69. Return on Risk 🔗
April 30, 2021
In which I ask what fraction of income is return on risk versus effort — and confess to being too clever for my own good, taking easy high-return bets that stunted inner growth, arriving at the counterintuitive conclusion that leisure and useless pursuits are the cure for cleverness.
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What’s percent of your income is return on risk as opposed to compensation for effort?
I don’t mean in a tax sense of capital gains. I mean any part of your income that’s due to a risk you took with uncertain return that could have been 0.
I think mine has been ~15-30%.
I don’t mean in a tax sense of capital gains. I mean any part of your income that’s due to a risk you took with uncertain return that could have been 0.
I think mine has been ~15-30%.
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Rents, passive income, capital gains are tax-legible subsets of the larger nebulous category of return on risk.
The optimal is probably <30% otherwise you suffer curse of resources.
The optimal is probably <30% otherwise you suffer curse of resources.
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Hard to actually estimate. For eg carefully researched conservative investments are mostly return on effort even if treated as return in risk. You put in effort to lower the courage needed. The courage needed to take an irreversible action is the actual measure of risk.
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Eg: meta-multiple choice test
a) Lazy and not cowardly: guess, score 25%
b) Industrious and cowardly: study, score 100%
c) Lazy and courageous: steal answers, score 100%
d) Industrious and courageous: phone in test you don’t care about, score 60%, do something better with time
a) Lazy and not cowardly: guess, score 25%
b) Industrious and cowardly: study, score 100%
c) Lazy and courageous: steal answers, score 100%
d) Industrious and courageous: phone in test you don’t care about, score 60%, do something better with time
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d is a calculated risk: you could be wrong about “something better” and subject was worth learning more than whatever you blew it off for
c is curse of resources effect of risk-taking courage if subject was worthwhile. You just robbed future self of knowledge by being courageous
c is curse of resources effect of risk-taking courage if subject was worthwhile. You just robbed future self of knowledge by being courageous
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I’ve probably taken more risks than optimal and suffered curse of resources to some extent... to a degree I’ve taken the “easy A’s” path through life because I’ve been decent at spotting good risks to take. Might have been better for me to have been forced down harder paths.
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I’m not particularly courageous but I’ve been good at spotting high return-on-courage options that fit me personally very well that few others could have made use of. Options that didn’t call for much courage from me but would have for many people who aren’t me.
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The costs are now becoming apparent. I wish I had more hard-earned skills now than I do. Skills that would be very fulfilling to have now. The downside of “work smarter, not harder” is that you lose the subtle positive externalities of working harder in terms of more growth.
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Sometimes the point is to do the hard work. There’s no point being clever and figuring out a machine to log 10k steps on pedometer just to get insurance discount. You’re ultimately just fooling yourself.
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Curse of resources from risk-taking = external compounding rewards at the expense of internal growth you actually need.
When you take a risk, account for lost internal growth too. Best if that stays constant while external payoff curve is reshaped.
When you take a risk, account for lost internal growth too. Best if that stays constant while external payoff curve is reshaped.
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Think of risk taking as opening yourself up to luck, like drilling for oil.
But if you actually strike oil... yeah you’re gonna turn into Saudi Arabia to some extent and wither away a big due to lost inner growth opp.
But if you actually strike oil... yeah you’re gonna turn into Saudi Arabia to some extent and wither away a big due to lost inner growth opp.
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An idiosyncratic definition of intelligence is inspired by the idiom “too clever for your own good.”
Intelligence is the ability to spot unreasonably high return-on-courage bets for you
Encompasses self knowledge and world knowledge. Not IQ. YouQ? UQ?
Intelligence is the ability to spot unreasonably high return-on-courage bets for you
Encompasses self knowledge and world knowledge. Not IQ. YouQ? UQ?
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Whatever my absolute intelligence relative to others by your favorite flawed measure, I’m probably too clever for my own good because I have been able to engineer life to be easier than was good for me. Now at 46 I don’t know how to work hard enough at hard earned skills 🤣
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It feels like a weird thing to say, but my primary life challenge now is learning to work harder and more patiently than I know how to, and strictly avoid the temptations of being clever.
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Oddly enough, the key to taking on this project has been maximizing “leisure.” Only in true leisure, in pursuit of uneconomic goals with no real external payoffs to game for, are you truly free to work as hard as necessary without fooling yourself.
Continuous partial leisure is better. Not full-blown leisure society or veblenesque leisure class parasitism. Just... your peak, quality time us your own.
I’ve had that condition for like 25 years now, but the first 15 I had to be very sneaky and clever to arrange life that way.
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If there’s an external goal I can get to that’s “worth” more than the internal growth of getting it the right way, I am usually clever enough to achieve it with much lower effort. So removing the external goal value entirely forces me towards the internal. So borderline art.
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Make it worthless or even negative worth to be “too clever for your own good.”
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If you believe in IQ you want the highest IQ compatible you can have without having attendant mental health issues elsewhere.
But YouQ should ideally be 100. Exactly smart enough for your own good. Not more or less.
But YouQ should ideally be 100. Exactly smart enough for your own good. Not more or less.
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This is why I really like space exploration. Nobody has ever come up with a non-bullshit objective external reason to do it. The only reason to do it is internal. You can’t be too clever for your own good in space exploration because it’s worth nothing externally.
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I suspect this line of thought leads many smart people to religion if they add one fatalist leap of faith: that the universe has arranged the perfect set of life challenges for your maximal spiritual development and trying to be clever with risk taking is cosmic foolishness.
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This I don’t buy. The universe is pretty random. The challenges life throws at you have no intrinsic meaning. Unfortunately you actually have to choose when to take the easy-courageous way around, and when to take the hard-submissive way through.
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Many tragicomic paths begin with the hope that life is meaningful enough that surrendering agency and doubt is a metaphysically smart thing to do. Hence the focus on surrender and submission in all religions.
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Not that it can’t lead to brilliantly wrong metaphysics. Leibniz was a risk-taking royal-ass-kissing, solipsistic hustler, but also seemed to be genuinely religious in exactly this sense. He believed the universe was fractally optimal at every instant down to the last monad.
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Leibniz was possibly the ultimate “too clever for his own good” guy. So clever he invented calculus and computers and for an encore fooled himself into believing Spinoza was wrong with an intricately wonderful bullshit-vitalist metaphysics (monadology)
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Probably a good bit of commencement speech type advice for kids would be: pick one useless thing you’re neither going to get clever with, nor let others dictate how you pursue, and design life around reserving your peak hours for that.
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Get as clever as you like in adjacent things. Take risky shortcuts etc to pay the bills in other areas. But the one core thing. Keep it off limits for cleverness, external incentives, and surrendering of control.
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“Center your purest hobby in your most free hours every day Luke”
I guess I accidentally approximately did that. Except writing would probably not have been the thing I’d have picked if I’d actually given this idea serious thought at say 22.
I guess I accidentally approximately did that. Except writing would probably not have been the thing I’d have picked if I’d actually given this idea serious thought at say 22.
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Purest = least susceptible to external incentives, most deeply entangled with who you are
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Since a few people are asking what I'd have chosen at age 21 instead of writing if I'd consciously thought of it this way... I've been answering 'parkour'. It's partly a joke, but also partly hindsight wisdom. I'm way overindexed on life of mind over life of body, with high cost.
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I'm not particularly athletic, but not particularly unathletic either, and there was a time when I could have, at relatively low but patient effort, set myself up for a far more healthy future. Now it would take 100x the effort and I'm like "just accept progressive decrepitude"
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It's not as bad as that... I do work out and put some effort into staying in shape, but it's mostly damage mitigation and stop-loss levels. The decades of underinvestment can't be reversed.
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And I did used to actually enjoy several physical activities enough, and was unterrible enough at them, that they were real options 20 years ago... ultimate frisbee, swimming, running, hiking. I just didn't choose to ever invest at more than casual level.
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I have a feeling that would have been an investment that would have floated all boats (including mental) in middle age.
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Just realized that what I mean here is roughly what Douglas Hofstandter means by a "strange loop" ... activities that are entangled enough with identity all the way down
“Center your purest hobby in your most free hours every day Luke”
I guess I accidentally approximately did that. Except writing would probably not have been the thing I’d have picked if I’d actually given this idea serious thought at say 22.
Notes
- @JUSTINPUSHAS — https://twitter.com/JUSTINPUSHAS/status/1387986033334128643