Coding as the ‘New Literacy’.

More evidence that it pays to be smart:

Global oil and gas job losses: 350,000 and counting

The exploration and production (E&P) sector was the second worst sufferer, registering more than 80,000 layoffs, followed by the drilling sector, which has seen more than 52,000 job cuts.

U.S.-specific data from the report shows that nearly 100,000 people lost their jobs in the oil and gas extraction and supporting segments between October 2014 and January this year. More than half of those were in Texas, according to statistics from the U.S. Bureau of Labor.

‘Blue collar’ industries such as drilling are struggling. Meanwhile, high-IQ sectors such as information technology are projected to see strong job growth (and also pay more, too):

It would seem like more than ever, coding is the ‘new literacy’.

The divergence between blue collar industries and high-IQ ones goes back to the the 80′s, with the decline of unions and then later in the 2000′s during the bursting of the housing bubble, which hurt many construction and landscaping workers. From Virtue Signaling and Status:

The latter, on the other hand, are losing their jobs, whether it’s oil falling from $100 in 2014 to $30 today, hurting lots of blue collar energy workers, or the housing bust of 2006-2009, which hurt blue collar construction workers. Or the rise of the low-paying service sector, replacing obsoleted but high-paying factory jobs. Meanwhile, high-IQ tech is doing better than ever, impervious to pretty much all macro conditions, save for a blip in 2000-2002 during the dotcom bubble or in 2008 during the recession. This dichotomy is also observed in the housing market, with real estate in high-IQ regions such as the Silicon Valley constantly making new highs, versus almost everywhere else still well-below the 2006 highs.

Snapchat is paying new recruits hundreds of thousands of dollars to work there, and competent coders in Silicon Valley can easily make six-figures. Sure beats working on an oil rig and either dying in a fire or failing off and dying of hypothermia or drowning. Over and over again in our post-2008 economy, the ‘high-IQ cornflakes‘ keep rising to the top.

Deconstructing a Viral Article

In mid-March 2016, Robin Weis’ article “Crying” went massively viral, getting hundreds of up-votes and comments on HackerNews, as well as many shares elsewhere. Rather than focusing on the subject of the article itself, I’m going to focus more on the meta-narrative: why the article was so popular and what its popularity says about post-2008 society.

By showing vulnerability in describing her crying habits, Robin exudes authenticity, a major theme of post-2008 society. Here is a passage showing vulnerability, hence authenticity:

I’ve always considered myself to be a bit of a crybaby, triggered frequently and privately and sometimes for hardly any reason at all. I’ve also always considered myself to be a fairly strong person, stable and resilient and able to work through challenging situations. I found it difficult to reconcile that part of myself with my overwhelming sensitivity, and I wondered about the exact nature of the things that were capable of pushing me over the edge. Naturally, I turned to spreadsheets to help me find the answers to my curiosities.

A defining characteristic of post-2008 (and 2013) society is the synthesis of intellectualism and individualism. Her account of crying is a very personal (hence individualistic) and she is obviously very smart, being that the site is about data visualizations (data visualizations could be considered a STEM field, combining statistics with programming, requiring a high IQ), she is a highly competent writer, and an introspective and possibly introverted person (INTP), completing the synthesis. From Post-2008 Themes:

The common thread here is individualism, a defining characteristic of post-2008 society…Our culture of individualism prizes individual accomplishments (like a physics or math discovery), popularity (Instagram & Twitter followers), and merit (related to individual intellectual accomplishments), which tend to be harder and more exclusive and celebrated than collectivist ones. Religion is inherently collectivist, generally having a low barrier to entry to salvation. Same for political parities, which tend to have low barriers to entry for participation. Neither spotlight the individual. But a degree in physics or math, while much harder to obtain than going to church, brings much more prestige to the individual than being a random churchgoer. Perhaps some are tired of the celebration of ‘self’ and wish to return to simpler, more collectivist times. As I discuss earlier, some individualism and intellectualism is need to for society to advance, and there is is probably an optimal balance between the two.

This is also related to the the post-2008 rise of the ‘STEM nobility‘ and ‘STEM celebrity‘, with ‘STEM people’ becoming ‘esoteric celebrities‘ through blogs, YouTube, Instagram, Vine, Twitter, and other mediums. Wikipedia editor and blogger Guillaume Paumier is another example, as well as ThunderFoot on Youtube.

From Meta Narratives:

A meta-narrative is why was this tweet so viral? What does its viralness say about the state of America, the economy, and society? The explanation, according to this blog, is that we’re in a ‘smartist era‘ since 2008, and especially since 2013, where intellect and science is more valued than ever, and this is related to the post-2013 SJW backlash and the rise of ‘nerd culture’. Culture is emulating economics, where nerds are more valued in terms of higher wages, approbation (the tweet going viral) and appropriation (The Big Bang Theory show, Instagram culture, etc). Nerds create value though merit and talent; SJWs, on the other hand, seek to persecute nerds for nor being inclusive enough to other genders or races, or for not sufficiency spreading their wealth. Rising stock prices and rising home prices are rewarding nerds for the economic value they create, and now society, in general, is too. The viralness also seems to debunk the belief that America is ‘dumbing down’, as the joke requires an understanding of fractals, a concept that until recently was considered esoteric. If Twitter and the internet existed in 1985 instead of 2015, I don’t think such a tweet would have gone viral. Meta narratives are subjective, so yours may differ from mine, and perhaps a narrative doesn’t exist. Notice how the meta-narrative is much longer and perhaps more interesting and thought-provoking.

Had she written about a more mundane or gender-specific topic (gardening, cooking, fashion) and maybe had a fashion blog instead of a data visualization blog, no one would have cared and going viral would have been impossible. Even though fashion, gardening, and cooking are huge industries, they are saturated. Unless you have a huge advertising budget, you can get much more traffic focusing on niche or esoteric subjects than larger, mainstream ones. Consider there are 50-100 million people interested in cooking and or fashion, vs. only, say, 20,000 interested in data visualizations. Intuition would dictate to focus on the former, but this may be wrong because those popular subjects already have 1000′s multi-million dollar brands behind them, sucking in all those millions of people, whereas ‘data visualization’ has far fewer sites relative to the total audience size. 30% of 20,000 is still better than 0% of 50-100 million. Being an esoteric celebrity may not compare to being Angelina Jolie, but it’s still many magnitudes better than being a nobody. As evidenced, for example, by the huge viralness of a WaitButWhy article about the Fermi Paradox, there is a surprisingly large demand for complicated, esoteric stuff.

I wrote many articles covering the 2008 and 2012 presidential elections, but as far as I can recall have only written five or so articles about Trump, Hillary, Sanders, and the 2016 election, mainly because those subjects have become so saturated. There are simply too many people writing about those things that it’s impossible to write a perspective that hasn’t already been covered by at least a dozen bloggers and journalists. In 2008, social media was only in its infancy, and there was no vox.com, fivethirtyeight.com, or Bloomberg View. Topics such as NRx, meta narratives, intellectualism, eugenics, HBD, and Social Darwinism, although not nearly as popular as politics, have far fewer people writing about them.

As I show in the example of Warren Buffett, intellectualism, competence, and merit is what draws people in, not being extroverted. Every year, thousands of people flock to Omaha for Buffett’s annual shareholder meetings – not because Buffet is a people-pleaser, but because he is very competent and his insights are invaluable. Elon Musk, another example of someone who is extremely competent, had the most popular Reddit AMA ever. Richard Dawkins, who lately seems to have gotten into habit of offending the easily offended, also had an enormously popular AMA.

According to the ‘social taxonomy‘, it the article could be categorized as: smartist era > individual > intellectualism culture > naval gazing and introspection.

Taleb’s CV

Part 1: Nassim Nicholas Taleb: Thin-Skin In The Game

Going through Taleb’s CV, it’s not as impressive as its length suggests. Owing to his large media presence, getting published in some journals is easier, and a lot of his papers are duplicates of the Black Swan concepts. There are also a lot of opinion and policy pieces, which may not count as being scientific. Other papers are collaborations such as with Emanuel Derman. Here’s one such paper on the CV, which is very short and is not particularity new or novel. Although Einstein’s special relativity paper was also very short, typically a substantive research document is at least a dozen of pages (in order to sufficiently convey the significance of the new finding. Owing to all the ‘low hanging’ fruit being picked in competitive fields such as finance, finance, and math, it has been my observation papers typically have to quite long), but all of Taleb’s papers are extremely short.

A 2004 paper by Taleb, Bleed or Blowup? Why Do We Prefer Asymmetric
Payoffs?
, comes in at only 15 pages including illustrations and an inordinately long list of references for such a short paper, and is very light on math and data analysis. Also the subject of asymmetric payoffs was not a new concept at the time. I doubt this would even pass for a master’s thesis.

It shows it was published in the JOURNAL OF BEHAVIORAL FINANCE, which sounds prestigious because behavioral finance is an important topic that has received considerable attention in recent years, so therefore it must be an important journal, right? Nope. Wikipedia shows an impact factor of .2 – putting it at the bottom of the heap:

According to the Journal Citation Reports, the journal [1] has a 2010 impact factor of 0.262, ranking it 71st out of 76 journals in the category “Business, Finance”,[2] and 256th out of 305 journals in the category “Economics”.[3]

That’s pretty bad. In contrast, the Journal of Finance has an impact factor of 4, putting it among the top five most prestigious economics journals in the world.

Counterintuitively, the prestige of a journal tends to be inversely proportional to its specificity. The titles ‘Journal of Finance’ and ‘Journal of Quarterly Economics’ sound very broad, but they are also among the most prestigious economics journals. These journals will publish papers covering a wide variety of topics – trade policy, securities regulation, financial mathematics, quantitative finance, microeconomics, econometrics, behavioral finance – provided the research is of a high enough caliber. Lesser quality papers tend to get published in more specific-sounding journals, with long, keyword-rich titles such as Journal of Statistical Economic Methods.

The handful of papers in the CV are all sparse and published in obscure, low-impact journals. Is this a conspiracy to suppress his research? No, his research just isn’t that novel and or original. Rare events happen, people occasionally underestimate risk, and options have asymmetric payoffs. Big deal.

Also it’s extremely easy to pad a CV. Einstein is reported too have published ‘over 200 papers’ but most of these of variants of his majors work (the stochastic model of Brownian motion, the photoelectric effect, general relativity (along with Hilbert), and special relativity (mass-energy equivalence)). Major ideas can be broken apart into smaller papers, along with applications of said theories, turning a handful of ideas into hundreds of papers. Listing TV appearances, which the vast majority of people won’t verify, is another way to pad a CV. Russia Today, for example, will have almost anyone on.

Late mathematician Gian-Carlo Rota describes how duplicate results, or variants of a single results, can be published in multiple journals:

As I looked through his Collected Papers however, another picture emerged. The editors had gone out of their way to publish every little scrap Riesz had ever published. It was clear that Riesz’ publications were few. What is more surprising is that the papers had been published several times. Riesz would publish the first rough version of an idea in some obscure Hungarian journal. A few years later, he would send a series of notes to the French Academy’s Comptes Rendus in which the same material was further elaborated. A few more years would pass, and he would publish the definitive paper, either in French or in English. Adam Koranyi, who took courses with Frederick Riesz, told me that Riesz would lecture on the same subject year after year, while meditating on the definitive version to be written. No wonder the final version was perfect.

So that’s pretty much what Taleb has been doing for the past decade…milking this ‘Black Swan’ concept for all it’s worth, to the tune of millions of dollars in book deals and lots TV appearances, talks, and mediocre papers.

Jobs, Basic Income, Post Scarcity, and all that Jazz

There have been a smattering of wealth inequality/economics articles lately:

THREE GREAT ARTICLES ON POVERTY, AND WHY I DISAGREE WITH ALL OF THEM

Economics Has Failed America

Scott goes on about the unrealistic expectations of trying to teach everyone hihg-IQ skills, when biology imposes barriers to such hopes:

The QZ article warns that it might create a calcified “perpetually under-employed stagnant underclass”. But of course we already have such an underclass, and it’s terrible. I can neither imagine them all learning to code, nor a sudden revival of the non-coding jobs they used to enjoy. Throwing money at them is a pretty subpar solution, but it’s better than leaving everything the way it is and not throwing money at them.

It’s hard enough teach young people algebra; coding is many magnitudes harder. A frequently voiced concern that the cognitive requirements to perform entry-level labor may rise to a sufficiently high threshold that it excludes too many people from the labor market. This may mean that while the total number of jobs does not fall, the IQ requirement rises. Another issue is the ‘hollowing out‘ of the middle, where there too many low-paying jobs, lucrative creative class jobs, but not enough middle-income ones. Luddite Fallacy and Lump of Labor may ignore job pay or cognitive demands.

As I explain in The Economics Debate: Jobs and Automation and Coming to Terms With Our New Economy, However, there is reason for hope.

New technologies seem to spawn jobs for all skill levels. However, cars are much more complicated the carriages , yet there are jobs for all intelligence levels, from people who clean the interiors of cars to those who solve differential equations to model airflow. Also, the fruits of economic progress tend to be shared with everyone, even with rising wealth inequality, in the form of better technologies, larger social safety nets, and rising standards of living, as “Nathaniel_Bude” points out (this is such a good comments that I pasted the entire thing):

“Cost of living” is a misleading term, because the cost of staying alive has gone up much less. 1 kg of rice still costs about $1 in rich areas, rich people only choose to buy much more expensive food. And similar reasoning applies to all the other “necessities” that people somehow manage to spend so much less on in poor areas than in rich areas
.
But this increase in spending has absolute benefits. Homes with screen windows, non-leaky roofs, clean tap water, and flushing toilets – that are all factored into “cost of living” here – really can make the difference between early death and long life. It is not a “red queen’s race”. Rich people do not need these things any more than poor people. Poor people need them just as much, but can’t afford them.
So there have been huge benefits from rising GDP, and there would be huge benefits to raising levels of consumption in the poorest areas toward the levels typical in the developed world. Which is why it frankly offends me to discuss handing out more money to the poorest people in the richest areas.

Especially when there is a better alternative. Negative income taxes at the low end (like the earned-income tax credit) are not zero sum! They directly redistribute to the relatively poor, while incentivising more work and greater labor force participation rate, which raises their total income even more; and fuels economic growth, which produces a bigger pot of money that we can tax and redistribute as we see fit (like, say, to the absolutely poor).

The poor benefit as much as rich from new technologies, and new technologies create deflationary forces on prices and raise living standards. There’s perhaps a misconception that capitalists only cater to the rich; however, capitalists want to make their innovations and services as accessible to as many people as possible, provided they can turn a profit. Consider an experimental cancer drug, for, say, liver cancer. Should it become successful, the potential market is enormous – tends of billions of dollars a year or even more. It does drug companies no good to restrict cures to the very richest.

From QZ: QZ: The universal basic income is an idea whose time will never come

I’ve written about the UBI here and here.

Regard the basic income, some thoughts and ideas:

1. Means testing the basic income: those who are deemed unsuitable for a UBI are excluded.

2. Compliance: those who abuse or fritter their income are bumped back to regular welfare. If a UBI is supposed to replace most welfare, a UBI recipient going on welfare indicates a failure of the program.

3. Find ways to reduce living expenses, making a UBI more effective.

In “Average is Over”, economist Tyler Cowen floats the idea of the unemployed, unable to adapt to a changing economy, moving to low-cost regions or ‘camps’, subsiding on an inexpensive diets and cheap entertainment. Automation wrought by technology may make enough goods cheap enough that such a post-scarcity society may be possible. These ‘camps’ may be a much cheaper alternative to rent, which can be very expensive.

People could leave the camps when they have the financial means or motivation to do so, but the location of the camps may make getting work difficult unless the work is online or on the camp itself. It may end up resembling something like Kiryas Joel.

The resurgence of nuclear families are another possibility. Millennials living with their parents longer to save money, for example. Families would form multi-generational domiciles or clans, passed-down from one generation to the next, rather than everyone splintering off.

4. Unfortunately, a UBI will not make much of dent in healthcare or education, given that those can easily cost tens or even hundreds of thousands of dollars a year for a single person.

5. Will a UBI replace the minimum wage? Eliminating the minimum wage could be deflationary, auguring well with #3.

The future will be one where there is an abundance of free time, for all socioeconomic levels, with fewer hours worked, a shrinking labor participation rate, and possibly even a shorter workweek. There is a tendency among some on the left to want to ‘put everyone to work’ when it’s not necessary or possible.

Even if there is enough abundance created by technology and a generous, paternalistic ‘elite’ to give everyone, both working and permanently unemployed, a comfortable standard of living that would rival that of kings 500 years ago, people may still complain about wealth inequality and lack of fulfillment, because someone will always have more. Studies have shown that relative wealth is as important, if not more, than absolute wealth (also known as big fish in a little pond vs. being a small fish in a big pond). That’s why the solution of camps may be effective, by lumping everyone together and thus eliminating class envy.

Post scarcity also won’t provide status, ‘ownership’ ,or ‘participation’. The paradox, I suppose, is that you have all this technology and economic expansion, but the average person’s contribution to the process is becoming less and less. People generally want to believe that they are valued, that they have some sort of ‘stake’ in society, that they are contributing, and that they have some form of control. A post-scarcity ‘system’ will need to provide and or emulate those things.

Nassim Nicholas Taleb: Thin-Skin In The Game

The Talebian One himself, Nassim Nicholas Taleb, whom I have written about at length on this blog, has a new book, “Skin in the Game”, which he has been promoting on Twitter. This is not a review of the book; rather, it’s a review of his broader ideas and character.

The problems with Taleb are:

1. contradictory views
2. apparently oblivious about modern option pricing and markets; misconstruing the views of experts
3. disproving ‘black swan’ theory requires trying to prove a negative
4. thin-skinned and short-tempered
5. a dearth of viable/realistic solutions to financial regulation problems and risk

Why do I care? Because he goes around on Twitter bullying people, calling scientists and economists ‘frauds’ and ‘chalatans’, but cannot take criticism, whereas Dawkins, for example, has received much more criticism than Taleb, for far less, and takes it much better. Although Eric Falkenstein has written some much needed criticism (pretty funny review of Taleb’s AntiFragile) of Taleb regarding volatility and options, more is needed.

Taleb’s views are full of contradictions. For example, in “The Most Intolerant Wins: The Dominance of the Stubborn Minority” he writes:

The entire growth of society, whether economic or moral, comes from a small number of people. So we close this chapter with a remark about the role of skin in the game in the condition of society. Society doesn’t evolve by consensus, voting, majority, committees, verbose meeting, academic conferences, and polling; only a few people suffice to disproportionately move the needle. All one needs is an asymmetric rule somewhere. And asymmetry is present in about everything.

This is an elitist view, which I agree with, but it seems contradictory to his populist-inspired attacks on universities and academia, his support of Sanders, and his promotion of the ‘Fat Tony’ character (the ‘everyday man’) over the academic. It’s like he can’t make up his mind. He seems to be subscribing to the Daniel Kahneman view that everyone, including the smart and elite, are irrational and susceptible to simple cognitive biases (like the conjunction fallacy and anchoring), in effect promoting leveling – that ‘smart people’ are not so smart and rational, after all. This is also similar to the blank slate, which could explain why Taleb is so close to Gladwell and Kahneman but enemies with Pinker. (This feud dates back almost a decade, during the so-called IQ Wars.) As I explain, proponents of the ‘blank slate’ often believe that no one is intrinsically better than anyone else (leveling), and that it’s the role of the state to help create equal outcomes. Moral relativists tend to believe all humans are inherently irrational and corrupt, and that that is no preferred standard of morality or a ‘more rational’ group of people. Although Bryan Caplan argues that most people are too irrational, too ill-informed to vote, the distinction is that Taleb holds the reverse view, which is that the ‘elite’ are irrational and the ‘everyday man’ is more rational and exalted, a view compatible with left-liberalism and moral relativism.

If there are a small number of superior people (as Taleb indicates by the quoted passage), why not put them in power? Instead of making arguments for why smart people deserve more, he advocates populist views and policy that would cause harm to the most productive, most useful members of society. By doing away with centralized, interconnected systems, society would fall, and the smart, exceptional people that Taleb pretends to care about would find their talents misplaced. Society reverting to a post-apocalyptic, chaotic, disconnected, hunter-gatherer state would hurt the cognitive elite, since their priorities would likely be diverted to finding food and shelter, not making abstract discoveries.

Taleb attacks academia, failing to realize that academia (once you eliminate the ‘safe spaces’, ‘trigger warnings’ and other SJW-nonsense) is essential for sharing ideas. The equations Taleb uses were derived by academics cooperating with each other and sharing their ideas, with one idea built upon an earlier one. That’s why his attacks on ‘nerds’ doesn’t make sense: nerds derived all the math he uses in his papers, and without ‘nerds’ (or the ancient equivalent), humans would probably still be scribbling in dimly-lit caves…

Although Taleb occasionally hints at holding ‘libertarian’ economic views, which is why he’s respected among ‘alt right’ circles, I believe he’s a liberal who possibly has SJW leanings. Being a liberal is more than just identifying as a liberal – it’s mindset, a constellation of beliefs. It’s about attacking conservative figures. It’s about attacking ideas that are congruent to the ‘right’, including HBD, ‘order’, and ‘stability’. It’s about allying with those who are antithetical to the ‘alt-right’ (Gladwell and Matt Taibbi).

Here is Taleb attacking Trump and the Ronald Reagan in the same tweet:

Instead of taking Taleb’s word for it, I decided to investigate further, reading actual books on the matter instead of tweets, and while Reagan was probably not as sharp as Nixon, he was competent enough for the job. Contrary to popular myth of being an amiable dunce, Reagan was an eloquent speaker, a quick study, and had strong command of the issues. He also wrote thousands of letters and was well-read on a wide variety of topics, from philosophy to history.

Also, how many Tweets by Taleb are there criticizing Obama’s personhood (not policy)? Zero. Although Taleb may criticize some of Obama’s policies (such as foreign policy), the attacks are never personal, unlike his attacks on republicans like Trump (who he calls ‘Donaldo’) or Reagan.

Furthermore, Taleb has never spoken out against SJWs, black lives matter, or false rape accusations.

Here is Taleb endorsing non-interventionism, although such views are not unique to him:

There is a famous story about George Washington during the drafting the Constitution. It was suggested that a clause be included to limit the size of standing armies, to which Washington quipped to the effect that there should also be a motion limiting the size of an invading army.

That’s the problem with non-interventionism – it only works when everyone adopts it, but like the size of an enemy army, it’s perilous to make such a generous assumption. Non-interventionism means allowing the enemy to build-up at their leisure until they are ready to mount a massive attack, rather than eliminating the enemy at the onset of potential trouble. Neutrality didn’t prevent Pearl Harbor from getting bombed, and the attack forced America to abandon non-interventionism and enter the war, although one can argue that American involvement in WW1 was an instigating factor.

In some cases, non-interventionism may not be an option or may lead to undesirable outcomes. Consider three countries, A,B, and C. A and B are trade partners, and B and C are neutral. Then B does something, inadvertently perhaps, to provoke C into war. With B losing the war, the economy of A is endangered, so A must intervene on behalf of B.

But doesn’t interventionism conflict with Pinker’s thesis about the world becoming less violent? Not necessarily, because America military might and willingness to use it (big stick) may dissuade countries from engaging in war, knowing that the United Sates may intervene at great cost to the aggressor.

In showing his softness on terror, here is another tweet:

Yes, technically that is true, but sometimes Islamic terrorism is really just Islamic terrorism. Incompetence allows terrorist attacks to happen.

Even liberals such as Richard Dawkins and Sam Harris understand the threat posed by Islamic terror on free society, and understand that the more radical elements of Islam are a threat to free speech, the religious equivalent of SJWs. But Taleb is silent on the matter, refusing to denounce Islamic terror and mass Islamic immigration into Europe.

Here is Taleb attacking Hillary:

I don’t like Hillary either, but it’s obvious that by never attacking Sanders, Taleb is sympathetic to welfare liberalism. Sure enough, here is a tweet praising Sanders:

I fail to grasp how promoting a message of division and class warfare is ‘saintly’.

Taleb wants to believe that the complexities of science and theory should be reduced to a bunch of aphorisms and heuristics. Or that ‘skin in the game’ is more important than expert opinions, but as Scott notes:

I guess the thing I’m not sure about is – does personal experience/”skin in the game” reduce fully to factual propositions? Does a factory worker have an advantage over a journalist in understanding globalization just because he knows that being laid off is really bad, and that it’s harder to get a new job than a journalist thinks – two things we would expect any journalist worth their salt to already know about? Or is there some hard-to-communicate knowledge that’s neither factual nor just a cover for “the secret hard-to-communicate knowledge that I am selfish and want a system that benefits me rather than other people”?

A person who is unemployed may be able to provide a personal account to justify why the economy is bad, but his opinion may be skewed by his own negative predicament and thus not indicative of the economy as a whole. Rather than deferring to anecdotal evidence, it’s better to defer to the actual economic data itself, weighing the summation of the good against the bad. Yes, losing your job sucks, but it doesn’t mean the whole economy sucks. This is related to the fallacy of composition.

Taleb’s arguments are easy to debunk by anyone who has actually traded options, understands elementary statics and option trading, or anyone who has actually studied option pricing, and being that I have done all three, dismantling Taleb’s arguments is a breeze:

Taleb’s books, papers and lectures repackage knowledge that statisticians, traders, and economists are already well-aware of. Fat tails and concave/convex risk are not new concepts. Pretty much all he does is state what anyone with some background knowledge already knows: that, yes, all statistical models have limitations, selling options can entail a greater loss than buying them, a single ruin can undo all prior wins, and models may underestimate risk. Although there is is nothing wrong with repackaging – new ideas are hard to come by, and pretty much all popular science books regurgitate information that exerts already know – Taleb has made a career out of distorting and misconstruing experts and professionals, whether it’s about statistics, option trading, or risk management. Taleb insist traders and statisticians are are obvious to the concept of fat tails, convexity, and ‘tail risk’, when in fact they are aware of it, and long before he wrote his books and papers ‘discovering’ it.

If you read his Twitter, Taleb often posts links to various math equations as if the concepts are new or his own, when they are not. It would be like me transcribing calculus equations from a textbook onto my website, Twitter, and PDF files and then calling them my own. To those who don’t know calculus, I may look like a genius, but to those who know calculus, I’m just re-posting stuff that is already known.

Taleb claims to be an option trader, but some of his comments suggest ignorance of how modern option markets work, as well as ignorance or omission of post-Black Scholes option pricing literature. Taleb argues that options are incorrectly priced to account for black swans – but, actually, options are priced correctly to account for jump processes and skew, with the research on the matter (jump diffusion models) going back to the 70′s. There are very complicated option pricing models that account for jumps and variable volatility. A Google search reveals a handful of pricing models that generate ‘fat tails’ and ‘volatility smiles’.

Second, the EMH stipulates that options are priced correctly, and if they weren’t then traders could make abnormally high returns from the inefficiencies, which would then eliminate the inefficiencies. Active management has done very poorly in recent years, suggesting a market that is more efficient, not less. Option traders make money from selling overpriced options and by betting on market direction, but not from the options themselves being inefficient or the market pricing the options incorrectly.

In a paper, Taleb argues that selling OOM (out of money) puts is a bad idea due to the volatility explosion, but this assumes that options are priced strictly under the Black Scholes framework and that options can be traded at infinitesimally small fractions of a penny. In reality, the volatility smile or skew makes these far OOM put options much more expensive than assumed by Taleb and the Black Scholes framework, thus substantially limiting potential profit. Also, there is a minimum ‘ask’ price for OOM puts, usually a couple cents. The huge multipliers given by Taleb are under the assumption you can buy OOM options for infinitesimally small fractions of a penny, which you obviously can’t.

Here is Taleb again talking out of both holes, dragging in the mud economist Justin Wolfers in the process:

Taleb fails to grasp that just because rare, unforeseen events occasionally yield option buyers extremely large profits, doesn’t mean the options are incorrectly priced or that option sellers are oblivious to risk. As I explained earlier, OOM (out of money) options have a skew or smile to account for the possibility of these rare events. This means that although option buyers can make large profits, the skew makes the expected value of these trades (over many years) still negative. This means that for every trader who strikes it rich with a black swan, many more will fail, and the ‘house’ will still come out ahead. No free lunch. Just like Taleb underestimates the intelligence of his critics and the intelligence of policy makers, Taleb vastly underestimates the intelligence of modern markets. Anyone who reads a Taleb book thinking it will give them an edge in today’s super-efficient market, is just a sucker.

If you can judge someone by the company they keep, Taleb prefers the company of pseudoscientists to actual scientists and economists, an indictment on his intellectual credibly, and is why scientists (rightfully) ignore Taleb’s tweets, dismissing them as rantings of an unhinged dilettante.

Taleb is incapable of debating at a high school level. For example, regarding Pinker’s “Better Angels of OUr Nature”, which argues that the world has become less violent, Taleb’s counters that we don’t know the ‘true’ variance of the distribution that underpins violence, meaning that Pinker is not accounting for possible black swans like nuclear war that may kill millions of people at once. Taleb uses this argument against all his critics, but the problem is, methodologically, such an argument is fallacious. Taleb is invoking the argumentum ad ignorantiam logical fallacy by forcing Pinker prove that there won’t be nuclear war or some black swan, and in the absence of such a proof Taleb must be right. Of course, such a proof is impossible. Whereas Pinker’s arguments involve empirical evidence of how the world is safer, Taleb waves it away by forcing Pinker to prove a negative: that nuclear war (or some other great crisis) won’t happen. (See Russell’s teapot)

Here’s a Facebook post by Taleb defending pseudoscience purveyor Malcom Gladwell:

Many people are harrassing Malcolm Gladwell. Assuming critics are right about the anectodal aspect of his work, many many social “scientists” are much worse, many are dangerously ignorant of the very notion of “evidence” and the validity of statistical claims. And if he who is clueless about statistical inference is clueless about science.

By ‘many people’ he means anyone with a brain? Anyone with at least a room temperature IQ, if they think hard enough, can see through Gladwell’s nonsense. It’s not surprising both authors, who have made fortunes repackaging unoriginal ideas and disseminating erroneous ones, gravitate to each other.

Although on Twitter Taleb constantly rails against journalists, his BFF Gladwell is a journalist, albeit a very glorified one that is probably often mistaken by non-scientists for being a scientist.

On Twitter, Taleb regularly attacks real scientists – Richard Dawkins and Pinker – who are also critics of SJW-liberalism. I guess Taleb would rather side with the SJWs than side with scientists who are at war with them (the SJWs), in the battle for intellectual honesty and the free dissemination of ideas.

As other have noted, Taleb is thin-skinned as rice paper and will block anyone on Twitter who disagrees with him, as well as having a short temper. He’s also liable to insulting his intellectually superior opponents, with retorts like ‘bullshit’, rather than forming actual substantive counterarguments. He’ll even insult regular Twitter users who merely point out the holes in his arguments, which are often wide enough to drive a truck through.

Here’s a recent example of Taleb accusing Noah Smith, who despite being a liberal deserves praise for standing up to the Taleb bully, of being a ‘charlatan’ for writing a negative review of one of Taleb’s books, as well as calling someone else an ‘imbecile’ and an ‘idiot’ for disagreeing:

For some who wrote a book titled ‘Antifragile’, Taleb sure has a fragile ego.

It’s funny how Taleb accuses Noah of using strawmen arguments when Taleb himself can’t formulate a cogent refutation, apparently conflating car theft, which is a crime, with a negative book review, which is protected speech under the First Amendment…

He also doesn’t offer any good solutions to regulatory problems in his rants against ‘too big to fail’ and ‘systemic risk’, and like Bernie Sanders and Elizabeth Warren, he blames bankers and Wall St. but ignores the role of the irresponsible homeowner. In response to the problem of black swans, he say to make systems ‘anti fragile’, but this is not a solution; it’s a buzzword. In a perfect world there would be no systemic risks, but such a world cannot exist if economic activity is not to be disrupted significantly. Just saying ‘break up the banks and make everything smaller’ is not only unfeasible, but it may backfire. Smaller banks and and less centralization didn’t prevent the Great Depression or the many smaller crisis of the 1800′s and early 1900′s. In fact, central banking was created to prevent bank runs, which plagued the economy for much of the 18th, 19th and some of the early 20th century. From the early 1800′s up until 1920, I counted eight financial panics in the US, compared to just two (Great Depression and 2008) in the past 100 years, so one can argue that centralization has made the US financial system more stable, not less so. The savings and loan scandal was very small relatively speaking to the overall economy, so it’s excluded. Although there were recessions in the 70′s, 80′s, 90′s, and 2000′s, the financial system itself was not at risk but rather these recessions were attributable to economic cycles.

It’s unreasonable to blame policy makers and banks for failing to anticipate black swans, because by Taleb’s own definition they are random and unpredictable. Imagine a bus is hit by meteorite, killing everyone but the driver. Is the driver culpable for not foreseeing the impact? Rather than losing sleep over black swans or trying to be psychic, a more practical approach is to have systems in place to contain crisis as soon as it arises, along with reform to help prevent future crisis. The 2008 bank bailout (TARP), although maligned by almost everyone, was a success, sequestering the weakest parts of the economy (banking, housing) so the healthier parts (payment processing, technology, web 2.0, retail) could thrive. Eight years later, TARP has surpassed even the wildest of expectations, with lending standards much more stringent and bank reserves fatter than ever, and by early 2011 the treasury reported a profit.

Part 2: Taleb’s CV

Theranos: The Cards Fall

With recent news of Theranos voiding test results, and other revelations, there is now a definite possibility Theranos has been mortally wounded and that my earlier optimism may have been misplaced. But now even accusations of ‘fraud’ are being thrown around, and I think that’s where the line needs to be drawn.

From zr0h3dge: http://www.zerohedge.com/news/2016-05-18/elizabeth-holmes-admits-theranos-technolgy-fraud-restates-voids-years-test-results

And Seeking Alpha, or as some call Seeking Losses:

What Investors Can Learn From The Theranos Fraud

Hmmm..I’m not a lawyer, but I’m pretty sure intent to defraud (bad faith) can only be proven in a criminal court, not in an online opinion piece.

Mistakes and failures are an unavoidable part of capitalism, and is failure in itself is not proof of fraud. Fraud involves a deliberate, malicious intent to deceive investors, customers, and other entities. Attributing mistakes and misfortune to fraud can have consequences such as dissuading capitalism, for fear of being libeled if things go wrong. The left does not understand this.

The zr0h3dge one is even worse because it’s apparent ‘Tyler Durden’, who in playing the holiness card has some skeletons of his own in his closet, doesn’t even know what Theranos does:

In the process of commiting fraud and building up her valuation, Holmes repeatedly gambled with people’s lives, sending them clearly wrong results. As a result some patients have received erroneous results that might have thrown off health decisions made with their doctors, the WSJ reports. All this is needed is one death and there is a criminal case.

In other words, Theranos may have put as many as 890,000 lives per year in jeopardy with its fake technology.

The good news, this is now officially game over for if not Elizabeth Holmes, then certainly her company:

Talk about hyperbole. Theranos only offered basic blood panels and tests for Herpes Simplex 1. Theranos tests were never intended or marketed for life or death situations. The FDA does regulate, for example, the accuracy of glucose meters, but Theranos never offered such tests. Someone whose life hinges on test results would not use Theranos; they would go to a hospital or use FDA-cleared test kits. It would be very difficult to prove in a criminal court that Theranos test results endangered lives. More likely it would go to a civil court.

From Wired:

The bigger threat comes from consumers. Many people probably made medical decisions based on those two years of voided tests. Or perhaps they wrongfully decided to forgo medical treatment for a misdiagnosed condition. “If Theranos negligently did blood tests, then someone has a right to sue,” says Davidoff-Soloman. “And it looks like it might be a good case.” But so far, he says he has not seen any examples where a person has popped up and said they were adversely affected by the results from a Theranos test. So again, wait and see.

Also voiding test results not not prove fraud or that the test results are egregiously wrong, as no blood test is 100% accurate. If Theranos was promoting these tests to symptomatic people of a possible life-threatening condition, then perhaps there is a case if Theranos was egregiously inflating the accuracy of these tests. Like if someone was extremely fatigued, had petechiae, and then took a WBC Theranos test that came back normal, only to be later diagnosed with Leukemia. But in such a circumstances, most people would go to the emergency room or primary care physician, who would order tests using conventional technology.

Also

…and outsourcing 94% to companies whose products actually worked and many of whom likely had a far lower valuation than the one at which a bunch of idiot billionaires “valued” Holmes’ worthless company.

Hmm yet those ‘idiots’ are billionaires and you’re not. Venture capitalists understand there is a non-zero risk that that their investment may, due to unforeseen circumstances, become worthless. The most spectacular implosion I can recall is Myspace, which went from being worth $5-10 billion in the Spring of 2007 to being nearly worthless by early 2009. That’s the risk associated with venture capitalism.

I mean, I guess there is a possibility of fraud, but imho it’s still too early to know.

Entering the ‘Grey Zone’

How to Be Grumpy: Aaron Clarey’s The Curse of the High IQ

This passage stood out:

Look, kid. (I was born in the first week of ’75, so there’s no way he’s older than I am.) Are you aware that Voltaire was repeatedly deported and imprisoned in the goddamn Bastille for bringing about the very Enlightenment that allows you to have a free market to analyze? You root for the Stefan Molyneux podcast on your show. How can you not be aware of the fact that Socrates was freaking killed by the mob for his efforts to bring reason and evidence to Western civilization?

We upbraid SJW-types for their ingratitude, bitching about European culture while enjoying the comforts that the dreaded white males have invented for us. Well, maybe you could say a little thanks to Voltaire for going through all that crap so you can have the freedom to make a grand a day consulting.

It was philosophy and literature that built the ideological framework for the liberties we enjoy. Stefan Molyneux doesn’t spread free market ideas by writing code, he does it with philosophy. The Marquis de Sade suffered in the Bastille too, just so you could have Internet porn. The fact that green-haired idiots whose written English is no better than Clarey’s have taken over literature departments doesn’t mean freaking John Locke was an idle playboy. That’s like saying the entire gaming industry is worthless because Anita Sarkeesian thinks she’s part of it.

Here we see Ann Sterzinger entering the ‘grey zone’, supporting some ‘enlightenment’, particularly as it pertains to intellectual output, but rejecting SJW-liberalism and egalitarianism. But then you invoke the slippery slope argument, which is that a little liberalism will eventually lead to full-blown liberalism.

I also agree with this passage:

As if I weren’t already enough of a freak, my elementary school decided to deal with it by making me skip a grade, which guaranteed I would get the crap beat out of me on the regular by the bigger, older farm girls. Not that there was anything else to do with me. “Gifted and talented” programs were limited to a one-year experiment when I was in fifth or sixth grade; all of the extra money in the tiny budget was already eaten up by the special education programs. Because morons are “special.” (And then they were shocked when I took up with Ayn Rand in high school.)

Reforming education, to stop throwing money at the ‘bad’ (the far-left side of the Bell Curve), is a good start, and is an example of a ‘grey zone’ policy.

To codify this as ideology, reactionary realism is about understanding reality as it is and then acting accordingly, eschewing wishful thinking and sensationalism (like Peter Schiff, Zerohedge, and other doom and other ‘doom and gloom’ prophets and gold peddlers). Related, the ‘rationalist right’ combines elements of rationalism and empiricism, with right-wing perspectives on economics, defense and homeland security, HBD, and sociology, as well as a being pro-technology and pro-civilization. Sorta like HBD meets neoconservatism, with some anarcho capitalism and classical liberalism spliced in, and rejecting most if not all democratic institutions, to be replaced by a fundamentally different ‘system’, as Mark Yurray writes:

The alt-right is a racialist populist movement that views mass immigration as a problem to be solved with right-wing populist politics…

….The neoreactionary solution to this problem is not right-wing populism, but a reboot of the government: retire the millions of public workers and put one CEO/King in absolute power with the authority to steer the country along the best path he can see.

Although he leans centrist, Josh Brown of The Reformed Broker could be a recent example of someone who is both pro-capitalism and technology, is empirically minded, and rejects populism, hype, and sensationalism. Further on the right, George Gilder may be another example, who despite being pro-technology (I mention this because some on the ‘right’ mistakenly lump technology with liberalism, when technology and NRx can be compatible.) and supporting free markets, is a vocal critic of feminism and the breakdown of the family structure. Marc Andreessen and Peter Thiel are possibly others.

Good policy‘ should advance civilization, even if such policy is unpopular with a constituent, deviates from conventional thinking (heterodoxy), an or is temporarily inconvenient and or requires short-term sacrifice (consequentialism, categorical imperative). The 2008 bank bailouts, for example, could be seen as being ‘pro-civilization’ by stemming the bleeding (which policy could have prevented, but assuming that such preventative measured were impossible, necessitating intervention) at the cost of the ‘free market’ being temporarily suspended in the process. Despite the bailouts being hated by everyone, however, in the long run, it was a ‘success’ by enabling free market capitalism to thrive afterward (success like Tesla, Facebook, Uber, etc), by stemming the bleeding from the weakest sectors (housing, banking) so the healthier sectors could thrive (retail, payment processing, internet, etc) instead of being weighed-down. In evolutionary theory, species die because they cannot adapt, due to a lack of variation. Mutations (deviations) allow some to survive changing environments. Likewise, policy should be flexible enough to adapt to changing environments.

Related: WHY GREY ENLIGHTENMENT?, Brief Into

Chinese nationals pour more than $150 billion over five years into US real estate

Chinese nationals pour more than $150 billion over five years into US real estate

But during the same period, at least $127 billion went into US homes, and in the 12 months to March 2015 — the latest period for which relatively comprehensive data could be gathered — home purchases totalled $39 billion.

That put the Chinese past Canadians, who have long been the biggest foreign buyers of US residential real estate.

Geographically, Chinese buyers are concentrated in the most expensive markets: New York, Los Angeles, San Francisco and Seattle, but Chicago, Miami and Las Vegas have also drawn buyers.

But isn’t America supposed to be in decline due to wealth inequality, says the left? Or isn’t housing supposed to be a bubble, says Shiller? The wealthy, smart Chinese are ignoring the left, buying real estate in high-IQ regions like the Bay Area, and it makes the left angry that the Chinese are ignoring the doom and gloom. The left has been predicting a bubble in Bay Area real estate since 2012, and they keep being wrong. Same for that moron and human bullhorn Peter Schiff, who has been sounding the false alarm for crisis since 2009, to no avail. Smart, productive people will keep making the left look like fools. People who predict crisis are wrong 99% of the time and sit on the sidelines as everyone else makes money. Just as there is no bubble in technology, there is no bubble in high-end real estate. Instead, it’s a flight to quality as the wealthy Chinese look for safe havens to park their piles of cash. In bubbles, low-quality assets become overpriced. Even in web 2.0, only the cream of the crop (Uber, Air BNB, Snapchat, Slack, Pinterest) are seeing stratospheric but sustainable valuations, while low-quality companies like Jawbone, Fitbit, and Gopro smolder.

Related:

China’s investors find safe haven in American real estate
China and The Liberal War on Success

Lessons From the Trump Surge: What We Learned

1. You cannot buy victory. Although the left insists money has corrupted politics, allowing the rich to buy elections, Jeb Bush spent over $130 million on his campaign, with nothing to show for it, while Trump spent very little and still bested all of his competitors by a large margin:

2. The pundits are (almost always) wrong. With the exception of Mike and Scott, few pundits predicted the accent of Trump. Even Nate Silver got it wrong.

3. Connecting with voters is crucial. Trump’s divorces, past ‘liberal leanings’, and bankruptcies didn’t impede his ability to connect with voters, who supported Trump on one issue above all: immigration. In 2008, Obama wooed voters on a single issue: economics, specifically promising to undo the mistakes of the Bush administration. Jeb, Rubio, and Cruz were never able to forge the necessary connection with voters, preferring instead to uphold ‘safe’ status quos instead of taking risks by tapping into the fears and frustrations of voters.

4. Never apologize. Trump received flak for his comments on Mexico, Muslims, Megyn Kelly, and John McCain, but refused to recant, knowing that doing so would show weakness to his supporters and that apologizing would not change minds of those who already didn’t support him. Also this tries into ingroup/outgroup dynamics. By making these comments, Trump is signaling to like-minded supporters (ingroup) against an outgroup (‘establishment conservatives’, feminists, SJWs, mainstream media, etc).

5. Make others play your game; don’t play someone else’s game. Trump knew he would not get a fair shake at a Fox News debate, so he didn’t show up, knowing that that the ratings would plummet in his absence; consequentially, the debate was cancelled.

6. Leverage the media. Trump would quote statistics that were possibly exaggerated, knowing that the media in ‘fact checking’ would inadvertently make the subject matter of those comments the focal issue. Trump quoting statistics about black-on-black crime got the media talking about crime, for example.

7. Trump is a one-man media empire. Although the WSJ and NYT twitter accounts have 11 million and 22 million followers, respectively, their tweets on average only get 40-100 ‘engagements’ (likes, retweets) whereas Trump’s account, which has only 8 million followers, gets between 4-10 thousand engagements per tweet. This means a single Trump tweet probably has more ‘reach’ than all of the mainstream media combined. There’s no need for Trump to waste money on ineffective, costly campaign ads when Twitter and Facebook are free and have substantially more engagement and virality.

8. Related to #7, social media is taking over traditional media. From Reddit to 4chan to the ‘alt right’, Trump is like the Ron Paul of 2016, channeling internet grassroots enthusiasm, with ‘cuckservative’ as a rallying cry for millions of those on the ‘right’ who had enough of a party indifferent to the issues really important to voters (immigration).

9. Until recently, hoaxes took time to debunk, often after the damage had already been done. However, with the collective intelligence of social media and sites like Reddit, these armies of netizens are not only influencing the news cycle but are also debunking hoaxes within hours instead of days or weeks, forcing the mainstream media to quickly retract stories and issue corrections. A recent example is the Michelle Fields assault hoax, which falsely implicated Trump staffer Corey Lewandowski. Now the left is trying to create a narrative that Trump is a womanizer, in a New York Times article that too was quickly debunked as a hoax, with many comments by women taken out of context to defame Trump.

10. Trump is like Teflon. Related to #3, because Trump is so masterful at connecting with voters, he’s impervious to everything, and the media’s only recourse if to make stuff up (#9) when facts fail.

Coming to Terms With Our New Economy

(Parts of this essay were cut from an earlier article, which I shortened to make a new one)

From Forbes: Why ‘The System’ Is Rigged And The US Electorate Is Angry

Then in the 1970s, something went wrong. It was as if a strange new economic disease began to infect everything. Firms focused more closely on making gains for themselves and stopped passing on gains in productivity to their workers.

Here is the chart, which I’m sure everyone has seen, that shows how real hourly wages have stagnated relative to productivity:

There are a few things to keep in mind:

1. Living standards have surged. Technology, as well as very tame inflation, has made many things cheap and affordable, compensating for the decline in real wages. If CPI-based inflation is close to zero, does it matter that real wages are also flat?

There is a positive side effect of automation: deflation. By increasing productivity and efficiency, technology acts as a deflationary force:

Think about computers: your price per speed and functionality in your computer has gone down every year since they’ve been invented.

ANOTHER GREAT EXAMPLE OF INNOVATION AND DEFLATION

Think about lighting your house. In the 1880s you would have to work for 15 minutes to pay for an hour of kerosene lamp usage.
Today you have to work for 1/2 a second to get an hour of reading light.

Ditto for cars. For clothing (as a percentage of your income) and even for food (as a percentage of your income – food costs have gone from about 20% of your income in 1969 to about 3% of your income. )

However, there is a caveat. As Scott Grannis and myself have noted, inflation/deflation is bifurcated, with services being more expensive despite durable goods (like electronics) being cheaper:

2. Entitlement spending is also surging – services such as medicare, education, welfare, social security, emergency room treatment.

3. Non-wage compensation has also surged. Companies are paying more in benefits such a healthcare.

4. Although we’re seeing a hollowing out of the middle, there also also been a gain in upper-income jobs.

It is true that Pew’s analysis shows that the number of households that fit within their categorization of middle class has shrunk by 11 percentage points since 1971 [from 61% to 50%]. It is true that the proportion of households that are classified as lower class has increased from 25% to 29%. But it is also true that the proportion of households that are classified as upper class has increased from 14% to 21%.

That is to say, part of the reason that the middle class is disappearing is that they are succeeding and jumping to the next bracket. And a greater number of them are moving up than moving down. Be wary of the assumption that the drop in the middle class is a sign of a crisis.

5. The evidence suggests there will always be new jobs despite automation, although of course like most things pertaining to economics there is no unassailable ‘law’ that says it must be this way. There are income opportunities that are stretch the imagination, inconceivable. For example, on YouTube there are hundreds of these ‘ASMR’ channels, and these video bloggers are quite popular, with tens of thousands or even hundreds of thousands of subscribers. It’s not music – it’s sound effects that are intended to be relaxing, and apparently there is a very large market for this that just a few years ago didn’t exist.

Niche service sectors and professional services will do better than manufacturing. For example, audio editing (to take advantage of the boom in pod casting), copy editing and audio book reading (to take advantage of the post-2008 writing boom), video editing (for Youtube), and so on. Also spyware removal and computer repair.

Professional, high-IQ services will thrive: doctors, lawyers, quants, programmers, etc.

The low-IQ service sector (clerical work, fast food, Walmart door greeter, etc.) will see growth, although the jobs won’t pay much.

But there will be a hollowing out out of overpaid, mediocre-talent jobs. The decline of manufacturing will continue. In today’s competitive, ‘average is over’ economy, you have to be exceptional or you will find yourself on the lower rungs of society.

I discuss automation and unemployment in more detail here.

Coincidentally, Reddit seems to agree with #1, in a recent ‘Shower Thoughts’ post that went massively viral: My standard of living is far greater than that of a king in medieval times.

Here is the most up-voted comment, which was also ‘gilded’ in approval:

I think people are taking OP overly literally saying that he doesn’t have the powers of a king.
What he means is that in our modern world we can eat food from almost anywhere we please, we have modern healthcare that can cure diseases that would have been fatal in medieval times, we can travel to other lands quickly and safely. All of this would have been out of reach for even the wealthiest people in medieval times.

However, class envy plays a major role, as someone on Reddit astutely points out:

Many/most people are more concerned with relative status than absolute progress. This makes evolutionary sense. My genes want to make copies of themselves and this is more driven by where I stand in comparison to everyone else than how high my standard of living is.
When people discuss income inequality, this is the factor driving their concerns. Because it’s a deep-seated emotion, people frequently do not realize relative status is the reason they care about inequality. They then engage in motivated reasoning and generate alternative reasons, like the rich are taking from the poor. While the stated reasons for being concerned with income inequality are frequently illogical, the underlying sentiment that causes them is not.

Bernie ‘wealth spreader’ Sanders’ whole campaign is about pitting the poor against the rich. Rather than celebrating wealth creation and technological progress, the left wants to take away the fruits of labor from the most productive, fanning the flames of class warfare.

I’m sure you’ve heard this Marxist slogan, ‘From each according to his ability, to each according to his needs’. Although communism promises to end scarcity, the result is an abundance of nothing. Everyone is equal, but worse-off as a result. Without incentives, there is no production.

But that doesn’t mean capitalism isn’t entirely shielded from criticism, which is that capitalism, especially in the increasingly competitive winner-take-all post-2008 economy, requires a lot of debt, effectively making it ponzi-like in nature. To succeed in post-2008 capitalism, due to the exorbitantly high costs and competition, you need to convince someone to write you a blank check, and then that ‘someone’ also needs funding from someone else, ad infinitum. As opposed to multinationals that can borrow at next to nothing, borrowing costs for small businesses are too high and the failure rate is also very high, leaving the entrepreneur financially ruined. The implosion of the banking and housing sector in 2008, and, in 2014, the implosion of the energy sector, brought to light the risks associated with debt and leverage. But capitalism still works and is the best of all alternatives. This is because while the failure rate is very high, as are the initial costs, the expected value over many iterations is still positive.

And from the New York Times: What’s Our Duty to the People Globalization Leaves Behind?

What is often forgotten or ignored are all of the people globalization helps lift up. By several estimates, free market capitalism has pulled over a billion people out of poverty.

To quote Peter Nixey:

In addition to that, in the the last 50 years the world has become a much better place to live. Health, wealth and education are up across the board. That’s happened because our economies are more efficient and effective. The people who run the businesses that drive those economies have benefitted proportionally. Is it really such an issue if a few people get rich so a lot of people can wealthy?

No, it’s not a major issue, and many Americans agree. Online, it’s a different story, and it seems like everyday there are at least a couple articles about wealth inequality and tangentially related topics of capitalism, technology, and globalization…that just goes to show how important of an issue it is to many people (online that is). Offline, it’s not really such a big debate. Sports, news, and celebrity gossip tends to dominate offline discourse. The economy is an issue that affects everyone, and solutions to problems are hard to come by, and that’s probably why it’s such a heated debate, with participants ranging from economists to average people.

However, as I discuss in Paul Graham: Economic Inequality and The Refragmentation, there are no obvious or simple solutions to people who are displaced/disenfranchised by globalization and or automation, and none without major limitations. We’re probably going to be seeing more ‘gig’ jobs, more entitlement spending, and a lower labor force participation rate. As mentioned before, cheaper goods offsets lower real wages, since globalization helps keep costs low by exporting inflation. Historically speaking, and as I explain earlier, new jobs tend to be created to replace obsolete ones, and globalization may also spur job creation. Simply getting rid of globalization may introduce more problems than it solves.

Maybe we need to come to terms with the fact that the meritocracy is one stratified by IQ, with some having the cognitive potential to produce more merit than others, and those smarter people will tend to rise to the top socially and economically, too…But in return, we (average people) get new technologies, job creation, and higher standards of living owing to the creations of the cognitive and financial 1%.

Boris Johnson is right in that the economy has been ‘shaken’ and all the ‘high-IQ cornflakes’ are rising to the top of the ‘cereal box’ that is analogous to the economy. The outrage by the left over his comments was predictable, as million of people want to believe they have free will instead of having their fate largely determined by a number, IQ. That doesn’t mean we need to do away with merit or get mad, but instead offer economic conditions for everyone to succeed within their cognitive limitations. You can’t raise society and the economy by chopping down the smartest, the most successful, which is what Paul Graham was getting at in his essay. Class warfare is analogous to Animal Farm where the uprising makes things worse for everyone. People who are rich should not have to prove they are sufficiently empathetic to the poor. There’s a saying, ‘offence is taken, not given’.