Pelf & Weal

Business, Economics, and Government

Gambler’s Paradise

Two ideas came to me last week and I struggled with them until I realized they were both the same idea, just expressed differently. For this post in Pelf and Weal, it is called “Gambler’s Paradise.” For my post in Digital Minefield, it is expressed as “Technology’s Fatal Flaw.”

This post’s title comes from Jack London’s Valley of the Moon. Through with cities and socialism, in the second half of the book London offers an alternative in the form of sustainable farming.

A minor character condemns America’s rapacious westward movement, calling it a “Gambler’s Paradise.” Written in 1913, America could no longer despoil and move West. There was no more new land.

The critique refers to the US morality as a Gambler’s Morality. London understood this. He had been part of the Klondike Gold Rush of 1897. But gold is only a tiny portion of today’s abandoned mines.

Colorado, while in the news today, is only one state with abandoned mines. Many think most of those are in Western states. I counted twenty states with web sites for abandoned mines. And mines aren’t the only abandoned places in the US.

Gambling didn’t end at the Pacific. As it continued to use up all the open lands, the winners began to change the rules of the game. Today, they’ve arranged it so whenever they take a big hit, the government steps in to bail them out.

For a long time, the small players could play illegal games like the numbers racket. Now, the big players have all but killed illegal gambling with lotteries, Vegas and Atlantic City, and a casino for every handful of Native Americans.

Yet, as big as all these are (easily over $100B a year), they’re not the big game. Gambling is in the news every day and every night: The Stock Market Report. Nothing else is of such continual interest as the tiny fluctuations in these various indices.

The news anchors claim to be addressing these numbers to investors. That’s what they call themselves and everyone follows suit. Nonsense. Only gamblers are interested in minute daily (and hourly) variations, just as they look for a hot dice table or a slot machine.

There is no such thing as day trading of investments; it’s gambling pure and simple. What your bank calls “financial instruments” are not so pure and not very simple. They’re just more gambling, organized by big Wall Street firms and sanctioned by a desk in your local branch.


Automation’s Big Lie

The latest trade proposals have raised, once again, concerns over job shrinkage here in the US. Invariably, the counter-argument tries to make the case that the jobs we will lose are less valuable than the jobs we will gain.

This is the exact same argument we’ve heard since the 60s when the rising power of computers made automation a very real threat to workers beyond the assembly line. It was a lie then and is still a lie today.

The lie is based on the fallacious premise that the person performing the relatively simple task that will be lost overseas or to automation will be capable of performing (with training) the newer, more sophisticated job created by this change.

While this may be true for some displaced workers, it cannot be true for all. If it were that easy to move up to a more skilled job, then that job too would go overseas or be automated.

The big lie is the assertion that every worker can be raised up to a higher skill level and that all they need is the opportunity (created by the displacement) and the training.

This fiction assumes all displaced workers are working below their potential. Some most likely are, but to suggest all of them is ridiculous.

The fiction is also the utopian version of the American Dream. It is most often expressed in the saying that in America, anyone can become President. While we like to joke that this does seem to be the case, the reality is that it is simply not true.

While many may be capable of being President, very very few are capable of raising the money to run for President, let alone enough to win the election. And not everyone is capable, even with training, of performing a more sophisticated job than the one they have.

Joke-of-the-Week: The bill currently in contention is referred to as a “free” trade bill. Yet, much of it is classified. And no one on Capital Hill mentions the irony.

Unnatural Selection

The previous post was about what some people call free market capitalism. Others call it unfettered or laisser-faire capitalism (with or without the dash). There’s still another term, one dating back to the late 1800s: Social Darwinism.

The more popular phrase for Social Darwinism was “dog eat dog.” At least it was popular with those who controlled the dogs. (Think Monty Burns of the Simpsons.) As usual, them what had wanted more.

Despite all the power of this very powerful class of business overloads, they lacked one thing. While they controlled the press (from newspapers to novels), what they didn’t have was an advocate, a voice with philosophical cachet.

That’s when they discovered Herbert Spencer. He hadn’t been hiding. In fact, he has been referred to as “the single most famous European intellectual in the closing decades of the nineteenth century.” By whom? Never mind; he was forgotten in a generation.

In his day, if you wanted to be up-to-date in any of a dozen academic disciplines, you read Herbert Spencer. But he had his own take on Darwin. “Survival of the fittest” came from Herbert Spencer, not Charles Darwin, And it’s wrong.

Natural selection, as delineated by Darwin, says nothing of the kind. Not only is it wrong (it’s survival of the sufficiently fit), but it’s judgmental in the worst possible way. It can and has been used to justify might makes right.

Which is why the dog eat dog capitalists of the late nineteenth century hired Herbert Spencer to be their spokesman. It’s all revealed in A Perplexed Philosopher (1892), written by Henry George.

George was an American philosopher, whose work is still in print and is being read and studied today. This is also true for Spencer’s predecessors who wrote about evolution and progress: Patrick Edward Dove and Robert Chambers.

“Survival of the fittest” covers 90% of what most people know about evolution. From this misinterpretation of Darwin comes King of the Hill, Top of the Heap, and Mighter Makes Righter

All these benefited the kings of capitalism whose direct philosophical descendants preach a slightly sanitized version of free market capitalism. Although they don’t control the economy, their ideas keep pushing it towards Spencer’s Social Darwinism.

The Long and Short of Capitalism

Last week one friend was bemoaning the many excesses of capitalism and another deploring the demise of Radio Shack. I knew a bit about the history of Radio Shack but could I highlight the faults of capitalism?

A good place to start is Peter Drucker. He said a business must know what business it’s in. Obviously, the cause of Radio Shack’s departure. Instead of staying in the business of electronic parts and accessories where they had no competition, they wanted the big bucks of mobile phones—where everyone was a competitor.

He also said a business’s main job was to get and keep customers. I don’t recall (and I’ve read almost all of his books) that he said anything specific about a business’s need (like any organization) to survive, to perpetuate itself. But he did say that the function of profits was for the costs to tomorrow.

Any business that maximizes short-term profitability with the hope of sustaining it indefinitely will sooner or later succumb. Short-term cannot achieve long-term, and long-term is the very definition of survivability. Maximizing short-term can only minimize long-term.

Short-sighted (literally) businesses will claim that short-term profitability—as exemplified by quarterly reports—is a strategy to attract investors. Nonsense. Investors should be in it for the long haul. What they’re attracting are gamblers, personified by day-traders. When too many businesses in an economy take the short-term approach, the result is inevitably long-term instability.

Today’s businesses are not only short-terms as to profitability, they also believe in the short-term for their employees. They eschew any interest in loyalty; they work assiduously to avoid worker benefits; and they don’t invest in their own locations or suppliers.

In other words, they neither plan for nor work towards their own survival. This attitude extends to their environment, whether surrounding nature, the towns (and its citizens) where they reside, or the viability of labor-management relations. Not to mention avoiding paying their fair share of taxes to the governments that protect their very existence.

However, few speak of short-term capitalism, and its obvious short-comings. Instead, what we hear is praise for “free-market” capitalism, which is better described as unfettered capitalism. Its prime tenet is freedom for its actors and actions. As long as that freedom is unrestrained, it can and will choose the immediate gratification of the short-term. But for how long?

Small Business Survival

This coming weekend, squeezed in between Black Friday and Cyber Monday, is Small Business Saturday. It’s been an official “thing” since 2010, although it’s been talked about for years. I wrote an article for the local (Sarasota) paper twenty years ago.

But I have to wonder how serious we are. As embattled consumers, we’re being squeezed more and more every day. I hear a lot about “small businesses are the economy’s job creators,” but I don’t see any real support from either political party.

By support, I mean reducing their taxes to give them a chance to survive long enough to prosper. And then they can pay real taxes like any other successful business. By support, I mean reduced government regulation until they’re strong enough to cope with it.

By support, I mean ads taken out by local taxing agencies explaining how local businesses are important for our tax base. And while they’re at it, show the ways in which many businesses don’t contribute to the local tax base.

By support, I mean local community support for small businesses that strengthen the community in many ways other than just the tax base. I could go on, but I’m sure you can make up your own list.

A list that would not include giving tax breaks to corporations relocating in our community. Short-term gains like these are easily lost to another community willing to give away more, or to corporate restructuring.

All this talk of tax breaks brings me back to the main point: Are we serious about supporting local small businesses? It brings me back because when it comes to raising or lowering taxes, can anyone compete with the big lobbyists in D.C.?

As long as the big corporate lobbyists have more influence on how our local small businesses are taxed than our local community do, then how can the local will prevail? And how can our choices of where to buy really make any difference?

The Failure of the 80% Solution

At a time when the complexity of the world (technology and human relations) is moving quickly beyond our control, organizations—businesses, governments, and NGOs—are asserting more authority and solidifying their procedures.

Increasingly in our daily lives, we collide with institutionalized approaches to our problems. You might ask, How did this happen? Why have these organizations retrogressed, especially when much of the world is advancing so rapidly?

Or you might realize the answer is obvious: these institutions have neither the know-how to adjust, nor the budget. Both top management and front-line workers prefer control to solving problems. The definition of a solution is theirs, not ours.

Basically, only two things constrain organizational behavior. One is the 80/20 principle, where 80% of the problems are solved using only 20% of the resources, and conversely the remaining 20% of the problems require 80% of the resources.

The other is that organizations perpetuate themselves, seek survival, by funding structure while ignoring function. It’s easier to find money for buildings than payroll. What societies (short of revolution) seem unable to do, is make institutions reform their structure so their functions continue to serve society.

Existing social institutions never lead social change. Instead, they are dragged, kicking and screaming, into a future where change is imposed by outside circumstances. Change is driven by new institutions, if they are able to kill off the old.

We are becoming a society of fixed approaches, inflexible bureaucracies taking the easy way out, the convenient solution (for the organization, not the client). Their solutions appear to solve 80% of the problems, using only 20% of the resources.

Any part of the budget dealing with the 20% of the clients whose solutions would require 80% of the budget is disposable. It is, so long as 20% of the budget handles most of the remaining 80%. So what if that’s cut, it still deals with a majority.

They refuse to examine a problem to see if it falls in the 20% that require more thought, more research, more action, and especially more money. If it doesn’t fall into the 80% solved by 20% of the budget, then by definition it’s too expensive to fix.

The more pressure, the more institutions entrench. Structure masquerades as function. The 80% served by only 20% of the budget pretends to be the total solution. Flexibility become bureaucracy; procedures vanquish reason. And it’s not working.

Internet Regulation? (2)

I’ve read over fifty technology-related books in the past few years and they all say the same thing about the Internet in the United States. They say it’s not only the slowest of the top fifteen industrialized nations, they say it’s the most expensive.

A few of these books say why: the triumvirate of AT&T, Comcast, and Verizon keep lobbying Congress to make it so. None of these books offered a way to change this inequity. (Or is that iniquity?) None.

Congress is not suddenly going to reverse itself, i.e., listen to us and not the lobbyists. When I say us, I include any business not in favor of the status quo. The big three aren’t going to fade away (more likely they’ll become the big two or big one).

The only way things will change is by enacting new law, created because new forces lobby for it. Some of those changes were hinted at in the previous post. But who could be these new forces? You? Me? I don’t think so.

Where to look? Easy. Who benefits from less expensive and much faster Internet? Before you say “everyone,” I say I don’t think we can organize everyone. But we can organize enough businesses that aren’t owned by the big three.

These businesses need to get behind some kind of nonprofit, pseudo-organization that exists just to lobby Congress for the better (and cheaper) Internet that will benefit all of us.

I can’t think of any good reason why not. I don’t think they’re afraid of AT&T, Comcast, or Verizon. And Congress should fear any publicity revealing how bad the Internet has become.

It should be simple for economists (unless they’re in the pay of AT&T, Comcast, or Verizon) to show Congress the numbers. I.e., how much the economy will benefit from a better Internet.

As for the libertarians who think the free market should bring this about without government meddling, they need to remember it was DARPA, a government agency, that created the Internet.

I don’t like government intervention, but when things get out of hand, they have the only stick big enough to get the greed-mongers back in line. Big enough, but no bigger, If you know another way to fix this mess, please comment.

Internet Regulation?

Interesting comment from Billy on Monday’s Digital Minefield post (“Insecurity, Part Three”):

“As much as I hate to talk about more regulations and regulators, we all have experienced the downside of the internet which has to a large extent taken the place of the postal service. 200 years ago we thought postal service was important enough to be run by the federal government and we ended up with a relatively safe and private mail service. Sticking your hand in someone else’s mailbox was verboten and the postal cops came after you if you did. So where are those internet cops who go after the thieves using the internet. Where?”

His question is larger than Internet Regulation, but regulation is the casus belli word that will set off the screaming and yelling, so I will address it first.

For those carrying the banner of “No Regulation, Ever” I say, Would you like to volunteer to be my food taster? For those who steadfastly maintain that the goal is less regulation, I say your intent is good, but you’re off target.

What we need is the least amount of regulation that will provide an acceptable level of safety. For example, too little regulation could end up increasing our national medical bill, just as too much regulation has added to those costs.

It’s not about more or less, it’s about determining the right amount. To borrow a phrase from economist E. F. Schumacher, what we need is appropriate regulation.

The next red flag concept that will set people off is free market über alles. Seems to me the government-run Post Office (USPS) plays well with its competition from UPS, FedEx, and others. If some of the Internet were to be government regulated, that wouldn’t preclude free market competitors.

If you add those two up, perhaps what we need is a minimum of government regulated Internet leaving room for plenty of free market opportunities. And we have such a model (sort of) staring many of us right in the kisser.

By regulation, cable and satellite services must provide access to local stations broadcasting over the air. (That air is also known as public air waves.) Beyond that, those services can offer anything they want (for additional fees). It’s a mixture.

Although there are no Internet services comparable to local broadcasting, it’s fairly obvious where we need government protection: email and access to free sites. And by “free” I mean sites not requiring a) a fee, or b) a legally binding agreement.

Sites like this one, WordPress, and ones like Wikipedia meet this criteria so why not regulate (minimally) those connections? If we had such regulations, someone who hijacked one of these sites would be breaking Federal law.

Likewise, anyone who steals your email address also would be breaking Federal Law. Not to mention people who spam you when you don’t want them to (e.g., with obscene materials).

As for the other sites (those not free or requiring legal binding), such as FaceBook, they can take care of themselves. They don’t need Federal protection, and are free to pursue redress in civil court.

This is what could be done. Next time, I will discuss why it must be done.

Just Desserts

This post is about the business of health—or should I say ill health. In a single word it sums up the major health problem of our immediate future. The word is, dessert. (You thought I was going to say obesity?)

Of all the food group charts and diagrams you’ve seen over the years, have you ever see one depicting the foods we most desire? Of course not, probably because every schoolchild (of every age) knows it begins and ends with dessert.

So am I saying our obesity problems are all due to our eating desserts? Not exactly. Desserts are just the cherry on the top. Our obesity problem is really about the food industry pushing everything they can under the irresistible dessert umbrella.

Dessert today is more than a meal’s last course; it’s an anytime treat regardless of meals. But how is it a treat if your freezer, refrigerator, and cupboards are full of it? Treats should be special, for special occasions. Anything else is pure indulgence.

Look at the cereal aisle in any supermarket. I’m not simply talking about all the unnecessary added sugar. Look at the names, look at the graphics. These products are clearly designed to make us think “dessert.” And it’s not just the cereal aisle.

Since when did muffins become small cakes? A chocolate-chip muffin has nothing in common with a bran muffin except its size and shape. Ordinary muffins are outnumbered ten to one by fancy muffins screaming dessert!

Look at what used to be plain cream cheeses. How many dessert fruits can you count? Probably not as many when compared to yogurts. I mean, Banana Cream Pie yogurt? Even simple sugar-free carbonated drinks use the dessert vocabulary.

Check out the dessert-sounding flavored coffee additives. In the mood? Stop at the coffee bar and get your quadruple-flavored shopper’s boost? Have a snack bar. Labels may say health or protein but have you read the ingredients? Counted the carbs?

I’m sure you could easily add to my list. Once, I thought most of our obesity problems were fueled by supersized caffeine-packed, sugar-loaded soft drinks. It’s plainly much worse than that.

This is a massive campaign by the food industry to push a variety of foods onto the ever-expanding dessert plate. The key is packaging, Anything can be repackaged as dessert. Contents change as easily as image. Presto! Healthy becomes heavenly.

You may walk into the supermarket wanting food, but everywhere you look you’ll see desserts. In time, maybe you’ll be waddling out.

When Truth Is Troubling, Sell The Lie

There are two basic facts of Internet life. One is that every big player wants to get as big as they can by acquiring as much data as they can. They have many reasons and selling the data isn’t the only one.

We have entered into the Era of Big Data, and Google is just the biggest player. With so many big players, our data has become fair game and the hunting season isn’t only year-round, it’s 24/7.

Nothing new here, only that most people haven’t realized the extent to which their data is being harvested. For profit. At the same time, their privacy is vanishing, like the buffalo.

The other basic fact, generally acknowledged but rarely discussed, is that on the Internet everybody lies. It’s the basis of social media, and the biggest lies are told on online dating.

Another, more heavily mined source of data is Facebook. While FB says they have a minimum age limit, there are literally many millions of underage children who feel no compunction about lying to be part of social media—and not just FB.

So just how valuable is this planet-sized data if no one knows what’s true and what’s not? My guess is that no one, not the buyers nor the sellers, really want to know. They’re getting rich from gathering, processing, and selling this data, tainted or not.

True or not, our personal information earns billions for the Kings of Big Data—and keeps the government apprised of our whereabouts. They say they’re data mining; I say we’re being hunted.

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