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A stock index fund buys stock in every company that is a member of some defined index, such as the S&P 500. The idea is that if you own, for example, a little bit of 500 different companies, you'll be well diversified and generally do better than the professional stock pickers, thanks in part to lower fees and lower taxes.

The reason index funds are so popular is that it's hard to pick individual stocks that will outperform the average. But I wonder if it is just as hard to identify stocks that will surely NOT be stars in the next year. In other words, could you have the best of all worlds by starting with, for example, the S&P 500 stocks and subtracting the ones that have no realistic chance of being stars?

Much of the growth in an index fund comes from about 20 percent of its stocks. It's hard to know in advance which stocks will be in the top 20 percent next year. But is it just as hard to forecast which stocks will NOT be in the top 20 percent? On the surface, that seems easier.

So called short sellers make money betting stocks will go down. As a group, and over time, they don't do better than the people betting which stocks will go up. That might tell you that identifying the stocks that will go down is just as hard as identifying the ones that will go up. But for my hypothetical index fund you don't need to identify the stocks likely to go down a lot, which is where short sellers make their money. You simply need to identify stocks that are unlikely to be top performers on the up side. Isn't that a relatively easy target?

The quick answer is "no." If it were that easy there would already be such funds and everyone would be rushing to invest in them. A big reason the economy is in such a mess is that lots of investment ideas seem like obvious winners but aren't. I laugh every time I see a commercial on CNBC for some product or brokerage service that boasts it will help you use your own excellent theories to invest your money. What the world really needs is a product that will prevent people from using their own dumbass ideas to invest.
 
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I have a common name. There are at least three guys named Scott Adams in my local community. Most big corporations have a Scott Adams on the payroll. We're all over the place.

When your name is that common, it's only a matter of time before one of us gets arrested for serial murder, running a Ponzi scheme, or having a dungeon below the house. So far we have been lucky. Most people named Scott Adams end up pursuing hyper-nerdish lines of business. The most famous Scott Adams who isn't me is a pioneer computer game developer. Not too shabby. And recently a junior member of our club won a science award for genetically modifying wheat. Nice.

http://www.ctv.ca/servlet/ArticleNews/story/CTVNews/20090507/designer_wheat_090509/20090509?hub=SciTech


I wonder if other people throughout history have worried about this sort of thing. For example, one of the most colorful bad guys of all time was called Vlad the Impaler. You could Google him, but his name pretty much says it all. I wonder if after he got famous for being all fierce he worried that some other Vlad the Impaler would come along and ruin his reputation. He wouldn't want to be walking the dog and overhear neighbors talking...

Neighbor one: Who gutted that peasant over by the other dead peasant?


Neighbor two: I heard it was Vlad the Impaler.


Neighbor one: Do you mean the chicken fornicator or the other one?


Right now there's a 16-year old Scott Adams in Canada saying, "Why did that idiot have to write a blog about Vlad the Impaler and ruin my good name???"


Sorry.

 
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Recently I wrote that newspapers (all of them online) would become extremely local to your family. CNN had a similar article recently, but what they call hyperlocal is your community, not your family. So that isn't nearly local enough in my view.

http://www.cnn.com/2009/TECH/05/01/future.online.news.hyperlocal/index.html?iref=t2test_techtues


Moreover, I think the family calendar is the organizing principle into which all external information should flow. I want the kids' school schedules for sports and plays and even lunch choices to automatically flow into the home calendar. And when I want to decide what to do on the weekend, I want to click on the date for next Saturday and have all the relevant choices of plays, movies, and events pop up.

Everything you do has a time dimension. If you are looking for a new home, the open houses are on certain dates, and certain houses that fit your needs are open at certain times. If you are shopping for some particular good, you often need to know the store hours. Your calendar needs to know your shopping list and preferences so it can suggest good times to do certain things.

Time is closely related to distance. On a typical night, for a typical family, there is much driving to and fro to deliver people and goods to where they need to be. Sometimes it is more complicated than a Fedex route. It would be nice if the family calendar helped us plan the shortest routes to accomplish all goals. The calendar just needs to know what I need and when, then plan which family member with a car is nearest.

Perhaps your calendar could suggest some carpooling as well, all automatically. I don't need to know my friends' business, but if their calendars and mine spoke to each other and found some common driving patterns it could shoot us both an offer to carpool, assuming we had approved those friends in advance for such offers. My phone would get the offer and I could confirm with a simple text message response.

When I read the news, I'm generally most interested in how stories have unfolded across time. I want to know the "new news," as in the topics that have never been reported until today, but I also want ongoing charts and graphs about the "old news" such as wars and the economy. My understanding of the war in Iraq, for example, has little to do with what blew up today and a lot to do with the trend lines over the entire war. In other words, I see the news in terms of time.

In most families, everyone keeps their own calendar and does a spotty job of sharing what's on it with everyone else. In time that calendar coordination will happen electronically. And most of the information will come from external sources, such as your schools, clubs, and organizations to which you belong.

Some time ago I blogged that advertising belongs in your electronic calendar, for your benefit more than for the advertiser. That's because my interest and desire in certain products and services is linked to timing. If my calendar has a certain birthday coming up in a week, and I've checked the boxes saying the person is a certain age and gender, or has certain hobbies, my calendar can start giving me gift suggestions and recommending online flowers and e-cards and the like. In other words, advertisements can move from nuisance to valuable service just by adjusting when you see them.

I think the biggest software revolution of the future is that the calendar will be the organizing filter for most of the information flowing into your life. You think you are bombarded with too much information every day, but in reality it is just the timing of the information that is wrong. Once the calendar becomes the organizing paradigm and filter, it won't seem as if there is so much.

 
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I was reading a debate on healthcare in the recent Newsweek. The prominent Democrat supported some sort of national healthcare while the prominent Republican supported more of a free market approach. Most people will probably take sides based on their assumptions about government efficiency versus market efficiency.

An old joke that works as its own punch line goes "I'm from the government and I'm here to help." Most people in this country reflexively believe the government will screw up anything it touches. There's plenty of evidence for that view.

But I wonder if government can be more efficient than the free market in specific situations, specifically in situations where the service is more about software than headcount, and where nothing needs to be invented.

Imagine a situation where you are deciding if a particular service should be handled by the government or by a hypothetical free market dominated by three players. The government's incentive is to provide the service as cheaply as it can. Any company's incentive is to transfer the greatest amount of money from consumers to stockholders. And to do that in a competitive industry you usually end up with what I call confusopolies. A confusopoly is a situation in which companies pretend to compete on price, service, and features but in fact they are just trying to confuse customers so no one can do comparison shopping.

Cell phone companies are the best example of confusopolies. The average consumer finds it impossible to decipher which carrier has the best deal, so carriers don't have normal market pressure to lower prices. It's a virtual cartel without the illegal part.

The advantage of a free market system is innovation. The market has an incentive to try new things. Governments prefer to avoid risks. If you need innovation, you want the free market.

In the case of national healthcare insurance, I ask myself these questions:
  1. Is it more about software than headcount?
  2. How important is innovation?
  3. Is the free market for this service a natural confusopoly?


Before you call me a socialist, I don't have an informed opinion on national healthcare. But I also don't have an automatic bias in favor of a free market that gave us Enron, WorldCom, Madoff, derivatives, and mortgages to hobos. I think you have to look at the specifics.

 
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When I'm walking the dog, and she squats to do her business, I reach into my pocket like a good citizen and take out a plastic poop bag. The bags are slippery and hard to open. The only solution is to lick a finger and give myself enough temporary gripping power to pry it open. The problem with this solution is that I'm licking my finger while thinking of dog crap. This never fails to creep me out.

But I topped it yesterday. I was working out at the gym and felt a powerful thirst. The gym provides large paper cups near an ice and water dispenser. I filled my cup, slapped on a plastic lid, and inserted the straw. So far, so good.

As I was happily slurping away, I entered the locker room and the first person I saw was a man in his mid sixties with a towel around his waist, blow drying his hair. Suddenly, to my horror, he put the blow dryer under the towel and started drying his junk. . . while I was sucking on a straw. I was temporarily blinded and I forgot most of my childhood.

Am I the only person routinely afflicted by the proximity problem?
 
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Here's a link to a recent article about me. I thought it was especially well written.

http://www.mercurynews.com/entertainment/ci_12148055


As regular readers know, I lost my voice for several years thanks to a vocal condition called spasmodic dysphonia. I regained my ability to speak thanks to the one surgeon in the world who pioneered a fix for this problem.

I sound terrible on the video because I was drawing and talking at the same time, so you hear me mumbling and searching for the right words. I don't multitask well. So unfortunately that's my "normal" voice. The spasmodic dysphonia problem is 100% gone. When I'm not distracted, my voice is better now than it ever was, largely because I did so much vocal training before discovering the surgery. I actually came out ahead on this deal.

If you have read anything about my use of affirmations, you might be interested to know that the only affirmation I've employed for the past several years has been "I Scott will speak perfectly." This was a worthy test of affirmations since most voice experts said spasmodic dysphonia was incurable. I'd guess that 99% of the people with the same condition believe it can't be fixed, and that belief will make it true for them. I chose to believe the opposite. So while I still don't speak "perfectly," I'm already better than my old "normal" voice.

 
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How can you make money from this whole global warming thing? I mentioned back in January that I was investing in a water resources portfolio (PHO) under the theory that water would be the next bubble. So far I'm up 9%, but the market is up in general, so that's no big deal. Global warming is predicted to cause massive droughts in some places, so this seems like a good hedge.

But it got me thinking that there must be a way for believers in global warming to profit at the expense of skeptics, assuming the believers are right. For investment purposes it doesn't matter what is causing global warming. All that matters is that it is happening and apparently already unstoppable according to a growing consensus of scientists.

The obvious stock plays have already been run up. If you invest now in solar, wind, and other green energy players, you might be getting in late. And some other better technology could overtake them. I'm looking for an investment that doesn't involve green technology.

For example, I already play soccer and tennis at indoor facilities. If there was a stock you could buy in some company that was building indoor sports clubs that would be a good play. You'll need them when it gets hotter.

Food supplies will be disrupted in some places and maybe improved in others. If you could find a way to invest in an agribusiness that has its operations in places likely to have improved growing conditions with global warming that might be a play.

Maybe real estate is the way to go, but it's harder to diversify. The idea is to find places that have just okay weather now that will have terrific weather later. That seems too risky. Real estate is influenced by too many other factors.

The best investment hedge might be as simple as a portfolio of sunscreen manufacturers.

What are your global warming investment ideas? And resist the urge to say, "beachfront property in Idaho."
 
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Yesterday I spent several hours at a photo shoot. The photographer was an award-winning top-of-his-field professional with an almost supernatural sense of visual rightness. At one point he was taking some profile shots of me and I mentioned that I thought I had a "good side" but couldn't remember which one it was. So he had me face left, then right. As soon as I turned right he said, "It's that one." No hesitation. No doubt about it.

I find this to be an inconvenient sort of knowledge. For the rest of my life, every time I talk to someone I will want to cheat my face toward the good side. I will never again make eye contact unless it by peripheral vision. In the interest of public safety I will only walk on the side of the street that puts my good side toward traffic.

I feel like a hunchback who doesn't want anyone standing behind him because he knows people will stare at his hump. I fear people will be looking at my ugly side and wondering if it is the first sign of swine flu.  

I'm thinking of getting an eye patch for my ugly eye. Then I'll put in a Bluetooth headset to disguise my ugly ear hole. I considered wearing a hat to hide the upper part of my ugly head but it would be rude to wear a hat indoors. My best bet is to convert to a religion that requires a turban and doesn't have an issue with mutton chop sideburns on one side.

If I put it all together just right it will be a look. On one side I will be an unnaturally handsome cartoonist, just like always, but my ugly side will be transformed into an Elvis pirate Sikh theme with just a hint of douche bag cell phone user. I'm sort of an artist, so I think I can pull that off.

Or was it my other side that the photographer said was my good one? Shit.
 
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I'm in a photo shoot this afternoon for an upcoming article in Wired. No time for a proper blog entry, but my Google Alert just dredged up a Dilbert-related link that made me laugh out loud. It's cruel. It's juvenile. And yet so clever.

http://caps.fool.com/blogs/viewpost.aspx?bpid=187982&t=01001019292467236494

Dennis Kneale interviewed me recently during a satellite media tour that I did for my Dilbert 2.0 book . I like him. But I laughed anyway.

Speaking of my big-ol'-coffee table book, Dilbert 2.0, the economy is your friend once again. Thanks to a worldwide slump in book sales, especially on the high end, you can scarf up the best work I have ever done for an embarrassingly low price: http://www.amazon.com/Dilbert-2-0-20-Years/dp/0740777351. It makes a good gift because people will assume it cost more. And when they buy their next gift for you, they might try to match what they think you spent on them and you come out ahead. It's like free money.
 
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A spy informs me that one firm is already telling its employees to avoid shaking hands as a way to lower the risks of swine flu. I can see this sort of policy catching on. My informant wonders what sort of greeting should replace the handshake. I'm on it.

There are few times in history when you have a chance to create a new and lasting custom. I say we put our collective minds together and come up with a business greeting that involves no skin-to-skin contact and no exchange of bodily fluids.  I will open the bidding by suggesting the forearm bump. I already use this method jokingly with my friend who has germ issues. It's like crossing swords except you cross your sleeved forearm. The cooties don't have time to penetrate two layers of sleeves. Or so he thinks.

This new swine flu greeting still needs something extra, such as both people saying, "Huzaaa!" when their forearms touch.

An alternate move would involve making a fist and holding it up to your snout sideways, as if you are forming a pig's snout, snorting then finishing with a fist bump. That's still hand-on-hand contact, but at least it's the clean side.

Who has a better idea for a handshake replacement?
 
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