Why Conservatives Hate San Francisco's Nancy Pelosi (it has nothing to do with communism and everything to do with the disruption of markets)

Republicans really hate Nancy Pelosi. Last week, in the midst of a pandemic taking 1,000 lives a day and a reminder that we still have 11 million newly unemployed people, the most popular story on Facebook was about Nancy Pelosi's haircut. On a related note, I've seen a number of Trump fans holler about how a vote for Biden will be a vote for socialism or communism, some of it explicitly tying this charge back to Pelosi who - in their eyes - apparently is a socialist or represents a socialist part of the country.

Nancy Pelosi -Democrat - is the Speaker of the House. Mitch McConnell - Republican - is the Senate Majority Leader. There are 535 members of Congress but these two easily have the most influence on legislation. By comparing the regions that elected them as representatives, you can learn a lot about who Republicans and Democrats are.

Kentucky is the 2nd most dependent state in the union, taking in far more money than it pays in taxes. California is 41st on that list.

Kentucky had 39 startups attract $743 million in venture capital in 2018. San Francisco had 1,127 startups attract $24 billion in venture capital, 30X the number of startups and venture capital in spite of the fact that San Francisco's population is only 20% that of Kentucky's. No Republican has explained why venture capitalists are so enamored of the communists in San Francisco but so avoidant of the capitalists in Kentucky.

Average income in San Francisco and % of folks with a BA are both 2.4X higher than in Kentucky. In Pelosi's San Francisco, households make nearly $100,000 more than those in Kentucky. In January, the unemployment rate in Kentucky was twice as high as it was in San Francisco.

The Republican - Democratic divide along with income is not limited to Kentucky and San Francisco. Of the 8 states with the highest per capita income, Biden is strongly favored to win all 8 (per fivethirtyeight's forecast 6 Sep). Of the 8 states with the lowest per capita income, Biden is favored to win only one. This November, the other 34 states will be deciding whether to follow the lead of the communities that host Silicon Valley, Wall Street and Harvard and MIT or to follow the lead of rural Mississippi, Alabama and Kentucky.

How do politicians like Mitch McConnell manage to convince so many folks that the socialists are in San Francisco and the true capitalists are in Kentucky, a state that manages to attract lots of government subsidies but very little venture capital? In other words, a region highly dependent on the government but not capital markets?

Maybe it is because markets are disruptive and the real issue for Republicans is a preference for tradition over the disruption of change. The whaling industry was made obsolete by oil wells. Oil wells are being made obsolete by solar panels. Progress has little respect for tradition and for conservatives, tradition is more important than markets.

William F. Buckley was the right's favorite intellectual for decades. His most telling quote was, "A conservative is someone who stands athwart history, yelling 'Stop!'"

The Bay Area is not communist. It does, however, represent a threat to tradition. It continually tries new things with less regard for tradition than perhaps any other region of the world. Now California governor Gavin Newsom was the first elected official in the country to grant same-sex wedding licenses when mayor of San Francisco. Dee Hock - former founding CEO of VISA - helped to invent the modern credit card in San Francisco. Genentech was founded there, the first company to dare turn genetic code into intellectual property, starting the biotech industry which threatens to change humanity at a its most basic level: our DNA. For many conservatives, this sort of entrepreneurship, innovation and social invention is more threatening than any socialists. And yet it is the natural culmination of market economies, the very opposite of communism.

Underground Tunnels and News Feeds - how the right exploits the parallel worlds we live in

My mom was having trouble with her computer about 4 years ago. I eventually got things restored and launched her Facebook. (She rather charmingly assumed that when a friend posted they had sent her a personal note, so found it exciting.)

Conceptually I knew part of the genius of Facebook is that each one of us has our own Facebook. First of all, everyone has different friends and subjects to follow. Then our comments and likes determine who gets to the top and who we rarely see. In place of the daily newspaper we once shared, we now have a minute by minute privately customized publication - and they're wildly different.

My mind was boggled by how different hers was. First, it had page after page of seemingly random posts. Random as in the URLs they pointed to were literally strings of words. None were Newsweek.com or sandiegouniontribune.com. And the posts were a mix of weird allegations ("Hillary is sick!") to weird "news" ("Melania wears beautiful summer dress" or "The First Lady's dress makes her arms look so masculine!"). None of it was news as I think of it. It was all praise or criticism of outfits or manners and the occasional distortion or outright lie. Through this window on the world, mom saw the Obamas as an embarrassment, Trump as powerful, Melania as beautiful and Hillary as a threat.

Facebook is market driven. One of the many things that I love about markets is that they are driven to create exactly what you want. You want a sandwich made with a croissant? We got you. Rye? Check. English muffin? Fine. You don't like reggae or hard rock but you do like the fusion of those two? Listen to Dread Zeppelin. (Seriously. Listen to Dread Zeppelin.) Markets treat every one of us as unique and the mix of things I consume is different from the things that you do. The same is true of us as producers, as employees. Specialization means that we all bring something different to the market in terms of what we make and take. It's a beautiful thing.

But politics is not about the thousands of ways each one of us is unique. It is about the dozen or so things we share in common. We have to agree on where the road will be built, what we teach in schools and who gets public assistance and who does not. What is brilliant and beautiful in markets is divisive in politics.

Facebook also enables conspiracy theories. Yesterday a friend who is a fan of Trump sent me a link to an article about 35,000 children released from tunnels under New York. As if this were a real story. The link was to a website with the name operationdisclosure1. It is a complete nonsense story, totally fabricated, and easily debunked, offered as proof that Trump is a hero and the world is full of evil from which he will save us. These are posts that only show up in the feed of people who've already shown their willingness to believe such things - so many of us don't even know about them.

QAnon has emerged as a weird amalgam of conspiracy theories. Folks who like or react to stories about 35,000 children coming out of underground tunnels in big cities are likely to get a stream of QAnon conspiracies. One of the common theories is about the deep state, the notion that the government is actually run by nefarious civil servants intent on stealing your money, guns, and freedoms. Just as he has done with the 35,000 children living underground, Trump is intent on freeing us from the imprisonment of this deep state.

If you are not fed a stream of nonsense, deep state means nothing to you. If you are steeped in QAnon, use of the term "deep state" is a sign that "you're one of us." You get it. It is like a random line from a song or video game or movie; meaningless to folks who are not a fan and a sign that "you're one of us!" to the folks who are. And Trump says "deep state" a lot.

Yesterday Trump was asked about QAnon. He said only positive, if vague things. A couple of people on my post about this are now arguing that he didn't really endorse QAnon. Technically they are right. (Trump didn't technically say Obama and Harris were constitutionally unqualified for office ... he just quoted "some people" as claiming they were born elsewhere. Repeatedly. Same with calling COVID a hoax or masks as useless or snake oil a sure cure for the pandemic.)

You have to know that everyone has a different media diet to understand what they hear. One person is being fed continual QAnon nonsense about the "deep state" that is working against Trump. Another hears nothing about this. When Trump says, "Deep State," it just sounds like nonsense to the person whose feed isn't full of QAnon garbage but is confirmation of the veracity of QAnon to the folks who feed on it. Millions of people are fed a steady diet of conspiracies and told that credible sources are fake news. Trump regularly affirms to his fans that this world is the real one, the only one they can trust. And their feed is a daily confirmation of that.

The Biggest Danger of the GOP - Or What The Comey Hearing Drowned Out

Thursday, the House GOP passed a bill to repeal Dodd-Frank. Friday, the NASDAQ fell nearly 2%. Meanwhile, the world fixated on a UK election essentially won by the party already in power and a Comey testimony in which we learned that Trump lies. The news of the day was good cover for bad legislation. Really, really bad legislation.

A little story

A little town is divided among three groups. One group is pro-football, the other is anti-football and the third group is mostly neutral.

The anti-football group got that way because a couple of kids were seriously injured. One will be in a wheelchair for life. The anti- group simply argues that no sport is worth this risk.

The pro-football group are simply fans. They love the sport, point to the tradition, the way it gives the kids something to come together on and cheer for, the way it builds a sense of community, and how it calls young men to excellence. 

The problem is, the pro-football group has been hijacked by a sub-group so repulsed by the idea of rules to make the game safer that they've gone in the opposite direction. Call this group the football fanatics. They think that kids shouldn't even have to wear helmets if they don't want to - or can at least wear the old leather helmets that were good enough for players in the 1920s.

Here's the problem. The pro- group is only one or two spectacular injuries away from losing football altogether. And given the way the fanatics are approaching this - eliminating "silly rules that just slow down the game" like flags on late hits or tackles that involve helmet to helmet contact, etc., they have greatly raised the risk of serious injury.

The people who should be most grieved by the fanatics are the fans who care less about any specific rules of football than they do about just having the game in town. Because what the fanatics are doing is making it probable that the anti-football group will get their spectacular injuries that lead to cancelling the program.

The real story

Which brings us to capital markets.

Thursday, buried beneath the tsunami of coverage of the Comey hearing and UK election - the House passed a bill to repeal Dodd-Frank. Two major provisions of this bill set us up for another Great Recession: one provision exempts financial institutions from capital and liquidity requirements to allow them to take on more risk and another provision puts in place bankruptcy provisions in lieu of "orderly liquidation." So, financial institutions are free to take on more risk and when that risk leads to bank failure it won't be treated systematically. That is, it sets up the conditions for a run on the banks like the one that lead to the Great Depression. People will need to withdraw capital to protect themselves at the exact moment that the banking system would need more liquidity. 

Capital markets are one of the great inventions of mankind. Credit can finance the construction of high-speed trains or a cup of coffee, finance your education that launches your career or your house that becomes your home. Credit can finance research that cures an old cancer or a new product. The capital markets that have emerged since about 1700 have transformed our world, giving us longer lives, and making us more productive and happy. The joy football has brought into Americans lives is microscopic in comparison to what capital markets have brought. 

The Republicans are philosophically opposed to regulations. They are the pro-football fanatics who believe that the game of capitalism would be made better if only we removed all those troublesome rules that just get in the way of a good game. And while it's true that the game goes slower with rules and regulations, it also saves people from serious injury that comes from the failure of one or two big institutions becoming catalyst for a Great Recession. 

Real fans of football would shut out the fanatics who try to eliminate rules. Real fans of capital markets would do the same to the anti-regulation fanatics who - just years after the worst recession in nearly a century - are working to eliminate the regulations that save us from serious injury. Anyone who wants to see capital markets survive, evolve and prosper to continue to enable prosperity, will come out against this deregulation inspired by ideology. 

The biggest danger of the GOP's approach to repealing Dodd-Frank is that it will enable anti-capital market forces to make more coherent arguments against them. We now have a president who supports dictators; we can easily have a president in a decade who supports communists. If you love football, you would shut down the fanatics arguing against making it safer; if you love capital markets, you would shut down the fanatics working against making them safer. 

Unsolicited Advice in a Miserable Job Market

There's a whole group of delightful recent graduates who are trying to start careers in this, the most miserable job market since they invented the personal computer. Here is some unsolicited advice that might help.

Most importantly, don't make your prolonged unemployment or underemployment mean anything about your own potential. If you get caught in a tsunami, your swimming skills have little or no influence over where you end up. This job market? It is a tsunami. Wonderfully able and capable people who would have been making six-figure salaries in the late 90s are serving lattes in today's economy. The people doing so well in the late 90s were not more able; the people struggling so much in today's economy are not less able. The difference lies in the economy. The good news? This economy will change.

Don't confuse cash flow, a job, and a career. In an ideal market, you'd solve all three of these problems at once, starting your career with the right job and getting the cash flow you need. In this market you might have to split those into two or three pieces.

You might have to get a job before you can start your career. Don't give up on your career if this happens. And if that happens don't let your job define how big you are. Define the job by who you are - not the other way around.

WARNING: THE FOLLOWING BIT OF ADVICE MAY SOUND LIKE IT'S COMING FROM AN OLD CODGER.
Follow your bliss, sure. But the only way this pursuit will pay is if it happens to coincide with the bliss of a customer or employer.

Markets are actually a beautiful thing. They force us to connect our lives to the lives of other people. It is not enough to figure out how to please yourself; you have to please other people. Masturbation can't compete with love making. Whatever bliss you can create in a vacuum does not compare with the bliss you can create with and through other people. Inquire about other people, what they like, what they need, what they wish for. Markets get created out of the intersection of what one person wants and what another can provide. If you can find a way to meet those needs, you'll find a form of bliss twice: once because you get the joy of making other people happy; a second time because in a market economy, you'll be paid for this act.

Even if you are looking for a job, think like an entrepreneur. How would you create value? How could you present this possibility to a customer or employer? Go do it. You literally have nothing to lose. The fact that businesses are creating so few jobs doesn't mean that there are so few opportunities for creating value. Look beyond the want ads.

Remember the Stockdale Paradox: always face the most brutal facts of your present situation while never losing faith in your future. If you are all brutal facts it is easy to feel brutalized and lose hope. If you are all optimism and light, it is easy to gloss over the present reality and what needs to be done.

Mind your diet: feed your hopes and starve your fears.

Be patient with yourself. Believe in your own potential and know that if it really is your potential, it will take a lifetime to realize. I know some of the young adults who are struggling in this market. They're delightful people who I think will make fabulous employees and entrepreneurs. If anything good comes out of this prolonged recession, it might simply be that for a generation so gifted and privileged there might have been no simpler way to remind them of the necessity of compassion and the inevitability of chance.

Better than Gold

The price of gold has soared as every other market has behaved more erratically. Apparently the thinking is that gold is a safer investment in bad times, even good for a spectacularly post-crash, or even post-apocalyptic world.

I still don't understand the allure of gold. It has value in dentistry, say, and jewelry, but that would probably account for about .1% of the demand for it. Of all the magnets for capital, it seems to me one of the most useless.

If you really do think that markets are going to collapse and society is breaking down and want a hedge against this, don't buy gold. Buy canned goods, bottled water, and toilet paper.

Video: Keynesian Economics & the Great Bailout of 2008

Again, I try the video experiment.

As I videoed this, the negotiations for some kind of intervention seemed to be stalled or even breaking down. I completely support the notion of debating and challenging the Paulson plan. I cringe at the thought of the free market advocates just derailing any kind of plan, as if there is not some financial system that we need to protect. The neoconservatives convinced that this problem can be left to markets are the same ones who saw nothing wrong with the invasion and occupation of Iraq.

Time for a Virtual Democracy

Tim Harford, the Undercover Economist, has an interesting posting about the difference in efficiencies between markets and elections. It is upon the responsiveness of institutions to these two dynamics - markets and election - that our quality of life rests. In the comments, section, the point is made

Your vote buys one of two gigantic packages - a president or a congressman (at the national level, at least). But your dollar can be split into many parts and be used to buy many different products.

If we could choose to vote for every policy, power and person in government, and not be directly affected when we abstain from voting, then a vote might be more like a dollar.

It seems clear to me, at least, that the vote is a FAR blunter tool than the dollar.

And as I read this, I wonder, why? Why is it that we have to vote for one person or party or another? Why not vote on things issue by issue? We certainly have the technology. We can vote on whether Barry Bonds home rum record should have an asterisk or whether Britney Spears should get custody of her children. Ours is a wired world and there seems little reason why the public couldn't vote in an on-going basis for a variety of policy issues.

Imagine that every 2 to 4 years, you voted for one business conglomerate that was going to provide you with all your products and services in the coming 2 to 4 years. Your phone service, ice cream, automobiles, and housing would all be provided by whoever you "voted" for. We'd think that this was absurd. And yet, that is what we do at voting booth. Is it any wonder that so few Americans vote and so many are dis-satisfied with those who are elected? Isn't it time that we reflected in our democracy that we have made some advances in polling and communicating in the last 225 years?

As American as Baseball & Apple Pie

Dennis Kucinich and Ron Paul are certainly the most interesting and provocative candidates running for president. I love that Kucinich wants to set up a Department of Peace and that Paul wants us to stop acting like an empire. They have no chance of winning, though, and for good reason. Liberals are more sensitive to market failures and more willing to step in where businesses fail. Conservatives, by contrast, are more sensitive to government failures and are more willing to stop subsidizing failed government programs. But some liberals simply go too far and just don't trust markets, ever. Same goes for some conservatives and government programs.

It's not true that Ron Paul wants to abolish all government or that Dennis Kucinich wants to abolish all businesses. But they both stray close enough to such positions to have earned Americans skepticism and distrust. Kucinich's health plan isn't just an attempt to step in to rectify market failures. He makes explicit his distrust of markets when he says that companies ought not to profit off of illness. It would be hard to pack more misunderstanding about capitalism into a single sentence. Ron Paul basically wants to do away with all government programs save defense. (Okay, so I'm exaggerating, but not by much.) He wants to keep us from the pitiful lifestyle of the Swedes (where the tax burden is over 50%) and imitate instead the enviable lifestyle of the Mexicans (who suffer a tax burden of only 18.5%).

The reason that Paul and Kucinich have never gained much traction in the polls is that the average American - however much he's become disgusted with businesses or government - still fundamentally believes in markets and elections and the results they produce. Most of us have caveats about such beliefs, but very, very few Americans believe in doing away with government programs or company profits. For that reason, the two men who carry suspicion of these two institutions the furthest have found themselves the furthest from the center of the American polity and of any hope for victory. For Americans, disgust with government programs and profitable companies is like disgust with family; it's inevitable but not to be construed to mean they're ready to be estranged. For all their kvetching, Americans love their markets and elections and are not only willing to live with the results but are unwilling to live without them.

Finally - A Plan for Iraq

Here's a plan that would save us money and lives and might even gain us friends in Iraq. Only Halliburton might lose in this plan.

First, it is worth noting that before the invasion, Iraq's total GDP was $22 billion. We are now spending $100 billion a year on the occupation. The plan follows almost automatically from the juxtaposition of these two facts.

Pull out the troops. In its place, put in a plan to pay each Iraqi a sum that would total up to about $55 billion - about $1,000 per Iraqi and more than twice as much as they had before the invasion. This plan suggests a variety of questions, but it would be an opportunity for the conservatives who so strongly supported the invasion to show their faith in markets.

How to rebuild Iraq? Let every family have money to pay for contractors to repair their portion of the country. This might well prime the pump, stimulating construction projects and new businesses. We could have a plan to pay the sum for, say, two years, and after that draw down the sum by about 20% a year until it reaches a stable point.

What would be the result? We'd save money and lives. Iraqis would have resources to help themselves. And the 50% plus unemployment might even drop as the economy was infused with money that could be used to buy goods and services.

What is the old bumper sticker? Tourists go home (and leave your daughters). This could be similar. Troops go home (and leave your budget). It's time that the conservatives remembered that they don't trust government programs and do trust markets. Let their policy reflect this.