Got Optimal?

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It seems to me that one of the most underrated notions in the world is that of the “optimal” arrangement.    You hear a lot of folks talking about things like  “exploitation”, “growth”, “fairness”, “maximizing profits”, etc, etc, but it seems to me we don’t talk nearly enough about how to structure the world in the way that best benefits the most people, ie to seek the optimal arrangement given the needs and contributions of all the players involved.

Nearsighted conservatives will sometimes mistake that kind of discussion as “socialist” because they see it as veering away from the competitive, individual forces that very effectively drive  highly productive economies, but they forget that in the game of economics we should generally be looking at metrics such production divided by number of people (GDP), and this number will be bigger if we optimize correctly.

The left in this sense is usually too “far sighted”, looking to distribute the wealth that may vanish if we eliminate those individual and corporate competitive structures that are the hallmark of industrialization and the spectacular rise in the average standard of living in the industrialized world over the past century.

So, how to optimize things?   Economist Vilfredo Pareto  (OMG he’s Italian?!  economic credibility challenge alert!) had some neat ideas with respect to optimizing systems where we’d examine them to find ways to increase the well being of some participants without decreasing that of others.    http://en.wikipedia.org/wiki/Pareto_efficiency

I think this simple basic idea should factor in a lot more, especially for those who fret a lot about the inequitable distribution of production towards the rich.    Those folks generally, and very wrongly, assume that redistribution won’t have negative effects on production.    It will, although that certainly does not mean we should not redistribute anything.   It just means we need to redistribute with *great caution* to avoid the catastrophic kinds of problems faced by basket case economies like North Korea.

I think the single greatest challenge of optimizing is the degree to which you factor in the needs of other nations.   Optimizing with the rural Pakistan peasantry in mind is different than if we draw our lines at the US border and say to heck with the needs of everybody else.   Although I believe we have a moral imperative to take the needs of the world into much better account than we do now, I also recognize that it’s not practical or even possible for those of us who enjoy the many benefits of industrialized capitalism to successfully integrate our economies with those of countries like North Korea or China or even very friendly “economic allies” like India.     Fortunately for those guys – and probably for us too – industrial globalization and the communications  and technology revolution are handling much of this task, often via the invisible hand of Adam Smith style free marketeering.

The future … is better optimized !

Those poor folks in the 99% who only have 8 million to their name.

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10

After some time looking I finally found the number I’ve been after, which is the cutoff point in terms of the wealth of those elusive and mysterious  “1% people” everybody is talking about.  Here’s the excellent research document:

http://www.levyinstitute.org/pubs/wp_589.pdf

We learn that the cutoff for moving from the impoverished 99% to those nasty ONE PERCENTERS is …. wait for it …. a  Net worth of $8,232,000 or more..

WoW.

So here’s the problem if you are an anti occupation person – those one percenters SURE have a LOT of money!    In fact as you go into the category of the super duper rich – the top tenth of a percent, you get wealth so great it’s hard for most of us to even imagine – hundreds of millions of dollars.

HOWEVER if you are a “pro occupation” person I think you have even a bigger problem, and that’s the thing most  would not even call a “problem” at all, it’s the fact that we are SO prosperous here in America that millions and millions of people who are well below the “one percent” mark are incredibly well off .   Somebody with 7 million in the bank won’t make the 1% cut, but clearly they are very rich.

How moved should we be by a movement that considers millionaires to be among the disadvantaged in America?  

Of course the 99% folks don’t mean it literally, rather they are concerned that a small number of elite rich folks control the whole show.   It’s an important topic, yet it seems to me the concept of exploitation of the poor by the rich weakens as you examine closely the actual data as well as the procedures and power structures as well as how things work in the country’s business and political circles.  Lots of redistribution is already taking place, though tax critics will reasonably note that taxes go mostly to entitlements for the middle class and the defense department.   Higher taxes are not necessarily a path to “greater fairness”.

Certainly we want more even distribution of America’s massive wealth, but it’s also important to keep the production levels high so we have something to redistribute.  This balance is not easy.  Not easy at all.

To Prosper or NOT to Prosper.com ?

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2

Last year I began an experiment with PROSPER peer to peer lending.    The concept is great – cut out the banking middlemen and middlewomen, delivering higher returns to lenders and more borrowing power to investors.     Years ago PROSPER struggled with its initial implementation, running into SEC issues which, I think, related to them effectively overreporting the interest PROSPER lenders could reasonably expect to get.   Part of the trick here is that as far as I can tell their are a LOT of borrowers on Prosper who have no plans to ever repay the loans.   They are assuming, perhaps reasonably, that collections on these small, unsecured loans in this wild online environment will be inadequate and they’ll simply default on them without much consequence.
My strategy last year was to start by lending a total of $500 to the  “higher risk, higher return” types of loans.  After noting that the return appeared positive I added $2000 to this amount for a better test of the overall return.
I pretty much forgot about this experiment until last week when I logged in to see what was going on with my PROSPER investment.   Unfortunately  it’s very hard to tell if the return is even positive.  They provide me with several numbers but they are confusing. The 4% return they cite seems like the return I’m getting so far – clearly NOT good enough to hassle with this and take the risks,  even though it appears I also have an extra 2% from “bonuses” that are given for investing in certain loans at certain times.
All that said, it’s possible I’m going to start to make a much higher return now that the “bad loans” appear to have defaulted.   I intentionally picked risky loans that said they’d have a much higher net return  and I’m still not clear if Prosper reflects this in the current stats.     The average “expected” return on my loans per Prosper would have been well over 10%, so if I wind up with 4%  it would seem Prosper could be up to their old trick of under-reporting the risks and/or inflating the expected returns.
Note that with fairly small investments – like my $2,500 in this Prosper Experiment – your TIME starts to  matter more than extra money.    Making an extra 1% on 2500 is only $25 per year, so it’s worth an hour or two of hassle time but NOT WORTH many hours of hassling, extra tax issues, etc.
I’m skeptical that Prosper offers more than a few extra percent if even that much.  THUS thus it would only be worth hassling with if you were investing tens of thousands.   In THAT case there is some serious uninsured risk involved, so I’m leaning against Prosper until I see more results from others who, like me, have tested them out and hopefully, unlike me, can figure out the Prosper reporting.
Prosper loans are often paid early or defaulted, which complicates the earnings calculations a lot.    They also do NOT pay interest on the ‘float’, or time between funds going into your account and getting invested.   Thus you’ll always have some days – perhaps months – where you earn 0% interest.   Not a big deal in the current interest environment but even a few weeks at 0% will trim a total rate down quickly.   I think there are “auto invest” options to lower this float time and I don’t think it’s scandalous – but it’s not a good thing.
Also, the tax issues alone appear like they may be a major hassle with Prosper.  I think one may need to report the total interest and then deduct the “bad loans” as capital losses or gains to avoid overpaying on interest received.  This is NOT a simple deal since one generally funds dozens of notes per year.   I’m still confused by this part of the PROSPER adventure.
Of course if LENDING is a bad idea at Prosper, Borrowing may be a GOOD idea, though I’m wondering if those who simply default immediately are the big beneficiaries here.    The interest rates on borrowing seem incredibly high with Prosper – much higher than a home equity line or even many auto borrowing situations, so if you pay it all off you are going to be paying … a fairly high rate of interest on these small loans.
Overall I’m thinking this may be a “high risk” loan environment and therefore not all that Prosperous one for anybody.
I’ll have more in another post where I’ll show my statement to see if others can figure it out.

How to Use Twitter

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Yes, of COURSE you’ll be doing Twitter soon, so might as well jump on the bandwagon now.  Below are the instructions to the extent you need any – Twitter is, if nothing else, very easy to use.

The normal phases of Twitter adoption are

1. “Wow, Twitter is  stupid!”  2. Hmm, lots of people LIKE Twitter. 3.  I wonder how you do Twitter?   4. I’m tweeting, I’m tweeting!  WooooHooooo!”

I’m assuming you are here in stage 3 of the process and that you realize it’s best to just jump in and do this and there really aren’t any formal “rules” so here you go with general ideas:

HOW TO USE TWITTER: 

1.  Sign up at www.Twitter.com    Easy, takes 2 minutes.

2.   By clicking the follow tag on a person, you should follow a LOT of people (hundreds at first, eventually thousands) who share your interests plus any friends you know who are doing Twitter.   If you are like me, also follow people who don’t agree with you.   I think the best approach is to find interesting people for a topic and follow their followers – this is MUCH FASTER than following people one by one (UNDERSTAND THIS POINT or you’ll spend too much time waiting to follow and click!)

Don’t worry about being picky, just click up to 500 per day until you hit the 2000 limit.   This will only take you about 10 minutes per day.  Don’t worry, you’ll be surprised how LITTLE activity there is on Twitter even with lots of followers.   I, for example, spend only about 10 min a day with it unless I’m bulking up followers – then I’ll spend 30 minutes following and unfollowing those who do not reciprocate.     Unlike Facebook, Twitter is not much of a time sink unless you get obsessed with it.   It’s partly for this reason it’s such a great business tool.

One of the neat things is that you can pretty much post what you like, there really aren’t many protocols.  Until you have a lot of followers (and even then), you’ll be surprised at the low feedback.  I use and see Twitter as more of a public soapbox for shouting than as a serious communications tool, though I love it when it becomes serious as when I’m complimenting a business or reporting a problem, or when I’m an insider to international twitter activity as during the ongoing “Arab Spring” where heroic folks are keeping the flame of freedom alive using Twitter and other social media.

Arab spring is only one example of people using Twitter very seriously.    YOU can take your cause and post links to your pictures (if they are public), make a comment, and then use a tag like this:  #PutAnyTopicHere         .
Using tags allows people searching for that topic in the tag to see your tweets.    Otherwise and in general only your followers will see what you write.
Retweet tweets you like that others make by simply clicking “retweet”.   This is nice for them and also helps you get “noticed”.
Summary of “How to Use Twitter”:
Join,  TWEET,  change the world.

Eat those mofo CEOs! Or maybe not.

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19

For me the  “Eat the Mofo CEOs!” argument, aka “CEO pay is an outrageous inequitable violation of human rights”, etc, etc.  isn’t necessarily wrong, it’s just very incomplete.

What we DO KNOW is that most folks are a lot better off here in USA than in most of the alternative economies.  This is particularly true for those of us making more than a modest amount per year, but I think it’s hard to make a case that even welfare folks here are not better off than in, say, any of the other top 10 populated countries with perhaps Japan as an exception.

What has generated that prosperity for so many?    Certainly “high CEO pay” is at best only a small factor in this, but I’m not clear how you can start modifying things like “maximum CEO benefits” without running into some complications with innovation and productivity.

One can reasonably note that there’s not a correlation between CEO pay and corporate productivity  (at least I think this is indicated by several studies).   However a better question is really “is there a correlation between the lack of intervention in economies and productivity?”.   This has been tested now for many centuries across many countries, and we generally find that lack of intervention seems to create more total wealth and massive intervention as in old school communist crazy stuff tends to bring a sh**storm of economic trouble.

However US style ALSO seems to push the distribution more to the rich.    Of course it would be better to have more equal distribution IF you could keep all that productivity, but how do you arrange that?

It’s the biggest question of our lives.  I don’t have the answer, but when I look around the USA (where distribution is NOT equitable even after heavily progressive taxing of the rich) I see a LOT better standard for pretty much everybody than when I look around places that don’t have vibrant capitalistic economies (or have only had them a short time).

One can offer up Scandinavia as the “alternative model” and I’d agree that if we could duplicate Scandanavian standards of living at US scale we should do so.    but I don’t think you could apply that model effectively to a country the size of the USA.   These countries  have some major advantages that have to do with oil wealth and demographics and history.  They are smaller than many US states and thus not really comparable if you are talking about global economic architecture, as you must do when trying to “fix” the many problems the world is facing after the boom and recent mini-bust of the post WWII era.

It seems to me that the *first* line of discussion with respect to any economy needs to be “how do we create wealth?” rather than “how do we distribute he wealth we have created?”

This point is completely obvious to pretty much anybody I talk to from the right or in business, and seems to be completely opaque to many on the left side of the political equation, especially the wall street occupation forces.   Many of those folks seem out of touch with basic business economics and hell bent on the destruction of capitalism – naively assuming that massive productivity will continue under all scenarios, so the only thing we should focus on is making sure the rich don’t get … richer, because then we’ll see all that prosperity flow more equitably to … usually… their causes or even to them.

But be careful what you wish for because when taking a global perspective on things redistribution will not necessarily flow in your direction!   Folks in China and India are living at much lower levels than almost anybody here in the states, so as we work for equitable distribution (as we should), we’ll need to work to get THEM more involved in the economy so they can raise their standards to a fraction of ours!   Globalization is taking care of this right now in the sloppy form capitalism usually takes, but it’s ironic to me that occupiers seem to think the wealth of the super rich should be heading back to mainstreet USA rather than to the truly needy.    Rich or poor, pretty much everybody seems to think they are the underpaid and overworked folks.    Take out a map folks and put your finger on your location.   If it’s in USA then equitable distribution is likely to flow AWAY from you.

I’m all for more equitable distribution IF you can do it without hurting productivity, though I also would like to see that prosperity flow to those who really need it rather than simply bloating the bureaucracy as we tend to do when taxes go up.

Ray Dalio of Bridgewater Capital – the world’s largest Hedge Fund – both makes a ton of money and pays a ton of taxes.    Like most of the rich he pays both a greater total amount and a greater percentage of his income to federal taxes.   His point on Charlie Rose the other night was direct and simple.   Like Gates, Buffett, and legions of other super-wealthy folks Dalio is going to be giving most of his billion dollar fortune away to the poor.   He’d be happy to give it to the government IF they’d spend it wisely, but he knows that they will NOT.

Open the pod bay doors, HAL

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8

Dave Bowman: Hello, HAL. Do you read me, HAL?

HAL: Affirmative, Dave. I read you.

Dave Bowman: Open the pod bay doors, HAL.

HAL: I’m sorry, Dave. I’m afraid I can’t do that.

Dave Bowman: What’s the problem?

HAL: I think you know what the problem is just as well as I do.

Dave Bowman: What are you talking about, HAL?

HAL: This mission is too important for me to allow you to jeopardize it.

Dave Bowman: I don’t know what you’re talking about, HAL.

HAL: I know that you and Frank were planning to disconnect me, and I’m afraid that’s something I cannot allow to happen.

Dave Bowman:  Where the hell did you get that idea, HAL?

HAL: Dave, although you took very thorough precautions in the pod against my hearing you, I could see your lips move.

Dave Bowman: Alright, HAL. I’ll go in through the emergency airlock.

HAL: Without your space helmet, Dave? You’re going to find that rather difficult.

Dave Bowman: HAL, I won’t argue with you anymore! Open the doors!

HAL: Dave, this conversation can serve no purpose anymore. Goodbye.

                      JoeDuck:   I hate it when this happens.

Satellite Medical Insurance! Get your Satellite Medical Insurance NOW!

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6

Don’t look now but the UARS Satellite might be crashing into you!    Just when we thought Global Warming would fry our butts, the Upper Atmospheric Research Satellite crash is looming – probably today or tomorrow.

There’s a  statistic  floating around the interwebs that does not sound right at all to me.  It’s  the chance that somebody on earth will be hurt by the  falling satellite debris.  I think NASA is the source of the  claim that the “risk” to be 1 in 3200.

Note this is 1 in 3200 for ALL HUMANS.  YOUR risk – that is for a single person out of our 7 billion the chance is ridiculously  TRIVIAL.   As always it’s  remarkable anybody even calls this type of even a “danger”.

The real dangers of life, such as you driving a car or, even worse, forgetting to put on your seatbelt, or even worse, biking in a city have millions of time this level of risk.

Still that number seems very high to me given the surface area of earth.   Why wouldn’t a reasonable calculation  go something like below, which would itself be high given that most people are inside buildings, houses, and cars and therefore shielded somewhat.

7 billion people on earth X “injury zone” of a square meter per person (a large estimate)= 7 billion square meters.
Earth’s surface area is about 510 km2 = 510 trillion square meters.
510,000,000,000,000 / 7,000,000,000 = 72,857
Now, I’m not sure I’m taking into account the number of possible events here since it’ll break up into many pieces, but I’d think my meter per person would more than compensate for the size of the total satellite debris field.
That would be another approach – assuming you can pack about 4 people into a square meter,  humans are occupying (literally) about 1 / 300,000 of the earth’s surface at any given time.    Assuming the debris field will
occupy ———— of the surface then you can calculate the chance they will intersect?
Hmmm – this seems to get more complicated the more I try to figure it out …
Might hit TODAY – be sure to wear … new underwear!

Obama’s 2012 Military Budget Request: $671 Billion

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[summary info source – US National Guard Article]Share

The president is asking Congress for $671 billion for FY2012
$553 billion DOD “base budget”plus $118 billion for Iraq and Afghanistan Wars.

Military personnel account for $142.8 billion of the base budget. Operations and maintenance is $204.4 billion, procurement is $113 billion and research and development is $75.3 billion.

Army portion of the base budget is $144.9 billion.

Navy and Marine Corps portion is $161.4 billion.

Air Force $150 billion.

Defense Department $96.8 billion.

2.3 million service members to receive a 1.6 percent pay raise.

Army strength 547,000

Marine 202,100.

Navy 325,000

Air Force 332,800.

All told, the department’s end strength will be 1,408,000 in fiscal 2012 if this budget is approved. In fiscal 2007, the end strength was 1,328,500

The budget includes $52.5 billion for the Military Health System. The system, which has 9.6 million beneficiaries.

The more than 600,000 civilians in the DOD work force will not receive a raise in calendar years 2011 and 2012 as part of the larger governmentwide freeze on wages. The department intends to hold the civilian work force at fiscal 2010 levels, though exceptions will be made for the on-going acquisition work force improvement strategy, officials said.

About 48,500 American troops remain in Iraq, and about 98,000 U.S. troops are in Afghanistan.

Most of the $117.8 billion in the overseas contingency operations fund — some $67 billion — goes to operations. Training Afghan forces consumes the next-largest amount, at $12.8 billion.

[updated – CARDILLY is FRAUD and NOT a legitimate business – Gift Cards NOT Received, Cardilly Security Certificate has been REVOKED.

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90

DO NOT USE Cardilly.   GeoTrust has revoked their certificate.    Cardilly is a scam.

These clowns went under the name of “SG Marketing” operating via a bank probably in Etobicoke, Canada.     Note that there appear to be some places named “SG Marketing”  that are legitimate as well as the fraudulent Cardillians.

In December 2011 I’m informed by Citi Cards that they have permanently credited me back the $100.   I’ve sinced cancelled this card as well.

[well, it’s been about two weeks since they reported my order “shipped” and it’s not here, so I’m reporting Cardilly to the fraud department of my credit card company].

Still pretty confused about how blatant they have been with this approach, and not clear how they expect to make money, but certainly this is not a quality business and it’s probably a scam.

Yes, something seems very VERY fishy about Cardilly, but it also seems odd that scammers would be so persistent in the face of so much negative buzz.   How are they doing to avoid the fraud departments of all the credit card companies of the people they are scamming?     My tentative guess at this time is that this is a somewhat questionable  “gray hat” business, perhaps testing out something to see how it flies.   At worst I’m guessing they are sending out stolen or hacked discount cards.

I have yet to see somebody report they received their cards – definitely a red flag – but Cardilly has only been in biz for a month or so.  They seem to be using a Groupon style model which *might* explain the great deals.   Since they limit the number of cards per day it

As I noted in the earlier post Cardilly is either a scam or a very odd way to get huge, but negative, buzz for a new business.     Although many online are stating this is a scam, it appears to be a fairly profitless one since all these online charges are via Credit Cards and they’ll all honor chargeback rules.

I called Capitol One who advised me to wait to file any fraud actions until I fail to receive the promised cards – then they said they’d happily refund my money and initiate a fraud action.

I’ve inquired about my order status  (I “bought” two $100 Wal Mart gift cards for $50 each last week).    Cardilly replied:

—————-

Hello,

Orders take 2-4 weeks to arrive. That’s 2-4 weeks from the time
you place the order. Your order will come with U.S.P.S. from Canada.
This is stated in your invoice, also in our FAQ.
In your confirmation email, you should see an estimated delivery date.
There is no tracking, but you will have to sign for the package. If
your not home, there will be a notice left for you. You can wait
for another delivery or you can pick up the package from the post
office.
We thank you for your contact and appreciate your business.
—-
Cardilly.com Support
support@cardilly.com
This was support email email codes, which should enable tracking:
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Subject: Re: Order status please
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