PicoBusiness

China quake caused by colliding land masses.

This is a little bit like saying:

• Lava is made of molten rock
• Water is made of Hydrogen and Oxygen
• Space lacks breathable air.

I finally got around to listening to this podcast on jobs and captalism and poor people.

The basic concepts that Russ discusses:

• Does Capitalism require poor people to do the menial work?
• Do rich countries require poor ones to exploit in order to do the manual labor work?
• Is Capitalism “rigged” to ensure that only the top 1% get all of the benefit of economic growth?

In general, Dr. Roberts knocks it out of the park - discussing in clear and data-leavened terms about why he believes that the system is not “rigged”, and why rich countries do not require poor ones.

It is on the topic of Capitalism requiring poor people that I find myself disagreeing with him. Here’s the general claim:

Rich people don’t want to mow their own lawns or paint their own houses. Without poor people to do that work, the whole system would collapse

Dr. Roberts points out, quite correctly, that this is absurd. 100 years ago, there were a lot of dirt-poor people who made a living (barely) threshing wheat in fields. Now we have combines and tractors and other devices to do this work for us. The poor in the US have multiple color televisions, cars, refrigerators and all sorts of other amenities in their lives that those wheat-field workers would have never had, or been able to afford, if they were still doing that work today.

But where I don’t think Dr. Roberts fully explained things is that this definition of poor is always changing - no one thinks about wheat-fields anymore when they think poor - they think “garbagemen” and “cashiers”. If, through the miracle of science we automated those jobs, people would move the goalposts - mechanics and security guards would be “poor”. And if, again, through science those jobs were eliminated, a new set of jobs would be the “demeaning jobs that no one wants to do.”

Essentially, there are always jobs that are the “least pleasant”, and people will always think “How horrid that I should have to do this unpleasant job.” Thus, they will perpetually see these people as exploited rubes whose sweat grease the wheels of the market.

Perspective is in order here, but perspective usually gets in the way of a good sound-bite.

What?? How is that possible? I hear you ask.

Honestly, I struggled with this for several months now. I knew that according to Friedman, “Inflation is a monentary phenomenon” (which means it’s caused by the government’s management of the money supply). But this didn’t square with the obvious fact in front of me: Oil prices are up, which means that food prices are up, flying costs more, etc. Prices are going up, not because of the government, but because of oil.

And it is true - certain prices are going up. But lets take a trip to the gas station as an example. Last year, you went to the gas station every week with $60. It cost you $30 to fill up, and you went inside and bought a big gulp and a bag of chips, which totaled $5. So you leave the gas station with a full tank and $25 to spend on other things - say, for example, dinner out some weeks, or a new DVD on the others.

This year, you again go to the gas station with $60, but it costs you $50 to fill up because the price is higher. Now you go inside and…. maybe you buy nothing. Maybe you don’t bother with the chips, and just buy the soda, spending only $2, instead of $5. So now you leave the gas station with $8 to spend on other things.

You won’t be buying dinner out for $8 and you won’t be buying a DVD for $8 either. You’re going to have to substitute something else - something cheaper. Like a movie on On-Demand cable, or a frozen dinner at home.

…So what?
Well, last year, your decision to eat out increased the demand for restaurants. Your decision to buy a DVD increased the demand for DVDs.

But now, you aren’t eating out, and you’re not buying DVDs. The demand for those goods is falling. The poor restaurant owner is obliged to find ways to cut costs or reduce profits in order to reduce the cost of his service. At the same time, he has higher food prices to contend with, and this will be a real struggle for him. On the other hand, the movie studios pay almost nothing for each DVD they make - they can easily drop the price of their DVDs to get you to spend your money on them.

You may not have quite the same experience watching a movie on-demand at home over a frozen dinner than you would going out and having a nice dinner at a fancy restaurant.

But you are affecting prices with your decisions. Some prices will go up, others will come down. Some restaurants will go out of business, because they can’t handle the reduction in income at the same time they are experiencing an increase in costs. Others, which may have better cost management techniques or more profits, can weather the storm.

Inflation, in its truest form, is increases in prices where you have no alternative - no way to choose to spend on X instead of Y to save money. According to Friedman, that only happens because of government’s interaction with the money supply.

http://www.overcomingbias.com/2008/04/prevention-cost.html

The claim: Because prevention techniques have to be widespread to be effective, the cost of making them widespread dwarfs the benefit of reduction in the disease. In other words an ounce of prevention costs more than a pound of cure.

Political Observations

1. The vast majority of pundits, when faced with a crisis, will claim that the crisis would have been averted if only we had done what they told us to do.
2. Alternatively, they will say that the crisis happened because of the actions/policies of their rivals. Hah hah! They say. This is why you should never listen to _______
3. Pundits will generally ignore the complexities of issues in order to make their point clear. That is what makes them dangerous, and what makes it foolish to listen to them without a truckload of salt. There are no simple issues.
4. You can point out that an issue is complex to a pundit, and they will ignore you, or mock you. Because admitting that the world is complex and that their philosophy isn’t perfect hurts their pocketbook.
5. I’ve noticed a surprising tendency amongst progressives - they believe that corporations can brainwash people into buying their products like slaves, and they believe that journalists can brainwash people into caring about certain topics. Didn’t Air America disabuse them of this notion? Note: At least they’re consistent on this (fairly silly) belief.

Business observations

• I listened (on the radio) to the owner of a landscaping company say that without lower-wage illegal immigrants on his payroll, his costs would be too high, and he would go out of business. Really? No one will want landscaping at all if it costs a bit more? All of his competitors are well-prepared for this contingency? I’m not particularly indignant about immigration, but this argument is lame.
• Right now the business world is essentially all-doom, all-the-time. Historically, this is usually the time when it turns around.

OpenCongress has come out with a new version which allows you to network, discuss, evaluate, and vote on what’s happening in Congress. You can track specific bills, Senators, Representatives, or issues and they’ve even put together a page on how to make the most of it: http://www.opencongress.org/profile/howtouse

read more | digg story

Yet another awesome tool from the Sunlight Foundation. But then, I’m biased http://punchclockmap.sunlightprojects.org/

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Here’s your chance to learn about the candidates for the different congressional seats (Senators and Reps) in the 2008 election cycle.

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Glenn Reynolds (of whom I am an avid reader) asks, with regard to the use of ethanol as a fuel “WILL ETHANOL LEAD TO FOOD SHORTAGES“?

I was originally going to say “Of course not.” But then, I realized the one scenario where it would happen, and that is if corn is heavily subsidized by the government (ie. the taxpayers, i.e. you and me), but only for use as Ethanol. If it happened quickly enough, every farmer would immediately sell their corn for use as Ethanol, because they’d get money whether it was used or not.

But in general, if the government doesn’t do something stupid like massive, quickly applied subsidies (a tall order, I admit) then there should be no food shortages. Food would get more expensive, especially meat, but all in all, I expect that people can cut back on fuel more than they can cut back on food, and that would cause more farmers to sell their corn to food production instead of Ethanol production. End result - just like any other situation where multiple markets require a particular raw material, we’ll end up with a market equilibrium that will sort everything out.

I’ve been focusing most of my blogging attention on Indefinite Articles, but this seemed like a much more business-focused article:

Jeffrey Pfeffer on Pay for Performance

I’m generally a believer in PfP, so this was an eye-opener.  Very thought provoking.

The ability of senior leaders to execute on business strategy depends largely on whether employees are encouraged to speak up about project failures. A simple dynamic — called “organizational silence” — causes 85% of failed business programs and projects, according to a research study by The Concours Group and VitalSmarts.

read more | digg story

Fred Wilson asks

“Will the Web always be the minor league of video” and the equivalent “The question is: Will the TV always be the pinnacle of fame.”

The answers are no, and no, respectively.

The web will not always be the minor league of video, assuming that you include interactivity (even in a limited sense) in that definition.   Interactive, multi-angle, exploratory video is much more likely to be the future of video, instead of the flat presentation we have now.  To a generation growing up on video games, the ability to interact with the screen and the characters is important, and it will only get more important over time.
And the TV will not always be the pinnacle of fame, for the same reason that radio is no longer the pinnacle of fame, nor composers and authors before that.  Eventually, games and interactive media will become the pinnacle of fame, if not something else.  Again, look at it in generational terms.

Now, if I constrain myself by adding “in the next 5 years” to each of those questions, my answer is yes, and yes.

A recent study indicates that more and more people are running sole proprietorships.   In this modern age of wonder (which will, of course, seem quaint in 50 years), where every service you can use is on the ‘Net, where you have to meet with your customers face-to-face less and less frequently, and where broadband Internet access is nigh-ubiquitous, any “knowledge worker” can probably find meaningful and valuable self-employment.

Hat tip: Tim O’Reilly

with all the interest and focus on the “online” aspects of the presidential race, I feel safe in predicting that the presidential campaign of 2008 will certainly be an eLection!

- thanks folks, I’m here all week.  Try the steak!