Howard Schultz is the latest example of the dangerous fallacy of omnicompetence

From Jonathan Chait:

Billionaire coffee-shop mogul Howard Schultz is seriously thinking of running for president as an independent. Schultz appears to be one of those rich people who has confused his success in one field with a general expertise in every other field that interests him. His apparently sincere belief that he can be elected president is the product of a sincere civic-minded commitment to the public good and an almost comic failure to grasp how he might accomplish this. That confusion is probably being spread by his hired staffers, whose financial incentive, conscious or otherwise, is to encourage him to embark on a costly political fiasco.

We shouldn’t feel too bad if Schultz wants to waste some of his great-great-grandchildren’s inheritance playing political fantasy camp. The problem is that Schultz’s earnest confusion might succeed just well enough to have catastrophic consequences.

This seems like a good time to revisit this ongoing thread.

Tuesday, September 12, 2017

More magical heuristics -- Levy's omnicompetence

Yesterday, I introduced the term magical heuristics (still open to a better name) to describe nonrational mental tools used by many journalists and investors particularly when discussing science and technology. I laid out four general categories for these heuristics: magic of association; magic of language; magic of attitude; magic of destiny.

This post from Alon Levy (one of the most important contributors to the Hyperloop debate) perfectly fits with two of these categories, magic of association and magic of destiny (the idea that there are chosen ones among us destined for greatness). The whole thing is very much worth reading, but I've selected below the paragraphs that are most relevant to this thread and added emphasis to bring home the point:

There is a belief within American media that a successful person can succeed at anything. He (and it’s invariably he) is omnicompetent, and people who question him and laugh at his outlandish ideas will invariably fail and end up working for him. If he cares about something, it’s important; if he says something can be done, it can. The people who are already doing the same thing are peons and their opinions are to be discounted, since they are biased and he never is. He doesn’t need to provide references or evidence – even supposedly scientific science fiction falls into this trope, in which the hero gets ideas from his gut, is always right, and never needs to do experiments.

...

I write this not to help bury Musk; I’m not nearly famous enough to even hit a nail in his coffin. I write this to point out that, in the US, people will treat any crank seriously if he has enough money or enough prowess in another field. A sufficiently rich person is surrounded by sycophants and stenographers who won’t check his numbers against anything.


...

The more interesting possibility, which I am inclined toward, is that this is not fraud, or not primarily fraud. Musk is the sort of person who thinks he can wend his way from starting online companies to building cars and selling them without dealerships. I have not seen a single defense of the technical details of the proposal except for one Facebook comment that claims, doubly erroneously, that the high lateral acceleration is no problem because the tubes can be canted. Everyone, including the Facebook comment, instead gushes about Musk personally. The thinking is that he’s rich, so he must always have something interesting to say; he can’t be a huckster when venturing outside his field. It would be unthinkable to treat people as professionals in their own fields, who take years to make a successful sideways move and who need to be extremely careful not to make elementary mistakes. The superheros of American media coverage would instantly collapse, relegated to a specialized role while mere mortals take over most functions.

This culture of superstars is a major obstacle frustrating any attempt to improve existing technology. It more or less works for commercial websites, where the startup capital requirements are low, profits per employee are vast, and employee turnover is such that corporate culture is impossible. People get extremely rich for doing something first, even if in their absence their competitors would’ve done the same six months later. Valve, a video game company that recognizes this, oriented its entire structure around having no formal management at all, but for the most part what this leads to is extremely rich people like Bill Gates and Mark Zuckerberg who get treated like superstars and think they can do anything.

The press still hasn't figured out what "Netflix original" means.

Just to get this out of the way, I haven't gotten around to Roma yet (my to-see list is very long and still includes an embarrassing number of genuine classics) but there is every reason to believe that it is an exceptional film fully deserving of its accolades. The problem isn't the movie itself; it is the way it's been covered. We have once again a dramatic reminder that journalists, despite having run countless stories on Netflix, still don't understand the subtleties of what they reporting.

When you read about a "Netflix original," you probably assume the process behind it went something like this: Someone came up with an idea for a motion picture or TV show. It could be someone inside or outside of the company, but either way an executive was approached and the decision to greenlight the project was made. At that point, Netflix put up the money, gave some input to the creative decisions, then took full ownership of the finished product. Sometimes, this is a pretty good description of the process but not always.

Often, Netflix owns little or no share of these programs. Instead they pay top dollar for a period of exclusive streaming and the right to call something a "Netflix original." Other times, they step in and buy a finished product, usually something prestigious and awards friendly (and you don't get much friendlier than Alfonso Cuarón in full art house mode). As best I can tell, Netflix didn't have anything to do with Roma until shortly before its release.

It is also important to note that, even by the director's own admission, this was a picture of extremely limited commercial potential. A Spanish-language drama filmed in black and white with no recognizable stars. Even if it wins an Oscar, it almost certainly will not bring in enough subscribers to offset the amount of money that Netflix is spending to acquire and promote it.

As we have discussed at great length in the past, a constant flow of hype is essential for maintaining the sky high valuations of companies like Netflix and Tesla, and keeping these stock prices high benefits senior management in a number of ways. You can't really fault them for playing this game, but you can criticize the reporters covering it for playing along.

More good work from Adam Ruins Everything

PDF tip

I'm a little embarrassed that it took me long to figure this out, but I had a great deal of difficulty finding the right tool for getting images out of PDFs like this turn of the century Scientific American I got from Internet Archive's indispensable collection.

It turned out that the solution was under my nose all the time. All I had to do was import the PDF into Inkscape, select the page  I needed then ungroup it. Couldn't be easier. Give it a try. 

Another newly relevant repost

If you've been listening closely to the reporting on the LA teachers' strike, you may have heard some of the people on the picket line talk about the need to stand up to billionaires. This Monkey Cage post provides a bit of context.

Vergara vs. California: Are the top 0.1% buying their version of education reform?

By Mark Palko June 23, 2014

---

On Tuesday, a California superior-court judge ruled that the state’s teacher tenure system discriminates against kids from low-income families. Based on testimony that one to three percent of California teachers are likely “grossly ineffective”—thousands of people, who mostly teach at low-income schools—he reasoned that current tenure policies “impose a disproportionate burden on poor and minority students.” The ruling, in Vergara v. California, has the potential to overturn five state laws governing how long it takes for a teacher to earn tenure; the legal maneuvers necessary to remove a tenured teacher; and which teachers are laid off first in the event of budget cuts or school closings.

— Dana Goldstein writing for the Atlantic.
The Vergara vs. California decision has garnered a great deal of media attention. It has been covered as an education story, a labor story, a legal story, but the connection to another highly topical subject has been largely overlooked: Vergara vs. California is an income-inequality story.
Put another way, the decision, the course of the trial, even the very existence of the case were largely the result of actions of a small set of very wealthy men. What’s more, this is true for almost every major education reform initiative from Common Core to L.A.’s billion-dollar iPad program to endless charter school pushes. Though the list of names does vary somewhat from story to story, the same figures keep popping up. For instance, it is rare to find a major reform initiative that does not involve someone who has worked for or received support from Eli Broad or the Bill and Melinda Gates Foundation.
Perhaps more importantly, even when the faces are new, the résumés are remarkably similar: extremely wealthy present or former CEOs, usually male and from the tech industry, with a proclivity for MBA-style rhetoric and approaches. Given the importance of the CEO demographic, it is not surprising that arguably the most powerful figures in the education reform movements of the United States and Britain (David Coleman and Michael Barber, respectively) both worked at McKinsey and Co., the definitive management consulting firm. (Definitive does not mean non-controversial. Barry Ritholtz has a good overview, and you can see my more education-centered take here and here.

The pair of education advocates [Gene Wilhoit, and the previously mentioned David Coleman] had a big idea, a new approach to transform every public-school classroom in America. By early 2008, many of the nation’s top politicians and education leaders had lined up in support.
But that wasn’t enough. The duo needed money —tens of millions of dollars, at least — and they needed a champion who could overcome the politics that had thwarted every previous attempt to institute national standards.
So they turned to the richest man in the world.

— from “How Bill Gates pulled off the swift Common Core revolution” by The Post’s Lyndsey Layton.
Of course, presence does not equate to influence, and influence is not necessarily bad. In order to get to a discussion of social good, we need to start by asking:
Does this group have a disproportionate influence over the current direction of education?
And, if so, is this disproportionate influence in some way undemocratic?
Consider the cases of Common Core and Vergara vs. California. With the former, it is important to note how unlikely it would have been for this program to get off the ground without Bill Gates. Both Coleman and Common Core have always been controversial. Coleman came into the education field strictly on the weight of his work with McKinsey, having no experience either as a teacher or a researcher. As for Common Core, almost immediately after gaining national attention, the proposed standards were greeted with considerable opposition. Here’s popular EdWeek blogger Anthony Cody writing in July 2009:

Sixty individuals, ONE teacher among them, will write national education standards in the next five months, in a secret process that excludes effective input from students, parents or teachers.

Along with the standards, a great deal of additional related material (curricular suggestions, sample lessons) were released, often to extremely negative reviews (including a particularly harsh reaction toward a scripted lesson that made the “odd” decision to teach the Gettysburg Address without referring to the Civil War).
Given the scale of Common Core, the speed of its adoption and, to put it mildly, its lack of grass-roots support, it is difficult to imagine that the initiative would be where it is today if not for Gates’s influence. By the same token, it is equally difficult to argue that competing ideas with more popular support but less influence behind them have gotten the same chance.
With Vergara, the difference is even starker, since it raises questions of equal access to the courts. Virtually every aspect of the case, from the founding of the organization Students Matter to the selection of plaintiffs to the quality of representation to the key witnesses to the research cited in the decision were influenced and, in some cases made possible, by a handful of large personal fortunes.
Students Matter was founded by David Welch, a Silicon Valley entrepreneur of considerable wealth and even more formidable connections. From the Mercury News:

And wealth has attracted more wealth — the Broad Foundation, a controversial education reform organization opposed by most teachers unions, and the Walton Family Foundation, started by Walmart founder Sam Walton, have donated to Students Matter. The nonprofit faced costs including a $1.1 million bill in 2012 from Gibson Dunn & Crutcher, the high-powered law firm that argued the court case.

The selection of defendants appears to have been based on their willingness to challenge the statutes Welch et al. wanted overturned, not on the level of harm they suffered. There does not seem to be any evidence that any of the students had a tenured but grossly ineffective teacher. Four of the nine weren’t even attending schools that had tenure. From the defense’s post-trial brief:

Plaintiffs Monterroza and Martinez both attend charter schools that are not subject to the challenged statutes at all. Beatriz and Elizabeth Vergara both attend a “Pilot School” in LAUSD that is free to let teachers go at the end of the school year for any reason, including ineffectiveness.

Actually, one of the “grossly ineffective teachers” had earlier been named teacher of the year (you can see an example of her work here).
In the trial itself, perhaps the most damning testimony came from Harvard professor Thomas Kane and LAUSD Superintendent John Deasy (previously best known for his disastrous iPad initiative). The quality of their testimony is outside of the scope of this conversation; what is relevant is that much of Kane’s research was funded by the Gates Foundation while Deasy is a former deputy director of the education division of the Gates Foundation and a graduate of Broad’s superintendent academy.
Common Core and Vergara are, of course, isolated instances, but they are both important and representative. In case after case, theories and approaches favored by a handful of very wealthy individuals received preferential treatment in the education debate. You cannot call that a democratic process.

This one might be worth revisiting, particularly the last line

Wednesday, June 24, 2015

Defining dysfunction

This paragraph from a recent Paul Krugman post reminded me of something I've been meaning to dig into for a while.

A brief aside: I don’t think it’s right to call this a case of Washington “dysfunction”. Dysfunction is when we get outcomes nobody wants, or fail to do things everyone wants done, because there doesn’t seem to be any way to package the politics. In this case, however, people who oppose TPP voted down key enabling measures — that is, they got what they wanted. Calling this “dysfunction” presumes that this deal is a good idea — and that kind of presumption is precisely what got successfully challenged yesterday.

We hear “dysfunction” thrown around a lot (often by me), so it might be a good idea to pin down some definitions. Krugman is definitely on the right track, but statements about “nobody” and “everybody” are obviously unrealistic. Every scenario makes somebody happy, up to and including the rise of Cthulhu and his dark, chthonic host. A workable definition will have to take that into account, as well as considering differing intensities of opinion.

A system is dysfunctional if there is no consistent weighting of preferences that corresponds to its actions. (I'm going to be careful not to let this drift into a discussion of voting paradoxes because a good portion of this audience knows a great deal about the subject and I would have to do serious research to make sure I didn't make a fool of myself.)

For example, a group could do what the plurality wants, or it could use some sort of weight by rank (first choice is worth five points, second is worth four...), or it could take into account strongly held positive or negative opinions.

Let's use restaurants. A group might go to an Armenian place because three out of seven listed it as their first choice, or they could go to Chipotle because six people listed that as their second choice, or they could take Chipotle off the list because one person refused to go (I'm with that guy. Living in LA and going to Chipotle is like living in Rome and going to Pizza Hut). All of these decisions are consistent with a functional organization.

If, on the other hand, the group ends up going for Thai when everyone would have preferred burgers, that's dysfunctional. I can’t think of a reasonable and consistent weighting scheme that can produce that result.

A political party is more complex than a group of friends, but in some ways it may not be that much more complex. I’ll try to flesh this out later, but for now, while you have to be careful talking about what a large group “wants,” I suspect that there are a lot choices that the GOP would “like” to make (infrastructure spending, for instance) in the same sense that those friends would “like” to be having burgers now.

Based on these definitions, for large chunks of the Twentieth Century, I'd say that the Democratic Party was the more dysfunctional. The Republicans, however, do seem to be making up for lost time.

Reading over this, it's pretty clear that I have a ways to go before I have a proposal for something coherent and measurable and usable, but I do believe there is something out there, What's more, I suspect that, in 2015, it's probably more important to worry about dysfunction than about ideological extremism.

Can Tesla survive without the Musk hype and bullshit?

From 2 Reasons To Sell Tesla: $920M And $26,250 by Peter Cohan

A little more than two months from now, Tesla -- in which I have no financial interest -- could have a considerably lower cash balance.

How so? The terms of a $920 million convertible bond make me think that come March 1, Tesla will have to part with at least a third of its remaining cash.

…

At the end of September, Tesla had about $3 billion in cash. This brings us to Tesla's $920 million convertible preferred stock -- which comes due on March 1. If Tesla's "average share price [is at] $359.87 or higher for 20 consecutive trading days," Tesla can pay off the note with common shares, according to the Journal.

But that level is 19% above its current price -- and I think it is much more likely that Tesla will need to fulfill its obligations to investors by forking over $920 million in cash.

...

By my math, the cumulative effect of these cash outflows should bring Tesla's cash balance to a dangerously low level.

I’m not going to pretend to understand the subtleties here – I have no relevant experience in this field – but the general notion that failing to maintain their stock price can have serious and imminent consequences for Tesla nicely complements a point we’ve been making for a while now.

Finally, it is essential to remember that maintaining this “real-life Tony Stark” persona is tremendously valuable to Musk. In addition to the ego gratification (and we have every reason to believe that Musk has a huge ego), this persona is worth hundreds of millions of dollars to Musk. More than any other factor, Musk’s mystique and his ability to generate hype have pumped the valuation of Tesla to its current stratospheric levels. Bloomberg put his total compensation from Tesla at just under $100 million a year. When Musk gets tons of coverage for claiming he's about to develop telepathy chips for your brain or build a giant subterranean slot car race track under Los Angeles, he keeps that mystique going. Eventually groundless proposals and questionable-to-false boasts will wear away at his reputation, but unless the vast majority of journalists become less credulous and more professional in the very near future, that damage won’t come soon enough to prevent Musk from earning another billion dollars or so from the hype.

I was thinking simply in terms of the advantages of holding a major stake in a multi-billion dollar company, but as the Forbes piece points out, a big drop in that price can actually threaten the very life of the company.  The valuation of Tesla was always built on a myth and on the willingness of most of the press (with the notable exception of the LA Times) to go along with the fantasy. Now that facade is starting to collapse and it is likely to bring the company down with it.

A few more moments with the super one

There was always more to Super Dave than met the eye. Like many of the signature characters of his brother, Albert (particularly in Real Life and his stand-up), Einstein's doomed stunt man was a study in a recognizable smarmy show-business type whose facade soon cracked, revealing a mixture of anger and desperation.

I’m not sure whether this is a cautionary tale about data manipulation or about concentration of economic power but I’m pretty sure about the cautionary part.

Good reporting from the Verge:

Dirty dealing in the $175 billion Amazon Marketplace by Josh Dzieza

Last August, Zac Plansky woke to find that the rifle scopes he was selling on Amazon had received 16 five-star reviews overnight. Usually, that would be a good thing, but the reviews were strange. The scope would normally get a single review a day, and many of these referred to a different scope, as if they’d been cut and pasted from elsewhere. “I didn’t know what was going on, whether it was a glitch or whether somebody was trying to mess with us,” Plansky says.

As a precaution, he reported the reviews to Amazon. Most of them vanished days later — problem solved — and Plansky reimmersed himself in the work of running a six-employee, multimillion-dollar weapons accessory business on Amazon. Then, two weeks later, the trap sprang. “You have manipulated product reviews on our site,” an email from Amazon read. “This is against our policies. As a result, you may no longer sell on Amazon.com, and your listings have been removed from our site.”

A rival had framed Plansky for buying five-star reviews, a high crime in the world of Amazon. The funds in his account were immediately frozen, and his listings were shut down. Getting his store back would take him on a surreal weeks-long journey through Amazon’s bureaucracy, one that began with the click of a button at the bottom of his suspension message that read “appeal decision.”

When you buy something on Amazon, the odds are, you aren’t buying it from Amazon at all. Plansky is one of 6 million sellers on Amazon Marketplace, the company’s third-party platform. They are largely hidden from customers, but behind any item for sale, there could be dozens of sellers, all competing for your click. This year, Marketplace sales were almost double those of Amazon retail itself, according to Marketplace Pulse, making the seller platform alone the largest e-commerce business in the US.

For sellers, Amazon is a quasi-state. They rely on its infrastructure — its warehouses, shipping network, financial systems, and portal to millions of customers — and pay taxes in the form of fees. They also live in terror of its rules, which often change and are harshly enforced. A cryptic email like the one Plansky received can send a seller’s business into bankruptcy, with few avenues for appeal.

Sellers are more worried about a case being opened on Amazon than in actual court, says Dave Bryant, an Amazon seller and blogger. Amazon’s judgment is swifter and less predictable, and now that the company controls nearly half of the online retail market in the US, its rulings can instantly determine the success or failure of your business, he says. “Amazon is the judge, the jury, and the executioner.”

I'd be nervous about overgeneralizing your findings...

But it would be cool to dig through.

BONUS tweet!

Are you a health care academic or think tanker? Would you want to use our database of 1,700+ medical bills for a research project? We’re exploring the possibility of a partnership around this — if that sounds interesting, email me at sarah@vox.com. (12/11)

— Sarah Kliff (@sarahkliff) December 18, 2018

Just imagine what would happen if the New York Times were to announce the discovery of an advanced alien civilization?

Actually, you don't have to.

MARTIANS BUILD TWO IMMENSE CANALS IN TWO YEARS; Vast Engineering Works Accomplished in an Incredibly Short Time by Our Planetary Neighbors -Wonders of the September Sky.

By MARY PROCTOR.AUG. 27, 1911

ACCORDING to a telegram dated Aug. 17, from Flagstaff Observatory, Arizona, Dr. Percival Lowell announces the rediscovery of two new canals of Mars, which were seen for the first time at the last opposition in 1909. The canals are now very conspicuous, and attracting world-wide attention because of their startling significance. ...

"Why Horse-Race Political Journalism Is Awesome" is prime Shafer

As mentioned before, Jack Shafer has always been a reliably obsequious sycophant when approaching those high placed in the establishment hierarchy while being a genuinely mean-spirited bully toward outsiders and other safe targets. Even under the best of circumstances, this would make him an odious character, but these are not the best of circumstances. The stakes are now much higher.

It was perhaps inevitable that, when he weighed in on the issue of horse race political coverage, he would do so in an attempt to undermine the work of reformers like Jay Rosen and Margaret Sullivan.

Horseracism might be scary if the campaign press corps produced nothing but who’s up/who’s down stories. But that’s never been the case. American newspapers overflow with detailed stories about the issues and the candidates’ positions. At the end of the 2008 campaign, Washington Post ombudsman Deborah Howell sorted Post political coverage over the previous year and found 1,295 horse-race stories compared with 594 stories about the issues. This ratio seems defensible, seeing as the who’s up/who’s down of the horse race can change daily. Issue stories don’t need that sort of constant revisiting, especially if they’re done well.
...
Horse-race coverage also helps clarify the voters’ minds when candidates converge on the issues, as happens regularly in the Democratic presidential derbies. If there’s little difference between the views of the candidate you favor and the leader’s, horse-race coverage helps optimize your vote by steering you toward the politician most likely to implement your views. Pundits aren’t the only ones who worry about a candidate’s electability. 

For the main election, these arguments are obviously inapplicable, but even on the primary level, his case is weak and sometimes self-contradictory. The very fact that Shafer, who has built much of his career defending the indefensible in the service of the journalistic establishment, falls back to the “seems defensible” standard tells us he knows he’s got a weak hand.

How weak? For starter, while there is some value in helping voters determine electibility and that polls play a role in this (though not a large one, early numbers mainly tell us about name recognition, and that's not really a factor in the general), it is dwarfed by the importance of helping voters understand the problems facing us and how each candidate plans to address them. What’s more, these questions are enormously complex. This means that journalists were spending less than half of their time on topics that were both more important and needed to be explored in greater depth. 

But it gets worse. Horse-race stories are primarily about prediction, who is more likely to win, and any prediction that swings wildly back and forth is, at best, chasing noise and is by definition bad. Even that is too generous a reading. The primary horse-race coverage that Shafer terms awesome didn’t just waste time and muddy the water by reporting every meaningless fluctuation as a trend, it also managed to get the actual trends wrong. Reporters and editors wanted badly to make the Democratic race seem more competitive than it was (at least, in part, to justify more horse-race stories). More to the point, they desperately wanted to convince themselves that Trump wasn’t the GOP front-runner.

On some level, this descent into denial was based on the knowledge that the rise of Trump was bad for the country, but there was another, less praiseworthy motive. The establishment media had invested heavily in false balance, both-siderism and radical centrist positions. The Trump candidacy required either painful soul-searching like we saw from the Washington Post, or a debilitating level of cognitive dissonance like we are still seeing from the New York Times.

Yes, this is what a content bubble looks like

This post by LGM's Loomis is a perfect example of an unintentionally interesting piece, one that makes a tremendously important point in passing then never returns to it.

One of my New Year’s resolutions for 2018 was to watch more television. I’ve slowly increased my TV viewing over the last couple of years in response to the great stuff out there. Now it’s kind of weird, as the consensus is that there’s a lot of just OK shows and not much that’s really that compelling compared to the prestige dramas of earlier this decade. But I’m so far behind that this really barely matters to me.

There's a lot to unpack here.

One. While most of us are making New Year's resolutions to watch less television, Loomis is one of the very few who actually resolved to watch more, particularly those buzz-friendly critical darlings that the major streaming services are spending so heavily on. He is the ideal consumer with respect to this business model, and yet even he acknowledges that he will never be able to catch up with all the shows on his to-see list.

The dirty little not-so-secret secret of most of these must-see shows is that very few people actually watch them. For all their awards and feature stories, they remain more talked about than viewed. We could have an interesting discussion about their role in brand building and other indirect effects, but even with those taken into account, you have to have serious concerns about a business strategy that spends billions of dollars producing shows with such tiny audiences.

Two. Yes, N=1, but the perception that quality is slacking off has tremendously disturbing implications for the business model. For a number of years, the formula for generating awards, buzz, and perceived quality was fairly simple. Obviously, making good shows did help, but the key to getting noticed was hiring big-name talent, spending stunning amounts on PR and marketing, and sticking as close as possible to a handful of genres that lent themselves to extensive coverage and favorable reviews ("it's a dark, edgy crime drama with a quirky sense of humor, ""it's a dark, mindbending science-fiction drama with a quirky sense of humor"). Now, though, there is reason to believe that through a combination of saturation and the half-life of novelty, the formula is losing its effectiveness. That means even more obscene amounts of money will have to be spent to create the same impact.

Three. Finally, as we have said many times before, content accumulates. The 500 or so series that are currently in production are not just competing against each other, but against everything that has come before. If someone like Loomis who is almost genetically engineered to seek out new, trendy shows is opting instead for something that has been off the air for years like the Sopranos, investors should definitely be taking note.

Graduated Capital Gains Tax

This is Joseph.

There has recently been discussion about raising the top marginal income tax rate to 70% in the United States.  But the top 0.1% of earners manage to harvest the bulk of capital gains as well as income, and capital gains have the potential to be a much bigger source of income.  They are also taxed a low and fixed rate.

The reason for this treatment, in my opinion, is due to their role in housing appreciation.  I buy a house for $100,000.  Houses double in value.  I decide to move to an equal house somewhere else in the same city (maybe I change jobs and need a shorter commute) but now I owe the difference between the $100,000 that I bought the house for and the $200,000 that it is now worth.  If capital gains taxes where 40%, that would be a huge tax on an efficiency improving move. It's so obviously bad there is an exemption for home sales.

But what about other capital gains?  An idea that Canada has played with is a lifetime exemption for capital gains tax.  This allows for a higher tax rate (Canada halves it and then applies ordinary income tax).  But note a great feature of this system.  Poor people with small amounts of capital gains are not taxed on them at all due to their tax bracket (homes are handled via the lifetime limit where you can exempt a lot of appreciation from homes).

But it allows one to set very high rates of taxation for the wealthy.  It also makes it a lot harder to shift income between ordinary income and (for example) stock options to reduce tax liability.  I think pairing these reforms and making the capital gains tax graduated according the ordinary tax schedule would be a great pairing.  Sure, Mitt Romney will still find ways to get a lower effective tax rate.  But it would make it harder to insulate huge amounts of wealth, especially if we went after tax havens.

Something to think about.

What we were saying in 2013

And I think it bears repeating.

Thursday, October 24, 2013

Journalistic decline and GOP dysfunction

Picking up from Tactics, Schmactics...

When we talk about the mainstream media and the right-wing media and all the other little sliver media out there, there are all sorts of standards with which we can make our distinctions. The one I prefer, at least for this discussion, is axiom-based.

In the New York times, or Time Magazine, or slate, or in any section of the Wall Street Journal except the editorial pages, most of the writers start from the same basic set of assumptions. To a slightly lesser extent, you can say the same thing about the right-wing media: Fox news; Rush Limbaugh; red state. We could argue about the validity of each of those sets of assumptions, but the important part for the moment is the difference between the two sets.

Though there had always been right wing papers and left wing papers, it has only been in the past few decades that it is possible to completely immerse yourself in one set of assumptions while your neighbor is completely immersed in another.

That's part one of the story. Parts two and three are what happened to the two halves of the journalistic universe since then and how those changes have affected the breakdown of the Republican party.

On the mainstream side, simplistic narrative journalism, dogmatic centrism, and a increasing disregard for accuracy and for holding subjects to a high standard of honesty all acted together to weaken the press's traditional role in checking party extremes. Since these practices had long been coupled with a sense that the Republicans were the dominant power and a fear of conservative pushback, this primarily worked on the right,  allowing unpopular and extreme Republican policies to gain traction. This was particularly true in the area of governance. Unprecedented use of filibusters and other obstructionist techniques were practiced up until recently with relative impunity due to the "both sides do it" mentality of many journalists.

On the right wing media side, journalists traded off their normal role as providers of feedback in order to be more effective motivators. This is perhaps most obvious with Ailes and Fox News where the goal (after turning a profit) was clearly to shape (and in some cases, falsify) the facts in such a way as to keep the base loyal and energized. In the short term, the strategy worked well but it always had inherent risks, risks that have finally started doing serious damage.

You can read this partly as a cautionary tale of Straussianism gone awry. The first, the most fundamental assumption of any society based on the noble lie is that you have a hierarchy with well-defined classes of the liars and the lied-to and that all major decisions are made by people in the first class.

Here's an analogy: officers have been known to paint overly rosy pictures for soldiers ("Things are going great on the Western front." "The enemy's factories are in ruins." "Victory is near."). We can argue over the ethics of this kind of lying, but it's easy to see why some officers might do it.

Now imagine that through a combination of field promotions, broken lines of communication and general confusion,  strategic and tactical decisions start being made by people who actually believe all of the misinformation that was fed to the ranks. I'm no military historian but I'm fairly sure this would probably end badly.

We had a pretty clear example of this kind of a breakdown in the Romney team's analysis of poll data in the last days of the election. There was clear value for Romney in having his supporters believe that he was ahead but that value was more than negated by having his advisers believe the same misinformation. You can see similar dysfunction in the recent shutdown where many congressmen made what now appear to be disastrous decisions based apparently sincere belief in such Fox News talking point as "people won't get that upset about a shutdown."

Put more broadly, the processes that allow the right version of the truth to get to the right people – something that has been an integral part of the Republican strategy – has seemingly broken down entirely.

In addition to the largely random flow of misinformation, conservative media created an unforeseen problem in the rank and file with narrative momentum. When most members of a group get much of their information from outside, there's a natural friction on in-group narratives when members realize that their version is not shared by the general public. Conservative media is immersive to an unprecedented degree. Narratives like "the only time Republicans lose is when they become too moderate" are allowed to build unchecked.

On a related note, the immersive quality also greatly facilitates social norming. This greatly encourages extreme positions and widens the gap when members of the group try to communicate with outsiders.

More on this soon.