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.
Wednesday, November 25, 2009
Wednesday, November 18, 2009
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.
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.
Wednesday, November 11, 2009
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.
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.
Wednesday, November 4, 2009
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.
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