Recently I suggested that someday it might be illegal for untrained citizens to invest in stocks of individual companies because it is too risky. As regular readers know, I sometimes throw out provocative ideas just for the fun of it. I didn't think much about that idea until after I wrote it. But the more I mulled it over, the more it started to make sense. So I'm going to develop that argument here.

I remind you that I lean libertarian (without the crazy stuff) so all of my impulses are to allow people the freedom to hurt themselves any way they choose, so long as their corpses don't block my driveway or cost me anything. So the argument I am about to make offends even my own sensibility. The troubling part is that it makes sense.

Let's begin by noting there are already plenty of restrictions on personal freedoms when the consensus is that these restrictions somehow protect people from themselves, or they protect society as a whole. For example, where I live you can't legally...
  • - Drive without a seatbelt
  • - Ride a motorcycle without a helmet
  • - Commit suicide
  • - Practice law, medicine, or other professions without a license
  • - Operate a motor vehicle while under the influence
  • - Gamble in most places
  • - Carry an Uzi down the street
  • - Buy dynamite

The list goes on, and that doesn't even include the many restrictions on underage activities. So there is nothing unusual or unprecedented about legal restrictions on freedom when an argument can be made that it protects lives or property.

My argument against allowing individuals to invest in stocks is that unless you have insider knowledge, which is already illegal, your odds of beating the index averages are slim. It is nothing more than gambling.

The myth of stock investing is that a person who does more research has better results. But there is no science to support that view. Indeed, the person who understands the most about individual stock investing avoids them completely and invests in ETFs or index funds.

The problem with doing your own research on stocks is that you must rely on the information coming from the management of a company, and managers are generally misinformed or lying. Even the most seasoned investment professionals running mutual funds perform worse than the indexes on average. Brains and research can't overcome the fact that much of your data is deliberately tainted at the source.

When people go to Vegas to gamble, they usually set some sort of limit for their losses. And they go with the full knowledge that winning is unlikely. It makes sense for that sort of activity to be legal, within limits, because it is viewed as entertainment and not investment. But if it were common for people to bet their retirement savings on Blackjack, you can be sure it would be illegal.

We don't allow unlicensed people to practice law or medicine, sell real estate, or even build a house. It is entirely consistent to restrict the untrained from making risky stock investments.

I reiterate that this runs against my own libertarian philosophy. I would feel I had lost something important if I couldn't invest in individual stocks. But it is also true that my net worth would be larger if I had never done it. And it would be larger still if I hadn't allowed professionals to do it on my behalf.

If anyone comments to this post by saying, "I do my own research and I made money in the stock market," it is proving my point. And if you don't see why that proves my point that further proves my point.

There is a growing trend for people to be buried with their cell phones.


This idea appeals to me on many levels. Obviously I'd want a phone in my casket just in case I pop back to life. Although I'm fairly certain that if I wake up in a casket I would be able to scream through six feet of dirt, I'd still want a phone as a backup.

You might argue that the embalming fluid would eliminate any chance of going back to work on Monday. And the fact I specified cremation in my will reduces the odds of waking up in a casket. But I am cautious by nature when it comes to issues such as being buried alive. There is a non-zero chance my last wishes are misinterpreted then the undertaker runs out of embalming fluid and decides to fake it, and my purported death is nothing but an extra good nap. It could happen, and I want a phone. I also want an outlet and a charger. And I want my casket to be at least 2,000 square feet with 10-foot ceilings, ventilation, good lighting, and a bathroom. So yes, I get the whole cell phone thing.

I'm sure my readers realize this trend creates an opportunity for some world class pranks. Begin by pretending you are putting the deceased person's cell phone in the casket and then pocket it. Later you can call the relatives of the departed and ask questions such as "How's the weather out there?" You might accuse the living of being too hasty about dividing up your possessions. Tell them you have befriended some worms but you are concerned they are up to no good. If they ask how you are doing, say everything was fine until you farted. There's no end to the comedic opportunities.


If you order Dilbert 2.0, my twentieth anniversary book, today or tomorrow, you can still get it before Christmas.


Check out the reviews. It's probably the best thing I have ever done.


In yesterday's blog I imagined a future where capitalism morphs into something with freedom of employment but more restrictions on how individuals can spend, invest, and buy health care. The point of the restrictions would be to keep gullible idiots from destroying the entire economy, again, through their own reckless behavior.

Most of the comments fell into two camps:

1. Capitalism is fine the way it is.

2. People would never stand for those new restrictions.

Some people also assumed I was recommending new restrictions on freedoms. I'm not. I'm predicting the restrictions because it will become clear that the alternatives are impractical. And as always, it is just a thought experiment. Don't take it too seriously.

First let's look at the notion that capitalism is fine and we're experiencing nothing more than another recession. I don't think that's the case this time for several reasons. The biggest reason is the baby boomer generation that is retiring and poised to absorb all social security and health care resources while adding little in productivity. And by the way, they didn't save enough money to retire. Next you have the Kazillion dollars in debt, and another tsunami of mortgage defaults that will trigger over the next few years as rates automatically adjust upward according to contract.

Meanwhile I see no obvious candidate for an economic driver to the upside. Apple can only sell so many iPhones.

Unwise debt and unsustainable bubbles had masked the fact that the economy was already bankrupt. The next mortgage meltdown (unavoidable), and the baby boomer impact (unavoidable) are not balanced out by anything that looks like good news. In other words, capitalism Part 1 failed.

The second objection to yesterday's post is that people wouldn't put up with any additional curbs on their spending and investing freedoms. That seems ridiculous to me since we already put up with so many societal restrictions. A few more would hardly be noticed. I don't remember the last time I heard anyone grumble about seatbelts. And if the government told banks they couldn't make billion-dollar loans to the homeless, no one would complain about that new restriction on freedom. Some restrictions on freedom just make sense.

Suppose your so-called restrictions on freedom came down to this question: "Would you rather have affordable healthcare or the right to make ignorant and risky investments?" Or how about, "Would you like to have a job or the right to be obese without being taxed extra?"

I don't know what capitalism's second act will look like, but it probably involves preventing individuals from being as self-destructive as they would prefer.

I remind you that I lean libertarian, so I'm happy to let anyone engage in risky and morally ambiguous behavior, but only up to the point where it has an impact on me. When your behavior raises my taxes it becomes my business.

Things change. It's the nature of the universe. Yesterday's greatest ideas give way to ideas that are better, or better suited to the present, or at least different. Change is the only thing on which you can depend.

So what about capitalism?

I think capitalism had a good run, but it will soon be done. Socialism will be too expensive to maintain as the world economies slow, and communism won't be making a comeback. The economies of the future will be something new.

Capitalism was conceived before the Internet, and before the gears of commerce became computerized. The system could absorb a lot of con artists because they didn't have the ability to steal fast enough to cripple the system. As you know, that has changed. Crooks in expensive suits now have the ability to swindle trillions, collectively, thanks to the efficiency of the system. And idiots in expensive suits can do even more damage.

The economy is now too complicated for even the regulators to know when a con or a huge mistake is happening. The balance of power has swung to the crooks and the market manipulators. Even if we could regulate away these problems, it's already too late. There isn't enough money left to support the planet under the current social systems, at least not when the boomers start retiring and unemployment starts climbing.

I've been wondering what the new economic system will look like. I think the next economy will have the same freedom of employment and entrepreneurship as capitalism. That part seemed to work well. But you might see restrictions on what types of investments individuals can make, to keep them out of trouble. Most people should be restricted to buying only the broad indexes with an ETF. And perhaps the percentage of stock you can legally own as a percentage of your net worth should go down as you near retirement. Stock bubbles could be avoided by restricting how much money can be invested in stocks, on an annual basis, to keep the price earnings ratios around 15. New stock offerings would be funded by existing companies and institutional investors.  (Clearly that idea isn't well thought out. It's just a directional sort of prediction.)

But the biggest change could be in what sort of consumption is allowed under the new economy. Most of our problems were caused by people who couldn't control their own spending. Banks could tighten their credit requirements but that won't be enough to stop the spending junkies from depleting their own nest eggs. So you might see some forced savings rules in the new economy.

Depending on how bad the economy gets, you could also see rules banning single passengers in cars. And working from home might become a legal requirement for economic reasons. Perhaps your health insurance premiums would be based on your body mass index and whether or not you smoke. You could see a whole range of restrictions on how consumers can live, spend, and invest, to prevent market bubbles and waste.

So I think the new economy will allow you freedom of employment, but you won't be able to spend and invest your money as freely as you once did. That was the part that got us in trouble.

I'm not saying this new economy will be an improvement. It's just a prediction.
In my capacity as cartoonist, I feel an obligation to simplify complicated discussions until two things happen simultaneously:

1. Absurdity is achieved.

2. The reader feels as if it all makes sense.

My comic from Saturday illustrates that principle.

According to Google Alerts that comic has been posted to more blogs than any comic I have ever created. It inspires me to more fully explain the theory of finance in this blog.

Think of financial theory as a stool. The stool is supported by three legs, or truisms.

  • History always repeats.
  • Past performance is no indication of future returns.
  • Asshats are trying to steal your money.

These three truisms can explain any financial phenomenon. For example, if your financial advisor suggests that you invest in a market bubble that is about to burst, he will explain that the past is no indication of future results. Just because a Price/Earnings ratio of 45 has never been sustainable in the past doesn't mean it won't be perfectly safe in the future.

And when the bubble bursts and you lose half of your money, your advisor will explain it's because history always repeats. In other words, he's an asshat trying to steal your money.

This stool also explains the housing situation. Financial experts knew that making loans to hobos had never been a good idea in the past. On the other hand, past performance is no indication of future returns. Maybe this time would be different. Then history repeated and asshats stole your money. As a bonus, they even stole each other's money this time. You have to admire their thoroughness.

One last thing you need to know: People who say it is a good time to invest are called bulls. The bulls are at the center of all financial problems.

In summary, if you want to understand financial markets find a bull and look at his stool.

People keep asking me what I think about bailing out the U.S. car makers. I am unqualified to have an opinion on the economics of that question, and the experts seem divided. In situations such as this, where the experts disagree on the best path, I say use the limited supply of money someplace where the experts DO agree that it would help the economy, if there is such a place. I'm not claiming that withholding aid from the car makers would be the best solution. It's just the most rational decision when the best path can't be known.

And this got me thinking about why we have so many cars in the first place. Excess cars cause traffic, pollution, and dependence on foreign sources of oil. And who benefits most by this situation? Answer: car makers.

Suppose the government enacted laws that made it legal for anyone to be a taxi driver in his own car without a special taxi license. And suppose the income was non-taxable. The result would be cheap taxis and high availability. Every time you wanted to run an errand, and had an extra minute, you could choose to pick up a rider and cut your own driving expense in half. Technology will make it easy to match amateur taxi drivers with riders. And the market would keep prices low.

Now obviously there are lots of problems with this scheme, in terms of security, liability, and people puking in the back of your Hyundai. But compare that to our current problems: car expenses, traffic, pollution, global warming, and excess energy use. I think the universal taxi scheme comes out ahead.

None of this could happen while U.S. automakers are still in business. They would lobby to make sure the market for new cars stayed strong. And obviously the professional taxi drivers wouldn't like it. So they would lobby against it.

This sort of thought has been going through my mind lately because I think the current recession isn't going to be temporary. I think we're on the verge of a change as profound as the Industrial Revolution. Society will have to retool its expectations to meet the reality that there just won't be enough money to provide necessary services if we insist on consuming in an inefficient way.

The universal taxi theory won't happen because farsighted politicians changed laws. It will happen because people start doing it on their own in such numbers it will be impossible to prosecute, especially given the dwindling law enforcement budgets.

Likewise, the future includes legalized (de facto or literally) drugs and prostitution, out of budget necessity. There simply won't be enough tax money to chase that sort of perp. And say goodbye to speed limits in all but the most dangerous roads.
I generally dismiss conspiracy theories. If something sounds ridiculous, it's probably not true. Now I find out that the Governor of Illinois was selling a U.S. Senate seat to the highest bidder.


This makes me reevaluate my rule of thumb on conspiracy theories. I have to move the bar in terms of what is too ridiculous to be potentially true.

If you tell me the government has been covering up alien visits for decades, I still consider that too ridiculous to be true, but mostly for the reason that alien visitation seems unlikely. I have no problem believing that the government would cover it up for some dumbass reason. That is well within the realm of believable.

I have no problem believing that during the 9/11 attacks our government ordered the Air Force to destroy the passenger jet that was heading for the Whitehouse, and found it convenient that the passengers rushed the hijackers at about the same time. It makes a good hero story. I'm not saying that's what happened. I'm just saying that it doesn't qualify as too ridiculous to be true. To me it even sounds more likely than the official version.

The most evil conspiracy theory I have ever heard involves the idea that the 9/11 attacks themselves were planned by the U.S. government as a pretext for military action and subsequent profit by some industrialists. I don't believe that's true, but again, thanks to Governor Asshat, I can no longer rule it out simply for being too ridiculous to consider. The bar has been moved.

I don't know if the Mafia fixed the election for President Kennedy, then had him whacked because he didn't return the favor, but it is well within the realm of non-ridiculous.

What other theories do you think are now in the realm of not-too-ridiculous?

If we ignore for the moment that we are already moist robots of a sort, I wonder if it is inevitable that we will evolve into more traditional robots of metal and silicon and plastic.

I think futurist Ray Kurzweil predicted that someday we will have body scanners so accurate we can analyze a human brain and transfer it to a computer. Obviously the computers of the future will need to be more powerful to handle the load, but that seems feasible. I wonder what happens next.

Suppose we transfer a dying guy's brain into a computer, and that computer passes the Turing Test, thus demonstrating genuine intelligence. For all practical purposes it might have the same personality as the human brain that went into it. If you had a conversation with it, I can imagine it expressing a desire to live and even procreate.

Now here's where it gets interesting. Once you transfer more than one human into computer form, the two of them could choose to mate, with their offspring being the combination of the two artificial personalities, after agreeing to some rules about which traits they prefer to be dominant.

As computers, they could still tap into all the knowledge on the Internet, but only as needed, the same way regular humans access the Internet. The only programs running automatically and all the time would be their core personalities.

Eventually these computer brains would request more robust robot bodies, and the regular humans would oblige by developing ever better models. And then things get really interesting because regular humans could mate with robot lovers. The offspring would be the combination of the computer's mind and the scanned brain of the regular human, again following rules to see which traits dominate. The offspring would necessarily be a computer, thus dooming regular humans in the long run.

In some cases a dying male could leave behind a sperm sample before evolving into his computer-robot self. That way he could still reproduce with a regular human woman. So there would be a period in human evolution where regular humans and robot humans routinely mate and have the option of a traditional or robot baby.

Eventually, when all humans have robot bodies and computer brains, it will seem silly to be encased in separate physical bodies when reality could be better handled via simulation. So all the individual computers would agree to download to one huge computer and live a simulated reality for the rest of time.

The imagined reality would feature each "person" in flesh form. Upon the death of a particular simulated human, the host computer person would "reincarnate" into another simulated human baby.

By the way, it already happened. Your flesh form died a billion years ago. To make the simulation meaningful, you walled off the memory of being in a simulation. But you left the digital equivalent of a bread crumb path back because, being human, you couldn't totally release on the past. So we see hints and clues in this simulated life that give us a way out of this simulation if it becomes too brutal.

For example, in this simulated life we continually create simulations of our own. We call them TV shows, plays, movies, books, and even computer games that are simulations of life. Everything in this life is a metaphor. And our coincidences aren't as coincidental as we think.

I'm guessing you don't buy this explanation of your reality, but consider this: If the prediction of the future seems reasonable, and time is infinite, it is infinitely more likely it already happened compared to the possibility that it will happen in our future and hasn't yet. We could be imagining the universe as only 14 billion years old in the simulation.

(Yes, I am borrowing from the Boltzmann Brain idea and combining it with Kurzweil's predictions and a dash of The Matrix, plus a few other ideas. That doesn't make it wrong. That just proves we left bread crumbs.)
I was reading something scary the other day. Obviously it was from an economist. He said the real problems haven't started yet. Wait until the Baby Boomers start retiring. Their nest eggs are tiny and there won't be enough Social Security and health care money in the universe to keep everyone in cat food and diapers.

I'm an optimist so I think society will find a way to adapt. But I wonder what that will look like? It might be an improvement.

For one thing, I think you'll see more sharing. The Internet can make it easy to know where you can find resources to borrow. The most obvious example is carpooling. But it could get down to who has food in the fridge that will go bad because someone will be out of town for a week. Or maybe it becomes easy to find a reliable grandma who will babysit for free if you agree to feed her cat next Tuesday. The market for sharing is totally untapped.

I just bought two tickets to a show, for an upcoming trip. I'm sure I will like the show. But I won't like it more than watching a good TV show with family or friends while eating popcorn and sitting on the couch. It's just different. Most luxury expenses are entirely unnecessary in terms of happiness.

I eat a lot of meals out, but it's mostly for convenience. After most restaurants go out of business, which should happen in the next five years, people might start cooking group meals. It makes a lot more sense for your family to make a big pot of mashed potatoes and meet the neighbors for a group buffet. That's relatively little work for each family, and relatively cheap. Again all you need is the Internet to help you organize that sort of thing. Plus you need a good dose of poverty to eliminate the alternatives.

The new poverty is likely to be different from anything that came before. Imagine a world where even the poor have good Internet access and universal healthcare. If you were healthy and could use the Internet to find everything else you needed, from borrowing a tool to organizing a Scrabble game, you'd be pretty much set.

The other way the future could go is that out of economic necessity the government will approve some sort of feel-good pill that makes your external situation less important. You won't mind sharing a one-room apartment with 20 people if they are all on the same pill. And you won't require much in terms of entertainment. So long as the pill is cheap, which it could be if the government declares it so, then people won't need much to be happily retired. The pill could be outlawed for anyone under 65, just so the wheels don't completely fall off the economic engine.

It would be impossible for the government to approve a pill that simply made you feel good. Society frowns on that sort of thing. But imagine the inventors of the pill being smart about how they describe the pill's impact. Instead of saying it makes you happy they could say it makes you less fussy. You won't mind eating that cat food instead of steak because you're suddenly less fussy when medicated. Even the most religious person would agree that living like a monk can be a good thing. Fussiness is the influence of the devil. The government would surely approve an anti-Satan pill.

Which way do you think it will go: more sharing or more medication?
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