Monthly Archives: March 2017

Jordan Peterson Discusses IQ

Jordan Peterson over past year has become something of a internet phenomena and celebrity, his videos watched by hundreds of thousands of fans and have thousands of up-votes and positive comments. He also has some interesting videos about IQ.

The first video is spot-on:

Politicians, both for the ‘left’ and the ‘right’, in terms of constructing policy, default to the same tired, failed solutions that ignore the role of IQ. Peterson understands this.

The second is kinda iffy (I think he makes too many assumptions, and there is only paucity of data to support them, or there are too many confounding variables):

Having a high IQ raises economic mobility, all else being equal, but measuring the top 5% of IQ is hell of a lot easier than measuring the top 5% of wealth, because the latter is so hard to quantify. For the former, it’s as simple as taking an IQ test. For the latter, wealth is affected by a multitude of variables and varies depending on how you measure it: such as tax rates, location of residence, income, number of siblings, etc. Being the only child of a 3-person family that makes top 5% of national income and has top 5% of national wealth, while living a low-cost neighborhood, is a lot better than growing up in a 10-person household in a very high-cost-living neighborhood also making top 5% of income. A person who has a $300k home paid-off and makes $20k/year (bottom 5% of income) is ‘wealthier’ than someone who makes $150k a year (top 5%) but has no home equity and a negative monthly cash flow due to large family, car, and other upkeep expenses. A person who makes $25k a year for 30 years strait and pays minimal taxes will be wealthier than someone who makes $100k for only three years and pays half of that in taxes.

The part about longer life expectancy and better health is suspect…Those people on the “world’s oldest” lists, who live to 110-115, never strike me as being terribly bright…usually they are just simple, average or below-average IQ people. Yes, the IQ/life expectancy correlation is about averages, not extremes, but an explanation for the possible diminishment between IQ and life expectancy is that average-IQ jobs in the past tended to involve manual labor and difficult work environments, but many of those jobs have been replaced by technology and thus occupational hazards have lessened. Also, medical technology, which benefits people of all IQs, is improving and is attainable by everyone, regardless of ability to pay. I would like to see a study of IQ for the very oldest of people; my hypothesizes is that high IQ is not overrepresented among the exceptionally aged (>90 yrs). And of course, there is also the confounder of race regarding IQ and life expectancy.

Regarding industriousness, smarter people are able to work smarter by finding shortcuts to compensate for possibly not working as hard. They understand the subtleties that elude the less intelligent, although this is no guarantee of success. A smart person who tries to invent a perpetual motion machine, is doomed to failure, no matter how hard he tries or how smart he is. The problem is when smart people rationalize ‘dumb’ things, as you often see with professors who espouse Marxian/Foucault dogma. The part about abstract ability (such as choosing specific letters in a string of random letters) is correct.

I was unable to find any info to corroborate the part about adult head size and IQ, although there are a handful of studies involving children. Microcephaly, characterized by a head circumference of two standard deviations or more below average, is almost certainty associated with mental impairment, and is often congenital and thus diagnosed very early in life.

Also agree that ‘multiple intelligences’ theory is rubbish…by creating enough types of ‘intelligences’, anyone can be a genius at something.

Shared Experiences

From the study of ‘intellectualism culture’, which is a branch of ‘social theory’, arises the concept of ‘shared narratives’, discussed on this blog many times already. Shared narratives are beliefs, areas of inquiry, and values held by–and unique to–high-IQ people that bring such individuals together regardless of political or socioeconomic backgrounds.

But then there are also ‘shared experiences’–events and activities that are unique to smart people, that also bring such individuals together regardless of politics. Going to a football game is not a shared experience, because it’s not exclusive to high-IQ people. For example, this ‘meme’ I have a test tomorrow and I’m staring blankly at my book went massively viral on Reddit a couple weeks ago and is an example of a ‘shared experience’, which is why it was so viral–thousands of smart people can relate to the experience of being unchallenged in high school, only to find college coursework work more difficult. The ‘college experience’–whether it’s majoring in a STEM subject, economics, quantitative finance, or philosophy (all of which are high-IQ majors)–is ‘glue’ that holds smart people together regardless of their politics.

One of the benefits of completing college, besides higher wages due to ‘signaling theory’, are the social and bonding aspects the ‘college experience’ among other graduates. That’s one reasons why, despite being on the ‘right’, I no longer ‘bash’ millennials who go into debt to study cognitively-rigorous subjects such as STEM, philosophy, or economics and are unable to find good-paying jobs afterwards, or simply choose not to work, because intellectualism, in and of itself, has value. A decade ago, before the anti-college movement became a ‘thing’, yeah, telling students to not major in liberal arts was considered novel advice, but now it’s become repetitive and hectoring. Nowadays, many students who go into the liberal arts already know the pay and job opportunities are not going to be as good as a computer science degree, but they do so anyway, for reasons besides money. Other shared experiences induce: high school being too easy, dealing with insufferable low-information people and politics, work being boring and tedious, and bosses being inept and clueless.

The idea of work and wages being a virtue is a leftist one based on Protestantism and populism. For communists and socialists, work is always a virtue, regardless of economic value (which is why the far-left supports wasteful stimulus and make-work programs).

For smart people, who may be underappreciated by a less intelligent collective society, playing videos games (playing video games being the shared experience) is a form of escapism, which is why this story by 1843 Magazine (a subsidiary of The Economist) Escape to another world, about how unemployed men are playing video games instead of working, went hugely viral on Reddit, Hacker News, and 4chan. For smart people, video games provide autonomy and fun, in contrast to a boring job where their talents may be ignored. Low-information society wants smart people to conform to consumerism and political correctness, and smart people are responding in silent protest by ‘dropping out’, whether it’s going their own way (MGTOW) to live a life of minimalism, playing videos games, or living with their parents to avoid having to waste money on rent and ‘adult responsibilities’.

Going back to the meme, here are some of the most highly up-voted comments:

For the first comment “thats normal.. whats your topic?” the phrase ‘that’s normal’ connotes familiarity, hence the experience or ‘shock’ of difficult college coursework is ‘shared’ between the commenter and whoever posted the meme and, as well as shared by the thousands of people who up-voted both the meme and the comment.

The second most up-voted comment is both a shared experience and a shared narrative (the experience and narrative of how high school is dumbed-down and how teachers and administrators neglect the smartest students, in favor of trying to bringing the slowest up to speed, in which I agree: Too much taxpayer money is wasted on special ed and other ineffective programs. We need better policy in America that doesn’t neglect its best and brightest. Majoritarianism fails America’s smartest).

SJW/liberal Cathedral vs. Tehnocommercialism Cathedral

Perhaps there are two ‘cathedrals’–the SJW/liberal one, which we are all familiar with, and a technocommercialist one (Nick Land alluded to something similar year ago, but I don’t remember the post), and the two are at odds with each other. Technocommercialism seeks to secede from the former, a process some call ‘exit’. The latter is probably preferable to the former and, IMHO, more likely to ‘win’ than the former, but technocommercialism has its own drawbacks–it tends to be globalist, supports high-IQ immigration (which boosts GDP growth, but over the long-run will change the national demographic), and believes in the supremacy of capitalism and science, subscribing to a materialistic and positivist view of the world and rejecting forms of idealism and mysticism.

Characteristics of the SJW/liberal cathedral:

In general, it’s bigger; has a larger coalition as measured by legions of low-information Democratic voters, SJWs, and BLM; controls media, entertainment industry, universities, and much of national government; low-IQ, dysgenic; slow growth and dying industries (such as TV media, publishing houses, and newspapers); relies on masses for support (power in numbers); neoliberal and social democracy; social justice is very important; nepotistic; very old and established institutions (such as Washington DC, New York Times, CNN, etc.); NYU, Brown, Dartmouth, and Pen; low-IQ immigration for cheap votes; George Soros, Bernie Sanders, Noam Chomsky.

Tehnocommercialism cathedral:

Smaller, but very powerful and influential relative to its size; massive growth and booming industries with high profit margins (Amazon, Google, Facebook, Netflix, Palo Alto Networks); very wealthy per capita, insular; high-IQ, eugenic; elitist, pragmatist, and consequentialist: 19th century progressive-liberalism; classical liberalism, neoliberalism, neoconservatism, techno-libertarianism; meritocratic; highly individualistic; high-information voters and supporters; skeptical of democracy or opposes it; high-IQ immigration for technology, but also low-IQ immigration for cheap labor; free trade, globalization; Harvard, MIT, Caltech, and Stanford; Peter Thiel, Marc Andreessen, Ayn Rand, Paul Graham, George Gilder.

The first one is bigger but it’s slowly dying and or being subsumed by the second one, which is why I think tehnocommercialism will win in the end. Amazon is taking over left-wing retail (dumb stores such as Target, for example). Economically, Southern Europe and South America, which are social-democratic and low-IQ, are falling behind America and China. Facebook, Google, and Instagram are making ‘old media’ (such as Time and CNN) obsolete. Major TV networks have falling ratings and are losing money. University enrollment (except Ivy League) is falling, probably because parents and students are tired of going $100,000+ into debt to be lectured about ‘white male privilege’. BLM and SJWs are losing support, especially online. And, of course, Trump won, but he alone probably won’t undo decades of damage, but its a step in the right direction. Silicon Valley and Manhattan on a per capita basis are much wealthier than much of the nation and much smarter, which makes up for their small size. Despite Trump, Washington DC is a major bastion of far-left liberalism and will likely remain so unless the far-right is able to make greater inroads.

Real Estate vs. Stocks, Part 2 (why homes win, and why rent sucks)

As discussed in Part 2, in recent years, there has been a ton of interest online in finance. Everyone, but especially millennials, want to know how to make more money quickly, whether to rent or buy a home, who to save for retirement and how much you need to retire, index funds vs. individual stocks, and how to get rich quick…or slowly.

In Part 1, I outline some of the benefits of home ownership versus stocks. If you buy a home for $240k outright, versus paying rent, you effectively double your money in a decade in terms of money saved by not paying rent. But is it really as good as it sounds.

Many people in their 20′s and 30′s are in a situation where they have some money saved up and a job that pays a decent wage, and they are wondering if they should put the cash in an index fund while renting — or — instead of renting, using the cash for a down payment on a home.

Let’s crunch some numbers…

Let’s assume starting in year ‘X’ you earn $2,000 in after-tax income every month, and wages grow at 3% a year. Hypothetically, you also have $43,000 cash, which can either be invested in the S&P 500 or on a down payment. You can either put this $2,000/monthly income into stocks or in a mortgage. Historically, stocks have returned 10%/year (including reinvested dividends). Rent is $2k/month and grows at 3%/year as well. Home prices rise 2%/year. Let’s assume a rent/price ratio of 18, which is the national average (12 months * 18 * $2000/rent~$430k home). A 10%-down mortgage on a $430k home means you put down $43,000. For simplicity, let’s also assume the mortgage interest deduction is offset by property taxes.

Case A: $43,000 initial in S&P 500 + $2000/month invested, compounded 10% a year for a decade. However, gains in rent offset gains in wages, so all after-tax income goes to rent. Total profit is simply 43k*(1.1^10-1)=$68k.

Case B is more complicated. Initial home equity $43,000. Initial home value: $430,000. After a decade, at 2%/year, the home is worth $525,000. Profit: $52,000. The mortgage payment is $2,000/month (adding $150/month extra to take into account other fees), which is offset by income. But wages are growing at 3% a year, which is invested in the S&P 500 like above.

Between years 0-1, total yearly wages are $24,000, all of which goes to the mortgage, so 0$ leftover and 0$ total

Between years 1-2, total yearly wages are $24,700 (wages rise 3%/year), leaving $700 leftover, which is put in the S&P 500

Between years 2-3, total yearly wages are $25,460, $1460 leftover and put in S&P 500; the $700 grows to $770; total= $2230

This is a recurrence relation… Wolfram Alpha is used to tabulate the remaining years. The end of the 10th year shows $46,000 of capital accumulated due to a combination of wage increases and S&P 500 reinvestments.

But this is an underestimate…let’s assume the wage increase is in 10 discrete chunks spread throughout the year in equal intervals, and each chunk is immediately invested in the S&P 500.

So for year 1, wages increase 3% by year-end to 720, so each chunk is $72. We have: 1.1*72 (the first chunk gets all of the S&P 500 gains) + 1.09*72…1.01*72 (the final gets the least). Adding up .1+.9+.8 … .01 gives (n^2+n)/(200). For n=10, the sum is .55, which times 72 is $40, which represents a 5.5% gain after a year on top of the $720, for a total of $760 after one year.

The new recurrence relation, which when evaluated gives $62,000 profit after the 10th year. Total profit $52k+$62k=$114k

$114k beats the $68k by 67%. One of the reasons why home ownership does well is because the mortgage is fixed at $2,000 a month, whereas the rent in the first example keeps growing. This allow the excess income to be invested in the market.

Josh Barro’s Bad Day

It’s war:

EXCLUSIVE – Michael Savage Following Alleged Assault: ‘It Is Clearly Open Season on Prominent Trump Supporters’

The left was correct in 2016 when they predicted that if Trump won there would racism and violence–only it is against Trump supporters, but that doesn’t count as violence…those Trump supporters ‘deserve it’, according to the far-left’s ‘logic’.

left-wing elitist Josh Barro missteps (Josh did not realize that the MacDonald’s account, which made the anti-Trump tweet, was hacked):

The NRx critique here is that Josh is technically correct (about the elites) and is conveying an anti-democratic view, although tactlessly; but his first tweet is wrong, because as noted by Chris Arnade, inner-city minorities consume McDonald’s as much, if not more so, than Whites.

Both neocons and neoliberals, such as Josh Barro, tend to be be elitist, pragmatic, and consequentialist, in contrast to the far-left (social democrats, welfare liberals) and far-right (nationalists, traditionalists), that are more populist.

Why Gold Fails as a Hedge Against Inflation (and when it works)

In the aftermath of Trump’s win, something that wasn’t supposed to happen, happened. Inflation expectations surged, but gold got clobbered:

The GLD fund, a proxy for gold, fell 8% (from $125 to $115) in the days immediately following Trump’s victory, and then it fell another $7 in December:

Inflation expectations, however, surged as shown by the spike in short-term yields in anticipation of considerable federal spending under the newly-elected Trump administration:

As shown above, interest rate expectations have ratcheted significantly, and the yield curve is expected to be much flatter due to short-term rates rising very quickly under Yellen’s rate hike regime.

And the week Trump won, treasury yields went nuts, in anticipation of higher interest rates and inflation:

Gold, which is touted as a ‘hedge against inflation’, failed spectacularly.

If you listen to talk radio or watch TV, there are ads that tout gold as a hedge against inflation. But gold also failed in 2013 when the fed announced the beginning the its taper program and the impending end of QE…But if the TV ads and Zero Hedge were right, the opposite should have happened: gold should have risen in anticipation of higher inflation due to the fed ending its QE program…So why in 2013 and 2016 did gold fall in anticipation of tighter monetary policy (taking away the punch bowl, as they say). Why is gold doing the very opposite to what everyone says or expects that it should? Why is gold not hedging this inflation?

There are a lot of subtleties to why gold behaves the way it does, and why it hedges but also fails to hedge. It took me years to understand this myself until only as recently as a month ago when I had an epiphany. People don’t really understand how gold or even how inflation works, even though they think they do.

Notice how I use the words ‘inflation’ and ‘interest rates’ almost interchangeably–but this is wrong–they are not interchangeable, although are often correlated. This key subtlety underlies why golds fails so badly for Americans who buy it as a hedge.

Let’s start with a simple example that shows when gold works as a hedge.

Let’s assume you’re a citizen of Venezuela, country that has 200% CPI inflation. But depositors in Bank of Venezuela only get 70% a year, because the central bank of Venezuela is always behind the curve on inflation. Inflation is rising faster than central bankers can keep up. Also, Venezuela has a really poor standard of living and a falling currency relative to the US dollar. $500 in Venezuela bank becomes $200 after a year, due to currency depreciation–even after taking into account the interest paid on deposits at Bank of Venezuela. This means your purchasing power relative to US dollars (or more specifically, American standards of living) shrinks considerably for anyone who has money in Venezuelan currency. This makes gold an effective hedge for preserving buying power (or more specifically, American US dollar wealth), because $1200 invested in an ounce of gold will still be wroth around $1200 after year (give or take 10% or so), versus only $400 after a year in equivalent Venezuelan currency.

But Americans aren’t citizens of Venezuela, yet they buy gold anyway. But what if America becomes Venezuela? Well, it can’t, because the US dollar is still the world’s benchmark of wealth and buying power, and until that changes (if it ever does), there is nothing to actually hedge. Also, US living standards, similar to the dollar, are a global benchmark (when measuring living standards of a specific country, they must be measured relative to American living standards). As I showed in a post awhile ago, when people complain about America’s stagnant real wages, they are not taking into account rising standards of living for Americans and increased purchasing power. Venezuela may have positive inflation-adjusted wages, but what good is that if the standards of living are really awful (empty shelves in food stores, spoiled food, no electricity, no running water, etc.).

But what if US dollar plunges? This will make imports more expensive–boosting the CPI and thus inflation to some degree. If Europe can replicate the same standards of living as America, but cheaper, then gold is a good hedge against a falling US dollar relative to the Euro and Pound. This was the case in 2002-2011 when gold, the Euro, and the Pound all rose together. European buying power and standards of living were boosted by their strong currency. But in 2011, and continuing to this very day, six years and counting, the US dollar has done very well, and gold has done poorly.

OK, but what about Trump, 2013, and gold failing to hedge against rising anticipated inflation and rate hikes? Again, going back to this quote:

Notice how I use the words ‘inflation’ and ‘interest rates’ almost interchangeably–but this is wrong–they are not interchangeable, although are often correlated. This key subtlety underlies why golds fails so badly for Americans who buy it as a hedge.

As the Venezuela example shows, gold becomes more attractive when present inflation exceeds expected inflation. For Americans who hold gold as a hedge, what matters is not the inflation itself but the inflation relative to interest rates. Trump winning jacked-up future rate hike expectations, but inflation itself didn’t go up much. The market perceives the spending under the Trump administration to be more inflationary for interest rates than expansionary for CPI, which makes long-dated bonds less attractive, but the CPI itself won’t go up that much, because the spending won’t boost GDP growth that much relative to the deficits. This makes gold less attractive, because the actual inflation (CPI) itself isn’t going up that much, just the interest rates are.

The Taylor Rule is important here–if the fed is ‘behind the curve’ (inflation exceeding interest rates), gold can be a good hedge. If the US CPI is 20% and interest rates are 10%, yeah, gold prices should rise. This is why economic stimulus, counterintuitively, is bad for gold holders, because it boosts interest rates but not inflation, because stimulus spending doesn’t boost the economy that much, only debt. Rising interest rates makes cash more attractive. If you have 10% CPI inflation but 20% interest rates, gold becomes less attractive than if reversed. 2013 is another example…the taper boosted long-term interest rate expectations, but actual inflation itself didn’t go up. The market had no reason to expect inflation to rise, and thus perceived the Bernanke fed as being to hawkish. As a result, TIPs, medium & long-dated treasury bonds, and gold all fell significantly in 2013, but short-term treasury bonds (1-3 years) did not fall much, because the fed was not expected to raise interest rates much within the next 2-3 years. Yes, even TIPs are not a good hedge, because like gold, TIPs only hedge against rising CPI-based inflation, not rising interests rates.

In mid-2016, after Brexit, gold surged despite the Brexit being deflationary, because after brexit, because the US economy and stock market didn’t contract much, the expectation was that the fed would be ‘behind the curve’ in delaying rate hikes due to Brexit, but otherwise US economic growth was unchanged.

But also, after Trump won, the dollar surged, because higher interest rates makes the dollar more attractive, further hurting gold (because a rising dollar makes imports cheaper and lowers CPI, thus is deflationary). But in 2002-2007, the dollar fell and interest rates rose, but this was because hedge funds were buying the Euro, Pound and other foreign currencies in anticipation of a foreign economic boom that never came (these funds lost a ton of money in 2008, 2011, and 2013).

Between 2009-2011, the CPI was around 2% but interest rates were less than .25%, which is why gold did well–the fed was behind the curve.

In conclusion, for Americans who buy gold as a hedge, it’s only effective as a hedge if: the US dollar falls a lot like it did in 2002-2011–and or–if the fed is perceived as behind the curve in tackling CPI-based inflation. Gold will not preserve capital if CPI-based inflation is expected to be low relative to interest rates; in such an instances, short-duration bonds and notes are better. If Trump’s stimulus plans are passed by Congress, gold will likely take a hit, to the dismay of those who are expecting gold to hedge.

The Alt-Right Punches Way Above Its Weight

New post by Spandell Find the Symmetry:

Funny thing is, the dark side of the Internet is a small, tiny little thing. Really. Neoreaction is, what, 1,000 people? Spread around the whole world. 75% in the US, maybe. And the alt-right, which has inherited much of good ol’ national-socialism, is what, 20,000 people? I love those guys, I really do. Frog Twitter is hilarious. /pol/ is very funny. But come on. Even Steve Sailer, who has been writing for decades, who is a middle-class, 50+ old, utterly middlebrow guy who writes in very accessible language, who writes about sports! Steve Sailer has 13,000 followers on Twitter. Ezra Klein has 1.6 million. Ezra Klein, that doofus-looking doofus. Even Matthew Yglesias, whose picture is in English phrasebooks to explain the phrase “his face looks like a joke”, has 270k followers. The alt-right is beyond small. Trump didn’t win because of the alt-right. He won because he got 60 million Fox News watchers to vote for him.

But media isn’t talking about the at-right much anymore. Now they are focused on healthcare. The media overgeneralizes the alt-right to mean anything to the right of National Review and newer than Pat Buchanan and Ron Paul. Twitter follower counts don’t mean much anyway, unless your following is organic. Most of these corporate media accounts have a lot of useless/bot followers and little engagement relative to the number of followers. 1.6 million followers and 99% of them inactive or robots. Steve has only 13k followers, but 1/2 the number of ‘retweets’ and ‘favorites’ as Ezra, who has 1.6 million. Steve’s Unz columns generate massive page views and comments…more than a typical New York Times columnist. He usually writes three posts a day, and each one gets dozens or even hundreds of comments, making him one of the most influential columnists alive.

The Alt Right punches way above its weight. The MSM media, outside of finance, isn’t that influential and punches way below its perceived weight. The MSM is a paper tiger…fake/useless Twitter followers, headlines that are forgotten hours after being published, faux SJW outrage, etc. Yeah, the WSJ and New York Times finance sections pack a serious punch (because they are followed by billionaires and other important people who can move markets), but the other parts of the paper not so much. Most people don’t know or care about politics…they just care about what’s on TV and supporting their ‘team’, whether it be the ‘red’ team or the ‘blue’ team. Most of those who voted for Trump would have done so anyway, with or without Fox News. Even if the GOP ran a ham sandwich and did no campaigning, it would have still gotten at least 45% of the national vote; ditto for the Democratic party if it ran a tuna melt. Due to the electoral college, election victories are decided on the margin–the 5% who are undecided in key swing states, and the alt-right may have played a pivotal role in tipping the election in Trump’s favor in these states. Trump won Michigan, Wisconsin, Pennsylvania, Ohio, Florida and other battleground states, in an otherwise very close election.

And this is why the left is scared..because they know that their media cannot deliver election victories and has dwindling power. The people who read New York Times columns are zoned-out and unengaged. Alt-right people are engaged, and each alt-righter is like 10,000 NYTs-reading zombies. Milo, who is in his 30′s, has Instagram account, and each post has thousands of likes…does any New York Times columnist have anything comparable to that? No. Liberals, especially, baby boomer ones of the New York Times demographic, are out of touch, out of times, clinging to their 60′s-era socialist/communist dreams.

Why the Customers Don’t Have Yachts, and Why it Doesn’t Matter

The oft-repeated phrase ‘Where Are the Customer’s Yachts?’, the the title of Fred Schwed’s 1940 classic book on investing, has become something of a cultural refrain for greed and self-interest in the financial industry (but also in other industries), of how brokers allegedly intentionally enrich themselves at the expense of their clients.

The origin of the phrase is described by the anecdote:

Once in the dear dead days beyond recall, an out-of-town visitor was being shown the wonders of the New York financial district. When the party arrived at the Battery, one of his guides indicated some handsome ships riding at anchor. He said,

“Look, those are the bankers’ and brokers’ yachts.”

“Where are the customers’ yachts?” asked the naïve visitor.

So the question, more tersely is, why are the customers/clients not as rich as their brokers/advisers?

That is a pretty nonsensical question…what if it were rephrased, but with different examples: why are people who buy Nike shoes not a rich as Phil Knight or Michael Jordan? I bought golf clubs…why am I not as rich as Tiger Woods? That is literally the same logic. Brokers provide a service to clients by managing money. Some do a better job than others. Whether or not such services are worth the fees is a matter of debate though (I generally believe they are not, but that is another story). But expecting the recipients of a service to be as wealthy as whoever is providing them betrays common logic.

Someone who is entrusting their money to billionaire hedge fund manager Ray Dalio or billionaire bond trader Bill Gross, does not reasonably expect to become as wealthy as either.

Whether or not the manger does a good job, such as by beating a certain benchmark or preserving capital during a recession or crisis, matters most to the client.

Consider a money manger who is really successful, returning 15% a year (13% after fees), and he collects $10 billion in capital total from 10,000 clients (each putting in $1 million). Each client makes $130,000/year, which is not nearly enough to buy a yacht, but the clients are happy anyway because they are beating the benchmark. Now if the fund manager collects 2% off the top, he earns $200,000,000/year, enough to buy a yacht, but he’s helping his 10,000 clients too, who would have made less had they invested on their own. The more people the manger helps, the more money he makes…what’s wrong with that? Why should the broker’s compensation not be proportional to the number of clients he has, just as Nike’s revenue is proportional to the number of shoes it sells?

But what if the manager does a poor job…the capitalistic system stipulates that he should still get paid, because he is still rendering a service (but not doing a very good job at it), but clients have the power to manage their own money (to vote their with wallets), and if enough do so, mangers will either charge smaller fees or possibly even cease to exist.

Bifurcated Inflation

The news cycle as of late has been like watching paint dry…months ago I predicted such slowness, but even I am kinda surprised by the uneventfulness of the Trump administration so far. The administration started off with a ‘bang’ with that travel ban many weeks ago, and for a moment it seemed like things were really going to change, but everything has slowed since.

Anyway, Xenosystems has a post up about bifurcated inflation, a topic which this blog covered in 2014 and 2015 a couple times.

The NRx critique is that Marx and Milton Friedman are opposite sides of the same coin: looking at the world through the prism of economics and capital–it’s just that Milton’s approach works better.

However the caption below the tweet is incomplete–yes, computer hardware is cheaper, but Microsoft Office is not. Software is still as expensive as ever. TVs are cheaper, but not the cable bill or the internet bill. Printers are cheaper than ever…The ink? Not so much. A gallon of printer ink costs $9,600, and ink prices have exceeded the CPI. The chart is comparing apples and oranges: services on the top; hardware on the bottom.

From Age of Abundance? It Depends

Carriers will give the phone for free if you lock-in a long-term expensive contract. The electricity bill, too, which in addition to the internet bill, needs to be paid to run Netflix. TVs are very cheap but cable bill keeps rising…

The future of economic growth is services and ‘upkeep’ (rent)- whether it’s housing rents, insurance, cable bill, phone bill, or jobs in the low-paying service sector such as fast food. It’s become so cheap to manufacture stuff, that growth must be extracted from services. Decades ago, electronics were expensive, but relatively speaking, services were cheap; now that has been flipped:

Although the tweet shows a decline for cellphone service, Americans are paying more for phone service (but this could be because they are spending more total time on the phone and using more bandwidth, thanks to smartphones):

Who is to blame: society or the individual

In Classification of Ideologies, I explore the differences between the far-left, the far-right, the centrist-left, the HBD-right, and in-between.

Consider a problem such as poverty or unemployment:

To the far-left (welfare liberals, Marxists, socialists, SJW-left, etc.), social problems are a failing of society (structural racism, discrimination, capitalism, etc.). The burden is a collective one, to fix these problems. The far-left view the world through the lens of power, with those who have power wielding it to oppress and exploit those who don’t.

To the centrist-left (neoliberals and classical liberals), libertarians, and neoconservatives, socioeconomic problems are a failing of the individual, not society. For the HBD-right (such as myself and others) this may be due to low IQs (an internal, individual trait) hindering the ability of individuals to succeed in an increasingly technological and competitive economy. To some conservatives, people may fall between the cracks because of poor work ethic (also an individual trait). The ‘Just-world hypothesis’ is often invoked to justify wealth inequality, in which structural forces that contribute to poverty are ignored. Thomas Friedman, a neoliberal, blames not capitalism–but individuals for not being able to keep up with an increasingly interconnected, automated, and competitive ‘flat world’. Charles Murray laments the delamination of society, but blames not capitalism, but IQ.

Much of his argument is centered on a notion of self-selective sorting that began in the 1960s and 1970s, when he argues that cognitive ability became the essential predictor of professional and financial success, and people overwhelmingly began marrying others in the same cognitive stratum and living in areas surrounded largely by others in that same stratum, leading to not only an exacerbation of existing economic divides, but an unprecedented sociocultural divide that had not existed before in America.

Although classical liberals and neoliberals may subscribe to a social-Darwinistic worldview, they support a social safety net to help those who may be unable to adapt, more so than neoconservatives, and welfare liberals, who reject social Darwinism, support the largest social safety net of all–obviously.

The far-right, but also some neoconservatives, also blame society (such as secularism, breakdown of families, materialism, cultural degeneracy) for individual failings.