Dilbert.com Blog

Winning by Picking Losers

Wed, 23 May 2012 01:00:01 CDT

There's plenty of research showing that professional stock fund managers do worse than the indexes over time. In other words, consistently picking winners is impossible except by chance or illegal means. But I wonder if picking losers is easier?

Suppose you built an index fund by starting with the largest 500 stocks in the United States, based on capitalization, then removing the fifty or so stocks that experts predict will be dogs for the coming year or so. Would your remaining 450 stocks beat the S&P 500 index?

It seems to me that picking losers has to be easier than picking winners. But one problem with my concept is that the most beaten-down stocks can have the largest percentage gains if they show signs of life. Also, low stock prices can make companies susceptible to takeovers, which can also mean spikes in the stock price. I realize it's not easy to pick losers. But is it exactly as hard as picking winners? I only need to be a little bit better at picking losers than winners and I have a good investment strategy.

When the housing bubble burst, it didn't take a genius to know that the companies in that industry would suffer for several years. Okay, okay, hindsight is easy, so let's see if you and I can predict which industries or companies are likely to be dogs over the next three years.

My prediction for dead-money stocks would include any company competing with the iPad. I think Microsoft, Dell, and HP will have anchors tied to their butts for a few years as consumers skip their next laptop upgrades in favor of iPads.

What are your picks for dead money stocks?

Confirmation Bias Test

Mon, 21 May 2012 01:00:01 CDT

The Trayvon Martin shooting case is turning into the world's biggest example of confirmation bias, starting with the shooting itself.

We now know that the shooter, Zimmerman, thought Martin fit the general description of the two men (young, male, African-American) who had been spotted robbing homes in the neighborhood. Martin's hoody served as a partial disguise, which probably made Zimmerman's confirmation bias go through the roof. My best guess is that everything Martin did up to his death, including the fight, contributed to Zimmerman's confirmation bias that he was dealing with a dangerous hardened criminal.

On the flip side, Martin probably made up his mind quickly that Zimmerman was some sort of racist, bully, thug wannabe who was just looking for a fight. After all, what kind of guy gets out of his car and follows you down the street in the dark? The last thing that might occur to you is "Neighborhood Watch."

When the story first broke, and the public had scant information, much of it incorrect, most of us jumped to an initial assumption. People who have had experiences with bullies and racists probably assumed Zimmerman fit the mold. Therefore, he must be prosecuted.

Others, most notably Geraldo Rivera, thought that a 6'3" guy dressing like Emperor Palpatine from Star Wars, with a black hoody, on a dark night, in a crime-riddled neighborhood, set the stage for a tragic misunderstanding.

My question to you is this: If you made up your mind about Zimmerman's guilt when the story first broke, has the flood of new information changed your mind? Or has confirmation bias allowed the new information to harden the opinion you already had?

Have any of you changed your minds about Zimmerman's guilt based on new information?

[Update: I'm no lawyer, so maybe someone can answer this question. Even if you believe Zimmerman's bad judgement alone created the situation that resulted in a much larger guy sitting on his chest and punching his head with no indication it was going to stop anytime soon, isn't it still "self defense" if he shoots the guy pounding his face? That's a real question, not rhetorical. -- Scott]

Instagram versus Facebook

Thu, 17 May 2012 01:00:01 CDT

The Facebook IPO happens tomorrow, and I have a question for my readers: If you use Facebook, are you still spending as much time on it as you did last year?

I was talking to a young Facebook user recently and asked if her new obsession with Instagram had come at the cost of Facebook time. Her answer was yes, and I got the sense that Facebook was for old people and Instagram was for the young. Ouch.

Instagram is a brilliant business concept. It strips out the best part of Facebook (Hey, look at my photo, friends!) and then makes improvements on that feature (Hey, look at my sepia-toned photos, friends!). In addition to besting the best part of Facebook, Instagram also improved on the worst part of Facebook: sketchy privacy. While a parent might ban a kid from Facebook for privacy reasons, Instagram is relatively less of a privacy issue. The keyword here is "relatively," since either service lets you post dumb comments and incriminating photos of yourself.

It's no wonder Facebook threw a billion dollars at Instagram, apparently to kill the competition by absorption. If I were Zuckerberg, and I noticed young people migrating from Facebook to Instagram just as I prepared for my IPO, I'd spend a billion dollars to make the problem go away too. I wonder if Instagram would have sold for something closer to $100 million if Facebook had already done its IPO. Timing is everything.

Readers of this blog, are you using Facebook less this year than you did last year?

Leadershi*

Mon, 14 May 2012 01:00:01 CDT

Recently President Obama announced that he supports gay marriage. But he also said that if states want to continue discriminating against gays, it's their decision. I assume the President also believes Abe Lincoln should have stayed out of the slavery issue under the theory that the states should decide which rights they grant their minority populations. (Someone clever said that before I did. I forget who.)

Meanwhile, President Obama is using scarce federal funds to shut down marijuana dispensaries in states that have legalized medical marijuana. On this issue, the President is opposed to states' rights.

The interesting thing about the dual issues of gay marriage and medical marijuana is that both have a track record that can be evaluated. Why not use science, or at least economics, to figure out what works?

In places where gay marriage has been legal for some time, what has been the cost to society? Has the social structure crumbled? Did taxes go up? Did any hetero Christians turn gay from peer pressure? Was there an outbreak of bestiality? Did it rain toads?

Medical marijuana has also been practiced long enough in some places to have a track record. Did the states that legalized medical marijuana experience an uptick in traffic deaths? Or did all of the stoners driving home from the dispensaries slow commute traffic and make things safer? Did residents eat too many munchies and become obese? Did cancer patients start robbing convenience stores to pay for their habit?

One could argue that the minimum requirement to be called a leader is that you don't wait for your Vice President to become so embarrassed by your position on a prominent national issue (gay marriage) that he takes control, forcing you to meekly follow. President Obama glibly said that Vice President Biden "got over his skis" when he came out in support of gay marriage. Actually, Biden displayed leadership. I understand why the President didn't recognize it.

On the Republican side, Romney is like a bag that's half snakes and half candy. When you put your hand in, you never know what you're getting. Romney might be awesome. I like the general idea of putting a turnaround expert in the oval office at a time when we need one. But the reality is that we don't know what we're getting with Romney. He is, after all, a robot that professes a deep belief in magic. Good luck predicting how that would shake out.

President Obama is getting a lot of credit for killing Bin Laden. But how much credit should we give to luck? It was lucky timing that our intelligence people located Bin Laden during Obama's term. And if no one knew for sure that Bin Laden was at the compound before the attack was launched, the President was guessing. He guessed right, but guessing isn't a repeatable skill. And realistically, you and I would have made the same decision to launch a strike.

In theory, the United States is protected from revolution because we have the option of voting out the bums we don't like. The reality, which is sinking in, is that our only option is to replace bums with bums. As long as no candidate feels the need to be philosophically consistent, or to base decisions on data, we don't have a functional government.

That's why I favor starting an emergency backup government using social media. I think we need an insurance policy against the total breakdown of civilization. We need a backup government that's ready to go in case our existing form of government loses its last shred of credibility and citizens start ignoring it.

Other countries have an emergency backup government in place. It's called the army. When the civilian government loses credibility with the people, the army can step in and maintain order while a new government is formed. That's roughly the case in Egypt and Pakistan, for example. But that sort of system has a high cost. The citizens of the United States wouldn't want a military government as an emergency backup. I think this country would prefer some sort of government-in-a-box backup solution that is organized over the Internet.

I think the major problem with our current form of government is that although the major parties are competing with each other, the system itself is a monopoly. There's no competition for the federal government as a whole. I think it would be useful to form a shadow government on the Internet, complete with chosen leaders and policies. That would create a sort of competition for the existing government. The media could keep tabs on how many citizens have a preference for the shadow government over the existing one. If the shadow government gets too much support, the existing government is likely to evolve to avoid relegation.

Competition is good. We need some competition for our entire system of government, not just competition within it. We also need an insurance policy in case citizens decide to revolt. Admittedly, that's a small risk, but that's the point of insurance - to protect against small risks with catastrophic potential.

If you think competition is good, insurance is prudent, and fact-based leadership is better than naked politics and superstition, you should be in favor of forming an emergency backup government on the Internet.

Venture Capital

Fri, 11 May 2012 01:00:01 CDT

The media treats with reverence the geniuses who invested early in tech giants such as Google, Facebook, and other big Internet names. If you're a super wealthy person, and you obtained your wealth by luck, inheritance, or financial manipulation, you're probably eager to prove you have something useful to offer the world. You want to be associated with a sexy new startup to demonstrate your brilliance and establish some family honor. You want to do the modern equivalent of buying yourself a title. Instead of becoming Lord of Devonshire, you can be an early investor in a startup that might become a household name. You want to be like Sean Parker, who will forever be introduced as co-founder of Napster and founding president of Facebook. Internet companies are the new royal titles.

My theory is that venture capital used to be a more rational business model. Today, I think venture capital is largely ego-driven. For wealthy investors, it's more about proving how smart you are, and having the chance to forever associate your name with a startup success. It's sort of like the Kennedy family transitioning from their bootlegging roots (allegedly!) to politics. Rich people often need to scrub their family reputations. Investing in startups is the modern way to do that.

I came up with the Ego Theory of Venture Capital while reading through a list of startups that recently got funded. Maybe it's just me, but I didn't see anything in the bunch that looked like a potential winner. Ego has to be behind much of the funding because economics wouldn't explain such weak investments, even under a venture capital model. Historically, a venture investor hoped to succeed 10% of the time. Now I'm seeing startups that seem, at least to my non-expert eyes - to have something like a 1% chance of success.

Interestingly, all of the doomed startups comprise, collectively, a system in which poor people can redistribute wealth from the top 1% to themselves. If you want the rich to have less money, one sure way to do it is by starting an Internet company and getting venture capital funding. The only way your scheme for income redistribution can fail is if your startup unexpectedly succeeds and makes the rich investors richer. And what are the odds of that? Check out this article in Business Insider about the poor performance of venture funds.

Now we have this absurd situation in which society is complaining that the rich have too much money at the same time the rich are begging the poor to take their money. The only condition the wealthy put on the transfer of money is that the poor need to put together some PowerPoint presentations that use the words "social" and "cloud." Is that too much to ask?

If you think the rich have too much money, stop complaining and do something about it: Start your own Internet company and go get some venture capital funding.

Future Generations

Wed, 09 May 2012 01:00:01 CDT

People like to say they care about future generations. That's ridiculous, obviously. The reality is that people only care about perpetuating their own genes. If we cared about the quality of life for future generations, most births in modern societies would result from the sperm and eggs of donors that are healthy, brilliant, talented, hard-working, happy, tall, and blessed with excellent emotional intelligence. To keep things non-racist, let's assume the donated sperm and eggs in my hypothetical situation come from the best specimens in every ethnic group.

Just to be clear, I'm not recommending that society restrict reproduction to the best genetic specimens among us. That would violate all sorts of basic freedoms. All I'm saying is that if we cared about future generations, we have the means to solve a lot of their problems in advance through genetic management. In reality, we don't care too much about future generations, so the current method of mating all higgledy-piggledy is fine with everyone.

None of us wants to live in a world where human reproduction is restricted by the government, or even by social norms. I'm just making the case that if the current generation of child-bearing folks were to bite the bullet and voluntarily accept restrictions on their reproductive options, future generations wouldn't need to have the same restrictions. In a generation or two, society could go back to mating all higgledy-piggledy in the old-fashioned way, secure in the knowledge that any mate they might select in that future generation would be the product of good genes.

It's a creepy idea, right? Yeah, I get that. It's impractical too. But I'm sure people once said the same thing about donating their organs, and we got over that. The only real limitation to genetic management is psychological. We could get past it if we truly cared about the wellbeing of strangers that will be born after we die.

Income Distribution Magic

Mon, 07 May 2012 01:00:01 CDT

Suppose you could snap your fingers and instantly reduce the huge disparity in income distribution across the globe. Would you do it?

Many of you will probably say yes. You'd take some of the "extra" money from the rich and use it to help the needy. But suppose I put one condition on this magic power of yours. Suppose the only thing you can do by magic is reduce by half the wealth of the top 1% while knowing the money would be transferred to no one. The money would simply cease to exist. The rich would have half as much, while everyone else remained the same. Would you use your powers then?

I keep reading opinions that the gigantic gaps we see in income distributions are corrosive to a healthy society. If that's the case, using your magic to screw the rich should be a good thing for the world - including the rich themselves - even if the poor are not directly helped at the same time.

So how about it - Would you use your magic to screw the rich, thus reducing the gap in income distribution?

Homes for Oldsters

Fri, 04 May 2012 01:00:01 CDT

Have you visited an assisted living facility for the elderly lately? If you have, I'll bet it was clean and professional, but also unspeakably sad. The residents are well cared for, but they look lonely and bored and forgotten. Maybe we should figure out how to fix that situation before it's our turn.

If you consider the huge demographic wave of retirees coming down the road, and the fact that many haven't saved enough for retirement, and the fact that science keeps finding ways to keep our withered bodies alive longer, we have a big problem brewing. Where will all of those old people live?

Some oldsters will live with family, of course, and some will be independent until the end. But that still leaves tens of millions of old people in need of assisted living. What will that look like?

Let's begin by imagining an elder care facility designed to stimulate the residents and provide a great quality of life. Current facilities appear to be designed for efficiency, more like hospitals than hotels. What we have now are clean and bright facilities that are needlessly depressing. Let's start by getting some better colors in there, and adding some real design. Every room should have a second floor view of something beautiful and interesting, a gas fireplace, porcelain tile floors, interesting lighting, beamed ceiling, and a little extra space. Think of a lake cabin or a Spanish bungalow. Good design costs more, of course, but I'll talk about economics later.

Now imagine that each room has a huge flat screen TV on the wall, and speakers in the ceilings. The residents would also have the option of wireless headphones with built-in microphones for Skype calling, or for listening to loud shows, or music, or books on tape. I imagine the remote control for all of this in the form of an arm band, so it never gets misplaced during the day.

The TV and speaker systems for the one-room apartments would have interfaces designed especially for old people. The upcoming wave of elderly people will be comfortable enough with technology that we will have more options than before. The onscreen menus would be large and simple, and also operate on voice command. The lights, phone, and temperature would also be controllable from the menu on the TV. Let's also assume the oldsters can use the armband controller to speak directly with the staff in case they need something.

The genius part of my idea involves locating the elder care facility next to an animal rescue facility. It's the perfect symbiotic relationship. Both the old people and the animals want company. They can have each other all day long. There will be some extra hygiene issues, but humans live with dogs and cats now without much trouble. We might want to create common areas for human and pet interaction, to keep the fleas out of the main living areas.

I would also combine the elder care facility in the same building with a childcare area. Kids are germ carriers, and you wouldn't want much direct contact between the snot nosed kids and the seniors. But I think you could let the healthier seniors work part time in the childcare facility to give them something active to do. And for the rest of the seniors, it's just a happier environment when you can see kids coming and going, and playing behind glass windows. Call it the ambiance of life. And in some cases, the kids might be the grandkids of residents.

I'd also want each senior to have his or her own garden space, arranged in rows, at wheelchair height, in a common greenhouse. This gives the seniors something to cultivate and have fun with. There's something about gardening that appeals to most old people.

Now imagine a kid-sized soccer field in the courtyard of the assisted living facility. During the school day, the kids from childcare would use it to run wild. After school, older kids from the area would schedule the field for team sports. The elderly residents would have front row wheelchair access to watch the action.

Now imagine that the seniors can use their big screen TVs to Skype with family and friends from anywhere in their apartment. And let's assume the interface is designed with only a few visible options, such as "Call Timmy" or "Answer Call." If your grandma is in the facility, just fire up your iPad and visit her without leaving your couch. If you're having a birthday party for a grandkid, set up the call on the iPad and just leave its camera pointing in the direction of the action. Grandma will feel like she's in the room.

I can also imagine wheelchairs of the future being motorized and guided by a sort of in-house GPS system. If grandma wants to visit the animal petting area, or take a ride through the adjacent park to get some sun, she just tells the chair where she wants to go and it takes off on a slow ride.

Let's also imagine that all recreational drugs become legal for people over the age of 75. While drugs are clearly bad for kids, can we say the same thing about senior citizens? Recreational drugs might actually keep seniors healthier by increasing their happiness, energy, appetites, and general interest in life. And it's not as if seniors in assisted living will be operating heavy equipment or making important decisions. I don't see a downside.

Now that we've done a great job designing the assisted living facilities to be stimulating and life-affirming, how do we pay for all of that extra stuff without government assistance?

For starters, the facility can have a few extra sources of income. The childcare wing would be an income source, as would the sports field that could be rented out. I could also imagine beautiful garden areas around the grounds that are suitable for weddings and events. That's another revenue source. The facility could cater the reception as well. All of this activity helps to make the residents feel connected to the circle of life.

Now imagine that these senior facilities are owned and operated by a company that also sells long term care insurance. People would start paying for their assisted living while still relatively young. With insurance, most people will pay and never reap the benefits. I think people would pay a premium to know they have a guaranteed spot in a high end assisted living place if the time comes. Compare that sort of investment to the stock market, which is iffy at best. I think an argument can be made that investing in your own future assisted living is the smartest retirement investment you can make.

Climate Change

Wed, 02 May 2012 01:00:01 CDT

Warning: This blog is written for a rational audience that likes to have fun wrestling with unique or controversial points of view. It is written in a style that can easily be confused as advocacy or opinion. It is not intended to change anyone's beliefs or actions. If you quote from this post or link to it, which you are welcome to do, please take responsibility for whatever happens if you mismatch the audience and the content.
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Yesterday I read that 97% of climate scientists agree that climate change is happening, and that human activity is a contributing factor. That sounds convincing to me. I'm not qualified to argue with climate scientists about climate science. But it makes me wonder how often experts have accurately predicted anything of this complexity.

That isn't a rhetorical question. I actually wonder what our track record is for predicting the outcomes of complex systems.

One might argue, by analogy, that an automobile is a complicated machine, yet it's easy to predict what will happen if you put sugar in the gas tank. Perhaps all we need to know about climate science is that any change to the global mix of chemistry is likely to change the temperature. Is it that simple?

Climate change skeptics suggest that the environment will somehow automatically regulate itself, perhaps through offsetting changes in cloud behavior. That sounds like something I wouldn't want to count on. And apparently the cloud theory of self-regulation has been debunked.

But back to my main question: Can you name some examples from history in which the strong consensus of experts - scientists or other - accurately predicted the outcome of something as complicated as the global climate?

It's no fair picking examples in which experts merely interpreted what happened in the past, such as evolution, or the birth of the universe. It's easier to figure out what happened in the past than it is to predict what will happen in the future.

I'm curious how many of you simultaneously hold the following two nearly-contradictory opinions:

1. Climate change is real because scientists say so.

2. Experts have never accurately predicted anything so complicated.

According to most climate scientists, we know that the average temperature of the world has increased in recent years. That part seems settled. But is it equally certain that the trend will continue and become a global catastrophe?

I believe that my question can't be objectively answered because climate change is too politicized. Your opinion on how well humans predict complex systems will depend on what you already decided about climate change. Please prove me wrong.

Lust Dust

Mon, 30 Apr 2012 01:00:01 CDT

My editor thinks this comic is inappropriate for newspapers. He might be right. You won't see this one published anywhere else.

One of the tricks I use as a comic writer is the imaginary last scene. In this case, the funny part is what you imagine happening after the comic is over. Your mind fills in the details. If I do my job right, everyone fills in the last scene with whatever works best for them. Some of you imagine something subtle and some of you have a more graphic interpretation. Personally, I see a time-lapse scenario that features bulging eyes and seasons changing. The important thing is that each of you imagines a scene that is customized to your sensibilities.

Virtual Bedroom

Fri, 27 Apr 2012 01:00:01 CDT

Imagine two small rooms in different cities. Each is filled with a bed and no other furniture. On the side walls, very near the bed, are huge flat screen TVs with 3D cameras. You make a date with someone in another city - perhaps a spouse who is traveling for work or in the military, or perhaps a romantic friend you met on the Internet. You agree to a time, and decide which direction you will be facing to see each other. The screen you face will be the one displaying the other person looking back at you, appearing as if he or she is in bed with you. The bedding and beds would be designed to look like an extension from one virtual room to the other.

The wall behind you would display whatever scenery the two of you had agreed would be your location. It would look as if each of you had a window behind you. Perhaps the two of you decided you would be on a tropical island, or in a high hotel tower overlooking Paris.

A big part of the illusion would involve sound and lighting. Sensitive microphones would pick up all of the ambient sounds of your bed sheets. The scenery program running in the background would supply subtle ocean sounds, cricket chirps, or traffic noise, depending on the situation.

The lighting would be low, so that everyone looks good. The room around the bed would appear dark except for the virtual window behind each person. That would enhance the illusion of your togetherness. The 3D cameras would add depth.

Each person would also have a warmed body pillow to snuggle into during the virtual sleepover. The pillow wouldn't try to emulate the other person; it's just there for some tactile comfort.

I imagine this starting as a sort of hotel business model. You check in for the night, and the bed portion of the room is equipped as I described. In the beginning, you might only need a few of these rooms per state or small country. If you haven't seen your spouse/lover/friend for a long time, you'll be willing to drive a few hours for your virtual sleepover.

Eventually, high end homes will have virtual bedrooms that the kids will use for sleepovers with friends in other places. Army bases will have virtual bedrooms for spouse visits. Singles will meet online and decide to have a first date in the safety of their virtual beds. The elderly might want another oldster to keep them company through the night without the bother of actually living with another old person. Snorers will be able to spend the night in the same virtual bed by turning down the volume.

Yes, yes, the concept lends itself to virtual sex. But I think you can build a business model that doesn't require that.

I think virtual rooms will someday provide elderly folks with an illusion of the mobility they once had. Someday they will be able to press the "Himalayas" button and take a virtual helicopter tour through the mountains without leaving the wheelchair.

If you know anyone who plays Xbox Live, in which you can put on headphones and chat with friends in other places while playing, you know how popular virtual rooms already are. Adding a bed and 3D video is the next natural step. Maybe Apple will get into the game after they finish dominating every other market.

Leopard Bike

Thu, 26 Apr 2012 01:00:01 CDT

When a leopard runs, it launches off its two back legs, lands with its two front legs, waits for the back legs to catch up to the front, and repeats. The power comes from the back legs. I wonder if you could create a bicycle that uses run-like-a-cat action.

I used to have a recurring dream about running like a cat. In my dream, gravity was weak, or perhaps my cat-person muscles were extra strong. But it in any case, it seemed effortless. There was something natural and awesome about being able to run in that fashion. I'd love to ride a bike that emulates a cat's running motion, but perhaps less parallel to the ground, for visibility reasons.

My back legs would be doing most of the work, pushing off together, and operating the back wheel of this hypothetical bike. My arms would power the front wheel, and it would be geared differently than the back wheel so that my arms don't travel as far, or work as hard, as my legs.

For long bike rides, current bike designs might be the best. But for a full body exercise that is more fun to ride, and doesn't require you to shove a seat up your anus, I might prefer the leopard-inspired bike. My hypothesis is that running like a leopard would be a more satisfying form of exercise than normal biking.

Does someone already make such a thing?

How Much do the Rich Keep?

Wed, 25 Apr 2012 01:00:01 CDT

What percent of a rich person's income does he spend on himself?

To simplify the writing here, assume our hypothetical rich person is a guy. Let's say he pays about half of his income in taxes. That sounds about right, especially if you include sales taxes and property taxes. Now let's say he has a wife and three kids. Most of his living expenses, such as his houses, benefit all five members of the family. So divide most of his expenses by five to get his individual piece.

In our complicated world, the rich guy might have a first wife to whom he pays alimony, or he might support some other family members who need some help. And let's say he donates a healthy part of his income to charity.

So far, we've only discussed the money that flows in and out during the rich guy's lifetime. The bulk of a rich guy's wealth passes to heirs.

Net it all out, and I'll bet your typical rich guy spends only 5% of his income on himself. The rest goes to the government, family members, and charity. Therefore, arguably, every time a rich guy gets up and goes to work, it's 95% charity, roughly speaking.

Now let's say the rich guy made his money by starting a company that employs a hundred people. Half of the firm's gross income might flow to employees and investors. Then there is an economic multiplier effect as those employees buy goods and services, and pay their own taxes. A wealthy founder of a business might spend on himself only .001% of the gross income his company generates.

I know, I know: You still hate our hypothetical rich turd because he has a lot of toys, and lots of control over how his money is used. And every time he buys a Rolex instead of feeding a homeless family, he's not exactly walking with the saints. That's what society teaches us to think.

I prefer to divide the world into two groups: People who are trying, and people who aren't. I respect anyone who is making a constructive effort to improve any part of the world, including his or her own little piece. When people apply effort, wealth is mostly a result of luck, in terms of genetics, geography, or timing. I don't begrudge anyone their luck.

God's Matchbox

Mon, 23 Apr 2012 01:00:01 CDT

I was in Reno this weekend with some friends and family, one of whom is widely recognized as the luckiest gambler in the universe. Let's call her Jane. Jane has reportedly won so many jackpots at slot machines that her track record seems to defy all reason. She's a gambling legend. I decided to put Jane's skills to the test in front of two witnesses: my wife, Shelly, and me. I gave Jane $50 and asked her to combine it with her own $50. Her assignment was to score a big win for our collective investment while my wife and I observed her technique.

Shelly pointed at the high roller slot machine room, where the $100 wouldn't last long without a win. Jane needed to feel the right vibe before picking a winning machine, so she asked us to follow her while she felt out the room. Jane is like the slot whisperer. I think the machines actually talk to her.

As you might expect, the high roller slots area was relatively empty. Far off in a darkened corner was a lone, bearded, creepy gambler. Jane walked straight over to the machine next to the creepy guy in the darkened corner and declared it to be a winning machine. I tried to wave her off, not wanting to spend more time than necessary in a darkened corner with a creepy guy, especially since the entire rest of the room was empty. Shelly stepped in and insisted that we let Jane pick the machine that spoke to her, without our unlucky influence. I reluctantly agreed. Jane sat down, inserted our $100, and started hitting win after win. Two minutes later, we split $600. WTF?

I took my $250 net profit and gave it to the control group for this experiment, i.e. me. I lost $200 on a variety of different slots in less than ten minutes. I didn't see another jackpot, big or small, that night. Jane had won about five jackpots in two minutes. I won none.

The freaky part happened the next morning. I was up early and took a long walk to a bagel shop. On my way back, I was crossing a huge empty parking lot, looking at the clear blue sky and snowcapped mountains. Suddenly a meteor crashed into the atmosphere directly in my view plane. The meteor streaked across the sky with a bright green trail of fire. It looked as if God had used the Earth to light a match. Seconds later, I heard the sonic boom. It was literally the coolest thing I have ever seen. Apparently this was the tail end of the Lyrid meteor shower. But unlike the nighttime meteor showers I've seen before, in which the meteors looked like fireflies in the distance, this meteor must have been relatively massive, and very near. Wow. It was a once-in-a-lifetime sight.

Across the street from me, facing the wrong direction, were four college students who missed the whole show. I was lucky to be looking in exactly the right direction. Wait. . . lucky? Lucky!!!

I decided this was a sign. I went back to the slots and hit them hard. I lost, and lost, and lost. I was down $200 in minutes. I tried one machine after another. I was confused. Jane had proven that luck exists, and I just saw my lucky meteor, so how could I keep losing? Then it hit me: There might be a pattern here.

If you recall, Jane picked the slot machine that no one else would have picked. Even if the creepy guy hadn't been in the far corner, how many of you would have entered a square room full of available slot machines and picked the one that was almost in the corner? Most people would probably play something nearer the middle of the room. If you preferred the corner, like the creepy guy, you would take the actual corner, not the machine one over from it. In other words, Jane picked one of the least attractive machines in the room, and it turned out to be "lucky."

From a business standpoint, it makes sense that the least attractive machine would pay best. If you're designing a casino layout, you know you can get suckers to play the losing machines in the best locations, and the ones with the most attractive lights and sounds, all night long. The casino can maintain whatever gambling odds are legally required over the entire body of slot machines while using psychology to steer people away from the ones that pay best. All of my losing spins involved machines that somehow appealed to me on a visceral or spatial level. What I needed was an undesirable machine. So I looked for one.

That's when I spotted a slot machine sporting the worst graphics I've ever seen. It was one of those full-screen types with a changing matrix of images. The artwork looked as if it had been created by a 13-year old for a school project. The graphics were so bad that you couldn't even tell what the images were supposed to represent. It looked intentionally unattractive. And I remembered from the prior evening that this machine had sat empty while most of the machines nearby were occupied. I had passed it up several times myself. If my economic theory of casino design was right, this was my winning machine. I sat down and fed it my last $100, which quickly turned into my last $25. And this is the part of my story that gets strange.

On what would have been nearly my last spin before quitting for the day, I hit a $400 jackpot. That was my biggest lifetime win at a slot machine. The machine's graphics went into celebration mode. At the end of the animation cycle, the onscreen image changed to a Western desert sky at twilight. The final animation was a meteor streaking across the sky, exactly like the one I had just seen. Freaky.

I don't actually believe in luck, or omens, or magic. I know that every part of my story can be explained by chance, or perhaps the economics of casino design. On the other hand, I also don't believe that reality is necessarily fixed and immutable. I can't rule out the possibility that we're experiencing some sort of Schrödinger's cat situation, in which all possibilities exist simultaneously until an observer intervenes. In any event, it was a fun weekend. I spent my winnings on a nice massage. And no, I didn't get lucky during the massage. But I like to think that in some parallel universe my twin did.

National Security and Blackmail

Fri, 20 Apr 2012 01:00:01 CDT

Reality Distortion Field

Wed, 18 Apr 2012 01:00:01 CDT

I'm finally getting around to reading the Walter Isaacson biography of Steve Jobs. I'm fascinated by the discussion of how Jobs developed what became known as the Reality Distortion Field. Apparently Jobs had a lifelong battle with reality and won.

One way to look at Jobs' life is that he was a liar and a con man with a gift for design. According to Isaacson's reporting, Jobs had no love for truth. Jobs learned how to lie, cajole, manipulate, and charm until people believed whatever he wanted them to believe. By all accounts, Jobs' mixture of cruel and unsavory skills caused people to produce seemingly impossible results.

That's one way to interpret events. But it's not the only interpretation. According to Isaacson's book, Jobs spent years trying to understand the nature of reality before he started bending it. Jobs dropped a lot of acid, travelled to India, followed gurus, became a fruitarian, meditated, and studied religion. He was clearly looking for something. What if he found it?

Jobs' spiritual journey probably led him to believe reality is subjective - more like a complicated set of ideas than a huge clump of matter. I've never tried acid, but from what I hear, it changes your view of reality forever. Before you take acid, a rock is just a rock. After acid, a rock is sometimes a rock, and other times it's just one possibility. When you consider all of Jobs' spiritual experiences, it's fair to assume he had an open mind about the nature of reality.

For context, keep in mind that physicists also have some whacky ideas about the nature of reality. Some scientists believe we are experiencing just one of many universes. Others question the nature of time. Einstein showed us that reality is different for observers traveling at different speeds. And in the quantum world, reality is smeared across probabilities.

Maybe it's simplistic to say Jobs was a liar and a con man. Perhaps it would be more accurate to say he found the user interface for reality, and lying is simply one of the levers. We know Jobs spent years trying to find the keys to reality's engine. Maybe he found them.

The biggest head-scratcher about Jobs' career is how many times he transformed entire industries: computers, phones, music, animation, and more. And each success happened with a different mix of Apple employees. Do you believe all of that success was luck, or perhaps luck plus extraordinary business skill? Or is it possible something else was happening?

I don't believe in magic. But I can't rule out the possibility that reality has a user interface. Perhaps the Reality Distortion Field was exactly what it looked like.

Love and Safety

Wed, 11 Apr 2012 01:00:01 CDT

I have a hypothesis that the sensation we describe as love is actually a feeling of relative safety that another individual provides. The "relative" part is important. Allow me to expand on this idea.

Humans are essentially animals that somehow learned to read. Our most basic instincts for survival are still very much intact. We are living danger detectors. That feeling of stress you experience so often is your early warning system.

Danger can come in many exotic forms. One form of danger involves physical safety, and here we can see that our loved ones would be the most reliable when it comes to protecting us in a dangerous situation. When the bear goes after you in the forest, your coworker tries to outrun you, but your spouse is likely to grab a tree branch and join the fight.

You will be tempted to argue that an armed hunter who happens to be in the general area during the bear attack would be more beloved than your spouse, according to my hypothesis, because only he can shoot the bear and revive your feelings of safety. But I think the hunter example supports my argument. If the hunter kills the bear and saves your life, you will in fact feel an immediate and deep affection for him that is a lot like love. For cultural reasons, you won't define your feeling as love, but it will feel spookily similar. And you know that after you thank the hunter, he will no longer be your protector. Your feelings for him are temporary.

Likewise, there's probably a good reason that women are often attracted to men in uniform, particularly the ones in lifesaving professions, such as police, military, and firefighters. As further evidence for my hypothesis, a cool uniform doesn't benefit doormen or waiters in the love department. For women, it must be the feeling of safety that makes a difference. It probably also helps that healthy-lookin men are more likely to produce healthy babies, which in itself makes a mother safer as the children get older and can help out.

Danger comes in many forms beyond physical peril. For example, one of my worst fears involves the risk of loneliness, or the risk of not being seen as useful to others. For me, that would be worse than death. Our loved ones are the best protection from that sort of danger. As long as you have a good relationship with your family, significant other, and friends, you feel safe from the dangers of loneliness. And you always feel potentially useful.

From a species perspective, our fear of eventual death is closely related to our impulse to spread our genes and create a sort of immortality. We feel love for the person we see as baby-making material, even if we override the instinct for reproduction for practical reasons, such as economics, age, etc. We're simply wired to feel safer, gene-wise, when we're around someone who might help us reproduce.

Religion also supports my hypothesis. The pious don't simply prefer God, or find it convenient to obey God. They literally love God. This is consistent with my hypothesis because the opportunity for an afterlife is the ultimate safety net. Even if things go pear shaped during life, believers still feel safe in the long run, and therefore they feel love.

Your dog appears to love you above all others, but it's no accident that you are your dog's main protector. You feed it, shield it from bigger dogs, shelter it, and let it sleep near you at night for group protection. In return, you know your dog will make you feel less lonely. We're a species that relies on group size to keep us safe. The more creatures we have on our side, the less likely we will be attacked.

A cat is harder to explain by my hypothesis. A cat makes you feel less lonely, but it has little or no protective qualities beyond sensing approaching danger faster than you can. I think that explains why an unusual number of men dislike cats: Cats don't have your back when the trouble comes down.

Love has many flavors, of course. You experience different kinds of love for a spouse, a family member, a friend, a pet, a hero, and a deity. My hypothesis is that each of those flavors of love is related to how safe each individual makes you feel. A little bit safe feels different from very safe.

That's my moist robot explanation of love. I hope I didn't ruin it for you, or minimize its importance. Making another person feel safe is the most perfect gift you can give. Love is the glue that binds society. If my hypothesis is correct, love is how you know you're doing things right.

When Companies Become Countries

Mon, 09 Apr 2012 01:00:01 CDT

I wonder when the first multinational company will form its own country to avoid wars, government red tape, and corporate taxes. It feels inevitable. I assume it will involve seasteading.

The current notion of seasteading involves floating cities that are outside the control of existing nations. That concept has its appeal, especially as a way to test new forms of government. But existing corporations already have their own form of government called management, and despite its warts, it generally works.

Imagine, for example, that one of the world's beloved companies such as Apple or Facebook someday decides to start its own country on the sea. The company's existing management structure would need to add several functions, such as education, healthcare, and police. The corporate government would look a lot like the Chinese government. In other words, it would be efficient in terms of profit, while giving up freedoms that employees are already accustomed to giving up. For example, company employees don't have freedom of speech when it comes to criticizing management. Somehow we live with that restriction and it doesn't seem too onerous.

There would be no taxes for permanent residents of the company country. Public services would be funded from corporate profits. Every paid service in the country, from banking, to insurance, to groceries, would be company-run. The accounting would be transparent and the profits would flow to public services.

The big worry with this model is the "company store" abuse that was common during the early days of the United States. In some cases, an employer would take advantage of its monopoly on goods and services to gouge its employees, turning them into virtual slaves. But I think that risk can be addressed by accounting transparency, and by capping the compensation of top management to a multiple of the average employee pay. It also helps if employees can choose to leave whenever they want. That keeps management in line.

Wages in the company country would be low while still attracting top talent, so long as the cost of living islow, taxes are non-existent, and the lifestyle is awesome. Employees could earn less while saving far more, especially if they own equity in the company.

This prediction assumes that traditional governments continue to bankrupt themselves and strangle their own industries with red tape. That feels like a safe bet. But the main reason a company might want to form its own country is to attract the best minds, and the lowest cost of labor, from all over the world without any immigration issues.

Do company countries seem inevitable or unlikely to you?

Robot Love

Thu, 05 Apr 2012 01:00:01 CDT

Every time I come home, my dog is so happy to see me that she literally runs in circles around the kitchen. Her happiness rubs off on me. I wonder if someday humans will bond with their robots the same way we bond with pets. Your first reaction to this idea is probably dismissive. Pets are alive, and that's why we form bonds with them. A robot is nothing more than a clever tool. But just for fun, let's reverse-engineer the emotional bond we have with pets.

Consider the impact of appearance. Dogs are absurdly cute, and that helps us bond with them. We like babies and attractive adults for the same reason. Humans are wired to respond to cuteness. At the moment, robots are not cute in the same way as dogs and babies. But it's easy to imagine that situation changing as robot developers learn to make their products physically appealing. Someday robots will be soft and warm to the touch. And I would expect robots to move as naturally and unpredictably as animals within a few decades.

I can also imagine robots that appear to breathe while actually functioning as air filters for the home. And I would think that someday robots will have the same subtle smells and pheromones as living creatures.

Building a robot to imitate a person, as opposed to a dog, has an extra level of difficulty because human speech and intelligence are hard to mimic exactly. Building a robot dog is much easier. Perhaps your future robot dog will bark to get your attention if there's an intruder, or the house is on fire, and it might softly whine when it needs a service call.

If you accept the notion that a robot dog can someday look, act, sound, and smell like the real thing, what else does it need to generate an emotional bond with a human? Will it matter that we know it isn't alive?

Consider movies. A well-made movie generates strong emotions in people even though we know the movie screen is not alive. We know the actors are acting, and the story isn't real, and still we have an emotional response. I believe our future robotic dogs will have the same impact on us as movies. We will always be aware of their non-living nature, but we'll be helpless to resist forming emotional connections. If you doubt that humans can form emotional connections with objects, check out the stock price of Apple.

You've seen a lot of science fiction stories about our robot-filled future. Sometimes we can't tell who is a robot and who is human. Sometimes the robots try to kill us. Sometimes the robots make us stupid because we learn to depend on them for all of the hard decisions. But I think the real danger from robots is in the emotional bonds humans will form with them. I fear that robots will be far better companions than pain-in-the-ass humans, and we'll lose our incentive to reproduce. When robots become awesome and economical, no one will want to spend time with a smelly, inconvenient, annoying, overpriced human.

My prediction is that robots will eradicate humankind with love, not laser cannons.

What if Stupid People Organized?

Wed, 04 Apr 2012 01:00:01 CDT

Warning: This blog is written for a rational audience that likes to have fun wrestling with unique or controversial points of view. It is written in a style that can easily be confused as advocacy or opinion. It is not intended to change anyone's beliefs or actions. If you quote from this post or link to it, which you are welcome to do, please take responsibility for whatever happens if you mismatch the audience and the content.

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What if Stupid People Organized?

What would happen if stupid people figured out how to organize their vast numbers into a cohesive political force? It's a scary thought. Luckily for Earth, stupid people have always had trouble grooming effective leaders from among their ranks. Historically, that simple fact has always kept their power in check. But now it looks as if stupid people have discovered a workaround - one that requires no leader. We're screwed.

Don't jump ahead and assume I'm talking about one of the major political parties in the United States. That would be too easy. Sure, every major organization has its share of stupid members. But the smarter members of any group almost always bubble to the top and run things. Historically, smart people have always found a way to jump on any runaway horse and get ahold of the reins. But lately, thanks to the Internet, there are far too many runaway horses.

I'm talking about a site called Change.org. It allows anyone (gasp) to start a petition and gather millions of virtual signatures. How much research do you think those millions of people do before piling on? Answer: not enough. And how much impact do those petitions have? Answer: Sometimes a lot. You see the problem here.

I assume many of the petitions at Change.org are worthy and helpful. As the saying goes, a blind squirrel sometimes finds a nut. What we don't know is how many times stupid people have used Change.org to leverage their ignorance and multiply their power. Does that represent 5% of the petitions on Change.org or 95%? There's no way to know.

Regular readers of this blog might recall that members of the LRC (low reading comprehension) community went after me on Change.org last year. An LRC activist took something I wrote out of context, started a petition, and duped thousands of stupid people into piling on. I assumed at the time it was an exception, and an annoyance, but nothing more sinister or important. That was until I heard that over two million people signed a petition on Change.org to prosecute the killer of Trayvon Martin. Amazingly, millions of people who know they don't have the full facts of the case have demanded that the shooter be prosecuted.

It's possible, maybe even likely, that every signer of the petition is 100% correct. There's plenty of circumstantial evidence in their favor. But anyone watching the slow trickle of changing "facts" in this case understands that none of us really knows what happened that night. One thing we know for sure is that the people who have the most information - the police investigators and prosecutors - apparently don't think a jury would rule out self-defense. That situation could change, obviously. The point is that the circumstantial evidence is fluid, and it points in at least two different directions.

I don't know if the good work that comes out of Change.org offsets the bad. In any case, I don't think free speech should be curtailed. My point is that Change.org is a tool that can empower both smart people and stupid people, and that only one of those situations is good.