Complete Whimsy, Deficits, Dollar, Federal Reserve

Peter Schiff Does Stand Up

OK, so Peter Schiff has gotten a little too doom and gloom for me of late, but he’s still the man. And apparently he can do stand up comedy too:

 Not bad for a stock broker…

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Live and Learn, Trust

Swift Reviews: The Easy Way to Stop Smoking

The Easy Way to Stop Smoking Cover

5 Stars

Allen Carr’s classic book is possibly the most important book I ever read. I hadn’t smoke that long and I would like to think I would have quit eventually anyway. But then again, I had “succeeded” a few times and had gone back every time. So the fact that this book helped me quit (or as Allen Carr describes it, escape) smoking for good says something in and of itself.

Indeed, at the time I bought the book about a year and half ago the book had over 1000 ratings on Amazon.com and still had a five star rating! That is something I have never seen for a book with that many ratings. It has since fallen to 4 1/2 stars with about 1300 ratings, but many of the negative reviews seem to have missed the mark.

For example, this one:

I wish this book were true. Unfortunately, it is wishful thinking. It does not take into account the actual physical symptoms of quitting smoking. It assumes that all physical ills are psychological, which they aren’t. I am so disappointed with both the book and the reviews.

This ignores one of the biggest revelations of the book; that the actual physical withdrawal pangs of nicotine withdrawal are extremely mild. As Allen Carr puts it:

There is no physical pain in the withdrawal from nicotine. It is merely a slightly empty, restless feeling, the feeling that something isn’t quite right, or that something is missing… (pg. 24)

… Most smokers go all night without a cigarette. The withdrawal “pangs” do not even wake them up. Many smokers will leave the bedroom before they light that first cigarette; many will have breakfast first. Increasingly people don’t smoke in their homes and won’t have that first cigarette until they are in the car on the way to work… These smokers have eight or maybe ten hours without a cigarettegoing through withdrawal all the while, but t doesn’t seem to bother them. (pg. 34)

Those really painful withdrawal pangs actually come from your own mind (after all, your mind, by itself, can make you physically ill). Many smokers go for long stretches, while they are distracted with a game or TV show or whatever and don’t smoke. It’s not like every smoker smokes on the hour ever hour. Often tiAllen Carrmes, it’s certain cues, like leaving the house to go to work or lunch time or when the plane you’re on lands that set off the craving.

As The Power of Habit demonstrated, habits can be strong and ingrained in the most primitive parts of the brain. So what’s necessary to stop smoking, since the withdrawal pangs are so slight, is to change our habits. And this involves becoming self aware of them. Specifically, asking the question; why do we smoke?

Everyone says we shouldn’t smoke because it’s unhealthy and gross and blah blah blah, but it has to provides some benefit, right? Well, no. And most of what this book does is prove that. He shows how smokers attribute contradictory benefits to smoking. For example, the excuses will be that cigarettes help with concentration and boredom as well as relaxation and stress. How could the possibly do both?

Obviously, they don’t. All the cigarette does is relieve the slight physical withdrawal pang. And the brainwashing, as Allen Carr refers to it, takes over. We think we need the cigarettes, so our mind makes us need them and induces the really bad pangs people talk about when they try quit with willpower. So Carr demolishes the brainwashing to leave us with only the slight, easily tolerable physical pangs.For example, one excuse for smoking is that we smoke because we’re bored. Well, what’s more boring than smoking a cigarette? Oh yeah, smoking is boring so it probably doesn’t help relieve boredom particularly well. He has a long list of these types of excuses.

So every habit has a cue, a routine and then a reward. By learning that there actually is no reward to smoking cigarettes, the cues become irrelevant very quickly. In essence, Allen Carr’s book doesn’t make it easier to quit smoking, it makes it so you don’t want to. It doesn’t take much willpower to not do something you don’t want to do.

Other forms of quitting don’t work very well (I certainly tried a few of them). For example, it’s correctly claimed that nicotine replacement therapy doubles the chance of success. But then again, it doubles your chances all the way to 7%. A study in the Internal Archives of Occupational Environmental Health showed Allen Carr’s seminars to have a 12 month success rate of 51.4%. And the book’s high rating on Amazon.com lend credibility that the book does similarly well This is especially true given how it seems the message flew over many of its detractors heads. How many of those that failed just didn’t take the book, or seminar, to heart?

So all in all, I highly recommend The Easy Way To Stop Smoking to anyone trying to quit, err, escape smoking.

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Photo Credit: gamepasattic.ca and wikipedia.org

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Liberty, Live and Learn, Trust, Uncategorized

Swift Reviews: The Power of Habit

 

The Power of Habit cover

4 StarsCharles Duhigg certainly bit off a large bite for himself, and did a mostly very good job of chewing it.

The Power of Habit is a fascinating book that looks into how we develop habits and how those habits affect us at individual, organizational and societal level. The most interesting part is the beginning where he tells the story of Eugene Paulie, a man whose brain had been severely damaged by encephalitis and had lost all of his memories, including his ability to remember anything after more than a few minutes.

Yet the man could still speak and do all the tasks he had learned throughout his life. In fact, he could even walk around the block and find his way back home. Cues would tell him it was time to eat and if it weren’t for the intervention of his wife he would eat five or six meals a day.

What this helped lead scientists to was that habits are not memories. They are more similar to instincts, but instincts we learn or adopt. Basically, they are automatic processes that takeover when we receive whatever cue, and it culminates in some reward that solidifies the habit. While the processes are complicated, they mostly reside in the basal ganglia, the very center and most primitive part of the brain (the brain effectively evolved on top of itself with the most advanced parts on the outside, such as the prefrontal cortex).

This has all sorts of important implications especially with regards to addiction and how we judge individuals behaviors. How much of what people do is under their control? Unfortunately, Duhigg’s dicsussion of this is the weakest part of the book. He compares the case of a woman named Angie Bachmann who won the lottery and then became a gambling addict and gambled away her entire fortune, and then proceeded to gamble away her entire inheritance., with a man named Brian Thomas who accidentally murdered his wife while having a sleep terror.

Sleep terrors are quite different from sleep walking as sleep walking is usually just going through random habits, while sleep terrors involve going into a highly anxious, primitive neurological state. The night he killed his wife, they had seen some hoodlums causing trouble, so they moved their RV. That night he had a sleep terror and while dreaming that those hoodlums were attacking him, he strangled his wife to death while unconscious.

The woman was held responsible for her debts while the man was acquitted of murder. Duhigg sums up our society’s motives as follows:

… there is one critical distinction between the cases of Thomas and Bachmann: Thomas murdered an innocent person. He committed what has always been the gravest of crimes. Angie Bachmann lost money. The only victims were herself, her family and a $27 billion company [the casino she gambled at] that loaned her $125,000. 

Thomas was set free by society. Bachmann was held accountable for her deeds. (pg. 268-269)

There are a lot of interesting questions with regards to the legal and moral ramifications of neurological science, but this is a horrible comparison. Right off the bat, the difference between criminally punishing someone and civilly holding someone accountable for a debt they incurred is enormous.

Thomas was literally unconscious when he attacked his wife. And while he had had night terrors before, he had never done anything even remotely violent and there was no real reason to think that he would. The question with regards to Thomas is should someone be held liable for what they do while unconscious. Bachmann was conscious while she gambled. So the question for her is should someone be held liable for something they do while habitually addicted.

They’re two very different questions, and if we do drop Bachmann’s culpability because she was a gambling addict, do we thus drop the liability of someone who drives drunk and kills someone in a car crash because they were an alcoholic?

This is especially true since one of the important lessons of this bookwhich is touched on throughout and elaborated upon in a very good appendixis that habits can be changed.  Yes, we do things by habit without thinking about them in what is effectively an instinctual sort of way. And yes, changing them is difficult. But yes, they can be changed. Each habit is three steps: 1) Cue, 2) Routine and 3) Reward. The key is to isolate them. He describes the steps experts agree on taking:

– Isolate the routine

-Experiment with rewards

– Isolate the cue

– Have a plan (pg. 276)

What’s important is to change the reward to something positive (i.e. eating an apple) instead of something negative (i.e. eating a cookie). But of course, one has to figure out exactly what the reward really is. It may be the longing to have a break rather than eat something and the cookie is incidental. Thus, the experimentation.

In the book, Duhigg also goes into the habits of organizations and societies, particularly societal movements. This part is good too, but is more anecdotal than empirical. Still, the story of Starbucks and Alcoa almost obsessively emphasizing respectfulness and safety respectively, and the discipline and success that came from that, is quite compelling.

Despite some minor flaws, The Power of Habit is still a fascinating and well written book on an extremely important topic. Much of what we do is through habit, not conscious thought. The better we understand and thereby learn to control our habits, the better we will all be for it.

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Photo Credit: blog.hpb.com

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Individual v. Collective, Live and Learn

John Stossel Rundown

Here are some of my favorite, mostly recent, discussions on some very relevant topics by the man with mustache himself:

 

John Stossel with Chuck Devore and Matt Welch comparing why Texas’s smaller government model is better than California’s big government model

John Stossel with Nick Gillespie debate Thoedore Dalyrymple on the Drug War and Obama’s Hypocrisy

John Stossel with Radley Balko on the troubling development of police becoming more militarized

And then John Stossel’s special, which I highly recommend, Illegal Everything. Nothing better sums up out of control bureaucrats than this:

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Dubiously Free Trade, Individual v. Collective, Live and Learn

Wealth Inequality in America: A Partial Critique

So I’m a little late on this one, but there is a viral video on wealth inequality in the United States going around that compares what a survey of 5000 Americans said they thought wealth inequality should be and then compared that to what it actually is. Well, as many of you know, wealth inequality is substantially larger than most Americans think it is:

Now I should start off by saying I agree with this video in part. Wealth inequality in the United States is too high and it’s getting worse. While proponents of free markets rarely complain about income inequality directly like say Joseph Stiglitz, they do complain a lot about corporate welfare. Tim Carney’s book, The Big Ripoff, is to me the best rundown on the whole bloated mess. And what would corporate welfare probably lead to… well, more income inequality.

That being said, there are problems that should be highlighted. Some of these problems relate to what is considered wealth but the big one is actually a sort of meta-problem with the way that normal people think about inequality. In other words, what people think inequality should be doesn’t make any sense if they actually think about. Why you ask? Well, let me explain:

1. The Big Missing Variable

The big missing variable when discussing income inequality is increased exponentially in terms of it’s importance when discussing wealth inequality. Indeed, it may be startling to think of how simple a variable this is.

Age.

It seems obvious now that you think about it, doesn’t it.

After all, how much money were you making when you were 25 compared to 45. Probably less than half. But when it comes to wealth, oh lord, it’s not even close. The wealth inequality figures discussed in the video make no attempt to control for age. And as a matter of fact, the gap in wealth between the young and the old has been growing.

According to a Pew study, the net wealth of those over 65 between 1989 and 2009 went from $120,000 to $170,000, a 42% increase. For those younger than 35, their wealth actually decreased from $11,500 to $3500, a 68% decrease. And more importantly, $170,000 is 4850% of $3500!

Now remember that these aren’t the same people being measured over time. Perhaps this has something do with people going to college more and thereby 1) starting their career later and 2) having a lot of student debt to pay off. Thereby they’re worth less when they’re young, but more when they’re old. Or perhaps kids these days just don’t know how to save like they’re folks did.

But when you boil it down, people under the age of 44 only possess 11% of the wealth in the United States. That’s an incredible figure if you think about it. And remember, these people are going to get older. They’re going to pay off their student debts, get that big promotion, pay off their house, inherit their parents wealth, etc.

For example, take this thought experiment; say everyone in the country made the same income, but each decade of life they got a promotion. They start at $20,000/year in their 20’s, then they go to $30,000/year in their 30’s, etc. In addition, they save 5% of their income each year and make no return on their savings. Assuming there are as many people in their 70’s as 20’s (which of course there aren’t, but bear with me), this is what the income and wealth inequality would look like:

Wealth inequality Spreadsheet

Or as the video presents it:

Wealth Inequality Graph

And that’s assuming that everyone is equally talented, that every industry is equally as profitable and that everyone has just as good of saving and investment habits. Furthermore, if I put in just a small return, that chart would be skewed even more. At 3% interest, if the person contributes every month, on their 30th birthday they will be worth $11,627. On their 60th, they will be worth $198,486. In that case the bottom 20% is worth only 2.69% and the top is worth 45.6% of the total. And that acts as if everyone in their 20’s is worth over $10,000 when in reality most are worth next to nothing.

Any serious look at wealth inequality, and income inequality for that matter, has to take age into account.

2. Entitlements

OK, our entitlement systems are a little underwater, but ignore that for a second. Payroll taxes are capped at $113,000, so in some ways it acts as a regressive tax. But then again, it’s not supposed to be a tax, it’s a government mandated insurance scheme.

Well, throwing in Medicare and Social Security add a little for the rich, but they do add a substantial amount of wealth to the poor in relative terms. How much more wealth would the poor and middle class have if instead of paying into a government program they were mandated to put that money in a health savings account or IRA or something to that effect? Well, it would be quite a bit. This would smooth out the curve a bit. While it makes sense that the author of the study don’t include entitlements since it’s based on when you need it (Medicare) or how long you live (Social Security), conceptually, we need to take them into account.

So let’s take a shot at it. According to Bankrate.com:

… A male average earner who retired at age 65 in 2010 paid out $345,000 in total Social Security and Medicare taxes, but will receive $417,000 in total lifetime benefits ($464,000 for a woman)… In the case of a household with only one wage earner, the taxes paid out were $345,000, but the benefits received by both parties will be $778,000. For two-earner couples where one earned the average wage and the other earned a low wage ($19,400), tax payout was $500,000, but benefits will be $800,000.

OK, that doesn’t sound particularly sustainable, but if that average person is taking out some $400,000 plus in benefits, couldn’t that be thought of as a form of wealth?

3. Individuals vs. Families

In the video, the narrator describes the survey as separating the American population into “groups.” Groups of what? Well he doesn’t say. Luckily the links in the lowbar did. And you guessed it, it’s family wealth, not individual. Once again I have to clarify this ridiculous error. When family sizes vary in shape and size you simply cannot compare them as if they were the same. As Thomas Sowell has noted:

 Households are of different sizes, they vary over time, they vary from one group to another, they vary from one income level to another. So for example, there are 39 million people in the bottom 20% of households, and 64 million in the top 20%. So you’re saying, yes, 24 million additional people do tend to have more money.

Or in other words, the top 20% has almost 60% more people in it than the bottom. Even if there were an equal number of people in the other three “groups” and every individual had the same wealth, the top 20% would have almost 25% of the wealth and the bottom 20% would have barely 15%. When we further take into account that many in the bottom 20% are in prison, single parents, people on welfare, disabled, drug addicts, homeless, etc. it becomes clear that dividing the country into such groups is simplistic at best.

In Other Words…

Now again, even after all that, I do think this is a problem. And I will join liberals in denouncing the major role corporate welfare played in all of this (and I would add, Federal Reserve policy). However, before liberals get too far into their rant about about taxes being too low and regulation being too light, I should note some other possible reasons.

1. Immigration: I believe the impact is relatively small on income inequality (David Card, for example estimates it’s share is only 5% of the increase between 1980 and 2000), I do think it’s effect on wealth inequality is large. Most immigrants, after all, come to the United States relatively poor.

2. Dependency and Welfare: Charles Murray’s new book, Coming Apart, makes the case that the values of the upper class and lower class have diverged, and I do think there’s something to this. Indeed, while in 1960 only 9% of men in the bottom 30% between the ages of 20 and 64 were working. In 2000 it was 30%! In 1996, only 0.286 people in single person households in the lower median worked. It’s hard to increase one’s income, and very hard to increase one’s wealth when you aren’t working. How much has this separation in values played a part? And oh by the way, the decline in marriage probably hasn’t helped either.

3. Technology: I think this is the big one. Charles Murray touches on it a lot as have many others from all across the political spectrum. To use Murray’s example, in the 60’s, someone who was really good at math could become a math teach and make a decent living. Today they could go work for a Quant Fund on Wall Street or maybe for Google and pull seven figures a year. Or take music. Back in the day, musicians wasn’t such a feast or famine gig, because there were no recording devices. So the gigs were how you made a living. Today there’s a bunch of starving artists and a few megastars. And then of course there’s automation and robots and computer algorithms that are making lower end manual labor jobs less necessary, and they’re starting to do a number on service jobs as well.

In other words, the problem is complicated. I do think globalization plays a role (although I think it plays a role in lowering poverty levels around the world too). And of course it should be mentioned too that people have different levels of talent and produce different levels. Those who produce the most should be rewarded. And without some inequality, there’s no incentive, at least no material incentive, to work hard and bring great products and services to the market.

It’s just that inequality is too high. And while that’s still a subjective opinion, I think it rings true for most of us. Just be careful to wade through these statistics before yelling that the sky is falling.

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Live and Learn, Uncategorized

Bill Syrios on Real Estate Investment

A few weeks back my father, who started Stewardship Properties back in 1989, gave a talk to the Eugene Real Estate Investment Group on his career and advice on real estate investment. I recommend that any aspiring real estate investors, or seasoned investors, or simply business or entrepreneurial minded folks should have a listen.

Part 1:

Q&A:

 

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Individual v. Collective, Live and Learn, Obama Says

Glenn Greenwald Slaps Down More NSA/Edward Snowden Nonsense

David Gregory asks Glenn Greenwald the idiotic question of whether he should be charged with a crime for basically being an investigative journalist. Greenwald also explains why, although it’s true that Eric Snowden is guilty of a crime for exposing the NSA’s invasions of privacy, that the espionage charge is ridiculous.

How quickly (most of) Obama’s supporters give up the values they held circa 2001-2008:

 

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