CFA Brings New Life

Alas, my CFA books came in the mail today - signifying the repeat of my hellish months of equations and analysis. Good news for this blog though: renewed knowledge comes with fresh ideas for future entries! Be on the lookout!

Business of LIfe

We all live with the objective of being happy; our lives are all different and yet the same - Anne Frank

I know I said that my next post would explain why we stay in relationships when we reach that point of no return, but - though anachronistic - I feel like I should explain the purpose of this blog – where all my ideas are coming from and why I feel that life can be brought down to these economical equations.

How I see it, life is a business. That sounds horrible - I know - but hear me out. A business where you make more money than you put in can be deemed successful. A life where the happiness you get is at least proportionate to the effort you put in to get it can be deemed great.

Let’s talk business. A firm starts out with a business plan. The owner will appoint a board of directors – a group of people who have the right to vote and decide on factors affecting the business.

A firm will also have shareholders – those who invest in the company and have voting rights on certain matters. They put money into the corporation in hopes of monetary profit.

A business will come across many things in its lifetime:

1. Mergers
2. Bankruptcies
3. Quarters where returns are below expectations
4. Quarters where returns are above expectations

The ultimate goal: monetary profit.

Now, life. You start out with dreams and aspirations. Your family is there to guide you, to use their known right to give input on factors affecting your life. And sometimes, to straight up tell you what you have to do.

You’ll have friends – people who invest in you. They counsel you and guide your decisions. They put in time and advice in hopes of making you more content. And in an equation of any true friendship – seeing you happy makes them happier.

In your life, you’ll come across many things:

1. Relationships
2. Extreme loses
3. Failures
4. Successes

Your ultimate goal: happiness.

Connection. Your dreams are your business plans and your family - your board of directors. Your friends represent your shareholders. Mergers equate to relationships and bankruptcies equal extreme loses. Lower than expected returns are failures and above - successes. And, most importantly: life's profit is happiness, a business' profit - money.

There will be future entries that will add more depth to what I've already mentioned above. It's not hard to draw parallels between life and economics. They both come down to supply and demand: how to get what you want and need with the resources you're given and how to find that comfort at equilibrium where supply meets demand.

Diminishing Margin of Happiness: Why Relationships Plateau

Do you ever wonder why as a relationship develops, the little things don't seem to mean as much anymore? Why the first bouquet of flowers they brought you meant so much more than the fifteenth?

Economists have a term they call the diminishing margin. In their respect, it means that each additional input yields a smaller and smaller increase in output. More simply put, the more of something you have, the less it means.

It's strange how when both people are the same as when they first met, a relationship still manages to plateau. Here's what I like to call The Diminishing Margin of Happiness. It explains why repetitiveness and consistency make a relationship boring.

I know I said before that you can't measure happiness, but for this example, I'm breaking my own rule. Let's use one of the most widely known gesture of affection: flowers. The first time your sweetheart shows up at your door with a gorgeous bouquet, you're ten times happier than you were before. The second time they come with roses in hand, you're only about eight times happier because, well, it's been done. You begin to expect this kind of behavior from them - and we all know, predictability takes away from excitement. The third, six times happier. It continues like this until them showing up with flowers leave you feeling nothing.

When it comes down to it, the same things that made you happy at the beginning won't make you as happy two years down the line. When they don't change and come up with new romantic gestures to show you their love, you lose the excitement. Things go from being endearing, to predictable, to routine. You're still happy, but they don't make you happier today than they did the day before. What's left?

When the production level of a company plateaus, they invest their resources in Research and Development. They try to find something that boosts the production output so that it's increasing as fast as it did in the beginning. That's exactly what a relationship needs when things begin to level out. You need something new, something exciting, something that hasn't been done or seen before.

However, if a company exerts its resources and can't find anything to increase production, they know that perhaps it's time to shut down. So, when you've done everything you possibily can to put that spark back in the relationship, but it doesn't work -- well, maybe it's maybe time to move on. Easier said then done, I know. But, why? Don't worry, I've come up with an equation for that too. But, I'll leave that for my next post.

Inelasticity of Love

We are never so defenseless against suffering as when we love, never so forlornly unhappy as when we have lost our love object or its love. - Sigmund Freud

Freud says it all, nothing hurts as much as getting your heart broken. We all know that overwhelming pain that you can't shake. Yet again, here's another attempt to explain something so intangible with a little empirical thinking.

Let's start off with some quick definitions any student of economics has seen:

Elastic: a slight change in price results in a sharp change in demand.

Inelastic: change in price results in a slight, if any, change in demand.

More simply put: an elastic good is something you can live without if your conditions aren't met. An inelastic good is something you need, something you have to have - no matter the price. The conditions for inelasticity include the following:

1. There are few substitutes and they are difficult to find and obtain
2. It's a necessity
3. It's unimportant how much you have to put in to obtain it
4. Little time or inclination to seek for a substitute

Ok, with that said, let's get to the point. When you first start dating someone, they're completely elastic. One little thing that irks you and your demand for them drops drastically. Or, in other words, they're out the door. But, when you start investing yourself into someone, start feeling something, inelasticity steps in:

• You know that there's no one out there just like them. (condition 1 of inelasticity)
• You need them in your life because things just don't feel right without them there. (condition 2)
• You will give all of yourself to this person. (condition 3)
• You don't want anyone else. (condition 4)

See where I'm going here? Why is losing love so hard when there are so many fish in the sea? Maybe it's because no two people are exactly the same. No one fits with you in the exact same way. The little quirky things in their personality that make you love them - that make them so perfect for you - make them completely inelastic in your life.

Yes, Freud did do enough drugs to kill a horse, but we can't argue that he's off here. Losing someone you need - someone you have to have - that hurts. Like hell.

Average Joe and Ordinary Jane

Anyone who knows me knows that I have an established list of fears - ranging from open water to kankles. But anyone who really knows me, knows that it's all gibberish. So here it is - my actual number one fear in life: being average.

I know that sounds like an awful thing to be afraid of because, well, by definition - it's typical, it's common, it's what most people are. But, I know I'm not the only one with that fear. We all want better. We all want more.

But, how do you measure average? How do we define who we are in these terms? Lucky for us, Wikipedia did all the work. The wikipage spits out all the data - telling you if you're the Average Joe or Ordinary Jane. It's broken down into categories: families, income, education, social class, occupation and homeownership...

Those are a lot of categories. The full on Average Joe has to fall into the average range for all those classifications. However, even Wikipedia admits that some things can't be measured - like the aspect of family. The more I look at these statistics, the more I question. Are any of us really average?

I know, that question makes no mathematical sense. Of course there are average people, questioning the presence of an average in anything is blasphemy to any empirical mind. But, contrary to what I try to convince myself - that most things in life can be dumbed down to equations - there's no dumbing down here.

There's too much subjectivity in it all to really categorize ourselves. Happiness can't be measured, I'll never argue that. There are too many different definitions to the word success. The life that I picture to be ideal - to someone who comes from difference experiences - could seem nothing more than average.

So, it's time to smash my own fear. Maybe, we're all above average in some aspect of our lives. Life is made up of so many components and it's hard to believe that anyone can fail at all of them. I actually believe that everyone has something they excel at. Honestly though, I think that anyone who is happy with the life they lead is already more than average.

You Can't Teach an Old Dog New Tricks

Or can you? As 2009 comes to an end, a new year is looming: full of promises and possibilities. However, there are many of us, I'm sure, who don't see it that way - myself sometimes included. We're thinking to ourselves, "I've been this way for so long, there's no way I can change." Whether it be: habits, relationships, careers, or whatever else - it's easy to not want to change. It's easier to believe that change is not possible.

Experience and observation support that claim. How many times have you seen people attempt change and fail. How many, "I'm going to start working out this year" have you heard, only to later be told, "I went to the gym religiously for about two weeks, but I can't do it anymore."

If I know I can't do it, why the hell should I even try in the first place? How many people want something better in life, but are too afraid to pursue that desire? When it comes down to it: change is scary. If things get bad, there's no "undo" button for life.

But, you know what? Change is possible and sometime extremely rewarding. Experience and observation support that too. Look here:

Julia Child:

This lady went from a government spy to famous chef. Talk about major career change. Entering cooking school at the age of 36, she became a culinary master.

Hellen Phillips

At the age of 48, Hellen entered The Biggest Loser weighing in at 257 pounds. At the end of the season, she weighed a mere 117 pounds - dropping from a size 22 to a size 2.

Yes, I know those are extreme examples. But look around you and you will see success stories everywhere. There are always people who manage to fix the part of them, or their life, that they felt needed fixing. Don't write off small successes and don't be plateaued by big ones. The most successful people are the ones who never stop wanting more. The ones who want to be better and act on that desire. Because, let's face it, things can always be better.

So here's to all of you: May your new year be full of positive changes. Persevere through the challenges. Win your battles. Learn from the ones where you lose. I wish you the courage to pursue change and hope that this year brings you one step closer to being the person that you want to be. Go on, now: start writing your own success story.

Happy New Year, everyone!

(photos courtesy of cinemapassion and NBC)

Life Equations?

When you ask people who study numbers why they love math so much, one of the main responses you hear will be, "Equations don't lie. There's no subjectivity, you follow the equation and get the answer that you're looking for."

In my many years of schooling, I've always wondered why life's questions couldn't be simplified into these unquestionable equations. But, when your focus is numbers and you're living life, the two eventually mix. Well, for me, at least. So let's take a stab at it.

Love and relationships. Without a doubt, when it comes to them, uncertainty is certain. You are never 100 percent sure of how the other person feels. You're never even 100 percent sure of how you feel. And we all know it, unrequited love doesn't work. We beat ourselves up for always questioning it. Always wondering. Telling ourselves that we're so stupid for feeling so unsure. But, it goes back to high school math. Maybe the things they teach you did stick. When it comes down to probability, the answer is right there. You're right in all your questioning.

Let's start with these simple equations of probability:

(Now, before I lose you, I promise - it's not as daunting as it looks.)

P(A) = the probability that you love your significant other

P(B) = the probability that they love you

P(A or B) = the probability that one of you loves the other

P(A and B) = the probability that you BOTH love each other

P(A and B) = P(A) x P(B)

P(A or B) = P(A) + P(B) - P(A and B)

Let's apply this to life.

Let's say you're with someone - and you're pretty sure that you love them, but there are those moments when you question if what you're feeling is real. So, let's say you're 90% sure of your love.

P(A) = .9

You're always going to question the feelings of your significant other, no matter what they tell you - because let's face it, it's human nature. Unless there's a meter on his heart that I can actually see, his sweet and loving words will never be 100 percent true. Let's say you're about 80% sure of his love.

P(B) = .8

So when you're 90% sure that you love him and 80% sure that he loves you, it's safe to say that the chances of one of you loving the other is pretty damn high.

P(A or B) = P(A) + P(B) - P(A and B)

= .9 + .8 - .72 = .98

Well shit, 98% is a really good percentage. Yes, but that's the chance of one of you loving the other, not both.

The number that really matters - P(A and B) - the probability that you BOTH love each other.

P(A and B) = .9 x .8 = .72

72 freaking percent. Yeah, that's passing. But is that enough when it comes to matters of the heart?

When it comes down to it, the odds of you both loving each other is always lower than that of one way love. So, hell yes, I'm going to question things! I know feelings can't be dumbed down to numbers, but the probabilities always work out that way - unless you're both 100% sure of your love.

In that rare and special case, it's safe to say that it comes down to that well known equation that we heard 2gether sing on MTV throughout our adolescent years:

You + Me = Us.

I know these equations don't answer whether or not your relationships will work out. But, maybe - just maybe - they might serve as some empirical proof that you're not insane for feeling all your uncertainties.