First, let's get the terms straight. There is no real rob "advising" going on. There is a lot of rob "re-allocating" occurring, but these are not the same thing. Like many other things in life, advising is a matrix of experts referencing other people, who are also relying on the expert of other people to the such that the reason for what they are doing is an invisible vanishing point lost in the mists of time and opinion. They all do the same thing because "everyone knows that that is what you are supposed to do." only, know one really knows. More on that in a minute. 

I have written about the advantages of having good data when lifting weights. I recently started wearing a smart shirt that tells me exactly how much each muscle works in real time during my workouts. Since doing so, I have exceeded my maximum bench press by 40 pounds. And I set that record 12 years ago when I was in my 30's. This should not happen. 

The difference is that I finally have data that tells me exactly how well each lift works and what muscles it works. And what works is not the same as the conventional wisdom of personal trainers and muscle mag gurus. If fact, they are mostly wrong. 

If you hook electromyogram (EMG) sensors to a muscle, they tell you how much it is firing. Now whether an expert weightlifter believes that the muscle is firing is of remarkably little importance. And it turns out that conventional wisdom about which exercises do what, while widely agreed upon, is often wrong. 

Often, experts are relying on flawed perceptions and groupthink. Similarly, one can see this happening in the robot-advisor space - in fact, in most advisory services. All base recommendations on age, time to retirement and a 5-10 point risk appetite scale. You can talk to a person, go to a website, or use an app. The approach is the same. After all, everyone know that this is how you do it. 

Of course, when they all do it the same way, one has to wonder what their value proposition is. they seem to be saying, "well we ask you age in a more insightful way." Right. 

With all of the investor data these investment companies have, you would think they would have built a better sensor to read this. I have personally done the work on this and it turns out that while there are groups of people who behave the same way over time, these groups are not necessarily clustered around age, time to retirement and risk scale. So the measurements used don't necessarily correlate with a persons investment style nor what is best for their goals. 

In other words, the company is saying, "we want to build our advisor muscle, so we are going to do squats."  And it then  turns out that the advisor muscle responds best to pull ups. Everyone knows that squats are what work. Everyone does squats. And everyone has the same lame advisor muscles that aren't improving. But because they already have the answer, why build a sensor to understand what is really happening. 

So the sensor of analytics that could be used rarely is, and when it is, the senior experts disregard anything that contradicts what they know: everyone gets more risk averse as they age. All poor people need larger returns, all women are more conservative than men, etc.  Only, what they know is opinion, not fact. 

Someone could easily use the data that already exists, find the patterns of behavior, and build a true automated advisory system that beat the face to face assessments, and at lower cost. It does not even take sophisticated math (but you'll have to hire me to tell you what it does take.) 

Any day now, someone will develop this insight and start offering services that do to the industry what Amazon did to online retail. And everyone will be doing face palms because it is so simple. But by then, the battle will have been lost. 

For what it is worth, friends who ask me how to build muscle often find my penchant for data interesting, but they still prefer to just sort of guess at what works in the gym. Being guided by fiction is much easier than the discipline required to drive by numbers. And this is very fortunate for anyone competing. There is nothing better than your competition refusing to challenge their dearly held, and erroneous beliefs. 
​

The news stories on Zika are fading already. I didn't think such a mild disease would have legs. Even Ebola could not last and it is a truly nasty virus. Pika is milk toast by comparison. 

But it is concerning that the media loses focus so quickly. If there were a truly bad risk threatening us, I wonder if it would capture the public's attention for long. I think that the danger with the Scare of The Week mentality is that it desensitizes people to real risks. 

The other problem is that every time one of these comes up, some prevention program is put in place, and never dismantled. We are still taking off our shoes at the airport because one person once tried unsuccessfully to use a shoe bomb. I imagine they will still be screening for nonexistent shoe bombs after I am long gone. 

​It seems like a bad idea to create something that, when employed, actually destroys the goal for which it was designed. For example, a fire extinguisher that makes fires larger, or a weigh loss drug that causes morbid obesity. Or risk management that cases massive losses.
 
Two unrelated incidents occurred on my trip to New York today that  are linked by risk management run amok.  Risk management itself can apparently be a risk. Let me explain.
 
As I was leaving Boston this morning, I attempted to get cash from an ATm to cover cab fare.  I was unable to do so because my credit card had been deactivated. It turns out that my bank, Citizens Bank, had cancelled a large number of their employees cards at one time because there had been some sort of possible data breach.
 
My card had not been hacked. But there was a possibility that just maybe it would be, and that would be a problem for the bank.  Of course, not being able to access cash on a business trip was a huge problem for me, but that was a problem my bank was happy to make me suffer through.
 
At the end of the day, I went to the airport to return home and found a huge line at security. It took me an hour and twenty minutes to get through security, which is 4 minutes longer than my actual flight home took.  Tha’t right. Flying a plane full of people between Boston and New York takes less time than walking 50 feet in TSA world.
 
These  inconveniences are both the result of a highly risk averse culture. In the case of Citizens Bank, the possibility that my card maybe, might be used in a fraudulent transaction that their robust security algorithms wouldn’t catch led the bank to simply render my card invalid.
 
At the airport, the slim chance that there is a terrorist hiding a bomb in his shoes, a bottle of water or an iPhone led the authorities to demand such a thorough search of my body and posessions that it causes a colossal bottleneck.
 
I do not argue that credit card fraud is a problem. Nor do I deny that terrorism is a threat. However, there should be a principle in risk management that the cost of risk avoidance should not exceed the cost of the loss. It makes no sense, for example, to pay $500 to avoid a $100 loss.
 
Unfortunately, the principle being employed  is the precautionary principle which states either “better safe than sorry” or “if it saves just one life, it is worth it.”  
 
Risk management must balance the costs and benefits just like every other profession.  When done wrong, it causes more damage than it prevents.  This makes risk managers the  agents of loss, caused by their own profession which was created expressly to diminish or avoid losses. 
 

The recent debate over gun control made me stop and think again about the purpose of risk management. Is it to identify the worst losses and allocate resources to preventing those? Or is it to prevent the losses that sound the worst? 

I decided to do a little research on causes of death. Here in the US, we tend to have a skewed way of looking at such things. We look at individual deaths and weigh them based on the person. The death of thousands of nameless people due to heart disease carries less weight than the death of one child whose life is exhibited on television. 

According to the CDC, the top three preventable causes of death are Smoking, Obesity and Alcohol. Smoking and obesity drive about 450,000 deaths a year....EACH. Alcohol causes about 95,000. 

Now, if I was a risk manager and the company was losing $900,000 a year due to employee theft, and $11,000 due to auto accidents, the choice would be simple: focus on stopping the theft. 

But somehow the world of public health does not work this way (at least not where politicians are concerned).  There is no major discussion going on nationally about outlawing alcohol and cigarettes. Instead we work about terrorism, or gun deaths, or e-coli outbreaks. Swimming pools cause more deaths than many of the things we spend most of out time on. 

But perhaps I am being harsh. I once worked for a company on the audit team. We discovered a pricing problem that was causing a verified loss of $100 million a year. However, the chief executive was far more concerned that year with avian flu, which never cost the company a dime. The company is no longer in business (shocking, I know). 

I do wonder how long any institution can last when it spends the majority of its resources on risks with very low severity. Unfortunately while one can choose a different company, one is more or less stuck with one's country. Being someone who likes to take charge of fixing these things, it is very difficult to sit idly by. 
​

Reading the "Best Nonfiction of 2015" recommendations, IT is clear that  the only (crappy) nonfiction anyone reads anymore is in the form of a personal memoirs, preferably about how the author was victim of injustices that MUST BE FIXED!!!  

The formula is simple: 1) identify why you life has been difficult 2) formulate a theory around how this is evidence of vast injustice 3) Expound upon the ways in which others made your life hell 4) appear heroic by detailing how you overcame this awful state of affairs. 

I propose that good nonfiction should be of an entirely different form. It should: 1)  identify events, situations, or people 2) that highlight an recurring theme in human behavior 3) that is engaging/entertaining and 4) provides us with a deeper understanding of the entire human condition (as opposed to micro segments such as dyslexic, transgender, Maori, double amputees with alcoholic parents). 

Since I value being part of the solution rather than merely complaining about the problem, I have composed a very short  list of outstanding non-fiction that I read in 2015. There is far more interesting history than we have time to read about; why spend time on piffle? Death comes too soon and who wants to be laying there in our final hours thinking "I never understood why Thomas Edison started electrocuting people and elephants publicly!"  And really, do you want to go to a cocktail party without understanding the medicinal benefits of surgically installing goat testicles into your abdomen? (and how this led to the career of Wolfman Jack?--seriously, it did.) 

Learning about the world is immensely fun and helps to frame what is going on around us. Plus reality is far better at generating a good story than some poxy author crippled by self pity and anger writing post modernist fiction.  
http://www.amazon.com/gp/product/0802146058…

While the central focus of this story is Thomas Edison publicly electrocuting a beloved circus elephant on Coney Island, it manages to weave a story that includes most of the major currents in late 19th century American Society. The lives of P.T. Barnum, Tesla, JP Morgan, Westinghouse, Edison and others anchor a story about the madness of the late 1800's. I don't think one can properly understand America without knowing this story. 

Elephants and electricity meet both at the circus, and at the war between Edison and Tesla. In the circus, Elephants provide a sort of meter that measures the worldliness of rural americans who are being introduced to the broader world through electric lights (far before Edison showed up) and Elephants. And electricity is the technological innovation that is driving the transformation of the continent. 

Edison, who wanted DC current to be predominant, was losing the was to Tesla's AC/DC current. Using his inventive mind, he struck upon a plan: just a being Guillotined became synonymous with beheading, he would make electrocution synonymous with AC/DC current by getting the press to refer to getting electrocuted as "getting Westinghouse". Not willing to wait for random accidents to occur, he convinced NY state to electrocute a criminal, and then, in what could only be called a snit of maniacal proportions, electrocuted and elephant.  

Fascinating reading. a story far more bizarre than any fiction. It should be required reading for every American. 

http://www.amazon.com/Making-Them-Believe-Leg…/…/ref=sr_1_1…

In the era before adoption of the scientific method in medicine, there was patent medicine, aka snake oil. Without governing bodies, people looking to profit by miracle cures concocted a dizzying array of medical treatments that were, at best pointless; at worst, they were deadly. 

In this anything-goes world, it made perfect sense that someone would start surgically implanting goat testicles into aging men to increase their virility.  But the story is oh so much larger than just that. 

Like Tiopsy, this is one of the historical accounts that is about one small aspect of 19th century society, but explains how we got to the modern world.  It will also seem eerily familiar to people who have followed modern day miracle cures such as colloidal silver and tea tree oil. There is truly nothing new under the sun. The only difference is that we send more people to jail these day. 

http://www.amazon.com/Date-onomics-Dating-Bec…/…/ref=sr_1_1…

Tinder and the hookup culture are often bemoaned. We see a decline in marriage rates, the erosion of the traditional family and often blame it on something handy like a dating app, or Hollywood. 

But this si why we have statistics, is it not? to identify causes and correlations without speculative narratives? 

The author looks at how the gender imbalance in the dating pool drives all manner of societal changes. Specifically he looks at how the dominance of women in universities has changed dating culture. In short, his hypothesis is that when women went from 40% of college students nationally to 60%, it created a surplus of college educated women in society. Women's disinclination to marry men with less education, coupled with this imbalance has led to a situation most men would consider pretty damn good; lots of women competing for a small population of men. 

He compares cities with different demographics, and also populations of animals with different male/female ratios to support his belief that this surplus of available women decreases the marriage rate, increases promiscuity and is far more responsible for the changes we see than an app like Tinder. 

Whether or not you are in the dating pool, this is a great example of how to thoughtfully approach a question with data (as opposed to going with good-sounding theories.) 

Honorable Mentions:

http://www.amazon.com/Insubordinate-Spirit-Ea…/…/ref=sr_1_1…

We forget that the initial pilgrims faced a very hostile environment in the colonies. They were not well armed, well trained, nor well prepared. The native Americans were not particularly welcoming. In fact, the indians widely practiced slavery in ways that would make Confederate supporters blush. A great read to wash away to fictional stories we were taught in grammar school. 
http://www.amazon.com/Rise-Fall-Alexandria-Bi…/…/ref=sr_1_1…

the Library at Alexandria probably contained Calculus. Had it survived, we would have had a 1000 year jump on Newton. That ancient man was making steam engines in Roman times mystifyingly gets no press. Everyone should know this. 

http://www.amazon.com/Almost-Nearly-Perfect-P…/…/ref=sr_1_1…
​
Bernie Sanders believes that the Scandinavian countries represent the perfect ideal of western economics. Others disagree. The author, living in Denmark with 75% income tax(!) decides to travel around and give a first person account. Entertaining if nothing else. 
​

Is there anything more uncomfortable than finding out that everything that you thought you knew is wrong? 

I ask this because I am simultaneously delighted, and miserable due to some new data I have been able to maintain. And it shows that for about 30 years, I have been doing things wrong and wasting much of my time. 

I am not talking about investing. I wish that market prediction was solvable. No, I am talking about weight lifting, one of my favorite hobbies. I have been lifting weights 5 days a week since I got my first weight set for my 12th birthday. 

I have read hundreds of articles and books on the subject, kept detailed records, subjected myself to all kinds of measurements and tests. And most of it was negated by the data I started receiving from my shirt. 

I had invested in a kickstarter for a smart shirt (and pants) from a company called Athos (liveathos.com). Their garments have a bunch of EMG sensors sewn inside. These sensors measure muscle activity. The app that runs on my iPhone receives signals from these sensors and tells me, in real time, how hard each of my muscles is working. At the end of the workout, there is a report that gives me an overview. 

This data provided by Athos is not opinion. It is not the word of a 23 year old kiniseology major who has a theory on muscle growth. And it is certainly not an advertisement disguised as advice in some muscle mag put out by the supplement industry. This is just pure data. 

When I first started working out with Athos, the data seemed so wrong that I was convinced that the whole system was broken. I would do an exercise to work out muscle A, and muscles B and C would be the ones working. 

But over time, what I found out was that you can argue with data, but you will lose every single time. 

The data was right. I just did not understand what was happening during my lifts. The literature I read, and the advice I had gotten about how to lift of the years -- wrong, wrong wrong!  It is almost as if I found out that California is North of Boston. Hard to believe, but if you drive north from Boston and run smack into Hollywood, you have to rework you map. 

What I find most interesting is my own reaction to this. At first I didn't want to believe the data. Me, Mr.Analytics. No, I wanted to be right. This is the reaction most people have to anything that proves they are wrong. 

Fortunately, I don't want to be one of those people arguing that Einstein is wrong and that Calculus is a scam. I want to understand the world better through data so that I can innovate.

So I listened to the data. In just a couple of weeks, I saw my results improve and I now, for the first time, know the actual facts. I no longer operate on belief, wives tales, and fictions in the gym. When I do an exercise to strengthen the pectorals, I can see that it is actually strengthening the pectorals. 

It is liberating. It makes me feel giddy. It is empowering. But I doubt that that this is going to be the universal reaction to this data. Years working in Fortune 100's have taught me that there are far stronger forces than data at work. 

My prediction is that the data will win; but we will all know we have been in a fight. The initial disbelief and defense of old ideas will die very hard. People will fail, be fired, be subject to whisper campaigns....it will be tough. 

But there is something truly comforting knowing that the truth is not only on your side, but that it is broadcasting itself in beautiful, hard, incontrovertible numbers. I   think I will fight on the side of data. 

The scariest thing about Halloween when I was a kid was the constant threat of deadly candy. According to my grandmothers, there were psychopaths in most every street who spent the year thinking of ways to kill children with candy. 

They had proof. There were stories of razor blades in apples, candy bars full of needles, and poisoned baked goods - Rat poison chip cookies and the like. 

We were forbidden from eating anything that was not sealed. All fraud and baked goods were promptly discarded (with much cheering from the children; really, fruit for halloween? that is just mean.) 

Like most years, there are breathless news stories about the usual razor blade in candy. But upon further investigation, it turns out that they were hoaxes by people hoping to get attention. What is truly bizarre is that the media is so anxious to find a single case of death by candy, that they will pick up any story from anywhere in the nation to support their theory that evil child haters are still plotting to destroy children by poking their tongues with needles hidden in Twix bars. 

Having worked as a risk manager most of my life, I find human response to danger very interesting. One would think that with modern safety features such as police and tamper-proof packaging, we would be relieved that we were no longer facing death as we did for 99.999% o the past 10,000 years. 

But no, as life gets safer, we just look harder for ways to scare our pants off. A few that come readily to mind: Cancer from power lines, SARS, phantom acceleration, the crack epidemic, killer bees, phantom acceleration, anthropogenic global warming, cancer from bacon, cancer from sun, Global Cooling, destruction of the ozone, acid rain, cancer from cell phones, chemical poisoning from almost everything, genetically modified food.....the list is endless. The Week Magazine has and article called "Scare of the Week" where they list the latest breathless warnings. Never has a week passed without a new fright. 

This is all a good bunch of fun, like a haunted house. I guess it gives us something to do while we are not dying of the plague or starving to death. But if taken seriously, it can have very expensive side effects. Spending actual money and passing laws based on phantom threats is not productive -- especially when there are real things to worry about. 

​But the looming debt bubble and the bankruptcy of social security have never been as exciting as a good razor blade in the apple. 
​

Exxon, like many companies, was the subject of many protests and negative media attention over the years. The prevailing wisdom has been to create a positive public image, donate money, make concessions, and otherwise treat the complaints of its adversaries as if they were valid. 

There are those in the world who hate, hate, hate corporations. They blame them for every problem from the wealth disparity, racism and money in politics, to murder, climate change and destroying the entire world. Exxon is one of the prime targets. 

Of course, what Exxon does is extract a valuable and necessary resource from the ground so that society can provide heat and light, transportation, farm and transport food, build buildings, manufacture products, and keep the entire economy running. But really, they produce oil and gas. 

In return for supporting our society and way of life, they are viciously attacked by political groups and the media. 

In some ways, it is like they are being besieged by an army of Mongols. Their attacks will only be satisfied when Exxon, like a weak city, falls and they can raid it for all of its gold and resources (and murder its leaders in a gruesome and public fashion.) 

By attempting to play nice with their attackers, Exxon engaged in activity akin to feeding those besieging the city. They donated to their causes, and the causes used the money to arm themselves for a fresh attack. 

Now the invading army has constructed the Trebuchet called "RICO", and hopes to destroy Exxon by prosecuting them for lying about climate change. I won't even try to discuss the merits of their case, as this is not a rational attack; rather, it is a religious war based on the commandment that all corporations are evil, and those producing natural resources should be killed. 

The funny thing is that unlike tobacco, there are no damages. There is not a single loss that can be attributed to climate change. But even if there were, Exxon did not put any carbon into the atmosphere. They extracted oil; however the people who are attacking them are the ones who turned it into CO2. 

I am not talking about cars and home heating here. Every person in the USA lives a life completely supported by fossil fuels. Every building was built with oil, gas and coal. All food is planted, harvested, transported, packaged and prepared with them. 

Every product in their homes from the toothbrush to their shoes are made with oil byproducts, manufactured with their energy, transported, sold and maintained with oil and gas. 

Even the computers and servers on which they publish their bilious screeds against oil companies are run on fossil fuels. If they would like to eliminate oil companies, they had better prepare for a very uncomfortable 18th century lifestyle. Otherwise they are hypocrites, much like the cocaine addict who complains that those farming cocoa leaves in South America are the true evil doers. 

Not that any of this reasoning will help Exxon if the politicians agree to go after them. But then, perhaps this is partly their fault. Rather than fighting back, they tried to placate those who attacked them. They knew that the climate models didn't work. Heck, with the pause in global warming at almost 19 years, and ALL climate models deviating horribly, everyone know the models are total garbage. 

But having tried to make everyone happy, they just strengthened and encouraged their enemies. The barbarians are now at the gate ready to rape and pillage. It is probably time for Exon to get a spine and defend itself. 

I was recently told that my BMI was too high and that if I did not lose a lot of weight, I was going to die. Well, perhaps my doctor said something a little less dire, but I take my health, and my life seriously.  
 But I have learned over the years to be suspicious of simple metrics like the BMI. Besides, I have been working out for 30 years, and was pretty sure that there was something wrong here.
 For those of you not familiar with it, the BMI or Body Mass Index is a table of values based on the weight and height of individuals. It is based on the distribution of weights within the population. Since obesity is strongly correlated with a host of health problems, it is used as a predictor of diabetes, heart disease and premature death.
 When death is involved, I take my time to dig into the data and figure out what is really going on rather than rely on the experts.
 The problem with the BMI is that it looks only at height and weight. So an NFL running back who is muscular with 3% body fate, but weighs a lot is put into exactly the same BMI category as a couch potato who is the same height and weight
 I scheduled a highly accurate body composition test called a DEXA scan. And sure enough, it turned out that not only was I not overweight, I was actually optimal.
 You see, I have been lifting weights for about 30 years. Additionally, I eat an extremely healthy diet and I exercise at least 10 hours a week. So yes, my body weight is high for my height, but as the DEXA scan proved, it is muscle.
 If I had listened to the advice of the “experts”, I would have shot for a target weight that would have shot me right past anorexia to the land of concentration camp skinniness. The experts were trying to kill me.
 How could my doctor, who has seen me in my skivvies being obviously not fat, rely more on the BMI number than what he saw in front of him? Well, he  did what most do, which is to simply accept the generally belief rather than do the hard work of actually digging into the data.
 One time, the CFO of my company projected that we were going to suffer a massive shortfall in earnings. Everyone knew, he said, that our revenue was driven by X, Y and Z, and these were all declining. So we fired over a thousand people, cancelled projects, slashed bonuses, eliminated benefits and braced for the revenue drop.
 X, Y and Z all dropped as predicted. But revenue stayed flat….and then went up.
 The CFO and all the experts “knew” that these factors drove revenue, because that is what everyone had always said. Those trying to show anything contradictory were shouted down.
 And so the firm stopped key projects, lost tons of talent and created a hostile relationship with its workforce because the experts could not be challenged.
 Sometimes, the experts’ advice to save you, will kill you. It is best to look at the one thing that does not lie: data.

One of the best things about being a geek is the amount of space robots take up in my mind. For example, what does the world look like if robots take over all of our jobs? this world is very real n my head. 

And I do mean ALL of our jobs. Robots making robots, running the companies, doing the financial reports, making investment decisions, etc. Everything from the Mail room to the corner office is done by artificial intelligence. Ditto food production, clothing manufacture...everything. 

What would humans do? 

On the one hand, this is absolute paradise. All work is done by robots who do not need to be paid. It is a world of massive abundance. 

But on the other hand, how could it work? if humans do not work, they won't have money to buy anything produced by the robots. How would I buy a domestic robot if there are no jobs where I could earn money. 

And how do companies make money if there are no longer any consumers. Robots will not be buying iPhones. 

Surely a few humans would own the robot companies, but it is not like they could run an entire economy just by selling things to each other. 

So the good news is you do not have to work or do any cleaning ever again. The bad news is, you can't afford anything to clean because there are no jobs left anywhere. It seems like there is a paradox here. 

I am thinking that sometime along the robot takeover, people would simply stop working and robots would be delivering things to us for free. Once 80% of the population became unemployed and started to starve, the robot makers would direct some robots to build more robots to feed the people. 

Or there would be a massive revolution. Or societal collapse. All fun to think about. 

​I am actually hoping to lure people into this thought experiment, so if you have ideas, please send me an email at vancebeaumont@comcast.net