Curt Doolittle

Category: Economics, Finance, and Political Economy

  • ARENT WRONG AFTER ALL. Just because we became more prosperous when freed man fro

    http://www.aei-ideas.org/2013/02/how-to-stop-the-robots-from-taking-all-our-jobs/LUDDITES ARENT WRONG AFTER ALL.

    Just because we became more prosperous when freed man from heavy labor so that he could engage in manufacturing, calculating and servicing, that doesnt mean we will equally benefit from freeing man from manufacturing and calculating.

    Mos of us can move from heavy to piece labor. But few of us can manipulate abstract calculative ibjects and pocesses.

    The future is one of increasing visibility and value of differences in ability.

    Source date (UTC): 2013-02-05 01:08:00 UTC

  • JUST TO PUT MY MONEY WHERE MY MOUTH IS: I’M SHORTING MICROSOFT

    JUST TO PUT MY MONEY WHERE MY MOUTH IS: I’M SHORTING MICROSOFT

    Source date (UTC): 2013-01-23 18:04:00 UTC

  • I’VE BEEN SAYING FOR EIGHT YEARS : MSFT IS DEAD AND TAKING SEATTLE WITH IT. -AN

    http://www.forbes.com/sites/adamhartung/2013/01/20/sell-microsoft-now-game-over-ballmer-loses/LIKE I’VE BEEN SAYING FOR EIGHT YEARS : MSFT IS DEAD AND TAKING SEATTLE WITH IT.

    -AN ENTREPRENEURIAL CATHARSIS. A MANAGERIAL CONTRAST. AND THE VALUE OF AUSTRIAN ECONOMICS AND PRAXEOLOGY-

    Microsoft has created an absurd environment in seattle. It has given more of its profits to employees that any company in history.

    Those employees have spent that money in the local market. It has created an affluent and educated community in King County. It’s a beautiful place to live.

    I’ve been working with Microsoft since they intentionally recruited me along with other thought leaders from the Borland camp in 1992.

    I’ve been instrumental or built four companies in the Microsoft space. With the most recent being the largest privately held firm servicing Microsoft customers.

    I”ve tried to save two products for Microsoft from outside the company, and in practice I am pretty sure that I’ve saved one (time will tell), and we know that we significantly improved the life of another.

    I spent half of 2005 working with senior people trying to implement change in how Microsoft marketed itself.

    What I learned, was that the incentives in the company made it impossible to change without a CEO who understood the problem, and would force the change, and a board that would back him.

    But interestingly enough. I had precisely the opposite problem. In our company we earned 40% of our revenues from Microsoft.

    So, I knew. I knew it was exit that dependency on Microsoft or die.

    My investor fought me. My management fought me.

    They fought me on the downturn in the economy that was inevitable.

    They fought me on the collapse of Microsoft spending that was inevitable.

    I lost the arguments. Because I could not produce evidence of a future that they could not sense on their own.

    That’s because there is no evidence of a future that they could sense on their own.

    And I had too little power to enforce such a change.

    I quit in May of 2009. They refused to accept it. And that was my mistake. Loyalty trumped wisdom.

    But nothing changes. The board over-invested in both Microsoft and TMobile, further extending our dependency.

    Microsoft constrained it spending. Then TMobile was ‘sold’. Business rapidly evaporated.

    I argued that the government would never, under any circumstance, allow the merger.

    That we should prepare campaigns for the duration of the dispute, and for the eventual failure.

    It was a tremendous gift. TMobile has great customer service. Customers love them. If you’re merger is rejected you have the best marketing opportunity in the world.

    With some significant gyrations, I saved the company in the fall of 2011 by a maneuver that is worthy of textbook inclusion.

    Then, I resigned again. This time for good.

    Am I happier today? Yes.

    Am I still angry about halving the size of the 100M company I built? Isn’t that obvious? Well, who wouldn’t be. It’s like someone kidnapped your child and sold her into drug slavery.

    Yes. I am happier today. I am also a little vindicated that the people who opposed me are humbled by it.

    Austrian Economics Explains Everything. If you are in business and do not understand Austrian Economics you are operating from a position of ignorance.

    Keynesian macro belongs to politicians and to investors who try to make money out of asymmetry of information in a complex economy.

    Macro policy is the system of creating lies in the economy so that people act as if those lies are truth, thereby reducing unemployment.

    Austrian economics is the system of understanding truths in the economy, despite the fact that the state creates systemic lies in order to reduce unemployment.

    The source of my predictive ability is due almost entirely to my understanding of Austrian Economics.

    Austrian Economics taught me to never be fooled by a trend. To look not at empirical evidence and extrapolate. That numbers describe the past but do not predict the future.

    It taught me to look at the INCENTIVES within any organization. The INCENTIVES that encourage consumers to buy a good or service.

    And the economic and social environment that enables the organization to serve the interests of consumers who REACT to that economic environment by changing their preferences in their signaling and purchasing.

    But with those incentives, do you know what really killed Microsoft?

    The US Government Killed Microsoft. They killed Bill Gates’ influence in the company. They killed his ability to execute in the company. The US Government killed Microsoft.

    They did because the government ignores Austrian Economics. We Austrians know that few if any companies hold more than a decade of dominance. It’s almost impossible to do so.

    We know that the only monopolies are created by government privilege and microsoft had no such privilege. It was vulnerable to the market. Which was precisely why it fought to win the browser war so hard.

    Organizations calcify around an existing market opportunity, the market changes, the organization is indebted so falls into the Innovator’s Dilemma. The staff develops rent seeking behavior and the company loses it’s advantage.

    Microsoft will change only when Ballmer leaves and one of the prior execs who understands the company and has experience working in the company under Bill Gates returns.

    Microsoft would have to acquire Dell just to keep pace with Apple in quality. But I would bet that the government will block it, and therefore put additional bullets into the company.

    But the culture at microsoft is ruined. internally it’s a government bureaucracy. The people are frustrated and disheartened by the bad management.

    A question? What portion of the USA’s increase in productivity from 1980 to 2006, and what percentage of the stock market profits created during that period, were from Microsoft?

    If you knew it would scare you.

    Source date (UTC): 2013-01-22 12:51:00 UTC

  • BANKING: CREDIT UNIONS ARE GOOD. BIG BANKS ARE BAD. AND WHY Banking is a means o

    BANKING: CREDIT UNIONS ARE GOOD. BIG BANKS ARE BAD. AND WHY

    Banking is a means of allowing people with disparate knowledge, means, goals to cooperate by concentrating their capital and cross-insuring each other. Banking is a GOOD BUSINESS for society and society as we understand it is not possible without banking.

    Now, when you get service charges, this is just charging you for the costs you put onto the bank. THis is a GOOD IDEA because otherwise people who do a lot of bank work force people who don’t to pay all oft of costs. That would be an involuntary transfer. That’s bad. It’s stealing.

    The problem occurrs when the state starts putting funny money into banks and creating a ‘hazard’ by doing so. They allow banks to make risky loans. and those risky loans increase consumption at the expense of creating a fragile economy.

    The argument that Keynesians make, is that we get more good out of that fragility than we do bad.

    And that’s not a truth. It’s a matter of preference.

    And the people who would prefer not to have booms and busts that are caused by the government, because they take risks because the cost of money is cheap, and the pricing information that they see around them is distorted. Then the rug is pulled under them by the fragility and it all comes crashing down into a recession and depression.

    Credit unions are good things.

    Use them.

    Big banks are for conducting war. That’s why we have them. thats where they came from. that’s what they do.

    Source date (UTC): 2013-01-22 07:56:00 UTC

  • BANKING: DEATH BY COMPUTER : RESURRECTION BY CREDIT UNION My family has been in

    BANKING: DEATH BY COMPUTER : RESURRECTION BY CREDIT UNION

    My family has been in banking for generations. It is a very good business. For most of history, you could talk to a banker. A banker was like your accountant, lawyer, or priest: he gave you advice and counsel and worked with you. They were reasonably educated people with decision making authority.

    The advent of computers made it possible, and competitive to centralize banking, turn to statistics that measured and compared statistics about what you did WITHOUT the advice and help of a banker to learn about money, interest and credit, instead of PROVIDING you with the advice about what to do with money, interest and credit.

    This created a lot of asymmetry of knowledge in the population. People got more ignorant and became statistical objects rather than members of a portfolio of relationships that banks built.

    Starting in the 1970’s when the USA instituted the petro-dollar, or using the US Dollar as the world currency for buying oil, the USA has been issuing cheap credit both home and abroad.

    The impact on banking has been that the government is essentially insuring increasingly ignorant consumers with cheap credit, who increasingly get unconsciously into debt, and increasingly into default, rather than building knowledgeable consumers of credit and producers of interest.

    community banks, and in particular, credit unions, are more than just a ‘nice thing’ for consumers. They can rebuild our society by removing the asymmetry of knowledge that lets banks prey upon ignorant consumers and sell them into predatory debt.

    Community credit unions are how all consumer credit should be done, even if we have to legislate it. Because big banks are just part of the government. They are part of the century long credit scam that has made us all slaves.

    Why are we slaves? How do you become a US Citizen? You get a driver’s license, a credit card, a loan for a car, and a loan for a house, and now you are controlled by credit, not by moral code, not by cultural norms, not by laws, but by credit. You are a credit slave. And that might not be bad if it works. But for an absurd number of people, they fail at the card, or the car or the house and become indentured servants. SO it is not so much that those of us who succeed do. It’s that we are advocates for a system that creates a permanent and dependent underclass.

    Credit is citizenship and the lack of it makes you a serf.

    And only community banks can provide advice and counsel. We force people into schools so that they don’t become ‘scoundrels’ that we must support through charity. Why is it that we use credit to create a lower class of people ostracized from the system purely out of ignorance? Why is it that we put almost ten percent of our people into prison for minor drug charges, and therefore guarantee they are dependent upon the rest of us to support them, and if not, lead lives of dependence and crime?

    Now I understand that very few ordinary people can tell whether what I’m explaining here is more or less true than any other explanation that they’ve heard. And all I can do is hope that it makes more sense than some conspiracy theory does.

    We may have the best of intentions. But the road to poverty is very often paved with the best intentions. And the road to social fragmentation has been, with certainty, paved with good, but foolish intentions.

    Source date (UTC): 2013-01-21 12:29:00 UTC

  • RECORD AND IMPROVABILITY OF ECONOMIC FORECASTING “…economist Victor Zarnowitz

    http://m.nber.org/papers/w2099.pdfTHE RECORD AND IMPROVABILITY OF ECONOMIC FORECASTING

    http://m.nber.org//papers/w2099.pdf

    “…economist Victor Zarnowitz wrote in “The Record and Improvability of Economic Forecasting” that there was too much reliance on trends, and he also noted that predictive failure was also due to forecasters’ incentives. Zarnowitz wrote: “predicting a general downturn is always unpopular and predicting it prematurely—ahead of others—may prove quite costly to the forecaster and his customers”.

    Incentives motivate Wall Street economic forecasters to always be optimistic about the future (just like stock analysts). Of course, for the media and bloggers, there is an incentive to always be bearish, because bad news drives traffic (hence the prevalence of yellow journalism).

    In addition to paying attention to incentives, we also have to be careful not to rely “heavily on the persistence of trends”. One of the reasons I focus on residential investment (especially housing starts and new home sales) is residential investment is very cyclical and is frequently the best leading indicator for the economy. UCLA’s Ed Leamer went so far as to argue that: “Housing IS the Business Cycle”.

    Source date (UTC): 2013-01-20 15:48:00 UTC

  • THE ILLUSION OF PRODUCTION One psychological trick of moral deception that left

    THE ILLUSION OF PRODUCTION

    One psychological trick of moral deception that left leaning economists rely upon is the implication that the term “production” is merely a process of execution.

    This process of execution is contrasted with the process of “research and development”, with the implication that there is no risk to production and high risk in research and development.

    Furthermore, that the economy consist entirely of processes of production, and that research and development is largely unnecessary and a luxury of those few who find their entertainment in it.

    As such, a process of production is a form of exploitation of labor, and the process of research and development is an unnecessary device for the purpose of signaling status.

    But this is all an illusion. An error at best, and a deception at worst.

    All production in a competitive market at all times under all circumstances is an act of “research and development” at high risk.

    Two private sector factors reduce that risk: superior knowledge of consumer wants, and superior knowledge of how to service them, more cheaply than someone else.

    Two factors further reduce that risk: grant of privilege by the state that conveys a limited monopoly. And access to credit markets at lower rates.

    The human bias in favor of the illusion of competence pervades the left and is its source of confidence. This bias is further reinforced by the false consensus bias, which confirms their illusion of competence.

    Their participation in a discipline in which they hold the unique academic privilege of not being held accountable for their errors further reinforces both the false consensus and illusion if competence biases.

    All economic action is risk taking.

    The state grants privileges in the form of limited monopoly powers to certain industries in order to increase employment and taxes. It creates expansive credit to empower both industry and consumer to take risks.

    If production were execution rather than risk taking, then credit and privilege would not be necessary.

    But production is an illusion. The market consists entirely of research and development.

    And the absurdly high turnover in organizations is but one proof of it.

    Source date (UTC): 2013-01-18 15:27:00 UTC

  • WHATS WRONG WITH UKRAINE: TAXATION “The tax laws are amended often and sometimes

    WHATS WRONG WITH UKRAINE: TAXATION

    “The tax laws are amended often and sometimes retrospectively. They are still characterized by lack of precise policy or explanation. A number of government bodies and different levels of the State tax authorities issue their own interpretations of tax legislation which may be contradictory. Many issues still remain open for clarification. All these factors lead to the risk of a different interpretation of tax legislation by the State tax authorities and taxpayers. A

    major recent development was the adoption in December 2010 of a consolidated tax code that aims to simplify and update the taxation system.” – Chadbourne, Kiev

    The justice department has had major reforms in 2010. And they’re intelligent reforms. The tax system had the same reforms. However, corruption is so rampant is difficult to determine how meaningful they are.

    Source date (UTC): 2013-01-15 13:06:00 UTC

  • WHATS WRONG WITH UKRAINE: “…financial reports are prepared for tax purposes ra

    WHATS WRONG WITH UKRAINE:

    “…financial reports are prepared for tax purposes rather than as a means of establishing their financial state.”

    You cannot trust any numbers here unless they are kept by a foreign national using western accounting standards. (GAAP).

    Source date (UTC): 2013-01-15 12:56:00 UTC

  • PREDICTION RANT Neither the weather nor the economy are predictable except at th

    PREDICTION RANT

    Neither the weather nor the economy are predictable except at the extremes. Weathermen and Economists sell us good feelings: the illusion that we can plan the future with some degree of confidence, as if we can exchange contract rights with nature and market.

    um…. no. It’s Shamanism: hand-waving that makes us feel better in the face of uncertainty because it releases hormones.

    But it’s still shamanism.

    Source date (UTC): 2013-01-14 11:26:00 UTC