Why It Is Possible to Make Above Average Returns – Even in Efficient Markets

There is a well-known hypothesis in financial economics, called the Efficient Market Hypothesis (EMH), that spawns a lot of debate. The EMH states that financial markets are ‘informationally efficient’. In other words: a financial asset’s market price always incorporates and reflects all available relevant information. Hence no investor can consistently use such information to find stocks that earn him above average returns. After all: such information is already reflected in the asset’s price; so if there is a lot of ‘positive’ information about the company, the stock’s market price will have increased, and if there’s a lot of ‘negative’ information, the price will have decreased.

I want to make an argument why, even if the EMH holds, it might still be possible to consistently earn above average returns on investments. The argument is basically very simple. Let’s first recall the EMH. We know that an efficient market is a market in which the price of a financial asset (let’s say a stock) always incorporates and reflects all available information. Hence, you cannot benefit from the set of available information in such a way that you can consistently earn above average returns on investing in the asset – or any asset for that matter. But does it follow from this that you cannot consistently achieve above average returns? I don’t think so.

Because what if you are consistently better than other investors in anticipating future information? Then, even though the stock’s market price reflects all available information, you can utilize this anticipated future information to decide whether to buy or sell a stock. And if you can anticipate future information (which is information not yet incorporated and reflected in the stock’s price) better than the average investor, then you can earn above average returns, time after time.

This all sounds pretty abstract. So let’s look an example. Suppose there is a stock of a company that produces wind turbines – call it ‘stock A’. Furthermore, let’s suppose that at this point in time investors are on average not confident about wind energy’s potential. They might think that the cost of producing wind energy is too high, its profits depend solely on the current regulation, or that it will still take a long time before our fossil fuels are depleted, making the switch to wind energy not urgent yet. Given these considerations the stock trades at a price of – let’s say – 10. Let’s assume that this price indeed incorporates and reflects all available information – such as information contained in annual reports, expert analyses etc. Hence it seems reasonable to say that you cannot consistently earn above average returns on this stock by utilizing only this pool of existing information.

But what if you believe that, given the ever increasing energy consumption and ever decreasing level of fossil fuels, society has in the middle-long term no choice but to turn to alternative forms of energy – forms such as wind energy? If you think this is true, then you can anticipate that any future information about the wind-turbine producer will be positive – at least more positive than today’s information is. You can anticipate that the future information will show an increase in the firm’s revenues, or – for example, in case the firm is close to bankruptcy but you know that its managers don’t profit from a bankruptcy – a decrease in costs. Given that the market is efficient, you know that at the time this information will become public, the market price of the stock will increase to reflect this information, to a price of let’s say 20. If you can anticipate such future information consistently, then you can anticipate the future stock price consistently, allowing you to consistently earn above average returns – despite the perfectly efficient market.

An equivalent way to look at this matter is to say that you take into account more information than the average investor in calculating the stock’s fair value. Let’s say that you are doing a net present value calculation, and you have estimated the firm’s future cash flows. In case of stock A, investors used estimated cash flows that lead them to a fair value of 10. However, given your anticipation of future information, you estimate these cash flows to be higher – leading you to a higher valuation of the stock. Again: if you can consistently anticipate future information better than the average investor, you can consistently earn above average returns – even in an efficient market.

Commercials: Not All Publicity is Good Publicity

Commercials: you’re likely to absorb hundreds of them per day, via media such as the TV, radio and internet. As I have written about in a previous article, the average person spends 1/24 of his life watching commercials on television. That’s a quite a lot, isn’t it? But I don’t want to focus on this act of wasting our lives by consuming useless material. I want to take a look at the effect of commercials, and of marketing in general, on the perception of a company’s brand. Most companies seem to believe that any publicity is good publicity. They seem to think that – no matter how bad a commercial might be – it’s always better to have a commercial than to have no commercial at all. But the question is: is this true?

When you’re watching television, and you see a commercial of a brand you’ve never heard of before, what will be the effect of this commercial on your perception of the brand? Marketers seem to think that they’ve increased your ‘awareness‘ of their brand, in the sense that – consciously or not – you now know about the brand‘s existence. And this might very well be true. But then the question would be: is all awareness good awareness? Or can awareness – as created by commercials – lead to a (more) negative (instead of positive) perception of the brand by the customer?

I believe it can. I believe that whenever people see terribly non-funny commercials (as there are plenty of) on television, they associate the brand promoted in the commercial with negative values such neediness, pity and lameness. I believe that the next time these people are in front of, for example, a supermarket they’ve just seen in an utterly non-funny (but intended to be funny) commercial, they will think to themselves: ‘Come on, I’m not going to support such a quasi-funny company’, and they’ll decide to skip the store. Even though these people might have entered the store if they hadn’t watched the commercial, or if the company wouldn’t have produced the commercial in the first place. But now they’ve got all kinds of negative associations with the brand, they decide to skip the store and go to another store – which might have less awareness but still more positive awareness than the supermarket of the commercial. And this goes not only for the supermarket-market, but for any other kind of market as well.

Customers usually don’t care about whether a brand is well-known – note that this doesn’t hold for clothing brands and other products that depend for their value to a large extent on marketing. We just want to buy a particular good or a particular service. And the only thing guiding us to a particular store is our perception of this brand/store. And if this perception is negative – which it very likely might be as a result of a bad commercial – you’d consciously avoid this store, and move to a next one. Even though the particular brand might have put a lot of money into its marketing efforts, they’re worse off than they would have been if they hadn’t launched the commercial.

Of course, marketing – including commercials on television and radio – can have a positive effect on a company’s brand and consequently on the sales of the company’s goods/services. But only if the company markets the relevant aspects of its brand, and not just launches a commercial for the sake of showing how ‘funny’ it is as a supermarket. Most people won’t appreciate that: the intelligent people might feel like they’re being treated like babies, and will therefore consciously avoid the brand, and the less intelligent people might not respond at all to this irrelevant kind of commercials.

If want to get people to your store (or make use of your service), you have to stay close to the product your selling, because that’s where customers are coming for or not coming for. Emphasize your low prices, your current actions/sales or your great service, and skip the bullshit. Then, and only then, can marketing attract – instead of scare away – customers.

But what do you think?

What Is the Value of a Human Life?

People are getting older and older and demand better and better (medical) care. Also, advancements in technology and medical knowledge allow what once seemed to be incurable illnesses to be cured – or at least treated. These trends result in an ever increasing rise in the medical expenditures of countries. This begs the question: how far should we go in saving a patient’s life? What is the value of a human life? Should we be prepared to save someone at all costs? Or should we think about the financial consequences of our decisions? And if so, what is the (financial) limit?

There are several ways in which this question can be answered. One response would be that we should go as far as possible in trying to save a person’s life. That is, as far as possible given the boundaries set by our medical and technological knowledge. And although this might cost us (as a society) a lot of money, the money spent on saving a person’s life is nothing compared to the value gained by prolonging their stay on our planet; the emotional gain experienced by the person – and not to forget his family – is of an extraordinary value: a value that can impossibly be expressed in terms of money. Therefore any means available should be employed in order to let people experience (an extension of) life.

However, given that the value of a human life would be ‘impossible to express in terms of money’, why then should we come to the conclusion that – because of that – we should be prepared to save a person’s life at all costs? Wouldn’t that be a rather arbitrary decision? After all, given that (human) life is of a such value that it is inexpressible in terms of money, why then even bother to make the transition to talk about costs? If a human life would truly be invaluable, it would be just as nonsensical to talk about trying to save a person’s life at all cost as it would be to say that we shouldn’t be prepared to pay any money in order to do so, right? The value of life is after all of an entirely different dimension; irreducible to monetary terms in any sense – no matter whether this value is in millions or pennies.

Well, that seems a little radical, doesn’t it? Another option would be to say that we should go as far as could be considered economically reasonable. In welfare countries where civilians have to pay relatively high taxes, that for a huge part are gobbled by the nation’s medical expenses, it seems fair to not only think in the interests of the patient and his family but to also consider the economic prospects of the relevant patient. After all: would it be reasonable for society to pay a huge sum of money to save someone’s life, while the person being saved might be unable to ‘repay’ (in terms of making an economic contribution to society) the medical expenses in any sense? From a purely utilitarian viewpoint, this seems to be an unwise (and even a wrong) decision. Surely, it might be ‘fair’ to save the person’s life, in the sense that the person probably has paid taxes all his life (taxes that were used for paying the medical treatments of others). But that doesn’t change the fact that, at this point in time, it would be unprofitable/utility-degrading to pay for the patient’s treatment.

A solution to cover this seemingly unfair attitude – although it might sound counter-intuitive – would be to make people decide for themselves how much they are prepared to pay for saving a patient’s life. Subsequently, it would be this amount of money that the person would contribute (in the form of taxes) for covering the country’s medical expenses. However, the other side of this plan would be that, whenever the tax payer himself would have to be treated in hospital, this person’s treatment costs will be compared with the amount of money he contributed to society for covering its medical expenditures/saving a person’s life. Based upon this comparison will be decided whether or not the person should be treated. When the contribution-fee is decided upfront – before the person ‘officially’ enters society (let’s say at the age of 18) – no conflict of interests can occur, and everyone’s wishes are taken into account.

A totally different option would be to shove the full responsibility for covering one’s medical expenditures down to someone’s own wallet: to make people pay for their own medical costs. After all: who would mind a person spending thousands of dollars coming from his own pocket? No-one I suppose. Unless, of course, this person is you. Because what to do if you don’t have the money required to cover your medical expenses? It doesn’t seem fair to let you die just because you haven’t earned as much money as the richest ten percent of the population, right? However, even if you would be the person becoming sick and having to pay for your own medical costs, you might still consider this libertarian attitude towards ‘paying my own costs’ to be the true righteous manner to live your life.

It is in no way an easy question. It is about much more than medical costs/finance: it’s about values/ethics, which implies that there is likely to be no definite answer to this question.

But what do you think?

The Difference between What You Get and What You Earn

In economic theory, it is claimed that if a market would function perfectly, people would get for their products and services whatever it is they contribute in terms of value. And the same goes the other way: people would pay whatever they find a product or service worthy of. But when you take a look at the real world markets, and all the actors in these real world markets, this principle doesn’t seem to hold. Not at all.

I want to show this by giving one example. That of the banker, and the hacker.

A banker invents all kinds of ingenious derivative constructs, futures and other financial products in order to make money. The more complex the better. For if a product is complex, the layman doesn’t understand it. And if the layman doesn’t understand it, it is easy to lure him into what might seem to be an attractive deal, but which in fact is nothing but a ticking time bomb.

It is generally acknowledged that bankers, and especially the bankers referred to above, are at least partially responsible for the credit crisis we have experienced. It is safe to say that a lot of wealth has been lost during the crisis; people lost their homes, their jobs, and governments had to step in to save the day. In other words: these bankers have, at least over the last couple of years, made a negative contribution to the overall utility of society.

Why then do they get paid so much? Why then do they get a high positive utility for acting in a manner that ultimately decreases society’s utility? Although I am not interested in explaining this phenomenon in this post, one explanation could be that it seems like the bankers contribute a lot of happiness, because they (can) create a lot of money, and – in our capitalist society – money equals happiness. Hence the bankers create a lot of happiness.

Luckily, there are also people who do the exact opposite: they don’t get paid anything while making lots of people happy. They are the modern day equivalent of Robin Hood. An example would be the people contributing content to Wikipedia. But also the people behind Popcorn Time; a digital platform at which you can stream pretty much any movie, and all for free. These people make very many people happy – an exception would be the film distributors of course – but don’t get paid anything. Even though, in contract to the banker, their net contribution to society’s utility is positive.

Although we don’t pay the Wikipedia guys and Popcorn Time geeks in terms of money, we can pay them in terms of a currency that is even more valuable: gratefulness and respect. Something the bankers cannot count on. Because after all: there is a difference between what you get, and what you earn.

But what do you think?

Sex Ever More Present in Pop Music: Problematic or Not?

The prevalence of 'sex' in pop music

The word ‘sex’ is ever more present in pop music

Look at the video clip of Miley Cyrus’s song Wrecking Ball. Now tell me: what do you think? Probably something along the lines of: why is she naked pretty much all time?

But even though Cyrus’s clip might be shocking, it seems like we have hit a new peak in the emphasis on sex in pop-music. The peak is called Anaconda and its singer Nicki Minaj.

The facts
It is not only your grandpa or grandma who say that today’s music is all about sex. There are data to back up this claim. Psychology professor Dawn R. Hobbs shows in Evolutionary Psychology (a scientific magazine) that approximately 92 percent (!) of the songs that made it into the Billboard Top 10 in 2009 contained ‘reproductive’ messages, with ‘reproductive’ obviously being synonymous with ‘sex’. In other words: 92 percent of the pop-songs that became a ‘hit’, were at least partially about sex. But even though this research shows that today’s popular music is very much about sex, it doesn’t show that today’s pop-music is more about sex than music in ‘the good old days’.

But different research, by the LA Times, shows that the pop-songs of today are more about sex than ever before. The research shows that ever since the beginning of the 1990s, the word ‘sex’ starts appearing more and more often in singles that make it into the Billboard Year-End Hot 100 singles (see picture).

Hence we can safely say that today’s pop music is very much, or at least much more than two decades ago, about sex.

Problematic?
This is not to say that this trend towards ‘sex-songs’ is a problem. Maybe it is caused by noble motives, such as liberalizing talk about sex.

But it seems that the occurrence of the word ‘sex’ in today’s pop-songs has one and one reason only: songs about sex are more popular than songs about different topics. This is shown by the facts presented above. And since the music business is – like any other business – commercial, it aims to sell as much of its goods as possible. Hence it makes sense, from the perspective of money-making businesses, to produce songs that are about sex. Hence it appears that it is not nobility, but profit-seeking that is responsible for this trend.


Nicky Minaj with Anaconda

This trend might be a problem for you if you, being a consumer of pop-music, are looking for artists that provide you with an original perspective on society; views on, let’s say, the exploitation of the working class, or an argued for position on liberalizing sex. Views that make you think. So one could say that the sex-trend deprives today’s youth of the supply of original views that are so important for them to be able to develop themselves.

But what do you think?

Why Students from Top Universities might be Worse than ‘Not-top’ Students

One of the top universities

The University of Cambridge: one of the top universities

It is a fact that some universities are more popular among employers than others. See this link for a ranking of the top 10 universities in the world — according to employers in 2013/2014. There are hardly any surprises in this top 10. As always, the University of Oxford, Cambridge and Harvard are included.

The question I ask in this post is: based on what criteria does an employer prefer one university to an other? And how reasonable is it for a company to base its preference on these criteria?

Admission standards
It seems fair to say that universities like Oxford and Cambridge have higher admission standards than pretty much any other university in the world. Therefore, being admitted to such a university is by itself an indication that you are ‘better’ (in terms of pre-university academic results etc.) than non-admitted applicants.

Hence one could say that it makes sense for employers, knowing about these strict admission procedures, to be more inclined to pick someone from such a university than from any other university. After all, the ‘top’ universities already have done part of the selecting for them.

Harvard students not necessarily better
But the above reasoning is not valid. Since even though it might be true that the Oxfords and Cambridges of this world pick the students that were the best before they entered university, it doesn’t follow that these students are still the best after they have been through university.

It might very well be so that someone who didn’t do his utmost best in his undergraduate studies (and therefore was not admitted to a top university) decides to change his effort when attending a Master. After all, he knows that there are people from Oxford and Cambridge around, so he has to step up his game in order to get a decent job.

The opposite might be true for a person studying at a top university. He might feel like, now he has been accepted into this prestigious institution, the chance of him finding a good job have increased significantly; so much that ‘just passing’ his Master might be sufficient for him to still obtain a job that suits his criteria.

In other words: getting a degree from a top university doesn’t necessarily make you more educated than someone who has got his degree from a ‘not-top’ university.

Social factors
When we look a little further, we see that social factors play a role too in the hiring process of a company. After all, a company – let’s call it ‘Company A’– wants the best employees. Therefore it might look at the ‘best’ firms in its industry in order to see where they get their employees from. Seeing that they get their employees from the top universities, the company believes that it should do so too; after all: these companies are the best in the industry, hence they should have the best employees, right? And given that these employees come from the top universities, these universities must provide the best employees.  Hence Company A hires someone from a top university.

Now assume another company enters the industry. This company will be even more inclined to hire someone of a top university because of the increase in the university’s reputation due to Company A employing its students. This points to the fact that companies do not look solely at the capabilities of its potential employees; the reputation of the university the candidates have studied at is of importance as well.

Top universities still good
The above is not to say that employing students is all based on the unjustified supposition that top universities provide the best employees. After all, it seems reasonable to suppose that those entering top universities are motivated, disciplined and will enhance their capabilities while attending the top university. Hence it is likely that they will still be ‘best’ after having gone through their top-university education.

Given that being a good student implies being a good employee, the latter implies that these students will be good employees. But it should be kept in mind that social factors such as the reputation of a university are self-perpetuating, hence no watertight indicator of the quality of students.

The Changed Nature of Money: From Gold to Digital

What is money? In the Middle Ages and before, money was a physical entity. Something you either had in your pockets, or not. Whether it was cows or gold, it was something you could touch, something of which you knew it couldn’t just be created “from thin air”. Although gold coins could be made by the government, the government still needed gold to make the coins. And since getting gold wasn’t easy, you could trust that the amount of money in a society – whose value was based on the amount of gold being in circulation – wouldn’t fluctuate that much. You had certainty, just like you could be certain that the tree in your backyard couldn’t grow new apples every day. It was a gradual, natural process. And this was a calming thought, ensuring you that the value of your money would be rather stable of time.

But now – a couple of centuries later – we’ve got the internet, and everything has changed. Money no longer is gold, but is replaced by a string of digital numbers on your computer. We no longer pay the butcher by handing him over a few tangible units of gold, but we put our plastic card into a digital machine and our digital string of numbers gets digitally reduced. The comfort that this brought us is enormous. We don’t even have to carry gold around anymore.

But although the “digital era” brought us many comforts, it also brought uncertainty – and vulnerability – into our lives. Because who ensures us that the amount of digital money that is in circulation will be a stable amount of money over time? Who ensures us that, whenever the government feels it’s losing in popularity, it cannot just put an extra zero-digit behind the digital number on its bank account? Who ensures us that – like cows and gold – the value of money is based on stable, natural entities that cannot be created from thin air, and not merely upon our perception of the value of money, which is an entity susceptible to the whims of those with monetary power? In other words: who guarantees the value of our money? Who besides ourselves, besides our perception of money? And if the value of money is merely dependent upon our perception of it, then how easily can this perception – and thus the value of our money – be adjusted by means of external intervention? How much certainty do we have regarding the value of our future money?

Because what is the value of money if we can just hand over an 8-digit number to Greece, knowing that it will never come back, and not even worrying about it never combing back because we know we can create more money whenever we want to. Who can ensure us that the money we’re working for is really worth the value we expect it to be worth over time? What is the value of money if new money can just be printed over and over again? Or even worse, when it requires nothing but the adding of an extra digit in the server space of the government. Is that still money? Or is it a 21th century substitute for money, created as a logical consequence of our fetish with digital technology and its “benefits”?

Let’s stay realistic. One thing we can reasonably say is that money – instead of possessions like gold and cows – has become more of a means for exchanging rights and less of a means for exchanging property. Rights of obligation, rights of someone to do something for another person in change for an increase in that someone’s right to legitimately claim something from others. I know it sounds abstract, but that is because it is abstract. The non-abstract gold- and cow time is over. Mutual obligations are all that remains. A problem? Maybe. A change? Definitely.

But what do you think?

Flipping the Hierarchy of the Sciences

There are different sciences, and each one is ‘appreciated’ for its own unique contribution to our collective knowledge pool. But some sciences are appreciated just a little more than others. Whether it be the social sciences that are regarded as the most complex and developed sciences, as Auguste Comte believed, or the natural sciences as being the ones coming closest to the ‘objective truth’, as people in our society – implicitly or explicitly – seem to presume: there’s always a certain hierarchy in our perception of the sciences.

It’s understandable why – at least in our society – the natural sciences are regarded to be ‘better’ or ‘more scientific’ than those ‘subjective’ social sciences. The natural sciences – physics, chemistry etc. – are related to Western industrialism and the inventions (steam engine, electricity, televisions etc.) it brought forth. And since natural sciences –> inventions –> money, and since money is good, the natural sciences are good too. At least better than the social sciences, for the latter won’t make us millionaires. But even though such hierarchies are understandable, they might have some negative implications for the manner in which the ‘lower’ sciences are being looked upon. They might, for example, lose their ‘scientific status’, and hence the respect that comes with this status. But there’s a remarkably easy way to solve this problem.

People are used to thinking in terms of higher and lower, at which ‘higher’ is associated with ‘better’ and ‘lower’ with ‘worse’. This vertical manner of thinking might be a relic from the past, in which religion was very prominent and in which higher meant closer to heaven, and in which heaven was good. But whatever metaphor was responsible for the pyramid-structured hierarchies we tend to visualize in our heads, it’s a fact that it’s omnipresent in our conceptual frameworks.

But let me ask you something: what would happen if we would turn this vertical hierarchy on its side? If we would obtain a horizontal ‘hierarchy’? Would we then still have a hierarchy? Probably not, for the distinction between higher and lower ranks would have disappeared. It’s just left and right, with left – for example – being the social sciences and right the natural sciences – in case you order the sciences based on a criteria such as ‘nature dominance’. Or you could put the natural sciences on the left hand side and the social sciences on the right – in case the variable of choice would be something like ‘people dominance’. Whatever criteria you use for ordering the sciences, the hierarchy will have disappeared, and hence the negative consequences for a science appearing at the bottom of the ranking.

It’s a very easy change in ordering the sciences, but one who doesn’t entail the negative consequences of a vertical hierarchy.

But what do you think?

Trust and Having Three Locks on the Door

I was looking out of my window, staring into the night, and saw my neighbor returning to her home from – what seemed to have been – a late night walk. She opened her door and – when she was inside – closed it. She not only closed it, but she locked it as well: with three separate locks. But why did she do that? Why three locks? Why not merely one or two? The answer is as simple as it is frightening: because we can’t trust each other. We don’t know what other people’s plans are. We might have worked hard in order to buy our flatscreen television, but others might have another interpretation of what “working hard” consists of. Robbing a middle-aged woman is – after all – not as easy as it might look.

This morning I went to the grocery store. In front of me, in the queue, stood an old lady. She was paying for her groceries, by pin. When she was about to enter her pin-code, she threw a look at me: a suspicious look. A look as if I would rob her of her pin-pass, if only I would have the chance.

I was going on holiday with a couple of friends of mine, and we were booking a flight. When the point came at which one of us had to pay for the flight up front, assuming that the others would pay him back at a later point in time, each one of us hesitated to take the offer.

If you want to trust someone, you better share your secrets with one person only, and that person is yourself. And even that person isn’t fully reliable. Even that person might come to change his mind and break his part of the deal. Because the “you of tomorrow” might have different needs than the “you of today”. While the “you of today” might intend to save money in order to pay for his education, the “you of tomorrow” might really like to buy that MacBook.

People have different interests, and different means for satisfying these interests. While some might be good in football and make tons of money with it, others might be good in carpentry and make not so much money with it. And some people don’t know where they’re good at, so they decide to make use of those who know where they’re good at. And although we can’t blame anyone for not having the required means at his disposal, we might doubt the morality of those who (ab)use the talents of others.

But what if morality would be a talent too? What if, just like soccer and carpentry, morality is just another quality ingrained – or not ingrained – in a person’s nature? Are we then still allowed to blame those whom seemingly lack this sense of morality? Or is this just the way they are, are they just using their “moral means” at full power? Or what if morality is only reserved for the few lucky ones? The ones who can afford to be moral, because they possess all the resources allowing them to live a moral life? Isn’t morality a luxury, like a MacBook or a mobile phone? A secondary need, only relevant for those who have passed the first layers on the survival-ladder?

Maybe…but it’s still a good idea to lock your doors.

But what do you think?

The Dysfunctional Nature of the Internet

The internet is an outdated medium, but still the most modern one we’ve got. It’s a medium supporting the big ones, the ones with money, and preventing the new and little ones from reaching the top. Popularity is valued over relevancy. Fame over creativity. On Google, 58.4% of all the clicks from users go the first three links, the links considered most appropriate by Google. This percentage decreases dramatically when you leave the top three. Number 11 – that is, the site on the top of the second page – receives merely 2.6% of the clicks. Also, links are still the number one factor in the rankings of search engines like Google, MSN and Yahoo!. And an important factor in the valuation of these links is their trustworthiness, with trustworthiness being a notion that is vague, utterly subjective and based on criteria not necessarily enhancing the quality of the information provided.

Each of these factors hinder new, creative and recalcitrant bloggers from receiving the popularity that they – based on the quality of their content – might deserve. The internet, which in fact is Google and some other search engines, is Marxian in a dysfunctional manner. Power structures determine what information does and what information doesn’t reach the “consumer”, the client sitting behind his computer. It’s only when you’re in the bourgeoisie, when you belong the “big guys”, that you will get noticed. If you’re nothing more than a member of the proletariat, you can yell all you want but the power structures will push you down.

But why would this be a problem? And would it even be a problem? Well, it not has to be. It merely indicates that the internet is dominated by a few big corporations and that you, as a blogger, are painfully dependent upon the support of these few big guys. And even this wouldn’t necessarily have to be a problem. Not if these big guys would base their rankings on factors that we – “the consumers” – find most important. We just want to read the information that bests suit our “information needs”. We don’t care whether this information is written by a fat guy or a big shot working at an esteemed newspaper. We just want our wishes to be fulfilled as accurately as possible.

But the truth of the matter is that the internet, as it exists in this 21st century of ours, can’t live up to these requirements. And the reason for this is pretty simple: the internet can’t read our minds. The internet doesn’t know what we are looking for when we type in, “Gay marriage from a Hobbesian perspective”, in Google. The internet merely recognizes the words “Gay marriage” and “Hobbes”. An although Google might come up with articles talking about gay marriage and about Hobbes, it forgets one big thing: the sentiment I’m looking for. I want the internet to provide me with information that suits my feelings, that absolutely fits my deepest – and sometimes even inexpressible – desires. It is merely cold words that the internet is founded upon. Cold words stringed together by links. We cannot blame Google or any other search engine for this. It’s just the way our 21st century technology works. This is the closest we can currently get in satisfying our needs.

I want to pick your brain for a second, and travel with you to the year 2060. In 2060 the internet will be different. It will not be based on written words anymore. It will not depend on how these words match Google’s database anymore. No, in 2060 we can by merely thinking and feeling about what we’re looking for urge Google to find the information that exactly matches our sentiment. Our brain waves will be matched to the “brain wave DNA” of the information that can be found on the internet. No need for links anymore. No domination of the “big few” anymore. Only the pure relevance of information will be judged. This will be an environment for beginning bloggers to thrive in. Released from the “status disadvantage” they currently have. Only the value of one’s content can and will be judged.

But what do you think?

Swearing Bankers: Is That Going to Make any Difference?

Bankers want to make money. And that’s okay, right? Everyone wants to make money. But they should do so in an “ethical” way, right? They shouldn’t screw each and every customers just in order to gain some extra profit. No, they should be nice guys. They should respect the interests of their customers and not – for example – gamble with their savings and pensions. However, it is not always easy to respect the customers’ interests and make money at the same time. Sometimes it is just way easier to go straight for it; to take every (doubtful) opportunity to make money. And – as we have seen with the big crises that have occurred (or are still occurring) – “greed” can have negative effects on society. Governments need to step in with “their” tax money to save the day because, as they say, the banks are “too big too fail“. That is, it its much cheaper for the governments to pay “some” money to prevent the banks from collapsing, than to let the bank collapse.

It seems fair to say that banks keep us in an (economic) stranglehold; we can’t do anything but give into their wishes. They are like our big silly brother that holds the family fortune but likes to live the good life; buy drugs, drinks, smokes etc. So if you don’t watch him closely, the money will be gone (“Aaaaand it’s gone“, South Park, anyone?).

So what are we going to do? Just sit back and hope our silly brother won’t make any mistakes again? Or are we – somehow – trying to force him to act “wisely”, without violating the “rules of the free market”? Well, the first option seems kind of risky; so let’s try the second. What can we do? Well, as the Dutch government is trying, we can let the bankers swear to act nicely (link is in Dutch). Let the bankers put their hands on their hearts and say out loud: “we value our customers and we will do anything to prevent them from being hurt”. Well, isn’t that nice?

It it sure is. But will it work? Well, probably not. Because what will happen to the bankers if they don’t stick to “the oath”? Well, then the bank has to decide whether or not the banker is really capable of doing the “banking” job. Really….are we going to put the banks again in charge of what it means to do a good banking job? Then what has changed (again a Dutch link) compared to the situation before the bankers sworn to act nicely? Well, now the government has at least tried to make the bankers act nicely. Now, if they act evil again, it’s not the government fault anymore, right? They have done everything they could, right?

I think we all see that having bankers swear that they will act nicely will not make any difference. At least not without any legal consequences attached to not acting nicely. But the situation might be even worse than this. It might be that the situation after having the bankers sworn to act nicely is more “unethical” than the situation before. But why is that? Well, imagine a bank complying to the “bankers’ oath”. The bank is all acting “ethically” and respecting its customers. But then, suddenly, the bank goes bankrupt. Why is that? Well, the bank was the only bank really complying to the oath; the bigger and “smarter” banks did what they should do: make money no matter what it takes. So, by stimulating banks to act “ethically“, the government itself is acting unethical: they are promoting “unethical banks” (read: banks not complying to the oath) in continuing their greedy actions by weakening the competition of the “sweet” banks. That’s not really nice, is it?

So what’s the lesson we should learn from this state of affairs? Well, two things: first of all, governments that want to promote ethical behavior have to set firm rules – not just oaths without any legal repercussions – if they want to promote ethical banking behavior. And secondly, how can can we ever except companies – and especially banks – in a capitalistic society to act nicely if this acting nicely goes against their profit making interests? There aren’t charity organizations, are they?

But what do you think?

An Unequal Distribution of the World’s Wealth: Is It Fair?

50 percent of the world’s wealth is owned by 2 percent of the world’s (adult) population; the bottom half of the world’s population barely owns 1 percent of the global wealth; 10 percent of the population account for 82 percent of the world’s wealth; Africa owns 1 percent of the world’s wealth, while Europe and North America account for respectively 30 and 34 percent. These are figures, and figures don’t lie. So: what to infer from these figures, or more importantly: what should we infer from these figures? One thing is for sure: the world’s wealth is not fairly distributed, or at least not in an economical sense.

I am not going to make a plea for worldwide communism, in the sense that the world’s wealth should be distributed equally among all of its inhabitants. That would be unfair, right? To have people working to pay for other people’s laziness? No, that doesn’t seem to be the optimal option. It could work, of course, if everyone of us would be prepared to work his ass off in favor of a more prosperous world overall. But we don’t want a world that is more prosperous ‘overall’: we want our wallets to be filled with more prosperity; we want to make sure that we are fairly rewarded for our contribution to society (or the world for that matter). Because, as is the case with the worldwide pollution and exploitation of fossil fuels: you can play the nice guy but, in the end, the nice guy will get screwed by the more selfish – or more intelligent; depends on your perspective – people. The prisoner’s dilemma seems unsolvable in a world like ours that is crowded by insecure people; people that see each opportunity to cooperate as an opportunity to be screwed.

Nonetheless, I want to trigger your imagination with the following (unrealistic) idea: what if we could take the world’s total wealth as it currently is and divide it by the total number of people living on this earth, and give every individual this average amount of wealth to start their lives with. See it as a kickstarter: when you are thrown in this world of ours, you will be given some certainty; a buffer, so to say. You can decide for yourself what you want to do with your buffer; you can spend it on drugs, or you can use it to start your own business; you can decide to buy a car that you don’t actually need, or you can save your buffer money for buying a house later on. You can even bundle your wealth with the wealth of others in order to create bigger and collectively shared goods (like roads, schools etc.)! It’s totally up to you.

In our world this ‘starting amount’ of wealth would be 26.202 dollars. Note that this is wealth per capita and not income per capita. Income is nothing more than a temporary reflection of a country’s wealth; therefore a one time change in income will not make much of a difference; not without increasing the wealth (factories, technology etc.) that underlie it.

This ‘wealth sharing kick-start idea’ I’ve presented can be though of as a variation of John Rawls’ idea of the the veil of ignorance. This is a well-known philosophical thought-experiment, that goes (more or less) as follows: imagine that every person on this world wouldn’t have been born yet. All of us would be standing behind some kind of curtain separating us from the earth that we are about to enter. We don’t have any idea about what our own capabilities (where we’re good at) and the capabilities of others will turn out to be when we in fact enter the world. Also, we don’t know what our fate will be: we might become a plumber, but we might just as well become a CEO. All you know is that you have to make one decision now, and that decision is: when all of us will enter earth, what will be the ‘fair’ manner of distributing the income we will come to earn and the wealth we will accumulate? Are we prepared to pay for the medical care required for someone’s handicapped son (which, remember, could be you; you after all don’t have a clue about how you will turn out to be), or don’t we find that fair? And if we would find it fair, how much money would you be prepared to lay aside for these expenditures? Again the question is: what is fair?

Rawls’ message with this veil of ignorance is that, if everyone of us would imagine him or her standing their, behind the veil of ignorance, we might come to notice what a truly fair world might look like; irrespective of our own particular situation. Like any thought experiment, one can debate whether it would even be possible to think about ‘how the world should be’ without knowing anything about yourself or the world. Let’s however, for the sake of the argument, assume that we could. Now I ask you: what would you do? Would you commit to the wealth kickstarting plan, or would you gamble and hope you will become the next Bill Gates?

What do you think?