Conferencing Time! Hear All About Risk Theatre!

Well, the manuscript is finished and awaiting the editor’s big red pen. That means it’s time to change gears. It’s conference time. Time to get out there and spread the word around: risk theatre is the new game in town!

Anyone who knows a good site/database with a calendar of upcoming academic conferences please forward a link. After searching around (mainly by Google search), I found a promising looking conference to submit a paper proposal. They’ll send out acceptance letters in late February, fingers crossed! Here’s how the proposal letter looks:

408-1602 Quadra Street

Victoria, BC V8W 2L4

January 16, 2017

To The Organizers:

My name is Edwin Wong and I would like to propose a 20-minute paper to talk about how Macbeth speaks to contemporary audiences. I approach Shakespeare from a Classics background in ancient theatre (MA, Brown University). Here is my proposal for your consideration:

How Much is the Milk of Human Kindness Worth?

Two changes in the Shakespeare quatercentenary offer new creative options in the staging of Macbeth. One: life has become more monetized. Today actuaries set a price on mortality and measure an individual’s place in the Chain of Being by net worth. Two: the downside impact of man-made risks has gone up. They feared the plague, the storm at sea, and other natural risks. We fear Fukushima, bioengineering, leveraged assets, and other calculated risks. Macbeth addresses both these changes.

Each dramatic act in Macbeth is an act of gambling. In the play, Macbeth lays down the milk of human kindness for the crown. By staking milk for the crown, he demonstrates how some things are to be bought by human assets, not cash. Life has value and buys things cash cannot. The play demonstrates how life is not to be valued by an actuarial table, but by the limits of its desires. The play speaks out against life’s monetization.

Macbeth is also a lesson in risk management. Macbeth’s plan is good. But instead of becoming a king, he dies a tyrant. The play speaks out to the dangers of calculated risks. The play is a reminder to the modern masters of the universe, who, in the name of progress, gamble with the fate of the world: more things can happen than what they expect will happen. Birnam Wood is always coming to high Dunsinane Hill. My paper considers how performances of Macbeth, by concentrating on gambling acts and risk, can speak to the preoccupations of contemporary audiences.

Thank you for considering my proposal. I look forward to hearing from you.

Sincerely yours,

Edwin Wong.

Did my best to write an attention grabbing title and fit as much as I could (but not too much) into the 200-300 word proposal. How does it sound?

Until next time, I’m Edwin Wong and I’m doing Melpomene’s work.

Fearful Symmetry – Zee

Fearful Symmetry – Author Blurb

The concept of symmetry has widespread manifestations and many diverse applications–from architecture to mathematics to science. Yet, as twentieth-century physics has revealed, symmetry has a special, central role in nature, one that is occasionally and enigmatically violated. Fearful Symmetry brings the incredible discoveries of the juxtaposition of symmetry and asymmetry in contemporary physics within everyone’s grasp. A. Zee, a distinguished physicist and skillful expositor, tells the exciting story of how contemporary theoretical physicists are following Einstein in their search for the beauty and simplicity of Nature. Animated by a sense of reverence and whimsy, Fearful Symmetry describes the majestic sweep and accomplishments of twentieth-century physics–one of the greatest chapters in the intellectual history of humankind.

Fearful Symmetry: The Search for Beauty in Modern Physics

This is a review of the 1986 Macmillan pressing. Believe it or not, it has been sitting on my bookshelf for 30 years! In fact, while putting together this review, it seems that Princeton University Press released the 2nd edition last month (September 2016). Time flies.

The premise of the book is that simplicity is built into nature’s design. Beautiful equations have a running chance at being true. Ugly equations have no chance. That was Einstein’s acid test when reviewing equations. Zee follows Einstein’s school of though on beauty and reality. One form of beauty is symmetry:

On one side stand Einstein and his intellectual descendants. To them, symmetry is beauty incarnate, wedded to the geometry of spacetime. The symmetries known to Einstein–parity, rotation, Lorentz invariance, and general covariance–are exact and absolute, frozen in their perfection. On the other side stands Heisenberg with his isospin, shattering the aesthetic imperative of exact symmetry. Heisenberg’s child is approximate and plays apart from spacetime. Unlike spacetime symmetries, isospin is respected only by the strong interaction.

Lorentz Invariance, Parity, General Covariance: It’s Greek to Me!

Perhaps one reason the book sat on the bookshelf for 30 years is because it is hard to understand. Although Zee writes for the layperson, it is a tough go: cutting edge physics in multiple dimensions is hard to understand. But I’m glad I read it. It solved a long standing mystery in my mind concerning philosophy.

A long time ago, I got some pretty good advice from Professor Keith Bradley. Actually, it wasn’t directly from him, but through one of his students, Professor Leslie Shumka, who had heard it from him. This was at the University of Victoria. Incidentally, I always found it ironic that the University of Notre Dame poached Professor Bradley (who is the world authority on Roman slavery) away from us. The irony is that he is anything but Catholic and far from being religious. The University of Notre Dame, of course, is a Catholic university. Oh yes, the advice: the advice was to read widely in subjects that are not in your field of specialty. This way, you pick up novel insights: it encourages you to think outside of the box. And this is what happened when I read Fearful Symmetry.

Eureka!

Have you heard of the ancient quarrel between the rationalists and the empiricists? The Stanford Encyclopedia of Philosophy sums it up as follows:

The dispute between rationalism and empiricism concerns the extent to which we are dependent upon sense experience in our effort to gain knowledge. Rationalists claim that there are significant ways in which our concepts and knowledge are gained independently of sense experience. Empiricists claim that sense experience is the ultimate source of all our concepts and knowledge.

Rationalists like to point out that the mind can grasp things independently from sense experience. The most quoted example is that of the interior angles of a triangle. That the angles equal 180 degrees can be comprehended by pure thought. Empiricism argues the opposite, that knowledge comes from sense perception. The scientific method of coming up with a hypothesis and testing the hypothesis by observation is an empirical method.

Zee points out that the 19th century, ‘a large collection of experimental facts were summarized into equations which in turn revealed a symmetry in Nature’s design’. In other words, 19th century physicists were empiricists: they made many observations. Their knowledge came from observing the world. They modelled their equations after what they saw. But this all changed in the 20th century.

In the 20th century, equations were driven by the idea of symmetry. Einstein’s theory of gravity is not the result of carefully measuring planetary orbits (i.e. making the equation fit empirical observations), but rather, his theory of gravity is the result of applying an understanding of Lorentz invariant symmetry on space-time. Regardless of whether or not I understand what Lorentz invariant symmetry is (I don’t), I do understand that his theory of gravity is a rationalist theory.

Yang-Mills Theory and Rationalism

Zee describes how, in 1954, two physicists, Chen-ning Yang and Robert Mills, invented a theory based on a symmetry of dazzling mathematical beauty. Their theory was based on aesthetics rather than any experimental observation. Although physicists recognized its beauty, they had no idea what to do with it, or, for that matter, what could be done with it. That changed in the 1970s when physicists started to believe that the electromagnetic and weak interactions could be unified into a Yang-Mills theory.

If you want to find out how the Yang-Mills theory rolled together the electromagnetic and the weak interaction, you’ll have to read the book. What is important to me was that know I can see the ancient quarrel between the empiricists and the rationalists breaking out in my own lifetime. What I had thought was an academic debate (the priority or thought or sense/experience) was a real debate in the physics community. If nature is ugly, then empiricism is the way to go: make many observations and sum them together in an equation. But if nature is beautiful (and symmetry is a form of beauty), then nature can be comprehended by thought alone.

When the Yang-Mills theory came out, it was a mathematical model that predicted the existence of particles that had not been discovered yet. Furthermore, the measured masses of known particles did not square with what the Yang-Mills theory predicted (it required gauge bosons, which are massive, to be massless). But it turned out that Yang-Mills was right. Particle accelerators eventually found the particles predicted by Yang-Mills theory. And it turned out that at higher energy levels (i.e. moments after the Big Bang), gauge bosons become massless.

The implication of all this is that there is something to rationalism. The mind is the most complicated machine in the universe and it can make some crazy predictions about what the world is like prior to observation. The only caveat is that it must be guided by beauty, in this case, the beauty of symmetry.

The moral of the story: read lots and read widely. Until next time, I’m Edwin Wong and I’m Doing Melpomene’s Work by reading books on physics.

Looking For a Structural Editor

Finished rewriting Paying Melpomene’s Price last night (September 8). The goal was to complete the rewrite in one year. The process started August 3, 2015. So a year and a month. Compared to my usual estimates, that’s not bad!

It’s been a long journey. The initial write (2007-2015) was done part time while working full time. It was really a ‘proof of concept’: it was only readable by me (and even that was hard). The rewrite made it readable to others. Think of writing a book in terms of building a new condo building. Cranes and scaffolding are necessary when the tower is getting built. But they don’t help the people who will eventually move in. In fact, the residents won’t want to see artifacts from construction. The rewrite removes the cranes and the scaffolding.

The chapters have gone out to beta-readers the last year. They’ve provided helpful feedback. Now the next step: find a structural editor. As the name implies, the structural editor works with the whole structure. The structural editor is not a proofreader or a copy editor. They come after.

Placed a job posting with the Professional Editors Association of Vancouver Island for a structural editor a few moments ago. Here’s how it reads:

Are you a structural editor looking to edit a non-fiction, academic title on the theory of tragic theatre? If so, this posting is for you!

Preface and eight chapters, approximately 48,000 words. Target audience: dramatists, literary critics, academics (literature, theatre studies, and aesthetics), and non-specialists interested in the philosophy of tragedy. The work is similar in scope to ‘Tragedy and Philosophy’ by Kaufmann, ‘Tragedy & The Paradox of the Fortunate Fall’ by Weisinger, or ‘Tragedy Myth & Mystery’ by Hathorn.

The edit might appeal to you if you enjoy the works of writers such as Sophocles, Aeschylus, Shakespeare, Corneille, Ibsen, and O’Neill. If you enjoy gambling (or the idea of gambling) the edit might appeal to you as well: the thesis is that each dramatic act in tragedy is also a gambling act.

While the idea of the philosophy of tragedy might sound complex, it really shouldn’t be. It should be simple enough for a kid in grade four to understand. I’m looking for a structural editor who can help out with that.

Fingers crossed, I have a feeling the quality of the finished book is going to depend a lot on the structural editor. I’ve taken it as far as I can myself, now is time to get some help.

Wit – Margaret Edson

Wit Back Blurb

In this extraordinary play, Margaret Edson has created a work that is as intellectually challenging as it is emotionally immediate. At the start of Wit, Vivian Bearing, Ph.D., a renowned professor of English who has spent years studying and teaching the brilliantly difficult Holy Sonnets of the metaphysical poet John Donne, has been diagnosed with terminal ovarian cancer. Her approach to her illness is not unlike her approach to the study of Donne: aggressively probing and intensely rational. But during the course of her illness–and her stint as a prize patient in an experimental chemotherapy program at a major teaching hospital–Vivian comes to reassess her life and her work with a profundity and humour that are transformative both for her and the audience.

Wit Author Blurb

Margaret Edson lives in Atlanta, Georgia, where she is an elementary school teacher. Between earning degrees in history and literature, she worked in the cancer and AIDS unit of a research hospital. Wit is her first play.

Cover Art

Cover Art Wit

W;t Review

Well, the other day (actually a year ago!), English professor TS was chatting about modern works. He specializes in 18th century gothic novel, but the conversation turned to present day drama. Was there anything that caught his eye that had been written/performed lately? By ‘lately’ the last thirty or so years was meant. He said that yes, there was a play by Edson that he had read called Wit or W;t. It was powerful and left a lasting impression on him. That day, I put it on the reading list. The local library didn’t have a copy, but luckily they do interlibrary loans. It turns out the Vancouver Island Regional Library had a copy they were willing to lend to the rival Greater Victoria Public Library.

Warning spoilers ahead!

And now back to our regularly scheduled programming…

I like how the play is set in one act without intermissions. I like that the play is short, under two hours. As Vivian says: ‘I’ve got less than two hours’. Yes, the play is metatheatrical with lots of lines spoken directly to the audience. Lots can be said in two hours.

Here’s the synopsis: Vivian suffers terminal ovarian cancer. She volunteers to try out an experimental chemotherapy regime, more for the benefit to the research than herself. Because she is an academic specializing in Donne’s Holy Sonnets, she examines her situation through the lens of literature. Ultimately, she finds it hard to swallow Donne’s ‘And death shall be no more, Death thou shalt die’. In an ironic twist, one of her doctors was one of her students. As she dies, her life becomes intertwined with Donne, who was also grappling with ‘salvation anxiety’ in the Holy Sonnets. For her, though, part of the answer lies in kindness, human kindness. The ending is surprising. You’ll have to read (or see it) to find out. It’s worth it.

I like the dialogues. And the monologues. They are rich because Edson draws from her own experiences. How exactly the Holy Sonnets ties into Vivian’s death is not clear to me. But that’s what makes the play art: the uncertainty. I hope Edson (maybe she has already) comes up with a sophomore effort after Wit.

Until next time, I’m Edwin Wong and I’m Doing Melpomene’s Work.

Captive Capital: A Reply

Assiduous reader LH posted a thoughtful reply to the last post on the idea of captive capital in Dickens’ A Christmas Carol:

I’m wondering about the logic in this line of argument. There is too much absolutist terminology for my liking such as “If you don’t like Scrooge, you are against captive capital. If you are against captive capital, you think money should be free, not hoarded. ” It’s not either/or – there’s a balance. Saving does not equate to hoarding.
As one who does not have a pension (as is the case for most in our country) if I do not save (or “hoard” in your language) I become the grasshopper not the ant. My income is such that I can (and should) do that. At the same time I give and it has become a significant part of who I have become. Through this all I have been struck by two truisms: 1) the love of money is the root of all kinds of evil and 2) it is better to give than receive. I am by no means the poster child for these truths but when I have opportunity to encounter those (all too rare) “aha” moments I am always struck by them and would like to think that on some level this affects me at a deeper level to cause change and, perhaps, bring me more in alignment with God (or whatever you want to call that Transcendent Other).
This is what I think happened to Scrooge. When he gave he was having a profound encounter with a notion that moving away from a sense of “self and self alone” (which I think is really at the core of hoarding) and other narcissistic values brings surprising happiness and freedom. I think part of Dickens’ genius in his story (and in other bits of his extensive writing) is in communicating the serendipity of this action. If you read a biography of Dickens you will learn that he was a philanthropist at heart and found great joy in indulging in his giving.
I wish all readers the opportunity to experience that freedom and joy this Christmas and perhaps wonder where this comes from – is it some objectifiable neuronal endorphin-related phenomenon or is there something more consequential “out there” that our soul is responding to?

Captive capital is capital in the form of stocks and bonds which is no longer traded. It is held by hoarders (such as Scrooge), university endowments, pensions, and sovereign wealth funds. Once capital becomes captive, it desires to grow. It does not want to be disturbed. It does not want to be drawn down. It may make disbursements–such as when university endowments pay out scholarships–but the idea is for the principle to grow. The danger is that captive capital supports a class of consumers, who, owing to the fact they have an income stream, can now consume without producing. A second danger is that since captive capital grows faster than the GDP, at some point it will become the entire economy. The example I used was the Norwegian Sovereign Wealth Fund. You can see the original post here.

Saving Does Not Equate to Hoarding

Saving does not equate to hoarding: that is the one of the points LH brings in his reply. It’s true. So, in terms of producers and consumers, the following options are possible:

those who produce and consume in equal amounts (i.e. one who makes $10 and spends $10). These are the workers.
those producers who invest a portion of their earnings. Their investments work for them, allowing them to consume more than they produce with their own hands (i.e. a saver who makes $8 with his own hands but, thanks to investment income, can spend $10). These are the savers.
those producers who invest all (besides what is necessary to subsist) of their earnings. Their investments work for them, but they reinvest all the proceeds (i.e. one who can spend $100 but only spends $1). These are the hoarders.

Perfect! Saving does not equate to hoarding. It is a sliding scale. In the most efficient economy (the least captive capital), those who produce consume an equal amount. A less efficient scenario happens when investors begin ‘captivating’ capital: investing it for the purposes of spending the income it generates. But this is not all bad, since these savers are at least spending it. The capital is not entirely captive. The hoarders are the worst case scenario. They invest, but spend the bare minimum. If production and consumption is a cycle, by hoarding they bust the cycle.

The True Problem Isn’t Even the Hoarders

Even though the hoarders’ investments grow faster than the economy (because rates of return on stock market investments typically exceed a country’s GDP), the hoarders aren’t the true problem. Eventually their savings will be freed and will return into the economy. The reason? We all die in the end.

The bigger problem are pensions, endowments, and sovereign wealth funds: they have an indefinite lifespan. The bigger they get, the more privileged one class gets and the less privileged another class gets. To be sure, pensions, endowments, and sovereign wealth funds are beneficial, but at what point do they become too big? Anyone ponder that?

One solution that LH pointed out would be to give back to society. But would enough people do that to offset the damage of captivated capital?

And with that thought: Happy New Years! Party like it was 1999!

I’m Edwin Wong and I look forward to Doing Melpomene’s Work in 2016. See you there!

A Christmas Carol (Belfry Theatre)

FB treated me to Belfry’s production of A Christmas Carol on December 1st, opening night! It stars Tom McBeath as a corrigible Ebenezer Scrooge. Written by Dickens and adapted for the stage by Shamata. Here’s what the party looks like. That’s Scrooge in front of the door, wearing a grey housecoat:

Dancing Scrooge

Christmas Carol Synopsis

Everyone knows the story of Scrooge. Consumed by avarice, he is offered an opportunity to change. Three ghosts visit him: the Ghost of Christmas Past, the Ghost of Christmas Present, and the Ghost of Christmas Future. They show him how his miserly ways have made Christmas miserable to those around him. The shock of seeing himself from the perspective of the other changes him. How does he change? He starts spending the capital (money) on those around him. A donation to the charity. A raise for Cratchit. A turkey for Tiny Tim. Forgiving the debtor. And so on.

A Revisionist Reading of Christmas Carol

The usual reading of Christmas Carol is that Scrooge lacks holiday spirit. He is miserly and miserable. He makes those around him miserable as well. The commonplace interpretation of Christmas Carol is surely what Dickens had in mind. It might be right but it is, well, commonplace. If the role of art is to challenge, what is needed is not a commonplace interpretation but a revisionist interpretation. A revisionist reading goes something like this:

If debtors owe Scrooge money, is that Scrooge’s fault that he collects his debts? If Scrooge is paying Cratchit too little, why doesn’t Cratchit tell him to go to hell? Is Scrooge the only employer in town? If a charitable gentleman donates to charity, does his donation place a moral obligation on others to do likewise?

That’s the standard revisionist reading of Christmas Carol. I like it. But it doesn’t go far enough. Let’s take the extreme revisionist position.

Scrooge and the Problem of Captive Capital

Part of the complaint against Scrooge is his wealth. Specifically, he hoards his wealth. In other words, the capital that he has accumulated isn’t being pumped back into the economy. It isn’t making him happy. And it cannot make others happy. Like it or not, implicit in the story is the idea that money buys happiness. Happiness isn’t going around because his capital is captive: it sits in his vault. It does not circulate. How do we know this is correct? At the end of the play, when he starts circulating the captive capital (turkey for Tiny Tim, raise for Cratchit, donation to charity, etc.,) everyone becomes happy. So Christmas Carol is a play about the problem of captive capital. Or at least that’s what a revisionist stance would argue.

If you don’t like Scrooge, you are against captive capital. If you are against captive capital, you think money should be free, not hoarded. By producing things (or services) one creates capital. By spending money, capital is returned back into the system, where it can work. It goes around in a cycle. If the cycle is broken, then the capital has become captivated. It is useless.

Are you still with me? Captive capital (i.e. all the money Scrooge has hoarded) is bad. Circulating capital is good (turkeys for Tiny Tim). Capital follows the cycle of production (creation) and consumption (spending). Now the $10,000 question: can you think of an example of captive capital today? Not any example of captive capital, but the largest example of money that is doing nothing. Scrooge money, if you will. So big that it threatens to undermine the economies of the world.

Did you say billionaire heirs and heiresses? Yes, that is captive capital, but that is not the biggest and most damaging example. Did you say corporations and cash hoards? Well, sort of. Maybe. The jury is still out on that one. Apple justifies its cash hoard ($200+ billion and equal to the GDP of a medium sized nation such as Czech Republic) because it gives it autonomy. It’s harder for lenders to boss Apple around. The cash hoard gives Apple autonomy from Wall Street. Berkshire Hathaway is like that too. They’re both well run companies in my eyes. Did you say Buckingham Palace (as EK suggested)? Yes, that’s true. But what I was thinking of is bigger than Buckingham. The biggest and most dangerous example of captive capital are pension funds, sovereign wealth funds, and endowments.

Pension Funds, Sovereign Wealth Funds, Endowments & Other Forms of Captive Capital

The popular argument is to make pension funds, sovereign wealth funds, and university endowments larger. Pensioners benefit from pension funds, citizens benefit from sovereign wealth funds (social benefits), and students benefit from university endowments (bursaries and scholarships).

Here’s the problem, however. It can be summarized in a little equation r>g. R or the rate of return of captive capital is greater than g or the growth rate of a nation’s GDP. Pension funds, sovereign wealth funds, and university endowments invest in the stock market. Nowadays, the stock market is projected to grow 7% a year (historically it has been closer to 10%). The GDP of developed nations such as USA or Canada grows 2% a year if we are lucky. So, if r>g, pension funds, endowments, and sovereign wealth funds will grow to become a disproportionate amount of a country’s national wealth. To compound the problem, pension funds, endowments and sovereign wealth funds also grow tax free, a fact which further exacerbates the equation “r is greater than g.”

The tax free is a big deal. Think of the monasteries in the middle ages. They were tax free as well. They grew to such an extent that eventually, they were a drain on the national income: at some point, everything became part of the monastery, choking the government of revenue. Some say that this is why the kings had to make war on the monasteries, to reclaim the missing economy.

You ask, well, what’s the problem if captive capital gets bigger? Some might even want captive capital to get bigger. Students, pensioners, and the citizens of nations who have sovereign wealth funds would benefit. This brings us back to Scrooge.

In a healthy economy, there are producers and consumers. Producers produce, make money, and release the money back into the cycle by consuming. Scrooge is a danger because he produces, but does not consume. Well, pension funds, endowments, and sovereign wealth funds are sort of like that. Except on the other end of the chain: by paying out benefits, they support consumption but they are not producing anything.

Take the Norwegian sovereign wealth fund. It is a highly praised and successful model: instead of spending their North Sea oil revenue, it goes into this fund to provide benefits to Norwegian people. In 2014, it had $857.1 billion of assets (in USD). That’s 1% of the whole world’s stock market. Now, Norway’s population is 5.1 million. Conventional wisdom says that one can spend 4% of a stock portfolio each year indefinitely without drawing down on the principal. Since sovereign wealth funds grow tax free, the safe drawdown percentage is even a little higher, say 4.5%. So, a $857.1 billion investment should yield $38.569 million per year. With a population of 5.1 million, that means that each year, every man, woman, and child in Norway could receive $7562 USD for doing nothing at all.

Now, the Norwegian sovereign wealth fund started out in 1990 and, in 24 years, has grown to $857.1 billion. If it continues to grow, sooner or later, everyone in Norway can retire. Even the children. This is good. Or is this good? Someone still has to produce the goods the Norwegians are consuming. So, in effect, by managing their capital well, they have enslaved other people in the world. Sort of like what Scrooge has done.

Ba humbug.

I’m Edwin Wong, and there is little problem of captive capital when it comes down to Doing Melpomene’s Work.

Enough – Bogle

Enough Author Blurb

John C. Bogle is founder of the Vanguard Mutual Fund Group and President of its Bogle Financial Markets Research Center. He created Vanguard in 1974 and served as chairman and chief executive officer until 1996 and senior chairman until 2000. In 1999, Fortune magazine named Mr. Bogle as one of the four “Investment Giants” of the twentieth century; in 2004, Time named him one of the world’s 100 most powerful and influential people; and Institutional Investor presented him with its Lifetime Achievement Award. Enough., Bogle’s seventh book, follows his 2007 bestseller The Little Book of Common Sense Investing.

Enough: True Measures of Money, Business, and Life

Bogle, Enough Cover Illustration

I like Bogle. I like him for starting the index fund revolution in the 1970s. He created the first mutual fund that mirrored an index: the S&P500. It held whatever was in the S&P 500 and its holding were weighed by market capitalization. No active manager, no stock picking, no speculation. The result was rock bottom fees. Back then, they called it “Bogle’s Folly.” The big investment firms derided him. Bogle had to start up his own investment company in 1974 (the year I was born) to sell the product. Today, that company–The Vanguard Group–is one of the largest money managers in the world with 20 million + investors and 3 trillion of assets under management. Yes, I am proud to invest my money with them.

The original fund is still going strong today and trades under the ticker VOO. It’s expense ratio is a negligible 5 basis points. What’s 5 basis points? Well, 5 basis points is 5% of 1%. Expressed as a percentage, 5 basis points is 0.05%. For every $1000 invested in VOO, an investor would pay 50 cents each year for Vanguard to rebalance the holdings to track changes in the S&P500. Considering that the average mutual fund in Canada charges 2.35%, 0.05% is a steal. The difference is 4600% In dollar terms, on $1000, the average mutual fund would charge $23.50 and VOO would charge $0.50.

If, as they say, in the long run you can safely draw down 4% of an investment portfolio each year, if you’re paying 2.35% in fees, the investment firm is leaching over half of your returns from you each year. Think about it in those terms: 2.35% is over half of 4%! In effect, you’ve handed over over half of your money to the investment company. When Bogle says that the most important thing is to keep costs low, he’s right!

Think of assets not in terms of net worth, but in terms of the income stream that it generates. If you think of assets in terms of net worth, it’s easy to be careless with money: “2.35% of $1000? That’s only $23.50 a year, that’s not much at all,” someone might say. But if $1000 produces a $40 income stream each year and you have to pay $23.50 of that $40 in expenses, well, all of a sudden, whoa, that seems like a lot of money!

To think of money in terms of an income stream instead of net worth is to go back to an 19th century perspective. Back then, the question wasn’t: “How much is your farm worth?” but rather “How much income does your farm generate?” Think of Jane Eyre or Magic Mountain. To characters in those novels, net worth means nothing. Income is everything. You can’t buy bread or pay rent with net worth. You can, however, purchase shelter and food with income.

How can Vanguard keep fees so low? Most investment firms are there to make money from the people that buy its products. Not Vanguard. Vanguard is structured as a coop. Coops are structured so that profits are returned to its shareholders, who are also its customers. With a traditional company like Fidelity or State Street, they are there to make money for their shareholders. As much money as they can. With Vanguard, all the profits are returned to its customers. How does it return the profits to its customers?–by lowering the management expenses. So that’s how Vanguard works: it creates value for its customers, who are also its owners. Their interests are aligned.

Creating Value For Society

Bogle is all about creating value for society. By structuring Vanguard as a coop, he aligned shareholder and client interests and created value for investors by returning profits to the clients. To Bogle, 21st century America has lost its way: there is too much cost and not enough value, there is too much speculation and not enough investment, there is too much complexity and not enough simplicity, there is too much counting and not enough trust, there is too much managemen, and not enough leadership, there is too much salesmanship and not enough stewardship, there is too much focus on things and not enough focus on commitment, there is too many success and not enough character. In short, with Enough, Bogle thinks that America has lost its way because it has too many 21st century values and not enough 18th century values.

What Is Enough?

Bogle begins and ends Enough with this true story, printed in the 2005 New Yorker written by the writer Kurt Vonnegut:

True story, Word of Honor:

Joseph Heller, an important and funny writer

now dead,

and I were at a party given by a billionaire

on Shelter Island.

I said, “joe, how does it make you feel

to know that our host only yesterday

may have made more money

than your novel ‘Catch-22’

has earned in its entire history?”

And Joe said, “I’ve got something he can never have.”

And I said, “What on earth could that be, Joe?”

And Joe said, “The knowledge that I’ve got enough.”

Not bad! Rest in Peace!

What is enough? If you talk to the fellow on the street, enough might be a thousand dollars more than he earned last year. Enough is funny. Money is also funny. Its like productivity at work: whatever tasks workers are given, they will make it fit their 8hr shift. So too with money: if you make more, you will spend more. You will never have enough.

One of the statistics in the book stuck in my head. America has 4% of the world’s population. If you ask the average American, they’ll say they want more. They don’t have enough. Well, Americans already consume 25% of the world’s output. How much is enough?

America–and Canada–are probably the best place to be born in the world right now. There is universal medicare. Universal pensions. They are the lands with the greatest social and economic mobility. They have safety nets in EI and welfare. There is religious freedom. If you could be born as an average person in any other time or place, do you think you’d have a better chance somewhere else? How much is enough?

I’m Edwin Wong and enough for me is the opportunity to be Doing Melpomene’s Work.

Capitalism and Freedom Part Four – Friedman

Friedman, Capitalism and Freedom

Part three of this blast from the past looked at The Role of Government In a Free Society. In that chapter, Friedman argues that small government is conducive to individual freedoms. The more the government looks after people–even with seemingly benign programs such as retirement pension plans–the less freedom a people have. Remember that the Canada Pension Plan (CPP) isn’t free (except perhaps for the first generation of recipients). The contributions come out of your and your employer’s pockets. If there was no CPP, you would have been able to spend your money as you saw fit.

Incidentally, the last company I worked for had a defined benefit plan. They gave the employees the option to opt out of the plan; employees who opted out would have the deduction for the pension plan removed from their paycheques. That is to say, they would receive a larger paycheque. I opted out and invested the money in investments of my own free choosing. Expanding CPP (that is all the talk these days) is fine. But why not make it so people can also opt out of it? That way, those without investment knowledge would be covered and those wishing to manage their own retirement portfolios would be able to do so.

While a fan of small government, Friedman believes that government does some things better than the private sector. First, government is a rule maker and umpire. Second, government coins and regulates the value of money. With this, we turn to chapter three: The Control of Money.

Friedman on The Control of Money

Our task in this and the following chapter is to steer a course between two views, neither of which is acceptable though both have their attractions. The Scylla is the belief that a purely automatic gold standard is both feasible and desirable and would resolve all the problems of fostering economic co-operation among individuals and nations in a stable environment. The Charybdis is the belief that the need to adapt to unforeseen circumstances requires the assignment of wide discretionary powers to a group of technicians, gathered together in an ‘independent’ central bank, or in some bureaucratic body. Neither has proved a satisfactory solution in the past; and neither is likely to in the future.

The gold standard is undesirable because the amount of money in a society would be dependent on the ability of that society to extract, refine, and produce gold. Friedman doesn’t mention this, but this brings to mind ancient Athens. Why was Athens able to attain hitherto undreamt levels in literature, art, science, and philosophy? Was it because of their democracy? Maybe. But it was more likely because they had unlimited money in the form of the silver mines of Laurium: 20,000 slaves toiled there daily in the 5th century. So, a gold or a silver standard can positively or negatively affect a state, depending on its mineral wealth.

The central bank is undesirable because, in attempting to resolve crises, it often makes the problem worse. Friedman blames the Federal Reserve System for exacerbating the Great Depression.

I find these shoulda woulda arguments on the Great Depression only half convincing. Arguing that ‘this made things worse’ or ‘this made things better’ is at best a thought experiment. To do a controlled experiment in economics, you’d need to set up an alternate-earth to see the actual effects of differences in policy. The failure of shoulda woulda arguments is that they are not tested against their unintended consequences. I much prefer economists to make projections into the future based on their models and hypotheses. While it would be hard to determine whether their forecasts are right because they were right (they can nail the prediction and still be dead wrong), at least they have to face up to the unintended consequences of their policies. This seems more honest than the ‘I told you so’.

Friedman On the Dispersal of Power

A liberal is fundamentally fearful of concentrated power. His objective is to preserve the maximum degree of freedom for each individual separately that is compatible with one man’s freedom not interfering with other men’s freedom. He believes that this objective requires power to be dispersed.

While Friedman is talking about the dangers of concentrating the power of regulating money in the government, the need to disperse power got me thinking about the amalgamation of municipalities.

Victoria, or Greater Victoria, is composed of many separate municipalities: Saanich, Esquimalt, Langford, Sooke, and so on. There has been talk for many years about amalgamating the municipalities. There would be significant cost savings to streamlining everything: fire, police, garbage, landscaping, and so on, especially for the smaller municipalities such as View Royal, which has a population under 10,000. There would also be benefits to businesses. Building inspectors from each of the municipalities all follow the BC Building Code, but they interpret the clauses differently. Amalgamating the municipalities would mean a construction company would know what to expect no matter where the construction site was located.

I’m a fan of amalgamating the municipalities. So much waste in having little dukedoms spread over the place, duplicating services. I guess here I disagree with Friedman: I favour efficiency over freedom.

Friedman On Inflation

In the present state of our knowledge, it seems to me desirable to state the rule in terms of the behaviour of the stock of money. My choice at the moment would be a legislated rule instruction the monetary authority to achieve a specified rate of growth in the stock of money. For this purpose, I would define the stock of money as including currency outside commercial banks plus all deposits of commercial banks. I would specify that the Reserve System shall see to it that the total stock of money so defined rises month by month, and indeed, so far as possible, day by day, at an annual rat of X per cent, where X is some number between 3 and 5. The precise definition of money adopted, or the precise rate of growth chosen, makes far less difference than the definite choice of particular definition and a particular rate of growth.

By ‘growth in the stock of money’ I take it that Friedman means ‘inflation’. How times have changed since he wrote those words in the early 1960s! Today the bogeyman is deflation and we are lucky to achieve a 2% rate of inflation. From 1984-2015, core inflation has averaged 2.22% As of October 2015, core inflation is at 2.1% and dropping. No wonder the 1960s were a decade of change: at 5% growth, every 20 years, the society is 100% changed (5% * 20 years = 100% change). People speak of ‘change’ today. But at 2% growth and under, how much change can you have? Countries like India and China, which are growing at >7%: now there’s possibility for change (and revolution if you’re not careful).

In the quote on inflation, I take it that Friedman wants the mandate of the Federal Reserve to be limited to maintaining inflation rather than full employment. Today, the Federal Reserve (and also the Bank of Canada) has a dual mandate: target inflation and full employment. I’m not sure about this, but the argument seems to be that if monetary conditions are stable, let private enterprise figure the employment part out. That sounds reasonable to me.

The thing I don’t quite get is why a 3-5% rate of inflation was targeted in the 1960s and why a 2% rate of inflation is desirable today. Why do we need inflation at all? Is inflation and growth the same thing?–i.e. if the GDP rises 3%, does inflation also rise 3%? I don’t think so. Is inflation built into the system to prevent people from hoarding money (because it eats away at non-invested savings)? Or?

Until next time, I’m Edwin Wong and, believe it or not, Doing Melpomene’s Work, like economics, is a study of how people behave in a dog eat dog world where resources are limited.

Capitalism and Freedom Part Three – Friedman

Part two of this blast from the past looked at The Relation Between Economic Freedom and Political Freedom. There seems to have been some consensus in the 50s that economic and political freedom were separate items: Friedman argues that they are one and the same. In part three, we turn to chapter two: The Role of Government In a Free Society.

Friedman On Government as Rule Maker and Umpire

Nothing new here. These are the legislative and judicial branches of government. Government defines society. Government provides a level playing field for free enterprise. By maintaining personal freedoms (freedom to relocate to a different county or state, freedom to change careers, freedom to shop around, etc.,), free enterprise can function. But there is the thorny problem that to preserve one person’s freedom is to take away another person’s freedom. To demonstrate the point, Friedman has a memorable quote from a Supreme Court Justice: ‘My freedom to move my fist must be limited by the proximity of your chin’.

Friedman On the Necessity of Government

The need for government in these respects [i.e. to modify, mediate, and enforce rules] arises because absolute freedom is impossible. However attractive anarchy may be as a philosophy, it is not feasible in a world of imperfect men.

So anarchy would be feasible in heaven? It was surprising to see this admission by Friedman. He is full of surprises.

Private Monopoly, Public Monopoly, or Public Regulation?

Here’s a question that’s still hot today. Friedman talks about monopolies or regulation regarding the issues of his day: phones, railways, and letter delivery. Technical (phones) or infrastructure (railways) or competitive (letter delivery) factors in the decades leading up to the 1960 had made it so that telecommunications, railways, and the postal service had single providers. The question was whether they should be in the hands of a private monopoly, a public monopoly, and how they should be regulated. Today the question applies to things like BC Ferries, medical marijuana, the internet, the pharmaceutical industry, and so on. The industries are different but the question still relevant.

Here’s what Friedman says:

When technical conditions make a monopoly the natural outcome of competitive market forces, there are only three alternatives that seem available: private monopoly, public monopoly, or public regulation. All three are bad so we must choose among evils. Henry Simons, observing public regulation of monopoly in the United States, found the results so distasteful that he concluded public monopoly would be a lesser evil. Walter Eucken, a noted German liberal, observing public monopoly in German railroads, found the results so distasteful that he concluded public regulation would be lesser evil. Having learned from both, I reluctantly conclude that, if tolerable, private monopoly may be the least of evils.

Interestingly, since the 1960s, telecommunications, railways, and letters delivery are no longer monopolies. Still publicly regulated though. All three industries seem to be in good shape, at least from the viewpoint of the consumer. Maybe public regulation is the least of evils?

Friedman’s Predictions On the Future

The historical reason why we have a post office monopoly is because the Pony Express did such a good job of carrying the mail across the continent that, when the government introduced transcontinental service, it couldn’t compete effectively and lost money. The result was a law making it illegal for anybody else to carry the mail. That is why the Adams Express Company is an investment trust today instead of an operating company. I conjecture that if entry into the mail-carrying business were open to all, there would be a large number of firms entering it and this archaic industry would become revolutionized in short order.

DHL, Loomis, UPS, Fedex: it’s happened. And the industry has been revolutionized. Parcels from China or Great Britain arrive on the doorstep (Victoria, BC), in some cases, in less than a week. Crazy. In fact, the competition has become so efficient that Canada Post pays the likes of UPS and Fedex to move their mail around: it’s only on the last leg where the postie comes to the door that Canada Post ‘delivers’.

Top 14 Things the Government Does To Irk Friedman

1 Parity price support programs for agriculture [still around today, i.e. dairy industry]

2 Tariffs on imports or restrictions on exports, such as oil import quotas, sugar quotas [less today with NAFTA and other free trade deals]

3 Government control of output, such as through the farm program, or through prorationing of oil as is done by the Texas Railroad Commission [the Texas Railroad Commission was the OPEC before OPEC (setting prices on oil) and the farm program gave money to farmers for not growing crops: seems to be less government control of output today than in the 1960s, though I am not sure on this one]

4 Rent control [still around and on the rise in the form of low income housing]

5 Legal minimum wage rates [here to stay and more and more of a contentious issue, i.e. ‘minimum living wages’]

6 Detailed regulation of industries, such as regulation of transportation or banking [on the rise after the Great Recession. If the banks have a problem, fix it with regulation!]

7 Control of radio and television by FCC [no problem, we have internet these days]

8 Present social security programs, especially old age and retirement programs [these programs are getting bigger and bigger, pretty soon CPP will be bigger than the Canadian economy!–then what?]

9 Licensure provisions in various cities [Uber vs taxi licences]

10 So-called ‘public housing’ [You know this one doubly irks Friedman because he uses ‘so-called’ and surrounds ‘public housing’ with quotations as well!]

11 Conscription in peacetime [Friedman won over some unexpected allies with this one back in the day]

12 National parks [Friedman is referring to BIG places like Grand Canyon and Yellowstone]

13 Legal prohibition to carry mail for profit [No longer!]

14 Publicly owned and operated toll roads [Trend is toward P3 projects that are a mix of private and public funds with a private operator leasing out assets for 100 years. In fact, a Canadian company, Brookfield Asset Management, is a world leader in maintaining and managing infrastructure (roads, bridges, etc.,) the world over]

Until next time, I’m Edwin Wong, and, while Doing Melpomene’s Work isn’t a monopoly, it seems like I’m the only one doing it!

Here: A Captive Odyssey (William Head Prison Theatre)

A play performed in an actual prison by inmates? Who could pass up a chance like this? Not me and FG, who drove the 40 minute drive down the windy road to William Head Institution, a minimum security jail overlooking the Strait of Juan de Fuca. Performing since 1981, this year, and for the last three years, they’ve been writing their own plays. Here: A Captive Odyssey is the product of an intensive 6 month writing/production effort by the William Head on Stage Theatre Society (WHoS). As they said after the show in the Q&A: ‘every day a new script’. Warning: spoilers dead ahead!

Here: A Captive Odyssey Synopsis

HERE: A Captive Odyssey is a tale that is spun from archival research and oral stories of William Head, with inspiration from the book Quarantined by Peter Johnson. Two inmate friends are finishing their final years of their sentences at William Head and find themselves on a time-travel odyssey back into the history of William Head, complete with shipwrecks and sea monsters. Through drama, movement, shadow puppetry and live music, audiences will experience a haunting time-travel vortex that whirls through centuries of both First Nations and settler occupation. Before it was a prison, William Head was home to First Nations fishing grounds, a Scottish pioneer’s sheep farm, small pox quarantine centre, hospitals, dormitories, fumigation rooms and schoolrooms. This land has many intriguing and surprising tales.

Admission

You can’t bring anything in with you. Wallets, cell phones, gum packages, and purses all have to be left in the car. Each couple is allowed one set of keys (to get back in the car). All that you can bring in is your ID. The jail itself is right along the water. Picturesque. At the parking lot is a tower overlooking the water, a double set of chain link fences, and a guard station. They check your ID and you sign in with the name and time. The security guard give male visitors an invisible stamp that shows up under a special light. It’s an all male facility.

From there, two six man vans shuttle visitors to the gym, which is a minute or two down the road. The drivers are excited to host the event and are happy to tell stories about the prison. The last escape they had was a couple of years ago when a prisoner floated away in a coffin. Too bad the drive wasn’t long enough to learn more. A coffin? What, you would paddle with a stake? Very industrious. But I guess jail brings out industriousness in people, especially after many years.

Crowd

Full house, all age ranges. Estimated capacity of the gym for the audience is 160. Lots of young folks in the 20s. Different than the regular grey haired crowd at the Belfry and McPherson. Tickets are a bargain $20. Large cast and crew. Roughly 22 acting roles and 3 support roles (lighting and music).

Economics

Assiduous readers will recall that the economics of live theatre has been one of my preoccupations. Here runs 12 times. Let’s say they fill up each time (if they had more shows I’m sure they’d sell out as well, quite a bit of good buzz in the air). So that’s 12 * 160 * $20 = $38,400 in revenue. Now, divide this up by the 22 acting roles, the 3 support roles, and the other writers, directors, and so on. Let’s say the number is 30. $38,400 / 30 = $1280 each person. That’s $1280 for 6 months of part time work. Let’s say they put in an average of 20 hours per week for 6 months. That’s a total of 520 hours (26 * 20). In the end, it works out to a renumeration of $2.46 per hour. I think this is part of the reason why so many theatre shows outside the jail are one man shows. $2.46 an hour is not enough to get out of bed for most folks.

But here’s the question of the day: are the prisoner-actors compensated or do they receive monetary consideration for their efforts? Presumably, they will get out one day and when that day comes, they’ll need some cash to keep them afloat while they look for a job, get a place, and integrate back into society. You’d probably need, say, $3000 to get a place, put down deposit, pay for a couple months rent, get some clothes, food, etc., Can they save up for this in jail employed at various tasks? To me, it’s a fascinating question.

Here The Play

It wasn’t till the end that the play came together for me. With plays I’m either really sharp or really obtuse. Genres that I know well, I’m pretty sharp. Take horror. If a guy goes down to check out something in the cellar, you already know before he goes down what’s going to happen. He ends up in trash compactor (or something like that). But if I’m not familiar with the genre, I’m thick as mud. With this play, I wasn’t sure what to expect. Actually, that’s not true. From the blurb, I had expected a documentary style play, more a history lesson than a drama. I was wrong. It was both.

There’s two main characters. They’re both in jail. One of them has his act together and a plan: do good works and get out of jail sooner. The other one is a slacker. They are fishing buddies.

Well, it turns out that the slacker hooks a magical sea monster that sends him time travelling from 1700s William Head to the present. The other fellow spends the play looking for his friend.

As the slacker travels through time, he witnesses the horrors of slave labour, court room injustices, and sees the effects of smallpox. When he gets back to the present, he understands that life is short: a life without a plan is an unlived life. He resolves to work hard to get out of jail. His friend, meanwhile, has also made positive strides: he reconnects with his estranged sister.

Reception

Fantastic play. The audience loved it. Lots of talent. Raw talent, as most of the inmates did not have theatrical experience. But it wasn’t the talent that made the play. I think what made the play was that everyone took a big chance putting it together. The audience recognized this and showered the players and the producers with applause. The risks they took in putting this on stage were real. And so was there enthusiasm. The difference is like the difference watching NBA basketball and college basketball. Of course the talent in NBA basketball is better. But boy do they play out their hearts in college. The prison production is like watching college basketball.

Perhaps my favourite part of the play was the Q&A session at the end. The audience got to ask questions to the players. Questions like: ‘How does being in the play help with rehabilitation?’ or ‘Do you plan on pursuing theatre on the outside?’. A lot of honest responses on how hard it was for them to open up to the process of theatre and work together. Some funny responses as well: one guy said that he volunteered because he thought ‘it would be cool to play a prison guard’.

What struck me the most is how likeable many of the actors were. They didn’t seem like they belonged in jail. They just seemed like regular dudes. Which they probably are. So this was eye opening. And the best thing was how genuinely happy they seemed to be to be able to put on Here: A Captive Odyssey for the packed house. Kudos. A real play by real people. Something real at stake: some kind of redemption, perhaps? I’m sure there were some tears in the eyes of both the spectators and the players by the end of the night.

Until next time, I’m Edwin Wong, and I’m Doing Melpomene’s Work.