Welcome back to the 1st Law Newsletter - Friday Edition.

In this email:

• Risk and ruin

• Principled knowledge

• Quote on failing systems

Risk and ruin

The relation between size and risk: the smaller the community, the less risk there is to the larger whole if it fails, so it can take more risk and act more selfishly. The larger the community, the larger its span of control, and it must minimize the risk of failure because everything under its control will be affected.

For example, if one of my loved ones got sick and needed care, I could (and would) risk personal ruin to help. Leaving my job and responsibilities behind would do little to no harm to the country I live in. The same would not be true if I ran the country. In that case, I could cause confusion, panic, and a scramble for power. Similarly, if I want, I can take large financial risks because I have no dependents. The same is less true for a family of four, and much, much less true for the banks that back the savings of the country. If money is used irresponsibly at the banking or federal level, the whole country could be ruined financially.

Principled knowledge

If you can’t derive something on the spot, you don’t know it. This is the test of true knowledge. Whether, starting from a blank piece of paper and a pencil, using nothing but your mind, you can derive a result or a conclusion. I think this is the root of the problem of the North American education system. With Google and AI, memorization is becoming more useless every day. But in school, memorization is (more often than not) how you are tested. Thus, you study by memorizing, and somewhere along the way basic understanding is lost (or never gained). What is important is understanding—having a solid foundation and being able to reason your way up from basic principles.

What is your field of expertise? If you did not have access to the internet, how well would you be able to do your job? Interesting to reflect on this…

Quote I Want To Share

This is what I think about whenever I hear about bailouts. All the small fixes lead to an unavoidable problem later on. We need to let things fail—businesses, people, and systems. It is the natural result of irresponsibility and incompetence. Bailouts are unfair to those who were responsible enough to avoid failure.

Stop privatizing wins and socializing losses.

Thanks for reading!

Lucas