Sunday, June 14, 2009
Tuesday, December 25, 2007
Why Buying Insurance is Irrational
Although there may be many reasons, there is no purely rational reason for ever taking out insurance. In other words, taking out insurance is a fear-based, irrational decision. Essentially, you are betting against yourself. That is how the insurance companies make money, they make you bet against yourself and they take the other side. Statistically, they make sure the odds are at least 51%49% in their favor. They are playing off your fear and statistically, they win you lose, the majority of the time.
I am not arguing that insurance is not the right decision for you. However, from a purely economic sense, the chances are more likely than not that you will be paid out less than you put in. Why would you ever take those odds? It is not a whole lot different than sitting down at the blackjack table. You know the odds are against you, but you do it anyway. Why? The answer is different for everyone. For you, making sure your child is easily able to afford college may be a good reason to purchase Life Insurance. But your decision to purchase insurance is not based on sound or rational investment principles of risk and reward as the odds to be paid out are certainly against you.
That doesn’t mean that you should not get insurance or that it won’t pay off some of the time, just don’t expect the decision to be rational.
Although there may be many reasons, there is no purely rational reason for ever taking out insurance. In other words, taking out insurance is a fear-based, irrational decision. Essentially, you are betting against yourself. That is how the insurance companies make money, they make you bet against yourself and they take the other side. Statistically, they make sure the odds are at least 51%49% in their favor. They are playing off your fear and statistically, they win you lose, the majority of the time.
I am not arguing that insurance is not the right decision for you. However, from a purely economic sense, the chances are more likely than not that you will be paid out less than you put in. Why would you ever take those odds? It is not a whole lot different than sitting down at the blackjack table. You know the odds are against you, but you do it anyway. Why? The answer is different for everyone. For you, making sure your child is easily able to afford college may be a good reason to purchase Life Insurance. But your decision to purchase insurance is not based on sound or rational investment principles of risk and reward as the odds to be paid out are certainly against you.
That doesn’t mean that you should not get insurance or that it won’t pay off some of the time, just don’t expect the decision to be rational.
Thursday, December 21, 2006
"Top-Down" Vertical Integration Eats Too Much
Natural resources of land allow us to farm, manufacture, transport and distribute food, clothing, and housing as well as enjoy great luxuries. In our current economic system costs of these natural resources perpetually go up in the form of rent. The costs of our housing and retail distribution rents are hugely inflated at the expense of our farming, manufacturing and transport production. For example, already bloated Mass Retail Distribution Profits and Costs continue to go up. Mass Retail is the largest owner of food and product distribution land in this country. In other words, they are the largest landlords of our farms in America. The Stock Market is the new landlord in disguise and it increases rents for its retail distribution network through its effort to generate rising capital stock profits. These Large companies own the land and keep increasing the rent. As we innovate across our production economy, the value we create is not realized. As stock profits go up, our rents we pay for food production essentially go up. As a retailer, they control the most critical stage of the distribution process, the consumer’s price. As a result, they are able to set the revenues and costs for the economy and in many cases even provide retail banking distribution to finance the consumption. The revenue is the price the consumer will pay and the costs are the maximum costs for farming, manufacturing and transportation. The retail distributor is then able to attain 100% of the long-term innovation value. As a result and because the retailer can only afford himself (wage for service but not innovation or profit) such “Top-Down” Vertical Integration profits/fixed costs are unsustainable, based on the Economic Law of Land Scarcity.
Natural resources of land allow us to farm, manufacture, transport and distribute food, clothing, and housing as well as enjoy great luxuries. In our current economic system costs of these natural resources perpetually go up in the form of rent. The costs of our housing and retail distribution rents are hugely inflated at the expense of our farming, manufacturing and transport production. For example, already bloated Mass Retail Distribution Profits and Costs continue to go up. Mass Retail is the largest owner of food and product distribution land in this country. In other words, they are the largest landlords of our farms in America. The Stock Market is the new landlord in disguise and it increases rents for its retail distribution network through its effort to generate rising capital stock profits. These Large companies own the land and keep increasing the rent. As we innovate across our production economy, the value we create is not realized. As stock profits go up, our rents we pay for food production essentially go up. As a retailer, they control the most critical stage of the distribution process, the consumer’s price. As a result, they are able to set the revenues and costs for the economy and in many cases even provide retail banking distribution to finance the consumption. The revenue is the price the consumer will pay and the costs are the maximum costs for farming, manufacturing and transportation. The retail distributor is then able to attain 100% of the long-term innovation value. As a result and because the retailer can only afford himself (wage for service but not innovation or profit) such “Top-Down” Vertical Integration profits/fixed costs are unsustainable, based on the Economic Law of Land Scarcity.
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