"People who always give nothing are rational fools who blindly follow material self-interest." --- Richard Thaler (2016)
Inspired by Richard Thaler’s Misbehaving: The Making of Behavioral Economics, the “Rational Fool” serves as a whimsical yet thought-provoking representation of the human tendency to act against our own best interests despite possessing rational capabilities. This concept, rooted in behavioral economics, challenges the traditional economic assumption of humans as perfectly rational decision-makers.
This drawing aims to spark curiosity and discussion around the fascinating intersection of psychology and economics, highlighting the importance of understanding behavioral biases in our everyday lives.
Through this playful visual metaphor, I invite visitors to explore the intriguing complexities of human behavior and decision-making, ultimately encouraging a deeper appreciation for the nuances of our choices.
Downloadable Content – Raw Notes
Interested in diving deeper into Richard Thaler’s work on Misbehaving? Download my unfiltered notes below 👇
In 1992, Dr. John Gottman started his groundbreaking research on divorce that led to the discovery of what he termed the “Four Horsemen of the Apocalypse” which ruins most marriages. Through a series of landmark studies focused on four simple behaviors, Dr. Gottman could predict with 94% accuracy, whether or not the couples he studied would get divorced within six years.
The Four Horsemen of the Apocalypse are behaviors that, when unchecked, are predictors of divorce. Each of these behaviors represents unpleasant strategies that partners often employ with one another within conflict. Understanding their impact and limiting their existence within your relationships will do you wonders.
The Four Horsemen Are …
Dr. Gottman defined the top four behaviors that predicted divorce as the following:
Criticism: attacking your partner’s personality or character, usually with the intent of making someone right and someone wrong.
Contempt: attacking your partner’s sense of self with the intention to insult or psychologically abuse him/her
Defensiveness:seeing self as the victim, warding off a perceived attack
Stonewalling: withdrawing from the relationship as a way to avoid conflict. Partners may think they are trying to be “neutral” but stonewalling conveys disapproval, icy distance, separation, disconnection, and/or smugness
A Drawing of John Gottman’s Four Horsemen by Brian Nwokedi inspired by the 1887 Viktor Vasnetsov painting
The Four Horsemen and How To Stop Them With Their Antidotes
Criticism targets a person’s characteror personality and its antidote is a gentle start-up
Contempt targets a person’s sense of self and its antidote is to build a culture of appreciation and respect
Defensiveness targets you as a victim and its antidote is to take responsibility
Stonewalling targets your relationship and its antidote is physiological self-soothing
Final Thoughts
I once heard that in order for a marriage to survive, the ratio of positive to negative emotions in a given encounter must be at least 5:1. This is because negative interactions often outweigh positive ones.
Successful relationships must have a balance between positive and negative feelings/actions between partners. Conflict in relationships is unavoidable, but successful relationships are those that are able to manage conflict in healthy ways.
The Four Horseman framework translates not just to personal relationships but work relationships as well. It can sometimes be easy to forget how much relationship advice actually translates into the business world because ultimately we are just a collection of people working together 🙂.
Going forward for me when I see criticism and defensiveness galloping in (the two horsemen that show up the most in my relationships), I will remember this framework and use the appropriate antidote.
“Tranquility is worth pursuing as it is a psychological state in which we experience few negative emotions, such as anxiety, grief, and fear, but an abundance of positive emotions, especially joy”
--- William B. Irvine, A Guide to the Good Life: The Ancient Art of Stoic Joy (2008)
Introduction
We 21st-century humans are a bunch of spoiled brats that don’t realize how good we actually have it. We have climate-controlled buses, that take us to climate-controlled airports, where we board climate-controlled airplanes, that take us anywhere we want in the world. And somewhere in our modern existence, we have lost our ability to remain resilient.
The overarching goal of Stoicism is not to banish emotion or remind calm while suffering a setback. Rather, the goal of Stoicism is to minimize the number of negative emotions one experiences in their life and to suffer setbacks without thereby actually suffering.
Stoics are not unfeeling human beings. Rather they are humans that have mastered their responses to life’s trials, tribulations, and setbacks. In fact, Stoics often see setbacks as an opportunity to thrive. When faced with a setback, Stoics treat it as a test of their resilience and resourcefulness. They turn the setback into a sort of game (Stoic test) devised and administered by the “Stoic gods. Similar to the concept of framing, the Stoic test relies on the fact that how we mentally characterize a situation has a profound impact on how we respond to it emotionally.
I now understand that a Stoic’s primary goal is to attain and maintain tranquility. That ultimately means striving to avoid experiencing negative emotions while continuing to enjoy positive emotions, especially in the face of setbacks.
What Will I Do Differently As a Result of This Book?
Change my perspective and mindset in such a way as to not experience negative emotions in the first place
Remember the quote by Charles R. Swindoll “Life is 10% what happens to you and 90% how you react to it.”
Remember that the highest cost by far is the emotional distress a setback triggers i.e. how you react to what happens to you
Review my raw notes on this subject matter continuously and often
Reminder from the Stoic Gods…
God (think Jupiter) sets us back not to punish us but to give us an opportunity to do something courageous and thereby increase our chances of attaining “the highest possible excellence
God, says Senecca, knows that “a man needs to be put to the test if he is to gain self-knowledge” and that “only by trying does he learn what his capacities are.”
This fatherly God wants his children to “know the pain of toil, of suffering, of loss, so that they may acquire true strength.”
Whatever type of God you assume, understand that he is testing you to make you stronger, to develop your character, and to make you more appreciative of the life you are living
Downloadable Content
The goal, under life’s circumstances, should be to make sure that no matter when your editor publishes your novel (your death), it will stand as a complete work – or as complete as is humanly possible. William B. Irvine has written two very good books on Stoicism, and the following book notes have been created to help you with your understanding of William B. Irvine’s work!
"The Smart Machine Age will usher in an era where the smartest humans are not those that have the deepest knowledge"
--- Edward Hess & Katherine Ludwig, Humility is the New Smart (2017)
Summary
With the dawn of the Smart Machine Age, humans need a new playbook to thrive. That playbook is laid out in detail by Edward Hess and Katherine Ludwig in Humility is the New Smart. In order to reach “New Smart” you need to:
(1) Quiet your ego
(2) Manage yourself (emotions & thinking)
(3) Reflectively listen
(4) Emotionally connect & relate to others (otherness).
Having finished the 750+ page tome to Capital by Thomas Piketty well over a year ago, I have just gotten around to writing up what I learned. In attempting to summarize this book, I realize that there is no way I can cover everything I learned. Quite simply, Piketty has blown my mind with the depths of his research. This book is the deepest source I have ever read on how capital behaves and why wealth and income inequality are two sides of different coins.
I figure that the best approach with this write-up is to break it down into manageable chunks. What follows below is a summary of the theoretical characteristics of Capital and how it behaves in the world today as well as in the past. I’ll unpack the features of income, capital, and output and how each of these dynamics interplay with one another.
The next write-up at a later date yet to be determined, will delve into the impacts that Capital has had on inequality. I’ll unpack the structure of inequality and some potential solutions that Piketty mentions. This review is by no means a political or opinion piece. I am simply sharing some of the learnings I received from diving into this book.
With that, let’s dive in…
Is r > g the Central Contradiction of Capitalism?
The first concept that Piketty spends time unpacking is the relationship between returns on capital and the overall growth rate of the economy. Piketty boldly states that growth in the future will slow and capital will be that much more important. As economic growth slows and falls below the average rate of return on capital, past wealth naturally takes on a larger importance. This is simply because it takes only a small flow of new savings to increase the stock of wealth steadily.
Thomas Piketty’s First Fundamental Law of Capitalism
The second concept that Piketty spends time unpacking is what he calls his First Fundamental Law of Capitalism. This law shows how important capital is in relation to the national income of a country. As the nature of wealth over the long run continues to transform (i.e., capital used to be agricultural and has since been replaced by industrial, financial capital, and urban real estate), its importance as measured by the capital/income ratio has remained steady and unchanged.
Thomas Piketty’s Second Fundamental Law of Capitalism
The third concept that Piketty spends time unpacking is what he calls his Second Fundamental Law of Capitalism. This law shows that countries with high savings rates and low growth rates accumulate enormous stocks of capital relative to their incomes over the long run. This can have significant effects on the social structure and distribution of wealth in a country. Piketty emphasizes that the impacts of this law are gradual and take decades to manifest. Boldly, Piketty predicts that by 2100 the entire planet could look like Europe at the turn of the 20th century with a capital/income ratio of 6-7 years.
The Dynamics of the Capital/Income Ratio in Europe and the U.S.
By investigating the dynamics of the capital/income ratio of Britain, France, Germany, and the United States, Piketty uncovers that the nature of capital in these rich countries has changed: capital was once mainly land but has now primarily become housing, industrial, and financial assets. But capital’s importance remains the same.
The Dynamics of the Capital/Income Ratio in Britain
In Britain, private wealth in 2010 accounted for 99% of national wealth and the bulk of the pubic debt in practice was owned by a minority of the population. Britain in summary is a country with accumulated capital based on public debt and the reinforcement of private capital.
The Dynamics of the Capital/Income Ratio in France
In France, private wealth in 2010 accounted for 95% of national wealth and the bulk of wealth in France was driven by accumulations of significant public assets in the industrial and financial sectors followed by major waves of privatization of these same assets. In a sense, France is a country with a model of Capitalism without Capitalists.
The Dynamics of the Capital/Income Ratio in Germany
In Germany, capitalism takes on a more social ownership point of view. Prevalent in the German marketplace is the stakeholder model of business where firms are owned not only by shareholders but also by certain other interested parties like the firms’ workers themselves. This Rhenish Capitalism has resulted in lower stock market valuations for German firms when compared to British & French firms.
The Dynamics of the Capital/Income Ratio in the United States
In the United States, more than 95% of the assets are American-owned but the influence of landlords and historically accumulated wealth was less important in the U.S. than in Europe. However, the structure of capital in the United States took on a different form. Specifically in the South, slave capital largely supplanted and surpassed landed capital. So much so, that the total market value of slaves represented nearly a year and a half of U.S. national income in the late 18th and first half of the 19th century.
Conclusion
A market economy based on private property, if left to itself, contains power forces of divergence, which are potentially threatening to democratic societies and to the values of social justice on which they are based. My next write-up on Capital in the Twenty-First Century by Thomas Piketty will dive into the immense inequalities of wealth that have occurred as a result of the natural dynamics of capital.
Stamped from the Beginning chronicles the development of racist ideas, and the ongoing failure of American society to root out these ideas. Throughout time, racist ideas about Black people have perpetuated racial discrimination against Black people, and have led the consumers of racist ideas to believe there is something inherently wrong with Black people.
Ibram X. Kendi focuses his efforts on emphasizing that the policies and the history of oppression and racial discrimination of Black people have made opportunities for Black people scarce. And it is truly this scarcity of Black opportunities that is inferior – not Black people.
It’s clear that racism and discrimination are still highly pervasive in today’s world. And while there are multiple angles to the current problem of race, I want to spend this post unpacking the long-term economic implications of the consistent scarcity of opportunities faced by Black people. The end of slavery for many Black Americans was just the beginning of a larger quest for economic and democratic equality.
But First … What’s A Good Definition of Racism and Racist Ideas?
Any concept that regards one racial group as inferior or superior to another racial group in any way is a good definition for racism as illustrated in this book. And historically, there have been two kinds of racist camps in the World:
The best way to separate the Segregationists from the Assimilationists is to think of their racist ideas as a spectrum. The Segregationists regard Black people as biologically distinct and inferior to White people while the Assimilationists encourage Black people to adopt White cultural traits and/or physical ideas.
Assimilationists read Darwin as saying Black people could one day evolve into White civilization; Segregationists read Darwin as saying Black people were bound for extinction. Both camps are racist because they each regard White people (on racial group) as superior to Black people (other racial group).
In stark contrast to the Segregationists and Assimilationists stand the Anti-Racists; people who think there is nothing wrong with Black people and think that Black people as a whole are an equal racial group to all. Anti-Racists are truly committed to racial equality and focused on interrogating and shedding our world’s racist ideas.
In American history specifically, there have been four major fathers of Segregationist and Assimilationist ideas and one major mother of Anti-Racist ideas. While far from exhaustive, the graphic below depicts each individual:
Why Do These Delineations Matter?
The delineations between Segregationist, Assimilationist, and Anti-Racists matter simply because the issue of the 21st century is “the problem of the color line” that is a result of the racist ideas that have been perpetuated by Segregationist and Assimilationists alike. As multiple series of separate but unequal laws were instituted, nearly ever aspect of southern life from water fountains, to businesses, to transportation were segregated. These separate and inferior Black facilities and opportunities fed White people and Black people alike the segregationist idea of Black people being fundamentally separate and inferior people. It is these racist ideas that have led to policies that have on average rendered Black Americans second-class status socially, economically, and politically.
So, although official segregation is dead, we as an American society still face a real “problem of the color line.” The laws against color can be removed, but that will leave the poverty that is historical and institutionalized consequence of color. For some three centuries now, the communal experiences of the slaves and their descendants has been adversely shaped by social, economic, and political institutions of our ignoble past[1]. And the true American tragedy is our current reluctance to engage in conversations to fix the results of this ignoble past. As nearly two average American lifetimes (79 years) have passed since the end of slavery, America’s national sin is now the responsibility of the third and fourth generations to fix[2].
Slavery Fueled the Growth of the American Economy; Cotton Fueled America’s Growth as a Global Player
The first slaves arrived from West Africa in 1619 and by 1776 slavery was everywhere and legal in all 13 newly created states. But it wasn’t until the rise of cotton during the 19th century that the US went from a colonial and primarily agricultural economy to the second largest industrial power in the world. Cotton created an interconnected global market that linked the industrial textile mills of the Northern states and England with the cotton plantations of the American South. And slave labor fueled it all.
As the following chart shows, cotton-based slavery became America’s first big business:
As cotton production grew exponentially (roughly 400% over 60 years), so did the number of the enslaved (roughly to 4 million people by 1860). The bodies of the enslaved served as America’s largest financial asset and became the force needed to maintain America’s most exported commodity[3]. More than just cotton, this new US economy accelerated worldwide commercial markets in the 19th century, creating demand for innovative contracts, novel financial products, and modern forms of insurance and credit[4].
Cotton profits propelled the United States into a position as one of the leading economies in the world, and made the South its most prosperous region. Unquestionably, cotton-based slavery transformed the American economy.
The Myth of the Antiracist North and the Racist South
When current day citizens look back at the atrocities of slavery, they often pin these atrocities on the South, and the South alone. Doing so, downplays the true capitalistic nature of cotton-based slavery. Because cotton was the number one export from the US during the 19th century, there was a very tight relationship between slavery in the South and the economic and industrial expansions that happened in the North and other parts of the Western worlds. Put very simply, the slavery economy of the US South was deeply tied financially to the North, to Britain, and the rest of the modern Western Worlds.
The benefits of cotton produced by enslaved workers extended to industries beyond the South. In the North and Great Britain, cotton mills hummed, while financial and shipping industries also saw gains. Banks in New York and London provided capital to new and expanding plantations for purchasing both land and enslaved workers[5]. Everyone in power benefited from the system of slavery except of course the millions of enslaved.
Today’s racial wealth gap is perhaps the most glaring legacy of American slavery and the violent economic discrimination and dispossessions that followed[6]. And failure to provide the formerly enslaved with the land grants of 40 acres originally promised through Sherman’s order only accelerated this wealth gap.
Today’s Racial Wealth Gap Began in the Past
Since the Civil War, Black people have faced social, economic, and political headwinds that provided limited opportunities for Black people to accumulate wealth. Even post-Reconstruction, Black people faced law and public policy that was disadvantageous to their cause. Through the first half of the 20th century, the federal government actively excluded Black people from government wealth-building programs like the New Deal.
Between 1944 and 1971, federal spending for former soldiers totaled over $95 billion. Combined with the New Deal and suburban housing construction, the GI Bill gave birth to the White middle class and winded the economic gap between the races. But as our nation tends to do with programs like these, Black veterans faced discrimination that reduced or denied their benefits under the New Deal welfare programs.
The continuous scarcity of Black wealth building opportunities is one of the biggest reasons why the wealth gap started in the past and continues on today. In many ways, the opportunity to accumulate wealth is contingent on the wealth positions of one’s parents and grandparents. As the stats below will show, the descendants of slaves suffer from a scarcity of opportunities that will have lasting adverse impacts on Black wealth as a whole.
The following are some stats on the disparities in wealth between Black and White households.
White Americans have 7x the wealth of Black Americans on average
Median family wealth for white people is $171,000. Median family wealth for black people is $17,600
White households earned a median income of $69,823 in 2019 versus $43,862 for Black households
Black people make up nearly 13% of the US population by hold less than 3% of the nation’s total wealth
Black households have on average $4,400 in home equity, compared with $67,800 for white households.
The gap in homeownership rates in 2019 between Black and white households—about 41% for Black Americans versus 73% for whites—was the widest in a quarter-century, according to census data.
Mutual Obligation to Fix the Devastating Legacy of Slavery and Discrimination
There is no silver bullet to correct the inequalities that are 400 years in the making and deeply ingrained in our systems, institutions, and laws, Richard Neal (D., Mass.), chairman of the House Ways and Means Committee, wrote in a recent report on health and economic equity[7]. While we cannot change the past, we as Americans must not also be indifferent to the current suffering that is linked directly to that same past.
Our history has in fact dealt Black Americans a bad hand; one of inherited poverty and a devastating legacy of discrimination. Collectively, we as a people must work together to address this nation’s unfinished racial opportunity.
Not tackling the question of past discrimination is akin to asking Black people to enter the 100-yeard dash forty yards behind the starting line. And when Black people lose the dashes and the racial disparities of our country persist, racists blamed the supposed slowness of Black people, not the head start of accumulated White privilege.
What the survivors of slavery endured in the cotton fields has everything to do with the wealth of the US today and the disproportions of the wealth between While people in the US on average and the wealth of Black people in the US on average. Continuing to turn a blind eye to this fact is our nation’s continual sin.
[1] Loury, Glenn C. (1998, March 1). An American Tragedy: The legacy of slavery lingers in our cities’ ghettos. Retrieved from https://www.brookings.edu/articles/an-american-tragedy-the-legacy-of-slavery-lingers-in-our-cities-ghettos/
[2] Desmond, Matthew. (2019, August 14). In order to understand the brutality of American capitalism, you have to start on the plantation. Retrieved from https://www.nytimes.com/interactive/2019/08/14/magazine/slavery-capitalism.html
[3] Lockhart, P.R. (2019, August 16). How slavery became America’s first big business. Retrieved from https://www.vox.com/identities/2019/8/16/20806069/slavery-economy-capitalism-violence-cotton-edward-baptist
[4] Baradaran, Mehrsa. (2019, August 14). Cotton and the Global Market. Retrieved from https://www.nytimes.com/interactive/2019/08/14/magazine/slavery-capitalism.html
[5] Timmons, Greg (2018, March 6). How slavery Became the Economic Engine of the South. Retrieved from https://www.history.com/news/slavery-profitable-southern-economy
[6] Lee, Trymaine (2019, August 14) A vast wealth gap, driven by segregation, redlining, evictions, and exclusion, separates black and white America. Retrieved from https://www.nytimes.com/interactive/2019/08/14/magazine/racial-wealth-gap.html
[7] Tergesen, Anne and Gillers, Heather. (2021, February 22). U.S. Retirement Crisis Hits Black Americans Hard. Retrieved from https://www.wsj.com/articles/u-s-retirement-crisis-hits-black-americans-hard-11613989981?mod=djem10point
[8] Kendi, Ibram X. (2016). Stamped from the Beginning: The Definitive History of Racist Ideas in America. Bold Type Books.
