Muslim Extremists and Why the West Needs to Start To Take Meaning Seriously

Thanks to Thomas Jefferson, the US was founded not just with religious freedom but freedom from religion. Others wanted to have a church-member in good standing requirement for politicians that he dismissed.

There is, in the West, still a misunderstanding about religious freedom. You can hear it in this video when the Muslim extremist protests his lack of freedom to take away the freedom of another person. ("Why can't I tell you to cover up? Where's my freedom?") You get an insight into the minds of religious extremists in this remarkable piece of reporting from Clarissa Ward. What has fueled progress in the West is that we no longer bind people to the unproven - and unproveable - beliefs of others. The simpletons she interviews - whether intentionally or unintentionally - don't get that distinction.

60 Minutes: Recruiting for ISIS

One would hope that people in the West would gather at least two lessons from this video.

One - particularly for the US - we can hope that anyone who wants to impose laws on others because of their own religious beliefs will see how absurd that is. The simplest difference between good religion and bad may simply be whether it is imposed on others or on one's self. You believe that at the moment of conception a zygote is fully human? Fine. Impose that belief on yourself but not another who might feel that sperm and egg aren't human until weeks or months past the point of conception.

Two, it's long overdue for the West to offer young people an approach to life that gives their lives meaning even if they aren't the best, aren't great athletes, celebrities, or rich. We tell them the game is to become these things but don't tell them what to do when it looks as though they won't be winners in this game. That can lead to a crisis of meaning that neither markets nor elections can address. There has to be more to life than capitalism and democracy but in the West such matters are not part of the public sector. If you feel alienated from this system, you're vulnerable to extremists beliefs like the characters Ward interviews.

We need to take meaning more seriously, to help people to construct meaning even while insisting that beliefs that can never be proven never be forced on others. This is no trivial task. In fact, it might be as big a challenge as the work of John Locke and Thomas Jefferson to articulate and enact religious freedom. It's a project worth taking seriously but one that the  modern West has - so far - left to pop songs.

Three Lies Politicians Are Telling You

Here are three lies politicians are telling you.

The Lie: I'm a successful businessman so I can be a successful politician.
The Truth: This is like saying, I"m a good dancer so I can play piano well. It's possible but the two are very different. You can't layoff bad citizens. You can't target market only certain taxpayers. And what's the equivalent of profit for a government? Surplus? It's a very different thing to make average people successful than it is to prove that you're special and yet - of course - campaigning is about just that: making the argument that you're special.

The Lie: The economy is like a household.
The Truth: This is like saying that the ocean is like a cup of salt water. This would just be a silly comparison if it weren't so dangerous and believed by so many. The economy is defined by dynamics that a household simply doesn't capture.

The Lie: I'll go to Washington and make a difference.
The Truth: Bill Clinton once said that being president is like running a graveyard: you've got a lot of people under you but no one is listening. And in this election, you're not voting for a president, easily the most powerful person in DC (and yet still not that powerful). You're voting for a senator or representative at the national level. Those people represent 1 out of 535, not even one percent of the people who influence legislation. The best bet is that the guy you vote for won't make a difference.

How Google Creates Income Disparity (Or How Google Has Confused Their Ability to Hire Great People With the Ability to Make Employees Great)

Jonathon Rosenberg and Eric Schmidt have just published "How Google Works." Recently Yahoo CEO and former Google employee Marissa Mayer interviewed them about it at the Computer History Museum.

They had some great insights about the direction of technology and how to give talented people a degree of autonomy to work on products they were passionate about. I nearly missed that, though, because they started out with completely inane advice that they didn't even realize was inane.

Their foremost advice was to hire highly creative, driven, passionate, smart people. And as proof that their approach works, Schmidt mentioned that the most interesting startups and Google projects were run by people hired under a program that Marissa Mayer developed to recruit and cultivate such people.

This is obviously impeccable advice. It is also - less obviously - irrelevant to most companies. It's like Harvard or Stanford telling other universities that they should only admit amazing students with the highest SAT scores and most interesting backgrounds.

On average, the average company is going to hire average people, just as the average university is going to accept the average student. Presumably, every company will try to hire the best employees they can and every university will try to enroll the best students they can. And because Google is in such an amazing space right now - flush with resources and a culture of the best and brightest - they find it easy to hire the next best and brightest person. That's not advice though, anymore than Angelina Jolie might advise an aspiring actress to be seen as the most beautiful woman in the world.

There is a huge difference between creating a company that would make average people accomplish extraordinary things and a company that will allow extraordinary things. To Google's credit, they seem to have created an organization that allows extraordinary people do extraordinary things. Not every company does that. That's a huge plus. But it's not obvious that they've created a company that average people can use as a template for creating something extraordinary.

It's easy to say that such a thing is not possible but if you compare the productivity of modern employees with that of employees from 100 or 200 years ago, it's obvious that progress depends on enabling the average person - that individual who is in the 50th percentile - to do something better and more remarkable than such an individual could 5 years earlier or 30 years earlier. Comparing things historically, we have enabled the average person to do extraordinary things. By the end of the 20th century, progress had enabled the average person to be six times as productive, even while reducing the average work week from 6 days to 5. More recently, though, that hasn't happened.

Median household income is no higher than it was twenty years ago. There are a lot of reasons for this but maybe an overlooked one is how companies like Google are doing so much to select out the best and brightest and mistake that for making the average person more productive. Our strongest institutions - from Google to Harvard - aren't just ignoring the bottom 10 or 20% but are actually ignoring those outside of the top 1%. It might be that because of this, it's no coincidence that the divide between rich and middle-class is growing.

From Lean Startup to Lean Schooling - What if Students Were "Graduated" Every 10 Weeks?

One of the central ideas of the Lean Startup by Eric Ries is the idea of Minimum Viable Product, or MVP. The purpose of a MVP is to release a product as quickly as possible in order to begin gaining market feedback. The biggest waste is making a "great" product for which there is no market, so the more rapidly a startup learns whether it should persevere or pivot (change key features, target a different market segment, etc.) the more likely its success. Product release and re-direction that might take traditional product development teams a year or two could be happen in weeks or months instead. A company practicing Ries' (and Steve Blank's) method could have made dozens or hundreds of release iterations in the time a traditional company might take to make its first release.

Think about that concept applied to education. Even just the education after high school. Our current university system - largely invented by Wilhelm Humboldt nearly 200 years ago - wastes billions in budget and costs graduates trillions in lost income. The waste is enormous.

As it now stands, an 18 year old chooses a major, a direction in which to take her life, based on some vague notions of joy in work, income, and their own interests and strengths. But for far too many students, they invest four to six years of their lives, pay tens of thousands in tuition and forego perhaps a hundred thousand in income in order to get a degree that ends up peripheral to their career. The first real feedback they get about whether this major is going to create opportunities to work with the sorts of people they enjoy, doing the sorts of tasks that engage them, creating value for markets able to reward them is after graduation. Some - many - go back to school for graduate or professional degrees after getting feedback on their bachelors degree but these, too, often result in unhappy careers. I recently had a lawyer tell me that, based on her experience, about 80% of lawyers hate their career but can't go into anything else because they are burdened with student loans that preclude a change.

What if, instead, universities practiced a variant of Minimum Viable Product? Instead of rapidly releasing products for feedback - products that are continually revised based on real market response rather than speculation - universities could rapidly "graduate" students to enter the market? What if students were put into the work place within weeks of when they started university? Say at the end of a 10-week quarter? And then returned to university 2 to 10 weeks later with real data they could use to steer their education.

One huge difference is the difference between students and products. Products don't care about what market they land in or whether they enjoy their customers or not. Students do care and deserve real-world experience in a work place to learn whether the sorts of people they'd work with (and customers they would serve) are people they'd enjoy working with or for. They'd begin to collect data based on their own experiences, from the nature of the work to the experience of the paycheck. They begin to learn whether this work was more conducive to the experience of flow or frustration.

In the world of products, the releases never stop. Ries cites examples of companies that make dozens of software releases a day, A product is continually evolving, continually changing and (hopefully) improving. Students could do something similar, going through this continual process of "graduating" into the market every 10 weeks for 2 to 10 years, depending on the nature of their study and the direction their interests, passions, and market demand take them. Just as in today's world, some would walk away with the equivalent of an AA and some a Ph.D. But the difference - and it would be a huge difference - is that their degree would be the product of continual contact with actual work experience. The possibility of disenchantment with that career would be lower - or at least would be informed by actual experience of it rather than speculation about it.

It would be easy - and reasonable - to suggest that this is impractical or that internships already exist or that students can already work part-time jobs to get such experience. But the school system is not set up to ensure such on-going contact with the experience of work. Only a few students are able to create or find such experiences. A society willing to invest billions in education and expecting young people to invest years of their life should be able to systematically create such experiences. (And if there are not enough opportunities for working in a particular field, that could work as a brake on new students entering that major. Why invest another 2 to 10 years in a career for which you can't even get a few weeks worth of work now?)

Education matters too much to defer feedback on it to the very end. By whatever means, universities need to take more responsibility for letting students learn from the market and their own experiences and not just learn from professors and textbooks.

A Museum of What Has Been Lost - Starting With the Story of How After the Mona Lisa Was Stolen The Lines at the Louvre Grew Longer

The Mona Lisa was stolen in 1911. More people lined up to see the blank wall on which it had hung than had previously lined up to see da Vinci's actual masterpiece. It seems to say a great deal about human psychology that we focus so much on what is missing.

It seems fitting that Franz Kafka cut short his vacation to rush to the Louvre to be a part of this event that could have been described as Kafkaesque. Of course any reputable country music artist could tell you that songs focusing on what is missing hold our attention.

This suggests the possibility of opening a museum of lost objects. (For one thing, acquisition costs would be incredibly low.)

Within the museum could be rooms of empty space, each blank space a tribute to lost art or literature. The Greek tragedian Sophocles produced about 120 plays, only seven of which have survived into modern times. "The scholar Didymus of Alexandria earned the nickname 'Bronze-Ass' for having what it took to write more than 3,500 books; apart from a few fragments, all have vanished."* Of the seven ancient wonders, only the Great Pyramid remains. What we now have saved in traditional museums is just a fraction of the great works that existed once upon a time. There are hundreds of museums filled with items that have been "found." This museum of what has gone missing would be the one museum that could be labeled "lost."

Perhaps along one wall of this special section of what is missing could be a place where people - along the lines of PostSecret - wrote down some of their deepest losses, from opportunities to great loves to being able to run without aches. It might just be that people would line up to see that. 

* pp. 81-2 of Stephen Greenblatt's The Swerve: How the World Became Modern

Stupidly Predicting the Stock Market (Fools Rush in When Angels Dare to Sell)

If you want to look foolish, predict the stock market. Given I've just tweeted a jobs report prediction (over 300k for October, to be reported in early November), I may as well set myself up for a full prognostication pratfall and add the stock market as well.

The S&P 500 is up only 1.4% from the start of the year. For all the talk of an over-priced market, that's not exactly indicative of a bubble. And if you go back to pre-dot.com bubble, to Jan 1997, the annual return since then works out to fairly pedestrian 5.5%. Again, that's not exactly outrageous. From a long-term perspective, the market has plenty of room to rise.

Secondly, the Eurozone has serious structural issues. It is unlikely to hit strong growth in less than 1 to 5 years, so it won't be much competition for investment dollars.

Emerging markets are due to rise again - given their stage of development they could probably put capital to the most productive use - but it's going to be hard for them to begin exporting at the proper rate when southern Europe and the US are trying to work down their current account deficits.

Bonds are risky investment alternatives. The Fed can't lower interest rates any lower and with unemployment now under 6% it's just a matter of time before they start raising rates. Worse, the global economy is still flirting with deflation, something that would make nominal bond rates fall. Both - or either - of these events will just cause bond prices to fall.

The smart money has left housing now that prices made a big shift upwards last year. Mortgage loan requirements are still harder to get than during the mid-aughts boom and likely will be for years. Home prices should edge up for homeowners, which is nice, but it's not obvious they'll rise sharply enough to attract a lot of investors.

Commodities will be hurt by stagnating demand in Europe. Oil prices are already falling and prices at the pump promise to edge close to $3 by year end. Gold is less alluring as voices like Glen Beck's are no longer able to point to record deficits as (their) proof that gold will soon be the only safe refuge.

All that to say that American companies - who have proven their ability to generate record profits even during a weak recovery much less what now (in the States) promises to be a strong recovery - are probably the only serious investment alternative. It would be lovely if stock prices were lower but I think we are in a period in which returns to capital are simply lower. Part ownership in a company through the stock market will probably be the best investment alternative we'll have for a significant part of a portfolio.

So, I'd look for a sharp rise in the market before year end. I think between now and December 31, the market could easily rise 5% or more. The result will be a fairly unimpressive year but it will have gotten their in spectacularly volatile fashion.

The GOP's List of Spectacularly Wrong - But Sincerely Panicked - Major Predictions

You can tell a lot about a worldview by how well it predicts. Of course worldviews are weird tools that can more readily shape us than we shape them. Because of this, even if a worldview is proven wrong we are likely to defend it.

Mitch McConnell is the minority leader of the US Senate. If he and the Republicans win the November election, he'll be the majority leader of the world's most powerful legislative body. In a recent interview, he criticized Obama for presiding over a "jobless recovery." Mitch has been in the Senate since 1985 and this year's job total will be nearly double the average during his time. (Okay - 1.85X, but that's pretty close to double.) It used to be that the Republicans limited themselves to bad predictions. Now, emboldened by a decade in which voters have not held them accountable for a worldview that predicts nothing accurately, they have decided to simply lie about current reality. It's not obvious that voters care; Republicans will probably win the Senate.

The Republican Party McConnell helps to lead has made predictions on a series of issues during this century, and their record is nearly perfect and worth reviewing.

1. Tax cuts will create jobs and won't create a deficit because the economy will grow so much faster.
2. Iraq has WMD
3. Iraqis will greet us as liberators.
4. Iraq will become a beacon of democracy in the Middle East, a model for other countries and help to stabilize the region.
5. Financial deregulation will make the economy stronger.
6. TARP will cost taxpayers billions.
7. The deficit needed for stimulus, to help the economy recover, is growing out of control and will take down the economy.
8. Obamacare will raise medical costs.
9. Obamacare will cost us jobs.
10. Obamacare will drive up the deficit, a deficit already out of control.
11. Obama can't control the border.

All of these predictions were made with great certainty, alarm in their eyes and conviction in their voice. So how did they do?

1. In the three decades before the Bush tax cuts were enacted in 2001, job growth averaged 19.8 million jobs. In the decade after the Bush tax cuts (2001 - 2010), the American economy lost nearly 2 million jobs. And the deficit? When Bush won office there was a budget surplus of $236 billion. A decade later, there was a budget deficit of $1.3 trillion, a swing from positive to negative the size of Australia's entire economy. It would be hard to imagine a scenario in which Republicans were more spectacularly wrong. But they didn't stop there.
2. It turns out that not only did Iraq not attack us on 9-11 but they didn't even possess weapons of mass destruction with which to threaten us or our allies. Nothing was found during the decade in which US investigators and troops scoured the country.
3. Iraq is now a terribly divided country. About the only thing that the major parties could agree on recently is that they wanted America out. 
4. Iraq has become a model of corruption and minority oppression. Millions have been displaced and hundreds of thousands killed. Neighboring countries are ravaged by civil war and now ISIS threatens to further de-stabilize the region. Worse, the various forces battling in this region are better trained and better armed - now able to kill more efficiently and effectively - thanks to a massive infusions of American money, arms, and training.
5. Bush raised up a vision of increased rates of home ownership, praised financial de-regulation and free markets. The subprime market that emerged out of this deregulation helped to blow up the global economy. The Great Recession caused unemployment to spike into double-digits across most high-income countries and the banking rescues cost trillions of dollars. Trillions. 
6. TARP - the bailout program that was a joint product of Bush and Obama administrations - not only stopped banks from failing but paid back billions to American taxpayers. 
7. The deficit that was seemingly growing out of control is now well under control. No one even talks about it. It is now at 2.8% of GDP (which is below average), down nearly a trillion from the peak it reached during the Great Recession. Neither inflation nor interest rates spiked as alarmists warned. 
8. Before Obamacare was enacted, per capita spending on healthcare rose about 4% a year. In the most recent 3 years, it was gone up 1.3%, the lowest 3-year rise on record. 
9. Obamacare will cost us jobs, Republicans warned. They are right about this. People who used to take a job just to have healthcare coverage are now using Obamacare instead. But more broadly, last decade's loss of more than a million jobs is on track to become a job gain of 20 million in this decade. A drop in the rise of healthcare actually helps American companies to be more competitive.
10. Healthcare costs drive the deficit. Now that healthcare costs are rising more slowly, revised estimates for this - and future years' - deficits have dropped. If Obamacare has actually helped to lower prices, it has lowered the deficit. 
11. Net immigration from Mexico is roughly zero (there are about as many Mexicans returning to Mexico as coming to the US) for the first time in decades.

The GOP's major prognostications of the last decade have been wrong. Spectacularly wrong. It isn't hard to get predictions wrong. Anyone who tries to predict makes mistakes. It is hard to so consistently be this wrong. Now, of course, the next line of defense against actually changing a worldview is to claim that the facts are wrong, to change labels, to simply deny. (It's hard to know where McConnell's "jobless recovery" claim falls among these categories. Is he denying the facts reported by the BLS? Does he have a new label for a recovery that creates jobs? Is he denying that the economy is creating jobs?) This mix of denial and dismissal seems to be the direction McConnell wants to lead Republicans in now. Sadly, I think they'll have a pretty good following. 

5 Reasons Boehner's Tweet Called Our Attention to 5 Points He Couldn't Make

Today, Boehner sent out this odd tweet, a "5 points for jobs" plan

The twitterati were quick to notice that he'd left these five points blank and filled them in for him. Rather than provide 5 points, I'd like to suggest 5 reasons he may have released such a list.

1. The GOP, the party of self- reliance, has finally adopted a "do-it-yourself" platform, inviting everyone to come up with their own jobs plan and filling in the blanks themselves. ("You better have a plan to get your own job.")
2. Boehner held up his hands to his staff, fingers splayed, and said, "My jobs plan has five points ..." and then, like Rick Perry listing government agencies that he would shut down, got stuck. Unlike Perry, Boehner was unable to even start his list.
3.   It is a surreal nod to laissez-faire capitalism, assuring voters that no matter how long the list, nothing will be on it.
4. It is a list of the legislative achievements of his 113th Congress. (This same list works for jobs, crime, environment, foreign policy, healthcare ... well essentially everything. No Congress has done less in terms of legislation.)
5. Boehner types out his own tweets on a modified IBM Selectric and accidentally hit one too many carriage returns as he was still composing his list.

It's Time for a True Patriot in the White House

Instead of the obligatory American flag lapel, it's time for presidential candidates to show they love every state and not just the country. I'd like to see them with a chest full of flag lapels to prove that they love Wyoming AND Vermont.

The puny little American flag could be replaced by a chest full of state flags, like medals on the chest of a general.






It would be great to have a medals race during the debates, each trying to out patriot the other. It might look something like this:

The Economy May Have Hit a Tipping Point for Wage Growth

It won't be until employees have choices about where to work that we will see wage growth, a key to progress. Ben Casselman reports at fivethirtyeight.com on a statistic that could signal a turn in labor market conditions.

Some people are unemployed because they lost their job. Others left their job or decided to rejoin the labor force and are looking for one. For the first time since the Great Recession began, the number in each group is roughly the same.

People don't leave a job unless they believe can do better. (Even if doing better means living closer to someone they love, working at a lower income.) Generally speaking, as more people leave jobs of their own choice, they head into better jobs. By contrast, when they are laid off, they often have to take lower-paying jobs. This difference in how they leave - of their own volition or because they are forced - could be the first strong signal that wages are about to start rising faster than inflation.

So many problems that people (rightfully) fret about, problems like stagnating wages and income inequality, might simply be the product of woefully inadequate job growth. It make take a decade of normal job growth to ameliorate these. The good news is that we're on track for creating about 20.5 million jobs this decade. The bad news is that we're coming off a decade in which we lost a million jobs and so far, we've gained only 9.7 million this decade. We're still coming out of a crater.

But with unemployment finally below 6% and still heading down, the labor market is healthy enough that it can start putting upwards pressure on wages.

Today's Jobs Report Sets a New Record for Consecutive Months of Job Creation

Last month the economy gained 248,000 jobs but today's announcement is for 317,000 new jobs since July and August numbers were revised upwards by 69,000.

The total for the year is already over 2 million with one quarter to go. Better yet, the fourth quarter has been one of the strongest during the recovery.

We're on track for the best year since 1999. 

This is now the longest uninterrupted streak of positive monthly jobs reports. For exactly four years BLS has reported net gains in job creation, matching the streak in the late 1980s. And this streak is almost certain to go longer. This in the midst of the Tea Party's near-government shut-down last year, Ebola panic this year, repeated Eurozone crises, Arab Spring, Russia's invasion of the Ukraine, and the fact that during no other recovery has the federal government been shedding jobs. There have been, in the parlance of the field, some strong headwinds. And during this volatile period, the American economy has created 9.1 million jobs, more than Japan, Western Europe, Canada, and Australia combined.

At 5.9%, the unemployment rate is below 6% for the first time since before the Lehman Brothers bankruptcy in September of 2008 that - for many - marks the beginning of the Great Recession. (In the 14 months after Lehman Brothers, the economy lost 7.2 million jobs, a staggering number.) Better yet, the rate at which the unemployment rate is dropping is accelerating. Accelerating at the point at which the longest previous recovery on record stalled. 

Perhaps the best news about this has yet to play out. For more than a decade, the jobs market has been weak. Imagine a rope that pulls up wages. If that rope is slack - if the unemployment rate is 6% or higher rather than 5% or lower, say - wages stagnate. We are entering a period in which the job market is finally strong enough to not just create jobs but to bid up wages. 

It might just get better. 

Entrepreneurship Can Be Taught - And Might Someday be Taken as Seriously as High School Football

A new study by Kathryn Shaw of Stanford provides data supporting the notion that entrepreneurship can be taught. 

I would assume that like art, football, or accounting, there are people with a natural aptitude for it and that anyone can become better at it with the right coaches and experience. 

Every high school student knows about successful, high-paid athletes in the country and has a team of coaches at their high school who can help them to become better at football or basketball. In 40 of the 50 states, the highest paid public employee is a football or basketball coach.[1]  Even though everyone knows that only a fraction of the kids playing football in school will go onto become pros, the ones who do are all the more adept at it for all the time they "played" in school.  There are one million kids playing high school football. 1,700 men play for the NFL. 

Imagine taking entrepreneurship even half as seriously, making sure that students weren’t just aware of high profile entrepreneurs like Gates and Zuckerberg but actually had coaches at school who could help to develop them. Even if just a fraction of the kids who "played" entrepreneur in school went onto become professional entrepreneurs, it could make a huge difference in rates of job creation.

Gallup CEO Jim Clifton, who has led the analysis of millions of bits of data on this topic, argues that “from all of Gallup’s data and research on entrepreneurship, what will most likely tell you if you are winning or losing your city … [is] 5^th to 12^th graders’ image of and relationship to free enterprise and entrepreneurship.”[2] 

Just as students now play sports, they could compete on business plans and they could launch startups as varied as for-profit businesses, social movements and bands. A community could work to team up aspiring entrepreneurs who have business savvy and new business models with aspiring innovators with technical skills and new inventions. There are already a smattering of people pioneering and advocating policies such as these; what they need to make an impact is a community primed to realize the importance of developing such strategies and programs. Who knows? Perhaps in 20 years the top paid public employee in, say, 4 states will be an entrepreneurial coach who has helped to launch dozens of successful startups, creating jobs and wealth in the process.

Here's a really exciting example of people taking this idea seriously coming from the thought leader Steve Blank.
http://www.inc.com/steve-blank/teaching-students-entrepreneurship.html

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[1] http://deadspin.com/infographic-is-your-states-highest-paid-employee-a-co-489635228

[2] Jim Clifton, The Coming Jobs War, Gallup Press, 2013. 

In Just 2 Years the Economy Lost 8.6 Million Jobs, Erasing 8.5 Years of Job Creation. It Took Only 5.5 Yrs To Recover

It was only six years ago that the Great Recession began in the Fall of 2008. Lest you yawn at this Friday's announcement of tying the record for consecutive months of job growth (9 million jobs created over 48 months) and last week's announcement of 2Q GDP growth of 4.6% (annualized rate), it's worth reviewing how awful things were such a short time ago. It could have been worse than the Great Depression. It certainly started out worse.

"Between March and September 2008, eight major US financial institutions failed - Bear Stearns, IndyMac, Fannie Mae, Freddie Mac, Lehman Brothers, AIG, Washington Mutual, and Wachovia - six of them in September alone. And the damage was not limited to the US. More than 20 European banks, across 10 countries, were rescued from July 2007 through February 2009."

The failures and near-failures weren't limited to just the banks in question. This rippled out. Credit dried up.

"The seasonally adjusted value of commercial paper outstanding in the U.S was $2,150bn at the end of June 2007. A year later, this had shrunk to $1,741bn. A year after that, in June 2009, it was down to $1,229bn. It had still not recovered in June 2013, when the outstanding amount was just $998bn. Asset-backed commercial paper, which is used to finance mortgages, shrank even more dramatically, from $1,200bn in June 2007, to $523bn  two years later and a mere $276bn in June 2013."

The result was a contraction in international trade, purchases, and hiring. Without financing, people don't buy cars and houses, start businesses, or hire employees. Financing is the support structure for the modern economy. Without it, GDP collapses.

"The volume of world trade fell by close to 20 per cent in the twelve months from April 2008, against around 10 per cent over the twelve months from June 1929. World equity markets fell by around 50 per cent over twelve months this time, against around 20 per cent in 1929-30. ...
Between the third quarter of 2008 and the first quarter of 2009, the annualized rate of decline in GDP in the six largest high-income countries ranged from 6.4 per cent in France, 7 per cent in the UK and 7.1 per cent in the U.S. to 10.2 per cent in Italy, 11.7 per cent in Germany, and 13.8 per cent in Japan."

In just two years - from January 2008 to December 2009 - the US economy shed 8.6 million jobs. To put that in context, in the seven prior years of George W.'s presidency the economy had created only 5.6 million jobs. In just two years, we lost 3 million more jobs than we had created in seven. It was as if every job created from October of 1999 forward had disappeared, 8.5 years of job creation erased. Fortunately, it took only 5.5 years - not 8.5 years - to recover those jobs.

The fact that in the wake of this financial crisis - a financial crisis worse than what triggered the Great Depression - we have tied the record for consecutive months of job creation is truly remarkable and worth celebrating.


Quotes taken from Martin Wolf's The Shifts and the Shocks: What We've Learned-and Have Still to Learn-from the Financial Crisis

“Can the U.S. economy be doing all that well if ‘Kidney’ is a common autofill?”

Two things can be true: the economy is getting better and things are incredibly hard for some people. The social safety net has holes in it large enough for entire families to fall through.

An article from Forbes' staffer Maggie McGrath about non-traditional measures of economic well-being includes this sobering statistic.

Data from Google’s search autofill — which updates the most likely completion of often-searched-for phrases, like “near me” or “that deliver” for the phrase “pizza places” — supports the food stamp data and the hunch that Americans are still feeling the ill effects of the recession. ConvergEx found that the phrase “I want to sell” autofills with “my car,” “my house,” and most concerning, “my kidney.” The word kidney has cracked the top three autofill results every quarter since the fourth quarter of 2013.

“Can the U.S. economy be doing all that well if ‘Kidney’ is a common autofill?” Colas asks.

Sitting Still in a Plane Moving 400+ miles per Hour - Why People Are Unimpressed with Economic Progress

Evolutionary scientist Richard Dawkins argues that there was no first human. The reason? The change in any given generation was so imperceptible that what appears dramatic over millions of years seemed to fall within the range of normal variation. There was no baby born to early primates that looked more like modern man. The change was very slow and might have passed undetected by anyone generation in spite of the dramatic difference between early mammals and modern man. There are less dramatic examples in every day life. The hour hand on your watch moves, Dawkins says, but you won't see it. You will be old, eventually, but there is no one morning when you wake up old. One of the biggest obstacles to understanding evolution is that we can't even conceive of millions of years of time, much less how much change can play out within that huge window of time.

On a related note, studies have shown that many people can't really appreciate the impact of compound interest. If you put $10,000 into the account of your newborn grandchild and made 10% a year on that investment, by 50 that grandchild would have one million dollars. If you didn't give them the money until they retired at 67, they'd have $6 million. If you made them wait until 100 (assuming great gains in longevity), they'd have $137 million. The way that compound interest begins to escalate is hard to conceive, but of course it makes a dramatic difference in lifestyles for capitalist countries that make progress each year, even if that progress doesn't seem particularly dramatic at the time. 

And that might be one reason why people are so unimpressed with economic progress. At any given instant - any year or sometimes even decade - the progress we make may not seem impressive. Even if we're making the right moves, today doesn't seem any different from yesterday. 

We (rightfully) project the long-term impact of carbon emissions and what that will mean for global temps. That is sort of mind-boggling because it shows us the long-term impact of incremental change. But if incomes raise as much in the 21st century as they did in the last, median household income (adjusted for inflation) will be about $300,000, a projection as valid even if less bandied about.

Sold The Horse and Bought a Car - Tijuana to San Diego Wait Times Plummet from 2 to 3 Hrs to 10 to 20 minutes

This is huge news. It could affect San Diego and Tijuana's economies in ways that only bio-tech and Maquiladoras have.

From my house to Mexico is about 10 miles but the return trip would take 2 to 3 hours just last month. In that same time, I could be in Los Angeles, 130 miles away.

Now, times have been cut from hours to minutes. A two-hour wait might now be 20 minutes. Or less.

That's like the difference between going into town on a horse or driving. It will be a huge boon to the region, increasing the flow of traffic in both directions.

Kansas' Brownback About To Lose His Job As Governor Because He's Bad at Algebra

Governor Sam Brownback of Kansas enacted a sweeping tax cut for the state. He slashed taxes for everyone, reducing middle class tax rates from 6.25% to 4.9%. To his shock and dismay, the $700 million surplus he inherited is now projected to fall to a $238 million deficit. This has caused some backlash and apparently he's now trailing in polls.

Governor Sam Brownback

Arthur Laffer

Kansas paid Arthur Laffer, of Laffer curve fame, $75,000 to come into the state and sell the tax cut. Laffer believes that people who have to pay tax on money have less incentive to make money. In his mind, the good people of Kansas would all go make considerably more money if only they didn't have to give so much of it back in taxes. Why bother to make an extra $1,000 if you just have to pay the state $62.50 of it?

Laffer's curve is laughable for a number of reasons but the most obvious is the simple algebra it depends on.

Assume Kansas has GDP of $100 billion. (And that's not far off. The state's GDP is about $117 billion according to Google.) With a tax rate of 6.25%, that gives the state income tax revenue of $6.25 billion.

Now, cut the tax rate to 4.9%. In order to maintain tax revenues at $6.25 billion, total GDP would have to raise to $127.5 billion. In other words, it would have to grow by 27% to offset this tax cut. To put that in perspective, the US economy will probably grow about 2.5 to 4% this year. China's economy will grow about 7 to 8%,  Europe's closer to 0%. 27% would be an absolutely stunning, unprecedented rate of growth. Even during a full, four-year term. And all triggered by the magic of dropping marginal tax rates from 6.25% to 4.9%, a tax cut that (Laffer would argue) would finally give people the incentive to get rich.

If Brownback knew algebra, he could have quickly calculated the growth rate he'd need to balance the budget with his new tax rate. Sadly for the state, that level of math competency was apparently not needed to qualify for the governor's job.


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I suspect that Brownback will win re-election but a couple of interesting articles suggesting he might not can be found here.
Mother Jones, Patrick Caldwell, "What's the Matter With Sam Brownback?"
The New Republic, John B. Judis, "This is What's the Matter With Kansas"

Using Charter Schools as Tools for Progress by Letting Them Patent New Approaches

Pedro Noguera writes a great piece in The Nation about charter schools titled, "Why Don't We Have Real Data on Charter Schools? Charters were supposed to be laboratories for innovation. Instead, they are stunningly opaque." 

He makes a variety of important points but one statistic he mentions almost in passing is to me the defining one: 

"According to a 2013 study by the Center for Research on Educational Outcomes at Stanford University, only 29 percent of charter schools outperformed public schools with similar students in math, while 31 percent performed worse. Most charter schools, in fact, obtained results that were no better than traditional public schools."

Let's round this instead of using 29% or 31%. Essentially, what this Stanford study revealed is that 33% - one-third - of charter schools did better than public schools, one-third did worse and one-third did the same. Depending on just how you measure it, this exact same claim could be made of public schools themselves: about a third are noticeably better than average, about a third are worse and about a third are average - give or take. In other words, charters schools - on average - are no better and no different than public schools. 

Noguera reminds us that charter schools were supposed to be a way for specific schools to be free of traditional regulations in order to allow experimentation. What they have become instead is a means to compete with public schools without real transparency or accountability. 

I have an idea for making education more innovative, for giving incentive to every teacher and educational entrepreneur to make education better. Let organizations and individuals patent new ideas. Let them get a monopoly profit on the good idea of - say - using business startups in high school as a means to fund extracurricular activities for kids while teaching them about business, marketing, product development, using art for ads, math for balance sheets and profit and loss, etc. You might patent this as an organization ("The Wanna-be Jobs School of Business") or as an individual inside of  a public school. If other schools adopt your curriculum, they pay you. And for 7 years you might make millions on the spread of your idea. After that, your patent expires and every school anywhere can use the materials or approach for free. Education gets better and there is money available to incentive people to develop new materials, methods, and philosophies. 

As it now stands, there is no incentive for any charter school to share anything that would actually make other schools better. That would simply mean giving away their competitive advantage, which is nuts. Instead, give them incentive to develop approaches that would benefit everyone.

In the 1620s, Edward Coke (pronounced Cook) led the creation of patent law, essentially granting monopoly rights for a short-period before making knowledge of new technology public. This gave people incentive to invest time and money into inventions that previously only gentlemen of leisure might dabble with. By 1699, England had its first steam engine and during the next century the Industrial Revolution was underway. 

If the US is serious about promoting education, maybe the right model isn't letting private schools compete by using methods that appear to be - on average - no different from those of the average public school. Maybe the right model is letting any individual or organization patent educational approaches that every school would find enticing to adopt.

GDP Grew 4.6% in 2nd Quarter (Politicians and Media, Committed to Bad News, Look the Other Way)

The final estimate is that the GDP grew by 4.6% in the 2nd Quarter of this year, according to today's report from the Department of Commerce.

Consumer spending on durable goods (things like cars and refrigerators) and business investment were up 14.1% and 9.7%. Consumers spending more on purchases that could be deferred demonstrates that they are feeling more confident about the economy, as does businesses spending more to invest in the future.

It's not just the best quarter since 2011. It matches the best quarter since before 2007.

But you won't hear much about it. Not on the news, not from politicians. It is in no one's interest to present positive news. A reporter on Bloomberg said, "There's no reason to look at GDP growth today." Other news outlets, apparently agreeing, simply failed to mention it in their top of the hour reports.

The Obama administration is still pushing for programs that would create more jobs and raise median income. To say that things are going great makes it harder to argue for those programs.

The Republicans move blithely from one irrelevant and bone-headed argument to the next, whether it's invading the Middle East or paying for two wars with a tax cut or screaming about how huge deficits during the Great Recession are going to blow up the economy or how Obamacare is going to create huge deficits and blow up the economy.They repeatedly show themselves completely tone deaf on policy and - sadly - in tune on politics, managing to win the attention of media and voters without ever actually being right about anything of substance.

Liberals think it's awful that the GDP is growing because corporate profits are going up and it is only the rich who are getting richer. So for them, the economy actually sucks and numbers to the contrary are misleading. Misery still exists and they'll focus on it. Liberals fail to see the humor in Woody Allen's quip, "I can't enjoy a meal as long as I know that someone, somewhere is starving."

Conservatives think it's awful that the GDP is growing because it suggests that Obama's and the Fed's policies might actually be sensible rather than disastrous. Today's most influential conservatives are ideologues who think that pragmatism is the worst kind of betrayal and wouldn't admit that government policies could have any positive impact even if the fastest growing economy of the last quarter century was communist.

The media think it's best to ignore mention that the GDP is growing robustly because it undercuts an incredibly lucrative narrative that brings up ratings. Whether they're trying to get ratings from liberals outraged at how only the 1% are benefiting from this recovery or from conservatives who are clinging tightly to their belief that the world is getting worse and has been since Adam and Eve's expulsion from the garden, and that any proof to the contrary is either fabricated or fleeting. Bad news is good news for news outlets. People stay tuned for news about hurricanes, not 70 degree weather.

It's an odd time. Never has technology and business innovation offered more potential and yet rarely have people been so gloomy about the future. If a huge swath of us get wiped out by Ebola, we'll look back chagrined at what petty things we whined about. If - as I think - we'll hit an inflection point that makes us more prosperous and privileged than any previous generation has dreamed about, then we'll look back chagrined at how incredibly pessimistic we were at the dawn of this change. In either case, the committed pessimism strikes me as absurd and increasingly takes a commitment to denial that hopefully fewer and fewer people will be able to muster.

Pittsburgh Pirates Get Into Playoffs for One-Third of What It Cost the Dodgers

A 3-bedroom home in Los Angeles costs $695,000. In Pittsburgh, a 3-bedroom home costs only $143,000. Given players can get a place for their family for less, the Pirates don't have to pay as much. It's not something GMs think about but apparently it can make a big difference in payroll costs.

Because living expenses are lower in Pittsburgh, the Pirates were able to make it into the playoffs at a cost per victory of less than a million dollars. By contrast, the Dodgers had to pay about $2.3 million per win.

Here is the ranking of price paid for victory for the teams that have (so far) qualified for the playoffs.

A couple of notes.
The number to the left of the name indicates the ranking - out of 30 teams - for total payroll.
This is the payroll they started the season with. It might be different now.
As of today - 24 September 2014 - there are still more teams that will join this list. None will get in for as little as the Pirates.