Category Archives: Business

Detroit emerges from bankruptcy. Not quite.

1 Reply
missing homes Detroit

While Detroit’s central core comes back, surrounding, homes burn at 220+/month, leave Detroit streets looking like the teeth of an aging hillbilly.

Detroit went bankrupt last year, the largest US city to do so since New York in 1970. As with New York’s bankruptcy, Detroit’s was used to cancel old debts and rewrite ill-thought contracts. Detroit also got to jail some crooked politicians including mayor Kilpatrick, described as “a walking crime wave.” But the city and county have no easy path out of bankruptcy as both city and county are likely insolvent. That is, they spend more than they take in despite massive out-state funding, and high taxes, 10% above the state level. To make matters worse, they are losing population at the rate of 1% or so per year. It’s hard to fund a city built for 2 million on the tax revenue of 1/3 as many, especially when they are mostly unemployed. Unless a lot changes soon, another bankruptcy is almost inevitable — likely this time at the county level.

We got in this state, largely as a result of a 50 year war between the black, solidly Democrat, somewhat anarchist, political establishment of Detroit, and the white, stayed, mostly Republican out state. The white population fled following the riots of the 60s and the richer black population soon followed. The remainder stayed, trapped in slowly decaying neighborhoods as the city went broke. White flight allowed the black community to develop its own, Motown culture, but except for the music industry, it has not benefitted from this culture.

Detroit's murder rate, 45/100,000, is the highest in the US. It's coming down but not that fast.

Detroit’s murder rate is the highest in the US. It’s come down 10% in the last 2 years, but has far to go.

Detroiters have poor health, poor savings rates, high murder rates, and a fire rate of about .22% per month, 2.6% per year. The city lacks basic city services like reliable fire fighting and street plowing. Police at one point erected signs that said, “enter at your own risk.” There is a lack of small businesses and the services they would provide too: laundromats, grocery stores, and taxis (though no lack of bars and marijuana maintenance clinics). Employment in the auto-industry is down. And it’s not being replaced by home-grown small business – perhaps hampered by the low savings rate. A surprisingly large fraction of the Detroit homes are in foreclosure, see map, and with it a high abandonment rate and a high fire rate. As pheasant and dear return, non-core Detroit is beginning to look like farm country.

Detroit foreclosures near me. Blue is occupied homes, red is unoccupied, yellow unknown, and green is destroyed homes or vacant, foreclosed land.

Detroit foreclosures near me. Homes in dark blue are occupied foreclosed, red is unoccupied, and green plots are destroyed homes or vacant, foreclosed land.

It’s not clear what political leaders should do. The city council would like to return to their pre-bankruptcy ways where they could borrow as much as they felt they needed and spend on whatever they saw fit — often on fast friends, fast cars, gambling, and vacation homes outside of the city. But the out-state population has been reluctant to give them the credit card. Is this racist or is it prudent — probably both, but this can not continue. The city and county pension funds were ransacked for ill-advised investments and consulting fees to cronies and their power-lawyers. Either the money is replaced from out-state or there will be some unhappy retirees in the not-too-distant future. My guess is that the state will have to pick up the tab for this mismanagement, but that they won’t want to hand over management control afterwards.

Rand Paul, a potential GOP presidential candidate, has proposed rebuilding business and property values by a method that the city will almost certainly reject. His solution: cut services to low-population density areas and cut taxes on business and earned income. While this would likely bring in new people and new businesses, the people would likely be white, and the businesses white-owned/ white-serving. Black-Detroiters have too little savings, organization and income to directly benefit from this plan. Detroit’s Democrat politicians will claim, not without merit, that this is welfare for rich whites: a way for them to become yet-richer while doing nothing for the poor blacks of the burning neighborhoods. They are likely to demand control as the elected officials of the town: regulating business and raising the minimum wage to create “equality.” I suspect this is a bad idea.

Detroit hunger games

Detroit suffers from two populations and a divide.

To some extent we’re already seeing the return of white-owned, white-serving businesses. Classic buildings in the core of the city have been purchased by white developers – notably Dan Gilbert of Quicken Loans leading to gentrification and an influx of single, white hipsters. The newcomers are viewed as half-saviors, half-carpetbaggers. They dwell in a whiter city core with hipster bars and expensive restaurants. Does a poor city with massive debt, crime, and unemployment benefit from a core filled with high-priced, gourmet coffee and fern bars?

The author, Robert Buxbaum, enjoys a day at an artificial beach in central Detroit.

The author, Robert Buxbaum, enjoys a beer at an artificial beach-cafe in central Detroit with some, few black folks, none poor. Is this good for Detroit?

The new hipsters put a squeeze on city services too — one that’s hard to deal with fairly. Detroit can not afford to plow all the streets after a snow. Should the new high-tax white folks get plowed streets, or should they suffer equally with everyone else? Detroit education is abysmal, but the high tax-bracket folks want better. Should they get it, or suffer equally? They want extra street lights and police protection. Should they get it, or suffer equally? Is this the way up?  A solution I’d proposed some while ago was to divide the core city from the now-rural outskirts so that each could be managed more sanely. It’s not a grand a solution like Rand’s plan, but less likely to be rejected. One way or another, we seem destined to have a Detroit with a rich core and abandoned neighborhoods. I suspect it might as well be managed that way.

Robert E. Buxbaum, February 10, 2015. I don’t have solutions, but write about the city’s problems, and the partial solutions I’ve heard as a way to clarify my thinking — and perhaps yours too.

Is college worth no cost?

2 Replies

While a college degree gives most graduates a salary benefit over high school graduates, a study by the Bureau of Labor statistics indicates that the benefits disappear if you graduate in the bottom 25% of your class. Worse yet, if you don’t graduate at all you can end up losing salary money, especially if you go into low-paying fields like child development or physical sciences.

Salary benefits of a college degree are largely absent if you graduate in the bottom 25% of your class.

The average college graduate earns significantly more than a high school grad, but not if you attend a pricy school, or graduate in the bottom 1/4 of your class, or have the wrong major.

Most people realize there is a great earnings difference depending on your field of study with graduates in engineering and medicine doing fairly well financially and even top graduates in child development or athletic sciences barely able to justify the college and opportunity costs (worse if they go to an expensive college), but what isn’t always realized is that not all those who enter these fields graduate. For them there is a steep loss when the four (or more) years of lost income are considered.

risk premium in wages

If you don’t graduate or get only an AA or 2 year degree the increase in wages is minimal, and you lose time working and whatever your costs of education. The loss is particularly high if you study social science fields at an expensive college, and don’t graduate, or if you graduate in the bottom of your class.

A report from the New York Federal Reserve finds that the highest pay major is petroleum engineering, mid-career salary $176,300/yr, and the bottom is child development, mid-career salary $36,400/yr (click to check on your major). I’m not sure most students or advisors are aware of the steep salary difference, or that college can have a salary down-side if one picks the wrong major, or does not complete the degree. In terms of earnings, you might be better off avoiding even a free college degree in these areas unless you’re fairly sure you’ll complete the degree, or you really want to work in these fields.

Top earning majors Fed Reserve and Majors that pay you back.

Top earning majors: Majors that pay.

Of course college can provide more than money: knowledge, for instance, and learning: the ability to reason better. But these benefits are likely lost if you don’t work at it, or don’t go in a field you love. They can also come to those who study hard in self-taught reading. In either case, it is the work habits that will make you grow as a person, and leave you more employable. Tough colleges add a lot by exposure to new people and new ways of thinking about great books, and by forced experience in writing essays — but these benefits too are work-dependent and college dependent. If you work hard understanding a great book it will show. If you didn’t work at it, or only exposed yourself to easier fare, that too will show.

As students don’t like criticism, and as good criticism is hard to give — and harder to give well, many less-demanding colleges ,give little or no critical feedback, especially for disadvantaged students. This disadvantages them even more as criticism is an important part of learning. If all you get is a positive experience, a nice campus, and a dramatic graduation, this is not learning. Nor is it necessarily worth 4-5 years of your life.

As a comic take on the high time-cost of a liberal arts education, “Father” Guido Sarduchi, of Saturday Night LIve, describes his “5 minute college experience.” To a surprising extent, it provides everything you’ll remember of 4 year college experience in 5 minutes, including math, history, political science, and language (Spanish).For those who are not sure they will complete a liberal arts education, Father Sarduchi’s 5 minutes may be a better investment than a free 4 years in community college.

Robert. E. Buxbaum. January 21-22, 2015. My sense is that the better part of education is what you get when you don’t get what you want.

Of Scrooge and rising wheat production

4 Replies

The Christmas Carol tells a tale that, for all the magic and fantasy, presents as true an economic picture of a man and his times as any in real-life history. Scrooge is a miserable character at the beginning of the tale, he lives alone in a dark house, without a wife or children, disliked by those around him. Scrooge has an office with a single employee (Bob Cratchit) in a tank-like office heated by a single lump of coal. He doesn’t associate much with friends or family, and one senses that he has few customers. He is poor by any life measure, and is likely poor relative to other bankers. At the end, through giving, he finds he enjoys life, is liked more, and (one has the sense) he may even get more business, and more money.

Scrooge (as best I can read him) believes in Malthus’s economic error of zero-sum wealth: That there is a limited amount of food, clothing, jobs, etc. and therefore Scrooge uses only the minimum, employs only the minimum, and spends only the minimum. Having more people would only mean more mouths to feed. As Scrooge says, “I can’t afford to make idle people merry. I help to support the establishments I have mentioned [the workhouses]. They cost enough, and … If they [the poor] would rather die,” said Scrooge, “they had better do it, and decrease the surplus population.”

Scrooge, the poor rich man.

Scrooge, the poor rich man with a tiny carbon footprint.

The teaching of the spirits is the opposite, and neither that of the Democrats or Republicans. Neither that a big government is needed to redistribute the wealth, nor that the free market will do everything. But, as I read it, the spirits bring a spiritual message of personal charity and happiness. That one enriches ones-self when one give of and by ones-self — just from the desire to be good and do good. The spirit of Christmas Present assures Scrooge that no famine will result from the excess population, but tells him of his 1800 brothers and shows him the unending cornucopia of food in the marketplace: spanish onions, oranges, fat chestnuts, grapes, and squab. Christmas future then shows him his funeral, and Tim’s: the dismal end of all men, rich and not:  “Will you decide what men shall live, what men shall die? It may be, that in the sight of Heaven, you are more worthless and less fit to live.” And Scrooge reforms, learns: gives a smile and a laugh, and employs a young runner to get Cratchit a fat goose. He visits his nephew Fred, a cheerful businessman for dinner, and laughs while watching Tom Topper court Fred’s plump sister-in-law.

The spirits do not redistribute Scrooge’s wealth for him, and certainly don’t present a formula for how much to give whom. Instead they present a picture of the value of joy and societal fellowship (as I read it). The spirits help Scrooge out of his mental rut so he’s sees worthy endeavors everywhere. Both hoarding and redistribution are Malthusian-Scroogian messages, as I read them. Both are based on the idea that there is only so much that the world can provide.

World wheet production

World wheat production tripled from 1960 to 2012 (faostat.fao.org), but acreage remained constant. More and more wheat from the same number of acres.

The history of food production suggests the spirits are right. The population is now three times what it was in Dickens’s day and mass starvation is not here. Instead we live among an “apoplectic opulence” of food. In a sense these are the product of new fertilizers, new tractors, and GMOs (Genetically modified organisms), but I would say it’s more the influence of better people. Plus, perhaps some extra CO2 in the air. Britons now complain about being too fat — and blame free markets for making them so. Over the last 50 years, wheat production has tripled, while the world population doubled, and the production of delicacies, like meat has expanded even faster. Unexpectedly, one sees that the opulence does not come from bringing new fields on-line — a process that would have to stop — but instead from increased production by the same tilled acres.

The opulence is not uniformly distributed, I should note. Countries that believe in Malthus and resort to hoarding or redistribution have been rewarded to see their grim prophesies fulfilled, as was Scrooge. Under Stalin, The Soviet Union redistributed grain from the unworthy farmer to the worth factory worker. The result was famine and Stalin felt vindicated by it. Even after Stalin, production never really grew under Soviet oversight, but remained at 75 Mtons/year from 1960 until the soviet collapse in 1990. Tellingly, nearly half of Soviet production was from the 3% of land under private cultivation. An unintended benefit: it appears the lack of Soviet grain was a major motivation for détente.  England had famine problems too when they enacted Malthusian “corn acts” and when they prevented worker migration Irish ownership during the potato famine. They saw starvation again under Attlee’s managed redistribution. In the US, it’s possible that behaviors like FDR scattering the bonus army may have helped prolong the depression. My sense is that the modern-day Scrooges are those against immigration “the foreigners will take our jobs,” and those who oppose paying folks on time, or nuclear and coal for fear that we will warm the planet. Their vision of America-yet-to-be matches Scrooge’s: a one-man work-force in a tank office heated by a single piece of coal.

Now I must admit that I have no simple formula for the correct charity standard. How does a nation provide enough, but not so much that it removes motivation– and the joy of success. Perhaps all I can say is that there is a best path between hoarding and false generosity. Those pushing the extremes are not helping, but creating a Dickensian world of sadness and gloom. Rejoice with me then, and with the reformed Scrooge. God bless us all, each and every one.

Robert Buxbaum, January 7, 2015. Some ideas here from Jerry Bowyer in last year’s Forbes.

von NotHaus, the terrorist who uttered money.

2 Replies

Bernard von NotHaus was sentenced two days ago, December 3, 2014 in Federal court, North Carolina on charges of terrorism for the crime of making token coinage. This crime is called uttering money in English common law, but it is not generally considered terrorism, or generally prosecuted at all in modern times. The sentencing was covered by only one newspaper, The New York Sun. The New York Times and others, I guess, found it wasn’t news fit to print. But I find it newsworthy enough to blog about.

The current price of silver (as I write) is $16.60 per ounce. Had Bernard von NotHaus limited himself to selling ordinary, one ounce, silver medallions for $20 each, he could have made money on each, and perhaps been awarded a medal for his artistry. Instead, von NotHaus stands convicted as a terrorist against the US economy. The problem: his $20 medallions include the symbol “$20” and the word “dollar” on the coins. The government’s claim is that people might come to use his silver medallions to buy $20 worth of products, and this, it was argued, could bring down the government. Also incendiary was the phrase “Trust in God.” The federal prosecutor argued this was too close to our government’s, “In God we Trust.”

A liberty dollar. The crime is terrorism by uttering money -- saying that this coin should be used as $20 currency.

A liberty $20 piece The crime is terrorism, undermining the US by suggesting people use this coin as currency.

Von NotHaus was arrested on June 6, 2009, and had his coins and metal confiscated. He was convicted of terrorism March, 2011. Among the evidence are gold coins with the image of Ron Paul and certificates with von NotHaus’s image marked as 1 Dollar negotiable currency. Making these items isn’t quite counterfeiting, as the coins and certificates don’t look like US currency, but the US government decided it’s worse: economic terrorism. Anne Tompkins, the federal prosecutor successfully argued that von NotHaus is suggesting that the currency of the US is somehow deficient, and perhaps that the president and his crowd are doing something wrong in their efforts to drive inflation by printing excess currency. Ms. Tompkins successfully argued that such “attempts to undermine the legitimate currency of this country are simply a unique form of domestic terrorism” and that they “represent a clear and present danger to the economic stability of this country.” I’d say that’s over-reacting.

The Liberty Dollar. It's not counterfeiting, but the crime of terrorism by uttering money. Printing certificates with the intent of having them used as currency.

The Liberty Dollar. It’s not counterfeiting, but terrorism. 20 of these can be exchanged for a silver coin. US currency is non-negotiable; you have no right to change

The mechanism whereby these items are supposed to undermine the economic stability is the reverse of Gresham’s law. Gresham’s law is that the worse currency will stay in circulation and the better will be driven out. Applied here, Gresham would predict that people will hoard these liberty dollars and will spend only the paper. That’s what happens with ordinary art, or gold bars. But our government’s terrorism argument assumes Gresham’s theories are wrong, and that people will hoard Obama’s paper while spending von NotHaus’s coins. On that chance, Mr. von NotHaus stands convicted of terrorism. Mr. von NotHaus’s defense is that he never claimed his medallions should be used as currency. The judge rejected this defense. For all I know, Ms Tompkins could now pursue Von NotHaus for sedition: suggesting there is something wrong with the way we pursue minters.

The Ron Paul $1000, weapon of mass destruction.

The Ron Paul, $1000 weapon of national destruction.

At sentencing yesterday, Judge Voorhees ignored rules that should have condemned von NotHause to life in prison. Instead, he ruled for 6 month’s house arrest and 3 years probation saying he didn’t believe von NotHaus was motivated by evil intent, but rather by philosophical speech (something partially protected by the first amendment). I’m always glad for lenient sentencing, especially when the argument involves freedom of speech. I’m also glad for philosophy, but that does not mean I’m happy about the outcome. To me, von NotHaus deserves a medal; he is the Rosa Parks of hard currency. And I think that’s fit to print.

Part of the reason this conviction bugs me is that I got a free education courtesy of Peter Cooper, the citizen industrialist of the 19th century who founded the greenback party. He published (uttered) $3 bread notes to advertise his cause. Robert Buxbaum is a good US citizen, who uses only non-negotiable, fiat currency; none of this negotiable stuff for me. December 5, 2014.

Loyalty, part 2: power hurts the leader

2 Replies

In a previous post, I made the case that one should avoid accepting loyalty requests as these are generally requests for your self-destruction. Someone who asks for loyalty is not saying he’ll provide you with good pay, a comfortable environment, empowerment, and good security. Rather that he wants your service despite little or not pay, discomfort, enslavement, and likely death or disgrace. There are some, few exceptions, but loyal service of this type rarely serves the servant.

Your chance of surviving as a minion is low; your chance as master is lower.

Your chance of surviving as a minion is low; your chance as master is lower.

I’d now like to claim that having loyal followers hurts the leader, too, costing him good service, and separating him from health, friends, and family. Most leaders are better off as half of a duopoly, without minions, and only loose control of their workers. The first reason for this is to note that minions don’t do good work relative to free men. They die for no good reason (e.g. you forgot to feed them), or they stop work and wonder what you’d like next, or they get drunk and gripe, or they beat each other up over fervor or small territorial issues. They very rarely innovate or work together, and for any complex project like taking over the world (or the tristate area) needs workers who do. Good work requires pride in achievement, and a loyal slave has none.

Having loyal followers precludes one from having a close relationship with the followers (you can’t appear weak), and also with friends (your minions must have one leader, not two). The leader gets used to being surrounded by sycophants, and begins to doubt those who behave otherwise. The boss will begin to distrust friends and allies, those he needs to stay in power, as these are the very people who could most easily assist others to take leadership from him. Over time, the king, boss, monopolist and dictator share less and less. As a result they end up secret and bitter, with many fears and none he can call close. And what pleasure is there in power, if one can’t share the rewards with friends and family, or share the burden with others.

Only support someone who could rule reasonably honestly and well. Chaos is worse than a dictator. Kanin from the New Yorker.

Only support someone who could rule reasonably honestly and well. Chaos is worse than a dictator. Kanin from the New Yorker.

A great number of kings have killed themselves in one way or another, very often because of overly large ambitions (see cartoon). King Saul, in the Bible is perhaps the first, Hitler is perhaps the most famous, and Colonel Qadhafi of Libya is perhaps the most recent. More often, maximum leaders are murdered, typically by friends and family. Famous examples include Julius Caesar, Augustus Caesar, and Nero; Charles I, Louis XVI, Richard III, and Tzar Alexander. Both the king of rock (Elvis) and the king of pop (Michael Jackson) killed themselves with drugs. Yet others died in needless wars or were exiled. Napoleon was defeated, exiled, returned, re-exiled and then murdered by an associate.  It’s not that safe to be the infallible king. Perhaps the wisest move is that of Pope Benedict, who last year left Rome for a life of monk-like solitude. Machiavelli points out, in “The Prince”, that only two Roman Emperors died of natural causes, one because he became emperor at a very old age, and the other was Marcus Aurelius, an advanced ruler who empowered his subjects.

The great leaders create so much space for others to lead that they are almost invisible: they lead by offering encouragement.

Political bosses and monopolist businessmen, though lower in power, don’t fare much better in life. Boss Tweed died in jail, as did Capone, Boss Pendergast. Even if they avoid jail, the fact that no one likes you takes a toll. No one liked Vanderbilt or Rockefeller, Carnegie, Morgan, or Fisk. While they lived, they could expect nothing more than senate investigations and ugly lampoons in the free press, plus an unfavorable memory after death. William Hearst and Howard Hughes died as virtual hermits, best remembered as the inspiration for “Citizen Kane” and “The Navigator.” Peter Cooper and Steve Jobs are different,  industrialists liked in life and in death; and Bill Gates may join them too. Their secret was to empower others.

He's being eaten alive by his power, money, and respect. In the end, he had none.

He’s being eaten alive by his power, money, and respect, as are all those he might love.

Woe to the wife, child or friend of the dictator. The wife and children of a king or king-pin rarely enjoy much of the power. The king-pin doesn’t trust them (often with good reason), and neither do the people. Stalin killed his wife and children as did Nero, Frederick the Great, Herod, Hitler, and quite a few others. It was said that is was preferable to be an animal in the courtyard of these greats than a son at their table. And even if the king or king-pin doesn’t kill his wife child or son, the people often do e.g. Marie Antoinette was killed shortly after Louis XVI and the Tzarina of Russia alongside Alexander III. Similarly, the wife of Hitler, the Mistress of Mussolini, and the wife of Nicolae Ceausescu all died at their husband’s side, sharing the punishment for their husband’s ambition.

The kings of Sparta fared relatively well, as did their wives, despite the militarism of Sparta. Their trick was that Sparta was a du-archy, a country with two kings. Sparta was strong and stable, and their kings (mostly) died at home. In business too, it seems the selfish leader should step back and become almost invisible. It helps him, and helps the people too. If the leader can’t share power this way, he or she should at least give people a simple choice between two things he controls and accepts (chocolate and vanilla; Democrat and Republican). Workers with a choice, even a small one, learn to act somewhat independently, and customers (or citizens) don’t complain as much either if they have some control over their fate. All will come to like the leader more, and the leader will like himself more. People stopped resenting Microsoft when there was a viable alternative, Apple, and Microsoft engineers benefitted by having a competitor to their products. I suspect that Bill Gates realized this would happen when he helped fund Apple’s return to the market. Unfortunately, most monopolists, bosses, and king-pins are too stupid, or too afraid to do this. In the end, it’s the trapped employee or follower who shoots the leader from behind.

Einstein on freedom producing good. I'd say freedom is also a good in itself

The ideal situation is a delicate balance between control and freedom. A great leader will empower those around him and support the opposition. That was the unrealized sense of Mao Tse Tung’s hundred flowers movement (let 100 flowers bloom; left 100 schools of thought contend). It’s political tensegrity. Most leaders can not let go to do this (Mao could not). Still, there IS a sanity clause, Virginia. And a leader should know that there is no benefit to the king who gains the whole world and loses his friends, family and sleep.

Robert Buxbaum. Remember, remember the 5th of November; those oppressed, and those imagining themselves oppressed rise and plot.

When is loyalty a good thing? pt. 1

2 Replies

Loyalty to a person or institution is generally presented as a good thing — a sign of good character. Disloyalty, by contrast, is considered one of the basest of character traits — the sign of a dastard, a poltroon. But I’d like to make the case that the loyalty that leaders demand (the most common loyalty situation) isn’t real loyalty, but stupidity or worse, toadyship disguised as loyalty. I’d further like to suggest that this attachment hurts the leaders as much as the followers in most situations — well, nearly as much. That is, a sane leader is better off where there is a viable alternative to his product, leadership, or service — a loyal opposition party, as it were.

If you give loyalty for free don't expect it in return.

If you give loyalty above your self interest, don’t expect it in return. If you don’t value yourself, no one else will.

But first, what is Loyalty? If I believe a teacher because he makes sense, or serve a boss because he pays me well, this is not loyalty, but common self-interest. Similarly, if I eat at a restaurant or buy a product regularly, it isn’t loyalty if the quality is particularly good and the prices particularly reasonable. Loyalty is when you eat at a place despite the quality being bad, or the prices high; or follow a leader who pays poorly and provides only danger and hardship. Or who’s crooked and damaging to your sense of self.

If you give a company or group loyalty for free, they are likely to take it and you for granted; if you don't value yourself, no one else will.

If you give a company or person loyal service, they are likely to take it and you for granted; Matt Johnson, 2010.

In general, there are only two reasons why any person would follow a leader like this. One is an attachment to the leader’s vision of the horrible future if you do not. Tales of grisly torture from a distant enemy are good to keep the underlings in their place. An even better reason is attachment to a brilliant future if you do suffer in the present. Tales of the glorious messianic future where you and those you love benefit from the current struggle and sacrifice. It doesn’t have to be a godly messiah; communism presents a messianic vision without a god, but it’s glorious, and the sun always shines. Generally speaking leaders who ask for loyalty ask from both perspectives: a horrible enemy at the gates, and a glorious future if you follow.

There may be a rational basis to fear a grisly enemy, or to suffer and follow in hopes of a glorious future, but if you find you are being asked to follow a single individual or a group that’s controlled by one individual, it’s worthwhile worrying that the leader may not be loyalty to you. Ask yourself: does the leader share real power and information? Does the leader make you feel worthless for the heck of it? If you have a leader like that, it might be worth considering: if the messianic vision ever does materialize (unlikely) the leader may forget to reward your part. History has quite a few examples of this.

Loyalty to country includes the imperative to try to improve the leadership.

Loyalty to country requires one try to improve the leadership. Leadership rarely agrees.

Where real loyalty shows up as a sign of a fine personality, is in marriage where both parties share power, money, and information. Or in loyalty to a country where you (or your child) has a real, rational chance of being leader. If you really trust the significant other (a good marriage) or where there is reason to think one’s home and family will benefit from one’s personal sacrifice, one might rationally give up ones comfort and life following to protect one’s significant others. Even so, the real loyalty is not to the leader, but rather to an organization that one believes will protect one’s children and community. A leads who asks you to kill innocents (Al Qaeda, Stalin, HItler, Jonestown), or who amuses himself by your suffering, e.g. (Stalin) probably has lost the connection between your loyalty and the goal. (Cue the song– we don’t get fooled again).

An honest military leader will have a soldier council or protective group above him to keep him (and others) from over-reaching. There will also be a time limit on the loyalty commitment and an explicit understanding that service does not include suicide, genocide, immolation, or personal embarrassment for the amusement of others. There is an also understanding that the follower’s life and well-being will not be sacrificed in vain, and that no one will be expected to accept suicide rather than capture. On the other hand, a soldier who runs away from all danger and thus endangers his fellows or mission should expect punishment or courts-marshal.

Church groups don't often look favorably on oversight

Church groups don’t often look favorably on oversight

Many groups don’t tolerate oversight of this type, and these groups should be viewed with suspicion. Church groups for example, are often led by those would like you to believe that suspicion of them is suspicion of God, it isn’t — it’s suspicion of a person. An honest leader gives the option of going to the police or the union representative, or the newspaper if necessary. Without redress, the worker/soldier/churchman may come to suffer needlessly or come to commit atrocities because of the power of the organization or the personal charisma of the leader. Any organization with a messianic vision of the future is dangerous; all the more so if there is no half-way point, no real sharing of power in the way to get there, and no real oversight for the grand-high pooh-bah (or whatever the grand leader’s title). Let the follower beware.

A Parable: The Donkey and the Brigands, by I don’t know who (I can’t find a source, but know this isn’t my own creation).

There once was a farmer who had a donkey — a talking donkey, as is the way with these parables. At one point, as they were traveling through the woods, they heard the approach of brigands (thieves). “Move quickly,” the farmer said to the donkey, otherwise we’ll be captured.” “Will the brigands treat me any worse than you do?” asked the donkey. “No,” said the farmer, about the same.” “Will they feed me any less than you do, or beat me any more?” “No,” said the farmer, about the same, I’d guess.” Will they load me any heavier, or make me go on longer journeys?” No, said the farmer, about the same, I’d guess.” “When I’m too old to work, will they keep me in my old age, or will they kill me, as you likely will for animal feed and for my bones and skin?” “Probably they’ll do as I would,” said the farmer. “In that case,” said the donkey, “I’ll go at my pace and what will be with the capture will be.” The moral: loyal service has to be a two-way street.

In part 2 of this essay, I’ll explain why even the leader doesn’t benefit from your complete loyalty.

Robert Buxbaum, October 20, 2014. I run my own business, and sometimes think about it, and life.

How do technology companies sell stuff?

1 Reply

As the owner of a technology company, REB Research, hydrogen generators and hydrogen purifiers, I spend a fair amount of time trying to sell my stuff, and wondering how other companies connect to potential customers and sell to them. Sales is perhaps the most important area of business success, the one that makes or breaks most businesses — but it was sadly ignored in my extensive college education. Business books are hardly better: they ignore the salesmen (and women); you’re left to imagine sales and profit came of themselves by the insight of the great leader. The great, successful internet companies are applauded for giving away services, and the failed interned companies are barely mentioned. And hardly any book mentions smaller manufacturing businesses, like mine.

So here are some sales thoughts: things I tried, things that worked, and didn’t. I started my company, REB Research, about 20 years ago as a professor at Michigan State University. I figured I knew more about hydrogen purifiers than most of my colleagues, and imagined this knowledge would bring me money (big mistake: I needed customers and profitable sales). My strategy was to publish papers on hydrogen and get some patents as a way to build credibility (worked reasonably well: I write well, do research well, and I’m reasonably inventive). Patents might have been a better strategy if I had not then allowed my patents to be re-written by lawyers. I built the company. while still a professor (a good idea, I think).

When I realized I needed sales, I decided to use trade fairs, conferences, and ads as the big companies did. Most of my budget went for ads in The Thomas Register of American Manufacturing, a fantastically large compendium of who did or sold what (it worked OK, but was since rendered obsolete by the internet). I bought $1500 worth of ads, and got 2 small lines plus a 1/8 page. That’s where I got my sales until the internet cam along. In retrospect, I suspect I should have bought more ads.

William Hamilton cartoon from the new-yorker. I sure wish I could make deals.

William Hamilton cartoon from the new-yorker.

My other big expense was trade fairs. Many big companies sold at trade fairs, events that are widely attended in my field. Sorry to say, I never found customers at these fairs, even when the fairs were dedicated to hydrogen, everyone who’d come by was was selling, and no one was buying, as best I could tell.Somehow, my bigger competitors (also at the fairs) seemed to get interest but I’m not sure if they got sales there. They seem to find sales somewhere, though. Is it me? Am I at the wrong fairs, or are fairs just a scam where no one wins but the organizers? I don’t know. Last month, I spent $2000 for a booth in Ann Arbor, MI, including $350 for inclusion into the promoter’s book and $400 for hand-out literature. As with previous events, few people came by and none showed anything like interest, I got no e-mail addresses and no sales. Some hungry students wandered the stalls for food and freebees, but there was not one person with money in his/her pocket and a relevant project to spend it on. I doubt anyone read the literature they took.

To date, virtually all of my sales have come from the internet. I got on the internet early, and that has helped my placement in Google. I’ve never bought a google ad, but this may change. Instead I was lucky. About 20 years ago, 1994?, I attended a conference at Tufts on membrane reactors, and stayed at a bed-and-breakfast. After the conference let out, the owner of the BnB suggested I visit something that was new at Harvard; a cyber cafe, the second one in the US. They had Macintosh computers and internet explorer a year before the company went public. I was hooked, went home, learned html, and wrote a web-site. I bought my domain name shortly thereafter.

The problem, I don’t know the next big thing. Twitter? Facebook? LinkedIn? I’m on 2 of these 3, and have gotten so sales from social media. I started a blog (you’re reading it), but I still wonder, why are the bigger companies selling more? The main difference I see is they attend a lot more product fairs than I do, have slicker web-sties (not very good ones, I think), and they do print advertising. Perhaps they match their fairs to their products better, or have a broader range of products. People need to see my products somewhere, but where? My latest idea: this week I bought HydrogenPurifier.com. Send me advice, or wish me luck.

Robert E. Buxbaum, flailing entrepreneur, September 10, 2014. Here’s a feedback form, the first time I’m adding one. 

Political tensegrity: the west is best

5 Replies

We are regularly lectured about the lack of kindness and humility of the western countries. Eastern and communist leaders in Russia, Iran, Saudi Arabia point to Western pollution, consumerism, unemployment as prof you need a strong leader and central control to do good by regulation, thought policing, and wealth redistribution.

Let me point out that the good these leaders provide is extracted from the populace, and the advantage of central control is rarely as clear to the populous as to the leadership. When leaders redistribute wealth or place limits on the internet, movies or books, the leaders are generally exempted, and the populous are not made more moral or generous either. One does not say a prisoner or slave-worker is more generous of moral than one on the outside despite the prisoner working for free. The leaders feel certain they are protecting their people from thought and greed, but it isn’t clear outside of the leadership that these dangers are as great as the danger of despotism or rule by whim.

Authors and thoughts are blocked in the East by the whim of a supreme leader who also determines who is an infidel or enemy, or friend, and which businesses should flourish, and who should be rich (his buddies). By contrast, two fundamentals of western society — things that lead to purported immorality, are citizen rights and the rule of law: that citizens can possess things and do things for their own reasons, or no reason at all, and that citizens may stand as equals before a bar of law, to be judged by spelled-out laws or freed, with equal believability and claim.

In Russia or Iran, the Commissar and Imam have special rights: they can take possessions from others at whim, shut down businesses at whim; imprison at whim  — all based on their own interpretation of God’s will, the Koran, or “the good of the state.” Only they can sense the true good, or the true God well enough to make these decisions and laws. And when they violate those laws they are protected from the consequences; the masses can be prosecuted to the full extent of the law, and then some, not even requiring a trial in many places (Gaza, for example) if the leader feels speed is needed. The rule of law with equal treatment is a fundamental of western civilization (republicanism). It is commanded by Moses in the Bible at least seven times: Numbers 15:15, Numbers 15:16, Numbers 15:29, Exodus 12:49, Numbers 9:14, and Leviticus 24:22, “One law and one ordinance you should have, for the home-born, and the foreigner who dwells among you.”

The equal treatment under the law: for rich and poor, king and commoner, citizen and foreigner is a revolutionary idea of the west; that justice is blind. Another idea is personal possessions and freedoms. There is no concept of equality under business law unless there is a business that you can own, and personal possessions and rights. These are not in place in eastern theocracies: they tend to treat the preachers (imams) better than non preachers because they are presumed smarter and better; similarly men are treated better than women, who have few rights, and the state religion is treated better than infidels. In communist countries and dictatorships the dictator can get away with anything. Admittedly, in capitalistic states the rich and powerful find loopholes while the poor find prison, but not always (our Detroit’s ex-mayor is in prison) and it’s not the law. A feature of Eastern theocracies and dictatorships is that they lack a free press, and thus no forum for public exposure of legal mischief.

Einstein on freedom producing good. I'd say freedom is also a good in itself

Einstein on freedom producing good. I’d say freedom is also a good in itself.

The strongest arguments for socialist dictatorship and theocracy is that this is needed to protect the weak. Clement Attlee (labor socialist British Prime Minister, 1945 -56) explained his government’s take over of almost all British business: “There was a time when employers were free to work little children for sixteen hours a day… when employers were free to employ sweated women workers on finishing trousers at a penny halfpenny a pair. There was a time when people were free to neglect sanitation so that thousands died of preventable diseases. For years every attempt to remedy these crying evils was blocked by the same plea of freedom for the individual. It was in fact freedom for the rich and slavery for the poor. Make no mistake, it has only been through the power of the State, given to it by Parliament, that the general public has been protected against the greed of ruthless profit-makers and property owners.”  (Quotes from Spartacus.edu). it’s a brilliant speech, and it taps into the government’s role in the common defense, but it’s not at all clear that a chinless bureaucrat will be a better boss than the capitalist who built the firm. Nor is it clear that you help people by preventing them from work at a salary you decide is too low. 

England suffered a malaise from public ownership and the distribution of profit by those close the liberal party. Under Attlee there was lack of food and coal while the rest of Europe, and particularly Germany prospered, and passed England in productivity. Germany had no minimum wage, and  still doesn’t have one. In eastern countries, ingenuity is deadened by the knowledge that whatever a genius or worker achieves is taken by the state and redistributed. A cute joke exchange: Churchill and Attlee are supposed to have found themselves in adjoining stalls of the men’s room of Parliament. Churchill is supposed to have moved as far as possible from Attlee. “Feeling standoffish, Winston” Attlee is supposed to have said. “No. Frightened. “Whenever you see something large you try to nationalize it.” Perhaps more telling is this Margret Thatcher’s comment, and exchange. Making everyone’s outcome equal does more to penalize those with real pride in their ideas and work than it does to help the truly needy.

While there is a need for government in regards to safety, roads, and standards, and to maintain that equality of law. It seems to me the state should aid the poor only to the extent that it does not turn them into dependents. There is thus a natural tension between private good and public service similar to the tensegrity that holds cells together. Capitalists can only make money by providing desired goods and services at worthwhile rate, and paying enough to keep workers; they should be allowed to keep some of that, while some must be taken from them to get great things done. I’ve related the tensegrity of society to the balance between order and disorder in a chemical system.

Robert E. Buxbaum,  August 27, 2014. This essay owes special thanks to a Princeton chum, Val Martinez. Though my training is in engineering, I’ve written hobby pieces on art, governance, history, and society. Check out the links at right.

High minimum wages hurt the poor; try a negative tax

2 Replies

It is generally thought (correctly I suspect) that welfare is a poor way to help the poor as it robs them of the dignity of work. Something like welfare is needed to keep the poor from starving, and the ideal alternative to welfare seems to be a minimal job — that is one that is easy enough for a minimally skilled worker to do it, and high-paying enough so that this worker is able to support a family of 4. Such jobs are hard to produce, and hard to sell to those currently getting welfare — that is those getting paid the same amount for no work at all. I’d like to propose something better, a negative tax along with the removal of our minimum wage.

I suspect that our current system of minimum wage hurts the desperate poor and middle class at least as much as it helps the working poor. One problem with it is that it flattens the wage structure, hurting the ego and incentive of those who work harder or with higher skills. The minimum wage encourages lax work, and reduces the incentive of workers to improve. A higher talented or more experienced worker should make more than an unskilled beginner, but with the current minimum wages they hardly do. Our high minimum wage also hurts the desperate poor by cutting the lower rungs off of the employment ladder. Poor, unskilled, young folks are not hired because it will take a while before they’re productive enough to justify the minimum wage. And anyway, why should the minimum wage number assume that every worker lives independently (or should) and that every job deserves to support a family of four. Most unskilled workers are neither independent nor are they supporting a family of four. Most unskilled workers are not independent, nor are they the sole support of a family.

I suspect that people push for high minimum wages as a way to help without giving themselves. The cost is borne by the company, and companies are seen as evil, faceless oppressors. They prefer not to notice that the a high minimum wage creates high unemployment in central cities and other low skill areas, like Detroit before bankruptcy, and Puerto Rico today. In Detroit before bankruptcy, the living wage was set so high that companies could not compete and went bankrupt or fled. The ones that stayed hired so selectively that the unskilled were basically unemployable. Even the city couldn’t pay its wages and bills.

A high minimum wage increases the need for welfare, as some workers will be unemployable — because of disability, because of lack of skill, or from an ingrained desire to not work. The punishments a community can mete out are limited, and sooner or later some communities stop working and stop learning as they see no advantage.

The difficulties of taking care of the genuinely needy and disabled while the lazy and unskilled has gotten even some communist to reconsider wealth as a motivator. The Chinese have come to realize that workers work better at all levels if there is a financial reward to experience and skill at all levels. But that still leaves the question of who should pay to help those in need and how.  Currently the welfare system only helps the disabled and the “looking” unemployed, but I suspect they should do more replacing some of the burden that our minimum wage laws places on the employers of unskilled labor. But I suspect the payment formula should be such that the worker ends up richer for every additional hour of work. That is, each dollar earned by a welfare recipient should result in less than one dollar reduction in welfare payment. Welfare would thus be set up as a negative tax that would continue to all levels of salary and need so that there is no sudden jump when the worker suddenly starts having to pay taxes. The current and proposed tax / welfare structure is shown below:

Currently someone's welfare check decreases by $1 for each dollar earned. I propose a system of negative tax (less than 100%) so each dollar earned puts a good fraction in his/her pocket.

Currently (black) someone’s welfare check decreases by $1 for each dollar earned, then he enters a stage of no tax — one keeps all he earns, and then a graduated tax. I propose a system of negative tax (red) so each dollar earned adds real income.

The system I propose (red line) would treat identically someone who is  incapacitated as someone who decided not to work, or to work at a job that paid $0/hr (e.g. working for a church). In the current system treats them differently, but there seems to be so much law and case-work and phony doctor reports involved in getting around it all that it hardly seems worth it. I’d use money as the sole motivator (all theoretical, and it may not work, but hang with me for now).

In the proposed system, a person who does not work would get some minimal income based on family need (there is still some need for case workers). If they are employed the employer would not have to pay minimum wage (or there would be a low minimum wage — $3/hr) but the employer would have to report the income and deduct, for every dollar earned some fraction in tax — 40¢ say. The net result would be that the amount of government subsidy received by the worker (disabled or not) would decrease by, for 40¢ for every dollar earned. At some salary the worker would discover that he/she was paying net tax and no longer receiving anything from the state. With this system, there is always an incentive to work more hours or develop more skills. If the minimum wage were removed too, there would be no penalty to hiring a completely unskilled worker.

At this point you may ask where the extra money will come from. In the long run, I hope the benefit comes from the reduced welfare rolls, but in the short-term, let me suggest tariffs. Tariffs can raise income and promote on-shore production. Up until 1900 or so, they were the main source of revenue for the USA. As an experiment, to see if this system works, it could be applied to enterprise zones, e.g. in Detroit.

R. E. Buxbaum, June 27, 2014. I worked out the math for this while daydreaming in an economics lecture. It strikes me as bizarre, by the way, that one can contract labor for barter, pay a pizza for two hours labor, but you can’t contract labor for less than the minimum cash-rate $7.45/hr. You can go to jail by paying less than this in cash, but not in food. In Canada they have something even more bizarre: equal wages for equal skills — a cook and a manager must earn the same, independent of how well the cook cooks or how needed the work is. No wonder violent crime is higher in Canada.

My solution to the world’s problems: better people

Most of the problems of the world are caused by people. Look at war, it’s caused by people; look at pollution, people; look at overeating, or welfare, or gun violence. You name it, the problem is people. My simple solution, then: better people. Immigration is a simple solution for a county that can do it selectively (take in the best, leave the rest); it’s worked for the US and it doesn’t have to beggar the third world. Education is another way to help, but we’re not quite sure what sort of education makes people better. “An uneducated man may steel from a boxcar, an educated one may steal the whole railroad.” Theodore Roosevelt is supposed to have quipped.

Those who claim they are uncommonly moral and good at teaching it have barely any proof that they are. American schools produce financially successful people, but not particularly moral ones; Europe’s approach is different, but there’s no indication they’ve done better at moral education. We look to the 18th century, or the Greeks, but they were no more moral than us, as best I can tell. The Taliban, the communists, or similar fundamentalists claim moral superiority over the west, but from my perspective, they look even worse. 

I notice that people learn morality from one another — that is each person acts like his neighbor. I also note that people tend to act better when they are involved, and feel part of whatever country, city or group they are in. Targeted immigration might bring in better people–honest, hard working, non-violent — and these people might help improve and motivate the locals. And even if we don’t improve by interaction, perhaps lazy Americans will ride on the backs of the hard-working immigrants. But it strikes me that the disconnect between world problems of high unemployment, world hunger, and lots of open, US jobs is a moral problem that could be solved by targeted love. Allowing some increased mobility from country to country and job to job (plus better preaching?). If you can move you are more-likely to find a job or place where you feel fulfilled, and you are likely to do better and more there. Even the countries and jobs that are left might benefit by being rid of their malcontents. And we don’t have to take everyone.

From "Hispanic-hope."

From “Hispanic-hope.”, an interesting combination of Bible-study and immigration morality.

Living in America is desirable for most people from most countries. Far more people want to live here than we can accept. As a result, we are in a position to target the bright, honest, hard-working Peoples from virtually any country. These folks are helpful to industry and to the US tax base as these immigrants tend to work out — or get deported. In the short-term they might displace Americans or depress salaries, but even that is not certain. There is no fixed slate of US jobs nor a fixed amount of work need. Yesterday’s job taker is tomorrow’s job creator. Our country is built on immigrants, and has not suffered from it. We should not take those who hate the US, or those who hate freedom, or have no skills, criminals and the sick. Nor should we give citizenship immediately. But that still leaves plenty who we’d want, and who want to be here. Th. Roosevelt said, “you can not take in too many of the right people, and even one of the wrong type is too many.” I suspect this is true.

I suspect we’d have 90+% odds picking good people from a crowd. The Immigration system does a good job now, and the great colleges have done better for years. The past is usually a great indicator. If someone is well, and has worked for years, or has been here in school; if they’ve managed to stay productive and out of trouble, he/she is a good candidate. A first step would be a work permit, and in a few years they can apply for permanent residence or citizenship. Many of the most successful people in America are either immigrants or descendents of immigrants. The founders of Google and Facebook; the builders and the shakers. These people have the ‘get-up and go.’ You can tell because they’ve gotten up and gone.

Dr. Robert Buxbaum, June 16, 2014. I’m a child of an immigrant, went to public school, got a PhD at Princeton, have built my own company, and have (so far) avoided arrest, imprisonment or serious scandal. With the help of my Canadian-immigrant wife, I’ve produced three Buxbaum clones, my biggest contribution to improving the US and the world.