Scott Alexander is back!

The best blogger under the Sun—Scott Alexander—is back after a short hiatus. His new blog is called Astral Codex Ten and hosted on Substack.

Scott is a blogger like no other. He covers a wide range of topics, so it’s actually very hard to describe the content. It’s best if you just dive in and start reading. Apart from eye-opening insights, he also had measurable impact on my life. I now mostly ignore news, politics or the latest online outrage. I also partly attribute my improved health to Scott.

To help you start reading his works, many people have compiled their short lists.

• Who is Scott Alexander and what is he about? (from a few days ago)
• The Library of Scott Alexandria (from 2015)
• The very best of Scott Alexander and Slate Star Codex (from 2017)
• Scott’s own list on the About page

Apart from the popular posts, I’m especially fond of his (loose) series on Bayesian reasoning and predictive processing in the brain, so here comes a list that other people missed.

• Bayes for Schizophrenics: Reasoning in Delusional Disorders
• It’s Bayes All The Way Up
• Book Review: Surfing Uncertainty
• Can We Link Perception And Cognition?
• SSC Journal Club: Friston On Computational Mood

A big update to my investing tutorial

I’ve updated my investing tutorial. A few things have changed since I wrote it in 2016.

• Cheap global currency hedged bond ETFs were introduced by iShares, SPDR and others. TER is only 0.1%, making them some of the cheapest bond ETFs on the market.
• Cheaper stock ETFs were introduced, mostly by iShares.
• Buying US-domiciled ETFs is no longer easy for European investors.

Music Recommendations #3

The first two editions of Music Recommendations were sent to my friends via e-mail, so you won’t find them on this blog.

I sent my last recommendations in 2013, so there’s a lot of music that I’ve discovered since then. Some of it is older than 2013.

I’ve only listed albums that I think are worth listening to, so all my ratings are at least 7/10. You can listen to all albums in one Spotify playlist.

Two Fingers – Six Rhythms 10/10

Last.fm tags: to listen, grime, electronic, idm, dubstep, bass

I often hear people say, “There hasn’t been anything new in the music scene since the 80’s/90’s.” To which I typically reply, “Have you listened to Amon Tobin?” This work under Two Fingers is no exception. Make sure you have bass on full blast while listening to this.

Bonus: listen to Two Fingers DJ set from 2013 on Soundcloud or Mixcloud.

Metronomy – Nights Out 9/10

Last.fm tags: electronic, poptron, electro, british

When my brother first listened to this, he asked, “What are these guys smoking?” I said I had no idea, but it’s great music. Very crazy and full of contradictory rhythms.

The Kills – Blood Pressures 9/10

Last.fm tags: indie rock, garage rock, alternative

After the end of The White Stripes, this is my go-to rock band. They have great vocals and the style of the songs varies a lot.

Black Sun Empire – From the Shadows 9/10

Last.fm tags: drum and bass, neurofunk, darkstep, dubstep

I thought drum’n’bass was dead but then I found Black Sun Empire. This album is dark, which makes it hard to listen to at times. It usually lifts my mood, though.

Jungle – Jungle 9/10

Last.fm tags: electronic, psychedelic, jungle, techno, soul, dancehall

The slowest album on the list. Great for evening chill-out.

Mujuice – Mistakes and Regrets 9/10

Last.fm tags: electronic, idm, minimal, russian, glitch, experimental

Mujuice blew my mind years ago at Wilsonic music festival and continues to do so to this day.

The Knife – Shaking the Habitual 8/10

Last.fm tags: electronic, experimental, dark ambient

Such a dark and strange album. I keep changing my mind about it. 4 years later I still haven’t been able to fully digest it. Getting used to it takes a lot of time.

Bonobo – North Borders 8/10

Last.fm tags: downtempo, electronic, chillout, trip-hop

Nothing can ever beat Bonobo’s album Days to Come, but he still keeps his standard.

Caribou – Our Love 8/10

Last.fm tags: electronic, experimental, indie, poptron

After Swim, which is an album out of this world, Our Love was a disappointment, but still worth listening to. I think I like Caribou more when they play faster than this.

Skalpel – Transit 8/10

Last.fm tags: jazz, nu-jazz, ninja tune, electronic

This album makes for a great background music. Worse than the old ones, but they also kind of keep their standard.

Clark – Totems Flare 8/10

Last.fm tags: idm, electronic, warp

I originally thought Clark would be very boring, but this album proved me wrong.

FM Belfast – How to Make Friends 7/10

Last.fm tags: poptron, electronic, synthpop, indie

This is dance music that even Richard Štefanec is willing to listen to. Unfortunately, the few very good songs are accompanied by many mediocre ones.

Book review: The Simple Path to Wealth by JL Collins

I’ve always recommended JL Collins’ Stock Series to anyone interested in saving, investing and early retirement. JL now took the series and other posts from his blog, polished them and made into a book.

The good

Everything is explained very simply and JL uses a lot of stories. It’s also very short, so you won’t be bored reading it.

You’ll learn the basics about stocks and bonds, how the market works and that a very good investment strategy is actually very simple, with only two index funds. But more importantly, it will give you a lot of crucial advice for this endeavor.

• There will be times when your portfolio drops 20% within a month and you’ll feel like you’ve made a huge mistake. The solution is simple: treat it as “Sale! Everything 20% off”. The book has a lot of other tricks to make you a calm investor.
• Chapter III "It has never been about retirement" is the single best short piece I’ve read about the philosophy of saving and early retirement. If you need motivation for saving and investing, this book will give you plenty.
• I also really like the final chapter on risk. No, you can’t be sure the 4% rule will work forever. You can’t be sure that Earth won’t be hit by an asteroid. We live in uncertainty, but having savings can only help you.

The bad

My biggest complaint is the incorrect advice about international investing. To be fair, most investing books are also somewhat incorrect, but JL goes too far and recommends only owning American companies. This is on three grounds: high risk, big American companies are global and it’s more expensive. I don't buy any of these 3 arguments.

• It's true that international investing sometimes bears more risk, but this risk has also been rewarded, for example emerging markets over-performed the rest of the world by 2% yearly in the last 40 years.
• The difference in price these days is about 0.1% in yearly fees between an American and a global fund. That’s a very small price for a much higher diversification.
• JL says the world is getting more globalized and connected, so having only American companies is enough – you get exposed to all economies anyway (according to him). Increased globalization is happening, but the stock markets ignore that. Comparing last 15 years, emerging markets gained 6.4% yearly while developed world gained 3.3% (MSCI World IMI vs. MSCI EM IMI).

Some small complaints:

• I wish the book used real (=inflation-adjusted) returns. If the index grew 12% yearly when 4% of that was inflation, saying that your wealth grew 12% is very misleading.
• JL uses a Bell curve to illustrate the variability of stock returns, but to me Bell curve means lack of variability. In reality, stock returns have a long-tailed distribution and that’s one of the reasons why it’s so easy to under-perform the index.
• I’m curious why JL didn’t mention Betterment (and robo-advisors in general), because he writes about it positively on his blog. In the book, he says multiple times his strategy is about simplicity. However, avoiding Betterment adds 3 times more complexity for an average person.

Final verdict

Go read the book, it’s awesome. Yes, there are factual inaccuracies, but you can correct that by reading All About Asset Allocation or A Random Walk Down Wall Street instead. This book excels in things that other books get wrong or ignore—the psychological and philosophical aspects of investing.

Disclaimer: I got an early copy of the book in exchange for review here and on Amazon. I won’t receive any compensation if it sells well, so I didn’t have an incentive for a good review.

6 non-fiction books that changed my life

Throughout my life I have read plenty of non-fiction books that changed the way I think about everything. Most of them are based on scientific research, although many ideas are just theories in need for more testing. Your parents, teachers, friends and even politicians taught you many false beliefs. By changing them to something more scientific, you will experience much less cognitive dissonance, which is the mental stress you experience when reality doesn't match your beliefs. Your mind will be more at peace.

The effects of my reading so far have been far-reaching:

• Reading a blog about financial freedom helped me cope with my health diagnosis.
• Being honest and vulnerable is great not only for your personal life, but your professional life as well. For example, your colleagues will respect you more if you don't hesitate to admit a mistake.
• Reading economic theories made me adjust my moral values and philosophy; see for example this blog post.

I'm not saying that these books contain the ultimate answers, but by reading them I have become slightly less wrong about everything.

Every step of the way I was wrong. About everything. All throughout my life, I was flat-out wrong about myself, others, society, culture, the world, the universe, everything. And I hope that will continue to be the case for the rest of my life.
...
There's that famous Michael Jordan quote about failing over and over and over again, and that’s why he succeeds. Well, I am always wrong about everything, and that's why my life improves.

Mark Manson in Why I’m Wrong About Everything (And So Are You)

If you are a fan of political correctness, many of these books will disappoint you. Reality doesn't care about offending someone; reality just is. For each book I tried to list one idea that stuck with me the most from the book.

The Happiness Hypothesis: Finding Modern Truth in Ancient Wisdom, by Jonathan Haidt

This is my number one book that I have read about 5 times over the years. Whenever I'm facing a big decision like choosing a place to live or a job, I consult the book to see how it will affect my happiness. Happiness comes mostly from other people and if you want to be happier by means of money, buy experiences, spend it on others or don't spend it.

The book looks at different philosophies through the lens of science and how they affect happiness. It turns out that a large part of the Greek or Buddhist philosophies survived scientific tests. The book also tells a lot of fascinating results in psychology, not necessarily related to happiness.

One idea: Suppose there are two people, one has just won one million dollars in lottery and the other has just become quadriplegic, so he can't move from his neck down. Who will be happier one year from now? Surprisingly, they will be on about the same level. Our minds are very adaptive and they get used to new situations quickly.

Models: Attract Women Through Honesty, by Mark Manson

Even though this is a book about women, it had big effect on other aspects of my life as well. If you ignore the parts specifically about women, it reads as an excellent lifestyle guide. Better relationships and friendships are then by-products of improved lifestyle and behaviour and they seem almost effortless. The book also taught me how to be more assertive, expressive and confident.

A large part of the book is devoted to vulnerability and honesty which are two necessary qualities for stable relationships. Being vulnerable doesn't mean showing weakness, it signals inner strength and is therefore very manly (here is an excerpt of the book about vulnerability).

One idea: Polarization – don't be afraid to admit that you have listened to Britney Spears' song Toxic more times than appropriate 10 minutes into a conversation (alright, alright, that's me!). This will push away some people very quickly, but you will also find the ones you like quicker.

P.S. Mark Manson has an awesome blog (gender-neutral these days), where he writes about everything life-related often backed up by research in psychology. He's the guy I cited in the beginning of this post.

Financial Freedom through Badassity, by Mr Money Mustache

I'm cheating a bit here, since this is not a book but a blog. Before reading it, I used to save about 20% of my income but now it's up to 50% even with a lot of travelling. And if you save 50%, you can retire in 17 years. You will also become happier by spending less and saving more. Retiring early doesn't mean that you stop working, you can work for less or for free (volunteering).

If you are interested in how it can be done, go to the "start here" menu item or read my favourite post.

One idea: Nothing beats the stock market when it comes to long term returns. Stock market is volatile and sometimes you gain 0% in 10 years, but over 25-30 years the yields are better than for any other form of investment.

Is there anything good about men?: How Cultures Flourish by Exploiting Men, by Roy Baumeister

After reading this book I understand myself and other men much better. It explains why evolution made us behave the way we do. The book also debunks most of the myths that modern (third-wave) feminism is built on.

There are two main differences between the two genders: nature rolls the dice more with men and different genders have different motivations. For example, men and women have similar IQ on average, but men are overrepresented among people with high IQ as well as among people with low IQ. Men also have different motivations, like willingness to take big risks. Cultures have been exploiting this – big risks often led to great results but many men have died while taking risks, or became very poor and homeless.

One idea: I used to think that women are more social than men. If being social is good, why hasn't evolution made men as social as women? Evolution actually did make men social but in a different sense. Women prefer few intimate one-on-one relationships while men prefer plenty of shallow relationships.

P.S. You can read an invited address that Baumeister gave at a meeting of the American Psychological Association. The book expands on the topics in the talk.

Capitalism and Freedom, by Milton Friedman

I like to think about capitalism using a sharp knife metaphor. So far we haven't found a better tool for cutting food than knives. Their greatest strength, sharpness, can also lead to injuries. This book talks about why capitalism is a sharp tool and how to avoid injuries. It is very old and economics has made a lot of progress since then, but I still like it a lot for how it changed my world view and moral values.

Capitalism and high levels of freedom don't mean that there is no welfare. The Economist recently wrote: "When it comes to choice, Milton Friedman would be more at home in Stockholm than in Washington, DC." Historically, Sweden has been very free and capitalist. Milton Friedman was also a proponent of negative income tax, a very simple welfare program that is more efficient than what most countries have now.

One idea: Government should be organized on multiple levels. If possible, a government function should be done at the lowest level. It's easier for you to influence a local politician and if you don't like it, you can move 10 km to another town. Things that require a lot of coordination or are inefficient on a local level, like the military or taxing pollution, need to be done at the highest levels.

P.S. Milton Friedman has brilliant rhetoric skills. Even if you don't like freedom or capitalism, I suggest watching some of his videos on YouTube.

Predictably Irrational: The Hidden Forces That Shape Our Decisions, by Dan Ariely

This book saved me a lot of money. It explains many of the psychological tricks that marketers are trying to play on us. Stay cautious every time you see the word free or there are too many options given to you.

Experiences are affected by our expectations. A fancy meal eaten in McDonald's will appear tasteless while the same meal eaten in a fancy restaurant will appear excellent. Similar thing is true for many things ranging from music to pills, so you can improve your perception by increasing your expectations.

One idea: Sellers are trying to trick you by having expensive items that no one buys. Suppose a restaurant has meals costing between 10 to 20 euros. Now suppose they add a couple of meals that cost 30 euros. Nobody will ever order those, but people will spend more now than before.

Other great books

The following books were not that life-changing but they are still great. Perhaps they would be life-changing if I read them 5 years earlier.

• Survival of the Sickest: The Surprising Connections Between Disease and Longevity, by Sharon Moalem – Sometimes a sickness might help you survive. Fascinating journey into medicine, biology, genetics and epigenetics.
• The Naked Ape: A Zoologist's Study of the Human Animal, by Desmond Morris – Even though we think of human species as superior to everything else, underneath everything are we still animals.
• She Comes First: The Thinking Man's Guide to Pleasuring a Woman, by Ian Kerner – A guide to giving oral sex with a great introduction to woman's anatomy.
• Art of Manliness (a blog) – If you are confused what a man should do in 21st century, this blog has plenty of good suggestions.
• Drive: The Surprising Truth About What Motivates Us, by Daniel H. Pink – I never thought that motivation would be so tricky.
• Simplify: 7 Guiding Principles to Help Anyone Declutter Their Home and Life, by Joshua Becker – Simplify your life by getting rid of the nonessential stuff, activities and even people.
• Understanding Comics: The Invisible Art, by Scott McCloud – Fascinating analysis of how comics is drawn and written.
• Staying Alive in Avalanche Terrain, by Bruce Tremper – Probably the best educational book I have ever used. It has a great mix of theory, interesting stories and pictures.
• A Random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing, by Burton G. Malkiel – A very long book about a very simple investing strategy.
• Proofs from THE BOOK, by Martin Aigner, Günter M. Ziegler, Karl H. Hofmann – Only the coolest mathematical proofs.
• Armchair Economist: Economics & Everyday Life, by Steven E. Landsburg – Everyday life situations analysed by an economist.
• Brain Rules: 12 Principles for Surviving and Thriving at Work, Home, and School, by John Medina – Presenting recent advances in neuroscience in an easy way.
• The Power of Habit: Why We Do What We Do in Life and Business, by Charles Duhigg – How habits are formed and how to get rid of the bad ones.
• Quiet: The Power of Introverts in a World That Can't Stop Talking, by Susan Cain – Why introverts exist and why they are not inferior to extroverts, they are just different.
• Thinking, Fast and Slow, by Daniel Kahneman – About two systems in our minds working at different speeds.