Solvation

Can't Take it With You? How to Downsize

2009-07-07T16:03:35-07:00

I have recently downsized from a house that was far too large for my needs. My new apartment fits much better—but is just small enough to need some storage. As you can imagine, I've had a lot of decisions to make, and of course this isn't the first time I've had to make them.

I realized I was using the framework of evaluating items based on not only their tangible value, but their intangible value as well. I also realized that this was helping me go much more quickly.

This is a big job, that we all face at some point, whether we do this in our own home or after a family death, so I thought I'd share some insights.

This post has three parts:

    Part 1: How do you establish value?
    Part 2: What framework do you use to make decisions based on that value?
    Part 3: How do you actually get rid of things?

Part 1: How do you establish value?

I break assets into six types -- both in the personal and professional realm. Then I talk about first building those assets and then protecting them.

    1. Financial
    2. Sentimental (or Spiritual)
    3. Social
    4. Environmental
    5. Intellectual
    6. Functional (or Primitive)

(1) Financial value is based on basic question, "how much money can I sell this for?" It's a straightforward calculation encompassing: how much will it cost to move it, how much will it cost to store it; how much will people pay for it right now, and how much money can this produce/save if I keep it?

Also, keep opportunity costs in mind. For example, if I spend 20 hours trying to sell something for $100, would I have better used that time -- financially speaking -- on some other endeavor?

In general, if you're storing something only because the replacement cost is high, you should consider getting rid of it and buying new, later. A great example is moving boxes: if the cost of storing them is zero and you can keep them clean and dry, then by all means store them. But often they're in the way, that's a cost, just not a financial one. (Remember that if you participate in an economy where people share, then you'll be the recipient of shared goods -– free boxes – when you need them-.)

The rule of thumb: the heavier it is (books) or the larger it is (upholstered furniture), the more quickly it should be considered as something you remove rather than store.

If the thought of selling it is painful, even though you won't recoup the financial value by storing it, then it has value other than the strictly monetary. Which brings us to our next kind of value.

(2) Evaluating sentimental or spiritual value causes many to feel overwhelmed. Here are a few heuristics you can use to be more specific about your feelings, and make better-informed decisions:

Historical value: is it a family heirloom that you have an obligation to retain or give to another family member to retain? If so, you're going to feel terrible if you can't find a solution for this item, so find someone to delegate this task to if possible. If you don't have space to keep this, see if someone in your family does.

Sentimental value: is it something that evokes memories for you or your children? How strong are the memories for that specific item? Do you have other similar items that are of significantly more emotional value? And, particularly for sentimental attachment to furniture: consider treating it as you would a great vacation, and take photos of it.

And last: how much joy would you get if you did give this away and someone else had the opportunity to build an attachment to it?

(3) An item with social value is helpful for you, if it's on display. For example, imagine a community organization gave you a prize. If you like to display it so that other people can see it, because it communicates something about you to visitors, it has social value. It’s like a diploma.

This can be difficult to distinguish from sentimental value, especially if you have nowhere to display such an item. Do you like having it around because it makes you feel great? If so, consider keeping it as an heirloom. It has sentimental value, but you might want to pull it out in case a context arises where it could give you some social value as well.

(4) Environmental value encompasses physical health, mental health, and an external world that supports life. At some point you felt you needed those medicines, emergency kits, filtration systems... do you still need them? If you do, bring 'em. If not, pass them along. Do you have pets or plants? Does an item give you emotional peace be it shrine, yoga mat, or beautiful furniture? Does it contribute to your physical health in a way that nothing else will do?

For emotional health in particular, think about whether it is these specific objects, or their arrangement, that brings you peace. It may be that you can abstract this collection into a concept that you can replicate on a smaller scale elsewhere.

(5) Intellectual value is primarily about objects that inspire thought. Libraries come to mind, but this also may include artwork or music or other artifacts. These are the tools and creative systems of your profession, your vocation, or even avocational work. Think of computers, toolkits, books: objects that inspire and enable your intellectual creativity

The first question you should ask here is: how replaceable is what you have? Some books and instruments are replaceable, some aren't (or may not be in the future). What *is* your library? What do you have that might already be out of print?

Second, consider how much of your intellectual asset base might really be sentimental? Again for those sentimental items, decide whether you need to have the physical book, the specific artwork, or just a memory of it. Often, books are small enough we just want to keep them. Personally, I confronted and overcame what can only be called a “book addiction” when I realized I was choosing living space based on how many walls were available for bookcases. I concluded that reselling some book would be a better option than allowing them to be the critical component of such large decision, and store those that are truly unique.

Last, question how much of your library or other thought-provoking items give you social value? These are your friends' books, the books you use as conversation starters, and potential loaners. In those cases, revisit (3) Social value, above.

(6) Functional value is conveyed by items when they allow you to fulfill a rudimentary task. (I call this "Primitive" in order to tie it into the framework of Primitive Intangible Assets, and to more clearly distinguish it from the productive component of intellectual and other assets.) So in terms of assets, we're talking about things that enable and enhance physical performance and power, like eating, sleeping, or mobility.

What do you need to do? Do you have tools adequate to these tasks? You can value these in a similar way that you would value financial items. To the extent they're commoditized, can they be replaced? If they're a specialized item, does the frequency of your usage justify storing them for possible future use?

----

And there you have it - a system by which you can more objectively evaluate what you have. Most objects will be intuitive decisions of "move/store/remove," but I hope this will be helpful for the few items or classes of items that you will need to think about more deeply.

Next comes the tough part: applying the framework to decide what to keep and what to get rid of (Part 2), and deciding on the right mechanisms for releasing your possessions back into the wild (Part 3).

Full Spectrum Finance

2009-06-04T09:39:42-07:00

B Labs, Acumen Fund, PriceWaterhouseCoopers, Deloitte, and the Rockefeller Foundation have joined together to create standards to enable measurement in the Social and Environmental Impact spectrum. From the IRIS site:

The IRIS conceptual framework leverages over a dozen frameworks ranging from the Global Reporting Initiative (GRI) G3 to the International Financial Reporting Standards (IFRS) to the Social Reporting Standards metrics developed by the Social Performance Task Force (SPTF) and The Microfinance Exchange (MIX). Many of these frameworks were designed for specific sectors like microfinance, which has adopted the SPTF metrics, or to encourage standardization and credibility in social and environmental reporting, like GRI. The IRIS taxonomy is designed to function across a variety of sectors to enable better measurement and communication of social and environmental impact.

There are many ways to slice the problem, but it's this: we are using an antiquated financial measurement system, built in the time when communities and roles were comparatively very stable, so traditional family structure enabled the development of intangible assets (for example healthy, educated children and care for the sick and elderly) without too much burden. We need a new system that incorporates measurement of intangible assets: clean air and water, skillful and creative people, and social trust and goodwill, etc.

In other words, we need to measure not only financial wealth -- as a proxy for products and services that we want and need -- but those building blocks in society-at-large that allow us to create financial wealth in the future.

The entire structure that has so far been limited to financial profits is being re-envisioned by many people, as the several sets of standards the IRIS backgrounder shows. The goal is to be better able reflect a sustainable economic model.

Dave McClure's Talk: Shock and Oh!

2009-06-02T12:48:42-07:00

Evidently, Dave did a talk, and there was brouhaha. I didn't see the presentation, and my response was written into a comment. While the comment is awaiting approval, I posted the link to Tracey Ullman to my Facebook profile. Well, I guess Tracey piqued interest.

Here's the comment on Susan Mernit's post:

(1) Saying "two women entrepreneurs don't find it offensive so you shouldn't either" is belittling. Everyone is entitled to their opinion. Dave (and others) to their opinion that Dave using image(s) that some might feel are exploitative to make his point is the right route; other people who opine that exploitative/erotic photos are never the right route in a professional environment.

(2) The one thing I've learned in life is that it's important to strike a balance between being consonance and dissonance. Yes, it's important to get along. Yes, it's important to stir the pot. It's a difficult line to walk sometimes.

Dave's take here is that he used a visceral image to evoke a visceral response. Dave: I think that worked. This is what a visceral response feels like. Some women feel that you, as a social arbiter and community leader, have attacked them by putting sexuality in a work context in an inappropriate way.

(3) Let me unpack how that reads for me. The social assumption is trivial: (straight) women need men to take care of them. You have "women entrepreneurs that you funded." I'm glad you've provided resources for women, of course that's a huge step. But let me ask this: how many female VCs do you work with? How many do you know?

If you (and I really mean anyone, of course) met a woman with a start up idea who was middle aged and a single parent, would you think she was able to also go through the rigors of founding a company? What about if you met a man who was middle aged and a single parent? Did you just think "oh, the woman is soft and nurturing - not tough enough!" or "oh, the man won't probably have full-time custody, so he'll have more time"? Because those are both widely held beliefs (Remember Blink? http://www.understandingprejudice.org/iat/ )

And what if the father had full-time custody? Would you figure - oh, I'll pay him market rate and he'll just get in some help and deal with it? "Courtship of Eddie's Father" time? Because what happens for women is that hiring managers *tell* them they "know they want work-life balance," and believe me this is reflected in pay rate and opportunities for advancement. (My idea of work-life balance involves staff, let me tell you.)

Further, if "you" ran across a man who only saw his kids every other weekend, would you still identify with him, think he's a good guy, maybe pal around? If a woman only saw her kids every other weekend, would you see her the same way?

So. The reason, for me, why I pay attention to this stuff is that the gender roles are widening, and the assumptions are corrosive.

(4) All that said, I think keeping porno in the workplace is possibly *better* in the long run for women!

The most culturally corrosive thing I've seen over the past decade or so is the return to good-girl / bad-girl mentality. To assume that "Virtuous" women should be frigid, controlling, and pure means that women who are passionate, supportive and experienced are "dirty." I'm not ok with that. I see it increasingly.

(5) And last but not least, the inimitable Tracy Ullman:

Finance: What is broken?

2009-02-25T08:54:55-08:00

A quick shoutout today for a brilliantly turned couple of paragraphs to illustrate a new framework for explaining what many intuitively understand. From The Responsiveness Scorecard - Umair Haque - HarvardBusiness.org:

The real problem isn't stimulus, it's responsiveness. We're trapped in a zombieconomy: one full of brain-dead organizations who are about as intelligently responsive as Homer Simpson.

Want better clothes? Don't ask the Gap. Want better software? Don't ask Microsoft. Want better cars? Don't ask Detroit. Want better music? Don't ask record labels. Want better healthcare? Don't ask big pharma. Want to hold on to your money? Don't ask a banker. Welcome to economic Bizarro World.

The economy has gone catatonic. Unresponsive corporations are just the tip of the iceberg. Markets can't allocate. Investors won't invest. Banks can't value, or hold onto anything of value. People don't trust, much less consume. What's going on? The real problem isn't how or what we stimulate - but that almost none of our organizations could respond in the first place.

He goes along to illustrate four different ways to break through these problems. I'd like to add my drum: in order to be responsive, we have to know what's going on, and that requires two things: (1) measurement in line with our values, and (2) a new type of leader who instinctively, unrelentingly creates and upholds an healthy cultural environment even in the midst of a volatile, uncertain, complex, and ambiguous world.

The Great Meltdown

2009-02-15T17:56:00-08:00

Grief.

We all have plans and expectations. Some of them are modest; but some of them are about nothing less than creating the infrastructure for our lives.

For the past several years, it's been increasingly harder to realize our dreams. Tougher to live on one income (or two... or three...), harder to get good healthcare without arguing for it, a challenge to find the right school for one's kids. But we all do our best to get our priorities met, whatever they may be.

And then it turns out that the infrastructure on which we've been building OUR infrastructure has evaporated. What are we left with? Our savings are plundered, our schools are desperate for money, even our doctors are in debt. ThIs not what we wanted! It's not what we planned and hoped for! We worked so hard; there was so much promise. And now it's gone. A lot of it anyway.

So. We are a nation (a world) in grief.

I believe it's important to acknowledge that it really hurts. We sacrificed to build. It was broken down.
We're sad.

Money IS important.

But now that we've agreed that money's important, we need to understand WHY.

Why is it important? What did we trade to acquire money, and why? We made choices that were about acquiring money for a reason. What was that reason?

Did we think, "But what if we got sick, who would take care of us? I need to afford the best insurance."
Did we think, "But I can't live *there*! Who would chose that? I am willing to work harder to live in this community that's clean and safe."
Did we think, "But my children need to be educated well! I can't risk poor education, let alone outright danger and peer-community norms I'm not comfortable with.

Sure we bought iPods and jet skis, and that's fun - but when we were fed up with work, we didn't keep at it because we wanted toys. Why did we keep going? I'm guessing that it was constructing our own personal infrastructure that was what kept us trudging off to work during the lowest lows.

So. Assuming that's the case...

If I could assure you a safe, clean, modest house, with limited work hours, plenty of time with your family, and not much TV screen real estate but friends and a park... and health care when people got sick.... big loss? Or maybe it's an tradeUP from hectic dry-cleaning runs and endless travel with timezone-sickness?

There was grief: rage and disappointment and sense of futility.... But one way or another, we're all going to need to continue to build our personal and community infrastructures.

Take inventory. These are the new rules:

(1) De-emphasize money-messages. Money is more scarce, but it often can't buy what you want anyway. (And soon there may be inflation.) Remember everyone has a belief system about money. Some think spending money shows love. Some think having it shows power. Or success. Or behaving in a certain way to acquire money shows obedience. Or safety. So respect each other's messages, and try to disentangle money from the underlying communication.

(2) Respect Other Peoples' Boundaries. Your character is what you have. People will trust you or not; they will share with you or not. Make sure that what you do and how you treat everyone will stand up in the light of day. Population may get dense; we may see some epidemics -- we've been alert to that possibility for a while. Work now towards minimizing your space needs and your impact on other people.

(3) Forgive. Remember that everyone makes the wrong choice at some time; that what we've built isn't who we are -- for good or bad; that almost every person has the ability to contribute positively to other peoples' lives. (The few who don't are quite noticeably in need of assistance. Help them.)

(4) Listen particularly to people who live by systems of rules that are different than your own. Jonathan Haidt gives a brilliant talk about morality (below) -- and the difference between liberals and conservatives. There is no single right path. As I wrote before, this is the time for leadership that is flexible and resilient. Leadership roles will be fluid: "lead, follow, or get out of the way" are all valid choices for a single individual, in different circumstances.

(5) If you have resources to put to the changing landscape, focus on creating the new systems: how do we measure the development of intangible assets? How will we link those items we measure in the community (civic participation, health/environmental cleanliness, cognitive development via the educational ecosystem) with other areas of the community, namely that which produces goods and services?

We're living in a time where we're throwing out the old system and bringing in a new one. It's going to be chaotic and difficult and there's going to be ongoing suffering. Keep alert and compassionate and work towards its resolution. That's all there really is to do now.

Economic Policy and Protectionism Revisited

2009-02-03T08:23:19-08:00

Today's Financial Times has an article that points out the EU is warning about the US stimulus plan adopting "protectionist" provisions.

So, please pardon me while I reframe:

Protectionism - preferentially giving money to our own country, rather than finding the "highest value" (quality per cost) provider.

Choosing suppliers based on the valuation of tangible AND intangible assets - preferentially giving money to those suppliers who employ American residents within our borders, who support our social infrastructure (via taxes or other contractual obligations), who are respectful of US/international values towards working conditions and environmental impact, and who provide low financial costs.

Note, any company can compete on these criteria. A simple, new way of envisioning this process allows us to avoid protectionism while simultaneously meeting the needs for US economic development. Furthermore, it's largely European universities that are leading the way towards understanding how to systemically value of intangible assets.

I can only hope we'll take this opportunity to learn how to measure and account for these impacts more rigorously.

Drinking the Financial Kool-Aid

2008-11-23T22:11:05-08:00

I just don't have anything to add. This is a brilliant essay on bias.

naked capitalism: Finance Has Lost Sight of Its Role.

WANTED: Financial Pros with Firm Will

2008-11-20T08:28:44-08:00

The WSJ blog post, "Don't Be a Hero" discusses just how random things are right now. The financial markets have essentially turned into prediction markets, reflecting peoples' intuitions about what might happen next and rendering absurd the concept of a valuation model. It's almost as if we're in a volatility bubble. What does "we're providing liquidity to the markets" even mean now?

What can be done?

Instead of "don't be a hero," we need fund managers and traders to go long, to stop staring at the short-term catastrophe, and INVEST for two years from now (or longer). After all, what does risk management mean when the real risk is everything goes to he!! in a handbag? So, instead, imagine coming out the other side, after everything melts into a puddle and needs to be reformed: what should the economy look like in 5-10 years?

(HINT: Many of you will already know what I'm going to say, but for those who don't, this is not conceptually difficult. Productivity depends on having the pieces of the puzzle ready to go. Those pieces center around (1) trust -- which is built within relationships, which are themselves created through common purpose and shared activities, (2) knowledge, and (3) personal and environmental health. Find entities that build those components, and we'll be out of the deep dark hole much faster than if we continue to flail around. And it's not farfetched or out in wacky-land: here's the World Bank blogging from Social Capital 08.)

Financial pros: The social expectations are that financial losses will be huge, and that there's no rhyme or reason or good plays in this market. It's not a matter of being astoundingly clever or fast on your feet; in a way, you have carte blanche to do what you think best without any second-guessing. Stop looking for short-term opportunity -- it's all roadkill, and you're behaving like crows. Move this in the right direction.

Financial Crisis and Moral Psychology

2008-10-27T14:50:28-07:00

There are those who might think I'd take the opportunity to call out Mr. Greenspan's confession that maybe "free markets" aren't a panacea, or that the Financial Times endorsed Obama, or even once again call on people to find the silver lining by heeding the wisdom of their (great-) grandparents.

But instead, I'm struck by the juxtaposition of two things I ran across almost coincidentally. First, we have the New York Times' article on use of bailout funds by banks to do their own asset building to maximize their own competitive position, rather than using it for what the investors (all taxpayers) require, namely freeing up credit markets.

And almost simultaneously, I watched this fantastic video of John Haidt, which shows he has comedic timing as well as a intellectual brilliance and timely train of thought. He and his group have identified five components of "the moral mind." Though his main thesis is truly fascinating, and I'll have more to say later on that, I've got to say that the part that struck me here was that in games requiring cooperation, there was a result that gamers perform much more cooperatively in a regime where there's punishment.

So what's going on with these crazy bankers? Are these people immoral on some axis ("fairness" springs to mind)? Do they believe that enhancing their own wealth, their families, their companies will somehow protect them from the results of worldwide distress (a deliberately-blind interpretation of "comfort")? Do they believe that profiteering is a main cultural attribute of their group, so their behavior is somehow more loyal than anyone on the outside of this group could imagine?

Or is it a simple case of using the social tools in hand to punish people whose greed has run amok: shame?

As Marlene Grossman says in the context of her work at a community organization, "People have to overcome all kinds of terrible things. And they manage to do it and survive, and survive with such dignity. Those kinds of stories need to be told. And shame on us who don't listen to it. And who put ourselves in a cocoon and say, 'oh, you know... those people...'"

In-group loyalty! Vote for Obama and have one great big harmonious group.

Wynton Marsalis on Colbert Report

2008-10-21T19:02:05-07:00

Wynton Marsalis was a guest on the Colbert Report, a show on Comedy Central hosted by Stephen Colbert, whose schtick is satirically mocking pompous and superficial hosts. Marsalis took one of Stephen's snide taunts and gave such a beautiful quote, I had put up this mini-post:

Stephen Colbert: How do you win at jazz? Is there a point system?

Wynton Marsalis: Let me tell you what. When you start to play and you see people jumping up and down in the audience, and hollering and screaming, and wanting to get up on the tables... and then some other people next to them have tears coming out of their eyes and another person is sleeping, and the whole room erupts in a volcano of feeling?

Stephen Colbert: Yep.

Wynton Marsalis: You won.

Technorati's Ironic Lack of Community Focus

2008-10-21T05:38:00-07:00

I occasionally point out that there's a lack of representation in technology-based communities of a non-upper-middle-class-male life experience. I mention that this leads to many problems, including structures that instantiate a specific type of young-male worldview and style of interpersonal interaction.

Another example for the heap: the blog categories for Technorati. I'm not exactly sure where a blog about volunteerism would go, since there actually is no category -- ironically -- for community activities.

SoCap08 - Financial Return Maximization is Absurd

2008-10-20T07:57:04-07:00

Last week, I was SoCapO8, a conference that was oversubscribed nearly 3-fold, where most people have signed up in the past few weeks, post-financial catastrophe.

There is a lot going on in the social investment space, but I want to address, specifically, one item, since my for-pay job at the groupery is a bit hectic due to a major upgrade (...and if you run volunteer organizations, you should check it out! It's a powerful product and a great team!).

Back on-topic: on Tuesday evening was The Economist Debate Series:

Motion: This house believes you can maximize social returns by maximizing financial returns. Two voices for, two voices against.

* Moderator: Matthew Bishop, The Economist
* Shari Berenbach, Calvert Foundation
* Elizabeth Funk, Unitus
* Steve Zuckerman, Self Help
* Alvaro Rodriguez-Arregui, Ignia Partners LLC

I realize this is where the argument is, but I'm going to address the underlying question:

Is the idea that we are able to consciously maximize financial returns a fantasy?

I believe so.

(1) Maximizing financial returns begs the question: over what time frame? In order to value something at this moment, I have to make assumptions about the net present value of future cash flows. This requires me to make assumptions about the future.

If we say "1000 years" (taking it to the extreme) it becomes obvious that we can't possibly know enough about the intervening time to say with any certainty at all whether what we're doing is maximizing financial return or not. The idea is that the further out you go, the less the impact is on the present, but...

If we say "a long time but something we think we might know about" (let's say 10-100 years) then our instinct is to turn this into a Sharpe ratio (risk-adjusted return), and start thinking about what risks we need to protect against in order to "maximize financial return." But we can only guess what those risks might be, and how likely they would be, and start making assumptions about which risks we should mitigate (despite the cost) vs. which risks we can allow to happen because they're either so rare and costly to mitigate that it would wipe out our return if we did so, or conversely because we feel they are so inconsequential.

And now we can get bogged down in what people might refer to as "policy arguments" about those risks. But the point is that it's not knowable in the 10-100 year range what will maximize return, because we don't know how risks might play out, and we can't even decide which risks to mitigate.

So we can't maximize risks without knowing the environment we're in, and we can't know the environment before it exists. Your idea of maximizing return depends on your picture of the risk environment; mine depends on my picture.

But let's continue, because people do *act* with the idea that they're maximizing revenue, as a way of life. What is going on there? They believe, we believe, we're maximizing each transaction.

So, let's examine that. We're in the immediate time frame, and we have to still keep in mind what we expect future cash flows to be like for the length of time our decision is in effect (think "will this car suit me for the next 5 years?"). The further out we go, the more our projections might be just flat-out wrong. Most decisions we make, we believe will impact us for a few years. But then, we start imagining retirement or our grandchildren's livelihoods and realize we have to somehow plan for that too - plan for something we can't begin to control. And then often we're struck, again, with the absurdity of knowing the risk environment in the future well enough to make any decisions today.

Maximizing financial return sets us up to walk into traps!

Well, really it sets us up to keep our head down and watch our feet. But we're not walking down a road! We're walking through a field. While making sure each step we take is on solid ground is certainly important, the question remains: where will that lead us?

We don't know! We don't know because the picture we have in our mind of what's at the other side of the field is a fantasy. We can't see it; we're focused on our feet and the next few steps we're going to take. We don't have any real idea where we're headed.

So the question we are taught to think about and answer, "Can maximizing financial returns lead to maximized social returns?" is backwards! I propose a new question:

(How) can maximizing social returns lead to maximized financial returns, over a time frame of one full lifetime (80 years)?

Does this frame change the way you think about growth?

Financial Panic & First Aid

2008-10-09T13:15:03-07:00

OK, a brief emergency post.

What is gone is gone. Did you just lose a lot of savings, an idea of how your future would be? Or did you get diagnosed with Stage IV cancer? Be sure to keep things in perspective. (And yes, today about 4000 people will get diagnosed with cancer in the US.)

Today:

Do something positive for your physical health.

Listen supportively to one person you know who you suspect is in a more precarious position than you are. Listen to them. Don't talk about yourself. They might not talk about what's going on, but they probably need to feel connected. If you don't do "talking," then do what you would do to lend support.

If you still have money to manage, invest not only with an eye to finding a safe harbor for financial capital in this Category V hurricane, but with an eye to where you're going to rebuild in the future.

Remember this: human beings can be safe and happy given kindness, trust, the ability to express their creativity and a way to fit into their society.

Guard those things.

Soros' Financial Plan

2008-10-01T07:54:39-07:00

For those who haven't heard me wax poetic, my personal dream team is:

Baruch Lev
Robert Shiller
Richard Thaler
Fareed Zacharia
Madeleine Albright

But I also really like George Soros. Here is his outline for a solution to the United States' financial woes.

First, note, he also disdains the bailout bill:

The emergency legislation currently before Congress was ill-conceived – or more accurately, not conceived at all.

His explanation of what went down:

Two weeks ago the Treasury did not have a plan ready – that is why it had to ask for total discretion in spending the money. But the general idea was to bring relief to the banking system by relieving banks of their toxic securities and parking them in a government-owned fund so that they would not be dumped on the market at distressed prices. With the value of their investments stabilised, banks would then be able to raise equity capital.

The idea was fraught with difficulties. The toxic securities in question are not homogenous and in any auction process the sellers are liable to dump the dregs on to the government fund. Moreover, the scheme addresses only one half of the underlying problem – the lack of credit availability. It does very little to enable house owners to meet their mortgage obligations and it does not address the foreclosure problem. With house prices not yet at the bottom, if the government bids up the price of mortgage backed securities, the taxpayers are liable to loose; but if the government does not pay up, the banking system does not experience much relief and cannot attract equity capital from the private sector.

He drives to a more effective solution:

Since Tarp was ill-conceived, it is liable to arouse a negative response from America’s creditors. They would see it as an attempt to inflate away the debt. The dollar is liable to come under renewed pressure and the government will have to pay more for its debt, especially at the long end. These adverse consequences could be mitigated by using taxpayers’ funds more effectively.

Instead of just purchasing troubled assets the bulk of the funds ought to be used to recapitalise the banking system. Funds injected at the equity level are more high-powered than funds used at the balance sheet level by a minimal factor of twelve - effectively giving the government $8,400bn to re-ignite the flow of credit. In practice, the effect would be even greater because the injection of government funds would also attract private capital. The result would be more economic recovery and the chance for taxpayers to profit from the recovery.

Soros Foundation Blog

The Bailout, The Election

2008-09-30T08:37:27-07:00

The market, this morning. Particularly telling: central banks might want to consider not throwing money into the system because it dampens any impulses banks might have to lend to each other.
http://www.nakedcapitalism.com/2008/09/libor-surges-to-nearly-7-but-us-stock.html

Thanks to Al Chang, via Jerry Michalski's Yi-Tan group for the next two:

Analyzing the Bailout: What's In It, Anyway? Clear synopsis about why this bailout is ill-conceived.
http://www.clusterstock.com/2008/9/analyzing-the-bailout-what-s-in-it-anyway-

Mussolini Style Corporatism in Action. On an actual phone call.
http://www.nakedcapitalism.com/2008/09/mussolini-style-corporatism-in-action.html

Merrill: Low Treasury Yields to go Even Lower. "...our models suggest that there is another 15-20% downside in average home prices and they are already down 20% from the peak."
http://www.nakedcapitalism.com/2008/09/merrill-low-treasury-yields-to-go-even.html

...and my personal favorite from a few days ago, a study of Republicans by psychology professor at the University of Virginia, written for liberals who grapple with why others make such different choices.

What Makes People Vote Republican - Jonathan Haidt. "(M)orality is not just about how we treat each other (as most liberals think); it is also about binding groups together, supporting essential institutions, and living in a sanctified and noble way. When Republicans say that Democrats 'just don't get it,' this is the "it" to which they refer. " http://www.edge.org/3rd_culture/haidt08/haidt08_index.html

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Off-topic bonus link: Gut Instinct's Surprising Role in Math - NY Times

Your Future Financial Health - A Roadmap

2008-09-29T22:45:49-07:00

The markets are crashing. You might be feeling anxious, worried about how you going to weather this financial crisis, what you should *do* (or not??) to protect you and your family.

I will tell you.

If you build an airplane out of legos, and the airplane comes apart -- well it is very disappointing, you might feel crushed if you've worked very hard on it -- but you can still build a new airplane because you still have the legos. Sure, it's not an airplane until it's assembled, but the legos themselves are intact. When the airplane falls apart, it's time to make sure we don't lose any of the legos. We can even gather more legos, get them organized, and start snapping those guys together for the rebuild.

That's what intangible assets are: the legos.

Those are not only the aspects of life that we truly can't do without, those are the blocks from which productivity is built and risk is managed. Examples of intangible assets are social relationships, trust, teamwork, knowledge, health, environmental resilience... the list goes on. Take stock of those things. Treasure them and build upon them.

And the economy will recover, because those building blocks, like legos, are still here in a very real way.

So, do this:

Build social assets: Build positive relationships. Reconnect with people you genuinely enjoy spending time with. Reach out to new people. Help others who don't have much to rebuild with. Help the elderly who won't have time to wait out. Protect your friendships. Have the courage to maintain a positive outlook during a time of misfortune. Don't argue, turn on each other, or let fear or panic guide your behavior.
Build knowledge assets: While listening to other people, learn a little. Read what other people have to say; imagine things from their perspective. Of course, it's always a good idea to learn new things, just like it's always a good idea to behave honorably.
Build physical assets: Maintain health, both physical and emotional. Get whatever it is taken care of. Keep your sick kids home until they're no longer contagious. Make choices that benefit environmental health.
Build spiritual assets: Enjoy the arts: music, reading, whatever you prefer. Enjoy nature. Become grounded and connected with the teachings of the religion of your choice.

You may think, "Lovely. But what the heck am I supposed to do with what remains of my money?"

The answer is to do the same thing. Invest in building blocks. Will the financial ROI be good? Will it even be positive? That, I don't know, and even for successful investments it will depend on the time frame. But I do know this: If you are going to invest, carefully investing in areas that will benefit the ability of the world to solve problems and be productive will build the ability for the economy to recover.

Specifically:

Invest in technologies centered not only on energy production and efficiency, but on sensor and separations technologies (like filtration).
Invest in approaches that facilitate community cohesion, problem-solving, and the formation of partnerships and groups.
Invest in knowledge growth within schools and beyond.

There is a lot to do.

Gas Mileage vs. Fuel Efficiency

2008-09-10T09:48:33-07:00

Around the same time that I blogged a little calculator for a friend thinking about what to do with his cars, the AAAS put out a news release, Replacing Least Efficient Car Has Benefits for Climate, Wallet".

In particular, check out the embedded video which explains why thinking about efficiency (per 10,000 miles, for example) enables better consumer decision-making.

How to Become a Veterinarian

2008-09-06T13:56:45-07:00

My friend's daughter has just begun at UC Davis School of Veterinary Medicine. How did she get there? Here are six key steps. Jaime Richards column: Want to be a vet? It can be done - Inside Bay Area.

Stand Up to Cancer - SU2C

2008-09-05T09:14:43-07:00

A quick post on an event tonight that raises funding for cancer research via your passive participation. Like many people, my life has been drastically altered through losing people I love to cancer: my mother and father both died of cancer (1990, 2004 respectively), and my son's other grandmother also (1994). I have had other relatives and friends who have themselves been afflicted by cancer, or have their lives changed by the affliction of others they love.

The SU2C website gives more details on the overall campaign, or watch

When Variance is High

2008-09-02T18:12:14-07:00

I was talking to a friend this weekend. He mentioned how broadly distributed intellectual potential is among the population, and it got me thinking....

When I was a kid, I played games at recess and ran around. I swam butterfly for a year in high school. I played some tennis. A few coaches commented that I have decent hand/eye coordination and was reasonably quick. I was nothing special, either way... unless what I needed to do required both my feet to leave and then to return to the ground! In that case, failure was (and is) a reasonable expectation, and an injury, quite possible. Unless I'm going to be landing in water at the end, this whole "leaving the earth's surface" thing is clearly something my brain doesn't process well at all.

I was lucky, since I was a girl - the fact I was eager to play sports successfully offset my comparative lack of height as well as my leaping challenges. But for many boys, Physical Education class was a nightmare of humiliation, where coaches had achievement expectations that the boys just didn't have the inclination to train for and in many cases lacked the physical talent to meet.

Those same boys grew up in many cases to be academically successful men; fathers, who could determine funding priorities and administer school districts. I'm not sure this is related, but my son's academically excellent public school has a Physical Education department whose grading requirements for an A- in 9th and 10th grades are apparently "successfully changes into PE clothes." There is no required physical education at all for 11th and 12th grades. The coaches do care a lot about the teams, but not at all about educating anyone of even average physical talent.

In other words, I suspect that since PE was difficult for people who weren't talented athletically, it was curtailed and then turned into an utterly useless program. Imagine what would happen if we taught math that way? If you're not "math team" caliber, you show up for class, play math-based games if you want to -- hang out and talk to your friends if not -- and then you get an "A-" so long as you don't cause any problems.

I believe we need to create "learning environments" for physical learning in the schools. Teachers ridiculing kids who can't make the quota of pushups isn't okay; but neither is saying "voila! no need for push-ups!" I think understanding how to deal with the wide distribution of physical talent will help academics find innovative new approaches for managing the wide distribution of intellectual talent.

So back to the conversation with my friend, because there's another part to this, centered around the wide disparity in IQ that schools have to deal with, and how that affects the way people approach their lives, particularly how they approach conflict.

I don't actually have any answers to the questions he raised. But I have been thinking a lot about, specifically, the role of public education beyond the education of specific intellectual skills.

I have seen bright children become so competitive that they lose all sense of empathy. I have seen average children become so insecure and anxious they get sick. I have seen children (and adults) become violently angry and destructively frustrated when they just can't "get it," particularly when the pressure's on and the stakes are high.

I believe the future of education has to be team-based, because we can't afford, as a society, to exacerbate impulsive anger in children who aren't succeeding at the moment, whether they're just not smart enough or they're just generally prone to anger or impulsivity, or they are having short term personal crises. Having social support helps people feel calmer, and gives them confidence they'll weather whatever they need to face.

We need to know a lot more about how to integrate people who are experiencing failure, anger, and obsession. We have an idea of how to create an intellectual learning environment: it's okay to try, mistakes are tolerated, unpacked, and knowledge is gained. Now we need to learn how to create learning environments that accommodate emotional learning.

And we have to expand those domains to encompass a way to differentiate the curriculum for a very wide disparity in natural talent.