I never thought much of history when I was in high school.  Why do we need to remember all that silly stuff that happened a long time ago?  That was never fully explained, and so it seems a little pointless.

Now I know it matters, and I wish someone would’ve explained why.  It matters because history repeats itself and people have short memories.

Life is not a laboratory, so you can’t know what will happen if you pass ObamaCare or not.  There is no control group or double blind peer reviewed studies on the subject; we can’t split the US in two and have one group continue status quo while the other pursues health care reform, then compare the results…….but in reality there is something that will often suffice: history.

History (sometimes modern history) runs natural experiments for us; if you understand history, you understand the present…you can preview the future.

Is anything sustainable?

“The American Republic will endure until the day Congress discovers that it can bribe the public with the public’s money.” It is debated who originally said that, but let’s give it to the Frenchman Alexis de Tocqueville.

I think about that a lot lately, because I wonder about the sustainability of Democracy.  I’ve already discussed that I don’t understand how our monetary system is sustainable….money as debt requires us all to be in ever increasing amounts of debt to allow the economy to grow.

I watch the welfare systems of Europe….where the people,  always on strike, demand more and more from a government they don’t seem to understand is not giving them jobs.  It does not provide them with healthcare, or a pension, or education, or really anything……it takes from them and when they receive it back they act like they’ve gotten something.  It was theirs in the first place.  If I rob most of your money, then give some of it back to you….have I really done you a favor?

Maybe in some cases…if you can do better with the money than I can (which is possible)……but is it sustainable?  Won’t I always end up voting myself more until I do to the country what the labor unions did to Detroit and the US auto industry?

I think of the US, with its crippling income inequality, and I see a future where voters may well try to vote themselves more.  Why not?

If people no longer feel hard work can get them ahead in life (and I admit that as I watch Wall Street get bailed out while I foot the bill, I wonder whether lobbyists might be better than hard work), they will pursue other means…voting themselves benefits is one avenue.  Crime is another.  Leaving the country is another (an avenue we see Mexicans  pursue).

Government does not hold any real power.  People agree uneasily to be governed because they feel the alternative is even worse…but that doesn’t mean it will always be.  History teaches us that ALL governments except the ones currently in existence have failed. These will likely fail too.

Alexis de Tocqueville also said, “The best laws cannot make a constitution work in spite of morals; morals can turn the worst laws to advantage.” and its corollary: No contract can be sufficiently specified as to prevent dishonest behavior by those who wish to gain advantage.

History, and Stanley Milgram’s Stanford Prison Experiment, show that people’s morals are easily swayed.  People act in accordance with the situation.

Our Constitution, Democracy….our way of life…..its all enabled by this basic agreement that we trust people and its possible to come to mutually beneficial agreements.

Government (Democracy or otherwise) is a moot point if people decide the system is rigged against them and that it doesn’t pay to obey the rules.

Governments fail for this reason.  At that point you must reset the people’s sentiment by fixing the system; or you have to bribe them with their own money.

I wonder about the sustainability of all our modern governments.  I think they will fail; perhaps in our lifetime.  I wonder what will come next?

I’ve heard this before; I guess its just coming up more now as the jobs situation gets worse.

The private sector had 107 million jobs in 1999, and that’s about the number it has currently….a decade later.  There was an artificial bump before Y2K as companies hired a bunch of folks and bought a bunch of new computer equipment in anticipation that there would be some technical apocalypse, but still…10 years on and there is no net job creation.

That’s tough for the common man to swallow; after all GDP has increase from 9 trillion in 1999 to about 14 trillion today.  Are you telling me there those extra 5 trillion dollars created no net jobs?

Also, population has continued to increase from 279 million in 1999, to 304 million today.  So there are more people chasing the same number of jobs, while national income (GDP) went from 9 to 14 trillion dollars.

Where did the 5 trillion dollars go?

Here are two facts you can take with you (unfortunately not to the bank):

1) Trickled-down economics is shite:  It doesn’t trickle down.  A rising tide doesn’t lift all boats; it drowns those without boats.  Income inequality is the worst its been since WWII; Reagan, Bush I, and Bush II are responsible for most of that.  If you think income inequality doesn’t matter, then ok.  But it causes crime and ill-health.  That will eventually effect you; I don’t care how hard you try to sequester yourself away from the poor (which are increasingly the middle class).

2) What’s good for Wall Street is not good for Main Street. And its corollary:  What’s good for US companies is not good for the US. In the past, this was true.  Where did the 5 trillion dollars go? It went to China and India via US companies.  In fact, I wouldn’t even call them US companies anymore.  They are global; they are not beholden to any government.  If a government upsets them they could always pack up and ship operations (i.e. jobs) elsewhere and still sell their goods/services in the country.

Maybe that isn’t where all (or even the majority) of the 5 trillion dollars went; however, a large number of the missing jobs are not missing…..they are simply relocated.  My company, for instance, has not closed up shop in the US.  We still have operations here; its just that we are adding jobs 4 to 1 overseas.  They used to all be here.  So growth is still good…just not growth in the US; however, since it is a US company their corporate income/consumption still counts towards GDP.

I’m not happy about this; however, I sometimes feel like it is a snowball gathering steam down the mountain.  I guess the only practical advice I have to give about the future of the US economy (and thus YOUR livelihood) is:  Be conservative.  We will be the first generation to have a lower standard of living than our parents; accept it.  Our children will increasingly compete for jobs against people continents away who need to make less than we do to survive.  Its hard to win in that equation.

I have one suggestion that is practical and will help immediately:  Stop the wars.

I lived in the Middle East; they hate foreign occupation.  They hate it.  I mean HATE.  Its their hang-up.  The more we intervene, the most terrorists we create.  For those who say, “We aren’t occupying; we’re liberating/helping”….I will say it is simply a matter of perspective, and theirs is the only one that matters.

Stop the wars, and spend the money at home.  We are losing to a phantom enemy that we create more of the harder we try to root them out.

I have some things to share with the 7 or so people who might read my website:

Why I am apolitical:

I’ve always stated that I am apolitical, neither democrat, nor republican, nor centrist, nor libertarian.  But I have strong ideas about politics and the role government can have in our lives…very strong ideas.

So as I watch the bailout of the financial system and the endless debate on healthcare reform everyone agrees in theory needs to happen…..I ask myself:  Why am I  not more political?  Here is why: because there is no substantive difference between the democrats and republicans.

We think of them at opposite ends of the ideological spectrum, but they are not.  They argue loudly about small difference they make seem big while rarely addressing anything substantive.

I’ll use the example of the financial system bailout:  Both the republicans and democrats wanted to bailout the financial sector; they just argued about the amount (both amounts being very large) and how to spend the money.  The Republicans started the bailout and then the Democrats inherited it, and continued the same basic policy.  Neither party addressed why it happened in the first place; no one (except maybe Ron Paul) wanted to discuss the structural issues of a monetary system based on debt and a fiat money controlled by unelected officials making decisions behind closed doors (the Fed).  Neither party has addressed the “too big to fail” issue (not only that, but the big financial companies have used the bailout money to buy up the smaller companies that failed during the crisis; they’ve actually become bigger).

Here is another example:  9/11.  Both parties wanted retribution.  No party was brave enough to say:  ” 2993 died today in a terrorist attack.  6,744 people die a day on average everyday, so to put that in perspective, America is not under attack.  This was high profile and a great tragedy, but to upend our way of life, to start long costly (very costly) wars on foreign soil with unclear means of success in which more men and women will certainly die…..to restrict and lose, in the name of increased security, the very freedoms and civil liberties we would claim to go to war to protect…..this is not acceptable.  If this is our response to terrorism, then certainly we have already lost.”

This brings me to my next point.

Why Republicans want healthcare reform to fail:

I do not think the Republican’s opposition to healthcare reform is 100% genuine and in the interest of their constituents (even if you include the healthcare companies as their constituents). Republicans want healthcare reform to fail because if the Democrats pass the reform the people want, the Republicans may not see the inside of the White House or a majority in Congress for a generation.

The point, is that neither party has a genuine interest in doing what is best for us….they have an interest in getting re-elected.  They pass laws based on that and little else.  Democracy works because the two can definitely overlap; if you pass laws people want, you get re-elected…..but their are other ways to go about it as well:  money can also get you re-elected (so pander to companies); being less-bad than the alternative can also get you re-elected (just bash the other party and say great things about yourself).  In short, there are alternative ways to get re-elected.

This brings me to my next point.

Why I want to go back to school:

I’ve been kicking around the idea of going back to school to get a PhD in Economics.  In the long term, its a good life to be a college professor, and in the short term it would allow me to follow these ideas to their natural conclusion.

Incentives.

People are neither good nor bad; they act, en masse, according to the situation in which they find themselves.  Modify the incentives and you modify behavior.

I would like to study some form of behavioral economics that would allow me to construct a system of incentives to help people avoid all these situations.

The economic system in which we operate works together with government/law to create the set of incentives that control our lives.  I would like to draw lines in the sand, to establish some facts and some subtlety:

The free-market can fail to reach optimal outcomes. We must accept that these textbook perfect market conditions don’t exist in the real world, and even if they did they would still produce monopolies, corruption, inequality, price fixing, etc.

Economy doesn’t exist w/o government….therefore government has a role to play…not as a spender of money, but as a regulator, a system-maker.  We need to accept that the invisible hand of capitalism produces anxiety, inequality and pits us all against ourselves.  This produces crime, mistrust and ill-health.  We don’t want to live in a country like that.

GDP is a horrible measure; lets replace it:  It promotes over-consumption, doesn’t differentiate between types of spending, and you can’t subtract from it.  Here is an example:  The US has the largest economy in the world with a GDP of 12 trillion (per year).  I can turn the tiny nation of Uruguay (or any country for that matter) into the largest economy in the world:  Let them borrow 13 trillion dollars from someone and spend it all on rat poison next year.  They will be horribly in debt and have a country full of rat poison…..but they will have a 13 trillion dollar GDP.  You might be thinking “that’s not how it works, surely!?!?!”…..but oddly enough, it is.

Monetary policy is the basis of our society, because money controls/influences most of our actions.  Fiat money created by debt is the structural issue that has caused our current crisis, and yet few seem to understand that (so no one addresses it).  Money systems fail (and empires fail with them).  To create a lasting society, you have to create a lasting money.  Our current system is unsustainable; it allows the government to confiscate our wealth through inflation.  Taxes are cheap in comparison.

I would like to clarify these ideas, to write my own Das Kapital; furthermore to elaborate it using agent-based computer modeling so that it isn’t all theory, you could potentially model changes to law/monetary policy to see the potential effect.  It would be akin to what weather forecasters use; imprecise, but better than nothing.

What do you think?  Quit my job and go back to school or continue as is?

Obi Wan said he felt a great disturbance in the force when Alderaan was destroyed by the Death Star.  He was right; however, he was also a movie character and a Jedi bad-ass.  Real people can’t sense stuff like that, but they do occasionally get a feeling they haven’t felt in years, like Vader did when Obi Wan was on the Death Star.

I have wondered often what makes someone old; why do people grow up?  They obviously age physically, but what happens that makes them think about things as an adult.  There are advantages to being an adult, and some to being an eternal adolescent as well.

Today I was transported backwards about 15 years for a few minutes.

I sat there for a second and went…..”wow, so this is what it feels like to be young”.  Young is full of anxiety and anticipation.  It is uncertain.

Adulthood is more self-assured, less explosive, wiser.  I think wisdom is often just the realization that everything is dependent on time; the answer today is not always the answer tomorrow….and yet we must still have answers.

Adulthood is repetitive.  Youth hasn’t had time to be yet.

Youth creates your pains.  Adulthood is learning to live with them.

Youth dreams and dreams are quick.  Adults do things, and that takes a lot longer.

Youth is subsidized by adults.  Youth is not-sustainable for this reason.  Adults realize that nothing gets done unless they do it.  Youths are mistaken in the amount of effort it takes to make life happen.

Youth is beautiful and beauty is very powerful.  Adulthood realizes beauty is persuasive, but not always useful.

Youth burns.  Adults realize nothing burns completely.  Be careful what you burn.

Youth lives in a world of ideas, since they have little yet of life to fill their heads.  Adults live in a more concrete world, as reality tends to swamp idealism as the years stack up.

Adulthood is overly cautious.  Youth is rash as it doesn’t yet realize how fragile and precious life is.

____________________________________

The point is that today I felt young again for a second as something old was made current and I was transported backwards in time.  What an odd feeling…like it was happening to another person.

My distant past (before Atlanta and grad school, those years when I traveled, and before)……is so far removed from my present life that I remember it like a movie.  That person I was no longer exists.  But he did for a few minutes today.

I can’t say much was better about the former Elliott, except that he was younger, better looking, more full of himself, and had more hair….I guess not everything is better now 😉

I pride myself for being a hack, weekend economist.  I admit it isn’t going to make me rich, but it is interesting.

It is easy, at first pass, to answer the “why did we bailout the financial sector” question.  The answer is because they are rich and have powerful lobbyists, and there is intuitively some truth to the claim that without a finance sector to grease the wheels of the economy, that it would grind to a halt.  So whether or not the companies are to blame for their own mess; we need them, so we have to save them….I guess.

But why do we need them?  Why, if too much credit got us into this mess in the first place, was there a deafening cry from Washington to get credit flowing again.  How could the disease be the cure? (BTW:  that was the premise of the bailout:  We want this bailout money to go towards lending.  Lending had stopped because risk couldn’t be accurately gauged.)

The question then becomes, “Why do we need lending?”  What is so important about the ability to keep credit flowing that we literally cannot do without it, even for a little bit, while the financial sector shakes out and healthier companies (those without exposure to bad debt) take the place place of the old financial sector?  How long could that take?  A year?

Why the cry from Washington of “We must act NOW,” as in RIGHT now.  They passed the TARP bill almost immediately with no rules attached, and started handing out money willy-nilly….compare that with healthcare: In healthcare there is a near endless debate over a change everyone agrees in theory needs to happen (overhaul of costly system) and for which there is a moral imperative (richest country in the world with 47 million uninsured citizens)….then TARP:  No debate, no moral imperative, very costly, no oversight/enforcement, benefits only a few.  How did that happen?

I think I figured it out, and I figured out a few other things in the process:

Money is debt.  That is why we need debt.  Without it there is no money….literally.  95% of all money in circulation is debt.  If all that debt were paid off……..there would be almost no money, and thus no economy.

The government doesn’t create money in our monetary system.  The banks do. They do so through loans.  To simply a bit, when you take out a loan, that is new money.  It isn’t taken from another person’s deposit and given to you.  The money didn’t exist before.  When the bank credits your account for the amount of the loan the money comes from nowhere…it is created with a digital keystroke. Money can be thought of as a series of IOUs (debt), which, if they are all paid back….equals zero.

(This answers the question as to why banks are so profitable.  They don’t actually need any money.  They give you money they just created from thin air, and then you have to put up the house/car/etc for collateral (which you may end up losing to them) and pay them back interest.  Interest on what? They didn’t risk anything…..they didn’t actually put up any money on their side.  They don’t stand to lose much, since they can buy insurance on loan failures and they get the collateral if you don’t pay.)

So back to the bailout:  Why must the debt keep flowing?  Why MUST banks lend or the economy comes to a screeching halt?

Two reasons:

1) Loans are always being paid back (which destroys money; money lent is money created, money paid back to the banks is money destroyed), so for the money supply to continue to increase, there must always be more loans going out than there are payments coming back in.  If loans don’t go out, the money supply contracts and deflation occurs. Deflation is a hard loop to get out of, and is definitely bad for the economy.

2) If I borrow a dollar from you and then you borrow a dollar from me and we later pay each other back, then all is good.  But what if we decide to charge interest (which banks do)?  There is only two dollars in our economy…the money simply doesn’t exist.  One of us has to go bankrupt because we won’t be able to pay.  The only way to pay is to borrow money from a third party (or borrow more your original lender).  This is how our economy works.  You always borrow the principal of the loan, but you must pay back principal plus interest.  Where does the interest come from? We borrow it (because that is pretty much the only way to create money).  Individuals may be debt free; that is true…but the system as a whole must always borrow an escalating amount because the system must always pay back principal plus interest on the original principal or people (the system) goes bankrupt. That is what we are seeing now.

And that is why lending must happen.  That is why we saved the financial sector.  Debt is money.  Without the debt/credit/banks….there is no money and no economy.

I think if everyone were a little more educated on how our money system works this would be a better country to live in.  All that shit they do in Washington is just smokescreens and old, self important white men thinking they know something.

“Permit me to issue and control the money of the nation and I care not who makes its laws.” — Mayer Amsched Rothchild

“If the American people ever allow the banks to control issuance of their currency, first by inflation and then by deflation, the banks and corporations that grow up around them will deprive the people of all property until their children will wake up homeless on the continent their fathers occupied.” — Thomas Jefferson

I’d never heard that term before a few weeks ago, but I get the concept.

Sometimes jobs are not outsourced or offshored…they simply disappear and no one gets them…or at least that is the concept.

As I think about machines taking blue collar jobs, and computers taking increasingly white collar jobs….it is only a matter of time until no one’s job is safe.

The economic concept there is that the increasing technology is a good thing:  We don’t want people farming with oxen and mules.  We’d all be starving to death…not enough food to go around.

We also like the automation of more complex work.  We complain when someone’s job is replaced by an Excel macro, but was the work really that worthwhile anyway?

Also, I worked on one of those big enterprise platforms for years (like the ones that handle stock trades, account balances, cut paychecks, etc).  Trust me, without stuff like that our society wouldn’t exist.  If the virtual paper pushed by those systems became real paper that someone had to process….every single person in the US would be employed as a paper pusher.  That’s no life.

We need those things; every job that is “lost” makes our society better.

So what’s the issue?

Well, two things:

First, the easy one:  Offshoring is great because we save money by allowing Indians to program our software and China to manufacture our goods.  We spend that money elsewhere, hopefully in some productive pursuits in addition to enjoying a higher standard of living…and we’re a little better off on average.

Now it gets more conceptual:  China is learning to manufacture.  India is learning to program.  What are we learning?

The concept is that China manufactures cheap, basic goods, and India programs low level software…but where do you learn how to manufacture complex goods and high level software……you start with the cheap and low level.  We are exporting our expertise to them, and not replacing it here.

The second point is a bit further out:  Goods get cheaper as we get better at making them…and we are definitely getting better.  Economics also says that as the marginal cost of making one more item drops to zero, the cost can also drop to zero.

Will we ever get to zero?  Will things ever cost nothing (or close to it)?

It isn’t a dumb question.  We live like kings if you compare us to someone  200, 300, 1000 years ago.  The cost of stuff IS dropping…just not quite to zero, and we think up new crap to get, so we end up on the hedonic treadmill.

I used to think that would last forever, but I am not so certain anymore.  I’ve seen some real big ideas come out of bio-tech, alternative energy, nano-technology, artificial intelligence, etc.  If even a few of those hit……we’re in for a ride.

Let the price of energy drop to near zero and watch the price of all other goods drop dramatically.

Let bio-tech add 50 good, productive years to everyone’s life and watch the most productive of us invent/outsource/unsource things we never dreamed of.

The biggest (probably most far off) bets are in nano-tech and artificial intelligence.  Imagine a nano-tech printer that can “print” anything you can draw up (there is already work being done with these kind of general purpose printers).  Now imagine you didn’t even have to draw it up…you ask your artificial intelligence to think of something for you.

Some of this isn’t so far fetched.  The printer idea will come in some form.  So will AI to rival human intelligence.  There are already self-improving algorithms that you can give a problem to and generation over generation (all on a computer) it (being the algorithm) will get better at the task…in essence evolving.

When this hits the price of goods will fall to near zero, and basically humans will be worthless, vis a vis the Matrix and Terminator.

Anyone that thinks I am advocating that we attempt to  re-cork the bottle and protect jobs here at home or become subsistence farming Luddites misunderstands.  I am simply playing out scenarios.  Protectionism wouldn’t work anyway.  Societies rise and fall.  The US is on the downslope.  Nothing will change that.  As for humans being useful, frankly I don’t think it matters.  Just as societies rise and fall, so do species.  Perhaps it is time to give something else a chance.

Ok, I’m off to bed.

I’ve never seen anything like Saudi Arabia.  I would not call it awe, or interest.  I would describe it as a dull itch looking for an outlet, an uneasy boredom.

Most of my exerience in the Middle East has been with more moderate countries:  Turkey, Morocco, and to a lesser extent Egypt and Jordan.  Honestly I don’t know if there is anywhere on the planet more “conservative” than Saudi.

“Conservative” is in quotes because honestly I don’t know if that is the right word.  I’m scratching my proverbial head here.  I can certainly describe the country, but I don’t know what to make of it.

Women:  This is what people generally want to know about, so here goes:

They do where abayas, which is basically a black robe that covers everything but the eyes.  Some of them even cover their eyes.  That has to suck.  They seem to start wearing them at puberty since the young girls wear regular clothes; I bet they cry the first time they put it on.   What must that be like for a mother?

Women can’t drive; they couldn’t vote up until a few years ago.  Where I work there are two separate cafeterias; one male, one female.  At the hotel, only men can use the gym.  The women do go to the pool…in their abayas…totally covered in black  They don’t swim.  They watch the kids swim.

To work women need permission (written) from their male guardian.  Over half of Saudi university graduates are women; a lot of good that education does them as they as sequestered away in the house, unable to leave unless escorted.  Many shopping malls have women-only floors.

Speaking of shopping, I’m amazed by the number of high-end women’s clothing stores, Gucci, Fendi, Benetton, etc, etc, etc.  Where the hell do they wear them?  The answer, I have learned, is that they are dressed to the 9s under that incredibly unflattering abaya.  Bizarre.

Speaking of unflattering, I do find somethin incredibly mystical and forbidding about the young women behind their veils.  In the West, men (including myself) look at women when they pass; we may look at any part of their body though, since most body parts are at least exposed in sillouette.  There is no personal connection when looking in this way.

The ONLY thing to look at when a veiled woman passes is her eyes; and that makes it personal.  She knows you looked at her, and she is obviously looking at you too.  Their eyes are dark, black pools…mysterious, cat-like…communicating something profound if only you knew the language.  There is something oddly MORE personal and intimate about it than I’m accustomed to.  Sometimes you can see a smile from under the veil touch their eyes;  the eyes tell alot. 

I wonder what they are thinking?  They know their life is restricted.  Are they happy with that?  Is it simply accepted as part of life?  I don’t like to judge other value systems….there is something odd about it though.

Regardless, the restrictions will loosen.  There is a huge shortage of qualified Saudi men for jobs (Saudi men will not take “menial” jobs).  They have the largest ex-pat population of any country I’ve ever been to.  They will be forced to start to employ Saudi women…or their country will be over-run by Philipinos, Pakistanis, and Indians….not that that would be a bad thing, but I’m sure the Saudis wouldn’t love it.

Wasta:  The only Arabic word I’ve learned is “wasta”.  It means influence.  It is the system of nepotism, favoritism, tribalism, etc. that is the politics of life here (this also applies to many other places in the world).  In Saudi it is ALL about relationships. 

I’m here consulting; why bother?  They don’t wish to be efficient.  They play fierce office politics, hoard power, blame others, play favorites, etc (of course this happens in all offices, but to a greater degree in Saudi).  I’m not saying those as a negative, that is simply life here.  It DOESN’T; however, add up to any kind of recipe for effectiveness or efficiency. 

Gas:  I figure it is about 50 cents a gallon.  The joke here is that gas is cheaper than water (which is true since it is a desert)…..3 times cheaper.

Life in the Cities:  Cities have vibes; they have life.  Barcelona has life.  NYC buzzes.  Paris is elegant and self-righteous.  Delhi is swarming, complex, and anachronistic.

Saudi cities are dead.  I have never been anywhere that lacks character like this.  Riyadh is simply one large shopping mall, bright…new…sterile…lifeless.  Jeddah is hardly better.  

Rude drivers, no sidewalks, streets filled with all men, dust hanging in the air, 100+ degrees with endless shopping malls filled with oil money (the whole country would be re-swallowed by the desert if not for oil.  They’d still be beduins with camels.)   

There is no music, no dancing (Viva Cuba!).  There is no alcohol.  The Internet is censored.  There are no women to look at to lift the men’s moods.  There is no fun.  I’m sorry…really.  It is bad.

People take their cars into the desert on the weekends to drive I’m told.  Saudis like picnics (it was 110+ degrees everyday last week).  Whooppiee!! It sucks.

In conclusion, when I first visited the Middle East over a decade ago as a young, brash kid I said, “The entire Middle East needs to get laid.”  I still think that is true; it would be the end of terrorism, and hopefully the beginning of some fun.

Yes, I know that I never posted about Cuba (here are some pics).  I know that I haven’t written anything in a long time.

The fact is that I’ve been extremely busy, with work (about to leave for S. Arabia for two weeks) and being engaged (wedding Jan 2nd) and family drama (parents are getting a divorce) and house repairs (bathroom renovation) and tennis (USTA city champs!).

The Problem with Parties:

I had some people over to the house to watch basketball on Saturday.  I invited people over because I didn’t want to watch the NCAA tourney at a bar and have to pay 4 bucks a pint and have to drive after drinking.  So I said come over and I’ll grill out.  So I did.

That works out great for the most part, except I didn’t watch that much basketball.  I spent a lot of time outside cooking and not watching basketball.  Then I tended some to the guests…made sure everyone had what they needed.

Then if you invite people over, there are people you didn’t invite over.  They find out and wonder why.  I don’t mind that much; I keep about my things the same, and if they don’t invite me next time, I live on….but the point is:

I just wanted to watch the game and have a drink; I didn’t really succeed.  I think the best bet would be to watch it at home by myself…that sounds a little depressing, but yet liberating at the same time.

The “Scrubbing the Toilet Strategy”:

Otherwise I had a trip to Cuba coming up for vacation….3 weeks.  Sounds great.  I was getting excited.

Then work asked me if I was interested in going to S. Arabia for a on-site consultancy.  I don’t actually have to say yes.

But I think back to when I went to India with work a few years ago:  I was just a little over a year into my job (same place I’m at now), and was not chosen to go to India because other people had more experience.  But then one of those people backed out at the last second and I agreed to go.  So I got my opportunity basically because I agreed to do it when no one else would…its the scrubbing the toilet strategy.

Now is the same concept.  If the project was staffed in the US they’d never pick me.  There are lots of other more experienced consultants available, but most of those won’t agree to go to S. Arabia, so the pool dwindles.  I get my opportunity when the someone backs out at the last second and the pool dwindles to one…me.  So off I go to S. Arabia.  I better dust off my djellaba.

Who Watches the Watchers?

Everyone knows I’m apolitical…mainly because there is little difference between the Republicans and Democrats.  I believe that power corrupts…even the most well meaning people succumb.  I believe the best government/system is one that does not let too much power into any one set of hands.

I watched President W. Bush grab power like a king and ignore the Constitution.  Bush stripped civil liberties, ignored Congress, and basically ran the country like it was under martial law all in the name of the War on Terror (ever read 1984 by Orwell?).  He used a crisis to extend his power while claiming (and likely really believing) it was for our own good.

Now Obama takes office on a platform of change….and he grabs power too.  He uses the crisis of the economy to do things the Fed and the Dept of Treasury were never meant to do. (The Fed nor the Treasury Dept are meant to bail out the economy. By law they cannot invest in companies.  The proposal to tax the AIG bonuses 90% is likely unconstitutional.)

Ever heard of the 10th amendment?  “The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.”  To sum up:  All powers not explicitly granted to the Federal government in the Constitution are prohibited.  It is meant to limit power….crisis by damned.

In the end the issue is that the power is never returned.  Eventually it all sits with the overseers (the government)……but who watches the watchers?  That’s the question.

Ok…really its two different topics, so I’ll take holistic thinking first.

So I do HR consulting, and we are always talking about the big picture…creating a holistic transformation, etc, etc.  Let’s think about holistic.  Its means whole.  You’re thinking about the whole thing.

Why is this is pipe dream?  Two reasons:

1. Employees, no matter how high up in an organization (other than the CEO/COO) only have a certain purview.  The Executive VP of Compensation….deals with compensation.  If s/he were to think about the effect of compensation, it is just one piece of what keeps an employee at a company and motivated to perform (there is also benefits, manager competence, even the comfort of the chair s/he sits in at work).  In short, the VP of Comp can’t afford to think holistically about “total rewards” or “employment brand”….their purview is too limited.
2. Some companies now have “total rewards” managers, or some other role, trying to get around this paradox.  Its a good idea, and likely works better than roles with more limited scope.  2 issues here:
   1. Its hard to find someone that knows a fair amount about everything related to Total Rewards or Employment Brand (It was hard enough to know just about Compensation).  Competence at this level will be difficult to come by….by definition.
   2. Here is the main issue, and my main issue with Holistic thinking….even in the best case scenario:  Complexity is hard to sort out.

People are not smart enough to deal with real complexity.  No one is.  The human brain cannot deal with an unlimited number of variables.  If you make a manager’s scope too limited, they are not holistic.  If you make the scope larger, they run into the issue of complexity.  Ok….what’s the real issue?

They call it the Butterfly Effect or perhaps more accurately the Law of Unintended Consequences.  Bottom line, we are unable to predict the outcome of systems that get too complicated.  The weather is an example.  Businesses are another…at least currently.

I think business/management will eventually become more scientific.  The human brain often fails at modeling complex systems (no person can predict the weather), but science can do a little better given time.  Of course, we still can’t very accurately predict the weather…even with science.

Any advice for businesses?  Yeah, I do have some.  Its a vote for the next-best, iterative solution.  The great Holistic strategy is not forthcoming, and if it were…..it would be too complicated to implement.  Be willing to start something today that you know is a step, and isn’t perfect, and is full of holes.

Companies already do this.  They’re good at it.  Where then do they fail?

Short-sightedness.  They start on a step 1…by the time step 2 is supposed to happen, they’ve had turnover (the original planners are now gone), the business environment has changed….they’ve already come up with another plan.  Plan 1 isn’t anywhere near done, and they’re already on Plan 3.

There is an abundance of strategy in corporate America.  There is not a ton of execution/follow through.  Even I recognize this.  By the time I’m good enough at my current job to have real effect….I’m off to something else.  Sustained effort is gold.

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And then there is inflation.  I explained here what the US is doing with its monetary policy (printing money), and how we might bail ourselves out of this mess (other countries will finance our ir-responsibility).  It seems the Chinese know it too.

Another short bit on inflation:  I’ve heard the business press say wage pressure causes inflation (if people get paid more, then prices go up).  That’s shit.  Inflation is primarily caused by a change in the money supply.  The money supply is controlled by the Federal Reserve.  The Fed causes inflation.

What the Fed tries to do is even out the business cycle, to prevent inflation, to prevent boom and bust by slightly rigging the system all the time to ensure even growth and stable prices.  We get back to Complexity though (and weather prediction).  No one can predict economics.  The Fed gets it wrong….and thus causes our business cycles, not prevents them.

I’m not down on the Fed….I’m sure Ben is one of the greatest economists ever to live….but that don’t mean shit.  The greatest weatherman is still just some clown pointing at clouds on a map…..failing against Complexity.