Saturday, December 31, 2011

Capitalism and Civics

The tenor of discourse in American conversation1 has run so far into the anti-capitalist, anti-free market vein that we seem to have reached a kind of rhetorical dead end. People in the private sector are now generally viewed as some kind of primitive, unteachable, gibbering ape—with apology to all living apes—who cannot be trusted to know right from wrong, refrain from messing in the house, or even recognize their own best interest. If capitalists were driving down a mountain road, they would be laughing maniacally and steering for the cliffs. They are thought to be people really too ridiculous to be believed.

Now, I am the old-fashioned sort who believes that any group is made up of individuals. While groups as a whole may advocate and pursue mad, impulsive, categorically imperative courses,2 individuals tend to take actions that seem reasonable and justified in terms of their own worldview. That is, I will credit people with the ability to think, reflect, change their minds, and act accordingly.

So, in this context of individual enlightenment, what is a capitalist? As the concept has developed over time, he or she is anyone with liquid resources—that is, wealth not locked up in a house and land, jewelry, or some class of transportation hardware—available to invest. The time value of money3 suggests that leaving dollars under the mattress, where inflation can gobble them up, is pretty stupid. And putting them in a bank savings account, where they earn about 0.02 percent per year under current Federal Reserve policies, is foolish. Of course, the mattress and the savings account are the most risk-free, thought-free, and care-free ways to treat money. Any other use requires more risk, thought, and personal responsibility. And generally, the more risk and thought required, the greater the return that use of the money will command.4

A capitalist invests his or her spare money so as to get the greatest growth, or return, consistent with an acceptable level of risk. Of course, some people see huge returns to be made by guessing into which numbered pocket on a spinning wheel a little ball will bounce, or which horse out of eight or nine can run the fastest, or what string of numbers will come up together in a random drawing. For most of us, however, the risk of losing the principal altogether in these ventures is too great. We prefer a lower level of risk and a more modest return.

Capitalists buy stocks in companies that they think will do well, grow, and tend to increase in value.5 Or they buy the bonds of companies that have a good reputation for honoring their debts and will pay back the principal with interest. In this sense, the mass of employed Americans who participate in 401(k) savings plans and individual retirement accounts (IRAs) are capitalists. They look ahead ten, twenty, or forty years to a time when they will not be able or want to work, and they expect their money to grow on the way to meeting them there. Let’s call these passive capitalists, because they are making investment decisions that will ride the coattails of those who manage the companies in which they invest.

Active capitalists, then, are people who take this money that’s borrowed through bonds or raised through stock sales—plus, usually, some of their own money—and invest it actively in a business. They use the money to buy productive and logistical capabilities such as manufacturing equipment and trucks. They hire workers to use the machinery and drive the trucks. They rent or purchase property for their factories and warehouses. And they hire or contract for support in areas like accounting, advertising, or human resources. If it’s a new business, the stock and bonds usually go to paying the costs of starting up. If established, they may pay for an expansion. Eventually, however, the business has to pay its own way plus a bit more—through profits and sales growth—to reward investors in terms of stock growth and dividends or bond yields and interest.

All of this is basic Microeconomics 101. What seems to have gone off the rails in recent discourse is the expectation that active and passive capitalists will act rationally. The presumption seems to be that, without intense government supervision, goal-setting, and micromanagement, capitalism will explode, poison the earth, ravage people, and destroy society. The sum of all the good things that government management is supposed to achieve through regulation and policy setting is usually described as “sustainability.” By that is meant encouraging or forcing capitalists to adopt social, environmental, and governmental goals that stand above and beyond the basics of earning a profit by providing goods and services that people want at a price they will pay—that is, by satisfying a demand in the marketplace.

Now, granted, the focus of business managers has shrunk over the past couple of decades. I can recall from the early years of my career when corporations rewarded employee loyalty and spent extra time cultivating community values. Companies used to see their role as balancing the natural tensions among four groups: customers, shareholders, employees, and community. Then, in the 1980s, a hardball style of stock analysis came into vogue and the words “shareholder value” became the cry. The term usually meant that a company worked to meet “the Street’s” expectations for stock price, earnings per share, and dividends each quarter. It made American managers less inclined to invest in growth and stability over the long haul. But any company that doesn’t keep one eye on the horizon will die in the long term anyway.6

It is my view that social goals, environmental goals, and government goals (except those represented by actual laws) are all secondary and pretty much unnecessary. If the intent of a business is to maximize its profits, then you do that by obeying the law (i.e., not paying fines or spending idle time in jail) and operating efficiently (i.e., not losing money to waste). Does it pay to treat your workers fairly? Of course. That way, you attract the best talent and generally avoid losses due to theft, obstruction, negligent damage, and downtime. Does it pay to be a good corporate citizen? Of course. If you do bad and hurtful things—such as ignoring social norms relating to racial equality, ethical and humane treatment, or respect for people and the environment—then someone will observe and report it. Then you'll lose money to competitors with a better name, because you’ll have to lower your prices to attract a less thoughtful class of customer.

As a case in point of operating efficiently, I once worked at a large oil refinery and commented to my supervisor that it didn't smell like the refineries I remembered from afar in the New Jersey of my youth. He said that this was by design. In fact, if I did smell anything, the company would pay me to report it. This wasn't simply a case of conscientious environmentalism. The plant’s chemical technology was tuned to such a degree that any odor meant a leak—“and that means we're losing product,” he said. The management’s self-interest made it a more vigilant environmental watchdog than any EPA investigator dropping in for the annual inspection.

Similarly, modern approaches to systems engineering, operating methods, data management, and people management mean that the modern company will run efficiently and effectively by choice, or suffer negative consequences. The focus of public attention in a transparent and open information environment means that a company will operate ethically by choice, or suffer the consequences of lost sales and lawsuits.

Is this approach—through self-interest—better than trying to write a law that covers all cases? Not always, because people are not uniformly smart or thoughtful, and the outcome is not certain. But with a law, the outcome is not certain, either. Laws must always be enforced through continual observation, routine apprehension, and credible penalties operating as deterrents.

If you doubt this, consider the California highways. With a speed limit of 65 mph, the average speed is usually above 70 and often closer to 80. Drivers go with the flow, and the California Highway Patrol usually cruises right along with them. The officers are more concerned with reckless and aggressive driving than trying to control the actual speed of the flow. This may be supremely sensible, but it’s not strict enforcement of the speed laws.

But making it in the capitalist’s best interest to undertake a course of action is more likely to have results, because capitalists are very good at looking out for their own interests. They are also very good at finding loopholes and workarounds when a law is not in their interest. And any enforcement strategy must obey another economic principle: the law of diminishing returns.

Simply put, pushing too hard on any one factor in a process reaches a point where more emphasis on that factor won’t achieve much. If you try to improve adherence to or compliance with a rule by enforcement alone, without addressing other incentives, you reach a point where a hundred patrol cars—in the example above—are no more effective than ten in reducing traffic speed. That may be why the California Department of Transportation has resorted to speed control by other, passive, physical means—like narrowing lanes, limiting lines of sight, and designing “weaves” between adjacent on and off ramps. When people have to slow down or risk breaking their necks, they usually comply.

Regulations that work through natural processes and the self-interest of the operator simply have a better chance of achieving their goals.

1. By “conversation,” I’m referring to what I hear from the mainstream media, bandied about in the blogosphere, and readily subscribed to by friends in the social media.

2. Think of the sort of fixation on a single principle that turns a zero-tolerance policy toward drugs or weapons into a scavenger hung for baby aspirin and butter knives in school backpacks, or an abortion rights advocate into an enthusiast for infanticide at the moment of birth.

3. Basic economics: everything is moving; everything is changing. Anything that is not growing is dying. The economy is like an ecology, always growing in one area by dying somewhere else. In such a dynamic environment, any asset that isn’t finding a productive use and growing is going to shrink and die. Money over time should grow in value. Otherwise, why did God give you eyes to see and a brain to think?

4. See Risk Free from December 4, 2011.

5. Speculators, day traders, and others who take a temporary position in a stock, believing it will go up or down in the short term, are less like capitalists and more like gamblers.

6. Managers who intentionally ride their companies to the block and chop them up for the current value of the parts are not really managers. They are corporate undertakers, and the business is already in a terminal state.

Saturday, December 24, 2011

Formula for a Golden Age

Since we seem to be so far from having one right now, I think this is the time to pause and consider what makes a Golden Age in any civilization. Is it something you always have to look back on and discover in hindsight? Is it something that’s more satisfying and fun to remember than to experience? Is it possible to engineer the conditions for a Golden Age? And is it possible, however inconceivable, that we are in the midst of one right now?

Certainly, it is easier to identify a Golden Age in the rearview mirror. Think of the times that have been so identified: the Edwardian period, between 1900 and the Great War; the Elizabethan period, between 1558 and 1603; the Augustan period, between 27 BC and 14 AD; and Periclean Athens from roughly 480 to 404 BC.1 These times have a sentimental glow about them. They make us think of the golden light of late summer afternoons, bountiful harvests, full-bodied vintages, exuberant paintings, epic poetry, and a world at peace—perhaps not least because of the chaos and turmoil that came after them.

Those are image fragments, of course, but they still ring true. For example, the arts were on display in all such periods. The Athenians enjoyed the plays of Sophocles and Aeschylus, and the wit of Socrates. The Augustans were given Virgil’s epic Aeneid on the founding of Rome. The Elizabethans saw a flowering of the theater and the genius of Marlowe and Shakespeare. The Edwardians inherited the Impressionist painters and the Romantic poets and composers from preceding centuries and made the most of them. These were all arts within the reach of the average literate person and anyone with the time to attend the theater or gallery—say, the upper middle classes. In that sense, the arts of these times extended beyond the wealthy patron and his immediate circle, and could be enjoyed by a wider slice of society.

In these periods, like most times, it was good to belong to the upper tiers of society. The wealthy could eat well, drink well, and play well. What marked these Golden Ages was a surface stability and lack of active war, which is a devourer of the leaders of society as well as the other ranks. Edward—whether by intention or through lack of attention—managed to avoid the wars of Queen Victoria’s reign, such as the Crimea and South Africa. He could jolly along his nephew the Kaiser and celebrate English and German rivalry with yachting displays at summer regattas. Elizabeth ended a religious revolt between Catholic and Protestant factions and extended her father’s and grandfather’s buffer against the dynastic politics of the Wars of the Roses. Augustus ended a hundred years of civil strife between contending leaders and their pledged legions, and initiated the Pax Romana. The Athenians existed in a sliver of peace between the Persian Wars and the Peloponnesian Wars.

But under the surface? Edwardian England was the center of a technological arms race in Europe that led to the first of two world wars. Elizabeth was in constant struggles with her ministers over the succession and with France and Spain over the future of Europe, and avoided the latter’s invasion only through a fortunate combination of wind and storm. Augustus maintained the peace only by clamping down an army-backed dictatorship as the last man standing from the civil wars, and he also struggled with the succession. The Athenians were in constant conflict with their neighbors and allies. For anyone paying attention, none of these were idyllic, restful periods.

Each of these periods grew wealthy with trade. The Edwardians prospered from the empire Victoria consolidated in the Middle East and India. The Elizabethans stood at the dawn of New World exploitation and picked the first fruits of Spain through piracy. Augustus welded the corn harvest of Egypt and the riches of the eastern Mediterranean onto the Roman sphere. Athens drew masses of tribute from her Delian League in the Aegean and from colonies overseas.

Although it’s never been a good time to be poor, these periods had something for the lower classes as well. The Edwardian period saw the beginnings of a progressive concern for those in need. It was also, in the United States, a period of massive immigration and new beginnings. The wealth of Elizabeth’s reign was beginning to spill over to benefit the merchant classes.2 Augustus settled legionary veterans on newly conquered lands, rebuilt the City of Rome and ensured its food supply, and reorganized the tax structure. Fifth-century Athens regularly heard the political voice of the average person—so long as he was born in Athens and not a slave or a woman.

So, what are the ingredients of a Golden Age? One part a period of fragile stability, usually with war and political upheaval as bookends. One part growth in trade and public prosperity. One part a flowering of the arts. One part opportunity for the common man. These conditions generate a spirit of public confidence. People are willing to speak their minds. People look ahead to better things.

But a Golden Age is not just about having a full belly and personal security. That way lies relaxation and a long nap. The spirit of confidence is tinged with just enough insecurity and doubt that people are inspired to scramble. And there must be a promise of improvement, so they know how to direct their steps. In this sense, living through a Golden Age might provoke more anxiety and require more hard work than people are likely to remember later.

Can a ruler or the leaders of society engineer these conditions? They can try. Political stability is well within a ruler’s or society’s grasp. Ironically, this usually requires a projection of strength rather than the cautious desire to avoid conflict: Enemies are more likely to avoid a snarling dog than a cowering one. Elizabeth, Augustus, and Pericles were all rulers who projected confidence and strength; Edward seems to have inherited the reputation from his mother. Trade and opportunity are usually within the control of government—if, that is, its ministers will release their grip a bit and trust in the efforts of entrepreneurs. The arts can always be publicly encouraged.3 Harder yet is to enlist the common people and capture their imagination: The average person is incredibly sensitive to what’s blowing on the wind.4

I would maintain that, despite all appearances, we are now living in a Golden Age, one that started with the end of World War II and persists up to the present. Consider these conditions:

War and political unrest: Yes, we have endured a cold war between various ideologies, first between free-market capitalism in the West and totalitarian communism in the East, then between tolerance of religious belief in the West and consolidation of a single belief in the Middle East. And yes, we have experienced numerous small wars at the edges of these greater conflicts: Korea, Vietnam, the Balkans, Iraq, Afghanistan. But we have not experienced massive invasion into the heartland of either set of beliefs and a final resolution by conquest. Communism collapsed peacefully under its own inadequacies; religious consolidation will eventually do likewise under the onslaught of trade and education. The wars we have experienced are on the scale of the border conflicts of Imperial Rome and the skirmishes of Elizabethan England.

Trade and prosperity: The Second World War left the United States as the last man standing, like Augustus after the civil wars. It also offered the former combatants, Germany and Japan, the chance to rebuild their destroyed, 1930s-era industrial bases with modern, postwar technology.5 The U.S. encouraged this and made them trading partners. The fall of communism in Russia and eastern Europe, and its commutation to a form of state capitalism in China, opened up global markets. Advances in computer technology and automation improved productivity and made possible a flood of inexpensive goods and efficiently delivered services. The Green Revolution expanded the global food supply. Countries like China and India ceased being economic failures and became global exporters.

Flowering of the arts: Technology—especially computers and the internet—have opened a floodgate of the arts. Books, music, movies, and the ideas they represent are readily at hand to anyone. More than that, the barriers to producing art have never been lower, because the same technology also allows anyone with a computer, a video camera, a microphone, and internet access to become a writer, musician, or moviemaker. While we may not yet have found the age’s Sophocles, Virgil, or Shakespeare, we still are experiencing a period of tremendous creativity.

Welfare of the common man: In the developed countries of the West, the life experience of the average person has never been better. Yes, there are still poor people,6 and yes, we are still in a recession. But most people expect and live a middle-class life. In the developing countries, there is more opportunity for growth and achievement. In the long view, science and technology have enabled levels of education, communication, nutrition, travel, leisure, entertainment, and personal satisfaction once reserved for kings and courtiers.

That looks like a Golden Age to me. Yes, we still have instability and anxiety. Yes, there are reasons for thinking the road ahead might be going over a cliff. But then, the Edwardians had some inkling of the Great War ahead, and the Athenians were already sliding into the war with Sparta by the time Pericles died. But the lights still shine and the music still plays.

The question is, what will people in a hundred, a thousand years, or more be looking back on? The last six decades as a time of relative peace and plenty? Or the quiet before the storm?

1. It’s interesting to note that these periods are all named for monarchs. But then, most of history has been identified with the person nominally in charge, from native American war chiefs to U.S. presidents.

2. Shakespeare’s grandfather was a tenant farmer. His father started a retail trade in wool and corn, took up leather working, and became a glover. By the third generation the family was fully employed in the theater arts.

3. Promotion of the arts may be a necessary but not a sufficient cause of a Golden Age. Certainly, the Works Progress Administration in the 1930s promoted and paid for the arts vigorously, and that wasn’t anyone’s idea of a Golden Age.

4. As one of the smartest people I know—a former journalist—once said, “People ain’t stupid.” That might be the founding stone of democracy. It links to Lincoln’s quip about fooling some of the people all of the time and all of the people some of the time. John Brunner in Shockwave Rider caught the flavor of this with his projection of the Delphi poll: “While nobody knows what’s going on around here, everybody knows what’s going on around here.” The Germans call it the spirit of the times, Zeitgeist: what everyone knows and recognizes.

5. To cite just one example: in the 1950s, new technologies in steelmaking became readily available, from the Linz-Donawitz (LD) oxygen process to electric-arc furnaces to continuous casting. Germany and Japan rebuilt with these technologies and leapt ahead of U.S. steelmakers, who were still working with open hearth furnaces and rolling mills built in the 1920s and ’30s.

6. Consider that people in America who live below the “poverty line” actually live better than most of India’s or China’s middle classes. We simply cannot conceive of letting our poor live at the level of their poor.

Sunday, December 18, 2011

Trust No One

We’ve recently had revelation 2.0, the second-anniversary outpouring, in the undying story that is “Climategate.” Whether by theft, internal leak, or public request under the Freedom of Information Act, we are getting a look inside the ruminations and not-for-public-consumption exchanges of opinion among the experts in the new field of climate science. Not having read more than the snippets that appear embedded in internet stories, I can’t say that the revelations are damning proof of anything. The consensus about human-made, or anthropogenic, global warming (AGW) may be God’s own truth, or a cynical hoax, or merely misplaced enthusiasm about some worrisome trends.1 But what the revelations do seem to show is disappointing.

Before I get into that disappointment, some caveats. First, I am thrilled by the internet and the access and transparency it makes available to the average person. The news of the world is no longer the private product of three broadcast networks, two wire services, and half a dozen major metropolitan newspapers. Now everyone can blog and respond online both to the mainstream media’s postings and to other bloggers, expressing personal opinions and beliefs that may or may not always be firmly fixed in the provable facts. The sunshine of the open exchange of ideas and beliefs is really the best disinfectant for private obsessions, hatreds, and manias.

Second, I am depressed by the internet and the access and transparency it makes possible under the rubric that “information wants to be free.”2 Everyone needs to have some secrets: the salary figure you’ll really accept in a job interview; your rock-bottom price for that car; what you actually do in the bathroom and the bedroom. Governments and other organizations also need secrets: what wild-guess alternatives they might discuss before deciding on the actions they officially take; how much risk they’re prepared to tolerate in pursuing those courses of action; and when the diplomacy will stop and the war begin. Some secrets and illusions are simply necessary to a functioning society. Total exposure to media and internet attention 24/7 is now burning up every public figure who’s even brushed by the spotlight.3 Public certainty about facts and findings, discoveries and statistics, is disappearing into a raging sea of personal beliefs, manias, and unpublished agendas.

Third, I’ve worked most of my adult life with engineers and scientists as a technical writer and corporate communicator. I have tremendous respect for these people. They are admirable because, in a world of opinion and fantasy, they treat data seriously and scrupulously. They have to, because if an inconvenient fact intrudes on their formula for a new medicine or biological assay, their design for a dam or nuclear reactor, then really bad things can happen, and their signature is on the reports and drawings. They may have opinions about statistical outliers and obvious errors—why some data can be ignored safely because, for example, the instrument or reporting conditions were known to be suspect—but such doubts are always revealed, addressed, footnoted, and explained for all to see and understand.

In the matter of anthropogenic global warming, that level of publicly available scrutiny does not—according to the email fragments I’ve seen—appear to have taken place in reaching the consensus among climate scientists. In order to make clear the picture of human carbon burning as the main cause of rapidly rising planetary temperatures, these scientists seem to have been cavalier about some inconvenient facts and findings. The scientists involved mention these facts privately but, in order to keep the picture clear and simple, they appear to agree among themselves that they will not treat such facts as meaningful.

In this matter, they step beyond the bounds of science and into the realm of science fiction.

The scientist’s job is to make observations, draw preliminary conclusions, make hypotheses about these observations, and devise experiments that will test and prove them—which means trying to falsify them, if possible. The final step is to open the whole question to other scientists, who are then invited to examine the original data, reproduce the experimental work, think of and try other tests, and finally either support or reject the hypothesis.

Only in science fiction does a scientist become the popular hero leaping into the breach. Only in stories does he or she become a partisan for the implications behind his or her test results and rush to a microphone in order to save humanity from disaster.4 In fact, to the extent that a scientist becomes a partisan for any particular point of view, his or her credibility declines. The scientist as advocate is distrusted, whether he or she works for a panel that reports to a drug company, a tobacco company, or an agency of the United Nations.

Consider Charles Darwin. If any scientist had ever fashioned a dagger to plunge into the heart of divine creation, he did. Darwin presented a convincing argument for the natural, cause-and-effect changes in environment and opportunity that transform one species into another. This was implicitly a criticism of the idea that each species was created in its perfection by an all-knowing deity. Yet Darwin merely presented his ideas and let them speak for themselves. He did not move on to attack the church or the country’s education system. In fact, he remained a churchman and, apparently, a believer throughout his life. His business was with the science, the knowing, not with changing his society’s attitude toward it.

One would imagine that, in describing a possible global catastrophe, a person of honest and humane intent would naturally include a discussion of variability in the data—what are called “error bars” on a graph—and any possible alternative conclusions to be drawn from the data. And if there is a recommended course of action that is difficult or demanding, then the importance of open and free discussion of the variables rises in direct relation to the difficulty of the task. We all want to be sure we’re right before causing major disruptions.

However, as I understand it, the scientists who report so absolutely on anthropogenic global warming have:

1. Chosen to track the concentration of one gas, carbon dioxide, out of a complex atmospheric mix, including water vapor and methane among other greenhouse gases. The choice was apparently made because CO2 is the one gas whose concentration has been widely affected by human activity in the last 100 years and it’s also the one that scientists can actually show to be increasing.

2. Tracked regularly and reliably recorded temperature fluctuations from only about the last 100 to 150 years. The rest of the temperature data points are estimates, interpreted from other data series like tree ring patterns, which are themselves susceptible to other influences.

3. Fed these concentrations and temperatures into various models of the planet’s climate. Weather and climate are complicated phenomena, with many variables in play. So the construction of these models, including the assumptions they make and the dependencies they describe, is critical to shaping the results.

4. Come up with a prediction, within a span of degrees and with narrow error bars, of conditions that will exist 100 years into the future.

5. On the basis of this temperature prediction, prophesied a number of possible related effects on conditions like ocean level, rainfall, storm severity, agriculture, and other phenomena of interest to humans.5

Making a prediction based on a model is what I would call a conjecture. A conjecture about the Dow Jones Industrial Average for a century from now, based on similar data sets and model types, is not something I’d bet on. A prediction is not a fact, like the tested strength of a steel bar or the measured activity of an enzyme.

The corrective course that these scientists are advocating will be neither easy nor undemanding. They suggest that carbon burning in the developed western world has already caused irreparable damage to the Earth’s climate. They and the politicians, economists, government administrators, and citizens who accept their findings are demanding immediate and rapid changes in our energy infrastructure. They want to replace coal- and oil-based electric generation (currently about half of our installed capacity) with wind and solar (currently just a few percent) over the span of a decade or so—much faster than any economic replacement program.6 They also want to increase the prices of motor fuel and electricity so that the average customer will use less. These actions will result in misallocation, deprivation, rationing, lower economic activity, and declining lifestyles.

It won’t be a global catastrophe to ask Americans, Europeans, and upscale Chinese and Indians to accept these hardships. Certainly, a lot of people in less developed parts of the world already live that way. But the sudden collapse of economic activity will be a dislocation approaching within one or two orders of magnitude the projected dislocations that might occur, a century from now, because of a warmer climate.

Now, if all this advocacy is based on scrupulous attention to and treatment of the data—collected, evaluated, annotated, open to discussion and dispute—and based on the operation of models whose variables, source code, dependencies, and assumptions are open to review, criticism, and reproduction, then it would still be advocacy, and so suspect.

But if the advocacy is based on a belief or predilection that comes before the data and the models—that is, if the climate scientists are no better than tobacco company scientists—then who can you trust?

We have a long-standing tradition in our democracy that anyone has the right to scream, wave his arms, and call for massive and immediate societal changes right now! in order to correct some perceived injustice or avoid some prophesied catastrophe, based purely on personal opinion and belief.7 But we also have a tradition of letting the average citizen look critically at the screamers and arm-wavers, decide whether or not their arguments are persuasive, and vote accordingly.

If the climate science consensus is based on sincerely held belief and a willingness to trim the data and nudge the model in the direction of that belief, then the public is in danger of accepting a false proposition. The proposition is that the conclusions are the result of good, honest, respect-the-data science—such as has provided us with new views of and advances in biology and medicine, physics and electronics, chemistry and materials over the past two centuries. But the honest intent may not be present in climate science and its predictions. Even if these scientists are pursuing the noblest of motives to avert the direst of catastrophes, the published emails hint at a basic dishonesty in their approach. And anyone who accepts the consensus because it has been couched in the language of science and attested to by scientists is in danger of accepting that false proposition.

Trust no one. If these physical scientists can disrespect the data to prove their point, then who can you trust? Not some politician or social scientist who has joined hands with the physical scientists because he or she shares their viewpoint. Not a government of such people elected by a population of voters who blindly accept whatever a scientist says and writes. And if we can’t trust the scientists on this, a scientific question, then how will we ever know? Anthropogenic global warming may be God’s honest truth, a cynical hoax, or misplaced enthusiasm about some worrisome trends. Who is to say?

Frankly, I’m more afraid of certain economic collapse brought on by massive infrastructure change attempted over the next nine years than I fear possible collapse due to predicted temperature and environmental changes over the next ninety. But then, I’m not a scientist.

1. My personal belief? It doesn’t much matter what humankind does. As a greenhouse gas, carbon dioxide is only one of several atmospheric components regulating heat re-radiation. And greenhouse gases are only one of several factors influencing climate. Solar output is a bigger factor, and we seem to be ending a recent sunspot maximum (where more sunspots yield higher energy output) and heading into some kind of sunspot minimum. Whether that minimum is short-lived or prolonged, no one can predict. But even if we could prove—unequivocally, undeniably, without the slightest doubt—that every shovelful of coal burned serves to dig the grave of an innocent human being, it still wouldn’t change a thing. No society—not ours, nor the Europeans, Chinese, nor Indians—will seriously handicap their economy to prevent a temperature rise of a few degrees over the next century, no matter what the predicted effects. Individuals may be smart and have free will, but societies are like a wave in the ocean: a million water molecules pushing and pulling each other along, all going somewhere—and eventually getting there.

2. I also firmly believe—although it’s off topic for the discussion here—that the information an individual or group has worked to produce must be adequately compensated. Yes, the novelist has used the language’s public-domain words and the society’s publicly discussed themes to create his or her new and exciting story that others want to read, but the novelist’s effort in arranging those words and displaying those themes is a product that should no more be stolen and handed around than the products of Ford and GM should be stolen off the streets and taken for a joyride. The same goes for the work that a scholar does in uncovering old facts and presenting them in support of new conclusions; or a musician does in putting together common notes and song lyrics to create new music; or a photographer does in framing a public sight and capturing it in values of light exposure, contrasts, and shadows to express a new vision. Intellectual property is not theft, and it shouldn’t be forced into surrendering its labors as a gift.

3. For example, as a young man I enjoyed the inspiration of John F. Kennedy’s speeches without having to know he was, apparently, an oversexed, promiscuous cad who routinely cheated on his beautiful and articulate wife.

4. And yes, my characters have done that—most notably the geologist Ariel Ceram in The Doomsday Effect. But that was science fiction.

5. And when they do change—when sea level rises against the shore and the band of arable land moves north and upslope—what will happen to people? They’ll adapt. Will there be dislocations? Disruptions? Hardship? Yes, certainly. But consider that much of the investment we’ve made in sea-level infrastructure and current farming methods did not exist a century ago. Or it existed in more primitive forms, like wooden docks or horses and plows, all of which have since been rebuilt to handle changes in technology like containerization and factory farming. If sea level were going to rise twenty feet in ten months, that would be a screaming catastrophe. But if it rises that much over 100 years, then sea level simply becomes another factor in your investment decision and lifestyle choices: move or stay, put down roots along the shoreline or go live inland? And believe that the climate and sea level will change, one way or another, in the next century. Go ask the Ephesians.

6. Personally, I think coal, oil, and natural gas are all too valuable as chemical feedstocks to be burned for electricity or motor fuel. My preferred energy solution is to take solar power from orbit, where the number of available kilowatts per square meter is about ten times the number that reach the ground. For a possible way to do this—and kick start our entire use of space in the process—see my novel Sunflowers.

7. In fact, we’re seeing some of that behavior in the Occupy Wall Street crowd.

Sunday, December 11, 2011

The Great Secret of Time

Most of us can be focused, creative, and brilliant for an hour or for a day. We can conceive of a burst of energy that would let us, if we had the talent, write and finish a short story or a song lyric, paint a small canvas, or shape a bust in clay. But faced with something much larger—a novel, an opera, a mural, or a Mount Rushmore—we quail. The task is too big, the effort too great. We can’t even get started.

The secret is time. In order to do great works, you have to parcel it and marshal it. That’s easy enough to say, but for most of us nearly impossible. The effort to control our time takes too much discipline and patience. But there are tricks to help anyone attain great things.

1. Do a Little Every Day

If the task is too much to accomplish at one sitting, then the only thing to do is break it up into bite-sized—or sit-sized—chunks. This is how any artist works, by doing a little bit every day. Some artists can do a lot in a day, but that’s not the way to start out. Until you are sure of your energy level, it would be a disaster to commit yourself to an overly ambitious schedule. Commit, instead, to achieve something, then adjust the content and the effort until you find a sustainable level.

Of course, this approach applies to more than creative efforts and works of art. Every paying job is based on doing so much each day. No one would try to process all the orders coming into a company, ship all the products made in a factory, or answer all the customer queries by one superhuman effort for one hour a day, or one day a week or a month. You gauge the flow and keep on top of it.

The same applies to the kind of effort and practice it takes to master a musical instrument or any other skill. Despite the ideal of accelerated training shown in The Matrix, you can’t learn Kung Fu in one fifteen-second blast of neural stimulation and visual imagery. You must practice every day, learn and absorb and perfect new techniques at a regular pace, layer new skills and experiences on top of ones already mastered.1

2. Have a Plan

It may be possible to write a novel by sitting down at the keyboard every day and writing just whatever comes to mind. To some extent, this is what any novelist actually does, but if the mind is a blank and subject to curious vagaries when you sit down, the novel won’t be much good. It will wander all over the landscape, turn back on itself, and generally bore the reader.

The novelist, the painter, or the team carving the Crazy Horse Memorial in South Dakota all need a plan for the work at hand. The plan might be quite detailed—a run-through of the story, or canvas, or mountain in miniature. Or it might be more like a framework, a generalization of the structure, like the bamboo scaffolds with which Asian builders cocoon a skyscraper in progress.

The outline or framework may be completely finished before the writer or artist undertakes the actual product. Or it may come into being as work-ahead, executed just a few days or months before the actual writing or application of paint, groping toward a final image that’s still relatively plastic in the artist’s mind. Either approach can work.2

There are also traps in either approach. If the plan is too detailed and precious, the daily effort might follow it right out the window without seeing any inherent flaws in the structure. If the plan is too loose, the daily effort might become mired in creative detail. I think of the book outline as planning a road trip on a map, viewed from the 30,000-foot level. You know enough about where you’re going to leave town in the right direction and not wander in circles in the desert, but you don’t have such a hard pencil mark that you follow the state line and drive into a box canyon.

3. Have a Clear Vision

Separate from creating and following an outline, vision is a matter of knowing what your heart and intellect are doing. You can follow the book outline exactly but still wander in tone and be false to intent.

You need to be clear about whether your book or play or symphony is meant lightly or seriously. Some books invite the reader to laugh, make plays on words and inside jokes, and take the comic view of life; some compel the deeper emotions, ask for greater commitment from the reader’s attention, and intend to inspire or frighten. Some music is ebullient and grandiose, some somber and majestic. It’s important to know from the beginning what you are doing and stick with it. Books that start out as great emotional voyages and devolve into a fit of the giggles get thrown across the room with great force.

If you are feeling light and playful when you sit down to write, but the book at hand is a political thriller or a tragedy—or vice versa—then some days you will not be able to honor your commitment and push the word string forward. It’s important to know these times, consciously refrain from writing or painting, and avoid messing up good paper or canvas with work that will only have to be ripped out and done over. And if too many days end up that way, it may be a clue that the book and your heart are following divergent paths.

Of course, some writers and artists can school their emotions and do the necessary work under all conditions. They can turn from an evening of drink and merriment to write or paint the death of a beloved character. Or they can turn from personal tragedy to spin a tale of fun and laughter.3

4. Keep Your Eyes Below the Horizon

As you proceed to do your daily quota of words or paint or bars of music, it’s also important to focus downward and inward. You have to turn your gaze away from the arc of the story, the distant goal, the climax and denouement, the bright sunrise at the heart of the canvas—and write the scene you’re working on today, to paint the patch of shadow that is under your brush.

This may sound like conflicting advice—have a clear vision, but don’t look at it—but the principle is simple enough. If you are hiking on a crest line or climbing a rock face, you must occasionally look up to see where you are going, but you mostly look down at where to put your feet and what your next handhold should be.

The daily task is a particular piece of the work. It must share in the whole, but it still have its own internal logic, emotional context, rhythm, and purpose. The reader might be aware of the entire sweep of the book, but he or she is still reading this one patch of words, this one character’s experience, this one piece of the story at a time. A person listening to a symphony might remember what came before and anticipate what will come after, but he or she is only hearing the musical phrases being presented at this particular instant.

Only the painter, sculptor, or architect—a practitioner of the visual arts—can expect the viewer to take in the entire work as a single pattern, at a glance, as a gestalt. But even so the single glance is made up of disparate parts: light here and shadow there, an arch here and a cornice there. And each of these details has its own being and deserves individual respect and attention.

5. Harness Your Desires

Commitment to maintaining a daily schedule is one thing. Actually attaining it is often something else. What works for a week or a month may not last a year or a decade.

We all would like to be an accomplished musician, a writer with a stack of books behind us, or a painter with a collection of canvases. Thinking and dreaming about this level of accomplishment is one thing, desiring it enough to put down the television remote and go to the daily practice, or writing or painting session, is quite another. That requires a heartfelt desire, a sense of personal destiny, a life decision that lets you see your days and your purpose on this planet become focused on this choice and not others—often at the expense of others.

Fortunately, this is a decision most easily made when we’re young and full of energy and dreams. Then it’s easy to form habits of mind and body, of daily schedule and seriousness of purpose, that carry over into the hectic years of marriage and child-raising and endure through to the quiet years of maturity, attainment, and retirement. This is why so many music and arts programs are directed at the young, to capture their imaginations and their hearts.

6. Live an Orderly Life

The final requirement of meeting the daily commitment is to live an orderly and purposeful—and usually sober—life. To set aside an hour a day for painting or writing or musical practice requires that your days not be chaotic with other events.

This can be easier than it seems. Some people have jobs that require unexpected demands such as on-call periods and frequent travel. But the doctor or medical technician who is on call often has “down” periods of simple waiting. The traveler has empty hours in airports and hotel rooms. These can be filled with work at a keyboard if the passion is writing. Admittedly, it’s a bit harder to fill this time with work at an easel or practice on a musical instrument.

The great danger of making these spare hours work for you is the eventual interruption. To begin working on a chapter or scene while waiting for a flight can be dangerous. Any artistic endeavor is one of immersion, and your flight might be called when you are deep in the story. Then the choice is to break off your thought, or let the gate close and find a later flight.4

Notice that in all of this I’ve left out two elements that most people consider vital to creative effort: talent and inspiration.

Talent is, of course, a prerequisite. If your brain cannot generate a word string or the pitch-and-toss of dialogue on command, if your eye and hand cannot draw a fluid line with purpose, then it’s going to be difficult to write or paint. But usually these things can be learned; all it takes is practice and desire. And if you simply are not good at them, you won’t go far and will quickly look for something else to try. The daily task that is the secret of time simply won’t enter into the equation.

Inspiration is overrated. If you have prepared yourself with desire, a plan or outline for the story or painting in hand, clear vision of your purpose in tackling it, and the quiet mind that comes with an orderly life, then inspiration is a matter of sitting down and addressing the task. Inspiration comes from the work itself.5

It’s just a matter of putting down the remote and getting busy. And you know there’s nothing worth watching on television anyway, don’t you?

1. This applies not just to artistic endeavors and martial arts training. I know a man who used to quail at the thought of painting his house: doing all those rooms and hallways and moldings and doors in two or three days of backbreaking effort. Instead, he made painting a part of his weekend effort, for an hour or two on Saturday afternoons. He would commit himself to painting one wall of one room, or one side of a hallway, then quit. He probably spent more total time cleaning brushes than if he had tried to do the whole house in two days, but he got it done eventually and relatively painlessly. I also knew a couple who had an iron bedstead that needed to be chipped down to bare metal through several layers of old paint. Rather than try to do it all at once—with consequent hand cramps and blisters—they set the thing up in a back hallway and, every time they passed through, took two or three whacks with a scraper. It took them several months, but they got it clean. A little bit every day.

2. I’ve written books both ways. Ideally, I would like to have the outline complete down to the level of chapter and scene before I start, or shortly after I have the book idea set up with an encouraging first chapter or two. (In the old days, publishers might buy a novel on the basis of sample chapters and a finished outline—but no more. Now they want the entire book finished on spec.) I’ve also written books where I knew generally where the story had to go but worked up the outline in chunks, usually one or two sections ahead of what I call “production writing.”

3. Some people would say this is the sign of a defective character, of someone too emotionally facile or insincere to be trusted. Actually, it’s a matter of practice and discipline. The work lives apart from the artist.

4. One technique I’ve found useful when interrupted right at the critical point in a scene is to space down a couple of lines and do a quick sketch of what comes next: key words, key thoughts, key action steps. This takes perhaps thirty seconds and precedes saving the file and closing down the computer. Having that fragment to work from makes starting back up much easier.

5. Sometimes what looks like inspiration does raise its head. There are times when I am supposed to be working on a story, know more or less what should come next, but can’t make myself write. I can’t even look at the keyboard. Almost always, in this situation, the “what should come next” is wrong. I know at a subconscious level, which I cannot at first put into words, that something is missing or inverted or false. Then I need to stop and rework the outline. But otherwise, let me think of the opening sentence—the phrase, emotion, sensory image, or what have you that starts the scene—and my little word generator kicks in. And then we’re off to the races.

Sunday, December 4, 2011

Risk Free

Ain’t so. Humans have never found a way to live without risk. And our current economic system cannot provide a better than purely miserable return on your money without undertaking some risk. That’s not for want of trying, of course. And these days it seems that financial people, investors, and governments take on huge risks and blow off the possible consequences as if they were living on a permanent cloud. What has happened to sanity?

From my memory of things, as a long-time reader of business magazines and the Wall Street Journal, we started going off track back in the 1980s. Then the smartest, most persuasive of the financial people invented the “high-yield” or “non-investment-grade” or “speculative-grade” bond. This was a way—and still is, to some extent—for the largest, most solid of U.S. corporations to raise more money than would normally be possible in the financial markets.

Credit rating agencies like Standard & Poor’s, Moody’s, and Fitch Ratings exist to study the conditions under which corporations and governments raise money by selling bonds.1 Based on the stability and strength of the entity borrowing the money, the size of its other obligations, and its history of honoring its debts, the agencies assign a rating to the bond. The scale goes from the highest, AAA, down through AA to A, then through the Bs and Cs, with pluses and minuses, just like a school grade. A rating of D indicates a debt that’s already not being repaid as promised.

These rating systems don’t try to eliminate risk, simply categorize it. If you want minimal risk, buy AAA-rated bonds like U.S. Treasurys. You won’t make much in interest, but your money is secure. The high-yield bonds, in contrast, were and still are offered under conditions and promises to pay that make them about the last thing on the borrower’s mind. If things go badly with the corporation and it has to line up its creditors in the order by which they’ll get paid, the high-yield investor is standing at the end of the line and likely can whistle for his money. The attraction of these bonds, for the buyer, is that they pay really well. With a greater risk that the bond might become just a piece of paper, the buyer expects to earn a whole lot more for taking and holding it. You expect to be paid well to hold a hot potato, too.

The magic trick that financiers in the 1980s pulled off was convincing buyers that, because of the high yield and despite the low rating, these were great deals. After all, the companies floating these bonds were all solid earners, among America’s biggest corporations, and nothing really was going to go wrong. Hey, you can trust these guys! Even though these bonds soon picked up the name “junk,” people forgot about that and snapped them up. It looked like a way to make big money without real risk.

Suddenly corporations had a lot of cash from selling junk promises to pay. Some used it wisely, but many went on buying binges, snapping up smaller companies and undertaking expansions that—in previous times and with less money in play—might not have looked so attractive. But the concepts of “debt” and “obligation” are so Puritan. The smart financial people called it “leverage”—making a little bit of your money and a lot of other people’s do the work of a long stick.2

The trouble with an environment like this is that Gresham’s law, that bad money drives out good, still operates. People who are playing fast and loose with their promises tend—over the short run—to do better than, have an advantage against, and out-compete the dullards who play it safe and won’t jump into the pool. Companies like Enron and WorldCom puffed up and suddenly became as big as, or bigger than, old established companies like Chevron, AT&T, or GM, Ford, and Chrysler. Until the bubbles burst, that is, and they disappeared.

In the mid-1990s, the smart financial people invented another couple of concepts to address risk and keep the party going: the hedge and the derivative. These are simple concepts that became incredibly complex and mysterious.

A hedge is just what it sounds like—hedging your bet. If you undertake a risky gamble on a stock going up or down, then make a simultaneous bet against that happening, or a bet on some other, inversely probable occurrence. This is like betting both red and black on the roulette wheel, or betting on both fighters in a boxing match. The bets are never exactly equal, because that would be pointless. The idea is to recoup some of your loss if the situation goes south. Very smart people work up statistical relationships and use a stunning amount of math to gauge the risks and rewards between the original investment and the hedge. A company called Long Term Capital Management was founded in 1994 to employ these strategies so that money would grow fast and without risk. The tower of complications it constructed collapsed and the company closed in 2000.

A derivative is just a form of bet. Two financial parties agree to pay each other certain sums of money based on the movement of some reference variable like a stock market index, the future value of gold or some other commodity, or any complexly dynamic phenomenon. The derivative is not an investment in the market or the gold or any underlying value; the parties are simply using it as a condition of the bet. This is not very different from betting on the order in which cards will come out of a deck.

Not surprisingly, derivatives are often used as hedges for actual investments in the market for stocks or commodities or real estate.

As noted elsewhere,3 I am not a mathematician, or statistician, or any kind of trained scientist, but I am plagued with a great deal of caution and common sense. I don’t like to jump into a pool until I know how deep it is. I don’t like to undertake an obligation unless I have a clear view to how I’m going to fulfill it. And my guts tell me you can’t avoid all risk over the long term. You can hedge a bet now and then. You can dodge the consequences of risky behavior once or twice. You can build a house of cards up to two or three levels. But sooner or later you have to come back to a ground state with respect to risk. You have to equilibrate4 and return to a condition of balance.

While the economy may not be a zero-sum game,5 every person and organization operating within it ultimately leads a zero-sum existence. You are born into this world with nothing of your own, and you will leave it the same way.6 Electrons absorb energy and rise from one shell level to the next, then release that energy and drop back. A person’s getting and spending ultimately equal out. A company’s stock and debts ultimately equal its assets and profits. Risks and rewards ultimately balance out. And nobody cheats the hangman.

Every speculative fever—from the tulip mania of the 1630s and the stock market boom of the 1920s, to the tech boom of the 1990s and the housing bubble of the 2000s—goes through predictable phases. From being a new thing that only the rich, the smart, and the daring will invest in, the prized commodity—whether bulbs or stocks or houses—becomes something that everyone is willing to borrow to acquire, because there’s really no risk, because the demand is infinite and the price will never go down.7 Sooner or later, however, risk catches up, everyone steps in a hole, and the market collapses.

It always has, and it always will. But it is our nature to believe that this time, just this once, things will be different and we can cheat the hangman. … Isn’t hope a beautiful thing?

1. A bond is nothing more than a portable form of loan. It represents a corporation’s or government’s obligation to pay back the money it borrowed. A bond differs from a simple loan in that anyone holding the bond can sell it anytime in an open market to someone else, who will eventually receive from the borrower the principal money plus interest. Depending on how people feel about the bond and its issuer at the time of sale, the price may be a bit more or less than the principal-plus-interest to be paid back. This difference establishes a “yield” for the bond.

2. Among the probably unwise uses was the “leveraged buyout.” The managers of a company would decide they didn’t like being custodians, having shareholders, and obliging themselves to meet the shareholders’ and stock analysts’ quarterly expectations. So the managers floated a lot of unusual debt, bought up shares of the company’s own stock, and ended up owning the company—plus a mountain of owed money that hung over these companies, swinging back and forth and descending over time like Poe’s pendulum.

3. See my blog Fun with Numbers from September 19, 2010.

4. To borrow a word from the sciences.

5. See The Economy as an Ecology from November 14, 2011.

6. Yes, of course, sometimes Mummy and Daddy are rich and can set you up with a lot of advantages, but you yourself are born as naked as any pauper’s child. And yes, you may leave behind a great fortune for the benefit of your heirs, but you die as penniless as any husk on the burning ghats.

7. It didn’t help that, in the latest bubbles, the U.S. Federal Reserve, which manages the country’s money supply and sets the basic rate at which money can be borrowed, has kept that rate low for reasons other than providing easy money for everyone to get drunk on. They thought low interest rates would keep inflation from taking off; instead other things took off. Managing risk is like packing a partially inflated weather balloon into a suitcase: if you push it in here, it pops out somewhere else.

Sunday, November 27, 2011

Seduced by Numbers

I freely admit my addiction as a technophile. I love watching, learning about, using, and owning machines, gadgets, technical and industrial processes, and other creations of the mechanical arts.1 Since most of these devices are rated quantitatively, with numbers, my affection would seem curious.

For the first thirty years or so of my life, I was basically “innumerant”—allergic to numbers. I did pretty well with simple arithmetic in grade school but started to slip when they introduced the method of extracting square and cube roots, which I could not easily distinguish from long division. I floundered in Algebra I and sank outright in Algebra II. I never could figure out what anyone might do with a phrase like “a2+2ab+b2” in quadratic equations.2 So my schooling gravitated away from math, physics, and the higher sciences toward English literature, languages, history, and similar qualitative studies. That was difficult for a science fiction writer, and I had make up a lot of ground when I became serious about technical writing and hard-science novels. But I digress.

The first time I felt the pull of the numbers related to a machine was when I became interested in motorcycles in my late twenties. My first bike was a two-stroke Yamaha, which came in the 250 cc and 350 cc versions. I instinctively plopped for the bigger engine. When I graduated to my dream machine, a BMW, I had the choice of 500 cc, 600 cc, and 750 cc engines and again went for the biggest. In my stupid, English-major head, I couldn’t tell the difference between optimum and maximum,3 although given my six-foot-six frame and corresponding weight, a big motorcycle was the right choice for me.4

My second brush with machine ratings was in purchasing my first computer, an Apple II, back in 1979. Up until that time, I knew computers only as massive and unobtainable things: the IBM 360 that was leased by my university and later my corporate employer; it lived in the basement, crunched all the organization’s numbers, and was attended by a priestly class who alone knew how to communicate with the beast. But here was a thing no bigger than a portable typewriter—although married to a television set—that claimed to be a computer. It took a while for the salesman in the store to convince me that this was a real, multi-purpose computer, able to perform any function with the right programming, and not just some single-function device like a calculator or a video game. I had no real use for a computer, of course, but the notion of a machine that responded to written instructions fascinated me.

And suddenly there was the question of numbers. Did I want 32 kilobytes of RAM or the full 48 kilobytes? I naturally plopped for the larger number, thinking that a machine with open-ended capability would benefit from more of whatever a kilobyte might be. Later computers—and I bought my fair share—offered even more numbers: gigahertz of speed, megabytes of disk capacity, baud rates of connection, pixels of screen resolution. It became possible to run wild in so many dimensions.

I discovered that even with that original Apple II, there was a hunger for completeness. The computer’s motherboard5 offered eight slot-like connectors across the back for electronic cards that would variously increase memory, add supplementary processors, and coordinate signaling for peripherals like disk drives, printers, and modems. When I had about half of the slots filled with devices for a workable system, the remaining empty slots began preying on my mind. They represented potential capacity that I was not using. I began looking for and buying additional peripherals just to fill in those gaps. A friend of mine, who had to deal with his own peripheral addiction, called this “slot fever.”

I’ve held off buying an Apple iPad, even though I own a Kindle, a Nook, and an iPhone, because I know that I will want—insist upon—the model with the highest possible amounts of memory, connectivity, speed, resolution, and whatever other measures are appropriate to what is, essentially, the electronic analog of a sheet of paper. Full-blown capacity can practically double the price of the basic machine.

When I began handling pistols,6 I started with a .357 magnum revolver that my brother owned. But unless you buy the high-power loads, which are much more expensive, you are still shooting the basic .38 cartridge. That’s fun, but the .45 cartridge is bigger, more impressive, and makes a louder noise. Guess which way I progressed?

I don’t think this seduction by the numbers is just my own personal fetish. All around us are people buying cars with the most horsepower, television sets with the largest diagonal dimensions, stereo amplifiers with the highest wattage, trucks with the greatest towing capacity. If some is good, a lot is better, and “Can you get that with the 402 engine?”

You can see the urge not just at a personal level, but organizationally as well. The military is especially susceptible: The next generation of jet fighter has to reach a higher Mach number, have a stealthier radar image, carry a bigger payload, turn quicker, and land on a shorter runway. The missiles get bigger, the payloads larger. Even business organizations, where some consideration of cost versus effect might be expected, can be lured into buying bigger computers and server farms, building larger headquarters and larger factories to achieve even more growth in larger markets.

Did people always react this way? I suspect not, until machines took physical work out of the equation. If a bow with a 65-pound draw weight is right for a person of your size, do you really want one with a 200-pound draw? If four horses can pull your loaded wagon, do you really want to hitch up and try to control a team of twelve or twenty horses?

The closest analogue I can think of from pre-industrial times is the collector. It doesn’t matter what is being collected: statues, stamps, coins, butterflies, German ceramic beer steins, or race horses. More is better, and there is always one more item that will fill out your category and complete the set.7 Slot fever.

In the past, only the wealthy, the idle, and those with lots of spare cupboard space could satisfy the passion for collecting. But with modern machinery, you can “complete the set” in one purchase by buying the most horsepower, the biggest screen, the highest wattage. Until, of course, next year’s model comes out with an even bigger engine, larger screen, more RAM, more buttons, more of … everything. And then you just have to trade up.

It’s how we end up deep in debt and still crying for the moon: seduced by the numbers.

1. You might say the interest was bred in my genes: My father was a mechanical engineer and his father a civil engineer. I think it broke my dad’s heart that neither of his sons wanted to follow him into engineering.

2. Not until forty years later, when I began seeing it in the calculations supporting a two-dimensional matrix that combined dominant and recessive genetic traits. I still can’t solve the damned thing.

3. For those of you who are similarly impaired, remember that optimum body temperature is 98.6°F, while maximum body temperature can kill you.

4. BMW now offers its touring machines with a six-cylinder, 1600 cc engine, and I have to speak sternly with myself to keep from rushing out and buying one.

5. Today you can use a computer and never look under the hood; you might not even know what the motherboard is or where to find it. But with the Apple II, you were part-user and part-hobbyist; you popped the top off and went inside for all sorts of user-serviceable conditions.

6. Why? Because I write fiction with occasional military action and people shooting guns. It seemed important to learn a thing or two about them. You can read all the books and articles you want, but half an hour shooting on the range and observing real life, competent gun handlers (rather than actors on television) provides a unique perspective.

7. I’ve always avoided the collecting bug myself. I could see that you start off with an attachment to some class of objects—Chinese porcelains, Amazonian beetles—because you can see them as novel, clever, beautiful, or similarly attractive in some other dimension. You start with an eye for beauty that anyone can appreciate. But soon you learn more about the topic, broaden your interest, and expand the scope of your collecting. Eventually, you are bidding and paying an exorbitant price for an indifferent-looking cup or a really ugly little beetle because you know it to be unique, rare, or otherwise special. That way lies madness.

Sunday, November 20, 2011

What is Strength?

As noted some weeks ago, I’m a longtime fan of Frank Herbert’s Dune books and their guiding principles.1 I find it compelling that, of all the Imperium’s institutions and social groupings, the series’ most enduring is the Bene Gesserit. They are variously described as witches, engineers of religion, manipulators of the human bloodlines, and inheritors of human purpose from the Great Schools period. While the Fremen, the Bene Tleilax, and even the Imperium itself come and go in the series, the Bene Gesserit endure through the whole impossible history. They are the Greek chorus against which all the action plays.

The B.G., their Reverend Mothers, their acolytes, and their books and teachings contain many wise and wicked sayings, but one that has always stuck with me is from Herbert’s next-to-last novel in this universe, Heretics of Dune: “Never support weakness; always support strength.”

You might imagine that a society of women, especially those undertaking the religious education of the human race, would naturally tend to support the weak: children, other women made vulnerable by bearing children, the sick, the disadvantaged, the dispossessed. They should be following Mother Teresa into the slums of India. Supporting the strong feels all wrong. After all, the strong can take care of themselves. So, was this Herbert, a male writer, injecting an anti-feminist viewpoint into his imagined all-female society?2 Or was he simply being perverse?

To understand the Bene Gesserit in this context, we have to examine what it means to be strong as a human being. And I believe this is one of the “cleavage questions”3 that can crack open and help examine much of what is troubling our society today.

We tend to think of “the strong” as those who have the advantage: a big stick, the biggest guns, the biggest bank account, the most politicians in their debt, the most laws on their side. By contrast, then, the weak are those with no weapons, no resources, no friends, and no influence. It’s a formula that speaks to the cynical adage “Might makes right.”

Why do I call that adage cynical? Because western civilization goes back to Judeo-Christian roots that totally deny it. Justice, fairness, proportion, treating people as they deserve—everything we consider to be “right”—stands apart from the kind of force a bully, a dictator, a king, or even a democratic majority can bring to bear. The Bible bristles with counter-stories of the strong brought low, from Pharaoh to Goliath to Caiaphas and Pilate. The human sense of right and wrong comes not from external circumstances of force and power, but from the heart and its capacity to observe, weigh, and decide. Right stands outside the bustle of war and politics and resides in the eye of God.

It’s clear, also, that the kind of strength we are describing in these situations comes from factors that stand outside the person wielding power. To hold the big stick, command the strongest battalions, be able to write the largest checks, influence the greatest number of politicians—these are externals. Any person can pick up the stick, take command of the troops, inherit the wealth, and compound personal influence through a pleasing smile. It takes no special intelligence nor moral goodness to wield such power.

It does take muscles, and the discipline to build them, for a man to pick up and use a stick—but in today’s society, the one who wields the bludgeon is usually not the person in actual power. It also takes a kind of self-discipline to build a personal fortune and the political connections that represent the true power in modern society. You have to work hard and forego many passing pleasures, husband your resources, invest wisely in both opportunities and people, take risks, do favors, listen to a lot of bad jokes, and eat a lot of tasteless congratulatory dinners.

Discipline and dedication are both aspects of personal strength. Yes, they can be used for bad purposes. But any person who dedicates him- or herself to a cause, and disciplines his or her mind, heart, and body to attaining it, is halfway to moral virtue. People who make such sacrifices almost never do so for petty reasons. People do not strain and strive “because I want to be a big man and have everyone at my beck and call.” Instead, people usually dedicate themselves to causes bigger than their own personal selves. You may not agree with the cause itself—the glory of God, or greater Germany, or American exceptionalism, or Marxist principles—but these things stand outside the individual and draw him or her onward.4 Even actors and musicians, seemingly the most vain, selfish and self-glorying of people, must reach outside themselves and provide pleasure to their audiences if they are to be successful and attain the status they desire.

In this context, the contrary quality—weakness—represents lack of effort, dedication, and discipline. The weak do not want to spend the effort to achieve anything. They will accept the terms and conditions that others impose so long as they can get a fraction of what they want or need in return. The weak want to be taken care of, carried on someone else’s credit, and appreciated for some quality other than their own contributions.5

It is in this sense, I believe, that the Bene Gesserit axiom is meant. It’s a truism that if you subsidize something, you will get more of it. If you support weakness—not the temporary kind, where a man may be down on his luck for reasons outside himself, but the perennial kind that wants and expects a free ride—you will get more people with their hands out waiting to be served. If you support strength—those who have a place to go and the ambition and discipline to get there—you will have more people pulling on their oars and moving civilization forward. One effort supports doers, the other begets the done-to.

If your business is the future of the human race, as it was with the Bene Gesserit, then you can see which way the land slopes and how, left to its own devices, the water will run. You build civilization up, rather than letting the forces of sloth tear it down.

And if this kind of strength is paired with a sense of morality, equity, and proportion, you get strong people who are able to care for others in their times of need. Samaritans rather than bullies. And that’s the greatest strength of all.

1. See The Dune Ethos from October 30, 2011.

2. The first Dunenovel was published in 1965, when the counterculture was breaking away from the beatnik coffee houses of San Francisco and spreading nationwide, particularly on college campuses. This was also the time that the Women’s Movement was spreading, with the publication of Betty Friedan’s The Feminine Mystique in 1963. Herbert was certainly reacting to that current, but I don’t think his Bene Gesserit were meant to parody it—certainly not through all six novels.

3. I take the term from diamond cutting. Carbon crystals are practically impenetrable by shock and hammer blows due to the interlocking nature of their hexagonal lattice. But find the right plane and apply a small amount of pressure, and the diamond splits easily. Some problems are Gordian knots with ready-made fracture lines, just waiting for a sword cut at the right angle with the right kind of question.

4. People who rise on the corporate ladder are seldom aiming for personal power over others. Instead, they are usually seeking the freedom to act, to do things for the good of the organization according to their own views—rather than following the views of their superiors—about what will be efficient and effective. The person who wants someone to polish his boots only so that he can plant them in other people’s backsides is quickly discovered and dismissed as a petty fool.

5. Think of “Sadie, Sadie, Married Lady” in the musical comedy Funny Girl: “Do for me, buy for me, lift me, carry me …”

Monday, November 14, 2011

The Economy as an Ecology

We are going into our fourth year of recession. We have a bumpy road still ahead of us. And we have no promise of ever again seeing the sort of economic growth and prosperity that seemed to be America’s birthright in the late 20th century. In the Great Recession—as in the Great Depression before this—many people today are adopting the notion that acquiring wealth and property constitutes a kind of theft. One person’s wealth robs others of the chance to make a bare living. If I am rich, then I have made you and others like you poor. What one consumes another cannot have. This notion derives from the analogy of the national economy as a great pie. And it’s simply a false analogy.1

For one thing, a pie is static. So much exists, to be cut into so many slices, thick or thin, and then it’s gone. Pie is a zero-sum commodity. As noted in my previous blog, an economy is not a physical object. It’s a dynamic condition, a pattern of interchange between one person and another, among people and corporations and institutions. It isn’t a “thing,” at all.

Let’s, however, for a moment, consider that the economy might be a thing. If so, where did it come from? Is it the land? There is only so much land on Earth, and only a small fraction of that is immediately useful. So if I own land and you don’t, am I therefore rich and you poor, and does my ownership deprive you of a living? That proposition might work in a simple farming situation. I got the good bottomland with rich soil and plentiful water, yielding good crops and making me rich. You got the parcel with sand and rocks far from any water source. But as thrifty, scientific farmers have shown in many situations, even poor land can be made to yield with the right application of human energy and creativity. Think of Israel, northern Utah, or eastern Washington. Land left to itself just lies there.

If the economy were a thing, would it be natural resources? Certainly, nations with plentiful timber, oil and gas, and metal ores have become wealthy. As energy and raw materials, these God-given resources are the starting point for many economic transactions.2 If I own land bearing these riches, I can become rich. If you own land with no resources, you might remain poor. But just like the land, resources left to themselves just sit there. The Middle East lay above an ocean of oil and remained poor for generations because no one knew how to drill for it, or finding it on the surface, how to use it. The same could be said for western Pennsylvania or the Los Angeles basin.

Land and resources are the stuff upon which an economy can do its work, just as grain is the stuff that a miller grinds. But the grain is not the grinding, and raw materials do not automatically make themselves into wealth.

Is an economy then the mines and factories, the tools of production? Now we’re getting close. If I own a factory, I can become wealthy. If you work in my factory, you might have a living, although I can see to it—through controlling your hours and wages—that you remain on the edge of poverty. But there are many factories across our landscape that became idle and were boarded up. They made goods that people no longer wanted, or made them inefficiently, or made them less efficiently than factories elsewhere. Factories and machines are no more an economy than land and materials. They are a means to the activity, not the activity itself.

So, is the economy the money flowing through it? We value everything in dollar units—land and houses, commodities, shares of stock representing ownership of factories and machines. And certainly, if I have a dollar, that’s a bill or coin you don’t have. But money is just a marker, a tally, recording the transaction. Money is a chip of wood floating on the river that shows you how fast the water is flowing. And money certainly is not finite. As we’ve discovered in the age of electronic banking and stock markets, money isn’t metal disks and printed paper—those are just physical reminders. Instead, money exists in our heads and in our computers. Money is created when an asset such as a share of Apple stock or a house in Palo Alto gains value because someone else sees it as desirable and will pay more for it than the value I see in holding onto it. Money is destroyed when someone else later sees that asset as less desirable and won’t match the money I paid out to acquire it.3

The economy is the activity that finds a use for the land, the materials, the machines of production. Money is the lubrication that raises that activity above the level of simple barter.4 Other people and their demand for food, goods and services, energy and housing, make it worthwhile for the farmer to plant another acre, the miner to dig another ton of ore, the factory owner to add another machine line, the developer to extend a suburb. Without demand, these things don’t happen.

Where does demand come from? As noted in my previous blog, demand comes from productive activity. If I have a job and earn money, I have the means to satisfy my needs for food, clothing, and shelter, my desire for transportation, fashion, education, and amusement, and anything else my store of value allows. If I don’t have a job—a place in the economy—I may have wants, needs, and desires, but they don’t become economic demand.

The proper analogy for an economy is an ecology. In a rich ecology, like a tide pool or a rainforest, sunlight is captured, used, and reused at many levels. Plants absorb it and grow carbohydrates. Animals eat them and produce proteins. Food chains develop with expanding niches for more animals and plants. Opportunists thrive, like the bacteria that process rotting vegetation and animal wastes. Life increases. Life makes more life. In a poor ecology, like a desert, sunlight falls without effect—only making the sand hot. Less energy is captured and traded. Niches disappear or become fiercely competitive. Life decreases. Absence of life diminishes life.

In this analogy, an economy with free markets, a robust system of banking and capital, and wide-open trading—like America’s—is a rain forest. An economy with tightly controlled markets, closely held capital, and narrowly defined trading opportunities—like Soviet Russia’s—is a desert.

But you might object that the ecology is driven by a free natural resource: sunlight. Without the sun, life ceases in either the rainforest or the desert. Where is the comparable free resource in an economy? And I answer that the free resource is human energy, creativity, and ambition. We humans want to make things. We want to define and create meaning for ourselves and our chosen group. Some will invent new products, new systems of production, and new ways of thinking that open new courses of action. Others will use their energy and ambition to make those products and follow those new paths. That’s human nature shaped by a million years of evolution.

In a free-market economy that rewards creativity and ambition, human energy is captured, used, and reused. People are able not only to secure the food, clothing, and shelter that they need but to indulge in tastes and pleasures beyond the bare necessities, or to save and invest in ways that increase their future potential. These activities create opportunities not just for the farmer, the weaver, and the carpenter, but also for the gourmet chef, the fashion designer, the cinematographer, the artist and writer, the banker and broker. Activity begets activity, and wealth creates wealth.

In a closed, command-and-control economy that ignores creativity and ambition—except for a chosen class of state bureaucrats entrusted with society’s future—the focus becomes mere survival. All the rest is sunlight falling on sand. It starts with the drive to equitably provide the basics of life to passive citizens, but people without the opportunity to dream and expand their lives meaningfully will sink into boredom, alcoholism, and mischief. Economic activity declines. Eventually the struggle over crusts consumes all human energy, like scorpions grappling in the desert.

Human nature was not designed by evolution to be static. We are not things, but dynamic beings. And we cannot be baked into a pie.

1. I wrote on this subject before, in It Isn’t a Pie from October 3, 2010. It appears to be time to expand and explain the substitute metaphor.

2. “God,” in this sentence, is a kind of shorthand, not a sign of my devotion. The deity stands as proxy for many fortuitous situations that occurred once and will not be repeated: forests of strong oak and soaring redwoods—resistant to pests and perfect for building—found along the West Coast; pools of oil and domes of gas found under ancient seabeds; veins of gold running among the granite; fields of iron oxide lying close beneath the clay. Use them once and they’re gone. The gifts of weather and soil, fossil sea life, or good geology.

3. And money also simply grows or decays over time. If my money in the bank is loaned out to build homes and factories or buy productive land, and later paid back with interest, it grows. If my dollar bills stay under the mattress, the rate of inflation makes them worth less every year.

4. Without money, the miner has to trade a bucket of ore to the farmer for an apple to eat, and the farmer has to collect a lot of buckets and then give them to the factory owner to get the tractor he needs. Money makes things go faster.

Sunday, November 6, 2011

When Corporations are People Too

Some members of the political pole around which the Occupy Wall Street movement has coalesced suggest that one solution to our economic problems would be to revoke or rewrite the legal fiction under which a corporation has status as a person. Supposedly, this would remove the element of big, “faceless” corporations making decisions for the rest of us. However, like most simple solutions to complex problems, I fear this one will have unintended consequences. Bad ones.

The argument in favor of ending this artificial legal personality is that it would remove the shield protecting the living, breathing people actually making those decisions. They would be exposed to public scrutiny and could be punished for their crimes. However, laws are already in place to hold individuals responsible for the decisions they make as corporate officers. Our laws and regulations are thick with personal, human responsibility. Corporate executives and directors who break the law can be and have been prosecuted, fined, and imprisoned.

Still, one of the functions of a corporate entity is to absorb and deflect legal liability, as when there are financial losses to be borne or legal disagreements to be resolved. For example, a corporation may acquire debts beyond its capacity to pay. When the cash flow stops and creditors outnumber payers, the corporation can go bankrupt—divide its assets, pay out what it can, and in the process disappoint a number of those lenders—without impoverishing the human management and the corporation’s shareholders. A corporation may enter into agreements and, if they should become disagreements, bear the consequences of a lawsuit. The corporation can receive and defend a suit from others, or bring suit if its rights are infringed. Although people with a pulse are making decisions about this, they do so in the name of a collective, the interests of the shareholders, rather than as a matter of their own personal honor.

If this weren’t the case, then running a business or buying stock in one would be far more risky. Encounter a downturn in the market, a falloff in sales, an expansion plan gone wrong, or a customer or contractor with a grudge—and you could lose not only your livelihood or your investment but also your home, your savings, all your possessions, and still be in hock for future wages.

Maybe this is what the OWS people want. Make shareholder capitalism so risky and punitive that no one would want to play. That would be a quick route to state-sponsored socialism or communism.1

But if your aim is to improve our free market system, rather than put a stake through its heart, ending legal personality would probably be a bad idea. Consider that under our system of laws, only a person can enter into a contract, open a bank account, acquire and own property, borrow money and pay debts (a form of contract), hire people (another contract), and function in a hundred other ways required to transact business. If the assembled owners—partners, shareholders, or some other collective with a common cause despite their individual aims and wishes—could not function in this way as a legal entity, our economics would be returned to a medieval level. All business would be personal business. The cobbler makes a pair of shoes and sells them to the farmer, who pays for them with the proceeds of his grain harvest, which he has sold to the miller, who grinds it to make flour and sells it to the baker, who makes the bread the cobbler will buy with the money from selling that pair of shoes.

It’s tidy. It’s neat. It’s personal, and everyone takes responsibility for his actions. People lived that way in Europe for almost a thousand years. They were called the Dark Ages. Business on a personal level will enable a community—a small one—to survive. But it keeps you at the productive level of a pair of shoes and now and then a violin. Try to make anything bigger and more complex, like a piano, and you need several craftsman to come together and blend their skills.

Perhaps those piano makers can all work under personal contract with the owner of the piano shop. That owner takes responsibility for the business, investing his profits when he needs to buy iron for another piano harp, wood for a case, or wire for strings. And if the market for pianos dries up, he takes the loss and goes out of business, returning his craftsmen to farming or working for the miller. This is still at the community level. Such a business cannot aspire to anything big.

Consider the automobile. In the early years of the nineteenth century, hundreds of makers of horseless carriages functioned like our imagined piano shop: garages turning out handmade vehicles, each one unique, with few parts in common. They didn’t travel very far, which was a good thing because if you drove a car made in Cleveland into Chicago, and it broke down, you would have to return to the maker’s garage to get it fixed.

The convenience we take for granted, that a Ford sedan made in Michigan can be sold and serviced in San Francisco, would be extremely difficult to achieve on the basis of such purely personal business. William Clay Ford, Jr., the great-grandson of that Henry who actually did start out in a garage workshop in Detroit, would have to buy and own factories all over the globe, borrowing the money for this from his personal friends. He would personally contract with hundreds of thousands of workers to build the cars, acquire and hold millions of tons of steel and other raw materials as his personal property, and maintain possession of those millions of vehicles until each one could be sold to an individual buyer.

Of course, the buyer of that car would have to save up and pay for it all at once, unless he knew someone with a large amount of uncommitted cash willing to make a personal loan. There would be no banks to evaluate the buyer’s creditworthiness and write a loan against the value of the car. There would be no insurance company to assume the risks of his driving this encumbered asset on the city streets. Every aspect of our lives would be carried out on the basis of the people we knew personally or could convince of our trustworthiness through their personal experience or on the basis of our smiles and winning personalities.

There was a time when such a personal approach to business was the norm, and it could achieve great things. In ancient the Roman world, there were actually corporations with an artificial personality: the societas and collegia, where people joined together and created a group—a body or corpus—that that could enter transactions and acquire debts that were not the personal liability of the members.2 But these groups were still social; people came together on a first-name basis and could know and trust the other members. They were anything but the faceless creations of a legal system.

Elsewhere in Rome, however, the individual—the strength of one man’s personality and trust in his skills and judgment—was everything. Julius Caesar was the scion of a noble family and became its paternal head, but he wasn’t the president of any “Caesar Inc.” like the Fords, Hiltons, or Versaces. The family fortune—what there was of it—was his to spend. He made his way as a politician in Rome on the basis of the people for whom he could offer protection and do favors. They became his followers and, if they had personal followers of their own, those became the followers of Caesar as well.3 On the basis of this popularity and not a little personal generosity, the Roman state advanced him in the course of public offices, the cursus honorum, and in time of war gave him command of army units. But as office holder and commander he still had to win the confidence of the people under him. A general going into battle didn’t just give orders and expect his soldiers to carry them out as a matter of law and discipline—he had to make a personal speech before each engagement to whip up their enthusiasm.

Ending the fiction of the artificial legal personality in our current laws would either reduce the power and robustness of our economy to the level of a village in the Dark Ages, or give rise to an even greater emphasis on “the 1%.” These would be the people who, like ancient kings and tyrants, could command a following on the basis of their personality and their fortune. Imagine a society that did not put its trust in institutions like the Ford Motor Company or Exxon-Mobil, which today are owned by legions of shareholders, whose interests are protected by disinterested financial rating agencies like Standard & Poor’s. Instead, our economy would function at the whim of great patrons like Henry Ford or John D. Rockefeller—robber barons answerable to no auditors or committees, who could whip out their checkbooks and make any little inconveniences such as laws and competitors simply disappear.

Granting institutions the power to do business has enriched us all, enabling a level of product standardization, global convenience, and economic power unimagined by previous societies. To undo that would impoverish millions. It’s simply a bad idea.

1. Assuming, of course, that the state itself could still function as a legal entity representing the interests of its citizens, a republic, and not as the personal retinue loyal to a single individual, a king.

2. Municipal entities like the City of Rome functioned in similar fashion. And the tradition of collective ownership continued under the church in the Middle Ages, where the members of a brotherhood shared ownership of an abbey or monastery and its property. This tradition grew up with the great universities, where the student colleges were modeled on the collegia of Rome.

3. It’s no coincidence that the criminal organization shown in The Godfather—with its emphasis on favors, protection, personal loyalty, and demonstrations of respect—so closely resembles this Roman tradition.