Interest, Inflation, and Currency: Or Why Monetary Policy Creates Hurdles to Entrepreneurship

Dearest friends,

I suppose at one point, I would discuss personal finance. So here it is. The finance of persons, or a bit of it, as I understand it. Call me Mr. Monsieur Moustache. Let’s go down to New York, The New York, and follow the money.

The following is not a definitive theory, but merely my hypothesis. I don’t know *for sure* what has caused this to happen, but here is what I think.

Repeat after me: Volatility is not risk. Volatility is not risk. Volatility is not risk.

Imagine two agents. The first entity, call it the rentier, is concerned with extracting value sufficient to live a comfortable life off of their assets. The goal of a rentier is not the maximization of their own wealth, but their own survival through long time, preferably in maximal comfort. Therefore, the rentier wants to invest in something where the returns exceed the erosion of purchasing power (inflation) plus their own desired safe rate of withdrawal (a number I typically ballpark, arbitrarily, at 2% for long time) plus an amount to be reinvested to maintain a margin of safety against uncertainty, such that the fund is never overdrawn during bad times.

So the equation faced by the rentier is as follows.

ROI > I + MS + RS

Where the terms stand for inflation, margin of safety, and safe withdrawal rate.

Now, the naive supposition is that these people will chase as much yield as they can. That’s a misunderstanding of rentier psychology. If that were the case, you would see the fortunes of old money balloon into infinity. Simultaneously, if the fate of old money was to lose money, you would not see old money at all – the term would be meaningless and the concept nonsense. Some people do deny the existence of old money and confidently proclaim the saying, “Shirtsleeves to shirtsleeves in three generations.” To that, I say that if you take that as the null hypothesis (persistence = .4), the odds of my family surviving to the present are like the odds of picking a single grain of sand correctly out of all the grains of sand on Earth. And some of our rivals from those very old days are still around. You see this around the world, from the Norman conquerors, to Florentine elites, to American colonial fortunes. The probability of a family surviving like that by chance is well past 1e-9*.

Why wouldn’t an aristocratic family want to maximize yields? All too often, power means problems. The majority of people are content to live a life of comfort and ease. The goal of a Cloud Person family is not to slowly expand until it engulfs the whole world, and despite the maxim of r>g, this does not and cannot hold in the micro scale. No tree grows to the sky. r>g implying the growth of elite fortunes only holds in the macro/societal sense, implying the steady expansion of the noble/professional class through an empire’s lifespan, what Turchin calls elite overproduction. An individual aristocratic family stagnates, stuck in a perpetual decline towards poverty but never quite getting there, a dramatic WASP (although, strictly speaking, I believe the term Norman-American is more historically accurate) heiress lamenting the fall of her house with a breathy “Alas!” (To my beloved sad one, do not hit me.) This is a holding pattern which can safely last centuries or millennia.

How does one successfully stagnate? The avoidance of risk. As they say in finance, rule 1 is to not lose money. That doesn’t mean never take losses, it means never blowup. Risk is not volatility, but the chance of an investment blowing up. And fatal risk, the kind you never take, is when these blowups blow you up, not just your investment. But even lesser blowups hurt bigly. Rather than pursuing maximal returns, a prudent aristocrat acts contra the prescriptions of economists and their rational Homo Economicus, but instead minimizes their exposure to blowup SO LONG AS THEY ARE ABLE TO SATISFY THE RENTIER EQUATION WITH THE BASKET OF ASSETS.

What’s the other half of this capital equation? Why, people who want to take that money and make more money, like yours truly. Call them the capitalists. Value can beget value, wealth can birth wealth. Little golden soldiers march out and produce a building, a factory, a monument to prosperity. A would-be capitalist presents an opportunity, like open a restaurant on Fifth Street, speculate on macroeconomic conditions, buy oil futures, make loans to greased up deaf guys, and gets capital. Money is not free. Money is not free! Money has a price. What is this price? Interest. Interest is the cost of acquiring money. For the capitalist, interest is a cost. So far, this all hews to conventional theory. But conventional theory holds that lower interest spur further investment, because the lower cost of money increases the profitability of investment until it attracts a taker.

But is this the case? Let’s imagine an extreme example (which is increasingly less extreme in this day and age). If you can borrow at 0%, you can grow this money and have a safe rate of return by putting it in a brokerage and enjoying 2% interest. If you are a rentier, you are now satisfied. If you are a capitalist playing this skim somehow, you are satisfied. Economic activity is not really happening. Business is not growing. Money is stuck in a brokerage, doing activities where the broker can’t lose too much money and collapse from a bank run. The money sits under a mattress, useless. If you can borrow at a sufficiently negative rate of interest, then you don’t have to do anything. You can sit on a dragon’s hoard of gold and wait for your purchasing power to steadily increase.

What generates new wealth? Entrepreneurship. Innovation. Expansion. These are activities which yield very high returns. In some sense, you can say that you’re rewarded handsomely for this. But this is foolish. You are actually exposed to a lot of real risk, even if the asset is not volatile. It can explode! Rentiers are not in the business of investing in entrepreneurs and business, even if this is a fundamentally profitable thing to do. Rentiers want to stay safe. Their interests lie not in profit maximization, but an indefinite stay at the top. Accordingly, you have to force them into riskier asset classes. The lower the interest rates, the lower you can descend on the risk chain while still surviving as a rentier. At very high interest rates, you might only be able to maintain rentier status by investing in direct business ventures while maintaining a store of gold as your margin of safety. As interest rates decline, stocks and corporate bonds become attractive vehicles. Fall further, and you can just dick around on an infinitely leveraged bank deposit. The items higher on the risk totem are closer to the production of real value. First you build a business, then you invest in developed businesses so they can grow, then you lend to a government or a bank which might invest in developed business so they can grow, etc. Just as delta can be said to be an option’s moneyness, yield is an asset’s entrepreneuriness. The closer you get to the fray and the struggle of business competition, the sweeter the returns. Rentiers aren’t charities. They’re families that delay consumption for millennia so they can sit and drink pina coladas. They’ll only do what they’re obliged to do so, whether from financial need or cultural bonds.

Here’s a chart.

fredgraph

The red line is real interest rates.
The blue line is investment as a proportion of real GDP.

Viewed this way, investment goes up when interest rates go down. The monetarist thesis is confirmed. The long run secular decline in interest rates is a steady increase in investment spending over time. And that’s why every Tom, Dick, and Harry can start a business.

Except… the green line.

What is that green line?

The green line is net investment in new business. If you tell the story of the green line, then business investment (as opposed to purchasing blue chips and AAA bonds) is anemic, barely responding to interest rates as monetarists would expect. Actually, it does the inverse. New business investment never does better than during the terrible super interest rates of the early 1980s. As interest rates decline, the spread between investment spending in general and business investment shoots up and never looks back. We call that asset inflation. The low interest rates allow for more leverage, and thus more capital directed at assets, but business activity becomes disfavored. You can see that investment overall goes up, but business investment is anemic! Particularly, you can note 2 years of net negative business activity under Obama, the first time a contraction has ever exceeded a quarter in length.

Why would people feel the Obama recovery was fake? Why were the roaring 80s so roaring? What does GDP mean for lived prosperity? I believe the net business formation better reflects the perceived health of the economy, because small business is more linked to the prosperity of the average American. While big business generates the GDP and pays out handsome salaries and benefits, the majority of new jobs come from small business. Up until very recently, a majority of people still worked for small businesses. The expansion of big business into mass employment with McJobs is not precisely a trend to root for either. Small business keeps America employed, and employed America stays away from drugs, despair, and depression.

fredgraph-2

Here is a chart with business formation, inflation, and interest. We can see neither curve is a perfect fit, but again, contrary to establishment thinking, there is a clear positive correlation between inflation and business. Accordingly, the Fed’s goal is to keep inflation… low. At least this, I consider more forgivable because inflation serves as a tax on the middle class, which primarily holds hard cash instead of investments.

We can consider this a variation on the Austrian economics theme of malinvestment. Essentially, the lower the interest, the more investment classes become viable as a means for a rentier to maintain their wealth. That means money is driven from business into these other categories, causing a buildup of assets that would not happen under the free money market of gold or some other deregulated currency. Interest being the cost of money, the demand for lots of money to play games with bonds instead of increasing direct production would drive the price of money up. The difference is that the activity is rentier-based, not entrepreneur/capitalist based. The Austrians suppose that entrepreneurs start businesses because of low interest rates, or that a fund might start a strategy because of favorable rates. Not so. Entrepreneurs start new businesses because they are entrepreneurs and they have a screw loose. Similarly, funds don’t wind up when the interest rates go against them. It’s the way rentiers allocate their capital that changes, in accordance with the least risk principle. Some people blame the complacency of the American people for the decline of business. But if this was the case, then the amount of capital per business would rise, as all the investors converge to invest in the few remaining gritty entrepreneurs. Many of the people who espouse this theory believe that immigrants are needed to inject a entrepreneurial spirit into America. Put bluntly, this is bullshit and a cheap excuse for open borders. The amount of capital put into each business has remained constant. The pool of capital available has shrunk.

Another hypothesis a friend and colleague has advanced is that the real explanation is a cultural shift – the shift to professional money managers and financial advisors. These people don’t invest in small business because they don’t understand it, because it’s not securitized and theorized. Now, the theories behind the markets are mostly bunk used by over-groomed finance professors to pleasure themselves, as seen by the regular failure of EMH and MPT. But that may also be a cause. Financial advisors don’t feel comfortable in this pool. You might find that explanation more sound.

No jokes today. Monetarism is the death of American business. It is the death of the American dream. I don’t like the gold standard, but it imposes discipline on central bankers. The Rothschild-backed gold standard never saw madness like this. Coincidentally, it would probably be easier for me to get funding, but your dear Monsieur would never act selfishly, I promise.

You may not be interested in markets, but markets are interested in you.

Sincerely,
Monsieur le Baron

* If your alleged odds of staying in the top quintile starting in the top quintile by conventional mobility models are .35, then the odds of staying in the top quintile for 20 generations (a relatively conservative survival horizon, many families are older, including big ticket names) are 7.6e-10, something that only happens a few times in all of humanity’s existence. Not recorded history. Human existence. The short version is that Raj Chetty is wrong and his optimistic, sunny estimates of social mobility are practically utopian.

Hello frens

Dearest friends,

I will have a full length post soon enough, I think. I’m working on one. Economics based.

In the meantime, there is something on my mind. The problem with polls.

I got polled again today.

According to Pew, you have a 1 in 154,000 chance to be selected for one of their polls. Fair enough. Here’s the problem though. I’m polled every month or two. Either I severely, severely underestimate the amount of polls conducted in this country, or something is rotten in the state of Denmark, though probably not intentionally rotten.

Supposing I experience a 1 in 3 chance to be polled each month, that suggests there are something like 70,000 polls conducted a month. That seems improbably high to me, but perhaps it’s true. Otherwise, there’s some sort of strong sampling bias going on.

I can think of two major reasons why this might be so.

1. People don’t like to talk to pollsters. I like to talk to pollsters. A pollster will dial until they reach a halting point, which often means they’ll halt at me or a person similar in character to me. That’s not going to be representative. That’s going to be the kind of weirdos who love talking to pollsters.

2. The difficulty in building samples of certain demographics. I’m not just polled an unusual amount. I’m also invited to focus group new products for Big Bank and Fancy Corp. Why? If you’re constructing a sample and one of the components has to be people in their 20s of a certain net worth, then you’re not dealing with a lot of people! Clearly, too many of the yoofs are avocado toast loving wastrels. Polls try to fractionally distill into groups like income >$250k, Asian, Wiccan, Republican, Space Wizard, but these are not independent categories, but interact and form weird archetypes, such that if you’re looking for rich people, the kind of rich people you find will return radically different results. I’m not sure I’m being very clear, but people are archetypes, are types, are kinds of people. The man who owns a dealership may be just as rich as a BigLaw partner, but brother, they are going to be very, very different. So if you try to construct samples and you pick rich people, you can create really weird and bizarre answers depending on the arbitrary rich person you found that day.

Weep woo. Bean burritos.

A strange thing. And yet, polls are held up as scientific truth.

Call me maybe,
Monsieur le Baron

A Chart, A Tool, But Not for Chartists

Dearest friends,

A chart!

Class Diagrams-blog

Next time you’re talking to someone and the labels get thick and confusing, use this.

Class is a sticky socio-economic concept.

When someone says “UC” or “UMC” or what have you, they could mean any of the things to the right.

Church’s conception of class is basically three career tracks or life paths. A young E begins their life in E4 and tries to scrabble upwards. They start with a ticket punched to join the ranks of America’s professionals, but often have their eyes on higher things. A G dues pays their way up until they arrive at a comfortable G2 position. These are the people who go to the Big City to “make it”. Labor people develop skills and certifications to advance, while paying their dues in time. These represent three ways of making your way through the world. You can vaguely call them “connections”, “culture”, and “skills”. Church is bigoted against Es, who he considers vaguely sinister at best and downright Satanic Illuminati evil at worst.

The Fussell conception of class is more like different ethnotribes. You can imagine three different tribes, “Uppers”, “Middles”, and “Proles”, with their own customs and cultures. There are, in turn, little clans with their own quirks within the three. That the classes happen to be arranged hierarchically is less significant than the three basically being distinct populations with their own unique physiognomies and cults. They eat differently, drink differently, speak differently, and play differently. Fussell is bigoted against “Middles”, who he considers pretentious, snobby, spendthrift pikers.

The money conception of class is rarely expounded formerly by any academic or bloggers, but it’s probably the most naturally American. Class is your money, and class can be bought. The economic brackets I have highlighted can be thought of the status of established households. You will note the considerable overlap. This is intentional. Each economic class imparts different attitudes about money. For the uppers, they simply do not understand money, just as a fish does not know what water is. How could they? For the upper middles, money is a tool of influence and power, used to extend one’s reach. Debt and hard cash are interchangeable as “liquidity”. Two attitudes predominate: “Ambitious” and “Contemptuous”. The ambitious mindset is possessed by those well-aware of their own lowliness, who feel the knife cutting lightly into their dangling gonads. The contemptuous mindset is possessed by bohemians, who turn their back on a life of striving to go live in a dumpster. The middle segment sees money as a way of obtaining fine goods, the better things in life, and to keep up with the Joneses. Their watchword is “comfortable”, they are born into “comfort”, then spend their adulthoods trying (and sometimes succeeding!) in regaining that “comfort”, banishing money anxiety from their minds. The working and lowers experience money as a fleeting thing, to be spent as soon as it is seen, before it darts away. In fat times, they purchase bling like jewelry and TVs and boats. In lean times, they clip coupons and try not to starve.

The common terms are basically a hodge-podge medley of all these concepts. And this occurs partly because it is true. People of the “UMC” world might interact with Es who were born into professional jobs, Gs who finally clawed their way into being G2, and labor elite business owners. Trump might act like a member of Fussell’s Prole tribe, but he still lives among people of the “UC”. It’s very easy to imagine a teacher knowing a cop, even though a cop is the better sort of prole/L, while a teacher is a “Middle” or a G.

Are you still confused?

At least I got to draw.

Good with crayons,
Monsieur le Baron

Stupid Party, Evil Party, or the Cynical Crusades of Cunning Capitalists

Dearest friends,

It seems that when I am at a party, I am in a party, which makes me party to certain things. Personally, I’d rather be privy to the privy, a privy in the privy. Too many people are looking for a magic spell, or some formula which may as well be one, but I am sympathetic to the sentiments of Gore Vidal. The greatest magic is not some occult scrap or incantation, it is being smarter than your enemies. If only I could be such a wizard.

Alas, it seems I am often in the stupid party. The only problem is that no one can seem to agree which one it is! To hear Donkeyphants tell it, Demonthuglirats are a party masterminded by Big Fupa, Cleetonius Snapback Sueytonius, Hitler Jesus, and the Menergy lobby. Every day, the Cock Brothers drill the Ladyboy Earth Mother and extract her viscous black fluids (should probably get that checked out, by the way) so as to collect the Menergy profits they use to fund the racism machine, which beams the racism that keeps wypipo alive.

Tangent. Cleaning product called Ethnic Cleansing. WIPE POWER! WIPE POWER! It’s got all the cleaning secrets of… uhh… the ethnics. Fund it, bruvs.

By contrast, we have the Muleodons. When they aren’t desecrating the cross, they’re getting spitroasted by the handlers in the Big Gay. They outsource factories and import fudge-colored fudge packeries to satisfy their lust for the British Broadcasting Corporation. They erect dead baby castles made out of live babies, just to be ironically extra evil (Note: Don’t try this at home). Their list of crimes is so long, you could make a whole documentary denying them all. Does anyone want an NPR tote?

Let’s take one contemporary issue, which I have studied at great length. To pro-abortionists, it seems obvious abortion should be mandatory, because we must abort the fetus of the baby Cthulhu before he awakens and begins a thousand years of darkness. The pro-choicers only have the weak argument that baby Cthulhu should be free to self-actualize and get a LIBERAL ARTS DEGREE in world-destruction, the hippie bastards. Since it’s ridiculous anyone would sincerely believe in this, it’s clear their organizations have been paid off by the sinister Cock Brothers and their Menergy Companies, collectively known as the Menocratic Manocracy. Not even the Cock Brothers want a thousand years of darkness. But they’ll still pay for people to protect the bodily autonomy of the fetus against the parasitic sustainer (who leeches off the fetus’s Instaauras for precious likes and upvotes).

The problem with labeling the Pachydemos the Evil Party is that the roles are often reversed in different situations. Sometimes the Remonrats are trying to make our economy more sustainable by using precious green energy mined from our Earth’s confetti deposits, while the DMC scaremongers about the threat caused by runaway clown emissions. That’s because there’s a profit to be had tying our energy to the non-renewable sun, which will soon grow dim and explode, whereas confetti rocks last billions of years and can be recycled into new planets. Now, both parties will claim to be using fax and logjams to DESTROY their opponents, but the problem with that claim is that you can fax anything so long as it fits on a flatbed scanner. Obviously. Indeed, if you go to college and take a Philophilia course, or get a Doctorate in Office Supplies, you will often be called to fax something from one side of the room, go to the reverse side, fax it again, and keep faxing it back and forth until the professor gets bored and unleashes the rabid badgers on everyone who hasn’t done their homework. This is a training technique known as the Devil’s Avocado, where you try to spread toast that isn’t yours.

Ultimately, people come to rely on their moral intuitions and certain core axioms. And that’s the problem. Political parties are not composed of people of one mind, like the Borg, but are coalitions built on a constant struggle for advantage between internal factions. Because of this, one party may have many different positive agendas within it, which the factions can’t agree on. The political platform itself is, of course, a compromise position. When a party plays the “stupid party” role, it means that they are trying to set forth a positive policy but can’t agree on one. After all, policies come from different axioms and also present different tradeoffs. To the lumpen, oblivious to party politics, it looks like squabbling over minutia. And to some extent, it is. When a party is being the “evil party”, it is acting oppositionally to a positive agenda. It can be because the positive agenda smells, because they’re being manipulated by nefarious forceps, or probably even a third or fourth reason. Either way, it appears like one party has a moral message, and the other party is just saying “Fuck you”. Because it is. The opposing party doesn’t need to agree on a path forward to agree that a certain path is obviously bad, but because it sets forth no positive agenda of its own, it looks like it is opposing an obviously good thing (all positive agendas are sold to the masses as obviously good).

But Monsieur, this is all stupid and obvious! How dare you waste my time? Apologies, dear reader, but I am a brainlet and it takes me a while to get anywhere. Besides, regardless of how obvious things are, sometimes they must be restated. Education has a knack for blinding people to obvious truths. They get so many fax, they can dial into anything. That’s tragedy and alienation of modem life, we’re not on the same page. And worse than that is to fax too many modems – life becomes phoney. That’s post-modem thinking, that there is and can be no one true AOL disk (but it’s AOL 10). Personally, I think we will one day look to the heavens again, and cast our ether nets there.

To get back on track, sometimes policies get passed. Obviously stupid policies get passed. You see, when setting a positive agenda, and you have many good but flawed paths forward, dissenting is entirely reasonable. Accordingly, it’s not a good show of loyalty. But if the party chooses a very, very stupid policy, then agreement shows that everyone really is a true blue party member. It’s a classic example of signalling. So instead of seeing a party choose one of several viable options, we should see them ultimately unite behind very stupid plans that please no one. A very stupid party indeed.

A seeker after slamsara,
Monsieur le Baron

Freaks, Geeks, etc, or Recounted, a Day at the Incredibly Large Miniature Golf Tourney

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Dearest friends,

I am, of course, a man of business and leisure. And business being merely leisure in haste, I suppose that makes me a man of double leisure. As such, I have a tale for you, although it may restate many of the points I have previously made here and here. With any luck, this form makes it less tediously obvious and banal. You could consider it a part 3, if you would like.

It was a lukewarm summer day, and the breeze was neither strong nor weak. It was, in short, a mild day. Naturally, everyone was annoyed. They preferred their weather cool ranch Doritos. Pseudo-Erastothenes was first to triangulate the hole, being a frequent consumer of Doritos and therefore a master of triangles and all related shapes. But he didn’t get there first. Because he had to advance his right and left wing in tandem, he couldn’t flap very well, so he was beaten there by everyone else. The challenge in Incredibly Large Miniature Golf was not in getting the ball in the hole, but in operating the flying suits. Also, there were flying suits.

Should have mentioned that earlier, I suppose.

We were also wearing boxers with lobsters and anchors all over. Boxers, brief, and no pants. Never any pants.

Mixotec of the Discotheque was the first to get into position, and he was already in a sour mood. He had studied Physics in school, making him an Aztech, but he abandoned the field. It paid too much, and his real passion was in music. And that was a fatal mistake for him to make, for he was never able to gin up the requisite irony in dealing with song – he cared too much. And one should never care *too* much, unless you should. So he always lost. Last month, he had lost again. Franz Ferdinand Magellan had circumnavigated the globe while playing rock music, and donated his bankroll to the Green Movement while he was at it. It was an act both expensive and supremely pointless, which is the only kind which makes life worth living. Some had protested the act of going around the world by jet for environmental causes, which only added to Franz’s prestige. After all, who was going to stop him?

In retrospect, Mixotec should have abandoned his disk jockeying to join AztLAN, the Neo-Mexican telecomms firm. But it was too late now, which was less a statement about time and more one about the loss of face that changing course would entail.

“Electronic music is too popular for me to get big now,” said Mixotec.

We all agreed. After all, one could not make a name for one’s self if something was too widespread. That made it common, and therefore base. And contrary to what one might expect, base was the opposite of based.

Mixotec had begun his career in the 70s, when the field was suitably obscure. But time passed, and the Seventies were now the Oughts. It is what it is, but an is not an ought, though the Oughts are what is. It is what it Ought to be, but not what it ought to be, and therefore ought not be the Oughts.

Regardless, he was doing fine. He could sustain his lifestyle. They all had trust funds, because they did not trust funds. Accordingly, they could live the busy lives of the idle rich. They traveled around various social circles, because they were squares, the proper shape for nerds. It goes without saying that they were all nerds, which is why I am saying it. A nerd was not the same as a geek. Geeks had obsessions. A geek’s obsession dominated their identity, because it was fitting to their identity for idiosyncratic reasons. Nobody told them to collect stamps or molest horses or trim tiny trees. They just did it because it was their reason to be. Our caddy was a geek, a freak, and quite meek. He smelled because he did not bathe, but he did not bathe because he did not smell. The Caddy, Bobby, was a Wej. While Jews had large noses, Wejs had no noses at all. Or at least, it seemed like that. To be honest, I could never tell. And to be honest, I could never tell if he bathed either – it was simply an assumption.

Torwell said that the greatest gap, the one we could never bridge to the Wejs, was that they were dirty and we were not. And even if they were clean, they were dirty. Walter Lyle Jr IV was next to large minigolf, and he took his club without acknowledging the caddy, no matter how desperately the caddy wanted to be acknowledged. He took the club because he was in the club, the club with the clubs. A country club is in the country, and has the country, but despite this, it is not for one’s countrymen. Another case of bad naming. People invested a lot in names, which meant they were in a terrible, terrible bubble. But for now, it was yet another unicorn success story out of Sans Serif, the world’s font of innovation. The Most Distinguished Care-a-lot Bear hated that place. He called it Silly Con Valley. Frankly, I agreed. It was all puffery. That was why it was so tremendously important. Puffery was always the most important thing of all. We had picked the game of large minigolf because it was obscure. That too, was puffery. But to admit puffery as puffery would be to give away the game. Only a very serious man could wear a very silly thing in seriousness, and it served as further proof of his seriousness.

Right now, it was just us and the caddies. The caddies had been the original players of the game, and they played it because it alleviated their Weltshmerz by speaking to their Weltanschuung. The only problem was that it spoke to ours too. We were the green men, because we were on the putting green. How could they keep outsiders out? They would have to make their hobby unattractive to outsiders, not through their social behavior, but by making the hobby undesirable in its own right. And some did, which is why horse jerking didn’t work, though it did jerk. But so long as the hobby could demonstrate prestige in some way, it would one day be colonized. Thus, there could be no peace for Peacehammer, Peacehammer being too subversively interesting to a world of perpetual war. A warld, if you were. Peacehammer would one day even get a televisor show. We were on the Eastern tip of the Western half of Oceania, and the wind was blowing north-“Buy Southwest stock,” said Lyle. Then he swung, and with a terrible thwung, the ball were flung. It went east, towards Eastasia, our perpetual enemy except when it wasn’t, which was every other Tuesday.

It didn’t go very far. Lyle only liked local flights. Puddlejumper trips. Up and down, down and up. They were like us, the Wejs. They were more like us than the normies, which is why they hated us.

Familiarity bred contempt.

After all, how much difference was there between Memelord and Memepeasant, at the end of the day? Little, and they resented it. For, despite this, we had everything, and they had nothing. The Caddy looked at us with hateful eyes. But he was a Caddy, and that was all. For all he was was Caddying, for the hobby was everything for Bobby, Hobby Bobby, and Hobby Bobby loved large mini golf with all his heart. We didn’t. We came because large minigolf was hard, and being hard made it a good test of our nerd cred. It was a game of Cred Dead Redemption, but with less horse testicles. Calculating the trajectories of large minigolf would kick the trajectories of our lives into high gear. Did we do it because we loved large mini golf? Only some of us did. Lyle swore. He had hit the Mourning Chicken, which meant he had to take three penalty strokes from the Kinoplex’s roof, and that meant battling through the popcorn mines. We called that one a “double bogey”.

Hobby Bobby showed the duality of it all. Top and bottom together. Together playing large mini golf. There was a phenomenon, Schrodinger’s Catgirl, and it was illustrated well when Hobby Bobby and the Most Distinguished Care-a-lot Bear were side-by-side. The Most Distinguished Care-a-lot Bear’s ancestors had come over on the first sunshine cloud to Oceania, and they had won the struggle for New Jersey, genociding the primitive Carebear Cousins that used to live there. He was, in short, a very big deal, and very old stock, and the pinkness and plushness of his felt and fluffiness of his stuffing was a testament to his good breeding. As he would put it, “I am no half-rate Create-a-Cub.” And despite this, he was a lover of Japanimation. And that was the essence of the Schrodinger’s Catgirl paradox. If you picked a random anonymous Japanimation early adopter, it would probably be a basement dwelling pee-bottler. But it could also be Mr. Care-a-lot. A person buying a bit of bitcoin in the early years was probably a weird outcast, but it could also be the Ginklevoss Twins, cream of the crop. There were only two kinds of early adopters, top and bottom. We were all autistic, which set us apart from the brown people outside.

The Most Distinguished Care-a-lot Bear put a spin on his ball, which worked; because it, spinning that is, tended to work; spinning works because spinning is a good trick; he had learned the trick from a Colonel Ardenti, amateur occultist and professional Sandinista, who taught him to use the right force. Spinning was the lifeblood of Isis and her mysteries. It was also a good trick.

The tragedy of it all was that both the brown people and the other brown people desperately wanted to be with us. The first, in imitation of us, the second, to chase our prosperity despite holding us in contempt. And thus, large mini golf was a doomed thing as soon as we came to it. Now that we played it, it would slowly gain currency as a social proof of high class, and thus would spread to people who otherwise would have no interest in it. Thus, it would pass from the geeks to the nerds and finally to a kind of fake geek cargo culting the object in a vain attempt to gain status. And then we would abandon it for greener pastures. We were the green people, and we could only live in green fields. In the end, it would be the Hobby Bobbies alone in a desolate field, but at least free to pursue their passion, the end being like the beginning, the top being like the bottom, the black squares of a checkerboard being the same as the white. The only way to stop this decay once the ball was in our court was for the thing to be so difficult and costly that it would be prohibitive for the browns to partake. I looked outside. There was already a brown at the gates. Like most early browns, he was white, female, and shopped at Target. She/he identified as he/she, but mostly to impress other browns on Twatter. The browns made distinctions among themselves, but to me, they were all browns.

“You see that one, Bobby? He will never get in. He is not of our kind,” said I.
“I hate you,” hissed Bobby.
“I know,” said I.

I had hit my ball poorly, and it landed in a sand trap. Sighing, I trudged, alone, over to it. Unbeknownst to me, Bobby had followed me. Bobby fell upon me, and he was strangling me, and his hands were crushing my throat, and I was grasping, struggling, straining, and my arms were trying to wrest his hands away, and he was bashing his head against mine, and I was bleeding, and he was bleeding, and our blood mingled together in the sands of the sand trap, and my face was bluing and it was redding and blue and red were playing together, and then it was all going dark, and Bobby had killed me, and I was Bobby, and I was alive, and I was getting up, and all I was dusting myself off. And then I was fine, because existential crises and out-of-body experiences were something, like hard drinks, that a wise man only had once a day. And besides, it was 6, and we, the bank’s bank men, lived our lives by 3-6-3, so large mini golf was over.

In the morning, the greens would be overrun, and by evening, desolate.

Sic transit gloria mundi.

“Hi ho,” said I.

And that was it.

As subtle as a Kelly cartoon,
Monsieur le Baron

The Value Proposition of Elites, or Why You Should Feed Me More Fudgesicles

Dearest friends,

I zoom around the world like Pac-Man around his maze, eating up pellets. And I have to ask, where do the pellets come from? Do they fall like mana from heaven? How do they obtain their marvelous roundness? Why do they taste like corn puffs? What sorcery empowers the big pellets to give ghostbuster powers? If I were a natural philosopher, I could answer such questions.

Let’s see what Edmund Burke has to say.

“A sermon from a noble duke, or a noble marquis, or a noble earl, or baron bold, would certainly increase and diversify the amusements of this town, which begins to grow satiated with the uniform round of its vapid dissipations. I should only stipulate that these new Mess-Johns in robes and coronets should keep some sort of bounds in the democratic and levelling principles which are expected from their titled pilpets.”

Or, in short, the aristocracy exists to undermine the basic values of our proud English Englishmen. Wonderful. Why even keep them around? Tradition? Tradition is lovely, but it doesn’t explain the value proposition in the first place. If time tells us anything, people told “because it is” will inevitably tear down the old ways. Burke’s argument is also rooted in property rights and the rightful place of people in society. We’ll get back to that one… another time.

For now, the value proposition.

If you’ve hung around this sphere of blogs, sometimes known as the Weblogoball, you may know of the notion of value transference. There exist projects which societies embark on – the usual stuff. Building factories, constructing dams, selling hot dogs, cloning orphans to harvest their organs, selling heroin, opening the Hellgate to Hai’lac’nox, the Pain Dimension, where our dark masters reside, milk delivery services, and maybe hanging the Christmas decorations.

As such, professionals and especially executives do not produce themselves. They coordinate production activities and take a portion of the proceeds. If you want to build a house, you’d rather have ten construction workers than ten civil engineers. Ten nurses will usually be more useful than ten doctors. But there can be no large or complex projects without coordination. The price you pay for that coordination is the skim, the value transferred for not directly productive activity. Yet Marx raises an excellent objection. Much of the time, this coordination is not done by the controlling interests themselves, but by a class of paid managers.

Furthermore, many jobs that are often done by the genteel have no relation to value transference at all. Take art and writing, two things often done by the rich. Not only is there no productive activity to siphon off of, the person is doing the work themselves. Anything produced there is done by the elite. They paint. Now, one might object that art is bohemian and is thus somewhat marginal. It’s a fair objection. But there is another elite vocation which also does not engage in value transference. It is academia. Not only is academia not bohemian, it is at the very heart of aristocratic culture. Ausonius was made consul for being a great professor. As Bourdieu noted, it is the font of honor. While, legally speaking, the sovereign is the font of honor, the actual granting or sale of a title to a graduate of a noble college is not happening arbitrarily, but within a pool of talent which the universities have already curated. Your ticket is punched. Here in Freedomia, we lost the titles but kept the system.

The next notion is that elites need to be paid off so that they don’t cause trouble. People of higher social status, by nature, are able to muster resources through their connections and prestige. Therefore, jobs need to be made for them and money given so they don’t maraud. In this model, the elite is a sort of stationary bandit, and the price paid to them is a bribe to not cause chaos. I think there is also much to recommend this as a factor in elite compensation. However, it holds more true in early stages of development, where the elite remains of a martial character. That is not to suggest the elite of today are totally disarmed – lawfare remains a valid concern. But most of them, if left alone, are unambitious nerds, more likely to hot glue a figma than to be a hotspur. If there is danger, then more of it lies with the frustrated will to power of the middle class and their agitprop protests. Antifa will bike-lock your head.

How are products made? They are made through labor. This is the input of the workers. But, as Ayn Rand noted, brute muscle alone cannot make a railroad. A railroad is not only muscle, blood, and iron, but also ideas, the concept of the railroad itself. This is why another name for the professional class is the creative class. What white collar professions do is provide the inputs of the mind, not the body. Mind and thought, not muscle and blood. Products require designs.

The academia sits at the center of elite culture in many civilizations because it stands as the symbol of thought itself. Why are elites often early adopters of new trends? Because they’re innovative. Because they’re new thoughts. Elites broke with the ancient tradition of nursemaids to start breastfeeding. This didn’t work out so well with small, flat chests. So infant formula was invented, and became a stunning success. Early infant formula killed babies. In this day and age, infant formula has become so safe and cheap that it has been adopted by the masses. Naturally, this means the elites have abandoned it to go back to breastfeeding. The more things change…

What does this mean? Ideas push out the long term production frontier. They make society more productive in the long run. So long as the civilization lasts, the idea never stops paying. The contribution of an elite may never exceed what they receive as compensation during their lifetime, but over the history of a state, it might. In that sense, the production of an elite is not the same as the production of a worker, since it may require many generations to pay back the investment, and it goes on long after the person has expired. In the short run, they can be said to be parasitic. In the long run, sometimes not. So what is the correct time horizon to judge their contribution on? And how should they be paid? Should they be paid based on how much they add while they live, or how much they add to the overall wealth of humanity in the long run? R&D labs are cost centers, but a nation that doesn’t encourage its corporations to conduct research falls behind. Across many settled societies, you keep seeing social classes arise. There’s a reason for that, and it’s not just “humans are assholes”. If it was a total waste, then more egalitarian tribes would not have been supplanted by settled hierarchical civilizations.

Secondly, many elites never produce anything. The value proposition is extremely high variance. Medicine had provided little of value for centuries. Then, with the invention of vaccines and penicillin, the whole profession was made profitable in an instant. It was undoubtedly worth it, but you wouldn’t know it from the first few millennia. Instead, you would come away saying that a significant portion of the gentry was upkept doing what was essentially voodoo. To borrow the expressions of a certain volatile Med, the payoffs of elites lie in Extremistan, while the payoffs of workers lie in Mediocristan. Workers are governed by physical limitations. Even a very strong and able miner can’t mine exponentially more coal than his neighbor. Markets are very, very good at pricing the labor of workers. The pay of workers around the world tends to be similar. The income of a Chinese machinist is not too different from an American one, but our corporate overlords are too cheap to pay extra.

Contrast this with elites. Some ideas they come up with solve previously eternal human problems. Hunger has been banished. Disease mostly destroyed. Some ideas are basically neutral or pointless, like pet rocks. And some ideas are actively harmful and corrosive to the host society. In that respect, elites resemble venture capital investments. You lose money almost all the time, but sometimes you hit that unicorn, and you make enough to make the whole enterprise worth it. And venture capital is not investing in staid, predictable industrial expansion, but is looking for the disruptive ideas that will change the world.

If we pay people based on their expected value times a certain multiplier for profit, then the pay of workers is easy to calculate. But the pay of elites? Difficult. If their payoff function lives in Extremistan, then the expected value must be dominated by the small probabilities of massive payoffs, the tails. And we have few means of assessing how likely these tails are, or how big the jackpots will be. So you can’t price out the “proper” pay for an elite the way you can for ordinary workers. The payoff function is too fuzzy. Two different capitalists might assess the productivity of a coal miner differently, but the valuations will still be in the same ballpark. Creative work? Not so much.

This is why the incomes of elites vary so wildly across time and space. Cross the pond, and every job makes a different amount. Many jobs pay far less. The tax structure for capital is different. Every payoff scheme is different. Is a doctor so much the worse for living in Germany? Is an industrialist a better industrialist if he lives in Ireland and not the mainland? Have America’s rulers become far smarter and more competent since 1950? In modern America, we expect scientists to make peanuts and to coast on the great prestige of their work. But in 19th century Norway, scientists ruled the roost. Wealth, power, and knowledge were concentrated into one set of hands. And so, the masses instinctively recognize there is something unseemly about the rising wealth of the 1% and their masters, the upper class. Because there is so much fuzz and uncertainty about the expected value of these things, getting paid more or less is just a matter of manipulating cultural conventions and norms. Elites write blank checks to themselves.

If you’ve got that kind of power, it’s best to write a low number, so that all will consider it reasonable, and to take one on the chin if you make a mistake. Often, what makes people mad is not the size of the checks, but the lack of consequences for bad ideas. People are perfectly okay if a CEO makes $100 million shoring up American industry. It’s seeing a CEO golden parachute out of a burning building that really pisses them off.

Especially since, as you ascend, money is not money. That is, money does not represent the same thing. For the bulk of society, money is the means by which they sustain themselves. It’s resources to eat. Their share of their productivity is what Marx would call the necessary labor to reproduce labor. Most people live paycheck to paycheck, and every dollar is another dollar to buy Stardollars coffee and pumpkin spice corndogs. Once you reach the upper middle class, you achieve satisfaction of these life needs. Money is no longer about getting another Margaritaville machine. It’s not about stuff. It’s about power. It’s shares of ownership of the means of production. It’s influence bought from politicians. It’s points in the game of prestige. As such, absolute pay doesn’t really matter that much. Relative pay matters, because relative pay and relative wealth is what determines your rank in the pecking order. This adds another fuzz factor to calculations. What they’re getting isn’t stuff, it’s power. It fills a different psychological need from the income of workers.

Was I supposed to set up a Pac-Man analogy? Eh. It’s an overrun. We’re behind schedule. Give me a million dollars and I’ll provide one, maybe. Probably. There are a lot of risk factors on my risk factor chart.

“Engineers like to solve problems. If there are no problems handily available, they will create their own problems.” “Work is for losers. A winner says ‘That’s on my list’ and never commits to a deadline.” – Bob the Builder, probably

Or maybe it’s all bollocks. Give me fudgesicles. I deserve it, since I am such a big value creator. Productivity = The Bigs.

Hates Mondays, meetings, and Monday meetings,
Monsieur le Baron

A Better Political Compass, or The Magnificence of Doublethink

Dearest friends,

Without a good compass, you will get lost. This is why I get lost so often – I have yet to find a reliable supplier of hiking supplies. It can be hard to navigate without being able to get your bearings. You can use the sun, but I find the sun has this unfortunate habit of swooping out of the sky trying to eat me, making this dreadful angry face all the while. And one can try to use the animals as a guide, but when I try to sing at the birds, they just peck me.

So a compass.

Similarly, if one is to wander the political woods, one must have a good political compass. Yet I find the ones available often too shabby. The first axis is often labeled Left vs Right. These two terms on their own don’t tell us anything. They might as well be team jerseys or colors: Red vs Blue. Indeed, many shabbier tests use party positions as the metric – to be a Leftist is to toe the Democratic party line. Needless to say, there are many flaws to this. Some go farther and call this the economic axis: leftists are socialists and rightists are capitalists. Yet, many would call positions like Traditionalism, Fascism, and Monarchism rightist. But these often reject capitalism for various reasons. Similarly, most people would agree progressives are leftist. But progressivism is usually defending the extension of Capital’s power – #wokecapital. And people point at something like, say, gay rights, and say that it’s leftist, even if it has nothing to do with economics. Clearly, capitalism vs communism is inadequate to explain this.

What does? The common thread uniting the Left is not socialism, but constructivism. That is, the Left believes that things are socially constructed. Things being socially constructed, they are, in some sense, malleable. Culture and nurture rules, not nature. Genders are a social construct! Laws are a social construct! Gravity is a social construct! By contrast, the Right believes in innate properties of things. There is an essence to everything, an immutable nature. Men and women are different. Capitalism channels man’s inherent greed productively. Human races are real and more than skin-deep. Going to the absolute extreme on the Left, one might expect someone to say there is no such thing as truth, only social constructs, so we can will away the Sun if we all clap our hands and believe. Going to the absolute extreme on the Right, one might expect someone to point out an ethnic group, say, the Yews, call them treacherous, and say that treachery being in their nature (as our qualities and weaknesses are in ours), and nature being unchangeable, the only path forward is extermination. Culture is downstream from biology.

Nowadays, political compasses often have a second axis going vertically, which they term Authoritarianism vs Libertarianism, and which is supposed to capture social attitudes. As we can see, lots of social attitudes can already be captured by the Left-Right dimension. But this dimension is also real, just mislabeled. The distinction which is being captured is not Authoritarian vs Libertarian, but Collectivist vs Individualist. Collectivism, in turn, is implicitly Authoritarian, because the group is privileged over the individual. Because of this, the individual necessarily must suborn their interests to that of the group. This creates a power differential and relation. When groups form, even anarchist groups, leaders and decision-making processes form, which people must submit to. Collectives imply authority. Collectives imply a relationship of authority. Collectivism is therefore implicit hierarchy. Individualists don’t see the world that way. For them, a man is born with rights. No government needs to exist for a man to be free to drink spring water, speak his mind (at the birds, presumably), or build a gunsword which shoots guns which shoot swords. Man is free because the world is free. Groups form and then IMPOSE upon the individuals, taking some of their rights for themselves. But for such an arrangement to be legitimate, the ruled must consent to surrender some of the freedom which they possess in the state of nature. Those who are Leftist Individualists we would call progressives or libertines. Because reality is socially constructed, they perceive reality as a group impingement on their innate freedom to socially construct themselves into being a Two Souled Karate Unicorn. God bless them. Those who are Rightist Individualists want to protect their natural right to have sex with twelve year olds because, actually, it’s ephebophilia not pedophilia and the attempt to define it otherwise is a plot by the government and its sinister roads, so buy up all the little girls you can using gold, which holds innate currency value. Leftist Collectivists see the perfect People Management Software as twelve easy gulagings away, and in the meantime, we’ve got to stop those wreckers sent by the Untied Shoelaces, land of godless materialism, people treating dogs as children, and negroid music. Rightist Collectivists know that if they can just get all those yahoos and punctuated merchants subverting the Ordnung back in line (or thrown out of helicopters), King Arthur will return, the mountains will jizz chocolate, and peace will reign in the land forever probably.

Except some don’t. And also, isn’t this just a relabeling of the existing compasses? Before you throw me out of a helicopter for being a shallow pedant and a hack, I have one more thing to add. And then you can throw me out of a helicopter for being a shallow pedant and a hack.

There’s one more axis. Constrained vs Unconstrained. This may sound familiar, because it is familiar. I stole it from Sowell. But it explains how monarchists and fascists are different, even if they might both be Collectivist and Rightist. Constrained thinkers tend to see the world as defined by tradeoffs. It is a fallen world. Things don’t really permanently improve. History goes in cycles. Mistakes are unavoidable because knowledge is costly and the future is messy. Conflicts come from people having fundamentally different interests. Unconstrained thinkers believe in progress, that things can and will improve, and that win-wins dominate, not trade-offs. Mistakes are a matter of ignorance. Conflicts come from failures to communicate. Fascists are Unconstrained, Reactionaries are Constrained. Ancaps with NAP attacks are Unconstrained, Old Libertarians are Constrained.

Looking over the long flow of history, technology tends to fit the Unconstrained pattern, while governments and cultures fit the Constrained one. So, naturally, engineers tend to be Constrained thinkers and sociologists Unconstrained. An engineer is trained to think about the tradeoffs made when building something. You can trade strength for weight, heat for power, speed for durability, etc. They are constantly confronted with setbacks and failures. And they see all human constructions crumble to dust in time. But every once in a while, one lifts one’s head from the cube and sees that the internet really has gotten thousands of times faster and you’ve made a fat bundle along the way. Similarly, sociologists and their ilk see so many human cultures that it’s hard not to notice the vast differences in the way cultures do things. And they are confronted by differences in values. In turn, it instills a kind of optimism. If so much can be different, why can’t we improve? And so they make another preschool program that doesn’t work. Aristocrats gain prestige by moving leftwards, and they are also constantly manipulating and messing with the proles, so it’s hard to avoid the conclusion that these cultures are constructed – you’re constructing them. But such a position means that your fancy hat is just as constructed, so why don’t we construct it off your head? The prole doesn’t have much margin for fanciful ideas, better the devil he knows. Besides, he sees the kids growing up and the animals breeding, and he knows temperament comes from the parents. But such an ideology means that his low status really is innate to him and deserved. Collectivism tends to attract people who have little but their group identity to be proud of, and in turn, Collective regimes purge those people as useless eaters. Individualists often find themselves asserting their special individuality, a unique identity that everybody hates, and which would be pounded to a pulp absent the government monopoly on force.

What’s the Matter with Kansas? is a mistitling. It should really be called what wrong wit humies atok their fecking stupid uezs.

Anyways, to make a long story short, I see eyes out in the trees looking at me. I’m cold and wet and hungry. I’m hoping you can use the IP posting this to find where I am.

Send hookers and bitcoin,
Monsieur le Baron