Fall Down 7 times, Stand up 8

This is an old Japanese proverb that I heard at David Mas Masumoto's talk at Stanford University last week. An organic peach farmer, David is a well-published writer, he has nine books to his credit.

More important than either of these, he is a deep thinker, and a wonderful narrator. While sitting in the talk, I was transported to his farm. I was with him when he told his father after high school that he was not returning to the farm. I was with him when he spent two college years in Japan, working on a farm in a small town - this is the town his grandfather has left, because he was the second son of the family; only the first one inherited the farm.

I was also with him when he graduated from the University of California, Berkeley, and went back to his farm. And, I was with him when his father had a stroke, and had to come out of his stroke by relearning everything, including farming.

We think of people who live by physical labor to be so burdened with their labor, that they don't have time time to think and to write (everyone else is burdened too). I could not be more wrong in the context of David Masumoto. He took each situation - positive or negative - and converted it into a learning experience. A learning experience not just for himself, but for others.

Wouldn't it be a wonderful world, if we all did the same.

Paul Krugman - on the current economic crisis

Continuing with the series of New York Times Columnists - it was Nobel Prize winner Paul Krugman's turn. The lecture was rewarding. Like the other speakers before him, he too relied in part on humor to get his talk going. But the substance was serious. He spent most of his time on the current economic crisis. And, in the process, he strongly supported his fellow Princeton Professor - Ben Bernanke - multiple times.



His theory is that this current crisis is as bad as the Great Depression, but that we were able to stem it in a short time (1 year), because we knew how to deal with it.



He started off with a lot of pessimism, but then went into positive items.

1. For now, at least, we have avoided the apocalypse; earlier this year it wasn't so obvious that we will be able to.


2. The Great Depression was much more than an economic crisis. Without the great depression, we would not have had Hitler or the Second World War.


3. The Great Depression was a malfunctioning of the economic system. Once that was over, analysts analyzed it endlessly, and put measures in place to convince themselves that it can't happen again.


4. And, as of 15 years ago, people belived it - that a crisis like the Great Depression cannot happen again.


5. But, in 1990's, troubleing signs started appearing. There were a series of economic events across many Asian countries. And, a group at Princeton University worried about whether this could happen to us. They called themselves "the worriers."


6. And, it did happen to us, with a vengeance.


7. How does the current crisis compare with the Great Depression? It was just as bad for the first 12 months. After May, however, we diverged from the Great Depression.


8. Earlier this year, we feared that we would fall apart, but now that worry is not there. Instead we worry that we might be stuck in a depressed economy.

So, things sound pretty bad. What precipitated the crisis?

1. It was primarily a banking crisis. We thought that banks could not collapse, but we were wrong.


2. This was partly because there are a lot of banks that do not fit in the traditional definition of banks, and hence they did not have the safety net that traditional banks do.


3. While such institutions always existed, they have become much larger in the last few years.


4. The mother of all bubbles was partially responsible for this banking crisis - Coastal Florida, Southern California and other Real Estate. By the way, this was not limited just to the US - places outside the US, e.g. Spain, Ireland etc. suffered too.


5. This Real Estate bubble combined with low interest rates and weak bank regulations precipitated the crisis.


6. The net effect of the crisis is that we are about 10 million jobs less than where we should be (we lost 8 million jobs, plus in this time, in normal economy, 2 million jobs would have been created.)

So much, for the pessimism. We did some things right too.

1. We had wisdom from the Great Depression. So, we did not make the mistakes that our pre-decessors did. (E.g. we cut interest rates, as opposed to increasing them, as was done during the Great Depression.)


2. Govt. and quasi govt agencies have been stepping to take the place of banks.


3. Budget deficits are not good, but sometimes better than alternatives. In this process, the govt. ends up being a big stabilizing force.

But, the problem is that this is not enough. For every one job that is open today, there are six people unemployed. Average duration of unemployment is six months.

The Clinton period was among the longest periods of economic growth. The economy grew at 3.75%. Unemplyment went down by .5%.

While we are growing at 3.5%, it is temporary, because it is based on two short-term factors:

1. Inventory reduction, and


2. Government stimulus.

So what is the solution? A number of them - unfortunately, Congress won't pass any of them:

1. More stimulus
2. Employ more people directly, without middlemen
3. Give banks more money from tax payers

France and Germany mostly avoided this through carrots and sticks to employers.

He served severe criticism for the Bush administration. He criticized Obama too, but gently.

1. It is good to talk to people at the whitehouse who are not evil or stupid. But the current administration is not doing enough.
2. Everything Bush was doing was wrong. While Obama is doing the right things, he is not doing enough.

Regarding Bank bonuses, he said that the money could be used by the banks themselves. Besides, giving such bonuses breeds the kind of culture that got us into trouble.

Here are answers he gave in the Q&A session.

On health reform, he set the following goals:

1. We should have universal care. Every other advanced country in the world has it.
2. Then, we should make it affordable to the economy.

He pointed out that we are already paying for healthcare of the most expensive people (elderly and chronic).

On taxes, he said that an additional 2 to 4 % of the GDP is affordable.

Things driving more globalization is not the Internet - it is container shipping.

Green can help jobs, as businesses will invest in advance.

Can ethics be taught in business schools? He doubted it.

Overall, a great presentation.

David Brooks on US society

It was David Brooks's turn at the Celebrity Forum at the Flint Center in DeAnza College last Wednesday (10/14/2009).

The conservative New York times columnist did not appear conservative. In fact, I was impressed with his balanced perspective. He covered a lot of ideas, peppered with anecdotes that made his conclusions real.

Here is why David Brooks thinks Obama is great:

1. He is tremendously perceptive about other people.
2. He is very intellectual - reads not only what he needs in politics, but also other things
3. He has surrounded himself with "nice" people. The tone of his administration is "niceness."
4. He has immense self-control and self-confidence.

David Brooks thought that George W. Bush was also smart and well-read, but he surrounded himself with people who would say yes to him. His people were afraid of organizing meetings that would bring other viewpoints. The result was that there was no debate in his administration. Obama on the other hand, looks for debate, and seeks out people who disagree with him. This ensures that he has heard it all before, and can stay calm on the outside even when confronted with hostile viewpoints.

But things are not all rosy for Obama (remember, David Brooks is a conservative columnist).
According to the speaker, Obama is:

1. Trying to do too much
2. He has a desire to rise about debate (also known as not taking position)

That led Mr. Brooks to talk about the country and its future. He believes that the country has two issues.

The character: Today's culture in America is about self-indulgence, as opposed to self-effacement, and humility. This has let to an erosion of financial morality. In this context he also talked about health-care. Interestingly, he said that none of the proposals under serious consideration is good enough. They are all tinkering with health care, but none of them is transforming it (he pointed out Democratic Sen. Ron Wyden's plan as one such transformational plan).

Decline in human capital: US traditionally enjoyed a 35-year lead in education, but that has now been squandered away.

The two are related. He drew a very interesting analogy - our intellect is like a boy riding an elephant; the boy is the conscious mind and the elephant is the unconscious mind.

If we want to improve character and human capital, we need to improve the unconscious. Much of this unconscious development takes place before we are four years old. To bolster this, he quoted a study on delayed-gratification apparently done at Stanford many years ago. (Children were left in a room with a marshmallow. They were told that they can eat the marshmallow, but if they waited until the researcher got back, they would get two marshmallows. The researchers tracked these children over time, and found that those children who delayed their gratification by waiting for the second marshmallow grew up to be more successful in many aspects of life - academics, income-levels etc. While the other group had much higher incarceration rates.)

The conclusion I draw from this is fairly straightforward, and that is not new, but as a society we are not able to address this. Helping children develop good character before the age of four can't happen through teaching. It has to happen through role-modeling. Unfortunately, as David Brooks points out, the current generation is self-indulgent - which implies that they can't be good role models. Are we, then, in a downward spiral, or is there a way out?

Tom Friedman on Global Warming

He talked to a capacity crowd this evening at the Flint Center at DeAnza College in Cupertino. He made a very powerful case for doing something about global warming. On the other hand, he failed miserably in justifying the Iraq War (why was he even trying).

Global Warming

Using clever slides, he tied together the economic crisis (subprime) and the environmental crisis.

1. They both underpriced the risk
2. They both privatized the gains, and
3. They both socialized the losses

If you jump off an 80 story bldg, for the first 79 floors you will feel like you are flying. That is what was going on on wall street and in nature. We are now at the 80th floor - having hit the ground - and are going to pay for it.

He believes that our generation (the baby boomers) ate through much of what our parents bequeathed us. The result is that the chances of our children having a better life than us are close to zero (unless we can address the energy issue).

That launched him into his new book - Hot, Flat and Crowded. Hot, because of global warming, flat because of rising middle class all over the world, and crowded because of continuing population growth. (In 1830, there were 1B people in the world. In 2008, there were 1B teenagers.)

These three factors (hot, flat and crowded) came together around the turn of the century, and are driving five megatrends

1. Energy and natural resources supply and demand
2. Petrodictatorship
3. Climate change
4. Energy poverty
5. Bio diversity loss

He addressed each of them with cogent arguments, backed up with data and great examples.

On biodiversity, he mentioned that our children will have to play Noah - for there will be lots of species of which there will only be two members left on earth. If humans don't do anything about them, these species will die out - like they are dying today - at the rate of one species every 20 minutes.

The five problems all have the same solution - abundant, cheap, clean and reliable electricity. Whichever country succeeds at this will be the next leader. And, his view is that USA must strive to be this leader.

Doing this will take sacrifices. Unfortunately, people are not willing to make sacrifices. Instead, they are hiding behind politics - becuase a democrat (Al Gore) is fighting against climate change, conservatives are opposing him.

Iraq and Afghan Wars

Like many people, he is tying 9-11 to the Iraq war. This is an idea that has been discredited for a long time. Why would he do this, I don't understand. His other argument was that we are spreading democracy in the world through this. Right! Beat up people to teach them not to beat others up. He has got to move on from this extreme conservative position.

"How to liquidate the USA debts without entering the nuclear war"

This title on an ad in today's Financial Times was intriguing. Here is what the first paragraph said.

"Today the total debt of the USA amounts to over 100 trillion dollars which is constantly increasing. In order to liquidate all the debt obligations and to save the name, any debtor reuires a force-majeure circumstance to refer to, and therefore not pay the debt. The force-majeure circumstances on a global scale could be wars and revolutions. That is why the threat of the world war is becoming more real."

Wow! Is the threat of a world war more today than it has been? I am not sure that I believe it.

The solution they recommend is elimination of paper currency, and its replacement with gold. While I can't claim to understand the implications, the ad has made it sound like a simple thing. Here is how they close their ad.

"Everyone is starting afresh. No one owes anything to anyone."
Gold and Freedom."

Interesting, particularly, if doable. There is a website listed in the ad sterligoff.com. I know nothing else about them, and while I did go to their website, I could not find this particular ad.

"Quality is in the eye of the beholder"

Our assumptions mold our behavior. We have all grown up learning to do our personal best, and that "good enough isn't good enough." There even used to be an award at my work - the GENI award "Good Enough Never Is."

Yet, we have also be been frustrated by people taking much longer to finish a task. Part of the reason it is taking them longer is that they are striving for perfection. If that perfection does not matter to you, the receiver of the work, then that work is wasted. I remember coaching members of my team to give me a one day assignment in one day (with the quality that I expected), rather than in one week (with perfect quality). At school we had to make compromises - at work we have to make compromises, so why not in personal life?

While this rule applies most of the time, there are exceptions too. Sometimes you have to educate the beholder. This is also known as managing expectations - your own or someone else's.

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Thanks to Jeff Wildfogel and his "Creating Breakthroughs" class at Stanford University for much of the content above.

I will see if if I believe it

We are all used to the expression - I will believe it if I see it. Recently I have also been hearing a modified version - I will see it if I believe it.

Stated another way, it is - you see things not as they are, but as you are.

Brought back memories from a psychology course I took as an undergraduate (With Professor Ram Adhar Singh). He cited an example of a professor, whose car had the words "Silver Streak" painted on the side. Every time, this professor stepped out of the office to drive out for lunch, he had to do a double take, as the words would appear "Silver STEAK" to him.

Has it happened to you during an argument with a friend - that both of you have read the same book, yet drawn totally opposite conclusions about lessons from the book? You see what you believe.

In the 70's, there was a Psychology study done at Stanford University, where a few psychology graduate students got themselves admitted to an insane asylum under a made-up condition (Existential Anxiety). Once they were in, they acted perfectly normal - but they were not released. The doctors kept on finding new things that were wrong about them. One of the things they did was to document all their experiences. The doctors termed this as a condition - "Excessive Writing." The other inmates actually diagnosed this condition much better, by asking these students - "are you writing about your experiences here."

So, if someone feels slighted by what you say, think about it. Sometimes they may be looking to feel slighted, and will pick the one statement out of 100 that in their mind they can interpret to mean that you have slighted them. The big issue is not that they did it. It is that they did it subconsciously, and truly believe it.

Who Owns Life

Fascinating talk by Prof. David Magnus of Stanford University on June 25, 2009. Here are some interesting observations:

• When you get some medical procedure done, your extracted tissue, blood etc. no longer belongs to you. It belongs to the medical facility to do whatever they want to, including commercialize it.
• When your get your DNA sequenced by a commercial setup like 23AndMe, the sequence is owned by them, not you.
• What rights do you have on babies born with your eggs? None, apparently.
  

Some questions he raised:

• The issue of postmortem sperm - either sperm that was preseved earlier, or that recovered from a deceased person (can be collected within 24 hours of death) - at the request of the wife. How do you know if the father would have wanted this to happen. There are also interesting implications for estate planning, if a child is born 20 years after the father dies. What does he or she inherit?
• There is an active market for human eggs. Those from Stanford fetch twice as much $ as those from an ordinary school - thousands of $. What if the child born does not display the characteristics the parents bought the eggs for? It is natural - because the genetic makeup alone does not determine capabilities. (Jose Canseco was a famous base-ball player; his twin brother, in spite of trying a lot was never able to make it in the major leagues)
  
• Women can sell their eggs for reproduction, but in most states, they can't sell eggs for medical research. Is this right?