A lot of truth here.

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I love browsing the mathematics section of book stores. Yesterday I found a book on complex adaptive systems written by Len Fisher that so far is outstanding; I suspected as much after I bought it and noticed that Michael Mauboussin offered suggestions for the manuscript. The Kellogg’s creation/discovery of Corn Flakes is but one example of economic evolution at work.

http://www.bloomberg.com/news/2011-12-15/the-accident-that-started-the-breakfast-cereal-business-echoes.html

The brothers developed breakfast flakes by accident in 1893, when Will abandoned a pot of cooking wheat to attend to business matters. He returned to find a mixture with a stale and hard consistency. Unwilling to waste the food, the brothers forced it through rollers with the hope of forming long sheets of dough. Instead, they created wheat flakes, which they toasted and served to the San’s patrons as a breakfast cereal.

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Another example of the beauty of free markets in the spirit of the famous: I, Pencil.

We rarely examine sufficiently the counterfactuals to the success of free markets, which allows anti-capitalists such as Michael Moore (as big an exploiter of capitalism as ever existed) and the OWS movement to win public relations campaigns. As I, Pencil has aptly demonstrated, private property rights and free markets have created remarkable wealth for EVERYONE, so much so that we take it for granted.

“We are perishing for want of wonder, not for want of wonders.” –GK Chesterton

Michael Moore should pledge a food boycott until he is capable of creating a cheeseburger from scratch; “eat local,” and all that…

http://waldo.jaquith.org/blog/2011/12/impractical-cheeseburger/

A few years ago, I decided that it would be interesting to make a cheeseburger from scratch. Not just regular “from scratch,” but really from scratch. Like, I’d make the buns, I’d make the mustard, I’d grow the tomatoes, I’d grow the lettuce, I’d grow the onion, I’d grind the beef, make the cheese, etc.

It didn’t happen that summer, by the following summer, my wife and I had built a new house, started raising chickens, and established a pretty good-sized garden. I realized that my prior plan hadn’t been ambitious enough—that wasn’t really from scratch. In fact, to make the buns, I’d need to grind my own wheat, collect my own eggs, and make my own butter. And I’d really need to raise the cow myself (or sheep, and make lamb burgers), mine or extract from seawater my own salt, grow my own mustard plant, etc. This past summer, revisiting the idea, I realized yet again that I was insufficiently ambitious. I’d really need to plant and harvest the wheat, raise a cow to produce the milk for the butter, raise another cow to slaughter for its rennet to make the cheese, and personally slaughter and process the cow or sheep. At this point I was thinking that this might all add up to an interesting book, and started to consider seriously the undertaking.

Further reflection revealed that it’s quite impractical—nearly impossible—to make a cheeseburger from scratch. Tomatoes are in season in the late summer. Lettuce is in season in spring and fall. Large mammals are slaughtered in early winter. The process of making such a burger would take nearly a year, and would inherently involve omitting some core cheeseburger ingredients. It would be wildly expensive—requiring a trio of cows—and demand many acres of land. There’s just no sense in it.

A cheeseburger cannot exist outside of a highly developed, post-agrarian society. It requires a complex interaction between a handful of vendors—in all likelihood, a couple of dozen—and the ability to ship ingredients vast distances while keeping them fresh.  The cheeseburger couldn’t have existed until nearly a century ago as, indeed, it did not.

 

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In Brief

• Researchers plan to build a computing system that would model the entire world to predict the future.
• The project would be powered by the enormous data streams now available to researchers.
• Yet models are not perfect; many researchers think they will never be able to capture the world’s complexities.
• A better knowledge machine may arise out of Web-like principles such as interconnection and argument.

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Read the whole thing in Friday’s Wall Street Journal: http://online.wsj.com/article/SB10001424052970204138204576600641068232846.html?KEYWORDS=kessler

Wilson Greatbatch, 92, died this week a wealthy man. Investing $2,000 of his own money way back in 1958 and tending a garden to feed his family, Greatbatch invented the pacemaker. He licensed it to Medtronic, a company now valued at $36 billion that sells and continues to improve pacemakers and defibrillators. Greatbatch did his part to improve society, create wealth and increase, quite literally, our standard of living. But apparently that’s not enough. President Obama suggested under a Cincinnati bridge this month that “if you’ve done well. . . then you should do a little something to give something back.”

Give something back? Greatbatch did well specifically because he provided something that society needed. His and Medtronic’s profits are what you and I are willing to pay above costs for these life-enhancing devices. This is true of Apple iPhones and Genentech Herceptin and Google Maps and Facebook Likes…

Steve Jobs gets taken to task for his lack of visible charitable giving—”no hospital wing or an academic building with his name on it,” wrote the New York Times’s Andrew Ross Sorkin recently…

The Bill and Melinda Gates Foundation is spending billions to eradicate malaria and other diseases in Third World countries. I admire their work and hope they succeed. But note that Bill Gates’s fortune came from Microsoft, whose software has done more to help bring Third World countries out of poverty than any charitable or government program.

Google founders Larry Page and Sergei Brin have saved all of us hundreds of billions of hours of research and driving around, far more value than their $20 billion each in wealth. They can give to whatever alternate energy project they want and it won’t match the wealth they have already created for me and you. Same for Jeff Bezos at Amazon and the founders of Facebook and Twitter and LinkedIn and the rest. Will we soon disparage these Robber Geeks?

It’s inevitable but wrong. Because they, like Wilson Greatbatch, have done their part to create wealth for society by inventing and being in business and investing their profits into even more productive products and services. That’s “giving back.” Taxes and charity are just gravy.

Mr. Kessler, a former hedge fund manager, is the author most recently of “Eat People And Other Unapologetic Rules for Game-Changing Entrepreneurs” (Portfolio, 2011).

 

 

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If managing a hedge fund is no different from managing an SMA except that an SMA gives the investor some access and control over her account, why would adding SMAs trigger the need to register? I think we get a hint in the following column on the laws that are created merely to protect the interests of the politically connected:

http://www.washingtonpost.com/opinions/in-arizona-nibbling-away-at-free-enterprise/2011/09/22/gIQA9B2erK_story.html

H/T: cafehayek.com

…soon after 1932, New Deal progressivism washed over the courts, which became derelict regarding their duty to protect economic liberty. Courts deferred to governments eager to experiment with economic micromanagement. Inevitably, this became regulation in the service of existing interests. And regulatory agencies often succumbed to “regulatory capture,” whereby regulated businesses and professions dominate regulatory bodies.

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Still, for the market to avoid moving downward toward its fundamental averages, one would have to expect significant positive economic developments in the near term such as skyrocketing productivity, job growth, and earnings growth. Is there anything on the horizon that makes you feel that these positive developments are just around the corner?

Media explanations for daily market price movements are usually vague guesses, but it seems there are plenty who are willing to bet their clients’ money on it. It seems there are many people holding out hope for some kind of deus ex machina so that just about any rumor helps the market temporarily avoid its fate.

Here is an explanation from today’s Dow Jones Newswire’s Market Talk Column for today’s late swing in the market:

4:05 (Dow Jones) US stocks pull a fast one – a very fast one – in the last hour, rallying almost maniacally in the last 10 minutes of trading to finish higher after falling sharply in the morning. DJIA jumps 69 (0.6%) to 11061, after sliding as much as 168 earlier; S&P 500 gains 8 (0.7%) to 1162, Nasdaq Comp rises 27 (1.1%) to 2495. Fears of Greek default drove morning’s sell-off. Rumors in the afternoon that – wait for it – the Chinese would buy (or are buying) Italian debt seems to have driven the rally.

A rumor that the Chinese may buy Italian debt is the deus ex machina for the world economy?

The problem in Europe and the rest of the developed world is a decades-long lack of productivity combined with a population that expected much. We all wanted something for nothing. Up until now, politicians in the developed world made many promises to their constituents and only asked for office in return. Those promises resulted in policies that helped accelerate our resource consumption from the future to the past and present.

For example, in the US think of long-term policies such as Social Security; Medicare; subsidized housing in the tax code; tax policies that favor debt over equity; etc.; and short-term policies such as cash-for-clunkers. Each allowed individuals or corporations to:

• avoid saving for retirement;
• avoid saving for medical care that will surely be needed one day;
• avoid saving for a large down payment on a house or car; or
• encouraged the use of debt to expand or buy a business

In each case, more wealth could be exhausted earlier in one’s life than it could without such policies. In each case, a larger amount of resources are guaranteed to be exhausted in the future to pay for present consumption, which of course means less will be available for future consumption of anything.

Those promises also created incentives for people to shun the productive work that leads to real wealth creation and created incentives to simply seek handouts. But, that can only go on for so long and now it is time to pay the bills.

I need to understand how that translates into the optimism that is keeping the market floating above its long-term fundamental averages. How does receiving a large bill for prior consumption make one optimistic about the economy and the market in the near future? How is that bill going to be paid, if not with long-deferred gratification? Do you think dumb-money, say from the Chinese, will pay the bill free of negative conditions? I do not. What exactly can Italy offer the Chinese? And then, which trap door will the deus ex machina come from for Greece, Ireland, Spain, the US, Japan…

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One of the factors influencing (my) decision to give up voting control of Magna was the increasingly restrictive rules governing the management of companies. I believe regulators have put in place excessive rules that stifle the market’s creative forces – namely, the innovative managers, entrepreneurs and inventors who are the engines of new wealth creation. We need to loosen the regulatory straightjacket and create a simpler, more clear-cut regulatory framework that allows business more room to innovate and expand.

Maybe he is emboldened because he sold shares and is retiring. Regardless, most entrepreneurs think that the regulatory burdens are reaching a breaking point.

In my business, with the stroke of a pen, bureaucrats have decided that investors who were sophisticated before when they had $1 million of net worth including the value of their primary residence are no longer sophisticated unless they meet that amount excluding the value of their primary residence. They are also considering raising the cutoff amount to $2.5 million. It is not as if these distinctions would eliminate the Madoffs of the world, the ostensible targets of the regulation. The Madoffs of the world prey on the uber wealthy because “that is where the money is.” This is probably another example of congress paying back those who contribute to election campaigns. In this case it is the managers of large hedge funds who would like their pesky competitors to disappear. Who is John Galt?

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Shrinking in a Bad Economy: America’s Entrepreneur Class

By JOHN BUSSEY

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I hope these scientists become fabulously rich, which would mean great things for the other seven billion of us (minus one Michael Moore and his Cuban witchdoctors).

Aug 10, 4:55 PM EDT

‘Amazing’ therapy wipes out leukemia in study

By STEPHANIE NANO

Associated Press

NEW YORK (AP) — Scientists are reporting the first clear success with a new approach for treating leukemia – turning the patients’ own blood cells into assassins that hunt and destroy their cancer cells.

They’ve only done it in three patients so far, but the results were striking: Two appear cancer-free up to a year after treatment, and the third patient is improved but still has some cancer.

Scientists are already preparing to try the same gene therapy technique for other kinds of cancer. “It worked great. We were  surprised it worked as well as it did,” said Dr. Carl June, a gene therapy expert at the University of Pennsylvania. “We’re just a year out now. We need to find out how long these remissions last.”

He led the study, published Wednesday by two journals, New England Journal of Medicine and Science Translational Medicine.

 Read the whole thing:

http://hosted.ap.org/dynamic/stories/U/US_MED_GENE_THERAPY_LEUKEMIA?SITE=AP&SECTION=HOME&TEMPLATE=DEFAULT&CTIME=2011-08-10-16-55-12

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