Month: February 2009

A friend works at a wind energy company. I asked him if he was getting his share of the money from our new planned economy. His response: “We are stimulated! There is some good stuff in there for renewable. We may need to open a DC office just to chase the $$.”

As long as we think that we can grow GDP by having an ever-larger proportion of our best citizens working as full-time lobbyists, it would seem that the stimulus bill is working as advertised.

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Barack Obama proposes to dig the Federal government out of its deficit hole with higher taxes on the 2 percent of Americans with the highest income. Today’s Wall Street Journal carries an analysis of what would happen if the government could confiscate 100 percent of those folks’ earnings. The depressing conclusion is that it wouldn’t be enough money.

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I’m enjoying Soon I Will be Invincible as a book on CD right now. The character and voice of Dr. Impossible, a victim of Sociopathic Hypercognitive Disorder, are very entertaining. The audiobook is marred by a parallel narrative from the perspective of a boring female hero, but you could probably skip over all of the hero sections and still follow the story.

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Just finished read Ahead of the Curve: Two Years at Harvard Business School. Philip Delves Broughton was a British journalist who dragged his wife and young child away from Paris in hopes of changing his career. He was successful in spending $175,000 and graduating with the Class of 2006, but the HBS degree does not make him irresistible to consulting firms and investment banks. Broughton achieves an excellent balance between summarizing the material taught and the social experience. Highly recommended to anyone considering business school (a potential $174,983 savings by reading the book instead of attending) or anyone wondering why our economy is where it is.

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Worth a trip to the library.. the February 23, 2009 New Yorker magazine.

There is a story by Evan Ratliff entitled “Shoot!” about Jerry Barber, a guy who has developed a variety of recoilless automatic shotguns and rifles (videos). Because these powerful weapons don’t have much recoil they can be mounted on lightweight ground robots and radio-controlled helicopters. The U.S. Army doesn’t like them because they aren’t expensive enough and weren’t conceived by them.

“The Background Hum” is about Ian McEwan, author of Enduring Love, among other great novels. My favorite part is when McEwan’s son is assigned the book for a school paper. He asks his dad about the meaning of the novel, makes that the subject of his paper, and receives a D for his work. The teacher says that he didn’t understand the book and that Joe, the main character was “too male” in his thinking.

There is also a story by Italo Calvino, the only one of these that I could find online.

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Prior to the U.S. economy collapsing, there were news reports that women were shunning men without college degrees (example). They didn’t want to bother marrying a man who might become a financial burden and preferred to raise children by themselves rather than settle for a soon-to-be-unemployed blue collar worker. I wonder if the Depression will accelerate this trend. For a single mom, it will be tougher to earn a sufficient wage to pay for child care and living expenses. The blue collar guys are being destroyed. Rich guys are becoming comparatively much richer. A Wall Street executive might only get 80 percent of his former bonus from the TARP funds, but with the rest of the nation destitute, he stands even taller than before. A university dermatologist earning $4.4M per year looked good before industry failed, but he looks great now. A guy who can spend a record-setting $41 million on a Matisse while the rest of the world queues up for bread is going to look like a god.

If a woman’s primary concern is the ability of a mate to support her children, wouldn’t she be better off as the junior wife of that dermatologist than as the only wife of a soon-to-be-laid-off autoworker? Especially since government aid flows only to select industries, the current Depression seems likely to greatly exacerbate income inequality in the U.S., pushing wages of 30-50 percent of guys below what is necessary to support a family. The remaining men, employed in the favored sectors of government, health care, banking, and government contracting, will consequently become far more sought-after. Could we soon see de facto if not de jure polygamy?

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Finished reading The World Is What It Is: The Authorized Biography of V. S. Naipaul by Patrick French.

Born in Trinidad, educated at Oxford, and condemned to wander the planet, short of cash, for most of his life, V.S. Naipaul turns out to have led a more interesting life than the average scribbler. He ended up needing two wives, an English one for literary collaboration and an Anglo-Argentine one for sex. Due to the English wife’s infertility and the Argentine wife’s lack of formal status, he never had children.

From an early age, Naipaul was convinced of his own superiority and the fact that other people were put on this planet in order to serve him. He had contempt for 1960s- and 1970s-style left-wing political sentiments, especially as applied to Third World countries. He was scathing in his criticism of postcolonial African and Latin American regimes and where others saw hope for a bright future he saw cruel kleptocratic dictatorships ruling over people who could aspire no higher than mediocrity. Naipaul’s sympathies were with people in postcolonial nations, not with the rulers or the big ideas. His sympathies with the common man made him one of the greatest journalists of the 20th century even though he often had very little sympathy for close friends and family.

Naipaul wasn’t much fonder of liberal sentiments in First World countries. Commenting on the rise of violent crime in Britain, he said “several generations of free milk and orange juice have led to an army of thugs.” He voted only once and it was for Margaret Thatcher’s Conservatives.

After the Islamic revolution in Iran, Naipaul became concerned about Islamic fundamentalism, which he saw as a huge threat to the West and extremely destructive to everyone other than Arabs. Naipaul spent 1980 traveling to non-Arab countries that had adopted Islam and writing Among the Believers. Despite his fears that Islam would turn the entire world into a crummy place, he was not necessarily sympathetic to those who had run afoul of angry Muslims. On page 434, French discusses Naipaul’s refusal to sign a petition supporting Salman Rushdie, sentenced to death by Ayatollah Khomeini. “I found [his statements] usually left-wing and trivial and antiquated.” The fatwa? “It’s an extreme form of literary criticism.” Despite Naipaul’s view of Islam as a destructive force for humanity, he married a Pakistani Muslim in 1996, following the death of Pat Hale, his English wife.

This book would be a great gift from a parent to a child who is interested in becoming a writer. When Junior discovers that winning the Nobel Prize in Literature at age 69 entails spending most of one’s decades depressed, impoverished, ignored, and bitter, he will likely knuckle under and agree to pursue radiology.

Perhaps the best evidence of Naipaul’s fair-mindedness is that he authorized this biography by Patrick French. The book is unsparing in its treatment of the subject’s petulance, whoring, abuse of and ingratitude towards those who had helped him, and other character flaws that most of us would wish to conceal.

Next: Must read A Bend in the River and A House for Mr. Biswas, which are considered Naipaul’s greatest novels.

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I stopped by a friend’s house today to pick up Alex’s cousin, Roxanne. How were things going? “Better than last night,” Roxanne’s grandmother said, “when I had 12 members of the Cambridge Fire Department here.” What was the problem? “The Viking range caught on fire, some insulation internal to the stove,” she explained.

This is why a Viking costs ten times as much as a GE. You eventually get a new house with the Viking.

[My parents saw this posting and wrote that their next-door neighbor moved into a dream McMansion with a brand-new Viking refrigerator-freezer. It apparently required 13 service visits before they got it working.]

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Back in May 2008, federal, state, and local government obligations were estimated at $531,500 per American household (source: USA Today). This was a total of $61.7 trillion. I’m wondering how the same numbers would look right now. With more people jobless or involuntarily retired early it would seem that the obligations would have grown. We also have perhaps $3 trillion for bailing out banks and stimulus spending. If we were nervous about paying for these debts and entitlement programs a year ago, shouldn’t we be terrified now? Presumably the obligations can only be paid for by private sector workers, whose ranks have been shrinking. (You could argue that government workers pay various taxes, but their original salary all came from tax dollars to begin with.)

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October 2008: Stock markets collapse. A business that has some cash decides to sit tight because a stock market panic usually ends up correcting itself.

November 2008: Stock markets collapse some more. Our example business holds onto its work force because (1) there might be some end-of-quarter orders, (2) the Obama Administration might have some great ideas, and (3) we don’t know how long this slow period will last.

December 2008: You don’t want to lay people off at Christmas. Obama has recruited some good people.

January 2009: Unemployment and GDP numbers are in. Things look terrible.

February 2009: The Obama Administration policies have been announced and they aren’t going to do anything to make the U.S. a better place to do business. S&P 500 below 800 and seemingly stuck there or below. That’s back to early 1997 levels. Cash is running low. Maybe it is time to return the company’s expenses to early 1997 levels.

Does this scenario make sense? A lot of businesses and individuals are slow to react to change. They certainly wouldn’t want to fire well-trained people hastily. We’ve been through about 4.5 months of steady downturn. That seems like the right amount of time for a business manager to say “This depression is going to be enduring. How many jobs do we need to cut?” The Federal Reserve governors just this week revised their forecast for the coming years to predict a much deeper and longer downturn. If it took the experts at the Fed 4.5 months to figure out that our trajectory was negative, you’d expect the average business manager to take at least that long.

What does that mean as a practical matter? We’ve not yet begun to see layoffs. So far only the weakest companies have fired workers. In the coming 6 months, big companies will finally try to adjust to the changed economic reality.

What do readers think of this theory? Are the job losses of the next 6 months likely to be worse than those of the preceding 6?

[On the topic of companies adjusting, my friend Max pointed out that the dinosaurs were doing great as long as there was a lot of food. “They just ate and ate and ate. If a mammal came near them they would step on him. When the climate changed and there wasn’t as much food, the dinosaurs said ‘We need to downsize now.’ The Fortune 500 are going to be about as successful in downsizing as those dinosaurs were.”]

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