Bad Immigration Policy

I am not sure how I stand on the immigration reform currently being debated.

I lean, however, toward letting more people come into the country legally. There are a variety of reasons for this, but mostly I want to give as many people as possible the opportunity that this country offers.

Another really important reason for a more open immigration policy can be seen in my world of MBA education. At Tuck, we now have foreign students hired by US-based employers who did not receive an H1-B visa this year. That means they will have to use their optional practical training (OPT) visa, which gives them one year. They will have to re-apply next year for the H1-B, and they will have to be out of the country for a couple months in between the time the OPT expires and an H1-B is granted (assuming it is granted). Is it any wonder that US-based employers don't want to hire non-US graduates of the Tuck School?

Meanwhile the UK gives something like 5 years of work authorization for any MBAs from top programs (as determined by the UK government). No problem.

My worry is that companies, especially the very top employers such as investment banks, private equity funds, and consultancies, will migrate to a country like the UK so they have the pick of the world's best talent. The US will suffer as top companies leave. Is this one of the reasons why the City of London is increasingly the world's financial center?

Our First Hobie Pitchpoling Experience!

It is Memorial Day 2007, and there was a good 15mph west wind, so my two boys and I went out to the lake to sail our Hobie 16 -- here is a picture of it.

We got this boat this winter, just rigged it for the first time on Saturday, and took two brief sails on the weekend. Not a lot of wind on those first trips out. Today was different, the wind was really blowing. We got out and were having a great time, with the boys taking turns going out on the trapeze.

I was just thinking I should take my hat off before losing it when the wind really started howling. Nice whitecaps were picking up, which on an inland lake means a pretty good blow. Then followed a series of errors. I saw the leeward hull starting to go underwater, and I figured that meant trouble. I told my older son to go forward, when I should have said move aft! He was also holding the mainsheet, and kept it nicely sheeted in. My youngest son was out on the wire, controlling the jib, and he had it sheeted in so it was giving us a lot of power. I think I might have turned downwind a little as well, accidentally.

Anyway, that leeward hull dug in deeper at the same time the wind picked up even more. All of a sudden, we were in a slowmotion pitchpole! The back of the boat came up, the hulls dug in, and over we went! My youngest son went for a ride up by the forestay, as he was still on the trapeze wire. I came down on my middle son's leg, and somehow I got my own leg twisted up in the jib sheet. That gave a little excitement as I lay in the water with my leg caught up in some ropes above my head. I have a nice rope burn on my shin and lost a good bit of hair. Anyway, I looked around and saw that we were all OK, although somewhat shocked.

So there we were in the middle of the lake, with the Hobie on its side and the three of us in the water. I had read about righting a Hobie, and we had a righting line (thanks to the seller of the boat for that one!) but of course reading how to right a boat is not the same as actually doing it...especially when you have just had the shi#&* scared out of you. But we all hung on the righting line and waited, and sure enough, the boat flopped back over. We jumped up, and I yelled, "Sheet in and feel the magic!" Away we went...with a little more caution.

The nice thing is, we won't be afraid of pitchpoling again, and we know how to right the Hobie. It was actually pretty fun, definitely character building. As someone once said, "It isn't a sport if it can't kill you."

Sustainability Coordinator Wanted/ Takeover Needed

Our local grocery store in Hanover is the Hanover Consumer Cooperative. It is a great store, with good selection of fresh fish, an in-store butchery department, and nice organic produce. They even had Copper River sockeye salmon this week, at $15 per pound. The only problem is that they sometimes venture a little too far into the liberal realm, like now.

The Coop is now advertising for a person to serve as Sustainability Coordinator. You have to be kidding. A GROCERY STORE, which should be operating on the thinnest of margins, wants someone to work on, among other things, "coordination with other organizations on collaborative sustainability programs."

This will probably cost the organization something like $60,000 per year, inclusive of benefits.

It is fun to dream about taking over the Coop and putting a for-profit enterprise in its place. The local market would still demand great food, and I bet we could get it at lower prices than the Çoop provides. Now there is an idea most people would not think possible: That a for-profit enterprise, with its "need" for "unnecessary" profit, could actually provide a service at lower cost than a not-for-profit.

Monty Hall Revisited

My middle school son came to me with this twist on the famous Monty Hall/Let's Make a Deal probability problem. I am looking for the answer to the problem, and want the clearest most succinct explanation.

The original Monty Hall problem goes like this: There are three doors, and behind one is a prize. A contestant picks a door, but does not get to look behind it yet. Monty Hall, the master of ceremony (who knows which door holds the prize), opens one door, showing that there is nothing behind it. He then gives the contestant the chance to switch doors: The question is, should one switch?

(There are game theoretic aspects to this problem that are often ignored. Let's assume that Monty Hall ALWAYS opens an empty door and gives the contestant the chance to switch, no matter if the contestant currently has the right door or not.)

The answer is that one should switch doors. Not the most intuitive probability exercise for many people, but correct, given our parenthetic note above.

Now here is the twist. An exam in school will be either Monday , Tuesday or Wednesday, and the teacher has not said which. A student is assessing the odds of what day the test will be in order to study the night before. The day picked by the student is Wednesday, and she has arranged her schedule to study Tuesday night. Monday comes, and the teacher announces that the test will not be that day. So...should our student switch her pick, just like the contestant in Let's Make a Deal?

Thankfully, Jimmy Carter is no longer President

As reported on Breitbart, Jimmy Carter had this to say about outgoing Prime Minister Blair:

"Former US president Jimmy Carter on Saturday attacked outgoing Prime Minister Tony Blair for his "blind" support of the Iraq war, describing it as a "major tragedy for the world". In an interview with BBC radio, Carter was asked how he would describe Blair's attitude to US President George W. Bush. He replied: "Abominable. Loyal, blind, apparently subservient. "I think that the almost undeviating support by Great Britain for the ill-advised policies of President Bush in Iraq have been a major tragedy for the world."

I gave up on Jimmy Carter a long time ago. A very smart man, but not enough appreciation for what Libertarians believe in -- the amazing power of free individuals to organize a decentralized but efficient society. I started really turning against Carter after he sat next to Michael Moore at the Democratric National Convention in Boston. And now comes this latest broadside. Has the man no decency? Does he really think that Tony Blair is subservient to Bush? I can't believe that liberals are willing to give Bush such a complement -- that he somehow manages to get a person of Blair's intelligence and demeanor to be subservient. Hmmm....is there an alternate theory out there that would explain Blair's behavior? Such as, he is doing what he believes to be right and best for his country?

The Libertarian View

I was listening to a great radio show on Bloomberg radio on my way out to my camp tonight. They had a CATO Institute fellow on, I think it was Brink Lindsey, and he was talking about what it means to be a Libertarian. He said how Libertarians are not comfortable with either the Republican or Democrat labels, but that they would tend to side with Republicans on economic issues and with Democrats on social and privacy issues. I agree. He also had a line about the Libertarian’s trust in the power of decentralized actions taken by free individuals. I agree there too. I had more trouble agreeing with his position on foreign policy. I suppose that the Libertarian tendency would be non-interventionist, simply on the basis of distrust of centralized government. But a Libertarian will certainly support my right to defend myself. The question comes down to where the line is that separates defense versus activist intervention.

The Berkshire Hathaway Phenomenon

This post will cause me some trouble, I am sure.

Now don’t jump to conclusions, I generally agree with much of what Warren Buffett says, and specifically, I think that much of his investment advice is good. But I am a little worried that over 20,000 people are willing to shell out good money, and burn fuel, to travel to Omaha to watch Warren and his partner chat on stage for several hours. I also worry a bit about the message that many people seem to hear, even if it is not what Buffett would profess: that stock picking is good, and the lessons of modern investment theory, especially those concerning the value of diversification and indexing, are wrong.

The observations I would put to you are the following. On the one hand, my friends and colleagues who are of a liberal mind (small “l,” not liberal in the political sense but in the “liberal arts” sense) have no problem in seeing only the role of chance, random mutations, and natural selection when they observe the glory of some biological wonder like the human eye. No reason to bring in any role for divine intervention here; chance-based evolution takes care of it all. (Please, bear with me, I do like the theory of evolution!) But these same people, when they observe the glory of Warren Buffett’s investment returns, with the Berkshire Hathaway stock portfolio beating the S&P 500 20 out of 24 years, and an abnormal annual return of 8.6%, have no hesitation in pointing out….well, the equivalent of divine intervention!

We have this thing in auction theory called the winnner’s curse, which means that the winner of an auction needs to think carefully about what it means to be the winner: if there is uncertainty over the value of the item to bidders, then there is a very strong tendency for the person who makes the biggest error in value estimation to be the one who bids the most and wins the auction. Ex ante, all bidders’ estimates are unbiased, but ex post, the WINNER’S estimate is known to be a biased high estimate of the true value. And the more bidders, the more biased is the winner’s estimate. With 2 bidders, the highest value estimate is not too bad an estimate of true value; with 2000 bidders, the highest value estimate will be biased by several standard deviations.

A very similar phenomenon occurs with investment results. Start with 10,000 investors, and let them randomly choose stock portfolios over 24 years – no talent, just random stock picks. After 30 years, what do you think the winner of this contest will look like? I promise you, there is a very good chance that the winner of that contest will have beaten the average return in 20 out of 24 years, and have an abnormal return of at least 8.6% per year. Should we crown that investor queen, and travel thousands of miles to worship at her feet? Or should we say, “Hey, your ideas are great; I will take them into consideration. But what I would really like to borrow is some of your luck.”