30 April 2009

Torturous Logic

There is lots of news and commentary addressing the question of using torture. The typical arguments against it revolve around the notion that we are better than that, torture is not effective (a person is pain will tell you what you want to hear, regardless of whether it is true), and torture violates domestic and international law. I haven't heard what is, for me, the most important reason for this.

There was a time in our history (think Spanish Inquisition, witch trials or any inquiry by an angry or frightened dictator) when the interrogation methods were essentially punishment. If such interrogation methods were legal, trials were essentially meaningless. If you could be put on the rack and your bones broken in the process of trying to extract a confession or "gather information," then the fact that you might eventually be found innocent is rather poor consolation. Torture as a means to extract a confession is essentially a guilty verdict without a trial.

The modern world with rights for the individual is at odds with torture for this reason. It is both this simple and this complex. Once you begin torture as a means to determine guilt, you've corroded rights.

28 April 2009

Reality Again Trumps Your Blogger's Feeble Imagination

In the media's race to be first with the breaking news
Judging from the timing of the reports on it, it would seem that the most remarkable thing about Obama's first 100 days is that it took considerably less than 100 days.

Swine Flu
As if the Wall Street crowd did not have enough grief, what with bankruptcies, bad credit, collapsed portfolios and bad press surrounding tax-payer subsidized bonuses, there is now an influenza virus that seems to be aimed directly at them. Fortunately, what seems to be the most obvious symptom - a blue face mask - also works well to hide shame.

And speaking of Republicans
Arlen Specter of Pennsylvania has become a Democrat, leaving Democrats one former SNL comedy skit writer away from a filibuster proof majority. Obama's approval numbers are running at about 37.5x Bush's approval ratings in spite of his spending billions a day. And consumer confidence rose by more points in a single month than the Detroit Pistons managed to score in their series against Cleveland.
Remember when you wondered how the Republicans could seem to get away with re-electing George W.? They didn't. Time rarely sides with madness.
On a related note, in an attempt to boost sagging revenues, Fox News has begin to take bids from Americans competing to be the first to take up Sean Hannity on his offer to be waterboarded.

An Air Force of None
Air Force One was flown over ground zero in New York as part of a publicity photo shoot. Panicked New Yorkers emptied out into the streets. Obama has promised that this will not happen again. He explained that this distraction from the economy was planned before the threat of a pandemic had already seized headlines. As part of his stimulus package and plans to restructure the military, Obama is nonetheless moving ahead with plans to promote the sale of anti-aircraft guns to neighborhood watch groups.

Sarkozy's Bold Plan
The French, showing themselves more innovative than us in concocting stimulus packages, have announced that X-rated photos and videos of Carla Bruni - their first lady - have been stolen. The media coverage surrounding this material could, alone, be enough to stimulate the economy. Or at least economists.

I Have Something to Tell You With This Tomato
Russ Douthat, who I used to think of as an interesting writer, suggests that Cheney should have run for the presidency so that Americans could have judged his record. It might have made more sense for him to have sat in stocks for week so that the country could have expressed its appreciation.

Psychic Finds Airborne Chihuahua
And in what must surely be a metaphor for the times, fierce winds in Detroit actually blew a six-pound Chihuahua about a mile away from its owners. (Who had taken the dog to a flea market. Isn't that just asking for trouble?) As if that was not enough oddness for one story, the dog's owner's contracted the services of a dog psychic who led them into the woods to their dog.
And then the psychic made blowing sounds, began to flap her arms and seemed to "glide away" from the stunned couple.

26 April 2009

This is me cautiously appluading

Bush rather casually decided that laws applied to him only as he saw fit. He was - with Cheney's seeming encouragement - an elected dictator. Rather than abide by laws, he apparently thought that as executive he could decide which of the laws applied. This was true even of bills that Congress sent him.

Obama might have just avoided falling into the same, "laws don't apply here" approach. Earlier, Obama said that he wasn't sure he wanted to open up investigations into the torture that was authorized by the Bush administration. Like Bush, he seemed to think that he had discretion about which laws to apply, which wrongs needed to be investigated.

The first step to returning the presidency to its rightful place as beholden to laws and the constitution is for Obama to set aside his squeamish feelings about possible prosecutions against Bush administration officials (including the panicked Dick Cheney). This is not his call and I'm glad to see that he's decided to turn this over to the Justice Department. Executives can't cherry pick which laws they apply.

25 April 2009

Capping the Pay of Bank's CEOs

We can't escape the importance of financial institutions to our economy. If large banks and financial institutions collapse, we're hosed: credit markets keep us from third-world lifestyles.

In practice, this means that banks get to be free market profiteers when times are good and public beneficiaries when times are tough. It's not obvious that we'll ever get away from this reality, so here is my simple suggestion about how to address this: make CEO pay in these institutions a function of the pay of the average worker. Align their interests with that of a normal guy like Blogger Bob.

I think we can work out something like the pay for the nation's chief executive,as can be seen in this simple table comparing the ratio of the President of the US's pay to the average worker to the ratio of CEO's pay to the average worker.

I like what we've done in the public sector. The president makes a lot of money but it is not an outrageous sum, unlike CEO pay.

Banks and financial companies are some of the worst at creating pay inequities. Goldman Sachs CEO made $70 million in 2007 and Goldman’s two COOs made slightly more - $72.5 and $71 million. Lehman Brothers CEO made $34 million in ’07, the year before his company went bankrupt. And yet banks are sort of in the public sector. At least, that is, we're on the hook for their mis-management.

The deal should be simple: if you need the insurance of the U.S. government (and any bank beyond a particular size needs to be required to avail itself of this insurance), then you fall into the world of public sector. That is, your CEOs' salary will be capped in a ratio roughly related to that of the President's.

Feeling generous, I wouldn't even require that these CEOs limit their pay to today's presidential ratio of about 13X. I would even let them return to 1960's ratio of president's pay to average worker, a ratio of 25X.

One thing that I naively believe about this arrangement is that it could help average salaries to move upwards. Investment decisions can have huge impact on average salaries by influencing productivity and the creation of good jobs. CEOs of financial organizations might be more considerate of the impact of their investments on average salaries, eager to bump them up, stressing investments that translate into higher pay. If they could raise the salary of the average person by even $1,000, they'd get another $25,000. This seems like the right incentive to me.

CEO pay is outrageous. Still. One great place to begin rectifying this is in the quasi-private / quasi-public arena that is the modern bank. And what better time to do it than now, when banks are so obviously tangled with the public interest.

22 April 2009

The Last Sure Thing

My friend Beth is in the Netherlands, looking into rumors that originated from a rogue group of economists who believe that investment markets go through very, very long cycles. Their theory? The next big thing is going to again be Dutch tulips.

It would be irresponsible for me to advise you to move ALL your money into tulips, but I'm pretty excited. I have evaluated my 401(k) and if I move quickly, I still have money enough left to buy 2. Tulips that is.

I just hope this works.

Self-Licking Ice Cream Cone: the real financial invention

"Word of the Day today is LIQUIDITY. LIQUIDITY is when you look at your Retirement Account and wet your pants."
- Allen Warren

The folks at etrade sent me a note that starts out:

Not surprisingly, the long and painful bear market has pushed a lot of money to the sidelines. At the end of 2008, cash in money markets and bank accounts had reached nearly $9 trillion or 74% of the value of all publicly traded stocks in the U.S.!

That was the highest such ratio since 1990 — and it would only take a portion of that money moving back into the market to have a powerful effect on stock prices

One of the things that I find so fascinating about social reality is how it differs from physical reality. It does not matter whether you suddenly think that a bowling ball is as soft as a marsh mellow - if you drop it on your foot you will feel intense pain. By contrast, if you suddenly think that that stocks are a bad investment, you'll get evidence of just this thing.

There are real and legitimate reasons for markets going up and down. Having said that, there is a great deal of "me too" money that chases after the trends of these dynamics, the money that makes the bubbles and the bubbles pop.

Right now, there is about $9 trillion waiting for stocks to become safe again as an investment. When will stocks again be a safe investment? When that $9 trillion stops waiting.

What do you think is true about financial markets? The real answer is, Whatever you think is true about (or in regards to) financial markets. Of course, as arbitrary as this seems, it can't just be manipulated at will. It's worth remembering that the publishing industry phenomena the year before the financial crash was The Secret.

How could anyone not find cultures, societies, and markets fascinating?

19 April 2009

The Bubble Media - A History of the Future

It turned out to be a simple thing, really: there just was not enough demand for facts to sustain profitable news organizations. CNN laid off a large group of science writers. Newspapers closed. As blogging became easier, the ratio of people writing to the facts actually reported reached an historic high. And then went higher. It was a bubble waiting to pop.

Some folks were happy to hear that all religious people were nuts. Facts were fabricated, distorted, and filtered to support this viewpoint. Others were eager to hear about how distorted and fabricated is science. More facts were fabricated to support this. The market provided facts for which there was demand.

As it turns out, there was no real demand for the truth. The truth was too messy to neatly fit into any one theory or viewpoint. It was not simple. It didn't really support anything as simplistic as conservative or liberal, material or spiritual distinctions. Tolerance for the facts required a kind of tolerance for ambiguity and lack of resolution that most people found distasteful. TV news was always secondary to the drama, comedies, and entertainment on TV. But once newspapers dissolved in the early part of the 21st century, movies became the preferred form of news: by contrast to actual events, movies offered revenge for the oppressed, engaging and attractive personalities, discernible plot lines, and resolution in less than 2 hours. The way that past generations had clung to tribal myths and persecuted those who might advocate the empirical method, the developed world began to cling to movie myths at the expense of reality and people who struggled to report it.

In this sense, the 21st century did turn out to be the virtual reality century. What few had considered was that this virtual reality would use humanity's oldest operating system: the belief systems and imagination of groups.

It was this decay in thinking and disconnection from facts that, finally, undermined society. Not war. Not climate change. Not discrimination or financial collapse. It was, instead, simply a growing disinterest in the facts. Pity, really, because it had been a wonderful civilization.

15 April 2009

The Taxman Cometh

It seems obvous that everyone would be anti-tax. Actually, the anti-tax movement is a strange coalition of the haves and the have-nots. (This leaves out the have-somes, a category into which most of us fall.)

The haves like the anti-tax movement because the only option to taxes is debt. Debt needs to be financed and an investment that pays more than inflation is a great way to protect one’s wealth rather than risk it. (If you are rich enough, returns of 20% or 5% won’t make much difference in your lifestyle: losing 50%, however, might.) The haves love government debt because there are few investments so safe.

The have nots like the anti-tax movement because government spending does not so obviously benefit them. For instance, spending on advanced education might raise incomes but not for those in the little rural communities that lose their best and brightest to far away universities and even farther away companies. The fact that rural areas are heavily subsidized by urban areas in the form of transportation and agricultural subsidies (among others) is invisible to these folks: what is visible is the obvious wasteful spending on things that they can't relate to: things like obscure research, bailout of banks, sex education.

On my way to dinner tonight I found myself in the midst of a sea of anti-tax protesters. I heard one acknowledge another's sign, promoting fairtax.org, and then continued with "What I really want is no-tax.org."

The populist notion is that taxation is a form of extortion. But there is always extortion. Mexico’s tax rate is only 18.5%, but the weak government is no match for drug lords who extort the population at will. Communities always have someone stronger, someone with guns, able to enforce rules and “extort” money. Better to make those parties at least somewhat accountable through elections, laws, and some form of oversight. The resistance to taxation that assumes that a world without a government as one without extortion comes from a mindset that ignores history.

We’ll always have an anti-tax movement in this country. Given that it promotes deficit spending, though, it simply encourages more government spending than we’d otherwise need or want. When we don’t have to pay as we go, we spend too much. The real irony of the anti-tax movement is that it is fueled by the rage of the have-nots and yet it helps to finance the contentment of the haves. Funny how that works. You might think that this would just make the have nots angry, but I guess that their rage is already directed elsewhere.

13 April 2009

Pirates! You've Seen the Movie - Now Watch the News!

“It’s Disney’s fault,” Maddie sat down breathlessly.

“What?” Bernard didn’t have a clue what Maddie was talking about.

“The pirates. They’re Disney’s fault,” Maddie asserted with a nod.

“Disney because …? “

“Well, they’ve changed the image of pirates. With Peter Pan, pirates were evil. Nobody liked Captain Hook. Now with that Pirates of the Caribbean movie, they’ve made being a pirate so glamorous. Why wouldn’t those Samoan boys want to be pirates? They all want to be like that French-loving Johnny Depp.”

“That’s actually Somalian pirates,” I said, trying to help.

“4 third-world teenagers with guns and we send the navy after them. This is how much the threat to our way of life has degraded and how desperate the media is for a story and the politicians for a sense of purpose and reason to spend more on defense.” Bernard was disgusted.

“This is a big deal,” I said, touting my newly acquired knowledge about the boat-jacking pirates.

“It is,” Bernard raised his eyebrow skeptically.” Really?” He shook his head and said, “This is the story du jour. It’s a cheap way to sell news. And it leaves us with the question we always get with the media: does it still qualify as focused if we’re focused on distractions?”

“Du jour!” Maddie looked alarmed. “Since when did you decide to be like Johnny Depp?”

Bernard rolled his eyes. I am not sure if he did it out of exasperation or intentionally, but I could have sworn that he uttered a pirate’s ARGH.

POTUS - Text Me!

Americans realized that the president came from a new generation when he began texting the polity through freeway signs. Many found it disconcerting to see messages like,

"Cngrs! So dum! LOL!"

10 April 2009

Bernard Questions the Direction of Causality

Bernard got right to it. “Do you suppose that we’ve got causality backwards?”


“Well, we think that the event that comes before causes the event to follow.”

“Ah. You are talking about the hic hoc postal ergo hoc fallacy?” I said, proud that I’d remembered this from my philosophy class.

Bernard frowned. “You mean post hoc ergo propter hoc?” he queried. “Since an event follows another it must have been caused by it?”

“Uh, yeah,” I said. Suddenly drawing a complete blank on what I’d just said or how I had pronounced it. “Isn’t that what I said?”

“Sort of,” he said, wrinkling his nose. “But no, that is not what I am talking about.”

“Oh,” I said in what I hoped was an intelligent tone.

“I’m talking about something broader than that. We know that just because an event comes before another it did not necessarily cause it. But we also know that cause comes before effect. We know that if something did cause something else, it always happens first. But what if that is not the case?”

“What?” I asked, baffled.

“Well, look at it like this. All your life you have seen wind blow. You know that when things move, the movement comes from being pushed, being blown away. And then one day someone turns on a vacuum cleaner and now things don’t move because they are blown away. They move because they are sucked in. In our models of the world, causality is blown away from the cause, comes after. But maybe effects are sucked towards the cause, effects come before.”

“Got it.” I thought. But was not sure.

“Well what if causality were like that? What if the past didn’t cause things? What if the future were the cause of things? We get sucked towards a future rather than caused by our past?”

“Are you arguing for predestination?”

“No. I think that the future has infinite options. It is just that we’re pulled forward by these possible futures.”

“But you have to admit that some things are caused by past events. A boy sets a fire and the hillside erupts into flames. The event before caused the wildfire after. Right?”

“What if that is simply a failure of imagination? The past event causes the next because it came before? The invention of the telegraph, for instance. You think that was caused by what came before? Or do you think that it was caused by a possibility – what came after?”

“So, you think that the notion of causation ought to be replaced by the notion of possibility? Or you really saying that causation works from the future to the past?”

“I’m really saying that the two ideas are the same. Current events are caused by future possibility. I think that we keep looking into the past to see the cause and we should be looking to the future.”

“Bernard,” I rubbed my forehead. “Some days you give me a headache.”

“It’s probably low blood sugar. Here,” he handed me the menu. “Order something to eat. You’ll feel better.”

The prospect of food did make me feel a little better. Maybe his notion of causation was worth considering. Did the hunger cause me to order or did the prospect of food cause me to order? Wait. Just as it seemed that Bernard was starting to make sense, I lost it again.

Bernard smiled. “You think I might be on to something?”

“Yes Bernard, I do think that you might be on something.” And then I looked for our waitress.

"'Hip hop, postal hick,' fallacy" Bernard shook his head disgustedly. "It wouldn't surprise me if someday you get a recall notice from your alma mater, asking you to send your degree back."

09 April 2009

A Private Sector Bailout for Detroit

Last year, GM lost $30.9 billion.

Exxon made $45.2 billion.

The solution to Detroit's woes seem obvious to me: Exxon buys GM and simply begins a give away program, getting the money back at the pumps. It's like giving away razors in order to sell the replacement blades. If people weren't driving cars, Exxon would have trouble making money. They need the auto industry. Why not simply buy it in order to keep it safe?

Besides, Exxon's profits were more than Google's and Microsoft's combined. If they can't make the auto industry profitable, maybe it's time we tried biking.

07 April 2009

My Degree Has Been Recalled (or, the perils of blogging)

As I read the letter, icy fear gripped me. My hands were cold and clammy by the time I was done. It was from my alma mater. And I quote.

We are issuing a recall notice for your degree.

You may know that in this economic downturn, it is becoming increasingly difficult to attract students able to pay tuition. For this and other reasons, we are making a concerted effort to improve our image. We are appealing to graduates for donations, focusing our research money on projects we think are more likely to bring prestige to the institution and we are instituting a quality control program.

We have read your blog. We find it appalling that you would make the claims you do after having sat through classes at our august institution. We can only conclude that you either cheated your way through, have been hit with early onset dementia, or have been kidnapped by one or more irrational ideological
groups and brainwashed. In any case, we do not recognize your thought processes as at all related to the fine work of the professors who taught you.

You need to send back your diploma. Either that or stop expressing your opinions in public. We cannot afford to be associated with you.

If you would still like to boast of a degree from our college, you can contact our admissions office to schedule remedial education sessions. A cursory glance at your writings suggests that for you the sessions would probably require a commitment of 2 to 3 years.

You have until June 15 to return your diploma. At that time we plan to award it to a more deserving young mind, one we would be proud to have represent us. Please do not force us to resort to more public forums as we de-confer you degree.

Thank you for your understanding. We look forward to settling this peaceably.

I was afraid this would happen. Even worse? It is from the community college I attended.

What Color Is Your Bungee Cord?

I think that it's time we stopped fooling ourselves. It is getting harder and harder for young people to get started in life. They leave home. They come back. They leave home. They come back. They make the leap and come springing back.

It is time to replace What Color is Your Parachute? on the bestsellers' list and replace it with What Color is Your Bungee Cord?

If you don't see much of me at R World, you'll know what's going on. I'm at work on the book that alternates between chapters on boldly setting goals and pursuing your dreams and then inconspicuously changing your plans while you move back in with your folks, working a job in the service sector.

06 April 2009

Manufactured Scarcity and the Lesson of Losing

You have to love the NCAA playoffs. Start with 3 million high school players. Take only 35,000 into college programs. Let only 24,000 play more than a minute or two. Then put 64 teams into a tournament to determine who is the national champion. Eliminate 50% of the contenders in each round. Let one team remain. [Okay. I totally made up the numbers up to the point of 64 teams. This is a blog, not a newspaper. I don't have a research staff.]

My favorite bit is what happens to each team as they exit, the lesson in the primacy of losing. It does not matter how many games a team has won up to this point, the one game that they remember, the one game that defines their season, is the loss.

I wonder if it is true that as societies become more affluent and less subject to actual scarcity (all of these student athletes have enough to eat, to learn, to wear, are healthy, etc.), if manufactured scarcity does not become more important. Because if you think about it, that is what a tournament does - manufacture scarcity.

In order to build character, we need goals that teach us how to handle losing. I say it only tongue in cheek that I love how 63 teams entering the tournament are guaranteed to be "losers." If this makes all but the final team feel a little more apathy, a little more understanding of people who really have lost, then the fact that the tournament produces so many more losers than winners actually serves a purpose.

At least losers have played. That's something.

05 April 2009

Bigger than a Mushroom Cloud

I fret about Obama's economic plan ... his enthusiastic spending ... the way he's taking on everything at once ... and then he does something like this ...

Obama outlines sweeping goal of nuclear-free world
PRAGUE – Declaring the future of mankind at stake, President Barack Obama on Sunday said all nations must strive to rid the world of nuclear arms and that the U.S. had a "moral responsibility" to lead because no other country has used one.

There is, to me, no clearer sign of madness than the inclusion of nuclear bombs in any nation's arsenal. They prove that for a couple of generations the nation-state was more important than humanity. And Obama has had courage enough to say that we need to get rid of them.

Suddenly, I love this guy again.

01 April 2009

Now This is Too Much Government

I am a moderate liberal, not a conservative or socialist. Conservatives believe that markets always work and big companies are better to be trusted than big government. Socialists want economic equality and trust big government more than big business. A moderate liberal - as I define it - thinks that government and business need each other as checks on excess and both need to be regularly and seriously questioned by the angry - or even just curious - masses who will otherwise become tools of these institutions. Conservatives believe that individuals have to make it on their own and socialists believe that the individual is merely a product of the state. We liberals believe that the role of government is to provide opportunities (e.g., health care, education, and well regulated markets) for the individual because no one can make it on their own but the individual should nonetheless be free to define his own life. Not the controlling government of socialists or the abandoning government of conservatives but, instead, a government that enables individuals.

One of the problems with being a moderate liberal is that one can't simply say that government or private sector is the solution. For me, the answer is "it depends." Markets fail and we need to intervene at times (for instance, the market for educating children living in poverty is almost nonexistent and we need the government to step in with money), but markets are generally the best way to allocate scarce resources (children and their parents should have choices about educational philosophy and schools and these schools should thrive or fail based on how well they shape and/or meet demand).

So, when it comes to CEOs and the power they should wield, I think that the current power structure is tilted towards CEOs. Someone needs to intervene. I'm not exactly a conservative on this matter of leaving companies to behave as they wish. But I don't think that Obama - or his staff - have any uniquely qualifying abilities to choose the CEO who'll enable an automobile company to prosper. For me, the notion of Obama and company making the decision to oust GM's CEO Wagoner is the low point in his presidency.

What is the quip? You can trust a man who knows his limitations? If Obama is now pretending to have expertise in corporate management, he's certainly failed that test.