Stock Bubbles, Tulips, and Toilet Paper

“There’s only two things I hate in this world:  people who are intolerant of other people’s cultures and the Dutch.” – Austin Powers in Goldmember

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Read this blog or this man will shoot that car.

People can be stupid.

People in groups are almost always stupid, and they can remain stupid until they do quite a lot of damage.

Let’s take a trip off to Europe (unless you already live in Europe) and back in time to 1636 A.D. (unless you already live in 1636 A.D.) and review the price of . . . flowers???

The Dutch (at least I think that’s what they call the people from the Netherlands, but you can call them Sven or Maria or whatever suits you) in 1636 were a  seafaring bunch, who made money trading all over the world and had colonies in North America, South America, South Africa, India and all those islands between Asia and Australia.  One thing that a Dutch guy brought back (and I don’t think this one was lost) in addition to the most efficient way to remove hair and lint from your bellybutton was the tulip.

In a parallel development, the Dutch were big on trading stocks in companies, like the Dutch East India Company, or in commodities like sugar or pancake mix.  The markets were sophisticated.  In 1632, you could buy sugar for delivery in 1633.  This was nice if you wanted to guarantee your sweet tooth, but you could also trade that contract to somebody else for a higher price if they decided they needed the sugar to make PEZ® or Fruit Pies.   Nowadays we call those “futures” contracts.  Yup, the Dutch were doing this 400 years ago.

But a slight change in laws made those contracts different.  The buyer could buy the right to buy sugar.  The seller had to fulfill the contract, but the buyer had no obligation to buy it.  It was his or her (yup, plenty of Dutch female speculators) option to buy the sugar.  This is what is now known as “futures options.”  And you could buy them on . . . anything.

Even tulips.

In November of 1636 something must have broken in the minds of a batch of silly dead (now, not then) Dutchmen and women.  They started bidding up the futures options contracts on . . . tulips.  And various colors and varieties became more valuable, especially one that that had a virus that changed and made a tiger-striped pattern.  They looked awesome.  But one tulip bulb went for the same price as ten years’ worth of a typical laborer’s wages.  That’s $250,000 or $300,000 today.  For a tulip bulb.

There appears to be little record of people going broke in big numbers when the bubble burst, but certainly there were some people who came out a bit poorer, and the entire reputation of traders was ruined.  Not that it was that great in the beginning, but Jan Brueghel the Younger painted the fine painting below, Satire on Tulip Mania, depicting the traders as monkeys.  If you look closely you can see the nifty tiger-striped tulip in the left corner.  Myself?  I’d pay much more for a monkey that traded futures options contracts, even if he did a lousy job.

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Yes, it’s public domain, being nearly 400 years old, unless Disney® wants to try to make a movie about it….

This was the first recorded financial insanity of this type, and it was fairly benign.

What other manias occurred during history?  Well, lots.  But researching them all would take quite a lot of work, and far more wine than I have in the house right now.  So, let’s just look at the ones that I want to talk about:

  • Salem Witch Trials – 1692 to 1693. Twenty people executed when a bunch of kids played a prank.  Or there were real witches.    This is still a bubble, but it was just teen angst magnified a zillion times.  Fortunately, they had awesome wood floors, like in the picture below.  Are those oak?  I’m so jealous!

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  • The South Sea Bubble – in 1720, the price of shares in the British South Sea Corporation went from £100 to £1,000 (the £ is the funny symbol that British people use for money). Sounds like a great deal, right?  Well, the records seem to indicate that the South Sea Corporation spent most of their time issuing stock and very little time on actually, you know, making money.  So why did so many people (including Isaac Newton himself) shove all of their spare £ into a company that just made stock?  Isaac Newton is reported to have said:  “I can calculate the movement of the stars, but not the madness of men.”  Apparently Newton couldn’t manage £1,000-£100=£  Below is a public domain picture by dead artist Godfrey Kneller of Isaac Newton when he was in his “looking like the guitarist from Queen” phase.

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  • Radium – 1920’s to late 1930’s. Everything had radium in it or was named after radium.    Drinking water.  Watches with glow in the dark faces.  My college mathematics classroom (yeah, after I took Calculus I, Calc II, Calc III and Differential Equations in the same room?  Enough radioactivity to power all of North Korea and a lot of corpses that are technically nuclear waste.  I have a straight razor case from the era.  You guessed it:  “Radium Straight Razor Company.”
  • 1920’s Stock Bubble – The classic. Fueled by post World War I enthusiasm and the rise of new technology (radio, the automobile, phones, and PEZ®) people went . . . insane.  Everybody was investing in the stock market, including a shoeshine boy, who famously gave Joe Kennedy (father of President John F. Kennedy) a stock tip.  Kennedy then decided if shoe shine boys were involved in the stock market, too many people were in the stock market.  He then proceeded to smuggle a bunch of liquor and manipulate a senator or two, then lunch.
  • Hula Hoops™ – Watch The Hudsucker Proxy to see exactly how this was invented. Okay, I kid.  But the Hula Hoop® hit when Hawaii was just becoming a state, and there was a large mania about the place, even though it had been a part of the US for nearly a century.  100 million were sold within two years, despite the US population being only 180 million at the time.  Sales fell off when people were finally told that there wasn’t a limit on the number of times a hoop could be hooped prior to it wearing out.
  • Johnny Carson’s Toilet Paper Run – in 1973, Johnny Carson (a late night television host back when there were only three channels and who was very popular) noted that there was a toilet paper shortage, but was referencing commercial grade toilet paper. He used that to make a few jokes.  (Toilet paper is just plain funny).  People took him seriously, and pretty soon there were shortages and rationing of consumer grade TP in several cities.  Shortly after the commotion, Carson told his audience he was joking.  People in the US could again poop without fear.
  • Pet Rocks® – A rock. As a pet.  For money.  Broke sales records, until people figured out that they’d paid $3.95 (plus tax) for a rock.
  • Cabbage Patch Kids© – A really ugly doll, but middle-aged women jumped out in droves to fight each other in a series of battles that would have made the gladiators of the Colosseum in Rome proud, if they had been middle-aged women with purses the size of four year old children fighting each other for dolls in the aisles of K-Mart®, Montgomery Ward™ and Sears©.
  • Beanie Babies™ – A really cute doll that spiked in popularity in the late 1990’s. The creator of the company decided to make special “limited runs” of a cheap, plush doll that looks like a dog’s chew toy.  Middle-aged women fought each other in the aisles for these as well, but it was the 1990’s so they all had greasy ham-hair like Kurt Cobain.  After a brief spike of popularity, most Beanie Babies are worth . . . dog chew-toy value.  There are a very few that might be worth some change, but don’t hold your breath.
  • Dotcom Bubble – The thing I wrote about Beanie Babies™ above? Just replace “Beanie Babies®” with “stocks” and “Middle-aged women” with “greedy but stupid baby boomers.”
  • Tasers© – At one point in 2004, Taser™ the company would have had to sell three Tasers® to every person in the United States to make the profit the stock $150 stock price implied. We didn’t buy the Tasers®, and neither did you, so you can buy the stock for $20 or so.
  • Housing Bubble –House prices never go down. It’s a fact!  Except when it’s not and imperils the entire economy of the world.
  • Tesla® – I’m not saying it’s a bubble (LINK), but it’s a bubble. Tesla© is not worth more than Ford™.

Most of the bubbles or manias I’ve listed above share a similar pattern –

  • Start – The guy started making Beanie Babies®. They only sold a few.
  • Spark – A reviewer mention in an article that some are “valuable” and “rare”.
  • Information Spread – Engage middle-age lady network.
  • Publicity – News stories show up in newspapers, television.
  • Mania – Nobody wants to be left behind, so everybody buys all the Beanie Babies®.
  • Market Collapse – Somebody writes an article questioning paying $10,381 for a dog chew toy. “Bubbles burst when fools run out of money.”
  • Regret – Closets of Beanie Babies© sit in closets, since one day they’ll be valuable.
  • Next Mania – Well, maybe next time I’ll be in first and make all the money…

And financial markets work exactly the same way, but with less dog chew toys.  People want to seek a return on their money, and when there’s enough money just lying around, stupid investments get made.  And some of those investments pay off in a huge way, especially for those that got out early.  The Dotcom crash?  Plenty of people sold as it was on its way up, and made huge amounts of money.  The housing crash?  One guy predicted it and put in place investments so that he made hundreds of millions off of the crash.

But sometimes what looks like a bubble . . . isn’t a bubble.  It’s a trend, and a real trend based on sound, rational economics.  The guy who was sure that the smart phone was a fad (me), the guy who thought that credit cards would never catch on with a rational public (my dad), and the guy who thought that Europe would be plunged into a horrific war (my great, great grandfather).  Oh, wait, the last guy was right.

And sometimes there are bubbles, and sometimes there are trends.  One person working to figure out the difference is a geophysicist named Didier Sornette, who has an amazing Wikipedia page (LINK), and looked at the mathematics that surrounded earthquakes and compared it to stocks or other financial assets in a bubble.  Turns out that the bubble was analogous to a really stressed mass of rock.  He made some predictions after the Dotcom bubble, and was right enough that he got hired to just study financial crises in Zurich (LINK).  Tough duty.

When you think a deal is too good to be true, or you see a group of people jumping on a bandwagon, think twice (cough Tesla® cough).  You want to avoid the Hula Hoop® Witches™ without Toilet Paper.

This blog is NOT stock advice, I don’t own any positions in anything mentioned, and don’t plan on any for the next month or so.  

The Link Between Sugar, Cancer, and the Kardashians

“What about the reality where Hitler cured cancer, Morty? The answer is don’t think about it.” – Rick and Morty

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Artist representation of what a cell might look like.  Just kidding – fireworks at night in Fairbanks on July 4th.  Hint:  on July 4th there is no night in Fairbanks.

In new news this week:  cancer eats sugar.  But that really isn’t new news, since Dr. Otto Warburg won a Nobel® Prize in 1931 for showing that a cancer cells use ten times the amount of sugar as a normal, healthy cell.  Sugar consumption also leads to cancer’s biggest risk factor:  being fat (I could say overweight or obese, but let’s not chop the onion too finely – Arnold Schwarzenegger was overweight, but never fat.  I’m talking fat, here.)  Now that correlation is clear – fat people catch more lung cancer than smokers.  But is the cause right?  Is being fat the problem, or is it the things that you do to get fat that cause the cancer?

As we’ve discussed in the past, much of medical research has the same scientific rigor as astrology (Sagittarius, here!) or alchemy (I know where soooo much lead is) or even astronomy.  Ha!  The Earth revolves around the Sun!  What a hoot!  A recently released review indicates that as many as 30,000 (that’s not a typo) scientific (if you call biology “science”) papers were based on using the wrong type of cell.  In one case they were using liver cells instead of lung cells.  I personally taste my all my cell cultures before using them, and always check the expiration date.  Even a rookie can taste the difference between liver and lung!

See, I told you people don’t know how to Science anymore (LINK).

But a recent study that seems to have actual science behind it (and by authors whose first names are Johan, Wim, and Veerle) investigates the relationship between sugar and cancer.  It seems that cancer cells get energy through fermentation of sugar, and the more sugar a cancer cell has, the faster the cancer grows.  (Normal cells generally oxidize the sugar, so they use a different path.)  Again, in their study, increased sugar led to increased growth, which is what you want in a bank account, not a tumor.

But your body has to have sugar, right?

Well, no.  Generally the brain prefers glucose (the kind of sugar found in your bloodstream) but it can do just fine, thank you on ketones.  What are ketones?  A 1960’s Motown band?

No, ketones are what happens to fats (your fat, or butter, or cheese) when your liver rips ‘em apart and stuffs them back into the bloodstream where they eventually feed your brain (and every other organ, too), so you can save the sugar packets that you were going to send to Congress and the Kardashians (Say, would that be a great TV show or what?  Congress and the Kardashians . . . ).  But your body (the liver, again) can also turn protein into glucose.  So, is it necessary to have carbs or sugars in your diet?  No, not really.

So, curing cancer just means avoiding Twinkies® and chocolate-covered raisins?  No.  Or at least I don’t think it’s that simple.  If so, I’m free to give my Nobel™ acceptance speech any time after next Wednesday.  What my Internet sources indicate is that it’s not a bad idea to go low carbing if diagnosed with cancer, along with cutting back on the protein because it can become glucose.

One doctor in particular (LINK) recommends a diet of up to 70% of calories from fat in response to cancer.  Actually, he recommends this diet to all patients, regardless of cancer status.

So, is there a link to cancer growth and sugar?  Absolutely.  Is there a link to getting cancer in the first place and sugar?  Probably.

Should you trust what you read?  Hmmm.  Remember when carbs were good for you and eggs were bad for you?  I’m expecting smoking and scotch prescriptions before I die . . .

Am I a doctor and should you trust this without checking with somebody more than me?  No way.  Check all of this out for yourself.

Deals: How George Lucas, Bill Gates, and Almost Every Other Rich Person Got Rich

“I guess the only other fair way to go about this would be that one of us deals with the body situation while the other one of us deal with the Krazy 8 situation.  In a scenario like this I don’t suppose it is bad form to just flip a coin. Heads or tails?” – Breaking Bad

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Who would have guessed that George Lucas would have his own Lego™?

Some small group of people become wealthy due to savings.  Some other small groups of people get wealthy by growing their business slowly over time.  Besides being born rich (which is the easiest and surest way to get rich), what do the majority do?

The Deal.

There are good Deals, and there are bad Deals, and I’ve been involved with both kinds.  So have you.  Anyone who has done a Deal (and, really, that’s everyone – two year olds start bargaining for candy and to stay up late as soon as they can speak) has likewise done good and bad Deals.

Let’s start with bad Deals.  One of the worst Deals I ever did was when I traded in my first car at a car dealership.  I traded for a pickup that was older than the car.  Six years older than the car.  Plus I gave them a big wad of cash to do the deal.  After that Deal was signed, the store manager played a recorded sound of a bomb dropping and exploding over the store intercom.

I innocently asked why they had played the explosion sound.  The car salesman said it was, “just a thing the manager does.”  Of course, it was in honor of the horrible Deal I’d just done.  I suppose it was fair.  Several years earlier I had sold them my used car.  After several hours of negotiation, they offered me a pretty good price.  I asked, “Do you need to know if there’s anything wrong with it mechanically?”

The salesman said, “Nah.  Just the body.  They can fix any mechanical problems.”

The car had a cracked engine block.  Hint:  seeing steam coming out of your tailpipe is never a good sign.

Well, I did ask.  Actually, several times.  I’m not sure they really liked that Deal . . . I guess I wish I had a little bomb sound that I could have made . . . “oh, no, that’s nothing.  Just something I like to do.”

But they got the last laugh with the pickup.  A year later it threw a rod (this is very bad) through the engine block and oil pan while I was driving seventy miles per hour.  Pretty impressive, actually.

What are some examples of other famous Deals/decisions?

  • George Lucas got the merchandise rights for a little film he did called “Star Wars®” for $20,000. I think that one little afterthought deal earned him over a billion dollars – and that’s after taxes.  Nerds who live in Mom’s basement can afford a LOT of Boba Fett® figurines, since they can avoid that whole “dating” money sink.
  • Bill Gates bought DOS® for $50,000. It formed the basis of MicroSoft™.  It became really valuable because IBM® said, “Who wants to own software, am I right, Brandon?  The money is in the hardware.  Let’s go get some martinis, cigarettes and blow dry our feathered hair, maybe play some Pac-Man™.”  Or whatever IBM© dudes said at lunch when Reagan was president.
  • Peter Thiel bought 10% of Facebook® for $500,000. He now only owns 2-3% of Facebook© due to dilution and share sales.  Don’t cry, he can still afford to buy lunch out once a week.
  • The Internet Bubble was probably the greatest mass insanity since the Dutch sold tulip bulbs for the price of a house (yes, this really happened, and I’ll talk about it in a post somewhere during the next week or two). I had a friend who got caught up in a website during the Bubble.  He ended up selling a company (he owned about 20% of it) to Alta-Vista©.  Who?  Alta-Vista™!  They were the Google™ before Google®.  How much did they sell the company for?  Fifty Million Dollars.  Immediately, my friend was worth Ten Million Dollars.  Unfortunately it was in Alta-Vista stock, which, by agreement he couldn’t sell for six months.  Six months later?  His Ten Million in stock was worth Two Million.  He got out, but he was a 36 year old with $2,000,000, which I guess is a pretty cool consolation prize.  Why did Alta-Vista™ want his company?  It had huge growth – heck, it made $2,000 a month!
  • AOL®-Time™ Warner©. Investors lost $8 billion on this merger.  Who could have predicted that dial up internet wasn’t the wave of the future?
  • Invading Russia or Afghanistan. Repeat after me:  no land wars in Asia.  Oh, we’re involved in two of them right now?  Yikes!
  • Nathan Rothschild had early information on the result of the Battle of Waterloo where Wellington defeated Napoleon in “Friday the Thirteenth Part 4: Napoleon Strikes Back.”  Even from the Rothschild archives we find:  “I am informed by Commissary White you have done well by the early information which you had of the victory gained at Waterloo.”  So, knowing the outcome of the battle, it seems certain that Rothschild made some money as the markets were agitated with the uncertainty of the war.  How much did Rothschild make that day?  History does not record, but Rothschild built a fortune that is estimated at $450 billion dollars in today’s money.  That’s five Mark Zuckerbergs.  Nathan didn’t make many bad Deals . . . .

What characterizes a Bad Deal?

  • Missing information: When I made my stupid truck deal, I had no idea how to get car value information.  This was pre-Internet.  Mismatched information leads to one-sided Deals.
  • Failure to understand potential: Star Wars® merchandise might have been a few posters and t-shirts.    Biggest movie merchandising Deal ever.  This is similar to what Bill Gates saw.  He figured that DOS® was worth much more than the owner did, and used it to leverage into everything MicroSoft™.
  • Taking advantage of circumstances. Thiel originally lent money to Facebook® that they needed badly.  He ended up with the 10% equity stake in the company.  Nice timing, good Deal.
  • Stoned-Level Euphoria: The Internet Bubble was characterized by wisdom of a mob all high on PEZ® and thinking that a website that was clearing $2,000 a month was worth $50,000,000.  Like toddlers with checkbooks making Deals.  Trade a Bugatti® for Cadbury Cream Eggs®?
  • Invading Russia or Afghanistan just shows that you have no ability to learn from either history or The Princess Bride®.
  • Rothschild bet on bad Deals made in a hurry under pressing circumstances. Never make a Deal under pressure, unless you have to.  Really have to.

Nature of the Deal

I’ve seen company take long, agonizing looks at acquisitions and mergers that amounted to far less than 1% of the company’s value.  I’ve also heard that Warren Buffett has bought many a company on a one page contract.  He says his lawyers make them longer now, but the Deals that made him rich (well, richer) could be written on a single page.  And nobody argues that Buffett does bad Deals.

But are there really Win-Win Deals?

Whenever I hear “win-win” I think of those zombie adult over-enthusiastic motivational speakers.  You know the ones I mean – the ones that are always insufferably happy?  Them.  They talk about win-win.  But win-win deals can be real, and here’s an example:

I was working at a multi-billion dollar company when a multi-billionaire decided he wanted to buy it.  He offered 30% above the current stock price, which was six times what I had gotten my shares for.  I took his offer (for my shares, not the company) in a second.  The billionaire then structured his payments from the profits so that his original purchase was paid off in about three years.  Plus he still owns the company.

So, I got more money out of the stock than I ever expected, the billionaire got more billions, and he still employs thousands of people daily to make products that millions of people use.

That’s a win-win-win-win.  Yay capitalism!

What was my personal best Deal?

When taking a job at a company, I requested as part of my offer that if they ever asked me to move, they’d pay me at least what I’d paid for my house.  Since house prices always go up, this was an easy calculation for the company, right?  Sure!  They agreed, and I said, “yes.”

Eleven months later when they asked me to move, the housing bust was in full swing.  Thankfully, they cut me a check for the difference between the appraised value of the house versus my original purchase price.  Had I not asked for that simple clause, I would have been out $45,000.  The upside?  The company also paid the mortgage, insurance, and property taxes until the house sold, a year and a half later.

Don’t feel bad for the company . . . they still got the better end of the deal.

They got me!

The Future of Employment, or, Almost All of Government is a Jobs Program

All right, listen closely.  I was at the unemployment office and I told them I was very close to getting a job with Vandelay Industries, and I gave them your phone number.  So now, when the phone rings you have to answer “Vandelay Industries.” – Seinfeld

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Notice it doesn’t say Texas Pain RELIEF Institute?

What are we going to do with everyone?

I’ve been (throughout my life) a proponent of the human race.  I like it.  I may not like certain individuals, but I’ve got a great degree of hope when it comes down to humanity.  And up to now, the equation has been that more people equals more Einsteins, more Isaac Newtons, more Nikola Teslas, and more Stephen Hawkings.  These are shining examples of humanity – folks who helped the human race achieve much more than we would have or could have without their knowledge.  I read an article recently (I am not making this up) about rising obesity rates in Ghana due to KFC® becoming the restaurant of status and choice.  And we know how much Einstein contributed to the secret government project that led to KFC™’s fried, greasy goodness.

There are seven billion of us, and 2.1 billion have the problem of being obese or overweight.  Less than 800 million are suffering from hunger or malnutrition.  This is a victory of the greatest magnitude.  Yes, obesity is bad, but I would much rather have people having heart attacks in their fifties after having a tasty chicken wing versus starvation at fifteen.  Everyone who has that choice would make the same choice, and raise their greasy hands up if asked.

In general, the world is getting better as we as a society create more wealth, as I talked about in previous posts (LINK).  But I’m really concerned as I look forward with simple questions:

How much does the future need us for continued prosperity?  How many people do we really need?  How many can be actively employed in productive work?

There are various reasons that I’m wondering:  Increasing Productivity, AI, Smart Machines, Robots to name a few, though there are other issues as well that we’ll skip today.

I’ve written before that trucking is a sure bet for replacement once self-driving trucks are approved by the Department of Transportation and the various states and a self-driving unit costs less than (about) $400,000 per unit.  After those conditions are met, at least a million jobs (and likely more) will be gone as fast as the autonomous trucks can be produced.  But it’s not just truckers.  It will be fast food workers.  It will be janitors.  It will be an increasing number of lower and mid-skilled jobs throughout industry.  If it can be described by an algorithm or computer program, it will be automated.  A large number of sports articles and financial news articles are now produced with no human intervention.  Journalists would worry, if there were enough of them left to worry.

And jobs that aren’t eliminated will be minimized.  An example:  a structural engineer nowadays runs calculations for a new bridge or skyscraper through a computer program that analyzes the stresses in the structure and optimizes the design for code and seismic conditions.  It then chooses the beams and columns and other structural members based on tens of thousands of calculations and three dimensional finite element analysis, and then pops out design drawings. Sproink.  (That’s the noise the drawings make when they come out of the machine.)

Fewer engineers are required, and the engineers don’t need to be as proficient since the engineering knowledge is built into the program.  Both the number of people and the quality of people goes down.

Another example:  I just bought (for $30) a device the will give me the data I need to order glasses online.  No prescription, no optometrist, no waiting.  Also, no glaucoma check, but I don’t have to take off time from work to visit the doctor.  And the glasses I ordered online cost less than I would pay, even at Wal-Mart®.  I may describe it in Friday’s blog.

Another example:  I had a cold that I was pretty worried was heading into my lungs and I was worried that I’d get pneumonia.   For $60 I got online from my basement (where I was in a cold sweat despite my 101˚F, got antibiotics, and got better.  Otherwise?  A $120 doctor visit where my copay would have been at least $100.  Yes, a real doctor was involved in the visit, but it was incredibly efficient for them – I’d imagine they make $300 an hour.  No office, no actual contact with icky sick people.  It was a great transaction for both of us.

But . . . it means we need fewer Doctors.  And fewer waiting rooms.  And fewer nurses.  Et cetera.

Efficiency is awesome.  It lowers costs, and does that while quality is increased, in most cases.

When economists study inflation, they study the price of the item.  I have a color TV in my house.  When my dad bought his first color TV, he spent (on an inflation adjusted basis) over $3,000 in today’s dollars.  With that kind of money today?  You could buy a 75” Sony® Ultra HD that also has a popcorn maker and margarita blender built in.  So, economists measure how much better a thing has gotten as well as what the thing costs.  They call this measurement “hedonics” because it’s way more confusing than “measuring how stuff got better.”

So, we live in a world where getting sufficient food to eat is easier than at any point in history.  We also live in a world where getting information is easier than at any time?  Want to listen to a song?  Unless it’s the Beatles™, it’s pretty much on YouTube®.  And we can make more things, better, faster and cheaper, than at any time in history.

But why hasn’t efficiency hit, oh, say the Department of Motor Vehicles?  Or the local County office where I go to get license plates?  At both places, you have to stand in line.  At both places, hours are limited, and you’d better get done before quitting time, because they’re serious about closing up at 4:30pm.

In a typical business, the best parking spaces are reserved for the customers.  In government?  The best parking places are reserved for the employees.  And I think government is giving us a hint:  the most important consumers of government are its employees.  You and I are the product.

And why, in a world where I can apply for $100,000 credit at midnight can I only get my driver’s license between 9AM and 4:15PM (closed for lunch hour)?  Why is it harder each year to deal with government?  Why do their budgets keep going up, faster than inflation?

Because nothing the government does is intended to help you, the consumer.  The bright folks that are hired to make wonder weapons?  Jobs program.  We do NOT want people that smart on the street.  The people who work for NASA®?  Jobs program.  They don’t even have to make rockets anymore, and Elon Musk has clearly shown that if he had NASA’s budget he’d be building Burger Kings® on Mars, because he’s have a million people living there in the next decade.  NASA spent money putting together braille books on the solar eclipse in August.  That might explain why we have to piggy back a ride with the Russians to get to the International Space Station.  NASA is a jobs program.  Originally it had a job to get people to the moon.  Now?  It produces new classes of astronauts with no vehicle to fly.  Thankfully they have a budget for cardboard boxes to sit inside and make rocket noises.  There’s even a budget for markers to write “ROKET” and “USA” on the side of the boxes!

The Department of Education, which has taught no classes?  Jobs program.  The Department of Energy, which has never produced a Watt?  Jobs program.  The military?  Parts of it are a jobs program, but most if it is real.  But you better pay attention to what congressional district and state the new weapons will be built in . . .

Your liberal-arts college professor?  Given a job so that they wouldn’t agitate for revolution in the streets, rather, they can agitate for revolution to rich kids who would much rather play Playstation® and X-Box©.

Ever wonder why they rip up a section of street that looks pretty good, and then work it for months?  Yup.  Jobs program.  Not to say that the original Interstate Highway System wasn’t real.  It was.  But now what do we build?  What infrastructure is left?  Dams are awesome for hydroelectric power, but just try to build one nowadays . . . it’s easier to declare war on Ghana.

It really took me by surprises that this was the case – that most government spending is based on the concept of giving people money so that they don’t riot in the streets (dumb people) or so they won’t plot and plan a revolution (liberal arts professors) or build wonder-weapons in a James Bond worthy plot for foreign governments (government scientists)?

Why is government inefficient?  It’s not.  It’s a very efficient jobs machine.  You’re just the product, not the consumer.

But what about the jobs that are already out there?  A recent study says that the average worker works less than four hours a day.

Think of the creativity that creates!  How to look busy for eight or nine hours a day when you’re done working after four?  And how long will a business stand for this?  Eventually, in private business, all of the “four hour a day” jobs will be eliminated – the business has to pay taxes, remain competitive.

But government will respond.  New regulations will be created and enforced that require new employees to compile data and report it to the government.  This is done mainly so that the government has excuses to hire more employees, but has the side effect to requiring more private sector compliance workers.

I actually had a job once where, on my start date, my office wasn’t yet ready.  They told me . . . come back in two weeks from now.  Did they pay me for the two weeks?  Yes.  And, who did this?  Yup.  It was a government job.  And, although I saved them several million dollars, they were kinda disappointed.  They wanted to spend their full budget.

But there will be in the next decade millions of people becoming unemployed as their jobs are minimized or eliminated due to clever business disruption, probably faster than the government can create jobs (hint: the government is broke (LINK)).  I’d love to suggest a minimum basic income, but we can’t pay for it.  We can’t even afford PEZ®.

What do we do?

There are millions of people in the United States right now that would love to work.  And millions more in made-up jobs that produce nothing that would love to work in productive jobs.  Around the world, this number is surely in the hundreds of millions.

And we need fewer of them every day.

How about . . . we let someone smart pay them to work on something really important . . . like going to Mars?

Paging Elon Musk . . . .

Unless someone else has a better idea?  Raise your greasy hand and sing out!

Loneliness vs. Being Happy. A choice?

“When a man of Scotty’s years falls in love, the loneliness of his life is suddenly revealed to him.  His whole heart once throbbed only to the ship’s engines.” – Star Trek

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The Boy at six.  How much fun is Christmas?

This week the Internet has been aTwitter® about loneliness.  It’s part of the cycle – it’s Fall, so it’s time for peak talk about being lonely.  Weight loss stories go year ‘round, but they peak after Christmas.  And the stories have a kicker.  “Loneliness is worse than ______ (obesity, high blood pressure, smoking, or, heck choose your own favorite disease to fill in the blank).”  The most recent article that I read seemed to focus on middle aged men, but I think it goes much deeper than just loneliness.  I think the roots are back to Hope.

When was the last time you were so excited that you could hardly sleep because of the day ahead?  That’s Hope.

I’m old enough I enjoy giving stuff more than getting it, but I’ve observed that kind of Hope, that level of anticipation most recently in The Boy and Pugsley.  The Boy is seventeen, and really surprising and delighting him at Christmas is difficult, now.  But Pugsley is twelve and would have the Christmas tree up in early September if we’d let him.  Pugsley dearly loves Christmas, and that spirit is alive in his heart, even when The Mrs. and I play Scrooge and Grinch®.  The Christmas Spirit (which is really just super-concentrated Hope) is naturally strong in the young.

I’ve recently discussed Scott Adams’ Formula for Happiness (LINK),

Happiness = Health + Money + Social + Meaning.

How does it apply to the young?

Health is (generally) a given.  When a child is sick enough that he leans over the side of his bed and throws up in his brother’s pants (which just happened to be on the floor there because they shared a room), he tends to remember that.  (My brother, John Q. Wilder, was not happy.)  Youth and vitality go together, since they haven’t had time to wreck their health yet.

Money is a hit or miss.  But (generally, again) money issues don’t weigh heavily on the mind of a kid.  They know that times might be tight, but they have no perspective to keep them up at night worrying about money.

Social?  In all but the extreme cases, kids have plenty of chances to interact with other kids and make friendships that last a lifetime.  Even shy kids.  They might not be friends with the popular kids, but they can have friends.

Meaning?  Yes, but like kids, it’s pretty shallow.  Being good is near enough what constitutes meaning for the younger set.  Meaning often comes from adequate performance and parental praise.

But as people get older (past their thirties), the equation changes.

Health:  Yearly you are reminded of increasing limitations, stronger eyeglass prescriptions, and less hair (except on the back, where it grows thicker than an Amazon rain forest).  Ow.  My hip hurts.

Money:  Generally people are better off financially as they get older, with the caveat that their peak earning potential may be in the past.

Social:  Friendships may have worn away through long hours and distance – most social contacts might even be at work.

Meaning:  Meaning likely comes from work, spouse, or volunteer organizations, or, in some cases, just making it to another birthday.

What role does hope play?  Hope is looking forward to time with friends and family, having goals big enough to be worthy of chasing, having plans of things you want to do and experience.  These things lead to enthusiasm and excitement in life.

What does the opposite side of the Adams Equation look like?

Despair=Poor Health(No Hope)+No Money(No Hope)+Alone Socially(No Hope)+Meaningless Existence(No Hope)

Despair leads to all the bad issues:

  • Loneliness
  • Depression
  • Disappointment
  • Sadness
  • Pain (real, not like needing a safe space in college because spaghetti is cultural appropriation)

It’s a lot like being a fan of a California NFL© team.

A sudden cratering of any one of the factors in the Equation of Despair can bring about a vicious cycle, leading to spiraling sadness.  This despair is dangerous – fatal if long enough and deep enough.  How many widows die within a month of their husband?  How many men die a month after retirement?

Whereas Hope can put you in a bad place and make you stay for too long (bad job/bad marriage/Raiders® fan), Hope is of then the only thing that will keep you alive when things go horribly wrong, as they absolutely will from time to time.

I think the key might be in being able to look at the world, not through the jaded eyes of experience, but by being able to maintain that sure Hope of a six year old on the night before Christmas . . .

Value Creation and Zombie Steve Jobs

“Lies are like children: they’re hard work, but it’s worth it because the future depends on them.” – House, M.D.

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Pugsley, prior to going for his midnight shift in the PEZ® mines.

I was talking to a friend yesterday when he mentioned that he had been transferred to manage a group of newly graduated college kids.  To be clear – this group of college graduates is in no way typical – I imagine that they’re making in range of $80,000-$90,000 a year.  Not Harvard Law money, but still pretty good for the small(ish) town my friend lives in.  So, as a new manager to the group (he’s been managing people for decades, and he’s a good one) he got the group together to explain what he was looking for from them, what his general expectations were of his employees.  In one line that has been standard for him for years, (I heard it from him when Bill Clinton was President) he indicated that he expected the group to put in, on average, fifty hours a week.

Chaos!

Pandemonium!

My friend had become Literally Hitler.

He eventually backed down to forty-five hours per week, and was demoted to just being Literally Saddam Hussein.

As he told the story, I laughed.

The irony is that these college grads that actually do put in the long hours that my friend suggested will soon be so far ahead of their colleagues that their colleagues will never be able to catch up with them:  the harder worker will have more knowledge, more skills, more credibility, and very soon, much bigger raises and promotions.  Their colleagues will call them, “lucky.”

90% of success is showing up on time.  At least 5% is working just a bit harder, so your skills build up faster, especially when you are young.  (The remaining 5% is turtles.  All the way down.)

What’s the point in all this hard work and achievement?  To be rich?  To stress yourself out to the point where you have a heart attack in your 30s and die?

No.

The point is Value Creation.

One of the coolest aspects of the capitalist system is that it allows you (really, forces you in a purely capitalist system) to be of value to your fellow man.  Capital flows to those that create and provide value.  So, in a truly capitalist system, you create wealth for yourself by creating value for someone you might not even know or ever meet.  Bill Gates made money when I bought my copy of MicroSoft® Word™, and yet he’s never invited me for dinner.  Nor will he, unless that restraining order lapses.  I’ve told him to stop calling me, but that man won’t listen.

Value creation is like magic.  You take an idea or concept to make someone else’s life better, and then you create a product or service out of wood, metal, plastic, or just plain computer code, or, like this blog, just out of pure ideas.  If your idea is good, people will buy it, eat it, or read it, but probably not all three, unless it’s breakfast cereal.

Capitalism is simple – you (should) make money only when you create value for someone else.  Value Creation is nearly alchemy.  Alchemy was (at least in part) focused on turning lead into gold.  Capitalism is better.  It can turn cow poop into gold – when sold as fertilizer.  In a capitalist system, we transmute lower valued items into higher valued items every day.

The flows of capital follow the paths cut by Value Creation.  Those people (and businesses) that are best at creating value get more money.  What do they do with that money?  Do they put it in a box?  No.  They use it to create more value.

And that’s what my friend’s newly graduated college students do not get.  The business isn’t there for them to have a great life.  It doesn’t exist to pay them a living wage.  It won’t pay more because housing is more expensive where the business is.  Companies pay based on the value the employees create.  Don’t create more value than somebody else would for minimum wage?  You’ll get minimum wage.  Don’t create enough value for a three bedroom house on two acres in San Francisco?  Your boss and company don’t care.

In the end, it’s Value Creation.  How do you do it?

There are lots of ways, but perhaps the best way to create value is to solve someone’s problem.  The bigger the problem and the greater the number of people, the greater the value creation, and, generally, the greater the wealth that the person or company can expect to get.  The cell phone is a great example – before it existed, people spent no money on it.  After it was invented, people would spend . . . some money on it.  After the phones got data, and the phones got smart?  Massive floodgates of money poured into a product that had never existed.  Apple© went from a value of $30 billion to a market cap of 30 times as much, nearly a trillion dollars after their innovation with the iPod® and with the iPhone™.  They created a new category, and brought value to people in ways that nobody (except Steve Jobs) anticipated.  I hear that their primary focus right now, however, is bringing Steve Jobs back to life, so they can have a new idea.

The effort that went into creating the new products that Apple® launched was legendary.

And it was more than forty hours per week . . . because changing the world takes more effort than that . . . .

Reality: Does it exist? And if it does, are there cookies?

“It’s been six hours.  Dreams move one one-hundredth the speed of reality, and dog time is one-seventh human time.  So, you know, every day here is like a minute.  It’s like Inception, Morty, so if it’s confusing and stupid, then so is everyone’s favorite movie.” – Rick and Morty

Pugsley after trying to figure out quantum mechanics on his Quantum Mechanics Lego® set.

Phillip K. Dick wrote multiple stories about reality being fluid, or, in many cases, entirely misleading.  The tricks that memory can play were multiplied, and often the memories you recalled weren’t yours at all.  You can see that in titles of his stories, such as “Do Androids Dream of Electric Sheep,” and “We Can Remember It For You Wholesale.”  You might recall the movie versions of these:  Blade Runner® and Total Recall™.

Dick had a certain sense of paranoia that pervaded him, with a nearly constant theme of an eroding reality falling apart around him in both his life and in the characters that he wrote about.  In The Man In The High Castle, Mr. Dick alludes to this reality being a different one, and that there are nearby realities that were close enough to impact ours in real and permanent ways.

So, if you’ve ever felt this reality was just a little bit off, remember, that sometimes even paranoids are right . . .

The Boy and I went to go see Blade Runner: 2049 today.  He didn’t like it.  Too long, music was overpoweringly loud.  I agree it was too long – it probably would have been an awesome 90 minute or 100 minute movie.  And, as a dude getting older, louder things don’t bother me too much.  I liked this movie better than the original and would recommend 2049, though I must admit to not being a big fan of the original.  The Thing®, Fast Times at Ridgemont High™ and even First Blood (Rambo)© were better films, I thought.  (Odds are you won’t remember the film that won Best Picture® that year:  Chariots of Fire.  I’ll save you the time.  Booooooring.  Ben Kingsley plays Gandhi, who starts a film production company with Burt Reynolds where they concentrate on creating movies about quality footwear from India.  Again, my mini-review:  Boooooooring.)

But Mr. Dick brought the question forward:  what’s real?

I know that there’s a pretty big consensus that this universe that we inhabit is real, it has substance, objects are made of matter, your senses tell you the objective truth, your memories are reliable, and that the whole thing follows a set of understandable logical rules.  Time is linear, and goes just one way.  You can understand the things that are local, that are near you, but you have no perception of things that are very far away, unless you have a cell phone or a radio.  If a tree falls in the forest, well, it falls in the forest, whether you heard it or not.

This is the best way to get through a day.  Guessing that a train has mass and that mass times velocity will turn you into a fine mist if you ignore it is probably the safest way to consider reality.  Ignoring that one is pretty much an “at your own risk” sort of thing, though there’s anecdotal evidence that none other than George Washington had two horses shot out from under him, and four bullet holes in his jacket during the French and Indian War.  So, did reality change around Washington (LINK)?  Scott Adams thinks that reality might be very malleable (LINK) and he is a millionaire cartoonist, so I’d take whatever he says seriously (seriously).

 

But we all agree that baking bread smells good, and poo doesn’t.  So our senses are right on track.  But flies . . . seem to like the smell we don’t?  Are our senses lying to us on what is good or bad, or are they finely tuned to present a picture of reality to us that is most advantageous for us our long term survival?  All evidence is that sugar tastes sweet and good to us, not because it is good for us, but because it has a high energy content.  A sucrose or dextrose or lactose or maltose or fructose (note the trend) molecule all taste (more or less) sweet.  That would tell a primate to eat more of the sweet stuff, and much less of his own poo.  Flies?  Not so much, I’m sure poo smells like fresh-baked bread to them.  In no way does your sense of smell tell you the objective truth, though it’s got some pretty good programming built in for your survival.

But surely, your sense of sight doesn’t lie?  Well . . . why is a rose pretty?  Why is a pretty girl pretty?  While much of the reality you see might be (at least somewhat) accurate, even the filters your sense of sight puts the world through are far from objective.  Plus, a big portion of what you see during a day is just your brain filling in details for you.  Your effective actual visual area is much smaller.  HD camcorders now pull in far more data than the human eye.

I am generally sure my memories are good, though.  But one night while watching a television special on stupid game-show moments, The Mrs. and I were wondering when it had been narrated, since the narrator was Richard Dawson.  I remembered vividly reading about him dying in 1990 or 1991.  The Mrs. recalled the same thing, from the same timeframe.  Even the cause of death was the same: cancer.  We hit up Alta-Vista® or some other search engine.  Yahoo® maybe? It showed clearly that Richard Dawson was alive, and had not died the way we both remembered he had.  (He has since passed on.)

We’ve since come on to a few more things that we both remember that were counter to what Google® says when we ask.  So are our memories what changed, or was it reality?  Are The Mrs. and I slowly slipping through a myriad of potential John Wilder and The Mrs. personas throughout multiple, closely related universes?  Could it be that every time we part from one another, we don’t come home to exactly the same person we left?  I slipped left, The Mrs. slipped right?  I’m one step closer to a universe where the Kardashians are poor, unknown grifters operating out of Wal-Mart® parking lots, and The Mrs. I left this morning slipped towards a universe where the Kardashians have solidified control of a world government?

Let’s pretend there’s only one reality.  Does it follow rules that we can understand?  In the famous double-slit experiment, the answer really is:  No.  It doesn’t.  Let me give a description of the experiment:  There are two slits on a piece of paper.  A photon, or particle of light, can go through either one.  But if light is a wave, it will go through both, and create a diffraction pattern on the back.  Sure enough, we can prove that light is a wave!  It creates a diffraction pattern on the back, as shown below (source: Wikimedia, Jordgette, CC By SA3.0)

It does it because waves of light behave like this (source, Wikimedia, Lookang, CC By SA3.0):

But if you look to see where if a photon goes through a particular slit?  The diffraction pattern disappears.  You know enough about the photon that it no longer behaves as a probability wave, but now has to be a particle.  It forms a boring old line.  Diffraction disappears due to knowledge.

Whose knowledge?  Your knowledge.  If you observe it, you make the photon choose where it is.  Observation changes the nature of the phenomenon, and, in this case, determines reality.  No, reality has rules that conform to your observation.

So, is time a linear one-way street?  This (LINK) experiment shows that there just might be reactions to stimuli . . . before the stimuli occurs.  Beyond that, there’s more than anecdotal evidence that just shortly before his death, Lincoln had a dream that detailed his body lying in state.  So, there’s that.

And being able to understand only things that occur locally?  Here is a study (LINK) that admittedly is more on the fun side – this lady’s dog knew when she was coming home.  At a random time.  When she was at least 8 miles away.

As far as superpowers go, these would be awesome.  I mean, seeing is way better, but seeing the future would be awesome.  Especially seeing into the future for the next thirty seconds or so.  Imagine the saber-tooth tigers you could avoid by halting before you cross just that spot on the way to the watering hole.

Oh, and the tree falling in the forest?  It hasn’t.  And it has.  Until it’s observed, it exists only in a state of quantum superposition – it hasn’t fallen/has fallen but it won’t until it’s observed, and that observation in the future triggers the quantum collapse of the superposition state into a fallen tree or an upright tree.  Just like the dual slit experiment, the very nature of the reality we observe on a day-to-day basis is dependent upon the observer.

So, reality, when viewed a little closer, maybe conforms more to Philip K. Dick than we’d normally, comfortably like to see.  I mean, we like the comfort of assuming that everything is as it seems, but it may be that we develop more of our own reality than we think we do, as both actor and observer in our life.

And when it comes to observers, The Boy says skip Blade Runner: 2049 and instead go read The Man in the High Castle . . . .