Wednesday, June 23, 2010
Tuesday, June 8, 2010
Has America Forgotton the Fruits of Freedom?
Brian S. Wesbury - Chief Economist
Robert Stein, CFA - Senior Economist
Date: 6/7/2010
Putting aside religious beliefs, nothing in life has 100% upside – nothing. But the closest thing to a guaranteed better, safer, and more fulfilling life is freedom. Freedom means responsibility. It also means failure, accidents and mistakes. This, in turn, leads to learning, which is why successes outweigh the failures. However, humans must be free to understand the consequences of their actions. Without consequences, there is little learning.
When freedom prevails, the ingenuity and inventiveness of people creates incredible wealth. This is the source of the natural improvement of the human condition. Capitalism is created by free people. Socialism, on the other hand, is what happens when people trade their freedom for the perception of safety. And when people trade in their freedom, they trade it in for a less dynamic, less safe, life.
These days, more and more people seem willing to trade in their freedom. But who can blame them? Intellectuals and politicians are telling them it’s the right thing to do. Ken Rogoff, professor at Harvard and former Chief Economist at the IMF, has written that, “The accelerating speed of innovation seems to be outstripping government regulators’ capacity to deal with risks, much less anticipate them.” In a recent opinion piece he drew parallels between the BP oil spill and the subprime financial crisis. Like a modern-day Luddite, he asks for government protection from technology.
Many political leaders, who call themselves conservative, and say they believe in freedom, have also made the same argument, albeit in a roundabout way. By supporting TARP, stress tests, bailouts, and stimulus spending, they implicitly suggest that a system of free markets cannot remain stable without government control. These “so-called conservatives” talk the talk of freedom, but do not walk the walk. George W. Bush said that he “abandoned free market principles to save the free market system.” The only thing Americans who listen to that can believe is that free markets aren’t trustworthy.
Don’t get the wrong idea. Oil gushing from a pipe a mile deep is appalling. We wish not a drop had gurgled to the surface, ruining beachfront property and fishing habitats.
But accidents happen. The good news is that we learn from them. Between 1970 and 1979, there were an average of 25 oil spills per year of 700 tons or greater (from shipping). Between 2000 and 2009, there were just 3 per year on average. Oil companies lose money, and soil their image if oil spills. They have a huge incentive to stop spills. These incentives cause them to invest in better safety controls.
The number of plane accidents has fallen significantly. The same is true of train accidents and coal mining accidents. If the government ran all the train, plane, coal, and oil companies there would still be accidents. No one can stop them. Negative events do not mean that free markets and capitalism have failed. Freedom cannot eliminate the risk from life, but neither can government.
In fact, when government does try to eliminate risk, it often creates even more. For example, by holding interest rates at 1% back in 2003 and 2004 in order to stop deflation, the Federal Reserve created the environment necessary for the housing bubble. Fannie Mae and Freddie Mac, and other government inventions, inflated housing even more. It was these things that caused the financial panic, not freedom.
And back in the 1970s, the US government stopped the building of nuclear power plants, partially because of an accident at Three Mile Island. Today, people complain about coal and CO2 emissions – a problem made worse by the lack of nuclear power.
There is no way to take the risk out of life. When government tries, all it really does is transfer that risk elsewhere. And without the growth and advancement that freedom brings, the system breaks down and wealth creation is undermined. You can’t get something from nothing. The fruits of freedom are only available to those who are willing to take the risks of freedom. Let’s not forget that lesson.
Be well.
republished by my good friends:
John Fitzgerald Acosta
Managing Partner, CPFP
Financial Advisor, RJFS
Brian M. Fernandez
Managing Partner, CPFP
Financial Advisor, RJFS
Robert Stein, CFA - Senior Economist
Date: 6/7/2010
Putting aside religious beliefs, nothing in life has 100% upside – nothing. But the closest thing to a guaranteed better, safer, and more fulfilling life is freedom. Freedom means responsibility. It also means failure, accidents and mistakes. This, in turn, leads to learning, which is why successes outweigh the failures. However, humans must be free to understand the consequences of their actions. Without consequences, there is little learning.
When freedom prevails, the ingenuity and inventiveness of people creates incredible wealth. This is the source of the natural improvement of the human condition. Capitalism is created by free people. Socialism, on the other hand, is what happens when people trade their freedom for the perception of safety. And when people trade in their freedom, they trade it in for a less dynamic, less safe, life.
These days, more and more people seem willing to trade in their freedom. But who can blame them? Intellectuals and politicians are telling them it’s the right thing to do. Ken Rogoff, professor at Harvard and former Chief Economist at the IMF, has written that, “The accelerating speed of innovation seems to be outstripping government regulators’ capacity to deal with risks, much less anticipate them.” In a recent opinion piece he drew parallels between the BP oil spill and the subprime financial crisis. Like a modern-day Luddite, he asks for government protection from technology.
Many political leaders, who call themselves conservative, and say they believe in freedom, have also made the same argument, albeit in a roundabout way. By supporting TARP, stress tests, bailouts, and stimulus spending, they implicitly suggest that a system of free markets cannot remain stable without government control. These “so-called conservatives” talk the talk of freedom, but do not walk the walk. George W. Bush said that he “abandoned free market principles to save the free market system.” The only thing Americans who listen to that can believe is that free markets aren’t trustworthy.
Don’t get the wrong idea. Oil gushing from a pipe a mile deep is appalling. We wish not a drop had gurgled to the surface, ruining beachfront property and fishing habitats.
But accidents happen. The good news is that we learn from them. Between 1970 and 1979, there were an average of 25 oil spills per year of 700 tons or greater (from shipping). Between 2000 and 2009, there were just 3 per year on average. Oil companies lose money, and soil their image if oil spills. They have a huge incentive to stop spills. These incentives cause them to invest in better safety controls.
The number of plane accidents has fallen significantly. The same is true of train accidents and coal mining accidents. If the government ran all the train, plane, coal, and oil companies there would still be accidents. No one can stop them. Negative events do not mean that free markets and capitalism have failed. Freedom cannot eliminate the risk from life, but neither can government.
In fact, when government does try to eliminate risk, it often creates even more. For example, by holding interest rates at 1% back in 2003 and 2004 in order to stop deflation, the Federal Reserve created the environment necessary for the housing bubble. Fannie Mae and Freddie Mac, and other government inventions, inflated housing even more. It was these things that caused the financial panic, not freedom.
And back in the 1970s, the US government stopped the building of nuclear power plants, partially because of an accident at Three Mile Island. Today, people complain about coal and CO2 emissions – a problem made worse by the lack of nuclear power.
There is no way to take the risk out of life. When government tries, all it really does is transfer that risk elsewhere. And without the growth and advancement that freedom brings, the system breaks down and wealth creation is undermined. You can’t get something from nothing. The fruits of freedom are only available to those who are willing to take the risks of freedom. Let’s not forget that lesson.
Be well.
republished by my good friends:
John Fitzgerald Acosta
Managing Partner, CPFP
Financial Advisor, RJFS
Brian M. Fernandez
Managing Partner, CPFP
Financial Advisor, RJFS
Friday, June 4, 2010
If I Want It Done Right, I Do It
The STORY:
Two weeks ago on Friday afternoon, 15 minutes after normal quitting time, as Robin headed out the door to go home, Jesse, her boss, saw her walk by his office and called out to her.
"Robin, before you go, there's something I want to ask you," he shouted, getting up from behind a desk that was literally a foot deep in paper.
Mistake, thought Robin, I should have left the back way. Everyone warned me about him.
"Robin, if you have a minute..." his voice trailed off as she followed him back into his office.
"Actually, I don't," she replied, "we're having people for dinner, and I need to get home."
"Just a minute..." again the voice trailed off as if he had not even heard what she had said.
Although she was annoyed at being kept late at work, Robin was flattered, too. Jesse was actually asking her what she thought of the company's direction. He even asked her to spend some time over the weekend writing down what she thought. Then he wanted to go over it on Monday morning.
Partly to finally get out of there and partly because she believed he was really interested in her ideas, she agreed.
Robin worked all weekend to produce a 22-page report. On Monday morning she arrived, only to find out that Jesse had decided to take the day off. I guess that's what you can do when you are the company President. She left the report on his desk.
Four days later, upon returning from lunch, she found the report she had done for Jesse on her desk. Opening it, she discovered just about every inch of every page was covered with negative comments. On the last page was written, "None of your ideas have any merit. Please see me after work today. I need to make sure that you understand what I expect from my employees."
The RESULT:
Jesse has taught Robin a very valuable lesson on how to survive and prosper in his company. Never, never should any initiative or original thought be expressed. The road to success is finding out what Jesse wants and then giving him exactly that in return.
DISCUSSION:
While Jesse is an extreme case of megalomania, he did not become this extremely self-important overnight. It took years of gradually believing, more and more, that everyone around him was becoming less and less competent. Believing more and more that if he wanted it done correctly, he had to do it himself or somehow turn those around him into mindless drones who would do his bidding.
And when Robin inevitably leaves within a year or two, Jesse will ascribe her departure to the fact that she couldn't measure up to the hard work, and he is better off without her since she never really did her job anyway.
APPROACH:
For a period of two or three days, jot down on some note paper that you carry what you are doing as you go from task to task. But leave out the detail. As they use to say on an early TV program, "Just the facts."
Once you have your work list of the past two or three days, sit down with it. Now take a pen and mark those tasks you did without any assistance from anyone. Of those tasks, are there any you believe that only you are capable of doing? One or two would not be unusual.
For most tasks, ask for and use input and assistance from others in the company. And learn to agree with others on how you will combine your approaches. Then do it.
You don't need mindless drones, you need co-workers.
THOUGHT:
If you are the only one who can do it right, then you might as well work in a hall of mirrors where the only thing you see is yourself.
Two weeks ago on Friday afternoon, 15 minutes after normal quitting time, as Robin headed out the door to go home, Jesse, her boss, saw her walk by his office and called out to her.
"Robin, before you go, there's something I want to ask you," he shouted, getting up from behind a desk that was literally a foot deep in paper.
Mistake, thought Robin, I should have left the back way. Everyone warned me about him.
"Robin, if you have a minute..." his voice trailed off as she followed him back into his office.
"Actually, I don't," she replied, "we're having people for dinner, and I need to get home."
"Just a minute..." again the voice trailed off as if he had not even heard what she had said.
Although she was annoyed at being kept late at work, Robin was flattered, too. Jesse was actually asking her what she thought of the company's direction. He even asked her to spend some time over the weekend writing down what she thought. Then he wanted to go over it on Monday morning.
Partly to finally get out of there and partly because she believed he was really interested in her ideas, she agreed.
Robin worked all weekend to produce a 22-page report. On Monday morning she arrived, only to find out that Jesse had decided to take the day off. I guess that's what you can do when you are the company President. She left the report on his desk.
Four days later, upon returning from lunch, she found the report she had done for Jesse on her desk. Opening it, she discovered just about every inch of every page was covered with negative comments. On the last page was written, "None of your ideas have any merit. Please see me after work today. I need to make sure that you understand what I expect from my employees."
The RESULT:
Jesse has taught Robin a very valuable lesson on how to survive and prosper in his company. Never, never should any initiative or original thought be expressed. The road to success is finding out what Jesse wants and then giving him exactly that in return.
DISCUSSION:
While Jesse is an extreme case of megalomania, he did not become this extremely self-important overnight. It took years of gradually believing, more and more, that everyone around him was becoming less and less competent. Believing more and more that if he wanted it done correctly, he had to do it himself or somehow turn those around him into mindless drones who would do his bidding.
And when Robin inevitably leaves within a year or two, Jesse will ascribe her departure to the fact that she couldn't measure up to the hard work, and he is better off without her since she never really did her job anyway.
APPROACH:
For a period of two or three days, jot down on some note paper that you carry what you are doing as you go from task to task. But leave out the detail. As they use to say on an early TV program, "Just the facts."
Once you have your work list of the past two or three days, sit down with it. Now take a pen and mark those tasks you did without any assistance from anyone. Of those tasks, are there any you believe that only you are capable of doing? One or two would not be unusual.
For most tasks, ask for and use input and assistance from others in the company. And learn to agree with others on how you will combine your approaches. Then do it.
You don't need mindless drones, you need co-workers.
THOUGHT:
If you are the only one who can do it right, then you might as well work in a hall of mirrors where the only thing you see is yourself.
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