Jordy Blog

Economic Woes: Understanding the Cause and the Cure

Robert Lefevre observed that “Government is a disease that masquerades as its own cure.“

Obama’s “Economic Stimulus” package, like Bush’s and Bernanke’s banking bailouts, typify this statement. No sooner is the economic knife twisted in on our belly than our haggardly assailant disappears into the night. Immediately our saviour appears, riding on his white horse and swearing revenge. But how did he get here so fast?

Obama’s Economic Stimulus Package

Let’s just look at the Obama’s so called “economic stimulus” package logically.

Was our current economic situation really caused by a lack of green energy? Did we really just not have enough STD prevention education? Was it all this really because we didn’t have enough high speed internet in rural areas? Was it because our current highway system is inadequate? Did we just not have enough food stamps?

If none of these problems were part of the underlying problem, how does fixing them constitute a solution? Yet that’s literally what we’re being billed. Government simply changes out the labels in its pork processing plant, and all-of-a-sudden we can’t get enough. In government, just re-brand whatever your selling as “Economic Relief”, “Stimulus Package”, or “Cure to Whatever Happens to Ail You Today”, and it’s bound to sail right through.

Sure, there’s much more to Obama’s “Economic Stimulus” plan than funding STD prevention education, but it’s all crap because it all ignores the recessions’ underlying causes. Even the tax cuts are crap because, just like the Bush tax cuts, there is no associated cut in spending. In fact, to say that we’re getting quite the opposite of spending cuts is a remarkable understatement.

Cutting taxes without cutting spending requires either inflation or debt. The former (like taxation) steals from current citizens, while the latter steals from future citizens. Both payment vehicles are immoral. Should income taxes be decreased or even eliminated? Absolutely. But the only lasting way that government can stop stealing the wealth of its citizenry is to stop spending it!

Our Current Recession: the Cause and the Cure

If we really want to fix our economic problems, we need to fix them at the cause. But remarkably few people understand the cause –and that’s what makes us so vulnerable to government deception.

To understand the cause and the cure of our current recession, shouldn’t we look to the people with proven track records –you know, the people that actually foresaw the current crisis before it happened? Remarkably, the solutions offered by people like Peter Schiff and Ron Paul –people who were dead right about the economy even before the bubble burst– are still being relatively ignored. The alternative approach: what our economy really needs is more people teaching kids how to use condoms. Good grief!

If you want to understand the cause of recession, as well as its cure, Ron Paul says it pretty succinctly:

Cures for Our Economic Disease

I have recently had several opportunities on various news programs to discuss the economy and what is wrong with the so-called economic stimulus package. I have said over and over what we shouldn’t be doing, and now I’d like to explain what we should be doing.

But to improve the situation, you must first have a solid grasp of how we got here. Government policies and central planning created the housing bubble, now going bust. About a decade ago the government made expanded homeownership and affordable housing a public goal. Through Fannie Mae, Freddie Mac and the secondary mortgage market the government incentivized creative, low down-payment, more widely available mortgage products, and discouraged the market-proven lending standards of the past. The Federal Reserve kept interest rates artificially low, which added more fuel to this fire. Many related sectors temporarily flourished because of this, and many people got into homes they otherwise could not have afforded. The increased demand for housing sent prices soaring until in many markets housing became even more unaffordable, necessitating even more creative mortgages, and impossibly leveraging homeowners. Many risky investment vehicles such as mortgage-backed securities, derivatives, credit default swaps grew out of this unsustainable situation. As the foreclosures began, the house of cards started to tumble. Too many people have confused the symptoms and the pain of the bust with the problematic policies that caused the bubble, which is really what needs to be treated.

First of all, just as the best cure for a hangover is not to drink so much, the best cure for a recession is a recession. It is time to sober up and return to free market sanity, risk and reward, supply and demand, without political intervention. Politicians are good at catering to the needs of special interests, but very bad at determining what needs to take place in the market. Government should stick to punishing fraud and enforcing contracts. When they use the tax code, bureaucratic departments and their manipulative rules and regulations to dictate social and economic behavior, we end up with distortions and malinvestments. Bailing out banks, continuing failed Fed policies and strapping the taxpayer with toxic debt will worsen the pain, and punish the innocent.

If Congress really wanted to do something helpful, it would cut taxes. Ideally, we would repeal the income tax altogether and get the IRS off the economy’s back, which would be a huge boon. We should also cut spending. Cut every unconstitutional department and program, every wasteful governmental encroachment on the people’s liberty and money, starting with our massive overseas empire. The cost of our empire is bringing us to our knees, just as the Soviets’ empire did to them. Congress should also abolish the Federal Reserve and take back its responsibilities to ensure sound money, safe from the manipulations of powerful banking interests.

These things would constitute real change, real economic stimulus. The plans being bandied about Washington are just more of the same. As long as no one seriously considers the cure, we are unfortunately destined to prolong the disease.

There it is, refreshingly simple.

Now that we’ve identified our assailants as big government and central banking, maybe we can go after them! Or wait, here come a couple brave knights who seems more than willing to do that for us. Hold on a second… Don’t we know you?

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Universal Wishlists: A Lesson in Open Marketing

Universal Wishlist Review

I’m not a big shopper, especially when it comes to traditional brick-and-morter stores, but the internet marketer in me loves new features that make online shopping more pleasant. Such is Amazon’s new Universal Wishlist feature. (OK, it’s not that new, but it’s still awesome.)

I love Amazon’s Universal Wishlist because it allows me to save items from other online stores right to my Amazon wishlist. Being able to store all of the products I want in one place has made Amazon my de facto shopping site for filing away stuff that I want now, but can only afford to buy someday. It’s my new virtual den of covetousness.

Other similar services exist as well. TheThingsIWant also looks kind of cool, and it has basically the same core functionality.  I haven’t tried it, but they supposedly have a feature that allows you to syndicate your wishlist to your blog. Very cool, and surely they’re getting some affiliate commission from that. I’m not sure that I would ever use wishlist syndication, but I can definitely see it being an interesting component of a personal or family blog.

It occurred to me that Google Product Search must have some similar feature, and sure enough, they do. Google shopping list lets you save products you want and compare prices across tons of online stores. It also lets you save notes and publish products in either a public or private list. Very cool. The biggest feature that it’s missing (for me, anyway) is the ability to make your own wishlist submissions for items from smaller stores (like the Mises.org store) that don’t show up on Google’s radar. Too bad. Still, it’s great if you only buy from big retailers.

Anyway, if you’re online shopping experience has been bound to one retailer, I now pronounce it unbound.

Lessons in Open Marketing

But, you might be asking yourself: “Why would Amazon extend it’s functionality to to other sites? Isn’t that giving away some of its secret sauce, let alone revenue?”

Answers:

1. Amazon uses the Universal Wishlists to make the “long tail” even longer, meaning it allows for even more product to be saved on it’s site. This is not necessarily to their direct benefit (since they don’t get the direct sale) but it does help build a shopping community around their site, and that’s as good as gold.
2. I’m sure Amazon also gets a bit of a traffic boost from this. When else would I ever go from Mises.org directly to Amazon? Having a “Click to add” to my Amazon wishlist right in my browser makes Amazon one click away from any retailer on the net. Now that’s smart. (This is somewhat analogous to building a brick-and-morter store in the mall. Why build right next to your competition? Because you can both benefit from the increased traffic that being in the the place for shopping will bring. If it’s sybmiotic, it works for everyone.)
3. Another win for Amazon: data mining. Suddenly Amazon knows what products I’m “eyeing” from other sites, often their direct competition. That’s great data to have when for making pricing, merchandising, and marketing decisions. That kind of competitive data is priceless, especially to an online store that process and act on that data quickly. Interested in a lawnchair from so-and-so? well here are our lawnchairs. X customer added Y watch from Z store? Why don’t we sell Y watch? You get the picture.

Overall I think implementing the Universal Wishlist a great, although somewhat unintuitive, strategic move for Amazon. It’s gutsy to encourage and facilitate increasing sales for other retailers; but it also builds community, increases site traffic, and provides meaningful (and actionable) data for competive analysis. Plus it builds goodwill –or at least it did for me. I appreciate being able to use Amazon’s wishlist feature wherever I find good products. That’s just good marketing.

The Trouble with Pizza Girls

The trouble with pizza girls (and everyone else these days) is that they blog.

I love the internet and its bountious opportunities for citizen journalism.  Ten years ago you would never have heard this story.

Encouraging Criticism

MidMarketMaven posted Matt Marsh’s notes from Stephen Covey’s recent speech at the University of Utah:

“Finally, [Covey] asked how many people in the room had created a culture in their lives that at least permitted, if not encouraged, those around you to kick back against what you say, to which very few responded yes.”

I can’t believe that anyone in their right mind wouldn’t do everything in their power to get as much constructive criticism as possible. Still, there are employers who basically pay their employees to agree with them. It’s a weird mentality that pitches personal vanity against personal success. I for one would take success every time, but you gotta let people love themselves to their own detriment. :)

Inviting an Unbiased Critique

When seeking an opinion on a developing idea, don’t say, “Here’s my idea! Don’t you love it?!” Instead, get meaningful feedback by inviting criticism: “Here’s my idea! Will you shred it to pieces it so I can make it better!” Smart people realize that they will get smarter by testing their ideas against those of others. They take notes on any areas that need fixed or clarified. They evaluate suggestions, make necessary changes, then try again. This refining process of acting on valuable criticism can make a bad idea good, and a good idea great. Thus criticism is a crucial ingredient of continuing improvement.

Criticism Prevents Problems

Of course, in the business world, this revision process hopefully happens well before a proposed product or service hits the market. Critiquing a product early on prevents potential losses and gives the company the benefit of resolving problems in the quiet of the boardroom rather than the echo chambers of an unforgiving market. Great leaders allow their ideas to be subject to the criticism of employees and coworkers so that they can fix potential problems before they solidify. Inviting criticism allows you to get it right the first time, often saving time, money, and reputation.

At the very least, valuable criticism from coworkers, employees, and trusted friends will give insight into doubts that may arise from potential investors and customers. Even if the criticisms are baseless, they may help you determine where clarity might be added to your message to avoid confusion and increase deal flow.

Constructive Criticism Builds Buy-In

Employees and coworkers who are encouraged to critique an idea take pride in the idea as it is modified to reflect their own input. Even if some recommendations are not taken, employees benefit as their concerns are calmly and logically addressed. Either way, a consensus develops, and team members become more likely to take a personal stake in their work.

Inviting criticism makes employees feel that their input is valued and important. This leads to intrinsic motivation, higher productivity, lower turnover rates, and the comfort of knowing that you can be effective without being a jerk. :)

Investors, partners, and customers also feel a degree of ownership in ideas that they have helped develop. Take your more polished ideas to them and ask for their criticism. Are there better ways of accomplishing your common goal? Can your investors, partners, and customers recommend or even co-develop other, better strategies? As people become more involved, each becomes a confidant and a trusted partner in your success. Having furnished their ideas (much more than mere money) they become contributers and allies, dedicated to making the idea succeed.

Yes-Men Breeders Prefer to Stay Stupid

In all your business dealings (especially if you have “subordinates”) watch out for yes-men. People who flatter you instead of voicing their dissenting options do you a great disservice by letting you remain in your own stupid ignorance and self-deception. Friends don’t let friends be stupid.

If you find yourself surrounded by the “overly-reserved”, note that their unwillingness to voice concerns it is very likely your fault. If there is something about you that makes them reluctant to question your ideas, change your behavior. Create a culture where you can benefit from others’ insight.

Learn to respect, trust, and openly reward people who are willing to stick their neck out to set you straight. Publicly acknowledge your weaknesses so people feel like they can offer advice and help without offending. Be approachable! Otherwise, your ideas will never be as successful as they could be with a little help, and you will struggle to make them work one hard-knock at a time. Save yourself the trouble by inviting and responding to criticism up front.

“Critical” Take Aways

You should proactively invite criticism. Ask for it! The people you deal with have concerns, and you can’t resolve them if you don’t know what they are.

Invite criticism in the planning phase to refine your product and presentation and avoid major marketplace mistakes. Use trusted criticism to refine your ideas until they become winners.

Invite and respond to criticism to achieve crucial buy-in from stakeholders.

Get over yourself! People can’t help you and your ideas improve if you don’t create a culture of constructive criticism.

Lastly, be wary of ideas that seem too good to be true; they probably are! Bounce them off of smart people who will do you the favor of telling you you’re wrong. Review, refine, then try again.