Elements of a Great Story

Everyone loves a great story, but did you know that there's a simple forumla for telling a great story? It's true! The elements of a timeless, successful story are:

1. The story should begin "Once upon a time…"
2. The story should involve a bear or bears
3. The story should end "…lived happily ever after"

The first and third elements are familiar to everyone. The second is perhaps less obvious, but makes sense when you think about it. Great stories are about bears! Goldilocks leaps to mind, and … and … gosh, wasn't Goldilocks a great story?

The shortest great story is therefore simply:

Once upon a time, there was a bear, who lived happily ever after.

Brilliant, isn't it?

The three elements are easily adapted to any storytelling setting. Here's an example of applying the elements to your story about why you were late for work.

Original version:

I was late because there was a terrible traffic accident. Someone probably died.

That is grim and not at all pleasing. No one wants to tell or hear a story like that! Now here's the same story with the Three Elements applied:

Once upon a time, I was driving to work this morning. I was late because there was a terrible traffic accident. Someone probably died, but I lived happily ever after.

P.S., there was a bear.

Much better! This conveys the same information but with a playful, easy-going tone that makes everyone a little happier. That's the kind of story that people love to tell and hear.

Gold Clauses

George Reisman on how to protect the economy from runaway inflation:

There is something that could be done. There is a financial life raft, as it were, that could be made available to everyone, that would enable people to salvage at least some significant portion of the real value of their savings and contracts denominated in fixed sums of dollars. It is something much more urgently needed, aimed at a much more realistic danger, and much more feasible than efforts to control global warming, say.

What is it? It is the enactment of a creditors protection bill, whose essential provisions would be the insertion into all outstanding contracts of a limited, contingent gold clause, and the removal of all legal obstacles to the inclusion of such clauses in all future contracts.

He even reminds us of the historical precedent:

The insertion of a gold clause into existing contracts should by no means be regarded as any kind of new and additional government interference with the freedom of contract. To the contrary, it would be a major step in undoing such interference. Prior to their abrogation by the New Deal in 1933, full, 100 percent gold clauses were the norm in the United States in long-term term debt contracts, and had been since the Civil War. They are something that comes about on the foundation of the rational self-interest of individuals when it is allowed to operate free of government interference.

It's always a treat to read Reisman. I only wish he blogged more often.

It's Worse Elsewhere

If the recent stock market slumps, domestically and abroad, have got you feeling blue… just remind yourself that It Could Be Worse!

Venezuela is launching a new currency with the new year, lopping off three zeros from denominations in a bid to simplify finances and boost confidence in a money that has been losing value due to high inflation.

…

Some Venezuelan critics, meanwhile, have dubbed the new currency the "weak bolivar," noting its predecessor, the bolivar, has seen its purchasing power suffer in an economy where inflation ran roughly 20 percent in 2007 — the highest in Latin America. [source]

Tremendous mineral wealth — tremendously mismanaged.

The central bank of the southern African country has a issued a 10million Zimbabwe dollar note. The move increases the denomination of the nation's highest bank note more than tenfold.

…

Zimbabwe faces the world's highest official inflation of an estimated 25,000 per cent. Independent financial institutions say real inflation is closer to 150,000 per cent. [source]

From the breadbasket of Africa — to a country reliant on humanitarian aid.

Beware ye the socialists for they will destroy your economy!

Silly Stimulus

Now that the popping of the housing bubble is beginning to be felt in the broader economy (thanks to last summer's seizing up of credit markets), politicians are falling over themselves to be the loudest proponent of a fiscal stimulus plan.

Right now, President Bush is said to want an income tax rebate that would be generated by eliminating the 10 percent tax bracket, which applies to roughly the first $8,000 of income for single filers and the first $16,000 of income for married couples filing jointly.

That would mean taxpayers could get rebates of up to $800 if single, or $1,600 if married.

But neither President Bush in his statement nor Paulson in a briefing afterwards would confirm that amount. "I don't want to play bigger than a bread box," Paulson told reporters. "The president is focused on broad-based tax relief for those paying taxes." [source]

I want to be absolutely clear that I am completely in favor of this stimulus plan — I want my $800 back. (And if I were emperor, I would get rid of more than just the 10% tax bracket!) At the same time, I know that this stimulus plan won't achieve its stated purpose. This is one of those cases where bad economics makes people support a good thing for the wrong reasons.

The economics of this issue are very confused in the popular media. The great worry of various pundits is that people might not spend their whole tax rebate, and if they don't spend it it won't help the economy. This reasoning is totally backwards. Government spending is pure consumption. If the goal of the stimulus is to see those funds applied to consumption instead of savings, the government should keep the money!

Of course, it's not about consumption in the aggregate. (It never should be. Aggregation is the source of many economic confusions.) Government spends money on different things than individuals do, so the rebates will have a genuine economic effect. They will boost the revenues of companies that sell consumer's goods at the (relative) expense of other companies. Whatever part of the rebates is invested instead of consumed — and it will be a lot — will contribute to future production, which is good for the economy. (Yes, sadly, some of that will prop up malinvested businesses and allow them to avoid liquidation a little while longer. However I do not worry that businesses will mistake this one-time stimulus for a genuine reduction in the rate of originary interest; i.e. it won't reinflate a bubble.)

I'm completely in favor of diverting funds from wasteful government consumption to beneficial individual consumption and especially to productive investment. I specifically believe that individuals using their rebate to pay down debt is a good thing, too.

The economic benefit is that it increases the weight of individuals' spending preferences relative to government's spending preferences. The economic benefit is not that it increases consumption spending.

And it's not going to be enough to avert a recession.

When I Loose my Mind

… dumb things fall out.

I know that English is a difficult language, even for native users, but there are a few common errors that grate on me every single time I see them. The worst is the confusion between "lose" and "loose". Teams lose, knots are loose. The team that lost is the loser, the looser knot will come apart sooner. And, losers tie looser knots. Okay?

English isn't a tonal language — except for the word "dude" (which can mean practically anything depending on how it's uttered) — but that's no excuse for being tone deaf. These are all different and shouldn't be confused:

• assurance: a guarantee about things
• ensurance: making things happen
• insurance: protection from things
• ohsurance: apathetic agreement
• yousurance: gentle incredulousness

I also get affected by the effects of confusing "affect" and "effect". But apostrophes are worse!

Granted, there are many rules for correct apostrophe use but my favored advice is simply that apostrophes make things possessive, but never plural. Some questions are silly, but one question's silliness is greater than all the other questions' silliness. Is everyone clear on the difference between "1960s", "1960's", and "1960s'"? Sheesh! And try to keep in mind that some words are inherently possessive, so don't get an apostrophe. The book is yours, not "your's".

That is all for now.

Stock Pain

U.S. financial markets opened today to the news that Citigroup lost a bunch of money in Q4'07. A few highlights:

• Loss of $9.8 billion ($1.99/share)
• $18.1 billion portfolio write-down
• $4 billion reserve against consumer credit defaults
• $12.5 billion raised from equity (dilutive to existing shareholders)
• Dividend cut by 41%
• 4,200 job cuts
• Stock down 7.3% during the session, and another 1.2% after hours

Intel also published earnings for Q4'07 today. Giant pile of money:

• Profit of $2.3 billion ($0.38/share)
• Record quarterly revenue of $10.7 billion
• Gross margin 58.1%

So what does our stock do? … it fell 1.7% during the session, and after our earnings announcement it fell 14% after hours.

Awesome. My stock options have lost 96% of their value in the past two weeks.

Interesting how Citigroup's nigh-apocalyptic earnings report is met with a big decline, yet Intel's hugely profitable earnings report nets a decline twice as large. Investors are fickle. :)

I'm enormously happy about the horrible year the stock market has been having so far (e.g. Dow down ~6% YTD) because I fund all my tax-advantaged accounts during the first quarter. I'll be buying more cheaply.

But now I wish I hadn't also invested a bunch in mid-December! At least I invested safely… only one very small position of what I bought (~$500) has underperformed the Dow since then.

For comparison, gold is up ~6.5% YTD, and silver is up ~8%.

2007 Personal Year in Review

It's time for a little personal reflection. I know I'm usually an issues blogger but you can excuse a post or two about my life, right?

Professional

I had another great year at work. Last year, the processor I've been working on for so long was finally built and our debug tools are accomplishing their mission. Back in 2003/2004 the technical challenges involved in this project loomed large and no one was sure whether it was possible to do what we've done. Now, years of innovation and problem-solving later, we have proof in the lab.

We don't stop often enough or long enough to contratulate ourselves on what we've achieved. We're so busy improving things for the current project and looking forward to the next projects that it's easy to lose perspective. But the view from here is awfully nice!

We've done a great job and I'm proud of the work I've done and the team I've done it with. I know a lot of my co-workers read my blog, so I want to say: Thank you. We have done a great thing.

Financial

I stopped posting net worth updates about halfway through the year. I didn't want to spend the time writing those posts when I thought not many people cared about them in the first place. Additionally, I think they tilted my blog too far away from its roots. (I did keep posting on Networth IQ, though.) I'll continue to do personal finance articles from time to time but I don't want that to be the blog's theme.

That said, 2007 was a very rich year for me, clearly the best ever — I was up about $150,000. (2006 also looked good, but artificially, because I wasn't valuing my house at its market value at the beginning of the year.) I've certainly felt the gyrations of the housing market this year, with my home's estimated value up $21,000 at peak only to finish down $5,000.

Personal

In 2007, two close friends and co-workers had significant family events: A marriage, and a birth. These things finally overcame my inertia about the single life and I started dating. The curious can read my personal ad. (Those with too much time on their hands can contrast it with Micha Ghertner's.) I'm actually active on three online dating sites (eHarmony, Match.com, and Yahoo! Personals) but I think eHarmony's system is awful and the population is very small on Yahoo.

• Women who I contacted: between 50 and 100
• Women who contacted me: 2
• Women I had e-mail conversations with: about 11
• Women I met: 6
• Women I met more than once: 3
• Number of times my heart was broken: 5 (yes, really)
• Approximate total cost: $1,500 (yes, really)
• Favorite day: shopping with Jacque at Clackamas Town Center
• Favorite moment: sitting with Celiene in Pioneer Place
• Current status: single

I don't want to dwell on failure here by recounting the details. But I can't resist offering one piece of salacious advice: Do not kiss a Thai woman on the second date.

The most puzzling and remarkable thing I learned is that foreign-born asian women are dramatically more likely to be interested in me than any other demographic group. Of the women I met, 4 out of 6 fit that profile.

Home

I had a roommate for one month this year. It was actually the first time I've had a roommate since my first semester of college. My cousin moved to Portland and her living arrangements fell apart as soon as she got here… so she stayed with me until getting that mess straightened out. Despite being accustomed to living alone, I do miss having someone else around the house!

And speaking of the house… I've been very relaxed about completing my decorating project, so we're still not finished. But we're close enough that I can share these shocking before-and-after pictures of my living room and downstairs bathroom.

My tiny downstairs bathroom

My living room

The improvement is stunning! Sadly, the entire upper floor of my house still looks like the "before" pictures…