another with greater and greater force. In this way they act as immediate substitutes but long-term complements.
  14. Don’t continue to bear burdens after they have been lifted: the analogue here is carry-over heat. When you cook a large rib roast, you might want to hit a target internal temperature of 140 degrees. If you wait for a probing thermometer to register 140 degrees before removing the rib roast from the heat, you will end up way past your target temperature. The reason is carry-over heat. After you remove the roast from the oven, radiation from heat stored in the outer layers of mass as well as from the cooking vessel will continue to cook the roast and can drive the core temperature up another 10-15 degrees. Similarly, we can let stress build in our systems even after the stress-causing burden has been removed or corrected. This is as much about internal morale as it is marketing.
  15. Don’t bear burdens by proxy. Is this issue your burden, or is it a colleague’s?
  16. You can’t live at the end of a one-way street: you must be consistent in your principles and actions. It is the only way to earn and keep the respect of your peers, followers, leaders, and rivals.
  17. Learn to ask hard questions and to accept hard answers.
  18. In business writing conclusions and recommendations should be reasonably obvious. A good test is: if removed entirely, could a reasonable reader surmise and write themselves in essence the same conclusion section that you yourself have written albeit hopefully more fluently.
  19. Set aside time to meditate on the big picture. For any major project or decision, take some time to contemplate how the possible alternatives and the potential outcomes fit together with your overall goals. Consider the situation from a strategic viewpoint as many good tactical decisions have poor strategic results.
  20. At the time when an issue arises, speak up sooner rather than later, and if not then, then later rather than never at all. Corollary: Speak in a measured manner and to the correct audience.
  21. In an important respect problems and strengths have quite opposite characteristics. While it is easy to create problems, properly identifying them is a much finer skill. Conversely, the ability to create and foster strengths is always dear, but the knack for recognizing them is a common trait. The highest talent is the combined skill of determining the true problem and calling upon the proper strength as a solution.
  22. A poor reaction to a mistake makes for a worse mistake.
  23. The necessity of scrutinizing one’s own work is directly proportional to the work’s exposure and purpose.
  24. Update! Don’t hesitate to reevaluate your position by modifying or even reversing if new information truly warrants that new appraisal.
  25. Manage your image. No one else will manage it for you. In fact, others will create a caricature of your image—sometimes intentionally, sometimes unintentionally.
  26. Try to distinguish yourself through your work (not your self-promotion) so as to be seen as an irreplaceable talent rather than a commodity.
  27. Know how to argue, when to argue, and when to agree. Effective, successful teams argue thoroughly, critically, intelligently, passionately, and professionally, but they also know when and how to present a unified front.
  28. Do not solve problems before they are problems. You cannot be a hypothetical firefighter.
  29. You get what you measure. Corollary: Your value to the firm is how you are measured.
  30. Don’t get married to inconsequential ideas. Don’t fight for worthless victories. You only get so much combat equity.
  31. Consider if a fantastic goal deemed too impractical if not “impossible” is because you cannot imagine living there or cannot yet see getting there. Fortunes are made solving the latter problem while fortunes are lost chasing the former.
  32. Completion is possible. Perfection is not.
  33. Employers can mitigate ineptitude much easier than carelessness.
  34. In business you are either surfing or drowning.
  35. Know the source of your competitive threat. In the races we run sometimes we are overtaken from behind; other times the path we have chosen simply runs out with us left exasperated staring at a dead end.
  36. The two fundamental questions in business are: What does the customer demand? How can my firm be the supplier? (i.e., What do you want? How can I deliver it?)
  37. Don’t be afraid to be skeptical of a business practice, but don’t be surprised if there is a rational explanation for it.
  38. It isn’t about where you have been; it’s about where you are going.
  39. If you don’t know the cost of the marginal unit, you’re better off not “knowing” anything about cost at all. Knowing other bits of data like total cost, average cost, an example of cost, will lead to very poor decision making quite often. Those figures will deceive as much as enlighten—they anchor us to irrelevant comparisons.
  40. Strategy is not the sum of tactics; strategy must be a whole unto itself; you cannot back your way into a good vision.
  41. The four essentials of negotiation are: know what you want, understand what you can give, determine what you can take, be willing to walk away.
  42. Just because you need more doesn’t mean you can get more: a revenue shortfall of goal or forecast/budget does not create a selling opportunity. Remember: Update!
  43. Beware following “Best Practices”. Sometimes you are following a leader; sometimes you are following the proverbial lemming who happens to be in front of you.
  44. A business decision’s probability of success is only partly dependent upon the ability of the decision maker. The best business leader in the world couldn’t have saved the buggy whip industry from the approaching avalanche that was the automobile.