Sunday, December 30, 2012

Three Uses of the Knife

I made time during my two transcontinental airplane rides in the last couple weeks to read two books. One was Michael Shermer's "Mind of the Market", which I will have to write somewhat extensively about at a later time... But the other was preeminent play-write, David Mamet's, "Three Uses of the Knife" - one of his numerous short books on dramatic writing.

The book is intriguing and brilliantly - if at times strangely - written, and I think it has a ton of incredible insights on the writing process and what constitutes good art, bad art, what happens to 2nd & 3rd acts when writers get lazy and run out of ideas and what audiences really get out of dramatic structure. It's a short book and worth reading... but I found one passage in particular that is highly relevant to what I do.

On page 21, Mamet writes:
"Stanislavsky says there are two kinds of plays. There are plays that you leave, and you say to yourself, "By God, I just, I never, gosh, I want to, now I understand! What a masterpiece! Let's get a cup of coffee," and by the time you get home, you can't remember the name of the play, you can't remember what the play was about.

And there are plays - and books and songs and poems and dances - that are perhaps upsetting or intricate or unusual, that you leave unsure, but which you think about perhaps the next day, and perhaps for a week, and perhaps for the rest of your life.

Because they aren't clean, they aren't neat, but there's something in them that comes from the heart, and, so, goes to the heart.

What comes from the head is perceived by the audience, the child, the electorate, as manipulative. And we may succumb to the manipulative for a moment because it makes us feel good to side with the powerful. But finally we understand we're being manipulated and we resent it."
I suspect David Mamet has hit on something quite profound here. To be fair, he does seem to do that a lot... But in this case, it's also tied to what I do for a living.

Some of this goes back to a point I've made dozens of times in the last few years... the more I try to use "reason" to try to make cogent arguments and convince people that there are better ideas than the ones they currently accept, the more it tends to feel manipulative to some people and turns a lot of audience members off - thus compelling them to reject the very ideas for which I'm attempting to make a supportive case. Rational arguments just aren't the way to go if you wish to use media to change the way people think.

It's a bit of a paradox though, because if you really think about it, presenting intellectual arguments is the least "manipulative" thing I could actually do.

What's actually far more manipulative is trying to get people to change their minds about something by appealing solely to their emotions. Mamet is talking about dramatic fiction, to be sure, but consider any Michael Moore documentary as a case in point - they are manipulative precisely because they present ideas through an emotional, rather than rational, lens. A film like "Sicko" is long on emotional appeals and comedy, while simultaneously being conspicuously light on facts or cogent arguments.

But of course, that is what is actually effective - in Mamet's words - at getting to people to think about something the next day, the next week and possibly for the rest of their lives, which is precisely what needs to happen for people to internalize a concept.

At least with the documentary form, most audiences enter a viewing with some sense of skepticism - the truly effective means of using emotion to manipulate people's ideas an sentiments is within the fictional dramatic arts. Consider a film like Nick Cassavetes' "John Q", in which a father (Denzel Washington) takes extreme measures to get a cold-hearted and possibly corrupt insurance company to reconsider their decision not to pay for his son's life-saving medical treatments. This film is undoubtedly even more effective at getting people to support the idea of state-run (so-called) "universal" health care than is anything Michael Moore could produce, if for no other reason than that the emotional appeal is much more powerful when audiences must buy into it as a pre-requisite for becoming immersed in the drama of the story itself.

Clearly what any father when his son needs an expensive heart transplant is march into
a hospital with a gun and take as many hostages as possible... 
The writer and filmmakers have presented their audience with a set of circumstances - namely that an evil insurance company callously allows a poor, sick child to die just so they can make a quick buck - and that set of circumstances must be accepted by all audiences as a condition for understanding and buying into the drama of the film.

Of course... That's just a fictional movie, right?

I suppose so, but this all winds up presenting a moral conundrum as well, of course. I'm not comfortable at all using emotional manipulation to force someone to think about what I want them to think about without any intellectual support - which to be perfectly honest, is what I think I tend to be up against in the world of idea-advocacy media.

More films than I can count are made now explicitly with a message and a goal of changing the world... and of those, few are at all libertarian and banking on none show anything but contempt for markets and sound economics, which is one of the things I care most about. Dating back at least 50 years, the film industry has been inundated with film after film that uses every tool of emotional manipulation there is - with deliberately political intent or simply as a byproduct of the writers' beliefs - to push an agenda of social change, nearly always dominated by support for statism and/or an overt rejection of many key classical liberal concepts. Ever since I was a kid there's been a huge number of ostensibly environmentalist films which pit ordinary, sympathetic families (usually with sick children, poisoned wells, dying wildlife, etc.) against powerful business interests often irrationally motivated to destroy the environment "for profit".

Avatar, Erin Brockovich, Fern Gully, Captain Planet, The Informant, Michael Clayton, The Lorax... Even the  new Matt Damon film, "Promised Land" about hydrolic fracturing ("fracking"), which opens this Friday... All of these employ the now-standard evil corporation vs. lovable natives/homeowners/children/animals archetype. Corporation/business vs. life.

It's so common today that it would be far easier and less time-consuming for me to list all of the films that weren't depicting business as evil and destructive.

Naturally, the state is never mentioned at all except occasionally as the benevolent protector of "the people", in spite of the reality that virtually anytime a corporation does something other than add value to the world, the state can be quickly found at the core protecting and subsidizing them at taxpayer expense. Even "The Informant", which is a pretty funny movie about illegal "price-fixing" activities is all about the agri-business conglomerate Archer Daniels Midlands - which, dating at least back to 1995, the Cato Institute's James Bovard called "A Case Study in Corporate Welfare":
"At least 43 percent of ADM's annual profits are from products heavily subsidized or protected by the U.S. government--"at least," because the substantial gain derived by ADM from various domestic crop support programs and export subsidies is virtually impossible to quantify.
ADM's political strategy has long been based on the ideas that politicians should control prices and markets and that ADM and Andreas should control politicians."
But hardly anyone in the film industry cares a bit about that... if they even understand it at all.

Meanwhile, the hatred of business itself, the mistrust of markets and spontaneous order and even of individual liberty on the whole is virtually ubiquitous.

Indeed! While in Los Angeles I also bought another book which I should be reading very soon entitled, "Filmmaking for Change: Make Films That Transform the World" by Jon Fitzgerald, who created and runs CineCause. I'll go out on a limb and bet that not a single example to be used in that book will be a film which suggests that markets are good or that people should be more free from government interference in their economic decisions... I'm certain no examples to be used want to "transform the world" in the same way I hope to.

I suppose there's more than a bit of poetic irony in this purchase made all the more ironic in light of this other passage from a couple pages later in "Three Uses of the Knife":
"Dramatists who aim to change the world assume a moral superiority to the audience and allow the audience to assume a moral superiority to those people in the play who don't accept the views of the hero.

It's not the dramatist's job to bring about social change. There are great men and great women who effect social change. They do so through costly demonstrations of personal courage - they risk getting their heads beat in during the march on Montgomery. Or chain themselves to a pillar. Or stand up to ridicule or scorn. They put their lives on the line, and that can inspire heroism in others.

But the purpose of art is not to change but to delight. I don't think its purpose is to enlighten us. I don't think it's to change us. I don't think it's to teach us.
I don't believe reaching people is the purpose of art. In fact, I don't know what "reaching people" means."
Interesting, no?

Mamet suggests here that plays (and books, and movies, etc.) which set out to "change the world" aren't really viable as "art" any longer. I'm not certain that he's right about that, but I am certain that he's right that dramatists who aim to change the world are assuming a moral superiority to their audience, and that can easily become condescending and wind up counter-productively turning people away from the message - particularly when that message is politically polarizing in some way anyway.

Notable examples of this would include the non-liberal reaction to Michael Moore's movies, or the non-conservative reaction to Dinesh D'Souza's recent, "Obama 2016"...

So regardless of whether or not "message movies" constitute good art, the practical lesson here is that good drama makes people feel something the dramatist wants them to feel, and that in turn often compels them to internalize and think about the issues involved long into the future. Unfortunately... It seems to be that the dramatists who are by far the best at creating the kind of "from-the-heart" writing that Mamet discusses in the book are all to some degree opposed to the kind of philosophical ideas that come from intelligent reasoning. So all the moving, emotional drama that gets people to think is being expended on convincing audiences to think what I rather strongly believe are the wrong things!

This too is hardly surprising to me.

Recently, I've started thinking a great deal about creativity and why precisely it is that the best writers and filmmakers - and artists broadly - seem to be those who are the least capable of also doing the intellectual work necessary to come to accurate conclusions about the parts of human life which are somewhat counter-intuitive, like economics. One hypothesis I have for this comes from recent neuroscience research which shows that the parts of the brain responsible for empathy cannot operate simultaneously as the parts of the brain which are responsible for logical thinking.

In November, Popular Science wrote:
"A new study published in NeuroImage found that separate neural pathways are used alternately for empathetic and analytic problem solving. The study compares it to a see-saw. When you’re busy empathizing, the neural network for analysis is repressed, and this switches according to the task at hand."
It seems to me that the tools it takes to be a great creator of heart-felt drama, one needs to exist nearly all the time in the "empathetic" part of the mind. Certainly one needs to be using that part of the brain when actively engaged in the process of writing great drama in order to fully understand the humanity of what's being written. Meanwhile, if you want to understand the way societies best function, you need to be critical, analytical and use logical reasoning skills to assess what is true. This is because - particularly in the humanities, but in most of science - all the stuff that's right out on the surface and easiest to see tends to be highly deceptive.

To quote Russ Roberts' favorite F.A. Hayek quote:
"The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design."
...and from Frederic Bastiat, one of my favorite quotes from the introduction of "What is Seen and What is Not Seen":
"There is only one difference between a bad economist and a good one: the bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen."
But of course, it's very hard to see the less-visible effects in life if you don't step back and look at an issue somewhat dispassionately. Using an example from earlier, in the John Q movie, what's not seen is the scarcity of hearts available for transplant. Nor does the movie depict all of the adults & children who were better or more viable candidates than Denzel Washington's son, or all those individuals who could afford the transplant surgery and thus provide compensation to all the hundreds of other people directly and indirectly involved getting that heart from the donor to the right patient.

The compelling story is to look empathetically at Denzel Washington's character and the actions he takes on behalf of his family. The insurance company makes a great villain, and a child dying makes a great motivation for the actions of the protagonist.

In short - all the elements that make a great story are nearly antithetical to the skills needed for good analysis.

It's hard to know where to go with all of this. It's not very satisfying to point out a bunch of paradoxes and run away, but that's kind of what I have to do here.

  • Audiences find directly presented rational arguments to be "manipulative", yet emotionally-driven drama that pushes a message is perceived instead as a good story worth internalizing. 
  • Writers who produce great drama get better at creating powerful stories almost directly to the extent that they are worse at using reason to analyze the world - virtually guaranteeing that the best story-tellers are (in some ways) the worst thinkers. 
  • The dramatist's job is not to bring about social change, but through the act of delighting and entertaining audiences, good drama can get people to think and feel new things - thus producing social change.

Clearly, in spite of it being such a short book, David Mamet's "Three Uses of the Knife" gave me a lot to think about.

Sunday, December 9, 2012

On The Subject of Creativity.

Today, I want to start a discussion about creativity.

But... Rather than open with a long tangent about how amazing Twitter and YouTube are - in that they not only provided a home for this brilliant and important discussion, but enabled me to randomly stumble on it through Brain Picker this morning - I want to dive right in and suggest that you just take a bit and watch John Cleese talk about creativity in 1991:

Then watch this related talk he gave in 2009:

Now that you've all watched that wonderful video (you did, right?), you'll notice that Cleese separates human thinking into two distinct "modes": Open, and Closed.

In the open, or more creative mode, people are thinking playfully and creatively - that is, we're exploring all of the different types of ideas that may come out of our minds without too much consideration for practicality, factual accuracy or whether or not they're logically sound. In the closed mode, we are thinking practically and rationally and critically. Some people might describe this as "right" vs. "left" brained thinking.

As a mental model for how people operate, there's probably a lot to what Cleese is saying here.

The talk itself is ultimately about how to increase people's creativity, and while he - I think rightly - offers no easy answers, he does provide 5 fairly significant conditions under which creativity becomes a lot more likely. Maria Popova of Brain Picker conveniently condensed them for me already, so I'll just quote her:
  1. Space (“You can’t become playful, and therefore creative, if you’re under your usual pressures.”)
  2. Time (“It’s not enough to create space; you have to create your space for a specific period of time.”)
  3. Time (“Giving your mind as long as possible to come up with something original,” and learning to tolerate the discomfort of pondering time and indecision.)
  4. Confidence (“Nothing will stop you being creative so effectively as the fear of making a mistake.”)
  5. Humor (“The main evolutionary significance of humor is that it gets us from the closed mode to the open mode quicker than anything else.”)
Given those conditions, it's a lot easier to become creative and generate good ideas than without those conditions. He repeatedly comes back to this idea of building a "Creative Oasis" where you can create a unique space away from the pressures and distractions in other parts of your life in order for you to become creative.

In the 2009 video, he devotes more time to discussing the need for boundaries and the importance of not being interrupted while in this Oasis.

On a personal note, the reason I often find myself staying late at my office, working on the weekends and I believe the reason I tend to do my best work between the hours of 11pm and 2am much of the time, is precisely because the rest of the people in my world (including my co-workers) go home or go to bed, and leave me free from other human distractions.

Oddly, by the way, I find that non-human distractions aren't that big of a problem. I can have music or movies on in the background and easily tune them out for most of my work (except when writing), but the minute real people are in the room, I can't focus on being creative in the same way. It turns out, it's really important to be able to shut yourself in that Oasis if you want to get into a good creative rhythm. I also find that once I'm in that mode, I really don't want to stop until I've exhausted my ideas.

And that brings me to two additional key quotes from Cleese's original lecture (again, thanking Maria Popova for her transcriptions):
"We need to be in the open mode when pondering a problem — but! — once we come up with a solution, we must then switch to the closed mode to implement it. Because once we’ve made a decision, we are efficient only if we go through with it decisively, undistracted by doubts about its correctness."
"To be at our most efficient, we need to be able to switch backwards and forward between the two modes. But — here’s the problem — we too often get stuck in the closed mode. Under the pressures which are all too familiar to us, we tend to maintain tunnel vision at times when we really need to step back and contemplate the wider view.

This is particularly true, for example, of politicians. The main complaint about them from their nonpolitical colleagues is that they’ve become so addicted to the adrenaline that they get from reacting to events on an hour-by-hour basis that they almost completely lose the desire or the ability to ponder problems in the open mode."
Again, I see an immense amount of important truth in these statements.

Getting into the open mode is difficult... But it's also entirely at odds with the closed mode. They cannot really co-exist simultaneously, or at the very least, they clash... and of course this makes sense if you consider what the different modes of thinking are doing. One is a free-flowing "brainstorm" of largely disconnected ideas, shapes, colors, or words with which a person's creative mind can hopefully build brand new connections. Meanwhile, the other is an analytical process which absolutely requires you to put boundaries on your thinking and assess reality as it is.

What's more, a recent study used MRI scans on people solving different types of problems and discovered that when people's brains are engaged in what could be considered "empathetic" types of thinking, the parts of their brains which are used in reasoning and rational thinking were deactivated.

Neuroscience seems to be demonstrating that it may be impossible to be both rational and empathetic simultaneously.

And I think this sheds a lot of light on to why many artists are simultaneously so great at understanding and engaging people in universally human terms and so bad at understanding science, math, economics, and even philosophy. The skills needed to become an incredibly great artist and creator seem to be almost entirely at odds with the skills needed to become a great intellectual and thinker.

I suspect this provides some useful clues as to not only why the artist community tends towards promoting bad - but emotionally resonant - ideas about various academic disciplines, but also why it's so hard for economists, engineers and other people whose job it is to think rationally about the world and who more thoroughly the boundaries of reality, to be very creative about how they present their ideas to others.

What an interesting paradox, though, isn't it?

It's the creative person - the person who can most easily access their "open mode" in Cleese's terms - who can be most effective at telling stories and moving other people emotionally, but it's also the person who spends the most time in their open mode who has the most difficulty engaging the world logically.

It really gets at the heart of the challenges for people like me - who kind of exist in the two extremes of these different modes of thought - in conveying good ideas to others as creatively as possible. It's always been a problem, actually... The more you have to tell the truth, not embellish the stories you're telling and stick to "the facts" or the logical ideas, the less creative you can be. Creativity and intellectual honesty wind up often being at odds as well.

See: "Kony 2012", "The Story of Stuff" or Robert Reich's "The Truth About The Economy" as a few major examples of this.

At any rate, there is one thing I might quibble with John Cleese on in this - and that's that there should be no judgment of good or bad ideas when being creative. if you're working in a team trying to brainstorm, I do think that criticism can be a good thing - provided that the people doing the criticizing are people you respect and trust and whose critiques are useful.


I don't think that blasting bad ideas is a good thing in a room filled with people who offer no ideas of their own - then it's just negativity, and I do think it's better (as Cleese suggests) to build on good ideas rather than shut down "bad" ones. But I know from my own experience that I'm at my best and most creative when I have people to challenge and bounce ideas off of.

Healthy, constructive competition and challenge can absolutely aid the creative process.

The creative process isn't ever going to be identical for every person - and getting in the right headspace to generate really creative ideas and make the best decisions you can happens a little differently for everyone. But it does seem to require some time and separation from the practical or rational concerns of the rest of the world.

So for me, the serious question remains: How does one find more artists who are at the extremes of their creative "open" modes and their rational "closed" modes? Is it possible to cultivate great artists who are also brilliant and rational thinkers?

I hope so.

Saturday, November 10, 2012

"What’s the multiplier? Better, we hope..."

I'm looking at old articles on people's support for government stimulus in the wake of the "Great Recession" back in 2007 or 2008.

I found this, from Paul Krugman, published November 10th, 2008... He's worried about the impending fiscal stimulus package:
"I had a hunch that the Obama people might be thinking too small on stimulus. Now I have more than a hunch – I’ve heard an unreliable rumor!"
So, what's 'too small' look like? Conveniently, Krugman lays it out clearly:
"So what kinds of numbers are we talking about? GDP next year will be about $15 trillion, so 1% of GDP is $150 billion. The natural rate of unemployment is, say, 5% — maybe lower. Given Okun’s law, every excess point of unemployment above 5 means a 2% output gap.

Right now, we’re at 6.5% unemployment and a 3% output gap – but those numbers are heading higher fast. Goldman predicts 8.5% unemployment, meaning a 7% output gap. That sounds reasonable to me.

So we need a fiscal stimulus big enough to close a 7% output gap. Remember, if the stimulus is too big, it does much less harm than if it’s too small. What’s the multiplier? Better, we hope, than on the early-2008 package. But you’d be hard pressed to argue for an overall multiplier as high as 2.

When I put all this together, I conclude that the stimulus package should be at least 4% of GDP, or $600 billion.

That’s twice what the unreliable rumor says. So if there’s any truth to the rumor, my advice to the powers that be (or more accurately will be in a couple of months) is to think hard – you really, really don’t want to lowball this."
Good news for Paulie!

The rumor he heard was wrong, and we got an $819 billion stimulus package a couple months later - of which the CBO acknowledged $637 billion was direct spending by the Federal government. It also approved a ton of future spending, as well.

But hey! It's great that Krugman warned us about "lowballing" the stimulus, cause as we all know, that stimulus totally fixed everything, and we're all better now.

[Washington Post graphic of the stimulus package]

Thursday, November 1, 2012

Prices Matter.

I know it seems awful for most people to think about, but scarcity is real, and especially in natural disasters, a free price system matters.

You might have read recent news reports about Hurricane Sandy disrupting supplies to people in New York and New Jersey. Some reporters are claiming cases of "price gouging". For example, the New Jersey Star-Ledger reports:
"Bumper-to-bumper cars, trucks and SUVs stretched from the New Jersey Turnpike rest areas, taking up right lanes for up to a quarter of a mile.

Where open and functioning gas stations could be found, people waited up to two hours for a share of those precious gallons.

In some cases, they might have been paying more than they should have, and reports of $5-a-gallon gasoline have reached state officials, who are investigating dozens of allegations of unlawful price gouging."
But consider that "price gouging" is a reflection of increased demand/limited supply of - in this case - a crucial good that in some cases can mean life-or-death for people who want to get it.

Politicians and the public at large need to stop their polemic moralizing for a moment and ask themselves what the alternatives are. On the one hand, we have the anti-"price gouging" position where politicians pass laws against any price-increases during natural disasters, and people get outraged if anyone raises the price of gasoline. But that doesn't change the fact that there is a far lower supply of gasoline than anyone would need to meet the emergency demand.

So... Under an anti-"price gouging" regime, who gets the gasoline? Answer: Whoever gets to the gas station first.

Is this really the best possible allocation of scarce & vital resources?

I'd say no. Not even close.

Those who get there first are not necessarily going to be those who value or need the gasoline the most. Hypothetically, what if you were responsible for an orphanage, and you had 30 children to account for and protect in the aftermath of a natural disaster that destroyed your facility? Surely you would attend to their immediate needs first and for as long as it took to secure the safety of the kids, right? Eventually, you'll need to go get some gas to power a generator, or to fill up the tank in a bus or a van so you can get the kids out of town.

But... While you were doing that, imagine that I - who have no child-saving responsibilities, and who has only experienced a power outage, but no flooding or real damage to my home - decide that I'd like to get out of the city. I hop over to the gas station long before you have even have a chance to do a headcount.

By the time you get there, there's nothing left. Your children are stuck with no power, no way of fueling a car or a generator and no place to live.

Now, consider the alternative.

What if you let prices rise? What is the likely result?

Well, to be sure, I might be rich enough to decide to suck up the higher prices and buy the gas anyway and get out of town. But, more likely I'm not, and I decide to go back home, grab a blanket and read a book until the power comes back on - leaving more fuel for people who need it more - possibly people like you.

"Price gouging" is something that I suspect is shocking to a lot of people, because they think that only the rich people will get goods & services during natural disasters... But that's not really the issue. The resources will go to those who place the most value on them - and maybe those people are rich, but we could also easily be takling about groups of people like churches & charities who might have vans that would transport many poor people to safety and have pooled monetary resources and who maintain emergency funds.

Anyone who actually had the greatest need and placed the highest value on gasoline would be getting it, and more importantly - the high prices would encourage entrepreneurs from all over the place to come in and bring new resources into the affected area.

Don't believe me? Check out this film I made about the recovery in the after math of the 2011 tornado in Joplin, Missouri that nearly destroyed the entire town:

Allowing prices to shift and rise in response to crisis situations is a crucial way to get goods & services to those people who actually need them the most, and to encourage the import of new resources & labor into disaster-stricken areas. This isn't a new lesson from economics, but it's one that people keep refusing to understand...

The longer we put off recognizing these kinds of lessons, the more people will continue to suffer.

Monday, October 8, 2012

Addicting Misinformation

Articles like the one I'm about to rant about drive me completely apoplectic.

First, I will admit that "Addicting Info" is - to be fair to my own sanity - one of the most unabashedly biased "leftist" blogs on the web and is staffed by some of the most ignorant amateurs out there, so I probably shouldn't care that much, but this article has over 7,000 "likes" on Facebook and not a word of it is true or even particularly sane.

I don't really want to give it any further traffic, so I will simply copy & paste the article here, with a few highlighted points of incredible stupidity (emphasis mine). It's not very long anyway. One Nathaniel Downes (about whose credentials I cannot currently find a shred of viable information) writes:
"Across Europe, the failure of austerity is clear. However with the weakness of the Eurozone’s de-centralized government apparent, France took upon itself a very different path to rectifying its financial woes. Instead of cutting services, punishing its population for the excesses of the élite, France has taken a page out of history, and taking the old tactic of raising its taxes.

The new tax rates top off at 75% of income earned over $1 million euro (approximately $1.3 million USD) for individuals. Some economists are quick to proclaim that such a tax rate would cause the economic conditions to become worse and that it sends a message that France does not like the rich and is not open for business.

This of course is nonsense. France, like many nations, has a tax penalty for taking money out of the country. France also utilizes a value added tax on goods going into the country. This means if a business decides on moving, to say Africa, to avoid the higher taxes, it would find any of its goods at a severe penalty when they returned to sell their goods and services to one of the largest economies in the world. Any business which decides on not selling to the market, of course, is being stupid. They are doing the metaphorical cutting off of their nose to spite their face. Every business can be replaced, so if a market is there, a company will come to fill it.

Instead of being anti-business or anti-rich, it is instead very pro-business. Now a business cannot waste its resources in supporting overpriced leisure-rich. Instead, the businesses which for invest in expansion, in its customers, and in its employees will find themselves rewarded. This becomes a very business friendly environment, companies which work in France will be very pro-growth. This will in turn expand their owners fortunes and overall wealth.

This is not a record for taxes, the United States once sported a 94% income tax rate. What this is, however, is a rejection of the Chicago and Austrian school of economics which have dominated the world for the past 40 years, and an embrace of the American school of economics, a school which has been sorely missing from the austerity debate."
Let that sink in for a minute.

Here's my response, which I posted to as a comment on the article itself. Here I will also add links so that my points are supported:
This has to be the dumbest, most poorly researched or argued article I have seen in years.

1. "Austerity" hasn't actually been attempted in nearly any part of Europe, and even to the extent that anyone could claim it exists even in Greece, it is overwhelmingly comprised of further economy-crippling tax increases and levies on incomes, goods & services, imports and everything else... ALL of which make people worse off and takes more money out of individual's hands, giving it to politicians to spend instead (which is largely why this isn't working), and the few instances where spending is being "cut" are either roll-backs in growth or things like raising the retirement age before social security benefits can be collected, selling *some* of the thousands of state-owned businesses and assets to cronies, and limiting or eliminating bonus payments/freezing public sector wage increases.

NO PART of this is a reduction in state control over the economy in Greece - or in Spain, or France for that matter, and nobody else has done anything but TALK about "austerity".

It is one of the most ludicrous things in the world to engage in policies that no reasonable person would call "austere" and then declare austerity a failure when raising taxes on everything under the sun and exploding Keynesian stimulus spending doesn't work to bring about prosperity.

So that's retarded... and it brings me to point #2.

And no, that Krugman quote is not out of context.
2. The Monetarist "Chicago School" had some influence 40 years AGO, but hardly has any influence on American policies now - and barely had any influence worldwide any way... but more importantly, the Austrian School has had ABSOLUTELY NO INFLUENCE over policy at any point.

You could discover this if you took two goddamn seconds to look at what Austrian School economists actually advocate, and what kinds of policy conclusions their methodology would support. They were the ones most seriously warning against the policies that brought about the financial collapse in the first place, and they are not the ones in charge of policy-making in the US or anywhere in the world today either.

They tried to STOP the $700 Billion bailouts, and the $800 Billion stimulus packages. They argue AGAINST the $1.5 Trillion worth of yearly deficits we've run for the past 4 years. They argue AGAINST having a central bank set interest rates and they argue consistently against the manipulation of the money supply.

Not a SINGLE member of Bush's or Obama's teams of economic advisers, nor anyone at the treasury or at the Federal Reserve (which is, as I mentioned, antithetical to Austrian School ideas from the start) is remotely influenced by the lessons of Mises, Bohm-Bawerk, or Menger... or really even by Schumpeter, Bastiat or Hayek.

We've seen an explosion of government spending, an explosion of regulatory control over the eocnomy during the past 40 years... We've seen NOTHING that remotely fits a model of what most Austrians might support.

3. Tax rates.

Contrary to the article... YES... 75% tax rates are going to create further capital flight from France (UPDATE: They ALREADY ARE.). Likewise, 94% top marginal income tax rates for a couple years, and then the 91% rates we had throughout the 50s and 70% rates we had from the 60s to 80s created incentives for America's wealthiest people to engage in tax-avoidance strategies (i.e. shifting their reported income from salaries to asset dividends, moving money to low-tax off-shore bank accounts and other legal strategies, and assuredly some illegal ones), and while those top rates only applied to those who would be billionaires today (i.e. not people making $250,000+ who are in the top bracket now) to begin with... their effective rates were always far lower.

Nobody has ever paid rates anywhere near 94%... and frankly. Why in the hell would they?

Beyond that... And here's the REALLY important part... What matters to government is not actually the tax RATES. What matters is revenue. And unfortunately, revenue in the US has been steady at 18-20% of GDP for the last 60 years...... In spite of tax rates being at 91%, and 70%, 42% and 39% and now down to 35%, that revenue as a percent of GDP has never substantially changed.

Why not? Because people actually DO change their behavior when rates go up or down, but the amount of blood people allow governments to extract doesn't fluctuate that much.
[Note: I made a video on this very topic not too long ago.]

We are, of course, also spending at about 25% of GDP, which is entirely unsustainable - yet history is not on your side if you think the solution here is to raise taxes.

What worthless garbage this article is.
I followed that up with an addition I meant to include in the original:
One other thing actually... All the freaking major economics textbooks, all the major universities, and all the lead government economists are all overtly Keynesian. And the policies we have are in line with that.

Before I go on, I want to point out that the book I linked above is Greg Mankiw's "Principles of Economics" textbook, which is the most widely used intro to economics textbook in the world. To pull from Mankiw's Wikipedia page, note the following:
"Nicholas Gregory "Greg" Mankiw ( /ˈmæn.kjuː/; Ukrainian Cyrillic: Григорій Манків; born February 3, 1958) is an American macroeconomist and Professor of Economics at Harvard University. Mankiw is known in academia for his work on New Keynesian economics.

From 2003 to 2005, Mankiw was chairman of the Council of Economic Advisers under President George W. Bush. In 2006, he became an economic adviser to Mitt Romney and continued during Romney's 2012 presidential bid.[1][2] He is a conservative[3][4][5][6] and he writes a popular blog, ranked the number one economics blog by US economics professors in a 2011 survey.[7] He is also author of the best-selling textbook Principles of Economics, and according to the IDEAS/RePEc rankings, he is the 32nd most widely cited economist in the world today.[8]"
Not only is Greg Mankiw one of the leading voices of "New Keynesian" economic thinking, he was also an adviser to George W. Bush during his term in office, as well as an adviser to Mitt Romney today.

Now... You might be thinking... Hey, this guy is a Republican! The Democrats surely offer something different, right? Are you wondering then what about Obama's advisers?

Well... Bad news, everyone!

They're all Keynesians as well - and even less influenced by the more free market teachings of the Chicago School, even when a few of them were influenced by Milton Friedman (it was hard not to be, for the record) in areas like statistics and modeling like Austen Goolsbee.

Here's the list of current & former members of the United States "Council of Economic Advisers" going back to 1949... I'm not going to go through each person one by one here, but I dare you... Go find me a single person substantially influenced by the Austrian School.

Spoiler alert: You're going to fail.

Even Milton Friedman - who was one of the most influential economists of all time by himself - isn't even on this list. But Joseph Stiglitz is. The point is easy. If you look at who has influence over the universities and over policy, it is NOT the Austrian School economists holed up at George Mason, or Auburn, or the other few outposts around the US. Pete Boettke, Don Boudreaux, and Steve Horwitz don't have any say over what's going on... and even less so do people like Robert Murphy, Mark Thornton or Peter Schiff... and somewhere way, way, wayyyy down on this list are people like

To say that they are the cause of all economic problems in the world is disastrously wrong and frankly... it's simply a lie written at "Addicting Info" to further provide confirmation of biases to those who don't know any better and don't want to know any better. It's very much like what I wrote many years ago in my first ever published op-ed on economics for the Ludwig von Mises Institute responding to similar stupidity coming from Thom Hartmann.

That said... I cannot even begin to say how irritating and borderline enraging this kind of stuff is.

And let's be honest... There's so much more to be enraged about in this article than I even commented on at the post!

I mean... Downes' argument here is literally that the government of France can keep all of its rich people by imprisoning them in a brutal taxation gulag.

If you don't want to be taxed at 75%, that's cool... leave the country, except... oops, we're going to tax everything you have when you leave and restrict all imports from coming in. So you'll be "stupid" if you don't just stay and take the beating while continuing to produce all you can for your starving fellow citizens. I'd ask if anybody honestly believed that any of this was a good idea or would make people in France better off... But apparently, around 7,000 people DO believe this!

What in the hell, world?

Restrictions on imports just mean that goods in France will be more expensive, and of poorer quality as French producers assuredly will not have comparative advantage in all cases but are insulated from outside competition thanks to consumers being literally or virtually prohibited from acquiring better or cheaper goods made elsewhere. Taxing rich people at those rates will utterly crush production to begin with, but the notion that rich people - who tend to have some ability to bribe public officials or to work around laws where they need to, and who also tend to be rather savvy about financial issues - won't just be able to leave or that they will simply take the punishment is insane.

It has NEVER worked that way.

All this economic thuggery is going to do - and IS already doing - is push out all the investment, all the capital and all the jobs and prosperity away from France to other, friendlier places. Places like Singapore & Hong Kong, or if you want to stay in Europe, Switzerland or even just across the channel in the UK. No matter what the idiot author of this piece thinks, France isn't engaging in "pro business" activities by punishing rich people, which isn't what I want government to be in any case, but it also sure as hell isn't "pro market" which is actually what matters if you want economic growth.

Capital availability for private entrepreneurship (a French word, by the way!) is absolutely essential to a thriving economy. The French government simply cannot redistribute its way into national prosperity no matter how many times they try.

It's all just so incredibly stupid that it literally gives me a headache, and if people don't get educated even well enough to know when they're being lied to, we're never going to get out of these kinds of messes as a species.

Saturday, October 6, 2012

The October Pledge & Revealed Preferences

I'm feeling a bit like a crappy friend and a crappy human being.

My best friend at my work, Jeff Proctor, came up with a really cool idea. Or at least, I want to believe that it's cool. I love it, actually...

The idea is called "The October Pledge" (which you should totally like on Facebook right now!), and the idea is simple... For the whole month of October, or the month leading up to this year's presidential election, you agree to do the following:
"No matter how I vote (or don't vote) in November, I pledge to spend the month of October creating value and bringing joy to the lives of others. I will abstain from political commentary (positive or negative) and, instead, spend my time taking actions that make my life -- and the lives of people around me -- better. When November comes, I will take whatever political action my beliefs warrant, but for now, I choose people over politics!"
That's it. Should be easy enough... The only problem is, for me... It isn't easy at all.

So, I'm here to talk about the difficulty for me, and make a little note about revealed preferences. The concept of "revealed preferences" is an idea in economics in which we recognize that people say they like or dislike all sorts of things, but at the end of the day, what matters is how we act.

I can claim that I love backpacking (and I do claim this), but if I spend my Saturdays sitting on my couch watching a movie instead, I'm demonstrating a revealed preference such that movie-watching is in reality a higher valued way to spend my time than is backpacking. Unfortunately, in addition to being a good example to illustrate the concept, it's also a true story.

I wish it wasn't sometimes.

Honestly... I really do wish I was the guy who went out by himself wind, rain or shine and did cool outdoorsy activities. I wish I spent more (any) time this summer with my kayak than I did at my desk working on Learn Liberty videos. Alas, that's not what I did. I revealed a preference all summer for working over kayaking.

I am proud to say that this morning I did go out to an archery range nearby to get some target practice with my brand-new recurve bow. I suppose that's a bit random, but it's fun and it's decent light exercise combined with skill & hand-eye coordination, so it's pretty engaging. Maybe next week I can get someone to go out there with me... Plus, at least the bow is something I can easily toss in my car. The kayak is a ton of work by comparison. So is backpacking... Especially when you don't really have anyone to go with you.

Anyway, the thing is... Movie watching makes me very happy too, and it isn't a ton of work. It also benefits me by keeping me in the loop on what industry people are doing, what audiences care about and I can totally rationalize it as professionally beneficial behavior. And I mean, it is... But also, I just enjoy doing it. So that's what I do.

So........ What's all this got to do with the October Pledge?

Well, I've come to realize that as much as I don't care about politicians or "politics" per se, and while it would actually be very easy to not talk about the election or engage in any kind of armchair punditry for the next month, I do get a great deal of benefit from having intellectual discussions about economics & philosophy, and these things intersect with politics so much that I think it'd be very difficult for me to abide by the spirit of the pledge. You can see this as a revealed preference in action nearly every day if you follow my twitter or Facebook feeds.

So I can't make the full promise.

What I can do is say that I won't engage in any punditry, and I won't talk about Romney or Obama's electoral campaigns, or whether or not one or the other will win... I don't care very much about that in any case, and frankly, I really don't think it matters which wins to a large degree. I will probably still write about and engage in discussions philosophy & economics, and frankly, I don't see how I can avoid these things being perceived of as "political", even when I don't necessarily believe they are in the strictest sense.

I will also do my best in the next 4 weeks to make the overwhelming majority of my posts be about art, music, film, and other creative endeavors. To the extent that I can create value for other people... well... I gave blood last week, which was good, I've written two in-depth emails to people recently in response to their questions seeking advice about how to get into creative careers, and I'm working on a bunch of value creation at work and as a freelancer.

For myself, even though it's getting to be a bit more problematic weather wise, I'm going to try to get out and do some more active things like the archery or kayaking, and meanwhile, I have a bunch of skills I want to learn creatively as well... particularly in the realm of animation.

I may even get back actually into writing a science-fiction feature film script which I had a "winning" concept for about a year ago. Just to see if I am actually capable of something like that.

Who knows.

Jeff's right. Politics is stupid, particularly around election time, and now is the time every four years when everyone tends to go completely bonkers anyway. It's a time when a bunch of amateurs who don't care enough to even learn the first thing about the ideas or issues in play suddenly come out of the woodwork with innumerable opinions based on nothing but their own team allegiances. It's a pretty dismal time, to be honest.

So I agree entirely that I don't really want to be a part of it.

I can't sway anyone's opinion at this point in the year in any case, and even if I could, if at all possible I'd sway it away from voting at all. Or I'd at least try to sway it towards voting "no confidence" or for a 3rd party or write-in candidate. I'd also probably tell you to vote down every expansion of government and every increase in spending you can at a local level... But since I can also do basic math, and have a perfunctory understanding of Public Choice Theory, I don't know that it would matter even if you did.

That seems cynical, but it is pretty realistic.

Alright, so... I'll do my best to avoid the whole subject for the next few weeks, but I make no promises. If you want to support the October Pledge, and I really do think you should - particularly if you don't work in a politically-charged field like I do - then by all means, share the Facebook page and change your profile picture. Get on board.

Creating value for yourself and others is something we should be doing all the time, and even if the state makes that harder to do by initiating and supporting violence against peaceful people and restricting individual choice... we can still opt to ignore it wherever possible.

This might be one of those moments. Good luck.

Friday, October 5, 2012

"My bigotry is just common sense."

This has to be one of my favorite things in a long time...

Thaddeus Russell, the fabulously interesting historian, and author of "A Renegade History of the United States" is a buddy of mine. This evening, on Facebook, he posted an interesting Ronald Bailey article about how "Liberals Admit to Discriminating Against Conservatives" in Reason Magazine. I also posted it tonight, and it's definitely worth reading.

From the article: 
"...a new study, "Political Diversity in Social and Personality Psychology," by Dutch psychologists finds that overt discrimination against conservatives [PDF] likely plays a role. The researchers surveyed several hundred social psychologists, most of them American, and found that 6 percent identified as "overall conservative""
Then Bailey quotes the researchers, who say [PDF]:
"The current results suggest one answer: Members of the conservative minority are reluctant to express their political beliefs publicly. Survey 2 shows why: Hostility toward and willingness to discriminate against conservatives is widespread. One in six respondents said that she or he would be somewhat (or more) inclined to discriminate against conservatives in inviting them for symposia or reviewing their work. One in four would discriminate in reviewing their grant applications. More than one in three would discriminate against them when making hiring decisions. Thus, willingness to discriminate is not limited to small decisions. In fact, it is strongest when it comes to the most important decisions, such as grant applications and hiring."
When Thaddeus put this on Facebook, it sparked what I think is a truly hilarious series of comments, that everybody really needs to see. At least you should see the first few:

I'm sorry, but that is just spectacular to me!

David begins by claiming the article/study is "Bullshit!", presumably meaning that he doesn't believe liberals discriminate against conservatives in academia. He follows that up instantly with saying that conservatives/Republicans are "RACIST PIECES OF SHIT" and shouldn't be allowed to be employed at universities.

Of course, he's not bigoted. Oh, no... His positions are just "common sense". You can tell by how he used all caps.

There are more comments like this, and for the most part they are equally oblivious, cognitively dissonant and  - in my opinion - hilarious in their astounding irony. David supports his position by linking to a Huffington Post story about a single, Republican member of the Arkansas State House of Representatives who wrote in a book that the descendants of black American slaves might be better off in the US than they would have been had they been born in Africa. That's not actually that controversial statement, as far as I'm concerned, but it seems that he goes on to make a lot of racist statements as well.

Now... It's a Huffington Post article, so I'm assuming there's more than a little bias working against this guy here, but given that we're talking about a state-level politician from Arkansas, it's not like it'd be surprising that that guy was an out an out racist.

But............. Taking a single person's views and then ascribe them to all conservatives is - I pointed out - insane, dishonest and stupid. Thus we get my second favorite part of the thread, where David calls me a conservative for criticizing his logic.

There's another bit that I think is worth saying something about as well, though... One of the commenters, "Joe", who I believe is a university professor, lists a bunch of reasons that he believes conservatives shouldn't fit into the social sciences. But, quite consistent with the bulk of my experience talking with "liberals", his descriptions of conservative beliefs are generally inaccurate and misstate the arguments conservatives actually make.

Here's Joe's comment:
"Climate change denial is by far the dominant position in the GOP. Beyond that I can see research scientists as not likely to be Repubs because the party has turned its back on science on everything from stem cell research to NSF and NIH funding in general. In social science, many conservatives don't even believe in something called the social - preferring explanations that at the level of the individual or family. And as for the humanities, these disciplines have been under assault from the right for a long time, particularly the business right which sees any intellectual endeavor not in pursuit of profit as a waste of time and resources. Not to mention the fact that conservatives are far less likely to support student grants and manageable loans to attend college. Having said all of that, I have Republican colleagues both in my dept and elsewhere. In fact, one of my former PhD students, an arch-conservative if there ever was one, just got a tenure-track position last year. I visited him in the summer, and he appears to be thriving."
.So... Here's the thing.

First of all, Democrats turn their backs on science all the time as well. Ronald Bailey wrote another recent article about this as well called, "Who's More Anti-Science: Republicans or Democrats?", noting that the anti-vaccination crowd, the fears of GMO crops, the appeals to failed Malthusianism, the fear-mongering about pesticides and even fracking and things like that - all actual evidence to the contrary of their claims - tends to come from Democrats and "the left". Not to mention that there is so much more bias against advances in technology when coming from entrepreneurs & business. One key passage:
"Expanding on his argument at DeSmogBlog, Mooney asserts that the left doesn’t abuse science; it merely has policy disagreements about it. As an example, he cites affection for the precautionary principle. “There is always much scientific uncertainty, and industry claims it’s safe, but environmentalists always want to be more cautious—e.g., adopting the precautionary principle,” he notes, adding: “The precautionary principle is not an anti-science view, it is a policy view about how to minimize risk.”

But as University of Chicago law professor and current administrator of the White House Office Information and Regulatory Affairs Cass Sunstein noted in a 2003 working paper entitled “Beyond the Precautionary Principle,” this idea “imposes a burden of proof on those who create potential risks, and it requires regulation of activities even if it cannot be shown that those activities are likely to produce significant harms.” Note specifically the latter point.

Furthermore, Sunstein observed, the precautionary principle is now pervasive, applying to global warming, nuclear power, pesticides, and biotech crops. Restraint on experimentation is unscientific in the sense that it demands the impossible: Researchers can never show in advance that any technological or scientific activity will never produce significant harm."
Point being... There's plenty of anti-science ideology on the left, and even more so what actually concerns me is that often a policy disagreement surrounding a scientific is assumed - by liberals, in my experience - to be a disagreement over "the science".

Take Global Warming, for example. Contrary to what Joe claimed, I don't encounter a ton of conservatives (and I'd be willing to bet that I meet and know/am friends with many more than he is) who don't believe global warming exists. I know many who believe that either the risks, the causes, or the severity (or all of the above) of global warming are overblown, but I don't know many who deny that it's happened.

Most are happy to look at NASA data and say what most intelligent people say: "NASA scientists have the tools, the expertise, they're collecting good data from space... they're probably right."

But where they diverge - and I'm in this camp - is that simply because global warming exists does not mean that every totalitarian, "world government" scheme some progressive wants to impose on billions of people to "solve" the problem should be allowed or supported.

That disagreement isn't a disagreement over the data. It's a disagreement over policy and what constitutes an acceptable way to solve - even potentially very large - problems.

Consider what Joe said about the NFS or NIH as well. I've never really met a conservative who wants to "defund" science. I've met plenty, and of course nearly all libertarians, who don't want THE STATE to fund science.

Not using force to pay for something, and not doing something are two totally different things.

Republicans have their baggage to be sure, but the assumption that they are always evil, stupid or wrong gets tiresome to me, because it invariably comes from people who couldn't articulate a non-progressive opinion accurately if their lives depended on it. I find the reaction to Thaddeus' posting fairly instructive in this regard, but keep in mind that it's merely one of hundreds of comparable examples I've experienced in the last decade or so.

And on that note. Anytime you find yourself about to justify your angry bigotry by claiming that it's just common sense............... Well....Just take a step back and listen to yourself.

Wednesday, September 5, 2012

What It Means to 'Belong to the State'

As I understand it, the text above this picture reads, "The Happy Life Mao Gives Us".

Mao Zedong - ruler of communist China from 1943 to 1969 and a man to whom, just to be clear, is rightly credited with the murder/deaths of up to 78,000,000 people - believed that (his) government owned all the people of China. Notably, this was a life much less happy than is depicted in the above propaganda.

"The people" in Mao's China belonged to the state.

Government was father & mother, brother & sister, and aunt & uncle to all... All choices, all ideas, and all activities were - and often still are to this day in China - controlled entirely by the state and all production (or as much as the Communist Party could keep tabs on) was dictated, mandated and distributed through the auspices of government. All this was as it should be, if you understand the practical ramifications of communist philosophy.

By all accounts of my friends who have lived in or near China, and from my personal observations of and interactions with everyone I know who is from China, this belief in the state as the owner of the people rather than the other way around has - over the last few generations - created a culture in which concepts of autonomy and individualism are virtually unknown. The notions that people have any inalienable rights or that all people deserve the same treatment under the law is mostly unheard of even now.

This means no due process or freedom from imprisonment or murder at the hands of the state. No freedom from theft and no property rights, no control over who you associated with or what you talked about. There is no freedom of speech or expression in China and those who have fought for it over the years - such as Nobel Peace Prize winner, Liu Xiaobo - have found themselves in jail.

Mao loved all the children so much he made sure their
dads died in wars and famines so he could read them
their bedtime stories.
But, what is almost worse than all of that is that many of the people of China believe that the state should be imprisoning people for saying unapproved things, and the state does own and control all of the citizens. So, far from merely destroying the lives of tens of millions of individuals who got in the way of authoritarian plans... The philosophies of Mao, when enforced and imposed on a population, eventually rob all the people of their fundamental dignity as human beings.

This, I think, is the greatest evil of authoritarian communism.

And many of the Chinese people I've known over the years have been - for lack of a better description - extremely fearful of liberty, and in turn, fearful of themselves. They are fearful that they cannot be entrusted with the power to run their own lives. Better (in their opinion) to have a ruler self-appointed by violence or by the absurd claims of "divine right" make all important decisions for them.

The autocrat knows best, the lowly peasant is unworthy and that is how the world was always meant to be.

Words simply cannot do justice to how depressing it is to me to watch people affix the chains of oppression and subservience on themselves, but that is exactly what happens under those kinds of regimes. It is the cruelest trick humanity has ever played on itself.

And so now I come to the point of this history lesson...

Submitted without further comment, I give you a few scenes from the Democratic National Convention:

1. "How 'Pro-Choice' are Democrats?" from Reason TV

2. "Democrats: Let's Ban Profits!" with Peter Schiff

3."We All Belong to the Government" from Revealing Politics

How do you feel about these videos?

Monday, September 3, 2012

Thinking Your Way to Success with Andrew Carnegie

I just stumbled on a Business Insider article purporting to list "21 Ways Rich People Think Differently". I will get to a breakdown of that list in a second, but first I want to talk about Andrew Carnegie.

The Business Insider article reminds me a great deal of Napoleon Hill's classic 1937 book, "Think and Grow Rich", which was basically commissioned by Andrew Carnegie as a way to study the beliefs and philosophies rich people of his era had in common in order to see if learning about that would help illuminate ways to help other people to join their ranks. But first, here's a little useful background knowledge on Andrew Carnegie himself!

As most people probably know, Andrew Carnegie grew up incredibly poor.

Andrew Carnegie at 16 [right]
In 1848, as a 13 year old boy and having just immigrated to the Allegheny, Pennsylvania from Scotland with his family, Carnegie got a job in a cotton factory for 12 hours a day, 6 days a week. At 15, he got another job as a telegraph messenger boy and made it a personal mission to memorize the names, faces and positions of all the prominent businessmen in Pittsburgh. At 18, he had become a telegraph operator and secretary for the Pennsylvania Railroad Company. It was there that he started working his way up the metaphorical ladder. With the railroad, Carnegie learned how to be a manager and how to run operations within a large organization.

By 1861, Andrew Carnegie was asked by his boss Tom Scott to help manage railroads and supply lines for the Union Army's war efforts during the Civil War. Scott had recently been appointed Assistant Secretary for War in charge of transportation, and Scott appointed Carnegie to the position of "Superintendent of the Military Railways and the Union Government's telegraph lines in the East". The transportation of munitions, and communication lines built by Carnegie and his team during the Civil War was unequivocally an integral part of the Union's eventual victory.

Andrew Carnegie was 26, but he was no prodigy. He had accumulated 13 years of working experience and knowledge by this point in his life.

After the Civil War, he left the railroad business and founded the Keystone Bridge Works and Union Ironworks companies and began providing much-needed rail lines and infrastructure to the railroad companies which taught him how to be good at building systems and operating companies. These companies became the genesis of his titanic US Steel and the rest, as they say, is history.

Why the biography?

Andrew Carnegie at 43
Because what most people really need to understand is that there was nothing particularly impossible or unknowable about Andrew Carnegie's success.

He worked exceptionally hard. He was smart and enjoyed learning and continued to educate himself throughout his entire life. He consumed volumes of literature. He was friendly and sociable and made sure to do his due diligence and knew who the important players were both geographically and within his industry nationwide... These attitudes and habits pervaded his life, and by the time he was 30 years old, he was doing very well, and by the time he was 50, he was one of the richest men on the planet.

Too often, I find that people don't realize or appreciate that what matters to people's lives is what they believe and which ideas form the basis of their actions.

Becoming an industrial titan isn't merely a matter of luck as perhaps our current President would like you to believe. Nor is it (as Andrew Carnegie's case fairly well demonstrates) a matter of attending a government school, using government roads, benefiting from government funded technologies or drinking clean government-managed water and eating government-inspected and approved food. None of these things were particularly available to Carnegie.

One thing was available to Andrew Carnegie, however... Freedom.

Freedom buys an individual so much more than the roads and schools and all of that other stuff provided by the auspices of politicians spending other people's money, but increasingly few people in the US seem to understand this important fact. Carnegie's father came to the United States for opportunity and a better life. Andrew Carnegie took that opportunity and ran with it like few others in human history have been able to do.

Today, many of the same opportunities don't exist for poor immigrants - and they're getting harder and harder to come by - purely because the state has squashed them, so that's definitely something to consider when reading the rest of this. However, this post is not about those kinds of obstacles.

Today I'm writing about ideas.

Carnegie believed - and I believe - that it was all a matter of the way he thought. And he passed that knowledge on to his employees and friends, such as Charles M. Schwab who started his career as an engineer for one of Carnegie's steel companies. Many of the people who learned from Carnegie became exceptionally wealthy themselves.

What are these ideas? Here are a few of my favorites ideas culled from Napoleon Hill's fine book (this will be a bit plagiarized from a few sources and mixed with my own thoughts, for the record):
  1. Thoughts Are Things:
    Whatever the mind of man can conceive and believe man can achieve. Every person is the master of their own fate - because everyone has the power to control what they think about.
  2. Desire:
    There are no limitations except those we set ourselves. Both poverty and riches are the offspring of thought. Definteness of purpose and burning desire to possess it made all the difference. The real leaders of the world have always been those people who could convert their thoughts into skyscrapers, factories, airplanes and everything else.
  3. Faith:
    Faith is the head chemist of the mind. The emotions of faith, love and sex are the most powerful of all the major positive emotions. The subconscious mind makes no distinctions between constructive or destructive thoughts. It will translate either into reality. Therefore, guard carefully what you think about. You must have faith in your own ability to achieve whatever it is that you want to achieve or you cannot expect to achieve anything.
  4. Imagination:
    The imagination is the workshop of the mind where plans are fashioned. Any impulse or desire starts to take shape and form through the imaginative faculty of the mind. Man can create anything that he can imagine. Man’s only limitation lies in the development and use of his imagination.
  5. Decision:
    Procrastination - the lack of a definite decision - is a common enemy that every successful person must conquer. People who are successful have the habit of reaching decisions promptly and changing those decisions slowly if ever.
  6. Organized Planning:
    Everything man can create or acquire first begins in the form of a desire. Desire is the first part of the journey from the abstract to the actual. It’s in the workshop of imagination that plans are created and organized.
  7. Persistence:
    Persistence is essential in transmuting desire into its monetary equivalent. Will-power and desire, when properly combined, make an irresistible pair.These aren't the full gamut of ideas found in that book, but to me they are some of the most important... beginning with the first one.
Thoughts are things. That lesson is powerful if well-understood. You are what you think about most, so be careful what you think about.

FREE PDF... Public domain, ftw!
Some of this may sound like I'm abandoning logical reasoning, by advocating holding some faith-based beliefs, but this really isn't the case. Since what you believe fundamentally affect your actions and the results of your actions, it matters a great deal that the beliefs you hold are worth holding - even more than whether or not all of them are objectively "true".

Take the idea of faith.

Napoleon Hill didn't mean that you needed to have faith in some mystical spiritualism or a god of any kind. He meant that you need to have faith that you are capable of doing what you set your mind to. That's not a question of objectivity, it's a matter of belief and nothing more. You may fail. You may have never been able to do what you want to do... But if you don't believe that you can achieve your goals - if you do not have faith in yourself - you will never succeed.

This, I think, is 100% correct.

So what did Business Insider have to say? Here are their 21 ideas which they believe are shared by modern rich people:
  1. Average people think MONEY is the root of all evil. Rich people believe POVERTY is the root of all evil.
  2. Average people think selfishness is a vice. Rich people think selfishness is a virtue.
  3. Average people have a lottery mentality. Rich people have an action mentality.
  4. Average people think the road to riches is paved with formal education. Rich people believe in acquiring specific knowledge.
  5. Average people long for the good old days. Rich people dream of the future.
  6. Average people see money through the eyes of emotion. Rich people think about money logically.
  7. Average people earn money doing things they don't love. Rich people follow their passion.
  8. Average people set low expectations so they're never disappointed. Rich people are up for the challenge.
  9. Average people believe you have to DO something to get rich. Rich people believe you have to BE something to get rich.
  10. Average people believe you need money to make money. Rich people use other people's money.
  11. Average people believe the markets are driven by logic and strategy. Rich people know they're driven by emotion and greed.
  12. Average people live beyond their means. Rich people live below theirs.
  13. Average people teach their children how to survive. Rich people teach their kids to get rich.
  14. Average people let money stress them out. Rich people find peace of mind in wealth.
  15. Average people would rather be entertained than educated. Rich people would rather be educated than entertained.
  16. Average people think rich people are snobs. Rich people just want to surround themselves with like-minded people.
  17. Average people focus on saving. Rich people focus on earning.
  18. Average people play it safe with money. Rich people know when to take risks.
  19. Average people love to be comfortable. Rich people find comfort in uncertainty.
  20. Average people never make the connection between money and health. Rich people know money can save your life.
  21. Average people believe they must choose between a great family and being rich. Rich people know you can have it all.
So... That's a lot of things. Not all of which I would agree with (at least not without further explanation) or which I'd argue only apply to a very small, select group of rich people.

For example, how many rich people in 2012 are teaching their kids the tools they need to get rich?

My general observation is that usually wealth that's created in one generation is squandered in the next or in a few generations hence. And when the wealth is substantial (say, Sam Walton's fortune), often the heirs don't do all that much to maintain it but don't need to because their parent or grandparent's company is so well-organized that it remains successful with or without their help.

There may be a valuable Michael Gerber lesson there... but this post probably doesn't need to get into it.

I do think there's a lot here to really consider though. The first several stand out to me a great deal. The "money is the root of all evil" concept is a horribly damaging idea for a number of reasons. First because money is a too, no more good or evil than what it's used to accomplish. Actually a "tool" is even the wrong word. Money is lubricant. WD-40 for trading. It means that I can trade my video production services to someone who needs those for the products a farmer makes which I need to be able to eat and survive.

You might think that a tank blowing up a village is evil, but I think you'd be hard pressed to find anyone who thinks that the axle-grease had any particularly demonic properties.

Poverty is the real evil. Poverty is the material evil that has plagued mankind's entire existence and only goes away when wealth is created. That's it.

A few of these "Average person" attitudes I actually find to be incredibly pernicious. For instance, the "lottery mentality" is an abomination. If you believe getting rich - or simply having the life you want to have by whatever definition that happens to be for you - is a matter luck, you're screwed already. Waiting around for your life to be everything you ever dreamed of is the surest way I can think of to never being happy. It's a life filled with excuses.

So is doing something you hate for a living. If you don't like your job and you're not passionate about it, it's just going to be a miserable influence on your whole life. I just had this conversation with a woman who told me tonight that she basically avoids her work at all costs. She justifies this by believing that not caring about money gives her time to care more about her friends... The thing she's missing is that most rich people or people who have rich-people habits don't work hard because they feel they "have to". They work hard because they love what they're doing.

That's what I do at any rate, and it's what everyone I know who is successful does as well.

Another thing I think is exceptionally important - and which is highlighted by Napoleon Hill and also by Robert Kiyosaki in "Rich Dad, Poor Dad" - is this idea that specific knowledge over "education" is what really matters. In Kiyosaki's book, the "poor dad" was the Superintendent of Schools for the State of Hawaii. He thought that a good life would come from a masters or a Ph.D. My dad thinks the same way.

But I know too many people with multiple masters degrees to believe in that jive.

My own masters was a means to acquire specific knowledge, and I acquired it because I had a vision for what I wanted to do with it. That is how I have always approached my education.

As Sherlock Holmes puts it:
"I consider that a man's brain originally is like a little empty attic, and you have to stock it with such furniture as you choose. A fool takes in all the lumber of every sort that he comes across, so that the knowledge which might be useful to him gets crowded out, or at best is jumbled up with a lot of other things, so that he has a difficulty in laying his hands upon it."
I know brains don't really work that way, but my limited time on planet earth does constrain me from learning "everything".

I learn a lot, and I retain a lot, but I'm not generally in the habit of spending my time learning about Kim Kardashian's husband of the week. Why? Because I don't have infinite time, and spending my time on those kinds of things is a poor opportunity cost for me. My education has always been self-directed and even in high school I tended to prioritize the knowledge and skills I believed I would need to achieve my goals. Some things I had to get special permission for. For example, my school had no music theory course. So I made one. A few years later, I earned part of my living as an undergraduate & graduate student by teaching theory to others.

I never went to school or college or did graduate work simply to be "taught" whatever someone else thought I should know. I went because I had a lot of things I personally knew I wanted to learn - and I've kept learning ever since, in and out of the classroom.

Maybe most people who read this won't understand the distinction, but I think it's very important. Specific knowledge matters to success. General knowledge is only useful to the extent that you know how to apply it.

While I'm writing this lengthy blog about thinking and being successful, and now that I've mentioned Robert Kiyosaki, I may as well highlight a few things from his work that I think we should all think about as well. Here are 6 lessons, courtesy of the website, Madame Noire:
  1. Lesson One: The Rich Don’t Work for Money
    "Rich Dad was more focused on ways of creating residual money, money that increases even if you don’t work, rather than waiting for the next job with a pay raise."
  2. Lesson Two: Learning Financial Literacy
    "Developing financial literacy is key to having any success with money. Financial literacy is simply the study of managing one’s finances."
  3. Lesson Three: Mind Your Own Business
    "As mentioned in the previous lesson, the key attribute that must be developed in order to gain wealth is to focus on your asset column. The rich focus on improving the size of their investments rather than simply waiting or demanding pay raises in their income.
    This means keep your expenses low, reduce your liabilities and diligently build a base of solid assets."
  4. Lesson Four: The History and The Power Of Corporation
    "By filing as a corporation, the rich are able to mitigate their losses to only the amount they invested in the corporation. They are able to pay taxes after they pay for expenses. For people who have jobs, it’s the opposite case where taxes are taken out of paychecks before one is able to cover expenses."
  5. Lesson Five: The Rich Invent Money
    "... if you truly want to see your investments grow exponentially you must be willing to put in the money in places that show relative risk."
  6. Lesson Six: Work to Learn - Don’t Work for Money
    "As Kiyosaki recommends in the book, take a long view of life. Instead of simply working for the money and security, which are important, take a second job or take classes that will teach you a skill. He goes even further to describe the three main management skills necessary for success:
       1. The management of cash flow (assets and liabilities)
       2. The management of systems (basic economic theory, political landscape, etc.)
       3. The management of people
    If one is able to focus getting jobs that develop these three major skills sets, he is well on their way on the path to success."
Bonus... Kiyosaki's 5 main obstacles people need to overcome if they hope to get rich:
  1. Fear - Overcoming the fear of losing money. The fear of losing money is real. Everyone has it. The difference becomes how a rich and poor person handles the fear. Wealthy individuals use failure as a teaching moment and aren’t afraid to fail.
  2. Cynicism - This deals mostly with those around you. Follow your own path, because at the end of the day, wealthy individuals are a small percentage who go against the grain and don’t follow the crowd
  3. Laziness - One must be willing to put in the time and effort to build up their financial knowledge. This means being selfish and taking time out to build one’s personal wealth.
  4. Bad Habits - Reducing expenses is easier said than done, but one must be willing to break those bad spending/investing habits in order to be successful
  5. Arrogance - Always be willing to reach out to those who are successful and those you want to emulate. To become wealthy, it’s often a collaborative effort, bouncing ideas from prospective mentors.
Notice any patterns here?

Ultimately I think there's a lot of value in thinking about thinking in this regard. How do people who are successful think? How do people who are less successful or unsuccessful think? If someone is perpetually making poor choices, I want to know what I can about the way they're making decisions so that I don't fall into the same traps. Likewise, if everything someone touches seems to constantly turn to gold, I want to know how they're thinking and making decisions as well.

Much like some of the other discussions I've had lately, this is one of those areas where a lot of people are just uncomfortable talking about it. But we should be talking about it.

It's ideas that shape the world, and lately it feels like all the world has to offer are very, very bad ones.