Liberals Do Not Oppose Capitalism

SUBJECT: Liberals Do Not Oppose Capitalism

FAIR WARNING: I meander into a bunch of different points with this post. I hope to polish it later and repost. (So your feedback in requested and appreciated).

INTRO:

A very well-educated conservative friend of mine sent me a link to a Cato Institute essay by Robert Nozick entitled "Why Do Intellectuals Oppose Capitalism" (1998).

http://www.cato.org/pubs/policy_report/cpr-20n1-1.html

I'm always glad to get a thoughtful invitation to sample my political opposition's sources first hand. Too much "echo chamber" is terrible for a productive debate.

I question the very premise of that essay. I contend that it's unfair to frame this debate as "intellectuals (liberals) opposing capitalism". I'm very liberal by most standards and I run in such left-wing, Hollywood circles that it's virtually a cliche. So I hope that lends me some credence when I strongly state this: I very rarely encounter anyone who is opposed to capitalism full stop. I think that population is microscopic even among self-identified Liberals.

Much more prevalent, by at least an order of magnitude, is the typical liberal who opposes "Unregulated Capitalism" or "Laissez-Faire Capitalism" or "Free Trade". I think that is a massive distinction. You are free to argue that anything other than an extreme Libertarian's definition of capitalism is "not capitalism". But if you do then be prepared to be alienated from the overwhelming majority of Americans. 

You can try to make your case that life would be better overall if we embraced "Unregulated Capitalism" and entirely rejected any social safety net. But you won't win any wide elections admitting that you want to abolish Social Security, Unemployment Insurance, SNAP, Public Education, FDA, EPA etc. 

Heck, as of 01/27/12, Ron Paul can't even win a plurality of the GOP vote in highly conservative sates.

NOTE: I previously made a similar point about the GOP's politically-expedient shifting definition of "Socialism".

http://corpania.blogspot.com/2010/11/republicans-shifting-definition-of.html

That established, I think that Nozick's argument is flawed and falsified by the facts. 

Here is my perspective...

1) Liberals (and especially Liberal Intellectuals) rarely begrudge undeniably productive/innovative icons like Larry Page (founder of Google) or Steven Spielberg for their wealth. There is very little envy and instead there exists substantial appreciation of or pride in their achievements (if not motivating inspiration). The same respect cannot be said of Philip Knight (q.v. Nike's overseas child labor problems) or the average Wall Street banker (primarily because of the bailouts that are seen as "reverse Robin Hood" taking taxes from the underpaid school teachers to subsidize the bankers unmerited bonuses).

Why can Liberals draw such a distinction between Larry page and a Wall Street Banker? If Nozick's argument were perfectly true then there would be no such distinction. However, Nozick may be on to something regarding the very fact that liberals make such distinctions at all. 

2) Nozick makes a layperson psychological assessment of Intellectuals feeling "entitled" to success they have not achieved and resentful of the less-inteligent who become successful. To be sure, if that were the case then that would be difficult to defend assuming we, as we generally claim, aspire to a meritocracy. "Potential" shouldn't be rewarded because what you do with that potential is so much more important. Consequently, it is "Achievement" which should be rewarded (in order to encourage more achievement, not to mention the obvious morality of it).

And so, the bigger issue presents itself: Have we created a truly meritocratic system that best encourages achievement?

If we haven't done so then some people's gains, by definition, are inherently illegitimate (at least compared to the ideal). 

This is summed up with the legendary Chester Karrass book title: "In Business, as in Life, You Don't get What You Deserve. You Get What You Negotiate."

Since we must conclude that not everyone is a master negotiator, some people must be getting more than they deserve and other less than they deserve.

Examples: 

• Is the $150k per year Bentley salesman really providing triple the utility to society compared to the $50k per year Fire Fighter?

• How can it be good that the School Psychologist (Guidance Counselor) with a Masters in Social Work makes less than the Dog Groomer to the Stars?

• Why should the Mutual Fund Manager looking after $1 Billion in investments make over 100x what a US Air Force Pilot makes flying a $1 Billion Stealth Bomber?

http://corpania.blogspot.com/2011/12/why-should-wall-street-trader-make-more.html

One idealistic solution is to turn everyone into a better negotiator. This would be tantamount to making everyone a better poker player until the skill differential reduced to virtually nothing and the game became purely one of luck. Though with negotiation skills more equally distributed, the person's actual benefit to society should be better represented in her compensation. But how much effort work would that take and wouldn't that energy be better used in "growing the pie"?

SIDE NOTE FOR YOU: For your own good you should know the essentials of negotiation (which is much more than mere brinksmanship).

Here's a starting point > http://en.wikipedia.org/wiki/Negotiation

My quick negotiating tips: 

i) Research (what others pay for a similar thing and what your negotiating opponent normally prices it at)

ii) Sell (get your opponent excited about making the deal, initially go for "win-win".)

iii) Know your range (best case / worst case) before you meet.

iv) Give away as little leverage as possible: Try to get them to make the first offer but if that's impossible, always lowball when buying or ask big when selling and then demand either acceptance or a counter-offer. 

v) Don't negotiate against yourself: (don't compulsively fill the silence, make them fill the silence).

But who wants the whole world haggling all the time on literally everything?

Arguably, capitalism particularly thrived with the advent of the "standard price" (as opposed to the inefficient, slow & tailored-the-customer Bazaar pricing).

A more effective solution, IMHO, is to evolve our economy to become ever more meritocratic. This requires us to recalibrate & redirect incentives and few systems are equipped to handle that better than the Federal Government.

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CRUCIAL SIDE NOTE FOR ME:

I am in the process of formulating a grand theory that is not yet ready for its own post. 

In short: Because economics shapes policy by what it measures, I think there should be a new measure of productivity/prosperity beyond GDP (Gross Domestic Product and its outdated Agricultural/Industrial/Service sectors troika) that specifically excludes "non-productive" sectors (like War, which actually benefits no one, and "zero-sum" businesses like Wall Street & Insurance & SNL's Commercial Parody about ROBOT INSURANCE).

In a less pejorative economic paradigm all businesses could be classified into these 3 groups: 

a) Productive (e.g. Farms, Manufacturers, Creative Pursuits, & Services that tangibly increase happiness >>> that which "grows the pie")

b) Protective (e.g. Police, Military, Security, Lifeguards, & some Healthcare >>> that which"preserves the pie")

c) Partitioning (e.g. Lawyers, Courts, Accounting, Banking, & Insurance >>> that which "divides the pie")

THE BENEFIT OF THIS KIND OF PARADIGM: By concerning ourselves with these different kinds of productivity we can better identify (and thus defend against) the growing problem of being an unproductive society overly reliant on Wall Street instead of actually making things. Ideally, we would be reducing "Protective" and "Partitioning" sectors down to as small as possible while directing resources (human resources & investment) into "Productive" pursuits.

FACT: "From 1990 to 2006, the GDP share of the financial sector in the broad sense increased in the United States from 23% to 31%, or by 8 percentage points." - http://www.bis.org/speeches/sp081119.htm

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3) Given the following:

a) it is inevitable that China's economy will surpass America's (because they have triple the population and a faster growth rate)

b) America's advantage over the rest of the world in education has slipped with no evidence it will change direction

c) America's advantage over the rest of the world in manufacturing has slipped with little evidence it can change direction

>>> We should take a serious look at our approach to the concept of "Comparative Advantage" and what works best for Americans ("Free Trade" vs. "Fair Trade"). The goal of government must be to protect & enhance the lives of its citizens. Increasing the profitability of nationless corporations should only be pursued insofar as it enhances the lives of the nation's citizens.

4) Let's assume, for a moment, that generally the smartest kids go to Harvard. It should then scare us all that such a shockingly high percentage (30% to 45% depending on the year) go to work on Wall Street. Assuming they do it for the money, wouldn't it be better if we created more lucrative incentives for the smartest to become inventors, innovators, engineers, scientists, researchers?

NOTE: That is related to my old refrain that "Free Market Capitalists" should stop taking credit for American prosperity when it was the inventors, engineers and scientific researchers who actually made life better (in the form of computers, air conditioners, medical cures etc.). Because almost no one would give up their current life of technological advancement if given the choice to go back in time and be Pharaoh of Egypt. Sure you could roll around in gold and have women worship you (which is understandably desirable) but one infected cut could kill you. Life keeps getting better because of technological progress.

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ALSO NOTE: This is all substantially related to my still inchoate concept of "Productive Wealth".

http://corpania.blogspot.com/2006/12/corpanias-theory-of-productive-wealth.html

Corpania's Guide to Buying a New Car

Many of you know that I'm an "aspiring polymath". And I do indeed have substantial knowledge on myriad subjects. Case in point...

BACKGROUND: Over a decade ago, for 4 weeks, I was a car salesman in the legendary 'major leagues' of car sales: Cerritos Auto Square (which is the largest collection of big car dealerships in the world). I had one week of amazingly eye-opening training and then went on to become the second highest seller (by units) and the second lowest (by profit) out of the over two dozen salesmen. I was moving a lot of cars by giving customers really good deals (which massively hurt my personal commission).  

The dealership allowed its finance guys to slimely "repack" a few of my deals (e.g. They advertized 1.9% financing and I sold a car for a decent price that enabled a fair commision for me. But then they rearranged the terms with the customer that didn't actually lower the customer's monthly payment but, on paper, did lower the agreed-upon sale price (and thus my commission) while simultaneously and equivalently increasing the loan rate thus increasing their paper-profit on financing alone (in short: they increasied the finance guy's commision at my expense). I hated it all around and so I quit. But I learned a lot about negotiations and, of course, car sales. I have since kept-up a bit reading how that industry has evolved up to now.

So here's some nerdy advice for buying new cars...

First determine which car your want.

Then research to lock the lowest price and then lock the best financing terms.

ASSUMING YOU KNOW WHICH CAR YOU WANT...

(if not check out tips for finding the right car for you: http://www.edmunds.com/car-buying/10-steps-to-finding-the-right-car-for-you.html )

AND ASSUMING YOU HAVE A LOT OF TIME & ENERGY TO HUNT FOR THE BEST DEAL...

1) Find out the dealer invoice price on the exact car you want (it's ideal if that car is "in stock" at a local dealership). Go to Kelley's Blue Book - http://www.kbb.com/ and http://Edmunds.com AND THEN CHECK THE CURRENT INCENTIVES: http://www.edmunds.com/car-incentives/

NOTE: Print everything out and bring them with you to establish your credibility & savvy with the salesman. 

2) Try to get lucky by searching for your desired car on the local dealerships' individual websites. Often their "internet deals" (that are designed to attract customers) are better than anything you could negotiate on your own. You might as well also check http://Cars.com , http://CarsDirect.com and their competitors.

3) On one of the last days of the month (when they're trying to hit their goals/bonuses), go to a big local dealership (it can't hurt to check their Better Business Bureau rating on http://www.bbb.org/us/ ). Test drive the car to determine if you indeed want it or not. If they have different options on your test drive car then be sure to use your iPhone/Android Smartphone to check the web for the invoice price on that one with those options. NOTE FOR SoCal RESIDENTS: Cerritos Auto Square is really the biggest collection of large car dealerships in the world. Theoretically you can get the best deal there because of the volume. But be forewarned, they also have the biggest shark salesmen.

4) After the test drive, the salesman will likely invite you to sit down inside to discuss the deal. When he asks "How much do you want to spend on this car?" then you reply with a price that is no more than $500 over "dealer invoice" price (or, more importantly, the effective dealer price considering their current incentives - whichever price is lower) for that exact car (regardless of their higher sticker price or MSRP or even Edmond's "True Market Value"-> remember that dealerships get numerous additional hidden incentives/bonuses from the manufacturer to sell you the car, like for every 29 they order sometimes they can get a 30th car delivered for free).

This "$500 over lowest effective dealer invoice price" reasonable lowball offer might mean a $100 commission for the salesman personally (not to mention get him closer to his own bonus goals) so it is totally fair. You can offer even less (e.g. only $100 over lowest invoice, but then the salesman might make a mere $20 so his pride could get in the way). Consequently, determine whatever your first lowball offer is, make it to the salesman, then close your mouth and wait for his response (don't negotiate against yourself).

5) If he says "You can do better than that." then you can playfully reply with industry jargon "Just make this deal quick so I can give you a perfect score on the CSI and you can get another 'up'. Otherwise I'll go elsewhere." 

NOTE: They do care about the "Customer Satisfaction Index" surveys. And an "up" is like an "at bat" in baseball. A car salesman is lucky to get 3 "ups" per day and often actually sells fewer than 10 cars per month. 

> Or you can simply and politely say "Ok, if you don't want my business then I have to say good-bye. Thank you for your time." and then ACTUALLY LEAVE the dealership. It is very unlikely that he will let you leave without at least running your offer by the sales manager. If he does let you leave then call ahead to other dealerships to check if they have your desired car in stock and try to buy from them. 

6) More likely, one or more dealerships will come back with a counter-offer that is somewhere between their list price and your lowball offer. Unless the car is in crazy demand you should be able to get it for no more than $500 over invoice price (or effective price considering current factory to dealer incentives whichever is lower). Stick to your guns, this is a hard negotiation and as the buyer you have the leverage (especially in this economy). 

NOTE: The more flexible you are on color and features the lower the profit you can offer the dealership. But, in any event, only buy the car you are actually happy with since saving an extra $100 or so won't likely bring you continued happiness on a car you don't like.

7) If every dealership lets you leave then remember that one of them will likely call you back later with a better offer. If they don't call you back and you do return then you should be aware that they will think they have real negotiating leverage on you (which will likely hurt your deal).

8) Before you actually test drive any car, get your FICO scores (e.g. from MyFico.com)  to see how good your credit rating is. Anything over 700 should easily entitle you to the best possible loan terms. Between 700 and 600 there can be substantial variance. Below 600 gets pretty damn bad. Below 550 means scary onerous interest rates. 

9) It's good to check with your bank (and others) beforehand to see what interest rate they would give you to buy a new car. Dealership financing is a big profit center for them. They regularly find banks to finance your loan at a low interest rate and then sell it to you for a higher interest rate and pocket that difference as profit (often more than the profit difference between what they paid the manufacturer and what you ostensibly paid them). 

NOTE: Even if you get a great deal on the price you can still get burned on the financing (e.g. Depending on the loan amount, accepting an 8% interest rate when you were entitled to 4% could easily mean unnecessarily giving up thousands of dollars of your money in extra profit to the dealership over a 5-year loan).

10) Be sure to double-check whatever interest rate the dealership offers you with your own "loan calculator". Here's a good one...

http://www.bankrate.com/calculators/auto/auto-loan-calculator.aspx

NOTE: If their monthly payment offer is higher than what the calculator says it should be then they just tried to trick you by raising the sale price when they finalized the interest rate. SO ALWAYS CHECK THE MATH!  

P.S. There are additional special considerations if you're:

a) trading in your old car

b) leasing

c) buying a very high-end brand

d) considering dealer add-ons or extended warranties

So do plenty of research.

My friends should always feel free to hit me up for personal advice (on any topic, really).

NOTE: For even nerdier tips check out these websites... 

• http://www.carinfo.com/carbuyingtips.html
• http://www.fightingchance.com/
• http://www.carbuyingtips.com/
• http://www.insidercarsecrets.com/financing.html 

GOOD LUCK AND GOOD KARMA TO YOU.

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Solution to SAT Cheating Problem

So I just saw the "60 Minutes" segment on professional cheaters of the SAT test.

These smart students make fake IDs to impersonate their clients and get them high scores.

http://www.cbsnews.com/video/watch/?id=7393498n

Granted there were only around 150 confirmed cases out of 3,000,000 tests taken. So even if the confirmed cheats are only 5% of the actual number then that would indicate a still a pretty successful 99.9% fair/non-cheat rate.

Nevertheless, impersonation is a problem.

Here's a solution...

1) Equip all testing locations with a digital camera (or require them to use their own) and ensure each student is photographed when he/she signs-in. (Possibly also scan-in his/her ID for extra security).

2) Upload all photos to the testing company's website/database.

3) Use "facial recognition system" to automatically compare potential matches. Investigate flagged-potential matches.

4) Post the test-takers' photos with their scores when the colleges look them up.

* Note: This has the added benefit of discouraging would-be cheaters because their photos will exist on the database forever. Consequently, if a cheating ring is ever exposed the evidence will exist to go back and expose ALL involved (test takers & clients).

This should also be enacted for online courses (e.g. MITx) so that final exams are conducted by objective, secure proctoring services.

BTW - I am interest in this because of my related ideas (including: "testing/certification" is or will likely be more important than how/where you learned a subject AND ALSO see my idea about Graduation Authentication Links).

My storyline for "Men in Black:4"

I love the "Men in Black" films. They're clever, creative, fun, FX-rich, spectacular, sci-fi comedies. Yes, MIB2 was perhaps a bit similar to the first MIB (minor victim to the standard studio request of "give me the same but different"). But it's still good and I enjoyed it.

 

After watching one trailer for MIB3, I'm re-hooked and excited to see this second sequel. Apparently this third film in the trilogy is about (SPOILER ALERT for those who are deliberately avoiding the trailer so that they can see it "fresh") the familiar terrain of "time travel".

 

But I have a different storyline for a "Men in Black" sequel that, I hope, they will eventually use.

Here are the main beats...

 

1) Zed (Rip Torn) is abducted by aliens unknown to the MIB team. A new alien named Tibor (played by Andy Dick) arrives with intel about the suspected abductors. It seems that his planet has it's own ad hoc MIB team (right down to the same uniforms) and they want to establish a partnership with the MIB on Earth (and its allies).

 

2) Agent J (Will Smith) is assigned to go after Zed on Abraxis, the alien planet where the abductors are thought to have landed. The inhabitants of that alien planet look remarkably humanoid (think Star Trek TNG) and their technological advancement is barely 20 years ahead of Earth's.

 

3) Agent J is greeted by that planet's own MIB team and assigned an alien partner, Agent Tibor. Agent J is given a disguise so that he looks native to that alien planet. They have to be extra careful because the inhabitants of planet Abraxis have been in a 1000 year war with the inhabitants of Omegsis, a rival planet in its solar system. Consequently, everyone on this planet Abraxis is hyper vigilant to identify spies from Omegsis. And they, like humans on earth, have no idea how many other interstellar species exist, let alone interact.

 

4) Agents J and Tibor travel the planet Abraxis, investigating the clues left behind & interrogating suspects and searching for Zed. But Agent J's tactics are disappointingly ineffective due to the Abraxis aliens' massively different culture/norms/idiosyncrasies and Agent Tibor is no better at it (since he's so weird & amateurish). Plus the rest of the Alien planet's MIB team seem lazy or incompetent because they put in so little effort to help. Periodically Agent J & Tibor encounter Omegsian spies and they quickly arrest the spies & put them in Abraxis' ad hoc MIB detention center (for fear of exacerbating this war).

 

5) In the third act, The Arquillians (a different alien race, remembered from the first MIB movie, where they threatened Earth with destruction unless the galaxy was returned), who are now allied with Earth, seek to deploy the same tactic of "threaten Abraxis's MIB to return Zed to Earth". The ad hoc MIB get scared and immediately flee the planet entirely, leaving Agent J & Tibor to find Zed in the remaining hour before the Arquillian's destruction deadline.

 

6) Tibor messes up again in following up on another lead for Zed's whereabouts, despite Agent J's faithful encouragement. Then Agent J figures it all out and demands Tibor get out of the disguise. Agent J cuts open Tibor's mask revealing another alien species inside. Tibor is not an Abraxisian! But rather he is an Omegsisian. The entire ad hoc MIB team on Abraxis are actually Omegsisians who abducted Zed planning on pinning it on the Abraxisians so that the MIB allies would destroy the entire planet of Abraxis (their sworn enemy). Agent J stops the destruction of Abraxis and gets the Arquillians to threaten Omegsis until Zed is safely returned. Zed & Agent J return to Earth.

 

 

HOMAGE TWIST: The Abraxisians and the Omegsisians are mirrored colors of each other (inspired by the Star Trek original series episode entitled "Let that be your last battlefield").

 

 

ADVANTAGE OF THIS STORYLINE: We get to explore all the fun MIB story tropes in an inverted way (from the opposite perspective - human as the alien).

 

 

OK, so what do you think?

 

NOTE - I'd be surprised if no one pitched anything like this to the studio before. But I might have a few unique elements worth developing. You tell me.  Any MIB fans with feedback?


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Why should a Wall Street Trader make more than an Air Force Pilot?

Alan Reynolds (Senior Fellow at the Cato Institute) wrote an opinion piece in the WSJ on 12/06/11 entitled "Tax Rates, Inequality and the 1%"

He (perhaps facetiously) subtitled it "Those who obsess over income shares should welcome stock market crashes and deep recessions because such calamities invariably reduce 'inequality.'

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My response... DAMN THAT IS DISINGENUOUS OBFUSCATION!

 

While he makes a valid point about fairly factoring in how tax rate changes may likely have influenced how compensation is structured and thus measured, the bulk of it is specious garbage.

 

1) His subtitle's implication is that every OWS supporter "obsesses" about income shares as if that would be invalid (in fact or manner). Further, more perniciously, it explicitly argues that every supporter of OWS wants to punish the wealthy just for being wealthy (and even if it means hurting the poor). This is insulting and obscene.

It would be comparable to a crackpot OWS protestor shouting "The richest 1% want to eat the poor's babies."

And, to be fair, I only did that for one month. ;-)

 

2) On to the substance...

Certainly different tax codes should indeed be factored into economic analysis. But if changing tax codes mean we can't compare different time periods then the entire study of economics would devolve from an aspiring science (q.v. objectivity, isolating variables, testing predictions etc.) into a subjective art perhaps more akin to dogmatic cults (q.v. theories can't be challenged by facts, ideology trumps real world experience).

 

Different people imagine different idealized future worlds. But for those with substantially similar goals there must be objective measures. This is so we may assess the effectiveness of proposed policies based on their past performance. 

 

A country's most basic/fundamental economic measure is the income of the citizenry (as a barometer of their prosperity). On this crucial point, is there any serious doubt that wages have been largely flat for the majority of Americans over the past 30 years? Conversely, does anyone earnestly challenge the notion that the top 1% (or 0.1% or maybe 0.01%) have been increasing their incomes at an rate much faster/greater than that of the rest of the American population?

 

Of course, the truly great deserve great success. American culture embraces this celebration of superiority in part to motivate further greatness. I am not any different. So the question that interests me is: By what measure is one determined to be truly great? 

 

If someone is entrepreneurial and creates a business (or hedge fund or law firm etc.) then he certainly deserves greater success than the person who merely performs a job he was trained to do (even if that job has billions on the line). Why should the trader who controls $1billion in investment assets make more than the Air Force pilot who controls a $2billion B-2 bomber? (let alone over 50x more)

 

The biggest issues for the OWS movement are:

 

a) Increasing Inequality with zero structure in place to counterbalance this scary trajectory (and even so most there barely aspire to Canadian-style "socialism").

 

b) Banks got bailed out (through TARP and the trillions in loans and balance sheet transfers of "toxic assets") all on the taxpayers' dime and then these same banks had the temerity to claim they had "record profits" in order to shamelessly rationalize excessive bonuses.

 

>>> NOTE: I'm all for unfathomably large bonuses for the investment managers who outperform the market. But, for a given set of risk & objectives, if mutual fund manager "X" massively underperforms a comparable (mindless) index fund, why should he make anything at all? (let alone tens of millions).