Why Are We Afraid Of Getting Smarter?

What I would watch for over the next 15 years are developments that enable humans to evolve more rapidly, in order to compete with machines.

That is from Arnold Kling discussing Vinod Khosla's essay about the next technology revolution.

Thinking about the singularity and perhaps it is a bad analogy, but will our future robot overlords be of the demeanor of teenagers or middle-aged adults ... or grandparents, and will they be male or female? Will they be an it or a they (a collective like the Borg or individuals)? Will they be Mr. Spock or Navin Johnson? In other words, how human will they be and how much will that hold them back?

Despite all the worry about the singularity, I come down firmly on the side that advances in AI, et al. will be used to radically improve humans. I foresee improvements by orders of magnitude to cognitive abilities in addition to health, strength, and other physical attributes as we advance scientifically and economically. Basically we are some future cyborgs' impoverished ancestors. And of course realize that from nature's point of view up to now we have been the super AI.

Also, to counter the doom and gloom regarding the loss of jobs taken by robots, I offer (in addition to this evidence): Some people predicted the device that is the modern smart phone, but who predicted the massive size of the app universe that serves it? Some predicted how computers would bring productivity enhancements and job replacement/elimination in modern business, but who predicted the magnitude or breadth of information technology jobs?

It is much easier to imagine the elimination of work through improvements. It is much harder to imagine what it takes to get there and what else is created along the way. It is simple to master a pencil and imagine how useful it is immediately upon first encounter. It is virtually impossible to fully comprehend what it takes to create a pencil or to conceive of the smallest sample of that which it can be used to design.

There is always more out there.

Highly Linkable

Remembering the lessons of "Swamp Thing", 3-D printing DNA can make us more of what we already are.

Flying without getting the window seat is like dieting without looking in the mirror--where's the satisfaction?

And while you're flying, make one of these your destination.

This photo set represents the good, the bad, and the ugly of humanity. Prepare yourself before clicking.

Every bridge in America. (HT: Tyler Cowen)

A great example of how in well-functioning markets outcomes satisfy along multiple dimensions.

Bryan Caplan recycles a great piece that speaks to making the perfect the enemy of the good--don't let your quest for purity extinguish your chances for progress.

Scott Sumner provides example applications of what he calls The Wittgenstein Test. This is an effective way to check one's reasoning that I plan to start employing on myself.

Arnold Kling seems to not realize that "I want this to be; therefore, it is feasible" is a logical argument for some people.

It seems that the Republicans will be running with tax-reform as a central part of their agenda for 2016--one can hope, but don't hold your breath waiting for results. To that end Sumner says Rubio-Lee is great; co-blogger David Henderson says not so fast.

Disagreements about that particular bundle of tax proposals aside, I'm sure Henderson would agree with Sumner's analysis here of why a pure wage tax equals a consumption tax and that taxing capital income is VERY BAD.

One last one from Sumner: I agree with his analysis on what Democrats really want and where reducing inequality ranks. To those who want progress against inequality, which one should though the devil is in the details, I'll give the same advice as above--continue breathing.

WWCF: Ultra-Luxury Shopping Malls or Widespread, Pervasive Free Samples?

Which will come first?

Ultra-Luxury Shopping Malls

or

Widespread, Pervasive Free Samples

We've been hearing about the death of malls for some time.

Evolution of shopping: It used to be an expensive luxury to go shopping--imagine Christmas shopping downtown in the big city in a black and white movie. The economies of scale both in production (better machines allowing low-cost labor to be more productive) and marketing (a big umbrella venue in the form of the traditional mall) worked for decades to make shopping more and more affordable. Malls couldn't exist until these factors reached a critical threshold. Then they became prolific. But something funny happened on the way to the Ridgemont Mall stereo store. 

Now shopping is again becoming too expensive for malls to provide it but not because of resource limitations but because of better alternatives. In both cases (the pre-mall and soon post-mall eras) opportunity cost are high (remember, opportunity cost is the only economically meaningful way to look at cost). It used to be that one needed to purchase a lot and purchase wisely given one's time investment in going shopping along with the goods offered for sale being a relatively big sacrifice. In steady progression the falling cost of goods and the improved experience meant that malls could command our shopping attention because they lowered the opportunity cost. Malls generally offered a more efficient alternative; although, the entertainment value of the mall cannot be overlooked. The mall was a big tent, bundled package much like a newspaper. It had a little bit of everything and could afford to accommodate nearly every taste because of the volume. Certain high-margin sales, which translated into profitable leases for the landlords, created opportunities for many low-margin sales--the marginal cost of adding costume jewelers and Orange Julius is pretty low once the mall is built and being paid for by anchor department stores.

However, today we have reached a state in which the alternative method of shopping, ordering online, dominates the efficiency of physical shopping by many orders of magnitude.* Compounding this problem for malls is the fact that there are many alternative forms of entertainment that make hanging out at the mall seem fairly dull. Hence, today the resource limitation is the ever-growing value of our time.

Are malls dead? Only malls as we knew them and in such numbers as we knew them. I predict a resurgence of destination shopping with and because of vastly enhanced luxury experiences. The retailer or landlord who masters this will enjoy rewards some will find surprising. These may not be the one-stop shop where "this mall has everything" and "the people of today's world hang out," but they will attract our time and wallet in a way that today's shopping malls cannot. I am thinking the magnitude of these differences will approach the differences between a day at Harrod's versus a trip to Wal-Mart and the experience at Bass Pro Shops and Cabela's versus the local bait shop. 

To be clear a qualifying "luxury mall" would have the following qualities:

1. It would be a destination unto itself not just a shopping trip--many customers would go for the experience with no expectation of buying anything.
2. It would offer a large variety of goods rather than a single theme.
3. It would have a significant common space independent of any particular retailer.
4. It would make past generations of mall goers feel completely out of the shopping league.

That was a long way to go to get to the first half of this WWCF. The second half will come quicker. Goods are getting fantastically cheaper as is shipping. Our time and attention continues to be scarce--in fact, it grows more scarce as our options of what to do with our time improve. One solution for marketers is simply giving the goods they wish to sell away for trial. Instead of targeted advertising to demographically attractive households, how about targeted distribution of the goods themselves? I am thinking a $100 purchase of household items from Amazon will come with a curated box of complementary items for free. The first of the month brings an unsolicited trial supply of "things you never knew existed and cannot possibly live without." Eventually, many households will come to expect this as the primary way to discover new, perishable goods. 

Which comes first? The adaptations to the mall experience have a bit of incumbency advantage being that the mall has a more symbolic and established position in our shopping lives. However, the sampling idea may have a faster ramp up. To make the competition more determinable I'll say the creation of the fifth luxury-type mall (new construction or massive renovation of existing space) competes against the regular delivery of unsolicited free sample goods to >500,000 households. These thresholds hopefully capture an established trend rather than a one-off beta test. I predict the free sample idea to come within 10 years and just before the luxury mall idea can qualify, but I believe both will spur along the other making it a quick finish. 

*Don't be misled by statistics that show only a small effect coming from online sales. I contend that heterogeneous-consumer, high-fixed costs businesses are generally very sensitive to small decreases in demand because they rely on a diverse, network-effect customer base that is harder to understand (hence, harder to regain once it begins to slip) and they cannot scale downward effectively. 

Thoughts on Tyler Cowen's OU Talk

I had the privilege of hearing Tyler Cowen speak at OU this evening. It was a very good lecture and the Q&A after was equally rewarding. I was impressed by the OU students' questions. My thoughts follow.

He began by saying how his job is to view the world "weirdly"--to look beyond the obvious in a way many find weird. As such he wanted to discuss three basic contentions or predictions (my apologies for any butchering from poor memory):

1. Globalization will decline. 
2. There is a myth of the rational autocrat.
3. "Fortress (North) America" will see a continuation of the current stagnating trend. 

To be fair he qualifies these predictions with the caveat that they may be the most likely of many altogether unlikely outcomes. Perhaps there is a 30% chance of one being correct where that is still the most likely outcome possible. 

Much of what he predicts I agree with, and part of the thesis supporting his three contentions is too vague in my understanding for me to form sharp disagreement. In fact I think he is wrongly maligned because of inferences people create from The Great Stagnation and Average Is Over that are not his actual argument. Nevertheless, I find some disagreement in how significant the trends he sees are or how meaningful they are as a guide to the near future. 

Thinking back over the past 115 years in American history I can think of a few periods where change and trends would lead one to make very similar arguments to The Great Stagnation and Average Is Over, but in each of those cases the future turned out quite a bit different (better in fact). My question going into tonight was if he had a testable hypothesis (i.e., how will we know if he was wrong 20 years from now?). In his talk he did give some specificity to the three contentions, but it was not as definitive as I would have liked.

My thoughts and questions on each contention:

1. Globalization will decline, which he defines this as cross-border trade as a percentage of global GDP declining (peak trade).
• Isn't this a natural process as wealth grows, as local markets get deeper? Local economies seem to import the good until they can import the technology to do the work themselves--sort of a territorial vertical integration. Oklahoma can produce a lot now that it used to import from more developed states. The division of labor is limited by the extent of the market--hence, a larger market allows for greater division within it.
2. There is a myth of the rational autocrat. 
• I was confused by what he meant here thinking "rational" meant responding to incentives in self-beneficial ways, but instead I think he means rational to be peaceful or choosing or agreeing to good outcomes. 
• I think he is largely correct that it is wrong to assume autocrats will choose or can be made to choose good outcomes.
3. "Fortress (North) America" will see a continuation of the current stagnating trend. 
• He looks at 1999 as a turning point stating that real median income has declined since then. This one I was able to discuss with him briefly afterwards. I asked how many (if any) 15-year periods over the past 115 years would match this pattern. He said there were some. And he agreed that we are probably in the beginning half of a ~40 cycle between the major advancements of a technology and the benefits reaching the entire economy. It is just that he sees the interim as quite painful for many and not as typically fulfilling for most as in previous cases. 
• We were specifically comparing the early automobile and today's tech sector. What became clear is how he was focusing on the labor implications while I was considering the consumption implications. To me he is caught up in considering labor income, but that is a cost. The economic benefits of a technology are not how it employs people; it is how it enriches their lives.
• Related to this I had another question I didn't get to ask. He stated that median, male, real income was lower today than in 1969. But isn't this a data-mined straw man? If the typical man can get by (and really thrive) in 2015 vs 1969 because his wife works or stuff is cheaper or his family wealth from prior generations allow, isn't this progress to the good? I fully agree that the patterns to labor, the risk factors to labor, the options for labor have changed and are changing dramatically. I am just not convinced it is necessarily bad for labor or that we can tell with any reasonable certainty.

Again, it was a very engaging and educational talk. 

Highly Linkable

I want to go to there.

I DON'T want to go back to there then.

Speaking of a then to be glad we are no longer in, Megan McArdle on bread bags as shoes.

How about going back to the days when a computer word processor could spell check your work but had no clue about what the correction should be (start at the 10:04 point for the "New Frontiers" part)? I knew Mr. Wizard's World well. I can remember each of these episodes like I watched them yesterday.

The people of these worlds are so tiny, I'm crushing their heads.

Here are a couple of reasons nobody likes me in my world . . .

• I tend to look at sports discussions scientifically and logically rather than emotionally and indeterminately. Most people don't like that.
• I acknowledge that I am not a grammar expert . . . or are I??? But I do love pointing out to people when grammar "rules" they believe in strongly are actually grammar myths not worth believing in. 

James Altucher would tell me not to bother with people who don't like me. He is right. I've been making my way through the interviews on his podcast that he summarizes here. They have ranged from mildly interesting to fascinating. Each has been rewarding in one way or another. A great example of learning by exposure to diverse points of view.

Here is a diverse point of view from Alex Tabarrok defending the company town.

Arnold Kling offers a diverse way of looking at the purpose of the study of economics.

Finally, Timothy Taylor has a different approach to understanding cooperation and competition.

If I Were A Rich Man . . .

In the trust business we have a few inside jokes. One is that you anxiously await each typical age threshold "expecting" to receive notice that you are the beneficiary of a trust you did not know existed. These dates are generally 18, 21, 25, 35, and 45. I've got just one left. I'm not holding my breath.

I have a few crazy stories about trusts that actually do exist while the beneficiaries are completely unaware. These include some with contingencies that range from bizarre to spiteful. If those contingencies don't play out, some other party will be the recipient. In the very likely event that I am not going to win the trust lottery, what are realistic goals for my wealth going forward?

I am not so much thinking about specific numbers. It is more about evaluating where I've been and where I'd realistically like to be in real terms. I think of these as levels of wealth.

Let's get it out on the table right now that upon reflecting on my current status I have to feel incredibly lucky (just don't call it "a blessing"). It is very likely that like myself, everyone reading this blog is in the top 1% of current human wealth. Basically every household in the United States above the poverty line is in this top 1% group. I enjoy riches that would be undreamed of by previous generations of Americans or current populations around the globe today. So with an eye of thankfulness to what I have, how would I measure being "wealthier" than I am today?

Somewhat in hierarchical order, here are the levels of wealth I would like to achieve. I reserve the right to change my mind on this including adding to it; which is to say, I recognize that what I value now may not be what I value in the future.

• New cars and more often - I would like to feel financially strong enough that without hesitation I would always buy brand new cars. And I would like to be able to replace cars about every 2-3 years rather than 6-8. 
• Top-level electronic, entertainment packages - I would like to have satellite radio in all cars (I do in one and I work to always get a discount for it (see the next item on this list)), all the premium channels and other packages for TV, full memberships in all the Internet radio desired like iTunes Match, Pandora, etc., the top-tier of Internet broadband and mobile data packages, et al. 
• No discount shopping/rewards programs - I make A LOT of decisions with an eye to how I can get a discount or participate in a rewards program. At some point it is not worth one's time. I would like to be wealthy enough that it is never worth my time. It would be a hard habit to break, but I would adapt. 
• [UPDATED] Dining out without limit - Eating at the kind of places where I most like to eat and ordering as I like to order is currently something subject to a sharp budget constraint. It would be amazing if that were no longer the case.
• Top-of-the-line furniture and appliances throughout my home - Like many of these, this presumes I am wealthy enough to afford the risk my kid, my kid's friend, your kid, etc. will destroy my leather chair from a place you've never heard of, guest-bathroom TV, ice-maker in the backyard kitchen, etc. 
• First-class travel - I want every flight I take to be business class at the least with first class an option. I want to stay in the best hotels at every destination and in the best room available. This might include something as small as staying on property at Disney and in a suite with a view. It might include the Ritz-Carlton's destination club. 
• Netjets is the natural next step within this item.
• Having a private suite at my favorite sporting events - We've discussed this one before.
• [this space reserved for future awesomeness...]

Yubby dibby dibby dibby dibby dibby dibby dum.

Remember... all I'm offering is the truth. Nothing more.

(Updated to correct small grammatical errors due to voice to text problems)

Yesterday's Marketplace Morning Report had a snippet examining different articles from an old 1948 issue of Fortune magazine (starts about the 3:45 point in the short clip). One part of the story stood out to me. It was about business and ethics and specifically about inequality using the example of teachers being underpaid. It is unsurprising but disappointing to me that this story line has been around as long as it has. It is disappointing from the standpoint of it being either economic ignorance or deceptiveness.

Allow me to point out the logical implication of the idea that teachers are underpaid (Fair warning: I do this to be provocative by stating it in a rather harsh but still true manner. This is designed to get a rise out of you but also to make you think critically.). Here goes:

Either they're too dumb or lazy to figure out how to get out of that job and into the one that pays them what they're worth or . . . they're worth what they're being paid.

I will let you seethe on that for a moment.

Okay, now let's be a little more charitable. Notice I won't go so far as to basically canonize everyone in the teaching profession. For those who truly could make a greater total compensation but instead sacrifice for the good of the cause, that is wonderful and to be commended. At the same time, if you are doing it as an act of charity, you have forfeited your right to complain about the pay. For the rest . . .

This could be another case of the old adage there ain't no money in that. But there is money in that; we just have to understand what type of money there is and what is truly determining that total compensation. If you make the proper adjustments for time off and other benefits including pension plans for public school teachers that may be too generous, you see that actual total compensation is fairly high. It still lags what many talented teachers could earn in other professions, but we have to respect their reasoning for making the choices they make.

So why is teacher compensation largely composed of non-pecuniary benefits like time off and job security? One easy answer would be that most of the teaching jobs are through government, which is subject to the whims of the political arena and haunted by bad incentives.

(I've updated the next paragraph to clarify my point)
Yet the larger economic reason (for teachers' pay structures including the low annual wage commonly kvetched about) is more subtle. Income is overwhelmingly determined by comparative advantage and the size of the market--not intelligence per se. Frankly speaking there are a lot of eligible candidates for teaching jobs despite the work of teachers unions to restrict the employee pool. And in the market for teaching children there are in most cases quickly diminishing returns to intelligence.

Don't believe me that income is a matter of comparative advantage and market size rather than intelligence? Imagine you are a member of a primitive society living on a small, isolated island. Would you rather have as your only differentiating skill to be the one guy who knows how to split an atom or the one guy who knows how to tie knots?

Trying To Understand Inflation

Scott Sumner makes the case that economists generally can’t agree on what inflation is, and even when they do, their understanding is at odds with the general population. Let’s explore this a little:

Imagine an economy with one laborer, me, one capital owner, you, two consumers, you and me, and two kinds of goods, apples and oranges. It takes me one hour to produce one apple and one hour to produce one orange. I can only work a maximum of 500 hours in total per year. I get paid one dollar an hour, but you get half of my wages (this makes it easier to introduce a monetary system into this fictional economy rather than having the capital owner retain the product--just assume after production the fruit is co-owned by you and me hence we "buy" it from the coop). Let's start with the price of apples at $1 and the price of oranges at $1. Another way of looking at it is to say the price of an orange is one apple and the price of an apple is one orange.

Fast forward to one year later where apples and oranges begin the year at the same price of $1 each (sticky prices) but then rise to $1.17 for apples and $1.05 for oranges (details how are below), my wage rate is still $1 per hour (sticky wages), but my productivity has increased whereby it only takes me 45 minutes to produce either fruit. In this story how can we meaningfully talk about "inflation"? Prices have risen, but so has productivity. In fact, productivity has potentially increased 33%. And wages are flat for the time being. None of these variables alone really tells the story. John Cochrane might say we’re on to something.

And if a monetary authority (an entity that controls the supply of money such as a central bank) targets "inflation", we start to see big problems. David Beckworth tells it better and more thoroughly than I can.

Picking up on one of Beckworth’s claims, we can see from our hypothetical apples and oranges economy that it will look like the supply of money needs to be loosened when in fact it needs to be tightened to allow total spending in the economy (nominal GDP) to be maintained.

Let's assume in the first year I produce 300 apples and 200 oranges, and then you and I each separately purchase/consume 150 apples and 100 oranges. Total spending in year 1 is $500 (500 fruits at $1 each). 

[here comes the yada, yada, yada...]

In the second year I produce 360 apples and 240 oranges taking just 450 hours to do so thanks to my enhanced productivity which leaves time every day to pretend I'm Rip Van Winkle while on the clock (you'll see below why I would stop working at some point short of maximum output--360 and 240 are somewhat arbitrary numbers). My total wages are $500 still since I'm still getting $1 per hour for 450 hours of labor and 50 hours of napping. You still get half of my wages, but additionally the central bank gives you $100 and me $75 (out of thin air) so as to maintain the monetary authority's desired ~2% inflation target in the face of a 33% rise in productivity* ($175 is about a 35% increase over the $500 monetary base). I have $325 and you have $350. As we attempt to make our purchases of apples and oranges presumably to get at a similar consumption arrangement as before (half of each type of fruit for each of us), we bid up the price of each good somewhat so that the market can clear and in the process we change the consumption arrangement some. Your greater purchasing power allows you to bid up your slightly preferred fruit, apples, a little relative to oranges. The prices settle at $1.17 for apples and $1.05 for oranges (these prices are arbitrary in the example—just one of many ways the math will work out). You walk away with 190 apples and 121 oranges while I get 170 apples and 119 oranges (just one of many possible outcomes). This makes total spending in period 2 $675 [$1.17 x (190+170) + $1.05 x (121+119)].

We can summarize the economic situation: Total spending, "nominal GDP", is up dramatically (35%) while the "real GDP" is only up 20%. The monetary authority wanted only about 2% price inflation but got a 15% level. The economy could potentially be producing 11% more fruit than it is actually producing. The Cantillon Effects of you getting $100 and me only $75 from the central bank may be unrealistic and are not central to the story. I believe there is something to it and it can have distributional effects as it does here (both in the price change and ultimately the quantities of apples and oranges we each get to enjoy). Don’t get lost in this, though; it is not the central theme—rather understand that inflation is a murky subject and policy based on it can have severely adverse consequences.

It was my expectation of the central bank's inflation targeting which led me to shirt instead of producing more--I happened to stop at 360 apples and 240 oranges. The high rate of money supply growth was a negative shock to my purchasing power. I should have seen my $1 per hour going further as the price of apples and oranges came down in nominal-dollar terms, labor-hour terms, and substitute-good terms (apples for oranges and vice versa). If instead of targeting inflation the central-bank targets nominal GDP to rise about 5% such that nominal GDP should be about $525 in year 2, prices will be allowed to fall and my purchasing power because my wages are sticky will be rising; hence I will be incentivized to produce closer to the the economy's full potential. In which case I will be doing a lot less shirking. Year 2 would look more like this: I produce close to 667 total fruit, the money supply increases about 5% rather than 35%, the prices of apples and oranges each fall about 25% (a 33% productivity increase implies a 25% price decrease) but is offset some with the 5% increase in money supply, and the economic distortions are minimized. Happily ever after . . .

*The key here is that the central bank doesn’t completely understand the increase in productivity, and it realistically wouldn’t. In a more realistic, fluid economy what they would see would be falling prices or at least downward price pressure for apples and oranges. Productivity gains would equally be disguised as underemployment (after all, I am napping). The feedback loop keeps telling them to fight deflation—i.e., increase the money supply.

WWCF: 3-D Immersion TV or Live Wallpaper?

Which will come first?

3-D Immersion TV

or

"Live" Wallpaper

Let me start by defining some terms. 3-D immersion TV means a television experience that transcends the current "I am watching something projected before me" to be more "I am in the middle of something occurring around me". I don't know exactly what it would look like other than think of the difference between watching a stage performance of Les Miserables on television versus actually being at the performance seated down front. Now imagine stepping on stage. 

The 3-D immersion experience (3-D I-TV) would have the action truly happening about you rather than just with depth in front of you. Perhaps it would be holographic from a device(s) located on the ceiling and floor. I think it will start with sports and then reality shows with scripted programs in large part to follow. I imagine multiple camera locations/angles such that watching the football game from home will be much like having the best seats in the house where your perspective changes as the action dictates. Imagine multiple Skycams where perhaps you choose your vantage point following the action as best suits you. There would be little worry about an important part of the play going out of screenshot--just turn your head, and you can watch the quarterback getting late-hit as the ball sails down field. 

As for "live" wallpaper (Live-Walls), this is a combination of two ideas I've had for a very long time. When I was young, I dreamed of a spherical room you could step into and suddenly be looking at a 360' x 360' view of some impressive landscape like the Grand Canyon. The camera system driving this video would be mounted on a tall, thin tower. Holding onto this dream, I was then influenced from the early Web's webcams. Molding my concept into a more practical form, I now want walls that will project whatever desirable vista I would like to surround myself with: the beach in Hawaii, Broadway in NYC, the Champs-Élysées, etc. 

Imagine what this technology does for the elderly trapped in their hospital/nursing home/prisons. Imagine how this can transform schools. Imagine how much more enjoyable your current, drab office would be. Sure this will put Big Picture Frame out of business, but the rest of us will be Soarin' Over California from our living rooms. 

The limiting factor for 3-D I-TV is probably technological, but we are getting closer and closer to holograms. The limiting factor for Live-Walls is probably more economical related to the business plan--getting to a critical mass to make the investment using existing technology worthwhile (e.g., using just flat-screen HDTVs). The ultimate desire to have entire walls that act as video screens puts technology as an additional hurdle for Live-Walls. 

I think the critical point for which has come first will be once one of these technologies is common in middle-class homes. The first may seem to face more obstacles, but this might be what "saves" TV. Imagine shopping from your home in a 3-D environment. Imagine the demand for sports and hence sports advertising. The business case for 3-D I-TV may drive its advancement. Of course there is a third possibility: that these two ideas converge in one large step toward Nozick's Experience Machine.

My guess is Live-Walls is coming first and will be within the next 10 years. 3-D I-TV follows within 5 years of Live-Walls' critical mass achievement.

How To Be Teflon

Everybody gets into difficult situations. EVERYBODY. Everyday. If you aren't getting in one today, good for you. Or maybe you're not trying hard enough. Or don't realize you're in one.

This is a guide to for difficult situations. Not a guide. A few ideas. They may be bad ideas. Apply at your own risk.

This isn't about being a Teflon Don. This isn't about committing crimes and getting away with it. It is about rising above a problem. Finding your way out of a difficult situation. Maybe that means a solution. Maybe that means a victory. Maybe that just means an escape hatch. They all look the same from the other side. I'm not saying this is what I'm always able to do. It is just what I try to do.

EVERYTHING IS A COMPLIMENT

Suppose someone just challenged your solution, put down your proposal, laughed at your ideas. It was supposed to be a professional setting. Just like that you are on the emotional defensive. Stop right there. They have just paid you a flattering compliment. They've just said, "As good as that was, you are better. Show me better." Now do just that.

Who cares that they were crass, inconsiderate? We'll get to the insignificant moments shortly. Or maybe they are just bad communicators. Don't hold that against them. Show them the better way. Ask them what they want, what they think. Get them to tell you the way to communicate with them.

Most people lash out when they don't understand. Confusion sparks primitive emotions bordering on physical reaction. Defuse it by giving them control. Figure out what they need to know by letting them do the talking. Always be thinking about solutions and expect that other people are too.

What if you can't? If you and the other person are at an impasse? Back away. Put time between the two of you and the problem. Notice they aren't the antagonist. You aren't the protagonist. It is the two of you against the problem even if it doesn't, and it usually won't, feel that way.

What if you still can't? Oh, well. Walk away. Some people can't communicate. Or won't. Doesn't matter because . . .

ONLY THE PEOPLE WHO MATTER, MATTER

Deep down the important people are always rooting for you. ALWAYS. And the people who aren't are insignificant. It is just like Thin Lizzy said, "If that chick don't want to know, forget her."

People we care about strive to 'get it'. That is how they show they care about us. And we reciprocate. Being a good friend, a good business partner, a good lover, a good person is about forgiveness, understanding, acceptance, and support. We're trying to make each other better while knowing we ourselves are highly imperfect. So imperfect that there isn't time to consider other's faults because . . .

THE LAST MOMENT IS INSIGNIFICANT

What has happened is literally in the past. What comes next is what matters. You will be judged by what happened and what will happen and you can only change one of those things. It is you're next decision that matters. Make it right, or make a mistake, that's okay because . . .

YOUR MISTAKES ARE TINY

Somewhere right now many people are making colossally bigger mistakes than you are right now. You've made bigger mistakes. You will make bigger mistakes. You learn, you adapt, you improve, you move on. Don't be stuck in the past with those who themselves can't escape it.

Don't focus on the mistakes; you're better than your last mistake. Much better. Now show it. Rise above it.

But how? What if it feels big? IT IS BIG. This mistake won't end well. Well, you're wrong. The Universe is big. You are small. Time is long. You are fleeting. And that moment, that mistake is but a flash that can be forgotten, undone, moved past, resolved because . . .

LIFE'S A LONG SONG

Most of life is in your own head. You sleep maybe one third of your life if you're lucky. And that time is just you and your dreams. You are alone with your thoughts perhaps another third of your time. The rest is also you thinking about what is happening around you while you intermittently interact with it.

This leaves very little time for you to actually act--be those actions successes or mistakes. And keep in mind you won't necessarily know the verdict right away if ever at all. Many actions we take are inconsequential. Many mistakes we make are as well. Some aren't, but you'll endure because . . .

YOU'RE TEFLON

You are the reason difficult situations were invented. Just so you'd have something to do.

Always be listening to your favorite music in your head. Give yourself a theme song. A whole playlist. As the situation dictates, switch to the perfect anthem.

Pretend the situation you're in is already scripted and you're just acting it out and you're the hero. Don't be cocky. Don't be arrogant. Just rise above. Let somebody else take the credit and the glory. The audience knows the truth. And they're rooting for you. Always.

Partial Compilation of the Wisdom of Max

As originally posted to Facebook (most recent first) over the past year and a half with slight edits for clarity, I give you

The Wisdom of Max

Me: "Max, put on your jammies."
Max: "I don't want to wear jammies."
Me: "Look, I'm wearing jammies."
Max: "No you're not! Jammies have airplanes and stuff on them. You're just wearing regular clothes!"

Max: "Do you know why they call them black widows [pronounced 'weiddos']? Because they are so weird looking."

Max: "It's really easy to kill zombies. You just get a sword and hit them a bunch. It's pretty fun." Who says Minecraft doesn't teach you anything.

Max: "Birthday parties are gooder than everyphrang because ... Getting older ... sigh..."

Max: "Old people are lucky. They can't go to jail. Guess why. Because they forget so much."

[from April] "It's chalk and water. When I asked him what he was doing he said, 'MOM, I'm sciencing.' Well, I guess I can't argue with science."

Max referring to a friend at preschool: "Heston's not really a bully. He's just kinda the boss."

I'll be vague to protect the innocent, but Max's quote was good: "Mom, tell your friend next time to NOT put nuts in the chocolate chip cookies."

In this photo we see Max explaining that "the inside of a bean has seeds that are like bullets. If you break it open and put them in a straw, you can fire them like bullets." Thank you, Papa, for that helpful bit of knowledge.

Max thinks this bird poop on the car window is cool because it looks like a rocket ship.

Max is at a friends birthday party. A few of his observations:
     "I can never trust a hot dog."
     "My real name is Max, but in your gang my name is Zane."

He's been working in this all morning running around fretting, "I don't know if this will work..."
It is an "Opathenator". He told me what it does, but it is too complex for me to summarize in a Facebook post. (notice the use of a laser)

(At Victoria's The Pasta Shop) Max said, "Bring me all the lemons."

Max wants everyone to know he had three dreams last night (2 bad and 1 good): 

1. We as a family were going on a train ride and he fell in the river. 
2. He was being chased by dragons and one ate him. 
3. A jet landed right by our garage (this was the good one. He said I would like it and maybe I'll have it sometime). 

     He then said, "Dreams are like listening to music with headphones only without headphones."

Max: "If you put honey all over [which he pronounces as 'O-er'] your yard, you'd have ants EVERYWHERE!"

Max: "I AM happy. I'm just not acting happy."

Max: "Guess what whiskers are for."
Me: "What?"
Max: "To shave."
Walked right into that one. But he continue, "They actually are just to give you something fun to shave."

Max: "If you tell somebody you went potty, but you didn't, and you don't tell them the truth, it's a lie. . . . 
I thought of that all by myself. That's what I do. I think of interesting things."

Laying down with Max while was going to sleep and me thinking from the long silence that he was, he raised up to say, "If I had some hot macaroni and there were ants nearby, I'd put it on the ants so they would die. Ice would work too."

Today Max and Elise went to the Myriad Botanical Gardens. Max said, "Mom, I have to ask you something. Can I pick these flowers? Can I take these flowers home?"
April replied, "No, you cannot."
Max said, "Okay, I just had to ask."

So Max was drawing with Eva today. He drew this guy in the middle and said, "that's a vampire." 
Eva asked, "How do you know what a vampire is?" He answered, "A vampire is just a naked zombie." And .... now I will have nightmares.

Max: "I wish I was three! Everything was easy when I was three. But in a while I'll be five, and that will be so cool!"

[from Nana]: While keeping Eva, Max and Elise this weekend, I gave Max and Elise both orange popsicles. Max quickly ate half of his then set it in his plate. Elise laid hers which was barely touched down immediately and grabbed his.
Max: "Hey! That's mine!"
Me: "That's okay just take hers she had barely touched it."
Max: "It might have germs, she licked it."
Me: "But Max she's your sister you don't care if you eat after your sister do you?"
Max: "No, not now that she is in our family."
Me: "Well she has always been in your family, she has the same Mommy and Daddy as you, remember when she was born?"
Max: "Yes, but when we first got her we didn't eat after her or anything for a while until we finally let her be in our family."
Guess it is one of those exclusive families that only accepts the best...

Max: "Papa, sometimes people think things that aren't true, but they don't know."

More from Max: "Some times things are funny, [shakes his head] but people don't laugh."
"You know bad words? You can learn good things from bad words."

Max: "Daddy, does it frustrate you that the house is taller than you."
Me: "no, not really."
Max: "But it's frustrating when things are taller than you."
Later . . .
Max: "My favorite thing to do today is to watch Eva while she plays. That bothers her. I like distracting her."

As I was grinding coffee this morning, Max said, "If you run out of concrete you can use coffee but it is really hard to do. REALLY HARD! You have to add boiling water and wait a long time."

Max: "David Graybill [his 6'4" cousin] couldn't take a bath. He is too tall. Do you know why David grew so tall? Let me tell you. Some people grow wide [he stands with his legs apart and arms lifted out to demonstrate]. But David grew long [he stands tightly together very straight like a pencil]. It happens at night. You don't notice because it is at night. But it happens."

Max: "If Superman was a real person, he'd be made of steel. But his cape wouldn't. His cape would be made of red cape stuff."

April: "I'm sending you kids to boarding school for the summer. I can't take the fighting."
Max: "I don't want to go to boring school. I don't want to ever go to boring school. I like my house."

[at Pi on the Plaza District] Max walked up to this sign and said, "What is my imagination saying?"

Elise is watching Sesame Street. Max can't figure out for the life of him what this is.

Max: "Dreams are important. They are good for you--even bad dreams."

Playing with Eva, Max said, "Remember what we did a long, long, long time ago, before today ..?" The rest isn't important. The specification that three long times ago is "before today" was the interesting part.

[from Nana]: Last night we gave our grandson Max (age 4 1/2 yrs.) a lava rock we found in the desert on our trip to Yuma. I said, "We picked up this lava rock for you in the desert. It is from a real volcano." His eyes got a look of excitement and alarm and he took it from me the way a person would take the surprise gift of a million dollars. "Wow" he said, "WHERE DID YOU GET THIS?" I told him we found it in the desert. He continued, "I mean, HOW DID YOU PICK IT UP? IT HAD TO BE BURNING HOT!"

Max today: "Robots were invented in the olden days to help people catch rabbits and chickens." I think he's watching too much Looney Tunes.

Max is focused in school work and focused in his Martial Arts.

Max from the shower: "Elise doesn't have boy parts! Where are her boy parts! She is like a cow. Milk comes out of there." How is he just noticing this?

Max explaining: "... And then a BIG giant ball of fire came down and there was fire everywhere and it killed all the dinosaurs. Then the scientists buried them, and then there were people who grew up, but first the scientists so they could bury the dinosaurs..." He drifted off as his non-sequitur became apparent.

Seems like he'd make a good pet owner.

So what do you do when you're playing hide-n-go seek, you are winning (not able to be found), and you have to go to the bathroom? Champions, like Max, apparently stay in place and pee their pants. ‪#‎commitment‬‪ #‎WhatChampionsDo‬

Eva has two friends over for a sleepover.
Me: "Max, let's get out of Eva's room and let the girls play."
Max: "No way! I wanna party with them!"

Max: "We talk about vinegar at school. You can drink it but it seems really bad but it is good for your bones."

Max relaxing in his new blanket-fort-house. There is a 20-foot "secret entrance" that runs behind the kitchen and around the side. It's really cool.

Max is showing Elise Minecraft. He is sad because in the zoo he built the piranha has jumped out of its pond and is going to die.

In another conversation, Me: "You need to get to sleep. It's a school night." Max's sharp reply: "I don't go to school at night!"

Max: "Your pants would be really stinky if you had cheese in them for a really long time." I am now checking all his clothing.

[from Nana]: Babysitting Max age 4 1/2 yesterday he told the dolls, "daddy has to go to work to buy food for your or else you will starve to death and Daddy will go to jail." then he looks up for a second and considers that thought, "well maybe I wont go to jail, then he continues, yes Daddy would go to jail."

April is taking Eva to the OKC Philharmonic tonight to see Sarah Chang play violin. I was telling her that a lot of people will be dressed very fancy tonight. Max said, "I don't like fancy." "What do you like?" I asked. "Cool," he replied.

At the end of her workout yesterday, April was out of breath and Max said, "Mom! When you are out of breath you have to go outside and eat some air or you might pass out!"

Max: "Flowers make nectar in their tummies like we make poop. And bees making honey. Lots of animals make things for us..." It went on from there for some time. Chickens are his favorite animal.

Max says: "You don't want the hedgehog to see his shadow - then there will be 1000 more days until fall comes."

So, Max pulled one of my books off the shelf and asked what it was about. It was Brian Greene's "The Elegant Universe", and it was opened to a diagram about relativity. He is now running through the house attempting to go fast enough to time travel. He didn't understand when I told him that if he does, I won't be able to tell.

Now this is a bubble bath.

Max: "Today at school I saw where you get Bible'd."
Me: "What?"
Max: "Bible'd!" [this actually went back and forth several times with him getting VERY insistent]
Me: "What do you mean?"
Max: "You know, with the big bathtub."
Me: "Oh, baptized."
Max: "Xactly! Daddy, have you ever been Bible'd?"
I didn't know how to answer.

Eva is at a birthday party next door that is "girls only". There is an age factor too, but that isn't something he could understand. Max: "Mom, for my birthday send a note to every girl in the whole wide world, 'No girls allowed!'"

Max: "Don't forget to set up the Montana Fire tonight in my room."
April: "What do you mean?"
Max: "You know, the thing that blows air in my face."
April: "Oh - the humidifier."

Max: "When we left on our trips, I worry about my toys and our house. What if somebody broke in and put a bomb in it. That would be crazy! I'd punch the bad guys in the tummy."

Max at Whole Foods whispering to April: "Mom, mom. I want to say that lady looks freaky, but that would hurt her feelings."

Max (in a Darth Vader voice): "Luke, I am your father . . . Son, and Holy Spirit." He might be confused.

Just after closing the door as the last of the cousins left from Christmas; Max: "Daddy, sometimes when I'm telling people goodbye, it makes me really sad."

Max: "Why did Nana make her Thanksgiving chicken on Christmas?"

He's loving his new swing set. Don't tell him it's too cold!

Max: "Did you know that you can see pictures of things in your brain? I'm looking at cool pictures right now. Can you see them?"

One of Max's rules seems to be to always stay in character.

One of his last thoughts before finally going to sleep brought Max rising straight up to ask, "What is faster a duck or a monster?" I knew immediately there is no correct answer I could give to this question as judged by him. Fortunately, he let me know, "I think a duck is faster running and flying."

Max is glad to be done practicing his Christmas program at preschool, "It was very disruptive to the day."

Max: "How did God create everything? Does he have a magic wand?"

"In Heaven can you fly? How? Do you say, 'I want to fly?' and you grow wings?" (With a concerned look.) "But I don't want to grow wings. I might just be saying, 'I want to fly'."

Max: "Elevators are pretty good places to pick your nose, but you shouldn't do it."

Upon learning what crab cakes really were Max said, "Crab cakes should be cupcakes shaped like little crabbies."

Max right now is jumping on the couch saying, "I love this night! It is like a birthday party!" Eva, watching MNF observed, "I just don't get some beer commercials. I like the one where he goes to the top of the mountain and pulls the beer out. I get that one."

Max: "Sometimes coaches look goofy."

Max: "Santa can't jump very high; he's a big dude."

Max is on a roll: "A giraffe could eat you." Me: "Well, no. Giraffes don't eat people." Max: "But if you had a leaf suit on they might."
Later: "Sometimes Santa comes into your house and looks around and if you have a bunch of toys he might only give you some and if you had a whole lot he'd leave you none."

Several from Max:
"Cows have to get the milk out of their skin or they will die."
"It is hard to pick your nose if it is sore but sometimes you have a big booger and if it is really big you need to wash your hands like ten times."
"If you didn't have a mouth you couldn't ask for candy if you were a little kid. That would be sad. "

Max: "Sometimes when you need to go pee-pee really bad someone talks to you and distracts you and you go pee-pee a little in your pants."

Max: "Papa, your neck looks like a turkey's."

Max: "It was easy for God to make aliens because they're so close to Heaven."

One of the byproducts of attending OU games is Max insisting we spend Sunday morning re-enacting the entire pregame in the backyard. I "get" to be the fans who have to stand up and clap and cheer at all the appropriate times. He is the players warming up, the announcer, the band, and the players running out of the locker room. The neighbors must love us.

[at the OU football game] Max: "What's a 'Hunnicutt'?" Me: "It means 'settling' and 'disappointment'."

At bath time.
Me: "I have to get your hair wet to wash your hair, Max."
Max: "NO! 'No' means no, daddy!"

Max: "Jesus has very good hearing."

Max's dream:
"A dinosaur was after me and 'Ah-Weece'. We hid under the table. He didn't kill us, but he zapped Mama."

Things I've learned this morning: Max, "In the world of donuts there are yeast donuts and cake donuts."

Max says, "Daddy doesn't wear a shirt when he mows - so neither am I"

Max gets Trick or Treat



Max was seriously concerned about his Sooners yesterday.

Wisdom from Max:
"A long time ago ghosts got into dinosaurs and thats why you don't see them any more."
"The beetles are the leaders of the bugs." Me: "Why?" Max: "Just because."

Max: "I'm a Wichita man. I'm from Wichita."
Homophone innocence.

"It's a glass of water." 100% his own idea and execution.

Max: "When you get old [elderly], you have to hear everything twice."

Max, "When I grow up, I want to be just like you, Daddy. Then I'll be able to go in the attic by myself." Apparently that is the measure of adulthood. He followed it with, "But I don't want to go into the attic." Quite the dilemma.

Max, "A magazine is a book you read when you go to the dentist."

[from Aunt Susie] A conversation between me and my 4yr old nephew:
Me: Max, I really like you
Max: I like me, too

Max reacts to eating a chocolate mouse


Max explained to me, "People call it a washcloth, but it's just a little towel."

April: "Max, please stop playing in the bathroom." Max, combing his hair: "I'm not playing, I'm being handsome."

April, "Max, is there anything you want from the store?"
Max, "Hmmm... Do they have gummies that look like bears?"
April, "When have you had Gummy Bears?"
With a confused look, Max, "Gummy Bears???"

Max just told me that Elmo was nice, but the dirty man was mean. I think he meant Oscar the Grouch.

Max's joke:
Max, "Mom, today at school I had a hand sandwich."
April, "No, you had a ham sandwich."
Max, "No, a hand sandwich. I ate it with my hand!"
"...I'm just kidding. It was peanut butter and jelly."

Max as the Flash (Flash wore an apron, right?)


Max was almost asleep when his eyes shot open with fear and regret as he worried, "I don't want Jesus to retire." Relax, he is not a prophet. Our priest, Father Boyer of St. Mark the Evangelist, is retiring tomorrow. Max is vague on what a priest is and completely unfamiliar with the concept of retirement.

Max plays Air Hockey


Mothers get accused of many things being their fault. This was a new one on April. Max: "Mommy! You broke my ideas."

Max says: "If God were not in the sky but was on the floor that would be cute because God is cool."

Not sure what this means. Max, "Let's pretend we don't have super powers."

Max to Elise: "I'm gonna squeeze the cutsy out of you." He said it in a sweet way, but it was still a little concerning.

Max's word of the day is 'sanitize': "Carrots are dirty. They have to be washed and sanitized."

Remember when finding a stick could make you happy?

Max sings Taylor Swift


Advice from Max: "It would be really hard to put lava in a water balloon, so don't even try it."

[at Easter] Max found an egg with money in it and said, "I'm gonna get all this money, then I can go to college, then I'll be rich forever!"

From the Wisdom of Max: Did you know that cheese makes you stop dying? Farmers put medicine in cheese.

Me from behind a closed door: "It's me, Baby Elise."
Max: "No it's not."
Me: "Oh yeah, it is."
Max: "You don't sound like Elise."
Me: "I changed my voice, I'm Elise."
Max: "If you Elise, pee your pants."
Checkmate Max.

April to me: "We need to start watching on Netflix 'Breaking Bad'."
Max with a distraught look on his face: "Oh no, can we fix it!?"

What I heard from the other room:
Max: "Eat this."
Eva: "EEEWWWW!"
Max: "It's yucky.... Don't eat it."
I did not investigate. Some things are better left unknown.
From April: The first thing that Max said to me this morning was "I went to the grocery store by myself and I had cheese". I asked him if it was a dream. He said "yes and papa was there and there was a shark".

April: "This is the coolest morning ever - we saw a fire truck testing its ladder and we saw a hot air balloon."
Max: "And we saw beautiful trees and a beautiful baby and a beautiful you."

Some of Max's more interesting questions of the day (he has many everyday):
"How do things not break?"
"How is your head attached to your shoulders?"
"How long cents does a kite cost?" (Pretty sure he meant how 'many' cents).

Three Points On Knowledge

1. Over Representation:

Think about when we offer our knowledge and opinions (and conjectures) on a particular topic for which we are not an expert--in other words, 99% of our daily dialogue. It would be interesting if the social norm would be to conclude by saying, "And that is the extent of my knowledge on this subject." Some people, of which I am one, are of the personality type that they feel compelled to share everything they know about a subject when discussing it. There is nothing wrong with this per se, but it can create the false illusion that we know more than we actually do--that there are even more gems left in the bag rather than that's all, folks!

I've been trying to make an effort to be more explicit about the limits of what I know, and I plan to work harder to that end.

2. "I Don't Know"

"I don't know"* is the almost always unacceptable response that is almost always the most correct answer. What happens after we die? There is but one correct answer scientifically speaking. You can believe one thing or another, but you do not know. 

IDK is nearly as applicable to all questions pre death. The complexity of our Universe, our economy, our own preferences leaves us generally in a state of darkness with just flickers of sporadic light. We should be more appreciative of this truth.

Yet humans have a universal thirst for certainty. Inquiring minds want to know. That is a good thing--it leads us to question and find answers and then question those answers to reveal deeper truths. I just wish we could be more honest about how true and virtuous the answer IDK is. If we were, it might minimize how thirst for certainty is also a bad thing. It is a big part of why we crave and succumb to authority. It is how con men can win over intelligent people. The investment community if full of people who refuse to say IDK. Politicians get roundly "defeated" in debates by even hinting at IDK. In business you might as well say "Fire me now".

Saying "I don't know" takes courage and wisdom, and so does acceptance of it as an answer.

3. Trust of Knowledge.

There are two extremes along the dimension of trust I am considering here. Those extremes are only trusting locals vs. locals are morons. I think people tend to fall toward one extreme or another, but they are not consistently at either end. Rather it varies topic to topic. The former extreme is driven by belief that only locals understand the circumstances whereas the latter is driven by knowing locals too well to know their flaws. Both reasoning are obviously faulty when at the extreme.

I see this thinking often in my profession, investment management. Some people are biased against a local firm managing their money preferring at least someone "smart" enough to be in Dallas or Chicago if not New York. Other people take the opposite approach and are very fearful of anyone from New York City! because "they will", of course, rob you blind.

Related (perhaps a bonus knowledge point): Margins of accepted error--how one's biases influence the margin of error one allows for cohorts who match versus cohorts who oppose one's views. Most ideas are bad ideas--impractical, plagued by substantially bad facts, and suffering from poor reasoning. Yet I think we cut our ideological brethren a lot of slack while being harshly critical of our opponents. We do something similar in business. If I trust locals, I give them a wider berth (and perhaps more financial leniency) than I do outsiders. If I think locals are fools, the hurdles I make them clear leave both of us poorer.

There are many ways we inconsistently apply margins of accepted error. Recognition and mitigation of these requires constant vigilance.

Keep thinking . . .

*There was a recent Freakonomics podcast on IDK. I thought it was good, not great. I hope the space they devote in their new book is a little more fulfilling.