Showing posts with label new york times. Show all posts
Showing posts with label new york times. Show all posts

Wednesday, December 30, 2015

Tax dodging by the super rich

This is a "no duh" story to end 2015, but the explicit details are interesting (more so than the typical corporate inversions we've recently heard about). During the Clinton years, the 400 highest income American households paid an effective rate of 27%. Now it's 17%. And because payroll taxes hit the less wealthy harder, that 17% rate means that the highest-income Americans are paying about the same tax rate as a family with $100K household income (80th percentile in the US). How can that be democratic and just?

Like their gated communities and hedge funds, there is an exclusive-access world of private tax dodging infrastructure that the super-rich pay millions in fees to access (including political contributions), but it saves them tens or hundreds of millions in taxes per household. These families span the political landscape, which is especially dismaying for the supposed "progressive rich." If they adopt the same practices as the Kochs, then they are just adding to the problem instead of fighting it.

Their biggest source of tax savings is of course that schlubs like us earn wages as income, while they earn the bulk of their money through complex investment vehicles, shell corporations, and trusts - and those barely get taxed. They need pricey lawyers and bankers to set up, but it pays off. The NYT article said that the rich treat it like a fun game - like an easter egg hunt to find all the possible loopholes to screw Uncle Sam and the 99%. But I'm sure they don't think of the impact that way - they "deserve" the rewards because they're just more clever/influential than the rest of us. Some of the arrangements are so complex that the underfunded and maligned IRS can't even keep track, and they are supposedly the custodians of the rulebook. But they don't craft the tax policy, they just do their best to interpret and enforce it.

The NYT article failed to state what the total tax losses are to the US due to these practices by the super rich. But I wouldn't be surprised if it numbers in the tens of billions. Maybe that is not a huge # vs. the total US income tax revenue (over a trillion per year), but it could buy a lot of road repairs and school programs. And besides the actual revenue, cracking down should send the message that the rich do not get to play by a different set of rules. They already enjoy vast socioeconomic advantages that enable them to grow their wealth, and maybe some of those advantages should be reduced too, but at least they should not weasel their way out of their patriotic and civic obligations.

Otherwise IMO they are more damaging to the country than all the deranged mass shooters and ISIS-inspired amateur terrorists, because the cheating rich are undermining US principles of equality, justice, and community, which hurts us all. Remember the old saying (paraphrase), an accepted injustice anywhere diminishes justice everywhere.

Thursday, March 26, 2015

Elite colleges are not necessarily the place to get the best life prep

This is especially true for wealthier Americans and "elite" institutions, where admission is seen more as a status symbol (like a Tesla or a LV bag) rather than a vehicle for educating and cultivating a young person for the benefit of society (a university's true mission). But actually, the data suggest that graduates of elite schools do not have significantly better life outcomes on the whole vs. graduates from "moderate" state schools. Sure, there are some segments where your pedigree really matters, but do you want to spend the rest of your life in those circles, surrounded by pompous pricks (some snobby corners of tech, Wall Street, etc.)?

And of course two major drawbacks of attending an elite private school are (1) debt and (2) a more bubble experience (your peers will be more homogeneous, and you may not get exposure to many real-life challenges that help a student thrive in the adult world). Also, some students may feel complacent that admission is the endpoint - they made it. Life is just about marketing yourself and jumping through the hoops to earn some administrator's approval, and then you're on easy street.

But admission is actually just the start - students should be driven to maximize their precious opportunity and realize that it is just a first step along a path that has many greater challenges and learnings ahead. Students may feel entitled ("I'm going to have a degree from Yale - of course the top employers will want me, I'm so awesome!"), and then lose focus (or even get lazy) - while other similarly-talented students snubbed by the Ivies might have a chip on their shoulder, rededicating themselves at a state school to be the best they can be. And let's be honest - undergrad chemistry or econ at Harvard vs. Texas will be taught at about the same quality (and probably not much better than Coursera). The concepts and knowledge are identical - it's just how motivated the student is to think critically, set healthy goals, and apply the learnings productively. Upon graduation, which student will likely have more grit and tenacity to succeed in the workplace? Savvy employers know that character/fortitude is way more important than pedigree to help the org succeed.
Some other sick facts about the perverted system:

  • In some cases, families are paying admissions "coaches" $50K and starting at age 12 to get their resume in good enough shape to be competitive. Just imagine what message that is sending to the kid for what is required to get ahead.
  • Stanford set the record recently for a 5% undergrad admissions rate. Now the bar has moved so of course the Ivies will try to match. They often do this by advertising to students with good metrics, but low chance of admission (maybe no legacy or not from the right demos). This helps puff up their "exclusivity rating" by making the median scores of their applicants look better, while lowering their admissions rates. And as we know from Apple, exclusivity begets disproportionate interest, even if the underlying product doesn't merit it.
  • Many administrators and admissions officers know that the system has gone off the rails and want to fix it, but they fear that they will be the only one and then be at a disadvantage vs. their rivals who perpetuate the misguided process.

Saturday, June 22, 2013

Scientific studies suggest money makes you an a-hole

First, they conducted a simple observation of pedestrian and driver behavior at an intersection. They found that 90% of drivers do yield for pedestrians (as law and safety demands), but of those who blew through, a significantly higher % of those vehicles were classified as "luxury". Also luxury cars cut off other drivers at a higher rate. A lot of things could be potentially wrong with such a study, but the result seems logical - spending a lot on a car with attached marketing messages like: you have arrived, you are Mr. Badass, you deserve it, you're better - may motivate the driver to feel that he/she (mostly he probably) doesn't have to stop for "peasants" and is entitled to get to the destination unhindered. Or maybe their social environment is very status conscious and competitive, so driving is also an opportunity to demonstrate their perceived superiority, or they may feel the need to drive like a jerk to fit the mold of success (even if they actually want to drive more politely). Of course this doesn't apply to all luxury drivers, and there are plenty of jerks driving clunkers.

You know how politicians take candy from babies? Rich people do too, literally. Controlling for various other attributes, they had participants fill out a phony form in a private room. There was a small jar of candy on the table, which they were told was for kids for the next study later in the day, but they could have some if they wanted. Participants labeled as "rich" (maybe above some cutoff for self-identified household income, reference their PNAS paper for details) took 2X more candy than non-rich. Even though they were permitted to, typical conscientious thinking might be: I can buy my own candy later, the kids will enjoy it more, I don't want to look like a pig, etc. to motivate them to refrain. But maybe rich people are used to getting better service and favors from others (with less regard for sharing & limits), so they are conditioned to take when offered without considering others.

You have probably heard about studies that show CEOs are more likely to cheat on games (even with no rewards) by self-reporting higher scores (with no outside verification). The same applies to rich people. In a computer-simulated die toss game, the richer participants in their study were more likely to cheat and report scores that were mathematically possible, but actually impossible due to the hidden logic of the sim. The narrative seems reasonable: rich people are competitive and may lie to increase their chances of winning if they can get away with it. Their personal payoffs for winning unethically outweigh the possible consequences of getting caught, and that calculus may not apply as much to the sub-rich, where consequences dominate (jail, getting fired, etc.).

Lastly, what happens when non-rich people "feel rich" and vice versa? The researchers had people play a rigged game of Monopoly, where a randomly decided player (of various personal wealth levels) got to be Goldman Sachs (more starting $, more die rolls, got to have the car playing piece). It was about mathematically impossible to lose from that position. During the game, the Goldman player tended to exhibit more bossy, dominant behaviors. When asked how they felt about the game results, the Goldman player was more likely to take personal credit for their success rather than acknowledge their randomly-assigned advantages. We know that manifests itself in real life, as from our previous discussions, the rich may feel OK with tax evasion because they feel they already paid enough, and they deserve to keep more of it due to their cunning/superiority. Conversely in the Monopoly game, those in the position of the disadvantaged player tended to exhibit more compassionate, gracious behavior (despite their actual social class).

Extrapolating these results out to the real world, I suppose we shouldn't be surprised when the most rich and powerful among us behave badly and are caught in greed/ethics scandals. And for the rich who behave well and can still be generous to others (like Buffet), they have particularly impressive discipline and caring, especially considering the temptations, lack of accountability, and pernicious culture of their elite social class. I doubt many rich people read the PNAS journal, but the authors caught hell after their paper was published. I think it's pretty hard to be totally uncaring (sociopathic), so deep down even the biggest rich jerks probably realize they are doing wrong, but as I said their incentive structure compels them to knowingly do wrong. They don't like being reminded they are being bad, so of course they lash out or make excuses. And it's no help that our tax-legal system heavily favors the rich and is chock full of loopholes. They use it as a cop out. My business ethics prof said something like, "Legal does not guarantee ethical. If you measure your actions by the law alone, you're in trouble."

But maybe all this stems from our society's value system. Money is the literal currency and also social currency for status (which gives you access to pretty spouses, creature comforts, fame, and other perks). We don't celebrate the kindest or meekest or most generous among us. We celebrate the richest, biggest jerks who take what they want and don't care about anyone else. In fact we suck up to, idealize, and emulate them - even post Recession. I am fairly sure such phenomena would not occur in cultures where materialism, egotism, and such are not as valued, like Amazonian tribes or Tibet before China's ethnic cleansing. This comes back to the "selfish gene" argument. The animal side of us needs to be selfish and dominant to propagate our genes. But we are social beings too; if we are too sociopathic, then we will alienate ourselves, which may imperil our progeny. So kindness in a sense is a form of selfishness, but I think too much kindness is a better problem to have than too much greed.

The rich are just doing what their culture enables and compels them to do. Maybe the fault lies with the 99%. The rich are always outnumbered. Starving, abused peasants burned and hung the rich when they went too far in Europe and Cuba. We just take it in America, because our goal is not to have a more just society of "liberty, equality, fraternity", but to join the ranks of the rich one day and lord over the 99%. So that is the problem. We don't fight inequality and abuse because we are totally fine with such an unjust system, as long as we eventually get to the top. But obviously that is a pipe dream for the vast majority of us. But that is the evil genius of the system, it traps us in our own unrealistic ambitions and hopes. Maybe the "new" American Dream (where the goal is to be the man, not just middle class) is actually bondage rather than emancipation. It tells us if we commit ourselves 100% to our careers (work almost to death), comfort, fun, wealth, status, and all that can be ours. But that won't happen for everyone, even if all they do is work. And all that effort in vain actually serves to make the execs and investors (who have already made it) richer. Talk about a scam.

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I always wonder what is really being measured in these studies.  Is the car really correlated to wealth or spending?  If i CAN buy a luxury car but don't am i less likely to be an A-hole? 
And who cheats at games with no reward or really cheat at all?

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Re: luxury cars, of course not all purchasers are actually rich, and as you said, plenty of rich don't feel the need to buy them. It's maybe a self-selection phenomenon. The ones who drive them are more likely bought into the image message, and therefore may be predisposed to act like a "typical BMW driver."
Re: cheating, we've all used cheat codes in video games right? No actual reward there, but it's an easy way to progress in the game and enjoy the winning feeling. I suppose if there are no consequences (the comp won't refuse to play with you next time), why not? The people who don't cheat may feel that cheating only hurts them, so they're rather face the challenges and push themselves to master the game and win properly.

Sorry I forgot to add in the OP, by no means am I saying that armed revolt is the only way to make things better. We just have to hold bad behavior to account, and change the incentive calculus. We have to make it so costly to behave badly that even jerks will have no choice but be civilized (whether insider trading or not yielding for pedestrians). Criminal penalties may be a start, but the rich control the legal-judicial process. We could also stop idolizing rich jerks, and instead celebrate the ones who "do it right". Here's a crazy idea: why don't we idolize the folks in the Apple commercial instead of the folks that run Apple? And please let's stop emulating Kardashian, Zuck, etc. And when we see bad behavior on the streets (by rich or otherwise), we should call them out on it. Maybe they are beyond reproach, but at least others will take notice that such conduct is detrimental and won't just be blanket condoned. Racism, sexism, xenophobia, and homophobia used to be tolerated (and even encouraged) in US society. But gradually we used education and alternative role models to shame those ideas to the margins and private thoughts. We can do the same for "richism" too, but it's a bigger challenge because it's more pervasive. But we have little choice. Imagine if our society was actually 99% rich instead? What a horrible place to live!

Even worse... crazy rich Asians!!! http://www.amazon.com/Crazy-Rich-Asians-Kevin-Kwan/dp/0385536976

Tuesday, August 7, 2012

Madeleine Levine on successful parenting

“The cost of this relentless drive to perform at unrealistically high levels is a generation of kids who resemble nothing so much as trauma victims,” Levine writes. “They become preoccupied with events that have passed — obsessing endlessly on a possible wrong answer or a missed opportunity. They are anxious and depressed and often self-medicate with drugs or alcohol. Sleep is difficult and they walk around in a fog of exhaustion. Other kids simply fold their cards and refuse to play.”

...as parents and as a society, we’ve reached a tipping point, in which the long-dawning awareness that there’s something not quite right about our parenting is strengthening into a real desire for change. Families, their fortunes tracking the larger economy that encouraged so much of their excess, are crashing after bubble years in which they spent their every penny, and then some, on cultivating competitive greatness in their kids. Now exhausted, often disenchanted and (conveniently enough) broke, they’re reconsidering whether the mad chase was worth all the resources that sustained it.

-NYT

Another best-selling child psychologist chimes in about the dangers of obsessive, hyper-expectations parenting leaving even "successful" kids feeling burnt out, worthless, and unable to cope with adult challenges. I guess it's natural, but privileged US parents seem more concerned with the external indicators of their kids' success vs. harder-to-measure internal. The guest likens it to building a house, but being more concerned about the home decor instead of making sure the structure can actually stand. They love their kids and want them to do well, but they're taking the wrong approach and doing a disservice instead (a common theme for America in recent years - we mean well but we end up making it worse). And at least Levine dares to ask the obvious root question: are you doing all this crap for your kids, or yourself?

http://www.nytimes.com/2012/08/05/opinion/sunday/raising-successful-children.html?_r=1&src=me&ref=general (seriously one of the best article's I've ever read, and not just because I'm in agreement with her - it's amazingly written)

http://www.nytimes.com/2012/07/29/books/review/teach-your-children-well-by-madeline-levine.html?pagewanted=all
http://www.kqed.org/a/forum/R201208071000

The 1% are outliers, and not something we should all aspire to (and clearly not something we will all achieve). Yes that life has a lot of benefits and opens many doors, but what does that person (and their loved ones) sacrifice, often permanently, in order to get there? To some it's worth it, and to others maybe not - especially since attainment is not guaranteed regardless of how much extracurriculars/tutoring you do, what your degree says, and how great you think you are. All parents think they and their kids are "above average", but of course that is impossible. Most of us and our kids will be sub-rich and "normal". There is nothing wrong with that, as long as you are at peace with yourself. Easier said than done I know, and I feel inadequate about my professional and personal development almost every day (sometime justified, sometime foolish based on dumb social influences). I just hope those feelings don't lead me to bad behaviors described by Levine. And I would say that my control-freak dad was edging towards being a helicopter parent ahead of his time, but not that I blame him for all my issues. It's not the "losers" who are messed up, but this world's value system and economics that are perverse in my view (yes a critic would say, "of course a loser would blame the system to explain his failure"). Winners love and praise the systems that enabled them to thrive (Romney), and the opposite for the losers. What does that say about the system? Clearly it works for some but not all, though hard to judge its merits since we haven't really experienced a viable alternative, because those who profit from the system will resist reforms.

Sunday, July 15, 2012

FDA spies on dissenting staff, possibly illegally

http://www.nytimes.com/2012/07/15/us/fda-surveillance-of-scientists-spread-to-outside-critics.html?_r=1&hp

F.D.A. officials went to the inspector general at the Department of Health and Human Services to seek a criminal investigation into the possible leak, but they were turned down. The inspector general found that there was no evidence of a crime, noting that “matters of public safety” can legally be released to the news media. Undeterred, agency officials began the electronic monitoring operation on their own.

Rep Van Hollen: “It is absolutely unacceptable for the F.D.A. to be spying on employees who reach out to members of Congress to expose abuses or wrongdoing in government agencies.”
Senator Grassley:  “[The FDA] have absolutely no business reading the private e-mails of their employees. They think they can be the Gestapo and do anything they want.”
Just freaking ridiculous. 6 PhD scientists at the FDA were concerned that their agency was approving scanning devices (made by GE Healthcare) for mammograms and colonoscopies that were giving patients too much radiation. They tried to voice their opinions, but were shut down. So then they attempted back-channel communications with Congressmen, the press, and even the White House to try to get some leverage against their management, whom they felt were making a mistake and putting patients at risk.

What did the FDA do about it? They hired a security firm to use off-the-shelf spyware to monitor the communications of these "trouble-makers". They have also since terminated those employees. But this could be illegal under new laws on retribution against whisteblowers. Of course when the news broke, the FDA said that was not their intent, and instead they were building a case that these employees were leaking confidential information (discussions between the FDA and companies are confidential to "protect trade secrets", though I don't think they should be). I find that argument bizarre, since it's not like Wikileaks and national security here, putting spies or diplomats in harm's way. And even if the scientists were leaking info, if GE and the FDA did nothing wrong, then they have nothing to hide. If the scanner gets approved, then we should be able to know everything about it, right? But the whole secrecy concern was moot anyway, because the moron contractors that the FDA hired to snoop on the scientists accidentally posted all the classified reports the scientists were working on online (they have since been taken down). One of the scientists happened to discover this when he was Googling one of his "co-conspirators". Obviously GE is not happy either: the Keystone Cops FDA was ostensibly trying to protect its secrets, and ended up exposing them to a worse degree. Hollywood couldn't make this stuff up.

So is this about a medical device company using its leverage to get its regulatory agency to rubber-stamp its next big-money product, even if it's not entirely safe? Those FDA managers probably want "real jobs" after they do their time in gov't, and GE is a big, rich employer. When principled, concerned scientists try to DO THEIR JOBS, then they are threatened and spied on. The FDA was concerned about those "defaming" their agency. What are they, the Islamic State of Iran? In America we TOLERATE DISSENT, especially when it's in the interest of public safety. After Nixon, I thought we weren't supposed to have "enemies lists". And it's not like one disgruntled quack scientist here; 6 were putting their careers on the line because they felt so strongly about this issue. Maybe they're not all noble saints and other things are going on here, but at least this justifies a second opinion on the scanners, especially now that Americans are starting to express their disapproval over excessive radiation and diagnostic costs imposed on us by device companies and doctors.