When the Ignored Predictions Have the Best Chance of Coming True

Sometimes, your prediction has to be ignored in order to come true.

Someone predicts that a stock will skyrocket in price over the next few years. So, its initial price when it goes public is very high. Because it is so high when it is first available, not only does its price not skyrocket, it hardly goes up at all. The prediction that everyone acted on is made a lie.

Someone predicts that a company is over-priced, so few people buy it when it first goes public. Its initial stock price is very low. Because it started so low, its price rises over time as it performs okay and investors who bought when it first went public see a good gain. The prediction that everyone acted on is made a lie.

Experts warn that hundreds of thousands of Americans could die from a pandemic. They are taken seriously, special measures are taken (people stay indoors and interact with almost no one), and the experts' dire predictions do not come true. The prediction that everyone acted on is made a lie.

Advocates for life as normal argue that the pandemic is overblown and we should go about life as normal, ignoring the panicked advice of so-called experts. They are taken seriously and hundreds of thousands of people die from a pandemic. The prediction that everyone acted on is made a lie.

Predictions and policies here in the US will be volatile. To make it even more complicated, the predictions will change what happens - in the opposite direction of what was predicted.

What is my prediction? Our behaviors, policies and the predictions about it will look like a murmuration of birds.

In the Long Run We Are All Rich: What Negative Interest Rates Mean for Good Policy

The Dutch have records that go back to the time of Martin Luther - 500 years. In that entire time, including the European settlement of continents, 30-year religious war, the end of knighthood, serfs, industrial revolution, the car, telegraph, telephone, TV, computer, modern medicine, introduction of democracy .... interest rates never went negative. Until about 2 years ago.

Now the Dutch, the EU, Japan and even the US (for the US still only briefly and after adjusting for inflation) have all had and / or have negative interest rates.

This is huge.

One of the things I've not seen anyone talk about is how valuable it makes investments.

Imagine that you start with $100 income. Each year that income grows by 5%. You want to price this income stream for the next 50 years.

If you assume that interest rates are +1%, then you discount next year's income by that amount. $100 next year is worth only $99 this year. You discount the amount by 1%. And of course the further out in time, the more you discount that income stream.

If you assume that interest rates are negative 1%, -1%, you actually increase next year's income. $100 next year is worth $101.

What is the price of a 50 year income stream growing at 5% a year when interest rates ....

are 1%? $1,903.

are -1%? $1,014,861,688

It's the difference between two thousand and one billion.

What does this mean? The lower interest rates are, the bigger the reward for investments now. What kind of investments will pay off long term? R&D. Education. Startups. Infrastructure.

As we come out of this incredibly painful downturn, we should invest money as if we were drunk or billionaires. This will do two things. One, it will employ a lot of people right now in construction of infrastructure, R&D, teaching and working in or managing startups. Two, it will generate future income that is worth more than it ever has before.

Negative interest rates signal a wonderful thing. It means that the future has never been more valuable and with capital so cheap, never a better reason to invest in this future. In a twist on Keynes, in the long run, we are all rich.

Popularizing Systems Thinking

Models of complex behavior increasingly sit at the background of vital political discussions like global warming and pandemics. It is time to make them a more integral part of our political discussion. Until voters can understand and participate developing models to predict the behavior of systems, we will have unstable politics, particularly in a country like ours that puts so much stock in the opinion of everyone. This country was defined by a way of thinking. It’s time to expand that.

Our founding fathers did not pioneer Enlightenment thinking but they were the first to create a community organized around it. The Enlightenment shifted people from a reliance on authority and tradition (church and king) to reason and debate (science and democracy). Our founding fathers popularized education – most notably, Thomas Jefferson founded the University of Virginia – with an emphasis on rhetoric and analysis as essential to creating smart voters. They generally believed that education was necessary to freedom and democracy. But as it turns out, rhetoric is a poor way to understand or communicate complexity. We need to update what constitutes a good education.

Today we have expert systems thinkers but we haven’t popularized systems thinking, made it a part of the way we organize and act or even a part of what we include in education. Analysis focuses on parts at one point in time; systems thinking focuses on interactions over time, like how viruses spread at different rates depending on how we behave or how CO₂ builds in the atmosphere depending on our technology. Systems thinking is as important to an effective democracy in this 21^st century as Enlightenment philosophy was to an effective democracy in the 19^th and 20^th centuries. We can’t coherently debate systems as varied and crucial as our financial, environmental, education, and healthcare systems with fluency in systems thinking.

Hearing Bill Gates talk about a pandemic in 2015 and how serious it will be, he mentions what "our models told us." Listening to California governor Gavin Newsom in press conferences, he, too, references "our models." Models have the potential to explain futures we haven't yet experienced. Models will never be perfect; they can, however, be sufficient to inform good policy.  Once you understand compound interest, you may not be able to predict how much wealth you’ll have in 30 years but you know what to do: invest early and often to maximize that wealth. Once you understand how rapidly the coronavirus can spread, it informs policies like shelter-in-place. Even though models are sensitive to changes in assumptions and inputs, they can still point us in the right direction. The better people understand them, both their limits and the insights they provide, the more credible and helpful these models.

I work with really bright scientists and engineers to plan – or model – their projects to develop new products like drugs, medical devices and computer chips. Two benefits inevitably follow. One, each person gets insights into what others are doing and how that impacts them. Good models are key to coordination. Two, they learn more of what is possible as they play with the model, play a game of “what if” to see how they might accelerate launch. “What if we hired one more circuit engineer?” “What if we doubled the number of clinical trial sites so that we could enroll patients more quickly?” The models let them answer what-if questions and become tools for making really smart people even smarter, in the same way that a spreadsheet can help a financial planner to get and communicate insights. Models that a group jointly creates and maintains could be used to inform an entire populace about their policy options on issues like economic stimulus, global warming, or the spread of a pandemic. Even very simple models can help to illustrate important dynamics more clearly than rhetoric.

Democracy depends on education. Change is accelerating. We’re increasingly dependent on systems. Education needs to include system thinking. In a crisis like a pandemic, we have to react to what the models predict about consequences because if we wait to react to actual consequences or rely on our intuition (intuition informed by completely different circumstances) our actions will be tragically late. Models let us learn from the past and from possible futures. The AI that recently beat the world champion Go player Ke Jie was able to make a move no one had ever before seen, a move learned from millions of game simulations it had simulated play even before playing its “first” game with Ke Jie. When a community encounters something like the coronavirus, it would be nice to be at least as prepared as one might be for a game of Go.

There are a variety of ways to popularize systems thinking. One way might look like video games. Imagine kids learning about global warming or economic development by getting exposed to simple models that play out over time. They first learn to turn the knob on this variable and then that variable. They see which variables are akin to the butterfly's wings in Brazil that causes a snowstorm in Minneapolis and which are akin to a hundred moths beating their wings uselessly against a light bulb. Over time they begin to introduce their own data, their own variables, or even change the structure of the model. The class as a whole could build a model that represents their collective insights and predicts outcomes few – if any – minds are sophisticated enough to foresee.

Good education changes life outside the classroom. Eventually democracy might mean that we have collective, online models that represent our best knowledge and are as widely understood as an op-ed or debate. Policy could come out of millions of simulations that are largely transparent and contributed to and understood by millions of citizens. Perhaps working on models will become as much a part of citizenship as working on campaigns or reading and arguing about op-eds. In the same way that a car lets us travel further than we could on foot, good models can let us create better policy than we can with debates.

Ron Davison lives in San Diego County, wrote The Fourth Economy: Inventing Western Civilization and works with teams in Fortune 500 firms and startups to accelerate product launch. @iamrondavison

A Post-Pandemic Stimulus Plan to Quickly Create Jobs

Adding to the trauma of deaths, illness, layoffs, and social isolation, at the end of this pandemic we will find ourselves with tens of millions unemployed. Without quick, bold policy initiatives, the post-pandemic economy will create even more trauma. The millennials in particular – a generation that began its career in the aftermath of the Great Recession and now face this economic wreckage only a decade into careers – are going to be badly hurt by this.

Unemployment has longer lasting negative impacts than does divorce, being widowed, or being laid off.[1] It’s traumatic and ruinous to someone’s long-term economic prospects and any policy we need to adopt to address tens of millions who are unemployed has to account for this.

What would quickly employ people and stimulate wage and productivity growth? Doing for entrepreneurship what policymakers did last century for capital and labor. That is, invest boldly, at unprecedented levels.

Prices tell you what markets think is abundant and what is scarce. Capital and labor aren’t scarce. Entrepreneurship is.

Proof that capital is no longer scarce is simply this: the price of capital has gone negative. How unusual is that? The Dutch have records on bond sales that go back 500 years. In all that time they never had negative interest rates until just a couple of years ago. Growing affluence means that there are more investors than ever looking to build portfolios. (And hundreds of millions more reliant on markets through investments in pension funds.) Because of this, trillions in capital move around the globe in search of returns.

Education seems to also be providing a lower return than it did half a century ago. The price for college graduates is dropping. The Fed recently reported that a college degree no longer offers a wealth premium.[2] Which is another way of saying that market prices for education – like capital – suggest that it isn’t that scarce. And many millennials, struggling to pay for housing in cities on wages that aren’t terribly higher than those from a decade or two earlier are wondering when their return on a college investment is going to yield a return. It might not.

Once upon a time capital and education were scarce, though, and investing in them gave the country phenomenal returns. A look at what past investments in what was scarce did for wages and job creation suggests what could happen if we make similar investments in what is scarce today. That is to say, to get some sense of what a startup stimulus might do for the economy, we can look at what past investments in capital, education and research did for the economy last century.

In his book, The Rise and Fall of American Growth, Robert Gordon reports that output per hour between 1920 and 1970 grew 2.82% a year. Between 1970 and 2014, it grew only 1.62%. If wages had grown at 2.82% between 1970 and 2019, median income would have been $88,000 rather than the $48,000 it actually was. Compounded over a lifetime, a difference of 1 to 2% is huge. You don’t get returns without making investments, though.

During World War 2, the government invested billions in capital equipment for factories building wartime equipment. Between 1940 and 1945, consumption of capital rose from $19 billion to $116 billion[3], much of that coming from the government.  Additionally, it sent experts on production and management – consultants like W. Edwards Deming and Peter Drucker – to help companies make best use of this capital.

The result was dramatic. On D-Day, June 6, 1944, the Germans could deploy only 319 aircraft. The United States and its allies deployed 12,837. American manufacturing was more powerful than a Nazi blitzkrieg.

When the war was over, the government let companies keep the manufacturing and intellectual capital it had funded. Rather than make tanks and planes, they began making cars and TVs – at rates as impressive as the preparation for D-Day.

Next, the government invested an unprecedented amount in education. Between 1944 and 1949, BA degrees conferred rose from 126,000 to 432,000. The rapid rise in the creation of knowledge workers was essential to the emergence of the information economy.

Finally, the government spent more on R&D, funding agencies like DARPA and the NSF. The innovations resulting from this research – as varied as the internet, communication satellites, and genetic engineering –helped to create hundreds of new technologies, thousands of new products, millions of new jobs and trillions in new wealth. Most R&D investments fail to generate any return. The ones that do, though, continue to compound over time to create value that dwarfs the initial investment. (In this way, investment in R&D is very similar to investments in startups: most fail and the few that succeed generate great returns.)

A startup stimulus could do two things. It could quickly create hundreds of thousands – even millions – of jobs. And it could yield returns as dramatic as the long-term returns to education and research made after World War 2.

While the price markets pay for capital and education seems to be falling, the the price of entrepreneurship – wealth created by successful entrepreneurs – is high and still rising.

In 1987, when he was 31, Bill Gates became the youngest self-made billionaire in history. About a generation later, in 2008, Mark Zuckerberg became the youngest self-made billionaire at age 23. Investments in entrepreneurship could offer high returns.

Big investment in startups – entrepreneurship – will pose as many challenges as big investments in education, research or infrastructure did for past generations. Anyone who knows how difficult it is to identify good startup ideas or to launch a company from scratch will realize that a startup stimulus will be at least as difficult as figuring out how to ramp up production in 1944 to complete one plane every five minutes, launch fifty merchant ships a day, and finish eight aircraft carriers a month. Or land on the moon or launch communication satellites. It won’t be easy but it will yield a great return.

This is a big challenge that promises a big reward. A hundred billion dollars could fund 50,000 startups that employ 700,000 people for 18 months; a half a trillion would fund about 250,000 startups and create 3.5 million jobs. There would be no question about whether a startup stimulus would create jobs. It would be designed for exactly that. We could begin funding startups even as people still shelter-in-place and – depending on how bad unemployment is – adjust the scope of this startup stimulus up or down.

Americans hit by this pandemic could quickly return to work. Rather than a gap in their resume and a hole in their savings, they would get valuable work experience and savings. The trauma of long-term unemployment would be mitigated and their lifetime earnings, productivity and wealth would be greatly different.

What would we get for our return? Tens of percent of these startups will fail as soon as their guaranteed funding is gone, but they will have provided employment at a critical point in the recovery. Tens of percent are likely to continue beyond their window of guaranteed funding for another year or three. Many will become great, viable companies. A few will even become iconic companies, the GE, GM or Apple of their generation. Successful companies mean better products and services for all of us, higher wages and more wealth.

Additionally, all sorts of unexpected benefits came from aggressively investing in capital, education and research. The NSF didn’t start with the idea of genetic engineering or a computer smaller than a pocket protector. The same will happen with great investments in entrepreneurship. As more people become more adept at entrepreneurship, as more communities can at will create new companies able to create jobs and wealth, economies will become more prosperous and less subject to long-term sluggish growth that breeds cynicism and helplessness.

Bold investments in entrepreneurship will not only immediately create jobs but could trigger a steady rise in productivity and wages at least as strong as that of the American economy before 1970. The short and long-term potential of such policy is huge. So is the risk of doing anything less.

Ron Davison lives in San Diego County, wrote The Fourth Economy: Inventing Western Civilization, and helps team within Fortune 500 companies and startups to accelerate product development. @iamrondavison

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[1] https://ourworldindata.org/happiness-and-life-satisfaction

[2] https://www.theatlantic.com/ideas/archive/2020/01/college-wealth-premium-collapsed/604579/

[3] https://fred.stlouisfed.org/series/A264RX1A020NBEA (in 2012 dollars)

Investing in the Apocalypse

The Dow
between mid-Feb and mid-March dropped 38%.
between mid-March and mid-Apr (today) rose 34%.
Since mid-Feb the Dow is down 18%.
(Remember that if the market falls from 100 to 50, it drops 50%. If it then raises 50%, it will only be at 75. It takes a bigger % gain to recover than the % fall that got you into a hole.)

This raise of 34% strikes me as irrational. Our economy will not be the same for at least a year. It could easily take years to get back to normal. Profits will drop more than the 18% that the Dow has fallen.

The dilemma is that if you get out of the market and then get back in, you have to be smart on timing twice: you have to know when to sell (best time was 15 Feb and second best might be now) and when to buy (that may be about mid-summer when people finally realize how abnormal the new normal is or even in February of next year when a new administration awakens optimism).

I don't know about you, but I cannot save enough to retire on the 0.1% return of a bank account, and one of the only certainties in investment is that risk and reward go together. If you avoid risk, you will avoid returns.

What are our options?
1. Just ride this out and try not to get cute on timing. This probably means looking at some lousy monthly statements during the next 3 to 12 months. (And probably a couple of exciting ones. It seems safe to say that volatility will continue to be high. Also, as the government pumps money into an economy where people are going out less and consuming less, this money might just find its way into investments rather than consumption, oddly driving up asset prices even as the underlying economy of everyday consumer behavior shrinks.)
2. Sell and wait for months to finally buy in later. The risk is that you miss the sharp rise that could easily characterize the uptick or that you simply sell at the beginning of a surprisingly decent year's gain.
3. Invest in countries and states that are having better success managing the coronavirus. Of course if it is a country like South Korea that is so dependent on exports, even getting your own act together might not be enough when your trading partners are in a deep recession or - worse - enacting xenophobic trade barriers. In this situation, having a great economy is like having a beautiful home in a terrible neighborhood; still not that great. Still, I do think that there will be a return premium on communities that are well managed.
And speaking of well managed, California (and possibly Washington) companies are more likely to benefit from a virtual world and from smart government management to enable their communities to be less hard hit than companies in other regions. CA and WA's companies could be as different from the rest of the nation as any foreign companies.Watch your own behavior. What are you consuming more of? Less? This could be a leading indicator of where profits will flow.

All the above should be taken with a grain of salt. Your best bet is to diversify across time (just buy once a day or month or year or decade depending on what you can afford, regardless of whether the market is reaching new highs each day or seeming to drop into the abyss) and companies / industries / and countries. Still, I have trouble believing that the market is going to have a great run over the next quarter or three. We have yet to get handle on this pandemic, much less what it will take to adjust to a post-coronavirus world that could easily run at about 75 to 95% of current levels for quarters or even a couple of years.

Acting on Forecasts Rather than Proof

The forecasts for COVID-19 deaths are falling. That's wonderful news. It turns out that measuring the cost for exponential growth of a virus has something in common with measuring the value of startups. It is subject to error but can still inform you how to act.

One key lesson is to move first and move fast. By the time you have data proving the value of a startup, you pay far more for it. Similarly, by the time you have data proving the severity of a virus, you pay far more for it.

Number of deaths thru 11-Apr:
San Francisco: 14
New York: 6,898

"[San Francisco mayor London] Breed ordered businesses closed and issued a citywide shelter-in-place policy effective on March 17, at a point when San Francisco had fewer than 50 confirmed coronavirus cases. (California Governor Gavin Newsom followed with a similar statewide order 19 March.) On that date, New York City already had more than 2,000 positive cases. But New York Governor Andrew Cuomo and New York City Mayor Bill de Blasio, reluctant either to shutter schools or issue a stay-at-home directive for the nation’s largest city, didn’t take similar action for several days. By the time New York City fully shut down on March 22, more than 10,000 cases were reported across its five boroughs." [From the Atlantic, "The City That Has Flattened the Coronavirus Curve"]

5 days can make a big difference when facing a virus that spreads or contracts exponentially.

I see people wondering how stock prices can go up when we're still in a pandemic. Stock prices represent an attempt to price an endless stream of future profits. It is true that the Dow is up 30% in the last couple of weeks. It is also true that it is still down 25% from its peak a couple of months ago. Stock prices fluctuate because people are trying to estimate something in the future that is continually changing as events and best estimate methodologies change. Investors still agree that the coronavirus and measures to protect against it have lowered the value of future profits; their margin of error in estimating that means that stock prices are going to fluctuate. A lot.

I see people dismissing the models forecasting coronavirus deaths as being wrong. Models are always wrong but that doesn't mean that they aren't helpful. One catch-22 with models and policy is that the group taken least seriously could be proven most accurate. What do I mean? Let's say that we had ignored the coronavirus warnings from experts and continued as normal - never socially distancing and not changing anything. In that scenario, New York would be a best case for cities and fatalities would be multiples of what they are now. We could easily have 1 million deaths rather than 100,000. The best-case forecasts would now seem tragically naive. On the flip side, if we listened to those who warned of the worst and took serious measures to protect against that, moving fast and dramatically, the worst-case forecasts would now seem morbidly pessimistic. We would have far less than 100,000 dead and would never come close to a million. Even without behavior change, forecasts of anything that grows or contracts exponentially are likely to be off. Hugely. The outcome could easily be 10X or 1,000X better or worse given just small changes in the rate of contagion or mortality.

Early investors in Apple likely never once stopped to think that it could be worth a trillion early the next century. But they didn't have to know it would be worth that much to know it was a good investment. Given the Bay Area is the epicenter for trying to value the future, it is unsurprising that it would become a model for how to minimize the harm of a virus. Among the many things the folks in the Bay Area have learned is that it is better to move first to pursue a possibility - whether that possibility is avoiding fatalities from a pandemic or owning shares of a startup that later make you rich - and then learn from and adapt to reality than it is to wait for the data to come in and by then to have missed your opportunity.

As the future comes at us with increasing speed, the ability to quickly assess what models suggest rather than what data confirms could make all the difference.

A Preview of What Alternative Energy Could Mean for the Health of our Planet

Per the Economist, by the 21st of March in most cities trips planned had dropped by 70 to 90%. People are traveling and polluting less - about 10 to 30% of what they normally would.

We are going to get such great data on what a difference dramatic drops in pollution levels make from this crisis as we all enjoy bluer skies and - in the face of a respiratory epidemic - actual decreases in asthma-related cases. (*Note - Ron is not a medical expert. He's just speculating on this point. Obviously rises in COVID-19 cases would dwarf drops in asthma due to drops in pollution. But if you can avoid the virus AND enjoy less pollution ...?)

In the mid 1800s, we slaughtered whales for oil to use on machinery in the early days of the Industrial Revolution. By 1900 we were using petroleum oil, a huge improvement. And now we're about to make another great improvement. a move to alternative energy. That can be accelerated with broader public support.

This trial period might help to raise that support by providing us a taste of what is possible, a preview of coming attractions.

Where Progress Comes From - and what we had best not blow up

In a time of crisis, everything is questioned. That makes sense but the West has made progress in certain ways that should never be undone. These things should not be questioned.

1. Freedom of religion and freedom from religion

Martin Luther's declaration that "We are all priests," is the claim that freed us from theocracy. There was a time when people looked to the church to explain causation and looked to supernatural causes rather than natural causes as reasons for why people got sick, crops failed or ships wrecked.

The Enlightenment thinkers who founded the US were among the first to free the community from the tyranny of one religious voice, allowing us all to freely choose how - and whether - worship. One of the biggest benefits of this is that it shifted the basis for social cohesion from dogma to science. Science builds on testable hypotheses and regularly generates new understanding. Scientific thinking is the stuff of progress.

The first amendment to the US Constitution captures beautifully the dimensions of this:

Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances.

2. Democracy

The notion that a community should be for all its members and not just the aristocracy is another essential layer to the prosperity of our modern world. Theocracies and democracies are just made up but the consequences are real. Of the 10 most prosperous countries in the world, 10 are democracies. 

3. The American Dream 

Retirement income. The possibility of early retirement. Owning one's own home. Time and money for vacations. Most importantly, enough affluence to choose what career and what company - perhaps even one's own company - to work at.

The notion that people can freely and easily participate in job markets, credit and stock markets, and be consumers in a world with millions of products and services is another foundation stone to progress. 

These three are foundations to the world in which we now live. They do need continual improvement and refinement.  They need to be offered more broadly. (We need to continue efforts to make it easier for everyone to vote and lift more people out of poverty.) We will not make progress by having less of these three; we will have progress by having more them, more independence of thought and reliance on scientific rather than superstitious thought, more ability for communities to define the laws and policies that define their world, and more widely shared affluence.

These three also represent a transformation of the dominant institution from a tool for the elites into a tool for the masses. "We are all priests," and "We the people," made church and state tools for the individual, overturning theocracies and monarchies. The 20th century story of how the average person was given access to credit and investment markets and department stores and online shopping is a story of widespread poverty giving way to widespread affluence. The 20th century included the story of how financial markets - like church and state before them - became a tool for the masses and not just elites. Progress will never come from blowing these up, or reversing any of these three major institutional changes. It will come from furthering them.

More dramatic than incremental improvements on these three previous victories, though, is a transformation of the corporation. Like church, state, and bank before it, the corporation is now the dominant institution.

In the early 20th century, we made dramatic gains as corporations learned how to mass manufacture goods, giving the common person goods that had previously reserved for elites. Ford's Model T might be the most dramatic example of this. 

Year  -   Number Sold  - Price
1910        19,050             $900

1925    1,911,705            $260

This is a wonderful example of the American Dream in action, a good once out of reach becoming accessible. A broad swath of people were able to enjoy what only a few had earlier been able to enjoy.

Today's corporation is less about making products than creating value. In the company of 1920 succeeded by making products that benefited more people, the company of 2020 succeeds by making value that more benefits more people. Because of the transformation that has come from the American Dream, every year more Americans are benefiting from this latter promise of modern companies.

What does this mean for the corporation? For it to become a tool for the common person, it needs to build mechanisms that allow its employees to more easily create - and share in - wealth through forms of entrepreneurship. Like church, state and bank before it, the corporation needs to be made the tool of the common person and not just elites.

Progress won't blow up the three freedoms that have come from making church, state, and bank our tools to be used for us rather than we for them. Progress will come from extending that pattern of progress once more into yet another dominant institution. 

How Trump's Policy Turned a Catastrophe into a Tragedy

Greek tragedies were based on the notion of a dilemma, a character forced to choose between two bad options. Kill your mother or your father. Be sat on by an elephant or eaten by a tiger. Crash the economy or kill millions of people. There is no happy ending in a tragedy.

Right now the US is choosing to crash the economy rather than kill more people. The virus has already cost us trillions in lost equity. It will likely cost us millions in lost jobs. Most of us support that choice but there is another option.

We have this dilemma in part because we don't know who has the virus and so we're acting as if everyone does. Why don't we know? A paucity of testing.

If you know who has the virus you don't have to quarantine everyone and shutdown everything. You track who has the virus and who they've come into contact with and you restrict their movements. People they've not come into contact with are free to go about their day. It's business as usual for some portion of the community.

It costs money and takes executive expertise to do this kind of testing and tracking. One of the things that Singapore does is take government seriously; just as in the private sector, they pay some government executives millions and can compete with corporations for the best and brightest. They did extensive testing and tracking of people with the virus and took a very targeted approach.

Michael Lewis's The Fifth Risk may become the source for explaining the deeper cause of why 2020 became a tragedy. Lewis (author of Moneyball, Blind Side, The Undoing Projct and other best sellers) documents how the Trump administration at turns gutted and neglected the various agencies that employed the experts who do things like track hurricanes or nuclear weapons. Trump slashed funding to the Center for Disease Control (CDC), which included eliminating the team responsible for simulating, setting policy for, and coordinating responses to a global pandemic. That cost us in response time and decision quality when this pandemic hit. It's like the difference between calling the fire department that is sitting around the firehouse and waiting for your call and figuring out who could help to fight the fire and where they might find hoses and ladders and how to use them ... while the fire is burning.

Trump has largely replaced any experts who might challenge him with sycophants who only praise him. The World Health Organization (WHO) offered testing kits early on in this pandemic. His administration - biased against anything global - said "No" to this offer and chose to manufacture the kits themselves. Consulting on product development projects, one thing I've learned is that it always takes longer to develop something than you think it will, even if you allow for it taking longer than you think it will. It took longer to create testing capacity than the experts hastily drafted into roles as pandemic response team members hoped. We lost valuable time. And now the virus has spread without check or without good information about where it is. Vietnam - a country with a fraction of our per capita GDP - had conducted more testing than us early on.

We saved a few billion dollars by not taking government seriously Now we're going to lose trillions and trillions. (I know. It's a global pandemic. Lives would have been lost regardless. Trillions of dollars would have been destroyed regardless. My argument is not that this could have been completely avoided. My argument is that it could have been significantly mitigated. The fallout could have been much less severe.)

I understand that Singapore is city-state rather than a sprawl of a nation-state spread over a continent. Still, they pulled off this strategy of extensive testing and tracking and have been able to avoid the tragedy we face. They've had no deaths. Schools without cases of the virus are open, as are shops and restaurants. The American disdain for the importance of good people in strong agencies who are not forced to operate in the equivalent of a pop-up store to deal with something of this magnitude is going to cost us dearly, in lives and dollars. It's tragic.

https://www.npr.org/…/singapore-wins-praise-for-its-covid-1…

How Trump's Fixation on Wealth and Disinterest in People Has Exacerbated the Stock Market Crash

Right now, Trump seems focused on the stock market. You can see why. The stock market that he has taken as an affirmation of his leadership and wisdom is now in free fall. The Dow did well under Clinton and Obama's presidencies (gaining the equivalent of 15.9% a year and 12.1% a year) and disastrously under George W. Bush's 8 year term (losing the equivalent of 3.5% a year). With this coronavirus rippling through markets, Trump's annual compound returns equates to 1.1%. By another measure, as of 12 March 2020, the market had lost the entire $11.5 trillion it gained since his election.


Trump's travel ban and the Fed's attempt to add liquidity and dramatically lower interest rates has done little thus far to slow the fall of markets. Trump's fixation on wealth and disinterest in people and complex problems has caused him to work backwards on the catastrophe before him.

1. The first priority is lives and healthcare. Trump has done little to suggest more lives will be saved by his actions. Test kits have been slow to emerge. Treatment centers are not set up across the country. More will die than need to. He's announced a travel ban from Europe because he's xenophobic, not because it is likely to make much difference at this point. Tests and treatments should be made free and capacity for testing and treatment should be radically increased.

2. The economy is the second priority. People will lose jobs and will need income. Children may be turned away from schools and will need childcare. Businesses like airlines and hotels will suffer severe income loss and will likely layoff workers. Plans need to be in place to keep the economy operating and to keep people financially secure with things like mortgage payments and grocery money, to say nothing of healthcare.

3. Last, actions should be taken to stabilize markets. Without a foundation of good healthcare and protected economy, actions to stabilize the stock market simply ring hollow and seem insufficient. And in truth, the stock market is one way to predict the future. Without good plans in place to change that future, tinkering with the stock market is likely to be ineffectual. With credible healthcare and economic plans in place, stock markets may correct on their own.

Lives matter more than the economy. The economy matters more than the stock market. And if policy makers work on these issues in that order, they could return things to normal by year end. If they try to rush things and gloss over these real world issues and "fix" the stock market first, they will exacerbate a catastrophe that will include the stock market. The stock market is not the game. It is merely the scoreboard. If you want to change the score, you focus on the field of play. What's on the field are real lives and their medical and economic health. Thus far, the market is not convinced that Trump has a good game plan for those realities and if Trump wants to change the score he has to turn the game around.

Globalization and Today's Reality

Markets across the West are down 9 to 15% today. It's important to talk globalization.

The most defining issues of our day are not national. Pandemics, economies, financial markets, global warming, immigration, culture, ideas, research .... all of these issues are about as neatly contained within borders as are clouds.

The US went to war in 1860 to settle a really important question: would we be a confederacy of independent states or a union of states? Before Lincoln, the most common phrase was "The United States are." After Lincoln, the most common phrase was, "The United States is." Lincoln made us a nation. By 1860, railroads, a nascent stock market, and factories able to make enough goods for a nation and not just a neighborhood had transformed the US from a collection of neighborhoods and states into a nation. The world had become bigger and our government needed to adapt. At that point, state economies had become less meaningful than the national economy and we needed a national government to match that.

Today a similar thing has happened in regards to national borders. We cannot resolve the big issues of the day with national policy. It requires international alliances and strong international organizations, just as the growth of the economy in the late 1800s required a national government.
Globalization is not just about international trade. It is about creating strong alliances and organizations that enable coordination and cooperation. National today is what states were 150 years ago. And just as states still have distinct cultures and policies, so will nations. That said, our reality is global. We need institutions that match that reality.

How Exponential Growth Boggles the Mind

Somebody picks up on a problem in the pond. Lily pads are growing rapidly. By their calculations, they're doubling every day to cover more and more of the pond.

Assume that it takes 30 days for the pads to cover the whole pond. Someone who has been hollering about this problem for 25 days sounds shrill for a simple reason: on day 25 lily pads cover only 3% of the pond. From day 1 to 25, lily pads have only grown from a tiny fraction to 3.1%. Double that 5 more days, though, and you're looking at 100% coverage - enough to choke out the pond.
We don't have good intuition for exponential growth.

In related news, a week ago Italian hospitals were able to give each coronavirus patient high-quality care. Today they are practicing triage. Not everyone who comes into the ER is getting treatment - even some folks who are dying for reasons unrelated to the coronavirus. They simply haven't the capacity.

Real GDP Growth by Decades

Fund

Mutual fund.
Fund, from the past tense of fun.

Unprepared for a Pandemic

A standing army is a fairly new thing in the history of humanity. Now we likely spend too much on the military but the notion is that a community needs the ability to rapidly respond to a threat as serious as invasion. And it turns out that a strong military is a deterrent. The fact of having it makes us less likely to need it. (Although sadly, not less likely to use it ... which is another story.)

Trump's 2020 budget proposed an increase in military spending of $210 billion over 2016. Increase. He proposed a total of $2.7 trillion.

Meanwhile, he proposed only $136 billion in public health and safety, a cut from the $140 billion in 2016.

He proposed a bigger increase in military spending than he proposed in total for public health and safety. Military, INCREASE by $210 billion; health and safety, FUNDING of only $136 billion.

Infrastructure, staffing and research to rapidly respond to a threat as serious as a pandemic will - like a standing army - save lives and perhaps even make us less likely to need to respond to a pandemic because it might help us prevent such an event.

In an interview about five years ago, Bill Gates called a global pandemic the most predictable catastrophe of our time and said that there was no excuse not to be prepared.

And if you think that it cost too much to have the equivalent of a standing army for battling pandemics, consider this: in the last 3 weeks, the market has lost about $4 trillion in value. Even more than Trump wants to spend this year on the whole of our military. It may cost you more but the life you save could be your own.

Why Pete Buttigieg Could Be Our Next President

One simple distinction for leaders is eloquence. Bill Clinton was the best speaker I've heard in politics. Obama created a similar confidence in listeners, exuding intelligence as he calmly explained things. And now we have Pete Buttigieg who is easily the most eloquent of the great candidates in the 2020 field. (He may have been making a dig at his opponents in the debate last night when he said, "As everyone up here has so elegantly [rather than eloquently] said.")

Republicans love to talk about Democrats as socialists but of course that is nonsense (stock markets actually do better under Democrats and have for a century). In truth Democrats nominate moderates who prefer markets to government agencies but are not afraid of government. It is true that Democrats prefer candidates who actually believe in science rather than conspiracy theories and Keynesian policies to unregulated markets but only in the mind of the most excitable Republicans (that is to say, talk radio and Fox TV hosts and their fans) does that make anyone a socialist.

One thing that sets Democrats apart is their insistence on inclusion. It is older white men who vote Republican. Democrats lead in just about every other group - young, minorities, women and - speaking of minorities - the college educated.

51% of men vote Republican and 59% of women vote Democratic. The last Democratic nominee was a woman.

54% of whites vote Republican but 90% of blacks, 69% of Hispanics, and 77% of Asians vote Democratic. The last Democratic president was black.

50% of those over 65 vote Republican. 67 to 58% percent of voters under 44 vote Democratic. Bill Clinton, George W. Bush and Donald Trump were born within 66 days of each other; Bill was sworn in when he was 46 years old, the third youngest president ever. Donald Trump was 70 - the oldest president ever when sworn in for his first term.

Like Obama and the Clintons before him, Pete Buttigieg has moderate politics and a distinct identity. He's young. If he won this election he would become the youngest ever president. And he would be the first gay president.

Like Bill Clinton, Barack Obama and Hillary Clinton before, it is not Buttigieg's policies that make him a liberal but instead his identity. (And like Bill Clinton, he was a Rhodes scholar.)

So why might he become President Buttigieg? Because what he shares in common with the two previous Democratic presidents is eloquence, moderate policies with an emphasis on use of reason rather than emotion to solve problems, and an identity as an "other." It may not be a fluke that he won the Iowa caucus.


Graphs from Pew here.

Alphabet (Google) Joins the Trillion Dollar Club

This week Google joined Apple, Microsoft and Amazon in the trillion-dollar valuation club. 

Location matters.
Microsoft and Amazon headquarters are 11.7 miles apart.
Apple and Google headquarters are 8.7 miles apart.

In 1901 US Steel became the first billion dollar company.
1955, GM, first to hit $10 billion
1995, GE, first to hit $100 billion
1999, Microsoft, first to hit $500 billion
2018, Apple, first to hit $1 trillion.

Here are some things you may find by googling Google.

Larry Page DOWNLOADED THE INTERNET in 1996 as part of his doctoral work at Stanford.

Larry Page grew up in the Bay Area and his dad was a big Grateful Dead fan, had a weekly radio show about the Dead. When Google could afford it, Larry Page hired a chef who had worked for the Grateful Dead to feed his employees. Every winter they had employee trips up to Squaw Valley and one year, Google employees were coming back to the chef to ask what had been in the ganja goo balls that was making them hallucinate.

3 years ago someone at Google told me they were spending $2 billion a year on employee meals. (Food - the fuel of knowledge workers - is free at Google.) I'm sure that has gone up. I don't think they serve ganja goo balls anymore.

In 1998, Jeff Bezos was so impressed with Page and Brin that he invested $250,000 in Google, buying what is now 6.6 million shares at the equivalent of 4 cents per share. (It closed today at $1,479.52 a share, so up 39,059X on Bezos investment.)

Is the Future Non-Factory Jobs? (One Way to Understand the Jobs Numbers for Manufacturing)

Each month bls.gov releases the new jobs numbers. "The economy created 130,000 jobs last month." The technical title for this jobs number report includes the phrase, "nonfarm." Farming is such an insignificant and volatile portion of the nation's workforce that it is excluded from the official record of new jobs created or destroyed.

Once upon a time, farming was hugely important. Now it is not. We may eventually say something similar about manufacturing jobs.

The other day in the airport, I struck up a conversation with a guy from Wisconsin. He told me that his dad was one of 11 and his mom was one of 4. All 15 of that generation (we're talking about folks who started careers in the 1950s) were dairy farmers. There were 64 cousins in his generation. Of those, only one is a dairy farmer and he's going bankrupt. (This cousin has only hundreds of cows; the dairies that are surviving are big businesses with thousands of cows.) Nobody in that group of cousins is encouraging their children to prepare for life as dairy farmers.

Manufacturing jobs as a percentage of the total workforce are now where farm jobs were in 1963: 8.4%, suggesting that manufacturing is running about 60 years behind farming. Defining factory jobs is harder than defining farming jobs, though. I've seen a note at BLS.gov to the effect that an increasing number of jobs in manufacturing fall into the category of knowledge work. Programmers for the robots and process design experts are among the folks who now fall into the category of manufacturing; a decreasing percentage of the folks in manufacturing are not working on production lines as we classically envision it from pictures of the 1950s. They are as much a part of the information economy as are the programmers and analysts sitting in cubicles for software or service companies.

Of late I've seen an uptick in our consulting for projects that are production line transfers. The vast majority of our work is with companies developing new products. These production line transfers have literally gone from zero percent of what we do to about 10%.  What does it mean to transfer a production line? A factory line in, say, Pennsylvania is being transferred to Monterrey, Mexico. The savings are huge and irresistible and when the transfer is done, the US has fewer manufacturing jobs.

Trump has defined his presidency in large part by two things: radically slowing immigration and bringing back factory jobs. Immigration has dropped under his watch. Initially, factory jobs rose as well but there is a problem with that.

His sudden imposition of tariffs made domestic sources more favorable and seemed to have raised the percentage of jobs created in manufacturing to meet this uptick in demand. The problem is, though, that supply chains are complicated. If I bought cheaper steel from China to manufacture a car, say, a tariff on Chinese goods may cause me to shift over to an American supplier of steel within a month or so. Short-term, that would raise the number of manufacturing jobs. But given that ultimately I need to compete on the global market, this need to pay more for a key input might cause me to make a more dramatic change over the next year; I may shift my entire production line out of the US to where tariffs don't distort input costs and threaten my profit margins. Short-term, the tariffs may raise manufacturing in the US; longer-term, they may drive it out. And that seems to be what is happening.

When Trump was sworn in, manufacturing was 8.4% of the total workforce. As a percentage of new jobs created in the prior 12 months, that rose above 10%. For nearly a year. During the last twelve months, though, it has dropped to about 2%. During the last twelve months, manufacturing jobs as a percentage of new jobs created is about one-quarter of what it was when he took office.

This is not something to celebrate or to mourn. This is simply a fact. Once upon a time we were in an agricultural economy and children grew up expecting to work on farms. Decades later, that expectation shifted from farms to factories. A good society prepares its children for jobs that will keep them employed at good wages, though, and cares less about whether they will work on farms in factories or in cubicles or in the home office than if they are making good wages. A bad society forces traditions on its children and tries to prepare their children for jobs that were suitable for their grandparents but not for them.  It's not an agricultural or industrial economy any longer.

It is true that there are problems with the information economy and some evidence that we're getting diminishing returns from encouraging more children to get college degrees to prepare for work. That said, children are much more likely to grow up to work on a laptop than they are in a factory or on a farm. Promising to bring back factory jobs is like promising to make your skin look younger; it may work for a time but the long-term trend is against you.

Why Automating Truck Drivers' Jobs Could be Good News

I've heard and read concern about the millions of truck drivers who could lose their jobs to self-driving trucks.

Here are two reasons why I don't think it's a big deal. It might even be a positive.

1. Every year the American economy destroys nearly 30 million jobs and creates about 28 million. It is a very dynamic economy.
There are currently about 3.5 million truck drivers. Let's assume that they are ALL gone in a decade. (That strikes me as wildly optimistic or pessimistic, depending on your perspective.) All gone in a decade means that every year 350,000 lose their jobs. That sounds like a lot. You know what percentage of jobs destroyed that is? Just over 1%. It's a dynamic economy. We can create new jobs for them. Our economic health is never defined by the number of jobs we destroy; it is defined by the number of jobs we create.

2. What kind of jobs will be lost? Dangerous ones.
Across the American workforce, per 100,000 workers, there are 3.5 fatalities a year on the job.
Transportation workers? About 15 to 16. Truck drivers are more than 4X as likely to die on the job as the average worker and twice as likely as police officers or fire fighters. In most jobs they'll be safer.

Data on how dangerous jobs are here:

https://www.bls.gov/news.release/cfoi.t03.htm

Data on how many jobs are destroyed and created each quarter are here:

https://www.bls.gov/news.release/cewbd.nr0.htm

Now It's a Cult

In a Facebook conversation yesterday, I pointed out to a Trump supporter that believing Trump means that you have to discount the CIA, the NSA, the FBI, our courts, the media and scientists. For starters. His response was that I couldn't know who was right because I didn't actually see whatever it is that Trump is talking about this time.

This is how members of a cult talk. There is no objective reality that can be tested with observation or theories. There are no facts. Really, you have just two choices: either believe the leader or don't. You can be part of the conspiracy against him or you can be part of the group that supports him.

How Selfish and Selfless Overlap

Let us say that you were a complete hedonist. You only did what made you feel good.

Wouldn't you still do things for other people? Given how we are wired, doesn't it make a person about as happy to make someone else happy as anything one can do? For instance, have you ever seen anyone making a baby laugh who looked like they were having a miserable time?

"Bring me a wave separate from the ocean and I will show you a person separate from the universe."
- Alan Watts

Has Wealth Creation Become More Exclusive?

As managing partner of Andreessen Horowitz, Venture Capitalist Scott Kupor argues that much of the gains from startups have shifted from later-stage, post-IPO to pre-IPO private markets. By the time we normal people get into the market, early investors have already captured a lot of the value.
From Scott Kupor's Secrets of Sand Hill Road (updated with data as of today).

"Consider the following example. Microsoft went public in 1986 at a $350 million market capitalization. Today, Microsoft has a market cap of approximately $1.2 trillion. That's a 3,430x increase in market cap as a public company. [An initial $1,000 investment in MSFT when it went public would now be worth $3.4 million.]
"In contrast, Facebook went public at a $100 billion market cap and now trades around $555 billion.[An initial $1,000 investment would now be worth $5,550.] ... For the public market investors to eventually earn the same multiple on their Facebook holdings as has been the case for their Microsoft holdings, Facebook would have to reach a market of more than $340 trillion. To put that in perspective, US GDP is about $20 trillion and global GDP is about $100 trillion. "

[Ron again, not Scott.]
In other words, folks who bought Facebook stock will never get the returns of folks who bought Microsoft stock.

Two possible explanations - not mutually exclusive.

My notion of the third economy is that finance was democratized (banks and stock markets made tools of us common folks in the same way that the first and second economies made tools of church and state). It seems sad that we've gone backwards on this and so much of the gain on capital has been pushed back into less accessible private markets that fund early stage startups where elite investors can get higher returns.

There may, of course, be another explanation for this. Capital no longer limits but knowledge workers do. Median pay at Facebook is $240k. That's median pay. It might be that the knowledge workers who are the limits to the information economy are now getting the returns that capital used to get.

Trump as Your Rogue Mailman

Trump creates so much daily chaos that it is easy to lose track of why Congress has moved ahead with impeachment hearings. A simple analogy to explain his conversation with the Ukrainian president might help.

Congress authorizes social security payments. Of course, they are just legislators so they don’t actually deliver the check to recipients. Your mailman – a part of the executive branch – does that.

Imagine that the mailman tells the social security recipients on his route that he’s running for city council and he will give them their check but first they have to make a public statement claiming that his political opponent is involved in a corruption scandal.

Once this is revealed, you would expect an investigation into the mailman’s behavior. You would not be surprised if he were fired.

So, what does that have to do with Trump’s situation?

Congress – the House and Senate – authorized money for the Ukraine. Why? Largely to defend itself from Russia. Russia has already invaded – and now occupies – the Crimea. (Another quick analogy? Imagine that Mexico had taken Texas from the US because a chunk of its residents spoke Spanish. That’s essentially what Russia did by invading and taking Crimea from the Ukraine.) Russia may have plans to take more – perhaps even all – of the Ukraine. The US would rather deter Russia with a show of support than to wait for Russia to again attack and force the US and NATO to either just watch Russia conquer the Ukraine or force a war between NATO (the Ukraine is not a member of NATO but has applied to join) and Russia. Congress wants to check Putin’s aspiration for conquering former Soviet territory.

Trump, apparently, does not.

Just like social security checks, Congress has authorized money for the Ukraine. Just like social security checks, Congress does not actually deliver the check. Trump’s White House – which is, like the post office, a part of the executive branch – delivers that money. And just like our rogue mailman, Trump was using his position of power to withhold money as a way to get something of personal value. He was asking the Ukrainian president to declare that they were investigating Joe Biden for corruption before Trump would deliver the Ukraine money Congress had already authorized.

Trump is not a monarch. He is subject to laws just as every other citizen. And when he uses the executive office to extort foreign heads of state to do him a personal favor, he is as much in violation of law as the mailman who extorts the social security check recipients on his route. 

Some Policies my Ideal 2020 Candidate Would Pursue

My ideal candidate would take the following positions on these issues.

Economics

• Make it easy for entrepreneurs to succeed.
• incubators in communities the way earlier generations planted libraries and universities as just one of the many support structures to put in place to make more citizens more entrepreneurial. Do all we can to make citizens wildly successful and then tax the ones who achieve success at high rates (say, marginal tax rates double that of middle class) to pay for investing in the next round of new entrepreneurs.
• Make a huge investment in research

• We will spend about $3.5 billion on DARPA - Defense Advanced Research Projects Agency - this year. DARPA has helped to fund amazing technologies that helped birth modern computers, smart phones and satellites. We are still counting the trillions in returns on early investments of millions and billions in DARPA. I would match the DoD's R-and-D spending with similar levels of spending on Department of Education, Department of Energy, etc. to something like the table above. This would not only employ a growing number of doctoral graduates (we could conservatively assume about 140,000 new jobs for staff and leading researchers with the numbers above) but would lead to returns of trillions in the future as we solve problems of energy, commute times, poverty, environment, etc. Entrepreneurs can translate this research into development, creating new wealth and jobs in the process of deploying new processes, services and products that build on this research.
• Make it easy for employees to use corporations as tools for creating wealth
• Laws requiring mechanisms inside of corporations that allow employees to create wealth through innovation and entrepreneurship and dictating that between 0.5% to 2% of that corporation's employees are paid more than the CEO as a result.
• Tax inheritance more than capital gains more than income
• Massive spending on research on alternative energy, upgrading infrastructure to reduce carbon emissions and the introduction of carbon tax. Innovate our way out of a fossil fuel economy.

Social policy

• Make it easy for single moms to succeed
• Make high-quality childcare free
• Sex is one of the most wonderful acts and rape is one of the worst. The main difference is consent. Pregnancy and childbirth is one of the most wonderful acts ... unless it is forced on you by others, in which case it is one of the worst. It should be the choice of individual women about whether and when to have sex or babies, not the choice of the men in their community. 
• Annually - and aggressively - reduce childhood poverty
• Provide universal healthcare
• This would include death panels and other criteria about what level of care we have a right to and what level of care the community should not be billed for.
• Transform K-16 into an education system that creates a common sense of community but a wildly diverse workforce that includes the knowledge workers that are the primary focus of schools today AND trades, entrepreneurs, makers, government and service workers and other emerging career paths

Communications

• Treat investigative reporting like research. That is, it should be funded by the government with oversight of the agenda by citizen boards. (We should more aggressively follow the example of the BBC.)
• People whose data is key to the success of a social platform (e.g., Facebook, Twitter, etc.) should receive a portion of that platform's revenue (idea taken from Andrew Yang).

A Curious Explanation as to Why Europe's Population Fell During the Dark Ages

Learned something curious from Berkowitz's Sex and Punishment, a book I picked up from the Harvard Bookstore a week ago.

Medieval priests used penitentials to define rules and punishment. A lot of prohibitions involved sex and some were odd. (To be fair, in an age before cars, guns, and corporations there wasn't much other behavior to regulate.) In a few regions, the penalty for performing fellatio on one's husband was greater than the penalty for killing him.

The penitentials offered a labyrinth of penalties and prohibitions. Among other things, it left only about 4 days a month during which it was "legal" to have sex. Even those limits weren't enough: married couples could be prosecuted if they were known to enjoy sex too much. Pope Gregory (~540 to 604) declared that marital sex was blameless only when there was no pleasure involved.

Perhaps unsurprisingly, during the period of the Dark Ages when these penitentials had the most influence - from about 500 to 1050 - Europe's population actually shrank.

So that's kind of interesting.

Beyond Win-Win or Win-Lose into the Strange Mind of Donald Trump

Stephen Covey's 4th habit is the building block to relationships. It also gives us a way to better understand the danger of Trump.

Think Win-Win is how we approach others. It's a belief that relationships make things better for us and them, for you and me, whether the you is a romantic or business partner or simply a friend.

Covey's 5th habit is Seek first to understand and then to be understood. You have to understand their perspective and their win and then communicate your own. His 6th habit is Synergize which could be stated more clumsily as, Create a solution that will not just give you your win and them theirs but might actually result in something extra that neither of you could have anticipated, a solution that encompasses both of your wins in a manner that might actually create wins you hadn't anticipated - whether for you or people outside the relationship.

Back to the 4th habit of Think win-win, the approach to take into a relationship or even a quick encounter.

To get to win-win, one needs both courage and consideration. You need courage enough to articulate and fight for your own win. You need consideration enough to listen and fight for the other's win. 

If you have only courage but no consideration, you'll likely become either a win-lose person who must beat the other while getting your own win or simply a win person who doesn't care at all whether the other person gets a win or a loss as long as you get your win.

If you have only consideration but no courage, you'll likely become a lose-win person who takes on the role of martyr, simply swallowing your own needs and dreams and deferring to the needs and dreams of others.

I think one obstacle to win-win is that it isn't natural to both be willing for combat for our own win and willing for empathy to understand the other's win. We tend to toggle into either courage or consideration rather than try to encompass both.

Trump introduces a new variable in this model that I hadn't really considered before: the role of comparison or status. It takes him to a new and odd place.

Trump's trade wars seem to have played a factor in the fact that Germany and China's economies are now stuttering. Automobile production has fallen dramatically in Germany. China's growth has slowed. In response to these sorts of issues, bond markets suggest there is a higher probability of a global recession. None of this seems to deter Trump from his trade war.

Part of Trump's bulldoggery of course is related to the fact that Trump has never once admitted to a mistake of any kind. I suspect, though, that it actually points to something else that is so defining of Trump: his quest for status above all else. In the wake of the 9-11 tragedy he called in to announce that with the collapse of the World Trade Center, his building was now New York's tallest. There was a tragedy but it gave him more status and that was what he wanted to talk about. Trump cares less about living in time of antibiotics and internet than being the top dog and if he had to choose between being Attila to the Huns or middle-class guy in a wildly affluent future, he'd choose to be Attila. What matters most is to be at the top.

China's economy has grown more rapidly than ours for the last 20+ years. This makes perfect sense given their relative stage of economic development. (It takes the average Chinese all week to make as much as the average American makes by the end of the day Monday.) This contrast outrages Trump who wants to be better.

I get the very real sense that given the choice between winning less than China wins (for instance, our economy grows 3% and theirs grows 6%) or losing less than China loses (our economy contracts only 1% while China's economy contracts 3%), he would choose losing less. It doesn't matter nearly as much that we're winning as it does that our position is better than our rivals.

Trump's little graph is not about win-win or win-lose quadrants. It is simply this: we're doing better or worse than the other guy. Better can include a loss in real terms as long as our loss is not as bad as the other guy's loss.

The probability that the US economy tips into recession goes up every time Trump's Twitter Tourettes drives him to spew out trade war nonsense. Remarkably, the probability of recession still seems considerably less than 50%; recession within the year is unlikely. In any case, our economy will likely be doing worse in 2020 than it was in 2016 but China and Germany's economies will likely be doing even worse even than ours. The global economy doesn't matter to him. Our relative position does. I'm not even sure what to call Trump's mindset. (Who cares about winning as long as we're doing better than than the other guy?)

Trump's 2020 campaign slogan could simply be, "You should see the other guy."  

The Economics Behind the 3 Waves of Feminism

Robert Wright's Nonzero forms one of the foundations to my worldview. The other day he interviewed Kat Rosenfield and Phoebe Maltz Bovy on the Wright Show. One of the topics that came up was the three waves of feminism. As Rosenfield and Maltz Bovy defined it, it seemed to me that these three waves of feminism could be defined through economics.

1. Wave one feminism most easily characterized by a woman's right to vote came in the wake of industrialization. (It was 100 years ago that women got the right to vote.)  As labor was less about muscle and more about the mind, women could less easily be ignored as equals.

2. If wave two feminism came after the Pill - approved in 1960 - maybe it was about pointing out that with family planning a woman had even more control over how she timed her entry and engagement in the job market. She had the option to take a role more traditionally associated with men. Her biology no longer kept her home raising children.

3. If wave 3 feminism is happening now, it may be coincident with what I see happening: the beginning of the shift from an information to entrepreneurial economy. If the early 1900s was about a rise in product invention, I think that the early 2000s will be seen as a time of a rise in social invention: changing and inventing institutions to accommodate who we are or aspire to be. The old quip about the Model T, "You can have any color you want as long as it is black," in the early 1900s has given way to UX research that tailors the product to the customers. We judge products by how they perform when we use them; curiously, we still judge students and employees by how well they use schools and workplaces rather than judging schools and workplaces by how well they perform for students and employees. What does this have to do with anything? There are institutional changes that need to be made to accommodate (most? some?) women and it's not enough to say to women, "You just adapt to these institutions and social norms that have been made for men." The most obvious of these is that a woman who does want to raise a couple of children will find herself carrying a heavier load in child raising than a man simply because of the biological reality of pregnancy and nursing, etc. One option is to pretend this away, another is to say that women should just revise their ambitions to accept the fact that they can't engage in the same way as men and a third way is to insist on change to institutions to accommodate both their biological realities and their ambitions.  I think one element of social invention will be intentionally adapting our institutions to the people we are rather than the people our grandfathers imagined themselves to be. What I'd call social invention or entrepreneurship. 

Put more succinctly,

3. Wave 3 feminism is not just about women's right to participate fully but changing defining institutions to adapt to who women are and aspire to be. It's about shifting the burden of adaptation from women to institutions and social norms.

The Future of Politics Might Be Culture, Not Policy

One of the things that neo-nationalism might signal is a hunger for common culture. We all listen to different music, read and watch different stories and worship at different holy sites.

We share an economy but not a culture. What is economics? A study of how we depend on strangers for our lifestyle. Some people find that unsettling. 

Peter Drucker supposedly said "Culture eats strategy for breakfast." A variant on that is "Culture eats policy for breakfast." Culture excites people and policy makes their eyes glaze over. One of the more enduring elements of culture is music.

It takes less time to listen to a song than read a book or watch a movie. This might be why 4 of the top 5 people (counted by followers) on Twitter are musicians. (Obama tops the list, followed by Katy Perry, Justin Bieber, Rihanna, and Taylor Swift.) Music might be the most effective cultural glue we have.

Prediction? Eventually politics will devolve into a people - bored with policy and disappointed by politicians - voting on what song will be the national anthem for the next couple of years. 

Then politics will really get ugly.