26 September 2016

Now That We've Convinced You That All Politicians Are Liars, We'd Like to Offer You the Best Liar - a Really Terrific Liar

Republicans: I'd like to borrow the country.
Democrats: Again? It didn't turn out so well last time when you borrowed it.
R: As if you're any better.
D: Well you did total the country, the global economy, and leave the Middle East in turmoil.
R: None of that was my fault.

Today - 26 September - Donald Trump leads in the polls.

I do think that one thing Republicans have succeeded in doing is in making cynicism about government seem like sophistication. "All politicians are liars" is a wonderful way to excuse the worst candidates from any responsibility. There is now an argument about whether it matters that a politician repeatedly lies. 

It is an odd place that we've come to. Trump lays out incoherent policy that thumbs its nose at the constitution, expert opinion, and common decency and gets a break because everyone says, "Well, he will never do that." Clinton lays out a coherent policy and gets criticized because, "She will never do that."

Good policy that comes from the same ideological (and literal) family tree as the policy that helped to make the 90s so prosperous is discounted because we can't trust what Clinton is saying. 

Why can't we trust Clinton? Because all politicians are liars.

Bad policy that is inspired by reaction to talk radio and Fox news is discounted because we can't trust what Trump is saying.

Why can't we trust Trump? Because all politicians are liars.

Given all politicians are liars, we don't have to do the hard work of actually thinking about the policy or so-called facts. Instead of using our brains we can just use our guts. 

Politifact tracks statements made by the candidates, rating them from "pants on fire" to "true." 13% of Clinton's statements earn either a "pants on fire" rating or a simple "false." 13%. Trump? It's 53%. Over half the statements he makes can't be trusted. 

24 September 2016

Just One Glaring Problem with Trump's Approach to Illegal Immigrants

A guy seeing your frustration with a coin that seems to often come up "tails!" offers to get rid of the tails of your coin.
"How," you ask.
"Trust me," he says.
Frustrated and angry, you do.
How does he get rid of the tails portion of your coin? He just takes the coin.
The good news? No more tails.
The bad news? No more coin.

Donald Trump has convinced his supporters that immigrants are a threat to their livelihood and even their lives. (More than once he's trotted out grieved parents whose child has been killed by an illegal immigrant with a gun or a car.) If we build a wall ... If we deport them ... If only it weren't for immigrants, the economy would be so much better.

Well, there is your tail. We don't like losing jobs to the immigrants and Donald promises to get them out.

How? Well, he glosses over the little details of how you'd manage to find and deport 11 million people. (A task that is complicated by so many things - including the fact that families are rarely one thing; how do you deport a 45 year old whose two teenagers are not only citizens in the US but in school here? His answer? Trust me.)

But his plan to remove the tails portion of the coin of course involves taking away the heads portion of the coin.

Every person here in the country is part of our domestic market. They rent or buy houses. They buy food, clothes, cars, and thousands of little and big things that get sold or rented every day. If we were successful at deporting 11 million people, we would lose all that demand for goods and services. Even assuming that their incomes are only half that of the average American, they represent incomes of about a quarter of a trillion - $275 billion - a year. That's a chunk of income lost, enough to throw the country into a recession.

I could make all sorts of mind-numbing calculations based on reasonable assumptions about how much illegal aliens contribute to the economy but bottom line, if they aren't living here, they aren't shopping here. The good news is that they wouldn't be here to take your job in nailing up sheet rock in the construction  industry; the bad is that they wouldn't be here to demand housing and with them gone, it's conceivable that the homes abandoned would be available for folks to buy or rent, meaning that no one would need to build houses for awhile and you still wouldn't have a job nailing up sheet rock in the construction industry. It's tough to imagine that demand for housing would be strong in the aftermath of 11 million lost residents.

Donald Trump is promising to take away the tails you hate getting on your coin. How will he do that? He'll take away your coin.

19 September 2016

The Popularization of Entrepreneurship and Customizing Arrangements with Each "Employee"

Ricardo Semler was the first CEO I'd heard of to have half a dozen folks working side by side on a factory floor, each with different arrangements. One might be working for a monthly salary, another hourly, another doing piece work and another renting equipment from Semco (the company founded by Semler's father and later run by Ricardo) to make the product the employee would sell on their own, outside of Semco. Semler may have helped to pioneer something that will become common.

The next big wave is going to be the popularization of entrepreneurship and one element of this will be to make more employees more entrepreneurial. Having multiple arrangements with "employees" is key to this.

One reason flexible arrangements is key to making employees more entrepreneurial is because it forces both sides - management and the employee - to consider and understand the source of revenue and profit. There is no arrangement that you should make that would be bad for either side. But you can't make an intelligent offer or counter-offer without information about where profits come from. Curiously, the typical employee today has no real sense of whether she's a necessary cost or a source of value that generates 90% profit margin.

If you are going to have real and useful deals made for each employee's arrangement, it means that you have a real and clear sense of how the company creates value. That alone suggests clarity that rarely exists or at least is rarely communicated widely.

Then, once you have clarity about the sources of profit and your employees have clarity about what they would most like now - this one wants to work 10 to 12 hour days in order to make as much as possible at this stage of life, this one wants to work only 6 hours a day because their child is in school only that long, this one wants to work on projects that require 10 hour days for months and then take a month or two sabbatical, this one wants to take the risk that what they're doing will payoff handsomely and wants to be paid half in salary now and half in future profits later - you have the basis for profitable deals and custom arrangements.

These custom arrangements do at least two things. One, it gives employees the ability to customize their jobs to fit their lifestyle. Two, it drives every deal towards greater profit, because everyone knows that profit is what funds these deals and gets them approved. If your proposal will generate profit, management can say yes. Timothy Ferris argues for the relentless application of the 80-20 rule, looking for the 20% of your activity that results in 80% of your value. People looking to make arrangements would be continuously looking for ways to add more value in less time, translating the gain into either more time off or more income. This would democratize the drive for profit and would fund autonomy.

It will also do something else that we in the West have done three times before. It will make the institution the tool for the average person.
Between 1300 and 1700 - during the first market economy that we'd call an agricultural economy - the church in the West became a tool for the average person. We got religious freedom and that meant that individuals defined their beliefs and could even found a church to realize that.

Between 1700 and 1900 - during the second, industrial economy - the nation-state became a tool for the average person. Subjects became citizens.

Between 1900 and 2000 - during the third, information economy - the bank became a tool. Average people who could scarcely get a loan in 1900 were regularly throwing away offers for credit by 2000.

Within the next few decades, the corporation will become a tool for employees. And one of the ways that this will play out is through flexible arrangements employees define that give them more autonomy and give them - and the corporation - more profit.

13 September 2016

Where Political Beliefs Come From

I have a co-worker who I quite enjoy. We are in exactly the same position in a very small company, similar in our love of absurd humor and our enjoyment of clients and getting to explore different technologies and corporate cultures. There is a lot about us that is very similar.

Curiously, our politics are very different. Or maybe not at all curious given he grew up in Georgia a decade before I grew up in California.

We like to think that we choose beliefs but maybe they choose us. And perhaps the vehicle through which they do is the thousands of micro-expressions we're exposed to growing up. Let me explain.

Imagine an earlier time in evolution. You are part of a small tribe and you know that you can't survive on your own. You have an idea for an approach that you think would result in more food. It challenges the old ways though and you also know that it will be risky to push too hard with your idea.

 As you propose your idea, you'll be less wed to the idea - which might make things a little better for everyone - than avoiding exile from the tribe - which would make things much worse for you.

So how do you exercise caution when making a proposal that could either make you a hero or an exile? You learn to read expressions, body language, tones ... and you look for early warnings that you might be over-stepping the bounds of convention in ways that will get you kicked out of the group.

To this day, it's probably the case that we learn to read the thousands of clues about "you're in the group," or "you're about to get kicked out of the group" status and we learn to respond to those. That feedback is immediate and important compared to the more abstract feedback about policy tends to make the next generation healthier, wealthier, or wiser.

My co-worker who grew up in Georgia a generation earlier would have been shaped by more conservative feedback than me. It's no surprise that today he is more conservative. And maybe we don't really choose our ideologies so much as learn them as a way to stay within the group we find ourselves in.

Today Census Bureau Announces Surge in Wages in 2015

Regular readers of R World know that I've been arguing that first half of 2010s would bring unemployment to healthy levels and this second half will bring wage growth to healthy levels. It's hard for wages to rise when business can hire from the ranks of the unemployed and those ranks have finally thinned. Today the Census Bureau reported this:

SEPT. 13, 2016 — The U.S. Census Bureau announced today that real median household income increased by 5.2 percent between 2014 and 2015 while the official poverty rate decreased 1.2 percentage points. At the same time, the percentage of people without health insurance coverage decreased.
Median household income in the United States in 2015 was $56,516, an increase in real terms of 5.2 percent from the 2014 median income of $53,718. This is the first annual increase in median household income since 2007, the year before the most recent recession.

More here.
To put that in perspective, last century wages grew 2.1% a year, which made incomes 8X higher by century's end. How big of a deal is 5.2% wage growth? (This is an increase in real terms, so it's inflation adjusted.)

First of all, 5.2% is the "biggest wage increase since the Census started recording this data nearly 50 years ago."

Secondly, if wages kept growing at 5.2% a year through the end of this century, median wage would be $4.2 million. That's pretty cool. (And unlikely. Still, I don't think that $1 or $2 million inflation adjusted is unlikely though. Not that I'll be around to confirm my suspicions.)

Some people worry about the level of debt we're leaving future generations. That's nonsense. The only worry is whether we're leaving them with healthy or sickly wage growth. 

07 September 2016

What Trump's Love of Putin Reveals

Trump affirmed tonight that he really, really likes Putin. Putin has invaded countries and killed reporters and political opponents ("Well do you want me to tell you what Obama's done," Trump asks in rebuttal) and yet, as Trump says in support of the man, Putin has an 82% approval rating. This gets to the essence of what is most troubling about Trump.

Trump doesn't necessarily aspire to a traditional kind of dictatorship. He seems more interested in a dictatorship of the majority. This is the difference between a democracy and a liberal democracy.

In a liberal democracy, the majority gets to rule but even minorities have rights like freedom of speech, independent press, a judiciary that answers to its own conscience rather than a president or prime minister's. The majority doesn't rule. The majority merely chooses the people who will define policy (to the extent that this policy doesn't take away the rights of minorities).

Trump has threatened to sue reporters that criticize him, banned selective news organizations from his events, presided over rallies in which crowds have called for the execution of his political opponent Hillary Clinton, and has himself called for a ban that would end freedom of religion.

Donald Trump does not just show a lack of support for rights and freedoms of everyone - including minorities. He shows a lack of interest.

Given this, it's no wonder that he admires Putin who shows no respect for rights and hates Obama who not only shows an interest in the rights of minorities but is one. The only reason that Trump is just a bully is because he hasn't yet won office.

Inflation Adjusted, Our 7 Good Years Followed by 7 Lean Years Is Now 8

After Joseph was sold into Egypt, Pharaoh had a dream he wanted interpreted. The catch? He was bothered by the dream but couldn't remember it. His wise men couldn't interpret a dream he couldn't tell him about but Joseph could. 

"You saw 7 fat and healthy cows grazing who were suddenly devoured by 7 lean and mean looking cows," Joseph told Pharaoh. "What this means is that Egypt will have 7 years of prosperity and good harvests followed by 7 years of famine. You'll want to tax everyone enough each year in the good years to have surplus on hand for the bad years."

The Pharaoh liked what he heard, Joseph was made Prime Minister, and Egypt was saved from ruin. Everyone lived happily ever after (until, of course, Moses came along generations later and unleashed plagues on Egypt). 

Sadly, the 7 good and 7 lean years still seems to be a thing. It's just that with inflation, it's now 8.

In the last 8 years of the 20th century, from 1993 to 2000, the land was prosperous. Jobs were created at record rates, poverty dropped throughout the land, and wealth increased. 

Then, bored with prosperity, the people chose a new path, a candidate they'd like to have a beer with. (To be fair, in the 2000 election more Americans voted for a continuation down the old path but sometimes a candidate can win a majority of the popular vote without winning a majority of the electoral college.)

In the first 8 years of the 20th century, the land was attacked, and jobs and wealth were destroyed. The people didn't realize that good people could have bad policies, policies that could result in bad times. Shocked and dismayed, they turned back after the 8 lean years.

The hole they dug was so deep that it took years just to recover the lost jobs and wealth. But eventually, the jobs came back, wealth was recovered (although both were redistributed), and the economy returned to normal. Sort of. A little less vibrant but still growing steadily and people felt like they could once again buy new cars and houses, splurge for vacations and lattes. 

But again they grew bored with prosperity and their gaze turned fondly to a candidate who they liked simply because all the folks who claimed to be experts didn't like him. He promised change. They liked that. Good times are boring. Tragedy gives you a sense of purpose, challenges to overcome.

So, they turned again to this path that alarmed experts  but excited something primal within them. And again the country had 8 lean years ....

Once upon a time, nature's cycles of drought and rain, cold and warm drove prosperity and poverty. Now we're still on an apparent cycle but this one appears to be driven by boredom with the pedestrian pace of progress as compared to the bold strokes of tragedy, something primitive within us that longs for a challenge more interesting than showing up for work every Monday at 8 AM. The old cycles are driven by nature; this new cycle is driven by human nature.

8 prosperous years followed by 8 lean years. It might be the new rhythm America. Or a really old rhythm. Embrace it.