THE LEGENDARY, MYTHICAL, HISTORY OF INSURANCE

Ten thousand years ago, in the Columbia River Region, which is now Oregon and Washington, the Walla Walla Indians used canoes to transport their trading goods down the Columbia River. They had to navigate through dangerous rapids to get to the place where they traded with other Indian tribes. Invariably, one of their 10 canoes would capsize, losing all the goods of one Indian family. This was a terrible loss to the family, so they decided to share the risk by putting some of each family’s goods into each of the 10 canoes. Thus, the idea of spreading and sharing risk was born. The pure cost, of “insuring” the safety of their goods, was a premium of 10% of the value of their goods.

Chief Freelance Thinker decided to start a “for profit” business to offer insurance to individual canoes that came down the river. He charged the pure cost of risk (10%) plus his business expenses (5%) plus a modest profit (2%). An individual Indian could “transfer his risk of total loss” to Chief Freelance for a “premium” of 17%! Chief Freelance’s business came to be known as, INA (Indian Nation Assurance). That is the history of insurance. The ability to transfer risk enabled entrepreneurs to start successful businesses. This enabled tremendous economic growth in the world. Let’s all be thankful for the invention of insurance! Happy Thanksgiving Day.


Next week we will learn more about insurance. Bet you can’t wait!


P.S.

Chief Freelance made mucho wampum and retired to the good life.

BOLD BUT FLAWED AMERICAN HERO

He was 35 years of age and in poor health. He suffered from malaria, syphilis, and depression. He was a drug addict and an alcoholic. He had only 2 friends and never married. He was alone in a room on the Natchez Trace when he committed suicide. With two pistols he shot himself in the head and in the chest but continued to live until he repeatedly cut himself with a razor. The poor, miserable man died on October 18, 1809. Who was this man and how did he come to such a sad end?



He was the first American to cross the Continental Divide. He was a famous contemporary of Daniel Boone and Davy Crockett. He was a close friend of Thomas Jefferson and served as his personal secretary during Jefferson’s presidency. He was a man of high energy and great self-discipline. He was unique, truly gifted as an explorer and as a leader of men. He was a near perfect army officer who led the Corps of Discovery with his other friend, William Clark. Yes, I am describing the greatest of all American explorers, Captain Meriwether Lewis.


If you would like to understand how Captain Lewis went from such glory to such a sad ending, you should read, “UNDAUNTED COURAGE” by Stephen E. Ambrose. Ambrose brilliantly reconstructs the Lewis and Clark Expedition from Lewis’s point of view. It is a sweeping adventure story that was a thrilling read for me. The book is proof that history can be entertaining and interesting. I highly recommend this book.

COMBINING "THINKING" AND "HEALTH CARE REFORM"

In my opinion, Thomas Sowell is the best "thinker" concerning economics and health care reform. I have added a link to his home page on my blog. Today's posting is a synopsis of one of his brilliant columns.

There is a difference between reducing costs and shifting costs around. Costs are not reduced simply because you pay less at the doctor's office and more in taxes_or more in insurance premiums, or more in higher prices for other goods and services that you buy, because the government has put the costs on businesses that pass those costs on to you.

Despite all the demonizing of insurance companies, pharmaceutical companies or doctors for what they charge, the fundamental costs of goods and services are the costs of producing them.

If doctors' incomes were cut in half, that would not lower the costs of producing doctors. What it would do is reduce the number of very able people who are willing to take on the very high costs of medical education when the return on that investment is greatly reduced.

Britain has had a government- run medical system for more than half a century and it has to import doctors from Third World countries where the medical training may not be the best. Reducing doctors' income is not reducing the cost of medical care, it is reducing the quality of care.
There are some ways in which the real costs of medical care can be reduced but the people who are leading the charge for a government takeover of medical care are not interested in actually reducing those costs, as distinguished from shifting those costs.
The high costs of "defensive medicine" _ expensive tests, medications and procedures required to protect doctors and hospitals from ruinous lawsuits could be reduced by eliminating frivolous lawsuits. But politicians who get huge campaign contributions from lawyers are not about to pass laws to put a limit on lawsuits.

THE FINAL LESSON ON THINKING

I saved the best for last. What you think and what you say to yourself is of critical importance to your success in life. Positive thinking is good but cancelling negative thoughts is more important. Negative thoughts can occur after you do a bone headed blunder such as backing out of the garage without putting the garage door up, or launching your boat without replacing the drain plug. After such an event, you may say something like, “I am too stupid to live”, or “I am a complete idiot!” You must immediately cancel these thoughts by saying, “cancel, cancel”. Then, say something reassuring like, “even geniuses do dumb things once and awhile.” “I am not stupid.” “I just had a memory lapse.” Dwelling on your mistakes is a form of dysfunctional thinking, which can undermine self- confidence and hold you back. Here is an example: Having made a mistake at work, a person may believe, “I’m useless and can’t do anything right.” Believing this tends to make things worse. The individual reacts by avoiding activities and then behaviorally confirming the negative belief to himself. The negative belief becomes a self-fulfilling prophecy of failure. You are what you think you are! Be careful what you think. Cancel those negative thoughts by saying, “cancel, cancel”! Keep on thinking and tune in next week for a new topic.

LESSON FIVE: THINKING IN DIFFERENT WORLDS

When you imagine comparisons and similarities between dissimilar subjects and events in different worlds, your mind looks for cues and suggestions to make the comparison meaningful. For example, you want to improve the common flashlight and decide to look in another world for ideas. You look in the world of "automobiles" and choose the specific act of changing a tire. Then, you look for cues in the specific act of changing a tire that will help you improve a flashlight. You describe what is involved in replacing a tire: Read the manual on how to replace the tire. Because there is no external power source, you have to manually crank the jack. Eureka! A flashlight could have a crank mechanism to recharge the battery! You used an unconventional way to think about a problem. You used an analogy with changing a tire to improve a flashlight. This is what is meant by looking in different worlds. Thomas Edison invented the phonograph after developing an analogy with a toy funnel and sound vibrations. The way buzzards kept their balance in flight served as an analogy for the Wright brothers when they were developing an airplane. Your thinking technique will improve if you learn to use similarities and comparisons with things in other worlds! Keep an open mind and practice this new way to think. You can have great ideas to improve your life.

LESSON FOUR: A NEW WAY TO THINK

If you always think the way you've always thought, you'll always get what you've always got. The same old ideas. You only have the ability to create ideas based on your existing patterns of thinking_on the way you have been taught to think. You need some means of producing variations in your ideas. Here are a few ways to generate variations in your ideas:

• Combine things in novel ways
• Using random stimuli in connecting the unconnected
• Thinking in opposites
• Thinking metaphorically and analogically in other worlds
• Actively seeking the accidental discovery  and finding what you are not looking for

These strategies liberate your creativity by breaking up your conventional thinking patterns. Think about substitution, combine, adapt, magnify, modify, put to other uses, rearrange, reverse. Everything new is some addition or modification of something that already exists. You take a subject and turn it into something else. Example: Natural gas becomes polyethylene becomes milk jugs. French artists Seurat and Cezanne realized that color was not continuous transitions  in nature. They broke down the discrete experiences of colors into "dots" and grouped them in various ways to act on each other and create stunning new artistic experiences that revolutionized the way artists perceived the world. OK, try these ideas to think of something brilliant! Keep an open mind but don't let your brains fall out. Keep on thinking.

LESSON 3 ABOUT THINKING (RELATIONSHIPS)

First of all, I appologize for being late. I have been posting my blog every Wednesday but missed last Wednesday because of being on vacation.
Today, we are going to think about your relationships with people. Whether it is a friend, a co-worker, your supervisor at work, or your neighbor, relationships can be dangerous. You need to be able to identify the people who can make your life miserable and avoid them like the plague. Who are these people and how do we recognize them? Psychologists call these people, sociopaths. One in 25 ordinary Americans is one. They secretly have no conscience and can do anything at all without feeling guilty. They have no feelings of guilt or remorse no matter what they do to you, no limiting sense of concern for the well-being of friends, family, or strangers. They lie with impunity and only care about themselves. The bad news is, they are difficult to identify. They are masters of deception. The most reliable sign of a sociopath is that they appeal to your sympathy. They want other people to feel sorry for them; Then, they can take advantage of you. When considering a new relationship, practice "the rule of threes". Three lies, three broken promises, or three neglected responsibilities, means trouble! Do not give your money, your work, or your secrets, or your affection to a three-timer.
Until next time, keep an open mind and keep on thinking.