Friday, August 21, 2020

Eulogy for my father-in-law

In loving memory of Robert Douglas:

The annual Fourth of July firework show in the backyard at my house was not the most extraordinary show you’ll ever see. It featured two kids: one of them my son and one of them my father-in-law. I always thought the basic goal was to try to set my backyard on fire and at the same time joyfully attempt to see who could be rushed to the emergency room first. Of course, it was really just two pals having a great time together like they always did.

Thank you for coming today to this celebration of the life of Robert Douglas. Today we remember a man who always showed us nothing but love. A man who made up for what he didn’t possess with the gift of being there for us in countless ways. A man who was Always Present.

Always there to be a friend to his kids and especially his grandkids, Tyler, Nicholas, Eva, Max, and Elise. He wanted nothing more than to experience life with them and to be their companion. In spirit he was truly just an overgrown kid in so many good ways. He had a big imagination, playfulness, and a love for toys. So many toys. Boxes and boxes and boxes and boxes of toys. If you could think of a unique toy from history, and I mean any time in history, he had one of them. And if he had one of them, he actually had several of them. While some were in mint condition stored away waiting to one day be sold, in most cases they were not perfect. As Max liked to say, “all of papa’s stuff is just a little bit broken.” A pristine, brand-new toy right out of the box is ideal. But that is not reality. Reality is being able to play with the toy you have and use your imagination to fill in for that which is missing. Having the toy that is slightly broken is better than not having a toy at all. Being there matters. Present and imperfect is infinitely better than absent and completely gone. 

Robert was a wise man of few words. But when he spoke, it was meaningful. He had seen a lot of life. He was accomplished, well traveled, scholarly, and street smart. He was a collector of many treasures of an astonishing variety. He had an eye for quality and great instincts for trade—an arbitrageur and bargain hunter extraordinaire. Truly a renaissance man. 

He was a dreamer. His wondering, optimistic mind always hopeful for what might be next. It led him to many dead ends and dreams left unfulfilled. But it also took him on many adventures. Each one starting with little more than a hopeful destination and a willingness to try something new. Such is the life of a wandering writer, which he very literally was. He left behind many journals, poetry, screenplays, and an unfinished novel we hope to publish someday soon. 

As much as he wanted to take that trip around the world completing travels he had begun decades ago and as much as he wanted to do so many, many other things that he was not too proud to ponder aloud, economic reality constrained him. But another inertia kept him moored as well—loyalty to his children and a desire to always be a part of their lives. Always present. 

He was not ever in any way a complainer. His toleration of pain was matched with his toleration of the worst conditions. When he traveled with us on vacation, he happily would volunteer for the worst bed or couch to sleep on, the chore of babysitting at night after a long day on the beach, and any other sacrifice to make sure he was doing his part and never in the way. He had a strong desire to always be needed and helpful. This desire included small kindnesses like driving grandkids to practice and patiently keeping watch. It also included selfless acts of great generosity. When Eva’s father, Brian, was diagnosed with cancer, Robert immediately without hesitation volunteered to do anything April needed including moving to Chicago to be there directly and permanently to help. 

Robert wandered long to find a home. He served honorably in the United States Army. He worked for the U.S. Foreign Service as a translator and codebreaker. For many years he taught at various public and private schools. Entrepreneurially, he tried his hand at professional photography, one of his many skills, owning and operating a studio and engaging in many freelance projects with large clients. There were many other endeavors. All had their moments, but none were the right fit. Some combination of discontent or an itch for something new would send him along a new path.

At the age of 70 he finally found his place at All Saints Catholic School. For the first two years he taught grammar and English. This year finally and for the first time he was embarking on teaching literature, one of his many passions. He was greatly looking forward to it. This was one of his dreams coming true. 

I think he knew that he was in really bad shape this past week. He emailed April early last Friday morning saying that he was going to need help leaving school that day. Later in the emergency room she asked him why he hadn’t just asked her to come get him right away that morning. He said it was because he wanted to see all of his students before going away. We’re not sure if he meant to see them once more expecting to return after a while or one last time forever. 

The limits of life are hard. One papa only has so many chances to be with five grandchildren. Robert did the best job he could to give his time and his love to his kids and grandkids. I’d like to think that now he gets the endless pleasure of being able to be witness, to be silently present with all of his grandkids all of the time not having to make any sacrifices among them but being able to just watch them live life. He will forever be in our hearts and always present.


Friday, August 7, 2020

What To Root For

In late summer every football fan begins to dream about the season to come with aspirational hopes for one's team and general excitement for what autumn will bring. That is every normal late summer. 

But this is 2020. So, here we go. 

I am torn as to what I should want to see happen. On the one hand I do not think cancellation of the season is the prudent choice from a health perspective. I would rather see options kept alive as the developing situation continues to play out. And this is strengthened by two underlying convictions as controversial as they may be: the health risk is generally minimal and people should have the liberty to choose for themselves what risk they wish to face. 

Note that there is a wide gulf between being completely back to a regular football season and no football season whatsoever. Minimal fans with abundant spacing and many other procedures can be a prudent compromise. No fans initially with potentially many or full fan attendance later in the season is also a possibility (keep your options alive). 

The pandemic is not completely understood, but we know A LOT more about it today than 6 months ago. And we are a lot further along all the curves including toward herd immunity. In just about every action we take we are potential externalities for our fellow man. And do remember that those run in both flavors (positive and negative externalities) and to many varying degrees. Magnitude matters. 

Are we so certain that this disease is too misunderstood, too deadly or otherwise too harmful, too contagious, and simply too terrible for people to make their own choices about exposure? For many people the answer to that question is yes, which raises interesting questions about many other activities and diseases. I do not believe the evidence supports this point of view. If we cannot have football in any manner, then how different should the rest of our lives be? Trust me, I know how some are willing and eager to answer that question. 

My threshold for the use of force is much higher than that. Like Bryan Caplan, "I accept a strong presumption in favor of human liberty. You cannot rightfully shut businesses and order people to 'stay at home' out of an 'abundance of caution'. Instead, the burden is on the advocates of these policies to demonstrate that their benefits drastically exceed their costs..."

Who am I to say an elderly man living with terminal cancer should not come to a football game? I am referring to a specific, very devoted fan and personal friend. I believe he should have the freedom to make that choice. I am a strong believer in freedom, fair dealing, and justice. 

Deciding for others is an invitation for injustice. Unfair bargaining is a method of unfairly restricting the freedom of others. All of which brings me to the other hand . . . The players.

The general data for the typical college age-person shows very low health risk associated with COVID. While particular individual players very certainly have underlying conditions or other circumstances like close contact with at-risk people, most do not. For those that do, accommodation and excuse from the risk is very much the right thing to do. 

It is not the player's health risk per se that I believe gives rise to an "other hand" concern, but rather it is the general injustice of players not being compensated with the added burden of a health concern bringing this disparity into sharp relief. 

Most people when confronted with this idea ask the wrong question--"Why should we pay players?" The correct question is the opposite--"Why should we NOT pay players?" The default presumption in a free society is that people should be paid for their labor. If you want the services of another person, you should expect to do so by reaching a mutually agreeable arrangement.

"But the players have agreed to play, and they are paid. Haven't you of scholarships?" is the typical response. That response is as wrong as it is common. That "agreement" is made repeatedly in a very one-sided deal between the individual player on one side and a very powerful buyer of services on the other--college universities. These colleges act in concert under the rubric of a pure cartel organization--the NCAA. This is not a pejorative, emotional charge nor is it name calling. It is a very well established factual depiction. And the power and extent of the NCAA is supported explicitly and implicitly by government action at every level. This shouldn't be a surprise as cartels do not withstand the inevitable forces of competition and free markets without state support.

As a cartel the NCAA and its member institutions conduct themselves as a single buyer of college athlete services--the technical term for this is monopsony. This affords them considerable economic power and leverage, which they use to enforce an arrangement that is very good for themselves at the expense of the athletes. The reason why college football and basketball programs are limited to what they can provide athletes is because doing otherwise would unleash that terrible scourge upon the Earth unto the halls of college sport purity--the free market with its evil property rights and competition. More specifically, the athletic departments and universities and all those who individually benefit financially from the current arrangement would have to share. 

The most succinct way to explain why athletes are not currently paid what they are worth is to simply ask why would NCAA regulations on what athletes can earn be necessary if they were currently earning their market wage. The more detailed way is to do the economic analysis as sports economist Dr. David Berri among others have done repeatedly

About those scholarships . . . There are two very strong arguments against the common refrain that they’re getting a college education. The first is that that college education is something they could attain anyway and do so with little to no expense. Most of these players would be eligible for need or merit-based scholarships as well as grants that would cover the cost of college. The second is that that college education is in fact not worth very much to many of them. For many people college is not the right decision. We push way too many people through the college system inside and outside of sports. For many a different route through trade school or other education or flat out immediate pursuit of a job would be a better option.

There are many other bad arguments made in defense of the system that we know. These include:

What will happen to the schools who can't afford to pay? and This will just mean that football ends at many places and only the biggest programs will survive. While a radical change may and probably will result in a lot of disruption, the market is more dynamic than its opponents' imaginations. Plenty of room exists for true amateur and other types of football aside from a professional college league. And it is very wrong to assume that Alabama, Ohio State, Oklahoma, and other blue bloods in football as well as Kentucky, Duke, Kansas, and other blue bloods in basketball would benefit from a world where direct, open payments were able to be made to players. These programs benefit the most from a limit on the very important competition dimension of wage compensation. Alabama does not hurt for the top talent in football. Paying players would be a pure expense for them with little to no incremental benefit. Oh, and are you soooooo sure players aren't already being paid in many cases. Black markets of illicit payments to athletes are alive and thriving in this world of prohibition. And they do so with all of the horrible consequences associated with black markets.

How will they be paid? Will it be a free-for-all? Will players make different amounts? I don't know and I don't have to solve this problem to be correct about much higher compensation being the rightful world to strive for. I don't know how much the local grocery employee should make. I don't know how much the CEO of Exxon should make. Hell, I am not quite so certain about how much I should make. The market is a marvelous process that reveals this knowledge to us and constantly refines it. Let the market work.

No one wants to see college kids make that type of money. While this is not true as professional sports, entertainment in general, and many other areas of life attest--IT DOESN'T MATTER. An unfair deal is not made fair because a beneficiary (direct or indirect) prefers it. 

They aren't worth that much. Supposing you have ignored the vast research in this area including that referenced above, let me give you a simple example using a different sport as this will also defeat some of the false arguments that relate to worries about other sports and athletes. At my favorite university, The University of Oklahoma, Patty Gasso is an extremely good coach of the extremely good OU softball team. Coach Gasso makes about $1.2 million per year for her services. Of her many talents, two of them relate directly to athletes--recruitment and player development. So I ask, how good do you think Gasso's OU softball team would be if she were required to randomly pull her players from the pool of all female OU students and how well would the team do if the women selected to play were redrawn at random before each game? More to the point, how much would Coach Gasso be paid in this hypothetical? To the degree players add value above random replacement we get some idea about the added value talented players bring and are worth.

Title IX completely disallows this in fact or in economic result. This is Myth #6 in economist Andy Schwarz's 13 Excuses, Not Reasons: 13 Myths About (Not) Paying College Athletes

There are other bad arguments. Many play upon our biases and jealousies. These too must be called out for what they are. Two wrongs don't make a right. Frustration that there are great rewards for great, rare talents is common but unjustifiable. There is no reason or virtue in adhering to the rules of the past when those rules are revealed to be wrong for today.

Simply put, any argument justifying the current arrangement must address the central question--why should we NOT pay college athletes.

If ever there were a season to make a change, this is it. Beyond the pandemic and all the economic and health disruptions, we of course are in the midst of an opportunity to take a major leap forward in the name of justice. Perhaps 2020 will eventually come to be remembered as the year when significant racial progress started. When old institutions were challenged and remade. When we realized it doesn't just have to be this way because it has always been this way. 

This is another example of my theory that the pandemic has accelerated already present trends. In this case we may be witnessing some version of the universities of the Power 5 conferences separating themselves from the NCAA and beginning of the dissolution of the NCAA cartel. Let us hope a new cartel does not rise in its place. My optimism for change is tempered and I know that any new result will be with its flaws. Don't let the perfect be the enemy of the good. Don't forsake progress for the fear or even the certainty that change will be flawed.

Perhaps a lost season is not required. Compromise with true pre-commitment to reform could be a way out. Let the universities call the players bluff, but also let the universities come back to the table with solutions. Make them put up contractual commitments, earnest money, and public promise of specific and explicit change. The road map at this point of the journey is quite blurry and very undecided. The most we can expect is to have a destination, boundaries for the eventual route to be found, and a burning of the bridge of retreat once the journey begins.

That is what I am rooting for.

I stand with the players. 

Sunday, July 19, 2020

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.

Saturday, July 18, 2020

The Wisdom of a Small Child

From about the time he was five years old, my son Max had four favorite sayings/shouted responses: 
  1. IT DOESN'T MATTER!
  2. QUIT RUSHING ME!
  3. QUIT WASTING MY TIME!
  4. IS THAT REALLY NECESSARY? 
He always has said them emphatically and authoritatively. And he doesn't back down. 

I have had this post in my notes for years (he will soon be 11). Although I am late in posting it, it remains true and relevant today. He has added to his repertoire
  • No, Dad, that's not how it works.
  • Look, just let me do it.
He has a point in each case that I really can't argue with. In fact, these are probably phrases we should all employ more often, if only with a bit less volume. Let me explain.

It doesn't matter - this is true for most everything. I don't mean so in an extreme philosophical sense of if you take a long enough perspective, it all fades into meaninglessness. But I do mean that a longer-run and bigger-picture perspective is the right approach. Most things in the here and now just don't matter too much. Go with the flow of life. If almost every problem is essentially small, the proper response is generally essentially modest. 

Quit rushing me - this relates to most things not mattering. What is the hurry? Rushing introduces added risk of error. How often are we neglecting this cost for some illusory goal of doing it faster? If it matters, it can wait. If it needs haste, speed will naturally follow. Perhaps we who realize a particular need for urgency need to inform others who are unaware or impress upon ourselves this demand, but the slip from alert to panic is a quick one. Almost nothing is actually on fire.

Quit wasting my time - time is our most precious asset. In a sense it is essentially the true unit of account. How much time a given action or inaction requires is a very underappreciated cost. And we only vaguely are aware of the value of our own time much less the value of someone else's. Our tolerance for wasting another's time or another wasting our own should be quite low. Our tolerance and appreciation for someone guarding preciously their own time should be quite high. Be polite, but don't let time be wasted.

Is that really necessary? - If it doesn't matter (usually to a large degree) and we shouldn't be rushed and we should not waste time, this question becomes imperative. So many times were these phrases shouted back to me as I struggled to get him to put his shoes on (among so many other similar trivialities). Getting the shoes on was necessary but . . . it kinda didn't matter, I didn't need to rush him, yelling at him do it rather than helping him wasted everyone's time, and none of that was really necessary.

No, Dad, that's not how it works & Look, just let me do it - I'm glad he is outspoken and very eager to try things for himself. He will make many, MANY mistakes in this journey. But I owe it to him to allow him this dignity. 



Thursday, July 16, 2020

What Explains The Low Death Rate of COVID-19?

Perhaps that title has you scratching your head, or perhaps it has you filled with indignant rage. In any case your first question should be: low in comparison to what? 

There is good evidence about how low the risk is for some (young especially but middle-aged and otherwise healthy in general) and how high it is for others including the very old. 

What I want to do here is put down my current assumptions about what is driving the death rate from COVID-19. These are not just subject to change, but I plan to revise my thinking (whether or not I get a chance to formally update this post or make a similar future post). I invite the reader to do the same--putting down one's thoughts in precise numbers is a very good exercise for cutting through shallow thinking.

Let's start with the assumption that everyone who gets COVID-19 will die from it and everyone will eventually get it. Let's limit this analysis to the United States. Formally stated:

probability(Death) * probability(Infection) = 100% * 100% = 100%

We know those two probabilities are not true (at least not yet!). So what is mitigating against each? Below are my thoughts on the factors reducing each including the amount they reduce the probability. Keep in mind these are for the average case. Obviously there would be greatly differing answers for various subgroups, and the answers would vary greatly over various periods such as March versus July of this year. Also note that I am simplifying the math by assuming the factors are mutually exclusive, which assumes that a factor is assigned responsibility (the associated percentage) when it is the dominant factor (e.g., While a therapy and general healthiness might help to save a given patient's life, if it was in fact the patient's own T cell immunity that was the most important factor, T cell immunity would in that case be assigned as the decisive factor.).

Limiting factors on p(Death):
  1. General healthiness = 50%--which, again, is to say that general healthiness reduces the death rate by 50%.
  2. Therapies (not including a vaccine) = 15%
  3. T cell immunity = 15%
  4. Virus weakening over time to be less potent = 10%
  5. Other natural immunity = 9.5%
  6. Residual (i.e., an infection does result in death) = 0.5%
(Note: I have not included a vaccine since one does not yet exist.)

Limiting factors on p(Infection):
  1. Good hygiene (active resistance to introducing infection) = 20%
  2. Personal preventing factors (natural resistance to infection) = 20%
  3. Social distancing (voluntary & intentional as a change from baseline normal behavior) = 20%
  4. Natural physical isolation = 15%
  5. Virus mutating to become more/less contagious = 10%
  6. Government-imposed lockdowns = 5%
  7. Residual (i.e., one does become infected) = 10%
(Note: The virus mutating to become more contagious could mitigate infection if it meant a faster burnout before 100% population infection. The virus mutating to become less contagious could mitigate if it meant that it changed the baseline for the other factors such that they were now more effective.)

The product of the two residuals gives us the population death rate. 
Residual(death) * Residual(infection) = 0.5% * 10% = 0.05%
This implies I am predicting 0.05% of the U.S. population or about 165,000 people will die directly from the virus. 

The ultimate accuracy of this calculation is not in any way my aim here. Rather I want to be constructive and precise about what I believe is actually driving the pandemic outcome. So it is the list of factors, which I very well may need to revise to at least add some or clarify existing, and the percentage share contribution I assign to each.

Notice that I believe lockdowns and their ilk, which could be construed broadly as involuntary, coerced social distancing, are responsible for a very small decrease in infection rates. However, I believe they have a very large economic and human cost (reduced happiness, reduced liberty, reduced agency, reduced dignity, reduced wealth, reduced health otherwise, et al.). 

Updated (7/25/20): I am seeing more and more evidence that the IFR may be lower than my estimate of 0.5%. If so and if the death level remains where it is today (about 150,000) growing less and less, then that implies the infection rate is higher. For example, at 150,000 deaths and an IFR of 0.5%, infections would be about 30,000,000. If the IFR is 0.25%, then infections would be about 60,000,000 or about 18% of the U.S. population. As for where I am wrong in the IFR, I have no guess--even though it is a factor of 50% perhaps (0.5% should be 0.25%), MAGNITUDE MATTERS! Any single factor is in that case just slightly off to get that new residual result. As for the infection rate, I can make a meaningful guess (and so can you disagreeing with mine for sure). I would guess social distancing explains a lower amount (e.g., 20% becomes 10% or so).

Friday, July 3, 2020

From Hong Kong With Love

We stand at the precipice of a great opportunity. The government of China is doing what governments do by going state on Hong Kong. The leaders there correctly perceive HK as a threat to their power and way of life. While I continue to predict that in the long run HK will eat China rather than the other way around, there are alternatives.

Many are suggesting a policy tool to challenge Beijing is to open borders to HK emigration. This is a classic tails we don't lose, heads we win situation. To wit: If China balks, HK keeps its autonomy and the progress of freedom marches on; if China digs in, we get a giant gift. I'm sure you can see the first case, but I expect the second case is a bit harder to swallow. Allow me to explain the benefits of Open Borders with this extreme example.

A few years ago I had the pleasure of visiting HK. Although I was fairly familiar with it, I was still completely amazed. I look forward to one day returning. At the time I planned on doing a post about the HK economy in comparison to my native Oklahoma economy. Unfortunately, I didn't get around to it, but I think I can quickly summarize one of the economic points I wanted to make: 

Hong Kong is 138% more productive than Oklahoma and most of that difference is because of population. The average Hongkonger is only 25% more productive than the average Oklahoman. And that is despite/because HK has much less land area on which to work. Key takaway: More people equals more opportunity.

(sources below)PopulationArea2019 GDP (PPP)2019 GPD per capita (PPP)
Oklahoma3.95 million69k sq miles$206 billion $52,150 
Hong Kong7.45 million1k sq miles $491 billion $64,928 
% difference89%-99%138%25%

My extreme example to illustrate the benefits of Open Borders begins with a bold proposition: I propose we open the borders of Oklahoma to ALL residents of Hong Kong to become permanent guests with the opportunity to become citizens if they so wish. 

I can already hear the dismissive laughter followed by the panicked apoplexy. "Dear God, you can't be serious!"

Of course I am! This is easy. Do you think there is something magical about the small island of Hong Kong? Well, there might be, but it is nothing a little policy changing can't fix. And fortunately Oklahoma is not too far off from the HK freedom trail. 

"But wouldn't that influx crash the local economy? Think of all those mouths to feed."

Yes, and think of all those hands to work and minds to think! 

The one big stumbling block to a massive migration like this would be finding a place to house all the people. Well, Oklahoma has 69 times as much space as HK and construction here is cheap. 

Not convinced? The heart of my extreme example is how this would affect my personal employment. When I was in HK, it was for a couple of CFA Institute conferences. While there I was treated to a personal tour of part of the city by the president of the Hong Kong CFA society. We had a chance to chat about our relative societies--I was president of CFA Society Oklahoma at the time. His society was one of the world's largest with about 6,700 members. Mine was one of the smallest with only about 170. 

So what would happen if 6,700 CFA charterholders began migrating to Oklahoma? Would there be pressure on my job? Probably not immediately as people aren't as interchangeable as classical economics assumes. Over time there would be competitive pressures, but so too would there be competitive gains. With that massive increase in talent would come much in the way of business opportunities. I would have new job offers as well as a bunch of new job competitors. Would the net effect be to lower my wages? Maybe, but even here there less to worry about. 

The median total compensation* for a charterholder in HK is about 4% higher than for a charterholder in Oklahoma. While the cost of living in HK is perhaps 67% higher than in Oklahoma, most of that is housing, which remember is much easier to come by in OK. And for those like me who own a home, this influx should greatly increase my personal wealth. 

Think about it this way: Should current charterholders in HK want more or fewer charterholders in HK? The instinctual answer is as simple as it is wrong--fewer sounds good until you answer the question of how would there be fewer. A shrinking market for any type of employment is not good for those in that line of employment. As a native charterholder I stand to gain much if other charterholders want to migrate to my community. The likely worst-case scenario isn't that I lose my job and/or take a massive pay cut. It is that my job changes and new opportunities force me to make some changes. Change is scary, but change is inevitable. I would much rather have the trends of change as tailwinds than crosswinds much less headwinds. Growth is good.

Open borders in Oklahoma for Hong Kong citizens is unfortunately not going to happen. And even if it did, 8 million people would not show up tomorrow. In fact, most would choose not to make the journey at all. But for those that did it would be a great benefit for those already in the place of their reception. 



Sources for data in table: 
*CFA charterholder compensation data is from CFA Institute's 2019 Compensation Survey, which is proprietary to members--unfortunately, I can't directly share it.

Sunday, June 28, 2020

A Parable On Perspective

"I saw a terrible, just tragic sight, last night at Chez Paul. A couple couldn't afford the wine pairing with the chef's tasting menu. I heard him lament something about his job at DrillRock. You know they've been one of the worst hit by the industry downturn. I can only imagine their worries... 'Do we sell the lake house--it was just in Architectural Digest!?! Will the kids have to go to public schools? At what point do I downgrade to a social membership at Bushwood?...' It all makes me question my own good fortune and if I am blissfully ignorant of how precariously close I actually am to a dramatic scaling back in my life."

"Oh! And while the valet was getting the car we saw paramedics assisting a homeless man ... heard a bystander say something about him passing out and hitting his head. He looked downright skeletal. That was sad too."