Everyone: Raise your hand if you are interested in beta testing as a micro-investor and have between $1K and $5K you’d like to commit on this in the next month.

Also raise your hand if you are a social entrepreneur who has a project that fits the space we discuss above requiring between $5K and $15K to get 3 months in and path to profitability.

https://www.newscientist.com/article/mg20227141.200-disorderly-genius-how-chaos-drives-the-brain.html

I think it’s fascinating and highly relevant. Brain activity sounds very similar to an economy. I really don’t know the right way to send you this without dropping it into comments.

I fully agree with https://emergentfool.com/2009/03/16/climate-shifts-as-a-complex-systems-property/ and think it’s brilliant. The Fed does attempt to monitor “meta prices” in it’s firefighter role to prevent a phase shift into deleveraging and subsequenty systemic shutdown.

I think they underestimated the importance of shadow banking and “shadow leverage”, which i’d argue are one of the most important of “meta prices”. Leverage is the main feedback mechanism and should be watched like a hawk. shadow banking, options, futures, cdo’s etc…

On top of that, i’ll say that Sumern’s 5% NGDP growth targetting woudl work if he shifted some focus to LEVERAGE and meta prices other than the interest rate target.

I still urge you to not throw incentives by the wayside…. otherwise we’ll end up with 5-10% of the population twisting their thums cause noone wants to buy a house or a car.

Both Kling and Sumner are against bailouts. Kling is for the reform of financial executive incentives. Such reform is below the level at which Sumner is concerned. He’s concerned about reforming the Fed.

But this post wasn’t about bailouts or incentives. I’ve done other posts on those topics. This one was about money as an emergent behavior. If you have a non-trivial, testable hypothesis about that, please share. Otherwise, I would appreciate you not hijacking the post.

People might definitely disagree with me that there is a huge moral hazard in bailouts, one year bonuses without any clawbacks (not amounts) particularly when enhanced with leverage, bankruptices, loan modifications, and even free healthcare. And i’ll gladly entertain the discussion. I would anticipate it leading to an argument whether advancing humanity as a whole is more important than allocation at any point in time. Don’t get me wrong, i don’t think all those things are bad. Just presenting some examples of incentive/freerider/agency problems that are widely known and discussed.

My biggest concerns are the one year bonuses that execs and money managers get, not because of the amount, but because it encourages risk taking by having limited to no downside and a huge upside.

However, I don’t think i ever said anything about PERSONAL definition of just. I am quite confused, because i dont’ know where you got that. If you don’t see why the examples above may seem unjust, i will gladly ELABORATE. I said that monetary economists don’t concern themselves with the topic of resource allocation and agency problems as much as they concern themselves with growth and i believe it’s like trying to cure the flu with tylenol. Yes you can definitely use the market and “meta prices” to judge what the market is doing, but the what CAUSED the imbalances are AGENCY PROBLEMS and we need to treat the cause and not the symptom.

I believe I present plenty of arguable, testable, and implementable premises and there’s nothing i like more than a CONSTRUCTIVE argument.

I thought about it some more and i think you may be sayign that i am an idealist because i said “it will be hard to change my mind”. I’m really sorry i wrote that, because i was expressing a prediction about the strength of the argument, not my faith in it. but once again, i didnt’ arive at this through internal processes. it was through debate with a variety of people.

Presumably, you do want to expand your knowledge and perspective through such debate.

I do not think this a good strategy, either for trying to find the “truth” or establish your status as a man of ideas.

I don’t agree that there is such thing as an expert. They may have spent the most time on it, but in economics there are no experts. There is may be a handful of ideas that have survived 50 years. So I’m not digging the argument from authority.

Growth is only correlated with quality of life. I’m not exactly sure how “experts” get causality. If growth and resource allocation isn’t fair or efficient, the same effect won’t happen. Even if the agents within the system tell you that theyr’e happy cause they now have a cell phone instead of a land line. They’re missing the part where 50% of their assets got erased. I think it’s hard to see what CAN be possible while being within the system. (BTW i moved here from ukraine in ’93). I’m talking about the paths that history didnt’ take. Kinda like the argument in the Black Swan about our analysis history focusing too much on the path taken instead of all the paths that could have been taken.

Manufactured inflation is nothing more than taxation of savers for the benefit of the debtors. Once again, i agree that the ends justify the means to prevent collapses, but not to create “growth”. MSFT might have benefited everyone, but i’m not sure if they were entitled to that much money. increased homeownership benefited americans on average partly due to it being our “American Dream”, but noone’s analyzing what should have happened. Incentives are highly assymetric and they lead to unnecessary risks and volatility which require drastic measures of wealth REdistribution for the sake of the “system”. within the system it makes sense, but i’m saying the system is flawed.

i think you’re right. it will be hard to change my mind. :)

I do fundamentally disagree with you assertion that growth isn’t a virtue. Every expert on developing nations that I ask says growth is the number one thing that makes people’s lives better. That seems pretty virtuous to me.

1. You nailed it. They both ignore the feedback of the markets. Economics is built on the faulty logic of snapshot analysis. Feedback is not a secondary pehnomenon, it’s primary. particularly in the age of internet. Thanks to google we dont’ ahve to think anymore and deman slopes the other way. woo hoo!

2. I don’t know about Kling, but I’ve argued way too much with Sumner on his reflation ideas. I agree that the only way to prevent lack of growth is through some sort of devalution (GD1.0, Japan, and Scandianavian countries in the 90’s are the only precedents of the current environment). And that is why the blogosphere has embraced Sumner. Yes- devaluation is all we got. And I agree with him on this as well.

A. We shouldn’t try to devalue. I don’t think that growth is a virtue. Economists oughta concern themselves with resource allocation first, becaues if incentives are … well… f*d up, then any growth will be short lived and/or unjust. So i disagree that we need to constantly target a 5% NGDP growth as he suggest. It’s an absurd goal as well. Nothing in life is constant and linear and technological progress and people’s biases will never exist in a linear fashion. He blames the Fed for “causing” the “big” crisis (fall 08+). His “causal” argument is highly semantic and only true with economic “snapshot” analysis. It’s absurd (IMO of course) to think that the highly leveraged collapse in real estate didn’t domino into a bigger crisis. It’s a bit like an atheist arguing with a priest. We dont’ buy enough of each other’s premises. But even if we assume that the economy was collapsing and the Fed didn’t act fast enough, then why has he been crying “ease more” during the bounce. IT’s true that we’re not ought of the woods, but his framework lacks (and can’t have) timing and it will always have excuses for why somethign wasn’t done perfectly as it should have been done.

B. We can’t really devalue. This is a tougher argument, but i still think that QE in this environment is like unplugging a sink by pouring more water in. The VELOCITY of money is the issue. We gotta make the banks lend and instead everythign gets sucked into the black holes that are their balance sheets. Sumner woudl say that the AD curve has shifted and banks aren’t the problem. I don’t know. i’m not a priest though. I can’t imagine a bubble without leverage and credit participation and this ain’t china.

3. Monetary variables are observable, and they may be “meta prices”, but we still dont’ know what the threshold for ever increasing feedback is. Sumner was complaining about the TIPS coming down when S&P was 900 something a month or so ago. Only a greed panic ensued. We dont’ have a meta-brain to interpret meta-prices for us. we need to clean the economist meta-house and focus them on resource allocation and thus INCENTIVES instead of the glory of prediction business (aka finance).

(i followed sumner’s blog for month, but quit in frustration. so right, yet so wrong – i couldn’t take it)

As you are aware, Fuhrman is not a big promoter of fish. That said, when our family saw him, he specifically recommended that the boys and I eat fish 1-2x/wk, preferably wild salmon as it’s low-mercury, and not subject to the nonsense that farm-raised salmon is.

I used to take an algae-based DHA supplement (despite being able to get it from whole food sources, not everyone’s body has the ability to convert short-chain omega-3 to DHA) but now take a fish-derived DHA/EPA supplement from Metagenics.

Fuhrman on fish:

https://www.drfuhrman.com/faq/question.aspx?sid=16&qindex=6

Marion Nestle suggests getting a Fish Advisory Card (link below) for use when shopping or in a restaurant:

https://www.montereybayaquarium.org/cr/cr_seafoodwatch/sfw_whatsnew.aspx

Still, I have to wonder how they define ‘truancy’ — our NYC public school has a policy that says a child may not report back to school unless he has been without fever for 24 hours. If my kid runs a fever on Monday afternoon, he can be totally healthy on Tuesday morning [or at least healthy enough to take a walk on a nice day] and still not be allowed in school.

Who gets to decide whether or not he’s truant?

City also makes money off the poor by issuing tickets for: jay walking – not buckling up speeding or a variety of other vilolations.

A friend was recently stopped in Vegas for speeding – 45 in a 35 zone. He pulled to the left and stopped between the yellow lines as there was lot of traffic to the right.

He was ticketed for speeding AND refusing to give the right away to an emergency vehicle – because he stopped between the yellow.

They break down the fines from A thru H “A” costing $67.00. “B” (what he was fined) $187.00 and a “H” (not yielding to an emergency vehicle) $632.00!!!!! for a total of $819.00.

The “F” is a whopping $1.130.00!!! Whatever that is for.

He went to court and the judge threw out the “H” and gave no points. Still $187.00 is a lot to pay. Especially for those who are just making it from check to check.

Is this serious?

M

The issue is, as you say, a shortage of collateral. With derivatives on debt the collateral gets spread more than 1 to 1 (which is where it needs to be to stop systemic risk). In the past, unsecured bad debt was punished by sending the debtor to prison. Usury was also a form of recourse that is unacceptable. Bankruptcy and government bailouts have taken us too far in the other direction. Some sort of balance must be struck.

Here’s a proposal, what’s wrong with it? Other than education, no loans are allowed that are unsecured 1 to 1. Eliminate bankruptcy law entirely (personal and corporate).

The only reason bankruptcy laws are necessary is if you have debt you cannot reasonably pay. But if there’s no unsecured debt, there’s no need for bankruptcy law. All risk-funding should be equity-based only.

If you are an equity shareholder in a fallow company, you can either find a fire-sale buyer for your stock so you can take the write-off, or you just have to wait until management decides to close the doors. Remember, the company has no debt, no lines of credit and thus does not have a need to declare bankruptcy. Everything had been funded entirely by venture capital. It’s way more fair to the investors anyway since equity holders share in the upside and are thus compensated for the risk of ruin (which is the same whether the investment is debt or equity).

I own a car, I want to make the $2500 worth of bets (could be on one game or on 25), why sell my car before the games? Presumably I’ll win more often than I lose. When things go bad (something about shit flying into fans), that’s what the car is for. Why liquidate up front?

Same with an education loan to an 18 year old, it’s really an advance on a positive EV bet (Income|College > Incoming|High School) without Mom and Dad having to liquidate the house up front. Everyone seems to win. Throw in some life insurance in case the kid dies?

Excessive leverage can only exist if there’s a shortage of collateral. Maybe the market will learn a lesson?

Education should be paid for, but i’m afraid to be overly confident on this, because absolutes lead to “american dream” labels, which lead to irrational pricing (“what do you mean it’s already priced in?! College education has never gone down in price”) :)

Derivatives on leverage are much tougher to justify. I totally agree – the same asset should never be leveraged more than once, except in Utah.

The one category I would consider indispensable in a developed economy is education loans (I hadn’t thought of that one, so thanks). OTOH, you could say that educating citizens is a social good and should be paid for.

I’m not sure why leverage needs to continue just because it has been allowed in the past. Something about good money after bad :-)

In practical terms, I think it could easily be mandated that derivatives on leverage are not allowed. Meaning you can loan any amount to anyone you want for any reason, but you can’t parcel out or otherwise sell any part of that loan or use it as collateral for anything else. This would go for developing economies as well.

Will see what we can do.

Just to be specific/clear, I have invested in several independent movies and the catch is that whoever ends up distributing it takes all the profit and claims that it cost more than they spent.

So it issue for me is not that I’m funding social good, it’s that somebody is eating my lunch while I’m paying all the bills. If someone makes a profit it should be the investor, not the movie industry, but that never happens.

I’d say that there is an argument for leverage, because we dont’ exist for the economy (developed or not), we exist for ourselves and engaging in trade is a way to increase the usefullness of resources. So is it mandatory to have leverage? No. But does it make sense for the individual and society to borrow money for education and all kinds or resources while a kid – yes. you’re a “developing” agent in a sense. Same goes for old people, who need to extend their assets as much as possible – they should be allowed to lend if they wish to do so. Same goes for life insurance, which is straight up gambling, but it’s useful.

I already stated my second argument is that leverage IS mandatory, because it’s already in the system and outside theoretical economics everythign is path dependent. we are in a crab trap that is leverage. If our system is crumbling because we’re too leveraged, it is suicidal to remove it all right now. Right?

I realize this is a strong statement, and I do qualify that there are mandatory uses in a developing economy. But I challenge anyone to come up with a mandatory use in the global developed economy today.

My concern is that this or any policy which is inversely proportional to the majority’s desire (votes, money, etc…), will only be implemented when it is not needed and is very likely to be repealed or loopholed when it’s needed the most. It’s an equivalent of the three branches of gov’t in order to curb their power in the long run. However, we’ve done plenty to undo that safeguard – terrorist prisons without due process, spying, torturing etc… So, that’s why i think we’re destined to go through more volatile booms and busts than need be.

Then there’s all the talk about creating fallible networks instead of concentrated institutions that put the entire system at risk. I absolutely agree, but the whole path dependent thing is a huge “roadblock”. The only ways of getting there are by either letting institutions fail (missed that chance) or by using antitrust laws to break them down once the credit/economic environment improves. Fat chance.

So instead of working on these two issues (leverage and fallibility) our glorious leaders seem more concerned with redistributing wealth and finding witches. bread and circuses?

Even in the realm of #3, a portfolio of enough stocks that is market neutral should be able to use 3x to 5x leverage safely. I see that as pretty comparable to betting the 25 college football games.

Massive leverage on directional bets, not so sensible.

Now some cliche about a baby and bathwater…

I think it breaks down into at least three categories based on whether the range of outcomes in known in advance and whether the payoffs are a function of people’s perceptions.

1. Known, not a funtion – casino, lottery. Probability theory and normal curves apply
2. Known, is a function – horses, sports. Some probability models can still be used.
3. Not known, is a function – finance. The range of outcomes is function of leverage and perceptions, so the distribution is highly volatile.

I don’t know if i’m definining this correctly, but this would be the first step in deciding how much leverage would be allowed for different types of bets. #1-2 are pretty much under control and don’t pose any systemic risks. Although it would be pretty interesting to see a casino extend credit based on people’s winnings!! Still this is the sole area where probability theory can be fully applied, so risk management and Var would actually work.

#3 is f*d for life. seems like we need some sort of mechanisms that is inversely proportional to the popularity of the investment, which is so anti-democratic it makes me seriously doubt whether such a safeguard can ever exist or be supported by any politican when it’s of the utmost importance.

First, most of us also understand the risks for investors in film projects, and to be honest the fulcrum of Louise Levison’s Filmmakers and Financing is a single line: “Film is probably the worst investment anybody could ever make.” Optimistically she sets the chance of an independent film generating any revenue at about 1/50; I expect both you and I know people who have worked in the studio system, where the chances of any given movie traversing the path from script to theatrical release is vanishingly small.

So why does anybody make movies at all? You sound like you’re speaking from personal experience when you say investors feel screwed by experience with film financing, so you already must have realistic financial expectations: Were you screwed out of catalyzing social good, being “in the mix” on a social/business level, feeling personally useful and productive, or maybe getting external ego validation?

Why would anybody want to invest in open-source software, or projects trying to fix problems in other people’s online infrastructure, or design automation systems… and then to top it all off use their resources to start a nonprofit or stick a GPL on it all and then give it away for free? For whuffie? To build a community? Because they see a social, ethical, technical or aesthetic problem that needs to be addressed? Because they want to use the thing themselves?

All those.

What we’re developing isn’t a company aiming at “blockbusters”. Not only are the numbers for that sort of business model ridiculous, the lifestyle is boring.

What we’re trying to build isn’t analogous to a movie studio, it’s a way of better supporting and completing the innumerable small, functional, simple projects that we ourselves want to use.

To jump tracks for a second with the analogies: we’re the people who are bored with K strategies adopted by most American business folks. We want the world to swing back towards r strategies: more small, energetic, successful projects getting done. More dying, sure. Ideas are cheap.

The other analogy that cropped up last week to describe what we’re building? Consulting for ourselves.

What doesn’t carry over? Seems like a lot of the cultural baggage these metaphors evoke. The analogy to finding a distributor is the trickiest–unclear what lies downstream of what we’re already doing. We’re working on that, and there are some sound ideas floating around here. Maybe we’ll have to make our own distribution channels as well.

I’m familiar with venture360. It’s definitely a better tool than going with gut feel. However, our thesis is that subjective evaluations of any kind are unlikely to offer much predictive benefit (i.e., alpha) at the seed stage. So we are almost completely avoiding this type of scoring approach.

We’ve put two years into a web based application for deal analysis that we license to nearly two dozen angel groups.

You might want to save some time by using what’s already in place. You can watch a demo video and see a sample output report on the website below.

https://www.venture360report.com

happy to set up an account so you can give it a test drive.

Alex

If I want to bet 25 college football games at a Sportsbook for $100 each, why should I have to bring $2,500?

Theoretically we probably shouldn’t deny people the desire to lend their money out anyways, but we need to always remember that our world is going to become more and more interconnected (globalization + internet), so if anything, we should use less and less leverage, because we are more likely to experience long periods of stability followed by wilder panics.

In the real world, it will be the opposite – increased length of stable times is used as an argument for more leverage by businesses AND regulators. This is where it all breaks down. there’s a reinforcing feedback loop between money and power that prevents us from reaching an optimum solution.

The optimist in me would argue that the use of any new technology also resembles a bubble. I was pretty late in getting a cell phone, but a fad/luxury turned into a necessity. So yes, regulators cannot really call out and prevent bubbles, but the same cannot be said about credit and leverage. I cannot think of any example where credit/leverage didn’t go through a bust after going through a boom (unlike new technology, which CAN go through a boom without a bust). So i’m optimistic on asset bubbles (they’re not THAT bad), but pessimistic if increasing leverage/credit is involved.

What’s even worse than leverage is when the bad guys are given another life and bailed out. I mean we DO want to save the system, but this isn’t going to end well. There IS reality and the right incentives are key. Misallocation of resources cannot be constantly saved by reinflation. Even if the system survives and there is no ultimate crash, the incentives for hard work and prudent investing disappear, so we’ll be stuck in a gambling world where a lot less real progress is made (than could be made). It IS an equilibrium of sorts, but don’t count on me on working very hard. I guess if the system can still “trick” people into working hard, then all is well, but we can do so much better. The reinforcing money/power loop is scarier than leverage. Talk about tangents!

In terms of how such tax revenue would be spent, Ace and I were discussion some options that I’d like people’s opinion on:

1) Personal Medical Accounts: tax goes into a “lockbox” for the individual’s later medical costs, and cannot be used for any other purpose. If you die with a surplus, money goes to a general “backup” fund.

2) Good Food Offset: You buy a Twinkie at the register and are taxed a dollar, which you can use as a coupon to buy foods that are good for you (exact formula and details TBD).

Thoughts? Alternatives?

Could easily be used for a food tax…

Hint #1 Warren Buffett was on vacation.

2. Absolutely. Evolution leads to dead ends all the fittest is only clear in hindisght and only for a limited period of time until the next ice age or so. BUT

3. I would argue that mistakes don’t kill people, guns and leverage do :) The dotcom bubble involved a much more creative and useful invention and was just as speculative as the housing bubble, but i think the biggest driver of the SEVERITY of resource misallocation and subsequent blowup was LEVERAGE. It’s human to make mistakes. It’s not human to live on 3-10% margin. 10% we MIGHT be able to get away with. Everything else is lethal.

4. Corporate incentives. not as important for survival of the system (as long as we remove excessive leverage), but hugely unfair. 1-3 yr bonus compensation packages need to go away. introduce vesting and clawbacks.

Simple as that. BUT, #3 is being adressed naturally through the credit cycle; if and when leverage is removed through regulation, you can rest assured that it will be brought back in a different form (instrument) or generation (say 70 years later). if we are lucky that is.

The two articles you refer to do not provide any substantive argument against this point. The Telegraph article provides absolutely no evidence. In fact, it says that organic proponents should not argue on the basis of nutrition. Fine with me. Of course, it then goes on to insinuate underhanded political motives to the FSA. Please.

The Huffington Post article refers to (but does not properly reference) a few studies that show organics to be higher in antioxidants. In fact, the FSA sponsored study acknowledges this difference. But that wasn’t the metric used in the study. Remember, _systematic_ benefit was what the FSA was after. The HP then goes on to rail against the FSA for not acknowledging the environmental benefits. So what? That wasn’t the question the study was asking.

This is pretty typical ideologically driven press. Don’t like the evidence? Try to change the subject or engage in ad hominem.

I would love to see a well constructed retail level study on the nutritional content of organic versus conventional foods. If there was a statistically significant and clinically relevant finding for organics, I would increase my demand for them. Of course, I’m motivated by evidence. The question is whether organic proponents would reduce their demand in the face of a contrary result.

https://www.telegraph.co.uk/foodanddrink/5942078/Ignore-the-FSA-It-is-still-better-to-buy-organic.html

OK, that’s kinda funny. I can totally buy that.

I agree with you that there is a philosophical split on this issue and that’s why we are not getting anywhere on health care reform. The problem is, those who are opposed because something “seems a little too socialist” are hiding their head in the sand and not realizing that the status quo already is half socialist, but it’s the wrong half.

I can’t think of anything more UN-American than someone remaining willfully ignorant of the risks they are taking and then when their actions cause them harm down the road, expecting everyone else to suffer and bail them out.

(ps, Ben, thanks for sharing the MediaCurves link, that’s a cool application!)

***I am pro-choice too, but more importantly, I am pro INFORMED choice.***

I’m glad you brought all this up, because I do think these are the types of policy issues that will be in play in the 21st Century Q1. And glad you weren’t offended by my screw-off commentary … just playing devil’s advocate while challenging myself as, honestly, for other reasons I am thinking about health for the first time in my life these days.

Though I know you started this just looking at the effectiveness of a policy, I think what you’ve stumbled on is how a philosophical split will play out in American politics. Because while you may be right on the math and science, I gotta think at least half the country will resist your overall view on taxation. If you and Tiltmom win, great, fair enough. But I hope you don’t because:

1) you say it yourself, you want to tax risk; and I’m of the belief that taxing risk will discourage risk … and to me that is downright un-American. Imho, risk is part of the American ethos, and you have to take the good with the bad.

2) the notion of informed choice vs. choice … well, i can think of a few examples where the “informed choice” would be to have an abortion, as opposed to keep the baby, but let’s not even go there, LOL …

It’s all just a little too socialist for my taste.

(Thanks for the reading recs, btw, TM.)

And yes, I support a risk-tax for engaging in activities like bike riding and mountain climbing for the exact same reasons.

As an aside, and as someone who sometimes engages in riskier-than-average activities (skiing, driving in traffic, etc), I actually WANT to be taxed at a level that is commensurate with the risk involved. Why? Because then I will have a much better understanding of the risk than I do now and I will be able to make an informed decision on whether the benefits outweigh the risks. Currently I am flying blind and deluding myself. As we all are.

I am pro-choice too, but more importantly, I am pro INFORMED choice.

And here’s some interesting but not-as-nuanced-as-I’d-like info on caffeine:

https://www.diseaseproof.com/archives/hurtful-food-eat-for-health-the-caffeine-drug.html

Again, if you liked Pollan, the best books I’ve read on the subject are Marion Nestle’s _What To Eat_ (a serious must-read) and David Kessler’s _The End Of Overeating_ that I referenced above.

_Stuffed and Starved_ by Raj Patel is also good, as is _Appetite For Profit_ by Michele Simon.

The trick, we’ve found, is using the metaphor of film production companies. Venture and even many local economic development-driven angel funds tend to operate like movie studios managing kept projects and permanently-held properties. But independent film production is much closer to the description you’re giving: a pool of savvy but risk-friendly investors, a suite of small, innovative and often socially-motivated projects not companies, and an intermediary.

The intermediary we’re calling the production company. Our PC is setting up a portfolio of three small but game-changing open-source and socially astute projects right now, and building the suite of investors, and the best practical advice we’ve found so far comes from books on independent film business plans.

The other trick, of course, is something that many folks immersed in the company-driven culture of the coasts might miss: we’re all independents, and we will remain independents after our projects are done. But we form a collective, a community of reputation and practice that can fill the “end credits” of any reasonably-sized project in a day or two. Traditional businesses, I’m betting, feel obliged to pay down the risks associated with managing emergent teams; they tend to accumulate expensive employees or contractors, and get bogged down with expenses.

after all, his point about life expectancy decreasing in impoverished parts of the world practically contradicts the original premise — because they aren’t drinking Coca-Cola there. i semi-jest and understand there’s far more complexity to the matter … but at the same time, what you’re essentially asking me is to declare the way i’ve eaten my whole life as unacceptable — and that’s gonna be a bitter pill for many to swallow.

you want me to pay more because i’m running up health care costs? well, with all due respect, screw you! it’s in my interest to fight back, and say why don’t we make all the “healthy” people pay more? after all, they are the ones suffering injuries from bike-riding and mountain-climbing accidents.

just as you can find research saying caffeine is healthy, i’m sure i can find (or theoretically pay for) research that says it is not. After all, I KNOW it’s addictive. but you don’t want me to get it from Coca-Cola, but you are OK with me getting it from Starbuck’s … so long as I don’t put too much chocolate and sugar in it?

even if i were to agree with all your points about soda, i just can’t like the premise it sets up for who says what about what i can put in my body.

pro-choice, ya know?

and what about Malthus? plenty of research to suggest that more people on the planet for longer periods of times can be pretty costly.

again, i know i’m going off a deep end there … but with so much uncertainty related to what you propose, it tells me this has to be a local issue at best.

Pollan’s book was definitely an eye-opener, and it’s frightening to think that mcdonald’s can change the genetic make-up of potatoes … so maybe there’s a corporate issue there for the Feds to contend with.

I will point out that in the short term, a significant tax on bad-for-you foods would raise significant revenue that could go to easing the health care burden caused by the poor nutrition. In fact, it could be set up so that each individual’s food tax revenue goes into an account that can only be used for medical expenditures…

As an entrepreneur, the $5K doesn’t really help out that much (the legal fees would be $5K+ in itself), but the promise of additional investment when certain milestones and goals are hit would be appealing.

For the micro-investor, he sleeps happy knowing that he can still put in a lot of “options” and only invest lots of money when something picks up traction. The entrepreneur sleeps at night knowing that he has a potential investor with some skin in the game.

Both sides are happy.

I’m not sure if I’d want many micro-investors, but I think this set-up would work great in the early stages of a company where if I just have 2-3 micro-investors, a promise for further investment and my own funds. It would take away the burden of raising additional funds.

Rafe – Since this type of structuring is relatively new, it would be very interesting to hear first-person accounts from you of how this concept evolves and is put into action. You could on the verge of triggering an entire new approach to starting up businesses :)

The great, addictive triumverate of Sugar-Salt-Fat is going to win out almost every time for reasons that have nothing to do with how cheap or expensive it is. Most food today is produced in labs where millions of dollars are spent inventing new ways to make food addictive. And despite what our body needs over the long-haul, there is some evolutionary design built into our desire for sugar and fat. [What evolution didn’t count on was its constant availability.]

Take a look at Vegas. Looking at upscale restaurant prices, there’s no question that there’s plenty of disposable income for food. Yet it’s nearly impossible to get a healthy meal there.

That’s not about income. That’s about people making choices that have nothing to do with economics.

MUST READ REC: The End Of Overeating by David Kessler

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1422974

Abstract

A popular policy option for addressing the growth in weight has has been the imposition of a “fat tax” on selected foods that are deemed to promote obesity. Understanding the public economics of “fat taxes” requires an understanding of how or even whether individuals respond to changes in food prices over the long-term. We study the short- and long-run body weight consequences of changing food prices, in the Health and Retirement Study (HRS). We found very modest short-term effects of price per calorie on body weight, and the magnitudes align with the previous literature. The long-term effect is much bigger, but it takes a long time for the effect to reach the full scale. Within 30 years, a 10% permanent reduction in price per calorie would lead to a BMI increase of 1.5 units (or 3.6%). The long term effect is an increase of 1.9 units of BMI (or 4.2%). From a policy perspective, these results suggest that policies raising the price of calories will have little effect on weight in the short term, but might curb the rate of weight growth and achieve weight reduction over a very long period of time.

Clearly to make a diff the tax would have to be significant…

Another issue is on the food production end. Seems even in health oriented grocery stores there is still too much sugar in foods like yogurt and chips. How about more product options with significantly less natural sugar?

One improvement might be to add an alternative between surupy regular coke or diet coke using sugar substitutes…..use 8 teasp of sugar in a coke instead of 16.

I think you misjudge the effect of a tax. It will make unhealthy foods more expensive, but I do not believe it will bring down the price of healthy foods.

Michael Pollan argues that we don’t pay enough for food and I suspect he’s right. This is, in part, because corn and soy are so subsidized and those ingredients appear everywhere. If you remove those subsidies, the cost of fast food goes up, but it still costs an organic farmer what it costs to grow spinach.

Huh? Aren’t you contradicting yourself? Pollan says we don’t pay enough for food. And if we tax it, the price goes up, esp of the bad stuff. Isn’t that mission accomplished?

Let’s remove the subsidies entirely, then tax foods that are bad for you in proportion to their total nutritional score. BTW, corn syrup and soy milk would be taxed much higher than whole corn and whole soy beans.

As for lifespan, the gains are in the developing world where diseases of poverty are slowly being eradicated. The diseases of affluence mostly stem from poor nutrition and lack of exercise and are what’s keeping us from making better gains on life expectancy. For instance, type 2 diabetes — which is almost entirely the result of poor nutrition — reduces
your life expectancy by 30-50% vs that of a non-diabetic person from the time you are diagnosed.

the one thing that prevents me from getting behind your efforts, btw, is that the average human lifespan continues to increase. it’s the factoid that has to be overcome for this to be seen as anything more than just a money grab, imho.

https://www.washingtonpost.com/wp-dyn/content/article/2009/05/17/AR2009051702053_pf.html

https://www.foodpolitics.com/

Here’s a recent post on the subject:

https://www.foodpolitics.com/2009/07/whats-new-with-calorie-labeling/

And here’s a bunch on the soda tax issue:

https://www.foodpolitics.com/tag/soft-drinks/

I don’t specifically know how it kills people, but such a process has obvious negative consequences.

I’m ready to start investing, where do I sign up?

If the idea fails, and doesn’t pick up traction, the micro-investor eats the cost. If it starts to pick up, the micro-investor can have 1) first option to invest into the company and 2) buy shares at a pre-determined discounted rate.

– Totally agree with @Jinal that a small seed micro-investment for 10% of equity is not favorable for the entrepreneur. One can max out credit cards for $5K without giving away equity. Also, @DanielHorowitz mentions that incubators such as Y-Combinator, TechStars, etc take on average 6-7% for $10K – $15K. They are getting this equity because they offer a lot of the “intangibles” such as access to successful entrepreneurs, community around the “incoming class”, and a pitch event at the end of the summer in front of the entrepreneurial community (TechCrunch and Guy Kawasaki are known to attend these pitch events). Looking at it from an entrepreneurial standpoint, this is a no-brainer to give away 7% equity to get this in return. The $10K doesn’t matter as much as the opportunity to learn and gain exposure for my company.

– After watching Entourage last night, I realized that the ideas don’t really matter as much as the entrepreneur, and execution of the idea. The scene with Ari Gold asking Turtle to show him some “proof of concept” is how all investments should work.

– So, I think there’s a massive opportunity within the “Y-Combinator” space that doesn’t involve moving to Boston (yuck!) and giving up your life for a 3-month period. As far as targets, it would be after the “young individuals that give up their job to work FT on the project.” Rather than focusing on pre-seed and idea companies, it would be nice to put your money on entrepreneurs that already have an idea in a place with some sort of traction. Your due diligence would be split between the idea and on the entrepreneur to successful execute it. The micro-investor should also be willing to offer additional intangible resources such as time and connections to ensure a higher success rate.

– How about this as an idea to structure a real simple agreement between the entrepreneur and micro-investor? Investor provides enough runway for a 3-month salary (roughly $7.5K per founder) or $15K total for 3-months. If certain goals and milestones are met, investor is willing to invest further ($10K – $250K) to grow the business for X amount of equity over X amount of time.

If the idea fails, the micro-investor eats the $12K, and both sides move onto the next project. (This is the same model for “staking” poker players in major tournaments.)

This allows the entrepreneur to focus on building and growing the business versus worrying about raising capital. Also, if the company gets further investment, the equity is diluted but the shares are worth much more, which is the goal of everyone invested into the business.

(1) Total entropy:
The total amount of disorder in the system (which is always increasing if the system is closed– 2nd law)

(2) Rate of entropy:
The rate at which order is being transformed into disorder. This is basically a derivative of (1) and time.

I’m thinking about these two measures in relation to the “flower” in my previous post. When the blossom is at its apex of beauty/symmetry/complexity (the moment just before it first begins to whither), its rate of entropy (2) is at its highest level. At that moment, the flower has the most “order” available to be transformed into “disorder,” and its rate of entropy (2) is highest. As it begins to whither, less and less order is available to be transformed into disorder, so its rate of entropy (2) decreases.

But all the while the system’s total entropy (1) is increasing, however high or low the rate of entropy (2).

So, with that said….

@rafefurst: You write: “As entropy increases, symmetry also increases.”

I’m wondering which entropy you’re talking about here. If you’re talking about total entropy (1), then in a sense you’re claiming that symmetry is always increasing (because total entropy is always increasing), which clearly isn’t the case, is it?

If you’re talking about the rate of entropy (2), then I would agree, but would flip around the statement:

As symmetry increases, the rate of entropy increases.
(think of the blossom above)

[Then again, maybe symmetry is always increasing… if you see the end state (after entropy is finished) as perfectly symmetrical, which it may very well be. For example, if the universe doesn’t contract and continues to expand and eventually all subatomic particles have broken down to their constituent parts (quarks and leptons and whatever) and all these particles are spread across the universe in perfect equidistance from each other…. at that moment entropy is complete, but we also have a completely symmetrical physical state, no?]

Re biodiversity: could you think of an ecosystem as a larger version of the flower above? As the ecosystem grows and diversifies by way of speciation, its symmetries become ever more complex and and its future ever more unpredictable. At some point, it reaches a kind of apex or peak where it has the most available order (complex symmetries) to transform into disorder. From that point on, it goes into decline as total entropy continues to increase while the rate of entropy slows down with each ratchet down in diversity and complexity.

This gives us a rate of 3 kidnappings per 1 million children.

2002 DOJ report has the number of child abductions @ 115, and the 2000 U.S. census has the child population at 71.8 million.
This gives us a rate of 1.6 kidnappings per 1 million children.

So, give or take, we have perhaps a 50% decrease in child abductions.

n.b. I am counting “stereotypical kidnappings” which involve “a stranger or slight acquaintance, who detains the child overnight, transports the child at least 50 miles, holds the child for ransom, abducts the child with intent to keep the child permanently, or kills the child.” (DOJ, https://www.ncjrs.gov/pdffiles1/ojjdp/196465.pdf)

I think medicine has lost sight of the fact that people who “die of caner” really die of systemic burdens imposed by pathogen proliferation.

Oncologists focus on “reducing tumor burden” but never tell the patient that reducing the size or number of his tumors does not necessarily extend his life one bit.

Perhaps the best place that explains cancer without over-simplifying is Arny Glazier’s book.

In my current understanding, there is an element of all three of the alternatives, and many other factors as well in terms of what kills you about cancer. In some ways it’s better to ask, how does normal multicellular life work and sustain itself? At the highest level of abstraction, I view cancer as the autocatalytic unwinding — or the photo negative — of multicellular life.

There seems to be a number of alternatives.

1. The tumor’s physical growth interferes with local geography and signals are lost.

2. The tumor’s demand for increased blood consumption is unstainable.

3. The tumor is merely reflecting some failure in the nervous feedback system.

Got any ideas what I could read to figure this out?

General concern is the audience: not only does one has to be concerned about experts vs. non-experts, as expressed in your concern about jargon, but more subtly, and specifically, about addressing ‘mainstream’ cancer researcher vs. ‘outside-the-box thinkers’. Some of the new ideas you present are easily understood by the latter, but would be utterly confusing to the former who rely on a limited set of simple (simplistic) concepts carved in stone. It may be easy for you to understand the new ideas since you do not carry the baggage years of reductionist, gene-centred research, but without explicitly stating what is the current paradigm shared by the crowd and what are bold new ideas, you may confuse many readers while preaching to the choir. In other words, without providing a historical frame the arrow of innovation, the change of mind, the zeitgeist, are a bit lost.

In terms of pedagogical background, in Fig. 1 it would help to designate what is a GENE. The concept of a gene while outdated as you correctly said, is still generally valid. The ‘outdatedness’ refers to some subtle features (splicing, regulatory RNA , etc) which are actually not very relevant. Thus it still may help to point to the DNA and indicate that a gene is a fragment of that DNA (bottom of Fig 1). Otherwise, the word ‘gene’ never appears in the background explanation. Also, in conjunction with background information, the equation “genetic network (loosely equivalent to the “proteome”) is a bit crude. I am empathetic but also know that it can easily become subject of distracting hair-splitting comments by narrow minded readers.

One unfortunate confounding factor is that the treatments we rely on are often pretty harmful (chemo, radiation, surgical removal), so it’s hard to say in some cases whether the patient died of the disease or the cure (or more likely some combination).

Serious question.

I understand your desire for 10% equity, but I think you need to offer a bit more money. Also, you need to figure out what other services might be available to the founders. (e.g. legal, mentorship)

@Jinal Incremental commitment doesn’t necessarily mean incremental equity. You could decide from the beginning what percentage of ownership in the venture is for sale and stick with it throughout. For instance, you could need $5K to get a prototype done and decide you’re willing to sell 10% ownership. You split this 10% into 1000 shares at $5 per share. Now say the prototype is well received and you need another $5K to bring it to the next level and launch. So you offer up another 1000 shares at $5 per share. Now the 10% of the business is composed of 2000 shares (I believe this is called “diluting” in investor speak). You must first present these new shares to your current shareholders allowing them to purchase these new shares up to a max of the number of shares they purchased last time. This allows them to retain their initial share of the ownership. For instance, if an investor bought 100 shares in the first round, they own 1% of the business. If they purchase their max of 100 shares in the second round, they retain their 1% ownership, if they opt out completely, their ownership will be reduced to 0.5%. Once all current share holders have decided on how many shares to purchase in this round, whatever shares are left can be purchased by existing shareholders (looking to increase their ownership stake) or new shareholders.

@Rachael, my personal preference is to set (and reset) these expectations verbally and candidly, but not legally. Legal structure, in my experience, tends to absolve all parties from personal responsibility and encourages them to game the structure to their own advantage rather than relying on trust and “social capital”. Furthermore, because of inherent vagaries and uncertainty at the seed stage, it’s impossible (in my experience) to set up legal structure that doesn’t quickly become more burdensome and inefficient than something that helps the success of the project. Every project has a natural break-point where it makes sense to paper things legally, and I would be seeking entrepreneurs with whom I feel comfortable that we could determine when that is together.

@Daniel, no I was thinking $5k was worth about 10%. Maybe this is too high, but if we are now just haggling over price, it seems like the model might have legs.

@Daniel, I completely agree with your assessment of the three “underserved markets” and the opportunities they represent. Furthermore, I expect that the most common use of funds will be to pay rent (which is very high leverage and great, IMO), but it’s even better if rent is covered, as in the markets you site.

One issue/negative of funding people with full-time jobs is that it’s a real risk that their employers will claim ownership of the project if it’s successful, regardless of whether the employee worked on it in their “spare time”. The lines between “company time” and personal time are getting fuzzier each year. Personally I love the student-entrepreneur market on just about every level.

a) Students (Undergrad and Grad) – You don’t seem to cover this group in your proposal, but I think they are attractive for a number of reasons. They are already part of a large community that offers them many valuable resources and services. They likely already have their basic living expenses covered and can devote the investment entirely to the company. Finally, if the project gains traction, they are ideally positioned to take up the project fulltime.

b) Young employed individuals with a side project – While perhaps this group has the highest risk profile, I don’t know that they are being served by anyone. Again, they likely have their basic expenses already covered, and can devote the majority of the investment to the company. If the project gains traction, they can take it up fulltime. Since, they already have a job, there is a risk they won’t take the side project seriously and might squander the money, but there are certainly some people with great ideas that just need a little push.

c) Young individuals that give up their job to work fulltime on the project. This is the group that is currently being served by YCombinator and a host of other “pre-seed” companies. They are appealing because they are essentially giving up other opportunities to devote all their time on the project. Unfortunately, this requires some of them to spend the investment money on living expenses, leaving precious little for the newly founded company. Additionally, when the money dries up (~3 months) these people must either give up on their project or acquire new funding asap.

I think each of these three markets is lucrative and represents a viable opportunity.

I loved your post. Honest, straight-forward, and funny.

I sit on all sides of this analysis, I am young (relatively:), I am an Angel Investor (directly and indirectly), and I am an entrepreneur.

Most importantly for this context is that I support the fragile relationship you have discussed between the entrepreneur and the investor.

As a third party to the relationship in your post, I carry the burden of making sure everyone’s expectations are communicated and subsequently met.

All relationships are choreographed around a dance involving expections. Commuincate the steps – everyone falls in line. If you just start moving with no direction – it’s a cluster F*&%.

For these reasons, I encourage you to think differently about the legal deal structure. Yes the legal documents protect you, but they also give a clear set of guidelines for the entrepreneur to follow.

When legal documents are prepared well and fairly, they are a great way of helping to ensure a better outcome to the relationship.

The CEO’s of your portfolio companies want to live up to your expectations, so it is very important you tell them exactly what they are from the time of investment to various exit scenarios.

Hope that helps,

Rach

I am not against the idea of equity. I would rather have that then debt. Even in the case of micro-equity – but then the current model that you have gives major equity in exchange for micro-investment. That is not aligned correctly and that is the part I take issue with.

Another way to look at micro-investing is also perhaps not in terms of money and in terms of need. I would be willing to share 2% – 5% of my company (with the right partner) in exchange for all branding, identity development and design. (depending on my needs)
To me, that is more quantifiable.

Rafe – still waiting to hear your definition of ‘traciton’ :)

@brad I agree with the notion of incremental commitments – but does that mean incremental equity?! I’d lose 100% of my company in 10 months if that was the case. Please clarify your stand.

It’s a great question you ask, whether the entrepreneur would rather take micro-equity or micro-debt investment. What about you? Brad? Matt? et al?

As an investor, debt doesn’t excite me in the least. It’s vulnerable to the negative black swan; I take all the risk that you don’t go bankrupt, leaving me hanging, and you get 100% of the upside — minus my measly percentage rate. That said, I think there are many investors who would dig the Kiva model for the same sorts of projects I’m talking about here. And if I’m advising you on which to take, and assuming all you want is money, it’s a no-brainer: take the debt!

There are legal pre-ipo markets in Germany.
Apparently illegal (“gray market”) but popular versions of these operate in India as well. (One of the many things I learned during my recent trip to Bangalore.)

It may be that both the regulatory environment and the public appetite is more ripe for this idea now. I say go for it!

I agree though, it could be difficult to define what “traction” is. However, I think this could be avoided with incremental commitments. So the angel could commit 2K to the first month which produces a prototype. If they’re happy with it or at least thinks it has potential, they could commit more. Otherwise the entrepreneur will need to find another angel that believes in the prototype.

Yes, Kiva does not discriminate who they allow as entrepreneurs, however they do market it as helping the third-world. I don’t want my proposal for a new web service competing with a Ugandan village’s proposal to build a new well. It’s just not right. Furthermore, I don’t want interest accumulating as I’m working on a project. I want angel investors who are excited by what I’ve set out to do, believe in it, and want to be a part of it by helping out financially. If the whole thing falls through, I’ve lost man hours and they’ve lost cash. If it succeeds, we both own a share of the business and we both win. I don’t mind sharing ownership in a business that would never have gotten off the ground without financial help from others.

I’d love to hear what you meant by a business gaining traction in 3 months. What does traction equate? Sales? Press? Pr?

Brad – FYI, Kiva allows loans to US based small business owners as well. And would you rather pay your money back to an investor with interest or let the investor have 10% equity in your project?

I recently started working as a freelancer and was able to build and launch a startup (more of a prototype really) in between client projects. I thought about getting investors but found it hopeless without a prototype to show. The incubator organizations like Bootup Labs, Y Combinator, and Tech Stars are great but are very limited in the number of projects they take on, require you to have at least one business partner, and relocate to their location. They also seem to involve a little more hand-holding than I need. What I need most of all is seed money, so I can treat the startup as a client project and get it off the back burner. With enough seed money, I could treat it as a full time job and free myself of client projects altogether.

I think there is a real need for a service that allows angel investors to connect with entrepreneurs, get behind their startup idea, and provide seed money for startups in exchange for a stake in the venture. This is an excellent startup idea in its own right.

A little about me…

I am a web developer, web designer, and entrepreneur. I’ve known I was an entrepreneur since I setup a lemonade stand in my home town when I was 7 years old. I moved on to the internet in my teens, teaching myself web design and programming, and producing several popular non-profit web sites in the late nineties. For the past decade, I’ve been working at companies and dreaming of new entrepreneurship opportunities but never having the time to work on them.

Regardless, it’s sort of not relevant to the fundamental opportunity as I see it. I was just trying to shed some light on my personal motivation equation and suggesting that there are many others like me if you allow the mixture of coefficients to vary (where ROI is not the real reason we do it).

Daniel Horowitz reminded me that Y Combinator and growing legion of clones are already playing in this exact space. I’m talking about becoming part of that growing legion, with some differences in focus and model. I think that the gap is probably more huge than most people realize, that there’s room for billions of dollars in this space, and that the Y combinators of the world today are just scratching the surface.

That said, from what I can see, there seems to be an opportunity in the set union of {social entrepreneurship x NYC area}. This is the space that Michael and many others are in.

Let me know if this clarification doesn’t obviate all the remaining questions/criticisms you have and I will try to answer them.

Great article with some very interesting topics touched upon.

A few of my thoughts as a business man, investor and professional entrepreneur.

For this point-

“I expect the first look for follow-on funding if the project gets traction, and I understand the price will go up since the risk is lower.”

If an outside investor invests 25k in my company, I invest 50k in my company and my dad invests 15k in my company and you invest 5k is it really feasible to request first look at follow up investment opportunities. I do not see how this request is viable in any investing scenario as I would assume there will always be someone with more invested then you that should ultimately have first look at further investing.

For this point-

“I am looking to get about 10% of the equity of the project for my initial investment of $1K to $5K.”

I do not know a person in my age range (28-35) that even can live off 1k a month. 1k to 5k for any respectable business is a very very trivial sum (especially one expected to come with a tribe of people). 10% of an entire company is not in any way trivial. It seems you are asking for way to much given the amount of money risked.

For this point-

“I expect the tribe to know if the project gets traction within about 3 months, if not it needs to be ruthlessly abandoned.”

Are you asking for your 5k back here? Why would you demand something be ruthlessly abandoned when you have so very little invested and so many stipulations maintaining how little you have invested. Again if I have a 100k in my project and you have 5k why would this demand be met after three months.

The main confusion I would have as an entrepreneur coming to you for money would be determining if you want to be an active or passive investor. At times you seem to want to be very active-

“Those that do leverage my strategic help are definitely more likely to get funded by me in the future”

“I expect the tribe to know if the project gets traction within about 3 months, if not it needs to be ruthlessly abandoned”

“being “in the mix” on a social/business level (30%)”

“I have to like and trust the entrepreneur first and foremost “

And at other times very passive-

“With a micro-investment, I’m happy to throw it on the wall and see if it sticks.”

“And by not boxing them in with rigid contractual obligations and manufactured incentive schemes, I am increasing the number of discretionary decision points the entrepreneur has.”

“I feel no qualms about doing little to no diligence or business model validation”

It just feels like a greater distinction needs to be made on if you stand to be a more passive or active type of investor.

Last I think to much emphasis/time/writing is being placed on the fact that you must like the people that you do business with. From my experience and when dealing with large successful organizations and business networks your not going to like everybody and most often your greatest business and life successes come with how you deal with the people you don’t like that you must work with (I have not seen a business where this dynamic does not occur on some level and at some point constantly). Life is the same way. It never amazes me how fast a humans likes and dislikes can change over minute items and rapidly. From my perspective as a business man I think it goes without saying that the business should be legal, moral and treat those involved fairly and respectfully. These are givens in business in my eyes and something that does not need to be spelled out in detail.

Regards
Matthew Weiland

I think the shift from genetic to cultural evolution was much more significant than whatever cyber-transition the singularity folks are talking about.

From this, it follows that some angels may indeed have money as their #1 motivation. Plenty of rich people don’t absolutely require the returns their investments generate. But you can bet that their primary reason for choosing one asset over another is it’s risk-adjusted ROI.

The percentages I gave were my own personal mix but I expect other would-be micro-investors to be all over the map, so don’t get stuck on that particular motivation profile. While I do think that most angel investors will SAY their #1 motivation is monetary ROI, that can’t really be the case. For one, given the risk of ruin, no angel investor needs the expected return they get from angel investing to make a living, it’s a glorified hobby. And even as a hobby, if you look at the risk-adjusted expected value, it’s not nearly worth their time (let alone opportunity cost for their time). So there must be intrinsic motivations too, and I would say that if we (angels) are being honest with ourselves, money is never the main thing. I know this doesn’t answer most of your questions as an entrepreneur, just clarifying the angel motivations piece.

A few things: if the 40% of your reason to invest in 1K – 5k in small businesses is doing social good, I’d suggest you go to kiva.org and find US based (or non!) business to feel good about your money. You wont get 10% equity but you there is a 90% chance you will get your money back in 6-12 months.

Next: if I ever started a business, there is absolutely NO WAY I’d let you have 10% of its equity for an investment of 1K – 5K. My credit card company lets me borrow more than 5K for zero % APR. The only risk I run is that if my business loses, I still have to pay them the 5K back but I don’t owe the Credit card company anything if my business is successful. On the other hand, I tend to lose 10% of my equity to you for such a small investment. This could either be a genious or an incredibly stupid move for me.

Also, I don’t know much about you. (I couldn’t find an about page here) But even angel investors and VC’s have their limit in terms of networks and people they can reach. If I knew more about the kind of networks you have access to, I MAY consider the 5K investment, but even that is going to be a hard sell since I am a pretty strong networker and have the gift of tireless persistence. But I’ll grant you that.

Another point – I’m not sure 3 months is enough time for a business to gain traction. How do you quantify this anyways? I’d love to hear what “traction” is according to your definition?

Lastly, I’m not sure I’d want a micro-investment. Maybe this is just me, but people my age (I am 26) are also very wary of investors/ VCs and private equity. If I am going to go down that route, I am going to be very smart and do my due-diligence as well.

And I’d want an investor who is interested in me and sees value in my business not from a surface level but from an in-depth, vested level. Your 5K investment makes me feel like you are not vested enough in my business and probably won’t care if it failed. That is not the note I’d want to begin an investor-entrepreneur relationship on.
I have to be able to trust and have confidence in my investor as well. And I’m not sure this type of arrangement will do that.

I think there this concept of micro-investments is great in theory (and in practice with organizations like kiva.org – but the motive there is purely altruisitic) I’d be curious to see you refine this further and find a way to balance your need to do social good and still profit from it.

Would love to hear your response to this.

Merging of technology works as well. But it’s kinda like an animal finding an unlimited food supply without the accompanyign water supply increase and thinking that it’s set for an unlimited and wonderful life. I think our BRAINS wont’ be enhanced to the degree where assymetrical incentives and god know what kind of motivations for people with power WON’T create misallocations and opression. We’re not just “humans”. Civilization has a hierarchy that needs to evolve as well for quality of life to truly improve. Yes, compared to history, we seem to have come a long way, but how do we quantify how much we’re missing out on if the incentive system was somehow perfect?

I’m not disagreeing. But bringing up the idea that we also have evolving social structures that need attention. I DO hope that the internet can bring the democratic process to more “decisions” (kinda like google), but then we still have the “free rider” problem and majority opressing the minority. This is not horrible, but i see it as a huge bottleneck for FAIRNESS of life. Kinda like the Churchill thing that i think he said “Democracy is the worst form of government, except for all those other forms that have been tried from time to time”

Now, you could argue from a practical point of view that the optimal incentive plan is not achievable. Fair enough, but then I’m worried about how we decide what is the “greater good”. Because we’re talking about manipulating people’s irrationality, I’m quite leery of any such process’ ability to rationally determine the greater good.

The meta-irony that I just discovered in searching for this is that the aphorism is a massive simplification of what Einstein actually said!

It can scarcely be denied that the supreme goal of all theory is to make the irreducible basic elements as simple and as few as possible without having to surrender the adequate representation of a single datum of experience.

Kev, does that sound fair?

Now the irony you mention seems to suggest that we should stay away from these proverbs, because you either get it or you don’t and if you don’t then there’s a high likelihood that your end up being the executioner.

Besides, i’ll gladly drive a bus through an innocent person to save two. But not at all times :) i think the best one liner would be to communicate that issues are much more complicated and two sided than any proverb or one sided article/book/movie/speech/party could ever suggest.

I completely agree about greenwashing & prius’ & talking about carbon footprints. It’s an unfortunate reality, but an opportunity for making money for others as well — so many double-edged swords these days.

I’ll bow out at this point, thanks for the good discussion.

And I wouldn’t be too sanctimonious about not engaging in status seeking. Humans are incredibly inventive at such things. I see a lot of clear status seeking among environmentalists to see who can be the most visibly eco-friendly. In fact, one of the reasons I think the Prius was more successful than the Civic Hybrid was that the Prius clearly looks different from any other Toyota. So people know that you are into being green.

And all this talking about how low people’s carbon profiles are? That’s status seeking.

For those who “need” the rules, society would be lucky if such people could even approximate the Golden Rule most of the time, let alone grasp the difference between that and the Diamond Rule (let alone, execute that difference).

You may say it’s therefore silly to even propose such a thing as the Diamond Rule. But I do believe that if there is a beacon to aim for way out on the horizon, it should at least be the right one. And if you are going to trash the existing beacon as Penn does, it would be irresponsible to not try to replace it with something better.

To those who criticize my word choices (Alex, Andy, Daniel), please offer an alternative. You KNOW what the intent of the Diamond Rule is, and you KNOW that if people follow the intent correctly, it would be a good thing. So what’s correct way to convey that.

Also, you are assuming that others don’t know facts that you don’t know.

Daniel Gavaldón at 9:32am July 15
Interesting thought. However, in a good many cases this would be a matter of insulting the OTHER persons’ intelligence…

Rafe Furst at 10:47am July 15
not really. the “if they knew everything” is more of a Rawlsian “initial position” than a paternalistic stance. nobody can truly put themselves in another person’s shoes. the maxim is a device to help you do better on that front though, to see them in a more objective light. in other words, you and i are different, have different wants and … Read More

Daniel Gavaldón at 11:30am July 15
OK. Perhaps the difference/problem is with the English original above. As you may know, most OTHER languages have TWO verbs/concepts for ‘to know’. One implies a grasp of a lot of factual knowledge, the other a deeper more extensive acquaintance. Thus I could interpret ‘the diamond rule’ (as expressed in English) in 2 very different ways: one a compassionate understanding, etc., the other almost bordering on the patronizing…

NYT Article From Treasury to Banks, an Ultimatum on Mortgage Relief

https://bit.ly/lcD32

@Holden. I always take the happiness vs GDP statistic with a grain of salt. I’m actually reasonably up to date on the academic happiness research (recommended: Bruno Fey’s _Happiness: A Revolution In Economics_). The inter generational measurement issues here are rather daunting. Personally, I don’t know anybody who would rather live in 1959 than 2009.

I have to say, though, that I’m a bit of a “more with less” kind of person for a number of reasons. At the simplest level, I think it really helps to be able to evaluate our lives and direction from a cleared slate. The only way we’ll be able to figure out what impact we’re having (positive, negative, negligible or disastrous) is to have a baseline. When I started consuming less and less, I started seeing how much others were consuming — and I dare say, needlessly!

One way to put this stuff in perspective is view the 20 minute film “Story of Stuff” that a curious individual researched and presents for free on the web (site listed below). (Aside: favorite quote: “And if you think about it, what’s the point of an ad except make us unhappy with what we have.”)

Finally, I wanted to recount what was discussed on NPR today about average GDP vs. Happiness. In the past 50 years our average GDP has skyrocketed (over 7 percent annually avg), and yet our happiness is no higher. While I do believe that having more means to address health and education issues, and daily living is a good thing, I also believe that folks have been continually distracted from the good things in life (mostly people) by the bad things in life (mostly things that grow outdated and leave us wanting newer (costlier) things). One way to address this recurring disease is to distance ourselves (as a society) from all these “things”.

-Holden

ps. Two notes: 1) I do realize when we stop consuming we’ll hurt our own businesses, and I’m okay with this; I’m looking for a sustainable solution, and that includes people, not just dollars. 2) Sorry about getting on the tangent of “stuff” from the environmentalism — I find they’re plenty related.

pps. Excellent, simple movie: https://storyofstuff.com/

It’s Not Just Carbon, Stupid

That being said, I think information technology as an industry is likely to grow going forward at about the rate of the economy. I just do not see the kind of innovation that we saw in the last two decades of the last century. In many respects, many of the interesting problems that we set out to solve have been solved.

https://blogs.barrons.com/techtraderdaily/2009/06/21/tom-siebel-abandons-tech-investing/

Back to the Garage

Yes, entropy is sometimes viewed as the rate of degradation of energy to less useful forms, but this definition is unsatisfying because it doesn’t specify what “useful” means. The forms of energy that are useful to us are precisely those that come in predictable, harnessable forms, like light or electricity. Heat is not so useful because it is literally the random motions of individual particles.

So yes, your statement “as more energy is degraded by the system, the system’s complexity and diversity increase while its predictability decreases” is correct, though “complexity” is a slippery word.

Your second question is worthy of a blog post of its own, but I will give a short answer that the relationship between entropy and beauty is not so simple. Compete randomness (think white noise on a TV screen) is not much more interesting than compete predictability (e.g. an unchanging blue screen). True beauty requires a sophisticated mixture of order and disorder.

On the question of where the education money goes. I have a thought.

One of the things I do in my job is work on teleconferences and webcasts. For many years we have produced two or more a year on K-12 education funding in California (although I think it unlikely there will be any this year). Education leaders, superintendents of schools, State Legislators, and education researchers present and discuss.

It is my job to prepare the “visual aids” for use on screen, so I get to read the material rather closely and occasionally get to read the source materials

These are my primary credentials.

One of the subtexts in these events is so-called “categorical spending”. Money provided by governments at all levels in order that schools provide very specific services to students. For example, special education for the developmentally or physically disabled.

It seems that nearly all of these “grants” have a fairly heavy reporting requirement. Considerable accounting, testing to document that the program is working (the voters want to know their money isn’t being wasted on programs that don’t work), and sometimes a specific administrator (who seems often to have an administrative assistant) is required by the terms of nearly all of these grants.

I have been left with the impression that this mode of funding, i.e. dozens or even hundreds of separate “funds” with separate results measurement and separate or semi-separate administration, consumes a large portion of the money being budgeted to education.

I’m sorry to say that these “impressions” don’t tell me how much of our educational budget is being consumed by this statutory administrative overhead, but the nature of the discussion leads me to understand that it is financially significant and that education leaders at every level resent the requirements that so much of the money the “receive” must be spent outside the classroom.

As entropy increases, symmetry also increases. Beauty is a bit more complicated because some people feel symmetry is beautiful and others prefer asymmetry. Still others find symmetry ‘fearful’ :-)

I have gone out on a limb and claimed that asymmetry is the root of all value, and similarly it is the root of complexity (even though we still don’t quite know how best to define complexity itself).

Symmetry breaking is talked about as an important concept in physics for explaining the specific and seemingly arbitrary (but not random) configuration of matter and energy in the universe, given that the supposed “universal laws” seem to be all about symmetry. Can’t say I understand it at more than a superficial level.

Aesthetically, I am a fan of both symmetry and asymmetry…

If so, are you claiming that a system’s unpredictability is a function of its energy flow? That is, as more energy is degraded by the system, the system’s complexity and diversity increase while its predictability decreases.

A related question:
Is there a connection between increased entropy and increased symmetry/beauty. For example, it seems that the more entropy a flower has, the more symmetry and beauty it has. At the moment when it’s “falling apart” the most, it is also displaying the most beauty, no?

By extension, is predictability inversely correlated with symmetry/beauty?

i wanted the ShiftHappens deck to portray more multivariate interactions, rather than a lot of numbers with implied relationships.

as a couterpoint, it’s probably also good to present data but not necessarily draw the conclusions too forcibly, since, if people feel as though they are finding the conclusions themselves, they feel more ownership and passion for them.

Nothing about this system seemed to work. As for stimulus, these academic institutions charge 50-70% in overhead. That would be 100-140Million towards utility, taxes, insurance, endowment, whatever, but not towards research and job creation.

Off my soapbox. Generally, I have a lot of respect for NIH, but I think the quality and review would have been higher if they enforced their own policies.

If you’re really interested, you should read some of the references at the links in the post to get a feel for the issues.

https://www.climateaudit.com is also an excellent source for seeing how theory and practice fail to match up.

https://www.thenewatlantis.com/publications/taking-the-earths-temperature

“Statistical studies suggest that a system of 50 to 100 reasonably distributed temperature stations around the globe would be sufficient to reproduce an accurate representation of most localized temperature anomalies and to account for isolated effects such as urban heat islands. Various statistical techniques can then be applied to produce a single figure representing a fairly reliable globally-averaged temperature. Much as opinion polls rely on sampling and margins of error, climate scientists make statistical claims about the validity of their global temperature figure, saying that they know with 95 percent certainty that we have enough sensors and that they are widely-enough distributed around the planet so as not to allow for thermal anomalies that would result in a global average differing by more than 0.04 degrees Celsius.

This is the level of accuracy claimed with today’s distribution of sensors and analysis techniques. Such a system of sensors with similar capabilities has been reliably and consistently in place for roughly 150 years, allowing scientists to obtain a value for global temperature based on direct measurements back to the mid-nineteenth century, though with a slightly larger uncertainty of about 0.1 degrees Celsius”

Then again guys, there’s always Rock-Paper…well, you know.

“Very low food insecurity” does not mean that the “family goes without food on a regular basis. ” According to the USDA, it means “at times during the year, eating patterns of one or more household members were disrupted and food intake reduced because the household lacked money and other resources for food”.

What you want to know is what this means in terms of actual caloric intake. Jay B has done some research in this area so you should ask him. Here’s what his homepage currently says:

“This second paper examines how well the answers to food security questions correlate with serum measures of nutritional adequacy and caloric intake. For elderly, food insecurity is a good measure of nutritional adequacy, but it does not perform as well for children”

https://www.stanford.edu/~jay/research.html

The last line of the abstract from his paper is:

“These results suggest that researchers should be cautious about assuming connections between food insecurity and nutritional outcomes, particularly among children”

“Given that I am in the room to sleep and shower,” – Please consider how much of you life you spend sleeping.

Is it karmically bad to stay in a nicer place that I’m not really using? – I would argue that karma is both more complex and adaptive.

It may be useful to assess your own karmic debt that you feel compelled to stay at the IP.

P.S. Terribles is near the Hard Rock and pretty inexpensive by the way

https://abcnews.go.com/2020/story?id=7866033&page=1

Given the inextricable link between hunger and poverty, I was really glad to see one of my favorite organizations, Kiva.org, has finally launched in the U.S.

Sarah, do you think there’s a way for organizations like yours to work closely with Kiva and its ilk to try to break the vicious cycle for the families you see?

What does hunger look like in America? It might be a family with both parents laid off in the recent recession, who needs to visit a food pantry to make it through the month. It might be a child, who relies on free school breakfast and lunch during the week, but has little to eat on the weekends. It might be a senior choosing between vital medicine and food. It might be a single mother working two low-paying jobs who can’t make ends quite meet. You mentioned a homeless person as an example, and certainly homeless people face problems with hunger. Yet, most of the people reached through our 250 Agency Partners are families struggling to get by. Hunger devastates people is so many ways: the shame of not being able to feed your family, the lack of mental focus that makes it harder to work or find a job, the lasting developmental damage of even just a few episodes of scarcity in a child’s life, the health impacts of eating a cheaper diet, which might make a person feel full but not have the right nutritional balance for health.

Let me share some research on hunger’s impact on children, quoted from Feeding America: “Studies show that children from food insecure households are likely to fall behind in their academic development compared to other children, making it difficult for them to reach the same level of development as their food secure peers. (Frongillo, E., Jyoti, D., Jones, S. Food Stamp Program Participation Is Associated with Better Academic Learning Among School Children. Journal of Nutrition: 136; 1077-1080.2006.) And children who struggle with food insecurity also have problems with academic performance, tardiness rates, and absenteeism. (Meyers, AF., Sampson AE, Weitzman, M., Rogers, BL., Kayne, G. School Breakfast Program and Performance. American Journal Dis. Children. 1989: 143; 1234-1239.) Research even indicates that children with poor nutrition in the first three years of life show less capacity to learn—and any interruption in nutrition may have lasting effects later on. (C-SNAP, 2006. Nourishing Development: A report on food insecurity and the precursors to school readiness among very young children.) Proper nutrition is vital to the growth and development of children. Even mild under-nutrition experienced by young children during critical periods of growth impacts their behavior, their school performance, and their overall cognitive development.”

For more information on the connection between hunger and obesity, which you referenced, please see: https://www.frac.org/pdf/Paradox.pdf.

Finally, I invite you to visit the Three Square Food Bank (www.threesquare.org) in Las Vegas and learn more about local responses to hunger in our midst. We work every day to help Southern Nevadans in need obtain food, through direct distribution and, soon, through outreach regarding the federal nutrition programs as well. We are working in collaboration with 250 Agency Partners, 144 schools, dozens of business and civic groups, and thousands of volunteers, to address the needs of people who are struggling with hunger. I invite you to visit one of our sites to see how real and devastating hunger is, right here in our country. I would also be happy to discuss this topic with you further.

Sarah Borron
Advocacy and Research Manager

https://www.npr.org/templates/story/story.php?storyId=5023829

Sure you can get a meal if you live in a box, but if you are working two jobs and are still being asked to sacrifice a decent meal just to be able to keep your kids in a safe environment and have access to passable education and health care then people are likely going hungry on a regular basis. That seems less than acceptable to me.

I would never under-estimate big business and it’s willingness to buy good publicity by co-opting a social issue. That might not rule out the possibility that they won’t do good as a by-product.

I really liked your point about the difference between eating and malnourishment by the way.

If anyone knows anyone else who works in online learning, creative/conceptual education, or is just a really cool educaiton innovator, please let me know!

Thanks,

Laura

https://www.theblueschool.org/

If Sam were even a year younger, I’d hold him back a grade and send him there.

Max starts 5th grade next year. QTL is very much on the radar, but I’m glad we have a year to see how they do before having to commit. New charter schools have risks, including continued capitalization and the ability to retain teachers.

Right off the bat Dale, my quote about saving us from you was quite generic. I would certainly not make a personal judgment based on so little information. Please do not assume so and accept my apology where required :-)

As to the topic at hand, I wonder how much of this is a ‘presentation’ problem, with this being the offending quote:
“All are devotees of behavioral economics — a school of economic thought greatly influenced by psychological research — which argues that the human animal is hard-wired to make errors when it comes to decision-making, and therefore people need a little “nudge” to make decisions that are in their own best interests.”

I am very respectful of Dale & Deedy’s clear abhorrence of paternalism, and the above quote seems to reek of it. But it also seems to imply that this is somehow ‘new’ behavior. I would argue that while the program and the name for it might be new, the behavior is not. Billions of dollars are spent in every industry and in every conceivable way to study populations and demographics to manipulate us into behaving in certain ways, buying certain things. I don’t know that I object to the government being more open about what is already a part of the equation. One of my earliest lessons to my children was to create an awareness that they are seen as a demographic. A product may be worthwhile on its own merits, but it serves them to know that much study and man hours went into portraying it at its most appealing. Why is it priced at $9.99 instead of $10.00? Know to ask these questions and then make your choice.

Additional to this, Dale expressed concern regarding the underlying premise that “humans are by nature irrational in their decision making and should be protected from themselves by government intervention.”

I’m afraid that I believe human beings are almost entirely irrational and I’m not sure how the rational mean ever became the default model for anything. Nothing in our history would support it. And as to the ability of people learning from their mistakes I don’t know that I see that tendency in humans or institutions much either. For a common touch point for us all we have poker. It’s the perfect microcosm, the math and behaviorals have all been laid out and yet how many players repeat the same self destructive behaviors again and again despite immediately painful consequences? Only the smallest percentage will evolve. The rest provide the pool of donation.

People make horrific choices every day believing that they will come to happiness. Libertarianism argues that this is their right. I agree. Government has no overriding interest in protecting us from ourselves. But this program seems clearly to fall into the region of government providing a safe environment for its citizens in a situation that cannot really be legislated. It seems unlikely that this will be the only example of that either. I’m not sure how you could pass laws against teen pregnancy. Obviously by the time you have an offender it’s too late and the cost is enormous and generational from my experience.

Beyond being worded poorly I think such programs are a step towards education and self-regulation. I see no real coercion, force or paternalism at work beyond what already makes up the general operations of society. I am not any more frightened by the concept of behavioral economics than I am by what I see already. Rather, I am somewhat heartened by it finally being called by name and discussed out in the open.

Way over the 140 character tweet, I know. I’ve been saving up. My apologies if I lost my audience:-) Really, by far my biggest surprise from the article came in reading that behavioral economics has only been circulating since the 80’s and seems to have been rejected at first even then. Did I read it incorrectly?

Have you read the entire article? I’m much more interested in the underlying suppositions about human nature, the responsibility of government, allowing people to learn from their own mistakes and pproviding them with a safe environment in which to do so, etc.

For what it’s worth,
Deedy

CORRECTION

I do not want anyone forcing me to make decisions that they think are best for me.

“Unfortunately, government decisions are based on politics.”

From MOM:
I have no quarrel with the pregnancy program or other programs that protect young people, protecting and education them should be an obligation; My problem with this article is the underlying philosophy. I do not want anyone forcing me to make a decision that they think are best for me.

(Just consider the possibly that John Kyl may be making those decisions for you.)

From Dale: I am distressed that anyone should think they need to be saved from me.

What I think Dale is missing though is that the way in which this program is actually implemented is exactly the opposite of how he’s characterizing it, and how it’s undoubtedly going to be characterized in the media. The truth, if you read the study, is that rather that being paternalistic and restricting freedoms, the program aims to — and does in fact achieve — empower people to make good decisions for themselves. The money is insignificant and simply a hook to get them in the door and to remind them of their own self-stated goals.

Dale, aside from the faulty advertising (it’s not exactly “paying women not to get pregnant”) and the PR problem that such a program would have on a larger scale, do you have other objections?

The ability to create life is a lifecourse altering decision for the tenns themselves, the child created and often the members of two extended families that far outstrips the hormonally driven adolescents involved. Libertarianism is preferred, but total freedom assumes that all the actors are rational (see recent free market experiement ;-).

I just lived two years of the scenario I tweeted and the effects of it had ramifications that spread wider than even I would have predicted. I can only then extrapolate those outcomes throughtout the entire LA County foster care roster. Here’s my $1 a day for the experiement.

The govt intercedes on societies behalf one way or another. Your choice is at what point you believe such intercession guards the wider interests of society.

Upshot: Sometimes the government is not saving you from yourself. Sometimes, it is saving US from you :-)

Cheers

My response to this article was to its entirety, not just the paying kids not to have kids – but to the premise that humans are by nature irrational in their decision making and should be protected from themselves by government intervention.

This is scary. Extremely insidious. Say goodbye to our Freedoms. Say goodbye to out rights.

Teach that freedom demands education and personal responsibility. Legislate just laws. Enforce them.

Insidious and scary thing about this is that gov’t intends to SAVE YOU FROM YOURSELF.

LIFE:as youCHOOSE to live it- LIBERTY:as youCHOOSE to exercise it -HAPPINESS:as youCHOOSE to pursue it -& FREEDOM – ALL GONE

Then Lana Waggoner rebuts:

Sorry. Twevesdropping on yr exchange. Scenario: Teen has child. Teen fails. State takes custody of child. State pays all costs. State gets money from us. This does not factor in the high rate of failure likely for that child as adult. Society pays again. Big believer in personal liberty and freedom, but those sorts of choices affect many other people (ie society) quite directly.

As it turns out from the study referenced above, the money is actually a red herring. The real magic at work is non-monetary:

An adolescent has difficulty focusing on long-term goals such as education and career and may have difficulty understanding that remaining nonpregnant may result in rewards later in life. To prevent subsequent pregnancies, young mothers must be presented with desirable alternatives. Rewards for the achievement of short-term goals reinforce positive behaviors and provide an incentive for future actions.
…
To be selected for the program, mothers 16 years of age or younger had to be willing to attend a weekly meeting, stay in school, and state a desire to remain nonpregnant.
…
The money served as an incentive to encourage regular attendance, and it was a constant reminder of the program’s ultimate goal: delaying a subsequent pregnancy until it was desired.
…
Members consistently rated the goal-setting activity and interaction with leaders as the two most valuable aspects of the meetings. Interaction with other group members ranked closely behind and was followed by interest in the topics discussed at the meetings and obtaining $7.00 each week.

As we know from the vast literature on behavioral psychology and cognitive dissonance, monetary incentives can undermine desired results (see Dan Ariely’s TED talk for striking examples). Thus, one would expect that paying much more than a dollar a day would be a bad idea both from a purely utilitarian standpoint and from a civil libertarian perspective.

@Rafe – You bring up a good point. Gaming the system will certainly be an issue. To prevent it, we would likely have to limit the total potential value of outstanding contracts to some fraction of the value stipulated in the contract. e.g. If there is a market for a startup valued at one million then the total value of outstanding contracts can only be 100-200k. Also, all trading will have to be completely open and transparent, much like the standard stock market should be. Then, if a founder or insider starts dumping shares then people know something is up, and can react accordingly.

Of course, the prediction market is just a means to calibrate one’s probability assessment which was the primary reason to offer you a bet. Given the similarity of our backgrounds, I expected our priors to be similar. So offering you a bet helped uncover the perceived difference in those priors.

As I said, when I negotiate a bet, I’ll do a post. I think it would be great if you could figure out how to refine, parameterize, and syndicate it in such a way so that people on markets like InTrade could make the full range of bets on future temperature.

I am trying to do a principled job in the negotiations so that it is as reasonable a template as possible.

This is precisely why I offered the bet. As I am both unwilling and unable to put a gun to your head, it was the best I could do in terms of eliciting your true decision standard :-) That’s what I wanted to calibrate my own probability assessment.

If you do check back here, I would be curious to know what bet you would take on the other end, i.e., at what 20 year temperature increase would you take the under? .25 deg C (~1.25 deg C higher in 2100)? .5 deg C (~2.5 deg C higher in 2100)? 1 deg C (~ 5 deg C higher in 2100)?

FYI, I am currently negotiating a 20 year temperature bet with another blogger. The details turn out to be complicated. More updates as events warrant.

There was another good This American Life piece where they showed the difficulty the banks are having revising loan terms because they don’t have the experience and infrastructure to make it happen:

https://thislife.org/Radio_Episode.aspx?sched=1296

Act I

-j

2) Couldn’t this be seen as an externality based on the weight of your car? We could deal with this by pricing in the externality – or, in more concrete terms, requring that liability insurance be higher for bigger vehicles to cover the increased damages when you hit something (assuming it’s your fault).

(Yes, I know I’m poking an old discussion. But it’s not that old…)

Seems like it’s easier to destroy pretty much anything than to create it. Destruction has thermodynamics on its side.

More to the point, what incentive structures within these banks is causing them to ignore such clear win-win possibilities?

The CDE calculates the Current Expense of Education per Average Daily Attendance across all CA school districts:

https://www.cde.ca.gov/ds/fd/ec/currentexpense.asp

For 1998-99, the total was $5,379. In 2008 dollars that’s $6,951.

For 2007-08, the total was $8,594. That’s a real per-student increase of 23.6% in just 9 years.

I don’t know why it appears to you that investment levels are declining, but that’s not what the numbers say.

This is pretty much PennyMac’s business model. Buy large blocks of mortgages, renegotiate terms (by lower principle or interest rate), then service the term of the mortgage and actualize the profits.

It’s a brilliant solution but slightly different than what you describe above.

I believe that if the homeowner were to see that there was an actual human being on the other end of this “robin hood fund” they likelihood of default would significantly decrease.

This is the problem that PennyMac faces, they’ve just bought the loans so in the borrowers eyes what makes them any different then the original bank? This coupled with the fact that it was started by former Countywide Bank execs also puts them at a disadvantage.

Nevertheless, the usurious terms that borrowers face from all debt servicers speaks to the need for bank reform. Obama’s newly signed legislation makes some steps in the right direction but it has not gone far enough.

I’m actually more interested in the next phase of this economic crisis: the commercial real-estate mortgage bubble.
(those guys are gonna have rate resets soon too)

-Chris

I’ve been thinking about the old proverb recently, “those who ignore history are doomed to repeat it.” But I think this is less and less true all the time. In fact, due to ever-increasing complexity, the more you are a slave to the past, the more likely you are to be wrong.

Susan Polgar wikipedia – https://en.wikipedia.org/wiki/Susan_Polgar

Fusiform Gyrus wikipedia – https://en.wikipedia.org/wiki/Fusiform_gyrus

Separately, I believe that most people with 99th percentile memories are using visual chunking. After all, a picture’s worth a thousand words…

Let’s assume that there are 20 classrooms per school. We have $3,400,000. We need some custodial help and say two managers. Call that another $150,000 in salaries.

Anyway you see where I am going…this is a business I want to be in!

It seems to make intuitive sense that the combination of Federal mandate and a lack of any ability to raise money through property taxes, the typical source in this nation, would put the burden on the state government.

I’d also be curious to see what impact rising health care costs have had overall. I tend to think that the increased cost of insuring state workers and caring for the uninsured over this time would be a terrible burden.

I think you are mostly right, but Rafe is right too.

I do agree that the grants are likely to be awarded to those who know how to “game the system,” and write good proposals. But, the more proposals submitted, the more likely one of them is going to be a “game-changer.”

Regardless of the number of proposals, the innovative game changing ideas are unlikely to be chosen. This is the core problem that needs to be fixed.

Do you think gambling could save science?

What’s more relevant from this is that these in vitro RNA systems meet the criteria for Darwinian evolution: replication with heredity and selection. Therefore it shows plausibility that life could arise on Earth from scratch.

BTW, I just noticed an error above, I should have said “exogenous” not “endogenous” (correcting now).

For me the problem lies right here. If determinism is true, then you are not making a choice. You will simply pick the box that you are destined to pick.

Conversely, if you are indeed making a choice, then you have free will and no prediction algorithm could possibly predict your choice beforehand with 100% certainty.

I suppose that were I in this situation, and I for some reason had complete confidence in this being’s prediction ability, I would have to take both boxes. Because then the prediction machine, which cannot possibly be wrong, will have put $0 in box B. I get $1000. But of course, this has all been predestined in advance and my “choice” was pure illusion.

Another interesting increase is the cost of incarceration in CA. Judiciary and criminal justice cost the state about $6.4B in 1999, and had grown to over $12B by 2006. (There is upcoming non-discretionary spending coming up here because of the ruling that CA prisons have to build new health care facilities, which is going to tack somewhere around $8B to that number.)

I think this is a very important point. Given intuitions and even business practice (especially in manufacturing), we feel that “noise” is a bad thing and needs to be removed. Notwithstanding this, there are a lot of situations where noise provides a lot of benefit. For example, for biological evolution you need some variation (truth be told, the vast majority of variation is neutral or harmful, but on occasion good things arise). In optimization problems, you often need to introduce some noise to keep things from getting stuck at inferior optima. In economics, the presence of noise traders will often allow a market to work much better (imagine if everyone relied upon the identical trading rule or expectations—you would get wild price swings). In bee hives, having some noise in the trigger point where individual bees alter their behavior tied to the temperature of the hive, allows much better thermo regulation. I’m not sure how much work has been done on noise and government policy, but I would think similar insights apply (along with a likely mistaken intuition that policy should always be predictable and transparent—probably a good idea in some situations and a bad one in others—I suspect you are right that the dividing line here is closely tied to the complexity of the underlying system).

So where is the extra 38% going to?

The risk as I see it is skewing the incentive to great grant writers who are bad at doing the research they propose. But let’s jump off that bridge as we get to it. There be dragons everywhere.

Maybe you as the grant giving institution wants more applications but what about the other side? (scientists) Having to apply for a thousand grants to get get one seems like a waste of researchers time? (i.e. increased transaction costs to obtain money)

As for increasing “transaction cost”, my contention is that if I have 10 applications to review I will read them all thoroughly. If I have 1000, then I will skim their abstracts and discard 99% of them based and only delve deeper into the ones that are clearly outstanding. I will ALWAYS want more applications not less. Even if I can’t possibly even read the titles of all of them (let’s say there are a million), by having larger numbers the chances that the “black swan” is in the field increases and I at least have a better chance of noticing it than if it didn’t apply at all.

@Rafe

So the more applicants the better? 200 applicants per grant is better than 100 applicants per grant? This seems like an awful lot of unnecessary transaction costs to me.

How do you measure quality? Years of experience? Education? And, why should I believe that these higher quality applicants produce better science?

@David, I think you mean “paradox of choice” right? I think it’s a valid concern for the reviewer, but I don’t think it negatively affects the quality of the choices. On average the grant quality should go up.

If I’m a motivated vendor and somebody stink bids me, I say no and he later comes back with a decent offer there is no way in hell I say no to it because of his prior behavior (assuming he is qualified etc).

(Some back story for you…last year I offered $500k less than asking on a home, the vendor said no, but came back a month later and said yes and I now have my dream home at a price most realtors would have been very reluctant to submit.)

What do you think?

You don’t lose market exposure by offering a lower commission, but you do directly impact agent behavior and lower your chances of receiving an offer.

1) My approach doesn’t require a perfect correlation, just a very high correlation.

2) This isn’t a commitment from a game theoretic view, it’s a modification of your internal thought processes via cognitive dissonance. I assume that W will be aware of how cognitive dissonance modifies thought processes and therefore make this modification on myself. As long as W observes that boundedly rational humans hold both one-box and two-box beliefs, publicly making modifications to your own psychology should affect W’s behavior.

3) As I implied in (2), I think it’s a mistake to frame this problem as a classic single-shot competitive game. You must take advantage of the fact that W observes humans behaving in ways that aren’t perfectly characterized by competitive game theory.

1. My formulation, which is pretty standard, does not assume a perfect correlation. Only a very high correlation.

2. None of your examples of how to commit to one box are credible. Why should stating I am a one boxer be believed? Why should writing an article not be taken as satire? Why should my play in a simulation not be interpreted as a fake-out?

3. The metaphor about modifying one’s source code is not helpful here. It is not our internal decision procedure that is wanting. Rather, we need to be able to signal that a) it is reasonable for the predictor to believe that it is reasonable for us to play one box, and b) this belief is still reasonable for the predictor to hold, knowing that it would be reasonable for us to trick the predictor into holding this belief.

Eliezer’s reasoning bears on both your points. His argument is that if you could commit to one-boxing in the case where you face a credible W, you would. E.g., if you were a self-modifying AI, you would modify your source to one-box.

Obviously, humans can’t directly modify their source. But there are a number of known psychological dynamics you could employ. For instance, you could publicly state that you are a one-boxer. You could write an scholarly article that argues for the rationality of one-boxing. You could hold a Newcomb simulation where you in fact one-box. Etc.

Which brings us to the question of credibility. Certain formulations of the problem do in fact specify a track record of successful predictions. Your formulation specifies that there exists a perfect prediction algorithm and W uses it. So it’s not really an issue in the toy version. Either it’s specified or it isn’t.

In the “broad” version, there’s always some information. Is there any evidence that W has access to advanced predictive technology? Then it’s a matter of how advanced you think it needs to be. But we all have some belief in this regard, which we can encode and solve for.

So if your selling agent says he has to give the other side standard commission or they won’t work it, I think you aren’t losing much exposure.

But I may be different…

I’m not sure what it would take to convince me that it’s worth 6% to sell my home, but it would take a lot. I sold a $1M home in NJ days before the mortgage fiasco hit and while my agent was great no way that was worth $60k. And as I said earlier I had negotiated for less.

We do both buy and sell side and try to balance our business 50%-50% between the two. What stops us from being a matchmaker on both sides of the transaction is that real estate in a big city doesn’t really operate that way. I believe that more than 95% of transactions in our market have two unrelated agents involved, one for the buyer and one for the seller. Dual-agency where you represent both parties is quite rare. No agent, no matter how successful, has buyers for their specific listings or exact listings to match their buyer’s needs. We rely on the thousands of other random agents to source the perfect buyer or seller for our clients. The largest brokerage here only has ~20% market share, so even the large players can’t be a market maker.

I agree that the number of transactions per home owner is not likely to change much.

Do you do both sell side and buy side? If not, why not? If so, what’s to stop you from simply being a match maker and facilitating the transaction with a fixed fee?

Commissions are largely controlled by brokers, not their agents, so a flood of agents doesn’t break the stranglehold on rates because they are locked in by practices of their brokerage. Most agents won’t pursue lower rates because it jeopardizes their livelihood. They simply can’t source enough transactions to make the numbers work. The vast amount of agents out there make a modest-to-poor living for the hours they put in. Most agents operate far, far below their true capacity to close deals and end up spending most of their time trying to source their next customer.

I don’t think that the number of transactions per homeowner will ever really change. People buy/sell a home only a few times in their lives.

I certainly don’t underestimate the daunting nature of the task. We see that every single day, and it does mean that true commoditization will likely never occur for the profession. People don’t trust that $500 – $1000 is “enough” to get the expetise that they need. However, the expertise shouldn’t valuable enough to pay for a brand-new car, which is what these big paydays end up being.

I think what you might be underestimating as an agent is how complex/difficult/daunting/emotional the prospect of buying or selling a house is for an average home owner who does maybe one of these deals their entire lives. We don’t want to mess it up and we are willing to pay a premium to have an expert hold our hand.

I would guess that the percentages will come down if and only if the average number of transactions done by the average home buyer/seller increases.

The problem with real estate commissions is that the seller sets commissions for both agents. Even discount brokers encourage you to pay full price to the other agent. You wouldn’t want to be the one guy in the neighborhood with lower commissions. That will impact agent behavior and reduce chances of a sale. This mentality has increased in the downturn with some people offering agent incentives above the 3% to move their house faster. Personally, I have always advocated letting buyers determine the commission for their agent. That would open up competition on both sides of the transaction, rather than the way it is now where sellers chicken out about paying less than everyone else.

The other big issue is that there are flat out too many agents pursuing too few deals. The average agent may close only 6-7 deals per year. They need those 6-7 deals to have big paydays to pay for their living expenses, pay for their marketing expenses, and make up for all of the transactions and customers who went bust. Given that most agents eke out a modest living on those few transactions, they cling tightly to the established 3%, claiming that it is necessary to “cover the costs of doing business”. If the bar to entry was raised and there were far fewer agents, they could secure more deals, and we wouldn’t have this incessant pressure to maintain high commission rates.

2. If, as some have argued, Newcomb’s problem is the 20th century version of Pascal’s wager, then it is by no means obvious that rationalists should win.

Here is one set up of the problem that I like. Suppose that we are given a correlation table between 1 box decisions, 2 box decisions, and the two states of nature, $1M in box, and nothing in the box.

It turns out that yes, the number of times people choose 1 box have a very high number of $1 M, not perfect however, and the number times people choose 2 have a very high number of $0 in the box.

So, in essence, if we were playing a game there are two focal points – choose 1 and predictor places 1 million or choose 2 and predictor places 0.

Why the predictor has preferences like this is a genuine mystery, but suppose that is all we know.

Here is the revised mystery: how can we credibly signal to the predictor, who makes his choice first, that we are committed to being a one box chooser? And is this credible signal sufficient?

Your answers are?

@Kevin, I’m usually on side with whatever Eliezer says, but his argument rings pretty hollow to me on this one, wouldn’t you agree? Where are you supposed to receive this evidence about W’s past behavior since it wasn’t part of the original setup? Seems like post hoc “rationalization” [sic]

https://www.overcomingbias.com/2008/01/newcombs-proble.html

His main point is that a rationalists should, above all, win. On average, rational strategies should produce better results.

So the key question here is not the prior of what other people choose. The question is what the prior is that W will be right. If you receive credible evidence that W has done this in the past and has been right, you should one-box. If you think he’s just a joker, you should two-box.

[Personal brag — I got to talk to Martin Gardner about this briefly when I interviewed him for the Randi bio.]

https://www.cato-unbound.org/2007/09/10/robin-hanson/cut-medicine-in-half/

Click to access showcare.pdf

We should be debunking the crap that pharmaceuticals put out that shows zero effect once you control for placebo (like cough syrup). “Medicine” is typically way more costly than homeopathy for the same outcome.

To be clear, I was not referring to the researchers but rather the reviewers. And I wasn’t suggesting that it is a conscious bias, but rather an unconscious one. For instance if I asked you who will win cricket match this weekend, aren’t you inclined to your home team more frequently than can really be justified by the stats? But now if I asked you to bet $1000 on the outcome of the game, I am pretty sure you will forget your wishful thinking and bet with your clear, rational mind. Research bears this out that time an again when there’s money on the line, people are more rational, better predictors, clearer truth-seers than when there’s not. And info markets are a way to leverage this phenomena to the advantage of all those who seek truth.

People buy homeopathic remedies to the tune of $150 million a year. Is the market saying it works?

Science says homeopathic remedies don’t do what they are purported to. Overwhelmingly.

The masses can be asses and therefore markets can be woefully misleading. It’s hard to blame the markets; they are, afterall, just markets not sentient beings, and as such just reflect the collective input of the constituent market participants. But garbage in, garbage out.

Peer review is useful to filter out garbage.

Similarly, the price of contracts today on different predictions about temperature in 50 years incorporate all of the expectations about how well current models correspond to reality. Yes, these contracts don’t pay out for 50 years. But we can use today’s prices to act. That’s the whole point.

@Rafe. My statements about the usefulness of peer review were only in contrast to prediction markets and only for a very broad definition of peer review. I include PLoS ONE under that big tent.

Here is a simple example.

Will Omega-3 supplementation improve mental performance?

I am confident that info-markets will more accurately and more efficiently (faster and cheaper) give us the answer to this question than any traditional research methods involving peer review.

I’m in favor of publishing results. I just think that instead of peer review we should follow a PloS One model and attach at least two types of markets to each publication (a) truth value (b) importance/relevance.

And I think info prizes can be used to change the bad incentive scheme that has emerged where scientists are forced to “publish or perish”. This leads to micro-focused (i.e. irrelevant) incremental results that you carve out and are chosen so as to be so arcane that nobody could ever challenge your work.

Peer-review has a place in science, just not the dominant one. And it should always be checked by markets.

There is an implicit presumption by the proponents of info markets that scientists aren’t being as honest as they could be. Do you honestly believe that scientists spend their time slogging over theories that they believe in their heart to be hogwash? Most scientists believe that their methods and findings are correct. When new techniques and models that better predict a phenomenon are discovered scientists are generally quick to adopt them. When scientists publish their findings in a peer reviewed journal they are demonstrating confidence in their findings. If scientists were to bet on scientific ideas they would bet on their own, almost without exception.

Info markets are predicated on financial profits and losses motivating people to make correct decisions. There are very few scientists that entered the field who were motivated by money. Believe me, there are simpler and better ways to make money than through science. Scientists are motivated primarily by their innate curiosity. Scientists are among the last group of professionals that would be attracted by betting markets and without expert opinions the proposed scheme would be little better than a lottery. Beyond the hard sell we don’t need scientists being distracted by betting. We want researchers to focus on their research, while minimising any distractions.

Kevin’s example suggests that info markets have a limited application in a single stage of the scientific method, i.e. prediction. However, in science we are more interested in the base models underlying these predictions, in other words the “why” and “how” questions. So far, I’ve seen no example of how info markets can give us insights into these types of questions. Further compounding the issue, is the fact that predictions are completely dependent on their underlying hypotheses. Since we can never be certain of the validity of our hypotheses, we can never be certain of the validity of our predictions. The truth is that info models don’t tell us much more than what scientists could easily acquire from studying the peer reviewed literature.

The use of prediction markets in regard to global warming is highly impractical. Do we sit around and wait for 2050 to hit, so we can say “I told you so”? In the real world we act on the best current information regarding issues like global warming. However, in the intervening time we will enact policies that will impact global warming and any previous predictions we had made. Moreover, the best model may not be the best predictor because of unforeseen changes or the availability of new data, while a bad model, using sloppy data, may stumble upon the correct prediction by chance alone. I am also left wondering how info markets deal with questions that are not going to be decided any time in the near future.

Info markets also fail to take into account theoretical fields of science. These are by definition exploratory and subject to fail in a great many cases. Info markets would classify a theoretical model that doesn’t predict a future event as a bad model, while science would classify it as progress, since it allows us to falsify a particular hypothesis. Are you suggesting that we discourage fields such as theoretical physics by means of financial penalties? I see info markets favouring scientists who make correct predictions, while restricting originality and exploratory work.

1. You make an interesting point about the “directionality” of complex adaptive systems whose agents are able to attempt to change the entire system by changing the rules (i.e. humans) versus those who don’t have this possibility (i.e. every other natural system of study we know about). But I do think there are solid lessons to be learned about oscillatory and attractor dynamics in both types of systems. In particular the Yellowstone analogy actually is an argument against “self-regulation” in favor or a more stochastic policy that has the overall effect of dampening oscillations. What is your thought about the concept of stability through instability?

2. Kevin is right. That’s not to say I am a fan of the standard economic arguments, which often involve closed-form symbolic math as opposed bottom-up simulation with emergent results/conclusions. I’d like to see the majority of economic analysis and argument move towards the latter as is only logical when dealing with such systems.

We have two competing hypotheses. One says that CO2 emissions will warm the Earth by more than 2.5 deg C in the next 50 years. One says CO that CO2 emissions will warm the Earth by less than 1.5 deg C in the next 50 years. Between 1.5 and 2.5 deg C, it’s a push. (I’m simplifying things for clarity at the moment. There are actually more than two alternatives and they are a bit more complicated than just temperature assertions.)

We’ve got to make real policy decisions on this topic now. A market for contracts on future temperature would illustrate the true “consensus” much better than publishing counts.

My personal opinion is that the best approach is a mix of publication and markets. For what I’d call “exploratory” science, peer review is probably better. You’re trying to generate novel explanations.

For what I’d call “confirmatory” science, markets are probably better. You’re trying to evaluate the relative merits of alternative, well-defined hypotheses (or apply a bunch of hypotheses to solving a particular practical problem).

I should begin by stating that my position is not that peer-review doesn’t have inherent flaws. It’s a human enterprise, and as such, is prone to human problems. However, I believe that peer-review is the most effective and practical system we have for maintaining high scientific standards.

Do I think that info markets work? Sure, but in the same sense that Wall Street and betting shops work. Do I think that info markets have a place in science? No.

First, you need to have an understanding of what constitutes science. Science is a largely blind process, in the sense that we don’t know the results of an experiment a priori. Otherwise, we wouldn’t need to do science. In this sense scientific enquiry and info markets can be said to be similar. But the similarities stop there.

In science we can never be said to know the true answer to any question. The philosopher David Hume first pointed out the problem with induction in the 18th century. In short, past experiences cannot be used with certainty to predict future events. His ideas were later formulated, mostly by Karl Popper, into the falsification principle, which forms the backbone of modern science. Richard Feynman said it best concerning scientific enquiry: “we never are right; we can only be sure we’re wrong.” Info markets appear to dependent on post hoc knowledge of the outcome of a particular event or parameter. In contrast, all scientific results are tentative.

In order to bring this discussion forward, I suggest Rafe present me with a concrete example of how info markets could be applied to actual scientific research.

As for math apps, look on Ideosphere for claims such as P!=NP and Goldbach’s Conjecture. More specifically regarding research, read Hanson’s papers comparing how peer-review works and how information prizes (and info markets) work when it comes to academic research. The papers address exactly your problem.

I’m also wondering how a market-driven would apply to my field: mathematics. For instance, I have a paper whose results are all technically correct, but is being rejected by journals because it doesn’t fit neatly into any recognized mathematical research program. How could a market-driven system help me?

Also, at what point should we institute interruption for Swine Flu, SARS etc…somebody should be thinking of this now.

But it doesn’t need to be in the print business. After all, while humanity and nature aren’t antithetical, printing-on-dead-trees and nature do seem to be somewhat at odds :-)

Massachusetts decriminalized marijuana possession after the November elections; there should be some data on the results of this experiment in the near future.

As far as applying it healthcare R&D – that’s very tough. I don’t know if free markets provide the correct framework. In reality if you have cancer, you want to extend your life. If you don’t have cancer, you want to put that ugly reality somewhere in a dark corner of your brain and eat an apple once a day hoping that you never have to confront your mortality that way. So the way the PUBLIC AND markets see it, the real problem IS extending people’s lives that already have cancer. It seems very short sighted, but i’m a bit hesitant in declaring it so. Democracy and free market do sacrifice the minority. Of course when it comes to health, it feels so inhumane. So the only point is that the NATURAL incentive structure has a bit of a free rider problem. So we DO need the government to step in and throw out some carrots for original research. BUT it’s very rare that we can outsmart and outincentivize the market. If you’re out of school, then the laternatives to government money are much better. so i’m guessing those funds will hit school researchers. Nothing wrong with that in my opinion. those are the people that don’t have the normal incentives to begin with, so unfortunately i don’t think we can REFOCUS the corporate sector, but i also am not sure that’s such a good idea to begin with. Increasing funds for original thinking in schools – go for it. but those guys would have probably done the reseach anyways :)

I just don’t think the analogy between homeopathy and cold fusion is strong enough to justify the comparison for the reasons I already outlined. This is a case of orders of magnitude difference in impact, plus I don’t think you’ve characterized correctly the amount of real scientific support/evidence in cold fusion vs homeopathy.

How about a friendly wager? It could be based on just cold fusion results (you’ll give me odds, right?) or cold fusion results vs. homeopathy results. I’m fairly flexible on how you’d word it, we just have to come to the right price.

This would include things like making regular visits to the village where our forces provide modest, but highly visible rewards for cooperation in that round. We should also make a highly visible commitment to keeping our forces there for a significant period of time.

Of course, if we don’t think there’s anything we can do to get the villagers to think we’ll be around and consistent enough to treat this as a repeated game, then this won’t work.

As for the WHO study, .3% mortality is in fact EXACTLY the number I cited in the original post. So I’m obviously not dismissing them. I just think we should spend our scarce resources proportionally to the threat, e.g., a baseline of 10x as much money on clean water and 7x as much on malaria prevention/cure (then adjusted for intervention effectiveness of course).

It does not follow that we jump on the “fat tail” climate disaster bandwagon as a default. But you don’t have to be a “chicken little” to be concerned.

For example, do you dismiss the folks at World Health Organization study who write:

“Climate change was estimated to be responsible in 2000 for approximately 2.4% of worldwide diarrhoea, 6% of malaria in some middle income countries and 7% of dengue
fever in some industrialized countries. In total, the attributable mortality was 154 000 (0.3%)
deaths and the attributable burden was 5.5 million (0.4%) DALYs.”

Re: the McKinsey study. They don’t explain how they made their calculation, so I can’t really comment. It’s not what the IPCC says which is what the warmists typically use as their standard.

Re: brothel externalities. I would support a “prostitution adaptation program” that helped working girls adjust to the new demands of a warmer world :-)

“A 2008 study, not peer-reviewed, by the consulting company McKinsey Global Institute uses cost curve analysis to estimate that it is possible to stabilize global greenhouse gas concentrations at 450 to 500 ppm CO2-e with macroeconomic costs in the order of 0.6-1.4% of global GDP by 2030.”

Maybe they are naive…

I think a discussion of externalities would be appropriate here. For instance did you take the following into consideration: https://www.metro.co.uk/weird/article.html?in_article_id=39945&in_page_id=2 ?

I’ll care about AGW when pigs fly…

then, swine flu.

:-)

Re: “forecasts for 2085”. You compare “business as usual” with “the most aggressive carbon reductions”. Is that really a fair comparison? The US can barely muster support of Kyoto, let alone agree to the most aggressive carbon reduction measures. Sounds like a straw man argument to me.

Regards

John Pinniger

@Alex You got it. We need to find better ways to incentivize risky approaches and outside the box thinking. The current system for allocating scientific research funding rewards those who follow safe, popular, mainstream ideas (which also don’t include much interdisciplinary research.) Any ideas on how we can improve the incentive structure?

However, most people believe the explanation is the efficient markets hypothesis: that all the available, relevant information is already incorporated into the price.

This looks less likely to most people for seed stage startups. I actually do have an argument along those lines, but it requires assuming that there is efficient substitution between employee and founder job opportunities. Fewer people seem convinced of this assumption so I typically go with the argument based on uncertainty.

However, I suppose if one is “Warren Buffet” of angel investing, then he/she might be able to beat your model. Then again, have you come across such an individual in your research..

1. If it worked, homeopathy could save billions (trillions?) in health care expenses. OK, I concede cold fusion could potentially save even more, but billions saved is a lot of money! Why are we ignoring homeopathy (asked very tongue in cheek)?

2. Homeopathic practitioners and researchers claim that it works (beyond placebo), even while acknowledging (at least some of them) that the theory is a bit far-fetched (memory of water, theory of opposites, etc). Ditto for cold fusion (“it works, but we don’t know why”). In both cases: “it’s an empirical problem”

3. Homeopathy enthusiasts claim gov’t research necessary because pharma giants not motivated and the scientific community has dismissed it. Fed gov’t should get involved in cold fusion research, because scientific community has dismissed it.

4. The existing homeopathic research is not compelling. The existing cold fusion research is not compelling. Ok, I concede: it’s not compelling to the broad scientific community. If you are able to present repeatable research findings for either homeopathy or cold fusion, the scientific community is going to stand at attention.

—-
A final thought: why not invest in psychokinesis and skip the whole fossil fuel/cold fusion folderol?

Certainly, there are labs in different parts of the world conducting research. The potential financial gain if LENR does work is a powerful incentive for commercial enterprise, *if it seems at all compelling*.

And there’s the rub.

Carl Sagan once said “extraordinary claims require extraordinary evidence”. Even the LENR researchers concede the theory is lacking. That might be OK if the consistent empirical results made up for that.

Sometimes the lack of a theory obfuscates and hinders the scientific process. The existing laws of physics are pretty good at explaining most of the phenomena we encounter. If you approach LENR/cold fusion as something extra-physical, then you stand the risk of making errors, IMHO. If you are measuring cosmic-ray signals and using that as evidence for cold fusion, as apparently happened in the early days of cold fusion research, it might be because you threw out basic physics and a theoretical basis.

His original example had to do with how mortgage funds in the 70’s were evaluated by the crowd.

He has an excellent observation about how it is possible to sell a bond with a fixed interest rate for an increasing amount of money.

The example is well worth reading.

Seems reminiscent of Dan Ariely’s TED Talk.

Yes, what I’m saying is that I believe there to be enough evidence that on a risk-adjusted cost-benefit analysis, cold fusion research has a big ROI.

In contrast homeopathy is nothing like cold fusion. For one, homeopathy does not have the promise of simultaneously revolutionizing the economy, forestalling the coming energy crisis and healing the damage we are doing to the global environment. For another, homeopathy can “work” based purely on a placebo effect (cold fusion can’t) and since homeopathy is a fraction of the cost of many equally dubious yet “scientific” treatments (which often have deleterious side effects that homeopathy does not). Finally, homeopathy has always had, and continues to have, its day in court, as it’s used by millions of people daily. We don’t need to fund research on it, just try it for yourself. You can’t try cold fusion for yourself to power your home yet, there needs to be research to get the technology to that point, assuming the phenomenon is legit.

I’m not saying that I believe homeopathy works beyond placebo effects, or that I would use it to treat any of my own conditions, but rather that it’s a harmless, impactless folly that doesn’t deserve public funding. The opposite is true for cold fusion.

Surely for $1mm 10 different labs can set up what the Israeli’s have done and if more than a couple of them get the same results then it’s time to rethink. This could be done in six months. And the puny investment vs the potential return is a rounding error.

For tens of thousands of years people didn’t know how gravity worked but it didn’t stop them from utilizing it to roll boulders down on enemies etc.

Seems to me there are so many other areas of research that *do* have a compelling basis. Or, do you believe that the rationale for cold fusion is compelling?

What I’m hearing is we should pursue cold fusion because if it did really work, it would be amazing.

Here’s a bit of today’s diatribe:

1. COLD FUSION: PLEASE, MAY I HAVE A CUP OF TEA?
Last Sunday’s edition of the CBS News program 60 Minutes was titled “Race to Fusion.” It was 1989, Fleischmann and Pons are shown with the “cold fusion” test tube that would have killed them had they been right. Because they lived, the race was called off. Michael McKubre of SRI apparently didn’t get the memo; he just kept doing it over and over for 20 years.

Lucky for him there’s still no fusion, but he says he does get heat – except when he doesn’t. How does it work? He hasn’t a clue, but he showed a video cartoon of deuterium defusing through palladium and said it might be fusion. In fact McKubre called it “the most powerful source of energy known to man.” Whew! But wait, Dick Garwin did a fusion experiment 60 years ago; it worked all too well. Garwin thinks McKubre is mistaken.

Just about every physicist agrees, so the American Physical Society was asked to name an independent scientist to examine the claims of Energetics Technology, according to 60 Min correspondent Scott Pelley. An APS statement issued Wed. says this is totally false, and the APS does not endorse the cold fusion claims on 60 Min. (Aside: This morning I thought I should watch the video on the 60 Min web site one more time. Drat! CBS took it off. No matter, there’s a full transcript. Uh oh! The part where CBS says the APS picked Rob Duncan to look into the ET SuperWave is gone. CBS can change history? My God, time travel! Now that is powerful.)