Archive for May 2013
The traditional notion of capital is that it’s a transferable asset that makes money for you. So if you have enough capital, you don’t have to work because your money works for you.
This old-school view of capital is no longer applicable to the modern world. Currently, the risk-free return is close to 0% (for example, the 1-month LIBOR rate is 0.19%). Factoring in inflation, capital invested in risk-free investments is actually a wasting asset.
Even stocks, which are not risk-free investments, don’t return as much as they are used to. Look at this chart which shows the dividend rate of the S&P 500 since 1871. You can see that before the drop-off in the 1950s, the dividend yield tended to be around 5%. Even at the very peak of the 1920s bubble, the dividend rate was above 3%. But the dividend rate dropped below 2% in the 1990s, and has generally been under 2% for the last 15 years. The dividend rate today is 1.94%.
People will argue that investors don’t expect to make money from dividends because companies will retain their earnings instead of distributing it, or they will distribute the earnings through stock buybacks or when there’s a corporate takeover. But didn’t these expectations also exist a hundred years ago?
The reason for declining returns to non-human capital is because the returns are going to human capital instead. Or rather, you may call it value transference. Returns that should go to shareholders are instead gong to CEOs and other highly compensated employees, and to Wall Street types such as investment bankers and hedge fund managers.
When you add estate tax on top of assets losing their value over time, in order for future generations to remain wealthy, one must past value-transference capital to one’s descendants. This is why the elite are so concerned with raising their children to that they are positioned to attend elite schools and enter elite career tracks. And why wealthy men are far more likely than you would believe, if you only read “game” blogs, to seek intelligent wives who will pass on good value transference genes to their children rather than bimbo trophy wives.
The researchers used a health survey conducted by the National Center for Health Statistics, drawing on data from about 47,000 women ages 45 to 84. The study weighed more than a dozen factors to see which were causing the divergence in mortality rates. Poverty, obesity, homeownership, marital status and alcohol consumption were among the factors investigated.
But they mattered little. As it turned out, smoking was important, as had long been established, but researchers were surprised that joblessness had a dramatic effect, even after controlling for factors that employment would have generated, like income and health insurance.
Not only was obesity not related to health, neither were other factors I would have guessed would be, such as marital status or homeownership (both being correlated with higher class and higher IQ).
I think this result is real and not bad statistics. I think that people need to have meaning in life, which is sadly, for most people, provided by having a job. This is why the elites are correct in understanding the importance of having a self-actualizing career.
The best way to improve health, therefore, is not with anti-obesity campaigns, or even just by giving away money (because poverty wasn’t even important). The government needs to provide meaningful make-work (not an oxymoron) so people who are otherwise economically useless have something self-actualizing to do.
I’ve previously suggested that the government pay people to play online games like World of Warcraft, but for people who can’t get into that, we could also pay people for excelling in sports leagues or other activities.
Steve Sailer presents evidence that Obama scored 45 on the LSAT, which was the 98th percentile.
I scored 46, which as the 99th percentile. So Obama is just a little bit less intelligent than me, and I scored high enough on graduate admission tests to qualify for the Triple Nine Society. Remember, the LSAT is only taken by college graduates who want more education, so a 98th percentile on the LSAT means one is well into the 99th percentile compared to the entire U.S. population.
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To further clarify this, a score of 45 on the LSAT probably means that Obama has an IQ in the top 0.5% of the population, but not the top 0.1% of the population, which means his IQ is between 142 and 149.
How common is it for a black man to have an IQ of 145? If it’s true that there’s a 1SD IQ difference between blacks and whites, then it’s as common for a black man to have an IQ of 145 as it is for a white man to have an IQ of 160, which puts Obama in the 99.99 percentile among blacks, or one in 10,000. So if there are 35 million blacks in the United States, then Obama is among the smartest 3,500 blacks.
Here’s a news story about a 72-year-old Fort Worth man who heard his neighbor’s burglar alarm going off, so he got his handgun and went out to investigate. But the local police saw a guy with a handgun wandering around in the dark, so they shot and killed him.
The story of the 72-year-old from Fort Worth is very similar to the story of George Zimmerman. The moral of both stories is that you shouldn’t voluntarily engage in any activity in which you think you might need a gun to protect yourself. The old guy should have let the police investigate the burglar alarm, and Zimmerman should have let the police look for the suspicious-looking teenager.
The higher-level moral of both stories is that you should live in safe gated communities and not in prole neighborhoods.
The even higher-level moral of both stories is that you should graduate from an elite Ivy League university so you can get into a good career track so that you can afford to live in that safe gated community.
First, my definition of “fashion sense”:
The quality of knowing what clothes and accessories are in style, popular, and flattering to the wearer, and the propensity to put effort into wearing such clothes and accessories.
The conjecture is that the more fashion sense one possesses, the less likely one is to be a libertarian.
Now, maybe you think I am just joking, but actually the goal of this post is to show that there are psychological reasons why this is a real phenomenon.
First of all, the evidence: (1) computer programmers have below average fashion sense; (2) men (except for gay men) have less fashion sense than women; (3) the libertarian movement skews heavily male and towards computer programmers.
For example, the blog NH Insider writes:
In an article about the Free State Project … I found a rather interesting quote that got me thinking. In the article they describe the typical Free Stater as: “Many are single men; the majority are computer programmers.”
There’s more direct evidence that libertarians don’t dress very well. Do you remember that in debate after debate, Ron Paul was unable to wear a suit that actually fit him properly? And sometimes there’s a libertarian booth in front of the Time Warner Center, and the men who man the booth are never dressed very well.
The reason for the connection between fashion sense and libertarians is that libertarians are loners who don’t care what people think about them and who don’t want to adhere to the conventions of society, and that’s why they are attracted to a political philosophy of the government leaving them alone.
People who put a lot of time and effort into dressing fashionably are the exact opposite. They are people who are very comfortable with the idea that they should conform their behavior to the whims of the majority, or at least the majority who influence what’s trendy, popular and fashionable.
Unfortunately for libertarians, this correlation makes it very difficult for libertarians to get their message out; no one will take them seriously because they are dressed like nerds.
At a hearing Tuesday in a Seminole County court, Circuit Judge Debra Steinberg Nelson denied a string of defense motions concerning evidence that was intended to portray Mr. Martin as a troubled teenager with a propensity for fighting and an interest in guns. Prosecutors argued that such evidence had nothing to do with Mr. Martin’s death.
George’s story is that Martin attacked him first and was beating him up, and fearing for his life or, he shot Martin in self defense.
Because there are no witnesses to the fight except for George himself, Martin’s propensity for fighting is very relevant evidence because it increases the likelihood that Martin started the fight.
Such evidence of prior behavior would not be admissible if Martin were on trial for beating up George, but Martin is not the one on trial here. Normally, the law gives deference to the criminal defendant who has a constitutional right to introduce evidence that he’s not guilty (with a politically correct exception for so-called rape shield statutes).
Are George Zimmerman’s constitutional rights being violated? Are there any criminal lawyers who read this blog?
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In a comment, Peter from Long Island writes:
He should have fought back like a man rather than relying on his gun. I really don’t care if he ends up in prison.
Trayvon was taller and more muscular and an experienced street fighter. George was short and his weight was fat, mostly stomach fat (38-inch waist).
But I agree that he shouldn’t have been following Trayvon in the first place. Instead of patrolling his prole community, he should have used his free time to increase his job skills so he could make more money so he could move to a more expensive and safer gated community.
My previous post on why it sucks to be an old engineer became a comment thread on a computer programmer’s forum.
If you want to read through the comments, be aware that they suffer from survivorship bias. This means that older people who used to be computer programmers/software engineers but dropped out of the industry don’t post there, so the existence of older programmer types saying that my warning is false is not at all representative because you are not hearing about the older people who used to be computer programmers.
It appears that several of the posters there have co-authored programming books, which tells you about the kind of dedication and expertise required to stay relevant as an older computer programmer/software engineer. In contrast, in just about any other profession, you don’t have to be a published author in order to stay employed.
Reading through the comments demonstrates something about the personality of computer programmer types. They believe they are smarter and better than everyone else, and therefore on account of libertarian economic theory in which smart people create value and value creators are always rewarded, they have nothing to worry about. For some reason, nearly all computer programmer types buy into libertarianism and they all think they are like Howard Roark. (White American computer programmers, that is. The Indians are more likely to be clock-punchers who happily claim it took them four hours to fix a very minor bug that I could have fixed in 15 minutes, back in the days when I did that stuff).
One commenter looked down upon my mention of immigration, on account of the assumed fact that anyone who is smart and competent like himself welcomes competition from immigrants. This is obviously an aspergery way of looking at the world. No one who wants to make money welcomes any competition. No one gets rich when there is competition. I was involved in an industry in which there were two major companies, both losing money and headed towards bankruptcy, but then they merged and as one company they became very profitable because they could raise prices and they were no longer subject to suppliers having them bid against each other. The CEO who walked away with 9 figures of profit was sure glad that there was no more competition.
Changing topics slightly, here is one comment I’d like to comment on:
I work at a software company that most likely will be bankrupt by year end due to a young developer’s desire to rewrite our flagship product from the ground up using “new” technology. Three years later this new product has 40% of the functionality of the previous version and has customers canceling contracts that have been with us for 10+ years.
I know why the young developer wanted to do this. So he could put down on his resume that he worked with the new technologies and could therefore get better jobs. This is necessity for those who want to stay relevant and employed. Too many years working in VB6 (that’s an excellent software development tool from the 1990s that’s now looked down upon with disgust because it’s not “object oriented,” and it was abandoned by Microsoft) and the result is technological obsolescence. Maybe the young developer sunk the company (who knows if the commenter is exaggerating?), but he will probably get a better job out of it. This anecdote explains why a lot of software sucks. The developers’ interests in staying technologically relevant are at odds with the need of their employer for reliable software that works.
There was an article in the NY Times on Saturday about how the Hamptons elite are worried about middle-class strivers, who are young people who go to the Hamptons because of the glamour of the whole place even though they can’t really afford it; they tend to stay in illegal “share houses” and they get drunk on the beach.
With the damage to the Jersey Shore caused by Sandy, there is the worry that more of these types might show up in the Hamptons this summer. And god forbid if Snooki might show up!
As I wrote in my post on the top-out-of-sight, Nantucket is a higher-class place to summer because it’s a lot harder to get to. Not only can you drive to the Hamptons, there’s a commuter rail line that goes there relatively inexpensively, and a bunch of bus lines have popped up during the last few years.
As if the coming wave of foreign engineers resulting from the inevitable immigration bill isn’t bad enough, I saw this comment left on a Wall Street Journal article:
At my recent 40th Stanford reunion, everyone I knew who had stuck with engineering (as opposed to becoming an entrepreneur or a VC) was either unemployed or in fear of becoming so. A woman from my freshman dorm told me her brother who’d gone to MIT was also unemployed as were many of his classmates.
When not even a Stanford or MIT engineering degree is good enough to keep an engineer employed at 60, there is genuinely no market for engineers that age. Plan accordingly.
Do your future self a favor, find another occupation.
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Read the follow-up post .
“Bubble” is in quotes because the word is commonly used in a conservative echo chamber on the internet. But education cannot be a bubble, because bubbles burst, and education cannot burst because it’s not something that can be bought and sold like stocks, bonds, precious metals, houses, land, or tulips (to mention a few things that have bubbled and burst in the past). I am sure that if people could sell their college degrees to someone else, we would see the value of them plummet, and all college professors would have to collect unemployment because there would be so many degrees available for resale that no one would want to pay full price and waste four years attending college. But of course, that can’t happen.
They say about regular bubbles that they inflate for a lot longer than anyone can imagine. And that’s a regular bubble like a stock market bubble. For how long can an “education bubble” inflate when the degrees can’t be sold, and when the debt isn’t subject to bankruptcy laws? The answer is a hell of a long time.
The statistics that show that college graduates have much better career and life outcomes than non-college graduates will only increase in the direction of demonstrating the benefits of college. I also predict that most of what’s currently considered good blue-collar occupations for which a college degree is not required, will in the not-so-distant future require a college degree. So yes, you will need a college degree to become a plumber or an auto mechanic.
People who read these conservative echo-chamber blogs may think that everyone knows the real truth about college, but most of the world is not reading those blogs. The mainstream believes that college graduates earn more money because college make people smarter. The mainstream thinking is not going to change. The mainstream is aghast at the suggestion that we should stop making people smarter.
So knowing that things will continue as they are for at least another decade, with college getting more expensive and college debt increasing and the only government reaction to be to make the payback of the debt more affordable (which will just encourage students to borrow more and colleges to charge more), how does one make profit from knowing this? If you knew about the coming NASDAQ bubble in 1995, you could have made a killing by buying stocks. But what does one buy to make a killing in the coming “education bubble”?