Successful people vs. Failures

“Successful people suffer through catastrophes and bankruptcies. The successful person fails many times and bounces back. The failure fails only once, letting that one failure become a judgement of his worth, and thus his label.” From a well-designed PDF summary of The Now Habit by Neil Fiore, which is moving straight to the top of… Continue reading Successful people vs. Failures

My Anti-library

<picture missing> Pictured above is part of my anti-library. The first bottom row are unread or partly-read books. The back row and shelf are either read or reference books. What’s an anti-library? In The Black Swan, Taleb talks about Umberto Eco’s collection of 30,000 unread books. These books represent Eco’s anti-library, the reservoir of information… Continue reading My Anti-library

Forget About Black Swans, the One Ahead is Neon

From Forget About Black Swans, the One Ahead is Neon on the Wall Street Journal:

As Nassim Nicholas Taleb’s bestseller “The Black Swan” made clear, the human mind is poorly equipped to prepare us for rare, important and unpredictable events. But maybe our minds—and our markets—aren’t very well equipped to protect us against neon swans, either.

Many investors seem to be coping with what seems like an obvious risk simply by closing their eyes.

…If the U.S. defaults or its credit rating is downgraded, says William Bernstein of Efficient Frontier Advisors in Eastford, Conn., Treasury prices would probably “go to 97 or 98,” losing only a few percentage points in value. “You’re not going to wake up one morning over the next couple of weeks and find they’re priced at 50 cents on the dollar,” says Mr. Bernstein.

“It is absolutely inconceivable that we would flat-out default and not pay anything,” he adds. “The worst-case scenario is a very temporary payment problem, and I think the Treasury market knows that.”

But the ripple effects could be considerable. Mr. Bernstein expects corporate and municipal bonds to drop much more drastically if the Treasury market is hit by default or downgrade. And stocks, he says, could be massacred. For investors with cash and courage, a crisis in U.S. Treasurys might well pose a historic buying opportunity. If, instead, it turns out to be “like a giant asteroid hitting the earth, Mr. Bernstein says, “then there isn’t much of anything that’s likely to protect you.”

This article may be outdated since they raised the debt ceiling recently, but it’s still a good read.

Live Dangerously

“For believe me: the secret for harvesting from existence the greatest fruitfulness and the greatest enjoyment is—to live dangerously!” —Nietzsche, The Gay Science (section 283)

Brent Pottenger on “Self-Experimentation with Story Systems”

Brent Pottenger, author of the healthcare epistemocrat blog, asks: How should we invest our intellectual and spiritual energy and capacity? His answer lies within the confines of tradition. Take a look at his m=1 Story Systems example. I’ve been experimenting in an n=1 fashion for quite a while now, but the idea of an m=1… Continue reading Brent Pottenger on “Self-Experimentation with Story Systems”

“—Christianity, alcohol, the two great means of corruption.”
The Portable Nietzsche, page 652

“Every kind of faith is itself an expression of self-abnegation, of self-alienation.”
The Portable Nietzsche, page 639

The analogy of Christianity to alcohol is interesting to me. The chemistry of alcohol: ethanol is a carbohydrate, the metabolism of which leads to the inhibition of the enzyme phosphofructokinase (slowing and directing cell metabolism to store instead of burn fat) and is converted to triglycerides in the liver (storing more fat); ethanol binds to the GABA-A receptor which increases effects of the inhibitory neurotransmitter GABA (effectively slowing nervous system reactions), and of course increases liver cirrhosis. (A bit oversimplified, and disregarding the hormetic effect of alcohol, but the point remains.)

The chemistry of Christianity: faith rests on convictions, convictions inhibit the believer from independence so that he “cannot posit himself as an end” and in fact requires someone else—a priest or deity—to posit any end at all, and so he becomes a means to others’ end—a slave—in which case his freedom and sense of self continually deteriorate. Just like alcohol, this pathway dulls the senses and robs men of the vivid sense of life that accompanies self-overcoming or self-actualization.

I’m not sure how much Nietzsche knew about biochemistry, but in any case he has here a deeply accurate analogy.

From Summation by Auren Hoffman:

Entrepreneurs tend to be street-smarter than strategy consultants. Entrepreneurs are more practical, more focused on the bottom line, and more attuned to real-world contingencies.

A typical strategy consultant job interview might go something like this:

“I toss a coin. Heads you win $10,000. Tails you lose $6,000. Do you play this game? Why?”

And a typical strategy consultant answer would go something like this:

50% chance I win, 50% chance I lose. So my decision calculation goes something like:

Winnings: (0.5) * $10,000 = $5,000

Loses: (0.5) * $6,000 = $3,000

My net value of this game is $2,000

Therefore, even if I am very risk averse, I’ll still play this game, because I can afford to lose $6K when the payoff is so much higher.

A typical entrepreneur would look at this game totally differently and would ask a series of questions:

1. How do I know the coin is fair? Maybe tails is much more likely to come up. Can I test the coin by flipping it 500 times to see if it is consistent? Do I really want to waste my time performing and recording 500 coin tosses?

2. How do taxes affect my wins and losses? Is Uncle Sam going to take a huge chunk of my winnings but not recognize my losses? Can I only apply my losses to gambling gains? How are state and city taxes affected?

3. Do I have to pay in cash if I lose and do I get cash if I win? If that is the case, are we going to show up at the location with all the money? Will I be secure? Can I pay by credit card to get frequent flyer miles?

4. How can I be sure I will collect from you? Are we going to hold the money in a third-party escrow? How much will that cost?

Auren Hoffman, Summation

It’s interesting to note that Nassim Taleb gives a similar example of the coin toss scenario when discussing the thought processes of The Nerd and the street-smart common-sensical Epistemocrat.

Here, however, Auren Hoffman is describing the typical entrepreneur. I’m sure Taleb (and most entrepreneurs) would agree that, despite the typical risk associated with entrepreneurship, creating your own business and liberating your finances—that is, putting your wealth in your own hands—changes the nature of the question so that you have ultimate control over the amount of risk that you choose to take on. Otherwise, your entire stream of income would be dependent on the decisions of the establishment that hired you.

Picture entrepreneurship like a pyramid, a large base and a fine point on the top; the large base represents multiple opportunities for streams of income. A typical job, however, would look like an inverted pyramid, in which you only have one source of income—the point of the pyramid. If that one source fails, the entire pyramid would collapse on you.