Underestimating the Role of Luck

June 21st, 2009

Many people are apt to look at powerful, capable and charismatic public figures and attribute their success to “pulling themselves up by their bootstraps” - as if, in addition to their quantifiable gifts, they had some uncanny moral superiority to the rest of humanity which made their success inevitable. They want to establish some kind of causal relationship between the character of Oprah Winfrey, Andrew Carnegie, or Sam Walton and the success that they achieved - and, often, their own success.

I am hestitant to ascribe any such relationship between my character and my current state. After all, a great many of the things in my life are the result of chaotic systems. I’m hesitant to call them luck, because there were no dice involved per se, but my ending up in a certain place and doing certain things is the result of a multitude of narrow and sometimes arbitrary decisions.

For example, I only know my current set of friends because I 1) decided to enter Berkeley on deferred enrollment rather than attend Davis, 2) didn’t get into the College of Engineering, 3) decided to become an English Major, 4) happened to attend my orientation on a particular day, 5) started making wise cracks in tandem with another person, whom I befriended, 6) maintained my friendship with her over the course of several years despite divisions with her friends and varying personal circumstances, and 7) started going to weekly game nights with her despite some level of social anxiety and apprehension. And who knows what other myriad variables were involved in getting me to that particular place and getting the rest of them into that particular place to become my friends.

Or, for another, possibly more extreme example, I can reflect that I am only about to be married to my lovely wife because 1) I decided, more or less on a whim, to become involved with a high school musical, 2) I subsequently made a few close friends in the drama clique, who encouraged me to try out again the following year, 3) the director’s toddler was enchanted by my audition in a pantomime role and broke into paroxysms of laughter, 4) I subsequently attended Foothill College for the drama program and for a girl I was having a fling with, 5) I barely didn’t make the cut to get into the acting program there, 6) another person dropped out of the program, a slot was offered to me, and I decided against attending and redoubled my efforts to get into Berkeley, 7) I took English 117T, the performance-study Shakespeare class offered once every two years at Berkeley, and 8) the directors thought I would have chemistry with Isolde, and had us audition as Beatrice and Benedick (which went to taller - but no less deserving - actors).

I can recite a similarly long-winded tale of how I ended up in my career. If, for me, things like my wife, my friends, and my career were determined by a totally chaotic set of circumstances, it should be easy to see that the difference between triumphant success and obliterating mediocrity could be determined by chaotic circumstances. If not for all of those things, who might my friends be? Would I be single, or involved with another? Would I be a lawyer, an engineer, an actor, or a menial worker hoping to make it some day? It would seem, then, that there is a weak correlation between my capabilities and any particular outcome - in fact, had some important things in my life been slightly different, I would no doubt be a very different person.

And with regard to others, I’ve known plenty of people who were very intelligent but worked in rather mundane, low-paying jobs, and, conversely, rather unremarkable people who were absurdly successful. So, it would seem that strong capability is neither necessary for success (as there are low-capability rich people) nor is it sufficient (as there are highly capable poor people). Then again, my effort may have been necessary, as I could’ve just decided to stay in my room and play Diablo II and, later, World of Warcraft while the world passed me by. And I would say that there are a lot of unsuccessful people out there who seem slaves to their own ignorance, pettiness, vice and self-sabotage, just as there are successful people who are beacons of intellect, learning, gumption and determination.

So, while I am, again, hesitant to call any of this luck, it would seem that many of the things in my life are the result of staggering coincidences, decisions made on a whim, the interference of factors outside my control, and emotional sentiment. That’s pretty damn chaotic if you ask me.

Still, I can see why people would want to believe they are the captains of their own souls, so to speak. I certainly try to convince myself of it as I slog through my daily life. It rings hollow to say, “Look at everything I’ve accomplished. Thank God that an infinity of chaotic circumstances beyond my control conspired with my meager individual effort to create this outcome.” And, after all, winners tend to take credit for their successes, as losers tend to blame the stars for their failures. So, I generally tend to take credit for my successes, and I think it is a great psychological device.

However, convincing yourself that you are the sole arbiter of your destiny is foolish and myopic. I realize this is a dangerous and problematic statement, but I think that the rich man who believes he is rich because he is lucky is inclined to be the steward of his less fortunate brethren, as the nobility of old aspired to be. After all, the rich stayed rich and the poor stayed poor, so rich or poor was determined by accident of birth. But I think that the rich man who believes he is rich because he is morally superior to the poor is inclined to have disdain for them - to deny them dignity and security, to degrade and humiliate them, to drive them to steal and kill to survive.

Wedding website live

May 31st, 2009

brianandisolde.com

Astroturfing and Bay Area Real Eastate

May 20th, 2009

So, I’ve been following a few housing  blogs recently - The Housing Bubble Blog, Knife Catchers and Burbed. While Burbed focuses on the Peninsula and THBB is global, Knife Catchers focuses mostly on the tiny and increasingly exclusive hamlet of Alameda.

For those who are unfamiliar with the layout of the SF Bay Area, Alameda is the site of a former  naval base right across the bridge from downtown San Francisco, a few minutes away from Berkeley, and is also a fucking island. Apparently the criminal element from Oakland can’t cross running water, because it also boasts uncommonly low crime rates and pretty decent public schools. It has decent shopping, a beach and a few good bars.

So, basically, it’s a pretty cool place to live. Jobs? Right across the bridge. Nightlife? You don’t even have to leave the island. Food? Fifteen minutes north. Lush outdoors? Twenty minutes north. Worried about the kids? The whole island is a 25-mph zone. Personally, I’d rather live in Berkeley because of BART access, but Alameda is also cheaper. Needless to say, I’m a little bit uneasy even writing about it, because I’d rather people didn’t know about it to keep the property values low. At the same time, unemployment is at 11.2%, and a lot of people are defaulting on their homes. Buyers are scarce and more property is coming on the market all the time. There’s stories about how some buyers are so arrogant that they make serial offers at 50% of asking price until some chump bites out of desperation. So, it’s kind of difficult to gauge what’s going to happen.

But strangely enough, until the author recently closed comments, Knife Catchers abounded with generically-named, incredibly verbose people with approximately the same personality and one agenda: telling us that the bottom in Alameda has been hit and that if we didn’t buy now we’d be priced out forever.

Putting aside my highly paranoid nature for the moment (which tells me that they’re all a bunch of smarmy, astroturfing realtors with too much time on their hands trying to generate additional demand), this whole thing still stinks to me. Let’s imagine, for a moment, that four people are looking at a real estate blog. None of them hold real estate broker licenses and none of them own property in the area - yet.

1. No stake, thinks market is going down

This is a person who’s not looking to buy or is not in the area. They are interested purely for academic or entertainment purposes.  They might be a realtor or they might not, but it doesn’t really matter. They seem very likely to post to a blog simply to entertain themselves. They are probably going to simply speak their minds, too. Then again, there are countervailing forces. If they don’t have a stake, why would they post to such a local blog. I’m even reluctant to post to Burbed, with its focus on an area only 30 minutes south.

2. No stake, thinks market is going up

Likewise, this person would be very likely to discuss what’s going on. It’s always nice to be a contrarian, and, hey, you might help a few people out by letting them know their window of opportunity is closing. However, the same countervailing pressures discussed above would seem to apply.

3. Stakeholder, thinks market is going down

This person is looking to buy soon, but is uncertain because they know they won’t be able to recover their investment for ten or fifteen years. Still, they are anxious to get the best deal they can, so there is a monetary incentive for them to talk loudly about how bad the market is. That will push the market down further.

4. Stakeholder, thinks market is going up

This is where it gets interesting. They’re looking to get into an area they consider to be the next Piedmont, and they want to do it soon. So why would they express their opinion? If you’re getting a good deal, a smart person shuts the fuck up about it lest it evaporate. If anything, they’d lie. There’s no reason to pay any more than they have to. Then again, they might also simply be stupid, careless, or they may think it won’t make a difference.

Now, the majority of the talking heads on Knife Catchers would seem to fall into category #4. Some of them have stated openly that they’re looking to buy soon. However, why are there so many of them? Why are they willing to write such verbose posts? Why now, as we are entering the Spring buying season? Are there that many stupid people in this area?

My conclusion: No.

5. Realtor, thinks market is going down

This person knows the market is going down. However, they are more than willing to participate in an astroturf campaign, because that extra demand will likely net them thousands of dollars of money.

And there is no #6, because the market is going down and any realtor who can’t at least admit that to themselves probably won’t be in the business much longer.

How to Overpay for Anything

May 12th, 2009

Economists usually use detached jargon such as “supply” and “demand.” They talk about things like “demand shifts” and “supply shifts,” but what really causes them to happen?

To a great extent, economics - or more properly business, I suppose - is about psychology and power. A buyer’s market is a market where the buyers have power and the sellers are scrambling to lower prices to please them. A seller’s market is one where each seller feels like the prettiest girl at the prom, and can coyly refuse all but the most generous offers. It’s great to be the one with power, but it’s hard to just knuckle under and let yourself be taken advantage of when the market runs counter to your interests.

That’s why the first thing people try to do when the market works against them is change the game.

Seems logical enough, right? The world changes; you adapt to it. However, it’s important to realize that this is going to be happening so you don’t get gamed. For example, real estate agents aren’t going to be going around trying to sell houses at the current equilibrium price, no sir. They’re going to try manipulate people, and prey upon their emotions:

  • Fear. You don’t want to be left out in Stockton or Tracy, do you? You’d better act now.
  • Excitement. You’re getting a steal of a deal. Who cares if you have to bid a little more?
  • Greed. The market is bottoming. Just think of the instant equity you’ll have when the price goes up again!
  • Envy. Do you want to be the chump who’s living in a one-bedroom condo while all of your friends have 3000 sqft mansions?

As soon as you fall prey to these emotions, you’ve taken the power that the crash handed to non-landed buyers and given it right back to the realtors on a silver platter. It’s just like with the Wii. Nintendo produces too few of the console on purpose so that people will perceive them to be scarce, and therefore more valuable.

I sometimes fall victim to these emotions when I see a really nice guitar. “What if I never see a deal like that again?” “It’s such a sweet instrument! I have to have it.” “Just think! I’ll have a guitar that retails for $3500 and only spend $1500!” However, I try to get the better of these emotions. That money could be put to better use in activities that will generate money, or towards down my down payment. And, after all, it’s $3500 theoretical dollars I will never see because I intend to never sell an instrument - it’s an instrument of unknown quality - and I see deals like that all the time. Similarly, there are plenty of good deals to go around in real estate, the houses aren’t that great, and we’re likely to see more property go up on the block soon, not less.

And, anyway, “because you’ll get a good deal” is a bad reason to buy something. Instead, figure out what you need and how much of it you can easily afford, then buy it. It’s that kind of thinking that’s gotten our country addicted to over-consumption and created the conditions for massive speculative bubbles.

Hello, world

April 29th, 2009

After neglecting my blog for a long time, and planning on building a newer and shinier website, I have decided that the path of least resistance is to simply install WordPress again and use a default theme. There are several good reasons for this:

  • I have a lot of opinions, and expressing them is theraputic;
  • I don’t have a lot of time, what with work, side work, and a wedding; and,
  • If, at some point in the future, I decide to change the theme to one more to my liking, WordPress is an acceptable platform.

Let’s just hope I don’t have to deal with quite so much comment spam this time around.

The installation went well. Unfortunately, there have been some casualties.

Most distressing, the gallery website that I ran for the 3rd Floor of Spens-Black Hall, 2003-2004, UC Berkeley is dead.  This was back before services like PhotoBucket, or at least back before I knew about them, so it was pretty special. There were a lot of memories on there: friends, enemies, parties, day trips, and a younger, less knowledgeable, 190 lb me. I haven’t looked at it in ages, but I’m sad to see it go. rm -rf is dangerous indeed.

Also, the blog postings I had from that time are gone as well. These I am not totally sad to see go. On the one hand, it’s good to know where you come from - on the other hand, nostalgia can be dangerous. I still have the posts in a database in case I ever want to look at them, but I’d rather keep them to myself. I enjoy re-inventing myself and I don’t feel those posts are an accurate representation of my current state.

Besides, they’ve probably been scraped onto hundreds of spam sites anyway.