Justin Singer: Person

“There are fifty or so billionaires and tens of thousands of millionaires in Silicon Valley.” Think about that for a second: tens of thousands of millionaires, almost all them created by companies that didn’t exist two decades ago.

The defining difference between Silicon Valley companies and almost every other industry in the U.S. is the virtually universal practice among tech companies of distributing meaningful equity (usually in the form of stock options) to ordinary employees. Before companies like Fairchild and Hewlett-Packard began the practice fifty years ago, distributing stock options to anyone other than top management was virtually unheard of. But the engineering tradition that spawned Silicon Valley was much more egalitarian than traditional corporate culture.

In a fascinating piece several years ago in Vanity Fair, Todd Purdum captured the sheer absurdity of what it’s like to be president. On the single Wednesday Purdum covered, Obama was dealing with a West Virginia coal mine tragedy; a vacancy on the Supreme Court; an Arizona law empowering police to identify potential illegals; a shortage of funds for FEMA; the nominations of a federal appeals court judge, seven U.S. attorneys, and six federal marshals; and a special award for country singer Garth Brooks. And that was a quiet day. The relentlessness of the job, the 24/7 pace of the media, the complexity of the tasks at hand, and the sheer number of moving parts creates a situation no single individual can manage. Add to this a polarized Congress and an integrated world that America can’t control, it’s no wonder the presidency is an impossible, perhaps implausible, job. The current headaches Obama confronts at the State Department (Benghazi), at Treasury (IRS targeting conservative groups), at Justice (the seizure of Associated Press phone records), and Defense (sexual harassment) may well represent a bad combination of mismanagement and bad luck. But they also reflect the reality that Obama, to paraphrase Ralph Waldo Emerson, is not a master of all he surveys. The presidency is just too big and complicated for that.

We expect our presidents to be a cross between Superman, Moses, Mohammad, and Jesus. And we have an almost cartoonish conception of their ability to get the rest of America’s institutions to go along with their views. The president’s power, as Richard Neustadt famously argued, is the power to persuade. But circumstances for that persuasion must be present — and most of the time, they’re not.

The emphasis upon entrepreneurship as the crucial factor in capitalistic evolution involves both theorist and historian in considerations that go far beyond the limits of economics. Schumpeter is explicitly aware of this fact, and insists that in his conception the economy is not isolated but functions in a larger universe which requires in the first instance sociological analysis for its interpretation. The theory of innovations is neither a “great man” nor a “better mousetrap” theory of history. The innovator is a person whose traits are in some part a function of his sociocultural environment. His innovation is a new combination of factors and elements already accessible. It relates in every phase to previously developed business and monetary habits, technological skills, and variable tastes, none of which can be regarded as functions of economic activity alone.

I met a group of Google employees in their early twenties, beneficiaries of the country’s most elite educational institutions, now applying their sharp minds to the investigation of multiple concurrent relationships. They all did yoga, were extremely attractive, and accompanied their sexual experimentation with controlled consumption of psilocybin mushrooms and MDMA. They spoke of primary and secondary relationships, and described a world in which jealousy and possessiveness were the sins to overcome. I attended the cult-like meetings of a group of people who have devoted themselves to the female orgasm. After a “game” at one meeting, where I stood directly in front of a male stranger who looked in my eyes and repeatedly demanded answers to the question “WHAT DO YOU DESIRE?” for several minutes, I went home, drank almost a full bottle of wine, and wept.

Again, it is important to underscore that it is the indirect psychological effects from Fed support and the low cost of capital—not the popularly imagined injection of Fed liquidity into stock markets—that have gotten investors to mobilize their idle cash from money market accounts, increase margin, and take financial risk. It is our money, not the Fed’s, that’s driving this rally. Ironically, if we all understood monetary policy better, the Fed’s policies would be working far less well. Thank God for small favors.

We’re all, to varying degrees, slaves to our experiences. The [titans of finance’s] formative experiences, almost to a man, were in the early 80s. This is when they built their knowledge and assembled their financial playbooks. They learned words like Milton Freidman, money multiplier, Paul Volcker, Ronald Reagan, and the superneutrality of money. Above all, they internalized one dictum: real men have hard money. This understanding implies that an increase in bank reserves deposited at the Fed (i.e. “printing”) eventually feeds credit growth and thereby inflationary pressures; in other words, no base money increase, no credit growth. Only one problem: reality disagrees.

In other words, much of the “missing” gdp [driven by an 11.5% drop-off in military spending] — whatever its long-term geopolitical value for foreigners — was not creating actual, consumer-relevant value for the United States. Putting back that military spending would pump the gdp number back up, but that is distinct from the economy improving. Fetishizing gdp makes the least sense when it comes to military spending, and it is remarkable how few media accounts recognize this point in even a partial fashion.

The rational agent model has more questionable consequences in the domain of policy [vs. economics] because the assumption that individuals are rational in the pursuit of their interests has an ideological coloring and policy implications that many would view as unfortunate. If individuals are rational, there is no need to protect them against their own choices. At the extreme, no need for Social Security or for laws that compel motorcycle riders to wear helmets. It is not an accident that the department of economics at Chicago University, one of the most illustrious in the world, is known both for its adherence to a strict version of the rational actor model and for very conservative politics.

The transformation of the stewardess from all-American girl next door to a sexier image, was largely the work of the Burnett advertising agency, which won the United account in 1965, and Mary Wells, the advertising director of Braniff Airlines. Leo Burnett’s team realized that young consumers were an emerging market—and appropriating aspects of the 1960s counter-culture “could help market United to older Americans who still wanted to feel young and hip.” At the same time that the Burnett agency was struggling with its campaign, Branniff kicked off its “Air Strip” television ad, in which a stewardess slowly removed pieces of her Pucci uniform during the flight. Shortly after, United’s ads promised consumers that stewardesses would “go all out to please you!” The sexual revolution had infiltrated the airlines, and other carriers soon modified their images as well.

Last week, millions watched as an entire city was shut down to look for one guy. Every major news station was covering the pursuit of one guy. We all know the face and relatives of this one guy. And it’s all because he is an alleged terrorist. But more American were murdered in the south and west sides of Chicago than there were U.S. servicemen killed in Afghanistan last year, and yet for some reason we don’t view those neighborhoods as terrorized.

We did it to ourselves. We made it unprofitable for humans to make markets, which reduced the interest in small cap research and the IPO process. We further exacerbated things by allowing the exchanges to go for-profit - the only revenue stream they could find was selling access and data and capabilities to parasitic tech firms. They took the money - now it’s the only money they actually make other than renting out the trading floor for cocktail parties and the Westminster Dog Show. So now we have this atmosphere where a tweet from a hacked account can temporarily wipe out half a trillion dollars of wealth in minutes. Hope you’re enjoying this!