Investment Strategies of Party Loyalists

Here is a curious little chart I created to compare stock market performance by party between the time that Teddy Roosevelt took office and yesterday's close.

Imagine that you have two rabidly political families whose allegiance to their party is so strong that each time one of their own take the presidency, they put all their money into the market (as measured by the Dow Jones Industrial Average). And each time a president from the opposing party takes office, they sell their stocks and put their money under a mattress.

The simple question this answers is, Who would fare better? As you can see in the chart below, the Democratic faithful would have done much better in the last 110 years. Much better. While the Republican family would have grown their $100,000 to $509,720, the Democratic family would have grown their $100,000 to $2,796,037, about 5.5X more. (click on the chart below to make it bigger)



Of course you could say that the market does what the market does and the parties - much less the president - have little to do with it. Or you could point out that the best policy would be to invest during administrations of presidents whose last name start with a "C" (Coolidge and Clinton) or "R" (Reagan and Roosevelt), regardless of party.

You decide what to make of it. Today I'll just offer the numbers. Discuss it among yourselves.

Reality is Diverse

to be nobody but yourself -
in a world which is doing its best,
night and day,
to make you everybody else -
means to fight the hardest battle
which any human being can fight .
never stop fighting.


e.e. cummings


It is really just in the last generation that we've become aware of how diverse was the world of Christianity in the 3 to 4 centuries after Christ's death. The Dead Sea Scrolls and Nag Hammadi Library, among other finds, have revealed various gospels and epistles that never made it into what we know as the Bible. Most of these were obviously not written by any of Christ's original disciples or by Paul and for this reason alone were omitted from inclusion in the approved canon. (But it is worth noting that most serious scholars today think that other forgeries did make it in. For instance, 2 Timothy seems to have been written in the second century after Christ and most certainly not by Paul.)

In the fourth century, the canon was defined and various and competing ideas about Christ were consolidated into a (mostly and sort of) uniform view in the form of the Bible. Soon, the church that owned this "true" view even used torture and death to enforce this pure view. Most people look at the Inquisition as evil but I think that the evil originated when the church decided that God could not tolerate diversity of thought and sought to make uniform the theology and teachings that professed to represent his views. Surely God loves uniformity. This might seem reasonable. It does not seem to be backed up by evidence.

This notion that God's will obviously tends towards the uniform does, I think, miss an important suggestion from nature. (I say suggestion because it may or may not be a "lesson.") Nature suggests that the creator loves diversity. There are about 1.75 million species on the planet. Some have bones and some do not. Some breath under water and some drown in water. Some walk around and some are rooted. Some are really cute and some are hideous. Some are peaceful and some are dangerous. Some are huge and some are too small to see. It's not obvious that you can draw many conclusions from nature other than the fact that nature loves diversity. The life form that works depends on so many things that one would be at a loss to predict them all in advance. Diversity, it seems to me, is the lesson of nature.

As communities become more developed and free, a similar thing seems to happen with the human population. That is, diversity seems to spring up. We have goths and hippies, the driven and the laid back, the flirtatious and the prudes, the athletic and the slothful, the intellectuals and the disinterested. The list goes on. It may well be that we have something akin to 1.75 million species of humans.

Ultimately, the Church was forced to use force to try to squelch this great diversity of people. To this day, Protestant churches reject Catholicism but tend to accept the central claim that diversity is wrong (although the diversity of ways that they reject the notion of allowing diversity does, itself, create a fair bit of diversity, from Mormons to Baptists to Presbyterians to Anglicans to Jehovah's Witnesses, to ...). It could be that they are right. It could be. But then how to explain the motives of the creative force behind the massive diversity of nature? And how to explain how attempts to make human life all one way led to one of the Darkest and most violent periods of history when the Church largely ruled the West between the collapse of the Roman Empire and the rise of the modern, secular nation-state?

The more I look across time and communities, the more convinced I am that one of the simplest measures of advancement is how many kinds of people can make their place in the world. It seems to me that diversity is not just a wonderful thing in nature - it works in communities too. And that suggests to me that the Church's attempt to go against this trend meant it was destined to become evil. Next time someone says that they know what is best, ask for who. Some things that make people feel alive really are universal: oxygen, for instance. Other things that make people feel alive really are true for just a minority of folks: live jazz, for instance. Reality is diverse. Any explanation of it ought to accommodate rather than deny this, it seems to me.

Caption Contest (Because it's Friday)

Alternative captions:
What Santa's elves do on their summer vacation.
Godzilla was seen making the exact same moves just before he attacked Tokyo.
The buzz in the playroom was that his were the world's most dangerous diapers. The buzz, of course, coming from those whose mouths weren't full of chewy toys.

Progress

Regular readers know that I'm stupidly optimistic about the future but still have bouts of frustration when it appears that so few voters and policy makers get how much is at stake (for good or bad). I had to smile to see this report about the two Bills (Gates and Clinton) who do seem to realize how much difference a person can make.

This from Gates' post:

It’s pretty amazing to realize that 50 years ago, more than 20 million children died before their fifth birthday. Last year, it was fewer than 9 million. I think this is one of the greatest accomplishments of the last hundred years.

But 9 million children dying unnecessarily each year is still 9 million too many. That’s why we need to continue our efforts.

To read the whole post ...

http://www.thegatesnotes.com/Thinking/article.aspx?ID=121

The Unfortunate Eye-Glazing Tendency of Economic Development

Economic development sounds like such a dry and abstract topic. That’s unfortunate. Economic development can mean the difference between a mother crying as her child goes off to college or crying as her child dies in her arms. Poverty brings with it so much grief and prosperity so much possibility. The potential for a human life is vastly different at higher and lower stages of economic development.

As I would define it, no topic has such a pervasive influence on the lives of people. Economic development is not just a matter of getting more goods but of giving people more options. At its most dramatic, economic development gives people the option to eat rather than starve. At its more nuanced, in developed countries, it gives people options about how to define their own lives. In the poorest countries, it can mean life. In the richer countries, it can give meaning to life.

Sell Your Gold Now

Gold is a lousy investment. Oh, I know it has gone up lots of late - outperforming real estate and stocks by a wide margin. But it is a lousy investment just in the sense that it does nothing for productivity or the economy. It is the natural resources equivalent of putting your money under your mattress. And my belief is that, in the long-run, for something to be a good investment in terms of returns, it has to be a good investment in terms of generating wealth. Gold at best stores wealth; it doesn't create it.

If you invest in real estate development or stocks, you actually put money into a general fund that can be used to create new jobs, new homes, and new products. By contrast, when you put your money into gold you divert money into a nothing more than speculation. (Unless you're betting on gold fillings make a big comeback.)

My guess? Gold will go the way that real estate did over the last few years: the "sure" investment that proves itself as susceptible to bubbles and busts as any.

Gold prices have recently dropped, but they're still high. I say sell now and put your money into something that actually creates something of value. Long-term, that is the only sensible play. For you or the economy that you ultimately depend on for prosperity.

The End of Men?

Excerpts from the Atlantic, The End of Men by Hanna Rosin ..

Earlier this year, women became the majority of the workforce for the first time in U.S. history. Most managers are now women too. And for every two men who get a college degree this year, three women will do the same.

Of the 15 job categories projected to grow the most in the next decade in the U.S., all but two (janitors and computer engineers) are occupied primarily by women.

Women now hold 51.4 percent of managerial and professional jobs—up from 26.1 percent in 1980. They make up 54 percent of all accountants and hold about half of all banking and insurance jobs. About a third of America’s physicians are now women, as are 45 percent of associates in law firms—and both those percentages are rising fast.

Women now earn 60 percent of master’s degrees, about half of all law and medical degrees, and 42 percent of all M.B.A.s. Most important, women earn almost 60 percent of all bachelor’s degrees—the minimum requirement, in most cases, for an affluent life. In a stark reversal since the 1970s, men are now more likely than women to hold only a high-school diploma.

In 1970, women contributed 2 to 6 percent of the family income. Now the typical working wife brings home 42.2 percent, and four in 10 mothers—many of them single mothers—are the primary breadwinners in their families.


In 1970, 84 percent of women ages 30 to 44 were married; now 60 percent are.

A 2008 study attempted to quantify the effect of this more-feminine management style. Researchers at Columbia Business School and the University of Maryland analyzed data on the top 1,500 U.S. companies from 1992 to 2006 to determine the relationship between firm performance and female participation in senior management. Firms that had women in top positions performed better, and this was especially true if the firm pursued what the researchers called an “innovation intensive strategy,” in which, they argued, “creativity and collaboration may be especially important”—an apt description of the future economy.

Jeremy Rifkin - the Empathic Civilization

Vampire PR

If I ever hire a PR firm, I want to hire whoever has been in charge of improving vampires' public image in recent decades.

Beyond Freedom and Control: Autonomy Supportive Politics

The child who grows up without the laws, education, or health care is not free: he's been abandoned. There is a difference.

I demonstrated my stupidity again this weekend trying to look smart. (Which might, upon reflection, be the most effective route to looking stupid.) I tried to argue for universal health care with a man who, I’m pretty sure, has been a Republican since he was 12. We agreed that catastrophic health care would be a better option. I think it would be best to simply tell every American that they will not go bankrupt because of bad health and ensure that their personal expenses don’t exceed, say, $5,000. (And yes, this would have to be adjusted for people who are even more poor, but not as much as one might think. But I digress.) We disagreed about whether there ought to be universal health care regardless of the plan.

For me it is simple. If a 19 year old living on his own, working a job without benefits, should get cancer he should not have to die for lack of money. The market is a marvelous mechanism for distributing cars, designer jeans, and glazed donuts. It should have no say in whether someone lives or dies. (And if you agree with this, you do believe in universal health care. You may simply disagree on the extent of it and details.)

And reflecting on this, I realized that one of the most influential books I’ve read turns out to define my politics as well as my ideals for managing, teaching, or parenting.

Edward Deci wrote Why We Do What We Do: Understanding Self-Motivation. In it, he offers three models of parenting or managing. The first is controlling, where the locus of control is with the parent or manager and where the child or employee is expected just to follow the lead. This is actually pretty effective at certain stages of development. The other model is abandonment, where the parent or manager essentially doesn’t care, leaving the child or employee to work things through on her own. Some call it freedom. Again, this could be effective at times. But Deci argues that the real purpose of any kind of leadership is to work towards autonomy for the individual. He advocates autonomy-supportive behavior that is intent on creating the ability for self-directed behavior. This is enabling and like the abandonment model shifts the locus of control to the individual and like the controlling model offers help.

For me, this seems like a wonderful model for government. Things like public education, health care, and police protection enable individuals to live their own lives. A good government does not control or abandon its citizens: it enables.

Conceptually this is such a simple thing that I would imagine everyone would agree with it and perhaps all political disagreement traces back to differences in opinion in trade offs. (For instance, conservatives who oppose Obama’s health care hate being told that they have to buy some health insurance plan. They find it controlling. I guess the same could be said of seat belts or motorcycle helmets. For some, the law is controlling because it makes so many people do what they wouldn’t. For others, it is enabling because it leaves so many more brains in skulls, giving individuals the possibility of autonomy.)

But for me, realizing the applicability of Deci's model to politics was an epiphany of sorts (what Hyrum Smith of Franklin-Covey would call a “blinding flash of the obvious”), helping to define so many of the policies that are important to me, from generously funding basic research to education to making it easier for people to start businesses.

Let's Make the Ten Commandments Law

I think it is time to take the advice of Sarah Palin and so many others and make the 10 commandments the law of our land. For those of you who may not recall just what those commandments are, let’s go through them (The New International Version is, by most accounts, the most accurate translation), using Exodus 20: 3-17.

1. "You shall have no other gods before me.”
Some argue that this is evidence that the Jews were not so much monotheists as a people who believed in many gods (sort of polytheists) but only worshipped one. Such arguments begin to muddle things, it seems to me, and I’ll just go with the more literal interpretation: the first commandment suggests that we must accept the God of Moses. Simply put, we need to become Jewish. This will be a change for the nearly 98% of Americans who are not, but if we’re serious about inviting God’s blessing I don’t think that this is too much to ask.

2. “You shall not make for yourself an idol in the form of anything in heaven above or on the earth beneath or in the waters below. You shall not bow down to them or worship them; for I, the LORD your God, am a jealous God, punishing the children for the sin of the fathers to the third and fourth generation of those who hate me, but showing love to a thousand {generations} of those who love me and keep my commandments.”
So, no images of lions, cougars, and marlins that we might idolize. Hmm. So, no sports team mascots as near as I can tell. To me, this can only mean that we stop idolizing sports teams and their stars, so starting with high school teams we’ll do away with competitive sports. Again, this should not be too much to ask when we think of what is at stake. (And really, I'm open to other suggestions but I will simply say that if we start dismissing commandments starting at the second one, we run the risk of ending up where we are now.)

3. "You shall not misuse the name of the LORD your God, for the LORD will not hold anyone guiltless who misuses his name.”
This might mean no cussing that involves taking the Lord’s name in vain (which always seemed distasteful to me anyways). It might also mean that one not mis-use the name of God in political matters, using the approval you imagine he has given you to win votes.

4. "Remember the Sabbath day by keeping it holy. Six days you shall labor and do all your work, but the seventh day is a Sabbath to the LORD your God. On it you shall not do any work, neither you, nor your son or daughter, nor your manservant or maidservant, nor your animals, nor the alien within your gates. For in six days the LORD made the heavens and the earth, the sea, and all that is in them, but he rested on the seventh day. Therefore the LORD blessed the Sabbath day and made it holy.”
So, simple enough. Sort of. No businesses will be open on a Saturday. I’m not sure how we’ll handle businesses like rest homes, hospitals, and emergency services but I’m sure we can make exceptions. It’ll just be the shopping malls, grocery stores, TV stations, radio stations, Internet sites, gas stations, hotels, and, of course, sports complexes that will close down from Friday at sundown to Saturday at sundown.

5. "Honor your father and your mother, so that you may live long in the land the LORD your God is giving you.”
This seems simple enough (although it may be more involved than merely sending a card on Mother’s Day).

6. "You shall not murder.”
Well, this will save on military expenses, end the debate on abortion AND capital punishment, and add to longevity as we all become vegetarians.

7. "You shall not commit adultery.”
Given that half of marriages end in divorce and about half of married people have committed adultery, this one is going to require an adjustment. For starters, we simply outlaw divorce. In fact, I think it would be a good idea to require all divorced or separated people to get back with their first spouse. Or become celibate. Again, I’ll leave the details of this re-partnering program to the politicians.

8. "You shall not steal.”
Presumably this would not apply retroactively. It would be a shame to have to give this beautiful country back to the Indians.

9. "You shall not give false testimony against your neighbor.”
This has always seemed like a great idea to me. Seriously. But if we’re going to treat it as law of the land rather than a simple injunction for believers, perhaps we should make use of the affordable technology that would allow us to monitor anyone at all times. (This could also come in handy for determining things like adherence to the 5th or 7th commandments.) This way, anyone falsely accused could produce video proof that the neighbor is lying. Trials would involve footage showing what the neighbor did or said. No more, “he said,” “she said.”

10. "You shall not covet your neighbor's house. You shall not covet your neighbor's wife, or his manservant or maidservant, his ox or donkey, or anything that belongs to your neighbor."
I’ll leave this to theologians to explain in more detail but I’m pretty sure that among other things, this means no advertising. Properly done, only seduction is more effective for making people covet. I realize that this would hurt a major industry and leave TV, radio, and the Internet without a source of revenue and likely depress GDP as well, but again … this should not be too much to ask of a country sincere about winning God’s approval.

Shalom. And call your mother.

Those Crazy Catholics

Am I the only who suspects that the Roman Catholic Church would - in a heart beat - seize control of governments again if they thought they could get away with it?

I heard on BBC radio today that the Philippine government is finally allowing a gay party to run after a court overturned the decision to keep them out because they might offend religious groups. The Catholic Church protests the decision to allow this political option.

Catholics throughout the US are protesting Arizona's new anti-illegal immigrant law that might result in fewer Latinos (and fewer Catholics).

Catholics in the US for years have objected to the legal freedom of choice for pregnant women because this choice contradicts their religious beliefs.

Meanwhile, the Catholic Church is in trouble for ignoring laws regarding child molesters.

So, the officials of the Catholic Church want to impose their religious beliefs onto others in the form of laws but does not want the laws of the land to apply to them? Weren't they forced to give up this arrangement shortly after the Dark Ages? And could they be more obvious about how eager they are to again have such an arrangement?

But I guess no political leader is going to have the courage to rebuke a group that claims to represent more than a billion people. I liked it better when they were a definite minority in this country and were eager to prove that they had no political ambitions but merely wanted the freedom to worship in peace. And maybe that's the secret to success: lots and lots of denominations so no one denomination feels safe to impose their beliefs on anyone else but enough religious people that everyone is eager to maintain religious freedom.

It is becoming more and more credible that the current pope last served as head of the office that once ruled over the Inquisition. One can only speculate that he spent too much time in the archives.

Nick Clegg - Britain's New (favored) Beta Male

Intriguingly, some research into primate behavior suggests that the beta male actually does better than the alpha male. Eager to keep his position atop the heap, and needing a key ally to do this, the alpha male is more likely to favor the beta male with choice food and females so as to not lose the beta male to a competing alpha.

In yesterday's election in Britain, the Conservative Party won but did not win enough. That is, in order to rule, the conservatives will have to form a coalition government with another party. The problem with this is that, in this sense, the Labour Party is tied with the Conservative Party. That is, whichever party is able to partner with the third-place Liberal Democrats will rule. And this would appear to make Liberal Democrat leader Nick Clegg Britain's favored beta male. Without Clegg's cooperation, neither Labour nor Conservative can rule.

This is a fascinating election for so many reasons but one, of course, is that Britain faces very similar issues as the US. The most obvious similarity is the need to deal with the aftermath of the financial crisis and Great Recession.

To me, it's unfortunate that the Conservative Party did not win outright. The Brits will run a record deficit (11% of GDP) this year and the definite impression I got was that Cameron (the Conservatives leader) was more interested in reducing spending than slashing taxes, which should make Conservatives far more effective at reducing the deficit. Further, as mentioned in the last post, I got the distinct impression that Cameron has a better plan for implementing real reform in the city (London's Wall Street, or financial community).

But instead, Nick Clegg will likely dictate terms to the next administration. What left me unimpressed with Clegg was his seeming reliance upon general voter discontentment with the two main parties. Imagine a candidate standing up between Bush and Kerry and saying, "C'mon. You're not happy with these two. You know it. Vote for me." Crafting an effective policy requires doing more than expressing disgust with the main parties. I never really heard how Clegg's Liberal Democrats offered a coherent difference from either main party. And yet he will get to be the favored beta male. Watching the coalition government rule may well be as fascinating as watching the election. The jockeying for position is not over yet.

--------- post script
Oh, and by the way, my politics have not changed. I envy the Brits their conservative party. Sometimes a country needs to move in the direction of self reliance and smaller government and sometimes it needs to move in the direction of more regulation and public programs. Neither direction is a foregone conclusion any more than you can say whether you'll more often turn right or left on your drive to the store. But here in the states, our conservative party has been hijacked by people who deny climate change is a risk, deny health care is a right, and whose only economic development trick seems to be cutting taxes. If the Republicans looked more like Britain's Conservative Party, they'd be hard to beat. Instead, they're ruled by obstructionists reactionaries who deify Ronald Reagan but would reject him as a candidate for having actually raised taxes twice. But people do learn.

Could David Cameron Save the American Republican Party?

I watched the final debate between Britain’s current and two contending Prime Ministers this evening. They represented the Conservative Party, Liberal Democrats, and Labour Party. The contrast between the three was not half as stark as the contrast between British and American conservatives.

Let’s hope that American conservatives are paying attention to David Cameron of Britain’s Conservative Party. The Republican Party has been hijacked by policy makers who have decided that the clearest way to distinguish themselves from reasonable and practical policies is to offer unreasonable and ideological polices. Cameron’s campaign will hopefully remind Republicans that it is possible to distinguish yourself from reasonable policies by offering other reasons rather than just blindly opposing the other side.

For instance, Republicans in this country – the party that supposedly represents conservatives here – are mindlessly opposed to financial reform. Without reform, we will again find ourselves in the position of either bailing out bankers or letting them take down our economy. (And of course, no one wants to admit that even with great reforms we’re likely to find ourselves in this situation, the only difference being the probability and severity of the hostage situation.) Republicans simply don’t want to be seen cooperating with Obama – no matter how obvious or sensible his policies seem to be.

David Cameron, by contrast, rather sensibly wants to change things within London’s banking community in the wake of the Great Recession. He wants more regulation and more consequences for banks that pursue reckless policy. This position has the advantage of making sense whether one’s analysis is sophisticated or simply based in a common sense reaction to the last financial crisis. Cameron even mentioned that his plan for financial reform was very much like Obama’s.

In Britain, policies of liberals and conservatives sometimes align and sometimes clash. There does not appear to be a requirement to oppose everything the opposition party proposes. This used to be true in the US as well. Modern Republicans, as near as I can tell, seem to define themselves less by what they think will work than by opposing what Obama seems to think will work.

The curious thing about this is that Republicans are becoming more insistent on blind ideology in a time when the countries whose economies are performing best defy easy categorization: China is nominally communist but often more aggressively capitalist than the G-7 countries; Peru and Brazil’s economies have performed splendidly with some odd hybrid of socialist and free market policies that generally favor the poor. Anymore, the fastest growing economy is as likely to espouse adherence to free markets as socialism (and all the while adopting pragmatic policies). It seems as though the real solution to economic growth is ideological flexibility, not ideological rigidity. And yet Republicans, bucking the trend of conservatives and socialists alike around the world, are becoming more ideological. But if successful policy is pragmatic rather than ideological, having such an ideologically intent party means that we’re robbed of a practically conservative option in this country. No matter what your ideological orientation, you should find this troubling. We can’t steer right in this country because the party trying to pull the wheel in that direction does not want to pull into the other lane so much as go off-roading through the oleander.

I do believe that the Republican Party will look back at this period as the time of their great hijacking, a time when their only answer to any question was lower taxes and when they let themselves get defined on everything else by their automatic opposition to Democrats. As long as ideologues own the party, the country will either suffer from their rule (as under Bush) or conservatives will suffer from Republicans’ inability to win control in DC (as under McCain). As I said, one can only hope that American conservatives are paying attention to Cameron – and humble enough to learn from Cameron and even – on occasion – agree with Obama.

Fun Facts About John Paul Stevens

For some reason I find this little tidbit fascinating: if Supreme Court John Paul Stevens is replaced by someone who is not a Protestant, for the first time in our history our Supreme Court will be completely made up of non-Protestants.

Currently, we have 6 Catholics, 2 Jews, and 1 Protestant serving on the Supreme Court.

I also find it interesting that although John Paul Jones was born more than a quarter century AFTER John Paul Stevens, Jones retired from Led Zeppelin in 1980, more than a quarter century BEFORE John Paul Stevens retired from the Supreme Court. I'm sure that this says something profound about the lifestyles of rock stars and Supreme Court justices.

The Slow Mitigation of Madness

Curiously, very little seems to have been made of Obama's recent attempts to secure and reduce the number of nuclear weapons. As with so much in life, this baffles me. This seems to me his most important accomplishment. Nuclear weapons are predicated on the curious notion that a state's existence should somehow outlast the existence of its people. It's hard to imagine any sane future two or three centuries hence that doesn't look back at nuclear weaponry as the most curious evidence of institutionalized madness.

Perhaps the oddest news story I've read in the last couple of years has to do with LBJ, Castro, Nukes and the Kennedy assassination. Apparently, LBJ had evidence suggesting that Castro, weary of the Kennedy brothers' multiple attempts to assassinate him, arranged JFK's assassination. The evidence for this was not conclusive but was suggestive. When LBJ learned about this, he sat on the investigation. His reasoning? The American people would be so outraged at this that they'd demand retaliation and given Cuba was a satellite state for the USSR, Johnson could see things escalating into nuclear war. LBJ decided that retaliation wasn't worth such a risk.

It might be true that nuclear weapons made war so costly that simply having them made states more hesitant to engage in even conventional warfare, much less retaliation for assassination of its leaders. But the fact that we had no nuclear wars does not mean that they were impossible. The simple question is whether it is better to lower the probability of, say, 100,000 casualties from conventional war by 50% if it meant raising the probability of 100 million casualties by 5%.

The eruption of volcano [insert unintelligible Icelandic name here] recently is a reminder of how rapidly surrounding areas could be impacted by something like nuclear war. As my friend Norman pointed out the other day, even a couple of nuclear bombs lobbed back and forth between India and Pakistan would - in addition to devastating populations in those countries - likely radiate out to impact the regions around them. Imagine radioactive volcanic dust and try to project a situation like this month's volcano lasting for years. Madness indeed.

Nuclear materials are unaccounted for. Worse, the states now threatened by them were the ones to produce those materials as part of a national security program.

Most people realize that it would be awful if Iran got nuclear weapons. Because we've had generations to acclimate to the idea, we've lost the realization that it is awful that any state has nuclear weapons. Give credit to Clinton, the younger Bush, and Obama for having the sense to realize that national security and nuclear weapons don't really belong in the same sentence and working to reduce decades of build up.

Recessions come and go, as do tax cuts, health care insurance programs, and attempts to reform education. No other policy has the potential to so negatively, and perhaps irreversibly, impact humanity as nuclear weapon policy. If we're lucky, Obama's successor will continue the escalation of nuclear arms reduction and future generations won't have the strange possibility of nuclear winter to live with.

The Difficulty of Predicting History

Apparently it is as hard to predict history as it is to predict the future. History is a story we tell about the past to make sense of it to our own lives.

Westminster Abbey is a burial place for some of the greats of England, and some who are by now, completely inconsequential. I was struck by how arbitrary is the inclusion and exclusion of certain figures of history. As near as I can tell, Jethro Tull is not there - the man whose agricultural inventions helped fight hunger and increase wealth. Yet mere servants to royalty are included there - people whose only contribution to history was to please or befriend the most powerful person in England at the time. But most curiously, Westminster Abbey captures history in real time, revealing how little we understand how lives today will be made important or rendered trivial by subsequent events.

Part of this is a matter of popularity. It seems probable that Vint Cerf will be considered more important to history than, say, Mussolini, and Robert Beyster will be more important to business history than Larry Ellison or Jack Welch, but of course Cerf and Beyster are far less known than the others. Current popularity matters.

But the bigger problem may be the problem of knowing what immediate history will make things different tomorrow. We know that GM was laying off lots of people in the late 1990s but were unaware that Brin and Page were starting Google. Sometimes years later – sometimes decades later – we finally realize the importance of certain events. History is as hard to predict as the future in part because history depends on a prediction of the future.

It's Worth Asking

A recent poll suggests that nearly one-in-four Republicans believe that Obama is the anti-Christ.

Next time you're with four or five of your Republican friends, when there is a lull in the conversation, lean in conspiratorially and ask, "Okay. Which one of you knows that Obama is the anti-Christ? And why?"

What ensues ought to be more interesting than whatever else you were talking about. Like non-standard uniforms, for instance.

The Future of Baseball?

Team uniforms are ... well, so uniform.

I wonder how long before we'll have a professional team named, say, The Las Vegas Rebels, or the Santa Cruz Non-conformists whose team members are free to dress as they please. The pitcher in retro-uniform, the Left Fielder in his college jersey, the first basemen in shorts and t-shirt because it is hot.

The beauty of it is that whatever you wore to the game, you'd be showing your support for the team.

Health Care Aftermath

Republicans felt that health care reform ought not to focus on expanding the insured but, rather, on limiting lawsuits.

Within hours of Obama signing the new health care bill, Republicans have sued.

History from the Future: The Burger Craze of 2014

It was hard to know exactly when futures markets had begun to drive commodities prices. Oil, obviously, was one place where speculations on financial markets drove the everyday price at the pump - causing prices to rise and dip like seagulls in a squall. And then the same thing began to happen to wheat, rice, beef, chicken .... And before long, the prices at restaurants and grocery stores began to move in tandem with these commodities prices, like prices at the gas pump. And then somebody got the really bright idea of pricing food like stocks and the real fun began.

The pushing and shoving in line at the fast food joints as the first indication that something profound had changed. Customers were bidding for burgers like traders on the floor of the stock market. Prices were bouncing up and down like the price of Yahoo stock. From the time someone got into line to the time they ordered, the combo meal they wanted might have gone up or down a dollar. But that was just at first. Soon, this market, like so many before it, began to be defined by derivatives and speculation.

In 2014, there was the great quarter pounder craze. As the pace of social change quickened, demand for comfort food surged. Coupled with a bad wheat harvest that year, savvy speculators realized that beef prices would soon be going up. A day trader who'd become rich speculating on gold around the time of the Great Recession, Chaz Mingus, tried to corner the market on quarter pounders and the folks at Goldman Sacs began to bid against him. It was surprising that quarter pound burgers rose to $10. What was more surprising was that this actually created a resurgence of interest in quarter pounders. Worried that this American classic might soon be priced out of reach, Americans lined up to buy it before prices went higher. This, of course, made prices go even higher. Commentators were soon explaining that it only made sense that quarter pounders would cost $120. Hadn't Americans been paying exorbitant prices for fine dining for decades? And what was more classic than the burger? And then prices hit $500 and as had happened decades before at Ford and GM, the new credit and financing divisions of Burger King and McDonald's began to make more profit than the actual restaurants. Stories abounded of people who were paying the equivalent of monthly mortgages for their quarter pounder habit.

The derivatives market began to trade in the concept of the hamburger. How could you price something so iconic, people began to ask. And then the prices got really out of hand.

Curiously, the market bust about a year later when Wendy's introduced the fifth-pounder. Prices plummeted and millions of Americans were left holding the bag on $2,000 hamburgers.

The Simple Financial Reform Act

My plan for financial reform is simple.

Bankers get two kinds of bonuses: positive and negative.

Let me elaborate.

If a bank makes a billion dollars in profits, some banker in it might get a bonus of a million. This kind of thing actually seems like a pretty good deal for banks and their shareholders. If some guy can find you a billion in profit that you weren't going to have before, it only seems fair that you share the wealth. I honestly have no problem with institutions like banks sharing profits with people who take initiative. In this way, banks (or corporations) do what smart governments have done for business people for centuries: let these individuals keep a portion of the money they make. (And countries usually let entrepreneurs and individuals keep about 50% to 70% of what they make, whereas banks and corporations only let their employees keep about 1% to 20% of what they make. If anything, banks and such may give too little for a bonus.)

So business people within a country have an incentive to take risk. They start a business to make money. To get a return, they have to take a risk. One of the simplest rules of business and investing is this: higher risk yields higher return. But the business person is also careful about taking risk. Because the even simpler rule is that more risk means more risk. The business person could lose his business and his house. He's bold but not reckless.

The problem with bankers is that they, too, have an incentive to take risk. They make up new financial instruments, make investments, and try new things in seek of higher returns. If these risks work out, they get a big return. But if these risks don't work out, they get nothing.

It is easy to say that the bankers are greedy. But really, how would any of us play this game? The more risk you take, the more you can make. Oh, and if you lose the bet, you get nothing. That's right. You don't get a negative amount. You simply don't get a bonus. You would be right to take huge risks. But of course, even if you can't do worse than zero, the bank can lose billions or even trillions.

An easy way to continue to motivate bankers to move banks forward is to continue to give a bonus. An easy way to make sure that the risks they take moving forward are bold but not reckless is to mandate that their bonuses can be negative as well as positive. Sure you can make a million but you can also lose a million. Or, if you are playing options and the like, perhaps lose tens of millions.

This is not something that bankers will adopt themselves, any more than popes willingly gave up religious control over regions of Europe or kings willingly gave up control over portions of their kingdom. Nobody with huge power ever just voluntarily gives it up.

But as long as governments are insuring banks - as they should - they can stipulate how something like a bonus is calculated. And I suspect that no one regulation would do more to ensure a balance between the necessary risk taking to keep the industry innovative and the cautious risk avoidance that would keep the financial industry from regularly imploding.

Once We've Cut Health Care Costs ...

We can adopt this plan for education.

Less Jefferson, More Schlafly. If that doesn't make America stronger, we'll have to resort to more drastic measures

Texas is changing textbooks, putting more emphasis on the influence of Phyllis Schlafly and less on Thomas Jefferson.

“By getting married, the woman has consented to sex, and I don’t think you can call it rape.”
- Phyllis Schlafly

“We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty, and the pursuit of Happiness.”
- Thomas Jefferson

The Texas State Board of Education approved some controversial right-leaning alterations to what most students in the state – and by extension, in much of the rest of the country – will be studying as received historical and social-scientific wisdom. Here are some of the other signal shifts that the Texas Board endorsed last Friday.

A greater emphasis on “the conservative resurgence of the 1980s and 1990s.” This means not only increased favorable mentions of Schlafly, the founder of the antifeminist Eagle Forum, but also more discussion of the Moral Majority, the Heritage Foundation, the National Rifle Association, and Newt Gingrich’s Contract with America.

Thomas Jefferson no longer included among writers influencing the nation’s intellectual origins. Jefferson, a deist who helped pioneer the legal theory of the separation of church and state, is not a model founder in the board’s judgment.

Read the whole thing here.

Of course a half century later, there are fewer surprises

When we got into office, the thing that surprised me the most was that things were as bad as we'd been saying they were.
- John F. Kennedy

Firing Teachers? That'll Change Everything.

Newsweek's cover article argues for firing bad teachers. I'm sure that will change everything. Just like voting out all the bad politicians will change Washington.

We used to burn witches because we didn't understand disease and bad weather. Today we vote out politicians and fire people because we don't understand systems.

Are there bad teachers who should not teach? Probably. Can some of them be rescued themselves by better education about how to teach? Probably. Will more rigorously firing more teachers help? Probably not.

Keep this in mind. We have no more populous profession. How many teachers do we have in this country? 3.7 million, more even than lawyers (952,000), engineers (1.3 million), waiters (1.8 million), janitors, maids and household cleaners (3.3 million), and secretaries (3.6 million).

I am going to assume that we can't afford to pay enough to compete for the engineers or lawyers (and it is not obvious how many would have the personality and skills to deal with and manage kids anyway.) I am also going to assume that very few of the waiters and maids have the background to educate kids. So, assuming that we fire the bad half of teachers, where are we going to find nearly 2 million "good" teachers? (The Gates Foundation is researching what makes for good teachers and one thing that they can report with confidence is that current certification is no predictor of "good.")

We have an educational system. If we want a different output, we have to change the system, not the people working in the system. If you don't like the way the movie ends, you don't hire new actors: you change the script. (And I will agree that changing the system may change who gets through the system to become teachers. I don't deny that there are bad teachers. I just deny that they constitute a big enough problem to change outcomes much given how much we can now afford to pay teachers and the technology we currently use for teaching.)

And I would say that a measure of how well the system performs should begin with accurate measures. The Newsweek article suggests that the US performs about on par with Lithuania, ranking about 10th in the world. I think it would be more telling to know how first generation immigrants from Mexico or China (or Lithuania even) do on standardized tests compared to kids who are still in Mexico, China, or Lithuania. (And even this would not be apples to apples given that English as Second Language kids aren't given provision for learning a new language in most American school systems.) By that measure, I'd be willing to bet that we do pretty well.

No other country in the world brings in more immigrants from more countries. I feel confident that third and fourth-generation American kids would hold their own against kids from any country.

Does this mean that we ought not to change the educational system? I would never say that. I've argued for changing the system numerous times in this blog. (40 posts not counting this one.)

But succeeding at improving the current system would be the booby prize (and I don't mean booby in a good way). It would be like making a better turn table or horse carriage in a world of CD players and cars. If we could find a market for standardized tests, emphasizing them would make sense. We have not and they do not.

If we begin to pay some teachers $130,000 and fire others, we'll just raise the cost of an already costly educational system by increasing turnover, teacher training costs, and raise wages. Paying some teachers far more while firing others sort of reminds me of giving some kids A's and flunking others. If that kind of system gave us results that made people happy, we wouldn't be talking about firing teachers.

Those Anti-Market Forces Are Ruining Everything

From yahoo:

One year ago, the economic crisis dragged stocks to their lowest in more than 12 years. The S&P 500 is up 68.5 percent since then --the strongest one-year rally since 1936, according to Standard & Poor's, but still 27.6 percent below its all-time high.

Damn that anti-capitalist, socialist Obama.

Extended Lives = Extended Childhood

George Will writes about boys who won't become men in this week's Newsweek. George decries the fact that the median age at which boys marry or leave home is going up. He makes some good points but misses the context of extended boyhood: we're living longer.

Life expectancy goes up about 3 months a year. This works out to about 2.5 years per decade or about 5 to 7 years per generation.

So, let's say that we still left home and married at 14, as people did only a century or so ago when life expectancy was about 40-some years. Is that really how much preparation we want them to have for work and parenting? Do we expect 14 year olds to choose who they'll be married to at 85?

If the next generation gets married two years later than their dads and then retires four years later than their dads, they'll still end up married and retired for longer than their dads. That is what happens when life expectancy goes up each generation.

It is not just old age that now lasts longer. So does youth. That life stages - from youth to middle age to old age - would all extend for longer as life itself lasts longer makes every kind of sense to me. But I guess saying that wouldn't make for a very interesting column.

The Secret About Health Care Costs

Rumors are, health care is about 16% of our total GDP. One of the few things that politicians and their constituents seem to agree on is that costs are too high.

So, let's say that the folks in DC reduce health care costs by half - making health care more affordable.

Little problem. Our GDP would suddenly drop by 8%, leaving about 12 million people suddenly unemployed.

People holler about debt and forget that for every dollar of debt there is a dollar of assets.

People holler about costs and forget that for every dollar of costs there is a dollar of revenue.

There will be no sweeping change in health care. It threatens too many jobs and businesses. What we can hope for is coverage for everyone and then incremental cost containment.

The most important thing we could do to contain health care costs, though, has nothing to do with health care. We need to grow new sectors, new industries, that make health care a relatively smaller and smaller portion of our economy. The way to make health care more affordable is to generate more revenue from outside of the health care industry, revenue that can be used to pay for health care.

We aren't just dealing with a health care system. The health care system is, itself, a part of a larger system. Lose track of that and "solving" the health care problem seems nearly impossible.

Excerpt from a Future History Book, or "whatever happened to shopping?"

The popularity of shopping depended on the ancient urge for the modern, that old wish for something new.

No one had considered the possibility that this urge for the new might actually be turned on shopping itself, or that fashion might go out of fashion.

Yet people gradually decided that they had too much stuff and clutter and turned away from the malls. Consumption never again drove the economy like it had throughout the 20th century.

For generations, economic goods had implied economic goods to have. Early in the 21st century, communities realized that people were ready to focus more on economic goods to do. The stuff of life was replaced by experience, and having became less important than doing. As communities adjusted, it was not just philosophers who saw this as positive. Even economists eventually realized that this was progress.

The (Un)Health(y We Don't) Care Summit: Or, What's Really Wrong with Washington

I watched about ten minutes of today's bipartisan health care summit, catching some of Lamar Alexander and Nancy Pelosi. Two things struck me as terribly wrong about the summit and convinced me that nothing useful would come from it.

One, they need a facilitator who is truly non-denominational, who can cut them off when they talk too long, and keep moving towards something actionable. The biggest problem with this, of course, is that the folks in Washington seem convinced that there is no one worthy of such a task because they've got the monopoly on wisdom.

Two, they need to move from talking to modeling their assumptions. If a congressperson wants to plan lunch, he talks. If he wants to plan a campaign trip for next month, he talks. If he wants to change health care for the biggest economy in the world, he talks. Compare communication with transportation. If that same congressperson wants to go to lunch, he walks. If he wants to go to a function across town, he drives. If he wants to go back to his district, he flies. He uses different technologies for travel but not for communication and planning. It's no wonder that Congress doesn't get anywhere - it is still doing the planning equivalent of walking everywhere.

Imagine a session in which a facilitator (or two) captures the assumptions that these politicians are making. "You are saying that liability insurance drives doctors out of rural areas. Okay, what is the causation and what is weighting? Liability of more than what triggers an exodus from rural areas?" And bit by bit, the model could be constructed. Then, the causation could be tested. Data that exists could be used. Data could be collected. Assumptions could be tested and collected into a network of causality and then simulated. Technologies exist for this. As the group works on this, a few things would happen. Leverage points would emerge. It may well be that the objectives of covering everyone and holding down costs could be met with a far less comprehensive plan. And the group would gradually be brought together over a model that is grounded in data.

Finally, such an approach might just do something to disarm the ideological who resist practical solutions because of principles. And on that note, an excerpt from Dietrich Dorner's wonderful book, The Logic of Failure: Recognizing and Avoiding Error in Complex Situations, in which he's talking about the success people have with systems simulations.

“The good and bad participants did not differ … in the frequency with which they developed hypotheses about the interrelation of variables in Greenvale. [That is - we all develop our theories about how the world works.] Both the good and bad participants proposed with the same frequency hypotheses on what effects higher taxes, say, or an advertising campaign to promote tourism in Greenvale would have. The good participants differed from the bad ones, however, in how often they tested their hypotheses. The bad participants failed to do this. For them, to propose a hypothesis was to understand reality; testing that hypothesis was unnecessary. Instead of generating hypotheses, they generated ‘truths.’”

What if Debt were Driven by Productivity Gains?

I've never seen anyone suggest that growth in productivity might be the fuel for a growth in debt. The rate of productivity growth has been remarkable in the last couple of decades. So has the growth in debt. Maybe the one causes the other. And maybe debt is the result of a good thing (productivity growth) and not a bad thing (a sudden lapse in morality).

Try this thought experiment.

100 people all farm to eat. Then one day, one guy makes a machine that allows him to feed 100 people all by himself. Now, we've created 99 unemployed people who can only beg or borrow in order to eat.

One of two things happens next. Either no one else comes up with new products or services that generate income and the the starving 99 are unable to pay back the inventor, and the whole "economy" collapses back to some uneasy situation with 99 parasites and one productive inventor. Or two, inventors and entrepreneurs emerge from within the 99 to create new goods and services that allow them to eventually pay back the loan for food and create more jobs.

If we stop short at the debt of the 99 hungry hopefuls, we'll be stuck. The way through this is not to take on less debt but, rather, take on more.

This odd little thought experiment suggests that debt - whether of the newly unemployed who want to eat or of the new and would-be inventors and entrepreneurs - follows from productivity gains. And the debt may be really ugly. For instance, in this example, the unemployed food eaters are borrowing money to eat. And the "wealth" the inventor feeding 100 people has is in the form of IOUs from the hungry hopeful. And further, if the successful inventor backs a new inventor, he is actually loaning him money that is just promissory notes and not real cash. And yet if all these loans are not made, the system collapses.

Following this logic, it could be that debt follows from productivity gains. The point then is to stimulate more innovation - even if that means incurring more debt - in order to create the next venture that will provide jobs to the newly unemployed.

So, what is the solution to our current levels of unemployment and increased debt? It is not to worry about debt. It is to worry about creating the next new thing - from building infrastructure to creating new businesses.

I will maintain my contention that our problem is not a problem of too much debt or even of financial institutions that create too much wealth - real or bubbled. Our problem is that we aren't doing enough to translate our excess labor and capital resources into new ventures. This is not a failure of labor or capital markets. It is a failure of entrepreneurship. We need to do more to create entrepreneurship within organizations (what Gifford Pinchot calls intraprenuership) and without. The solution is that simple and that complicated. Focusing on debt right now is a distraction. We need to innovate our way out of this.

Which means, essentially, we're in the same situation we've been in for centuries, only more so.

"No!"

Anything you are not free to say "no" to, you are unable to say "yes" to.

You can't really choose what you are not free to reject.

This is worth remembering if you really are intent on moving away from parental and managerial or even educational models that don't depend on some form of tyranny.

Is it any wonder that one of the first phrases that toddlers learn is "No!"? This is the beginning of taking control over defining self rather than capitulating to others who would gladly define you.

A Nation in Denial

Here's a curious little fact.

In Obama's 2010 budget, he's showing mandatory expenses at $2.184 trillion. (Mandatory includes things like social security, medicare, and interest on the national debt.) He's projecting revenues of $2.381 trillion. So, $197 billion is left for all discretionary spending. Unless, of course, we want a 1.2 trillion deficit.

Let's say that we balance the budget without adding taxes. We'd have to cut all discretionary spending by more than 85%. This would mean, for instance, that defense spending would drop from $664 billion to $95 billion, a level we haven't been at since before World War 2. The National Science Foundation - the investment our $13 trillion economy makes into basic research - would be a mere $1 billion, or about what Exxon makes in an hour.

People like to talk about the good old days before the time of so many taxes. Of course, they forget that in those good old days life expectancy was about 47 years, income was a fraction of what it is now, and people had yellow teeth. Assuming they had teeth.

George Bush took us to war and gave us a tax cut. We bought it.

Barack Obama got elected by promising universal health care and a tax cut. We bought it.

We're the ones in denial here, not the politicians. They know that they have to give us our programs and tax cuts or we boot them out.

If a politician promised to raise taxes and cut programs by enough to balance the budget he or she would lose the election. (And anyone who thinks you could balance the budget with just raising taxes or cutting programs is obviously a beneficiary of the new medical marijuana laws.) It's that simple.

Obama has appointed a commission tasked with creating recommendations for moving towards a balanced budget. Elected officials can't talk honestly about what needs to be done, so the bitter truth is left for appointed officials to say. Because you can't stay in office and talk honestly about the deficit. Not if you want to be elected by a polity in denial.

Quaint Victorian Notions About Capital in a Modern World

We Americans live in the richest, most economically driven country in the history of the planet. And still we’re ambivalent about money and debt. Our revulsion to debt is literally Victorian.

There was time in history when capital was scarce and hard to get or create. Social inventions that helped to overcome this limit made communities rich. Social inventions included new norms, like traditions of saving and investing, and new institutions, like modern banks, and bond and stock markets.

One of the social inventions that helped in the early days of capitalism was uneasiness about debt, something shared by British and Americans in the 1800s and early 1900s.

19th century preachers inveighed against debt, teaching that it mars and stains the soul. Protestant preachers liked to quote Paul, "owe no man anything but love." Debt was proof that one failed at self-denial. Charles Spurgeon, the best-known English preacher of the late 1800s, described the trinity of evil as "debt, dirt, and the devil."

And yet by the early 1900s, debt had become obviously essential to economic progress. This is still a point little appreciated, it seems, but it has to do with establishing new industries. You'll have to follow a few steps here, but I'll try to keep it simple.

1. Imagine a world where everyone has to farm to be fed.

2. Then, someone invents a machine (capital) that can do the work of 100 men. This means that 99 men are freed up to work on something else.

3. 99 men are unemployed. 1 man is incredibly rich. Or would be, if only the 99 hungry and unemployed men had money.

4. Inventors and entrepreneurs create new products and services – from the sublime to the silly. [Look at the end of this post for a list that comes from the years around 1900.]

5. These inventions and business ventures require financing. Debt even. Debt creates. Getting these new industries started is an act of faith. It requires capital investment for building factories and stores. It requires capital for making payroll to manufacturing and sales people. And it requires consumer credit so that people can begin buying this new thing. Once established, though, capital gets its return and there is a new source of sales and salaries. Debt can create new wealth. And yes, even consumer debt that isn't obviously directed at creating wealth can be instrumental to this.

6. These new ventures and inventions don’t just make life more interesting, richer, and confusing: they create jobs for the 99 people made redundant by productivity gains in the old industries.

All this to say that reluctance to take on debt can hobble progress. One of the worst things you can do in an economy is treat what is scarce as abundant and what is abundant as scarce. Victorian England - with its social stigma against debt - was actually creating the right culture for that stage of capitalism. Capital was scarce and people should have treated it carefully. The reality behind the billions made in venture capital, junk bonds, and credit cards today, though, is expressed in Michael Milken’s observation that, “In an industrial society, capital is a scarce resource, but in today’s information society, there’s plenty of capital.” Today, jobs are scarce and capital is abundant; an economy that goes into debt because it is mis-using its capital but creates jobs so as not to mis-use its labor has an edge over an economy that leaves a large percent of its work force under- or unemployed.

So, with all the worry about debt, what does this suggest? To me, this change suggests that we ought not to worry about wasting capital that is abundant. Rather, we should worry about wasting labor. Our economy will be made stronger by employing more people into productive ventures, not by avoiding debt. Once we’ve got employment back up and have created jobs, we can worry about debt. But not about eliminating it – just in shifting it into the creation of new industries and services.


--------
Some of the inventions from the decades around 1900:
central heating; the safety razor; stainless-steel implements; the striptease; the electric toaster; iron, oven; sewing machine; dishwasher; electric elevator; dial phone; portable typewriter; radium treatment for breast cancer; heart surgery; the psychiatric clinic; contact lenses; toothpaste in tubes; motion pictures; musical comedy; the gramophone; volleyball and basketball; the Ferris Wheel; the jukebox; breakfast cereals; milk delivered in bottles; packaged produce; Coca-Cola; margarine; the ice cream cone; the refrigerator; public libraries; the correspondence course; the full-range department store; the chain store; the shopping center; the coin telephone; the traveler’s check; fingerprinting; the automatic pistol; the electric chair; the automobile and the airplane; the underground city subway train; the pneumatic tire; color photography; rayon and other artificial textiles; chewing gum.

Biden vs. Cheney - Due Process Loses

I love Joe Biden. Dick Cheney? Well, not so much. And yet Cheney has won the last little tussle with Joe, and this, like so much related to Cheney, infuriates me. He has won because he got Joe to agree with an implied premise in his argument.

Cheney is upset that the Nigerian crotch-bomber was read his Miranda rights. Joe counters that the same thing happened to the ped-bomber from England under Bush's administration. Cheney doesn't think that would-be terrorists deserve rights. Joe seems to (sort of) agree with this inane suggestion, which is why the two VPs upset me.

The executive branch has a duty to execute the laws. VPs, for instance, are sworn into office promising to uphold the constitution. This seems to me a vote of confidence in our laws. And note that our laws are such that having rights does NOT mean that one can't or won't be punished.

So, when Cheney expresses his anger that someone may have hinted that the crotch-bomber (which, by the way, could make for an attention-getting chat name (as opposed to CB handle)) had rights, I have to ask this: if Cheney doesn't trust our laws or due process, why on earth did he waste 8 years of his life as the second-highest ranking member of the branch of government sworn to uphold those laws?

Biden was right to call out Cheney yesterday. He could have gone further and simply said that his faith in our legal system is so great that if an accused terrorist is found innocent he'd accept that verdict as more trust-worthy than trial by media.

I know that it is fashionable not to trust in government. It would be nice, though, if the people heading it up showed a little faith in it.

Time to Copyright Investigative Journalism

When our founding fathers wanted to encourage more innovation to make a better world, they gave us patents. Patents reward an inventor with a monopoly for a time, making the payoff for sacrifice and applied creativity greater. The result is more of a good thing.

Investigative reporting is also a good thing. With facts and a better understanding of what's going on, a community can make better choices. The crooks in high places are more careful. Yet even as we get more media coverage, we seem to get less investigative reporting. Maybe its time for something like a patent or copyright for news uncovered.

Imagine that you learn a story behind how the number of deaths attributed to medical malpractice are generated. Right now, you do the work to generate this story and the instant you publish it, it becomes news. Talk shows, columnists, and other reporters can use your startling insight to opine and make their point about why malpractice insurance or litigation should be changed. You do all the work and they get the buzz.

But what if every time they cited your study, you'd get a little kickback, like royalty paid for use of a patent? Think about how much money could be made by infusing the news with ... well, with news. Right now, all the money is in generating opinions and the republic is no better for it. What if it were an investigative reporter who made the big bucks for unveiling a link between DEA officials and Mexican drug cartels, or showing how earmarks have made political donors rich? Think how much more energy would go into revealing what is really going on if that were the case.

A community simply hasn't got a chance to be well governed without a good media. Maybe it is time to less passively wish for good reporting and put in place some laws that actually reward it. It worked with invention.

Like Freddy Krueger

Apparently a real billboard expressing a genuine sentiment. I mean sentimental.

Sacred Cow Sausage

Hopefully we won't take our deficit problem too seriously this year but once the recession is clearly behind us, it will be important to address. Very important.

Right now, the problem seems intractable. When a problem can't be solved, it is time to look in new places for solutions.

Currently, there are three places that are considered sacred for budget cuts, three places we don't even consider as sources for potential savings.

1. Defense. We still spend money as if preparing for a large-scale conventional war. We fund weapon systems long past their "not feasible" expiration date. We don't know the difference between war and occupation. But if you want to lose an election, simply mention the possibility that we might want to decrease - rather than increase - defense spending. We will not get to a balanced budget without changing the assumption that defense spending is sacred. We don't have to spend more on defense than the rest of the world combined and it makes up about a trillion of our three trillion budget. I don't know how you ignore this if you are serious about balancing a budget that is off by about a trillion.

2. Social security. Technically off-budget and its own category, but still leaves a large carbon, I mean fiscal, footprint. When it was introduced, social security kicked in around the time that the average person died: life expectancy and retirement age weren't so very different. Today? Very different. This is simple. For my generation, we have got to raise retirement age by 1 to 5 years. This will make a huge difference in the money collected by and paid out from social security. We can't pretend that the rules for when people retire remain unchanged as life expectancies increase.

3. Medicare and all health care. People are bankrupt by medical costs and this is wrong. Millions are not covered and this, too, is wrong. What else is wrong? Covering expenses that are, say, under $1,000 or even $2,500. This creates overhead for billing, adding costs to health care. It makes us less price sensitive (imagine that filling up your gas tank had a set co-pay of $5 whether you were buying it at $2.50 a gallon or $5.20 a gallon) for services whose price would be lower if subject to price competition. And it makes us feel entitled rather than careful about casually using health care. If we did not cover services under some threshold, we could greatly reduce the cost of administration and coverage. Health care - like defense and security - should be a right. That ought not to be construed to mean that every piddling service we need is something we should pay for through the roundabout means of taxation and government reimbursement.

Right now, we can't seem to reduce the deficit, much less balance the budget. When your current set of assumptions preclude your goal, it is time to challenge the assumptions.

Oh, and one other thing. Even challenging spending on these sacred cows will not be enough. We will have to raise taxes. We may as well make the slaughter wholesale.

A Little Reminder on the Limits of Prediction

Hank Paulson and Alan Greenspan were on Face the Nation today. The former Treasury Secretary and Fed Chairman may well represent as much as we know about economics.

After offering their opinion about what projected deficits will mean for the economy over the next decade, they both very sagely predicted that the Colts would win today's Super Bowl. This was, of course, a brilliant little reminder of the limits of prediction.

Of course, everyone knows that an economy over a ten year period, and the influence of the deficit over economic activity for good, bad, or indifference, is a much simpler thing to predict than a mere game. Because a game, of course, involves the actions of independent agents, the unexpected, herculean efforts, unpredictable strategies, and chance. By contrast, an economy of 300 million people in a world of 6.5 billion, in a time when there has never been more opportunity for innovation in technology or social institutions, has none of that.

The Difference Between Experts and Expectorate

"McCain was in communication with Bernanke and Paulson, too, but to less useful effect. In one exchange with the Fed chairman, McCain compared the causes of the crisis to some recent management troubles at Home Depot. It's kind of like that, isn't it? he asked Bernanke. No, it's not, a flabbergasted Bernanke replied.
[p. 381 of Game Change by Heilemann and Haperin]

When even the man who came close to becoming president doesn't understand the difference between macro and microeconomics*, I suppose I ought not to be so dismayed by what we see among the talking heads and the general public. Of course there is nothing unique about the dismissal of economic experts. The public has rejected the claims of experts from domains as varied as astronomy (well, now that we have pictures we accept the notion that we're hurtling through space at high speeds in spite of the fact that our hair is not blowing back every time we stand outside), climate change, evolution and medicine.

Perhaps in the future, we'll have a series of questions one has to answer about what best we know. It seems probable that we'll know more and better in the future and some of that will refute what best we know now. But I have little respect for people who reject the claims of experts until they can first explain those claims. If you understand current science and theories on these topics and THEN choose to reject them, good enough. Your rejection I can accept. If the only thing you know about what the experts assert is that they are wrong, whatever you're expressing doesn't really even qualify as an opinion: it might just be gas or, well, expectorate.

So, what about a new phase of democracy? We make people take a driver's test before they can get a license and yet bad policy is more dangerous than bad driving. Perhaps we ought to give out different levels of voting license to our representatives in Congress. On some things, anyone can vote. On other issues, one needs a special license. And again, you don't even have to agree with the conventional wisdom - you just have to understand it.

The making of policy is wonderfully public. This is good. Or can be, if the public and their politicians knew when they didn't know. Sadly, too many take Palin's approach.

"Palin was waging a persistent internal crusade to reverse one of the [McCain] campaign's major strategic decisions. ... When her traveling chief of staff, Andrew Smith, pointed out to her that McCain, Schmidt, and Davis had reached their conclusion on the basis of complex calculations involving the polls and the budget, Palin simply shrugged and uttered one of her signature phrases: 'I know what I know what I know.'"
[p. 409 of Game Change by Heilemann and Haperin]

One of my favorite thinkers, W. Edwards Deming, said you could trust a man who knows his limitations. It seems that we could say the same thing about a polity and its media and representatives.

* The difference between macroeconomics and microeconomics is this simple: when Keynes helped to define macroeconomics he essentially said that the whole (the macro) economy has characteristics different from its parts (the microeconomy). Implied in this is the use of fiscal and monetary policy to stimulate or dampen demand but chronic deficits are no more essential to Keynesian economics than atomic bombs are to Einstein's theory of relativity. Keynesian economics does, however, suggest that regional, national, and even global economic policy will need to depend on something other than a laissez faire approach to economics or simply relying on agents within the economy to do what seems best from their perspective.

One Eskimo - Kandi

Been too long since I've posted a song for your enjoyment.

My Analysis of Obama's State of the Union

Talking about the struggles that Americans face in this recession, Obama said, " I hear about them in the letters that I read each night. The toughest to read are those written by children ..."

And I thought, well, yeah. Their handwriting and spelling can make it nearly impossible sometimes.

Multinational Corporation vs. National Government - Multi Wins!

The Supreme Court realizes that the government is no longer the big dog and has rather blatantly rolled over for the corporation. I should be outraged by the various implications of this, but instead just find it inevitable.

This from Jonathan Alter's most recent column about the Supreme Court decision to let corporations put unlimited money into any election.

In oral arguments, Ruth Bader Ginsburg, another dissenter, asked if foreign companies should have the same free-speech rights as domestic ones, since foreign individuals are allowed to make a speech here. The majority had no answer, and opened the door to a Chinese bank or Russian oligarch buying Congress.

Right now, the American political landscape has two camps regarding government and the corporation. One is wrong and the other is irrelevant. Sadly, it’ll probably take about a decade or two for communities to catch up.

One camp applauds the Supreme Court’s decision to let corporations spend unlimited amounts in elections. They rightfully see corporations as the engine for our economy, the creators of wealth and jobs. They wrongfully think that this means that corporations’ interest will dovetail with local communities and thus don’t need regulation.

Another camp is outraged at the Supreme Court’s decision. They rightfully see corporations as more interested in profits than American jobs and more interested in avoiding costs than accepting regulations that lessen the damage to communities through pollution and other egregious acts. They wrongly think that in a global economy the government has much influence over an institution that is so dispersed (we talk about “the corporation” but there are, in fact, thousands and thousands), pervasive, malleable, and quick.

Sadly, while political parties engage in the equivalent of Beta vs. VHS debate, the corporation continues to gain power in ways that don’t necessarily benefit communities here in the US.

The church could not reform the nation-state. Once the state had eclipsed the church in dominance, citizens had to transform the nation-state through revolution. Today, a similar thing has to occur within the corporation. Stockholders and employees – owners of the financial and intellectual capital of corporations – have to transform the corporation from within.

I’m optimistic that this can happen. I’m not optimistic that many people will even try to play this game for another decade or two.

Flag on the Play - Excessive Celebration

Today I heard such a sad story. A friend went to a monster truck show yesterday and reported that what he saw, "was big and loud."
"You're talking about people or things," I asked.
"As a matter of fact," he said, "there was this one really loud, big guy with his shirt off who got handcuffed."
"What did he do?"
"Nothing, really, that I saw. I think that he was just overly excited about monster trucks."

It wasn't like the poor guy was at Von's or in church. He was at a monster truck rally. And was cuffed for excessive celebration. Where else is he going to be able to freely express his passion for monster trucks?

I love baseball, but find it inane that when a guy hits the rare home run he has to act as if he's jogging out to take his position, showing minimal emotion. It used to be that football players at least knew how to celebrate scoring, but apparently the officials thought it bad form for a guy to get excited and they now throw a flag at a player who acts too happy.

I missed the official memo requesting more apathy. Maybe the pharmaceutical companies are behind this, knowing that in order for us to continually swallow our emotions we'll eventually need some sort of chemical handcuffs. Or maybe the real plot is to get us all to stop emoting so that when they begin replacing us with robots we'll be less likely to notice.

Obama Finally Gets His Experience Just as His Support Dries Up

Leadership does not just begin with vision. It begins with getting people to confront the brutal facts and to act on the implications.
- Jim Collins, Good to Great

Again, I feel like a Martian. I’m not sure whether to feel comforted by that or not.
When Bush invaded Iraq, I was aghast twice. Once that he’d do it in response to 9-11 and then that so many people – from media to everyday citizens – would so blithely cheer him on.

A year ago, when Obama was sworn in, I was, like so many Americans, so relieved that Bush was gone and happy to have a new president who seemed so intelligent, thoughtful, and carefully optimistic. The one big concern I expressed at the time was that Obama had no real experience. A year ago, I felt like a part of the majority. It was a little heady.

After peaking in the summer, Obama’s approval ratings have steadily dropped. They are now below 50%. And this is the part that I don’t get.

Obama’s one big weakness last year was a lack of experience. He now has it. And he’s done pretty well. I’ve got criticisms of the man, but he’s largely the cautiously progressive, boldly moderate candidate we elected. He’s kept his calm. He’s put money into infrastructure and education, showing his commitment to making long-term improvements in this country. And he’s shown genuine respect for other countries and won back our standing in the world community. He’s changed tactics, strategy, and even specifics about his goal on health care but has yet to sacrifice direction (moving towards more coverage for more Americans).

I’m still hopeful about this man who writes about the audacity of hope, but now I feel a little less uneasy about him. In my book, he’s proven that he can translate his potential into results. He has experience and the experience is not that bad, in spite of the bad economy and wars he’s inherited.

Bush had a great imagination. I’ll give him that. He wanted to transform a dictatorship in the Middle East into a beacon of democracy within a couple of years. Given such a thing has never happened in the history of humanity, such a goal showed great imagination. But he showed little acceptance of the world as it is.

By contrast, Obama has yet to show much imagination but he has seemed to show a real acceptance of the world as it is. He seems very realistic.

And to me, this explains why Obama’s approval ratings have steadily slipped. He hasn’t promised that anything will be easy. He has not claimed that in reality we’re well positioned. There is nothing exciting about confronting a reality that is full of issues as difficult as climate change, two wars (well, occupations really), the worst recession in a century, and health care costs that are steadily eroding salaries and competitiveness.

Yet the potential that comes from honestly addressing reality as it is, well that’s a potential for great achievement.

For me, Obama is addressing the real issues with real solutions. There is nothing easy, exciting, or quick about this. Drucker once said something to the effect of, “even the grandest strategies eventually devolve into real work.” And yet it is work that, finally, works.

I actually feel better about Obama now than I did a year ago. I guess this puts me back into the minority. But you know, after 8 years of watching Bush, I get some comfort from that.

A New Kind of Manager

I suspect that in the future, work teams will increasingly be coordinating their activities through the Internet and be less reliant on companies. And this will set the stage for a new kind of manager.

Decades ago, if you had told a new recruit that people would pay for the (admittedly kinder and gentler) experience of boot camp, would HIRE someone to push them beyond what they'd do on their own, they would have laughed at you. And yet (probably) millions of people hire personal trainers.

One of the biggest differences between the personal trainer who pushes you and the drill instructor who pushes you is whether the experience is voluntary. The person who is drafted - or even volunteers - has no choice about the experience, however "good" it may be for him. And in this I think that we potentially have a new model of management.

Imagine a future where managers are brought in by teams who realize that they need someone to coordinate their efforts, even to push them at times, in order to realize their potential. Such a model is not so very odd, really. Personal coaches are very common, but personal coaches work with individuals.

Management is a really crucial skill. More so as our world and projects become more complex. It's probably not enough to leave tasks to individual initiative, even if we have more natural (e.g., market) consequences and inducements for such tasks. Able managers will probably always make a good living.

But one of the big problems with current institutions is their reliance on extrinsic motivation - the use of carrot and stick to make things happen. Employees, like the boot camp recruit, have little or no choice about what to do or any ability to define goals or the tasks they want to try. These are assigned. This is good enough in a world where products are scarce and the definition of economic goods is generally limited to goods to have.

Philosophers talk about three kinds of goods: goods to have, goods to do, and goods to be, each higher and more meaningful than the last. Economic progress will shift soon from an emphasis on economic goods to have to economic goods to do. Work is an essential part of this. (We know that Darwin, Jonas Salk, Galileo, Michelangelo, and Andrew Carnegie were historic figures. We tend to forget that they defined themselves - and our civilization - by their work.) And as people come to work more often as a way to (in part) create goods to have and (in part) create for themselves goods to do, a management that is based on intrinsic rather than extrinsic motivation will be essential. The drill instructor you have no choice but to obey is replaced by the personal coach you hire to help you to realize your potential.

Of course the paradox is that as we focus more on intrinsic motivation and goods to do, we'll actually get more and better goods to have than in the old system. People who are intrinsically motivated are typically more creative, more productive, and do higher quality work. Call me an optimist, but one reason that I'm convinced that such a model will eventually emerge is because it gets better results.

Management as a service rather than form of control. Think about it.

Lower Taxes? Why Not NO TAXES?

Fed quietly posts record $46.1-billion profit in 2009.

I find this promises a fascinating alternative to us actually paying taxes. The Fed has enormous influence over interests rates and even exchange rates and, of course, stock and bond markets. It seems to me that with a proper amount of cunning, the Treasury Department could regularly generate profits. I'm waiting for Sarah Palin to take the "no new taxes" pledge to the next level, campaigning with the slogan, "No taxes."

That would, of course, give us years to figure out how to make up for the fact that all this manipulation would leave our investment portfolios stunted like bonzai trees in a redwood forest. But then again, having to work until you die would sting less if you knew that your income wasn't being taxed. I would hope.

A New Olympics

Games mirror life in that they require some mix of skill and luck and have uncertain outcomes. One reason we love games is that that while we may be unable to predict whether we'll win or lose, we know what game we'll be playing when we're done.

By contrast, the game of life has uncertain rules and we may find ourselves playing a game we hadn't started out in. A man eager to show how smart he is may soon find that he is, instead, playing the game of how gracious he can be. A person who thinks that life is all about making money may suddenly find herself playing a game of soul searching. Life has a funny way of changing the game on us and it is not just that we can't predict whether or not we'll win or lose but even what game we'll be playing.

So, I propose a new kind of Olympics, one that more closely mirrors life. Figure skaters will find themselves suddenly sprinting and archers will find themselves performing the high dive. It will - as with life - be a test of one's ability to adapt to something one did not sign up for. We'd call it, "The whatever life throws at ya'" Olympics. Or something like that. It might just be the best reality show yet.

Ill-Timed Fiscal Responsibility

Imagine the kid least clear on the topic getting to deliver the lecture in class and you get a sense of what happens to economics in a modern democracy.

Democrats are talking fiscal responsibility now. They've heard from their districts that Americans are aghast at our level of deficit spending. And, of course, Republicans have been harping on deficits ever since spending plans have shifted from the military to health. This is terrible timing.

Geithner and Obama have both signalled that they're aware of the need to reduce deficits and that they dare not do it too soon at the risk of tilting us back into a recession.

When the economy was expanding, the Bush administration ran chronic deficits and hardly a word was said. This was ridiculous. Large deficits during good times guarantee huge deficits in bad. And deficits in good times just fuel speculation, price inflation, and new ventures that cannot be sustained. It is during good times that we ought to speak out against deficits but it is during good times that a people feel they can afford to take on such debt.

During bad times, there is a sense that we spent our way into financial trouble and this reckless spending ought to be stopped. Americans in particular have always been uneasy about credit. Few remember that commercial credit met as much opposition in the late 1800 and early 1900s as homosexuality meets today: the apostle Paul wrote more clearly and as often about avoiding debt as he did homosexuality. We get very moral about debt during bad times. This is unfortunate, like getting squeamish about blood during surgery.

Deficit spending is necessary during bad times and is - at best - an annoyance during good. Economics is, of course, continually subordinate to popular opinion in a democracy, so what makes for good policy matters little. Lots of people claim that medicine is a conspiracy but the individual who believes in modern science and medicine can still visit a doctor: if enough people see economic policy as a conspiracy rather than the best we know, all of us get banned from seeing the doctor. Talk show hosts who fell asleep during economic lectures will fume and sputter and callers will chime in with their outrage and these kinds of people will send letters, organize voters, and set policy.

Keynes was a genius but there are lots of coffee shop diners who understand economics better than he did (and, presumably, understand physics better than Einstein). For the record, Keynes recommend government surplus in good times and deficit in bad. Right wing talk show hosts recommend the opposite. You take a guess as to who can be trusted more.