Three Sigma Systems

NYT 8/31/2010 – Trapped Chilean Miners Forge Refuge

“…at 62 years old, Mr. Gómez is the oldest of the 33 miners trapped nearly half a mile underground here and has become the spiritual guide to his men…” Aside from Mr. Gómez, there is Luis Urzúa, the 54-year-old shift leader who organizes their work assignments, is helping to map the path of their rescue hole…”

I can think of no situation more likely to reduce a human being into a whimpering terrified animal greater than that of being buried alive almost 3000 feet underground. Given the generally accepted view of the economics of human nature we should expect initial panic to give way to a King Rat scenario in which the strong prey upon the weak and thereafter, even the strongest give in to the paralysis of terror and hopelessness.

But nothing of the sort is happening among the 33 Chilean miners trapped a half mile below the surface of the earth. What is happening is that these desperate men are acting out their human nature, which is to confront the challenges that life has placed before them with purpose and method. Given the problem they face, they have created a leadership hierarchy that defers to the wisdom of the eldest among them (Joseph Campbell’s “Gray Beards”). These elders have embraced the task assigned to them by willing followers, of focusing the group’s thoughts, deliberations and actions in ways that help them survive.

This self-organizing principle, in which human beings come together to confront the challenges that life puts before them with shared purpose and method is the essence of human nature. Over the millennia the forces of natural selection have built this modus operandi into our genome. This is what human beings do naturally —-unless that is, they are constantly bombarded with messages that intentionally obfuscate the nature of the challenges they face and systematically promote fear and loathing among them.

The misguided “sciences” of psychology  and economics base their sales pitch about human nature on the idea that humans function as economically self-interested individuals. But the economics of human existence are meaningless when regarded in terms of individuals. It is only in terms of our relations with one another in addressing life’s challenges, that human survival becomes possible. Then again, as Dr. W. E. Deming was fond of saying, “Survival is not mandatory”.

Current events should make it abundantly clear that the human race is in no less dire straights then the Chilean Miners buried deep in the earth. We need to stop listening to the “King Rat” claptrap that’s being dished-out in generous portions and come to grips with the challenges that life is putting before us. Once we do that, all that remains is for us to do what comes naturally.

In today/s NYT Economix, Princeton economics professor. Uwe E. Reinhardt, demonstrates that the economist’s beloved idea of”efficiency” is more capable of creating misery for the greatest number of people than happiness.

“Efficiency is the seemingly value-free standard economists use when they make the case for particular policies — say, free trade, more liberal immigration policies, cap-and-trade policies on environmental pollution, the all-volunteer army or congestion tolls. The concept of efficiency is used to justify a reliance on free-market principles, rather than the government, to organize the health care sector, or to make recommendations on taxation, government spending and monetary policy.”

If your read his article carefully, you will see that his explanation drives a stake through the heart of the vampirish beliefs that are driving us toward ruination.

I have on previous occasions discussed what I call the myth of efficiency. The so-called “science” of economics is built upon the idea that human beings will seek out the most “efficient” means to fullfil their needs and desires — to achieve maximum happiness. In other words, economists begin with the assumption that individual actors will seek to minimize their investment of personal resources and maximize their return. From this we get the notion that all human behavior is driven by a natural “profit motive”.

Challenging the economist’s view of the human drive for “efficiency” is a difficult proposition if only because you and I see day-in and day-out, that most, if not all, of the people we deal with seem to act in exactly that way. The evidence of our senses tells us that others can only be trusted to do what they believe will produce for them, the greatest gain. So pervasive is our belief in the economist’s blood-sucking axiom of human behavior, that it is often extended to include our relations with those closest to us. We regard our spouse with cautious suspicion. We expect that our children will engage in duplicity to get what they want. We lay awake at night wondering which child our parents most favored.

And, given the evidence of our senses, are we not required to respond in kind?

“What a world, what a world”,  said the Wicked Witch of the East.

The question we need to ask ourselves is if  ”efficient”  blood-sucking is the way of the world as it “is” or if it is the way of the world as we “make it”?

A world of people seeking the greatest efficiency, which Reinhardt casts in terms seeking optimums, tends to produce misery in greater proportions because those who suck more blood must do so at a cost to others, and in doing so, successful blood-suckers acquire a vested interest in perpetuating the myth of efficiency that keeps them sucking large.

Perpetuating the myth is not as difficult as it sounds. For the religiously minded, God’s grace will do. For those who prefer science, the discipline of economics seems “logical”. And for those who prefer more practical reasons, differentials in reward and remuneration — doggie bon-bons — are powerful myth-sustaining incentives.

Wait a minute, you say, doesn’t the fact that differential rewards motivate belief  prove of the economist’s theory?

No more nor less than than the observation that dependence on a daily regime of heroin drives a person to the happiness of  self-annihilation.

It is no surprise that we see vampires everywhere about us. From the day our children are born, we hover over them in training and judgement, lest they be weaker than other vampires. Then we send them off to schools in which the blood-letting is reinforced by grading on a curve. We pit children against children and children against teachers. And once school is out, we divide workers against workers and workers against bosses and neighbors against neighbors. All the world is made a blood-bath of suckers and suckees.

All of this self-made reality seems to us, the natural order of things, and we cleave to it as if it was the word of God Herself. Until that is, we actually need to address tasks of deadly importance.

When we train our young to fight our wars, in which we want to suck the blood of others, or keep others from sucking our blood, we happily do a turn about. We train those who will engage in the most difficult and deadly of enterprises to work together. We teach them that each depends on the others. We teach them to trust one another and to trust those assigned to coordinate and lead. An army of vampires who devour one another just won’t cut it!

So now we find a very different idea of efficiency in which mutual trust and collaboration take precedence over individual self interest.

So it stands to reason that if we can create armies of selfless fighters to tackle the greatest of challenges, then the economist’s vampirish “instincts”, if they exist at all, do not determine our modes of behavior after all. It seems that our human nature is what we chose to make it.

(Now that I think about it, the movie “Daybreakers” was quite clever.)

People often ask why the work of W. E. Deming and his mentor, Walter Shewhart, figure so promintenlty in my thinking about the nature of human endeavor and the human enterprise as a whole. My answer is that these two men recognized that the human faculty for predicting the future is what sets we humans apart from all other creatures. Prediction is the bread and butter of our existence and the quality of our predictions determines whether we live or die. Deming and Shewhart understood that our principal aim in acting must be to reduce variation, and thereby, increase predictability.

Our penchant for prediction is more than a hobby, it is a genetically hardwired obsession that causes us to imagine patterns, cycles, and rhythms in all events related to our activities. To our minds, the regularities of events, real and imagined, are the keys to predictions by which we organize our actions along useful lines. We call these patterns “systems”.

Based on this understanding, Deming and Shewhart both concerned themselves with methods for recognizing useful and meaningful patterns and, given our limited powers, for reducing the variability of those patterns in order to enhance our ability to predict the outcomes of our activities.

Two articles in todays NYT deserve our attention. Both deal with instances in which we, who rely on predictability for our survival, have by our own misguided actions, increased variability and thereby reduced predictability.

In Weather Chaos, a Case for Global Warming

Double Dip? A Tipping Point May Be Near

Everything varies, but it is not the direction of change that matters most but rather, the range of change that threatens our survival as a species.

Slater OR Orr?

NYT, August 9 2010 – “Fed-Up Flight Attendant Makes Sliding Exit“

After a dispute with a passenger who stood to fetch luggage too soon on a full flight just in from Pittsburgh, Mr. Slater, 38 and a career flight attendant, got on the public-address intercom and let loose a string of invective. Then, the authorities said, he pulled the lever that activates the emergency-evacuation chute and slid down, making a dramatic exit not only from the plane but, one imagines, also from his airline career.

We know he’s crazy because he didn’t ask.

“There was only one catch and that was Catch-22, which specified that a concern for one’s own safety in the face of dangers that were real and immediate was the process of a rational mind. Orr was crazy and could be grounded. All he had to do was ask; and as soon as he did, he would no longer be crazy and would have to fly more missions. Orr would be crazy to fly more missions and sane if he didn’t, but if he was sane, he had to fly them. If he flew them, he was crazy and didn’t have to; but if he didn’t want to, he was sane and had to. Yossarian was moved very deeply by the absolute simplicity of this clause of Catch-22 and let out a respectful whistle.”

Catch 22 by Joseph Heller

Been there, done that!

Do you remember a few months back, when the U.S. media was busily burying Toyota’s reputation as the be-all and end-all of automotive quality? To me, the media’s myth-busting paroxysms came off more like a witch-hunt than investigative journalism. Now that their fear-mongering Toyota-bashing is no longer in the headlines comes this from NHTSA, who have been carefully investigating Toyota unintended acceleration reports.

“The early results suggest that some drivers who said their Toyotas and Lexuses surged out of control were mistakenly flooring the accelerator when they intended to jam on the brakes.”

And,

“In spite of our investigations, we have not actually been able yet to find a defect” in electronic throttle-control systems, Mr. Smith told the scientific panel, which is looking into potential causes of sudden acceleration.

In the wake of the great Toyota panic of 2010, Toyota’s senior managers have tearfully apologized in public and Toyota’s engineers have created numerous fixes for problems still not found. As of February of 2010, Toyota estimated that their cost for recalls and lost sales at about two billion dollars.

In past posts on this blog I have expressed my feeling that there was a hidden agenda designed to play on the xenophobic tendencies of a declining nation that has squandered its edge in quality manufacturing and is now trying to claw its way back, not by rededicating itself to creating great products, but by denigrating its competition.

As I have said before, Toyota is just another automaker in business to make a profit. Their products are far from prefect, but have thus far been much better than anything produced by U. S. automakers. To begin to understand why this is the case we need only study Toyota’s corporate response to the media witch-hunt. Rather than dig their heels in with denials and blame-shifting (see BP oil spill), they bowed, apologized, bent with the wind and went on about the business of improving their products. Their response reflected what has come to be known as “The Toyota Way”. Meanwhile GM, having learned nothing, is giving lip services to digging itself out of the grave it dug itself into with a taxpayer funded sham product called the Volt (see NYT “G.M.’s Electric Lemon“)

No design is perfect and the imperfect design of Toyota vehicles certainly contributed to crashes. After all, if the operator of a vehicle can accidentally apply the gas rather than the brake, the gas-pedal next to the brake-pedal design could stand improvement. But the two billion dollar rush to judgement in the media was most certainly fueled by a desire to take the number-one automaker in the world (not made in America) down a few notches rather than a legitimate concern for product safety.

This is the same con as the one being used by the Republican Party in the U.S.  Rather than earn the respect and loyalty of customer-audiences by creating great product and improving it continuously, the Republican party spends all their effort attacking the other party’s products. This method has the benefits of being cheap, requiring no thought, and by creating nothing, immunizing it perpetrators from responsibility for their (not) products.

But there’s a downside to this technique as well, and I am not defending Toyota. I am attacking the con-artistry of U.S. business interests and media lackeys and more importantly, the gullibility of American audiences who mistake creating nothing for doing something. People who are lost in the funhouse had better wake up soon. These con-artists are shoveling dirt into our grave faster than we can dig ourselves out!

In a recent interview conducted at the University of Oregon, Seymour Hersh (no relation), a Pulitzer Prize winning investigative journalist who writes for the NYT and New Yorker, invokes the Quaker wisdom that the moral imperative of the journalist is to “speak truth to power”. As I see it, the Quakerism applies to more than just journalists.

Hersh goes on to discuss two subjects of great interest to me: the myth of objectivity and the reality of our futile wars of adventure that prove most tragically, that we do not learn from history! I see his comments against a backdrop of ideologues and fools battling over petty self-interests in which we become caught up in deadly games of lies and deceits that render us helpless in solving the problems that threaten our survival as a nation and a species.

For a breath of fresh air, watch and listen to this interview.

NTY – “U.S. Economic Growth Slowed to 2.4% Rate in 2nd Quarter“

• The United States economy expanded at an annual rate of 2.4 percent in the second quarter, after expanding a revised 3.7 percent in the previous three months.
• Nonresidential fixed investment…was a key driver of growth in the second quarter, rocketing up at an annual rate of 17 percent.
• Consumer spending… a leading indicator of a recovery in part because it accounts for such a large share of the economy, has been leveling off. It grew at an annual rate of 1.6 percent in the second quarter, after an annual increase of 1.9 percent in the previous quarter.
• The personal savings rate in the second quarter was estimated to have been 6.2 percent.
• Imports spiked at an annual rate of 28.8 percent, the biggest jump in a quarter-century, compared with an annual increase of 10.3 percent in exports.
• Government spending shot up more than many anticipated, growing at an annual rate of 4.4 percent after a decline of 1.6 percent in the first quarter.
• Residential fixed investment spending on items like new homes grew at an annual pace of 27.9 percent in the second quarter. “This will almost certainly reverse hard next quarter,”
• Many economists to believe the recession that began in December 2007 is technically over… [but] The nation’s unemployment rate continues to linger just below 10 percent [and] Some forecasters have predicted even slower growth in the second half of the year, perhaps close to an annual rate of 1.5 percent.

“Given how weak the labor market is, how long we’ve been without real growth, the rest of this year is probably still going to feel like a recession,” said Prajakta Bhide, a research analyst for the United States economy at Roubini Global Economics. “It’s still positive growth — rather than contraction — but it’s going to be very, very protracted.”

Huh!?

So what do all these gyrating numbers — these supposed course indicators  — really mean?

The book “The Heart of the Sea” tells the story of the whaling ship Essex. Along with other whalers of the day, the entrepreneurial spirit led the captain and crew of the Essex to take ever greater risks in order to find and harvest the diminishing population of profitable whales.  On November 20, 1820, while killing the members of a sperm whale pod they located some 2000 miles west of the coast of South America, a member of the pod turned and rammed the Essex twice, breaking the ship’s back and sending her to the bottom. Regrettably, in their enthusiasm for the hunt for profits, the ship’s lifeboats were under-provisioned and neglected, as were any contingency plans should the complement’s adventures go awry.

The officers and crew of the Essex were competent sailors but in their recklessness, they became cast adrift in a situation in which the course indicators that had served them well in the past —- their charts, their ship’s performance characteristics, and their count of whales rendered — no longer applied. In their quest to profit their quarry had turned against them, transforming their intention to profit into a problem of survival.

During the three months that followed, the officers and crew of the Essex struggled to keep their lifeboats afloat and to divine some course of action that would take them to safety. As their situation grew more dire they repeatedly changed their plans, sometimes going this way and sometimes that. The numbers that had guided them in the past were no longer reliable in their new circumstance and in their final calculations they came to see their only salvation as cannibalism. By the time the last of the eight survivors from the original compliment of twenty-one were rescued on April 5, 1821, they had consumed the corpses of seven of the fellows.

It seems to me that in our obsessive drive to profit by entrepreneurship, we take ever greater risks in the interest of profits. As our harvests threaten to become diminished we reach ever farther for resources and markets that can be profitably exploited.

In some cases our folly comes in the form of our over reaching belief in our technologies of which the BP oil spill on but one small example. A confusion of senseless numbers continues to proliferate in that event. The confusion of numbers associated with climate change provides another indicator that we treading uncharted waters.

More significantly is the confusion of numbers that flow from our entrepreneurial adventurism around the world. We should not be surprised when the whales we have been hunting turn against us in an effort to break the back of our predatory ships. Osama Bin Laden is just one example of the ever increasing number of  whales who are turning against us in defense of their pods.

What the numbers tell me is that although we still imagine ourselves as noble hunters, ranging widely aboard a stout and well armed ships, we are actually already in the lifeboats, sizing up our shipmates for dinner.

AP Story: Bernanke: Fed to hold off on steps to aid recovery.

There is a general consensus today that in the upcoming elections the economy trumps all of the cultural issues that have long divided liberals and conservatives. On one extreme of the debate are those who believe that in the midst of our economic crisis, we must commit to spending whatever resources we possess, even borrowing more as needed, in order to restore our economy to a balanced forward motion. On the other extreme are those who say that we must harbor our resources, cut our expenditures and bide our time so that the economy can restore itself to its natural balance and growth.

Let me recount an experience I had that might help you decide which course of action you should support.

As readers of this blog know, I am an avid and lifelong sailor. Sailing is all about balancing natural forces through a process of continuous feedback and control. It is like walking a tightrope in which the enormous and impersonal natural forces of wind and sea can be turned to the seafarer’s advantage by finding and managing a dynamic balance point between those forces that enables forward progress.

At sea it is the situation that determines how the sailor selects a strategy. When the boat is in balance, only very small adjustments are needed to keep it on course and safely moving forward, but once the system becomes unbalanced, the conservatism of small adjustments is no longer sufficient. and more dramatic tactics become necessary.

Some years ago I was doing a solo race that took me some miles off the coast of Santa Cruz, California and well out of sight of other boats. On the upwind leg of the race things worked quite well, but then came the time to turn downwind and set the spinnaker. I clipped into a safety line and as I moved to the bow to hoist the sail an unexpected wave struck the side of the boat and I was thrown overboard into the cold waters of Monterey bay.

Although I had given thought to the possibility of going overboard and had taken the precaution of using a safety harness that clipped me to the boat, I was unprepared for the chaos that ensued once I was in the water and no longer controlling a balanced boat.

At first I wasn’t very worried. I was firmly tethered to the boat. All I needed to do was to get back onto the boat, retake control, and start racing again. But it wasn’t as simple as I had imagined.

To begin with, the boat began to oscillate out of control. First it would right itself because of the weight in the keel. Once righted, the partially hoisted spinnaker would fill with wind and violently knock the boat down again. The effect of these uncontrolled oscillations was to produce a zig-zag motion that dragged me through the water.

My plan had been to use the step at the back of the boat to get back aboard, but each time a tried to use the step, the violent motion of the boat pulled me back down into the water. After several tries I realized that my exertions, along with the cold water, were quickly sapping my strength. I also knew that in the Monterey Bay waters, hypothermia would start killing me after about 20 minutes of immersion.

It then dawned on me that my plan for recovering control of my boat had become untenable. My conservative strategy would be to ball my self up to save my body heat in the hope that, given more time, some external forces would solve my problem. My liberal option was to carefully devise an alternate plan and expend my rapidly waning resources on one go-for-broke effort at self-rescue.

Obviously, I survived that day and now I leave it to you to figure out which approach I used.

In retrospect, my brush with death at sea was a learning experience.

1. I have stopped racing sailboats alone. There is risk enough in putting to sea in small boats.

2. I now have a better understanding the dynamics of being thrown overboard and have created controls that I hope will work better should I ever be in that position again.

3. I know that my mitigation of risk will help make me a safer sailor but I also know that risk can never be eliminated. Sometimes loss of control will create situations in which one must one must go-for-broke to avert disaster.

Solo risk taking, the idea that unmanaged external forces will keep things balanced, belief that you can always be in control, and belief that you can predict all eventualities and devise foolproof methods of self-rescue, are all symptomatic of the thinking that got us into our current economic circumstance. How to go about rescuing ourselves from our delusions is not a matter belief. It is a practical matter that requires a sober estimation of our current situation.

Jeffery Rosen has written a stunningly thought provoking article in the NYT Magazine: “The Web Means the End of Forgetting“. He wrestles with the nature of human memory and the construction of self. Lest you think that such concerns have little importance in the conduct of your everyday affairs, consider Rosen’s observation that…

According to a recent survey by Microsoft, 75 percent of U.S. recruiters and human-resource professionals report that their companies require them to do online research about candidates, and many use a range of sites when scrutinizing applicants.

Rosen toys with the idea that as we tread the Web each of us leaves behind a trail of digitally fossilized footprints. Our trail, so fossilized, will inevitably be used by others who wish to decipher our habits and thoughts, to corner and categorize us for their own purposes.

What might others make the trail we leave behind? How will this or that record of moments past — a picture, a written paragraph, a voice or video recording — be used by anonymous hunters browsing the Internet with the aim to decode and classify us?

How fearfully discreet should we be, lest we become defined and damned by a digitally fossilized artifact created in some unguarded moment and interpreted by those with their own agenda?

A search of the Web reveals an ancient snapshot, originally taken in 79 AD Pompeii. It was captured by the superheated ash from Mount Vesuvius. The indelible image captured presents us with one frozen moment in the lives of two citizens of Pompeii. Is their ungouarded moment sweet or obscene? What conclusions might a human resources specialist draw regarding the character of these two people? Should they be hired?

Recently, my son, a young journalist, wrote an interesting story for the Santa Cruz Sentinel: “Despite significant health challenges, 15-year-old Santa Cruzan Tess Dunn finds herself rocking out ...”

The Online Etymology Dictionary explains the origins of the concept of “disease” a follows:

disease

early 14c., “discomfort,” from O.Fr. desaise, from des- “without, away” (see dis-) + aise “ease” (see ease). Sense of “sickness, illness” first recorded late 14c.; the word still sometimes was used in its lit. sense early 17c. Related: Diseased.

Early 14c., “discomfort,” from O.Fr. desaise, from des- “without, away” (see dis-) + aise “ease” (see ease). Sense of “sickness, illness” first recorded late 14c.; the word still sometimes was used in its lit. sense early 17c. Related: Diseased.

NYT, July 13, 2010 – “Rules Seek to Expand Diagnosis of Alzheimer’s“:

If the guidelines are adopted in the fall, as expected, some experts predict a two to threefold increase in the number of people with Alzheimer’s disease.

The new guidelines include criteria for three stages of the disease: preclinical disease, mild cognitive impairment due to Alzheimer’s disease and, lastly, Alzheimer’s dementia.

Under the new guidelines, for the first time, diagnoses will aim to identify the disease as it is developing by using results from so-called biomarkers — tests like brain scans, M.R.I. scans and spinal taps that reveal telltale brain changes.

The changes could also help drug companies that are, for the first time, developing new drugs to try to attack the disease earlier. So far, there are no drugs that alter the course of the disease.

The trick to unraveling this con is to follow the money. In this case you, the mark, begin getting fleeced out of your most precious assets —  your money and your sense of well-being — upon being diagnosed with “preclinical” Alzheimer’s as much as 10 years before you lose your keys!

Doctors, MRI manufacturers and operators, drug companies, and snake oil salesmen get richer.

You and other preclinical sufferers like you, get poorer, even as you begin a pill-popping life as a prisoner condemned to an ignominious death without possibility of pardon.

This con is actually a variation of the oldest con in the book. In the ultimate diagnosis of preclinical disease, the day you are born you are sinful and you must spend the rest of your life in the shadow of your incipient affliction. Although there is no cure for your sinful nature, strong doses of the palliatives dispensed by high priests, along with ample tithing, can mitigate your misery and self-loathing.

At the root of the problem with our health care system is a treatment centered diagnostic terrorism that does more to create diseases and profits than enable human health and well-being.

See “Use a brain scanner, go to jail!“

See also: “That Uneasy Feeling“

Jeremy Rifkin gives a provocative lecture, supported by some entertaining graphics, in which he asserts that the human species is essentially defined by it empathic powers.

In other words, the process of evolution has selected for human nature that “feels” with others and thereby enables us to bridge the physical boundaries between individuals. The faculty of empathy allows us to synchronize our actions in dance, music, conversation, and in building in infinitely creative ways. We humans, as a whole, have survived 50,000 years because we have, for the bulk of that time, behaved in a manner that made us effectively greater than the sum of our parts.

I am largely in agreement with Rifkin. Our penchant for constructing the world though knowledge is based in our empathic interactions with one another. Our very consciousness depends upon our ability to share symbols and experience shared feeling about our constructs.

So why have we come to embrace the “scientific” ideas proffered by social Darwinism, that the nature of the human condition is rooted in every man for himself? The answer to this mystery is as simple as “follow the money”. Who stands to gain from this false science?

Rifkin’s thesis is that we must make an effort to organize our society in a manner that promotes empathy. It may be even simpler than that. Maybe all we need do is systematically remove the obstacles that have been placed in the way of doing what we do most naturally.

Thanks to John Dowd, who called this link to my attention, along with his comment: “You will like this.  I’m not buying it, but you will agree with it.”

He was right. I do like it!

CNN Money.com, June 26, 2010, Consumer Confidence News:

“Economists pay close attention to measures of consumer confidence as a proxy for consumer spending, which drives the bulk of the U.S. economy.

Wikipedia, Confidence Trick (Game):

A confidence trick or confidence game (also known as a bunko, con, flim flam, gaffle, grift, hustle, scam, scheme, swindle or bamboozle) is an attempt to defraud a person or group by gaining their confidence. The victim is known as the mark, the trickster is called a confidence man, con man, confidence trickster, or con artist, and any accomplices are known as shills. Confidence men or women exploit human characteristics such as greed and dishonesty, and have victimized individuals from all walks of life.

Shills, also known as accomplices, help manipulate the mark into accepting the con man’s plan. In a traditional confidence trick, the mark is led to believe that he will be able to win money or some other prize by doing some task. The accomplices may pretend to be strangers who have benefited from performing the task in the past.

CNN Money.com, July 7, 2010 Ask the Expert (aka Ask the Shill),

Turning $200,000 into $800,000… [I]nvolves nothing more than some simple math. The kind of gain you’re shooting for requires a 6% annualized return, assuming you’ll reinvest your gains each year and that those gains will also earn 6% a year. ]T]o earn 6% annualized you don’t have to actually get 6% year in and year out. You could earn(?) more in some years and less in others. So, for brevity’s sake, to use an example over a three-year span, earning 10% one year, -2% the following year and 10.5% the next year would also work. The key word here is “potential.” When you invest in stocks and bonds, you may do spectacularly well some years (a 50-50 mix of equities and bonds earned 17.4% in 2009), fare poorly in others (the same blend lost 16.4% in 2008) and get so-so returns in yet other years (4.3% in 2005). You’ll find that you can significantly increase your odds of reaching your goal by investing more aggressively. For example, the odds of having $800,000 in 24 years jump to 31% if you invest 70% in stocks and 30% in bonds, and your upside also climbs significantly. There’s a 10% chance that you’ll have at least $1.3 million.

BLAH, BLAH, BLAH!

How to Beat the Con

A greedy or dishonest mark may attempt to out-cheat the con artist, only to discover that he or she has been manipulated into losing from the very beginning. This is such a general principle in confidence tricks that there is a saying among con men that “you can’t cheat an honest man”.

Those who follow my blog know that it is actually about a theory of knowing — a theory about how our minds come into being and how they work. My position is that mind can only be understood in the context of the whole creature. It cannot be reduced to parts. As I lamented in a blog entry some time ago, one of the most misleading trends in mind research is being fueled by MRI technology. (See “Use a Brain Scanner, Go to Jail“).

Last week’s New Yorker has a fine article on the subject of brain function and human behavior. “A Man of Letters” by Oliver Sachs, discusses research into a form of aphasia called alexia, in which the stroke victim loses the ability to decode written language, although he can still write and can still comprehend language by other means. Although MRIs show that the malady is correlated with damage to a very specific region of the brain, the idea that the decoding of written language is physiologically ensconced in one portion of the brain is problematic. The advent of written language, a cultural invention, is too recent to be explained in terms of brain evolution. So what shall we make of the observed correlation between an area of the brain and decoding writing?

To me, the correlation observation is like saying that legs are necessary for walking and when they are damaged, walking can no longer take place, therefore legs are the cause of walking. Silly, no? But just yesterday I listened to a long NPR piece heralding the discovery of regions of the brain that are correlated with murderous impulses.

We are lost in the funhouse of our inventions. God save us from ourselves!

Paul Krugman is not sleeping well. He is dreaming about the dragon at the gate. His column today predicts “The Third Depression” in which a deflationary spiral leads to prolonged unemployment that will relegate millions of young Americans to lives of hopelessness — a generation of the hopeless.

Krugman is a classic “liberal Capitalist”. His vision is one in which market  forces are the natural order of things, but that we must manage that order to avoid undesirable excesses. In the current situation, he believes, government must redistribute wealth in order to keep the market system alive. The medicine he prescribes makes perfect sense as far as it goes. It’s the back to normal part that haunts my dreams.

It seems to me that there are two ways of looking at our situation. Either we view the law of the jungle as natural and desirable, but exercise constant vigilance to hold the voracious beasts of the jungle at bay, or we rid the jungle of the voracious beasts by finding another way to keep everyone safe, happy and well fed.

I am reminded of the villagers who invited a fierce dragon to reside in a cave near the village gates in exchange for his protection and largess. Once ensconced in the cave, the dragon began making demands that the villagers set aside a dragon’s portion of their harvest in exchange for services rendered. To the villagers’ dismay, a vicious cycle ensued. As the villagers and the dragon prospered, the dragon’s appetite grew ever greater. With each passing year the dragon grew bigger and stronger and still more hungry. Soon, even the gratuitous sacrifice of the village’s young and innocent virgins was not enough to sate his hunger and temper his predacious instincts.

Given the dragon’s nature, many villagers realized that the day had come when they must slay the dragon or both the villagers and the dragon would die. When faced with this unpleasant prediction, the majority of villagers remained reluctant to undertake such a perilous task, preferring instead to round up more virgins.

And so it goes.