Jacobian
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Cooperation is for Winners
This is a good point. In fact, I wrote an essay for Ribbonfarm about avoiding competition where you can, such as in education, careers, and dating.
This is not a contradiction. This post is about building *traits* that let you be competitive. That’s why sports is the best place to learn them: it’s a very benign and rule-bound form of competition, very unlike cutthroat politics, academia, AI startups etc. Building skills that allow you to compete doesn’t mean you have to seek out zero-sum contests to grind your life away at, but it does mean that you won’t get scared away from a field if it becomes competitive and starts forming a hierarchy. It lets you choose where to compete.
Example: MIRI can work on AI safety at its leisure because it successfully competed for a high rank in the hierarchy of EA organizations. MIRI has to compete for donations and employees, and sportsmanship values let it do so without destroying other EA orgs along the way.
According to Statista, 10-11% of Americans below the age of 50 have played soccer in the last 12 months. Wikipedia puts that number at 24 million and rising in 2006. There are 4 million players registered with official US Soccer Association, but I play every week and have no idea what that is.
So there are somewhere between 5 million and 30 million people who play soccer *regularly* in the US, and 25,000 were admitted to a hospital for head injuries for a rate of 1/200-1/1200.
I play every week but I don’t go flying into the sort of aerial tackles that end up with two players banging heads, as well as being cautious about my cranium in general. If my chance of head injury given this is 1/1000 each year, playing soccer is still worth it.
Masculine Virtues
Come on, man. I link to the source that I think would be most relevant for my readers to understand the following discussion. In this case, it’s the official APA release on the APA website describing the APA guidelines, it’s not like I was linking to some third party account. As for the PDF with the guidelines themselves, I link to it at least twice in my post and it is linked from the release as well.
Curing the World of Men
It could be libertarian bias, but I think almost all financial advice would turn into a horrible grotesque if someone turned it into binding law. Politicians are financial idiots, and they will legislate based on what their financial idiot constituents will approve of, not what will make people financially secure in the long term. What politician ever has even the incentive, let alone the knowledge, to do the latter?
Take Social Security for example. It’s basically a Ponzi scheme that can only be sustained long-term by doing things that harm everybody, like excess inflation or excluding the people who paid for it (high earners) from receiving it. How is that different from an average financial idiot person taking on credit card debt and then making suboptimal life choices to keep the interest payments at bay? The difference is only in the national scale of the stupidity.
People make bad choices all the time when it comes to money, food and romance. But when politicians jump into those areas they make terrible laws, and those are much worse than mere bad choices.
If someone will stay in a relationship or job that drives them to the verge of suicide for “identity” reasons, it means that the person/institution providing someone’s identity has almost unlimited power over them.
I’m thinking of something like academia, which is used to dealing with people for whom their identity as an “academic” is the most precious thing in the lives. It’s not just internal “culty” things like academics having their own friend groups, markers, and even language. It’s also how external society sees them, like academics having special social status and even different names (“My name isn’t No, it’s Doctor No!“) that reinforce “academic” as a precious identity. As a result, academia can impose arbitrary rules on its members, overwork and underpay them, and cause them to be depressed and anxious at 6 times the rate of the general public.
Perhaps the antidote to this is to build up an identity that is self-conferred, rather than being dependent on the approval of other people. You can call yourself a “rationalist truth seeker” for example even if the rightful Caliph thinks you’re a moron, so that’s an identity that doesn’t open you to exploitation.
$1,000 to cover an emergency isn’t a measure of wealth, it’s a measure of liquidity. For this reason it makes sense to compare it to income. If you have $200,000 in student debt but still have a couple thousand in your checking account in case your car breaks down, you would count as having the money the way the survey was run. Using the word “savings” in that sentence was probably a bad choice on my part.
There’s an annoying catch here. I think financial education can help if it comes with really actionable suggestions. Instead of just talking about general principles, the vast majority of people would do better by following some super simple guidelines like:
Don’t take credit card debt unless it’s to save a life.
If you have debt at >5%, pay it right away before doing anything else. Devote at least 20% of your income to paying off the debt, regardless of how much you make.
After debt is taken care of, put 20% of your income in a global stock index fund 401k each month on autopilot.
Whenever you think “I’ll buy this thing so that people think I’m cool” consider whether when you see people on the street with the thing you actually think they’re cool.
But whenever you write something like that, people will flood you with nitpicks about some convoluted case where the specific advice doesn’t apply. In this way, people who understand the math and only need the general principles prevent everyone else from taking the simple and useful advice that would benefit them.
Finance Followups
[Question] Why Don’t Creators Switch to their Own Platforms?
Well, as a matter of fact it doesn’t seem like they do—they want 8%-15%. You could start a bank that promises to stay at e.g. 30% equity, but the market seems to indicate that you’ll have a hard time finding investors. Banks work hard to differentiate themselves since they ultimately offer very similar products, and I don’t know of any large bank that successfully differentiates by having high equity ratios.
Isn’t this an argument for encouraging more profitable banking (e.g., by eliminating capital requirements) so that banks could afford to give personalized attention to small borrowers? If banking is restricted, there’s only enough banking to go around for the big fish.
If we started downvoting silly puns my entire blog would be at −1,000,000 points forever. You got my +2, hang in there, Ryan!
I wasn’t trying to sneak in an assumption of bimodality, I just wanted to go through the math for two relevant examples: 10% equity (where banks currently are) and 50% (where Cochrane wants them).
why is there so little demand in the middle?
I think there is − 11.2% is in the middle between 3% (the absolute minimum allowed) or the 6% pre-crisis and 50% (the highest non-joking suggestion). I don’t know (I don’t think anyone knows) whether 11.2% is the magic right number, but it seems to be in the right range especially compared to the extremes. But today all large banks are above the 6% average of 2007 and in the 8%-15% range (or 11%-17% if you’re looking at Tier 1 Cap / RWA) and their balance sheets got more stable and boring.
This is how the system works: the pendulum swings back and forth from boom to crisis and eventually settles on a good equilibrium (for many things, not just capital ratios). This post is mostly an argument against kicking the pendulum viciously in one direction or another.
Marriage and a family, if you do it right. Spouses have very aligned incentives, along with the added bonus of sexual attraction and outside expectations of working together. It’s tragic when couples turn marriage from cooperation to competition, but it’s not at all inevitable.