Ideas Having Sex–Redux

Originally published in Flourishing September/October 2012 

Some time ago (April 2011), in an article entitled Ideas Having Sex, I shared with you one of my favorite books, The Rational Optimist1, by Matt Ridley.  In contrast to the financial media, who have a vested interest in promoting crises and conflicts, Ridley’s fundamental message is that optimism is the rational approach to life.

According to Ridley, who is a Scottish geneticist, human beings long ago learned the benefits of voluntary and mutually beneficial exchange.  (You may have noticed that those who have not learned the art of such exchange are most often found to be criminals or demagogues.)  The art of voluntary and mutually beneficial exchange, especially here in America, has become part of our cultural DNA.  We call it “win-win”, and it explains why our unique experiment in economic freedom created a cultural and economic expansion that snowballed into an empire of benevolence and wealth.

Tom Gardner, co-founder of the Motley Fool newsletter companies, recently endorsed2 Matt Ridley’s theme, “Exchange is to cultural evolution as sex is to biological evolution.”  And the extension, “Most powerful of all is the exchange of ideas.”  Paraphrasing Gardner:  …while the exchange of hard goods is at any given moment a zero sum enterprise, an idea can be shared to an infinite degree – hundreds or even billions of people can benefit from a single idea.   Moreover, ideas may combine with a virtually infinite number of other ideas, thus creating exponentially expanding human benefits; as, indeed, they already have.

Gardner points out that in today’s networked world, the benefits of voluntary exchange of ideas include greater literacy, greater transparency, more shared best practices, and deeper empathy and mutual awareness than ever before in human history.  Our lives are richer because of the Internet and wireless communication technology. 

I recently thought to download from Amazon’s Cloud Player to my iPod a song I’ve always enjoyed and taken inspiration from, Lacy J. Dalton’s hit single, The Boys of 16th Avenue3.  It was written by Thom Schuyler in 1983, and recorded by Dalton in the same year.  It celebrates the “million dollar spirit” of aspiring young musicians, who give up everything else to follow their dreams to Nashville.  I hadn’t heard it for a long while, but when I played the song a few days ago, I was struck by this line:

There’s cowboys, drunks, and Christians,
Mostly white and black and blue.
They’ve all dialed the phone collect to home
From 16th Avenue.

Forget for a moment the remarkable fact that my iPod (for which I paid less than a hundred dollars) has more computing power than all the Apple computers on the planet in 1983; what struck me about those lyrics was—though I’ve placed more than a few collect calls in my time—that I can’t remember the last time I saw a telephone booth.  And, who among us does not now carry a smart phone they can’t live without? 

I have no opinion on the future of smart phones; the iPod, or of Apple, the company that makes and sells it; or of Amazon, the ubiquitous, world-wide Internet shopping mall.  But I’m very sure that the future of the world economy is not in the hands of criminals or demagogues.  These people do exist—indeed, they swarm—and they are an impediment to progress.  But, the future is, as it has always been, in the hands of the creators—people who today may have, like the boys of 16th Avenue in 1983 or the cofounder4 of Apple in 1976—little else than a million dollar spirit, one good idea, and a burning desire to manifest their talents in the marketplace of voluntary exchange.  Today, ideas are dispersed, democratized, and mated with other ideas at light speed; and many are then concretized in the lives of millions of people through investors like you and me, and the managers and marketers and laborers of the world’s great companies.  The iPod is just one example. 

The proliferation and mating of ideas has been expanding human horizons for nearly one hundred thousand years; and that omnipresent, long-term trend is not seriously threatened by today’s faux-populist politicians or by the vainglorious sideshow we call “network news”.  Still, I can appreciate that despite decades, centuries, and millennia of accelerating improvement in the human condition, our contemporary politicians and pundits have the volume and circuitry to influence our thinking in ways we may not fully realize.  For example, during every market setback, I hear people echoing CNBC and its ilk with questions like,  “But, what if the economy/market doesn’t recover?”  I know that some advisors, in response to such queries, are telling people to turn off the television, and that’s probably fine advice, as far as it goes.  But, I still think it wouldn’t do any harm, and it might do much good, for investors to read—for calming, historical perspective—books like The Rational Optimist, by Matt Ridley.  For another setback is surely coming, though we cannot know when or from what level. mh

1.  http://www.amazon.com/The-Rational-Optimist-Prosperity-Evolves/dp/006145205X

2.  http://newsletters.fool.com/   (subscription required)

3.  http://en.wikipedia.org/wiki/Thom_Schuyler

4.  Steve Jobs, by Walter Isaacson, Simon and Shuster, October 24, 2011.

The Catallaxy Revisited

Originally Published in eFlourishing Issue 19, June 15, 2010

 “We see in almost every part of the annals of mankind how the industry of individuals, struggling up against wars, taxes, famines, conflagrations, mischievous prohibitions, and more mischievous protections, creates faster than governments can squander, and repairs whatever invaders can destroy.”

– Thomas Babington Macaulay (1800 – 1859), quoted in The Rational Optimist, by Matt Ridley.

Because I am a confirmed optimist, some of you may think that I don’t understand how bad things are out there. I assure you that I do, and this article is offered in evidence.

According to Neil Barofsky, special investigator general for TARP (Troubled Asset Relief Program), the United States has now spent approximately $3 trillion on programs designed to heal our financial system and replace jobs lost during the recent financial crisis and recession.

As I mentioned a couple of weeks ago, the European Union (EU) has created a loan fund of almost €1 trillion (Euros). The fund’s purpose is to rescue euro zone countries like Portugal, Italy, Greece, and Spain – unfortunately, but accurately, referred to in the media as “the PIGS”. The European Central Bank (ECB) has announced that it’s ready to buy both government and private bonds “to ensure depth and liquidity” in the market for deadbeat debt. The Federal Reserve, the Bank of Canada, the Bank of England, the European Central Bank, and the Swiss National Bank have all agreed to help facilitate this bailout. This is a spendthrifts’ consolidation loan, complete with austerity mandates that, in my opinion, will ultimately lead to violence. In Europe, I believe that that’s the good news.

Just as in our mortgage meltdown, banks are at the epicenter of the current European debt and currency crisis; and German banks are some of the most highly leveraged institutions in the world.

I could go on, but I think the point is made. Ballooning budget deficits, already out of control prior to the orgy of bailout and stimulus spending, are beyond ineffective; in my opinion. (I have intentionally omitted the $100 trillion of unfunded liabilities associated with Social Security and Medicare, and the truly negative budget implications of Obamacare that don’t kick in until 2014. What would be the point?) We should learn from the poor Europeans, whose cradle-to-grave entitlement dogma is rotting their once-great civilizations.

I get all that, and I understand why people are concerned.

Nevertheless, I remind you that some American non-financial corporations have more cash on their balance sheets than at any time in more than fifty years. That does not mean that there are no opportunities for businesses to expand and profit; there are many. Rather, with interest rates on savings still less than 1%, increasing corporate cash may be a measure of the irrationality and unpredictability of government policy. Prudence trumps profit.

Last week, I suggested that you read The Rational Optimist: How Prosperity Evolves, by Matt Ridley. That recommendation stands, and will stand; it’s an important book, and one that is destined to become a classic. It reveals that throughout human history, voluntary exchange in the marketplace has been the golden goose of human progress. Exchange is to human nature as nest building is to birds – it’s what we do. Over the past two centuries, exchange has been greatly facilitated by advancements in transportation and communication technologies. Progress has gone viral. Today, American business represents humanity performing its highest functions at an extraordinary level of proficiency; it is the most rational, most innovative, most life-serving, most achievement oriented, and the most forward-looking institution in the history of the world.   

Be an optimist.

*Deficits: 2008 = $680.469 billion; 2009 = $1.471 trillion; 1Q2010 = $328.929 billion.

Sources:

Heflin, Jay, The Hill, May 20, 2010. http://thehill.com/blogs/on-the-money/banking-financial-institutions/93285-government-has-spent-3-trillion-and-counting-on-financial-crisis

Bureau of Economic Analysis, March 26, 2010. http://www.bea.gov/newsreleases/national/gdp/2010/gdp4q09_3rd.htm

Council of Economic Advisers. http://www.whitehouse.gov/administration/eop/cea/estimate-of-job-creation/

McPheters, Lee, February 3, 2010. http://knowledge.wpcarey.asu.edu/article.cfm?articleid=1857

Bureau of Labor Statistics, U.S. Department of Labor, May 7, 2010. http://www.bls.gov/news.release/pdf/empsit.pdf