Yesterday I asked you to identify the next economic bubble or artificial shortage that is likely to form. You did better than I expected. The winning suggestion: WATER.

In order to have a good artificial shortage you need several things to be true:

  1. The commodity must be essential.
  2. There is a plausible "natural" explanation for the shortage.
  3. Only large companies have the resources to increase supply.
  4. The government is involved in some way.
  5. The media hasn't yet obsessed about it, but could.
  6. Inventions to solve the problem are noticeably absent.
  7. There are futures contracts for it.

Water has it all, except for the existence of futures contracts, as far as I can tell. Once you see a market for water futures forming, bend over. That's when the manipulation will begin. Crooks prefer manipulating financial markets over building reservoirs.

The plausible explanation for the worldwide shortage is that the population is growing faster than the supply of clean water. Add global warming to the mix and you have plausible explanations for worldwide droughts. That's the cover story. It's true enough to mask the artificial shortages that will be caused by the speculators and hedge funds.

So how can you invest and make money in water now, before the bubble tops?

I was one of Enron's victims when that company manipulated the energy prices in California and looted the residents.
A recent report on 60 Minutes described how big banks, speculators, and hedge funds caused oil prices to skyrocket in 2008 despite falling demand and rising supply. I got screwed in that deal just like the rest of you.

And of course there was the Dotcom stock bubble that cost lots of people a bundle, thanks to the many unscrupulous financial "experts" and lying CEOs who made it possible.

Some would argue that the war on terror is really about channeling taxpayer money to the military industrial complex. I don't think that's the whole story, but the war in Iraq probably wouldn't have happened unless someone was sure to make a profit.

Then there was the bogus move to ethanol that made food prices skyrocket. Thank you lobbyists!

Now the housing bubble and the mortgage backed derivatives are picking my pocket along with yours.

And don't get me started about Bernie Madoff, although I think I dodged that specific bullet. It's hard to tell.

This got me wondering who will screw us next. You know someone is manipulating the market whenever you see a bubble, a relatively sudden shortage, a scare, or any investment that is too complicated to understand. Armed with that knowledge, where is the next bubble, scam, scare, or artificial shortage?

The obvious next candidate for a financial disaster involves all the government money intended to stimulate the economy. It's the biggest game in town for 2009, so every crook in a suit is figuring out how to get a piece of that action. I'm sure the upcoming administration means well, but the criminals have improved their methods since the New Deal. Watch out for any sort of confusing organization or fund that gets created to manage and distribute the stimulus money. We could save time by arresting those guys in advance.

I expect another financial disaster to be in the "green" field. Look for more inexplicable shortages, bubbles, and of course confusing investment opportunities in that area, possibly in conjunction with the stimulus funding. Many companies in that industry already had a good run up in stock prices, but I think that's just the beginning. If you don't see Warren Buffet investing in that area, there might be a good reason.

Health care costs are going through the roof in the U.S. One assumes that increase is a simple function of an aging population, rising costs, malpractice insurance, patented treatment options, etc. I'd watch that area for the next big scam or bubble. It seems ripe because everyone already expects those prices to keep rising quickly.

You have been warned.
How long will it be before someone creates an application for the iPhone that has all of the advantages of a baby without the disadvantages? This would take the Tamagotchi concept (http://en.wikipedia.org/wiki/Tamagotchi) a step farther.

Imagine a cute little CGI baby's face that fills the entire iPhone screen and is programmed to move like a real baby. You don't see the rest of the baby, just the big face. If you touch your finger to the baby's mouth, it starts sucking on it, essentially nursing. Its eyes would open and its little cheeks would start working.

The motion sensing technology of the iPhone would let you do everything from burping to rocking. And you could have some sort of humorous animated diaper changing sequence.

Obviously this application would be targeted at women. Thanks to evolution, most women get all gooey in the presence of a baby's face. You could kick this concept up a notch by programming the application to create a baby that is the combination of the user and the mate of her choice, based on morphed photos. The baby could even age, learning to speak and interact at about the same pace that artificial intelligence evolves in the iPhone. In time the application would seem just like a real child.

The best part of this idea is that someone is probably already working on it and will be pissed that it was described here before it launched.
Have you ever wondered how someone crosses the line from being an acquaintance to a friend? Or more importantly, if you want to convert an acquaintance into a friend, what could you do that wouldn't come off as stalking?

I think you can define a friend with two criteria, both of which must be met. A friend is. . .

1. Someone you have told a secret.

2. Someone who has accepted a favor from you.

Notice that I have cleverly defined a friend in terms of things you give and not things you receive. If you are evaluating your potential friends in terms of what they can give you, or how they can entertain you, you probably don't have many friends.

I read somewhere that telling a secret makes the recipient of the secret automatically bond to you. It puts the giver of the secret in a vulnerable position and it changes the receiver into a protector. That's halfway to being friends.

The second rule is simple but powerful. We accept favors from strangers all the time, without any expectation of becoming friends. But we don't also share secrets with those strangers. It is the combination of the secret and the favor that nudges an acquaintance into a friend.

Most people are wired to reciprocate. So if you go first with your secret and your favor, the recipient will be primed to do the same. It is the willingness to reciprocate that matters.

Obviously you don't want to give a dangerous or important secret to an acquaintance in hopes it will lead to friendship. You want to hold back the good stuff and start with something small. For example, lets say you are both at a dinner party and your host served duck. At the dinner table you told the host the food was wonderful, but later and privately to your would-be friend you jokingly confess that you hate duck. That's a secret, but a tiny one. You don't want to start out with your deepest secrets. Work into that over time.

Likewise with the favors, keep them tiny at first. You might have some special knowledge to share that costs you nothing but a few minutes of your time. Or perhaps you had a conversation about a vacation spot and you forwarded an e-mail with a link that your potential friend might find useful. It's a tiny favor and will be accepted. You don't want to start right off offering to drive someone to the airport at 4 AM.

This partly explains why people who work together, or play sports together, naturally become friends. You have lots of opportunities to share small secrets and perform minor favors. And of course you have lots of things to talk about. That helps.

The secret and the favor are necessary but not sufficient for making a friend. You still need some basic chemistry and common interests. But chemistry and common interests aren't things you can easily change. So if you find a candidate for a friend with whom you have some chemistry and common interests, work on the secret and the favor. Those you can control.

When I was a kid we had a pool table in the basement. It barely fit. We only had enough room to maneuver the stick when the cue ball happened to be near the middle of the table. The pool table didn't have a slate bed. That would have been expensive. Our family liked bargains. One of our home court advantages was the knowledge that hitting a ball slowly along the North side meant the ball would roll to the edge and cling all the way to the pocket.

I played about a billion hours of pool on that table, mostly by myself when bored. There wasn't much else to do on a freezing winter night in Windham NY. We only had three channels on TV and I did my homework at school.

As an adult, I realized my dream of getting a nice pool table. Thanks to my many hours of childhood practice, I don't often lose. The exception is when I run into someone who also grew up in a cold climate and had a pool table.

Pool is a game in which there is a nearly perfect correlation between how much you have played during your life and how good you are. I sometimes joke that instead of playing actual games I could just compare my number of hours of lifetime practice to my opponent's and declare a winner. Research shows this is essentially true for all sorts of skills.


So you would think that the secret to success is to practice more than your competition. But it's never that simple. In order to put in that much practice you need the opportunity, such as having a pool table in your basement*. But you also need some sort of passion, or drive, or OCD to put in the time. Where does that come from?

Personally, I have felt the compulsion to practice particular skills dozens of times in my life. It happened with ping pong, drawing comics, tennis, computer programming, and other things. Practicing these skills always felt like something I couldn't stop if I wanted to. The attraction was so strong that it felt like OCD. The only reason I wasn't treated for my afflictions is that the activities to which I was drawn (no pun) were socially acceptable.

It makes me wonder if the passion part of our brains will ever be manipulated by drugs so that passionless people get just enough OCD to obsessively practice something until they get good at it.

* Malcolm Gladwell's book, Outliers, talks about the importance of opportunity. It's a great read.

During my corporate years, an executive of the company once pulled me aside and told me his philosophy that there are two types of people. He called them "good bears" and "bad bears." He thought I would be delighted to know I was a good bear. My first reaction, which I kept inside my head where it would be safe was "Thanks for the nothing, you simplistic bastard." But in the fullness of time I have come to embrace his philosophy.

I allow for some slop in my designations. Everyone is nice sometimes, and everyone has their selfish or evil moments. But at a person's core you will find either a good bear or a bad bear.

Case in point, a reader sent me this observation from his workplace.

"Extra food from company events is often put in the break room areas for those who weren't involved in the meeting.  I have a co-worker who, when happening upon the food, will pack it up and take it home.  He rarely leaves anything behind.  One time he was seen taking the bag the food was delivered in out of the trash so he could repack it.  He's been seen packing up the left over plastic silverware, napkins and plates, but leaving behind the Italian dressing.  He must not like that kind."

While I can't rule out the possibility that this person was taking the food to a homeless shelter, something tells me that isn't the case. The homeless often like Italian dressing. In any case, this is just an example.

Do you buy into the philosophy that people are either good bears or bad bears at their core?
One clear sign of the End Time is when the media starts publishing my opinions on the economy.


Worse yet, now I have to worry that, for the benefit of the world, Warren Buffett will send his goons to kill me. As long as I'm a dead man walking, I might as well make things worse before I go. Here now, more of my opinions about the economy.

I wonder what people mean when they say the economy will recover in 2010. The only way that can happen is if another irrational bubble forms thus creating an illusion of wealth similar to our previous illusions. If you take illusions out of the equation, there isn't anything to get "back" to. The wealth was never there in the first place.

I said before that I think we're on the cusp of a change as fundamental as the industrial revolution. But this time the change will be on the consumption side, not the production side. As a society we have dabbled with recycling and such, but it has always been fairly optional. There was no real penalty for waste.

The coming consumption revolution won't be strictly for the benefit of the environment. It will be an economic necessity, driven largely by the huge numbers of retired poor. There simply won't be enough stuff for everyone if waste is allowed.

The Internet will make this revolution possible. I've already written about the concept of ride sharing becoming widespread if the Internet and smart phones allow you to easily find rides going your way. That's just one example of how society could adapt to having less money without losing much in terms of happiness. Here's another example:

In California we're facing a severe budget deficit, and this will demand cuts in education among other things. I can imagine a future economy where everyone is home schooled over the Internet, and the average result is an improvement. With the Internet you could leverage the best teaching methods to the entire country. No one gets the bad teacher or the disruptive class. There are no bullies and no cliques.

Obviously you can see lots of problems with this approach. We assume that kids gain a lot from the social interaction of being in school. And of course personal attention from a teacher is important. But we have enough home schooled kids in the world to test that theory. My guess is that as long as home schooled kids have friends in the neighborhood, and siblings, they socialize just fine. The social skills can be learned on sports teams and at Girl Scouts. And I suspect a parent can give better personal attention than a teacher with 20 students.

Poor kids don't have computers and Internet connections. But subsidizing them would be far cheaper in taxes than sending them to school. And suddenly everyone would get the same quality of education.

I'm reading an excellent book called Outliers, by Malcolm Gladwell. One of the topics involves the huge academic disadvantage absorbed by kids who are the younger ones in a given class. Eleven months is a huge difference in maturity when you are in second grade. Home schoolers could start grades on their birthdays, and always be at the same maturity level as their peers. That change alone can buy you a big gain in average academic achievement.

Gladwell also discusses the disadvantage of having no school in the summer. It's a legacy of our farming past, with no current utility. Every summer the American kids lose ground to the Japanese kids who school year round. Home schooling would have no long breaks. Another problem solved.

This is the sort of change that could never happen if the economy was in a happy bubble and it seemed that money was abundant. But as the reality of our economic situation settles in, unthinkable options become thinkable. The good news is that the unthinkable options will have lots of advantages.


The other day I was at the Small Dog Park. It's a fenced area where dogs under 20 pounds can frolic with each other. I was chatting with a friend, whose dog is named Indy, about a movie I just watched involving a dog named Marley. After my friend left, I met a guy who has two Italian Greyhounds, coincidentally named Marley and Indy.

I don't know the odds of discussing two dogs named Marley and Indy, immediately followed by an unrelated discussion of two different dogs named Marley and Indy. I'm thinking it is in the smallish category.

Speaking of coincidences, I have started noticing that all movies are about me personally. For example, the Marley and Me movie is about a guy who writes humorous columns about his dog. My last blog post prior to watching the movie was a humorous piece about my own dog. (See below.) The writer in the movie worked in a cubicle at one point, and if you look closely at the comic hanging on his wall, it's Dilbert.

There's a bit of selection bias in this coincidence. I did know it was about a dog. But I wasn't aware it was about a writer who writes humorous bits about his dog. And I didn't expect to see one of my drawings in it.

Still, it seems that every time I watch a movie or a TV show lately there is at least one element that is yanked directly from my life. And I don't mean the obvious stuff such as "we are both humans." The connections are usually pretty obscure.

I have to remain true to my skeptical roots and explain these coincidences away with references to selective memory, and pointing out that it would be even stranger if there were no coincidences at all, given the richness of life's experiences. But it got me wondering if there is any way to design an experiment to test the theory that life is an illusion.

Obviously the illusion could be so well designed that all testing of it would be cleverly thwarted. So a negative result would mean nothing. But suppose this illusion was providing a fire hose of ongoing clues. What would those clues look like?

One possible clue is that your life might have what I will call a theme. For example, Steve Jobs' theme is that he can turn any business into a huge winner. You might call that skill, but he still had to be in exactly the right places at exactly the right times for his particular skill to be useful. I don't think he would have been much of a hunter/gatherer.

You probably know people who are the opposite of Steve Jobs, able to snatch defeat from the jaws of victory again and again, through no obvious fault of their own. It looks like extraordinary bad luck. That's a theme.

If your name is Kennedy, you might have good luck with love and money and power, but bad luck with transportation. Stay away from PT boats, convertibles in Dallas, cars in rivers, and small aircraft. That's a theme.

Some people are lucky in love, but unlucky in health. That's a theme. You get the picture. So ask yourself if your life would look entirely random from an objective viewpoint or is there a recurring theme. If you have a theme, you might be a product of design.

Another clue that life is an illusion is that perceived reality might have inexplicable dead ends or cracks. Consider the physics study of entanglement, where particles influence each other at any distance, which is seemingly impossible. Or consider that light is both a particle and a wave. Physics is full of examples where reality seems to have cracks and dead ends.

How would you test to see if life is an illusion?

The other night I couldn't get to sleep. The problem was that I was sharing the bed with a wife, two cats, and a dog. The only position left for me would have looked like the chalk outline at a murder scene. I decided that one of the mammals needed to be moved. I was groggy from sleep deprivation, but even in that debilitated state I knew the wrong answers were (in this orders): wife, cat 1, cat 2. A good night of sleep isn't worth a bite wound.

I figured moving the dog was my best chance of not regretting this plan. She's a 12-pound toy Australian Shepherd and always in a good mood. When she's sleepy you can mold her into any position you like, Gumby-style. My idea was to bring her up toward my chest, with her back to my stomach, spoon position. Then I could turn sideways, insert my special small knee pillow between my legs and be good to go.

It was totally dark so I was operating by touch. I reached down and pulled little Snickers up to my chest, adjusted my blankets and pillows, and started settling in for a luxurious snooze. I love it when a plan comes together like that.
Few things are more soothing than sleeping with a warm puppy. I decided to use the dog as sort of a little pillow for my snout. It felt wonderful to snuggle my nose in between her ear and her neck area. She was totally unconscious so she took any position I assigned. It was great, but perhaps one more adjustment would make it perfect. I decided to put one arm around her and slip my hand under her head, just to get extra comfy. But there was just one problem.


I was panicked, feeling around in the dark for where she must have contorted her head to make it so far from where I knew it had to be. I slipped my hand under my pillow and felt around, nothing. I checked to see if I was accidentally lying on her head: negative. Her head just wasn't there. In my half-asleep state, I worried that a horrible accident had happened during the night, possibly involving a circular saw. I realize that sounds unlikely to you, but keep in mind that my own snoring doesn't wake me, and I did have a headless dog.

I'm sure many of you readers are ahead of me on this story. Eventually I realized her head was on the other side of her body, exactly where it belonged. I had been snuggling my face into my dog's ass.

So that's how my 2009 started. I'm really hoping it isn't some sort of omen.
I've written before on the topic of how the universe seems to have a cruel sense of humor, or maybe just a sense of balance. For example, the universe might allow you to be rich, handsome, and a young President of the United States. The only catch is that you also get assassinated in Dallas, or your intern is Monica Lewinsky. There's always a catch.

But I think I found the all-time winner in this category in a Forbes article about billionaires who lost some or all of their fortunes in 2008. Before you read about him, allow me to describe the conversation that the universe had with his soul before he was born. I think it went something like this:

Universe: I've decided to make you a billionaire.

Soul: Woo-hoo!

Universe: But you will lose more than half of it in one year.

Soul: I guess that's still okay. That's still a lot of money.

Universe: And you'll probably go to jail for two years.

Soul: Dang. I knew there was a catch. Still, it's only two years.

Universe: Actually, that's not the catch.

Soul: Uh-oh.

Universe: Your name will be Anurag Dikshit.

Soul: Ha ha! Good one. Seriously, what will my name be?

Universe: We're done here, Dikshit.


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