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.

Success, Ability, and all that

I came across this nice discussion at LessWrong which is similar to my old post Success vs Ability. The illustration below shows why even a strong predictor of outcome is seldom able to pick out the very top performer: e.g., taller people are on average better at basketball, but the best player in the world is not the tallest; smarter people are on average better at making money, but the richest person in the world is not the smartest, etc.

This seems like a trivial point (as are most things, when explained clearly), however, it still eludes the vast majority. For example, in the Atlantic article I linked to in the earlier post Creative Minds, the neuroscientist professor who studies creative genius misunderstands the implications of the Terman study. She repeats the common claim that Terman's study fails to support the importance of high cognitive ability to "genius"-level achievement: none of the Termites won a Nobel prize, whereas Shockley and Alvarez, who narrowly missed the (verbally loaded) Stanford-Binet cut for the study, each won for work in experimental physics. But luck, drive, creativity, and other factors, all at least somewhat independent of intelligence, influence success in science. Combine this with the fact that there are exponentially more people a bit below the Terman cut than above it, and Terman's results do little more than confirm that cognitive ability is positively but not perfectly correlated with creative output.

In the SMPY study probability of having published a literary work or earned a patent was increasing with ability even within the top 1%. The "IQ over 120 doesn't matter" meme falls apart if one measures individual likelihood of success, as opposed to the total number of individuals at, e.g., IQ 120 vs IQ 145, who have achieved some milestone.

It is plausible that, e.g., among top execs or scientists or engineers there are roughly equal numbers of IQ 120 and IQ 145 individuals (the actual numbers could vary depending on how the groups are defined). But the base population of the former group is 100 times that of the latter! (IQ 120 is about top 10% and IQ 145 is roughly top 0.1% in the population.) This means, e.g., that the probability that an IQ 145 person becomes a top scientist could be ~100x higher than for an IQ 120 person.

This topic came up last night in Hong Kong, at dinner with two hedge funders (Caltech/MIT guys with PhDs) who have had long careers in finance. Both observed that 20 years ago it was nearly impossible to predict which of their colleagues and peers would go on to make vast fortunes, as opposed to becoming merely rich.

Hollywood Hills

I'm not a materialistic guy, but I do like modern architecture. My eyes nearly popped out when I saw this photo in Dwell. The house is in the Hollywood Hills and the view is of downtown LA.

Inside the 1%

The figures below are from a recently released IRS study using 2007 data (the most recent available; note this is pre-2008 credit crisis). The study focuses on the top 1% of adults by wealth (net worth of at least $2M or so). Medians and means differ by a lot, which is explained by the distribution in the bottom figure. Click for larger images.




About 50% of the top 1% in wealth are over 60. Having $2M saved up for retirement is not nearly as unusual as, e.g., having accumulated $2M before age 50.



Net worth distribution within the population of top wealth holders (assets > $2M; about top 1% of adult population): having $10M puts you in the 90th percentile (so, top 0.1% of total population) and $50M puts you in the 99th percentile (top 0.01% of total population).




See also Real Wealth: "Most of those in the bottom half of the top 1% lack power and global flexibility and are essentially well-compensated workhorses for the top 0.5%, just like the bottom 99%. In my view, the American dream of striking it rich is merely a well-marketed fantasy that keeps the bottom 99.5% hoping for better and prevents social and political instability."

US wealth inequality

This is a great example of the visual presentation of quantitative information.



One quibble: I suspect that the top 1% individual discussed near the end has wealth equal to the average among the top 1%, which is strongly distorted by individuals at, e.g., the top 0.1% level. If they used threshold 1% wealth the result would not be as dramatic.

It's also important to note that there is a 30+ year lever arm influencing average wealth -- relatively modest disparities in annual income can, when combined with differentials in investment,  consumption, etc., result in substantial differences in accumulated average wealth.

See also Real wealth.

US income distribution

Where is the middle class in this figure? If we eliminate young and old people, does the peak shift to the $30k range, or are things bleaker than I had thought? [ See links in comments for better figures. ]

Wikipedia: ... Household income in the United States varies substantially with the age of the person who heads the household. Overall, the median household income increased with the age of householder until retirement age when household income started to decline.[25] The highest median household income was found among households headed by working baby-boomers.[25]

Households headed by persons between the ages of 45 and 54 had a median household income of $61,111 and a mean household income of $77,634. The median income per member of household for this particular group was $27,924. The highest median income per member of household was among those between the ages of 54 and 64 with $30,544 [The reason this figure is lower than the next group is because Pensions and Social Security add to income while a portion of older individuals also have work-related income.]).[25]

The group with the second highest median household income, were households headed by persons between the ages 35 and 44 with a median income of $56,785, followed by those in the age group between 55 and 64 with $50,400. Not surprisingly the lowest income group was composed of those households headed by individuals younger than 24, followed by those headed by persons over the age of 75. Overall, households headed by persons above the age of seventy-five had a median household income of $20,467 with the median household income per member of household being $18,645. These figures support the general assumption that median household income as well as the median income per member of household peaked among those households headed by middle aged persons, increasing with the age of the householder and the size of the household until the householder reaches the age of 64.

Real wealth

A private wealth manager reflects on the top 1 percent and top .1 percent in net worth. His data would be a bit more informative if he broke it out by age group (note the numbers at the link are not entirely consistent with those given below, probably because of the use of means vs medians or threshold values). A 30 year old with a million dollars and someone about to retire with the same net worth are in two very different situations. See also working class millionaires.

... Until recently, most studies just broke out the top 1% as a group. Data on net worth distributions within the top 1% indicate that one enters the top 0.5% with about $1.8M, the top 0.25% with $3.1M, the top 0.10% with $5.5M and the top 0.01% with $24.4M. Wealth distribution is highly skewed towards the top 0.01%, increasing the overall average for this group. The net worth for those in the lower half of the top 1% is usually achieved after decades of education, hard work, saving and investing as a professional or small business person. While an after-tax income of $175k to $250k and net worth in the $1.2M to $1.8M range may seem like a lot of money to most Americans, it doesn’t really buy freedom from financial worry or access to the true corridors of power and money. That doesn’t become frequent until we reach the top 0.1%.

I’ve had many discussions in the last few years with clients with “only” $5M or under in assets, those in the 99th to 99.9th percentiles, as to whether they have enough money to retire or stay retired. That may sound strange to the 99% not in this group but generally accepted “safe” retirement distribution rates for a 30 year period are in the 3-5% range with 4% as the current industry standard. Assuming that the lower end of the top 1% has, say, $1.2M in investment assets, their retirement income will be about $50k per year plus maybe $30k-$40k from Social Security, so let’s say $90k per year pre-tax and $75-$80k post-tax if they wish to plan for 30 years of withdrawals. For those with $1.8M in retirement assets, that rises to around $120-150k pretax per year and around $100k after tax. If someone retires with $5M today, roughly the beginning rung for entry into the top 0.1%, they can reasonably expect an income of $240k pretax and around $190k post tax, including Social Security.

... Since the majority of those in this group actually earned their money from professions and smaller businesses, they generally don’t participate in the benefits big money enjoys. Those in the 99th to 99.5th percentile lack access to power. For example, most physicians today are having their incomes reduced by HMO’s, PPO’s and cost controls from Medicare and insurance companies; the legal profession is suffering from excess capacity, declining demand and global outsourcing; successful small businesses struggle with increasing regulation and taxation. I speak daily with these relative winners in the economic hierarchy and many express frustration.

Unlike those in the lower half of the top 1%, those in the top half and, particularly, top 0.1%, can often borrow for almost nothing, keep profits and production overseas, hold personal assets in tax havens, ride out down markets and economies, and influence legislation in the U.S. They have access to the very best in accounting firms, tax and other attorneys, numerous consultants, private wealth managers, a network of other wealthy and powerful friends, lucrative business opportunities, and many other benefits. Most of those in the bottom half of the top 1% lack power and global flexibility and are essentially well-compensated workhorses for the top 0.5%, just like the bottom 99%. In my view, the American dream of striking it rich is merely a well-marketed fantasy that keeps the bottom 99.5% hoping for better and prevents social and political instability. The odds of getting into that top 0.5% are very slim and the door is kept firmly shut by those within it.

... I could go on and on, but the bottom line is this: A highly complex and largely discrete set of laws and exemptions from laws has been put in place by those in the uppermost reaches of the U.S. financial system. It allows them to protect and increase their wealth and significantly affect the U.S. political and legislative processes. They have real power and real wealth. Ordinary citizens in the bottom 99.9% are largely not aware of these systems, do not understand how they work, are unlikely to participate in them, and have little likelihood of entering the top 0.5%, much less the top 0.1%. Moreover, those at the very top have no incentive whatsoever for revealing or changing the rules. I am not optimistic.

Price and self-deception

Is the letter below for real, or just a clever parody? ("Shoes!") This old joke says it all:

A man meets a woman in a bar and asks her if he will have sex with him for a million dollars. The woman thinks about it for a moment and says yes.

The man then asks the woman if she will have sex with him for $20. The woman becomes incensed and says, “What do you take me for, a whore?”

The man replies, “Ma’am we’ve already established what you are, now we’re just negotiating price.”

Related posts. Via Maoxian.

Why I Love My Sugar Daddy: ... The dating pool in my town wasn’t the most appealing, so I took my search online. I was bombarded with messages from guys who couldn’t spell, took shirtless pictures of themselves in mirrors, and were perfectly content to be living in their parents’ basements. I was a driven pre-law student with a 4.0 GPA and dreams of a pitbull-esque career in corporate law. These candidates weren’t cutting it. I wanted a man who was ambitious and successful, someone who knew what he wanted and exactly how to get it. I wanted an established man.

I entered my specifications into Google, and the first hit was a Sugar Daddy dating site. “No way,” I thought. “I’m not a golddigger, I just want a man who has his shit together.” But the tagline had already hooked me– “Meet Wealthy Men Seeking to Spoil Beautiful Women!” It felt like I had just been challenged… was I attractive and charming enough to pique the interest of a successful millionaire? My mind raced. Is this thinly-veiled prostitution? Were there really men out there who wanted to buy me shoes? I like shoes! Was this going to affect how I identified myself as an intelligent, independent woman? PRESENTS! I caved. I set up a profile, paid the membership fee, and waited to see what would happen.

The difference in quality (my idea of quality, at least) between the two dating pools was… slightly disappointing. I was expecting some kind of Mensa utopia, but apparently shitheads exist in all tax brackets. Once I became more realistic about my expectations, the outlook was less bleak. There were men who read! Books! These men had careers and dreams and ambitions! I was getting messages that were entirely free of grammatical errors!

I learned very quickly that there were many different types of SD relationships, ranging from blatant prostitution/escorting to regular relationships with the perk of total financial stability. After going on a few dates and being flat-out propositioned, I decided I wasn’t into the whole sex-for-cash-in-an-unmarked-envelope deal. I received offers to be a travel companion– jetsetting to Bali or Brazil whenever a SD’s schedule allowed it– but as a busy student, that option didn’t seem too viable. I decided that I wanted a more traditional relationship, which is slightly harder to find, but (IMO) is the most rewarding. I was looking for someone who, like myself, was busy building their career and simply didn’t have all the time in the world to commit to a normal relationship. Something easy, fun, and drama-free, with a guy who could help me better myself in all areas.

After a year and a half of casual relationships with great guys, I met my current Sugar Daddy, The Lawyer. My first date with The Lawyer was… probably one of the most surreal experiences of my lower-middle class, smalltown life. After exchanging a few e-mails, phone calls, and Skype sessions (who knew 45-year olds knew how to use Skype?), we agreed to meet. Normally, a quick date at Starbucks would suffice, but The Lawyer lived 1500 miles away. Since I didn’t have a law firm to run, we decided it would be easier if I travelled to meet him. ...

... I had never even flown business class before, so a private jet was… well, it was fucking awesome. ...

When I first got into the whole Sugar Daddy relationship world, I was worried I was going to lose myself. I didn’t want people to think I was some kind of brainless, golddigging bimbo. I was worried that other people’s opinions of my love life would somehow change who I was and what I believed in. Of course, that’s total bullshit. I’m the exact same person I was two years ago, except with more shoes and less debt. SD relationships work for me, and not just monetarily. They fit well into my busy life, and most of the men I’ve met are smart, kind, and incredibly charming. I’m in a great relationship, and I have no reason to be ashamed of it. I’m not a brazenly parasitic adult baby. I’m just an intelligent, driven, career-oriented woman with a boyfriend who likes to buy me presents.

Click through for marvelous comments.

Millionaires next door

Percentage of families with at least $1 million USD in investible assets (excludes primary residence). Data from BCG Global Wealth 2011 Report. ***

1. Singapore 15.5%
2. Switzerland 9.9%
3. Qatar 8.9%
4. Hong Kong 8.7%
5. Kuwait 8.5%
6. UAE 5%
7. United States 4.5%
8. Taiwan 3.5%
9. Israel 3.4%
10. Belgium 3.1%
11. Japan 3%
12. Bahrain 2.6%
13. Ireland 2.3%
14. Netherlands 2.3%
15. UK 2.2%

*** Wealth is defined as total assets under management (AuM) across all households. AuM includes cash deposits, money market funds, listed securities held directly or indirectly through managed investments, and onshore and offshore assets. It excludes wealth attributed to investors’ own businesses, residences, or luxury goods.

How the world works

I posted this as a comment on a GNXP thread about whether it is worthwhile to attend an elite university. I suppose you can get the main points by watching The Social Network (which I haven't seen yet) and thinking about what Zuckerberg's life would be like had he attended U Mass instead of Harvard. BTW, rumor has it that Zuckerberg's buddy from Exeter, who went to Caltech, is the main guy responsible for the ability of FaceBook to scale without collapsing (this is a nontrivial technical feat which Friendster -- remember them? -- failed to accomplish). Anyone know more details about this? Does the techer appear in the movie or in Mezrich's book?

Go to the web sites of venture capital, private equity or hedge funds, or of Goldman Sachs, and you’ll find that HYPS alums, plus a few Ivies, plus MIT and Caltech, are grossly overrepresented. (Equivalently, look at the founding teams of venture funded startups.)

Most top firms only recruit at a few schools. A kid from a non-elite UG school has very little chance of finding a job at one of these places unless they first go to grad school at, e.g., HBS, HLS, or get a PhD from a top place. (By top place I don’t mean “gee US News says Ohio State’s Aero E program is top 5!” — I mean, e.g., a math PhD from Berkeley or a PhD in computer science from MIT — the traditional top dogs in academia.)

This is just how the world works. I won’t go into detail, but it’s actually somewhat rational for elite firms to operate this way — a Harvard guy knows how the filtering works at his alma mater and at similar places so he trusts it. Plus, at the far tail of ability I would guess the top 10-20 UG schools grab almost 50 percent of the pool.

I teach at U Oregon and out of curiosity I once surveyed the students at our Honors College, which has SAT-HSGPA characteristics similar to Cornell or Berkeley. Very few of the kids knew what a venture capitalist or derivatives trader was. Very few had the kinds of life and career aspirations that are *typical* of HYPS or techer kids. At the time I took the survey almost 50 percent of the graduating class at Harvard was heading into finance. You can bet that the average senior at Harvard knows what Goldman Sachs is (and even what it means to make partner there), that McKinsey is so over (relative to careers in finance), what the difference is between a Rhodes, Marshall and Churchill scholarship, etc. etc. Very few state school kids do … Last year a physics student at Oregon won a Marshall to go to Cambridge. The administrators were happy about the PR. I had a conversation with a vice-provost about how to ensure a steady pipeline of such candidates — but there are not the resources, institutional understanding of the process, etc. (let alone pool of able kids) to turn UO into a Rhodes/Marshall/… machine like Harvard.

Now tell me that peer or network effects don’t matter. Controlling for SAT may account for much of the variance in well-established careers like medicine or even law, but for the very top jobs (which contribute disproportionately toward income inequality), kids at elite schools have huge advantages. Guess where I will send my kids (assuming they can get in)?

To see the elite / non-elite divide most starkly, look at the probability of (earned) net worth, say, $5-10M by age 40. This cuts out almost all doctors and lawyers and leaves finance, startups and entertainment (i.e., movies or television; let’s ignore sports). Even after controlling for SAT, I would guess elite grads are 3 or maybe even 10 times more likely to achieve this milestone.

Controlling for IQ doesn't account for differences in drive or life expectations or naked ambition, let alone social networks, signaling or information flow among elites.

See also Returns to elite education.

SeekingArrangement: all about the Benjamins

We wrote about the high-end "dating" site SeekingArrangement.com (founded by an MIT grad) here. See the SA blog comments for back and forth between real life sugar babies and sugar daddies :-)



This article, by a would-be writer, appeared in Vanity Fair recently.

Vanity Fair: ... I had become a member a few weeks earlier, partly as a social experiment and partly out of genuine desperation. I was frustrated with my job, which offered little upward mobility, and was thinking about quitting it to pursue my goal of becoming a full-time freelance writer. Holding me back were my lack of savings and my fear of sacrificing a regular paycheck. If I had a hefty allowance from a generous benefactor, though, I figured that I could take the leap comfortably.

... The site, which launched in 2006, has about 420,000 members, of which roughly one-third are sugar daddies and two-thirds are sugar babies (sugar mommies account for less than one percent). While sugar daddies pay $49.95 per month for a premium membership (or $1,200 a month for Diamond Club certification, which requires verification of one’s net worth through tax-return data), as a sugar baby I was able to join for free. I uploaded two photos and listed some general information about myself, and I stated “open, amount negotiable” in the space that asks what you’re looking for. (Seeking Arrangement skirts the issue of prostitution by promoting the exchange of “intimacy and companionship” for “gifts.”) I took a deep breath and posted my profile, determined to focus on New York–based single men claiming to be worth at least $10 million.

... When Charlie—divorced, late 50s, worth about $50 million—asked to meet me, I tried to remain hopeful. I sauntered into the Mercer Hotel in jeans and a gray cardigan one frigid Sunday morning, scouring the crowd for a tall, gray-haired man. He spotted me first and tapped me on the shoulder.

“Here you go—just a token,” Charlie said, extending his hand.

I examined my gift—an iPod—and said, “Thank you,” determining to be extra pleasant during brunch.

We both ordered eggs, and by the time our food arrived I had grown to like Charlie. For starters, he provided an earnest explanation for joining Seeking Arrangement.

“I can’t separate the fact that I have resources from who I am,” he said. “It’s part of me. And it’s something I have to offer twentysomethings.”

“I completely agree.”

“I married young, you know. And I remained married for nearly 30 years while I was raising my kids.”

“How old are they?”

He chuckled before admitting, “It’s kind of weird. They’re your age.”

“It’s not weird at all,” I said.

Charlie turned to Seeking Arrangement, he explained, because most of the women he had been meeting wanted to settle down. “I don’t want another family,” he said.

“I promise you I’m not in the market for one,” I told him, and then asked, “Have you ever done this before?”

“I’ve never been in one of these relationships, exactly. But I’ve certainly been generous with previous girlfriends. And since joining the site, I’ve been on a few coffee dates. Pretty positive experiences, actually. I met an editor for a fashion periodical, a translator for the U.N., and a girl whose dad”—he stopped to laugh—“whose biological dad had just cut her off. The only negative experience I had was with a girl who was dating a hedge-funder. She said he had given her her nose and her Birkin bag, but that she needed cash. A bit mercenary for my taste.”

Here is a segment that features the founder:

Non-residential net worth

Here it is by age group -- net worth excluding primary residence. Note the data is from 2001, so the top 1% or 5% will have gained while everybody else will be about the same (see Krugman discussion of growing wealth and income inequality here). The latest surveys suggest about 8 million US families (out of 110 million) have more than $1 million in liquid net worth. See here for more data from an IRS study.

Gordon Gekko, from the movie Wall Street: "The richest one percent of this country owns half our country's wealth, five trillion dollars. One third of that comes from hard work, two thirds comes from inheritance, interest on interest accumulating to widows and idiot sons and what I do, stock and real estate speculation. It's bullshit. You got ninety percent of the American public out there with little or no net worth. I create nothing. I own."