Archive for the ‘Economics’ Category

So, I joined a Facebook group.

November 4, 2010

Specifically, a boycott organization group for companies that donate to political campaigns. The group’s called “The People’s Boycott”.

The Citizens United decision gave corporations license to steamroll our democracy with raw cash, and the rest of us have no democratic recourse short of a constitutional amendment that strips corporations of personhood, and, well, that’s not going to happen anytime soon.

In the meantime, I’m going to be doing my little part to drive as many politically-involved corporations out of business as possible. Persons should equate to political power – not dollars. And if someone’s going to use their dollars to weaken my political power, well, then I’d rather they not have any dollars.

So, here’s the link one more time: http://www.facebook.com/home.php?sk=group_165989556764257

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Predatory Business – Payment Plans

July 26, 2010

So a while back, I wrote a bit about how business practices coincided with other vulnerability exploitation approaches. I’ve decided to point out a good case study: Cell phone payment plans.

Really, this applies to any industry in which you’re given the choice of payment option before you receive the product, and particularly before you know what product you even want, but cell phones work particularly well as an example because they function on a sophisticated network governed by computers.

Billing is fairly easy to integrate into cell phone infrastructure – so easy that some companies can update your billing information very quickly, during use of the service. It would be trivial for such a company to have a universal payment plan which charged a small rate for each minute/text/photo/gigabyte of bandwidth/etc, or a universal payment plan which charged a monthly rate for unlimited use of services.

Instead, consumers are faced with a large array of wholly unnecessary choices for varying plans – for what purpose? Well, since we know businesses don’t exactly operate out of the goodness of their hearts, I think it’s safe to conclude that the cell phone companies are making money off of this setup somehow.

I would hypothesize the profitability of such plans come from two sources:

The illusion of choice: By offering options, even if they aren’t meaningful options, a cell phone company can make claims to superior service, particularly superior customer service… which is particularly ironic considering that the second source of revenue from such plans is…
High penalty fees: By offering options to people based on their needs before they make use of the product, cell phone companies can extort extra money from people whenever their needs change.

Here we can contemplate the mindset that produces and tolerates such business practices – practices which functionally predate upon consumers to score extra money, rather than endeavoring to make additional profit through providing a superior service (which, if you listen to an economist, is supposedly how capitalism works).

The mindset that produces such business practices is, obviously, the for-profit business mindset. The idea that the shareholders need to receive their cut of profit and that businesses shouldn’t let piddling concepts like ethics or decency get in the way – an idea that dominates much of America’s economy.

I’m probably more interested in the mindset that has us tolerate such practices and continue to do business with companies that use them. You’d think it’d be insulting for a company to treat us like prey rather than people, and yet we as a people don’t seem to care.

I think, instead, that what’s going on in our society is a widespread application of ‘just-world’ justification – where we find ourselves subconsciously permitting and even forgiving the misdeeds of others – in this case, the exploitative pricing strategies of cell phone companies – by blaming the victims of such predation. “So he’s stuck with a three-year contract for a phone that won’t work in his house?” someone might say, “He should’ve done more research into if his phone would work.” – thus blaming the victim for a problem generated not at all by the victim, but by the predatory contract.

This is not to say that there isn’t something we can each of us do to avoid becoming a victim – just that we’re doing the wrong thing as a culture at the moment. If we each try to play their game, letting them attempt to predate upon us and feeling good about ourselves when we get lucky (because it’s not a person’s fault if, for instance, their circumstances change and they need a different service than in the plan they’re contracted for), then we all remain prey.

I would propose that the way to escape being prey is to stop tolerating corporate predation altogether – if your cell phone company offers unnecessarily complex plans and contracts designed to scam people, don’t do business with them at all. People who prey on others should not be rewarded, even by people who aren’t suffering at their hands at the moment.

The Supply and Demand of Capital

May 23, 2010

This originally started as a comment I made on a blog, and I figured it was worth expanding and posting here.

Overview

All right, get into economic theory thought mode here, because I’m going to be talking about capitalism and supply and demand.

Specifically, the supply and demand of capital itself.

You see, businesses need funding to get started and to expand – this funding is called capital (or ‘venture capital’, for starting some new companies). People with money to spare offer up venture capital, and people who start and run businesses accept it and use it to expand the economy.

Supply for capital is dictated by how much money people have that they don’t need or want to use to consume – these people offer up capital to someone else in exchange for interest on the money they offer up.

Demand for capital is dictated by how much people are consuming – the more people are consuming, the more businesses can expand and the more room for new businesses there are.

Market correction, more supply with less demand

Now, when supply outpaces demand, you end up in a situation where you have people with a whole lot of money, but there’s simply not much to do with it. Businesses that meet all sorts of demand are already well-funded, but people still want to be able to invest capital into them so they can make money.

This makes capital ‘cheaper’ – that is to say, it becomes easier for people running riskier or less profitable businesses to get capital. As supplies of capital continue to increase faster than demand, more and more money is placed in such risky investments.

Eventually, some of the riskier of those investments fail – this reduces the supply of capital, and reverses the trend – now investments that used to be reasonable become too risky to remain invested in, so people start pulling out their money.

But because the value of capital has increased, _nobody_ wants to buy these risky investments, because they are no longer worth the money you’d have to put into them. This means the people who owned those investments must sell them at a fraction of the price, losing much of their wealth and further reducing the supply of capital, which causes the cycle to repeat.

This cycle continues until demand for wealth outstrips supply enough for the economy to start growing again, and in the meantime destroys phenomenal amounts of wealth. This is how a market crash (and subsequent recession/depression) happens.

When the rich become richer, the amount of free capital increases. Conservative economic policies encourage this, and ultimately encourage this kind of market crash.

Market stagnation, more demand with less supply

This is not to say that it’s good for demand to strongly outstrip supply – this makes it harder for people with good ideas to obtain venture capital, as investors of capital have more freedom to ‘shop around’ for higher value, lower risk assets. This means that there will be more economic growth per dollar of capital, yes, and much more stability for that capital, but less total growth.

The market can correct for this situation as well, as people pay more for the limited supply of goods they want, business owners make more profit, which generates capital that can be reinvested towards producing more goods.

This circumstance happens when there are more people demanding goods than there is wealth to facilitate the production of them, generally the result of government policies which reduce profits and improve quality of life for the less wealthy.

Government influence and striking the balance

As this supply/demand relationship among the most expansive that can exist in an economy, government has great ability to influence it incidentally.

Government policies that influence this relationship include but are by no means limited to:

  1. Taxes – progressive taxation systems increase the amount of money that can be spent, which increases demand for capital, and regressive taxation increases the amount of money that goes into supply of capital. The “middle class” is an interesting phenomenon here, as individuals in the middle class both consume, and contribute investment capital – meaning that taxation that discourages the growth of a middle class would probably not significantly affect this relationship, but would reasonably slow an economy nonetheless by reducing both supply of and demand for capital.
  2. Fractional Reserve Banking Policy – Fractional reserve banking is a financial technique where banks get to lend out some of the money they have rather than keep it all in reserve, so long as they keep enough money onhand to be able to manage their activities. This technique increases the supply for capital without capital holders needing to have as much excess wealth to burn, and makes the supply for capital more dynamic and able to respond to a changing economy, but it can be hazardous in the event of a large market crash, as it can cause banks to fail if the market takes too big a hit, too quickly. For this reason, Fractional Reserve policies do not function optimally in environments where supply of capital is naturally abundant compared to demand.
  3. Consumer protection, regulation, etc – The government often uses laws to force businesses to take a stake in their communities, be it through regulation of their practices, regulation over profits vs. reinvestment, minimum wages and labor laws, and so forth. Such regulations, when done properly, generally reduce profits, which decrease capital supplies. Some regulatory measures, such as labor laws, can improve demand for capital by improving worker quality of life.

Government action has a significant amount of influence over the supply and demand of capital through these measures – proper management of these measures can be used to reduce the frequency and severity of market crashes, or to stimulate additional economic growth in the face of high demand for goods.

Sources and forms of capital

Capital doesn’t just come in one flavor. Capital comes from various sources and systems and where it comes from helps to shape the nature of the economy it goes into.

  1. Loans – Loans are a source of capital in which, if the business owner can pay off the loan, the owner then owns the business investment. Fractional reserve banking increases the availability of loans.
  2. Venture capital – Venture capital is a source of capital in which the venture capitalist owns the business investment (or, more frequently, owns a high percentage of it), but grants control of the capital to the individual operating the business. Venture capital is generally intended to ‘cash in’ by selling the company once it has grown, rather than draw profit from the asset.
  3. Public ownership – The company is considered an asset and private individuals or organizations own parts, or hold stock, in the company – an initial release of stock (called an “IPO”) generates capital for the company directly from investors. This stock generally carries with it a degree of control over the company’s operations, and frequently stock corporations are designed to return maximum profit at the demand of stock holders.

Here we can see that different types of capital are facilitated by different sources – the availability of loans, for instance, improves when more assets are placed in banks, and the lucrativeness of public ownership increases when more individuals have wealth to place directly into investment.

Conclusion

Was I supposed to be going somewhere with all that? Well.

An economy thrives best when the supply and demand for capital are balanced, and increasing at the same rate. Excessive supply of capital can be catastrophic to an economy, and excessive demand slows growth.

Indicators of excess supply include booming stock prices and easily-obtainable credit (especially credit used to artificially bolster demand for capital, such as from credit cards). Indicators of excess demand include goods and services shortages.

Generally, a strong supply can be correlated with a more wealthy upper class, and a strong demand can be correlated with a robust lower and middle class and good quality of life.

Conservative policies have led to an extremely wealthy upper class, lower quality of life for the lower and middle classes, and sporadic, catastrophic market crashes. America desperately needs the rich to be less rich, for its’ own health.

Or, in summary, rich people really are bad – at least if there are too many of them, or they’re too rich.

A Proposal for an Alternate Business Model

May 15, 2010

So I think I can propose a better way to operate a business than the existing for-profit stock model.

Well, ‘better’ in the sense of being more sustainable, being better capable of nurturing a community rather than taking from it, and possibly even better at providing a superior product.

What I’m thinking, is that a company could shift to a profit-through-tip-only system.

All revenue is reinvested into the company (the employees, especially management, would need to be appropriately wage controlled), and the company is not publicly traded (I don’t think it would work with a public company, at least in the concept’s present, fledgling form). Instead, customers are at some point informed that the company is not a traditional for-profit company and that the only profits the company makes are through tips.

Tips rendered by customers are given in some proportion to the owners, as well as the workers.

This means that, instead of a profit motive oriented around increasing revenue and reducing costs, the profit motive is now oriented more directly around customer satisfaction. It also provides a stronger incentive to nurture the community, as you would want customers willing to be charitable and having the cash onhand to do so.

The idea has significant potential problems.

  • I can’t think of a good way to apply it to a publicly traded business.
  • It’d probably be less profitable than a profit-oriented business, so a free market would never pick up on it. Even if it was more profitable, the focus isn’t on profit, so there’s little reason to believe such a shortsighted culture as a free market culture would ever pick up on it anyway.
  • The model probably wouldn’t work at all when dealing with for-profit companies as clients – what for-profit company would ever issue a tip? Only human beings can be counted on for the charity that would make this model work.
  • It wouldn’t discourage advertisement and other manipulation of customers, even exploitative methods.

Nonetheless, I think it shows promise.

A Rational, Self-Interested, Free Market Argument for Socialized Health Care

September 14, 2009

Private health insurance is worthless. Purchasing it does not benefit me.

Let’s say I purchase private insurance. So long as I don’t get very sick, it don’t actually get any benefit – as I could have just saved the money that goes into my insurance and paid for it out of my own pocket (and had the rest as, y’know, actual money).

So, the only way private health insurance could possibly benefit me is if I become so sick that the insurance company would necessarily lose money by paying for my sickness.

So all the people who actually need health insurance are people who are non-profitable for health insurers.

Which leads to a fascinating Catch-22: as any company whose objective is to make profit (all private health insurance) is encouraged to immediately cease to do business with me when it becomes apparent I need their service – because, as noted, I’m not profitable for them.

Even worse, the more sick I am, meaning the more I need their service, the greater their incentive becomes not to provide me with that service.

Furthermore, a free market can not solve this problem through the introduction of honest health insurance companies.

Any market in which an honest health insurance company must compete against a dishonest health insurance company, will have business flowing from the dishonest health insurance company to the honest health insurance company, as interested and informed individuals change their service. However, interested and informed individuals are the ones who need the service, and are thus by definition not profitable (as previously established). So honesty can only ever net a health insurance company reduced profits, ensuring their inability to compete in a free market.

Even a free market in which, somehow, only honest health insurance companies can resist this effect – as it is the nature of free markets to encourage innovation which increases profits, and there is no greater boost for the profits of a health insurance company than refusal to provide health insurance.

Ultimately, this means that I can not trust any health insurance company to actually provide health insurance – while there is a chance that I may receive health insurance if I need it, there is a chance I may not, and the very company which is supposed to provide me with health insurance would conspire that I do not get it.

Health insurance, like all forms of insurance, is a service in which I pay money in exchange for reducing my risk – in this case, my risk of not being able to pay for health care. However, private health insurance does not fulfill this function.

Instead, it shifts my risk – from the risk of being unable to pay for health care, to the risk that my private health insurance company will refuse to do so, leaving me without even the money I would have had if I’d never used private health insurance.

An insurance system that does not reduce risk is a nonfunctioning insurance system.

Furthermore, no amount of regulation can solve this.

Regulation is by its’ nature static and slow-to-adapt, while the market is quick to adapt towards the objective of increasing profits. The government can not be trusted to keep up with a dynamic and strongly motivated private system dedicated to refusing to provide me with service.

Furthermore, successive layers of regulation will increase the system’s complexity, ultimately making it easier for the highly-competitive private health insurance industry to scam me out of providing service, as I must not only contend with the health insurance industry itself but with the additional bureaucratic structures created by the government in an attempt to make public health insurance function.

So ultimately, all government can do to private health insurance is make it even more so a waste of my money.

So I gain nothing from private health insurance. The market can not fix this (and in fact enforces the worthlessness), and the government can not fix this. There is no way a private health insurance company can provide me with a service that I can trust and remain in business.

Ergo, private health insurance is worthless.

Meanwhile, the very problem that most plagues social service – a lack of profit motive which encourages unprofitable spending – is the only thing that can produce a trustworthy form of health insurance. If I need socialized health insurance, the government won’t care! They’ll happily pay the bills at my time of greatest need, not worried that I’m costing them money that they could conserve by simply letting me die.

The government does not need to make money – so they have no reason not to provide me with health insurance.

So I can trust them – socialized health insurance can function to reduce my risk of being faced with health care bills that I can not pay.

So, to reiterate:

Private health insurance: Absolutely, uncorrectably worthless for me.

Socialized health insurance: Accidentally perfectly functional for my needs.

As a self-interested, healthy member of America’s socioeconomic middle class, the only tenable option for me for health insurance is the government.

And I’m pretty sure that applies to everyone else too.

Now the question is: To flowchart this, or not to flowchart it?

A Depressing Analysis of the “Too Big To Fail” Phenomenon

June 25, 2009

Typing ‘too big to fail’ into Wikipedia gets this:

The Too Big to Fail policy is the idea that in economic regulation the largest and most interconnected businesses are “too big to [let] fail.”

The justification of Too Big To Fail (Henceforth abbreviated as TBTF) is essentially that a company can get so big that if it gets run incompetently, it will take down the entire economy, including all of us, and that this is really bad. My definition does not involve this justification. In fact, I think that justification is just an excuse, a distraction away from the real TBTF problem.

We didn’t get the bank bailout, after all, because politicians were concerned for the welfare of the people. We got the bank bailout because the banks asked for one. Politicians made little to no choice in the matter, except to get talked into it by lobbying organizations representing banks (and offering sweet reelection cash).

Which leads us to my definition of TBTF: An organization or group of organizations becomes Too Big To Fail when it gains the leverage to be able to purchase its’ continued existence from a third party even when it’s being run so badly that it should collapse.

The large banks, who essentially bribed the government into saving their asses, qualify for this definition. GM, in combination with their union, the UAW, accomplished the same, making them TBTF. In fact, all my TBTF businesses are also the government’s TBTF businesses.

But there is a difference – my analysis is predictive, because it comes with a theory.

Namely, that once a business is able to purchase TBTF power, that business can only collapse once the third party it’s purchasing TBTF power from collapses.

That is to say, I am predicting that the banks bailed out, and GM, will only be able to collapse once the government is bankrupt and no longer able to save them*.

So we’re looking at a number of supercorporations run by greedy, incompetent people, who can essentially keep getting rewarded for screwing up over and over, each time putting the government in that much more danger until finally the government collapses under corporate dead weight.

I told you in the title it’d be depressing!

Now, you may be wondering, “Well, so, are we all just doomed? What do we do about this?” Well, we might indeed all be just doomed. But the solution would be to cut down the power of any company big enough to effectively lobby the government by itself (like those banks), and to demolish any organizations coordinated enough to do the same (like, for instance, the RIAA).

Can that happen? Probably not. We’re living in a nation so utterly in the thrall of corporatism that the thought of actually controlling the entities that essentially run all our lives has become absurd.

So, yeah. Depressing.

*-It may be possible that this prediction could be wrong and yet the fundamental theory still correct, due to pricing modifications of TBTF power once invoked. In this event, verification of the theory would require much more in-depth examination of political corruption and campaign finance bribery. I hope this is the case, because this scenario offers a way for TBTF corporations to collapse possibly before the government goes with it.

All Economies Are Doomed!

June 12, 2009

So,  it occurred to me today that I am a market failure fatalist.

The systemic and all-consuming flaws inherent to the structure of the free market itself seem impossible to me to overcome, short total economic failure* (that probably includes all the rich people dying violently to clear up the nepotism).

A quick look at some of the problems I see, above and beyond known inherent free market flaws:

  • Self-interested actors function without ethical boundaries whenever possible – constant consumer visibility and vigilance is required to enforce a semblance of correct behavior upon industry decision-makers.
    • It is thus in the interest of said industry decision-makers to stifle consumer visibility, be it through intentional or unintentional process obfuscation, deliberate spread of misinformation, generating conflicts of interest for ideally unbiased individuals (such as scientists), or just outright lying – all to keep consumers from being aware of corporate practices and policies. Essentially, access to information about the market is an extremely valuable thing, but its’ widespread proliferation is essential for proper market function, and that proliferation is a common good which the market can not be expected to provide (further complicating things, the estimated value of that good may well exceed the value of the goods the information actually concerns).
    • It’s also in the interest of market actors to stifle consumer vigilance. Public relations maneuvers to engender ‘trust’ in corporate interests without doubt have the function of reducing scrutiny of corporate practices and policies. Furthermore, it is in the interest of market actors to leave individuals without the very skills required to correctly understand and make decisions based off of market information. Essentially, it is in the interest of the market to avoid empowering consumers, economically and intellectually, to the greatest extent possible.
  • Markets expand and new industries are created through the commercialization of goods and services – a free market can be expected to make a marketplace of anything, provided only that there is money to be had as a result. And no potential industry in the world offers a greater incentive for commercialization than the industry of legislation.
    • Not only does the free market require extensive government intervention in order to function, but the more effective that intervention becomes, the greater the incentive to any given firm becomes to manipulate the laws to remove barriers which restrict profitability. Essentially, as the law takes steps to try to prevent illegal/unethical greed, unethically greedy individuals have more and more reason to manipulate the law such that not only can they not be stopped, but so that the law can be worked to their outright advantage.
  • Economies of scale promote the focusing of greater amounts of relative wealth into successively fewer hands. This ultimately leads to a “too big to fail” problem in which one individual or a small group of individuals gain enough clout to potentially destroy markets, turning them from economic assets to potentially catastrophic liabilities. Mind, also, that this problem is not new to humanity: “Too big to fail” is a problem that has plagued government, and continues to do so to this day (frankly, that makes this problem the most solvable, as we have centuries of experience trying to fix it).
  • The ability to benefit from assets in the short-term, then divest of potentially unstable assets, combined with the concept of limited liability for asset holders, provides an incentive to work to obtain short-term profit regardless of long-term ramifications. What would normally be a high-risk/high-return gamble of assets on exclusive short-term gains becomes a low-risk/high-return gamble when limited liability is introduced into the corporate environment, even without taking into account the ability to ‘cut and run’ from a company you no longer believe you can wring further high profits from. This leads to a scenario in which our economy is collectively encouraged to ‘bet the farm’ (or firm, as the case may be) repeatedly until, inevitably, the bet fails and the economy catastrophically collapses**.

These problems are in addition to the known, and very widely-impacting common good problem, in which nobody is incentivized to develop common goods and/or everyone is incentivized to deplete them. Among other problems, this:

  • Provides incentive towards the destruction of the environment and other unsustainable business strategies.
  • Provides incentive against development of workers, community, and other infrastructure.
  • Provides incentive towards overexploitation of the consumer for profit, a resource which the depression we are sliding into has shown is not an infinitely exploitable resource.

Also, there are all the very human market problems, such as discrimination, nepotism, monopolies, the list goes on.

All in all, well. Markets fail, and we can’t stop them. They are self-consuming machines which render 99% of humanity as engines of enrichment for the phenomenally wealthy and powerful 1%, and even then dysfunctional such that people can figure this fact out every so often and go on a ‘revolutionary’ killing spree of that 1% out of spite.

*-I hope to one day learn or develop a way to overcome these problems, but solutions to them quite evidently do not exist at present.

**-Envision the following theoretical game (Which I hereby dub “Indon’s Casino”):

Each player begins the game with 1 point and may bid any number of points each round. After each player has bid, each player must roll a die with 100 sides – if that die comes up as anything but a 1, the bid is doubled. However, if it comes up as a 1, each player who did not get a 1 must reroll for that bid once for each person who got a 1.

A Story Regarding Ownership

June 5, 2009

Okay, story time!

A house owner comes along hard times and goes to talk to someone who is renting out a room in his house.

The owner says to the renter, “Sorry, I’m kicking you out.”

The renter is necessarily shocked. “What? Why!”

The owner says, “Well, money’s tight, you’re eating my food and taking up space I could use to have a home office, and the rent you’re paying me just isn’t worth it.”

The renter says, “Well, if you’ll give me a few months, maybe I can get a promotion or something and be able to pay you more rent?”

The owner replies, “That really wouldn’t align with my best interests, and the way things are, I’d much rather prefer you out as soon as possible.”

The renter grows desperate, “But without a place to live, I’ll almost certainly lose my job and starve to death! Don’t you care that you’d have my life on your hands?”

The owner says, “I don’t really see how your life is any of my concern – this is my house and I’ll do what I want with it, as is my right.”

So the owner kicks the renter out, and the renter, without a place to live (and before long also without any job prospects), eventually dies of exposure.

The moral of this depressing story? There is none – it’s a parable, I must confess to having planned a bait-and-switch.

What I want you to do now is consider your sympathies between the owner and the renter, and I want you to think of what your position on abortion is.

If you felt for the owner, are you pro-choice, and support a woman’s ownership of her womb and her resulting right to do whatever she wants with it, even if it kills someone?

If you felt for the renter, are you pro-life, and feel that the welfare of those in need outweighs the rights of those with privilege?

It seems strange to me that the american political movement nominally in favor of the rights of ownership is the same one in favor of government control of the means of production (pun extremely intended), while the american political movement that would prefer welfare for the disadvantaged is the same one that advocates that gestation needs to be privatized (and if there’s a good pun there, I intend it too).

So, yeah, just a thought I had. Plus, a story. Everyone loves stories, right?

World Depression 2: This Time, it’s Personal.

May 21, 2009

The world is in a depression.

No, it’s not a recession, except in the inane, technical sense that, say, the Vietnam War was a “police action”. And anyone who tries to tell you otherwise is, at best, comically wrong.

We have an exceedingly high measured unemployment rate despite years of attrition to the workforce leading people to simply give up on trying to get jobs, and very many of those in the workforce currently have jobs paying less than they did before, or need to work two jobs, just to make ends meet.

We didn’t even collapse into this depression from a “Boom” or “Economic Expansion” or whatever the news would have you call it.  Our economy has limped from one near-recession to the next for getting close to a decade before it all fell down – oh, but during those years, well, if you were rich and invested you could make lots of money, so people pretended like the economy wasn’t in any trouble, when in fact quite the opposite was going on. The only “Boom” we’ve had over the past few years has been a boom of self-deception.

Homebuyers deceived themselves into believing that lenders could be blindly trusted. Bankers and investors deceived themselves into believing they could get a free lunch. Consumers deceived themselves into thinking that they could keep up their debtor’s living forever. Americans as a whole deceived themselves into thinking our culture and economy was healthy and even thriving – plus, we thought it was a good idea to elect Bush, twice!

We need to get over lying to ourselves, and lying to each other. We’re in a god-damned Great Depression: Great Depression Two.

No, wait, better idea. We’re in World Depression Two. WWI used to be called “The Great War”. Well, we used to only have one Great Depression – now we have two. So we should take a page from our own history books and retcon the Great Depression into “World Depression One”, while what we’re in now becomes “World Depression Two”.

It should work out well to our advantage – WWI, followed by WWII, presents a simple series with a logical next step: World War Three. It’s a terminology that helped, no doubt along with many facets of the cold war, to bring the understanding of the possibility of another global military conflict within our grasp. We couldn’t lie to ourselves when the prospect of another World War is as easy to understand as counting to three.

Similarly, we can benefit from calling this spade what it is (preferably before we start digging our next hole with it, please). World Depression One could have been a unique event – but now it’s happened twice. We should do our part to ensure that the peoples of Earth can never forget this fact. We need to warn ourselves (because we’re stupid and we forget hella fast) and future generations that this shit can all happen again. We need to make it as easy as counting to three.

Would World Depression Three be the same as WDII? Of course not.  WWI and WWII were each quite different (and in fact, one of the reasons we were blindsided with WDII was our naive assumption that it would be the same as WDI, leading us all to sit pretty in our 80-year-old, neglect-decayed Maginot Line of protections convincing ourselves it could never happen again).

We need to start thinking about what WDIII could be. We need to get paranoid about it. We need to make the understanding of our global interreliance on each other, to the point where greed and carelessness on the part of one of us can spill over to affect all of us, we need to make this understanding ubiquitous to the human condition. We need to start making stirring personal stories about how people’s lives are getting jacked up by WDII that get turned into award-winning movies (preferably before computers drive the industry bankrupt). I’d make a call for movies about post-apocalyptic WDIII aftermaths too, but Mad Max was made some time back, that market’s clearly been there for a while.

Anyway, we should all do our part to stop lying to ourselves and to each other.

We’re in a depression. Don’t let people tell you otherwise.

Universal Commonalities in Competitive Systems and A Call for Lateral Thinking

May 21, 2009

What’s the difference between military strategy, plotting a con game, and business planning?

To a large degree, scale.

That is to say, each of these systems all follow a similar functional model, as each is built around analysis of complex systems predominantly featuring humans and their behavior, with an aim towards the analyst gaining an advantage.

That model is, roughly, as follows:

  • Acquire a target.
  • Analyze the target for vulnerabilities.
  • Exploit vulnerabilities as appropriate (to your advantage and/or the target’s disadvantage)
  • Analyze the actions you took to improve your approach.
  • Repeat.

There are ultimately deep commonalities when it comes to any system primarily characterized by individuals’ attempts to exploit each other and avoid exploitation in turn. And yet, working from the same fundamental dynamic, each of my examples developed in wildly different ways.

In the military world, this dynamic is analyzed to a great degree, and there’s an understanding that this is, in essence, a science dedicated to such dynamics in the context of war – and it’s a science of interest to many sophisticated militaries around the world.

In regards to con games, where the average person finds himself on the defensive end of the model, we find ourselves woefully unprepared. Despite having a wealth of understanding of analysis of such systems in general, we continue to find ourselves nearly defenseless before individuals who take people for hundreds or thousands of dollars, if not even more. We seem impotent to fight the “war” against systemic, illegal exploitation, which in my mind begs the question as to why this is the case – I might explore this in greater depth in the future.

And yet, the most lopsided of the three systems I noted, in terms of preparedness to work within and understand a system of competitive exploitation, is the corporate world. I find this the most fascinating example of the model out of the three, as in our society we find ourselves both the aggressors and the defenders, and yet in so many industries we find the aggressors with an unsurmountable, systemic advantage over their consumers.

How can we, as a people, understand so much about human nature and yet find ourselves so utterly powerless to prevent people from taking advantage of us with it? Is there some form of Marxist-like class structure at work, with the strategists of professional economic exploitation having removed themselves from the populace at large, which remains vulnerable to well-coreographed advertisements and litanies of fine print? Do we simply not realize that we are the targets of our own corporate voraciousness, that the organizations taking our money with military-like precision and effectiveness do so not out of any desire to provide a service, but to take as much of our money as they can while providing as little as they can get away with?

Is, perhaps, our very collective inability to identify and work against individuals who have targeted us for exploitation, itself some form of vulnerability, exploited willfully or accidentally against us?

But to get to the point – I can’t help but wonder if and how we can apply lessons from any one of these exploitation systems to others of its’ ilk. I envision the greatest obstacle there to be one of applicability – how can you apply, say, the lessons of asymmetrical warfare and apply them in the context of spam mailing campaigns of credit card offers? How do we get inside the OODA loop of a corporation that spends millions of dollars trying to preemptively predict, say, our eating behaviors to get us to purchase more of their food?

It’s not an easy problem by any means – but that just means it’s all the more worthwhile to think about it.