Monthly Archives: October 2012

We’re New At This

When it comes to the economy, technology, and government the human race is relatively new to this. People will regularly make claims about certain policies working or not working but the reality is that on many issues there are so many variables involved that we can’t really know for 100% certainty if something worked or, more importantly, if something worked for the reasons we think it did.

Consider for a moment that a hundred years ago we didn’t have flight. We are facing problems today that humanity has simply never encountered before because we didn’t have the technology. Globalization is happening and we are really only scratching the surface. Flight is only one major change, more recently we have had the technological communication revolution (the internet) and fundamental changes in production because of automation.

With all of these things being relatively new it is really hard for anyone or any economist to really make perfect predictions for the future. We simply don’t have enough information yet. In 200-300 years humanity will have a trove of data to dig through regarding policies and the economic implications of those policies but right now all we can really do is make best guess scenarios. No one likes to think of themselves as being experimented on but that is actually the reality of what is going on right now.

In exchange for being able to witness some of the most fundamental changes in human history we pay for it by, unfortunately, being the test subjects of figuring out how all this is going to work out. It is important for us to recognize this because, as I have stated in other posts, it is very easy for us to be hyperbolic and make knee jerk reactions to things. We really are in one of the most important times in history. We are the explorers and discoverers of what will work for us moving forward in this new world we are creating for ourselves. Like anything worth doing there are heavy risks involved but I believe the risks, in this instance, are well worth it.


Convincing Ourselves

One of the biggest revelations I have ever had in life was that I was capable of being wrong. Not only can I be wrong, I can even be wrong about things I am sure about. Many of us might say that we could recognize when we are wrong or change our minds if we are proven wrong, but the reality is, most of us can’t.

In most cases we define our universe almost entirely by our personal experiences and this is highly dangerous. A series of unfortunate events can lead to you becoming bigoted. If we are slighted by a member of a minority, for instance, on more then one occasion we might shape our entire universe in a different way based on these experiences.

We are vicious about defending our experiences and the opinions we generate from them. We are so aggressive about it, that we will often surround ourselves in people that agree with us just so that we can believe we are right. It’s much easier, and satisfying, to surround ourselves with people that agree with us. We would rather ramble on for hours on end in agreement, not accomplishing anything, then to create purposeful friction which benefits not only ourselves but the entire race as a whole. The examples of this behavior are plentiful; the biggest being religion and politics. Outside of religion and politics you have major and minor social groups that conform to certain ideas or philosophies.

Without compromise, objectivity, introspection, and debate there can be no progress.

Hitler had some bad experiences with some Jewish people and decided it would be better if they didn’t exist. Ayn Rand witnessed the effects of extreme socialism and decided that the complete opposite has to be the answer. Karl Marx witnessed the distress of the proletariat and decided the only way to make everyone happier was through a complete abolishing of free enterprise.  It’s very common for us to be hyperbolic. When something doesn’t work many of us assume the opposite is the answer and we rarely stop to think about the center.

What is at stake is everything. Without compromise, objectivity, introspection, and debate there can be no progress. Elolight will slip away from us.

The future is Solar. Period.

I once worked with a developer who said something interesting, “I find it so funny, everyone is talking about building fusion reactors. We already have a giant fusion reactor, it is called the sun.”

What I am about to discuss might sound unrealistic, but it is already happening. In 20 years there will be very little conversations about coal, oil, and nuclear. Right now solar energy is doubling in efficiency every two years and its cost is dropping by about 50% each year. This article on Bloomberg outlines this for the last year. Even 13 year olds are making solar power more efficient.

An expert in the field of technology acceleration, Ray Kurzweil predicted many things using the idea of an exponential curve. Solar Energy is going through the same process computers went through when they went from filling a room to being in your pocket, check out this video below.

All energy sources on the planet, with the exception of geothermal, is caused by the sun. Fossil fuels are the remains of living organisms which could only exist because of the sun. Even wind is caused by the temperature in variance created by the sun heating the planet.

If you’re an investor, solar energy is where you would want to put your money. For the average person, it may be possible to finally move past the energy conversation and move on to more pressing issues.

The Decentralization of Power

When people start talking about Solar, they think that once it gets efficient enough, the government will just plug in a couple large fields of solar panels and hook them up to the grid. I have an alternate theory based on what is actually going on now.

Right now, all over the world, people are starting to get off the grid. An investment in solar can pay itself off in 10-15 years but every year the price drops the amount of years it takes for it to pay itself off will also decline. As this happens more people will get off the grid. It is highly probable that in 8 years time a significant amount of  the population around the world will have homes powered by solar.

By the time the 16 year mark rolls around the government may need to do very little because people will already be off the grid. It is much cheaper to have a decentralized power system then to have a centralized one. Not only that, a decentralized system is more resilient to catastrophes. In the same way personal computers spread to everyone’s houses as they got cheaper so will solar power generators.

Prophets in Other Species

Humanity has become a species of self evolution. Everything from our technology to our religions have evolved with us. The evolution of Judaism to Christianity could be perceived as a progressive evolutionary step in religion from a belief system that had laws on diets, slavery, and stoning to a more progressive belief system that did not need those rules or laws. One of the underlying concepts of all religions is the idea of a prophet, a person that has a radical or new idea that can change the minds of people. However, prophets don’t necessarily only express religious ideas but ideas on the universe as a whole.

Who was the first person to truly express the idea that the world was round or that electricity could be utilized to our benefit? When all the right variables fall into place a person will emerge that can fundamentally change the world. However, people rarely stop and think about if prophets can emerge in other species and I believe they can.

It is as big a revelation to them as us discovering the earth is not the center of the universe.

Imagine a group of monkeys who have never utilized tools before. If for whatever reason one of those monkeys decided to use a stick to get food, that monkey could be considered to be a prophet among its species. Now when we look at that we might think it is silly or endearing, however, to those monkeys it is a massive revelation. It is as big a revelation to them as us discovering the earth is not the center of the universe.

This line of thinking has some profound and possibly interesting implications. Under what circumstances do prophets emerge? If you’re spiritual, you could choose to believe that from the very first single cell organism to where we are at today, prophets have pushed us to the next level. The real question is, what major revelations will future prophets provide?

Socialized Infrastructure

Working together is a social concept

There is a trend that has been happening for the last 100 years, particularly in the USA. They associated the word “socialism” or more important the term “socialized” with “communism” or “fascism”. The core idea of socialism is people working together to achieve common utilitarian goals. What you have in the USA, in particular, is something called a Social Democracy. A social democracy is different then socialism and most countries of the world have been figuring out the best methods of implementing it.

There is a commonly held belief that the “free market” can solve all problems. If you believe in evolution, we have two billion years of proof, if you don’t, then we have six thousand years of proof that when social concepts are implemented they can accelerate “free market” growth substantially. If the USA truly had a free market ideal, they wouldn’t be united or have the constitution. People working together for a common goal is not a primary capitalistic concept but it may be an accidental consequence. When we look at a jungle for instance, we see a sea of death made up by creatures constantly killing each other with a broad range of quality. To date only one creature has emerged from that entire debacle with the ability to create fire, that would be us. Thanks to anthropology we know that, besides tools, one of our most definitive characteristics which lead us to our ultimate domination was the implementation of socialistic principles like the family unit.

In this regard, the USA used to be one of the most progressive social democracies on the planet. They worked together building a social infrastructure which business could operate and compete on top of because consistency is not a characteristic of the free market; if private organizations were responsible for building road infrastructure, you would get a patch job and the best roads would end up being built around the most profitable companies which in turn would just make them even more profitable and make it almost impossible for new comers to enter this “free market”.

No other creature willfully creates fire

Many business people in the united states who have become successful will believe they were 100% responsible for their success. They will usually discount the roads they used, the police that defended them, or the government regulations that were in place to actually allow them to be competitive. In some cases entire companies would not exist if it was not for the initial research and development done by the government (the internet for example). They will use this 100% belief to justify that everything they have earned belongs to them and the government is stealing it from them with taxes where in actuality the government by means of the socialized infrastructure they built is actually the primary and also most important investor in their company.

They will usually discount the roads they used or the police that defended them.

Despite the USA having a social infrastructures for fire, police, roads, hydro, garbage collection, and military (sure there is more) you still have a large amount of Americans pushing against ideas like Obamacare. You might think that from the liberal leanings of this post that I would support something like Obamacare but you would be wrong. Obamacare is an attempt to implement socialized healthcare in the worst possible way to keep Americans happy who are still being influenced by world war 1 and 2 American propaganda on communism and socialism. Healthcare is a required service, no one chooses to get sick, just like no one chooses to require water to survive. You don’t need a car but you do need healthcare. Healthcare should be a federally run single payer system without private organizations holding your life or death in their hands. As a percentage of GDP the USA spends more on healthcare then any other country who properly implements socialized healthcare. In addition, they claim to have the best health care system in the world yet their population has a shorter life span and higher infant mortality rates then other countries with socialized medicine.

As a Canadian, a lot of other Canadians I talk to (not all) understand why we pay the taxes we do for healthcare. I pay to help those when I am not sick so that if I get sick they pay for me. It’s common sense and co-operation. Sure there may be economic issues that have to be addressed to make it more sustainable over longer periods of time, but there will always be economic issues – you only have one life.

A Single Share (in the stock market) part 1

When I was twelve I started reading the wall street journal. From that point on I became some what obsessed with it; I read every book I could find (and couldn’t find, but then hunted down) and also spent countless hours in front of a spread sheets moving numbers around. Later as I got better at coding I built more sophisticated forms of analysis and looked at the market interesting ways and even discovered things like fibonacci fractals embedded in non-linear price data. I did not find a holy grail but what I did find was a better understanding of what was going on at an objective level.

For a lot of people the stock market is this place where prices go up and down and people get rich or poor. The media reports news and a large amount of people make the best decisions they can make. However, it is easy to get lost in the complexity of it all. Even multi-billion dollar companies who apparently hire the brightest people in the world still seem to have the capability to go broke. To understand the stock market all you need to do is look at is the single share.

A single share represents a percentage of a company and that has all the attributes you might think would go with owning a company except since it is such a small percentage there is no guarantee of getting a cut of profits. A share has two major ways it directly affects an economy.

  1. It can provide the owner with dividends (a cut of corporate profits)
  2. It can be taxed

Now at this point, and this is where most people may get confused, you might ask what about when share prices go up or down? This does not affect an economy. For every sale there is always a winner and a loser, the net gain will be 0. Let’s look it another way, let’s say I started a company with a single share and I sold that share for 1 billion dollars, if a poor sucker bought it from me I would be up by a billion, and they would be down by a billion. Now that person could then sell it for 2 billion, but that next person will then be out exactly the same amount of the previous two transactions (+1-1+2-2 = 0).

Money Logistics
The secondary market which is what most people know as the stock market is a way of moving money to smarter people. It functions exactly like a casino, generally speaking, the person who owns the casino is much brighter then the people who spend all day in front of a slot machine. In the same way the people that make most of the money off the stock market sell books, run tv shows, or are brokers. You will get some traders who will make money, but they will either have some form of proprietary knowledge or access to more news (they’re smarter).

The main issue with the secondary market is that moving money to intelligent people is not always a good thing. A company banking billions of dollars would not be as good for an economy as if the people that lost the money instead spent the money on physical items or personal entertainment.

Additional Tax Revenue
When an economy is doing well and people have extra money on hand they will often invest in the stock market. The more people buy the higher prices will go, this is of benefit to the government because ultimately they can tax this and it actually gives the government an influx of money. It actually acts as a wealth distribution mechanism in high times.

How we can fix the stock market

Eliminate Commissions
In the past buying shares of a company required a lot of effort, so brokers took a commission. In the digital age, the entire process can be digital. Most governments regulate corporations, so it would only make sense if the government took over the process of share acquisition. The government could take a very small flat fee (tax) per person who executes any orders in the stock market regardless of volume and not impose any volume or order restrictions.

Eliminate Market Makers
Market makers give the market liquidity and they make it easier for people to execute trades. This keeps amplitudes of the market down, but the major affect it has is that it just makes it easier to fleece the population of commissions.

Eliminate Margin Trading
Margin trading is buying shares with credit. Specifically, it is an automatic process that can bypass credit checks. If people choose to take out a loan to invest in a company that is fine, however, they should have to go through the same credit process as every other loan.

What Could and Would Change
Day trading or swing trading would decrease substantially. People would be more inclined to invest in companies that yield good dividends or have good prospects as opposed to trying to bank on short term price motion. Since both day trading and swing trading have a high rate of failure, this money would ultimately flow to better beneficiaries in the economy as a whole. Since the market does have a random nature, most people who attempted to engage in day trading would ultimately end up at 50/50 over prolonged periods of time and since there would be no commissions on every trade, this would not be a negative scenario. One of the reasons for the price motion we have today is the added hesitation of the fear of commissions. Commissions cause a large amount of irrationality when it comes to short term trading.

While it certainly wouldn’t be ideal, and never could be because of human mistakes, the market would more closely resemble the state of business as opposed to being an arbitrary slot machine where stock prices spin out of control. If the above changes were implemented the market would fundamentally change for the better and the primary market, which I will discuss in part 2, will remain untouched. In addition, this will only truly work if there are changes to other economic policies.