The Swamidass Sez

Monday, February 20, 2006

Money or Time

There is a saying, "Put your money where your mouth is." That is to say, prove you mean your cheap words by sacrificing a valuable resource. In thinking about how this applies to charity or "good works," it sometimes seems easy to give $20 here or there to a cause that I support. Certainly giving money is critical - people and organizations need money to meet practical needs, but I would add, "Put your time where your money is." For instance, if I saw someone alone and hungry on the street, which is easier to do - hand them $20 or spend 2 hours talking with them and getting them some food? Both are good and require sacrifice, but for most people that I know, 2 hours would be a much taller order.

Time is the most valuable resource anyone has. Bill Gates and the homeless beggar on the street both have exactly the same number of hours in a day. No amount of money can buy more time. In fact, the more money people have, the more they value their time. So it seems that time spent is the truest indicator that someone means what they say.

Wednesday, February 15, 2006

Risky or Foolish?

I've always thought of myself as being fairly conservative when it comes to taking risks. I don't trade options, play roulette, scuba dive, or other high-risk activities. But thinking back on my life, it seems that I have actually engaged in several activities which are considered fairly dangerous, risking my life, limb, or money:
- Day traded the Stock Market
- Invested in and Started small businesses
- Bought almost fully-leveraged real estate
- Played Poker (low-stakes)
- Piloted small single-engine aircraft
- Skied Black Diamonds

I have won some and lost some (money, not life or limb), but while it seems that I have a higher tolerance for risk than average, "Fools rush in" does not describe my approach. As I gain more knowledge or skill in any of the activities listed above, the risk I take decreases proportionately.

How is risk calulculated? Risk combines the probability of a negative event occurring with how harmful that event would be. (Risk / Reward is a different analysis)


Consider driving. Historically in the US, each year there are 20-30 fatalities per 100,000 drivers.
1) The probability being killed in a car accident is about 0.025%.
2) On a scale of 1 to 100 (100 being the highest), the "Consequence #" would be 100 (Death).
3) 0.025% * 100 gives a Risk of 2.5.

If I decide that my risk tolerance is 20, then driving is an acceptable risk.

So when I look at the risks of playing poker, it goes like this:
1) Assume I am new to the game, and I believe that I'll lose everything 80% of the time.
2) I buy into a $100 table, which I'll assign a 40 out of 100 Consequence #.
3) Therefore, 80% * 40 = Risk 32

32 is above my risk tolerance of 20, so this activity would be too risky. However, there are options for reducing my risk:

1) By increasing knowledge I could improve my chances to losing only 20% of the time.
2) By decreasing my potential loss to $5, the Consequence # would be about 10.
3) 20% * 10 = Risk 2

A person playing poker in this second scenario assumes about the same risk as someone driving down the street.

How many activities in life are 100% guaranteed to succeed? Ecclesiastes 11 says:

4 Whoever watches the wind will not plant;
whoever looks at the clouds will not reap.
5 As you do not know the path of the wind,
or how the body is formed in a mother's womb,
so you cannot understand the work of God,
the Maker of all things.
6 Sow your seed in the morning,
and at evening let not your hands be idle,
for you do not know which will succeed,
whether this or that,
or whether both will do equally well.

Outcomes of endeavors in this life are not certain. Since things that appear safe sometimes fail and risky ventures sometimes pan out, taking a variety of calculated risks with the right level of potential loss and knowledge seems to be the wisest path.

Saturday, February 11, 2006

Now I know the rest of the story

In the frontier days of American history, stagecoaches were used to transport valuables and well-to-do people. These types of cargo were hot targets for the robbers and other nefarious people who roamed the lawless parts of this country. So to protect the stagecoach and its contents, a shotgun toting guard would sit next to the driver. These days, not many automobile passengers carry big guns, but nearly 100 years after the stagecoach, people still cry "shotgun" when they want to sit in the seat next to the driver.

Friday, February 10, 2006

Everyone's doing it

In reading various articles about the movie "Brokeback Mountain" I started to get the feeling that everyone had seen this movie. Adjectives such as "phenomenon," "blockbuster," and "critically acclaimed" fill many of the the articles. One article stated, "The 'Brokeback Mountain' phenomenon has become as unavoidable as a military recruiter at a continuation school."

This prompted me to check out the facts. The Box Office Figures show that 'Brokeback' has earned about $60 million to date. The production costs were probably low, so the project is probably in the black, but by normal standards this would be considered a modest success at best and a failure at worst. In contrast, "Finding Nemo," "Passion of the Christ," and each of the Lord of the Rings movies all grossed over $300 million.

Of course, box office results are not the only indicator of a good movie, but at the very least, it shows that the number of people who have seen "Brokeback Mountain" is relatively small compared to other blockbusters. 'Brokeback' may win many Academy Awards, but the hype is a tad overblown. I wonder if it has anything to do with the content of the movie...

Monday, February 06, 2006

Goo-Goo Gah-Gah

In the past few months I was told how parents start talking 'baby talk' after the birth of a child. I would start talking goo-goo gah-gah, baby waby. Just wait, I was told. It'll happen to me too.

Well, I had a premonition that this was false. I saw that the same people that gave me these predictions actually talked that way to little babies, but I never felt any inclination to do so.

So now that my daughter is home, I wondered if the predictions would be true. Well, so far, I can say they are not. I speak to Rachel in normal English, just like I would with anyone else. For now, its a myth busted.

Sunday, February 05, 2006

God and Doctors

This week I realized a couple things:
1. God has made the human body even more amazing than I thought before.
2. Doctors (Surgeons) work under incredible pressure and should be paid very, very well.

Afer seeing my wife split open on the operating table, it was hard to believe she would live to tell about it. She recovered faster than I did. That the body can undergo such trauma and survive, is witness to the great design of the human body.

At the same time, watching the doctors do their work gave me a much deeper appreciation for the skills they have. A Caesarian Section is a relatively common procedure - I can only imagine the complexity of brain, heart or transplant surgeries. A talented doctor is worth every penny they earn.