Monthly Archives: September 2016

Millennials and Misconceptions

This is going viral: College Advice from a 75-Year-Old Who Went to School for 55 Years and Got 30 Degrees

Note how a comment that was critical was heavily down-voted and subsequently deleted, while comments praising the man were up-voted:

The story went viral because Millennials believe that, despite high student loan debt and weak job prospects for many graduates, the accumulation of knowledge is and of itself is a noble goal, but they also believe in wealth (as measured by wealth in a bank account, a brokerage account statement, or in real estate, instead of ostentatious displays of wealth in the form of rapidly depreciating positional goods and services (sports cars, nightclub VIP service, etc.)). Warren Buffet, Mark Zuckerberg, Larry Page, and Elon Musk epitomize the latter, all being extremely wealthy and smart but also living a minimalist lifestyle, in contrast to Donald Trump (who isn’t as smart and has a much more extravagant lifestyle), who I support for president, but he’s not as respected by millennials as much as Musk or the founders of Google. Speaking of minimalism and intellectualism (both which are valued by millennials), Warren Buffett drinks cola (not fancy imported spirits), drives an old car, and still lives in the same home he bought decades ago in the quiet suburbs of Omaha, avoiding the commotion and extravaganza of New York despite arguably being the most important person in finance alive.

This is why I’m not so quick to beat-up millennials who accumulate debt, because even if the job prospects are poor, having the degree is part of a ‘bonding experience’ or camaraderie between other millennials who also have degrees and find themselves in similar predicaments. The degree also signals intellect. A STEM degree is preferable, but that doesn’t make the liberal arts useless in the eyes of millennials, provided the degree has some degree of intellectual rigor and are not completely useless or commercialized (like degrees ‘child development’ or ‘search engine marketing’).

Also, many have grown weary of the constant hectoring about how you ‘have to major in STEM’. Given all the recent media coverage about STEM, there is almost no one alive who doesn’t know that STEM pays more, and such reminders have become repetitious and patronizing. Even parents know STEM pays more, as well graduates and prospective students who choose to go to college for reasons besides making money (although they may later regret their major).

…and from that same discussion, a highly up-voted comment that defends religiosity:

Part of the reason why I have written so many posts about millennials is because there are so many misconceptions perpetuated by the media, as well pundits, who are all too inclined to overgeneralize millennials to fit a preexisting political bias, agenda, or belief. A common misconception is that millennials subscribe to the same form of ‘militant atheism’ as Richard Dawkins and Sam Harris, but although millennials lean atheist more so than other generations, as shown in the screenshot above they are refreshingly tolerant of Christianity, understanding even if one chooses to not believe in god, that religion still has a useful function at both the personal and societal level in terms of fostering well-being and community. As part of the post-2013 backlash against ‘low information’, demagoguery and zealotry (by believers and non-believers alike) is frowned upon. Same for the post-2013 backlash against SJWs and rise of centrism and rationalism: many people, especially the well-informed and educated and even liberals, are tired of a shill, vocal minority that uses ‘low information’ tactics to try to impose their poorly researched beliefs and values on others.

Another myth: that millennials are spendthrift and or ignorant about finance. Quite the opposite, as I expound on here and here. Millennials on Reddit are not representative of all millennials, but it’s a pretty big sample.

Whereas older generations embraced activism and action ‘you must save the whales’ ‘you must get a job’ ‘you must fight the man, man’ ‘you must must start a family and buy a home’, millennials want to stay at home and ‘chill’, embrace pacifism, procrastinate, indulge in intellectual endeavors, or be ‘boring‘. But also millennials seek wealth, but on their own terms, and don’t wish to fritter their money on rapidly depreciating positional goods. ‘Careerism’ is a post-ww2 phenomenon that locks people into a rat maze where a big home or a fancy car, not cheese, is waiting at the exit. Millennials, generally, want none of that, and who can blame them. Rather, they are choosing MGTOW, Red Pill, minimalism, etc. as alternatives. For millennials, wealth is measured not just by how much money you have but also how much you know, too, which is why they value higher education (even if the degrees may not pay much and or require a lot of debt).

If it seems like I’m picking on the ‘right’ here, I’m only trying to help by correcting some of the persistent misconceptions of millennials that may impede the ability of Republicans to connect with this very large and influential bloc. Another common misconception is that all millennials are radicalized liberals. Although SJWs and BLM are mostly millennials and have gotten a lot of media attention for their antics and tantrums, they are not representative of all millennials, and many millennials, including even liberals, are tired of how WSJs suppress free speech or any idea that may deem ‘racist’ (a word which has been redefined to mean anyone who holds views that the far-left finds offensive), as part of the post-2013 SJW backlash. Consider the alt-right surge, which is mainly led by millennials and has been so immensely successful and influential that even Hillary Clinton and the MSM (such as CNBC) are talking about it. Trump owes some of his success to the alt-right.

How I Rewired My Brain to Become Fluent in Math (response)

How I Rewired My Brain to Become Fluent in Math

They should just call it magazine because some of these articles are so wrong as to induce vomiting.

There is no disagreement about the absurdity that playing basketball will make you taller but many people willingly believe ‘brain puzzles’ or ‘rewiring’ will make them smarter. [1] Many want to hold on to the cherished belief instilled by culture that they have ‘free will’, and that their potential, particularly as it pertains to intellectual endeavors such as math or coding, is not limited by genes.

Interestingly though, intelligence is treated as malleable whereas physical traits less so. We’re more apt to believe we can ‘rewire our brains’ to become good at math, than become a marathoner. Part of this has to do with how society has evolved economically, from an economy and society that prized physical labor, to presently, the ‘information age’, where intellectualism is more important than physical strength. A couple hundred years it would have been the opposite: people believing that physical ability and traits are malleable but intelligence less so. High intelligence confers with a greater self-worth, as well as being a more valuable person to society in terms of economic value and creative output.

Nowadays it’s not as politically incorrect (or at least not as much as it was decades ago) to point out that perhaps some groups, due to certain biological traits, are better at basketball or sprinting than others. But to suggest that some groups are less intelligent? Well then it’s off to the unemployment line for you.

I was a wayward kid who grew up on the literary side of life, treating math and science as if they were pustules from the plague. So it’s a little strange how I’ve ended up now—someone who dances daily with triple integrals, Fourier transforms, and that crown jewel of mathematics, Euler’s equation. It’s hard to believe I’ve flipped from a virtually congenital math-phobe to a professor of engineering.

One day, one of my students asked me how I did it—how I changed my brain. I wanted to answer Hell—with lots of difficulty! After all, I’d flunked my way through elementary, middle, and high school math and science. In fact, I didn’t start studying remedial math until I left the Army at age 26. If there were a textbook example of the potential for adult neural plasticity, I’d be Exhibit A

We’ll it’s fairly obvious the author has a high IQ, and this helped her make the transition from a ‘mathphobe’ to a ‘numerophile’. HBD explains what others attribute to ‘magic’, ‘rewiring’, or ‘tons of practice’. This also douses water on the multiple intelligences theory, as opposed to the Spearman ‘general g’ theory of intelligence. The creation of these multiples types of ‘intelligence’ (‘street smarts’, EQ, ‘multiple intelligences’) seems to be part of a trend in political correctness in not wanting to face the unpleasant reality that some people are perhaps smarter than others, so by creating many types of intelligences, everyone can be smart at ‘something’. As it turns out, people who are smart at writing can often make the transition to other high-IQ endeavors such as math or coding, whereas those who are less intelligent tend to not be very good at anything intellectual-related.

[1] A refutation is that exercise can improve physical ability, and that if people improve at basketball by practicing then one can become smarter by doing ‘brain puzzles’ and ‘rewiring’. In general, physical ability tends more plastic than mental ability, but improvement in ability should not be confused for modification of ‘traits’. People know that height is a fixed trait, which (after the bones stop growing) is correct, but they are also inclined to believe intelligence is malleable, but this is just as absurd as thinking you can modify your height (short of surgery). As for ‘brain training’, brain puzzles do not boost IQ to any high degree of significance.

But how about studying? Don’t people who study math become better at it. To some extent, yes, but improvement at a task should not be conflated with modification of an underlying trait (like height, IQ, etc.). Studying is like doing a single Sudoku puzzle over and over and being really good at the one Sudoku configuration. IQ is what allows you to be good at any puzzle, and to master puzzles quickly. IQ involves making inferences, separating noise from signal. It’s the reason why ‘plug and chug’ is much easier for students than word problems; the latter requires making inferences. It’s more mentally demanding. As for learning, smarter people get better faster (which is also why IQ is strongly correlated with job performance). The less intelligent may see improvement, but they may never make the fundamental connections necessary for mastery (it never ‘clicks’), and they are less adept at filtering noise. IQ is analogous to the hardware on a computer whereas ‘brain boosters’ and ‘studying’ are like the ‘software’…no matter how good the software is, it will run against the physical limitations imposed by the number of transistors on the chip, as well as the RAM.

Tooleb becomes self-aware, part 2

It looks like Nassim Nicholas Tooleb is becoming self-aware again in a recent Medium post appropriately titled The Intellectual Yet Idiot (in which he expands on his original Facebook post). Just replace all instances of ‘IYI’ with ‘Tooleb’ and it’s a perfect description of him.

For those who think Tooleb is part of the alt-right, he’s not. He’s not even a conservative but rather a liberal pretending to be a libertarian, who frequently attacks the rich and corporations:

What we generally call participation in the political process, he calls by two distinct designations: “democracy” when it fits the IYI, and “populism” when the plebeians dare voting in a way that contradicts his preferences. While rich people believe in one tax dollar one vote, more humanistic ones in one man one vote, Monsanto in one lobbyist one vote, the IYI believes in one Ivy League degree one-vote, with some equivalence for foreign elite schools, and PhDs as these are needed in the club.

Tooleb doesn’t oppose democracy and populism; rather he believes it’s been corrupted by the rich and corporations, as well as ivy tower elites. He still holds on to the romanticism of the democratic political process.

Here is Tooleb praising India’s democracy while calling Saudia Arabia a ‘very fragile country’:

I know that Saudi Arabia is a very, very fragile country, probably the one that’s most fragile for a lot of reasons. They are more robust to oil revenue to Iran and other countries but not other things. They say oil is x percent of GDP, around 50% but the rest is also linked to oil. It is untenable. You see here in India you do not have governance problems, it is a democracy and that makes you a lot more robust than other countries, definitely more robust than China.

In waging class warfare, pitting the makers against the takers, Tooleb is no different than Bernie ‘wealth spreader’ Sanders.

Tooleb writes:

The IYI has been wrong, historically, on Stalinism, Maoism, GMOs, Iraq, Libya, Syria, lobotomies, urban planning, carbohydrates, gym machines, linear regression, Gaussianism, Salafism, housing projects, and p-values. But he is convinced that his current position is right.

But then he drags Pinker again through the mud as an ‘IYI’:

The IYI is member of a club to get traveling privileges; if social scientist he uses statistics without knowing how they are derived (like Steven Pinker and psycholophasters in general);

This continues in Tooleb’s tradition of attacking experts who are smarter than him (Pinker, Dawkins, etc.).

Tooleb is so blinded by his dislike of Pinker that he fails to see that Pinker, despite being an ‘IYI’, is actually very critical of communism, writing in his book The Better Angels of Our Nature that “…communism was a major force for violence for more than 100 years, because it was built into its ideology.”

As Pinker astutely points out, communism is violent because violence is required in order to achieve and enforce ‘equal outcomes’, in agreement with the blank slate worldview of humanity that mandates equal outcomes, as well as the nationalization of private property. But equality goes against human nature (rich, successful people, including even Hollywood liberals who vote democratic, don’t voluntarily want to forfeit the fruits of their labor to the state) and the ‘natural order’ (productive, intelligent economically rising above the less intelligent, unproductive), necessitating violence to get it.

Here is something else that’s pretty funny, from Nassim Taleb Talks Antifragile, Libertarianism, and Capitalism’s Genius for Failure, in which he says:

Taleb has called New York Times columnist Thomas Friedman “vile and harmful” and coined the phrase the “Stiglitz Syndrome” after Nobel-prize winning economist Joseph Stiglitz, which refers to the phenomenon of public intellectuals being held utterly unaccountable for their bad predictions. Paul Krugman and Paul Samuelson are among Taleb’s other Nobel laureate bête noires.

Hmmm…speaking of unaccountably, why hasn’t Tooleb owned up to his own wrong 2009 predictions of hyperinflation?

Unlike last year’s sudden market implosion, inflation isn’t an unimaginable event that few currently anticipate. In fact, many fear inflation right now amid government efforts to goose the economy. Universa’s bet, however, is that inflation will reach levels few expect.

What a spert he is. I was one of the few bloggers who was correct about almost everything since 2011, correctly predicting a continuation of the bull market and low inflation.

If you raise this issue on Tooleb’s Twitter, or question any of his beliefs, he will block you.

Behavioral Psychology and Influence

I’m skeptical that this persuasion stuff works on anyone who is remotely competent, such as gatekeepers and employers. It’s all flimsy social pop pseudoscience, much like Daniel Kahneman and Dan Ariely books that tell a message that people want to read despite the actual science being lacking, fabricated, or nonexistent.

Of the six items on the list, authority, consistency, and social proof are the ones that matter, but obtaining those requires a lot of competence. Or you can use shills, but that’s dishonest. Reciprocation often does not work in situations where there is a great disparity of power between both parties.

Yes, these persuasion techniques may work on people with room temperature IQs, or if you want to be a used car salesman, but to persuade and influence people who actually matter (gatekeepers, employers for good-paying jobs, journal editors, etc.), you have to demonstrate extreme competence. There are no shortcuts or ‘life hacks’. Persuasion, as well as influencing important people, ultimately requires proving your worth, by being competent, as I explain in more detail in Why Dale Carnegie is Wrong.

Suspicions of the social sciences being flimsy (with the exceptions of certain quantitative fields of finance, as well as the study of IQ) were affirmed in recent misconduct scandals (Diederik Stapel, Marc Hauser), as part of the ‘replication crisis‘ that is rippling through the field of behavioral psychology right now:

This isn’t the first time that an idea in psychology has been challenged—not by a long shot. A “reproducibility crisis” in psychology, and in many other fields, has now been well-established. A study out last summer tried to replicate 100 psychology experiments one-for-one and found that just 40 percent of those replications were successful. A critique of that study just appeared last week, claiming that the original authors made statistical errors—but that critique has itself been attacked for misconstruing facts, ignoring evidence, and indulging in some wishful thinking.

Bad ideas are infectious because they often tell people want they want to believe, not what is true.

Post-Pundit Era

Perhaps we’re kinda in a post-pundit era. Pundits used to have a lot of influence, but since 2013 or so, not as much. Through much of the 80′s and 90′s, pundits dominated the newspapers, radio, and TVs, their opinions broadcast to a Zingiest that eagerly spread the word, as well as influencing policy. Thomas Sowell, through his widely read books and columns, played a role in creating Reganomics, but nowadays one would be hard-pressed to find a pundit that influenced Obama as much as Reagan was influenced by by Sowell and Laffer.

One could argue that the first shoe to drop was the decline of talk radio and newspaper circulations and subscriptions, as a consequence of the internet era. As information became more disseminated and fragmented, the influence of the handful of so-called ‘mega pundits’ became diluted as thousands of smaller pundit such as bloggers and podcasters competed for people’s attention. Suddenly, the opinion pages of the WSJ and NYTs were read by fewer people, and fewer people care what Paul Krugman or Thomas Friedman have to say, unlike in the early 2000′s when those mega-pundits had much more influence on the ‘national debate’.

Online, on major communities like Reddit and Hacker News, I can hardly recall anyone referencing anything written or said by a major pundit. For the ‘right’, no mentions of anything by Rush Limbaugh, Sean Hannity, or Bill O’Reilly. Likewise, no mentions of Paul Krugman, Maureen O’Dowd, Thomas Friedman, or Thomas Blow, all of whom write for the biggest newspaper in the world, The New York Times. Ross Douthat is a notable exception, because he taps into these ‘shared narratives’ probably better than any other pundit.

The second shoe to drop, and a much more recent development, is the post-2013 rise of ‘intellectualism culture‘, as I alluded to in Alt-Right and Internet Journalism, consequentially lessening the viralness and influence of 80′s and 90′s-era partisan punditry, which has given way to ‘shared narratives’ and a more introspective or nuanced writing style. Although Ann Coulter articles are shared among conservative communities and websites, her articles almost never go viral on major social bookmarking sites. This is because her articles (as well as the same for leftist pundits like Krugman) are perhaps perceived as too opinionated and shrill, not intellectual or nuanced enough. Rather than tapping into a ‘shared narrative’ or using data visualizations, these pundits are just preaching to the choir, which was an effective strategy as recently as a decade ago, but will fail to expand the underlying message that the pundit is trying to convey to a savvier audience that has become deaf or repulsed by demagoguery.

Let’s say you want to ‘raise awareness’ (which is a hackneyed expression, but raising awareness is what pundits try to do) about America’s immigration problem. The pre-2013 approach would be to write a divisive opinion piece, replete with hyperbole and metaphors (such has referring to immigrants as ‘hordes of invaders’), and such an article would be widely read and well received by those already in your ‘tribe’, but it be very hard to get the article to go viral elsewhere. The post-2013 approach would be to ditch the hyperbole and opinions and instead create an article full of data visualizations that shows many immigrants are coming to America and how the native population is being displaced, and so on. The latter has a greater likelihood of going viral and, ultimately, raising awareness about immigration.

James Altucher’s Top 1% Advisory Report Review (Don’t Bother)

There has been some recent discussion about ‘James Altucher’s Top 1% Advisory Report’, which purportedly grants its subscribers access to the same lucrative investments ‘elite’ investors use.

Top 1% Advisory, a hugely
popular new research letter

Each month, multimillionaire investor James Altucher shows you how to make 100% to 500% gains… on the best ideas in the hedge fund and venture capital world.

Dear Reader,

The Top 1% Advisory – is a first-of-its-kind release by Stansberry colleague James Altucher, a multimillionaire entrepreneur.

My name is Jared Kelly, by the way. I’m a Director at Stansberry Research.

Normally – the Top 1% Advisory costs $2,500 for one year. Demand for this new letter has skyrocketed since its release last month… and has caused a major ripple throughout our industry.

I don’t need to part with $2,500 to know it’s bunkum. These sales gimmicks prey on the unsophisticated who have no clue about investing or how private markets work.

If demand is skyrocketing, that would make the investments in the letter overcrowded and hence less profitable for future investors. If these investments are so wonderful, why tell anyone? If a single startup or stock pick can make 10-100x your money, just do that over and over until you have a billion dollars or something. Even $25,000 is not enough if these purported returns are feasible. Thus it would seem more money is made selling newsletters than than actually investing.

Investing in start-ups has a lot of risk, and the top start-ups like Uber and Snapchat, which have yielded huge returns for venture capitalists, are inaccessible to the general public to invest. Only a handful of start-ups are successful (as in completing an ‘exit’ strategy), and you need a lot of money to bankroll the many companies that don’t exit and or shut-down, in the hope of finding a few diamonds in the rough. According to data compiled on Ycombinator companies, the success rate is only 12%:

Excluding startups who have only received funding and have not yet exited, as per Paul’s strict definition, we are left with a rate of success between roughly 56/468 ≈ 0.12 and 56/404 ≈ 0.14 or 12-14%.

“Success for a startup approximately equals getting bought. You need some kind of exit strategy, because you can’t get the smartest people to work for you without giving them options likely to be worth something. Which means you either have to get bought or go public, and the number of startups that go public is very small.”

Unless the company exists, your cash will remain tied up. Venture capital is a profitable endeavor but out of reach of anyone doesn’t have millions of of dollars. Investing in private markets require special accreditation that is only obtainable for the top 1% of income earners, and carries a high risk.

On the website he lists stocks that he invested in using his ‘system’, all of which have risen a lot, but fails to disclose the stock picks which have done poorly, and most importantly, these picks were purchased at the beginning of the current bull market, which is now in its 7th year and counting, and there is no guarantee the next seven years will be as prosperous as the prior seven.

Like James Altucher, I am bullish on the stock market and the economy, but his approach is wrong, particularity because some James’ stock picks (which he has disclosed to the public, not his newslettew) have tended to not do well. Two notable examples that come to mind are Vringo (VRNG), which he recommended in 2012 and has since lost some 95% of its value as of 9/13/2016 (it did a 10-1 reverse split though), and, in 2013, Corporate Resources (CRRS), which is effectively bankrupt due to accounting fraud. This is despite the S&P 500 rising 40%, so if you had invested in those two companies you would have lost all your money…pretty bad for a bull market. I know there are some picks that may have done better, but the overall average is strongly negative, which underscores the inherent difficulty of stock picking.

Besides my favorite stocks – Google (GOOG), Amazon (AMZN), Tesla (TSLA), Microsoft (MSFT), and Facebook (FB) – I recommend large cap tech (QQQ), retail (XLY), and healthcare (XLV), all which have outperformed the market on a risk adjusted basis.

…Which brings me to a yet-to-be-disclosed service James Altucher is offering, which for the aforementioned reasons I am highly skeptical of.

Here is a link to the sales pitch, and while the story of his dad is a nice sentimental touch, the premise is inherently flawed. And here is the video, which I have embedded below:

Essentially, what James is offering is some sort of ‘insider’ system, based on James’ connections within the financial industry, that will allow you to trade stocks like the ‘pros’ do.

From the sales pitch:

look at a site like U.S. Securities and Exchange Commission and I look every month at all of my favorite investors and see what stocks they are quietly beginning to buy.

They don’t go on CNBC talking about these stocks. They don’t go to the newspapers. But they have to report their holdings to the SEC in obscure filings labeled “13-D” or “13-G” or sometimes “13-F”.

They don’t talk to anyone.

Well, that’s not true. They all talk to each other. They talk to me. The information and analysis gets passed from one to the other and that’s how ultimately the stocks go up.

The major problem here is two fold: First, if the information is publicly accessible, such as on the SEC’s website, then in accordance with the EMH (efficient market hypothesis) the information will be instantly priced into the stock. Thus, the stock will likely rise of fall based on the disclosed information before you can react. James makes it sound like the ‘Securities and Exchange Commission’ website is some clandestine organization – that someone how he has stumbled upon something new, when, in reality, hedge funds have algorithms that automatically scan these databases for updates.

Second, and probably more importantly, active management has actually done quite poorly, as indicated by falling ‘alpha’. Fund mangers, especially in recent years, have failed to beat their benchmarks. It’s incontrovertible: everyone, including the experts, sucks at picking stocks:

Why Active Management Fell Off a Cliff – Perhaps Permanently

Whack-a-mole fund managers can’t beat index funds

‘Scale and Skill’: Why It’s Hard for Managed Funds to Beat the Indexers

Poor performance catching up with active stock fund managers

Investment: Loser’s game

86% of investment managers stunk in 2014

To say active management is bad is an understatement – it’s downright awful.

It’s hard enough picking the right sectors in this schizophrenic bull market, but picking individuals stocks is many magnitudes harder. Even Warren Buffett is having some difficulty, with major holdings such as Coke, IBM, and American Express lagging the S&P 500 since 2012. The main reason why Berkshire Hathaway stock (BRK) has done so well in spite of mediocre stock picks is because of its large private holdings like Geico. Emerging market have done poorly since 2011, and small and medium caps have also lagged since 2014. As part of the winner-take-all theme, the stock market and economy has become much more myopic, with lots of losers and fewer winners.

To exploit the tendency of overcrowded investments to lag the broader indexes, a good strategy could be to find which stocks and sectors are the most widely held by funds and then short these stocks, with 50% allocation also going long the S&P 500.

So even if these experts are feeding James information, very little, if any, will be of any good. Essentially, the data shows that the funds are as clueless at stock picking as retail investors – the only difference being they collect commission fees, which is really how the money is made, not stock picking. I believe there are some individuals and firms that do have genuine stock picking and market timing ability, but they seldom accept outside money, and they sure as hell will never disclose their secrets to James, or anyone else for that matter.

In Defense Of A Boring, Comfortable Life (analysis)

An article on, In Defense Of A Boring, Comfortable Life, is going viral:

There is nothing wrong with living a comfortable and unadventurous life.

I know. This is the internet. The odds are good you just spent five minutes watching someone do something incredible. After watching that video, you probably thought to yourself, “Wow. I should totally go and punch a giant shark in the face.” Or maybe, “Sure. I can take that zip line over a volcano. Why not?” Then you realized, like most people, that you’d rather go hiking instead. But then you find hiking is super boring and nature kind of sucks. Especially if you’re like me, and insects make you the main course every time you enter the woods.

It’s then you begin to realize, as I did when I turned 33, that maybe the adventurous life isn’t all it’s cracked up to be. It just looks fun, and because we’re regularly exposed to other people’s allegedly fun lives, that makes us imagine doing the same things with our own.

If you want to live in a beautiful, comfortable apartment, and chill out and watch Netflix on the weekends? (And I mean really watch Netflix, which is why I put the “chill” first there), there’s nothing wrong with that. It’s your life. You should do what makes you happy. Honestly, I read a lot of books. If I can spend my weekends working on my comic and reading a good book? I’m as happy as a clam.

This article echoes many themes of this blog and post-2013 society and culture, such as millennials choosing to be alone, at home being introspective, reading, or watching Netflix instead of engaging in ‘adventuresome’ activities such as traveling or going to nightclubs, as part of embracing a ‘spartan’ or ‘boring’ lifestyle of frugality, minimalism, and intellectualism, not excess, materialism, or extravaganza.

Part of this economics: a perpetually weak job market, as well as too much student loan debt, means less money to spend on traveling or going out, but intergenerational cultural factors may also play a role.

Millennials are sorta like 20-something curmudgeons. It’s not the 70-something yelling ‘Get off my lawn!’ – it’s the 20-something saying ‘I want to watch Netflix or read a book at home alone. No, I don’t want to go to a social event such as a club, a baby shower, or your wedding’.

The ‘boomers’ when they were young embraced escapism (such as through psychedelic music, cross-country motorcycle trips, and recreational drug use) and rebellion (against ‘the system’, ‘the establishment’, and ‘the man’).

Gen-x, while there was less rebellion, had escapism in the form of alternative and grunge music, MTV, ‘dumb’ sitcoms (such as Seinfeld, Friends, etc.), as well as drug use. There wasn’t as much intellectualism back then, and consumerism was everywhere. But at the same time, for much of the 80′s and 90′s, living standard for many Americans still weren’t that great, corporate profits & earnings were much weaker than they are now, and interest rates were too high.

By contrast, as mentioned in Intellectualism, Individualism, and Wealth, Part 4 (philosophy of millennials), millennials (with some exception of SJWs) generally don’t seek to rebel or escape, but rather adapt and be in the ‘preset’, engaging in studies and online debates on philosophy, finance, and economics, all to better understand ‘the system’ instead of fighting it. Escapism for millennials is generally constructive and intellectual, such as watching documentaries and high-production shows on Netflix, posting or blogging online, or reading (such as in the case of the author of the article, B.J. Mendelson), not binge-watching Friends or zoning-out on music videos. Although millennials created OWS, it quickly fizzled out, and they soon realized that it’s more productive to learn to emulate the rich and to understand how the economy works than rebel against it (which is counterproductive).

There is also less drug and alcohol use than earlier generations (although marijuana may be an exception):

As a result of this saturation of information, the media latches onto millennial drug use. However, according to the National Institute on Drug Abuse (NIDA), millennials actually use fewer drugs and less alcohol than their parents’ peers did. Tempting though it may be to point fingers, teenage drug use declined by more than 34% between 1993 and 2013, a crucial time period that encompasses the teenage years of almost all millennials.

By all accounts, alcohol use is also less common for millennials. According to the same NIDA report, teen drinking has decreased by 42% since 2003 alone, and by more than 60% since 1995. Now that most millennials are in their 20′s or 30′s, this demographic is also leaning away from hard liquor, preferring craft beer and wine. In fact, millennials drink twice as much wine as their parents did at the same age.

This article also relates to ‘advice culture’, borne out of Millennials learning how to adapt, not rebel, to a challenging economy, which seems to reward individualism and lavishes heaps of praise upon an exalted few, with mediocre job prospects and student debt for everyone else. Edgy, contrarian articles (such as In Defense Of A Boring, Comfortable Life) that offer ‘advice’ on navigating post-2013 society and culture often go viral, as millions of people (not just millennials) are coping with ‘how to be average’ if you cannot be the next Zuckerberg, Musk, or Theil (not that everyone wants to be like them, but they are portryed by the media as paragons of success and accomplishment).

And from Wealth, Intellectualism, and Individualism, Part 2 (the obsession with finance):

But at the same time, an article about ‘being average‘ also went viral. This ties into post-2008 ‘authenticity culture’, of how it’s better to be authentically ‘true to yourself’, even if it means being average, than being deluded and afflicted by Dunning Kruger. Biological determinism again rears its head, with genes limiting the potential of people who aspire to more than their biology will allow. This is related to ‘share narratives’, as millions of people are seeking answers to existential questions like, ‘Can someone who is only average find meaning in life in an economy and culture that seems to rewards individual success and talent, and how so?’ Not everyone can be a day trading genius, a web 2.0 billionaire, or a top physicist or mathematician, so learning or coping with being ‘average’ is a useful skill.

Although job prospects may not be as good, the good news is many millennials are rejecting the corporate ‘rat race’, preferring a lifestyle of minimalism over consumerism, as a way of not only adapting to a more difficult economy but as part of a culture that has become more intellectualized. Millennials would rather code and stay home and read, sometimes in the case of the former becoming suddenly very wealthy, but in spite of the wealth still living a minimalist lifestyle.

Cambrian explosion’ of intellectualism

One question is: why learn advanced mathematics? This is related to the is-ought problem, as posed by Hume. The examples in differential geometry can be difficult and time-consuming , unlike simple calculus, and are best done with computer, not by hand. A single tensor, as found in general relativity, may have dozens of components…writing them out would be taxing. The question is, what do want to do with this knowledge. There is value in learning complicated, abstract math to signal intellect and thus become more popular online, and maybe get consulting work. That alone is very valuable, and is why STEM graduates or graduates from elite schools make so much money and have such god job prospects compared to everyone else, because such degrees generally require a lot of intelligence to obtain and thus signal competence.

But also, why is there so much interest in learning complicate, esoteric math concepts? All things ‘smart’ have gotten more attention as of late, such as as theoretical physics, quantum mechanics, philosophy and math (as well as all these things melded together). It seems, especially as of 2013, there is huge demand for learning complicated mathematics, coding, and trading algorithms. It’s like the AP-math class of high school but expanded to include almost everyone, not just a dozen students. Popular sites like WaitbutWhy are popularizing ideas (cryonics, fermi paradox, etc.) that just as recently as a decade ago were mostly of the domain of scifi aficionados and scientists. Pre-2008, the internet was a pretty ‘dumb’ place, dominated by crappy MySpace profiles, LiveJournal and DeviantArt, V-Bulletin forums, bombastic opinion pieces, bland advice pieces, and content transcribed from offline sources to the internet. Then, around 2013 or so, came long-form, infographics, data visualizations, and social networking like Facebook and Twitter (which replaced Myspace). And also, the rise of ‘expert culture’ – sites like Reddit, Hacker News, Medium, as well as those ‘question and answer’ sites that have social aspects to them (math exchange/overflow, stack overflow/exchange), all of which reward competent, helpful people with ‘karma’ and status. In the past, you either had to go to a crappy V-Bulletin site or a newsgroup, and your contributions were generally ignored outside of their respective communities. ‘Expert culture’, which is related to ‘intellectualism culture’ is how ‘esoteric celebrities’ are created, because now these competent, smart people are having their contributions broadcast to the world, gaining wealth and social status in the process. There are huge markets for this stuff, tons of readers, and lots of viralness and page views – and no topic is too complicated or esoteric. I liken it to a ‘Cambrian explosion’ of intellectualism.

But also, people observe, read headlines about high-IQ founders, venture capitalists, and coders making tons of money in Web 2.0 (Uber, Pinterest, Snaphat, Dropbox, etc.); STEM people getting tons of prestige, status, and global notoriety for their finding (Arxiv physics and math papers frequently go viral); and how the economy, especially as of 2008, rewards intellectualism and STEM in terms of higher wages and surging asset prices (like stocks (the S&P 500 has nearly tripled since the 2009 bottom), web 2.0 valuations (Snapchat is worth $15 billion, on its way to $50 billion), and real estate (Palo Also home prices have doubled since 2011)), and, understandably, many people want a piece of the wealth pie. They see that intellect – which includes STEM, finance, and also quantitative finance – is the path to both riches and social status (as embodied by wealthy geniuses like Musk, Thiel, Zuckerberg, Shkreli), which is why there is so much interest in these technical, difficult subjects, unlike decades ago when only a handful of people were interested. This is the so-called wealth-intellectualism synthesis.

An explanation for this ‘explosion’ may have to do with how the internet evolved, as well as demographic changes. From the late 90′s until around the early 2000′s, the internet was dominated primarily by music downloading/sharing and pornography, as well as crudely designed ‘personal webpages’ and news repositories (,, etc.). Internet and computer speeds were slow, and what little precious bandwidth there was could not go to waste, so that meant a lot people used the internet to circumvent restrictions found offline, for example, not having to pay $18 for a CD but instead downloading the songs for free using a service such as Napster (which lead to a lot of lawsuits), which took a long time due to slow internet speeds. But at the time, it was amazing….people underestimate how important music downloads were for the early internet. While teens and 20-somethings were downloading music and pornography, older people were primarily using the internet to check news, finance (motley fool and yahoo finance were two popular sites). By 2002-2009, almost everyone has some form of high-speed internet, forums and social networks such as Myspace and v-bulletin are very popular and begin to overshadow music and porn downloads (because the internet is faster, people don’t have to chose between downloading music or porn (first priority) or social networking (second priority); they can easily do both), but the internet is still a pretty ‘dumb’ place, as mentioned earlier. At this point, millennials are still in their in their early to late teens and don’t have as large of a presence on the internet as they do now, which between 2002-2009 was dominated by gen-x.

Fast-forward to 2013, and now millennials are either finishing college or just graduated, and now dominate the internet, which has evolved from being dominated by Myspace, porn, and music downloading (all of which have now been pushed to the periphery, and Myspace has been replaced by Twitter and Facebook, which are much better), to now being dominated by sites such as Medium, Reddit, and Hacker News, that reward intellectualism and have huge traffic and growth. Although Slashdot, a smart site, was popular in 2002-2009, it was mostly an outlier, not the mainstream. Furthermore, millennials, being overeducated and more intellectually curious than earlier generations, are leading this intellectual renaissance/explosion, and have a keen interest in ‘smart’ topics such as economics, philosophy, computer programming, physics, finance, HBD, political science, sociology, etc. – not just music downloads or checking sports scores, and readily debate these complicated subjects on social news sites such as Reddit or Hacker News or on Twitter, which is both good and bad, to some extent. It’s ‘good’ because millennials helped create the ‘alt right’ another other esoteric ideologies and movements (such as MGTOW and Red Pill) that defy the boring, politically correct left-right dichotomy. Debating physics and economics online, imho, is more interesting than downloading music. Instead of trying to find the latest ‘Britney download’, young people now want to learn about functional programming, how to make money online (such as through stocks and finance) and be self-sufficient (instead of broke, dull, and spendthrift like their baby boomer parents), learn about Tensor flows, or the space-time continuum. They are also taking to Medium and Tumblr to blog about philosophy and how to find meaning in life, but also about programming, social theory, and start-ups. But on the other extreme, unfortunately, there are the millennial SJWs, who seem to have an especially large presence on Twitter, with ‘BLM’ Twitter mobs and campus crusaders.

Does algorithmic trading work?

There has been a lot of discussion (such as on Reddit, Quora, Hacker News, and other communities) about quantitative/algorithmic trading:

Does algorithmic trading really work for individual traders? Isn’t it just another seemingly sophisticated method like technical analysis?

Does algorithmic trading really work? What are the potential gains and limitations?

What kind of return can an average algorithmic trading firm achieve today?

Algorithmic Trading: The Play-at-Home Version

Algorithmic Trading: A Brief Introduction

Does algorithmic trading work? I don’t know for sure, but I think a lot money is made in market making (Citadel Capital comes to mind), which tends to full under the umbrella of algorithmic trading – the two are closely related.

Algorithmic trading is often a full-time job. It involves a lot of trading and paying constant attention to order books, as well as tons of backtesting and data analysis. Because your competitors are constantly evolving, so must you, and staying ahead of the competition is very time consuming. Just because something is automated or algorithmic doesn’t mean you can be complacent.

Major firms such as Goldman will have vastly more resources (computing power, access to top talent) than a typical DIY quant trader. However a major advantage for small traders is that they don’t have the same liquidity constraints as large traders. Large traders move the market (and this may be undesirable and must be taken into account when placing trades), but smaller traders can slip through without having to worry about complications such as ‘market impact‘.

Being bigger comes with many perks. People believe that Warren Buffett, for example, trades the same stocks everyone else does (except he is really good at it), but this wrong to some degree. Buffett has access to special deals (such as preferred shares on Bank of America and Goldman Sachs that pay large dividends) that ordinary investors would never have access to.

Slippage and commission fees can adversely effect performance. It isn’t too uncommon for a system that is profitable without fees and slippage to be rendered unprofitable ones those two factors are taken into account.

Then there are a plethora of statistical biases that plague traders: look-ahead bias, data dredging/snooping biases, curve fitting, and so on.

Here is an example of how slippage can negatively affect the equity curve of a strategy:

Success may still be elusive. The literature shows that most (about 90-95%) traders fail. Although Renaissance (James Simons), Citadel (Kenneth C. Griffin), and Quantum (Soros) have had huge success, they are outliers and have access to special propitiatory ‘tools’ and markets that ordinary traders don’t have access to. It’s not like these quant firms are using a mom and pop discount brokerage firm as everyone else does – rather they are the firms, meaning that they often make money from ‘making markets’, not trading them with a directional bias (long or short) as most people do. By making markets and using direction-neutral trades, these firms can make money in pretty much all market conditions.

Most quant firms and traders use leverage, which is necessary to generate large returns from small underlying movements, but this can backfire in a big way as the 1998 implosion of Long Term Capital Management showed.

Overall, I don’t think quantitative trading is as glamorous as many think it is, and I’m not sure if the returns are worth the effort. The historical returns for the S&P 500 average about 7-8% a year (exuding dividends), which many funds, despite access to top talent and top trading tools, fail to beat. There are simpler methods, based on mathematics such as the ETF decay, that an also generate very good returns and don’t require full-time trading. A lot of caution must be taken in any strategy, and risk management is crucial.

Lessons from a 45-Year Study of Supersmart Children

What is obvious to pretty much everyone else, isn’t so for the blank slate left, who have to perform mental gymnastics to explain away the reality that environment alone cannot account for the disparity of outcomes, both educational and socioeconomic, between individuals. According to the left, policy makers are not ‘doing enough’ and that ‘higher taxes are needed to close the gap’, or that ‘institutional racism is to blame’.

Here are two studies that put in a nail in the coffin for the blank slate (because the welfare left are impervious to logic and empirical evidence, it won’t convince them, but interesting nonetheless):

Parents’ math skills ‘rub off’ on their children:

Surprisingly, the researchers also found that children’s intuitive sense of numbers — i.e. the ability to know that 20 jelly beans are more than 10 jelly beans without first counting them — is predicted by their parents’ intuitive sense of numbers. Researchers determined that such close result parallels could not have been produced through similar institutional learning backgrounds because their previous research showed that this intuitive sense of numbers is present in infancy.

This is obvious to anyone who has either attended school (everyone) or works with children: there are the ‘slow kids’ and the ‘smart kids’, and these differences in intellect manifest very early in life, long before 10,000 hours can ever kick in. Teachers can reality identifying which students will succeed at life (or at least have the most potential to succeed) and who are slated for an ennobling career flipping burgers or greeting strangers at Walmart.

To give an anecdotal example, my middle school had a yearly writing content, and the winners obviously had more talent than everyone else (as was obvious when they read their stories aloud during the awards), and since we were only 11-13 years old it’s not like any of us had thousands of hours of practice under our belts.

But that means we need universal pre-pre-pre-k…all the way up until conception. We’re not spending enough tax dollars to to close the gap, obviously.

Here’s another: How to Raise a Genius: Lessons from a 45-Year Study of Supersmart Children:

The research emphasizes the importance of nurturing precocious children, at a time when the prevailing focus in the United States and other countries is on improving the performance of struggling students. At the same time, the work to identify and support academically talented students has raised troubling questions about the risks of labelling children, and the shortfalls of talent searches and standardized tests as a means of identifying high-potential students, especially in poor and rural districts.

The headline caused confusion for some, because it seemed to suggest, perhaps, that it’s possible to turn a child into a genius (nurture). As the passage above shows, what the author meant is that the child has already been identified as a genius (such as through an IQ test), and then what the next steps should be in order to maximize the child’s potential. Cognitive capital is like any other resource, and it should not go to waste.

Special education gets vastly more funding than gifted education despite both extremes being represented equally on the Bell Curve. This represents a massive misappropriation of public resources, and needs to be rectified.

The welfare left talks about ‘breaking barriers’, but this is false or a red herring: what they really want are equal outcomes. The SAT was created with the intent of identifying exceptional talent that may have been overlooked by elite universities, which at the time had quotas, but now the left wants to neuter the SAT or eliminate it altogether, because the ‘wrong people’ are scoring too high, so to prevent this it’s time to get rid of the SAT.

Probably the most overused, trite argument you encounter online when debating IQ is that ‘not everyone who is smart achieves much – early to bloom, early to rot’ – or something along those lines. This study lays that argument to waste:

“Whether we like it or not, these people really do control our society,” says Jonathan Wai, a psychologist at the Duke University Talent Identification Program in Durham, North Carolina, which collaborates with the Hopkins centre. Wai combined data from 11 prospective and retrospective longitudinal studies, including SMPY, to demonstrate the correlation between early cognitive ability and adult achievement. “The kids who test in the top 1% tend to become our eminent scientists and academics, our Fortune 500 CEOs and federal judges, senators and billionaires,” he says.

Although not every high-IQ person will achieve world-renowned success, the odds are much higher than someone who is less intelligent.

In further shattering the blank slate, exceptional talent manifests early in life, irrespective of practice or environment:

Such results contradict long-established ideas suggesting that expert performance is built mainly through practice—that anyone can get to the top with enough focused effort of the right kind. SMPY, by contrast, suggests that early cognitive ability has more effect on achievement than either deliberate practice or environmental factors such as socio-economic status.

Here is a point-by-point refutation of some of the more persistent myths about IQ and giftedness:

Finding “gifted” children does not contradict this. Nobody pops out of the womb a math genius.

Yes, technically no one pops out knowing trig or calculus, but some are born with the cognitive capacity, which later manifests in life, to readily master abstract and complicated stuff, and others aren’t born with that ability so they struggle to understand concepts that smart people grasp easily. Although ability can be lopsided (some are better at math than verbal), the less intelligent tend to have no dominant strengths – they are just average. And that’s fine. Most people are that way.

Gifted children are “gifted” with a laser focus on the unusual things that they find fun – math, music, what-have-you. They spend countless hours playing with numbers or with music, while little Johnny is playing with a ball.

Why don’t adults play with paste, coloring books, and alphabet letters? Because they are too mentally mature for those activities. Likewise, high-IQ children have a higher mental age, hence they find these tasks tedious and boring, as adults do.

…when people point to “gifted” talent, this is just another cop-out. They don’t have an explanation. They are appealing to everybody’s shared sense of magical outcomes. But it boils down to the hours that kids put into their interests.

Well, there’s something called an IQ score, and it does a pretty good job at predicting all sorts of things, such as socioeconomic outcomes, job performance, educational attainment, welfare dependency, and learning ability. The IQ test is one of great achievements of human psychology, is much harder to manipulate than EQ tests, and scores tend to remain stable throughout life.

One question is why these erogenous views about IQ are so persistent, and why the the blank slate view of human development is so popular. Perhaps it has to do with ignorance. Many people have been fooled by the intellectual-equivalent of snake oil salesmen such as Malcolm Gladwell, who dispenses a message that is appealing but is either wrong or unfounded. There are also potential career consequences for espousing biological realism, as we saw in 2005 with the firing of Larry Summers. Teachers can’t tell parents their kid is slow, and parents refuse to accept that their kid may be slow, preferring euphemisms like ‘ADD’, ‘differently-abled’, or ‘Autism-spectrum disorder’. As we see with Gladwell and others, entire publishing industries are built upon promoting blank slate-ism to a public that laps it up – there is a lot of money at stake. At the national level, entire multi-billion dollar departments, as well as the careers of thousands of bureaucrats, depend on shoveling money into the furnace of promoting equality of outcomes.