Author Archives: Mike

Antifragile by Nassim Taleb

  By Mike | December 31, 2012 - 13:13 |
2 Comments

I think a lot of OTPers would really enjoy this book. From the author of “The Black Swan”, it explains how natural systems grow healthier with a little bit of disorder, and how suppressing volatility can make systems more fragile, drawing lots of connections to the world economy and banking specifically. I’m only 1/4 through but loving it.

TFMR Podcast- growth at the expense of sustainability

  By Mike | October 19, 2012 - 11:55 | ,
8 Comments

If money printing causes economic distortions (mispriced assets), but the problem is misdiagnosed as “the lack of aggregate demand” and the ‘solution’ is more printing, isn’t hyperinflation inevitable in the long-run? Even if we’re in a beautiful deleveraging where inflation and deflation are currently fairly balanced, is there any other end game? Can they ever stop printing?

Link to mp3 directly, link to podcast page

 

Play

Podcast: Play in new window | Download

The Seeds of a Self-Propagating Meme-Basket

  By Mike | October 9, 2012 - 11:53 | ,
3 Comments

Some “not-so-heavy content”:
How do we change the behavior of a society? I’ll take for granted that we can recognize some flaws.

We’ve been trained to follow a certain formula:

  1. Find some set of rules that, if followed by most individuals, would result in the social behavior you’d like.
  2. Get those rules written on a piece of paper that serves as instructions for men with guns.
  3. Have the men with guns enforce your rules.

There are several fundamental flaws with this approach. Because it’s a formal system, there are certain beneficial rules that are impossible to find.  Like “don’t threaten non-violent people with violence.” Since every single rule is enforced by threats of violence (it’s hard-wired into the nature of the apparatus), this potentially beneficial rule is ruled-out, along with many others. This has to do with Godel’s Incompleteness Theorem, and the inherent limitations of formality.

There is a better way.

  1. Find some set of beliefs that, if held by most individuals, would result in the social behavior you’d like. This is our “meme-basket”.
  2. Then, include within that meme-basket the idea that it’s good to spread the meme-basket to others. This is why the meme-basket is “self-propagating”.
  3. Figure out a way to plant the seeds of your meme-basket in as many people as possible.

Now just wait, and reap what you sow. Learn from your mistakes and try again.

Because we’re working with beliefs instead of rules, the system is flexible. We avoid the pitfalls of Incompleteness by doing away with the formal apparatus. It also empowers each of us to improve society, without having to harness distant power centers. We can change the world simply by influencing the people around us.

Of course, finding the right seeds is hard, and making them germinate is even harder.

It’s easy to think of what people shouldn’t do. It takes a lot more creativity to imagine what beliefs would encourage people to do the right thing. And unfortunately, most people’s intellectual gardens are overrun with weeds, thorns and impenetrably hard topsoil.

People are convinced that the formal system they learned about as children is the best way to change society. These ideas are rooted deeply into their sense of self, and have grown so large in the absence of competition that they block out the sun and the rain. We have to hack away at fruitless memes with logic, evidence and Occam’s Razor, guard ourselves against the thorns of emotional backlash, till the soil with imagination and inspiration, and water the seeds with encouragement and patience. When they finally sprout, shine down with the rays of Truth and soon the meme-basket will grow by itself. Then it’s just a matter of time until it reaches maturity and propagates to another garden.

This is how you change the world.

[From SailboatDiaries by Michael Fielding]

Building a Cognitive Toolbox

  By Mike | April 19, 2012 - 09:47 |
13 Comments

I made my first video series and now I’m not sure where to share it, I thought maybe some of the OTP crowd might enjoy it or find it interesting. It’s based off of a blog post I wrote where I talk about different tools we can use for thinking and reasoning, and why I think they’re important.

Here I’ve embedded the videos within the original post, and here it is as a YouTube playlist.

Hallucinogens

  By Mike | April 11, 2012 - 12:50 |
1 Comment

I tripped last night and had an incredibly rewarding experience, gained a lot of new insights and perspectives. I was listening to Pink Floyd’s The Wall when your mp3 “We didn’t ask to be here” slipped in. I almost changed it, but then I realized it fit just about perfectly. It made me wonder, has the Mystic tripped? Is that what the name’s all about?

Pink Floyd’s Another Brick in the Wall

Why is the Fed paying interest on reserves?

  By Mike | January 30, 2012 - 21:16 | ,
24 Comments

The answer to that question by Eugene Fama in this week’s Econtalk (from 39:28-40:42) struck me as particularly insightful, but I’m not sure I completely understand it.

39:28 Russ: Do you have any thoughts on why the Fed is paying interest on reserves? Guest: Oh, absolutely. Because they know that if there is an opportunity cost from these massive reserves they’ve injected into the system, we are going to have a hyperinflation. Russ: So what’s the point of injecting the reserves if you are going to keep them in the system? Guest: Exactly. Russ: So what’s the answer? Guest: The answer is: this is just posturing. What’s actually happened? That debt is now almost fully interest-bearing, all the liquidity that they’ve injected. So, they’ve actually made the problem of controlling inflation more difficult. Controlling inflation when they didn’t pay any interest focused on the base: cash plus reserves. But now the reserves are interest-bearing, so they play no role in inflation. It all comes to cash, to currency. How do you know? Currency and reserves were completely interchangeable; that’s what the Federal Reserve is all about. So I think they’ve lost it. Now what happened, they went and bought bonds, long-maturing bonds, and issued short-maturing bonds. It’s nothing. They didn’t do anything. Russ: But they are smart people. Guest: Right. Russ: Ben Bernanke is not a fool. If you could get him alone in a quiet place with nobody else listening and say: Ben, what were you thinking? What do you think he’d say? Guest: I don’t know, but I wouldn’t believe it. In the sense that at most he could have thought he could twist the yield curve. Lower the long-term bond rate. Now I’m looking at the long-term bond market–it’s wide open. Even though they are doing big things, they are not that big relative to the size of the market. Russ: Yes, I am mystified by that as well. I don’t have an explanation.

Why is it that, because reserves are interest-bearing, they play no role in inflation? Because they’re not being loaned out into the system? But haven’t we established that banks don’t lend from reserves anyway?

So now he says inflation all comes down to cash, to currency, “because currency and reserves are completely interchangeable; that’s what the Fed is all about.” I don’t get what exactly that means, or why that makes the problem of controlling inflation more difficult.