Monthly Archives: August 2016

Wealth, Intellectualism, and Individualism, Part 1

From Michael O. Church in response to Justine Tunney, Thanks for your insightful reply:

What is this war? What are the sides? To be honest, I see a lot of bitter conflict in our society, but I don’t see the coherence of a war. I don’t see “sides”. I see a dissolution into feudalism and extreme individualism. I see a society where selfishness has become a virtue, in which “neoliberalism” (which is not very new, and not liberal) goes unquestioned, and in which pointless division thrives.

Maybe he’s right but perhaps too pessimistic about individualism, which I see as a force against leftist collectivism, whether economically or socially, but this push to individualism may also may be disconcerting those who are unable to adapt and or morally object to America’s increasingly atomistic economic and social landscape.

‘Individualism’ is a major theme of this blog, as part of the ‘trinity’ of wealth, intellectualism, and individualism, defining ‘themes’ of post-2008 society. Our post-2008 economy is a more cutthroat one, where status, more than ever, is based on individualistic merit, not collectivism or connections. Also, whether it’s stock trading, real estate, or the obsession with finance, everyone is striving to get rich, and high-IQ entrepreneurs like Martin Shkreli and Elon Musk, who embody all of the trinity, are tantamount to ‘deities’ or ‘John Galts’ (or maybe Francisco d’Anconia) for our generation of otherwise agnostic or atheist millennials. Some could liken the post-2008 economy to an ‘Ayn Rand world’ in overdrive, with neoliberal/neoconservative economic and foreign policy thrown in, too, and this seems accurate given recent economic and social trends. Even George W. Bush, in 2004, famously coined the phrase ‘the ownership society’ to describe the increasing importance of personal ownership and individualism. [Although some on the ‘right’ call neoconservatives liberal Straussian Trotskyites, such labels fall apart upon closer scrutiny.] From the Atlas Society:

Objectivism is the philosophy of rational individualism founded by Ayn Rand (1905-1982). In novels such as The Fountainhead and Atlas Shrugged , Rand dramatized her ideal man, the producer who lives by his own effort and does not give or receive the undeserved, who honors achievement and rejects envy

Of course, Michael O. Church and I are not the first to make this observation. Tom Wolf, in an influential 1976 article in New York magazine, described the 70′s as the “‘Me’ Decade”, a ‘general new attitude of Americans in the 1970s, in the direction of atomized individualism and away from communitarianism, in clear contrast with social values prevalent in the United States during the 1960s.’ But perhaps the difference between then and now are how values have changed, from a society where individualism and success were only a part of a bigger picture, not the entire picture itself.

Recent examples of Individualism include the MGTOW movement, the ‘choose yourself’ paradigm as described by James Altucher, millennials trying to be self-sufficient financially, ‘selfie culture’ (Instagram and Snapchat), and ‘hustle culture’ (millennials trying to make money on their own terms, whether through stocks, real estate, and other means, bypassing the traditional 9-5 job route).

Individualism also means more accountability and personal personal responsibility, instead of ‘shared’ responsibility. In the pre-2008 world, millions of mediocre workers were overpaid to perform jobs that have since been automated, outsourced, or completely eliminated, as emphasis has shifted towards ‘value creation’, efficiency, and productivity. The rise of the ‘gig economy’ is an example of how individuals are being paid for the value they directly produce, instead of workers being overpaid and the collective (company and shareholders) footing the bill. In the past, the cost of mediocre employees (think the pointy-haired boss of Dilbert) was distributed among the productive, and no one noticed, allowing these mediocre employees to fly under the radar for many years. Then 2008 came, profits began to fall, and bosses began to ask, ‘Why are we paying all these people so much to do so little?’ The herd was thinned, and since 2009 and profits and stock prices have surged. And to add insult to injury, in spite of huge profits, many of the jobs eliminated in the recession never returned.

Worse still, remaining employees that have not been tapped by the icy finger of the ‘profits reaper’ find themselves at the mercy of perfidious employers, in an era where loyalty is gone and the supply labor vastly exceeds demand, giving employers decided upper-hand over employees, for many industries and jobs. And then there is the SJW digital lynch mob, ready to descend on anyone that they deemed ‘racist’, a word that has been redefined to mean not someone who acts on actual prejudice but merely observes biological differences or, ideologically, fails to subscribe to far-left liberalism.

Here is a video by Mike Cernovich interviewing James Altucher about ‘choosing yourself’:

Of course, a lot of people resist this ineluctable reality. ‘I want to keep my overpaid job,’ they insist. Unless you’re in the top 1-5% of talent and are irreplaceable, odds are your employer will eventually find someone or some way to perform your job for less money, rendering your job unnecessary.

From tinkerers, to writers, to entrepreneurs, some individualism is necessary for society to advance, but like most things there is an optimal balance between collectivism (community, clergy, schools, family) and individualism (innovation at the individual level, research-based academia, and entrepreneurship).

To be continued…

Neoliberalism

An article by Sam Bowman on neoliberalism went viral: I’m a neoliberal. Maybe you are too

Neoconservatives also support free trade, markets, and are consequentialist, unlike the far-right. They also tend to have a more optimistic outlook than either the far-left or the far-right.

Neocons are typically consequentialist, supporting policy such as 2008 the bank bailouts, which created the risk of moral hazard over the long-run (and went against the ethos of ‘free market capitalism’) and was very unpopular with a lot of people, but may have been necessary to stem the bleeding from the financial system and boost confidence so that the healthier parts of the economy would not be weighed-down by the ailing banking and housing sector.

Also, Sam Bowman is from the UK. The European-equivalent of ‘liberal’ tends to be more further to the ‘left’ than the US-equivalent. Bill Clinton, despite running as a democrat, favored deregulation, welfare reform, and was tough on crime.

In response to an earlier post, someone counters that liberals are optimistic:

Small correction: as a far-leftist, we actually believe we’re (ie: Marxists, anarchists, other radicals) the inheritors of the Enlightenment and its tradition of emancipation, understanding, and happiness through the systematic application of reason. We do not have a pessimistic view of human potential merely because we object to Whig history. The opposite! We object to Whig history because we look at the world and believe that we can progress much further than the present day.

Not all Marxists and far-leftists agree on everything. Some Marxists believe technology may render jobs obsolete, and that this is a good thing, whereas many on the far-left want ‘full employment’ (examples being the Works Progress Administration by FDR in the 1930′s and the Obama stimulus in 2009).

Karl Marx, in a section of his Grundrisse that came to be known as the “Fragment on Machines”,[22][23] argued that the transition to a post-capitalist society combined with advances in automation would allow for significant reductions in labor needed to produce necessary goods, eventually reaching a point where all people would have significant amounts of leisure time to pursue science, the arts, and creative activities; a state some commentators later labeled as “post-scarcity”.[24] Marx argued that capitalism—the dynamic of economic growth based on capital accumulation—depends on exploiting the surplus labor of workers, but a post-capitalist society would allow for…

Neoliberals, unlike welfare liberals, are more receptive to post-labor economics. Also, the inheritors of ‘The Enlightenment’ are today’s neoliberals and classical liberals, and maybe some libertarians. Like Same Bowman above, they are generally optimistic about human nature, and support free trade, free dissemination of ideas, technology, markets, and some social safety net. Now contrast that to the far-left of today, such as BLM, SJWs, Sanders, and, in 2011, OWS. BLM, for example, has a very negative view of human nature, believing that blacks are being systematically oppressed by so-called ‘institutional racism’, a view also shared by SJWs. Sanders, rather create wealth and celebrate individual success, wants to fan the flames of class warfare. SJWs oppose free speech and support censorship of ‘offensive’ ideas and individuals, going so far as even protesting liberal professors (or anyone whom they deem as ‘privileged’). The far-left also subscribes to the notion of the ‘noble savage’ and that modern civilization and technology are inherently racist and oppressive, preferring that the world revert to a simpler and more egalitarian state.

Maybe I’ll make a spreadsheet to show the similarities and differences between these and other ideologies

Philosophy as a STEM Subject

The acronym STEM, as everyone knows, stands for Science, Technology, Engineering, and Math. STEM subjects are math-intensive, analytic, and generally require a high intelligence to understand all the rules and intricacies. By this definition, the umbrella of subjects that could be considered ‘STEM’ or STEM-like could be expanded to include finance, economics, and even philosophy…I’ll leave it to the reader to find a catchy acronym.

Finance, which includes both personal finance and accounting, requires math, although the math tends to be simple – mostly arithmetic and compounding. There are also data visualizations involved, and the organization and interpretation of arrays of information such as spreadsheets and financial statements.

Economics, beginning in the the 50′s with Solow’s Growth Model and then in the 70′s with the theory of Rational Expectations and efficient vs. behavioral markets, has become very mathematical. Differential equations are a necessity, along with complicated diagrams and processing and analyzing an abundance of data. For example, there is Robert Barro, who used econometric methods to analyze data; John Cochrane, who pioneered time-series economics. Then there’s Paul Samuelson, a famous economist who used a lot of math to formulate his economic theories, adding significant rigor to the field of economics; Milton Friedman of the Chicago School and possibly the most famous economist of the 20th second half of the century, who used mathematical methods in the modeling of rational agents; Buchanan and the Calculus of Consent; Ronald Coase and his theorem…all economists who applied mathematics to economics subjects such as public choice, behavioral economics, rational markets, and decision making. More recently, physicists Lee Smolin and Eric Weinstein have begun applying concepts of gauge theory to macroeconomics.

Quantitative fiance is the most difficult and math-intensive of all fields of finance and economics, requiring a study of multi-variable partial differential equations, real analysis, measure spaces, martingale theory, and probability theory.

Online, especially since 2013 with the rise of ‘STEM culture’, finance, economics, philosophy, and quantitative finance carry the same prestige as the ‘hard’ STEM subjects such as physics, computer science, and math. Offline, no one cares you’re are an econometrician, but online you’re royalty. But even history majors, lit majors, comparative literature, and anthropology majors are also respected – subjects that, in contrast to useless ‘fluff’ degrees, are rigorous and intellectually redeeming even if they don’t pay as well as STEM. Also, finance, economics, and philosophy majors have as high of SAT scores (a good proxy for IQ) as math, computer science, and physics majors.

Then there’s philosophy, which I proclaim to be a STEM subject. Most people when they think of philology, the names Aristotle, Socrates, Plato, and maybe Nietzsche, Hume, and Kant come to mind, not mathematicians. But modern math and science offers a way of reconciling, or at least shedding new light, on questions posed by philosophers centuries earlier. The work of Godel, Turing, and Cantor blur the lines between philosophy and mathematics. Not only has philosophy, like economics, has become more STEM-like in recent years, but online especially, over the past few years, I’ve also noticed an immense increase in interest in mathematical-philosophy.

Kant in his 1781 magnum opus Critique of Pure Reason argued there were limitations to knowledge beyond the empirical: ‘Kant’s arguments are designed to show the limitations of our knowledge. The Rationalists believed that we could possess metaphysical knowledge about God, souls, substance, and so forth; they believed such knowledge was transcendentally real. Kant argues, however, that we cannot have knowledge of the realm beyond the empirical.’

Fast-forward to the 20th century, when Godel and Church disproved Hilbert’s ‘Entscheidungs Problem‘, as described by Scott Aaronson, who himself often blurs the lines between philosophy and science, in his research on computer science and complexity-theory:

The Entscheidungsproblem was the dream, enunciated by David Hilbert in the 1920s, of designing a mechanical procedure to determine the truth or falsehood of any well-formed mathematical statement. According to the usual story, Hilbert’s dream was irrevocably destroyed by the workof Godel, Church, and Turing in the 1930s. First, the Incompleteness Theorem showed that no recursively-axiomatizable formal system can encode all and only the true mathematical statements. Second, Church’s and Turing’s results showed that, even if we settle for an incomplete system F,there is still no mechanical procedure to sort mathematical statements into the three categories “provable in F,” “disprovable in F,” and “undecidable in F.”

In layman’s terms, every proof of the consistency of arithmetic (specifically, Peano axioms) is incomplete (arithmetic cannot prove itself).

These proofs tenuously vindicates Kant’s ‘synthetic a priori’, that there there are limitations to what can be proved, and that abstractions and propositions (like ‘multiplication’ and ‘addition’) have no empirical antecedent (a priori knowledge) and are ‘synthetic’ not ‘analytic’.

Bertrand Russell, Ludwig Wittgenstein, Ernst Zermelo, Alan Turing, Alfred Tarski, and Georg Cantor are other examples of mathematicians whose results had philosophical implications.

The P versus NP problem may is also relevant in understanding the limitations of what cam be proved under ‘reasonable’ conditions by a computer, specifically whether every problem whose solution can be quickly verified by a computer can also be quickly solved by a computer.

Related to existentialism, Robin Hanson’s Great Filter thought experiment could answer the Fermi Paradox, as to why alien life has not been observed despite the high probability that it should exist.

A significant area of philosophical inquiry involves the very concept of reality itself, whether reality is ‘real’ or ‘artificial’ (a computer simulation), the latter posited by Oxford Philosopher Nick Bostrom in his famous ‘Simulation Argument‘, which ‘proves’ there is a non-zero probability everyone is living in a simulation. In addition to the probabilistic argument, there is also the mathematics and logistics of creating the simulation itself, such as if enough resources exist for an advanced civilization to build a sufficiently powerful computer that can emulate the complexities of reality, or how such a computer or program would be created. Creationists argue that the structure of the universe is so fine-tuned (such as physical constants) that a ‘creator’ or ‘designer’ of sorts is involved, an argument that merges theology with neurology, biology, and physics.

Philosophy of mind – a branch of philosophy that studies the nature of the mind and the brain (mind–body problem) – has reaches in computer science and artificial intelligence, specifically if a simulated mind is conscious, or if a sufficiency advanced artificial intelligence is a substitute for consciousness. Computational theory of mind is view that the human mind or the human brain (or both) is an information processing system and that thinking is a form of computing, a view endorsed by philosopher Daniel Dennett, who argues that artificial systems can have ‘intentionality’ and ‘understanding’. Philosopher John Searle, invoking a thought experiment he devised called the Chinese room, counters, arguing that while a computable mind may seem like it has ‘understanding’ to an outsider, it doesn’t. This is an example of how philosophy borrows from STEM subjects such as neurology and computer science.

Free will vs. determinism is an age-old philosophical debate that has attracted the attention of quantum physicists. If the universe is entirely deterministic, it may imply humans have no free will. Philosopher and cognitive scientist Sam Harriss rejects free will; Daniel Dennett endorses compatibilism, which mixes some free will with determinism. This also ties into quantum mechanics, in an article from Scientific American The Quantum Physics of Free Will:

More recently, quantum-gravity theorist and blogger Sabine Hossenfelder has offered some thoughts. In a 2012 paper, she suggests that there is a third way between determinism and randomness: what she calls “free-will functions,” whose outputs are fully determined but unpredictable. Only those who know the function know what will happen. This is distinct from deterministic chaos, in which the function is universally known but the initial conditions are imperfectly known.

There is also the ‘many worlds’ interpretation of quantum mechanics, to reconcile determinism and free will by postulating that every possible event or outcome resides in a discrete universe that doesn’t interact with other universes.

The demarcation problem, in the philosophy of science, is about how to distinguish between science and pseudoscience. Karl Popper argued that science, in contrast to pseudoscience, can be falsified. Russell’s teapot, is an analogy or thought experiment, coined by the philosopher Bertrand Russell (1872–1970), to illustrate that the philosophic burden of proof lies upon a person making scientifically unfalsifiable claims, rather than shifting the burden of disproof to others. It’s impossible for someone to disprove within reason (without checking every square inch of space) the existence of the teapot. This ties into string theory, because the concern is that it cannot be falsified by any existing technology or scientific method. String theory may ‘never be wrong’, since it can always be ‘modified’ when new evidence is introduced that challenges (such as the failure to discover supersymmetry) the theory. Concepts such as the ‘multiverse’ are also impossible to falsify. It doesn’t mean these concepts are not fruitful (in the mathematical sense) or possibly correct, but right now there are no ways to test them.

That’s enough examples. It’s obvious that philosophy has extended its tentacles to all STEM subjects. In many ways, STEM complements philosophy by filling gaps of knowledge, or by providing new perspectives or angles of inquiry on timeless questions.

Defining ‘Progress’

From Social Matter: When We Talk About Tradition, What Do We Really Mean?

This passage stood out and is a position I have argued awhile:

Yet, many mistakenly attribute the corruptions of the modern world to science and technology because of the close correlation that is thought to exist between the two. Because the rises of modernistic worldview and high technology occurred more or less contemporaneously, it is widely believed that the two necessitate each other

The one does not necessarily follow from the other, however. There is nothing about scientific knowledge that intrinsically demands, or even preponderantly suggests, the sort of atheistic rationalism that is widely considered to be coupled with it.

In NRx discussion and articles, often words like ‘progress’, ‘modernity’, and ‘progressivism’ are often thrown about, as unalloyed evil, but it seems like not much thought or care is taken in understanding what these words really mean.

‘Progress’ and ‘modernity’ are very broad. They can mean technological progress or modernity – cars replacing horses; computers replacing typewriters; antibiotics replacing blood-letting. It can also mean social ‘progress’ (suffrage, civil rights, democracy, etc.).

Modernity can means better architecture that is impervious to natural disasters…it’s not just about civil rights.

Technological progress should be isolated from ‘progress’ as in liberalism; the two need not be interchangeable, nor should technology be the antecedent of liberalism. The UAE, for example, embraces technology, with the total rejection of leftist ideals such as democracy and civil rights. Even in pre-1960′s America there were great titans of industry and science, who created economic value and enriched the world with their creations, but only decades later did political correctness really start to spiral out of control, and it still is.

grey enlightenment AUGUST 15, 2016 AT 8:41 PM
technological progress should be isolated from ‘progress’ as in liberalism; the two need not be interchangeable. The UAE for example combines technology with total rejection of leftist ideals such as democracy and .

From wiki:

Progressivism is a philosophy based on the idea of progress, which asserts that advancement in science, technology, economic development, and social organization are vital to improve the human condition. Progressivism became highly significant during the Age of Enlightenment in Europe, out of the belief that Europe was demonstrating that societies could progress in civility from barbaric conditions to civilization through strengthening the basis of empirical knowledge as the foundation of society

We can keep the science and economic development but reject the other stuff.

But a counter-argument is that technology may have a dysgenic effect, resulting in overpopulation and lower global IQ. But there’s where Exit comes into play.

Why HBD?

Even among the ‘alt right’, HBD remains a divided issue.

From Xenosystems:

Why is HBD so important? A lot of focus goes there. Is there a good reason besides making fun of deluded liberals? Some kind of non-obvious knowledge?

The specifics are fascinating for sure, if you’re into it, but that’s just like science in general…

The argument for HBD can be summarized as:

-Better policy (normative)
-Better understanding of the world (positive)
-Maximizing human potential (both)

HBD is important because a lot of money is wasted on policy that ignores the role of biology. HBD-based policy would save taxpayers money, but policy makers think it’s more important to not offend people than to confront the reality that, no, not everyone is equal or the same upon conception. For example, billions of dollars are spent on public schools that lump almost everyone together regardless of innate skill (that means that slow kids are often merged with the smarter ones); money wasted on special education while the gifted get far less funding; money wasted trying to futilely pull certain groups out of poverty despite the multi-decade persistence of achievement gaps; money wasted on college degrees as a form of ‘signaling’ because of ‘disparate impact’ litigation prevents the expanded use of IQ-testing for employers; also, money wasted on low and average-IQ young adults going to college, when they should not go but are prodded to anyway; billions of dollars annually spent on mass incarceration and welfare (although incarceration is necessary to protect society, HBD-based policy (such as eugenics and, related, mandatory birth control) may help, by raising national IQ and breaking the welfare-crime-poverty cycle); money wasted treating rare genetic diseases that significantly compromise quality and quantity of life, because policy makers believe ‘every life is worth saving’ at any cost. It’s estimated that 80% of healthcare is spent on the end-of-life care, or palliative care, for a total of about 5% of all patients. Instead of curing diseases, a lot of money is spent keeping people alive long after they stopped contributing economic value, or when the prognosis is already terminal.

Gene modification and embryo selection may, over many generations, boost national IQ, helping to eliminate or reducing persistent problems like crime and welfare spending, while accelerating economic growth and technological innovation. Costly, incurable diseases may be eliminated at the embryonic level through genetic engineering. Obesity, which costs $147 billion annually, may be eliminated by genetically modifying metabolism, by altering the neurology that controls satiety and hunger, or by modifying certain bacteria in the gut. The implications are enormous, and to squander these possibilities will possibly make America less competitive compared to countries like China that don’t have trepidation over HBD. It’s even a potential national security issue.

Overall, Incorporating HBD into policy, both at the national and local level, may make everything better, more efficient, and save taxpayer money.

Another objection:

I know it is heresy to say this in these parts, but HBD really is fallacious epic-level nonsense, a pseudoscience. Different people are different obviously, but anyone that claims that morbidly obese homosexual junkie`s lifestyle does not affect his life expectancy should not be taken seriously (it does not take bogus twin studies to conclude that).

Most proponents of HBD don’t entirely discard the role of environment, and it’s a common misconception that HBD ignores environment. But twin studies show a strong hereditary component to intelligence and obesity. That means when people with similar genetic makeup are raised apart, their genes still, in most instances, override their different environments. This applies to multitude of diseases that seem to have a hereditary component: susceptibility of cardiovascular disease, stroke, liver disease, lung cancer (both in smokers and non-smokers), etc.

There are numerous classical twin studies in obesity, and the average heritability (i.e., proportion of inter-individual difference in a trait explicable by genetic variability) reported consistently in these studies on the order of 40–75% (8,11,12).

Source: Human Obesity: A Heritable Neurobehavioral Disorder That Is Highly Sensitive to Environmental Conditions

But also, biology affects how people respond to their environments. A person who metabolizes food slowly or has insufficient leptin production, may be vulnerable to obesity in an environment that has a lot of high-calorie food.

But HBD is also about improving understanding about the implications of traits such as IQ, and correcting the many persistent misconceptions about IQ (such as that IQ is not important, that IQ doesn’t measure anything important, that IQ tests are wrong and or are culturally biased, that high-IQ people are unethical or not creative, and other persistent falsehoods). It’s also about debunking attempts to create ‘substitutes’ for IQ, such as Howard Gardner’s flawed Multiple Intelligences ‘theory’. Thus HBD is not just about biology but also about education, choosing empirical evidence over wishful thinking and political correctness, and making the general public better-informed about these issues.

A common criticism is that HBD focuses too much on IQ, that there are other facets of humanity than intelligence. This may be a valid criticism, but IQ is very important as a ‘sorting mechanism’ for who succeeds of fails in modern society, and looking at things like wealth inequality, entitlement spending, achievement gaps, and crime, from an HBD-perspective can shed new light on these issues.

For example, HBD can explain why the gender gap is so persistent in the sciences, or why the wage gap exists. For example, studies have shown that women have less variance in IQ, meaning that there are fewer superior-IQ scores among women despite men and women having roughly the same average IQ. Attempts by policy makers to try to narrow ‘gender gaps’ may be futile due to limitations imposed by biology.

IQ explains wealth of nations: why some nations stay poor and others advance technologically and economically. IQ explains why Silicon Valley is so successful but Detroit isn’t.

IQ explains, contrary to Gladwell, why some never succeeded or attain ‘mastery’, no matter how many hours of practice they may accumulate, or why some seem innately better than others despite practicing less. Knowing your IQ can help set realistic expectations.

IQ can explain the persistent gap in wealth and achievement not just among nations but races, too.

IQ is not a trait that exists in a vacuum…it’s linked to other things like job performance, morality, and temperament. Although the trope of the ‘evil genius’ or ‘psychopathic serial killer’ is common in pop culture, death row inmates have below-average intelligence.

IQ can explains why ‘good-intentioned’ attempts by policy makers to ‘re-educate’ the workforce in response to technological unemployment may fail, again due to limitations imposed by biology.

The folly of the leftist intelligentsia is their belief that the rest of the world can (or should) become like them, and in doing so problems like technological unemployment will go away. A poster on r/slatestarcodex who goes by ‘Guomindang’ articulates the flaws of this reasoning better than I do:

The people being made useless by technology are not the same people who can find employment mastering the Foucaldian hermeneutics of transgender Chicano poetry to deconstruct the performative ontology of white heteronormativity. Technology is a rising tide of water in a room full of people who are only as tall as their IQ, and the mastery of scholastic nonsense can only benefit those farthest from the water line. I do think of it as an employment program, but perpetuated to employ and reward people of a certain political tendency. Societies, too, have long benefited from the stability of keeping restless intellects occupied with producing harmless scholastic nonsense, although this safety valve does sometimes falter.

I think the much larger government employment program for the increasing mass of useless people is what Moldbug calls Solution D-1. We just don’t perceive it as a government employment program because the employment occurs in the nominally private sector of the economy.

Then there is the ethno-nationalist argument against HBD, which is that a hierarchy by IQ possibly puts Christian Whites behind Ashkenazi Jews and East Asians. Even if this is true, the list of achievements and inventions by Whites should be enough to assuage these fears. IQ and creativity are linked, but perhaps Whites have slightly more creativity as a substitute for less IQ than Asians. But not to make this into a political post, America, which is predominantly a Christian nation, does risk losing its dominance in the event of runaway leftism, as we are seeing with EU.

Although epigenetics (the left’s version of HBD) plays a role in cancer development and various genomic imprinting disorders, there is no evidence epigenetics plays a greater role in IQ than genes.

Some of this possibly veers into ‘political incorrectness’, but a reality-based approach is superior to willful ignorance. The latter means going around in circles, repeating the same platitudes over and over, with no meaningful progress or understanding ever being made; the former leads to solutions and understanding. Ignorance dominates discourse, for fear of the consequences of noticing inconvenient truths, as we saw with Larry Summers in 2005, James Watson, and many other leading science and public figures who were ‘tarred and feathered’ for blasphemy against the leftist ‘blank slate’ orthodoxy.

Politico, Politica

The 2016 election news cycle can be likened to a broken record attached to one off those antique megaphones, that blares the same outrage over and over, in a loop. We’re supposed to get worked-up about whether Trump or Hillary will win. The genius (or perhaps travesty) of the system are its multiple layers of redundancy that keep it self-sustaining and indestructible, no matter the outcome. You could put a wind-up doll in the Oval Office, or, as in the case of Obama, an empty suit with an earpiece and a teleprompter, and power is still conserved – but it’s not concentrated. Instead, it’s dispersed.

That’s not to say I’m agnostic about the outcome – I want Trump to win – but let’s keep our expectations realistic. In the case of Trump, congress is not like a boardroom. The odds that much will change are slim, and it will take years to get stuff through. Perhaps there will some form of immigration reform, but, again, these things take years, especially if it’s challenged by the courts.

Right now, Hillary’s health has become a concern. If elected, there’s a reasonable likelihood she may not survive office or may become incapacitated, and this makes her VP choice especially important. But for some reason, I don’t take as much delight in making fun of her as I did with Obama in 2008 and 2012, or Sanders in 2015. It seems like everyone on the ‘left’ (or at least everyone online) hates her, so her winning balkanizes and weakens the resolve of the left. Even if she wins, it’s still better than Sanders, who is much further to the left. One can make the libertarian argument that because Hillary is so rotten and avaricious, that in her effort to gain power she’ll leave everyone alone, focusing only on self-preservation and her own personal material gain (the opposite of the meddlesome do-gooder). Or that she is so inept and feeble (both mentally and physically) that she won’t do much.

The NRx Review

An up-and-coming reactionary blogger who goes by the handle ‘Dark Reformation’ released an 8-part manifesto.

In part 8, in my opinion the most important section, he discusses the philosophical underpinnings of his ideology, specifically utilitarianism and determinism.

There is no free will. The Dark Reformation acknowledges that humans have no free will, that they are fully caused beings. Free will is a Christian invention designed to get around the problem of evil;

Firstly, it will transform our understanding crime and punishment; secondly, economics. If free will does not exist, then moral responsibility (moral blame and retribution) must be either justified anew or abandoned. This means that concepts like guilt and retribution are, philosophically speaking, meaningless. Economically speaking, determinism puts paid to self-made man myths, and charges of laziness and indolence in people, or the preferability of fully eliminating welfare. This does not require giving up law, order, free-enterprise and a good society. Not at all. But it requires putting these things on a truer and more stable foundation. That foundation is utilitarianism.

Agree with the part about determinism. But that still does not absolve them of the consequences of their actions. One can argue that America’s justice system is based on utilitarianism by putting away a lot of people for a long time, for the ‘greater good’ of society. The problem is crime has a biological component…even if you eliminate democracy, cathedral, etc., you will still have bad apples that society will have to deal with, although one can make the argument that democracy makes the genetically predisposed more likely to ‘act out’.

As far as welfare and crime is concerned, since people don’t have free will, and poverty and crime has a hereditary component, the solution is an HBD-based one. Maybe mandatory birth control for welfare recipients. Offer financial incentives for less intelligent people to go on birth control, and pay individuals of the top 5% of intelligence to breed. Right now we have an entitlement spending problem and prison crowding problem, and eugenics possibly provides the best long-term approach for dealing with those problems. Although America seems to be good at importing talent, mean reversion is problematic and inevitable. Heathcare spending is another problem.

The foundation of the Dark Reformation is empiricism. Empiricism is the epistemology that attempts to understand the political and social world as it is, and not how we would like it to be. This is a different kind of empiricism to the one commonly presented in philosophy textbooks.

Also agree, and we need policy based on reality, not wishful thinking and appealing narratives, as I allude to in my own introduction, Why Grey Enlightenment. But this works both ways, for the ‘left’ and the right’. For the left’ it’s the narrative that man is a ‘blank slate’ that is ‘perfectible’ if enough tax payer dollars are spent, instead of allocating resources to those who stand to benefit the most. Like, why are hundreds of millions of dollars being spent on special ed programs when more spending for gifted education, which receives far less, would have a greater ROI. This ties into ‘reverse Darwinism’, of how the left siphons money from the most productive of society to sustain the least. For the ‘right’ it’s Austrian economics and eschatology, which I find unhelpful in dealing with economic reality today, although the ‘left’ is further off the mark than the ‘right’. You can’t say that QE is money printing, when it isn’t. Or that the US economy is dying, when it isn’t.

In part 2 he criticizes democracy, following part 1, where he lists the myriad of problems facing society and men.

The problem, perhaps, with the manifesto is the first part, in which there is too much idealism and wishful thinking. He’s using anti-democracy a conduit or panacea bring about some right-wing version of utopia that is not possible.

I oppose democracy not to bring fulfillment to peoples lives, which is a different problem altogether, but because democracy gives too much power to those who contribute the least, who then vote for policy that hurts the most productive. This an economic problem, and it’s a leap of faith to try to apply it to a psychological one (happiness and fulfillment), as the author tries to do. The problems in part 1 are real, but they are not necessarily solved with parts 2-8. Or maybe they are…although I’m skeptical that this ocean liner that is analogous to American society can be turned around.

Men are failing and falling behind due to difficulty of adapting, both due to economic and cultural factors. Although the US male suicide rate has ticked up in recent years, it’s back to where it was in 1981:

Dealing with feminism, misandry and indoctrination in schools, etc., will help. There is a problem of boys, who cannot sit still as long as girls, being over-medicated. The economy perhaps places too much of a premium on those who are obedient and inclined to do paperwork, not those who want to get their hands dirty.

But after leaving school and the leftist indoctrination, the depression should go away to some degree, but it doesn’t. Perhaps the problem is then with society and the economy, which rewards individualism, credentials, and merit too much, while ‘collectivist’ things like family and religion are pushed to the periphery. Maybe the ‘expectation gap’ is another problem: men leave college with high expectations of job security, only to be disillusioned when reality falls short. Also, people are failing because they are not smart enough, don’t have the skills, or the economy is too competitive.

Ultimately, the problem is both cultural and economic, alluding to a post on Slavoj Zizek – a mix between Economic and Dialectic materialism.

Related to to the far-left, there are elements of Marxism, such as the passage from part 3:

In a modern democracy, power is not exercised by the people but by those who control the means of production, replication, and dissemination of ideas, narratives, arguments, explanations, data-points, “science” etc.

This is similar to a passage by the Christian anarchist and philosopher Jacques Ellul, who argued that modern technology was a threat to human freedom and religion:

…man himself is exalted, and paradoxical though it may seem to be, this means the crushing of man. Man’s enslavement is the reverse side of the glory, value, and importance that are ascribed to him. The more a society magnifies human greatness, the more one will see men alienated, enslaved, imprisoned, and tortured, in it. Humanism prepares the ground for the anti-human. We do not say that this is an intellectual paradox. All one need do is read history. Men have never been so oppressed as in societies which set man at the pinnacle of values and exalt his greatness or make him the measure of all things. For in such societies freedom is detached from its purpose, which is, we affirm, the glory of God.[62]

Science (such as Charles Darwin’s theory of evolution), reason (liberalism), and the worship of technology (Saint of Steve Jobs) – all products of The Enlightenment – had replaced god, a view that is shared by many reactionaries:

But since then, scientism (through Charles Darwin’s theory of evolution) and reason (higher criticism and liberal theology) have desacralized the scriptures, and the sciences, particularly those applied sciences that are amenable to the aims of collective economic production (be it capitalist, socialist, or communist), have been elevated to the position of sacred in Western culture.

Even if this is true, I have a more optimistic outlook, because technology improves living standards. Surveys also show a positive correlation between GDP and happiness:

But also, another problem is many on the far-left also oppose technology, on the grounds that technology eliminates jobs, creates pollution, causes wealth inequality, or separates workers from the ‘means of production’. The problem is there is a potential contradiction: If NRx, in contrast to welfare-liberalism, opposes redistributionism and egalitarianism, then attacking technology and capitalism plays into the hands of the left. Technology and capitalism accentuates and magnifies individual differences, with the smartest and most productive moving ahead of the pack, the opposite of egalitarianism. NRx should be celebrating this, as do I.

But then the issue of technological unemployment arises, and programs like the UBI have been floated as solutions. It’s possible ‘post scarcity‘ may be obtained in the economic sense, but individuals may still notice inequity between them, even if all basic needs are met.

Although Ted Kaczynski, another Luddite, argues that technology and depression (although Dysthymia seems more accurate; depression is too strong of a word) are correlated:

Imagine a society that subjects people to conditions that make them terribly unhappy, then gives them the drugs to take away their unhappiness. Science fiction? It is already happening to some extent in our own society. It is well known that the rate of clinical depression had been greatly increasing in recent decades. We believe that this is due to disruption of the power process…[66]

Another possibility is that doctors have gotten better at diagnosing depression, and that more depressed people are seeking treatment, not that rate of depression has increased.

Marxism and its related anarchist and socialist ideologies are all too alluring, which could explain their popularity among intellectuals both on the ‘left’ and the ‘right’ – ‘if only we can cleanse the world this worship of technology and money, everything will be wonderful’.

Rather than trying to fix society and undo progressivism, which is a near-impossible undertaking, I advocate self-improvement, which is considerably easier. For example, if it’s a foregone conclusion that techno-commercialism will win (which I think it will), then buy index funds like the S&P 500 and companies like Google and Amazon, to take advantage of this. This is something almost anyone can do, and while it won’t change society, it will improve your own financial well-being, especially given that social security may not exist in a couple decades if the welfare state collapses under its own weight.

Even after all these posts, it’s still hard to make sense of it all, at times.

Slavoj Žižek-NRx Connection

Marxist philosopher Slavoj Zizek and reactionaries have become unlikely bedfellows. Marxism and NRx are supposed to be opposite sides of the political spectrum, so what’s going on here.

I’ve observed that rationalists and reactionaries seem to commingle a lot. For example, Scott has written a lot about Moldbug and in the process introducing NRx to a large audience that may have otherwise never heard of it, and many rationalists would rather debate reactionaries than automatically dismiss them.

As someone who identifies as being on the ‘right’ and who also posts on rationalist communities, this tolerance and willingness to entertain opposing views, is a breath of fresh air. It’s about extending the same courtesy that we may extend to ourselves, to those in the ‘outgroup’, but also many assumptions about the ‘outgroup’, upon closer inspection, may be wrong. It’s all too tempting to subscribe to reductionist narratives, that all ‘X believes in Z’, when there are often subtleties. For example, a couple years ago when I started this blog, and then only until recently – I thought #gamergate was very similar to the ‘alt right’, but upon closer inspection they are not the same. #gamergate are not culture warriors, red pill, traditionalist conservatives, nationalists, or HBD-ers. Their main concern is culture and entertainment (Hollywood, computer games, video games, etc.) being diluted by political correctness. If we criticize the media, and rightfully so, for using low-information, reductionist narratives, we should also hold ourselves to a high standard in our own discourse.

This rationalist-reactionary synthesis is discussed in more detail in Intellectual Solvent, Part 3:

In Solvent Part 2, I elaborate on etiology of the alliance or camaraderie between certain forms and liberalism and NRx, arguing that intellectual bonds may be stronger than political ones, but other reasons include:

- Rejection of majoritarianism. As I explain in a post about utilitarianism, both NRx, on the right, and utilitarians, on the left, believe majoritarian systems – be it a government or even a classroom – are inefficient and or corrupt, preferring systems where like-minded smart people make decisions, not the ignorant masses. For NRx, it’s to promote ‘right wing’ causes; for the ‘left’ it’s to promote ‘liberal’ causes.

Zizek and NRx/’alt right’ are united against ‘low information’ discourse by the mainstream media, that attempts to reduce complicated topics into easily digestible, politically-correct narratives…don’t expect any Fox News or Huffington Post-like soundbites from either. It’s like, ‘I’m a Marxist, and you’re a reactionary, but we can both agree the mainstream media insults our intelligence.’ By ‘politically correct’, I don’t just mean ‘leftist’, but rather the platitudinous thinking that constitutes much of mainstream conservative and liberal discourse.

Other similarities include:

They oppose reductionist narratives and structuralism (trying to treat the social sciences as a physical science, such as by grouping humans into socioeconomic categories, or ‘theories’ or ‘grand narratives’, as Marxian economic determinism tries to do).

This is related to Jean-François Lyotard’s The Postmodern Condition: A Report on Knowledge, ‘in which he analyzes the notion of knowledge in postmodern society as the end of ‘grand narratives’ or metanarratives, which he considers a quintessential feature of modernity.’

This is also related to Materialism, which can be divided into Economic Materialism and Dialectical Materialism:

Materialism asserts the primacy of the material world: in short, matter precedes thought. Materialism is a realist philosophy of science,[13] which holds that the world is material; that all phenomena in the universe consist of “matter in motion,” wherein all things are interdependent and interconnected and develop according to natural law;..

Marxists tend to believe in Economic Materialism, related to the Marxist dialectic that the proletariat are victims of economic forces:

The end result of economic determinism in this view is both economism (a narrow focus on how people earn their livelihood) and economic reductionism (the attempt to reduce a complex social reality to one factor – the economic – such that this one factor causes all other aspects of society). This, according to some,[who?] plays directly into the hands of the business class, and ultimately ends in an anti-working class position, whereby the allegiance of the working class is just a “tool” to be used by the political class to modernise an economy, with the aid of forced labour, if need be.

Žižek is Hegelian Marxist, favoring Dialectical Materialism over Economic Materialism:

In contrast to the conventional Hegelian dialectic of the day, which emphasized the idealist observation that human experience is dependent on the mind’s perceptions, Marx developed Marxist dialectics, which emphasized the materialist view that the world of the concrete shapes socioeconomic interactions and that those in turn determine sociopolitical reality.[11] Whereas some Hegelians blamed religious alienation (estrangement from the traditional comforts of religion) for societal ills, Marx and Engels concluded that alienation from economic and political autonomy, coupled with exploitation and poverty, was the real culprit.[12]

This seems to agrees with the reactionary viewpoint, which blames religious alienation, not ‘worker exploitation’ as the source of societal ills.

They are more interested in intellectualism and ‘pursuit of truth’ than tribal loyalty; both Zizek and ‘alt right’ have offended their liberal and conservative constituents, respectively, by going off the reservation on some issues. An example is Žižek speaking out against open-border policies in Europe:

The greatest hypocrites are those who call for open borders. They know very well this will never happen: it would instantly trigger a populist revolt in Europe. They play the beautiful soul, superior to the corrupted world while continuing to get along in it. The anti-immigrant populist also knows very well that, left to themselves, people in Africa and the Middle East will not succeed in solving their own problems and changing their societies. Why not? Because we in Western Europe are preventing them from doing so.

Additionally, a shared dislike of enlightenment ‘ideals’, such as the rejection of majoritarianism forms of government (demos) and rejection of the concept of ‘unalienable rights’ (natural law vs. divine right). The far-right is skeptical of capitalism, because capitalism – and open borders and free trade that it often entails – may be affront to traditionalism and nationalism. Marxists reject capitalism categorically, as an affront to ‘worker rights’. ‘The Enlightenment’ is predicted on optimism of human nature and progress, whereas the far-left and far-right have a more negative outlook. The political spectrum may be curved, likened to a loop or a horseshoe, with the far-left and far-right sometimes merging (12 o’clock) opposite to centrism (6 o’clock), which could explain the similarities.

Bashing neoconservatism and neoliberalism seems to be pretty popular these days, by anyone who isn’t either. These two ideologies are convenient scapegoats for everything that is wrong with the world. Neoconservatism was the dominant flavor of the ‘right’, beginning in the early 80′s with Reagan, and then ending in 2015 when Trump upset the ‘old order’, splitting the party.

The ‘shared narratives’ concept seems relevant here. For example, a shared interest in existentialism, economics, and futurology.

But more importantly, we agree political correctness has gotten out of hand, and that society needs a frank, honest discussion about issues like race, rather than pandering. I’ve noticed that the far-left has more respect for those who push back and challenge their views, with substantive counterarguments, than those who nod and go along, or pretend to agree. Mainstream liberals and conservatives however seek the predictably of echo chambers and self-reinforcement.

Evidence of Bubbles and other ‘Anomalies’ Does Not Disprove the Efficient Market Hypothesis

Are markets efficient?

The mere suggestion that markets are mostly efficient is sufficient to elicit an emotional rebuke: ‘Doesn’t 2008 disprove the efficient market hypothesis (EMH)?’ No it doesn’t, actually, and to say it does represents a common misunderstanding about the EMH.

For years, I have defended the EMH:

Defending the EMH
Defending Rational Markets

Although the EMH is not perfect (as noted by Fama, all models have limitations), it’s a ‘good enough’ approximation:

It’s a model, so it’s not completely true. No models are completely true. They are approximations to the world. The question is: “For what purposes are they good approximations?” As far as I’m concerned, they’re good approximations for almost every purpose. I don’t know any investors who shouldn’t act as if markets are efficient. There are all kinds of tests, with respect to the response of prices to specific kinds of information, in which the hypothesis that prices adjust quickly to information looks very good. It’s a model—it’s not entirely always true, but it’s a good working model for most practical uses.

Thaler, a researcher of behavioral economics, dissents:

Thaler: I have two examples. The first is house prices. For a long period, house prices were roughly 20 times rental prices. Then, starting around 2000, they went up a lot, then they went back down after the financial crisis.

My second example is the CUBA fund. It’s a closed-end mutual fund that has the ticker symbol CUBA but, of course, cannot invest in Cuba. That would be illegal, and there are no securities [in which to invest]. For many years, the CUBA fund traded at a discount of about 10–15 percent of net asset value, meaning that you could buy $100 worth of its assets for $85–$90. Then, all of a sudden, one day it sells for a 70 percent premium. That was the day President Obama announced his intention to relax relations with Cuba. So securities you could buy for $90 on one day cost you $170 the next day. I call that a bubble.

Critics of the EMH can cite examples of the market behaving ‘inefficiently’, but this doesn’t disprove the EMH – except for possibly the very strongest of forms of efficiency. Most proponents of the EMH subscribe to either weak-form efficiency or semi-strong-form efficiency:

In semi-strong-form efficiency, it is implied that share prices adjust to publicly available new information very rapidly and in an unbiased fashion, such that no excess returns can be earned by trading on that information. Semi-strong-form efficiency implies that neither fundamental analysis nor technical analysis techniques will be able to reliably produce excess returns. To test for semi-strong-form efficiency, the adjustments to previously unknown news must be of a reasonable size and must be instantaneous. To test for this, consistent upward or downward adjustments after the initial change must be looked for. If there are any such adjustments it would suggest that investors had interpreted the information in a biased fashion and hence in an inefficient manner.

The EMH is predicated on ‘random walk’ theory – that stocks behave randomly, moving in unpredictable zig-zags. This means that given enough time, any pattern will be observed. What may seem like a bubble’ or a ‘crash’ could just be fluctuations that are inevitable if given enough time.

Although anomalies like CUBA or stock crashes may seem to refute the EMH – the ‘catch’ is that such anomalies are too brief, too inconsistent for investors and arbitrageurs to have consistent, abnormally high returns.

In the case of an ETF like CUBA trading above its NAV (net asset value) – this is a very common occurrence, but it’s often not profitable to exploit because it’s impossible to know when it will return to its NAV, and short-sellers can lose money if it keeps rising (the markets can remains irrational longer then you can remain solvent). Also, borrowing shares to short may be difficult, and there may be high fees that render this strategy unprofitable. In the case of CUBA, because it’s the only ETF of its kind in existence, and because the individual components are not traded, it’s impossible to set up a neutral counter-trade.

This is consistent with the EMH, because the EMH stipulates that it’s impossible for firms to consistency earn abnormally high returns from market ‘anomalies’. For every fund that makes money shorting what seems like an obvious ‘bubble’, another fund losses a lot of money (because the bubble fails to deflate in a timely manner), so it all kinda cancels out in the end.

It’s also worth noting that price patterns that seem like a ‘bubble’ may, in retrospect, be rational if the fundamentals eventually align with prices. The initial euphoria in the 90′s was in anticipation of the huge growth that was to follow decades later, and in retrospect these ‘irrational’ speculators were right, as Amazon fulfilled its loftiest of expectations – and then more.

Amazon’s revenue has surged:

Although profit is low, this is misleading, because Amazon is reinvesting its profit into its business. Importantly, cash flows are very strong, meaning that Amazon’s business operations are profitable:

This is how people who short ‘obvious’ bubbles sometimes become ruined, because in many instances the fundamentals eventually align with prices.

In recent years, Amazon has done so well that someone who bought Amazon in 1999 would still have a compounded annual return of over 10%, even after taking into account the dotcom crash of 2000-2003 and 2008 financial crisis.

Another example is Bitcoin, which keeps rising despite numerous predictions – some going as far back as 2011 – of its demise, or how Bitcoin is just a ‘flash in the pan’. In late 2013, when Bitcoin surged from $100 to $1000, many pundits called it a bubble, but Bitcoin was pricing in growth from China and increased adoption, which later came to fruition. And that’s why Bitcoin is at $600 now, having retained most of its gains from 2013, because the fundamentals were real. At the same time, there were many ‘alt coins’ that were created to ride the coattails of bitcoin’s success, but these failed because they were never able to gain traction.

The market is like a giant ‘committee‘ that is trying to estimate the best price, as a function of newly-introduced information and probabilities:

…the market , through daily the ebbs and flows, is constantly adjusting to reflect new data and probabilities. You have an event with a theoretical price impact of $X and a probability of Y and the product $XY tells you how the market reacts. And this is done millions of times a day, so the price that you see is the product of a very large computerized ‘committee’ that is trying to determine the ‘right’ price, which is the very opposite of the clandestine ‘rigged casino’ that the left would have you believe Wall St. is.

So in the case of dotcom stocks in the mid to late 90′s, the market was maybe assigning a probability that e-commerce would become as big as it is today, multiplied by the enormous economic implications. As shown by AOL subscription growth in the 90′s, internet adoption was booming, and whose to say it wouldn’t keep growing and that a PE ratio of 200 for Yahoo.com wasn’t rational?

If there’s a 1% chance a company will be worth $100 billion dollars, $1 billion is the ‘fair’ price. If the company fails, it’s worth zero and short-sellers can make money, but otherwise he losses. Again, the EMH doesn’t prohibit bubbles (or behavior that, in retrospect, is ‘irrational’); it just makes it very hard to generate consistent, abnormally high profits trading these ‘anomalies’.

Stock market crashes don’t disprove the EMH. A random walk process with ‘jumps’ will generate crashes. Also, the evidence suggests that funds that try to ‘protect’ against crashes, such as hedge funds, do not have excess returns, over the long run, than those who stay in the market, as shown below:

So while a crash-proof fund may have done very well in 2008, its performance would have suffered in subsequent years during the market rebound.

If crashes represent an ‘inefficiency’, then it should be easy to profit from them by buying put options of the S&P 500. However, the very steep implied volatility skew for put options hurts profitability, resulting in a negative or near-zero expected value, over the long run, for such a strategy. This steep ‘skew’ is due to the ‘jump’ process, as predicted by the complicated Heston Volatility model. The common misconception is that options are priced with Black-Scholes, and therefore fail to account for jumps and another anomalies, but modern option pricing is far more complicated – but the end result is an efficient option market despite jumps and crashes.

The ‘low volatility‘ anomaly is also cited as an example of the EMH failing, but there is an explanation for this anomaly that is consistent with the EMH, which is that investors, who are often contained by capital borrowing costs, choose riskier assets that have a higher potential return despite a worse ‘risk adjusted’ return, sorta like a lottery ticket. An investor can choose to put all his money in a riskier asset such as the S&P 500 to earn a higher potential total return, or he can put the money in a low-risk asset and get a higher risk-adjusted (smoother) return. But to get the same absolute return as the riskier asset, the low-risk investor must use leverage. But due to borrowing costs (from using leverage) and ‘risk of ruin’ of using leverage, the risk-adjusted returns from leveraged low-volatility are negated to some degree.

Further lending credence to the EMH, the performance of active management (versus passive management, that invests in the S&P 500) has suffered since 2000, having fallen off a cliff in 2014, as further evidence of the inherent difficultly of stock picking, due to the impenetrable efficiency of the stock market. Many of these funds, aided by teams of PHDs and $20,000 Bloomberg terminals, still fail to beat the lowly S&P 500. This is an example of the post-2008 ‘peak everything‘, winner-take-all stock market and society. Not only is the stock market more efficient, so is everything else, too, which could explain why entrepreneurship is too hard, or why everything else is too hard as well. In a perfectly competitive market, marginal profitably converges to zero. There are some exceptions like mega-cap globalist companies such as Google, Amazon, and Facebook, (as well as consumer staples ETFs) that have established market dominance, which is why for years I have recommended those stocks as an easy way to profit from the winner-take-all nature of the post-2008 economy.

Slow Economic Growth Not a Big Deal

From the NY Times: We’re in a Low-Growth World. How Did We Get Here?

It seems like since 2009 there have been a plethora of articles bemoaning the ‘slow growth’ of the US economy.

Or the usual headlines about the IMF revising its global growth forecast from 2.5 percent to 2.4887% …yaawn it’s all noise. Or hw how ‘slow growth’ is a ‘crisis’ and that, in the worlds of Krugman, we must ‘end this recession now’.

People have been saying this since 2009, yet the S&P 500 is up 250% since then.

We need to put things in perspective.

The reality is:

The US has greater inflation-adjusted GDP growth than most of the world, including much of Europe, the Middle East, and South America, and Japan

Countries like Russia, Brazil, and Turkey have higher nominal GDP growth, but also a lot of inflation:

It’s like selling a book for $20 but inserting a $20 bill inside. Yeah, you’ll get a lot of sales, but it’s costing you more money than you make. That’s the bad situation facing many of these emerging countries right now…they are borrowing a lot of money at very unfavorable rates to keep growth high, whereas America can borrow at very little and still have solid growth.

Profits & earnings for tech companies, payment processing, retail, and consumer staples companies have far-outpaced GDP growth. A lot of the lag comes from the chronically weak financial, commodity, and energy sector.

Google, Amazon, and Facebook reported blowout quarters for like the 50th time in a row. Companies like Nike, Lowes, Costco, Disney, Johnson and Johnson, Starbucks, and Home Depot reporting double-digit profits & earnings growth.

It’s much harder to grow a large economy than a smaller one. There’re diminishing returns to scale. It’s harder to grow an economy at the same rate it was growing when it was 10x smaller.

Like finding a dollar on the ground if you already have $1 in your pocket. Your ‘net worth’ doubles, but it’s only $2 total. Repeating this dozens of times will be much harder.

2% real GDP growth, while slow, is still growth. Most people cannot perceive the difference between 2% growth and 7% growth. No one wakes up in the morning and says ‘I can’t go to work today because the economy is only growing at 2.5% instead of 3%’.

Real GDP is back to 2003 levels, and far fewer people were complaining about slow growth back then:

Slow growth doesn’t preclude discovery and innovation, things like web 2.0, smart phones, apps, theoretical physics, mathematics, Uber, self-driving Tesla cars, Amazon drones, and on-demand entertainment. Airbnb recently raised $850 million at $30 billion valuation. Right now there is is a bunch of research going on regarding ‘moonshine modules’ as a way of applying abstract algebra and elliptic curves to string theory. All this amazing stuff going on despite ‘slow growth’.

So while more growth may desirable, ‘slow growth’ isn’t too much to lose sleep over.

There is evidence slow growth may be optimal, over the long run, by preventing the fed from raising rates. When there is too much growth, inflation goes up and the fed responds by raising rates, which sometimes causes a recession and a bear market like in 2001.

A lot of people have mentioned the UBI as a way of boosting economic growth, but it’s worth reminding that the effective income tax for the lowest 20-40% of earners is negative. The problem is America is becoming a nation of handout-seekers.

Another retort is that central bankers are buying back stocks, and hence why the S&P 500 is up so much. This is also false. The fed does not buy stocks, although companies occasionally buyback their stock. Profits and earnings expansion is the main reason why the market has done so well:

Large companies are printing cash quarter after quarter, buying back stock and issuing large dividends.