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Paul Volcker, 1927-2019: How He Saved the World from Inflation

By Shlomo Maital

Paul Volcker 1927-2019

  Paul Volcker has passed away; he was 92. Volcker served as Chair of the Federal Reserve Bank, appointed by Jimmy Carter in 1979.

   Volcker was a giant, physically, standing 6 ft. 7 inches tall – but also a giant in wisdom and courage. The US was afflicted by double digit inflation, from 1979 to 1981, driven by cost-push price rises and soaring oil prices.   Volcker quickly understood the threat. With the dollar serving as the world’s major, perhaps only, globally-accepted currency, US inflation threatened not only the US but also the global trading system, then struggling from recessions in 1973 and again in 1978/9.

   Volcker acted with what then seemed like outrageous boldness. He raised Fed interest rates to 21%.   This was unheard of. I can only imagine what today’s President, Donald J. Trump, would have said, had he (heaven forbid) have been president at that time. Trump wants zero interest rates, no matter what the economy needs, and has hassled current Fed Chair Jerome Powell over his unwillingness to promote cheap credit at all cost and at all times.

     Volcker’s move put a halt to the inflation, stopping it in its tracks, but also ground the economy to a halt, causing a recession, or what came to be known as stagflation. Partly as a result Jimmy Carter became a one-term President, defeated in November 1980 by Ronald Reagan. It was ironic that Carter lost partly because of a very wise and strong appointment that he made, to the Fed.

     We must remember Volcker and the strong independence of the Federal Reserve system that prevailed, until now. No President has dared messing with the Fed’s independence, until now. Research shows that nations with strong independent central banks fare far better than those where governments make their central banks into private money-printers. Trump endangers today’s Fed, and as a result, endangers the world. We should remember Volcker fondly, and recall the lesson he taught us.

 

Will Economists Say They’re Sorry? Don’t Hold Your Breath

By Shlomo Maital

  In Erich Segal’s gushy novel Love Story, and later in the 1970 film starring Ryan O’Neal and Ali McGraw, you hear this line twice: Love means never having to say you’re sorry.

   Really?   I thought that when you truly love someone and hurt them, you always always say you’re sorry and try to make amends. And if you don’t? Well, where’s the love?

     I am an economist. Led by Milton Friedman, we gave the world unfettered free markets, that in 2008 nearly destroyed the world economy – we’re still repairing the damage.   We gave the world supply-side economics (cut taxes on the rich and you get a cornucopia of investment spending!) and the Laffer curve (cut taxes and you get more revenues than before). We gave the world the idea that senior management is responsible only to shareholders, for maximizing profit – an idea business schools set in stone. Professor Friedman said it was wrong for corporations to give money to charity, for worthy causes, because the money belonged to the shareholders, it should be given to them.

     If you don’t believe me, read Binyamin Appelbaum’s recent book, The Economists’ Hour, a slashing indictment of all the false theories we economists dumped on a naïve, believing world. Appelbaum’s day job is writing editorials for The New York Times.

     The world right now is in a mess. It’s not solely us economists’ fault, but much is.  

     And it’s time to say we’re sorry. No, love is NOT not having to say you’re sorry. Double negative.

       Are economists sorry? I don’t hear a whole lot of apologies or even mild recognition of the damage we’ve done. And this is no Love Story.

       And the part that hurts me most?   Economists built their free-market ideology on one book, Adam Smith’s 1776 Wealth of Nations. The book was pushed to the ultimate absurd, “greed is good” (George Gilder).   But Smith was really NOT an economist, he was a moral philosopher, and his greatest book was Theory of Moral Sentiments (1759), where he said people seek the esteem of their peers, by doing good deeds. Which IS true!   And which is also a good prescription for finding meaning in life. And no, greed really is not good. It’s terrible.

     What if economists had built their discipline on THAT principle, earning our peers’ esteem, and not on free-market bottom-line unfettered capitalism?

       When the Soviet Union dissolved in 1991, Sovietology departments in universities all over the world shut down. Why? They got it wrong. They had not foreseen this startling development. They were utterly discredited.

       Perhaps then economics departments should shut down. As a way of saying, I’m sorry.  

     According to the Washington Post, “A great migration is happening on U.S. college campuses, English majors are down more than a quarter (25.5 percent) since the Great Recession, according to data compiled by the National Center for Education Statistics. It’s the biggest drop for any major tracked by the center in its annual data and is quite startling, given that college enrollment has jumped in the past decade.”

     Same holds for philosophy majors. So we will have a world of lawyers, and economists – who are ignorant of critical thinking and great literature? If we ever impeach economists, perhaps one of the charges will not only be laying the foundations for the Great 2008 Recession – but driving innocent students away from studying subjects that are truly important.

      

What Does It Take to Get the US Congress to Do the Right Thing?

 Dogged Persistence & a Late-Night Celeb

 By   Shlomo Maital   

John Feal hugging Jon Stewart

     After 9/11, many many of the responders and site-workers fell ill, as the toxic materials of the wreckage destroyed their lungs, livers and other organs. It’s hard to believe, but the Federal Government has been criminally slow to replenish the fund that helped pay for their medicine and care.

       On July 23, the Senate passed the 9/11 Victim Compensation Fund reauthorization bill. It will help first responders pay for health care through 2092. President Trump signed the bill.  

   Republican Senator Rand Paul, who voted for Trump’s $1.5 trillion tax cut, creating a $1 trillion deficit, voted against the bill, citing fiscal irresponsibility.

Well done, Senator. Make us proud. Make America great again.

       Here is what it takes to get the US Congress to do the obvious right thing.

         It takes John Feal. For the past 15 years, he has organized trips to Washington, hundreds of them, by ill, injured and dying responders, through his FealGood foundation. Feal is a demolition construction worker, who was injured while clearing rubble at Ground Zero and had part of his foot amputated. He has tried to persuade Congress to do the right thing since 2004.

         And it takes Jon Stewart. Born Jonathan Stuart Leibowitz, Stewart’s The Daily Show was for my money the funniest, most biting satire on television, for almost 20 years, since it began in 1999.  

           Here is how The Daily Beast’s Michael McAuliff describes how one dogged persistent citizen, Feal, enlisted a celeb, Stewart, and against all the odds – everyone said there was no chance to pass the bill before Congress went on vacation – got it done. Feal knew Stewart, because Feal had been on The Daily Show.

   “….when it came time to talk to lawmakers about the next bill reauthorization, [Feal] didn’t want Stewart to just read a statement he’d prepared with guidance from Hill staffers.     He wanted Stewart to speak purely from the heart, so he primed him.    He gave him a note in the morning about how much Pfeifer [a 9/11 first-responding firefighter who died as a result of the toxicity] and Stewart’s friendship meant to him. Just before going into the hearing room, Feal and former FDNY firefighter Kenny Specht presented the comedian with the fire coat Pfeifer had worn on his first job. Feal had bought it at a charity fundraiser the night before. He had dozens of responders sign it as a sign of thanks.  

   “I knew I was getting to him. I knew he was just a bowl of Jello,” Feal said.   In the hearing, Stewart was scheduled to go last. And as the proceedings progressed, Feal kept working on Stewart, pointing to the packed audience and empty chairs of representatives.    “He was just festering. I said, ‘Put the piece of paper away, and do what you do best,’” Feal recalled. “I think that moment was where we changed course. I think that’s where we took matters into our own hands. And I saw a window where we could get this done before the August recess, and I knew we didn’t have to wait until November, December like everyone else wanted.”

   Stewart’s talk went viral. He tore a strip off the Congressional representatives, chastising their utter indifference. “Your indifference cost these men and women their most valuable commodity: time. It’s the one thing they’re running out of”.   He was visibly emotional, and close to tears of rage.

   So what does it take today to get the US Congress to do the right thing? It takes one dogged, determined citizen, who somehow can enlist a celeb, who explodes spontaneously in righteous anger, at an outrageous display of indifference, by members of Congress who simply were not there. And media who helped the celeb’s talk go viral, playing it hundreds of times.

       Even stone-age fossil Senate Majority Leader Mitch McConnell could not resist it.

       So, how often will Congress do the right thing in future?  

       It seems to me the Babylonians invented the zero for us, so we could answer that question precisely.   Because, how often will the Feal-Stewart duo recur?

     

 

    

Life as Math: Break Your Problem Into Pieces
By   Shlomo Maital

   How do you solve real-world problems? Hard ones?   Not, say, partial differential equations…. But life problems, relationships, dilemmas, work, career, kids.

   Let’s turn to a new and wonderful book by Cornell University mathematician Steven Strogatz *.   His book is about calculus. Remember your college course Calculus 101? One you may have struggled with? Can you believe calculus can solve real-world problems, not just math problems?

     Start with differential calculus and derivatives. This technique takes a hard problem and breaks it down into very very small pieces. Try the same with life. Problem? Insoluble? Break it down. Take it apart. Use the method of seven why’s… why?, response, why?, response, until you get down to the infinitely small level..and the core of the problem.

     Next take integral calculus. Start small and build it up. Build the big picture. Take your seven why’s…   zoom out, then put the pieces together and ‘integrate’….add it all up.

        Strogatz shows how a geneticist combined with a mathematical expert to crack the HIV    problem. Drugs were developed to combat HIV and keep it from becoming AIDS. But there was a dilemma. Using the drugs prematurely might cause the body to develop immunity and endanger the patient. The mathematician plotted the curve of HIV virus in the body, over time, and how the body destroyed the virus…. And came up with the strategy, eventually, of the HIV cocktail – the combination of three drugs that has proved so effective and life-saving. This was done, using calculus, plotting the computing the curve of HIV virus ‘kills’ by the body’s immune system over time.

     Bottom line — tackle problems like a calculus expert. Break them down. Take a small piece. Work on it.   Understand the whole problem by understanding a small part of it.

* Steven Strogatz. Infinite Powers: How Calculus Reveals the Secrets of the Universe. 384 pages. Houghton Mifflin Harcourt 2019.

 

Why Do People Swallow Whole Fake News?
By   Shlomo Maital

 
   Why do so many people swallow whole fake news?  Why do we believe things that are patently false (like the 2016 rumor that Hillary Clinton was somehow molesting or kidnapping children in a fast food restaurant?)
     Today’s Global New York Times has an Op-Ed that has some strong answers. It is written by Prof. Gordon Pennycook, from my hometown Regina, Saskatchewan,  and co-author David Rand, MIT.*
      The bottom line:  Education is not the answer.  More educated people fall for fake news, too, especially fake news that agrees with their views.
       We fall for fake news, because we are unable or unwilling to engage in critical thinking – to challenge everythng we read critically, and subject it to the laws of reason and logic.
        Critical thinking is a key skill that is taught far too little in schools and universities.  At Queen’s University, long ago, I took a compulsory course in Philosophy, in the days when all university students were required to know some literature, philosophy and history.  It was the best course I ever took.  I learned about logic, about ethics, and about metaphysics.  And I learned about critical thinking.
       A critical thinker asks,  is this true?  Is it based on strong facts?  What are the facts?  Is it logical? Does the conclusion follow from the premises? What are the sources? 
        The enemy of critical thinking is the Internet news mania.  Internet news has a news cycle of seconds.  Everything is instant.  There is no time for reflection or challenging thought.  So – let’s slow it down.

     Build yourself a news microscope.  Focus it.  Zero it in on news.  Think critically.  Reserve judgment as you do so.  Just because Buzzfeed is in a big hurry does not mean that we all have to be.

•  “Why do people fall for fake news?”    Gordon Pennycook and David Rand.  New York Times, Tuesday January 22 2019.

What Is Your Mantra?
By   Shlomo Maital

In Sanskrit, the word ‘mantra’ means “a sacred utterance, a numinous sound, a syllable, word or phonemes, or group of words believed by practitioners to have psychological and spiritual powers”.

     I teach my entrepreneurship students to work hard on a ‘mantra’ for their startup idea – three words that capture the essence of their value creation.  Great mantras do have power.

       For Nike, for instance: authentic athletic performance.  For Wendy’s (fast food chain): healthy fast food.  (Nike’s Just Do It! is a marketing mantra, not a ‘this is what we stand for’ mantra).

       A new documentary on Brexit (Britain’s exit from the EU) focuses on the person who lead the pro-Leave campaign in 2016, Dominic Cummings. He chose a three-word mantra for the campaign:   Take Back Control. It was brilliant. It captured what the British people wanted – control of their borders. Problem was — taking back control of the borders also involved a hornets’ nest of other intractable problems, including the Ireland-Northern Ireland border. But – the three-word mantra was crucial in the 52% majority for leaving the EU.

       I think each of us needs a mantra – a way to focus what we seek, why we are alive. A mantra is always an over-simplification, like the Brexit Leave mantra. But the advantage is, sharp focus. Einstein said, simplify as much as possible – but not more so. Can you simplify your own focus, down to three words, without distorting, or misleading?

       My mantra for the past few years, since I became a pensioner, is: Help Other People. The underlying logic: Pensioners become instantly transparent, the moment they retire. By creating value for others, you remain relevant and engaged. Believe me, it is not easy!  

       What is your mantra?   Do you need one? Has your mantra changed and evolved?  

 

Life Below Ground – at 250 Degrees!

By   Shlomo Maital

 A lot of money is being spent looking for life on Mars.

   What about looking for life on Earth – in unexplored places. It’s called “deep life”.

   A fascinating report by AFP, a global news agency, informs us:

   “Scientists have drilled a mile and a half (2.5 kilometers) beneath the seabed and found vast underground forests of “deep life,” including microbes that persist for thousands, maybe millions of years, researchers said Monday.   Feeding on nothing but the energy from rocks, and existing in a slow-motion, even zombie-like state, previously unknown forms of life are abundant beneath the Earth despite extreme temperatures and pressure.   About 70 percent of Earth’s bacteria and archaea — single-celled organisms with no nucleus — live underground, according to the latest findings of an international collaboration involving hundreds of experts, known as the Deep Carbon Observatory, were released at the American Geophysical Union meeting in Washington.   This “deep life” amounts to between 15 and 23 billion tons of carbon, said the DCO, launched in 2009, as it nears the end of its 10-year mission to reveal Earth’s inner secrets.   The deep biosphere of Earth is massive,” said Rick Colwell, who teaches astrobiology and oceanography at Oregon State University.

   A Japanese scientist who led the study said the following:

   “Most of deep life is very distinct from life on the surface,” said Fumio Inagaki, of the Japan Agency for Marine-Earth Science and Technology.   Using the Japanese scientific vessel Chikyu, researchers have drilled far beneath the seabed and removed cores that have given scientists a detailed look at deep life.   “The microbes are just sitting there and live for very, very long periods of time,” he told AFP. He described the team’s findings so far as a “very exciting, extreme ecosystem.” Among them may be Earth’s hottest living creature, Geogemma barossii, a single-celled organism found in hydrothermal vents on the seafloor. Its microscopic cells grow and replicate at 250 degrees Fahrenheit (121 Celsius). [This is well above the boiling point of water!]  “There is genetic diversity of life below the surface that is at least equal to but perhaps exceeds that which is at the surface and we don’t know much about it,” Colwell said.    

       Brought up from these ancient coal beds and fed glucose in the lab, researchers have seen some microbes, bacteria and fungi slowly waking up. “That was amazing,” said Inagaki.   Scientists have found life in continental mines and boreholes more than three miles (five kilometers) deep, and have not yet identified the boundary where life no longer exists, he added.

           These microbes way underground are important, because they have captured huge amounts of carbon, leaving the oxygen we humans breathe.

           And perhaps they hold the key to removing the carbon spewed into the atmosphere from burning fossil fuels, causing climate change and global warming.

Parenting: Gardening? Or Carpentry

By   Shlomo Maital

 

I have not yet read Alison Gopnik’s 2016 book, The Gardener and the Carpenter – but I am writing about it, after hearing her on a Hidden Brain podcast. I will certainly read this book soon and highly recommend it. Gopnik is a professor of psychology at U. of California, Berkeley.

   Here is her main argument about our children: We worry too much and do too much for them: children flourish when they are given freedom. When it comes to looking after kids, be a gardener not a carpenter . ‘Parents should be like gardeners. The aim is to provide a protected space in which children can become themselves’

   In Gopnik’s metaphor – a carpenter builds a table or a bookshelf, starting with a plan, and then executes the plan. Some parents think parenting is like carpentry – plan the children’s nature, and development, and see it unfold according to plan.

   Gopnik sees parenting as gardening.   Create a secure, rich environment for children. Turn them loose. Watch them grow and develop.   Be prepared for many surprises. Give them freedom to explore who they are and what they want. And then, like a garden, watch the results, that will often amaze, maybe sometimes sadden, you.  

   Here is a small experiment that conveys this message:

     In 2011, a team of psychologists did an experiment with some preschool children. The scientists gave the children a toy made of many plastic tubes, each with a different function: one squeaked, one lit up, one made music and the final tube had a hidden mirror. With half the children, an experimenter came into the room and bumped – apparently accidentally – into the tube that squeaked. “Oops!” she said. With the other children, the scientist acted more deliberately, like a teacher. “Oh look at my neat toy! Let me show you how it works,” she said while purposely pressing the beeper. The children were then left alone to play with the toy.

     In the “accidental” group, the children freely played with the toy in various random ways. Through experimenting, they discovered all the different functions of the tubes: the light, the music, the mirror. The other group, the children who had been deliberately taught how to use the toy by the teacher, played with it in a much more limited and repetitive way. They squeaked the beeper over and over again, never discovering all the other things the toy could do.

     Gopnik observed, in the podcast, that “parenting” is a relatively new word, a 20th C. word. And it implies a measure of control, of shaping, of design, of ‘carpentry’. Of course, parents educate children, teach them values, and keep them safe. But all this, she says, should be done in an atmosphere of discovery and exploration.  

     A book review sums it up well:   “To seek to parent a child, Gopnik argues, is to behave like a carpenter, chiselling away at something to achieve a particular end-goal – in this case, a certain kind of person. A carpenter believes that he or she has the power to transform a block of wood into a chair.  When we garden, on the other hand, we do not believe we are the ones who single-handedly create the cabbages or the roses. Rather, we toil to create the conditions in which plants have the best chance of flourishing. The gardener knows that plans will often be thwarted, Gopnik writes. “The poppy comes up neon orange instead of pale pink … black spot and rust and aphids can never be defeated.” If parents are like gardeners, the aim is to create a protected space in which our children can become themselves, rather than trying to mould them.”

    

Divided America: In Pictures *

By Shlomo Maital

 

 

   How divided is the United States politically? An interesting graphic from the Washington Post tells the story.

   Top figure: % voting Democrat, mid-term (Nov 6) House of Representatives, by gender. Women: 66% (2/3).    Men: 50% (1 in 2). Huge difference.

   Middle figure: % voting Democrat, by age. Young (18-39)   66%. (2/3). 65 and older: 45% (less than 1 in 2).

   Bottom figure: % voting Democrat, by education (white people). College women: 66% (2/3). College men: 50%.   Non-college men: 37%.

     Other graphs will tell the same story: East Coast/West Coast vs. Heartland (Middle states).   North vs. South. City vs. Rural.

     A New York Times headline summed up the election: Election confirms America’s divisions.

     A close study of the 3 graphs shows: The divisions have been there since 2008 – but in 2018, they have grown substantially.

     Not all of this divisiveness and anger can be blamed on Trump. Some comes from the fact that a few have grown wealthy, many have grown poorer. This deep economic division was ignored – and America will now pay the price.

 

*   Source: Washington Post, Brian F. Schaffner, Nov. 10. “….these charts are based on data from the Cooperative Congressional Election Study (CCES), a large-scale academic survey conducted in every election year since 2008. For the 2018 CCES analysis, we used pre-election interviews with respondents weighted to be nationally representative of the adult population. We then applied a likely voter model trained on previous election cycles to create estimates for the 2018 electorate.”

Living Life As an Entrepreneur: Without a Startup

By Shlomo Maital

   A funny thing happened to me on my way to speak to a group of Canada’s York University engineering students on Monday. I did a “pivot”.

   In startup entrepreneurship,   startups “pivot” when they start by doing one thing, or one idea, and discover (by interacting with real people) that what is really needed is something different.

     I spoke to my students about “why startups fail – and how a few succeed”. But I also spoke to them about – when to become an entrepreneur?

   In five years? 10 years? After gaining experience and saving some money?

   No.

   Now. Today. Tonight!

   Because entrepreneurship is not a profession, it is a mindset. And we all can live fuller, more interesting, more meaningful, more creative lives, if we live them as entrepreneurs, with an entrepreneurial mindset.

   But what is it? What is an entrepreneurial mindset?

   I believe there are two parts.

   Part One: sharp eyes and ears. Be alert for things that you believe are simply wrong, and for people who have a pressing need that is unmet.   Entrepreneurs don’t seek to make money, they seek to make meaning, by filling unmet needs of people, to make people happier, smarter, wiser, more content, healthier, and more vigorous. Living a life by doing this, even in small ways, is full of interest and meaning. I myself discovered this rather late, but not too late.

   Part Two: solutions. Assume that for every challenge, every problem, every unmet need, there IS a solution. And if not a solution, an amelioration, a way to make things a bit better or a lot better. If you assume from the outset that really hard problems do NOT have a solution, then your brain will be unlikely to come up with one. If you assume from the outset that there IS a solution, or at least a partial one, your brain, including your subconscious brain, will work on the problem – and ideas will pop into your head at the most unexpected times.   I’ve known many people who recount such experiences – and I’ve had them myself.

     Want to become an entrepreneur?   Start now. Look for ways to make people happy. Then implement them.    

     Worth a try?  

    

 

 

Blog entries written by Prof. Shlomo Maital

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