Detroit: Product of Liberalism or Just Bad People?

There is a front page story in the New York Times about how it is now coming out that one of the reasons Detroit is bankrupt is because the pension trustees just decided to give money away. For years they would just hand out extra money from the pension fund, above and beyond what contracts called for, to both retirees and active workers. When they started running out of money, they borrowed, which worked for a little while, until it...drum roll...didn't.

You can read it here.

What's really interesting is the comment section. Obviously, lots of liberals read the NYT, and since there hasn't been a Republican seen near Detroit for about half a century, it's fascinating to see their contorted rationalizations. The main one seems to be, "This isn't a story about the failure of liberalism, it's simply about some corrupt people, and corrupt people come in all political flavors."

The second part I'll agree with. My own state senator here in New York, a Republican, was sent to prison for taking bribes. But having said that, the rationale fails to acknowledge that corruption happens when it has certain preconditions, and it is liberals who are the relentless cheerleaders for these preconditions.

It is statism, in a nutshell. Big, unwieldy, states are like a petri dish for corruption. The bigger the government, the bigger the corruption. This is primarily the result of the growth of the "administrative state," which has become government's fourth branch. Its workers are almost completely unaccountable, and they have ever-growing power that can be monetized. For many, the temptation is too great, and worse, it becomes part of the accepted culture.

Look at Lois Lerner, the undeniably corrupt IRS honcho. She got a long, paid, vacation, and now a lucrative retirement (although she was corrupt for ideological reasons, not monetary).

Oftentimes, corruption happens because it feeds the state. Look at the railroad workers in New York, who for years would routinely claim disability just before retirement to enhance a lifetime of benefits. The union, the regulators, and the politicians all looked the other way because the donations were flowing.

People are people, and a certain percentage are of flawed character. Such bad actors seek out situations that can be exploited for their benefit, and what better than a growing government with ever more authority over its own people? Checks and balances are vanishing.

It's even worse in places with one-party rule, like Detroit, Chicago, and New Orleans. In such places, politicians are easily corrupted as well as bureaucrats. Normally, politicians can be held accountable by voters, but when they're not, their position becomes a sinecure, and the inevitable follows.

You can see the phenomenon elsewhere in the world, too. Places like the Philippines and Greece are highly corrupt because their governments are very large. Cuba is 100% corrupt because the state controls everything. There's hardly any corruption in Singapore or Hong Kong, though. Simply not a lot of opportunity.

Large states and corruption go hand in hand. Between liberals and conservatives, I know of only one ideology that embraces an ever-growing public sector.

Remember the Kurds?

The largest chemical attack in history on a civilian population was not in Syria, but in Iraq, where Saddam Hussein slaughtered thousands of ethnic Kurds for not being supportive of the regime. Thousands more died later of complications, disease, and birth defects.

Barack Obama was a consistent opponent of the war in Iraq, but now he wants war with Syria. What's the difference, exactly? Is it because Bush was president, so he reflexively had to oppose everything he did? Or is it because Democrats, peaceniks when out of power, are disturbingly comfortable with projecting military power when they're in charge? The operating principle just seems to be that we have no national interest, and therefore we must be acting out of the goodness of our hearts.

Republicans and the Environment

Know anyone who hates the environment? I don't. We all love pristine beaches, wooded trails, and soaring mountains. We take joy in sharing these places with our children.

And yes, even Republicans appreciate lakes and trees. And yet they are widely perceived as "anti-environment." Why is that?

It's because they are obliged to check the relentless environmental agenda of the left, which they rightly believe goes too far. This puts them in a position of always saying "no" to policies that seem just fine to our minimally informed electorate.

What could possibly be wrong, for example, with a bill called, say, the "Clean Water for Our Children Act”?  Likely plenty, if you read the details. But to the casual observer it seems as if Republicans just want slightly dirtier water.

"We are pro-environment, too, just less so," is not a coherent philosophy.  But as long as Republicans keep merely reacting to the overreach of the left, that's how it’s going to look.

What Republicans need is a positive message, a way to champion the environment, one that is understandable and consistent with conservatism, and clearly delineated from the destructive approach of the left. 

The good news is that such a philosophy already exists: it's called conservationism. Even better, it is an approach with deep roots in the Republican Party: Teddy Roosevelt, founder of our national parks system, was its first political champion.

Decades before eco- became a mischievous prefix, there was conservationism. It is a pragmatic philosophy.  It takes the view that we all benefit from nature and therefore act as its careful stewards. It acknowledges that humans and the environment are inextricably linked. A conservationist preserves a forest, but also judiciously hunts and logs. 

A conservationist says, "We have been given this tremendous gift, and it's up to us to manage it wisely."

Environmentalism, however, is a sterner affair and qualifies as an ideology, one that views man as outside nature and its mortal enemy. Progressives get certain memes in their heads—population bomb, climate change, sustainable—and turn them into religious manias. Rational thought is discarded. They talk about high-sounding goals, but never weigh the concrete results of their policies.

Yes, it would be wonderful if all our energy came from hydropower or solar, but conservatives point out the disastrous economic effects of pursuing such pristine goals in a precipitous manner. To the environmentalist, this is irrelevant.

Conservationists take a judicious "cost/benefit" view of nature, while environmentalists do not. Conservationists husband resources for both use and aesthetic pleasure, while environmentalists believe that nature has innate “rights” that supersede our own.

Nature is a blessing. It is to be respected and preserved, but for our own benefit. The cost of everything must be weighed against the benefits. One hundred years ago, Republicans had this right, and it is time to look back in order to move forward.

A Market Opportunity for a College with Vision

This piece presupposes you read my last post on Why Colleges Are Doomed. If you don't have time, in it I outline why the typical liberal arts college has a business model that's about to get disrupted upside the head, and few, if any, see what's coming.

The case I made was one that projects less demand and far more supply, but I also suggested that most colleges just aren't getting the job done anymore. Come, drink beer, get a diploma. But worse, universities generally have adopted poisonous philosophies of political correctness. This hasn't caught up to them because of all multi-decade forces that have supported the higher ed model in general (again, see last post). But it will.

Let's be blunt. Universities, particularly in the Northeast, have lost their collective minds. They have allowed their curricula to be polluted with useless, angry, ideological majors such as Women's Studies, Afro-American Studies...pretty much any major that ends in the word "studies." At formerly great institutions like Bowdoin you can study important matters such as "Queer Gardens." Thirty-two  courses like that and they hand you a diploma.

And then...what? Since there's no place in the private sector anymore for people with useless majors, many "studies" grads get recycled right back into academia and become professors, teaching their bile to another generation who, just in case they didn't know they were supposed to be angry with "the system," will be now. Anger on anger, with none of the participants adding anything to society or the economy.

A great deal for 60k a year, no?

Then there's the pitiful record colleges have on free speech, which is to say they're all for it unless it's speech they don't approve of, which is to say anything conservative. Conservatives getting shouted down during campus appearances is a near weekly occurrence. University administrators routinely do nothing, further encouraging campus Maoists.

Graduation speakers? Conservatives need not apply.

I could go on (and on), but I won't, because any informed person reading this already knows about the overwhelming bias in academia. If not, spend five minutes with Google.

So, given the impending apocalypse of the higher education model, it might be time for one or two enlightened colleges to do something radical to ensure their survival, no?

To wit, I have a modest proposal: brand yourself as "conservative." Toss out every half-assed, ideologically-based major. Gladly accept the resignations of the scores of outraged professors. Establish a core curriculum with an emphasis on the Western canon. Require a course on constitutional history. Embrace the study of all cultures but not the notion that all are equally wonderful. Some of them suck.

Don't let anyone graduate without some grounding in math, hard sciences, and at least one foreign language.

Require econ majors to learn Von Hayek and Friedman. Ban Keynes and Krugman? No, that's not what this is about. This is about balance, about understanding both sides of an argument, and then learning how to reason them through on your own. That's what conservatives do. Colleges today are more about indoctrination.

Protect free speech for all, but only for those who express it with civility. Students can embrace the tenets of "Occupy," whatever those are, but they can't occupy the damn quad if it's against the rules.

Ironically, I'm describing how virtually every college in America used to be, circa anytime before around 1968, so one might brand this as "traditional," rather than conservative. But I'm not sure it describes any well-known colleges today.

So, back to the opportunity. Americans very consistently, over time, describe themselves as conservative. The percentage has remained about 40% for a very long time. This doubles the number who describe themselves as "liberal," and this is also very consistent.

Now, of the population of parents who actually foot the tuition bills, how do you suppose those percentages fall out? I'd say it was a safe assumption that north of 50% are conservative.

What if they had just one brand name option that pursued the course I described above? What if just a single college, say a Trinity or a Middlebury, embraced this very different path?

Well, here's what I think would happen. Applications would skyrocket, as would alumni giving. Their national profile would be raised. Maybe, just maybe, it will be enough to thrive through what's to come.

Oh, there would be a very brief and difficult transition, and the New York Times would weigh in disapprovingly, but it would work. You have to think of this in business terms. College is a market, driven by supply and demand. Right now, there is plenty of liberal supply and zero conservative supply, and yet we know there are more conservatives out there than liberals. Real life businesses rarely find market imbalances that are so cut and dry.

Will anyone try this? It would require an incredibly ballsy president, not to mention an iron-willed and board, one that could withstanding the collective howl of the liberal establishment. So, no, in other words.

They will go down with the ship.

Why Colleges Are Doomed

Know what a run-of-the-mill liberal arts college charges these days? About $60,000 a year. This number has been rising faster than just about anything else over the last couple of decades. Why? Basically, growing demand and fixed supply. Fixed supply is understandable; universities don't just pop into existence to meet growing demand, but this is about to change. Demand growth is also about to change, but first let's see what's been driving it until now:

• Demographics - the echo boom has been applying to college in droves.
• Internationalization - applicants from newly wealthy countries like Korea.
• Availability of cheap student loans.

On top of this abundance, university endowments had a great, multi-decade run through 2008. It's been a very good time to be a university president. The wind has been at their backs for a long time. When this happens in the business world, though, it invariably breeds a lot of lazy and inefficient practices that get exposed when the weather changes, and it is about to change drastically indeed for the higher ed business model. Many won't survive.

Growing endowments? Gone. Demographics? Now on a declining curve. Cheap student loans? With a federal government that's essentially broke, this game won't last either (I'm not even mentioning all the government grants here). And unless our colleges want to fill their dorms entirely with the children of Russian oligarchs and Chinese billionaires, the internationalization game has largely been played out.

But it's worse than that, because the supply part of the equation is about to change too. Ever hear of Kahn Academy? Coursera? How about iTunes U? These are all free, online options that offer best practices education, many taught by some of our finest educators. In other words, you don't have to go to college to learn anymore. Knowledge has been liberated from ivy tower oligopoly.

The undergraduate model, in particular, is highly threatened because, frankly, most schools just don't do a very good job anymore. They are four year summer camps for kids who got trophies for showing up. Now, they get degrees for showing up. Gone are most course requirements and core curricula, in their place, useless exercises in things like race and gender studies. Studies show that the amount of homework the average college kid does has been cut in half over the last couple of decades.

So, what are colleges left with to justify their existence? Two things, as best I can tell. First, they remain desirable "brands," at least some. Google and Goldman Sachs still buy the brands, not the self-taught. But this will change, and probably sooner than we think. How? A Google or an Apple will discover that they can find good employees who have excelled at, say, Coursera, where one is graded. It will get a lot of publicity, and this will cause parents to start questioning why they are mortgaging their houses to pay for tuition when they can get it done for free.

Second, there is socialization. You make friends in college, and these friends are a lifelong asset, in both an emotional and practical sense. This advantage may be the last one on to which colleges hang. I suspect, though, society will find a solution for this. Perhaps some college somewhere will toss all its expensive, tenured, professors and throw its doors open for students to pursue collaborative learning experiences. There will be ways to meet people and make friends that don't cost 60k a year.

All this is going to go down very hard. Any institution that has thrived under a successful model for generations doesn't just sit down and reinvent itself overnight, particularly if the new model requires destroying the old one. Well, actually, some businesses do. IBM, Amazon, and Netflix come to mind, but these are extraordinary companies with courage and vision. There are far more Eastman Kodaks and Blockbuster Videos out there.

And, let's face it, universities are not run like businesses. In fact, they think it's beneath them. Does anyone think that there are frank discussions going on at the board level about any of this? The small, expensive, liberal arts colleges will get hit first and hardest. I would not want to be in charge of Bates or Ohio Wesleyan right now.

On top of all this, there is the crazy ideological direction that most schools have pursued, making them even less tenable. But in this, there is an opportunity. I will address that in my next post.

We All Be Wearing Google Glass in Five Years (or Sooner)

Google Glass is something you've probably heard of, but don't really know much about yet. Kind of like the internet in 1994. But they represent the Next Big Step. To what? To the more seamless integration of man and machine, a graying of the boundaries, of man made better by technology.

This is something I have written about here and here.

Think the idea is gimmicky? Think again, and understand what's coming. This is the internet (and then some) right in front of your eyes and in your ears. No need to fish your phone out of your pocket. Robert Scoble, a tech guru, has been trying out a pair for a few weeks, and he says he'll never again be without them. You can read about him here.

What do they do? Well, you can photograph or film anything you're looking at hands free. You can get turn by turn directions. You can ask them anything (voice recognition is built in). You can pull up the internet right in front of your eyes. It appears to hover a couple of feet in front of you, not in your direct line of sight. You can read or send emails and texts. But that's only the beginning.

For a fun video that highlights some of this, click here.

Remember, if you're old enough, back when the Apple II hit the market. It did absolutely nothing useful, but a lot of early adopters bought them anyway. Very quickly, software developers made them, and other PCs, highly useful. Suddenly, it wasn't a case of wanting something, but needing it. You were at a disadvantage without one.

Or how about in the late 90s, when cell phones started gaining popularity? Many resisted, particularly the middle aged and older, thinking it completely unnecessary - annoying, even - to always be "available." Now, there's a societal expectation that you have a phone, and that's because they have become indispensable. Of course, along the way they got "smart" and even more ingrained into everything we do. The App Store is now approaching its 50 millionth download and the iPhone hasn't even been around for six years. Apps were almost an afterthought.

All this will happen with Google Glass (and presumably an Apple competitor). The development community will flock to Glass like Michael Moore to a donut. Tens of thousands of new applications, ones we can't even dream of, will be introduced, and many of them will become integral to our daily lives. Many will do astounding things, like merge what you're seeing with virtual reality. You will be at a disadvantage going about your daily business without your Glass.

Yes, the early adopters will look like geeks, but that won't last long. If the product is priced in the $200-300 range, as is rumored, it will go viral quickly.

Portable, augmented intelligence, currently represented by the smartphone, is effectively becoming our sixth sense because it connects us directly to the entire world, wherever we are. As I've written before, history will someday be divided between the time before this and the time after. Google Glass is the Next Big Step.

P.S. This device will introduce us to a veritable tsunami of privacy issues, but that is a whole other post.

Living in History (Part 2) - Fast Forward

A reader named JPR posted an excellent comment on the last post, so much so that I will expand the conversation here.

He wrote:

Your post raises an interesting question: how will one distinguish himself from others in the future, or excel in any intellectual way? You mentioned Jeopardy.  Ken Jennings was the most amazing human contestant ever, but he bowed before his new master Watson after a solid drubbing.  How does one “get into Harvard” in a world where everyone has Google and Watson built in?

Some individuals will still be able to stand out based on physical size, strength, and athleticism.  We realize now that the popular concept from the 1960’s, that we are going to physically evolve into soft creatures with large heads to hold our enormous brains, is erroneous.  Human nature will always prize health, athleticism, and physical beauty.  There will always be some iteration of Muhammed Ali or Michael Jordan for people to marvel at.  Men and women will be attracted to attractive mates.  Unless we deliberately alter this trait, I think we know it is hardwired into the human brain.

But it has been Da Vinci and Einstein, Caesar and Churchill, Ford and Jobs who have transformed the world, not Michael Phelps.

I don’t claim to have an answer.  Will it be creativity that cannot be programmed in?  Curiosity?  Mental stamina?  Competitiveness?  Aggression?

There is no doubt we are headed in the direction you describe.  We should embrace it, not resist it.  But the prospect does raise some primal fears of a sterile, humorless, and/or tyrannical dystopia where everyone is equal in ability, not just opportunity.

I think the answer is that knowledge isn't everything, it's a tool. It's kind of like when your teacher tells you it's an open-book test. I always knew to be leery because I couldn't ace it by just memorizing a bunch of stuff - all the facts would be accessible to all. It's what you did with the facts that counted.

To me, the future - Google in your head - will be like living an open-book test. Original thought, creativity, humor, not to mention hard work - all these things are still on you. Technology will serve to turbocharge the process.

We Are Living in History

I'm sure you've been asked that question: If you could travel back in time, what era would you choose? I've noticed this question has been asked more than once on my company's website, Wayin. Answers vary. The time of Jesus is always popular.

But there's always a concern over how one would "cope" without all the advances we have become used to. Two thousand years ago there were no easy ways to get around or communicate. Everything was labor intensive. You probably had to grow at least some of your own food, and you likely never traveled more than a few miles in your lifetime. Could you cope with that? My guess is you'd look around for a few days, check the box, and then hop back in the time machine. Gotta get a double decaf latte, stat.

Ever ponder how people 500 years from now might answer the same question? I'm guessing their answer would be right now. This- now - is the age when augmented intelligence began, when we all became connected. If you're over the age of, say, 40, you are the last generation to grow up without the internet. Your lifetime will have witnessed the single greatest transition in human history. My 500-years-from-now self wants to meet you.

The funny thing is, those visitors from the future won't want to stick around long, either. To them, connected intelligence will have been integrated into their very biology for centuries, and it will seem to the like we walk around without an additional sense, like being blind. They will be amazed how we possibly coped, especially pre, roughly, 2005, when smartphones became ubiquitous. Augmented intelligence will have made our decedents orders of magnitude smarter.

What is augmented intelligence? Well, how about being able to look up any fact in the world instantly over your smartphone? How about getting directions on-the-fly? How being able to communicate in dozens of ways with anyone, instantly, no matter where you are. I'm sure I don't need to go on. These are examples of what augmented intelligence is today. Buckle your seat belts for what it will mean even a decade from now.

There have really been three technological revolutions, if you think about it, that are the backbone of what I'm talking about. The first was when personal computing became affordable in the 80s. The second was when the internet hit an inflection point as browsers like Netscape became available in the mid-90s. The third was when the internet was freed from our computers and could go with us inside our smartphones. This last one has only happened in the last seven or eight years, and its implications dwarf the the earlier two.

Connectivity is an appendage now. Going outside without a smartphone causes anxiety in anyone under the age of 40. Connectivity is an appendage, and it is evolving from an annoying one that was mostly good for phone calls and emails, to something that is almost necessary to navigate through the world. "Almost" necessary will become "absolutely" necessary very soon. It is hard to believe that "apps" have only been with us for four years.

The smartphone will give way also. Connectivity will become more integrated than something you have to actually carry around in your pocket. Google is working on Google Glasses as we speak. Be prepared to see hipsters everywhere wearing clear glasses around and talking to themselves within a couple of years (followed by the rest of us)...

Bendable computers/smartphones are almost here as well...

Devices will literally be woven into the fabric of our lives. It doesn't stop there, though, because after that, connectivity will be integrated into our neural systems, some believe by around 2030. Google will be in your head. (Think of how you'll kick ass on Jeopardy.) Neural implants are already enabling some amputees control artificial limbs just by thinking about what they want to do.

Think of what it would be like to grow up with both the connectivity and the computational power of computers inside your head. Now imagine that, having lived your whole life with this incredible cognitive power, someone took it away. That's how the pre-millenial world will be viewed by history; a pre-enlightenment, cognitive dark age.

Finally, think how intriguing it would seem to meet people whose lives spanned the transition from one age to the other. That's us, so pay attention! History doesn't always seem remarkable when you're living it, but living it we are.

Tax Policy Enters the Twilight Zone

Reprinted with permission from one of my favorite blogs, Beeline...

 At times I think we are living in The Twilight Zone.

For those a little younger than I am, The Twilight Zone was a television series that originally aired from 1959-1964 that combined science fiction, suspense, horror or fantasy which often concluded with a macabre or unexpected twist.

The show started with a voice-over like this which was narrated by the show's creator, Rod Serling.

"This highway leads to the shadowy tip of reality: you're on a through route to the land of the different, the bizarre, the unexplainable...Go as far as you like on this road. Its limits are only those of mind itself. Ladies and Gentlemen, you're entering the wondrous dimension of imagination. Next stop....The Twilight Zone."

If you don't think we have crossed over the line to The Twilight Zone consider this AP story about Gerard Depardieu, the French actor, who recently renounced his birth citizenship because of his anger over the proposal by French President Francois Hollande to raise the income tax on earned income to 75% from the current rate of 41%. In his letter renouncing his citizenship Depardieu stated that he was leaving France because of his belief that success and talent are being punished by the current French government.

Gerard Depardieu

Where is Depardieu going to take up citizenship? Switzerland? Belgium? Austria? UK? USA?

No. This is where we enter The Twilight Zone.

Depardieu is on his way to becoming a Russian citizen as President Vladimir Putin has approved Depardieu's application for citizenship in expedited fashion.

Why would Depardieu be interested in becoming a Russian citizen?

Russia has a flat 13% tax rate. That's right, 13%! France is at 41% and wants to go to 75%. The USA has just increased the income tax rate on rich people like Depardieu to over 40% (including the Obamacare taxes) and communist Russia is at a flat 13%!

This highway has indeed led us to the shadowy tip of reality. We have found we are also on a route to the land of the different, the bizarre, and the unexplainable when a communist country has a flat tax of 13% and what have always been considered free market, capitalistic countries are close to confiscating incomes and property rather than taxing it.

I have to think that if Serling had submitted a Twilight Zone script to CBS in 1962 with a story line that Russia had a flat tax and was luring people of individual talent and achievement away from Western countries it would have been rejected as too far fetched.  Not only has Atlas Shrugged but Ayn Rand could return to her homeland and feel good about it.

Please change the channel! All of this is getting a little too scary to watch. Let's watch Leave It To Beaver instead.

Wall Street Develops Stockholm Syndrome

Barely able to contain its delight today, the New York Times reported that major executives, particularly Wall Street executives, had come around to the "need" for higher taxes.

I seriously doubt a single one of them actually thinks raising taxes is a good idea. But they fear the fiscal cliff more than tax hikes, and they suspect Obama might be more than willing to let us all go over that cliff if the Republicans don't yell "uncle" on rates. Also, if you run a big business these days, particularly in the financial sector, big government is your not-so-silent partner. It works like a protection racquet: don't pay/acquiesce, and you get hurt. Pay up, and your new friend will protect you from unseemly things like competition. Regulation after regulation are raising the bar for entry so high that few newcomers will bother trying anymore. It's true in banking, it's true in conventional money management, and it's true in hedge funds.

Most of these execs know there's a difference between tax rates and tax revenues. They know that raising rates won't bring in anywhere near what the government projects and might even bring in less. They might also know that the rich actually paid a higher percentage of the tax burden after the Bush tax cuts, not before. If they're really on their game, they might even beware of Hauser's Law, which demonstrates that the government only brings in about 19% of GDP in tax revenue no matter where you set rates.

But they must keep their new partner happy, particularly as the latest cudgel, Dodd-Frank, begins to get implemented next year. And they are walking on eggshells - their task master in the White House is not pleased with his Wall Street subjects who largely abandoned him this past election. Examples will be made!

These executives won't actually personally suffer with the higher rates. Once you're worth a certain amount, it doesn't really matter much, so on a purely rational, self-interested basis, their collective kowtow is almost understandable. What they lose in after-tax income will be made up for by what they gain in regulatory advantages and general market stability, or so they think.

They will find themselves wrong. They are helping set up a terrible deal with tax hikes today and budget cuts tomorrow, which, if history is any guide, will never materialize. Debt will overwhelm us, as will market instability.

I wonder how much time will have to pass before we all look back and say, "What the hell could we have been thinking."