Tag: politics

October Book Reviews

I only had time to read two books in October, but they were both interesting and well worth my time.  One was fiction and one was non-fiction.   Check out my reviews from past months here.

SuperFreakonomics: Global Cooling, Patriotic Prostitutes, and Why Suicide Bombers Should Buy Life InsuranceSteven Levitt and Steven Dubner.  SuperFreakonomics is a great follow up to the Stevens’ first effort, Freakonomics.  If you enjoyed Freakonomics, you will love SuperFreakonomics.  They tackle all sorts of problems with data, which you hardly ever see in most other walks of life.  Ever since I read Freakonomics, I’ve been fascinated with the way they look at problems and issues and I’ve been reading the Freakonomics blog in the New York Times daily.  In SuperFreakonomics, Levitt and Dubner tackle emergency room safety, the efficacy of child car seats, prostitution and most controversially, global warming.  They also present some amazing history about this history of vaccines, car seats and health care in their trademarked, data driven, but still humorous style.

I won’t ruin any more of the book for you, but there has been a huge outcry from the global warming establishment about SuperFreakonomics’ take on global warming.  Dubner and Levitt say that global warming has become a “new relgion complete with dogma and good and evil.”  They have been proven right because they were immediately criticized by the global warming establishment when the book was released.  I liked the way they tried to bring reason and science back to the global warming debate and move it away from political, religious debates that it has become, but was suprised that they advocated so hard for geo-engineering.

Levitt and Dubner (and I) love to point out that most of our problems come from unintended consequences of well meaning policy decision.  Many times, these unintended consequences could have been predicted ahead of time, but weren’t looked at for a variety of reasons.  They advocate geo-engineering the planet, but don’t take any time to talk about the potential unintended consequences.  There may not be many (but I doubt it), but I was expecting them to address the issue at least a little bit.  That said, SuperFreakonomics is entertaining, informative and well worth reading.

Absurdistan – Gary Shteyngart.  Not many books can make me laugh out loud.  I was on a flight to NYC, reading Absurdistan and trying not to laugh out loud and failed fairly miserably.  Absurdistan is the fictional story about a young, Jewish, fat, son of an oligarch, Russian immigrant to New York City and his trials and tribulations going between Russia, the US and Absurdistan, a fictional country located near Iran.  I read it on the advice of of someone who likes many of the same books I’ve read and wasn’t disappointed.

Shtyngart’s writing is really fun.  He mixes in hip hop references with geopolitical feelings musings that would only occur to a Russian who moved to the US.  One of my favorite parts is about how people in the 3rd world applaud whenever a pilot safely lands a plan “as if it were some kind of miracle”, whereas in the West, people complain about being late and rush to get off.  The section on a Holocaust Museum in Absurdistan is brilliant writing and worth reading on its own.  The books is a scathing critique of just about everything from Russian politics, American foreign policy, fat people and corporations.  While a little slow in places, each chapter has at least a gem worth finding.  I recommend reading this book if you like history, politics, different cultures and good writing.  As a bonus, after reading Absurdistan, Oscar Wao and The White Tiger, I now know how to say a certain part of the male anatomy in Russia, The Dominican Republic and India.

The Slow Death of the Reserve Currency

It stared with leaders like Hugo Chavez, Mahmood Ahamdinejad and Saddam Hussein who wear their anti-Americanism as a badge of honor.  Next, it was the developing countries who generally liked the US but felt they were not getting a fair shake.  Next was Russia and India.  Then came China, America’s largest trading partner and largest foreign holder of US dollar denominated securities.  Yesterday, it was the oil producing countries in the Middle East.  Even Germany has quietly started to complain.  What issue has managed to unite most of the world?  The US Dollar’s viability as the world’s reserve currency.

Back in April, I questioned whether the US Dollar is America’s Achilles Heel.  Each day, I am more and more convinced that it is.  Back when leaders like Chavez were the only ones questioning dollar hegemony, most of the rest of the would could safely ignore his statements as the ramblings of a dictator blinded by anti-Americanism.  Most people did.  When developing countries complained about the devaluation of the dollar, people could brush the complaints off as jealousy.  When Russia started rumbling about moving away from the US dollar, some people started to take notice, but were not concerned, as they viewed Russian statements as posturing to reassert itself on the global stage.

Finally, when China’s central bank head made statements that he was not happy with the huge increase of the money supply, people began to take notice, but were still not convinced that there was a problem.  Next, China signed currency swaps with countries like Argentina, Brazil, Thailand and others that allowed businesses to do deals in Yuan, rather than relying on the US dollar.  This was a clear shot across the bow at US dollar hegemony.  China has also stopped buying longer term US securities, prefering short term notes that they can roll over more quickly, while stockpiling raw materials, rare earth metals and precious metals.

Yesterday, the world had to take notice when the Middle East oil states held secret meetings with China, Russia, Brazil, France, Japan and others to discuss selling oil against a basket of currencies and gold, rather than US dollars.  The US was left on the sidelines.  Pretty much everyone is denying that these meetings took place, but where there is smoke, there is fire.  It is the logical progression for the rest of the world.

They cannot attack the US militarily and win, so they have to attack the US’s biggest asset and its biggest weakness: the reserve status of the dollar.   It is America’s soft underbelly.  I don’t believe that these countries are moving away from the dollar because they do not like the US or want to see the US fail.  They are moving away from the dollar because they are scared.  They are scared that the US will continue to print huge amounts of money to inflate away its massive $90T+ unfunded liabilities (yes, T=trillion) and national debt, making their dollar denominated securities go down in value.  I have seen people say that America’s unfunded liabilities between the debt, medicare and social security is over $120T, or about 10 years of GDP.  You can see their fear in skyrocketing gold, which hit a record high of $1,045 per ounce today.  The oil producing nations are tired of pumping their tangible, natural resources in exchange for dollars that are not backed by anything.  They are simply looking out for themselves.

Taken together, these country’s actions are a frontal assault.  They are saying “enough is enough.”  They do not want to accept our paper, which is backed by nothing, in exchange for their manufactured goods or natural resources.   Unless the US takes decisive action to stop the erosion of the dollar, I fear that the US will lose its biggest competitive advantage: the reserve status of the dollar.  If this happens, our standard of living is fated to go down.

Are you Missing the Unintended Consequences?

I attended a talk by Michael Pollan, the author of The Omnivore’s Dilemma and In Defense of Food, last night at the Kohl Center in Madison.  Pollan is one of my favorite writers and thinkers because he almost always has a new take on old problems that bring new and interesting points to the debate.  Pollan is most famous for In Defense of Food, an “eater’s manifesto” on how to eat well and forsake the “western diet” of processed foods and refined carbohydrates.  His book is interesting on many levels, but what struck me during the talk was how many of the problems that Americans have relating to their diet are unintended consequences of well-intentioned policies crafted by nutritionists, nutritional scientists, government bureaucrats and health-conscience consumers.

For example, Pollan talks about how throughout American history, there have been “blessed” and “evil” nutrients.  In the 1800s, protein was evil and John Harvey Kellogg led the charge against this scorage, leading many Americans to give up their traditional eggs, bacon, sausage and pancakes for boxed cereal, with the blessed carbohydrates.  Later, it was fat, leading to the creation of margarine and transfat to replace real butter and animal fat.  The Atkins phenomenon brought protein back because carbs were supposedly bad.  There have been many other examples of this throughout American history, but these are the easiest ones to see.  Each of these movements were started by people with good intentions who wanted to make Americans healthier.  At best, they did not work.  At worst, they made things worse.

The margarine and other plant fats that scientists created ended up being worse than the fats that they were replacing.  Pollan claimed that this switch led to hundreds of thousands of premature deaths from heart disease and other preventable diseases.  These deaths were an unintended consequence of food scientists and the government’s good intentions to help American live healthier lives.

Pollan’s talk led me to start thinking about other unintended consequences and how many people miss their impact in everyday life. I found some relating to our food, including some potential ones relating to Pollan’s “eater’s manifesto.”  Subsidizing the corn and soybean market after the USSR’s wheat crop failed in order to ensure that we never went hungry led to monocultures and a crash in farm prices, which led to fewer family farms.  It has led to America’s overproduction of cheap corn, which made high fructose corn syrup the cheapest and easiest sweetener to work with, leading to cheaper manufactured food and fatter, less healthy Americans.  Cheap subsidized corn and soybeans make it tough for farmers in Africa to compete and pull themselves out of poverty.  Now I don’t believe that each of these are straight cause and effect relationships, but its clear that these unintended consequences of trying to make sure that America’s food supply is secure have continued to ripple across the world since the 1970s.

Pollan’s manifesto advocates that we eat food, not too much, mostly plants and move away from packaged, processed “food like substances.”  This is a good goal, but he also advocates moving away from monoculture and large industrial farms.  The thinking is that we we have healthier plants, animals and humans if we diversify our food supply and stop growing huge amounts of corn and soybeans for use in just about everything.  Pollan believes that these types of changes could help solve global warming, the healthcare crisis and  potentially the current economic crisis.  It is clearly a noble goal, but what about the unintended consequences?

If farmers move away from high yielding monocultures, might we be at a larger risk of famine in the future as populations rise?  Could we lose jobs in the current food industry?  Could lower yields lead to higher food costs, much like how increased demand for corn based ethanol raised food prices worldwide, with most of the increased hurting the world’s poor?  Are there some other unintended consequences that Pollan’s way of thinking might bring about, much like the other big changes to our food supply brought to America’s dinner tables?

Personally, I think it is worth experimenting with Pollan’s ideas because I’m not sure we can do much worse than we are doing now, but it would be foolish to simply accept them and begin to implement them immediately.  I don’t believe that Pollan is calling for this, but I have not seen much research into the potential unintended consequences of his ideas. It reminds me a story I just came across the other day about tuna fishing.

In the early 1990s, groups like Greenpeace were outraged that tuna fishing companies were killing hundreds of dolphins with each catch.  Here’s how tuna fishing works

The main way that tuna is caught is through purse seines in the Eastern Tropical Pacific. Basically, after a large group of tuna is located, a miles-across purse seine net is closed around them via a group of small boats associated with a large factory ship.  It’s an effective way to catch large amounts of fish for not a lot of money.

This technique is pretty standard- the main variation lies in how the large group of tuna is located. There are basically three ways to do this.

1) Get lucky and happen to stumble across a large group of tuna visible from the surface in the middle of an enormous ocean. Obviously, this isn’t terribly practical.

2) Attract tuna using floating objects.  Stay tuned, we’ll come back to #2.

3) Follow dolphins, because dolphins in the Eastern Tropical Pacific are often associated with large schools of tuna. Dolphins are easy to follow because, unlike tuna, they have to come up for air.

For a long time, #3 was the most common way of catching tuna. The problem with this method was that by definition, dolphins are right there- and they get caught in the net as well. Despite the honest effort of many sailors to free dolphins (there is a long maritime tradition of respecting dolphins), by some estimates, around 500,000 dolphins a year were killed as a result of bycatch.

Sounds terrible, right?  500,000 dolphins EACH YEAR were killed as a result of this tuna fishing.  Groups like Greenpeace and others marshaled public support and got the rules changed, making dolphin following illegal.  People could not fish for tuna by following dolphins to big groups of tuna.  So what happened?

Tuna fishing fleets rapidly switched over to method #2, attracting tuna using floating objects.  If you put a log in the middle of the ocean, within hours it will be surrounded by fish. It may have something to do with the fact that many open ocean fish can go their entire lives without encountering a hard surface.

The floating objects now used by tuna fishing fleets are quite high tech- they have sonar and video cameras that allow the flagship to detect how many fish are near that object. Once there are enough, the purse seine comes and scoops them all up- and the floating object is redeployed.

The big problem with this method is that floating objects don’t only attract tuna. EVERYTHING is attracted to floating objects, including sea turtles, sharks, seabirds, billfish, and, yes, dolphins!

Well-intentioned groups like Greenpeace and others tried to help the dolphins by making fishing for tuna by using dolphins illegal, but the unintended consequences of their actions have created “The Ecological Disaster that is Dolphin Safe Tuna.” Here are some stats comparing the bycatch of both methods of fishing.  First, the floating log method, then the old, dolphin method:

Ten thousand sets of purse seine nets around immature tuna swimming under logs and other debris will cause the deaths of 25 dolphins; 130 million small tunas; 513,870 mahi mahi; 139,580 sharks; 118,660 wahoo; 30,050 rainbow runners; 12,680 other small fish; 6540 billfish; 2980 yellowtail; 200 other large fish; 1020 sea turtles; and 50 triggerfish.

By trying to help dolphins, groups like Greenpeace caused one of the worst marine ecological disasters of all time. Few other fisheries are as bad for groups like sharks and sea turtles as the purse seine fishery, and none are as large in scale.

“Ten thousand sets of purse seine nets around mature yellowfin swimming in association with dolphins, will cause the deaths of 4000 dolphins (0.04 percent of a population that replenishes itself at the rate of two to six percent per year); 70,000 small tunas; 100 mahi mahi; 3 other small fish; 520 billfish; 30 other large fish; and 100 sea turtles. No sharks, no wahoo, no rainbow runners, no yellowtail, and no triggerfish and dramatic reductions in all other species but dolphins.”

In other words… the only species that “dolphin safe” tuna is good for is dolphins!  The bycatch rate for EVERY OTHER species is lower when fishing dolphin-associated tuna vs. floating object associated tuna! The reason for this is obvious- floating objects attract everything nearby, while dolphins following tuna doesn’t attract any other species.

If you work out the math on this, you find that 1 dolphin saved costs 382 mahi-mahi, 188 wahoo, 82 yellowtail and other large fish, 27 sharks, and almost 1,200 small fish.

“Dolphin Safe Tuna” is one of the most egregious examples of unintended consequences that I have heard about in a long time.  I wonder if we may repeat similar mistakes with global warming (now called climate change), health care, taxes, the bank bailouts and our monsterous national debt.  We should at least try to look at the potential downsides and unintended consequences of our larger decision in all aspects of our lives – political, business and personal – so that we do not make another mistake like margarine or dolphin safe tuna.

An Antipoverty Nudge

A charity in New York City is trying an innovative approach to helping people below the poverty line.  Modeled after a program in Mexico that pays poor people to do things like immunize their kids, send them to school and make healthy food, Groundwork brings a similar approach to New York’s poverty stricken communities.  Here’s how the program works:

This modest community-based nonprofit is one of six neighborhood partners in the experimental Opportunity NYC program, which pays poor people — mostly single moms — for a broad range of health, education, and work-related activities, everything from taking their kids to the dentist to getting a new job to attending parent-teacher conferences.

Since its September 2007 launch, the New York initiative has paid $10 million to 2,400 families living at or beneath 130 percent of the poverty line — about $22,000 for a family of three. The typical participating family earned just under $3,000 during Opportunity NYC’s first year.

I’ve been interested in nudges, small behavioral changes that can create big changes in society, since I read Nudge by Richard Thaler and Cass Sunstein.  I love learning about these nudges, whether its ways to increase the tips that tour guides receive or ways to help students retain more information over summer vacation, so this program caught my attention.  I think its an interesting experiment that could be very successful with enough testing.  Currently, the program has spent over $25mm on 2,400 families, which doesn’t seem like that great of a return.  I’d like to see the program focus on 2-3 of the most important tasks that people were being paid to do and expand the program to more people.  If they could show that going to parent teacher conferences, taking your kid to the doctor for a checkup and cooking a healthy home cooked meal once per week had the most impact, the program could invest in the tasks that had the highest benefit with the lowest cost, all the while helping more people.

Some anti-poverty workers are not a fan of the this program.  One worker said thinks the program is almost offensive:

Opportunity NYC borders on offensive — the idea that a person can be bribed into doing better in school or being a better parent,” says Mark Winston Griffith, executive director of the Drum Major Institute for Public Policy in New York City. “It sort of suggests that poverty is a lifestyle choice, that somehow if we’re just given a nudge, that we can choose not to be in this condition, or choose for our children to do better in school, or choose as parents to provide better child care. It comes out of the idea that poor people are almost sort of culturally and inherently dysfunctional. Not because of structural circumstances but because of their own personal failings.”

David Jones, the President of the Community Service Society in NYC, is not a fan because he thinks the project it too small to combat the huge problem that is poverty in NYC.

“In New York City, almost 50 percent of African American men are not currently employed. We have nearly 200,000 young people who are neither working nor in school,” he says. “Those numbers can’t be addressed with incremental incentive programs. Not because the ideas are bad but because the scale of the problems is huge.”

While I understand where both of these critics are coming from, I can’t agree with their thinking.  We know that the current anti-poverty programs are not working very well, so we might as well try something new.  Just because a problem is huge does not mean that a small solution can’t be successful.  In the startup world, many small solutions have solved huge problems, even when the founders were simply trying to change a small part of the big problem.  If the program doesn’t work, then end the program, but if it does work to make people’s lives better, then by all means continue it.  I’d love to see more innovation and entrepreneurial thinking in the charity space.  I think there is probably room for a great deal of innovation and improvement.