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Tuesday, May 28, 2013

Monetary Devaluation is the Diffusion of Responsibility By Other Means

One of the things that corporate culture seminars love to preach about is the concept of "owning it". That is to put your own indelible mark on a project so that people know who to blame when something goes wrong. Because in a poorly managed project where there is no clear owner, the likelihoods of failure are high and then when the project fails, it triggers a cascade of blame. The developers blame the business analysts. The BAs blame the project managers. The PMs blame the customer. The customer blames everybody else.

What's left is a mess of wasted money and man-hours (which is essentially money) and no usable product. A failed project has plenty of blame to go around, but without a clear owner, the responsibility of failure gets diffused throughout the entire group, allowing everybody to keep their jobs. However, if somebody very clearly assumes public responsibility for the project early on, that person is likely to get canned or demoted (or rather just passed up for promotion in the next round of career adjustments).

One thing that economists and policy analysts love to bring up when they talk about Greece's economic depression is its lack of ability to export its way out of the crisis. If Greece had its own independent central bank, it could devalue its currency to gain a competitive advantage on the export market, and thus earn enough hard currency to rejigger the economy. What nobody likes to mention is the flip side of devaluation. Sure, your exports look more attractive. But imports become horribly expensive. It represents a real and substantive decline in living standards across the board, and it effects everybody within the country.

If they were to go the Full Argentina (a full default of their debt and a return of the Greek Drachma), their debt burden goes away. But they've traded a spear for a pike. They don't have to leak any further purchasing power abroad in the form of bond repayments, but they lose purchasing power at home in the form of higher prices for imports. The economy of Greece is centered primarily around shipping/trade, agriculture, and tourism. That's where it earns its hard currency (foreign exchange). It has to import just about everything else.

One of the reasons preventing Greek exporters from spearheading the economic recovery is the fact that they don't want to cut their Euro-denominated prices. To do so without concurrent devaluations in other sectors of the economy is to paint a target on their back. Nobody wants to be the first to give up the gravy train. Because the firms that still exist profitably within Greece are going to try and ride out the storm while the country's high prices and sclerotic regulatory system prevent the mobilization of its dispossessed capital (unemployed Greeks). So if one firm lowers their prices and the others don't, that firm becomes that much less profitable and more likely to be on the chopping block.

That's why monetary devaluation is so appealing to certain economists. It forces everybody to share the pain. Collectively, Greece needs to accept a permanently lower standard of living but no individual wants to take the first step. That's why monetary policy represents a massive diffusion of responsibility. No one Greek is responsible for the devaluation of the currency. The country, collectively, is responsible. And that means no one is responsible.

Staying within the Eurozone, however, gives the Greeks a clear owner: Germany. The feeling of powerlessness and dependence that many Greeks have toward Germany is palpable. And that's creating massive anti-German sentiment in the country. And yet, it's still the clear preference of the Greeks who matter. The recent Greek elections elected a coalition that favors staying within the Eurozone, and thus staying under Germany's thumb.

Because breaking away from the Eurozone means a loss of German subsidy and the transferring of responsibility from Germany, an external enemy, to itself. And that's something the Greeks don't want. Responsibility is a heavy burden to bear, especially when you're responsible for a catastrophic failure.

Thursday, May 23, 2013

The Lesson that Black America Needs to Learn

Last Sunday, President Obama gave the commencement speech at Morehouse, a Historically Black College in Atlanta. And in his address, he gave some tough love to the soon-to-be graduates. Here's an excerpt:
Well, we’ve got no time for excuses. Not because the bitter legacy of slavery and segregation have vanished entirely; they have not. Not because racism and discrimination no longer exist; we know those are still out there. It’s just that in today’s hyperconnected, hypercompetitive world, with millions of young people from China and India and Brazil — many of whom started with a whole lot less than all of you did — all of them entering the global workforce alongside you, nobody is going to give you anything that you have not earned.
That is going to be the operative paragraph for the 21st century. And it was poorly received by one Ta-Nehisi Coates over at The Atlantic: 
I think the president owes black people more than this. In the 2012 election, the black community voted at a higher rate than any other ethnic community in the country. Their vote went almost entirely to Barack Obama. They did this despite a concerted effort to keep them from voting, and they deserve more than a sermon. Perhaps they cannot  practically receive targeted policy. But surely they have earned something more than targeted scorn.
 Coates is falling into the very trap that President Obama warned him about. He took umbrage at his remarks because it didn't salve his pride. That pride is toxic. And it seeps into everything we (not just blacks) do. Pride is what makes people lose perspective and rationality.

The President is right. The emerging markets of the Pacific Rim and South America? They're rising. They're about 15 years from developed market status. And, increasingly, the value of labor will drop. Minimum wage laws will price many black Americans out of the labor market, and white Americans will (many would argue they already have) become increasingly segregated by class and wealth barriers. That will perpetuate prejudice against blacks.

If those in charge are white, it's easier for lower status whites to ingratiate themselves into the favor of the establishment. The reason why executive boardrooms are overwhelmingly white and male is because most of the wealth is held by white males. People go with what they know. And white males know a lot of other white males. Greater diversification in the boardroom will only occur when females and minorities start amassing more and more wealth. Unfortunately, as blacks know all too well, it's hard to improve your relative status when everybody else starts at higher status.

The fact is you have to work harder, and get more breaks to achieve the same results as somebody who has a higher status than you. That will never change. And many factors are out of your hands. You have to hope that people higher up than you will become complacent and self satisfied. And then you have to work hard and smart so that you can eventually catch up and surpass them. That's the only way.

The next time you eat out at a restaurant, take a good hard look at your server. Your server does not want to be at that job. They're making terrible money. They work irregular hours. They frequently have to deal with customers with an exaggerated sense of what they're entitled to when they eat out. And they have to do everything with a smile so that you'll tip them properly. Thank you, sir; may I have another?

That is the reality of minority/junior status in any society. To advance, you can't just do the same amount/quality of work as somebody who has higher status than you. You have to be better than them. It's not fair. But life is not fair. If you want to make it more fair (or if you want life tilted in your favor) you need to put in the time and effort to do so. Because nobody else will ever care as much about it as you will.

And don't put that time and effort into public policy. Public policy will not give you the advance in status that you seek. When markets were crashing in 08, Congress panicked and you know what they did? They bailed out the banks. They bailed out the rich. Because when push comes to shove, money wins over government every single time.

There's another article in The Atlantic about The Jeffersons. And in it they describe one scene that illustrates the dynamics of race and money:
Money, in George's mind, represented the best defense against discrimination. "Let me tell you something about people," George tells his old adversary Archie Bunker at a cocktail party. "That bartender's willing to work for me because if you got enough green in your pocket, then black becomes his favorite color."
Money is power. And those who have power get to make the rules that everybody else has to live by. If you want to call the shots and you're disadvantaged, you have to work harder and smarter than everybody else and can't expect that "good enough" will cut it. That is the lesson that black America needs to take to heart. And that was what President Obama was saying to the graduates of Morehouse.

Saturday, May 18, 2013

Real Time With Bill Maher: Counterpoints (5/17/13)

Tonight's show was a bit uneven at times because the panelists weren't that great. But there was some good discussion so let's get to the bits that should be addressed.

Bill Maher 1: The Republicans are the problem in Washington today. For example, they've voted to repeal Obamacare 30+ times.

There are actually legitimate questions and issues surrounding the government's deadline for the state healthcare exchanges and the reactions of employers to the law by cutting their employees' hours. Given the fact that one key provision of the ACA is almost certainly going to be repealed (the 2.3% tax on medical device sales revenue) before it takes effect, and the fact that many people are not going to like having their company provided health insurance being swapped for a government subsidized plan, it seems like the Republicans are merely operating 6 months ahead of schedule.

The broader issue about gridlock is a bit more muddled. One of the distinguishing features of a post-industrial democracy is that the sheer amount and depth of entrenched interests (across the spectrum) that really dislike change. As a result, it becomes impossible to gather the political support necessary to create the truly effective reform needed to fix the nation's various issues, because any meaningful change necessarily results in a fundamental realignment of various powerful interest groups. The political system nor the politicians are to blame. They simply follow the money and the polls, and right now the polls are inconclusive and the money is readily available. The end result is gridlock and the inexorable accumulation of regulation and tax loopholes designed to circumvent that regulation.

Richard Haass: The Bush Administration squandered the Clinton surpluses of the late 90s. 

Democrats and progressives love to point out the fact that, under Bush, the national debt almost doubled from 5.7 trillion to 9.2 trillion dollars (which is actually only an increase of ~61%). But as a share of GDP, which is the crucial measure, it only increased from 58% (in 2000) to 64% (2008). This was the fundamental reasoning behind Dick Cheney's infamous statement "Reagan proved that deficits don't matter". The fact of the matter is that they really don't matter so long as the economy is grows at the same rate that the deficit does. This was mostly the case under the Bush years. It has not been the case under the Obama Administration because of the so-called Great Recession. And before anybody starts thinking about it, no, the Great Recession wasn't caused by Bush. It was caused by a myriad of factors that had their origins in the 80s.

Michael Moore: The real crime in this country is the fact that these 501(c)(4) organizations are tax exempt. And the fact that companies like GE paid nothing in income taxes.

Longtime readers of this blog know where I stand on the issue of corporate taxes. But as for the reality on the ground, the issue is that although the IRS has a vested interest in making sure nobody is abusing the tax code, unfairly targeting a segment of these groups based on political affiliation is a huge blow to the rule of law and the equal protection clause.

If Republicans are smart, they won't frame this as a "who knew what when" argument. They'll frame it as part of their broader narrative that government is too powerful. And when the government is powerful, it necessarily becomes political because everybody outside of the government will clamor for their seat at the table. And when their politicians get into office, they're either going to want a return on their investment or to settle some scores. That is the nature of big government.

Maher 2: We don't really know why health care costs went down.

Actually we do. Employers are increasingly converting their employee health insurance plans to high deductible HSAs and individuals don't like paying out of pocket costs. The recession accelerated this trend. It's really that simple.

Zach Galifianakis: If more people knew where their food came from, this would be a bigger issue.

People don't care. And, to be honest, if you eat something and it doesn't give you food poisoning, in all likelihood it won't trigger some sort of sinister long-term deterioration of health unless your entire diet consisted of unhealthy foods in the first place. And GMO foodstuffs can be healthier than organic food if you only eat organic lard. It really comes down to the basic composition of your diet, which GMOs really have no effect on. In short, this isn't a bigger issue because people don't care where their food comes from. Or at least, the vast majority don't care enough to the point that they're willing to pay more for organic foods.

Maher, Moore, Andrew Sorkin: There should be a national gun registry. States register cars, why not guns?

Gun ownership has, for better or worse, become an incredibly political issue. Car ownership, so far, has not. Given the fact that, as SE Cupp pointed out (and the rest of the panel agreed with) that gun violence/homicide rates have declined in spite of less gun control, there is no need for a gun registry. And there is the very real presumption of guilt that goes behind the creation of one.

Maher 3: CO2 has surpassed 400 ppm in the atmosphere. We're all screwed!

I'm going to use the exact same argument that progressives use when they argue for higher deficit spending. It (inflation, in their case) hasn't happened yet and I don't think it will. So why not?

The global economy has grown by leaps and bounds over these past 20 years. And the ever increasing demand for cheap energy in the fastest growing regions of the world (China, India, certain parts of South America) is only going to put more pressure on energy prices. Despite all the doom and gloom of the climate change alarmists, things haven't really changed too much.

You can't be for CO2 reduction and against hydraulic fracturing for the extraction of natural gas. Because natural gas is just as cheap as coal but it only produces half as much CO2. That basic fact has actually led to a decrease in CO2 emissions in the US even as global CO2 emissions (to say nothing of "green" Europe) continue to rise.

Quick Observations:

1. Michael Moore's is a one trick pony. He can spout mindless rhetoric about class warfare and evil corporations. Plus he's fat. And mostly unlikeable. He's always been that way. Please keep him off the show.

2. SE Cupp is annoying, loud, attractive, and only occasionally makes a worthwhile point. If you want an attractive, intelligent semi-conservative on the show, please get somebody like Margaret Hoover.

3. The last bit on Prince Harry is something all Brits knew about 10 years ago. But the language it was couched in is just further proof that Game of Thrones is slowly taking over the world, and, at the very least, the indisputable flagship of HBO.

Thursday, May 16, 2013

Scratching the Surface and Finding *-Ism

Two separate articles came out in the Atlantic yesterday. One talked about the disparity in IQ tests between racial groups. The other was about the financial effects of increased female representation in the corporate boardroom. Both of them dealt with the issue of identity and its observable effects. And both of them also deal with two types of isms: Racism and sexism.

Jason Richwine was a former policy analyst at the conservative Heritage Foundation. He resigned his position after information surfaced that his doctoral paper argued Hispanic immigrants tended to have lower IQ and drew a disproportionate amount of government benefits. At its face, it's a topic of poor taste. People on the left will cry racism. People on the right will say "he was only pointing out what we all knew to be true". As always, the truth lies somewhere in the middle.

Those crying racism are wrong in that Richwine is a racist. And this is the big thing that conservatives hate about liberals. They don't want their prejudices being called racist, because racism is an extremely offensive charge. But Richwine is prejudiced. And this is what infuriates liberals. They can't believe that conservatives can't admit to their own intellectual bias and prejudice.

To abstract the issue somewhat, let's look at something that generates a little less controversy: food deserts. A food desert is a term urban planners use to describe an area that has a lack of grocery stores serving fresh produce and an abundance of fast food restaurants and convenience stores selling prepackaged junk food. Such areas tend to be in the inner city, with above average poverty rates, and also predominantly black.

Let's say there are two people looking at a detailed map of food deserts with the city. The first person, noticing that all of the food deserts are overwhelmingly black and have a disproportionate number of fast food chains that specialize in fried chicken, says "This isn't surprising. Most black people love fried chicken." The second person tells the first person "You're being racist!"

The first person is baffled (and a little angry). He saw an area that is disproportionately black and has a disproportionate number of fast food restaurants that specialize in fried chicken. He thinks it's merely pointing out the obvious that black people love fried chicken. But the problem is the sentiment behind the thought is prejudiced. The second person wants the first person to realize he's being prejudiced (although not racist, that is an overreaction by the second person).

And it's prejudiced because nobody would ever say something like "white people love fast food". If you look at cities whose population is still heavily white, you'd notice that poorer white neighborhoods also are food deserts. And they happen to have a lot of fast food joints as well. But you'll never see anybody saying anything to the effect of "most white people like fast food". You will, however, see a lot of "poorer Americans consume a disproportionate amount of junk food and fast food".

The difference is that people consider a white person the "default" person. So when they describe the habits of some other group, they use a different, nonracial adjective to describe it. When they start using racial adjectives, what they are doing is they are thinking of an "abnormal" group and then ascribing attributes to that group based solely on physical appearance. That is the definition of prejudice.

I'm ethnically Chinese and nobody would ever mistake me for anything other than an "Asian". So when I meet new people and they hear my accent (general American, ie neutral or "accentless"), many ask me "so were you born here or...?" The implication is that my English is too well spoken for a non-native American (who's Asian) so therefore they want to know whether I was born and raised here. But if I were white, I would never be asked that specific question. Because being white is the default and people assume that all white people are from the US.

That's a relatively harmless example. I certainly don't take any offense to it. But there are many examples of conspicuous identity that have deleterious effects to the people made aware of the fact that they're different. Girls in school, for example, perform worse in math exams when they are reminded of the stereotype that "girls aren't good at math".

Think of the reason why people wear suits to interviews. The expectation of the vast majority of society is that if you're interviewing for a career-track position at a company, you should wear a suit. What's the reasoning behind it? Let's examine the reasoning by counterexample. Let's say you're the interviewer and the person you are interviewing came in wearing shorts, flip flops, and a ratty t-shirt with some semi-witty slogan on it. What would you do? You would immediately begin thinking "why is he dressed like some stupid hipster?" And then you wouldn't be able to stop thinking about him being a hipster and what being a hipster represents.

Because the interviewee is, in the mind of the interviewer, a hipster, the interviewer already has already formed an opinion of the interviewee without the interviewee doing anything except showing up. The job could be extremely technical and you're interested in finding a candidate who's truly qualified for doing the job....but you still can't get over the fact that the guy dressed like a hipster. Ultimately you pass on the candidate.

You might be thinking to yourself "but we all know you're supposed to wear a suit. The guy made a conscious choice to dress casually and he paid the price for it". But that's the thing about race. You can't choose the color of your skin. And if it's different from what's expected (which is white, let's be honest here), then already you've identified something to the interviewer. And with that comes the tyranny of pre-formed opinions. You might want to be judged solely on your merit, but nobody is ever judged solely on their merit. It just happens to get even harder to get judged solely on your merit if you identify yourself as something other than the norm. As Louis CK once put it, "Never identify yourself! Are you crazy?"

This is the thing about white privilege. It drives some people (almost exclusively white) crazy, because they don't perceive themselves as having any sort of advantage. But, as a comedy writer once put it, "You didn't perceive yourself as being in a position of power because that is the main advantage of power -- that you don't have to think about it."

One timeless Hollywood trope is the out-of-touch rich/popular guy. They can't see what everybody else plainly sees because their money and their popularity shield them from the harsh reality that everybody else experiences. But in the case of racism, or sexism, or basically any *-ism, the harsh reality is that there is a default/normal option and everything else that's different automatically has a host of expectations and pre-judging built in. Pointing that out isn't *-ist. But it sure as hell doesn't win you any empathy points.

Monday, May 13, 2013

The Case For Strength

Despite being a libertarian, I often espouse neoconservative views when it comes to matters of foreign policy. The world is full of failed and failing states, many of which could destabilize international trade. And international trade is one of those technologies (and it is a technology) that we rely on to maintain our astonishingly high standard of living.

And that is the entire basis for our foreign policy. To ensure that the supply chains of the modern economy are not threatened by instability abroad. And the best way we can ensure the integrity of those supply chains is with overwhelmingly powerful armed forces. Right now, we are in possession of a military that is incomparable in strength. And so long as we have the largest economy in the world, it needs to stay that way.

If progressives were dictators of the US, they'd gut the defense budget. That desire is couched in two reasons. They think that even if we halve defense spending, we'd still have the most powerful military in the world (and that's actually true) and that we don't need to concern ourselves with being the "world's policeman".

I'll be the first to admit that there is a huge amount of wasteful spending. But that fault lies mostly with self-interested Congressmen vying for dollars to be inefficiently spent within their district and state who want extraneous military bases kept open and unneeded production of various weapons systems to keep their constituents happy. I'd be all for finding efficiencies within the Pentagon's budget, but unlike the progressives, I don't want our operational capabilities reduced.

Many of them will argue that we have no need for 11 supercarrier battle groups or bases in Europe and Asia or a gigantic air force. But we do. And it's because this gigantic logistical framework is what's needed to project military power in every corner of the globe. The unfortunate reality of defense is that the military can't afford to rest on its laurels or let down its paranoia. They have to envision every plausible threat, how it could occur, and how to best neutralize/prevent/contain it. That's why we had plans to invade Canada up until 1939 and hadn't declassified those plans until 1974.

It's also why we've had an active naval base in the Middle East since 1948. The reason is quite clear. At one point in time, before we had the technologies capable of extracting petroleum from shale and tar sands, the Middle East contained up to 80% of the world's proven oil reserves. Given the fact that the modern economy depends on (relatively) cheap gasoline, it becomes quite clear why the US has been so engaged in the region for so long.

With the advent of unconventional oil (with the vast majority located in the Americas), there have already been calls to ratchet down our engagement within the region. This is a good thing. But it doesn't mean we need to completely disengage. The fact of the matter is nobody knows what the future holds and which area of the planet is going to be the next decade's geopolitical hotspot.

That uncertainty in the future means we need a strong military now and always. And we need a strong military that is capable of projecting force anywhere on the earth. Because when the great Melange Wars of 2056 occur in the region of the world formerly known as Madagascar, the United States of North America will need to be able to send its Obama class aircraft carriers to secure the peninsula.

Saturday, May 11, 2013

Real Time With Bill Maher: Counterpoints (5/10/13)

 Excellent show tonight. Let's go beyond the talking points and deconstruct some arguments.

Mark Bittman 1 (on Bloomberg's > 16oz soda ban): It's not nanny state hijinks. You have to start somewhere.

You have to start somewhere is the justification we tell ourselves when we're looking for something so much more than what we have. Unfortunately, once things get on the government books, it takes a Herculean effort to get them off, which is why we have websites like Dumb Laws. Bloomberg believes in the power of government curtailing individual agency if it doesn't fit his vision of how society should conduct itself. If he could appoint himself dictator of New York, he would. But he has elections and other ambitions to consider, so all he can get away with is this incredibly stupid soda container ban.

Mark Bittman 2 (on Bloomberg's > 16oz soda ban): Many theaters don't even carry sodas smaller than 32 ounces so the ban is actually giving consumers more choices.

The mental gymnastics needed to square away this bit is impressive. Taking away a choice can lead to more choices (if mandated by the government), but the city isn't mandating more choices. It's eliminating a choice. And that doesn't mean consumers are getting more choices. They certainly aren't getting better choices.

Bill Maher 1: I'm bored talking about this non-controversy about Libya. 

The one infuriating aspect of Maher (and many progressives in general) is that they are convinced that their arguments are perfect and the only rational way of looking at things. When two panelists challenged him on the Libya testimony, he just changed the subject.

Maher is correct in the sense that there was no crime committed by the government. But the problem the panelists were trying to point out is that the credibility of the US government is being sacrificed on the altar of politics. The testimony of Greg Hicks coincides with a formal admission by the IRS that some "low level" workers had targeted tea party organizations for review of their tax-exempt status.

In all likelihood, these incidents were probably just low to mid level bureaucrats trying to curry favor upstairs (not at the top, just to the next layer of authority) by being idiots. Unfortunately, wars  have been started by an inability of leadership to keep their unruly troops in line. And this is a similar situation. The more incidents that come out that cast suspicion on the ability of the Federal government to operate without partisanship, it loses more and more legitimacy.

Bill Maher 2: Islam is a religion of oppression and war. And when these US backed dictators fall, we see the proles being proles (and instituting oppressive oligarchical theocracies). Not all religions are the same. And at least the religion in the US is much more benevolent.

People are people. I'm glad Greenwald called him out on this because people are capable of doing terrible, awful things. And the US has its fair share of military adventurism, and has constantly involved itself in the affairs of the Middle East since the end of WWII. While I don't think we have the most culpability when it comes to assigning blame for the instability of the region, it's still impossible to rule out US policy as a significant factor.

Bill Maher 3: 3D printing of guns is a terrible, terrible thing.

There are definitely concerns to be made about guns that could potentially be smuggled through secure checkpoints. But, to be perfectly honest, a very tiny minority of people would actually try to stir something up with these weapons. Modern government authority is capable of suppressing and recovering from these isolated, individual threats, and we should just let it lie.

In all honesty, these guns are much less durable and effective compared to a real, mass manufactured firearm. You can get ceramic knives that can easily pass a metal detector. And if the name of the game is assassination, it doesn't take much to kill any single individual if the perpetrator doesn't care about their own well being. Sometimes we simply have to accept the fact that there is no such thing as complete security from any and all threats.

Bill Maher 4: I thought the problem of sexual assault in the military was getting better. But reported incidents have gone up significantly since we first started addressing the issue.

This is a classic logical fallacy. An increase in the number of reported cases of sexual assault does not necessarily mean that the military has a worse problem than before. The vast majority of sexual assault (whether in the military or in civilian life) goes unreported. A marked increase in reports in a short period of time means that authorities are doing a better job of creating an environment where women are more comfortable with coming forward with accusations. That's obviously better than an environment where rapes go unreported for fears of stigmatization and career suicide.

Bill Maher 5: Wealth inequality is out of control. The wealthy should want to have their wealth redistributed, because it beats having the mob go populist on you.

There was some wealthy dude in the 60s who, when asked about his support for the obscenely high tax rates on the wealthy, remarked that he'd rather have half of his money than none of it. This is the type of thinking that people like Maher can get behind.

And why wouldn't he? He's rich because he had some success as a standup comedian and news show host. It's not much to hang your hat on. And when wealthy people feel guilty about their wealth, they are more comfortable with having some of it taken away if it means they can still be wealthy.

Wealth inequality is a huge issue. But this issue is not going to go away by government facilitated redistribution of wealth. It is an issue of education and the denial of base instinct. The fact of the matter is that wealth is simply unspent money. There will always be huge gaps in wealth if we keep treating the symptom and not the underlying cause.

Thursday, May 9, 2013

The Life and Times of Journalists

I don't envy journalists. The hours are long and the pay is light. Many of them barely scrape by for years, waiting for a big break that never comes. But it's a relatively predictable tragedy. The problem with journalism is that it's a low skill prestige occupation, which means it's a job where the actual requirements of the job aren't that high but everybody still wants to do it.

Unlike professional athletes, surgeons, concert pianists, and fighter pilots, journalists inhabit a vocational plane that doesn't really require that much effort. The vast majority of journalists are anonymous. It's very hard to tell the difference between the works of two journalists. Success in industry seems to be a function of sheer doggedness (or an especially depressing grade of low-simmering desperation) and a hook (the journalist is exceptionally attractive and can parlay their journalistic experience into a visual media gig), not the quality of journalism itself.

This is probably why journalists are so opinionated. The ones left standing are those who have outlasted all other challengers. Their metaphorical blood, sweat, and tears have been poured into a professional career that they have to believe was worth it. The ones who succeed, most likely with a heavy helping of luck and good timing, don't want to believe they succeeded based on random chance and circumstance. They want to believe they succeeded because they were the best at what they do, which is to report on the events of other people.

And that's why they have such strong opinions. They can't help it because it's their job to interpret reality, and they've spent so long doing it that it's impossible for them not to have strong opinions. This is actually counterproductive to their actual jobs, because opinions aren't the domain of journalists. Facts are. And it appears to be why so many people in the trade, who have spent so much time collating, aggregating, and analyzing, want to jump from reporting to commentating.

The most prestigious positions in a news organization are usually on the opinion side. The Wall Street Journal is a damn good financial newspaper, but its reputation is built on the foundation of their editorial page. When extraordinary events occur, it's always the editor that chimes in with a special editorial. The journalists are essentially written out of the equation. The organization and the readership are essentially telling them that their job is insignificant.

We live in the age of cheap information. Everything that's out there has already been reported on. And it seems what the people really crave are opinions. There's no such thing as a blog that reports the news. Blogs only give their analysis on the news. It's always about the why. Because the why is what makes a good story. And that is, ultimately, what the people crave. A good story.

Monday, May 6, 2013

The Dynamics of Relationships and Economies

It's in the evening. You and your girlfriend are watching TV together in your living room. You get up to go to the bathroom and then return. A few minutes later, your girlfriend does the same. But she storms out of the bathroom, accusing you of leaving the toilet seat up. You're surprised and  not sure why this is a big deal. She doesn't like your body language at all. You two get into a huge fight. 30 minutes later, your relationship is over. What happened?

The immediate cause of your relationship ending was you leaving the toilet seat up, which pissed off your soon-to-be ex. But obviously that wasn't the most important thing. There were other things that happened in the past, that your girlfriend put up with, and your relationship muddled along for a couple more months. And then that fateful night, you leave the toilet seat up for the umpteenth time, and then your girlfriend dumps you.

A couple weeks later, you realize, after half a dozen beers and talking with your best friend at a bar, that your relationship probably turned irreparable somewhere between you forgetting her birthday and getting fired. Everything before those two events, you figure that your relationship was still in a good state. And everything afterward, although you didn't necessarily know it at the time, was just time spent running out the clock.

After a great recession, when the country's intelligentsia conduct a postmortem, they are always eager to find some sort of origin event that started this whole mess of things. The proximate cause that kicked off our economic recession was the financial crisis in the latter half of 2008. But if you talk to conservatives, it really began with the Community Reinvestment Act (signed into law under the Clinton Administration) or Greenspan's loose money policy after the Asian Financial Crisis and the Dot com bubble. If you talk to Democrats, it happened when Gramm-Leach-Bliley repealed Glass Steagall or when Wall Street first started securitizing mortgages in the late 90s.

Because when we analyze the history of tragedy, the proximate cause is never seriously considered as the most important factor. Why would it be? Events set in motion years before happened and influenced everything that happened after, and once the situation deteriorates badly enough, it just takes one swift kick to topple the whole structure. You're not going to blame yourself for forgetting to put the toilet seat up; you blame yourself for forgetting her birthday or you blame your boss for firing you or some other event that happened in the past that is obviously more important than something trivial like the position of a toilet seat.

At any point in a relationship, any event or action is viewed with a certain set of expectations by either party. However, when the relationship's status changes (for better or worse), those expectations change, and that influences your future decisions. The most extreme example is your partner winning the lottery. Suddenly, expectations change and everything you used to do is viewed through a different light: why are we still going to this dingy restaurant, why was their gift to me for my birthday so cheap, etc.

Economies are the same way. When things are going well, there's always gonna be some worrywart muttering something about dangerously low interest rates or an aging demographic profile or increasingly expensive Federal spending programs and we just nod our heads and continue about our business unperturbed. And then the recession happens and suddenly those problems seem much more worrisome and more worthy of our undivided attention, even though those problems existed before things got bad. They just seem much worse in comparison now.

Chuck Prince, one of the former chiefs (and there are many former chiefs) of Citi, once famously remarked that "as long as the music is playing, you have to get up and dance". He was referencing the tremendous performance of Citi's LBOs and trying to allay fears of reduced liquidity (the music stopping) hurting future deals. It beautifully encapsulates economic cycles and relationships in general because when things are good, everybody's an optimist. And it's only when the music stops that we take a more sober look at how things truly stand.

There are numerous psychological studies that suggest that, individually, our analytical and decision making skills deteriorate when we're in a good mood and that they tend to sharpen when we're in bad moods. It's hard not to make the similar connection to relationships and macroeconomics.

Saturday, May 4, 2013

Real Time With Bill Maher: Counterpoints (5/3/13)

Good show. And, just as importantly, good conservative leaning panelists. The Republican Party could do much, much worse than to have Pete Hesgeth and Mattie Duppler to become the face of the new GOP. Mini prediction: Roger Ailes is going to offer at least one of them a gig on Fox News. But let's address the talking points.

Jeremy Scahill: One of the most important things that the Obama Administration is going to be known for is its reckless expansion and approval of the worst practices of the War On Terror.

If you want to impress people at a progressive cocktail party, you can't do much better than to criticize the President for effectively prosecuting the War on Terror because of the Constitutional issues that rise around drone strikes (particularly in the case of Anwar al-Awlaki and his son), indefinite detention without indictment, and the mounting (but unpublished) body count of these daily JSOC raids.

This is what sports fans like to call Monday Morning Quarterbacking. These decisions are made at the highest level and when it comes to national security and the safety of our men and women serving overseas, sometimes the people calling the shots act on bad intel and it creates blowback. You're not in the position that they are in. And you aren't responsible for the safety of thousands and hundreds of thousands of lives. The highest priority of every high ranking military officer is the safety of our troops while Congress and the President litigate the issue of where they get deployed.

At the end of the day, it's easy to criticize when you have nothing at stake and no responsibilities. But most people at least have the sense to realize that things are different when you're over there. And that tough decisions have to be made, even when there is a significant risk of failure. Given the fact that no major terrorist attack has happened on US soil under the Obama Administration (the Boston bombings were a freak occurrence) and that we assassinated Osama bin Laden, there is very little to criticize the President on when it comes to keeping Americans safe while prosecuting the War on Terror (or, as the official name has it, overseas contingency operations).

Lawrence O'Donnell 1: The Europeans are in even bigger trouble than we are because they tried, stupidly, to implement austerity as a means of economic recovery.

Right now there is a huge argument between economists over the economic policy of the Eurozone, with each country within it acting as a proxy war between economists advocating massive deficit spending and economists advocating fiscal restraint. This colors O'Donnell's statement because he was lobbing a potshot over at the camp advocating fiscal restraint. And he's wrong.

These various countries within the Eurozone are screwed not because of austerity. But because of the economic fundamentals that plague their country. Regulatory morass, high tax rates, an aging workforce, and an inability to coordinate economic policy makes it impossible for individual countries to effectively address the recessions and depressions occurring within various countries of the Eurozone.

In the periphery, the two hardest hit countries are Greece and Spain. And to blame the entire Eurozone for "austerity" is laughable. Countries like Greece and Spain (or even France, for that matter, as they seem to be headed down the same road) are not like the US. Their countries are indebted even further than ours is. And their economies are far smaller and less prosperous. They can't deficit spend as recklessly as they would want to (or as American Keynesians want them to) because nobody is willing to lend them money to do so.

The biggest argument that people in the Keynesian camp have against austerity is the UK, but even then it's not a very good argument. Although it's generally agreed that the UK practiced austerity, it's also generally agreed that France did not. And the UK has a vastly lower unemployment rate than France (7.8% to 10.5%) and its average rate of economic growth over the past 3 years is higher.

Bill Maher 1:  There is something fundamentally wrong when, in the past 4 years, all of the increase in net worth has gone to the top 7% of households while the other 93% have seen their wealth decline. 

I talk about this all the time. If you spend all of your money on depreciating assets, you aren't building wealth. Since rich households are the only ones who spend their money on appreciating assets like stocks and bonds, they're the only ones who will experience increases in net worth. This is not an issue of a rigged economic system. It's simply an issue of financial prudence, and that can only be dealt with on an individual basis.

Lawrence O'Donnell 2: Nobody is paying 39.6% Deductions and loopholes and blah blah blah I only have a working knowledge of how the tax code actually works.

Actually plenty of people will pay the 39.6% rate. But because of the way graduated income tax rates work, obviously not all of their income is taxed at 39.6%. Highly compensated employees like athletes or doctors (who draw a paycheck from a hospital, not their own practice) will easily pay 39.6% on the bulk of their earnings. But O'Donnell doesn't know how taxes work so he doesn't really understand the argument he's making.

Bill Maher 2: The Justice Department should charge more of these terrorists at Guantanamo. They have a perfect conviction record. 

 Just like boxing promoters, prosecutors will only take on the cases they think they can win. But unlike ordinary criminals who are incarcerated, we can't just let the guys at Guantanamo leave. Too many of them are caught fighting American troops once released. I'm glad O'Donnell pointed that out but he just barely got the point in.

Observations:

1. After seeing O'Donnell's demeanor on the show, I'm absolutely convinced that Aaron Sorkin modeled the character Will MacAvoy on The Newsroom after him.

2. Jeremy Scahill must be a hit at progressive cocktail parties.

3. I guarantee you that Mattie Duppler was teased mercilessly in middle and high school.

4. Bill Maher's gap between the top of his collar and his skinny tie (I hate skinny ties) really annoyed me.

Thursday, May 2, 2013

Full of Sound and Fury, Signifying Nothing

For the vast majority of job seekers, going to college is worthless. Actually, that's not true. It has exactly one worthy purpose: to show employers that you went to college. Increasingly, a college degree is being used as a signal. So what I really meant to say is that going to college does not actually give you skills that make you a more productive worker.

And this is the tragedy of college. Too many people go to college, pay exorbitant sums of money for 4-6 years, and then wind up with a piece of paper that didn't really make them a better worker. They just went there because people expected them to go. And if you didn't go to college, well you must not be the kind of guy who understands how the system works.

And that's the real "value" of college. It tells people that you know how to play the game. And because that is better than not knowing how to play the game, it makes you more valuable in the eyes of an employer. This only becomes an issue when a person is intelligent and aware of the game but also doesn't want to waste 4 years of time and money just so they can have the decoder ring of employability. Because there are many well educated, intelligent, hard working high school graduates who could skip college altogether and join the workforce and be just as productive as a regular college graduate were it not for the fact that most college degrees are economic signals.

This is less true in my line of work. I'm a software developer. And the great thing about my job is that it gets very easy to tell whether you can do the job or not. Because unlike other jobs, where all you really need is sentience, somewhat effective communication skills, and literacy, software development is literally a do or die proposition. Either the product exists or it doesn't. And when it doesn't exist, it's painfully obvious to everyone attached to the project. So if you can't make the product, you get canned.

Actually that's not true either. You wouldn't have gotten hired in the first place. Most employable software developers are savvy enough to design interviews in such a way where we can easily weed out people who obviously can't do the job. Anybody we feel unsure about we don't hire, because of the enormous financial risk involved in hiring and paying a developer. Only people that we feel absolutely confident who can do the job get the nod.

But unfortunately, even people in the software industry have to resort to signals. Since open positions get flooded with applications, the hiring manager needs a way to thin the amount of applicants we interview. Interviewing takes a long time and involves a lot of people (the hiring manager, the technical lead, other key people in the project for "culture fit"). And that means each interview takes up hours of time that could have been spent getting the product out the door.

So we resort to signals. You need to be able to structure your resume the right way so a quick glance can signal to the employer that you're worth a real look. And we can also drastically thin the herd by making a college degree a requirement for the job. And that's a real shame, because I know a few guys who didn't graduate from college and are good developers. The only problem is they have fewer ways to signal to employers that they're not like the vast majority of people without college degrees who would be incapable of doing the job.

From the employer's point of view, they can't afford to spend time trying to pick a diamond out of a very large rough. It's easier just to have a cutoff and people who can't meet the cutoff don't get considered. Convenience trumps "getting it right", because even though the best person for the job might not have a college degree, it's just not very likely. Those friends I was just talking about? Huge exceptions.

Something that would be very useful to employers would be a skills and cognition test. An employment firm could develop a test that would be, say...200 multiple choice questions (6 possible answers, penalties for guesses), and a quick writing section. The only questions on the test would be based on simple math (no calculus, combinatorics, or geometry), reading comprehension, and logic. The writing section would be used to determine whether the candidate can communicate effectively on paper (an incredibly important and useful skill). The test should take around 3 hours (which would also deter lazier candidates from applying) and those who pass a cutoff point can be granted interviews where a trusted person can determine culture fit and general demeanor.

That would be ideal for finding qualified candidates for non-specialized entry level positions. And it would eliminate the effective requirement for a college degree. I'm a big fan of certification tests because you can design them to be narrow and specialized in scope to only test for the skills that employers actually want in a candidate. A college degree is too broad and subject to too many variables (quality of the college, range of curriculum, etc) to be an effective signal. The best signals are those that actually signal the exact qualities that employers are looking for in new employees.

Now, I'm not saying this would work for everybody. It could only work at the entry level (after you get your foot in the door, it's all about experience, experience, and experience). But perhaps it could eliminate years of pointless and expensive credentialing that young people go through just to have a shot at an interview. Or hell, just grant interviews based on SAT scores and a written essay unique to each firm.