Posts published by “StartUp Daemon”

The trend is your friend, but all trends come to an end. China’s resurgence is no exception to this time-tested maxim. Rising powers tend to get mired in multi-decade crises, often never to re-emerge. Such is the nature of the world and of human hubris. Yet, the consensus – including much of China’s own political and intellectual elite – gleefully extrapolates from the country’s meteoric rise. Just about everyone appears certain that within a decade or two China will surpass the US economically and mount a credible challenge to American military dominance in the Pacific. Reality and history, however, beg to differ. The foreseeable future is obvious: China’s current path ends in India.

To be sure, a quarter-century of breakneck economic growth has made China the envy of the world. Some half a billion people found new homes in its mushrooming cities. From skyscrapers and bullet trains to satellites and fighter jets, China quickly adopted just about every advanced technology. The country seemingly sailed through the global financial crisis of 2008-2009 as if it was happening on a different planet. More trillions of dollars of foreign ‘investment’ poured in at the tail end of a multi-decade industrial and real-estate boom. Invincible China’s omniscient leaders could make no misstep.

This mythic ascent to global pre-eminence has been just that – a myth. The reality is much less lustrous. Since the late 1980s, the state-controlled banking system has undergone several wholesale bailouts. China’s rulers blazed new ground in mathematics and statistics as the total of provincial GDPs quite often surpassed the central government’s nationwide figure. In leaked diplomatic cables, then-future Premier Li Keqiang was quoted as smiling that GDP numbers are ‘for reference only’. Yes, China’s economy has grown spectacularly, but probably much less so than widespread perceptions. And it happened on the wings of the most epic debt binge in human history. Years and decades of uncorrected malinvestment have inflated colossal bubbles in stocks, real estate and industrial capacity.

As the facts become too loud to ignore, the mainstream groupthink has struggled to find a counter-narrative. Chinese apparatchiks and foreign pundits peddled ‘soft landing’ as a substitute for the unravelling myth of economic miracle. But years of empty talk about rebalancing the economy have only added up to more – much more – of the same. China’s growth story was mostly based on debt-funded fixed investment: plants, real estate and infrastructure.

By 2014, fixed capital formation remained stubbornly anchored at about 45% of GDP, according to the government’s own statistics. In 2015, China still accounted for 57% of global cement output. The much-touted shift away from investment did not materialize. The country produced 30% more cement in the past three years than the US did in the past 116 years

Here is the problem. Any ‘rebalancing’ would require the instantaneous transmutation of tens of millions of semi-literate factory workers into computer programmers. Or laying them off. Neither is feasible, so Beijing has had to backtrack sheepishly every time real reform was attempted.

Every move to put the brakes on the rabid debt inflation that keeps China’s multiple bubbles from imploding has sent shockwaves through its banking system and the global economy. After housing showed signs of slowing, Beijing ushered in a stock bubble by allowing mom-and- pop day traders to lever up to the hilt. When that bubble burst, the prospect of social unrest forced a ham-fisted government takeover of the securities markets. Reports have surfaced that the authorities are busy inflating still other bubbles – this time in venture capital and commodities. Meanwhile, official statistics say fixed investment grew over 10% last year. Some rebalancing indeed.

Historically, explosive growth has invariably led up to a protracted and painful crisis period to correct for its excesses. China today is deeper in debt than the US at the outset of the Great Depression. Some recent data put Chinese bank ‘assets’ alone at 367% of GDP, up from 196% in 2007. A bank’s asset typically is someone else’s debt. And it is anybody’s guess how much more unserviceable debt festers on the balance sheets of local governments, state-owned enterprises and the shadow-banking sector, which collectively financed much of the fixed-investment rampage. The People’s Bank of China tallied new ‘total social financing’ at a neat $1 trillion just in the first quarter of 2016. Japan, with its measly 450% debt-to- GDP ratio, must have long been left in the dust by all-conquering China.

What China is experiencing is neither a rebalancing nor a landing, hard or soft; it is a crash. If American experience is any guide, the peak-to- trough contraction in China could easily reach 40% of GDP. It took the US stock market a quarter-century, a world war and a baby boom to recover to its 1929 levels.

Large-scale economic collapse, like market crashes, is not a singular event but a process that unfolds over many years. China’s economy has long been precisely this kind of slow-motion train wreck. And the 2015 stock-market plunge dealt a fatal blow to the soft-landing narrative. Hot money – foreign and domestic – rushed for the exits. Amid plummeting foreign trade, Beijing imposed ever more stringent currency controls while devaluing the yuan, thereby feeding an all-too- familiar vicious circle of capital flight.

According to consensus estimates, some $800 billion fled China in just a year. Chinese looking to park their money out of the country have caused epic property bubbles in major global cities. China’s debt problem is a threat not merely to its economy but the entire world. Yet, in terms of the country’s long-term prospects as a global power, the debt overhang pales in comparison to the demographic and environmental crises that are already baked in the cake. As a consequence of the one-child policy, ever-smaller cohorts with ever-greater job expectations are entering the workforce. China’s higher-education bubble has produced a generation demanding well-paid desk jobs but with even fewer marketable skills than its American counterpart. Meanwhile, millions of illegal immigrants from neighbours such as Vietnam and Burma already toil in China’s factory towns, as local Chinese become unaffordable for manufacturers to employ. This is Japanization writ large.

And then there is the aforementioned concrete. The permanent smog screen over the industrial heartland is one of the country’s lesser environmental challenges. Life in the cities is prohibitively expensive for many migrant workers. As they age and as industrial growth slows and reverses, millions of unlicensed migrants will have to head back, but may not like what they find at ‘home’. The Chinese have literally cemented over large swaths of what used to be agricultural land mostly populated by subsistence farmers.

There is no telling how much heavy metals and toxic chemicals have been dumped into China’s soils and aquifers. The effects of this yet-unfathomed ecological calamity will unfold for decades, impacting everything from productivity to healthcare costs in an already aging society.

Against this backdrop, expectations that China will inevitably subvert US dominance are premature. Granted, economic troubles are not much of an obstacle for nationalism and militarism. But China’s nationalist resurgence and recent maritime adventures are a sign of weakness rather than strength. Careening away from Maoism and towards Leninism underscores the leadership’s acute awareness that the economic story will not last much longer as a source of legitimacy for one-party rule. Such concerns are behind President Xi’s taking direct command of the army. Chinese elites may well decide to inflate a nationalism bubble, just as they encouraged stock-market speculation to deflect attention from real estate. Nationalism is both cheaper and more sustainable.

But then there is the geopolitical context. On the other side of the Himalayas, another giant is awakening from its stupor. India’s economy is much smaller than China’s and shares many of the same pollution problems. But India has three great strategic advantages in the ‘long game’ that China is playing. India has a much younger population and more than twice the population growth rate. It will surpass China over the next decade or two as the world’s most populous country. In addition, India is much closer to the Persian Gulf, where the planet’s most important energy source is concentrated. When it comes to petroleum, India literally stands in the way of China. It also has a tradition of worryingly friendly relations with Japan, which can be a source of capital if an alliance is pursued more actively. Finally, India’s government and economic system are decentralized. In a decentralized economic system, mistakes are more likely to remain localized and less likely to be perpetuated by large-scale bailouts. This is why India has been developing in fits and starts, but also why its growth will be much more sustainable than China’s.

With relatively low levels of debt, India’s explosive surge is just a matter of when. The talk of China’s economic decline does not even begin to capture the size and scope of the global impact. The sheer scale of economic mismanagement puts to shame all previous bubbles, so it is hard to say whether the world as a whole, not just China, will be able to dig itself from this hole without major war. Yes, China’s odds of recovering 20-30 years down the line are not terrible, but in the meantime the new rising power in Asia is going to be India. Per capita, India’s economy is still in its infancy. But watch out – they grow up fast.

This missive of mine originally appeared as a guest contribution on www.martin-van-creveld.com in May 2016. I'm republishing it with his edits, without alteration. You will want to follow Dr van Creveld because he is the greatest military historian and thinkerer of our time. Find his appearances on YouTube and you will know why.

India To Build Major Overseas Military Base Off Africa To Combat China https://t.co/ufBQRBKPJw

— zerohedge (@zerohedge) February 21, 2018

https://platform.twitter.com/widgets.js

This is Kurt Vonnegut’s commencement address to the MIT’s graduating class of 1997, which was never addressed to the MIT graduating class of 1997 and never authored in any way by Kurt Vonnegut.

Mary Schmich's satirical bit for the Chicago Tribune is remarkable not for being one of the most prominent mass hoaxes of the early Internet. Not even for nailing the Vonnegut down to the comma (the viral hoax is evidence Mary did an epic job of it).

It strikes me for two reasons. First, for being (surreptitiously) cognizant of so many life-altering things young men and women are often ignorant of. Second, for the subtle differences in detail between Mary’s work and a hypothetical equivalent written by a man (including Kurt himself). Differences in both substance and presentation.

I will not break this down line by line because it has to be interesting in order to be good teaching. Instead, I will focus on something from my personal experience, which ought to give a cue to the men and women amongst you, including my Russian bot followers. (It won’t help much if you are a dining table or a hovercraft.)

There are two huge challenges with the book I’m writing at the moment. One is that it is a “program” book: it must break your brain so bad that you be able to write back on it anything you want despite your earlier assumptions. The second – and much greater challenge – is that I want the book to accomplish this in equal measure with both men and women.

For the second reason, I put even more effort than before into grasping how women experience the world and how the world experiences them. One longtime observation of mine, which has become especially acute lately, is how oblivious young women are of what will happen to them as they age (this is, like so many troubles of youth, mostly due to parental ignorance and weakling pussyfooting around helping children understand how people operate).

Individual society in its actions (regardless of politically correct diktats) still considers young women precious and treats young men as dispensable cannon fodder. So, if you are a young woman and not utterly repulsive in manners and appearance, your relations with people are probably going much more smoothly than after you get past the four handle.

Because of my way of life, I’m surrounded by attractive young women and constantly entertained by the way they approach me (frequently as a stranger) and just ask for stuff. I adore people with courage and usually the requests are perfectly reasonable so I’m more than happy to provide. What makes it hard to contain my laughter is the observable expectation – indeed, assumption – on their part that they will be “serviced” just like that. I don’t want to imagine the sadness and crisis and confusion of these women when they get even 10 years older. I’m often tempted to do some teaching to soften that blow – and help them enjoy/take advantage of their youth more – but most of the time that ends up falling on deaf eyes and blind ears. As Mary would say: “advice, like youth, probably just wasted on the young”. (I have skin in the game because I can't feel good when the women around me don't.)

The faux speech is also instructive because of how experiential it is. Mary's voice is firm and authentic, albeit faceitious, because she had skin in the game, if not enough sunscreen. The women amongst you will feel the mismatch between Mary's words and the experience of what she is talking about. That mismatch has little to do with her wordsmithing, which is quite evocative. Authentic knowledge acquired through experience, as Mary herself suggests, can only be diluted by words, however powerful the communicator. Those of you who are familiar with the INCERTO will appreciate Mary's authentic grasp of uncertainty and induction.

I was grown and bred by women, amongst women and for the pleasure and entertainment of women, so I’ve long wanted to do a women’s special which benefits all. Because we need – and want! – moar women active on the Twitter. This is a good place to begin, and I will be grateful if you find value in it.

To make the most of this bit, imagine what a man would have written differently in the subtle details of this “speech”. Find someone of the other gender, and compare yours with their prediction. Test yourself and each other. It might just blow your mind what you find out (or don't) even before you read my book.

Ladies and gentlemen of the class of ’97:

Wear sunscreen.

If I could offer you only one tip for the future, sunscreen would be it. The long-term benefits of sunscreen have been proved by scientists, whereas the rest of my advice has no basis more reliable than my own meandering experience. I will dispense this advice now.

Enjoy the power and beauty of your youth. Oh, never mind. You will not understand the power and beauty of your youth until they've faded. But trust me, in 20 years, you'll look back at photos of yourself and recall in a way you can't grasp now how much possibility lay before you and how fabulous you really looked. You are not as fat as you imagine.

Don't worry about the future. Or worry, but know that worrying is as effective as trying to solve an algebra equation by chewing bubble gum. The real troubles in your life are apt to be things that never crossed your worried mind, the kind that blindside you at 4 pm on some idle Tuesday.

Do one thing every day that scares you. Sing.

Don't be reckless with other people's hearts. Don't put up with people who are reckless with yours.

Floss.

Don't waste your time on jealousy. Sometimes you're ahead, sometimes you're behind. The race is long and, in the end, it's only with yourself.

Remember compliments you receive. Forget the insults. If you succeed in doing this, tell me how.

Keep your old love letters. Throw away your old bank statements.

Stretch.

Don't feel guilty if you don't know what you want to do with your life. The most interesting people I know didn't know at 22 what they wanted to do with their lives. Some of the most interesting 40-year-olds I know still don't.

Get plenty of calcium. Be kind to your knees. You'll miss them when they're gone.

Maybe you'll marry, maybe you won't. Maybe you'll have children, maybe you won't. Maybe you'll divorce at 40, maybe you'll dance the funky chicken on your 75th wedding anniversary. Whatever you do, don't congratulate yourself too much, or berate yourself either. Your choices are half chance. So are everybody else's.

Enjoy your body. Use it every way you can. Don't be afraid of it or of what other people think of it. It's the greatest instrument you'll ever own.

Dance, even if you have nowhere to do it but your living room. Read the directions, even if you don't follow them. Do not read beauty magazines. They will only make you feel ugly.

Get to know your parents. You never know when they'll be gone for good. Be nice to your siblings. They're your best link to your past and the people most likely to stick with you in the future.

Understand that friends come and go, but with a precious few you should hold on. Work hard to bridge the gaps in geography and lifestyle, because the older you get, the more you need the people who knew you when you were young.

Live in New York City once, but leave before it makes you hard. Live in Northern California once, but leave before it makes you soft. Travel.

Accept certain inalienable truths: Prices will rise. Politicians will philander. You, too, will get old. And when you do, you'll fantasize that when you were young, prices were reasonable, politicians were noble, and children respected their elders. Respect your elders.

Don't expect anyone else to support you. Maybe you have a trust fund. Maybe you'll have a wealthy spouse. But you never know when either one might run out.

Don't mess too much with your hair or by the time you're 40 it will look 85.

Be careful whose advice you buy, but be patient with those who supply it. Advice is a form of nostalgia. Dispensing it is a way of fishing the past from the disposal, wiping it off, painting over the ugly parts and recycling it for more than it's worth.

But trust me on the sunscreen.

Follow me on Twitter @startupdaemon because that’s where things are happening.

As a kid, I deliberately cut myself with a knife. Several times. I did it on my own, no-one made me or encouraged me in any way. The proximate goal was to experience the pain of a flesh wound without actually being stabbed. It was extremely painful for a child, but I did it again. And again. More than the knife or a potential infection, I feared the adults would catch me do it or see the blood. There would be endless explanations followed by whining (not mine, obviously), arguing, possibly calling the doctor and the Armenian pope. I would not see the end of it for days and months. THAT would be pain.

I’d spend off-school summers at my grandparents’ farm and that’s where I ran all sorts of secret experiments (I don’t remember ever getting caught). We had livestock, fowl, even a farm dog, so there were plenty of animals around to torture. The animals I fed, groomed, cleaned after; the experiments I ran on myself. (No, I did not need an ethics class or a special message from “morality” to figure any of that out.) I did the trials for two reasons. The first one was curiosity and desire to understand the world around me. Ultimately: to tame fear of the unknown, of all that could happen, of death itself. My instincts must have told me that I had to figure myself out before laying claim to the world.

The second reason was that I was usually bored to death. There was only so much farm work that the adults would let me do, and there weren’t any kids around that I would want to play with. My despair was such that sometimes I would walk the country roads in the high-noon heat of summer, when even the birds hid from the deadly Sun. Just so I wouldn’t have to stay caged in the house doing nothing or in the slow decay of sleep. I suspect I instinctively felt that the distress and exhaustion would somewhat alleviate my existential dread. And of course, at least initially, the walks were another test – of how much heat and dehydration I could take.

Towards Wizardry

All my family cared for me, yet I had a most miserable childhood. Mind you, my parents didn’t impose any unusual restrictions on what I could do. When I was about 8 or 9, I inadvertently formatted my father’s only working computer and made all manner of unique data irrecoverable (again – out of boredom more than curiosity). I expected some form of dressing down for thinkering, but no. His genuine reaction was to have a laugh over not being able to recover anything because of how well I had done it. I couldn’t believe it, but immediately understood the lesson. We set about getting the machine to work right away. (I don’t want to imagine what helicopters do to their young to protect them from failure.)

It’s not like I did not have other strategies to fight boredom. I’d bring a pile of books when going to my voluntary exiles on the farm, but I’d run through them in days. An abyss of empty weeks and months would then stare at me before the dreaded school-year started (moar boredom). Thinkering was not just a way of life, but a way of survival. One of many desperate days, I climbed into the attic of my grandparents’ house and started digging through the old boring books for adults which nobody read. There I stumbled on a handbook about child development, which my parents had probably never cracked open.

The book, written about 1960-1970 in the Soviet Union, discussed things like sex, puberty and child psychology. I was 10, possibly much younger. That remains the most terrifying day of my life, although I have had three near-death experiences. I was so horrified that I could not put the book down; I had to start rereading it as soon as I had finished. Overnight I would hide it away, so it wouldn’t be used as kindling or “reorganized” somewhere.

It is easier to find men who will volunteer to die, than to find those who are willing to endure pain with patience.
— Julius Caesar

— Daily Zen (@dailyzen) October 19, 2017

https://platform.twitter.com/widgets.js

When I was about 13, I wrote my first essay on the psychology of the unconscious (for philosophy class in school). The teachers couldn’t believe what I had written and thought I had somehow cheated. That day was the first time I realized you cannot tell people what they are – you can only show them. (I would have to relearn that lesson many times.) I also got my first indication that people never really change their minds. You had to bulldoze over their predispositions and literally destroy their beliefs before anything new would be allowed to take root, let alone flourish. So I shifted my focus to books with more indirection and practical knowledge like “How to Make Friends and Influence People”.

None of this was some childish rebellion. It was the same inner drive, searching and being redirected less haphazardly and more constructively. I had effectively gained my independence from any parental control by about 14-15. That little adjustment took the shape of my not eating for three days, which I was already experimenting with secretly. I don’t remember the occasion and it doesn’t matter. Probably it was because of some parental lie which incited savage retribution. I could take any advice, bad decision or criticism from my parents, but lying got NO KUARTER.

As a teenager, my focus shifted from boredom-based experimentation to more deliberate savagery because girls. This included the obvious: physical training like lifting weights and doing 700 sit-ups in one go, or picking up karate – although the idea of being beaten up on the dojo in front of dozens of people absolutely petrified me. By age 16-17, I would get up at midnight, do any homework/studying that needed to be done (perhaps), take a cold shower by 5 and be on the public bus to school before most adults had even brushed their teeth. This after martial practice, which frequently ended late at night. So I could have coffee (and not infrequently vodka) with girls socially before first class for the day started. Thus, most “adults” were physically excluded from my daily life; I’d only see my parents having their morning coffee, and perhaps for a cigarette together before I left for “school”. And school was ludus hominum.

By the time I was 18, I had long been aware that people are irrational (myself included), and that many educated people are imbeciles regurgitating vacuous platitudes like “math is the language of the universe”. (My high-school math teacher didn’t say that because he was not an imbecile; teacher-wise I was very privileged.) Throughout my adult life, any attempt to share my experiences and discoveries crashed into a wall of fear, scientism and the illiterate junk that pervades popular “culture”.

Say less.

— sᴛᴀʀᴛᴜᴘ ᴅᴀᴇᴍᴏɴ (@startupdaemon) January 26, 2018

https://platform.twitter.com/widgets.js

On the very last day before my high-school graduation, the philosophy teacher was doing oral exams for students who wanted to make up a grade. Girls in my class had nicknamed her “The Joker” because of the mounds of makeup on her face. Some minutes in, The Joker pontificated that the meaning of life was the pursuit of knowledge, possibly while (mis)quoting some ancient Greek author. By then, I knew better than to argue with idiots, but I was so aggravated that I could not contain myself. I explained politely that she was basically begging the question and there could not be received meaning to life on that basis. She suddenly was so infuriated that she stopped examining and many students didn’t get to improve their grades. I felt terrible about that, but after class, people were congratulating me instead of worrying about their grades. Even the worst students sensed that she was a fraud, and enjoyed having her exposed in public.

Scientistic Fraud, Slavery and the Base

Most of public education, particularly in the United States, is based on and proliferates some form of scientistic fraud. The differential diagnosis for scientistics is that the person assumes credibility for anything that follows the phrase “scientists say”. Scientistics includes the religious belief in science (scientism), but also the corrupt use of pseudoscience for imbecilic or untoward purposes. Most “science” coverage in the press is a form of scientistic fraud. Scientistic fraud is luddic almost by definition because most of the perpetrators have tenure or six-figure fellowships at “research” institutes and “think” tanks.

Some days ago, I wrote a missive on public savagery as an antidote to luddic fraud. The tweet went viral when NNT retweeted it. Hours after making that writing public, I received an email from a Washington lobbyist, which presented an opportunity for savagery. Although there is no expectation for privacy for any stranger who sends me unsolicited messages, I would not make it public if it did not begin with luddic name-dropping of former associates, who surely have not endorsed the lobbyist’s purpose (the author of the email would have mentioned it if they had and they would have reached out to let me know about the reference; altered their names to protect them from "guilt by association").

I will not pick apart the cited papers point by point. The email was striking not for using pseudoscience, but for abusing the claims of the respective authors without restraint. The Mercatus paper they cite deals mostly with federal regulation, is almost entirely theoretical and provides zero evidence for the specific issue. The Harvard paper makes no mention of credit card debt “collections” or the “statute of limitations” on them. But the lobbyists want help to defeat a Massachusetts bill that will make it easier for people with credit card debt to recover from delinquency.

This is the Base in pure form: disgusting, imbecilic, scientistically fraudulent and unabashed in its impertinence. In this case, the Base is to extend the terms of debt slavery for poor Americans, making sure that they never recover from the abuse of banks and debt collectors. In any situation where you observe the Base, there are only two paths which make sense. One is to remove yourself, the other – to remove the Base. No compromise, no kuarter. The only room in-between those options is in the solitary-confinement ward of a psychiatric hospital.

If you don't scrape the Base off your boots, don't be surprised if you find it in your home.

— sᴛᴀʀᴛᴜᴘ ᴅᴀᴇᴍᴏɴ (@startupdaemon) February 1, 2018

https://platform.twitter.com/widgets.js

Blood in the Game

Blood in the game is the most powerful antidote to scientistic fraud and the Base because it allows the practitioner to step outside the frame of “the system” while instilling fear and confusion, paralyzing away some of the toxic output almost immediately. Scientistics fear people with blood in the game because it indicates a certain level of “madness” by painoff: forfeiting academic appointments, awards and “the respect of the community” a priori. The same “headless chicken” reaction can be observed when someone with blood in the game penetrates any other bureaucracy such as a corporate or governmental environment.

In my experience, putting blood in the game has always produced a barbell of reactions. On one end of the distribution are people who value the outlandishness and effectiveness of my output and daring. On the other are headless chicken who do not understand it nor are able to resist it while alternating between paralysis and runaround panic.

It is impossible for the individual and society at large to grasp the complexity of what is. Uncertainty pervades existence and many retreat in fear. Some in the distractions of daily life, others in the false safety of charlatan forecasts, still others in their own lies. Blood in the game is largely driven by a recognition that one’s own life and experience are subject to the vagaries of the world. To improve one’s chances in a noisy world, one inflicts noise upon oneself. The key distinction between the weightlifter heading for the gym to practice for a competition and the hunter with blood in the game is that while gym practice has a predictable range of outcomes, only one thing is predictable about putting blood in the game – the painoff.

Blood in the game is about redrawing the game board with one's own. Someone with blood in the game often deviates from one’s own routines to “see what happens”. Self-disruption is the core distinction of blood in the game. This is not haphazard or necessarily reckless. There is a strong deterrent because routine-breaking is painful, almost by definition, and the painoff is immediate. With skin in the game, one learns from one’s mistakes by suffering losses. With blood in the game, one intentionally makes "mistakes" with guaranteed harm to oneself, with the purpose of improvement. No pain, no gain.

Take the path of most resistance.

Success and contentment are built on this simple rule.

— sᴛᴀʀᴛᴜᴘ ᴅᴀᴇᴍᴏɴ (@startupdaemon) November 18, 2017

https://platform.twitter.com/widgets.js

The practice of blood in the game wasn’t born yesterday. A common theme among revolutionary thinkerers is that they frequently were social (self-)rejects and pursued innovation in spite of their immediate self-interest, often even in spite of their immediate self-preservation. Public humiliation, loss of job opportunities and even death are common amongst famous thinkerers (Galileo, Copernicus, Archimedes, Tesla).

During the 2016 US presidential election, Scott Adams predicted the win of D. J. Trump at tremendous personal cost, losing millions of dollars in speaking fees because of his unpopular views (not least, that people are irrational apes) and "guilt by association". For well over a year, he was subjected to public ridicule and regarded as a "fringe" wacko, then gradually even the mainstream started realizing that he might be right. His stated goal and idea was to build a new public platform and change the way people "think" about popular opinion, decision-making and "rationality".

Lack of blood in the game is a core reason social structures die because blood in the game is how innovation survives despite a seemingly “safe” environment. Steve Jobs ensured the survival of Apple and the successful launch of the iPod by merciless culling of existing products amid the discombobulated resistance of board members and executives. Then cannibalized the market appeal of the iPod (a hit product) with the iPhone. This is an example of a rare phenomenon: blood in the game implemented by a corporate head.

The blood in the metaphor is not just a reflection of the painoff. Think of blood here as a life force as well. Systems which accommodate individuals with blood in the game are more likely to develop antifragile properties than systems which stop at skin in the game. When you practice blood in the game, you become the life force of the world, but you may perish in the process.

The Great Mother Goddess and Her Son

As we often find in our distracted lives, what we see as new or profound was mundane to the ancients. Blood in the game is just another iteration – or the practical archetype – of the Thraco-Phrygian myth of the Great Mother Goddess and her Son. In the earliest known versions of this myth from Thrace and Anatolia, the Son’s blood must be spilt so that the Mother would be impregnated and the cycles of life resume. The Son’s sacrifice would ensure the renewal of the world – but not its repetition or replication. The myth was about rebirth, but it was world-ending. “What has been has been and must be set aside.” This savagery was embedded in Thracian ritual tradition. Thracian funerals were orgiastic celebrations, especially if the deceased had fallen in combat.

After the Thracian settlement of northwestern Anatolia, the cult of the Mother – by then known as Cybele – came to dominate the entire region and the later Hellenistic kingdoms of Phrygia and Bythinia. In Greece, she was Rhea, mother of all. Her main cult center may have been the Thracian city of Cabyle (KABYLH) near the Odrysian Valley of Kings. Meanwhile, the Son would evolve into the central Thracian deity Sabazios, a slaying horseman and god of sky and thunder.

Sabazios or his Orphic predecessors were adopted by the Greeks/Romans as Dionysus/Bacchus – god of fertility and, appropriately, profusion – alongside Thrace’s orgiastic traditions of honoring these gods with wine-drenched debauchery. The cult of Sabazios himself spread to Anatolia and ultimately throughout the Roman Empire. Demosthenes describes the ritual ecstasy of priestesses dancing with snakes to welcome the arrival of Sabazios, intoxicated by wine and the blood of sacrificial animals, which were often dismembered. A perfect example of mass hysteria. Even when depicted on horseback, Sabazios is often seen with an expression of rage, pain or madness, one hand reaching plaintively towards the sky.

The pervasive theme of the cults of Dyonisios, Bacchus and Sabazios is that of mystic ritual, not typical of native Greco-Roman traditions. It celebrates chaos and the abandonment of established order so that rebirth and renewal become possible. The semblance with the Hindu cult of Shiva, the ying-yang god of destruction and creation, is eery.

The cult of Sabazios may have influenced that of St George (a serpent-slaying horseman which originated in Anatolia) and St Elijah (prophet associated with thunder and the sky). The “-zios” term in the god’s name is a cognate of Greek “θεός” and “Zeus”. Peculiarly, “Saba-“ appears similar to Latin “salvare”. Can you think of any other Son who had to bleed so the world would be saved? Or should I draw you a picture?

We had rekt the competition. By Year 3, our company had a 40% market share and a couple of our dozen-or-so competitors were already insolvent. Most of the rest were choking on massive unsold inventories and worthless real estate. Even when the economy had soured a couple of years later, we were swimming in free cash flow, kept investing in new products and facilities, and – to crush the spirit of the competition completely – paid out fat dividends.

This happened in the simulation game during the final year of my business degree. It was a high-value experience not just because of all the fun my partner and I had while cruising through our final year. There was just so much good teaching in the “International Strategic Management” course that we were taking together (obviously none of it came from the textbook – I’m not even sure there was one). Fraud was the very pinnacle of that good teaching.

Just before the final round, our nearest competitor was light years behind, on both financials and game points. But two of the middling teams (and by "middling" I mean "near-bankrupt") conspired to game the system through classic accounting fraud (which was not prohibited by the rules of the simulation). They sold each other assets at inflated prices, thereby booking enormous profits and reporting gigantic balance sheets on the asset side in the final tally. Despite their fraud, we ended up a very close second. So hard had we rekt the competition, even fraud couldn't help them. And ultimately the professor figured out what had happened and nullified the fraudulent transactions.

Much of the credit for our winning big goes to my partner-in-virtu – a longtime friend, who’s gone on to a great career in finance. She was terrific in handling the technicalities of the game, had the character to be completely unperturbed by the savagery I was inflicting on our operations (I kept pushing the limits of what we were doing despite our early success), and exercised the good judgement to keep our plans secret. We barely had to meet outside of class to do any of it, so well did we work together. And when we met (in secret) we spent most of the time laughing. (In case you were wondering what winners do in their private time, now you know.)

How to Win Even More Bigly

Winning, and winning big, is surely enjoyable. But in the end, it was bittersweet. Not because we didn’t get the most points on the final board and missed that excitement (the board went out before the fraud was discovered and publicized). I was kicking myself for not having invented the scheme earlier, and finding a way to prevent it or turn it to our advantage. The game (as poorly designed as it was) had turned out extremely useful – not for the financial inputs but for the human behavior. In vino veritas, in ludo civitas.

Here are some of the lessons it taught me, in no particular order:

1. Complacency is euthanasia.
2. No-one is more dangerous than the weak/stupid/incompetent.
3. To win, you don’t just master the game – you master every which way to break the game (hunter).
4. Avoid unnecessary commitments.
5. When something is too good to be true, it is too good to be true.
6. Only ally yourself with the competent.
7. If some glaring success cannot be explained, it’s probably fraud.
8. Fraud has to be invented.

(Be aware that I had to learn Lesson 1 although we were not complacent even for a moment throughout the semester. We learnt from something that didn’t happen.)

Understand that most fraud you’d encounter in life is luddic – committed by people who think they are better than you, but fold quickly when the going gets even a tiny bit tough. That’s why public savagery is so effective as a fraud deterrent. Both D. J. Trump and N. N. Taleb are extreme practitioners of this tactic. The really juicy bit is that it works prospectively and cross-domain. If you feed a couple of people to the lions – just for fun – no luddic burglar will try to break into your villa (only the very best heisters will). Because I fired and sued a back-office employee publicly yesterday, my construction contractor is doing an excellent job today. (Note that a corporation or government would do the exact opposite – try to cover up any fraud or incompetence, or any appearance of unpleasantness.)

If you’ve read any of President Trump’s books, you will have noticed that he’s never been particularly effective in suing people. Not on the legal side. But he kept threatening to sue this guy or that, and sometimes filing lawsuits. Why did he keep doing that if it was so see-through, sometimes cost him money, and could even be seen as a weakness? One big reason is how well it works as a filter against luddic fraud. Brassless fraudsters shrivel away even when they can see through your posturing.

Imagine me working on a research note with Nassim Taleb. Knowing what you know about him, you can probably see it would be very successful, but also a lot of rigor and hard work, wouldn’t it? Or else.

It would be even more obvious – and onerous – for the fraudster: not just the pretend work, but the fraud itself would be a lot of hard work. And the consequences of getting caught would be severe. So even with a high potential reward, the luddic fraudster would be deterred (a hardcore fraudster wouldn’t). If I had been more savage publicly as a student (outside the frame of the game), the teams which committed the accounting fraud would have thought twice before doing it. Despite that their transactions were not prohibited by the game. Luddix are bullies in the sandbox, but cower when they pass through a dark alley alone.

The Problem with Cowardice and Stupidity

As with most things, stupidity immunizes even luddic fraudsters against deterrence. You can witness this in the comments of Nassim Taleb’s Twitter account on a daily basis. You will see a bimodal distribution (the proverbial barbell is omnipresent!). On one end you find lots of interesting questions and useful contributions; on the other – lots of mind-numbingly boring trolls and downright idiotic complaints; the endless expanse of the Sahara in-between.

Deterrence cannot immunize you against cowardice either. The coward with a chip on his shoulder (which is often his own cowardice) will wait in the shadows for an opportunity to backstab you. This is one of the hidden, however small, costs of public savagery – it attracts the resentment of dangerous cowards. The good news is that the more savage you are, the better the backstabbing opportunity that the coward will want to wait for. So most cowards will end up waiting forever.

The lesson here is that if you decide to be savage publicly, you have to go all the way. The middle ground is stupid ground. Because the middle ground is dangerous ground.

Update: Context and why I wrote this today. Would they do anything like this if they were playing against the Mob?

These Are The 6 Traders Who Were Just Arrested For Manipulating The Gold Market https://t.co/kQVetXi1eZ

— zerohedge (@zerohedge) January 29, 2018

https://platform.twitter.com/widgets.js

I was holding off for a special piece on the levels of knowledge/decision making one can operate on, but I was tempted to jump the gun by a fresh example of this concept being put to work by Nassim Taleb. It was just too juicy to pass up.

Those of you who follow me on Twitter probably have already been aggravated by more than one of my bizarre-sounding, counterintuitive and “obviously nonsensical” tweets and retweets.

Here is a recent sampling of what I am referring to (I’m not embedding the tweets or the attribution to keep this short and sweet; you can find the originals by using your brain):

• When the Romans said AMAT VICTORIA CURAM, they weren't talking about planning.
• Women love men who love women. Can I possibly make this any clearer?
• Say less.
• The only way we have to truly "know" reality is to become it.
• That is the only way Nature operates – against itself.
• Don't ask for permission.
• To find contentment, find out who you are.
• I love cheesecake. I just don't eat it.
• It's better only if people use it.
• If nothing matters, then it doesn't matter that it doesn't matter.
• Things are not what they seem to be, nor are they otherwise.
• Perhaps the most pervasive & destructive delusion in the world is that you need to have the information in order to make good decisions.
• Consensus is a euphemism for wrong.
• The more complex the strategy, the less it is a strategy,
• (Blood in the game.) Of all that is written, I love only what a person has written with his own blood.
• Don’t be poor.
• The foot feels the foot when it feels the ground.

I can go on and on, but by now you probably get the pattern. Meanwhile, I am on the record as saying that every single tweet on my timeline is intended and designed to be useful for my followers. So what the living hell??

While it can sound like incomprehensible drivel, each statement has a very direct implication for action/decision making without much need for analysis. These are examples of what I provisionally call “authentic knowledge” – knowledge that arises from and drives Right Action. That’s why we could also call it “action knowledge”. AK is distinct from experiential knowledge because it is not arising just from experience/survival. And it certainly isn’t the type of “knowledge” you can get from textbooks. (I'm intentionally not unpacking any of the statements above.)

If you know anything about classical logic or mathematics, you will have noticed from Nassim Taleb’s technical papers and books that he is a rigorous thinker. One of his particularly infuriating qualities is that he thinks in dynamic systems (“parables”) rather than linear progressions (“stories”).

This quality of his possibly triples or quintuples his obnoxiousness to the sort of people he terms “imbeciles” because they are blind to this type of reasoning. They see non sequiturs, lapses or empty space where he builds branches and interconnections. Among other emotional responses, these perceptions trigger fear because they appear as uncertainty to the misperceiver (hence some of the extra aggravation and obnoxiousness).

Some hours ago, Nassim volunteered on Twitter that he is not doing any press promotion for his new book “Skin in the Game” and not giving books to reviewers except in France. His stated justification for that decision is to “verify that the Media is something of the past”. Observe the double entendre here. Is he doing an empirical test or is he taking directed action?

Maybe even he didn’t and still doesn’t “know” the answer in the ordinary sense of the word. Yet this is his authentic reason for his choice (we assume he is not lying). He is not confused or uncertain.

This framing is just the appetizer to what comes next – and it’s not squid ink!

Asked why he is making an exception for France, he explains it with his liking of foie gras. If you are steeped in (and blinded by) “Western” philosophy and logic, you will see this statement as nonsense. “The guy doesn’t want to explain why he’s giving the French special treatment, so he’s making a joke.” This interpretation can be absolutely accurate, and still miss more than half of what he’s likely saying. In his “authentic knowledge”, giving the French a special pass can be 100% sensibly justified by his enjoyment of their delicacies. It’s a perfectly good reason!

A different way to frame this comes from marketing psychology. If you are familiar with the persuasion books of Robert Cialdini, you will have heard of the fake “because” that can be used to induce compliance without any sensible reason. For example: “You should follow me on Twitter because you enjoy coffee and other delicious beverages.” (Obviously my channel is not about coffee.) You can think of “authentic knowledge” as the reverse of the fake “because”. AK is the “unfake” because which is not necessarily obvious from the outside but “makes sense” to and drives individual action.

If you follow Taleb’s public appearances and read his books, you will see that he uses the unfake because profusely. This unabashed authenticity is a core reason why he can be savage with his detractors and totally get away with being a monumental asshole.

When we think about bailouts, it’s the banks and the carmakers that first come to mind. Government Motors, Government Sachs. But there is a much more insidious failure to fail that’s been growing like a tumor for several decades now and has already metastasized in many walks of life.

Some years ago, when I taught college students, I certainly didn’t expect them all to be geniuses or the grittiest lot in the world. But the magnitude of the conformity and lack of initiative that most demonstrated was truly shocking. And they lacked basic technical skills. And I was teaching at one of the top 25 universities in the US, where many freshmen have been homeschooled or gone to expensive private institutions.

Among other things, they had all been meticulously programmed, even the brightest ones, to be politically correct. They were afraid to say anything controversial – lest someone somehow be offended or made to think. Challenging me or asking provocative questions in class was out of the question.

The problem certainly isn’t from yesteryear. But it’s been getting worse, at least in my experience. The inability to take risks that this political correctness, this perpetual comfort and coddling have inculcated is staggering. And please don’t blame it all on the schoolteachers and university professors swimming with little pedagogical training against a powerful current of overprotective parents, erratic school boards, log-headed state and federal standards and hyperactive “community” organizations waiting for the slightest blunder to strip them of their tenure and whatever dignity they may have left.

FACT: many colleges have “speech codes” for institutionalized censorship.

FACT: few professors have the practice of calling on the shier students to participate in the discussion so they can build confidence and social skills. That is, if there is any discussion going on at all.

FACT, BRUTAL FACT: in many classes students can get a passing grade basically for showing up.

That first year of teaching I gave failing mid-semester grades to half of my students – and a long lecture on how important it is to challenge authority (that is, me) and think critically and independently. Red ink spilt profusely over their papers, identifying technical and logical lapses. By the end of that taxing semester, their writing had become unrecognizable – well-organized and almost without typos. In discussions and papers, they would come up with ideas that had evaded me after an entire decade in the same discipline, often holding me up well after our class was supposed to have ended.

I will never forget what one of my best students that year said when she got her mid-semester F: “Well, maybe I should get out of my comfort zone and say more of what I think.” (She already knew I had zero interest in opinions.)

Failure, and facing it on one’s own, is the only way to develop any sense of individual autonomy. The very thought of failure is crippling to younglings these days. And I cannot think of anything that has been a more powerful motivator to me as a young person. That sinking feeling, undetermined, overcasting my every instant with foreboding and ambiguity. But there is a science and an art to unleashing the creative value of failure. It is our responsibility to cultivate and elevate that creative value to the level not just of an educational, but a cultural norm. Can you point to anyone who created anything of value without failing miserably early on?

Alas, pipe dreams are just that. Instead of thinking individuals, we’re producing softie conformists, ready to believe or tolerate anything they are fed by politicians, media and tech gurus. I don’t even want to consider what the future of a society like that is going to be. But what does all this mean for the individual, right now?

The coddling culture makes it thrice as hard for all of us to “make it” in life, and make it on our own terms. The critical input of our society (family, friends, coworkers, anyone) is dialed down to the level of white noise, which confounds more than it enlightens. We are left with the dual task of being savage to ourselves about our shortcomings all while working to overcome them. Some of us will embrace that challenge. Dopamine puppets will go buy the latest “smartphone”.

Some months ago, I was at the shop of Yo-Yo Ma’s luthier for a cello tune-up. That day I learnt more about the instrument than I had in a lifetime of deliberate listening and studying.

I also got to experience true mastery: what it feels like, what it looks like, what it sounds like.

The shop is located on a major shopping street, but occupies the top floor of the building. There is little indication at the street-level entrance that there is anything noteworthy on the upper stories. It’s not just borderline impossible to get an appointment with the Master. The shop’s location works to deter being visited by the uninitiated, but still signals class and means aplenty.

Stepping in from the unpresuming concrete stairwell, you are transported into a 19th century house-museum. Everything from carpet to ceiling is cozy, soft and mellow. Instruments, tools & pictures are exhibited on the walls and in special vitrines. Most of the pictures show some manner of a cruel joke. My favorite is a boy bent over a basin and soaping up a violin with a washcloth. The drawing is pithily titled “Keep your instruments clean.” or something to that effect.

The entry hall is somehow bustling with people and the dedicated receptionist is busy, but that’s for regular customers. Someone else meets us and leads us into a cozy room deep inside, where we wait for the Master luthier. I assume the business makes most of its revenue from selling instruments. The six- and seven-figure kind. As far as I’m concerned, everything is extremely well-organized, yet unpresuming. A well-oiled machine – oiled, not perfumed.

The tune-up takes less than 10 minutes and the cello is unrecognizable. Now it just makes sense when played. The other half-hour of the sit-down is filled with a very understandable – and altogether unsolicited – explanation of what just happened. The Master lays out both the technical tricks to it and the physics involved. He talks about the knobs and the tweaks, the resonance of the wood at different humidities and temperatures, even the bow. He sometimes almost speaks in equations, and you still understand everything. I have a hard time not laughing out loud while he is talking or asking questions just because everything he says is so clear and makes so much sense.

That conversation – mostly wistening on my part – was eye-opening. Not so much because of all the delicious things I learnt about one of my favorite musical instruments. Every moment of the interaction, from the instant we first shook hands, I was aware of – and enjoying – the fact that I was dealing with a true Master. Not because of reputation or credentialing, but because of the Master’s demeanor and his command (and love) of the subject matter. It felt like flying. I don’t know if you’ve ever practiced lucid dreaming and flying adream, but this felt very much like it.

That encounter taught me a few things about how you can spot a true Master regardless of the field of expertise. First, a true Master doesn’t care what you think. All those pictures of plebs destroying instruments? Well, a Master takes that as a fact of life. It happens.

Second, a true Master doesn’t need to show off in any other way than his practical mastery itself. He abides in what he does. The only reverence implied and observed was the Master’s own reverence towards the instrument (a rather expensive and fragile cello, which had been essentially out of tune for at least six months, but still used as principal at a major orchestra).

Third, the Master explained everything he did without prompting. He elaborated on why he asked every question which he asked. (There were ZERO excessive questions and pleasantries.) He requested permission before playing the instrument (he did NOT ask permission before tuning it). If you knew nothing about classical instruments, let alone cello, you would have felt more comfortable during this brief impression than in your mother’s womb.

And all along, in every word and in every gesture, you were aware of one thing. That he knew his stature and his craft, and he did not take himself too seriously.

PS: Grit is the tell for Mastery potential. You can catch Meta Weiss with the Southern Cross Soloists on Feb 25 at QPAC in Brisbane. She's also performing at the Montreal Musical Chairs Festival March 15, and then playing the Beethoven Triple Concerto on March 25 with the Melbourne Youth Orchestra.

https://www.youtube.com/watch?v=1TepNgxZo9k