JustinIdea - Justin Ricaurte's Personal Blog

The Genius Curve

A couple of friends had passingly mentioned it, so I decided to hunt down the paper on "the genius curve."  It's a very interesting paper published in 2003 about how the genius and crime curves are linked by the testosterone drop that happens in men once they get married and have kids - this causing men to be less competitive and hence cause less crime and provide fewer scientific achievements.  I was wondering what environmental effects might cause this.  The fact that married men still make contributions to science after they marry, even if there's a drop-off signals more than evolutionary biology is happening.

Some ideas that come to mind:

1. Time dedicated to work decreases.  Once married and with kids, you start to restrict your work hours.  Gone are the 80-90 hour weeks, and 40-60 becomes the new norm.  Unless you're ok with not seeing your family as much.
2. Time at work becomes focused on securing resources for the family.  The focus is no longer on trying to make amazing contributions, but instead the near-term need of making sure the bills are paid and that savings for the kids education is happening.  
3. They worry about keeping-up with the Jones's, so making contributions to humanity starts to take a back seat again.
4. They start to work-out less, especially strength training, due to increased time commitments elsewhere, which lowers their testosterone levels below the elevated levels they had when they worked-out.
5. They allow their minds to become less curious due to their shift in focus.  If you're having a tough time putting food on the table, will you really care about the latest developments in human genetics?  Although I'm guessing with amazing scientists that less curiosity doesn't necessarily become the case, but maybe more so, the men become more ingrained in their ways of thinking.

Another thing to look at would be the people who continued to be productive and contribute to science in their later years.  Are there any commonalities among them aside from not having married and have kids, and if so, do they do something that the ones that peak in their 20's don't or vice versa?  And what does this mean for entrepreneurs?  Seeing as I'm 23, an entrepreneur, not married, and without kids, I'm curious as to what things might cause men to achieve less later in life. 

Minorities Holding-Back Minorities

The fact that an African-American firefighter would punch a Latino firefighter, because the Latino firefighter stood up for equality under the law, is ridiculous.  It's sad that some minorities want their employers to promote them based-on the color of their skin instead of the content of their character, and these are the ones who have been holding back minorities for the last 45 years.  Did they not listen to Martin Luther King, Jr - a man that is held up as a martyr among men and in the same esteem as George Washington and Abraham Lincoln?

"I have a dream that my four little children will one day live in a nation where they will not be judged by the color of their skin but by the content of their character."

The content of one's character is judged based-on merit and how they deal with others.  Holding minorities to a lesser standard than whites is reverse discrimination and does not hold true to the words that King spoke on August 28th, 1963.  If minorities aren't up to par competing based-on merit, they need to shape-up and start working harder and smarter, instead of complaining about discrimination.  Focusing on championing educational achievement in minority communities by the minorities themselves, like Booker T. Washington had done, would be a great start.

But too many minorities feel entitled today because of injustices that occurred in the past.  But do you know what?  This is America.  We aren't limited by a caste society where you must stay in the same social bracket that your parents were born in and perform the same job as them.  We have the freedom to be our own people.  If your workplace is discriminating against you, then quit and start your own company whose policies of non-discrimination will make you out-compete the competition and put them out-of-business.  

Yes, there is still racism in America, but it isn't nearly as bad as it was 50 or 150 years ago.  Today's racism is peanuts compared to then.  So stop complaining and start working, doing otherwise is a disservice to those that were enslaved and faced heavy discrimination in the past.  And if American-born minorities don't start working, then the immigrating minorities will leave them in the dust (and hopefully change the culture of laziness among some of the American-born ones at the same time).  Just look at President Obama.  He's the son of a Kenyan immigrant (no American slave roots).  It's the work ethic that counts.  

p.s. Apparently Supreme Court nominee Sonia Sotomayor doesn't agree that merit should be held above color.

Translating the 10 Principles of Economics for Non-Economists

In case you were wondering what is guiding all of those economists out their making decisions right now that will decide the future state of our economy (or if we'll have one), Greg Mankiw, a professor of economics at Harvard, does a brilliant job of translating the 10 principles, so that non-economists can understand what is going on in the minds of economists.

From his blog: Random Observations for Students of Economics

Controlling Rising Health Care Costs - Give the Power to the People

Right now, Democrats and Republicans in Washington, D.C. are fighting over what type of system the United States should use to control skyrocketing health care costs.  I thought I would do some digging to see which plan will actually reduce costs.

The Plans:
    Democrats - Government-insured (especially a push for single-payer) health care
    Republicans - Private insurance and government out of the picture

I went digging and using data from the Center for Medicare and Medicaid Services, I found that the plans put forward by both the Democrats and Republicans will fail at controlling costs.  Costs have been rising even though Medicare, Medicaid, and private health insurance have been insuring a larger proportion of American's medical care since 1960, when the Great Society programs and employer- based health insurance really started to take-off.  If the given plans would save money, then the domination by government and private insurance should have already started yielding cost savings.  Instead, costs have been skyrocketing.
 
So I kept digging to see if there was any granule of data that would show me anything about why health care costs have been rising.  The devil was in the details. 

What are both plans missing?  The power of the consumer.  Insurance, whether government or privately-run, fails to contain costs.  Food is more important than health care, yet we don't need to buy food insurance to ensure every American is fed.  Since World War II, Americans have been relying more heavily on insurance than ever before to pay for health care.  

Digging through the data, I found that as Out-of-Pocket payments for health care have decreased as people shifted to insurance (both private and public), while health care costs soared and the types of health care paid for have stayed relatively stable.
  
The system that we have that is based-on insurance is the problem.  In order to lower health care costs, we need to get insurance (except for catastrophic) out of the picture and have consumers pay for their own health care.  Then everyone will be able to afford their own health care, on their own.

In order to create the system, the Federal Government will need to:

1. Tax employer-sponsored health insurance (to stop distorting the market)
2. limit federally-financed health care to Medicare for the elderly (they deserve to be paid-back for the money they put-in).
3. give Medicare beneficiaries accounts with pre-determined amounts of money to spend on health care that they can then use to shop around for non-catastrophic health care use (and this is what they're limited to).  Then give them catastrohpic coverage to cover the balance.
4. Make sure direct primary care providers are not defined as insurance companies for Medicare patients
5. Make illegal the practice of insurance companies limiting their payments to doctors within their "network", which is anti-competitive and hurts consumers.

State Governments that are serious about controlling health care costs will also make sure direct primary care providers, such as Qliance, are not defined as insurance companies.

Instituting these programs will take the incentive away for people to get insurance and will give the power of their health care decisions back to the American people.

For more info, check out:
"How to Cure Health Care" by Milton Friedman

Utilitarianism is Slavery, Individualism is Freedom

I can get into some fairly intense debates with a few friends of mine that subscribe to the utilitarian ethic, since I am an ardent individualist.  So I've been thinking about how to best show the fundamental flaw of utilitarianism and why individualism is the view I subscribe to.

It all comes down to the fact that utilitarianism is slavery.  When you use a utilitarian philosophy, you work on creating the greatest good for the greatest number, which means that whoever is doing the deciding of what the greatest good is and who the greatest number are is in essence playing god by controlling what everyone else can do and everyone that they control is their slave.  This person doesn't need to be a big man either; it can be a small group or a majority of the people as well.

For example, let's say we have a group of people that want to go to war and another group of people that don't want to.  The reason those that want to go to war are for it is to get the other nation's resources and to expand.  Right now, the ones that want to go to war are in the majority, and since everyone that is part of the group needs to go to war (as in be enlisted in the military and see combat), then those in the minority are a slave to the opinion of the majority, and must go along with it, even if they object to it.  Under individualism, the majority would not be able to force the minority to go to war.  They would have to go to war by themselves and could not enslave the minority for their aims.

This is just one example, but anytime you use the utilitarian ethic, you are saying that the individual is a slave of the group's opinion, whether the group is a nation, a company, or a group of peers exerting pressure.  This is exactly why the United States is a republic and not a democracy.  Democracy is tyranny of the majority, while a republic protects the Rights of the minority. 

Since slavery was abolished in the United States with the Thirteenth Amendment, why are people in the United States still trying to enslave individuals by using the utilitarian ethic?  Only individualism provides true freedom.

Break-up Big Banks to Increase Shareholder Value and Reduce Systemic Risk

Since before the Federal Government decided to get in the game of bailing-out the banks last fall, I've been of the opinion that it would be better for the Federal Government to not let banks get too big to fail and to break them up into smaller pieces when they get too big, so they don't become a systemic risk, instead of bailing them out.  After Microsoft was being threatened with being broken-up, I saw the fallacy in trying to break-it-up into two or three monopolies instead of 5-10 competing companies, like when Standard Oil was broken-up.  While pondering this possibility for banks, I realized that breaking-up big banks into smaller banks might also have additional huge benefits to both the bank shareholders, the financial system, and taxpayers.

Rules of the System
Here are some general rules that would guide the benefits of this system:

1. Banks too big to fail, maybe $500billion+ in assets, will be broken into  banks with $100-200 billion in assets
2. The "Child" banks are not allowed to merge with nor acquire other child banks for 5-10 years (unless they are being liquidated), but they may merge with and acquire non-child banks (non-child banks do not include the children of other big banks that were broken-up, those are still child banks).
3. All child banks of a given parent bank, will each get the same systems, procedures, and technologies that their parent had, just like if the parent was a bacteria and duplicated itself into a bunch of children.  This way they all face a level playing field, with their siblings.
4. The shareholders in the parent bank, get equal shares in each of the child banks.

Benefits to Bank Shareholders
First to the bank shareholders, because any move should make sure the shareholders can see their return increased.  Big banks like any big company will come against the law of large numbers and have their growth stall once they become huge, since as they grow larger, the amount of revenue growth they need in order to increase their returns grows along with their new revenue levels.  Small banks don't face this limitation.  Therefore, the children of the best run big banks will be able to grow faster than their parent by acquiring, absorbing, and instituting their best practices into other banks.  Giving shareholders a stake in each will allow the shareholders to see their returns potentially increase at a much faster clip, while at the same time spreading their risk.  For example, JP Morgan and Wells Fargo shareholders could see huge gains in shareholder value by having this system adopted, because both banks are incredibly well-run. (Full disclosure, I've had family members work at Wells Fargo and I own stock in it through a family, stock partnership.  Also I have a good friend at JP Morgan. :)

Benefits to the Financial System
Second to the financial system, because we don't want the system to come crashing down around us.  The big banks that are not run well, when broken into smaller pieces, will have their bad pieces go under, because the smaller, bad banks won't be able to spread their risk over a larger bank and hide their troubles.  This will provide more room for the well-run banks to grow.  What then happens is the bad practices are destroyed faster and the good practices are able to grow faster, which leads to greater productivity growth and a more stable system overall, especially since the bad banks are reduced to banks that won't damage the overall system after they eventually fail.

Benefits to Taxpayers
Finally to the taxpayers, since the banks that are too big to fail will be broken-up, there will no longer be a need for bailouts, ever, which will save us hundreds of billions if not trillions of dollars in the future.  No more Citi's, Bank of America's, and AIG's will be sinkholes for our money. 

Turning-up the dial on creative destruction can be a great thing.

Is There a Constitutional Problem with Corporate Personhood?

I remember from my business, government, and society class (MGMT 320) at UW that we discussed how laws in the United States had evolved to count corporations as People, which also gave them the Rights that the Citizens of the United States have.  A thought just crossed my mind that made me wonder if the way corporate personhood is currently structured might violate The Constitution.

Amendment XIII

Section 1.

Neither slavery nor involuntary servitude, except as a punishment for crime whereof the party shall have been duly convicted, shall exist within the United States, or any place subject to their jurisdiction.

Section 2.

Congress shall have power to enforce this article by appropriate legislation.

Now corporations have "owners" that are its "shareholders", which is where the problem potentially exists.  If

1. corporations are People and have the same Rights as other People that are outlined in The Constitution,
2. "slavery" means that a person is owned by one or more other persons or entities, and
3. slavery is illegal in the United States, then...

isn't it illegal for corporations to have "owners" since most corporations haven't committed a crime to warrant being enslaved or put into involuntary servitude?

It would seem from this predicament that either corporations cannot have owners or that corporations should not be granted full personhood, because of this constitutional problem.  Here's the Wikipedia article for more history on corporate personhood and how it has specifically developed in the United States.

How To Use Pessimism To Your Advantage

Yesterday I wrote an article about how to use optimism to not only one's advantage, but in order to encourage those around them.  While Optimism is great, it is also best to balance optimism with pessimism (or paranoia depending on how you look at it).  

As Cameron had pointed out in a comment yesterday, a realist is neither optimistic nor pessimistic, and a realist will always look at the world through this neutral lens.  The problem with a realist is that if they were to look at the probability of starting a company and turning it into a billion-dollar corporation, they would laugh and go buy a McDonald's franchise, a near guaranteed way to become a low-single-digits millionaire.   The realist will never try to surmount mountains that have never been surmounted before, because the odds are stacked against them.

An optimist, on the other hand, not only takes the chance at striking it big, but also encourages others to do so as well, although unfettered optimism is pure gambling - think the people use see waste their money at slots at casino's or join all the other 49ers in the same river while gold-digging - and wastes your time and money.

The perfect balance to optimism is pessimism, but not "I can't do it" or "It will never happen" pessimism, but rather pessimism that you focus for risk management.  Pessimism is great for asking "What if...?" and seeing how negative events can hurt you.  When used properly, this process allows you to identify holes in your plan, so that you can pre-emptively plan for them to ensure yourself greater success at a lower risk, while also setting yourself up to recover a decent return on your investment (whether it be time, money, or a combination).  By combining optimism and pessimism, you will take better calculated, bold risks, instead of never taking bold risks or gambling your life away.

Personally, I would rather take calculated, bold risks and live a fulfilling life due to them than ask for the rest of my life what would have happened had I actually stepped outside and smelled the roses.

Are You Helping or Hindering Others?

One thing I've learned more about over the last few years is how people perceive the world, especially in how they perceive others.  A lesson I've learned is that when you become negative towards someone that you know, if there is currently no evidence to support the action to the other person, often times you are projecting yourself and your experiences and seeing the reflection of your experiences back at you.  Here is an example of an experience I've had that sums up this point.

When driving in the car a while ago with someone (not to be named here), I was having a conversation with the person about what both of our goals were.  After describing to the passenger some of the things I would like to achieve over the next 5-15 years, the passenger promptly turned to me and told me that I couldn't say what I expected my life to be like in 5-15 years, because most likely I was going to have problems come up that would deviate my course, cause me to fall short of my goals, and fail.  I was intrigued by this, because I always create expectations of the future for myself, and it is one of the core tools I use to determine what courses of action to take now and to also keep me excited for the future, and yes, changes of course do happen.  Good thing for me, I don't care for pessimism when it's unwarranted, so the criticism stayed with me in order to display this lesson, but didn't touch me.  

Later this same person apologized, when they realized that they had made the expectation based-upon their own experiences, because when they had made life goals in the past they had been derailed for various reasons even though they had poured their heart and soul into them, so they expected that this was the way the world worked.  There was no reason based-upon myself or my life experiences that had caused this impression on them.  I commended this person for being able to realize that it was not anything inherent in myself that made the impression, but rather the filter they had seen the world through.  Most other people would never have realized this about what they said and would never have taken the time to reflect upon it, which elevated my respect for this individual.

So when you are interacting with others, what do you tell them?  Are you the encouraging individual that doesn't let preconceptions from your own life get in the way, and instead make sure that you help them to find the best path to achieving their goal?  Or have you not realized that your negativity is due to your own perceived failures in life that you approach things so negatively and dampen the enthusiasm of those around you and try to keep them from going after their dreams?  No matter what camp you currently fall into, the future is yet to be determined, and since the only way you can maximize the future is to take risks now, it is better to give people the benefit of the doubt and encourage them to go act on their dreams.  

The Best Sub-Prime Fixing Stimulus Idea I've Seen

From the NYTimes by Thomas Friedman - "The Open-Door Bailout"

“All you need to do is grant visas to two million Indians, Chinese and Koreans,” said Shekhar Gupta, editor of The Indian Express newspaper. “We will buy up all the subprime homes. We will work 18 hours a day to pay for them. We will immediately improve your savings rate — no Indian bank today has more than 2 percent nonperforming loans because not paying your mortgage is considered shameful here. And we will start new companies to create our own jobs and jobs for more Americans.”

Cost to the United States - Maybe $1-3 billion to go through all the paperwork, which sure beats wasting $800 billion on a stimulus package and $2.5 trillion to shore-up our financial system.  

Friedman continues by elaborating on how we became the wealthiest country in the world, which I think many Americans sometimes forget:

“Dear America, please remember how you got to be the wealthiest country in history. It wasn’t through protectionism, or state-owned banks or fearing free trade. No, the formula was very simple: build this really flexible, really open economy, tolerate creative destruction so dead capital is quickly redeployed to better ideas and companies, pour into it the most diverse, smart and energetic immigrants from every corner of the world and then stir and repeat, stir and repeat, stir and repeat, stir and repeat.”