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.

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.

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.

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.

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.

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.

Ethanol: Update

--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.

The Myth of the “Google Generation”

Perhaps you’ve heard the news: Younger generations born or raised during the last several years, the co-called “Internet Age,” are the most web-literate. They have an ease and familiarity with the technology of computing and the Internet which often dwarves those of older generations. They can find information readily out on the World Wide Web, process it readily, and use it effectively.

Right?

A recent study by the “CIBER” research team over at the University College of London claims that these assertions become more incorrect the further one reads into the above paragraph.

“Research-behaviour traits that are commonly associated with younger users – impatience in search and navigation, and zero tolerance for any delay in satisfying their information needs – are now becoming the norm for all age-groups, from younger pupils and undergraduates through to professors.”

What do they intend to do about it? Dr. Malcom Read, Executive Secretary of the British Joint Information Systems Committee, says:

“These findings add to our growing understanding of subjects that should concern all who work in further and higher education – the changing needs of our students and researchers and how libraries can meet their needs. We hope that this report will encourage debate around these important questions. We hope it will also serve to remind us all that students and researchers will continue to need the appropriate skills and training to help navigate an increasingly diverse and complex information landscape.”

I’ll be curious to see what comes from the forthcoming debate.

Evolution: Not Random

Evolution is not random.

"The findings of an international team of biologists demonstrate that evolution is not a random process, but rather occurs through the natural selection of successful traits...The findings, which constitute a significant milestone in establishing and reaffirming the mechanism of Darwin’s theory, will help in understanding how evolution works in all living creatures"

The Culture-Productivity Factor

I am currently studying for my Bachelors degree in Finance. In the course of my studies, particularly a leadership and professionalism course, a question was asked on a pre-assessment regarding what cultural diversity did to a workplace. The answer, of course, was not that it produced a richer cultural environment; rather that it increased productivity because different cultures have different ways of approaching and solving problems.

In fact, a recent study corroborates this information. The study shows that culture dictates the wiring of the brain, so to speak:

“Neuroscientists Trey Hedden and John Gabrieli of MIT's McGovern Institute for Brain Research asked Americans and East Asians to solve basic shape puzzles while in a functional magnetic resonance imaging (fMRI) scanner.”

It’s a fascinating study; and, in fact: "There's a hint that six months in a culture already changes you," he said, referring to psychological, rather than neurological, research. "It suggests that there's a lot of flexibility."

I, Economist

The Greeks used the words oikos for house and nomos for law which would eventually be combined to reflect philosophies which would evolve from the writings in the Muqaddimah, written by the Arab historian Ibn Khaldun in 1377. Mercantilists and physiocrats would eventually arise in Europe, becoming known as economists, studying the separate discipline of economics with the publishing of Adam Smith’s quintessential work The Wealth of Nations in 1776. A discipline falling within the purview of the larger study of business, it is formally considered a social science studying production, distribution, and consumption of goods.

When I was previously in school for one of my business degrees I categorized the three business sub-disciplines of accounting, finance, and economics into what I dubbed “Matthew’s Levels of Money” such that each of the fields dealt with money at different levels: Accounting deals with the simple “accounting” of funds inasmuch as making sure what money is where; economics deals with the greater movements of such things through groups of businesses, industries, markets, national economies, and larger systems. Finance deals with money flowing in intermediate systems, between the scales which accounting and economics covers. Lastly, I posed that there were areas in which accounting merged with finance and where finance and economics merged as fields of study.

While finance and accounting are all well and good, economics, at least to me, is the physics of the business world. Physics is the study of the relationship between matter and energy, one of the fundamental sciences on which everything else in the universe can be understood and is built upon. Economics is a business and social field of study which can shed immense amounts of light onto many things, not just those that involve money, distribution, or production.

For instance, when observing behaviors of others, the economist understands that people are apt to do one of two things: Seek pleasure and avoid pain. Put another way, one needs to find the incentive in the actions of individuals or groups thereof to understand their stated or unstated intentions. People speed in their cars along their route between points A and B because there is a perceived incentive that they would rather be at point B rather than either of the other alternatives. People cheat on their taxes because there is the perceived incentive that they will not have to pay as much money to the Internal Revenue Service or that they will get more money in tax refunds. They may be honest because that makes them feel good, or they may tell lies because they feel that there is an incentive in being perceived a different way than what reality would otherwise dictate: People chasing the incentive is a powerful tool.

A concept in economics which is closely related to a person’s incentive to do something is one that is old as the science itself: Utility. It is essentially defined as the degree of usefulness which a person assesses to a situation, product, or anything involving choice; classical economics dictates that each person should be maximizing utility in any situation involving choice. While practicality is often what textbooks teach in regards to how utility is measured, this can vary based on culture or any one of a multitude of other factors. For instance, companies have a tendency to use Canada as a test market, as opposed to the United States, because Canadians tend to attach more practicality to their measure of utility and Americans tend to attach more status or prestige to their perceived utility in a decision, such as one to purchase a product. Put another way, Canadians will buy the test pizza at a fast food chain restaurant because they find it convenient or tasty. Americans will purchase the pizza because it is the cool thing to do that week.

Economics is a versatile science which allows the practitioner to look at the details of a given situation or the big picture. From the intelligent interactions between agents to the dynamics of national economies, economists rely on data and an understanding of the geometry of a given situation. Calculated, the economist is an effective decision maker that can sort through and process large amounts of information and think effectively on their feet.

In the art of corporate warfare, the economist is an able participant and a lethal combatant. Even in the hands of any other member of the business team, a firm understanding of economics will make one’s effectiveness that much more potent.

Monkey Mondays: Mouse of Keyboard Monkey

The mouse which the kid of Keyboard Monkey would use.

See it here.

“To every action there is always opposed an equal reaction.”
—Sir Isaac Newton

Times change; everyone knows this. Change is that great constant that coincides with the passage of time. I used to work in a call center for the wireless phone industry: Starting as a vanilla agent in the receivables management department, I became one of the fastest employees to move into the “resolutions” department where the duty du jour was to assist agents in doing their jobs and assist customers in escalated situations. Just as any high technology industry, the wireless industry changes quickly. If something didn’t change (at least) on a weekly basis, something was wrong…and the next change would often be much bigger than the changes that would have normally occurred over the course of the last week or more that had not had change.

The easily-learned, but difficult to adapt to principle is that things change. Each day, all around us, we see things changing. However…what is the propensity for people to change along with the changing times?

There are conventional wisdoms abound here. Conventional wisdoms, as anyone whom as read here any time in the recent or distant past, understands that this sort of wisdom is often nothing more than convenient. The short answer is that people can change, but it can be difficult for them to do so.

The longer answer: Sir Isaac Newton, the guy that once proverbially had an apple fall onto his head, then determined that for every action there is an opposite and equal reaction and developed a brand new system of math to describe the phenomena that he had discovered in the universe. Among his definition of the brave new universe that was coming to know the world was the concept of inertia. This principle of classical mechanics dictates that an object at rest will stay at rest and, likewise, an object in motion will tend to stay in motion. People don’t change because they are often held back by inertia such that they have behaviors which hold them back. While I can’t cite the research, I recall hearing once that after a couple weeks of “staying home, holed up in the house,” doing little to nothing productive, a person’s brain chemistry changes fundamentally, such that they are more apt to continue in that mode of living: I’ve witnessed this around me over the years and experienced it myself once, during a down period. I have often asked myself about the madness in the minds of these people.

It seriously requires a person to force themselves to get off of their behind and go out and do something.

An interesting corollary to this: How does one deal with the constant of change?

Most of the time people are resistant to change. Going back to my days in the call center business I learned one critical thing: The people that resist change often get left behind. The people whom grasp onto the change, ride the wave, and become a part of the change, “change agents” and “change warriors,” often find themselves benefiting from the change rather than becoming a casualty of it. However, I have a caveat coupled with a case study: Be careful not to become a casualty of the change

Quote: Extraordinary People

“One machine can do the work of fifty ordinary men. No machine can do the work of one extraordinary man.”
—Elbert Hubbard, The Roycroft Dictionary and Book of Epigrams, 1923

To commemorate the last address Bill Gates will give at the Consumer Electronics Show as the Chairman of Microsoft, a quote from one of the biggest visionaries of our time:

“If GM had kept up with technology like the computer industry has, we would all be driving $25 cars that got 1000 MPG.”
—Bill Gates, Chief Software Architect and Chairman, Microsoft

Quote: They Can't Get Away Now!

“All right, they're on our left, they're on our right, they're in front of us, they're behind us... they can't get away this time.”
—Lieutenant General Lewis "Chesty" Burwell Puller, U.S. Marine Corps

Quote: Judgment and Experience

"Good judgment comes from experience and experience comes from bad judgment."
—Unknown

Monkey Mondays: Happy New Year Monkey!