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Money Changes Everything: How Finance Made Civilization Possible
Money Changes Everything: How Finance Made Civilization Possible
by William N. Goetzmann
Edition: Hardcover
Price: $21.66
65 used & new from $18.97

3 of 3 people found the following review helpful
4.0 out of 5 stars A useful addition to the literature, but not a lot of fun to read, May 22, 2016
The publisher sent me a copy of this book for review.

There are so many books covering the history of money that it helps to begin by categorizing them by the authors' fields of interests and political views.

For example, one of the best is David Graeber's Debt. The author is an anthropologist and anarchist who argues money is debt, and debt leads to war, slavery, political repression and other violence. History: The Human Gamble is Reuven Brenner's metaphysical account of financial history, leading to a libertarian view. Another excellent entry is Niall Ferguson's The Ascent of Money, written by a historian and champion of the liberating and progressive effects of finance. In Money, Felix Martin considers money from a political view and argues for a center-left/Democratic socialist/Keynesian-economy-managed-by-professional-economists world. Franklin Allen and Glenn Yago use linguistic evidence and an evolutionary perspective in Financing the Future. They would like to see a lot of financial innovations. There are plenty of others, treating most of the same evidence and events, but from perspectives as different as the blind men and the elephants, and coming to radically different conclusions.

Money Changes Everything is archaeological at its core. The main attention is on physical money and documents. This will not surprise readers familiar with his earlier book, The Origins of Value, which is an anthology distinguished by gorgeous photographs of monetary artifacts. It is narrower than the other books, nearly all the attention is on ancient Mesopotamia, Greece, Rome and China; and medieval to early modern Europe. The focus is clearly related to the amount of surviving physical evidence for exchange systems. The book is the least political of the monetary histories I am familiar with, it seems to have a mild center-right perspective generally supportive of the force of finance, but sympathetic to light regulation.

I think this book is most useful as a counterweight to all the enthusiastic theorizing and argument in the field. Many of the documents and artifacts described don't fit neatly into anyone's theories. Any reasonably clever writer can cherrypick historical evidence and employ rhetorical sleight of hand to promote persuasive theories. But as John Adams put it, "Facts are stubborn things; and whatever may be our wishes, our inclinations, or the dictates of our passions, they cannot alter the state of facts and evidence." That's not to say that the books above are wrong, just that considering their arguments in light of the evidence in this book can lead to more nuanced, and likely more accurate, views.

On the negative side, facts are duller than speculation, and this book is particularly dry. The author's passion is clearly to handle the physical remnants of history, which is less exciting than proposing bold hypotheses about the sweep of human events. He graciously praises every single researcher cited, in the text, not footnotes. That's really nice, but it starts wearing thin for readers.

I recommend this book highly for anyone seriously interested in the history of money and finance. I can't promise you a good time or deep insights, but I think it will challenge your views and make them better. Without the serious interest in the field, I don't think you'll make it far into this long, dense, plodding (but useful) book.


Odds On: The Making of an Evidence-Based Investor
Odds On: The Making of an Evidence-Based Investor
by Matt Hall
Edition: Hardcover
Price: $18.14
36 used & new from $9.98

5.0 out of 5 stars Fills an important gap for sensible investors who want a bit more than index funds, May 22, 2016
Disclosure: The publisher sent me a free copy of this book, asking for a review. I am in the financial business and would generally benefit if more people invested as the author recommends.

The reason I like this book so much is that it provides a rare in-between view of personal finance. On one hand, there are books that are easy to understand and point out the importance of sensible low-cost, tax-efficient strategies based on the idea that markets are efficient. A Random Walk Down Wall Street is the classic, now in its 11th edition, and John Bogle has written some great ones as well. On the other hand, there are fine books on rational investing principles, such as Expected Returns and The Missing Risk Premium, which suggest investors can do better than S&P500 index funds, but these are a lot more effort to read.

Odds On is as persuasive and easy to read as the first group, while offering some of the more advanced ideas in the second group. This is a rare combination. The book is a selective autobiography rather than an investment text. I suspect it has been simplified a bit to make some points, I doubt the author was as naÔve or his first brokerage firm as villainous as portrayed in the text. But of course the concern is not with journalistic fact or the psychology of the author, rather the book builds on events of the author's career to make parables to convince the reader.

The biggest financial mistake most people make, and by far, is to spend too much money. No clever investing can make up for this fault. It means they fritter away money on things that mean little to them (or can even be burdens) and periodically run short causing them to have to skimp on important things or worse. The damage is not just financial, these people can never be financially secure. Except for a few people with extreme happy-go-lucky dispositions, more common in movies than real life, this is a miserable way to live.

The second biggest mistake is to pay high fees and too much in taxes, in erratic application of aggressive strategies that would be unlikely to work even if pursued with skill and discipline, and simply cannot work for dabblers.

The first type of investment book will get you past these first two hurdles. They will persuade you to make rational financial plans and sensible low-cost, tax-efficient moderate risk investments. This is almost everything investing can do for you.

Odds On argues that you can do a little bit better, maybe 2% per year or so in additional return after fees and taxes. That's not a lot in any one year, but over a 35-year investing lifetime it doubles the final result. It means paying somewhat more in fees and taxes in order to take advantage of risk premia that are persistent, pervasive and liquid. This is related to investment ideas marketed under terms such as "smart beta", "style investing" and "factor investing".

All these ideas start from the idea that the market is very efficient. Therefore, one rational strategy is to buy the market and accept the average return. This is among the cheapest and most tax-efficient strategies to implement. Since you weight investments by their market capitalization, there is no need to buy or sell as assets move up or down in price. You are automatically holding the correct amount.

However, there is another academic finding that is just as important as market efficiency. Fischer Black famously put it that the market gets prices right within a factor of two (that is, more than half the correct price and less than twice the correct price) 90% of the time. Fischer was not a guy to make up numbers for rhetorical effect, he thought carefully about them, and I argued with him to make it "within a factor of two half the time." A lot of people naÔvely think that if it's hard to beat the market it means that the prices must be accurate. But of course, if the prices were accurate, they wouldn't change. In fact they change far more than economic fundamentals can justify.

Knowing that some stocks are overpriced and some are underpriced is useful, even if you can't tell which stocks are which. If you buy a market capitalization index fund, you are mathematically forced to buy too much of the overpriced stocks and not enough of the underpriced stocks. If you use any other criterion, such as putting the same dollar amount in each stock, or buying according to value, momentum, yield or anything else, you eliminate that bias (the equally weighted S&P500 index generally outperforms the capitalization weighted S&P500 by 1.5% to 2% per year, although it does underperform over long periods, especially during bubbles when the more overpriced a stock is, the more it goes up). Of course, if you select criteria that have strong empirical and theoretical support for outperformance, you can do even better.

But evidence-based investing is not a sure thing. You're paying more fees and taxes today, and those are sure things. You're hoping to make back the extra costs and more, and it seems like a smart bet, but it's a bet nonetheless. One worry is that the history of evidence-based investing shows deceptively low risk and high return due to increasing investment in these kinds of strategies, and that things will reverse as investors pull out. I don't believe that personally, but it's something to consider.

This is not just a financial question, after all, the real purpose of all this is to be happy. Some people are happy knowing they're getting their fair share of the economy's growth, at the lowest possible cost. Standard index funds should be their choice. Other people sleep well knowing that they've chosen the path based on the best calculations. Evidence based approaches make sense for them. I find it useful to ask people how they will feel if they choose wrong. A standard index fund investor fails when everyone fails. An evidence based investor fails when the smart money proves not to be so smart. Do you prefer to stand with everyone, or with the smart people? Did you boo in the original Star Wars when Luke overrode the computer to "trust the Force"? That's an evidence based investor who prefers to trust the computer. But most people in my theater seemed to prefer the "Force emanating from all living things." De gustibus non est disputandum.

It is possible to go another step away from market efficiency and go for even higher fee strategies like merger arbitrage, activist investing and global macro. These are generally referred to as "hedge fund" strategies, although they are increasingly available to retail investors. Personally, I like to use risk premium and hedge fund strategies. I am happiest feeling that I'm beating the market, I always want the edge. I don't mind losing as long as I got my money in with the best of it. That's probably not the healthiest attitude, but it's who I am.

Odds On is a quick, pleasant read in which the author builds both an emotional and logical case for evidence based investing. It's not for everyone, but this book will help you figure out if it's for you.


Jarrow Formulas Epactive, Supports Cardiovascular Health, 60 Softgels
Jarrow Formulas Epactive, Supports Cardiovascular Health, 60 Softgels
Price: $25.12
8 used & new from $19.62

4.0 out of 5 stars A fine product if you want pure EPA, May 13, 2016
Vine Customer Review of Free Product (What's this?)
I have been trying various forms of Omega-3 oil supplements. This is among the easiest to take (softgels go down easily, no taste or digestive upset). The manufacturing quality is top-notch. However I did not notice the same benefit from these pure EPA oils as I got from ones with a mix of EPA and DHA. That's only one person's subjective evaluation, your experience could well vary.

If you want pure EPA, this is the best product I've found.


Canon PR10-G Wireless Presentation Remote, Green
Canon PR10-G Wireless Presentation Remote, Green
Offered by Pavilion Electronics
Price: $89.99
11 used & new from $89.99

5.0 out of 5 stars Top notch quality, poor instructions, high price, May 5, 2016
Vine Customer Review of Free Product (What's this?)
I agree with most of the other reviewers that this is a top-of-the-line laser pointer/wireless presentation remote, with poor instructions (hard to read, covers the stuff you already know badly and the stuff you need to know not at all). I prefer it to the Logitech version, and also to the cheaper Kensington. The differences are small, but then this functionally similar to devices that sell for under $10, so at this price point, everything matters.

I like the feel of this device, and have found it somewhat more reliable. When you click the page moves, and moves immediately, so you don't end up pressing twice. It has no trouble if there are obstacles between you and the computer. I can't say I've had a lot of trouble with other expensive presentation remotes, but I use them a lot and have a bit more confidence in this one.

I can't say it's worth the extra money, but it is my favorite pointer.


The Norths Meet Murder (The Mr. and Mrs. North Mysteries)
The Norths Meet Murder (The Mr. and Mrs. North Mysteries)
Price: $7.99

1 of 1 people found the following review helpful
4.0 out of 5 stars The slam bang tang reminiscent of gin and vermouth, April 23, 2016
Verified Purchase(What's this?)
This is the second novel in the Mr. and Mrs. North series which encompasses 27 mysteries written between 1936 and 1963. The series gave rise to a successful play, movie, radio series and television series, as well as three spin-off novel series by the same husband and wife writing team. The books were inspired by the success of the 1934 brilliant film The Thin Man (which shares a general plot and characters with the even more brilliant 1933 Dashiell Hammett novel, but none of the gritty noir realism). Mr. and Mrs. North are not as rich or witty as Nick and Nora Charles of The Thin Man, and they have a cat instead of a dog, but there is the same combination of gentle marital domestic comedy, 1930s Manhattan socializing and classic mystery-puzzle that the reader is expected to solve before the end.

The Norths were named for bridge puzzles in which the North player, by tradition, is the dummy (bridge is a four person game, and in puzzles and advice columns the players are designated North, East, South and West). The dummy takes no part in the play of the hand, her cards are played by her partner. In the early Mr. and Mrs. North mysteries, including this one, they are observers only, but Mr. North's self-deprecating logic and Mrs. North's clever but foolish-sounding insights, lead to the solution.

Although these books are tightly plotted classic mysteries that play by all the rules so the reader can solve the case if he pays attention, the crime is not the main focus of the story. They are written in an elegant style that offers social commentary and lightly sketched but incisive personalities. There is also a layer of broad comedy. This is witty, sophisticated storytelling; artificial in plot and minor characters; but with a sincere core and infrequent but strong brushes of realism.

Whether or not you enjoy this book will depend largely on your taste. They are much slower moving and softer-boiled than the noir authors of the era, but harder-boiled and more substantive than comparable British mysteries. I think most mystery fans will enjoy reading one or two for the picture of Manhattan at the time, and some will find the mix of journalism and classic mystery to be a pleasing cocktail.


Hard-Boiled Anxiety
Hard-Boiled Anxiety
by Karen Huston Karydes
Edition: Hardcover
Price: $24.95
22 used & new from $16.11

1 of 1 people found the following review helpful
4.0 out of 5 stars Tough guys on the couch, April 23, 2016
This review is from: Hard-Boiled Anxiety (Hardcover)
There is no doubt that Dashiell Hammett, Raymond Chandler, Ross Macdonald, and their detectives provide plenty of grist for psychological study. There is also no doubt that the author of Hard-Boiled Anxiety has read the books closely and thought deeply about the stories and their relations to their authors' lives.

I do have some doubt about the appropriateness of a Freudian analysis. It leads to paragraphs like this:

"Macdonald is choosing a welter of sexually tinged metaphors to describe the process of writing fiction: 'dangerously hot materials'; 'feeding [both] the writer [and] other people'; 'problems, memories--whatever else makes up one's own psychic life; wrestling with your own angels.' These all speak to the guilty anxieties of childhood."

I have to strain to see any sexual tinge to those metaphors. I guess "hot" has a sexual sense, and some sexual activities are like "wrestling," but it takes a Freudian to see a "welter" of obvious sexual references. It certainly takes a Freudian to consider "the guilty anxieties of childhood" to be synonymous with "sex". There is a moderate amount of this kind of thing. Another Freudian tendency is to assert parallels that seem either coincidental or purely verbal to ordinary mortals.

If you take that Freudian stuff seriously, or if you're willing to overlook it, there's plenty of detailed information and incisive analysis that does not depend on outmoded mystical theories. The links between these three seminal writers are illuminated, and also the extent to which their art imitated their lives.

The Freudian approach works best with Macdonald, who underwent Freudian analysis and explicitly adopted some Freudian ideas. He is also the most literate of the three, the most concerned with what goes on inside people's heads. Hammett and Chandler are both more down-to-earth, and more concerned with actions than thoughts, but there is still considerable insight to be gained by comparing their psychological assumptions.

When the author is telling stories, either about the novelists or their works, the prose is graceful and stylish. She weaves the material together well. When she veers into more theoretical stuff it gets denser and more work to read, but it's never turgid or pedantic.

I'd certainly recommend this book to serious students of noir detective fiction, and I think more casual fans will enjoy at least the biographic and literary analysis parts.


The Pot Thief Who Studied Georgia O'Keeffe (The Pot Thief Mysteries)
The Pot Thief Who Studied Georgia O'Keeffe (The Pot Thief Mysteries)
by J. Michael Orenduff
Edition: Paperback
Price: $12.09
46 used & new from $7.78

0 of 1 people found the following review helpful
3.0 out of 5 stars Above average light mystery with plenty of flaws but some good stuff as well, April 23, 2016
While I basically agree with Paul Cassel's critical review, I like this book a star better than he did. Yes, the story is slow and the mystery silly. Yes, there are way too many "jokes" about characters mishearing words. Yes, there are implausible elements. Yes, there is too much repetitious backstory, boring for people who have read the earlier books, and unbalanced for those who have not.

On the positive side, there is some great New Mexico color, and information about desert Native American pottery and the artist Georgia O'Keefe. The characters talk too much between doing silly things, but they are interesting characters nonetheless. There are several scenes irrelevant to the plot, but they are entertaining scenes.

This is an explicit imitation of Lawrence Block's wonderful Bernie Rhodenbarr series, translated from Manhattan to New Mexico, and from burglar to pot thief. It manages to capture some of the lighthearted fun and historical lectures of the original, but is several notches down in plot and especially dialog. That still makes it an above average light mystery.


The Renewable Virgin (The Marian Larch Mysteries)
The Renewable Virgin (The Marian Larch Mysteries)
Price: $7.99

5.0 out of 5 stars Fun, fast mystery and time capsule of early 1970s feminism, April 23, 2016
This is a real gem of a mystery, basically comic, but with three seriously interesting women characters at its center and a fascinating account of life for women in the early 1970s. The mystery itself is a bit forced, but it is deliberately sketchy, a device to display the characters rather than a whodunit puzzle for its own sake.

I suspect younger readers will have difficulty understanding some of the elements of this book. In the early 70s, women had problems that seem nearly unthinkable today. In some states a man could legally beat his wife, as long as he didn't cause serious physical injury or bother the neighbors, and in no state was it a crime for a man to rape his wife. Top educational institutions, including the service academies and all of the ivy league schools except Cornell, refused admission to women. Most good jobs were effectively closed, over 90% of doctors and over 95% of lawyers were male. Birth control and other female health issuers were at the mercy of state legislatures and doctors.

Of course, feminists of the time fought all these things, but they also worried about things that seem almost silly today. For example, the "renewable virgin" in the title refers to the expectation that young women should look sexually attractive and available, but be unspoiled innocence the next day, every day. The heroine in this book is an actress in a television series in which she plays the sexy admiring neighbor of the hero, and is required to alternate between lustful and innocent within each episode. That certainly isn't unthinkable today, although roles for women have broadened somewhat and there is more tolerance for sexual activity of good girls. Anyway, it seems silly compared to the serious stuff above, but at the time nearly all feminist positions were dismissed as silly, and it wasn't clear the extent to which the legal and economic problems resulted from cultural assumptions.

A significant plot element in the book is whether the heroine will agree to judge a Miss America contest, which would be a big help in her career, or refuse out of feminist principle. Again, the Miss America pageant is still with us and judging it doesn't seem like a big crime. But this is now, and that was then.

The second major character is a police detective who is treated well within her department and enjoys career success, although she must have been among the first women allowed to take promotional exams in the NYPD (1964) and near the first to make detective lieutenant (1967). However she is not shown to have any romantic interest, friends or fun. The third woman is a respected history professor whose drive destroys first her husband, and later her son. There is also a fourth woman, a business executive in a family business, whose actions are described but who does not appear directly.

None of the male characters amount to much. Some are cowardly, some are venal, most are stupid; and some have those qualities in comic exaggeration. The story is fast, fun and light, but the characters have strong grounding and plausible development. You can take this as a slick light mystery, or as a time capsule of early 1970s feminism, and enjoy it either (or both) ways.


Flash Crash: A Jake Rivett Heist Thriller
Flash Crash: A Jake Rivett Heist Thriller
by Denison Hatch
Edition: Paperback
Price: $14.95
21 used & new from $10.95

1 of 6 people found the following review helpful
2.0 out of 5 stars A muddled pastiche of action movies, April 23, 2016
Every page of this over-the-top thriller will remind you of some action movie you've seen--often a specific one. I'm not surprised that that author is a screenwriter, not only is he inspired only by movies, but he pushes characters and events around rather than letting anything develop naturally. The writing is wooden and purely descriptive as if directors and actors will fill in his framework with mood and emotion, and a specialist will do the dialog later. There are even tired gimmicks like ripping off the clothes of an attractive young woman for no good reason (and the clothes magically reappear untorn in the next scene) that might add a few dishonorable dollars to a movie gross, but do nothing in a printed book.

On the positive side, there is plenty of action. It's the only thing that keeps a reader turning pages and the author is skillful in delivering it. I read a lot of thriller-wannabes with good plot, characters, dialog and development; but that cannot keep the action going. This author might have a future adding tight suspense and thrills as a co-author to someone with a more literate approach to novels.

The story is completely absurd in both overall arc and specific details. One random example is the detective hero rockets through Manhattan on a Ducati motorcycle while maniacally waving a large crowbar with one hand while the other is used for a mobile phone in which he is learning intricate details of a heist investigation. We are told "needless to say" trucks get out of his way. Pedestrians, sure. Average drivers, maybe. But trucks? Afraid of a crowbar? I assume the author does not know how motorcycle throttles work, how riders balance and how hard it would be to hear a mobile phone while racing at high speed and wearing a helmet.

The same guy uses a hand gun to try to shoot his way into an armored car (in an urban neighborhood), and succeeds in breaching the armor to get from the back to the cab with his trusty crowbar. We're told he's the first on the scene, yet there are four police helicopters there before him, the author has trouble keeping his scenes straight. The hero is undercover (of course) but he leads the highest profile criminal case in the city, directing large teams of officers in public, which might hurt his cover. He serves a no-knock warrant by driving three militarized vehicles at high speed onto the grass in a quiet residential neighborhood, removing any possibility of the surprise that is the point of no-knock. And all of this is to find a material witness in a white collar crime, while no-knocks are supposed to be used when a drug dealer might flush the evidence down the toilet, or a known armed-and-dangerous felon might shoot through the door. All of this is visually exciting stuff that makes absolutely no sense. It allows the author to work in scenes from a dozen different movies.

The research is pretty bad. People are always driving or taking public transportation in the wrong directions. There is the usual confusion between investment banking and proprietary trading. The "flash crash" of the title is not a flash crash. The person described as a "quant" who instigates it has the resume of a quant, appears to have the job of a quant developer but the salary and access to physical hardware of an operator. That sounds like a minor point, but it means that he doesn't have to worry about separation of duties, maker-checker, logs or any of the other controls that prevent the kind of thing he is doing. It's like saying a bank teller told all his coworkers including the guards to go out for coffee, then opened the vault with a hairpin. I'm fine with implausibly elaborate Mission-Impossible-style heists, but the author should at least make an attempt to explain how things might be done. The most ludicrous belief is that large global banks settle their trading by shipping gold to each other around the city in armored cars.

Only the most uncritical action junkies will enjoy this book.
Comment Comments (2) | Permalink | Most recent comment: May 5, 2016 9:39 AM PDT


Success and Luck: Good Fortune and the Myth of Meritocracy
Success and Luck: Good Fortune and the Myth of Meritocracy
by Robert H. Frank
Edition: Hardcover
Price: $17.77
70 used & new from $13.02

37 of 75 people found the following review helpful
1.0 out of 5 stars A book to give liberals a bad name, April 22, 2016
This has to be one of the least logical books I've ever read, and oddly enough it's written by a very logical thinker. It starts out by arguing success is determined by largely by luck. To be more precise, he's clear that you need ability and effort, but that those are only prerequisites; among the large number of talented triers, luck picks the winners. He justifies this with by emphasizing the million random flutterings of butterflies' wings that send our lives in different directions.

The glaring error in this is that a million random coin flips are unlikely to deviate from expectation by more than a fraction of a percent. A casino takes millions of bets, and has a predictable result. If you want to argue that outcomes are dominated by luck, you have to say they depend on a few big chances, not millions of little ones.

It's arguably true that your specific life situation is a matter of luck. If a butterfly had flapped its wings a few weeks before your birth, 5,000 miles away from it, you might not be reading this Amazon review now, and could have an entirely different life situation. But that doesn't mean your degree of success is entirely a matter of luck. Each of those millions of random events could have improved or hurt your Life Satisfaction Index (or however you measure success), and you undoubtedly got close to the expected number of ups and downs.

After spending a couple of chapters on that idea, the book suddenly switches without any notice to the reader. Now it turns out that success is largely determined by the circumstances of your birth, such as where you are born and the quality of care you receive through childhood. Of course this contradicts the first argument, since if everything is random, differences in initial advantages would be quickly erased by luck. The glaring error here is that your birth situation is matter of luck only in the sense of being beyond your control. Your parents, or some earlier ancestor, chose where to live, probably based in large part on opportunities for descendants. Your parents also worked and struggled (or not) to get the resources to devote to your upbringing. Other people worked--and maybe fought or died--to win respect for your rights, to build infrastructure, to create the technology and culture that enrich your life. Again, a large part of their motivation was likely to improve the world either for their descendants, or future generations in general, or both. So your birth circumstances are your inheritance, a gift given to you, not luck.

At this point in the book I realized the author had no intention of discussing the role of luck in success. Rather his purpose was to generate support for a progressive consumption tax and increased government spending. I see some merit in those ideas, although I have some objections as well. But I'm baffled by the attempt to link the amount of luck in life to fiscal policy. I think the connection, although it is not spelled out in the book, is that the gifts you received at birth obligate you to pass along similar advantages to future generations. For the first version of luck, in which success is random, I think the general idea is that things you receive purely as a result of luck are not really yours. Of course just as these are based on conflicting empirical claims about causes of success, they are inconsistent moral arguments as well. Neither one is strong, a gift you did not ask for should not create an obligation, and if you choose to take a chance--such as starting a business or buying a lottery ticket--you are entitled to the results just as much as if you created them through talent and effort (in fact, in the case of the lottery ticket, talent and effort would be cheating and the prize should be disallowed).

Despite the weaknesses, these are ancient arguments. You owe everything the God or gods, or the King, or your ancestors or the Motherland. However the author leaves out three essential elements that priests and dictators knew enough to supply. The first is why you owe to one particular source, that is, why not split your obligation among all the things everyone believes in, or just among the ones that seem right to you? That's why the Judeo-Christian-Islamic tradition makes its first commandment to forget about all those other obligations; and totalitarians make it the first point of indoctrination that only your King, or the State, or the People, or whatever, matter.

The second thing the author omits is why he is the representative chosen to direct repayment. I have no idea how much of my happiness results from initial endowment versus my merit and efforts versus luck. But I’m pretty sure Robert H. Frank had little to do with it. So he cannot appeal to my generalized gratitude to get my support for his views, he has to convince me with facts and argument like anyone else. Here, priests and Kings have elaborate ceremonies to anoint themselves, while totalitarians tend to favor rigged elections.

Finally, the author is not asking me to personally give more money to the government, he wants me to support forcing other people to do it. But those other people have average luck, by definition (it’s possible to argue that everyone alive is lucky to be alive, or cursed for that matter, but this gets into philosophic subtlety far beyond the material in this book). Moreover to the extent reflecting on my blessings fills me with good feeling toward everyone, I don’t want to force them to do anything. To take care of this issue, priests tell us blasphemers anger the gods against everyone, and totalitarians say something similar about reactionaries and counterrevolutionaries.

As I’m scratching my head over this mess, the book jerks me in an entirely new direction. Now it turns out that neither luck nor initial endowment determine success, it’s positive feedback. This does answer one problem with version 1.0 of the luck argument, if the million coin flips are correlated, it’s possible to get results far away from expectation. If winning one makes it more likely that you’ll win future flips then extreme good and bad results can occur frequently.

But two troubles remain. The first is that positive feedback amplifies merit and effort just as much as luck. Therefore the amount of positive feedback says nothing about the relative importance of luck. The second is that there’s no moral reason why the existence of positive feedback should make me more willing to share with others.

The logical flaws in the book are so overwhelming that I haven’t complained about the weak support up to now. Everything is based on either anecdote (literal anecdote, not just small sample study), popular books by authors like Malcolm Gladwell or studies designed for broad media interest (most of these studies are done by serious researchers, and their work when replicated and challenged by other researchers has led to important insights, but simplified descriptions of dramatic individual small sample studies are not compelling). This is disappointing from a serious academic, but when we get to positive feedback and winner-take-all it’s particularly painful because the author is expert in this area. He is well aware that there are forces both for and against winner-take-all, and that the simple phrase stands for a nuanced reality. Yet invokes it in its crudest form in order to fit it into his argument.

Of course it’s true there are fields in which small initial success can lead to exposure which can lead to more opportunities for success, so that some people go on to enormous success, while equally talented, equally hard-working people with the same number of lucky breaks remain obscure, because their successes were dispersed and failed to build. But in other areas, and the ones most important for life satisfaction, the reverse is true. A good long-term marriage is one of the best things a person can have, and in most countries you’re allowed only one at a time, and have trouble fitting too many into a single lifetime. So one success works against subsequent successes. It’s hard to score the winning goal in the World Cup final while starring in a movie that will win you an Oscar in between Nobel Prize acceptance speeches. Life is about choices more than it is about positive feedback. Almost everything worth having requires time and attention to nurture and enjoy. It’s possible to derive great satisfaction from career, family, friends, passions and other things, but they do tend to compete with each other. Even the happiest people in the best situations have to balance them so that gains in one area necessarily take away from others, and losses in one area free up time to improve and enjoy the others. Winners can’t take all, because they can’t handle it all.

The fourth argument made in the book is an improvement in the sense that it doesn’t contradict all of the previous arguments. It could be consistent with the first version. However like all the others it is not sign-posted, the reader has no clue that we’re veering off in a new direction. It also uses a different kind of evidence, which is a relief, but that relief is tempered because it is even weaker evidence.

The author runs a simulation in which success is determined 49% by ability, 49% by effort and 2% by luck, and claims that luck is still very important in the outcome. Problem one is that he makes no effort to model ability and effort, they are just draws from a probability distribution, in other words luck. So we’re comparing different quantitative degrees of luck.

The second problem is the simulation proves the reverse of what he wants to show. You don’t need to simulate, the computations are easy to do. He posits 100,000 contestants. Once ability and luck are determined, an average of only 86 of the contestants have any chance of winning. Even though there is 2% luck, it affects only 0.086% of the contestants (in a more general context, we would expect the contribution of each factor to be proportional to the square of its size, which means a 49%/49%/2% division would imply a 0.083% role for luck). And even that overstates things, because most of the contestants have microscopic probabilities of winning. Ability and effort have reduced the 100,000 contestants to the equivalent of 8 remaining contenders with equal probability (8 is the expected value of one over the sum of the probabilities squared, which equates 86 people with different chances of winning into the same informational uncertainty as 8 people with equal chances of winning). So 2% luck represents only 0.008% of the outcome.

The third problem is the author has rigged the simulations in important ways. He draws ability and effort from uniform distributions, which have the thinnest possible tails. If you pick 100,000 independent variables from a uniform distribution starting at zero, the largest value is likely to be 0.001% larger than the second largest, making it easy for 2% luck to matter. A more realistic distribution is exponential, in which the largest value is likely to be 6.4% larger than the second largest, so 2% luck is less important. Also by defining success only as being the highest possible score he focuses on the outcome most dependent on luck.

If I were to do this exercise, I would start by assigning ability according to an exponential distribution rather than drawing randomly from a uniform. Effort is a choice. If everyone is the same, either everyone who has a chance of winning will exert maximum effort (if the prize is valuable compared to the cost of effort) or zero effort (if the prize is not valuable compared to the cost of effort). With everyone devoting the same effort, effort will seem not to matter, regardless of how important it is. Therefore you need a model with differing preferences for the prize versus the cost of effort.

Finally, realism demands compensation for high finishes other than first. Even in so-called winner-take-all situations there are at least a handful of winners, and there is considerable value in being also-rans. Only a few movie stars make millions of dollars, but lots of other people make livings in the movie or related businesses.

Overall, I’d say that a very smart author has managed to write an appalling illogical and badly supported argument for some not unreasonable policy recommendations. The title is particularly misleading, because there is no serious effort to analyze, measure or even define success and luck. This is the kind of thing that gives liberals a bad name, vague appeals to gratitude in order support high levels of taxation and government spending, without the rigor that even the most primitive religions and tribal leaders knew to apply (conservatives will sometimes fall into making equally vague appeals to decency or tradition or values). There are good arguments for liberal policies, but you won’t find any in this book.
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