Don’t Want It! [Also... On the Value of Re-Reading Useful Books]

Readers, I'm re-reading Jacob Lund Fisker's paradigm-shifting book Early Retirement Extreme, and I re-stumbled onto a quote worth sharing.

Giving up wants can be as tough or easy as going on a diet, giving up smoking, or changing other habits dependent on strength of character. However, doing without is often thought of as a sacrifice, especially when strongly attached to material comforts. It's quickly realized (after about a month) that happiness does not stem from being surrounded by possessions, but that being surrounded by them is the result of an addictive habit. Thus, it can be tremendously liberating not to "need" something to be happy.

Since humans need very little, eliminating various wants can go far in terms of solving problems. Can't afford it? Don't want it! Too complicated? Don't want it! Reduce and simplify. Reduce and simplify! An entire aesthetic can and has been formed around this principle, and so the pleasure from following this path can be as strong as the (previous) pleasure of accumulation. However, as there's a point of diminishing returns to the pleasure of accumulation, there's also a point of diminishing returns to the pleasure of giving things up. The optimal point is somewhere in the middle. It should therefore be kept in mind that while eliminating problems can be a very good tool, some will be very tempted to make it their only tool, in which case it becomes a hammer for which the whole world becomes a nail.
--Jacob Lund Fisker, Early Retirement Extreme

What I love about this quote is how it synthesizes and combines ideas from minimalism, frugality, consumerism and consumer empowerment, all of which are frequent discussion topics here at Casual Kitchen.

Also, it brings to mind other worthwhile books I've discussed here at CK, like Marie Kondo's The Life-Changing Magic of Tidying Up and her equally useful follow-up book Spark Joy. Marie Kondo's central idea is to keep only the possessions that truly spark joy in you, with a secondary theme that you can--and probably should--eliminate nearly everything else in your life that doesn't spark joy.

An interesting conclusion that we can draw out from these complementary books and the philosophies behind them is the striking idea that you actually "don't want!" a surprisingly large percentage of your stuff. Maybe you once might have thought you wanted it... but you were wrong. We're often wrong about our wants and needs.

If you can acknowledge this, if you can accept it, not only will you have less stuff (probably a lot less stuff), but you'll also have far more happiness. And more money! Think about it: a meaningful percentage of the things you will buy in the future will be things you ultimately "don't want!" Avoid buying them. It's a great feeling to get rid of stuff, but it's better (not to mention more enriching) to not accumulate stuff at all. Marie Kondo and Jacob Lund Fisker ought to get together for a beer one of these days: their ideas are surprisingly in sync.

And the savings aren't limited just to money. Think of all the time you'll save if you don't have to shop for things you "don't want!", if you don't have to take them home, if you don't have to figure out a place to store them, don't have to dust them, organize them, maintain them, pay for extra square footage in your home to make room for them, and so on. And, obviously, you won't have to agonize over whether or not to discard something you never even bought. The "don't want!" heuristic enables you to avoid the entire exercise. Every time-consuming part of it.

So, lately, I've started using this way of thinking whenever I consider an item or a service that I might need or want: How can I "don't want!" this? How can I avoid acquiring an item, avoid spending money and time, and yet still solve this particular problem I'd like to solve?


Finally, a closing thought on re-reading books. Only a small fraction of books merit reading once--and a vanishingly small fraction of books merit reading more than once. I'm getting enormous value on my second reading of Jacob's book. It's helping me groove and maintain values and habits I prize deeply, values and habits that I want to make sure I keep in the years to come.

Which books merit re-reading for you? For me, they tend to be books that taught me new or particularly useful habits, or books that helped me shape a new way of thinking about the world. Books like Early Retirement Extreme, Your Money or Your Life and Nicholas Taleb's books The Black Swan and Antifragile all fit this category. William Irvine's excellent book on Stoicism, A Guide to the Good Life, fits. And so on.

What are books that you have (or will) re-read? Why? We can all benefit by hearing about "re-read worthy" books. Share your titles in the comments!

Readers! You can help support the work I do here at Casual Kitchen by visiting Amazon via any link on this site. Amazon pays a small commission to me based on whatever purchase you make on that visit, and it's at no extra cost to you. Thank you!

And, if you are interested at all in cryptocurrencies, yet another way you can help support my work here is to use this link to open up your own cryptocurrency account at Coinbase. I will receive a small affiliate commission with each opened account. Once again, thank you for your support!

Money Sundays: The Efficient Markets Hypothesis Explained in Simple Terms

Readers: I wrote this post years ago for a long-defunct website. I thought I’d republish it here at Casual Kitchen for those readers interested in investing and personal finance. Feel free to skip it!

What are efficient markets?

Perhaps you've heard the joke about the economist walking down the street with one of his students. The student sees a $20 bill lying on the sidewalk. As he bends down to pick it up, he hears his professor laugh mockingly at him and saying, "If that were REALLY a twenty dollar bill, somebody would have picked it up already!"

The intellectually intimidated student stops himself mid-bend, laughs timidly, and leaves the $20 lying right there, stealing longing glances at it as they pass it by.

Well, saying markets are perfectly efficient is just like being that condescending economics professor. He just left a perfectly good $20 bill untouched on the ground, AND he convinced his student to leave it there too. All because he believed it couldn't actually be there.

The whole notion of efficient markets has become so contentiously debated that three separate forms of the theory have evolved:

1) Strong Form Efficient Markets Hypothesis
Basically, this version of the theory says that stock prices reflect all information and there's no way you can possibly "beat the market" (or as the academics would phrase it: earn excess returns).

This version of the theory is easy to understand, elegant.. and it's pretty much been proven false by the collective weight of the evidence. But it's a good starting point to help illustrate the other versions of the theory.

2) Semi Strong Form Efficient Markets Hypothesis
This version of the theory says that stock prices react so quickly to new information (say, if a company gets a buyout offer, or if a company prints terrible quarterly results), that there's no way you can make money by trading on that information once it's out. Obviously "insiders" know about such information in advance (and are prohibited from trading on that knowledge by SEC rules), but normal investors like us who see the good or bad news will not be able to buy or sell the stock before the price adjusts.

There are problems with this version of the theory too, namely that stocks tend to overreact to news in the short term and under-react to news in the long term. Thus you can often make money by playing the other side of the trade: for example, by selling a stock after it spikes on a great quarter print, or buying a stock after it falls due to a disappointing news event.

3) Weak Form Efficient Markets Hypothesis
This version of the theory argues that you can't make money with any strategies using historical share prices or other financial information. This says basically that technical investing (using charts to make stock market buy and sell decisions), will never make you money. Furthermore, using historical financials will likewise not be useful, because that information will have already been baked into the current stock price. The theory still allows for investors to do what's called "fundamental analysis" to identify stocks that are undervalued and overvalued.

This is probably the most palatable version of the theory to most EMH adherents. Even so, there are instances where it falls on its face too. For example there are instances in recent history where company financials contained serious red flags that were notable and visible to anybody who could read financial statements. Enron comes to mind as one of the most prominent examples, as the company consistently and inexplicably ran years of negative cash flows despite showing years of accounting profits. This is one of the oldest red flags in the book.

I'll leave you with a few final thoughts, one from me and two from a couple of investors that are a bit more well-known and well-regarded.

First, it's always a bit disconcerting when a theory of markets experiences a schism--a three-way schism no less! It makes you wonder whether it, or any of the offshoots, can really stand on their own.

Second, Warren Buffet, an investor with a lot more credibility than I'll ever have, had this to say of professors who teach Efficient Market Theory: "Observing correctly that the market was frequently efficient, they went on to conclude incorrectly that it was always efficient."

And of course it was John Maynard Keynes, renowned 20th century economist and investor, famously said, "Markets can remain irrational a lot longer than you and I can stay solvent."

So the next time you're walking with a condescending economics professor who believes in Strong Form EMH and you see a $20 bill lying on the sidewalk, bend down and pick it up! As you're putting it into your wallet, say you prefer the Weak Form.

READ NEXT: Ten Book Recommendations (Actually, Eleven)
Readers! You can help support the work I do here at Casual Kitchen by visiting Amazon via any link on this site. Amazon pays a small commission to me based on whatever purchase you make on that visit, and it's at no extra cost to you. Thank you!

And, if you are interested at all in cryptocurrencies, yet another way you can help support my work here is to use this link to open up your own cryptocurrency account at Coinbase. I will receive a small affiliate commission with each opened account. Once again, thank you for your support!

Rousseau On Luxury: 10 Thoughts

"For luxury either comes of riches or makes them necessary; it corrupts at once rich and poor, the rich by possession and the poor by covetousness; it sells the country to softness and vanity, and takes away from the State all its citizens, to make them slaves one to another, and one and all to public opinion."
--Jean-Jacques Rousseau, from The Social Contract

If I had to distill some useful rules and courses of action from this famous quote from Rousseau, here’s what I’d come up with:

1) If you have money, do not flaunt it. Ever.

2) Do not status compete. You only make life that much harder for everyone else.

3) We live in a world of constructed preferences and Diderot Effects, which means having more money often makes you need still more money.

4) Luxury products also typically oblige you to learn copious amounts of phony, ersatz knowledge, wasting your time and cognitive bandwidth.

5) Thus if you don't have money now, but one day would actually like to have some, avoid luxury and all the costs that go with it.

6) To avoid "softness and vanity" don't spend money as a default solution to solve problems. Instead, learn how to solve the problem without spending money or buying a product.

7) Friends who care or make note of what you drive, how you live or "who" you wear are not your friends. We all know this intellectually, but...

8) Ignore the rich. And aggressively ignore "the rich" as an entity presented to us by BS vendors in the media.

9) Instead, learn how they got rich in order to learn possible courses of action that you might pursue to improve your family's financial situation.

10) Note also: "the rich" presented to us in the entertainment media are usually hilariously far from rich.

BONUS) Teach people to save and to invest. Do not encourage them to spend or signal.

Readers, what thoughts would you add here?

You can help support the work I do here at Casual Kitchen by visiting Amazon via any link on this site. Amazon pays a small commission to me based on whatever purchase you make on that visit, and it's at no extra cost to you. Thank you!

And, if you are interested at all in cryptocurrencies, yet another way you can help support my work here is to use this link to open up your own cryptocurrency account at Coinbase. I will receive a small affiliate commission with each opened account. Once again, thank you for your support!

How Cut Through The Bullsh*t

It's interesting (uh, well, to me at least) how writing a post on one topic often inspires a tangential post, then another tangential post, and then another... until you're totally orthogonal to the original topic. Two weeks ago I wrote a post on how we fool ourselves by reading and talking about things, then last week I pursued a tangent on how cooking is a beautifully action-based, low-BS domain.

Today is the orthogonal essay: it's a humble (and probably incompetent) effort on my part to structure my thoughts on BS in general, and how to cut through it. It's a bit of a mindwank, it has nothing to do with cooking, and worst of all it's probably too long. Feel free to skip it.

With that friendly warning out of the way, let's get into the BS.

Defining BS
First, let me spend a minute defining what BS is, at least by my thinking. It's when someone starts giving opinions that are:

1) Frequently without any serious knowledge of the subject, and
2) Typically unaccompanied by any concrete action, planning or goals.

Essentially, BS is talk ("tawk") with neither follow-through nor competence.

One other fascinating characteristic of BS: a person BS-ing never thinks he's BS-ing. That's how it works. If you realized you were outside your circle of competence and had no idea what you were talking about, you wouldn't offer an opinion! Or at the least you'd severely qualify that opinion beforehand.

Finally, the worst characteristic of BS: we all do it and we all like to think we don't.

Some examples of BS might be:

* I can't believe how greedy Big Food is. They make all these delicious, high fat foods just to make us all fat.
* Our government was so stupid to bail out the banks back in 2009.
* This summer Tom Brady and Bill Belichick are finally going to split up. I can feel it coming.
* The rich really ought to pay more in taxes.
* The stock market is overvalued and about to crash.

Two quick caveats: First, I'm not saying that these statements are true or false. I could have easily offered contra-statements to each of the above examples and they'd still be BS. Second, there is nothing necessarily wrong with making statements like these. At least from time to time.

But there is, however, something very wrong if this describes the vast majority of the statements someone makes. Why? Because they are all passive (even effete) statements, unaccompanied by personal action, personal growth, or personal accountability.

The single worst source of BS
Of course, the worst source of BS is media-packaged news, and TV news is the worst of the worst. A vast portion of the punditry opining on television, in editorials and in print and online media are spreading BS too, and this gets us into an important (and toxic) aspect of BS: typically, media pundits make highly confident statements with no accountability whatsoever if it turns out that they're wrong. This lack of accountability is important: it's why Nicholas Taleb angrily uses the phrase "BS vendors" to describe most punditry. It's deeply unfair and unethical if you attempt to persuade people around you to hold an opinion, but you yourself have no downside exposure if that opinion is wrong.

Worse still, the media (and its confidently-stated opinions) tends to be the source of most of the topics we talk about. Let's face it, most people need to be given things to think. Sadly, salient, attention-garnering topics like like crime, violence, inflation, unemployment, inequality, obesity, the latest in studies show science, politics, etc., is what the media gives us to think about. And talk about. This is true only to the extent we consume media and news of course.

A simple solution to BS
Now, let's move on to solutions. Let's say someone around you starts regurgitating opinions on some topic du jour. And you, well, you don't enjoy BS-ing. You don't enjoy trading effete opinions about the world or getting into debates over things that are entirely outside your circle of control. You're much more interested in learning something useful about how the other person thinks, or learning something useful about how to navigate reality. How best to cut through the BS?

Here's what to do: use open-ended questions to ask what specific actions others are taking. What specifically are they doing to prepare for the outcomes they consider likely, for the outcomes that will happen if their opinions are correct?

For a concrete example, let's say you're talking to someone opining confidently that the stock market is massively overvalued and about to crash. Useful open-ended questions to ask might be phrased in these ways:

* Tell me, what are you personally doing about this?
* Would you share with me what you are specifically doing in your personal situation to prepare for what you think is going to happen?
* If you think X is a major problem, what actions are your taking, then, to protect yourself and your family?

Suddenly, the conversation stops being about hand-wringing and pontificating and starts being about how to function more effectively in a world where we hold a given set of opinions. It becomes about how to better navigate reality. It becomes useful, actionable and solution-minded, and no longer just "tawk."

Then again, if the person doesn't have a ready answer to any of these questions, if they mumble, if they come up empty-handed and can't immediately offer any concrete actions they've taken... then they are BS-ing. Both themselves and you. It's time to smile, agree and deflect.

In my former investing career, we used a slightly more jargon-based phrasing of the same question: "Okay, so you think X [the stock market's going to crash/hyperinflation is coming/rates are going higher, etc]. How are you positioned?"

The opining person then has an opportunity to describe what specific actions they've taken: in this case it would likely be a list of the various investment actions they've taken to manage any exposure to their opinion set.

This is a gloriously BS-vaporizing question. It tells you instantly if the person is BS-ing your or not. If someone thought hyperinflation was coming and wanted to say so credibly, they'd be able to articulate specific investment actions they've taken to prepare. Instantly.

Thus if the answer is something like "I hold 25% of my assets in gold, the only stocks I have left are either of companies with very strong pricing power or of companies that have direct commodity exposure, I'm experimenting with some small investments in cryptocurrencies, and I recently bought some arable land in Upstate New York just in case" I can be fairly confident that this person is not BS-ing me. Why? Because it's not just "tawk"! He has taken meaningful financial actions to protect himself from the specific risks he's concerned about.

He might be right or he might be wrong, but at least he isn't BS-ing you.

This is totally, totally different from a pundit BS-ing on TV. Media pundits rarely disclose how they are positioned--and they are likely not positioned in any way at all. Thus they get the benefits of media attention today with zero downside and zero accountability if wrong about their opinions.[1] They get all the upside, while you--the consumer innocently seeking advice and counsel from "experts" in the financial media--suffer all the downside.[2]

We're all BS vendors now
If you think about it, the same thing happen in person-to-person BS as happens with media pundit BS-ing: Opining with no downside. Which is why the question "what specific actions have you taken?" is so clarifying and so anti-BS. It takes the conversation into specific solutions so you can see whether the person opining has any skin in the game, and whether their opinion merits being listened to.

One quick caveat: we probably ought to exclude high BS/low personal action domains like sports from this discussion. If someone spouts the opinion "I think Tom Brady and Bill Belichick are finally going to split up this summer." and you ask "what specific actions are you taking to prepare for this?" you'll get a blank stare. At best.

BS heuristics
I'll close this post off with a few more heuristics on high-BS domains:

1) Any domain where there exists jargon easily adopted and regurgitated by everyone (e.g., bump stocks, quantitative easing, tariffs, etc.) is likely a very high-BS domain. The jargon--and our easy use of it--tends to give us a dangerous illusion of knowledge.

2) Some domains are by definition non-action based and therefore high-BS: politics and economics are worst offenders here. See also professional sports. Again, it's totally fine to talk about these or any other BS-heavy topics! Just know it for what it is.

3) Anything heavily covered in the news or media is likely high-BS. Generally these subjects are laughably oversimplified, offer enormous illusion-of-competence risks, and typically the debate is already pre-framed for us, if not outright propagandized. This is a feature, not a bug, of media coverage.

And, to make this post a little more action-based, let me offer two heuristics we can use to detect and limit our own BS:

1) Try to not forget, ever, that we know very much less than we think we know.

2) It pays to drastically limit our strongly-held opinions. At the very least to limit them only to domains that we have actually performed at an advanced level.

These last two heuristics have a lot to do with the deliciously ironic Dunning-Kruger Effect, which essentially says that people vastly overestimate their competence when they are incompetent in a given domain. And once they actually start to get good at that domain, only then do they begin to realize how incompetent they are (and were). This is psychology's embodiment of Bertrand Russell's fabulous quote "The trouble with the world is that the stupid are cocksure and the intelligent are full of doubt."

Which takes us to our final conclusion. In those (likely very, very few) domains where you have truly deep expertise, you will have tremendous humility about your opinions, and if you have a strong opinion it is a reliable indicator that in that domain you are BS-ing and do not know it.

READ NEXT: Using Your Sophistication and Great Taste Against You

[1] It's a useful exercise for practicing epistemic humility (and also like shooting fish in a barrel) to come up with examples of pundit wrongness. Here are three from the finance and investing media that stick in my mind:
a) "Legendary" investor Bill Miller repeatedly recommended bank stocks on CNBC mere months before the 2008 bank crisis;
b) After allegedly "predicting" the 2008-2009 crash, economic pundit Nouriel "Dr. Doom" Roubini continues, broken record-like, to predict doom and gloom for years afterward, keeping many investors out of one of history's best-performing stock markets.
c) The mother of all stock market "heads I win, tails you lose" BS artists might be Elaine Garzarelli, who after blindly lucking into predicting the 1987 crash became a nearly perfect contrary indicator thanks to the utter wrongness of all her market calls thereafter.

[2] Worse still, articles and interviews about crashes and bubbles get extra coverage, so of course the media brings those to us relentlessly. Think back over the past nine (nine!) years since the 2009 stock market bottom. Have you seen more negative or bearish stories than positive stories in the financial media? How many articles attempted to scare you out of stocks all the way up during this incredible, life-altering bull market? Astute readers might be able to deduce a heuristic here to help them improve their financial decision-making in the future.

[3] If you made it this far down the page, congratulations. :)

Readers! You can help support the work I do here at Casual Kitchen by visiting Amazon via any link on this site. Amazon pays a small commission to me based on whatever purchase you make on that visit, and it's at no extra cost to you. Thank you!

And, if you are interested at all in cryptocurrencies, yet another way you can help support my work here is to use this link to open up your own cryptocurrency account at Coinbase. I will receive a small affiliate commission with each opened account. Once again, thank you for your support!

There’s No BS in Cooking

A few follow-up thoughts on last week's post on the difference between doing things and talking about doing things.

Cooking gives us a striking illustration of this difference. You can talk about cooking, you can read about it, you can watch shows about it. But it's painfully obvious to everyone that none of these things is cooking. You can't demonstrate you "know" cooking without actually performing the action of cooking.

Better still, in cooking there is a far lower risk of fooling ourselves with a "psychological sense of completion" compared to other domains. And it's interesting to think about why: it boils down to ego injury. If we make a practice of ingredient bragging, or worse, blather in conversation about advanced cooking techniques yet we can't actually cook, it would be a tremendous ego injury if we get found out. It would be transparently pathetic. Therefore, because the risk of embarrassment is too great, our egos don't (and won't) risk pretending to have expertise we don't have.

All of this makes cooking a wonderfully BS-free domain.

In stark contrast, other fields are buried in BS. Have you ever heard an out-of-shape person talking pseudo-knowledgeably about fitness regimens or diets? Another example: in my former professional field of investing, it's hilariously common to hear people blather on about the stock market or the economy with zero knowledge whatsoever behind their talk. (We're clearly in a stock market bubble right now, and I'm deeply concerned about hyperinflation and ultra-high interest rates once the Treasury stops QE.)

Of course the worst of all examples is the domain of politics. We're all experts here. We all feel justified in having strongly held political opinions, even though 99.9% of us have never held any actual political responsibility and half of the electorate doesn't even vote.

Cooking is refreshingly different, and I wonder if one of the reasons I like it so much as a subject (and why I find so many metaphors and so much to talk about in it) is because it's an action-based, non-bullshit domain. If you can cook something you can cook it. You don't talk to demonstrate your competence in cooking, you don't regurgitate factoids and jargon in conversation to demonstrate your competence in cooking, you cook to demonstrate your competence in cooking. There's no way to hide behind "tawk" like there is in all these other domains.

Have you ever heard anyone sling cooking jargon without knowing anything in the same way people constantly sling investing (or economic, or political) jargon without knowing anything? (Yesterday I was chiffonading some local organic collard greens, and I thought, gosh, if I brunoise-diced them instead, they would go great in a sugo that I could simmer in my Chinese ding.)

That is a sentence I'm fairly confident I will never hear spoken. And certainly not by someone who has no idea how to cook.

Sure, okay, there's ingredient bragging and virtue-signaling in cooking. Nothing's ever perfect. And yes, sure, people do watch cooking shows and don't actually cook. But nobody's ego confuses this with actual cooking. You show you can cook by cooking, by preparing food and serving it to friends and family and having them enjoy it. It's refreshing.

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Readers! You can help support the work I do here at Casual Kitchen by visiting Amazon via any link on this site. Amazon pays a small commission to me based on whatever purchase you make on that visit, and it's at no extra cost to you. Thank you!

And, if you are interested at all in cryptocurrencies, yet another way you can help support my work here is to use this link to open up your own cryptocurrency account at Coinbase. I will receive a small affiliate commission with each opened account. Once again, thank you for your support!