Happy New Year!

Bumper sticker I saw today:

Party Like It's January 20 2009.

Dick - Still Clueless, Still Convicted (But Sadly Not a Convict)

Dick Cheney is about to leave office. In spite of whatever worries you have about 2009, this single fact ought to be enough to buoy your spirits about the new year.

Dick Cheney - for all his egregious violations of protocol, decency, and the constitution - has skated through his 8 years in office with a minimum of media reprimand or screed. How much, for instance, did you ever hear about Cheney's stock options with Halliburton and how his personal returns soared into the thousands of percent as a result of Halliburton's no-bid contracts from the Bush - Cheney administration? In a media that feeds on scandal the way vultures feed on road kill, Cheney's moral decay was oddly passed over.

Cheney casually asserts that the president can start war without Congressional consent, (even if the war is with a concept like terrorism) and once engaged in war can suspend any laws (again, without Congressional consent). More than that, the president can launch nuclear attack without consenting with anyone.

Cheney's vision of the presidency is not that of a normal dictator, whose rule would extend without question across a mere country only. No, Cheney's president as dictator is of an emperor of the free world - able to end laws and life without challenge.

I suspect that Cheney's insistence on attacking Saddam was motivated by envy as much as perceived threat; no one questioned Saddam within the country and Cheney's reach for power has been coupled with a near refusal to explain himself. Although the man has never distinguished himself with any notable intelligence or wisdom, he feels as though he is a superior to the 300+ million Americans for whom he works and simply does not have to engage the rest of us in any kind of conversation. This is not our country - we have, in his mind, turned it over to George and him for the 8 years.

It still baffles me that George and Dick are leaving office with no worse penalty than record low approval ratings. But I'll let go of that for now. The real point is that they are leaving office. And that is reason enough to welcome 2009.

Just wondering aloud about the rugged individual's chance at love

Poets, mystics, and romantics talk about love as a loss of self, a transcendence of the ego.

On Geert Hofstede’s Cultural Dimensions measure, the US has the highest Individualism ranking in the world.

The US also has the highest divorce rate in the world.

Just wondering about a connection. That's all. I have nothing more to add.

Required Reading for the Obama Cabinet

Dietrich Dorner's The Logic of Failure makes points that escape some policy makers, lessons Dorner draws from systems simulations. Taken to heart, the following lessons might be enough to keep Obama's administration from the mistakes of Bush. Dorner's book - or at least these very succinct excerpts from it - ought to be required reading for Obama's Cabinet.



Wouldn't it be wonderful if we could move beyond the "policy as an article of faith" phase of politics?

Both the good and the bad participants proposed with the same frequency hypotheses on what effects high 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.

Catastrophes of just the last few years include Katrina and the 2008 credit crisis.

One basic error accounts for all the catastrophes: none of the participants realized that they were dealing with a system in which, though not every element interacted with every other, many elements interacted with many others. The conceived of their task as dealing with a sequence of problems that had to be solved one at a time. They did not take into account the side effects and repercussions of certain measure. They dealt with the entire system, not as a system but as a bundle of independent minisystems. And dealing with systems this way breeds trouble: if we do not concern ourselves with the problems we do not have, we soon have them.
"Catastrophes" seem to hit suddenly, but in reality the way has been prepared for them. Unperceived forces gradually eat away at the supports necessary for favorable development until the system is finally unable to resist any longer and collapses.

A leader ought to provide a narrative that is bigger than the moment, that provides more context than the urgency or false calm of the immediate situation.

The information a newspaper-reading citizen receives about economic developments or the spread of epidemics, for example, lacks both continuity and constant correctives. Information comes in isolated fragments. We can assume that those conditions make it considerably more difficult to develop an adequate picture of developments over time.

No amount of planning can compensate for the dispersion of control with a shared goal. Bush's discipline to keep all staff on message was probably just one more thing that worked against him.

We would do better to follow the advice of Napoleon, whose motto for such situations was, "On s'engage et puis on voit!" (Freely translated, "One jumps into the fray, then figures out what to do next.")
In very complex and quickly changing situations the most reasonable strategy is to plan only in rough outlines and to delegate as many decisions as possible to subordinates. these subordinates will need considerable independence and a thorough understanding of the overall plan. Such strategies require a "redundancy of potential command," that is, many individuals who are all capable of carrying out leadership tasks within the context of the general directives.

It is not enough to state standard platitudes as goals. Meaningless might help with political speeches, but it makes policy formulation difficult.

Bad participants simply compiled laundry lists of goals without providing operative principles for achieving them, and they made no distinction between primary and secondary measures. The bad participants provided a "jumble," not an "organized set" or measures.

Remember how much grief the neo-cons managed to create for Kerry because he simply used nuanced language that suggested that he understood the complexity of a situation?

Thomas Roth used results from a planning game to identify characteristics of good problem solvers. Roth studied the language that good and bad participants used while engaged in a simulation game called "Tailor Shop." The task was to manage a small plant that manufactured clothing. Using records of what the participants said as they thought out loud during the experiment, Roth studied the nature of their problem-solving language.
Roth found that the bad problem solvers tended to use unqualified expressions: constantly, every time, all, without exception, absolutely, entirely, completely totally, unequivocally, undeniably, without question, certainly, solely, nothing, nothing further, only, neither ... nor, must, and have to.
The good problem solvers, on the other hand, tended more toward qualified expressions: now and then, in general, sometimes, ordinarily, often, a bit, in particular, somewhat, specifically, especially, to some degree, perhaps, conceivable, questionable, among other things, on the other hand, also, moreover, may, can, and be in a position to.
It is obvious from these two lists that the good problem solvers favored expressions that take circumstances and exceptions into account, that stress main points but don't ignore subordinate ones, and that suggest possibilities. By contrast, the bad problem solvers used "absolute" concepts that do not admit of other possibilities or circumstances.

"History will be my judge" is a wonderful punt on self reflection and trying to understand the consequences of choices.

The desire to check on efficacy seems to increase but never assumes major propositions. That is odd because we would expect that rational people faced with a system they cannot fully understand would seize every chance to learn more about it and would therefore behave "nonballistically." For the most part, however, the experiment participants did not do that. They shot off their decision like cannonballs and gave hardly a second thought to where those cannonballs might land.
Strange, we think. But an explanation is readily available. If we never look at the consequences of our behavior, we can always maintain the illusion of our competence. If we make a decision to correct a deficiency and then never check on the consequences of that decision, we can believe that the deficiency has been corrected. We can turn to new problems. Ballistic behavior has the great advantage of relieving us of all accountability.
The less clear a situation is, the more likely we are to prop up our illusion of competence with ballistic behavior. Such behavior reduces our sense of confusion and increases our faith in our own capabilities.

2009 Predictions That Are Safer Than a SubPrime Mortgage

It seems only proper that a blogger predict the future. I mean, what are you paying for if not some reassurance that 2009 will be different from 2008?

So, here is my attempt to write the news stories before they become news. Let me be the first to welcome you to 2009.

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June 11 (RW) Internet pioneer Leland Vaughn succeeded in sending himself through the Internet. The full appreciation for this momentous feat was somewhat muted by the time it took for this inaugural full body download. During the three years it took Leland to be fully downloaded into his fiancé’s living room, she married and gave birth to a child. The little family was “shocked and horrified” when Leland was finally, unceremoniously dumped onto their living room floor.

On a positive note, a great number of Wikipedia entries seemed to have gotten tangled up in Leland’s memory, although his eager attempt to share tidbits such as the ability of the crown cardinals of Austria, France, and Spain to veto papal appointments from the 16th to 20th centuries failed to calm his ex- fiancé’s new husband. Given that the tidbits downloaded into his consciousness during this time seemed random, Leland has lost all sense of time – his memory of the 3 years during which he was in transit are a curious mixture of ancient and modern history and current events based on what scientists are now calling proximate virtual memory events, or data nuggets that were co-mingled with his digital ghost.

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September 17 (RW) Unfortunate cookies become popular. Fortune cookies give vague promises about the future, whereas unfortunate cookies offer vaguely worded consolations for past injustice. “You have every right to feel slighted by your in-laws; they should have been more impressed.” Or, “In spite of your grade school’s teacher’s reassurances to the contrary, her punishment was excessive.”

Although wildly popular, these unfortunate cookies have created a new, awkward dating situation: first dates that break into tears after breaking their unfortunate cookie to suddenly find themselves consoled for an injustice that has been haunting them for years.

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November 11 (RW) Groovy makes a comeback in the American vernacular.

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March 16 (RW) Iceland succumbs to a takeover bid from Citibank. Pundits are divided as to whether this transforms finance or politics. Cynics claim that it just formalizes the old arrangement between the two.

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June 9 (RW) Budget cuts and a weakening economy lead to the first genuine innovation in education since kindergarten: the 3 year Bachelor’s degree. By reducing education costs by 25%, this move brings college education within reach of millions more Americans.

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October 14 (RW) Universities around the nation are issuing recall notices to graduates, ordering them back for additional courses or risk losing their degree. This move is seen by some as a desperate attempt to replace revenues lost by cuts in government spending and the sudden popularity of 3 year Bachelor degrees.

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April 19 (RW) Bionic limbs are suddenly the most obvious and popular of the new solutions to the transportation problem. Rather than move 3,000 pound vehicles in order to transport 160 pound people, the limbs will add only a few pounds to the total person weight and create less congestion on roadways while dramatically lowering annual fuel costs and carbon footprint. (Catchy slogan of the year? “Instead of a carbon footprint – why not just leave your own? Bionic legs – one charge will take you 40 miles …. in about an hour.”)


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December 23 (RW) Happiness becomes the new black, the fashionable alternative to gloom and doom that is popularized in the news. Sadly, it is back out of style by year’s end.

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August 28 (RW) Newspapers, continuing to lose market share and revenues, will begin to auction off celebrity. Taking a page from the Paris Hilton saga, they will create buzz for a million, and coverage that can’t be missed for only ten million. After the most closely watched election in decades, this will be one of the few growth areas for beleaguered papers. The news will benefit twice: once by selling their services this way and again by reporting on this trend in tones of outrage.


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All year long (RW) Blogging will go through a year of mergers and acquisitions. (Given that there is no money in blogging, it seems only natural that the M&A activity will move to the blogosphere in a year when there is no money in financial markets.) Some of the mergers will be unsurprising - Huffington Post's takeover of Daily Kos seemed terribly obvious in retrospect. Others, however, caught even the most savvy analysts off-guard. June Cleaver Nirvana takeover of Cosmopolitan, for instance, shocked everyone in traditional media and no one in the blogosphere. (Holly told reporters that after giving sex tips for decades, it was time for Cosmo to begin offering advice about how to raise the children that are the natural consequence of following such advice. "It is time to move with our readers, offering stories that they would now find relevant - advice on potlucks and being seen in public in chicken costumes, for instance.") R World will, sadly, be bought out by a Ukrainian poet who insists on rhyming everything BEFORE translating it into English. Living Next Door to Alice will be the first to pioneer the application of a new claymation software that makes all of his posts look like they are narrated by lava lamp blobs morphing into talking heads that vaguely remind people of celebrities in the same way that clouds remind people of horses or sea shells. This media form will so captivate audiences as to entirely replace TV - for the third week in May.

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And best of all, in 2009, people will begin to take silliness seriously. It is not obvious that there will be any other way to make it through with our sanity intact. Have a wonderful year.

The SI "Where is My Swimsuit?" Calendar

Wandering through Border's today, I spotted the perennial best seller - the Sports Illustrated Swimsuit Calendar. The super model on the cover didn't actually have a swimsuit - not that I could tell. Which gave me an idea.

The 2010 Sports Illustrated "Where is My" Swimsuit? Calendar.
Super models searching for those little bikinis that have become so small that they are nearly impossible to find.

I think it could sell.

Stuart Smiley in the Senate?

It looks as though Al Franken might win the final recount in Minnesota.

Meanwhile, Joe Biden, in his typically candid style, tells George Stephanopoulos that the U.S. economy is danger of absolutely tanking in 2009.

If Biden is right, I don't suppose it would hurt to have regular reassurances that we Americans are smart enough, good enough and doggone it, people like us. I feel comforted just thinking about it.

Peace & Joy

The problem is that no one fights for peace.

The Argument for Way Cool Job Titles

This week, Andrew Marr had among his guests Dr. Andy Miah from the University of the West of Scotland and accused him of having the coolest job title of any guest he has ever had.

Miah is Fellow of Visions in Utopia and Dystopia at the Institute for Ethics and Emerging Technology.

Now why didn't I think of that? And why can't all job titles be this cool? I mean, is the cost any different for a business card that says Consultant or Analyst or one that says Challenger of Collective Delusions, Rescuer of the Future from Tradition and Social Inertia, or Bodhavista of Fashion and Style?

It's a recession. There is a very good chance that the powers that be will skip your next raise. At least ask them to give you a great job title.

The Dynamics of Financial Immorality

Cause and effect are not closely related in time and space.
Underlying all of the above problems is a fundamental characteristic of complex human systems: "cause" and "effect" are not close in time and space. By "effects," I mean the obvious symptoms that indicate that there are problems - drug abuse, unemployment, starving children, falling orders, and sagging profits. By "cause" I mean the interaction of the underlying system that is most responsible for generating the symptoms, and which, if recognized, could lead to changes producing lasting improvement. Why is this a problem? Because most of us assume they are - most of us assume, most of the time, that cause and effect are close in time and space.
- Peter Senge, The Fifth Discipline

"The typical response is to blame whoever it closest to the problem."
[paraphrasing] W. Edwards Deming

Here is a potentially great column by James Boyce making his case for how we came into this financial crisis. The column could have been great but it so reeks of accusations of immorality as to miss the real point: questioning the dynamics of the financial system and the rules and behavior that might make it more stable.

Thousands of years ago, disease was obviously the product of sin. Why? We blame the one closest to the illness and we didn't understand illness - didn't understand germs or viruses.

Today, financial catastrophes are obviously the product of greed, of excess, of immorality by the players closest to financial markets - those in debt or those who created the instruments of debt.

There is probably no system more complex than a global financial system. No one completely understands it. And yet it is not obvious that accusations of sin make for good explanations or offer good solutions.

One of the more counter-intuitive conclusions of Keynes was that "good" behavior could actually hurt the financial system. When people chose to save during a down time, they merely exacerbated the down turn.

One of the more counter-intuitive conclusions of Copernicus is that those of us sitting around on planet earth are hurtling through space at thousands of miles per hour.

What seems obvious in systems is not always right.

If you hear someone struggling to explain the system dynamics of the global financial system, know two things: they are probably wrong and they are on the right track.

If you hear someone blaming immorality for the collapse of the financial system, ask them whether the outbreak of winter colds and influenza is a product of worsening morals in cold times or a form of penance for bad behavior during summer.

Shoe Throwing Blogger Reports from the Road (it is cold in the midwest without shoes!)

You know the difference between Muntader al-Zaidi - the guy who threw his shoes at Bush - and us bloggers? Muntader al-Zaidi actually got George to change his position.

I like the idea of throwing shoes at George Bush on 20 January as he leaves office. It could be like rice at a wedding. It might even catch on as new tradition for seeing off the outgoing president. (After 4 to 8 years in office, they always seemed to have inflamed some portion of the shoe-throwing polity.)

Life Hiker Pops Out of the Virtual World of Blogging

Who Framed Roger Rabbit was notable because characters from one dimension burst through into another. The animated Roger Rabbit landed in our world, cartoon physics intact. Today, I had a similar experience. Sort of.

I got to meet Life Hiker today here in San Diego. We have been reading and commenting on each other's blogs for at least a year now, and when I heard his voice on my answering machine yesterday, I had to chuckle. It was so cool to have him break through the virtual barrier into my real world. (He has, apparently, been there in his real world all along.)

One biggest problem with Life Hiker (who actually has a name) is that I find so little to disagree with in his comments and posts. We've come at some of the same positions from different directions, but I've learned this about the blogosphere: it has created a new kind of neighbor. LH may live across the country in New York, but he's pretty much a next door neighbor when it comes to ideology and worldview. And getting to sit down with him and his son at Con Pane - one of my favorite San Diego bakeries - felt natural.

My wife Sandi came towards the end of our meeting. (He looked more delighted to see her than me, but she is, to be fair, more delightful to look at.) She told him that he was so "real," had such obvious integrity. And he is and he does. I love ideas and would be content not to bother acting on 98% of my ideas. By contrast, LH regularly volunteers, travels abroad to follow his convictions about how to help people, and basically lines up his beliefs and actions in ways that are every kind of admirable. It was great to "meet" this man I know so well.

Who Needs Infrastructure?

Inflatable electric car can drive off cliffs

Lisa Zyga writes,

It's hard to say what the most intriguing thing about XP Vehicles' inflatable car is. Maybe it's that the car can travel for up to 2,500 miles on a single electric charge (the distance across the US is roughly 3,000 miles).

Or maybe it's the fact that you buy the car online, it gets shipped to you in two cardboard boxes, and the estimated assembly time is less than two hours. Perhaps it's that the car is made out of "airbags" - the same polymer materials used to cushion NASA's rovers when they landed on Mars. Then again, it could be the company's claim that you can drive the car off a cliff without serious injury, and that it will float in a flood or tsunami.

This is perhaps one more reason that the Big Three are flirting with death - a new wave of vehicles is emerging.

The thought of being able to drive off cliffs is exciting but it suggests to me an even more interesting option: doing away with roads altogether. Who needs bridges even, if you have a car that can float? Can you imagine how many trillions of dollars we'd save if we didn't have to rebuild or extend our ailing infrastructure?

December 21, 2012 - Maya End of World Prophecies

My buddy Mark Van Stone has written about the many theories that have sprung up around the coming end of the Mayan calendar. Mark is a Mayanist and a professor of art history and is a fascinating fellow even when the topic isn't something as inherently interesting as ancient civilizations and end of world theories.

The Maya Cosmic Prophecy: From Sensation to Sensibility

Maya Scholars, in Mexico, Guatemala, Belize, Honduras, El Salvador and North America, have been watching with amusement and dismay as self-styled experts proclaim that ancient Maya prophets foretold an earth-shattering happening to occur December 21, 2012. This predicted phenomenon gets described in contradictory but often cataclysmic fashion--as an ecological collapse, a sunspot storm, a rare cosmic conjunction of the earth, sun, and the galactic center, a new and awesome stage of our evolution, and even a sudden reversal of the Earth's magnetic field which will erase all our computer drives. One even predicts the earth's initiation into a Galactic Federation, whose elders have been accelerating our evolution with a "galactic beam" for the last 5000 years. In sum, the world as we know it will suddenly come to a screeching halt.

Read the rest of it here.

It does seem, though, that espousing any end of world theories (and Mark is not) is a thankless job. If such a prophet ever gets it right, it is not as though he can ever enjoy any recognition for that, after the fact. And of course if you are wrong, you have the whole world there to mock you. It sounds like the kind of job we bloggers could handle. I may just start posting the occasional end of world prediction. Stay tuned.

Santa's Head Banger Doppleganger - "Dancing with My Elves"

By the time Christmas is over, Santa has to be so exhausted, and tired of giving, so weary of patiently sitting through hours of photos and incessant requests for presents. I think that on 27 December, he cuts off the beard, takes off the red suit, and performs. When he does, I can only imagine that he looks and sounds like this - snarling as he sings, "Dancing with my Elves."

Blagojevich's Free Market Solution to Political Appointments

Illinois's Democratic governor Rod Blagojevich was going to auction off Obama's Senate seat. He might wind up in jail but it is worth thinking about the positives in his attempt. There are at least two.

1. This might be one way to end the political dynasties that persist in our democracy, a free market solution to the current triumph of tradition over open competition.

2. This might be one way to raise money for the government. The French did this before the Revolution. For a certain fee, one could actually become, say, the Duke of French Onion Soup (okay, not quite that bad, but sort of). This was actually an odd form of bond sale because the new royalty, once they'd purchased their title, would then be paid an annual "royalty" into perpetuity, a return on their investment. Why couldn't Senate seats be sold in the same way, the electoral college giving way to eBay?

And it is doesn't seem right to be too hard on a guy named Blagojevich. With a name like that, he probably knew that his career was not going any further. Of course now, blagojevich could become a verb, as in, "he totally blagojeviched that opportunity."

The Gore Kennedy al-Qaeda Conspiracy as Reported in the Tribune

The Democrats' most visible expert on environmental issues is flying to Chicago to advise the president-elect on his Environmental Protection Agency and Energy Secretary appointments. Unless Gore has found a way to fly there in a cape, I am not sure how this is news.

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As the world becomes more complex, brands have more value. In theory, we make rational decisions based on lots of information. In practice, we rely on familiar brands to sort through a sea of confusing variables. (Caroline) Kennedy may be replacing (Hillary) Clinton as the junior Senator from New York.

Or political dynasties could have nothing to do with brands and everything to do with our membership in the primate family: Jane Goodall might be able to explain political dynasties more readily than branding experts.

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Tribune, publishers of newspapers like the Chicago Tribune and LA Times, has filed for bankruptcy. I've noticed of late that I don't have the patience for a newspaper for one simple reason: the mix of stories the editor chooses have little overlap with the mix I'd choose when on-line. As it turns out, the packaging of the stories into a "paper" is the part of publishing that has perhaps the least value. It is not just the fact that stories can be accessed by online users who don't subscribe - each of us can put together our own package of news, commentary, comedy, and borscht recipes without relying on the randomly overlapping interests of editors. Tribune is going to be just one in a string of casualties of this new hyper-customization of media unless they figure out how to facilitate this process rather than close their eyes and desperately wish it away.

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Five members of al-Qaeda have entered a guilty plea. Apparently, they want a promotion from prisoner to martyr. Of course this is nonsense.

Those al-Qaeda guys could never manipulate a country as sophisticated as ours. Osama bin Laden had planned to lure the U.S. into wars it could not afford, destroying the country by enticing it into overextending itself financially, leading to economic ruin. Of course this is nonsense.

We are simply too sophisticated to be so easily manipulated.

How People Talk

Today we were with my parents. I realized something about what we talk about - my parents and I prefer very different topics: dad likes to talk about things, mom about people and I like to talk about ideas.

I decided to process this by creating a table, adding to it a reference point. The thing I didn't put into this simple table is optimistic or pessimistic - whether someone prefers horror stories or stories with a happy ending.
(To make this table large enough to easily read, you can either click through or buy a huge monitor.)

Peace & Happiness

"I still believe that peace and plenty and happiness can be worked out some way. I am a fool."
- Kurt Vonnegut

A Stimulus that Doesn't Cost Trillions - Raising the Quota for Foreign Workers

One of the ideas behind any economic stimulus package is that spending has a multiplier effect. If the government spends $100, the people who get that money will spend a portion of it on services and products that will, in turn, be spent again, and again, and again. The defense contractor gives his money to the restaurant owner who gives it to the flooring store who .... The $100 originally put into the economy might stimulate a total of $200 to $1,000 before its ripples fade into insignificance.

Communities can also get a multiplier effect from jobs that create goods that are sold globally. Engineers and manufacturers, for example, eat out, pay taxes that pay teachers, hire plumbers, and stimulate the local economy in various ways that are obvious when someone like GM closes a plant or office in a community.

We now are spending borrowed money in the hopes of stimulating the economy. Had our policy towards foreign graduate students and employees not become so xenophobic since 9-11, we might be getting more of that stimulus from high-paid professionals who are, instead, now living and working in places like Bangalore and Shanghai.

One of the most noticeable things about American high-tech firms is what a high percentage of their team members are foreign born. As a consultant, more than once I have been with development teams where I was the only American-born person. It is not unusual for about 90% of the team to be from either China or India. They are living and working here in the US but they had moved here either for graduate school or work.

Most Americans are unaware of how much work the nice couple from India or China brings into the area. When a high-tech company hires a software developer or hardware designer for a six-figure salary and his wife gets on at the local ER, making the same or more, these two stimulate the local economy in various ways. They spend money at local restaurants and bid up the prices of homes. They make it more probable that a book store will come into the area or that a college will offer MBAs to aspiring professionals. The plumbing company owner who makes even more than the engineering director can make that much because his clients make good money. Everything ripples. Surgeons in rich countries are rich and in poor countries are poor.

But if in a post-9-11 world this Indian software developer stays in Bangalore, so will the things he can buy. The bump in pay for the plumber, the expansion of the local MBA program, the steadier business for the restaurants ... all of this now accrues to Bangalore instead of Chandler, Arizona, or San Jose.

Since 9-11, it has been increasingly difficult for American companies to hire foreigners. Recently, I heard a director of software from a medium-sized company say that he doesn't even try to get work VISAs for foreigners and accepts that he just won't be able to get enough talent here in the US. Meanwhile, he - like so many managers I've talked to - tells horror stories about working with teams in Bangalore or Shanghai, trying to coordinate the definition of specifications and the execution on tasks across cultures, languages, and time zones. American companies would often rather have the talent here in the US but do not have that option. This doesn’t just make it hard on American companies; it makes it hard on American communities.

We live in a global economy and we may well be experiencing the first significant recession of this most recent wave of globalization. Today's report about the loss of half a million jobs last month makes it obvious that this is already worse than the average recession. I can't help but think that it has been made even worse by our nearly xenophobic policy towards foreign graduate students and professionals. After World War 2, we were the magnet for talent from around the globe. We had the technology and labs that could be found nowhere else. We had the capital and the big corporations. Gradually, that advantage has eroded. In the 7 years since 9-11, American politicians have consistently exacerbated this trend with their apparent fear of foreigners.

As American politicians consider radical measures like bailing out huge swaths of the economy with trillions of dollars, perhaps they could consider a simpler measure. Perhaps they could raise the quota for foreign-born workers to allow the American economy to enjoy the most organic and natural of stimulus packages: great jobs that help to employ the millions of teachers, doctors, dry cleaners, waiters, and plumbers whose salaries ultimately depend on the pay and productivity of their clients.

From Boom to Bust(ing up big companies)

Eliot Spitzer demonstrates over at Slate why I was so grieved when we lost him to libido. Given the importance of financial markets, it seemed to me that his savvy about them was incredibly valuable to good government.

Spitzer says that the "too big to fail" model for banks is the problem and that rather than prop them up with subsidies, we ought to let them fragment into smaller pieces.

Yesterday, I had an exchange with my cousin Scott and he suggested the same thing about the auto industry. Let the little start ups offering new and innovative (and typically more green) designs take market share from the Big 3. (Look at this little Aptera, made by a company here in San Diego County, that gets 300 mpg, for instance.)

For autos and finance the future is uncertain. What kind of models will work best? What kind of financial products are innovative and which are merely reckless? What kind of cars will work to alleviate congestion and pollution? And even we could define these products, what kind of company could best provide the whole package (from employees to prices to support infrastructure) to best deliver those products?

Given so much is uncertain, it is best to have lots of experiments running right now. The Big 3 and the big banks could, in theory, run those experiments, letting various divisions and groups take their shot at creating a new future. But one of the many problems with CEOs making so much money is that they seemingly feel obligated to earn it. They review and judge the various plans from within the company, effectively running everything through the same filter - making the company one really big test of one theory rather than lots of small tests of many theories.

Given the financial crisis, Obama has been compared to FDR. What if, instead, the better model is the brash Teddy Roosevelt who broke up big companies, forcing competition into industries that made a few rich but did little for the rest of the country? He could do worse than accept this argument from Spitzer:

But even more important, from a structural perspective, our dependence on [financial institutions] of this size ensured that we would fall prey to a "too big to fail" argument in favor of bailouts.

Two responses are possible: One is to accept the need for gigantic financial institutions and the impossibility of failure—and hence the reality of explicit government guarantees, such as Fannie and Freddie now have—but then to regulate the entities so heavily that they essentially become extensions of the government. To do so could risk the nimbleness we want from economic actors.

The better policy is to return to an era of vibrant competition among multiple, smaller entities—none so essential to the entire structure that it is indispensable.

The concentration of power—political as well as economic—that resided in these few institutions has made it impossible so far for this crisis to be used as an evolutionary step in confronting the true economic issues before us. But imagine if instead of merging more and more banks together, we had broken them apart and forced them to compete in a genuine manner. Or, alternatively, imagine if we had never placed ourselves in a position in which so many institutions were too big to fail. The bailouts might have been unnecessary.

Wonder

Beyond all the political chatter, fretting about financial markets, criticism or defense of the new administration and the love for the absurd ... a little reminder about what it is all about from the wonder that is Natalie Merchant.



I love this song and video.

Happy Hump Day.

Soros on Free Market Fundamentalism

I think I realized one of the biggest reasons why DC has seemed to choose free markets over regulation: it is easier to opt for free markets than to do the difficult work of figuring out how to regulate them.

George Soros has written an article, The Crisis and What to Do About It.

Since [financial markets] are prone to create asset bubbles, regulators such as the Fed, the Treasury, and the SEC must accept responsibility for preventing bubbles from growing too big. Until now financial authorities have explicitly rejected that responsibility. It is impossible to prevent bubbles from forming, but it should be possible to keep them within tolerable bounds.

Soros has made a fortune in financial markets. Last year alone his income (income - not wealth) was nearly $2 billion. Soros fled eastern Europe for free markets but is a critic of what he calls free market fundamentalism.

I mostly agree with and admire Soros. (Okay, maybe even envy him. I'd work at his salary for just a week and be happy with the 30-some million.) I think it is wonderful to have markets and I think that it as silly to think that financial markets will self regulate as to think that football games or or any sports contest will self regulate.

But his words here get to the crux of why regulation is so hard and why it is so much easier to take the extremist positions of free market fundamentalism or socialism.

First of all, who wants a Federal Reserve chairman who keeps asset prices down? It sounds good in abstract, but we're actually talking about home prices and portfolios that we're keeping from appreciating too much.

Secondly, what is the tolerable bounds for a bubble? Don't we all want just one or two more percentage gains - no matter what gains we've already made? Who is to say what is too big? Someone whose annual income is $1.7 billion? Someone who is on a fixed government salary and envies anyone making more than $100,000 a year?

As anyone who has bought furniture at Ikea can attest, just because something is hard is no reason not to do it. Getting the right level of regulation is hard because what makes for best short-term conditions (stability and predictability) can make for poor long-term conditions (innovation and change at the heart of progress).

Soros is saying what a lot of us are thinking. He also seems to raise more questions than he answers. And I think that this is perhaps the biggest reason that free market fundamentalism won converts. It suggests that regulators don't have to make any hard decisions or difficult judgments. They can simply leave it to the market.

$25 Billion for These Guys?

"Leadership is not the same as reaction. Even a cat will jump off of a hot stove. Leadership involves prediction."
[loosely quoting] W. Edwards Deming

The big three auto companies are clarifying their request for $25 billion to bail them out.

GM"s CEO will drive to DC in a hybrid car.
Ford's CEO will work for $1 if the auto industry gets $25 billion. (Which, oddly enough, suggests that if his company has less money he'll ask for more pay.)

These two were sharply criticized for flying to DC on private jets, asking the American taxpayer for money. And Ford's CEO, Mulally, said that he thought his $21.7 million compensation package was okay, even when the company he was leading needed to be bailed out.

I guess this shows that these CEOs can be shamed into changing their behavior. But it also seems to affirm that they are merely lurching from one reactionary move to another. And in an industry where developing a new model car can take 3 to 8 years, leadership by reaction is far more of a liabilty than high gas prices or tight credit markets.

It seems doubtful that these CEOs have a bold vision of the future or have any real connection to the average consumer. Given that, it is not obvious how they'd be able to put $25 billion to good use. I say invest the money into mass transit instead.