Archive for May, 2010

Was it merit? Or was it luck?

May 13, 2010

Is Bill Gates one of the world’s richest men because he is smarter and harder-working than everybody else? Or is his wealth due to luck?

Malcolm Gladwell in Outliers points out the advantages Bill Gates had.  First, like many of the pioneers of the computer industry, he was born in the 1950s. He came of age just when Altair introduced the first do-it-yourself personal computer kit was introduced in 1975.  Moreover, as a teenager, he attended one of the few private schools with its own state-of-the-art computer, and graduated from high school with thousands of hours of experience in programming – an opportunity that very few people had in that era.

Microsoft Corp. took off when IBM Corp. commissioned him to provide an operating system for its new PC and neglected to require Gates to sign an exclusive contract.  If IBM had done so, Gates would never have been able to make the MS-DOS operating system a standard for the whole computer industry.

So, yes, Bill Gates had opportunities that nobody else had, but he had the intelligence and determination to use these opportunities in ways that not everybody would have done.  And, yes, somebody else would have created a standard computer operating system if Microsoft hadn’t done so, but it was Bill Gates who would have done so.  Yes, success depends on good luck, but, as Louis Pasteur said, chance favors the prepared mind.

Even when success is wholly a matter of luck, as in a lottery, you need to offer a prize if entice people to enter the lottery.

I don’t begrudge Bill Gates his billions.  He helped create something of value.  The only people I resent are those who got rich not by creating something of value, but by milking the system to enrich themselves at others’ expense.  Unfortunately we don’t have good ways of distinguishing between the two.

Usury as a religion

May 12, 2010

The bailout of the European banks, like the bailout of the U.S. banks, shows that society has assumed an obligation to the banking system that takes priority over all other obligations.  The Greek government did not default on its debts, nor did the governments of Portugal, Ireland, Italy or Spain.  The crisis arises from the fact that the big bankers feared Greece might default on its loans, and jacked up interest rates accordingly. This of course increases the risk, which is further increased by speculators betting on default. The rescue operation being undertaken by the European Union and the International Monetary Fund is not a rescue operation of the people of Greece, who are likely to have to endure high unemployment, lower wages and worse public services, but a rescue operation for the banks.

So the obligation to repay loans takes precedence over all other obligations.  And the nature of compound interest is such that the burden of a debt can increase without limit.  If you have a potentially infinite obligation that takes precedence over all other obligations, is this not the equivalent of a religion?

When I studied history and economics in college, I was taught that the traditional Jewish, Christian and Muslim teachings about usury were one of the chief obstacles to modernity and progress. Some 50-odd years later, seeing the stranglehold the financial system has over the part of the economy that produces goods and services, I think it is time to revisit those teachings.

I recognize, of course, that someone who borrows money has an obligation to pay it back.  And I recognize that lenders have a right to be repaid for their inconvenience and risk.  The problem is the unlimited nature of compound interest – that someone can pay back the principal of a debt many times over, and still be deeper in debt than before.  This was the basis of debt slavery in the Roman Empire and of slavery in many parts of the world today; it was the basis of indentured servitude and the old-fashioned company town.  It is the plight of poor countries to the International Monetary Fund and the international banking system.

I am intrigued with the idea of Islamic banking, which sets a cap on compound interest. This is done through various mechanisms. In one of them, the lender theoretically “buys” an asset or an interest in an asset that is being pledged for security, and then allows it to be bought back in installments at a greater price but a fixed price.

I do not think Islamic-type banks will compete successfully in the international marketplace, because their capital will increase at a slower rate than traditional banks.  But perhaps there could be a system for chartering banks organized on such principles, or for using such principles in student loans or other government loan programs.

Still flying on one wing (the right wing)

May 11, 2010

A wise friend of mine once commented  that in American politics, we have only one wing – the right wing – and you can’t fly on just one wing.

Since the Nixon administration, the country has been moving steadily to the right. We have had strong, decisive conservative Republican Presidents who have put permanent imprints on American public life, and weak apologetic liberal Democratic Presidents who have mitigated but not altered the conservative trend.

Ronald Reagan set the country on a course of deregulation and successive tax cuts for upper bracket payers; Bill Clinton did not change this.  George W. Bush put in place the governmental basis and legal foundation for a police state; Barack Obama is not trying to change this.

Ronald Reagan and George W. Bush knew less about the details of public policy than Jimmy Carter and Bill Clinton, but they were more effective Presidents because they did know one thing – their own minds.  They had definite goals and never stopped pressing toward those goals.

Obama is more like Carter and Clinton than he is like Reagan or the younger Bush. Obama’s strength is his ability to understand and appreciate all points of view.  His weakness is his seeming inability to take a clear stand and fight for it.

When Obama was elected, he had an opportunity that no previous liberal Democratic President has had in my adult lifetime.  He had a power base of citizen activists and small contributors that could have given him a measure of independence from party structure and large campaign contributors.  At the same time the Democrats got three times as much in campaign contributions for 2008 from Goldman Sachs and twice as much from Citicorp as the Republicans.

Obama could have mobilized his supporters to support a meaningful health insurance reform bill or a meaningful financial regulation bill.  Instead he sought to appease vested interests.  This is a mistake, even from the standpoint of political expediency.  As soon as the Republicans come to their senses and return to being a sensible conservative party, Wall Street will drop the Democrats and return to its natural home. Meanwhile Democrats face an “enthusiasm gap” which all observers think puts the Democrats at a disadvantage in the coming elections.

The great management consultant Peter Drucker said that if three people in a row fail in the same executive position, the problem lies not with the traits of the individuals, but with the job itself.  I am critical of President Obama because, if he really is doing the best job that is humanly possible, then our political system is so dysfunctional that there is no way to reverse the nation’s slide into Third World status. This is something I don’t want to believe.

The Second Amendment and the terror watch list

May 10, 2010

Sometimes it seems as though there are two schools of thought about the U.S. Constitution. One is that the only part of the Bill of Rights that matters is the Second Amendment right to keep and bear arms. A good example of this was Attorney-General John Ashcroft in the early George W. Bush administration. If he had upheld the Constitution as a whole as he did the Second Amendment, civil liberties in this country would be in better shape than they are.

The other school of thought is that the Second Amendment is the only part of the Constitution that doesn’t matter.  A good example of this is a recent proposal to forbid the purchase of firearms whose name is on the federal government’s terrorism watch list.  Republican Senator Lindsay Graham of South Carolina came in for ridicule when he said that was a violation of a Constitutional right.

But like it or not, the Second Amendment is part of the Constitution, and the Constitution – all of it – is the law of the land.  And there are more than a million people on the terrorism watch list, many of them in error. The list has included dead people, an eight-year-old boy, government officials with security clearances, Nelson Mandela and Senator Edward Kennedy. Moreover people have gotten themselves removed from the list by the simple expedient of changing their legal names. Will prohibiting people on the list from buying legal firearms really make the country safer?  Is it so ridiculous to fear that a list may be misapplied?

My mother was a school teacher

May 9, 2010

My mother was a school teacher for all her working life. She and my father met at western Maryland’s Frostburg State Teachers College (now Frostburg State University).

She taught first, second and third grades, mainly at the Winter Street School in Hagerstown, Md., and Williamsport Primary School in nearby Williamsport, Md. Her career stretched from the 1920s to the 1960s, and in the second half of her career, she taught some of the children and a few grandchildren of some of her earliest students.

She had the reputation of being an outstanding teacher.  Parents were pleased to get their children in Mrs. Ebersole’s class.

The only way she was evaluated was that, every now and then, a supervisor from the Board of Education would come around to observe her in the classroom.  When that happened, she would use whatever teaching method was in favor at the time; otherwise she would use her own.

Then, too, she always took care that her attendance registers were in perfect order, with no smudges or crossings-out.  Evidently the school principals of the day always checked these carefully.

Today’s educational world is very different from hers, but it is the same in one respect.  You can use all the quantifiable measures of student performance you like, but nobody really knows what goes on in a classroom except the teacher and the students.

Hubble telescope looks at “empty” space

May 8, 2010

In 1996 and again in 2004, scientists pointed the orbital Hubble telescope at seemingly blank parts of the sky.

Click on this to see what they found.

I feel awe and wonder at how the immensity and complexity of the universe exceeds my power to comprehend it.  The philosopher Bertrand Russell said that thinking about the stars and galaxies helped him see his frustrations with human affairs in perspective; this helps me see what he meant.

I thank my friend Bill Elwell for forwarding the link.

Mirandizing the Times Square bomber

May 7, 2010

Everything in the Times Square bomber case went as it should.  An alert bystander – an immigrant from a Muslim country, by the way – tipped off police to a suspicious circumstance. New York City police courageously and skillfully rendered the bomb harmless.  A suspect, Faisal Shazad, was apprehended before he could get out of the country. He was questioned by the FBI’s crack High Value Interrogation Group and, according to the government, provided valuable information both before and after he was informed of his constitutional right to remain silent.

Senators John McCain, Orrin Hatch and others nevertheless criticized the FBI for issuing the Miranda warning.  Evidently they have a principled objection to due process of law, even when it works.

The right to remain silent, guaranteed by the Fifth Amendment to the U.S. Constitution, is one of the most basic concepts of the Anglo-American tradition of liberty under law.  It was enshrined in the English Bill of Rights of the 1687 after a long struggle against absolute monarchs whose power was based on forced confessions and secret trials.

The Supreme Court decision in Miranda vs. Arizona came as a result a long history of abuses by American police.  People my age remember the expression “third degree” and what it meant. I don’t want to go back to that era.


City schools and the flight to the suburbs

May 6, 2010

The city of Rochester, N.Y., where I live, has the same kind of troubles as most urban school systems in the United States – a high dropout rate, poor test scores and a flight of middle-class people, many but not all of them non-Hispanic white, to the suburbs, leaving behind a school population of poor people, many but not all of them black and Hispanic.

Mary Anna Towler, the editor of City newspaper, and Mark Hare, columnist for the Democrat and Chronicle, along with many others, think middle-class flight is itself the problem. They think the main obstacle to giving children a good education is “concentration of poverty.”  I hesitate to differ with people who are so dedicated to the welfare of the city and its children, and who have thought so deeply about its problems over such a long period of time. But I don’t believe this kind of thinking will get anybody anywhere.

What are they saying to middle-class parents? Poor children are poison, but we want you to put your children in the mix to dilute the poison. Who will willingly do that?

In fact I know college-educated middle-class white people whose children have gotten excellent academic educations in city schools and in the process gained a better understanding of the society in which they live than children educated in a more sheltered environment. But I know of those who’ve had a bad experience in city schools, and still others who don’t want to take the chance. Then there was the poor black woman in the city some time back who was convicted of fraud for enrolling her children in a suburban school. She was so desperate to get her children out of city schools that she was willing to risk being convicted for a criminal act.

I don’t criticize any of the people I’ve mentioned for their choices. If I had children, I would do what I thought was best for them, and not what I thought was theoretically best for society if everybody did it.

The fact is that parents and teachers in the city, not people in the suburbs, are responsible for education in the city. Almost all human beings, except a few kings and aristocrats, are descended from poor, illiterate people, and yet education is possible. Education is possible in the city, too.

And while I don’t claim to be able to tell teachers how to do their jobs, I have some thoughts – for whatever they’re worth – about improving our school system.


Risks and rewards of offshore oil drilling

May 5, 2010

The risk of offshore oil drilling is environmental catastrophe that jeopardizes the livelihoods and well-being of people who live and work along the coast.

It makes possible the depletion of the U.S. 3 percent share of the world’s known oil reserves, which we might need in the future.

The only reward is more profit to the oil industry.


Subprime college loans

May 4, 2010

Millions of Americans took out home mortgages in the expectation that house prices would always go up, only to find that the market value of their homes is less than what they owe on them.

There are others in the same situation with regard to college loans.  They went into debt expecting that the investment in improved educational credentials would pay off in the job market, only to find that the value of their marketable skills is less than what they owe.  [Update 8/3/10: More than one in five student loans in repayment since 1995 are in default.]

I have a good friend in that position.  He went back to school in mid-life to get an advanced degree in his professional field, partly because he loves what he is doing but also in the expectation of a payoff. He graduated in the middle of the current recession, and has been living hand-to-mouth, eking out a living through a patchwork of temporary and part-time jobs. Even if he gets a full-time job, it is unlikely to be in the field he studied for.  He finds that what employers want are not highly-qualified experts with specialized knowledge, but jacks-of-all-trades who are willing to work cheap.

He has had to temporarily suspend payments on his loan, and gets dunning telephone calls from bill collectors based in India.

His situation is not unique, or even unusual.  People with home mortgages and underwater home prices can discharge their obligation by forfeiting their homes.  People with student loans and underwater careers cannot use the bankruptcy process.  Some of them will be in a form of indentured servitude for the rest of their careers.

I am not the first person to compare unpayable student loans to subprime mortgage loans.

Click on this for a recent college graduate’s lament.
Click on this for a report on the plight of law school graduates.
Click on this for a report on how disadvantaged students are being exploited by for-profit schools.

I think our system of ever-rising tuition financed by college loans is one reason why the United States as a nation pays more that other advanced countries for medical services and legal services. Someone who comes out of medical school or law school with a huge debt burden needs a high income to pay it off. Human nature being what it is, they don’t willingly relinquish the high income once the debt is paid.

I think the for-profit business model harms higher education.  If the goal of a college is to maximize revenue, then (1) it will maximize enrollment regardless of whether students get any benefit from it and (2) it will give preference to students who are stupid and rich over those who are smart and poor.

The ideal would be free or cheap higher education for everybody who is capable of doing college work, and a job market in which people are judged based on what they can do rather than what credential they have.

But I don’t have a good answer as to how you would achieve that ideal. Nor do I have a good idea of what to do about my friend’s plight.  All I can do is engage in old-guy nostalgia about the golden age of state universities and the GI Bill, when any middle-class family could easily save up for college tuition and any poor person, with some effort, could work his or her way through. Of course in those days a college education was an option, not a requirement for a middle-class standard of living.

[Update 8/9/10]   Actually there is no real-world reason why we can’t have affordable higher education open to all who qualify, or decent jobs for anyone with a good work ethic.  I must have been overly discouraged about our dysfunctional politics and economy when I wrote the original post.

[Update 9/5/10]  Click on this for a report on the government’s role in exploiting student loan debtors.

Arizona and immigration

May 3, 2010

I think Arizona’s new law on illegal immigration is a bad idea.  But it is directed at a real problem, and I don’t have a good answer to that problem.

Arizona has a population of about 6.6 million people.  An estimated 400,000 to 500,000 illegal immigrants live within the state, about 7 percent of its population. Probably illegal immigrants comprise an even higher percentage of the work force.  The unemployment rate in Arizona is above 9 percent. Subtract the illegal immigrant population, and some of those jobs open up to citizens and legal residents. If you say citizens wouldn’t do those jobs, you mean they wouldn’t do them for the pay that the illegal immigrants get. Wages would rise for necessary jobs if that was the only way to get people to do them.

I don’t think you can stop illegal immigration by means of border patrols nor by means of spot checks of Hispanic-looking individuals. If you really wanted to stop illegal immigration, the only way to do it would be to have a national ID system, linked to a national data base with biometric information based on retinal scans or other unique individual characteristics, to require employers to keep records of the IDs of all their employees and to punish employers who fail to comply. No, I don’t like this.

An alternative is open borders.  Without barriers to immigration, there are no problems with illegals. No, I don’t think this is feasible.

The third option is what we have now – to restrict immigration, but to wink at violations of these restrictions.  The result is a large internal population of people who are outside the protection of the law – people with no recourse if they are exploited or cheated by employers or abused by government. I like this even less than the other two.


Heinlein’s Rule

May 2, 2010

Never attribute to malice what can adequately be explained by stupidity.

Robert A. Heinlein was perhaps the leading U.S. science fiction writer of the 1940s and 1950s and continued writing into the 1980s.  He wrote books for boys that I loved as a teenager.

Photos from the Gulf

May 1, 2010

The Boston Globe’s web site has amazing pictures of the big oil spill off the Louisiana Coast.

Click on this to view them.

Fortune 500 rejected cover

May 1, 2010

The May issue of Fortune magazine is its annual issue on the Fortune 500 list of the largest U.S. corporations.

This year the magazine commissioned Chicago illustrator and graphic novelist Chris Ware to draw the cover for the special issue, then rejected his submission.

Click on this and then click to enlarge to see his submission.

It was a great illustration. While Fortune’s reason for rejecting it was obvious, I hope it is made available as a poster.

Click on this to see the unimaginative cover Fortune did run.
Click on this for a retrospective on Fortune 500 covers.

Click on this for background on Chris Ware.

P.S. (7/23/10)

Click on this for a slide show.