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A Notable January Birthday

by Helping Families Flourish, posted in Flourishing Article

 

Originally published in Flourishing January 2012. 

Vernon Lomax Smith was born in Wichita on January 1, 1927.  After his father lost his job as a machinist during the Great Depression,Vernon’s family moved to a farm in western Sedgwick County.  As a teenager, he attended my parents’ alma mater,Wichita North High School, graduating in 1945. 

Vernon said that after high school, he wanted go to Cal Tech, but his high school grades weren’t good enough; so, he attended Friends University in Wichita to rehabilitate his academic record.  He then went on to earn a B.S. in Electrical Engineering from Cal Tech in 1949, an M.A. in Economics from the University of Kansas in 1952, and a PhD. in Economics from Harvard in 1955.  I guess that ain’t too bad for a farm kid. 

Dr. Smith has since held teaching and research positions at Stanford, Brown, Cal Tech,Arizona, and George Mason University, among others.  He is currently Professor of Economics at Chapman University’s Argyros School of Business and Economics and School of Lawin Orange,California; a research scholar at George Mason University Interdisciplinary Center for Economic Science; and a Fellow of the Mercatus Center.  But Wait!  There’s more:  

In 2002, Dr. Vernon Smith was awarded a Nobel Prize in Economics for his work in behavioral and experimental economics.  Most of the research that earned Dr. Smith the Nobel Prize was conducted at the University of Arizona between 1976 and 2002.

Then, at the age of seventy-eight, Dr. Smith spoke publicly for the first time about having Asperger’s Syndrome, a developmental disorder on the Autism Spectrum.  Social deficits, communication difficulties, stereotyped or repetitive behaviors and interests, and cognitive delays often characterize these disorders. 

Thank you, Dr. Smith, and Happy Birthday!

******************

I wonder….  Who—other than Vernon, and perhaps his mother—would have predicted his outstanding achievements?  mh

Entrepreneurs, Capitalists, and Income Inequality

by Helping Families Flourish, posted in Flourishing Article

Originally published in Flourishing January 2012.

In 2009, there were 211,254,000 Americans over the age of fifteen who earned income.  If you earned more than $205,000 in 2009 you were in the top 1%.  If you earned $55,301 or more, you were in the top 20%.  Median household income in 2009 was $49,777. * 

So, for those of you in the top 1%, please know that I appreciate that you don’t have to be on Wall Street, much less the head of Goldman Sachs, to earn at that level.   I also know that none of you started in the top 1%, and I know that concerns about falling from the 1% can keep you awake at night.  Nobody wants to travel backwards in life. 

For the rest of us, it might be helpful to ask, who are the 1%?  The answer is that they come from all walks of life, but they generally fall into three broad categories.

Many of the top 1% of income earners in Americaare small business owners or entrepreneurs.  An entrepreneur can be defined as someone who acts to identify and fulfill the needs and desires of others in the marketplace in an attempt to earn money over and above the cost of acting; e.g., to earn a profit. 

Entrepreneurship—or running a business—involves every bit as much creativity as oil painting or novel writing. It requires imagination, understanding of the relevant tools and resources, and combining them into something new and different and valuable to others.  It’s hard work, even if—and especially because—it’s mostly mental work.  Very few people want to think as much, work as hard, take as much personal risk, or assume as much responsibility as is required of the successful entrepreneur and small business owner.

Others in the top 1% of income earners inAmericainclude highly skilled professionals, such as doctors, lawyers, executives, athletes, and entertainers.  Let’s give them their due; most of them work really hard, put in very long hours, and they have to study and train continuously to keep up with the demands of their professions.  For better or worse, most of us are lacking either the candlepower, or physical attributes, or work ethic that it usually takes to succeed in these challenging fields of endeavor.

That brings me to the capitalists, who make up a substantial portion of the 1% and much of the top 20%.  Most of today’s capitalists are people just like you and me.  In fact, they include you and me.  So, what do we do that makes us capitalists?

We do two things, and each is an incredibly valuable service to our fellow human beings; and each was an essential factor in the advance of our species from cave-dweller to homeowner, from fruit scavenger to grocery shopper.  The two things?

We defer consumption (we wait); and B) We assume risk.

Deferred consumption (waiting) was and is essential to human advancement for the simple reason that the production of food, clothing, and shelter takes time.  While we capitalists are waiting for the return of our money, entrepreneurs are using it to build and finance factories, houses, and automobiles; to create and market cell phones; to plant and harvest crops; and to do a million other things that take both time and money—a lot of time and a lot of money.  Because we wait for the return of our money (our capital), entrepreneurs and businesses can offer their hourly or salaried employees a regular paycheck.

We capitalists also bear the risk that the money we’ve saved and invested (rather than consumed) will be lost.  While the worker expects to be paid regularly, usually at least once a month, the capitalist may have to put his money at risk for years while awaiting a return on his investment. 

Sometimes, of course, two or more of the roles of entrepreneur, professional, capitalist, and employee are combined in one person.  And for each of those functions, it’s reasonable to expect compensation—sooner or later—depending on the terms and performance of each role. So now, let’s consider the fact of income inequality. 

First, although members of each of the three top earning groups I’ve just discussed are typically very smart, work really hard, and are very disciplined; that’s not the only reason they are in the top 20%, or even the top 1%.  We know this, because there are millions of smart, hardworking, and disciplined people, who are not in the top 20%.

The most basic reason that people make it into the top tiers of income earners is that there is a significant demand for who they are, or for what they do, or for what they’re selling—and they fulfill that demand more effectively or more completely than their competitors.  Each and every day, millions of Americans, and billions of people around the world, make purchasing decisions.  Those decisions ultimately determine what every product and service will cost, how many of each will be produced, and who will be rewarded.

If you’re a really good soldier, marine, or sailor; or teacher, or policeman, or fireman; or if you’re working in any of the thousands of worthy occupations from which we all choose, and you’re not in the top tiers of income earners, that may not seem fair.  But, of course, each of us makes our own “purchasing decision” when we decide what kind of work we want to do.   

We know going in what the potential of any job or career is or might be.  That potential is set by the demand for our occupation, how well we perform in it, and how many others are competing with us for a limited number of jobs, customers, clients, patients, investment opportunities, etc.

For example, investment bankers generally earn more than accountants, because, although accountants may be just as smart and hard-working, they are usually less tolerant of risk.  There are many more good accountants, therefore, than there are really good investment bankers.  A good chef will usually earn more than a short-order cook for very similar reasons.  In any field, skill and the willingness to tolerate risk and uncertainty are rarities, and they are usually accompanied by higher compensation. 

Which brings me to the concept of The Pyramid of Ability and The Law of Comparative Advantage. 

When it comes to playing basketball, I’m no Michael Jordan.  Heck, I’m no Jay Hrabik.  You may not know Jay, but he was the best player on our high school basketball team. (I was the 25th player on a team of 12.)  After serving in the U.S. Army for three years during theVietnamera, Jay became a CPA; but I’m getting ahead of myself.

After high school, and before Jay enlisted in the Army, he and I worked together at Bike’s Burger Bar.  Though Jay still disputes it, our skills as hamburger flippers were about equally developed.  I’m just guessing, but in hamburger flipping, Michael Jordan could probably have kept pace with either of us.  My point is that on the pyramid of ability, the three of us may have been equally talented hamburger flippers, and if we had all held that job at that time, we might have earned similar incomes. 

Again, I’m just guessing, but it’s very possible that Michael Jordan could have become either an investment advisor or an accountant.  On the pyramid of ability with regard to numbers, Jay, MJ, and I may have been similarly skilled, and we might have earned similar incomes, just as in flipping burgers. 

The good news for Jay and me is that fewer people can qualify to be accountants and investment advisors than can flip hamburgers.  That helps to explain why we gave up our jobs at Bike’s Burger Bar. 

But, Michael Jordan not only waived the opportunity to flip burgers, he passed on the chance to become either an accountant or an investment advisor.  That may not have been good news for the few people who would have become MJ’s clients, but it was great news for the millions of people who enjoyed watching “His Airness” play basketball. 

That’s The Law of Comparative Advantage, which probably also explains why Michael Jordan is making underwear commercials, and I’m not.   Neither, as far as I know, is Jay.

Do I resent the fact that Michael Jordan is in the top 0.01% of income earners?  Would I be better off if Michael Jordan earned less than he does?  Is Michael Jordan somehow taking something away from me? 

If Jay had grown up in another town, would that have made me a better basketball player?  If Michael Jordan had earned less money, would I have earned more?

The answers to all of these questions are obvious:  No!

Now, imagine that instead of becoming the greatest basketball player of all time, Michael Jordan had become a billionaire oil producer; or a billionaire investment banker; or a billionaire movie star. Are the answers any different? 

They are not.  Each of us is judged in the marketplace by our employers and our potential employers, our customers and our potential customers, our clients and our potential clients, our fans and potential fans.  Through their purchasing decisions, they tell us what our products and services are worth to them, and we can choose whether to provide them, or not. 

The incredibly wide range of products and services—and the equally wide  range of qualities and skills—offered in the marketplace, explains why there is such a wide range of income. 

Sometimes, we may feel we’re being judged unfairly or inaccurately.   But if that’s truly the case, it’s our responsibility to seek other markets or to develop new skills.  mh

*http://politicalcalculations.blogspot.com/2010/12/thats-your-us-income-ranking.html

America’s Anne Frank

by Helping Families Flourish, posted in Flourishing Article

Originally published in Flourishing December 2011.

November 11, 2011—Veteran’s Day—I was privileged to be in New York City, attending Nick Murray’s  Behavioral Strategies Conference.   I attend Nick’s conferences whenever I can, for the same reasons that I read his books, essays, and newsletter: Twenty years of reading Nick Murray has not just made me (I hope) a more effective advisor; it has (I know) made me a better husband, father, grandfather—and a better American.

As one example, in the March 2010 issue of his newsletter, Nick reviewed and recommended Delayed Legacy, by Conrad Netting IV.  Conrad’s father was the same age as my father, and like my dad, Conrad John Netting III set out to do his part to rid Europe of the Nazi scourge.  From June of 1944 through May of 1945, Ted Harvey walked and belly-crawled across Europe—from Omaha Beach through France, Belgium, and Germany—to the banks of the Elbe River.  Conrad Netting’s job was to provide air support for soldiers like Ted.

So, even before Allied infantry forces were fighting their way through the hedgerows of  Normandy, Conrad Netting was skillfully piloting his P-51 Mustang on missions to Berlin, Frankfurt and other German industrial centers.  Then, while on similar missions  after D-Day, Conrad—like many other courageous young pilots—didn’t hesitate to drop out of the clouds to take on German ground forces whenever the opportunity presented itself. 

It was on just such a mission on June 10, 1944 , as he strafed a German convoy—effectively saving the little French town of Saint-Michel-des-Andaines—that Conrad Netting III became a casualty of war.  Five weeks later,  his bride, Katherine Henderson Netting, gave birth to their son, Conrad John Netting IV.  (Look closely and you will see that Conrad’s P-51 was named ConJon IV.)

Katherine never remarried.  She packed up her husband’s belongings, and the many letters that had passed between her and Conrad, and stored them all—along with her memories—in a place that was to remain private for nearly fifty years.

On July 4, 1994, a year after his mother’s death, Conrad Netting IV learned about the foot locker stamped with his father’s name.  For the next decade, he explored—at home, and with the gentle people of Saint-Michel-des-Andaines—his long-delayed legacy. 

I bought Delayed Legacy on Nick Murray’s recommendation in April of 2010, and I’ve returned to it many times.  I never expected to meet its author.  But, in New York City on Veteran’s Day– 2011, Conrad Netting IV—who Nick Murray had likened to Anne Frank for the illustrative power of his personal story—autographed my well-worn copy of his book.  As I visited with Conrad, I found him to be just as charming as his book is wise. Katherine had raised a good man! I don’t know that I’ve ever felt so honored.

Today, Conrad Netting IV is a CPA and financial advisor in San Antonio, Texas, the city in which he was born.  You can get his book at Amazon or from Barnes and Noble, but I’ll be happy to order an autographed copy for you, directly from Conrad.  Just ask.  mh

Death: From Mystery to Solvable Problem?

by Helping Families Flourish, posted in Flourishing Article

Originally Published in Flourishing December 2011

Elsewhere in this newsletter, I mention the fact that when I was born, human life expectancy in the United States was 62.9 years.  When my father was born in 1917, it was about 56 years.  A white male born in 2004 had a life expectancy of 75 years, and a white female had a life expectancy of more than 80 years. Do you detect a trend here?  This essay is a thought experiment, but not just a thought experiment:

Robert Freitas of the Institute for Molecular Manufacturing in Palo Alto,California estimates that eliminating a specific list of 50% of currently preventable conditions would extend human life expectancy to …yes, 150 years.

Now, let me really freak you out:  A laboratory at the University of Arkansas has managed to genetically alter worms to extend their life expectancy more than tenfold.  As a result of similar experiments, Dr. Cynthia Kenyon at the University of California now says that “People have always thought that, like a car, our body parts eventually wear out.  But we found out that over time, when one gene was manipulated, the worm remained youthful – in all ways – so that age-related diseases were also postponed.” 

Obviously, we’re not worms, but like worms we are DNA-driven organisms. The first Human Genome Project, completed in 2000, cost $2.7 billion.  At about the same time, Dr. Craig Venter sequenced his own genome for $70 million.  By 2009 it was possible to get a genome sequenced for less than $5,000, and like computing power, the cost and time required for genomic sequencing are accelerating toward zero.  How long will it be before treatments and cures and manufactured human organs are genetically tailored to each individual? I don’t know, but Ray Kurzweil, author of The Singularity is Near, points out that AIDS drugs that cost $30,000 per patient per year fifteen years ago, now cost about $100 per patient per year; and they work more effectively now, too.

The struggle against aging and death has been going on for a long time.  Because we value life, that struggle is the most natural thing we could do.  I expect that most of us will fight against aging and death to the very end of our lives; I know that I intend to do that very thing.  This is not intended as a religious statement, but I have never believed, as some do, that the purpose of life is death. The purpose of life, I believe, is to live it. And maybe, just maybe, it’s time to start thinking about the death of—or at least the radical postponement of—death.

My purpose in this essay is not to hold out an unreasonable hope for radically extended life expectancy for those of us already well past our physical prime.  But, as we close the old year, I would like for you all to think about what it might mean for your financial plan, if you were to live just 15 years beyond your current life expectancy. You might then want to ask yourself what it would mean to your financial plan, if your children or your grandchildren could expect to live to 150 years.  I freely confess, I don’t have the answers – or at least not your answers – but I’m convinced that these are becoming important questions.

And now, since the rest of your life starts today, take good care of yourself; and please—have a Merry Christmas and a Happy and Healthy New Year!  mh

Save The Children

by Helping Families Flourish, posted in Flourishing Article

Previously published in Flourishing November 2011.

You’ve probably heard (or read) about Amy Chua, the perfection demanding “Tiger Mother”.  This essay is not about her.  But it is about how to get your teenager to clean her room, to take responsibility for setting her own goals, and to get her homework done well and on time.

Parents all over the world, regardless of political, economic, racial, or religious views, love their children; and they want them to become happy and successfully independent adults.  The trick for most parents—perhaps especially, affluent parents—is to provide their children with everything they need, and some of the things they want, without creating a sense of entitlement; in short, without spoiling them—and without nagging or threatening them.  How can today’s parents instill the critical values that will help their children stand on their own two feet as adults and become active, contributing members of society?  Where can today’s parents find answers?

We all know about Dr. Spock, though I myself never read him.  When my children were growing up (1968-1994), I relied on PET (Parent Effectiveness Training), as taught by Dr. Thomas Gordon.  I was hardly the perfect parent—Linda was much better—but all four of our children are independent, successful adults; and I’m grateful that I had PET.

But, the world has changed.  Today’s young parents have far more resources available to them than we had, but they also face more and greater challenges.  I love my grandchildren, and though I can project an incredibly bright future for them, I worry about the temptations and distractions they face in today’s fast-paced world.  I don’t envy my children’s parental challenges and responsibilities.

I try to mind my own business, too, but I’ve just read a wonderful little book—a twenty-first century Dr. Spock or PET—and I’m passing it along to all my kids.  Some of you may want to do the same.

The book is The Entitlement Trap, by Richard and Linda Eyre, and it was just published on September 6, 2011 by Avery (Penguin).  It’s subtitle is How to Rescue Your Child with a New Family System of Choosing, Earning, and Ownership.  In truth, the term rescue may be an overstatement, but it effectively communicates the urgent need for solutions that many of today’s parents feel.  The Entitlement Trap lays out the principles, strategies, and tactics—with suggestions for practical and tactile tools—today’s parents need to move beyond nagging to counseling and inspiring.  It applies specifically to ages 4-16.  It’s available at Amazon for $10.98, a discount of $7.02.  I recommend it for every parent—and every grandparent, too.  mh

The Half-Life of the Welfare State

by Helping Families Flourish, posted in Flourishing Article

Originally Published in Flourishing August/September 2011

Social Security is projected to exhaust its trust fund in 2036. Medicare will be out of cash in 2024. Technically speaking.

In reality, both systems are already in the red, because there are no actual assets in those trust funds; only government IOU’s. As Social Security and Medicare begin to pay out more than they take in from payroll taxes, they’ll scarf up virtually the entire federal budget and guarantee a steady increase in our already dangerous national debt. Add to that the current low interest rate environment (0-2%), and ask yourself what happens when we’re paying a more normalized 5% rate on upwards of $17 trillion.  Why else do you think the Federal Reserve is determined to keep rates so low?

Everyone already senses this, of course, but most people don’t yet understand that the current budget crisis heralds the beginning of the end of the Era of Entitlements.  Though Social Security has been around since 1935, the growth of cradle-to-grave entitlements accelerated in the 1960’s and ’70’s, when we decided that we  could subsidize everything for everybody. From education, to housing, to medical care, to food stamps, to the arts and entertainment, to retirement; a consensus of Americans decided that a policy of “from each according to his ability, to each according to his need” would be a fine thing. The wealthiest among us would somehow pay for it all.  Or most of it, anyway.  But it was an illusion. The 2009 Patient Protection and Affordable Care Act  (PPACA) was the last gasp grasp of that philosophy, and because the American people—having finally realized who would really pay—overwhelmingly opposed PPACA, it had to bullied through Congress in the dark of night.  That Act, following hard upon the government-led bums’ rush into housing (1995-2006), and the subsequent $trillions wasted on bailouts and stimulus packages have pulled back the curtain.

So, we’re now intimately acquainted with the life cycle of the entitlement hoax. Benefits, bailouts, and tax breaks are passed by the Congress and millions rush to claim them.  Marginal taxes rates can never be raised fast enough to keep up with an unending stream of entitlement promises without triggering a recession, so Congress makes up the difference with massive deficit spending and an ever-increasing debt burden—and we get a recession, anyway.  The Federal Reserve sops up the government’s debt with an increasing supply of inflationary electronic dollars—until we reach the point where we are now.  Over a (pork) barrel.

The task of our generation, and perhaps the next, is to preside over the dismantling of the voracious entitlement monster we’ve created.  We can now see that it was the unprecedented wealth created by the entrepreneurs, savers, and investors of our parents’ generation that made the welfare state seem plausible. In particular, the post-World War II boom in Americaand Europesupported the fantasy that we were rich enough to afford such an immoderate system of cradle-to-grave entitlements.  But, despite the incredible wealth creation of the past sixty years, the Age of Entitlement is now kaput.  We are living in the Age of Recompense.  Without explanation—since none should be needed—let me just assert that that’s a good thing.  It means that working, saving, and personal responsibility will soon be in vogue, and not just for those formerly willing, but for everyone.  Well, I guess that is the explanation, isn’t it?

The science of Physics tells us that a radioactive isotope decays perfectly according to first order kinetics.  For example, the half life of the Carbon 14 isotope is 57.3 centuries, which means that in 5,730 years, one half of any given quantity of Carbon 14 will have decayed into its surroundings.  By its nature, Carbon 14 is physically unsustainable.

As an extreme, and, therefore, educationally valuable case, consider the PIIGS (Portugal, Italy, Ireland, Greeceand Spain).  Over the last forty years, they were all built on the self-same ideal of cradle-to-grave entitlement; and here they are, begging the world for bailouts.  The entitlement philosophy is economically unsustainable, because compound interest, being mathematically akin to radioactive decay, guarantees that sooner or later entitlements will consume all of a country’s capital, and then destroy its credit, too.  With the demonstration and dissemination of that knowledge provided by the sad spectacle of the PIIGS, the remaining half-life of our own welfare state will not be measured in centuries, perhaps not even in decades.  mh

Adolph and Me

by Helping Families Flourish, posted in Flourishing Article

Originally Published in Flourishing August/September 2011

About a year ago, I wrote an article for this newsletter about the 45th reunion of my high school graduating class.  In that article I mentioned that, during my high school days, I’d worked for A. A. (Adolph) Reisig,  “…but that’s a story for another day.”  Well, that day has finally arrived.

I don’t know what made me think of Adolph again just now, any more than I can excuse the fact that I haven’t seen him since 1996, when we were both in Russell to witness Bob Dole’s announcement of his vice-presidential running mate.  We had spotted each other onMain Street, and the first thing he wanted to know, “What business are you in now?”  That was sooooo Adolph!

I told him, and he replied, “You know I have some investments, too.” 

“Yes,” I said, “I do know that.  You were the first person who ever talked to me about the market.” 

“Well, how are you doing?” he asked, but before I could answer, the national media had spotted him, and I slipped back into the crowd.  I never saw him again.

I was fourteen years old, when Adolph first knocked on our door.  He and his family lived just a few houses down the street, and he’d come to ask my dad, if I might like to earn some money that drizzly spring day; and my dad assured him that I would.  So, I climbed into Adolph’s pick-up, an aging but well-maintained Dodge, proudly emblazoned with the name A. A. Reisig Oil Co.  Among his many small-business enterprises, Adolph owned the local Texaco Bulk Plant.  He distributed gasoline, diesel fuel, motor oil, kerosene, anti-freeze, and dozens of other products to the farms, ranches, and Texaco service stations in and around Hays,Kansas.  He also provided and maintained both underground and above ground storage tanks.

So, that first Saturday on the job, my assigned task was to climb down a ladder into a mud pit—I’d guess that it was about twelve feet deep—to wrap a chain around a ten thousand gallon gasoline storage tank.  For $1.25 an hour (and my dad’s approval), I would have done almost anything, and compared to some things I’d done, this was a walk in the park.  The reason I had the job, incidentally, was simply that I was the skinniest kid—if you can believe it—that Adolph could think of that day.  Despite the wet weather and the dirty job, I had some fun and made some money.  I wasn’t too proud to ask Adolph if he had anything else I could do.

That was the first day.  Over the next three years, always for $1.25 an hour, I wrapped a lot of chains around a lot of tanks for Adolph.  I unloaded boxcars filled with 55 gallon drums of bulk oil products and anti-freeze, and thousands of cases of motor oil.  I delivered them to Adolph’s warehouse on a flat bed winch truck and unloaded them, using a small hydraulic lifting platform.  You might think that a skinny teenager can’t or shouldn’t do that kind of work alone, but I could and I did. I developed a strong sense of pride in my work, too.

I scraped and brushed old paint and rust from pipelines and tanks, and repainted them.  I painted warehouse floors and mended fences. I filled delivery trucks with gasoline from overhead storage tanks. 

Adolph was a sportsman, so, on the land that’s now home to the Ramada Inn of Hays, I launched clay targets, so he and his daughter could practice their shooting skills.  When you’re being paid, you don’t get to shoot.  But, I just thought I was a lucky kid to have a dad who knew Adolph, and to have a job that paid so well; and, of course, I was.

Did I mention that Adolph was virtually deaf?  Well, he was, and that made him hard to talk to; not that I had much to say.  What the heck did I know?—about anything?  So, I listened a lot.  Adolph was my dad’s friend, and I learned that he was also a good customer of the lumber yard my dad managed.  I learned that he had a collection of mid-range rental properties, and I painted most of them before my time was up.  He owned a couple of aging motels. With Hays being equidistant fromKansas CityandDenveron Highway 40 (and later on I-70), they each provided him an agreeable income.  Adolph had started his business career with a one-man auto body shop, but it had been closed long before.  I never asked why.

I’m sure that Adolph thought of himself as my mentor.  He told a lot of stories—the kind a kid’s expected to take a lesson from—but there were two things in his life of which he seemed especially proud.

First, he was a lifelong friend of Bob Dole, who had by then become a U.S. Congressman.  They had grown up together in Russell, and Adolph had been instrumental in helping his friend recover from war injuries.  He had also helped raise money to pay for Dole’s reconstructive surgeries.  In fact, that’s how Adolph and my dad had become friends:  In the late 1940’s, cigar boxes stood ceremoniously on the counters of businesses throughout Russell.  In effect, they were collection plates to help Dole and, doubtless, many other young men, who had come home from the war with serious injuries.  

Adolph was about thirty-eight years old when I went to work for him,  and I remember how very proud he was, when he earned his business degree from Fort Hays State University in 1961. That degree meant a lot to him, but I had no idea why.  I wonder, now, at how little I knew about Adolph.

Fifty years later, when I finally was curious enough to google “Adolph Reisig”,  here’s what I learned:  Adolph was born in Russell, Kansasin 1923, and graduated from RussellHigh Schoolin May of 1941.  Two days after the bombing of Pearl Harbor, he enlisted in the United States Marine Corps.  As a nineteen year old member of the First Marine Division, he went ashore on Guadalcanalon August 7, 1942, where he served under Lt. Ray Davis. (Lt. Davis was later awarded the Congressional Medal of Honor for his service inKorea during the Battle of Chosin Reservoir, and he eventually achieved the rank of General.) 

While defending Henderson Field onGuadalcanal, Adolph was wounded numerous times, and suffered the permanent loss of his hearing.  He was evacuated to hospitals inAustralia, until he could be safely transferred to theOaklandNavalHospital, where he spent eleven months, recovering from his injuries.

Back home on the packed-sand prairie of westernKansas, Adolph soon became a successful businessman; which I already knew, of course, and that would have been more than enough for him to have an impact on his community.  But, he also co-founded the Ft. Hays Historical Society, and served for many years as Executive Director of the Ft. Hays State University Endowment Association.  He co-founded the Butterfield Trail Antique Auto Club, and he was active in theMethodistChurch, Lions Club, VFW, Toastmasters, American Legion, the First Marine Division and the Marine Corps League.  With a group called the Rooftop Riders, he made an annual horseback crossing of the Great Divide.

Adolph Alexander Reisig died three years ago, on Saturday, September 27, 2008.  Typically, I didn’t know.  And now, when I finally do know that I’ll never again listen to his queries and admonitions, I miss him.  mh

Steve Jobs Retires

by Helping Families Flourish, posted in eFlourishing Article

I’m sad.

One of the most creative and independent business minds of the twentieth century has told us that he’s about to pass from this world. No, he didn’t say that exactly, but anyone who knows anything at all about his personality knows that he’s not a quitter; and Steve Jobs is quitting.  He’s stepped down, voluntarily, from his $1 a year job as CEO of Apple. 

It never was about the money.  It’s always been about loving life. And, therein lies a lesson for all of us.  Mr. Jobs was an orphan and a college dropout, who – just for the fun and excitement of it – reinvented four industries. 

First, he introduced the personal computer, the Apple I (1976), and later, the Apple II, and the MAC, with its revolutionary graphical-user-interface.  Then there was the movie industry and Pixar, with its revolutionary computer animation technology; Toy Story (1995) was the first.  Then Mr. Jobs set his sights on the music industry, creating the Ipod (2001), so that you can now carry up to forty thousand songs in your pocket or purse.  And, finally, Mr. Jobs reinvented the telephone industry with the introduction of the Iphone (2007).  Given enough life-time, Steve Jobs might well have transformed television and who knows what else; but sadly, that now seems unlikely.  Mr. Jobs has been battling cancer since 2003, and he seems finally resigned to defeat.

Much has been written about Steve Jobs, and I’ve read all that I could find.  Right now, I’m waiting for Walter Isaacson’s biography, Steve Jobs, which is to be released in November by Simon and Schuster.  But, today, I urge you just to read Steve Jobs in his own words here.  His 2005 commencement address at Stanford, Find What You Love, tells you everything you need to know about Steve Jobs’ character and personality.

Yes, I’m a little sad, but I’m still grateful to have lived in a world, and in a country, where a Steve Jobs is still possible.

PATIENCE, DISCIPLINE, and CONFIDENCE in the FUTURE! mh

Age of Rand?

by Helping Families Flourish, posted in Flourishing Article

First published in Flourishing May 2011.

Ayn Rand, born Alisa Rosenbaum in St. Petersburg, Russia, on February 2nd, 1905, was one of the 20th century’s foremost voices for human freedom.  Some of you, no doubt, have read some of her work.  Recently, her most famous work, Atlas Shrugged, was adapted for the silver screen, and Atlas Shrugged, Part 1, was released to more than three hundred theaters in eighty U.S. cities on April 15.  Rand was not just one of the 20th century’s most famous and articulate champions of freedom, she was also the most misunderstood and most slandered.  Since I’m a great fan of her work, and having just seen the movie, I want to share with you a little of what I know about Ayn Rand.

After living through the Bolshevik Revolution, and the economic chaos and political repression that ensued, young Alisa fled the Soviet Union for the United Statesin 1926.  Already conversant in French and able to get around in English, she began her career in the movie industry working for such notables as Cecil B. De Mille.  She later became an accomplished playwright, most famously authoring The Night of January 16.  (My sweetie played Magda Svenson in the Beloit High School Junior Class Play, c. 1963.)

In 1936, Ayn Rand’s first novel, We the Living, which she said was the nearest to an autobiography as she would ever write, was published by McMillan.  It has since sold more than 3 million copies.  Remarkably, in 1942 it was adapted for the movies inItaly.  Though it was censored only a few weeks after its introduction, a digitized version is now available with English subtitles.  I own the 2-DVD set and it is a beautiful film, which one would expect, since it stars Alido Valli and Rossano Brazzi, two ofItaly’s movie legends.

Ayn Rand’s first financially liberating success came in 1943 with the publication of The Fountainheadby Bobbs-Merrill. The book has now sold 6.5 million copies.  Fourteen years later, Atlas Shrugged was published by Random House, championed by that firm’s Chief Executive, Bennett Cerf. Atlas Shrugged has sold over 7 million copies; more than 500,000 in the last year.

The success of her novels enabled Ayn Rand to devote the remainder of her life to building a system of thought – a philosophy – that she would call “Objectivism”.  She wrote and edited several periodicals containing philosophical essays, and cultural and political commentaries.  She played a critical role developing new advocates for laissez-faire capitalism, including, as you may have guessed, moi.  Her influence on American culture has, likewise, been profound. A 1991 survey by the Library of Congress and The Book-of-the Month Club placed Atlas Shrugged second only to the Bible in influence among American readers; admittedly and appropriately, a distant second.

Ayn Rand owed much of her success to the power and directness of her writing style. She was a master of reducing an idea to its clearest and most effective formulation.  For example, she wrote that, “If some men are entitled by right to the products of the work of others, it means that those others are deprived of rights and condemned to slave labor.”  Or, when challenging the view that human perception is unreliable, because it’s limited by the nature of our sensory organs, she would write satirically, “Man is blind, because he has eyes — deaf, because he has ears.” 

Ayn Rand called big business “America’s persecuted minority”, so she is often characterized as a naïve apologist for crony capitalism; but nothing could be further from the truth.  She vehemently condemned the “type of businessmen who sought special advantages by government action.”   

The most controversial aspect of Ayn Rand’s philosophy, ethical egoism (not to be confused with psychological egoism), is also one of the most misunderstood. The point of her egoism was not to advocate the pursuit of one’s own interests at the expense of other people.  Rather, she rejected the model of conflicting interests. She rejected not only the subordination of one’s own interests to those of others, but also the subordination of others’ interests to one’s own.  Though her ideas were original, in practice they were not a radical departure from what most of us regard as mere “common sense”.  In everyday parlance, she was an advocate of “win, win”.

Ayn Rand identified the roots of the 18th century Age of Enlightenment—the philosophical movement that led to America’s founding—in the rediscovery of Aristotle by St. Thomas Aquinas.  She always insisted that Aristotle was the greatest of all philosophers, and that St. Thomas Aquinas was the second greatest, her own atheism notwithstanding. For Ayn Rand, as for Thomas Jefferson and others among our founders, the Aristotelian recognition of the fact that rational human interests, however diverse, are naturally harmonious was (and is) the proper moral foundation of human relationships and a free society.  Preserve that thought.

Human progress is often driven by creative and controversial people working outside of the so-called establishment, and Ayn Rand was certainly that.  But, her philosophy is in many ways an extension, clarification, and moral defense of the principles that guided our founding fathers; and thanks to the popularity of her novels, her inspiring vision of the majesty of the human mind, and her defense of the ethical necessity of human liberty Ayn Rand has already affected and improved the lives of millions.  I think it’s very likely that in fifty years her ideas will be the foundation of America’s predominant secular philosophy.  Unfortunately, I won’t be there—well, I might not be there—to see how it all works out.  mh

Of Pawns & Kings

by Helping Families Flourish, posted in Flourishing Article

First published in Flourishing May 2011.

Louis XIV was King of France for seventy-two years, and though he was not the worst of Kings, he did lead France to the brink of bankruptcy through his lavish and self-congratulatory spending. Mark Twain famously said that history doesn’t repeat itself, but it rhymes.  Indeed.

We Americans are about to begin a national discussion of that vast, unfunded taxpayers’ liability known as Social Security.  (The discussion is bound to include all entitlements, but for the sake of simplicity, I’m focusing on Social Security.) For that discussion, we can thank President Obama’s National Commission on Fiscal Responsibility and Reform1.  Even the Social Security Administration confirms that sooner is better than later. (See inset p.2)

For the better part of seventy-five years, most people have believed that their Social Security contributions were being set aside for their retirement.  Not for one second did my father believe that his pension checks came from his children’s pockets. But in fact, they did.  The money he had deposited into Social Security had been spent for programs and projects designed to assure an abundance of goodies to a mixed assortment of voting blocks. That process continues unabated and enhanced today.  And, in that process and others of equal deception, we have become a collection of political pawns, bribed and manipulated with our own money.  

Unlike in my father’s time, virtually everyone knows today that there is no Social Security “lockbox”.  There is, instead, an unfunded liability awaiting the American taxpayer of this and succeeding generations in excess of $7.7 trillion2.  That’s just for Social Security, which is itself dwarfed by the unfunded liabilities of Medicare, etc.  I know what Dad would say about that: “Holy smoke!”  But, he was a better man than I am.

I don’t need to tell the readers of this newsletter that one of the most important motivations for private saving and investment is the need to provide for—you’ll forgive the anachronism—old age.  As in my father’s case, one “unintended consequence” of Social Security has been to create the illusion of saving and to reduce the apparent need for disciplined investment in IRA’s, 401(k)’s, and other retirement savings opportunities. Not surprisingly, the rate of saving in the United States has declined precipitously over the past seventy-five years.

The Social Security system has not only served to undercut the motivation to provide for old age and retirement by means of private saving and investment, there is a second “unintended consequence”.  It has also impaired the average American family’s ability to actually do so.  OASDI withholding (7.65% of wages and salaries) is nearly double what the average family spends on gasoline3; and I’m not counting employers’ contributions to Social Security.  Each of these two “unintended consequences” were entirely predictable—and were predicted by free-market economists4—but it gets worse.

Ask yourself this question:  “What if the money paid into Social Security had actually been invested in real, physical capital assets—American business enterprises, for example—instead of taxpayer-backed IOU’s?”  The answer is that in a relatively free economy, that investment really would have been the source of future financial security, just as private savings and investments are today.  Instead, three generations of King Louis wannabes have created a promise to levy unfathomable taxes on future generations, while they consumed the Social Security tax revenue that should have gone into saving and investment.  Now, the future has arrived; and it’s us.
At the most basic level, the coming debate about entitlement reform will serve to highlight a conflict of philosophies.  America was founded on the philosophy of Individualism; of the unalienable right of each individual to pursue his own happiness in his own way, asking only that he use neither force nor fraud in that pursuit.  Social Security—and Medicare, Medicaid, and Obamacare, as well—are premised upon the philosophy of Collectivism or Social Contract6; of subordination of the individual’s freedom to a presumed and so-called “greater good.” 

The scarcely concealed premise of collectivism, though, is that the average individual is too stupid or too lazy to plan and manage his own life; and therefore, he must rely on the government to rescue him.  In practice, we now know, when the power of government intervenes between the real providers—the people whose work, savings, and investments are ultimately to be taxed—and the receivers, “to rely” becomes “to demand”.  This is amply illustrated today by the European PIIGS (Portugal, Ireland, Italy, Greece, and Spain).  Are we next?

The first step in any recovery is to recognize the problem.  With the report and recommendations of President  Obama’s National Commission on Fiscal Responsibility and Reform, we can now see clearly that the consequences of lavish entitlement programs—not just in Europe, but here, too—are the eventual economic destruction of the nation through the undermining of real saving and the compounding of the national debt.  The bond rating agencies have issued their warnings, too.

There is also, I’m sorry to report, the potential for geriatric holocaust.  That will be the result when millions of elderly people—the Baby Boomers, most likely—without savings of their own, wake up to find that their children and grandchildren have grown tired of supporting them; or are simply unable to do so.

So yes, just as the doomsayers tell us, we do face a growing debt threat of runaway inflation and/or worldwide deflationary collapse. But, the doomsayers underestimate the American people.  We’re only beginning to see the nature of the game that’s been played by our King Louis wannabes, and we don’t like being pawns.  Moreover, we won’t submit to the indignity of stealing our grandchildren’s future.  We’re better than that!

The history of American free enterprise informs us that for every human need and desire, a free-market solution will sooner or later emerge, that is better and cheaper than anything that government can provide. And, with the report of the National Commission on Fiscal Responsibility and Reform to prompt and guide us, we’ll soon begin the tortuous process of dismantling and replacing Social Security, Medicaid, Medicare, Obamacare, and other bankrupting entitlements with free-market solutions.  In that process, which will take a generation or more to complete, we’ll reignite the entrepreneurial flame that defines America, and put every adult citizen back in charge of his or her own life.  ….Now, I can hear someone asking, “But, what if…?”

Call me an incurable optimist, or just call me stubborn—I see myself as a student of history: If the federal government defaults on its debt, or if the Federal Reserve creates a runaway inflation, or both;  history tells me that I will—more than ever—want to rely on myself, and on the earnings and resources of America’s great companies, to secure my livelihood and protect my family’s future.  mh

  1. http://www.fiscalcommission.gov/
  2. http://www.heritage.org/budgetchartbook/unfunded-liabilities-entitlements
  3. http://www.creditloan.com/infographics/how-the-average-consumer-spends-their-paycheck/
  4. Man vs. The Welfare State, Henry Hazlitt, Arlington House, 1969.
  5. Leviathan, Thomas Hobbes, 1651.