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Lagarde, Dalio, Summers, Botin, Cohn in Davos

Macro shouldn’t matter to investors. However…sometimes its interesting. Unchartered territory and stuff…

  • Some economics lessons form Ray Dalio – monetary policy doesn’t work anymore/end of the debt supercycle/political extremism threat to economy
  • Botin (Santander): QE won’t work fully as banks need to hoard cash
  • Cohn (Goldman): more men in employable age, unemployed in US then France/new regulation stimulates banks to hoard cash
  • Currency wars, Europe’s erroneous approach to austerity etc.

http://www.bloomberg.com/news/videos/2015-01-22/lagarde-cohn-summers-botin-dalio-on-bloomberg-panel

The Future of Teaching, Free Knowledge, More Online Courses: Robert Shiller

I already wrote you various times about online courses. I do believe this is the ultimate phase of the renaissance, started in Europe (thanks to the Arab library’s and some Italian gamblers) and currently enlightning the entire world.

Keeping knowledgee within a small group of privileged people has proven to have horrendous effects and is a clear waste of potential. The unleashing of restrictions around knowledge is the most important driver for wealth, wellbeing and collective achievement.

Currently cost of education are high, to private individuals and to governments. I believe online courses are the beginning of serious potential to lower costs per student for governments and students.

How? Think about this…if the best classes and professors are freely available there’s no reason anymore to have so many universities. If I’d be a student I would ask my university to provide access to the best in a certain field of knowledge. If I would be a government I would ask the subisidised universities to rigorously cut teachings and link all students to the one top professor there is in finance, economics, biology. If I would be a company I would tell my people to follow online courses for personal development and if I would be a corporate I would cut reimbursement of MBA courses.

I believe knowledge and teaching in the future will be following the pareto law: 1% of the universities will teach 99% of the students or 1% of the universities and speciliazation will be the key driver for survival of universities. To use Taleb’s classification: eduction will become a clear case of extremistan.

Ín some time from now, initiatives like coursera will take a more formal role in university level education, youtube will take over from television etc. I spend more time on blogs and youtube than I watch television. My kid brothers don’t even bother to have a television. Knowledge is starting to be freely available. You just have to choose what you want to know more about. I love it.

Enjoy the best teachers from your relaxing chair, I’ve watched Robert Shiller behavioral finance classes: http://www.academicearth.org/subjects/finance

An Interview with Jeremy Grantham on Natural Resources, Global Growth and Society

Listen to this brilliant interview (by Peter Day of BBC) with thinker/investor Jeremy Grantham (GMO)

Global Growth is Overestimated

Fertility rates in the developed world have dropped like a stone. Why does everybody keep their growth rate the same when the populations has dropped in man hours from 1.5 % to 0.2 %? This implies you should drop your growth rates with 1.3%. Because future working populations are known and people like Bernanke, the IMF and the World Bank keep their expected growth rates at the same level they are expecting a productivity increase of 1.3%. Why? Productivity has come down historically, because the service sector is becoming a bigger piece of the pie and the service sector is declining in productivity offsetting productivity gains in manufacturing.

Forecasting ‘Real’ GDP Growth

Contrary to the general 2.5%-3% GDP expectations, Grantham expects a 1.5% GDP growth but subtracts a component of 0.6%. 0.1% for the costs of more dangerous and expensive wheather (hurting crops, causing floods etc.) and 0.5% is for the increase in cost of resources.

The Error in GDP Calculations

GDP is more a description of costs than of utility of output. Grantham mentions easy Saudi Arabian Oil vs. Brazil’s deep sea deep salt layer oil. The cost to society of the latter one is much higher per barrel of oil (utility). Brazil’s GDP will rise, but how is this a win for World GDP?

Also the price of natural resources are counted in GDP. Between ’02 and ’08 natural resources tripled which was counted as a surge GDP growth. So Grantham and his team at GMO see GDP calculations as an inaccurate way to calculate economic gain, as it includes costs, which are obviously no virtue or gain.

The Fascinating Turnaround of Natural Resources

Natural resources declined for 100 yrs up to 2002. In 2002 we saw an incredible spike in prices, greater than in WWII. Up to 2002 natural resources had declined with 70% in real terms and all of a sudden natural resources are making up all their losses. Grantham thinks this is the effect of the compounded growth of China and India (10% p.a.) and their increase in demand for resources per capita adding up.

If China currently gobbles up about 50% of resources and it doubles again in 10yrs you’ll have to find another 45% in resources to keep prices at similar levels. The lack of new resources is going to break the bank. Especially oil price hikes will push everything up as it is half the costs of any other natural resource. One of the inevitable price pressures is the increasing cost of winning oil. Frecking perhaps will increase the availablity of oil, however the cost price is so high, oil prices aren’t expected to come down. 

The Quest for GDP Growth of Politicians is a Major Psychological Problem…

  • Decline in population is our last hope, not an economic crisis
  • Look at Japan: a perfectly functional society with an output per hour slightly higher than the US (since ’89) and 5% unemployment
  • Old people have to contribute to the economy and have to continue to work

Grantham: “In the long run you can not have physical growth in a finite world”

Also listen to this great interview for Grantham’s original views on capitalism, renewable energy and society.

The Surprising Truth About What Motivates Us

Enjoy this video by Daniel Pink: The Surprising Truth About What Motivates Us

  • Financial rewards work for simple mechanical tasks, but do not work for cognitive tasks beyond a rudimentary level. Higher incentives lead to worse performance!

Rewards II

  • Money IS a motivator, however up to a threshold. You should pay people enough to take the issue of money off the table…
  • 3 factors lead to better performance and personal satisfaction…AUTONOMY, MASTERY AND PURPOSE.
    • Autonomy: our desire to be self directed. For performing complicated tasks you want your people to feel engagement…
    • Mastery: our urge to get better at stuff, give your people the possibility to get better…
    • Purpose: we are purpose maximizers, not only profit maximizers…

Reading list:

Drive

Free online courses from Princeton, Stanford, Berkeley and more…

Always wanted to study at Princeton, Stanford or Berkeley? Now is your chance…and it’s free! Just go to the website and sign up to the courses you want.

https://www.coursera.org/

About Coursera:

“We are a social entrepreneurship company that partners with the top universities in the world to offer courses online for anyone to take, for free. We envision a future where the top universities are educating not only thousands of students, but millions. Our technology enables the best professors to teach tens or hundreds of thousands of students.

Through this, we hope to give everyone access to the world-class education that has so far been available only to a select few. We want to empower people with education that will improve their lives, the lives of their families, and the communities they live in.”

Source: https://www.coursera.org/about

Niall Ferguson: the 6 killer apps of prosperity

If you’re interested in why some countries are more prosperous than others…watch Niall Ferguson’s analysis:  http://tiny.cc/797ngw