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The Fatal Blindness of Unrealistic Expectations

We are damned to fail when we avoid hard truths
Wednesday, October 28, 2015, 10:10 PM

I wrote the article below in January 2013, but never published it. The strong response to last week's post on the hubris and hype of Silicon Valley, as well as this recent interview, jogged my memory and inspired me to dig this out of the mothballs. I was pleased to see how relevant it remains 2.5 years later.

My old employer, Yahoo!, has been in the news again of late.

Its latest CEO (and former Googler), Marissa Meyer, is currently at the World Economic Forum in Davos, Switzerland, where she has just given her first televised interview detailing her strategy for the beleaguered web giant.

I wish her and the current team at Yahoo! well with their plans, I really do. The saga of Yahoo!'s descent over the past decade was heartbreaking to watch and experience from the inside. I'd love to see the company find a way to become a leader again.

But I don't have faith. 

In my opinion, the company can't be "fixed." At least not the way the tech pundits and the past parade of Yahoo! CEOs have touted it can.

Why? Because of a congenital failure to define its identity, paired with a chronic refusal to be honest with itself.

I get asked a lot for my opinion regarding Yahoo!'s fall from grace. I believe the seeds of its failure were sown from the beginning, and I've come up with the following analogy to make it as intuitive as possible. It all starts at the very formation of the company.

The Importance of Clear Vision

First, look at Google. When the founders Sergey Brin and Larry Page first started collaborating, the Internet had been around for a while and they were insightful enough to realize that the data on the Web was growing exponentially. They reasoned that the company who made it possible to sift through all this data and find the most useful content, when needed, would create immense value.

So, they designed the Google platform from Day 1 to optimize around their core goal: "to organize the world's information and make it universally accessible and useful." This gave them a maniacal focus that enabled them to target talent, refine strategy, and prioritize resources. To this day, while there are many other businesses that Google has become involved in (from alternative energy to self-driving cars), everything revolves around first making sure that the central mission is protected and enhanced, and then leveraging the core platform to do ever more innovative things.

In this way, you can think of Google as the Borg of the Internet, following their mission of technical perfection with a methodical, measured dedication; unwavering in its focus.

Now, look at Yahoo!. Yahoo! is the Internet's Jedd Clampett.

If you don't know the story, the founders Jerry Yang and David Filo shared a trailer while graduate students at Stanford in the early 1990s. (It was literally a trailer. Stanford's graduate campus housing has improved much since then.) The graphical pages of the World Wide Web were just emerging, and as interested computer science students, David and Jerry spent a lot of time exploring them. As the number of Web sites multiplied, they created a simple directory – really nothing more than a page of bookmarked links – to help them keep track of the growing number.

This was the Internet's equivalent of Jedd Clampett missing a varmint with his shotgun, only to find "a-bubblin' crude" spilling out of the earth.

As simple as this directory was, nothing like it existed yet. So word got out, and people started flocking to it in ever-greater numbers. Pretty soon, the founders realized they had a phenomenon happening before their eyes, and they were savvy enough to enlist some seasoned help in structuring a business around it and monetizing it through advertising.

Well, the rest is history. Yahoo! experienced mind-boggling, stratospheric growth over the next several years. For a period of time for most people,Yahoo! WAS the Internet. For everyone else, it was the Internet's front door: occupying the best real estate within the new virtual universe of the World Wide Web.

But the key element to note here is that there was no fundamental vision or guiding mission that preceded Yahoo!'s creation. The company simply sprang into existence; a "happening" created by an unforeseen, rapid and gargantuan transmogrification of the world's analog audience base into digital 'users'.

And it's because of this lack of central identity that Yahoo! has floundered. What is Yahoo!? is a question that has plagued its executives since before I walked in the door in 2001. You would not believe the amount of manpower, brain cycles, and advertising agency dollars that have been thrown at answering this – and yet no enduring answer has emerged.

The Cost of Willful Blindness

Without knowing what its "core" is, Yahoo! hasn't known where to put its focus. It has tried to do everything, and as a result, its diluted efforts allowed pure-play competitors to claim the dominant position in each of the important verticals that it wanted to win. Google became the dominant player in search (helped along in its early days, ironically, by Yahoo!'s patronage). Ebay won auctions. Amazon won online retail. Facebook dominates social media. YouTube cornered the online video space. The list goes on...

As the early 800-lb gorilla, Yahoo! could easily have claimed any or all of these industries. But it didn't. And I know why: Unrealistic expectations.

I personally was involved in several of the neverending attempts to resolve this need to define Yahoo!. Each one ended up devolving into inaction – or worse, producing some declarative statement of vague pablum that only made folks even more confused. (Examples: Yahoo! is a "life engine," Yahoo! is "the premier digital media company," Yahoo is "you.")

The main reason for the failure to craft a clear vision is that the executive staff was unable to imagine giving up on major existing lines of business, even if there was no clear strategy for why they existed. Because there were so many directions Yahoo! could go in, you could make a compelling reason for why Yahoo! should retain its foothold in any multi-billion-dollar market segment. So again and again, after all the pontificating, theYahoo! executive team would convince itself it could indeed be all things to everyone.

Of course, having a clear identity means you know what you are and you know what you AREN'T. That second part is easily as important as the first. It's what gives you the discipline to say "no." To look at alluring market opportunities and pass on them, knowing that your core competencies aren't a good enough fit. To avoid wasting time and treasure chasing a losing game.

Without this clarity and discipline, Yahoo!s diluted and aimless efforts have resulted in its services becoming less and less relevant as the Web has evolved and matured.

I used to believe very passionately that the company could be turned around. But as time went on, I lost that hope, for two reasons.

First, I witnessed enough changings of the executive guard to conclude that the courage and ruthlessness required is simply not likely to happen. There are business lines at Yahoo! that are like Tolkien's Ring of Power. Every new CEO thinks they can withstand their allure as they unsheathe their cutting sword, and then soon finds themselves jealously protecting their "precious".

The second is that too much time and damage has occurred. Yahoo! has been rotting for years, resulting in unwieldy infrastructure, underperforming talent, poor partner relations, and consumer apathy. If the new CEO was suddenly bestowed from above with the "next big idea" for the Internet, why would you possibly want to saddle that gift with all of the albatrosses around Yahoo!'s neck? She'd be much better off starting a new company from scratch, with the right talent, the right culture, the right platform, and a clean shot at defining the brand.

The Hard Truth

So why am I going on so much about a struggling tech company?

Because I read this today from Robert Reich:

Brace yourself. In coming weeks you’ll hear there’s no serious alternative to cutting Social Security and Medicare, raising taxes on middle class, and decimating what’s left of the federal government’s discretionary spending on everything from education and job training to highways and basic research.

“We” must make these sacrifices, it will be said, in order to deal with our mushrooming budget deficit and cumulative debt. 

But most of the people who are making this argument are very wealthy or are sponsored by the very wealthy: Wall Street moguls like Pete Peterson and his “Fix the Debt” brigade, the Business Roundtable, well-appointed think tanks and policy centers along the Potomac, members of the Simpson-Bowles commission. 

These regressive sentiments are packaged in a mythology that Americans have been living beyond our means: We’ve been unwilling to pay for what we want government to do for us, and we are now reaching the day of reckoning.  

The truth is most Americans have not been living beyond their means. The problem is their means haven’t been keeping up with the growth of the economy — which is why most of us need better education, infrastructure, and healthcare, and stronger safety nets.

He goes on to make the argument for a wealth tax on the richest Americans to pay for that education, infrastructure, and healthcare.

I'm not going to tackle the wealth tax concept here (though I have strong opinions). But I want to point out that I see the same blindness to reality, the same unrealistic expectations, in Reich's commentary as I did in Yahoo!.

Reich mentions but then dismisses the only point that matters: America does not have the wealth to meet the entitlements it has promised. Nor can it sustainably meet its operating costs.

Why is that? Because we, as a society, have very much indeed lived beyond our means. By building up such a tremendous amount of debt through our profligacy that a small rise in interest rates would be catastrophic. That our children and children's children will be "paying backwards" for our largess, unless some debt-clearing event transpires (which I think will).

Being unwilling to acknowledge this unpleasant but fundamental truth dooms any attempts to avoid it, via wealth redistribution or any other means. It's the same flavor of willful ignorance that caused Yahoo! to convince itself it could claim all mountaintops until it eventually begrudgingly realized it wasn't summitting any.

There were many times in my years at Yahoo! where I would listen to the "rah rah" all-hands presentations by the executives and walk away disconcerted. Despite the assurances of the great talent within the company and the wonderful ideas currently on the drawing board, it increasingly appeared that they were not admitting the obvious: The strategy was flawed, the company was failing, and radical change was needed if we wanted to succeed again.

That's exactly how I feel when reading Reich's piece. If this is the logic that our country's leaders are using in their decision-making, then Houston, we indeed have a problem. Having seen this movie play out in the smaller Yahoo! microcosm, I have no appetite for watching a sequel at the national level. But I fear that's what we're in store for.

I don't know how much influence Reich has these days, as he's not working in the current Administration as he did for three other Presidents (Ford, Carter and Clinton). But from the current fiscal and monetary policy we're pursuing, it sure seems like his mindset is not that far from those currently in DC.

So I find myself reflecting on how I reacted when I decided Yahoo! wasn't going to change course. I decided I was going to need to change mine, instead.

I invested in self-discovery to identify work that was meaningful for me. Fulfilling work that I'd be happy doing no matter the compensation. I cut the cord, resigning before I knew what I would do next. Staying on would only delay the hard work I'd need to do to create my future. I started developing the skills I'd need for my new chosen profession. And I began to tap the power and goodwill of other people who could help me (and whom, in turn, I could help back).

Seems to me this is good advice for our national predicament. 

The ride from here is likely to get bumpy as reality punctures our leaders' unrealistic expectations. But if we, as individuals, invest in living authentically, working hard, and fostering supportive community, we'll enjoy the benefits of a resilient life regardless of what transpires.

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71 Comments

SingleSpeak's picture
SingleSpeak
Status: Gold Member (Offline)
Joined: Dec 1 2008
Posts: 473
Business 101, Government 101

Business 101:

What's your mission? Write it down. Spend the rest of your time referring to Chapter 1 often.

Government 101:

Get reelected. Spend the rest of your time convincing yourself you are doing things for the good of the people and the fact that you and your friends are getting rich as a by product is some kind of weird coincidence..

SS

 

kevinoman0221's picture
kevinoman0221
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Happiness

Thanks for dusting this piece off and showing it to us, Adam.

It got me wondering, if you had happened to have got on at a more functional tech company, if you would have had enough of a kick in the pants to change direction in your life and end up where you are today. Maybe right now you'd still be at a Netflix, which wouldn't be terrible, but I bet you wouldn't be as happy as you are in your current life. Just speculating :)

KugsCheese's picture
KugsCheese
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The fatal mistake but sadly

The fatal mistake but sadly prevalent in the fiat world "convince itself it could indeed be all things to everyone."

Hotrod's picture
Hotrod
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Understanding Reich

Adam,

I, for one, am ecstatic that  both you and Chris realized "something" was off kilter with our present situation and have done us a tremendous service by escaping the corporate treadmill and then running this site.

You are 100% correct for pointing out that people have unrealistic expectations about future financial directions.

However, I think you need to see another side of this.  Reich is representing the lower class vision of the economy.  In this regard he is acting as a politician, more than as an economist.

IMHO we are looking at the death throes of a debt backed, paper money system and it is very similar to playing musical chairs.  Reich is fighting for the slower and less coordinated people to get access to some of the chairs.  Otherwise, the Predator class naturally ends up with every chair.  There is always more money for "Defense", more money for Israel, more money for "Homeland Security", and if there is another bank issue, there will be more money for that-again. There will always be more money for the well connected and well represented until we hit the wall.

My point is Reich is providing a little bit of balance in the political spectrum, probably knowing full well that one day this will all end up really ugly. No politician would dare tell people the economic truth, as we see it. If such a politician appeared on the scene, and was taken seriously, he or she would be dealt with as a severe threat to the status quo. 

charleshughsmith's picture
charleshughsmith
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good analogy

Yahoo is a good analogy because nobody in the circles of power dares cut anything in the US state--even programs which have failed or are counter-productive continue on as they are jealously protected by those skimming vast wealth from their existence.  Look at student debt--nobody who is a 'serious person" like Reich has any "solution" that actually derails any players' gravy trains.  Ditto the F-35 aircraft, a multi-billion $ fiasco that can't be canceled no matter how costly it is or how inadequate the aircraft.

ckessel's picture
ckessel
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Change comes slowly

I agree with you assessment of our predicament Charles and  I have finally arrived at a level of acceptance with regard to governance. It has taken awhile to get here but the human condition seems to speak volumes about our ability to perceive and act vs. experience and react.  The former quality, as in economics, has high value and is relatively scarce while the latter is cheap and can be found in abundance.

But the change that is underway is inexorable although difficult to see. I was on my deck last week reflecting on how to describe the rate of change and we were enjoying the clouds and the sunset. It was really remarkable how the patterns and light changed and yet were happening slowly enough that you could not see it. But when you looked away for a short period of time and then checked back, the sky and light were completely different.

That's my analogy for describing how fast the change is happening. Governments will only see the storm clouds after lightening has struck their wallets!

Coop

pyranablade's picture
pyranablade
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Good Point Hotrod

It goes without saying that people in politics - even when well-intentioned - aren't "showing all their cards."

And Reich is certainly well-intentioned.

In a related thought.... Although Hillary Clinton recently told Stephen Colbert that she would let the big banks fail "if" another crisis comes, a Rolling Stone article by Matt Taibbi reveals that she is actually onboard with Goldman Sachs and that her "comprehensive plan" only gives regulators the "ability" to enforce things - in other words, Hillary's plan has no automatic mechanism to punish the banksters instead of the taxpayers when things go down the tubes.

http://www.rollingstone.com/politics/news/hillary-clintons-take-on-banks-wont-hold-up-20151014

So if you are a democrat, and you don't want another bankster bailout, you should be pulling for Bernie Sanders. I haven't researched the Republican candidates on this issue, maybe somebody has some input on that.

Hotrod's picture
Hotrod
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Hillary and Banks

Pyranablade,

Hillary not siding with the TBTF banks?  Laughable.  I don't think Bernie could stop the corruption either-even if he'd like to. No Republican candidate has mentioned anything regarding the banks that I know of with the possible exception of Rand Paul. The stench of corruption and the power of influence only step aside when the people are in the streets and demand change.  I wish I could be more optimistic.

Snydeman's picture
Snydeman
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Hotrod

Hotrod wrote:

Pyranablade,

Hillary not siding with the TBTF banks?  Laughable. 

Um, unless I read it incorrectly he was pointing out that Hilary has flip-flopped on this issue in typical politician method.

pyranablade's picture
pyranablade
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Clarification

Well, the most accurate way of saying it is that Hillary was "trying to have it both ways."

If you're on The Late Show you might actually get away with taking credit for something that you won't follow through with. Since Colbert wasn't able to hold her accountable I felt I was doing my part by pointing it out here.

Then again, most of us are well informed and rather cynical about TPTB. So maybe there was no need for me to make that post. 

chromas's picture
chromas
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Games

Really good article!

I agree, that many people could be "blind", that's true. And do not matter what level of education they have. And of course, for us all would be better, that we have less "blind" people.

But how to change it?

I think that we all need to play more games and especially where are more then two players or teams. Because just two players or teams, it is something unusual in life, always are others, maybe at some time they are passive, but they are in play, they just wait their time to act. 

And we need to create more games, which are more similar to real life.

Adam Taggart's picture
Adam Taggart
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Great question

Great question, Kevin.

Had I been at a better run company, especially if it offered a stock option rocket ride a la Netflix, I'm sure it would have taken me longer to hit the eject button.

But I'm pretty confident I would have eventually ejected anyways. Just with a pile of money this time...  :)

I recorded a podcast interview with the Johnson O'Connor Research Foundation a few hours ago, and it brought back strong memories of the inner angst I lived with before deciding to leave Silicon Valley. My heart is simply not in the game that is played there, and my head was very anxious about how non-resilient the area is.

So while a pile of money would have been nice, and maybe worth (financially) delaying my transition by a few years, I don't lament that things didn't play out that way. As my wife will tell you, the difference in my self-happiness is night and day compared to my pre-Peak Prosperity days. After nearly two decades of questioning my purpose and contributions, the past 5 years have felt like I've been truly "alive". Not sure there's a price high enough to put on that.

Hotrod's picture
Hotrod
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Sorry Pyranablade

My comment was an awkward way of agreeing with you. As you can probably discern, I am really cynical when it comes to political bluster.

cmartenson's picture
cmartenson
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Speaking of not having a clear strategy or vision

Snowden revealed some outrageous practices and constitutional abuses and the Obama administration - yes the same one that has not managed to bring a single criminal charge against a single senior banker - wants to charge Snowden with espionage.

It bears repeating; US Bankers committed literally hundreds of thousands of serious felonies and *not one* was ever charged by the Justice Dept. under Obama's two terms.

Recently the White House spokesman said "The fact is that Mr Snowden committed very serious crimes, and the US government and the Department of Justice believe that he should face them.”

Well, either you believe serious crimes should be prosecuted or you don't.

Pick one.

But to try and be selective about it all just makes one something of a tyrant.  Wielding power when and how it suits one's aims instead of equally is pretty much the definition of tyranny (which includes "the unreasonable or arbitrary use of power")

However, the EU has decided to drop all criminal charges against Snowden showing that the US is losing legitimacy across the globe by the day.

EU parliament votes to 'drop any criminal charges' against whistle-blower

The European parliament voted to lift criminal charges against American whistle-blower Edward Snowden on Thursday.

In an incredibly close vote, EU MEPs said he should be granted protection as a “human rights defender” in a move that was celebrated as a “chance to move forward” by Mr Snowden from Russia.

This seems both right and significant.  Significant because the US power structure must be seething.  It means that the EU is moving away form the US on important matters, and that's significant too.   Right because Snowden revealed deeply illegal and unconstitutional practices that, for the record, went waaaaAAaaay beyond the so-called 'meta-data phone records' issue.

And why shouldn't the EU begin to carve their own path?  Their interests and the US's are wildly different at this point in history, especially considering the refugee crisis that was largely initiated by US meddling and warmongering in the Middle East.

At this point, I would say that the US has lost all legitimacy on the subject of equal application of the laws, and cannot be trusted when it comes to manufacturing "evidence" that is used to invade, provoke or stoke a conflict somewhere.

The US is now the Yahoo! of countries; cheerleading our own self-described excellence and superiority at everything when the facts on the ground say something completely different.

Quercus bicolor's picture
Quercus bicolor
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cmartenson wrote: Recently

cmartenson wrote:

Recently the White House spokesman said "The fact is that Mr Snowden committed very serious crimes, and the US government and the Department of Justice believe that he should face them.”

And this "serious crime" was committed by Snowden because he saw it as the only viable path to revealing a systematic pattern of crimes by none other than our own federal government that are so serious that they threaten the basic founding principles on which our democracy was founded.

LogansRun's picture
LogansRun
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Quercus bicolor

Quercus bicolor wrote:

cmartenson wrote:

Recently the White House spokesman said "The fact is that Mr Snowden committed very serious crimes, and the US government and the Department of Justice believe that he should face them.”

And this "serious crime" was committed by Snowden because he saw it as the only viable path to revealing a systematic pattern of crimes by none other than our own federal government that are so serious that they threaten the basic founding principles on which our REPUBLIC was founded.

Fixed

lambertad's picture
lambertad
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Truth is treason

You know how the old saying goes "truth is treason in the empire of lies". I'm a staunch libertarian, but I wasn't always that way. Before that I spent most of my 20's in Special Operations wanting to 'kill bad guys who attacked us' on 9/11. It wasn't until my last deployment that I got ahold of Dr. Ron Paul's books and dug through them and realized his viewpoint suddenly made much more sense than anyone else's. Not only did it make much more sense, but it was based on Natural Law and the founding principals of our country.

A lot has been made of the fact that Snowden contributed money to Dr. Paul's 2008 presidential campaign and that this was an obvious tell that he was really an undercover (insert whatever words the media used - traitor, anarchist, russian spy, etc.). The part that I find troubling is the fact that Snowden revealed to the world that we are all being watched, probably not in real time, but if they ever want to review the 'tapes' they can see what we do essentially every minute of every day. That's BIG news to get out to the citizenry. If you've got access to that kind of data, you don't want that getting out, but here's the kicker - Very few in this country today even care. Nothing in this country has changed that I'm aware of. GCHQ still spies on us and passes the info to the NSA. The NSA still spys on everyone and the Brits and passes the info to GCHQ. Austrialia and NZ  and Canda still spy on whoever and pass the info on to whoever wants it. It's craziness. 

At the same time, as Chris and others have pointed out, we're bombing people (ISIS/Al Nusra/AQ) we supported ('moderate rebels) before we bombed them (AQ)  after we bombed Sadaam and invaded Iraq. Someone please tell me the strategy other than the "7 countries in 5 years plan". Yup, sounds a lot like Yahoo!. 

I'm looking forward to Christmas this year because I get to spend 5 days with my wife's family again. My father-in-law is a smart man, but thinks the government is still all powerful and has everything under control. It should make some interesting conversations and debating. 

Thanks for the article Adam, interesting parallel between TPTB and Yahoo!.

SingleSpeak's picture
SingleSpeak
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Perhaps the administration

should refer back to its mission statement more often.

"Liberty and Justice for All"

Otherwise, this experiment is not going to end well.

SS

HughK's picture
HughK
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Agreed!

cmartenson wrote:

But to try and be selective about it all just makes one something of a tyrant.  Wielding power when and how it suits one's aims instead of equally is pretty much the definition of tyranny (which includes "the unreasonable or arbitrary use of power")

Agreed!

SingleSpeak wrote:

should refer back to its mission statement more often.

"Liberty and Justice for All"

Otherwise, this experiment is not going to end well.

SS

And yes, sticking to one's principles and mission statement is something that organizations should do.

gillbilly's picture
gillbilly
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Frankenstein Capitalism

Found this article on Yahoo's finance page. It dovetails nicely with this article.

http://finance.yahoo.com/news/frankenstein-capitalism-sucking-life-america-151542600.html;_ylt=AwrC1jHT7jNWjB8A9gmTmYlQ;_ylu=X3oDMTByMDgyYjJiBGNvbG8DYmYxBHBvcwMyBHZ0aWQDBHNlYwNzYw--

Happy Halloween!

rhare's picture
rhare
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The article as usual fails to dig just a little deeper....

gillbilly wrote:
Frankenstein Capitalism

As usual, this article decries that "Capitalism" is the issue, not the "Crony Capitalism" enabled by government.  It would be nice if articles like this would just dig a bit deeper and ask why is "Capitalism" able to become "Frankenstein Capitalism".  Why not look at who is Victor in this story?  As long as we fail to look at government as the creator of this mess and continue to beg it to slay the monster, we will continue to get bigger and more fierce "Frankensteins".  It's time to take away Victor's tool chest!

Stabu's picture
Stabu
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When I Realized Yahoo! was in Trouble

This was truly a great article. I remember two instances that clearly indicated Yahoo! must be going south. The first sign was after Ms. Meyer declared an end to the work-from-home policy. This must have been in 2010, because at that time my main employer was moving in the opposite direction, making 50% of its workforce virtual, which resulted in three good things: 1) increased productivity, 2) decreased attrition, 3) and reduced fixed costs. The second sign was about a year later in 2011 when I heard radio ads for Yahoo!'s search engine. This incidentally coincided with my wife's decision to stop using Yahoo! as her search engine because it simply didn't fine half the things Google did.

Mark_BC's picture
Mark_BC
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You had me up until Robert
You had me up until Robert Reich. Although I agree that the world is suffering from unrealistic expectations, I disagree with any assertion that the western world, the US, or any country for that matter, cannot afford any of the following:
 
  • Social Security
  • Free medical care for everyone
  • Good public education with good salaries and pensions for teachers
  • Inexpensive government-funded university
  • Government research
  • and other similar programs
 
I agree with Reich that Americans, on the whole, have NOT been living beyond their means as of late, except when it comes to consumption of fossil fuels and related resources. In terms of government handouts, Americans are generally living well below their means. It is the American military industrial complex that has been living beyond its means.
 
Can someone explain the following to me? If, apparently, there is a glut of labour in America, based on the real employment statistics we find in the alternative blogosphere, then why is it that the above programs, that are in large part brought forth by labour, using little in the way of natural resources, are so expensive and unaffordable? (A doctor isn't using significantly more natural resources when he diagnoses a patient than he would if he was instead unemployed at home doing something else). Why doesn't that unemployed labour just supply the demand and bring down prices of those services so they are sustainable?
 
The answer? Because of KING DOLLAR distorting the prices of EVERYTHING. Please don't tell me on one hand that all these things are unaffordable (using the dollar as a metric) and then on the other hand tell me all about how the dollar has divorced all connection to fundamentals. You can't have both.
 
The reason those things aren't affordable is because of the strong dollar policy, and has nothing to do with whether society as a whole could afford them in a different monetary system. Of course they are unaffordable, as is everything else; that's what debt saturation is all about!
 
Bauer's picture
Bauer
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Unrealistic expectations

"Unrealistic expectations" seems to be with everyone, almost. I’m trying to decrease in my children, no luck so far…

kaimu's picture
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CRISIS INFINITY

Aloha! Mahalo Adam! Hmmm ... Actually Alcoholics Annonymous has a vast repertoire on the dangers of "expectations", which leads me to believe that perhaps rather than Rogoff or Reich a reformed alcoholic might be the best advisor for an economic recovery. Here's one ...

Expectation is premeditated resentment.

Another ...

My serenity is inversely proportional to my expectations.

My favorite is ...

All your best thinking got you here!

In other words all our best voting and our best democracy and our best capitalism and our best religion and our best career politicians got America and the world where it is today. The entire world is drunk on debt! I first saw this in the 1980s and decided to make a radical change and bail out on the Republican party. The two party system was a sham! My last Republican vote was Reagan. After that I supported Perot.

A new movie out called "Our Brand is Crisis"! The same script could have been used by Greeks in the 3rd century BC at the Theatre of Dionysis. Crisis is the age old tactic of the elite to retain power over the masses. Hitler certainly did not come to power in a time of great economic prosperity. Look when WW2 took place. Not exactly global prosperity!

Lets face it without EBT, SSI and Section 8 and SS and Med those in power now would be hanging from street lights lining Pennsylvania Ave. The elite are in a desperate bid to hold onto power at all costs even if it means WW4 and sending your kids to fight on a multi-front in the Middle East and Asia and Europe. I suspect before I die we will see the "draft" come back. But wait ... ah ... in many ways the "draft" is back as high youth unemployment tends to drive recruitment in the military. Yet the elite tactics are devised from a long list of historical tactics started in ancient time and practiced by ancient rulers. The commonality being "human nature". You simply cannot fix "human nature".

However you slice it clearly the sociopaths are winning! They have a long line of progeny from ancient Rome. Those who would commit criminal acts and order mass killings are always in charge. Always on top! Why is that?

I have posted this before from 1911. What's changed? Do not get hung up on that oft repeated buzz word "capitalism". If you use the simple and broad definition of capitalism which is that capitalism is simply the "accumulation of capital", leave out the methodology, then you understand that even Stalin and Putin and even Bernie Sanders and Hillary are great capitalists! Certainly Hillary stood by and applauded her husband's removal of Glass-Steagall back in 1999. That was a fatal year for the global Middle Class as the Euro came into power that year too!

“Glass-Steagall was no longer appropriate to the economy in which we live.  It worked pretty well for the industrial economy...but the world is very different”. - Bill Clinton, 1999

So by his statement his perception is that America in 1999 was no longer an "industrial economy". What then? Okay, it must be a "consumer economy" then! Certainly debt fuels that type of economy. Is debt capital?

Perhaps the US Fed has not raised the Fed Funds Rate because they subscribe wholey to ... 

DEBT LIVES MATTER!

chipshot's picture
chipshot
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Why No Wealth Re-distribution?

-When unearned income for the top .1% > earned income of 95+% of working people  (i.e. the uber-rich earn millions off their money while most earn less than $100K for actual labor)

-When unearned income comes in large part from the efforts of working people  (that work generates company profits which are distributed as dividends), plus rent and interest payments on borrowed money

-When unearned income is high enough to enable an extravagant lifestyle AND a growing bank account  (again, without even working)

why would anyone be against wealth re-distribution?  Because short of a massive market meltdown, the rich will only get richer.  Unless we enact progressive taxes to reign in massive net worths and the 7, 8, and 9 figure unearned incomes they generate.  Higher capital gains taxes and more profit sharing would help.

No question we are living beyond our means--both as a country and individuals--but wealth re-distribution could fund programs (such as those Mark_BC mentioned in post #23) that'd make us a stronger, less vulnerable country.

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Time2help
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Just keep going - business as usual

Nature is going to address the imbalances. She always does.

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RocketDoc
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Doing Good and Doing Well

There may be an assumption among "the elite" (policymakers and the commentariat) that doing ONE thing can achieve BOTH goals.  And it is probably a chimera.  The vision of justice for all men and one's own personal success CAN be mutually supportive but usually to truly help another requires sacrifice.  Justice requires virtue and does not guarantee a reward.  Oftentimes I find "no good deed goes unpunished".  It is lazy analysis to say that what is right and true always benefits me.  The truth may actually not include us.  That is not an argument for pursuing it assiduously I realize BUT experience tells us that what's right is hard and what's easy is probably selfish. 

Our leaders have refused to admit that of all the things America could be, it could not be all things to all people everywhere.  It could not singlehandedly "save the World" just because it was exceptional.  That hubris, made it flawed and we are currently reaping the whirlwind.  So I blame the hubris of flawed elites that as they succeeded they continued to believe in their own indispensable contributions rather than giving back to the society itself.  Since every Congressman/Senator becomes a millionaire by virtue of his election and thereby receiving a gold plated pension (not to speak of ANY morning coffee checks) why are they ALL not working hard for the common man or for future generations?  Some tragic flaw must blind them to doing the most necessary actions.  I have appreciated this site's focus on What is to be Done?  A question with a lengthy pedigree but no simple answer.  I like Resilience.  I like the concept of LESS.  Our military is not making us safer--we need to do less.  Government spending is not "helping" the debt or our economy and should be less.  Immigration should be less.  Energy use could be more efficient doing more with less, with some leadership.  So more bottom up encouragement and less top down control.  Less is more when pursing a failing policy.  As they say, when in a hole, quite digging.

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DennisC
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Nature

The wings of Time are black and white,
Pied with morning and with night.
Mountain tall and ocean deep
Trembling balance duly keep.
In changing moon, in tidal wave,
Glows the feud of Want and Have.

(excerpt from "Compensation" - Ralph Waldo Emerson)

And this closing paragraph from JMG's latest posting at The Archdruid Report, "The Patience of the Sea"

The sea is patient.  It has outlived countless species and will outlive countless more, ours among them. Among the things it might be able to teach us, on the off chance that we’re willing to learn, is that the life of a species, like that of an individual, is completed by death, not erased by it, and that its value is measured by the beauty and wisdom it experiences and creates, not by the crasser measurements of brute force and brute endurance.

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Michael_Rudmin
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Why against wealth redistribution?

Because unearned income IS wealth redistribution; and it interferes with the process of wealth creation, making petitioning and violence more effective at gaining control of assets than labor, which in turn disempowers and discourages labor while empowering and encouraging petitioning and violence.

Read Freiderich Hayak's "Road to Serfdom".

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rhare
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Who get's to decide? What is fair?

chipshot wrote:

why would anyone be against wealth re-distribution?  Because short of a massive market meltdown, the rich will only get richer.  Unless we enact progressive taxes to reign in massive net worths and the 7, 8, and 9 figure unearned incomes they generate.  Higher capital gains taxes and more profit sharing would help.

 
So I'm curious, why did you cutoff the line at 7 figures?  Why not 6 or 5?  After all the median household income worldwide is 4 figures.  Is it perhaps you just don't want to consider yourself in the greedy, evil rich category?
 
Do you have a pension, 401K, savings, and expect to retire based on their expected growth - ie. un-earned income.  Have you given them up so that your not being evil and greedy, or at least cashed them out so that you make sure your not participating in that evil unearned income?

chipshot wrote:

No question we are living beyond our means--both as a country and individuals--but wealth re-distribution could fund programs (such as those Mark_BC mentioned in post #23) that'd make us a stronger, less vulnerable country.

Let's see total wealth in the US is estimated to be around $85T, yet unfunded liabilities is estimated to be between $50T and $250T net present value depending on where you look.   Exactly how is that $85T going to cover all those promises.

What about all the debt?  Are you going to evenly spread it out as well.  If so then every household now owes and must work harder since they are now in debt. If you have been prudent and saved, does that mean your willing to be in debt just to make things fair?

Then you have to consider, if you had those assets, who would be left to buy them?  That $85T is a complete illusion since they are only worth something if you can sell them.  If even a small fraction of those assets hit the market the value would plummet. 
 
While a bit old, this video puts things in perspective.
 
It's pretty easy to advocate using violence to take from others....
 
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rhare wrote:Let's see total

rhare wrote:

Let's see total wealth in the US is estimated to be around $85T, yet unfunded liabilities is estimated to be between $50T and $250T net present value depending on where you look.   Exactly how is that $85T going to cover all those promises.

I thought the whole point that everyone is in agreement about here is that the $85T isn't going to cover it. Instead, those liabilities, one way or another, will be covered in a different monetary system, one that is purged of debt and reflects real-world wealth; one in which the price of labour will go way down in terms of buying "goods" -- things like oil and its derived products, but the price of labour will go up in relation to things in the economy brought about by "services" (other human labour), meaning that if the average person's wage drops in relation to an ounce of gold or a barrel of oil, then those reduced wages will make the government services that used to be un-fundable in the dollar system, suddenly fundable...

If trying to follow the preceding sentence causes mental gymnastics, then consider a real example: is medical care unattainable in Mexico? Nope. I haven't studied it in depth but I would guess that most people in Mexico have an easier time getting decent medical care than they do in America, or at least it is significantly cheaper to the state if the state is funding it. So then, the average Mexican wage is better at buying a doctor's visit than in America, but worse in terms of buying a gallon of gasoline. How is this so? Because doctors and everyone else in Mexico's medical system get paid less in relation to a barrel of oil than American doctors do.

I'm really curious. I have never seen an explanation for the question I have asked repeatedly over the years: when the economy stops growing (or more to the point, when the end of economic growth is genuinely reflected in the financial markets after the dollar finally dies), then a huge portion of the workforce will be out of work (the construction sector will go belly up). Furthermore, robots and automation have already eliminated another large chunk of the workforce. And China has stolen America's manufacturing sector via 40 years of currency manipulation. Those factors have resulted in the widespread social assistance programs you see today, which are preventing social breakdown. Someone please tell me: what are these people going to do for work to sustain themselves so they can buy medical care, education, and save for their retirements, after the current bureaucracy sustaining them collapses, in this future virtuous capitalist free market as described by Mises? I genuinely want an answer. I hear about how the western countries must take the painful medicine and cut government spending to force people back into the workforce so that they can again begin "producing" their own genuine wealth in free enterprise, so that America can rebuild its battered economy that has been destroyed by the "socialists". Where will the jobs be? What will people actually be doing?

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Time2help
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What will people actually be doing?

Mark_BC wrote:
I hear about how the western countries must take the painful medicine and cut government spending to force people back into the workforce so that they can again begin "producing"..

The term you might be looking for is "FSA". 

They may well be...displeased.

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thatchmo
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From what I hear, we'll all

From what I hear, we'll all be "coding", whatever that is.....I'm ready to peruse my old book on blacksmithing, and then hand it on to my niece......Aloha, Steve.

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rhare
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Many things on that list....

Mark_BC wrote:

then consider a real example: is medical care unattainable in Mexico? Nope. I haven't studied it in depth but I would guess that most people in Mexico have an easier time getting decent medical care than they do in America, or at least it is significantly cheaper to the state if the state is funding it. 

Why is medical care cheaper in Mexico, because the government doesn't fund it, or at least not a lot of it.  Much of it is provided by a real market that adjusts to provide services that people can afford.  It's not artificially inflated by things like FDA, AMA, etc, which are all simply cartels protected by government.  They limit competition and cause inflated prices.  In the US where before Obamacare, the government was responsible for close to 70% of healthcare (Medicare, Medicaid, VA) and enforces cartels in the name of protecting you.  It is not a free market when the bills are being paid by an entity that can use a gun to collect the payment.  There is no incentive to keep prices low when payee is not incentivized to do so, as happens when you spend other peoples money.

Mark_BC wrote:

I thought the whole point that everyone is in agreement about here is that the $85T isn't going to cover it. Instead, those liabilities, one way or another, will be covered in a different monetary system, one that is purged of debt and reflects real-world wealth;

No the point is those liabilities are not going to be covered at all.  They will no longer be liabilities as no one will pay them.  All those promises are going to be broken.  You had a pension and now you don't - ie. you will work for the rest of your life.

Mark_BC wrote:

I have never seen an explanation for the question I have asked repeatedly over the years: when the economy stops growing (or more to the point, when the end of economic growth is genuinely reflected in the financial markets after the dollar finally dies), then a huge portion of the workforce will be out of work (the construction sector will go belly up). Furthermore, robots and automation have already eliminated another large chunk of the workforce. 

Price of labor will reset.  It will be priced at what the market will support.   Labor is just like any other product, a large supply means cheaper prices.  No amount of manipulation with the things like minimum wage, protected cartels (ie. labor unions, professional licensing, etc) negates that fact.  At most it delays the reset.  As far as automation,  at some point labor becomes cheap enough it's better not to pay for the automation and better to pay for people.  As prices of resources rises, then labor will become more economical than automation.  Most people would rather deal with another person than an automated system.  How do you feel when you get trapped in a phone tree trying to call any service provider?  A human would be better as long as the price is right, but labor through artificial support, has been priced to high - hence the automation and high unemployment.

Life is hard, most people worked hard labor until they died until the recent gorging on cheap energy.  As we loose those "energy slaves" as CM puts it, we will return to manual labor.   We will also unfortunately have to work through the glut of extra humans, many which do not have skills that allow them to support themselves.  No amount of government or meddling with markets can correct that issue, just like the fiat money system, it can only hide and delay a return to reality.

Mark_BC wrote:

And China has stolen America's manufacturing sector via 40 years of currency manipulation. 

China didn't do that, we did it to ourselves.  We artificially raised the price of labor in the US and didn't allow it to compete when we had global markets.  Labor was too high in the US so production moved to China and other cheap labor areas.  In addition we used the special privilege of world reserve currency to make everyone feel rich and encouraged citizens to live beyond their means.   We've had a hell of a party and now we are going to get the hang over. 

Mark_BC wrote:

Someone please tell me: what are these people going to do for work to sustain themselves so they can buy medical care, education, and save for their retirements, after the current bureaucracy sustaining them collapses, in this future virtuous capitalist free market as described by Mises? 

You are still trying to live in the land of Unicorns and Rainbows.  Capitalism or a better term would be "free market", doesn't guarantee happiness, or employment or any of those things.  It allocates resources based on where they are most needed/desired since everyone votes with their wallets.  If there is a glut of a resource then the price falls, if it is in shortage the price rises to balance the supply and demand.  Those who need it most/desire it most will pay.  If possible higher prices bring on added capacity.  This applies to labor, too few farmers, then more will be produced - it's just has a longer lead time than many manufactured goods.

Most people will not have medical care as it exists today.  It is one of those areas where we have lived well beyond our means.  People will pay for what they can afford.  Either prices will come down on the service or most people won't be able to afford it.  In a free market, if it can be produced at an affordable price then it will, otherwise it's not available.  That's what it means to live within your means.  Most people won't get a higher education if it doesn't lead to a more productive existence because it's not sustainable and most people will not be able to retire. The fantasy of being able to work for 20-30 years and produce enough to support yourself has been a fantasy perpetrated by borrowing from the future - that's what that $100T future liabilities represents - it's the lie that you can have medical care, education, retirement.

Note that the "free market" could also just be called nature.  Life in all forms behaves the same way, it seeks resources to survive and strives to find the cheapest solution (easier, safer, etc).  In humans we represent those trades offs with money, but it's just an abstraction of a process that occurs in all life.  All manipulation to try and fight nature and live beyonds ones means will eventually fail. 

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chipshot
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rhare: Attacking comments you don't like to hear?

That's what it sounds like  (#31). 

Replies to your questions:

#1 "So I'm curious, why did you cutoff the line at 7 figures?  Why not 6 or 5?  After all the median household income worldwide is 4 figures.  Is it perhaps you just don't want to consider yourself in the greedy, evil rich category?"         

6 figures  (of net worth) is hardly enough to earn unearned income > most people's earned income.  And I was thinking in terms of the US, not the world.  With most solutions, there are details to be worked out and lines to be drawn.  Just because they can be difficult, and unfair to some, doesn't mean solutions shouldn't be pursued.

#2 Do you have a pension, 401K, savings, and expect to retire based on their expected growth - ie. un-earned income.  Have you given them up so that your not being evil and greedy, or at least cashed them out so that you make sure your not participating in that evil unearned income?

This discussion is supposed to be about us--the country as a whole--and the big picture.  Not about me.  However, I have gotten out of the unearned income game.  And more and more people don't have the opportunity  (in the from of pensions, retirement plans, etc)  to participate.  The retirement thing was something only a generation or two got to experience.

#3 Let's see total wealth in the US is estimated to be around $85T, yet unfunded liabilities is estimated to be between $50T and $250T net present value depending on where you look.   Exactly how is that $85T going to cover all those promises.

Nobody said it would.  But we should attempt to cover as much as possible.  Wealth re-distribution  (perhaps better labeled as "reducing the concentration of wealth")  is likely the best way to go, as the uber rich won't exactly suffer as a result.

#4  "Then you have to consider, if you had those assets, who would be left to buy them?  That $85T is a complete illusion since they are only worth something if you can sell them.  If even a small fraction of those assets hit the market the value would plummet."     IMO, the only good point you raise.  It's a problem the .1% will mostly have to deal with, since they have most of the assets.  In the meantime they'll certainly have less cash, as that's what the government would be collecting from them. 

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free markets and nature

rhare wrote:

Note that the "free market" could also just be called nature.  Life in all forms behaves the same way, it seeks resources to survive and strives to find the cheapest solution (easier, safer, etc).  In humans we represent those trades offs with money, but it's just an abstraction of a process that occurs in all life.  All manipulation to try and fight nature and live beyonds ones means will eventually fail. 

Rhare, Mark and all,

Great discussion on both sides.

Today in a couple of econ. classes we started learning about how government intervention is described by mainstream economic theory (the Neoclassical Synthesis) and we discussed this very point, by considering whether or not more rules by the government was more in accordance with nature or whether more free markets was.

On this fairly basic level, most of the students and I agreed that free markets were more natural for the self-evident reason that individuals doing what they see as in their own best interest is more natural human behavior than individuals following lots of rules and laws.

Then we moved on to the difference between anarchy and libertarianism. I think you would have approved, Rhare, at how much support I gave to the libertarian case.  Even though I don't describe myself as a libertarian, I am one in many ways and teaching mainstream economic theory (which I am sort of required to do in practice) tends to support libertarianism in many ways, maybe not as much as Von Mises and Hayek would have liked, but the heavy emphasis on the wonders of market equilibrium make a good theoretical case for laissez-faire.

However, after that discussion and reading what you wrote above, I don't think it's accurate to say that the free market could just be called nature. After all, we didn't really operate according to market principles for most of human existence, but rather according to some hybrid of individualism and tribalism during our very long hunter-gatherer period. that I don't  think we (or at least I) even understand very well at this point.

It's basically impossible to separate most of economic theory from the context in which it developed - the Industrial Revolution. Indeed, Ishmael argues that we divorced from nature when we started cutting the Earth with plows, and the five or ten millennia separating our agricultural and industrial expansions may eventually be seen - if there is any seer at that point - as all part of a wafer-thin sedimentary irregularity, as brief and unrepresentative as a manta ray's jump into the air.

One could make a better case that both anarchy and indigenous hunter-gatherer bands are much more more natural, but even then I'm not so sure about the former, which is just another flavor of industrial political philosophy.

Just as John Locke's state of nature served its purpose as an origin myth for the concept of natural rights, but is also a historical fiction, it also seems that free markets - and our entire transactional civilization - are not objectively natural, although they may be somewhat natural in the context of an expansion powered by fossil fuels.

Whether or not we go extinct, get ourselves back to the garden by going paleolithic, or make it through gauntlet of fossil fuel contraction by establishing a toe-hold in space as Arthur encourages is an open question. But I'm pretty sure that the current free market ideology will not survive in anything near its current form, as it seems to be mostly a cultural construct.

Having said that, I love the fact that libertarianism advocates so well for freedom and individual rights - both economic and civil.  It seems that today was the first time that some of the students considered anything other than that the government exists to "keep things in control" and to "keep us from hurting ourselves," (direct quotes).

And of course the tax ramifications of libertarian ideology make it an easy sell to the scions on the room, so there is that...

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Thuggary by any other name still doesn't smell sweet

chipshot wrote:
  • With most solutions, there are details to be worked out and lines to be drawn.  Just because they can be difficult, and unfair to some, doesn't mean solutions shouldn't be pursued.
  • This discussion is supposed to be about us--the country as a whole--and the big picture.
  • Wealth re-distribution  (perhaps better labeled as "reducing the concentration of wealth")  is likely the best way to go, as the uber rich won't exactly suffer as a result.
  • In the meantime they'll certainly have less cash, as that's what the government would be collecting from them.

You missed the point.  I can find very similar statements from various tyrants in history. So in other words what you are saying is:

My neighbor has more stuff and is living better than I am, let's steal from them.  In order to make it right, I'm going to steal from them and distribute it equally among all the other thieves who join me and to make it sound better we'll call it "taxes".

If your going to advocate wealth redistribution then at least have the courage to identify it for what it is. You want your gang of thugs (you call them government) to take from others on your behalf.  Note, this is exactly what has been going on already with the Crony Capitalism. The only difference is that you want to make sure your on the receiving end of the loot. 

Just keep in mind that if you live in the US, you most likely live better than much of the rest of the world.  I assume it's fine when others decide that you are just living a bit to high on the hog and should give up what you have.

Why not take a different approach and decide that it's not right to use violence to force your will on others and maybe it's not right to steal from others.  How about we try living within our means and have voluntary cooperation (ie. community) to make the world a better place.

chipshot wrote:

rhare: Attacking comments you don't like to hear?

Why yes I am.  When I see someone advocating violence to get what they want.  
 
chipshot wrote:
why would anyone be against wealth re-distribution?
You asked, I answered. Here is a video you might want to watch:  It Can't Happen Here
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wealth redistribution

why would anyone be against wealth re-distribution?

Ok, I'll bite.  Let's pretend we live in a society that is run by sociopaths, whose entire apparent goal is to redirect a good chunk of the tax loot they collect to their friends that run various cartels - let's call them the military industrial complex, TBTF banking, big pharma, big tobacco, industrial sugar & fatty food production, captive media, big energy ... have I missed anything?  Yeah anyhow, lets pretend the mechanism of governance is completely captured by this group: sociopaths & cartels.

Only, we don't really need to pretend, do we?  Because that's pretty much where we live.

So if you are advocating raising taxes on - pretty much anyone - and handing the money to the sociopaths, I'm going to say that's a bad idea.

Here's the thing.  Under your plan, wealth will DEFINITELY be redistributed.  I just don't think it will end up in the place you hope it will end up.

If we can arrange to have a system that isn't run by sociopaths - somehow - then I'd be for some amount of redistribution.  That, of course, is the trick.  Those pesky sociopaths always seem to float into positions of power.  Communism had that issue, if I recall correctly...

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Instead of "redistributuion," maybe its is simply fairness

Maybe we do need a "mechanism of fairness" and here's why I say that.

Do you remember Kurt Cobb's podcast? http://www.peakprosperity.com/podcast/94455/kurt-cobb-money-cannot-manufacture-resources

Speaking specifically about the oil industry he said:

Of course, the profit was privatized and now the consequences will be socialized, as in so many things these days.

Taxpayers -all of us - are paying for the messes left by the people who got rich off exploiting the environment (aka "natural resources"). 

That the American captains of industry also got rich off of exploiting people can also be argued, but it is an argument that would probably have us retreating into ideologies instead of discussing the facts. 

Dave Fairtex, you did a great job of listing the pernicious industries that profit the most from the red caprpet that our government rolls out for them. I agree that taking away that red carpet would be a good thing.

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chipshot
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For Those Opposed to Reducing the Concentration of Wealth:

Are you content to sit back and allow the uber-rich to grow wealthier  (leading to further concentration not only of wealth but also power, which BTW is corrupting the political system and weakening the economy), at an increasing rate of acceleration, without contributing anything to society?  That more and more wealth is going into the hands of fewer and fewer people?  While the overall wealth-pie is shrinking?  Hard to envision a good ending for such a scenario.  Remember, this is about people with incomes so high they were unthinkable 25 years ago, incomes that are solely the result of stratospheric net worths that are not a reflection of whatever contribution they've made to society.  It is NOT about neighbors that have bigger houses or newer cars than I do.

Monopoly  (the game) is a form of capitalism in its most basic and simple form.  What inevitably happens when you play Monopoly?  We are seeing that happen in real life  (a few get insanely rich, and contrary to trickle down theory, it does not lead to a "rising tide" for all others but rather comes at the expense of all others).

Don't know the specifics of a best strategy of reducing the concentration. Higher capital gains tax and much more progressive property taxes seem like good starting points.  Capping luxury taxes and social security payments, along with breaks on sales of secondary homes are the opposite of what needs to be done.  But those are the types of policies enacted--and difficult to change--when people are rich enough to buy politicians.

Maybe I'm too small-minded or unknowingly selfish, but I cannot see how the current concentration of wealth is good for the country in any way.  And short of major tax reform  (or market meltdown), I can't imagine how the concentration won't get more extreme.

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Posts: 845
"We're from the government and we're here to help"

I don't think anybody opposes reducing the concentration of wealth. What I oppose is the idea that it can be done through government, i.e. taxes/regulation. The 'disease' of wealth inequality is largely a result of  previous "cures". For example, the income tax, now over a hundred years old, was originally proposed as a tax on millionaires. Now, we have everybody who earns a buck paying those taxes, and having to endure an out of control IRS to boot.

The cronyism (falsely labeled 'capitalism") is empowered by an overarching government presence, without which the concentration of wealth would wither. The monopoly that you decry could only exist with the government running interference for it.

Please, chipshot, please don't help me anymore.

RoseHip's picture
RoseHip
Status: Silver Member (Offline)
Joined: Feb 5 2013
Posts: 139
If its broken

"Don't know the specifics of a best strategy of reducing the concentration"

When everything is broken you just push all the chips in and begin again with a new set of ideas. So why not program the same into the mix for this next go around? And please please do it with a bit of humor and playfulness. Debt jubilee is a fun word to get the creativity flowing.The actual ideas behind society engineering are not as important as getting started and what you learn along the way. Like all games its okay to have winners and losers. What's not okay is after the winners and losers have been sorted to not have a new go at things. The aspect that makes games so appealing and fun is that they have beginnings middles and ends.

Luke Moffat's picture
Luke Moffat
Status: Silver Member (Offline)
Joined: Jan 25 2014
Posts: 239
Adam Smith on Masters and Labourers

Taken directly from the Wealth of Nations;

Quote:

What are the common wages of labour, depends everywhere upon the contract usually made between those two parties, whose interests are by no means the same. The workmen desire to get as much, the masters to give as little as possible. The former are disposed to combine in order to raise, the latter in order to lower the wages of labour.

It is not, however, difficult to foresee which of the two parties must, upon all ordinary occasions, have the advantage in the dispute, and force the other into compliance with their terms. The masters, being fewer in number, can combine much more easily; and the law, besides, authorises, or at least does not prohibit their combinations, while it prohibits those of the workmen. We have no acts of parliament against combining to lower the price of work; but many against combining to raise it. In all such disputes the masters can hold out much longer.

We rarely hear, it has been said, of the combinations of masters, though frequently of those of workmen. But whoever imagines, upon this account, that masters rarely combine, is as ignorant of the world as of the subject.

And later on demands

Quote:

...The masters upon these occasions are just as clamorous upon the other side, and never cease to call aloud for the assistance of the civil magistrate, and the rigorous execution of those laws which have been enacted with so much severity against the combinations of servants, labourers, and journeymen.

So, just as our masters organise into their power groups, it seems we must do the same and organise into ours. And so he saw it all coming; the Council of Foreign Relations, the Bilderberg Group, the Trilateral Commission... clever man that Smith. So what can we do as we approach our Marx inspired Neo-Feudal shit-hole? Create an independent counter-culture would be my suggestion.

All the best,

Luke

rhare's picture
rhare
Status: Diamond Member (Offline)
Joined: Mar 30 2009
Posts: 1290
The rich - a distraction....

pyranablade wrote:

Taxpayers -all of us - are paying for the messes left by the people who got rich off exploiting the environment (aka "natural resources"). 

So who is holding the gun to your head to make you pay for those things?  It's the same entity that handed them an unfair advantage in the first place.

chipshot wrote:

 Are you content to sit back and allow the uber-rich to grow wealthier  (leading to further concentration not only of wealth but also power, which BTW is corrupting the political system and weakening the economy), at an increasing rate of acceleration, without contributing anything to society? 

As earthwise and others have pointed out, it's not contentment with the current system, rather it's the solution you and other's propose.  Giving more power over your life to others is going to help how?  While you complain that power is too concentrated then how is giving more power to the same corrupt group going to help?  How about looking out for yourself.  Don't like the way things are going how about taking away the force that keeps you locked to the corrupt system? Take away the governments ability to interfere with your choices.  

And stop worrying about the few (yes very few) paper billionaires.  It's a complete distraction.  First - a vast majority of their supposed wealth is all paper.  Also, there is this fantasy that we can just tax those evil bastards and solve our problems.  Sorry not going to work.  Even if you confiscated all the wealth of those billionaires in the US, not their income, all their assets - you get about what the government spends in 1 year!  And the second you try to sell all those assets, they drop to maybe 1/10 their value because there is no one to buy them. 

Then what?  Now it's going to be those rotten evil millionaires?  Say everyone who has more than $30M (HNWI) in assets, that get's you maybe another 2 years at most - with the same caveat that you can't really sell their assets for anywhere close to their valuation.

chipshot wrote:

It is NOT about neighbors that have bigger houses or newer cars than I do.

So then after maybe 3 years, your down to your neighbors.  Yes, you would probably be surprised by how many of your neighbors have $1-30M (it's not that much money)  many professional households (doctors, lawyers, engineers, small business owners,  or anyone in NY, LA, or SF who own their home) - or do all those people make up the list of people who don't contribute to society?

The problem is really really big.  It's complete denial to think the promises can be kept and all the talk about taxing the rich is just a side show.

HughK wrote:

Having said that, I love the fact that libertarianism advocates so well for freedom and individual rights - both economic and civil.  It seems that today was the first time that some of the students considered anything other than that the government exists to "keep things in control" and to "keep us from hurting ourselves," (direct quotes).

That shows how well trained (brain washed) we are to believe that government is the solution to all problems...  Voluntary cooperation and freedom of choice never seems to be an option...crying  

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 3458
wealth concentration

So the majority of the wealth concentration doesn't come from legitimate value creation, but rather from the excess returns from control over government.

Monopolies are very profitable.  So are enterprises that do not have to pay the actual costs of doing business.  So is the "control fraud" that Bill Black talks about.  That's how most of these guys are getting rich.

Do we really object to people like Gates, who built Microsoft, or Jobs, who built Apple, being rich?  I don't.  I object to all the bankers who made billions making fraudulent loans and got to keep the proceeds.  Angelo Mozilo, he's an example.  I don't want him to pay more taxes, I don't want his wealth redistributed - I want him in jail, and the illegal proceeds seized.

We don't need massive wealth taxes on rich people who got their money from building something worthwhile.  What we need is government that gets rid of cartel behavior, prosecutes theft, and enforces the laws.  If we can get that, we can seize the illegal profits, deter future bad behavior, and bring back the rule of law.

Taxes aren't the answer.  Impartial, fair law enforcement - that's the answer.  Transparency helps too.

sand_puppy's picture
sand_puppy
Status: Diamond Member (Offline)
Joined: Apr 13 2011
Posts: 1125
"It Can't Happen Here"

I was not aware of this movie by Larken Rose.  Rhare mentioned it above.  I just watched it and found that it was very well done and intelligently presented.  I highly recommend it to others.

KugsCheese's picture
KugsCheese
Status: Diamond Member (Offline)
Joined: Jan 2 2010
Posts: 1220
Michael_Rudmin wrote:Because

Michael_Rudmin wrote:
Because unearned income IS wealth redistribution; and it interferes with the process of wealth creation, making petitioning and violence more effective at gaining control of assets than labor, which in turn disempowers and discourages labor while empowering and encouraging petitioning and violence. Read Freiderich Hayak's "Road to Serfdom".

And if you accept Man is of Nature the 80/20 rule applies meaning 80% of wealth will be with 20% of population in a snapshot of time.   This makes sense since entrepreneurs are a minority in a society and not all are successful at same time due to competition and over time all fail in a project at some point.

reflector's picture
reflector
Status: Silver Member (Offline)
Joined: Aug 20 2011
Posts: 126
more direct

chipshot wrote:

Are you content to sit back and allow the uber-rich to grow wealthier  (leading to further concentration not only of wealth but also power, which BTW is corrupting the political system and weakening the economy), at an increasing rate of acceleration, without contributing anything to society?  That more and more wealth is going into the hands of fewer and fewer people?

hey, chipshot, you are right that extreme wealth disparity is, and has historically been, de-stabilizing to society and a recipe for disaster and revolution.

however, i don't think you've clearly looked into the reason for extreme wealth disparity.

in the usa, it is primarily due to government cronyism and the federal reserve system.

the federal reserve, a private for-profit corporation which is not a federal agency and is not audited, has a monopoly on the nation's money supply, with the blessing of the federal government and the us treasury. the fed's member banks create money out of thin air, at no cost, then loan it to the us treasury, and make interest on trillions of $usd. so it's no surprise then that the lloyd blankfeins of the world, who caused the last financial crisis and much of the current suffering of the american people, are now billionaires.

however, your proposed solution is completely backwards - the government is in cahoots with these large financial institutions. to favor increased intervention by the government, which is completely bought and paid for, will only cause more harm. it's as though your house is being burglarized, and the police and the burglars are both in on it, with the police inside your house passing your tv, stereo, and all your valuables through the window to the burglars - would you in this situation call for more police to come?

"tax the rich" proposals actually work out this way:

  • new tax proposal gets drafted
  • lobbyists get their grubby hands on it and build in loopholes
  • the truly rich use these loopholes to avoid the new taxes
  • new taxes end up falling on the middle and upper-middle class and thus destroying jobs and opportunity

a more direct approach to ending the increasing wealth disparity would be to end the federal reserve system, there is no reason for the nation to cede power to coin its own money to a private banking cartel which drains the nation's wealth like a vampire squid.

Snydeman's picture
Snydeman
Status: Silver Member (Offline)
Joined: Feb 6 2013
Posts: 174
Seems to me

It seems to me that the fundamental problem with capitalism is that it only operates best when it is completely "free," yet when it is free monopolies, Uber-corporations and cartels eventually form. These, in turn, will destabilize the freedom of the market as the Big Players drive out the small dogs and manipulate market forces to their own advantages. So the drive to alleviate the transgressions of large monopolies, cartels, and trusts - things Theodore Roosevelt feared greatly, by the way - through government intervention (socialism) is an understandable and well-intentioned thing. However, through too much government intervention, or rather governmental intervention in an age when the wealthy elite have learned how to make the government cater more to their wishes than to the masses, the same results have occurred. We now have too much central control and not enough "market forces freedom" in the system; however, knowing what I know about the depravities of the free-market capitalism industrialization era, I would not want to return to a laissez-faire system either. Rather, we seem to have done best with a mild socialism while we still had a gold/silver-backed currency - the 40s, 50s, and 60s. There were other factors to be sure, but...

Conclusion: Fiat is the biggest single contributor to why things are so fucked up, not "socialism" or "government meddling." These two things only become a systemic problem when you introduce a Fiat system, since it eliminates all limits to government action and spending and causes government to extend its reach beyond normal limits.

Second conclusion: I'm not submitting this as truth, but rather a thought experiment... 

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