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.

Malcolm Gladwell continues to lose credibility

The backlash against the 10,000-hours myth/rule keeps growing: The 10,000-hour rule is wrong and perpetuates a cruel myth

It’s not surprising why Malcolm Gladwell keeps a low profile these days…his reputation is in tatters, his book Outiers reveled as a travesty of fabrication and fiction that it calls into doubt the veracity of everything else he has ever written or will ever write…

Gladwell did a bait and switch: in his book Outliers ignoring the role of talent, and then when pressed for more details, clarifying that the 10,000 hour rule applies to those who already have talent but then practiced 10,00 hours to hone such talent. I think the amended version of ’10,000 hours’ is closer to being correct, and probably not the one the public wants to hear.

Ericsson’s research isn’t much better either though. His sample size was very small and his research was never replicated. As the ‘how I taught myself physics in one year’ post shows, it’s pretty obvious innate talent exists and can allow people to attain mastery of very complicated concepts in far less than 10,000 hours.

Not sure it is a cruel myth…more like wishful thinking that can have unintended consequences by mismanaging resources (such as having low-IQ kids in prestigious schools, in the hope that environment will overcome a cognitive deficit)…if it were so cruel, it would not have taken the world by storm…’10,000 hours’ succeeds as a meme because it tells people what they want to believe, that with enough practice, anyone can covet the skills of genius. It’s not so much that people want to become world-class musicians or top physicists, but rather that they have the potential to become those things if they want to, by practicing enough.

One of the most common blank-slate arguments is that because no one is born knowing anything, that therefore differences in achievement must be explained entirely by environment. People become ‘good’ at math because they ‘want to’, not because of genes. This argument is debunked in the post Lessons from a 45-Year Study of Supersmart Children, which shows that math aptitude manifests very early in life and is predicted by parents’ aptitude.

Yes, technically, no one is born knowing trig or calculus, but the people with genetic gifts make the transition from ‘bad’ to ‘good’ much faster than those without such endowments, all else being equal. An elementary school environment where all children come from similar backgrounds and are young enough that 1000′s of hours of practice is impossible, teachers can readily identify the gifted from the average–the gifted tend to know so much more and learn so much faster than everyone else (in the classroom environment, where parenting cannot be a factor), and it cannot possibly be explained by parenting or practice, because these children are so young and otherwise are very homogeneous. This is because gifted children learn with fewer repetitions (due to superior working memory and or other factors) and retain what they learn, which is key. People with high IQs learn faster and more efficiently.

From the articles:

The second reason we should not pretend we are endowed with the same abilities is that doing so perpetuates the myth that is at the root of much inaction in society — the myth that people can help themselves to the same degree if they just try hard enough.

You’re not a heart surgeon? That’s your fault for not working hard enough in school! You didn’t make it as a concert pianist? You must not have wanted it that badly.

But the problem is, telling someone who aspires to be doctor or some other high-IQ profession that they shouldn’t try, because they aren’t smart enough, may also seem cruel, so we settle on what we perceive to be lesser of two cruelties.

These delusions seems more pervasive regarding cognitive abilities (math and physics, especially) than physical abilities (running, jumping, basketball, etc.). From Our High-IQ Aristocracy:

Here’s why the basketball example doesn’t give peace of mind to those cognitively self-conscious, nor placates fears of a high-IQ aristocracy. Physical skills, such as running and jumping, are becoming less valuable/pertinent in the competitive-post 2008 economy that seems to increasingly reward intelligence and cleverness, as explained in Liberal Denial of Genetic Determinism

It’s not taboo to profess that genetics play a role in the variance of athletic ability but not intelligence, probably because the later is superseding the former in terms of important things like employment, income, reverence, etc. There are increasingly few jobs where physical ability plays a role in the hiring process, and the jobs that do typically don’t pay well. In the smartist era, people are looking up to scientists and other intellectual professions more so than athletes or actors.

Second, we tend to compare ourselves to people/groups that are similar to us. A person who is cerebral may aspire to understand the world like a famous physicist or to write like a famous author, and thus genius becomes the benchmark of personal self-worth.

The ‘information age’, and especially the post-2008 economy, which has become increasingly financialized and competitive, rewards intellectual prowess more so than physical strength. 100 years ago, when physical labor was more important and revered, things were probably reversed, with physical strength being perceived as more important than cleverness. A person who understands quantum physics–judging by wages and prestige online–by many quantifiable measures, is a superior to a laborer.

But rather than accept the unfair reality that some people are indeed ‘born better’ than others, we explain away these differences in outcomes by retelling these myths and fairy tales about IQ and talent, because the alternative challenges ‘free will’ and egalitarianism–beliefs many Americans hold dear. We explain-away biological reality by creating our own reality for why some are more successful than others: maybe it’s ’10,000 hours of practice’, an ‘unfair environmental advantage’, ‘fraud, cheating, or crony capitalism’, or ‘really, really, really good parenting and schools, and very, very, very early intervention’–never genes. To fulfill these rationalizations often means wasteful pubic policy at taxpayer expense, such as universal pre-k, intended to fix an achievement gap that is actually an IQ gap.

We need to learn to set realistic expectations both for ourselves and our children, even if such expectations aren’t what we want. But given how much emotionally and financially policy makers are vested in continuing theses wrong approaches (the entire multi-billion dollar educational industrial complex that employs thousands of bureaucrats and administrators is at stake here), it’s hard to be too optimistic things will change.

Why it seems like many high-IQ people ‘underachieve’

As if their earlier article How I Rewired My Brain to Become Fluent In Math wasn’t bad enough, magazine keeps raising the bar in demonstrating stupidity about all matters pertaining to IQ and intelligence, in their latest article If You Think You’re a Genius, You’re Crazy. We need to raise awareness about magazine in the hope people will stop taking them seriously and stop reading and sharing their articles. is just anther version of ‘fake news’, but under the veneer of intellectualism and ‘science’. People read because they think they are gaining some sort valuable scientific insight, but they’re just stepping in the brain droppings of someone who has no idea what they are talking about.

But cognitive disinhibition has a dark side: It is positively associated with psychopathology. For example, schizophrenics find themselves bombarded with hallucinations and delusions that they would be much better off filtering out.2 So why don’t the two groups become the same group? According to Harvard University psychologist Shelly Carson, the creative geniuses enjoy the asset of superior general intelligence. This intelligence introduces the necessary cognitive control that enables the person to separate the wheat from the chaff. Bizarre fantasies are divorced from realistic possibilities.

According to this conception, high intelligence is essential to creative genius, but only insofar as it collaborates with cognitive disinhibition. Exceptional intelligence alone yields useful but unoriginal and unsurprising ideas. Marilyn vos Savant made it into the Guinness Book of Records for the world’s highest recorded IQ, and yet has not managed to find a cure for cancer or even build a better mousetrap.

Often, ‘brilliance’ is conferred upon by peers, not by absolute merit alone. The Nobel Prize is mostly luck on top of existing skill (skill is a necessary but insufficient condition)…many others are equally skilled, but only a handful of people can win, by making the right discoveries at the right time. Had Einstein not discovered the photoelectric effect, some other German likely would have. Einstein gets most of the credit for general relativity, but a handful of mathematicians who are far less famous discovered the underlying tensor math that made general relativity possible. Using awards and public adulation as criteria for intelligence and brilliance is insufficient. Often, a major discovery involves many people who build the foundation of knowledge, but only maybe two or three people get most of the fame for publishing results that use such knowledge.

Also, Marilyn vos Savant’s IQ ‘score’ of 228 is a hoax, discredited by psychometricians, and was a contributing factor in the Guinness Book of World Records retiring the ‘highest IQ’ category in 1990:

Alan S. Kaufman, a psychology professor and author of IQ tests, writes in IQ Testing 101 that “Miss Savant was given an old version of the Stanford-Binet (Terman & Merrill 1937), which did, indeed, use the antiquated formula of MA/CA × 100. But in the test manual’s norms, the Binet does not permit IQs to rise above 170 at any age, child or adult. And the authors of the old Binet stated: ‘Beyond fifteen the mental ages are entirely artificial and are to be thought of as simply numerical scores.’ (Terman & Merrill 1937). …the psychologist who came up with an IQ of 228 committed an extrapolation of a misconception, thereby violating almost every rule imaginable concerning the meaning of IQs.”[12] Savant has commented on reports mentioning varying IQ scores she was said to have obtained.[13]

Anyone who still believes her IQ is 228 (or anywhere close to that) is unqualified to write about IQ.

The author also perpetuates the common misconception that having a high IQ is mostly a waste or meaningless, except for the handful of people who apply their intelligence, to, in words of the author, ‘cure cancer’. This is an example of binary thinking or false dichotomy: either a high-IQ person makes an earth-shattering discovery, preferably all on his own, or his IQ is useless and possibly even a burden–there is no in between. As part of the left’s denial of IQ, they create a hurdle for intelligence that is so impossibly high (making earthshaking-discoveries) that virtually no one can clear it, including most brilliant people. As it turns out, having a high-IQ is good for many things–not just for making those ‘earth-shattering discoveries’, but rather more mundane things such as publishing a book, publishing a research paper, making more money, living longer, etc. From Beyond the Blank Slate: How Libs Turn High-IQ Into a Handicap;

While the Terman study produced no Nobel Prize winners or technology billionaires, statistically speaking, a higher IQ increases the likelihood of success as measured by academic output, creative output (like punishing a book), income, and other indicators. There is a fascinating TedX talk about how standardized tests, contrary to what the left says about such tests being useless, can predict lifetime outcomes such as wages, being published in a journal, level of academic attainment, and so on.

You look at the most successful web 2.0 companies and all of the people involved – from the investors to the founders to the employees – all have above average IQs. The same goes for Wall St., or the vast majority of high-paying professions, where high intellect is required. The next Bill Gates or Zuckerberg isn’t going to have an average IQ. While there are low-tech ways to get rich such as skilled trades, the vast majority of people in unskilled professions, such as the low-paying service sector, make little money and barely get by. That’s not to say we should try to help these people – we shouldn’t, because that would be a waste of resources that could otherwise benefit more useful members of society, and entitlement spending is already too high.

Regarding the part about curing cancer, again the author demonstrates ignorance on multiple accounts. Cancer is not just a single disease–but one of many. To say cancer is ‘curable’ is a misnomer–cancer can never truly be ‘cured’ in the same way most viruses and bacterial infections can be; instead, doctors try to achieve a NED (no evidence of disease) state for patients, and if the disease does not recur, it is considered cured, but there is no guarantee it won’t recur. Developing cancer treatments, like most advanced technologies, requires large research teams and lots of money…no single high-IQ person will ‘cure cancer’ by his or own own self.

But then why does it seems like so many high-IQ people ‘underachieve’…first, as explained above, the left has created an unreasonably high threshold or standard for what constitutes success for high-IQ people. The archetype of the underachieving high-IQ person is largely a social construct or trope that is perpetuated by the less intelligent (but also some intelligent people do it do) who want to feel better about themselves and or to downplay the importance of IQ. But if it seems like high-IQ people ‘underachieve’, there are two possible reasons why:

A child may learn to read at 3 instead of 5, which suggests an IQ of 167 (using mental age), and is a very impressive feat, but there is no obvious proportionally equivalent achievement for someone who is, say, 40 years old (how do you read at a 67-year-old level?). This is why mental age fails for measuring IQ beyond childhood and why mental age tends to be unreliable for the highest of IQ.

Anther problem is that much of the ‘low handing fruit’ in terms of discoveries has now been picked, a problem compounded by the exponential growth of the world population over the past 100 year and the use of computers to automate the research process. This could explain why the age of Nobel Prize recipients in the sciences is increasing.

Gustav Källstrand, a senior curator at the Nobel Museum, told us that 100 years ago there were only around 1,000 physicists. Today there are an estimated one million in the world.

Now only is there more competition due to larger population size, but there is so much more requisite material to learn. An aspiring 21st-century theoretical physicist must learn quantum theory, string theory, and general relativity, whereas 100 years ago such concepts didn’t exist, and learning this stuff, which is very mathematically intensive, takes time. Due to the aforementioned factors, much of math and physics research over the past half century has been very incremental, often involving a fine-combed search for small adjustments to preexisting ideas–not ‘earth shattering’ breakthroughs. But this applies to all fields–economics, biology, psychology, etc. The average published economics paper is much longer and has many more co-authors than economics papers published half a century ago. Modern papers often run 40-60 pages and involve tons of compiled data and very sophisticated statistical analysis, taking many years and multiple economists to complete, and if that is not hard enough, the rejection rate is very high for prestigious journals due to the oversupply to papers and scarcity of journal space to publish them (as shown below). Like everything else, the market for academic research has become very saturated over the past few decades. Some on the ‘right’ insist the world is dumbing-down, yet all these major prestigious journals are being inundated with more manuscripts than they could ever hope to publish.

Source: Nine facts about top journals in economics

Anyone who is STEM and finance would agree that it’s more competitive and difficult than ever, even for brilliant people hoping to stand out among the ranks of their equally brilliant peers.

Why Robots Won’t Take All The Jobs

Over the past month or so, there has been considerable debate online about whether automation will destroy all jobs, and if so, how should policy makers try to respond. A few weeks ago, Bill Gates made headlines by proposing a ‘robot tax’, an idea which many economists roundly shot down. A story in February about Wendy’s installing 1000 self-ordering kiosks also made global headlines and was viral everywhere, as somehow being a harbinger for the imminent destruction of all jobs.

IMHO, the empirical evidence suggests this robot hysteria is overblown and that the ‘Luddite Fallacy’ will remain fallacious, but of course there is no guarantee that past economic trends will be predictive of future ones. Despite the trend towards increasing automation, the US labor force has grown in lockstep with working-age population size:

This says nothing about the quality or pay of such jobs, but it’s obvious the ‘end of jobs’ is far from certain.

So why hasn’t the post-labor utopian leisurely society that sci-fi movies and books promised us, happened yet? Why do these pesky jobs just refuse to go away? Here are some reasons why automation hasn’t eliminated all jobs, and why it likely won’t.

1. If an automation technology is successful at reducing costs, such technology will spawn an entire industry in and of itself, hence more jobs. The printing press led to eyeglasses industry, because so many people were reading books (which had become easy to produce, rather than having to be laboriously transcribed individually), that ‘farsightedness’ became a recognized medical condition. Until the advent of mass-produced printed literature, being farsighted was not really considered an aberration as it is today.

From The Economics Debate: Jobs and Automation:

What has to be understood is that when a new productivity-enhancing technology is successful, it spawns an industry, creating jobs in the process even if the original intent of the technology is to eliminate jobs. As more companies want this new technology to save money, the company that makes this technology is swamped with demand and needs to expand, and this means jobs are created. And then the new technology may occasionally break, and then repairmen need to be hired, ad infinitum.

2. Technology lowers prices for consumers, increasing demand, and hence employment.

Technology lowers production costs, which makes products cheaper for consumers. But technology also puts some people in the production process out of work. The ‘saving grace’ here is that lower prices increases demand for said product, which means that the manufacturer hires more people to keep up with demand , replacing employees lost to automation. This is shown by the price-demand curve below:

The shape of the curve is determined by price elasticity, but generally, cheaper goods means more demand.

Furthermore, the company (Company B) that sells the raw goods to the first company (Company A) also sees increased demand (because Company A is seeing more demand due to lower prices), so Company B hires people, which counterbalances jobs lost from Company A. It’s not going to be the same jobs, but you can see how jobs lost from one company/industry can create jobs for anther company/industry. But what if Company A doesn’t lower prices? Then Company A will be more profitable and use the profits to possibly expand their business operations and thus hire more employees, anyway.

3. The old jobs and technologies never completely vanish.

My ‘theory’ is that rather than technologies making old technologies completely disappear, both the old and new technologies coexist, but the new technology increases productivity so much that it dwarfs the older one, but demand for the older technology still stays strong for a very long time. So although the horse and buggy is an obsolete form of transportation, there will always be some need/demand for horses: for food, performance, sheriffs, racing, nostalgic stagecoaches, for fun, etc. Same for typewriters and quill pens..they haven’t gone away yet. Also, stagecoaches are still used in some circumstances. When food stores and fast food restaurants install self-checkout kiosks, rather than replacing all cashiers, there are still cashiers, but also attendants who help people with the kiosks.

4. New types of jobs are constantly being created.

Related to #1, innovations tend to create jobs. During the Middle Ages or Medieval Period, from the 5th to the 15th century, there were perhaps only as few as a couple hundred unique types of jobs, such as husbandry and farming. Nowadays, the number of types of jobs is probably in the hundreds of thousands. Jobs are being created that decades ago were inconceivable. The Web 2.0 boom, for example, spawned thousands of app and social media jobs that a decade ago didn’t exist. There are jobs were it would seem like jobs wouldn’t exists, but do.

For example, some websites, especially those that try to copy a magazine-style format, have those huge, annoying banners on the top of every article. Other websites have large images embedded within the article. Choosing those images is often no easy feat. Not only must the picture be relevant to the article and not draw too much attention to itself, but it has to be of a high enough resolution or else it will appear grainy or blurred when enlarged. Also, the image cannot be copyrighted, so scouring the internet for images its not an option unless such images are of the free domain. As you can see, there is a lot of work that goes into seemingly mundane tasks (such as choosing images to accompany an article), which means labor is required.

So what does the future hold? There will likely never be an ‘end of jobs’, but rather a decline of work and maybe fewer hours worked, meaning that a lot of able-bodied people will not work, either voluntarily or due to the job market becoming harder, and there will also continue to be a proliferation of low-paying service sector jobs. It’s also possible that individuals in the lowest strata of IQ may find themselves either relegated to jobs that pay subsistence wages, or unemployed and some some form of government assistance. Gig jobs, welfare, self-employment, disability, prolonged education, social security/retirement, and the ‘underground economy’ is replacing a significant chunk of the traditional job market.

Grey Notes: Your phone or your life

Lion is over-reading/overthinking this story. Representative Jason Chaffetz is right that people should prioritize essentials, such as health insurance, over discretionary expenses, instead of having taxpayers front the bill–it’s commonsense, and it’s sound financial and budgeting advice–so why so much outrage? Singling out the iPhone may have detracted from his message–possibly a poorly chosen example on his part. The iPhone is ubiquitous; many on the ‘left’ believe that both healthcare and phone service should be a ‘pubic good’; and, possibly, his mentioning of the iPhone invokes a negative stereotype of minorities gabbing away on the phone, downloading ringtones, and playing games, instead of working and paying bills. Some people associate inner-city Blacks and Latinos with excessive phone usage. Had he singled out cable TV, which is more expensive than an iPhone, I guarantee there would have been far less outrage. There is no stereotype associated with TV, and both liberals and conservatives understand that cable TV is more discretionary than phone service.