Advice to a Recent Graduate (and everyone else too)

As it is currently graduation season, I was recently asked on-the-spot to provide some advice to a recent graduate. Below is what I came up with. I think it is decent advice for all of us at all stages of life's graduations.

1. Take in lots of diverse information.
2. Be willing to change your mind.
3. Gracefully stand up for what you believe in.

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):

Tyler Cowen (Conversations with Tyler):

• 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. 

Richard Epstein (The Libertarian, Law Talk, and Reasonable Disagreements):

• 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 Economy, More 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.

Andrew Heaton (The Political Orphanage & Alienating the Audience):

• 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.

Conan O'Brien (Conan O'Brien Needs a Friend):

• 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? . . .

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 (AIER, Kids Prefer Cheese, & EconLog - there 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.

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.

Mistakes versus Traps - Dimension Analysis

Many of us have at one time or another drank too much in a given evening. This was certainly a mistake at least as judged by how the body and brain spent many hours the next morning screaming about it. Over drinking is an easy mistake to make especially when you are having a great time in unusual circumstances. One too many sneaks up on you. 

This type of mistake can have very serious including deadly consequences of course. It is all the worse since it compounds on itself through the natural impairment to judgement and accentuation of confidence. Fortunately in most cases this will only result in a painful hangover. 

Contrast this one-night stand of bad decision-making with alcoholism. A serial drinking problem is not so much a mistake as it is a trap. From what I understand there are about six percent of adults who suffer with what is labeled an alcohol problem. Some of these are people who are making a series of mistakes, which is in itself a form of trap. For others, perhaps a majority, the trap is the effect alcohol itself has in capturing them. 

I don't want to get into the weeds on how much agency those with an alcohol problem have or what the expectations of them should be. It seems in either case, low or high agency/responsibility, there is a trap condition being met. They are in a whirlpool from which escape is proving difficult. This is the nature of a trap as I am conceiving it. 

A mistake is just like it sounds. We are confronted daily with chances to make mistakes of many kinds with many varying potential magnitudes. In almost all cases the chances are extremely low to low--otherwise the world would be chaos. And correspondingly the implications are small. Yet life has fat tails and the realm of mistakes is no exception. 

One way to make mistakes worse is by following them up with mistakes--especially in the commission of a mistake cover-up. All the more reason to remember not to talk to the police. In this way a mistake upon a mistake can create a trap. Of the many great fiction depictions of this phenomenon, The Wire is perhaps the best showing time and again a wide variety of characters falling into traps because of mistakes made.

It can be hard but is important to distinguish mistakes leading to trap conditions and trap conditions alone ensnarling people in their grasp. Again, The Wire has examples of both. A kid in an inner-city public government school is a kid deep within a trap-rich environment. That same kid can be on a good course set for likely escape but for the kid-being-a-kid moment with the wrong teacher landing him in his first-time detention, getting connected to kids already within the trap, finding himself labeled by the bureaucracy, pushed and pulled into the trap. 

For traps we need paths to escape. Yet we must keep in mind two important truths: (1) We cannot change those who would not change themselves and (2) We should balance the tradeoff between help and enablement. 

In the first truth we fight against the cynics but also must come to grips with how in vain our efforts will be without willingness on the part of the would-be beneficiary. "You can't help them; don't bother," is too easy and too callous an excuse we use to not care and not try. However, resources are scarce. We can cannot afford to give effort to lost causes.

In the second truth we fight against the trap of simply treating symptoms* and insulating the trapped from the cost of their decisions when we are trying to render actually helpful aid and a true way out. To take one example, UBI's biggest shortcoming isn't its ridiculous math. It is the risk that becomes a lifestyle enabler rather than an enabler of life improvement. The adage "don't cry over spilt milk" needs a corollary: "quit doing whatever you're doing that is spilling the milk". 

For mistakes the framework needs to be quite different. Here we need a high tolerance for mistakes (the U.S. bankruptcy code is a great example) as well as robustness against their magnitude. Arnold Kling's conceptual tradeoff of hard-to-break versus easy-to-fix seems quite important here. We should seek more of both as they are not always mutually exclusive. When they are in opposition, we need to realize and prevent increasing one if it comes at too high a cost decreasing the other. 

Don't avoid mistakes--they are the lifeblood of success and progress. Forgive others and yourself for mistakes while working to not needlessly repeat them. 

Don't be blind to traps--they are everywhere attempting to seduce us. When you're in one, admit it. Work hard to get out knowing that the solution is probably somewhat counterintuitive. 

*look for a future Bandages versus Inoculation DA

The Rules of Investing Club

1. Stay invested - Don’t time the market. Timing the market is not just impossible. It is multiplicatively destructive in two ways: bad decisions compound mathematically and the likelihood of mistake compounds with attempts.
• Sub-rule - Know what this means. It applies when the market is “down” and when it is “up”. What makes you think you can define these? What makes you think you’ll both get it right on the exit/entry (at least twice) and have the nerve to make the proper moves at that time. Also, wouldn’t timing imply buying low? So why are you bailing after a crash?... oh, because even though you didn’t see the downturn coming up until this point, you now can see definitively that a further decline lies ahead.
2. Keep a cash reserve equal to X months expenses - X is up to you. A typical rule is 6 months, but mileage will vary. Be sure to include access to credit as a buffer as long as you also take into account that the event that causes you to tap into this safety reserve might also be damaging your credit access. Notice how this rule helps with adhering to the first rule.
3. Diversify - The only "free lunch" in investing as it allows for (some) risk reduction without return reduction (up to a point) when done properly.
4. Outsource - SPIVA. You ain’t special and just about no one else is either. Therefore, use well-run, low-cost, TRUE index funds. (Besides Vanguard, Fidelity and Schwab are also typically good providers.)
5. Do what it takes to stay on plan - Employ dollar-cost averaging (DCA) or enroll in forced (passive) contribution increases or use a professional as a commitment partner.
• Sub-rule - Make sure the pro has incentives that are congruent with your own, has the right credentials (CFA and CFP being the gold standards but experience matters a lot too), and is cost competitive. 

Where to Eat When Traveling

Summer travel season is quickly approaching. And this one promises to be crazy. On the supply side places are figuring out reopening on the fly in a rapidly changing environment and dealing with temporary shortages (in the common rather than economic sense). It may develop into an economic shortage if prices are not allowed to adjust, which I suspect will happen in many instances.

On the demand side personal balance sheets have never been so flush with cash. Combine that with the pent-up demand from a year without travel, and you have a recipe for a surge in customers. 

The list below is not time sensitive to this upcoming season. I want it to be evergreen, but hopefully it is additionally helpful for the vacation chaos of 2021.

Subject to revision, here is my advice list:

1. Eat the local cuisine - Back in grad school I was on a summer study abroad in the south of France--I learned a lot and 90% was not in the classroom. There were several lessons learned in food. One was Pizza Hut and McDonald's (royale with cheese aside) is the same the world over. Another was Tex-Mex in Toulouse is about as silly as that sounds--I don't think this would have been different had I not been from Tex-Mex country. 
2. Eat where locals (not tourists) are lining up - This helps you avoid the "world famous" place that is resting on its laurels. 
3. Dine where you will be comfortable - There is a lot to be said for challenging one's comfort zone. However, don't get so far out of your comfort zone that you can't relax and enjoy it. This includes go where your attire will fit in reasonably well and where your group will fit in. Got your kids with you? Then you're skipping passed Chez Paul. And keep in mind that truly kid-friendly places don't have to advertise that they are kid friendly.
4. Choose quantity of places over quantity of servings - When possible, choose two places over one for dinner and breakfast, perhaps three places over two or one for lunch.  Order smaller portions to accommodate. Diversification is a good strategy in more things than investing. For example, pick up coffee and a pastry early and then have or share an egg dish or waffles in an hour at another place. Don't worry about clearing your plate. That is a bad policy in general any way. 
5. Allow spontaneity / don't over plan - Reservations are necessary sometimes, and a rough outline plan is usually rewarding. Still many mistakes are made when adherence to a plan is strictly enforced. In battle no plan survives first contact with the enemy. In travel no dinner reservation survives the next bend in the road. Many a meal has been thwarted because of an unexpected photo op, "five more minutes at the craps table", a "quick last ride" on It's A Small, Small World, a shortcut through the park, etc. Also, that celebrity who is imminently about to leave the Plaza snuck out through the back door an hour ago. Go meet your friends for dinner.
6. Know your budget, allow some excess, stick to it - You're on vacation, dammit! And you want to take another sometime soon as well. Indulgence does not imply bankruptcy (read that both ways--an excuse and a warning). 
7. Use the small/medium/large/small ratio (related to #6) - You can only eat so much the same as you can only spend so much. The law of diminishing returns applies. Don't follow a calorie indulgence with another one. Space it out and pace yourself. You cannot see all of Europe in one trip. Likewise you cannot eat all of Europe in one trip.
8. [updated to add] Choose off hours - Places don't typically loose their magic when they aren't at peak capacity. Often they gain. This is not the case for places where the ambiance or surrounding entertainment is part of the experience, but that is about the show and not just the food. The last time I was in Vegas our group wisely choose not to go to Hash House A Go Go during the brunch rush (two-hour wait!) and instead went there around 6 pm getting right in. People are right to flock to that place. They are foolish to be so conventional thinking pancakes only work between 8-11 in the morning.

I'm not sure how much, but Tyler Cowen deserves a hat tip for certainly some of the above list.

This picture both supports and contradicts some of my list:

Being Nostalgic for the Future

Nostalgia is not a fond memory of an accurate past. Rather it is either fond memories of being young, good moments taken out of perspective (over emphasized), or a mythologized history that is not based on fact. 

As the philosopher Billy Joel told us, “…Cause the good ole days weren't always good, and tomorrow ain't as bad as it seems…”.

Put another way and paraphrasing the historian Austin Powers: As much as we might want the future to resemble a fictional past that we are nostalgic for, that is just not in the cards, baby. 

A much more productive and healthy mindset is to be excited about what the future will bring. Think past technological advancements, as great as they should be. The cultural developments will be splendid. 

If we can just get out of its way, there awaits us a brilliant future eager to get here. 

All Aboard!

Apropos of nothing in particular . . . 

Invest with the perspective that we are just passengers on trains. 

We are not the engineer. 

We are not a little kid laying out a model train set. 

We can choose the trains we board and the ones we avoid. 

Some are faster. Some have better safety. Some have more amenities. 

None are perfect, but some combinations are much better at getting us to our destination, and, importantly, we do not all have the same destinations. 

We cannot dictate the trains' schedules, speed, route, etc. 

We just have to accept what the trains before us are offering and decide among that option set--not an ideal, imagined one. 

We do not have to take the most popular trains if they aren't actually the right fit for us. 

Constraints are individual just like goals. For example, even though we both want to go from Los Angeles to Chicago, the Silver Streak may be best for you but not for me because I have a lot more luggage to transport and that train has limited capacity. 

It can be good to have a travel agent to help plan our trip, and a great conductor can help guide the journey. But it is us who have to decide, board, and endure the journey including if the train breaks down forcing us to find alternative options. 

The Forrest Gump Diet: A few simple rules for a better diet

Most dieting plans are nonsense. And most dieting is not about losing weight--it is about signaling that one would like to lose weight, is involved in a struggle, and would like sympathy. If people really wanted to lose weight, they would. 

Diets come in a thousand varieties, but it is clear that while each might work for a while for some people, they fail (or people fail them) as often as they work. That we know so very little about this highly desired realm of knowledge, it is a big economic paradox. My guess is that it is highly dependent on individual circumstances (extreme heterogeneity) and these are both governed by external environmental factors including cultural influences as well as genetic factors. As such, one size fits more than one might not be true. And yet I do think some guiding principles can be derived that can greatly help us on our journey:

1. Eat when you are hungry. (Note that this pushes back against intermittent fasting.) 
2. Eat slower. You are not in a speed contest. 
3. Eat less. You are not in a volume contest. This can most easily be achieved by simply not ever completely finishing what you have been served.
4. Eat less of the things that you want to eat. It is very likely that your desire is to eat more of the things that are not as good for you.
5. Eat more of the things that are not as desirable to you. This is the converse of the prior point.
6. Eat a greater variety. This likely helps with the gut microbiome, and it makes life more interesting. That said, some things may just not be right for your body, and that is fine.
7. Eat less processed foods and prepackaged foods. This one helps with #s 2, 3, and 4 by making food less convenient especially food that is generally nutritionally poorer for you.
8. Look to make good choices at the margin, but diet over weeks and months not hours and days. No one ever starved to death by missing a single meal, and no one ever became obese by indulging oneself one time. 
• The first key is to avoid temptation by avoiding bad situations. 
• The second key is to routinely seek to make a slightly better choice at each opportunity. 
• The final key is to be able to look back over weeks and months to see if you have generally been making good choices and improving choices. While this might entail the need to keep a journal, which is contrary to the spirit of this list of keeping things simple, evaluations over longer periods of time are essential to understanding if you’re making progress.

P.S. This is the diet that worked for me. I lost 20 pounds and it definitely improved some aspects of my health. Had I wanted to lose another 20 pounds, I would more devoutly follow it, but I want other things in life more. At least I'm honest with myself.

In Case of Pandemic Break Glass

Here is a message to future generations for when they find themselves in the next pandemic. This is subject to change, but you would already know that if you had started reading the list.

These are the rules and guidelines I would suggest for the next pandemic: 

(Yes, there is redundancy and overlap in this list. That is a feature not a bug.)

1) Be Willing To Change - Adaptation >>> plans. Your plan is great as a starting point. Grey board beats white board. But an eraser and a willingness to use it is best. Your plan will not entirely survive first contact with the virus. This is as ironclad of a law as you'll get in this realm.

2) Protect The Vulnerable - How is this not obvious? Well, it seems it very much wasn't this time around. And know this: you cannot always predict who the vulnerable will be. 

3) Practice Good and Improving Hygiene - Tighten up. Here is an example of where general pushback against conventional wisdom reverses and we need to speedily go in the other direction--side with conventional wisdom of being more hygienic during a pandemic. We have been getting cleaner and cleaner as a society. As we've gotten richer, we have gotten less tolerant of risk in general and health risk specifically. This long-term trend has an unintended consequence: we over protect--especially children. "Rub some dirt on it" is an exaggeration, but it has some truth. We should pushback generally against the tide of puritanical cleanliness. We need exposure to germs. But in the face of an acute and new health threat, this reverses. Then is no time to develop hardiness--at least not until we know a lot more about what we're up against. Hand shaking shouldn't be abandoned per se, but the norm should probably be to quickly pause the practice when a health risk arises.

4) Test, Test, Test, and Test Some More - Each of these links have unique, subtle points along the general line of the importance of testing. Yes, there is redundancy, but that is the point I'm trying to hit you over the head with. At the hope of repeating myself, testing is a key ingredient to knowledge in a pandemic. Here is the idea by analogy: You're suddenly in a pandemic . . . oh, no problem, we know how to pandemic, bro. No, you certainly do not. Each one has different features and each time the environment has changed (economically, normatively, politically, etc.). Image I put you in a large, completely dark room and told you there are dangerous things in the room and you need to escape. I hand you a dim flashlight as your only tool. It works sparingly requiring you to flip it on and off repeatedly to get some light. Not ideal but you would be quite foolish to toss the flashlight to the side and grope around blindly instead.

5) Don't Believe In or Rely On Magic - ..... masks, hand washing, existing drugs with non-obvious potential for help, experimental drugs, ventilators, et al. may help. None are perfect cures or magic bullets. Many ideas will have very large costs that may in fact greatly outweigh the benefits. Try lots of stuff (see #7 below), but don't rely on any one thing or set of things. And don't latch on to that first idea and refuse to let go (see #1 above)

6) Invest in Options Including the Value of Delay - "Flattening the curve" evolved into a constant moving of goalposts in order to justify desired policies. This was a combination of the wrong way to interpret #1 above and the exact problem #5 above and #8 below are opposed to. But the idea had immediate traction because it had a very plausible initial value--delaying even the inevitable can make the inevitable more manageable if not largely reduced in magnitude. Every month after March brought new developments in treatment and most likely a lower severity in the disease itself via natural mutation. But delay isn't costless (see the links in #5 above). Though options require premiums, they are still vastly undervalued. Testing and isolating and distancing (see #3 and #4 above) create options. And don't just do something, stand there actually can be an option-preserving strategy. 

7) Experiment (Let 1,000,000 Flowers Bloom) - Let people take risks. This is both a principled position as well as a pragmatic one. We need ideas from the most unlikely of places. We need discovery.

8) Don't Attempt To Centrally Plan - It never works well for general problems and it is downright disastrous in a fluid, developing emergency. The knowledge problem is most applicable and important in dynamic, high volatility, low confidence environments. For central planning to succeed even in theory the unknowns must be minimal and the variance must be low. Simple is better. Fewer cooks in the kitchen (i.e., Congress and lobbyists and the alphabet soup of agencies and a politically myopic U.S. President and risk-averse though power-happy governors ...) would prevent entangled messes that do little to help, too much to harm, and a lot to hurt. The bureaucracy is the nature of the state. Leveraging government in times of crisis maximizes its every shortcoming, hindrance, and corruption. 

9) Trust The Market - Allow prices to adjust (don't worry about 'price gouging'; rather embrace it). Allow profits. For God's sake if there is ever a time when you want to reward risk takers and resource providers, it is in a time of dire crisis. See below for more on why you don't need to worry about people taking advantage. People want to help. There are many avenues for social and normative guidance. Man desires not just to be loved but to be lovely--let him! Do not let your personal envy or hypothetical fears prevent those standing ready to help.

10) Trust People - Lord of the Flies was wrong. People respond to incentives and information. If you give them good and updating versions of both, you can expect good and improving results. If for no other reason than their personal self-interest, people will tend to make sensible and safe decisions. In fact they are very likely to be overly risk averse. 

11) Question Authority - Challenge the motives and knowledge of every solution provider in direct proportion to how confident or authoritative they claim to be.

12) Communicate, Communicate, Communicate (honestly and don't censor) - Lies undermine productive efforts and credibility.  Censoring prevents much needed experimentation and fosters distrust. If restricting dangerous activities including potential superspreader events is desired, say so. Give guidance and elevation and promotion to good advisors. Be open to and have a high tolerance for new ideas, debates and debatable positions, and mistakes. There will be mistakes. It is not how you prevent them as much as it is how you adapt to them once they occur. Because adaptation >>> plans . . .

Life Is A Negative Lottery

Being awaken by a phone call in the night is almost certainly a bad news event. At the least it is a wrong number that has disturbed your sleep. Unless you are the rare individual up for a Noble Prize, there are many dreadful bad scenarios about to play out.*

This is indicative of life in general where bad news typically comes as quick, acute shocks and good news develops slowly. One could say that life is constantly forcing us to essentially write (i.e., sell) put options. While insurance sometimes is available to mitigate these risks, to more fully counteract this exposure we should be prudently buying call options. 

Briefly, a put option is an agreement whereby the owner has the right (not the obligation) to sell something at a predetermined price usually on or before a specified date. By writing or selling a put option one takes on the obligation to buy at the price the owner can sell at. Think of it this way: If you sell me a put option on a barrel of oil that expires in one month, I can exercise this right any time in the next month** to sell a barrel of oil to you at the agreed-to price (let's say $40)--making you buy it from me at $40. If I don't currently own a barrel of oil, I simply go on the open market, buy it at the current price, and then sell it to you at $40. The lower the price, the better it is for the owner (me in this scenario) and the worse it is for the writer (seller, you). 

A call option is just the opposite in terms of the obligation--it is the right to buy at a specified price whereby the writer (seller) has the obligation to sell at that price. Imagine having bought a one-year call option on 100 shares of Tesla stock a year ago at the then current market price. On July 22, 2019 TSLA was going for about $255/share. By July 17, 2020 it was priced at about $1,500/share. Suppose you bought this option (right to buy at $255) for a cost of $5,000, and consider that the value of the call option right now would be about $125,000. That's a great outcome for the option owner and an awful outcome for the option writer (seller). 

Here are some examples in life of put options where we are the unfortunate, forced writers (sellers) and potential call options where we can be the prudent buyers. 

Puts: 

• Flat tire, car wreck, . . .
• Stomach bug, a cancer diagnosis, . . .
• House fire, termites, . . .
• Tripping on the sidewalk, bumping one's head, . . . 
• Tornado, flood, . . .
• [this list could go on and on]...

Calls:

• Nurturing good relationships and broad networks
• Maintaining a diversified investment portfolio added to regularly with constant market exposure--long-term compounding is the call option (outsized upside) aspect of this
• Putting a small but meaningful amount of money invested in esoteric opportunities like Bitcoin, a creative person's far-out idea/business, . . .
• Embracing a willingness to try new things and keep all options on the table (including the option to walk away)--for example, just a slight geographic expansion in one's willingness to relocate can have a large impact on their employment options
• Learning diverse skills--good for career options, building networks, and knowing something that randomly comes in handy for the right time/right place
• Not burning bridges; rather err on the side of putting oneself "out there"
• Buying risk when others are risk averse and in increasing proportion to that aversion
• Playing the lottery? Maybe, but...***

Find ways to disproportionately gain when things go well. Admittedly this is difficult as the opportunities are fleeting, rare, and easily outnumbered by fakes. Still, it is a very good way to improve one's holistic life portfolio. Perhaps the bottom line is when faced with two roads, take the one less traveled when the downside of each is close and the upside of the less traveled is high even if unlikely. 

*We don't even notify people of the Shazam Prize this way, or any way quite yet--coming soon.

**Technically this is an American option. A European option allows the transaction to only take place at the point of contract expiration. Effectively they are nearly identical in capital markets since one can always replicate the American option using a combination of European options or selling the European option to someone else.

***In most cases playing the lottery does not qualify under the prudent consideration--sometimes the expected value is actually positive, but the chances of a significant win are still mindbogglingly small. Still, $5 every once in a while (can you live up to that limit?) is a pleasurable escape from reality. My advice is simply to soak in the fantasy of what winning would be like considering also the downsides (change of lifestyle, lost friends, inability to trust many people, etc.). Perhaps to keep oneself in check, you should deliberately NOT play the lottery and accumulate those unspent funds in a separate account looking to its growth as a proud joy.