Leading the Revival of Individualism & Self Reliance

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Don’t Go Left, Don’t Go Right, Go Entrepreneurial.

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This post is a couple of years old, but we dug it out as part of our project for “100% Economics, 0% Politics”. There’s a much better way than the political way, and that’s the entrepreneurial way. It’s the way to empower everyone, and elevate all lives, through economic activism.

Everything has become politicized. Family, sex, gender, education, sport, economics, art, transportation, religion, climate, water, energy – there’s no part of everyday life that politicians have not sullied and made an issue for identity politics, class politics and party politics. They’ll attach the description “racist” or “sexist” or “partisan” to any subject whatsoever.

The left is as bad as the right, and vice versa. Often, it’s hard to discern where one side starts and the other one ends. The mainstream media, exploiting the one-way structure of their communications model (they talk, we are supposed to listen) cheers on this politicization without debating it. In the end, they become confused. Every day I read the Wall Street Journal. The Front Page, US News and World News sections appear to be written by young reporters with little knowledge of grammar and proper sentence structure, but with an infinite repertoire of anti-Trump diatribes that they seem willing to insert in any paragraph, often at the most inappropriate times. The Opinion section appears to be written by aging neo-cons, eager to invade foreign countries, beef up the US Military with taxpayer dollars, and enlarge government scope in all directions. The combination is confusion between the memes of left and right, and the ability to approve of both positions, but not of any alternative position.

For example, William Galston, a WSJ Opinion Section columnist, identifies those of us who do not identify with Republican and Democratic ideologies as “populists” who “undermine freedom the press, weaken constitutional courts, concentrate power in the executive” (Galston is vociferously anti-Trump), and “marginalize groups of citizens based on ethnicity, religion or national origin”. (WSJ online March 17, 2018.)

In other words, you must be left or right, but you mustn’t be anything else, or take any other positions.

There is a different point of view that’s available. Ignore both left and right, and politics in general. Don’t engage in virtue signaling. If you want to achieve a moral goal, if you want to save the world, if you want to achieve something meaningful, be an entrepreneur. Start a business. Use your powers of empathy to figure out how to help others through a commercial offer that brings them a new and better product or service – a better education, better transportation, better cleaning, better grooming, better content to read and watch. Don’t attempt social engineering or global climate engineering or political revolution or institutional reform.

We need people who can imagine a better future in entrepreneurial terms, not political terms. People who can identify how to serve their customers in a better way, and claim the reward of a financial profit for improving their customers’ lives. We need people who take personal, entrepreneurial and commercial risk because they see opportunity and they believe that they can seize it. We need people who will sacrifice in the present, by saving and investing and building a business, in order to succeed in the future. We need people who accept the verdict of the market, and who thrive on the feedback of those who try their services and provide commentary, positive or negative, that can be used in the responsive process of making improvements and doing better and trying harder.

We do not need politicians and bureaucrats who posture and lie about “public service”. They serve no-one but themselves. They are the ones who politicize everything. Entrepreneurs try their best to see what they can achieve. Politicians try their worst to see what they can get away with. We need people who embrace the economic way, and discard the political way.

Dear Uncle Bernie, The Wuhan Virus Ate My Retirement Account

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During a conference call last week with the Investment Management and Research team of a national brokerage firm, the Chief Investment Officer was asked, “Did you anticipate the possibility of the extreme market conditions of 2020? If so, was there a fallback plan?” The reply was yes, but not the coronavirus specifically. Their diversified strategies protected their client’s assets. But did they? According to Capital Markets are Uncertain Complex Systems, published by the Center for Individualism in July, 2018,

While almost everything was losing value, corporate retirement plan managers claimed to be helpless to do anything about it. After all, the meltdown could not have been anticipated, and its effects were not controllable, right?

The investment industry’s so-called diversifiers didn’t work in 2008, and they didn’t work this month.

Only US government bonds do this well. There is a vast historical data set to prove it. Traditional investment managers do not use US government bonds to diversify risk assets because of perceived interest rate risk, or their economic forecasts.

While the underlying cause of this year’s stock market collapse could not have been predicted, the event could have been anticipated,

The data exists to discover this. If you have bad assumptions, the allocation will not behave as anticipated. Well reasoned assumptions should have modeled extreme ‘asymmetric correlation’ markets.

The Economic Way

In May 2018, the Center for Individualism revealed two reliable methods for reinforcing human immune systems, and for reinforcing human retirement plans. In How to Apply the Economic Way to Destress Your Life, Physically and Financially,

For everyone, a fat burning focus improves metabolism, body composition, immune systems, and a sense of vitality. Using the heart rate monitor to maintain a mostly comfortable energy zone will help you live the one life you have to its fullest.

The economic way simply means having a vision, taking calculated risks, and avoiding mistakes. In order to understand how fitness and finance are related,

A no pain no gain mindset, and high intensity interval training, are probably bad decisions for most people. In personal finance, bad decisions involve maximum risk tolerance, economic forecasts, faulty return projections, beating the market, and staying the course.

For both, the essential element is an objective, forward-looking performance measurement system, and its called a Stress Test,

The heart rate monitor is a tool to that helps the user find the optimal energy zone for long-term health and vitality. Likewise, the Monte Carlo simulator is a tool that will help the user find the optimal confidence level for realizing priorities.

As human beings with active minds, we are learning and adapting to the reality of the Wuhan virus. One of its most advertised concepts is known as “flattening the curve.” In simple terms, it means lowering the probability of mass infection.

In a normal distribution, known as a bell curve, extremely low and high numbers of infections would be the tail ends of the curve, and called outlier events. But in this case, the horizontal axis of the graph is the number of days since infections began. Lowering the height of this curve means fewer peak hospital caseloads. Conveniently, this is important because hospital capacity has been squelched by decades of government regulations.

In stock market statistics, the horizontal axis is standard deviation (volatility), and illustrates the probability of extreme market events. These are also more frequent because of government policy.

The economic way for personal finance means controlling what we can control (for the Wuhan virus – hygiene and distancing), and model future cash flow needs against the uncertainty of the future. By using reliable data sets (which don’t exist for influenza or the Wuhan virus), we can anticipate the possibility of these outlier events, and manage the load.

Dear Uncle Bernie

Who is Uncle Bernie you ask? He is a metaphor for two living Bernie’s – Madoff and Sanders.

The former is a euphemism for hubristic market strategists who are in the business of being smarter than free markets, and its price discovery. The latter is a euphemism for heavy-handed policy makers who are in the business of controlling human economic activity, and doing the real looting. The two of them are connected at the hip; both avoid the reality of Ludwig von Mises’ Human Action and Friedrich Hayek‘s Knowledge Problem.

In contrast, this message was sent on March 13th to the clients of an American registered investment advisory practice. Their advice and service model is focused on their clients living the one life they have to the fullest, not trying to control or beat the market,

  • As you’ve heard in many news media outlets, the coronavirus is the biggest story of 2020. You’ve also heard that the US stock market has lost significant value at the same time.
  • While the number of people infected with COVID 19, on a global basis, continues to increase, and the value of stocks worldwide have decreased, it is important to keep things in perspective. On May 26, 2019, the S & P 500 US stock index closed at 2852, its current price. This means US stocks have lost what they earned over the last nine months.
  • At Poetic Justice Capital Management, we anticipated this. We did not predict it because we don’t make predictions. Instead, we anticipate the possibility of extreme market events, and prepare in advance. This market was included in our random simulations. For our clients who adopt an objective and principled process for making investment strategy decisions, this is central to the accounts we manage for you.
  • While it is popular to call this the Corona Market, that is misleading. The increase in market volatility as measured by the VIX, and the decrease in market valuation as measured by the S & P 500, is really being caused by political media hype and global oil market price wars. Accordingly, we recommend two courses of action.
  • First, protect yourself against this infectious virus with common sense precautions. However, we are not medical professionals, and will confine our advice to your financial health. Now is an ideal time to do a Stress Test of your investment strategy considering your current values and priorities. This will tell us if you are overfunded, underfunded or remain in your comfort zone.
  • The most conservative strategy you can afford is the one that meets your future cash flow needs, is easy to use and understand, and is reliable. Please feel free to call us with questions and schedule a telephone appointment or face to face meeting.

This advisor acknowledges the noise and chaos, had a fallback plan, refocuses on what they know and can control, and recommends principled action.

True Wealth Management

Retirement plan investors who are being advised to fill out risk tolerance questionnaires, that asset allocation drives results, to rely on market and economic forecasts, to hire managers who outperform, and to stay the course, have better choices.

An objective strategy is focused on principles for living, the efficiency of free markets, the uncertainty of the future, forward-looking performance measurement, and flexibility. As China’s leading reform-minded economist, and devotee of Austrian school economics, Zhang Weiying tells us, we can continue to live in confidence comfort because,

Precisely because human nature cannot be changed, the market economy exists, which is also the reason the market economy is necessary: It causes human actions to conform to the requirements of virtue.

 

 

 

tuttle twins books

The Entrepeneur Who Is Teaching Today’s Children And Parents The Economic Way.

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In the animal kingdom, there are predators and there are prey. Predators are highly adapted with keen senses, strength and speed. Prey are highly adapted for survival and are masters of their environment. In many cases predators are carnivores and prey are herbivores. In both cases, their survival instincts are highly developed and specialized.

For human beings however, instincts are not enough, the environment is too harsh. Survival requires our capacity for reason. We can either transform nature and acquire property to enhance our quality of life, or we can use force to enhance our quality of life by looting the property of others. How we use our capacity for reason defines us as predators or prey. Murray Rothbard explains the difference in his essay The Anatomy of the State, and the difference between the two is stark. At the Center for Individualism, we call it the economic way vs. the political way, or more simply, persuasion vs. coercion. This could be the most important lesson we teach our children about personal responsibility and ethics.

The Economic Way and the Political Way

In our postmodern world, the economic way is largely ignored in public schools. Thanks to Connor Boyack’s Association for Teaching Kids Economics, Rothbard’s essay has been transformed into an age appropriate (6 -10 year old children) illustrated story book called Fate of the Future. And it is but one of many classics of western civilization that have been translated for parent/child and teacher/student engagement. In Boyack’s The Tuttle Twins series of children’s books, examples include Leonard Read’s classic essay I, Pencil; Frederick Bastiat’s compilation of essays The Law, Ayn Rand’s prophetic novel Atlas Shrugged, and Henry Hazlitt’s Economics in One Lesson, all distilled to their essence.

And this is where the story begins. Not only is a massive hole in today’s public education curriculum being filled, the parents of these children are being introduced to ideas that were denied to them a generation or two earlier. And this is inspiring parents to read the original classics they had never heard of.

Like all successful entrepreneurs, Boyack has uncovered a need and created a new market. In this case, he is peeling away decades of educational propaganda from our government monopoly schools who teach the political way. The beauty of Boyack’s new way of teaching the economic way is in its simplicity. It’s family to family, and it’s not threatening like heavy books can be. Not only is Boyack creating a sense of wonder in the children who read his books, he is reaching a new audience in an older generation. He’s offering an optimistic vision for children and their parents of a future that they can create for themselves.

The Father, the Educator, The Activist, The Entrepreneur

Not only did Connor Boyack take personal responsibility for filling a public curriculum gap, he also founded a public policy network in his home state of Utah. The Libertas Institute’s mission is to defend self-reliance, industry, and freedom. He describes it as a do-tank instead of a think-tank, and it has had a great deal of legislative success. This is perfectly aligned with the latest installment in his The Tuttle Twins book series – The Spectacular Show Business. The goal of this book is to teach children the essential elements of what entrepreneurs do and how they think.

This illustrated book teaches children how to look for opportunities, solve problems, and inspire their creativity. In other words, get them to think about their sense of life as unique individuals. The method used by Boyack is known as Effectuation Theory. Because his audience is 6 – 10 year old children who don’t have a broad collection of life experiences and business associates, the idea is to have them think introspectively. Who am I? What do I know? Who do I know? What can I do? What resources do I have? What can I contribute? What is my plan?

How many of us have ever been asked those questions? By teaching values to children, Boyack is nudging them to bring out their talents, offer value to others, and find their creative talents to serve those needs. And it should begin at this age. After all, the economic way is the cornerstone of civilization.

Paying it Forward

Our first Poetic Justice Warrior, the entrepreneur and economist Jean-Baptiste Say, applied reason to reality and proved to the world that it is producers who create markets, consumers, and prosperity. He invented the term entrepreneur. Our second PJW, the entrepreneur and watchmaker John Harrison, solved longitude for the benefit of humanity. By applying modern technology where traditional methods had failed, he invented the maritime clock industry. Our third PJW is the entrepreneur and inventor Nikola Tesla; he took ownership of the future by harnessing the electro-magnetic power of the universe to meet daily human needs, and he invented the wireless electronic communication industry.

Now we celebrate the entrepreneur and dedicated father, Connor Boyack. He saw that the interests of postmodern statists are not aligned with the interests of individuals who are pursuing the ideals of western civilization. His series of children’s books are designed to help each child answer the ultimate questions regarding their relationships with each other, and their relationship with society at large. Boyack is not inventing an industry as much as he is reclaiming childhood education for parents. And this is badly needed. He’s doing it by leveraging the wonders of technology made possible by Tesla, projecting Harrison’s singular purpose against the prevailing wisdom of the state, and reinforcing the doctrine of Say’s Law for human flourishing. God help those who are dissuaded from developing active minds and choose to identify as Social Justice Warriors.

As a 21st century Poetic Justice Warrior, Boyack is teaching children how to identify the predators, avoid becoming prey, and solve the ultimate problem posed by Rothbard – how do we persuade for legitimate government and roll back our coercive state? It’s the Fate of The Future. To learn more about the distinction, please feel free to take our short Poetic Justice Warrior quiz and be sent the analysis of your results.

How Pure Economics Will Dethrone Politics.

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Can we ever separate economics from politics? The two are contradictory yet often confused.

Economics is the private use of skills, knowledge and assets to serve others via market exchange. Entrepreneurs and owners of capital (in the broadest sense – owners of knowledge, skills and experience as well as physical capital goods) are servants of consumers. Economic exchange requires entrepreneurs to ascertain what consumers want, and to assemble resources to provide those wants. If the consumer changes preferences, the entrepreneur must change production in order to continue to receive revenue and profit. The consumer is the boss. The power of entrepreneurs is subject to the choices of their customers, and capital ownership is strictly in the service of consumers.

Carl Menger offered a great example, that’s still very pertinent. A capitalist may own a machine used to produce tobacco products. The machine has value because consumers like to buy and use tobacco products. But should they, suddenly, shed their preference for tobacco products, that machine would have to be sold for scrap. Tobacco companies are re-learning this lesson today.

The Political Way.

Politics, on the other hand, is the diversion, and sometimes confiscation, of economic production by non-producers for their own ends. Politicians have established a hierarchical system of control by government, its administrative departments, its military, and its police forces. While elected politicians are, in some sense, subject to the electoral decisions of voters, that is not the case with the laws they enact (which accumulate and last beyond the duration of electoral periods) and the administrative apparatus they put in place to enforce their laws.  Politicians have a coercive power of control.

The confusion between the economic way and the political way arises in the overlap of economics and politics in people’s minds. Ludwig von Mises said:

All present day political issues concern problems commonly called economic. Everybody thinks of economics whether aware of it or not. As conditions are today, nothing can be more important than economics.

Our own fate and that of our children are at stake, according to the great economist.

Dethroning Politics.

F.A. Hayek’s principle for separating politics from economics was to limit government to the setting of general rules of conduct that apply equally to everyone. These general rules can improve the chances of all by giving everyone the prospect of finding a partner for a transaction favorable to both sides – a win-win. Under these known and reliable rules, a self-organizing citizenry can collaborate, trade and exchange and spontaneously create the economic output that raises the quality of life and standard of living for all.

But politics does not limit itself to this role. It is the struggle to decide “who gets what, where and how”. It is the pitting of one coalition of special interest groups against another in a bruising battle where some must lose so others can win. It is interventionism and regulation to stifle economic activity.

Hayek wanted to “dethrone” politics. Politics, he said, has become much too important, much too costly, much too harmful, and absorbs too much total energy, while at the same time losing the respect of the general public, who regard it as an incurable evil that must be put up with.

Hayek’s solution was to dismantle monolithic governments, and limit the agencies that we could not eliminate to operate under general rules they cannot alter.

Pure Economics.

Franz Oppenheimer was a little more optimistic. He believed that monolithic government is moving through a series of stages of development and has reached a peak in its current form of the administrative state, with its infinity of rules and regulations. He believed that, ultimately, all the giant organizations of the current stage – both government and the crony capitalist companies that integrate themselves with government to benefit from its coercive powers exercised on their behalf – would lose their advantage and wilt away. What would remain is a spontaneous order of individuals engaged in unhampered mutual exchange. He called this condition “pure economics”. That’s a term we can adopt for the goal of separating politics and economics. Keep economics pure.

Per Bylund puts it this way: without the hierarchical power of coercive government, policy-makers would have no policies to make, and there would be no wheeling and dealing with capital owners. The former would need to contribute to the economy rather than be a burden on it, and the latter would be strictly servants of consumers.

The outlines of “pure economics” are beginning to take shape in today’s emerging technologies. Individual entrepreneurs can download computing power, lines of code, algorithms and processes from the cloud. The can use global platforms to set up supply chains, collaborate with others, form teams and conduct work. They can utilize A.I. to augment their individual, team and firm capacity. And they are beginning to be able to disintermediate authorities and institutions using blockchain and cryptography. Oppenheimer put it this way: the individual can now form capital and himself become an employer rather than employee. That was the language of the first decade of the 20thcentury.

In 21stcentury terms, cryptography, bitcoin, entrepreneurship, self-organization and technology will provide the foundation for pure economics, and will dethrone politics.

 

 

 

 

How To Apply The Economic Way To De-Stress Your Life, Physically And Financially.

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“Live long and prosper” is a traditional Jewish blessing made famous by Mr. Spock of Star Trek fame. And this simple greeting can be broken down into two parts, vitality and productivity. Of course there are many factors that contribute to both, some of which cannot be controlled, such as heredity and violence, and many that can be. This is because the human organism is capable of transforming itself, both its internal physical and its external creative capabilities.

Finding The Healthy Energy Zone

There are a number of physical adaptations that people can train for. They range from increased strength, stamina, and flexibility to elite athletic performance. Many people simply prefer to feel good and look better, and that’s big, because it’s about small accomplishments and focus. A marvelous compass to guide people on this journey is a heart rate monitor. It provides instant feedback regarding physical effort, calories burned; and with some knowledge of metabolism, the energy source being utilized. For most people, reducing body fat and increasing endurance will lead to many other health benefits.

According to the book Slow Burn by exercise physiologist Stu Mittleman, the healthiest energy producing states are found in three heart rate zones. They are the “mostly aerobic pace,” the “speedy aerobic pace,” and the “most efficient pace.” All three utilize fat as the primary fuel source. The only difference is the percentage of sugar calories being included. For everyone, a fat burning focus improves metabolism, body composition, immune systems, and a sense of vitality. Using the heart rate monitor to maintain a mostly comfortable energy zone will help you live the one life you have to its fullest.

Discovering The Economic Way

The same thinking applies to achieving lifestyle goals that require money. In this case, it’s about having a vision about future cash flow needs, setting priorities, and crafting a plan that will achieve them with a high level of confidence. The variables include age and life expectancy, saving habits, financial resources, and spending goals. In other words, balance the things we can control against the uncertainty of the future. And the plan must be flexible; circumstances and priorities will change, and investment returns will be volatile. It means applying economics and thinking like a business owner.

The economic way also avoids bad decisions. In the world of personal fitness, a no pain no gain mindset, and high intensity interval training, are probably bad decisions for most people. In the world of personal finance, bad decisions may involve maximum risk tolerance, market forecasts, faulty return projections, beating the market, and staying the course. The economic way for both would answer the following questions. Does this anticipate needs? Is it easy to use and understand? Is it reliable? Does it lead to the good life? In other words, a strenuous workout or beating the market may sound good, but they don’t satisfy long-term personal goals.

Easing In To The Financial Comfort Zone

In economics, a reliable philosophy respects the evidence of spontaneous order, which can’t be predicted or managed. In finance, it respects efficient markets because investment returns can’t be predicted or controlled. A reliable investment strategy is grounded in the uncertainty of the future and the variability of actual returns. In fact, the actual sequence of returns has a greater impact on lifestyle planning than any strategy. That’s because life happens: people invest during their working years and spend during retirement years. If it wasn’t for that, the asset allocation decision would be the primary factor for success or failure, notwithstanding undisciplined spending.

So how do investors give themselves a high probability of living their lives to the fullest without unnecessary sacrifice or risk? Like an entrepreneur, they acknowledge that reality exists. They have a strategy for the possibility of changing market forces, and their effect on achieving important goals. For investors, it means taking into account all possible sequence of return scenarios, balancing them with current and future spending needs, and making trade-offs based on their unique values.

The Stress Test

This is not about predicting the future. Its about anticipating possibilities, achieving balance between competing priorities, and capacity for risk. And it means being flexible. The heart rate monitor is a tool to that helps the user find the optimal energy zone for long-term health and vitality. Likewise, the Monte Carlo simulator is a tool that will help the user find the optimal confidence level for realizing priorities. By performing 1000 random simulations, with all possible investment outcomes, the engine will calculate the likelihood of meeting or exceeding all lifestyle spending goals. This Stress Test can be performed at any time. And many what-if scenarios can be created, with new priorities, changing circumstances, and different trade-offs. This makes the process very dynamic and easy to understand.

Because flexibility is key, spending priorities and risk capacity are assigned ideal and acceptable levels, and there is always a fall back plan. Of course none of this is foolproof. Physical health is affected by a multitude of forces. And so is prosperity, especially by physical health. All the more reason to take a long view, embrace reality, be flexible, and live with confidence. As the ultimate man of reason Mr. Spock advises, live long and prosper.

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