21 June 2016

Silicon Valley Passes the Hat to Buy Trump a MacBook

Apple has decided not to donate any money to this year's GOP convention. They join Wells Fargo as past donors (in 2012, Wells Fargo gave $500,000) now withholding support for the Trump Show in Cleveland.

Meanwhile, a fan set a new record on StubHub by paying $99,000 for two tickets to Game 7 of the NBA Finals, a small reminder that there is a lot of money in the Bay Area.

By contrast, through April, a grand total of 7 self-identified Bay Area tech workers have donated just $1,020 to Trump's campaign, a tad less than the $1.6 million donated to Clinton's campaign by 766 tech workers and about what a MacBook would cost.

25% of companies in the Valley have been founded or co-founded by immigrants and Silicon Valley depends on a international network of suppliers and consumers. So maybe it's being against immigrants or free trade that has earned him the antipathy of Silicon Valley. Or maybe it's just because Trump says stuff that would have made even Jerry Garcia curious about what he's on.

20 June 2016

Paul Ryan's Big Gamble on the Trump Casino Candidacy

Paul Ryan finally decided to endorse Trump but he's already had to distance himself from Trump's comments. It makes sense that he would endorse Trump, but endorsing Donald involves a big gamble.
On the one hand, failing to support Trump could mean losing a lot of Republican elections in November. If the Republican Speaker of the House Paul Ryan did not endorse Trump, he would have made it very difficult for the Republicans at every level of government. If Republicans don't vote for the top of the ticket, they're less likely to show up at the voting booth to vote for everyone else - from Republican congress people and governors to city council people and state senators. If party elders like Ryan turn their back on Trump, Republicans throughout the country are likely to turn their back on a slew of down ballot candidates. Those are some big stakes for 2016 who could lose the Senate - possibly even the House - along with the White House, which would give Democrats power they've had only 2 years out of the last 20.

On the other hand, voters might reasonably conclude that the Republican Party's embrace of Trump is akin to embracing his odd pronouncements. It's tough to hug a skunk and not walk away smelling badly.

If voters - particularly millennials - see support for Trump as equivalent to intolerance of women and minorities like Muslims and Mexican-Americans, that misogynist / racist label could be tattooed onto the Republican Party itself. What's at stake if the coin falls this way? Not just the 2016 race but the Republican Party's future. If they are branded as the party that distrusted scientists but trusted talk show hosts on the topic of climate change and wanted to use a religious test to determine who came into the country, and thought that our most populous neighbor should be walled off, they could easily lose the millennials who have already replaced baby boomers as the most populous group of voters.

The Republican Party could become to the 21st century what the Whigs were to the 19th century. That is, they could be the party that started strong but were obsolete before the century was over.

18 June 2016

Did Media Distortion of Reality for Ratings Provoke the Assassination of Labour MP Jo Cox?

Americans continue to think that crime is going up even as it continues to fall.

Statistics for violent crimes (rape, sexual assault, robbery, aggravated assault and simple assault fell from 80 victimizations per 1,000 persons in 1994 to 19 per 1,000 in 2010. (You can see the actual crime rate in the light green line above.) Meanwhile, Americans remained convinced that crime rates were going up even as they were dropping.

This perception is not coming from direct experience. It is coming from the news. The problem is not that the world is getting worse but instead that in the competition for ratings, news is getting better at focusing on all that is alarming. It is worth remembering that what the news does is filters through the behavior of 7 billion people each day to report on the most outrageous and alarming acts. 

Which brings me to this heartfelt bafflement about how the media may have driven someone to assassinate Labour MP Jo Cox in Britain. James O'Brien is talking about UK but he could easily be talking about the US in this piece.


13 June 2016

Who We Should Seriously Ban From This Country

There is a group in this country that is four times as likely to commit a violent crime than any other. Not 4% or 40% more likely. No. They are 400% more likely.

And yet we continue to let them enter the country as immigrants and visitors. We make no attempt to round them up and deport them once they are here. And the fact of their violent tendencies is not a matter of discrimination or bias. It's a simple fact that seems to be deeply rooted in tradition and genetics. Our country would be much safer without them. Imagine a drop of 80% in violent crimes.

What group is this? Males. Boys and men don't just start the wars and populate our armies. They are the criminal element most likely to beat, rape, or kill someone.

If we are serious about making this a safer country maybe it's time to be less tolerant of a group this dangerous.

The On-Going Battle Between Progress and Perfection: Guns, Jobs, and Life Expectancies

I shared a fact with a friend about life expectancy. "Since 2000, life expectancy around the globe has gone up nearly 5 years. It went up 10 years in Africa."
This friend's response? "Just because you're living longer doesn't mean you're happy."

I've shared other facts, like, "We've now had 68 uninterrupted months of job creation during which we've gained 13.7 million jobs."
Responses typically include, "Yeah but there are so many people who have stopped looking for work," or, "Wages haven't been growing as much as they were in the late 1990s."

Today, the wake of the Orlando mass shooting, people are calling for better regulations on gun purchases and responses include, "You will always have people who break the law. They'll find a way to kill people regardless of what you do."

During Medieval Times, these 'yes but' people ruled the world. They were not interested in progress. Didn't even believe it was possible, really. They were interested in perfection though. The result? That period between the collapse of the Roman Empire and the Renaissance was a time marked by wretchedly short lives, abject poverty, and a near absence of freedoms.

During the last 200 to 500 years (depending on how you count it) the West has embraced the notion of progress and mostly abandoned the notion of perfection. A typical tool for progress is a Pareto chart.

The Pareto chart simply categorizes causes of failure. In this simple example, it lists the reasons for running late to work. Notice that it then prioritizes them by most frequent to least frequent. What does this do? Well, it doesn't lump all causes into one pile. Instead, it shows the most probable reason and lets a team focus on addressing that first. Of all the things we could do, what would make the biggest difference? The question isn't, "How do we make this perfect." The question is, "How do we make this better?" And in this it's a great example of how progress is made; just address one issue at a time and make sure that things are better next month or next year than they are now.

Small incremental changes can become huge. If you increase incomes by 2.1% per year, they'll be 8X higher in a century than they are today. (That's essentially what happened from 1900 to 2000.) If you increase your wealth by 8% per year, it'll be 22X larger in 40 years, at the end of your career. Progress is incredibly powerful. Perfection, because it is unattainable, is at best paralyzing and at worst destructive.

We will always have violence, early deaths, and unemployment. That doesn't mean that we can't - and haven't - made progress on those fronts. Progress starts with focusing on what we can do, not what we can't, with practical solutions rather than philosophical differences. Oh, and a belief that things can get better and not that the world is steadily and surely getting worse. To put it differently, progress depends on a belief in progress.

07 June 2016

Law School Secrets from Trump University

"It's a simple but powerful argument," the professor says. "Role play with me and I'll demonstrate."

"That judge is biased against me and needs to dismiss himself from my trial," the professor says.

"Biased against you? Why?"

"I called his mother a whore."

"Wow," students murmur as they scribble in their notebooks. Well, all but one student.

The professor, flushed from the excitement of his brilliant argument, singles out this inattentive student and says, "If you're interested in getting a good grade, maybe you should be taking notes."

"You can't fairly judge me," the defiant student says.

"I can't? Why?"

"Your father's a rapist."

"What! I ... oh," it dawns on the professor. "Brilliant. Wow. You're a natural at this. Who have you been consulting for legal advice?"

"I'm speaking with myself, number one, because I have a very good brain and I've said a lot of things,"* the student responds.

And with that, the professor gets out his notebook and begins to take notes.

* Actual Donald Trump quote from an appearance on MSNBC's Morning Joe, when Donald was asked who he consistently talks with about foreign policy.

05 June 2016

Entrepreneurship and the Route to Higher Wages

This year I've been working with a client in the heart of Silicon Valley. I live in San Diego.

San Diego is a lovely place to live. We have moderate weather, good universities, a variety of industries, the best fish tacos in the country, and good surf. I've lived in the Bay Area and am still fond of the region. The weather is only slightly more extreme, and the culture is one of the things that most intrigues me about the Bay Area. It's easiest to say that it's more liberal but that doesn't really capture it; there is a different set of concerns there and an openness to experimentation that manifests in everything from new fads and lifestyles to new technologies and industries.

Economically, San Diego and Silicon Valley may as well be in different countries.

Average wages in the US are $50,180. In San Diego, the average is $53,612, which puts us a modest 6% above the national average. Because of proximity to the beach and the best weather in the country, we pay more for housing than most places but it's not unreasonably high. It's nice but it's very much a part of the US.

In Silicon Valley (Santa Clara specifically), average wages are $112,008 a year, more than double what they are in San Diego. Double.

Just in terms of ratio of pay, Silicon Valley is to San Diego what the US is to Kazakhstan. The ratio of US to Russia, Malaysia, Greece or Poland is not as great as the ratio of Silicon Valley wages to San Diego's.

Bikes and electric cars on Google campus.
Prices, of course, are higher in Silicon Valley. I regularly spend (or more specifically, charge the client) about $400 a night for a hotel that would cost from $100 to $250 a night anywhere else in the country. One week Google was having a conference that drove up hotel prices. That week all my usual places were sold out but one place I had once stayed at a short distance away for the going rate of nearly $400 was charging $929 a night for that week.

Outdoor conference space on Google campus.
But even adjusting for the high cost of living, folks in Silicon Valley are making roughly $400 a week more than the next highest paid region of the country.

It is true that Silicon Valley has attracted some of the best and brightest, and that accounts for at least part of this wage differential . It's also true that the reason that the area can afford to pay these kinds of wages is because no area takes entrepreneurship more seriously. While other areas are busy making products, Silicon Valley's focus is on making companies. They are a manufacturing region and what they manufacture is equity. "What do you make?" "We make companies."

If you want to raise wages and create wealth, focus on entrepreneurship. It's the policy answer that raises all the right questions.



04 June 2016

The Long Boom Hits 68th Month - Breaking Old Record by 20 Months

This current streak of uninterrupted job creation nearly ended with yesterday's report. As it is, the current streak has hit 68 months, which is almost silly. The next longest streak - from the 1980s - was 48 months, nearly 2 years shorter. 

There were cries of alarm at how few jobs were created in May - only 38,000. It is worth looking at the data to determine if this is normal variation in the midst of a long boom or if it signals a coming slow down. We are five months into 2016 and this is the lowest average of any year since the recovery began in 2011, which would certainly support the notion that we're headed for a slowdown. But it's also true that even during a bull market in stocks there are really bad days and weeks and even in a long boom there are likely to be bad months or quarters of job creation. Looking at the year over year numbers gives us a better sense of how much to worry, and that suggests that we're within normal ranges.

In this graph, you can see the change in unemployment rate (the blue bars) and total jobs (the orange line) created since the previous May. 

May of 2014 was the biggest drop in unemployment - a drop of 1.2 percentage points from May of 2013. May of 2015 was the biggest gain in jobs; 3 million jobs were created in the 12 months prior months. The smallest change in unemployment was in May of 2011, the first year of the recovery, when the unemployment rate fell only 0.6 percentage points. That was the also the weakest year for jobs created, a total of just over 1 million jobs. The question, though, is how the last twelve months compare with the average during this 6 year streak.

The average during this streak is 2.2 million and since last May the American economy has created 2.4 million jobs. On average, the unemployment rate during this time has dropped 0.8 percentage points every twelve months and in the last twelve months, unemployment has dropped by 0.8 percentage points. In other words, even though this month was one of the worst of the last 60 months, it marks the end of a perfectly typical year by the standard of this recovery.

It does seem reasonable to conclude that we'll have a negative number sometime in the next few months. It doesn't seem reasonable to assume that this will mean that we're heading into a recession. I think that the odds that this streak of uninterrupted job creation will last another year are about as high as the odds that this streak will finally end this summer but in either case, it will take more than a month or two of negative job numbers to signal a recession instead of a stumble.

29 May 2016

Race, Sex, Politics and Gambling

White males are Donald Trump's base. No other group supports him As an old white male who is friends with many similarly old white males, I can tell you that most of us never stop to question whether we'd have similar levels of income and wealth if we were female or a minority. There seems to be a simple belief among us that if "we" were suddenly made black or Hispanic or female - or even, say, an Hispanic female - that we would do just as well, in spite of all the evidence to the contrary. It's tough to imagine ourselves as the other.

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This is the time of the election cycle when conversations and Facebook posts are cluttered with cries of dismay about how we get such poor choices for our elections, as if it reveals some shortcoming in our candidates. In fact, this lament reveals a shortcoming among our voters. In a nation of 300 million people who are growing more diverse every year, there simply is no way that the candidate who emerges from the primaries will be someone everyone is happy with.
Imagine that the only time you could hear music is in public places and we had to vote for the music we'd listen to over the next four years. You might love rock but even so you'd feel badly about choosing that to the exclusion of jazz or even the easy listening you campaign against. We have such diverse tastes in music that we'd never pretend to agree to one style of music even for ourselves, much less everyone. We'd finally agree on Frank Sinatra (again) or Bach (again) but none of us would be very happy about it.
There are two problems. One is that none of us are always conservative or liberal or federalists or states-rights people. The other is that whoever we elect will have to find a way to represent the uneducated, rural voter in Kentucky as well as the over-educated, urban voter in San Francisco. This guarantees that whoever wins 51% of the votes of this country will leave about 85% of voters feeling like the winner doesn't really represent them.
In a nation of 300 million, you can't get it your way. You are different from everyone else and so are they. Everyone feels like an outsider, so at least you have that in common with everyone else. You're not one in a million. You're one in three hundred million.

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As the father of an adult woman, I have a new perspective on feminism. From one angle it is very simple. It's true that women are sexual beings who love romance and sex and babies. Just like men. But it's also true that men get to be who they are outside of that. Men get to be accountants or mechanics or project managers without their sexuality ever being an issue. One simple take on feminism is that women have exactly the same deal, getting to be a person who is only incidentally sexual or female. It's simply about being a person first.

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The Republican Party is making its biggest gamble ever. The party is showing its refusal to support evolution by devolving from Lincoln to Eisenhower to Reagan to Bush to Trump. More than that, most of the party has decided to support Donald Trump. There is so much to say about this but I'll simply say this: when you've decided that religious freedom is negotiable, you've thrown in the towel on any claim of having principles. Trump has declared clearly that he wants to ban Muslims, effectively declaring his desire to end religious freedom. It would be incredibly comical to think that someone who doesn't know the difference between "second Corinthians," and "two Corinthians" (which sounds like the setup to a joke) would take it upon himself to decide which religions should be allowed. Would be if it weren't for the fact that Republicans actually support this candidate.
Republicans know that if they don't support Donald, they're handing the presidency to the Democrats and - quite possibly - the Senate as well. But the big gamble is that if they support him, they could still lose the presidency and then tar their reputation completely with millennials and most anyone under 60. Of course given that so many of them are old, the prospect of leaving behind an obsolete party apparently worries them about as much as leaving behind melting ice caps.

28 May 2016

What We Do for Love

Maybe we raise children, pursue romantic entanglements, join churches or movements and form friendships because we never feel as alive or as fully realized as when we love. We create reasons for love that are incompatible with the facts in order to unharness this mad impulse to love. "Isn't she perfect!" we say of the woman who so obviously isn't. "Isn't he adorable!" we say of the toddler who will begin to drive us crazy in one, two, three .... seconds.

We fabricate stories in order to justify what feels most alive for us, this feeling of love. And thank goodness that for all of the fatigue and exasperation of raising children, it is one of the most unvarnished and raw expressions of love a person will experience. Thank goodness because it makes us happily enter into something that puts so many demands on us. The heart needs love in the same way that the brain needs sleep and whatever self-delusion or sacrifice it takes, we will pay that price because whatever the price it is cheap compared to its value.

What the History of Income Inequality Has to Do with Christ, Buddha, and Dickens

Within a few centuries, the traditions and teachers that defined the Jewish, Hindu, Confucian and Buddhist faiths emerged. Most contemporary religions evolved from those early thinkers.

Curiously, these religious traditions emerged at a time when innovations like cities were creating unprecedented wealth. In hunter gatherer times, it's tough to accumulate wealth. When you domesticate crops and begin to trade and specialize in cities, it is easier to accumulate wealth. And, of course, wealth accumulates at different rates which means that while the community was getting wealthier, not everyone was getting wealthier. These religious traditions emerged as a way to offset the pure market forces that would have left the poor impoverished and each tradition introduced (or more likely, codified) morals and norms that would show respect for the poor and weak and not just conform to the rich and powerful. Jesus made it clear that we'd be judged by an all-powerful God based on how we treat those with no power.

The Industrial Revolution stimulated another round of social awareness, this time in the form of government programs. There is nothing novel about our time in this respect. We're once again living through an inflection point in the creation of wealth akin to the one that inspired Dickens to write so movingly about the poor and disenfranchised. Dickens helped to stimulate new policies for the poor like the abolition of debtors' prisons.

At each point in history when big economic changes have created new wealth, one outcome is poverty. There are two dimensions to this. One dimension is absolute. People who made a living farming became displaced as factories emerged and agriculture jobs disappeared. Some people can't adjust and as a result they really are worse off by this supposed economic progress. Another dimension is relative. Because there are people now able to buy manufactured goods, you might now feel poor because you can't - even though you never could before either. 

Today's income inequality is partly about poverty resulting from a loss of jobs to overseas and negative consequences from the Great Recession. It's more broadly about another inflection point in history, though, in which it is possible to create new wealth that the median worker is not yet pulled along by.

Entrepreneurship is creating a crazy amount of wealth and income in the US. Nowhere does this seem more apparent than in Silicon Valley where the ten most valuable companies (e.g., Apple, Alphabet (nee Google), Facebook, Oracle, Intel, etc.) are worth more than $2 trillion. A GDP of $2 trillion would put a country in the top ten in the world, ahead of Canada, Russia, and India. The wealth concentrated in Silicon Valley has driven up median home prices to over a million dollars and is unprecedented in history. This doesn't just create wealth; it reveals and creates poverty. In Silicon Valley there are tales of people making $80,000 a year who are homeless. That's a distinct kind of poverty.

But it's worth examining the reality of this new, entrepreneurial economy in which incomes are growing more than ever.  A higher percentage of households are making income over $100,000 than ever in history. 

Meanwhile, there has been a drop in the percentage of households making under $100k. 

Income is going up. Not for everyone but for a growing percentage of Americans. This is not an impossible problem to solve. Policies that would please Dickens and the religious leaders from Confucius to Christ are simple enough. We take some portion of that new wealth and income and use it to mitigate the poverty of those who haven't been brought along by the gains of the new economy.

For some this is offensive, suggesting that we're rewarding those who can't find their own reward in the market. It's naive, though, to believe that we live in the first period in history in which poverty has disappeared. 

Whether this new economy will drive changes as sweeping as those defined by Dickens and Buddha or simply affirm the relevance of their insistence on compassion in the midst of progress has yet to be seen.

19 May 2016

Donald Trump - Brought to You by the 24-7 Media

Donald Trump is a media creation.

First, they created him by focusing on all that is bad and alarming. Outrage is good for ratings and they've kept anyone who will pay attention outraged since the emergence of 24-7 news. When you are outraged, the only thing you can agree on is that the status quo has to go and that even an outrageous candidate is better than none at all.

Second, they've enabled him by taking him seriously. Trump hasn't a clue about anything and yet they report on his candidacy as if it were a serious thing worthy not just of consideration but incessant focus. They've learned that the only thing better for ratings than alarm is Trump and so have focused on him as a ratings bonanza.

Our understanding of our world outside of our immediate experience is mediated by the media. There is no good reason that a reality-show star should become president except that he's already shown his ability to get ratings. Shows that get good ratings get renewed and shows with bad ratings are cancelled. The rest of the Republican field was cancelled and Donald has each month been renewed because he is best for ratings. Given the media's focus, the American people have decided that he must be the real deal.

It has become increasingly clear that Trump is going to become president and there is absolutely no good reason for this except for what he does for ratings.