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November 2008
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Irrational About Retirement

How many years will it take you to save for retirement?  How many decades?  If it will take you 40 years to save for retirement, why won't you spend a few hours learning about how to best protect your retirement? 

Even simpler: Spend just a few minutes reading this article.  Then ask your "financial adviser" why he's charging you money to have you in anything other than an index fund.

Sentencing Madoff

Who here has ever had to worry about paying bills?  I have.  What sort of feeling is that? 

Imagine we could take that feeling and put it into a pill.  We then forced people to take that pill.  The difference is that, with our special pill, the pain would never go away.  Until the person died, he'd feel that misery of wondering, "Will I be able to afford my electric bill?  Will I be able to eat this month?  Will I be able to pay my medical bills?"

If we gave that pill to thousands of people, how many years in prison would we deserve? 

According to a Washington Post columnist, not many:

Wall Street's elite are dropping as fast as the financial markets they work in. As investors sort through the trail of financial wreckage left by Bernard L. Madoff, arrested for a $50 billion Ponzi scheme that may be the largest ever, federal prosecutors are preparing to charge him formally with crimes that could land him in prison for the rest of his life. In June, federal prosecutors in Brooklyn, N.Y., charged former Bear Stearns hedge-fund managers Ralph Cioffi and Matthew Tannin with lying to investors about their funds' true value and prospects. And in September, the FBI revealed that it is investigating the people who ran Fannie Mae, Freddie Mac, Lehman Brothers and AIG, all of which were casualties of this year's market meltdown.

Given today's economic climate, it's hard to feel any pity for these guys. Their reprehensible conduct has crippled the nation's financial system and will cost investors and taxpayers billions. But if you believe that the punishment should fit the crime, a bit of sympathy may be what they deserve. Really.

We punish criminals for the psychological damage they do to victims.  It's possible to rape someone without physically harming him or her; it's the damage to their psyche that we punish.  Some people never get over that stuff.  When you ruin a life, you do serious time.  And that's how it should be.

How many lives has Madoff ruined?  And we're not just talking about psyches, here, either.

If you're old and can't work, how will you pay your medical bills?  If you've saved enough money, you'd be able to afford drugs and healthy food that will extend your life by years.  If you lost your money, you'd die years sooner.

If I went around murdering old people, how many years in prison should I face?  Just a few? After all, they're almost dead, anyway.  Right?

Few would agree.  Yet can anyone rationally argue that Madoff has not shaved years off of numerous lives?  No. 

So the issue isn't whether Madoff is a killer.  He is.  So he should be punished as we'd punish any mass murderer.  Moreover, we need to deter others from killing old people.

Later in the column the author shows an astounding ignorance of criminals.  He writes:

For example, a relatively short prison term -- years, not decades -- can be enough to deter prospective financial fraudsters.

I have a conscience.  You probably do, too.  If we didn't, most of us would gladly defraud people out of millions - not billions - of dollars for five years in federal prison.  For a billion dollars, I would gladly spend 5 years in federal prison.  I may even agree to ten.  Federal prisons are full of drug dealers and fraudsters.  Gang rapes are usually the stuff of state prison.  I'd come out older, but I'd never work another day.  Plus, I could probably read a book each day.

If you put the choice to most people, many would take a guarantee of prison if it meant they could make millions of dollars.  With criminals, there is no guarantee they will get caught.  Most get away with it.

So why is it rational to assume that someone who isn't guaranteed prison would not cheat people out of millions?  It's not.  Moreover, once you realize that Wall Street is loaded with the vilest people you'll ever meet, lengthy prison sentences are the only answer.

If it were up to me, every case against Wall Street crooks would be filed in state court.  You couldn't pay me any amount of money to do prison time in New York state prison.  Imagine, then, the deterrence state prison would have on Wall Streeters.

A Skeptic Gets Fleeced

A guy who literally wrote the book on gullibility lost a bunch of money by investing with Bernie Madoff.  Here is his story.

He lists a lot of reasons for why people are gullible.  He omits the most-important one: Ignorance of psychopathy and sociopathy.  Most people are still reeling, "How, Bernie, how?"  Indeed, the author of the book on gullibility has a Ph.D. in psychology, yet he writes:

So should one feel pity or blame towards those who were insufficiently skeptical about Madoff and his scheme? A problem here is that the lie perpetrated by Madoff was not all that obvious or easy to recognize (in fact, it is very likely that Madoff’s operation was legitimate initially but took the Ponzi route when he began to suffer losses that he was too proud to acknowledge).

No.  Bullshit. Madoff was a psychopath.  Look at him, even now.  He smiles before the camera.  He feels no remorse or grief.  He was going to give away the remaining $300,000,000 he had in his fund to his children! 

Just because a guy has a nice smile, good credit report, and a long line of references does not mean he won't slice your throat for his own amusement.  Often, it's people who seem too good who we should watch our backs around.

People have zits.  Show me someone who doesn't, and I'll know that Photoshopping has been done. 

Before trusting someone, I need to know: What is wrong with him?  If I can't point to anything, then I immediately avoid that person.  Or, when I must deal with that person, I use appropriate manipulative tactics (which I would never otherwise use on a good person).

The Law As Fiction?

An economist who did not predict the biggest economic downturn in decades, has this to say of law:

At risk of offending my many friends in the legal academy, I think that law is a shockingly phony discipline.  Virtually everyone - liberal, conservative, Marxist, libertarian, or whatever - imagines that the law conveniently agrees with what they favor on non-legal grounds.  Almost no one admits that many, if not most, laws are so vague that there is no "fact of the matter" about what they mean.

Of course, he's right.  There is no Absolute Reality known as Law.  Statutes and cases are just bricks used to build whatever structure the builder desires.  But there is no Structure.

Of course, up until a few years ago economists built models around the Rational Man.  Economists also completely missed the economic downturn.  Just totally missed it.  If economists can't spot an iceberg, what is real about their Titanic?

More broadly, one has to wonder what discipline isn't phony.  Other than hard sciences, is any subject real?  Of course, the more one studies hard sciences, the more one wonders what is real.  Even hard science requires observation.  Those observers are people who suffer from innumerable cognitive defects.  Even assuming qualified observers; there's Hume's problem of induction.

UPDATE: Proving Caplan's point, Mike Rappaport writes:

But when law professors talk about how an issue ought to be decided -- that is, what the law really is -- then there may be wide differences, with political ideologies seeming to influence the result.  But this should be no surprise.  I am an originalist, and so what the Constitution really is to me is generally the original meaning.  What the law really is to a living constitution liberal will be something different. 

That doesn't answer Caplan's critique.  In fact, Caplan would say, "So it's just a coincidence that you are both an ultra-conservative and an originalist?  Just as it's a coincidnece that Lawrence Tribe is an ultra-liberal as well as a living constitutionalist?"  Caplan's point is that people do not reason towards some objective conception of The Law.  Rather, people bend the law to their political views.  

Given that there aren't any liberal originalists or conservative living constitutionals; it seems pretty clear that Caplan is right.

New York Times Prohibits Criticism of Caroline Kennedy

On Dec. 16, 2008, in a post entitled, "Caroline Kennedy Will Confirm Existence of Media Bias," I noted:

I eagerly await the mainstream media's treatment of Caroline Kennedy.  Given her (non)qualifications, it should be scorched earth treatment, right?  

If Caroline Kennedy is not burned by the media, then the debate over media bias will be over.  People of good faith will no longer be able to disagree about the existence of a pro-liberal bias. 

Those of us who care about truth and integrity should therefore follow the Caroline Kennedy story closely.

It didn't take the New York Times long to reveal its bias.  The Times, in Orwellian fashion, literally re-wrote a news article that made Carolyne Kennedy look bad.  When a Gawker read read the Times' story about Ms. Kennedy's visit to New York, the story began:

In a carefully controlled strategy reminiscent of the vice-presidential hopeful Sarah Palin, aides to Caroline Kennedy interrupted her on Wednesday and whisked her away when she was asked what her qualifications are to be a United States senator.

Ouch.  Had that article remained on the Times' website, those of us who see bias might have needed to re-examine our hypothesis.  However, when the story was revised to read:

The first day of Caroline Kennedy’s tour through upstate New York on Wednesday was meant to be a low-key, decorous excursion, mindful of the skepticism surrounding her bid to be appointed the state’s next United States senator. Fat chance.

Gakwer has more details here.  Read the whole thing, as well as the links.

Read This Post F*ckface

We all know, at least at the margins, that there is a right way to phrase requests.  Telling your employee to, "Print some copies, monkey," probably isn't the best way to achieve compliance.  And, unsurprisingly, there is a science to phraseology. 

Some phrases are scientifically-proven to be persuasive than others.  For example:

Behavioral scientist Ellen Langer and her colleagues decided to put the persuasive power of [the word because] to the test.  In one study, Langer arranged for a stranger to approach someone waiting in line to use a photocopier and simply ask, "Excuse me, I have five pages.  May I use the Xerox machine?"  Faced with the direct request to cut ahead in this line, 60 percent of the people were willing to agree to allow the stranger to go ahead of them.  However, when the stranger made the request with a reason ("May I use the Xerox machine, because I'm in a rush?"), almost everyone (94 percent) complied...

Here's where the study gets really interesting...This time, the stranger also used the word because but followed it with a completely meaningless reason.  Specifically, the stranger said "May I use the Xerox machine, because I have to make copies?"  [The compliance rate was 93%.]

Given that some phrases are more persuasive than others, you'd think that people would carefully consider the phrases they use.  Yet most don't. 

If you recognize the power of proper phrasing and want to improve how you phrase things, then you might enjoy these playing cards.  Ignore the cheesy title, "Irresistible Influence Cards-Salad: have it all."  Please.  The cards are actually good.

Each card contains a phrase.  The card explains what about the phrase makes it persuasive.  I don't agree with every phrase's supposed persuasive effect; but even thinking about the best way to phrase a request is valuable.  With these cards, it's easy to do a lot of thinking. 

The cards are a deck of playing cards with phrases on them.  So you can carry them in your pocket to read during down time, play a game of Solitaire.  If you have much weirder friends than I have, you could play card games with them.

(Disclosure: I'm starting to feel like an whore.  I do not own stock in AMZN, and I don't even have an affiliate arrangement with them.  So when I recommend something, it's not because I'm on the take.)