I'm so cynical that I recommend buying BP stock

In a just world, companies that claim the catastrophic possibilities of their actions are so extremely rare would then be required to "make a market" for insuring against such terrible events. My example: DanCorp says that drilling for diamonds under the LA water supply is very safe. So safe that it claims the chances of any harm to the public are 1 in a Million. Based on that assessment the permits would be authorized provided that DanCorp allow anyone, everyone to buy unlimited insurance FROM DANCORP at that same 1 to a Million ratio (as soon as insurance stopped being sold by DanCorp permission would be revoked). So if the water is ultimately spoiled by DanCorp's actions then DanCorp must pay a million times whatever insurance amount was bought. Maybe in the interest of practicality there could be a 50% or even 10x difference to allow for a "spread" (so maybe if it says the odds are 1 in a Million it only has to insure at a 1 to 100,000 payoff ratio). If something like this were done then BP (or Haliburton or any other company potentially jeopardizing the public) would have to either: a) Be accurate in their assessments and only take judicious risks - IDEAL! b) Be overly conservative in their assessments of risks (so as to arbitrage the insurance risk ratio) but then have a much less persuasive case to the permit-granting authorities. ------------------------------------------- But all of that is moot concerning my cynical headline recommendation to:  buy BP stock at 36.52 (as of Tuesday, June 1st, 2010). http://www.nyse.com/about/listed/bp.html http://www.google.com/finance?q=NYSE%3ABP Why do I write that? Because we don't live in a just world and I'm skeptical about the likelihood of the necessary progressive change our world needs. At a price of 36.52 , BP is trading at under 6 times earnings (whereas P/E ratios of 15 are historically stable). Nobody thinks the world will get off oil in the next 30 years (let alone the next 10). Consequently, BP stock is just so undervalued right now that I would buy it. And yes, I still believe we should get off fossil fuels ASAP and switch to renewable energy like Solar & Wind immediately. Check out my own solar ventures... www.RandyHallSolar.com & www.Prontia.com

Arguing Over Directions When We Desire Different Destinations

How can we argue about leaders or even directions when we desire different destinations? Here's the analogy: All of the voters are in a bus and we're deciding on a bus driver. We can look primarily at candidates' bus driving experience etc. if both have the same directions and destination in mind. Then if we don't get there, it's really easy to determine the driver's efficacy. Either we got there or didn't. Either we got closer or not. But that is never the most fundamental issue because the directions are always different (e.g. small government vs. big government, cutting taxes vs. cutting deficits etc.). If one driver wants to take the road on the left and the other driver will drive the road on the right then the difference between drivers themselves (assuming both are at least minimally competent) is secondary to the intended path. If prosperity is North East of us and of the two roads, one heads East and other West then, intuitively ceteris paribus, it's wiser to head East. But if the road East actually leads off a cliff and the road West eventually winds towards the North-East destination then it's wiser to head West. However, the intended path must first be a function of the desired destination. What if we can't find consensus on the destination? Shouldn't we first ensure the public debate focuses on the destination? Shouldn't we first at least attempt to resolve the most fundamental question from which all subsequent questions & answers depend? I want our leaders to articulate their ideal but viable visions of the future. I think there is comparatively little value in them doing so in abstract terms (as they often do). More practically, they should outline measurable, "falsifiable" goals with all of their conceivably attendant ramifications. Necessarily, these goals will have some new "losers" despite their projected overwhelming "winners". It is my contention that if this were done to American presidents starting in the 20th century that the Democrats would get substantially better scores than Republicans. It seems to me that despite the recent, over-hyped attention given to Tea Party activists, Americans have, over time, evolved towards a belief system where the desired "destination" is more in line with the Democrats. Consequently, Democrats' paths have been more effective in leading closer to that shared destination. And as expected, Democratic office-holders have been more effective in driving that road. Just my opinion. P.S. I was inspired to write this after re-reading an infuriatingly specious column in Fortune magazine (from February 11, 2009) that claimed: "It's inarguably true that in the very short-term, the New Deal did not fix the economy. Roosevelt's programs were first passed in 1933 but economists generally agree that the Great Depression did not end until 1939, when the country began preparing for World War II. Unemployment rates, which reached as high as 25%, took several years to recover and did not get below 9% until 1940." MY INARGUABLE REPLY: So the New Deal had to completely "fix" the economy for it to be good? As it even states in that very same paragraph, unemployment was cut in half and but somehow the writer thinks that shouldn't be seen as a good result. MY BIG OBVIOUS POINT: Moving closer to the desired destination should be seen as good! (e.g. Obama's first moves in Health Care Reform, Financial Reform, & Reducing Nuclear in the world). BTW - I dare Tea Party Activists, Libertarians and Right-wing conservatives to describe their desired destinations and specifically outline their preferred visions for the future. (q.v. Rand Paul's theories on civil rights). If they do (ceteris paribus) then the Democrats will have a very good year in 2010.

"Universal Value" & Price the Dollar to "Years of Sustenance" Standard

For years, I've been opining about what I call "Universal Value" which I think is one of the most fundamental aspect of economics. This idea runs contrary to free-market purists who think "the market as a whole can never be wrong" and that "crashes should not be avoided with regulation". (Maybe you should skim my February 10, 2009 post or my December 25, 2006 post for previous allusions to what I hope to explain here). So this post may only be a tiny bit interesting to those who are excited by monetary policy (the poor bastards). Here's my first attempt at articulating my idea to re-attach the dollar to a new "standard". Problem: Possible Rampant Inflation - devaluing American currency and thus our investments & assets. (q.v. countless examples of third-world countries where people carry wheelbarrows full of local cash to the market to pay for a few meager groceries). Many of you already know that I think tying currency to gold or any other shiny metal, regardless of its scarcity, is fundamentally absurd despite that history/tradition. Gold-standards are/will be worthless once people stop placing such an extreme premium on that yellow shiny element. So tying a currency to gold is systemically just as precarious, if not more so, than one that is "untied" or freely subject to the market. So here's my solution (which may or may not be original or effective): STEP #1: The government can create an ultra "bundle of goods" (which others have recommended) which... (here's "my" twist) are a function of a human's needs for a given year. This ultra bundle of goods would include: - shelter/safety for one year - nutritious food for one year - clothing for one year - minimal medical treatments - entertainment/education for one year - utilities Then the government could find locations in the US where it would be most economical to establish such housing (e.g. Wyoming, Texas or other wide-open but less-populous areas). I would think there would be overwhelming interest from communities across the country (especially depressed areas like Detroit, Cleveland etc.) seeking government funds to create these communities. NOTE - I'm not saying we put all of these in one segregated area. I'm saying the opposite of that. I would want there to be such communities in virtually every zipcode. Once you figured out the cost of this extraordinary "ultra bundle of goods" on a per year basis (dividing the cost of building & sustaining it by the number of years it will last) you would get the cost of a "Year of Sustenance" (YoS). Here's my first rough budget: - shelter for one year (e.g. a private trailer or apartment in a safe, unpolluted area) = $3k - nutritious food for one year (e.g. 2000 calories per day of assorted MREs) = $2k - clothing & goods for one year (e.g. those sufficient for the climate of that location) = $1k - minimal medical treatments (e.g. set by international human rights standards) = $1k - entertainment/education for one year (e.g. computer with access to the internet and/or DVDs & TV) = $1k - utilities (e.g. clean water/plumbing and solar electricity) = $2k GRAND TOTAL = $10,000 per year (but this could easily be "scaled-up" to nicer standards - e.g. "a house with a yard and fresh food" - for more money) STEP #2: The government actually builds/buys millions of these minimal housing/sustenance communities with their accordant amenities. They then make them available to the public for rent. Hopefully, not just as "the projects" for low-income people. (Social services / charity implication: the homeless, victims of domestic violence, parolees etc. could be given temporary access to these communities). STEP #3: The government then prices the dollar relative to the cost of "one year of sustenance". Thus, in this example, one dollar would be worth 0.01% of a "YoS". - $100 would be worth 1% of a "YoS". - $20,000 would be worth 2 "YoS". And one million dollars would be worth 100 "YoS". STEP #4: The US would then be required to have "YoS" built/ready for all the dollars in circulation. This is akin to casinos being required to have cash for every chip in play. The US could get sufficient "YoS" ready by at least 3 ways: a) actually building & supplying them - q.v. the WPA which helped America emerge from the Great Depression. b) buying them from real-estate developers desperate to fill up their oversupply of space or manufacturers with fallow factories. c) getting legal commitments from established companies which make those items based on mutually-agreed-upon exchange rates (e.g. Apple agrees to build 10 million laptops or Wall-mart agrees to feed 10 million people for year in exchange for 1 million acres of specified public land --- should it ever have to come to that). CONCLUSION: By requiring the US to have "YoS" built/ready, the dollar could never drop below the floor of 1/10,000th of what it costs to survive (albeit austerely) for one year. Assuming life-expectancy is 80 years, $800k would enable you live for a lifetime. Building up a next egg of cash/U.S. bonds worth $400k would guarantee you a 40-year retirement instead of possible death if markets or inflation destroys your investment. Now compare my idea to third-world currencies where inflation has been so rampant that they printed "100 trillion" dollar notes. At least with my idea there is a floor preventing further damage. The living at "YoS-level" certainly ain't desirable for most Americans in 2010 but it ain't supposed to be. It's just a floor. Otherwise, properly regulated markets can determine the swings. I know there are countless implications to this idea but I wanted to get this first draft posted. It's a work in progress. And I further note that it could be fundamentally flawed and impossible (but I currently just don't see how that's so). Stay tuned for further exploration of this topic. Good karma to you.

At $71, Oil is cheap

Checking the price of oil today (Monday, May 17, 2010) at 4:30pm EST on - http://www.bloomberg.com/energy/ showing NYMEX Crude is at $70.57 per barrel which seems very cheap to me. It seems like people are panicking (due to Greece et al.) that there will be a global depression (which is one of the few things that could substantially drop the price of oil). It's also possible that Big Oil is trying to keep the price down to counter any potential economic arguments to get off fossil fuels as a result of the giant BP spill. It's tougher to argue that renewable energy is "price competitive" when oil gets really cheap whereas the case for Solar & Wind is extremely compelling when oil gets to where it will trend for the foreseeable future (namely $70 - $90 a barrel as I've been saying for years, and massively more compelling when oil gets above $140 as it conceivably could). So BUY OIL at cheaper than $73 and sell it before it hits $85 or so (don't get too greedy). I guess if I had to put a "stop-loss" it would be at $64. And yes, I'm aware that following my most recent oil trade recommendation would have lost money (when I said, on March 29 2010, when oil was at $82.36 that it was "a little high" and that I recommended you sell when it drops to $78 and cut your losses if it goes to $85 - which it then did. Consequently I should have had the confidence to say it will eventually drop well below $82.36 which is has since done. Hindsight is 20/20). So overall, my predictions about oil have been pretty darn accurate. We'll see how good this one is.

Mind Blown by Godel and Now I challenge him!

My roommate in college recommended a book called "Godel, Escher, Bach: An Eternal Golden Braid" but I never read it. He was then and is now a brilliant guy with whom I have enjoyed debating many philosophical issues. I just recently started reading about Godel's Incompleteness Theorem and my mind was blown! As is my tendency, when I encounter an intellectually stimulating idea it does one of three things to me: 1) fits perfectly with my existing paradigm and thus is elegantly integrated into my belief system (which immediately makes me quite happy) 2) disproves and replaces something in my existing paradigm and thus is integrated into my belief system albeit initially uncomfortably (which eventually makes me happy) 3) challenges but doesn't disprove something in my existing paradigm and thus requires my active rumination until it is integrated or discarded (either of which leaves me a bit intellectually-emotionally conflicted for a while). Now I'm pretty savvy about math (Mensa member, Stuy grad, 750 math SAT) but currently I simply do not have the education to understand advanced math (number theory etc.). *So my mega-math-savvy friends need to help me out here, please.* Nevertheless, I am about to challenge one of the most established ideas in the Philosophy of Mathematics. (My ignorance & hubris are explained at the end of this post.) Godel claims - "There exist statements that are true but not provable". Which, intuitively to most people, sounds like bullcrap. He gives mathematical examples of logical statements that are true every time you test them but "unprovable" in that there are an infinite number of tests and thus no definitive way to "test them all" which leads to his conclusion that such a statement is "true but not provable". I argue that what is at issue is a misunderstanding of language (semantics). It seems to be a misunderstanding of the concept of "infinity". Of course infinity is infinite. Of course you can't make a closed set of rules about infinity. That would be like saying "there are a limited number of ideas to be thought of" because, of course, every idea could be integrated into a newer, bigger idea just as you can always add the number 1 to any number to make a bigger number. More to the point, Godel seems to think something "having been true every time it was tested" is exactly equal to "is and will always be true". I don't think that is universally useful and, more importantly, I draw a valuable distinction. As such, I think there should be "True1" which would be the most pure definition of truth and there should be "True2" which could have a lower burden. It's the difference between saying a "True2" statement like: this convict will kill you because "he has been proven to be a murderer before and thus will necessarily continue to kill" (which may or may not be true in the future) and saying getting guillotined will kill you because "separating your brain from your heart & lungs will prevent the oxygen from getting to your brain". Now this is not to say that a "True1" statement need be an un-disprovable tautology. If you could prove that a disembodied head could survive (q.v. the jars in "Futurama") then that would disprove the statement that "getting guillotined will kill you". I strongly believe in the concept of falsifiability being necessary in intellectual discourse. Therefore, I choose to define the most useful version of the word "true" (i.e. "True1") in this way: "that which is consistent with reality and also is provable for every case". In this way there is no such paradox nor anything counter intuitive (which I, by no means, think should be a requirement). Consequently, I would rewrite Godel's logical statements such that they communicated the difference between what I call "True2" which is "having proven to be entirely consistent with reality but with no fundamental proof for why it should always be the case" (which is like finding even nearly infinite correlations but still no causality) and the substantially higher burden of 'truth' which I call "True1" that is defined as "having proven to be entirely consistent with reality AND ALSO coherent with a fundamental proof for why it must always be consistent with reality". Ultimately this issue intertwines with some of my grander thoughts on human decision-making and intellectual progress. While I don't have the following all worked out just yet, here are some things to consider: a) Any statement can be infinitely questioned down to fundamental issues that are virtually unponderable. The fun example is the child who has a seemingly infinite series of "Why" questions. At some point the parent just has to say "Because I said so. Now eat your dinner.". Similarly, in all human interaction, there is a heuristic of "we gotta move on" otherwise you would be paralyzed at every moment, paranoid and asking whether you can trust even the most basic of elements of life. b) For any philosophy to be useful it must recognize the "we gotta move on" dynamic. However, I am not arguing that everyone needs to have the same threshold because I, of course, appreciate the benefits of specialization & division-of-labor. c) For any productive debate, the most fundamental ground rules must be enforced. Some of my favorite rules:  • Terms must be defined and consistent.  • Evidence must be given priority over theory.  • Predictions proven to be true must be give priority over retro-actively created theories of how/why things happened before.  • "Goal Posts" defining who "won" must be set early on and be immovable unless by mutual consent.  • Sophistry (e.g. Schopenhauer's 38 Ways to Win an Argument) must be discouraged and seen as a sign of weakness (because someone who knows he is right need not use such specious techniques). This all plays into my idea for www.wiki-debate.com / www.DebateSherpa.com where I plan to eventually "connect the echo-chambers". d) Humans each have their own algorithm for decision-making and these are by no means 100% universal and consistent. But I believe there is a flow-chart to be made of how people integrate new information into their belief systems. I think there is a general triage of questions with their own subroutines:    1- Is this for me? Do I recognize this as relevant to me in any way?    2- Is this urgent? ("Look out!")    3- Is this important? ("Fire!")    4- Is this interesting?    5- Is this true? (crucial sub-routine for determining this is: Authority? Track record? Bias? Impact for acceptance? Coherence with other accepted views? Future benefit?) e) This post is already too long otherwise I'd go into detail of how I generally prefer to engage & challenge ideas when I am probably, relatively speaking, too ignorant to do so rather than read in-depth research that I fear will "track" my thinking into unoriginal paths. Since I value creativity & originality so highly I often risk embarrassment with my ignorance & hubris. DAN'S GENERIC DISCLAIMER: I'm not entirely sure everything I wrote here is correct or even if everything here is original. If you find identical or even similar thoughts elsewhere please alert me to them (especially if they disprove my assertions). Thank you.

My solution to the "Incalculable Derivatives" Accounting Problem!

I just solved the "Incalculable Derivatives" Accounting Problem! When a well-known, well-respected "Whale" (Casino term for a big gambler) shows up in Vegas he often gets to gamble on credit extended by the Casino. But there is a maximum he can bet on credit before the casino will demand a wire-transfer payment. The casino decides what amount the whale is good for on-credit and beyond that it's no more Mr.Nice Guy. If only Wall Street were so wise! Here's my solution - Government/SEC should mandate that ALL future derivatives have a "maximum value". e.g. a Call Option could then be a right to buy a given security at a certain strike price (as normal) but the change would be that the right can be exercised no more than X amount "in the money" (where X is an extremely big number). So Google stock is trading at $550 a share and this extreme derivative call option (for a single share) has a strike price of $10,000 with an expiration date of 3 months from now. Because it is so "out of the money" it trades for $0.01 and some bank is selling millions of these options because it's so utterly sure Google won't rise above it. Without my idea, if Google goes to $20,000 per share just before expiration then each option that the bank sold for $0.01 it will now have to pay out at $10,000. Consequently, if the bank sold millions it would be "on the hook" for tens of billions in losses. But with my idea, X could be "ten thousand times the original price of the derivative". So any investment in a derivative could get a 10,000 ROI but no more. In that specific Google hypothetical example the X number is "10,000" which is multiplied by the price "$0.01" which would equal $100. So when the option was exercised the strike price would "reset" to $100 less than the current price (which would then be $19,900). For over 99.999% of derivatives, well over 99.999% of the time, this wouldn't make a difference to either party (buyer or seller) because X would be such an extremely big number. And for when the markets go crazy, there is a maximum loss/gain that would limit absurd swings that serve no value to the economy. Consequently, all future "toxic assets" would have a known upside & downside for much more effective accounting! When one bank wants to write uncovered calls (or any "naked" derivatives) it would have to list publicly (to the rest of the market) what its maximum downside pay-out would be. Then we wouldn't have the problem of "incalculable derivatives". And hopefully, that would lead to more judicious investing.

"Three Languages" Parable

Little Analogy for those who appreciate my pedantic (maybe arrogant & unoriginal) and grandiose attempts at profundity... A child is born (you don't know where) and learns his mother tongue. It is comforting to speak. Ingrained. Familiar. The child grows up. Meanwhile, that language has its opposite. None of the second language's words mean anything to that person. The second language is confusing and frustrating to engage for that person. Consequently, that person has a cultural aversion to speakers of that second language. Over time that cultural aversion leads to miscommunication & conflicts which lead to wars which lead to centuries-long blood feuds. A third language is subsequently developed. At first it doesn't seem to conflict with any of the other languages. Worldwide, smart people are attracted to this third language for its reliability & functionality. Virtually regardless of background, smart people foster unprecedented cooperation using this third language (especially compared to other languages' explicit hostility towards & exclusion of rival languages). This third language's cooperation leads to accelerating progress and invention. Even those who don't speak this wonderful, new third language enjoy its fruits. Eventually, this third language is seen as a threat by the speakers of the first two languages. These anxious speakers seek to restrict & ban elements and use of this third language despite its benefits. But the undeniably better-educated speakers of the third language have mounting evidence and continual innovation on their side. So their numbers grow. They convincingly argue that when different people (raised in different lands with different languages) seek to communicate with each other they should agree to use the language that most effectively benefits all involved. Why should everyone learn the first language or the second when neither has any universally recognized advantage? Just the opposite; speakers of the first hate the second language and vice-versa. Whereas both sides at least appreciate the benefits of the third. So why not have everyone focus on that third language? *Here's the potentially telegraphed "punchline"... Is this third language English? Or is it Science? Aren't the first two languages analogous to any two of the world's "Big 4 Religions"? Therefore, I hope we all agree to focus on the third language (science) first and where it can't speak we thus tolerate the divisive, exclusionary languages to exist. That is my attempt at a more poetic version of my clumsy "science is gold sand and religion is fools gold rocks" theory (where I argue that we should fill our heads with sand and if there are empty spaces we can then fill it with rocks as opposed to first filling our heads with rocks thus precluding space for more-valuable sand).

Oil Prediction: (last was May 12, 2009)

I know it's been almost a year since I made a follow-up to my last oil prediction (May 12, 2009). It was then I recommended you get out of Oil ETFs altogether (because of my distaste for ETFs in Oil which seem to be inefficient and not sufficiently correlated with oil prices). I continue to stand by my old oil prediction - from May 12, 2009 and also August 10, 2008 - that: "Oil prices "should" be $70 - $90 per barrel until the next major breakthroughs in solar/alternative energy or the coming evolution/revolution in our government's energy policy." However Monday, March 29th at 1:45pm EST - Nymex Crude Future is trading at 82.36 which seems a little high to me. I know the US Dollar is relatively weak and there are myriad reasons for a price to move. However, if I was a trader I would short it and get out  at around $78 for a quick profit (I would "cut my losses" if it went to $85). Just want to be "on the record" if I'm right and humble myself if I'm wrong. We'll see.

Didactic Wonk-Screed on Insurance

Before anyone debates health care reform with me they need to know the following: How Insurance Works Insurance is basically gambling which is a subject I know a lot about (seriously - please watch my rough video mock-up of a lesson on "Fundamental Gambling Theory" because it provides a crucial foundation to understand the tricky concept of insurance). As simply as I can explain it, an insurance company: 1) Assesses the likelihood of payout for a claim "1/X" 2) Multiplies that by the size of the claim(payout) "Y" to result in the "True Odds" cost 3) Calculates its operating costs "OC" & profit margin "PM" which together are divided by the number of insured "Z" to result in the "Business Costs" "Premiums" are checks insured customers ("policyholders") pay their insurance company. In equation form: Premiums = "True Odds" + "Business Costs" or, in detail, the premiums = ((1/X) * Y) + (OC + PM)/Z For example: Let's say I am an insurance company that only insures Americans against death by shark attack. The number of people who get killed by sharks in a given month is, let's say, 1 in 300 million (let's say about 12 American deaths per year). That likelihood is "1/X" according to my formula. And the payout for that claim (to the estate of the victim) is, let's say, three million dollars ($3,000,000.00) which would be "Y" in my formula. Further, let's assume initially I'm insuring every American against shark attack (so 300 million insured would be the "Z" according to my formula). So, in any given month I should expect to pay one claim for $3 million. But for my insurance company to survive I need to take in more in premiums than I pay out in claims. How much should my insurance company charge to each of my policyholders, per month, as a "True Odds" bet (initially assuming no overhead costs and no profit)? It's easy, simply multiply (1/300million) by ($3 million) and you get = 1 penny! So if all 300 million Americans signed up for my shark attack death insurance policy I would take in 300 million times one penny = $3 million and I'd have to pay out, on average, $3 million to the estate of, on average, one policyholder per month who dies by shark attack. But since I am running a business I have overhead costs and profit to make. And no company insures all Americans. So I can be simplistic and calculate all of my operating costs (employees, advertising, taxes, overhead as well as dealing with fraud etc. = which is "OC" in my formula) and add my profit margin ("PM") for my investors-shareholders and then divide that sum by the number of insured (which is "Z") to get the premium I must charge my policyholders. Consequently, I have to charge considerably more than one penny per month. How can I, the insurance company, extract greater profit as a business? a) I can charge higher insurance premiums. b) I can try to exclusively get people to sign-up who have a relatively low chance of death by shark attack (e.g. maybe the elderly in Colorado). That way I can take in money (in premiums) from people who are not likely have to have claims (no payout). c) I can try to reject as applicants for my policy those who are at greater risk for shark attack death (e.g. maybe scuba divers or people who vacation in shark infested waters). This way I can similarly limit the number of claims I have to pay out. d) I can somehow attempt to reduce the number of shark attack deaths for a lower cost relative to the number of claims it reduces (e.g. maybe by sponsoring "shark education" in resort hotels or maybe my hiring people to kill the sharks). e) I can wisely invest the insurance premiums that policyholders pay me to earn such a good ROI that I profit more between payouts. f)  I can create efficiencies in my business thus reducing "OC" and enabling greater profits ("PM"). g) or I can immorally & illegally attempt to getaway with not paying out the $3 million to each of the estates of legitimate policyholders who die by shark attack. My disgusting rationale might be that I can stall & hinder through the courts enough legitimate policyholders that I owe claims to such that some give up or some lose due to my great lawyers. If my stalling tactics & lawyers cost less than the payouts I legitimately owe then my disgusting scheme "works" in increasing profit. Now map that entire shark insurance analogy to the health care debate. For each possible sickness or emergency or other situation that requires medical care there is some likelihood of it happening (remember "1/X" from my formula?) and there is some estimated cost of a claim (payout = "Y") which results in the "True Odds" costs. In order to reduce premiums (i.e. contain "health care costs") we can do most everything that an insurance company can do to increase profits ("a" through "f" but hopefully not "g") and also we can reduce the profit margins (note that I consider "deca-millionaire" executive salaries to be de facto profit margins). SIDE NOTE: Please review arguments (and counter-arguments) that explain the true costs of action compared to inaction. Consider everything the non-partisan CBO (the necessary and recognized "referee" in all American policy debates related to economics) considered when it made its (conservatively-estimating) projections. Personally, I think the debate should first focus on those "True Odds". Someone please show me the website that calculates the "True Odds" premiums for every malady/injury/etc. and allows a user to create simulations of what things would/should cost if they only covered Disease "A" and "B" but not "C" . Alternatively this website should allow the user to "set a price" which will result in a limited collection of medical care services that would be covered for that price. I guess it could be a bit similar to those "Progressive Insurance" advertisements' offer to "Name Your Price" and they'll "build a policy to fit your budget". Then we can see what it costs to, for example, cover car accidents vs. chronic diseases (e.g. genetically-caused Crohn's or environmentally-caused Type 2 Diabetes) and thus people can identify & quantify what "rationing" they'd be comfortable with. Once we reach some sort of consensus on the "True Odds" we can then address (triage) the other factors that go into the price of premiums. Obama & the Democrats in congress just instituted a massive change in American Health Care (Insurance) based on fairly rosy forecasts in contrast to the unmitigated disaster the GOP predicted if it went through. We will see the future make one side more right than the other.

Ideas for Wiki-Debate.com / DebateSherpa.com

Further Developed Ideas for Wiki-Debate.com / DebateSherpa.com By Dan Abrams   First Draft "Executive Summary"   RAISON D'ETRE: Wiki-Debate.com / DebateSherpa.com will enable users to engage in global debates that actually connect the "echo chambers" and definitively resolve specious arguments so that those debates can be more productive.   FEATURES:   1) Anyone can establish himself/herself as a "Debate Sherpa"; this is someone who frames a given debate and provides succinct overviews of that debate's relevant points with links to credible sources.   2) Users can be introduced to the site by a Debate Sherpa they know or they can search for Debate Sherpas that have particular interests, beliefs or bona-fides.   3) Every page can be referenced and linked-to by anyone else. In this way any Debate Sherpa preaching to his choir can be effectively challenged by any other Debate Sherpa.   4) Every argument (web page) can be searched for its "back links" to supporting arguments/links AND ALSO to its counter arguments (both on the site and on other sites). In this way users can see  "what the other side is thinking" from its perspective. This is in stark contrast to current discourse vulnerable to intellectually poisoning by a disingenuously framed debate that includes straw men, misrepresents opposition and excludes valid counter-arguments.   5) Every URL/link referenced in a debate can be searched for its "back links" to supporting arguments AND ALSO to its counter arguments (both on the site and on other sites). In this way users can search the site to see if a given argument (posted elsewhere on the web) has a counter-argument.   6) By requiring undeletable pages there can be no fraudulent "rewriting of history". Rewritten pages can be featured on old (subsequently disavowed) pages but nothing is ever erased. This permanence may (hopefully) discourage the "trolls" and "flame throwers" so toxic to productive debate while simultaneously encouraging more thoughtful arguments. Let the million+ other blogs be where people spew their first drafts. Wiki-Debate.com will be where they come to craft their final drafts and seek definitive arguments from others.   7) Popular Debate Sherpas can gain followings and enable subscriptions to their debates. Popular arguments can be referenced and thus popularize effective Debate Sherpas. Even effective debaters (pundits, talk show hosts etc.) not yet on Wiki-Debate.com can still be utilized in productive debates and thus encourage further adoption by their respective fans.   8) By precluding anonymity and requiring a higher level of authentication, Wiki-Debate.com will encourage accountability and further discourage the "trolls" and "flame throwers".   9) By enabling our own "Wiki-Debate.com's Producitve Debate Code" there will be more accountability and thus necessarily more corrections and less tolerance of specious and previously discredited arguments.       First Draft "Mission Statement" / Market Need   The Problem that this Venture Seeks to Address: Productive debates are rare but should be popular.   All too often, important debates are made toxic by Machiavellian pundits, politicians and powerbrokers. They cynically win short-term political points with a facile-minded audience by using old, specious arguments (or blatant lies) that others have repeatedly, objectively disproven using unassailable evidence and logic.   Other websites have sought to address this problem with varying degrees of success. One set is the "fact-checking" sites that respond to quotes made by prominent players in a debate. They do research and come up with their evidence for why they deem a quote to be true or false. The big sites in this set include: - www.Politifact.com - www.FactCheck.org - www.MediaMatters.org - www.snopes.com - www.truthorfiction.com - (every political party and office tends to have their own "fact check" site)   But none of them provide a fair and overarching framework for debates to be organized. Another set of sites specifically seeks to address this problem. The main sites in this set include: - www.DebateMaps.com - debatepedia.idebate.org - www.createdebate.com However none is particularly intuitive or well organized. Debatepedia seems to suffer from particularly simplistic paradigms that assume there are only two sides to an argument.   The debate sites and all "fact check" sites have a fairly stark lack of "universal accountability" in that the user is supposed to just trust them. When they choose to provide sources with external links as validation this seems to work out fine. However "universal accountability" is crucial, and by that term I mean a method for inclusion of all possible counter-arguments and evidence.   Consequently, the same debates tend to happen in every corner of the internet and unfortunately these corners tend to be "echo chambers" of like-minded zealots. False information that, if true, would buttress their arguments gets easily spread which further toxifies public discourse.   There is currently no integration of the opposing sites. There is currently no consistent, reliable, efficient way to ensure all points of view are directly addressed so that bogus arguments can be more easily dismissed. Let's stop having the same B.S. debates and make some progress. Wiki-Debate.com will be that solution. Goal of this Venture: Promote "Productive Debate" of important issues.  (see acronym "OHELOALT")             Defined as:            • Open-minded                                     • Honest                                     • Evidence-based                                     • Logical                                     • Organized                                     • Accountable                                     • Lasting                                     • Thorough             There is reasoning behind that particular order of priorities which I'd be             happy to explain to you later.   Foundation:   One of the most important first steps in a productive debate is the elimination of misunderstandings. The most useless debates are those between two sides that actually agree but didn't first effectively attempt to understand each other.   It is useful, not to mention inspiring, to hold the foundational belief that, in any debate, "When each side knows everything the other side knows and both sides adhere to logic and reason then there will be the greatest chance at agreement". In so doing, the only possibilities for a lack of consensus must then be based on differing priorities. I have a consequential belief that priorities themselves can (and eventually must) be reviewed with equal rigor resulting in more commonly-accepted priorities. In that way, we may begin with as much "common ground" and agreed-upon "first principles" as possible. Then our debates will be most productive.   MUCH, MUCH MORE TO COME…

Very Skeptical of "Bloom Energy" / "Fuel Cell Technology" vs. Solar PV

I'm very skeptical of "Bloom Energy". MY BONA FIDES / CAVEAT: As many of you may know, I'm very into green technology. I took Unitek College's "Boots on the Roof" Intensive Solar course last year and continually read about assorted green technology. Currently, I'm a partner at RandyHallSolar.com (as a Solar Consultant and state-licensed salesperson in California) and I'm still developing Prontia.com (a new independent-broker system to match good candidates for solar installation with qualified installers). So here's the big caveat: I'm admittedly biased for Solar PV. With that in mind, I'm still extremely skeptical of "Bloom Energy" after seeing a puff piece about them on 60 Minutes and reading what I can about them on the web. SOURCES: http://www.cbsnews.com/video/watch/?id=6228923n http://www.cbsnews.com/stories/2010/02/18/60minutes/main6221135.shtml http://en.wikipedia.org/wiki/Bloom_Energy http://www.nydailynews.com/tech_guide/2010/02/22/2010-02-22_bloom_energy_inventor_kr_sridhar_makes_big_promise_with_bloom_box.html http://www.ecogeek.org/content/view/411/ http://www.businessweek.com/globalbiz/content/dec2009/gb2009127_746740.htm http://money.cnn.com/galleries/2007/biz2/0708/gallery.next_disruptors.biz2/8.html HERE'S WHY: A lot of people seem to be framing their rosy predictions about Bloom Energy around machine/unit cost (they say "sure the units cost $700k a piece now but eventually they'll cost consumers $3k"). That's because everyone knows how much exponentially cheaper/more powerful computers have become over time and these people apply that paradigm/analogy to their understanding of Bloom Energy's expensive fuel cells. And if cost of the unit was the sole factor then I might be a cheerleader for them, too. But cost of the unit is not the only factor when it comes to "fuel cell" technology because the units need fuel. It seems so obvious but that fact was virtually entirely overlooked in the 60 Minutes segment. PROBLEMS: Every fuel... 1) Needs to be collected somehow (e.g. harvested, drilled for etc.) 2) Needs to be processed somehow (e.g. filtered, fermented, refined etc.) 3) Needs to be distributed somehow (e.g. in pipes, trucks, tankers etc.) 4) Has inherent dangers in collection,processing & distribution (e.g. spills, fires, terrorism etc.) 5) Has inherent dangers at the consumer's location (e.g. fires, explosions etc.) All of those things (that need to be done for ultimately delivering fuel to the consumer) have costs and all of those dangers need to be managed and insured against. That adds up to real money. Especially since all of those costs are on a marginal-use basis (i.e. once you've reach maximum economies-of-scale, 10 mWh of energy has twice the cost of 5 mWh). *Note that Solar PV power has none of those problematic downsides.* Solar PV uses sunlight as its fuel (conveniently delivered to consumers' roofs for free by the sun). Whereas with "Fuel Cell" technology, consumers are still paying for every marginal unit of electricity they want to use. They are still at the mercy of the "fuel providers". "60 Minutes" oddly made a big point about Bloom Energy "getting rid of the (electrical) grid" without noting the necessary increase in fuel delivery currently in the form of natural gas (which is combustible and poisonous). While I concede that Bloom Energy's fuel cell technology may indeed already or may soon become less expensive that current utility companies' fossil fuel-based systems that's nevertheless short term thinking. Solar PV already leapfrogs all of those problems. Here are other downsides to Bloom Energy (and all "fuel cell" technologies): - Fuel Cell technologies are at least somewhat mechanically based (because fuel has to be piped-in) and thus are prone to mechanical breakdown. - Fuel Cell technologies are untested long-term and so their cost per kWh is unknowable. If the units only end up lasting 8 years then their cost per kWh will be amortized to be much higher and less viable. (Now compare that to solar panels which are guaranteed to last for 25 years and actually are lasting 30-40+ years). - Fuel Cell technologies are dependent on fuel markets, which can spike or be manipulated (like any market). - NOTE: that I haven't even mentioned the environment or "climate change" (which is certainly not insignificant to the energy debate. But Bloom Energy hype can be deflated on the economics alone). so here's the biggest problem in a nutshell link... http://en.wikipedia.org/wiki/Levelised_energy_cost In my opinion, these kinds of problems occur with everything except Solar PV and Wind. (especially the joke that is "nuclear energy" --- just read about the "Price Anderson Nuclear Industries Indemnity Act" that has American taxpayers providing free unlimited insurance to the nuclear energy industry to give the illusion that it's economically viable). http://en.wikipedia.org/wiki/Economics_of_new_nuclear_power_plants CONCLUSION: While the hype around Bloom Energy is white-hot right now (February 22, 2010), I wouldn't invest in it long term and if I could short it, I would. My Little Personal Pitch for Solar... The plain fact is that Solar is the most safe & reliable energy and now it's also the least expensive for consumers. The equipment costs & installation fees have dropped so much that Solar PV is economically viable right now (depending on the area of the country) without state rebates & federal tax incentives. But with those rebates and incentives the ROI for Solar PV can easily be well over 15% every year for 25+ years (compared to other investments, installing Solar PV can be better than over 99% of all mutual funds). If you own your own house be sure to run some numbers to see just how good it can be. Californians: http://gosolarcalifornia.cleanpowerestimator.com/gosolarcalifornia.htm New Yorkers: http://nyserda.cleanpowerestimator.com/nyserda.htm Change These Factors in the Calculator:  - Your electric use is probably between 600kWh - 1,500kWh ($100 - $400) per month - Escalation should be 5.0% to 6.5% per year (that's the historic average range) - PV size should be 6k to 12k depending on energy use - Cost should be $7,500 per kW-ac (or LESS => it could be as low as $6,500 if you get a great deal on a big system) And please contact me if you want my help or advice about solar. Thanks and good karma to you. www.RandyHallSolar.com www.Prontia.com

I estimate Muslims (in 2010) are 1/400th as dangerous as Germans were in WWII

Al Qaeda are not as bad as Nazis and modern Muslims are not remotely as dangerous as Germans in WWII. (I estimate it's "one quarter of 1%" as dangerous) First some stats to prove empirically that equating Al Qaeda to Nazi Germany is a false equivalency. German population in 1939 = 80 million German population in the Nazi Army (Wehrmacht Service) = over 4 million Americans Killed throughout WWII = over 0.4 million Percentage of US population killed = 0.32% Allied Soldiers & Civilians killed throughout WWII = 61 million I'm assuming 1/2 of those are by Nazi hands (the other half are Axis powers Italy & Japan. If you want to run numbers based on different assumptions, then please do.) http://www.feldgrau.com/stats.html  http://en.wikipedia.org/wiki/World_War_II_casualties So at least 1 in 20 Germans were actively (daily) working towards killing Allied troops & civilians (not to mention Germany's own Jews, Gypsies, Gays, Handicapped etc.). OK, now compare that to our modern day (2010) fight in the Middle East and arguably/regrettably with the Muslim World... Muslim population = 1.2 billion (i.e. 1,200 million) Number of modern Muslims actively working towards killing Americans = DISPUTED I'd estimate it's well under 600,000. The number of American deaths (including 9/11 and our wars/occupations of Iraq & Afghanistan) is under 10,000 and if there were more than 600,000 active enemies of America they would/could do a lot more damage & murdering considering how vulnerable we are (see my post on the "Dog that didn't bark"). If I had to guess I'd bet it's well under 60,000 but for the purposes of this illustration let's go with the conservative number that is 10 times that. Note - Telling a poll they "agree with Bin Laden" doesn't make them actively supporting or working towards Al Qaeda's goals. BTW - check out how those polls are trending in the past few years and especially since Obama was elected - http://pewresearch.org/pubs/1338/declining-muslim-support-for-bin-laden-suicide-bombing http://pewglobal.org/reports/display.php?ReportID=264 http://pewglobal.org/database/?indicator=20&mode=chart http://pewglobal.org/database/?indicator=19&survey=10&response=Often/sometimes%20justified&mode=table Ok, so here are my equations: Start with active killers and the damage they've done... 4 million Germans killed 0.2 million Americans and 30 million Allies. Consequently, the "average German in Wehrmacht Service" killed 0.05 Americans and 7.5 Allies. whereas... 600,000 Muslim Extremists killed 10,000 Americans. Consequently, the "average Muslim Extremist" killed 0.0166 Americans (already 1/3 as bad as Nazis). Now consider that while the group of 1.2 billion Muslims is 15 times bigger than 80 million Germans, the 600,000 trying to kill us is 1/2000th the size of the 1.2 billion person population. So you multiply the 1/3 by 15 = 5 and then divide that by 2,000 to get that modern Muslims are 1/400th as likely as WWII-era Germans to kill us. Let's look at it another way:  "1 out of 2,000 of all modern Muslims" trying to kill us is literally 1% as bad (i.e. 1/100th as bad) "1 out of 20 Germans" who were in Nazi military service trying to kill us. However since there are 15 times as many modern Muslims as there were Germans during WWII you multiply 1/100 by 15 to get that Modern Muslims are 15/100ths as bad. But since the Germans killed 20 times as many Americans as Muslim Extremists have they are 20 times worse. So you get 15/2000 which equals 1/133 but since Muslim extremists are 1/3 as effective per-extremist at killing Americans (compared to Nazis) you divide it by 3 to get to 1/400. Therefore the threat of Muslim Extremism is 1/400th as deadly(dangerous) as Nazism was in WWII. Put another way, Germans in WWII were 400 times more dangerous to Americans than modern Muslims are to Americans now. QED. *N.B. If you run the numbers including non-American Allied & Civilian deaths (which are 100 to 150 times greater than American casualties) you get that the Germans were at least 40,000 times more dangerous than modern Muslims (100 x 400). And if you also consider the percentage of the American population killed by Nazis compared to Muslim Extremists the WWII-era Germans look even worse compared to Modern Muslims.

How to Change Someone's Mind

How to Change Someone's Mind: People Prefer Conflicting Thoughts Much More Than an "Absence of a Paradigm" By Dan Abrams Contrary to a simplistic understanding of psychology's concept of "Cognitive Dissonance", I think most humans prefer to have multiple conflicting thoughts than to have an absence of a paradigm. That's why in order to change someone's mind you must first give them ideas they agree with, that they don't think conflict with their existing paradigm, and build upon them until the new paradigm is stronger than the old (which is thus discarded). Not that this should be an excuse for poor behavior, but remember that nearly everyone is a hypocrite on some level. No human is 100.00% consistent for his entire lifetime. That's because no one "gets it right" right from the start. Life is complicated and all rules have exceptions. Our understanding of the world evolves over time because we're always evaluating our beliefs relative to our interaction with the world. A baby learns one of its first "heuristics" is that when it is hungry to put food in its mouth. Its understanding of what "food" is may be based on the experience of putting anything within reach in its mouth. As its parents give it more freedom the baby learns that not everything that is within reach is necessarily food. His heuristic for satisfying hunger changes accordingly. Employing the useful analogy of a brain being like a computer, think of your environment constantly giving you input that your brain attempts to process. Information that supports or affirms existing software is saved and fortifies it against change. Falsifying evidence tends to shatter existing software but life is so complex that you can't throw out software without having something to replace it. Consider trying to do a modern financial analysis using only the first version of "Lotus 1-2-3". Sure, the current version of Microsoft Excel would be much more effective but unless/until you have it properly installed you shouldn't toss out your Lotus 1-2-3 because Photoshop won't help you do math. Similarly, the brain won't toss out previously used paradigms (regardless how objectively flawed or ineffective) unless/until it has something it regards as better. Consequently, when trying to change someone's mind: DO NOT START BY TELLING THEM ALL ABOUT HOW WRONG THEY ARE. Regardless of your evidence, it won't be as effective as another strategy I outline here: 1) Identify what they actually believe. (Don't jump to conclusions and don't make errors in understanding). 2) Articulate your existing areas of agreement. (This earns you credibility). 3) Introduce ideas/paradigms/input/software that support your position while simultaneously being acceptable to the person's mind you are attempting to change. Ideally, this new input will be so immaculately compatible that they will not only incorporate it but also attribute greater credibility to you (because they think you are fortifying their old paradigm). 4) Extend in small/slow, logical, "bullet-proof" steps the ramifications of these new ideas and how they necessarily lead to different proximate conclusions (but save that last "leap" conclusion for a little later). 5) Now, you may introduce your counter-arguments to his old paradigm. It is here where your criticisms will be most effective. (That's because now he has other, better, software installed. And the criticisms are telling him to get rid of the old/bad software.) 6) Finally, make your last "leap" from the newly established paradigms to your, better, conclusion. Now he can conclusively accept this "change of mind" and discard the old, worse, paradigm. I think all of this has a physiological/evolutionary biological basis. This person's synapses have been encoded in a certain way in the past and that persons very existence is some evidence (but not necessarily "proof") that those synapses in that architecture are, on some level, adaptive to the environment (if for no other reason than if they were completely counter-effectual the person would be dead). Until you help him build new synaptic architecture the brain won't voluntarily destroy its own architecture. But if you build up a bunch of new synapses that function more efficiently then the brain will nourish & fortify those areas while letting the less effective architecture atrophy or at least lie fallow. Anyway, many of you have heard me talk about versions of this theory for many years but if you now know it to be derivative (or worse yet, a complete ripoff/"simultaneous creation") please let me know ASAP. I pride myself on my creativity and originality but I'm realistic enough to attempt to be humble and request better information (if you have it - as I'm quite sure some must in this case). Thanks!

An advertising idea for films in lieu of using "555" phone numbers

We know that it takes audiences out of the moment when characters in films/tv give blatantly fake numbers like "555-1234" (for fear of inflicting something like Jenny-Jenny harassment to people with the number 867-5309).  My idea is for studios to get a batch of "real phone numbers" for their characters to mention in scripts but then have pre-recorded advertisements playing for those compulsively curious people who inevitably will call those numbers. The ads could be audio trailers just like Moviefone. I know that I've told a bunch of you this idea before (many years ago) and then mentioned how close the zeitgeist came when "Unbreakable" used a real phone number and just had a generic pre-recording that said "This is a studio-owned number that is not in use". But I like that I can use this blog to document my ideas and this one had not yet been time-stamped.

"Country Club Analogy" (Argument for "Fair Trade" over "Free Trade")

Let's start with the analogy and then explore how it's apropos to the debate on "Free Trade". Your father, who manufacturers golfballs, belongs to an elite Country Club that is owned by its members. Nearly everyone around the world wants to join but it's very exclusive. All "legacy" applicants (those born to existing members) are accepted but everyone else, even the very smart/talented, has to jump through a bunch of hoops over many years for just a small chance of getting in. Once you're in the Country Club there are all sorts of benefits. It's clean, secure, and overall really nice. People make deals there and the club takes a cut of every deal. Nevertheless, everyone seems to prosper. You and your dad are doing well because you're selling lots of golfballs to the members. The exclusivity of the Country Club thus prevented some smart/talented people from joining. Those people started making their own country clubs better. Historically, when it came time to attract major events, sponsors etc. there was really only one choice: your dad's Country Club. This near-monopoly had huge advantages that led to extraordinary profit-premiums for your dad's generation (he felt he was entitled to them and that they were well-earned). But over time the other country clubs got better and began to attract their own events, sponsors etc. Now the profit-margins are getting squeezed in the deals that are transacted in your Country Club. The costs of running the club keep going up (materials, personnel, equipment) and it still doesn't have some services that other country clubs offer. Consequently, your Country Club needs to raise its fees to cover its costs. But some of the older members of the club object to increased fees. They vote to reduce the amenities and allow the importation of cheaper golfballs from another country club. You and your dad are pissed at losing so much business but you're still OK because you still sell golfballs to other country clubs. This continues and your reduced profit requires you scale back. You decide to stop manufacturing near the course and instead open a cheaper plant near another country club and import them into your Country Club. Your employees, who were members of your Country Club, are now out of work and can't afford to pay yearly membership fees anymore. This further reduces the revenue of your Country Club necessitating, according to some members, further cost-cutting. Now the club wants cheaper fertilizer, seeds and sand. Your three buddies at the club who respectively sell fertilizer, seeds and sand do exactly what you did. They close their plants nearby and open plants near other country clubs. The closed plants put out of work more members of the your club which further reduces revenues. This is a vicious cycle leading to more business going to the members of other country clubs. Meanwhile, the booming businesses of the members of other other country clubs leads to their own "virtuous cycle" increasing the revenue of the members of other clubs and increasing the membership revenues. Those increased revenues enhance those country clubs to be closer and closer to the level of your elite Country Club. It's all pretty simply economics. It's even "free market" dogma that buyers will buy the cheapest products from anywhere they can. The analogy is pretty obvious and "one-for-one" about global trade. But what other options do we have? 1) "Take all the smart/talented people who apply" - This argument attempts to exploit the system by greedily taking all the best people for your Country(Club) so that the other countries are crippled by a lack of good people. Not only is this selfish and unsustainable it also DOESN'T WORK FOR THE MEMBERS OF YOUR COUNTRY. Consider this: if a better golfball manufacturer is admitted to your Country Club then you & your dad are still out of work. Yes, the club apparently doesn't suffer but the members (you & your dad) do suffer.  Thus, using Immanuel Kant's categorical imperative (which is just a fancy way of describing "The Golden Rule") the membership shouldn't agree to burning you and your dad because they wouldn't want the same thing done to themselves. Measuring the good of the Country Club by it's size, beauty & membership's gross revenue alone ignores the good/prosperity of its members. Why would the members want any policy that ostensibly helps the club but actually hurts themselves? Let's measure how good the members lives are over time and institute policy that makes their lives better. THE ALTERNATIVE... 2) For all intents and purposes - "Protectionism" to some degree. Your Country Club should encourage deals that keep its members employed. It should tax & discourage money earned in the club from funding ventures in other country clubs. It should not let in new members so as to encourage those applicants to go an make their own country clubs better. (Of course there are exceptions for moral/political reasons and protectionism need not be impractically extreme.) I'm skipping a few points here in the interest of some brevity. For those who reflexively decry protectionism in any form - What good is an "American Corporation" to America if it pays no taxes and employs no Americans? What good is a big GDP if none goes to enhancing the citizens' lives? Note - I'm deliberately trying to be provocative here. I'm not really claiming we shut down our borders entirely and attempt "Isolationist Fortress America". But I am suggesting we seriously decide what the purpose of government is.  I hope we can generally agree it's to make the lives of its citizens better (which I think is a pretty modest & benign idea though one that GOP&Libertarians generally can't stand).  Once that is settled we can define the measurements of what makes citizens' lives better. Then, necessarily, all government policies must be calibrated against those measurements. I contend that progressive, liberal and generally "Democratic" policies are better at enhancing citizens' lives. Whereas conservative, Republican policies (over time) don't even help the majority in the country club.

Why Hedge Funds Are (and want to be) “Risky”

Why Hedge Funds Are (and want to be) "Risky" --- Primer & Gambler Analogy By Daniel Lawrence Abrams   Primer:   Hedge funds have been around since 1949 and have generally functioned as high-risk/high-reward mutual funds for advanced investors.   Not bound by the laws and conventions of generic mutual funds, hedge funds are empowered to assume extreme leverage and place bets on complex financial instruments (e.g. derivatives) in order to achieve extraordinary returns on investment.   Only the best investors even attempted to start hedge funds. Those that lost money quickly disappeared. Those that made profits in excess of the market were highly prized.   If the S&P 500 earns 8% and a given hedge fund (after all fees) returns 9% then why not invest in that hedge fund? Savvy investors may be more concerned with ROI for a given level of risk but since the concept of risk is so difficult to reliably quantify for predictive power it all boils down to the bottom line: If investment option "A" earns 8% while "B" earns 9%, ceteris paribus, people would rather get 9%. Hedge funds often yield substantially greater returns than the market which is why they exist in the first place.   Why do investment professionals start hedge funds? They have more freedom to make "riskier" bets that can yield those superior returns. Making this even more attractive is their particular compensation structure.   Most hedge fund managers use a traditional 2+20 compensation structure. Every year, 2% of the money invested is taken for the hedge fund managers as a management fee (maintenance fee). Additionally, 20% of the profits are also taken for the hedge fund managers as bonus compensation "performance fee".   For example: –$100mil invested, HF yields 30% ROI = $130mil before fees –HF managers take 2% of the initial amount = $2mil –HF managers take 20% of the $30mil profit = $6mil –Total returned to investors = $122mil (i.e. 22% ROI)   So there's an obvious incentive for the hedge fund managers to make their investors a lot of money (consequently resulting in an even better bonus for the hedge fund managers).   Now consider the following… Gambler Analogy:   A wealthy gambler sees you winning at a casino. He offers to give you the traditional 2+20 HF manager compensation formula to gamble his $100k for him. He gives you one night in a particular casino that only has these 4 kinds of games:   1) There is a big game of no-limit hold'em poker where you only play with the other players (not the house) against whom you estimate you may have a 10% edge for the night. The blinds are 25-50 and betting is capped at $50,000 per hand.   2) There is single-deck blackjack where you can actually count cards and gain a legal, fair, small edge (maybe 5%) over the casino but the maximum bet is $100 per hand.   3) There is also "Betting on Fair Coin Flips" against the house, which is obviously entirely luck-based, that pays winning predictions 99 cents on a one dollar bet. This means the casino has an edge over you of 1%. Note that the maximum bet for this game is $1,000 per player per flip.   4) Finally there is "The Big Wheel" which is like a simplified roulette wheel where there are 20 spaces (19 losers and 1 winner) and pays off a winner 17 to 1.  True odds would dictate you should get 19 to 1 so you're actually giving up a 10% edge to the casino. Note that there is no limit on the amount you can bet on this game only.   So in this casino gambler analogy, where you are the equivalent of a hedge fund manager, on what games should you bet the $100k you were given to gamble?   A) If you're a great poker player against weak opponents then you should play NLHE poker because that's where you can get the greatest edge/positive EV (over 10% ideally). Consequently your 2% will get you $2k plus 20% of the $10k profit (which is $2k) totals a net profit of $4k for you and $6k for the gambler. Getting the gambler 6% ROI in one day is pretty great (it'd make a merciless mafia loan shark jealous).   B) If you're not as good as the other poker players but still smart then you can pretty safely count cards playing blackjack and hope/expect a 5% ROI on the $100k. Consequently your 2% will get you $2k plus 20% of the $5k profit (which is $1k) totals a net profit of $3k for you and $2k for the gambler.   C) If you can't play poker or count cards in blackjack then you could bet on the coin flips but you're giving up a 1% edge and so should expect to actually lose money for the gambler. Consequently your personal profit theoretically should only be the $2,000.   D) "The Big Wheel" may seem counter-intuitive for many so let's explore it in detail… You know "The Big Wheel" has a negative expectation with the worst odds for the gambler's money. But let's still explore your personal "Expected Value" (as the HF manager) if you simply bet the whole $98k on one spin of "The Big Wheel". –19 times out of 20 you would lose it all and only make $2,000 personal profit. –1 time in 20 you hit then you'd win $1,666,000 on the $100,000 investment. Consequently, your 20% would equal $333k plus your $2k equals $335k. –So in 19 spins you'd get $2k each (total = $38k) and on the 20th theoretical spin you get $335k. That's $373k over 20 spins for an "Expected Value" of $18,650. WOW! But it's terrible for the investor who's EV on the game (before the 2/20) is 90% of his $100k resulting in a $10,000 theoretical loss. After the 2/20 compensation, his expected value is less than 70% of his $100k for an over $30,000 theoretical loss.   Recap: •NLHE POKER: 10% POSITIVE / Your expected personal profit = $4,000 •BLACKJACK: 5% POSITIVE  / Your expected personal profit = $3,000 •COIN FLIPS: 1% NEGATIVE / Your expected personal profit = $2,000 •THE BIG WHEEL: 10% NEGATIVE / Your expected personal profit = $18,650   THEREFORE: Even though "The Big Wheel" has the biggest mathematically "Negative Expectation" because of the 2+20 compensation formula it is immensely attractive to the hedge fund managers who don't have an edge.   CONCLUSION: It is therefore even more important to go with a hedge fund manager who has a real edge on the competition. Don't simply pick a financial "brand name" with only a recently good ROI (especially if the management has changed during its run). Such "chasing last year's winners" is a short & hind-sighted technique that historically underperforms. Instead, select an investor with at least a decade of extraordinary returns.  BTW - if you're an "accredited investor" then you can contact me for my personal recommendations.

Fear = Hating the future you predict

Fear = Hating the future you predict ... Therefore, there are 3 ways to alleviate fear: 1) change the path you're on so as to create a different future 2) change your prediction 3) change your opinion of the future This is all especially important if you're particularly bad at predicting the future or if your hatred runs contrary to human interests (yours, your country, your world etc.).

My response to friends' response to my "Why Dennis Miller is a Republican" post

My posts to corpania.blogspot.com are automatically re-posted to my facebook page. Some of my GOP friends respond with facetious and occasionally thoughtful comments. Instead of replying to them on FB (where such debates are virtually always fleeting and are rarely substantive) I will quote from their comments and respond here. PLEASE NOTE THAT I AM EARNESTLY ATTEMPTING TO ANSWER ALL OF MY "OPPONENT'S QUESTIONS". I hope they will return the courtesy especially when I explicitly call for them to answer a specific question of mine. HERE ARE THEIR RESPONSES TO MY PREVIOUS POST ABOUT "WHY DENNIS MILLER IS A REPUBLICAN"... GOP FRIEND#1: "Regarding your view that killing doesn't lead to peace, what about the American Revolutionary War, the American Civil War, World War II, etc?" MY RESPONSE: I'm genuinely surprised the concept that "war begets war" isn't as universally accepted. I strongly urge those to revisit my previous post In not-so-short: There are 1,300,000,000+ Muslims on earth. Psychiatric studies show that as much as 1% the human population is schizophrenic. http://www.schizophrenia.com/szfacts.htm And more than 1/10,000 commit suicide. So it stands to reason there should be at the very least 1,300 schizo Muslims with a deathwish to be worried about. What if only 50 of them simultaneously shot up churches or malls around America? That would surely incite full-on WorldWar3. Clearly, if the threat was so great our enemies could coordinate some of them entering the US to wreak havoc (on our infinite vulnerabilities: like our non-hardened chemical plants, thousands of miles of Alaskan oil pipeline, water supplies, etc.). But they haven't. You know why? Because while the number of people who may superficially hate us may be in the millions or billions (substantially fewer since Obama's election) the reality is that over 99.99% ain't gonna do a thing about it because they're busy with their own lives (feeding their kids etc.). The number of people in the world who hate us so much that they're willing to leave their family and journey to our shores to kill us IS REALLY MINUSCULE! But every time we bomb someplace and there is any "collateral damage" (and there always is) then that victim's relatives become exponentially more likely to want to make that havoc-wreaking journey to our shores. War begets war. Revenge is a vicious cycle. Chilling our government into not waring is exactly what we need now. Until the geo-politics substantially changes we should be actively discouraging war (even more so than usual). GOP FRIEND#1: "As to Miller's psychology, isn't yours an argument from bad faith? Why diagnose his motives? " MY RESPONSE: No, not in my opinion. My analysis of his motives appears, to me, to be original, interesting and somewhat falsifiable. My theory may inform what may be the cause of the disconnect between left & right modes of thinking. But beyond the pedantic self-aggrandizing I'm doing, it's just plain fun for me. If you don't want to engage in my though experiments & philosophical debates then that's ok. I won't be offended. GOP FRIEND#1: Why do celebrities sound off on economic and global issues with junior-high level analyses every day of the week? Is it because they are shallow and seek to appear sophisticated? It is because they are personally monstrous people who compensate with simplistic moral preening? Is it because they don't understand business and are jealous of the power of those who do? Just following the pack?" MY RESPONSE: Your rhetorical questions have some validity, in my opinion. The nice thing about celebrities, or amateur philosophers like myself for that matter, pontificating about important issues is that, at least on the most basic level, they are citizens engaging in important debate. It's better than whatever superficial drama Spears, Lohan or Paris Hilton are up to. I'd rather have an engaged electorate as opposed to the right-wing policies that can only exist when voter turnout is low and skewed to the wealthy & elderly. Of course, that's primarily because I'm a progressive populist. GOP FRIEND#1: "Who cares? The only issue that matters is the content of their ideas. If you want to engage a serious discussion, I suggest leaving motive out of it." MY RESPONSE: While I think we can agree that the "content of their ideas" is paramount, I do think motive makes a difference (especially while diagnosing strategies). GOP FRIEND#1: "You did not qualify the statement "GWB also proved that military occupation doesn't work." So, the U.S. in Japan following WWII? MY RESPONSE: I don't want to get mired in a semantic debate but I duly stipulate that defining terms is crucial in a productive debate. So let me clarify by restating with a hedge - "Military occupation rarely works". I could have argued that an occupation after a surrender is substantially different from an occupation without a surrender. I could have also argued that the dynamics of occupation have evolved over the past 6 decades enabling fewer and fewer people to do greater and greater damage thus fundamentally changing the equation. GOP FRIEND#1: "BTW, although you frame your arguments as fundamentally discrediting Republican foreign policy doctrine, many war supporters today make similar points to argue the war implementation was tragically flawed but the strategy was sound. I don't make that argument, but some do. There's certainly a serious debate to be had on that, motives aside." MY RESPONSE: While I agree that a better implementation would necessarily have led to a better outcome it is practically ludicrous, as your disavowal implies, to claim that an outcome virtually 180 degrees different from their prediction is proof that the execution was the problem as opposed to the strategy (especially when none of those hawks were decrying the execution while it was happening. To the contrary - those very same hawks were crowing about how "flawless the execution was (in their opinion)" when Saddam didn't put up the defense they expected). GOP FRIEND#1: "Honestly, I think if we hadn't floated the dollar forty years ago we wouldn't have half the global problems we do, but that's another discussion." MY RESPONSE: That may be so but I am too uninformed about that topic to respond here now. I would need to know more about your specific arguments about that. GOP FRIEND#2: "Or... Dennis is aware of the fact that because of the blase attitude towards radical Islam by the Left -- which has led to North Korea and Iran both going nuclear -- it is now more likely than ever that militant Islam will get their hands on a nuclear device of some kind and detonate it within one of our major cities." MY RESPONSE:  Mentioning North Korea proves my argument and discredits yours. Focusing so much of our resources on "radical Islam" prevented engagement with North Korea (diplomatically and/or with military force). Nuclear proliferation is a very serious issue that I think deserves exponentially more resources. It was GOP's GWB & friends that diverted resources away from the prevention of nuclear proliferation. GOP FRIEND#2: "The fact that Obama and his AG have decided to try the 9/11 terrorists in open civilian court it just another example of how liberals just don't seem to get what's happening. Perhaps if Islamic terrorists openly supported Proposition 8 and campaigned to repeal Roe v. Wade, the Left would finally sit up and take notice...?" MY RESPONSE: What don't we "get"? Please explain the details of why upholding the rule of law is wrong and/or dangerous. "Those who would sacrifice liberty for security deserve neither" - Ben Franklin. Does the average GOP supporter truly understand what "liberty" is? If laws that protect the accused go out the window at the whim of the executive branch then what would happen if/when a less gracious and more militant progressive assumes office? What if Obama's more liberal successor chose to handle his critics the way Bush/Cheney handled theirs? I dare any of my GOP-supporting friends to explore this path of the debate. I will wager $100 that an impartial judge would rule that Bush/Cheney policies of oppression were way more fascist and civil liberty-crushing than those that Obama has implemented. I can't wait to ensnare my GOP-supporting friends in a GWBush vs. Obama debate. But I suspect they're too smart for that and will instead choose to move on and argue from their ideals. WHEN I PREVIOUSLY WROTE: What would be some sound policy decisions about nuclear weapons? - secure the unstable nations with nukes (like spending more on Pakistan than Iraq or Afghanistan whereas today we spend less than 5% of our Middle East War resources on the one radical islamic nation with currently viable nukes). - secure/payoff the scientists (especially from Russia etc.) so they have no economic incentive to arm our enemies. - secure the world by having fewer nuclear powerplants (which would result in less nuclear waste and fewer locations for resource-intensive enrichment facilities that could be "upgraded" to weapons) Yeah, I'm for all that. But those are Democratic policies whereas the GOP holds nearly 100% opposing views on those policies. MY GOP FRIEND#2 WROTE: Suggestions one and two are blackmail/bribes to terrorists. Not viable." MY RESPONSE: What is so inherently wrong with blackmail/bribes to terrorists? Let's look at it from a cost/benefit analysis. If bribes work then the only downside would be the possibility that the bribes themselves would encourage more terrorists. But that runs contrary to GOP assumptions that it's "Radical Islam" that is the threat. What would be the delta is enemies caused by bribing? Is that delta greater than the number of enemies created by "collateral damage"? We need to take a much more practical, holistic look and weigh all potential costs (including opportunity costs) of available options against the probability of the outcomes and their various risks & upsides. MY GOP FRIEND#2 WROTE: "Three is strange since Democrats want to get us off of oil, but no clean nuke plants like in France? Windmills won't power the world." MY RESPONSE: That implies there is such a thing as a "clean nuke plant" which is such blatant BS I'm shocked that I need to respond to it. Also, to date every single pro-nuke person I've ever encountered has been unaware of "The Price-Anderson Nuclear Industries Indemnity Act". In short, we tax-payers ensure the nuclear industry over a set amount. It is universally accepted that if we were to stop assuming that risk that there would be no nuclear energy industry. The insurance premiums to cover the unlimited liability would be so high that they would erase any hope of economic viability for nuclear energy. FINALLY - Windmills alone might not power the world but other renewable energy very easily can. I just took an intensive course on Solar PV and I'd be more than happy to explain the science and economics of how. MY GOP FRIEND#3 WROTE: Wasn't your time traveler experiment essentially carried out in the 90s after the first WTC bombing? The US responded by prosecuting terrorists in a US court of law rather than "taking it to them." Would you argue that because we gave those terrorists the benefits of our justice system it deterred future terrorists? Seems the answer is very obviously no. MY RESPONSE: This is a very trenchant point which I humbly take very seriously. Unlike so many GOP-supporters who can't ever concede a single point (I suspect they view all debates like a trial where they don't want to appear weak so they avoid productive debates and primarily seek to "rhetorically score" against their opponents) - I will concede that because I would have concluded a lack-of-attacks to be evidence on my side I must take the existence of an attack as evidence, not necessarily proof, that the other side is correct. But let's drill down deeper. The motivation for the first attack was not eliminated (that is not to claim that one must always eliminate one's enemies' motivations because that might be even worse). So it is reasonable to assume that there would continue to be attacks until the motivation was eliminated. The fact that there was a legal trial merely prevented an exacerbation of motivations. Whereas GWB's torture policies (Abu Ghraib) clearly exacerbated our enemies' motivations. The most important point is weighing our options of risk & reward. GWB's "taking it to them" had predicted costs and expected outcomes. The war was supposed to "pay for itself" and instead cost us $3trillion and counting not to mention thousands of American soldiers' lives and limbs. The outcomes were nearly entirely different from the predictions. Can't we fairly conclude that the strategy was a stunning failure when the costs were so off and the outcomes were so wrong? If that isn't a failure just how bad would things have to be for that GOP-Hawk strategy to be defined as a failure? How wrong does a GOP prediction have to be for the GOP-supporters to concede that it was wrong? Are the GOP-Hawks equally undeterred by the lessons of Vietnam (even though those errors were initially made by Democrats)? Let's make some predictions about Iraq & Afghanistan going forward. If my predictions come true and yours don't will you then concede that I know better? Is there any evidence or outcome that would disprove your theories? Or is your political paradigm unfalsifiable and impervious to facts? I routinely mention that I could be wrong. Would you at least give lip service to the possibility that you could be wrong? What would have to happen to prove that? I'm all to happy to set forth my predictions and criteria for falsifiability of my philosophical/political paradigms. I want to get to the truth and abandon my ineffectual ideas. I can't wait to shed my erroneous assumptions. What about you? MY GOP FRIEND#3 WROTE:  "It's not likely anyone will ever be able to quantify the number of lives saved because of US military action - or that you would call it anything other than propaganda if the previous Administration had tried. But it seems to me we can reliably say treating terrorists like common criminals is not an effective security policy." MY RESPONSE: I agree that we can't definitively quantify the parallel universes of "what if". But I entirely disagree with your claim that "treating terrorists like common criminals is not an effective security policy." That claim is not substantiated by the evidence. I will graciously reiterate that your trenchant point about prosecuting the first WTC bombers has some validity. But your simply not at all fully calculating the options. On this branch of the "permutation tree" we spent trillions of dollars and thousands of American lives. How much good will could we have bought with 1/10th of that? Here's a non-hypothetical point: your entire argument necessarily hinges upon the assumption that our very presence in the Iraq & Afghanistan does more good than harm and that we're killing more enemies than we're creating. That assumption is falsifiable and has already been disproved by the evidence. Read all the recent reports by the generals and intelligence agencies. In Afghanistan, the Taliban is resurgent and we're not gaining ground. The people don't trust the kleptocracy we installed and no one expects any lasting good resolution to come from our presence in less than 10 to 20 years. Now we can estimate what 10 to 20 more years of occupation will cost (by extrapolating what has happened in previous years). To make a wise decision we have to weigh those costs against what would happen if we pulled out immediately (like George Will described somewhat recently). Even if we concede that "our enemies would have a safe haven" who cares? Don't forget that the 9/11 attacks were conceived and executed by Al-Qaeda (from supposedly "Western-friendly" countries like Saudi Arabia, UAE, Egypt & Lebanon) while they were hiding in Germany & the United States of America. Terrorist attacks can be planned from anywhere in the world. There's no way around the fact that we need human intelligence and detective work to find them. Establishing good will by magnanimous foreign policy and yes, even bribes, can elicit such valuable information. In fact, it might be militarily beneficial if our enemies indeed had a "safe haven" in a hostile country because then we can just bomb the crap out of their base from the sky instead of hunting door-to-door with our soldiers. Is that blood-lusty enough for you? Think about all of our options and their costs, benefits & risks. I'm hoping but not expecting Obama just pulls us out entirely of the occupation and lets their countries bad guys war among themselves for a while. Final point - the industry of WAR is inherently counter-productive and necessarily "shrinks the pie". But now that so many military contractors are legally based outside the US for tax reasons there is much less incidental economic benefit to Americans (compared to previous wars where we made everything in the US and had to pay Americans to do it and therefore got increased tax revenue from it). For those of you GOP-supporters who still somehow disagree that FDR's progressive policies got us out of the Great Depression you must therefore conclude that WWII alone got us out. Ramping up industry to create our tools of war was a de facto stimulus/jobs-creation plan. It put money in people's pockets by paying with our collective credit card (national deficit/debt). Ok, that's a lot of process. Think about it and respond to my specific points. If you skim and reflexively respond in such a way that proves you didn't actually consider my points then you owe me $1. Seriously, I will insist on collecting. ;-) If you want to have a productive debate then you have to actually read and consider your opponent's arguments BEFORE you respond. Thanks and good karma to you.