John Maynard Keyes wrote in 1945 that “the day is not far off when the economic problem will take the back seat where it belongs, and the arena of the heart and the head will be occupied or reoccupied, by our real problems – the problems of life and of human relations, of creation and behavior and religion.” In the United States, we have pursued a policy of unquestioned growth and expansion, following the recommendations of prominent economists with an ardor that borders on religiosity. However, the economic problem, as Keynes described it, has not taken a back seat, but rather has the developed world in the grip of a severe recession.
In the United States we have always looked to economists for the magic to make our economy go. Milton Friedman, winner of the Nobel Prize in Economics, believed that a free market economy could expand and prosper with minimal government interference. Alan Greenspan, an admirer of Friedman, was revered as an enabler of unending growth during his service as Chairman of the Federal Reserve; he received the Presidential Medal of Freedom, the inaugural Harry S. Truman Medal for Economic Policy, the inaugural Thomas Jefferson Foundation Medal in Civilian Leadership, and was named both a Knight Commander of the British Empire and a Commander of the French L’Egion D’honneur. Presidents from Ronald Reagan to George W. Bush all trusted Greenspan with the keys to the economy. During the same time period, Bill Clinton, a Democrat, trusted economist Larry Summers’ advice that deregulation of banking and finance would also lead to continued growth; that was the height of Milton Friedman’s influence. Barack Obama appointed Summers to be Chairman of his Economic Council despite the fact that his policies were partly at fault for the current economic crisis. Why do all of these Presidents, from Reagan on the right to Obama on the left, put so much faith in these economists? Keynes, in The General Theory of Employment History and Money (1935), addressed this question. He wrote that:
“The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back. I am sure that the power of vested interests is vastly exaggerated compared with the gradual encroachment of ideas.”
The economic policies of the United States have become more and more complex since Keynes’ time. Over the decades, as the United States left the Gold standard, and created a dynamic economy reliant on the growth of consumption and continuous expansion, we have relied and trusted economists to make it all work. Most Americans who do not work on Wall Street have trouble understanding even some of the basic terminology and concepts used in finance today. Many of us learned what a Collateralized Debt Obligation was last year, and discovered how debt was securitized in such complex ways that even some of the old hands in charge of major firms didn’t really understand. Americans trusted economists to drive our growth, and while many don’t understand the problems we face, they expect economists to create a deus ex machina to miraculously get us out of the recession and onward to unending growth.
Yesterday the House of Representatives voted 234-194 to repeal Don’t Ask Don’t Tell, the 1993 law that prohibited gays and lesbians from serving openly in the military. The Senate Armed Services comittee voted 16-12 to send a similar bill to the floor of the Senate. Olympia Snowe, one of the few moderate Republicans remaining alive, was the only Republican to support the bill in committee. John McCain, ex-Maverick of Arizona, made his views on the bill clear:
“I think it’s really going to be very harmful to the morale and effectiveness of our military.”
Of course, while campaigning for the Presidency, McCain pledged he would listen to the Joint Chiefs of Staff; once they were ready for change, he would support repeal. Admiral Mullen, the Chairman, gave a stirring statement of support for repeal. Mullen does not underestimate the ability of today’s military to adapt to new policy. From my experience as a Naval Officer, DADT was a disaster; I knew people who were personally affected by it, and without question it reduces our readiness. However, McCain came of age in a different America. He cannot imagine a military allowing gays and lesbians to serve openly. Well, the Navy is finally going to allow women on Submarines, another restriction that was long defended because of ‘readiness.’ There was never going to be an easy time to make that change, and there is never going to be an easy time to repeal DADT.
The bill would not go into immediate effect, but after an ongoing policy study is completed, and after the Pentagon and the White House approve the new policy; basically, sometime next year. Republicans want to wait, but what they want to wait for is not the completion of the study, but rather the fall election, when they will pick up a few Senate seats.
Yesterday, David beat Goliath. Well, not quite; Apple passed Microsoft to become the world’s most valuable technology company. As of yesterday’s market close, Apple was valued at $222.12B versus $219.18B for Microsoft. This is a monumental achievement for a company that in the mid-1990s was believed to be in its last days. Back then, Microsoft was ascendant, and Apple maintained only niche markets for their products, like education.
In fact, I was a typical customer. In 1994, when I was heading off to college at USC, I purchased a Macintosh Performa for my dorm room. Compared to the Gateway that my parents had at home, the computer was simple, elegant, and user-friendly. Still, in retrospect I can see why these bad boys never took off in the business world.
In 1996, Apple brought back Steve Jobs as CEO, and the company began innovating again. However, not everyone was sold; for my graduation gift, I received a clunky Dell desktop. This machine was awful; I faced the blue screen of death at least once a week, and required a replacement of the motherboard within two years of purchase. By the time I returned to school in 2003 at Penn State, I returned to my computing roots. Apple, with Jobs back at the helm, was producing incredible notebooks, as well as new music players, the iPods. I am not an early-adopter by any means; by 2003 iPods were already ubiquitous. However, I still remember the first time I went jogging with my iPod, and the sheer joy I found in the shuffle function.
Steve Jobs changed the landscape of technology, twice. First of all, in 1984, Apple released the Macintosh with this famous Super bowl ad. He made the personal computer personal, unlike the grey MS-DOS machines produced by IBM. Then, when the company he founded was on the ropes, he transformed technology from a business setting to a personal setting. The outstanding Mac Books were certainly part of that. However, the iPod, the iPhone, and the iPad brought technology out of the office, and into the streets, onto the subway, into the car. First, our music collection was untethered from walls of plastic. Then, TV was portable; while living in Japan I loved watching Jon Stewart on my Subway commute. Finally, with the iPad, maybe we will eventually become untethered from our physical books, magazines, and newspapers. Instead of just business, technology now largely revolves around consumer desires.
However, there is a lesson of caution for Apple. Microsoft, in the late 1990s, faced off with the Justice Department over its dominance of the browser market. While Microsoft remains profitable, it has not been the same company since. Now, Apple is in the sights of regulators. The Justice Department is investigating whether Apple’s dominance of the online music market, with its iTunes store, is above board:
“People briefed on the inquiries also said investigators had asked in particular about recent allegations that Apple used its dominant market position to persuade music labels to refuse to give the online retailer Amazon.com exclusive access to music about to be released.”
Now, who today remembers the browser that had Microsoft all hot and bothered, the Netscape Navigator? However, Internet Explorer is no longer the dominant browser; Firefox, Chrome, and Safari, along with Explorer, share the market. In the same way, I doubt that Amazon.com will be a dominant music retailer ten years from now; however, Apple will certainly not be the only large provider of the coming cloud-based music market.
However, don’t be too alarmed for Apple. Some people fear that the company will falter when Steve Jobs is no longer in charge. In their book Built to Last, Jim Collins and Jerry Porras identify visionary companies as those that do not rely on one great leader, but rather develop a culture of innovation and success that emanate throughout the company and beyond the founder. If Steve Jobs is really smart, and I think he is, Apple is poised to continue its history of innovation long after he leaves the company.
UPDATE: Speaking of Built to Last, a company that was celebrated by Collins and Porras was Johnson & Johnson. In 1982, J&J ordered a nationwide recall of Tylenol after seven people died from poisoned Tylenol in the Chicago area. That recall, which some at the time felt was unnecessary and expensive, earned J&J many plaudits. However, now J&J is suffering from criticism that in 2008 the compant concealed a recall of Motrin, a popular pain releiver. Apparently, the tablets weren’t dissolving, and J&J sent a contractor to surreptitiously buy up the product from stores, but not to mention the word ‘recall.’ There are hearings on Capitol Hill, and the FDA referred the matter to its criminal investigation unit for review. The troubles that J&J is facing today are striking, compared to the way it earned people’s trust in 1982.
Can you imagine yourself in British Petroleum CEO Tony Hayward’s shoes? Well, they would be nice shoes, considering in 2009 he made $6 Million or so, a 40% increase from the previous year, while profits dropped 45% – but that’s another story. In my Communications, Persuasion, and Negotiation class, we are doing a simulation stakeholder dialogue exercise, and I represent British Petroleum; so you could say that I am trying to walk a day in Tony’s shoes.
This is a video of Tony interacting with the press on a Louisiana beach. Take a close look, you will see Tony avoiding the oily muck, and then yelling at a cameraman for filming him. This seems to be an ineffective communication strategy. How about some humility, how about acknowledging the concerns of Louisiana residents who are seeing their livelihoods buried in the oily muck?
BP’s Chairman, Carl-Henric Svanberg conveyed to the Financial Times his view of BP’s importance:
“The US is a big and important market for BP, and BP is also a big and important company for the US, with its contribution to drilling and oil and gas production. So the position goes both ways,” he said. Mr. Svanberg accepted BP’s reputation had been damaged by the accident but said that should not be long-lasting “if we do the right thing”.
OK, well what is the right thing? How about showing some concern for the workers that are being hired to clean up the mess? Apparently, fishermen that were hired by BP have fallen ill with severe headaches, dizziness, nausea and difficulty breathing. George Jackson, a 53-year-old fisherman, took a clean-up job after the closing of local fisheries left him unemployed. He was laying containment booms when his eyes started burning:
‘Like other cleanup workers, Jackson had attended a training class where he was told not to pick up oil-related waste. But he said he wasn’t provided with protective equipment and wore leather boots and regular clothes on his boat. “They [BP officials] told us if we ran into oil, it wasn’t supposed to bother us,” Jackson said. “As far as gloves, no, we haven’t been wearing any gloves.”’
Of course, the BP spokesman said he was unaware of any complaints. BP seemingly does not realize that public trust of business is at a low point after the Great Recession. Instead of being forced to show the underwater camera above the leak, why not willingly show it?
BP should be welcoming the press attention, and giving as much information as possible to stakeholders. Yelling at cameramen will only hurt you. With a crisis of this magnitude, and with the damage already done to BP’s reputation, an honest dialogue with the public is the one way to show that BP is accountable. Otherwise it just looks like they have something to hide.
It is a sad day in America. Last night Jack Bauer retired, probably to pick up a great deal on a subprime-vintage Florida condo. Now I can understand why Jack would retire; after all, in recent days he was shot and tortured; his daughter was kidnapped; he lost a wife and a girlfriend. That would be a tough deal for anyone to take. However, America is in a moment of crisis, and we need Jack.
For one, our country is being invaded. Some people have the gall to claim that the Constitution says that anyone born in this country is a Citizen. In fact, they refer to the 14th Amendment, which reversed the Dred Scott decision:
“All persons born or naturalized in the United States, and subject to the jurisdiction thereof, are citizens of the United States and of the State wherein they reside.”
Yes, that is the Constitution. But listen to what Randy Terrill, Oklahoma Patriot and Republican state representative says:
“Currently, if you have a child born to two alien parents, that person is believed to be a U.S. citizen. When taken to its logical extreme, that would produce the absurd result that children of invading armies would be considered citizens of the U.S.”
Taking ideas to their logical extreme is as American as Enhanced Interrogation Techniques. What Terrill is really saying is that all those illegal aliens coming into our country, to babysit our children, to pick our fruit, to clean our offices, well they are an invading army. See, Jack Bauer never worried about critics who claimed that torture was wrong. He did what he had to do to protect America. Well, Jack needs to help Terrill fight back against these invading armies.
Who else needs Jack? Well, the fine people of Arizona, for one. John McCain wants to complete the dang fence. Well, McCain is no Maverick, which for me means that he may not be able to complete the dang fence on his own. Jack Bauer, however, is the original Maverick. Not only will he complete the dang fence, but he will use some enhanced interrogation techniques in Congress to nationalize the Arizona immigration law. That law would require police to determine the immigration status of a person involved in a lawful stop where reasonable suspicion exists that they are in the country illegally, and would criminalize failure to carry alien registration documents.
Sure, the Law Enforcement Engagement Initiative, a nationwide group of police leaders pressing for a federal overhaul of immigration law, believes the law will lead to racial and ethnic profiling and threaten public safety. But Jack Bauer will be there to do what is right for America, so we don’t need to worry about Americans’ rights being violated.
That’s good news for Rhode Island State Representative Peter Palumbo, whose effort to introduce the Arizona law to a vote was defeated yesterday. Peter could probably use Jack’s help in his re-election campaign, too. I think we can all agree that America needs Jack now, more than ever.
It was a busy weekend in my old stomping ground, the Western Pacific. Late last week South Korea announced that clear evidence points to a North Korean submarine in the March 26 attack on the South Korean corvette Cheonan. South Korea, with U.S. backing, announced that it would sever all trade with North Korea, which would deny the Stalinist regime an estimated 14.5% of its international trade and $253 Million in revenue. Of course, North Korea relies on China for much of its trade, and China is and an awkward position. One wonders if this crisis dance will ever end, or whether China will take a firm hand with North Korea. It looks like this will be a busy summer in the waters off the Korean Peninsula.
Further south, Japan relented to American pressure and agreed to keep the Marine Corps Air Station on the island, against the wishes of Okinawans. This was a loss of face for Prime Minister Yukio Hatoyama, who campaigned on a promise to remove the air base from Okinawa. The islanders have been upset with the American presence on Okinawa since the 1995 rape and abduction of a 12 year old girl by two Marines and a Sailor. The history of this island is fascinating, and revealing. Until 1868 it was part of the Ryukyu Kingdom, an independent regional trade hub between China and Japan; Japan annexed the island and it became the Ryukyu prefecture in 1879. Just a few weeks ago, on the excellent Tom Hanks-produced mini-series The Pacific, the Battle of Okinawa was portrayed; over 150,000 U.S. and Japanese troops, and over 100,000 Okinawans died during the 82-day battle, which the Americans fought to get a staging ground to attack the Japanese mainland. The island was actually under U.S control from 1945-1972, and many military bases were built on the island. Okinawa is perched in the East China Sea at a location that all but guarantees its continued military significance.
UPDATE: (5/25) NY Times: Relations between North and South Korea, already strained over the sinking of a South Korean warship, deteriorated to their worst point in years on Tuesday as the South Korean president redesignated the North as its archenemy, and the North said it would sever its few remaining ties with the South.
While the fate of the Deepwater Wind projects are still being considered, let us not forget the Portsmouth Town Wind Turbine, which recently passed its first anniversary of operation. In one year, the turbine, a 1.5MW AAER produced model, gave the town 3,626 mWh of power, equivalent to about 75% of the town’s electrical load. It exceeded predicted production and revenue goals, and as such is an example of how wind power is right at home in the Ocean State. I play tennis at Portsmouth High School, right at the base of the 336 ft turbine, and hope to see more of these majestic turbines on the horizon soon.
Canadian venture capitalist Tom Rand produced this great video, where he talks about how renewables can play a much bigger role.
Here Rand talks about his Toronto hotel, which he calls the greenest hotel in the world, at TEDxToronto. His hotel includes geothermal and other renewable power, which he says cost less than 5% of the cost of his building.
Watch out, New Orleans. Watch out, Biloxi, Mobile. It looks like the risks of Hurricane season have increased as a result of the BP Oil Catastophe in the Gulf of Mexico. Apparently, if a hurricane encounters the oil slick now, the combination could be devastating, according to hurricane scientists. Not only could any hurricane increase the damage that oil does to coastal wetlands, but the presence of oil could lead to a more powerful hurricane. That is because the oil on the surface, because it is black, absorbs heat, and also prevents evaporation that typically helps to cool the Gulf in the summer. Of course, we have no precedent for this, because we have no record of a hurricane meeting an oil spill. I used to live on the Mississippi Gulf Coast, and can honestly say that this is the last thing the region needs. This is another clear illustration of how expensive a gallon of gas really is.
The National Academy of Sciences, responding to a 2008 Congressional legislative request, put together these comprehensive reports analyzing climate science and the choices about how we can respond. The reports afirm the scientific case for human influence of Earth’s climate. The short video above frames the methodology of the study.