Saturday, March 7, 2009
Creative destruction
It is often said that one of the facets of capitalism is "creative destruction": businesses and even entire industries are destroyed to give raise to new products and new ways of making them. Yet rarely do we think of this on the scale of a forest fire, or an earthquake, when all we see around us is massive destruction, with the "creation" part coming much later. Something like the current crisis. This begs the question: is such an orgy of destruction really necessary? Yes, the forest will grow again and new, stronger bridges will replace those that crumbled when the earth shook, but wouldn't it be better if we managed to harvest the timber before it burned, and used the cement to repair the bridges, instead of rebuilding them?
Thursday, February 26, 2009
Dumb individuals, smart crowds??
This crisis has many lessons for us, and one of them is that there is no such thing as "wisdom of the crowds" or "smart mob". I don't know who first came up with this nonsense, but it is so obviously stupid that it is hard to believe these phrases actually entered our vocabulary. What is the premise? That a bunch of people who make stupid decisions on their own would somehow be more capable of making correct decisions by being in a large group? Or is it so that their own stupidity is counterbalanced and diluted by the wisdom of others in that group? (But if that's the case, wouldn't we be better off with just the good decision makers, without the need to counterbalance the fools?)
This fallacy was, supposedly, reinforced by the Word Wide Web, which seemed to prove the Marxist thesis that sufficient quantity will transform itself into quality, in other words, a gigantic pile of garbage will create such a pressure that it will beget diamonds. One has only to read the comments left by readers of articles and blog posts to know that this can't be true. It is, in fact, rather depressing that so many of us are such idiots. Among the 327 comments left undearneath an excellent interview with Niall Ferguson, there are "insighful" analyses like this one:
Sure, this drivel is outnumbered by many more sane - even if negligibly so - comments, but how does this make the crowd of commenters smarter? Garbage does not produce diamonds, just makes them more difficult to find.
This fallacy was, supposedly, reinforced by the Word Wide Web, which seemed to prove the Marxist thesis that sufficient quantity will transform itself into quality, in other words, a gigantic pile of garbage will create such a pressure that it will beget diamonds. One has only to read the comments left by readers of articles and blog posts to know that this can't be true. It is, in fact, rather depressing that so many of us are such idiots. Among the 327 comments left undearneath an excellent interview with Niall Ferguson, there are "insighful" analyses like this one:
Paul Collins from Canada writes: Niall Ferguson is not the voice of reason but is in fact as mad as those in government and in industry. Those in power are mad if they can hold onto power forever. Nothing lasts forever. THESE PEOPLE ARE MAD!
Sure, this drivel is outnumbered by many more sane - even if negligibly so - comments, but how does this make the crowd of commenters smarter? Garbage does not produce diamonds, just makes them more difficult to find.
The opportunity in front of us
The current economic crisis is big and scary, but we would all be much better served viewing it as the huge opportunity it is. (Not unlike the tragedy of 9/11, which was a golden opportunity - to push us toward energy independence among other things - largely squandered later.) It is an opportunity to remake our deeply flawed economic system based on fake prosperity of living beyond our means instead of building real prosperity. I'm therefore quite encouraged by President Obama's apparent thinking on some of the crucial issues that will determine our future: federal budget deficit, healthcare costs, alternative energy, infrastructure. Of course, at the same time I am deeply unnerved by so much power being given to the Democrat-dominated Congress, who will use the excuse of this crisis to go nuts printing money and spending like a drunken sailor more for political than for economic gain. (You don't have to look very closely at the just passed Stimulus Bill to see a pork-laden train. )
There is plenty of worry to go around, including the fact that things will most likely get much worse before they start getting any better, or that there will be a big shift of economic power from debtors (Europe and the US) to creditors (China and Middle East), but if we play this thing right and hold the course, we may emerge with a much more sane and stable system within the next decade. I am optimistic that we're smart enough to do that.
There is plenty of worry to go around, including the fact that things will most likely get much worse before they start getting any better, or that there will be a big shift of economic power from debtors (Europe and the US) to creditors (China and Middle East), but if we play this thing right and hold the course, we may emerge with a much more sane and stable system within the next decade. I am optimistic that we're smart enough to do that.
Friday, January 2, 2009
Are we going to die from it?
I admit, that for a while I doubted that the recession was real. There is no point denying it, since I wrote about my doubts in this very blog. I thought that the media was feeding us stories about recession in order to make sure that a Democrat wins the upcoming presidential election. Well, the recession is very real, although I still believe that the media has a role in making it bigger than it actually would have been. A lot of what is going on is psychological, especially on the important level of consumer spending. Consider than in Michigan, one of the states most severely impacted by the recession, the unemployment is at 10 percent. That is about 4 percent more than the pre-recession level. However, the change in consumer spending is several orders of magnitude greater than the change in unemployment. A friend of mine told me that her business fell by 50 percent - this in relatively affluent Ann Arbor, which is faring much better than the rest of the state; in other places the predicament of small businesses is dire.
Since 95 percent of Michiganders did not see a change in their employment status, what accounts for this profound pullback? In large part, I think, this is fear, driven by the incessant barrage of bad news coming from the media. Having heard the phrase , "since the Great Depression" (as in: "The biggest drop in market capitalization since the Great Depression", "The worst holiday shopping season for retailers since the Great Depression", etc) half a dozen times per day, an American consumer, like the groundhog, hides back in his lair, ensuring that winter will last longer than hoped. Not surprisingly, the fear of recession will make the recession worse.
Why do the media do that? Mostly it's because that's what the media is about: they cling to the idea that only bad news sells, so they'll whip it up for as long as they are able to get people's attention. If there are multiple ways to tell a story, and multiple angles from which to look at it - you can rest assured that the most frightening angle will be presented to the readers or viewers. I also suspect that the election plays some role still: having succeeded in getting Obama elected president, the jubilant media would like to ensure that any good news about the economy does not start coming while Bush is still in office, so that his "legacy" remains as dark as possible. After all, it is bad enough that the war in Iraq appears to be pointing toward success, so the public's attention must be driven away from that, and toward the bleak state of the economy. It will really be interesting to watch whether the tone in the media starts shifting toward more optimism in the later half of January... I do hope that it does, and not because it will prove my point, but primarily because it may help us heal. The media's role so far has been akin to a relative from hell visiting you while you are sick with a bad flu, and telling you stories about avian influenza, and how many people die of flu each year, and the complications you may end up with, and how you had infected many of your coworkers, so now everybody hates your guts, etc. Would it be nice if they told us, for a change, that everything will be alright, and that we've overcome much worse in the past? Is it too much to ask?
Since 95 percent of Michiganders did not see a change in their employment status, what accounts for this profound pullback? In large part, I think, this is fear, driven by the incessant barrage of bad news coming from the media. Having heard the phrase , "since the Great Depression" (as in: "The biggest drop in market capitalization since the Great Depression", "The worst holiday shopping season for retailers since the Great Depression", etc) half a dozen times per day, an American consumer, like the groundhog, hides back in his lair, ensuring that winter will last longer than hoped. Not surprisingly, the fear of recession will make the recession worse.
Why do the media do that? Mostly it's because that's what the media is about: they cling to the idea that only bad news sells, so they'll whip it up for as long as they are able to get people's attention. If there are multiple ways to tell a story, and multiple angles from which to look at it - you can rest assured that the most frightening angle will be presented to the readers or viewers. I also suspect that the election plays some role still: having succeeded in getting Obama elected president, the jubilant media would like to ensure that any good news about the economy does not start coming while Bush is still in office, so that his "legacy" remains as dark as possible. After all, it is bad enough that the war in Iraq appears to be pointing toward success, so the public's attention must be driven away from that, and toward the bleak state of the economy. It will really be interesting to watch whether the tone in the media starts shifting toward more optimism in the later half of January... I do hope that it does, and not because it will prove my point, but primarily because it may help us heal. The media's role so far has been akin to a relative from hell visiting you while you are sick with a bad flu, and telling you stories about avian influenza, and how many people die of flu each year, and the complications you may end up with, and how you had infected many of your coworkers, so now everybody hates your guts, etc. Would it be nice if they told us, for a change, that everything will be alright, and that we've overcome much worse in the past? Is it too much to ask?
Tuesday, December 30, 2008
World to Israel: surrender, already!
Now that Israeli bombs started raining on Hamas in Gaza, the world has sprang into "action": there are condemnations, calls for a "ceasefire" from world leaders, even demonstrations (yes, in Europe, too - big surprise, huh?) in support of the Palestinians. The "world" had been conspicuously silent when Hamas were firing rockets into towns and villages in Israel. Never mind, that those rackets were clearly intended to hit anything and anybody: children, hospitals, schools, homes. Hamas did not even try to pretend, let alone make an actual effort, to aim at military targets. (Of course, the "world" understands that: after all, these are crude rockets, a far cry from the sophisticated weapons in Israel's possessions. The Palestinians can't be held to the same standard, can they? It's like when a maniac runs into a preschool while being chased by police, and starts swinging a chair. He cracks the skulls of a few kids, but then the police open fire trying to kill the guy, and a bullet hits a kid in the leg. Wouldn't you expect the maniac to walk free while the policeman would be dragged through courts and spend years in prison for shooting a child? That's a normal state of affairs in Western societies, the standard way of thinking about such things. )
Just like the US after September 11, Israel is making the grave mistake of responding to terror, of hitting back. That's when the paper-thin veneer of sympathy evaporates, replaced by outrage and by a steady stream of media interviews with assorted "experts", who tell us that this is only going to make matters worse. It will make the terrorists stronger, increase the anger in the muslim world, blah, blah, blah. What's the alternative? The experts don't really say, but one can guess that they would like to say, "Give in, do what they want, and hope for the best. The only way to deal with terrorists is to appease them. They will win, no matter what. Stop wasting your energy fighting them."
In the case of Isreal, giving Hamas what it wants means that the Jews would all have to pack and move out, leaving Isreal to Palestinians. What sane society would agree to follow that kind of advice? This is all the more infuriating that were the Palestinians to overrun Isreal and commit genocide, it would most likely draw only timid verbal condemnations from the world, mild in comaparison to the outrage generated were an Isreali plane to drop a bomb on a school in Gaza by mistake. Now we keep hearing complaints about a "disproportionate" response byIsreal. What would be the "proportionate" response? If the Israel fired rockets indiscrimantely into Gaza, without any pay attention to what they hit? Oh, this would be decried as a barbaric act, a medieval "eye for an eye", so unbecoming of a modern, democratic state. In other words, no matter what you do, you are always in the wrong. Lesson: do what you think is right and don't give a damn about the world's opinion.
Just like the US after September 11, Israel is making the grave mistake of responding to terror, of hitting back. That's when the paper-thin veneer of sympathy evaporates, replaced by outrage and by a steady stream of media interviews with assorted "experts", who tell us that this is only going to make matters worse. It will make the terrorists stronger, increase the anger in the muslim world, blah, blah, blah. What's the alternative? The experts don't really say, but one can guess that they would like to say, "Give in, do what they want, and hope for the best. The only way to deal with terrorists is to appease them. They will win, no matter what. Stop wasting your energy fighting them."
In the case of Isreal, giving Hamas what it wants means that the Jews would all have to pack and move out, leaving Isreal to Palestinians. What sane society would agree to follow that kind of advice? This is all the more infuriating that were the Palestinians to overrun Isreal and commit genocide, it would most likely draw only timid verbal condemnations from the world, mild in comaparison to the outrage generated were an Isreali plane to drop a bomb on a school in Gaza by mistake. Now we keep hearing complaints about a "disproportionate" response byIsreal. What would be the "proportionate" response? If the Israel fired rockets indiscrimantely into Gaza, without any pay attention to what they hit? Oh, this would be decried as a barbaric act, a medieval "eye for an eye", so unbecoming of a modern, democratic state. In other words, no matter what you do, you are always in the wrong. Lesson: do what you think is right and don't give a damn about the world's opinion.
Sunday, October 26, 2008
Dis-service
It is shocking how much the culture of customer service has deteriorated in some industries in just a decade or so. Sure, the recorded voice will tell you, "Your call is important to us", while placing you on hold, and the person at the other end (once you get connected to a real person) will apologize for the inconvenience you experienced, but in many cases it is just a veneer on a very rotten material. Not in all cases, because there are still examples of great service: recently I had a problem with Amazon.com's website and called the phone number for help. The recording told me that no representatives were currently available and asked me to leave a phone number, so that they could call me back. I did leave a number and a few minutes later received a phone call from a person who then proceeded to resolve my problem. It truly was a very positive experience.
Airlines, on the other hand... My very recent trip was a reminder of why I started to hate flying. From an exciting and somewhat exhilarating experience, flying has transmogrified into this experiment in how much humiliation and bad service can customers endure. For starters, I was shocked to discover that the airline I fly the most is now charging $15 per checked-in bag! I was not warned about that (my last flight had been in June) when I purchased the tickets online. Had I known, I would have packed smaller toiletries and avoided the 5 oz rule. At the airport I was facing the choice between throwing out my toothpaste, deodorant, and a couple other things, or paying the $15. I chose the latter, although mad as hell.
I don't even want to mention this humiliating circus of taking off your shoes, pulling out your laptop, putting all your toiletries into a quart-size ziploc bag, etc. You can't really blame it on the airlines - it was a bunch of mass-murdering fanatics plus an overreacting government, whom we got to thank for this. However, was I really naive to think that maybe these 15 bucks, plus the fact that more people would now try to squeeze their luggage as carry-on, would result in shorter waiting at the carousel? Yes, I was very naive. So, the airlines decided to start taking more of our money, without giving us more in return?Interesting.
There is also this not-so-new idea of no longer serving food on flights, but instead, selling boxes of junk food. At first they were still giving away these tiny bags of pretzels, but that apparently proved too expensive, so no pretzels or peanuts for you, unless you pay $5. Next step - and I'm sure it is coming - charging a buck or two for the sodas. This is going to be a tad problematic, because we've been told that it is crucial to drink enough liquids during long flights, so initially they will get away with this by offering bad tasting water for free. However, that will soon be taken away and you, "our valued passenger", will be on your own.
When I think about it, it is not a terrible idea per se, this charging for everything separately. If I don't like airline "food", why include it in the ticket price? Same with hotels: I don't watch TV, so I actually would be grateful if they took it out of my bill. What I don't like is the sneaky, arrogant way they are doing it. If you fly only a few time a year, like I do, you're going to be shocked by increasing cost and deteriorating service. It's like seeing a patient with incurable, slow-growth cancer every couple of weeks - each time you are shocked by how much he changed.
I know, the times when people dressed up before a flight, when the smiling stewardess brought you food and goodies, and real silverware, are not coming back. But how about bringing back some dignity and choice? If they don't want to offer free food, maybe they can sell decent meals instead of these horrible packages of junk? Let me buy a salad, but don't price it at $25 a bowl, please.
What about leg room? I obviously can't aford (or I am not stupid enough) to pay the horrendous prices for 1st class tickets, but I would probably pay reasonable amount for a little bit more space, so that I don't feel like a sardine in a can for 4 or 8 hours. How is this possible that in a country as entrepreneurial and competitive as ours, nobody has yet come up with an idea to beat the airlines at customers service? It's gotten so bad, that I would not really take a lot. Not even real silverware.
Airlines, on the other hand... My very recent trip was a reminder of why I started to hate flying. From an exciting and somewhat exhilarating experience, flying has transmogrified into this experiment in how much humiliation and bad service can customers endure. For starters, I was shocked to discover that the airline I fly the most is now charging $15 per checked-in bag! I was not warned about that (my last flight had been in June) when I purchased the tickets online. Had I known, I would have packed smaller toiletries and avoided the 5 oz rule. At the airport I was facing the choice between throwing out my toothpaste, deodorant, and a couple other things, or paying the $15. I chose the latter, although mad as hell.
I don't even want to mention this humiliating circus of taking off your shoes, pulling out your laptop, putting all your toiletries into a quart-size ziploc bag, etc. You can't really blame it on the airlines - it was a bunch of mass-murdering fanatics plus an overreacting government, whom we got to thank for this. However, was I really naive to think that maybe these 15 bucks, plus the fact that more people would now try to squeeze their luggage as carry-on, would result in shorter waiting at the carousel? Yes, I was very naive. So, the airlines decided to start taking more of our money, without giving us more in return?Interesting.
There is also this not-so-new idea of no longer serving food on flights, but instead, selling boxes of junk food. At first they were still giving away these tiny bags of pretzels, but that apparently proved too expensive, so no pretzels or peanuts for you, unless you pay $5. Next step - and I'm sure it is coming - charging a buck or two for the sodas. This is going to be a tad problematic, because we've been told that it is crucial to drink enough liquids during long flights, so initially they will get away with this by offering bad tasting water for free. However, that will soon be taken away and you, "our valued passenger", will be on your own.
When I think about it, it is not a terrible idea per se, this charging for everything separately. If I don't like airline "food", why include it in the ticket price? Same with hotels: I don't watch TV, so I actually would be grateful if they took it out of my bill. What I don't like is the sneaky, arrogant way they are doing it. If you fly only a few time a year, like I do, you're going to be shocked by increasing cost and deteriorating service. It's like seeing a patient with incurable, slow-growth cancer every couple of weeks - each time you are shocked by how much he changed.
I know, the times when people dressed up before a flight, when the smiling stewardess brought you food and goodies, and real silverware, are not coming back. But how about bringing back some dignity and choice? If they don't want to offer free food, maybe they can sell decent meals instead of these horrible packages of junk? Let me buy a salad, but don't price it at $25 a bowl, please.
What about leg room? I obviously can't aford (or I am not stupid enough) to pay the horrendous prices for 1st class tickets, but I would probably pay reasonable amount for a little bit more space, so that I don't feel like a sardine in a can for 4 or 8 hours. How is this possible that in a country as entrepreneurial and competitive as ours, nobody has yet come up with an idea to beat the airlines at customers service? It's gotten so bad, that I would not really take a lot. Not even real silverware.
Tipping point
I'm out of town, staying in a hotel, eating out, and so once again I'm confronting the issue of tips. There is something about this convoluted scheme of handing out "gratuities" to some people that irks me. Now, I'm not a bad tipper. I usually give more that 15% in restaurants, and leave 2-3 per day for cleaning my hotel room. I'm kind of used to it, so it doesn't irritate me very much, although it's the whole idea I'm really against. First of all: why do we tip some people, and not others? Is it because they provide "direct service" to us, like the waiter who interrupts my meal three times asking cheerfully, "How's everything?", and refilling my Diet Coke, event though I never asked for it and still have three quarters of it left? Well, how about that kid in the store, who bags groceries and wishes everyone a good day? As far as I know, nobody's giving him tips...
Is it becuase they have such lousy wages that we have to give them tips, so that they can make ends meet? There is some thruth to it, of course. I worked as a waiter myself, and the salary I drew was about half the minimum wage. The tips more than made up for it. But heck, if we did not tip the waiters, the restaurant owners would have to pay them better wages, not? I know that many waiters would not like it, becuase some are taking home pretty good wages in those tips, most of those tax-free.
Again, what about other people who are gettig shitty wages, like security guards or supermarket cashiers? Why are the waiters, taxi drivers, and hotel maids more deserving of our generocity? Or is this becuase in our egalitarian society we now consider the act of serving us, taking our hair out of the shower drains, making our beds, wiping our tables, bringing our food, somewhat demeaning? And the tip is supposed to take the edge off our guilt somewhat? But aren't there other, even more "demeaning" jobs that are not to receive gratuities?  Say, the lady at the cleaner's, who takes our sweaty, smelly shirts to wash and iron them?
I can't see good logic behind it, and so it irritates me, like one more annoying social convention without merit. I frankly try to avoid places and situations where I might be expected to tip. For eating out, I prefer the self-serve places, where you order and pay at the counter. Some of them are actually nicer than many restaurants, like the Wildflower Bread Company I found in Sedona, AZ. However, and this pisses me off to no end, in many of thes places you can spot jars with a label "Tips" at the counter. (Some try to look lighthearted with their "Feeling tipsy?" labels, and those are especially annoying. What, you put a shot of whiskey in my coffee??) This is really no different than panhandling, except that it happens indoors. What am I supposed to tip for? I will stand in the damn line, will pay for the coffee myself, will take it to my table, will put sugar and cream in it, will put the cup in the wastebasked when finished... Hell, maybe I should get a tip for all this serving I'll do??
I don't mind paying for things, even giving money away for charitable causes, but this tipping charade I'd much rather do without.
Is it becuase they have such lousy wages that we have to give them tips, so that they can make ends meet? There is some thruth to it, of course. I worked as a waiter myself, and the salary I drew was about half the minimum wage. The tips more than made up for it. But heck, if we did not tip the waiters, the restaurant owners would have to pay them better wages, not? I know that many waiters would not like it, becuase some are taking home pretty good wages in those tips, most of those tax-free.
Again, what about other people who are gettig shitty wages, like security guards or supermarket cashiers? Why are the waiters, taxi drivers, and hotel maids more deserving of our generocity? Or is this becuase in our egalitarian society we now consider the act of serving us, taking our hair out of the shower drains, making our beds, wiping our tables, bringing our food, somewhat demeaning? And the tip is supposed to take the edge off our guilt somewhat? But aren't there other, even more "demeaning" jobs that are not to receive gratuities?  Say, the lady at the cleaner's, who takes our sweaty, smelly shirts to wash and iron them?
I can't see good logic behind it, and so it irritates me, like one more annoying social convention without merit. I frankly try to avoid places and situations where I might be expected to tip. For eating out, I prefer the self-serve places, where you order and pay at the counter. Some of them are actually nicer than many restaurants, like the Wildflower Bread Company I found in Sedona, AZ. However, and this pisses me off to no end, in many of thes places you can spot jars with a label "Tips" at the counter. (Some try to look lighthearted with their "Feeling tipsy?" labels, and those are especially annoying. What, you put a shot of whiskey in my coffee??) This is really no different than panhandling, except that it happens indoors. What am I supposed to tip for? I will stand in the damn line, will pay for the coffee myself, will take it to my table, will put sugar and cream in it, will put the cup in the wastebasked when finished... Hell, maybe I should get a tip for all this serving I'll do??
I don't mind paying for things, even giving money away for charitable causes, but this tipping charade I'd much rather do without.