How's the View From Your Ivory Tower?

One fine day a couple of weeks ago, there was an op-ed that appeared in the Wall Street Journal written by Alan Blinder, one of my least favorite economists ever. In his traditional style, he manages to be agonizingly condescending and smug while reciting relatively pedestrian facts and theories. He has two suggestions in his editorial: have state governments stop shedding public sector jobs and offer companies who increase their year-over-year payroll to repatriate foreign profits of an equal amount at a "superlow" rate of 10% instead of the statutory 35%.

This absolutely kills me. Nothing is worse than a lifelong Ivy League economist with absolutely no real-world experience looking de haut en bas to the unenlightened masses. His official Princeton summary has him obtaining his doctorate in economics from MIT in 1971 and then teaching at Princeton ever since. That's a 42 year stint in academia without a shred of public sector or private sector experience (I consider academic work neither). This man can only fumble around for second and third hand accounts of how the real world works and yet the tone of his writing is always that of absolute certainty.

Perhaps if he could just fund a startup of his own and see it to fruition, maybe his views on job creation would change. Instead of serving up trite offerings such as halting government layoffs and miniscule, one time tax breaks, he might actually come away with a different perspective, much like George McGovern did. When McGovern ran against Nixon in '72, nobody could accuse him of being a dyed in the wool conservative. That guy was as far to the left as left could get in the realm of American politics.

And he lost in the biggest electoral landslide in post-war American history. After his career in politics ended, he became an entrepreneur, bought a hotel in Connecticut. It promptly went bankrupt 2 years later. 2 years after bankruptcy, he had written an op-ed in the Wall Street Journal complaining of the various rules and regulations that made life a living hell for a business owner. Keep in mind, he bought the hotel in 88, an era where, according to mainstream Democratic talking points, there was unchecked deregulation and the most pro-business environment since the Gilded Age. And yet, from McGovern's own hand:

I also wish that during the years I was in public office, I had had this firsthand experience about the difficulties business people face every day. That knowledge would have made me a better U.S. senator and a more understanding presidential contender. 

Strong words. People do not often have changes of heart in their old age, but one thing that forever remains foremost on a person's mind is their money, and the way that they lose it.

Washington DC is broken. You've heard that line everywhere. You've seen those words run the gamut from the Wall Street Journal's editorial page to The New Republic. From Heritage to MoveOn.org. But the reasons that they give are bogus. It's not about money, or sinister special interests, or the way our government is structured. It's the way our socioeconomic system is structured.

PSYCH. It's not just a ridiculous TV show on USA. It refers to 5 of the most elite universities in the US: Princeton, Stanford, Yale, Columbia, and Harvard. Undergrad and grad schools combined, 15 out of 43 Presidents, roughly 35%, have hailed from those 5 schools. To make it in politics, you need at least 1 of 3 things to be somebody. A famous name, the right education, or money. Everything else is secondary to those 3 things.

Because of it, DC has become so incredibly incestuous. The elected officials have the name and the money. Their staffers have the education. And that's all they have. Name, money, and education. No real world experience necessary. No firsthand experience of how businesses and government actually operates. This has become a real problem because our laws have no actual bearing in anything real.

Our modern day thousands-of-pages long laws? Made by law school graduates from Georgetown, public policy graduates from Harvard's Kennedy School, and econ grads from Princeton, Yale, and Columbia. All of them strung out on a diet of Ritalin (or some other amphetamine variant), Red Bull, and takeout pizza. Highly credentialed twentysomethings who were good at taking tests and writing papers are crafting our country's most far reaching bills to be argued in a Congress full of idiotic and complacent legacies of the rich and powerful and their various hangers on (people like Alan Blinder).

This is the real reason why things suck in DC. It's pageantry and a mating ritual between those who have power, those who want it, and those who want to keep it at all costs, regardless of their complicity in the deterioration of the general state of affairs.

This is the Ivory Tower of the political and intellectual class. Test takers, obsessives, neurotics, the paranoid, and the complacent rich. It must be a breathtaking view up there, although I think the lack of oxygen is definitely causing problems in cognitive function.

Predicting the Outcome: Chalk up another in the L Column

Fisher v. Texas was decided today, and they basically punted it back to the lower courts without overturning Affirmative Action. Which goes contrary to my expectation that they would strike down Affirmative Action. So I have to mark one of my previous predictions as erroneous.

Predictions Outstanding: 2 (Marissa Meyer, Michael Dell)

Predictions Vindicated: 2 (2012 Presidential election , Joe Flacco)

Predictions Erroneous: 2 (Romney Veepstakes, Fisher v Texas)

I forgot to mention that I had correctly predicted Joe Flacco's guaranteed amount (within 15%) on his contract negotiations with the Ravens. So that'll even out my prediction average. Unfortunately, I had hoped to be north of .500 by the time Fisher v Texas was handed down. But oh well.

I've been meaning to get a new piece out here but the remodeling job that recently started on my bathroom has made my condo an unexceptionally unappealing place to be in for extended periods of time so I haven't had many opportunities to write. I do plan on having another piece out either tomorrow or Wednesday, though.

The Big Secret Is.....There Is No Big Secret

In grossly simplistic terms, Tom Clancy's Rainbow Six is a book about an international counterterrorist unit and their exploits. In the book, an ex-KGB officer, bankrolled by an American billionaire, instigates a series of terrorist attacks in Europe. One of the attacks had Baader-Meinhof terrorists (a militant German socialist organization) take a very prominent Austrian financier hostage.

The KGB handler let the terrorists believe that the financier had an exclusive set of access codes to the international banking system which he used to great profit. The terrorists were hardliner Marxists and accepted his explanation without question. When the terrorists take the financier hostage and explain to him that they demanded those special access codes, it switches over to financier's point of view who then thinks to himself something to the effect of: oh my god, they want something from me that does not exist.

The reality is that there isn't some sort of secret set of access codes that allows a certain class of people (in the views of the leftist unwashed masses, primarily Jewish capitalists) to create huge profits for themselves by effortlessly manipulating financial markets. Success in high finance is a combination of luck, data analysis, and a fervent hope that your hunch is both correct and comes a split second sooner than another person's hunch. The end result might seem to be profits that come out of nowhere to the uninitiated, but that is never the case.

And that is precisely what those terrorists were. They were uninitiated. They had no idea how the real world operates. Unfortunately, many people in modern society have roughly similar views to those terrorists. Many are increasingly coming to the conclusion that the "game" is "rigged" by an all-powerful minority. The reality is anything but. There are powerful factions everywhere jockeying for a piece of the economic pie. And there are always winners and losers. But the human mind always fixes its attention on the winners, rarely the countless number of losers.

But for the average person, it actually isn't hard or expensive to become financially literate. The system is actually much more forgiving for average investors than for rich ones due to limits on tax-exempt investment vehicles and losses for tax harvesting purposes.

If you're a longtime reader, you know that I got started in the summer of 2007. I was just a rising sophomore in college then. And everything I ever learned about investing came from three books, a subscription to the Wall Street journal, and paying attention for about half an hour a day. Reading a financial newspaper day in and day out and you learn everything you need to know to invest properly. And you also start to see The Man's point of view and then you realize that there isn't a "The Man". There's just a bunch of people who have money who want to make more money.

The big secret is that there is no big secret. And for most people, getting rich is a very time consuming, laborious task that requires a certain amount of discipline that is beyond most people. Which is why most people are poor.

Real Time With Bill Maher: Counterpoints (6/14/13)

Wow, it's been a while since my last post. I've just been pretty busy in the real world, so I haven't had much time to think and write. Hopefully next week is better. But in the mean time, we had an excellent episode of Real Time and some things to clarify. So let's get to it.

Patrick Kennedy: Legalized marijuana will increase overall usage and marijuana has deleterious effects on the human brain.

On the science, he's absolutely correct. Quite a few studies have come out showing that moderate to heavy marijuana usage have substantive, negative effects on working/short term memory and cognitive development, especially in younger people. But that doesn't mean it would be the end of the world if we treated it like alcohol.

This is still a country about freedom. And personal marijuana use should not be criminalized. Combine the criminalization of marijuana with prosecutorial discretion, and you have upper middle class white kids in the suburbs skating by with barely a slap on the wrist and then you have poor black kids in the inner city getting thrown into jail for years. Not to mention tens of thousands of Mexicans across the border dying in cartel related violence.

A war on drugs is a war on Americans. Because everybody has a friend or acquaintance that does drugs. Next time find a person like that, talk with them for five minutes, and decide whether that person should spend their time rotting in a prison cell while costing the state tens of thousands of dollars per year. If you can't bring yourself to do it, it's time to stop supporting the Controlled Substances Act.

Niall Ferguson: The technology afforded to us has yielded Big Data, and the security apparatus of the state doesn't get nearly enough credit for preventing an attack. We need to embrace these technologies as effective tools for counterterrorism.

Kellyanne Conway: The real issue we need to decide is whether telecommunications can be considered private property. This is much different from an envelope with your name on it.

These two nailed both parts of the issue very well. I agree with Ferguson in the fact that these are effective tools. Companies already use Big Data to effectively market goods to consumers based on their buying habits (there was a documented case in which a company sent baby goods coupons to a household with a woman who didn't even realize she was pregnant based on her recent grocery bill). The same algorithms can be tweaked to predict the activities of terrorists. It's like the movie Minority Report except computers and not drugged out psychos are doing the heavy lifting.

Conway also brought up a very good point. And the answer is no. Telecommunications cannot be considered private property. Because telecommunications is about sending information across a government owned medium (the electromagnetic spectrum, which is owned by the Federal government and leased out to corporations who must then subject themselves to all the statutes and regulations and the authority of the FCC). Of course the US government can tell companies that they must turn over their metadata. This is literally no different from the mailman (an employee of the Federal government) looking at the front of an envelope (which contains information about the sender and the receiver).

What the government doing is legal and it cannot be considered an invasion of privacy because there can be no reasonable expectation of privacy when you conduct business on public property. Case closed.

Josh Fox and Bill Maher: Fracking is evil. Government is being paid off by corporations to look the other way.

Niall Ferguson, after listening intently to these two blather on and on about this non-issue, rightly took them to task about it. And I'm glad Jonathan Alter also joined the fray as well. Because the simple issue is hydraulic fracturing of shale rock to yield oil and gas is very economically beneficial and still much more cleaner than coal mining despite "leakages" and "contamination".

Alter is correct in that faulty casing in a small minority of wells is how leakages occur (the pipelines drill below the water table and under a vast layer of impermeable bedrock). It all happens on the surface and it's entirely the work of shoddy wildcatters instead of the big multinational corporations who have big fat targets painted on their backs by the media and by people like Maher and Fox.

The modern economy runs on cheap energy. Cheap energy is why we have things like air conditioning, mechanized farming, and why most of our money is spent on things we don't actually need (movie tickets, TVs, smartphones, sporting events, bigger houses, outrageously expensive designer clothing, etc). It is impossible to ramp up renewable energy (excluding nuclear, which is a progressive/liberal bugaboo anyways) to any significant percentage of energy generation in the US within 50 years.

Fracking is here to stay and it's much safer and cleaner than coal mining. Democrats and progressives in government (who actually have to manage the affairs of the country) know and realize this. It is only the Hollywood and ivory tower liberals and progressives who don't know this basic truth, because they have zero incentive to know it.

Bill Maher: Old Congressmen suck. And it's ridiculous how a legislative body with a 10% approval rating has a 90%+ retention rate every election cycle. Gerrymandering is to blame.

It's funny how it's never your Congressmen's fault. It's those evil Republican or snooty Democratic districts that screw things up for the rest of us.

This is a consequence of a weakened legislature. The current design of Congress (based on the rules that Congress has agreed to abide by) makes it extraordinarily hard for big bills to pass. This inevitably strengthens the executive branch, where the President and all the President's bureaucrats can essentially do whatever they want because Congress delegates much of the lawmaking to the myriad of regulatory agencies within the executive branch.

Congress is always a fun punching bag, and the many disparate districts can make for some easy targets like ridiculously old lifers, lightning-in-a-bottle hellraisers and airheads, boring middle aged white guys, and "feisty" minority and female representatives. But the truth of the matter is that Congress, and by proxy, the American people, have decided that Congress should no longer be a powerful institution within the Federal Government.

In a democracy, people get the government they deserve. And one story of American history is our gradual and increasingly democratized political process.

Real Time With Bill Maher: Counterpoints (6/7/13)

Very good show. Very good panel. Very good issues discussed. Let's get to it.

George Packer: Social mobility and the American Dream are on life support. The reality is that we're segregating ourselves in a society of the glamorous, rich, and famous and an underclass that's poor.

He's right. And the biggest problem is the decline of wealth. I've written before that the game changed in the 80s with the shift from defined benefit pensions to defined contribution retirement accounts. And nobody noticed that the game changed. So that's why the class divisions (that have always existed throughout society) seem so stark now. The relatively high wages we were able to pay unskilled laborers are gone. So now education, pedigree, and connections matter even more now to get a good paying job. And that reinforces the class divides.

Modern day society currently has 5 major socioeconomic classes: the out-of-sight, the working class, upper middle class spenders, upper middle class savers, and the capitalist class. Because only two small socioeconomic classes (UMC savers and the capitalist class) bother saving significant amounts of their income (therefore translating it into wealth), everybody else gets divided by income. And your source of income is tied directly to your job, which is now increasingly determined by social pedigree (education and "culture fit"). These classes always existed along the same lines, more or less, but it has been exacerbated by the increasing mechanization of the economy, which has disproportionately hurt low skilled workers and has disproportionately benefited people who have wealth.

That is why there is increased fretting among the chattering classes (comprised of mostly upper middle class spenders and some in the capitalist class and upper middle class savers) about the widening divides within society.

Maher and Company 1: The NSA controversy is controversial and we're not sure what to think.

I'm not sure why this has grabbed the news cycle. Maybe it's a slow one. But the fact of the matter is that this stuff has been going on for a very long time. Illicit/covert wiretapping, like they said, began shortly after the invention of the telephone. But people generally give the government wide latitude when it comes to matters of national security. And data-mining phone conversations (and financial transactions, for that matter) is very important to the intelligence community.

A lot of people are against the NSA's Echelon 2.0 program because of a slippery slope argument. It in conjunction with potential new laws could represent a huge erosion of civil rights. But that only happens when other much more egregious laws and regulations come into play. Fight on the margin when you have to. Don't try and draw a line in the sand.

Maher and Company 2: The DNA controversy is controversial and we're not sure what to think.

Same thing applies.

Kevin Williamson: Republicans have a hard time separating their politicians from their entertainers.

That was easily the best line of the night. And it's absolutely true. The Democrats can contain the fringe, extremist, and attention-whoring elements of their party. But the Republicans can't. The crazies are in charge of the sanitarium. And because of it, guys like Mitt Romney, moderates by nature, have to pander to the mouth breathers who control his fate in the primaries and by the time they get to the general, it's too hard to run back to the center.

Ana Navarro: *words*

It really does pain me to say this, but I cannot take you seriously if you talk with an accent. Suddenly, I feel very, very white.

Bill Maher: Reagan invented voodoo economics and income equality.

A lot of progressives like to use the 80s as a tipping point from when the US transitioned from the land of a vibrant middle class to a anarcho-capitalist free for all where the rich got everything and left the poor in the dust. And, there were many things that began in the 80s that contributed to the widening social divides we see today. Unfortunately, just about none of them have nothing to do with Reagan or even the Federal government in general.

An acceleration of globalization, the emergence of computers, the transition from pensions to individual retirement accounts, the crack cocaine epidemic, and uneducated/unscrupulous use of credit cards were the biggest drivers of inequality.

Climatology Isn't Science

One of the more infuriating traits of progressives and Democrats is that they love to pretend that they are the party of science. Because the Republican Party is home to many devout Christians who publicly profess extraordinary beliefs, it is viewed by many as the party of religious kooks and people who deny science. This is somewhat strange, given the religious belief that the technocratic left has in "science".

Nowhere is this issue more obvious than with climate change/global warming. It's best epitomized with Bill Maher's constant declarations on this show that "the science is settled" and that the Republican Party is just full of people who deny that the earth's climate is being adversely affected by human activity. Is Maher a scientist? Far from it. But what about the climatologists he loves to cite? Are they scientists. And the answer is...not really.

Science is a method of knowledge discovery. And the key thing that separates science from other methods of knowledge discovery is that it involves rigorous experimentation and tests hypotheses within a controlled environment. Scientists are people who discover knowledge by following the scientific process. By that definition, climatologists aren't scientists. Because all they do is gather data and then try and then make assertions based on the correlations they discover within the data.

Much of the research on anthropogenic climate change is based on measuring the composition of air (the relative amounts of various gases within the atmosphere), measuring average temperatures, plot it on a chart where the x axis is time and then try and suss out what it all means. Currently, the understanding among climatologists is that various greenhouse gases, primarily CO2, raise the average temperature of the earth. And that industrial output and energy generation contribute to increasing levels of greenhouse gases within the atmosphere.

 But none of that is based on science. Because the problem is climatologists can't conduct experiments on the climate. They can only observe and report. They can't intervene. The inability to intervene and then observe any changes in behavior is what separates climatologists from scientists.

And nomenclature is important. For me to say that climatologists aren't scientists is a calculated attempt to change the public perception toward the field. The lay perception of a man in a white lab coat is that of authority and knowledge. By refusing to give climatologists the designation of scientist, it "demotes" them to "researchers". And researchers are subject to much more scrutiny and skepticism than scientists.

Because researchers gather data. And their preconceptions and biases can alter their analysis of the data. Or exclude certain data. Or limit the window of data to support their preconceived ideas. This is something we absolutely must consider when we rely on the data and the opinions of researchers.

And that's why we can't call climatologists scientists. They are researchers. And they must be accorded the respect that researchers are usually accorded. Which is to say, not as much as that of scientists.

Hollywood Celebrities Are Liberal/Democratic For a Good Reason

One thing that surely frustrates Republican leadership is the overwhelmingly Democratic stronghold of Hollywood. Having America's most high profile public figures in the blue corner definitely helps Democrats. During President Obama's reelection campaign, he solicited funds from high profile Hollywood fundraising events multiple times. And yet, the Republicans know they can't hope to win over Hollywood's actors and actresses because of the nature of the business that they work in. It compels them to become Democrats.

The business model of the entertainment industry is pretty simple. Get as many eyeballs on your product as possible. Because of that, the people being eyeballed, the actors, gets a grossly disproportionate amount of money. After that is the director. And then after all other costs are accounted for, the producers get to take home the profits.

It takes thousands of people and hundreds of millions of dollars to make and market a big budget Hollywood blockbuster. And in big budget blockbusters, you almost always pay money for a bona fide movie star. That fee is going to be around 15-20 million dollars. After that, you have the director, screenwriter, and IP owner. Expect to depart with another 20-50 million dollars. The secondary actors' and extras' pay taper off dramatically. And GFX and SFX studios (who are famously overworked and working with some of the most razor thin margins available) do their thing for peanuts.

Think about what goes through the mind of a celebrity actor when they see their paycheck. They get paid tens of millions of dollars to work 80 hours a week for 3-4 months. If you were Robert Downey Jr. in Iron Man 3, you got paid 50 million dollars for about 1200 hours on the clock. That works out to about 42,000 dollars an hour, which is more than 12 dollars per second. Think about how absolutely insane that is for an individual to process.

The reason why actor's salaries are so high is because their brands are extremely valuable. At this point, it would be absurd for Marvel Studios to consider replacing Robert Downey Jr. with somebody else. People have come to expect his face and his voice in the role. Controversy and bad press would overwhelm the studio and cost them potentially hundreds of millions of dollars. And Downey Jr's agent knows that, which is why they were able to extract such a high fee from the producers.

If you're Robert Downey Jr, you'll come to the realization that it's not your acting that's worth 50 million dollars. Your brand is worth that much. And your brand is worth that much because you were able to leverage the labor and capital of tens of thousands of people. Everybody involved in the production is working to make you look good to tens of millions of people. That's how your brand got built.

And for handsome would-be leading men and beautiful would-be leading ladies who know how to read and recite words on a page, all they want is their big break. Getting casted in a role means that they get to leverage all that labor and capital. And the casting process couldn't be less related to our traditional ideals of merit.

Getting casted means you have the right look, a certain charisma, and a willingness to subject yourself to the whims of demanding and entitled producers and directors. All that boils down to is being the right kind of physically attractive and well spoken. The latter can be taught to anybody. The former is a combination of genetics, current societal preference (zeitgeist), and a willingness to exercise and stick to a certain diet.

So basically, it has everything to due with luck. That's what these actors and actresses are counting on to get casted. Sure, they'll try and tip the scales in their favor any way they can, but it really all depends on luck. Luck determines the next celebrity in America. Think of Disney and its celebrity manufacturing process. They get these photogenic, bright faced kids like Justin Timberlake, Britney Spears, Miley Cyrus, the Jonas Brothers, put them in a TV show, dress them up like pseudo-adults and put them in fantasy situations and suddenly they're the biggest thing. It doesn't matter how good they are at acting. They all suck. It just matters that they got casted because they're good looking and are literate.

Think of the effect that has on the Hollywood psyche. Actors and actresses know, deep down, that they owe their success entirely to outside factors. Celebrities realize this, deep down in places they don't talk about at parties. Because of it, they always carry a subconscious guilt over their wealth and fame.

That guilt is what allows then to be the champions of the Democratic Party. Higher taxes are fine with them because, hey, it's not like they actually earned the money. As long as it doesn't reach some absurdly punitive rate, they're fine with higher taxes on the rich. And it's also why they're so focused on social causes. They're suckers for situations where there's a group of people down on their luck, because they've also been in that same situation. They remember the waiting jobs (one of the more demeaning forms of work in the modern labor market) they had to take to support themselves before they got their big break.

Think of what the Democratic Party and what it stands for, and then think about how celebrities became celebrities. Is there any wonder why they are such staunch supporters of that political party?