Quote of the Day: Dignity is Worth Nothing Unless You Earn It and Pay the Price for It

A half-man (or, rather, half-person) is not someone who does not have an opinion, just someone who does not take risks for it.

My greatest lesson in courage came from my father — as a child, I had admired him before for his erudition, but was not overly fazed since erudition on its own does not make a man. He had a large ego, immense dignity, and required respect. But he was once insulted by a militiaman at a road check during the Lebanese war. He refused to comply, and got angry at the militiaman for being disrespectful. As he drove away, the gunman shot him in the back. The bullet stayed in his chest for the rest of his life so he had to carry an X-ray through airport terminals. This set the bar very high for me: dignity is worth nothing unless you earn it, unless you are willing to pay a price for it.

A lesson I learned from this ancient culture is the notion of as Megalopsychon (a term expressed in Aristotle’s ethics), a sense of grandeur that got superseded by the Christian values of “humility”. There is no word for it in Romance languages; in Arabic it is called Shhm —best translated as nonsmall. If you take risks and face your fate with dignity, there is nothing you can do that makes you small; if you don’t take risks, there is nothing you can do that makes you grand, nothing. And when you take risks, insults by half-men (small men those who don’t risk) are similar to barks by nonhuman animals: you can’t feel insulted by a dog.

This inspirational treasurable quote is from my favorite iconoclast and the profound thinker and philosopher Nassim Nicolas Taleb post at Facebook

Thank you Mr. Taleb.

My father (who was not a libertarian but I think had libertarian leanings) paid the price of dignity by steadfastly refusing to profit from politics--even when presented with such conditions.

I am carrying his principle over today.

Why I Don’t Bother to Give Talks

I didn't realize, until reading Seth Godin’s latest advice which he transcribes so well, the reason why I refuse or turn down invitations to talk in public.

Before you give a speech, then, you must do one of two things if your goal is to persuade:

Learn to read the same way you speak (unlikely)

or, learn to speak without reading. Learn your message well enough that you can communicate it without reading it. We want your humanity.

If you can't do that, don't bother giving a speech. Just send everyone a memo and save time and stress for all concerned.

That’s why I just write or blog.

Currency Controls: My Nightmare at the Airport

Not only has government paranoia almost cost me and my family a vacation, worst, I had to endure a traumatic episode from bureaucratic harassment from local officials.

My basic mistake was to leave my wallet and instead brought my peso cash allotted for our travel expenditures packed into a white business envelope.

At the immigration pat-down, I was asked what the lump in my left front pocket of my pants was which I promptly disclosed.

The inspector told me to step aside from the line and wait for the immigration official, stating that I had exceeded the maximum amount cash (P10,000) allowable for each local citizen to bring abroad, who would decide on my case.

The immigration official arrived and lectured me on my supposed offense. And the officer further said that in breach of the regulation, I was subject to penalty in accordance to the regulations of the Bureau of Customs.

I replied that I DID NOT know about any disclosure procedures, or of any currency exports regulations by individuals.

And prior to the pat-down all I did was to fill up a form where I affixed my signature which DID NOT contain any information about required disclosures.

The immigration departure document looked like this.

Looking back I found the said regulation from IATA’s website

Residents and Non-residents: local currency (Philippine Peso-PHP): up to PHP 10,000.-. Exceeding amounts require authorisation from the Central Bank of the Philippines. foreign currencies : up to USD 10,000.-, or its equivalent. Amounts exceeding USD 10,000.-, or its equivalent must be declared.

Information must be furnished on the source and purpose of the transport of such amount. Violation will be subject to sanctions under Philippine customs law and regulations.

This means I have to apply with the central bank for any amount exceeding 10k pesos to bring abroad! Gadzooks, what onerous red tape!

Back to the airport, the officer suggested that to circumvent the regulation, I could go out of the area and have my (slightly) excess pesos changed into US dollars or other foreign currencies.

However, because of time constraints, doing so risks that we could miss our flight, which would translate to financial losses on our flight tickets compounded by the psychic losses from our frustrated plans.

I pleaded to the officer that the marginally excess pesos (less than 5,000 per head) had been meant for my mom, who is an overseas resident, as a Christmas present. After a few minutes, the officer relented and allowed us through.

Of course, I am thankful to the officer for his ‘generous’ gesture in spite of the hassle.

But such event only reinforced my understanding of how unilateral or arbitrary laws corrupt a system.

-I became an alleged offender for bringing my personal property without knowledge of any breach of the law, and importantly without aggressing upon anybody else (except in the eyes of the enablers and implementers of the regulation, again whose regulations I didn’t know).

-For not enforcing the law, the officer can be construed as being remiss of his duties and equally culpable transgressor.

Yet he did so perhaps in the understanding of the law’s unreasonableness, in my opinion.

The officer knew such law has been repressive, selective in enforcement and would hurt citizens in good faith, thereby perhaps conscience dictated the tolerant decision.

Or it is possible too that the officer has seen enough of our mental and emotional anguish.

-The officer offered an alternative to go around the system (change excess pesos into US dollars), again for the same reasons.

-I was lucky to have that particular officer attend to me. For the outcome would have been different if someone else with malice adjudicated my case. Such regulations could have been used to mulct and extort on us.

And come to think of it, just how can one enjoy a vacation with only 10,000 pesos (USD 227 @44 pesos per USD) in the pocket, especially when visiting a country whose cost of living has vastly been higher than ours?

And considering the millions of local travellers abroad annually, I am quite certain that such regulation have hardly been implemented except for a few instances.

The implication is that such currency control regulation has not been only repressive, selective and arbitrary in implementation but also impractical.

Yet to whose benefit these regulations accrue?

One the political class.

By imposing capital controls, the political class does not want people to vote with their money, or for the markets to expose on their abuses to their constituencies.

The attempt to restrict money outflows, in the guise of preventing money laundering (applied mostly to political opponents rather than to the incumbents and their clients) and blame-the-speculators (not the policies of local politicians and bureaucrats) signify as symptoms of government repression, who coldheartedly would penalize the innocent for their upkeep.

Two, the banking class.

Obviously putting restrictions on cash movements has been designed to bring transactions to the politically privileged banking and finance industry, which have been under the ken or supervision of the political class.

Yet the unintended consequence has been to foster more underground activities, using loopholes (e.g. change to US dollars) or etc., while simultaneously breeding corruption of the bureaucracy.

Let me add that I brought spare cash as insurance from the untoward experience I had 5 years ago, where the failure to access my bank’s overseas ATM network almost left me helpless.

And I have to admit while I have some credit cards, I am an averse or an infrequent user where my credit cards have been meant for emergencies.

Yet another possible unintended consequence would be if there would be an emergency while in another country (say natural disaster), without enough CASH or access to credit cards or ATM, one will be left to suffer an undeserved fate because of such feckless regulations.

I have been reluctant to travel mostly because of my aerophobia, but now I have developed a new phobia: fear of bureaucracy-bureauphobia.

The Broken Window Fallacy as seen from my Damaged Computer

If there is anything I can share with you this week, it is the practical economic lessons from the broken window fallacy as seen from my continuing anguish with my damaged computer.

For now, there are two possible alternatives to my computer dilemma: hope that the repair turns out fine and done soonest, or that I may be forced to acquire a new one.

Over the past few days, the activities of my post computer crash life has revolved around

plying back and forth to the repair center by use of cabs,

getting limited access to the web from several internet café

taking meals outside in support of the above

For people who see destruction as a way of prosperity, they would focus on the money I would be spending on the repair center (if repaired) or the retail outfit and the computer manufacturer (if replacement) and the ancillary costs of these activities—taxi fare, computer rental fees and meals from vendors--as helping the economy.

However they would ignore or downplay the impact of my losses.

For me, money spent for either repair or replacement and all of the additional costs would have been money meant to buy a pair of new shoes or a new tablet.

This means that instead of my normal computer AND a new pair of shoes, or my normal computer AND a new tablet, at the end of the day, I would only have a ‘normal’ computer. Or the opportunity cost from my actions to repair or replace the existing damaged computer is a pair of shoes or a tablet. Instead of TWO goods I end up with one. So there is NO value added from the repair or the replacement.

In addition, as I await the verdict of the computer service center, my output has been vastly reduced. I can only make 1 post on my blog, where I usually make an average of 3 per day, and importantly, I wouldn’t be sending any weekend reports to my clients. So productivity has likewise been affected.

[Aside, my savings has allowed me to consider the two options, if I had no savings I would be at a total loss.]

I also have not been on track with what’s been happening on the global financial markets, as I told my principals that I would be ‘trading blind’. Such dislocation has brought me a great deal of distress. You see, the web has altered my way of living such that I have been become greatly dependent on it. This brings about the adverse mental aspects from such displacement or losses.

While these may represent as my personal issues, when amplified as natural or manmade disasters you would notice that destruction doesn’t lead to prosperity. While some economic agents may indeed prosper from such misfortune, the overall the damage would be greater than the peripheral benefits.

Statistics cannot articulate the mental and emotional strains and real productivity and purchasing power losses from the economics of destruction. Be leery of anyone who tells you so.

Another Endorsement for the Prudent Investor Newsletters

On my linkedin profile page, long time reader, Wharton grad, highly successful investment banker and corporate finance advisor and currently Managing Director, Corporate Finance & Consulting at the Center for Global Best Practices, Mr. Tony Herbosa posted this recommendation...

For anyone serious about investing in the Philippines, Benson's Prudent Investor Newsletters are a must read on a continual basis. I must say that the PI newsletters have helped me anticipate major turning points in the market.

My profuse thanks, Tony.

Incidentally, I found that one of my articles had been referenced in an article by a Mises.org contributor and author published at the top libertarian website (based on Alexas), Lew Rockwell.com.

Nothing to crow about, but such surprising discovery had been a delight for me, since I frequent the site.

Remembering The Philippines’ People Power

In the midst of the ongoing string of upheavals in MENA, today, the Philippines celebrate our version of nonviolent revolution which also toppled a dictator, popularly known as People Power, an event that occurred in 1986 or 25 years ago.

And in the spirit of Étienne de La Boétie, the early proponent of nonviolent resistance and civil disobedience, I quote Dr. Antony Mueller’s poignant comment on the ongoing revolution in Libya,

All it takes for government to fall is not to follow orders. Just stop doing what you're being told and the state will wither away and dictators will stand naked.

Though yours truly was an avid participant of both People Power and People Power 2, I was lucky to be part of a portrait taken by a magazine for an airline called 'Mabuhay ' during People Power 2.

But no same luck or remembrance for the original People Power.

Economic Insights from My Weekend at the Hospital

I just can’t help it: economics is part of everything we do.

Some insights I gleaned from my weekend at the hospital.

1. Moral Hazard.

Free lunch is such a compelling idea. Financial intermediaries (health insurance) provide a huge incentive for both principal (doctors) and agent (patient) who sees ways to benefit from its use, even if confinement is not a prerequisite or a required procedure.

Said differently, when the cost of confinement is perceived as low (because it is paid for by a third party), then demand for its use is high.

The advantage (for us) is that health insurance financing provides the “confidence” factor arising from any lingering fears of serious diseases.

In our case, the goals were met: causality of the ailment had been ascertained and importantly the “confidence factor” was established. However, in my view, it would seem that my wife’s confinement as more representative of a placebo effect, because hospital procedures were more about the symptoms and that the treatment could have been done as an outpatient.

Translated into social policies. While private financial intermediaries are governed by profit and loss from the actuarial calculated premium and liability tradeoffs, extrapolated into social policies, free lunch from “universal” health insurance translates to massive demand for health resources. This would lead to rationing and resource allocation determined by the bureaucracy and subsequent skyrocketing prices in health related resources, aside from having less quality treatments.

2. Treating symptoms than the root of the disease.

I thought that I was conversing with an Austrian economist as one of the main attending doctors of my wife gave us a marvelous, or what I would deem as a medical, but economically sound insight: the importance of establishing the relevant causality in diagnosing health problems.

The veteran doctor said that symptom based treatment is a commonplace approach of typical doctors (for many reasons). From that approach, the risk could be one of misdiagnosis or a multitude of intake of prescribed medicines, from different doctors, that may lead to internal conflicts and or side effects which may be perceived by patients as serious ailment.

This very much reminds me of how mainstream economists and politicians recommend solutions to economic problems: they are mostly short term ‘symptom’ based whose solutions are predicated on the throwing money at the problem, changing the figurehead, or regulate or tax the problem—what I call the “Three Monkey Solution”.

So unforeseen consequences can be applied to individual health problems, in as much it is with social policies.

3. Murphy’s Law: Anything you try to fix will take longer and cost you more than you thought.

The fixation on ‘free lunch’ via third party financing was supposedly cost free on our part. At the end of the day, aside from the costs of dislocation, shuttling to and from the hospital to the house plus other petty cash items, a non-accredited doctor had to be paid with professional fees not covered by my wife’s policy—Murphy’s law applied.

4. Agency problem.

I don’t know how this applies with health industry participants (such as doctors) employed or enrolled with third party or financial intermediaries providing health care (in the case of my wife’s weekend experience).

While (principal) doctors aim to nobly serve the interests of their patients (agents), doctors are economic agents as well, who seek to be compensated for their efforts or through their services.

And I would suspect that as economic agents, there would be the underlying incentive to seek asymmetric gains from applying treatments; such as from having more procedures, or through confinement or through more consultations. Again, I can’t say how this applies to my wife’s case. But I am speaking in the general sense.

Aside from medical diagnostics, a lot of the professional fees also depends on the degree of social or interpersonal relationship with patients. In our case, the financial intermediary has built in fees covered with the policy which has not been reflected on the bill. Only the non-accredited doctor had to be paid for, but this is understandable.

This is not to disparage anyone, but the point is that individual incentives are very much in place even for the people in the health industry. (Incidentally, my wife had two great doctors)

And this could be one reason why many doctors, allegedly, resort to symptom based treatment (see #2).

The moral here is that we should be circumspect about dealing with free lunches (in anything), examine health problems via relevant causality (in cognition of the different incentives underpining the principal-agent relationship) and to judiciously weigh on cost-benefits of treatments.

After all, doctors like everyone else are just human beings.

And I thank the Lord that my wife is safe.