Defenestrating Thoughts from the Bivouac

Of all the companies out there, I really admire UPS and FedEx. Here are two companies that went against a government sanctioned and heavily subsidized monopoly, and armed with private capital and their own smarts, they are winning.

The US Post Office has a government granted monopoly on first class mail. This monopoly advantage basically gives them all the facilities, trucks, and personnel they need to run package delivery services; essentially a large chunk of the US package delivery service is subsidized by the taxpayer.

And against these odds, UPS and FedEx are able to be profitable entities. Amazing.

So when Fred Smith, the FedEx CEO, was featured in a recent WJS article entitled “Washington is the Problem“, I read it with interest.

It’s worth reading the whole article, but I’ll mention a few parts that I really liked.

First he talks about how the tax structure and regulations give preferential status to banks. For example, for a company to raise money (i.e. get loans), they need to have a dollar of assets for 10 cents of “risk”. Banks, however, have one dollar of assets and $25 ot $50 of risk!

That means for every dollar in the bank, the bank lends out around $25 to $50!

With leverage like that, of course the banks can make great returns for short periods of time — until it all crashes down and the tax payer is forced to bail them out. As a result, the pay the banks offer attract the best and brightest.

So what happens is a misallocation of talent. Instead of our smartest kids going into production engineering to build factories, they go to Wall Street and move money from point A to point B. They don’t actually produce anything valuable, they just build Ponzi schemes.

The second point he made is that we’re at the point in this country where fewer people pay income taxes than don’t. And since the non-paying majority can just vote to take the money from the productive part of society, you have a problem for the overall economy.

I like Fred Smith. I don’t agree with him on everything, but the fact that his company employs 290,000, has $38 billion in sales, and owns 300 jet airplanes in face of competition that’s heavily subsidized, you got to take him seriously. :-)

Google is one of the corporate sponsors of Impact on Education, an advocacy group for Public Education in Colorado. As a sponsor, Google was given a table at Friday’s “Education Matters” breakfast forum. Despite the early hour (7 am!), I attended the event.

I found it very interesting and a little disappointing. Obviously as an advocacy group for public education, they are very much in favor of higher funding (e.g. taxes) for public schools. Yet much of the data they presented seemed to not support their desire.

Here are two of the facts that stood out:

• Colorado near the bottom of states in educational funding. Yet Colorado is one of the best states for education in the country.
• All schools in Colorado (by law) have the same amount of funding (except for a small window of allowed private fundraising). Yet there is a wide discrepancy in the quality of schools, as some of the school districts in Colorado are the among the best in the nation, while other are among the worst.

The conclusion they said? We need more money for schools.

Huh?

Both of these points show that (1) money is one of many factors and (2) at the current level of funding, you can have high achieving schools.

This is where the irony comes in; the organization is unable to separate “ends” and means”.

What they want is the “ends”, namely good public education. However, they no longer separate the “means” (funding) from the ends. So even though evidence may suggest that they should concentrate on other factors, funding is what they will blindly support. While funding is, of course, important, we need to step back and look at the big picture.

Whenever education and funding comes up, I’m reminded by something my dad told me once. Consider schools in 3rd world countries like India, the school doesn’t have a roof or electricity, kids don’t have paper and pencils, and teachers are paid basically nothing. Yet, how is it these kids can read and write, but our kids, with all the wealth, facilities, and curriculum can’t?

I think the big factor is the student’s attitude and their desire to learn. And most of this attitude comes from the parents and their peers. Do the parents value education? Does the student peer set support kids that get good grades?

This is of course very important. And is likely to explain a good deal of the difference between the high achieving and low achieving districts in Colorado.

Desire is also a big part of this. And that’s tied to the return on investment of an education. In many 3rd world countries, an education is a matter of life or death. If you can get a job, you get paid and can buy food. If you don’t, you won’t have anything.

In America, between our social programs and the fact that anyone with a pulse can get tons of credit, the return on investment of an education is less drastic. If you goof off in school, life may be tough, but you won’t starve to death.

(And just to be clear, I’m not against social programs…)

In conclusion, I think it’d be good if organizations spent less time lobbying and pushing for more funding. Funding is important, but some of their resources should be used to address the other factors that impact our students’ success.

With the country completely sick and tired of the incompetence and corruption of the current administration, it seems all but certain that America will vote for Change and Obama will win in a landslide. After all, Obama is currently expected to have over 370 electoral votes and may even win Georgia.

Yet, I’m not convinced that Americans are voting for Obama; rather, I think that they are voting against Bush and McCain.

If so, it’s very important to remember that the lesser of two evils is still evil.

This election is likely to give the Democratic Congress a super-majority. And these guys currently have a 10% approval rating!

And as I’ve written about lots of times, what Obama says and what Obama does is very different. He says he is against the war, wants to restore our civil liberties, and is against government waste. Yet he voted to fund the Iraq war, to re-authorize the Patriot Act, for telecom immunity, and for the bailout including its $150 billion of pork.

American is desperately seeking change. This explains the big bump that we saw Sarah Palin when announced as the Republican VP. People thought, “Finally! Someone new!” She got the advantage of being the new choice in a field of bad choices. And America really wanted a new choice.

Remember how in 2006 America voted in a Democratic Congress with a clear mandate to end the war and restore civil liberties?

Remember how a few weeks ago we completely flooded Congressional phone lines with overwhelming opposition for the bailout?

How did those turn out again?

Any reason that an Obama presidency would be any different?

I figure it’s time to stop ranting about politics for a bit and talk about education again. Education is something I’m very passionate about and “when I grow up” I’d really like to run my own charter school, set my own curriculum, and recruit the best teachers possible.

Of course, to do this, I need a big pile of money. So for now, I’m trying to figure out how to get a big pile of money. Perhaps, those Gnomes on South Park could help me…

(Hyper-observant readers will notice I added a new categories of blog posts named “Education”).

One of the things that really, really bothers me is when someone says, “But no one ever taught me that!” It’s surprising how often you hear this and it’s a clear indication of an educational system that is failing.

Let’s analyze that statement for a second. When someone doesn’t know something, what does it mean if their response is “But no one ever taught me that!”?

This phrases implies a frame of mind where one’s education is the responsibility of someone else.

The person who says this is really saying, “It’s not my job to learn, it’s someone else’s job to teach me.” This means our educational system is not teaching people to be critical thinkers who are always learning.

Rather, the system is creating a generation of people who sit passively and try to absorb “knowledge” through osmosis. 

There’s a lot of things wrong with this. First of all, people are less likely to learn concepts and more likely to just memorize facts. Science is now reduced from the art of the scientific method and the beauty self-discovery to just memorizing facts. Mathematics is reduced from the mind-opening language of physics to just a set of instructions on how to solve for X, without ever understanding why.

Under this system, learning is not engaging nor rewarding, it’s boring and painful.

Futhermore, by teaching a generation of kids that it’s someone else’s responsibility to educate them, you give them a convenient crutch to lean on the rest of their lives.

As people are losing their house to foreclosure, we hear endless stories of how people were targeted with predatory loans. Unless there was a gun to their head, the loans weren’t predatory. As an adult, you have the responsibility to read and understand what you are signing. If it’s too hard to understand, don’t sign it!

Just because your real estate agent told you it was fine is not sufficient. Notice again, people are conditioned to be told what to do, not figure it out themselves.

The biggest problem I have with this way of thinking, it that over time, society loses knowledge. If knowledge is exclusively “taught to you” and you have no responsibilty to seek it out yourself, then the most any given generation can know is the set of the knowledge the previous generation had!

And if some knowledge isn’t past on, it’s lost. Forever.

From the UK Times Online:

Everyone who buys a mobile telephone will be forced to register their identity on a national database under government plans to extend massively the powers of state surveillance.

Phone buyers would have to present a passport or other official form of identification at the point of purchase. Privacy campaigners fear it marks the latest government move to create a surveillance society.

OK, so the British gov’t create a databse which tracks which phone belongs to which person. The article continues with,

The move is targeted at monitoring the owners of Britain’s estimated 40m prepaid mobile phones. They can be purchased with cash by customers who do not wish to give their names, addresses or credit card details.

The pay-as-you-go phones are popular with criminals and terrorists because their anonymity shields their activities from the authorities. But they are also used by thousands of law-abiding citizens who wish to communicate in private.

Here we find out that terrorists use pay-as-you-go phones. But wait, there are 40M of these phones? How many of these people are terrorists? Probably not many. Even if you say that 0.01% of the prepaid owners are terrorists, that’s 4000 people.

If we read carefully, we find that pay-as-you-go phones are actually the norm in England. Of 72M cell phones in the country, 40M are pay-as-you-go (56%) and for companies like Vodaphone 72% of their customers use pay-as-you-go.

So the number crunching shows us that pay-as-you-go is how most people use their phones, it’s not some weird loophole.

Anyway, let’s say we build this database. Anyone see any reasons why it won’t work?

If you said, “terrorists will just steal or clone phones” or “terrorists will buy the phones on the black market without ID”, you’re right!

Even if we ignore the privacy concerns and Orwellian criticisms, the plan doesn’t even accomplish anything!

Yikes.

A lot of people have summarized this presidential election to “Who do you want to run the country?” My answer: “No one.”

First of all the President isn’t supposed to run the country. If you read Article Two of the Constitution it’s pretty clear what the President is supposed to do:

• The President is the military’s commander-in-chief, but only Congress has the authority to declare war.
• With the advice and consent of the Senate, the President can sign treaties and appoint “judges, ambassadors, consuls, ministers and other officers”
• From time to time he will give a State of the Union speech and make recommendations to Congress.
• He can under extraordinary cicumstances convene Congress for a special session.
• He will host Ambassadors
• He shall ensure that all laws are faithfully executed
• He commissions all Officiers of the United States

Based on that description, do you really think the President “runs the country”?

OK, now let’s just forget about the Constitution for a moment… do you think anyone is qualified to “run the country”?

Who is able to plan the lives of 300 million independent free-thinking individuals? The real question is this: is it even possible to effectively centrally plan the lives of everyone in a country?

I strongly believe the answer is no. The people we deem most qualified (our politicians) can’t even manage their own lives, marriages, families and business affairs.

Why do we think that any human is capable of managing everyone’s lives? When you think of it objectively, it seems impossible.

Here’s my reasoning: the system is too large and complex to understand our any new mandate or law will affect it. In a myopic view, you can make changes to things that you understand; but the downstream implications are impossible to predict.

A good example of this is subsidies to corn-based ethanol. It should have been easy to see that these subsidies would create a huge spike in food prices (both grain and meat) and lead to shortages. But central planners were unable to see this. And even today, those subsidies continue!

So not only were central planners wrong, even now they are too slow and inefficient to remove the universally agreed on harmful regulations!

Historically, central planning has been inefficient; in Soviet Russia, the government was unable to figure out seemingly simple things like the how much bread to bake. This led to food shortages, long lines for ratios, and the eventual collapse of the USSR.

To summarize, think about what you think you’d like the government to do. Suppose you want the government to run health care.

Now ask yourself one thing: “Do you want the same guys that run the Post Office and DMV to run your hospitals?”

I hope not.

Tonight there’s another one of those meticiously orchestrated PR events hosted by the two parties in American politics. In other words, there’s a “debate” tonight.

If you’ve watched these “debates” so far, you’re probably wondering why there are no serious exchanges of political philosophy and we just hear lots of soundbites.

We used to have the League of Women Voters run the debates, but in 1988 they dropped out (emphasis mine):

The League of Women Voters is withdrawing its sponsorship of the presidential debate scheduled for mid-October because the demands of the two campaign organizations would perpetrate a fraud on the American voter,” League President Nancy M. Neuman said today.

“It has become clear to us that the candidates’ organizations aim to add debates to their list of campaign-trail charades devoid of substance, spontaneity and honest answers to tough questions,” Neuman said. “The League has no intention of becoming an accessory to the hoodwinking of the American public.”

…

“The campaigns’ agreement is a closed-door masterpiece,” Neuman said. “Never in the history of the League of Women Voters have two candidates’ organizations come to us with such stringent, unyielding and self-serving demands.”

So without a debate sponser that wanted to play by their rules, the two parties did the obvious thing: they created their own organization.

And so the Commission on Presidential Debates was born. It’s run by the former head of the Republican National Comittee and the Democratic National Committee.

The Commission dictates everything, the questions, allowed follow-up questions, who’s in the audience, lighting, the moderator, and most importantly, who’s invited.

That’s why you only see two candidates at the debates. The Republicans and Democrats collude to exclude third party candidates. The last thing they want is someone up there that points out that both guys are basically saying the same thing.

In 1998 Walter Cronkite said,

“The debates are part of the unconscionable fraud that our political campaigns have become … the candidates participate only with the guarantee of a format that defies meaningful discourse.”

You know the really sad part though?

The candidates know the questions ahead of time and they still sound like idiots.

While we lived in Seattle, I had to drive by 3 or 4 car dealerships on the way to work. I started to pretend to gauge the relative strength of the economy based on the density of new cars in their lots. Surprisingly it sort of worked!

Since we moved to Boulder, I obviously don’t have the same commute. But I quickly discovered a new economic indicator. On my way to work, I drive by a Walmart and then drive by a Whole Foods. The relative utilization of those parking lots is very interesting.

In the past few weeks, I’ve seen more and more cars at Walmart and fewer cars at Whole Foods. It used to be impossible to find a parking spot at Whole Foods, especially around the after work rush. The last two times I went, easy parking and no wait at the cashier.

Yesterday, I refined my metric more; the number of Toyota Priuses in the parking lot of Whole Foods vs Walmart.

It’s well known that all Prius drivers are religiously against Walmart, while Whole Foods is similar to a cathedrals for them hybrid drivers. In normal circumstances, you will never see a Prius at Walmart.

But yesterday I saw two Priuses at Walmart. One could be an aberration, but two?

I guess the economy really is in bad shape.

Since the next presidential debate is tonight, I thought I’d write a brief note about the debates so far. Specifically, who won those debates?

The answer: both candidates won. And who lost? The American citizen.

Why? Because the candidates clearly demonstrated that there’s no real difference between the two parties and the American citizen didn’t realize it.

The following describes both McCain/Palin and Obama/Biden:

• The bailout for the rich is good and they support it. And they don’t have any programs to cut to fund it, so it’s more deficit spending. Both parties support stealing from our kids to give to the rich!
• Never hesitate to use military force. Back in the “good old days”, war was the last resort. Not anymore.
• Wasting more lives and money in Iraq
• Wasting more lives and money in Afghanistan (what’s that thing people say about land wars in Asia?
• Threatening war against Pakistan
• Threatening war again Iran
• More antaganizing of Russia
• Both are against gay marriage, but for civil unions.

So on social issues, foreign policy, and economics, there isn’t much of a difference.

They say stuff about abortion, universal health care, and other wedge issues, but in the past 20 years both parties have had full control of the White and Congress and did nothing. The parties want those wedge issues to remain.

The main difference we have this November is that one guy is half African-American and the the other VP is a woman. 

Remember how “the bailout has to pass, otherwise the economy will fall apart”? Well, it passed and the economy is collapsing. Our politicians just don’t get it, we will have a recession regardless of how much money they waste while pretending to “do something”.

On Friday, for the 3 hours the market was open after the bailout passed, the DOW lost 484 points ( ~$600 billion). Today, we’re down 567 points so far (~$700 billion).

Wasn’t the bailout supposed to prevent this?

I guess not; so that $700 billion revolving credit account for the Treasury to buy worthless assets and the $150 billion in pork did nothing to settle the markets.

And today The Guardian reported this:

Fears are mounting that many Wall Street banks and financial firms will refuse to participate in the US government’s $700bn bail-out package, leaving global markets and world economies in a perilous state for months to come.

‘There is a growing feeling that banks … might instead decide to tough it out,’ said Thomas Caldwell, chairman and CEO of Caldwell Financial, a $1bn-plus fund manager.

Wait a second. We were told that the bailout had to happen immediately since the banks need the money now.

But the banks are saying, “Well… I don’t know. We might participate in the program or not. We’re not sure. We’ll get back to you. We might just tough it out.”

So in reality, there was no urgency. The banks didn’t need this, they aren’t even sure they will take it. They think they can just “tough it out”.

In the end, we were lied to by our politicians. And despite 90% of the American people being against it, our politicians thought they were smarter than the rest of us “common folk”. Well, I guess they were wrong.

The bailout isn’t stopping the economy from collapsing and the banks don’t even want to participate. So in the end, it’s just a collosal waste of our money.