On a warm weekend afternoon in May 2008, on a dry field in southern Houston, the Hockaday Daisies met the girls from St. John’s to decide the Texas state champion in women’s lacrosse. St. John’s was the defending state champion from the year before, and had beaten Hockaday just two weeks earlier to claim the crown as champion of the Southwestern Preparatory Conference. Moreover, the Hockaday girls knew that the Texas state women’s lacrosse title had always been won from a team from south Texas ever since there had been a women’s high school lacrosse tournament. The Hockaday team knew that they had their work cut out for them.
This was going to be Laura Jean Stargardt’s last athletic contest for Hockaday, culminating many years of distinguished athletic endeavor. By the time she as an 18 year old senior, she had been playing competitive athletics at a high level for fourteen years. She started playing on a Hockaday recreational soccer team in Pre-Kindergarten as a five year old. That Hockaday team went on to dominate recreational soccer in their age group for the next six years, finishing as North Dallas U10 champions in 2000. Laura Jean was the linchpin of the defense through all of those years. Most of the girls on that team went on to play select club soccer, and Laura Jean played on a select team through all four years of middle school, alternating between striker (the key offensive player) and sweeper (the key defensive player). She also played softball (pitching one year) and basketball with her Hockaday classmates, including a season playing select basketball.
In 7th and 8th grades, Laura Jean rejoined her Hockaday classmates in playing for school teams for the first time. The Middle School girls played field hockey (fall), soccer (winter) and lacrosse (spring). As a precursor of what was to come, Laura Jean’s middle school cohort on those teams went undefeated through all six middle school seasons. In the Upper School, Laura Jean made varsity her freshman year in soccer and lacrosse. She played on the varsity soccer team all four years of Upper School, winning the Southwestern Preparatory Conference championships in her freshman and senior years. Laura Jean also played on the varsity lacrosse team every year except her sophomore year when she was rehabilitating from the reconstruction of an ACL torn during her sophomore soccer season. Lacrosse in her senior year was Laura Jean’s last season of playing sports for Hockaday, and the lacrosse finals was to be her last interscholastic game…ever.
The Hockaday lacrosse team was clearly the best woman’s lacrosse team in north Texas, but the best lacrosse in the state had always been played in Houston. The year before, in the spring of 2007, the Hockaday girls had shocked the sport by beating St. John’s in a come-from-behind victory to win the SPC championship. Laura Jean scored two goals during that game, including the tying goal as Hockaday overcame the initial St. John’s advantage. An emotionally spent Hockaday lost the next day against a public school team from Houston in the semifinals of the state championship tournament, and St. John’s went on to win the state crown.
In this senior year, Hockaday had faced St. John’s in the regular season and had lost a close, hard fought triple overtime game. St. John’s had then overcome Hockaday in the SPC championship game, a game in which Laura Jean was held off the field for most of the second half, the period during which Hockaday could marshal no offense.
Hockaday had faced the Memorial High School girls the previous day in the semifinals of the women’s lacrosse state tournament. Hockaday had eked out a tie in their regular season meeting, a game played less than two hours after the triple overtime contest against St. John’s. This time Hockaday blew out Memorial in the semifinal tournament game, setting up the rematch with St. John’s for the state title. It was to be one of the most important games in Laura Jean’s long athletic career.
The championship game did not start off well for Hockaday. The St. John’s team scored first, and then they scored twice more. Only five minutes into the game, Hockaday found themselves down 0-3. The Hockaday girls were playing hesitantly and without confidence against a St. John’s team that had already beaten them twice that year.
Then Laura Jean changed the tone of the game. She was passed the ball and possessed it outside of the defensive perimeter, slightly left of the midline. There was one defender marking her. In a signature move, Laura Jean got just the right position on the defender, burst past her and another defender who came over to double team, and split those defenders with a surge of speed. Laura Jean came in alone on the goalie and scored with an accurate shot.
Laura Jean was instrumental in scoring Hockaday’s next goal. She had the ball behind the net, and made an accurate centering pass to sophomore Tori Weatherford, who was crashing in from the front and scored with a one-touch shot.
The third Hockaday goal was another signature move by Laura Jean. She received the ball behind the net, and moved slowly around to her right (counterclockwise around the goal). As she cleared from behind the net, the defender who was shadowing her from the front of the crease came forward to keep Laura Jean away from the goal. Laura Jean turned her back to the girl, and as contact was made, she executed the classic “roll crease” maneuver. In this move, the attacker cradles the stick to her right and tries to turn the corner to her left on the defender by a combination of outrunning the defender and outmuscling her. In this case, Laura Jean’s superior footwork, leg muscles and balance prevailed, and the defender tripped over her feet and fell down. Laura Jean then coasted unopposed across the crease in front of the goalie, picked her spot and fired a shot into the net. With that goal, Hockaday was only down 3-4 and was definitely back in the game.
Shortly after scoring Hockaday’s third goal, Laura Jean came out of the game for a rest. The adrenaline was racing in her so powerfully that she walked down the sideline and threw up into the grass. One of her teammates asked her if she was okay, and Laura Jean just snapped back, “I’m feeling great!” She was back in the game before the first half ended. And Hockaday was in the game, with the score tied 6 - 6 at the half.
The second half was another close, hard fought, see-saw contest. Laura Jean played most of the second half as well. While the game had started with St. John’s clearly dominating and in control, the tide of momentum began to shift towards Hockaday. Taylor Thorton moved to center to take the draws in the second half, and in a game where ball possession is critical to scoring, Taylor won most of the draws for Hockaday. Both defenses, played tough and well, however, keeping the attackers from scoring easily. The Hockaday defense in particular played their best game of the season. The game was tied 10 – 10 with about three minutes to play. Hockaday possessed the ball the entire time, but was not able to get a goal. The game finished in a tie and went into overtime.
Overtime in women’s lacrosse is not a “golden goal” in which the first score wins and the game ends. Overtime consists of two three minutes periods, with the teams switching the goals they defend between the two periods. Luck would not be the primary determinant of the outcome; both teams would have time to execute well on offense and defense.
St. John’s mounted an attack earlier in the overtime period and scored, pulling ahead of Hockaday. Laura Jean had been well-defended in the second half of the game and had not been a key part of the offense. But in overtime, she got focused and determined. She was playing offensive midfielder, and after the St. John’s goal, she walked briskly and directly to the center circle, crouched into her position for the draw, and stared straight ahead in determination. She was in position and ready before most of the other girls got to their places around the circle. She did this after every one of the overtime goals, whether Hockaday’s or St. Johns’. She was obviously focused.
Laura Jean got the ball in the front of the goal, outside of the defenders’ perimeter, shortly after Hockaday won the draw. She got the ball and made a hard charge through the defenders directly at the goal, but she was fouled. This awarded her a free run from the 8 meter line. Laura Jean crouched on the circle, and when the referee blew the whistle, she raced directly at the goal and whipped off a hard shot into the net before any defenders could reach her. She had tied the overtime score at 11 – 11.
St. John’s managed to get possession of the ball and came back to score on Hockaday again, giving St. John’s the advantage in the game, 12 – 11. Once more, Laura Jean responded. From the front of the zone, she made a hard, charging move to the goal, breaking past the defender and beating the goalie with a well-placed shot. With her fourth goal, Laura Jean had once again tied the game and kept Hockaday in it.
Both defenses kept the offenses in check. With less than a minute left in the last overtime period, midfielder Carolyn Smith made the best play of her lacrosse career. She got a pass in a transition from co-captain Halley Huffines and ran up the right side of the field. As she entered the opponent’s zone, she split two defenders, and muscled her way between them and into open space. There was no one between her and the goalie. Carolyn cut across the front of the goal about 10 yards out, from right to left, and as she crossed the middle, she fired a hard left-handed shot that bounced on the ground and in, beating the goalie. While St. John’s won the ensuing draw, the Hockaday defense stole the ball back and ran out the rest of the clock. Hockaday won the Texas state woman’s lacrosse championship with a 13-12 overtime score.
It was Laura Jean’s last interscholastic game, but she finished in style. She scored or contributed to 5 of the team’s 13 goals. More importantly, she scored her goals when they were needed most, to jump start her team at the beginning and to put them into a position in overtime where they could win the game. Of the over 500 competitive games in multiple sports that she played in her youth, this was undoubtedly her finest.
Tuesday, May 15, 2012
Friday, April 23, 2010
Pretending to Fight Hunger
Yesterday Bill Gates, Microsoft founder and world’s richest philanthropist, and Timothy Geithner, US Treasury Secretary, announced a new initiative to fight global hunger and poverty. This new initiative, with the catchy title of Global Agriculture and Food Security Program, is a new fund “to help the world's poorest farmers grow more food and earn more than they do now so they can lift themselves out of hunger and poverty.” The fund will supply “financing to low-income countries with high levels of food insecurity” and will “invest in infrastructure that will link farmers to markets, promote sustainable water-use management, and increase access to better seeds and technologies.” The program will focus on rural communities with small and medium size farms. The ultimate goal of this program is “to create a world free of hunger and extreme poverty.” (Wall Street Journal, April 22, 2010)
This proposed solution will not fix the target problems of poor agricultural productivity and poverty, and it will only be a waste of money. It will not fix any problems because it is based on false premises of the causes of those problems. Low agricultural productivity and poverty can not be fixed by some form of investment in small scale farming. Small farms are the problem. There is a direct inverse relationship between the percentage of the population of a country involved in agriculture and the GDP per capita of that country. That relationship is not coincidental -- it is causal. A high percentage of the population engaged in agriculture means that farms are small – and that farming is subsistence.
There is no natural reason for agricultural productivity to be low in these countries. In a world in which all of the knowledge necessary to increase agricultural productivity is broadly known, it is the artificial economic restrictions in these countries that perpetuate fragmented, inefficient agriculture. Low agricultural productivity and widespread poverty are almost always self-inflicted. If Gates and Geithner really wanted to help these countries, they would work to eliminate the economic shackles that they place on themselves. Then a few people could become very productive at agriculture and the rest could go do something else productive. Successful farmers will squeeze out or buy out less successful farmers, and country-wide agricultural productivity will rise. You don’t need to teach every farmer how to be productive; you just need to let the ones who learn fastest succeed to their fullest potential.
But ripping apart a quaint agrarian culture and building a modern economy doesn't provide a "feel good" experience for liberals, despite the long-term positive results. And isn't liberal "feel good" what this initiative is really all about, after all? The people behind this initiative are not really fighting hunger in any way that will have broad, long-lasting results.
The real disappointing and disheartening lesson from this initiative is what it says about Bill Gates. Mr. Gates is a man whose technical and business acumen – brilliance even – enabled him build the foundation of the knowledge economy and significantly change the lives of millions of people around the world for the better. In the process he built a company which is now one of the pillars of the US economy, and made himself the richest person in the world. Yet since his retirement from his day job, Mr. Gates has been not just ineffective as a philanthropist – but stupid. The failures of his Foundation to improve world health (which were also based on false premises of causes) reveals Mr. Gates as just another man whose hubris overreaches his abilities. Clearly Mr. Gates has a gifted vision of information technology and how to build a business. Also clearly the gift of his vision does not extend to less familiar territory – particularly economics, politics and the broader realm of human behavior. The lesson that the last few years should have taught Mr. Gates is that he has limitations. It is disappointing and disheartening that such an otherwise heroic individual has not been able to learn that lesson.
This proposed solution will not fix the target problems of poor agricultural productivity and poverty, and it will only be a waste of money. It will not fix any problems because it is based on false premises of the causes of those problems. Low agricultural productivity and poverty can not be fixed by some form of investment in small scale farming. Small farms are the problem. There is a direct inverse relationship between the percentage of the population of a country involved in agriculture and the GDP per capita of that country. That relationship is not coincidental -- it is causal. A high percentage of the population engaged in agriculture means that farms are small – and that farming is subsistence.
There is no natural reason for agricultural productivity to be low in these countries. In a world in which all of the knowledge necessary to increase agricultural productivity is broadly known, it is the artificial economic restrictions in these countries that perpetuate fragmented, inefficient agriculture. Low agricultural productivity and widespread poverty are almost always self-inflicted. If Gates and Geithner really wanted to help these countries, they would work to eliminate the economic shackles that they place on themselves. Then a few people could become very productive at agriculture and the rest could go do something else productive. Successful farmers will squeeze out or buy out less successful farmers, and country-wide agricultural productivity will rise. You don’t need to teach every farmer how to be productive; you just need to let the ones who learn fastest succeed to their fullest potential.
But ripping apart a quaint agrarian culture and building a modern economy doesn't provide a "feel good" experience for liberals, despite the long-term positive results. And isn't liberal "feel good" what this initiative is really all about, after all? The people behind this initiative are not really fighting hunger in any way that will have broad, long-lasting results.
The real disappointing and disheartening lesson from this initiative is what it says about Bill Gates. Mr. Gates is a man whose technical and business acumen – brilliance even – enabled him build the foundation of the knowledge economy and significantly change the lives of millions of people around the world for the better. In the process he built a company which is now one of the pillars of the US economy, and made himself the richest person in the world. Yet since his retirement from his day job, Mr. Gates has been not just ineffective as a philanthropist – but stupid. The failures of his Foundation to improve world health (which were also based on false premises of causes) reveals Mr. Gates as just another man whose hubris overreaches his abilities. Clearly Mr. Gates has a gifted vision of information technology and how to build a business. Also clearly the gift of his vision does not extend to less familiar territory – particularly economics, politics and the broader realm of human behavior. The lesson that the last few years should have taught Mr. Gates is that he has limitations. It is disappointing and disheartening that such an otherwise heroic individual has not been able to learn that lesson.
Tuesday, June 30, 2009
The Smart Grid – The Limited Vision
There is significant fascination in the utility industry today about the future of the “smart grid’.
The expansive electric utility view of the smart grid is a means to know in real-time, in detail, how electricity is being distributed and consumed in their networks. Their view also includes some ability to use the smart grid, either through direct controls or through real-time pricing changes, to manage consumption to limit peak demand for generating capacity. To electric utilities, the smart grid concept includes functions like automated meter reading, distribution automation, and remote service connection and disconnection. Their concept also includes load management and demand response management. The overall purpose of the smart grid is to deliver a more reliable supply of electricity at lower cost – both the average cost and the marginal cost of peak demand.
An underlying element of the utility vision is that they have to establish a communications network to communicate with their infrastructure and with their customer end points (meters). A communications network is essential to the concept of the smart grid because monitoring, management and control of the network elements must happen in real-time. Almost all discussions about building the smart grid inherently include the concept of building a utility-specific communications network as its foundation (such as noted in this blog on Electricity 2.0). Most of these envisioned communications networks are proprietary, whether communicating over the existing power lines that the utilities already have deployed, or constructing some proprietary wireless network overlaid on that distribution infrastructure.
This makes electric utilities, along with the US military, among the last industries in this country that believe that they have to build their own proprietary communications network. They can not imagine any other way to reliably reach the large number of business and residential customers that they serve. Utilities are pursuing this proprietary vision largely because of their monopoly history. They believe that they have to control their entire infrastructure. For example, utilities have been grandfathered with radio frequency licenses from the FCC over which they have operated their own wireless voice communications networks for decades. The utilities believe that the only way to achieve the functionality, reliability, capacity and security that they need is to build, own and operate their own communications network.
Most plans for the smart grid do not currently envision using any of this country’s existing, ubiquitous communications networks. The telephone network is a well-known, technically mature resource that covers almost literally the entire country. The more recently deployed cellular communications networks have almost equally universal coverage, although the technologies continue to evolve. But the utilities are mostly overlooking the advantages of the existing, broadly deployed, broadly supported, low cost nationwide data communications network – the Internet.
If a smart grid is to be built that reaches to every customer meter, and to the power-consuming equipment behind the meter, it will be built on the Internet. The Internet is already broadly deployed, and it is expanding its reach into more places and to more devices every day. The Internet is already the backbone communications network for a broad range of commercial communications, whether conducting financial transactions, supporting on-line retailing, operating an integrated supply chain, or conveying medical information. The costs of adding Internet connectivity to devices, appliances, or machines is continuing to drop, and that connectivity is being built in. Utilities are wasting their money chasing the broad deployment, general adoption, and low cost of the Internet.
Load management and demand control will never operate over a proprietary utility network as envisioned by the electric utilities. Customers are not going to invest to communicate data through a smart electric meter. Particularly in commercial and industrial facilities, and increasingly even in residences, demand management of energy consuming devices is already being conducted by existing intelligent systems – industrial control systems, building automation systems, energy management systems, and even smart thermostats. All of these systems are being connected to the Internet, to the extent that they are not already. Customers will not tolerate having to connect to another network to take input from the utility, whether it is pricing or demand response requests. They will demand that information to come over the data communications network that they already support – the Internet.
Utilities may still pursue the misguided vision of building their own communications network to control their own power distribution infrastructure. They may also extend it all the way to their smart meters. Those smart meters will be the end points of any utility communications network, however, not a portal to the energy consuming equipment of their customers. The only real reason that utilities will install “smart” meters (for AMR or AMI) is so that they can track usage in real-time to assure compliance with pricing and demand response programs intended to limit peak demand. That function could be performed more easily and inexpensively over the Internet, but that will be up to the electric utilities and their regulators. The utilities’ customers increasingly conduct their data communications over the Internet, and they will require utilities to communicate with them that way too.
There may be a “smart grid” over which the utilities do a better job of managing their power distribution network. But it will never be a mechanism for communicating with their customers. That network already exists.
The expansive electric utility view of the smart grid is a means to know in real-time, in detail, how electricity is being distributed and consumed in their networks. Their view also includes some ability to use the smart grid, either through direct controls or through real-time pricing changes, to manage consumption to limit peak demand for generating capacity. To electric utilities, the smart grid concept includes functions like automated meter reading, distribution automation, and remote service connection and disconnection. Their concept also includes load management and demand response management. The overall purpose of the smart grid is to deliver a more reliable supply of electricity at lower cost – both the average cost and the marginal cost of peak demand.
An underlying element of the utility vision is that they have to establish a communications network to communicate with their infrastructure and with their customer end points (meters). A communications network is essential to the concept of the smart grid because monitoring, management and control of the network elements must happen in real-time. Almost all discussions about building the smart grid inherently include the concept of building a utility-specific communications network as its foundation (such as noted in this blog on Electricity 2.0). Most of these envisioned communications networks are proprietary, whether communicating over the existing power lines that the utilities already have deployed, or constructing some proprietary wireless network overlaid on that distribution infrastructure.
This makes electric utilities, along with the US military, among the last industries in this country that believe that they have to build their own proprietary communications network. They can not imagine any other way to reliably reach the large number of business and residential customers that they serve. Utilities are pursuing this proprietary vision largely because of their monopoly history. They believe that they have to control their entire infrastructure. For example, utilities have been grandfathered with radio frequency licenses from the FCC over which they have operated their own wireless voice communications networks for decades. The utilities believe that the only way to achieve the functionality, reliability, capacity and security that they need is to build, own and operate their own communications network.
Most plans for the smart grid do not currently envision using any of this country’s existing, ubiquitous communications networks. The telephone network is a well-known, technically mature resource that covers almost literally the entire country. The more recently deployed cellular communications networks have almost equally universal coverage, although the technologies continue to evolve. But the utilities are mostly overlooking the advantages of the existing, broadly deployed, broadly supported, low cost nationwide data communications network – the Internet.
If a smart grid is to be built that reaches to every customer meter, and to the power-consuming equipment behind the meter, it will be built on the Internet. The Internet is already broadly deployed, and it is expanding its reach into more places and to more devices every day. The Internet is already the backbone communications network for a broad range of commercial communications, whether conducting financial transactions, supporting on-line retailing, operating an integrated supply chain, or conveying medical information. The costs of adding Internet connectivity to devices, appliances, or machines is continuing to drop, and that connectivity is being built in. Utilities are wasting their money chasing the broad deployment, general adoption, and low cost of the Internet.
Load management and demand control will never operate over a proprietary utility network as envisioned by the electric utilities. Customers are not going to invest to communicate data through a smart electric meter. Particularly in commercial and industrial facilities, and increasingly even in residences, demand management of energy consuming devices is already being conducted by existing intelligent systems – industrial control systems, building automation systems, energy management systems, and even smart thermostats. All of these systems are being connected to the Internet, to the extent that they are not already. Customers will not tolerate having to connect to another network to take input from the utility, whether it is pricing or demand response requests. They will demand that information to come over the data communications network that they already support – the Internet.
Utilities may still pursue the misguided vision of building their own communications network to control their own power distribution infrastructure. They may also extend it all the way to their smart meters. Those smart meters will be the end points of any utility communications network, however, not a portal to the energy consuming equipment of their customers. The only real reason that utilities will install “smart” meters (for AMR or AMI) is so that they can track usage in real-time to assure compliance with pricing and demand response programs intended to limit peak demand. That function could be performed more easily and inexpensively over the Internet, but that will be up to the electric utilities and their regulators. The utilities’ customers increasingly conduct their data communications over the Internet, and they will require utilities to communicate with them that way too.
There may be a “smart grid” over which the utilities do a better job of managing their power distribution network. But it will never be a mechanism for communicating with their customers. That network already exists.
Friday, March 20, 2009
The Nationalization of Banking in the United States
Since the depths of the financial crisis in the fall of 2008, the United States government has become intimately involved in the ownership and operations of the financial services industry in general, and the banking system in particular. The US Treasury has made equity investments in major banks, and has become the major supplier of capital and liquidity to these largest banks. Since everyone knows that a major debtor is really an equity investor, these moves have essentially amounted to the nationalization of banking in the US. Anyone who doubts that the US government believes that it owns the banks has not been listening to recent speeches by President Obama and the US Congress.
Nationalization of the US banking industry is bad for the economy for all the reasons that nationalized industries have been bad throughout history in any country you choose to examine. This is especially so in the US because the free flow of capital is so important to the growth and vibrancy of our economy. Federal government intervention in the United States financial services industry will degrade the ability of the economy to function and to recover quickly from the current recession.
The US government is not just another investor among equals, it is an investor with a gun. The federal government will dictate the strategies, culture and actions of banks disproportionately to its ownership stake. The CEOs and management of the US financial institutions no longer work for traditional profit-motivated investors; they are working for the State. They are no longer motivated by making profits for investors – and themselves. Their compensation will look increasingly like that of civil servants, in which there is no upside reward for innovation and risk-taking, and in which the primary goal is job preservation by avoiding risk and responsibility for decisions that might have negative outcomes.
Today’s major bank CEO now works for the Secretary of the Treasury, and in reality, works for the Chairman of the congressional Banking Committees. The first time anyone forgets that, he will be called into a Congressional hearing to remind him. Those hearings will be called when major losses occur, when major expenditures are made without political benefits, or when politically correct lending is not extended. The management of financial institutions will now be motivated to not have any losses, so risk taking of any type is out. These government-owned institutions will no longer participate in the type of aggressive risk-taking that has funded the largest and most dynamic economy in the world, and that has built the globe’s largest and most efficient capital market.
The management of these government-owned institutions will be motivated to make lending decisions based on political goals, rather than the merits of the loan itself. We will see much more lending to the relatives, friends and political donors of Congressmen, lending in certain Congressional districts, lending for questionable but politically correct projects, and so on. Bank lending will become the new source of “earmarks,” and the new source of money for the politically connected to loot. Any banker that forgets who is really in charge will find themselves called before a Congressional committee to be publically excoriated, humiliated, and professionally destroyed. Only a few examples will be required to teach this lesson to the rest. Making money is no longer the goal of banking – buying votes is the objective.
The tragedy for the American people and our economy is that massive intervention and Federal seizure of the financial sector was not necessary. The industry needed to go through the catharsis of bad decisions being rewarded by bank failures. Overly inflated financial assets needed to be revalued to sustainable levels – and still need to. All of this could have happened, albeit painfully, and the economy would have absorbed the pain, learned its lesson, readjusted to the new reality, and moved on to the overriding goal of growing by creating wealth. The actions of the US government are only serving to defer this necessary cleansing process, prolong the recession, and seriously degrade the capital markets.
The private equity market has grown tremendously over the last decade in response to increasing government intervention in and regulation of the public equity markets. Now private equity remains the great unregulated hope for capitalism in the United States to provide the investment capital and profit-maximizing guidance that will once again create growth in the American economy. That is, unless the major US banks can quickly pay off the government investments and get out from under the Congressional boot.
Nationalization of the US banking industry is bad for the economy for all the reasons that nationalized industries have been bad throughout history in any country you choose to examine. This is especially so in the US because the free flow of capital is so important to the growth and vibrancy of our economy. Federal government intervention in the United States financial services industry will degrade the ability of the economy to function and to recover quickly from the current recession.
The US government is not just another investor among equals, it is an investor with a gun. The federal government will dictate the strategies, culture and actions of banks disproportionately to its ownership stake. The CEOs and management of the US financial institutions no longer work for traditional profit-motivated investors; they are working for the State. They are no longer motivated by making profits for investors – and themselves. Their compensation will look increasingly like that of civil servants, in which there is no upside reward for innovation and risk-taking, and in which the primary goal is job preservation by avoiding risk and responsibility for decisions that might have negative outcomes.
Today’s major bank CEO now works for the Secretary of the Treasury, and in reality, works for the Chairman of the congressional Banking Committees. The first time anyone forgets that, he will be called into a Congressional hearing to remind him. Those hearings will be called when major losses occur, when major expenditures are made without political benefits, or when politically correct lending is not extended. The management of financial institutions will now be motivated to not have any losses, so risk taking of any type is out. These government-owned institutions will no longer participate in the type of aggressive risk-taking that has funded the largest and most dynamic economy in the world, and that has built the globe’s largest and most efficient capital market.
The management of these government-owned institutions will be motivated to make lending decisions based on political goals, rather than the merits of the loan itself. We will see much more lending to the relatives, friends and political donors of Congressmen, lending in certain Congressional districts, lending for questionable but politically correct projects, and so on. Bank lending will become the new source of “earmarks,” and the new source of money for the politically connected to loot. Any banker that forgets who is really in charge will find themselves called before a Congressional committee to be publically excoriated, humiliated, and professionally destroyed. Only a few examples will be required to teach this lesson to the rest. Making money is no longer the goal of banking – buying votes is the objective.
The tragedy for the American people and our economy is that massive intervention and Federal seizure of the financial sector was not necessary. The industry needed to go through the catharsis of bad decisions being rewarded by bank failures. Overly inflated financial assets needed to be revalued to sustainable levels – and still need to. All of this could have happened, albeit painfully, and the economy would have absorbed the pain, learned its lesson, readjusted to the new reality, and moved on to the overriding goal of growing by creating wealth. The actions of the US government are only serving to defer this necessary cleansing process, prolong the recession, and seriously degrade the capital markets.
The private equity market has grown tremendously over the last decade in response to increasing government intervention in and regulation of the public equity markets. Now private equity remains the great unregulated hope for capitalism in the United States to provide the investment capital and profit-maximizing guidance that will once again create growth in the American economy. That is, unless the major US banks can quickly pay off the government investments and get out from under the Congressional boot.
Monday, October 20, 2008
Why I Am Voting for a Democratic President in 2008
I have voted Republican in every Presidential election since I was first eligible to vote – which was for Richard Nixon over George McGovern (okay, no brainer). But this year in the 2008 Presidential election, I am going to vote Democratic for the first time. For the record, I want to explain why.
In my eyes, the most important issue in any election is the role of government. I am a strong believer that less government is generally better. I hold that view particularly regarding economic policy. Government should restrict its activities to protecting the country and its citizens, and to enforcing contracts and the general rule of law. Spending on other government activities should be minimized or curtailed, and individuals should retain as much of their wealth and income to spend and invest as they see fit. All other government economic activity and spending acts as a drag on the well-being of individuals and the country generally.
In the 2008 presidential election, we have two candidates who are both liberals and who both do not understand economics or how economies work. Both candidates are likely to yield to the liberal and economic expansionist tendencies of the Congress. Prior to the previous two months, I would have predicted that either president will oversee enacting policies that will send the economy into a recession. Now that a recession is all but inevitable from the Federal Reserve’s contraction of credit, I expect that either candidate will enact policies that will only deepen and prolong the recession.
This presidential election is basically a choice between two evils. Both candidates will create a worsening of the economic situation in this country. The only choice available in this election is whether the Democrats or the Republicans are going to get blamed for the terrible economic situation in the 2012 presidential election. For me, I want the Democrats to get the blame to enable the election of a more traditional Republican candidate in 2012.
That is why I am planning to vote for the Democratic candidate in 2012. There is no way to avoid the economic damage that will be caused in the next four years. But the Democrats should properly get the blame for what is to come. The electorate will recognize their mistake and repudiate Democratic candidates and economic policies in the next election.
It is clear that either McCain or Obama will oversee the enactment of disastrous economic policies, but they will do it for different reasons and in different ways. Barack Obama is clearly a socialist in his deepest beliefs. He is more ideological and committed to equality of outcomes than he would be if he were just a populist. He believes that wealth should be distributed from the more affluent to the less well-off, and that wealth can be skimmed in this way without a problem. He does not understand how the more affluent got that way, and the multiplying effect their activiies have on the economy. He does not understand, or maybe not even care, that increasing marginal tax rates on people reduces economic activity and the growth that comes from it. Like most professional politicians, Obama does not understand that wealth is fundamentally created, not distributed. The Democratic controlled Congress is strongly oriented towards “tax and spend” policies, so they will accelerate rather than restrain Obama’s policy inclinations, as long as they get to skim a part of the redistribution for their pork barrel projects.
McCain, on the other hand, will help enact bad economic policy more from ineptitude than from ideology. He is ignorant about economics at even the most fundamental level, and so he does not understand the consequences of economic policies. Even more damning, McCain does not have any strongly held beliefs or principles about the role of government in general or economic policy in particular. At least Obama has deeply held beliefs about economic systems, fundamentally wrong though they are. In addition, McCain is a long-standing member of the Congress, where compromise is the norm. Most of McCain’s life and success has been in the Congress, where no principle is so sacred that it can not be sold out or sacrificed for a short term expediency. Consequently, McCain will be led by the Democratic Congress on economic policy, and he will compromise with them in enacting harmful economic policies – because he thinks compromising is what governing means. John McCain would be George H. W. Bush all over again, with the same depressing effect on the country’s economy, and with the same unfavorable result for the Republican presidential candidate in 2012.
The last time that the country had to choose between two Senators for president was Nixon-McGovern in 1972. In retrospect, almost everyone would agree that it was a “damned if you do, damned if you don’t” choice. Since then, the country has always elected a governor to the presidency, usually over a Senator. I believe that the country inherently understands that governors know how to govern, how to make tough decisions and be responsible and accountable for their decisions. Senators, on the other hand, are seldom accountable for their actions. This year, unfortunately, we also have the unfortunate choice between two Senators, and the country will suffer for it for the next four years. All we can hope to do is to predispose a return to better economic policies in 2012.
In my eyes, the most important issue in any election is the role of government. I am a strong believer that less government is generally better. I hold that view particularly regarding economic policy. Government should restrict its activities to protecting the country and its citizens, and to enforcing contracts and the general rule of law. Spending on other government activities should be minimized or curtailed, and individuals should retain as much of their wealth and income to spend and invest as they see fit. All other government economic activity and spending acts as a drag on the well-being of individuals and the country generally.
In the 2008 presidential election, we have two candidates who are both liberals and who both do not understand economics or how economies work. Both candidates are likely to yield to the liberal and economic expansionist tendencies of the Congress. Prior to the previous two months, I would have predicted that either president will oversee enacting policies that will send the economy into a recession. Now that a recession is all but inevitable from the Federal Reserve’s contraction of credit, I expect that either candidate will enact policies that will only deepen and prolong the recession.
This presidential election is basically a choice between two evils. Both candidates will create a worsening of the economic situation in this country. The only choice available in this election is whether the Democrats or the Republicans are going to get blamed for the terrible economic situation in the 2012 presidential election. For me, I want the Democrats to get the blame to enable the election of a more traditional Republican candidate in 2012.
That is why I am planning to vote for the Democratic candidate in 2012. There is no way to avoid the economic damage that will be caused in the next four years. But the Democrats should properly get the blame for what is to come. The electorate will recognize their mistake and repudiate Democratic candidates and economic policies in the next election.
It is clear that either McCain or Obama will oversee the enactment of disastrous economic policies, but they will do it for different reasons and in different ways. Barack Obama is clearly a socialist in his deepest beliefs. He is more ideological and committed to equality of outcomes than he would be if he were just a populist. He believes that wealth should be distributed from the more affluent to the less well-off, and that wealth can be skimmed in this way without a problem. He does not understand how the more affluent got that way, and the multiplying effect their activiies have on the economy. He does not understand, or maybe not even care, that increasing marginal tax rates on people reduces economic activity and the growth that comes from it. Like most professional politicians, Obama does not understand that wealth is fundamentally created, not distributed. The Democratic controlled Congress is strongly oriented towards “tax and spend” policies, so they will accelerate rather than restrain Obama’s policy inclinations, as long as they get to skim a part of the redistribution for their pork barrel projects.
McCain, on the other hand, will help enact bad economic policy more from ineptitude than from ideology. He is ignorant about economics at even the most fundamental level, and so he does not understand the consequences of economic policies. Even more damning, McCain does not have any strongly held beliefs or principles about the role of government in general or economic policy in particular. At least Obama has deeply held beliefs about economic systems, fundamentally wrong though they are. In addition, McCain is a long-standing member of the Congress, where compromise is the norm. Most of McCain’s life and success has been in the Congress, where no principle is so sacred that it can not be sold out or sacrificed for a short term expediency. Consequently, McCain will be led by the Democratic Congress on economic policy, and he will compromise with them in enacting harmful economic policies – because he thinks compromising is what governing means. John McCain would be George H. W. Bush all over again, with the same depressing effect on the country’s economy, and with the same unfavorable result for the Republican presidential candidate in 2012.
The last time that the country had to choose between two Senators for president was Nixon-McGovern in 1972. In retrospect, almost everyone would agree that it was a “damned if you do, damned if you don’t” choice. Since then, the country has always elected a governor to the presidency, usually over a Senator. I believe that the country inherently understands that governors know how to govern, how to make tough decisions and be responsible and accountable for their decisions. Senators, on the other hand, are seldom accountable for their actions. This year, unfortunately, we also have the unfortunate choice between two Senators, and the country will suffer for it for the next four years. All we can hope to do is to predispose a return to better economic policies in 2012.
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