this strikes me as the key value of conservatism: it gives people lots of index funds into which to sensibly invest their time, effort, and money. A well-civilized society has many, a barbarous one few.
Traditional norms as an index fund. I like that.
My review of The Square and the Tower.
I think it is very difficult to show that a particular technology favors peer relationships over hierarchical relationships.
I think that many of us made this mistake when we projected the social consequences of the Internet. Because the Internet is obviously a peer-to-peer network, we assumed that it would break down hierarchies. But the social world is its own sphere, and it does not necessarily mirror the technical world. Groups that are peer-oriented can use the Internet, but so can hierarchies. Perhaps some of the social changes that have taken place in recent decades disrupt hierarchies, including changes that were facilitated by the Internet. However, it is a fallacy to insist that just because the Internet is peer-to-peer, human groups necessarily must array themselves in that fashion in order to be successful in the current technological setting.
My essay is called Nassim Taleb and the Disagreeables (catchy name for a rock band, perhaps?).
Agreeables tend to take people’s words at face value. Disagreeables do not. One of Taleb’s themes is that people’s words are not trustworthy unless they are backed by skin-in-the-game action.
It’s a fun essay, in my less than humble opinion.
Russ Roberts does a podcast Nassim Nicholas Taleb on Skin in the Game. Listen to the whole thing or read the transcript. One random excerpt:
Crossing the street reduces your life expectancy by 1 in 47,000 years. It’s not a big deal. So, the–crossing the street basically is close to zero risk for me, because my life expectancy is not infinite. But if you made humanity cross the street, that would be a problem, because it would reduce life expectancy commensurably.
So, the problem of these analyses that people throw around is that they ignore the value from life expectancy of whatever you are threatening.
He has a chapter that speaks to the topic of my recent essay on when to defy orthodoxy. His answer depends on whether you have skin in the game, meaning that there are personal adverse consequences if you are wrong.
If you have skin in the game, then Taleb would say that you are entitled to challenge orthodoxy, and indeed you should. People with skin in the game who defy orthodoxy are free. People with skin in the game who do not defy orthodoxy are slaves. So working for a large corporation makes you a slave.
Without skin in the game, you cannot be a good person no matter what you do. If you do not defy orthodoxy, you are a toady, trying to get ahead by going along. You are a journalist or academic who repeats what other journalists or academics are saying. If you defy orthodoxy you are dangerous, because without skin in the game you are risking other people’s lives and other people’s money but not your own. You are a banker taking in huge bonuses from bets that pay off in the short term, and when the bets turn sour you are long gone.
At least, that is how I read what he is saying.
My recent post beyond ideology seemed to annoy people more than I expected.
I see “level 3 thinking” as cultivating emotional detachment from your political beliefs. I argue for detachment in The Three Languages of Politics. That means that if I choose to adopt the conservative position on an issue, I take a charitable view of those who take a progressive position or a libertarian position. I don’t want to demonize opponents. I don’t want to get so defensive that I cannot appreciate that my views might be wrong or at least questionable.
It’s March again, and my thoughts have already turned to fantasy baseball. I think that what I wrote last year pretty much stands up. A few additional notes:
1. Usually, what you want from your top picks is low down side. This year, there is an odd case. Giancarlo Stanton, after being traded from a pitcher’s park to the homerun-friendly Yankee Stadium, could, if all goes well for him, hit 20 more home runs than anyone else. Since he is not even in the top half of the first round in most drafts, he seems to me to have some upside. I am not saying that the upside makes up for the downside risk that he gets hurt or that he fails to even lead the league in home runs, but it will be interesting to see how he pans out.
2. The other thing that strikes me this year is that there are three catchers that interest everyone–Sanchez, Posey, and Contreras–and the rest of the catchers almost all fall to garbage time. In shallow leagues, often there is very little difference in performance between middling players and players you can pick up in garbage time. So it may make sense to spend the resources to get one of the popular catchers and settle for a couple of additional garbage-time players elsewhere.
3. I believe in thinking very carefully about the players I want on my bench. That means having a good idea of the players that become available in garbage time. It also means keeping in mind that an empty roster spot has value, particularly in auction formats when it gets to garbage time. Filling out your roster early in an auction is usually wrong.
4. Your bench strategy should align with your overall strategy. Or if your overall strategy is to seek value where it arises, then your bench strategy should align with what emerges.
Ordinarily, I like having a catcher on the bench, but if you spend money or a high draft choice on one of the top three catchers, then spending a roster spot on a second catcher is less appealing. Also, the first couple of weeks of the season, your number one catcher may not miss many games, so you could wait until the season gets going to pick up your second catcher.
Suppose your bench strategy is to go for hitters with upside, typically, young hitters you hope will have a “breakout.” then you want your starting lineup to be a mix of stars and lesser players, not a lineup that is so solid that your breakout can’t break in.
Or suppose your bench strategy is to go for a lot of pitchers, figuring that pitchers are volatile and you will sort out who is having a good year as the season progresses. Honestly, I have a hard time seeing the difference between starting pitchers that are ranked around twentieth best and those that you can pick up in garbage time. One reason to go for quantity rather than quality in pitchers is that you might want to bench pitchers when they visit Yankee Stadium or Colorado or go up against the Astros, Dodgers, or Cubs.
OK, if was obvious that home prices were wildly excessive in 2006, why is that not also true today? Nominal house prices are now far above 2006 levels, and even in real terms they are rapidly approaching the 2006 peak
My thoughts:
1. Housing starts have been in the toilet for a decade. Looking at these charts, single-family housing starts were at an annual rate of over 1.2 million starting in 2001, and they were over 1.6 million from 2003 through 2005. Single-family starts plummeted to around 500,000 per year from 2008 through 2012, and they barely topped 800,000 last year.
Over the last decade national average rental costs have risen faster than inflation. As I recall, they were rising more slowly than overall inflation from 2001 through 2007.
In short, compared with 2006, high housing prices today look more like a supply problem and less like a bubble.
Update: Commenter Handle points to the price/rent ratio chart, which clearly tells you that we are not at 2008 levels.
2. The U.S. has multiple housing markets. Looking at the Core-Logic price index page, the cities that have seen big price increases in the past decade include San Francisco, Boston, Denver, and Seattle. San Francisco and Boston are notoriously supply constrained. Denver and Seattle also are more likely experiencing long-term increases in demand relative to supply. The “sand states,” where housing performed the worst during the crisis, have lower prices than they did ten years ago, in some cases much lower.
In short, today we are seeing high prices in areas where income growth has been very strong. In 2005 and 2006, we saw higher prices driven by looser credit conditions.
As Tyler Cowen noted, Taleb takes on some of his reviewers. In a comment, I took on Taleb when he wrote
the variance within forecasters is smaller than that between forecasts and out of sample realizations.
He saw it as a sign of forecasters copying other forecasters. I do not think that this is necessary as an explanation. Unless you are adding noise to your forecast, your forecast should always have less variance than what you are trying to forecast. And it would not surprise me to see a range of forecasts show less variance than the range of subsequent outcomes. I wrote,
That is what you could expect. Suppose that the variable you are trying to forecast, Y, has a set of known determinants, X’s, and a set of random determinants, e’s. People should forecast conditional on the X’s, and the range of forecasts should be narrow. But the range of outcomes relative to forecasts depends on the e’s, and so the out of sample realizations could (and often should) have a wider variance
As usual, in your comments, please avoid making generalizations about either Taleb or me. Speak only to the specific issue that I raised.
