Reading Material

Someone finally replicated the Milgram experiments, sort of anyways. It hasn't been replicated because no review board would allow a similarly deceptive experiment to take place. The thoughts by a research assistant to Stanley Milgram are excellent.

The difference between a million and a billion shown graphically and in funnier comic form.

MIT Tech Review reads my blog (joke) and talks about electronic medical records and piracy (previously here and here, none of the links provided are especially great reads).

Q&A's with the author of the books Tyranny of Dead Ideas (good read, I may comment on it later) and Bottom Billion both from Freakonomics. The Bottom Billion guy, Oxford economist Paul Collier, kind of annoyed me. He had some great answers - he even mentioned Kiva as one of the best ways that Americans can get involved in Africa. The one that stuck out was this:

"I don’t know this stuff and don’t want to. But I am just about prepared to believe that the average Chinese person is smarter than the average Englishman." - Paul Collier after being asked about the controversial research of Richard Lynn.

Don't want to? Research regarding the average IQ of Asians by Richard Lynn showed their IQ's to be slightly higher than that of Caucasians. This was later refuted by James Flynn, the world's (likely) leading expert on IQ, who stated counter to Lynn that in fact Asians historically have had slightly lower IQ's than that of whites (Asian Americans: Achievement Beyond IQ, 1991, taken from Outliers p. 231). The delicious irony being that Asians out earn whites significantly here in the US. I'm not trying to be prejudice or inflammatory or whatever. I just believe in scientific rigor. I believe these questions and their answers are important. How can you not want to know?

No Balls Are Safe or I Miss Paintball

I'm sorry that the video is sideways, that's my fault. It was edited a long time ago by Chris Dilts.

In this video Jamin, one of the 2 or 3 "adults/mentors" on our team, is drunk as usually happens when it gets dark out. He barges into the hotel room beachside on the Pacific Coast and picks up Tommy by his balls. The signifigance of this is that anyone who gets shot during the day runs the risk of having "unsafe balls". It was kind of like motivation.

I made this as an 18 year old freshman in college using my brand new 5 megapixel digital camera that I carried with me on all my subsequent paintball trips. I abused that camera; it's no longer with us sadly, but it doesn't owe me anything either. This was the very first event of the reformed NPPL that took place in Huntington Beach, CA. I ended up playing in the NPPL for 5 years, 2 professionally, and a year after I quit they went bankrupt. The time in between was interesting though. I played with the same core of people for about 6 years. Lots of stories for another time.

A new 7-man league has emerged and it looks promising. It's called the USPL (US Paintball League). Their first event starts tomorrow at the same venue in Huntington Beach. It's a pretty amazing place to have a tournament. Anyways, one of my teammates just bought a professional franchise, Indianapolis Mutiny, in the new league. Best of luck to Mutiny and the USPL and a word of advice; focus on playing paintball and staying profitable. Promotion these days comes from being legit, not making lame videos, passing out flyers, and paying Fox for airtime.

Picturequote

"Around the hero everything becomes a tragedy, around the demi-god a satyr-play; and around God everything becomes - what? Perhaps a 'world'? -" - Friedrich Nietzsche, Beyond Good and Evil, 150

I've shown this image repeatedly here and here, but this is my first palladium print of it that I'm actually fairly happy with. In person the palladium print (also called a palladiotype) looks very different from a normal gelatin silver print. It is completely matte and has a much longer tonal range. Once I make some enlarged negatives I'll be able to show off the process a bit better than I currently can with a night photograph.


For those interested this was printed on 8x10 Bergger cotton rag paper using a mixture of palladium salts and ferric oxalate. It was then exposed under a UV lightbox, developed with potassium oxalate, and cleared with tetrasodium EDTA. The internegative and negative were made on Bergger BPFP-18 film which was blown up from a medium format (120mm) negative.

Chicago's Street Layout Explained

This is something I try to explain to people all the time. Usually without much luck, but least here I can give visuals too.

In Chicago all the streets are laid out in a grid pattern with corresponding numbers that start at State Street (running north south) and Madison (running east west). The address of that intersection is 0,0 or 0 State and 0 Madison. In Chicago 8 blocks equals a mile.* And major roads exist at half mile intervals for the most part.

For example, going north the numbers as they correspond to the major east west streets are:

Madison Ave., 0 N/S
Chicago Ave., 800 N
Division St., 1200 N
North Ave., 1600 N
Armitage Ave., 2000 N
Fullerton Ave., 2400 N
Diversy Ave., 2800 N
Belmont Ave., 3200 N
Addison Ave. 3600 N
Irving Park Ave., 4000 N

... and so on. By looking at the number and dividing by 8 (really 800 I suppose) you can tell that Fullerton is 3 miles north of Madison Avenue.

For north south streets it's:

State St., 0 E/W
Halsted Ave., 800 W
Sheffield Ave., 1000 W
Racine Ave., 1200 W
Southport Ave., 1400 W
Ashland Ave., 1600 W
Damen Ave., 2000 W
Western Ave., 2400 W

Here's a more complete list.

I used to live at 1034 west Belmont. Belmont is 3200 north, so I was 10.34 blocks west of State and 32 blocks north of Madison. If you understand how this works you can get anywhere with relative ease as long as you know the numbers of the place you're trying to find as numbers are on all Chicago street signs. As an added bonus you can figure out this distance if you feel compelled to do so as I often am.

One more odd note; even numbered addresses are on the west (on north south) and north side (on east west) of streets. Odd numbers are on the opposite. So again using the example of 1034 west Belmont you now know I lived at 1034 W, 3200 N, and on the north side of Belmont.


This is the Lake Shore path. Its end points are Bryn Mawr Avenue (5600 N) on the north and 67th on the south. Bryn Mawr is 56/8 = 7 miles north of Madison and 67th is... Madison to 31st is 3 miles (see below*) plus 4.5 miles for the remaining 36 blocks giving us 14.5 miles in total... not bad considering the winding nature of the path. It's about 16.5 miles long according to Google Earth which has a distance and path function so you can track distances... yea I know; amazingly simple, useful, and utterly dorky.

*The exception to this is actually where I live now; south of Madison Avenue. Between Madison and Roosevelt 12 blocks equals a mile, between Roosevelt and 22nd/Cermak 10 blocks equals a mile, and between 22nd and 31st 9 blocks equals a mile. Thus, from Madison to 31st Street is 3 miles.

Stuff Worth Reading

Great economic read. This has to do with GM mostly but the main thing I loved was this:

"For the broader markets to bottom and for the economy to bottom, certain cataclysmic events must occur. While the timing or form of these cathartic events are difficult to predict, you WILL know them when they occur. If GM and Chrysler are forced into bankruptcy, that will be the one of the bottom forming events.

Many more, such as the final nationalization of Citigroup (C) and Bank of America (BAC) and the complete unwinding of AIG are still required. Losses must be taken by all stakeholders, not just tax payers. Balance sheets must be purged and legacy liabilities written off. These companies need to be recapitalized and relaunched with pristine balance sheets. Only then can they contribute constructively to the economy and help engineer an economic revival."

Fantastic.

The Pirate Bay now has an app on Facebook (not a great read) to allow sharing of torrents. I'm sure that in many cases it's illegal as hell, but it does beg the question, can't this technology be used to disseminate information freely and legally in some way?

Another money scandal... although this time a company in CA walked out one their expecting (literally) customers who have fetuses growing in surrogate mothers; about 70 in all. Fortunately all of the surrogate mothers seem to be willing to still have the babies even though some of them are no longer receiving compensation. Legally they could abort the fetuses even against the wishes of the donors (biological parents). That's more or less the pinnacle of a moral dilemma.

An internet company works out of a tree house in PA. Just cool. I'd have to imagine that would make you a markedly happier person; at least it would for me. (Hat tip: wired.com)

Vanilla

I just find this interesting, it has nothing to do with anything other than the fact that I happen to like plants, especially vine plants. Bines too.

• Vanilla beans, actually seed pods, are derived from the vanilla orchid which grows as a vine. Great pictures of the whole process here.
• Although there are 110-150 species of vanilla orchid, only two are grown commercially. The Mexican or Bourbon (they're really similar) vanilla plant is native to the Atlantic side of Mexico while the Tahitian vanilla plant is either a mutation or hybrid of the Mexican vanilla plant that occurred in the last 50 or 60 years.
• The bloom of a vanilla orchid only opens for one day. If it hasn't been pollinated then it drops and will not produce a bean.
• The seeds of a vanilla pod or really any orchid will not germinate (sprout and grow) without the presence of a certain fungi, mycorrhiza. Orchid seeds have almost no stored nutrition so the seed and fungi form a symbiotic relationship whereby the orchid obtains carbon from the fungi.
• Although orchids are self pollinating the flower can only be pollinated in the presence of a specific stingless bee, the Melipona, native only to Mexico and parts of South America. Because of this the beans must be hand pollinated as most beans are grown outside of Mexico. This is what makes vanilla so labor intensive and expensive.
• Almost all vanilla plants are cultivated within 10 or 20 degrees of the equator with the world's largest producer being Madagascar.
• Once pollinated the pod takes 9 months to mature.
• Each vanilla plant will produce about 50-100 blooms per year, but only 5 or 6 flowers out of about 20 on each raceme (single vine) of these are pollinated to ensure higher quality.
• Vanilla plants remain productive for 12-14 years but take at least 2-3 years to become productive.
• About 97% of all vanilla that is consumed is synthetic. Which is scary because although vanilla can be synthesized in many ways (even from cow dung) presently it is usually made from guaiacol, a petrochemical.

Is Our Economy Recovering?

Short and kind of boring video.



Some people seem to think so, there are many indicators that say so too, but I call BS. 2009 will not be a pretty year financially.

Also, before I remember that I hate blogging about the economy because I don't even know where to begin and it's depressing... here's a truly good read on the Public-Private Investment Program (PPIP) plan by Geithner.

My last two posts have content from The Big Picture.

Interesting Charts

As an odd point of clarification that has almost nothing at all to do with this post; when I took economics classes in college we never really discussed political views regarding economics. Things like "The Chicago School" of economic thought and free market versus socialism were really just never discussed. I suppose we did talk a bit about government intervention. Mostly we figured out how changing one variable in any given situation would trigger a change in other variables. On tests we would be expected to know how to "create an economic story" and show the changes graphically. Most of it was just studying the history of economics which is really like... the last 100-150 years. I'm sure economists will be better prepared for future crisis's in the next 100 or 200 years when they have better data. Then again by that time I'm sure computers smarter than our (current) selves will be running the show (another subject I know).

Here's a typical page of my notes... don't worry, they're confusing to me (now) too. These 3 charts, that are really one, has to do with floating currency.

This is interesting just because I consider myself to be somewhat "informed" in terms of economics and what not yet was unaware at just how much the various indexes have lost in value. Aside: look at the REIT's (real estate investment trusts) in pink!

This is interesting on several levels. The red line in the center gives the inflation adjusted cost of buying a home. Thus, if you purchased real estate in 1979 it's worth about the same as what it's worth today plus inflation... think 3% a year. This of course isn't the case if you bought in a "hot" area where prices increased dramatically. There are positives (tax deductible interest payments, you get to live there, one of the few investments that's protected from inflation) and negatives (upkeep, generally poor appreciation, highly illiquid, and high transaction costs if you sell) to owning a home, but it is worth mentioning that it isn't a crazy idea to rent and invest the excess money you would have been paying on a mortgage. Then again, in a country with a (previously) negative savings rate, who has the will power to do such a thing?

Links

This is a take down of the New York Times columnists. I found it interesting because it seems that journalism is trying to report on this whole economic genocide thing but they are just failing... really they are. Not to be all negative. Here are some people that don't: Krugman's blog, The Big Picture, Freakonomics, and The Financial Ninja to name a few.

The Thugz on AIG. Hilarious, scary, and true.

Cows cause more global warming than cars, the steel industry, plus some others... now smokers? Smokers put as much particulate in the atmosphere as half of the cars in America.

Google is truely amazing... now you can unsend email on Gmail.

Everything is Amazing, Nobody is Happy

Bernacke Hits the Easy Button

I'm not going to get too into this, but "Helicopter" Ben Bernacke has finally lived up to his name. As an aside, he was given the nickname in 2002 because of a speech he gave about deflation. Deflation used to be a huge problem (it was during the Great Depression when we were still on the gold standard), but now that we're on a fiat money system the solution is simple. If the US dollar begins to deflate we just print money making each individual note less valuable. If we print too much then we cause inflation... which erodes government debt... hmmm I wonder what's going to happen after all of this is over? Anyways, Bernacke used to famous example used by Milton Friedman of dropping money from a helicopter.

Yesterday the Fed, for the first time ever, used a tactic known as quantitative easing. Quantitative easing means that the Fed, to put it simply, creates money out of thin air, credits it to bank's accounts, whereby they are allowed to loan it out at ten times that amount because of the fractional-reserve banking system. What? Pretend I'm the Fed, you're the bank. I don't even print the money, it just shows up in your bank account at my behest. Since you're a bank you only have to keep 10% of the money you have in reserve (this is different than those crazy unregulated "financial institutions" that were 30 and 40:1), so the $100 I gave you turns into $1000 of lending while the $100 sits in your electronic bank account. So what does this all mean? Lots of stuff, but who wants to read about that crap... this is much more insightful:

"We’ve arrived at this unfortunate juncture in our nation’s financial history because of reckless behavior in both New York and Washington D.C. Interest rates were too often kept too low, lending standards were whittled away until they were non existent, and borrowing too much for one’s own good (both corporate and personal) reached the point where it carried no negative stigma. Our nation’s elected officials consistently spent far more than was collected in tax revenue and our nation’s regulators were so poor they wouldn’t have been able to cut it as mall cops.

We learned nothing from the foreshadowing events brought about by the reckless behavior on display at Long Term Capital, Enron, and WorldCom. Bill Fleckenstein neatly summed up the last 15 years in one his best-ever Raps back in January of this year. Anticipating today’s events, Bill wrote, “…initially, in the late 1990’s, we attempted to speculate our way to prosperity via the stock bubble. And then, when that didn’t work, we attempted to borrow our way to prosperity during the real estate bubble. Of course, those two ended the way they did, in an epic disaster, and now we’re trying to print our way to prosperity…” Well said, Bill. Let us all hope the U.S. experiment with pushing the button on Quantitative Easing is more successful for us than it was for the Japanese. But given all the behavior that brought us to this point, we will need to be both lucky and good from this point forward." - Jack McHugh, on The Big Picture

Disappearing Money

This is the article that brought this up again. I think about sustainable asset value often (I just made that term up)... hm, it's almost like green spending. The article talks about where the money goes when the stock market goes down 50%; it literally disappears. This is because the current value of a stock reflects the companies expectations for future earnings... earnings forecasts are, in short, shit right now. Hence, stock prices fell and tend to reflect the explicit value of the company as opposed to its explicit (concrete) plus implicit (earnings potential) values. This is true of goods you purchase too. A good has its use (implicit) value and its scrap (explicit) value.

EDIT: I've been told this is concept is confusing so here's an example. When you first buy a couch it it has the potential to be sat on maybe a grand total of say 10,000 hours which is the implicit or potential value of the couch. The longer you own it the less potential it has to be sat on, it just wears out. Its implicit value thus decreases with use. Potential uses for an old couch... firewood, if it has steel in it you could scrap it, lawn couch, etc. The point with explicit value is that if you were to scrap it right now or in ten years it would still be worth roughly the same. Combine those two values at any point in time and you end up with the price of your car. A stock can be viewed in the same way, although it's a bit more abstract. A stock's explicit value is harder to gauge and is constantly fluctuating as the actual tangible assets of the company fluctuate. Again, the implicit value is the expected future earnings of the company. Combine these and you get the current stock price.

If the US produces about 13 trillion dollars worth of goods and services every year (GDP/GNP) how much of that value still exists a few years down the road? I have no idea, but I bet the Bureau of Labor Statistics does. Here's the data I'll be using. It's from 2007. There are 120 million "consumer units" (a.k.a. families, with the average consisting of 2.5 people) in the US and their average yearly spending equals $50,000. Of that $50,000:

$6,100 for food

$16,900 goes to housing

$1,900 to clothing

$8,800 goes to transportation

$2,900 for healthcare

$2,700 for entertainment

$5,300 goes to insurance and pensions

$1,000 for education

$600 for personal care

$500 towards alcohol

$300 for tobacco

$800 misc.

$1,800 for cash contributions (does that mean your drug dealer?)

If you follow the link to the data concerning spending behavior you'll find that it breaks down further into categories. Food breaks down into dairy, meat, etc. Housing breaks down into rent, utilities, finance charges, insurance, etc. This is what the list looks like if you remove the non-perishable goods from it:

$3,900 dwelling, unfortunately this includes interest and surcharges

$1,800 household furnishings

$3,200 vehicle

This list is given in descending order as to how fast the good depreciates. This means that only about $9,000 out of the $50,000 (18%) that people spend every year goes towards goods that hold some portion of their value after one year. Of note is the fact that in recent years the savings rate in the US (since 2005) has been negative. Ponder that one for a moment. I remember learning that when I was still in school (3 years ago) and no one thought too much of it... seems obvious now.

So what counts as something that holds its value? This is a bit hard to define. It's something of a grey area because the things that count, non-perishable goods, tend to depreciate over time. For example, a car. When a car is new its combined implicit and explicit values are quite high. As it gets older the implicit (potential for further use) gets smaller while the explicit (scrap, steel) value stays somewhat stable. Perishable goods such as groceries are worthless after just a few weeks. There are of course some goods that don't depreciate much at all. These might include bullion, guns, jewelry, art, etc. Basically things that don't require inputs and never wear out. I'm taking a quick look around my room right now... most of the value of my possessions will approach zero in the coming years. Here are a few of them:

books - these lose substantial value initially but then hold fairly steady.

high end film camera - bought it cheap, could actually increase in value one day.

jars full of change - depreciating slowly.

liquor - holds value perfectly (I never thought of this) as long as I don't drink it.

computer - almost worthless in just a few years.

furniture - may retain some value, especially the nicer stuff.

clothing - small tax deduction in a few years otherwise almost worthless.

_______

Part Two

"Almost any man knows how to earn money, but not one in a million knows how to spend it. If he had known so much as this, he would never have earned it." - Henry Thoreau, Journal entry, undated, age 20-30

Thoreau says something here that is hard to verablize in any other way. To me it means that often the stuff you buy isn't worth the tradeoff you made to get that good.

So what can we do to maximize the long term value of our spending? The easy answer is of course to buy things that hold their value well or not spend as much. The broad and hard to attain answer is that our society is transfixed with the present and we desperately need to start thinking long term. I've had talks with a few friends about this recently. Although, not as it relates to this subject. We spoke about it more as it pertains to corporate and political leaders. It's something I plan to write about in the near future. As it relates to this subject, it would behoove us as a society to build and consume (buy) things that are less disposable (concrete homes!). Not everything of course, but some of the major expenses must be rethought. Look at that data set. Over half of the expenditures in the US are on shelter and transportation ($17,000 and $9,000 making $26,000 of the $50,000 total). More than half of our money goes towards moving you around and housing you. That's kind of crazy. Why? Because during one of the better periods of my life my rent was $375 (Lakeview, Chicago) plus utilities brought it to about $430 and I rode a bike exclusively which maybe cost me $50 a year. That's $5,200 a year. So according to this data set $10,000 would be enough for me to live an "average" lifestyle. Where is all that other money and effort going?