Flashback – The Blame Game

Many Americans stumble through life following rules of thumb they heard somewhere while making no attempt to verify their effectiveness: drink 8 glasses of water a day; avoid eating fat; wolf down Vitamin C for a cold; shun fast food, etc. They take the same attitude toward so many myths: fear GMOs and food additives; fear nuclear power; fear fluoridation of drinking water; fear vaccines; worry about (extremely rare) school shootings and child abduction and more. When anything goes wrong they look for someone else to blame and to the government to fix it. Many legislators understand and relish their role as savior, which allows this lack of responsibility to continue.

 

Here from almost 7 years ago are my comments on this tendency to blame and depend on others to help.

[I just finished reading a book called Scapegoat:  A History of Blaming Other People. In it the author tells how, back as far as the Garden of Eden, we have been finding others to blame for our problems and shortcomings. We have blamed foreigners, other religions, the rich, the poor, bankers, God, Satan, witches, priests, kings and animals, even the weather. I think he left out all the “Bigs”: big business, big pharma, big tobacco, big oil, big government, big banks and the rest. No one takes responsibility and it began with Adam blaming "the woman" and Eve blaming the serpent.

This was coincident with two news articles: one about a common whipping boy, MacDonald’s, and the other about our lack of faith in the government.

The first is in the form of a video.  A high school science teacher from Iowa challenged his students to develop a diet for him based purely on the menu from McDonald’s. They were instructed to vary his meals and keep the total intake of calories and fats to within set guidelines. After eating three meals everyday from MacDonald’s and beginning an exercise program where he walked for 45 minutes a day, he lost 37 pounds and his cholesterol dropped from 249 to 170. This flies in the face of popular opinion and documentaries like “Super-size Me” that try to shift the blame from individual behavior to the fast food industry. As the teacher says, “It’s our choices that make us fat, not MacDonald’s.” Behavior has consequences.

The second related piece of news is the results of a recent poll showing that about 70% of Americans have little faith in government. “The percentage of Americans saying the nation is heading in the right direction hasn't topped 50 in about a decade.” Many are looking for fundamental changes in the structure of government, as “61 percent are pessimistic about the system of government overall and the way leaders are chosen.” The underlying premise here goes against the idea of responsibility as we look to the government to solve our problems and worry about their inability to do so, instead of being more self-reliant.

Perhaps it’s time to stop looking for someone else to blame, whether it be the government, fast food, or any of the other popular targets. It’s time to start solving our problems with better choices all the time.]

Flashback – Hating the Rich

Millionaires, billionaires and highly paid executives are favorite targets for someone trying to garner support for a new program. We should hate the rich merely because they are rich. The government should take away their money to help the poor. In this stirred-up state of envy no one wants to think about how the anger is selective. Nor do they want to hear how such a move would dampen motivation at all levels while not really solving any problems. 

I pointed this out right before the 2016 election, and nothing has changed since then:

[Maybe hating is too strong a word for it. Maybe being angry or envious is a better description of those feelings, the feelings various politicians and organizations vigorously promote. But since those same organizations and advocacy groups freely use the words “hate” and “haters,” it’s probably not completely unfair. In this case the hating is not only selective, but also difficult to justify.

Here is a graphic that has been going around on social media. It shows the total compensation of health insurance company CEOs. The caption and comments imply that this is the reason for the sharp increase in Obamacare (ACA) premiums for 2017. Let’s take one example and see what’s going on.

Let's not quibble over the fact that the information is three years old or that they calculate daily pay based on 341 days in a year. If these folks have moved on, they were likely replaced by others who were equally well compensated. Instead take the first gentleman, Joseph Swedish as representative.

He is the CEO of WellPoint, which operates Blue Cross Blue Shield plans in 14 states. Here is some information from a CNBC report from 2014. “The company had 37.5 million members at the end of the quarter, up 2 million members from a year earlier.” Apparently he is doing a good job of growing the company and meeting analysts’ expectations. But is his pay driving up premiums?

Take the $17 million shown above and divide by the number of customers, 37.5 million, and get 45 cents per customer. Divide that by 12 to calculate the effect on monthly premiums and we find that if he were paid nothing, each customer might see a 3.8-cent reduction in monthly premiums – 3.8 cents!  (By saving this up for 10 years each customer could afford one trip to Starbucks.)

Maybe it’s the fact that the government forces us to buy health insurance that causes such a negative opinion of these CEOs. By contrast, we never seem to get upset about the amount paid to the Disney CEO or star athletes. We never hear people complaining that the ticket prices would be lower if their favorite quarterback made less money. We give these people our money freely, even line up to do it, in return for a limited amount of entertainment, and they also get rich.

Look at the recent Desert Trip concert in Palm Springs. Most of the 75,000 tickets were gone in less than five hours, with the good seats going for $1599 each. The promoter is expected to gross $160 million for the three-day event, while paying the headliners up to $7 million each (for showing up and playing for a few hours). The LA Times reports that these rock stars from the sixties continue to do very well for themselves. “Since 2000, the Rolling Stones have grossed more than $1.1 billion with their periodic tours, according to Pollstar, the concert-industry-tracking publication. [Paul] McCartney has racked up $761 million, [Pink Floyd’s Roger] Waters has pulled in $592 million, followed by [Bob] Dylan ($293 million), the Who ($200 million) and [Neil] Young ($153 million).”

We love to hate those one-percenters, the people making a lot more money than we do, but the outrage is selective. When it’s Mick Jagger, Bob Dylan, Lady Gaga, Peyton Manning, Rory McIlroy, George Clooney, Tom Cruise, or Oprah, then it’s OK. Making almost $50,000 a day is very impressive, but it pales in comparison to $500,000 - $750,000 for a single speech or an advance on a book in the millions. We love the ones who perform for us and hate the ones who help us pay our doctor bills. Objections to the rich being rich are both selective and difficult to justify.]

Some Short Examples and Comments About the Five Dimensions

Critical thinking: A few weeks ago a furniture company was advertising 20% off or 0% interest until Jan 2024, which was about 40 months away. If you take the delayed payment offer and pay full price, you sacrifice the 20%-off bargain. That is the equivalent of paying over 5% in annual interest – not exactly a no interest deal after all.

 

Responsibility: It seems fine to harass, shame or even arrest people who don’t wear a face covering, yet in the case of a person who has children without the means to support or feed them, there is unlimited sympathy and generous financial support from the government and others.

 

Economic Understanding: Recently Subway lost a court case in Ireland. They tried to avoid paying tax on their bread, but the court ruled that their bread contains too much sugar to qualify for the “staple food” exemption. The media reported mockingly on the unhealthiness of Subway bread. 

 

One newscaster closed with “now it will cost Subway more” – wrong! It is really a hidden tax on the Irish Subway customers as they pay more for their sandwiches. I doubt if it will cost Subway any business as they raise the price a bit. Newscasters and most of the people who listen to them don’t understand economics or business.

 

Note: A recipe on Food.com for homemade white bread uses at least as much sugar as the Subway recipe. 

 

Perspective: Does anyone else find it odd that football players celebrate every time they make a good play? These people are highly paid to play a game. They are expected to throw the ball or catch it or tackle an opponent or keep him from catching the ball. When they do what they are paid to do, they make first down signals, high-five each other, do dances and mug for the camera. Try doing that in your job and see where it gets you!

 

Discipline: Consider those on-line sports betting ads. It’s initially risk-free as they promise to match your losses up to a certain dollar amount. Aren’t they counting on enough people getting hooked, even if it’s only a bet or two a week? As the saying goes, over the long run the house always wins. 

 

Here is some evidence of that. This source “estimates that New Yorkers bet $837 million on sports in New Jersey. When subtracting the payouts for wins using a conservative hold percentage, it’s an estimated $57.1 million in revenue for the operators and $6.2 million in tax revenue lost by New York to New Jersey.” With it not yet legal in New York, total losses to the state in taxes on the profits could be over $203 million.

 

Discipline (alternate): Despite being told for years to build a six-month emergency fund, most Americans were dependent on government enhanced unemployment and stimulus checks immediately after the pandemic struck and complained when they were delayed.

 

Other miscellaneous ideas: 

Three useless words – “go ahead and.” Every time you hear them “go ahead and” replay the sentence in your head with out them. It’s shorter and means exactly the same thing!

 

The only way to be an optimist these days is to have extremely low expectations. 

 

“Some free black people in this country bought and sold other black people, and did so at least since 1654, continuing to do so right through the Civil War.” (Source: Article by Henry Louis Gates, a black historian)

How To Watch News

I found myself talking back to the CBS Evening News a couple of nights ago. Usually they are pretty good, although like most of their competitors they don’t seem to be working as hard as they used to – over trusting anonymous sources, not confirming stories in a rush to be the first to bring us breaking news and presenting a dismal view – until the end when they throw in the obligatory heartwarming story. So critical thinking dictates that I treat their information skeptically.

The story that got me going was about tariffs. Now generally, I am for free trade and against tariffs. American tariffs are merely an indirect tax on us. They raise the prices of imported goods that we all buy and make the trading relationship with other countries less efficient – we don’t get the best goods for the best price. It’s basic economics. When they say something negative about tariffs I’m totally on board, but it’s not what they said but how they said it.

Jeff Glor started by saying, “Many Americans are already feeling the effects” of the $34 billion in tariffs on Chinese goods, the ones that went into effect less than 5 days earlier – really? That's a very fast supply chain. “The US is now threatening tariffs on thousands more Chinese products.” Then he turns to Jill Schlesinger who “looks at the impact” – the impact of what, imposing tariffs that he characterized as “threatened” just seconds before? Are they jumping the gun?

We learn that the next round of Trump tariffs, 10% on $200 billion of Chinese goods, “could hurt consumers.” Wait a minute. We were just told that many were already feeling the effect – now we are told the next round could hurt. They show a list of sample products: shampoo, baseball gloves, refrigerators, soap and cameras. Some are frequent purchases and inexpensive, while others are expensive but might be put off until a “trade war” is over.

“Already the lumber tariffs have added about $9000 to home prices”, Jill continues. I had a few problems here. Lumber tariffs are between the US and Canada, not China. Prices are not the same as costs. Are builders taking advantage of trade war news to boost prices like gas stations raise prices in anticipation of holiday demand? Besides, home prices are not uniform across the US, so any estimate will have different effects in different locations. 

“The North American Food Equipment Manufacturers said tariffs could raise prices at Chick-fil-A simply by increasing the cost of a pressure cooker used by the restaurant.” It makes me wonder how many pressure cookers they buy per year, what they cost, how much food they prepare before a pressure cooker has to be replaced, and what that comes down to on a per meal basis – I’m betting it’s mere pennies. (Not unlike the beer can story I told back in April.)

Finally, jobs could be impacted. They gave examples of Harley-Davidson and BMW saying that they would move more US production overseas. Do companies of this size hear about tariffs in April and 3 months later pull the trigger on an overseas move? This is very doubtful. It takes a lot of planning and many decisions. If they do move, it’s likely they had something in the works  a long time ago and the timing just happened to be coincidental (making the bosses look pretty smart).

But what can small businesses do? Jeff asks. “They can’t just move overseas and don’t have enough money to absorb price increases...” Wait another minute! What is this talk about absorbing increases? If any absorbing is going on, the consumer will be hurt less. How does this statement fit in at all with the rest of the piece?

All those unanswered questions and apparent discrepancies happened in a minute and a half. They don’t take any responsibility. (Jill Schlesinger is a financial planner, not an economist.) It’s up to us to be skeptical and think about what they are feeding us before swallowing it as indisputable fact. We must force them to do better than this as they try to make us panic.

The World's Richest

Last time I gave a very short summary of the principles of economic understanding.  Often personal and governmental decisions arising from good intentions lead to disruption and unintended consequences, whereas economic understanding would help us to anticipate and avoid these very natural outcomes.

One important omission from last week was the idea that the “economic pie” is getting bigger.  As the economy grows everyone is better off.  It is not the case that if I get more you must get less.  It's not a zero-sum game where having winners means some must be losers.  This is not obvious to young people because progress takes time.  

Eighty years ago only about half the households in the US had a radio and flush toilet.  Only about 60% had a car and 70% had electric lights.  About 60 years ago televisions came on the scene, and in another ten years color TV.  It wasn’t until about 40 years ago that home air conditioning began to spread.  Microwave ovens and home video recorders were brand new.  Regular use of personal computers in home and office came about in the last 25 years.  Cell phones and smart phones followed.  Today we take all this for granted, but we can afford to have the lifestyle we have due to a growing economy.

The poor today have appliances that a few generations ago were limited to the rich or that no one had because they were not invented yet.  The latest information I found were 2011 Census estimates of the percentage of poor households in the US that owned the following:  clothes washer and dryer (65%), refrigerator (98%), microwave (93%) air conditioner (83%), television (96%), video recorder/DVD (83%), computer (58%), cell phone (81%).  Those numbers are higher today, and it all came about through innovation, increased productivity and a growing economy, not because someone else had to settle for less.

 But Oxfam International sees it differently.  Using the tag line: “The power of people against poverty,” their focus seems not to be on eradicating poverty directly, but on the size of the gap between the world’s haves and have-nots.  In the news this week, a press release against income inequality lists the eight richest men in the world whose combined wealth equals that of the poorest 50% of the world.  Oxfam has been releasing this type of information each year before the World Economic Forum in Davos, a private conference for the world’s richest people, apparently trying to embarrass and shame them into supporting the cause.  (Note that just 1% of the people in the bottom 50% of the world are from North America.  And using their measurement criteria, new college graduates who owe more money than they have could be counted among the world’s poor.)

If we took everything away from these eight and distributed to the 7.4 billion people in the world, each of us would get $57.70.   The following year we would get considerably less from the next eight or ten or twenty.  It doesn’t work that way.

Some of the people listed are Bill Gates, who sold software to billions; Jeff Bezos, who lets us shop for almost anything on Amazon; Warren Buffet and Mark Zuckerberg.  None of these people forced us to give them our money.  We could have used inferior software, not shopped from home and never joined Facebook.  But many people chose to support them.  That’s how they got to be the richest people in the world, by inventing something we wanted, that added value to our lives and that we were willing to buy.  Gates and Buffet have set up charitable organizations.  Amazon has just announced plans to add 100,000 jobs in the US over the next 18 months. 

Now that we have freely given them our money and the growth of their companies has provided a huge number of jobs, Oxfam thinks they should feel guilty and the government should punish them with higher taxes.  Doesn’t confiscating someone’s money through threat of force constitute punishment?  (Should we limit the number of twitter followers anyone can have so we all have an equal chance to get our message out?  Wouldn’t that be fairer, too?)

Economic growth doesn’t work that way, and the key to ending poverty is through economic growth, not artificially shuffling around a fixed amount of money.

We Are All Doomed!

Americans line up, spend time and money, waiting for the football game, the rock concert or the blockbuster movie to begin, glued to their smartphones that they bought at Walmart with a credit card, using Facebook that is supported by advertising to gripe to their friends about how big business and the rich are ruining their lives; and they don’t see any connection.  No, all these rich people, most of whom got us to freely give them our money by providing goods and services and entertainment that we value, should now be forced by the government through taxes to give it back to us in the form of government services.  That’s what we have been manipulated into believing is the definition of fair and just.

Many Americans hear in church on Sunday that “suffering” is being beaten and nailed to a cross to die in the hot sun.  They wake up Monday thinking suffering is having a minor backache, and take the pills promising fast, all-day relief.  They show no sense of proportion.  They go on to ignore the fact that their achy body could stem from being overweight and out of shape, and that exercise might be a better long-term solution.  But being too busy is a good excuse to skip the exercise and healthy eating.  They also don’t see the connection between how they deal with their physical health and their financial problems.

Americans are never at a loss for things to protest or be offended by.  If you try to tell them to get a grip or man up (which is, in itself, offensive) you are accused of being an intolerant hater.  But toleration in the extreme is the same as enabling, and objecting to something out of a sincere desire to lead someone away from destructive behavior is not hateful.  When a pharmacy chain refuses to sell cigarettes, no one accuses them of hating smokers.  Having some things you don’t approve of and don’t condone used to be called having standards, now it's called lacking compassion.

And when nothing seems to be going right we turn to the government to fix it.  But as of this writing the presidential election is winding down to a race between what the majority of Americans agree are the poorest candidates in recent memory.  They are overwhelmingly seen as untrustworthy, while offering no positions and no vision. They are too busy accusing and insulting each other, mixing politics with comedy on late-night TV where hosts amuse us by messing up Trump’s hair or taking Clinton’s pulse.  Leaders are supposed to be people we can look up to and admire, people with virtue, who are more interested in the good of the country than their egos and job security.  When the Note 7 smartphone had battery problems, Samsung president admitted that it did not meet “the standard of excellence that you expect and deserve.”  Should we demand a similar apology from the Republican and Democrat National Committees?

No.  We have gotten exactly the kind of candidates we deserve!  They are appealing to the very sense of victimhood we seem to thrive on.  They will fight for us – assuming we can’t or won’t take care of ourselves, assuming that the odds are so stacked against us that only they can bail us out.

When I began writing these short essays almost five and a half years ago, my intention was to gather examples of how our behavior leads to the very consequences the media continues to brand as crises and epidemics.  Now, more than 560 posts later, I am far from running out of examples.  I don’t spend a lot of time searching for weird or exceptional examples.  These are from mainstream news sources and usually national advertising.  Common behaviors are taking America in the wrong direction and the trend continues.  For the past 20 years we see the same mistakes, the same advertising lures and come-ons, the same political appeals, the same handwringing in Washington and on the news.

I feel like the prophet Jeremiah, who was thrown into a well for telling people what they didn’t want to hear.  Unfortunately the truth is that behavior has consequences.  Behavior is not improving.  People are not learning from their mistakes and changing behavior, instead blaming predictable consequences on circumstances, government, political opponents, structural disadvantages, time crunch and distractions, bosses and teachers and authorities in general, big business and Wall Street.

When touring this country in the Nineteenth Century, Tocqueville was amazed by the success of the American experiment.  He later wrote, “Liberty cannot be established without morality.”  He often expressed morality as mores or habits of the heart, in other words right behavior.  As our values and behavior deteriorate, our liberty slips away, the experiment fails and we are all doomed.

Mythology by Dimension

Last time I wrote about understanding the world by using the lens of mythology.  Everyone has beliefs that they’ve developed since childhood through interactions with parents, teachers, friends, reading and learning.  As this personal mythology matures it becomes a guide for action, a guide for making moral decisions, judging right and wrong.  We each see ourselves as heroes of our own stories, stars of an imaginary movie playing inside our heads.  When we act in concert with our beliefs we are behaving heroically.  Otherwise we are cowards and a disappointment to ourselves.

Our friends, the people we hang out with, what I have called the tribe reinforce these beliefs.  (I purposely use primitive terms like tribe and mythology to emphasize the primitive nature of these reactions.  These core beliefs go deep and are very hard to change.)  When ideas contrary to our mythology arise our tribe helps us combat them by finding examples of how we are right and by shouting down the opposition, portraying them as villainous, evil, stupid, idiotic, naïve, and greedy.  The “others” are purposely lying to us to advance their selfish goals.

But that is usually not the case.  Those we consider villains are heroes of their own mythology, fighting the good fight on the side of what they believe is right.

That’s why we see so much division in the country today.  Everyone is so busy accusing each other of villainy, pointing fingers and calling names, that nothing gets settled.

Now comes the behavioral model.  Behavior has consequences.  If actions hurt you, stop doing them.  If actions cause suffering for others or fail over the long term to relieve their suffering, stop doing them.  We must use these same criteria to adjust our own behavior and to challenge the actions of others.  Name-calling and accusations don’t solve anything.  Behavior is the guide.  Unfortunately personal mythology blinds individuals to many behavioral errors.  Here are a few examples by dimension.

Economic understanding points out that there is no magic money tree.  Money always comes from somewhere, and we can usually trace it back to our own pockets.  When sympathetic juries hand out large awards to compensate for a loss, they fail to understand that insurance companies do not have a big, endless pool of money.  They get their money from us in premiums and will find a way to recoup the loss.  Their competitors will also see how such actions increase their risk and will take defensive action.  Everyone’s premiums go up.  It’s a myth that no one is hurt and only good comes out of this redistribution from the rich companies to the poor victims, but many cling to this myth.

Economic understanding points out that the economic “pie” is not fixed.  It’s not always a zero sum game with winners and losers.  The standard of living for everyone in the US has increased dramatically over the last century – for everyone!  The rich are better off than they were with more luxuries.  The poor are better off than they were with more conveniences.  Delivering fresh produce to a food pantry last year I heard clients discussing the best place to buy an inexpensive microwave oven.  Fifty years ago no one, rich or poor, had a microwave oven!  The rich are getting richer, but that does not imply the poor are getting poorer.  (Note: This Congressional Budget Office report shows distribution of income growth 1979-2007 was skewed toward the higher incomes, but all income levels experienced some growth.)

Many companies and industries are big and powerful.  Barring government interference, companies grow big by getting more customers.  The smart way to get more customers is to give them what they want at a reasonable price.  A bad way to attract customers is to treat them poorly or try to cheat them.  Most companies are smart enough to figure this out or they don’t stay in business very long.  A common myth is that all big companies are greedy and evil based on the actions of a few.  Sure CEOs are overpaid, but so are star athletes, TV and movie stars, super models and rock musicians; but you don’t hear people complaining about George Clooney making too much money.  And you don’t see people planning to skip the next Disney movie to protest how much the CEO is paid compared to the average Disney worker.  Our personal mythology is selective.

(In the interest of your time, I’ll continue the discussion on Friday.)