Curt Doolittle

Theme: Incentives

  • BUT WHY ARE AUSTRIANS DRAW TO THE AUSTRIAN MODEL? (not profound, but almost) (go

    BUT WHY ARE AUSTRIANS DRAW TO THE AUSTRIAN MODEL?

    (not profound, but almost) (good Austrian argumentative material)

    I need to update Peter Boettke’s definition of Austrian Economics to include the reasons WHY certain groups of people are morally and intellectual attracted to the Austrian model, rather than just the methodological differences:

    1) The testability of incentives as rational

    2) The visibility of voluntary versus involuntary transfers

    3) The visibility of the redistribution of risk to entrepreneurs, and the impact on entrepreneurial incentives.

    4) The visibility of the impact on opportunity costs.

    5) The visibility of the cumulative effect on opportunity costs.

    6) The visibility of decline in linguistic, rational, social, moral, mythological, and institutional capital.

    The longer your time preference the higher the cost of the portfolio of opportunity costs. (I should diagram this out a bit.)

    It was very frustrating to read the number articles of late that just put us outside the consensus, and paint us as extremists. I mean, I know that *I* agree with the mainstream: they affect what they measure. They achieve their short term objectives. But I disagree with the mainstream that the accumulation of externalities is inferior to the short term benefits.

    I don’t think honest progressives like Karl Smith disagree that there may be a cumulative effect of continuous distortion of the monetary system. I think they just feel that the moral good in the short term is greater than the risk and damage in the long.

    Now, I was right in my prediction, and Paul Krugman was wrong, that voters would absolutely NOT tolerate what they viewed was immoral behavior; and that the Germans would simply adjust Europe slowly rather than allow ‘immoral’ redistribution, or financially expensive adjustments to occur rapidly. Politics is a moral, not empirical exercise. (See my post on Paul Krugman’s Moral Blindness). And he couldn’t grasp that. The first problem of politics may be the suppression of violence. But the SECOND problem of politics, is the suppression of free riding. It doesn’t matter the size of the group, whether tribe or nation.

    Now, just because we are too unsophisticated to measure the impact on moral, social, calculative-coordinative, and institutional capital except in the longer term, because we don’t know how to price it, doesn’t mean that that stock of capital, priced or not, doesn’t increase or decrease. Or that we do not depend on that stock of capital as much or more than any other.

    So, given that the math in economics isn’t really all that challenging (knowing which data to pull, and its construction is), it’s not that Austrians are afraid of empirical work. (Although we get more nuts and fruits because we lack that filtration system). Its that what we care to measure doesn’t leave behind a record of prices. And opportunity costs dont create a record of prices. Furthermore, the use of large scale aggregates, launders all causality from the analysis.

    And in our view of the world, basing policy on these aggregates, unless it is extremely TACTICAL and LOCAL (loans, and debt forgiveness), pays the vast majority of attention is to that which matters very little, and ignores that which matters very much.

    We can spend down social and moral capital, just as we can spend down environmental capital, but we must give these things a few generations to recover. We have been spending it down for over fifty years. Probably a century as of 2014.

    I think our side does disagree with the fact that ‘it’s all demand’. And I am not certain that we are right. I’m certain that there are extremely negative consequences for stimulating demand unless it’s given directly to consumers as cash by bypassing the financial system. But the cumulative effect on the quality of goods and services still appears to diminish – although proving that’s a very hard task of teasing signal from noise.

    The stock of capital that troubles me most, because of the Marxist, Freudian, Postmodern, and Feminist attacks on the meaning of terms via obscurant language, is the stock of metaphysical bias embedded in the language. It’s eroded pretty consistently since the first world war. Even if our scientific language (nod to Flynn) is increasing, our stock of moral capital in the language is declining rapidly. This stock is what the Postmoderns attempt to ‘steal’ from the commons. And they are very good at stealing.

    So, in POLITICAL ECONOMY I tend to look at our biases as a division of knowledge and labor along time preferences. With Austrians and conservatives with very long time preference (aristocrats) and common people with shorter time preferences, and most progressives simply displaying conspicuous consumption as a means of demonstrating status.

    I don’t really care about the mathematical and procedural Platonists. They’re everywhere. But that’s an entirely different battle.

    Austrian Economics isn’t a debate over method. Thats a nonsensical sideshow. It’s a debate over priorities. Our methods are different because our TIME PREFERENCE is different – and we don’t have the LUXURY of taking the EASY way out, because our stock of preferred capital isn’t PRICED. It’s just HARDER to do what we do.

    That is how we must position it. And with that positioning we wipe out the influence of the … ahem, silly ideological pseudo-Austrians bent on stealing our name and identity.

    That’s my mission with reforming libertarianism anyway. 🙂

    Cheers

    Curt Doolittle

    Source date (UTC): 2013-11-16 06:34:00 UTC

  • A SHORT COURSE IN PROPERTARIAN CLASS THEORY PART 1: AWARENESS, INFLUENCE, INCENT

    A SHORT COURSE IN PROPERTARIAN CLASS THEORY

    PART 1: AWARENESS, INFLUENCE, INCENTIVE AND COERCION

    SPECTRUM OF INFLUENCE

    (a) Ignorance – none

    (b) Awareness – speech

    (c) Influence – speech

    (d) Incentive – exchange

    (e) Coercion – violence

    (f) Enslavement – perpetual violence

    INCENTIVES

    Incentives are factors that motivate and influence the actions of individuals. Something that an influencer can use to provide a motive for a person to choose a particular course of action.

    Organized cooperative activities in a social setting — such as cooperation for the purpose of economic production — depends upon each of the participants having some sort of incentive to behave in the required cooperative fashion.

    Different societies (and even different organizations within the same society) vary considerably in the nature of the incentive systems upon which they characteristically rely to organize their common projects. — from Johnson (with edits)

    I. PERSONAL CATEGORIES OF INCENTIVES (Johnson)

    ——————————————–

    Incentives may be classified according to a number of different schemes, but one of the more useful classifications subdivides incentives into three general types: MORAL INCENTIVES, COERCIVE INCENTIVES and REMUNERATIVE INCENTIVES.

    A person has a COERCIVE INCENTIVE to behave in a particular way when it has been made known to him that failure to do so will result in some form of physical aggression being directed at him by other members of the collectivity in the form of inflicting pain or physical harm on him or his loved ones, depriving him of his freedom of movement, or perhaps confiscating or destroying his treasured possessions.

    A person has a MORAL INCENTIVE to behave in a particular way when he has been taught to believe that it is the “right” or “proper” or “admirable” thing to do. If he behaves as others expect him to, he may expect the approval or even the admiration of the other members of the collectivity and enjoy an enhanced sense of acceptance or self-esteem. If he behaves improperly, he may expect verbal expressions of condemnation, scorn, ridicule or even ostracism from the collectivity, and he may experience unpleasant feelings of guilt, shame or self-condemnation.

    A person has a REMUNERATIVE INCENTIVE to behave in a particular way if it has been made known to him that doing so will result in some form of material reward he will not otherwise receive. If he behaves as desired, he will receive some specified amount of a valuable good or service (or money with which he can purchase whatever he wishes) in exchange.

    All known societies employ all three sorts of incentives to at least some degree in order to evoke from its members the necessary degree of cooperation for the society to survive and flourish. However, different societies differ radically in the relative proportions of these different kinds of incentives used within their characteristic mix of incentives.

    II. POLITICAL: THREE COERCIVE TECHNOLOGIES (Doolittle)

    ————————————————-

    The Three Coercive Technologies.

    1) FORCE:

    Tool: Physical Coercion

    Benefit: Avoidance Benefit

    Strategic use: Rapid but expensive.

    “Seize opportunities quickly with a concentrated effort.”

    2) WORDS:

    Tool: Verbal, Moral Coercion

    Benefit: Ostracization/Inclusion, and Insurance benefit

    Strategic Use: slow, but inexpensive.

    “Wait for opportunity by accumulating consensus.”

    3) EXCHANGE: Remunerative Coercion With Material Benefit –

    Strategic use: efficient in cost and time, only if you have the resources.

    III. STRATEGIC: POWER / THREE TYPES OF POWER

    —————————————–

    Power is defined as possessing any of the various means by which to influence the probability of outcomes in a group or polity using one of THE THREE COERCIVE TECHNOLOGIES.

    Power is the ability to Influence, Coerce or Compel individuals or groups to act more according to one’s wishes than they would without the use of influence, coercion or compelling.

    There are only three forms of power possible:

    1) Populist Power (Religion, Entertainment, Public Intellectuals)

    vs

    2) Procedural Power: Political, Judicial, and Military Power (Soldiers, Judges and Politicians)

    vs

    3) Economic Power (people with wealth either earned or gained through tax appropriation).

    It is possible and often preferable to combine all three forms of power in order to coerce people most effectively. Conversely, it is possible and preferable to create an institutional framework in politics that restricts the ability to combine different forms of power in an effort to constrain power.

    Source date (UTC): 2013-11-14 06:09:00 UTC

  • DECLINE OF CREATIVE DESTRUCTION Cause? 1) The loss of relative technical advanta

    http://econlog.econlib.org/archives/2013/11/the_decline_of_4.htmlTHE DECLINE OF CREATIVE DESTRUCTION

    Cause?

    1) The loss of relative technical advantage due to world adoption of consumer capitalism, and abandonment of marxism, socialism, and communism.

    2) Export of production and jobs due to high domestic taxes and cheap foreign labor.

    3) The distortionary effects of credit on innovation – favoring short term speculation rather than long term innovation: a general shortening of time horizons

    4) The misallocation of capital to reinforcing short run sectors including housing.

    5) The misallocation of human capital to finance, government, and housing.

    6) The failure to reform the education system out of its labor origins.

    7) The dilution of the work force by third world immigration

    8) The policy emphasis on consumption growth rather than innovation growth.

    9) …..

    I’ll just stop there…

    HOW MUCH ARE ECONOMISTS RESPONSIBLE?

    A lot actually. Because economics, as it is practiced, is a positivist enterprise incapable of measuring ‘what matters’: informal institutional capital.

    Civilizations fail, for very simple reasons: the instruments of production, calculation, coordination, and cooperation, cannot adapt to changes in circumstances, nor can they resist regressive results under the auspices of ‘innovation’. The reason we get wealthier is in fact ‘science’ or rather ‘extension of empirical tools of calculation’ that allow us to create increasingly complex divisions of knowledge and labor. Accounting is a far better weapon than cannon because one cannot produce a lot of cannon without accounting, nor an army and supply chain to support it. Laws are important but common laws are more important than other forms of law. Geometry is important but calculus is more important than geometry for many categories of problems. Perhaps most importantly, OPERATIONAL LANGUAGE is more important than mystical or allegorical, or moral language, and operation language requires the presence of scientific, operational, evidence. And further, operational language requires quite a few more IQ points than allegorical language.

    WILL TECHNOLOGY SAVE US FROM PROGRESSIVE DESTRUCTION OF THE WEST?

    It is an act of faith. You cannot extrapolate a trend. Most of our gains have been largely the product of harnessing fossil fuels so that we could teach people to read.

    Source date (UTC): 2013-11-11 01:55:00 UTC

  • HELPING OTHERS WITH OTHER PEOPLE’S MONEY…. … is just a cheap way to demonstr

    HELPING OTHERS WITH OTHER PEOPLE’S MONEY….

    … is just a cheap way to demonstrate conspicuous consumption because of your wealth. It’s Status seeking. It’s selfish. If you want to change the world, then pay for it yourself.

    It doesnt take much. Just a little self sacrifice.

    But everyone is a wanna-be. A pretender.

    “Artificial feel-good.”

    If it doesn’t cost it doesn’t have value.

    Source date (UTC): 2013-11-10 15:03:00 UTC

  • DID THE LEFT LEARN FROM THE FINANCIAL CRISIS? (They never learn anything. As Bra

    http://delong.typepad.com/sdj/2013/11/justin-fox-what-weve-learned-from-the-financial-crisis-noted.htmlWHAT DID THE LEFT LEARN FROM THE FINANCIAL CRISIS?

    (They never learn anything. As Brad Delong demonstrates yet again.)

    What “we” Learned is more interesting.

    (a) Capital flows were catastrophically risk producing.

    (b) Regulation of financial instruments was too weak to prevent fraud on a massive scale, and government created the incentive to commit systemic fraud, and the need to conform to systemic fraud because of a lack of regulation.

    (c) That the state allowed, and encouraged, the privatization of gains and the socialization of losses.

    (d) That the state still prevents individuals and organizations from suing individuals and institutions from regulating company, and financial system behavior via the courts, by declaration of standing, as a means of preserving the political right and responsibility for regulation of those institutions – and thereby creating the incentive for political influence and corruption. That they both create the problem and then offer to solve it isn’t lost on some of us.

    (e) The Austrian theory of the trade cycle is correct, yet again. Expanding credit causes misallocation and eventually, structural unemployment.

    (f) That the left blocked attempts to produce a compromise deal for spending that suited left leaning supporters, and reforms that suited right wing supporters. And that this block continues today.

    (g) We tried very hard, and, it looks as though it is possible to bankrupt the state if we work at it long enough. And either we bankrupt it or it bankrupts us and our families. Our view is that our families are family and that the state is an arbiter, not that all citizens are ‘family’.

    BUT THEN AGAIN, We aren’t positivists. 🙂 And the left is. Because it’s convenient.

    Source date (UTC): 2013-11-10 10:51:00 UTC

  • THE SOURCE AND PURPOSE OF PAUL KRUGMAN’S INTELLECTUAL CORRUPTION (explanatory po

    THE SOURCE AND PURPOSE OF PAUL KRUGMAN’S INTELLECTUAL CORRUPTION

    (explanatory power)(important)

    “The Conscience Of An Immoral Man”

    In a series of recent articles, Krugman suggests that there is only one answer for Europe and the world, and that is, for the Germans to redistribute to the periphery.

    But that’s false. The opposite answer is that the periphery borrow to REFORM themselves. And when I say something is ‘moral’ I mean that it forces an involuntary transfer – a theft. One cannot dismiss morality unless one dismisses theft. That’s what it means to be immoral: to steal indirectly, and anonymously.

    Once we include opportunity costs and the subset of social capital we now call ‘moral capital’, we see that material trade and consumption is just a minority of the human economy. And that the economy that makes material trade and consumption possible is the social and moral economy. And that theft of opportunity, or the various forms of free riding, or theft by immorality, are all equivalent forms of theft.

    So, Krugman’s solution is immoral. The conservative solution is of course. moral. Because conservatism in the west is a defense of moral capital. Incentives are incentives. Actions have cumulative consequences. Money is only a unit of measure. Human beings keep account of not only money but opportunity costs. And what Krugman is saying is that Germans pay opportunity costs and should involuntarily transfer them to the periphery.

    The trade is only IMBALANCED because of BEHAVIOR then it is not a trade imbalance, it is an incentive.

    ANALYSIS

    There is a very great difference between the imbalances in trade, education, technology, resources, and infrastructure and the imbalances in trust, discipline, time preference, and hard work.

    And it is IMMORAL and COUNTER PRODUCTIVE if we do NOT use trade imbalances to transform those who have less trust, less discipline, work less.

    The ongoing evolution of social capital requires that we punish free riders. And Free Riding IS THE PROBLEM that all societies must suppress. It is necessary for cooperation.

    SOURCE OF HIS IMMORALITY

    Paul studied trade between different STATES – plus he has deeply internalized both jewish ghetto ethics, and the need to justify the failure of his people to hold land through adoption of land-holder moral codes. (Albeit as a survival strategy.) Furthermore, for cultural reasons, he is an anti-aristocratic activist.

    Like many people with specialized knowledge he uses overwhelming bis in all his arguments to mask the very simple, but catastrophic errors he makes on a daily basis: that it is necessary to conform to germanic high trust behavior and institutions if one desires a high trust society, and the economic productivity of the anglo-german sphere.

    Conversely, and much more importantly, it is IMPOSSIBLE TO MAINTAIN THE HIGH TRUST SOCIETY by policy and will rather than culture and incentive. Free riding is the primary problem of economic and social development and why the nuclear family is so important (if fragile.) If people see free-riding, then they will punish it. If free riding is pervasive, people will STOP over-contributing.

    I cannot really tell if Krugman understands the importance of the high trust ethic, or if his ghetto ethics, hatred of white europeans, and his fascination with states and trade simply serve blind him to it.

    But given his obvious joy at expressing ridicule, and his facility with intentionally OBSCURING the moral and necessary constraint of free riding, with the status signals obtained from using charity as a means of conspicuous consumption, I would say that Krugman is nothing more than one more exceptionally verbally talented man, using loaded and obscurant language, as a means of conducting MacDonald’s insight into the damaging nature of

    Each expression of Krugman’s rhetorical glee, is a status perk he obtains, demonstrating both his conspicuous consumption, and therefore his status, while at the same time destroying the western high trust society by encouraging, in every way possible, free riding, rent seeking.

    THE BROADER CONTEXT

    If Noam Chomsky is the high priest, then Paul Krugman is the parliamentary head of the “Culture Of Critique” that, by use of obscurant language, is a systemic means of conducting intentional fraud: it is ‘the prestige’ in the verbal sleight of hand; the gesture that hides the true action: **Obtaining status by demonstrating conspicuous consumption using other people’s money, to increase free riding and rent seeking, in order to destroy the high trust society – which is the FIRST CAUSE OF ECONOMIC EXCELLENCE.**

    Once the speaker is possessed of status, then the ‘virtuously destructive’ cycle is complete. He has free reign to use that status, obtained by fraud and theft, to continue and expand his theft.

    Understood in this light, we see both the legitimacy of Paul Krugman’s insight into interstate trade, and the moral criminality of his rhetoric as an expression of the ongoing damage of the Cultural of Critique to western civilization and the high trust society.

    One can use verbal intelligence to articulate the truth. Or one can use verbal intelligence to construct obscurant language that by ‘the prestige’ – the award of status – under the rubric of care-taking, by encouraging people and policy makers to do just the opposite of what they intend: to destroy their high trust society by facilitating in every way possible the rent seeking and free riding that make the high trust society possible.

    Curt Doolittle

    The Propertarian Institute

    Kiev, Ukraine

    ——–

    Note: I’ll improve this argument a bit. This is my first draft. But I’ve pretty much got the idea down. And I think I’ve united finally, Popper and Praxeology through operational language, fixing both of them. I am not sure how successful that I will be with the argument that obscurant (unscientific, non-operational) language is required for moral speech, because operational language places a high barrier for knowledge on any speaker. But if one makes public speech, about public matters, he is offering a product to the market, and is bound by warrantee.

    Source date (UTC): 2013-11-06 03:20:00 UTC

  • (humor)(office) “OMG Denis. That looks AWESOME! It’s beautiful. I want to kiss y

    (humor)(office)

    “OMG Denis. That looks AWESOME! It’s beautiful. I want to kiss you. Can I kiss you?”

    (laughter) “No.” (more laughter) “But you can give me money.”

    …

    He knows how to shut me up. lol.

    (with Denis Chmel)

    Source date (UTC): 2013-11-05 07:56:00 UTC

  • SURVEY QUESTION – WHAT WOULD YOU PAY FOR X? (To ask this question, I have to cre

    SURVEY QUESTION – WHAT WOULD YOU PAY FOR X?

    (To ask this question, I have to create enough of a procedural armature so that I an ask a question that has enough context so that it can stay on the rails.)

    ARMATURE

    Just as a bit of a thought experiment, lets say that Texas were to secede. Under the new government, they eliminated all taxes except income taxes. And replaced all local services with fee-based, and privatized all services. Assume Texas issued its own currency (the STAR or something like that) backed by oil reserves. (allowing credit money.)

    That US Constitution was rewritten based upon its original form with the 14th restored, and counties replacing states etc. And Original Intent was specifically stated. And equality was limited to equality under the law. Including language we now understand necessary for the security of individual property rights. Including a prohibition on common property in marriage (Dissolution by other than contribution must be pre-defined in a marriage contract.)

    That retirement was provided by forced savings by every person, and that some portion of income taxes were used to fill everyone’s retirement accounts. Representation was still used, but it was lottocratic, and separated into three floors: tax payers from the upper 50%, and ‘the top 100’. (purpose being to keep taxes flat through incentives.) And a house of services. The government itself was prohibited from providing services. And any services that were provided must be paid for out of current income. And that all citizens, regardless of contribution, could participate in the house of services by lottocratic vote. The constraint on the house of Services is that it must get its money from the houses of Order. And that the house of Order must get its approval from the house of Services. These organizations pass contracts, not laws. These contracts explain the sources and use of funds, are of fixed, short, duration, and cannot be broken by later governments. In a perfect world some family with long Texas history would be voted into a position of hereditary monarch, with veto power, the ability to disband the government and call an election, and no other. Lastly, you had to participate in a swiss model militia that required all men be armed and fit for combat against invaders.

    QUESTION:

    What percentage of your income would you be willing to pay to live in that society? In other words, assuming you might want something even more anarchic, but that this situation actually occurred, would you be willing to move there, and to encourage others to move there, for these conditions. And what amount of income tax would you be willing to pay ‘to get in?’

    I have my own thoughts but I’m just curious what others think.

    Source date (UTC): 2013-11-03 13:35:00 UTC

  • TRUTH Being a VIP at the best club and best restaurants in town is worth the mar

    TRUTH

    Being a VIP at the best club and best restaurants in town is worth the marginal investment.

    When you want the best table two days before the holiday they make it happen.

    :).

    Tip like hell. Always be friendly and accommodating. Get to know the management. Be a consistent client.

    Source date (UTC): 2013-10-31 18:04:00 UTC

  • ON NEGOTIATION : LESSONS LEARNED FROM A LIFETIME OF DEALS ADVICE: —— 1) Have

    ON NEGOTIATION : LESSONS LEARNED FROM A LIFETIME OF DEALS

    ADVICE:

    ——

    1) Have something of value to trade. (Surprising that this should need be said. But it does.)

    2) Do exhaustive research before hand. Try to figure out how to make the other side successful in ways that it does not cost you cash.

    3) Be brutally honest at all times. DO NOT BE CUNNING. Be smart. Be Moral. Education tends to make men cunning, but wisdom makes them moral.

    4) Try very hard to understand the other side, and show that you understand them, and that you agree with them. If you find through this process that they are unethical, then walk. (I do that a lot.)

    5) Work creatively and hard to solve their problems for them. See if they reciprocate, or if they try to take advantage of it. If the former, thank them. If the latter, document it and keep a nice little collection of their sins for use later.

    6) Find out who the decision makers are and what their price points are. That is the ONLY EMPIRICAL value of any purchase. I can’t tell you how laughable most M&A books are. The value of any company is the amount it will take to get the decision makers to flip.

    7) Make very few promises. Hold every one of them. No matter what. Let the environment and their own fantasies mislead them. But never mislead them with your words. This actually puts you in extraordinary control of the situation.

    8 ) Always maintain walkaway power. This is your only real control.

    9) You must sleep in the bed you make. Do not soil it. Maintain personal relations. And do not make a deal that they other side can’t live with if you have to live with them. Trust matters.

    10) Maintain the moral high ground. Get others to do the dirty work. Let the lawyers fuck it up. They always do. But it won’t be your fault. Build trust by coming in and being reasonable, saving the day.

    11) Leave a deal-killer issue open until the last minute that they don’t care about but the BELIEVE that you do. If they play nickel and dime games, accuse them of being unethical over the single point and withdraw. Wait until they offer sufficient rewards to bring you back to the table.

    12) It is OK to have a reputation for being smart and ruthless, but you cannot have one for being a scumbag and a liar. (Unless you are an investment banker. Selling money does not require trust or virtue. You can be as big a scumbag as you want. Most are. Sorry. It’s true. )

    13) Never negotiate for what you really want. Never let them understand what you really want. It makes you vulnerable. I actually retreat very quickly. The purpose of this strategy is actually to avoid being manipulated by ‘cunning fools’, and focusing on mutually beneficial value creation. I cant count on the other side for that, so I just force the issue.

    14) Be very wary of stupid people no matter how profitable it might be. Stupid and cunning, versus moral and wise. Pick the latter. Good people tend to do good things and bad people don’t. Shitty people build shitty companies unless they have phenomenal amounts of money to erase the moral stench.

    15) The corporation and the shareholder thing is a total lie. Management owns the business, and shareholders are just high risk debtors. Anyone who tells you otherwise is lying to you.

    16) Lawyers have this incredible desire to feel they add value. By and large they don’t. Make sure they do the minimum possible, and that they write in plain language that can be understood by all parties. Make them draw a map of all the documents and what they mean. And summarize the key points. Realistically if you can’t lay it out in plain language by typing it in a text file, then the deal won’t hold up anyway.

    17) Avoid democracy. I write my own shareholders agreements. And I structure them as a dictatorship. And I do it on purpose. And if people don’t like it they can do something else. Democracy is a stupid damned idea no matter what the form of governance. Both private and public boards I have been on fall into the category of members who provide ‘money raising value’ otherwise they’re entirely dead weight. Your board should be owners and investors that you get approval from for taking capital risks. Otherwise they’re too ignorant to make decisions about anything material.

    18) You aren’t important. Everyone else is. The deal isn’t important. The quality of the deal is. The investment in the deal isn’t important. The consequences of the deal are. I find it pretty easy to maintain objectivity. Most people can’t. your ego doesn’t matter. Celebrate if and only if you made a quality deal with positive consequences.

    19) Build a LOT OF RELATIONSHIPS at ALL LEVELS as SOON AS YOU CAN. This removes all the freaking stress of a merger or acquisition. I usually try to get a couple people from every role in the business from the bottom to the top to go visit and have a party with the other side right away.

    20) Never buy anyone more than 20% of your size. It’s like ‘diversity’ in politics. Sounds good to idiots. But really, its a freaking disaster. You cannot assimilate someone that you are not at least 5x the size of, and do it successfully in one year. Most of the time it takes three years. Most of the time the anticipated gains in efficiency are lost by the three year assimilation period.

    (eh… I wanted twenty and I got there. 🙂 )

    TACTICS

    My favorite negotiating Tactics:

    —————————–

    1) Most unreasonable man. (Kissinger)

    2) Pursue A, and discount or ignore B when it’s B that you really want. (Distraction)

    3) Hint at money then lose interest, and let them come to you. (Seed of Greed)

    4) Plant a seed. Wait for ‘their bad day’. (Seed of Savior)

    5) Leak information at three degrees of separation. (Inception)

    6) Get them to spend the money in their heads. After that you have loss aversion on your side and they will lose every time.

    THE GOOD, THE BAD AND CONTEXT

    Now you’ve got to remember that I’ve built a lot of my career using little or no cash to buy small and distressed businesses, rolling them up, bringing in operations, talent and sales, and then selling the business. So I’ve actually bought a couple of hundred companies. (Really.) Although most are in the sub 10M range and no more than the 25M range. If they get bigger than that they have lots of useless management overhead that you can’t do much with.

    BAD STUFF: I did a deal in my twenties where I bought a business at an incredible rate, invested less than 1/4M in it and turned it into a cash machine. The owner got about 1/4M for the business, and we were making that in net about every quarter. He died after six months. And He died of sadness. I might be an Aspie but that f__king bothered me, and it still does – although I really didn’t know better at the time. I was, maybe 24 or 25 years old. A decent person doesn’t want that kind of shit in his head. And I care a lot about it. If you don’t care, then, honestly, I hope someone does the same to you some day because the world is better off without you. Really.

    UNCOMFORTABLE STUFF: I did a deal in the past ten years where I misjudged the ability of the owner and that person really wasn’t able to make a go of it as part of our organization. And would have been fine keeping the small business. That person didn’t make anywhere near the net he should have. I view this as my mistake because I should know better.

    FRUSTRATING STUFF: I did a deal, a big one, about 40M changing hands and like six law firms, and I trusted the investor, and the guy fucked me, fucked the company I bought, and fucked Microsoft. I never give up control any more. Ever.

    OK STUFF: I did a deal where guys make a couple of million each, but could have made more. The reason was that they did damage on the way out. I don’t feel bad about them.

    GOOD STUFF: It’s pretty easy to turn around weak companies actually. The issue is usually that the management consumes too much of the revenue and underinvests in sales. We invest in sales. The other is that unless you’re a certain size you can’t hire top talent. We fixe that most of the time. But the fact is that people still blame me for rescuing their business even if it didn’t end up rosy for them. Those people I think are silly. Fact is that most small business are small because that is the limit of the capacity of the owner’s ability.

    FUNNY: I think that most people assume I play the “Most unreasonable man” card a little too frequently. But it tends to cut through the bullshit and force real issues out onto the table. I have absolutely no problem with hostile argument. ‘Cause I’m an aspie and I generally don’t feel anything other than frustration with the other side’s illogical or deceptive arguments. So over time, I probably have used it too much.

    Source date (UTC): 2013-10-30 15:50:00 UTC