How to Recover the Economy

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Recover the economy? Pretty bold title, eh?

It’s way too easy to misdiagnose what ails the economy these days. Then again, how do you not misdiagnose a condition when you’re seeing the wrong type of doctor? A podiatrist is as likely to catch your brain tumor as a cardiologist is able to treat you for kidney stones. Similarly, and far too often, those who claim to be able to fix the economy, such as then candidate Barack Obama and now the field of GOP candidates, are attempting to use Band-Aids in place of stitches or putting a bruised arm in a cast.

recover the economy, promote entrepreneurism

Pres Obama, honorary doctor of economics

Such economic doctors will read a story in the New York Times and conclude that we need to tax the wealthy more, return to the tax code of the 70’s, and utterly unlearn the Reagan philosophies in order to return to a fair policy toward the poor.

That’s a casted bruised arm.

Others might suggest that in order to save the economy, they personally need to swoop in wearing a cape and single-handedly lower tax rates “across the board” so more money flows and business owners create jobs.

Should have used stitches.

Simple fixes cannot act as a long-term strategy to recover the economy, though they may provide a bump that they can take credit for, followed by a slump for which they’ll be able to place blame.

The economy is alive. It is comprised of every person on the planet. Each person has an identity in a worldwide economic game. In this Massively Multiplayer Online Role Playing Game (MMORPG), everyone must follow the rules. Anyone found breaking the rules risks varying punishments ranging from fines to removal from the game for a time while sitting in the State Penitentiary. Of the majority who follow the rules, everyone seeks their own advantage as defined by themselves. Perhaps advantage means personal wealth; perhaps it means spiritual value. Some players form clubs/teams/guilds/unions in order to achieve a greater advantage than would have been possible on their own.

Since the economy is composed of ourselves, there can be only one cause for why the disparity of wealth has increased over the last few decades: we allowed it. When your boss’s tax rate was reduced under any of the past administrations, did you immediately ask for a raise or did you fail to realize that your labors were then more valuable to him? Would you have stepped into a position for an extra $0.50 an hour over what you were making to fill the job made available by someone walking out after having asked for a $3.00/hr raise and not getting it?

Probably the latter and of course you would have, respectively.

Since we cannot trust our fellow man to not undercut us for our own jobs, the only real solution to preventing recessions and depressions–and to recover the¬†economy as it is–is entrepreneurism. More employers means more employees. Lower unemployment means rising wages.

Undoing Reagan era tax cuts only makes it harder on the employers and managers who are now likely leveraged with their own debts they would not be able to pay if their tax rate increases. Lowering tax rates on everyone favors higher income earners dollar-wise and there’s no guarantee that the money will be used to expand a business or even spent at all. It may in fact already be spent and put towards paying off some of that debt.

Having more people own their own businesses has a compound effect: 1) they free up a job for someone to come off unemployment and 2) they hire, directly or indirectly in the form of paying for services or using contractors, people off unemployment.

Unemployment falls. Wages rise. Economy recovers.

Moral for the politicians who want to recover the economy: pass policies that encourage entrepreneurism; pass on those that do not.

One Reason to Hate MLM’s

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Imagine loving Starbucks coffee so much that, one day, the manager approaches you and proposes having a Starbucks installed into your living room. Instead of paying $5 per latte, you’ll only need to pay $0.50! Since you go there every work day, that would equate to a savings of $90 in the first month alone! The best part is that having the business set up in your living room will only cost you $75, which means you are in the black in the first 30 days. What? You don’t want a Starbucks in your living room? You don’t want to have to run a business? That’s OK! You don’t actually need to hire anyone, or promote your coffee shop at all. You don’t even need to tell anyone that you have it. If your friends come over though and see you drinking your Starbucks, they’re going to ask for some too, at which point you can still charge them $5 per latte…or better, invite them to have their own Starbucks!

Such would be an equivalent to any number of Multi-Level Marketing (MLM) companies out there, especially the newer ones.

In my experience, a fairly common trait of MLMs is a built-in disincentive to have customers vs. business partners. There’s one company I’m thinking of in particular that has “start-up” costs of $39 per year. The product retails for $160 each month. As a distributor, the same product can be had for $112 each month. This means that if someone gets a real benefit from the product and wants to use it every month, they recoup the $39 in the first month’s savings.

This practice comes with several implications. The first is that if the company is incenting you to sign people into your business–even if they’re acting as just a customer–isn’t the “distributor cost” really the going market price? That would mean that selling it at $160 for a month of product borders on unscrupulous behavior. Sure, it could be justified that there’s only a 28% profit margin, which isn’t outrageous, but that’s overlooking the fact that the company has set up the structure recognizing that no one would want to pay the extra $500+ over the course of a year. Second, is that if the company is incenting you to sign people into your business, it can be construed that you are being paid for recruiting, which is illegal. Such a company has a high likelihood of being shut down by regulators in short order.

I have not found this practice anywhere else in business, have you?

Granted, not all MLMs include this practice; however, enough of them exist and actually thrive despite such unethical pricing structures to leave a bad impression of the industry with the majority of people. Combine this stigma with the masses of distributors who are told by their “uplines” that everyone in the world is a prospect and it’s clear why people lose friends when they partner with the wrong company.

Effectively Perceiving Butterflies and the Methods that Catch Them

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Something’s been itching at me the last few weeks, ever since I got back from Chicago for the nutraMetrix training there. One of the trainers had mentioned a reticulating sensor (no, I’m not 100% sure that’s the word she used) that we have that will cause us to see doctors and their offices everywhere we go as a result of our training. This is the same sensory appliance of sorts that our brains use to categorize everything in our lives and we typically become acutely aware of it only when we make a change in our lives. When you buy a new car, you’ll start to see that model everywhere you go. When you change your hairstyle, everyone suddenly seems to have the same.

This phenomenon got me thinking.

It’s fairly common knowledge that you can find support for any side of any argument in both the Bible and on the Internet. This is only possible because our sensor would be looking for the support.

The way I see it, it works with the behaviors of people, too. If someone screws up–even just minorly–at work and it gets picked up at the corporate rumor mill, everyone starts to look at that person’s activity through the prism of the rumors and starts to find falt in everything he does, even down to how he says "good morning."

The political ramifications are broad, too, but we see it happeneing in a practical sense with the way both Conservatives and Progressives become more resolved in their beliefs with every news story–even if it’s the same story! As for campaigning, some say that negative ads don’t work and maybe they’re correct, but if someone can campaign perpetually and constantly denigrate the other side (and have it make sense) without actually having a named candidate as an opponent, maybe even those skeptics would admit defeat.

I think it’s an interesting idea with many far-reaching applications. If nothing else, my hope is that someone’s sensors about sensors will be activated by reading this and they’ll start to wonder what notions they have throughout the day are only had because someone else set up their mind to think that way with another earlier comment. It’s all very Butterfly Effect-y.

The Wealthy Need a New Venture: The Next Frontier

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Looking back on the history of the US, it’s clear that although typical pioneers led the way into new territories looking for opportunity, it wasn’t until people of independent means moved there that civilization was brought to an area.

It was people with money to invest that backed the first caravans, who bankrolled the laying of the transcontinental railroad, and in many cases were best prepared to take advantage of the best opportunities available at the time. They may not have panned for gold, but they probably backed the company that sold the pans and pickaxes.

What is there these days? There are no more geographical frontiers anywhere in plain sight. The poles? The rainforests? The deserts? The wildernesses of the world are either politically protected or are showing little interest in repeating the growth of the American West. Today we have only financial frontiers, resulting in money being placed in new untested investments: first, hedgefunds; second, real estate; third, securitized debt and other derivatives–all of which may yet prove to be lousy creations of the financial mind.

The rich need somewhere to put their money. They need new frontiers. They need boundaries to push and horizons to expand.

What it comes down to, is that there needs to be a reason for normal people to seek out the colonization of sea and space and that reason needs to be stronger than mere tourism. It needs to be attractive and attainable to the masses and seen as a means to a better life.

I predict that whoever can create the demand for human travel to either of these locations (they don’t even need to be the source of how we’d get there) will dwarf Bill Gates in the amount of money at his disposal.

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Digg WSJ Interview of Geithner

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Check out the interview in this player:

In a follow-up question (starting around 10:00 into the interview) regarding the ties of bail-outs and non-bail-outs and the Secretary himself to Goldman Sachs, its partners and competitors, Mr. Geithner gave a very revealing answer as to why the government is spending like mad:

“If governments in crisis don’t act to repair a damaged financial system, don’t act to provide stability and confidence, don’t act to get credit flowing again, then what we face–as we learned from history: the Great Depression, Japan in the 90’s–what we’ll see is much much more damage. Hundreds of thousands of businesses fail that should not have failed, people lose their incomes, lose their pension values, lose their livelihoods as we saw in the last part of last year. And the basic imperative–it’s a moral imperative not just an economic imperative–is that in a crisis like this to protect those who are innocent of the mistakes that brought us to this place so they do not suffer from the judgments of others. You have to do things to provide stability and confidence and repair the damage caused by that. An that is the necessary thing to do for the country.”

I, for one, find this intriguing, that the government is acting on a moral obligation to protect those who are innocent from the mistakes made by government. Does Mr. Geithner realize the arrogance of such a statement? Does he realize that he is suggesting that this administration will not make mistakes? That there will not be any innocent victims from the actions he, the Congress, and President Obama put forth?

Now that Cash for Clunkers is out of the way and pretty much anybody that was planning on being in the market for a new car in the next 6 months or so and accelerated their purchase plans to take advantage of free money is now out of the market, what will Geithner et al suggest we do for the car dealerships whose sales are now going into a deeper slump for at least the next few months?

Can we yet predict the course of action if/when a public option for health care is created that government will take to protect the innocent when 60% of doctors decide not to take funds from the plan and seek alternate careers if necessary, rather than cooperate with bureaucrats who have not taken the same Hippocratic oath that they have?

What will the government do in 10-20 years when the debt load of this country becomes so large that our standard of living is reduced and children growing up now will look back on how we used to live?