Reply to Kaplan's Demographics of the Oligarchs

Bryan Kaplan said the following at the EconLog post Demographics of the Oligarchs:

You've heard about the Russian "oligarchs," right? They're the richest men in Russia. The insinuation is almost invariably that they owe their riches not to entrepreneurial ability, but to political connections. It's not "what you know," but "who you know," right?

If this theory were true, you would expect the oligarchs to have unusual demographics for business leaders. In particular, they should be:

# Unusually likely to have been important members of the Communist Party before they went into business.

# Unusually unlikely to come from groups - like Jews and Armenians - known around the world for their entrepreneurial talent.

Both predictions are wrong.

Most of the oligarchs are too young to have been Communist Party bigwigs. As one interesting paper explains, "Most of the individuals... are relatively young: nine of them are in their 30s, and 13 are in their 40s." The older oligarchs generally had Communist backgrounds, but were hardly leading figures in the Party: "The older oligarchs have typically come from Soviet-era nomenklatura. Prior to transition, they were either managing the respective enterprises or working in government agencies supervising the enterprises, and when the Soviet-era firms were privatized, they converted their de facto control into ownership rights."

Even more striking: The oligarchs are disproportionately Jewish. 90% of Russian Jews have left the country over the last 30 years, but 6 out of the 7 leading oligarchs have Jewish ancestry. This would be hard to explain if their success were primarily due to political connections - but expected if their success largely reflected entrepreneurial ability.

Bryan claims that because Russian Oligarchs are mostly of Jewish ancestry that means that they got there because Jews have entrepreneurial talent and not political connections. However, he never considered the alternative hypothesis that their Jewish ancestry gave them political connections.

In the comments section of Kaplan's blog, Mike argues that immigration does not help the US and he says the following:

Hispanic immigration is not making America a better place. Quite the opposite.

National resources certainly help-- especially if they are used wisely. But the most important predictive factor of economic success in the long run is the average IQ of a nation. The only instances where low IQ nations are successful is when they have an abundance of natural resources combined with an authoritarian government capable of employing those resources in an intelligent way.

By contrast, nations with high IQs and capitalist economic systems, even with few resources (like Singapore), are bound to prosper in the long run.

Armenia is not successful, in part, because of decades of Communism and the fact that corruption and authoritarian power structures are the norm in business and political relations throughout most of the former USSR.

I also wouldn't be surprised to find out that the national IQ of Armenia really isn't very high and that some process has led to the selective emigration of the more intelligent and entrepreneurial Armenians to the West over the years. If the sum total of the world's Armenian population is of above-average intelligence, and the diaspora has been selected strongly for intelligence, the fact that so many Armenians live abroad would help explain both the low average IQ of Armenia and the economic success of the diaspora.

A similar relationship exists between the Cuban exile population in Florida and Cubans living under Fidel. The average IQ of Cubans isn't very high, but the Cuban exiles in the U.S. have been reasonably successful because they represent an exceptionally intelligent and economically successful segment of the Cuban population.

What Mike doesn't consider is the fact that people will low IQs have resources as well because unskilled labor is useful. Those people who serve fries at McDonald's needn't have high IQs, yet they have an important role in the economy. Furthermore, Mike looks at the median or arithmetic average IQ of a population without considering the variances. If we consider the variances then a population with low median IQ can still be exploited for high IQ if the variance in IQ is large.

For example, suppose populations can be modeled using the normal distribution. Suppose we have two populations, population A has mean IQ of 80 with standard deviation of 40. Population B has mean IQ of 100 with standard deviation of 10. Population B is "smarter" than population A because the average IQ of the people in population B is higher than that in population A. However, if we define someone smart as someone whose IQ is over 120 then there are more smart people in population A than in population B. Those with IQ over 120 make up 15.87 per cent of population A and make up only 2.27 per cent of population B. There are more smart people in population A than in population B even though population B has a higher average IQ.

Blood Diamond (2006)

Today was a stay-at-home day for me, which means I spent the whole day indoors in my house. The main thing I did today was watch the movie Blood Diamond. What's the verdict? It's a good movie. I watched the movie with my mom. I suspect my mom wanted to watch this movie because she liked watching Leonardo DiCaprio in Titanic and wanted to see him again. Before the movie started, I tried to warn my mom that this movie was very violent. I knew because the classification or rating said so. It is rated R by the MPAA and MA15+ in Australia.

Blood Diamond turned out to be much more gruesome than I expected. There are endless scenes of killing and bloodshed, including limbs being chopped off children, bodies sprawled all over the road, mutilated corpses hanging from trees, and so on. Some of the scenes were excruciating, and I'm very sure my mom was not happy with what she saw. In spite of this violence, Mom watched the entire movie and she seemed quite moved by the ending. It's often very difficult for any movie to sustain my mother's interest for so long. Usually she'd get tired and walk away.

Blood Diamond also made me curious about real-life blood diamonds. Even if the specific plot is not real, the background, that is, the Sierra Leone Civil War, and the role of diamonds in funding the conflict, is all real. The rebels in Sierra Leone also made use of child soldiers. This conflict in Sierra Leone reminds me of the conflict today in Darfur and the Congo. However, in Darfur, the conflict is not over diamonds but over oil. The De Beers Corporation claims that, with the establishment of the UN's Kimberley Process, blood diamonds are a thing of the past. Even if there are assurances from certification processes, I am still wary about diamonds and to be on the safe side I myself vow never to buy diamonds ever. One reason for this vow is because I fear I may fund murder and rape. Another reason is because I believe that it's silly to buy for a woman an expensive and useless stone.

Talking to Children

I often hear complaints by housewives that staying home with the kids is dreadful because they have to endure endless conversations with their children. They want to be around adults and have intelligent discussions. It's incredible how people tend to want what is scarce or want what they don't have.

I know a friend--let's call him Frank-- who keeps telling me that he feels a strong desire to have children of his own. He told me that he has never actually spoken to a child before. Obviously he spoke to children when he himself was a child, but when he became an adult, he never spoke to any children. He only ever seems to speak to people his own age (not including his parents of course). This is likely due to his being institutionalized in school and university. Through the education system he was put among people his own age.

Wouldn't it be cool then if he could have a young friend? Wouldn't it be cool if he could regularly talk to someone younger? He told me he would love to give the child advice about life, something he wanted desperately when he was young but never received.

The existence of this paternal or maternal instinct among people creates a demand. Where there is demand without supply there is a business opportunity. Why not charge child-starved adult customers to talk to lonely children through telephone? If this idea went ahead, there is a danger that actual pedophiles will start talking about sex explicitly with the children, so to stop this from happening, consumers have to register with the firm first before they talk to any children. The consumer opens an account and must have more than, say, $1000 in the account to be part of this program. Talking to the children can cost, say, $1 per minute. If the consumer swears to the child or abuses the child in any way, then $1000 will be deducted from the account. All conversations will be monitored. This will deter members from abusing children.

In order to find lonely children, the firm can advertise to parents, psychologists, and school counselors. Depending on how many lonely children are needed, a wage can be paid to the children or the children's parents. Increasing this wage may be necessary if the business turns out to be very popular. To keep the firm out from trouble, you must do everything you can to protect the children. Emphasize that this is a service designed to satiate paternal or maternal instincts to help confused or lonely children. Such instincts are already satiated to a degree with child sponsorship programs for example by World Vision. However, this program allows consumers to actually talk to a child, and hearing and interacting with a child in this way may be a more stimulating experience than looking at a child's picture or reading his or her letter every half-year.

Is Bono Hypocritical?

I was browsing through Yahoo! Answers and found someone there who believes Bono is hypocritical for helping the poor because he has a net worth of $200 million. Since when it is hypocritical for a rich person to help a poor person? Why must only poor people help themselves?

There are many male feminists around. In fact, the first feminists were men just as the first ones who railed against slavery were white. Also, just about all of those who fight for animal rights are humans. Often those who need liberating do not have the power to liberate themselves. It takes those in power to help those who are vulnerable.

It is not unusual for rich people to help poor people. In fact, rich people, who have more money, are more capable of helping the poor since they are able to give up much more. Bono's wealth comes from his celebrity status, which draws a lot of attention. He uses this to help the poor by drawing attention to the problem of world poverty.

According to Google, a hypocrite is "a person who professes beliefs and opinions that he or she does not hold in order to conceal his or her real feelings or motives." If a man expressed a desire to liberate females, then his being male does not make this desire less genuine. Therefore, there is not necessarily any hypocrisy.

Frugal Tip: Forget the Garden

If a factory worker tells you he is trying to save money for retirement, and all of a sudden you see him driving a Ferrari, what would you think? If you spend hundreds of thousands of dollars on a sports car when you only need to spend $10,000 for a second-hand Camry, you can forget about early retirement. Depending on the cost of this sports car, they can probably forget retirement completely.

What if this worker told you that instead of buying a Ferrari F430 he is instead going to be frugal by buying something cheaper, and then the next day you see that he's traded in the Ferrari for a BMW M5? So instead of spending $250,000 for a car he spends $125,000, and he thinks he is saving money!

Since the M5 is cheaper than the F430, your factor worker friend is saving money, but he could do much better. My point is that simply buying something cheaper doesn't mean you're frugal.

The moral of that story leads me to the main point of this post. I have been reading on the Get Rich Slowly Blog about the January Update to the blogger's Garden Project. The guy tracks the costs of the seeds he uses for gardening. Country Taste seeds cost $2.75, Italian Sweet seed costs $3.75, and so on. While all this may seem cheap, it is the classic Latte Factor problem. According to David Bach, "The Latte Factor® is based on the simple idea that all you need to do to finish rich is to look at the small things you spend your money on every day and see whether you could redirect that spending to yourself. Putting aside as little as a few dollars a day for your future rather than spending it on little purchases such as lattes, fancy coffees, bottled water, fast food, cigarettes, magazines and so on, can really make a difference between accumulating wealth and living paycheck to paycheck."

Paying $1.25 for seeds may be better than paying $10.00 for seeds, but it is not better than paying nothing. This is analogous of the obvious idea that buying a $100,000 yacht is better than buying a $1 billion yacht, but it is not better than paying nothing.

If you are serious about saving money, the best thing to do is to simply forget the garden. Just let it die.

Of course, if you love your garden or love gardening too much or if you are eating from your garden, that's a different story. Growing plants may also be good for the environment.

Connect6

I'd like to talk about a game that I have been playing recently. It's called Connect6. The rules of this game are so simple it will take the average person literally less than a minute to learn. A Connect6 paper from the 2006 Computer Olympiad explains the rules as follows:

Players and stones: There are two players. The first player, called Black here, holds a set of black stones, like Go or Go-Moku games. The second player, called White here, holds a set of white stones.

Game boards: In theory, the size of game board can be infinite. However, practically, it is hard to support such a game board. Therefore, our proposal is as follows.
- For casual players, simply use 19×19 Go boards.
- For professional players, use 59×59 boards.

Game moves: Black plays first and places only one black stone on one unoccupied intersection, also called square in the rest of this document. Subsequently, Black and White alternately place two of their own stones on two unoccupied squares.

Game winning: The one who first gets six consecutive stones (horizontally, vertically or diagonally) of her/his own wins.

What I love about Connect 6 is that is such a simple game to learn yet has very complex gameplay. The simplicity allows you to teach new players quickly, whereas games like chess require more time to teach. Another benefit is that because the game involves trying to connect lines and involves no capture, Connect6 can easily be played on pen and paper like tic-tac-toe, meaning that you don't need any special equipment. This makes Connect6 an excellent game for moments when you're bored with friends and don't have chess sets nearby.

Another good point about Connect6 is its fairness. In most turn-based games like chess and Go, the player who moves first gets an advantage. For the game Gomoku (Connect5), mathematicians have proven that the first player can always win with perfect play. It is a solved game. Checkers too is a solved game. Connect6 is fair because the first player can only put down one stone at the beginning and subsequently each player puts two stones at a time on the board. Because there is no official limit on how large the board is, Connect6 as a game can be infinitely complex.

There are two sites where I play Connect6: Vying Games and Little Golem.

Vying Games has very good graphics and it also has bots (computer opponents) if you cannot find human opponents. At first I found it difficult to beat the bots at Vying Games, but over time I improved dramatically and now I can beat every single bot without raising a sweat. I've taken on all human challengers at the site. I have beaten many, including the website's designer Eki, but many of the human players there are tough and my results among the high-rated players have been mixed. Looking at Vying Games's Connect6 League Table, you will see my name near the top. Unfortunately many of the top players there are reluctant to challenge newcomers, perhaps to preserve their high ranking, and I suspect many of the top-rating players there won against easy bots very many times to gradually increase their rank. This is the problem with Vying Games. There are too few people and the bots are too easy.

The website Little Golem is different. There are very many players here, and many of them are very good. Unfortunately there are no bots, so you have to play correspondence games against humans. The graphics at Little Golem are also not good.

For beginners, I recommend you start at Vying Games and play against the bots. Once you are good enough to beat all the bots at Vying Games, start playing against humans both at Vying Games and Little Golem.

Also very fun are Connect6 puzzles at Connect6.org.

The image at the top is from a game I played with black stones against Piau with white stones. The whole game can be seen here.