Saturday, August 23, 2008
Temporarily Burning Manned
Yes, it's true: I will be at the weeklong hippie festival starting tomorrow. More izotts upon my return--assuming I don't perish.
Friday, August 22, 2008
The Conscience of a Nerd
One interesting thing about blogs is that it allows serious columnists--like Paul Krugman--to let loose a little, and do things that they could never do in a printed op-ed piece, like drop pop-culture references left and right. Krugman has been doing just this a lot lately at his blog Conscience of a Liberal, and I must say, the man has good taste. Check out these references, all in the last couple of weeks:
If he just added a generous sprinking of Simpsons quotes, it would be like reading an article by my friends.
If he just added a generous sprinking of Simpsons quotes, it would be like reading an article by my friends.
Powerful VP?
David Brooks has an advice-columny column about why he thinks Obama should pick Joe Biden as his VP. At one point, he talks about how Biden's loyalty will be good to have:
So is it indeed the case that Obama will follow this trend of empowering the vice president, such that he/she would be in a position to wield serious influence? I don't think I've ever read anything on this or heard anything about it from Obama that would tell us one way or the other.
...there are moments when a president has to go into the cabinet room and announce a decision that nearly everyone else on his team disagrees with. In those moments, he needs a vice president who will provide absolute support.Does he? It was my understanding that, normally, the VP plays a fairly peripheral role in the White House, and isn't in a position to influence the president's decisions (Dick Cheney was a big exception to that).
So is it indeed the case that Obama will follow this trend of empowering the vice president, such that he/she would be in a position to wield serious influence? I don't think I've ever read anything on this or heard anything about it from Obama that would tell us one way or the other.
What is this guy doing?!
It looks like he's just aimlessly firing a machine gun in some field:
Get back to work, guy!
Get back to work, guy!
Tuesday, August 19, 2008
McCain's surge
The latest narrative coming from the press is that the tide is turning in McCain's favor, and that he just might out-campaign a lackadaisical Obama come November. But this is a bit overblown. In the first place, even though supposedly this has been a good month for McCain and a bad one for Obama, Obama is still ahead in most polls. Second, if we listen to people who have money riding on the question of who will win--as opposed to a bunch of journalists who need to make up something by deadline--we see that McCain's prospects have increased a little, but are still pretty dang bleak:
Actual information
A report on the candidates' tax plans by the nonpartisan Tax Policy Center has been making the rounds today (via Paul Krugman's blog). Some highlights:
- Both McCain and Obama would greatly increase the national debt, although McCain's plan would increase it by roughly 40% more than Obama's:
...without substantial cuts in government spending, both plans would sharply increase the national debt. Including interest costs, Obama would boost the debt by $3.5 trillion. McCain would increase the debt by $5 trillion.
- Lower/middle income families would see their after-tax incomes rise under both plans:
[Obama plan:] By 2012, middle-income taxpayers would see their after-tax income rise by about 5 percent, or nearly $2,200 annually.
[...]
McCain would lift after-tax incomes an average of about 3 percent, or $1,400 annually, for middle-income taxpayers by 2012. - Those in the top 1% will experience lower after-tax incomes under Obama's plan, but significantly higher after-tax incomes under McCain's plan:
[Obama plan:] Those in the top 1 percent would face a $19,000, or 1.5 percent, reduction in after-tax income.
[...]
But, in sharp contrast to Obama, [McCain] would cut taxes for those in the top 1% by more than $125,000, raising their after-tax income an average 9.5 percent.
- Significantly more people will have health insurance under Obama's plan than McCain's plan, but neither plan offers universal coverage:
TPC projects the McCain plan would trim the uninsured by 1 million in 2009 and nearly 5 million by 2013, although their numbers would slowly rise thereafter because the tax credit would fail to keep pace with premiums. Obama would reduce the uninsured by 18 million in 2009 and 34 million by 2018. Even under the Obama plan, however, 34 million Americans would still lack insurance in 2018.
Monday, August 18, 2008
"We are governed by fools"
John Derbyshire at the conservative blog site The Corner laments:
Always interesting to watch grandiose internecine battles being played out between the different elements of the conservative camp. I think it's a testament to the Bush administration's sheer political power in the early 2000s that they were able to steer the nation onto the radical and reckless course of world-domination-for-democracy over the objections of liberals and a large swath of conservatives (the so-called "foreign policy realists" of the George H.W. school).There are some spectacles that are at once tragic and farcical. One such has been the sight of Georgian troops scuttling back from assisting us in whatever it is we imagine we are doing in Iraq, to help defend their homeland, while Condoleezza Rice stamps her foot, George W. Bush watches a basketball game, and John McCain says that he will do such things, what they are, yet he knows not, but they shall be the terrors of the earth.
We are governed by fools. At least Putin knows what he wants, and how to get it. If only freedom had such leaders!
College ain't for everyone--but neither are standardized tests
I think this WSJ article by one Charles Murray does a good job of explaining why college doesn't make sense for a lot of people:
However, Murray goes one step too far by arguing from here that we should therefore ignore degrees and focus instead solely on standardized tests modeled on "the CPA exam that qualifies certified public accountants". He does not offer any evidence that standardized tests are any more reliable than degrees as indicators of an employee's fitness. Rather, he just seems to operate under the assumption that for any set of skills, there is a standardized test that will yield an accurate snapshot of a person's proficiency in those skills:
I sympathize with Murray's point: for too many people, four-year degrees are a waste of time, and their extreme expense prevents many from climbing up the social ladder. But I think it's wrong to conclude from this that standardized tests alone hold the key. While they work for some professions, for many they are of limited value. One approach may be to keep the "degree" concept but make earning them less expensive and less weighted down with superfluous requirements. For example, there could be a general degree for "Administration" that would guarantee a person's proficiency in language comprehension and communications skills. There could even be a standardized set of assignments for the course that would impartially enforce universal standards. Such a degree would avoid many of the difficulties of a one-shot certification exam while keeping many of the advantages of the GPA metric, and hopefully allow a JC student to compete on an even playing field with someone from a fancy Ivy League school.
In the end I think we should be wary of one-size-fits all solutions--but that doesn't mean we can't be doing more to make the education system more efficient, meritocratic, and accessible.
Imagine that America had no system of post-secondary education, and you were a member of a task force assigned to create one from scratch. One of your colleagues submits this proposal:Murray's proposed solution? Judge applicants on what they know, not how they came to know it:First, we will set up a single goal to represent educational success, which will take four years to achieve no matter what is being taught. We will attach an economic reward to it that seldom has anything to do with what has been learned. We will urge large numbers of people who do not possess adequate ability to try to achieve the goal, wait until they have spent a lot of time and money, and then deny it to them. We will stigmatize everyone who doesn't meet the goal. We will call the goal a "BA."
You would conclude that your colleague was cruel, not to say insane. But that's the system we have in place.
The solution is not better degrees, but no degrees. Young people entering the job market should have a known, trusted measure of their qualifications they can carry into job interviews. That measure should express what they know, not where they learned it or how long it took them. They need a certification, not a degree.In principle, this sounds great. What we should be interested in is the end result of a person's education, not the educational process that led to that result. If two people are equally qualified for a position, it should make no difference that one of them went to a prestigious university while the other one had no formal schooling at all. Where and how a person was educated does not necessarily correlate with that person's true value as an employee.
However, Murray goes one step too far by arguing from here that we should therefore ignore degrees and focus instead solely on standardized tests modeled on "the CPA exam that qualifies certified public accountants". He does not offer any evidence that standardized tests are any more reliable than degrees as indicators of an employee's fitness. Rather, he just seems to operate under the assumption that for any set of skills, there is a standardized test that will yield an accurate snapshot of a person's proficiency in those skills:
The merits of a CPA-like certification exam apply to any college major for which the BA is now used as a job qualification....But this is really controversial. While the benefits of standardized tests are clear: universal standards, quantifiable results, etc.--they also introduce plenty of complications. A few I can think of from the comfort of my armchair:
[...]
...Certification tests would provide all employers with valuable, trustworthy information about job applicants.
- People who do poorly under pressure/time constraints are disadvantaged
- People unfamiliar with test-taking are disadvantaged
- A one-time test does not necessarily reflect a person's day-to-day productivity or work ethic
- Cramming is rewarded
- Test design can unintentionally favor some socioeconomic or ethnic groups
- Educators end up teaching only material that is likely to be covered by the test
- Not all skills--for example, paper writing--can be captured by a sit-down test
I sympathize with Murray's point: for too many people, four-year degrees are a waste of time, and their extreme expense prevents many from climbing up the social ladder. But I think it's wrong to conclude from this that standardized tests alone hold the key. While they work for some professions, for many they are of limited value. One approach may be to keep the "degree" concept but make earning them less expensive and less weighted down with superfluous requirements. For example, there could be a general degree for "Administration" that would guarantee a person's proficiency in language comprehension and communications skills. There could even be a standardized set of assignments for the course that would impartially enforce universal standards. Such a degree would avoid many of the difficulties of a one-shot certification exam while keeping many of the advantages of the GPA metric, and hopefully allow a JC student to compete on an even playing field with someone from a fancy Ivy League school.
In the end I think we should be wary of one-size-fits all solutions--but that doesn't mean we can't be doing more to make the education system more efficient, meritocratic, and accessible.
McCain's "cross in the dirt" story
Andrew Sullivan has a good post expressing skepticism about McCain's anecdote about a prisoner guard who loosened his ropes and explained this gesture of mercy by way of silently drawing a cross in the dirt. It seems that McCain had never mentioned this amazing incident until 1999, when he co-wrote his autobiography The Faith of My Fathers, and that the story bears a striking resemblance to one first told by "evangelical leader and former Watergate crook" Chuck Colson in a book published in 1983.
If I had to bet, I'd wager that the anecdote is false. That said, though, I think that it is an open question as to whether the falsehood was intentional or not. Memory is surprisingly malleable--counter-intuitively so--such that a memory can become fused with other memories or even stories about other people, with its details shifting over the many years and retellings. (In fact, this happened with an anecdote that Josh used to tell: what really happened is that, once upon a time, I contemplated doing something unmentionable involving a bar of soap to get back at someone for throwing a muffin at me mid-shower, but somehow over the years the story turned into that I actually did the unmentionable thing, which is false. It took me quite a while to convince Josh that his memory of the incident was completely fabricated.)
In any case, even if he did make it up, it's not the sort of thing I get very riled up about. However, the more McCain leans on this anecdote--making it the centerpiece of a campaign ad, using it to bolster is Christian bonafides, etc.--the more I want to see someone press him for an explanation of why he didn't mention it until 1999.
If I had to bet, I'd wager that the anecdote is false. That said, though, I think that it is an open question as to whether the falsehood was intentional or not. Memory is surprisingly malleable--counter-intuitively so--such that a memory can become fused with other memories or even stories about other people, with its details shifting over the many years and retellings. (In fact, this happened with an anecdote that Josh used to tell: what really happened is that, once upon a time, I contemplated doing something unmentionable involving a bar of soap to get back at someone for throwing a muffin at me mid-shower, but somehow over the years the story turned into that I actually did the unmentionable thing, which is false. It took me quite a while to convince Josh that his memory of the incident was completely fabricated.)
In any case, even if he did make it up, it's not the sort of thing I get very riled up about. However, the more McCain leans on this anecdote--making it the centerpiece of a campaign ad, using it to bolster is Christian bonafides, etc.--the more I want to see someone press him for an explanation of why he didn't mention it until 1999.
Sunday, August 17, 2008
What everyone should know about polls
If a candidate's lead in a poll is within the margin of error, that does not mean that it is meaningful to say that the candidates are "in a statistical dead heat". As Kevin Drum once explained:
The moral of the story: when you see Obama ahead in a poll, but the lead is still within the poll's margin of error, don't worry--it's still likely that Obama really is ahead.
...what we're really interested in is the probability that the difference is greater than zero — in other words, that one candidate is genuinely ahead of the other. But this probability isn't a cutoff, it's a continuum: the bigger the lead, the more likely that someone is ahead and that the result isn't just a polling fluke. So instead of lazily reporting any result within the MOE as a "tie," which is statistically wrong anyway, it would be more informative to just go ahead and tell us how probable it is that a candidate is really ahead. As a service to humanity, here's a table that tells you:So, for example, if the margin of error for a poll was 5%, and Candidate A had a lead of 3%, then that means that the probability of Candidate A really being in the lead is 73%. To say that the candidates are in a "statistical tie" or "statistical dead heat" makes you think that there is an equal chance that either candidate could be in the lead--which is wrong.
The moral of the story: when you see Obama ahead in a poll, but the lead is still within the poll's margin of error, don't worry--it's still likely that Obama really is ahead.
Thursday, August 14, 2008
The curious and the heroic
Conservative commentators David Brooks and George Will had strikingly different reactions to the Olympic opening ceremony in Beijing. For Brooks, the demonstrations of large groups working in synchronicity evoked a sort of scientific curiosity about how a society like China's and one like ours might be fundamentally different, and what that might mean for the future of geopolitics:
Brooks casts himself as the curious commentator who believes that the world can be understood via empirical research at the sociological and neuro-psychological level; Will casts himself as the heroic voice in the wilderness who believes that the world is best understood via historical analogies.
I'm not sure if one approach is categorically better than the other, or if there might be a third kind of sensibility that is a better choice than these two. But personally I find the Brooks outlook more prudent and more open to new possibilities--and therefore, in a world that is difficult to divine, more sound.
The world can be divided in many ways — rich and poor, democratic and authoritarian — but one of the most striking is the divide between the societies with an individualist mentality and the ones with a collectivist mentality.For George Will, on the other hand, the ceremonies brought to mind a more straightforward analogy to--what else?--Nazi Germany:
This is a divide that goes deeper than economics into the way people perceive the world.
[...]
...experiments have been done over and over again, and the results reveal the same underlying pattern. Americans usually see individuals; Chinese and other Asians see contexts....Americans are more likely to see categories. Asians are more likely to see relationships.
[...]
...what happens if collectivist societies snap out of their economic stagnation? What happens if collectivist societies, especially those in Asia, rise economically and come to rival the West? A new sort of global conversation develops.
The opening ceremony...was part of China’s assertion that development doesn’t come only through Western, liberal means, but also through Eastern and collective ones.
For only the third time in 72 years (Berlin 1936, Moscow 1980), the Games are being hosted by a tyrannical regime, the mind of which was displayed in the opening ceremonies featuring thousands of drummers, each face contorted with the same grotesquely frozen grin. It was a tableau of the miniaturization of the individual and the subordination of individuality to the collective. Not since the Nazi's 1934 Nuremberg rally, which Leni Riefenstahl turned into the film "Triumph of the Will," has tyranny been so brazenly tarted up as art.Both Brooks and Will are interested in the same basic question: the question of the threat of Chinese collectivism. But their attitudes are very different. Brooks looks to empirical research to try to understand Chinese society, and regards it as something that is historically new under the sun, an alternative--and perhaps distinctly Chinese--route to development. Will, on the other hand, is all too ready to understand China as a 21st century reincarnation of 20th century Nazi Germany. Zhang Yimou is Leni Riefenstahl; Beijing is Berlin; 2008 is 1934.A worldwide audience of billions swooned over the Beijing ceremony. Who remembers 1934? Or anything.
Brooks casts himself as the curious commentator who believes that the world can be understood via empirical research at the sociological and neuro-psychological level; Will casts himself as the heroic voice in the wilderness who believes that the world is best understood via historical analogies.
I'm not sure if one approach is categorically better than the other, or if there might be a third kind of sensibility that is a better choice than these two. But personally I find the Brooks outlook more prudent and more open to new possibilities--and therefore, in a world that is difficult to divine, more sound.
"The Obama Nation"
Wednesday, August 13, 2008
New duds
Figured it was time to move away from the Blogger default template. I don't know if I've moved to something better with this sort of "rational grayscale" look. I would have liked to have made only the blog title and post titles red, but alas, the template I used didn't give me that kind of flexibility.
Ah well. Let me know if you hate it.
EDIT: Ok well now I've turned it into an American Apparel t-shirt, but I guess that's okay for now.
Ah well. Let me know if you hate it.
EDIT: Ok well now I've turned it into an American Apparel t-shirt, but I guess that's okay for now.
Tuesday, August 12, 2008
A forgotten gem
For some reason today I was thinking about this old SNL commercial parody, "Grayson Moorhead Securities". It was a send-up, I think, of those weird Dean Witter commercials from the early 90s where they had an actor playing Witter dispensing nuggets of wisdom to a boardroom of yes-men circa--what, like 1947 or something. And his voice is weirdly breathy, I think from the combined effects of old film stock and excessive personal integrity.
Anyway, if someone out there knows where I can find a video of the Grayson Moorhead bit, send it on over.
Anyway, if someone out there knows where I can find a video of the Grayson Moorhead bit, send it on over.
Monday, August 11, 2008
Executive experience
I get the feeling that this Steven Warshawsky is a bit of a troll, so I feel a little iffy about even commenting on his article, but it's worth it I think just to bring up this issue of executive experience. Warshawsky believes that Obama cannot win the election, and that one of the reasons is because he's too inexperienced:
If elected president, Obama would be the fifth youngest president in U.S. history. The only younger presidents would be Teddy Roosevelt, John F. Kennedy, Bill Clinton, and Ulysses S. Grant, all of whom were much more accomplished than Obama. Grant, Roosevelt, and Kennedy were war heroes. (Not Clinton, notoriously.) Roosevelt and Clinton had served as state governors. Grant had been the general-in-chief of the Union Army during the Civil War. The least experienced of the four, Kennedy, had served twelve years in Congress, six in the House of Representatives and six in the Senate, and had been a serious candidate for vice-president in 1956.Well. Just because the five youngest presidents had more experience than Obama does not mean that all presidents have had more experience than Obama. There was an obscure president in the mid-nineteenth century whose only experience was a stint in the state legislature and a single term in the House, but he did alright.
Dumb ad
For some reason Obama has decided to respond to McCain's dumb "he's a celebrity" attack ad with his own dumb "he's a celebrity" attack ad:
Do people really give a shit about this kind of thing? It's hard for me to believe they do.
Do people really give a shit about this kind of thing? It's hard for me to believe they do.
Saturday, August 9, 2008
Sometimes you have to roll the hard 6
The coming war between Russia and Georgia is futile. I mean, sure, 7 armies per turn sounds great, but Asia's impossible to hold...
Thursday, August 7, 2008
96% male
This sex-guessing tool is all the rage. It said that there was a 96% likelihood that I was a male. How male are you?
Incidentally: I was a little curious as to how this thing works. Can any website access your browser history? Or does pressing the button give permission to the program to access it? It seems like a breachy little application.
Incidentally: I was a little curious as to how this thing works. Can any website access your browser history? Or does pressing the button give permission to the program to access it? It seems like a breachy little application.
Wednesday, August 6, 2008
Too much runnin'!
This week I've started a running regimen for pretty much the first time ever, and I've been wanting to take it easy. So I ended up just jogging down to Precita Park, and doing five laps of continuous running there. Well. It turns out that five laps around that little park comes to a little over 2 miles, which is way more than I thought--and also explains why I've been wanting to die halfway through the third lap.
So, yeah--gonna dial that back a bit. Also I should probably buy some kind of mp3 player, because otherwise a continuous loop of Hikaru No Go songs run through my head the whole time--and that gets old quick.
So, yeah--gonna dial that back a bit. Also I should probably buy some kind of mp3 player, because otherwise a continuous loop of Hikaru No Go songs run through my head the whole time--and that gets old quick.
Compounding repayment of debt is neat
Continuing along the same lines as a previous post, it seems to me that one reason it does not occur to many people to learn the basics about personal finances is that they have the impression that it is only applicable to people with money. After all, what good is knowledge about investing and compound interest and the like if you have no money to invest?
But one of the things you quickly realize when learning about finances is that the amount of money you are worth--even if that figure is in the negative--is relatively unimportant. What is important is the delta--the change--in your net worth from time A to time B. Thus, from an investing perspective, there is no meaningful difference between investing in a stock that rises 15% and paying off a debt at a 15% interest. In both cases, you are netting a (very healthy) 15% return on your allocation of money. In fact, repaying the debt is by far the "better investment", because--unlike the risky gamble on the stock--its returns are guaranteed.
One particularly neat application of this sort of thinking is compound debt repayment, which harnesses the awesome exponential growth powers of compounding to pay off debts much faster than you might have realized--for free. Let me explain what I mean.
Suppose you take out a $10,000 loan at an interest of 10% per year, i.e. 0.83% per month. The interest is calculated every month, which means that every month you get charged 0.83% on the total amount that you owe. Supposing that you choose to allocate $150/month towards this debt, this is what your payment plan looks like*:
(Click to enlarge.)
As you can see, in the first month we were charged $83.32 in interest bringing our total debt to $10,083.32--and then we paid it down by $150 to $9933.32. At this rate of $150/month, the debt is paid off in a little more than eight years.
However, a crucial thing to notice is that, though we may think we are being consistent in paying $150 every month towards the debt, in actuality we are allocating a smaller and smaller proportion of our income towards the debt each month. To see this, take a look at the amount of interest charged with each payment. Because the total amount owed decreases every month, the amount of interest charged also decreases every month. This is the same as additional income. So for example, in the second month we are charged $0.55 less for interest, which means that if we paid $150 towards the debt, then we would have an extra 55 cents rattling around in our pockets as compared to last month (remember, it is the delta that matters). Now, you could use that extra money towards food or a coffee or a movie rental--but you could also turn right around and use that money to pay off the debt. If you did this, instead of getting a 55 cent boost of income in the second month, your income would appear to remain the same as the first month.
A modest 0.55 cents might seem like it wouldn't make a significant difference, but it does--over time. If you were to continue to rollover the "income" provided by the decrease in interest every month, the debt would be paid off not in eight years, but in six:
(Click to enlarge.)
The paltry increase of $0.55 on the second payment turns into a mighty increase of $80 by the last payment. And if you can supplement that monthly increase in the nominal payment towards the debt--for example by redirecting money allocated on eating out, only if it's just one meal a month that is sacrificed--then you will shave even more time off of your debt repayment.
Now, if you read this twice and said, "Wait a minute, this is bullshit--you don't have an extra $0.55 rattling around in your pocket at all", then there is something that needs to be clarified about what a loan is. For some reason we have a whole lot of separate jargon when it comes to money that obscures a crucial insight about it, which is that it is no different than any other product out there in the market. It is no different, for example, than a DVD--there is demand for it, some companies supply it, and when demander and supplier agree on a price, the transaction goes down. In precisely the same way that you can rent a DVD by going to Blockbuster and paying a small fee for the privilege of taking out a copy of Coyote Ugly and returning it by a certain due date, you can go to a bank and pay a small fee for the privilege of taking out some dollar bills and returning them by a certain due date. The only difference is the jargon: for DVDs we say "rent" and with money we say "borrow", and with DVDs we say you pay "a rental fee" whereas with money we say you pay "interest".
So keeping this in mind, it is important to keep track in your ledger the distinction between what you are renting from the bank (the ten thousand dollar bills), and the fee the bank is charging you for the rental. In fact, what causes a whole lot of confusion is the fact that it just so happens that what you are renting from the bank is kept in bank accounts along with your real money--making it look like the rented dollar bills are a part of your whole system of income and allocation, when in fact they are not. They are better thought of as objects, like DVDs, that you rent and keep around the house and have to return at a later date. What is a part of your system of income and allocation, however, is interest, since this is similar to the $2 fee you pay to Blockbuster to rent the DVD (and certainly, like DVD rental fees, money rental fees are something you want to track as an expense).
With all this straightened out, we can see why it makes sense to say you have "an extra $0.55" rattling around in your pocket in the second month of repayment. The actual expense of borrowing--or renting--the ten thousand dollar bills is the interest payment. When you "pay down" the principle, what you are really doing is returning some of the bills that you had rented out. Of course, since you're renting out less bills, you will be charged less in rental fees. What compound repayment of debt says is: hey, now that you're paying less in money rental fees, you don't need to have as many dollar bills rented out! Return those bills, it's expensive to keep them rented out so long!
*These calculations are rough estimates. In the first place, the numbers were clumsily rounded before being displayed (don't worry--the numbers computed internally were not rounded), so some of the arithmetic shown might not be consistent to the penny. Second, there might be some float point inaccuracies. But I don't think the numbers are big enough that this would make a huge difference. Long story short: I hastily slapped this together to demonstrate a point in a blog post, so take it with many grains of salt.
But one of the things you quickly realize when learning about finances is that the amount of money you are worth--even if that figure is in the negative--is relatively unimportant. What is important is the delta--the change--in your net worth from time A to time B. Thus, from an investing perspective, there is no meaningful difference between investing in a stock that rises 15% and paying off a debt at a 15% interest. In both cases, you are netting a (very healthy) 15% return on your allocation of money. In fact, repaying the debt is by far the "better investment", because--unlike the risky gamble on the stock--its returns are guaranteed.
One particularly neat application of this sort of thinking is compound debt repayment, which harnesses the awesome exponential growth powers of compounding to pay off debts much faster than you might have realized--for free. Let me explain what I mean.
Suppose you take out a $10,000 loan at an interest of 10% per year, i.e. 0.83% per month. The interest is calculated every month, which means that every month you get charged 0.83% on the total amount that you owe. Supposing that you choose to allocate $150/month towards this debt, this is what your payment plan looks like*:
As you can see, in the first month we were charged $83.32 in interest bringing our total debt to $10,083.32--and then we paid it down by $150 to $9933.32. At this rate of $150/month, the debt is paid off in a little more than eight years.
However, a crucial thing to notice is that, though we may think we are being consistent in paying $150 every month towards the debt, in actuality we are allocating a smaller and smaller proportion of our income towards the debt each month. To see this, take a look at the amount of interest charged with each payment. Because the total amount owed decreases every month, the amount of interest charged also decreases every month. This is the same as additional income. So for example, in the second month we are charged $0.55 less for interest, which means that if we paid $150 towards the debt, then we would have an extra 55 cents rattling around in our pockets as compared to last month (remember, it is the delta that matters). Now, you could use that extra money towards food or a coffee or a movie rental--but you could also turn right around and use that money to pay off the debt. If you did this, instead of getting a 55 cent boost of income in the second month, your income would appear to remain the same as the first month.
A modest 0.55 cents might seem like it wouldn't make a significant difference, but it does--over time. If you were to continue to rollover the "income" provided by the decrease in interest every month, the debt would be paid off not in eight years, but in six:
(Click to enlarge.)
The paltry increase of $0.55 on the second payment turns into a mighty increase of $80 by the last payment. And if you can supplement that monthly increase in the nominal payment towards the debt--for example by redirecting money allocated on eating out, only if it's just one meal a month that is sacrificed--then you will shave even more time off of your debt repayment.
Now, if you read this twice and said, "Wait a minute, this is bullshit--you don't have an extra $0.55 rattling around in your pocket at all", then there is something that needs to be clarified about what a loan is. For some reason we have a whole lot of separate jargon when it comes to money that obscures a crucial insight about it, which is that it is no different than any other product out there in the market. It is no different, for example, than a DVD--there is demand for it, some companies supply it, and when demander and supplier agree on a price, the transaction goes down. In precisely the same way that you can rent a DVD by going to Blockbuster and paying a small fee for the privilege of taking out a copy of Coyote Ugly and returning it by a certain due date, you can go to a bank and pay a small fee for the privilege of taking out some dollar bills and returning them by a certain due date. The only difference is the jargon: for DVDs we say "rent" and with money we say "borrow", and with DVDs we say you pay "a rental fee" whereas with money we say you pay "interest".
So keeping this in mind, it is important to keep track in your ledger the distinction between what you are renting from the bank (the ten thousand dollar bills), and the fee the bank is charging you for the rental. In fact, what causes a whole lot of confusion is the fact that it just so happens that what you are renting from the bank is kept in bank accounts along with your real money--making it look like the rented dollar bills are a part of your whole system of income and allocation, when in fact they are not. They are better thought of as objects, like DVDs, that you rent and keep around the house and have to return at a later date. What is a part of your system of income and allocation, however, is interest, since this is similar to the $2 fee you pay to Blockbuster to rent the DVD (and certainly, like DVD rental fees, money rental fees are something you want to track as an expense).
With all this straightened out, we can see why it makes sense to say you have "an extra $0.55" rattling around in your pocket in the second month of repayment. The actual expense of borrowing--or renting--the ten thousand dollar bills is the interest payment. When you "pay down" the principle, what you are really doing is returning some of the bills that you had rented out. Of course, since you're renting out less bills, you will be charged less in rental fees. What compound repayment of debt says is: hey, now that you're paying less in money rental fees, you don't need to have as many dollar bills rented out! Return those bills, it's expensive to keep them rented out so long!
*These calculations are rough estimates. In the first place, the numbers were clumsily rounded before being displayed (don't worry--the numbers computed internally were not rounded), so some of the arithmetic shown might not be consistent to the penny. Second, there might be some float point inaccuracies. But I don't think the numbers are big enough that this would make a huge difference. Long story short: I hastily slapped this together to demonstrate a point in a blog post, so take it with many grains of salt.
Webcomic cynicism
In a recent email thread, people were being cynical about xkcd--which caught me by surprise, because it never even occurred to me to be cynical about xkcd. But after realizing that, yes, it is self-important and that, yes, it does have that vague I-think-I-had-that-idea-in-college quality to it, I can't go back--even though the pop-cultural reference in today's cartoon nearly redeems it.
Monday, August 4, 2008
Not about free speech
Roger Cohen has an op-ed today about a kerfuffle in France surrounding the firing of a political cartoonist:
But Cohen also criticizes the firing of Siné on free speech grounds, which I don't think makes any sense. Says Cohen:
Those who accuse Charlie Hebdo of a double standard for printing the infamous "Muhammad Cartoons" and yet firing Siné for his offensive remarks are unclear on the same point. In the case of the Muhammad Cartoons, a Danish newspaper was materially threatened and intimidated by a large number of offended Muslims. Reprinting the cartoons in solidarity with that paper really was an assertion of free speech, because it forced the government to uphold its duty to protect those with unpopular views (although personally, I thought the reprinting unnecessary and a little overdramatic). Unless we interpret Siné's gig at Charlie Hebdo as a "right"--something that it is clearly not--I don't see how refraining from firing him for his offensive remarks stands up in any way for free speech or rights in general.
Of course, all that said, an editor may freely choose to adopt an editorial philosophy that borrows from the logic of free speech, and permit the staff to express whatever inflammatory views it wants, even if they contradict the publication's mission. Indeed, as Cohen suggests, there can be wisdom in letting unpopular views be expressed unhindered so that they can be properly discredited in the marketplace of ideas.
However, there are limits to this approach: an off-kilter remark now and again might be permissible, but if a consistent pattern of offensive bigotry emerges, the editor may want to rethink having such a person on staff. In this case it looks as though the editor Philippe Val did precisely that.
The offending piece in Charlie Hebdo, a pillar of the left-libertarian media establishment, was penned last month by a 79-year-old columnist-cartoonist who goes by the name of Bob Siné. He described the plans — since denied — of Jean Sarkozy, 21, to convert to Judaism before marrying Jessica Sebaoun-Darty....Cohen believes that Siné crossed the line into anti-Semitism, but that he should not have been fired, arguing that such drastic action risks making Siné into a martyr and "stirring, rather than assuaging, what remains of French anti-Semitism". Fair enough.“He’ll go far in life, this little fellow!” Siné wrote of Sarkozy Jr.
He added, in a separate item on whether Muslims should abandon their traditions, that: “Honestly, between a Muslim in a chador and a shaved Jewess, my choice is made!”
[...]
Philippe Val, the editor of Charlie Hebdo, requested an apology from Siné, to which the veteran “chroniqueur” replied, with some brio it must be said, that he would much rather cut off his testicles.That did it for Val, who promptly fired Siné, who shot back by bringing legal action against the paper for “defamation.”
But Cohen also criticizes the firing of Siné on free speech grounds, which I don't think makes any sense. Says Cohen:
I’m with Justice Oliver Wendell Holmes Jr., who wrote in 1919 that: “I think we should be eternally vigilant against attempts to check the expression of opinions that we loathe and believe to be fraught with death.”I'm glad that Cohen feels so strongly about free speech, but it's not really applicable to the situation he describes. Free speech, after all, is the right of an individual to express viewpoints without fear of retribution from the government. It also imposes on government a duty to protect an expresser of unpopular viewpoints from violence or suppression at the hands of his fellow citizens. What free speech does not do is protect an employee of a newspaper from being fired by his editor. The cartoonist Siné ought to have the right to say whatever anti-Semitic thing he wants--but that doesn't entail a right to a megaphone to broadcast those views.
[...]
...I remain a free-speech absolutist. In that spirit, I defended the publication of the Prophet Muhammad cartoons. Curtailing speech is generally far more dangerous than allowing even vile views to be aired, not least by a cantankerous has-been like Siné.
Those who accuse Charlie Hebdo of a double standard for printing the infamous "Muhammad Cartoons" and yet firing Siné for his offensive remarks are unclear on the same point. In the case of the Muhammad Cartoons, a Danish newspaper was materially threatened and intimidated by a large number of offended Muslims. Reprinting the cartoons in solidarity with that paper really was an assertion of free speech, because it forced the government to uphold its duty to protect those with unpopular views (although personally, I thought the reprinting unnecessary and a little overdramatic). Unless we interpret Siné's gig at Charlie Hebdo as a "right"--something that it is clearly not--I don't see how refraining from firing him for his offensive remarks stands up in any way for free speech or rights in general.
Of course, all that said, an editor may freely choose to adopt an editorial philosophy that borrows from the logic of free speech, and permit the staff to express whatever inflammatory views it wants, even if they contradict the publication's mission. Indeed, as Cohen suggests, there can be wisdom in letting unpopular views be expressed unhindered so that they can be properly discredited in the marketplace of ideas.
However, there are limits to this approach: an off-kilter remark now and again might be permissible, but if a consistent pattern of offensive bigotry emerges, the editor may want to rethink having such a person on staff. In this case it looks as though the editor Philippe Val did precisely that.
Sunday, August 3, 2008
Bush family values
From a puff piece in the Times, a portion of a letter that George H.W. Bush sent to his five children:
“Your mother and I sit out here like a couple of really old poops, but we are at total peace,” the former president wrote. “She does crossword puzzles, real puzzles, reads a ton of books, plays golf, calls people up on the phone, writes letters and occasionally gets mildly (to use an old Navy expression) pissed off at me. I can handle it though — no problem. I fall back on bad hearing and changing the subject. Both work.”
The letter went on: “I sit on our deck, out of the wind, near the sea. And I realize that because of all five of you and yours I am a very happy man.”
It's kind of nice.
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