Joe Rogan interviews Dan Bilzerian

This is one of the best interviews I've heard in a long time. Warning: NSFW.

Joe Rogan interviews professional poker player and social media icon Dan Bilzerian. If you don't know who he is, check him out on Instagram (guns, girls, private jets, high stakes poker = 20 million followers = NSFW).

Among the topics covered: DB's experience in Navy SEAL training, high stakes poker, online poker in the early 2000s, sex, drugs, heart attacks, life, happiness, hedonic treadmill, social media, girls, fame, prostitution, money, steroids, stem cell therapy, and plenty more.

You can get the interview in smaller topical chunks (one of the best segments is embedded below). At bottom is the full 3 hours.

Off the Grid in British Columbia

Who wouldn't trade their stressful modern lifestyle for an off grid homestead in British Columbia? Lovely family, beautiful locale.

Solar + Li batteries + old school technologies allow sustainable living without discomfort.

Slouching towards the Valley

NYTimes magazine: Silicon Valley's Youth Problem. See also: Rivalry and Habituation, Hardware vs Software and Slouching Towards Bethlehem.

NYTimes: ... A few weeks ago, a programmer friend and I were talking about unhappiness, in particular the kind of unhappiness that arises when you are 21 and lavishly educated with the world at your feet. In the valley, it’s generally brought on by one of two causes: coming to the realization either that your start-up is completely trivial or that there are people your own age so knowledgeable and skilled that you may never catch up.

The latter source of frustration is the phenomenon of “the 10X engineer,” an engineer who is 10 times more productive than average. It’s a term that in its cockiness captures much of what’s good, bad and impossible about the valley. At the start-ups I visit, Friday afternoons devolve into bouts of boozing and Nerf-gun wars. Signing bonuses at Facebook are rumored to reach the six digits. In a landscape where a product may morph several times over the course of a funding round, talent — and the ability to attract it — has become one of the few stable metrics.

Yet for all the glitz and the glory and the newfound glamour, there is a surprising amount of angst in Silicon Valley. Which is probably inevitable when you put thousands of ambitious, talented young people together and tell them they’re god’s gift to technology. It’s the angst of an early hire at a start-up that only he realizes is failing; the angst of a founder who raises $5 million for his company and then finds out an acquaintance from college raised $10 million; the angst of someone who makes $100,000 at 22 but is still afraid that he may not be able to afford a house like the one he grew up in.

Tech is fun now, deliriously so, but this fun comes with a built-in anxiety that it must lead to more. As an engineer, coding should be your calling, not just a job, so you are expected to also do it in your time off. Interviewers will ask about side projects — a Firefox browser add-on maybe, or an Android version of your favorite iPhone app — which are supposed to indicate your overflowing enthusiasm for building software. Tech colloquialisms have permeated every aspect of life — hack your diet, your fitness, your dates — yet in reality, very little emphasis is placed on these activities. In a place with one of the best gender-ratios in the country for single women, female friends I talk to complain that most of the men are, in fact, not available; they are all busy working on their start-ups, or data-crunching themselves. They have prioritized self-improvement and careers over relationships.

... This past Christmas, my family went to dinner with another family, the Yangs, whose son, Andrew, was a sophomore at the University of Chicago and trying to decide on a major. He was interested in computer science, having taken the online version of CS50, Harvard’s introductory computer-science course, in his spare time. But his parents, both software engineers, wanted him to choose finance. They thought that being a software engineer meant drowning in a technical quagmire, being someone else’s code monkey. Their view of tech was shaped by their years of experience at old-guard companies, where a few cynosures (Bill Gates, Steve Jobs, Larry Ellison, etc.) got most of the money and the glory. I tried to explain to them how the tech world that their son would be joining is so very different. For all the industry’s drawbacks, I have never seen it as anything less than potential filled.

I’m not sure that they were convinced. But there is no doubt that, regardless, young talent will keep flocking to the valley. Some of us will continue to make the web products that have generated such vast wealth and changed the way we think, interact, protest. But hopefully, others among us will go to work on tech’s infrastructure, bringing the spirit of the new guard into the old. ...

Tech is more fun if you have an elite pedigree like the author of the piece (a Harvard grad) and can call on a network of friends and alumni to help you obtain funding, talented employees, and press coverage. Note, though, that the "10X engineer" is no myth. In fact, I believe there are 100X engineers ...

From Walden Pond to quant trading

True story. Theoretical physicist saves enough money during 5 years of postdoc to retire -- living entirely from investment income at $7k per year of expenditures (budget).

I simply saved more than three quarters of my income for five years. The math works out. If you save 83% and spend 17%, you need 25*0.17/0.83 ~ 5 years of savings, where 25 is the inverse of 4%, which is a safe withdrawal rate for at least 30 years.

While enjoying frugal living and retirement in his mid-30's, this former physicist starts a widely followed blog and authors a book: Early Retirement Extreme (ERE).

How does this story end? With the hero living a quiet Walden-esque life of contemplation and home cooked meals? No, of course after a few years he un-retires to join a fund as a quant trader/researcher!

What I like to do is solving impossible problems. Or just “hard problems”—problems that people don’t want to wrestle with. I did this in physics and learned a lot. I realized that I wouldn’t learn very much from solving a similar problem in physics and that’s why I quit physics. The challenge would not have been the same. Fortunately, I realized this quickly and I had the money to quit or “retire from my career“.

ERE is another one such “hard” problem solved (it’s only hard, because it’s somewhat out-of-the-box and thus more a question of shifting your perspective than it being any kind of technical challenge). I’ve written enough material here on the blog and in the book to show you how it’s done. I have the same problem with ERE. The challenge is gone for me. Many others are currently on the road towards financial independence and this is exciting for them but for me it’s just vicarious living. Becoming financially independent, the subject of this blog, is a period of transition and obviously one can only transition once. This is why fresh blood is needed.

[Uhh, part of the challenge is maintaining the minimalist lifestyle, well, for the rest of your life...]

... So what am I going to do now? Well, yesterday I got a job offer as a quant trader/researcher. I took it! I think this fulfills all my criteria. It’s a hard problem, it requires no marketing, no politics, no self-promotion, and no management. As far as I can tell, I’m safe from the Peter principle and can focus on research and development without worrying about suddenly finding myself having to sell or manage my stuff.

When I told this story to my wife she thought perhaps the job offer came from a rich former colleague in physics, who did it just to test him (i.e., f#ck with him) and throw a monkey wrench into the ERE equilibrium! ("Ha ha, Buddha came down from the mountain for chump change!") I won't be surprised if in 10 years this guy is complaining that his second home in the Hamptons is too small ;-)

Bertrand Russell

At the bookstore yesterday I came across the autobiography of Bertrand Russell, which I became engrossed in for some time. Below is the prologue, written when Russell was 84.

WHAT I HAVE LIVED FOR.

Three passions, simple but overwhelmingly strong, have governed my life: the longing for love, the search for knowledge, and unbearable pity for the suffering of mankind. These passions, like great winds, have blown me hither and thither, in a wayward course, over a deep ocean of anguish, reaching to the very verge of despair.

I have sought love, first, because it brings ecstasy -- ecstasy so great that I would often have sacrificed all the rest of life for a few hours of this joy. I have sought it, next, because it relieves loneliness -- that terrible loneliness in which one shivering consciousness looks over the rim of the world into the cold unfathomable lifeless abyss. I have sought it, finally, because in the union of love I have seen, in a mystic miniature, the prefiguring vision of the heaven that saints and poets have imagined. This is what I sought, and though it might seem too good for human life, this is what -- at last -- I have found.

With equal passion I have sought knowledge. I have wished to understand the hearts of men. I have wished to know why the stars shine. And I have tried to apprehend the Pythagorean power by which number holds sway above the flux. A little of this, but not much, I have achieved.

Love and knowledge, so far as they were possible, led upward toward the heavens. But always pity brought me back to earth. Echoes of cries of pain reverberate in my heart. Children in famine, victims tortured by oppressors, helpless old people a hated burden to their sons, and the whole world of loneliness, poverty, and pain make a mockery of what human life should be. I long to alleviate the evil, but I cannot, and I too suffer.

This has been my life. I have found it worth living, and would gladly live it again if the chance were offered me.

I found Russell's comments on Keynes quite interesting.

Keynes's intellect was the sharpest and clearest that I have ever known. When I argued with him, I felt that I took my own life in my hands, and I seldom emerged without feeling something of a fool. I was sometimes inclined to think that so much cleverness must be incompatible with depth, but I do not think this feeling was justified.

The bookstore had quite a nice section of Russell books. He wrote what could be classified as a "self help" book called The Conquest of Happiness, which anticipated a lot of recent work in positive psychology. See here for a nice overview.

... For those who find that even “the exercise of choice is in itself tiresome,” (147) Russell has a remedy that anticipates the smart unconscious. “I have found, for example, that if I have to write upon some rather difficult topic the best plan is to think about it with very great intensity—the greatest intensity of which I am capable—for a few hours or days, and at the end of that time to give orders, so to speak, that the work is to proceed underground. After some months I return consciously to the topic and find that the work has been done.” (49-50)

Perhaps the greatest obstacle to happiness is “the disease of self-absorption.” (173) Russell offers that his own conquest of happiness was due “very largely [. . . ] to a diminishing preoccupation with myself.” (6) A happy person knows that “one’s ego is no very large part of the world.” (48) ...

To the self-absorbed person, other people primarily serve as objects of comparison. “What people fear [. . .] is not that they will fail to get their breakfast next morning, but that they will fail to outshine their neighbors.” (27) Russell warns that “the habit of thinking in terms of comparisons is a fatal one.” (57) To overcome it, “teach yourself that life would still be worth living even if you were not, as of course you are, immeasurably superior to all your friends in virtue and intelligence.” (173) “You can get away from envy by enjoying the pleasures that come your way, by doing the work that you have to do, and by avoiding comparisons with those whom you imagine, perhaps quite falsely, to be more fortunate than yourself.” (58-59)

Likewise, Russell advises not to worry too much about what others think of you. On the one hand, he suspects that “if we were all given by magic the power to read each other’s thoughts, I suppose the first effect would be that almost all friendships would be dissolved.” (76) On the other hand, he doubts that “most people give enough thought to you to have any special desire to persecute you.” (79) This is a nice example of regression to the mean: Chances are you overestimate the love of your friends and the disdain of your foes.

Happiness

In the previous post I mentioned my scores on this Big Five personality test. Someone immediately doubted whether I (or any theoretical physicist) could really have scored at the 99th percentile for Stability (opposite of Neuroticism). Upon further reflection, I find the result a little puzzling as well!

One contributing factor I can point to is that I've been thinking about the problem of happiness and the hedonic treadmill for some time.

It's also true that my father passed away while I was still fairly young, so I had the impetus to consider his life in its entirety and to evaluate which of the things he did really mattered, and which didn't.

If you're interested in optimizing your own life satisfaction, I recommend the Happiness Project blog, written by Gretchen Rubin (she is Robert Rubin's daughter in law; I once worked with her husband who was at the time an investment banker). I especially recommend her short movie The Years Are Short (it's only a minute or so long) to any parent with small kids.

I guess I would describe myself as something of a stoic. My favorite bit of advice for academics comes from...

Marcus Aurelius

"Or does the bubble reputation distract you? Keep before your eyes the swift onset of oblivion, and the abysses of eternity before us and behind; mark how hollow are the echoes of applause, how fickle and undiscerning the judgments of professed admirers, and how puny the arena of human fame. For the entire earth is but a point, and the place of our own habitation but a minute corner in it; and how many are therein who will praise you, and what sort of men are they?"

On $500k a year

Hmm... after tax, that's barely above the carrying cost for a family of 4 in Manhattan -- assuming the usual private schools and a typical banker's wife ;-) See here for detailed accounting -- warning, may perturb your hedonic treadmill :-)

I understand the pay caps don't limit incentive stock option compensation. Perhaps that leaves some wiggle room, depending on what people think about the future value of bank shares (and modulo the inevitable nationalization we keep putting off). You certainly have to apply a deep discount relative to cash.

Some individuals are going to hop to foreign and smaller banks which are unencumbered by pay caps, or to hedge funds and money management firms. But I doubt job hopping is very easy for most employees right now, so I suspect this pay cap isn't going to hurt the banks that much (certainly far less than they've hurt themselves recently!), at least until conditions start to improve.

I'm interested in opinions from people on the Street, though :-)

What good is happiness if it can't buy money?

This NYTimes article covers recent results in happiness research, which shows that money does buy happiness after all ;-) The new data seem to show a stronger correlation between average happiness and economic development than earlier studies which had led to the so-called Easterlin paradox. One explanation for the divergence between old and new data is that people around the world are now more aware of how others in developed countries live, thanks to television and the internet. That makes them less likely to be content if their per capita incomes are low (see the hedonic treadmill below). The old data showed surprisingly little correlation between average income and happiness, but 30-50 years ago someone living in Malawi might have been blissfully unaware of what he or she was missing. See the article for links to the research papers and a larger version of the figure. Also see these reader comments from the Times, which range from the "happiness is a state of mind" variety to "money isn't everything but it's way ahead of whatever is in second place."

In previous posts we've discussed the hedonic treadmill, which is based on the idea of habituation. If your life improves (e.g., move into a nicer house, get a better job, become rich), you feel better at first, but rapidly grow accustomed to the improvement and soon want even more. This puts you on a treadmill from which it is difficult to escape. The effect is especially pernicious if you adjust your perceived peer group as you progress (rivalrous thinking) -- there is always someone else who is richer and more successful than you are! Note, the hedonic treadmill is not inconsistent with an overall correlation between happiness and income or wealth. It just suggests diminishing returns due to psychological adjustment.

Happiness: all in da gene?

shared environment = no effect
monozygotic twins = big effect

An overview of recent books on happiness, in the New York Review of Books.

...Beginning in the 1980s, Lykken and his colleagues surveyed 2,310 pairs of identical and fraternal twins, some reared together, others brought up apart, looking to see how closely mood, affect, temperament, and other traits tracked with shared genes and/or a shared environment.

What they found (from a smaller subset of the original group) was that the "reported well-being of one's identical twin, either now or 10 years earlier, is a far better predictor of one's self-rated happiness than one's own educational achievement, income, or status." This held not only for identical twins raised together but for those brought up apart, while for fraternal twins raised in the same household, the likelihood that one's sense of well-being matched one's twin's was, statistically speaking, not much greater than chance.

Original research by the Lykken group.

Happiness Is a Stochastic Phenomenon

David Lykken and Auke Tellegen
University of Minnesota
Psychological Science Vol.7, No. 3, May 1996

Happiness or subjective wellbeing was measured on a birth-record based sample of several thousand middle-aged twins using the Well Being (WB) scale of the Multidimensional Personality Questionnaire (MPQ). Neither socioeconomic status (SES), educational attainment, family income, marital status, nor an indicant of religious commitment could account for more than about 3% of the variance in WB. From 44% to 53% of the variance in WB, however, is associated with genetic variation. Based on the retest of smaller samples of twins after intervals of 4.5 and 10 years, we estimate that the heritability of the stable component of subjective wellbeing approaches 80%.

Lykken's book.

Vacation reading: Gregory Clark's A Farewell to Alms

A Farewell to Alms: A Brief Economic History of the World



Clark's book is an ambitious look at world economic history. The first half of the book is an excellent discussion of the Malthusian trap, in which increases in standard of living only lead to increases in population, which then (over generations) lead to declines in standard of living. The only stable point of this dynamics is at subsistence-level income. I need to think more about it, but I suspect Clark overstates the case for how well the Malthusian model applied in early human history. My impression is that there were wide disparities in levels of development that can't be easily explained in that context.

The second half of the book concerns the industrial revolution, and advances his (controversial) thesis that one of the main causes for this qualitative shift in the rate of human advancement was genetic. By analyzing historical demographic data he argues that by 1800 almost all residents of England were descended from previous generations of wealthy strivers -- reproduction rates correlated highly with family wealth in the previous Malthusian era, and the wealthy literally replaced the poor over time (less favored offspring of the rich often become the poor of future generations). Therefore, traits which are positive for commerce, long term planning, wealth accumulation, market organization, etc. had become much more widespread thanks to natural selection. I find this effect plausible -- it is consistent with recent genetic data on accelerated human evolution -- but am not as convinced that it dominates over cultural factors (at least, the two would work hand in hand). His case that it was a priori likely for England to be the first to have an industrial revolution doesn't seem particularly convincing (see Kenneth Pomeranz's Great Divergence for another set of arguments based on geography and natural resources).

Clark makes the interesting connection between modern man's descent from the strivers of previous generations and the hedonic treadmill: our happiness seems to correlate more with our position relative to perceived peers than with absolute levels of wealth.

I like the following quote from the final chapter of the book. I always found it very amusing that modern economic models can't do much better than to treat technological change as an exogenous, stochastic variable. (Yes, I know about Romer and growth theory, but would lump that in the "can't do much better" category.)

God clearly created the laws of the economic world in order to have a little fun at economists' expense. In other areas of inquiry, such as the physical sciences, there has been a steady accumulation of knowledge over the past four hundred years. Earlier theories proved inadequate. But those that replaced them encompassed the earlier theories and gave practitioners greater ability to predict outcomes across a wider range of conditions. In economics, however, we see instead that our ability to describe and predict the economic world reached a peak around 1800. In the years since the Industrial Revolution there has been a progressive and continuing disengagement of economic models from any ability to predict differences of income and wealth across time and across countries and regions.

Working class millionaires

A nice series in the Times by Gary Rivlin. It does a good job of capturing how real startup people think about wealth, their lives and families.

I'm glad I live in Eugene, Oregon -- easier to resist the hedonic treadmill in this eco-hippy college town :-)

In Silicon Valley, millionaires don't feel rich (check out the video as well).

Living modestly, despite a nice nest egg (this guy is successfully resisting the hedonic treadmill).

Making do, with $10 million (keeping up with the Joneses in the valley -- one of the rare times a journalist accurately describes the "carrying costs" of the wealthy lifestyle; I guess he had help).

Angry commentary from Metafilter, and more from Dave Winer.

...Silicon Valley is thick with those who might be called working-class millionaires — nose-to-the-grindstone people like Mr. Steger who, much to their surprise, are still working as hard as ever even as they find themselves among the fortunate few. Their lives are rich with opportunity; they generally enjoy their jobs. They are amply cushioned against the anxieties and jolts that worry a vast majority of people living paycheck to paycheck.

But many such accomplished and ambitious members of the digital elite still do not think of themselves as particularly fortunate, in part because they are surrounded by people with more wealth — often a lot more.

When chief executives are routinely paid tens of millions of dollars a year and a hedge fund manager can collect $1 billion annually, those with a few million dollars often see their accumulated wealth as puny, a reflection of their modest status in the new Gilded Age, when hundreds of thousands of people have accumulated much vaster fortunes.

“Everyone around here looks at the people above them,” said Gary Kremen, the 43-year-old founder of Match.com, a popular online dating service. “It’s just like Wall Street, where there are all these financial guys worth $7 million wondering what’s so special about them when there are all these guys worth in the hundreds of millions of dollars.”

Mr. Kremen estimated his net worth at $10 million. That puts him firmly in the top half of 1 percent among Americans, according to wealth data from the Federal Reserve, but barely in the top echelons in affluent towns like Palo Alto, Menlo Park and Atherton. So he logs 60- to 80-hour workweeks because, he said, he does not think he has nearly enough money to ease up.

“You’re nobody here at $10 million,” Mr. Kremen said earnestly over a glass of pinot noir at an upscale wine bar here.

...A few even choose to jump off the golden treadmill.

That is what Mark Gage, 51, an engineer, and his wife, Meredith, did when they left the Bay Area in 2005 with $3 million or so in assets. They bought a house in Bend, Ore. — “a bigger, much nicer home with dramatic views” — and now Mr. Gage works only when the perfect consulting job presents itself.

Yet the same drive that earned so many of the engineers and entrepreneurs who live here their fortunes keeps them tied to the Valley, which resembles nothing so much as a sprawling post-war suburb, though one whose roadways are thick with cars costing in the six figures.

Income inequality: Manhattan toddlers

From the Times, this story tells a lot about what's happening in Manhattan. My friends there say it's very kid-friendly these days, with crime way down from a few decades ago.

Given how the hedonic treadmill works, I can't imagine living in Manhattan if I were a Columbia or NYU professor. Who wants to be the poorest family in the neighborhood? ;-) One of the families in the article, the father a management consultant, says they won't be able to afford the upper West Side once their kids each need a bedroom of their own.

The analysis shows that Manhattan’s 35,000 or so white non-Hispanic toddlers are being raised by parents whose median income was $284,208 a year in 2005, which means they are growing up in wealthier households than similar youngsters in any other large county in the country.

Among white families with toddlers, San Francisco ranked second, with a median income of $150,763, followed by Somerset, N.J. ($136,807); San Jose, Calif. ($134,668); Fairfield, Conn. ($132,427); and Westchester ($122,240).

Median household income of families with children ages 0 to 4. (Left is all ethnic groups, right is non-Hispanic whites only.)



For more on income inequality, including the interesting observation that it is primarily driven by financiers and tech entrepreneurs (third link), see here.

Rivalry and habituation

I've been reading a bit about rivalrous behavior and the "hedonic treadmill" lately. For nice expository papers see the Web page of Richard Layard, an LSE economist who has a new book on the economics of happiness.

The hedonic treadmill is based on the idea of habituation. If your life improves (e.g., move into a nicer house, get a better job, become rich), you feel better at first, but rapidly grow accustomed to the improvement and soon want even more. This puts you on a treadmill from which it is difficult to escape. (Of course, habituation can be a good thing: after a traumatic event (e.g., loss of job, or limb, or loved one), you feel terrible at first but after a while can go on with your life.) Incidentally, I know a lot of former physicists now on Wall Street, who provide a nice example of habituation. Most go into finance thinking of a particular "number" (net worth) they want to reach in order to retire. But, their lifestyle requirements and therefore number tend to increase along with compensation, making escape difficult.

Layard believes people work too much, are too obsessed with money, and take too little leisure. In addition to habituation, another cause of this is so-called rivalrous behavior, in which our happiness depends on how our situation compares with a reference group of peers (co-workers, neighbors, family members, etc.). As an example of rivalrous behavior, people asked questions such as: "Which would you prefer: your salary is $50K per year, but your peers make $25K, or your salary is $100K per year, and your peers' $200K?" generally prefer the former, even though they would be worse off in absolute terms. However, people are not rivalrous when it comes to leisure: when asked a similar question about vacation, most people prefer the choice which gives them the most vacation, regardless of how much their peers are allowed. If you consider these results, it suggests that people would be happier in a society that is (a) more egalitarian and (b) offers more leisure, even if they are not as materially wealthy. As a Labour MP, you might imagine Layard would prefer this European economic model over the nasty US one, but he does have some interesting data supporting his assertions.

Without specifically endorsing Layard's policy recommendations, I can agree that habituation and rivalry abound. Most PhD students dream of becoming tenured professors, not realizing how rapidly the resulting glow can fade into petty competition over salary or citations. Many young entrepreneurs or financiers imagine happiness is guaranteed upon achieving millionaire status, only to realize that their new peer group comes with even wealthier, more successful, rivals.