Intrinsic Valuation

The Banker and his Wife
Quentin Metsys, 1514

According to professor Damodaran, the intrinsic valuation of a business is the “expected cash flows on the asset over its lifetime and the uncertainty about receiving those cash flows.”

The professor calls this, “discounted cash flow valuation.” What’s something that cannot be analyzed with this model? Things that don’t generate cash flows – ie. a painting, a good book, anything whose value is depending on the beholder. There are two ways to come up with a discounted cash flow valuation:

  1. By looking at the expected cash flows and adjusting for risk across all possible scenarios and summing it up. All scenarios means all possible values for risk that the company might face depending on different scenarios. In other words, you are taking the cash flows and adjusting for different risks.
  2. The other scenario is by having a fixed risk and adjusting for cash flows. That is, take different cash flows across time and use the same risk premium.

These can be expressed as such:

Value of an asset =  ∑ E (CFn) / (1 + r )n

Value of an asset =  ∑ CE (CFn) / (1 + rfn

Where E * CF is Expected Cash Flow, r is Risk, CE is Certainty Equivalent Cash Flow and ris Risk Free Rate.

This has a lot of common sense. What is the value of a business that never returns a positive cash flow? zero. Likewise, the value of a business that returns a large cash flow, and conserves a small amount of risk, is likely to be very valuable. A company like Apple comes to mind.

Now, how can we go about valuing companies based on these principles? We can look at their financial statements, specifically at their assets and liabilities.

Assets include investments that the company has already made, and assets that the company hasn’t made yet (this represents the expected growth potential that the company will have in the future). Companies in different stages of growth will have differing levels of asset classes. For instance, P&G will have a lot of investments made, but perhaps won’t have as much growth potential as say, Tesla.

Liabilities represent how a business must fund its operations. It can do it by using its own money (equity), or taking a loan (debt).

 


 

Here’s where we face a fork in the road. There are two ways to value a business, either by valuing their equity, or by valuing the entire business. Simply put, equity valuation is concerned with the cash flow that is returned to its investors. In public markets, this would be dividends (though the professor shows that you can measure a company’s equity value without dividends via their potential, future dividend).

Valuing the entire business takes a broader view by looking at the equity value and the liability value for its lenders, taking them together and calling it, Cost of Capital. You then discount the cash flows to the business at the Cost of Capital and get the value of the entire business.

So we conclude with two ways to value a company. We can value directly the equity of the company and adjusting it for risk, or get the value of the company via the cost of capital and subtracting debt.

First steps in valuation

Valuing companies and taking a calculated risk by investing in them is the basis of a value investor. Although my knowledge in this area is sparse, I’ve found NYU professor, Aswath Damodaran to be enlightening, funny, and sane in his approach to valuation. I’ve posted a link to his website where you can find resources and videos from his Corporate Finance course. What he’s doing is outstanding: creating free content available to all from one of the foremost institutions in the world. Our accident in living in this century where information overflows and overwhelms is a happy blessing! I’ll be taking professor Damodaran’s class, and hopefully advance my knowledge of valuation so I can apply it to my own stock pickings.

Website: http://pages.stern.nyu.edu/~adamodar/

Valuation course: http://pages.stern.nyu.edu/~adamodar/

The more things change the more they stay the same

The title is a direct quote from the initial credits of the 2008 video game, Call of Duty Modern Warfare 2. No kidding. If my patient readers haven’t left the building already, I’d like to elucidate why I believe this rings particularly true with the younger crowds today when it comes to social media.

We, as a species, have been around for about 200,000 years. Agriculture started 10,000 years ago, the industrial revolution ~250 years ago and the first iPhone just over 12 years ago (now I feel dated).  Since then, Silicon Valley companies have hijacked our brains in a way never before possible, by creating algorithms and machine learning models that target our dopamine receptors in a very focused way. Just like the food we have available today, our bodies are not adapted to consume this kind of content. We drown in the good feelings it produces and keep asking for more.

And who doesn’t like that pleasuring vibration that comes from our phone every time somebody “likes” our picture? Who doesn’t enjoy the feeling of hitting “post” and appreciating it like a fresh batch of homemade cookies? The author of this post certainly did! What’s wrong with having our vanities praised in the presence of all to see? What’s so bad about clamoring for attention and obsessively coming back to your phone every 10 minutes to see how many more notifications of likes and comments are being made from your latest vacation trip photo album?

Like Icarus, we fly too high and get burned by the sun.

Now. I am an Econ major, I like to think of things in terms of supply and demand, opportunity cost, and the like. If you give me these sets of facts, my reaction to it would be, “If it’s so bad for people to stay on social media, where’s the incentive for people to get off of it?” The answer is quite complicated, and I haven’t fully understood this question. However, I would briefly like to sketch an answer from the perspective of relationships.

The incentive that social media provides is convenience. It’s easier to text someone than to call them, or even visit them. Some might even say it brings them closer to each other -which might very well true, but that’s not necessarily the experience of the majority of people, I’d wager. The side effect of the convenience social media provides is isolation.

Now that we don’t have to be close to one another, we can be all in our little holes, away from the awkward interactions, inconvenient conversations with smelly, vulgar, strange people. Away from one another, we lose touch of one another. And we drift further apart. The end result is millennials being the most socially isolated generation ever recorded, with the least amount of friends and suffering the highest percentage of mental disorders (according to a 2018 Intergenerational Foundation study).

I don’t think this is a secret among by colleagues.

Gathering from the almost 10 years of my personal experience in trying to create community form scratch, I think I have the answer to this plague, and I have boiled it down to a few key principles that I’ve seen in Church groups, college clubs, sports events, community service groups and countless other units.

The answer is coming up soon so stay tuned.

The Storm

This poem is inspired by the story of Jesus calming the storm present in the gospels (See Mark 4:38-40). There’s a wondrous beauty in how the creator of the world once again speaks to it, and creation obeys. Jesus’ humanity is present throughout all of this scene, and it’s humbling to think he had to endure the same discomforts we do when faced against the elements. Finally, I take to heart the tiny fishing boat as a metaphor for our own soul, and how it battles through the storms of life, with us (the disciples) frantically trying to hold it together. Meanwhile, Jesus is at the stern, asleep –always with us. Sometimes we just have to reach to him to witness His power over our lives.

 

Clap of thunder strikes, winds howl fierce in the dark,

Mountains of water rise, fall from on high and crash.

Swaying side-to-side is the tiny craft of rotting bark,

the fishing boat that carries my precious Lord,

his eleven friends all aboard,

and twelfth who gave him up to sword.

Peter’s curled up in the hull, immovable as stone,

Thomas cries up to heaven, having lost all hope,

Tired, Mathew reefs the main, cold to the bone

James and John descend to the stern,

Asleep on a cushion rested Jesus all alone,

“Master, don’t you care we will die?” they cry.

The word made flesh stirred and rose,

But the waves smash the craft

and throw the King on his back

to the dirty, flooding hull.

Three times he rises—now behold:

Exposed to the ocean’s spray,

The voice that spoke from the beginning

Calls out to the winds gently singing,

“Quiet! Be still!”

The ocean blushes, the winds are shamed,

All is still, being bows and is contained.

loving eyes that see through worlds,

turns to His friends and tenderly asks,

“Why are you terrified? Do you not yet have faith?”

“Lord,” Peter replies, half relived and half aghast,

“The winds were too strong, we would have died,

Why didn’t you quiet the storm before our toil,

When you heard us start to cry?

“My hour’s not yet come, don’t be afraid,

the debt of death is yet to be paid.”

Linear Time in an Eternal Mind

Rushing waters, marking time,

visible to all, yet mystery sublime.

What are the eons to Him Who Is?

What is a second for Him Who sees?

On and on time runs its course,

shattering all with mighty force.

Great kingdoms are reduced to dust,

Towers of pride evaporate with the gust.

Time flattens mountains, dries up oceans,

Blows up suns and ends all motions.

Star-dusted nights with millions,

Are merely a tiny, fragile pinion,

In His mind’s eye, which delights!

What is time but a sign of our smallness?

Who dares to understand its crystal flawlessness?

Beings of time we are, but not for long.

Eternity is waiting, so stay strong!

 

“The river of time” is a common way to think about the passage of time. We commonly think of things occurring linearly-one things lead to another, which leads to another, in a typical cause-and-effect fashion. Unfortunately a conundrum presents itself when we start asking about this linearity’s relationship with foreknowledge and destiny. A question I recently asked myself was how God, having the Christian attribute of omniscience, can have foreknowledge of our decisions? Wouldn’t that conflict with the orthodox premise that we all have free will?

Now, some strict materialist will say there is no such thing as free will, to which I’d reply, that your assumption is itself a manifestation of your free will in believing in such nonsense!

Back to my main point, if God already knows what each one of us will do, wouldn’t that suggest that we’re not really in control of our own actions, and hence, that we don’t have  free will?

I can’t put my finger on who exactly came up with the idea first, but having read Boethius’ The Consolation of Philosophy and St. Augustine’s Confessions, it seems to me that these two extraordinary men arrived at the same conclusion independently from one another: that time (past, present, future) is seen in an eternal present by God, and His actual knowing of what things are to come do not actually interfere with our capacity for free will. Let’s re-trace the steps to see how this can be so.

God, if we are to assume he’s the highest possibility of being, must be eternal. If He (please note that the pronoun is not of concern here) were not, then God would be changeable, finite, and therefore not God. So He must be eternal. As you could probably imagine, an infinite being will see a time-anchored world differently than we’d see ourselves. An ant might see a mountain before it, but to us it’s merely a small stone. Imagine how much more God sees if he has infinite omniscience!

Where were you when I founded the earth?
    Tell me, if you have understanding.
Who determined its size? Surely you know?
    Who stretched out the measuring line for it?
Into what were its pedestals sunk,
    and who laid its cornerstone,
While the morning stars sang together
    and all the sons of God shouted for joy?

Since God is eternal, He sees past and future as an eternal present. God knows what we’ll do, he knows what our decisions will be, not because he actively intervenes in it, but because he sees us taking those actions across the spectrum of time (future and past), all in an immediate present. For example, let’s say I decide on a spur of the moment that I would like to go to the pool. God already knew that. God knew I was going to make that decision, that I was going to the pool, and that I would make myself dinner after. What if I decided instead, however, that I was not going to to the pool. God would still have known that. It’s futile to imagine a life where God doesn’t know what each person’s decisions will be. Even if we “rebel” against God and insist that we are independent of his all-knowing mind, God will know. This is not because God guides our wills like a puppeteer guides his marionettes. As Boethius put it, God doesn’t have so much fore-knowledge as forth-knowledge -everything happens in front of His eyes, in an eternal present.

From this divine perspective, I would like to materialize into words what I believe can be very beneficial for our own flourishing; an idea inspired by how God sees our finite universe: vertical time. If time is usually thought of as linear, with one direction and a single trajectory, vertical time brings out another dimension and extends time outward into the timelessness. This is all a bit strange so allow me to elaborate.

Consider our communication with the timeless -that is, prayer. Prayer extends outwards into eternal heaven, where it’s effects would no longer be tied to a specific point of time which it was initially offered. If you had prayed for the souls of sick people, not only would you be affecting future souls, but, because of the vertical dimension that prayer has, it affects past, present and future souls as well. Your prayer request at a single moment of time, by virtue of its ability to transcend vertically from the linear stream of time, can affect ALL time.

If you think there are other things that transcend to vertical time, feel free to comment below and of course, subscribe.

Where Middle-Earth Began

When mighty Beowulf took hold of Grendel with his bare hands, the demon proclaimed, “Nowhere on middle-earth, I realize, have I encountered a grip like his.” This passing reference being to the imagination of the middle ages as our world being in a middle-state between hell and heaven; between the time its savior was born, and the date He was to Come. An interesting allusion, no doubt, to the world that Tolkien would later create.

Traces of Middle-Earth and the mythology of The Lord of the Rings are scattered throughout Tolkien’s life. Like a forensic investigation, bits and pieces that evidence his genius have been found in obscure works from his earlier years. Such as when he wrote on the back of a paper the line, “In a hole in the ground there lived a hobbit” (This of course, was how The Hobbit started). Or his creation of the children’s character Tom Bombadil in 1934, who would later play a minor role in The Fellowship of the Ring twenty years later.

In 1914, when storms of war ravaged Europe, a 22-year-old Tolkien wrote the following lines of a poem which seemingly come out of the blue, “The Last Voyage of Eärendel.” There’s no character except Eärendel, and we get no sense of who he is or where he came from (in the Silmarillion, he will become the father of kings). The image above is a scene from the Silmarillion, where Eärendel (or Eärendil) is flying in his ship to battle against Ancalagon the Black, the greatest dragon who ever lived, armed with the brilliant light of a Silmaril stone.

From this curiously isolated poem in the early years of Tokien’s life, there appear immensely important themes that The Silmarillion and The Lord of The Rings would later evoke: light vs darkness, fantastical landscapes, attention to aesthetic, references to ancient peoples, crafts and legends. At face value, it’s a beautiful poem that is open to interpretation. On a deeper level, it is a mirror from whence we see our soul, and puts the question of whether we will ever have the courage, like Eärendel, to fly against the darkness within, emerge victorious, and become eternally renowned for it.

Eärendel arose where the shadow flows
At Ocean’s silent brim;
Through the mouth of night as a ray of light
Where the shores are sheer and dim
He launched his bark like a silver spark
From the last and lonely sand;
Then on sunlit breath of the day’s fiery death
He sailed from Westerland.

He threaded his path o’er the aftermath
Of the splendour of the Sun,
And wandered far past many a star
In his gleaming galleon.
On the gathering tide of darkness ride
The argosies of the sky,
And spangle the night with their sails of light
As the streaming star goes by.

Unheeding he dips past these twinkling ships,
By his wayward spirit whirled
On an endless quest through the darkling West
O’er the margin of the world;
And he fares in haste o’er the jewelled waste
And the dusk from whence he came
With his heart afire with bright desire
And his face in silver flame.

The Ship of the Moon from the East comes soon
From the Haven of the Sun,
Whose white gates gleam in the coming beam
Of the mighty silver one.
Lo! with bellying clouds as his vessel’s shrouds
He weighs anchor down the dark,
And on shimmering oars leaves the blazing shores
In his argent-timbered bark.

Then Éarendel fled from that Shipman dread
Beyond the dark earth’s pale,
Back under the rim of the Ocean dim,
And behind the world set sail;
And he heard the mirth of the folk of earth
And the falling of their tears,
As the world dropped back in a cloudy wrack
On its journey down the years.

Then he glimmering passed to the starless vast
As an isléd lamp at sea,
And beyond the ken of mortal men
Set his lonely errantry,
Tracking the Sun in his galleon
Through the pathless firmament,
Till his light grew old in abysses cold
And his eager flame was spent.

— The Book of Lost Tales, Part II.

 

Poem is copied from The Warden’s Walk. Art courtesy of Manuel Castañon.

What have we forgotten?

Power corrupts. Absolute power corrupts completely

So goes the saying. When I think of “absolute power,” I think of kings of the medieval ages, or of infamous dictators who made explosive speeches in front of thousands. When I think of absolute power, my modern mind tries to grasp the concept of being stripped of my freedoms completely, and see it in the most physical (and terrifying) way possible, in the cruel punishment of physical bondage.

But evil is more slippery than that. As the saying goes, the road to hell is paved with good intentions. Like the best superhero movies, the villain is not always so obvious; he is a mix of both good and evil, a hybrid of our worst nightmares and greatest desires. But ultimately evil.

In his ground-breaking book, Why Liberalism Failed, Notre Dame Professor Patrick Deneen points to the all-reaching tentacles of Leviathan, that great, all-seeing state figure with absolute power, to the Liberal State. What is the “liberal state”? It is the state that has the protection of the right of individuals as its highest ideal, and thereby justifies any and all means necessary to enforce this. This is all really good. We all have rights, we should be able to do whatever it is that we want to do, right?

You can. But there’s a catch.

If people were to do whatever it is that they wanted, we can assume that a portion of these citizenry will not be complying with the law. The executive branch therefore, has to entrench itself in society in order to root out those that are not complying with the law. Lets put this in a tangible example.

Suppose John is a very kindly man who likes to wear a really really tall hat. He wears it everywhere, while at work, while going out and even at home. He really likes his hat. Everywhere he goes, doors are tall enough that allow him to enter without tipping his hat. Now suppose John goes one sunny day into a coffeeshop and -gasp!- his hat gets tipped! John is furious with the coffeeshop owner. He feels extremely embarrassed and goes to court with the case that the coffeeshop owner should have taller doors to allow him to enter without tipping his hat off.  The judges agrees with John’s request, and orders all doors in the state to be tall enough to allow John to enter without it tipping his hat. John is now very happy, but the store owner had to pay a steep price to accommodate the height of John’s hat, which never again graced that coffeeshop.

Now this might seem like a silly example, and it is, except that similar circumstances have indeed happened in the last few years like this -where the individual appeals to the large federal state in order protect his/her individual liberty. If you multiply this many times over, across a large population, the government will have to become extremely massive just so that it can enforce all the little rules and regulations and rights that its citizenry is asking for. As Professor Deneen writes:

“The result is the systemic rolling blackout in electoral politics, governance, and economics, the loss of confidence and even belief in legitimacy among the citizenry, that accumulate not as separable and discrete problems to be solved within the liberal frame but as interconnected crises of legitimacy and a portent of liberalism’s end times.”

In order to protect all the rampant “rights” of its citizens, the government ends up betraying them. This lends the government enormous, totalitarian power. The great insight of Professor Deneen was therefore in realizing that, “Liberalism has failed because liberalism has succeeded.” Whenever a philosophy goes against the natural inclinations of a society, the more suspicious we should be of it. A community seeks unity through friendships and the mingling of bloodlines. An absolutist state seeks the same through the dissemination of propaganda and “re-training classes”. A community will engage in warfare for political or economic reasons. An absolutist state will engage in it as a matter of ideological principle.

We must not be lured by ideology which promises everlasting peace and prosperity for all. We must not fall prey to those who say, “the government will take care of it!”, or, “the only way of achieving this is by socializing it!” (that is, through the imposition of high taxes and re-distribution at the state level). People who say such things are not being mindful of the millions of souls who paid the ultimate price because, they too, wanted to see a world of goodness but donned that responsibility to the state instead of their own selves.

To close, it might be well to finish with Tocqueville, who described the American people as a society who, “do more to honor their philosophy than to themselves.” Indeed, let’s think about how we can become better as individuals before trying to make everyone as a group, better.

 

Passionless Passion & Wild Tranquility

One rainy, autumn day, I came home and felt a greeting. There was no one in my apartment. It was all silent and still, except for the falling rain and rustling of the pines. And yet, I felt a greeting by that same silence. An invitation akin to a dialogue you’d have with someone else. This “other” being my own self.

Through interior reflection, I have recently discerned a growing desire to learn about the nature of silence, and the ways which my life should be more conducive towards it. As a technologist and constant learner, information is almost always flowing though my mind, forming ideas and thoughts, compelling me to action. As such, I grow restless, and in that restlessness, more thoughts and ideas prop up, repeating an endless cycle of noise.

In his Pensée, Blaise Pascal wrote that, “all of humanity’s problems stem from man’s inability to sit quietly in a room alone.” How often have you found yourself like this? How often do we find ourselves fiddling for our phones or seeking something to get distracted with? The way I see it, our society has devolved into a utilitarian economy, where people derive meaning from how much they produce, and accumulate. I am no exception. I too have dwelt in these false notions of functionalism and activism, in the sense that I only derive my self-worth from how much I create.

The fact of the matter is this this is not a Christian way to see the world. St. Thomas Aquinas tells us that God is ipsum esse substantium, the very act of being itself. God just is. That’s why in Exodus He reveals to Moses His name as “I am who I am.” Being as we are, that is, being in silence, takes effort. There’s a struggle in our minds and hearts when we find that there’s nothing else to do, when we’re bored, when we feel that we’re lacking in attention.

One morning I went out to eat brunch with my sister and as soon as we sat down I scrolled through my Twitter. To my chagrin, my sister quickly took my phone with the same disdain as a parent would take a fragile object from an infant’s hand. Immediately I felt annoyed and felt compelled to ask for it back, but then I saw her put my phone alongside hers at the edge of the table and looked at me with inquisitive eyes. That’s when I got it. I was acting out an addiction to noise, failing to see that in the silence between us siblings there’s the calming notion that we currently are, and are sharing time together.

Let’s dive into the deep quiet of ourselves. Let us plunge into that dark desert, unexplored, endless by its very nature. We may find hidden within it our precious Creator, waiting lovingly for us to call. This cannot be accomplished through an emotional experience,  inspiring talk or riveting speech; but instead in a quiet place, with a searching attitude, away from the horizontal dimension of time and instead unto one that transcends vertically to the world beyond.

In the words of Fulton Sheen, “God will take anyone who is willing to love, not with an occasional gesture, but with a ‘passionless passion,’ a ‘wild tranquility.'” In other words, within the Silence of our hearts.

 

Bluegrass with a Heavenly Twist

When I first heard The Hillbilly Thomists, I recalled the words of GK Chesterton echoing in his smoky Beaconsville office, towering above me with his enormous gut of jolly while declaring, “it is the paradox of history that each generation is converted by the saint who contradicts it most” (6). Indeed, it was St. Francis’ stark poverty in contrast to the opulence of the church that gave rise to a great order of mendicants, and it was St. Thomas’ heavenly metaphysics that has inspired generations of scientists from succumbing to materialism. Today, we have The Hillbilly Thomists’ first album as a powerful counter-cultural force to modernity, pitting the old world of banjos, bagpipes and drum sets into the new millennium, and the result is a joy to hear!

The album begins with “Leaning On the Everlasting Arms” a glorious ode to living a life solely dependent on Christ. Right from the start, the song bursts with toe-tapping energy, solidly carrying the message of fellowship and peace into the bluegrass genre. Half-tuned violins fill the melodies with excited riffs, accompanied by that distinctive, vocal sound of Kentucky bluegrass. “Angel Band” slows down the tempo with its sparkling guitar accompaniment, while Gregorian chant-trained Dominicans add a touch of the divine to an otherwise earth-scented genre.

hbt-album-cover-front-e1512851990437

Doesn’t this make you wanna rock a banjo?

This ragtag group of preachers has made new recompositions of old songs, while creating new ones such as “I’m a Dog.” This original composition was written by the band’s lead vocalist, Br. Justin Bolger, formerly a professional singer and songwriter before entering the order of the Dominicans. The “dog” of course, being a reference to the popular symbol of the Dominicans as a dog with a torch in its mouth, spreading the good news of the Lord to all lands in faithful friendship with his Master. The lyrics (as they frequently do throughout the album) convey the paradoxical message that life is short and passing, yet it’s most well-lived by giving it away: “Making noise while I got time / Spreading fire while I got earth.” There’s no trace of melancholy or sadness in this sacrifice —it’s an exuberance that can only be described as child-like in sincerity.

My favorite song however, would be “What Wondrous Love Is This.” It asks the impossible question of why our Lord suffered such a terrible death for us, who are insignificant and imperfect: “What wondrous love is this that caused the Lord of bliss / to bear the dreadful curse for my soul / for my soul.” But the song never gives an answer to this question. It’s reminiscing of God’s answer to Job: “Where were you when I founded the earth? / Tell me, if you have understanding” (Job 38:4). The song goes through one last, short chorus (“Through eternity I’ll sing on”) then breaks away into an epic 3-minute banjo and violin accompaniment. Drums beat steady and strong, while strings ring in vibratio, as if they tremble at the existential question that has been posed. All in all, the album conveys the energy of a soul’s heroic journey through life, asking this same question but never being provided a direct answer, because it’s impossible…In the meantime, all we can do is “sing on” in praise of such “wondrous love.”

Works Cited
Chesterton, G. K. Saint Thomas Aquinas. Image Classics. 1974.

Should we be polite with our AI machines?

The short answer is no. You don’t have to say, “I’m sorry to bother you” to your iPhone before unlocking it, just like you wouldn’t have to excuse yourself to a dog before you go to the restroom, and even less if it were a sad cactus in your home office. The long answer however, reveals something incredibly unique about our human nature and civilization itself.

I was mindlessly scrolling through my Twitter feed as the social media overlord has instructed me to do, when I came across Chaim Gartenberg’s article on The Verge that debated whether we should say “thank you” or “please” to our AI gadgets.

My first instinct was to think this ridiculous; but then I started remembering all those times I would say “thank you” to travel website chatbots, Siri, Cortana and God knows how many more AI devices out there.

Like Chaim, I’m only polite as a habit. But then it got me wondering: as AI improves should we start being actually polite with our machines? There’s already a religion dedicated to it (founded by ex-Uber engineer Anthony Levandowski), does that mean we’ll all have to pay our respects to these super-smart machines in a not-so-distant-future?

Just so we’re all on the same page, Politeness comes from the latin word politus, meaning refined, elegant. Right from this definition, we can sense something different about politeness in people vs machines. You can certainly program a chatbot to be polite (I do). But that’s all the AI does: it acts on the parameters from which it has been programmed. I myself have to make an effort to be polite —I can forget, be lazy or simply not want to. A sufficiently advanced AI could observe how people behave with one another and emulate that behavior. Thus it would be learning to be polite from “experience.” With the addition of reinforced learning, it could know with whom to be polite and how to polite to be, depending on the person with whom it’s interacting with.

But could the AI actually learn politeness? Can it come to the conclusion that it should behave with reverence towards a person?

I don’t think so.

Being polite with someone else marks the person by distinguishing him/her with status. More than status however, it sets the person apart from the unconscious savagery of humanity and instead lifts the person into the realm of civilization. Voltaire erred in believing that, left to his original, uncivilized state, man would flourish and evil would dissipate. Nothing could be further from the truth. Leave a man to his “natural state” and he will rape, steal and kill his way into survival. The very fact that humanity developed civilization was to escape from this inner savagery. By being polite, we do the opposite: we give reverence to the other person, show a civilized fear, acknowledge their dignity. To have an artificial intelligence come to the understanding that a person has God-given rights, with an infinite value that cannot be grasped, is impossible.

Program your AI’s however you’d like; interact with the machines however you deem; but don’t expect that the machine will behave just like you, because it is not you. It’s a machine.