Monthly Archives: December 2015

Theranos, Part 2

part 1

From iSteve (STEVE SAILER) Theranos: The Elizabeth Holmes Reality Distortion Field

Another thing people have to realize about Theranos and other high-valued startups, these companies are funded by wealthy investors who are aware of the risks. They don’t need pundits lecturing them about the inherent risks of investing in hot startups. Everyone wants to play the nanny or the ‘I told you so’ game. It’s like going to the high roller table at MGM Grand and screaming at the gamblers there that the ‘expected value on baccarat is negative!’ Yeah, they know that, but enjoy playing anyway (though VC typically has a positive expected return).

Although there is a lot of hype, some of it is justified when you consider the enormous potential for savings using Theranos’ tests. According to the New Yorker, ‘a typical lab test for cholesterol can cost fifty dollars or more; the Theranos test at Walgreens costs two dollars and ninety-nine cents’, although the expansion of the partnership has been suspended in light of recent bad press.

More doubt: Theranos Trouble: A First Person Account

After two failed attempts to establish a Theranos account, I gain access to my numbers:

— Platelets: 430, given my condition, that’s high
— Hematocrit: 44.1, a passing grade, but uncomfortably close to the 45% limit

Stanford Hematology disagrees:

— Platelets: 320, no concerns, come back in two or three months
— Hematocrit: 41.1, ditto

However, the Theranos site for the CBC has 6 sub-tests:

Hematocrit
Hemoglobin
Platelets, Automated
RBC Automated
WBC Automated
WBC Count, Automated Differential

A ‘complete blood count’ has at least ten sub-tests, not just the two (Platelet, Hematocrit) he listed. If he can’t list all of the items instead of the two examples he cherry picked, how can we trust his story? He’s probably omitting stuff. A CBC with only two results is by definition not a CBC. No hospital would run a CBC on only two items.

A normal platelet count is between 150-400, which his results fall within. Although the there is a large discrepancy between the Stanford platelet test and the Theranos results, that doesn’t mean discrepancies won’t exist for other testing methods and other hospitals. Certain tests work better with small blood volumes than others. Blood glucose levels can be reliably tested with a pinprick of blood using a home test kit, although the discrepancy is somewhat worse than under a controlled hospital setting, which is not too surprising.. Beyond the herpes test, which they have received FDA clearance for, Theranos has 120 tests in the works, and getting FDA clearance on maybe a dozen of them would be huge progress.

Theranos was founded in 2003; it took over a decade for Theranos to develop its proprietary testing machines and get its first FDA approval (for the herpes simplex 1 virus test). The media is treating this like a horse race, and don’t understand that biotech and healthcare, as an industry, is very slow – it takes many years and lot of money to get things going. This is because of regulation (human lives are at stake), high costs (lab equipment, computer simulations, employees, clinical trials, etc), and the innate complexity of human biology. It’s not like an app where you have have it coded in a month.

Giving Theranos the benefit of the doubt

From Social Matter Desperately Seeking Susan Jobs

My opinion is somewhat different. Keep in mind, the women SJWs tend to promote have zero redeeming qualities – think Sandra Fluke, Sandra Bland, Mattress Girl. Elizabeth Holmes, along with her accomplices, created this company that seems successful (it’s herpes simplex 1 virus test received FDA clearance), even though there is some warranted skepticism. Part of the skepticism arises from confusion about Theranos’ business model, which is not as much at the mercy of the FDA as some may assume, due to a loophole that allows Theranos to bypass the FDA:

In a profile in the New Yorker last December, Theranos revealed its plans to seek regulatory clearance, despite the fact that currently diagnostic labs are under no obligation to do so. This is something of a regulatory loophole; most diagnostic labs buy their equipment from companies like Siemens or Roche, and those vendors do need to get clearance to sell their devices. But Theranos manufactures its technology and uses it in-house, so it doesn’t actually require clearance. The FDA is considering a change to these rules, and even though Theranos has benefitted from the loophole so far, Holmes submitted a comment to the FDA encouraging them to require all testing labs to submit to review.

Class I medical-exempt devices, such as the blood tests developed by Theranos, may exempt from the FDA because Theranos uses their own labs to test the samples – as opposed to selling testing equipment. Theranos’ blood tests may have been marketed as ‘class 2′ devices (which when sold require FDA approval), which is why the FDA got involved, but that doesn’t prove the blood tests don’t work or that Theranos won’t eventually get clearance to market these as ‘class 2′ devices. In July, 2015, Theranos’ herpes blood test received FDA clearance, so that bodes well for future tests.

At the very worst, the blood tests don’t work as well as originally hoped, investors loose faith, and the company is liquidated at a large loss.

There is still a lot we don’t know, and it’s too soon to call Theranos a failure. The loss of the Safeway partnership and halting of the Walgreens partnership is a setback but not a mortal blow. My prediction is they will get through this.

Of course, the NYT trashed Theranos. The paper also trashed Tesla back in 2013.

The author of the hit piece, JAMES B. STEWART, omits the fact that Theranos is actually sending documents to the FDA. Theranos isn’t trying to evade peer review. Theranos plans to get FDA approval for up to 120 tests, even though such approval may not be necessary due to the loophole. From Forbes:

When critics say that Theranos should publish more data, Holmes responds that she is doing something better: getting approval from the Food and Drug Administration for 120 different Theranos tests. This is not standard practice in the industry.

Many blood tests are actually not FDA approved, because tests that are developed by the lab that uses them have been exempt from many regulations. Holmes argues that FDA approval is a much higher hurdle than simply publishing in a medical journal. It’s great that Theranos is doing this.

and

But the FDA has just made public its decision letter to Theranos and a far more detailed memo around the agency’s thinking. The 29-page memo doesn’t explain how the Theranos system works, but does compare samples on the existing technology and using Theranos’ new technology. Not only are the test results substantially the same, but Theranos’ device is able to replace a blood draw with just a drop of blood, as advertised.

Whether it’s Tesla, Uber, Theranos, or or any other successful start-up, the left are like bloodhounds drawn to the scent of failure of the successful, even when such failure does not actually exist. The liberal media is so desperate for the successful to fail that they have to make stuff up, turning molehills into mountains.

The Big Short: Market Genius or Luck?

There are a lot of finance articles lately due to the hype over the film adaptation of Michael Lewis’ book The Big Short.

Interview with Michael Burry, Real-Life Market Genius From The Big Short

Is he a market genius or did he just get lucky? There is evidence of genius, in that between 2000-2008 Michael Burry returned 500% to his investors vs. a flat market, quite possibly the highest return of any fund that decade. Even more impressive, he did not get wiped out in the 2008 bear market, capturing both the bull market and the bear with perfect timing. That kinda throws water on the whole leftist belief that the market is rigged or a scam, or that the only way people make money in the market is with luck, cronyism, or deception instead of skill or talent. Obviously, he had no connections with Washington. He didn’t engage in insider trading. Using his superior intellect, he was able to find slivers of opportunities in a market that is otherwise impenetrably efficient.

But back to the original article, is there a crisis coming? The odds of another crisis are slim.

From a discussion, someone list some possibilities:

1) Some kind of dollar, global reserve crisis that rocks the global economy for a while. Spurred on by the US debt and projected near future large budget deficits due to welfare and entitlement spending.

2) Broader bond market. I think this is a well understood threat, and doesn’t require much elaboration.

3) A specific junk corporate debt crisis. About half of the major corporate defaults in 2015 were US companies, which have levered up significantly on the back of the Fed’s super easy money policies.

4) Another significant drop backwards in the asset bubbles the Fed just got done re-inflating. If the Fed’s policies fail to provide enough to sustain those huge asset classes (real estate and equities primarily), then when they tip over it’ll pull the US economy down into a protracted recession. The global economy is practically in a rolling recession as it is, if the US goes next it would cause a lot more global pain (including amplifying the problems in China and Japan, both big exporters to the US). There’s a real debate to be had about whether the Fed can ever actually create a scenario in which the intentionally inflated assets can sustain (stand alone without Fed props), or if they have to always deflate backwards with a hefty penalty for the market manipulation / forced capital misallocation (which then prompts even more dramatic action at each turn, to try to re-inflate).

Dollar collapse & hyperinflation seems unlikely, for reasons I give here and here. Despite all of the debt, the data suggests America is not at risk of defaulting from a genuine inability to pay; however, a technical default due to gridlock is possible.

The fed balance sheet is big, but interest rates are very low. The fed has posted a large profit, a 30% gain in 2015 for a profit over over $100 billion, which is sent back to the treasury.

Due to the mathematics of the yield curve and the composition of the fed’s holdings, the the odds of the fed losing money on its holdings are low.

“Short-term interest rates would have to rise rapidly to quite high levels — in the neighborhood of 7% — for the Fed’s interest expenses to surpass its interest income. Such an outcome appears very unlikely,” the paper said. In the event that the Fed did face a loss, it could simply hand no money back to the Treasury and, “in the most extreme case, future remittances would also be reduced (and recorded as a change in deferred credit), but the Fed’s capital base and financial position still would remain completely secure.”

Japan has a much bigger debt, they seem to be doing fine. Low interest and strong dollar is due to reserve currency status, flight to safety, emerging market weakness, commodity weakness, petrodollar, the large size of the US economy, and other factors.

Corporate profits are at record highs. A crisis in the corporate debt market would require either a major decline in profits (from a deep recession, for example) or a spike in interest rates, neither of which show any signs of occurring.

Overall though, a bet against the US stock market is probably doomed to fail, unless your lucky or skilled like Michael Burry was. Here’s why:

1. Nowadays, options are priced in such a manner that the expected value of buying out-of-money hedges is almost always negative. This is due to the inflated volatility for out-of-money put options and other factors.

2. It just so happened that the subprime mortgage meltdown coincided with Michael’s career; for the period between 1935-2007, his strategy would have failed. It also would have failed between 2008-present. Maybe it would have worked in 1987, so we’re talking three instances out of a century.* Right now, the evidence suggests banks have reformed their lending practices, with higher credit scores for new homeowners, so the odds of another banking meltdown in America are slim.

3. Then you have the constant stock buybacks, tame inflation and modest valuations, record high profits & earnings that keep growing, consumers that won’t quit consuming, and so on. A totally different landscape than before 2008 when Taleb, Michael, and other bears made their fortunes. I just don’t see a compelling reason for stocks to fall much.

4. A bet against the stock market (especially tech) is a bet against capitalism, technology, high-IQ, and the best and the brightest. Do you really want to bet against Amazon, Facebook, Microsoft, and Google? Do you want to bet against the fed and a billion consumers from all over the world, along with all wealthy consumers from China? I sure as hell don’t. Just because bears made money in 2000 and 2008 doesn’t mean it will work again. It may be years or even decades before there is another a big selloff. For every success story of someone who bets against the market, there are a dozen losers, although no one makes movies or writes books about them.

5. Perpetually low interest rates makes stocks more attractive at a higher valuation than usual. The price part of the P/E ratio is reduced when inflation is very low. When inflation is high, cash is more attractive.

Profitably betting on the collapse of the financial system is obviously much harder than merely betting on a decline. When you restrict the payoff to near default (>80 or greater loss of price of the underling security), the math shows that only 1929 (around that period) and 2008 would have yielded a positive return.

Of course, leftism is to be expected in anything even tangentially related to Michael Lewis, from the article:

The zero interest-rate policy broke the social
contract for generations of hardworking Americans
who saved for retirement, only to find their
savings are not nearly enough.

There isn’t really a ‘social contract’ in the Constitution, Declaration of Independence, or anywhere. There is no document that stipulates that the government owes anyone anything beyond ‘life, liberty, and the pursuit of happiness’, which are intentionally vague. The expanded ‘social contract’, which includes housing, jobs, guaranteed income, welfare, education, healthcare, high interest rates,…etc, is a construct by the left to justify more wasteful entitlement spending, to make the rich feel guilty for not spreading their wealth more than the high income taxes they already pay.

The evidence actually shows that a better returns can be had with stocks than cash (bills). Even with rates at 4%, stocks way outperform cash:

Putting cash into a bank is a poor way to save for retirement, if past performance is any clue.

The ‘hardworking person’ saving for retirement by stashing all his money in the bank may more myth than reality.

The majority of Americans have little to no savings, so the difference between 0% rates and 4% is immaterial if your expenses exceed your income.

The problem is not that interest rates are too low, but rather people suck at personal fiance. But on the other hand, the Paradox of Thrift suggests that it’s ‘good’ for the economy that people don’t save too much.

Those who have more wealth put it in bonds, collectibles, real estate, or index funds. They seldom just keep it in cash.

Another thing that’s kinda annoying are all these people who think their predicting of the housing market bust in 2006 is attributable to some sort of profundity on their part, rather than just broken clock theory.

Contrary to popular belief, many pundits were actually bearish on housing in 2004-2007. Given the enormity of the crash, it makes these predictions seem more prescient than they really were, but such predictions were hardly unique. Of these pundits, very few actually made money betting against the housing market. A Google news search from 2004 to 2006 shows many pronouncements of a bubble or crash in housing, as well as much skepticism of the housing market.

About half of the entries are pessimistic about housing (articles by CNN, NY Times and Bloomberg, Mises Institute, Robert Shiller), and the other half are bullish, dismissive of a bubble, or neutral (Cato Institute, WSJ).

By late 2006, being bullish on housing actually made you more of a contrarian than being bearish. As a rational realist, I’m not too impressed that someone predicted something that hundreds of other people also predicted in that same time period, and then didn’t even act on it by shorting the market. Also, the vast majority of pundit predictions are wrong (like all those failed predictions between 2009-2014 for the stock market to crash and or for a double dip recession), so being right once out of dozens of incorrect calls is hardly a sign of innate skill or prescience at forecasting.

* Restricted only to American financial institutions. Foreign ones have had many more crisis.

High Frequency Nonsense

One Way to Unrig Stock Trading (nytimes.com)

The alleged ‘dangers’ of algorithmic trading, including high frequency trading, is mostly hype by the doom and gloom liberal media. People and institutions lose money in the market because of bad timing and bad money management, not because of automated trading. Nowadays, most stocks, ETFs, and futures contracts are extremely liquid, allowing anyone to get filled very quickly, with minimum slippage (the spread between the bid and ask). One can easily buy a million dollars of Microsoft or the S&P 500 without moving the market too much. When hedge fund and retail investors lose money and or lag the S&P 500, it’s not not because they were front-run by a bot, but because they invested in bad sectors, an example being Carl Icahn’s bad bet on Chesapeake energy (the stock has fallen 70% since 2012). There are other examples: buying dotcom stocks in 2000, or bank stocks in 2006-2008, in which lost fortunes had nothing to do with algos, but rather bad timing. When the underlying company goes bankrupt or the stock falls 30-90%, does it matter if you got front-run by a few pennies? Rhetorical question, but I suppose it’s more appealing to blame someone else than blaming yourself for what is bad timing & strategy, and poor money management.

Related: misconceptions about high frequency trading

The Bailouts Benefited Everyone, Not Just Bankers

From NYT: Bernie Sanders: To Rein In Wall Street, Fix the Fed

WALL STREET is still out of control. Seven years ago, the Federal Reserve and the Treasury Department bailed out the largest financial institutions in this country because they were considered too big to fail. But almost every one is bigger today than it was before the bailout. If any were to fail again, taxpayers could be on the hook for another bailout, perhaps a larger one this time.

To rein in Wall Street, we should begin by reforming the Federal Reserve, which oversees financial institutions and which uses monetary policy to maintain price stability and full employment. Unfortunately, an institution that was created to serve all Americans has been hijacked by the very bankers it regulates.

When the fed bailed out the banks, they, in essence, bailed out the most productive people. By throwing Wall St. a lifeline, the fed and congress sequestered the problem parts of the economy, allowing the healthier parts such as Web 2.0, retail, Silicon Valley, e-commerce, venture capitalism, and biotech to thrive instead of being dragged down by the ailing banking sector. That is something few understand – they think it was just bankers who got bailed out, but pretty much every productive person benefited at least indirectly from the bailout, which by 2011 finally turned a profit despite all the predictions in 2008-2009 of its failure.

Everyone wants to blame capitalism and Wall St., but pity the loser homeowner who thought it was a good idea to buy a 6,000 square-foot McMansion on $40,000 income with zero down.

Financial regulation is doomed to fail because you cannot regulate stupidity, but that doesn’t mean everyone has to suffer for the mistakes and stupidity of some, which is why bailouts have become an unavoidable part of modern capitalism. It’s like choosing the lesser of two evils: risk moral hazard or risk things getting worse?

Sanders also ignores how bank balance sheets are the healthiest they have ever been and that non-performing loans are at record lows, suggesting that banks have reformed their lending practices:

Credit scores for mortgage originations are rising:

Subprime lending has also collapsed, and mortgage debt is back to it’s long-run trend after a bubble in 2003-2008.

If any were to fail again, taxpayers could be on the hook for another bailout, perhaps a larger one this time.

While taxes did rise in 2013, it was not out of economic necessity, but rather due to gridlock and Obama’s refusal to compromise by cutting certain programs (for example, raising the Medicare eligibility and slowing increases in Social Security costs by reducing cost-of-living adjustments). The bailouts turned a profit by 2011, and by 2014 the treasury reported profits of $15 billion on TARP. Can the same be said for welfare programs like disability, Obamacare, free emergency room treatment, social security, and food stamps. I think not. Although some welfare is probably necessary to avoid disruption, it’s disingenuous for liberals to pretend to be looking out for taxpayers, yet simultaneously advocating policy that greatly adds to the deficit and produces negative long-term economic value. Welfare liberalism is reverse Darwinism: throwing more money at the losers of society while at the same time punishing the successful with higher taxes and more regulation. And then they wonder why the economy isn’t growing fast enough or not enough jobs are being created.

Liberals like Sanders think they are ‘saving’ mainstreet, looking out for our ‘best interests’ by attacking the fed, when in reality they advocate policy that would destroy wealth and punish the most successful and productive.

Related: Don’t Blame the Fed – Blame Stupid People, Liberalism, Democracy

Bitcoin: It Ain’t Going Away

Awhile back I made a post recommending bitcoin at $290; a month later it peaked at $550, fell to $330, and is now at $450 again:

I don’t worry about the day-to-day moves, because I know Bitcoin is here to stay. Its not going away, nor is it some some ‘flash in the pan’ but rather a permanent fixture of commerce, much like Paypal or MasterCard. Bitcoin has value because it’s fungible, convertible into tangible goods through a marketplace, and cannot be readily counterfeited. The same for precious metals and the US dollar. Even copper has this property, but you would need a lot of copper to equal a bitcoin.

As even as far back as 2013 when Bitcoin was below $100, I’ve been recommending people buy. Part of what makes Bitcoin frustrating for experts but lucrative for speculators is the absence of transparency. No one really understands what it’s worth, but obviously many entities, both businesses and individuals, use Bitcoin. If everyone understood Bitcoin, there would be no market.

Since 2011, Bitcoin has defied all predictions of its collapse. If I had to compile all of the failed predictions of Bitcoin’s demise, it would take days and fill dozens of pages. Here are some of them, courtesy of Google. Even Moldbug, as smart as he is, got it wrong.* One could argue it’s too soon to call Bitcoin victorious, but I think three years is long enough. If the US govt. were going to make a concerted effort shutdown Bitcoin, it would have done so already. Unless it’s overtly illegal, what has to be understood is that the government typically doesn’t like to shut things down, preferring instead to regulate and tax. In the wake of the Silkroad debacle, Bitcoin has become heavily regulated,as far as America is concerned, and people who trade bitcoins are subject to capital gains taxes, much like a stock. Same for vendors who use Bitcoin as payment. If the government can’t shutdown cigarette companies, which cause about 500,000 deaths per year in the United States alone, are they really going to make a big effort to shutdown a harmless currency**? Because people occasionally use firearms for nefarious activities, does that make guns illegal? No. But guns are heavily regulated…same for cigarettes and alcohol.

* here, here, and here

** Some have argued that Bitcoin could threaten the sovereignty of the Govt., hence necessitating its shutdown. However, due to slow adoption, the finite monetary base of bitcoin (only 21 million coins can be mined), and the difficulty of mining them, I don’t see Bitcoin becoming a competitor to the US dollar. The US govt. could also make a new currency to replace both bitcoin and the dollar, backed by the credit worthiness of the USA, and then circulate that, as well use it for bond payments. More likely, though, Bitcoin will just be digital version of gold or platinum, something that – while valuable – doesn’t in anyway threaten the dominance of the dollar, and has various applications and other properties that make it valuable.

Wealth Inequality Not a Big Concern

‘Capitalism, Tradition and Traditionalism’ – An Overview

. The Reactionary sees no problem with wealth inequality, which reflects differences of aptitude, however the people at large will be prone to complaints of wealth inequality if their entire world is centered around capital, that which they may be unsuccessful at accumulating. Marx himself said that communism could never have gotten its start had capitalism not done away with the older system, which was able to effectively distract from common economic hardship.

Wealth inequity between the top .1% and everyone else keeps widening, especially in the past three decades, yet public opinion of wealth inequality is unchanged since 1985:

Predictably, democrats are more concerned about wealth inequity than republicans:

The fact fact that public opinion hasn’t changed in over three decades is more of a reflection of America’s persistent left/right divide, which has remained proportionally unchanged for decades, with approximately half the country holding conservative economic views and the other half more liberal.

Many people understand that wealth inequality is an inevitable byproduct of economic progress. People who produce more economic value are rewarded in the marketplace with more wealth than those who produce less. Those who create a lot of indirect economic value are rewarded the most, examples being entrepreneurs like Steve Jobs and Bill gates, whose inventions have created millions of jobs and hundreds of billions of dollars in economic activity, both directly and indirectly. Donald Trump, for example, is the highest polling candidate in the GOP primaries despite being much wealthier than his opponents. Revolution occurs when fundamental needs are unmet, typically due to economic collapse, not because of class envy. In addition to other factors, the October Revolution (food shortages due WW1) and French Revolution (flour war) were engendered by economic collapse resulting in shortages of food and hyperinflation. Although wealth inequality is high, it’s not like people are starving; in fact, there is so much abundance there is an obesity crisis and many people are choosing not work.

Some on the right want to see a more ‘holistic’ or ‘nicer’ version of capitalism, but what does that mean? It’s like saying you want to see a ‘nicer’ version of evolution. It doesn’t really work that way. Capitalism, like evolution, is autonomous, as a way of converting inputs (money, labor, etc) to achieve an outcome or state that is more efficient than what proceeded it.

Fredrick Brennan on Eugenics

Hotwheels: Why I Support Eugenics

Fredrick Brennan aka ‘hotwheels’, the creator of the popular imageboard 8chan and who is severely disabled due to brittle bone disease, uses himself as an example for why eugenics is a good idea for lowering healthcare costs and minimizing human suffering:

As a society, most of us seem to agree that people deserve medical care, and we are willing to pay tens of thousands of dollars directly to the parents of disabled children who knew for a fact that their children would be crippled. We are also willing to pay hundreds of thousands of dollars, and in some cases millions of dollars indirectly in medical costs.

Simply offering people with debilitating, genetically dominant genetic diseases $100,000 cash each to undergo voluntary sterilization would be a libertarian, humane way to encourage genetic purity. Couples who both carry a recessive gene could be offered a smaller sum, like say $10,000, by genetic counselors.

This is a good start, offering financial incentives for people with inauspicious genetic markers that may cause severe, costly disability to undergo sterilization, or maybe at least voluntary forgo pregnancy.

But the problem is that many prospective parents are unaware of these genetic risks, and other severe disabilities may not have an obvious genetic marker or family history where genetic counseling would be of use. For example, to screening for trisomy 21 requires that all mothers of certain risk factors (advanced maternal age) be tested early in the pregnancy, because the presence of the extra chromosome can only be detected after the first trimester. On the other hand, Tay-Sachs disease, which is inherited in the autosomal recessive pattern, is amenable to counseling because couples can be tested for carrier status before having children, hence the risk is well-defined.

Reddit also agrees, and even though ‘hotwheels’ is part of gamergate, even anti-gamergaters see the merits of his argument:

I’m going to defend Frederick Brennan’s article. I’m not totally one hundred percent behind his idea, but I support the discussion of it. It shouldn’t be immediately dismissed, and it’s unfair to relegate it to the most undesirable corners of the internet.

Frederic Brennan is a man who is suffering. He is in constant pain. Having dealt with several broken bones from a variety of sports injuries, I can tell you how painful a screw, or a plate, or a support rod can be, especially when they move just ever so slightly, grinding into your nerves.
.
.
.
His “eugenics” is not an enforced sterilization, nor based on pseudo-science.

It’s a voluntary program, based on genetic screenings, clear science, and compensation. This isn’t based on some demented notion of genetic purity, but on the belief that sometimes, some people are too sick to live.

Many of you support the concept of death with dignity, where those with terminal diseases fight for their right to end their own lives on their terms rather then suffer. I support it as well.

Oh, and merry Christmas to everyone, too.

Related:

Abortion & Healthcare Policy
Physician Assisted Suicide and Euthanasia May Lower Healthcare Costs

More Homicides = More Incarcerations

From a discussion on hackernews, someone writes:

This bug almost looks like a feature to me. The actual bug is the criminal justice politics that has resulted in an incarceration rate of 256 in such a wealthy and homogeneous society as Washington state.

The incarceration rate in Washington state, while actually being the tenth lowest in the US, is 2-4 times higher than that of European states of comparable size, wealth and diversity, such as Sweden, Belgium or Austria.

There is perhaps a misconception that America is arbitrarily locking up people.

America does indeed have a much higher incarceration rate than UK, with a rate of 700 per 100,000 vs. 150 in England.

Of these, 50% are for violent offenders:

In debating incarceration, the left constantly raises the issue of ‘non-violent’ offenders, glancing over the fact that a substantial number of prisoners are violent, even for the non-violent categories. Property and drug crimes, while not classified as ‘violent’, have the potential to escalate into violence, and represent a threat to social order. The broken window theory posits that small crimes are a ‘stepping stone’ to larger ones.

America has a substantially higher homicide rate than many developed countries:

The homicide rate for Washington state is 2-3 per 100,000, while Sweden is just .70, Belgum 1.65, and .90 for Austria.

It’s not surprising countries with high homicide rates also have higher incarceration rates than countries with fewer homicides.

Reactionary Realism

From Poseidon Awoke, NRx: Against Platonic Rationalism:

I believe that the Dark Enlightenment is the realization that we are currently governed by pseudosciences, which were created out of the Enlightenment exuberance for the human ability to reason (rationalize). What the children of the Enlightenment did not understand was the limits of human cognition and the laundry list of cognitive biases that humans have. As such, we cannot simply think our way forward, deducing from first principles… we have to actually measure and experiment. We have to measure our mental models against the real world. Today, the pseudosciences assume that they are correct because they are logically consistent, but when the real-world outcomes to not match their imaginary models, it is because of some witchcraft (some evil crimethinker), rather than the fact that the imaginary model is not founded on observable truth.

Agree that democracy is a pseudoscience that (as I explain yesterday) requires its subjects suspend disbelief. But I’m not so quick to join the ‘humans are irrational’ bandwagon, because that often segues into turning IQ into a handicap, a tactic common among the left and liberal pop psychology charlatans. If smart people and their models are occasionally wrong, do you think less intelligent people will fare better? If a rocket blows up on the launchpad, do we fire the rocket scientists and replace them with ditch diggers? I would argue that all humans act in a way that they individually perceive as rational, but the rationalizations of smarter people tend to produce better results both individually and for society.

If I had to rename the site, maybe it would be called Rationalist Reaction, Reactionary Rationalism, or Reactionary Realism. The idea is to reconcile free will/ individualism/autonomy within a reactionary and deterministic framework, where the ‘social order’ is both an economic and biological one. This is similar to compatibilism. The example of Hobbes’ river, in contemporary society, is analogous to IQ and other biological factors. For example, the meritocracy by IQ, which means that individuals have free will and self-determination within their cognitive limitations. People with low IQs and genetic markers for violence are influenced by these biological factors to make poor life decisions, so while they have free will to make choices, these choices are often bad.

Conservatives tend to want to preserve the ‘status quo’, but biology helps by creating new caste systems within America, especially since 2008, stratified by IQ, with smart people tending to rise to the top and the less intelligent wedged between the cracks. Thus, Social Darwinism may, in fact, be compatible with conservatism, as both are a means to preserving a social order – the former by biology and the latter by rule of law, culture, and customs – or, preferably, by some combination of both. Rationalism is the understanding of this process, the entanglement of biology with socioeconomics, but it also goes beyond that, to understanding macroeconomics, and to the rejection of superstitions and wishful thinking by the embracing reality even if we don’t always agree with it or like it.

The suggestion that some people are intrinsically better than others is antithetical to egalitarianism and is a view many conservatives, liberals, and libertarians find offensive, wishing it weren’t so. They create these ‘myths’ to explain it away – we need more spending on social programs, more wealth redistribution, stronger families, less regulation…etc, etc. I’m sympathetic to the last two, and indeed stronger families will make for a better society, but it doesn’t change the fact some people are still, at the biological level, better than others. That’s the problem with Thomas Sowell…although he’s right about economics, he dismisses the role of biology and its connection with economic outcomes, arguing like liberals do that to posit such a link is racism. Biological and economic reality throws cold water on these ‘myths’, as evidenced by growing wealth inequality, or how smart, rich people tend to produce more economic value than poorer, less intelligent people. Or how high-IQ people create technologies and research that advances civilization, sometimes getting wealthy in the process, too. Again and again, the research is clear: IQ is biological and strongly influences socioeconomic outcomes. Therefore, some people, upon conception, must better than others – if ‘worth’ is measured by the potential to create economic value and advance civilization, which I think is pretty important. One could argue, of course, that not all high-IQ people are productive, useful members of society, and this is true, but, by in large, the there is a positive correlation between creative output and IQ. In other words, IQ is more than just a number, as much as many were it were.

Some libertarians and conservatives, to their credit, even in rejecting the idea of biological determinism, acknowledge that some people are superior to others by virtue of their economic, scientific, and social contributions.

But back to the subject of policy, if smart people occasionally draft poor policy, that doesn’t mean smart people are the problem. We need better policy and leaders.