Rather Sorry Than Safe

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

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

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

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

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

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

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

*Calvin: You're sure?

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

Calvin: That's what everybody believes?

Adam: Yes, sir. It's true.

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

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

Calvin: Uh-huh.

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

Adam: Uh, I think they have.

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

--"Blast From The Past" via IMDB

Don't Confuse Poverty For Inflation

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

Source

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

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

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

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

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

Here is the thinking that leads the apologist astray: 

• The pandemic messed everything up where we couldn't work as much, killing production, etc. (negative supply shock).
• It is no surprise the shelves are bear. (scarcity at current price levels)
• With fewer things to buy and all the money still out there including all the government support, prices had to go up--same/more dollars chasing fewer goods and services . . . I thought you understood economics, Winkler? 

One problem with that story is that it neglects half of the equation--income. When we produce less, we have less income. We are poorer than before (the economy's output and perhaps its potential output is now materially lower). Understanding that is a glimpse into how a bad event like a pandemic cannot by itself cause inflation--another problem with that story. Inflation comes if the monetary authority, the Fed in our case, fails to properly adjust monetary policy adjusting it downward. 

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

 

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

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

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

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

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

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

Source

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

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

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

Three Things I Learned from My Favorite Podcasters

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

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

Tyler Cowen (Conversations with Tyler):

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

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

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

Jason Feifer (Build for Tomorrow):

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

Tim Ferriss (The Tim Ferriss Show):

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

Kmele Foster (The Fifth Column):

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

Nick Gillespie (The Reason Interview & The Reason Roundtable) - in the second case credit goes to the entire group as they all demonstrate the qualities below:

• Postmodernism is a very useful way to view and evaluate the world with much to offer especially to libertarian or classical liberal perspectives.
• A mix of irreverent humor skillfully layered in does not simply lubricate a conversation, but it can actually succinctly add information content--a picture is worth a thousand words, and a well-placed comedic side crack is worth at least 250. 
• We are and have been in a Libertarian Moment. It is just taking longer to develop and be fully realized than he and Matt Welch originally projected.

Malcolm Gladwell (Revisionist History):

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

Jonah Goldberg (The Remnant):

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

Tim Harford (Cautionary Tales, 50 Things That Made the Modern Economy, More or Less, et al.):

• A well-told story is one of the most effective ways to convey complex ideas and important truths.
• Statistics and data are underused and underappreciated.
• A devilish caveat: Beware simplistic answers when persistently offered; they are usually wrong. Beware complex answers when insistently provided; they are often hiding some important truth.

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

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

Penn Jillette (Penn's Sunday School):

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

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

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

Aaron Ross Powell & Trevor Burrus (Free Thoughts):

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

Russ Roberts (EconTalk):

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

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

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

Three Things I Learned from My Favorite Bloggers

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

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

Scott Alexander (Astral Codex Ten & formerly Slate Star Codex):

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

Don Boudreaux (Cafe Hayek):

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

Jason Brennan (200-Proof Liberals):

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

Bryan Caplan (EconLog (UPDATED: and now Bet On It)): 

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

John Cochrane (The Grumpy Economist):

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

Tyler Cowen (Marginal Revolution): 

• Be succinct. It is undervalued and under practiced.
• Be curious and take risks. 
• Read and write. Everyday and more than before. 

Robin Hanson (Overcoming Bias):

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

For a primer on Hanson see this.

David Henderson (EconLog):

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

Michael Huemer (Fake Nous):

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

Arnold Kling (askblog & In My Tribe):

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

Steven Landsburg (The Big Questions):

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

Phil Magness (AIER):

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

Michael Munger (AIER, Kids Prefer Cheese, & EconLog - there is not always a consistent home base for his writings):

• There is often a more intriguing and insightful other, other side. He is a three-handed economist. 
• True open-mindedness is a wonderful but rare quality. He has it and conveys it splendidly. 
• Re-examined knowledge yields improvement--even third and fourth derivatives. His latest insight is always either a new, deeper wrinkle on a previous insight or a way he had been wrong all along in how he previously understood something.

Matt Ridley (Rational Optimist):

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

Scott Sumner (EconLog & The Money Illusion):

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

Alex Tabarrok (Marginal Revolution):

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

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

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

How To Succeed In Business Trying Really Hard

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

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

How to Succeed in Business Trying Really Hard

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

Should Tipping Be My Only Charity?

I'm considering going a year where my only form of charity will be excess tipping--an amount well over and above what I would otherwise give. Before you dismiss this out of hand, consider the problem of charity  My ability to connect with truly effective altruism is very limited even if I religiously adhere to the formal EA movement or even if I completely reject the EA network. What I can do is reward good work and people working in general through gratuity. 

In truth I really probably can't make it my only form of charity from a practical standpoint. There are just too many obligations I have to traditional charity (e.g., my church donations, the United Way contributions I make through work, et al.). One could certainly argue the merits of these including how much is charity on my part versus quid pro quo where the quo is social desirability bias, virtue signaling, tax benefits (really just a subsidy for giving), and non-pecuniary benefits (e.g., two days of extra vacation for a continued minimum United Way donation). Nevertheless, I could substantially reduce all traditional and otherwise forms of charitable giving including donations of my time with excess tipping as the substitute. 

Let's consider some rough math on what this might mean. Hypothetically assume my desired annual charitable giving through this experiment to be $10,000. A point of consideration would be if the tipping would be limited to very traditional tipping situations, namely dining, valet, room service, doorman, etc., or if I would extend this to areas like occasional household services, namely plumbers, electricians, furniture movers, etc. One might argue that everyone should be tipped. However, to keep the math easy, I'll limit it to waitstaff in dining. 

Let's further suppose I dine out an average of 7 times a week at a moderate expense, 2 times a week at high expense, and 1 time per four weeks at a very high expense. The kids are with me for the moderate and high expense meals while it is just the wife and I for the very high expense meal, which are the following on average (with just the standard tip of 15%): $50, $100, $300. Per week that becomes $250 ($50x5) + $100 ($100x1) + $75 ($300x1/4) = $425/week or $22,100/year. Of this about $2,883 would be standard 15% tipping ($22,100 - $22,100/1.15)). To "donate" an extra $10,000 through excess tipping through the year, I would be making an implied 52% excess tip ($10,000/$19,217 [the amount spent before standard tip]). Stated another way, the increase is about 45% above the old levels ($10,000/22,100-1).*

Breaking this down by meal type we have a $50 meal becoming about $73, a $100 becoming about $145, and a $300 becoming about $436. Weekly expenses here have gone up $192 ($425 becoming $617). And the annual checks out where $22,100 is now $32,100. 

These would just be averages. I would hold out the ability to vary the amount to zero excess tip to a lot more excess tip based on maybe quality of service or perceived need. Also, I would do this for at least all traditional for-tip service providers. The fact that this would demand a continually updated Excel spreadsheet lending itself to trend and projection analysis along with graphs is indeed a very nice quid pro quo for me.

Some of the pros to this approach are:

1. I have a lot of relevant information close at hand since I witnessed directly the service provided.
2. I know pretty well exactly who it is going to even if there is tip sharing.
3. Related to the two points above, I can weight the charitable gift commensurate with the perceived level of deservedness provided I measure that directly proportional to the service performed. If I want to base it on need, this becomes a con (see below).
4. I am rewarding those who are doing something to improve their own situation as well as my life and others.

The cons are:

1. I am not able to see much into the level of need so as to increase my giving as a result.
2. Related to the first con, I would not be benefiting those who cannot work--very likely a group in much more acute need. However, this is a con of almost all charity as figuring this out is very difficult. My method here at least minimizes the problem of enablement--whereby charitable giving subsidizes and insulates people from the cost of bad decisions and rewards poor work ethic. Moreover, it is actually likely many of the people I would be excess tipping would be closer to people in need so as to aid them. No guarantee they will, but there is no guarantee some other method would be much better.
3. I would most likely be subject to bias in my excess tipping whether it be a subconscious prejudice (e.g., tipping attractive waitstaff or those who somehow connect to me in a way that is probably frivolous like having an interesting accent) or outright mistaken heuristics (e.g., thinking that someone working at an expensive restaurant is less deserving that someone working at a cheap diner).
4. If I am not meticulous about tracking the excess tip, I easily could fall so far behind so as to not meet the donation goal--I would be hesitant to tip someone $2,000 at an end-of-year meal. 
5. I might reduce my exposure to tipping even if inadvertently as the pain of seeing the substantially increased cost could weigh on my decision making. 
6. It might greatly disrupt my social group or the dynamic between me and the places I frequent. This is a big break with norms subject to misunderstanding and bad/unintended signaling. 
7. I may be underappreciating how it will affect me given that this attempt at more direct action on my part will not likely have noticeable results. I might become jaded for bad reasons.
8. I could have a net negative effect on the recipients subsidizing less optimal outcomes for them or hampering their natural progression to bigger and better things. The out of work actor working as a waiter might be cliché, but there is something to it. What if I unintentionally convince a young person to turn down an internship for mistaken hope that there are enough tippers like me out there making waiting tables their highest and best outcome? Did I say enough about how charity is hard?

Countering this longer list of cons, there are added benefits potentially. One is that this might become habit forming long term--when I return to charitable giving, I might continue excess tipping to some degree. Another is that it could be contagious as it would be as public as any giving I typically would engage in. One virtue of it is that it is a more generous act all things equal since I would not be getting a tax benefit. So rather than having other taxpayers subsidize my charitable choices, I would fully internalize them by going it alone.

If I end up doing this, I'll report back on how it worked in the wild.

*Notice I am ignoring the fact that this tipping is calculated on top of the sales tax--I gave up the ghost on that argument long ago for practicality sake. I don't like it, but the norm seems to be and the easier calculation certainly is to tip on the total after tax.

Mistakes versus Traps - Dimension Analysis

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

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

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

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

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

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

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

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

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

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

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

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

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

*look for a future Bandages versus Inoculation DA