Good Summary of "The E-Myth Revisited"

LINK - this is a good summary ,but for those who haven't, get the book and read it! The sequel, "The E-Myth Mastery" I think is very good too, although the first sixty or so pages of it can seem a bit flowery. But once it starts getting into the nuts and bolts about business, it is very meaty I think.

Should a New Entrepreneur Seek Venture Capital?

A lot of entrepreneurs may have dreams of building a business, getting venture capital money, and then building a super great company that will make them rich. I have no personal experience with this (yet anyway), but having studied the subject some, my opinion would be, for a brand-new entrepreneur, do not seek venture capital. Yes, there's the chance you could start the next Google or Facebook and get venture capital and become a billionaire very quickly, but this is extremely unlikely. There's a few bad things that can happen if you are a new entrepreneur seeking venture capital:

1) The business is likely your livelihood. It's how you feed yourself and your family if you have one. And the venture capitalists will know this. If so, they have a lot of leverage over you. They will know if you are desperate or not. This doesn't mean one can't seek venture capital with a new business, but if so, make it where it is purely optional; do not design the business from the get-go where it would absolutely need venture funding. This way, the venture capitalists will not have leverage over you if you can always reject their offer and walk away.

2) You lose freedom and control of your business once venture investors come in. They are in the business to make money, and in exhange for money, you give up equity in the firm, and hence a good deal of control. Now, the company no longer just moves along at the pace you want it to, instead, it has to grow and produce some real results, the kind that the venture capitalists want (it might produce results that are okay with you, but not okay with the venture capitalists). There might be things you want to do, directions you might want to take the business that now you cannot.

3) An inexperienced entrepreneur up against experienced venture capitalists can end up finding themselves made into an employee of their own company. The venture capitalists may well replace you as the CEO with someone much more seasoned and experienced in growing and operating businesses, and you may even find yourself fired from your own company, losing your equity stake.

2 and 3 can be especially stressful if the company is your livelihood. In my opinion, I would first build up a company that I completely own, then, after having built up a level of wealth in this sense, I would look for venture capital when starting up another company. At this point, you are far more experienced as an entrepreneur, maybe even in a position where you could yourself be a venture capitalist. You will have far more leverage over the venture capitalists in the sense that the company is not your livelihood. It is not the primary source of your wealth. You therefore will not be as inhibited about giving up equity in the company and hence control and the venture capitalists will know they can't push you around like an entrepreneur for whom the business is their livelihood.

In addition, two added benefits are that now that you have experience from having built a business already, you are not an inexperienced entrepreneur dealing with the venture capitalists, but rather an experienced one (and thus more able to spot any tricks they might be trying to pull on you), and also, because of this experience, the venture capitalists may be a lot less likely to want to replace you as the CEO, as you're not some inexperienced person in the CEO chair of the company in which they have invested money, but rather a successful person in your own right who already has built a prior successful business, who now is seeking to build another successful business. If anything, that's an incentive to KEEP you in the CEO chair.

I would follow this same strategy regarding partnering with other people to build a business as well. If two or three people decide to partner together to build a business, it can work, but then again, it can be very prone to failing, in particular if the partners' livelihoods are tied to the performance of the business. If two or three people decide to form a company because they feel they can create a company that will make them much richer, it is a lot easier emotionally if each partner already has their primary fortune elsewhere, and thus if the business venture fails, then they've lost money (which can still create hard feelings), but no one is now worrying about how to feed themselves or their family.

Summary of Ways to Build a Business/Wealth

So I just thought I would summarize some various ways to build a business, or wealth anyway:

Franchising and Chaining: This is where you build a business where you create the initial unit, systemize it to make it able to be replicated, and then begin expanding via opening additional units via chaining (where you put up the capital and open additional company-owned units), franchising (whereby you sell a franchise to another person who puts up the capital, assumes the risk, and operates the business according to the systems you have established, and then pays you a franchise fee), or some combination of the two. This can be done with many different types of businesses, in particular with restaurants, hotels, bar shops, hair salons, gyms, car dealerships, etc...new franchise concepts are being created all the time.

Create Brands/Franchises: This is what they tend to do in for example the toy industry, i.e. create franchises whereby in addition to the toys, a whole slew of additional merchandise can be created. Creating such a brand/franchise that is very popular is the Holy Grail in this kind of franchising. Some prominent examples could be Spin Master's Bakugan toys (with a cartoon and tons of merchandise) and Dora the Explorer (a cartoon which Nickolodeon franchised into a whole bunch of merchandise, thus making it a billion-dollar brand).

Although I can't think of any off the top of my head at the moment, I would imagine that franchising in this sense doesn't just apply to toys and cartoons though, it can be applied in other industries as well.

Roll-Up: This is basically where you start a business in a fragmented industry, or buy a business in a fragmented industry, or even buy multiple businesses in a fragmented industry and combine them together, then you take the company public, and use the stock to acquire other companies in the industry to build up an organization with economies of scale, that is greater than the sum of the parts. Like any method, this can be risky though, and I am no expert, but from my understanding there is more to it than just finding a fragmented industry. Two things to remember about a fragmented industry are:

1) Why is it fragmented? Is it fragmented into a bunch of smaller companies just waiting to be consolidated and no one has done so yet, or is it fragmented because the industry is simply structured whereby large firms do not have the advantage?

2) By "fragmented," one means a single, definable industry that is around $10 billion to $40 billion size. For example, the rubber industry is fragmented, but that is a highly-misleading way to look at it, because the rubber industry consists of many smaller actual industries, which can be consolidated. For example, the tire manufacturing industry is part of the rubber industry, but it is consolidated.

There are strategies and ways to go about finding fragmented industries that are good targets for building a company in.

Buy-and-Build: This is very similar to the roll-up strategy, but is done by private equity firms, and instead of taking the company public and using the stock to purchase new companies, they use forms of financing such as debt to be able to buy companies. Again, this has its own share of risks (if the economy bottoms out and the company is in a recession-prone industry, what was a manageable level of debt can very quickly become unmanageable). Private-equity firms will usually use buy-and-build strategies to build up a company that is greater than the sum of the parts, and then either sell the company to a larger private-equity firm, or take the company public via an IPO. Much of the consolidation that has occurred in the various fragmented industries throughout the economy over the past few decades has been due to private equity firms.

Automated Internet Business: This is a business in which is to a good deal automated and exists solely on the Internet, providing a service. I do not know much about these types of businesses, but I am sure that there is much potential for creating such businesses, just one has to think up new ideas. This type of business is one that can be very easy to start, or at least easier to start (requiring no major expenses on land or a building or capital for example), but yet can generate a lot of money for the owner.

Something to remember---the Internet is still very young. Thirty years from now, there will be a whole slew of new Internet businesses that were created whereby many people will be thinking to themselves, "Why didn't I think of that!?" But one doesn't need to try to create the likes of the next Google or Facebook, if anything, that might be involve too much competition. What I am talking about here are small Internet businesses, for example one that you could grow to generate say a few million dollars in income for youself a year. It has been done, although I have no idea how to do it (and if I did, I wouldn't tell the idea for obvious reasons :D), but I mean that would be an awesome amount of money, so what I would suggest is just do what I am doing, i.e. research and brainstorm constantly.

Also keep in mind that if you find an un-filled niche in a type of Internet business that is easy to start, you will very quickly end up having a slew of competitors, many of which may have no inhibitions about blatantly copying your website and service. If you can, try to find a business with harder barriers to entry.

Ecommerce: There is still a lot of potential I think to create a sizeable business via ecommerce as well. Amazon may be dominant, but that doesn't mean other companies can't be started to compete. Build a really good and sizeable company and Amazon may even buy it, for example they purchased Zappos (footwear ecommerce business) and Quidsi, Inc (owner of Diapers.com and Soap.com, along with some other brands now).

There are other ways to build a fortune or business I am sure, but these are all the big ones off of the top of my head for now.

Summary of Mistakes People Make in Starting a Business

So I just wanted to write a quick summary of some common mistakes people make in starting a business to avoid:

1) Start the business based on the line of thinking that since they know how to do the technical work of a profession, that they know how to run a business that does that technical work. For example, the hair stylist who starts their own hair salon, the chef who starts their own restaurant, the car mechanic that starts their own repair shop, etc...knowing how to do the technical work of a profession doesn't mean you know anything about operating a business that does that technical work. You might be a fantastic chef, that doesn't mean you know anything about operating a restaurant!

2) Start the business without understanding the need to create and build business systems to automate the processes of the business. This is what leads to many people who start businesses becoming chained to their business, having essentially bought themselves a job instead of creating freedom for themselves. The business thus detracts from their life as opposed to adding to it. The business will need systems so as to make it where it can operate and function without the owner being present at it all the time, and if the owner does need to be present, they can work ON the business as opposed to working IN the business. The systems make sure that the quality of the service provided is not dependent on the whims of the employees, as they follow the rules of the systems established. This makes sure the accounting, the financials, the greeting and treatment of customers, the washing of the dishes, etc...whatever, is done properly, where customers get the same experience irregardless of who is employed.

3) Starting a business based off of the thinking, "What business can I start that will make me rich?" This is terrible thinking for starting a business. Something always important to remember is that the world is made up of billions of people, and all of them have all sorts of problems in their own lives. Most people do not want to hear about other people's problems. Take your own life. You probably have a slew of problems, along with dreams and goals of your own. Think random people you pass on the street want to hear about them all, or even care? Ha! Nope. Nobody cares about your desire to become rich or to do this or do that, or see this or that, or visit this place or that place. Nobody cares about your sick grandma in the nursing home or your father developing Alzheimer's or your credit card debt problems, etc... (well okay, maybe some might, but I'm talking about the general population) as most people have problems of their own.

BUT...what people DO care about is, what is it that you can do to help solve their own problems? What can you do to make their own lives easier? Find ways to do this, and offer it as a product or service that is of excellent quality and priced reasonably well, something that satisfies a real need for people, and people will come to you in droves.

So as opposed to thinking, "What business can I start that will make me rich," seek to fill needs, solve problems, make things easier for people, streamline systems better than competitors, and if someone else is doing something, see if you can do it better/faster/cheaper.

Now of course, not all businesses are about solving needs, sometimes a product/service is just something people want because they like it (an extreme example, Beanie Babies, which gave their founder a $4 billion (yes that billion, with a "b") net worth. If you are lucky enough to create such a good/service, GREAT, but the chances of coming up with such a thing can be very slim. One can find success here though, for example, the Snuggie, the "blanker with sleeves" (BASICALLY A ROBE YOU WEAR BACKWARDS!).

Franchising and Chaining Article

Good article on the subject of franchising and chaining as it relates to building up a business: Should You Sell Franchises or Build a Chain?

Study of Business Models

So I became curious on the subject of business models, for example, are there a bunch of business models that exist that one can study? After some Googling, I did not see all that much, however I discovered this academic study, which according to it, despite being talked about all the time, there isn't a whole lot of formal study it seems on the subject of business models: Do Some Business Models Perform Better Than Others?

It seems that the subject of business models is like the subject of building business systems to automate one's business, i.e. a very important subject, but one in which there is not much formal information about. I think it would be interesting is maybe someone could write a book or two on this subject, as an academic reference, as it could be very handy for entrepreneurs trying to get started. As Michael Gerber points out in his book "The E-Myth" (now "The E-Myth Revisited"), most people who start businesses don't start them for entrepreneurial purposes, they start them for totally different reasons, which is why so many businesses fail and why those that succeed, the owner often finds that in their quest for freedom, to be their own boss, that they have in effect bought themselves a job, because they had no idea about systemizing the business so that it can operate independently of themselves.

All people who start a business with the mindset of an entrepreneur know that one must build business systems, but how to go about doing that, I don't think there is much in the way of formal knowledge.

More On China's Economy

Paul Krugman, in a rare post that I mostly agree with (I disagree with his assertion that we are doing worse than Japan did in terms of handling our crisis) thinks China is on the brink: Will China Break?

Another interesting article:

These point out two things I have been thinking about China: The End of the Chinese Dream

1) Corruption - The central government is extremely corrupt, and corruption leads to misallocation of capital and inefficiency. This kind of corruption means the central government cannot be nearly as "efficient" and "orderly" in their handling of affairs as they can appear to be from the outside (as some commentators have remarked about the Chinese dictatorship in comparison to America with our chaotic democracy where it appears that we can never get anything done, as opposed to the "efficient" Chinese---Thomas Friedman for example has remarked aobut the "benefits" of dictatorship).

2) Rising anger - One of the things pointed out over the last few years is how many Chinese don't care about what the central government is doing, that they don't mind it being a dictatorship. To myself, this is only because the economy was roaring (or appeared to be roaring anyhow) and when the economy seems to be doing great, most people don't care much about the government's actions. But when the economy tanks, then people do start caring. Right now, the rising inflation in China (likely due in part to their massive stimulus), along with the sheer corruption, is creating a swell of anger amongst those struggling badly. Combine this with when/if the bottom falls out of the economy, and massive unemployment occurs, in a country with no social safety nets of any kind, with the ethnic unrest that exists in China, and well it won't be pretty.

I in particular find it interesting how Krugman remarks about those who say that the bureaucrats controlling the economy in China are very brilliant and will do whatever is needed to stop the economy from tanking, but yet, this is exactly what he was told in the 1980s regarding the Japanese economy as well.

What Keeps a Train on the Tracks?

I didn't know this:

Vaclav Havel Dies At 75 Years-Old

In all the news coverage over Kim Jong-Il's death, the death of one of the truly great heroes of the modern world, that of Vaclav Havel, seemed over-shadowed. For those who do not know, Vaclav Havel was one of the key people in contributing to the ultimate break-up of the Soviet Union, a true hero for human freedom and liberty. He co-authored in 1977 Charter 77, a human rights manifesto calling on the Soviet Union to respect human rights and freedoms. He served time as a political prisoner for his views, but ultimately led a peaceful revolution of Czechoslovakia against the Soviet Union, eventually serving as the first president of the newly-formed Czech Republic.

I find it personally rather ironic that right after one of the great oppressors of human rights and freedoms dies, one of the great heroes for human rights and freedoms also dies. May he Rest In Peace.

High-Speed Rail Is Dead in America

This is about a week late, which is my fault, I meant to post it earlier but forgot:

LINK1
LINK2

To be honest, even though in a previous posting, I lambasted high-speed rail a good deal, I actually wouldn't mind it if it was viable, as I wouldn't mind taking a train from say New York to Los Angelos that goes slower than a jetliner but that is far roomier and more comfortable. I would not want high-speed rail to replace using the freeways though, or to require high gas taxes to subsidize it. But none of that matters now, as the whole concept is for the most part dead it seems.

The Truth About Wealth

LINK

Light Bulb Regulations Put On Hold for Nine Months

     As part of the government's recent spending bill, the Republicans in Congress inserted a piece of legislation that cuts the funding from the Energy Department to be able to enforce the new light bulb stnadards that are about start going into effect, for nine months anyway. This is a temporary reprieve, but probably won't change much, as the major light bulb manufacturers will continue along as they have been. Personally, I hope that these regulations are eventually repealed, but that is a long-shot. This is not progress, as the alternative bulbs do not offer the same quality of light as a conventional incandescent. They can get close, but they still differ, and the ones that are close cost a lot. Contrary to the claims of the advocates, incandescents are being outright banned in the U.S., just not immediately; in the short-term, the efficiency standards are just being increased (high-efficiency incandescents), but by 2020, incandescents will be banned (although I think this will be modifed if the price of the LEDs doesn't come down significantly by then): LINK
     From what I understand, it was actually the major lightbulb companies that lobbied for these higher-efficiency standards in the first place, because they wanted to force people to buy the alternative bulbs, as the regular incandescents are so cheap that the profit margin on them is very slim. If this is true (it is a fact that they lobbied for the higher-efficiency standards, but the companies official statement is probably that they did it out of care for the environment), then it is not surprising they are against any attempt at overturning or stalling the new legislation.
     The problem with the alternatives is that as it stands, aside from the high-efficiency incandescents, there is no known alternative that provides an equivalent quality of light to a regular incandescent bulb (and as said, the ones that get close are very costly). CFLs have the problems of not being dimmable or working well in the cold and of taking a bit of time to light up fully (unless again you're willing to pay a lot for the best CFLs), while LEDs have the problem of being directional light, which makes them fine for things like flashlights and headlamps, but for a general-purpose lightbulb meant to scatter light in all directions, it creates a problem. LEDs at the moment are also extremely costly (anywhere from $25 to $50 to $100 for bulbs that come close to matching a regular incandescent). The lightbulb industry thinks LEDs are the future of light and that their cost will come down rather quickly, I am skeptical of this though. Time will tell.
     What I really find ridiculous is how those criticizing the stall in the enforcement are saying that it is denying Americans more energy-efficient light bulbs that will save people money. It doesn't. People could buy those lightbulbs anytime they wish to. Allowing the original to stay wouldn't outlaw the alternative. If these alternaitve bulbs are really so superior, people would buy them and they would already be making the original incandescent obsolete. But people do not buy them because they cost too much and their light quality is inferior.
     Now in Europe, where the incandescents have been banned altogether, some are selling them as heaters (as technically, that's what conventional incandescent light bulbs are---heaters that produce some light; 95% of their energy is heat...only 5% is light). So if you sell conventional incandescents as heaters, you can say they are 95% efficient at their job! What I am wondering is, could someone start a company manufacturing conventional incandescents in the U.S. after they have been outlawed, but market them as heaters that happen to produce light...? I have a feeling the law would come down on the person...would it then go to the Courts? I could imagine the person having to prove that their "heaters" are really used as heaters and not just as an illegal way to manufacture conventional incandescents. Might be interesting to try though if one had the money to just start such a company.

Here are links to the websites selling incandecents as "heaters:"

Heatball (I love the little art graphic of the light bulb holding the sign on this site, looks hilarious)
Heatbulb

EDIT: Well as it turns out, the Heatballs were outlawed in the EU (rats!): LINK

On Regulation

This is an article on the subject of how to simplify the (likely) excessive levels of regulations in the United States: LINK

Figuring out how many regulations there are is a difficult subject, but two ways to attempt it are to look at the number of pages in the Federal Register, which publishes every regulation produced by the federal government, or to measure the amount of funding going to the federal regulatory agencies and the sizes of the staffs at said agencies. The Weidenbaum Center on the Economy, Government, and Public Policy publishes a yearly "Regulatory Report" which does just this. They can be found here: Regulatory Reports

"Hating America" by Bruce Bawer

This is from 2004, but I think the author makes some very good good points (the essay is not any anti-American diatribe, quite the opposite, but goes in-depth discussing the issue of anti-Americanism, particular in Europe): LINK

On Inequality

     So one of the big things as of late seems to be the focus on the subject of inequality. Whether it is New York Times columnist Paul Krugman, Robert Reich, or any number of other left-of-center columnists and commentators, there is this growing obsession with the subject of inequality in America, and in particular, how it has been growing over the past few decades (i.e. since the start of the Reagan presidency). What tends to be bandied about is that "the rich" are getting richer while the rest of America is being left behind, or seeing their incomes and wages stagnate.
     The thing that gets me with this whole fiasco is how oversimplified the subject seems to be and how it is used so much by certain politicians, the media, and certain academics to play on people's emotions. To start with the oversimplifications, let's look at how the topic of inequality itself. Although the terms "inequality" and "equality" are spoken about as if everyone knows their meaning, these words actually can have very different meanings. For example, there is equality under the law, there is equality of opportunity, and there is equality of outcome. There is also equality before God for the religious people.

Equality under the law means we are all subject to the same laws, rules, regulations, etc...irregardless of race, ethnicity, religion, color, sex, whatever.

Equality of opportunity means that no one should be prevented via arbitrary obstacles from being able to pursue their own goals and objectives.

Equality of outcome means that everyone has an equal outcome (at least economically) in life.

In the early days of of our republic, the word equality generally meant equality before God. Then later it evolved more to refer to equality of opportunity. Now equality of opportunity unto itself is a tricky subject, because literal equality of opportunity is impossible. Some people are born more talented or gifted physically or intellectually than others. To quote Milton Friedman in his book "Free to Choose,"

     Like personal equality, equality of opportunity is not to be interpreted literally. Its real meaning is perhaps best expressed by the French expression dating from the French Revolution: Une carriere ouverte aux les talents---a career open to the talents. No arbitrary obstacles should prevent people from achieving those positions for which their talents fit them and which their values lead them to seek. Not birth, nationality, color, religion, sex, nor any other irrelevant characteristic should determine the opportunities that are open to a person---only his abilities.
     On this interpretation, equality of opportunity simply speells out in more detail the meaning of personal equality, of equality before the law.

     These days, when people talk about "the growing inequality in America," what they usually are referring to is economic outcomes, not a growing inequality under the law or of opportunity. As said, the basic gist of this is that "the rich" are becoming richer, while the rest of America is either being left behind, or is falling further and further behind. Some claim that America used to be a much more equal society, but is now far more unequal than it was back in the 1950s and 1960s. What I am hoping to argue in this post is that not only is this not true, or grossly oversimplified anyway, but that it is even backwards in certain respects.
     To start with, note the obsession with there being an inequality of outcome. They seem to think that this is a bad thing in a free society. Well that depends on how you look at it. If you have a fixed pie of wealth, and one group is getting richer by taking and hogging all of the wealth for themselves, so that everybody else is poor, then yes it's bad. This is what tends to happen in socialist and communist countries, the most infamous being the old Soviet Union. The Communist Party would hog all of the resources that existed for themselves, while the average citizen had virtually nothing.
     But that isn't how it works in a free-enterprise society. Free societies that combine liberal democracy with market capitalism CREATE wealth. One thing important to remember is that wealth is not money. Wealth is the goods and services produced in society. Money is what we use to measure how much wealth we have and to trade it (trade goods and services). If you were worth $30 million in 1892, you were still poorer than a person worth $30,000 in modern America, because the person in modern America has access to goods and services that the person in 1892 could only dream about. In the 1980s, if you were rich, your car likely had a phone in it and a television (a miniature cathode ray-tube television). You were the big cheese with those in your car. Nowadays, a poor person can watch television or surf the Internet on their flat iPad or smartphone in their car, or of course make calls. And let's not even get started on the SUVs and cars priced for middle-income people, as these things are so loaded, they can make luxury cars of the 1980s and 1990s look sparsely-equipped.
     What this shows is that in a free and prosperous society, even if there is a large amount of inequality of outcome, people are still wealthy. It's just that they are unequally wealthy. In previous times, people were mostly equally poor. During the Middle Ages for example, even the richest people were very poor in comparison to what modern people have access to, minus a few things (they had castles or mansions, but even then, those things didn't have running water, electricity, or heating the way modern homes do;  castles in particular were dark, damp, and drafty). Your poor people of the old days were, well, super poor by modern standards.
     Now what is odd is that most of the people obsessing over the subject of wealth inequality seem to fall hook, line, and sinker for the fixed-pie fallacy, or they know of the above argument, but just choose to ignore it for whatever reason. The only thing I can think of is that they are just so hunkered down in their own ideology that they refuse to acknowledge points that refute it, sort of how socialists during the 20th century refused to acknowledge many of the obvious points regarding how socialism could not be made to work. But wealth inequality is not bad if everyone is unequally wealthy and continues to grow more wealthy. The "good times" many of these pundits speak of, where there was more "equality," were when people were more equally poor.
     In this sense, I would say never before in history has there been a time in which the citizens of this country were MORE equal with one another in terms of wealth. Never before have we had a period in which the standard of living for the average person can be so similar to that of a wealthy person. Back in the 1900s, for example, being poor meant you were poor. Being middle-income was still poor by modern standards. Becoming wealthy could really, REALLY change your lifestyle, your standard of living. In modern times however, this isn't so much the case. If you are comfortably middle-income, you can have all of the following (even if you are LOWER middle-income to below the poverty line, you can have much of this stuff):

Car with power windows, power doorlocks, navigation system, backup camera, ability to make calls, surf the Internet, or watch television from the car, air conditioning, heating, cruise control, leather seating, radio with CD player, and so forth (these are basic features for today's vehicles)

Home or apartment with running hot and cold water, electricity, air conditioning, heating, kitchen with all manner of appliances, flat-screen television, high-quality surround-sound, cable, high-speed Internet, high-tech videogame systems, high-speed modern computer, comfortable furniture, music players that can store hundreds or thousands of songs all on one player (no need to carry around tapes or a packet of CDs), etc...

Instant access to thousands of books either available online to read (usually the classics are) or if not, you can order them or now DOWNLOAD them right off-line, instant access to every work of music ever done, instant access to all movies and television shows, instant access to videos of all kinds, and so forth.

Fresh fruits and vegetables, fresh meats and cheeses, sweets and treats of all kinds, access to expensive sweets and treats, cheeses and meats if you're willing to pay more, access to innumerable beverages of all kinds (beers, wines, coffees, teas, fruit drinks, etc...of all prices and qualities).

Nice clothes and shoes

A bunch of other stuff I can't think of off the top of my head right now, but the average and less-than-average person can still buy them.

     With access to all of this stuff, the average person is rich by global standards. They aren't like a person in a Third World country who has to eat rice maybe once a day or every few days, who has to go and collect wood to burn for a fire to cook and/or keep warm, with no access to cheap electric light, no sanitation or running water (the same water they drink may be the same water they relieve themselves in), who has to worry about if they get a cut on their hand, will it get infected and kill them, etc...in America, we consider a McDonald's quarter-pounder to be a cheap, low-quality food. Imagine how such a Third World person would react if they could eat such a food each night! It would be a luxury to them, all that meat, and those fries. In America, if you get a cut on your hand, you can go to the sink, turn on the water, wash it with soap, disinfect with alcohol or hydrogen-peroxide, use neosporin, and place a bandage on it. The idea of dying from such a thing is almost unheard of, unless you have the unfortunate luck to cut yourself on say a rusty nail, and even then, it depends.
     Because the average American is so rich by global and historical standards, becoming what Americans generally think of as "rich," while it does mean a big change in lifestyle, the change is not anything near what the change would have been for a person in the 1800s going from poor or middle-income to rich would have experienced. The average person becoming rich gets access to what? A bigger home? With some nicer or newer versions of many of the appliances they already have. They get access to a nicer, more expensive car, again with just nicer versions of many things they already have. They can buy more high-end versions of everything, but the point is, they just get access to things they already have usually decent-quality versions of already. The areas where they would probably see the most major improvement would be in the quality of healthcare and education that they would be able to purchase. Whereas they were rich before, they are just richer now. So to sum up that point, I see Americans as being more equal in terms of wealth, when measured by access to goods and services, than ever before. And as time goes on, we will only continue to become even wealthier. Imagine what televisions, appliances, personal computers, smartphones, music players, the Internet, automobiles, etc...will be like within another thirty years (it boggles the mind!). Another thing to think about here is to compare the fortunes of earlier times adjusted for inflation. For example, Andrew Carnegie accumulated a fortune of around $500 million or so. But adjusted for inflation, he was worth by modern standards hundreds of billions of dollars. Now that is a severe amount of inequality. You have guys worth the equivalent of hundreds of billions of dollars, meanwhile the average person lived a life stuck in squalid poverty. Today, the richest people are worth "only" in the $50 billion range, and even the people below the poverty line are rich by global and historical standards.
     Moving to my next point, which will be shorter, one thing I wanted to point out also is that, inequality of wealth in the natural outcome of a free society. In a free society, people can do as they please. They can either sit around and do the bare minimum needed to survive, or they can be industrious and work a lot and seek constantly to work productively. Thus, there are always going to be "poor" and "rich" in a free society. What's important is that, minus the few truly poor (such as homeless folk), that overall society constantly becomes richer and richer, even if everyone is unequally wealthy. And as society becomes wealthier and wealthier, everyone becomes more and more equal in terms of standard of living.
     My next point addresses a particular pet peeve of mine which I think I may have mentioned in some posts before, but I can't remember, and that is the issue of using terms such as "the rich" and "the poor" and "the top 1%" and so forth. Speaking in this manner implies that society is divided into fixed classes of people, that there is a class of poor people, a middle class (which it is always claimed is shrinking), and a rich class, a permanent plutocracy or aristocracy essentially. What pundits claiming this are usually doing is confusing what are statistical income brackets with being fixed classes of people.
     For example, let's talk about the "top 1%" in terms of income. One of the things claimed (or pointed out) recently is that over the last decade, the top 1% has seen its incomes increase faster than the rest of society has seen theirs increase. Another claim made is that the top 1% control a larger chunk of the country's wealth today than in previous times (this claim also makes the fixed pie fallacy). The thing is, measuring the top 1% in terms of either income or wealth over time, does not represent the actual flesh-and-blood human beings that move into and out of that bracket over time. The reality is that people move into and out of all of the brackets all the time. One claim made is that since the financial crisis, the top 1% has seen its incomes increase while the rest of society's incomes have remained stagnant or even declined. This implies that the top 1% is some fixed plutocracy that have the game rigged to always benefit them. It ignores the fact that a statistical bracket ignores whether the actual people in it are changing constantly.
     Think of it this way: Let's say there is a statistical bracket that measures the fastest 5% of cars on the American highway system. Let's say that in the morning, the fastest 5% is increasing in speed at the same rate as the slower and middle-speed brackets of cars. Now let's say at noon, the fastest 5% starts increasing in speed faster than the other brackets. To someone who doesn't know what they are looking at, they might well assume that this bracket measuring the fastest 5% of the car population represents a fixed population of cars that is constantly driving on the highway, and constantly at a faster speed than everyone else. They do not realize that while the statistical bracket labeled "fastest 5%" is permanent, the actual cars that make it up are changing constantly. The cars making up the fastest 5% at 6 AM are not the same ones making it up at 12 PM. And so forth. Even though cars move into and out of the different brackets all day long, those brackets remain.
     Wealth and income are no different. Looking at statistical brackets can confuse people into thinking that these are classes of people when they're no such thing. A lot of people who were in the highest-earning 1% prior to 2008 are now in one of the lower brackets, even though the bracket itself can give the misconception that some fixed class of rich is doing well right now, even better than before. The bracket may be performing better, but with a whole slew of different people in it, as the previous people got knocked out of it. Regarding the misconception about the wealthy holding a larger chunk of the wealth than in previous times, well in addition to there being no fixed class of wealthy, what is forgotten here is that the pie grows in size. And during periods of large-scale wealth creation, you tend to end up with a lot more wealthy people. The corollary though is that usually this means a rising standard of living for the rest of society (the rest of society becomes richer too) because in order to get rich, usually these people have to be providing some type of product or service to society. It is truly amazing how pervasive this fallacy can be though. In reading one political pundit who could make some pretty decent arguments about things, with regards to the wealthiest 1% holding a larger chunk of wealth, he literally said, "This is because the wealthy have managed to redistribute more of society's wealth up to them." In other words, a fixed class of wealthy are hogging more of the wealth for themselves, and thus leaving less for the rest of us. He ignores, or is completely oblivious, to the constant increasing wealth of the average person, of the fact that the pie is not fixed and thus for one person to create a fortune doesn't mean the rest of society must be shorted by that same amount, and of the fact that there is no fixed upper class.
     Okay, now onto my next pet peeve: the claims about the "distribution of income" and the "distribution of wealth" in society. These terms one will often here made by political pundits who like to portray society as, again, rigged to benefit a fixed class of rich while taking from everyone else. The problem here is again confusing what is just a statistic with being an actual thing. The fact is that there is really no such thing as a "distribution of income" or a "distribution of wealth." That implies that there is a fixed amount of wealth and a fixed amount of income created each year that then is doled out to each member of society by a central authority. According to the pundits, the supposed fixed "rich" class have the system gamed so they can hog most of the income and wealth for themselves.
     The reality however is that the terms "distribution of income" and "distribution of wealth" are just statistical abstractions. Income is not doled out by a central authority, it is what a person earns for trading whatever skills, products, or services they have on the free market. Wealth is determined by how many goods and services people produce.
     Now onto yet another pet peeve of mine, the term "allowed to keep" regarding your tax bill. President Obama made a statement about this not too long ago, talking about how he would not support a policy that "allows him to keep" so much money. The Republicans fell for it too, in one debate where a teenager asked the candidates the question, "What do you think is a reasonable amount of money a person should be allowed to keep when paying taxes." Absolutely ZERO of the candidates jumped on this and pointed out the fallacy of this type of thinking, which is something I was rather shocked by. If any candidate had, they would have probably scored some major political points I'd imagine.
     But anyways, the term "allowed to keep" implies that the government ultimately owns everything you produce. That you are just a worker bee that works for the almighty government and whatever you produce goes to the government. The government then "lets you keep" a certain amount of this money. But that's not how America is supposed to be set up. This is a country about freedom, and in particular, economic freedom. In a country about economic freedom, one that was set up to limit the powers of the government, what a person produces is THEIRS. Not the governments. People produce for themselves. But in order to have a functioning society with rule of law, protection of private property, a national defense, and so forth, we have to have a government, and that means that the people must be taxed, which means that the government must unfortunately take some of what everyone produces. But the proper question here then is not, "How much should one be allowed to keep," but rather, "How much should the government be allowed to take?"
     Okay, onto another pet peeve: the confusing of wages with incomes. This, AGAIN, is usually done by political pundits who want to imply that things are worse than they really are. Oftentimes pundits will point out that wages are stalled or shrinking. Or they will point out household incomes are stalled or shrinking. Household incomes are a faulty way of measuring the subject because one is going by the incomes of a group of people, and households can change sizes over time. The one to measure is individual incomes, which such pundits almost always ignore, because individual incomes have been going up for many decades now. They usually stall when a recession occurs, then they begin increasing again. For example, they stalled during the 1981-1982 recession, they stalled in the recession of the early 1990s, they stalled in the early 2000s recession, and now they have stalled due to this current recession. Regarding wages, wages are not incomes. They are a part of incomes. Incomes consist of wages + the various benefits one receives. Wages being stalled or even declining doesn't mean that incomes are not increasing. What stalled or declining wages with rising individual incomes means is that the benefits portion of incomes is increasing in cost faster than incomes themselves are increasing, which means that more and more of a person's income is having to be devoted towards paying for the benefits provided by their employer, as opposed to paying for that person's wage. Considering that healthcare is increasing exponentially in cost, and has been for years, and that in the United States, healthcare is mostly provided via one's employer, it is not at all surprising that while individual incomes have been increasing for years, wages have been stalled or even declining in certain sectors of the economy.
     A final pet peeve of mine is the notion that the "middle-class" is shrinking or disappearing and that we are becoming a society of "rich" and "poor." As we've seen, this is not true in that everyone continues to grow richer as the years go by. What causes this confusion is that the term "middle-class" refers to a large segment of the population that earned an income that, back at one point in time, was generally what one needed in order to have a comfortable middle-class living. As the years have passed, the number of people making that particular income has been shrinking. But this doesn't mean that society is growing poorer. To the contrary, what it shows is that the income that represents a comfortable middle-class living has been increasing, which isn't surprising as inflation has constantly been occuring over the years and individual incomes have consistently been increasing. Today, the average middle-class person makes a higher income than a comparable person in the 1950s made, and a middle-class person today also has access to a whole lot of goods and services that a person making a similar income in the 1950s had no access to. Society grows richer as the years move on. What has happened to the large segment of the population that makes up the middle-class is that it has moved out of that income bracket that used to be considered middle-class and into a higher income bracket (this also giving the illusion that we are becoming a society of just "rich" and "poor"). Because individual incomes keep increasing, the middle-class now makes what in previous times was considered a high income. And what we think of as the "lower-middle-class" now lives a standard of living that used to be comfortably middle-class. Give it enough years and even people living below the "poverty line" will be making what right now is considered a high income. And you can be sure that when this happens, pundits will scream we are a banana republic, not realizing that we are no such thing, we are a society that is so rich, everyone is rich, just we are unequally rich.
     Another thing to keep in mind is that as incomes go up over time, the prices of goods and services continues to come down. For example, flat-screen televisions used to be incredibly expensive. They also were energy hogs. Now they are much more energy-efficient and the prices of them have come down greatly. Modern automobiles are equipped with features that luxury vehicles in years past did not have.The same has happened, and will continue to happen, with innumerable other goods and services as the years go on.

Do You Feel the Need, the Need for Tweed?

....so is titled an article in Of Rogues and Gentleman, a blog written by Brooks Brothers. Tweed is one of my favorite fabrics, as it looks beautiful, but is also very rugged and durable. Wearing it gives one a "civilized-rugged" appearance, in that you look like you could go out into the wilderness or whatnot, yet you also look extremely professional and civilized. Here is the article: LINK

MGA Entertainment Update

      I'm about a month behind, but MGA lost in their attempt at an antitrust suit against Mattel: LINK

Major Portion of ObamaCare Ended

The CLASS, or Community Living Assistance Services and Supports program, portion of the Affordable Care Act was scrapped Friday, as it was found that the program was simply unworkable from a financial standpoint. Health and Human Services Secretary Kathleen Sebelius's department tried for nineteen months to figure out how to make the numbers work, but couldn't (originally she said the program could be made to work, but now acknowledges it cannot). In order for the program to work, a second mandate would have been required: Read more here...

MGA Entertainment Seeks $2 Billion from Mattel

IT'S WAR! So first Mattel went after MGA for around $2 billion, now its the inverse.

Indebted Chinese Businessmen Flee

LINK

Also:

LINK2

Patent Reform Legislation

LINK - I am a few weeks late on this one, but President Obama has signed legislation overhauling the nation's patent system.

Chinese Bubble Is Act III In the Global Economic Crisis

LINK
LINK2

I truly am wondering how this is all going to play out. How is this going to affect Europe, which is already on the brink? And then the United States? People have been hoping that the bad economy, the global economic crisis, is at the beginning of the end, but we may really only be at the end of the beginning.

As a sidenote (which I think I have mentioned before on this blog, but can't remember), I am wondering if China's economy has really surpassed Japan's in size, or if that is just paper GDP in the form of lousy-quality infrastructure (such as the Shanghai garbage bridge), which would mean that in reality, China's economy may not really have surpassed Japan's.

Three Additional Fragmented Industries

Three additional fragmented industries I have found are:

1) Clinical laboratory testing industry (LINK)

2) Medical device contract manufacturing industry (LINK)

3) Hospital supplies industry (LINK)

Another industry that seems to be fragmented, but consolidating rather quickly is the instrumentation industry.  A still fragmented (but consolidating) area of this industry is life sciences equipment (also called the life sciences tools (and services) market); here is an article listing some companies in it: LINK

Interesting Article With Regards to Building a Large Company Out of Smaller Companies

     So I have written before about how one way to go about entrepeneurship is to find industries that are fragmented and see if one could go about consolidatng the industry by building a large company via the process of combining smaller companies in the industry together. Some entrepreneurs have done this, it is also a strategy used by private equity firms. Here is an interesting article I found on this subject, albeit a little dated, from the year 2000: LINK

CNBC Capitalism Commercial

I disagree with the notion about the rest of the world developing a "larger, more prosperous economy," I mean, larger, sure (the EU altogether is larger), but more prosperous? I think the U.S. will recover economically in time. We are going through some tough times right now, but the U.S. will recover. Otherwise though, I think it is a very awesome commercial about market capitalism:

Mattel and Industrial Espionage

LINK
LINK2

     So it seems that Mattel really did conduct industrial espionage against MGA Entertainment. What gets me with this is that even if you think a competitor stole your idea, then the last thing you would want to do is to engage in industrial espionage against them because if you get caught, then you completely lose the moral high ground. Mattel's claim was that MGA stole their idea by hiring Carter Bryant for his Bratz dolls, but that Carter came up with the Bratz idea while still working for Mattel, and therefore the Bratz brand belonged to Mattel. However, Mattel ended up ultimately losing their own case, meanwhile MGA countersued alleging that Mattel had engaged in industrial espionage, and Mattel lost here too.
     But even if MGA really had "stolen" Mattel's idea in that sense, it would have more been by accident or ignorance in hiring a man who had created the concept while working for a competitor (I don't know enough of the details about the case). But if you are in the right, the last thing you then do is to start conducting what are blatantly illegal activities.
     According to the second link, MGA is now planning to go after Mattel in Europe for their doing the same thing over there. Apparently Mattel has a history of being a bully in the toy industry. They tried to crush Isaac Larian but that guy sure is a fighter.

Industrial Policy (aka Lemon Socialism)

     So we have this company Solyndra, a solar-panel company, which the government gave a $535 million loan to and now it is in Chapter 11 bankruptcy. apparently this is only one of multiple companies that were given such loans and are now in bankruptcy. I think this if anything demonstrates the problems with the form of industrial policy where government thinks it is fit to determine what are the industries of tomorrow. "Green technology" and "green jobs" and so forth, for the time being, are mostly a fantasy. The United States economy is not going to be turned around by trying to create green jobs. You cannot power the likes of New York City, Los Angeles, Chicago, etc...or any major city with the likes of solar and wind power. The technology just isn't there at the moment (and government-subsidized wind farms are another boondoggle I think).
     Another technological boondoggle I think is the push for electric cars. These are not going to replace gasoline-powered vehicles anytime soon. They take too long to charge up. Yet we see government pushing for cars like the Chevy Volt.
     It will be interesting to see what heads roll over this Solyndra incident. In addition to being an example of the fallacies of this type of industrial policy, it also seems to be an example of crony capitalism, as the company is backed heavily by George Kaiser, a major donor to the Democratic party and a man who helped raise a lot of money for the Obama campaign.

Economist Nouriel Roubini On China

LINK - So Mr. Roubini thinks China's economy will hit a brick wall growth-wise around 2013.

Wisconsin Recall Elections

     LINK - So after losing in their attempt to get an activist judge elected to shoot down Governor Scott Walker's union reform bill, the Democrats and unions have tried recall elections in Wisconsin. The Democrats won some more seats, but not enough to take away the majority from the Republicans in the state Senate, which is now held by a very thin Republican majority (one vote). The opinions on this seem to spin it both ways. On the one hand, some say that it shows the Democrats that even after Walker's bill, the sentiment in the state still leans Republican as opposed to Democrat, which has implications for 2012 (one of the claims was that after becoming a Red state, Wisconsin was being turned into a Blue state by the actions of Walker and the Republicans).
     On the other hand, some say that this will likely result in the state's GOP moving to a more centrist method of governance. 

Mattel Ordered to Pay MGA Entertainment $310 Million

LINK - This is nearly a month old, but WHEW, well that sure is one hell of a turnaround of fortunes for MGA. From what I understand, Mattel is appealing this however. One thing I find very interesting with this case is how these two companies keep dragging this out for what literally seems like an eternity. I don't really understand how the legal process works, but it's like Mattel sues MGA. MGA loses the court battle. MGA then appeals, and manages to get things over-turned (there's more to it, I am just going by a rough memory here). A second trial occurs. MGA wins. Mattel asked for a third trial (I don't think that is happening though). But now they are appealing this decision.

When does the final straw occur where the one side wins for good, and the other side has lost? 

On August 17th, the judge ordered Mattel to post a $315 million bond if they want to appeal the decision: LINK

Steve Jobs Steps Down from Being Apple's CEO

LINK - this has a lot of people wondering, how will Apple fare with Steve Jobs no longer the CEO? Well he hasn't completely left the company, as he is staying on as the Chairman of the Board. How about that though, the company you created kicks you out, is then taken into the crapper by an inept management team, you are allowed to come back in, and proceed to build the company into THE most valuable company on the planet, upon which you then resign. I doubt it actually happened that way, but it's like Jobs had a goal: "Make Apple Most Valuable Company On the Planet" upon which after achieving this, he resigns.

It will be very interesting to see how Apple fares in the future.

Borders Books Is Closing Down

     So the book store chain Borders is closing down, going out of business. I have been going there quite a bit recently in order to buy lots of books at very discounted prices. What I am wondering though is, is Barnes & Nobles next? Will they be able to survive? This is very upsetting to me as I love book stores, but the problem is that they cannot, or struggle greatly, to survive the pricing onslaught from the major retail chains such as Wal-Mart, Target, Costco and so forth. This onslaught is not just limited to the book store chains either though. It seems to be that retail in general has been consolidating in two ways:

1) First, many retail industries saw the rise of the Big Box "Category Killers," in which large chain stores in retail developed. These wiped out a lot of smaller retail stores.

2) The rise of the general-purpose retail stores such as Wal-Mart, Target, Costco, and such. These stores are now killing off many of the Big Boxes. Whether it is books, toys, clothing, consumer electronics, etc...many a big box is struggling. Circuit City was driven out of business, which many thought would benefit its competitor Best Buy, but now Best Buy appears to be struggling against Wal-Mart and the others now as well. Toys R Us and other toy chains were sent reeling when Wal-Mart decided to start selling toys, and sold them purposely at a loss in order to win customers over.
     That is the power of these giant retail enterprises. They can decide to enter a product category, and sell said products at a loss because it is not their primary source of business, and then seriously hurt the competition while winning over lots of new customers. As an interesting side note, one of the axioms of free-market economists seems to be that a business cannot artificially lower prices, that this is impossible to pull off, because of the losses that will occur. Well perhaps most of the time, but monster enterprises such as Wal-mart have shown themselves most definitely able to lower prices in certain product categories to ridiculously low levels for temporary periods anyway, in order to win customers.

     Going back to the issue of book stores however, it isn't just the big stores that have been killing book stores, another issue is simply that now people can buy books on the Internet and also e-books. Books are a unique product in that people don't need to try them on, and rarely do people care what they look or feel like, and they are very difficult to damage in transport, so they are extremely suitable to ecommerce sales. The combination of the likes of Amazon, e-books, and the monster retailers, have thus seriously hurt the book store chains.
     There are some major dangers as a result of all this though. One thing that the book publishing industry has been doing that they are probably going to regret in the future is that because companies such as Wal-Mart, Target, Costco, etc...sell so many books, these retailers can make a book into a best-seller simply by placing that book onto its book shelves. This has proven irresistable to many book publishers, who thus have turned to the graces of the mega-retailers while ignoring the plight of the book store chains. The problem here is that unlike the book store chains, in which the survival of the business depends on the books, with these mega-retailers, the survival of the book depends on the business. Wal-Mart, Target, Costco, and so forth, do not need books to survive. Whether or not they stock books has solely to do with the bottom line. For example, Wal-Mart recently exited the arts and crafts retail industry (something that made the arts and crafts retailers very happy) because it wasn't making them enough money.
    Now I am sure people have heard of the 80/20 rule, i.e. that 80% of a business's sales can come from 20% of the products. I am no expert, but I'd imagine that this applies with books. I doubt a book store has sales spread equally among top-selling books such as the latest Twilight book and the latest political book and so forth with books from the mathematics, classical history, economics and business, etc...sections. Probably 80% of a book store's sales, unless a specialty book store, comes from that top-selling 20% of product. What this means is that the mega-retailers are only going to focus on the top-selling 20% books. That's how those retailers work. They sell the fast-moving stuff. Same with clothing and consumer electronics and food products and so forth. You find the bulk-selling products, not the products that make up the 80% of stock, but consist of 20% of the sales/profits.
     So in other words, if all the book stores go out of business, then not only are books pretty much at the mercy of these mega-retailers, but you will only be able to find the top-selling books in them. Going back to the issue of the book publishers, they have sprinted to curry favor with these mega retailers because of the massive amounts of books that they can sell. But they are as a result backing themselves into a trap, because the mega-retailers do not need books to survive. It is one thing, as a business, if you depend on a few big companies to buy and sell most of your product. You are essentially at their mercy. But if they need your type of product, you at least have that going. With the book publishers, not only will they be at the mercy of the giant retailers, but the giant retailers do not even need their product to survive.
     Now this idea of book publishers going out of their way to try and help the book store chains is not strictly theoretical, as the toy manufacturing industry does just this with regards to Toys R Us. The toy manufacturers recognize that being solely at the mercy of the likes of Target, Wal-Mart, Costco, and so forth, is not a good idea. It is very much in their interest to have a business that sells strictly toys. Because just like with books, whereas Toys R Us depends on the toys to survive, with the mega-retailers, the survival of the toys is dependent on them (these mega retailers can also greatly influence the types of toys that are produced as well because they sell so many of them).
     The book publishing industry really ought to look at doing this with regards to Barnes & Nobles, or they are going to find themselves totally at the mercy of a few companies that don't even need their product. As for what will happen to all those non-top-selling books if Barnes & Nobles goes down? Well, you will still be able to get them on the Internet and certain catalog companies, and I am sure small book stores will continue to sell them. Also, one might even be able to create a chain of specialty book stores, that are focused on selling all the types of books that the big mega-retailers do not sell (books on art, architecture, mathematics, sciences, engineering, etc...). Would be interesting to see if that retail concept could work. Especially if for a lot of books there was a print-on demand feature (there are machines now that can print a literal book out for you, 3D printing technology has seriously advanced as of late). For books that have to be ordered in, they could maybe focus on higher-priced, higher-margin books.
     One thing I also have been wondering is that perhaps Barnes & Noble should try to find some ways to change their stores so as to attract more customers. This may sound odd, but for example find a way to change the stores where although they are "book" stores, their primary profit-making method may not be books. For example, maybe they could make the bulk of their money from coffee and food sales (they already sell coffee and food, but maybe improve and build on this?), and sales of certain other products, with books being "a" product, perhaps even the product that makes up 80% of the store, even if only 20% of the sales.
     The book stores had no problem with getting foot traffic, it was the lack of actual sales that were killing them. People would come in, look at the books, but not buy anything. So try to formulate a business model that allows just this. Get foot traffic via the books, but make the bulk of the money via other products if possible (I have no idea if this is actually doable or how to go about doing it, but something to think about IMO.

Hey all...

Been a bit since I have posted as I've been busy lately, I however have quite a few things I intend to write about, so I will be making more posts soon.

Jeff Bezos "Goes Galt" On California

LINK

China's Red Flags

Interesting GMO report on China - LINK

Someone want to explain to me...

...how on Earth granting workers the right to choose whether or not they want to belong to a union is "sticking it" to the thousands of unionized workers (!?!).

Robert Reich Misleads

     So this video by Robert Reich explaining the economy has been popping up lately on many forums I've noticed:

Now I'm no economist, but I can spot nonsense and propaganda on this kind of stuff, and Mr. Reich really takes the cake for it here. First, note how he pulls two stunts, which are to cite wages and act as if America is divided into fixed classes. Wages are not incomes. Wages are a part of incomes. Incomes are wages plus the various fringe benefits that people get. In certain areas, wages have been stalled, yes, even though incomes per capita have been going up consistently over the years, but that is likely because of the rising cost of healthcare which is making it where more and more of a person's income is having to go towards healthcare costs instead of wages.

And "the top 5%" are not a fixed class. There is not a permanent poor class, a permanent middle-class, and a permanent rich class that people are born into, there are income quintiles. The actual people in those income quintiles change all the time. Many of the people currently in the top 5% were in the bottom earners ten, twenty, or thirty years ago, and probably quite a few in the middle-income quintiles or even lower-income quintiles now are folks who were in the highest-earning quintiles up until the recession hit. Essentially, Mr. Reich is making the very widespread fallacy of confusing what is happening in statistical categories with what is happening with actual human beings. So when Leftists say things like, " 'The Rich' have gained X amount over the years," it's really a nonsensical statement, because "The Rich" are oftentimes the same people who were "The Poor" some years ago. Also, Mr. Reich might bother looking at just who has gotten the major tax cuts over the years. We currently have 50% of Americans paying ZERO Federal income tax (LINK), with more of the overall tax burden being shouldered by the highest-earning 5%.

President Bush cut taxes for everyone, with some of the biggest percentage cuts going to the bottom earners. And he did things like double the Child Income Tax Credit from $500 per child to $1000 per child. It is through these various tax credits that many people end up paid by the federal government as opposed to paying it. No politician could say it, but personally I think what really what needs to be done at some point is to re-levy taxes on this 50% not paying anything. I'm not saying lower and middle-income people should pay high taxes by any means, but the ones not paying anything, that needs to stop, especially the ones getting paid by the government. There also is the problem in that while the amount of tax revenue as a percentage of the GDP that the government takes in has stayed relatively uniform, government spending per capita has continually been increasing over the years. In addition, Mr. Reich seems to expect equal gains across the economy, which makes no sense at all. Of course the wealthier are going to gain more than the lower earners, otherwise they would never have gotten wealthy in the first place. And also, again, "The Rich" aren't a fixed class.

Regarding public schools and infrastructure, well the U.S. has some of the highest per pupil spending with not necessarilly the best results, and if one compares on a state-to-state level, it depends. Some states spend more and get better results, some states spend less and get better results. Washington D.C. has the highest per pupil spending with some of the worst results. As for infrastructure, well we had a $820 billion stimulus of which only a fraction was allocated for infrastructure work, so I don't buy this argument either. The government had ample opportunity to spend money on fixing America's infrastructure, but didn't do it.

Tax Cuts and Government Spending Are Not the Solution to Every Problem

     So I've been thinking lately, that both Democrats and Republicans both seem to havethe perfect little setup when it comes to their favorite things (tax cuts for Republicans, government spending for Democrats). With Democrats, when the economy is roaring and the Treasury is flush with revenue, they always want to spend, spend, spend. They will lambast the Republicans as greedy, uncaring meanies should they advocate fiscal conservatism, and say that the whole idea is silly because the Treasury has plenty of money right now (apparently the idea that at some point in the future the economy will tank and a recession will occur and tax revenues will drop doesn't ever seem to occur; the fact that government programs grow exponentially in cost usually also doesn't seem to occur to them either). Of course, then when the economy does tank and a recession occurs, we here, "The Worst Thing You Can Do In A Recession Is Cut Spending." Well, maybe. But there's a difference between deficit spending during a recession in the sense that the tax revenues decline, and you just don't cut government spending, but you don't increase it either, versus engaging in running a massive deficit by greatly increasing spending in order to try and stimulate the economy. Usually, the Left prefer the latter, and their idea of stimulus is often spending money on a bunch of programs they have wanted to spend money on in the past (as we saw with the recent $820 billion stimulus in which only around $40 billion or so was allocated for infrastructure work). They also want to make the spending increases permanent. If they gun up spending during the recession and then the economy recovers, just let Republicans try to engage in big-time fiscal conservatism, and they will scream. Of course, that is all assuming the fiscal stimulus even worked, which as I have written in past articles pretty much never has happened.
     Now the Republicans, they are the exact opposite. Whereas the Democrats want to always spend, spend, spend, the Republicans are always wanting tax cuts, tax cuts, tax cuts. If the economy is roaring and the Treasury is flush with revenue, the Republicans will want to give people a tax cut. If Democrats dare talk about how this will blow up the deficit, they get called socialists and get told that tax cuts = more revenue because they create more economic growth which makes up for the drop-off in revenue (this does have an element of truth in it, but much of it is also Republican boiletplate---similarly, many times Democrats will refer to spending as "investing" in America, and claim that thus by "investing" in the economy, the economy will produce more revenue and the investment will pay for itself....this too has an element of truth to it, but is also used as Democratic boilerplate). Now of course, when the economy tanks and a recession happens, what is the Republican solution to the problem? You guessed it, tax cuts! And just like the Democrats with wanting to make their stimulus spending, which is supposed to be temporary, permanent, the Republicans want to make their tax cuts permanent.
     With both parties, this results in either too much spending for the current revenue, or too little revenue for the current spending, and thus deficits will result with either policy. With both parties, the policies are essentially a different variant of the same thing, which is to give money to the people. Some Republicans might try to claim, "Well, unlike with Democrats, we don't seek to have government control everything or give freebies to people, we just seek to let people keep more of their money..." but that isn't necessarilly true. Part of the reason about 50% of America pays no federal income tax right now is because of the Bush tax cuts, which included for example doublind the Child Tax Credit, which went from $500 to $1000 per child. A credit means the government is paying you, so if you are able to reduce your federal tax bill to zero, but the tax credit makes it negative, it means the government is paying you money (credits aren't the same as say deductions).
     I guess the point of this semi-rant is that both parties need to stop with the going overboard. Republicans should not call every government spending attempt by Democrats socialism and Democrats should not accuse Republicans of being evil meanies for seeking to be fiscally conservative. Just the same, Republicans also should not seek a tax cut every time the Treasury is flush with revenue (which also is not necessarilly fiscally conservative) and Democrats should not lambast Republicans for wanting to only "help the rich" when they do seek tax cuts. Legitimate investments in America and legitimate tax cuts in taxes that legitimately are too high are both good policies.
    

Wisconsin Supreme Court Upholds Scott Walker's Union Bill

LINK - And this folks shows why it is so important to vote. There was an election recently held in Wisconsin for a justice on the state's Supreme Court. The unions tried their best to get Supreme Court Justice David Prosser removed and have a new, activist justice it seems, appointed who would change the balance of the state's SCOTUS so they would uphold the ruling made by Judge Maryanne Sumi that Scott Walker's union law was invalid (on the grounds that it vioalted the state's open meetings law). If anyone followed the election that night, it was very close, as at first everyone had thought Prosser lost, then it turned out a bunch of votes hadn't been counted, and it turned out he had actually won. The SCOTUS ruled in a 4-3 decision, which means had the union judge won, it would have been a 4-3 decision and agreed with Judge Sumi.

Luke Johnson

     You will probably have to sign up, but an awesome columnist I found on the subject of entrepreneurship, business, and so forth is Luke Johnson of the Financial Times. He is himself a very successful entrepreneur, and he just put out a new book that is a collection of his columns written for the FT as well.

Dot Com Bubble 2.0?

http://www.guardian.co.uk/business/2011/feb/20/is-this-the-start-of-the-second-dotcom-bubble

http://www.independent.co.uk/life-style/gadgets-and-tech/news/investors-beware-is-the-new-dotcom-bubble-going-to-burst-2287159.html

Incandescent Lightbulb Ban

     So as you may (or not) have heard, due to legislation signed by President George W. Bush in 2007, incadescent light bulbs are to begin being phased out beginning January of 2012. Yes, our beloved incandescent light bulbs (well beloved to me anyway!) are being outlawed! Why? Well, basically because it's just another piece of government regulation in the name of being "green." The bill doesn't really "outlaw" incandescents so much as it raises the efficiency standards for light bulbs to the point that incandescent bulbs become illegal. The legislation starts in 2012 and gradually takes full effect up through 2014. In 2012, 100 watt incandescent bulbs will start being phased out. Already, California has taken this step, banning stores from stocking their shelves with 100 watt incandescent light bulbs. Then gradually lower-watt bulbs will be banned going through 2014.
     Now I personally really don't like the federal government telling me I can no longer purchase incandescent light bulbs. They may be 100 year-old technology, but they are cheap, turn on quick, and produce nice quality light. The alternatives at the moment are the CFLs (compact flourescent light bulbs) and LEDs (light-emitting diodes) but there are some problems with these (especially the CFLs):

1) Cost - They cost one heck of a lot more than a regular incandescent (a 100 watt LED costs $50)

2) Light quality - The quality of the light from a CFL is not the same as from an incandescent

3) No heat - CFLs produce virtually no heat. This has proved problematic for some towns that replaced their traffic lights with CFLs lights, only to realize that in the winter time, the old incandescents melted the snow, whereas the new CFLs do not. Some people also like the heat produced by incandescents; this heat also can help in heating ones's home in the winter time. Yes, during the summer, it makes it tougher to cool the home as well, but if left with the choice, one could then switch the incandescents out for an alternative during the summer time.

4) Environmental - This one I am unsure of. Some say CFLs are unsafe and must be disposed of in a special way due to their mercury content, and require a special cleanup procedure if you break one, others say this is scaremongering. What's interesting is that the U.S. government seems to want it both ways on this: they tell us that CFLs are hazardous enough that they require a special cleanup process, but at the same time, they are also perfectly safe.

5) Time - CFLs take some time to fully light up (as opposed to the incandescent where you just flick the switch and it's on). I have read that they have CFLs that switch on instantly now, but they cost a bundle.

6) Won't save energy - this one is the major claim, that although the LEDs and CFLs cost a lot more, they last a lot longer, and will thus safe energy. That for example, if all 300 million Americans replace their 60 watt bulbs (the most widely-used light bulb) with 10 watt bulbs, the energy savings will be enormous. But there is no proof this will happen. What will likely happen is that the energy saved from the light bulbs will then be spent somewhere else. People's electricity usage won't decline from energy efficient bulbs, they'll just use more electricity elsewhere.

     The reasoning behind the legislation is probably that of what you could nickname as "Nudge Regulation." Nudge regulation is regulation meant to nudge an industry a certain way, to incentivize it to do enough research and development to develop products that are significantly improved in a certain way. Sometimes, this works, sometimes it doesn't. Examples of nudge regulation could be the limits placed on how many gallons of water can be used to flush a toilet. Toilet companies had to go and design new toilets that flush with a lot less water. Or showers. Regulations were placed on how much water a shower head can flow. Which of course makes a shower have a less powerful flow. Some companies offer shower units with multiple shower heads, but this has attracted the ire of regulators as well. This company found itself in the crosshairs of a regulator back in 2006 for offering a unit with up to three shower heads. It is now 2011 and as the link shows, they are still in business, still selling the three shower head unit, so luckily legislation has not yet been passed outlawing multiple shower heads (or at least not nationwide). I am waiting for them to start trying to limit the size of water heater you can own, or the degree to which the water can be heated.
     Anyways, the idea behind the light bulbs is by raising the efficiency standards for light bulbs, companies will spend money on research and development to develop alternatives that can match the old incandescents in performance, and eventually, price. The problem is that this does not always work. GE (General Electric) WAS working on developing what were called High Efficiency Incandescent Light Bulbs, basically incandescents that meet the new efficiency standards, but they decided to can the idea as they believe the new form of light bulb will be LEDs and OLED (organic light emitting diodes). The problem is that creating LED light bulbs is proving more problematic than originally foreseen. I would hope that the R&D will win out in the end and eventually LED lightbulbs come down to the same price as current incandescents and provide smooth, steady, clean light. Unlike CFLs, I believe LEDs also produce heat.
     As recently as May 9th, 2011, South Carolina's Senate panel is introducing legislation to allow the continued sale of incandescents in their state. If it passes, as the article says, lawsuits will probably ensue. The lightbulb industry is invested heavily in making sure that incandescents remain outlawed, as they have invested a lot of money in creating the manufacturing plants to manufacture the LEDs and the CFLs. If the legislation were to be repealed, then essentially they will have wasted a bunch of money.
     Now despite these regulations, there are certain ways individuals and even some companies can bypass them. For example, the shower company offering units with multiple heads, people also can "hack" their shower by removing the flow regulator themselves, and now onto the really neat part. One of the complains about incandescent light bulbs is that they waste about 90% of their enegy in the form of heat. Yes, incandescent light bulbs are technically little heaters that we use for light, not lights that happen to produce heat. Some light bulbs are even used as heaters, for example heating lamps. These are light bulbs that are used as little heaters. And here is a picture of a heater that uses a heating bulb:

So the question to be posed is, if companies can no longer sell incandescent light bulbs, could a company sell incandescent "heating" bulbs? (wink wink :) ). And as it turns out, in Europe, there is a company doing exactly this. Europe already outlawed incandescents, so this company sells light bulbs as "heaters." I am wondering if a company starts doing this in America, if the legislation will end up modified to try and outlaw the sale of incandescent "heaters" as well. On the one hand, the regulators won't like it, on the other hand, it might prove tough to get legislation passed to outlaw what would probably be a niche product.
     Irregardless, I intend to start purchasing incandescent heaters once the light bulbs are no longer available and if the alternatives are too costly or lacking in quality. I also see a possible entrepreneurial opportunity here :)
    

Boeing VS National Labor Relations Board

     So as has been being reported in the media for some days now, the NLRB has sued Boeing for its plan to build a plant in South Carolina to build 787 Dreamliners. The NLRB claims Boeing is seeking to retaliate against the workers and that this violates labor laws. I do not see how Boeing is retaliating at all though. It hasn't closed (or planned to close) its operations in Washington state and move them to South Carolina. All of those union jobs are remaining intact (and boeing has also expanded operations, and hence jobs, recently there as well). Boeing's plant in South Carolina will be in addition to its Washington state operations. I do not see how this is retaliating.
     A commentor on the National Review article linked to in the article below made what I thought is an interesting point: "The Left want big businesses to operate like utility companies: unionized, highly-regulated, bureaucratic, and with cushy jobs for people from government." That does seem to be the case with this, the financial regulation which is probably going to bring the big financial companies on Wall Street into bed with the government to a good degree, also when looking at how the Affordable Care Act (Obamacare) turns the health insurance companies into utilities. A hearing is planned for next month, I am hoping Boeing wins. Unions should not have that much power over private companies.

NLRB Plans Even More Aggressive Action

Thoughts On How Robots Will Impact Our Lives In the Future

     So I was thinking about the subject of technology and how many modern technologies we take for granted were taken as being science-fantasy as short as twenty years ago. Not science-fiction, as in possible, but just the technology isn't developed yet, but science-fantasy, as in we'll never develop such technology. Modern cellphones and things like the iPad are an example of this. In the 1980s or the early 1990s, if you had suggested that in twenty years we'd have such technology, you might well have been laughed at. Flat-screen televisions as well. I would imagine the next major "flattening" will occur to air conditioners. Right now, window air conditioners are big, heavy bulky things that you have to stick in your window. But give it some decades, and I bet air conditioners will become flat and light and probably become a form of interior design accessory to rooms in the way the modern flat-screen television has become (so much so that in pictures of rooms from the 1980s and the 1990s, the old big bulky CRT televisions look like a major eyesore).
     So anyways, regarding robots, well there are generally two types of robots: practical and the non-practical humanoid robots. Practical robots are what are designed for uses in things such as manufacturing, the oil and gas industry, and military and law enforcement. These robots are not humanoids at all however. There are also some home robot designs, such as an automated vacuum cleaner and some others (iRobot makes these).
     Humanoid robots are a robot that is not practical yet because there is no real need for them and the technology is not there yet. The Japanese however are infatuated with the idea of humanoid robots and continue to make major progress in this area of robotics. Despite not being practical at all now, I was thinking that in the future, once the technology gets developed enough, they probably will become very practical in quite a few ways. The technology and the software has to overgo some major hurdles of course, but I believe this will happen because so much of the technology we have now was considered utter fantasy as early as a few decades ago. So what may seem like fantasy capabilities for humanoid robots right now will probably become reality within a certain number of decades.
     For example, a personal robot could help elderly people living at home. My grandma used to hire an aid, but usually these were underpaid older women who were crabby about life and their job and who also occassionally stole from my grandma. A personal robot wouldn't do any of that as it wouldn't have emotions. A personal robot could cook dinner for you, do your dishes, and your laundry, maybe even drive your car for you! Better yet, it might even be able to serve as a personal chef with the right programming. Many are aware how many of the things we enjoy today were luxuries not long ago. For example, in the 1980s, having a phone in your car made you a real big shot. And a television, super big-shot. Today, everyone and their grandma has a cell phone and an iPod and possibly an iPad or whatnot, where you can set the thing on the dash and watch a movie right in your car while waiting in traffic. You can carry an entire library's worth of music and books with you nowawdays quite easily. Automobiles now also are equipped with navigation systems and televisions with full entertainment system in them too. And these technologies will only keep becoming cheaper and cheaper, and thus working their way down into cheaper and cheaper automobiles. Cars without navigation systems today will probably get them in future and cars with navigation systems today will probably see them morph into full on-board computers that can do everything from navigate to allow surfing of the Internet to watch television on (some may already do this even).
     Well currently, having a personal chef and servants is a luxury of the rich. Modern people, even the poor, have a lot of stuff that used to only be available to the rich (and quite a few things even the richest couldn't dream of), but servants and personal chefs still are exclusive to the wealthy. But personal robots could change all that. All of a sudden, just as with the car phone, something that was previously the domain of the wealthy will probably end up becoming something that every family in middle-class America has access to. This also raises questions of what else the personal robots might be able to do?
     I had mentioned driving, but by that point, cars may well be able to drive themselves. We already have cars now with cruise control that can slow the car down and speed it up automatically in response to traffic, and also parallel park themselves. I would not be surprised at all if I was preserved somehow cryogenically, woke up in America in 2100, only to find personal robots are the norm with families, and all cars can drive themselves. As a side-note, I do not think we will end up with a society where all cars can only drive themselves, and humans can no longer drive (as often portrayed in movies about the future). Yes, self-driving cars may be a lot safer, but a lot of people still like to drive their own car as they please. I think it would be seen as too much of an intrusion on freedom if the government tried mandating all cars have to be self-driving by law and that people cannot drive them (and I would agree). Another reason I think this would/will not occur is because by that standard, the government already would probably have outlawed things like sports cars and motorcycles as well. Sports cars serve no practical purpose and can easily be deemed "unsafe." If you could mandate cars only drive themselves, then you could outlaw the production of sports cars and motorcycles altogether for the same purpose (traffic safety). But they are plenty legal. So I'd think people driving their own cars will remain. But it won't become unusual to see cars with their "driver" riding as just a passenger either. There would also be situations I imagine where you will need to drive the car yourself, such as when going to the grocery store, or mall, or a restaurant for example, where do you park? If you pull into a gas station, which gas pump do you stop at? Maybe you could direct the car by voice on these, but what if you have fallen asleep? Or maybe you are approaching a road that is an intersection with a stop sign, but the stop sign has been knocked down, so your car doesn't see it, and also can't see the car speeding down the intersecting road from a distance that you DO see, and thus doesn't know to stop? You'd want the ability to just hit the brakes on your own there.
     I am rambling a bit there, but just interesting thoughts on robotic automobiles. Going back to personal robots, I wonder what else they might be able to do? Besides laundry, cooking, cleaning, etc...maybe even hop into the car and drive to the store and buy groceries? Will the personal robot hop into the robotic car which will then drive the personal robot to the grocery store and back? :D What additional industries and jobs will be spawned by this personal robot industry? As with many technologies, I am sure certain jobs and industries will be affected. Accounting software and the personal computer killed the jobs of a lot of accountants, the Internet killed some industries off, and I am sure personal robots will as well. BUT, whole new industries and jobs will likely be created as well.
     This also brings up a few concerns, for example, how physically strong should such robots be? If helping elders, you'd need a robot strong enough to lift and help a human. On the other hand, you don't want something with too much strength either, because if something went wrong with it, it could hurt the person. You want the robot where if it tried to harm you for whatever reason (say it was chopping carrots with a big knife, then something goes haywire and you've all of a sudden got a knife-swinging robot in the kitchen), that you could just knock it down and subdue it. In the movies and animes, they oftentimes portray such personal robots as ultra-physically strong, or as having emotions, but it would be extremely foolish to give a personal robot such physical strength and also emotions (the whole point is that the robot has no emotions---and THAT is assuming they ever could have emotions, which no one really knows---software and computers that can replicate an animal brain and have emotions is waaaay down the line and also delves into religious issues as well (do animals and humans have a soul for exxample or are we just biological-chemical machines?)). So I do not believe robots would have such excessive strength or emotions. But even a robot with the strength of the average older person could still be harmful. The average older person could still stab a person for example. there could still be the risk of the robot having something go wrong. And what about bugs in the software? Imagine the Microsoft Windows equivalent of software in your carrot-chopping robot (NO THANKS!!)
     Another interesting concern is, if the robot can link up to the Internet for additional software uploads and upgrades, what happens if a virus gets into it? Provided personal robots are developed and go to recharge each night, and also are linked up to the Internet for any software updates let's say, then you can probably be assured that there are folks who will start developing software viruses to infect the robot, and make it start doing things it shouldn't (like go get the kitchen knife and stab the people). Some might think of Isaac Asimov's "Three Laws of Robotics" here, but a virus might erase any such programming from the robot. An emotionless robot, afterall, is going to be just a machine with a computer system running on software in it. A highly, highly advanced piece of machinery with a highly-advanced computer system running on highly-advanced software, but still a computer following instructions within a machine. It will follow the programming in it. So if the programming says get the knife and stab the people, it won't know any better.
     I have no idea in the slightest how society will deal with all of these issues as such technology is developed, but it is very interesting to think about.