Quotulatiousness

April 3, 2015

The rise and fall of the Beanie Baby bubble

Filed under: Business,Economics,USA — Tags: , , , — Nicholas @ 03:00

City Journal‘s Laura Vanderkam looks at the amazing and unlikely fad that swept much of North America until the wheels came off:

In the last few years of the twentieth century, speculative mania gripped seemingly normal Americans. People debated prices in online chat rooms. They devoured literature claiming that sound fundamentals, not froth, led to sky-high valuations. The frenzy grew and then, suddenly, the bubble burst. People lost everything.

This describes the dot-com crash, but it also describes a less-remembered mania for adorable plush toys known as Beanie Babies. In The Great Beanie Baby Bubble, journalist Zac Bissonnette blends the unlikely economics of an asset class encompassing Kiwi the Toucan and Happy the Hippo, and the unhappy tale of Ty Warner, the ruthless tycoon behind them, into a saga far more entertaining than a business book deserves to be.

Like many in the toy industry, it turns out, Warner had an unhappy childhood. His father abused his sister; his mentally ill mother would later steal Warner’s car. Perhaps to compensate, Warner developed an obsessive attachment to stuffed animals. After beginning his career as a salesman, he threw himself into getting the details of the animals he designed for his eponymous toy company right. The eyes in particular had to lock on a buyer. He once borrowed an employee’s pearl necklace to be sure the pearlescent color of a product’s fur was correct. He wanted all his toys to be worthy of bearing his name, “Ty,” on the ubiquitous heart-shaped tags.

From the beginning of his entrepreneurial journey, “his two biggest competitive advantages — obsessive attention to detail and trade-show charisma—outweighed his myriad disadvantages: lack of scale, no advertising budget, a small and not especially competent sales force, a limited product line, and little in the way of a track record with retailers,” Bissonnette writes. Warner would sell only to small stores — a declining market — because he never wanted to see his precious animals end up in a big-box discount bin. Yet the resulting difficulty this created for customers wound up adding to the mystique. People like a hunt. Fortune was kind to Warner for a while, and the limited availability, coupled with strategic “retirements” of desired Beanie Babies, boosted demand. A few collectors started re-selling rare Beanie Babies on eBay. As they made money and told their friends, a mania ensued.

March 30, 2015

The built-in advantages of the traditional family structure

Filed under: Media,USA — Tags: , , , , — Nicholas @ 02:00

Megan McArdle on the reactions to a recent book dealing with traditional and non-traditional families:

Robert Putnam’s Our Kids: The American Dream in Crisis has touched off a wave of print and digital commentary. The book chronicles a growing divide between the way affluent kids are raised, in two-parent homes whose parents invest heavily in educating their kids, and the very different, very unstable homes in which poorer kids generally grow up.

Naturally, social conservatives are delighted with this lengthy examination of the problems created by unstable families, even if they are not equally delighted with Putnam’s recommendations (more government programs). Equally naturally, there is pushback from those who see the problem as primarily one of economics and insufficient government spending, as well as from those who argue that there are lots of good ways to raise kids outside the straitjacket of mid-century, middle-class mores.

I have been trying to find a more delicate way to phrase this, but I can’t: This is nonsense. The advantages that two people raising their own biological or jointly adopted children have over “nontraditional” family arrangements are too obvious to need enumeration, but apparently mere obviousness is not enough to forestall contrary arguments, so let me enumerate them anyway.

Raising children the way an increasing percentages of Americans are — in loosely attached cohabitation arrangements that break up all too frequently, followed by the formation of new households with new children by different parents — is an enormous financial and emotional drain. Supporting two households rather than one is expensive, and it diverts money that could otherwise be invested in the kids. The parent in the home has no one to help shoulder the load of caring for kids, meaning less investment of time and more emotional strain on the custodial parent. Children will spend less time with their noncustodial parent, especially if that parent has other offspring. Add in conflict between the parents over money and time, and it can infect relationships with the children. As one researcher told me when I wrote an article on the state of modern marriage, you frequently see fathers investing time and money with the kids whose mother they get along with the best, while the other children struggle along on crumbs.

People often argue that extended families can substitute, but of course, two-parent families also have extended families — two of them — so single-parent families remain at a disadvantage, especially because other members of the extended family are often themselves struggling with the challenges of single parenthood. Extended families just can’t substitute for the benefits of a two-parent family. Government can’t, either; universal preschool is not going to make up for an uninvolved parent, or one stretched too thin to give their kids enough time. Government can sand the rough edges off the economic hardship, of course, but even in a social democratic paradise such as Sweden, kids raised in single-parent households do worse than kids raised with both their parents in the home.

March 11, 2015

QotD: Inequality

Filed under: Economics,Quotations,USA — Tags: , , , , — Nicholas @ 01:00

The left has a habit of framing “inequality” (their current social-justice hobbyhorse) in economic terms, which is fortunate because it makes debunking their nonsense easier. The left’s fundamental bit of chicanery lies in their failure to define “inequality” in any rigorous way. This is very intentional, for it allows them to frame inequality however they please — generally in the usual race/gender/class terms and using money as a yardstick. Rich white men have too much money; poor brown people (especially poor female brown people) have too little; therefore equality demands a reapportioning of the money so everybody has more or less the same amount. This is not socialism, they insist (bizarrely, given that this is pretty much the textbook definition of socialism). This is fairness.

[…]

Ultimately, the left’s vision of “equality” is not an empowering vision; it is a cramped and stingy philosophy of reduced expectations and lowered hopes. The unspoken (but never unclear) theme is that it is the State, not individuals or families, who should own and dispense of wealth. A happy man, in the view of the left, is one who receives money from the State and then spends it on consumption with no thought given to the future (for the future belongs to the State). Legacy is what the State says it is. The citizen should always be a creature of the now, concerned with nothing but short-term needs and gratifications, and with no allegiances beyond the vital one to the State.

Monty, “Wealth as an end and wealth as means to an end”, Ace of Spades HQ, 2014-06-24.

March 3, 2015

“Sugar Baby U”

Filed under: Business,USA — Tags: , , — Nicholas @ 04:00

With US university tuition on its never-ending rise, some students are taking a rather different approach to funding their education … but everyone assures us that it isn’t actually prostitution:

The average student-loan debt is approaching $30,000. That is to say, of the 70 percent of college students who borrow to pay all or some of their college expenses, the average student left college about $28,400 in the hole in 2013, according to USNews.

This alarming number has triggered a spate of news stories about female college students who are so panicked, so morally freewheeling, or both, that they are seeking the services of “sugar daddies”: older, well-fixed men who yearn to sponsor the academic careers of young college-age women in return for the sheer pleasure of spending time in the company of one of those youthful but impecunious “sugar babies.” (No, it’s not prostitution, everyone involved insists!)

[…]

Nonetheless, would-be Holly Golightlys ought to be wary of claims that the sugar-baby lifestyle will make pursuing that B.A. in art history entirely cost-free. For one thing, the entity that seems to the biggest promoter of the sugaring-one’s-way-through-college phenomenon is none other than SeekingArrangement itself, apparently the world’s largest sugar broker, with a claimed 3.6 million members. A promotional video uploaded onto YouTube by Seeking Arrangements in January 2015 touts “Sugar Baby University” with images of gorgeous young ladies who seem to be majoring in mascara, one of whom is being handed a sheaf of C-notes as she sits at her laptop. “Take out loans and eat ramen,” says the voice-over, “or get a sugar daddy and live the life you’ve always wanted. Sugar Baby U. is the place “where beautiful, ambitious people graduate debt-free,” the voice continues.

SeekingArrangement’s motives in seeking maximum numbers of enrollees in Sugar Baby U. who are also enrollees at real universities are blindingly clear: College-age women — almost always in their early twenties — are the most desirable age group for men seeking less-than-serious liaisons. (Google “coed porn,” and you’ll see what I mean.)

But the competition for those well-heeled older men willing to foot the bill for a lovely young thing to “live the lifestyle” she’s “always wanted” turns out to be quite stiff. SeekingArrangement’s home page advertises that there are “8 sugar babies per sugar daddy” — not a hopeful-sounding ratio.

February 9, 2015

QotD: The hyper-rich are not like you and I

Filed under: Environment,Europe,Media,Quotations — Tags: , , , , , — Nicholas @ 01:00

Convening to ring the alarm about global warming, our putative betters and would-be rulers gathered in Davos, Switzerland, filling the local general-aviation hangars with some 1,700 private jets. Taking an international commercial flight is one of the most carbon-intensive things the typical person does in his life, but if you’re comparing carbon footprints between your average traveler squeezed into coach on American and Davos Man quaffing Pol Roger in his cashmere-carpeted intercontinental air limousine, you’re talking Smurfette vs. Sasquatch. The Bombardier’s Global 6000 may be a technical marvel, but it still runs on antique plankton juice. The emissions from heating all those sprawling hotel suites in the Alps in winter surely makes baby polar bears weep bitter and copious baby-polar-bear tears.

The stories add up: Jeff Greene brings multiple nannies on his private jet to Davos, and the rest of the guys gathered to talk past each other about the plight of the working man scarf down couture hot-dogs that cost forty bucks. Bill Clinton makes the case for wealth-redistribution while sporting a $60,000 platinum Rolex.

The hypocrisy of our literally (literally, Mr. Vice President!) high-flying crusaders against fossil fuels — who overlap considerably with our high-living crusaders against economic inequality — is endlessly annoying if frequently entertaining. And there is something unseemly about enduring puritanical little homilies on how we need to learn to live with less from guys wearing shoes that cost more than the typical American family earns in a quarter. When that obnoxious Alec Baldwin character from Glengarry Glen Ross informs that sad-sack real-estate salesman that his watch costs more than that guy’s car, he was trying to provoke him into getting richer, to the tune of a Cadillac Eldorado or, if not that, at least the second-prize set of steak knives. But our modern progressive versions of that guy are even more obnoxious: They demand that we lower our expectations while they live lives of opulence that would have embarrassed the Count of Monte Cristo.

Out-obnoxious-ing a guy with Alec Baldwin’s smirking mug takes a lot of brass.

Kevin Williamson, “Davos’s Destructive Elites: ‘None of us is as dumb as all of us'”, National Review, 2015-01-25.

January 28, 2015

The great and the good gather at Davos

Filed under: Economics,Politics — Tags: , , , , — Nicholas @ 03:00

And Monty calls ‘em exactly what they are:

Luckily, all is not lost. Our moral and ethical betters have gathered in Davos to light their cigars with hundred-dollar bills while mocking the tubercular bootblack who’s been pressed into service to keep their shoes looking spiffy while they chat and laugh and eat lobster canapes. Oh, wait, I read that wrong, sorry. They’re in Davos to discuss the pressing problem of Global Warming(tm). Because they’re so concerned about Global Warming(tm) that they felt compelled to fly their private jets to an upscale enclave in the Swiss Alps to talk about it. While making fun of the tubercular bootblack who’s spit-shining their wingtips.

Don’t get me wrong – I’m a big believer in ostentatious displays of wealth. If I had the money, I’d build a hundred-foot-high statue of myself made out of pure platinum and then hire homeless people to worship at it for no fewer than eight hours per day. (I’d pay them a fair wage, though. What’s the going rate for abject obeisance to a living God? I’ll have to look it up.) But this Davos thing is just…rank. It’s a collection of rich fart-sniffers who want to congratulate each other on how socially conscious they are, and how much they care about the Little People. (Except the tubercular bootblack, whom they often kick with their rich-guy shoes.)

January 26, 2015

QotD: Against the Human Development Index (HDI)

Filed under: Economics,Quotations — Tags: , , — Nicholas @ 01:00

[W]hat exactly is the HDI? The one-line explanation is that it gives “equal weights” to GDP per capita, life expectancy, and education. But it’s more complicated than that, because scores on each of the three measures are bounded between 0 and 1. This effectively means that a country of immortals with infinite per-capita GDP would get a score of .666 (lower than South Africa and Tajikistan) if its population were illiterate and never went to school.

So what are the main problems with the HDI?

1. I can see giving equal weights to GDP per capita and life expectancy. But education? As a professor and a snob, I understand the appeal (though a measure of opera consumption would be even better). But in terms of the actual if not professed values of normal human beings, televisions and cars are a lot more important than books.

2. When you take a closer look at the HDI’s education measure, it’s especially bogus. 2/3rds of the weight comes from the literacy rate. At least that’s not ridiculous. But the other 1/3 comes from the Gross Enrollment Index — the fraction of the population enrolled in primary, secondary, or tertiary education. OK, I feel a reductio ad absurdum coming on. To max out your education score, you have to turn 100% of your population into students!

3. The HDI purportedly gives equal weights to three different outcomes, but bounding the results between 0 and 1 builds in a massive bias against GDP. GDP per capita has grown fantastically during the last two centuries, and will continue to do so. In reality, there’s plenty of room left for further improvement even in rich countries. But the HDI doesn’t allow this. Since rich countries are already close to the upper bound, the HDI effectively defines their future progress on this dimension out of existence.

To a lesser extent, the same goes for life expectancy: While it’s roughly doubled over the last two centuries, dying at 85 is not, contrary to the HDI, approximately equal in value to immortality.

The clear winners from this weighting scheme, of course, are the literacy and enrollment measures, both of which have upper bounds that are imposed by logic rather than fiat.

4. The ultimate problem with the HDI, though, is lack of ambition. It effectively proclaims an “end of history” where Scandinavia is the pinnacle of human achievement. […] Scandinavia comes out on top according to the HDI because the HDI is basically a measure of how Scandinavian your country is.

Bryan Caplan, “Against the Human Development Index”, Econlog, 2009-05-22.

January 10, 2015

Sub-orbital airliners? Not if you know much about economics and physics

Filed under: Economics,Technology — Tags: , , , , , — Nicholas @ 02:00

Charles Stross in full “beat up the optimists” mode over a common SF notion about sub-orbital travel for the masses:

Let’s start with a simple normative assumption; that sub-orbital spaceplanes are going to obey the laws of physics. One consequence of this is that the amount of energy it takes to get from A to B via hypersonic airliner is going to exceed the energy input it takes to cover the same distance using a subsonic jet, by quite a margin. Yes, we can save some fuel by travelling above the atmosphere and cutting air resistance, but it’s not a free lunch: you expend energy getting up to altitude and speed, and the fuel burn for going faster rises nonlinearly with speed. Concorde, flying trans-Atlantic at Mach 2.0, burned about the same amount of fuel as a Boeing 747 of similar vintage flying trans-Atlantic at Mach 0.85 … while carrying less than a quarter as many passengers.

Rockets aren’t a magic technology. Neither are hybrid hypersonic air-breathing gadgets like Reaction Engines‘ Sabre engine. It’s going to be a wee bit expensive. But let’s suppose we can get the price down far enough that a seat in a Mach 5 to Mach 10 hypersonic or sub-orbital passenger aircraft is cost-competitive with a high-end first class seat on a subsonic jet. Surely the super-rich will all switch to hypersonic services in a shot, just as they used Concorde to commute between New York and London back before Airbus killed it off by cancelling support after the 30-year operational milestone?

Well, no.

Firstly, this is the post-9/11 age. Obviously security is a consideration for all civil aviation, right? Well, no: business jets are largely exempt, thanks to lobbying by their operators, backed up by their billionaire owners. But those of us who travel by civil airliners open to the general ticket-buying public are all suspects. If something goes wrong with a scheduled service, fighters are scrambled to intercept it, lest some fruitcake tries to fly it into a skyscraper.

So not only are we not going to get our promised flying cars, we’re not going to get fast, cheap, intercontinental travel options. But what about those hyper-rich folks who spend money like water?

First class air travel by civil aviation is a dying niche today. If you are wealthy enough to afford the £15,000-30,000 ticket cost of a first-class-plus intercontinental seat (or, rather, bedroom with en-suite toilet and shower if we’re talking about the very top end), you can also afford to pay for a seat on a business jet instead. A number of companies operate profitably on the basis that they lease seats on bizjets by the hour: you may end up sharing a jet with someone else who’s paying to fly the same route, but the operating principle is that when you call for it a jet will turn up and take you where you want to go, whenever you want. There’s no security theatre, no fuss, and it takes off when you want it to, not when the daily schedule says it has to. It will probably have internet connectivity via satellite—by the time hypersonic competition turns up, this is not a losing bet—and for extra money, the sky is the limit on comfort.

I don’t get to fly first class, but I’ve watched this happen over the past two decades. Business class is holding its own, and premium economy is growing on intercontinental flights (a cut-down version of Business with more leg-room than regular economy), but the number of first class seats you’ll find on an Air France or British Airways 747 is dwindling. The VIPs are leaving the carriers, driven away by the security annoyances and drawn by the convenience of much smaller jets that come when they call.

For rich people, time is the only thing money can’t buy. A HST flying between fixed hubs along pre-timed flight paths under conditions of high security is not convenient. A bizjet that flies at their beck and call is actually speedier across most intercontinental routes, unless the hypersonic route is serviced by multiple daily flights—which isn’t going to happen unless the operating costs are comparable to a subsonic craft.

December 16, 2014

Affluence and the rise of major modern religions

Filed under: Economics,History,Religion — Tags: , , , , , — Nicholas @ 07:30

Colby Cosh linked to this article in Popular Archaeology, which discusses an interesting idea about what triggered the rise of Christianity, Judaism, Hinduism, and Islam:

It seems almost self-evident today that religion is on the side of spiritual and moral concerns, but that was not always so, Baumard explains. In hunter-gatherer societies and early chiefdoms, for instance, religious tradition focused on rituals, sacrificial offerings, and taboos designed to ward off misfortune and evil.

That changed between 500 BCE and 300 BCE — a time known as the “Axial Age” — when new doctrines appeared in three places in Eurasia. “These doctrines all emphasized the value of ‘personal transcendence,'” the researchers write, “the notion that human existence has a purpose, distinct from material success, that lies in a moral existence and the control of one’s own material desires, through moderation (in food, sex, ambition, etc.), asceticism (fasting, abstinence, detachment), and compassion (helping, suffering with others).”

While many scholars have argued that large-scale societies are possible and function better because of moralizing religion, Baumard and his colleagues weren’t so sure. After all, he says, some of “the most successful ancient empires all had strikingly non-moral high gods.” Think of Egypt, the Roman Empire, the Aztecs, the Incas, and the Mayans.

In the new study, the researchers tested various theories to explain the history in a new way by combining statistical modeling on very long-term quantitative series with psychological theories based on experimental approaches. They found that affluence — which they refer to as “energy capture” — best explains what is known of the religious history, not political complexity or population size. Their Energy Capture model shows a sharp transition toward moralizing religions when individuals were provided with 20,000 kcal/day, a level of affluence suggesting that people were generally safe, with roofs over their heads and plenty of food to eat, both in the present time and into the foreseeable future.

December 10, 2014

QotD: Quality, innovation, and progress

Filed under: Economics,Liberty,Quotations,Technology — Tags: , , , , — Nicholas @ 00:01

Measured by practically any physical metric, from the quality of the food we eat to the health care we receive to the cars we drive and the houses we live in, Americans are not only wildly rich, but radically richer than we were 30 years ago, to say nothing of 50 or 75 years ago. And so is much of the rest of the world. That such progress is largely invisible to us is part of the genius of capitalism — and it is intricately bound up with why, under the system based on selfishness, avarice, and greed, we do such a remarkably good job taking care of one another, while systems based on sharing and common property turn into miserable, hungry prison camps.

We treat the physical results of capitalism as though they were an inevitability. In 1955, no captain of industry, prince, or potentate could buy a car as good as a Toyota Camry, to say nothing of a 2014 Mustang, the quintessential American Everyman’s car. But who notices the marvel that is a Toyota Camry? In the 1980s, no chairman of the board, president, or prime minister could buy a computer as good as the cheapest one for sale today at Best Buy. In the 1950s, American millionaires did not have access to the quality and variety of food consumed by Americans of relatively modest means today, and the average middle-class household spent a much larger share of its income buying far inferior groceries. Between 1973 and 2008, the average size of an American house increased by more than 50 percent, even as the average number of people living in it declined. Things like swimming pools and air conditioning went from being extravagances for tycoons and movie stars to being common or near-universal. In his heyday, Howard Hughes didn’t have as good a television as you do, and the children of millionaires for generations died from diseases that for your children are at most an inconvenience. As the first 199,746 or so years of human history show, there is no force of nature ensuring that radical material progress happens as it has for the past 250 years. Technological progress does not drive capitalism; capitalism drives technological progress — and most other kinds of progress, too.

Kevin D. Williamson, “Welcome to the Paradise of the Real: How to refute progressive fantasies — or, a red-pill economics”, National Review, 2014-04-24

November 20, 2014

“The Piketty Gang ride in, a hollerin’ an’ a whoopin’ and take all the money from Scrooge McDuck”

Filed under: Economics,Media — Tags: , , — Nicholas @ 12:30

At Forbes, Tim Worstall explains why — despite the headlines — Piketty didn’t actually change economics:

That optimal taxation theory really rests on two things that we’re pretty sure are true. The first being that Laffer Curve thing. No, this doesn’t mean that all tax cuts pay for themselves. Rather, that it’s possible for tax rates to be so high that they actually reduce the amount of tax revenue being collected. A nice example of this is the latest rise in New York’s cigarette tax: less money in total is now being raised even though the tax rate has risen. Given that our primary purpose in taxing is to get the money we need to run the government that we must have (as ever, my opinion being that we might want to have less government, and thus lower taxes, than we currently do but that’s another matter) having a tax over the revenue maximising rate just isn’t sensible.

The second pillar is that we know that different taxes destroy different amounts of economic activity for the same revenue collected. As above, we want to gain revenue but obviously we also want it at the least cost. That means getting as much of it as we can from the low deadweight costs taxes and as little of it as we can manage from the high cost ones. We also know how the spectrum looks. At the lowest deadweight costs we have repeated taxes on real property (say, a land value tax), then taxes upon consumption (VAT or sales taxes) then on incomes and highest of all, upon corporates and capital. There’s one off the spectrum, transactions taxes like the financial transactions tax, but that’s so silly that no one serious is suggesting it.

So, standard and general theory insists that we shouldn’t be taxing corporates and capital at all if we can manage it and also that we don’t want to have very high taxes rates on anything.

So, if for political (or even emotional) reasons you think that we really should be gouging the rich then you’re going to have to go find yourself some new economic theories. And that, I think, is really what is going on here with Piketty and the gang (slightly catchy that, isn’t it? The Piketty Gang ride in, a hollerin’ an’ a whoopin’ and take all the money from Scrooge McDuck?). They want to find a reason to tax wealth, something conventionally contraindicated, and they want to have very high income tax rates, something also contraindicated by conventional theory. So, rather than try to overturn that conventional theory they’re bypassing it. Ignoring it even and just bringing up the idea of inequality instead to see if that will convince people.

November 13, 2014

“Class matters far less than it used to in the 19th century. Citizenship matters far more.”

Filed under: Britain,Economics,History — Tags: , — Nicholas @ 00:02

Tim Harford — white, male Oxford grad and child of Oxbridge-educated parents — checks his privilege:

All these accidents of birth are important. But there’s a more important one: citizenship. Gillian, Simon and I are all British citizens. Financially speaking, this is a greater privilege than all the others combined.

Imagine lining up everyone in the world from the poorest to the richest, each standing beside a pile of money that represents his or her annual income. The world is a very unequal place: those in the top 1 per cent have vastly more than those in the bottom 1 per cent – you need about $35,000 after taxes to make that cut-off and be one of the 70 million richest people in the world. If that seems low, it’s $140,000 after taxes for a family of four – and it is also about 100 times more than the world’s poorest people have.

What determines who is at the richer end of that curve is, mostly, living in a rich country. Branko Milanovic, a visiting presidential professor at City University New York and author of The Haves and the Have-Nots, calculates that about 80 per cent of global inequality is the result of inequality between rich nations and poor nations. Only 20 per cent is the result of inequality between rich and poor within nations. […]

That might seem obvious but it’s often ignored in the conversations we have about inequality. And things used to be very different. In 1820, the UK had about three times the per capita income of countries such as China and India, and perhaps four times that of the poorest countries. The gap between rich countries and the rest has since grown. Today the US has about five times the per capita income of China, 10 times that of India and 50 times that of the poorest countries. (These gaps could be made to look even bigger by not adjusting for lower prices in China and India.) Being a citizen of the US, the EU or Japan is an extraordinary economic privilege, one of a dramatically different scale than in the 19th century.

September 14, 2014

QotD: Chinese millionaires

Filed under: China,Humour,Quotations — Tags: , , , — Nicholas @ 00:01

Up to a point, as we recognized, the problem of the coolie-millionaire offers no real difficulty. The Chinese coolie lives in a palm-thatched hovel on a bowl of rice. When he has risen to a higher occupation — hawking peanuts, for example, from a barrow — he still lives on rice and still lives in a hovel. When he has risen farther — to the selling, say, of possibly stolen bicycle parts, he keeps to his hovel and his rice. The result is that he has money to invest. Of ten coolies in this situation, nine will lose their money by unwise speculation. The tenth will be clever or lucky. He will live, nevertheless, in his hovel. He will eat, as before, his rice. As a success technique this is well worthy of study.

In the American log cabin story the point is soon reached at which the future millionaire must wear a tie. He explains that he cannot otherwise inspire confidence. He must also acquire a better address, purely (he says) to gain prestige. In point of fact, the tie is to please his wife and the address to satisfy his daughter. The Chinese have their womenfolk under better control. So the prosperous coolie sticks to his hovel and his rice. This is a known fact and admits of two explanations. In the first place his home (whatever its other disadvantages) has undeniably brought him luck. In the second place, a better house would unquestionably attract the notice of the tax collector. So he wisely stays where he is. He will often keep the original hovel — at any rate as an office — for the rest of his life. He quits it so reluctantly that his decision to move marks a major crisis in his career.

When he moves it is primarily to evade the exactions of secret societies, blackmailers, and gangs. To conceal his growing wealth from the tax collector is a relatively easy matter; but to conceal it from his business associates is practically impossible. Once the word goes round that he is prospering, accurate guesses will be made as to the sum for which he can be “touched.” All this is admittedly well known, but previous investigators have jumped too readily to the conclusion that there is only one sum involved. In point of fact there are three: the sum the victim would pay if kidnapped and held to ransom; the sum he would pay to keep a defamatory article out of a Chinese newspaper; the sum he would subscribe to charity rather than lose face.

Our task was to ascertain the figure the first sum will have reached (on an average) at the moment when migration takes place from the original hovel to a well-fenced house guarded by an Alsatian hound. It is this move that has been termed “Breaking the Hound Barrier.” Social scientists believe that it will tend to occur as soon as the ransom to be exacted comes to exceed the overhead costs of the “snatch.”

C. Northcote Parkinson, “Palm Thatch To Packard Or A Formula For Success”, Parkinson’s Law (and other studies in administration), 1957.

July 9, 2014

Justin Raimondo reviews new biography of the Koch family

Filed under: Business,History,Media,USA — Tags: , , — Nicholas @ 07:46

The archvillains of capitalism, Charles and David Koch, are the subjects of a recent book by Mother Jones writer Daniel Schulman. Justin Raimondo reviews Sons of Wichita: How the Koch Brothers Became America’s Most Powerful and Private Dynasty.

According to Senate Majority Leader Harry Reid, the Koch brothers are responsible for global warming and much else that’s wrong with the world. This is part of a strategy to demonize Charles and David Koch — the principals behind the country’s largest privately-held company — and make them the issue come Election Day. There’s a big problem with this strategy, however: a recent poll shows that most of Reid’s own constituents haven’t the slightest idea who the Brothers Koch are.

Daniel Schulman’s much anticipated book, the first biography of the Koch family, may help voters bridge the knowledge gap — but Democrats are going to be disappointed if they think it will help their smear campaign. Indeed, it is likely to do the opposite. It’s hard to write a biography of someone you hate, and Schulman, a writer for Mother Jones, clearly came to admire his subjects.

The story starts with Fred Koch, a son of Dutch immigrants who settled in the “poor but plucky” town of Quanah, east of the Texas panhandle. Ambitious, single-minded, and tough as nails, Fred made his fortune helping Joe Stalin extract oil from the Russian steppes — learning in the process that the rosy picture of a “workers’ paradise” drawn by the likes of Walter Durante was the exact opposite of the truth.

Driven to seek overseas markets by an onslaught of patent-infringement lawsuits from a Rockefeller-connected oil consortium, Fred Koch arrived in Russia in 1930 and “found it a land of hunger, misery, and terror,” as he would later recall. When he left that autumn, his Soviet minder — who had spent the whole time capitalist-baiting him — bid adieu with this warning: “I’ll see you in the United States sooner than you think.” What Fred had seen in Stalin’s Russia set him on a course that landed him in the ranks of the John Birch Society.

Robert Welch, the society’s founder, recruited him early on: Fred was at the 1958 meeting where Welch first laid out his plan to fight the Communist menace and roll back the New Deal. The John Birch Society was a hybrid of Old Right libertarian economics and the McCarthyite paranoia of the 1950s, and Fred — by this time a tycoon — relentlessly lectured his four sons on the evils of collectivism and the value of hard work. He had no intention of raising a brood of “country-club bums” who would coast along on the family fortune. The 1950s were almost over before he bought the kids a television, and even then they had little time to watch it.

June 25, 2014

Mexico’s champion crony capitalist

Filed under: Americas,Economics,Government — Tags: , , , — Nicholas @ 08:31

I don’t read the various financial magazines’ regular fanboi coverage of multi-billionaires, so I wasn’t all that aware of the fabulous wealth of Mexico’s Carlos Slim. Slim is one of the richest men in the world, but he doesn’t owe his success to technical innovation or outstanding business skills … he owns the Mexican telephone market thanks to a sweetheart “privatization” deal he got from his good friend in the Presidential palace back in 1990. In other words, his fortune largely derives from his ability to skim off vast profits from a captive customer base. Steve Sailer rounds up some interesting snippets about Slim, including a bit from French economist and current media darling Thomas Piketty:

Andres Oppenheimer wrote for PBS:

    Mexico in the early nineties was similar to American capitalism in the late 1870s. Azcarraga, Slim, and Hernandez were not much different from railroad and steel magnate Andrew Carnegie or oil trader John D. Rockefeller. Like the American “Robber Barons” of their time, the Mexico Twelve were making a fortune from their close partnership with the government. And to their immense relief, Mexico was not contemplating anything like the 1890 Sherman Anti-Trust Act, which had broken up U.S. monopolies through forced sell-offs.

In return, Salinas demanded at a private dinner party on February 23, 1993 that Slim and Mexico’s other 29 oligarchs donate $25 million each to the ruling party’s campaign war chest, a total of $750 million. Oppenheimer notes:

    Telecommunications magnate Slim … supported the motion, adding only that he wished the funds had been collected privately, rather than at a dinner, because publicity over the banquet could “turn into a political scandal.”

Now, you might think that there is something unseemly about a regular contender for the title of World’s Richest Man making his fortune off the relatively small Mexican economy. We’re constantly told that Mexicans have to be allowed to flock to America to escape starvation in their own land. Yet one well-connected monopolist is permitted to pile up an enormous trove by charging exorbitant fees for the lifeblood of any economy, communications.

A 2006 article in the New York Times pointed out:

    The Organization for Economic Cooperation and Development, an association of wealthy countries based in Paris, reports that Mexicans pay some of the highest phone rates in the world, with calls costing 50 percent more than the group’s average. Forbes reported that the average monthly phone bill for a small business in Mexico is $132, compared with $60 in the United States.

Slim epitomizes the toll taken on the Mexican economy by monopolists:

    As a result, said Mr. Ortiz of the Bank of Mexico, economic growth is one percentage point less than it could be with real competition. There are not enough jobs to keep workers from migrating to the United States …

Piketty, however, is offended by how Slim

    … is often described in the Western press as one who owes his great wealth to monopoly rents obtained through (implicitly corrupt) government favors…

(Slim, himself, has been proactive about improving his press coverage: in 2008 he financially bailed out the New York Times and is now the newspaper of record’s second-biggest owner. Not surprisingly, Slim, who profits lavishly off long distance calls between illegal immigrants in America and their loved ones in Mexico, doesn’t get mentioned much in the Times’ vociferous denunciations of immigration skeptics.)

Piketty, in his inimitable prose style, explains that criticizing Slim is a mistake, if not downright racist:

    Rather than indulge in constructing a moral hierarchy of wealth, which in practice often amounts to an exercise in Western ethnocentrism, I think it is more useful to try to understand the general laws that govern the dynamics of wealth—leaving individuals aside and thinking instead about modes of regulation, and in particular taxation, that apply equally to everyone, regardless of nationality.

In other words, rather than the citizens of Mexico using the rule of law to break up Slim’s monopoly, as Americans did with Rockefeller’s, the important thing is for readers of Capital to take global control.

What could possibly go wrong in Piketty’s planetary empire?

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