13 January 2017

The Real Story Behind Trump's Adulation of Putin (and why golden showers is a generous explanation)

Trump has been critical - even dismissive - of Reagan and George W. Bush, Obama and Clinton. Meanwhile, he's had nothing but good to say about Vladimir Putin. Trump's Secretary of State nominee, former Exxon CEO Rex Tillerson, challenged China's claims on the South China Sea in a way that led China's state controlled media to warn that this would led to war between the US and China. War. Mexico's peso has dropped since Trump's election. Trump has never said anything good about the Chinese or Mexicans or tried to appease them. Trump has had only good things to say about Putin and the Russians. Only good. The contrast between how he talks about American leaders and Russia's leader, between how he deals with China and Mexico and how he deals with Russia, could not be more stark.

So why does this matter? Isn't it true that it would be good for the US to get along with Russia, as Trump says? And isn't it an asset that Putin likes Trump?

In fact, it is alarming that Trump is so enamored of Putin.

First of all, Trump has expressed envy for Putin's ability to jail and kill political opponents and critical journalists. You might argue that there is no way that Trump can imitate Putin's dictatorial actions here in the US and I'll say that the very fact that he leans in that direction guarantees that he'll do things no recent president has done. But there is a deeper reason to feel revulsion towards Trump's adulation of Putin.

This is most succinctly captured in the Ukraine's situation.

Eastern Ukraine shares a border with Russia and many of its values. People there watch TV, are fond of strong leaders who don't confuse them with debates and subtleties, they're afraid of the disruption of capitalism and foreign trade and they distrust liberal values that challenge their religion, homophobia and misogyny.

Western Ukrainians aspire to become more integrated with Western Europe, are on the internet, like grassroots movements with all their chaos, uncertainty and debates, yearn for open markets and trade, and prefer science and minority rights.

Putin clearly wants the whole of Ukraine to again be under his influence. He's already invaded the Crimea, claiming that he has a right to do that because people there like him better. In July, the same month in which he won the Republican nomination, Trump stated that he would recognize the Russian "annexation" of Crimea, leaving the invasion unchallenged. A month later, the Trump team made only one change to the Republican platform, leaving everything else untouched. Their only change? They removed a pledge from the Republican Party to provide military assistance to the Ukrainian government against the rebels in the East, rebels supported by Putin.

Trump is doing everything Putin would want while continuing to praise a man Marco Rubio recently suggested was a war criminal (citing not only the massive number of civilians Russian bombs have recently killed in Syria but the 300,000 citizens Putin killed in Chechnya years ago). I actually think the notion that he's doing all of this because the Russians are blackmailing him over sexually compromising videos is one of the more generous interpretations of why he's so enamored of Putin. For people who really like the West and its direction over the last 500 years, the idea that our new president shares their appreciation for Western values but doesn't want people to know about his sexual perversions is a better explanation than that he thinks more like Eastern Ukrainians than Western ones.

I don't know if the Russians are blackmailing Trump. I think it's scarier if they are not, if the real explanation is that Trump truly prefers Putin's model of governance to that of Reagan, Bush, Clinton and Obama's. He's already shown contempt for a free press that would challenge him and expressed an on again, off again desire to "lock up" the woman who dared to run against him. He's got a narcissistic personality and sense of himself as uniquely special; these two qualities alone make him more like dictators than the traditional American president.

Will we ever find out whether Trump's actually being handled by the Russians? That outcome would actually make me feel more relieved than what I currently suspect: Putin doesn't have to do anything but be Putin to win Trump's admiration and friendship.

There is a Japanese proverb that translates to, "When the character of a man is not clear, look at his friends." Out of 200+ world leaders, Trump has already made it clear which one he feels a special affinity for. That should scare everyone more than sexual perversion.

05 January 2017

Huston Smith, Religion, and What's Just Made Up

Huston Smith died Friday at 97. He authored what became the standard comparative religions textbook (it sold about three million copies), The Religions of Man. He was born to Methodist missionaries and died a Methodist even while studying, and then incorporating, practices from Buddhism, Islam, and Hinduism.

I think it was Bill Moyers who asked him how he could be so accepting of other faiths and yet still be a Methodist. I don't remember his precise answer but essentially he said, "If I studied languages I would - at the end of the day - still come home and speak English with my wife. We can acknowledge the fact that people communicate in other languages but we still have to choose one language to speak." Another way to put this is that it makes sense that people make sense of their lives in other ways but we have to make sense of things in a way that still makes sense to us. If that makes sense.

In the UK, their wonderful health care system has made huge progress in the battle against a variety of diseases and health conditions. It's led to a curious situation. Now, the leading cause of death among men under 49 is suicide. Having protected their population from outside attacks, they find themselves vulnerable to attacks from within.

There are a number of reasons one might commit suicide but surely a chief one is a crisis of meaning.

Here is the funny thing about the meaning of words. Look up the definition of a word and what do you find? Other words. The meaning of one word is expressed through other words. It would be a really bad dictionary if you looked up the meaning of, say, car and it said, "A car is a car. That's just what it is."

We find meaning outside ourselves, in other lives, in broader goals and tasks, in some arc of history. Religion was perhaps the first way that people made sense of the human experience.

Religion also made the world bigger. Robert Wright in his Evolution of God argues that as kin began to trade outside of their group their god(s) had to become bigger than the tribe. How do you make an enemy a trading partner or even a fellow citizen? You expand your beliefs to make those former strangers friends.  You love your enemy. Money, contracts, employment and trade are all well and good but outside of the context of trust they're ineffectual. The prelude to a global economy is a God of all humanity or at least people who see all of humanity as deserving of trust.

Speaking of trade, money is just made up. The fact that a 20 dollar bill is worth 20 dollars is not a fact inherent in a piece of paper that size and shape. It's only worth 20 dollars because we all agree that is worth 20 dollars. Money is completely made up and it is completely real.

Social invention - agreeing to the rules of a school or bank, agreeing that we will shake hands when we greet or kiss one another on the cheek or bow - is both made up and completely real. Religion falls into that same category. It is just made up that we should love our neighbor or forgive a brother. Such things are made up but their consequences are very real. Living with shame is so very different than living with forgiveness. Living life selfishly is so very different than living life selflessly. (And in truth it is hard to imagine a life that doesn't always have some element of shame and forgiveness, selfish perspective and empathy, but a life can be made very different simply by moving more in one direction than another.)

I agree with my agnostic friends that religion is just made up. I also agree with my religious friends that religion is quite real. Caught up in determinism and what that suggested about us simply being the products of past causes and present conditions, William James struggled with depression and suicidal thoughts. What if nothing he did or believed really made a difference, he wondered. One day he declared, "My first act of free will shall be to believe in free will." From that point on his life was largely different; he was mostly productive and happy. (James wrote the first psychology textbook and was one of the founders of the philosophy of pragmatism, among other things.) Did William James actually have free will or did he just make that up? Yes and yes, it seems to me.

Going back to Huston Smith, at the end of the day we have to speak in some one language in order to make meaning and to understand others, to understand and to be understood. Religions are deeply flawed and they are just made up but they certainly can provide meaning. Life is more than the logistics of work and sleep, food and recreation, or a winning score in a bank account. Realizing that if you had grown up in Indonesia you would likely be Muslim or that if you grew up in Nepal you'd likely be Buddhist or that if you grew up in Iowa you'd likely be Christian and realizing that this is arbitrary doesn't mean that it is meaningless anymore than it is meaningless to realize that if you grew up in China you'd grow up speaking Chinese. Meaning is fragile when we try to make sense of our own lives via a reductionist method that looks at us in isolation. Meaning can be robust when it sweeps out to include others, family, friends, and strangers, and the story of a life as part of some larger arc of history, part of a bigger set of forces that include our own words and actions. Meaning is never self-referential; it comes from the relationship of one word to other words or of one life to other lives. Religion surely isn't the only way to create meaning but it is a way that works for billions. And while you can just make up a language rather than rely on the ones around you, a language that isn't shared isn't much of a language. Religion has its flaws but one big advantage is that it is "spoken" by quite a few people around you. You can say something novel in a very old language. And maybe that's the challenge of a any religion: go beyond rote memorization of what others said to a statement that comes out of a common tradition into your own unique life and time, something that Huston Smith seemed to have done quite beautifully.

03 January 2017

What if History Has Only Just Begun? Contemplating a Post Economic Society

If you bring together parents of little ones aged 0 to 3, you'll hear them discuss very similar - nearly identical - stages of development. Getting potty trained, sleeping through the night, learning to walk and talk, and learn self control are constants for every child. Those little ones may grow up to become very different people who make their living, pursue romance, create or engage in hobbies, struggle with wild bout of optimism or depression - that is, live their lives in wildly different ways but in the first few years of their life they're dealing with nearly identical issues.

Which brings me to economic development.

We have this tendency to think of ourselves as having reached the pinnacle of evolution. Probably amoeba and early primates had even greater difficulty conceiving of the possibility that evolution hadn't ended now that they'd arrived, but even we tend to think of ourselves as a culmination rather than an intermediate stop. Not just as humans but as a culture or civilization. And yet, we're so obviously still a work in progress, so obviously not yet done.

I think that we've not only entered a fourth economy but that this fourth economy will be less a culmination than a mere phase, perhaps the equivalent of learning to walk or talk. It will transform what is possible but the talking is incidental to the communication, the walking incidental to getting somewhere. In the same way that writing brought humanity into a new phase of history but didn't end history, so will moving beyond scarcity bring us to a new phase but hardly end the continuation of history. And once we've moved beyond scarcity, economics as we've learned it will be less defining than assumed, in the same way that we don't now talk about different communities around the globe having a talking or writing culture.

Having social inventions that allow us overcome the limits of capital or entrepreneurship will be pretty cool. What is even more interesting, though, is the question of what we do when we've overcome all four economic limits. At that point we have the harder but more difficult work of then determining what sorts of societies we want to create. Or, rather, the generations that will come after us will have that work.

02 January 2017

Childhood 200 Years Ago (when it was outrageous to limit work days to 12 hours or offer 30 minutes a day of education)

This little tidbit from Chris Jennings' fascinating Paradise Now: The Story of American Utopianism. The Owen mentioned is Robert Owen who became fabulously wealthy operating factories using the new spinning jenny that boosted productivity enormously. This little excerpt is just a reminder of what childhood was like the early days of the Industrial Revolution and how viciously opposed people are even to the changes that strike future generations as obviously positive.

Owen used his newfound celebrity to back progressive legislation in Parliament. In 1815, he drafted a bill for the "Preservation of the Health and Morals of Apprentices ... in Cotton and other Mills." The bill had three central provisions: children under ten should be prohibited from working in mills; workers under eighteen should not work more than twelve hours a day; and young millworkers should receive a half hour of schooling each day.
Owen to Parliament expecting an enthusiastic response. Instead, the committee assigned to review the bill met him with startling hostility. "The employments of these Children in Cotton Mills is not sedentary [suggesting they were getting opportunities for physical activity]," one of the bill's opponents insisted; "it is neither laborious, nor such as tends to cramp their limbs, to distort their bodies, or to injure their health. Generally speaking those who are introduced young are most orderly, as might be expected from early habits of industry, attention, regularity, cleanliness, and subordination." A coalition of mill owners lobbied against the bill. In familiar language, they decried the proposed intrusion of big government into their industry. "Legislative interference betwixt the free labourer and his employer," they insisted, "is a violent, highly dangerous, and unconstitutional innovation." If children work fewer than twelve hours a day, some critics pointed out, their families will end up on the dole. As for the outlandish notion of providing young workers with thirty minutes of reading and arithmetic lessons each day, the claimed that "the unnatural mixture of education with work proposed by [Owen's] Bill, would not only be expensive and vexatious to the employer but impracticable in execution." Owen's proposed reforms would merely deprive the "heads of families of their natural control over their children," and "reduce the prohibitive labour of the Country." In short, the bill was an unpatriotic, antifamily job killer that would erode the morals of the working class by "throwing them idle and disorderly on the community too early in the evenings."

Nobody Expects the Spanish Inquisition - Trump's Promise to End Religious Freedom

The West led progress for centuries. Not because of superior genes but because of superior memes. The social inventions that have transformed Western Civilization since about 1300 have made lives longer, happier, and more free.

Three big transformations have given individuals in the West freedoms that created this prosperity. The first of the major transformations was religious. In 1300, the church defined orthodoxy - proper belief. Today the individual has religious freedom. Religion went from something society imposed on the individual to something individuals freely chose, rejected or modified. In 1700, you were a subject of the king or queen in your country. Today the individual chooses who will rule and even votes directly on laws. In 1900, private banks controlled money. Today access to investment and credit markets is widespread and monetary policy is managed by a public agency, capital markets subordinate to labor markets and unemployment rates.

Freedom of religion, democracy, and the pursuit of the American Dream - as we now refer to the products of these three revolutions - have indisputably made life better. In the Fourth Economy I argue that doing to the corporation what past revolutions have done to the church, state, and bank is the next big transformation that will dramatically improve life again. (Or more accurately, continue the dramatic improvement of life that has been playing out for centuries.)  Progress stalls when we fail to take the next step; disaster strikes when we go backwards.

One of the reasons I'm so utterly baffled and angry at the fact that my fellow Americans elected Trump is that he promises to take us backwards. Not just a little. He promises to take us backwards by centuries. He promises a religious test for admission to this country, curtailing the freedom of religion guaranteed in this first amendment.

Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances.

Freedom of religion is foundational to everything we enjoy in the West. For so many reasons.

First the obvious. People believe weird things. Yes, even you. You can kill people with weird beliefs in an attempt to rid the world of improper beliefs but believing that you can kill off all the people with weird beliefs is, itself, one of the weirder beliefs. Plus, even when you take measures that drastic, people with weird beliefs keep popping up. It is simply impossible to live peaceably with fellow humans if you believe that you can or should control their beliefs.

John Locke who defined the modern
separation of church and state.
In the century before our founding fathers defined our new country, Europe was devastated by the thirty years' war, a war with 8 million casualties at a time when Europe's population was about one-tenth what it is today. No war had killed off more of Europe's population. No war involving so many could ever be about just one thing but this war was mostly about religion. With such atrocities in mind, our founding fathers were committed to creating a country where religious freedom not only allowed people to live in good conscience (however weird their beliefs) but saved people from violence because of religious beliefs.

As it turns out, religious freedom is also great for invention and entrepreneurship. Innovation comes from thinking differently, from challenging norms and jettisoning tradition - things that no religion advocates. It wasn't just freedom of religion that our founding fathers granted. It was freedom of thought. You can't really separate those two because beliefs and thoughts are so intermingled they're effectively the same thing. Communities that have imposed no special beliefs on their people are the ones where invention and disruptive change have thrived and lives have improved.

In about two weeks we will swear in a new president who believes that Congress shall make a law disrespecting the free exercise of religion, banning Muslims from entry to the country.

Trump represents a reversal of the three revolutions that have brought us out of the Dark Ages. His minions are fans of the gold standard and gutting the Federal Reserve, essentially making capital scarce again and turning control of credit markets to private banks. He is contemptuous of the workings of democracy, denouncing it as rigged and cooperating with a foreign dictator to win the election. He denounces the free press, suggesting that we need to crack down more on critical journalists in the same way that Putin has, while praising fake news and suggesting that the National Enquirer deserves a Pulitzer. And as if it's not enough to reverse the revolutions of the 20th and 18th centuries, he wants to take us back even further to the 17th century and the time of the thirty years war when religious freedom was not trusted to individuals.

It is hard to over-state how far back into the bowels of history Trump's policies take us. He is a troglodyte who even our bewigged forefathers would look on as anachronistic.

Won't you at least give Trump a chance, friends have asked. A chance for what? To end religious freedom? To gut the people's ability to stabilize credit markets and make financial markets accessible to common people? To gloss over foreign powers' interference in our democracy? (And this doesn't even touch on his disdain for freedom of trade, another pillar of prosperity that inspired the Declaration of Independence but was not captured in the Bill of Rights.)

In my mind, the real question of how to make progress is a question of how to popularize entrepreneurship and that involves changing the definition of employee to someone who has the same sort of freedom within a corporation that a citizen has within a country. Few people believe this (it's a weird belief) but the number who do is growing. To the extent that we delay dealing with this issue, we delay putting median income growth on a path that ensures that each generation will do better than the last.  Freedom of work is a step forward and failing to address it is the one of the biggest reasons that median income growth has floundered in this century.

Not taking this step forward means stagnation. Reversing freedom of religion is, by contrast, a huge step backwards. It's almost comical that in this - 2016 - we would be considering such a move, much less have elected a man who has made it his policy.

How do I feel about 2017? I'm in disbelief that we - as a country - have gone medieval on religious belief, making proper religion a basis for acceptance within our community. I'm in disbelief but as Monty Python warned us, "Nobody expects the Spanish Inquisition."

23 December 2016

California vs. West Virginia: A Question About Which Direction the Country is Heading

Even some of my California friends had posted things like, "If you subtract California from the national vote, Trump won the popular vote." My counter to this is, "If you subtract the former confederacy from the national vote, Clinton won by 6.5 million votes."

Apparently there are folks threatening to boycott California because the state is out of sync with Trump nation. Such sentiments inspired this tweet:

Trump won by his biggest margin in West Virginia, by 42.2%. Clinton won by her biggest margin in California, by 30.4%. Let's compare those states and consider what it means to dismiss California as a place that is out of touch with the rest of the country.

California ranks third for median household income.

West Virginia ranks 49th.

California is the most populous state in the union. In 1950 it had 10.7 million and now it has about 40 million, nearly 4X as many. The simple fact that California has grown so rapidly is testament to its ability to create jobs.

West Virginia had 2 million people in 1950. Today it has 1.8 million, a drop of 10%. West Virginia has not been able to create jobs or even a net gain in population.

If you believe that people just are who people are, you might think that it makes sense that West Virginia would register a protest vote against the status quo. It's had trouble in this new economy and of course those poor people will vote for change. But if you believe that people are who their institutions are - if you believe that we're defined by our culture, schools, media, government, policies, and prevailing norms - then it is a terrible thing to follow the lead of a place like West Virginia. Why? Because the policies and norms it has chosen has made its people less able to thrive in the modern economy. History shows us that it's not how hard people work or who they are genetically that determines how prosperous they are. It is, instead, the systems they work with and within. Incomes were 6 to 8X higher in 2000 than they were in 1900 in spite of the average workweek dropping from 60 hours to 40. Incomes weren't higher because people were "better." They were higher because people learned, worked in, and were able to use better systems. If you believe that people can't change, than West Virginia was right to vote for different policies and leaders than California; if you believe that people can change and there is no intrinsic reason that West Virginia can't be as prosperous as California than it's a terrible thing that the nation is now going to follow after policies West Virginia voters think sound great rather than the ones that Californian voters think would be great. West Virginia's thinking doesn't make its people as prosperous as California's.

Here are just a few fundamental issues that Californians would find alarming in Trump's policies that apparently comfort West Virginians: immigration, free trade, and free religion.

California has the largest share of foreign-
born people, West Virginia the lowest. 
Trump wants to limit immigration, both legal and illegal. California is a land of immigrants. About 40% of Silicon Valley startups have at least one foreign founder. On a personal note, I was working with a startup on Google's campus this year and one of the departments (robotic sensors) had five people from five countries: the US, Iran, Italy, Poland, and South Korea. It's a global economy and California doesn't just sell to customers from all over the world, it hires and partners with people from all over the world.

Trump has chastised Apple for manufacturing its iPhone in China. He doesn't really like free trade and has threatened to levy a 35% tariff against Mexico and a 45% tariff against China. This could easily start a trade war. (Does anyone believe that other countries will merely pay huge tariffs and allow the US to continue to sell into their markets without levying an offsetting tariff? How naive do you have to be to believe that?) But it also misses the point. 75% of iPhones are sold outside of the US. Apple is headquartered in the US but it is an international company with an international product, customers, suppliers and partners. This is true of most of the products coming out of Silicon Valley, from Intel's chips to Uber's app.

Finally, Trump wants to limit the immigration of Muslims. This is a special kind of exclusion that is not only anti-constitutional (read the first amendment to be reminded that Congress shall pass no law regarding religion) but shows a complete confusion about where creativity comes from. Trump knows which religion is right and which is not. Really creative people don't even know which process is best or which theory will hold up for a century or will be dis-proven tomorrow. Freedom of thought - freedom to question or challenge established "truths" is fundamental to creativity. It's no accident that the free speech movement began in Berkeley just as the computer revolution was beginning. Freedom of religion is elementary compared to the freedom of thought needed to create new scientific theories, new social paradigms, new technologies, new businesses and new business models.

California has given birth to blue jeans, the Hollywood that generates TV shows and blockbuster movies, and a music industry that gave us acts like the Grateful Dead and the Eagles. It's been the source of so many cultural and business trends.  The most defining "industry" in California is Silicon Valley, a place that gave us Apple, Facebook, Intel, HP, Twitter, the internet, and venture capitalism. The most defining business in West Virginia is coal mining.

To this day we revere the ancient Greeks yet their golden age was only a century or two. Socrates died in 399 BC and Aristotle died in 322 BC. It was during the century or so around their lives that so much of what we know of their inventions - from philosophy to math to theater and democracy - emerged. It was an incredible time that the Greeks experienced only for awhile even though the world has felt its impact for the thousands of years since.

If this move towards West Virginia and away from California proves defining of the country's future, the US will go the way of other great and defining communities in history. We will have had our time and so much of what has come out of the US in the last century in particular is likely to continue to define the world in the way that the Athens of 4th century BC continues to define the world to this day. Civilization continues to carry forward the great inventions like money and democracy, even if it fumbles and drops them from time to time. It builds on what came before. Evolution - biological and social - doesn't throw away so much as build on. In that sense, the US of the 20th century will likely be with civilization for millennia to come. What isn't certain, though, is whether it will - like modern Greece - become just another also-ran as some other community becomes the innovators who we all follow with some odd mix of envy, reluctance, and excited mimicry.

For now, swing voters in the US have decided to follow the lead of a state that hasn't invented a new industry since coal mining in the 1740s rather than a state that is even now incubating industries as different as self-driving cars and genetic engineering. It's chosen to try going back to an earlier time when jobs were being created for coal miners rather than for entrepreneurs. If Trump is successful at creating such jobs it means that we'll be going in the direction of the 1700s rather than the late 2100s. That should be a sobering thought.

20 December 2016

Two Religious Divides that Can Ruin Christmas

Even an event as lovely as Christmas becomes a forum for dissent and proselytizing. It's not enough to simply let people enjoy the holidays, someone else has to foist their agenda on us. Here are two big ideological struggles that simply don't receive enough attention because they're so divisive.

Evangelicals: Let's put Christ back in Christmas.
Catholics: Let's put Mass back in Christmas.

Buddhists: Let's be open to the present.
Children: Let's just open the presents.

We're Uncertain Just How Much Economic Uncertainty Trump Has Added

"There are known unknowns and unknown unknowns," Rumsfeld famously said. With the incoming Trump administration we might now say, "There are certain uncertainties and uncertain uncertainties."

The stock market has rallied since Trump's election. Presumably, the reasons for this include expectations of tax cuts, stimulus spending, and deregulation. All of these add to uncertainty, though.

If Trump gets a stimulus package in the form of infrastructure spending, it will boost GDP more than if the stimulus comes in the form of tax cuts. (The tax cuts will overwhelmingly go to the rich. A guy making $500,000 a year is less likely to change his spending in response to a tax cut that puts $1,000 more in his pocket than will a guy who makes only $5,000 a year.) 

Will the stimulus - the assumed rise in deficit spending - boost the economy by 1% or by something negligible? It's uncertain because we don't really know what form the stimulus will come in.

Further complicating this, Trump has appointed Mick Mulvaney to head his Office of Management and Budget (OMB). He'll be responsible for crafting the budgets proposed to Congress. Mulvaney is a fiscal hawk who has voted against raising the debt ceiling and seems committed enough to a balanced budget that he'd shut down government for this. By contrast, Trump has promised tax cuts and boosts to defense spending and infrastructure, which will drive a big increase in the deficit.

Paul Ryan and Mick Mulvaney's desire for balanced budgets will be at odds with Donald Trump's "deficit be damned" policies. Will Trump's proposed budget deficit shrink or even become a budget surplus? It's uncertain.

Deregulation adds the most uncertainty of all. Before the Great Recession, banks were leveraged about 30 to 1. For every dollar they had in deposits, they had loaned out about $30. That gives you great returns but it makes you vulnerable to a credit crunch. Since Dodd Frank,that ratio has dropped to about 10 to 1, which makes for a much safer banking system. Now, the expectation is that a Trump administration will lower regulatory requirements and allow banks to raise that ratio again. Will the ratio go up to just, say, 12 or 15 to 1? That ratio might still be reasonably safe but raise profits nicely. Or will the ratio be allowed to rise all the way to 20 to 1 or even 30 to 1 again? That ratio will greatly raise profits .... and risk. Financial stocks could look really healthy even as the financial system gets sick. 

Will Trump deregulation give finance a little nudge or a dangerous shove? That's uncertain.

Add to this the uncertainty inherent in Trump's trade policies. Will he actually put 35% and 45% tariffs in place against Mexico and China? If he does, WTO will probably slap on retaliatory fines and this could set off a trade war. That path would cost us millions of jobs. If he only talks about trade wars but doesn't actually impose tariffs, it could "just" result in a slowdown in trade. It's uncertain.

And then there is the policy with undocumented workers. Will he actually deport 11 million people? If so, that will crush growth in aggregate demand here in the US and crash house prices. It's uncertain.

Economics is always uncertain but the Trump Administration has added more uncertainty to that than any that I can remember. And perhaps inherent in that uncertainty is an uncertainty about what Trump's victory will mean for the future identity of the Republican Party.

15 December 2016

Key Statistics From Obama's Final 2017 Economic Report

The president's economic advisers released their annual report - the 2017 Economic Report of the President - today, 15 December. You can find it here but you might not have time to read through all 599 pages of Barack Obama and Jason Furman's report, so here are some highlights.

Jobs, Unemployment, Wages

Economy has added 14.8 million jobs over 74 months, the longest streak on record.
  • Since June 2009, when Chrysler and General Motors (GM) emerged from bankruptcy, the automobile industry (manufacturing and retail) has added nearly 700,000 jobs, the industry’s strongest growth on record.
  • The unemployment rate has been cut by more than half to 4.6 percent as of November 2016, below its pre-recession average

    Wages for production workers grew faster since 2012 then they did from 1980 to 2007

  • In 2015, median household income rose at the fastest rate on record, with the typical family earning an additional $2,800.
  • Since the end of 2012 private production and nonsupervisory workers, who comprise about 80 percent of private-sector employment, have seen their real hourly earnings increase by 5.3 percent, more than the total cumulative real wage gains for these workers from 1980 to 2007
  • Real wage growth has been faster in the current business cycle than in any since the early 1970s.
  • Real median household income increased 5.2 percent in 2015, the fastest growth on record. 
  • Households at all income percentiles reported by the Census Bureau saw real gains in income, with the largest gains among households at the bottom of the income distribution.
  • The poverty rate fell by more than any year since 1968


     As of 2016, the uninsured rate stands at its lowest level ever.

  •      The uninsured rate among children has fallen by almost half since Obama took office
  •      20 million more adults have health insurance
  •      So do 3 million more children
The growth in healthcare costs has dropped since ACA

Since the ACA was signed into law in 2010, health care prices have risen at the slowest pace in 50 years.
  • The average costs for a family with employer-based coverage in 2016 were $4,400 below where they would have been had costs grown at their pace over the decade before the ACA became law

Wealth & Budgets

The 2016 deficit was 3.2 percent of GDP, about a third of the 9.8 percent of GDP deficit recorded in 2009 and equal to the average over the last 40 years
Per capita GDP growth higher in US than Japan or Euro Area

The economy is now 11.5% larger than at its pre-Recession peak

Real household net worth exceeds its pre-recession peak by 16 percent


     Since 2008, the United States has tripled the amount of energy harnessed from wind and has increased solar generation thirtyfold.

     Today, the United States is less reliant on foreign oil than it has been in nearly three decades.


     The America Invents Act (AIA) of 2011 led to a 20% reduction in patent wait times, supporting a 30% increase in patents granted

23 November 2016

We are all in pieces, struggling to create the illusion of a coherent "me" from moment to moment

Fascinating article by Julie Beck at the Atlantic on our inner voice. Excerpt from early on:

Inner speech, Fernyhough writes, isn’t bound by many of the conventions of verbal speech. For one, we can produce it much faster when we don’t have to go at the pace required to use tongues and lips and voice boxes. One researcher the book cites clocks inner speech at an average pace of 4,000 words per minute—10 times faster than verbal speech. And it’s often more condensed—we don’t have to use full sentences to talk to ourselves, because we know what we mean. 
But it does maintain many of the characteristics of dialogue. We may imagine an exchange with someone else, or we may just talk to ourselves. But that doesn’t mean it’s not a conversation. Our minds contain many different perspectives, and they can argue or confer or talk over each other. 
“We are all fragmented,” Fernyhough writes. “There is no unitary self. We are all in pieces, struggling to create the illusion of a coherent ‘me’ from moment to moment.”

22 November 2016

Expanding us

You have heard that Usain Bolt is the world's fastest man. He ran 100 meters in a record 9.58 seconds, which works out to a speed of 23 mph. He's a phenom who deserves to have a new verb named after him. (The t-shirt "walk, jog, run, sprint, bolt" captures it). He is not, however, the world's fastest man.

That honor goes to whoever is riding in the space station. Usain ran 23 mph. The space station travels at 17,150 mph. It orbits the earth every 92 minutes, something that would take Usain 45 days to do assuming that he could find bridges to cross the ocean and could maintain his mad sprint for 6 weeks. In truth, there is no comparison; it's impossible for him to sprint around the world and will be until we've been genetically re-engineered and ocean-crossing bridges that are not even designed yet have been built. 

We love stories of individual achievement but of course what we can accomplish on our own is - at best - akin to what Usain Bolt can do racing against the space station. Progress is dependent on social inventions, social constructs and institutions as varied as language, schools, guilds, and romance. 

The social inventions that are most powerful are the ones that make our world bigger. We have a natural love and concern for our family but that's a pretty small group. In fact, families are getting smaller all the time. Interdependence among families is not enough to get us to our current standard of living.

Religion seems to have been the first social invention that successfully expanded the trusted in-group from kin to something that encompassed not just neighbors but even strangers. The Kaaba in Mecca is the magnetic pull of the pilgrimage of Muslims. Even before Mohammed and the birth of Islam, this was a place that attracted pilgrims who came to worship the many gods within it. (Later, these many idols were destroyed in honor of Allah.) Mecca became a wonderful place for two reasons: one could go to worship and feel wonder and it was a safe and holy place where no war was allowed but trade was. This - safety that allowed trade but not battle - was the stepping stone from nomadic tribes to the rise of an Arab civilization that gave us the zero, algebra and Rumi.

Throughout history one thing has been clear: progress follows from the expansion of our institutions to include more people. The bigger the group, the more specialization, experimentation, creativity and abundance that is allowed. The bigger the group we're a part of, the more abundance. 

I worked with a startup on Google campus this year. One department had hard-to-find specialists who developed robotic sensors. There were only five people in the group but they came from five different countries: South Korea, China, Poland, Turkey, and Iran. This new venture brought in the best people it could find and it drew them in from every country. (Actually, it was the universities that did; robotics programs at John Hopkins, Stanford, and Vanderbilt had already brought these people from their home countries.) If you want the best, you draw from around the world.

Whether it is finding the best programmers in Silicon Valley or best frankincense and myrrh in Mecca, progress means drawing from a wide circle. If you can draw only from a circle 100 miles in circumference "best" will be much less impressive than if you can draw from around the globe.

Progress comes from a more expansive definition of "us." Regression comes from narrowing that definition of us to something smaller, "more pure." Nigel Farage in the UK was a chief voice in the Brexit movement, an attempt to protect the UK from the corrupting influence of immigrants. 

Thandie Newton, the brilliant actor who has starred in films like Mission Impossible and Crash, represents the product of that corrupting influence of immigrants. Her English father diluted his genes with a woman from Zimbabwe and she is the result. She's a reminder there is something even more important about globalization than competition or specialization. 

Specialization is both as profound in its influence on productivity as Adam Smith claimed and is almost incidental to the real prize of globalization. Economic value is an emergent property that doesn't belong in any one place but instead emerges out of the interaction of peoples, ideas, products, and services. The very measure of economic progress is a measure of exchanges, trades, transactions. Value is the little residual of an exchange between two people. The real prize of globalization is the vast numbers of interactions it enables and what that means for the spark of creativity. A friend recently reminded me that cities have described as the place where ideas come to have sex. The product of two ideas is a new idea and those can transform or create an industry, much less a product. 

Value comes from making our world bigger, not smaller. It comes from greater exposure to ideas, some of which even make us uncomfortable, not closing ourselves off from them. 

Progress doesn't involve abandoning our institutions. It doesn't lie in the direction of Brexit or retreating from trade with other countries. Trying to go it alone means that - at best - we run about 23 mph an hour while those within the comfort of elaborate institutions are traveling overhead about 75X faster than we could ever hope to. It might be that the simplest limit to our level of affluence is the extent to which we can expand our notion of "us."

The Rise (of Japanese Cyber-Virgins) and Fall (of the Japanese Population)

Nearly 20 years ago I was in Japan. People on the subway were staring at their lap and at first I thought they were merely avoiding eye contact, then - when I saw hand movement - wondered briefly about rosary beads (wrong culture) and then was flummoxed. I asked my client about it and he said that they were "texting." "Texting," I asked. "What's that?" He explained but it didn't really make sense. Years later, we adopted the craze and since then I've paid closer attention to Japan, which brings me to this excerpt from Mary Aiken's The Cyber Effect.

A [Japanese] government survey released recently estimated that nearly 40 percent of Japanese men and women in their twenties and thirties are single, not actively in a relationship, and not really interested in finding a romantic partner either. Relationships were frequently described as "bothersome."
Another survey found that one in four unmarried Japanese men in their thirties were virgins. The number of virginal single women in their thirties was only slightly less. At the time, Shingo Sakatsume, who works as a "sex helper" and counsels middle-aged virgins, observed, "In Japanese society, we have so much entertainment beyond love and sex. We have animation, celebrities, comics, game, and sports .... Why do you need to choose love or sex over the other fun things that don't have the potential for pain and suffering? The illusion of a perfect relationship, combined with the Japanese fear of failure, has created a serious social problem."
By 2060, if current trends continue, Japan's population will have shrunk by more than 30 percent.

In 2010, Japan's population was 128 million. By 2082, the number is projected to drop to 64 million, a drop by half. These aren't just projections. Last year Japan's population dropped the most since they began keeping records.

21 November 2016

Kanye West's 2020 Campaign

In 2020, Kanye runs for president. The GOP laughs.
He starts winning primaries. The GOP is dismissive. 
He continues to win. "This is outrageous," Republicans say. "He's incoherent. Sure he's famous and rich but he knows nothing and what he does know is wrong. He's rude. He's crude. There is no way he can win." 

The Chinese start dumping internal Trump administration emails. Kanye rises further in the polls. "A communist government is helping him to win! This is incredible!" Republicans protest. 

The few sane people left in the country acknowledge Republican outrage and say, "Wouldn't you think that all of that would make a difference."

"How did we get here," Republicans ask.

"Yeah," we respond. "How did we get here?"

Kanye's 2020 campaign begins