1Q84 - Do NOT read it

I am writing this to save people's time by the tons. 1Q84, by Murakami Haruki, was surely one of those lucky books that took space in many people's reading list this year. But, I will save your time - Do NOT read this terrible book. It took me over a month to finish this book, only to find that I came across the worst book by Murakami, perhaps even worse than Norwegian Wood. It almost feels like I've finished the Twilight saga. Then again, that one made sense at least.

It is pointless to list what are so bad with this book, since I could not really find anything good to mention. Murakami wrote this novel in three parts, publishing books 1 and 2 first and publishing book 3 after about a year. I am not sure - whether he is easily swayed by the public's reception or simply he does not have what it takes to finish what he has started. However, he created a total mess of immature curiosity (I feel sorry for the word curiosity, for goodness's sake), then could not make a plausible meaning out of the havoc.

In conclusion, do NOT read it, and you will save 40+ hours, which can be put to much better use.

Corporate Bond Credit Risk - A Very Long-Term Perspective

The National (of course, American) Bureau of Economic Research recently published a paper titled “Corporate Bond Default Risk: A 150-Year Perspective,” which CBS MoneyWatch summarized in an article. I could not access the paper free of charge because I could not fit in any category, but I believe the summary by CBS is worth noting. So here it goes: my summary of the CBS summary, plus some thoughts of mine for those numbers.

The long-run average default risk, for the period of 1866-2008 is 1.5% - a rather high number if you ask me. They are not just listed companies - but they are powerful enough to issue bonds. During the Great Depression, the default rate was well over 10%, but this is nothing compared to the whopping 36% default during the railroad crisis of 1873-1875. Without these outliers, the average will be smaller.

Default events had weak correlation (about .26) with business downturns. Recession indicators have little predictive ability with regard to corporate defaults. Defaults showed their own patterns over time, and had a cycle of about 3.2 years, which is longer than the business cycle.

The credit spread was only 1.53%. I think this is already quite small, but the realized premium for the spread was only .8%. Realized premium was quite low compared to the yield the bonds had when purchased. This is natural, because the yield is there to compensate for all kinds of risks - default, illiquidity, risks from embedded options if any, etc. Yield never equals expected return, but investors confuse them and keep chasing after high-yield bonds.

This, coupled with the 2012 investment outlook from Canadian Business (dated Jan 23, 2012), perhaps we should go with equities, and entrench ourselves in the long-term perspective, and behave like an institutional investor. Most of the companies listed in NYSE today, I believe, will still be there after 20 years.

You can be cool and save the Earth

There are easy little things we can do to help protect this green planet. Not using garburator (http://junsearth.blogspot.com/2011/07/little-things-we-can-do-1-stop-using.html) is one such thing. Another great easy thing to do is cold water laundering.

1.

According to Carbon Conscious Consumers, a US climate campaign body, 90% of energy used in washing laundry is used to heat the water.

Pushing cold/cold when you start the washing machine, instead of hot/warm, saves you carbon footprints equivalent to 9 miles of driving. This might not sound too impressive. Let me give you additional figures.

A standard American household washes 392 loads of laundry every year. Let’s round it to 400. 9 miles multiplied by 400 times of washing... means you can reduce carbon footprint by the amount of 3600 miles of driving.

On average, people drive around 12 to 15,000 miles per year. Using cold water in washing alone is equivalent to three to four months of “no driving.” Anyway, I don’t drive really. I use public transportation, and use Zipcar only when I really need it. For people like me, I should give some other comparable measure.

4 ounces of beef produces green house gases equivalent to 6.6 miles of driving. This means, 9 miles of driving will be equivalent to about 5.5 ounces of beef. This is a lot for me or for my wife, as an amount of beef to be consumed in one meal. Even for average people, a hamburger usually comes with a 4-oz beef patty. Again, 9 miles of driving is not to be taken as too little. However, I do not eat meat on Mondays because I am on the campaign of Meatless Monday anyway. Let’s use some other measure, then.

An average household in San Diego, California, emits about 11.5 thousand pounds of CO2 per year. (I used my old address in San Diego because the site wouldn’t accept a Canadian zip code.) Following this number, 9 miles of driving is equivalent to 6 hours of total abstention of energy use in home! In other words, if you use cold water to wash your clothes than hot and warm water, you can live for 6 hours, consuming the normal amount of energy, at the rate of an average American, the number one ranking citizens in terms of per capita energy use!

Still don’t get it? Now I will use a measure everyone can understand very quickly – dollar amount. If you wash 80% of your laundry in cold water, you can save $60 per year. (Of course this depends on your area. I think it will be something like $100 in San Diego.)

In addition to the environmental benefits, using cold water is better for the fabric. Furthermore, some dirt, notably protein-based dirt like blood or egg, will not go away if you wash them with hot water. Use cold water.

2.

However, there is one caveat in this great advice. Cold water is not as effective as hot water in killing viruses and bacteria. Use hot water for heavily soiled clothes and other clothes that require extra attention in terms of hygiene.

3.

I believe you now understand the benefits of cold water laundering well enough. To make life easier, I will make bullet points to remember for cold water laundering.


- Wash your laundry in cold water whenever possible.
- Pre-soaking or pre-treating enhances the efficiency of washing greatly. For example, I carry this pen-type detergent <show it> wherever possible, so that I can do a first-aid type of treatment when I spill some spaghetti on my Ferragamo tie. This same pen can also be used to pre-treat heavily soiled laundry items, before you put them into the washing machine. Just soaking your laundry in cold water for half an hour can help the washing
- Use specific detergents that say “cold water.”
- Do not underload or overload your washing machine. Washing with full loads help you save energy.
- Front-loading washing machines use less water. Use them.

I will repeat and summarize once more: 1) use cold water whenever possible, 2) pre-treat or pre-soak laundry before washing, 3) use specialized detergents, 4) wash with full loads, and 5) use front-loading washing machine.

This is a small and easy thing to do, but you can save the planet and feel great. Also, you can save some money as well.

What Is the Ultimate Driver of Evolution? - The Selfish Gene by Richard Dawkins

What Is the Ultimate Driver of Evolution? - The Selfish Gene by Richard Dawkins


My favorite subject of philosophy is epistemology. No wonder philosophers like Husserl, Heidegger, and Derrida occupies strong spots in the realm of my favorite philosophers. Skepticism must be the starting point of all this search for the true perception of the world. Believing thus, I have been always quite skeptical about so-called “certain facts.”

In the truest sense, what is certain is limited to tautologies. One plus one equals two because we defined them that way. Mathematical axioms are given as true because they are what they are defined. Everything else in this world is quite vulnerable to the attacks of skepticism. For one thing, most people would believe (including a friend of min who is an engineer and doctor) that the Earth is orbiting around the Sun. “Yes, it sounds quite plausible” was what I told him when we had a debate on this theme. Today’s physics does not admit the concept of centerpoint - everything is relative. Back to the Copernican thesis, what is (relatively) certain is that everything is explained better when we regard the Earth to move around the Sun, than vice versa. The so-called Okam’s Razor is a good criterion in terms of efficiency, but I am not sure of its legitimacy if I must give my best guess about the order of the universe.

The question of truth itself will be a solid topic for several blog postings. So, I will finally wind up and get down to today’s topic: the wonderful book by Richard Dawkins, The Selfish Gene. What I wanted to say in the two paragraphs above was, in short, being a skeptical, I was not sure about Darwinism either, like other theories. When I was in junior high, I was lucky to have a wonderful biology teacher. She was not just a smart teacher, but also a very conscientious person who wanted to make her students think about important things in life. After teaching us the evolution theory from the textbook, she took time to introduce us to the alternative, the creationism. At that time, I was not yet initiated into the realm of skepticism, and was like a sponge absorbing knowledge about the world. Consequently, at first I thought she started a joke. But she was so effective in raising questions about Darwinism, that she succeeded in planting a seed of suspicion in my mind, myself not aware of it.

To think about it, we all learn the theory of evolution in school, but rarely do we seek to read more about the omnipresent theory. Most people take it as granted. As for me, it was really lucky that I found Dawkins’s famous book in the local library. It was entertaining, educational, and quite often insightful. I can say I understand Darwinism better. And I hope the opposite side - anti-Darwinists - also wield the same weapon, science, to strengthen their theses.

This is already too long. Let’s dive into what the book says.

The single most important take-away from this book is this: the motivation and driving force behind evolution is the selfish interest of the genes who strive to thrive by making as many copies of themselves as possible. Living organisms, be they animals, plants, or the single-cell organisms in the Primordial Soup, are simply “survival machines” programmed and run by those selfish genes. However, it is not that the genes are micro-managing your body in details. They (collectively) programmed the way you behave, so that they can thrive and make more copies of themselves by letting you live longer and be prolific. Thus, it is true that your free will is bound by those genes’ selfish interests in the profound sense, but it is by no means that you are controlled by those genes like a zombie controlled by some virus. (Of course we do not know the interactive mechanism between a zombie-making virus and the zombie controlled.) Furthermore, genes are doing the engineering in a collective manner. Some genes are beneficial to each other when they cooperate, so that they both can prosper better. In some other cases, they generate a negative synergy and reduce their chances of prolonged survival. A good example of the latter case will be a gene that makes strong biting jaws and a gene that makes long and complex intestine that digests fibers well. The gene that makes herbivore intestine will be better matched with a gene that makes the legs leap farther, in which case they both can prosper by making their collective “survival machine” digest plants better and run away better from predators.

In other words, the driving force of evolution is not some kind of subconscious awareness in the individual organisms that strives to make its species prosper. Dawkins says that this is the most popular belief among evolutionary biologists. This was exactly what I learned in school. Contrary to this common belief, it is the selfish interest of the genes in living organisms that is driving the evolutionary process across the vast history of time.

Putting the first and most important cornerstone in the right manner makes everything thereafter much easier to explain. To answer the question “what is the selfish subject that strives to prosper by evolving?” with “the gene” makes other explanations much easier and plausible. This is an Okam’s Razor.

For example, the phenomenon of decrepitude can be (more) easily explained. Certain genes that increase the probability of death at younger age of the survival machine (especially before the survival machine can bear children) will not prosper 1) because they fail to make their own copies because of the death of the survival machine, and 2) because they will find it difficult to find other genes to cooperate with them. On the other hand, certain genes that increase the probability of death at older age of the survival machine will not have such problems. In other words, they do not care about the well being of their survival machine because they already spread their own copies to the world through reproduction at the heyday of the survival machine. Thus, genes that cause lethal conditions in the survival machine after a certain threshold - when its reproductive function becomes highly inefficient or defunct - are not removed from the pool of “fittest” genes, nor do they cause too serious harm in their pursuit of self-reproduction that they find it too difficult to find other genes to cooperate. This is decrepitude.

As another example, the bifurcation of the two genders is deliberated in a very intuitive and interesting way. At first, one survival machine, by chance, came out with a slightly bigger gamete than others. Because this organism (and the genes within) put extra efforts in the first stage of reproduction, it is beneficial to focus more on increasing the prospect of survival of this gamete, than to focus on producing more gametes to diversify in its investment portfolio of gametes. By contrast, other organisms with (relatively) smaller gametes will be better off if it can attach its gamete with the above-mentioned bigger gamete to form an embryo, because this diploid will have better chance of survival without any extra efforts on its side. Thus, for this organism with smaller gametes, the optimal strategy is to produce more gametes to enhance the probability of combining with the bigger gamete. To produce more gametes with the same (given) resources, it will choose to produce more, but smaller gametes. Thus, the two types of organisms will be drawn more and more towards its own optimal strategy - fewer bigger gametes for one, and more smaller gametes for the other. Now, we might be able to call them female and male, respectively, after they have gone separate paths far enough.

The final chapters of this wonderful book also show a true epitome of what a good book - or any type of truth-seeking efforts - can achieve. In chapter 12, he says “nice guys finish first.” Many people might think the author starts selling a philosophy (or even worse, a religion) at the end of a series of nice logical mind games. That will be a gross misunderstanding. First of all, the definition of Dawkins’s “nice” might not be accepted as nice by certain people. Second of all, he shows how nice guys finish first mathematically, using simulations based on game theory. Axelrod’s simulation of a Prisoner’s Dilemma game situation will be an excellent example to show the two points. His simulation showed that the nice tactic of Tit-for-tat (TFT) wins the day. TFT cannot be considered to be all too nice because it revenges against a harm done. TFT is nice in that it does not initiate a betrayal, and the revenge is employed only once to even out the previous betrayal done against it. (The fact that the simulation was a mathematical process need not be explained, I guess.) The conclusion, however, bears a rather Utopian connotation. TFT was found to bring everybody better result. Being nice brought happiness to everybody, even though it originated from an intent to earn big in the long term i.e. from a selfish intention. After depicting all the blood-smeared contests for survival among friends and family members, Dawkins presents readers with such a beautiful, even fable-like, but scientifically true insight.

One more thing I must not omit when I attempt to put my homage to this wonderful book is the concept of “meme.” The concept of meme shows that the concept of self-interested self-copier need not be limited to genes only. Memes, only short-lived yet compared to genes, evolved at spectacular speed, with the help of language and communication revolution. The concept of meme is, in one sense, as revolutionary as the first appearance of Darwinism itself. The first living organism evolved from the “primordial soup,” a huge step in the whole process of the “Big History.” Meme, I think, is another such huge step, in that the selfish self-copier has transcended the limit of biological form of gene. Does a meme have a “self” that wishes to prolong its own (collective) life? This question comes from misunderstanding of Dawkins. The selfish gene is defined as selfish. We cannot say a gene will become happier when it successfully proliferate through generations. The selfish gene was created as selfish, to strive to proliferate its own copies in the world. Memes can be understood in the same way. Shakespeare, I believe, must have wished that his works will be read and enjoyed by more people. But this wish of the author is not the creator of the meme’s (in this case, for example, a famous line from Hamlet) selfish wish for proliferation. Meme, I believe, has a selfish trait that wished to proliferate its own copies in the world. And this trait is basically there, innately, inside the meme, as genes have these selfish wishes. With memes, or some other forms of self-copiers beyond carbon and metabolism, the future might witness new kinds of living organisms - survival machines - completely different from the life we know today.

A Buffet Tax: Does It Matter?

Warren Buffet started the discussion thread, and a lot of “rich” people argued against his idea, presenting unbelievably thoughtless arguments like “if you want to pay more, you do it alone.” Frankly, the rather fierce response from the conservative side of American society surprised me a little. Though different in the severity of the fervor, about the same sentiment prevails in South Korea all the time, as far as I can remember in its short history of democracy. One of the core promises by the current president during his election campaign period was reducing taxes for the rich, which has been carried out incredibly well, compared with other promises he made, for example, lowering the tuition fee for college students, for which nothing has been done.

For sure, taxing the rich has one very loud and clear impact: it shows that the government is at least thinking about economic inequality, and perhaps is trying to do something as well. But what about its actual impact on the fiscal balance for the government? Think about this: in China, 0.4% of people is said to have 70% of wealth. To do a back-of-an-envelope math, I will assume that all the wealth are taxable like income. (Oh, I hear some rich people throwing rotten tomatoes and stuffs.) If you levy one percent of tax from all (OK, let us simply think of a tax on net wealth) you end up with 1% of the nation’s wealth as tax revenue. On the other hand, if you levy two percent of tax only from the ultra-wealthy 0.4%, you get 1.4% of the whole nation’s wealth as the tax revenue. Let us suppose that the bottom 50% of Chinese population hold 5% of the nation’s wealth, which would not be even close to the truth, since even in Canada, the bottom half only has 3.2% of the total wealth of the nation. Anyway, suppose that for argument’s sake. If you impose 1% of tax on the wealth of the bottom half, you end up with 0.05% of the total wealth as tax revenue. But, if you impose the same rate of tax on the 0.4% of the population who literally pwns the economy, you end up with 0.7% of the total wealth, which is 14 times larger than the revenue you get from the bottom half.

In the recent Canadian Business Magazine, Armine Yalnizyan, senior economist with the Canadian Centre for Policy Alternatives, actually did the long math with the case of Canada. The result is surprising. Taxing the ultra-high-income earners ($250,000+) at 3% more than the current highest tax rate, effectively creating a new tax bracket at the upper end, ends up $2 billion for the government to spend, in such crucial sectors as dental care for the children. By contrast, taxing the majority (54%) of income-earning population who earns $30,000 or less gathers meager $154 million. The revenue from the rich is 13 times the size of the revenue from the poor. Even in Canada, the wealth gap is this horrendous. And bear in mind: this is only about income, not about the difference in accumulated wealth. Doing the same math for countries such as Mexico or Turkey gives me a chill. (These two countries are at the top of the OECD economic inequality ranking.)

In conclusion, taxing the rich at a slightly higher rate is not simply a rhetoric, but brings sizable tax revenue for the government, for all the people. And for you messrs rich in the states, Mr. Warren Buffet is not saying that he wants to pay more taxes. He is proposing a change in the strange tax system.

References:
Lars Osberg, A Quarter Century of Economic Inequality in Canada: 1981-2006 (Canadian Centre for Policy Alternatives, April 2008)
Armine Yalnizyan, A “Buffet Tax” for Canada? (Canadian Business Magazine, Oct. 24, 2011)

12 Ways to Do Things Differently

I am a subscriber to BNet, a site that barrages you with nice advices not only about your business but about your life as well. Jeff Haden, a blogger for business owners, published this wonderful posting, for which I could not help the urge to share with others. Sometimes you want to do things in different ways, out of frustration coming from a deadlock, or just for the sake of a change. Here are 12 tips on how to do it effectively: 5 aspects, 12 actions plans.

Analysis
1. Switch measurement. Measure your success with different criteria, and you will look at things from a different perspective.
2. Shift benchmarks. Aiming high is good but can discourage you if you fail the mark. Try to emulate someone with your size.

Acceptance
3. Be yourself. Do not try to be like Steve Jobs. Pick a few traits of theirs and try to emulate them.
4. Let others be who they are. Accept others as they are. Don’t try to change them. Look at their good parts.

Assistance
5. Help a co-worker. Be specific in your offer. It is more likely to be accepted, and it also shows that you are a caring person.
6. Help a superstar. Because people think they can do it all alone, they lack help when they need it.
7. Help anyone. Help those less fortunate than yourself. You will feel great.

Approach
8. Go opposite. When in deadlock, instead of minor adjustment, try something totally different.
9. Drop one thing. Drop your 10th priority task and use the time for your top priority task. You can pick it up later.
10. Change your workday. Break your routine and schedule differently, to kill complacency.

Adoption
11. Pick a habit. Watch your role model, and pick one habit of his/hers, and make it yours. “Never reinvent a wheel when a perfect wheel already exists.” (Gee, I like this line.)
12. Pick someone to mentor. You learn more when you teach.

My final words are, I suggest you to try one at a time, unless you want to see your willpower deplete really fast.

Willpower - A Mind Game Against Yourself

A few weeks ago, somebody said that procrastination is his worst habit that he wants to fix, and almost everybody in the gathering showed some sign of consent. I believe I have much more self control than I had when I worked in the bureaucracy, but I still yearn for more control. When I get up at six in the morning and start stretching to get myself prepared for the morning yoga, oh man, I feel like I am dying! It is always a mind game against yourself, like the cartoon cliche of an angel and a demon whispering in your ears. But think about it: the resourceful, creative, and persuasive one is the demon. He comes up with all kinds of highly plausible excuses to make you bail yourself out of the temporary toil. By contrast, the angel is totally simplistic and blunt. Most of the time, at least for me, the angel’s winning argument is that you will regret if you skip it.

In Willpower: Rediscovering the Greatest Human Strength, a so-called “What the Hell” phenomenon is introduced. Deiters who already went over their daily calorie limit simply do not care any more for the rest of the day, because, what the hell, they are already foiled for the day. It is a very simple, but very powerful, excuse presented by the demon, to which our angel buddy does not have an effective couter-argument. Regardless you eat more or not, you will regret the same, because you already went over the line.

Here’s another interesting experiment. Two groups of students were kept hungry before coming to the experiment. One group of students were allowed to eat the chocolate cookies as much as they wanted. The other group was allowed only to eat raw, uncooked radishes, from a tray that contained both chocolate cookies and raw radishes. Many of the students in the latter group agonized over the presence of the cookies. Some looked at the cookies for a long time, before eating the radish. Some smelled at the cookies. Then, the two groups of students were tested to see how long they persist trying to solve an insolvable puzzle. The radish students, who already exhausted their willpower over the temptation of chocolate cookies, gave up the puzzle much sooner than the other group. Indeed, willpower is depleted as we use it. And I believe that this is the single biggest take-away from this book. We all know by our own experiences that we are most productive in the morning. Also, we often run really low on our tolerance level when we come home after a long tough day at the office.

However, this great learning is quite disappointing. We use limited amount of willpower throughout the day, slowly being depleted till we become helpless. Does this mean that I must not exercise in the morning, if I face a big, willpower-draining task during the day? Not surprisingly, the authors say that willpower muscle can be enhanced through exercise like any other muscle. However, what they suggest do not sound too much convincing. (The arguments were so weak that I do not remember any exercise they recommended!)

I should say, however, that this book is a kind of sensation because I have seen so many articles and postings about this book. Furthermore, if we ever forget about everything this book tells us, perhaps we can remember one thing, which will help us in many different situations:

Do not test yourself to the extreme. You will ruin everything and regret.