Sunday, December 28, 2008


Reading various economic related blogs, the great fear with this recession we're currently finding ourselves in is deflation, which is, of course, what you call it when prices continue to fall over time, making the dollar less valuable in relation to goods and services. Why is this a problem? It would seem to be a good thing if you have a wad of cash in your wallet, you can buy more and more cool stuff.

The problem is that in deflationary times, people stop buying. Why buy something now when you can get it cheaper tomorrow or next week. This phenomenon is what's happening currently with house prices. I know personally people who continue to rent even though they are in the perfect demographic for a house buyer because they want to time it just right to get in when house prices hit the bottom. This house price deflation, though, is hurting people who own those same houses, as they continue to loose equity, and if nobody is buying, they suddenly find them in a situation where they can't sell, especially if they need to (for example, what if you need to move for a job offer, or because you no longer need or can afford your house because of a job loss or retirement). This housing deflation condition is hurting our economy significantly, putting added pressure on the housing bubble, squeezing people who took out bad loans when times were good, and causing more and more foreclosures, further putting downward pressure on housing prices.

And, deflation is hitting other sectors of the economy as well, as the recession deepens, people lose their jobs, they stop buying out of necessity, and as the demand for goods and services shrink, so do prices. As businesses see shrinking demand, they try to shrink supply to match which puts more people out of work, further shrinking demand. Its a downward spiral toward stagnation and increased unemployment.

These conditions have the fruits of many years of really irresponsible economic behavior. Too many people trying to make money in the finance sector, too few people trying to make money making goods and services people could actually use or want. As people have a savings large enough to give them some measure of confidence, they suddenly have the confidence to continue their shopping behaviors through good and bad times.

Ironically, though, we should be a little use to deflation and we should, to some extent, know how to be responsible shoppers in bad economic times. The industry that thrives on deflation is the computer industry. The whole nature of technology is that because of the massive amounts of research and development, we get used to buying something because it will enhance our lives now even though we know that new, better, and cheaper technology will be available in the near future.

My wife bought me a really cool iPod for my birthday a few years back, and the cost of the iPod has been more than made up by all of the knowledge I've gained listening to podcasts. Ironically as well, the iPod has made me love going to the gym. I associate working out with podcasts, my one time I can listen to a podcast guilt free, and it helps me to prioritize exercise into my schedule which, of course, is another benefit.

Well, this Christmas, I returned the favor and bought my wife an iPod touch, and I must say, it is an incredibly awesome device, and so much more than a mp3 player. In fact, its music playing capability is no longer its best feature. Just last night I downloaded an application from the apple store that will allow my wife and I to track our daughter's diabetes very simply, then e-mail the reports from those logs both to ourselves and to our doctor. Very cool, and the price I paid for the touch was cheaper than the price my wife paid for my iPod. And all my sad iPod does is play music, no internet access, no video...

But should my wife waited? Absolutely not. I would have missed out on a really cool device. Will there be an even better device next year then the one I bought my wife? Most definitely. But we jumped in to bless our life now. And really, how long will our lives last anyway? How long should we wait on the sidelines until we take a risk, use some of our financial resources to buy things that will empower us to do more, to be more, to enjoy our lives more.

Of course, houses are much different than computers. They are much more expensive, the consequence of a bad purchase our much more severe. And, in my humble opinion, we have not been smart shoppers in the housing front, buying houses to show off more so than to fulfill our own personal need. We over-leveraged ourselves nuerotically, and now we are collective neurosis is bringing our economy to the brink.

We need to think more seriously about what exactly we want out of our house. A house is not an investment. We should not be buying houses simply to flip. We should not want to live in neighborhoods consisting of a sea of identical looking McMansions, impressive at first glance but lacking soul or heart.

Here's one example of a how we can get out of our housing bubble. Start building houses that people really want to live in. Innovative houses that excite demand.

Tuesday, December 23, 2008

Is Consumerism Bad? No.

In the spirit of being a contrarian, but also because I really, really believe this. Christmas is a wonderful time of the year because of the consumerism not despite it. Gifts are wonderful, both to get and to give. Really is this controversial? But it is... It's more hip to be cynical about Christmas, or more righteous, or in these economically troubled times, more responsible. But is it really better to give than receive as they say? Or is it better not to give at all and just share the warmth of our love with each other?

Sure, but if all we ever do is give and not receive, than someone out there is receiving an awful lot to make up for our lack of receiving. Obviously for every giver you need a receiver, and sometimes the best gift is to receive graciously and gratefully.

As you know, I've been a little obsessed by this downturn, all of this cutting back is giving me the blues. Christmas is the time to be generous, the one time of the year to splurge on somebody else. We skimp all year knowing that there are two times a year where we can indulge our urges to spoil our kids. And Christmas is even easier because you can use Santa Claus as cover...

One of the troubles with our economy is that we are experiencing a massive correction (over-correction really) in so many different facets of it. One of those is that we are finally beginning to save after so many years of spending beyond our limits. This kind of correction is good, a long time coming, and very necessary, as long as the the correction is not too drastic we're all fine. The problem is if we pull back too much, we literally pull money out of the economy, the decreased cash flow is literally felt by producers of goods and services who now have no buyers for what they produce. So they cut back, and a downward spiral begins and we're al poorer.

Depending largely on what we buy (some things are better than others), the act of making a purchase is an incredible statement of trust in both the seller, ourselves and our ability to give up some of our future purchasing power, and in the economy itself. We connect ourselves in a small way to a larger community. Building up a savings account is good and necessary, but we can save too much.

If you hoard what you have, you are literally making both you and other people poorer. It's almost akin to the Biblical parable of the talents, and burying yours in the ground (or in a savings account if you will).

But buying things is a great opportunity, and there are some very powerful ways to give well, here are my own personal examples:

1) We bought our parents ticket to a local play in town. Buying tickets to a concert or a play has many wonderful benefits. You do not add to the clutter of the recipient. In my parent's case, we are giving them a gift they would never buy on their own. Its a splurge for them to get to the theater, they hardly go to the movies, and they are just not used to indulging themselves. In a small way, I hope this enriches their life a little, to experience art. It also benefits the community, allowing actors, directors and stage hands to perform and to share a singular talent and to get paid to do just that. A win/win if you ask me.

2) My wife bought me an iPod a few years ago, and I love, love, love it. It is my most favorite possession. The iPod helps me focus (sometimes music at work really helps). At the time I received it, I had heard of podcasts, but didn't see the benefit, now I'm addicted to them. I love them. It was a big purchase, but my wife went ahead and did it for me, and I'm glad she did. I can think of so many things we have that we may not have had if we didn't have the excuse of a birthday or Christmas to indulge. We have our bose sound system was a birthday splurge, but we love it. We now are regular subscribers to the New Yorker, and that was started by a gift some years back (a generous one at that) from my sister. These gifts have enriched my life and I would be much poorer without them.

3) We give books to your children as gifts. I heard a podcast recently about how to encourage your children to read. One suggestion was to give your children books as gifts from an early age. So they enjoy books as possessions and as treats. Books should never be drudgery, but reading for pleasure should and can be an important aspect of everyone's life. I can't tell you how much I love to read. Reading books is an experience that cannot be duplicated in any other way. Internet reading, even, doesn't compare. An author has a chance to take you a long into another world, a world you can come back to for many, many days (if the book is long enough). And its almost as if you're in the mind and literally in the shoes of the character of the book in ways that is never possible in a movie. Give your children books. This is literally an investment that will pay you back many times over.

4) Education can be a gift. We don't really give school as gifts, but we sure spend enough money on our children's minds, and I don't mind one bit. I'll sacrifice almost anything except food, clothing, and shelter to make sure my children get as much quality education as I can muster. This past year, we have paid (and will continue to pay for) violin lessons, gymnastics, and drama classes. Next year we have our eyes on a class on animals at the zoo, a few city of Tempe classes, etc. But paying for education is a literal no-brainer. There's only a few things we're going to take with us after we die, our experiences and our minds. What we learn here comes with us when we go there. Our memories and our experiences are also powerful opportunities to learn. Don't be afraid to spend money on them.

So, I definitely want you to save, but you should also consume. To me, buying well is a gift. You are showing confidence in yourself, in the community, in the economy. You are also showing that you value the work of another person which in and of itself is a way of connecting.

So have a Merry Christmas, and so sure, Americans do need to save more, but we also need to keep shopping. I hope we continue to.

Saturday, December 20, 2008

Why Don't More Guys Blog?

They do, of course. There are plenty of male bloggers out there. But I know very few of them personally... But my wife blogs, and practically every single one of her female friends blogs. Its a strange thing, I guess. Maybe for the best?

At any rate, I'm really curious about what people think about the fact that Barack Obama chose Rick Warren to give the invocation at his inaugoration.

It's funny. The people I spend by far most of my time with (other than my own family) are my colleagues at work, and we literally have been told to avoid political talk in the work place (although it does come up from time to time, but only in the nicest kind of ways). Typically, we touch on politics gently, although occasionally we have had some pretty spirited debates on this bailout for example. Its very interesting because the people on my immediate team span the globe, there's a couple from China, one from India, another from Romania, another from Malaysia... Very interesting mix, and a more interesting perspective.

The people I associate with the second most amount of time with (again other than my immediate family) is the folks from my church, and again, politics is a subject I should tread quite a bit more carefully with these folks than I do, and usually I do. Its hard to nurture each other spiritually, when you get into it with each other politically I suppose. To the degree I do, I guess, I'm not as effective as I should be in my church community.

But politics has always been my first love, so I'm stuck having these fake blogging debates with very famous bloggers like Andrew Sullivan. I read one of his posts, either get a bit excited or a little fired up, and get inspired to write a post of my own in response.

Its a little one-sided, though, I along with thousands? millions? of people are reading his blog, but he has not shown the common decency to read mine. I've even sent him a couple of e-mails (he is gay, conservative, extremely pro-Obama, and lately has been a little nasty toward my church), but sadly no response, no mention of it on his blog.

Also, its a little unfair. My blogging habit is a hobby, his is a profession. Mine is a distraction, his is a career. And of course, he is about a million times better writer than I am and would obliterate me if he actually did decide to engage me in a little debate, so maybe its for the best.

At any rate, I'm a little guy without a blogging community to call my own.

On that note, here's what Sullivan thinks about the Warren pick: here, here, here, here, here, ok a lot.

It's an interesting move by Obama, mainly because of how controversial its been for so many people looking to carry the cultural war into Obama's administration. In case you don't know Rick Warren was a strong advocate for proposition 8 (Sullivan has said clearly that prop 8 was mean-spirited, bigoted, and wrong), encouraging his church members to vote for it. He's also strongly pro-life, anti-stem cell, of course anti-gay marriage. But he's written books like "The Purpose Driven Life" that have sold millions of copies, has de-emphasized some of these cultural issues and instead has focused time and energy on poverty issues, Aids in Africa, and global warming.

Read his wikipedia entry here. So, Warren is much more than a figure to be tolerated, he's a potential asset for the Obama administration, and Obama would be foolish to marginalize himand his community.

By the way, I really, really, really have a goal to transform my blog as follows:

As is obvious to you by now, I have completely abandoned my essays... I want to get back to it at some point. I have this dream about customizing a website where I can do a little bit of both. A section for blogging, then pulling from those blogs, as I have time, ideas to feed into more thorough essays on interesting (to me) topics which will be presented in a different section.

I'm hoping to have time to do so over the Christmas holidays. Wishful thinking? Most definitely... As it stands, i have a whole mess of disposable and by now dated blog posts that are burying some of my essays I wrote earlier. Not a travesty. They mean much more to me than to any of you, but still, I would like them to be a bit more available than they currently are.

Anyway, in case if I don't blog again (and I really, really need to tone it down a bit), I hope your holidays are happy and controversy free (but if I do see you in person this holiday season, maybe we can talk a little politics. Maybe indulge me in a little Rick Warren discussion if you don't mind)...

Friday, December 19, 2008

The conditions that caused the depression are eerily similar to the conditions that are causing our current problems

From the book I'm reading:

"The Great Depression of the 1930s was hardly the consequence of the stock crash alone. In certain respects, both resulted from the unstable conditions of the larger economy. Agriculture's troubles were well known, but other sectors were not much stronger. A bubble in Florida real estate had burst amid a hurricane in 1926; the escaping pressure flattened much of the residential construction industry. Auto sales had been sluggish for some time; Henry Ford sobered observers by declaring that the industry was substantially overbuilt. Banking labored under its chronic dependence on the confidence of depositors; should anything shake that confidence, even the most responsibly run bank would be at risk.

Nor were the sources of instability confined to America. For decades, but especially since the World War, American finance had been intimately entwined with European finance, rendering American banking houses vulnerable to the missteps and follies of their transatlantic counterparts. Whether mere misstep or full-blown folly, the decision of Britian's chancellor of the exchequer, Winston Churchill, to put Britain back on the gold standard at the prewar exchange rate had the most far-reaching effects. Churchill's decision ignored the fundamental changes the war had wrought in the world economy; it overvalued the pound and undervalued the dollar, making American exports cheap and draining Britian's financial reserves westward across the Atlantic. Benjamin Strong, the governor of New York's Federal Reserve Bank and de facto leader of the Federal Reserve system, did what he could to rectify the situation, slashing American interest rates and thus making the dollar less attractive to overseas investors. But the lower interest rates fueled the stock speculation that inflated the Wall Street bubble, limiting Strong's ability to counter the pernicious consequences of Churchill's exercise in imperial nostalgia.

Strong watched the bubble grow, with concern but not alarm. He understood the risks but believed that he and the Federal Reserve had the tools to deal with the emergent crisis on Wall Street. 'The very existence of the Federal Reserve System is a safeguard against anything like a calamity growing out of money rates', he declared. 'We have the power to deal with such an emergency instantly by flooding the Street with money.' Perhaps the Fed did have the power, but after the untimely death of Strong in 1928, it lacked the nerve. It lowered interest rates modestly after the stock crash, but skittish investors simply interpreted the reduction as a signal that the Fed, too, had lost confidence in stocks and that worse days were coming. They unloaded still more of their stocks. The flood of liquidity Strong had promised never amounted to more than a trickle, and as investors went into hiding, the nation's money supply shrank by as much as one-third. Prices fell commensurately, crushing debtors, who had to repay their obligations with dearer dollars, and discouraging producers from expanding, or even maintaining, output."

What's interesting is that if Strong had not died in 1928, and had the freedom to boldly flood the economy with cash, e.g. liquidity, the Great Depression might never have happened, FDR probably would not have won the election, and we would have faced down the Nazis with Hoover at the head.

Maybe the Great Depression was a blessing after all (as painful and damaging as it was to so many individuals who lived through that very dark time of our history).

But take heart, we have Bernanke, a literal expert on the Depression, doing everything Hoover and company did not. He's trying to flood the markets with liquidity, and while the economy has not bounced back, I believe he has prevented a free fall that may have occurred otherwise.

Also, Obama, who I believe is also as eerily similar to FDR as the Great Depression is to our current climate, becoming president right after the collapse, and not three years later.

By the way, I'm a lot happier about Bush's performance the last year or so of his presidency. He has effectively completely transferred his commander in chief role from Cheney to General Patreus, who has complete authority to do whatever he wants in Iraq, and Patreus basically turned things around over there (granted Bush has neglected all other parts of the world including most devastatingly Afghanistan and Pakistan), and now he has completely turned over the financial system to Bernanke and Paulson, who are much better qualified to deal with it.

Yep, Bush has become a lame duck president, but at least he had to good sense to let experts do his job finally.

Thursday, December 18, 2008

Obama has picked a Secretary of Education

And his name is Arne Duncan.

In this post I talked about the great debate between two movements in the education system between the reformers and the traditionalists. Duncan, apparently, is both. He has a record of reform but has worked well and is supported by the Teacher's Union.

You know, Barack Obama, is really building up his cabinet with the emphasis of pragmatism and centrism. We'll see how all of this plays out, but I think it was pretty smart of Obama to pick someone without a strong ideological bent. They also know each other, both are from Chicago, and they play hoops with each other.

At this moment, I'm listening to a Diane Rehm interview with Michelle Rhee, the chancellor of education in Washington DC one of the worst, if not the worst, public school districts in the country. Rhee is a strong reformer and she wants to toss out tenure, double the salary of the best teachers and fire the worst. She's also a supporter of standardized tests as an important but not exclusive way to measure teachers effectiveness.

At this moment, I fall in the reformer camp, although its probably smarter to have someone like Duncan as the head of education nationally, since the worst thing we can do is enter into a situation of deadlock that can happen if he gets too ideologically bent. Pragmatism, centrism, and unification was what Obama ran on, and it appears that's also how he's going to govern.

Two more thoughts listening to Rhee: That we need a public school system that acts as the great equalizer, that all students have the opportunity to get high quality education so when they graduate they can go seemlessly into the university without remediation, or they can enter the work force immediately and be effective.

This hits home with me. Right now there's a growing trend that to get almost any decent paid job now a days, you have to have a college education. Why? College education is really expensive, and is only arguably necessary to do a vast majority of the jobs in the work force. I believe that for many students, our high schools are just not doing enough to prepare their students for life.

Way too many kids graduate with no clues on their career, and no confidence in their life skills.

That's a damn tragedy. Just yesterday, my colleague was talking about a speech given by Joel Spoelsky whose a big time computer software blogger and owner and founder of a software company. Somebody asked him how important experience was in hiring a computer programmer, for example, how much better is a programmer with 20 years of experience to one just out of college.

His answer is significant and has all kinds of implications on our school system. He said that the best programmers started programming at age 10, so those kind of programmers already have significant experience coming out of college, and the difference between someone with 10, 20, or 30 years of experience is probably not significant enough to matter, so a company should focus on hiring good programmers, not programmers with a lot of experience.

I think that's an extreme point of view, but still the underlying message is clear. That our kids should have the opportunity to explore their interests and passions from an early age. That high school should be a time for students to both firm up foundational knowledge, but also to explore and discover interests, and passions. So that they enter the work force ready, or they enter university system ready.

Also, Rhee has another good point, that the interest of the students should always take priority over whether adults get a long. And in that spirit she is making some serious waves, especially with the teacher's union.

Again, it will be interesting to see how effective Obama as well as the number of grass roots reformers and education advocates that exist throughout our country will be.

Sunday, December 14, 2008

More Economics

Economics and philosophy really were my true loves in my undergraduate days. After I took a philosophy course (trying to fill in my electives), I thought seriously about switching major to philosophy, after I took an economics course, again, I thought seriously about switching to economics. I didn't because I just did not have enough confidence in myself to pursue a career as risky as those would be, careers with just a small number of available jobs filled by incredibly motivated and brilliant workers. That kind of high risk, moderate reward profile was not very attractive option to me at the time.

Sure many people get undergraduate degrees in philosophy or economics then get a more practical graduate degree, like law or business. But neither of those or anything related to that had any appeal to me. So, I stuck to my engineering pursuits, and now I spend way too much of my free time on "hobbies" that in a different life would have been my preferred career choice.

So, in that vein, I have been anxiously reading Franklin Roosevelt's biography, and like usual when I read a good book, I feel like I'm living the experience as I read it. The 1929 stock crash has happened, the Great Depression is in full swing, FDR just won the 1932 election, and in literally his first day in office, he declared a national bank holiday that would end up lasting five days. Can you imagine the entire banking industry being literally shut down for a full week?

But the Great Depression was both baffling and horrifying, here is a description from the book:

"It could hardly do worse. The late winter of 1933 was the darkest moment in American life since the Civil War, which for all the destruction it wreaked at least was comprehensible to ordinary men and women. The most discouraging aspect of the Great Depression was that if defied common logic. People went hungry while farmers dumped milk in ditches and left crops standing in the fields. The thriftiest of savers, cautious souls who had shunned the stock market as reckless speculation, saw their carefully tended nest eggs vanish overnight as banks collapsed. Factories sat idle while millions wanted nothing more than to go back to work.

The magnitude of the disaster could only be estimated, not least because the Hoover administration hadn't been eager to quantify the bad news. But the evidence available to a subsequent generation of historical statisticians indicated that by 1933 the total production of American farms and factories had fallen by a third, in real terms, since 1929. (The nominal decline was greater but included a sharp fall in prices as well). One-quarter of American workers were unemployed - working part-time or at jobs beneath their skills and training. Five thousand banks had failed or were failing, typically leaving their depositors without recourse. The stock market had lost three-quarters of its value since October 1929, wiping out millions more. Half a million home mortgages had been foreclosed, rendering the owners at once bankrupt and homeless. As property values plummeted, property tax receipts shriveled, forcing cities and states to lay off workers or pay them IOUs.

Hunger scoured the land. Generations accustomed to pulling their own weight often refused to seek organized relief until they were starving; in other locales the relief simply fell short of what was required. Individuals and families hit the road looking for work and shelter; the Hoovervilles that sprang up in every city and many towns were merely the most visible manifiestations of the tide of homelessness that swept the country. Young men and women postponed marriage; the nation's birth rate fell by a third.

Old people were particularly vulnerable. Guaranteed pensions were a rarity in the 1930s; workers expected to save for their retirements or work until they died. But bank failures stole their savings, and unemployment their livelihoods. In the human nature of things they were less mobile than the young, often because they were sicker. Some moved in with their children; millions simply suffered alone."

My limited understanding of economics and of the Depression much of which has come from this book seems to be that the ultimate cause of the Depression was as follows:

1) Pre-twentieth century, our economy largely was built on an economics of scarcity. More people farmed and most people's work went into providing for basic survival related essentials: food, clothing, shelter. Much of what they consumed they produced (relatively speaking).

2) In the 1900's, that changed as the country industrialized. More people moved into the cities and worked in factories. Global trade increased both prosperity and specialization. People become more interdependent and with that interdependence the world grew richer.

3) WWI crippled much of the trade in Europe and severely weakened the economy there. The US came out of the war relatively unscathed, but the US economy become increasingly dependent on other countries' economies as well. So Europe's problems affected the US.

4) This specialization and interdependency in the economy also provides an economic system that's harder to understand and more beholden to bubbles, and that was what happened in the 1920's with devastating consequences. The over exurberance led to over-leveraging and unsustainable debts. This massive bubble eventually popped (in 1929) becoming the biggest economic contraction in our history.

An economy of inter-dependency depends on trust in each other. I will work hard on my skills to produce my product with greater efficiency and greater quality in hopes that you will buy my product or my service. In exchange, I will use the money I earn to buy your product produced from your position of strength.

But this interdependency leads to a certain amount of vulnerability. I have devoted a lot of years of my life to develop skills in software development, but I have no clue how to farm, to sew, to build a house. I have specialized my skills in computers so I can contribute at a higher level to the economy in that way, so I can pay other people to make my clothes, build and maintain my house, and farm my food.

But if we lose our nerve, if we stop trusting in one another, it can result in a massive collapse, and that is exactly what happened in the 1930's. People panicked and they began to hoard, withdrawing money from banks because they stopped believing in banks. This panic literally led to to conditions where you had "idle factories with millions who wanted to work" and "milk being dumped into ditches while people starved."

In modern terms, if people stopped paying for my software, I would lose my ability to pay for another's farmed food. I would starve while our farms were left with a massive over-supply of food.

The brilliance of Roosevelt is that he wasn't afraid to act, and he acted with boldness and learned as he went. On top of that, he injected a sense of optimism, willing to engage directly with the country in the most personal of ways. In his first speech he said "There's nothing to fear but fear itself" which became the halmark of his presidency both during the depression and during WWII.

But one thing is for sure and is obvious. For us to limit these booms/busts cycles in our economy, its important that we trust in each other and that we behave in ways that earn that trust. That we have skilled workers that work with increased creativity and efficiency. That we don't over-leverage. Debt is good and necessary, but we should have a reserve for a rainy day, a reserve that will help us keep our cool when times get tough.

In that spirit, we should try to maintain a consistent spending profile through bpth bad and good times, a bit more caution in boom times, a bit more risk taking during a downturn. This is exactly the Warren Buffet approach to economics by the way. Its an approach that leads to selling high and buying low. Its counter-intuitive but its exactly right. Its a more sustainable, long term approach.

If every one had this spending/saving/investing profile we would see less volatility in our business cycles. Instead we would see steady, consistent growth.

Fear, in the end, is the enemy. We have a lot of reasons to be confident and optimistic, we shouldn't let anybody let us feel otherwise.

Saturday, December 13, 2008

Another Education Post

Lately, I've read some really interesting articles on education. Not surprisingly because education was one of Obama's priorities coming in and there's a debate waging among the Democratic party on how to fix it. The Republicans have been largely out of the discussion because they are still stuck on ideas that don't really work like vouchers, which apparently don't really work at improving academic achievement for low income schools.

In the Democratic party, the debate is between educational reformers and the traditionalists, and the front lines recently has been about Obama's choice for Education Secretarty. David Brooks talks about this debate here.

The reformers, according to Brooks, include the celebrities like Joel Klein and Michelle Rhee who support teacher's pay for performance and charter schools. Michelle Rhee's name is significant because I've heard of her :-), because of the Atlantic's articles here and here.

Here's a quote from those articles:

"Many people believe that teachers and the classroom are only one part of a vast web of relationships and environments that determine educational success. … In [Rhee’s] opinion, external factors simply underline the need for better educators. … “As a teacher in this system, you have to be willing to take personal responsibility for ensuring your children are successful despite obstacles,” she told me. “You can’t say, ‘My students didn’t get any breakfast today,’ or ‘No one put them to bed last night,’ or ‘Their electricity got cut off in the house, so they couldn’t do their homework.’” This sort of moral certitude is exactly what turns off many veteran teachers in Washington. Even if Rhee is right, she seems to be asking for superhuman efforts, consistently, for decades to come. Making missionary zeal a job requirement is a tough way to build morale, not to mention support, among the teachers who have to confront the D.C. ghetto every day."

In reading about Rhee and advocate and a graduate of Teach for America is a type A personality who literally works constantly and is not afraid of ruffling feathers.

But here's a quote from Rhee that resonated with me in the second link:

"One of the things I’ve been talking about a lot is time and how you treat time. In so many of the classrooms I go into, it’s like people are just biding time until the end of the day. They’re just passing it."


"Yes, or saying to the kids, “OK, let’s just get through 20 more minutes, we only have 20 more minutes and then you can go.” And that just sends kids the wrong message. Great teachers squeeze every second they can out of the school day and they don’t waste a single moment."

In my memory it seems like most of my teachers were just passing time, I had some notably good teachers, but the majority of them...

But an article I just read in the New Yorker was particularly profound. It's here.

In this article, Gladwell talks about how its impossible to rate college quarterbacks on how well they would perform in the NFL because success college tells you nothing about how they would perform in the NFL because the jobs are so completely different. And that teaching has a quarterback problem. You cannot tell if a teacher is going to be good until they are actually in the classroom.

Some quotes:

"This is the quarterback problem. There are certain jobs where almost nothing you can learn about candidates before they start predicts how they’ll do once they’re hired. So how do we know whom to choose in cases like that? In recent years, a number of fields have begun to wrestle with this problem, but none with such profound social consequences as the profession of teaching."

"Eric Hanushek, an economist at Stanford, estimates that the students of a very bad teacher will learn, on average, half a year’s worth of material in one school year. The students in the class of a very good teacher will learn a year and a half’s worth of material. That difference amounts to a year’s worth of learning in a single year. Teacher effects dwarf school effects: your child is actually better off in a “bad” school with an excellent teacher than in an excellent school with a bad teacher. Teacher effects are also much stronger than class-size effects. You’d have to cut the average class almost in half to get the same boost that you’d get if you switched from an average teacher to a teacher in the eighty-fifth percentile. And remember that a good teacher costs as much as an average one, whereas halving class size would require that you build twice as many classrooms and hire twice as many teachers."

"Educational-reform efforts typically start with a push for higher standards for teachers—that is, for the academic and cognitive requirements for entering the profession to be as stiff as possible. But after you’ve watched Pianta’s tapes, and seen how complex the elements of effective teaching are, this emphasis on book smarts suddenly seems peculiar. The preschool teacher with the alphabet book was sensitive to her students’ needs and knew how to let the two girls on the right wiggle and squirm without disrupting the rest of the students; the trigonometry teacher knew how to complete a circuit of his classroom in two and a half minutes and make everyone feel as if he or she were getting his personal attention. But these aren’t cognitive skills."

A solution for reform:

"In teaching, the implications are even more profound. They suggest that we shouldn’t be raising standards. We should be lowering them, because there is no point in raising standards if standards don’t track with what we care about. Teaching should be open to anyone with a pulse and a college degree—and teachers should be judged after they have started their jobs, not before. That means that the profession needs to start the equivalent of Ed Deutschlander’s training camp. It needs an apprenticeship system that allows candidates to be rigorously evaluated. Kane and Staiger have calculated that, given the enormous differences between the top and the bottom of the profession, you’d probably have to try out four candidates to find one good teacher. That means tenure can’t be routinely awarded, the way it is now. Currently, the salary structure of the teaching profession is highly rigid, and that would also have to change in a world where we want to rate teachers on their actual performance. An apprentice should get apprentice wages. But if we find eighty-fifth-percentile teachers who can teach a year and a half’s material in one year, we’re going to have to pay them a lot—both because we want them to stay and because the only way to get people to try out for what will suddenly be a high-risk profession is to offer those who survive the winnowing a healthy reward."

And that sounds really good to me.

Friday, December 12, 2008

If you're going to give this Christmas season, give well

I heard a really interesting article on NPR the other day with the founder of the website Give Well. Its a company dedicated to provide information about effective charities.

A few tidbits from the interview:

1) Should I donate my time if I have no money to give? Not necessarily. Charities do recruit volunteers, but they don't do it for the reasons you might think. Volunteers tend to get excited by the cause and eventually will donate money and its the money more than the time that is the big benefit for the charity. This just hits the point home, that unskilled labor is just not that valuable. He did make the distinction between skilled and unskilled labor. For example, if you're a doctor skilled in surgery and you decide to donate your skill to provide this service for cleft pallette corrective surgery for kids in poor countries, definitely do it. There's a huge demand and need for that skill.

2) If you do want to give time, spend a more time finding effective charities. Too few of us when we donate don't really spend the time questioning charities on their effectiveness. Sometimes we look at their overhead, but that is the wrong metric. A charity can be much less effective because they don't spend enough on overhead.

Perusing the website quickly here's a great quote:

"In both politics and charity, we hear many proposed "solutions" for poverty and inequality. Most of these solutions have been tried. Very few have been tested. And of those that have been tested, many just don’t work."

Also, I have another education post to make, but a quick thought from a New Yorker educated related article I just read that hits on the same theme, that a difference in the performance of a good teacher and a bad teacher can mean a whole year of academic progress for a student.

In a study, a bad teacher will advance students a half a year in a year's time. A good teacher can advance a classroom a year and a half. Makes a ton of sense to replace those bad teachers with good teachers.

Similarly, it makes a ton of sense to dry up funding for low-performing charities and instead funnel our money to the most effective ones.

Happy giving!

Thursday, December 11, 2008

I'm currently immersed in the book Traitor To His Class a really interesting biography on Franklin Roosevelt. Just wanted to give you a few nuggets of information of what I am learning:

1) Famous Relations:
Teddy Roosevelt was Franklin's uncle. Eleanor was Franklin's cousin? or some relative pretty close.

2) Franklin had ambitions for the presidency for a long time. He modeled his political path, especially early on after Teddy's. Teddy was governor of New York, so was FDR. Teddy was assistant secretary of the Navy during the Spanish-American war, so was FDR during Wilson's administration during WWI. Teddy volunteered to fight in that war as a "Rough Rider", FDR wanted to volunteer for WWI but was talked out of it. He was actively involved in managing the Navy convincing the government to build it up as WWI began but before the US got involved. He was going to volunteer to fight toward the end of the war, but it ended.

3) Teddy was a progressive Republican, someone John McCain tried and failed to model his own political map after. The Democratic party was an entrenched minority basically since the Civil war. Until Woodrow Wilson, Grover Cleveland was the only Democrat to win the presidency. Wilson only won because Teddy decided to run in the 1912 election splitting the Republican vote.

4) Woodrow Wilson lost the Congress heavily in the 1918 Congressional elections (as WWI was ending) because he tried to make the election a referendum on the war and on his League of Nations. Republicans won handily and effectively harpooned his attempts at winning a peace that could keep the peace. Wilson bet all of his political capital on the League of Nations which turned out to be a mistake. The Treaty of Versailles basically resulted in pretty harsh terms against Germany which in my humble opinion sunk Germany economically and opened the doors for Hitler and an eventual second world war.

5) Roosevelt ran as the vice presidential candidate in 1920 but the ticket lost handily, but Roosevelt's political reputation increased as a result.

6) The Republicans dominated politics through the 1920's. Ironically because of that, it was the perfect opportunity politically speaking, for Roosevelt to get polio (wikipedia believes Roosevelt actually didn't contract polio) allowing him to take partial political exile. He did continue to make a name for himself with some very inspiring speeches at the presidential conventions in 1924 and in 1928. He won governor of NY in 1928.

7) 1920s was a time of economic prosperity for the US as they profited from debts collected from Europe and a transition to industrialization. Farmers faired less well, but overall, the conditions were ripe for Republican dominance.

That's basically where I'm at in the book.

Regarding, Roosevelt's polio, this is a great quote from the book:

"Beyond improving his grasp of economics, Roosevelt's time at Warm Springs - and his overall experience of polio - made him better able to empathize with victims of misfortune generally. No one could suffer such an arbitrary blow of fate without becoming better attuned to others who suffered similarly. Capricious calamity isn't part of the American dream, which promises success to those who strive diligently toward reasonable goals. Other cultures have allowed greater scope for accident or the whims of the gods, but fatalism never caught on in America. Yet sometimes bad things do happen to people through no fault of their own. Roosevelt now understood this in a way he hadn't before.

Polio certainly helped people sympathize with him as they hadn't previously. Roosevelt's first four decades gave ordinary Americans little to identify with in him. His patrician background, mannerisms, and accent would have made him an ideal candidate for president in the age of Washington, Jefferson, and Madison, when ordinary Americans expected their leaders to stand above them. But the age of deference had ended with the election of Andrew Jackson; after that candidates for president needed to display a common touch if they hoped to win the people's confidence. Though some candidates faked it, the most successful were those whose bond with the people was genuine. Comparatively few Americans had suffered the specific disabilities associated with polio, but all had suffered in some way or another. And in their suffering they now could identify with Franklin Roosevelt."

And, seemingly by an act of God, Roosevelt was prepared to lead the nation during one of its most difficult trials.

Monday, December 1, 2008

On houses, On the Recession

Guess what folks, it looks like we're officially in a recession, as of December of last year, and by all accounts, we may be in this one a long time.

So much about this recession is both predictable and irritating. Predictable because the core of its cause came because too many of us thought we could get rich simply by buying a house. Now, that thought is not so crazy, many people have gotten rich off of real estate, but everyone cannot get rich off of real estate, and you certainly cannot get rich off a house you are living in. Why? Because you have to live in it. It's draining money from you every single month in maintenance costs in mortgage payments. It's not a cash cow, its a money pit.

But that's not how people were looking at houses. They would put a little (or no) money down, get into the house, watch it appreciate, take out an home equity loan and Wa La, free money. It's easy to say now, but this makes no sense in so many levels. The home equity loan is not free money at all, its a loan that you'll have to pay back on top of the mortgage you already took out. But assuming the house won't depreciate (which of course it now has), you can always sell the house, and pay back the mortgage, right? Sure, but now where do you live????? You have basically put yourself back to where you began before you bought the house but now house prices are more expensive.

This made sense to me then and it makes sense to me now, but I understand why many people did what they did, because everyone else was doing it. I was bucking the trend set by so many other people (getting a fixed 30 year mortgage rather than an ARM, getting into a mortgage well below the amount I qualified for, buying an older home in a area closer to my work, refusing to get a home equity loan, trying to stay out of debt generally so I wouldn't have to get a home equity loan). I'm really glad I did all of those things now, but at the time, I felt out of date, not with it, and rather foolish as I kept pleading with people to not buy crappy cookie cutters at edge of the universe...

But the whole thing is very irritating to me because a lot of bad behavior affects me. Too many people were making money off of a phony economy and I wasn't. Peddling subprime mortgages to whomever and whoever, making bank off of commissions. All of this real estate effort was doing nothing for the real economy. But it was inflating our perception of how large our economy was, and that perception was born out in an inflated stock price which is now in process of a free fall, and that free fall effects me. Now house prices and stock prices are sinking below their true values, the values they should be at if people just remained calm. The value of my house will bottom out I am sure below where it should be, the value of my 401K is below what it should be. None of this matters too much, as long as I don't sell my stocks or sell my house, my losses aren't realized. And even if I did sell my house, sure I sold in a buyer's market, but I would be buying another house in that same market, so I'm not too worried. As long as the economy stays healthy enough for me and for you to remain productive and employed.

But the fake economy can and is affecting the real economy. It affects our psyche, it scares us out of the stores. We stop spending, we stop investing, we begin hoarding, and that is a recipe for a prolonged recession.

But it doesn't have to be. Our government needs to spend money where we the general public pulls back. Ideally, we would have a healthy symbiotic relationship between government spending and personal spending. I want to live in a community where my government spends money on nice parks, light rail, free ways.

I drive around my part of Tempe, some of the oldest neighborhoods every single day and I wonder how we could more beautify the city. I love what's been done in downtown Tempe. I love the light rail that is opening soon that will connect me to downtown Phoenix in a more personal way than a freeway will.

I love the Tempe Center for the Arts, Tempe Town lake, the Botanical gardens, the Zoo. Scottsdale's Museum of Contemporary Art has an exhibit exploring innovative ways to renovate and gentrify the ugly strip malls that litter our community. I personally live right next to three, with their expansive parking lots, ugly 1970's cheap no-design architecture. They are ugly and decaying. Granted, one corner was refreshed slightly by a fresh coat of paint, but that ghetto-Fry's strip mall needs much more than a coat of paint. I would love to see something happen there, and yes I'm willing to pay for it.

At the same time, I want my neighbors to spend money on their houses, to landscape and beautify. Living next to their beautiful homes makes my life more beautiful, living next to their blight makes my life more blighted. Investing in my home makes my life more beautiful, failure to do so, makes my life more blighted.

So, there is a ton of work to do. Really, the amount of work to be done is limitless. And guess what? We have more than enough people who can do the work. We have talent, the US has the most educated work force in our earth's history. More people are graduating with college degrees. The internet provides information to each of us at our finger tips. We can mingle, share ideas, innovate together, help each other find more opportunities, learn from each other's mistakes. Technological advancements allow us to do more with exponential efficiencies. We have no excuses for a recession really. Let's get to work.

The problem is that we have been working for the past decade on completely idiotic activities. We had Harvard grads go to work for financial institutions to discover ways to make money by dividing up and moving around securities and credit default swaps in ways to maximize their profits. I'm sure some of this work is necessary, it creates greater efficiencies in money transfers, providing industry access to funds. But I am also sure that much of this work was a complete and total rip off and a complete waste of some of the best minds of our country. And that is nauseating to me.

Changing the color of the collar, I'm also thinking of all of the labor that went into building cookie cutter McMansions in the most remote locations of our dear desert just so people could have the illusion of money. They could feel rich in their pillored-stucco houses miles away the city center where they pile into their SUV's to commute each day across miles of dessert.

Now, places like Maricopa and Anthem are completely over-developed, glutted with foreclosures. A lot of hard work and sweat went into building a lot of cheaply constructed homes in far away places that now nobody wants to live in. I made some pretty persuasive arguments to friends who were buying out in the far reaches of our cities, predicting that the slums of the near future will be in exactly those neighborhoods.

So, we're in a recession. But it does not have to be prolonged. I believe we have elected the right president to pull us out of this one. I believe he will care more about spending then about deficits. He will invest in health care, in education, in infrastructure. We need improvements in all of those things. In the short term, it will get people working, in the long term we will benefit from the innovation and the infrastructure that will result from the efforts.

We can worry about the debt later when the recession is history. Let us hope that in the meantime we can take away a few lessons from the financial mistakes at the heart of this recession.

Let us learn the ultimate lesson of all: we can get rich, but its better, more sustainable and more globally available if we get rich off of work producing goods and services that actually help people. That kind of work is more enjoyable and more sustainable.