Wednesday, May 07, 2008


I offer my sincerest apologies for not posting as regularly lately as I have been able to previously. However, for your wait, I am releasing a paper which I have been writing for recent college courses geared towards a degree in finance.

The paper describes the seven fundamental tools that can be used to determine movement in a stock--one which makes money. I am using it as a proof of concept for a program that makes investing accessible by any investor, extremely, and very foolproof.

The paper is in Adobe's Acrobat formatter. The free Adobe Reader or compatible software is required to read the software.

Download the paper here!

Saturday, May 03, 2008

Please Take My Survey

As part of a required paper I must write for my forthcoming degree in Finance, I am needing to have a survey completed.

Please take a few moments to fill out my survey.

Please take my online survey here!

Friday, May 02, 2008

Nature or Nurture?

The age-old question: What affects a person’s behavior more: Nature—a person’s genes and other physically intrinsic characteristics; or Nurture—the environment with which a person interacts? While the general population loves to put a “this or that” perspective on things of this sort, I have long believed that it is, in fact, a combination of the two. Science has now vindicated that position.

Daniel Nettle, Reader in Psychology in the Centre for Behaviour and Evolution, Newcastle University, offers some research presented in the London Times:

Today, personality researchers almost uniformly agree that the things that make you the way you are consist of a combination of your genes, your peers and the idiosyncratic, chance experiences that befall you in childhood and adulthood. Your parents influence your relationship with them – loving or contentious, conflicted or close – but not your “personality”, that package of traits we label extroverted or shy, bitter or friendly, hostile or warm, gloomy or optimistic. Your genes, not your parents, are the reason you think that parachuting out of planes is fun, or, conversely, that you feel sick to the stomach at the mere idea of doing such a crazy thing voluntarily. You can’t do much about your personality, though you can tweak it a bit with cognitive therapy.

Thursday, May 01, 2008

The Lipstick Economy

Interesting story determining the measure of how well or how poorly the economy is doing, courtesy the reporters from the New York Times.

Not only is the lipstick theory plausible, “it’s perfectly consistent with all kinds of economic theory,” said Richard DeKaser, the chief economist with National City Corporation, a financial holding company and bank in Cleveland.

Saturday, April 26, 2008

Emotions, On the Face of It

When I was in high school my biology teacher said, very early on in the class, that the human face can give away what a person is feeling--no matter how well we can control our body language, our face can show our emotional state at any one time.

Well, recent research from Canada proves my former Biology teacher correct.

From the Reuters article:

Researchers at Dalhousie University's Forensic Psychology Lab in Halifax conducted the first detailed study on the secrets revealed when people put on a false face or inhibit various emotions, and found their faces told the truth.

Maximizing Utility and the Brain: Cash or Status?

Scientific American has an article regarding a study of the brain that indicates the brain places a high value on money, but a higher value on social status. From the article:

"Our study shows that both behaviorally and in the brain, people place an importance on social status," says Caroline Zink, a postdoctoral fellow in neuroscience at the National Institute of Mental Health (NIMH) in Bethesda, Md., and co-author of one of studies. "It's hugely influential even [when we're not] in direct competition with someone else."

Sunday, April 20, 2008

The Power of the Banana

Excellent article over at regarding the power of the banana.

Economics and the Common Man

Have you ever seen those polls where John Q. Public is asked about questions of a general economic nature? How many of them have, at the very least, a basic understanding of economics?

Yeah, me too; I think such an exercise is akin to asking a medical doctor about auto repair, an auto repair technician about quantum physics, or a particle physicist about literature: It makes about as much sense as, well, insert a colorful metaphor here.

Before Warren Buffet was interviewed that one Monday morning on CNBC and said that we practically have a recession, though we may not be in one technically, many people can only say as much when they’re asked about the “R-word.” In addition, I’ve noticed that the public tends to insert more emotion into their economic analysis than such things warrant.

Let me say this first: There is room for emotion in economics. When, however, a person’s opinion regarding the nation’s current economic state is based more on emotion than well-founded rational thought. Henceforth, my point: John Q. and Jane Public don’t know enough of a darned thing about economics to offer their opinion; at least not enough for it to be meaningful. In the spirit of that I’m going to point out a couple of economic concepts that might help to alleviate the problem.

Gross Domestic Product, otherwise GDP, once taught as Gross National Product, or GNP, is the number that sums all of the products and services rendered in the United States (or any country, for that matter). Right now GDP is around $13 Trillion or so, give or take a few hundred billion dollars. GDP is calculated as a combination of many things:

GDP = consumption + gross investment + government spending + (exports − imports)

While there are several nuances associated with each variable, there are a few things to point out.

· Consumption is the largest driver of the economy; essentially that is all of the dollars that you and I spend.

· Investment is nearly as powerful as consumption

· Government spending is relatively valued at one quarter the effect of investment spending.

This illustrates exactly the reason why it would be great for government to curtail spending, lower taxes, and help the marketplace—government spending doesn’t do nearly enough for the economy, lowering taxes allows for individuals to have the option to save or consume more (marginal propensity to save or marginal propensity to consume, respectively) –driving consumption and, perhaps, helping investments.

This makes sense to me, but I consider myself a fiscal conservative.

There will be the contingent out there that says that paying taxes is good because it funds essential services that the government must supply to people, and there’s the whole debate about which rights one has in regards to healthcare and such—that is not within the scope of this article—but if government were forced to act like business in their daily management then we would be able to get a lot more value from our investment in government than not. Put another way, we allow government to spend too much and, I think everyone can agree, that we get too little from it. Wasteful government spending becomes something four times as bad when you have this understanding.

So, in an ideal world there is a happy medium between extreme government spending and extreme tax breaks for everyone. We don’t live in an ideal world, however, and economics works in cycles. The best thing to remember is the economy will go up most of the time, but will go down every now and again. Panic is not something that needs to happen when it goes down. Markets correct, stocks fluctuate, and indexes do the same. It’s nothing to worry about.

Why do I say this? I say this largely because of my believe that our most recent economic downturn in 2008 has been worse than it needed to be because people tend to overreact to what they feel are negative changing market conditions. If they understood the underlying dynamics of the market and the philosophy that “this, too, shall pass,” it wouldn’t have been as bad as it was.

My tone about “was?” There are multiple indicators that are pointing towards the worst of the current downturn being over, and us being on our way back up. The recent rallies in the stock market, the change in CPI and labor numbers all point towards an increasing economy.

So, in light of whatever the market is doing, irrationality rarely does the market good in the long run. In fact, if it did well with it then we wouldn’t have had the downturn in the market which we have had.

Saturday, April 19, 2008

All That Lies Between

Once upon a time there was a man named Schrodinger and he had a cat. In his own words:

One can even set up quite ridiculous cases. A cat is penned up in a steel chamber, along with the following device (which must be secured against direct interference by the cat): in a Geiger counter there is a tiny bit of radioactive substance, so small, that perhaps in the course of the hour one of the atoms decays, but also, with equal probability, perhaps none; if it happens, the counter tube discharges and through a relay releases a hammer which shatters a small flask of hydrocyanic acid. If one has left this entire system to itself for an hour, one would say that the cat still lives if meanwhile no atom has decayed. The psi-function of the entire system would express this by having in it the living and dead cat (pardon the expression) mixed or smeared out in equal parts.

It is typical of these cases that an indeterminacy originally restricted to the atomic domain becomes transformed into macroscopic indeterminacy, which can then be resolved by direct observation. That prevents us from so naively accepting as valid a "blurred model" for representing reality. In itself it would not embody anything unclear or contradictory. There is a difference between a shaky or out-of-focus photograph and a snapshot of clouds and fog banks.

Meant to be a thought experiment about quantum physics: When does a quantum system stop existing as a mixture of states and become one or the other? (More technically, when does the actual quantum state stop being a linear combination of states, each of which resemble different classical states, and instead begin to have a unique classical description?)

A question that can be derived from this and/or the Heisenberg Uncertainty Principle is one of observation: What happens to a situation once it is observed. The short answer is that the mere act of observing something changes everything.

When I first started using computers in a serious sense, my school’s library had a 2400 baud modem which could connect to various bulletin board services, BBSs, which one could use for pen pal-style rudimentary communication. In the early 90s this is one of the things which I found myself doing. Though I did not know it, I was networking in my early teen years. I began a lengthy correspondence with a Lutheran pastor from somewhere in Michigan or Wisconsin, I believe (the actual location escapes me), through which we began discussing quantum physics. He posed the ageless rhetorical question to me: If a tree falls in a forest, does it make a sound? I always like bringing this question up as an introduction to the general strangeness of quantum physics. The answer is that if there is no one to perceive—observe—the tree, then it is not there: It does not exist. If no one is there to observe the forest, it does not exist. Therefore, if there is no one able to perceive the action of the tree falling, it does not fall because it does not exist.

It took me some time to reconcile this notion, but eventually came to terms with it. Over time I came to find the universal truth in this notion that anything and everything changes with observation. In our classical world which we can see, feel, taste, touch, and hear on a daily basis we can express the question of “have we observed that?” as a binary function—yes or no, or “1” or “0,” the fundamental essence of a “bit,” or binary digit. Does my cat exist? Yes! (“1”). Is the moon out tonight? No! (“0”). What about if you can’t answer these questions? Herein lies what makes quantum physics so creepy to many. The notion of Schrodinger’s Cat dictates that while something hasn’t been observed it can exist in a state of “superposition,” that is a position that is not necessarily natural and exists outside of a “0” or a “1,” or yes or no.

If you don’t know about something then it exists in an odd place…one that is not easily definable; as a side-note, however, this is how the concept of quantum supercomputing works, in a sense: This sort of theoretical, almost-real device stores bits of ones and zeros in superpositions instead of in absolute states. Because of this it can calculate much faster because it is not constrained by the classic laws posed by Newton in the mechanical world, and computes things much faster than Intel or AMD could muster with their fastest processors.

How can we make this apply to our everyday lives? Have you ever feared something that was “just around the corner,” or otherwise out there in a place in your world that might be slightly unknown enough to you as to cause you to feel things that might be irrational? Fear of something, someone, or some other type of emotion of an event happening which has a low probability or likelihood of actually happening once it is observed? The superposition concept that I discussed earlier wherein any number of all possible states exist, but it isn’t necessarily true or false, is where irrational thought and feeling resides—in a place that even likes to confuse the brightest minds of the 20TH Century deriving the basis for modern science.

Don’t let your fear, depression, anxiety, or other unproductive thoughts or feelings get the best of you. In the end you will find that your emotions or irrational thoughts are skewing the actual values of the situation which you are otherwise making more out of than you should: There is no need to kill the cat unnecessarily!

Thursday, April 17, 2008


Approximately 210 visits per month! Yay!

Monday, April 14, 2008

Monkey Mondays: Mars Monkey!

Russia testing monkeys to send them to Mars!

Read all about it here!

Saturday, April 12, 2008

The Surreality of the Real

We spotted the ocean at the head of the trail,
Where are we goin’, so far away?
Someone told me that this is the place,
Where everything’s better, where everything’s safe.”

—Toad the Wet Sprocket, “Walk on the Ocean”

We all find ourselves doing it: Our mind sets a stage for a place and we paint a mental picture about what we think a place that we have not yet been is going to look, feel, and smell like. The color of the ground, the heat emanating from the sun, the taste of the wind, and the feel of the culture all fill in a “paint by the numbers” portrait in your head. What is it like, though, when you finally see that which you’ve been imagining for all those years?

I did much of my substantive growing up on a farm just a mile south of the North Dakota-South Dakota border around the small communities of southwest North Dakota. There, the hills tend to gently roll with the occasional butte or larger hill; vegetation greens in the warmer months and browns in the colder ones. With the exception of a handful of state highway traversing through the county seats, smaller paved “farm to market” roads and less significant graveled stretches weave across the region along section lines and there can generally be the classic upper-Midwest town (a bar, a church, and a gas station) every 13 miles along the routes that mirror the railroads. Much like the character of Luke Skywalker in the original Star Wars movie knew that there was something else out in the galaxy for him, I left the farmstead to spread my wings and see the world.

Though the last decade has taken me halfway around the world and back—I have seen the Atlantic Ocean from Amsterdam, and the Pacific Ocean from Washington State—I have never been to California or the southwestern United States. So, recently, I decided to take that step. Taking the better part of a week vacation from work, a trail was made towards the border with Mexico where I waved back at the “waving cacti,” saw the Border Patrol, well, patrolling, the beaches of San Diego, and the lights of Las Vegas.

While your mind paints pictures of places where you have not yet been, I have found that rarely the mind’s eye can ready you for the experience of being someplace new. Living in the high desert of Colorado, it tends to be very dry here: That was contrasted with the humid wind blowing in off the Pacific. I grew up in small towns where the lights let out a gentle glow in the winter sky; contrasted with the constant stream of headlights on a Friday night traveling into Las Vegas—and the daytime-at-night conditions of that city. The rolling hills of green contrasted with the rolling hills of sand of southeast California, between Yuma, Arizona, and Calexico, California, was absolutely something else.

What is the most surprising of all, though, is what I surmised about the people along the route of the trip. Sure, a person speculates that different geographies have varying cultures to an extent, but what a person might not realize is that, regardless of culture, everyone is simply trying to make their way in this world. While culture might dictate myriad ways of going about that, we can forget that our fellow person is merely trying to make it through this day onto the next. Some have small goals, some have larger schemes, and everyone has an agenda—and sometimes that agenda is just to make it to the next day, alive and breathing.

This inalienable truth is coupled with what I refer to as the “Tapestry of the World.” Having been as many places as I have, and having seen as many things as I have, I’ve come to realize that every single place on the planet is unique in its own right, while still retaining a relationship with everyplace else. For instance, I can be driving in some part of Colorado and it will remind me of the flat back roads traversing somewhere between Grand Forks and Minot, ND. Every now and again when I’m driving along I capture a glimpse of something which offers me déjà vu. The farthest place from it can remind you of home, and someplace near to your home can seem very alien at times. This is one of the beauties of the world in which we live.

I’ve mentioned times before that key traits of leaders are that they understand that diversity leads to productivity, better solutions, and such and that a heightened level of awareness can make or break a leader. With this being said, I highly recommend that if you develop the wanderlust that I tend to have every year once the weather gets warmer that you go out and explore your world—be it just a few miles away or a few hundred miles away—there is almost always someplace which we’ve not been within reaching distance.

If you need to ask why you should go over that hill on the horizon, you can answer to yourself “because it is there.” Traveling, especially in this case, works very well as a metaphor for life—because where the surreal meets the real, our world becomes that much more.

Thursday, April 10, 2008

Friday Funny: Fight Club

Every now and then something that really strikes me as profoundly humorous strikes me:

"Fight Club" Busted at Local High School

What is so funny about it? "The first rule of fight club is that you don't talk about Fight Club."

And the second rule?

"The second rule of Fight Club is that you don't talk about Fight Club!"

Evidently, they talked. Kids, these days...

World Fastest Processor

Science keeps chugging along. When I was in high school I recall one of my teachers saying that the progression of science isn't an arithmetic progression; instead, it is a geometric progression. In other words, it isn't linear in the 1 to 2 to 3 to 4 fashion, instead it is 1 squared (1^2) to 2 squared (2^2) to 3 squared (3^2), so on and so forth.

And now, one of my favorite research operations in the world has developed the fastest processor in the world. Watch for the part in the block quote to see just how fast this thing is:

"The 5-billion-instructions-per second Power6 processor from IBM would beat such rivals as the 3.73 gigahertz Pentium Extreme and the 2.4 gigahertz UltraSparc T2 from Sun. 'It's hard to make the average person understand just how fast this is,' said IBM Chief Technology Officer Bernard Meyerson, offering an example meant to explain his company's baby that still leaves the listener awed with the speediness of the two laggards. 'Hold your index finger out in front of your face,' Meyerson said in a telephone interview from IBM headquarters in New York. 'In less time than it would take a beam of light to travel from your knuckle to your fingertip, the new IBM chip would complete one task and start looking for the next, he said.'"

Original IBM text here.

News article here.

Monday, April 07, 2008

There is Nothing Worse in Life than Being Ordinary

I watched, again, an interesting piece of cinematic work, “American Beauty.” Kevin Spacey plays a man telling the tale of him and his family near the end of his life. A tapestry of events weaves itself together to a conclusion which brings about revelations in the lives of everyone involved. During the arc which Mena Suvari’s character makes from point A to point B, she says that “there is nothing worse in life than being ordinary.” I got to thinking about this.

There is a bumper sticker out there that reads that “well-behaved women often make history;” the intent of which is such that the people—in this case, those of the female variety—who stand out are the ones that people remember, that are written about in the history books. It means that you want to, whether you are a man or a woman, should want to make history and leave your mark upon the earth in a way that sets yourself apart from others. As it is oft-said, if you take the road everyone else takes, you end up where everyone else does—instead, if you take the road less traveled you will supposedly do much better.

Let us look at this through the eyes of an economist: The “total cost of ownership” perspective. For everything there is a cost to be paid. The questions resulting from this notion bring a person to ponder what the cost to be paid is, what are the set of results to be had, and so on and so forth. Think of it this way: What is the cost of expending some capital—be that physically, mentally, emotionally, or financially—in the current time and let the fruits of this investment compound over the years…or pay the cost of not even trying and regretting that decision down the road. A wise judge once mentioned, as I paraphrase it: “The cost of utilizing discipline on a daily basis far outweighs the cost of not doing so.”

While ordinary is fine with some people, this blog is not of the ordinary. Throughout history several a notable figure have confronted a place in their life in which they needed to choose to be ordinary or to strive towards greatness. You have the choice to do so, and you will never know quite what it is like until you are there.

In closing a thought by one of the most famous writers of all time, William Shakespeare; his perspective: Be not afraid of greatness: some are born great, some achieve greatness, and some have greatness thrust upon them.

A Tribute to Charlton Heston

A man who was larger than life has, unfortunately, passed.

As a tribute to him, a video depicting his position on climate change.

Friday, March 28, 2008

Life Economics

Home economics is a dying discipline. When I went through school the classroom existed, but not the corresponding class. Much like civics it is being relegated to a niche of society in such a manner that it is being forgotten…at a price.

For years I have lived by the philosophy that I manage my life like I manage a business. On the surface it may seem cold, perhaps even callous—but that isn’t necessarily the case at all. In fact, improved efficiency and effectiveness makes for a better life. A few examples:

1. The Budget. Face it—you stand to get rich if you suddenly run into a large sum of money, but the chances of that happening aren’t such that you should count on it. Instead, the world of finance stresses the time value of money and leveraging your current assets. Your income is the best wealth-building tool which you have and by reducing your debt obligations you effectively increase the power of your income to produce wealth. You do this most efficiently by producing a budget and watching and managing every dollar that flows through your household. By taking this approach you can “make every dollar scream.” What to do after you get to the point where your debt is paid off and you have extra money lying around? Invest!

2. Buy Like a Business. Once upon a time we’re all financially struggling people—whether that be as a poor college student or in a period of personal financial contraction—but we’re not in that position forever. It is rarely a static condition, however, and we progress onto better financial times. At this point in time we can move from buying-to-survive towards purchasing-to-thrive. We learn to buy in bulk—and start to think like an accountant. Price items on a per-unit basis, for instance. When I worked in a grocery store, once upon a time, I noticed that the tags that accompanied stock on the shelves would always have a “price per ounce” or related entry on the tag. By making some observations a person notices where the “sweet spot” is for purchase of a particular item: To buy the smaller box of cereal or the larger, “value-sized?” The larger the package—think bulk— usually the better value per unit. Take this concept one step further and develop a product mix of products that are economical and meet your personal utility or that of your family. For instance—I purchased the specific Rubbermaid containers meant for cereal and have no problems with purchasing the “bag cereals” which are often very close to the recipe of the corresponding name brand “box cereals.” On the other hand, I am very picky about the hot dogs which I purchase.

Another step in which to take this notion relies upon you realizing that sometimes you pay more in up-front costs to save money across the lifespan of a particular item; a concept which accountants like to refer to as “total cost of ownership.” A good example is the typical inkjet printer: Cheap and comes with some ink; it may or may not come with a USB cable, and certainly comes with a notorious “power brick.” Sure, you may spend $30 on the machine, but you will likely end up purchasing a lot of ink cartridges—just black and color, if you’re lucky—over the course of your time with the printer. On top of this these ink cartridges are fickle in such a way that the printheads can easily become non-working if they aren’t treated right or used correctly. Although they can have great resolution—past 1200x1200 dots per inch—they do so by spitting small ink blobs onto the paper; this makes for a very dirty process. By contrast—if you can do without resolutions higher than 1200x1200 dpi then a laser (or LED) printer is for you. They are much cleaner, have longer lives, and are generally more efficient. Of course, there are makes and models that are better or worse than others, but a little research or stop by your local printer service shop will give you a leg up.

One project which I’m planning is to replace my cans-of-soda drinking ways with a fountain soda machine. Although the initial costs are high (several hundred dollars for the initial setup), the cost of consumables—the soda syrup itself—can be less than half the cost of a serving of its canned alternative.

While this is merely the tip of the iceberg, it is a starting point for to get you to thinking about how you, too, could make your life better!

Wednesday, March 26, 2008

Two Weeks is Too Long

Too weeks is too long for a new post. More this weekend, but in the meantime proof that a different perspective can increase your effectiveness or efficiency by...a single move.

Taken from

"A scrambled Rubik's cube can be solved in just 25 moves, regardless of the starting configuration. Tomas Rosicki, a Stanford-trained mathematician, has proven the new limit (down from 26 which was proved last year) using a neat piece of computer science. Rather than study individual moves, he's used the symmetry of the cube to study its transformations in sets. This allows him to separate the "cube space" into 2 billion sets each containing 20 billion elements. He then shows that a large number of these sets are essentially equivalent to other sets and so can be ignored. Even then, to crunch through the remaining sets, he needed a workstation with 8GB of memory and around 1500 hours of time on a Q6600 CPU running at 1.6GHz. Next up, 24 moves."

Monday, March 17, 2008

Zen and the Art of Server Maintenance

There was no regular blog post for this weekend, largely because I spent much time re-vamping my home network to include a special version of Windows Server 2003 quickly becoming adopted by the market as Windows Home Server. It’s a great thing, and as an early adopter once I got through paying the premium in the form of a learning curve with adding a degree of magnitude to the sophistication of my home network it had been 13 hours between Friday evening and through the first cartoon on Saturday morning. The rest of the time was spent configuring, tweaking, organizing the hardware, and the like. If what they say about adversity building character, then I can add some.

The situation reminded me of something that a gentleman that came into the printer-computer-office equipment repair shop I work at 40 hours a week said: “Troubleshooting is the epitome of understanding a discipline.” I’m not the best when it comes to printers and computers, sure, but I guess I’m better than 97 percent of the general public—I can take apart most any Hewlett-Packard printer, certainly, usually fumble my way through most other printer (certainly, with a service manual at my disposal), can make many a piece of computer hardware bow to my whim, and do quite a number with a multitude of a piece of software.

Information Technology—computers and the sort—just happens to be how I earn the bulk of my living right now. I don’t consider it my best skill set, or much more than a hobby. Still, I am challenged with it on a daily basis, some days better than others, and it helps to keep my mechanical and troubleshooting skills sharpened.

Saturday, March 08, 2008

Discussion: Economics of Technology Early Adoption

An interesting discussion over at Slashdot regarding the premium that people pay for being early adopters of technology. The discussion is done through the filter of the HD-DVD format which was recently declared dead; the casualty of the infamous "next generation format wars" between HD-DVD and Blu-Ray.

They Ought to Call Me Hercules

Over a cold slice of coconut cream pie and warm conversation recently a good friend of mine paraphrased an old adage that, probably, most of us have heard: “That which does not kill us makes us stronger.” Originally a Nietzsche quote it has been adapted to fit a plethora of situations from the warrior to the clerk that works in the local convenience store 40 hours each week: It has become a modern-day ethos of the person just trying to make it through, longing for something better as a sum result of their experiences.

The more strengthening experiences which they have to make it through, the better that it will make them: Someday these situations will make them Hercules-like.

So it stands to reason: Why do bad things happen to good people, vice versa, and other permutations of either in between. The short answer: Free will.

The longer answer: Start with a leaf that falls from far atop a high tree. Physics can tell us the individual forces affecting it—wind resistance, gravity, acceleration due to gravity, various factors of aerodynamics, and wind velocity and direction. It cannot, however, tell us where the leaf is going to land. Just as the physicist which can describe what is happening to the leaf has only a finite perspective of the universe ahead of him or her, each of us lack anything more than the finite perspective we allow ourselves.

A good way to reach this understanding is to first understand what the physicist does about the falling leaf: Understand the specific ways we are interacting with the world around us and how the world is interacting with us on a daily basis. Learn the general principles which guide you forward and figure out how you can make each better.

When we worked together at one of the major wireless companies in resolutions the same friend that I mention above taught me that problems a person has with the outside world usually originate from inside that person. In other words, if you are having problems with your spouse it is best if you look inside yourself before placing blame with them.

Even though animals have what resembles free will, the human sense of free will, combined with our problem solving skills and how the greater mix of those traits which make us human all falls into line making us, as humans, special. As humans we can choose. We are not programmed for any specific behavior, lest that which we have or allowed ourselves with which to be programmed. We are driven on a daily basis because we find specific utility in them. This utility manifests itself as pain, pleasure, morality, or one of many other things. Because we have the choice in deciding the value which our behaviors have, it is meaningful. On the other hand, if we were simply programmed to do something, lacking the choice to do it, the meaning that it would otherwise have is lost. You have the choice to do good things; you have the choice to do evil things—whichever path you choose then has all the more significance to you…and, through you, it has increased significance to the world around you.

As every child learns, however, each choice has consequences—either positive or negative. Let’s go back to the leaf for a moment: Even though it doesn’t have free will, it has a path from the top of the tree to the ground below it, through the space between the two. Every location through which it passes, each moment which it passes through that location, there are consequences. Since leaves are responsible for photosynthesis on the tree, the loss of a leaf in the community of leaves removes from the productivity of the tree for survival; the path of the leaf towards the ground might otherwise impede others in its path; where it lands on the ground might do the same, worse, or better. Just as physics teaches us the relationship between us and the energy which flows around us, it also teaches us the concept of the “world line” such that each particle—or, each person—has a path that it makes through the world. These paths interact with the paths of those in our immediate vicinity and as a component of the greater whole.

People tend to have only a finite perspective of the world around them, but without higher education or life experience tend to lack a strategic perspective; not only inasmuch as how their actions comprise the consequences of the greater whole, but also how they have or may become consequential casualties of the greater whole instead.

The reconciliation between our immediate lives and the grand quality of the greater community of humankind may seem mind-boggling, but you just need to remember that, from an economic perspective, you only need to participate to the capacity which you are able: Good deeds done on a daily basis will not only have spillover effects on the world around you, what are otherwise known as the “ripple effect,” and help to add value to the greater community.

In closing I’d like to end with a story that comes from a great movie from the mid-1990s: Phenomenon. In the movie the character played by John Travolta tells a story of a grove of trees in Colorado which were originally thought to be just a bunch of trees; in reality they were found to share a common root system which helped the grove thrive. As the modern-day human civilization we share a common root system, tempered by our freedom of choice: As parts of the entire grove of individuals, our actions have consequence to the greater community, just as the greater community affects us as individuals. If we want to make things right with the greater whole we start from within and make ourselves a more valuable part of the whole.

Sunday, March 02, 2008

Monkey Mondays: Monkeys and Economics

Scientists examine the circumstances under which chimpanzees, our closest relatives, will exchange one inherently valuable commodity (an apple slice) for another (a grape), which is what early humans must have somehow learned to do. The researchers found that chimpanzees often did not spontaneously barter food items, but needed to be trained to engage in commodity barter.

Why Don't Chimpanzees Like To Barter Food?

Perspective of the Giants: Warren Buffett

The name of the blog is Underground Value; and they have a great quote from second-richest-man Warren Buffett as part of an interview with him.

The difference between potential and output comes from human qualities. You can make a list of the qualities you admire and those you despise. To turn the tables, think if this is the way I react to the qualities on the list, which is the way the world will react to me. You can learn to turn on those qualities you want and turn off those qualities you wish to avoid. The chains of habit are too light to be felt until they are too heavy to be broken. You can’t change at 60; the time to look at that list is now.

Friday, February 29, 2008

The Power of the Down Market

Adam Smith, often dubbed the father of economics, is best known for his magnum opus, The Wealth of Nations. What is lesser-known about his writings, though, is what he wrote about prior to Wealth; The Theory of Moral Sentiments. Between these two works it can be argued that Smith was trying to describe the morality of humankind by superimposing economic theories onto it. Since 1776 social science has come a long way in understanding much of the behaviors of individuals: And we have finally come to the point in human history where we can recognize that markets, such as the stock market, and human behavior have many parallels—and form a symbiotic relationship with one another.

Take, for instance, the current behavior of the stock markets. Right now, as I look at the Dow Jones Industrial Average, I see that it is down 315 points; Standard & Poor’s 500 Index is down 37 points itself. When many people look at the numbers which we have been seeing in the stock markets lately they fear a word that is often brought up in the evening news, “recession.” Words like “inflation,” “stagflation,” and such are used. Perhaps some people would either categorize the behavior of the markets as overly complex, perhaps even irrational.

Just as people require corrections, controls in their behavior, to move forward and progress, the stock market requires the same. Just as risk is necessary to be in any system in which there is reward, so must there be correction. These corrections are a reflection of human nature inasmuch as people exhibit both rational and irrational components in behaviors. In his column in Forbes magazine, Paul Johnson writes an excellent column depicting the mechanics behind what is happening in the stock market right now and an impetus that helped to cause it. Pointedly:

All the same, markets are determined by moral strengths and weaknesses, and it is useful to identify what those are at each major episode. The state of the present market is the consequence of undue patience combined with excessive greed.

He continues to weave the intricate tapestry of morality, impatience, greed, and how they all tie into one another and become progress. The theme of rational components to seemingly irrational things, and how the up and down sides of each turn into our tomorrow, better than our today.

Mr. Johnson has some very brilliant insights.

No matter what we do, we exist as components of a much larger system: As people, we form communities; as workers at firm or a shop we put together a product, provide a service, or otherwise add value to something. Because we are part of something, and everything changes, we will eventually need to cope with change. Chinese philosopher Lao Tzu once wrote about life that it “is a series of natural and spontaneous changes. Don’t resist them - that only creates sorrow. Let reality be reality. Let things flow naturally forward in whatever way they like.

Management theory dictates that we survey those things around us and formulate plans to manage them and control systems to put situations back where they need to be should they fall outside of the tolerances which we set for them—this is something business students are usually taught in their first semester of school. However, anyone who has had management experience understands that no good plan survives combat intact and that no amount of control systems will hedge against change happening. There is nothing that can stop the ebb and flow of life of causing the unexpected to happen.

We learn to accept change. Better yet, we learn to balance the ebbs and move with the flows of what life throws at us. In a market that is “up” we live the good life and become richer in as many ways possible; in “down” markets we learn also how to accept it and learn ways to become richer. Necessity is the impetus for innovation, and difficult times offer us the opportunity to shine. In other words, accepting change is good, but learning how to use it to propel you forward is best.

Friday, February 22, 2008

Nothing Risked…

I recently had a brief conversation about risk with a client and friend of mine that leads the Information Technology Department for a nearby Ritz Carlton. One of the sum results of that conversation was that there are two kinds of risk: The stupid kind and the smart kind. There are countless individuals in the world who behave in such a way that they don’t factor risk much into their actions and behaviors. There are, however, those who calculate risks into their activities and understand the dynamics of this powerful thing.

Drive somewhere in the town or city in which you live. I will bet that the larger the municipality in which you live, the worse the drivers are: It appears that they use minimal, if any judgment. Maybe they have a cell phone to their ears; maybe they are exhibiting poor driving skills; maybe it is a combination of factors. At any rate, professional drivers are often taught the art of “defensive driving” which dictates that you, as a driver out on the roadways, must drive with the anticipation that someone is going to use poor judgment and that you must be able to drive in such a way as to be proactive or react accordingly to these drivers whom have increasing amounts of risk factors piling up on them.

I’ve once heard it said, or read it on a bumper sticker, that life is difficult; more so if you’re stupid. Stupidity has often been equated to ignorance. Think of the driver while you are out and about that is ignorant of the traffic laws, or (worse yet) ignorant of those around him or her. Those who aren’t aware of risk often overlook the power that it has in their lives and the world around them. Perhaps I could even go as far as saying that they are more apt to be “victimized” than the alternative.

I’ve often equated risk management and the world of insurance as one that assigns numerical values to behaviors and calls these information sets “risk factors.” For example, take a driver who fails to use their blinker all the time. This driver has a higher probability of getting into a collision with another driver by not notifying those around them as to their intentions on the roadways. If they also fail to use their mirrors properly, the earlier risk factor adds to this new risk factor. Additional factors only add to the mess. While one can easily apply this to any part of life, not just driving, there are ways to minimize your exposure to such risk factors.

For a few years I lived in the Rapid City, SD area. Just as the schools were heavy into “character counts” campaigns with their students, a local television station ran a series of advertisements much to the same effect geared towards adult audiences. One of these public service messages included a judge discussing the merits of discipline. Essentially the message was that even just a daily investment in self-discipline works wonders for hedging against. If you are self-disciplined enough that you can take a walk or do another sort of moderate exercise you decrease risk factors that would otherwise influence you becoming obese, becoming depressed, getting diabetes, or otherwise becoming physically or mentally unhealthy. Think of the things that you could do less of or do more of on a daily basis that would make your life better, increase your value, or otherwise might make you or those around you better.

With that being said, there is absolutely no way to mitigate all risk involved with something. Just as the stock market has something called systemic risk that is inherent to a particular industry or to the entire market. Whenever there is the potential for gain or reward, there is always risk. In fact, since there is always risk involved any time there is reward or gain possible, it has been argued that gain and reward are possible because there is risk involved.

This is why the best risk is that which is of the calculated variety: This is why the stock markets will always correct itself, will always (eventually) increase in value, and why most of us will realize gains to ourselves or our lifestyles over a long enough timeline and given enough effort. If we are able to learn how to calculate risk in our lives we can then move our lives from being at the unsophisticated level of the haphazard risk-taker into being the sophisticated, calculated risk-taker and, along with it, move our lives along a more successful avenue.

Saturday, February 16, 2008

Self-Capitalization, Self-Actualization

Once upon a time most, if not every, child is told that they “can do anything.” Each of us, from a young age, is instilled with the notion that our dreams are the only limits that we have. Over the course of my years I have seen so many people with this potential to be something more. So many times have I seen so many people that have been referred to as “bright,” “intelligent,” or even “brilliant,” but what sets them apart from those that exceed the mere “brilliant” mark or otherwise find a way with which to show for such talent, drive, or another singular trait?

These traits, such as drive, intelligence, or other talents…how many people do you know that have them, but they exist in a purist form inasmuch as they are in a vacuum: Only as a talent held by the person, but serving little purpose outside the immediate vicinity of the person possessing it?

What I have come to discern is that it is often difficult for a person to capitalize on their talents and their skills. Often we find a skill existing in our “mental toolbox” which is what the job market requires and sell it to an employer for a paycheck that gets us by. Perhaps that skill is something that falls towards the more prominent end of our skill sets, and perhaps it is something more ancillary; regardless, so many people end up selling this skill, alongside their time, to an employer for less than what they perceive that worth to be. And, aside from the clear-cut illustration above, the emotions that we have—such as fear, uncertainty, and doubt, often obfuscate the reality of things. No matter how talented we are, no matter how strong that skill set of ours really is, those things which we feel will often get in the way, forcing us to value our competence for more or less than it actually is.

In physics there is a term called escape velocity. In order for the space shuttle to lift off from the surface of our planet and successfully launch into space it needs to reach a velocity of about 25,000 mph; by traveling at such a speed it is able to build the necessary force to not only to defeat the gravity of the earth, but it also builds momentum such that the rocket or space shuttle can travel into orbit somewhere on the manner of 100 miles into the stratosphere. In much the same way, each of us are searching for that escape velocity: For our talents, our skills, and those things that we feel define us to reach the next level. Some do so for the fame, some do so for the glory, others for the honor or the sense of accomplishment. Others still do it for the money. When I say “capitalizing on one’s talents,” I mean simply for you to ask yourself: For what do you wish to trade your skills for? If personal honor is it, then you need to fuel your skills with passion, determination, and going that extra mile—doing those things which others will not do—in order for you to reach the point where you’ve properly capitalized on that skill.

Although it is said that you shouldn’t do anything for anyone other than yourself, in the words of Shakespeare, “to thine own self be true,” each of us are still dependent on the pyramid set forth in Maslow’s Hierarchy of Needs wherein we need food on the table, a roof over our heads, and to feel secure. In capitalizing on your talents you need to remember that one of the keys with Maslow’s Hierarchy is that one needs to successfully meet the needs of each layer of the pyramid prior to moving onto the next; if the satisfaction requirements is lost or not met for any layer on the Hierarchy, then you must go back to that level of the Hierarchy and satisfy those requirements before moving on. Translate your talents into getting a roof over your head, increasing your security and social needs, then into building your reputation and…as time progresses…towards investing in self-actualization.

Saturday, February 09, 2008

The Economics of Hope

Hope: An expectation and wish; “a belief in a positive outcome related to events and circumstances in one's life. Hope implies a certain amount of — i.e. believing that a positive outcome is possible even when there is some evidence to the contrary.

As part of my job I routinely travel between Grand Junction, CO and Vail and Aspen, CO. To pass the time between stops I often find myself listening to talk radio. My talk radio of choice between the hours of 10 a.m. and 1 p.m. in the Mountain Time Zone is Rush Limbaugh, conservative radio talk show host extraordinaire.

Firstly, before I go any further, I’ll mention something that I’ve said in the past: I’m not bringing this up as a political conversation; frankly, a person’s politics are akin to their religious or spiritual beliefs—they are personal and don’t have any bearing on any discussion in this forum; they merely act as a filter with which each of us process the world around us.

With that said, Rush had a monolog this week which depicted hope in a light different than I had ever looked at it before. It was very interesting in how it helped to re-shape my interpretation of the behavioral phenomenon. Let’s set the stage; from the transcript of the Rush Limbaugh Program on 5 February 2008:

Hope is the logical extension of people who think they don't matter to anything, and a lot of people don't like not mattering. Everybody wants to have meaning in their lives. So if you hope for good things, if you hope for a better country, "I matter, because I care, because I hope for a better country."

In this context, Rush sets up hope as being a manifestation of “one of those emotions which make one feel better about themselves,” a self-serving emotion, in other words. Hope is the stepchild of sympathy. It's like sympathy. You can have sympathy for somebody. Sympathy for the position of one’s self in the events of a greater scheme of things, sympathy for those in the path of the events which are part of such a greater scheme of things? Don’t get me wrong—no emotion is wrong or invalid; judging an emotion is outside the scope of this text or, even, my interest. What is within the boundaries of my interest and this text, however, is the effectiveness of such a feeling. What is the economics of hope?

A famous U.S. Senator and 2008 Presidential Candidate, Barack Obama, rose to fame in the Democrat political party in the United States, in part, by a 20-minute keynote at the 2004 Democratic Convention, which turned into a book by the same name, “The Audacity of Hope.”

Audacity: “Courage, resolution, boldness.”

“The courage of hope,” “the resolution of hope,” “the boldness of hope;” yes, all are good things…but as a principle which produces anything…hope can only go so far. The man behind the audacity of this hope was one that triumphed over his surroundings by conquering them, by besting his circumstances, exploiting opportunities, and staying true to the notion that action needed to be coupled with such hope.

Politicians, the consummate marketers which they are, try and sway our actions via votes and other support by trying to sway our emotions—in their view, a person will go to where their heart takes them. We are all constantly wooed by images of presidential candidates crafted by the individual campaigns themselves and by the media which reports (and also attempts to sway opinion) on the various players involved. The Democrats like to offer change. People hope for change, and so they vote for the Democrat which they feel will bring the most change. The Republicans, on the other hand, offer everything from a war hero to a master of the business world to a former governor in favor of the Fair Tax Plan and a minor contender which offers a strict Libertarian view on pretty much everything. Just about everyone is trying to appeal to our emotions in some form or another. Mostly, they’re trying to appeal to our emotion of hope, the courageous thing which it is.

However, hope is just that: An emotion which can satisfy that we’re a part of the process; because as long as we can hope for a better solution, we’re a part of that solution, right?

From the perspective of the 2008 race for candidates for U.S. President, in the words of Rush Limbaugh: The discussion of hope from a political leader is pure poppycock. It's empty; it's transparent; there's nothing there. It is totally devoid of substance.

Let’s take a step back, into a perspective more personal to you and me: Each of us have, at some point in time or in our lives currently, had hope; we have had hope for a good outcome to be realized, for our New Year’s Resolutions to take hold, or just to make it through the next day. Hope, however, is a short-term thing in these instances. Sooner or later, by itself, hope fizzles and the outcome which you had hoped to realize can quickly turn into worse, even less productive emotions: Self-inflicted suffering. Because hope didn’t allow you to realize the outcome which you had in mind, a person can quickly turn to loathing and lose hope.

[N]one of us can predict the outcomes in our lives, and so many of us use hope as a bridge to the eventual outcome we hope for from event to event or circumstance to circumstance…"Gosh, I hope I don't get fired next week." Start thinking I'm going to get fired or whatever it is, you generally end up thinking the negative. Now, people mistakenly place hope as the sentiment or the emotional state that will lead to the outcome of things, "Oh, gosh I really so hope this happens." But that's basically an excuse for not doing anything, for not trying, and so what you're doing is you're setting yourself up to have to deal with whatever happens, probably negatively, because you're not allowing yourself to be part of the equation to get the result that you want.

Rush pegged the remedy as well: [I]n my experience…my hoping for something never made it happen. My desire for something did.

Desire: “Want strongly.”Have you ever wanted something? Have you ever wanted something a lot? If you were to place degrees of “want” onto a specific outcome, the greater the degree of your desire for that outcome to happen, the more effort which you would likely put into achieving that desired outcome. The key is so easy: Actively make yourself a part of the equation which makes something happen.

I love real-world examples, perhaps you do, also:

"What's hope ever accomplished? Did Bill Gates hope when he was in school that he'd find the secrecy to the MS-DOS system getting on every freaking computer, or did he go do it?"

In and of itself, hope is not very useful past the warm and fuzzy feelings which it gives you. The more productive emotion, the more economical one, is that of desire…especially the sort which leads to action.

Saturday, February 02, 2008

Good Blog Post

I found this blog post recently, and would like to share it with everyone else.

Great stuff.

Knee Deep in the Hoopla

Everyone, to some degree, cares what other people think about them. Sure, there are those out there that have the “I am who I am, and all others be damned!” mentality, but even they must come to the stark realization one day that their success relies, to some degree, on the decisions of others. Sooner or later, everyone worries about their reputation.

So, what is it about this phenomenon of reputation?

Think about The effect which you have onto the world around you. Not just to your immediate family, close friends, and co-workers, but onto the circles of individuals belonging to more outlying portions of your friends and family. How about your acquaintances, lesser acquaintances, and people whom you don’t even really know, but with whom you still occasionally come into contact? The point is that we often have more impact on our own world, more than we realize. How often, however, do we take a moment to think about how we impact the lives around us, or if that impact is particularly positive or negative?

Think about the sum total of each of these groups, then think about the positive or negative impact which you have on them. Think about the degree of this impact: Just a bit good, just a bit bad, a whole lot good or a whole lot bad; or somewhere in between? In a psychological-economic sense and parlance of “Seven Habits of Highly Effective People” it is essentially the net imports and net exports of the emotional capital, both deposits and withdrawals, with other people.

Yes, people remember the impacts which you have on them. Some may let you know; some may not say a thing…but remember nonetheless. People tend to criticize when a need of theirs is not being met, but others will just let the ill will fester inside of them.

For the uninitiated, the concept of emotional deposits and withdrawals: Each time you interact with someone you will affect their emotions—if you do so positively, you make an “emotional deposit.” If you do so negatively, you make a withdrawal. Of course, you want to maximize the deposits which are made with each person in your life and minimize the chance that you will withdraw too much with a person. If you have enough emotional deposits with a person, you can certainly run a line of credit, so to speak. However…run a negative balance for too long and it becomes possible that you’re go into emotional default with a person and they’ll eventually write you off.

In an economic sense—a grander one—you must be aware of the aggregate of impacts which you have on other people. The net of the deposits and withdrawals which you make is ultimately the reputation which you have. In this sense, it is wise to be actively aware, monitor, and manage the impacts which you have with other people as to increase the value of your reputation and make you more famous than infamous.

Saturday, January 26, 2008

Zen and the Art of Brain Maintenance

It seems, much of the time, that not more than a few hours, days, or (for the lucky ones amongst us) weeks can pass by without facing a difficult problem. While some people have developed methods for confronting such problems, scientists have decided to tackle the subject to determine the mechanics that take place behind such decisions.

Their hopes and definition of the issue at hand:

’This insight is at the core of human intelligence … this is a key cognitive function that the human can boast to have,’ says Joydeep Bhattacharya, an assistant professor in Goldsmiths's psychology department. "We're interested [in finding out] whether—there is a sudden change that takes place or something that changes gradually [that] we're not consciously aware of," he says. The researchers believed they could pin down brain signals that would enable them to predict whether a person could solve a particular problem or not.

The findings shed some light on human thought processes: Once at a mental impasses, subjects experienced strong gamma rhythms, patterns of brain wave activity which has previously been associated with selective attention, in the parietal cortex—think upper rear of the brain, responsible for integrating information obtained from sensory input. When offered clues in this particular increased gamma-rhythmic state, subjects were less likely to gain insight on getting past their impasses.

If there’s excessive attention, it somehow creates mental fixation,” Dr. Bhattacharya notes: Your brain is not in a receptive condition.

When patients did not consciously monitor their thinking about a particular subject, they had their “eureka!” moments: The researchers likened it to an experience of emotional relief. Application of conscious information processing by the brain was associated with alpha waves—which have been previously associated with a relaxed and open mind. It has been shown that volunteers who were more apt to unwittingly solve problems exhibited more robust alpha rhythms as opposed to those who had to knowingly adjust their thinking to come up with the answer. In other words, the findings indicated that it is better to confront issues with an open mind rather than concentrating too much on them.

For a moment, let’s explore the larger network that the implications of these findings fit into. Research has shown that sleeping on a difficult issue is conducive to helping solve that issue, for instance. Just like any other muscle, the brain can be configured to have perspective to solve problems from a general sense, it can be trained to solve a specific set of problems, or it can be manipulated in the moment to work on a problem. My classic approach to solving a problem is that I prefer to take the tactful, graceful approach first; if that fails, then I will be apt to use a brute force approach. This particular philosophy fits in with the above, as grace employs techniques which are more concise, sophisticated, and even “Zen-like” in a sense, as opposed to the brute force approach where instead of coaxing a situation to become more to your satisfaction, you utilize more forceful techniques to control the situation to your satisfaction.

The solution for tough problems is simple, then: Either brute force your way through the toughness of the issue at hand…or use the smarter approach and walk away from the situation for a while. The alternative is to “train your brain” to have the perspective that is conducive to resolving these sorts of issues more quickly—by conditioning it to be more of a generalist than being focused on a specific manner of thinking.

Friday, January 25, 2008

Ethanol: Update


You should make sure you've read the post before this one regarding Ethanol; then read this one.

Now...recall the portion where I mentioned ingenuity and innovativeness as part of the way to counter the un-economical nature of ethanol? I forgot to mention that the same ingenuity and innovativeness could also be applied to the ethanol problem.

Like what this company is doing: They claim to be able to make ethanol from most any biological material using a bacteria-based method for $1 per gallon. Apply economies of scale, an experience curve, and you have some potentially cheap biofuel!

The Un-Promise of Ethanol

I’m not usually one to write about topics that are very much political in this forum mostly out of respect for everyone’s political views, the polarizing nature that such views can be, and the fact that I could care less about a person’s political views: They are of a personal nature, and it is as simple as that. That being said, I’m going to breach what is mainly an energy topic in this post, and what is only a political topic by extension of it being an election year.

I saw a commercial today in which someone said “I don’t want to drill my fuel, I want to grow it:” Conventional wisdom that flows nicely and strikes an emotional note with many people sympathetic to the so-dubbed energy crisis.

Senator Dianne Feinstein, senior Democrat Senator from California, describes the promise of Ethanol: It is “a perfect, win-win solution for both the nation's farm economy and its energy needs. According to the National Corn Growers Association, ethanol production could make 1.4 billion bushels of corn "disappear" in 2004 ... enough to replace more than 2 billion gallons of gasoline and provide a much-needed market for farmers stricken with chronically low corn prices. People feel the pinch of gasoline prices at the fuel pumps, eliciting an emotional reaction; furthermore people will tend to feel the plight of the depressed corn farmer—heck, I grew up on a farm and understand how economics work in agriculture.

However, I am an economist. From this perspective a dispassionate view of the situation must be done in order to properly assess the situation. What does the science say? What about the data?

David Pimentel has some insight on the situation. As an ecology professor at Cornell University, his research indicates that it takes the equivalent of just about 1 1/3 gallons of gasoline to produce enough ethanol to replace 1 gallon of fuel that goes into anything from your SUV to hybrid. In larger quantities, according to an article he authored in the science journal Natural Resources Research, it takes the equivalent of 271 gallons of gasoline to grow 2.47 acres of corn: Tractor fuel and the manufacture of nitrogen fertilizers are the biggest culprits here. The National Corn Growers Association, reporting on a study done by the U.S. Department of Agriculture, agrees: In June 2004, the U.S. Department of Agriculture updated its 2002 analysis of the issue and determined that the net energy balance of ethanol production is 1.67 to 1. (For every 100 BTUs of energy used to make ethanol, 167 BTUs of ethanol is produced.) In 2002, USDA had concluded that the ratio was 1.35 to 1.

Then, there’s the whole thing with the corn as part of the food supply situation: The U.S. ethanol sector will need 2.6 billion bushels per year by 2010—1.2 billion bushels more than it consumed in 2005. That’s a lot of corn, and how the market adapts to this increased demand is likely to be one of the major developments of the early 21st century in U.S. agriculture. The most recent USDA Baseline Projections suggest that much of the additional corn needed for ethanol production will be diverted from exports. MSNBC goes on to elaborate on the demand factors in the formula: Demand has risen so sharply, the amount of corn in storage is expected to drop to half of last year's levels, the department said. Farmers should harvest 10.55 billion bushels of corn, a 5 percent drop from last year.

Heck, it’s even making the price of the tacos I love so dearly to increase.

What are the essentials of the ethanol-as-a-biofuel situation? Ninety five percent of ethanol is produced from corn, and 11 percent of the U.S. corn crop went into ethanol production in 2004. With these numbers in hand, the U.S. Congress passed into law the Energy Policy Act of 2005; Section 1501 of which mandates 7.5 billion gallons of ethanol in use by 2012. As of August 2007 there were 124 ethanol plants around the country with 7 being expanded and 76 more being constructed: As a whole, somewhere in the range of 200 to 300 have been proposed.

The General Accounting Office of the U.S. Government, a body that deals almost entirely in numbers, has been quoted as saying that “ethanol's potential for substituting for petroleum is so small that it is unlikely to significantly affect overall energy security."

Now that we’ve defined the problem, what about the solution?

Human ingenuity, especially in the capacity for which the United States has been known, knows no bounds. If one is to take the two fundamental areas of scientific research of basic and applied, the former applies to research for the sake of research and “basic” or fundamental knowledge in the sciences; the latter is the sort such that the end result is a product or technology. With that, I believe strong basic research of a nation translates into a strong national defense—and I don’t believe that there is any political debate in this premise.

The best solution to this problem, then, is a joint approach whereas the markets and government work together towards the same goal of a economical form of energy which is either renewable or easily enough produced, and integrated into the current circumstances of our economy. Although not impossible, we live in an economy fueled by oil—making all that more difficult for this to happen. However, if part of economics is the risk-reward quotient, data firmly suggests that with the right motivation, impetus, and resources the reward hiding behind the risk could someday be a reality.