DWill wrote: I'm interested both to understand the world better and to locate myself and my family within the whole social/economic dynamic. What happened to us and why? What explains where we've ended up? One of my obsessions is trying to separate endogenous personality factors from external factors of historical and social influence.
I find it helpful to think in terms of dynamical systems, like turbulence around the bow of a boat. The interactions are so complex that regular math is not helpful, but some useful analysis still gets done with more vague concepts such as "stretching and folding" that describe how the interactions can shift in patterns, including sometimes shifting dramatically based on small differences in conditions.
The Harvard Study, following hundreds of individuals over a lifetime, found that sort of pattern. Sometimes a person would spend a decade or more in the doldrums then take off, or a quite successful person would fall apart in their personal life, etc. Basically my takeaway is that you have to discern your own story, and it often gets determined by "what happens to you while you are making other plans."
I wasn't familiar with the term "meritocratic sorting," though it probably happened to me. A Wiki article cites standardized testing as an example of meritocratic sorting.
College admissions is a standard example of sorting, and they try to make it more or less meritocratic. But hiring decisions follow a similar logic. You try to get the best-suited person to the job, but that can be hard to pin down. Extroverts have something like a 15% better chance of landing an attractive job, i.e. higher pay, etc. Standardized tests are far from ideal, and if you are someone whose strengths are poorly captured by them, then the reliance on them looks suspiciously arbitrary.
The best thing to be said for meritocratic sorting is that it is better than, say, a lottery, which is completely arbitrary. Yet entry into the U.S. for eventual citizenship has been based on a lottery for many years now, because the point was to treat people equally, rather than to "hire" the most "qualified" immigrants. Some say there is no justice in history, but that was a small counterexample.
The enormous interest in where Amazon locates its HQ2 must fit in here. And Amazon, I would think, wants to go into a leading edge area in order to be able to attract top talent. But wouldn't it be great if Bezos saw his mission as instead lifting up an area in need? Or by the brutal realities of economics is that just pure pie-in-the-sky?
Pretty much pie in the sky. However, I would not put it past Bezos to be working on an innovative approach to "headquarters" business. He could choose places like Cleveland, Baltimore or St. Louis in order to get low-cost workers, even of the skilled variety. (That may sound funny relative to getting grads from Stanford or even U. Washington, but 3M has its pick of high-powered chemists because people raised in Minnesota often want to stay there.) If the most critical decisions continue to be made face-to-face, there still could be a lot of product engineering and other HQ work done at a distance, with electronic connections.
The usual wisdom is that the slight edge in quality that you get from, say, locating in the SF Bay area translates into a big profit advantage, but Bezos may be betting he can get more performance for less cost by hiring "ordinary" tech workers and linking them better. He has already brought at least 3 revolutions to retailing, and I would not rule out such an ambitious plan.
On the side, I really don't get Tesla, how it can be worth more than GM while never turning a profit.
The price of a stock should be the discounted value of expected future profits. That's what you "own" with a share of a company. (The discount rate is higher if the variance of profit expectations around a given mean is larger. Essentially the greater downside risk hurts more than the better upside helps.) I used to boggle students' minds with the case of Amazon, which turned no profit at all for its first 10 years or so, and yet was valued highly by the market. Bezos had a good business plan - he plowed the gross profits back into investing in software and infrastructure to keep Amazon growing very fast. So net profit was negative. Yet now that the plans have come to fruition, his profits are enormous. We should be worried that he doesn't have enough projects to put all those current profits back into - tech gains are leveling off. Or maybe we should be glad, because tech gains are eating everyone's lunch. An issue to worry about.
Presumably Tesla is a similar case. Certainly they have had some "breakthroughs" already in battery tech, and the insiders may be betting that Musk can "do a Bezos." I don't know that much about Tesla, but I do know that we are headed for electric vehicles and there is a lot of money to be made off of solving the technical problems of making them convenient enough to catch on. The amount Toyota made by creating mass market hybrids first was pretty substantial.
I wonder why the irascible one refuses to acknowledge that services give us a trade surplus with the EU. His own businesses sell services, but he's stuck on commodities like coal and cars.
I was in government back in the good old days, the 90s, when politicians took substantive issues seriously. 45 has gotten all the way to the White House by treating it like a reality TV show. Why would he change now? The real irony is that the few things he does have actual beliefs about are the ones on which he is most wrong. The coming train wreck is not going to be pretty. Stock up on canned goods and build a fallout shelter in your backyard.
Interestingly, though, we can't say that the election exposed an urban/rural divide, because Trump did better in the cities under a million.
Fair enough, but it would be interesting to look at whether any of them were cities with significant growth in their economic base, like Boise or ? (Without doing a Wikipedia search, I couldn't think of any other small cities likely to be doing well economically. A telling situation.) My uncle said it was an election between the future and the past, and the past won.
Is Pinketty's book one you recommend, by the way?
Not really. I have dipped into it a bit and found it as boring and technical as people said. So I just quote the reviewers.
I'm simply not up on the distinctions between private equity and publicly traded companies. I'm sure it's Economics 101 stuff.
More like Finance 301. Publicly traded companies have to disclose their financial results, and if the share values fall they are vulnerable to outsiders buying up the shares in a takeover bid. What Kohlberg, Kravis and Roberts did in the 80s was show that such companies could be "taken private" (with a Leveraged Buyout) to avoid the vulnerabilities and publicity. (Leverage refers to the fact that banks or bondholders lend the money for much of the share purchases, so that the "principals" such as Bain or KKR only need to have ownership capital of 10 percent or so of the cost of the buyout.) The Emmy-winning movie "Barbarians at the Gates" (written by MASH's Larry Gelbart) was the first to reflect the drama of such LBO events.
Usually they succeeded by breaking up conglomerates and selling the parts for more than the original company was worth. This was possible partly because conglomerates had been created for bad reasons, and partly because of "buyer's curse" in which the highest bid in an auction goes to the one with the most exaggerated expectations for the result. But after the DotCom bust, Bain and KKR began to make more money by buying companies with heavy unmet obligations to their unions, like unfunded pension obligations, and then holding a gun to the union's head to get out from under them. The gun was bankruptcy.
They rode two waves with that trend: (1) competition from abroad was sucking the profit out of American manufacturing, which was almost the only part of the economy in which unions had ever made substantial wage gains (the main exception was the service industries organized by the Teamsters); and (2) general returns to investment capital were low (and have remained low ever since!) so that many pension funds were well below the forecasted levels based on previous behavior of returns.
I imagine the cultural and positional advantages act as boosters, whereby the middle-class kid with average intelligence is culturated to want to go to college, does go, and probably gets his foot a few rungs above the bottom of the ladder. The averagely bright kid who lacks those advantages of birth has a much worse chance of getting into career-type employment and may not have as happy a life. I believe you're right that genetic sorting always has occurred, though the environment determines which genes will be rewarded in money and prestige. Smarter people have always had the edge, but with entertainers and athletes it wasn't until fairly recently that those talents could translate to big wealth.
That picture of the various stories going on matches mine pretty well. The key phrase for me is "may not have as happy a life." We all know that one can be a billionaire and be clueless about how to ever really enjoy their life, while one can also sail through near-poverty with low material expectations but great family time and friendships, and have a wonderful life. The key issue about the stratification that the author focused on is that if you choose a life of low expectations you may be imposing that on your children.
What concerns me is the work that appears to be more and more the norm for those who aren't going to be launching into the professions. I could be way off, but bad jobs seem to be proliferating, so that low unemployment figures hide the reality that a great many workers face: jobs with no security, few or no benefits, less than full time hours, irregular schedules, and of course little chance for advancement.
I think that is spot on. And for so many of them, there is no concept that the Marines or Yale Law might be an option that could take them to a happier life. I do see some who manage to break into interesting work like adventure kayaking or renovating Victorian mansions, but mostly the run of the mill is not an enticing prospect.
I think that Stewart, being in the 10 percent himself, felt licensed to criticize his peers for being driven and, let's face it, shallow seekers of social perks. When you actually encounter people of this class (and I do think we're talking about a class), you may see something quite different: an admirable use of capabilities not lacking in social consciousness. What are such people to do, practice a life of self-abnegation? I should probably reread the article, but right now it's not clear to me what Stewart thinks people like him should do to help out the rest. It's not clear to me what I should do, and clearly I have just as much obligation though a notch or two below the 10%.
I am convinced that this is the next big issue for religion. Frankly a little self-abnegation goes a long way. Giving 3 percent of your income is enough to put in perspective your ability to live without the latest gadget and the hottest fad. But leaving self-abnegation aside, in some sense anyone who takes life seriously is in quest to know "what I should do." And the journey is our home. The quest to find something that clicks, that contributes in a way that feels right, is the quest for meaning in community.
It might be leading a literature group in prison for one person and gathering for quilting for another. It might be passing on a tradition of bluegrass banjo or organizing groups to inventory the wildlife in their suburb. The point is not to sacrifice, the point is to contribute.
I do think it's a great pity that high school kids stress out about getting into the "best" school, and that their parents have so much riding on the prestige level of the choice. A lot of the quality they think they're getting is imaginary. In reality, there is an embarrassment of riches in American higher education, such that State U is likely more than adequate for whatever Julio or Lucinda want to aim for.
We were very clear with our sons that the main advantage of the Ivy League schools is not what it says about you, but who you meet. We know this because we are friends with lots of Ivy Leaguers. They were both extremely happy with (expensive) liberal arts colleges instead. You are right about State U, but you should be aware that things run at a slower pace because the average student has less background and lower ambitions. Basically you try to take the more advanced classes as soon as you can, because that is where the interesting (and valuable) stuff is found. And the advising and career center help sucks.
I'm not sure I care, personally, about people not being able to be millionaires, even though a million in net worth isn't what it used to be. We can also, somehow, become more sane in our desire for wealth. I don't want to stop people from becoming millionaires either, though. It would help if fear didn't drive us so much, fear of health catastrophe especially, but also fear of the retirement safety net tearing apart.
Well, that's the basic appeal of social democracy, as practiced by Sweden and preached by Bernie Sanders. Let some people earn fantastic wealth if that's their thing, and even celebrate them for it, but also make sure the society functions on confidence and mastery rather than on fear and conflict, by putting a good social safety net in place.