Notes About The First Ten Days Of Your Life (#infancy, #life)

To my Little Lion,

I wanted to share some observations about the condition of your world at the time of and shortly after your birth, just ten days ago. It may interest you to look back on this some day, and it will be of benefit to me and your mother to remind ourselves of our good fortune, and yours.

You were born during the Winter Solstice last year (it’s New Year’s Day today, so I can already say “last year”, as if you’ve been around so long… we’re already shocked when we realize you have not been around even a month) and what’s more, you were born during a rain storm, the rarest of rare weather conditions where we currently live. Your mother and I are not superstitious people and we don’t believe there is any cosmic agency behind the concurrence of these events, I just find them remarkable because of their natural beauty, much like the nearly perfect weather conditions this morning when I finally took our dog for a walk– cool, breezy, clear, sunny, good visibility all the way off the coast to the island, fresh smelling air after another night’s rainfall.

You were born at home, as planned. The Wolf and I planned for months for that moment, as you were slowly growing inside of her belly, because we thought it gave the most advantages to you and to us. All of our friends who have had children describe the happiest part of the birth of their children as the moment they were released from the hospital and able to come home. We figured, why not just start at home and skip a few steps? We valued the privacy of it, as well. Your mother could labor anywhere she felt comfortable doing so, in an environment she knew well, with only your father and the three birth attendants (the midwife, the midwife-in-training and the doula to comfort your mother) nearby. We looked at your birth as a natural, healthy process and we were concerned that bringing you into the world in a hospital would encourage everyone around you to try to notice what might be wrong with you and your health, rather than what is right. It’s not that we’re anti-hospitals, and we appreciate that we live nearby one in case we needed extra help in bringing you into the world, we just try to live our lives simply and it seemed like we could do without. Your mother took great care to eat well, exercise, think happy thoughts, read a lot about you and how you were growing and how you’d be when you arrived, and so it seemed with such low risks to keep it that way by having you at home.

What did not go as planned was the specific day you decided to arrive! We were expecting you a few weeks from the day you were born. The Wolf and I were methodically going through our preparation checklists each day and week as your expected due date got closer. The day you were born, I was supposed to run to the market and start stocking up on supplies to feed your mother and the birth team. I didn’t get there in time! Your mother started laboring early in the morning and had pushed you out (without any drugs or medical intervention) by the afternoon! We didn’t even get the birth tub here in time for your water birth, she had you right on the bed you sleep in with us at night. The midwife was very kind and let me “catch” you as you came out. It was an exhilarating experience to grab your wet, slippery, bony, hot little body for the first time and lift you up and place you on your mother’s chest. We didn’t know what you’d be — a little boy or a little girl, though your mother says she secretly suspected you were a boy, and every passerby on our daily walks thought for sure you were a boy from the way your mother was carrying you, which is more superstition — but we were excited that you were what you were, if that makes any sense!

The birth team was so great with your mother. The doula arrived first and comforted your mother. Even though you couldn’t LEGALLY be delivered in our own bath tub (well, your bath tub, in your room), which I will tell you more about such silliness when you’re older, your mother labored in there with the doula while we waited for the midwife and her assistant to arrive. Everyone encouraged your mother and gave her the confidence and support she needed to bring you out, even though your father didn’t have any food or drink for anyone!

Your Grandma and Grandpa Lion came over to visit that first night and brought your mother and I some much needed food. They were so excited to see you! Your Grandma Wolf came a few days later, she lives a few thousand miles away and had to quickly change her plane tickets to be able to see you. She’s with us now and will be for the next few weeks. She is a big help for your mother and father, helping with sweeping, cleaning up dishes (your father is rediscovering his penchant for cooking these past few weeks), caring for your dog, doing laundry and even spending time with you which is really her greatest reward. She does all the hard work without complaint, with a smile on her face, getting to spend time with you for even a moment seems to make it all worthwhile to her. Even when you poop and pee on her, the chair, the floor and your dog during your “air time”. (Oh, and your Grandma Wolf is super obsessed with you staying warm, she is always chiding me about it.)

Your Auntie Lionesses came by and pitched in, too. They helped change bed sheets, sweep floors and they gave your mother and father an awesome early Christmas gift– six nights of meals that we packaged and put in the freezer to make more time available for me and your mother to spend with you. You’ve had a few visitors already, mostly your mother’s friends and some of Grandma and Grandpa Lion’s friends. They’ve bought food, gifts and good wishes. We didn’t have a name for you at first. Well, we did, but we hadn’t settled on it. So the first five days of your life created an obsessive mystery for many of the people who care about you. We “revealed” your name on Christmas Day while visiting at Grandma and Grandpa Lion’s house and everyone was overjoyed. Your Grandpa Wolf doesn’t get to meet you, but he gets to enjoy being part of your namesake, which we hope you will be able to appreciate some day.

As I said before, it is hard for your mother and I to believe you’ve only been with us for ten days now. All you know of the world is our bedroom, our living room, our kitchen, the view of the sky on the way to the local bakery and back, the ceiling of your mother’s car, and a few rooms of Grandma and Grandpa Lion’s house. The only people you know about are the few people who have come to see you so far, and most of them looked like funny blurs to you that you couldn’t focus on. You might imagine there are three animals in the whole world, your dog and your grandma and grandpa’s two dogs. We try to keep remembering that everything is new to you right now and everything will be new to you for years to come– you will need patience and your own space to learn and explore the vast diversity of the world and to make sense of it all.

We spend time holding you, but we also give you time on your back — on the bed, on the couch, not yet on the floor but eventually — to look around and move your body on your own. Your movements are jittery and random, but they have great meaning and importance to you. You are working on developing yourself, even when you’re moving around in your sleep, trying to become the person you will be. We don’t ever want to forget that, or try to hurry it, or expect anything of you but that. We resist as much as we can the temptation to “pattern-fit” your behavior right now, especially when people ask silly but well-intentioned questions like “How is he sleeping?”, “How is he eating?” etc. The answer is always, just as you are supposed to, whatever that is each day and night, it’s always changing because you’re always changing, getting a little older and a little bit further along your own plan each moment.

There’s so much more I could say, but this is what I want to focus on for now. Raising you is indeed a challenge, but it’s a challenge we chose and it’s a challenge we love (even aside from all the help we’ve gotten so far). We look forward to each day with you!

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The Thousand-Year Reich Fallacy (#economics, #politics, #InterestRates)

Nothing is more permanent than “temporary” arrangements, deficits, truces, and relationships; and nothing is more temporary than “permanent” ones.

~Nassim Taleb

The Nazi regime in Germany, which was early on referred to as the “Third Reich”, was also popularly referred to as the “Thousand-Year Reich”, the implication being that it was a regime which would stand the test of time and last over a period of many multiple generations.

An intellectual problem I’ve always had with this is that the seemingly ever-lasting circumstance has an explicit, definite end point. In the case of the Thousand-Year Reich, that end point is 1,000 years from the time it was established– and then what? More importantly, why only 1,000 years? If the Thousand-Year Reich represents some kind of political ideal, how would it be possible for the society underneath it to transcend these arrangements over any conceivable period of time? And what changes in circumstance would lead them to do so?

As an observer of financial markets and business cycles for going on a decade, I see the “Thousand-Year Reich Fallacy” with some frequency. For example, a market prognostication might be made in the following form: “Earnings growth is strong and sustainable, rather than seeing the S&P 500 tail off from current levels, I believe it will continue to rise and will be ten or fifteen years before we see a correction.”

Ignoring even the problematic metaphor of a “correction” in this context, I always find myself thinking in these circumstances– and then what? And what is it, 10 or 15 years from now, that finally precipitates this change in price?

The most obvious example of the Thousand-Year Reich Fallacy (which is really just a variant of the hot hand fallacy) lately is the specious reasoning we hear about about Zero-Interest Rate Policy (ZIRP), its longevity and the “new normal” economic paradigm it engenders. Many people, simpleton and sophisticate alike, have reasoned that central banks have painted themselves into a corner with their ZIRP attempts and having arrived at this corner, there is no way out that will not impose enormous social costs to exit, which they are beyond reluctant to effect as a result. The implication is that interest rates will not rise because they can not rise without grave disruption to economic activity.

The incentives of ZIRP and even NIRP (Negative-) are intuitively perverse. Under ZIRP, borrowers pay no costs and lenders earn no return for parting with their money, meaning lenders have become indifferent from the standpoint of time preference, preferring a dollar today equally to a dollar tomorrow. Under NIRP, borrowers are rewarded for borrowing and lenders are glad to pay them for their privilege, meaning that lenders prefer a fraction of their dollar tomorrow to their whole dollar today. Anyone who listens to this realizes that this is not a sustainable arrangement, ceteris paribus, and that studied in isolation they would not willingly behave that way as a lender.

So, the Thousand-Year Reich must come to an end. But when? And why? Here is where the fallacy rears its ugly head, as people will project an arbitrary time frame which seems sufficiently long to hedge against immediate uncertainty, ie, 20 years, 30 years, but they will not then reason about what changes must occur 20 years or 30 years from now that bring ZIRP/NIRP to an end.

For ZIRP/NIRP to truly be the “new normal”, there can not be any end point to it. But it is not anticipated to be the new normal, but only a Twenty-Year Reich. But what then? And why will it remain stable along the way?

The funny thing about the Thousand-Year Reich fallacy is how short of the initial timeline events end up, and how violently the trend unravels. In the case of Nazi Germany, a regime slated to last 1,000 years in fact lasted 12 years, from 1933 to 1945. Of course, it was a horrible 12 years, punctuated by a ghastly death toll, gross destruction of capital and property in Germany and abroad, and enormous political ramifications that reverberated outward from Berlin and into the present day. All the martial glory, all the eternal recognition and all the national greatness imagined at its inception was dashed to the rocks in just over a decade which, for those experiencing it, must’ve seemed like 1,000 plus forever years.

The ZIRP/NIRP paradigm is a similarly crowded trade from a social expectations standpoint. Anecdotally, I have seen that it is believed from shady, proletarian used car lot operators in Appalachian Tennessee, to educated, middle-aged professional bankers on the West Coast. Everyone knows it can’t go on forever, but they can’t see how it will end in the next five, ten or even fifteen years and certainly no one wants to try to imagine what it might be like. It will be truly unprecedented. But it will end, because it must end, and since it will end it’s worth thinking about what it is that will deliver the finishing blow, and why it could be a much shorter Reich than one could anticipate right this very moment.

Sorry, The Economy Is Officially Closed (#investing, #risk, #economy, #recession, #wealth)

One way to describe what I do for a living is “capital allocation.” Really, I am like an internal strategic consultant to a family business (a family of which I am a part) so there is more to it than that, but thinking about where to put our capital is one of the primary functions I serve.

One interesting problem to have when one owns things of value is receiving bids on those things from people interested in buying them when you’re not sure you want to sell. The further above your own estimate of “fair value” their bid goes, the stronger the temptation to take advantage and sell your asset. It seems like a pretty straight forward problem to solve.

The only problem is the market context of the potential sale. Generally, if you’re in a position to get more than fair value for what you’re selling, you’re going to have a hard time finding another asset to buy where the seller isn’t facing the same dynamic. In other words, you can potentially sell one asset at an inflated price and buy another at an inflated price– you’re probably better off just holding on to what you have because there’s no arbitrage in that and it could very well cost you money in terms of frictional costs like brokerage commissions and taxes on imaginary capital gains.

One thing you could do is sell your asset at an inflated value and sit and wait in cash for a better buying opportunity. The problem with that is that cash is, currently, a seemingly barren asset. If you stuff your haul into T-Bills, you’re lucky to earn a few basis points every 90 days– it might as well be zero, and when you factor in the effect of inflation and those damned capital gains taxes once again, it probably is. You could go further out on the yield curve and buy some 10YR Treasury notes, but then you’re exposing yourself to substantial interest rate risk with yields flirting with historic lows.

Meanwhile, most asset owners are earning strong internal returns on their invested capital right now. Say you’re earning 20% a year on your investments, why would you sell them to collect 1.5% over the next 10 years while taking enormous interest rate risk? Or to collect zero for some unknown amount of time sitting in T-bills or cash in a savings account? Every year you stay invested, you get ahead by almost 20% more. Could the value of your investment really drop by that much?

The business cycle is an inevitable fact of owning and operating a business in a modern economy. The question is not could it, but when will it drop by that much, or more? For many business owners and investors, the waiting is the hardest part. Giving up 20% a year for some period of time and avoiding the risk of a 50-60% or greater decline in asset values just isn’t attractive. It isn’t even attractive when thinking about the fact that buying back those same assets at half price could potentially double your return on invested capital during the next boom, an interesting strategy for shortening the compounding time necessary to achieve legendary riches.

For many, this inevitable decline in asset prices is inconceivable. It’s embedded deeply in the fear of selling and going to cash. The implication of this premise is that the economy is officially closed to additional investment. Those who invested earlier in the cycle can stay inside and watch a magnificent show as they earn outstanding returns on their capital while the boom goes on. But for everyone who sold too early, or never bought in, they have to wait outside, indefinitely, and wonder what it’s like– the cost of admission is just too high.

What makes this a stable equilibrium? By what logic has a competitive market economy become permanently closed to new investment, or a change in asset values, or a change in ownership of assets? Under what set of premises could this condition last for a meaningful amount of time and leave people who sell now out in the cold, starving and bitter for returns on capital, forever, or for so long that they would be losing in real terms over time in making such a decision?

To me, this “new normal” is absurd. It is juvenile to believe that the economy is closed and no one else is getting in. It’s silly to think that the people willing to pay those astronomical prices for admission are making a good decision, that they’re going to have a comfy seat and years of entertainment, rather than paying more than full price for a show that’s about to come to an abrupt end. It’s a topsy-turvy world in which the reckless and courageous high-bidders are the ones who get rich. If paying too much for things was the path to riches, we’d all be there by now. I think when everyone’s perception of reality and value skews toward a logical extreme like this, we’re closer to the show being over than the show must go on.

In the meantime, sorry, the economy is officially closed.

Experiencing Pregnancy As A Man (#pregnancy)

People ask me a lot lately how the Wolf is doing with her pregnancy. It’s kind of like the new “How’s the weather?” or “What’s up?” because I have similarly unexciting information to share in response. The truth is that she just hasn’t had many challenges with the pregnancy so far. Aside from a quick bout of nausea while making dinner one night during the first trimester she’s been pretty peachy– cheerful disposition (enhanced by the confidence of knowing she is caring for a new life growing inside of her), eating healthily and with a normal appetite, maintaining relationships with friends by continuing to exercise and getting together for meals outside the home. She definitely is more tired than usual, she is slower on our evening dog walks around the neighborhood and takes frequent naps throughout the day and often likes to go to bed early.

But no wild changes in personality or emotions or other kinds of physical, mental or emotional instability.

I think that’s what I am having a hard time wrapping my head around. If pregnancy ever comes up in the plotline of a TV show or movie, there is usually a “Pregzilla” moment where the newly sassy, demanding and impossible-to-please woman shovels ice cream and other junk food into her mouth, emasculates the man by ordering him around town and the house on silly errands (which he hops to to prove his love and loyalty to mother and child) and generally just storms around the world raising hell and acting like your typical idea of a bitch. It falls nicely into that other man-woman stereotype where the two people enjoy nothing more than relating to sympathetic listeners of the same sex how knowingly horrible marriage and their spouses are, but, ah, the things we do for love!

I guess shame on me for thinking corrupt Hollywood ethics and bizarre leftist social agendas would make for accurate depictions of real human biology and sociology in media. We just aren’t experiencing that. For me, her pregnancy has been essentially “painless” so far, and I think I can say without being a jackass here that, all things considered, it’s been relatively painless for her, too. We’ve heard so many horror stories from others and none of it has happened.

Although we did have a chuckle the other day when we were watching something together and there was a “Pregzilla” moment on screen and I said, “How come you aren’t all hormonal and crazy like that woman?” and she looked at me and said, “Oh, I did some random crying right before you got home!”

I’m not sure if it’s diet, exercise, self-control, lifestyle or just luck but so far her pregnancy has been a civilized experience for both of us.

(For the Wolf’s perspective, check out Experiencing Pregnancy as a Woman)

Why do we travel? (#travel, #Asia, #Taiwan)

Why do we travel?

Meeting other travelers, it’s often the first thing you ask, and are asked in return.

In many cases, travel fulfills that common desire to investigate whether the grass is greener, what some term “wanderlust” but which is really no more glorious than being convinced despite the evidence that if you just search a bit further and farther you’ll eventually find a place that is significantly better for you than where you are, if it isn’t perfection itself.

For others it is to gain a new perspective on people, places, history or culture. What is the food like and why do people make it like that? How are people dressed and what makes that customary or comfortable? How do people behave toward one another in their community and why? How do they get around and where do they go? Sometimes these become notches on the travel belt– “Oh I’ve been there, here and over there… I’m very worldly and can appreciate others in a way you’d only dream of if that was the kind of thing you yearned for for some reason.” The really psychotic ones almost make it like a race, “I’ve been traveling for X months and I’ve seen Y places, I’m way ahead of you on the quest to see it all and make myself comparatively more enlightened.”

We’ve only been at this for a few days on this trip but already we’ve been asked several times, and we’ve asked several times as well. This would include ourselves, I’ve been wondering, why are we traveling, and to these places in particular?

One gentleman we met on tour yesterday has been traveling, on his own, throughout southeast Asia for the better part of a year and change. He’s middle aged and a friendly fellow but the fact that he is alone and doing this relatively late in life makes you wonder if he’s looking for something, or simply lost. Why did he come here?

On our second tour last night we met several more travelers, all younger, female and apparently traveling on their own. They were each on an itinerary similar to ours– several weeks to a month total, visiting major developed economy cities, college educated (world travel doesn’t seem to be for the uneducated these days, which seems strange) and each seemed to have some personal heritage, identity or family connection to the region. But again, in the short time we met I couldn’t tell, why were they here?

It isn’t enough to simply ask the question. It is too philosophical and most people will reply with something shallow and obnoxious “to eat the food” or “to learn more about history”.

So, why do we travel? And why did we travel here?

I’m still formulating my thoughts on this, but I will attempt a response in the near future.

In the meantime, here is a picture of a handmade candle we found at a local designer mall. The young saleswoman told me it was called the “melting baby head”. I almost bought one but I think a picture will suffice and I didn’t feel like lugging it around the rest of the trip.

image

Why we travel

The Wolf and I were kicking around a few links via e-mail the other day as we (she) put the finishing touches on our South America excursion. We were reading something from one of Tim Ferriss’s guest writers about “how to travel”. The guy was a little sanctimonious in the beginning but ultimately offered some tips I found valuable for getting the most out of my upcoming travels.

I say it was a little sanctimonious as if I am displeased. But as a sanctimonious person myself, I mostly took interest. What the guest author was on about was “good” and “bad” reasons to travel. As I read it, I have to say I couldn’t figure out how anyone could have a “good” reason… it all seemed to boil down to restlessness borne of subtle, unaddressed displeasure with one’s usual circumstances.

I thought about why I like to travel. I noticed a lot of my reasons boiled down to this nagging insecurity and unhappiness thing. I haven’t found a way to rationalize my way out of that bag (and maybe I never will), so in the meantime I thought I’d “invert, always invert” (erroneously attributed by naive financial market philosophes to Charlie Munger) and pose it this way:

Why wouldn’t you want to travel?

I came up with a short, condescending list, in no particular order:

  • You’re completely unaware there is a world of other people and experiences outside the narrow confines of your everyday life
  • You can’t afford it (ultimately because you don’t prioritize the experience highly enough to take the steps necessary to produce enough for others in exchange to pay the cost)
  • You’re a racist
  • You’re intimidated by foreign languages and awkward some-English interpersonal encounters
  • You don’t like the food
  • You realize churches and temples are bizarre no matter where they are in the world and, seeing as how most travelers eventually wind-up staring at a place of foreign worship at some moment or another in their trip, you decide to skip it and stay home
  • You are a Zen-like being of perfect self-knowledge and self-control and there is no felt uneasiness you feel the need to relieve yourself of by journeying beyond your present place and state; in fact, you are so consumed by your enlightened presence that you don’t even travel into the kitchen for a snack… ultimately you stay right where you are until you sublimate into supreme nothingness (aka, you die and leave a smelly mess for the neighbors to find)

I think when you put it this way, it’s pretty clear why we travel and it’s really hard to come up with a reason why you wouldn’t live life exactly as we are (take THAT, Zen master!).