Do you buy champagne ?
I saw this graph at a presentation made by the Danish
Institute for the future. It shows how consumers have spent their money in the past, and how they will spend it in the future.
So if you are thinking about starting a company do you think it should sell grain, champagne or inflattable disposable megayachts ?
The world is getting richer....
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Money well spent ?
The notorious
Bjorn Lomborg who wrote "the skeptical environmentalist has in reply to the idea of setting up an early tsunami warning system in Indonesia after the recent catastrophe commented that the money might be spent better. The system can be set up for 18 million US$, and will probably save 100.000 lives next time a tsunami hits. But is this money well spent ?
Not accordding to Bjorn Lomborg. His take is that 3 million people in the area die from diseases such as malaria every year, and can be cured relatively cheaply. If the money were spent on this it would save a considerably higher number of lives.
I think he might be right...
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Think about this before your start a company
Want to drop your dayjob, start a high-tech company and make loads of money ? Well consider this equation before you start:
Y = yearly salary in your dayjob. If you are a skilled professional (which I am sure you are since you're reading this) your salary might be 100.000$
T = The number of years from you start your company till you cash out. 8 years is not a bad bet.
L = The percentual chance that your company makes it big, venture companies estimate that this number is 5%
M = The amount of money you make when you cash out.
Now:
Y*T = the amount of money you would have made in your dayjob in the time it takes from you start your company till you cash out. If you start a company and make it you will make M. If you start a company and don't make it you will make nothing. Since you only have L chance of succeeding you have to factor this into the equation, so the money you statistically will make is M*L.
So:
If Y*T is not greater than M*L it will be a bad investment to start your high tech company. Try and do the math and figure out how much your company should be worth after 10 years for it to be a good investment. In the example above you need to cash out with more than 16 million$, a surprisingly high number.
So think twice...
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A bit of behavioral economics
I seem to have always known that the holy grail of demand and supply finding an equilibrium that will reflect the correct prize for a product or service was a mirage. Nobody has perfect information about the product they are about to buy, and very few people seem to make rational decisions these days. Both of which are prerequisites for the theory of demand and supply to hold true.
I stumbled across
Daniel Kahneman's Nobel lecture in economics that deals with decison making under ucertainty, which is pretty much all the time. What he claims is that our intuition is prone to systematic errors, which affect our ability to make rational decisions. These systematic errors are consistently biased towards risk aversion. For example: most people will say no to a gamble where they have 50% chance of losing 10$ and 50% chance of winning 15$, even though it is quite obvious that the gamble is worthwhile. Typically the upside has to be twice the downside for people to take the gamble because they are risk averse.
Also, he argues that people are more sensitive to changes than to final states. What this means is that what we see and feel depends on previous stimulation, and not so much the overall state of things. If for instance we put one hand in very cold water and the other in very hot water and after a little while put both of our hands in lukewarm water one will feel that the lukewarm water is hot, and the other will feel that the lukewarm water is cold. The hands are more sensitive to the previous condition of hot/cold water than to the overall state of lukewarm water. So the memory of an episode, and the way we will react to similar episodes at a later time are not so much dependant on the how good or bad the episode was, but rather how the episode ended.
These findings also apply to economics, and have been shown to be consistent in a large number of tests.
So think of this next time you buy stock, it has pretty severe consequences on the market.
Daniel Kahnemann's Nobel price lecture
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Who has the upper hand ?
Just read Michael Christons
Caltech Michelin Lecture on the validity of science, and how unsound science often turns into policy. You know, he's the guy that invented the techno-thriller genre, and wrote Jurassic Park.
In the lecture he states that:
There is no proof that second-hand smoke is harmful ?
The polar ice caps are not melting, but actually getting bigger ?
There are no models that can forecast global warming or cooling reliably ? (We can't even predict the weather in two weeks, how about 100 years down the line!!!)
His point being that it is getting increasingly harder for us to assess the truth behind the apparently scientific findings that are being reported in an ever more cluttered media, and that we should not believe everything we see. Especially in regard to environmentalism, which happens to coincide with the plot in his new book "state of fear" where he paints a picture of a group of environmentalists as manipulating the media for their own good.
Interestingly, I checked a few sites in the net, and found that there seems to be proof that the polar ice caps have gotten smaller for the last 8 consecutive years.
So who is being manipulative ?
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I want one of those !!!
Check this out, a flying car, just like in the movies.
Skycar
The price tag is a hefty 500.000$, but hey Vertical take off and landing, 550 km an hour, a range of more than a thousand kilometers, complete FAA certification, triple redundancy in all major systems, and computerised steering so even idiots like me can fly it. It looks supercool, and is going into production in 2006...
I want one !!!
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