Occupy Wall Street

http://wearethe99percent.tumblr.com/

http://news.yahoo.com/blogs/lookout/occupy-wall-street-isn-t-wall-street-191808167.html

What do you think about the recent protests? Biden likened the OWS movement to the liberal version of the Tea Party. I don't think that's really accurate, since the TP is well organized, corporate-funded, and represented by numerous politicians/interest groups. But I guess the TP believes that spendthrift, meddling gov't is stifling the economy and causing our problems, and OWS believes that Wall St. and its political agents are hoarding wealth and making life harder for the other 99%.

I haven't been following the MSM coverage of the protests, but I would surmise that it hasn't been as flattering as that of the TP. The TP are portrayed as "real Americans" and patriots trying to wrest the country back from an ever expanding, profligate gov't. But OWS may be seen as lazy, whining redistributionists who are jealous of the success of the rich. Predictably, the GOP hopefuls (who are all quite rich) said as much at the recent debate.

Congress has a TP caucus and their agenda has pretty much hijacked a lot of US fiscal and economic policy. I don't hear any leaders on the left rallying to the OWS's message and calling for change. Sure, they pay them token lip service now that the protests have survived a month, but I think the Dems see them more as a liability than an ally, or even a political opportunity. I know OWS is younger and less widespread/organized than the TP, so it's not fair to directly compare their exploits. But they claim that their aim is not to get changes through, but just to make more Americans aware of what parties are making life more unfair for them, in their opinions. That being said, even if they are really successful in spreading awareness, where do they go from there?

The TP wants to take the WH, Congress, and make major changes to US laws and society. For better or worse, it's a grand vision that inspires interest and donations (plus they have the religion lever at their disposal). What about OWS? Will there be enough middle-class outrage to oust the corporate stooges in Washington, get the Dems to start acting like Dems, and/or elect fresh faces who will actually fight for regular Americans? I'm skeptical. After all we went through in 2008 (and where was OWS then?), we just won't/can't address the 2 Americas issues, so it's more or less business-as-usual again. If the Great Recession wasn't enough to get us to wake up, what hope is there? Yes I understand that it took FDR almost a decade to enact financial reforms and jump-start the economy (mostly thanks to WWII), but in today's information age, change should be quicker. Heck, just a month after 9/11 we started to wage a world war on terror.

OWS are definitely not like the 1960's movements, and are a lot more pragmatic and bourgeois actually (not necessarily a bad thing): they have beef with soaring costs, no jobs, deregulation, and executive compensation, but they probably don't want to blow up the system. But those are Band-Aid fixes. Even if our leaders could cooperate and effectively address half of those issues, it would be a great accomplishment but gross inequalities would persist. I know we'll probably never return to the 1940s-60s when firms were less influential and the middle class controlled the highest % of US wealth in our history (global conditions are just way different now). But as long as the unfair structure persists, for every wrong we right, the elites will just find new and creative ways to keep pecking at the rest. If it's not tuition or real estate, it will be something else. It's a rigged game. So maybe blowing up the system is the only way, since clearly corporate America and its politicians aren't going to sober up on their own. Too much loot and ego are at stake. I am sure the Cubans, French, Russians, etc. didn't want to have to rise up violently, but things got so bad they didn't have a choice. Unfortunately we still have a choice in 2011, or at least we think we do.

So I commend OWS for their personal sacrifices and making a public statement for what they believe is right, even if most of their peers are too uncaring and cowardly to do the same (myself included). They have changed history, but so far just slightly. Now clever and benevolent progressive strategists must figure out how to harness their energy and turn it into some concrete good for America. Nothing wins over cynics and doubters like results that benefit them, and failing to deliver will only further undermine their credibility. At least they're honest and didn't oversell themselves like Obama (or the TP for that matter), but unless they have something to show at the end of the day, they'll soon be forgotten - and that is what the establishment is expecting. Does anyone still talk about the huge immigration marches and anti-war demonstrations during the Bush years? No, because they didn't catalyze any measurable change (or the change was for the worse). I know they meant well and gave their all, but it's a tough crowd out there. Like Plato's cave allegory, the philosopher had a hell of a time trying to educate and emancipate the prisoners.

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But I just wonder how that will convince the "silent majority" of Americans in the middle to support the people movement and oppose big banks? They probably already do to a certain extent, but they need to see something tangible before they pull their deposits out of WF. Because that is the only way to hurt a giant like WF: incite a huge run or stock dump, which may or may not be legal. Though to be honest, WF behaved rather responsibly during the housing bubble compared to their peers back east. BofA on the other hand...

The West boycotted South Africa because of Apartheid, and that eventually brought the regime down. Banks need a reason to treat us better. If OWS somehow can organize boycotts or sell-offs, then maybe Wall St. and DC will pay more attention. But a sit-in or picket line may not be that effective. It's a start, but unfortunately the public needs more. The Cal students have been bravely doing that for years, and still the Regents don't give a crap and keep raising fees.

In addition to bank boycotts, we should try to discourage people from entering banking, speculation, and finance. We have enough of those assholes already, and not enough good teachers, nurses, engineers, etc. As Krugman said, when he was in grad school, only the "losers" went into banking because it was boring and not innovative. But now banking has of course become really exciting and innovative, because of the relaxed laws. Many of America's top talent want to enter private equity and finance, partly because the compensation, sexiness, and power are so great.

We need to reverse this trend, either by changing school curricula to only teach more responsible, ethical finance, enacting laws to cap Wall St. pay (or tax their income & cap. gains more), and/or compartmentalizing the financial system the way it was supposed to be under Glass-Steagall. Let the SEC be the SEC (though I doubt that will happen). Too Big To Fail is a bigger problem now vs. 2007, and all the top economists and progressive politicians see it. Heck the conservatives at AEI and Heritage probably do too, but won't speak up. The Great Recession was just a selection process, with the survivors emerging stronger than ever (apart from BofA and Morgan Stanley recently), like abusing antibiotics and creating disease-resistant microbes. Risk-taking bankers and their firms should be socially ostracized, like pimps and ambulance-chasing lawyers. Once it's not as comfortable to work on Wall St., we may see a sea change. As usual, humans respond best to carrots and sticks.

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http://marketplace.publicradio.org/display/web/2011/10/12/pm-oped-stop-wall-street-recruitment-on-college-campuses/

2 Stanford students just wrote a great piece in the school's paper about what we've been discussing (I swear I didn't rip off their idea in my last email). They're tired of big banks recruiting top students into their fold. For all the major problems facing humanity now, do we really want bright kids with the most privileged educations joining the financial ranks to "make rich people richer"? Harvard sends 20% of students to "socially useless" fin. services (and MIT/Stf another 15% each). These rates are 3X higher than previous generations. I know that sector is probably the biggest US "growth industry", but I think most of us would agree that FS are too bloated and too large a chunk of our economy for comfort. And it got that way partly at the expense of other fields that actually earn an honest wage and make useful stuff. Maybe we have to import so many foreign scientists and engineers because FS are diverting our good ones from "real engineering" fields to design exotic securities and scams instead (and paying them 5X more in some cases).

Maybe we need to cap the # of students enrolling in business/finance each year from top schools. I know this won't happen, but we see it in other fields. For some competitive majors (computer science, vet med, etc.), schools may require separate applications and grade attrition, so only the most worthy students get a degree in the subject. Another quality control step to make sure we're not just pumping in more Madoffs and Skillings into the system. I know a lot of the evils of finance are taught on the job, so we can't do anything about that. But maybe making it harder to graduate in these fields will weed out the pack so only the most well-trained and promising (or possibly the most fanatical, connected assholes) will make it through.

It is structurally so hard to become a doctor or lawyer in America, even if you're smart and rich. Why the hell is it so easy to make six-figs as a real-estate agent, trader, or banker? A firm still has to hire you of course, but the education path to those jobs is a lot shorter than that of medicine/law. And docs/lawyers have to swear ethical oaths - what about something like that for FS?

Some campuses block military and CIA recruitment of students. Therefore schools should have the right to refuse WS recruiters too. And maybe the boards should think twice about the message they're sending by accepting WS money to build the Goldman Sachs Center, provide scholarships, or to gain access to research resources and curricula. But in these times of cash-strapped schools (partly due to WS recklessness), it seems unlikely that they would turn down private money (in fact they're sending droves of people out to solicit more donations, quid pro quo of course). Plus the top privates are so flush with WS cash already that they're already a lost cause.

...[U]niversity administrations are also responsible. At best, they have passively allowed the largest banks to dominate student recruitment; at worst, they have enthusiastically promoted these companies and encouraged students to enter finance. To this day, career development offices accept donations from the wealthiest banks in exchange for special recruitment access. For example, until recently, Stanford’s Career Development Center featured Goldman Sachs as a “Gold Partner,” despite the company being under federal investigation for criminal trading practices.... an academic community that actively supports the same financial institutions whose rampant greed caused untold national hardship is a community on the brink of moral bankruptcy. - T Norris, E Pollak

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First off, if you believe in the cause, I absolutely encourage you
guys to go down to your local "occupy" location (if even as a
spectator) to show your support. I was there on the Wednesday as a
part of the larger march, and I came away pretty impressed at the
broad appeal of the movement. Their work through social media has been
nothing short of impressive.

Success is hard to define for something like this movement. I tend to
be pretty pessimistic as to the ability to change the actions of
politicians. I was talking to one of our professors who has been in
the newspaper quite a bit in regards to these protests, and he
suggested that these protests should be seen less in the light of the
tea party, anti-war protests, or the 60s, and more like the (now
forgotten) protests in the Great Depression. Those protests helped
bring about the New Deal, and a long-term goal here would be some sort
of overarching shift in economic policy goals like the New Deal.
However, in order for that to happen, the movement will eventually
have to coalesce behind a specific set of issues (I think the breadth
of the movement is an advantage right now) and we will probably need a
sustained economic recession/depression.

I DO believe, however, that the average American has changed. I think
the recent experiences have shown the average American that the
maintenance of a "free market" requires as much government
intervention as the maintenance of a welfare state. This is something
academics have know for a long time (after all, what are all those top
flight economists doing in central banks around the world?), but
something new to the American voter. The language of "99%" references
this idea. If the government is going to intervene anyway, why
shouldn't it do so for the vast majority of Americans? The Tea Party
was frustration with the fact that the government was intervening, and
OWS is frustration with how the government is intervening. In this
way, both movements have the same root cause, although with radically
different aims and support bases. For this reason, I have argued to
colleagues that, taken together, the support and opposition of
establishment practices regarding financial markets represent an
ephemeral second dimension in American politics (in addition to the
standard left-right economic dimension).

I don't think we'll be seeing the average American marching anytime
soon, but I'm OK with that as long as the American public stays
broadly supportive, or non-committal, regarding the protesters. After
all, social change is often fought on many fronts, and we can't expect
everyone to take the activist route.

Finally, I'd like to end with an argument, perhaps optimistic, about
why OWS might have more staying power than we might all think. I
remember a trip to Niagara Falls during the dot-com boom. In order to
get there, one usually goes through Buffalo. As we stopped in Buffalo,
I was shocked at the awful state of the town, by any parameter. I
started asking people what was going on (Buffalo had the highest exit
rate of any metro area for a long time, I believe). Well, Buffalo,
like so many other cities/towns in America, was an industry town where
industry dried out. It had been that way since the late 80s/early 90s.
 It wasn't just Flint, Michigan, industry towns all over the country
have suffered the same fate over the last 25 years.

We were all told that these towns were dead anyway; they had ceased to
be competitive in the global economy. But, we were OK with it, as
things were booming in the Bay Area and New York. The cold hard fact
is that politicians, Democrats and Republicans alike, chose to
explicitly disinvest in and failed to protect the average American in
these towns; instead, politicians systematically diverted funds from
people who needed them in order to invest in "the economy," and many
of us grew up as a beneficiary of this policy. I believe this kind of
protest failed to start earlier due to geographic segregation. We
never really saw the suffering, except in the occasional Michael
Moore-type film. Well, the lack of protection is starting to affect
New York and SF now too. People are angry, and they have been angry
for a long time. How does an economy grow stronger when all the people
grow weaker? What the hell is a jobless recovery? How is it that any
of that ever made any sense?

This is an extraordinarily unpredictable movement. I have no idea
what's going to happen; it could all end tomorrow. But if people want
change, it's the best we've got.

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Unfortunately, I think it was much easier for Guilded Age or Depression-era Americans to protests against the sins of corporate America than for us today (even if those populist movements have been swept under the rug of history). More than ever before, modern Americans work for corporations, invest in them (directly with 401ks, indirectly with pensions, etc.), and owe them (college, mortgage, CC debts). So to rise up against Wall St. means possibly compromising one's financial well-being and prospects for "the American dream" too. We all subconsciously hope (or are explicitly taught) that if we are team players, work hard, and go along, we'll become rich some day. I guess the middle class folks in OWS would really like to continue to believe that, but their personal struggles and the trajectory of America are forcing them to reconsider, and eventually protest.

Despite WS being a bigger part of our lives, our overall financial literacy is horrible. An average American trying to navigate modern finance and economics is like a toddler taking driving lessons. Heck most of us are college grads, but rely on others to do our taxes and manage our retirement. Yes the system is ridiculously complex (probably deliberate), but we should be doing better. This may partially explain the apathy and ignorance out there that some in WS and DC exploit. A fool and his money are soon parted. I guess it starts early with our poor record of math/finance/econ/ethics education, and our almost cultish obsession with material wealth and free market ideals. I guess this indoctrinates us to become very enterprising and entrepreneurial, but clueless on money management and prudent decision making.

Though I wonder how Western Europe and East Asia fare. They obviously score higher on math exams, but do they get exposed to practical finance/economics in secondary school? Of course some EU banks messed up worse than the US banks, but the Asian banks were more cautious (they learned after their boom-and-busts in the 1990's) and most Asian states did not need bailouts, did not see a spike in unemployment, and barely experienced a recession (what pains they felt were mostly due to fewer export orders by the West). As example, Samsung (which accounts for a whopping 13% of S Korean exports) actually posted its best performance during our recession. I guess culturally, Euros and East Asians tend to save more, borrow less, and take fewer risks than Yanks? I find that almost paradoxical because based on moral hazard, those living with strong safety nets like the French and Japanese should tend to take more financial risks than Americans living with generally inadequate labor protections, health coverage, and SocSec. But it's actually inverse, so it must be due to structural differences in the US economy/workforce/culture that change our consumer preferences and values. I dunno, what do you think? 

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http://www.businessinsider.com/what-wall-street-protesters-are-so-angry-about-2011-10?op=1

So goddam depressing. I guess the GOP are wrong, it's not really class warfare. That implies the peasants have a fighting chance. I really want to see how the GOP candidates (and most Dems for that matter) would respond to those data and how their views/policies are perpetuating (if not worsening) the trends. No matter how your slice it, those data are not indications of a healthy democratic society.

But at least some thinking people on the right don't approve either, albeit from a more pragmatic perspective. On APM's "Marketplace" radio show, they have a regular left-right debate between Robert Reich (former labor sec.) and David Frum (former Bush speech writer on the economy). But Frum has recently resigned, ostensibly because he no longer wants the burden of having to "speak for the right", as he disagrees with the dominant GOP stances on gov't and fiscal austerity (he'll continue to speak for himself on his blog though). Anyone with basic econ knowledge knows that harsh austerity during a recession/weak recovery is bad. Even staunch capitalists realize that it's not good for business if people are broke (or heavily in debt), desperate, and chronically unemployed. Safety nets are not just about socialist "nanny gov't"; they promote consumer confidence, productivity, and purchasing power. Again, it's about return on investment. In the next 12 months, will you get more social benefit from giving people EDD checks/food stamps, or slashing public jobs/programs just to barely reduce our deficit? Reasonable conservatives believe in small gov't and controlling spending, for the long term and in good economic times. All the extremist fiscal crap that the GOP candidates are spewing now will just exacerbate the wealth gap, weaken America, and make them look like a party of rich assholes (even more than they already are). 

Under the pressure of the current crisis -- intoxicated by anti-Obama feelings and incited by talk radio and Fox -- Republicans have staked out an extreme position on the role of government... For three years, my political party has veered in a direction I cannot follow. And if the GOP insists on framing the 2012 election as a ballot question on fiscal and monetary austerity, or if they nominate somebody manifestly incompetent to do the job of president, they’re going to lose me – and a lot more people beside me. - D Frum

http://marketplace.publicradio.org/display/web/2011/10/12/pm-frum-goodbye-interview/

What sucks is... if those inequality stats applied to one's spouse or manager (sometime not so different!), a person would probably get a divorce/new job. But the US lower-middle classes are just taking it and taking it like a battered spouse. If we can't wrest our nation back from the bankers, maybe we all should just "boycott America" and move to Canada as refugees (joking of course, otherwise Canada would need at least 10 more pro hockey clubs). Then we'll see if the feudal lords can survive without their serfs to kick around. Maybe those free market libertarians would just import more Latinos to fill our void? But at least it would send a message that we are sick of this mistreatment. Why should we hang around playing their rigged game? I know we don't have it as bad as Somalia or something, but do conditions have to deteriorate that much for us to act? We have one life to live, we just want to be happy, and frankly I don't want to waste my time on earth slaving away at a pointless job, saddled by debt/worry, and looking forward to an uncertain future.

There are greener pastures out there somewhere. Maybe not in Greece or Ireland, but somewhere. Like with a bank run, a "brain drain" may be the only way to get American leaders to realize that they need to make the country a nice and fair place to live, in order to retain good people and maintain global standing. Unfortunately, we don't have that much leverage because billions of poorer, desperate people would sacrifice their first-born to take our place, even if conditions are so unjust here (because it's still better than their homelands). So is that what the US elites really want, a third world America? The middle class is fed up and has left (maybe a lucky few get promoted to the upper class), and droves of expendable immigrants have taken their place. Then they might as well dispense with the American nationalism, ideals, and such, as we would overtly be a plutocracy and corporation state.

http://www.huffingtonpost.com/arianna-huffington/third-world-america-why-i_b_706673.html

Turley: Obama "devastating" for civil liberties

Civil libertarians have long had a dysfunctional relationship with the Democratic Party, which treats them as a captive voting bloc with nowhere else to turn in elections. - J Turley

http://articles.latimes.com/2011/sep/29/opinion/la-oe-turley-civil-liberties-20110929

http://www.npr.org/2011/10/10/141213273/op-ed-obama-devastating-for-civil-liberties

I know we discussed this in the past about Obama's campaign pledges to promote civil rights and gov. transparency, but as president he has actually increased secrecy and expanded the powers of the US terrorism-industrial-complex (even over Bush levels), sometimes at the expense of the rules of war, civil liberties, and other laws/values. I guess the calculation was simple for Obama: it was more important to get the support of the military-intel community than the civil libertarians, so he made decisions to favor the former. Especially with the economy/jobs front-and-center, I guess his people felt that civil rights won't be a critical issue in 2012, especially when his yet-unnamed GOP rival would probably endorse and harsher stance on executive privilege and the security-vs-rights debate.

So that's where we stand: the GOP isn't mad at Obama because terror plots are being thwarted and Al Qaeda leaders are getting whacked. Though I'm sure they'd prefer to get the credit, and probably feel that Obama is just the lucky executor of the good Bush-neocon policies that are now bearing fruit. Any consolidation of executive power and trimming of Congressional/legal/regulatory red tape is probably good for them. They know they'll recapture the White House at some point, and then it's pedal to the metal.

But from the left, Turley likens it to Stockholm Syndrome. We've fallen in love with our captor, just because he's the first black president, a young, handsome, charismatic chap, the game-changer, the chosen one, whatever other superlative. We aren't happy with what he's doing, but we just can't allow ourselves to oppose him and admit that we were wrong. So like a kid without discipline, he keeps taking and pulling, and taking and pulling, because we do nothing. The Dems bet big on this guy, and now we're stuck with him. It's very hard for a parent to admit that their kid is a bad seed because they still love him.

Yes it's true that campaigning is different than leading, so maybe Obama is under more constraints now and exposed to different information, which has changed his views. But any leader under crisis has experienced that, and some still decided to stand up for their beliefs despite the political consequences, while others folded like cowards and played it safe. Some things he has done are just flat wrong, and it's not like lives were imminently at stake. Yes it's possible that a GOP president may be worse. But if we were voting between Hitler and Napoleon, would we be content supporting Napoleon because he was just slightly better? And let's remember that Obama has in fact exceeded Bush on many secrecy and rights violations issues. We've dug ourselves into quite a hole with this one.

We can't allow Obama to get away with making a blanket promise to not prosecute any Bush-era people or CIA employees/affiliates for torture or other abuses, and squash any private investigations. I know closing Gitmo didn't work out for him (he was naive to think it would be easy), and these terror issues are a legal nightmare. Yes, justice is hard work, but that's what separates us from cave men. Would we rather condone abuses power, shadow governments, and selective application of the law like the enemy regimes we routinely denounce? People must be held accountable for their crimes, or there's no deterrent for future criminality. Poking around at the CIA and Pentagon is going to cause some problems for a president, but sometimes avoiding conflict and failing to do the right thing is worse. Same thing with the Wall St. investigations, no one goes to jail or gets punished, so what incentive do they have to shape up? Our democracy and republic exist and survive because of checks-and-balances on power. If the president shirks that responsibility, and even blocks Congress from intervening, what is to stop the security establishment from running amok, like they have always done in similar loose situations throughout history?

US soldiers are standing trial for abusing or killing civilians during our wars. They are on the front lines fighting for their country, paid slave wages, and still have to answer for crimes if they err. Why should CIA sociopaths, reckless Blackwater mercenaries, and neocon paper-pushers be exempt? I have particular contempt for the fat suits drafting policies in DC. These chickenhawks mostly never sacrificed an ounce of sweat for America, yet they are making decisions that are destroying innocent families and creating all sorts of unanticipated blowback for us, in between their tee times and K St. power lunches. Such patriots. The hubris. And now Obama, the Peace Prize Laureate, has thrown his hat in with them.

Mitt Romney the "job creator"

"Private equity combines both the best and the worst of capitalism," [Howard Anderson, former VC & MIT Sloan prof.] says. "When things go well, there's wonderful stories to tell about growth. When things went bad, it is not a pretty system — especially since [Romney's former firm] Bain Capital may have personally done well themselves, where both their investors and the employees did not do well."

Here's a guy [Romney] that just took somebody else's money and used it to make more money. The guy has never produced a thing in his life. - Former GST steel worker

http://www.npr.org/2011/10/06/141115638/2-portraits-emerge-of-mitt-romney-the-businessman

NPR is doing a series on formative jobs that the GOP front-runners previously held. For Romney, I knew he came from an investment background and is quite rich, but the extent surprised me. He was the co-founder and first CEO of Bain Capital, an elite private equity firm, and is personally worth 100's of millions. But in 2012, does America really need another HBS-trained Wall Street stooge? With the economy sputtering (partly due to Wall St. and the banks), America and Congress are desperate and may be more susceptible to the allure of "the Wall St. solution for recovery." Under the wrong president (and I'm not saying that Obama is the "right" one), we may foolishly accept all sorts of deregulation and concessions in the hope of future prosperity. Mitt can't relate to the average working person at all, and personifies the 2 Americas. We know who/what he serves. Remember his "corporations are people" quote that was legally accurate but foolish to say while campaigning in Iowa?

http://www.politico.com/news/stories/0811/61111.html

Romney was amazingly successful while at Bain (by Wall St. standards), which is another red flag. The firm had a 15-year stretch of unheard-of 100% rate of return. Clients usually pay priv. equity firms 20% of their profits as fees, but Bain could get away with charging 30% because they were that good. But good at what? Bain was credited with launching or boosting household names like Staples, Domino's, Brookstone, and Sports Authority. So yeah, I guess Mitt does know how to create wealth (for himself and certain pals) and jobs (but just the financial or minimum-wage retail kinds).

You never bat 1000 in this business, so how about the failures? In some cases, Romney's clients paid handsomely for Bain's advice, yet still filed Ch. 11 and were diced up and sold for parts (KB Toys, Ampad-Mead, Dade Int'l, GST Steel). In other cases, Bain encouraged firms to scale back US operations and outsource. Maybe those were the "right" business decisions, but they wiped out millions of investor wealth, cost US manufacturing jobs, and maybe only replaced them with a few financial jobs and exec bonuses. Of course as CEO, it's not like Romney was personally signing the pink slips, but this is what Bain did under his leadership.

And of course, running America is not the same as running a firm. Past success (however amazing) is no guarantee of future performance. California didn't think that former CEOs Whitman and Fiorina had what it took to help the state, and business tycoons Perot and Forbes did not fare well in their political runs. I guess Mitt convinced the people of Mass. that he was the right guy for the gov. job, but POTUS is a different beast. Romney has learned and improved a lot since his failed 2008 presidential bid, and has a huge war chest. Considering the state of the country now, he is a compelling candidate for many people. But unlike the unrealistic hopes we had for Obama, at least we know what Romney stands for, and to his credit he's not really trying to present himself as something else.

The outrageously corrupt NCAA football bowls

http://www.hbo.com/real-sports-with-bryant-gumbel#/real-sports-with-bryant-gumbel/episodes/0/174-episode/video/cashin-in-clip.html/eNrjcmbOUM-PSXHMS8ypLMlMDkhMT-VLzE1lLtQsy0xJzYeJO+fnlaRWlDDnszGySSeWluQX5CRW2pYUlaayMXIyMgIAacUXOA==

http://seattletimes.nwsource.com/html/sports/2016261023_apfbcsugarbowltaxviolation.html

We already know that major college sports are corrupt, exploitative, and dysfunctional, but the actual numbers are shocking (thanks to an HBO Real Sports investigation and others). First, it's inconceivable that the org's running each bowls are classified as non-profit charities, despite earning over $250M combined each year. There used to be about 10 bowls, but now the number is up to 35. Even the most successful charities on the planet don't grow that fast, only scams and bubbles do.

The bowl org's claim they are charities because they purport to give 75% of revenues to the participating schools - institutions that benefit society in many ways. Yes, the perennial bowl participant football factories like OSU, Nebraska, and Miami have really used the money to provide top education and discoveries for America (often head coaches are paid much higher salaries than the most famous and productive professors). But in actuality, the avg. school payment is about 55% for the dozen or so bowls whose financial records were made available. The poorly-named Humanitarian Bowl only gave 27% to the schools. When confronted with these facts, bowl reps say they are saving the rest for posterity to pay out to schools "at a future date." Well schools are laying off employees, raising fees, and letting buildings crumble NOW.

The problem here is similar to the race to host the next Olympics or over-bidding to win an auction. Schools and communities are so obsessed with getting to a bowl (and the perceived value it entails) that they fail to consider whether it's really cost-effective. Part of the contract between the bowl and schools often involves paying for their own travel, and a guarantee to sell a block of tickets to fans, or the school will have to eat the cost of empty seats. But it's hard for small schools to get alumni and fans to travel across the country during winter holiday time (and eat the big costs of tickets, hotel. etc.), so some schools predictably end up on the short end.

The bowl gets paid no matter what, and then short-changes the schools with smaller contributions. Some bowls even forced the school bands to buy tickets even though they were providing free entertainment during halftime. So knowing all this, why do some cash-strapped schools still fall into the trap? They fall in love with the "prestige" of participating, and many coaches/athletic directors are paid bonuses for reaching a bowl. The bowl org's claim that despite these concerns, schools come out ahead in the end because the publicity will increase alumni donations and fan/student interest for the future. Of course it's very hard to quantify and verify this benefit, so we just have to trust them. And apparently schools do.

So maybe the bowls short-change schools, but they give back to the community, right? Bowls claimed that they've given "tens of millions of dollars" to communities and charities each year. But according to tax documents, the grand total last year was about $4M, or <2% of revenues. But that giving is still generous, right? Well not if you consider the tax incentives and other perks that cities and politicians offer to the bowls, sometimes totaling in the millions. Again, bowl reps repeat the Olympics argument that the event "pays for itself" with all the extra tourism and commerce. Sure, tell that to Greece. Remember that cities also have to eat the clean-up, security, traffic congestion, and other costs. The show examined the example of the elite Sugar Bowl and the financially depressed host New Orleans. The Sugar Bowl gave $1M to Louisianans, but took $6M from their state leaders. Former LA governor Blanco took thousands of dollars from the Sugar Bowl in campaign contributions, which is technically illegal due to the bowl's tax status. And in return, Blanco has helped to maintain this profitable arrangement, even to the detriment of her Katrina-ravaged, cash-hungry state.

Bowls are also lobbying politicians to fight any changes to the system that would hurt them financially, such as a move to a nationwide playoffs postseason format. They've used the profits that didn't go to schools/communities to sponsor lavish trips and "retreats" to discuss strategy and woo VIPs. The org's defend these actions as legitimate efforts to maintain and improve the quality of the bowls. How about executive compensation? The heads of MSF, Amnesty Int'l, and the Salvation Army all make less than $300K/year. The heads of some bowls take in $500-700K, despite managing a much smaller org than the true charities. In some cases, "honorary execs" are paid hundreds of thousands for a few hours of seasonal work per week. Despite their ludicrous pay, a former Fiesta Bowl exec (J Junker) was found to use bowl funds on golf and strip clubs. They give the usual Wall Street excuse - the market sets the going rate to recruit and retain the talent necessary for the job. So I guess "the market" just values a guy who sets up a single football game more than a guy who is in charge of helping millions of Americans day in, day out.

Again, imagine the opportunity costs of bowl profits that could have gone to the causes that they're supposed to go to. Nonprofits are not taxed because they serve a public need, but it seems that the bowls are making off with millions while actually undermining some critical public services.

Battle of the billionaires

http://news.yahoo.com/warren-buffett-defends-proposal-tax-super-rich-191916203.html

It's cool when the rich go to war against each other, though of course I'm rooting for the smart one who doesn't hack cell phones of victims' families. The Economist agreed with Buffett that the US tax code needs to be fundamentally reformed by ending most deductions (that mostly benefit the rich) and taxing cap. gains heavier than wages. That way real labor and productivity won't be penalized, but speculation and excessive trading will (that benefits few and may put the entire economy at risk). Can anyone give me a cogent argument why hedge fund managers' compensation (not their own investments, but pay from their firm) deserves to be considered cap. gains? Bush-enomics. It's probably true that taxing the rich won't help our deficit situation much, but it signals a strong message to the market so the dysfunctional incentives structure still widespread in Wall St. and upper America may change.

It's interesting how quickly the rich mobilize their media and political minions the minute anyone of import barely raises the issue of tax hikes. That reveals their defensiveness/awareness of the preferential treatment they're getting, and how they know it's a scam that can't last, no matter how gullible they think we are.

http://www.economist.com/blogs/freeexchange/2011/09/budget-politics

Drone strike appears to have killed al-Awlaki

http://news.yahoo.com/us-officials-us-attack-yemen-kills-al-awlaki-130835684.html

I guess it's good for US national security that this man is dead, but what is to stop another similarly dangerous individual from taking his place and even doing a better job?

It is disconcerting that the US gov't can sanction the assassination of a US citizen living legally in another nation where we have no official military jurisdiction. All the "evidence" against this person is classified (actually he has not even been officially charged with any crime!), so we just have to go on the hate sermons he has released online and his alleged ties to the underpants bomber and Ft. Hood shooter. No due process, no explicit attempt to apprehend him, and it wasn't an interdiction to stop him from imminently harming others. Just shoot to kill, and the order came from a C-in-C who used to be a ConLaw professor.

Plenty of US citizens have committed treasonous behavior over the years (and yet our nation still stands), but Washington did not issue kill orders for them. In fact some of them today live comfortably and have radio/TV programs. I guess this shows Americans that under some set of conditions, our gov't can unilaterally and spontaneously murder us. But probably not being an extremist Muslim reduces our chances.

Interesting story of the Conficker worm

http://www.npr.org/2011/09/27/140704494/the-worm-that-could-bring-down-the-internet

The author of "Black Hawk Down" recently published a book about internet security and the Conficker worm, the most successful malware program known to date. I am not an IT guy, but from the interview, it seems that Conficker was written by expert hackers in Ukraine (who still remain anonymous) to tunnel into millions of Windows PCs and subtly control some of their processing resources, and then answer to a mother computer. Their aim seems to be the creation of a massive "botnet" of 10-12M slave computers worldwide that basically aggregate their processors to become the most powerful supercomputer in the world (even better than our best, expensive NSA comps). It's like those movies with the little nano-machines piling up to become a huge scary monster.

With this asset, the masters of Conficker may be able to brute-force crack computer encryption, presumably to guess passwords to steal money and/or secrets. 128-bit encryption technology can maybe produce gazillions of possible passwords (>10^38), which would take too long for even modern supercomputers to plow through. But the Conficker botnet can do this much quicker, and it's masters are now "leasing" the botnet resources to other criminals seeking to steal something. In theory, the penetration of Conficker is so great that its masters would be able to shut down the global internet if they wanted, but they seem more inclined to use it to steal, so it's left unharmed.

How the heck does Conficker infect PCs? Good ol' Microsoft did not make Windows XP very secure, and their engineers eventually discovered a vulnerability for remote access. So they issued a typical software update/patch to close the hole, and anyone who regularly updates their Windows OS should be safe. But the problem is that most PCs running Windows worldwide are using pirated versions that are not eligible for updating (another consequence of OS piracy: exposing the whole internet and trillions of wealth to crime; thanks a lot, China). So those users are totally exposed unless they download antivirus software or a free anti-Conficker program written pro bono by the "Conficker working group" near Stanford (calling themselves "the cabal," a team of volunteer cyber-security experts who recognized the danger of Conficker and are trying to stop it on their own time and own dime, because gov'ts are way behind the curve and doing nothing).

The irony is that Conficker started infecting PCs after this Windows patch. It's possible that the hackers analyzed the patch to reverse-engineer and discover what the Windows vulnerability was, so MS gave the bad guys a free how-to guide to hack Windows! By trying to fix their product, MS brought about the Conficker infection (in addition to many other similar malwares that have been since identified, and lord knows what we haven't found yet). Another consequence of monopoly: concentrated risk. And even though Conficker doesn't affect Mac or Linux, that's not to say that those OS's are any more secure. The Conficker masters just see less value in infecting the much smaller global population of Macs and Linuxes, which would create a much wimpier botnet. So take that, Apple snobs (and FYI, iOS has been hacked repeatedly so far).

Why can't we identify and shut down Conficker? Infected PCs show virtually no symptoms of infection, and are blocked from receiving any new updates, so it is a very clever parasite (and as I said, most of the infected PCs are not in the West). It just uses the processor selectively without slowing down your normal apps. But all the slave comps must answer to the mother comp for instructions, right? Why not just use that communication to locate the criminals and shut it down? Well, Conficker is elusive and doesn't just route all slave communications to one IP address. Then it would be easy to track, like a phone trace. But each day Conficker commandeers 250 IP domains, so it requires more effort to track down, and recent Conficker strains now use 2,500 domains and even 5 "high level" domains that are very secure. The hackers know that the poorly-funded cabal is the only group trying to stop them, so they just needed to make Conficker communications too costly to trace and block.

So where the hell is the gov't in all this? Isn't our security and economy at risk? Conficker seems a lot more of a concern than a couple of Taliban fighters with AKs. Obama just started a US Cyber Command within the NSA, a whole year after Conficker was discovered, but I surmise that they are grossly unprepared for the challenges ahead. Russia crashed Georgia's e-infrastructure with a worm/virus prior to its military invasion. McAfee pretty much implicated China in hacking some major US websites too, so the writing is on the wall. Hasn't anyone seen "Live Free or Die Hard?" We need McClane to rescue us.

The cabal approached the Pentagon and NSA to ask for help to fight Conficker, and maybe even sequester their computing resources. But they were summarily turned down, possibly over territorial or state secrets issues. I am sure that the NSA has a couple interns working on this (what else could be a higher priority for them, Mugabe's cell calls?), but clearly they are not winning (like Charlie Sheen). Here's another hilarious side-story. Remember how the US and Israel crashed Iran's computers controlling their uranium enrichment program? It set them back like a year. It's quite possible that our spooks hired the Conficker botnet to do that, or at least created our own similar worm inspired by Conficker.

Corporate and gov't cyber security is not up to task, but in this climate of austerity, it may be a hard sell to demand more investment in this area. No one cares to protect themselves until after the first disaster strikes (even though a few have already struck, but we just didn't care). I am sure the Ukrainian gang is a super-talented bunch of hackers, but they should be nothing compared to the resources that China or Facebook (no connection suggested) can devote to cyber-security, or cyber-warfare. Modern states already know that the best way to bring each other down (besides nukes) is to crash our e-infrastructure that we so depend on and take for granted. And even so, a cyber attack could disable our nukes and military. The internet was developed by idealistic engineers who wanted a free flow of information, so unfortunately it's structure is inherently vulnerable. We take the good with the bad, but ignoring the problem to this degree is just unacceptable. Fortunately, the likelihood of worms directly stealing our passwords and meager e-weath is still quite low. But what's the value of our little savings account if our national financial system gets wiped out?

The interesting tale of the Nets' move to Brooklyn, and what is says about the lockout

http://www.grantland.com/story/_/id/7021031/the-nets-nba-economics

Does Jay-Z have to look cool all the time, even with a tilted hardhat? What Ratner did will definitely be studied at Harvard Business School for years.

The silly owners-vs-players argument seems to be the same for NBA and NFL. The players' assets are their special sports talents. The owners' assets are the real estate and team name, under the protective umbrellas of the NBA/NFL monopolies. But say the Jerry Joneses and Mark Cubans of the world decided to retire and donate the franchises to charity. The players wouldn't be screwed. A new bunch of billionaires would build new arenas, pay the athletes probably higher salaries, and the only difference would be the New York Knights (TM) instead of the Brooklyn Nets (TM). Say Lebron and Brady decided to retire as well - their presence would be missed much more.

Profits (economic rent) should go to the scarcest, more demanded resources - in this case the players. People don't watch the games because of who owns the teams. The only reason the owners have such bargaining leverage is the anti-competitive nature of pro sports, so that other interested billionaires can't make better offers. Some thought it was ridiculous that NFL stars complained that they were treated like "slaves," but there are some undeniable similarities (and obviously some notable differences, like their still-enormous salaries, which should be bigger at market rates though). The AFL, USFL, and ABA tried to offer legit alternatives (in some cases paying players better and offering a more entertaining brand of sport), but the NFL/NBA used their legal-political-financial muscle to absorb or ruin them. Check out the ESPN "30 for 30" documentary on the USFL if you have time. They actually won an anti-trust case against the NFL, but they foolishly sought only $1 in symbolic damages, so the legal fees from that fight ruined them (and so did Donald Trump, seriously).

http://30for30.espn.com/film/small-potatoes-who-killed-the-usfl.html

So for the owners to piss and moan that they're going broke is a joke. If they don't like the business, then quit and start a hedge fund. There will be a line a block long to buy their franchise - since for a rich guy, it's such a rare feather to have in your cap, like a Picasso. It's not meant to make money (even though it does, plenty), it's a hobby to them. It's like the rich CEOs going to DC to beg for bailouts in their private jets and $10,000 suits.

"The rich have gone from being grateful for what they have to pushing for everything they can get. They have mastered the arts of whining and predation, without regard to logic or shame. In the end, this is the lesson of the NBA lockout. A man buys a basketball team as insurance on a real estate project, flips the franchise to a Russian billionaire when he wins the deal, and then — as both parties happily count their winnings — what lesson are we asked to draw? The players are greedy."

Emphasis was mine.

Confidence Men: the dysfunction and rivalries among Obama and his economic team

http://www.npr.org/2011/09/20/140594464/confidence-men-ron-suskind-on-white-house-woes

This recent book describes how Obama and his hand-picked economic team poorly managed the gov'ts role in the financial crisis, and in fact couldn't handle the group dynamics of their "team of rivals." Obama was a "brilliant amateur," who was dynamic enough to rise to the presidency, but grossly unprepared to handle the current burdens of the job. Wall Street alliances of course helped to fund Obama's campaign, but once the magnitude of the crisis came to light, Obama knew and articulated that the nation needed strong, Roosevelt-ian reforms to clean up the Street. But he subverted that goal by hiring Geithner and Summers, two individuals who were about as cozy to Wall St. as possible without being total insiders.

Larry Summers headed Obama's economic team, comprised of economists and officials with top credentials. Obama himself did not have much background in economic theory and policy, and often deferred to Summers in meetings - a man who by most accounts is a total a-hole and has to run the show, which further undermined the president. Obama's stubborn desire to achieve team consensus often delayed or hampered effective decision making. Summers was alleged to compare Obama's team to "Home Alone" with no adult in charge, also claiming that "Clinton would have never made these mistakes." Typical Summers to contribute to Obama's struggles and then criticize him for it.

Obama's hiring of Rahm Emmanuel as chief of staff was a mistake; Emmanuel was a temperamental strategist, not an effective manager. He often forgot to invite key people to meetings, especially the women in Obama's cabinet (deliberately or not). Obama recruited some of the most talented women in the country, yet many of them felt unengaged, disrespected, and resigned in disgust. During some meetings, the "boys" would band together and Obama would mostly listen to them and forget to consult with the women.

Treasury Sec. Tim Geithner felt that Obama was economically naive and also believed that America didn't need a major financial overhaul, so therefore Geithner had to protect the system from the president. Obama made it clear very early that the "TBTF" big banks should be broken up. But instead, Geithner "dragged his feet" on that order to say the least (they only got bigger under his watch), and some would say committed insubordination by instead giving aid to those banks. Clearly this was a herculean task even if Geither was 100% in agreement with Obama, and this was a rare chance to clean up the Street but instead nothing was done. Obama was very displeased with this, but stuck with Geithner so as to not cause additional controversy and economic anxiety. So to avoid the drama, he kept a disloyal, anti-reform guy in a key regulatory role. Maybe that pretty much sums up the squandered potential of the Obama presidency.

----------

I've seen this story making the rounds.  I basically don't buy it, for two reasons.

First, I don't think the explanation is sufficient.  They're making the argument that Obama wanted to be more progressive in his response and harsher on the banks, but that he was prevented from doing this by the intransigence of his economic team.  However, (A) he picked that economic team, knowing full well their support for the banks.  If your goal is to crack down on the banks, you don't put a pair of guys with a decade-long history of supporting banks at the head of the table.  (B) The pattern of pro-bank behavior is too consistent, and it's positive support as well as negative support.  That is, the White House support for banks wasn't just "not breaking them up" (support by lack of action), it was also actively propping them up (taking positive action) with TARP and TALF and HAMP and Fed discount window and blah blah blah.  An intransigent Treasury Secretary might be able to block breaking up the banks, assuming a sufficient level of incompetence from Obama in overseeing that (does he not periodically ask "hey, how's progress on that break-up?").  But the rest of the positive actions that the WH has taken in support of the banks?  And this continues up to the present: just a few weeks ago the WH was leaning on the NY AG to stop doing real investigations into banking misconduct.  A couple rogue advisors don't create this consistent pattern of behavior.

Second, I think the timing is too felicitous.  In 2007 and 2008 when Obama was campaigning, he said all the right things as a progressive.  Once he got into office, he dropped all of that and took a much more conservative tack than he'd suggested in the campaign.  Now we're getting back into election mode, and Obama is back to playing progressive.  We've got a new jobs bill that says all the right things, but which we all know has zero chance of getting passed.  And now there's a book out which does a nice little whitewash on all of the pro-bank policy Obama did and continues to push, claiming that he wanted to be progressive, he was sabotaged, but *now*, now he's going to really be able to be progressive.  Right.

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I see what you mean and I share in the suspicion. But it seems a very bizarre tactic for Obama and his supporters to downplay his pro-banks behavior with an explanation of incompetence/leadership vacuum. They try to remind America that he was a true progressive after all as we approach campaign season, but Suskind's narrative also reminds us that Obama is a bad manager and not very presidential at times. Would that make anyone more likely to vote for him? People like Summers have vehemently denied ever uttering anything anti-Obama while serving under him (though that is to be expected). If this is a PR ploy, it's either genius or wacko, but definitely risky.

While the banks helped Obama get to the White House, it's not uncommon for presidents to turn their back on some supporters once they take the reins of power (or at least not fully live up to the supporters' expectations). Though looking back, I don't think Wall St. has much to complain about Obama, except for maybe a few provisions in Dodd-Frank that eliminate some bank fees (the rest of the act can easily be circumvented by big institutions, and banks are already devising new schemes to replace the lost revenue from the outlawed fees). Obama took Wall St. money in 2007-2008 for sure, but I find it reasonable that in 2009 he wanted to enact financial reform as part of his overall vision for improving the country and responding to voter sentiment. He just had no idea how to implement it, and turned to the wrong people for help.

Obama's naivete came through in his hiring of Summers and Geithner. He's not an economist, so he wanted to defer to "experienced guys". I am sure Summers and Geithner said all the right things while they were being vetted, and maybe Obama ignored their track records, or didn't know enough (and certainly didn't ask the tough questions), or felt confident that his great leadership skills would keep those guys in line with his agenda. I'm not trying to excuse his mistake, but just proposing a possible explanation. Everything about Obama's first quarter was rush, rush, rush to respond to the fin. crisis. And with the GOP being a-holes and trying to block many of his nominations, maybe Obama just wanted to make "safe" choices for his econ. team, which would also hopefully reassure Wall St. and calm Main St. If he hired true crusaders for those posts, it would have been mutiny. Obama wanted to be a different type of leader who achieves change through consensus and cooperation, but set himself and the nation up for disappointment. I don't think he was pulling a fast-one on us; it was just a combination of conditions, inexperience, and poor planning.

And once Summers and Geithner revealed their true selves in DC, it was too late for Obama. Dismissing or marginalizing them (if even possible) would send a bad message. A real leader would have found a way to do something though, rather than keep tolerating Geithner thumbing his nose at Obama's plans. Or maybe Obama was just too gullible and loyal with Geithner - who maybe kept telling him, "I'm working on it but it's really hard to get the ball rolling - it's the GOP, man!" And Obama isn't one to step on toes and micromanage (especially on stuff he doesn't understand), so maybe he just left it on the back burner while he focused on health care and Afghanistan?

Overall, I don't think the book can persuade people one way or another on Obama's progressive bona fides. Conservatives already think he's a socialist, and fed up progressives think he's a phony and a sellout. Even if he is committed to his campaign agenda, is he competent enough to make it happen? Sadly, Obama tells Suskind in the book that after his staff shake-up after the horrible midterms, he now has the team in place to be the president the nation expects, and he's starting to hit his stride with the job. Well it's a bit late for that. Suskind does seem to paint Obama as a victim, but a lot of it was of his own making (despite the best of intentions), so I don't have much sympathy. But you have to agree that so many factors were aligned against him that even if he made flawless decisions, a lot was out of his control. It's possible that not much would be different today.

Honeybees and colony collapse disorder: much of our food at risk

http://www.pbs.org/wnet/nature/episodes/silence-of-the-bees/introduction/38/
http://en.wikipedia.org/wiki/Colony_collapse_disorder
http://www.ars.usda.gov/News/docs.htm?docid=15572

Maybe you guys have been following this colony collapse disorder (CCD) crisis. But since 2006, as much as 90% of honeybee hives in US communities have suddenly died in a matter of months (this has been observed in EU nations too). Bees are some of the most evolved, beautiful, and efficient creatures in natural history, and the species is 100M years old (humans have been using them for honey for 6K years). Their mass deaths are likely attributed to human actions. Analysis of dead bees reveals symptoms similar to human AIDS - their immune systems were compromised, which hampers digestion, cognition, and makes it easier for fungi, mites, or other pathogens to attack them. Also, forager bees (that usually have excellent navigation and communication) fly out in search of food, but then don't communicate normally and don't find their way back, so the hive starves.

Weakly-supported culprits include wireless radiation, pesticides, global warming/pollution, and GM crops with anti-pest properties. Concentrated pesticides and pollution can definitely kill bees, but CCD also occurs in areas without high incidences of these phenomena. It's most likely a confluence of several of these factors, and maybe others that we haven't identified yet. The presence of a virus in CCD-affected bees seems to be the most prevalent stressor, but the virus alone can't account for all the deaths. Some research is now directed towards cross-breeding virus-resistant African bees with domestic honeybees, but that is no guarantee of eliminating CCD (and new GM species carry their own concerns). 

Bees pollinate over 100 key flowering crops (including some plants that our livestock eats), contribute to 30% of our food supply (pretty much all ag. products besides staple grains that self-fertilize), and their low-cost services are worth at least $15B in economic output to the US. 3/4 of all current plant species depend on animal pollinators to reproduce. There is no insect substitute but the less effective and more fragile butterfly, and as far as I know only one province in China is trying out another species. They use human workers to spread pollen in their lucrative pear orchards, after industrial pollution wiped out local bees. Already in the US, habitat loss from urbanization and air pollution have wiped out most indigenous bees prior to this CCD crisis. Now there is a need for commercial beekeepers to truck mobile domesticated hives around the nation to pollinate various crops when in season (if local bears don't get to the honey-rich hives first). But among that population, about 1/3 of them (or 800K hives) have collapsed. Now we depend on costly Australian bee imports to make up the shortfall.

CCD should be a reminder of how fragile our civilization actually is without the help of very simple organisms that we take for granted. But their destruction will almost certainly lead to ours (or at least a more monotonous, unhealthy diet), so it behooves us to be much more aware and careful. Is it worth it to risk this much just to squeeze out some bucks of profit from another megawatt, strip mall, or bushel of corn? It's easy for industrialists to keep up their damaging practices while they hide behind the excuse of "where's the proof?", and nothing will change without new laws or massive public uproar.

Scientists think we're almost "lucky" to observe CCD, because it serves as a reminder and indicator of environmental stress likely due to human actions. Who knows about all the other harmful, toxic processes and problems that go unnoticed? Companies should be required to strongly demonstrate safety before being permitted to sell new products, like we do with drugs and foods. The absence of evidence of harm doesn't necessarily prove safety. And environmental impact assessments are clearly lacking if we approve so many projects that still end up causing damage down the road. But I forgot, regulations kill jobs. Well irresponsible companies kill living things, including people. What do we prefer?

The US transconti​nental railroads: not exactly a poster child for capitalism​, or are they?

http://www.kqed.org/a/forum/R201109061000




Richard White, a Stanford professor, recently published a book on the history of US railroads and the tycoons who ran them. Contrary to the popular mythology about the "heroic" and "self-made" champions of industry like Huntington and Stanford, it turns out that those men and the companies they ran only made it into the history books due to massive corruption, abuse of gov't resources, and human/environmental damage. And we have the general notion from econ 101 that firms make money by providing demanded goods/services to consumers in a cost-effective way. But for the railroads, every sort of business and market perversion you could think of (prior to the derivatives era) was attributed to them. Though we still have this strange adoration of the railroads as a romance and celebration of America, Old West freedom, and industrial capitalism.



Yes it was impressive that we could lay track from the Mississippi River to the Pacific in just a few years, and made amazing technological advances during the process, but it turned out to be a net loss for the country. Despite our misconceptions, many railroads went bankrupt or needed gov't "bailouts" to survive. And it was hardly free-market: transcontinentals were just not needed in the late 1800's (the demand for long-haul freight and personal transport just wasn't there to justify the huge costs), and even after the railroads were built, it was still cheaper and quicker to use SHIPS to get from SF to NYC, around South America and all. So what was the point of building them? Railroads were not reliable (especially during the winter months), so merchants still favored ships. Like any great capitalists, the railroads didn't respond to this deficiency with improved performance, but engaged in anti-competitive practice instead. They bought up most of the excess capacity on freight ships, creating scaricty and bringing ship rates closer to railroad rates. They negotiated with ship lines to get them to slow down their vessels too. Why try to outdo your competitors when you can just pay them to come down to your level instead?



The most respected railroad men avoided transcont. projects like the plague, and what was left were speculators, washed-up entrepreneurs looking for another chance, and crooks (sound like other modern industries we know?). What was significant about this period was the advent of corporate lobbying. The US railroads were pretty much the first manifestation of the modern American corporation. They pushed for Washington to create the conditions necessary for their flawed businesses to survive, similar to a Maoist or Soviet failed central-planning project. They were justified as a necessary "public good", even though the public had virtually no need for their services at the time. But when something is a public good, we may irrationally spend to keep them going even if they aren't doing any good for us. And of course stakeholders needed to justify their decisions and get public buy-in with propaganda and marketing, hence the Manifest Destiny, pride, and nationalism angles. There's nothing that US industry can't do, we're settling the savage lands with good old US hard work, go west for adventure and riches young man, yadda yadda. Sadly, there was more public outcry against the greedy, inept railroad corporations back then vs. the current greedy, inept firms today. The author speculates that this is due to enhanced marketing and penetration of US corporations today (corps play a much bigger role in US life today), so we are less likely to condemn something that we are associated with.



DC gave the railroads (RRs) huge guaranteed loans and literally millions of acres of free land (that they still own today and don't pay taxes on), even on terribly risky projects with no evidence of future profitability. RRs sold junk bonds to eastern investors by hiding much unflattering financials from traders (in fact, the big 3 US ratings agencies were started to rate RR bonds). And still the incompetent RRs needed several public bailouts to break even (even though the tycoons and big investors made out quite well off the US dime). And worse, the RR bankruptcy terms were so lax that the same doofus execs were allowed to retain control of the firms (not like Obama forcing GM to change their leadership team in exchange for bailouts, just when their execs were getting effective). Their debts were written off, so now these failed firms had a huge financial advantage over the viable, honest RRs (also sound familiar?), and drove some of them out of business. Talk about dysfunctional markets: the weak kill off the strong? Like the fruit companies in Latin America, the RRs asked the gov't to step in to violently break up labor strikes, clear out local Indians, and such. As many people died working on the RRs each year as the Civil War battle of Shiloh, often without investigation, punishment to firms, and compensation to victims (especially if they were Chinese).



So now that these joke of RRs were built, what to do with them? The firms had to get people to use them to gain revenue, so there was a big push to encourage settlement (although net population transfer was eastbound in the early RR years), buffalo hunting, cattle ranching, and mining in the West. There was no real demand for increased cattle ranching, silver, and buffalo, but the demand was manufactured with major gov't incentives, often with terrible environmental consequences (overgrazing, buffalo near extinction, mining pollution). And all the booms associated with those economies of course ended in bust and disaster for many Americans too.



If we learned our lessons from the RRs, the current dot-bomb and housing crashes might have been avoided. It's ironic that the most ardent libertarian proponents of the free market are the ones who most strongly advocate for our most uncompetitive industries. It's not the free market principles that they love, it's just taking advantage of whatever system is in place (loopholes and all) to come out ahead, no matter the cost to others. Obama and others talk about the need to invest in the future so we don't fall behind. But the problem is investments are based on predictions and many of those made by gov'ts turn out to be wrong. Look at the CA high-speed rail project - another total boondoggle where the true demand just doesn't justify the huge costs. Considering all the areas where CA needs more cash, it is a huge opportunity cost to sink billions into another rail gamble. But this is the price you pay when ideology trumps economics.



We wanted to settle the west and make tons of money, so we thought building RRs would get us there. But it was ahead of its time and caused a whole bunch of other problems. If you believe in the free market, let the market demand tell you when it's time to build RRs. If they are so desirable and well-planned, then they will easily get their own funding and won't need gov't loans and bailouts. The author contrasts the Dakotas. South Dakota's RR network was built bailout-free, and turned out to be much more high-performing than the nearby gov't-supported RR in North Dakota. In Europe and Japan, RR firms had to raise their own private capital before breaking ground, so their networks were a lot leaner, better, and weren't subject to the moral hazard associated with US firms wasting other people's money without accountability. Or if the RRs are truly a public good, nationalize them with a set of transparent laws and public input governing their operation. Of course there is the opposite extreme with China, where the gov't invested billions into another un-needed high-speed network, just to create jobs and grease the palms of various bureaucrats. But projects were rushed, safety standards and training ignored, and many of their trains run with mostly empty seats.

Looking back on 9/11 and the "terror industrial complex" it spawned

Maybe you all are like me, already sick of the emotionally-manipulative 9/11 remembrance content all over the mainstream media. Instead of more footage of twisted rubble, crying women, and the stars-and-stripes, how about something that's actually thought-provoking:

http://www.npr.org/2011/09/06/140056904/the-top-secret-america-created-after-9-11

Some of this we already know, but the Pulitzer-winning author Diana Priest has documented many ways that the secrecy-antiterrorism industry has exploded since 9/11... to a point that it is literally "out of control" as evaluated by security experts. No one knows how much we are spending, what we are doing, and who we are employing. The gov't was so unprepared for this growth that they needed to hire contractors to be able to run background checks on all the new contractors they were hiring. It's incredible: now 800,000 Americans, or 1 in 375 of us, hold top-secret clearances (many of them have not taken loyalty oaths to defend the US, and instead serve the profit motive). For all the GOP complaints about the size of gov't and its inability to sustainably create jobs - I guess they meant all other industries but this one.

And security contractors are paid much more than similar "public servants", so the CIA saw a brain drain where junior analysts would accrue the necessary year or so to acquire the basic skills sought by the security firms. They would then leave the CIA, get hired by Blackwater types, and do the exact same job for 3X pay, with the gov't and ultimately taxpayers on the hook to cover the higher expense.

If we thought CIA was covert, they are getting one-upped by JSOC (Joint Spec Ops Cmd, that used to do hostage rescue but now is the gov'ts elite hit squad that nailed Bin Laden and others). JSOC has all the power and resources of the CIA (if not more), yet isn't bound by law to report its activities to Congress or others. Obama has given them the green light to step up their activities, and to their credit they have killed/captured many more "terrorists" than the CIA. But it is scary that some secret org can decide to put a name on a kill list, and then just go out and do it without asking anyone for permission (yet are funded by us). They represent us but don't answer to us, so we get the blowback if they mess up (like errant drone strikes in Pakistan whipping up anti-Americanism).

Let's also remember all this stuff on the anniversary of 9/11, including the tens of thousands of non-Americans who have died as the result of our wars.

Worker disengagment and poor management are very costly

Here's another doozy about workplace dysfunction from the NYT:




http://www.nytimes.com/2011/09/04/opinion/sunday/do-happier-people-work-harder.html?_r=1



"Since January 2008, ...Americans now feel worse about their jobs — and work environments — than ever before. People of all ages, and across income levels, are unhappy with their supervisors, apathetic about their organizations and detached from what they do. And there’s no reason to think things will soon improve... Gallup estimates the cost of America’s disengagement crisis at a staggering $300 billion in lost productivity annually."



Wow, that is bigger than the GDPs of most nations.



I don't get why firms seem to just accept this. This is big money. Even if the "touchy-feely" worker motivation stuff is probably beneath most execs, the middle and lower managers just don't ask the necessary questions (or are too busy to pay attention), and no one is holding them accountable if they don't. No one likes the "adult babysitting" part of management, but if you want productivity, loyalty, and high-functioning groups, this is probably the most direct and effective route. Corny rah-rah speeches at all-hands meetings (that usually do not resemble reality) and sending out cliched worker satisfaction surveys (yet not acting on the findings) only hurts morale further. Are leaders smoking something, imagining that their departments are perfect utopias where workers always come pumped up to give their best (because of their brilliant leadership, of course)? And obviously it's about more than compensation.



Some managers are awesome, but others seem generally clueless when it comes to knowing their workers. They make threats, falsely promise or delay rewards, and set unrealistic goals, and as they watch their people scramble to meet them, they think it's validation of their good leadership. Wow, look at them go for me, and I didn't even need to bribe them! Some managers think (or make it appear) that their groups are high performing despite heavier burdens on them, but they never ponder if that is the best way. And I don't mean, "Can I squeeze even more out of them?" It's a tough climate for job-seekers now, but that shouldn't be a green light for managers to abuse captive employees and impose unreasonable expectations. "It's dog-eat-dog out there and we have to get tough to survive." Well a lot of sick, immoral stuff has been justified that way over the centuries.



I think especially in the tech fields, emotional IQ is so lacking and there isn't a serious effort at manager training/improvement monitoring. Sure it's a two-way street and workers share some blame for not speaking up and proposing solutions, but due to asymmetric communication and reputation implications, this can be nearly impossible to pull off. Basically, bad managers and management systems aren't getting fixed because (a) workplace culture from the top down doesn't take employee satisfaction seriously, (b) the higher bosses don't collect the right data to evaluate management skills and incentivize improvement, and (c) it is too risky or difficult for workers to inform the proper parties on their managers' shortcomings. Blind leading the blind kind of stuff.



Management seems to prefer to reorganize, rotate VPs, and alter budgets (to make it look like they've got a plan), instead of getting to the roots of employee dissatisfaction - which seem to be plainly obvious and intuitive, so it's not like a Herculean feat. They just aren't willing to give what the workers need. Or maybe some managers are more concerned with their own career advancement, politics, and other BS, so they want to hoard credit/attention and don't allow their workers a chance to take on more responsibilities, feel more engaged, and get noticed, all of which strongly correlates with job satisfaction and productivity (workplace creativity, a critical part of business success, is highly correlated with positive mood as well). Maybe it's some subconscious, antisocial behavior where managers can't help but keep their people down to satisfy their insecurities, like frat hazing or abusive parenting.



Maybe firms like Google (with plenty of super-smart but bad managers I'm sure) are trying to get on the right track. Use data-driven methods to improve management and worker engagement. Try to close the gap between a manager's false assumptions and what workers truly feel (and what is actually happening on the ground).



http://www.nytimes.com/2011/03/13/business/13hire.html

Solyndra bankruptcy

http://www.forbes.com/sites/toddwoody/2011/08/31/what-solyndras-bankruptcy-means-for-silicon-valley-solar-startups/


http://www.kqed.org/a/forum/R201109020900



This is a terrible sign for US cleantech and manufacturing just as US jobs reports are quite bleak. Solyndra was the poster-child of green start-ups. They got over $1B in private VC funding, $535M of guaranteed loans from the DOE as part of the Stimulus Plan (the first private firm to get a DOE loan), and even a visit from President Obama as part of his campaign to push for a cleantech-fueled economic recovery. Obviously the GOP are jumping all over this, citing this example as proof that Obama is clueless about economics and jobs: http://www.sfgate.com/cgi-bin/blogs/nov05election/detail?entry_id=96638.



Solyndra was so confident about its business prospects that it rapidly grew to 1,100 workers and set up a huge $700M plant in Fremont (yes, expensive-as-hell Fremont) to manufacture thin-film cylindrical PV panels. The writing was on the wall, but it was still a big shock that the firm declared Ch. 11 recently and laid off its entire workforce. So why did it happen? Is solar just a flop? Well, Solyndra's competitive advantage was using cheaper but less efficient thin-film technology at a time when silicon PV panels (the industry standard) were fairly expensive and China's solar sector was tiny and unproven. But since the 2008 downturn, China launched huge in capital investment projects, including building up a solar manufacturing industry from stractch that quickly became the largest in the world. The global price of silicon plummetted (demand declined due to the recession and supply increased due to development in China), wiping out Solyndra's advantage. The 70% price drop is great for global clean energy, but not for US manufacturers.



http://www.greentechmedia.com/articles/read/contract-silicon-prices-fall-50-close-to-spot-price/



So China was already subsidizing its solar manufacturing sector (basically free land, credit, and labor) to undercut the market, and now it's priciest input just got cheaper. So Solyndra was pretty much screwed, even if it had the best technology (2 other Bay Area solar firms also recently folded). But maybe we should learn from this example that cleantech firms shouldn't try to win through cost leadership. China will own us there every time. Our businesses have to utilize sophisticated technologies, innovative product development, and strategies so that China can't easily copy and undercut us (think Apple). Sure let's outsource the cheap, easy stuff like manufacturing and logistics, but we can't beat China on their terms - especially when their gov't isn't paralyzed with debt and partisanship, and they are 100% behind rapid high-tech and economic growth.



So what do we do now? The libertarians say this validates their views that gov't shouldn't be in the VC business. Maybe Obama's people were so awestruck by "the green panacea," that they didn't perform due diligence on Solyndra's prospects in a recession and vs. Chinese competition. But plenty of savvy private sector investors (such as Richard Branson and the Waltons) also threw money at Solyndra and got hosed (and that was during a time when VC money was pretty tight, before the exuberance over Facebook and such). Some big-gov't folks would say to not change course because Washington funded the interstate highway program, Internet, and GPS, and all those radically changed history and exponentially increased economic growth. True, but how about all the projects Uncle Sam funded that were utter failures, that we don't know about? Like usual, I guess the prudent course is some sort of middle ground. Gov't involvement but vetted as well as possible to avoid pork and boondoggles. The problem is, China is bankrolling ventures big time, and they can afford to have a 5% success rate and still gain market share on us. We can't afford to be wrong as much, especially with so much political resistance to cleantech and gov't spending now.



Another challenge is the industry itself. Highways and the early Internet are fairly straightforward concepts to develop, just plan and do it. But no one knows which horse to pick in cleantech. I suppose it would be wisest to diversify and place many small bets, but then no single industry will get to economies of scale quickly. Imagine if the gov't had to pick a search engine to back in the dot-com days. So now we have geothermal, wind, solar, biofuels, and fuel cells, with several variants of each. The gov't doesn't have the expertise and resources to properly evaluate all these options. The private sector doesn't have all the answers either. For example, one of the big Mojave Desert solar farms just decided to retool its entire setup from mirrors (focusing solar energy to heat water and spin a turbine) to conventional Si PV panels, since the global price dropped. Conditions are changing so fast that firms need the flexibility and investor patience to be able to adapt, if possible. But with Washington dithering and private credit still tight, we are only falling further and further behind. Good times.