Everyone always tells me that video games are rotting my brain and that they are a waste of time. As a world-leading rationalizer, I decided to try and prove the critics wrong.
Tha main focus of this podcast was on a video game called Fold It. I’ve logged several hours now on the game and it is pretty fun. The premise of the game revolves around folding proteins found in nature to try and mimic how Mother Nature would fold them. It can be used in a host of different applications, but real world results have already been acheived in the field of AIDS research. Check out the game at http://fold.it. Download the game client and I’ll see you in the chatroom!
Some other cool video game-esque inventions have been the Crusher (http://www.hightech-edge.com/crusher-darpa-autonomous-robot-iphone-xbox-controller/1417/)
Surgeons are also getting in on the “game” and controlling robots from across the world with a joystick. Check it out!
While some may consider this a feeble attempt to cover up a debilitating addiction, I will rest easy anyway – knowing that somehow I’m probably curing AIDS.
One concept I’ve touched on with many of my pillars and “bad guy quotes” since we started the podcast a year and a half ago is “Utility.” It’s a concept that is used in economics fairly regularly but I don’t think that the average citizen has a real firm grasp on what it truly is. And after doing a bunch of research, there doesn’t even seem to be a good resource anywhere that I have found that talks about what it philosophically means. All of the economics blogs and articles I’ve read delve too quickly into how to quantify it and fun graphs and calculations. So I wanted to take a pillar and really dive deeply into what it means. I don’t even know if the way I look at it is truly the proper way to describe it, but it’s one of those concepts that is really worth thinking about because you can apply it to so many situations to make a little more sense of why things cost what they cost, and how much value we derive from things.
It’s almost more of a psychological concept than economic, at least the way I see it, and can be applied to many situations that help us better understand why things are the way they are.
“Utility” is the measure of satisfaction we gain from consuming something. Now a while back, Perek did a great pillar about money and how it’s an indicator of value, but there are some problems with using cost and prices to determine the value of things. One of the biggest problems is that price is a crappy way to measure our satisfaction because everyone’s preferences and what money means to people is different. A $100,000 car would give me a larger amount of satisfaction than it would for Bill Gates. A $3.00 hamburger means a lot less to me than it would for a starving kid from India. You get the picture.
Taken even a step further, the satisfaction we derive from something changes even for a single person based on our circumstances. An ice cold beer provides more satisfaction for me, for instance, after I’ve just mowed the lawn on a 100 degree day, than the 9th beer I have at the end of a night of partying. So even though that beer “costs” the same in both situations, the first beer after mowing the lawn is “worth” more to me than that 9th one. The lawn beer has more “utility.”
You also can’t measure satisfaction of less tangible things with money. The feeling of satisfaction I get from a sunny, crisp fall day is not something that I could easily attach a monetary value to, but it definitely still has “value.” So it’s helpful to have a concept like utility to talk about our relative satisfaction.
Economists even have units that they can measure utility with, and they came up with the creative name of “Utils.” Using utils is a meaningful way to quantify these abstract concepts like a sunny day, or a cold beer. That lawn beer might be worth 100 “utils” whereas that 9th beer at the end of the night might be worth only 5 utils to me. Heck, if that beer gives me a hangover the next morning, I might even say that it has “negative utility” and I could assign a value of -10 because it detracted from my overall sense of satisfaction and well-being.
So these utils are a fun thing to play around with and economists love drawing graphs that have utility curves. I don’t like to get too crazy with trying to quantify these abstract concepts, but as an example, I could draw a beer utility curve that describes how much I value each beer as I consume them during a night. It would rise steeply at first, but with each successive beer I drink, the “Marginal Utility” of each beer gets less and less until it finally goes negative when I’ve had too much. So the fact that “at the margin” each beer is worth less to me, is the concept you might hear called “Diminishing Marginal Utility.”
So that’s as deep as I care to get right now in terms of really trying to quantify it. But again, “utility” offers us a way to talk meaningfully about our preferences.
Once we have a good understanding, (To use a term from my college calculus professor, “you can feel it in your guts”) the real power of utility is to start talking about the utility of money. So just like having a beer gives me a certain amount of satisfaction, so too, does having $5 in my pocket. Why? Because of all the possibilities of stuff I could buy with that $5 that would also give me satisfaction.
A graph of the utility of money would look very much the same as my beer graph, it would be diminishing, but in most cases would always be positive. I get more satisfaction from having my first dollar in my pocket (at the margin) than my one millionth dollar.
So now I have $5 in my pocket and I gain a certain amount of satisfaction (utils) out of, and then there’s the world that has all sorts of goods and services I could buy that would also give me satisfaction if I bought them, like a beer. Let’s say having $5 in my pocket gives me 50 utils. If I am a perfectly rational person, when I see something that will give me more than 50 utils of satisfaction, I will go ahead and buy it.
I should pause here because this is a very controversial point in the world of micro-economics that I shouldn’t gloss over. There has always been a huge debate about if humans (or markets) are truly rational. Lots of arguments back and forth, but this is why I think beer is a pretty good example. If I really knew after having 8 beers, that that 9th beer is going to give me zero utility, I shouldn’t really buy it, but the reality is that at that moment I’m probably not thinking rationally and may make a decision that gives me negative utility. But I still think it’s a very valuable concept that we can use to frame current events and debates in a meaningful way. If you want to dig a little deeper, listen to our very first podcast on the efficient market theory that touches on if the market is rational.
So let’s explore what sprinkling the concept of utility can do to help us rationalize and come to grips with the prices we pay for things. Let’s stick with beer first, but let’s look at it in the frame of my favorite topics; baseball!
A couple years ago, the Minnesota Twins got a new stadium to play in, and if you are ever talking to someone about the first time they went to this new stadium, at some point during the conversation, they are gonna say something like “Man what a beautiful stadium and a great game, but man, I had to pay $7.50 for every beer I had! What a rip-off!” It doesn’t make logical sense to us that we should pay that much for 12 oz of beer that we could easily get for less than half that price if we buy it at the liquor store and drink it at home. It doesn’t seem fair, until we take a step back and contemplate the satisfaction we are getting out of that beer. I don’t know about you guys, but I derive way more utils out of a beer at a ballgame with my buddies than I do if I’m drinking it alone on my couch at home while I’m watching survivor. They bring it right to me, I feel like more of a man, I look cool drinking it etc. It’s WORTH way more to me at that ballgame so I’m willing to pay way more for that same 12 oz of beer. If I didn’t think it was worth it, and it was more valuable for me to keep that $7.50 in my pocket at the game, that’s ok too. If I’m rational, I’m going to make the choice that maximizes my utility.
Here’s another real world example of utility of free time. Little did you know, that our very own Perek whether he knew it or not, had a real strong concept of utility. When we were all in college and living together, from time to time Perek would amass a large stack of dirty laundry. And on multiple occasions, rather than washing those clothes so that he could be a meaningful member of society, he would take a trip to wal-mart and drop $10 on a brand new golf shirt and 3-pack of undies. To the casual observer, this looked like INSANITY! People gave him a lot of crap about this, but if you knew Perek, it made total sense because of his utility preferences. The satisfaction Perek derived from doing a load of laundry, was simply way less than the satisfaction of buying a new shirt. Even dis-regarding the straight up monetary cost of doing a load of laundry, you had to find quarters, take time to load all your clothes up, schlep them to the hot washing machine room, wait for an opening, then come back when they are done, wasting a lot of free time. It simply gave him greater overall satisfaction (at the margin) to just buy a brand new shirt, then spend all that time dealing with laundry and keeping that $10 in his pocket. This was a specific micro-economic decision that he made, that might be totally different for most people, but if that was how he valued his scarce resources (time and money), we see that he probably made the right choice for himself.
A third way that I think thinking about satisfaction and value in terms of Utility is when people start to try and give me advice. Because remember, Utility is a MICRO economic concept and everyones decisions and preferences may be different. And this sage advice always tends to be on big ticket items. I experienced it the last time I bought a car. About 5 years ago, my truck broke down and I needed to get a new vehicle. I was pretty fresh out of college so didn’t have a ton of money, so I leased a brand new truck. Most people that like to give advice already would be jumping over themselves to tell me that that was a horrible financial decision, but I really put them over the edge when my lease was up and I bought out the residual value. “Mitch! Do you realize that if you total up all the payments you made plus the residual value you paid, you probably ended up paying thousands more dollars than the car would have been had you just bought it?! You should have bought a used car and driven it until it died. That is the way to get the most for your money!” And yes, I readily admit that if I ran solely the mathematical analysis, this looks like I made a bad decision. But let’s look at some things that are specific to me that I got utility from:
- I know nothing about cars. I don’t enjoy learning how car parts work. If something happens to my truck, I’m going to have to take it in and pay for repairs.
- I know that I’m the only one to ever drive my truck. It had 12 miles on it when I drove it off the lot. It is worth something to me that I’m not buying this thing off a sketchy guy on craigslist that might have filled the tank with sawdust. That piece of mind gives me satisfaction! Gives me utils!
- I hate to haggle and am not good at it. At the end of my lease, there was a non-negotiable residual number that I could simply pay, and get the car. No haggling over how much the trade in was, the dude going back and forth with his manager trying to make it seem like he’s getting the best deal for me, high pressure sales tactics etc. There was value for me driving in and literally just writing my residual value check and walking back out in a half hour and having them mail me the title.
Now this decision would probably be a lot different if I were gearhead who loved getting the best deal. I would have scoured the internet looking for the best deal, and then haggled until the seller was crying. That’s the beautiful thing about utility. It’s micro-economic and may be different for every person. Here’s a great blog and another explanation of one guy who always buys new cars because he VALUEs certain things differently than the conventional wisdom tells him to.
We’ve all seen the television shows and movies where purported ghost hunters use “science” in an attempt to be the first to actually catch evidence of a ghost or other paranormal entity. This has gained a lot of fame recently, as producers found that it made incredibly compelling “reality” TV. TAPS and Ghost Hunters are two recent examples. Unfortunately, both attempt to align themselves with credible scientific inquiry by using high-tech gadgetry and supposedly skeptic investigators, but inevitably fail miserably at both. Every episode seems to begin the same way, follow the same course, and end with the all-too-familiar, “we caught some interesting phenomena, which COULD be caused by a ghost because we can’t possibly think of what else may have caused it.”Now, it should be noted that TV programming is provided for entertainment purposes, and I do believe that these shows are, at a basic level, entertaining. I hope I don’t ruin this value for any listeners, because that’s not my intent. I’m just going to point out a few of the flaws in their investigational techniques, because I can’t bare to see the good name of science and scientists be tossed around so easily.Ben Radford does a great job of outlining the various scientific flaws found in a typical ghost hunting expedition in an article he wrote for the skeptical inquirer in December of 2010. He mentions the following issues:1. Assuming that no specialized knowledge or expertise is needed to effectively investigate ghosts.
Since there is no certifying body or degree-granting institution in the field of paranormal investigation, anyone can be an expert. For example, the two fellas who started TAPS and are featured in the SyFy channel’s “Ghost Hunters” are plumbers by day, but claim a lot of experience in hunting ghosts. Great, but this doesn’t mean that they’re especially good at it. They almost never make any solid claims at the end of their episodes. What other area of research can you consistently work in (and be respected), without ever putting forth an actual answer to a question you’re studying?
2. Failing to consider alternative explanations for anomalous or “unexplained” phenomena.
This is a huge issue for ghost hunters. Claiming that a specific finding is “unexplained” is much different than claiming that a finding is “unexplainable”. The first can be accurately stated by anyone who is too lazy to research the possible causes of a finding. The second can only be accurately stated when all other possible causes have been ruled out. Obviously, a 30-minute television show makes it difficult to ever measure a phenomenon and also make a legitimate claim that the phenomenon is unexplainable, yet they typically fail to make this distinction.
3. Considering subjective feelings and emotions as evidence of ghostly encounters.
Jane’s goosebumps and John’s sudden feeling of impending doom are not, and never will be, scientific evidence of anything at all. Enough said.
4.Using improper and unscientific investigation methods.
Why are you searching for ANYTHING with the lights off? This is an astounding, yet constant feature of ghost hunting programs.
How is your EMF reader, geiger counter, infrared camera, geophone, white noise machine, ion emitter, or microphone related to ghosts? None of these tools have ever been proven to measure the presence of ghosts, so how can you possibly use them as evidence of a ghost? How often have you seen a ghost hunter discover an electromagnetic field, and then immediately assume that a ghost caused that fluctuation? My first thought would be, “gee, I really have no idea how many geological or physical processes go into generating an electromagnetic field in the first place. Maybe I should consult a geologist or a physicist.” Nope, that never happens.
Ok, so you’ve recorded an EVP (electronic voice phenomenon….duh), is running around with a microphone and listening to the recording later really the best idea for locating a sound? In his article Radford makes an excellent suggestion: Why not use 3 different microphones, placed in stationary positions? If a sound is heard, you can use a little math to triangulate exactly where it came from. Seems like a good idea to me.
5.Focusing on the history of a haunted location instead of the specific phenomena reported at it.
Sure, hearing the old-timer at the post office exclaim, “You shouldn’t dig up the past!!!!” Is great television, but it does absolutely nothing for the investigation of an unexplained phenomenon. Except of course, create a huge bias for the investigators who plan to “scientifically” study the phenomenon.
For further skeptical inquiry, I direct you here:
and go here to practice your new-found skeptical knowledge:
Don’t. Fall. Asleep. Zombies are coming and they are going to take over the world. Unless of course you are prepared. Well…Prepare to be prepared.
Here are a few Zombie Apocalypse survival resources. This first one is from the CDC so you know that i’s legit.
Wanna know the best ways to kill a zombie? GO HERE NOW
The landing of the space shuttle Atlantis on July 21st 2011 marked the end of the Space Shuttle program for the U.S. In this podcast, the good guys discuss why this happened and what this really means to the future of space exploration. Puff steps up bigtime in the first challenge of the new season and also proposes a somber but significant new challenge (see links below). Thanks for listening!
Photo from Arstechnica.com:
How much does the space program cost us?
What are we going to do next?
NEW CHALLENGE LINKS!
Well it’s been a heck of a year, listeners. For our anniversary podcast, the Good Guys decided to do an episode that has been highly requested and long awaited. BEER! And in true Good Guys fashion we went one step further and brewed our own batch. We invite one of our dedicated listeners on the show to teach us about beer and critique the Good Guys Ale.
Geo dug into the numbers to see who won the most challenges, which episode was listened to the most, and other awesome statistics.
A big thanks to all our listeners! Without you this would be a weird thing for 4 dudes to be doing…
Let us know what you think! Comments go at the bottom.
As many listeners may remember, I (Perek) have had a huge amount of pent up demand for wireless electricity for about a decade now. Thanks to a recent e-mail from Chad, I decided now was a perfect time to unleash the magic. As it turns out, we are advancing more and more each day with this technology, and to my surprise, it has already been implemented in consumer products! There is a lot of science and math behind the actual technology, but we’ll leave that to the big n3rds. Below are some resources that were referenced in the podcast this week. I’ll leave it to the MIT grad students to explain it. A Good Guy to Know knows when to defer explanations…Thanks for listening!
By far my favorite technology. IMHO, this is the one that’s going to make it to our homes soon!
Here are some various articles about the general technology. They reference the MIT group and some others.
Let’s put down on paper (HTML) our iPhone wireless charging estimates (put forth in the recording):
Perek – iPhone 6
Mitch – iPhone 10
Chad – iPhone 8
Geo – iPhone 15
Hey Look! Our first correction! Meredith from one of the technologies discussed in the podcast was upset with my description of her technology and credentials. Below is her profile from her website directly. I said she was a bio major, but in reality, she was a paleobiology major – and now is a researcher in astrobiology.
Meredith graduated from the University of Pennsylvania in May, 2011 with a degree in paleobiology. She is a NASA astrobiology researcher and NASA student ambassador.
I also made an implication that they had resources available to buy their technology which is false. They apparently had no money for anything, and won 5 grand in an invention contest. I encourage anyone who wants to know more to check them out online. The link should be somewhere out there on the web. Thanks for trolling!
Best of luck to the company.
A good guy to know knows the basics about some of the terms politicians have been throwing around lately, even if you don’t have a strong opinion one way or another.
What is government debt:
At the most basic level, governments take in money, and then spend it on programs/people. So they take tax dollars from businesses and individuals, and then congress decides how to spend it. So you’ve got money coming in, and stuff you want to spend it on. When the stuff we decide to spend it on, ends up being more than we take in taxes, you have a “deficit.” This is the annual difference between what we spend and what we take in. So the deficit is the annual amount that we are “short.” If you have a bunch of years of deficits, you wind up adding to the national debt.
So instead of putting that ‘deficit’ on a credit card, governments can “issue debt” which is basically the same thing. They get others to give them money, and promise to pay them back at some interest rate. Here’s how the numbers look today:
US income -$2,400,000,000,000
Federal budget -$3,600,000,000,000
New debt – $1,200,000,000,000
National debt – $14,200,000,000,000
Recent budget cut – $38,500,000,000
Let’s take off 8 zeros and make this the Jones family:
Household income -$24,000
Jones’ spent last year -$36,000
Jones’ added to their credit card debt -$12,000
Total credit card debt of the Jones family -$142,000
After sitting around the kitchen table, grinding for weeks on what to
cut from their spending – $385
So in this example, everytime you hear “Trillion”, think of it as $10000 for the jones’ Every time you hear “billion” – think of it as $10 for the jones’s.
Who buys this debt?
Internal Debt – any debt that is owed to lenders within the country 60%
Individuals – savings bonds, college endowments, other institutions, Social security, Military retirement fund, etc.
External Debt – any debt that is owed to foreign lenders 40%
China – 7.5%
Japan – 6.4%
UK – 3.4%
All others – 11.6%
What is a ratings Agency
An organization that gives an opinion of the credit trustworthiness (ability to pay back the loan) and assigns a rating. Just like a credit score individuals, they give a grade to companies/non-profits – and most important to our conversation; governments.
‘AAA’—Extremely strong capacity to meet financial commitments. Highest Rating.
‘AA’—Very strong capacity to meet financial commitments.
‘A’—Strong capacity to meet financial commitments, but somewhat susceptible to adverse economic conditions and changes in circumstances.
‘BBB’—Adequate capacity to meet financial commitments, but more subject to adverse economic conditions.
‘BBB-‘—Considered lowest investment grade by market participants.
‘BB+’—Considered highest speculative grade by market participants.
‘BB’—Less vulnerable in the near-term but faces major ongoing uncertainties to adverse business, financial and economic conditions.
‘B’—More vulnerable to adverse business, financial and economic conditions but currently has the capacity to meet financial commitments.
‘CCC’—Currently vulnerable and dependent on favorable business, financial and economic conditions to meet financial commitments.
‘CC’—Currently highly vulnerable.
‘C’—Currently highly vulnerable obligations and other defined circumstances.
‘D’—Payment default on financial commitments.
So all of that brings us to today. Where one of the main three credit ratings agencies has downgraded the US’s ability to make its payments from AAA to AA+. Why did they make this decision? Kind of a hotly contested topic, but basically they thought that the US no longer looks like as safe a risk as it has in the past. It’s almost more of a political statement than based on hard facts.
“Since we revised the outlook on our ‘AAA’ long-term rating to negative
from stable on April 18, 2011, the political debate about the U.S.’
fiscal stance and the related issue of the U.S. government debt ceiling
has, in our view, only become more entangled. Despite months of
negotiations, the two sides remain at odds on fundamental fiscal policy
issues. Consequently, we believe there is an increasing risk of a
substantial policy stalemate enduring beyond any near-term agreement to
raise the debt ceiling.”
Why did the markets freak out? – Well actually, they really didn’t. So you’ve heard that bonds/treasuries are considered “risk free.” So basically, when people get concerned about being invested in really risky things, they want to “fly to quality” and this usually means buying a bunch of bonds. As we know from previous podcasts, when a lot of people want something, the price goes up. In this case, the price is the interest rate. So if the market really believed S&P, we would have expected people selling a bunch of bonds and starting to buy some other investment instead, causing the interest rates on treasuries to go up. Instead, as all the stocks started plummeting, the interest rate on treasuries went down to 2.22%, a super low level.
So while the market really seemingly reacted sharply, it almost feels to me like it’s just so sensitive that it’s overreacting a bit and will probably smooth out a bit. Since then we’ve had some more crazy up and down days, and we’ve been here before. Any listeners need to set me straight on anything?