Where 5% of the world lives

The blue and the red regions both contain about 5% of the worlds population.

Map by Ibisdigitalmedia

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The Real Cost of Flying

People think that the cost of plane tickets is high.  This video however breaks it down around the real math involved with moving 150+ people from point A to B and the more probable cost per person.

Photo by Trey Ratcliff of stuckincustoms.com

 

Possibly The Best Economics Lesson Ever

Ray Dalio of Bridgewater Associates has produced a 30 minute video called “How The Economic Machine Works” that distills down to the very essence pretty much all you need to know about how the general economy works.  It’s useful to see particularly because it’s able to zoom in and out of where the economy is at pretty much any given point, which in turn is useful to try and understand (and anticipate) where we are (and will be) in our economic cycles in the future.

He does this by explaining how income, spending, and credit work together.  He presents three basic graphs and lays them on top of each other so you can see what’s happening in the long term view, the short term view, and how productivity grows over time.

I thought it was a 30 minutes well spent and you might like it too.

Without Them

I was listening to music on Spotify when an ad for Spotify itself came on.  The ad mentions how “piracy is so old-fashioned” and that “every track on Spotify makes money for the artist because after all, without them there would be no music for us to enjoy“.

It’s that last part – the “after all, without them there would be no music for us to enjoy” part that resonated with me most.  This simple radio advert is actually pretty profound and is a perfect note to end 2012 on – a year where “you didn’t build that” and “fair share” were tossed around as if the creators of businesses were somehow not quite fully entitled to the fruits of their ideas and labor.

Apparently Spotify believes (and I agree) that the right thing to do to honor the creators of the music is to make sure the creators are paid and not stolen from – because they are in fact the brains behind the music.

The ad’s “Without them” concept can be applied to any business, any product, and the job creators behind those businesses.  “Without them” there is nothing. “Without them” people have no products or services.  “Without them people” have no jobs or ability to sustain their families.

My point here is that millions of people enjoy music thanks to those that create music.  Likewise, millions of people enjoy employment and lifestyles thanks to people who create jobs.  Is there really any difference between a musical artist who creates a song for sale or a businessman who creates pizza? (or any product/service)?  Each has a skill. Each has a product.  Each put effort and training into making that product for sale and… “without them” there is nothing but unfinished ideas and raw materials.

In the classic book Atlas Shrugged, the industrialists, the men and women of thought, vanish from the face of the Earth, going on their own strike of sorts and leaving everything behind including the keys to the car for anyone to pick up where they left off and run things.  Nobody does.  Nobody can.  Nobody remaining behind has the know-how or fortitude to do what the industrialists (i.e. job creators) did.

There is a line in Atlas Shrugged that go like this:

“Whether it’s a symphony or a coal mine, all work is an act of creating and comes from the same source: from an inviolate capacity to see through one’s own eyes–which means: the capacity to perform a rational identification–which means: the capacity to see, to connect and to make what had not been seen, connected and made before.”

-Ayn Rand, Atlas Shrugged, Part 3, Ch. 2

Imagine this.  How would it be if in the name of social and economic musical justice Spotify took a percentage of all the money Bruce Springsteen makes when his songs are played on Spotify and just gave it to an artist whose music was not chosen by the consumers in the free market to be played.  We could say that he “didn’t really write that” without the world providing to him the influence to come up with such musical ideas.   Would Bruce be cool with that?  I doubt it.

Company Founders, men and women of vision and production, should be celebrated, encouraged, and thanked, not threatened or villainized.  Like the Spotify ad says – “after all, without them there would be no music to listen to.”  The same goes for job creators.

Chinese Retail

Retail in Asia is at a completely other level than here in the USA and in China it’s particularly intense. The interesting thing about China (and in this photo taken in Shanghai on West Nanjing Road) is that virtually all wealth is new money – and when I say “new” I mean in the past 15-20 years new.  There is really no such thing in China as “old money” because there just was not any wealth in the society outside of a handful of folks.  As such, the new money Chinese have tended to flaunt their wealth.

I was at a presentation in Hong Kong where the regional director of LVMH was giving an amazing presentation about this subject and he said the bulk of billionaires in China are in their forties and the overwhelming amount of millionaires in China are in their thirties.  The retail scene in China reflects this too.  When it’s nice in China, it’s really nice.  There is a downside to this as well, and the Chinese are somewhat developing a reputation for being perhaps a bit too brand conscience and there are some side effects with this (which perhaps I’ll get into on a future post), but for now, this photo paints a bit of the picture of the scene in retail – and this is but one corner on West Nanjing Road – you should see the rest of it.

A Rebuttal to “How Rich is Too Rich” by Sam Harris

Sam Harris wrote a piece on August 17 on his blog entitled “How Rich is Too Rich?“.  It was a genuinely thoughtful piece with some great points but he lost my hope when he used the line “how much wealth can one person be allowed to keep“.  Allowed?  By whom?

And what about the other side of the “How Rich is Too Rich” coin such as “How Much Stealing is the Right Amount?” or maybe “How Much Waste is There in Government” or even “How Lazy Can You Be?

When it comes to private individuals generating wealth (even one dime) by performing a legal service or selling a legal product, the profit generated after belongs not to society but to the individuals and stakeholders that took the initiative to make it happen.

If we want to start throwing around the “allowed” word the very first place we should put that word is with the federal government.  We should not be asking how much Steve Jobs should be allowed too keep, but rather how much should the government be allowed to have from the taxpayers generating the wealth.

The US Government holds its position at the consent of the governed, and people are mad because government is using billions of dollars in taxpayer money to go way beyond the core purposes of government.  By and large Americans don’t have a problem with the concept of paying taxes, they have a problem with paying taxes when the tax revenue gets squandered.

Taxpayers who have trouble making ends meet are not thinking about Steve Jobs, Bill Gates, or anyone else like that, they’re thinking about their mortgage, their gas bill, groceries, medical bills, and other items that they could purchase if they only were “allowed” to keep more of their income.

They get mad because of the sheer waste all around them, such as this $600,000 gurgling toad sculpture.  How many tax paying households had to chip in to pay for this?  Don’t you think whatever monies were taxed and redistributed to purchase this commissioned work could have been put to better use by the people that earned that money?  There is an almost limitless supply of examples of government waste we could discuss – here’s 50.  It’s government that is “allowed” to keep too much money not individuals.

Sam posits a question and gives his answer.

“How many Republicans who have vowed not to raise taxes on billionaires would want to live in a country with a trillionaire and 30 percent unemployment? If the answer is “none”—and it really must be—then everyone is in favor of “wealth redistribution.” They just haven’t been forced to admit it.”

What about framing the argument this way?

How many Democrats who have vowed to raise taxes on anyone making over $250,000 would want to live in a country where employment goes to 30% because business owners limited to $250,000 in income have no incentive to grow past that – because anything over that amount would simply be confiscated?

Which do you think is a more likely scenario?  Clearly the second because nobody is close to an individual wealth of a triilion bucks, but we have all kinds of Democrats wanting to raise taxes on people who generate over $250,000 in income.

In Mr. Harris’ blog post, he brings up the news about Warren Buffett’s op-ed wherein he mentions he’s taxed at a lower rate than his secretary (and that many Conservatives pretend not to find this embarrassing).

This is comparing apples and oranges.  One is capital gains taxation and the other is ordinary income taxation. Mr. Buffett could always choose to pay himself ordinary income.  Why doesn’t he?  Mr. Buffett instead of pledging his billions to the Gates Foundation could choose to disperse with his wealth in some other way that’s not maybe as tax efficient.

Moreover, as this article points out, even if you flat out took all the money the super wealthy had you wouldn’t even put a dent in the problem. The root issue is not how much private people earn, it is the amount government spends.  This tired argument of taxing the hell out of rich people simply because they have it does not solve the problem.  Government must shrink.

And anyway, does anyone need a trillion dollars?  Of course not, but that’s not the point.  The point is does a need on my part create an automatic obligation on everyone elses?  If the answer is “yes”, then those people answering that way are in favor of stealing, they just haven’t been forced to admit it.

The problem we’re facing in the USA (and indeed the world) is that for many people the answer is “to hell with property rights, I want my stuff”.  They call this “social justice”.  But what is “just” about taking from your neighbor simply because you deem him to be more than satiated?

We’re all looking down the barrel of ugly arguments and scenarios these days not because of productive, job-giving, wealth creating entrepreneurs, but because of government fools who get in the way of free markets efficiently delivering solutions to people.  The very people government claims to help and champion are the very people that get wiped out by government.

Are free markets perfectly efficient?  No but they are far more efficient and “fair” than centrally planned economies where a few people pick winners and losers and there are only but a few winners. Remember fairness is a two lane highway.

In the USA we do have “crisis of inequality” and on a global level it’s even worse, but government interference, corruption, and waste only exacerbates the problem.  Americans (and likely most people in rich countries) do not want to live in a society with huge “inequalities” in wealth but the difference between Conservatives and Liberals is how we achieve that.  One could also easily point out that we have a crises of inequality in effort put forth by many people.

Offering 99 weeks unemployment checks or incremental welfare subsidies for every baby you have while on welfare only keeps people down when they might otherwise get up on their own.

The brutal truth is some politicians would have it no other way.  Until we elect people that limit government to what it is supposed to do instead of all of these superflous programs it won’t change too much.

If there is one place we should be pointing the “how rich is rich” question it is not at private individuals, it is at government.

Photo by Stuck in Customs