Archive for April, 2011

Societal Myopia

Why is it that we’re always focusing on the wrong things?  There is a clear human tendency to only see that which is directly in front of us, as opposed to envisioning the bigger HD picture.  We love easy answers.  I’ll take “Copernicus Was a Moron” for $500, Alex.

This myopia is universally pervasive.  In algebra we were often told to find “X.”  Perhaps it’s time to leverage those skills to find “why” (or in shorthand, “Y”).  Let’s look at a couple of sample problems:

1) We accept religious dogma blindly – Find Y (the 72 virgins qualifies as one of the answers)

2) You caught a cold – Find Y (I’ve always felt that, when you catch a cold, it is more important to identify who gave it to you than it is to concentrate on getting better)

3) The Romans thought-up crucifixion – Find Y (wasn’t it one particular individual who raised his/her hand in the back of the room and articulated this idea?  Who exactly was that?)

It’s all about cause and effect.  But, the cause is usually a couple of generations removed from the effect, and therefore obfuscated by the most recent and/or easily visible precipitating factor(s).  Example: It was an earthquake that caused an electrical outage and subsequent nuclear meltdown in Japan.  Really?  How about the cerebrally-challenged original plan to build a nuclear plant on a major tectonic fault?   You get the idea.  So let’s apply this more insightful analytical approach a little closer to home.

Times have been getting tough for Americans. The price of oil/gas is way up again, consumer staples are painfully more expensive and we have 9% unemployment (arguably closer to 17% in most major cities, especially if you consider the number of underemployed and those who gave up looking for jobs).  Most recently, the insolvent local and national government authorities have been instituting enormous global spending cuts.  Prisoners are being released, government workers and teachers are getting laid-off, Social Security and Medicare are being eviscerated, taxes and healthcare costs are inexorably rising and employee benefits are being thrown in the food processor.  And the debt!  Doesn’t anyone out there understand the meaning of the word trillion?

O.K., so why is all of this happening?  Clearly because the economy is bad.  But, why (Y) is that?  Because of poor Presidential leadership?  Because of OPEC?  Because of global political unrest or a Japanese tsunami?

Hello McFly!  Maybe it’s . . . I don’t know . . . Wall Street. Remember those guys? The banks, the hedge funds (still unregulated), the broker dealers, the mutual funds, the day traders.  You know . . . the “unfairly criticized and demonized” folks still making a killing while the rest of us are bleeding in the streets.  My deepest apologies to my very many close friends who toil daily in the volatile finance field, but have we all become infected with amnesia?  Is 2008 that far away that we can no longer recognize the original cause of the problems that have only just recently erupted?  It was never about the stock market declining.  It was and is about the destruction of the American economy – and that happened 2 years ago.  Your money, your benefits, your jobs have been stolen by the very people who bankrupted you for their own benefit. And what has their punishment been for putting us all on the unemployment line?  Record bonuses.  The average Goldman Sachs employee made $430,000 in 2010.

It’s usually not healthy to engage the process of assigning blame.  But in this case, the exercise might yield three positive results:

1) Removing the obscene leverage, guaranteed by the taxpayer, that caused this problem in the first place (the gasoline for the fire)

2) Hyper-taxing the throngs of people who gamble with our money and who have reaped inconceivable fortunes while taking no risk (except possibly losing their job), thereby supporting the society that made it all possible in direct proportion to the level of their lottery win

3) Requiring that 80% of the zero-interest government loans to the banks be lent to businesses and individuals

Just a thought.  We could continue to be intoxicated by the flowery prose and intellectual spin of those in control of our plutocracy, or we could finally make the effort to elevate ourselves above the trees and start repairing the fire-ravaged forest.  I would argue that the emerging crumbs of sporadic new (and arguably less substantive) job creation and decrease in the VIX are largely inconsequential to the big picture.  Can someone please get us a pair of those progressive glasses!

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Thought experiment. Let’s say Simon Properties launched a new program that rewarded you with a free iPad for every $10,000 you spent in their stores.  So you go out of your way to buy most of your family’s needs at a Simon mall, bypassing many of your favorite shopping destinations like Costco, the factory outlets, and the internet.  After 18 long months, you reach your goal and receive a coupon that can be exchanged for an iPad at any of the Simon Mall Apple stores.  Off you go to collect your bounty, but when you arrive, the Apple “specialist” tells you that the item is out of stock.  You curiously scan the surrounding bustling retail landscape and see salespeople handing out hundreds of iPads to customers.

“What gives?” you ask.  The specialist responds that only a certain amount of iPads can be dispensed to coupon owners each day, and today’s allotment has been filled. “But I paid for this coupon with thousands of dollars of my hard earned salary,” you say.  “Why isn’t my money as good as the money those customers have?”  The specialist just shrugs. So you ask if you should come back tomorrow, and the specialist tells you that tomorrow’s allotment has been exhausted as well.  In fact, the entire allotment for the next 11 months has been consumed by way of a very long waiting list.

Frustrated, you ask about your options.  You are told that you should come back every day because occasionally a scheduled coupon holder doesn’t show, and their reserved iPad will then be made available to the first coupon holder in line at the store.  Alternately, however, you can receive an iPad today in exchange for 2 coupons.  “But that’s bait and switch,” you say.  “You just doubled the price.”  The specialist refutes the allegation saying that it’s merely an optional customer convenience premium.

Reflecting further on this issue, you demand to know exactly how many iPads are made available on a daily basis for coupon holders.  That particular piece of information, you are told, is unavailable. Really? Could it be just 1 or 2 out of the 200+ product inventory per store?  Or maybe zero on certain high traffic days?  Isn’t this like Nathan Lane and Mathew Broderick selling 300% of their company’s stock to disparate qualified investors?  Another shrug.  “I wouldn’t know, sir.”

I used Apple as an example here because they have legendary customer service and sell killer products that are coveted by most people.  I would argue that the above scenario, irrespective of the specific company or service promoting it, is not an ethical practice, and would further question its legality.  And I would be most interested to hear a counter argument from anyone except those folks representing the businesses profiting from such a program.  My guess is, it would be a one-sided debate.

If you agree, perhaps it’s time to examine your frequent flyer program and then call your state senator.  Unfortunately, the “miles” scheme is only the tip of the iceberg.  One could easily argue that the airlines have earned the collective wrath of multiple government agencies, including the FAA, FTC and Congress for abusing their oligopoly power and exploiting a worldwide recession and energy emergency. They have quickly manipulated their market with the polished skill of Wall Street bankers and OPEC Ministers by strategically limiting supply (canceling flights), devaluing loyalty miles currency, and adding insidious charges for everything from fuel tax and carry-on luggage to seat selection, blankets and peanuts.  Most of us believe in free markets, but air travel has become as much of a necessity as are utilities; hence the airlines’ status as a regulated industry.  One would think it’s high time to evaluate the regulators. And beyond the necessity, wouldn’t it be nice to be able to use your frequent flyer miles to book a flight at the advertised reward level that departs before 2 am and has less than 3 connections, one of which is through Guam?  They say you get what you pay for.  Unfortunately, we all paid for the promise, but were sold vapor.

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