Monthly Archives: May 2015

Defending Rational Markets

Liberals like to assume markets and individuals are irrational, in agreement with their denial of individual cognitive exceptionalism. After all, if everyone is an irrational blank slate, how can anyone be intrinsically better than anyone else?

It’s then not surprising to see Michael Lewis – the inveterate liberal anti-banker journalist – be in favor of ‘irrational markets’ view, in a Bloomberg view article: The Economist Who Realized How Crazy We Are. A commenter quickly refutes the premise of the article, correctly arguing that choices that seem irrational in retrospect or to outside observers may not be irrational to the person carrying them out:

I disagree that people are irrational. What seems to be irrational to someone is simply behavior we don’t understand or agree with the reasoning behind it.

Everything makes ‘sense’ to the person doing it at the time they’re doing it for reasons they and they alone determine to be worthwhile. An observer may not be able detect the reason for that action. At other times, the observer might understand the reasoning, but disagrees with it. In neither case, does this mean the action doesn’t make perfect sense to the person making the decision.

I’ll cite the example of the guy faced with mowing his yard. I too don’t like paying someone to do things that I could do myself (up to a point), but that doesn’t mean I want to do the same thing for someone else. So I too might not want to pay someone $10 to mow my yard while I would turn down $20 to mow someone else’s yard.

When economists talk about ‘rationality’, it’s not how lay-people use the word, who typically use it mean a ‘level-headed’ person. In ‘econ-speak’ it means:

A decision-making process that is based on making choices that result in the most optimal level of benefit or utility for the individual. Most conventional economic theories are created and used under the assumption that all individuals taking part in an action/activity are behaving rationally

So all else being equal, choosing a $4 quart of milk is the rational choice over spending $10 for the same milk. This pertains to investing because some economists, especially those on the left like Robert Shiller, argue that individuals who buy stocks at inflated prices (or bubbles) are not rational because in retrospect the valuations exceeded even the rosiest projections of fundamentals. Therefore, investor behavior is irrational, defying the EMH, which stipulates rationality. But are the investors/speculators really irrational?

In an earlier article, Irrational Investors Don’t Exist, I delineate between ‘real time’ rationality and ‘long term’ irrationality, as well as explaining how trying to short ‘irrational’ bubbles for financial gain is a futile endeavor for most contrarians. Suppose in the past hour you see a stock rising from $60 to $90 for no apparent reason. Is it so irrational to assume it will go up another, say, $10 within the next hour? Maybe not. That is ‘real time’ rationality. But let’s assume the the stock implodes because the run-up was all hype and had no fundamentals behind it. In retrospect, those individuals who chased the gains were irrational. But what if the company becomes the next Facebook? Then they may have been rational. The ‘real time’ rationality reconciles long-term irrationality. Even if the speculators know the company has no fundamentals, seeing the sudden, great rise in price behooves chasing it since it’s ‘free money’ on the sidewalk and to not pick it up would be irrational. Betting against this rise by taking the opposite side (short the stock) can lead to huge losses due to ‘real time’ rationality, even if your original thesis that investors are behaving irrationally is correct in the long-term. The ‘real time’ is what trips up people like Shiller and Lewis, as well as everyone who thinks they are being ‘smart’ by shorting what appears to be a bubble.

The bubble-deniers and bubble-riders both have victories and defeats, ultimately resulting in a long-term stable return for both sides. Such a return could be ‘fundamental drift’, the risk-free rate, or some other benchmark/drift, which agrees with random walk theory, as I explain here. The aggregate of speculators cannot get a long-term ‘edge’ with either strategy.

Back to the EMH, the subject of a heated debate on Seeking Alpha. Prospect thoery, as orignated by Amos Tversky and Daniel Kahneman, is a popular alternative to the EMH; however, prospect theory/loss aversion may work in small, well-controlled lab experiments involving paid subjects, but it doesn’t always apply to the markets, which still exhibit great efficiency. The EMH has flaws, but it’s the better than the alternatives. The EMH underpins option pricing, and attempting to create option pricing formulas on an inefficient market would not only fail to work, but fail to agree with empirical results. Furthermore as shown below, the diminishing alpha, especially in the past decade, lends further credence to the EMH:

Fund returns are becoming increasingly correlated not only with each other, but the market, suggesting increasing efficiency of the market:

The Tyranny of the Bookish

Saw this re-tweeted by the great Charles Murray:

Perhaps it’s reading books, not grades, parenting, or TV, that is the biggest influence of success at life. It seems in our increasingly intellectualized economy and society, everyone is flaunting how much money they make or how many books they read. This ties into the growing MGTOW and Red Pill movement, which fuses right-wing philosophy/ideology with self-improvement. Even as recently as a decade ago, the conservative message centered around God, guns, and gays – but now, especially since 2008 and online, it has shifted towards intellectualism (like the Red Pill or Dark Enlightenment/NRX philosophy), self-sufficiency (delaying family formation to go your own way so you can be happier), objectivism (related to going your own way, hedonism), and economics (the unending online debate about student loan debt, jobs & automation, national debt, and wealth inequality). It seems like the old wedge issues just aren’t that important anymore, especially among younger conservative and libertarian types. It doesn’t mean Republicans have abandoned all wedge issues, but they have been pushed to the periphery. Defense spending, free trade, homeland security, and interventionism – once popular with the right as recently as 2004 – has lost its luster. It’s hard to know how long this trend will continue.

But back to the topic of being bookish, this picture went viral, with Reddit users wholly impressed. It isn’t at all like the stereotypical high school, where bookworms are ostracized – quite the opposite. The girl with the book and her parents were ‘rockstars’ that day. So much for America dumbing down, as the left keeps insisting it is.

Whether it’s mathematicians, theoretical physicists, coders, writers, quants, economists, or bibliophiles, the viral image above is more evidence that in America, especially, intellectualism is more important than ever, with MIT and Caltech the ‘meccas’. Reddit users know that the booksish, socially awkward, and introverted will rule the world, if they haven’t already. The financial problem of 2008 kicked the legs of the flimsy folding table that was the old economy, knocking it over and crushing those intellectually unfit.

Or from my post The Great College Debate in response to a Taki article by John Derbeshire, The Tyranny of the Bookish, in which I write:

Not being bookish is fine if you enjoy working a crappy job the rest of your life or you have the connection to join a guild. The evidence is clear: those who read more books (which I guess could include technical books) tend to make more money and without the need for as many connections. In Britain (and the rest of the world) during the years Derb’s youth there was an abundance of good-paying factory jobs that didn’t require much book learning; nowadays, not so much. In the post-2008 economy, cognitive capital translates into financial capital, and this leftist yearning for an earlier era when this wasn’t so won’t change reality. Republicans understand this, it’s the left, in their lack of understanding of economics, who wants to bring back the obsolete, overpaid factory jobs.

And that’s why being bookish is not just a hobby, but a predictor of success in an economy and society that increasingly rewards high-IQ.

The Great Decoupling

From AV: The Great Decoupling

Ultimately, I think this whole debate on wages, STEM, wealth inequality, and automation boils down to IQ.

The decoupling is also obvious when comparing advanced degree employment and income versus those with only high school or ‘some college’. It’s also pronounced between majors, with STEM earning more. these trends have accelerated since 2008.

To repeat myself, people are falling behind because of low IQs and the winner-take-all economy that enriches some, but doesn’t leave a whole lot for everyone else. Today’s hyper-meritocracy is amplifying the socioeconomic ramifications of individual cognitive differences such that a person with an IQ >110 is much more likely to succeed than someone with an IQ <90, whereas decades ago the disparity wasn't so obvious. Yeah, It's a well-worn argument, but it's probably the most applicable, succinct answer I can think of. As long as we keep asking the same questions (why is there so much inequality, etc..) there's no reason why the answer should suddenly change.

The solution, on the other hand, is harder than the explanation because you have to account for incentives and politics. Too much welfare and the incentive to work is gone. A solution that is too 'radical' may be roadblocked by politics. No one really knows the best solution, and that's why this is such a big debate. So many people realize that this is one of the most pressing issues of the 21st century. How are we going to develop a compromise or solution that handles automation-related jobs loss and inequality. Some propose a basic income; others want redistribution; others wants more spending on education, and so on...

From students fresh out of college and in debt, to people looking for jobs, or people who have been laid-off, we're all a part of this debate. Economics is not just for economists - now more than ever we all experience it in our everyday lives.


The Automation Economy and the Bifurcation of the Workforce
Will Technology Make All Jobs Obsolete?

My opinion has generally been in agreement with most economists, who argue that robots will never replace every job (the Luddite fallacy). Of course, there is no guarantee it will remain a fallacy, as there is a possibly the minimum IQ to complete ‘entry level’ work may rise beyond a point where most people are inapplicable. This will also render ‘more education/training’ based solutions ineffective.

Marc Andreessen and Twitter

Marc Andreessen, who is perhaps the most important VC and forecaster right now, like more soft-spoken Peter Thiel, is correct about many things such as Web 2.0 not being a bubble and being skeptical of democracy. The later point agrees with the NRX (Neo Reaction) ideology, showing that one need not be directly affiliated with NRX to be an intellectual ally. He’s also correct about free market capitalism and being pro-STEM immigration, and I’m sure he also thinks IQ is important and congenital (although I can’t find any reputable source to support this – but being that IQ is such an important part of high-tech, it doesn’t seem implausible.)

Here’s a good tweet by Marc Andreessen about the left’s incessant whining about bubbles:

The left keeps predicting doom and gloom and keeps being wrong.

As someone who follows Marc Andreessen on Twitter, what I find interesting is how he is able to court a diverse spectrum of views – something you don’t typically see on political sites. Often what happens is pundits only associate with direct ideological allies, resulting in an uninteresting echo chamber, but Mr. Andreessen is like the hub of a wheel with each spoke representing a differing view/perspective that links back to him, creating a symbiosis of sorts between the hub (Andreessen) and all the people (spokes) he interacts with. But also, Mr. Andreessen cannot be pigeonholed as either being resolutely ‘left’ or ‘right’, as his views encompass the full-range of the political spectrum.

And maybe that’s my approach, too.

For example, although Brad Delong and Noah are technically liberals, I agree with their view that the US debt is not that a big of a deal or about fed policy being effective and not hyper-inflationary, or about the dollar not collapsing – as many predicted incorrectly it would. Noah occasionally hits the nail on the head, and that’s probably why Marc Andreessen and others on the ‘right’ follow him. And Dr. Delong is right about US post-WW2 foreign policy being mostly a success – and even if such views (such as being pro-fed or pro-globalization) are unpopular among the welfare left, Delong’s temerity to challenge the liberal party line is not only admirable but intellectually honest, and that’s why I follow him on twitter.

Bernanke is Right

He’s right: Bernanke sees no risk of hard landing in China, bullish on U.S. economy

Not only does Bernanke deserve a standing ovation for saving the day in 2008 (along with Paulson and Bush), he’s right about the US economy still being fundamentally sound and about China not having a crash landing, as much as the libs want the US and Chinese economy to fail. Especially for high-IQ people, things keep getting better than ever and no amount of whining by the doom and gloom liberal media will change this, sorry. The left has been predicting a China hard landing since 2005 and they still keep being wrong, just like the left has been predicting a bear market and recession since 2009, to no avail. People like me keep being right, making money in stocks & expensive real estate, all the while laughing at the idiot leftists who are still waiting for the shoe that will never drop or the black swan that will never arrive. Volatility will keep falling, so that’s why I short VXX. Buy the retail etf (XRT), Healthcare (XLV), S&P 500 (SPY), and large cap tech (QQQ). To big to fail policy may suck, but it’s been a success, and America still has reserve currency status. S&P 500 going to 2,400 soon. Dow 20,000. Nasdaq 7,000. A bet against the economy and the stock market is a bet against the high-IQ people who keep America economically exceptional; a bet against free markets, the fed, and the meritocracy – that’s a bet I sure as hell would never make.

Telling Fairy Tales To Spare Our Feelings

From Quora How can I be as great as Bill Gates, Steve Jobs, Elon Musk, and Richard Branson?

Why can’t we have an honest debate about success and the role of IQ? Why do we need to lie to ourselves and then spread these lies to innocent victims, filling their heads with nonsense? Rhetorical question, I know. As the success of Malcom Gladwell shows, there is an inexhaustible market for fairly tales – not just for children -but adults, too. People want to be told what they want to believe, that with the alignment of certain environmental factors (ambition, practice, and some luck) anything is possible. And if you fail it’s never because of genes or other biological factors, but because the more successful person had some sort of unfair environmental advantage. Furthermore, being too smart can be a handicap…because Gladwell said so…empirical evidence be damned. Repeat for 120,000 words and you have a NYT best-seller.

As the Tedx talk below shows, there is no IQ ‘limit’ for success, and standardized tests, which are a proxy for IQ, are a predictor for success, especially for extremely high scores:

What is ‘good is not necessarily pleasurable or desirable. To conflate the two is called the Naturalistic Fallacy. It’s pleasurable to be told that IQ is not important or see Wall St. and the bankers burn, but this is not ‘good’. That’s why from a consequentialist perspective I supported the unpopular but necessary bank bailouts. It wasn’t pleasurable seeing Wall St. get thrown a lifeline, but it was the right thing to do.

The fact Reddit users see through Gladwell’s bullshit gives me faith in millenials, or at least those on Reddit and 4chan.

Like I mentioned before in a response to a Techcrunch essay by Jon Evans, the elephant in the room is IQ, and all of the aforementioned individuals, Zuck, Elon, Jobs, Gates.. etc, with the possible exception of Richard Branson, have very high IQs. But a simple search of the Quora page yielded not a single match for IQ among any of the replies. If you want to be as great as those people – while hard work and obsession does help – so to is being in the top .1% of IQ. Bill Gates got a near-perfect SAT score on the ‘hard’ pre-1995 test, corresponding to an IQ of 160 or so. While Woz is often credited as being the ‘brains’ of Apple, Jobs skipped many grades and still found his schoolwork super-easy, giving him time to ponder the wonders of technology. Elon Musk is a physicist/rocket scientist, applying his intellect in his role in Paypal, SpaceX, Solar City, and Tesla. Zuckerberg was a coding prodigy, creating websites as his peers were still struggling with simplifying fractions. Warren Buffett, who isn’t on the list, entered college early and knew more about finance than his professors. And this applies not just to technology, but writing (and a slightly different take), mathematics, trading, chess – any field that requires brain power, but more specifically, memorization and making inferences between disparate pieces of data – skills that IQ tests measure.

But also interesting, notice how the question is titled, How can I be as great as Bill Gates, Steve Jobs, Elon Musk, and Richard Branson? It’s more like, how can I be a great, like a technology leader? People equate greatness with high-IQ professions such as information technology and space travel. No one asks, how can I be as great as Don Thompson? But, ultimately, I’ll end it at this: The uncomfortable reality is that IQ, which is a biological trait, is more important than many people want to believe/accept. More than ever, in our increasingly competitive and technological economy and society, life outcomes seem to be influenced by IQ, with smarter people tending to rise to the top.

Related: So much for that 10,000 hour rule

The Canonization of Dr. Nash

Yesterday, the Nobel Prize winning mathematician and economist John Nash Jr. and his wife died in a taxi accident. From the NY Times obituary:

Receiving his bachelor’s and master’s degrees at Carnegie, he arrived at Princeton in 1948, a time of great expectations, when American children still dreamed of growing up to be physicists like Einstein or mathematicians like the brilliant, Hungarian-born polymath John von Neumann, both of whom attended the afternoon teas at Fine Hall, the home of the math department..

We’re still in that era today, of millions of young people aspiring to be great geniuses, except nowadays many want to be app developers, tech billionaires, stock traders, economists, and coders, but the intellectualism is still there, it’s just in new fields. Right now, among many 20-somethings, some of the most admired men are Warren Buffet, Elon Musk, Mark Zuckerberg, and Bill Gates, who are not only geniuses, but creating empires and becoming immensely wealthy in the process. But that doesn’t mean that today’s smartest generation doesn’t look up to purely academic/theoretical geniuses, and this is especially evident by the Dr. Nash beatification on Reddit, somewhat akin to Catholics grieving over the death of Pope John Paul II. In the span of just a couple hours, at least a couple dozen threads had been created eulogizing Dr. Nash’s accomplishments, each of these threads getting hundreds of or thousands of comments, with each comment lavishing more praise than the preceding one. In the post-2008 era, intellectuals, particularly in STEM fields, have become the equivalent of ‘patron saints’ for a generation of high-IQ empirically minded atheists and agnostics, and with the millennials being the largest and quite possibly the smartest generation ever – that is a lot of people worshiping at the alter of intellect. In a highly up-voted and 2x gilded reply, one Reddit user went so far as equating Dr. Nash to a father and family figure, amidst some heavy-duty sappy prose:

It takes a slightly malfunctioning mind to see what others cannot.
It takes a mountain of intelligence to tame the beast of mathematics.
And it takes a raw courage to trek through the unexplored, forging ahead through the woods while others lounge in the open field.
We are very lucky, as a civilization, that John Nash was all of these, and born just as humanity’s technological development went exponential.
The loss to humanity today is difficult to express properly, but it is most assuredly vast. It is not an overstatement to say that without John Nash many of our lives would be very different right now. His contributions to the world simply would not have been possible by anyone else.
Instead of focusing on a senseless death, we should instead focus on a long and cherished life, filled with a loving partner, and the peaks of accomplishments that most of us can only dream of.
And from this moment, we need to understand and take with us the realization that our global family has a void in it now. There was a time in history when only deaths in your immediate family affected you profoundly: mother, father, sibling.
Great humans passed away and left a horrific gap in the mesh that bound your group. This is no different, just a difference in magnitude.
Coincidentally, as a result of some of John Nash’s work, the Internet has expanded our definition of ‘family’ and ‘tribe’. A father is not longer a single male that grew up in the same household with you. Indeed, we are all family now as a result of the unprecedented power of the Internet.
And we have lost a father.
We can only cherish his memory, and realize what all sons have been forced to reckon with throughout history: when the father passes away, the time for childhood is over.
The family must go on, and someone must step into his shoes.
So we speak with loving respect for his body of work, because like all good fathers, his memory will be cherished in invincible and revered tones. At the same time, we sling the tools of his craft over our back and vow to do our best to carry on in his absence.
Though the task seems impossible, we must still forge on ahead through the dark forest ahead. One or more of us will inevitably ascend the same stairs of progress that John Nash graced, and perhaps the world will weep at our deaths as well.
The time has come for the sons of mathematics to step into the shoes of the father. They deserve their moment to mourn, but their primary duty is to keep the family moving through the difficulties and challenges ahead.
We owe you an impossible debt John Nash, and though we cannot ever repay you, we promise to pay it forward to the next generation.

Damn that is intense. I don’t think I’e ever felt that strongly about a person. Half the word count of this post came from that passage alone. So much for America ‘dumbing down’ or not appreciating intellectuals. Hardly.

Not only does this tie into my earlier post about the rise of the STEM celebrity, but also is evidence that being socially awkward is the new ‘normal’ or ‘cool’, and few people optimized social awkwardness like John Nash Jr., as anyone who read Sylvia Nasar’s biography of Dr. Nash would attest. This is also why I think the Red Pill may be putting too much emphasis on being ‘alpha’, especially when nerds like Dr. Nash are the ones that keep rising to the top economically and get all the praise and adoration. The NYT concluded his obituary:

Friends described him as charming and diffident, a bit socially awkward, a little quiet, with scant trace of the arrogance of his youth.

Considering his friends were probably also introverted geniuses, to say he was a ‘bit’ socially awkward is probably an understatement; to outsiders of normal intellect, he probably seemed outright bizarre. And that’s OK—and, in fact, encouraged in our increasingly competitive, technological, financialized, high-IQ economy of stocks going up all the time, as intellect and social awkwardness are equated with competence , introspection, and authenticity. Despite his long mental illness, few ever questioned Nash’s competence. And one could further argue that his illness arose from the struggle of having to deal with a world full of less-competent, less intelligent people, further adding to his authenticity. And that his delusions were manifestations of this struggle that we weren’t smart enough to understand or appreciate. And he was rocking the lumberjack/neckbeard long before hipsters.

It kinda makes me wish I were half as smart as him…maybe then I’d have more traffic to this blog, more accolades, and the warm, glowing feeling of personal accomplishment that comes from being the smartest and best in a competitive, celebritized, highly-vaulted field like mathematics (theoretical physics is another one). They say, ‘be yourself, but what if ‘yourself’ ain’t that great?

Working out, but more specifically, working out and posting pictures of it on Instagram or writing about it, has become the new American pastime. Among today’s gym-faring 20 and 30-somethings, cardio, such treadmill and ellipticals, is ‘out’ and strength training, such as squats and deadlifts, is ‘in’. Bigger is better, not just economically, but physically, too. But at the same time, this is compatible with the rise of the beta/MGTOW culture, of people who choose not to work out as often, but hold many of the same values of the PUA/Redpill movement. Self-improvement, both physically and mentally, is a big deal these days, especially in an economy that rewards merit and individualism more than ever. But it’s not self-improvement through extraversion (social activities, with the possible exception of dating for the PUA crowd), but by personal, more cerebral endeavors – be it stock trading, coding, being more empirically minded, healthier eating, financial & economic literacy, strength training, intellectualism…etc. For today’s smart generation, the the pursuit of truth and the empirical data supersedes trying to spare feelings. Political correctness is becoming obsolete, and the great outpouring, especially in the man-o-sphere and other smart communities, over DR. Nash’s death is evidence that people are seeking truth and reality from scientists, specifically mathematicians, coders, quants, statisticians, and physicists, over leftists who espouse divisive class warfare.

Defending the EMH

Continuing on my first post about the efficient market hypothesis (EMH), I believe in a semi-strong version of the hypothesis, which allows for some opportunities to make profit through a process called fundamental drift. It would seem that the EMH’s biggest opponent are from the ‘right’ of the political spectrum (zerOh3dge and Market Ticker type guys) who insist the market is ‘rigged’, which is a view that many on the left also share. In fact, it would seem the EMH has fallen out of favor from both sides of the ideological aisle, leaving only a handful of academics and myself to defend it. Of course, there are always the well-worn ‘violations’ of the EMH that are trotted out, with the sanctimonious belief that EMH doubters have somehow overturned the establishment, when in fact, such counter-evidence doesn’t necessarily refute the EMH. For reference, some violations include the infamous Palm Spinoff snafu, companies’ stock reacting ‘too much’ to the re-release of public information, and those ‘obvious’ bubbles such as the dotcom bubble. Irrational markets and behavior finance in popular now, but I think the EMH can be slightly modified to reconcile perceived ‘irrationality’ and still be consistent with an efficient market.

From The Wikipedia definition of the EMH,

The Efficient-market hypothesis (EMH) states that it is impossible to “beat the market” because stock market efficiency causes existing share prices to always incorporate and reflect all relevant information. According to the EMH, stocks always trade at their fair value on stock exchanges, making it impossible for investors to either purchase undervalued stocks or sell stocks for inflated prices. As such, it should be impossible to outperform the overall market through expert stock selection or market timing, and that the only way an investor can possibly obtain higher returns is by purchasing riskier investments.[1]

Borrowing from the no-arbitrage conditions of option pricing, I would modify this definition to say that the EMH doesn’t necessarily require that stock prices not be predictable, that all information be instantly reflected in the stock price, that bubbles cannot form, or that investors cannot act irrationally – violations of all of these things can happen in an efficient market – it’s just that the frequency and liquidity of such events isn’t consistent or deep enough to allow for a consistent, abnormally high profit. In a random walk, any pattern or outcomes is possible, but under the no-arbitrage condition the aggregate of traders cannot make an abnormally high profit/rate of return from these fluctuations. For every ‘obvious’ bubble where speculators profit betting against it, there are countless situations where traders lose their shirt as the ‘obvious’ bubble proves to be surprisingly resilient or isn’t a bubble at all. Then you have issues like low liquidity, short squeezes, and ‘hard to borrow’ working against the short seller. The same goes for re-release of public information. Yes, sometimes stocks move too much, but this doesn’t happen often enough to allow for abnormal profit. Same for arbitrage opportunities that are too small and too infrequent to allow firms to make an abnormally high rate of return.

Or as I wrote in my earlier article, Irrational Investors Don’t Exist:

Markets are nearly impossible to predict because in retrospect many bubbles like Facebook, for example, now seem rational. It is demonstrably impossible to exploit ‘bubbles’ to achieve excess returns, even during the late 90’s. For a couple reasons: liquidity and timing. It’s hard to find shares to short and if your timing is bad and the stock keeps rising, you’ll get a margin call and be forced out of the position at a large loss, even if your original thesis is correct. A notable example is the Manhattan Investment Fund that lost $400 million shorting tech stocks in the 90’s. He is the real wolf of Wall St., but you won’t be seeing a movie about him because the it makes the government look incompetent being that he got away with it. In 2007, Microsoft purchased a small stake in Facebook , valuing the social networking site at $15 billion. Everyone in the media and blogs (except me and some others) was convinced it was bubble. Fast forward to 2014 and Facebook is worth north of $130 billion. Anyone went on the opposite side of that trade (assuming Facebook was a public company) would have lost 500-700% of their money.

Make that $230 billion for Facebook. And now Uber is next in line to cross the $100 billion threshold, long after pundits were calling it a bubble at < $5 billion valuation. And this happens over and over again. The media and punditry goes to great lengths to tout their ‘bubble radar’, ignoring all the times they were wrong.

Feeling Left Out?

The feeling of being ‘left out’ is something that one normally assumes applies to children and teens – you outgrow it as an adult, but the question, Do you feel like you’re missing out?, that I posed on Hacker Network apparently touched a nerve, as evidenced by all the replies:

It seems like with all this amazing stuff going on in the world (surging web 2.0 valuations, people becoming instantly rich & famous in tech, booming stocks & home prices, new discoveries in physics, twitter debates, viral content and insta-fame) does it ever feel like you’re missing out, like there is a big party going and you’re watching from the sidelines.

I cannot blame anyone for feeling this way, and I go through this, too, which probably motivated me to ask the question and why it went viral on the site. We find ourselves living in incredible, yet very unequal times. The ‘big-fish–little-pond’ effect seems to be at play here, in that we care not so much for our own nominal/absolute prosperity, but our prosperity and status relative to our peers, friends, neighbors…etc. There is so much going on in the world and maybe the internet, which gives us this window to the world, is also a reminder of our quaintness at the individual level. Many want to be not just passive consumers, but also participants – a participation that goes beyond updating a Facebook status or posting a tweet that will not be read.

Part of this blog is not just posting opinions, but trying to better understand the world, how things work, why things are the way they are, and so on.

Related: Winner-Take-All Nation

Uncomfortable Truths

IMHO, one of the most pressing problems in society is this inviolable, pervasive discomfort surrounding the topic of IQ, in that educators, parents, and policy makers can’t come to grip with the reality that individuals below a certain threshold of intelligence are either less valuable to society (everyone is not equal) and or it would be a better use of public resources if such individuals were diverted from public schooling after attaining sufficient rudimentary knowledge and instead trained in vocational or service sector work. Normally, individuals with retardation don’t attend high school, but we think the threshold should be raised to an IQ of at least 90, or maybe the curriculum should be changed to teach the skills that would be most valuable to this subset of the population, who stand to benefit little from trying (and failing) to learn Algebra or world history.

Biological determinism is more relevant than ever in our increasingly competitive economy. If you find yourself falling behind in the post-2008 economic and stock market boom, you may way to get your IQ checked; you may not be smart enough to participate in the recovery. Or you may have majored in something worthless in college. Maybe you should have learned how to code, how to trade stocks, or how to buy real estate that always goes up (but if your IQ is not high enough, you will likely fail at these endeavors). But maybe, you can be a minimalist MGTOW, which is a popular choice for a lot of people these days. In our era of technological abundance and wealth creation, many are voluntarily dropping out. But I don’t mean dropping out like living in a remote cabin in a woods, but by by being alone without literally being alone. These are empirically minded STEM-centric people who value intellect, coding, the truth (even if it’s politically incorrect) and economics more than materialism and keeping up with their dull, uninteresting classmates on Facebook or Twitter. Social Awkwardness and Autism/Aspergers is becoming the ‘new normal’, the new ‘cool’, in America’s INCREASINGLY INTELLECTUALIZED ECONOMY AND CULTURE. Being a frugal, social isolated STEM person who lives a monastic lifestyle and possesses Spock-like logic and rationalism is the new ‘rockstar’ status, especially on sites like 4Chan and Reddit. That’s why I’m frugal to a fault. That’s why I always defer to the academic leteratre when in doubt. T