Monthly Archives: May 2016

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’.

Genes for IQ finally found…what’s next

There have been some recent developments in genome-wide association study (GWAS) pertaining to IQ and academic achievement:

Genome-wide association study identifies 74 loci associated with educational attainment:

Here we report the results of a genome-wide association study (GWAS) for educational attainment that extends our earlier discovery sample1, 2 of 101,069 individuals to 293,723 individuals, and a replication study in an independent sample of 111,349 individuals from the UK Biobank. We identify 74 genome-wide significant loci associated with the number of years of schooling completed.

These studies specifically concern Single-nucleotide polymorphism (SNPs), which are variations in a single nucleotide that occur at a specific position in the genome. A wide range of human diseases, e.g. sickle-cell anemia, β-thalassemia and cystic fibrosis result from SNPs.

From Wikipedia: A SNP is a single base pair mutation at a specific locus, usually consisting of two alleles (where the rare allele frequency is >1%). SNPs are found to be involved in the etiology of many human diseases and are becoming of particular interest in pharmacogenetics.

A locus (plural loci), in genetics, is the specific location or position of a gene, DNA sequence, on a chromosome. Each chromosome carries many genes; humans’ estimated ‘haploid’ protein coding genes are 20,000-25,000, on the 23 different chromosomes.

Additional information:

Brief Summary: Genes for IQ finally found

Paper from Nature: Genome-wide association study of cognitive functions and educational attainment in UK Biobank (N =112 151)

In response to these findings, West Hunt poses the question:

People are doing GWAS studies on alleles that influence educational achievement – IQ alleles, more or less – and are finding some. Once you find them, the natural question is how the frequencies of those vary in different populations. Do populations that test low on IQ have fewer plus alleles than those that test high?

As the title implies, either we don’t know or the research is liable to being suppressed. Once genetic markers are identified, the natural question is whether they vary between different groups (races), if some groups have more markers for high IQ than others, and then inevitably you enter the minefield of race and IQ. The research suggests that some groups may be less or more intelligent than others (as measured by IQ tests) but genetic data to confirm this would be a setback for various political interests.

To quote Andrew Sullivan, ‘p.c. egalitarianism’ may be hindering much-needed research in this field.

Ingroup/Outgroup Dynamics

Ingroup/outgroup dynamics are a topic of much interest to both the ‘alt right’ and rationalists. From Wikipedia:

In sociology and social psychology, an ingroup is a social group to which a person psychologically identifies as being a member. By contrast, an outgroup is a social group with which an individual does not identify. For example, people may find it psychologically meaningful to view ourselves according to our race, culture, gender, age or religion. It has been found that the psychological membership of social groups and categories is associated with a wide variety of phenomena.

Scott has written extensively about ingroup/outgroup dynamics, in one of his most important articles “I Can Tolerate Anything Except The Outgroup” observing how groups that share many similarities may be the most acrimonious, an example being German Jews versus Nazis:

Compare the Nazis to the German Jews and to the Japanese. The Nazis were very similar to the German Jews: they looked the same, spoke the same language, came from a similar culture. The Nazis were totally different from the Japanese: different race, different language, vast cultural gap. But the Nazis and Japanese mostly got along pretty well. Heck, the Nazis were actually moderately positively disposed to the Chinese, even when they were technically at war. Meanwhile, the conflict between the Nazis and the German Jews – some of whom didn’t even realize they were anything other than German until they checked their grandparents’ birth certificate – is the stuff of history and nightmares.

Other historical examples include Irish Catholics vs. Protestants. Or Israeli Jews vs. Palestinians, both being Semitic people residing in a close geographical proximity.

Why Are the Highly Educated So Liberal?

Online, however, I have noticed that some of the smartest, best-informed actually tend to hold some variant of conservative, libertarian, or neoliberal views on economic matters but are somewhat liberal on social matters.

I would wager that the liberal ‘liberal vs conservative’ dichotomy tends to be blurred among some of those who are smarter, so depending on how you word the question can result in answers that may or may not conform to these categories.

Answering ‘yes’ to the question ‘Is poverty a major issue?’ can be interpreted as liberal, but the solution may not necessarily be a liberal one.

Liberalism tend to be populist (Sanders’ campaign), but some call liberalism ‘elitist’, so it’s kinda confusing or contradictory how it can be both.

In this sense, for welfare liberals, the ‘outgroup’ is neoliberals, who tend to be more critical of direct democracies and populism, preferring variants of utilitarianism run by an educated, well-informed ‘elite’ over the ill-informed masses.

For NRx, the ‘outgroup’ may not be liberals, which is the most obvious choice given than NRx is a right-wing ideology/movement/whatever. Instead, perhaps, it’s ‘low-information’ and ‘democracy’, both from the ‘right’ and ‘left’, as one type of ‘outgroup’. As in the case of utilitarianism, it’s possible to be on the ‘left’ and still reject direct forms of democracy.

As very recent example of ingroup/outgroup dynamics over small differences, the post-2015 ‘cuckservative’ movement, which pitted ‘traditional conservatives’ against ‘establishment conservatives’, with insults hurled between both sides on Twitter and blogs, despite both sides being ‘conservatives’.

Thus, possibly in every group, there may be two ‘outgroups’: one involving small differences (establishment conservatives vs. alt right, neoliberals vs. welfare liberals) and an ‘outgroup’ of broader differences (conservatives vs. liberals).

Bay Area Rent Is Surging

Despite tame CPI-based inflation, rent, particularly in the Bay Area, has really exploded since 2011:

The Bay Area real estate market is white hot, defying all predictions of its collapse.

According to Zillow, San Jose, San Francisco, Palo Alto, and Berkeley rent has gained 40-70% since 2011, vs. only modest national gain in wages and CPI.

However, new renters pay more than established renters. Due to the difficulty of evicting deadbeat renters and to account for turnover, landlords need to charge enough at once to cover multiple months (typically up to a year) and to adjust for future inflation.

This is also an example of how the ‘middle class’ may be getting squeezed, with high rents, high student loan debt, and lousy job prospects.

Given these sobering statistics for renters, is it any surprise millennials are living with their parents longer, refusing to move out?

Or why home ownership may still be the best path to long-term wealth creation (or even short-term given that homes in some regions have surged 30-100% since 2012), versus lining the pockets of landlords month after month to no end? I would rather put that money into a home in San Jose, where prices are rising 15-20% YOY, than make the landlord rich.

From The Washington Post, Where it’s cheaper to buy than rent:

As you can see from the map above, there are very few regions where it’s better to rent than buy, yet many on the left (and some on the right) insist buying is bad. There are many (here is one, there are dozens others on Reddit) instances of people in their 20-30′s who have made big money in recent years buying and flipping properties, but that won’t dissuade the chants from the left that ‘all home buying is bad, you must rent’. Gets irritating after awhile. The left wants people to rent instead of buy, as part of the left’s war on the ‘ownership society’.

On a related note, this insistence that you ‘must move out of your parent’s house’ has also become repetitive in recent years, and is possibly wrong.

There are many millennials who believe financial independence is more important than location independence, if it means living with your parents longer so you can keep more of the money you earn instead of pissing it away every month to a landlord. But this requires that you have amicable relations with your parents, some millennials don’t.

$1,000 a month for rent could be better spent making yourself rich through stocks or on a down-payment on your own home. The stock market is up over 200% since 2009, and I predict that, like the Bay Area housing market, it has higher to go. Those who invested that $1,000 every month in the S&P 500 starting in 2009 would have A LOT (about $120-150k, depending on the calculation), versus a loss of $72,000 through rent (and this is not including rent hikes). Even if you started investing in 2007 at the peak of the last bull market, you would still come out way ahead. An investment in the S&P 500 in 2005 would be up 75% as of today, despite a bear market in 2007-2008.

$1,000 a month is the poverty line, yet wealth can be amassed if you aren’t pissing it away money every month for various expenses, and, secondly, if you invest it wisely, such as in the S&P 500.

The Economics Debate: Jobs and Automation

In the ongoing online economics debate over technology, jobs, and automation, the Luddite Fallacy and Lump of Labor fallacies are often invoked.

However, the there is a point of common confusion, which is if the goal of technology is to replace labor, then over the long-term labor cannot compete with technology. I believe technology will not displace all jobs. By lowering costs for one firm (such as a firm installing a robot to replace employees), that automation creates new jobs for another firm. Cars replaced the horse and buggy industry, but look at all the new jobs cars created. What has to be understood is that when a new productivity-enhancing technology is successful, it spawns an industry, creating jobs in the process even if the original intent of the technology is to eliminate jobs. As more companies want this new technology to save money, the company that makes this technology is swamped with demand and needs to expand, and this means jobs are created. And then the new technology may occasionally break, and then repairmen need to be hired, ad infinitum.

Although Amazon’s business model strives to automate as much of the shopping experience as possible, its employee count has surged, owing company’s enormous success:

As another example, despite the decline domestic auto manufacturing, the auto industry employs vastly more people than the horse and buggy industry ever did, including auto dealers, accessories, body shops, car insurance…even accident lawyers.

Although computers (called tabulating machines) were originally intended to help tabulate census results, it eventually gave birth to an industry larger than anyone could have ever imagined, as computers became faster and omnipresent.

In the case of robots, a whole new set of jobs will be created revolving around the robots, such as maintaining the robots. And of course, new jobs are always being created around news technologies. For example, major brands hire people to screen their Facebook pages for spam and to answer inquiries, as well as update social media, which is an example of a job that just a decade ago didn’t exist.

In other instances, automation and employees coexist, meaning that the total employee count does not fall despite automation. Rather than food stores eliminating all cashiers, self-checkouts coexist with them, and also employees are assigned to monitor the self-checkout machines.

And old technologies have a habit of being persistent. Like cashiers coexisting with self-checkouts, horse and buggies still exist, as do typewriters. In many instances, there is a demand for old technology that fills some sort of niche, and this demand, although much smaller than the new technology, is still large enough to keep the old technology going.

Another solution is retraining the workforce to learn better skills, but Gwern is not as optimistic, invoking the IQ argument that many may not be smart enough, in which I agree:

I see. So all we have to do with all the people with <120 IQs, who struggled with algebra and never made it to calculus (when they had the self-discipline to learn it at all), is just to train them into world-class software engineers and managers who can satisfy Silicon Valley standards; and we have to do this for the first time in human history. Gosh, is that all? Why didn’t you say so before - we’ll get on that right away! Or an anonymous “data scientist” recorded in the NYT: “He found my concerns to be amusing. People can get work creating SEO-optimized niche blogs, he said. Or they can learn to code.” Thomas Friedman:

Maybe the issue is 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, or as I explain in Paul Graham: Economic Inequality and The Refragmentation:

The trend, I predict, is that wealth inequality will become almost the same as IQ inequality. IQ is more much important today than a generation ago in influencing individual economic outcomes. 100 years ago in an economy dominated by manual labor, the difference between a 90 IQ and 120 IQ wasn’t that important, but now it is.

This may be manifested in the ‘hollowing out‘ of the middle, where there too many low-paying jobs, lucrative creative class jobs, but not enough middle-income ones, due to less intelligent people being able to find good-paying jobs. Luddite Fallacy and Lump of Labor may ignore job pay or cognitive demands. 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.

Ultimately, in our Great Economics Debate, the problem is no one knows of solutions or can predict what will happen, but these issues will impact everyone, hence why there so much discussion about the topic of jobs and automation.

Why Do The Rich Need So Much Money?

(This post was cut from an earlier post and made into a separate blog post, with some additional editing)

Another argument you’ll commonly hear is, why do the rich need so much money? Couldn’t it be spent better elsewhere?

Even leaving aside rich using their status to solidify their position, consider this: are the policies that maximize GDP and lead to high wealth inequality the same policies that maximize the prosperity of the middle 50% of the population? No economic rule I know of guarantees that to be the case.

Wealth isn’t created in a vacuum. Wealth can only be created in places with a high level of social order. That social order isn’t created by exceptional individuals, it’s created by the behavior and attitudes of ordinary people. Given that, why should societies not structure themselves to maximize the prosperity of the majority?
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What you have to keep in mind is that the government is typically really careless with money, and many government programs have a negative ROI. Yes, TARP and Tesla are two examples of government intervention working, but then you have the Obama Stimulus, which the majority economists concede was a failure, costing between $200,000-$2 million per job created. And then there out of control entitlement spending for low-ROI things like disability, food stamps, healthcare, and so on. The war on terror and Iraq, while possibly necessary, was too expensive and laden with waste. I would support a high-IQ basic income, more gifted education programs, more funding for tech start-ups, and a eugenics program, but instead we (the govt.) keep throwing money down the drain on people who are net-negative to the economy and society, or at lest much more money than necessary. We need to get over this ‘muh liberties’ nonsense and understand that your liberties and freedoms go out the door if your survival is dependent on someone else (taxpayers).

Also, capitalism is about incentives. When you create a negative incentives, it creates externalities, possibly in the form of companies moving overseas, job loss, or economic stagnation. Second, as I explain earlier, capitalism is expensive and the failure rate is high. Venture capital is mostly funded by wealthy, exmaples being the Space-x and Blue Origin rocket programs, both very costly and funded by billionaires Musk and Jeff Bezos, respectively. If taxes were much higher, such programs may not exist.

Most venture capital is private:

It’s not unreasonable to expect innovation will slow if the private sector is overtaxed, as the private sector funds most businesses and technologies.

High corporate tax rates create an economic incentive for companies to incorporate out of the United States through ‘inversions’ to get a lower tax rate. Relative to most developed countries, America has a very high corporate tax rate:

It’s a rock-solid fact that the U.S. corporate statutory tax rate is the highest among developed nations and is significantly higher than the average. According to 2014 data from the OECD, the combined federal and state statutory corporate tax rate for the United States is 39.1 percent. The average of the other 33 members of the OECD is 24.8 percent — 14.3 percentage points lower than the U.S. rate. Weighted by country GDP, the average for these 33 countries is 28.3 percent — 10.8 percentage points lower than the U.S. rate.

Rather than attacking the rich, who create jobs and technologies, another solution is to make life easier for people, especially millennials, such as by chipping away at credentialism, which is creating a feedback loop of higher tuition. The problem is disparate impact and quotas, which hurt job seekers, students, and employees.

Biology as a Sorting Mechanism

Some try to frame the left/right dichotomy as a battle between ‘order’ vs. ‘chaos’, but it’s more like ‘egalitarianism’ (forced equality) vs ‘hierarchy‘, whether such hierarchy is biological, social, and or economic. The far-left may deny individual exceptionalism in favor of a ‘blank slate‘ approach, because they believe the state should be able to ‘perfect’ man. The reign of Pol Pot is one such extreme example, where anyone who didn’t conform to the Khmer Rouge’s vision of ‘perfection’ was either murdered or ‘re-educated’. The biological reality that some people are perhaps born ‘better’ than others goes against such aspirations of perfectibility and egalitarianism. A communist regime is very orderly and systematic (the opposite of chaos) in its efforts to force equality, and although the eventual deterioration of the economy may lead to chaos, and the installation of a far-left government may be chaotic, chaos just for the sake of chaos is not the intent. One can make the argument that the left is ‘too orderly’ in trying impose their will on biology and human nature.

But to get a communist government you must first have a revolution, which is why the left seeks crisis – whether economic or geopolitical – as a way of punishing the rich and bringing about a more egalitarian society where everyone is equal, even if it means everyone has less (Sanders’ economic vision comes to mind).

The economic strain of WW1 weakened the Tzar autocracy, eventually leading to revolution:

“Russian Revolution” is the collective term for a pair of revolutions in Russia in 1917, which dismantled the Tsarist autocracy and led to the eventual rise of the Soviet Union. The Russian Empire collapsed with the abdication of Emperor Nicholas II, and the old regime was replaced by a provisional government during the first revolution of February 1917 (March in the Gregorian calendar; the older Julian calendar was in use in Russia at the time). In the second revolution that October, the Provisional Government was removed and replaced with a Bolshevik (Communist) government.

As Pinker and others have noted, there is evidence the world is getting safer, and the left wishes this weren’t so, preferring chaos so that the ‘unfair’ status quo is replaced by a more egalitarian one. Liberals deny individual cognitive exceptionlism, to promote leveling. According to the left, if people succeed it’s because they had an unfair advantage, practiced 10000 hours, cheated, etc. – not because of superior genes.

The left is robbing exceptional people of their exceptionalism by planting seeds of doubt, that maybe exceptional people cheated or are deliberately oppressing the less successful. It’s like Obama’s ‘you didn’t build that’ remark. Nevermind the day traders on Reddit who are consistently making fortunes in the stock market despite the left’s insistence that the market and the economy is rigged. But over and over again, exceptional people keep proving the left wrong.

However when pressed, some on the left will concede that IQ is real, is biological, and is relevant for certain skills, but then they have another strategy, which is to turn IQ into a handicap, meaning that a high IQ must come at the cost of another but more important attribute (for example, that smart people are lazy or unethical).

The question is, can people handle the truth about genes and socioeconomic outcomes, and I’m afraid the answer in many instance is still ‘no’. As I explain in the post IQ Anxieties, the idea of biology as a ‘sorting mechanism’ for society and achievement goes against the concept of ‘free will’ as ingrained by school, parents, teachers, clergy, etc – the conceit that anyone, with enough practice and education funding, can achieve anything (growth mindset vs. fixed mindset). And as explained earlier, such a sorting mechanism goes against the left’s aspirations of ‘perfectibility’. The ‘fixed mindset’ is more accurate, but probably not what people want want to hear, preferring the ‘growth’ one, which sells books and fills Ted talk lectures.

The concept of biological determinism makes many uneasy, because we want to believe we can not only control our lives, but our outcomes too. To quote Scott Adams, your mind is creating little movies in which you are the star.

For better or worse, the disconnect between reality and these ‘mental movies’ is vast. Maybe ‘better’ because, at the personal level, it’s a coping mechanism; ‘worse’ because the consequences of individual delusions are shared by society, in the form of bad policy.

Teachers can identify exceptional students at a very young age, long before 10,000 hours can kick in. Or the especially well-written Salon or Slate article that you know was written by someone with genuine talent at putting words together, talent that manifests early in life. Even in school, there are the ‘smart’ kids and ‘dumb’ ones. Again, no 10,000 hours needed to separate tomorrow’s losers from potential winners. Some defenders of the 10,000 rule may argue that the rule only applies to those who are already talented, with the 10,000 hours of practice supplementing talent instead of of replacing it, in which I agree, but many deny the role of talent altogether. The delusions inspired by the 10,000 hour rule remind me of parents who think their dull kids are smart, or Amazon self-publishers who blame ‘gatekeepers’ for their crappy books being rejected.

We want to live in a world where where if we fail it’s someone else’s fault, a conspiracy, or a failing of society – not a failing of the individual. That’s why Sanders’ blame-the-rich rhetoric is appealing to many – no, it’s not your fault (either due to laziness, poor life choices, bad genes, etc) for failing to succeed at life, it’s those ‘greedy rich people’ keeping you down. Although ‘bad genes’ are obviously beyond one’s control, it’s still an individual problem, not a societal one. This means that the successful and society should not divert too much attention to them (losers), but instead focus on the winners. Maybe this is unfair or mean, but it’s economic and biological reality that some will be better than others, that some will have more than others, and those who have the biological potential to succeed should have priority over those who don’t.

Related: Education and the Blank Slate: Setting Realistic Expectations

Alt Right, Part.. Whatever

From The Daily Beast: Meet Milo Yiannopoulos, the Appealing Young Face of the Racist Alt-Right


Analyzing a subset of the alt-right who call themselves “neoreactionaries,” Vox’s Dylan Matthews explains this important distinction, “Most modern libertarians are individualists, motivated by a desire to prevent the masses from oppressing the individual…
“Neoreactionaries are not individualists… neoreaction places huge value on group membership and group loyalty,” Matthews says.
“They are tribalists, and for the most part—let’s not mince words—they are racists.”

In regard to the Daily Beast article, there seems to be some confusion among the punditry about larpy-right vs. the rationalist alt-right, lumping the two together. The latter is less aligned to tribal-like loyalties, preferring intellectual thought and debate above slavish devotion to ideology. ‘Group loyalty’, ‘litmus tests’, and ‘membership’ has never struck me as a defining characteristic of NRx. Pre-2014 NRx seemed more libertarian, more theoretical, more rationalist, and more individualistic, versus the post-2014 attempts to try to codify it into political movement. The people who show up for Trump or Milo rallies are not representative of NRx as a whole, nor the other way around. Maybe some are, but not all. NRx has and should always be a little opaque, to keep it from becoming too activist, too political, too low-information. Many followers of NRx, in rejecting the democratic process, don’t seem to fit the personality mold (being a ‘team player’ or gregarious) of those who readily join political rallies and causes, as Altavisionary noted.

It’s kinda amazing how, despite being gay, Milo has been so effective at converting young people to the ‘alt right’, which is evidence the ‘alt right’ values ideas more so than identity politics or the person behind the ideas. This indifference or aversion to moral rigidity borrows from libertarianism.

Unfortunately, all movements come in waves, and there is always the possibility the ‘alt right’ wave will crest, if it hasn’t already, similar to the 2009-2012 Tea Party surge and other movements. As an anecdotal example, between 2014-2015, on popular investing website, a couple dozen people discussed and wrote articles pertaining to a special ETF strategy, forming a small ‘club’, and then in early 2016, possibly due to unfavorable market conditions or other factors, the discussion suddenly stopped. Things come and go. The question is, how to keep the momentum going.