Wednesday, February 25, 2009

Everything to win and nothing to lose

Nassim Nicholas Taleb, author of The Black Swan describes How bank bonuses let us all down in today's Financial Times. Sheer poetry.

The national paradox on Nationalization. The Obama administration doesn't want to destroy the private banking sector because that would be "bad" somehow. And to appease Congress, neither do they want to reward the investors in those banks with government bailout money. So, the market sells off the bank stocks punishing everyone who entrusted their IRAs to the mutual funds who favored the financial sector on past performance. Nationalization becomes a fait accompli. When Obama says that he wants to force banks to loan money, while eliminating the reward system, he might as well be talking to Martians. The Federal Reserve is the only bank in America where the employees get paid simply to do their jobs. And if they do them well, the reward is "not" getting grilled by a Congressional committee.

Thursday, February 19, 2009

Spare the rod, soil the child?

As in save the bars enclosing California's exploding prison population and condemn our children to the worst educational opportunity in the US. Yep, after the $12B cut in educational spending proposed to fix the California budget crisis, California will likely rank 50th out of 50 states in per child educational spending. (Does anyone have the data for Puerto Rico or Guam?)

A Federal judicial panel recently ruled that California's prison system (nearing 2X capacity) violates the Eight amendment - prohibiting cruel and inhuman punishment - and recommends a 33% reduction of non-violent offenders. Of course "we" plan to appeal this federal order to reduce our budget, and the suffering and recidivism that extreme overcrowding produces.

What a quandary - whether it is better to lock up a "3rd striker" for twenty to life for shoplifting, or layoff our childrens' teachers.

And don't forget the incarcerated geriatrics receiving millions of dollars of drug and medical treatments - while shackled to their wheelchairs. A recent study predicted that elderly or infirm prisoners will consume 33% of the $6B prison budget in the next few years. I sure sleep a lot safer at night knowing they're not on the streets.

Friday, February 13, 2009

The Disintermediation of Education

Is the K-12 model outdated?

Just as the QWERTY keyboard was designed to prevent hyper-nimble fingers from overwhelming the mechanical key strike mechanism, is the thirteen year K-12 program an artificial restriction on learning?

A case could be made that access to learning resources - materials, books, teachers and classrooms - required a lengthy multi-year program. But in today's connected world, any child with an Internet connection has access to every book ever written. Amazon's vision for Kindle "every book ever printed in any language all available in 60 seconds,"stated goal with the Kindle, is to offer "every book in any language in 60 seconds". Google's stated vision is to catalog all human informaiton. Language translation software will soon allow any document or video, in any language to be understood by any person in his native language.

Did the human brain evolve around a 13 year pre-college curriculum. Of course not. "Caveboys" were were either finding food or avoiding becoming food, long before their 18th birthday. Old Star Trek episodes depict a brain-erased person restoring all knowledge in some time-compressed process taking hours, not years. And there is no reason why that science fiction will not become possible someday.

The primary result of the K-12 and four-year college program is to introduce young people into the work force at approximately voting age. Thus school serves a social development mechanism as much as a learning process. Home schooling may provide insight into that thesis, in that home-schooling removes a social element from a child's development. Exposure to the parental belief system 24/7 is probably not in the child's best interest. Many home-school advocates do so because of strong beliefs rooted in religious or social bias. Exposure to different beliefs and different people during childhood are essential to a healthy involvement in a complex adult world.

There is another side to this issue - cost. The cost of a K-12 program is the largest or 2nd largest budget item in every state in the country. And in many third world and emerging markets, access to K-12 education is limited by resources. This is the primary motive behind programs like OLPC, One Laptop per Child Laptop. The Internet allows those countries to educate more children, while this country could educate children with less money.

When I entered a Southern Methodist University at age 18, there was a student who was only 12 years old. And he graduated before I graduated. He was probably in a hurry to leave an environment where he did not fit in. Participation in dating, drinking, and intra-mural sports was simply impossible for him. But what if half the student body was near puberty? What if the average age to enter the work force were to drop by 20%? Is this a good thing? And is it inevitable either way?

Thursday, February 12, 2009

Companies of the Future are Free

What if business could function like a Hollywood movie production. A company is created with a specific value-creation goal over a finite time-frame. Employees are hired to work either at a specific location, or any "connected" location. Roles, responsibilities and progress are managed online, where contributors and managers have instant access to the rate and direction of progress.

What are the barriers to such a system today? For one, the burdens of forming a company: taxes, employee benefits, laws. Corporate taxes should not exist in the US. They limit business creation and encourage offshore expansion to lower tax-base countries. For example in the semiconductor industry, integrated circuits are designed in the US, but IC wafers are tested, assembled and sold from offshore tax havens like Singapore or Ireland. If there were no corporate taxes in the US many of those jobs would stay here.

The second big barrier is employee benefits, e.g. healthcare. Healthcare should be a social responsibility not an employer responsibility. Your healthcare costs and provider network should not change if you change companies. It should only change if you change the state or country where you live.

So how does America fund social change without corporate taxes? With a new tax system. The Federal Income Tax system is absurd, wasteful and an ineffective tool of economic or social change. The solution is value-added consumption taxes (VAT), paid by every entity that consumes value, at the time of consumption. If your job is to sit at home, living off the grid, growing your own food, then you might only pay taxes on the medical treatments you receive. If you make and spend $200,000 per year, then you are paying taxes, but probably a lot less than a 38% bracket. And you would be paying a similar amount to your $200,000-income neighbors who can deduct items that you may not be able to deduct on today's 1040.

Social and economic change is managed by a non-uniform version of VAT. For instance, this is one way to introduce a carbon tax. A kilowatt of kerosene has a higher VAT than a kilowatt of solar/wind energy. It's that simple. Rather than obtuse 1049A deductions based on last year's expenditures, put the incentive right into the price of the item or service you need to buy today. The government collects taxes in real-time and adjusts VAT taxes in near real-time. They do this on toll-based freeways in Los Angeles, and it works.

With the right changes, companies of the future can freely form to create and export value. Value is taxed to fairly meet the needs of the government.

Tuesday, February 3, 2009

2**1, 2**2, 2**3 ...

who do we "TERMINATE"?
Humans, Humans, Yeah!

sotto voce Don't be Evil

Fight song for The Terminators of Singularity University.