One Simple Thing: Picking Up Plastic Bottles

By Dan Wilcock

For the last couple months, I’ve picked up any plastic bottles I’ve encountered on my daily walks in Rockville and Silver Spring. This way they don’t flow into the Chesapeake Bay and the Atlantic Ocean. This simple act refreshes my sense of being able to make a difference, no matter how small the scale. The idea isn’t mine; rather it was inspired by Watershed Adventures of a Water Bottle by Jennifer Chambers, to which I was exposed—in photo essay format—at my daughter’s Sunday school.

It amazes me how plastic seems to bubble off of human beings when they aren’t paying attention. The discipline of picking up plastic bottles I come across (assuming they don’t look too icky—my microbiologist friend says watch out) helps me realize when I’m not paying attention myself. A big way I wasn’t paying attention before was drinking coffee from the K-cup dispenser at work. As Mother Jones magazine points out, these increasingly ubiquitous and convenient plastic pods are having a dramatic environmental impact. I now use a micro-filter tea strainer to steep green tea each morning, and I count each cup I drink as a plastic bottle picked up and saved from choking our landfills and waterways.

You can do this too, and I hope you join me in this one simple thing. My efforts are less than marginally impactful, collective efforts are a bit better, but what really counts is awareness.

Review: Winning the Loser’s Game

By Dan Wilcock

There’s a reason why investing sages like Jack Bogle, Burton Malkiel, and David Swensen praise Winning the Loser’s Game by Charles Ellis. Now that I’ve read the book (just closed the cover) I know why. This book is a bullshit eliminator, completely clear-eyed about market risk (the fact that losses will happen) that nonetheless explains the stakes in not taking on market risk in a world where taxes and inflation constantly erode wealth. It’s a book that explains the counter-intuitive nature of the market in a way that clicks: why investors should welcome stock price declines, why booming stock markets are better for stock sellers than stock buyers, why stocks aren’t important because of their price but rather because of their ability to produce dividends. Even though these are well established interpretations of the market, their wisdom never sunk in before I’d read Winning the Loser’s Game. Hence I’d recommend it wholeheartedly as one of the best books on investing.

The title of the book comes from a journal article Ellis wrote in 1975. He compares investing to tennis, which for virtually every amateur is a loser’s game. The victor wins on their opponent’s unforced errors. Ellis argues that investing used to be a winner’s game, but the field got so crowded with experts and operators who know how to take advantage of all the suckers (my words, not his) that the only way to win is avoiding unforced errors. The biggest of these is attempting to “beat the market.” This is an endeavor where more than three quarters of professionals ultimately fail. The individual investor socking away money in IRAs and 401ks shouldn’t even try. Rather than losing by actively trading, and compounding those losses with all the fees this entails, investors should craft a realistic policy that seeks to capture the entire market return (through entire market indexes) or a segment of the market through selected low cost mutual funds.

I was already bought into the idea of indexing (the lowest cost, getting the most of whatever the market returns), but before reading this book I might have been more likely to shift my index holding to more bonds in a bear market to preserve value. This is psychologically understandable, but exactly the wrong approach. Big downswings require that investors stick to their policy and make the most of bear markets by sticking to the path they set. This is a more nuanced, and more practical, version of the old saying “buy low and sell high.” That simple saying doesn’t prepare investors to do the right thing. The phrase is premised on active investing, and when the markets are at their most volatile is when we as human beings are most likely to make precisely the wrong decisions. By staying the course, and investing in consistent intervals, buying low and selling high happen naturally. The market cannot be timed, according to Ellis. Jumping in and out of the market is, for most people, lost opportunity.

I read the 4th edition of this book. As of this 2014, Loser’s Game is now in its 6th edition and updated post-great-recession. If you’d like to know how Ellis deals with the market fallout from 2008, I’d recommend that version (which I haven’t read). I think, however, that the reader of the 4th edition would have been very well served throughout the last seven years. They would have stuck the course and rode the massive upswing in equities to their now record highs. They would also have established an emergency fund that would allow them to buy largely into equities and then be steely about holding them.

Anyway, after making it halfway through the book, which I’d borrowed from the library, I ordered a copy for my personal collection (4th edition, much cheaper than the 6th). This is a book that any investor would be well served to read annually, perhaps just before looking at results and allocation. The rest—virtually everything we read online in the financial news—is counterproductive noise.

Blogging in WordPress with MS Word: Any Good?

By Dan Wilcock

I’m posting this entry on my WordPress.com blog using MS Word 2010 as an experiment, just to see whether it’s any good. Word is set up to interface with most of the major free blog hosting companies, as seen below:

 

 

So if you’ve got a WordPress blog, like me, or one of the other standard options, the interface should be pretty smooth.

Once you enter your URL into the path they provide and enter your blog password, the wizard will let you know whether your blog has been successfully registered. At first this didn’t work for me, but I got through once I realized that the /xmlrpc.php extension after the blog URL is necessary.

So I’m in and composing this post—So far, so good. Here are five things I appreciate right off the bat:

  1. Better control of special characters. I can use my preprogrammed keystrokes to type in special characters while blogging. For me that em dash (—) I just typed would take two clicks of the mouse to execute in WordPress but I just hit F10 (the keystroke I chose for em dashes, which I use frequently in my writing, perhaps too much). Word is probably better at special characters and symbols than WordPress. For an example, look at what WordPress did to Pema Chödrön’s name on my ‘about me’ page (look under contemporary thinkers). With Word, this comes out a lot smoother. (Update: this corrected bit was simply my error. I used the upper-case letter, not bothering to see there is an appropriate lower-case letter available.)

     

  2. More upfront control over font size. I’m sure I can code font size by going under the hood and coding it in WordPress’s text viewer, but this is much more civilized.

     

  3. That screen clipping above is nice/was easy. I copied it by hitting window key + PrtScn, and then cropped and resized it right within the Word document. I have no idea how I’d do that with WordPress.

     

  4. This list I’m creating does something I’ve been unable to do with WordPress. Namely, I’m able to add an extra space between items, something I think just looks better. Word does this automatically after you hit return between two items on a list and then delete the middle item. It’s a nifty bit of intuitive functionality that I really miss when I’m composing in WordPress.

     

  5. All those snazzy Smart Art templates, Word’s spell check, etc. This seems to have most of the basic bells and whistles built into Word, such as automatic tables, etc. I’m sure a halfway decent WordPress wizard could repudiate this post showing point by point that composing in Word is unnecessary, but so far this seems to me like a decent way to go.

     

I don’t have any negative list yet, but will append one once I’ve pressed the green publish arrow the Word puts at the upper left-hand corner of the screen. If the blog spits out a bunch of ampersands afterward, I’ll write my complaints below.

***

Nope. Now I’m editing the post in WordPress.com, and everything came through perfectly. I think I’ve found a better way for me to blog.

UPDATE (6/23/2014): Word does have a blind spot when it comes to blogging in WordPress: video. There is no button to insert video content, unlike WordPress, which has the handy “Add media” button with easy ‘insert YouTube’ options.


Oliver Wendell Holmes, Sr., a humorous fellow, but no fortune-teller

“A man’s learning dies with him; even his virtues fade out of remembrance; but the dividends on the stocks he bequeaths may serve to keep his memory green.”

–Oliver Wendell Holmes, Sr., from The Professor at the Breakfast Table, Boston, 1872

Here is the quote in context (the entire e-book is free) on Google Books.

While his words are good for a chuckle, clearly the fact that I’m blogging about professor Holmes more than thirteen decades later undermines his reputation as all-wise soothsayer—unless the time period being considered is geologic.

His son’s “learning” and “virtues” were arguably even more indelible. When the quote was published, his son, Oliver Wendel Holmes, Jr., was around 31-years-old. Thirty years later, Holmes, Jr., became a member of the Supreme Court, where he served for 30 years. I wonder whether the second Holmes, more famous to contemporary Americans, would agree with his father’s quote. My guess is that all those dividends from stocks probably weren’t as valuable to him as his father’s words, particularly after the “panic of 1893″ and then, a few decades later, “black Thursday.”

I read the quote in The Wench is Dead, an Inspector Morse mystery novel by Sir Colin Dexter (Dexter’s early novels are filled with great quotations). More recently, I came across discussion of Holmes, Jr., in Last Call, Daniel Okrent’s excellent prohibition history, which contains yet another great Holmes quip, proving that humor probably ran in the family. Here’s the quote along with the context that Okrent sets:

The [Supreme] court’s senior member, Oliver Wendell Holmes, was known to appreciate his whiskey (in 1927 he registered his gratitude for an illegal gift bottle with a characteristically Holmesian aphorism: “I have not forgotten the prayer ‘Lead us into temptation.”

So, in short, Holmes was a humorous fellow, but he was no good at wisely predicting the future. Maybe that’s a reason why his son was even wiser, and appreciated a glass of whiskey now and then.

Capital in the 21st Century: A Review

By Dan Wilcock

Capital in the Twenty-First Century, Thomas Piketty (Belknap Press, 2014)

In my opinion, the worldwide success of Capital in the Twenty-First Century is something to cheer. Wealthy individuals, middle-class, poor, policymakers, bankers, and even artists can see themselves in these pages. They can trace their life trajectories set against the historic patterns of wealth (usually at least 100 years in scope, sometimes much longer). In a few words, the subject matter strikes a chord with most everyone these days.

Last month I bought one of the hastily printed  subsequent editions (the initial print run woefully underestimated popular demand) of this 577-page tome and just finished reading it. The book has a lot to teach about the nature of capital and its place in different types of economies. Everything boils down to two very simple equations that a middle-school student could understand. Probably the most important, to which Piketty consistently refers is:

β = s/g

This is the “capital/income ratio,”the meaning of which Piketty is really good about reminding the reader every time he uses is. β is calculated by dividing savings (s) by growth (g). He shows that throughout history, savings (which reflects the total value of accumulated capital) in rich countries has usually been larger than the rate of growth (the increase in national income). In rich countries today β is often somewhere around 6, which means that total wealth owned (almost entirely in private hands) is worth around 6 years of a given country’s income.

The other equation measures the share of national income that goes to capital’s owners:

α = r×β

r is the rate of return on capital. So, in the case where capital is worth 6 years of national income (β=6), and the rate of return (r) is 5%, then the amount of national income going to capital holders if 30%.

When r is greater than g, wealth begins to accumulate. The rich get richer. R has almost always been greater than g, according to Piketty’s analysis, except for a period of time in the 20th century (when growth was high and capital was subject to a series of shocks related to WWI and WWII). Those days are over. I won’t bother to recap his results specific here, but suffice to say they are food for thought.

OK, enough with the equations. If you could read what I just wrote and get it somewhat (and not to worry, Piketty reintroduces the equations almost every time), then you won’t have any trouble reading his book.

That’s a good thing, because I get the sense that Picketty would like his book to be read and understood by those who have the least proportion of α and β—most likely the low wage earners and asset poor individuals who make up more than half of rich countries peoples but own virtually no capital whatsoever.

That’s what’s great about Piketty. He genuinely cares about human outcomes, and his book’s value lies in showing to everyone that human outcomes are diverging radically. The inequality he presents throughout the book is a reversion to an earlier historical norm, which he ingeniously evokes by quoting from the novels of Balzac and Jane Austen—works of art from an era when the nature of capital was better defined and more commonly understood.

He doesn’t only look at the big picture. He also takes along look at the even more disturbing (particularly in the US) pattern of individual inequality. He makes a compelling case for the amazing rise in top executive pay in America and the spectacular drop in top income tax rates during the 80s and 90s.

This points to some of his suggested solutions: Progressive income taxes topping out at around 80% (as seen in the 20th century) for the highest incomes, an annual progressive global tax on large fortunes (combined with intepol-like global cooperation to stamp out tax havens), or a one-time global tax topping out somewhere around 25% for the largest fortunes. Compared to readjusting the economic balance through inflation or controls on capital (as seen in China), Piketty argues that a return to confiscatory taxation on oligarch-level wealth is the most just and equitable course.

Try telling that to the wealthy who increasingly control politics. Just saying.

I think he makes a strong case, although if I were President I don’t think I’d go as far as he advocates. The wealthy he wants to tax would remain wealthy. The forces he describes would help that wealth to grow again. But then again I’m just above that “50%-and-owns-nothing” category.

What a marvel to have this book explaining the big picture of wealth, in clear prose and without too much math/theory. A highly recommended book.

 

A doodle of economic forces

Sometimes it’s fun to create economic flow charts on loose leaf paper or cocktail napkins.

This is a simple doodle of how I conceptualize the positive and negative monetary flows related to labor and capital.

Labor and Capital

Illustration by Dan Wilcock, created using Lucid Chart

Being neither an economist nor a mathematician, I find it best to follow the keep it simple stupid (KISS) principle, and for me this is about as simple/stupid a representation of this vastly complex topic as I can come up with.

Leftward arrows are generally negative in nature. Rightward are positive.

This little animated NIH video about obesity is very powerful

By Dan Wilcock

In 2012 the U.S. National Institutes of Health and the Department of Health and Human Services produced this animated public service announcement. Scarcely more than a minute long, it nonetheless packs a philosophical wallop. I couldn’t agree more with its central idea, that little behavioral changes make a big difference.

The link between joint pain and excess weight, and the fact that ” just 10 pounds adds more than 30 pounds of force to your knees,” couldn’t be depicted more simply or concisely. Excellent computer animation, pacing, music, and message (writing and editing!), all make this a gem. It inspires me to lose weight, and to do so slowly with little changes.

Slightly tangential, but related: My math teacher freshman year of high school was fond of saying that knowledge deficits were like placing large rocks into a backpack. I was exhibit A because I had transferred schools and ended up taking only one semester of algebra. That deficit dragged down my ability to understand pre-calculus, which I barely passed–and only with the help of a tutor. I may never have been destined to become a mathematician, but I probably could have done a lot better with some course corrections along the way.

My point is that this video’s brilliant metaphor for the burden of excess weight (a sandbag on the shoulder) applies to many aspects of life. Mindless accumulation of possessions or indulgence in entertainment can deep six the finances of just about anyone. I’m happy that the U.S. government put together something so simple, yet so evocative and powerful.