In the two previous posts on insurance fundamentals, I introduced a fundamental inequality relating payouts to premiums and the concept of risk aversion. Today we will look at this through a bit of a numerical example. We will look at a risk that has a 1 in 100 chance of occurring and when it does happen the damage it causes is $50. A fair premium rate for this would be 50 cents (1/100 * $50), where fair means that your expected loss is equal to your expected premium payment. Now as we saw du...

Video is everywhere these days and for good reason. Even a short video clip contains a lot more information than a still image. But playing back videos in a way that works across browsers and devices has been tricky. Just using the HTML5 video tag means you have no control over the controls on the video and event handling is a complete cross-browser mess. Both jwplayer and video.js don’t behave like standard HTML elements and are therefore hard to use in modern responsive layouts. If you have...

In the two previous posts on insurance fundamentals, I introduced a fundamental inequality relating payouts to premiums and the concept of risk aversion. Today we will look at this through a bit of a numerical example. We will look at a risk that has a 1 in 100 chance of occurring and when it does happen the damage it causes is $50. A fair premium rate for this would be 50 cents (1/100 * $50), where fair means that your expected loss is equal to your expected premium payment. Now as we saw du...

Video is everywhere these days and for good reason. Even a short video clip contains a lot more information than a still image. But playing back videos in a way that works across browsers and devices has been tricky. Just using the HTML5 video tag means you have no control over the controls on the video and event handling is a complete cross-browser mess. Both jwplayer and video.js don’t behave like standard HTML elements and are therefore hard to use in modern responsive layouts. If you have...

In my first post on insurance principles I introduced the inequalityExpected payouts that has to hold for the industry as a whole and also for any one insurance company to stay solvent (yes you can collect interest on premiums, so consider this appropriately adjusted for timing of cash flows already).But what about the individual person or company seeking insurance? It follows immediately that this inequality must also bet true for many of those seeking insurance. Why? Well if the opposite we...

In my first post on insurance principles I introduced the inequalityExpected payouts that has to hold for the industry as a whole and also for any one insurance company to stay solvent (yes you can collect interest on premiums, so consider this appropriately adjusted for timing of cash flows already).But what about the individual person or company seeking insurance? It follows immediately that this inequality must also bet true for many of those seeking insurance. Why? Well if the opposite we...

Today marks my 8-year anniversary of blogging. I have learned so much from it and want to thank everyone who has engaged in the comments over the years. I am particularly grateful for comments that are critical and for ones that provide links to additional material. The reason is that those help move my thinking forward. They are part of the critical process through which knowledge improves over time (of course the occasional compliment or thanks are also much appreciated). We should not take...

Today marks my 8-year anniversary of blogging. I have learned so much from it and want to thank everyone who has engaged in the comments over the years. I am particularly grateful for comments that are critical and for ones that provide links to additional material. The reason is that those help move my thinking forward. They are part of the critical process through which knowledge improves over time (of course the occasional compliment or thanks are also much appreciated). We should not take...

Confidence in the US Congress is near an all time low according to a Gallup poll on “Confidence in Institutions.” People have stopped trusting government. And government has done a lot to deserve it. Politicians have taken huge sums of money from special interests and partisan divides have deadlocked government on important issues. Add to that the secret surveillance of the population by the NSA and other agencies as revealed by Edward Snowden. At the same time income inequality in the US has...

Confidence in the US Congress is near an all time low according to a Gallup poll on “Confidence in Institutions.” People have stopped trusting government. And government has done a lot to deserve it. Politicians have taken huge sums of money from special interests and partisan divides have deadlocked government on important issues. Add to that the secret surveillance of the population by the NSA and other agencies as revealed by Edward Snowden. At the same time income inequality in the US has...

I have not been blogging much because I have been working on my book, but many people have asked me about the markets. So here are my thoughts. Much of the recovery in the labor market since 2008 had been driven by jobs in the oil and gas industry. These were high paying jobs that went into parts of the country that otherwise are struggling economically. A lot of US production, however, is profitable only at oil prices of $60/barrel and above (some are saying $80/barrel). Crude oil is current...

I have not been blogging much because I have been working on my book, but many people have asked me about the markets. So here are my thoughts. Much of the recovery in the labor market since 2008 had been driven by jobs in the oil and gas industry. These were high paying jobs that went into parts of the country that otherwise are struggling economically. A lot of US production, however, is profitable only at oil prices of $60/barrel and above (some are saying $80/barrel). Crude oil is current...

Yesterday with the NYU Stern class that I am co-teaching with Arun Sunderarajan we focused on the fundamentals of different businesses. The class is about product market fit but looking for that doesn’t mean you can ignore the economics of the market in which you operate. If you want an example of what I mean, read my post from a while back about vertical integration in on-demand services. Later today I am meeting with an executive from the insurance industry. Given that we have invested a lo...

Yesterday with the NYU Stern class that I am co-teaching with Arun Sunderarajan we focused on the fundamentals of different businesses. The class is about product market fit but looking for that doesn’t mean you can ignore the economics of the market in which you operate. If you want an example of what I mean, read my post from a while back about vertical integration in on-demand services. Later today I am meeting with an executive from the insurance industry. Given that we have invested a lo...

The blockchain holds great promise for developing decentralized protocols and applications such as marketplaces (e.g., openbazaar), registries for digital and physical assets (e.g. mediachain) and social networks that have no value extraction by a controlling company. Everyone who wants to develop such applications though faces the same foundational problem: how to refer to resources and people without resorting to existing centralized systems. On the existing web we use URLs to point to reso...

The blockchain holds great promise for developing decentralized protocols and applications such as marketplaces (e.g., openbazaar), registries for digital and physical assets (e.g. mediachain) and social networks that have no value extraction by a controlling company. Everyone who wants to develop such applications though faces the same foundational problem: how to refer to resources and people without resorting to existing centralized systems. On the existing web we use URLs to point to reso...

I learned how to program on this Apple II over 30 years ago. Over that time period – as a first approximation – programming has stayed the same. Yes, I have learned new tools and new programming languages, but programming still amounts to typing a bunch of text into an editor in a syntax that’s generally easier to read for a machine than a human. That is about to change dramatically. When I teach programming to novices I introduce it by saying: programming is just telling a machine what to do...

I learned how to program on this Apple II over 30 years ago. Over that time period – as a first approximation – programming has stayed the same. Yes, I have learned new tools and new programming languages, but programming still amounts to typing a bunch of text into an editor in a syntax that’s generally easier to read for a machine than a human. That is about to change dramatically. When I teach programming to novices I introduce it by saying: programming is just telling a machine what to do...

There is a ton of confusion out there about Apple’s refusal to comply with a court order. The most level headed account I have been able to find is by the Register and I highly recommend reading it. The question I am more interested in is the following: what *should* the security design be for unlocking personal devices such as smartphones, but also say smart cars, fitness trackers, etc. I would posit that each device should ship with an *individual* key that is created by the manufacturer sp...

There is a ton of confusion out there about Apple’s refusal to comply with a court order. The most level headed account I have been able to find is by the Register and I highly recommend reading it. The question I am more interested in is the following: what *should* the security design be for unlocking personal devices such as smartphones, but also say smart cars, fitness trackers, etc. I would posit that each device should ship with an *individual* key that is created by the manufacturer sp...