Posts categorized “#OWS, Educate Thyself”

#OWS, Educate Thyself - Income Inequality (Part 3)

October 24, 2011   2:21 am

Previously in this series - Part 1 - IntroductionPart 2 - Credit and Banks

Income inequality. The rallying cry of the Occupy Wall Street crowd really rings hollow with this 99%-er. This is certainly not a new complaint; “eat the rich” has been a sentiment for decades (or centuries). I would posit that covetousness has existed for over 6,000 years, and led to the first recorded murder in human history. It was wrong then, just as it is wrong now. Now, this is education, not church; we’re not going to belabor this point too much. But, the cries of “fairness” are a moral appeal, and must be dealt with accordingly. The ultimate in fairness is that everyone is taxed the same, and paid the same wage for the same type of work. Some people believe this is way-unfair, and they seem to start with “from each according to his ability, to each according to his need” and work backward just enough to make it palatable to someone who claims to desire freedom. Know, as we enter this education, that I’m much more on the former end than the latter. (See the “Welcome to the Real World” heading in the introduction.)

Income inequality would be incomplete without a discussion of equality of opportunity. Think back over your life; have you ever had a friend who could out-eat everyone else, but still retained their beanpole-like physique? Did you also have a friend who was always dieting, and always looked like they should be dieting? Given an equal opportunity - a pizza and birthday cake celebration, for example - these two people will have unequal results. This is exactly how it is in life. Many different people take the same high school courses; some do well, others do not. Does the fact that everyone is not the valedictorian mean that the system is not fair? On the contrary, this illustrates that given equal opportunity, different results are possible (and likely). There’;s a phrase that originate with cars, but now is used for almost anything - “Your mileage may vary” (YMMV). This is an acknowledgement by car companies that, the way they drove the car, in the environment they had, that was the mileage they got; but, you may drive it a different way, or in a different environment, so your mileage may not be the same as what’s printed on the sticker in the window.

A boy is pushing a bagging lawn mower, with the caption 'I figured out at a young age the easiest way to get money from rich people. It's called a JOB.'Now, let’s continue this train of thought. There are two people who get the same college degree; let’s even say that their GPA was the same, and it was good - they graduated Cum Laude. Fast-forward 5 years, and the likelihood of these two individuals bringing in the exact same salary is very low; one is going to be making more than the other. Is this fair? That’s tough to say, but just with these facts, it seems pretty fair to me. Going back to the introduction again, a college degree is a tool, and what one does with it has a lot to do with their decisions, and also has a lot to do with the environment in which they live. Think about it this way - the same hammer that demolishes a house can be used to hit a chisel to make a sculpture; and, depending on the scenario, both are important. However, the demolisher is probably not going to get paid the same as the sculptor.

How many people could you employ? I know my answer to that question - zero. I have a small programming business, and currently, I am at the point of breaking even. Over the course of 2+ years, I saw a project with potential to go nationwide fizzle and die; the work I put into that is gone, with no monetary return. I went from looking at a breakthrough project to being back to square 2 (not quite back to square 1) overnight. What am I doing? Continuing on, keeping the lessons learned in mind. I’m not camping out in front of the organization that didn’t choose me, and I’m not blaming the system. But, I can assure you that there is no room in my budget for any employees at all.

Businesses can only hire people as they have resources to do so. These resource quite often manifest themselves as stores of money saved and earned via profits. There is nothing wrong with businesses making a profit, just as there is nothing wrong with you exchanging an hour of your time for a profit yourself (via a wage). (For the record - who was one of the voices saying that a rise in the minimum wage would lead to fewer available jobs? Oh yeah - me. I take little pleasure in that vindication, but I’d be remiss if I didn’t point it out.)

A graphical representation of the tax burden shift from Herman Cain's 9-9-9 tax proposalTo illustrate, let’s look at a hospital. Profit is a motivation even in a seemly-altruistic endeavor like health care. The operators of the hospital are responsible for hiring doctors, surgeons, nurses, nursing aides, medical technicians, janitorial staff, laundry personnel, anesthesiologists, etc. (or contracting it out). They are also responsible for purchasing beds, linens, cleaning supplies, medical supplies, and a full array of drugs; they also must maintain power, water, environment, and maintenance on their facilities. (I’m stopping there; I’m sure this list is incomplete.) The janitors and surgeons are both important; however, you’re not going to find a single hospital that pays janitors as well as it pays surgeons. Why? Two words - skill and education. Is that fair? Absolutely. The additional pay surgeons receive over janitors is a big reason many of them go through years and years of schooling, internships, and career-long continuing education.

Now, imagine you’re the surgeon. Would you think it fair if unemployed people demanded that you reduce your pay to that of the janitorial staff? If you say you’d be OK with that, you’re either naive or lying. But, these people get their way, and your pay is cut. You would be indignant that the fruits of your hard work were being demanded by people who have no claim on them. You would also no longer be able to pay the support staff necessary for your surgery practice, nor would you be able to spot the neighborhood kid the $50 to keep your yard up on a weekly basis. You would have to pull your children out of whatever private school they attend, which affects the teachers and workers at that school.

To put it as plain and simple as I can, these “rich” people you decry are the ones making our economy work. And, in our economy, you start where you start and try to improve your lot. That’s the promise of America. Not everyone will succeed, but the opportunity is there for those willing to work for it. For years, one party has fomented angst against one class of people, while pillorying those who are against that party as filled with hate. (Oh wait - maybe those are big words for college-educated people…) The Democrats make people mad about people who run businesses, and cast Republicans as hating poor people. Like many items of the Democrat platform, nothing could be further from the truth. These rich people are the ones employing people and supporting other businesses; they’re not sitting around their fireplaces smoking $100 bills and laughing at the peasants.

The graph running down the side of the post, as best I can tell, originated here, and was produced as an example of how bad Herman Cain’s 9-9-9 plan is. But, what I’d like for you to do is click on that, and look how tiny the increased tax is on the bottom 20% versus how much it saves the top 20%. (Keep in mind, #OWS-ers, that 19% of that top 20% are in your 99%.) This chart illustrates perfectly what is wrong with our tax code, and why our jobs are going to other countries. Where is the motivation to move yourself into that top 20%? (FTR, I am saddened by Cain’s recent adjustment to 9-0-9 “for poor people” - this completely destroys the beauty of 9-9-9 as an equalizer.)

At this point, I can hear the rebuttals about all the greedy people who have broken the law to increase their wealth. Those people will find no quarter here with me. One of my biggest problems with immigration reform is that the focus is always on the illegals, rather than the businesses who hire them with impunity. However, this greed and illegality must be fought where it is found, not via a whole-scale war on wealth. American has her position in the world because of her wealth! If profiling is so wrong in other areas, why is tolerated here?

Bottom line - instead of seeing these people as the enemy, you should see them as people you should emulate, whose accomplishments to which you should aspire. You should stop looking at what someone else has, and start looking at how you can improve your lot in life. Chase Bank is probably not hiring many Gender Studies graduates, and Exxon doesn’t have a great need for Gay and Lesbian Studies graduates. You may not find a job in your degree specialty - that’s OK. Work where you can find it, continue your education (but by all means, not at the same university that failed you so much already), and quit looking around so much.

Derek Sivers, in his summary of Barry Schwartz’s The Paradox of Choice, puts it this way.

More than half of people chose options that give them better relative position : better to earn $50k/yr while others around are earning $25k/yr than to be earning $100k/yr while others around are earning $200k/yr.

Can you see the lunacy in this? Because of their jealousy and covetousness, over half the people would choose half as much pay. This is exactly what you’re doing. Wake up, #OWS.


#OWS, Educate Thyself - Credit and Banks (Part 2)

October 22, 2011   4:28 pm

Previously in this series - Part 1 - Introduction

Credit is a big part of the Occupy Wall Street movement. They want debt forgiven, some even calling for an across-the-board forgiveness of all debt. By having this demand, they reveal another area where their college education has failed them. Let’s do a quick version of what they should have learned.

To illustrate, let’s create a hypothetical scenario. Person 1 (let’s call him “Bill”) has a business idea, but lacks the funds to make it a reality. Bill is sure that his idea will make lots of money, but he is frustrated because he cannot implement his idea. Person 2 (let’s call him “Tom”) has money that he has accumulated that he is not actively using. Bill comes to Tom and asks if he can borrow some of Tom’s extra money, so that he can implement his awesome idea. Tom is not sure about the purported awesomeness of Bill’s idea, and is reluctant to lend Bill the money. Bill is so confident in his idea that he offers to repay Tom 110% of the money that he wants to borrow. This provides Tim an opportunity for financial gain, and he decides to lend Bill the money he needs.

This story illustrates some of the basic concepts of credit.

  • Loan - money belonging to someone else, that is temporarily made available to another person.
  • Interest - money, in addition to the loan amount, that is paid to the lender.
  • Risk - the likelihood that the loan and interest will not be repaid.

In our story, a 10% interest rate was enough to make Tom assume the risk that Bill’s idea would generate the money Bill thought that it would.

Banks and other lending institutions have simply taken the above scenario and enlarged its scale. They take depositors’ money, and lend it to those who need it. They also provide services, such as securing the money they’ve received, providing convenient ways for people to get to their money. For some services, banks charge fees; for some services, banks pay interest. Because banks must be able to return depositor’s money on demand, they must assess risk before giving a loan. Some risk they simply will not accept; some risk they will accept, but charge the borrower a higher rate on the money to make up for it; and low risk is generally acceptable.

Student loans, a particular interest item to the #OWS set, are no exception. It is understood that obtaining an education may require money that a fresh-out-of-high-school person probably does not have. (Whether it should is a different topic altogether.) However, lending institutions see the value in having an educated populace, and are willing to extend loans to students to allow them to obtain productive skills. They realize that college-educated people are more likely to have good jobs, buy cars and homes, take vacations, and do lots of other things that inject money into an economy.

So, what’s the problem with them forgiving loans? It’s theft, plain and simple. Whoever was extended credit would be stealing the money not from the bank, but from the depositors of that bank. The bank is simply an intermediary set up to provide a mutually-beneficial service to both saver and borrower. (I’ll tackle the class warfare aspect in the next post, but it’s still their money no matter how much they have left.)

Another assumption regarding student loans is that the degree obtained will help this happen; with many degrees these days, a person may be no more qualified to hold employment than they were before they went to college. When I went through college right out of high school, my adviser recommended certain degrees as being more employable than others. I don’t know if colleges don’t have that, or if advisers these days think that we really need a ton of Fill-in-the-Blank Studies degrees; either way, that sort of degree has limited employment opportunity. If you obtained that sort of degree, and now can’t get a job, you rolled the dice and lost. Now, it’;s time to act like a grown up and get whatever work you can to provide for you (and your family, if you have one), and start repaying that loan you took out.

Iowa Hawk, via Twitter, provides a nice summary on this point.

IowaHawkBlog Twitter avatariowahawkblog David Burge
Lemme get this straight. A bank lent you $100k that you handed to a college for a worthless degree, and now you’re mad at… the bank?

Banks provide an important service by offering credit. If that credit is not repaid, the system collapses. If you think it’s hard getting a job now, try bankrupting all the employers, and see how much more plentiful (or scarce) the jobs become.

Next in this series - Part 3 - Income Inequality

#OWS, Educate Thyself - Introduction (Part 1)

October 17, 2011   2:52 am

This is the first in a series doing the education that the colleges which the Occupy Wall Street gang (#OWS hereafter, taken from the shortened version of their #OccupyWallStreet Twitter hash tag) failed to impart. I have two in the queue behind this one, but there may be more.

For those living under a rock, a group has been camped out in New York, protesting Wall Street. There was a list of demand published, but many protesters were quick to point out that there was no official list. However, there have been recurring themes. Corporations are greedy. The rich get richer while the poor get poorer. Debt is bad. People aren’t hiring them even though they have a college degree. A job is a right.

Dear #OWS, your parents and your colleges have failed you. Before we dig into details of why your demands are unworkable, there are a few big-picture things we need to discuss.

Welcome to the Real World

This is where your parents have failed you. You are the generation who grew up “safer” than ever, protected from terrible things like concrete under your playground equipment, lack of head protection when you rode your bike, having to suffer the indignation of losing your soccer match because they didn’t keep score, etc. You are the result of a social experiment gone horribly, horribly wrong, where a bunch of too-smart people decided that the way children were reared for generations had to change. They were going to do it better. They were going to do it more safely. They remembered how bad they felt as children, when they were picked last for sports, or struck out and helped their team lose a game; or how they were made fun of during the awkward stages as they grew from children to adults; or how they never fit in with the “in” clique at school. So, they tried to eliminate all these things. No scorekeeping, and everyone gets a trophy. “Don’t say that word!” “Bullying is wrong!”

Where they went wrong is that by their attempts to eliminate bad things, they did not teach you how to deal with these bad things. I’m all for the elimination of bullying, but you can’t wish that and make it go away; you should be trained on how to deal with it. In real life, there are winners and losers; there is no “no scorekeeping” option. Everyone does not get a trophy. There are attempts, and there are failures. You have tragically had your opportunities to learn how to deal with this as a child snatched from you. Now, you’re behaving as children would normally behave; you’re just a lot bigger. You’re adults, so you think that your demands aren’t childish. Sadly, I’m here to inform you that they are. Railing against the real world is futile; you are not going to change it, at least not much. You would be much better served applying yourself and learning how things work.

A College Degree Is a Tool, Not a Guarantee

Here is one area where your college has failed you. No matter what the admissions adviser told you, a college degree is not a guarantee of a good job. Even in good economic times, a college degree is likely to get you in the door, at an entry-level position. (You understand where the term “entry-level” comes from right? The level you start, when you enter a company?) The people that have been there for 10 years beg to differ with your assertion that you should start out at the level to which they have worked themselves up. And, if your degree ends with “Studies,” you’re probably 1/4 as employable as someone with a degree oriented toward something a business would actually need.

The Corporations You Decry Have Made Your Protest Possible

You have utilized the services of several public and private companies. Let’s take a look at the evil that’s made this protest possible, shall we?

  • Twitter - Still a private company, Twitter was valued at $10B earlier this year.
  • Facebook - Also a private company, Facebook’s valuation at early 2011 was $50B.
  • Google (GOOG) - You know, the owners of YouTube, the developers of the Android mobile operating system, and the target of your “Google It!” chants? They are a publicly-traded company valued at $57.85B (plus assets, minus liabilities)
  • Did you drive, or take public transportation, to get to the site of your occupation? Those evil oil companies made that possible.

Now, what you’re not going to read in future installments are claims that the “real world” is perfect. There is room for change, and there are people running companies who have no business running them. However, if you want to maintain the lifestyle in America to which you’ve become accustomed, or improve it, you really don’t want to be throwing the baby out with the bath water.

I’m sorry your parents and colleges have failed you. If you stay tuned to this spot, I’ll help educate you on why the things you’re so worked up about, contrary to what your “I wish communism worked because it’s just such a good idea” professors taught you, are actually good for you.

Next in this series - Part 2 - Credit and BanksPart 3 - Income Inequality