Joel Spolsky - Google+ - Two things about SOPA/PIPA and then I'll shut up :) (1) …
(1) The internet seems to ignore legislation until somebody tries to take something away from us... then we carefully defend that one thing and never counter-attack. Then the other side says, "OK, compromise," and gets half of what they want. That's not the way to win... that's the way to see a steady and continuous erosion of rights online.
The solution is to start lobbying for our own laws. It's time to go on the offensive if we want to preserve what we've got. Let's force the RIAA and MPAA to use up all their political clout just protecting what they have. Here are some ideas we should be pushing for:
- Elimination of software patents
- Legal fees paid by the loser in patent cases; non-practicing entities must post bond before they can file fishing expedition lawsuits
- Roll back length of copyright protection to the minimum necessary "to promote the useful arts." Maybe 10 years?
- Create a legal doctrine that merely linking is protected free speech
- And ponies. We want ponies. We don't have to get all this stuff. We merely have to tie them up fighting it, and re-center the "compromise" position.
Mr Spolsky is expressing thoughts that all of us should be thinking. In fact, I've partially expressed some related concepts before. Only, now that they've been expressed, we need to discuss them, modify them as needed, and then implement them. I encourage you to go to his post on GPlus and read the whole thing.
I, Cringely » Blog Archive » Why big companies can't change - Cringely on technology
At the polar opposite position from big industrial companies sit startups, nearly every one of which begins with an effortless expression of why? Big companies ask What? then How? but almost never Why? according to Sinek, who I think has it absolutely right. But good startups are motivated from birth by Why?
Nearly every good startup begins with why? and that why? is traditionally quite simple — because the founders want one for themselves. A hardware device or software application doesn't exist and they'd really like one, so they invent it. For startups why is easy. If it isn’t easy then you probably don’t have a good startup.
If as a founder your answer to why? is "to get rich" you are in the wrong job.
This is one of the paradoxes of our time. We send our youth to college to prepare them to get jobs in large corporations. But overall, large corporations started laying off more people than they hired back in the 1970s, and that trend has not, to my knowledge, changed. We need to be preparing our youth to start, manage, and thrive within smaller, locally-owned businesses (SLOBs), instead of large, out-of-area corporations (LOOACs).
If you're working for a large organization, you know what it is to have a great idea, but not have the autonomy at work to enable you to try it out. Likewise, if you're like most people in large organizations, you are mostly just trying to hang on until you can retire, so you do not want to make waves and wind up in the next wave of layoffs. And yet, you know the resources are abundant, because the executive team are always getting bonuses.
On the other hand, in a smaller organization, at least one that isn't run by a miniature Idi Amin, you are likely to have the autonomy to try out things, but you might not have the desired resources.
SLOBs:
- broader range of job tasks
- more autonomy as to how you do your job
- less formal policy
- smaller chain of authority
LOOACs:
- narrower, more specialized job tasks
- less autonomy as to how you do your job; how and what you do is likely scripted by policy edicts
- more formal policy, including written policy
- deeper and broader chain of authority; more oversight; more intermediaries
Imagine yourself creating a product or service to be produced by your current employer. Is your boss (and your boss's boss, all the way up to the top) likely to approve of your ideas for new products and services if all you have is the why it should be done? Or is he/she more likely to block it?
If your employer is a big company (a LOOAC), it is likely that your answer was 'block it'. You do not want this for yourself, and you should not want it for your children. Encourage them to find a SLOB (small, locally-owned business) or start one. Their future--and our nation's future--depends on it.
(Click to enlarge)
Source: eLocal.com
For the past few years, we've been talking about the advantages that SLOBs (Small, Locally-Owned Businesses) bring to their communities. Our plan is to continue doing this, and to highlight others who are doing the same.
I see a number of libertarian-leaning people posting online about their opposition to minimum wages. Most such posters claim to support "free market" principles. The previous post established that corporations naturally act to destroy free markets. Given the choice (and sufficiently-compliant regulators), corporations would knock most employees' pay down to just pennies per day, to the point where they had to build "company towns" again in order to house their workforces.
In other words, corporations seek to return to the conditions found under the robber barons of the 19th century. Corporations wish precisely the same conditions that would ignite a massive Marxist revolt.
As long as corporations exist, unions and minimum wage laws are necessary to counter-balance their naturally anti-worker attitude. Minimum wage laws, when the wages are reasonable and fully-enforced, prevent desperate workers from cutting their own throats in an effort to obtain more money.
Economists have long recognized that the employer-employee relationship has some quirks that can lead to employees agreeing to things that are not in their best (long-term) interests. For instance, dangling more paid hours in front of someone may get them to agree to a small reduction in the amount they are paid per hour. Dangling a chance at a promotion and pay raise may get them to agree to work off the clock (that is, unrecorded and unpaid). Conversely, cutting wages below a certain point tends to cause employees to be willing to work greatly expanded work schedules in order to put food on the table.
It has also been recognized that once people can take care of their basic needs, they start to desire more. In the workplace, they desire to improve themselves and to have their job tasks become deeper (job enrichment) or more varied (job enhancement). They may even seek career advancement. They also begin to purchase more goods and services. Instead of little Johnny being a latchkey kid, he may be sent to day care.
That additional spending helps to generate jobs elsewhere in the economy, and the shift in the types of goods and services purchased may also bring about some additional jobs.
If you're familiar with the economist's "circular flow of income" concept, you'll realize that higher incomes equal more jobs in the community, ceteris parabis.
Thus, within reason, placing a floor on allowable hourly wage rates lifts not only the affected workers, but many others within their local communities. What about cost-push inflation, one may ask. In most fields where minimum wages are an issue, price increases don't come from increased wages, but from the employer's desire to cap employee compensation at a fixed percentage of net revenue. If imaginary burger chain Gree-C Burger caps its labor costs at 20% of net revenue, then when minimum wage rises, even though the increase may be less than 1% of their net revenue, they will tend to raise prices enough to knock labor costs down below their cap again. In fact, they will tend to try to increase their share of the revenue (e.g., profit) by at least as much as the wage increase. In other words, minimum wage doesn't tend to cause cost-push inflation, reflexive price increases by employers causes cost-push inflation.
I will try to clarify this in a future post in this series. You can follow this series here.
Many people claim to favor capitalism and free markets, yet see no problem with the existence and dominance of for-profit corporations. The same people often oppose labor unions as being a damaging force, coming between employer and employee as they do. Such people lack understanding.
Labor unions are an attempt to use aggregation to obtain "market power", which can be defined as the power to unilaterally set prices and terms of an economic transaction. Likewise, corporations exist for that very purpose: to aggregate or pool resources in order to obtain more market power than the individuals involved could exercise on their own.
Did you see that? Corporations, like unions, exist to obtain market power, so that they can reduce costs, increase prices, and grow their profits. In the process, they violate one of the key conditions that much of capitalist economic theory is based upon--it is no longer about freely negotiated prices between buyers and sellers who cannot on their own affect market prices--it is now about growing your corporation's size, scope, and market share enough to force suppliers, customers, and employees to accept prices and terms that are more beneficial to the corporation.
In doing this, they break out of the area that capitalist theory likes to discuss. They instead move toward something much less appealing than the invisible hand. Corporations, by virtue of their size, life spans, and resources, tend to acquire enormous and outsized influence with governmental entities. They tend to seek out protected spaces, areas in which they may exercise quasi-monopoly or quasi-oligopoly power in exchange for filling the king's hand with coin. That is to say corporations always seek to corrupt governments in order to perpetuate themselves and expand their financial and political power.
So when Johnny, your son who recently graduated from high school or college, goes to apply for a job at "BigCo, Inc", he may not understand that regardless of his prior training or experience, regardless of his enthusiasm, regardless of how hard he works, the corporation's policies constrain his ability to negotiate a wage more in line with the quality and quantity of his output. If BigCo is large enough, the corporation's pay policies will also affect the ability to receive rewards for production at other employers in the same geographical area, or industry.
Although Johnny may not understand it, the corporation, by its anti-competitive nature, constrains and controls his ability to "earn what he's worth" ... it is not "free enterprise" nor "free markets" when a corporation controls what one can earn. It is market failure, caused by the anti-competitiveness that is inherent in corporations.
This is also important to understand because the present #OWS (Occupy Wall Street) protest movement has, like many others, conflated corporations' [mis-]behavior with capitalism. Corporations, and those who manage corporations (including financial corporations) work to prevent capitalist free markets, because their profits would naturally be eroded as rational and aware people realize that the corporate media companies seek to convince consumers that high current spending (and borrowing) is good, and curbing spending in order to save for future needs is bad.
The media don't do this on their own. They do this in order to enlarge the profits of other corporations and to improve the fortunes of politicians whose policies benefit them and their customers.
The truth is entirely different. Corporations are anti-capitalist and anti-free-market. They are pro-monopoly and pro-oligopoly when dealing with their customers (or their customers' customers in the case of Microsoft). Corporations are pro-monopsony and pro-oligopsony when dealing with their suppliers. Corporations decry any attempt for the other parties in the transaction to seek to balance their market power.
The #TeaParty movement also confuses these things. One of their hot-button issues is "socialized medicine", yet they fail to see that it is not possible to have a free market in health care, simply because you will give or promise to give anything that the doctor requests in order to have a few more years or relatively pain-free living. The doctor knows it, and so he or she can charge you very high rates. It is this market failure that led to the rise of third party payers, such as Medicare, Medicaid, and insurers. These organizations aggregate numerous patients in order to obtain (monopsony or oligopsony) market power against providers (hospitals, doctors, nurses, technicians, medical groups) and in the process have also been able to exercise monopoly or oligopoly powers against patients and those who pay the premiums for the patients' coverage.
So if you claim to support free markets, I would encourage you to start opposing corporations and their activities. Start seeking locally-made products from small, locally-owned businesses (SLOBs) and replacing purchases of products of large, out-of-area corporations (LOOACs) with these local purchases.
California attorney general subpoenas Fannie, Freddie: report - Yahoo! News
(Reuters) - The California attorney general's office has sent subpoenas to Fannie Ma e and Freddie Mac in a wide-reaching probe into the government-backed mortgage giants' lending and foreclosure practices, the Los Angeles Times reported Thursday.
The subpoenas are seeking information about how Fannie and Freddie are handling thousands of foreclosed properties, as well as details about their mortgage-servicing and home-repossession practices, the LA Times reported, citing sources families with the matter.
California regulators are also investigating how Fannie and Freddie bought and sponsored securities holding toxic mortgages, and how their activities might have contributed to the wave of foreclosures in California, the sources told the LA Times.
GM chief says public is past anger over bailout - Yahoo! News
DETROIT (AP) — The American public has gotten past its animosity toward General Motors for taking a government bailout in 2009, the company's top executive said Thursday.
Chairman and CEO Dan Akerson said a poll taken last summer for GM by Washington public opinion firm Peter Hart Research Associates shows that more than 70 percent of Americans have a positive opinion of the company. When the same poll was taken in July of 2009, more than 70 percent had a negative opinion, Akerson said.
"I think America loves a competitor. I think General Motors, Chevrolet in particular, is part of Americana," Akerson said during an appearance at the Detroit Economic Club.
Hey, Mr Akerson, have you been watching the news at all? Do you see the dozens, hundreds, and even thousands of people protesting in front of banks, stock brokerages, and government offices? What do you think has them so riled up, if it is not bailouts, mega-bonuses, and tax inequalities? They are protesting against giving money and benefits to people in positions like yours, and to the corporations and banks that are managed by people in positions like yours.
You see what happens when someone does not live in the real world? They can look right at something and convince themselves that they are not seeing what they are seeing.
In the real world, people have been kicked out of their homes by banks that have used fraudulent documents to facilitate the evictions. In the real world, people had all their savings tied up in the stock of "blue chip" companies like General Motors, and wound up losing everything when the companies used bailouts and bankruptcies to shed all their obligations.
In the real world, people who are going through hard financial times find banks and other financial companies turning the screws—instituting hard-core collection techniques, repossessing vehicles, and foreclosing on homes—often after being rescued by taxpayer funds.
Yes, Mr Akerson, we still remember. Not all of us will avoid buying a GM product, but we are not happy that you pretend to support "free enterprise" when the money is rolling in, then dig into taxpayers' wallets when things get tough.
2011-11-02: Capitalism 101: What Is Capitalism?
There will probably be several of these posts.
The term "capitalism" comes from capital. Because we tend to use "capital" to refer to "money", people tend to think that capitalism is about large corporations that form in order to obtain easier access to funds, take advantage of bulk discounts, and drive smaller competitors out of business over time.
BZZZT! Wrong answer. True capitalism, in theory, presupposes that all parties to any transaction have equal "market power" to set prices and terms. In most transactions, it assumes that an infinite number of buyers and sellers of product X, with none of them having market power. Corporatism, on the other hand, presupposes that by banding together, the investors, managers, owners, and employees of the corporation will benefit from gaining some amount of market power--and the bigger the company, the more market power it has--or in other words, that the society's economy is not capitalist.
In the United States, at least, large corporations influence government leaders to grant them privilege zones, where market competition is diminished. Examples of this include patents and copyrights, taxes and tax credits, and regulatory oversight. In doing so, the corporation gets market niches where it is not prompted to improve its product, pricing, delivery, or service. Those niches can then become steady money-makers. This is not capitalism. This is mercantilism.
Many economists refer to the US economy's mixture of taxation, regulation, private property, and focus on profit as a mixed economy, inferring that it mixes socialism and capitalism. However, the vast number of regulations, together with the way those regulations generally direct benefits to larger corporations (both for-profit and non-profit) and away from independents and individuals argues not for capitalism, but for a system in which the leaders of large benefits derive much of their organizations' wealth from their ability to sweet talk the king (or other rulers).
That system is mercantilism. Not that I favor "pure" capitalism. Instead, I favor the breakup of the LOOACs (Large, Out-Of-Area Corporations) that seem to control our government and a dispersal of those resources into local communities and the organizations and SLOBs (Small, Locally-Owned Businesses) that both characterize and sustain those communities.
Want to be more "equal" with the companies you do business with? You need lots of small businesses in vigorous competition for your money.
The news is full of it. Social media / social networking sites are full of it. The streets in the financial districts of major cities all over the country are full of it. Financial districts in London and Melbourne (and other foreign cities) are full of it.
The Occupy Wall Street movement, better known by its hashtag #OWS, is a widespread demonstration against the concentration of wealth and against the way that those with more wealth and more income have taken control of our government to plunder the rest of us.
Viewed in that light, I am again struck by just how similar the #OWS movement is to the Tea Party movement. Each movement channels the deep-seated rage of the working classes against the abuses that the political class and the wealthy class upon which it depends.
To be sure, neither movement is pure and blameless. The OWS crowd are subject to demonizing "Jewish bankers" the same way that Tea Partiers are subject to demonize President Obama as a "foreign born Marxist Muslim" who cannot legally serve as President. Both movements are rumored to be influenced, financed, or controlled by well-known wealthy extremists such as George Soros.
I was surprised to see even financial industry insiders full of rage at the abuses and bailouts, but that's just what this video portrays. I do want to point out that this was from 2009, and that I have seen exactly one video of this guy. I cannot tell you whether the man still feels this way.
Sadly, both movements miss the point. The enemy isn't "capitalists" or "marxists" ... it is not an intentional conspiracy. Too many of the major players hate one another and what they stand for. The enemy the everyday person is "big is better" thinking. Big government. Big business. Big banks. Big insurance companies. Big environmental organizations. Big labor organizations. Big mortgage bankers. Big investment bankers. Big lobbyists. Unless we get back to focusing on smaller and localized organizations and move most economic decision-making to that level, the mess represented by the bailouts will be repeated.
Do you want to fix our schools? Then you need to promote small, locally-funded, locally-controlled school districts, where the individual parent is as powerful as the superintendent of schools, and the schools' responsibility is the assist parents in fulfilling their duty to educate their children.
Want to fix the economy? You have to understand that Keynesian economics failed miserably in its only real test: the Great Depression of the 1930s. Only World War II bailed us out, and it did that by the military soaking up almost the entire then-recognized workforce, while other nations' production capacity was being destroyed by warfare. By the end of the war, the US was the main producer of manufactured goods in just about every category.
2011-10-03: A Jobs Depression?
THE AMERICAN JOBS DEPRESSION: We're In A Deep Hole And The Hole Is Deepening
America’s ongoing jobs depression - which is what it deserves to be called - is the worst economic calamity to hit this nation since the Great Depression. It's also terrible news for President Obama, whose chances for re-election now depend almost entirely on the Republican party putting up someone so vacuous and extremist that the nation rallies to Obama regardless.
I really do not think President Obama has anything to worry about. The Republicans have the seven dwarves running, not Cinderella. Robert Reich (the article's author) says:
The problem is on the demand side. Consumers (whose spending is 70% of the economy) can’t boost the American economy on their own. They’re still too burdened by debt, especially on homes that are worth less than their mortgages. In addition, their jobs are disappearing, their pay is dropping, their medical bills are soaring.
But the "jobs depression" is a natural extension of the long-term 'recession' that has been going on since 1999. Anyone with minimal economic literacy should be aware of ShadowStats' GDP figures (and probably dozens of others which show similar information).Take a look at the blue line on that chart. See how growth goes below 0% around 1999, and except for a brief uptick around 2003-2004, stays down thereafter? That is the definition of recession.
Consumer spending, around 70% of GDP, was artificially inflated with shaky loans beginning in the 1990s. In California (home to about 12% of the US population and about 15% of the US economy), real estate prices were increasing so rapidly that people were selling their not-paid-off homes and taking enough cash to enable them to move to Las Vegas or Arizona and buy homes outright. The result of this was that California exported its inflated home valuations to neighboring states.
Leading into our decade-long recession, people relied on refinancing their homes to extract miracle money which could be used to buy cars, computers, video games, televisions, furniture, or to pay for trips and vacations. The government and the financial industry together even persuaded people who had no realistic hope of paying for homes to buy them. This worked, and everyone pretended things were good, until real estate prices started to slip and foreclosures started to climb. That caused the financial industry to panic, leading to the bailouts.
In other words, the decade-long recession was preceded by asset price inflation--a bubble--in real estate. It was that bubble that enabled us to ignore the recession for the most part until around 2008. It was that bubble that the governments TARP was meant to reinforce. Homes which cost $50-100K in 1978 were $400-1M or more in 2008, at least in California, while inflation in the rest of the economy merely tripled prices. Rather than allowing prices to fall to natural levels (which should generally be near the inflation-adjusted 1978 price, plus or minus factors such as maintenance, taxes, and population growth & income in the surrounding communities), which would also have bankrupted the big banks.
The idea behind Bush's TARP program is that investors would regain confidence once we stopped forcing financial institutions to report accurate expected values for the collateral that secures their loans. In some sense, it seems to have worked. People are again buying stocks and other financial instruments of financial institutions. Those institutions, especially the larger ones, are reporting profits. But what is not happening is more jobs, paying more money to more people.
Reich's post is also available on his own site. He prescribes the Keynesian remedy (borrow money and use it to pay people to build infrastructure) that failed during the Depression and ever since. Don't get me wrong. Our roads, bridges, schools, and libraries need repairs. This could help people forget their troubles for a while, just as it did when FDR did it. It did not revive the economy then, and it won't revive the economy now. But it could be helpful. Ultimately, what the economy needs is private-sector jobs that are not subsidized by taxpayers, and Reich's proposal does nothing to provide that.
For that, we need to push imports down (through measures which eliminate cost savings due to paying below US standard wages and avoiding US-based plants' environmental compliance costs); prosecute bank, insurance, and other corporate CEOs (and other managers) whose companies benefitted from unethical financial practices (along with those who got skyrocketing bonuses for closing US plants and moving jobs overseas); and remove tax exemptions and credits that negatively affect our tax system. I also believe that corporations need to pay realistic rates (i.e., the same rates you and I would pay if we made as much money as they do), and that interest payments need to be counted as profit for tax purposes, just as dividends are. I do support charging corporations a gift tax whenever executive compensation exceeds that of the President of the US, as long as that gift tax is required to be highlighted in financial statements as "gift of stockholders' funds".
Repeat after me: Keynesian economics has failed.
One reason it failed is that it doesn't produce unsubsidized private-sector jobs, merely more tax-subsidized (and borrowing subsidized) jobs. When a government faces the potential of a default, such subsidized jobs only worsen things. (Greece, for example, should go ahead and accept that it will need to force lenders to accept reduced payments, delayed payments, or even no payments at all. Technically, any of those options is a default. Once that happens, there will be no more loans for a while, so Greece needs to figure out how to balance its budget for the next several years, and then default. The US, along with several other nations, is close to that point, and we need to start thinking about ways to balance our federal budget without collapsing the economy for everyone else.)
The other reason, of course, is that governments were supposed to raise taxes and cut services during boom times, so that they ran surplusses. That never happened. The US government has subsidized its budget through borrowings from Social Security, to the degree that there may not have been a surplus any year since Kennedy was president, and possibly only three times total since 1937. The natural political desire is to expand government each year, not to cut staff or budget. This is especially true during booms.
California, during some of the tech boom years, added something like 40,000 state employees in a decade or less. When the inevitable crunch followed, the state was torn by public-sector unions trying to keep those employees working. The result was higher taxes and fees to state residents during a time when those residents were struggling to stay afloat themselves.
Repeat after me: we want our economy to be based around unsubsidized private-sector jobs and small, locally-owned businesses.
What we do not want is to follow Greece on the path to default. Well, maybe defaulting would be a good thing, since we'd be unable to borrow for many years. It is the deep and widespread effects that would result, however, that we want to avoid.
Also, a clarification: According to Wikipedia, in 2008, the top marginal tax rate was 33% (or 35%, depending on which table you're reading). I support a top rate in the 35-40% range, as long as state rates don't cause the cumulative marginal rate to exceed 50%. Once taxes consume over half of one's marginal income, we run into all kinds of schemes meant to keep more of one's income to oneself, and we wind up with the same mess of deductions and credits we have now.
