Listening to Mandarin (2008-01-05/04-20)

Today I am intrigued by juxtaposition of contrasts in spoken (and written) Chinese:

• to ask, "Is it?" say shì bú shì (是不是), putting "is" next to "isn't";
• to refer to "thing," say dōng xi (东西), putting "east" next to "west";
• to ask, "How many?" say duō shao (多少), putting "many" next to "few"; and
  
• to refer to "size", say dà xiǎo(大小), putting "big" next to "small."

Though not in this blog's goal list, "Chat in Mandarin" is my 2008 non-work mental challenge. I listen daily on my 30 GB iPod to Instant Immersion Mandarin Chinese or Pimsleur Chinese (Mandarin) I, usually while doing 30 minutes of moderate activity. I chose Mandarin because Asia would be new to me and because there are perhaps 1.05 billion speakers. It's the language with the most native speakers (followed by Spanish and English, which I already speak)--an order of magnitude more speakers than other Chinese languages like Cantonese.

I've written about mental self-improvement several times. Recent research into neuroplasticity suggests thinking, learning, and acting actually change the brain. One of the activities Mozart's Brain and the Fighter Pilot: Unleashing Your Brain's Potential consequently encourages is memorization. Since Mandarin is not in the Indo-European language family like Spanish and English, it poses a memorization challenge for me (though thankfully not due to noun declensions or verb conjugations).

An additional memorization challenge is learning Chinese characters or hàn zì (汉字). In fact, some recommend against learning characters at first; others think writing is the main reason Chinese is so hard. (In contrast, to me the four tones don't sound hard so far.) I am studying an average of one simplified character and compound per day from Tuttle Learning Chinese Characters Volume 1: A Revolutionary New Way To Learn And Remember The 800 Most Basic Chinese Characters.

For flashcards I enter hàn zì into Zhongwen Development Tool (zdt)，a program discussed in Chinese forums that has a plug-in to search the CEDICT Chinese-English dictionary. I also downloaded a Pimsleur word list for zdt. The zdt stores hàn zì, pīnyīn romanization, and English definition. Other information (e.g., Learning Chinese Characters visual imagery), I enter into Mnemosyne.

Instant Immersion Mandarin Chinese came with Talk Now! Plus software from Eurotalk Interactive. However, both of the SourceForge programs (zdt and Mnemosyne), like the Pimsleur language learning system, use spaced repetition techniques (an idea I first encountered in Tony Buzan's Use Both Sides of Your Brain). Mnemosyne uses an early version of (and simpler interface to) the SuperMemo algorithm discussed in this month's Wired.

This juxtaposition of modern research and tools with an ancient language and writing may help my memory, but it also provides direction for travel. True immersion may be available in the People's Republic of China, where the official language is Standard Mandarin and the government uses simplified characters.

Reading Agile Software Development with Scrum (2007-12-17/2008-01-01)

"Scrum is built on an empirical process control model which is radically different from the defined model that most processes and methodologies use."
--Ken Schwaber and Mike Beedle, Agile Software Development with Scrum

This past month I attended a Seattle XP Users Group meeting, read Agile Software Development with Scrum (one of two books that are primary sources of information about Scrum), and toured SolutionsIQ (a Seattle-area Scrum training and consulting firm). I wanted to see how my company's experience with small teams compares with our colleagues' in the industry. We'd been using agile development methodologies and tools since before starting the company, due to reading Extreme Programming Explained: Embrace Change, Planning Extreme Programming, and similar books by Kent Beck and Martin Fowler.

Readers of this blog may recognize in agile development methodologies the management paradigms I profess. My management methods led my company to agile development methodologies like Scrum and Extreme Programming. My blog posts on management books provide the following principles:

1. Update opinions from observations. ("The Map is Not the Territory.")
2. Develop a culture of interdependence. ("Mature from Dependence to Independence to Interdependence," and "People are smarter than you think. Give them a chance to prove themselves.")
3. Prioritize what's important. ("Good is the Enemy of Best.")
4. Jointly determine the course. (See The 8th Habit.)
   
5. Set up and manage systems to stay on course. (See The 8th Habit.)
6. Focus talents on results, not methods, then get out of people's way and give help as requested. (See The 8th Habit.)
7. "Never automate something that can be eliminated, and never delegate something that can be automated or streamlined."
   

The principles above aren't articulated in industry terms, however. Specifically in software development these principles lead to the following practices:

1. Inspect results and update process.
2. Rely on people.
3. Work on highest priorities.
4. Teach self-managing teams.
5. Improve processes.
6. Remove impediments.
7. Automate testing.
   

These practices are agile:

1. Agile Software Development with Scrum emphasizes empirical process control.
2. Agile methods have a people-first orientation.
3. Product backlog and sprint backlog are prioritized.
4. Scrum uses self-managing teams.
5. Extreme Programming suggests various process improvements like spike solutions, coding standards, continuous integration.
   
6. A Scrum Master uses a daily stand-up meeting to learn impediments to remove them.
7. Extreme Programming emphasizes automated unit (and acceptance) tests.
   

I would list examples from our experience (e.g., engineering estimation, comparison to CMM Level 2 and key process areas, serving manufacturing clients, consensus decision-making) but this blog post is already long. However, I'll write that I'm pleased with how agile practice embodies good paradigms and principles.

[Updated FAQ link.]

Reading Plato and a Platypus Walk into a Bar (2007-12-25)

A New York boy is being led through the swamps of Louisiana by his cousin. "Is it true that an alligator won't attack you if you carry a flashlight?" asks the city boy.
His cousin replies, "Depends on how fast you carry the flashlight."

--Thomas Cathcart and Daniel Klein, Plato and a Platypus Walk into a Bar: Understanding Philosophy Through Jokes

Confusing the cause of an alligator attack is an example of post hoc ergo propter hoc, a fallacy that Plato and a Platypus Walk into a Bar describes in chapter II, "Logic." (It is a minor spoiler to opine that the punchline of the best post hoc ergo propter hoc joke is, "'Schmuck, that's the way you wave a towel!'") Logic is one of ten topics in the book that together give an overview of the story of philosophy. Thomas Cathcart and Daniel Klein summarize major schools of thought in each topic, and illustrate them with interspersed jokes. I read their book--a gift from Ryan--on Christmas Day at our apartment and friends'. I found it funny, and finished wanting more details on some philosophers--or at least more jokes.

Reading The Four Pillars of Investing

With relatively little effort, you can design and assemble an investment portfolio that, because of its wide diversification and minimal expense, will prove superior to most professionally managed accounts.

--William J. Bernstein, The Four Pillars of Investing: Lessons for Building a Winning Portfolio

A neurologist from Oregon seems an unlikely candidate for financial author and theorist. Perhaps it is not surprising, then, that William J. Bernstein, Ph.D., M.D.--author of The Intelligent Asset Allocator: How to Build Your Portfolio to Maximize Returns and Minimize Risk and The Birth of Plenty : How the Prosperity of the Modern World was Created--contrasts much of his financial advice with conventional wisdom. He writes, "Your social instincts will corrode your wealth by persuading you to own what everyone else in the market owns."

Of stockbrokers Bernstein writes, "He also occupies the lowest rung in the hierarchy of investment knowledge." Of the financial press he writes, "Ninety-nine percent of what you read about investing in magazines and newspapers, and 100% of what you hear on television is worse than worthless." U.S. stock returns are a "random walk" that no one can predict and few in the industry understand. (See the "drunkard's walk" in Conned Again, Watson!; this concept also inspired the title of Burton G. Malkiel's A Random Walk Down Wall Street, which I have borrowed from the Seattle Public Library or SPL.)

Perhaps some of Bernstein's assertions are not surprising: "Risk and return are inextricably enmeshed." While this stands in contrast to occasional low-risk, high-return offers, most readers know these to be too good to be true. Other authors, too, warn against overconfidence, Mistake 1 in Rational Investing in Irrational Times: How to Avoid the Costly Mistakes Even Smart People Make Today by Larry E. Swedroe (also out from the SPL). Edelman and Bernstein emphasize that "You are your own worst enemy."

However, unlike your coworker on the telephone daily with his broker (a broker who Bernstein writes "services his clients in the same way that Bonnie and Clyde serviced banks"), writers Edelman and Bernstein agree that "Stock picking and market timing are expensive, risky, and ultimately futile exercises." Edelman and Bernstein both follow modern portfolio theory; Bernstein especially believes the market is efficient. And in response to the high-fee funds recommended by your financial consultant, Bernstein warns, "The primary business of most mutual-fund companies is collecting assets, not managing money. Pay close attention to the ownership structure of your fund company and of the fees it charges."

Some authors--like Edelman--look at the 10.40% total return of the S&P Stock Index from January 1, 1926 to June 30, 2003 (while noting that past performance is no indication of future results). Bernstein, however, begins with Venetian prestiti prices from 1300 to 1500. "[T]he odds always favor data gathered over the longest time periods." He proceeds through economic history and then uses the Gordon equation to estimate the long-term expected return of the market as 6%.

Bernstein's combination of theory, history, psychology and business (the four pillars) is appealing to me because of its academic approach and statistical emphasis. The Four Pillars of Investing offers an intellectual investigation into the folksy advice to build portfolio income, written in an equally engaging style.

Reading Quantico (2007-11-14/17)

"Goddamn it," the President said, "Did they give them to you without a subpoena?"....
Chao put on a stubborn look. "It is our job to find dangerous criminals. Would you have it any other way?"

--Greg Bear, Quantico

A friend who knew I had read local author Greg Bear's Darwin's Radio, Darwin's Children, and / offered another book after my appendectomy: Quantico. Like the Greg Bear books I've read, Quantico is still-relevant (copyright 2005, 2006) near-future hard science fiction. (The science is even more current than Quarantine.) Like the Darwin series, Quantico involves molecular biology; like /, significant events occur in Seattle and Washington (although some events take place at Quantico).

Quantico is a frightening techno-thriller set in the US after another attack similar to 9-11, intending to portray the dangers of bioterrorism like Amerithrax:

The biological weapons and process in this novel are possible, but not in the way I have described them. I have tried to persuade of the dangers without providing salient details.
The dangers are real, and immediate. Sober judgment, selflessness, nonpartisan planning, and sanity are the only solutions.

The story also includes a female president with a stand on violations of personal privacy as a strong part of her campaign. The tension between liberty and security is therefore part of the book. In the scene with the President and Chao, I also wondered why the FBI would not pursue a subpoena. (To their credit, several agents in the book express skepticism about information extracted via rendition or torture.)

Such famous quotes as, "Those who would give up Essential Liberty to purchase a little Temporary Safety, deserve neither Liberty nor Safety," and "Give me Liberty, or give me Death!" show this tension is part of the history of the United States of America. Unfortunately, so is depopulation from imported infection--see Guns, Germs, and Steel.

Sometimes on issues with different but similarly important needs, debate becomes polarized around the conflicts between those needs. For example, economic growth and environmental health are in tension in environmentalism. In such cases one can sometimes search for solutions with synergy between the two needs, e.g., bright green environmentalism. This is the type of solution I support.

In Quantico, Bear uses his "powerful [imagination to]... conjure up not only possible methods of attack, but also ideas about how governments and individuals will respond and what kinds of high-tech tools could prevent attacks." Let us hope they respond in ways that enhance liberty rather than reduce it.

Reading Conned Again, Watson! (2007-10-24/28)

We all lose time and money every day to bad decisions. Often, we are not even aware of it. We continue in blissful ignorance, happy in the illusion that our native common sense is doing a good job of guiding us.

--Colin Bruce, Conned Again, Watson! Cautionary Tales of Logic, Math, and Probability

In my apartment the week following my emergency appendectomy, sometimes I had the energy to read (as opposed to only energy enough to watch Battlestar Galactica). As a break from personal finance books, I read entertaining Sherlock Holmes tales that were also instructional. Like Blink, Bruce's book is ultimately about decision-making. Conned Again, Watson! incorporates paradoxes and problems into nearly every chapter:

1. "The Case of the Unfortunate Businessman" discusses the "cab driver's fallacy", the prior investment fallacy, and the fallacy of mistaking relative for absolute savings. It begins with a scam modeled after The Big Con.
2. "The Case of the Gambling Nobleman" discusses the gambler's fallacy and the Martingale betting system.
3. "The Case of the Surprise Heir" includes the birthday paradox.
4. "The Case of the Ancient Mariner" connects the drunkard's walk to Pascal's triangle, and both to the normal distribution.
   
5. "The Case of the Unmarked Graves" illustrates both the Monty Hall problem (using probability trees) and the Wason test.
   
6. "The Case of the Martian Invasion" explores permutations in Bible codes and failure rates.
7. "Three Cases of Unfair Preferment" includes one with nontransitive dice.
8. "The Execution of Andrews" discusses the conditional probability fallacy using contingency tables.
   
9. "Three Cases of Relative Honor" describes game theory games similar to the Prisoner's Dilemma, including one similar to Arthur Conan Doyle's in "The Adventure of the Final Problem."
10. "The Case of the Poor Observer" discusses the problem of drawing conclusions from limited observations.
    
11. "The Case of the Perfect Accountant" mentions Benford's law.
12. "Three Cases of Good Intentions" discusses the theory of double-blind medical trials.
    

Rereading The Truth About Money Parts 2-5 (2007-10-11/)

Many people fail to save because they simply don't want to stop spending. Fine. Keep spending. In fact, I want you to.
Just change what you spend your money on:
Instead of buying a bottle of ketchup, buy Heinz stock.

--Ric Edelman, The Truth About Money

Like Kiyosaki, Edelman writes, "instead of buying things that later will have no value (like an empty ketchup bottle or a vacation), or virtually no value (like costume jewelry, clothing, or furniture), make sure the things you buy will retain and even grow in value." What are these things? Unlike a bottle of ketchup, there's no grocery store for investments. Parts 2 through 5 of The Truth About Money explain things that retain or grow in value, with many examples, graphs, and stories. (The cover is right that it's "personal finance that's fun to read!") This grocery store of investments has aisles for cash equivalents, income-producing investments, growth investments, and packaged products:

1. Cash Equivalents have little or no default risk. They can mature in more than one year--e.g., some bank certificates of deposit or commercial paper, U.S. EE Savings Bonds, U.S. Treasury Notes, and U.S. Treasury Bonds--or less than one year--e.g., checking accounts, savings accounts, money market funds, some certificates of deposit, and U.S. Treasury Bills. Ric recommends having six to twelve months' expenses available in less than one year, but otherwise avoiding cash equivalents because inflation erases their returns. Some cash equivalents have surrender charges and tax penalties--e.g., life insurance cash value or fixed annuities. These are not appropriate for cash reserves.
   
2. Income-producing investments are subject to default risk (indicated by the bond rating), event risk, and interest rate risk--which one can reduce by holding to maturity or hedging (e.g., with gold). Ric recommends favoring total return rather than rate or even yield. The Truth About Money discusses these income-producing investments:
   
• U.S. Government Securities include--in addition to cash equivalents--Ginnie Mae, Fannie Mae, Sallie Mae, and Freddie Mac. A GNMA repays principal as well as interest, and can prepay in 12-15 years instead 30 years.
  
• Municipal Bonds may be (currently) income-tax-free, but Ric disputes the relevance of this--and the wisdom of insuring them. In addition, municipal bonds are often callable.
  
• Ric recommends against Zero Coupon Bonds because they give low returns, lack payment before possible default, incur taxes on phantom income, and are callable. He also discourages taking physical possession of their certificates.
  
3. Investments that confer ownership or equity instead of (or in addition to) income rely on growth for their value. The Truth About Money discusses these growth investments:
   
• Stocks grow in value, generate income, have returns that beat inflation, and have tax advantages (tax on capital gains is less than the tax on income or interest, tax isn't due until sale, and heirs don't pay capital gains tax). One can purchase stocks through brokerage firms, discount brokers, or dividend reinvestment plans. Although buying international stock adds currency risk exposure, Ric observes that the international stocks and companies are increasing in value.
  
• Real Estate investing adds diversity--but also hassle. For real estate investment Ric recommends lots of cash, for reserves and purchases.
  
• Collectibles don't make good investments due to the possibility of fraud or damage, and inability or unwillingness to sell.
  
• Hedge Positions could help insure against inflation (e.g., gold), deflation (e.g., bonds, dividend-paying stocks, and cash), recession (e.g., oil and gas, minerals, forest products), lack of confidence (e.g., real estate, gold, and precious metals), collapse of the dollar (e.g., foreign stocks and currencies), and stock market crash (e.g., selling short or options trading like covered call writing).
  
4. Just as a real grocery store has prepared foods, the investment grocery store has packaged products--which are really investment companies. These make investments affordable, liquid, diversified, and professionally managed. Open-end or mutual funds have an annual expense ratio and a sales charge (front-end load, back-end load, level load, or no-load). The Truth About Money discusses these packaged products, beginning with six mutual fund types:
   
• U.S. Government Securities Funds exist, despite the perception that mutual funds are mostly a method to invest in stocks. These include Ginnie Mae funds, zero-coupon funds, intermediate funds, short-term funds, and ultra-short funds. Related funds are adjustable rate mortgage funds and global government funds.
  
• Municipal Bond Funds include money market funds, single-state funds (to avoid state income tax), Puerto Rico funds (to avoid all income taxes), insured muni funds, and high-yield muni funds.
  
• High-Yield Corporate Bond Funds (in contrast with short-term and intermediate funds) invest in long-term speculative grade bonds. Investors thus face credit risk in addition to interest rate risk.
  
• Balanced Funds invest in four asset classes: cash and cash equivalents, government securities, corporate bonds, and corporate stocks. There are related fund types: Asset Allocation Funds add other asset classes, Growth and Income funds limit asset classes to stock and bonds only, and Equity Income invest in stocks which pay dividends.
  
• Stock Funds can focus on different categories of market capitalization, different sectors, or different indexes.
  
• International Funds are open-end or mutual funds available in a variety of types: global funds, international funds, single nation funds, regional funds, or sector funds.
  
• Closed-End Funds, while still investment companies, differ from open-end or mutual funds. Shares generally trade on a stock exchange rather directly with the fund.
  
• Unit Investment Trusts are the third type of investment company different from open-end or closed-end funds. They have a fixed portfolio and definite maturity date.
  
• Wrap Accounts are not investment companies but accounts that protect investors from unnecessary trading commissions. However, Ric lists "11 Reasons to Avoid Wrap Accounts."
  
• Annuities are available from insurance companies. Variable annuities are securities products, however. They provide tax-deferred growth and guarantees against loss (in the form of living benefits and death benefits) at the cost of fees similar to mutual funds, plus contract fees and mortality charges.
  
• Real Estate Limited Partnerships are companies that permit investing in real estate with less hassle (for the limited partners). The Tax Reform Act of 1986 retroactively classified their income as passive, so investors cannot deduct losses from active income.
  
• Real Estate Investment Trusts (REIT) are like Real Estate Limited Partnerships, except that they are publicly traded.
  

This ends the tour of the investment grocery store (complete with links to Wikipedia). See the book for more detail. And have fun shopping!

Rereading The Truth About Money Part 1 (2007-10-10)

It is for all these reasons--to protect against risk; to eliminate debt; you're going to live a long time; to hand such major expenses as children, college costs and weddings; to buy cars and homes; to afford a comfortable retirement; to protect against long-term care costs; and to pass wealth to your heirs--that you need to create a financial plan.

--Ric Edelman, The Truth About Money

Part I of The Truth About Money, "Introduction to Financial Planning," discusses the reasons one needs and wants money. Chapter 1 then lists "The Four Obstacles to Building Wealth": procrastination, spending habits, inflation, and taxes.

Imagine a raise of $100 per month invested in stocks producing a combined 10% return. As Kiyosaki writes, buy an asset the produces portfolio income. Investing $100 per month from age 28 to age 65 (e.g., now until 2044) would be a total investment of $44,400. Compounding would make the investment worth almost $414,000.

This scenario enables calculating an example of the four obstacles Ric Edelman lists:

1. First, reducing the years of contribution from 37 to 25 (e.g., now until 2032) illustrates the effects of procrastination. If the same investment begins at age 40 instead of age 28, the total contributions decrease to $30,000, while the investment value at age 65 decreases to a little more than $123,000. This is almost $291,000 less than original scenario!
2. Imagine celebrating the raise by buying a Starbucks Grande Caffè Mocha on the way to work each day, except two vacation weeks. This spending habit could reduce the $100 raise by about $67, leaving $33 per month for investment. At age 65 there would be almost $135,000, or $279,000 less than the original scenario.
3. The preceding examples ignore inflation. If inflation were nominally 3% per year, $1.00 at age 28 would buy as much as $3.03 at age 65. So the $414,000 at age 65 would only buy as much as $137,000 did at age 28. Inflation would remove more than $277,000 of purchasing power.
   
4. Finally, consider taxes. A $100 raise could have a marginal tax rate of 33%. Kiyosaki notes the US government taxes earned income the most. This could reduce contributions to $67 per month, less than $30,000 total. At age 65--ignoring capital gains taxes--there would be almost $279,000. Withdrawing from the investment each year to pay capital gains tax, however, would reduce the value to about $203,000, or about $210,000 less than the original scenario.
   

In summary, the example effects of the four obstacles to wealth are as follows:

1. Twelve years of procrastination reduces the value of the sample investment by $291,000.
2. A workday mocha spending habit reduces the sample investment by $279,000.
3. Three percent inflation reduces the purchasing power of the sample investment by $277,000.
4. Income and capital gains taxes could reduce the value of the sample investment by $210,000.

The conclusions appear to be start now, buy assets instead of consumable expenses, invest to beat personal inflation, and take advantage of tax deferral. These are beyond the scope of this blog post, however.

(The remainder of this post explains calculation details: As an example--not an endorsement--, First American Mutual Funds FSKSX had a past performance of approximately 10%. The calculations use 9.569% compounded monthly, with no volatility for simplicity. Each scenario has additional assumptions:

1. The future value (37 years * 12 months/year =) 444 months later of a $100 per month annuity at (9.569%/year / 12 months/year = ) 0.7974 % per month is $413,890.79. The future value of the same annuity only (25 years * 12 months/year =) 300 months later is $123,333.15.
   
2. On Capitol Hill, Seattle, 8.9% sales tax makes a $2.95 mocha cost $3.21. Five mocha purchases per week for 50 weeks of the year is an average of 21 mocha purchases per month. The average cost is then $67.41 per month.
3. The inflation calculation assumes 0.25% per month, which is similar to current values but low considering long-term averages. The present value of a future sum of $413,890.79 at a rate of 0.25% per month for 444 months is $136,590.49.
4. A "regular" employee who earns $30,651 to $74,200 per year in Washington state would have no state income tax, but would pay 25% United States income tax plus 6.2% for Social Security plus 1.45% for Medicare. For that tax bracket capital gains taxes are 15%. The calculation assumes this applies to all the gains, which is the worst-case scenario--but still has less effect than the spending habit or procrastination example.)
   

Reading Rich Dad, Poor Dad (2007-10-07)

If you want a lesson in confusion, simply look up the words "asset" and "liability" in the dictionary.... An asset is something that puts money in my pocket. A liability is something that takes money out of my pocket. This is really all you need to know. If you want to be rich, simply spend your life buying assets. If you want to be poor or middle class, spend your life buying liabilities.

Robert T. Kiyosaki, Rich Dad, Poor Dad: What the Rich Teach Their Kids about Money--That the Poor and Middle Class Do Not!

Being from a middle-class background, the subtitle of Rich Dad, Poor Dad caught my eye in the Barnes and Noble personal finance area Saturday. As several responses to Don't Let's Go to the Dogs Tonight show, I like anecdotes. I read with interest Kiyosaki's contrast between his rich capitalist businessman dad and his poor socialist employee dad during his childhood in Hawai`i.

The folksy capitalist philosophy in Rich Dad, Poor Dad begins with an income statement and balance sheet. Kiyosaki simplifies each into two boxes with a line in the middle: for the income statement the line is horizontal, and for the balance sheet the line is vertical.

In the top of the income statement are earned income ("work for owner"), passive income, and portfolio income. In the bottom of the income statement are taxes ("work for government"), ownership-related expenses, and other expenses. Subsequent diagrams expand on portfolio income (dividends, interest, rental income, royalties), ownership-related expenses (mortgage payments, real property taxes, insurance, maintenance, utilities), and other expenses (fixed expenses, food, clothing, fun).

In the left side of the balance sheet are assets which create income--your business, stocks, bonds, mutual funds, income-generating real estate, notes, and intellectual property. In the right side of the balance sheet are liabilities ("work for bank") which create expenses--consumer loans, credit cards, and mortgages.

Poor Dad says, "Go to school, get good grades, and find a safe secure job." In other words, concentrate on earned income in the top of the income sheet. Rich Dad says, "The rich don't work for money, they have their money work for them." In other words, concentrate on passive and portfolio income in the top of the income sheet--with passive income being faster. In the bottom of the income sheet, the government taxes earned income the most, and passive income the least.

Rich Dad, Poor Dad consequently characterizes classes using these boxes. The earned income of the poor pays expenses in the income statement and little affects the balance sheet. For the middle class, expenses and taxes rise with income in the income statement, as do liabilities incurred on the balance sheet. The income of the rich purchases income-producing assets, with less rise in expenses or liabilities. (For example, a corporation deducts expenses from income before taxation.) In this way they practice the "pay yourself first" advice of The Richest Man in Babylon.

The challenge is defining "your business." Kiyosaki writes, "If I have to work there, it's not a business. It becomes my job." Timothy Ferriss has similar suggestions for a "muse" in the "Income Autopilot" chapters in "Step III: A is Automation" of The 4-Hour Workweek.

The goal for both Ferriss and Kiyosaki is freedom. The latter explains his wants:

I want to be free to travel the world and live in the lifestyle I love. I want to be young when I do this. I want to simply be free. I want control over my time and my life. I want money to work for me.

Readers of this blog will recognize this desire to travel and live abroad.

[Added diagram and corrected word.]

Reading Quarantine (2007-09-29)

Given my enjoyment of speculative fiction, it makes sense to follow a science book with a science fiction book. While I make occasional references to fantasy, most of my speculative fiction reading is science fiction; the books I've read this year include /, The Moon is a Harsh Mistress, and The Diamond Age. (I recommended in their reviews the following science fiction books: Xenocide, Children of the Mind, A Deepness in the Sky, Stranger in a Strange Land, The Number of the Beast, Animal Farm, Brave New World, Fahrenheit 451, The Left Hand of Darkness, Nineteen Eight-Four, and Cryptonomicon).

I didn't follow An Inconvenient Truth with a rereading of Dune, Dune Messiah, and Children of Dune. However, The Universe in a Nutshell discusses such science fiction topics as time travel (albeit concluding with Hawking's Chronology Protection Conjecture). Consequently I followed it with the Greg Egan's novel Quarantine.

The Universe in a Nutshell discusses the uncertainty principle often, including Feynman's multiple histories idea. Stephen Hawking explains the wave function as "a number at each point of space that gives the probability that the particle is to be found at that position." He discusses particle motion as a sum over multiple histories. In addition, he notes that "[t]he anthropic principle says that the universe has to be more or less as we see it, because if it were different, there wouldn't be anyone here to observe it."

These ideas appear in Quarantine. In Quarantine, Earth after the year 2034 is surrounded by a bubble preventing observation outside the solar system. Afterward researchers develop a mental device to inhibit wave function collapse. While the device operates, the first-person protagonist plays with probable histories, all the while wondering which history will happen, and which version of himself will observe the results.

The setting of Quarantine relies to some degree on the Copenhagen interpretation of quantum mechanics, with reference to other interpretations. The many worlds interpretation appears when the book's story line is several times inconsistent between periods in the protagonist prevents wave function collapse and subsequent events (e.g., a combination that is 1450045409 in one part of the narrative and ten nines in another). Even the Ensemble interpretation appears in name.

Greg Egan's plot is like a thought experiment, similar to Wigner's friend. As such it imagines how the quantum scales of books like The Universe in a Nutshell could affect observable life. In this way it is both entertaining and instructive.

Reading The Universe in a Nutshell (2007-09-14/18)

I have several scientific friends so I like to stay informed of recent theories. My physics familiarity extends from Newtonian mechanics to special and general relativity, but not beyond--and there have been more theories since I was in school. Consequently I selected one of Stephen Hawking's latest books, The Universe in a Nutshell.

I find I prefer science I can observe. Quantum scales are too small and relativistic scales are too large for me to see. (Though Arthur Eddington has observed the effects of general relativity.) In most of my life--except perhaps the night sky--classical theory is fine.

Nevertheless The Universe in a Nutshell was entertaining. I'm caught up, and relieved that superstring theory--which I missed entirely--may be superseded by M-theory anyway. I now know a generalist's overview of theoretical physics.

Reading Blink (2007-09-04/13)

Decisions are difficult. A good decision requires work; a bad decision brings consequences. More information sometimes helps, and--with the Internet--much information is available. However, consultant work gives me this perspective: more research delays a decision and increases its fee. Even if the decision is better as a result, the difference may be marginal and of less value than the lost time. During the delay no action is taken, which may have an opportunity cost. So I "sleep on it", stare out the window, or take a walk. I sometimes use these approaches--and my judgment--instead of additional information.

Malcolm Gladwell filled Blink: The Power of Thinking Without Thinking with anecdotes and studies about the effect of additional information on decisions. Some people assume that additional information always improves thinking; Gladwell cites situations in which that is not the case. An example is classical music auditions, which were biased against women until held behind a screen. The additional visual information actually distracted from evaluating the performance.

In the Afterward, Blink asks "When to Blink--And When to Think." The initial answer comes from Ap Dijksterhuis' studies on "unconscious thought" (which BBC News and New Scientist have summarized): think about simple decisions, sleep on complex ones. However, further reflection leads Gladwell to two qualifications: unconscious thought requires training, and statistical summaries suggest significant factors.

Gladwell gives examples of effect on judgment, both good and bad. Training improves judgment in the battle of Chancellorsville and the Millennium Challenge 2002. Biases have a bad effect on decisions we make in the "blink of an eye"; examples are the shooting of Amadou Diallo and the results of an Implicit Association Test.

In addition to training, statistical summaries also improve decisions by suggesting significant factors. The Wages of Wins suggests it is difficult to estimate summaries from incomplete observations of small differences. A report from Cook County Hospital exemplifies how statistics can isolate the factors relevant to a decision.

Statistical summaries also have their role in my consulting. I just completed a project requiring analysis of millions of records I imported from daily data and queried for mapping and evaluation. I use statistics, training, and unconscious thinking to improve the speed of my decision-making.

Walking to Work (2006-10-26)

Walking to the bus reminds me of my morning commute in Paris and renews my commitment to venture and work abroad again. In Paris Tuesdays through Thursdays we would awaken in Pigalle. Ryan went to school in Saint-Germain-des-Prés and Jean Claude went to work in Montmartre. I followed Jean Claude out onto Rue André Antoine, smelling the wet cobblestones as the street cleaners washed away the previous day. I heard the sounds of other pedestrian's shoes on the wet cobblestones and an occasional car vibrating along the street. The October air cooled me as I leaned into the steep hill and climbed. One morning in late October I took a photograph of the sunrise in Montmartre. Later on those weekdays I walked back down to Le Chao-Ba-Café for the afternoon sunlight.

On weekends--sometimes long weekends including Friday and Monday--Ryan and I would travel. We visited Montpellier, Nantes and Tours, Chamonix, Berlin, and London. We didn't visit Barcelona or Venice like we had hoped.

Memories and daydreams make me think of "Disappearing Act: How to Escape the Office", chapter 12 of The 4-Hour Workweek. A colleague who also develops software for Geographic information systems is currently in Turkey while his wife teaches. Perhaps I can do the same somewhere while Ryan teaches ESL.

Reading The Diamond Age (2007-08-26/09-03)

Neal Stephenson's The Diamond Age: Or, a Young Lady's Illustrated Primer has a future earth setting in which nanotechnology has significantly reduced scarcity but artificial intelligence has not been achieved. I enjoyed Cryptonomicon by Neal Stephenson (especially its encryption themes, which are present as well in The Diamond Age) and decided to read another of his books.

The "Diamond Age" is due to molecular control of matter making diamond--with multiple productive properties--a common material. (Wikipedia attributes this idea to "It's a Small, Small, Small, Small World" by Ralph C. Merkle.) It is interesting that the social organization in the story still contains classes, even though matter compilers make clothing, food, and covering available to all. I like to imagine how a just society would work.

The lack of artificial intelligence appears reasonable. The actual achievements of AI have always fallen short of predictions. Alan Turing estimated that by the year 2000 machines would be able to fool 30 percent of human judges during a 5-minute Turing Test. In 1965 H. A. Simon wrote that "machines will be capable, within twenty years, of doing any work a man can do." In 1967 Marvin Minsky wrote, "Within a generation ... the problem of creating 'artificial intelligence' will substantially be solved." Clearly none of these predictions have appeared.

I look forward to seeing how these areas--nanotechnology, scarcity, justice, and artificial intelligence--develop during my lifetime. Perhaps I will see some possibilities fulfilled.

Reading A Year of Adventures (2007-06-13/07-04)

I feel wanderlust and want adventure. Needing some plan, I purchased 25: Wildlife Adventures and A Year of Adventures: Lonely Planet's Guide to Where, What And When to Do It. The second book has sections for four weeks per month; each quarter also has a section of sevens--seven continents, seven summits, seven natural wonders, seven heavenly objects--for the "missing week."

If, for example, you have time off in December or January, you can turn to those months in the book. In each weekly section are several activities appropriate to that time of the year. Under each activity title is country, type of activity, fitness or expertise level, an explanation as to why that week is the best time, and a description. The following are examples (in late December and early January) of warm activities not requiring expertise:

• go to Micronesia,
• elephant trek in Mondulkiri Province,
• climb the Sydney Harbour Bridge,
• do canopy tours at Santa Elena,
• watch Jigokudani's snow monkeys,
• travel on an African truck,
• go to Robinson Crusoe Island,
• go to Queenstown, New Zealand,
• do gorilla tracking at Bwindi, or
  
• climb Sri Pada.

I found the entire book entertaining reading and read it straight through despite the arrangement. Many activities have seasons that span more than one month.

There's also a Web site with a search of G.A.P. adventures. For example, I searched for the following 15- to 20-day adventures between December 14 and January 8:

• wildlife/nature,
• trekking/hiking, and
  
• yacht/sailing.

The question that accompanies "Where should William go?" is consequently, "What should William do?"

[Corrected punctuation.]

Reading The 4-Hour Workweek (2007-06-19/20)

The 4-Hour Workweek borrows concepts from popular books like The 7 Habits of Highly Effective People and Getting Things Done while adding an attitude of its own. This post compares and contrasts the time management advice of these three books:

1. The 7 Habits of Highly Effective People (The 7 Habits) by Stephen R. Covey,
2. Getting Things Done (GTD) by David Allen, and
3. The 4-Hour Workweek by Timothy Ferriss.
   

The numbers below illustrate the areas of unique emphasis (1-3) as well as the areas of overlap (4-6) and an area all three books share (7).

1. The 7 Habits begins with principles and time management paradigms, and then proceeds to habits and time management tools. Previous posts have discussed some of these principles, but the concept most relevant to time management is Quadrant II. This concept affects the habits and tools Covey recommends.
   
   Covey notes that activities vary in both importance and urgency. Classifying activities as "Urgent" or "Not Urgent" and "Important" or "Not Important" produces a time management matrix with four quadrants (illustrated both in The 7 Habits and in First Things First). Quadrant I is important and urgent, Quadrant II is important but not urgent, Quadrant III is urgent but not important, and Quadrant IV is neither important nor urgent.
   
   The habit for time management is Habit 3, "Put First Things First". Habit 3 is based upon Habit 1, "Be Proactive," and--especially--Habit 2, "Begin with the End in Mind." "The basic problem is that their priorities have not become deeply planted in their hearts and minds," writes Covey. His time management advice is essentially, "Organize and execute around priorities." His top-down organization strategy begins with a mission statement, which defines roles, which have goals, which require plans, which become schedules.
   
   Covey also classifies time management tools into four generations: notes and checklists (first generation); calendars and appointment books (second generation); and priorities, goals, and plans (third generation). His fourth generation time management shifts emphasis: from efficiency with things and time, to effectiveness with relationships and results. "Subordinate your schedule to a higher value," he writes.
   
   
2. GTD approaches time management from the bottom up rather than the top down like The 7 Habits. The GTD approach is to deal effectively with internal commitments using simple tools. The problem, writes Allen, is new demands and insufficient resources. His process is managing action; time, information, and priorities aren't changed by management.
   
   Allen's tools are primarily notes, checklists, calendars, and appointment books--the first and second generations of Covey's classification. Similarly his plans are informal and focused on the Next Action.
   
   
3. The 4-Hour Workweek focuses on freedom, so its time management advice is in "Step II: E is for Elimination". Ferriss' question is, "How can one achieve the millionaire lifestyle of complete freedom without first having $1,000,000?"
   
   Since The 4-Hour Workweek is about freedom, and Step II is Elimination, Ferriss calls his chapter 5 "The End of Time Management." The chapter begins, "Just a few words on time management: Forget all about it." His strategy follows from the Pareto principle and Parkinson's law: focus on the vital few by shortening work time. His "Questions and Actions" pages elaborate on this principle by clarifying what activities really get one closer to goals in contrast to activities fill time and help avoid more important (and anxiety-producing) activities.
   
   
4. While The 4-Hour Workweek focuses on freedom, both Covey's The 7 Habits and Allen's GTD focus on peace of mind. For Covey, "Peace of mind comes when your life is in harmony with true principles and values and in no other way." Allen promises relaxed, stress-free productivity, a "mind like water." However, their paths to peace differ.
   
   Covey mentions crises more than stress. For Covey, crises are Quadrant I activities:

   [Effective people] also shrink Quadrant I down to size by spending more time in Quadrant II. Quadrant II is the heart of effective personal management. It deals with things that are not urgent, but are important. It deals with things like building relationships, writing a personal mission statement, long-range planning, exercising, preventive maintenance, preparation--all those things we know we need to do, but somehow seldom get around to doing, because they aren't urgent.
   

   For Allen, being stress-free also involves being prepared, but by being in control (see Ready for Anything as quoted in Wikipedia):
   

   Get everything out of your head. Make decisions about actions required on stuff when it shows up — not when it blows up. Organize reminders of your projects and the next actions on them in appropriate categories. Keep your system current, complete, and reviewed sufficiently to trust your intuitive choices about what you're doing (and not doing) at any time.
   

   Covey and Allen also both specifically address knowledge work. Covey's comments are in The 8th Habit.
   
   
5. Neither GTD nor The 4-Hour Workweek spend much time on principles and values compared to The 7 Habits . For Allen, values don't solve the problems of new demands and insufficient resources. For Ferriss, focus on values first requires free time.
   
   Allen writes, "And what created most of the work that's on those [to do] lists in the first place? Our values!" Priorities are also less important than context, time available, and energy available:

   "Setting priorities" in the traditional sense of focusing on your long-term goals and values, though obviously a necessary core focus, does not provide a practical framework for a vast majority of the decisions and tasks you must engage in day to day.
   

   Ferriss, rather than beginning with "big questions" of principles and values, ends with them in chapter 15: "Filling the Void: Adding Life After Subtracting Work." This chapter proposes "the point of it all" as "life exists to be enjoyed and... the most important thing is to feel good about yourself.... to love, be loved, and never stop learning...." This discussion borrows from Covey without attribution, also calling learning "sharpening the saw," Covey's 7th habit.
   
   
6. While The 4-Hour Workweek leaves values to the end, it begins with imagination and goal-setting in "Step I: D is for Definition." Ferriss, like Covey, starts with imagining a motivating state, both "being" and "doing", and sets goals to reach that end result. Both warn against expending effort that doesn't achieve that end. Covey writes, "It's incredibly easy... to work harder and harder at climbing the ladder of success only to discover it's leaning against the wrong wall." Ferriss, like Covey, contrasts effectiveness and efficiency:
   

   Effectiveness is doing things that get you closer to your goals. Efficiency is performing a given task (whether important or not) in the most economical manner possible. Being efficient without being effective is the default mode....

   In The 4-Hour Workweek, the end is a state of excitement in the next 6 to 12 months. In The 7 Habits, the end is a life mission centered on principles. Nevertheless both emphasize the need for a motivating vision of the future.
   
   
7. All three authors--Covey, Allen, and Ferriss--discuss delegation. Delegation is both a part of work flow and a way to empower.
   
   Delegation plays a similar role in the work flow in both The 7 Habits and GTD. In The 7 Habits plans become either appointments to schedule or stewardship to delegate. In GTD, after determining the Next Action, the next part of the process is to do it (if it takes less than two minutes), delegate it (if someone else is the right person to do it), or defer it. Consistent with its pursuit of freedom, The 4-Hour Workweek has the following advice:

   Delegation is to be used as a further step in reduction, not as an excuse to create more movement or add the unimportant.... Never automate something that can be eliminated, and never delegate something that can be automated or streamlined.

   The 7 Habits and The 4-Hour Workweek also discuss empowerment. The 7 Habits likens empowerment to leverage, enabling a manager to invest a smaller amount of time with equivalent result--provided the person accepting the task takes stewardship of the desired results, within guidelines, and with accountability and consequences. Similarly, The 4-Hour Workweek emphasizes the time advantages of empowering others, and says, "People are smarter than you think. Give them a chance to prove themselves."

[Added anchor for subsequent post.]

Reading The Bridge of San Luis Rey (2007-06-29/07-02)

"There is a land of the living and a land of the dead and the bridge is love, the only survival, the only meaning."
--Thornton Wilder, The Bridge of San Luis Rey

Hanging in our hallway is a painting from Peru of a hanging bridge, bequeathed to me by my maternal grandmother, along with The Bridge of San Luis Rey. I received these after January 2006 when she died in Panorama City Convalescent Center in Lacey after a period of ill health. Thornton Wilder writes, "Even memory is not necessary for love," but both love and memory of her still remain.

Reading The Moon is a Harsh Mistress (2007-05-24/06-17)

Thing that got me was not her list of things she hated, since she was obviously crazy as a Cyborg, but fact that always somebody agreed with her prohibitions. Must be a yearning deep in human heart to stop other people from doing as they please. Rules, laws— always for other fellow. A murky part of us, something we had before we came down out of trees, and failed to shuck when we stood up. Because not one of those people said: "Please pass this so that I won't be able to do something I know I should stop." Nyet, tovarishchee, was always something they hated to see neighbors doing. Stop them "for their own good"—not because speaker claimed to be harmed by it.

--Robert A. Heinlein, The Moon is a Harsh Mistress

I recall a time I looked through everything in the school library by Robert A. Heinlein. Although this blog only holds one such book review, I love speculative fiction--especially science fiction, fantasy, and magical realism. Nevertheless, I only really recall reading Stranger in a Strange Land and The Number of the Beast. I don't remember reading The Moon is a Harsh Mistress, even though I tend to remember social science fiction I read (e.g., Animal Farm, Brave New World, Fahrenheit 451, The Left Hand of Darkness, Nineteen Eight-Four).

The Moon is a Harsh Mistress was published in 1967--the year of the Summer of Love--and mentions themes common in the hippie counterculture movement of the 1960s. Its society excites me and inspires my imagination. It appeals to my civil libertarian leanings. I want freedom from conventional careers, freedom to travel, freedom from relationship restrictions, etc.; and I believe in responsibility and the importance of individuals. Luna in The Moon is a Harsh Mistress is among the societies in speculative fiction that seem desirable and viable to me. However, I don't know how our current societies would evolve into them.

Discussing How to Be An Adult (2007-06-28/29)

I admire my older mentors for the grace and good humor with which they handle adversity, and the ease with which they handle responsibility. I know several others of similar age that react to emotional events the way I remember people reacting in high school. Did these others get stuck somewhere in the maturing process? What made my mentors keep maturing? I don't know. I imagine, however, that How to Be An Adult may be useful to those with the motivation toward maturity.

As a previous post sparked some discussion, I wanted to post more detail on this book. The previous post selected a specific aspect of the book (assertiveness), whereas this post will provide an overview of How to Be An Adult.

Paulist Press published How to Be an Adult: A Handbook for Psychological and Spiritual Integration. Shambhala published How to Be an Adult in Relationships: The Five Keys to Mindful Loving. These publishers may show the intellectual trend in David Richo's thinking. I have started How to Be an Adult in Relationships but do not find it as inspiring as How to Be an Adult.

How to Be an Adult has as its metaphor a heroic journey: a departure from containment in conditioned fear (by letting go of neurotic ego), a struggle to move out and to become unconditional and powerful (by building a healthy ego), and a return to wholeness as unconditionally loving (by releasing the spiritual self). The parts of the book are "Personal Work," "Relationship Issues," and "Integration"--and I understand the last part least. These parts, however, remind me of Stephen R. Covey's maturity continuum--from dependence to independence to interdependence--that I've mentioned several times. I end this post with a list of the issues these parts and chapters discuss:

• Personal Work
• Growing Pains and Growing Up
• Assertiveness Skills
• Challenges to Adulthood
  
• Fear
• Anger
• Guilt
  
• Values and Self-Esteem
  
• Relationship Issues
• Maintaining Personal Boundaries in Relationships
• Intimacy
  
• Integration
  
• The Art of Flexible Integration
• Befriending the Shadow
• Dreams and Destiny: Seeing in the Dark
• Ego/Self Axis: Where Psychology and Spirituality Meet
• Unconditional Love
  

Rereading How to Be An Adult (2007-05-10/13)

The art in assertiveness is to ask strongly for what you want and then to let go of it if the answer is No. You tread the fine line between consistent perseverance and the stubborn persistence that can feel to others like abuse. Passive people do not ask for what they want. Aggressive people demand (openly) or manipulate (secretly) to get what they want. Assertive people simply ask, without inhibition of themselves or pressure on others.

--David Richo, How to be An Adult

A copy David Richo's How to be An Adult: A Handbook on Psychological and Spiritual Integration (borrowed a decade ago from someone I no longer know) comes off my bookshelf every few years for my reading. The forward notes, "This book is written in a highly condensed way," and this density provides me greater understanding each read. David Richo frequently quotes thinkers such as Joseph Campbell, Teilhard de Chardin, Émile Durkheim, Meister Eckhart, Ralph Waldo Emerson, Jung, Alice Miller, Virginia Satir, and Shakespeare (Hamlet, Romeo and Juliet, The Tempest, etc.).

There are three parts to How to be An Adult: "Personal Work," "Relationship Issues," and "Integration". Within Part 1 is Chapter 2, "Assertiveness Skills". An earlier post quoted this book in a discussion of definitions of emotional and personal maturity. I think the "Helpful Principles" in Chapter 2; and the definitions (above) of assertiveness, passivity, and aggressiveness; are useful as well.

The first "Helpful Principle" is as follows:

Early in life, you may have learned that it is not legitimate to:

• Show your real feelings
• Give and receive openly
• Ask for things directly
• Tell your opinions
• Take care of your own interests
• Say No to what you do not want
• Act as if you deserved abundance

These are injunctions against having power, and to the extent that we have internalized them, we have disabled ourselves and limited our adult capacities. Our journey to wholeness begins from just such a wounded place.

Since I want abundance, this is a good place to begin. Other principles strike me as useful:

• "Check out your feelings, suspicions, or doubts with the people involved."
• "Trying without doing is wishing rather than choosing."
• "You can be informed by others' behavior rather than affected by it."

Finally, David Richo lists "Basic Rights of the Assertive Person". Some of these stand out to me:

• "To say No or Maybe without pressure to decide in accord with someone else's timing."
• "To be illogical in making decisions."
• "To be free to explain your choices or not (includes not having to make excuses or give reasons when you say No)."

These stand out because I sometimes feel hurt when others exercise these rights. Perhaps--as is often the case--I don't really believe I have a right to delay, or make illogical or unexplained decisions, so insist others must be comprehensible. In most relationships, however, I try to practice assertion:

1. Be clear about your feelings, choices, and agenda
2. Ask for what you want
3. Take responsibility for your feelings and behavior

I think these skills are essential to mature adulthood.