Lessons learned

The late Peter Bernstein had much to offer...

Jason Zweig had this to say (excerpts):

Investing has yielded a few stars so famous they are known by first name. Warren Buffett is one. Peter L. Bernstein -- the economist, investment consultant and prolific author who died on June 5 at 90 -- was another.

In his almost 70-year career, he taught economics at Williams College, worked as a portfolio manager at Amalgamated Bank and ran the investment-counseling firm of Bernstein-Macaulay, co-founded by his father and Frederick Macaulay, who invented the modern discipline of bond investing.

In 1974, as Wall Street was suffering its worst market decline since 1929, Mr. Bernstein co-founded the Journal of Portfolio Management to improve risk management with insights from academic research.

In 1970, he asked rhetorically, "What are the consequences if I am wrong?" and said "no investment decisions can be rationally arrived at unless they are [based upon] the answer to this question." He counseled investors to take big risks with small amounts of money rather than small risks with big amounts of money.

The same focus on the consequences of error was one of the main themes of "Against the Gods," which he published more than a quarter-century later.

Also in 1970, Mr. Bernstein wrote: "We simply do not know what the future holds." Over the ensuing decades, he returned again and again to that phrase in his speeches, articles and books, because he felt it captured the central truth about investing.

Asked in 2004 to name the most important lesson he had to unlearn, he said: "That I knew what the future held, that you can figure this thing out. I've become increasingly humble about it over time and comfortable with that. You have to understand that being wrong is part of the [investing] process."

I've read many books and articles over the years written by Mr. Bernstein and always felt fortunate that he shared his thoughts and insights. The willingness to accept uncertainty in the realm of investing (and life in general) is a valuable lesson.

( re: uncertainty see also here here here and here)

There were many who did not ask the question: what if I am wrong?

I can not predict, but I can observe. The trick is learning what observations are worth making and then using that information to construct workable contingencies.

I See London, I See France...

Off to London, Paris, and Southern France for three weeks to give the kids a chance to see a bit of the world.

No blogging for me during that period, but maybe my coblogger will step up to the plate.

What's News?

I'm sorry, but the entire punditocracy has missed the point.

It is NOT news that someone in show business makes an intensely rude, crude, lewd, insulting, disgusting and/or despicable comment regarding an entirely inappropriate subject. Indeed, if we demanded an apology every time that happened, we'd never get anything else done.

The point is that Letterman's comment is a shot across the bow. He is saying, "Governor Palin, if you so much as poke your nose outside the great State of Alaska, we will insult and smear and humiliate and hound you and your family and your community and anybody who thinks or even looks like you until you feel so degraded and miserable that you run back home with your tail between your legs and never, ever come back. We hate you, we fear you, we loathe you, and we will stop at nothing to destroy you."

That's the news.

Fire up the Skeptics

Everyone is a Skeptic when it comes to religion. There are so many religions that it is impossible to be a believer in all of them so we are Skeptical about at least some of them. For the most part, we keep our Skepticism to ourselves because there is limited downside to letting others believe in whatever they choose to believe in as long as their attempts to convert the rest of us to their beliefs are kept within reasonable bounds.

However, if a religion exceeds those bounds, Skeptics will come out of the woodwork to attack that religion. Nobody wants to belong to a church that they believe is False. The propensity to not belong to someone else's church is so strong that wars have been fought over this sort of thing.

The Church of Human Induced Catastrophic Global Warmenism has exceeded reasonable bounds in trying to convert us all. This Church wants to use the full force and authority of the governments worldwide to force us to join. They want to limit our economic and political freedoms to force us to at least behave as if we believe.

To a great number of people, this is simply not acceptable and, sure enough, there is surge of Skeptics appearing all over the world.

I am one of those Skeptics. The science and economics on which the Church rests is full of holes, and unless that religion is one you wish to subscribe to, it may be safely ignored. If you do wish to subscribe to Global Warmenism, by all means please do so and limit your own energy usage and material consumption as you see fit.

Just don't impose your religion on the rest of us. Thanks.

Radical Christianists

Though not personally religious, I've argued numerous times that Christianity post-reformation is a peaceful and constructive religion.

Murders like this one undermine my argument.

California's Woes

I like living in California and I hope to continue to be able to live in California. However, if taxes are raised enough, I will feel compelled to leave for a lower tax jurisdiction in order to better provide for my family.

California is having some serious problems governing itself. As Megan McArdle wrote:

California is completely, totally, irreparably hosed. ... You can blame Republicans who won't pass a budget, or Democrats who spend every single cent of tax money .... You can blame the initiative process, and the uneducated voters who try to vote themselves rich by picking their own pockets. Whoever is to blame, the state was bound to go broke one day, and hey, today's that day!

We had a bunch of ballot initiatives to vote on yesterday, and while I got held up and didn't make it to the polls before they closed, I would've voted with the "uneducated" majority against tax increases had I been more timely. To vote for tax increases would mean that I'd be more likely to have to move so it would seem rather pointless to me.

I feel that the voters should set the budget and then the governator and legislature should figure out how to operate within that budget. They should choose which jobs and services to cut and they should get started now. Far fewer teachers, police, firemen, bureaucrats, etc. That I'm willing to live without.

Puzzle

Here's a puzzle.

Suppose I made you an offer. I have two check made out to you. One check is hidden in my left hand and one check is hidden in my right hand. One of the checks is for an arbitrary, positive, non-zero amount and the other check is for an amount either ten times larger than the other check or one-tenth the amount of the other check. The amounts have arbitrary precision (i.e., the amounts can contain fractions of a penny). It is random which hand contains the larger check.

Here's the deal.

You can pick the check in either hand. After you look at the check in the hand you picked (but you're not allowed to see the other check), you have to decide which check you want: the check that you've seen in the hand you've picked or the other check that you haven't seen. The game is then over and you walk away with your check.

Here's the puzzle.

Common sense would tell you that since the contents of my hands are random and unknown, it shouldn't matter what you do. Pick the check in either hand and be done with it, or pick either hand and then choose the check in the second hand - shouldn't matter.

Common sense would be wrong.

Let's say you've chosen a hand and find that the check is for $10. The other check is therefore either $100 or $1. The expected value is ($100 + $1) / 2 = $50.50 which is substantially better than the $10 you hold. So you should always go for the second hand after looking at the check in the first.

Which, of course, makes no sense since it's random.

What's the explanation?

The answer to this question is also the key to the secrets of the universe.

Too Big to Fail

"Power tends to corrupt, and absolute power corrupts absolutely. " Lord Acton

Being too big to fail, if true, couples a concentration of power (bigness) with a corruption of the free market ideal. The same concentration of power seems to inherently lead to other corruption as well. Mancur Olson's research and thought regarding the nature of special interests groups makes it seem inevitable to me that mega-corporations, especially in slow changing industries, will (continue to) form symbiotic relationships with the State that further strengthens both the mega-corporation and the State, to the detriment of the rest of the citizenry. We're seeing exactly that with GM, Chrysler, Steel protectionism, banks, etc., etc., etc.

So, given this seemingly inevitable sequence away from an ideal free market economy and towards Corporatism, exacerbated by the existence of huge business, is there anything that can be done to slow it down?

I think that reducing the number and size of large corporations would be helpful. However, giving the Federal government the directive to do such a thing by fiat would be a cure far worse than the disease. The method of reducing the number of large corporations, in order to avoid even more corruption and waste, would have to be formulaic and not subject to the whims of the President, Congress or regulatory agency bureaucrats.

The devil's in the details, but I'm imagining there might be a way to tax bigness such that the shareholders of large corporations would split the corporations into smaller entities, unless the bigness really was so advantageous, because of some manufacturing efficiencies or something like that, as to outweigh the increased tax burden.

What do you think?

Radical Libertarianism

I've been pretty disappointed with Cafe Hayek because the bloggers and commenters there purposely ignore both the real world considerations of government and the fact that the vast majority of the people in the United States are not even vaguely interested in Libertarian ideals. Part of my disappointment is that, for at least a while, I fancied myself as "Libertarian leaning", but they've convinced me (and not politely either) that I'm nothing of the sort.

Conveniently, the following excerpts from Libertarian Democraphobia relieve me of the effort of having to describe in my own words what I think are some of the fundamental problems of Libertarianism:

The libertarian non-coercion principle is a good abstract first approximation of the liberal presupposition that persons are free and equal. No one has a natural right to rule over another, and no one has a natural duty to obey. The liberal presupposition sets a high bar for the justification of coercion, and thus the justification of the state. Many libertarians think there is no justification. Therefore the only acceptable rule of collective choice is unanimity or full consensus. This is one focus of the debate between anarchist and limited-statist libertarians. On the anarchist side, political power cannot get off the ground, and thus the design of mechanisms to control political power is a non-issue. On the limited-statist side, political power does get off the ground, and thus so does the design of constitutions and democratic institutions. [...]

In any case, libertarians often display a confusing or confused reaction to democracy as it actually exists. The scheme laid out in most libertarian ideal theory is so distant from actual democratic practice that the whole existing system can seem by comparison a comprehensive injustice. When one’s ideal theory implies that politics is by its nature illegitimate and corrupt, one tends to develop a sharply disapproving attitude toward participation in politics. Lots of libertarians, for example, think it’s morally wrong to vote. (There are many structural reasons the Libertarian Party is hopeless, but here’s one reason libertarians tend to be at best half-hearted political activists.) Likewise, incrementalist approaches to policy can never be adequately pure from the perspective of radical libertarian ideal theory. School vouchers are still tax-financed; a system of mandatory personal retirement accounts has a restriction on economic liberty at its heart; and so on. So, not only is politics corrupt and corrupting. There are few democratically feasible libertarian policies that merit support. The public does not want libertarianism. Which means that the public does not want a system that respects fundamental rights. So much the worse for the public, the thinking tends to go. [...]

If libertarians are going to shift the politics of the countries we live in, we’ve got to get it through our thick skulls that many people have considered libertarian ideas and have rejected them for all sorts of decent reasons. We’ve got to take those reasons, and those people, fully seriously and adequately address them. Otherwise, we should probably just accept that libertarianism is a niche creed for weird people and reconcile ourselves to impotent, self-righteous grousing.

Cafe Hayek (especially blogger Don Boudreaux) is, in my opinion, completely mired in "impotent, self-righteous grousing".

The irony is that The Fatal Conceit by Hayek is proudly displayed on their website, and the fundamental concept of The Fatal Conceit is that sweeping away all of society's institutions in order to remake society according to better principles is a really, really bad idea, yet this is exactly what the Cafe Hayek bloggers would do in an instant if given the chance.

Adolescent moral preening

Jon Stewart admitted to Cliff May that he was willing to consider Harry Truman a war criminal for giving the order to drop the atomic bomb on Japan. There were a number of revisionist books on this matter many years ago. In doing the homework on the matter it became clear how nonsensical the revisionist notion was on this matter. It requires real historical ignorance and denial of the nature of the moral choice confronted by Truman to fault him.

The video of Bill Whittle fisking of Jon Stewart is extremely well done. Also, a guest blogger at Bookworm Room has a meaningful contribution.

Must see material!

Sustainability Versus Resiliance

I've never been particularly enthralled by the concept of "sustainability". It seems too static and too pessimistic. It seems to imply we're going to get the world to a certain state, and keep it that way forever, and that's the best we can do. Sometimes you hear the phrase "sustainable growth", but it sounds a bit oxymoronic - either something's sustaining or it's growing, but not both.

Along those lines I noticed an intriguing blurb in Foreign Policy (HT: Virginia Postrel). Here's an excerpt:

Sustainability is inherently static. It presumes there’s a point at which we can maintain ourselves and the world, and once we find the right combination of behavior and technology that allows us some measure of stability, we have to stay there. A sustainable world can avoid imminent disaster, but it will remain on the precipice until the next shock.

Resilience, conversely, accepts that change is inevitable and in many cases out of our hands, focusing instead on the need to be able to withstand the unexpected. Greed, accident, or malice may have harmful results, but, barring something truly apocalyptic, a resilient system can absorb such results without its overall health being threatened.[...]

Ultimately, resilience emphasizes increasing our ability to withstand crises. Sustainability is a brittle state: Unforeseen changes (natural or otherwise) can easily cause its collapse. Resilience is all about being able to overcome the unexpected. Sustainability is about survival. The goal of resilience is to thrive.

The rest of the article talks about attributes of a resilient system. It's a little short on examples and details, but I like the general concept.

Pros and Cons

If the opposite of "pro" is "con", does that make congress the opposite of progress?

(HT: Carpe Diem)

I Think Hayek Would Agree

The Road to Serfdom is best enjoyed in a Chrysler! Or a GM product.

(HT: Jeff via comments in a Vodkapundit post)

Going Galt on American Cars

Instapundit wrote about "GOING GALT" on your next car purchase.

There is pretty much no way I'll buy a GM car at this point, even if (or perhaps especially because) Obama is guaranteeing the warranty. I'm certainly not willing to support unprofitable and now essentially socialistic companies. And now that the unions basically own the company, I'd like to see the value go to zero.

However, this makes it a sad moment for me. I've always dreamed of owning a new Corvette and now the dream is gone. It obviously wasn't a very strong dream since I could've afforded one if I really, really wanted, but the two seat limitation of the car has made it impractical. In fact, it was probably one of those dreams I would've never acted on, but the dream itself was enjoyable.

On the other hand, I suppose that owning the Tesla Roadster wouldn't be a bad alternative dream...

A Different Never

In a recent speech, President Obama defined what he means by the phrase "Never Again" when used in reference to the Holocaust:

...our fellow citizens of the world showing us how to make the journey from oppression to survival, from witness to resistance and ultimately to reconciliation. That is what we mean when we say “never again.”

Yeah, well, that's not what "Never Again" used to mean. I'm certain that "reconciliation" wasn't part of it. The idea was to "Never Again" allow a homicidal dictator like Hitler come to power or to let him direct a massive genocide.

Clearly, with rhetoric like this, Obama is not even vaguely interested in standing up to murderous thugs or even attempting to take any real action to prevent present and future genocides. Never Again has unfortunately now completely morphed into Over and Over Again.

Bummer!

New Voting Strategy

I could not be more disappointed by the vast majority of politicians, both Democrat and Republican.

As a result, I'm thinking of forming a new political party: The Beautiful Babe Party.

The theory is that they couldn't possibly do any worse than our current set of politicians and at least they wouldn't be so hard on the eyes. I think this new party would be very successful since women would vote for them because they're, well, women, and men would vote for them for obvious reasons.

Since this is a post about pretty girls, I obviously have to post some picture. I've chosen Carrie Prejean, who was (possibly) denied winning Miss USA because of her views on gay marriage (she's against it), showing that even good-looking gals have opinions.

Monckton of Global Warming

While I think he's a bit of a loose cannon, I rather like this letter and paper by Monckton for being able to describe (and refute) numerous aspects of the science of Global Warming in terms that I think are understandable by a layperson with relatively little familiarity with scientific terminology.

Pontifications on the Extended Order - Part 5: The Economics of Slavery

Slavery ended in the United States in 1865 with the ratification of the 13th amendment. The narrative can do nothing but make you proud of humanity. Courageous members of the underground railroad. Secret networks organizing the slaves to escape north. A war partly fought for their freedom. Just about everybody except those evil southern slave owners came to realize the evil that slavery is.

Nice story, but I'm skeptical. Why did the populace suddenly come to the conclusion that slavery was wrong when it had been practiced for tens of millennia?

As I've written in previous Pontifications, humans are nasty and brutish and some of them are short (or something like that). In addition, almost everything can be explained by power, and power alone. The history of slavery in America, in my opinion, is no exception.

I suspect that the heroes of the underground railroad were scorned much like PETA animal rights terrorists are today. They were likely considered lunatic extremists. Consider if in 50 years, animals actually do get full rights, then the PETA extremists of today will be remembered as visionary heroes!

So why then? What changed the power equation? First, consider that southern black slaves may have on average done better than their free northern counterparts:

Fogel and Engerman argue that slaves in the American South lived better than did many industrial workers in the North. Fogel based this analysis largely on plantation records and claimed that slaves worked less, were better fed [...] A survey of economic historians concludes that ... 23% "agreed" and 35% "agreed with provisos" with their argument that "the material (rather than psychological) conditions of the lives of slaves compared favorably with those of free industrial workers in the decades before the Civil War."

Ultimately, I think that people are much better exploiting themselves than being exploited by others, and the free northern black, caring for himself, ultimately provided much better value per dollar which made the north more powerful. Even more importantly, rapid industrialization required flexibility of labor, and slavery is the most inflexible form of labor possible. The South was being held back economically by slavery. That is why it happened then.

Note that Fogel points out that the economics of agricultural based on slavery was more efficient than without it. Even if true, it doesn't change the fact that western civilization was in the midst of transitioning from an agrarian to industrial society. What mattered was not the efficiency of farms, but the efficiency of industry. The North, with only free men, excelled at industry and was therefore becoming ever more powerful relative to the South.

So then our morals evolved to catch up with the reality on the ground which was caused by power.

In the next pontification, I'll look at the fall of the European empires. The power equation changed, that's why the British left, not because they suddenly felt bad for the oppressed.

Self-Fulfilling Racism

Apparently, anyone who disagrees with Obama is racist. For example, consider this diatribe by actress Janeane Garofalo:

"'Let's be very honest about what this is about. This is not about bashing Democrats. It's not about taxes. They have no idea what the Boston Tea party was about. They don't know their history at all. It's about hating a black man in the White House,' she said on MSNBC's 'The Countdown' with Keith Olbermann Thursday evening. 'This is racism straight up and is nothing but a bunch of teabagging rednecks. There is no way around that.'"

Unfortunately, this type of claim of racism is partly self-fulfilling. If people elect a black candidate and are continually insulted by being called racist if and when they disagree with him or his Administration on various issues, I suspect that at least some of them are going to be less likely to elect a black candidate next time. That decision to not vote for the black candidate, though rational and perhaps even justifiable, is racism.

Times Are Ruff

(Hat Tip: John Goodman's Health Policy Blog)