The more you know...

The more you realize you're an idiot.

We actually know very little. It's a realization that I'm not quite able to put into words. As you learn more about a topic, you discover surprising and incredible truths and how naive and wrong you previously were. But these new truths that you discover will also likely be disproven or nuanced through later discovery. 

It can become exhausting to the point of making you want to throw up your hands and give up on acquiring or caring about knowledge at all.

But we must continue forward, boldly acting on the information we have while constantly seeking new information and remaining open to admit error... in everything.

What should the Fed do?

I believe the right time for a rate rise, if not this meeting, is next meeting. Economists are split and there are compelling arguments for both sides, but here's the deal breaker for me: 

Inflation has been kept down due to declining fuel and these effects are waning. Keep in mind, fuel decline doesn't just deflate overall prices directly, but indirectly as well due to the cost of transportation, so stable "core" inflation shouldn't be cause for dovishness. 

It's then argued that if inflation does start picking up, we can just raise rates then. I would buy this argument if we weren't in such unusual times. The Fed has been experimenting with new methods to raise rates because the old ways may not be strong enough given the huge amount of money unleashed into the system over the past 8 years. While the Fed is optimistic, these are still unproven on a large scale. So a sharp rise in inflation may not be able to be met with a sharp increase in rates.

Better to telegraph a very flat slope of increase and begin to shake the rust from the rate increase mechanism.

Philosophy vs. Data.

Some say "I have no philosophy, I simply follow where the data lead." But they're deceiving themselves. Your philosophy tells you how to interpret the data.

This shows up often in economics. If a certain policy maximizes cumulative welfare, it's deemed the best option. This is very blatantly a utilitarian philosophy, but it's argued as science.

Now this is where most economists would jump in with all sorts of qualifiers, but the point remains. We can argue about the numbers and methods, but most of the time we really just have different philosophies, we should spend our time debating those.

Long term growth.

This is something I believe is fairly common but is easy to forget.

In order to grow in the long term, you must be willing to embrace volatility, embrace downside, and embrace risk in the short term. Efforts to reduce risk, protect the downside, and reduce volatility necessarily reduce upside. Putting a bubble around things leads to stagnation.

This means two things. First, we must preform a risk/reward calculation on every decision; we cannot assume that risk reduction is good by default. Second, we must be prepared for and willing to endure the inevitable trough. Things will get rough, that doesn't mean stop. To reap the rewards we must be willing to ride through volatility.

The nuance to this of course is that risk for risk sake is just stupid. There are some common sense simple things you can do to reduce risk that don't limit upside, like wearing a bike or motorcycle helmet. But whenever someone suggests a way to limit risk and limit the downside, dig deep into what upside is being taken away.

Gut feelings.

Three factors come into play in decision making for everyone: logic, data, and gut.

You should continually learn about the world and your place in it by gathering data. This data can be analyzed to help you make decisions. And target specific data to add when confronted with a challenging decision. But data analysis is inherently flawed when decoupled from logic. The data may be telling you one thing, but you could have insufficient data, be mistaking correlation for causation, experiencing a Simpson's Paradox, or be in any other number of fallacies or paradoxes. If analysis results seem illogical, you should probably dig deeper. Likewise, analysis can prove, disprove, or help you refine your logic. 

This is often where people stop. But where do your gut feelings fit it? Some would argue that they should have no place in rational decision making at all. I disagree. Gut feelings are often your reaction to unanalyzed data or uncriticized logic that you've collected over time. So if your gut is telling you something, you should dig deeper into that feeling to logically explore where it is coming from. The results of this exploration can either prove your gut feeling right if there was some piece of data or logic that you had been ignoring, or prove your gut feeling wrong due to some flawed logic or incomplete data that was subconsciously weighing on you.

I would add that particularly weighty decisions also require prayer and God often points things out to us through our gut. 

There's nuance in the argument for nuance.

The challenge is our societies short attention span. We can say that we must explore and embrace the nuance of situations to come to the best opinion/solution, but how can we hope to convince others who may not have the time or desire to explore that nuance. 

We must find a way to put the argument into an emotionally charged 15 second sound bite... 

Why does this not conflict with yesterday's post? Well we should hope and encourage people to explore the nuance of arguments and details of arguments for themselves and we should make those nuanced arguments when at all possible, but unfortunately, we rarely have someone else's time or attention span to do so. Therefore we must find a way to communicate our idea quickly, simply, and in a way that encourages further exploration without compromising our position.

Not an easy task. 

In praise of nuance.

Things are either black or white and they come in 15 second emotionally charged sound bites! If things are black and white and you can choose the correct option (because they're always both black and white options), then the entire world can be explained in a series of 15 second emotionally charged sound bites.   

But as much as talking heads want us to believe that, few serious people would say they could sum up what they've learned in 15 seconds without diluting its truth and power to a point of trite platitudes devoid of meaning. 

But just because there are not wide swaths of black and white, doesn't mean things are actually gray. There are black and white pixels which look gray from a distance. 

We must do the hard work of exploring nuance and coming to conclusions based on nuance. 


Who are you? Our initial response to this is something like, well I'm a technology consultant, or I'm a music teacher, or I'm an aircraft mechanic. Deeper we may add things like father, artist, or Democrat. And if we're pressed we may share how we're introverts or orphans or even addicts.

But no matter how many labels we put on ourselves, we can never adequately describe who we are. We are each unique and each label comes with baggage. I'm an introvert who loves meeting new people, a Republican for immigration reform, and an entrepreneur that secretly wants to be a professor.  

Labels are an convenient shorthand at times, but they can become dangerous. We can feel a need to live up to the stereotypes of our labels. Others can put labels on us that don't fit. But ultimately, because no label truly describes us, we can live our life trying to discover the intersection of all our labels.

The problem is that that intersection doesn't exist.  We have an identity that is completely different from all of that. It is the core of our being. It is how God made us and it's only in Him that we can find it.

Crime and punishment.

Whether the penalty for theft is community service or death doesn't much matter if the odds of being caught are next to zero. Likewise, a relatively short prison sentence would be just as effective as the death penalty if one was assured of arrest.  

So when it comes to how to reduce crime, we should not focus on prevention as much as how to bring more cases to trial.  

While some criminals are just not bright, many simply discount the potential punishment by their probability of capture.  You can change their behavior by changing the answer to their expected value arithmetic, either by increasing the punishment or the probability of capture.

Legislating higher punishment is easy, but increasing the probability is more effective.

A light post for Friday.

Why is it impossible to buy a grey undershirt? You can buy white undershirts, black undershirts, mix packs that contain grey, but no grey alone. And please, don't respond with a link to some random website that will sell me one, I want to know why I can't do so in a store. 

Eleven stores I went in. Eleven. Not a single would sell me grey undershirts. 

It's like there are two people in the world. Those that where white undershirts and those that where lots of different color undershirts (and by lots I mean about three, none of which are technically colors).

I will fight on. The lone man who wears grey undershirts but not black.

CEO Pay.

The SEC is about to require publicly traded companies to release CEO pay as a percentage of median pay in an effort to shame them into lower pay. The problem with this is that CEO pay isn't that much higher than their officers pay. Lowering CEO pay may then mean a pay cut. You can then try to cut officer pay, but it's not that much higher than senior director pay... And so on down the ladder.

While you can say that it's just an old boys club where CEOs vote for higher pay for each other, that doesn't hold true down the ladder.  

Turns out that the job market is just that, a market with price determined by supply and demand. If prices are high, it means that there aren't enough qualified people. Those who love to bash CEO competence in addition to their pay can at least agree on that.


...are those that can do it live.

You can only be good at something if you can do it with out thinking about it.

You should only do something live if you can do it without thinking about it.

Experts are those who can do it well... live.

How do you become an expert? By doing it and messing up. Sometimes you do it live and mess up, sometimes you mess up in preparation, but either way you will mess up. Whether you should learn while live or while in prep depends on the consequences and is really a topic to be further explored.

Regulatory consequence.

Chicago has banned plastic bags from stores... Or so they want you to think. What they've actually done is require merchants to give out thicker, more harmful (for the environment) "reusable" plastic bags that people will likely just throw away anyway. 

But the politicians appear "progressive" and the progressives (who already had their own reusable bags) can count a "victory."

This is when the paradigm of "Presentation > Content" breaks down. The presentation is disconnected and in fact contradictory to the content. 

Changing society.

If there is something unjust about the culture, our immediate response is often to seek awareness for the issue. While this is an important step, it must immediately be followed by some form of action, else the awareness may make it socially unacceptable to talk about and, ironically, further entrench the ill.

Making it socially unacceptable to use the N word does not fix racism. 

In fact, the focus on words may have further entrenched racism because the most hateful of speech was simply driven into the shadows where it could fester and grow. Meanwhile, the rest of us thought we had made progress.

Business or pleasure?

If you do what you love, you'll never work a day in your life! 


A hobby becomes a profession when you have to do it. If you're tired or stressed from a hobby, you take a break. But once that hobby becomes a profession, you have deadlines and you can't avoid the parts that you don't like as much. 

This doesn't mean you shouldn't "do what you love," but be careful about making a hobby a profession, lot's of changes happen when you go from 5 casual hours a week to 40-50+ required hours per week. 

Carrot then stick. Then carrot... Then stick...

Carrots work, but carrots don't taste so good after a while. Sticks work, but after a while the pain is numbed. 

If you want to change behavior, you have to learn to use both. Once the carrots start to get old, bring in the sticks. Once the numbness sets in, lay out the carrots. 

The US and Cuba opened their respective embassies today. We've gone far too long with only sticks, it's time for some carrots. But for carrots to be truly effective, you must have a big stick in your back pocket and be willing to use it. 

Style... without the decision fatigue.

Much has been of the concept of decision fatigue: the more decisions you make, regardless of significance, the harder it will be to make good decisions. The standard solution is to simplify in order to make fewer decisions. 

Barack Obama, Steve Jobs, Mark Zuckerberg, and Albert Einstein all have a uniform of sorts for this very reason. By not having to think about what to wear every morning, you can free your mind for more important tasks.  

You can both not have to think about what you're going to wear and not have to wear a black turtleneck every day. First of all, you should have an interchangeable wardrobe. Every shirt should be able to be worn with every pair of pants and shoes. Then you can just pull the next shirt and next pants out of the closet in the morning. Finally, you should probably only have enough clothes for two weeks. This will force you to keep things simple.

On debt.

This is a brief follow up on my last post. There seems to be a growing attitude that debtors are entitled to forgiveness. It shows up in Greece, but it also shows up with student loans, house loans, and personal loans. If you borrow money, you must pay it back, it's as simple as that. If it was a bad decision, then you have to live with the consequences like any other bad decision.

The creditor can still forgive or restructure the debt and often should for various reasons, but that is their choice. Debtors should not feel entitled to forgiveness or else slowly but surely lenders will stop lending.

That would be a tragedy, as leverage is extremely powerful and can create great good when used correctly.

Debt, democracy, and the Greek crisis.

Much has been written about how the Greek crisis is really a tragedy for democracy. The argument goes that the desires of the Greek people are being overruled by the Troika (European Commission, European Central Bank, International Monetary Fund) and Angela Merkel. This group demands how Greece should be run without any responsibility to the people by using the threat of economic collapse.

This is the problem of democracy, when the power lies with the citizens no one is effectively responsible. Direct democracy is unfeasible (and arguably undesirable) so we elect representatives; however, if a nation makes a certain policy decision, the majority of people can effectively disown it by saying "I voted for another party" or "I wouldn't have voted for them if I knew they were going to do this." 

Which brings is back to the Greek crisis. 

The Greek people elected leaders who made poor financial decisions. But while everyone feels the weight of past decisions, everyone does not feel the responsibility of those decisions or the responsibility of changing course. "I didn't do anything wrong so why should I have to suffer?" The difficult answer is that collective power means collective responsibility. 

The country is bankrupt. The Troika are not required to continue financing Greece's poor decisions and have every right to ensure that any additional bailout they provide will not be sent up in smoke.

I do feel for the Greek people though. No one wanted to talk about (and people still avoid) the fact that maintaining a true currency union requires the individual members to give up sovereignty to the central authority. Not doing so simply creates a set of exchange rate pegs and history has shown that pegs are unsustainable except in a narrow set of circumstances.

The Greek people have spoken. They want their sovereignty. And so they should leave the Eurozone now no matter how destructive that would be.

Meanwhile, the E.U. and the Eurozone need to address their identity crisis head on. I have an idea, but that's for another post.

Value dilemma.

You have a set of values. Others have their own set. But what happens when these conflict? What would you do if your values would lead you to do something that would "hurt" another? You could compromise your values and maintain peace or you could maintain integrity and cause harm.

My gut reaction is to evaluate your values first and if you still believe them to be correct, then you should opt to maintain integrity.  It's not an easy choice though.

A hypothetical to evaluate nuances will follow.