Pro Commerce

Zero sum examples?

I have searched far and wide to find examples of positive sum games positive sum human interactivity.

Unless I am completely wrong, I can't find any such examples. Commerce may be the only human activity that is clearly a positive sum game.

Many people in psychology and negotiation talk about win-win and positive sum interactions among people and I am sure those are true however it is very hard to describe what is going on, in a way that it would make such interactions positive sum. We know how easily people can become angry, vindicative or permanently hostile so we know that anything else is proabably win-win positive sum.

I invite my readers to think of positive sum games, activities and behaviors because we have no chance of explaining to the many weak minded or brain-dead lefties why income redistribution is counterproductive and why commercial societies are so vital to our health and well-being.  We have to explained to them the core element of positive sum in powerful imagery.

Denis Dutton

To the family, friends and associates of Denis Dutton please accept my sincere condolences.

I communicated with Prof. Dutton several times by e-mail and he put this Pro Commerce blog on his Arts and Letters Chronicle from the very beginning. He was particularly appreciative of the occasional recommendations and outlines that I offered for doctoral theses.

I never met Prof. Dutton but I am grateful for his work, his interests and his contributions.

 

WSJ lacks Jew hate

Adam Smith made a very important point: nearly all the warfare of his era was based on religious differences. He saluted commerce because it did not generate mutual national hostility. He was correct then, he is correct now.

One reason I enjoy picking up the Wall Street Journal and sitting down to read it is that it is very unlikely to make me angry. That is not true for any other national media. The reason is simple:. The Wall Street Journal has no place for Jew hatred. Corporations do not hate each other or another Corporation because of Jewish ownership or the national headquarters of the company.

When I open any other national newspaper or media I am immediately confronted with some nation that hates Israel whether it's Ecuador, Venezuela, Turkey or Norway; Or some religious organization that hates Jews like the Presbyterians, the Anglicans or some black Baptists. Then there are all the United Nations agencies that hate Israel and Jews; or Bishop Tutu or Jimmy Carter or Mary Robinson and other UN political figures who hate Jews or Israel. It is almost every kind of person or institution except business people and businesses that hate Jews.

It is very nice to open the Wall Street Journal and be confident I will not be hit in the face with Jew hatred. Three cheers for the title of this blog. The domain of commerce is one of the few areas of decent human behavior.

Texas and G.W. Bush

If you follow politics you’ll note that the most recent 2010 census is giving Texas a large increase in members of Congress. If you follow business you will have noticed that there has been a steady population movement to Texas and Florida.

There is little question that Texas has created a very business favorable environment. If you have been reading George W Bush’s book, Decision Points, as I have, you will know that George introduced four major pieces of legislation when he first took office as Texas governor, 15 years ago. The four pieces of legislation included three designed to make Texas one of the most appealing business states in the country (the fourth was about education). With the help of one Democratic powerhouse Bush was able to pass his entire package of legislation in the first four months. The consequence is a business favorable environment and rapid economic growth.

When Bush got to Washington he did the same thing and Congress passed his complete package of legislation. His administration arrived at the start of a recession which was very short because of tax cuts and the economy grew during the next seven years he was in office (final two quarters weren't so good).

Tyvek McGilligan

In every year newborn children are commonly named after popular figures. There are long-term trends and there are long-term popular names (John, Paul, Karen) but these have not been as significant for the past 50 years as entertainers and public figures.

Which raises the question for me, when are we going to see the name Tyvek as the first name?

The name Tyvek is commonly printed on buildings under construction all over the country. It is a single layer effective insulator and weather protection strip that is commonly used as an inner layer on new construction and has the name Tyvek written all over the outside.

Tyvek Harrison or Tyvek Johnson has a rather macho tone to it.  I expect to see more Tyvek babies in the future.

Bay Bridge commuter drop

You will probably believe it, but the bureaucrats who run the San Francisco Bay Bridge and the Golden Gate Bridge decided to raise the price on casual carpools from zero to $2.50 and $3.00 and were surprised to find a significant drop in the number of cars in the carpool lanes.

Casual carpooling has been in effect since the mid-1970s in the Bay Area. The way it works is that specific locations in the city and in the suburbs are marked as agreed-upon stop locations where people who want to ride with someone else wait in line.  Cars arrive pick up two or more riders and drive off allowing them to go in the high-speed carpool lane and, until recently, to cross he bridge free. Going in the high-speed carpool lane often means saving half-an-hour in the commute, each way.

So you would not be surprised to find that the number of people using this commute approach dropped significantly when the $2.50 fee was added. The percentage of carpoolers in the first half-year of this brilliant new program has dropped 23%.

There has been a steady drop in the number of people crossing the San Francisco Bay Bridge for the past several years; roughly a decline of 4% per year for the last three years. Carpooling vehicles comprise 10% of all the vehicles crossing the bridge and of course they have dropped dramatically.

We cannot rely on bureaucrats to understand what is happening. But I will help explain.

First there has been a steady decline in the number of people commuting to work, particularly in the San Francisco Bay Area, where I  recently had a one-week opportunity (bridge repair) to notice the dramatic drop in the number of commuters.  The decline in downtown office rental is the strongest indication of what has happened. The number of salaried workers has been steadily declining as more businesses move out of central service areas  and more importantly as more people learn to work out of the office and be self-employed.

The move out of offices is a long-term trend, the bridge traffic merely confirms it.

But there is a secondary phenomenon that is also important. There has been a decline of environmentalism which was very strong in the early 70s and for 30 years supporting casual carpooling. When environmentalism as a broad-based movement died it was replaced in casual carpools by a sense of conviviality. People still liked riding together.

That sense of conviviality was seriously damaged when a price of $2.50 to $3 was introduced. Then a carpool was no longer the generous act of the driver providing a car and fuel; riders have to figure out how to divide up the costs and conviviality very rapidly disappeared.

I doubt that any bureaucracy is going to examine this phenomenon and figure it out.

About 15 years ago I looked into the basic data on record about cars crossing the bridge hour by hour.  Such data didn’t exist. Only the gross toll revenue per hour was on record. None of the idiots who ran that bridge bureaucracy actually knew the amount of automobile traffic that was crossing.  It was merely guessed at by dividing the revenue figure by the fee per car.

Apprenticeship program

I have said good things about one form of modern union; police unions that protect police officers from the irrational lefty public who want police officers to gently kiss and sweet talk people who are threatening them with weapons.

I have also realized that the inception of unions, crafts guilds, in the 15th century, had positive effects for the development of commerce. Prior to the evolution and development of crafts guilds most skills were kept in families, passed on from father to son to grandson. The evolution of crafts guilds, particularly in England, Holland and Switzerland generated an alternative approach to transmission of technical skills.

The crafts guilds generated apprenticeship programs which allowed non-relatives to study over decades and gain the skills relevant to formerly family controlled monopolies. We are talking about trades ranging from shoe production and  tailoring to small-scale ironworks. Creating a role for non-family members was probably a significant contribution to the development of industrial commerce.

The evidence for this development is clear when one compares the development of the clock and watch in England, France and Switzerland. The family watch manufacturing monopolies of France significantly restricted the growth and technological developments of watches and clocks in France.  Watch sales and technology boomed in England and Switzerland (source: Landes, Revolution in Time).

Bet against the Euro

I think a bet against the euro will be a good bet.

For the euro nations to stick together as one economic region requires two things:

-- first a group of poor undisciplined democratic socialist governments must be able and willing to keep their government deficits below 3% indefinitely into the future.

-- second, in the meantime, the Germans must be willing to subsidize their neighbors who are lazy, take long vacations, retire early and have no self-discipline.

Neither of these is realistic.

If you decide to make a stock market bet against the survival of  the euro, I suggest you buy a package of successful German export companies.  As the euro fails, German exports will grow. You have a long-term bet against the euro.

Google in hysteric eyes

I don’t really have a favorable view of the European brain.

While German and French intellectuals are wonderful fun to talk with because of their philosophical skills, Europeans in general have a single dominant metaphor in their mind that is perverse.

The Pied Piper.  The Pied Piper was a man walking through town playing a wind instrument. The power of his instrument seemed to bring all the children in the town into his fold. All the children followed the Pied Piper.

For Europeans, (and I am not making an exception for the small percentage who didn’t think that Jews around the world in 1935 controlled everything) there was a universal belief that Jews with beards and long noses were running the world via banking, media and technology.  Most Europeans now believe the same story, but the Jews are called Israelis.

The new Pied Piper for Europeans is a man who is carrying a dictionary.  Everyone seems to be following him.

The man carrying the dictionary seems to be the next danger Europeans fear because they believe all the children in their towns are following him. The man with the dictionary is Google.

Europeans seem to be insane about Google. Google is nothing but a modern electronic dictionary.  It is considered a European wide monster, a danger like Frankenstein.

How can a company (Google) that offers nothing but reference material be this perceptual monster? Such such a perception is only possible among Europeans (and their American lefty acolytes) who see a Pied Piper everywhere they look.

Think about it.   The Google Pied Piper is nothing but a reference dictionary and cannot be a threat to other businesses except for its dominance in brain space.

Latin pork

As Latin nation after Latin nation shouts their hatred of Jews from the rooftop, some of my friends and many people in the media find the anti-Israel posture hard to understand.

Not me.

Almost every Latin American country has its historic roots in conquest by the Spanish or Portuguese after the point in Spanish and Portuguese history when Jews were threatened with death, conversion or exile. Let us call that the first Holocaust.  The Spaniards and Portuguese have not changed over the past 500 years since they perpetrated the Latin Holocaust.

This was also the point in history, 1490s, when Spain and Portugal switched from beef, which was a natural product for large grazing hilly countries, to pork. Pork was a perfect choice of food for these Jew haters.   It was a permanent daily test of whether secret Jews among them had truly converted.

Pork is the main course for all meals in Latin America. It remains that way and it makes sure that Jews do not settle comfortably in Latin countries.

There are two minor exceptions, one is Argentina a country that raises beef for export, the other is Peru which has a sizable fish component in its diet (which accounts for a sizable Japanese population).

When I think of the current vast Jew hatred we see in Europe since the second Holocaust, I am not surprised to see the persistence of Jew hatred in Latin America subsequent to the first Holocaust.

Drama in numbers

There are several times in the past few decades when I have focused on a data set that required my thinking, for important insight. One such data set was evident in the early 1990s, when I looked at global population data and had to figure out what it meant for population to explode in part of the world  and contract in the rest (the explosion had been caused by expansion of hygiene, which had ended by then).

The same is true for decades-long data on obesity. The data does not present a clear or coherent picture of the results without careful thinking. I finally developed the model of Darwinian selection in the food marketplace to fully explain the obesity data.

Similarly I was able to understand the ‘08 national crash by carefully examining the financial, equity and banking data.

There are a number of other periods where I have developed new ideas by successfully focusing on unusual data sets.

The most important tool for understanding and analyzing data sets is the notion of a systemic problem.  Large populations and large pools of data can only be explained when changes occur because of systemic issues.

It is foolish to blame data changes on greed, failed government policy, political ideology or moral failures.  Those are not systemic issues. A systemic issue must be a problem within the system that becomes evident when the system is pushed into a new domain.

The data that we get to examine in this blog is the dramatic decline automobile deaths between 2005 and 2009. The number of deaths declined from 43,400 to 33,800. A truly dramatic decline in automobile fatalities.

First, it is important to reject the nonsense we hear all around us all the time. Apparently, the Chicken Littles who think that texting and talking on cell phones is a danger have not looked at the data.

What happened? I can think of three systemic changes that should be considered. 

* In the past 5 to 7 years many states have focused on first-time drivers 16 to 21 and made it difficult to get a drivers license without creating a good driving record.

* Many more cars have side airbags.

* Auto stability systems.

The firt two of these systemic changes make logical sense, however neither effects a large enough population to have shrunk the automobile deaths by the magnitude  we are seeing (new drivers might  be 5% of the population and new side airbag fitted cars, about the same).

Only auto stability systems, which have been increasing for 10 years, is a good explanation.

I will keep thinking about this issue and I count on my wonderful readers to do their part.

Best blogs Dec. 5 to Dec. 18th

The standardized California drivers test has five questions about PC disadvantages of automobiles.

Most people have no idea what a subprime mortgage is. In most cases they are nothing more than a second mortgage.

Hans Rosling is a champion of charts but is blind to the meaning of his charts. If he opened his eyes he would see that his charts promote commerce and only commerce.

There is only one clean, painless and effective way to commit suicide.

Slavery is only a good idea for a business run by a Marxist. A real businessperson would always choose salaried employees.

Only left to right

Over the past 40 years there has been a steady movement of intellectuals from the left to the right. It began with the people later calls neocons who all began their careers as lefties.

The gentle wave of the 1990s, became a tidal wave after 9/11.

The question that a reasonable person should ask is why is this movement nearly 100% in one direction? Why do we find such a massive swarm of lefties becoming conservative and virtually no one going the other direction. The exception being the recent graduates from cookie-cutter  political academia.

The answer is straightforward. The entire second half of the 20th century is the history of failure of lefty ideas. More government is only a good idea for people who work in the field of government bankruptcy.

Two updates

First I want to keep you apprised of what’s happening in the natural gas world which the mainstream media has completely ignored. California is going ahead with its Cap and Trade plan for 2012. The California utilities will find this convenient and allow them to burn dirty fuel for an extra two years and charge more.

What is happening is that the utilities and other big carbon generators will use coal and oil until the end of 2012 when the Cap’s will be calculated and put in place. At that point measurable conversion will occur and the utilities and heavy fuel users will convert to natural gas. They will save on the cap and trade tax and save significantly on the cost of fuel. Laughing all the way to the bank thanks to the environmentally gullible.

I promised an update on what happened in the California election last month. California moved against the great Tea Party conservative tide of America.

When we finally were able to look at the details it turns out that we had the highest turnout of Latinos in our history 22%. It further appears that Latinos  in California are automatically voting against the word Republican. A great deal of work will have to be done by the Republican Party to clean up this mess.

Good for everyone

Everyone in the United States and in most of the world benefited from President Obama signing a tax bill, yesterday, that continues the George Bush tax cuts and dealt with several other serious uncertainties in the tax code.

Uncertainty is probably the most serious problem the business world faces at all times and when the political world increases the level of uncertainty for businesses the ability of the commercial market to grow is thwarted.

If I were to take a guess, I would guess that the leaders of the G20 nations all phoned the president over the past month and begged him to remove the uncertainty in the American tax environment.

There are no Keynesians left in the world. Everyone who has responsibility for economic issues has probably conclude that Keynesian stimulus for president FDR seriously extended the 1931 depression. Similarly, the 2009 stimulus package that Congress-chair Nancy Pelosi drafted and passed probably has extended high unemployment for an additional 2 to 3 years.

Good economic news to start the year.  Thanks Obama.

 

Audience reactions

I have had three occasions when I faced a strong audience reaction.

The first time was in the early 1960s when I was on a team of people introducing integration of blacks into the public schools via busing. My presentation was to an audience of mostly white mothers, well over 200 in a junior high school auditorium.

I  had never before and never since encountered such a wall of hatred as those mothers direct at me.  They knew their children were being forced into schools with people they considered dangerous.

The second time was a smaller group, fortunately, in which I made a presentation suggesting that we create classes for people who were considering suicide. The venue was the Circus of the Soul Bookstore, a nightclub run by Gary Warne that became the point of origin of modern urban-gorrilla-activities.

It is irrelevant what my argument for the suicide classes was. The audience was furious with me and assumed that I was encouraging people to commit suicide. Nothing I said was relevant; the audience was outraged and didn’t hear a thing.

My argument was that many people would change their mind about suicide given sufficient opportunity to think about it and discuss the subject.

The third audience was nothing like the first two. I was giving a lecture on building your business to an audience of grocery store owners and managers. This was in the early organic days and many in the audience were hippies.

As an experiment I began by announcing that my talk was not for people who wanted to make a lot of money but for people who were in the food business because they loved it. "If you, in the audience, want to make a lot of money from your business I suggest you get up and leave right now". I stopped talking.

Roughly half the audience got up and left. The people who left were pissed. The remainder of the audience was a little anxious at first but after 10 minutes of discussing the subject they warmed up and were responsive. You can imagine how you would’ve felt to be in either the half that left or the half that stayed.

Slaves on my staff

Over many years I have been refining my spiel about the benefits of pro-commerce. The Phillips tirade on this subject has become increasingly convincing, colorful, and increasingly imaginative.

Occasionally I face opposing questions.   I constantly try to refine my devastating responses to the point where the opponent recognizes the futility and meaninglessness of their argument.

One of the underlying arguments commonly raised against commerce is the Marxist presumption that all wealth is derived from either exploiting natural resources or forcing humans into slavery.  

Last night I hit on a winning response to this Marxist nonsense. I said that I would rather have a salaried employee than five slaves.

The reason is simple. The level of management (and government support) required to use slaves is great and their productivity is nil. Most modern commerce is not poicking cotton.

When confronted with the Marxist view that all commercial productivity is inherently imperialistic, simply ask the question: ‘Could one salaried employee out produce five slaves?’  The answer is 'Yes'.  Slaves are very unproductive, very difficult to manage and  Marxists are hanging on to the slavery idea long after the commercial world has discarded it.

Walking tours

A friend of ours was leaving coffee yesterday to go on a walking tour of San Francisco, one of 80 walking tours scheduled that day.

I am very proud to be the father of this wonderful institution, walking tours of San Francisco. The history of local walking tours and my role in starting the process is described in several earlier blogs.

What I did was to create an array of products based on intelligence, narrative and vitality in the world of tourism.  When I think about what I created, I realize that there had been a vast untapped market before I introduced my material. Whether the market would have been developed without me, 1, 5 or 10 years later is unknowable.

There are many tourist destinations where the application of intelligence, narrative and vitality would be insignificant and would not have generated the massive institution that now exists in San Francisco.  Boise, for example.

I am very proud to have started this process here, to have planted the seed in a very fertile field.  

It also hurts me to know that the political class in San Francisco openly and consciously harms the tourist business by encouraging visible homelessness and generating our international reputation for political idiocy.

How to commit suicide

If you Google the title of this blog, exactly, you will find my name in the fifth entry. The entry dates back to 1981 and a discussion I had with the author, Art Kleiner, about doing an article on the subject of suicide.

Let me say unequivocally, I have not, and I will not help an individual to commit suicide.  For me suicide is a moral issue that requires the concurrence of not only the suicide themself but all people directly related and involved with that individual.

On the other hand I have always had great sympathy for individuals who commit suicide using inappropriate methods: many are painful, sloppy and ineffective.

Of all the methods for committing suicide, the one that is least painful, least sloppy and most effective is the ‘exit bag’, described in Wikipedia.  The exit bag is filled with either helium or nitrogen. Neither helium nor nitrogen gas is readily available.  Getting the gas remains the only barrier between a suicide’s intent and death.

The reason the exit bag works is not adequately explained in Wikipedia.

The mechanism that lets us know we have inadequate oxygen for our brain and for survival are the sensors that tell us the CO2 level in the atmosphere we are breathing.  If the CO2 level is too high we panic. If the CO2 level never increases, and there is really no oxygen available to breathe, which is the case if we are breathing pure helium or nitrogen, then our body has no sense that it is about to fall asleep and die. That is how and why the exit bag works.
 
This blog does not violate my moral code. I have provided information to keep suicide from being painful, sloppy or ineffective for the reader but I have not personally helped the suicide in ending his/her life.  That requires getting helium or nitrogen gas.

Wiki peepee -- part 2

The value of openness is far from unlimited. Openness can do serious damage in many circumstances. Transparency is not an inherent social or moral good.

Consider the following words: enemy, opponent, antagonist, hostility, conflicting interests and predator.

If you believe that any of these words describe real-world elements, then you can easily comprehend the reason that openness has barriers and limits.

There seem to be some people who mistakenly believe openness is an inherent social and moral good. These are people who believe that none of the words listed above are connected to the real world. These people are generally pacifists, anarchists and angry teenagers.

For the rest of us, openness is a term that can apply beneficially in many instances and is dangerous in many others.

In terms of the current wikileaks news stories, I have very little to add. I can only remind my readers that the definition of secrecy is ‘how much does it cost?’  Virtually all information is accessible..... the question is always ‘how expensive is it to obtain?’

-----------------------------

Hypocrisy footnotes:

the New York Times refused to publish the purloined 'private' data that destroyed the global warming debate a year ago; but eagerly published the 'secret' and 'confidential' material from wikileaks. 

If you check the wikileaks website you will find this is an organization with no transparency no openness, nothing to connect site with openness values.

Wiki peepee -- part 1

Is there a connection between open books, the long history of transparency in business and the current outbreak of Wikileaks?

So far I am not aware that anyone has written the history of openness. The process has been long; beginning with punishment of individuals for stealing from their employers. The entire 20th Century was concerned with making public information about financial instruments and government processes.

There is also a history of hacking in the world of technology and in the world of the computer, especially in networks. I personally dealt with the original actors who hacked the global telephone system. They were all in their teens and were motivated by a combination of loving technological power and fathomless curiosity.

I don’t believe that openness has an ideological or political basis, a priori. People from anywhere on the ideological spectrum can favor or oppose openness in a wide range of circumstances.

This blog has two parts. This part is in praise of openness where openness provides greater efficiency for institutions. The second part deals with the harm associated with openness.

I have long advocated open financial records including salary data for all businesses. However, I have always assumed that it would be voluntary. It has been my experience in dealing with many companies and businesses that such open financial documents results in superior operations for one reason: in an open books company everyone understands how the company works and what needs to be done to make the company work better.

I have been a strong advocate of executive compensation data being open. Unless the data is open and compensation is connected to executive productivity we get self dealing and corruption at top management.

My favorite case of openness is the practice among surgeons of bluntly reviewing their work in order to make improvements. Such practices are found in many highly technical fields where a  post operational review is conducted with extreme internal openness. In these cases, the candor works because it is entirely internal and will always remain exempt from outside eyes. Mistakes do occur and must be dealt with with candor not punishment.

China wins anti-dumping

China recently won a WTO case against Europe on an issue of anti-dumping. The next target for China will be the United States and our constant mistreatment of China on antidumping charges.

Let us begin with a simple explanation. Nobody in the history of business has ever found it desirable to sell products or merchandise in another country at a price below the cost to manufacture or produce the parent product.

The charges are always based on two pieces of flawed business thinking. One is that the government subsidizes the production to encourage dumping. The simple truth is that any system of taxation with exemptions and deductions will inherently results in government subsidizing some activities and penalizing others.

Either take the government out of all forms of taxation and demand identical taxation among countries or drop the stupidity of antidumping legal cases.

Second there is the presumption, especially among ignorant union bosses, that a business can create a dominant monopolistic position in a new market by entering the market with very low subsidized or 'dumping' prices.

Since this virtually never happens where the new country is anything but a Banana Republic the idea that the new country market cannot respond to subsidized products is foolish. But the long history of commerce says that even drug dealers do not provide cheap drugs very low or very long. And even in the most ridiculous cases they are not selling their products at or below cost.

I look forward to an end of American use of antidumping nonsense and hope that more people realize that this is a futile activity promoted by unions because of their blind zero-sum view the world.

MacArthur genius award

The MacArthur genius awards began in the late 70s. I have known a number of winners. Although all my friends deserved recognition and appreciation, the vast amount of money never did a thing.

Several of us knew this nearly a decade earlier. The Point Foundation, of which I was a president, deliberately chose to give grants directly to activists whose work we appreciated.

After three years of such grants it was obvious to all but one of our board, that our grantees would either fail, like lottery winners, or they would succeed because they would have succeeded without the money.

Only one member of our board was incapable of learning this lesson. He was a diehard Marxist for whom data and experience were irrelevant. He made the decision to spend the rest of his life in the grantmaking world.

In all the studies I have looked at, the hundreds of millions of dollars that the MacArthur Foundation awarded, generally has done nothing positive for our society.

The Foundation was taken over in the first few years by the Left. I wish I could say that Lefty blindness was the problem, but my own failures suggests that giving away money is the problem itself. In my book the Seven Laws of Money the fifth law is that you cannot give money away.

Blind scandinavian

You have probably seen this video on more than one occasion. It is a man named Hans Rosling showing the historic connection between national income and longevity.

The graphics are accurate and impressive.  The problem is that Rosling does not understand the driving force behind the correlation.

The driving force is commerce.  

The sequence is: an increase in productivity that leads to growing markets, more competent government, which in turn leads to sanitation and associated technological improvements in lifestyle.  

Government is never the source of this health improvement as was evident in the Soviet Union, China and India.  China and India only increased wealth and health with the free market after discarding socialism. The Soviet Union is now Russia without much commerce and with bad health.

Commerce is almost always decentralize and is therefore able to translate local productivity to better sanitation and technological improvements in lifestyle: toilets, better water and warm clothes .

Rosling in his final summary mentions future sources of improved health: one is green technology. The opposite is true. Green technology is inefficient and diverts real productivity from generating the benefits that result in wealth and health.

Rosling makes great charts but he himself doesn’t understand what they are about.

Positive sum world

It is a very rare person who understands the concept of positive sum.

The term comes from the world of game theory.  A game of chess or checkers or anything similar will have a winner and a loser.  Zero sum. It took game theorists to realize that in the real world of humans there are many instances in which two people interact and neither are losers.

If I trade my socks for your gloves we can both be better off. The same is true if you buy something from me that I wish to sell. We are both better off. In a voluntary society, such as most of us live in, nearly all transactions except for the government are positive sum.

I have obviously mentioned the one that is not positive sum: the government. Most government dealings are not voluntary and we the citizens are the losers.

The same is true for unions. Unions have been founded on the principle of a zero sum world. Winners and losers. How else can we explain the constant self punishing behavior of unions?

Invariably unions will make a choice between reducing their wages or benefits and losing their jobs. Because the labor union sees a zero sum world they choose to lose their jobs. They are unable to see that reducing wages or benefits might increase the productivity of their employer and result in subsequent increases in wages and benefits and jobs.

In simple terms the opposite of pro-commerce is pro-union.

My readers know that I have one exception to this statement and that is police unions who defend police against the absurd lefty public view that police officers should deal with dangerous and violent people with kindness and persuasion. Police unions defend police appropriately in these instances.

The euro mess

Many of the people I talk to on a regular basis seem to have very little understanding of the euro mess.

The problem is inherent. Many countries have joined together in an effort to create one currency with the commendable goal of creating a large market for goods and services.

In an earlier blog I used the metaphor of a tank of water. In the metaphor the government processes some of the water through its own filter. Some of government processed water is lost because governments have a negative multiplier.  Meaning that for every dollar the government takes in only 80 cents come out.  The commercial market must offset this loss of water in the tank by creating new businesses and new exports.

When we look at European euro governments we see that many governments joined together, each with a different government negative multiplier taking money out of the tank and each with a different business environment to put water back in.

The most successful government is Germany and the second most successful is France.

Both Germany and France are able to grow because the amount of money the government takes out of the tank is not as great as the amount of new growth that their commerce generates.

When an economy cannot generate enough new growth in business and exports to offset the amount drained from the tank by the government the cost of borrowing to offset the difference continues to grow. In the case of Spain, Greece, Ireland and Portugal the amount of net government expenses are much greater than the commercial market can offset.

Part of the reason for this is that all are highly socialized governments with very expensive pension, healthcare and employment subsidies. They are politically unable to reduce their expenditures at times when the revenue’s are declining.

Who would lend them money?

Sub-prime, what?

I meet many people and end up in many discussions where other people seem to believe the Wikipedia definition of sub-prime.  Wikipedia believes that sub-prime refers to all loans that are issued at higher than prime rate.   If that definition relates to the phenomenon that just destroyed $40 trillion of assets we have an extensive ignorance problem. In reality the Wikipedia definition is merely a truism

I worked on this issue for the past 20 years. The problem has always been second mortgages, not the hundreds of other loans with above prime rates. Such other loans include automobiles, mobile homes, personal loans, credit card advances and unsecured payables.

The reason the sub prime issue relates to second mortgages is because mortgage bonds were packaged together with second mortgages.  The justification for packaging these two together is that there is a similar source of mortgage payments and a similar underlying asset.

There have been many questionable mortgage loans packaged into the mortgage bonds. These include interest only for the first two years and many ARMs set at subsidized rates. However the bulk of the problems have been second mortgages.

The reason should be obvious: when someone gets into financial trouble the first mortgage and a second mortgage are both at risk. The second mortgage is what took all of the asset value out of the total mortgage.

When the second mortgage is in trouble the entire mortgage is in trouble and that is the striking problem with the coupling of prime and sub-prime finance.  That created a disaster.

Not automatically a source of disaster.  It would only happen after a significant rise in the price of residential housing.  It is just such a rise in  prices that encourages second mortgages.

When the expansion of the market and the prices reached their limit the entire financial structure has been put under great stress.  The underlying assets are bound to fail.

You might note an element in this financial picture that is seldom discussed.

In mid 2007 the price of gasoline went above four dollars per gallon in the US. That meant the cost of a 30 mile one-way commute increased from under $160 a month to over $300 per month. A squeeze factor that affects payments on first and second mortgages.

Triple bureaucratic nightmare

I avoid discussing evil.  My reason is simple. I think like Franz Kafka.

Kafka explained to all of us that the greatest evil was to be within a bureaucratic system. Bureaucracy is the source and home of evil.

I fell into a triple evil nightmare.

The first bureaucratic nightmare begins with stop signs. I wrote a blog about the way stop signs proliferate endlessly. I provided the data that showed that stop signs grew at a more rapid rate than the number of cars or the population and independent of the number of pedestrian accidents.  The political process has never had the capability of stopping this bureaucratic monster.

The consequence is that that most people ignore stop signs. I have counted at various stop signs the percentage of drivers who make a full stop.  The data ranges from 90% of the people stopping to less than 50% depending on the location.

Now the second bureaucracy enters the equation. Because so many people do not waste their time stopping at the superfluous stops signs the police are directed to penalize the scofflaws that they can find. Because this has no effect whatsoever on the number of people who stop at stop signs the punishments and the financial cost continues to rise.  At this point a first offense will cost somewhere between $300 and $500.

Now a third layer of bureaucracy is introduced. First-time offenders can take a driving course online as credit for part of their punishment.

I took the online drivers course.  It is a true bureaucracy. First, the relationship between the questions, 50, and the preparatory material ($29) was inadequate. More than 30% of the final questions were not covered in the preparatory material.

To add insult to injury the final 50 questions included 10 questions, 20%, about the evils of automobiles in the environmental world.  The questions champion the values of public transportation, the glories of public transportation including the glories of bicycle riding. These 10 questions were based on preposterous and erroneous data that purport to show how much more efficient buses and trains are than automobiles. Of course the 10 questions on politically correct environmental fantasy, was not covered in the preparatory online material.

Three bureaucratic overlays each one an evil on top of another evil. First stop signs are out of control, second police are used along with financial penalties to try to suppress the ordinary citizen's response to out of control stops, third an additional punishment is added requiring scofflaws to submit to abusive politically correct insults and ignorance on a test questionnaire.

To me that it’s pure triple evil.

Blogs November 15 to December 3rd

What field of law would a pro-commerce lawyer select? Immigration law.

The most absurd public statements before and after the midterm election was that unemployment played a role. How is that possible? States like California, Nevada, Illinois, and New York have the highest unemployment rates and still voted Democrat? Explained Lucy.

While the US, NATO, and Russia are fighting over the appropriate forum for defensive missiles, Israel has decided to shelve defensive missiles. The argument is simple: there is no such thing as defensive against missiles.

Calling someone a racist, is no longer perjorative.  That era is over. Today the name caller is a bigoted slimeball, an Al Sharpton.

The Mormons are not going to change their position on gay marriage. They have been fighting a related battle for 175 years.

Rise of capitalism and China

The core subject of this blog is increasingly the subject of discussion throughout the world.

The rapid growth of China is the reason.

Before anyone can make an intelligent statement about the future of China they must examine the commercial expansion of that nation.

We have dozens of nations to examine in the past century in thinking about commercial expansion. Most nations chose a course of communist, socialist, government directed activity and remained as stagnant as Cuba and North Korea.

As some nations and city states adapted to commercial inducements they emerged as modern productive nations.

The first great anomaly was Japan that simply copied from the commercial world of a Europe and America in 1865.

The next great explosions came after World War II with such extraordinary examples as Hong Kong and Singapore. And socialist failures galore.

Since most of the people discussing this matter these days are basing their models on economic theories they are of little relevance. The subject of commerce is a subject that stands alone independent of economic theory. What I simply want to point out is that most of the current commentators fail to understand the connection between a mercantile class and the success of commerce.

The person who did the most research and the most intelligent research on this subject was David Landes, his book is Revolution in Time.

Landes compared rapid expansion of clocks in Europe at the same time as industrial commerce was exploding. He recognized that the clock was of no interest to the Chinese of the same era except as a toy.

The reason was quite straight forward. China had a strict social hierarchy. When you set a time for a meeting, say one o’clock, the inferior would come early and would wait. The superior would come at his leisure and commence the meeting upon his arrival.

This does not work in the commercial world which is why clocks were important in Europe. Clocks provided a mechanism for equals or near equals to meet.

We have lots of data and history to show us that commerce requires a mercantile class of equals and that there is no other productive way of looking at the issue.

How wine caught on

There is an exhibition at the San Francisco Museum of Modern Art about the subject of how wine became popular.

I am not going. This is an exhibition put together by a New Yorker who believes that something about a French wine tasting fair in the mid 1970s  brought wine into the popular dining rooms of America.

This is blatant and historic nonsense. Having lived through the entire transformation for Americans from water and Coke at dinner to fine wines; I am fully aware of the history.

I recall a specific conversation with Nicholas Lehman in 1968 when we were discussing the influence that the hippie movement would have on American taste. I specifically stated that marijuana would be a major contributor to the sense of taste. Lehman argued that the major impact would be wine. By the end of the conversation we agreed that Americans were hedonistic and would adopt both.

As early as 1964 I had friends on the peninsula in the Silicon Valley ( the future world of computers) who were putting their investment income into vineyards. They were becoming experts on the subject of wine. At the same time my hippie friends were becoming enamored with one dollar bottles of mountain red wine to go along with their communal meals.

The two groups often overlapped. The hippie tastes improved and the investors anticipated strong market growth.

The modern wine in our dining experience arose in the early ‘70s when the hippies radically shifted our eating and taste practices. Along with good bread, good salads, fresh vegetables and great imagination derived from a wide range of world cuisines the hippies added wine.

That is the history. You can go and see what some New York aesthete has to say based on New York and East Coast blindness. I have seen nearly everything for the past 50 years that the hippies created credited to other unrelated sources.

(Photo is from Ridge winery founded in 1962.)