Monday, May 28, 2018

Forget college -- start learning every day!


Well, that heading is not to dismiss the college experience. College is, or at least used to be, a great way to spend one’s formative years, learning a bit about how much has been learnt by modern society over centuries, and of course, making lifelong friends.

The modern college system owes much to the German civil servant Wilhelm von Humboldt. In 1809, he brought industrial scale and efficiency to earlier systems. It served the needs of the industrial age, which needed trained managers to allow thousands and millions of workers to work in unison for an industrially efficient outcome.

This system has spread throughout the world today, and certainly has its benefits when the tedious work can be automated or outsourced to localities that still practice older, more oppressive industrial systems. But the world has changed. The outsourcing part of manual labor is slowly but surely giving way to automation. But the machines we build need constant re-programming, maintenance, and general care from expert, skilled people.

Unlike earlier manual labor work, this work requires skills that constantly change in their details. The managers and technologists are also prone to become outdated much sooner than one lifetime. This is the conclusion of Karun Philip in _Zen and the Art of Funk Capitalism_ (“ZATAOFC”). The prior sections of the book are a logical and historical story of the various components of commercial society, with references provided to further exploration of how this story has unfolded since those early 1800’s.

It starts with defining Knowledge, in the sense of how a human brain attains knowledge. It moves to the modern definition of money. It may surprise many that modern money is no longer gold, or even the promise of any government that taxes, though there were periods when those definitions were accepted. The only thing we can do with money today is to lend it. When we put it in a bank, the bank does lending for us. Otherwise they couldn’t afford to give us all the services it does and pay us an interest rate as well. All money is just credit and debit. Loans given, and loans taken. That’s it!

So, what is a loan? It is a promise to create a future flow of money from a person or entity that shows how they plan to work to earn an income that can support that future flow of money to the lender. Loans are created in banks by the stroke of a pen (or rather, by the tap on the keyboard, these days). Loans are the creation of money. If the repayment continues as promised, the loans are good. In other words, the money is good quality money. Yes, we can create infinite money through infinite loans, but if we stop paying attention to the quality, the repayments will stop. The money created would be bad money. The system would collapse.

ZATAOFC puts forward its concluding proposition, that we should be creating loans for constantly training and re-training workers. By keeping track of the trainers that are effective, money can be directed to training that is useful enough to produce future income. This could be for managers, technologists, marketers, entertainers, craftspeople, artists, and who knows what else. We don’t care for what. We care only whether the training is effective. Then we can go on producing more money (loans) and everyone can make more money for themselves. But we will all have to constantly re-train ourselves as old knowledge reduces in value and new knowledge becomes more valuable.

John Maynard Keynes put forward the idea of increasing money supply (loans) to get out of a Great Depression. Milton Friedman described the possible bad effects of this, namely runaway inflation. If we increase the money supply (loans) more than it ought to be increased, Friedman showed that inflation is the likely result. Both these works focused on the quantity of money (loans). ZATAOFC accepts both but emphasizes the quality of money (loans) created.

In 2017, the author, Karun Philip, started The Knowledge Capital Project to create user-contributed database of training courses, the return each course has provided to the learners, and data that can be used for lenders to lend to the areas they feel will be worth lending to. ZATAOFC is available on Amazon, with some extracts, and the blog at has some more extracts and a forum for discussion and critique of these and other ideas.

Wednesday, December 6, 2017

Quadrupling Gross World Product -- the solution for Argentina / Afghanistan / etc.

by Karun Philip.

What in the world is 'money supply'? That is a question I asked myself at the age of 18, when I started reading business and economic newspapers and magazines. I read vast amounts of literature in the subsequent 16 years but still had no proper understanding of it in my mind. Then finally in the Year 2000, I found the answer while trying to understand the difference between the Austrian school of economics, and the Monetarist school of economics.

If you ask the Austrians, they will tell you the difference between the schools boils down to whether capital is 'homogeneous' or 'heterogeneous'. To my engineering mind, this is just more gobbledygook from the world's most dismal scientists, though there is a core of truth in that presentation. I now understand the answer in more simple terms. Mainstream economists look at money as something that exists and then is deposited in banks. The bank then has 'liabilities' on its balance sheet (i.e., it owes that money back to the depositor on demand), and they can create assets (loans to individuals and companies) on the other side of their balance sheet. They make money on the interest rate differential. The question that is begged in this model is where the original money came from in the first place. The truth is that money was created privately without the government in the first place. Governments took over a virtual monopoly on money creation only recently.

So how did money come to be created in the first place?

The answer is to look at credit (loans) first and deposits second, instead of the other way around. Credit creation is the manufacture of money. Our economies can continue to expand endlessly only because the total amount of credit created expands continually. Money supply is nothing but credit supply. Money supply expands when credit creation expands. Obviously, when credit expands, deposits expand by definition. But it is credit creation that comes first. A bank creates a deposit entry in the borrower's account when they issue a loan. The loan itself is not backed by other deposits (yet, in our new model) but simply backed by the collateral assets that the borrower pledged in order to obtain the loan. The money units in that account then represents the fractional recourse to the assets that were pledged. The bank notes issued from that account are not just pieces of paper -- they represent that fraction of the pledged assets. The reason why the bank needs to make sure it lends only to secure borrowers and good business plans and track records, is because if they did not, then people would stop honoring the checks and notes issued by the bank. The quality of the money is the quality of the credit created by that bank.

I can set up a bank even in a war-devastated poor country, where there is not yet any existing money or banks. All I need to do is decide what collateral asset I think is valuable, and tell someone "Okay, you got yourself a loan of $10,000 if you pledge Asset X to me." I then create a bank account in the borrower's name and write an entry saying that $10,000 is available to him. I give him a checkbook, which he can use to order me to transfer money to anyone else's account. If he needs cash withdrawals, I print out a piece of paper that has some fraud protection coding scheme to detect counterfeiting. In a competitive 'free banking' environment, each bank would print their own notes, which, apart from having the total number of 'dollars' (or whatever common word is used for the unit of money), would also have the bank name on it. Now, if other banks start thinking that I am not collecting good collateral or not making loans that are 100% collectible, they may start accepting my notes and checks only at a market-determined discount to the face value.

Over time, people stop thinking about the pledged assets at the bank and think of money as represented by the paper notes itself. In earlier times, banks developed a system of requiring other banks to purchase a certain amount of gold reserves in proportion to their deposits, and customers would be promised an amount of gold in exchange for any note. This served as a quick and easy way for banks to determine whether other banks' notes were worth accepting or not simply by checking their gold reserves, or being part of a consortium that enforces and oversees members gold reserve requirements. With this system, the accepting bank did not have to study the entire credit portfolio of the issuing bank in order to determine the worth of the note. It is important to note that the gold reserve requirement was only a fraction of the total deposits. This is because banks calculated that only a small amount was demanded in gold most of the time.

Now, it is worth taking the time here to understand what a 'run on the bank' is. Note that in a system structured as described above, the depositors are told they can withdraw money any time. Yet the loans are to be paid back only over time. What you have is a mismatch in the maturity of the deposits and the maturity of the loans. Now, imagine you are a banker. If, all of a sudden, some event makes people want to withdraw all their money and store gold instead, you will have a mismatch in the liquidity of your assets (loans) and liabilities (deposits). You told the depositor he could have his money any time he wanted, and promised him gold, but now in this crisis you are unable to pay. So you start calling in your loans and seize collateral assets and sell them in the market. If the event that caused this 'run' on deposits is one that affects all banks, then everyone tries to sell assets at the same time, with not enough buyers, and the whole banking system can collapse.

In modern times, we are still experimenting with alternatives to the gold reserve requirements. Now, governments have taken over the task of printing notes, and can print as much as they want in times when demand for liquidity surges. But they got themselves in great trouble when they, for political reasons, tried to print more money so that more credit could be created and the economy could expand faster. The problem with that approach is that when money supply started with credit rather than deposits, the bank had an incentive to ensure that only good credit was given. As long as credit only expands at a pace that the knowledge available to create new business expands, things are fine. But when the government tries to arbitrarily expand deposits first, creating a balance sheet necessity for the banks to lend, then the excess money supply -- the money created without enough new knowledge of productive businesses, without enough new goods and services -- manifests itself in increased prices of the existing goods and services. In other words, price inflation, caused by an artificial increase in deposits first, rather than good credit driving money supply expansion.

Milton Friedman said that inflation is always and everywhere a monetary phenomenon. What he misses is that accelerated money supply expansion (also called money supply inflation in classical economics, which causes some confusion in lay people who use the word inflation to mean price inflation) need not cause inflation. If the number of goods and services actually desired by the population and deliverable by entrepreneurs increased, then credit can expand at that rate without inflation. Inflation happens when the expansion of credit is faster than the expansion of entrepreneurial knowledge and consumer demand. The limit to inflation-free money supply expansion is in the limit to the expansion of productive knowledge in the heads of people.

Friedman's discoveries were valuable though, because it allowed a government-created money system to regulate itself by limiting money supply expansion if inflation seemed to be picking up. But it also hampers the rate of growth potentially possible. The true solution is to use our model of looking at collateral-backed credit that back the deposit liabilities. But instead of using fractional gold reserves, the Internet today allows us to require banks to publish their credit portfolio, including delinquency, default, and prepayment data. The notes issued by banks would then be bought and sold in the currency markets based on solid information about the credit portfolio, and Internet-based market data on their market price would be available to every shopkeeper and entrepreneur equipped with a Web terminal.

Now, it is interesting to note that the market is already moving toward such a structure. Not in the consumer deposit arena but the arcane world of bank-to-bank finance. Constrained by government-imposed restrictions on lending, banks devised a way to create loans and sell pools of loans directly to investors. People who manage money do not just leave it in a bank and rely on the bank to keep it safe. They find loans or pools of loans and buy little pieces of such pools. This process of pooling loans and selling off pieces directly to investors, bypassing the traditional deposit system completely, is called securitization. Securitization is how banks circumvented the strangling restrictions of government-regulated deposit-centered banking. Money supply increased far more in the last two decades, with little or no inflation, than Friedman's theory of inflation predicts.

But most of this money supply expansion, credit expansion, has happened through the device of securitization. Note that securitization removes the liquidity mismatch problem that causes bank runs. The investor in a pool of loans, or any pool of future income flows, agrees to take as much money as comes in. If there is a default, the investor takes the loss. A risk-averse investor can simply buy the first rights to any money coming in and accept a lower or even zero return. The investors who assume the last rights to any money coming in and the first position to take a hit if there is even a single default, would proportionately get a larger interest rate. Sophisticated investors like insurance companies tend to buy the first loss positions of thousands of deals, and so even if some of them default, the net return is high enough to compensate the insurance companies.

As securitization booms along -- it grew by $500 billion in 2001 and will accelerate further in the coming decade -- bank deposits are well on their way to becoming obsolete. Investors will choose the risk portfolio they want their savings to be invested in, and be responsible for the loss if the assets they chose default. Bank runs become obsolete. Instead of having fractional gold reserves, we will now have 100% asset backing on every such bond we buy. The currency used by a country that uses all or largely securitized credit will not be subject to the kind of volatility that countries like Argentina have witnesses. Indeed, by allowing banks to issue bank notes -- or even traveler's checks -- that are backed by specific assets that are disclosed on their web site and traded in the market, Argentina can solve its liquidity problem in one fell swoop.

The implications to poorer countries including war-torn Afghanistan are more profound, as I explain in my book Zen and the Art of Funk Capitalism. The key step here is the expansion of useful knowledge in people's heads. All we need to do is allow any number of adult training schools to enter the country, and mandate that they disclose data on their effectiveness at improving the income of their students. Student personal data may be kept confidential, even while disclosing effectiveness in various aggregated segments. With this data, banks and investors will be able to create loans to fund effective training. And as we discover more and more ways that work, credit can expand ever faster. Many schools may also offer a stipend to attract students, as long as they are confident that the training will provide the student with future income potential that will cover the stipend as well as the cost and profit of providing training. Or at least, there will be few enough defaults, that the interest on those who succeed will be sufficient to cover the defaults. With the increase in money supply going directly to students, anyone engaged in learning useful skills will have money. That in turn will spur spending, and create entrepreneurial opportunities. But the place to inject this money is not through huge government spending plans. Instead, an injection of credit in order to finance adult training will inject the money as well as provide the skills needed to use that money and knowledge to produce things that people want. This injection of credit will be money creation that is backed by the knowledge in the student's mind, and the purpose of the loan is to provide such knowledge. Market competition and intense monitoring by creditors will be the most efficient way of discovering all the opportunities in each region of the world and for each type of person. Over time, we will discover many new skills that are effective in producing income -- ideas collected by observing their success in the market, rather than trusting only our own imagination or the imagination of a government bureaucracy (!) to come up with the specific skill that will be useful to each specific type of person.

If needed and possible, governments or charities can offer to buy the first-loss position on pools of adult training loans. This would provide liquidity to the adult training loan market. But over time the system will surely discover through competition the things that work and those that do not. Who knows, those who buy that first loss position for pennies on the dollar may see windfall profits when that country becomes knowledgeable with relevant skills for the coming millennium. The time to try this out is now. Economic underdevelopment is causing fundamentalism's rise in various parts of the world. This poverty is only because of a misunderstanding of how credit and adult training work, and how they ought to be re-organized to be competitive and market driven.

If the world can come together and move us to a new world order of high and high quality skills training, I have no doubt whatsoever that Gross World Product will quadruple or more in the coming decade.

The author is Chairman of Tranquilmoney, Inc., a company that provides a software platform to manage securitization and structure finance deals. Here is the link to the Training Overview for Cortex.

(Or copy the following link and paste it in your browser:


From Appendix II -- Knowledge Backed Securities (resolving fallibility)

Zen and the Art of Funk Capitalism

Knowledge Backed Securities

Karun Philip discusses a proposition that taking structured finance to the private skills-training industry can shorten the road back to global prosperity.
In this article I discuss the problems with the economic theory that claims that interest rate cuts will create money supply expansion that will re-start the economy, and then present a way that may help work around these problems.
Whom do we lend to?
On October 2, 2001 the US Federal Reserve cut interest rates once again to a 40-year low of 2.5%. In addition, private money is sitting on cash deposits in large quantities. There is now a large quantity of money in the banking system that economists claim will now be lent cheaply to successful companies, and this will stimulate new jobs and new demand. Great theory, but now look at the state of the successful large companies – they seem to be in no great hurry to borrow because they cannot see anything but decline in demand, and are lowering costs through layoffs, which will reinforce the reduction in consumer demand. There is plenty of capacity in the banking system to lend, but a lack of knowledge of where to lend it profitably and safely. And without growth in lending, there will be no economic growth.
The general consensus is that there will be a period of belt tightening that cannot be avoided. The debate is only whether it will be a short 6-month period, or a decade-long (and counting) experience like Japan’s.

Back to school

In every major downturn in the US, people have tended to go back to school during a period where they have been laid off and are finding it difficult to find a new job. If we take a look at this simple wisdom of ordinary people, we can begin to see how an efficient supply of capital to people to retrain themselves with economically valuable skills can be both profitable and sustainable. But instead of looking to college education which is general purpose in nature, we need to look at schools which train people in practical skills – these are the schools that would tend to provide a more predictable return on an investment in training than conventional college degrees. These schools typically provide a large return on capital to their students, but are unable to charge the full value of their training because of the limited purchasing power of their clientele prior to the training.

Loans for training courses

But lending money for training can be a safe and profitable business only if we employ the techniques of structured finance. There can be no guarantee that every student given a loan will be able to get a job of sufficient pay to service the loan. But we can collect and analyze data. By forming partnerships with training schools, lenders can build databases on the effectiveness of various types of training, in various parts of the country, and for people of various prior skills. These data sets will lead to the determination of how much default is to be expected, and thereby determine the price of the pool of training loans. The training school will be incented to provide such information since once the data is established and funding becomes available, they may be able to even increase the amount they charge for training, as long as they demonstrate a clear return on investment.

Operational innovations

The innovations from there can be endless. For example:
  • Make the training schools hold the equity tranche of the deal so that they are incented to discover ever better ways of making their training more effective.
  • Develop ways of credit scoring a training school and its prospective students to ensure that each type of person focuses on the type of career prospects that will maximize their particular aptitude.
  • If the training is proven to be sufficiently productive, consolidate older consumer debt such as credit card debt of the borrower into a training loan by lending the cost of training plus the cost of paying off the older debt.
  • Discover appropriate training schools for delinquent credit card debtors who can then pay back old debt as well as have the prospect of new earning power after the training investment.
  • Provide an online reference check to employers to validate the courses and performance of students who apply for a job. Defaulters and delinquencies can also be flagged on this reference check.
  • Provide an online rating of various professions, their average pay, the schools that train for that profession, and the banks that provide financing. This will enable people to find out what skills are most needed in the economy and how to acquire those skills.
Of course the standard tools of structured finance will also be applicable – pools of training loans can be split into waterfalls, interest-only pieces, etc. to tailor the supply of loans to the demand for risk and return in the capital markets.

Macro-economic effects

The data collection needed for building such a ‘Knowledge Backed Securities’ (KBS) infrastructure into place presents quite a massive task. But once it is underway, the macro-economic effects of such data being collected and used as a basis for new credit issuance ought to be quite dramatic. Over time, there will be almost endless prospects for investment in areas that are proven to be effective. The greater the pace of technological change, the more will be the need for workers in an economy to upgrade their skill sets multiple times in a career.
The unemployment claims would become virtually zero because everyone would either be in a job, or at a training school (or not seeking work). The training industry could be the source and sink for labor, constantly measuring what types of labor and skills the economy needs, and then supplying that labor before shortages cause bottlenecks on the economy.
Training would become very competitive and only schools that provide the best and most effective training would survive the test of detailed data analysis from Wall Street. However, with the liquidity available for higher investments in training, schools would be able to afford the best salaries in the economy to attract the best talent as teachers. With a way to for those who have useful practical knowledge to monetize that knowledge, the ‘habits of highly effective people’ will emerge and spread spontaneously as the market seeks out ever more productivity in training.
The massive positive fallout of such a system should be sufficient for the Federal Reserve to encourage KBS to the extent of providing liquidity to AAA-rated KBS, much as it buys rated mortgage products. It could also provide limited reinsurance or lines of credit to pools of loans for the lower end of jobs, where defaults may otherwise be too high.
In general, by investing in market-based training loans, money supply injections from frightened investors or the Federal Reserve can be employed in a way that will rescue consumer credit, and set the stage for demand recovery in a newer, reconfigured economy after bad older investments are written off. The injection of market-monitored training loans into the economy will also stimulate capital investment from businesses that can safely assume that consumer demand will not retreat indefinitely into a shell. While this ‘new economy’ will continue to be one where no job is safe from redundancy, it can also be one where if one job disappears, many other potential jobs are sure to be around the corner. And if capitalism does its trick of increasing productivity continually, you can bet that the new jobs will afford a higher standard of living than the old ones.

Saturday, December 2, 2017

Enabling Securitization through Technology

Enabling Securitization through Technology

Friday, December 1, 2017

Appendix I of the book: _A Rationalist's Guide to Religion_

Link to US Review
Zen and the Art of Funk Capitalism
Appendix I – A Rationalist’s Guide to Religion
The second half of the second millennium AD was driven by a profound change in people’s attitude to religion. Prior to that era, practically everyone in the world believed in some religion and some form of God. But with the advance of science, logic, and technology, man was suddenly able to accomplish results that seemed to be at odds with prior notions of how an individual’s will cannot be achieved, and “God’s will” would prevail. Descartes’ geometry and rationalism became the poster child for the new age of reason, where religion would be treated as the enemy of truth and enlightenment. There was much evidence to suggest that religions were indeed guilty as charged – senseless wars and crusades were commissioned by heads of religious communities, priests abused their power over their flock in order to make a luxurious living, and tribal notions of the role of women, slaves, and unbelievers were perpetuated by conflating the power of religion with the personal predilections of the all-too-human priests and community leaders.
In the 21st century, the reaction to all these religion-inspired abuses seems to fall into two broad categories – those who profess to be agnostic or atheists, and those who claim to be ‘spiritual’ but not a part of any organized religion. Both camps generally do believe in the power and utility of reason. But there is still a gap between rationalism and the worldview of traditionally religious people. I attempt to bridge this gap and provide a rational explanation for many of the sayings found in all of the major world religions including Christianity, Islam, Judaism, Hinduism, and Buddhism. I try to show that there is an interpretation of religious words and beliefs that is different from how the professedly religious criminals interpreted their own religious texts.
Zen and the Art of Funk Capitalism
First, we must summarize the precepts of a rationalism that accepts fallibility. In the preceding pages we used simple deduction to establish the following basic theories that seem to be irrefutable.
Theorem 1: All theories are based on an incomplete set of facts.
Theorem 2: As a consequence of Theorem 1, all theories are fallible.
This necessitates an assumption of Axiom 0: Despite our fallibility of our
inferences, we will assume the material universe exists and gives us valid data via our perceptions. Although this is intuitively obvious, the provable fallibility of knowledge implies that we must formally call this an assumption in which we must have faith. We will continue to use this assumption until and unless it is refuted.
Theorem 3: Since justifications for violence or coercion are fallible, morality is
defined by a ban on coercion and fraud. The purpose of law is to detail the various forms of coercion and formally outlaw each type.
Theorem 4: Due to provable fallibility, institutions of law must follow due process
and presumption of innocence while enforcing a ban on coercion.
Theorem 5: Democracy is a process by which people who are coerced can
express such coercion and seek resolution. Without democracy, fallibility and inherent power structures will not allow feedback of the coercion of the powerless.
Theorem 6: Discovery of valid theories about the nature of material reality is best
achieved by critique of competitive theories, often resulting in synthesizing a new
Zen and the Art of Funk Capitalism
theory that encompasses the facts earlier ignored by each of the preceding theories.
Theorem 7: Allowing complete freedom of action other than those actions that
involve coercion or fraud will accelerate the discovery of valid theories.
Theorem 8: Competitive trading of bank loans will most efficiently discover the
business areas that work.
Theorem 9: Competitive funding of student loans and adult re-skilling loans will
achieve the most rapid and effective training of individuals so that they may increase their wealth even in rapidly changing technological environments.
Theorem 10: Basic welfare through food stamp loans for the indigent will not
distort the knowledge discovery process of free and competitive innovation. With basic food and nutrition security guaranteed, adult training will provide a path for economic development of all without continued subsidies.
Given these ten theorems and the accompanying axiom, all of which should be acceptable to a rationalist, we will now take a look at the precepts of various religions. To be sure, we will omit several precepts that the religions do have, but let us keep in mind that the original message of religions may have been altered or added to by theologians who may have misunderstood their own faith. I only claim that there is enough in each religion to find common ground between rationalism and religion.
Hinduism and Buddhism
It is worth discussing Hinduism first here, since it is perceived to be polytheistic. In actual fact, Hinduism is monotheistic and uses the name Brahman (sometimes speltBrahmaan
and not to be confused with Brahmin, the name of a communityto denote the notion of
Zen and the Art of Funk Capitalism
the one God. All other 'gods' in the Hindu pantheon are considered only aspects of the one Brahman. Modern Hinduism is actually a revivalist movement that began in the 8th century AD, before which Buddhism had largely replaced Hinduism in the Indian subcontinent. The founder of the revivalist movement was Sankara, who in the 8th century AD walked across the country explaining his interpretation of the near-extinctknowledge contained in the Vedas, an interpretation he named Advaita orNon-Dualism, which is the central concept in the Vedas. He set up four centers for scholarly research into the Vedas, which over the next 400 years were the driving force behind the Hindu revival. In the 11th century, however, Sri Ramanuja overturned the conventional Sankara interpretation of the Vedas and offered an entirely new way of interpreting the Vedas, which he called Visista Advaita or "A Special Theory ofNon-Dualism". The main difference was the definition of truth. According to Sankara, the concept of Maya means that material reality is an illusion and it does not really exist. Accordingly, he claimed that the concept of Brahman or ultimate reality was equated to enlightened human consciousness. God, or Brahman, was a human-likeentity, but one which any human could become one with through attaining enlightenment. Ramanuja found this interpretation entirely inadequate. He defines the word ‘God’ by saying "the material universe is the body of God." For the rationalist, this implies that saying "God exists" is no more adventurous than saying "material reality exists." For Ramanuja, Maya then refers to the fact that human interpretations of our perceptions are fallible. But despite the fallibility, we must assume that the material universe is real – i.e. we must have faith that the material universe exists, that 'God' exists. This corresponds exactly to the rational deductions we make using incompleteness, fallibility, and logic.
Zen and the Art of Funk Capitalism
Ramanuja went on to make various other interpretations of the Vedas using the twin axioms that the material universe is real, but our inferences are fallible. He explained the difference between vidya, or knowledge, and sat, or truth. Truth is what exists --the material universe. Knowledge is our interpretations of our perceptions of the truth, of reality. But each theory we have may be true -- sat -- or false -- asat. Holding a false belief is therefore described as avidya. To discriminate between vidya and avidya, Ramanuja recommended the tool of criticism or discrimination. He said that though 'God' -- the material universe -- was only one, it is not homogenous. In fact, God (reality) is infinitely variegated and the human brain is a device that in essence is one capable of perceiving differences. Words are what we assign to the perceived differences, and language evolves based on ever finer perceptions of difference.
The other major departure from Sankara's interpretations was in the interpretation of the Vedic phrase "Tat tvam asi" or "That! Thou art!" The post-Sankara mainstream of Hinduism interprets that to mean that the individual consciousness is God -- that consciousness precedes material existence. Ramanuja turned that on its head and said it just means that we as individuals also exist in the material world, and therefore we a part of God (material reality) -- we are not everything God is, but since we materially exist, we are a part of God. But human beings -- or any sentient beings that have a perception engine such as the brain and use it to develop language -- are surely a special or divine part of reality. Sentience is therefore something that has degrees -- even animals have a brain and perceive reality, but they do not have language. The ultimate degree of sentience is a being that realizes that they are using a brain and language and understands the relationship between reality (sat) and knowledge (vidya)
Zen and the Art of Funk Capitalism
about reality. The phrase "Aham Brahman" or "I am (a part of) Brahman/God" affirms the importance and uniqueness of sentience (chit) as distinct from the insentient (achit).
The Buddhist derivatives of Hinduism use the concept of fallibility to detach a person from material needs. But Hinduism reiterates in the Bhagvad Gita that though one need not be overly attached to anything, this does not mean that enlightenment will come through pure detached meditation. It is only by engaging reality and interacting with it that one can understand the truth of the fallibility of one's knowledge and will and the supremacy of material reality. Reading words and ignoring material reality is insufficient and can only lead to misinterpretations. One must exercise one's free and fallible will and see which of the things we will are consistent with reality and which ones have adverse and unanticipated consequences. Each person then finds a unique and personal path to enlightenment that is best suited for the experiences and situations faced by that person. But given incompleteness and fallibility, there may be many things that a person wills but is unable to achieve -- in the face of this, one can use the techniques of detachment to accept that reality has its own way and one might instead turn away from achievements and simply contemplate the many wonderful aspects of reality and nature.
In the face of fallibility, free will is also the method by which people can build a culture and society that is sustainable. Here is where the concept of non-violence -- ahimsa --comes into play. Actions that do not coerce another sentient individual do not have adverse consequences. Such non-coercive free actions that become popular and imitated form the basis of a culture, and a means to prosperity and richness in life. Conversely, any act of coercion against another individual has adverse consequences (adverse karma). Thus natural law (dharma) is based on the varied consequences of a
Zen and the Art of Funk Capitalism
ban on coercion. As society becomes more complex, new laws can be discerned by using the principle that coercion is what needs to be allowed, but free will must be given full reign beyond that restriction. But note that the law (dharma) is discerned from critically observing the nature of reality -- not decided arbitrarily by a fallible individual or group.
Judaism and Christianity
Turning now to Christianity, the key aspect for the rationalist reader is to see that Jesus was speaking of what he felt was the correct interpretation of Jewish scripture. That is, he was not negating that God/reality drove Abraham and Moses to speak what they discerned to be the truth, but simply saying that the popular interpretations at the time were incorrect in some ways. He acknowledged that it was the same God that he was speaking of. Now if we see that material reality is that 'God' then it is not irrational at all to agree that they were all talking about the same source of knowledge --material reality had always been there and was still there and would always be there and its basic nature had not changed and will never change.
The New Testament of the Bible is best understood as a set of theses written about what Jesus was talking about. Given that these were written by fallible human beings, one can expect that there are misinterpretations of what it was that Jesus was actually talking about. For instance, if material reality is what is meant by the term 'God', then it is not unreasonable to assert that God exists, and only one God exists. Many of the other phrases attributed to Jesus can also be reinterpreted using the concepts of material reality as God and human knowledge as fallible interpretations of perceptions of reality. The gospel of St. Thomas is one such source of phrases attributed to Jesus-- that this
gospel by one of the apostles of Jesus was left out of the Bible is one consequence of
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the difficulty that people faced interpreting Jesus' words. Didymos Judas Thomas was known as the doubting Thomas after all, so it is not unreasonable to assume he was the best critical thinker among Jesus' followers. His gospel contains some sayings that are in other gospels and others that are missing. Here are some of them with the rational fallibilistic interpretations:
Jesus said, "If your leaders say to you, 'Look, the (Father's) kingdom is in the sky,' then the birds of the sky will precede you. If they say to you, 'It is in the sea,' then the fish will precede you. Rather, the kingdom is within you and it is outside you. When you know yourselves, then you will be known, and you will understand that you are children of the living Father. But if you do not know yourselves, then you live in poverty, and you are the poverty."
Given the definition of God as the whole of material reality, this is a very obvious statement. The 'kingdom' of God' is not elsewhere -- it is everywhere within us and around us. When we know ourselves -- that our knowledge is fallible due to the nature of our brain, perception, and language -- then we will understand that we are part of reality (children of the Father). If we do not know ourselves -- if we think our opinions are infallible -- then it will lead us to many acts of coercion against others and ultimately ourselves.
Jesus said, "The person old in days won't hesitate to ask a little child seven days old about the place of life, and that person will live. For many of the first will be last, and will become a single one."
Again, the fallibility of knowledge is a lifelong fact. Yet since material reality is real, the perceptions of everyone, including a small child, are important and contains information
about reality. It behooves even the wisest man to ask the most ignorant what their
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opinions are. After all, those opinions are there because of the impressions created on that mind by some aspects of reality that the wise man may have missed. By asking and questioning, the wise man can find out ever more about reality/God.
Jesus said to his disciples, "Compare me to something and tell me what I am like."
Simon Peter said to him, "You are like a just messenger."
Matthew said to him, "You are like a wise philosopher."
Thomas said to him, "Teacher, my mouth is utterly unable to say what you are like."
Jesus said, "I am not your teacher. Because you have drunk, you have become intoxicated from the bubbling spring that I have tended."
And he took him, and withdrew, and spoke three sayings to him. When Thomas came back to his friends they asked him, "What did Jesus say to you?"
Thomas said to them, "If I tell you one of the sayings he spoke to me, you will pick up rocks and stone me, and fire will come from the rocks and devour you."
This is an interesting story of why Jesus may not have been able to speak as plainly in the logic and materiality that is commonplace today. The worldview of people in that region in those days was such that they may have simply gone insane hearing that reality was God. What Jesus may have been trying to do is speak about fallibility and materiality in terms that were well understood and taken for granted in that community at that time. He also is clear that it is not him that is teaching -- he is trying to say that reality will teach all those who accept it and engage it. Actions have consequences, and
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in living them out we will always learn the same lessons in every age past and every age to come.
Jesus said, "You see the sliver in your friend's eye, but you don't see the timber in your own eye. When you take the timber out of your own eye, then you will see well enough to remove the sliver from your friend's eye."
Again, this becomes clear when we consider fallibility. Until we recognize that our own opinions are fallible, we cannot remove any infallibilist illusion that our friends are suffering from.
Jesus said, "I took my stand in the midst of the world, and in flesh I appeared to them. I found them all drunk, and I did not find any of them thirsty. My soul ached for the children of humanity, because they are blind in their hearts and do not see, for they came into the world empty, and they also seek to depart from the world empty. But meanwhile they are drunk. When they shake off their wine, then they will change their ways."
The human mind finds it hard to absorb the lesson of its own fallibility. It is not interested in learning about fallibility. The brain is chemically addicted to knowing with certainty, and it does not listen easily to those who claim otherwise. People are in that sense drunk. When they awaken and realize the fallibility of their opinions, they will cease to coerce others.
Jesus said, "If the flesh came into being because of spirit, that is a marvel, but if spirit came into being because of the body, that is a marvel of marvels. Yet I marvel at how this great wealth has come to dwell in this poverty."
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This is a direct comment that reality precedes consciousness. When a person finally realizes that the material is primary and starts to study reality, including people, with humility, then it is surely a marvel. Yet we are unwilling to accept this basic truth and dwell in the consequences of the coercive acts that we justify to ourselves as necessary.
Jesus said, "The Pharisees and the scholars have taken the keys of knowledge and have hidden them. They have not entered nor have they allowed those who want to enter to do so.
This is a comment that attacks the institutions that spring up after anyone successfully preaches the consequences of fallibility. The priests who seek power convert it into an anthropomorphic god and place themselves as the knowers of true and infallible knowledge. They will not enter the enlightenment of fallible rationalism and will not allow others to either.
His disciples said to him, "When will the rest for the dead take place, and when will the new world come?" He said to them, "What you are looking forward to has come, but you don't know it."
This is again the denial of heaven as some place other than the material reality we are already in. We only need to realize it.
Jesus said, "Congratulations to the poor, for to you belongs Heaven's kingdom."
This is an insight that people who are poor know intimately that their knowledge is fallible and that material reality is real. Wealthy and powerful people do not easily recognize this because their will is often achieved, and often at the cost of known or unknown coercion.
Jesus said, "Whoever has come to know the world has discovered the body, and whoever has discovered the body, of that one the world is not worthy."
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Again, the assertion that discovery of the nature of material reality and our own physical and mental nature is true enlightenment. But it is thankless in a world of people who are drunk on infallibilist opinions.
Simon Peter said to them, "Make Mary leave us, for females don't deserve life." Jesus said, "Look, I will guide her to make her male, so that she too may become a living spirit resembling you males. For every female who makes herself male will enter the kingdom of Heaven."
This is a surprising bit of modern gender equality. A traditional woman could remain sheltered in false security of assuming her opinions are infallible as long as there was a man who protected her and remained vigilant to unexpected events in an uncertain world. But when women choose to become 'men', or in other words to shoulder the responsibilities one has to in negotiating an uncertain world on one's own, to take risks and still act without coercing others, then she becomes as enlightened in all respects.
There are many more parts of the gospel, and over time it ought to be possible to find an interpretation for many of them in the light of fallible materiality, and to dismiss some of them as the misinterpretations due to the all too human weaknesses of the writers. But there is sufficient similarity to suggest that experience in the real world was what led the Jewish and Christian prophets to say what they did in the context of their times. The definition of the word 'God' as material reality itself brings rationality to vast tracts of mystical writing.
Turning now to Islam, we first need to decide which of the writings to look most closely at. Islam has two primary sources of knowledge -- the Koran, which is the word of God
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as spoken to Mohammed, and the Hadith which is the narration of the life of Mohammed as told by various priests after Mohammed's death. Clearly, as in the vedic and biblical analysis above, we can expect many mistakes and coercive intrusions of fallible human opinion in the Hadith, and can therefore focus on the words that Mohammed claimed were of God/truth/reality. But it is also true that the Hadith contains many wise sayings. But even a faith-based logic dictates that in order to infer which of them are correct and which incorrect, one would have to critically examine them and eliminate any that contradict the core words of the Koran itself. Indeed, in all the Muslim countries prior to the invasion of Crusaders from Europe, there was freedom of worship for all faiths, free debate on all issues, due process in law, and respect for individual freedom. Faith in the Koran was expected only by choice and not by force.
The central tenet of Islam is the same one as fallibilistic rationalism -- i.e., that human knowledge is fallible. The reasoning from there leads to all the same conclusions of modern liberalism that we discussed in the theorems at the beginning of this essay. The Koran contains many exhortations to retain faith that God's will (reality's 'will') is what is true and individual will is fallible. It says that those who persist in infallibilist illusions will come to a bad end. But like any religion, and especially after the trauma of massive and bloody invasions from Europe in the Middle Ages, power tends to get usurped by priests who would be dictators and who imagine they have infallible knowledge. With Islam, it is ironical that they hold up the very book that emphasizes the fallibility of the individual while asserting that their word is law.
The second plank of Islam is the emphasis on ethics. It is not considered permissible for a Muslim to act unethically. Now, the issue is reconciling this second tenet of Islam with its first, namely, that knowledge is fallible. If one goes by the Hadith which currently
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includes both wise and foolish statements, and conclude that only life in full accordance with the entire Hadith is ethical, and all other acts are unethical, then we would be relying on the words and actions of fallible men rather than the word of God as per Mohammed. Indeed, there are Hadith reform movements in modern Islam that are active all over the world. But like the other religions and modern liberalism, Islam concurs that coercion of any individual is unethical. This definition of ethics as full freedom of action other than coercing other individuals is one that is compatible with all religious “words of God” and yet can be justified purely rationally as well. Islamic law in the Middle Ages was extremely cognizant of fallibility and was faithful to presumption of innocence and due process for all. Modern nominally Islamic dictatorships are actually not in line with either of these two basic tenets of Islam and its dictators are possessed by their own infallibilist illusions -- in Islamic terms they are in the grip of the devil and not God. The third plank of Islam, like Christianity in some respects, is the absolute necessity for basic welfare. Abject poverty is considered completely unacceptable and against everything that is holy. But while this is achieved through charity in Islamic societies, it also leads to a concentration of power that can distort the market discovery process. With the alternative of food stamp loans run by a democratic government, as suggested in this book, the same outcome of basic welfare can be achieved along with a preservation of competitive discovery of ever more productive techniques.
One of the aspects of Islam that is relevant to modern liberalism is its treatment of banking. It holds that banking with unlimited liability of the borrower is unethical. Instead, an aspect Islamic banking called 'salam' allows a form of lending that attaches particular asset collateral. The risk of default is then carried by the named asset alone, and not the entire savings and assets of the borrower. For instance, a farmer can sell part of next
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year's crop at a discount to the expected market value of the crop. If the crop fails, the creditor must absorb the loss. This is identical to the modern asset backed securitization market in banking. If a homeowner defaults on a mortgage he will lose the house, but will get any extra proceeds from the sale of the house after paying back the lender. Asset backed lending, as discussed in the main section of this manuscript, is therefore completely compatible with the tenets of Islamic banking ethics, and in fact was practiced throughout the Muslim world even in the days of Mohammed. And as discussed in the book, asset backed banking is data driven rather than relationship driven -- anyone meeting the criteria will get the loan, not just the cronies of the individual banker. This discretion of an individual banker is the main source of unethical behavior in modern banking, and its decline actually increases the safety of the banking and monetary system by using data to ensure that the quality of loans made is high.
The last remaining aspect of Islam that is relevant to this discussion is education. Education is highly valued in Islamic countries. In the early days of Islam before the Crusades, education was liberal and allowed dissenting views, debates, and participation of scholars from all faiths. Muslim countries were the ones who preserved the Greek classics of Socrates, Aristotle, Plato, and the others. Without this preservation, and its retrieval by secret societies from among the Crusaders, the Western Enlightenment and the resulting liberalism and scientific progress could never have taken place. But in order to retain an education system that constantly questions conventional wisdom and seeks out ever better theories of reality, competition is essential. The system of securitized education loans that are traded publicly therefore is the one that would be consistent with the central tenet of fallibility in Islam. Education loans too are essentially asset-backed loans, where the asset is the knowledge that is
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imparted to the individual. If the knowledge were good, then the person would be able to earn enough to pay back the loan. Otherwise, the creditor would have to bear the loss. Since the responsibility for loan quality is on creditors who are successful competitors, quality of loans will be higher because they are in a better position than the ignorant student on which training courses to fund.
Thus the central tenets of Islam of fallibility, ethics, welfare, ethical banking, and education are all tenets that are compatible with modern liberalism. Combined with the discussions of material reality as God in order to make sense of religious writings, and the insights of other religions from Hinduism to Christianity, there is a compelling case for modern rationalists to understand religion in a way that was for a long while unthinkable. By creating a connection between ancient wisdom and modern science, it then becomes possible to reconcile the misunderstandings that have caused numerous unnecessary wars and much injustice.

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