Control what you can control
One must move step by step and keep moving - Atlas Shrugged, Ayn Rand
Take pride in all that you do
Value the process of hard work rather than the rewards it brings
You reap what you sow
Sunday, December 28, 2008
Sunday, December 21, 2008
The Impressionable Elites Get Snookered
Mark Penn of the Wall Street Journal has a great article with some interesting facts concerning the economic crises and the growth in wealth over the past decade. Click here to see the article or read below.
The Impressionable Elites Get Snookered
MICROTRENDS
DECEMBER 19, 2008, 11:42 A.M. ET
By MARK PENN
For most of this century, con men and hucksters preyed on the uneducated and the elderly who couldn't read the fine print. Some still are.
But now we learn that the real mother lode for con artists is not composed of uninformed dowagers who were left an estate they don't know how to manage, but rather the Impressionable Elites* of country clubs, and the rarefied hedge fund managers of Wall Street and Greenwich.
Forget about huge, sweeping megaforces. The biggest trends today are micro: small, under-the-radar patterns of behavior which take on real power when propelled by modern communications and an increasingly independent-minded population. In the U.S., one percent of the nation, or three million people, can create new markets for a business, spark a social movement, or produce political change. This column is about identifying these important new niches, and acting on that knowledge.
In "Microtrends: The Small Forces Behind Tomorrow's Big Changes," I take the view that rational, informed behavior is spreading through the better-educated lower and middle classes -- those who went to college, have information-economy jobs, and use the Internet. But at the same time, the elites have become more impressionable -- more removed from everyday problems, more trusting of what they hear, and more likely to adopt unthinking viewpoints based on brand or emotion.
Bernard Madoff proves the point. Here he is, in the most numbers-dominated part of our economy, and no one questioned his numbers. He sold himself to people on the basis of brand, and he got access to more marks by using the smart, rich and famous to introduce him to more of the smart, rich and famous.
Historically, elites have behaved like this. They follow a path from being the founders of new nations to the dupes who stand by as their piece of civilization is sacked and pillaged. It's like the old cliché about Nero fiddling while Rome burns. We are not quite where Rome wound up, but we're exhibiting some of its tendencies.
What happened in America before the financial crisis is that we had the fastest expansion of the elite population in history. In 1996, the top 1% of voters and consumers made $200,000 a year or more. Now, in the last election, 6% of the voters made over $200,000 a year -- a surprising sixfold increase in what used to be called the top 1%.
But our research** shows that the top 1% is heavily swayed by gut and impression, not numbers and facts. They vote more on the basis of personality in campaigns; buy products more on the basis of brands; and invest more on the basis of the tip than on sound logic. Who else would pay a premium for jungle-ready vehicles to run the rugged terrains of Scarsdale and Georgetown? Or shop at doggy bakeries for their pampered pooches?
How else could you explain Mr. Madoff allegedly making off with $50 billion dollars of elite money in the largest Ponzi scheme in history? Or Marc Dreier, the lawyer accused of selling $380 million of non-existent promissory notes to major investors?
At a recent meeting of my condo, the residents were asked if they had read all those documents they signed when they bought their apartments. One hand went up. Most of the residents hadn't even asked their lawyers check them out.
Elites are on information- and time-management overload, and the result is that they have been making big decisions with less information, not more. They throw their hands up in the face of adversity and complexity, relying upon the judgment of others instead of forming their own.
The entire financial crisis was started by small microtrends overlooked by some of the best and brightest minds at institution after institution. The crisis started with a default rate of something like 17% on subprimes, which were only about 10% of the marketplace -- or a total of about 1.7% of all mortgages. This tiny but growing group of borrowers -- a microtrend -- had enormous consequences for unwinding trillions of dollars of leverage and freezing the entire credit system. It happened because the best and brightest minds simply ignored those forces as too small to matter, too improbable to become important. But they did.
So now these same elites, and the millions who trusted them, are going to have to look at the numbers again. They can't just put their money in mysterious hedge funds and bigger houses and wait for manna to drop from the sky. They are going to have to start balancing their checkbooks, managing their healthcare costs and setting a monthly budget that they actually meet. Looking at greatly diminished assets and futures, these elites might just be shocked into reading the fine print on what they buy, or demanding detailed statements every month that they open and read.
And real transparency just might sell again to elites who used to love to invest in the black box. All Madoff and Dreier did was prey on the basic fact that elites don't really ask questions of other elites, and don't really demand answers when they do. Maybe that will change.
Maybe people will start ordering up mini SOX audits of their own finances, catching those repeating credit card subscriptions that go on their credit cards for things they have not used in years; demanding that each and every fund they invest in meet strict new criteria. They might even ask elite colleges to justify $50,000 a year in tuition for little personalized instruction.
The Dreier and Madoff scandals show just how impressionable even the smartest, best educated elites have become. But the reaction to their own unwinding, and to the reality of the financial crisis, just might bring them back to earth.
* "Impressionable Elites" is the term we used for educated, affluent people who focus more on personality than issues when it comes to evaluating political decisions. For more, please see pages 131 to 135 in "Microtrends."
Write to the Online Journal's editors at newseditors@wsj.com
The Impressionable Elites Get Snookered
MICROTRENDS
DECEMBER 19, 2008, 11:42 A.M. ET
By MARK PENN
For most of this century, con men and hucksters preyed on the uneducated and the elderly who couldn't read the fine print. Some still are.
But now we learn that the real mother lode for con artists is not composed of uninformed dowagers who were left an estate they don't know how to manage, but rather the Impressionable Elites* of country clubs, and the rarefied hedge fund managers of Wall Street and Greenwich.
Forget about huge, sweeping megaforces. The biggest trends today are micro: small, under-the-radar patterns of behavior which take on real power when propelled by modern communications and an increasingly independent-minded population. In the U.S., one percent of the nation, or three million people, can create new markets for a business, spark a social movement, or produce political change. This column is about identifying these important new niches, and acting on that knowledge.
In "Microtrends: The Small Forces Behind Tomorrow's Big Changes," I take the view that rational, informed behavior is spreading through the better-educated lower and middle classes -- those who went to college, have information-economy jobs, and use the Internet. But at the same time, the elites have become more impressionable -- more removed from everyday problems, more trusting of what they hear, and more likely to adopt unthinking viewpoints based on brand or emotion.
Bernard Madoff proves the point. Here he is, in the most numbers-dominated part of our economy, and no one questioned his numbers. He sold himself to people on the basis of brand, and he got access to more marks by using the smart, rich and famous to introduce him to more of the smart, rich and famous.
Historically, elites have behaved like this. They follow a path from being the founders of new nations to the dupes who stand by as their piece of civilization is sacked and pillaged. It's like the old cliché about Nero fiddling while Rome burns. We are not quite where Rome wound up, but we're exhibiting some of its tendencies.
What happened in America before the financial crisis is that we had the fastest expansion of the elite population in history. In 1996, the top 1% of voters and consumers made $200,000 a year or more. Now, in the last election, 6% of the voters made over $200,000 a year -- a surprising sixfold increase in what used to be called the top 1%.
But our research** shows that the top 1% is heavily swayed by gut and impression, not numbers and facts. They vote more on the basis of personality in campaigns; buy products more on the basis of brands; and invest more on the basis of the tip than on sound logic. Who else would pay a premium for jungle-ready vehicles to run the rugged terrains of Scarsdale and Georgetown? Or shop at doggy bakeries for their pampered pooches?
How else could you explain Mr. Madoff allegedly making off with $50 billion dollars of elite money in the largest Ponzi scheme in history? Or Marc Dreier, the lawyer accused of selling $380 million of non-existent promissory notes to major investors?
At a recent meeting of my condo, the residents were asked if they had read all those documents they signed when they bought their apartments. One hand went up. Most of the residents hadn't even asked their lawyers check them out.
Elites are on information- and time-management overload, and the result is that they have been making big decisions with less information, not more. They throw their hands up in the face of adversity and complexity, relying upon the judgment of others instead of forming their own.
The entire financial crisis was started by small microtrends overlooked by some of the best and brightest minds at institution after institution. The crisis started with a default rate of something like 17% on subprimes, which were only about 10% of the marketplace -- or a total of about 1.7% of all mortgages. This tiny but growing group of borrowers -- a microtrend -- had enormous consequences for unwinding trillions of dollars of leverage and freezing the entire credit system. It happened because the best and brightest minds simply ignored those forces as too small to matter, too improbable to become important. But they did.
So now these same elites, and the millions who trusted them, are going to have to look at the numbers again. They can't just put their money in mysterious hedge funds and bigger houses and wait for manna to drop from the sky. They are going to have to start balancing their checkbooks, managing their healthcare costs and setting a monthly budget that they actually meet. Looking at greatly diminished assets and futures, these elites might just be shocked into reading the fine print on what they buy, or demanding detailed statements every month that they open and read.
And real transparency just might sell again to elites who used to love to invest in the black box. All Madoff and Dreier did was prey on the basic fact that elites don't really ask questions of other elites, and don't really demand answers when they do. Maybe that will change.
Maybe people will start ordering up mini SOX audits of their own finances, catching those repeating credit card subscriptions that go on their credit cards for things they have not used in years; demanding that each and every fund they invest in meet strict new criteria. They might even ask elite colleges to justify $50,000 a year in tuition for little personalized instruction.
The Dreier and Madoff scandals show just how impressionable even the smartest, best educated elites have become. But the reaction to their own unwinding, and to the reality of the financial crisis, just might bring them back to earth.
* "Impressionable Elites" is the term we used for educated, affluent people who focus more on personality than issues when it comes to evaluating political decisions. For more, please see pages 131 to 135 in "Microtrends."
Write to the Online Journal's editors at newseditors@wsj.com
Quote of the Day
"In the midst of winter, I finally learned that there was in me an invincible summer."
-Albert Camus
-Albert Camus
Sunday, August 17, 2008
Chilling Costs of Global Warming (from WSJ)
Let me preface this with a brief synopsis of my opinions on global warming as they stand today. Generally, I believe that global warming is a natural effect of the world as was the ice age and all previous geological phases of Earth. Having said that, the human condition could have an impact on the speed or depth of global warming, and I am a firm believer in curtailing our possible effect on it (less electricity, less a/c and heat, less traveling, less fossil fuels, less water...more efforts to protect the ozone as we understand it today, more renewable energy sources, more recycling, more local produce, etc.). I think it is interesting that specialization, globalization and the booming population of the world are being cited as possible causes for global warming. These particular things are directly related to the progress of mankind, at least in his economic and health terms. Truly, without these developments, it is possible that humans wouldn't have the time and/or resources to devote to global warming whether through researching, protesting, etc. Anyway, the article is below and obviously there are two sides to this intensifying argument.
Chilling Costs of Global Warming
May 31, 2008; Page A10
Mackubin Thomas Owens's op-ed "Blame Congress for High Oil Prices1" ( May 29) is great, except it only touches on how the environmentalists are killing our economy and now people, too.
Congress has bought into the so-called global warming issue despite the fact that 32,000 scientists recently signed a petition stating that man's being the cause of any warming was suspect at best. Even Jupiter warmed up one degree this year. Did we do this?
As a result, we have taken 30% of our corn to make 3% of our fuel. It takes one gallon of gas to make 1/13 gallons of ethanol. Ethanol then burns 80% as efficient for no net gain. But it's cleaner!
So the environmentalists have stopped our exploration for fossil fuels, stopped our expansion of nuclear energy, stopped our production of coal-fired power plants, and now have convinced Congress to turn our food into energy, starving millions.
Global warming is killing people -- they are right -- not by any potential warming, but by starvation and lack of energy.
Peter Holmes
San Antonio
Chilling Costs of Global Warming
May 31, 2008; Page A10
Mackubin Thomas Owens's op-ed "Blame Congress for High Oil Prices1" ( May 29) is great, except it only touches on how the environmentalists are killing our economy and now people, too.
Congress has bought into the so-called global warming issue despite the fact that 32,000 scientists recently signed a petition stating that man's being the cause of any warming was suspect at best. Even Jupiter warmed up one degree this year. Did we do this?
As a result, we have taken 30% of our corn to make 3% of our fuel. It takes one gallon of gas to make 1/13 gallons of ethanol. Ethanol then burns 80% as efficient for no net gain. But it's cleaner!
So the environmentalists have stopped our exploration for fossil fuels, stopped our expansion of nuclear energy, stopped our production of coal-fired power plants, and now have convinced Congress to turn our food into energy, starving millions.
Global warming is killing people -- they are right -- not by any potential warming, but by starvation and lack of energy.
Peter Holmes
San Antonio
Al Qaeda on the Run (wsj article)
I'm throwing out all my weekend journals from the past couple months and came across this article on al Qaeda. Anyway, I thought it was a good read on why America needs maintain a military presence (possibly on a smaller scale though) before returning home from Afghanistan and Iraq:
Al Qaeda on the Run
May 31, 2008; Page A10
A year ago in July, a National Intelligence Estimate warned that al Qaeda had "protected or regenerated key elements of its Homeland attack capability," meaning it could be poised to strike America again. The political reaction was instantaneous and damning. "This clearly says al Qaeda is not beaten," said Michael Scheuer, the former CIA spook turned antiterror scold.
What a difference 10 months – and a surge – make.
CIA Director Michael Hayden painted a far more optimistic picture in an interview yesterday in the Washington Post. "On balance, we are doing pretty well," he said. "Near strategic defeat of al Qaeda in Iraq. Near strategic defeat for al Qaeda in Saudi Arabia. Significant setbacks for al Qaeda globally – and here I'm going to use the word 'ideologically' – as a lot of the Islamic world pushes back on their form of Islam."
What happened? To certain sophisticates, this is all al Qaeda's doing: By launching suicide attacks on Shiite and even Sunni targets, and ruling barbarically wherever they took control, the group has worn out its welcome in the Muslim world.
There's some truth in this. The Sunni Awakening in Iraq was in part a reaction by local clan leaders against al Qaeda's efforts to subjugate and brutalize them. The Arab world took note when Abu Musab al-Zarqawi ordered the November 2005 bombing of three hotels in Amman, Jordan, in which nearly all of the victims were Sunni Arabs. Extremist Islamic parties took an electoral drubbing in Pakistan's elections earlier this year following a wave of suicide bombings, one of which murdered Benazir Bhutto.
It's also true that al Qaeda finds itself on the ideological backfoot, even in radical circles. As our Bret Stephens reported in March1, Sayyed Imam, a founder of Egyptian Islamic Jihad and once a mentor to Ayman al Zawahiri, has written an influential manifesto sternly denouncing his former comrades for their methods and theology. This was enough to prompt a 215-page rebuttal from Zawahiri, who seems to have time on his hands. Lawrence Wright in the New Yorker and Peter Bergen and Paul Cruickshank in the New Republic have recently written about similar jihadist defections.
But the U.S. offensives in Afghanistan and especially Iraq deserve most of the credit. The destruction of the Taliban denied al Qaeda one sanctuary, and the U.S. seems to have picked up the pace of Predator strikes in Pakistan – or at least their success rate. This has damaged al Qaeda's freedom of movement and command-and-control.
As for Iraq, Zawahiri himself last month repeated his claim that the country "is now the most important arena in which our Muslim nation is waging the battle against the forces of the Crusader-Zionist campaign." So it's all the more significant that on this crucial battleground, al Qaeda has been decimated by the surge of U.S. forces into Baghdad. The surge, in turn, gave confidence to the Sunni tribes that this was a fight they could win. For Zawahiri, losing the battles you say you need to win is not a way to collect new recruits.
General Hayden was careful to say the threat continues, and he warned specifically about those in Congress and the media who "[focus] less on the threat and more on the tactics the nation has chosen to deal with the threat." This refers to the political campaign to restrict wiretapping and aggressive interrogation, both of which the CIA director says have been crucial to gathering intelligence that has blocked further terrorist spectaculars that would have burnished al Qaeda's prestige.
One irony here is that Barack Obama is promising a rapid withdrawal from Iraq on grounds that we can't defeat al Qaeda unless we focus on Afghanistan. He opposed the Iraq surge on similar grounds. Yet it is the surge, and the destruction of al Qaeda in Iraq, that has helped to demoralize al Qaeda around the world. Nothing would more embolden Zawahiri now than a U.S. retreat from Iraq, which al Qaeda would see as the U.S. version of the Soviet defeat in Afghanistan.
It is far too soon to declare victory over al Qaeda. Still, Mr. Hayden's upbeat assessment is encouraging, and it suggests that President Bush's strategy of taking the battle to the terrorists is making America safer.
Al Qaeda on the Run
May 31, 2008; Page A10
A year ago in July, a National Intelligence Estimate warned that al Qaeda had "protected or regenerated key elements of its Homeland attack capability," meaning it could be poised to strike America again. The political reaction was instantaneous and damning. "This clearly says al Qaeda is not beaten," said Michael Scheuer, the former CIA spook turned antiterror scold.
What a difference 10 months – and a surge – make.
CIA Director Michael Hayden painted a far more optimistic picture in an interview yesterday in the Washington Post. "On balance, we are doing pretty well," he said. "Near strategic defeat of al Qaeda in Iraq. Near strategic defeat for al Qaeda in Saudi Arabia. Significant setbacks for al Qaeda globally – and here I'm going to use the word 'ideologically' – as a lot of the Islamic world pushes back on their form of Islam."
What happened? To certain sophisticates, this is all al Qaeda's doing: By launching suicide attacks on Shiite and even Sunni targets, and ruling barbarically wherever they took control, the group has worn out its welcome in the Muslim world.
There's some truth in this. The Sunni Awakening in Iraq was in part a reaction by local clan leaders against al Qaeda's efforts to subjugate and brutalize them. The Arab world took note when Abu Musab al-Zarqawi ordered the November 2005 bombing of three hotels in Amman, Jordan, in which nearly all of the victims were Sunni Arabs. Extremist Islamic parties took an electoral drubbing in Pakistan's elections earlier this year following a wave of suicide bombings, one of which murdered Benazir Bhutto.
It's also true that al Qaeda finds itself on the ideological backfoot, even in radical circles. As our Bret Stephens reported in March1, Sayyed Imam, a founder of Egyptian Islamic Jihad and once a mentor to Ayman al Zawahiri, has written an influential manifesto sternly denouncing his former comrades for their methods and theology. This was enough to prompt a 215-page rebuttal from Zawahiri, who seems to have time on his hands. Lawrence Wright in the New Yorker and Peter Bergen and Paul Cruickshank in the New Republic have recently written about similar jihadist defections.
But the U.S. offensives in Afghanistan and especially Iraq deserve most of the credit. The destruction of the Taliban denied al Qaeda one sanctuary, and the U.S. seems to have picked up the pace of Predator strikes in Pakistan – or at least their success rate. This has damaged al Qaeda's freedom of movement and command-and-control.
As for Iraq, Zawahiri himself last month repeated his claim that the country "is now the most important arena in which our Muslim nation is waging the battle against the forces of the Crusader-Zionist campaign." So it's all the more significant that on this crucial battleground, al Qaeda has been decimated by the surge of U.S. forces into Baghdad. The surge, in turn, gave confidence to the Sunni tribes that this was a fight they could win. For Zawahiri, losing the battles you say you need to win is not a way to collect new recruits.
General Hayden was careful to say the threat continues, and he warned specifically about those in Congress and the media who "[focus] less on the threat and more on the tactics the nation has chosen to deal with the threat." This refers to the political campaign to restrict wiretapping and aggressive interrogation, both of which the CIA director says have been crucial to gathering intelligence that has blocked further terrorist spectaculars that would have burnished al Qaeda's prestige.
One irony here is that Barack Obama is promising a rapid withdrawal from Iraq on grounds that we can't defeat al Qaeda unless we focus on Afghanistan. He opposed the Iraq surge on similar grounds. Yet it is the surge, and the destruction of al Qaeda in Iraq, that has helped to demoralize al Qaeda around the world. Nothing would more embolden Zawahiri now than a U.S. retreat from Iraq, which al Qaeda would see as the U.S. version of the Soviet defeat in Afghanistan.
It is far too soon to declare victory over al Qaeda. Still, Mr. Hayden's upbeat assessment is encouraging, and it suggests that President Bush's strategy of taking the battle to the terrorists is making America safer.
Places I want to see: St. Helena
St. Helena in the South Atlantic. Charles Darwin visited St. Helena during his travels and it is one of the most isolated islands in the world as noted in a Wall Street Journal article entitled "Darwin's Joyful Journey of Discovery" that was published on May 31, 2008.
Books I want to read: How the States Got Their Shapes
By Mark Stein and published by Collins, this 352-page cartographic tour of America seeks to answer through history why states received their boundaries.
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