Monday, April 26, 2010
Question
Are people attracted to leadership because of the money and prestige associated with it or because they enjoy leadership?
Thursday, April 15, 2010
The business formula
I think the overall formula for how value is allocated within an economic system is governed by the following formula:
Consumer Contribution = Producer value received + System value received
There are an infinite number of solutions to this equation, so how is it decided who gets how much?
The consumer contribution is determined by the market since the consumer contribution is equal to the price they pay for a product or service. The other side of the equation seems a bit trickier. How do producers, innovators, and systems decide how to split the value that consumers contribute?
I'll return to this question eventually, but first I want to address something that this formula highlights. Because each of the actors on the right demand a certain minimum value, they will refuse to participate entirely if this value is not delivered. Since our current economic system depends on all of these actors, when one actor refuses to participate, the product or service is not produced. But what if you could create a system that didn't require so many actors, each demanding their share? It's not likely that you would be able to eliminate producers, but what if you could redesign the system so that it weren't so needy - so that it didn't demand so much. Suddenly, you would have a formula that could deliver products and services that otherwise couldn't be delivered and for those that are already being delivered, you could deliver them at a much lower cost to consumers.
In general, I believe that there is a way to rebalance how value is distributed. I believe that the system is capturing far to much of the value, and that a healthier society can be achieved through allocating more of the value to consumers and producers.
Consumer Contribution = Producer value received + System value received
There are an infinite number of solutions to this equation, so how is it decided who gets how much?
The consumer contribution is determined by the market since the consumer contribution is equal to the price they pay for a product or service. The other side of the equation seems a bit trickier. How do producers, innovators, and systems decide how to split the value that consumers contribute?
I'll return to this question eventually, but first I want to address something that this formula highlights. Because each of the actors on the right demand a certain minimum value, they will refuse to participate entirely if this value is not delivered. Since our current economic system depends on all of these actors, when one actor refuses to participate, the product or service is not produced. But what if you could create a system that didn't require so many actors, each demanding their share? It's not likely that you would be able to eliminate producers, but what if you could redesign the system so that it weren't so needy - so that it didn't demand so much. Suddenly, you would have a formula that could deliver products and services that otherwise couldn't be delivered and for those that are already being delivered, you could deliver them at a much lower cost to consumers.
In general, I believe that there is a way to rebalance how value is distributed. I believe that the system is capturing far to much of the value, and that a healthier society can be achieved through allocating more of the value to consumers and producers.
Wanted: A New Business Model
There seem to be three general components to our economic system: producers, consumers and the system. Within the producers classification there are many types. One type that deserves calling out is the innovator. So now we separate the system into four parts: producers, innovators, consumers and the system. By the system, I mean the mechanisms that coordinate behavior in the economy and keep things running smoothly. Examples include accountants, lawyers, and, perhaps most conspicuously, bankers. My questions are these:
- Of the value that our economic system generates, how much is each group capturing?
- To maximize the benefit to society, how much should each group capture?
- If our current system is not allocating value optimally, is there a better system?
Tuesday, April 6, 2010
Restoring a Lost Social Order
Hugh Nibley proposed a world without bankers. More broadly, he proposed a world not obsessed with the accumulation of wealth. To the modern reader this seems ludicrous. Without bankers, how do the young get their start (how would Elizabeth and I buy our first house?)? Without accumulating wealth, how do the old survive when they can no longer work? In America (aside from the small minority of socialistic thinkers), we see no answer to these questions, and thus, our society becomes centered on banks and our lives become centered on accumulating wealth.
But one need not look back too far to see that there is an answer to these questions. The answer lies in the establishment of a different social order. Or more precisely, a return of a lost social order - a social order that centers on families instead of banks. Just two hundred years ago, one of the primary responsibilities of a father was to provide his sons with an adequate start in life. Sons depended on their father instead of on banks. Likewise, the responsibility of children was to provide for their parents when they could no longer provide for themselves. Parents depended on their children instead of their nest egg.
Now if the two systems accomplish the same thing (a start in life and support at the end of life), what is the advantage of one over the other? I suggest the primary fault of the first (I'll call this the economic social order) and the primary benefit of the second (I'll call this the family social order) is where they require our focus to be. The economic social order requires our attention to be concentrated on money (why this is bad is primarily a moral argument) whereas the family social order requires our attention to be concentrated on our family (this is likewise primarily a moral argument). In the economic social order parents must spend most of their lives subject to a bank and devoted to building their nest egg. In the family social order, parents instead would be concerned with the development of their children since their children would essentially become their nest egg. Under the family social order, there would of necessity be some requirement for accumulation of wealth in order to give your children a start in life. So you could argue that this aspect is really no different. However, I would argue that accumulation of wealth in order to give it away does not have the same moral consequences as accumulating wealth so that you can spend your retirement years on a yacht.
The consequences of shifting to a family social order would be dramatic both for individuals and for society. For the individual, absent the requirement for wealth accumulation one would have more free time to pursue what they like. This highlights the importance of a family social order being introduced in the context of a moral society. Specifically, principles of saving and frugality must be preeminent in order to prevent children from becoming subject to the debts of their parents (the inability for governments to exercise this sort of restraint is one argument against a socialistic social order).
For society, if parent's end-of-life support depended on their children, the number of children parents had would dramatically increase. Parents would be incentivized to have enough children to insure themselves against children who don't turn out well or die early.
All of this said, I differ from Hugh Nibley in my opinion of banks. I believe that they have their role in society. Specifically, I see little harm in a person getting their start through responsible borrowing from a bank. This sort of a hybrid model would free parents from focusing on wealth accumulation entirely and freeing them to spend their time focusing on the important things in life: raising and developing children, gaining knowledge, serving others, etc.
And finally, it must be noted that a family social order will not remove the temptation to accumulate wealth (even when the family social order existed, prophets were still condemning the people for their obsession with wealth). It will simply remove the requirement to do so as one would no longer be required to accumulate a large nest egg for retirement.
But one need not look back too far to see that there is an answer to these questions. The answer lies in the establishment of a different social order. Or more precisely, a return of a lost social order - a social order that centers on families instead of banks. Just two hundred years ago, one of the primary responsibilities of a father was to provide his sons with an adequate start in life. Sons depended on their father instead of on banks. Likewise, the responsibility of children was to provide for their parents when they could no longer provide for themselves. Parents depended on their children instead of their nest egg.
Now if the two systems accomplish the same thing (a start in life and support at the end of life), what is the advantage of one over the other? I suggest the primary fault of the first (I'll call this the economic social order) and the primary benefit of the second (I'll call this the family social order) is where they require our focus to be. The economic social order requires our attention to be concentrated on money (why this is bad is primarily a moral argument) whereas the family social order requires our attention to be concentrated on our family (this is likewise primarily a moral argument). In the economic social order parents must spend most of their lives subject to a bank and devoted to building their nest egg. In the family social order, parents instead would be concerned with the development of their children since their children would essentially become their nest egg. Under the family social order, there would of necessity be some requirement for accumulation of wealth in order to give your children a start in life. So you could argue that this aspect is really no different. However, I would argue that accumulation of wealth in order to give it away does not have the same moral consequences as accumulating wealth so that you can spend your retirement years on a yacht.
The consequences of shifting to a family social order would be dramatic both for individuals and for society. For the individual, absent the requirement for wealth accumulation one would have more free time to pursue what they like. This highlights the importance of a family social order being introduced in the context of a moral society. Specifically, principles of saving and frugality must be preeminent in order to prevent children from becoming subject to the debts of their parents (the inability for governments to exercise this sort of restraint is one argument against a socialistic social order).
For society, if parent's end-of-life support depended on their children, the number of children parents had would dramatically increase. Parents would be incentivized to have enough children to insure themselves against children who don't turn out well or die early.
All of this said, I differ from Hugh Nibley in my opinion of banks. I believe that they have their role in society. Specifically, I see little harm in a person getting their start through responsible borrowing from a bank. This sort of a hybrid model would free parents from focusing on wealth accumulation entirely and freeing them to spend their time focusing on the important things in life: raising and developing children, gaining knowledge, serving others, etc.
And finally, it must be noted that a family social order will not remove the temptation to accumulate wealth (even when the family social order existed, prophets were still condemning the people for their obsession with wealth). It will simply remove the requirement to do so as one would no longer be required to accumulate a large nest egg for retirement.
Friday, April 2, 2010
Book Review - John Adams
Today I finished reading David McCullough's Pulitzer Prize winning biography John Adams. The book left me feeling grateful for and inspired by our second president and his remarkable wife Abigail. They were the Abraham and Sarah of the American nation.
What follows are some musings about John, Abigail, and what constitutes greatness.
John Adams was the son of a shoemaker and yet he became the engine that pushed the establishment of a country ruled by self-government. He was the mind behind the American Revolution, the Declaration of Independence, and the 3 branches of government outlined in the US Constitution. It was he who first suggested that the general of a continental army (that did not yet exist) be none other than George Washington. It was John Adams who, against the wishes of his cabinet, party, and popular sentiment, made peace with France--preventing a needless war that may have prevented the Louisiana Purchase from ever happening. He did so at the risk of a second term as president. He was a political hero and I am still wondering why the Adams Monument is still missing from the National Mall.
In addition to a list of great achievements, the man I read about was virtuous. He was, above all, true to his principles. Abigail even more so. They were impeccably honest and tireless workers. They were frugal and lived within their means. (At his death, Adams' net worth was around $100,000 while Jefferson's debts exceeded that amount.) John and Abigail did not get puffed up in their own eyes when they held high profile offices. After leaving the presidency, John took a public stagecoach home to Peacefield and became "Farmer John." Literally. He was building rock walls and tending to crops well into old age. Abigail took care of her family with love and work. What they missed most from public office was the chance to do good.
God - John and Abigail remained devout in their faith.
ABIGAIL -has become a personal hero of mine. I would dearly like to meet her someday. In the meantime, I will try to become more like her. Here is what others said about Abigail upon her death:
MARRIAGE-I admire how devoted John and Abigail were to each other. They were friends and companions. He described her as the great steadying force in his life. She was his "ballast." Her obituary notice in Boston's Columbian Centinel summarizes what she meant for John.
VIRTUE-A motto by which John and Abigail lived could have been the inscription John wrote for the sarcophagus of Henry Adams, the first Adams to arrive in Massachusetts in 1638:
What follows are some musings about John, Abigail, and what constitutes greatness.
John Adams was the son of a shoemaker and yet he became the engine that pushed the establishment of a country ruled by self-government. He was the mind behind the American Revolution, the Declaration of Independence, and the 3 branches of government outlined in the US Constitution. It was he who first suggested that the general of a continental army (that did not yet exist) be none other than George Washington. It was John Adams who, against the wishes of his cabinet, party, and popular sentiment, made peace with France--preventing a needless war that may have prevented the Louisiana Purchase from ever happening. He did so at the risk of a second term as president. He was a political hero and I am still wondering why the Adams Monument is still missing from the National Mall.
In addition to a list of great achievements, the man I read about was virtuous. He was, above all, true to his principles. Abigail even more so. They were impeccably honest and tireless workers. They were frugal and lived within their means. (At his death, Adams' net worth was around $100,000 while Jefferson's debts exceeded that amount.) John and Abigail did not get puffed up in their own eyes when they held high profile offices. After leaving the presidency, John took a public stagecoach home to Peacefield and became "Farmer John." Literally. He was building rock walls and tending to crops well into old age. Abigail took care of her family with love and work. What they missed most from public office was the chance to do good.
God - John and Abigail remained devout in their faith.
"He who loves the Workman and his work, and does what he can to preserve and improve it, shall be accepted of Him." - John Adams, nearing the end of his life
"I pray to heaven to bestow the best of blessing on this house an all that shall hereafter inhabit. May none but the honest and wise men ever rule under this roof." - John Adams in a letter to Abigail from the President's House
"It would be unbecoming the representatives of this nation to assemble for the first time in this solemn temple without looking up to the Supreme Ruler of the universe, and imploring his blessing.
May this territory be the resident of virtue and happiness! In this city may that piety and virtue, that wisdom and magnanimity, that constancy and self-government, which adorned the great character whose name it bears, be forever held in veneration! Here, and throughout our country, may simple manners, pure morals, and true religion flourish forever!" -John Adams, in a public benediction before Congress for the Capitol, the Federal District, and the City of Washington.
ABIGAIL -has become a personal hero of mine. I would dearly like to meet her someday. In the meantime, I will try to become more like her. Here is what others said about Abigail upon her death:
"The whole of her life has been filled up doing good" - John Adams
"My mother...was a minister of blessing to all human being within her sphere of action...She had no feelings but of kindness and beneficence. Yet her mind was as firm as her temper was mild and gentle. She...has been to me more than mother. She has been a spirit from above watching over me for good, and contributing by my mere consciousness of her existence, to the comfort of my life...Never have I known another human being, the perpetual object of whose life, was so unremittingly to do good." - John Quincy Adams (while serving as US President)
"Though her attainments were great, and she had lived in the highest walks of society and was fitted for the lofty departments in which she acted, her elevation had never filled her soul with pride, or led her for a moment to forget the feelings and the claims of others."- Rev. Peter Whitney
MARRIAGE-I admire how devoted John and Abigail were to each other. They were friends and companions. He described her as the great steadying force in his life. She was his "ballast." Her obituary notice in Boston's Columbian Centinel summarizes what she meant for John.
"Possessing at every period of life, the unlimited confidence, as well as affection of her husband, she was admitted at all times to share largely of his thoughts. While, on the one hand, the activity of her mind, and its thorough knowledge of all branches of domestic economy, enabled her almost wholly to relieve him from the cares incident to the concerns of private life; on the other, she was a friend whom it was his delight to consult in every perplexity of public affairs; and whose counsels never failed to partake of that happy harmony which prevailed in her character; in which intuitive judgment was blended with consummate prudence; the spirit of conciliation, with the spirit of her station, and the refinement of her sex. In the storm, as well as the smooth sea of life, her virtues were ever the object of his trust and veneration."I want to be the wife to Chris that Abigail was to John.
VIRTUE-A motto by which John and Abigail lived could have been the inscription John wrote for the sarcophagus of Henry Adams, the first Adams to arrive in Massachusetts in 1638:
"This stone...[has] been placed in this yard by a great, great, grandson from a veneration of the piety, humility, simplicity, prudence, frugality, industry and perseverance of his ancestors in hopes of recommending an affirmation of their virtues to their posterity."The virtues that led the lives of John and Abigail ought to be the same that govern ours.
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