Archive for August, 2009

Smart or Stupid Capitalism?

Sunday, August 30th, 2009

Dear Friends,

It seems to me that the way proprietary software is written is an example of stupid capitalism. This will be shown to be true if open source becomes the standard. (Which I think it will).

The main reason proprietary software is an example of stupid capitalism is that they only open certain file types. Usually only their own. Being unable to open files written by other software forces users to use more than one software package to open multiple file types. Word is an example.

While Word is a perfectly usable and user friendly program it only opens other Word formats. It cannot even open Works word processor files! As more people have the need to open different file types with their word processing software they will have to migrate from Word to another more adaptable software suite like Open Office.

By trying to force people to use Word exclusively Microsoft is driving people from it’s products. Some people will argue, ‘They are doing pretty well today.” to that I’ll just say this, “They said a very similar thing to Livy.”

No matter how big a corporation is… it can fall. If recent history teaches us nothing but this we will have learned something of value. Foolish practices will bring down a giant faster than any outside chipping away at market share. When a corporation collapses it is fast and sudden. (At least to outsiders). Leman Brothers for example.

So while I don’t see Microsoft or any other giant in the software industry collapsing soon they are spreading the seeds of their demise. They see this article as foolishness. They believe their business model is perfection. If only they can monopolize the market a little more… They will be the incarnation of Marx’s end of capitalism. Then will collapse, dragging down the world economies with them, just like the banking sector.

Too big to fail is something we should watch out for. Capitalism has at it’s heart that, the closer to perfect competition there is in markets, the more efficient the economies will be. The more monopolies the more the inefficiencies.

Because where a monopoly sometimes can produce a given product cheaper, due to scale of production, they always quickly become bloated. Paying too much to executives, lowering the quality of their products and charging too much for their products. (Vista). It is human nature. You or I are no different. Put in those circumstances we will act the same. The trick is to keep people from being in those circumstances.

But blunt hammered regulation isn’t the fix. Neither is trying to control every aspect of business through regulation. Government can be the biggest promoter of the eventuality by getting high speed internet to as many of the people as possible. (With tax incentives to companies, deregulation of that industry, etc…)This will allow the market to equalize. Free operating systems like Linux are not for everyone but deserve a larger market share. They will get it as more people are able to down load at high speed. Virus protection alone is reason enough.

If Microsoft starts using smart capitalism they will maybe have a less dominant role in the market but will stabilize their market share. Today they are dominant in every way except for safety, stability, privacy, and price. The quality issues are stupid. The price is a reflection of the monopoly status and is the equilibrium price. The virus issues are from Microsoft’s products being so widespread. A virus that infects a Windows machine will spread to more machines faster simply because of the lack of other operating systems out there. Like disease transmission in the human world. The less people that are immunized the faster the transmission rate. But as a greater percent of the population are immunized the slower the transmission rate and the easier it is to control an outbreak.

In the long term Microsoft cannot maintain it’s domination of the market. The question will be how will it come down? In a crash or easing down to a third or more of market share… Time will tell.


Thursday, August 27th, 2009

Dear Friends,

It seems to me that the idea President Obama put forward, a civilian national security force, as he describes it, is interestingly worded. It did remind me of an idea I have had kicking around for some time.

The US military could add another branch of service. It would be for policing duties in other countries. They would be available for UN sponsored security missions. They would go in after the Army or Marines have cleared a town or village. They would be trained in cultural awareness, some rudimentary language skills for the territory they are deployed in and in all types of police duties. A volunteer force they would fill a hole in American military might.

Take Afghanistan for example. Instead of moving in an American Army fire base to hold a town… move in a platoon of American Peace Keepers (APKs). They would set up a police station. Then rent housing from the people of the town. They would hire cleaning staff to clean the police station and their rentals. Pay to set up telephone service to the town police station. Then let anyone who needs it, use the phone for free, within reason. Lastly they would hire a number of the village men to be deputies. The APK would immediately fire anyone who had been caught taking a bribe or otherwise being corrupt. Once they had set up shop the regular Army could be removed to safe areas for rest and refit. Eventually the deputies will grow to be marshals and take over policing duties for the town. Freeing up the APK to set up shop in another town or redeployment to another theater.

APK would take the tactic of Take Hold and Build to the next level. Like adding another dimension to the battlefield in an insurgency, one that you control. The Army would be released to do what they do best and the people left in charge after the Army leaves will be dependable. This would utilize the military in the most effective and efficient way possible. Why train everyone to take land in the face of enemy fire when you don’t have to? Why teach every soldier cultural awareness if you don’t have to? Teach those that have the aptitude for it, how to take territory from a stubbornly dug in defense, and teach others to be effective and honest international police?

One draw for potential recruits would be that the training would qualify someone to do high level police duties in the USA or anywhere. People who have that bent to them like a challenge. They not only don’t mind confrontation they seek it. This would give people who have the temperament for it a chance to shine.

I would hope they would be like Andy Griffith and suffer the occasional honest fool but deplore the dishonest rogue. Be light handed in dealing with the people in their charge and fair in everything they do. If they establish a reputation of integrity and generosity, then actually live up to it, it will give them an aura of protection. People, no matter their religion, respect fair dealings and love (if not like) people who are generous. The reputation of the APK should be paramount to it.

It is something to think about. Maybe not a whole branch of service but an arm of the Army or the Marines. One thing is clear… the Militaries of the worlds most powerful democratic republics should think about insurgencies. They are easy to get started when the conditions are right and easy to get funded. So the likelihood of them cropping up in the future is good. Therefore, so is the likelihood of fighting one, even if your governors are poltroons and cower from a fight… In fact that makes it even more likely.

Modern Sophists

Sunday, August 23rd, 2009

Dear Friends,

It seems to me that Thrasymachus was an ideal example of the type of lawgiver the human race has had through out our history. If you recall the story of Socrates and Thrasymachus in Plato’s Republic. Thrasymachus argues with Socrates that justice is for the weak to believe and the strong to use, like a tool, to control the weak. He also goes on to say that justice is not only a tool to the strong, but is foolishness to actually believe, because it weakens the strong. With this Socrates two friends ask if Justice is a good that one should follow for the good it brings (extrinsic) or for an intrinsic reason, It is the highest good for example. Like brushing your teeth is a good we do to protect our teeth. Not for it’s intrinsic good. Or on the other hand like when we play. It is for it’s own sake and not for something we seek to gain in the future from the action, thus it is an intrinsic good. They asked if justice is an intrinsic or extrinsic good. To answer this question is why Socrates builds his fictitious Republic.

But back to Thrasymachus and his sophist philosophy of injustice. Even Thrasymachus admits the strong should pretend to be just, to keep the weak in line, and that the strong should look as just as they are unjust. The rulers that Thrasymachus imagines are the very ones we have endured for so long. People who pretend to be just. They hold up their arm in protest, screaming for justice, red faced. Indignant at the injustice in the world and pledging to put an end to it. While at the same time being as unjust as it is possible to be. Moreover pledging to use unjust means to achieve what they call just ends. Decrying Machiavelli all the while.

They never argue that people should be given equality. They always argue that people should be treated unequally. (To make up for past injustices). They argue that people should be put into groups to be better protected by the power of the State. They argue for diversity while denouncing other opinions as hate speech. There is no end to the injustice and hypocrisy of the modern sophists.

Textbook example of Thrasymachus‘s maxim that the rulers should appear just while actually being unjust. Calling for justice with indignation at the circumstances of a stranger smacks of insincerity. How can a person be indignant at the way a stranger is treated? I can be indignant at the way I am treated, I can be angry at the way a friend is treated, but how can I feel another’s pain that I haven’t even met? Then to act on this feigned indignation to force my version of justice on society is to be truly in love with oneself. Those that are in love with themselves focus inward and don’t see others as equals only as fools that need to be manipulated. (For their own good).

I am amazed that people who call for others to look at evil and discern the subtle shades of black. But when confronted by a world of color they staunchly see grayscale. They are incapable of seeing in any more than one dimension. Yet they must force their version of justice on society. All the while acting unjustly (not paying their taxes, etc…)and using unjust means (seizing the property of others, etc…) to their ends.

So I argue that these people are not just, but are in fact, are the heirs of Thrasymachus. Their rule has taken continents from prosperity to poverty. (while retaining the wealth of the Elite). Their rule has reduced empires to puppets. But they keep getting in power.

It is because their siren song is heard by upper middle class youth (the most dangerous people on Earth)… Weren’t the people present, at Plato’s discourse, the upper middle class youth of their day?

US Health Care Reform

Wednesday, August 19th, 2009

Dear Friends,

It seems to me that The democratically controlled congress has so poisoned the water regarding health care that they have sealed their own fate.

The Obama administration had as it’s cause celeb health care reform. By health care reform they meant setting up a framework for a single payer system. The democrats realize their improvident tinkering on the market supplied healthcare system and mismanagement of the two major single payer systems in the United States have broken all of them… badly.

Medicaid’s budget is careening to widen the US budget deficit in the next twenty years. The projected costs are astronomical. Medicare is even worse. They are all compounded by the Social Security bell curve in baby boomers. Combined, these three programs, Medicaid, Medicare and Social Security are projected to amount to over 45% of US GDP in twenty years.

This is entirely due to lack of foresight by the Democratic party that has been largely in control of these programs. The Republicans have tried to steer Social Security in a more sustainable direction but have been vilified for it by both the unbiased media and the Democrats. That is not to say the Republicans are not as foolish as the Democrats… they just want to benefit their constituents.

Knowing the dire straights the Democratic party has steered the US economy and the looming results of their poorly thought out great society programs they feel the only way to avoid blame is to take over the entire health care industry. Putting up a smoke screen to their ill-considered management. Then they can institute draconian rationing to drive down costs. Then blame Republicans for the need to ration.

80% of the total costs of health care are born in the last 20% of a person’s lifetime. So if government wants to lower the overall costs all it needs do is ration health care away from older people. Of course, being politically sensitive, this will be phased in slowly. It will take a decade or more to phase in the most draconian after the State seizes control of the industry.

The real driving factors of the double digit increase in the costs of US healthcare are not enough doctors, too much regulation of the industry, fragmented regulation among states, lack of tort reform and lack of market forces driving down costs.

The medical colleges in the US intentionally keep the amount of MDs they produce at a minimum. They claim it is to keep the quality high. The reality may be less altruistic. There is absolutely no reason the United States should import doctors from other countries. That is the hallmark of a third rate country. Not a world leader. The United States, in a more sane world, would be exporting doctors to third world countries, to improve the lot of the people in those countries.

Regulation in the US stifles innovation in insurance delivery. In Vermont the states regulation became so onerous that Kaiser Permanente, the not for profit insurance company, had to leave the state. Fractured regulation drives up the costs of any entity that does business across state lines. (This is why the interstate commerce clause was put into the US Constitution, not to regulate everything from nose picking to bedroom arrangements).

The elephant in the room of any meaningful health care reform in the US is tort reform. It would be an interesting figure to know what percentage of the health care dollar is spent on lawsuits both frivolous and accountable.

Lastly the market model breaks down in the case of healthcare. If told a certain operation will save the life of a persons child that person will rightly pay any amount for it. They are not in a bargaining position. Market forces presuppose that both parties to a transaction have at least some leverage. The buyer need not purchase the product and the seller has a certain cost of doing business. Both have incentives to both do business and to profit in their own way. When someone’s child’s life is in the balance there is necessarily no bargaining power on the part of the parent. The parent MUST purchase the operation.

The most important thing that will be lost with a US single payer system is the loss of innovation… But the Democrats will have avoided blame.

Why We Need Lawyers

Tuesday, August 11th, 2009

Dear Friends,

It seems to me that the reason we need lawyers in our society is that people don’t want to be held at their word. It is Hsun Ching’s maxim that the congenital nature of man is evil. By evil he meant purely selfish. Selfishness is our natural state. The civilization in us is learned.

Our civilization is learned and our selfishness is nature. The problem arises in that every incentive in our society promotes our being selfish and prevents us from being good. Take for example the child who, being a child, is out door throwing rocks. When he accidentally throws a rock through a window. The good child marches himself to the door, knocks on it and announces that he accidentally broke the window. The negative consequences flow from that virtuous act. Loss of outdoor privileges, possibly a spanking enmity from the victim of the rock incident and on and on. Now take the selfish child. He breaks the window and runs for it. If no one sees him he gets off scot free. There are no negative repercussions in his life. If he is caught he suffers no more, and probably less, than the virtuous child.

Especially the court system of the US promotes selfishness. Take for example the person who demands every right and privilege that could be afforded to him. That person enjoys a profound advantage over the person who goes along. The person who tries to be fair and honest in court is DOA. In the American court system perjury is not a high crime or a misdemeanor. It is nothing. The media and learned law professors were adamant about this point during the Clinton affair.

So if the incentives are set up to promote selfishness and our nature is selfishness then I wonder that any of us are civilized at all to any extent. The civilization in us is ground away. Yet we lament that some 20% of the population are sociopaths. They have absolutely no conscious. These people in our society have the advantage in any argument. They can screw over a friend for doing them a favor then expect him to pay for it. They are the avatar of selfishness. They don’t have the ability to see another’s point of view.

The fact is we are in a precarious situation. Our society depends on, at least some people, being honest and hard working. The problem of incentives goading people to abandon what they have learned is right must be fixed. Look at how sinuous and enmeshing the legal system has become. Like a vine that has overgrown the garden the US legal system has been fed and watered to the point that it has become a tangle that is quickly ensnaring our economy and our lives.

It is hard to hold people to any standard. We have been motivated by societal norms to be corrupt and selfish. All our lives we have been told to be good but encouraged to be corrupt. This tension passes through our entire civilization. Socrates argued against the Pre-Socratics, Rhetoratitions, and Sophists that it was the highest good to be a virtuous citizen. According to modern philosophers he won the argument. Well the argument might have been won but the battle goes on…

Cash For Clunkers

Thursday, August 6th, 2009

Dear Friends,

It seems to me that the US and the world economy would be better served by a general tax refund than any targeted “Cash for clunker” scheme. When the US was in the recession of 2001 the Bush administration, with the help of the divided legislature, decided to give a general tax refund. I remember it to be around $600.00 for a family, or something like that. The thing costed around $500 million. The US GDP was increased during the time the scheme was done and the economy came out of recession.

The main argument against the general population getting a tax “refund” is that many people would save the money or pay down debt. I maintain that doing both double the effect of each dollar. When credit is paid down the borrower has more credit to use to buy some big ticket item in the future. The creditor has money to re-lend back into the economy. The economy gets a double whammy for each dollar spent. So to say that paying down debt would be a waste of the money is absurd.

Saving a “refund” would give banks more solvency. After all, wasn’t the problem that banks were insolvent? That is what the two TARP schemes, that costed $2 trillion, were for. When people save money the banks have more money to lend back into the economy. When there is a general trend for people to save the banks are put in a comfortable position to lend. The economy gets another double whammy. The saver has more personal wealth, giving them more confidence, to spend money. The bank has a better looking ledger and is in a position to lend into the economy. Again doubling the economic impact of a “refund”.

The Cash for clunkers scheme has generated a lot of auto sales. I haven’t seen any hard figures yet on how many were sold but the number seems substantial. Wrecking yards are busy with business from it and are looking forward to a good inventory of used car parts. I have also heard that struggling auto dealership are staying afloat due to this timely legislation. It has been such a success that the government wants to throw another 2 billion dollars into it.

I will be very curious what the GDP increase will be from this $3 billion dollar scheme to move the economy (and sell cars). As to selling cars the program has been a resounding success. The effect on the economy both during the time the scheme is in effect and after the scheme finishes is still in question. I suspect the effects will be small and short in duration.

The money the government is printing and borrowing from itself for this scheme is being spent on a product that has been manufactured already. The reduced inventory will generate some restocking but the car manufacturers are wary of over stocking. Cutting down expenses is still job one. So the addition to GDP will be lessened. The money is being spent immediately so the impact is immediate. The long term impact to the economy will be in the driving down of used car parts prices. I predict will be another small scale economic “crisis” that will happen in a few months. Too large an inventory of used car parts will drive the price too low for the dealers in used car parts to have room for a profit. They will be crying to the government to fix this problem too.

So the Cash for clunkers scheme is on track to cost six times as much as Bush’s “tax rebate”. Do you think the effect on the US GDP will be six times Bush‘s “rebate” ?

Capitalist Holiday

Sunday, August 2nd, 2009

Dear Friends,

It seems to me that if a small percent of vacationers went on “Capitalist Holiday” the lot of man would be greatly improved.

A capitalist holiday would be a person going to some impoverished country. Bringing with them some tool or implement. So instead of spending $10,000.00 on some hedonistic spa we would take a cement mixer to Haiti and give it to some poor person. We would spend a day interviewing people for the gift. Then when someone suitable is found we give the recipient 50% ownership of the tool or implement. Preventing the gift from being sold. They then use it to make money. If their net profit is greater than $5,000.00, or some other agreed upon figure, the recipient pays the gifter 10% of the net profits above the figure.

This could be done with land, different crops, tractors, or anything else that would conceivably be of use to impoverished people. This would not only give people in impoverished countries a means to better their lot but would create an entrepreneurial ethos in the countries that received the largess.

If the gifter wants he or she could supply raw materials for the enterprise. Buying Portland cement for the mixer for example. Or gasoline for a pickup truck mounted back hoe. These things that are cheap in the US would help people, in impoverished countries, build infrastructure. When things are happening around us we all want to be a part. When people in a destitute village in Haiti see sewers being dug for people with a tiny bit money on one side and people having the holes patched in the walls of their homes, keeping out malarial mosquitoes on the other, they will want to improve the place they live as well. The productive movement will garner momentum….

Every time a tool or implement is gifted the GDP of the country that receives the gift will go up. Not only for the day the gift is given but as long as the gift is used. If a tool has a 5 year lifespan it will increase GDP for 5 years or more. Where people are living on less than a dollar a day an increase of a few cents is huge!

Issues of permits and indigenous corruption would need to be addressed by national governments. Countries that want to be involved in the program would have to sign an agreement to the effect that they would stamp out corruption that extorts money or otherwise hinders the bilateral enterprises. Permit and regulations should be clear and universal as possible. This would encourage international cooperation and improve the standard of living in those countries, that would, in turn, lower the tensions that lead to war.

I believe that many people in the developed world would do this. Because even if the governments in those nations are not civilized… some of the people are. Helping others is a sign of civilized people. The want, and in fact need, of civilized people to help those less fortunate is presupposed. If only a small percent of people who vacation would indulge, every few years, in a capitalist holiday, they might not only find themselves with a bigger heart but in time bigger pocketbooks… All around.

In time, this program would necessarily get infrastructure, to people that need it. The people in towns that had a great deal of interaction with the program would become tinkerers and entrepreneurs. They would be the seeds that would sprout into a healthy capitalist system. One that would raise the standard of living bar for the people in those nascent nations, much higher, much quicker, than any socialistic redistribution of an ever shrinking pie…