[FRIAM] Nautilus: Investing Is More Luck Than Talent

[Robert Wall]

Good morning Marcus,

I didn't give you a fair reply to this particular post; I got distracted
myself by the RT thing. 😊  I will try to make amends here ...

The *Nautilus *article--including my response to it--is about the "secret
sauce" to massive wealth.  The author's surprising conclusion after doing
multiple stochastic simulations is that it is predominantly *luck *that
accounts for success even after treating the experiment for *talent*.

"*His research interests include the distribution of wealth, investments,
CEO compensation, decision-making, and social phase transitions.*"


So I guess Moshe Levy, the author, has been looking at this for a while.
So, he wonders that if the secret sauce is just luck, then shouldn't we
"tax" the lucky in a way to rebalance the game?  It is an interesting
question for a hypothetical, non-intuitive result: the massively wealthy
are massively lucky ... by virtue of the way they accrued their wealth.  [*an
aside*: using the Buddhist concept of *dependent arising*, in this context,
one can never say "I did this all by myself."] If you are a dyed in the
wool capitalist you would likely recoil from such a suggestion; you would
say that "these personal gains are due to an individual's hard work and
talent ... we don't want to tax these virtues as it would provide a
disincentive and bring the whole enterprise to a screeching halt."

So the *luck hypothesis* seems to turn this argument on its head.  Moshe
also squeezes in another "snarky" bit about the massively wealthy being
able to avoid hard work and just live off of their investments. That just
leaves talent or skill, which we are told he treats for in his experiment.

Your idea, it seems, is that the answer to Moshe's wonder is that what
anyone does about the wealth gap should depend on how one actually uses
their wealth. Let's call this *the use argument*.  Do they, for example,
use their wealth for improving society or for separating themselves from
the same and living in their own gilded bubble?  [Please note that the
thread's issue is with personal wealth and not corporate profits, leaving
Google and payday loan institutions on the sidelines for the moment.]
Risking to make your point a little better, in this case, I would have
juxtaposed Bill Gates with the owners of WalMart, the family that owns as
much wealth as the bottom 42% of all Americans combined. And, the latter
entity will not even consider paying a living wage to its employees such
that the American taxpayer do not have to pick up the tab for the rest.
Bill and Malinda Gates are well-regarded philanthropists. So okay; which
one should be "taxed" more?

I am not really in favor of using taxes as the sole way of righting the
ship.  We have to also provide other ways for the 99% to earn their own way
on their own steam, as it were.“Government is not the solution to our
problem; government is the problem,” as Reagan is famous for saying.  But I
would amend Reagan's First Innaguaral insight by saying that a large or
growing governemnt is just a *symptom *of the problem.

The problem with government is that there is too much demand for it.  If
you ensure a living wage and provide for economic opportunities for all
Americans there would be less demand for government.  Moreover, the
American economy would have more viable consumers and less social
dependency.  The New Deal was all about this kind of fix to an ailing
economy, which was also due in some part to a grossly exaggerated wealth
gap.  But this is something the capitalist failed to do themselves at that
time.

I would say neoliberalism is trying to engineer biased coins that land in a
> coordinated ways to build something more complex.   One way is with trade
> laws.


I think I can partly agree with this statement ... about the biased coin
thing.  That is the rigging, IMHO; by not making adjustments to the flow of
wealth [akin to blood flow in a body] the system gets sicker and sicker.
Our economic system is arguably sick now when you consider the body
composed of constituents comprising the consumers in the system [the cells,
keeping with the metaphor].  To be sure, government does not have to be the
institution making the adjustments; the captains if industry should do this
first to avoid any necessary government intervention.

Just like you say that there are differences in billionaires, there are
differences in trade agreements. IMHO, the trade agreemets like NAFTA and
TPP help to perpetuate the neoliberal status quo with the multi-national
companies being the exclusive beneficiaries and the American worker [and
society] being the ultimate loser.  We might look at this with a biological
metaphor, say, the KT-extinction event, which percipitated a
*structural *evolution
allowing only the strong members to survive--strong for that niche, to be
sure.  This would be in keeping with the former neoliberal trope: "We make
money the old fashion way; we *earn *it."  [Remember that commercial in the
early eighties with John Houseman ... who played Contract Law Professor
Charles Kingsfield Jr. in the TV series *The Paper Chase*?  😎 ]

But, do we want to "live" in a world like that?  Or, can we evolve *consciously
*as a society to find a more inclusive solution?  If it plays out as it has
throughout history, the anser will be "not likely." I mean this hope could
be bordering on complete naïveté, calling for a universal Kumbayah moment.
Yes? 😕  But let's go on ...

Neoliberalism is now well-established in American politics, especially with
the SCOTUS' *Citizens United* decision. Just another *symptom*. The "blood"
has mostly gone to the head.  It will take a revolution like the Arab
Spring, IMHO. *Not *a Kumbayah moment!  As the Pareto distribution of
wealth versus population continues to skew more, this will ultimately reach
a tipping point ... and revolution will become more and more likely even in
this country.  And, I didn't learn that at RT. 😁  [*an aside*: Capitalism
requires some skew to the wealth versus population distribution in order
for there to be *incentive*--the engine for such a market-based system ...
and a very good system when resources are intelligently managed to not be
wasteful--it's biggest arguable hit for the health of the planet. I get
that, just like Kurt Vonnegut did in his *Breakfast of Champions* (1973).
Capitalism is like gambling and investments.  There has to be sufficient
likelihood of winning.]

As I watch the Inaguaration this morning and the mounting resistant to a
Trump presidency, I see an irony unfolding that suggests that maybe half of
America believe that the American economic situation could be different
with a different election result. Neoliberalism--not the Russians--has
effectively uncoupled those events.  The root of the problem is
neoliberalism itself, IMHO.

Yikes! I am kind of sounding like Reagan who ushhered in neoliberalism in
the country thirty-five years ago. 🤔 🤐  Sorry.  Neoliberalism is a whole
'nother, different thread.

I hope this is a better response Marcus ...

Cheers,

Robert


On Thu, Jan 19, 2017 at 8:39 PM, Marcus Daniels <marcus at snoutfarm.com>
wrote:

> "The rigging is, IMHO, of not doing anything about the unabated and
> disproportionate flow of wealth to the top and, hence, giving rise to the
> resulting, ever-skewing, descriptive Pareto distribution of wealth versus
> population.  It certainly does seem like an increasing biasing of the
> metaphorical *fair *coin [e.g., the busted "trickle down" metaphor of
> President Ronald Reagan]."
>
>
> I think it depends in part on the source of the wealth and how it is
> used.   There's a qualitative difference between a Google and a payday loan
> company that preys on the poor.   Are these wealthy people creating new
> high-paying jobs or locking-in people to dead-end jobs like coal mining?
> Do they have a vision of advancement of humanity (Gates) or just a
> unnecessary assertion of the `need' for a lowest-common-denominator
> dog-eat-dog view of things?  How does their wealth and power matter in the
> long run?    It is at least good that there isn't just one kind of
> billionaire, like the sort that destroys the environment and enslaves
> people.
>
>
> A problem with government is that the agency it gives people is either
> very limited (you get food stamps so you can eat), or it is also
> hierarchical like these enterprises (you don't get much agency unless you
> fight your way up or are an elected official).  For people to truly be free
> means creating a commons that facilitates other kinds of motivators that
> are rewarding in more complex ways than just salary or status.
> Universities don't really deliver on this, except perhaps for
> some professors who are in that world for most of their adult life.
>
>
> I would say neoliberalism is trying to engineer biased coins that land in
> a coordinated ways to build something more complex.   One way is with trade
> laws.
>
>
> Marcus
>
>
> P.S. RT is the Russian Propaganda news outlet.   Of course, they'd have
> their own motives for wanting to diminish Chinese power.
> ------------------------------
> *From:* Friam <friam-bounces at redfish.com> on behalf of Robert Wall <
> wallrobert7 at gmail.com>
> *Sent:* Thursday, January 19, 2017 4:57:14 PM
> *To:* The Friday Morning Applied Complexity Coffee Group
> *Subject:* [FRIAM] Nautilus: Investing Is More Luck Than Talent
>
> This is just an exploratory thought piece to try in this forum ... please
> skip if it seems, right off the bat, as being too thought-full ...  [image:
> 😴][image: 😊]
>
> Does *Pareto's Principle
> <https://en.wikipedia.org/wiki/Pareto_principle> *(with the attending,
> so-called Power Law <https://en.wikipedia.org/wiki/Power_law>) provide
> good *moral* justification for an amped-up progressive tax strategy or a
> reverse-discriminating set of rebalancing policies [e.g., changing the
> probabilities for the "everyman"]?  And, is the argument one of
> *morality *or one of *necessity*?  That's what this thread and the
> subject *Nautilus *article intend to explore, especially with the events
> that will begin the next four years tomorrow.
>
> *Nautilus*:  Investing Is More Luck Than Talent
> <http://nautil.us/issue/44/luck/investing-is-more-luck-than-talent?utm_source=Nautilus&utm_campaign=f5f998a451-EMAIL_CAMPAIGN_2017_01_18&utm_medium=email&utm_term=0_dc96ec7a9d-f5f998a451-56531089> (January
> 19, 2017).
>
> *The surprising message of the statistics of wealth distribution.*
>
>
> *I returned and saw under the sun, that the race is not to the swift, nor
> the battle to the strong, *
> *neither yet bread to the wise, nor yet riches to men of understanding,
> nor yet favor to men of skill, *
> *but time and chance happeneth to them all.*  (Ecclesiastes 9:11)
>
>
> [*an introductory aside*: As computational statisticians, we love our
> simulations ... and our coin tosses.  [image: 😎] We are always mindful
> of *bias *... as, say, apparent with the ever-widening wealth gap. Money,
> Money, Money <https://www.youtube.com/watch?v=ETxmCCsMoD0> ...] [image:
> 😊]
>
> [image: Inline image 1]
>
>
> So, as described in the subject *Nautilus *article, Pareto's Principle,
> descriptively seen so often in nature, seems to imply that the current
> widening wealth gap is, well, "natural?"  Judging by its prevalence in most
> all rich societies, it does seem so. However, remembering that this sorting
> process works even with *fair *coin tosses in investments and gambling,
> this process phenomenon with its biased outcomes seems to occur in many
> places and on many levels ...
>
> For example, we find this aspect of *luck in nature* elsewhere in
> biological processes; from *Wikipedia *... *Chance and Necessity: Essay
> on the Natural Philosophy of Modern Biology* is a 1970 book by Nobel
> Prize winner Jacques Monod, interpreting the processes of evolution to show
> that life is only the result of natural processes by "pure chance." The
> basic tenet of this book is that systems in nature with molecular biology,
> such as enzymatic biofeedback loops [*metabolisms*] can be explained
> without having to invoke final causality [e.g., Intelligent Design].
>
> Usually, relatively very few winners and many, many losers. Phenotypical
> luck or luck in tectonic location?
>
> According to the introduction the book's title was inspired by a line
> attributed to Democritus <https://en.wikipedia.org/wiki/Democritus>,
> "Everything existing in the universe is the fruit of chance and necessity."
>
>
> But, is there a *necessity *to Pareto's Principle? To answer this I must
> defer to my theoretical mathematician friends who so often look to Plato
> for such answers. [image: 🤔][image: 😊]  My thought is that the
> necessity comes from a need to, perhaps teleologically, react to it ... as
> the planet's only available potential intelligent designers ... the purpose
> being, on some scale, Darwinian-level survival.
>
> And, this aspect of *fate by chance* is also reasoned in the
> Pulitzer-winning* Guns, Germs, and Steel: The Fates of Human Societies is
> a 1997*, a transdisciplinary non-fiction book by Jared Diamond, professor
> of geography and physiology at the University of California, Los Angeles
> (UCLA).
>
>
> The book attempts to explain why Eurasian civilizations (including North
> Africa) have survived and conquered others, while arguing against the idea
> that Eurasian hegemony is due to any form of Eurasian intellectual, moral,
> or inherent genetic superiority. Diamond argues that the gaps in power and
> technology between human societies originate primarily in environmental
> differences, which are amplified by various positive feedback loops. When
> cultural or genetic differences have favored Eurasians (for example,
> written language or the development among Eurasians of resistance to
> endemic diseases), he asserts that these advantages occurred because of the
> influence of geography on societies and cultures (for example, by
> facilitating commerce and trade between different cultures) and were not
> inherent in the Eurasian genomes. [Wikipedia]
>
>
> The luck of geography.  So then, should the more fortunate nations be more
> progressively taxed?  Maybe we should ask Greece? Or see what Germany has
> to say?  Followers of egalitarianism would argue yes. Followers of Ayn
> Rand's capitalism or her Objectivism [like Speaker Paul Ryan] would argue
> no. I think most of the rest of us fall somewhere in between; that is, not
> sure. So, let's go on ...
>
> *Is the (economic) game rigged* then, as Bernie Sanders and Elizabeth
> Warren have insisted? Personally, I would say absolutely yes, and
> *neoliberalism *is the underlying philosophy of the rigging process
> <https://www.youtube.com/watch?v=z9wUGxgEFsw> [hear just the 1st 12
> minutes, if you watch].  But, maybe this political ideology is just one
> that is eventually spawned by a conspicuous need for moralistic or even
> Randian justification, by the winners, for its resulting
> destructiveness--as we so often hear, "wealth accumulation is based on hard
> work and talent."  So, intelligent design?
>
> The rigging is, IMHO, of not doing anything about the unabated and
> disproportionate flow of wealth to the top and, hence, giving rise to the
> resulting, ever-skewing, descriptive Pareto distribution of wealth versus
> population.  It certainly does seem like an increasing biasing of the
> metaphorical *fair *coin [e.g., the busted "trickle down" metaphor of
> President Ronald Reagan].
>
> Going forward, maybe we need to think about this neoliberal meme as the
> next four years, with a* President Donald Trump*, begin tomorrow  ...
> while also remembering that *morality *is a human concept or "invention."
> Or is it?  Or, does that even matter?!  Perhaps, morality is just a
> necessity ... but what are its goals ... dare I say its "purpose?"  When
> did it emerge? With consciousness?  How did it emerge?  By chance, as Monad
> and Democritus would insist?
>
> *Conjecture*: *It would seem that morality's human purpose is to check,
> slow, or rebalance the effects of the Pareto phenomenon in social and
> economic processes.*  Wealth has always been disproportionately
> distributed. Surely, just like the "selfish gene," morality arose out of
> self-interest; so it arose with prerequisite consciousness and *not *necessarily
> just with human consciousness [e.g., we see evidence of "morality" in other
> primate social systems]. As a system model, neoliberalism is connected with
> a positive feedback loop to morality and with a negative feedback loop to
> social stability. I think that there is a tipping-point distribution of
> wealth versus population
> <https://www.bloomberg.com/view/articles/2014-02-04/is-inequality-approaching-a-tipping-point->
> .
>
> *Conclusion*: The above conjecture is borne up by chance and necessity.
> The necessity is manifested by the need to rebalance the outcomes of the
> game [e.g., wealth or opportunity] every now and then, in order to ensure
> social stability. This just seems like a brain-dead conclusion that even
> Warren Buffet and Bill Gates get. But will Trump?  Strong critics of
> Hillary Clinton imply that she, like her husband, would surely have
> strengthened the negative feedback effect of neoliberalism toward their own
> self-interest and toward worsening social stability, IMHO.  The results of
> the November election are a kind of testament to this conclusion. In an
> unexpected way, we may have a *chance *with Trump to bring even more
> *necessary *awareness to the aforementioned system model that has often
> played out in human history and as recounted in Jared Diamond's book-length
> essays.  Bernie-style revolution? Perhaps.
>
> So, that is the idea of how *chance *and *necessity *fits here in "the
> game.". Now, let's dig into this idea of *morality *a bit more and how it
> fits in with the need for a different kind of evolution, not biological,
> but *conscious evolution*:
>
> This comment from a *Quora *article on this subject titled Is morality
> merely a social construct or something more?
> <https://www.quora.com/Is-morality-merely-a-social-construct-or-something-more> is
> notable:
>
> Mindaugas Kuprionis <https://www.quora.com/profile/Mindaugas-Kuprionis>,
> works at CERN
>
> Written 17 Sep 2010
> <https://www.quora.com/Is-morality-merely-a-social-construct-or-something-more/answer/Mindaugas-Kuprionis>
>
>
> Just recently Edge.org <https://www.edge.org/>held a conference titled "The
> New Science of Morality
> <https://www.edge.org/event/the-new-science-of-morality>". Consensus
> statement signed by several scholars (list below) was such:
>
>
> 1) Morality is a natural phenomenon and a cultural phenomenon
>
> 2) Many of the psychological building blocks of morality are innate
>
> 3) Moral judgments are often made intuitively, with little deliberation or
> conscious weighing of evidence and alternatives
>
> 4) Conscious moral reasoning plays multiple roles in our moral lives
>
> 5) Moral judgments and values are often at odds with actual behavior
>
> 6) Many areas of the brain are recruited for moral cognition, yet there is
> no "moral center" in the brain
>
> 7) Morality varies across individuals and cultures
>
> 8) Moral systems support human flourishing, to varying degrees  [aside--
> so morality may be akin to metabolic systems at the level of society
> --regulating feedback loops of sorts]
>
> [*aside*--  Fyodor Dostoyevsky's *Crime and Punishment *comes to mind.
> Under this eight-point new science, how would we judge the "higher-purpose"
> actions of Rodion Raskolnikov?]
>
>
> So if it is true that there is no distributional *purpose *to l*uck *other
> than a mechanistic, long-run, teleonomic
> <https://en.wikipedia.org/wiki/Teleonomy> sorting mechanism of outcomes
> in accordance with a Power Law, then should there be a *necessary*,
> periodic re-sorting of the initial conditions now skewed by *chance *...
>  like with a deck of cards before the next deal ...?  [image: 🤔]  All
> poker players would insist on no less.  Don't we all insist on a *fair *game?
> It's an interesting question, IMHO.
> Yes, I know; lots to unpack here.  Sorry.  Nonetheless, I thought the
> *Nautilus *article was quite thought-provoking as they always seem to be.
> Cheers,
>
> -Robert
>
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