Billions: Summary Perspective: One Problem and One Solution

15 Nov

Post by Bart Garrett

Six Colors. Nine tiles per side. The object of the game? Reconfigure the cube until each side sports only one color. It sounds so simple (and it is if you peel off the stickers!), but the Rubik’s Cube (the 1980 evil invention of a Hungarian architect) boggles the mind with over 43 quintillion possible combinations (yes, that’s a 43 followed by 18 zeros!). Give a Rubik’s Cube to every one of the world’s 7 billion people, have each person play for every second of every minute of every hour of their life, and the possible combinations still wouldn’t be exhausted! Yet, no matter how scrambled the cube is, it can always be solved in 20 turns or less (the world record is 5.66 seconds)!

There are 43 quintillion possible solutions to the 43 quintillion problems in the world today. And yet, it sometimes seems that we are less than 20 turns and 5.66 seconds from solving the puzzle. Our first question for (“What do you do with your billions?”) prompted a discussion over ranging topics: Money, income, giving/altruism, the role of government, the role of the corporation, big vs. small business, proper place and function of capitalism, fair/free trade, distribution of wealth, redistribution of wealth, happiness, education, and poverty.

I was quite pleased at the terms of engagement and the depth of the conversation. Yet, with an unwieldy topic (though necessarily so—kudos to Ezra for keeping the topic broad enough to foster the exploration of several interrelated topics) such as this one, it seemed that we could not easily agree on the problems at hand, let alone the appropriate solutions that might address those problems.

In the effort to spark some good follow-up discussion online, I am going to throw myself out there by stating the problem and offering a solution. And then, I’ll step aside and let the sparks fly—we will even allow you to end sentences with prepositions (inside joke for those that were at the event last Thursday!).

The Problem: (1) Health declines (life expectancy, infant mortality, obesity, mental illness, cancer), (2) crime rises (murder, vandalism, theft), (3) education divides (education gap, dropout rate, level of), and (3) society crumbles (relational capital dissipates, trust erodes, class warfare ensues) for many reasons, but the chief reason is the growing income gap or chasm of wealth distribution in any given country or society. “The Fiddle” team highlighted this quite beautifully—thank-you Toby, Demien, and Dave. One could almost hear the chants of, “We are the 99%!” on Sproul Plaza, just outside of our venue. Well, one could hear the chants if not distracted by the Frat Party Base Kickin’ in the next room.

Kouroush Karimkhany reminded us in his presentation that what makes us different from monkeys is that we can read the Economist (well, that, and some of us have less hair and use toilet paper, but I digress). The other night, a couple of folks questioned the rapid growth and severity of the income gap. Two weeks ago, a short article appeared in The Economist Online entitled, Income Inequality in America: The 99 Percent (Oct 26, 2011), and I offer it as a rebuttal. The article mentions the purposefully vague notions of the chants, mantras, and banners, “We are the 99%,” but then elucidates the sentiment with some good, hard data (view the chart here): “A report from the Congressional Budget Office (CBO) points out that income inequality in America has not risen dramatically over the past 20 years—when the top 1% of earners are excluded. With them, the picture is quite different. The causes of the good fortune of those at the top are disputed, but the CBO provides some useful detail on that too. The biggest component of the increase in after-tax income for the top one percent is ‘business income’ as opposed to income from labour or investments (though admittedly these things are hard to untangle). Whatever the cause, the data are powerful because they tend to support two prejudices. First, that a system that works well for the very richest has delivered returns on labour that are disappointing for everyone else. Second, that the people at the top have made out like bandits over the past few decades, and that now everyone else must pick up the bill. Of course it is a little more complicated than that. But this downturn ought to test the normally warm feelings in America of the 99% towards the 1%.”

The Solution: The solution to the rampant disparity of wealth or growing income gap is not further government intervention (taxation or regulation), nor is it more benevolent corporations (job creation, more equitable pay-scales, avoiding lay-offs, re-structuring the economic architecture to ensure that the company isn’t just about top-line expense and bottom-line profit, empowering employees to give charitably/benevolently with their time, talent, and treasure, etc.). These things might be helpful correctives, but they address external (presenting) symptoms and not the internal, root cause of the illness. The illness, as best I can tell, involves two of the Seven Deadly Sins, namely greed and sloth. The first is a consumptive consumption that can rarely be curbed or controlled, and the second is a ravenous black hole of laziness and apathy. In this respect, I suppose I most closely align with Bambi and Dave’s presentations, both of which chiefly involved the responsibility of the individual to be sacrificial and generous.

To identify greed and sloth as the besetting illnesses is not to say that all of the “haves” are greedy, while all of the “have-nots” are slothful. But, in the aggregate, it seems to me that real evil (cue the devil and pitchfork) is always greater than the sum of its parts. Thus, greed and sloth in the aggregate have rigged the system. My concern is that if we simply mandate that (1) the rich “pay their fair share” or (2) “give them a free pass” (to use the pejorative, political nomenclature), and then attempt to either (3) curb or (4) accelerate the “proliferation of entitlements” (to use the pejorative, political nomenclature), then we do little more than rouse and then exasperate the gods of greed and sloth, further exacerbating the problem.

This is where, I suppose, I might sound too preachy, but I really do believe that we need to find a solution that is internal (on the attitudinal/motivational level), and not external (governmental or corporate correctives). We don’t need any more carrots and sticks (as a quite tangential aside, I simply love Daniel Pink’s book, Drive); we might actually need some candles and prayer (or some other means for dealing with internal motivations and attitudes).

At the risk of sounding pessimistic, I am concerned that solutions might be hard to come by because the gap between the rich and poor is already so significant—for internal renewal to happen, rich people need to be around poor people and vice versa. Several sociologists that I read (Peter Berger, Robert Bellah, James Davison Hunter, and Robert Putnam) point to the religious organization as the most successful entity for creating diversity and integration. Yet, while leading the way toward integration, what is the most difficult gap to bridge? Ethnic? Cultural? Racial? Gender? Religious? No. No. No. No. And, no! Socio-economic? Yes! However, Tim Musgrove’s comments regarding the enfranchisement of the individual who can share in the means of production gave me reason for hope. Like Tim, I see this happening more through the corporation/business and less through the government because I think that our work rather than our state more directly affects the internal drive shaft of our motivation, and could best root out the weeds of greed and sloth.

It is with a heart of gratitude that I offer my thanks to all that participated and attended the first conversation. It was life giving for me, and I look forward to many future conversations.


Follow on perspective posted by Ezra Roizen

Contribution is the Currency of Self Worth

I received some grief for posing a broad, Rubik’s Cube, of a question.  But I actually think in the breadth of the question we were able to explore a number of parallel and interrelated topics.

Interestingly, we also received some grief for the “debate” format.  What drew people to the idea of was the search for the center, and that the debate format was a bit of a bait-and-switch – moving people into polarized rather than unified positions.  But that was our attempt to bring an engaging method to the overall madness.  The thinking was that providing a sharper contrast to the issues would help us identify the parts and build a better whole.  All things considered, I think it worked, and what’s interesting is Bart and I both ended up in a generally similar place.

In kicking off this discussion, I was really asking a question behind a question.  It was as much about social priorities as it was about individual behavior and choice.

This process has helped me clarify my feelings on these matters, and I’m sure my life coordinates will be different because of these several weeks of consideration and debate.

I tend to agree with Traver Hutchins’ point in the online comments that “Taxing is not the same as giving.  You won’t see a lot of that humanizing effect, or enhanced unity across socio economic classes because of more taxation of the entrepreneurial class.”  I also am drawn to the energetic simplicity of Mark Cuban’s rant “Make a boatload of money. Pay your taxes. Lots of taxes. Hire people. Train people. Pay people. Spend money on rent, equipment, services. Pay more taxes.”  So how do we harmonize these voices?

At the debate, Tim Musgrove, representing “Poppycock,” presented an excellent case.  Which I’ll summarize as the following:  If we follow the early writings of Karl Marx he essentially said personal dignity comes from one’s contribution and the ability to own part of the means of production, essentially being enfranchised in the state/system.  If we roll that forward to today, we see a rapidly rising rate of structural enfranchisement.  More people than ever own stock options, participate in pension plans or run a small businesses.  Today we have a huge (and growing) number of people who are owners of the means of production, and are enfranchised by the system.   We’re basically on the right track.

The opposing team in the debate, “I hope you like the sound of fiddle,” focused their arguments on the large and growing disparity of wealth in our society.  They did an excellent job summarizing the problem, but I found myself leaning forward for a sketch of a solution, which was not forthcoming.  I was moved by Toby Stuart’s point that money needs to keep moving through the system, and not be pent up in the savings accounts of the wealthy.  I also enjoyed Demian Entrekin’s framing of the problem in the tenets of the French revolution Liberty, Equality, Fraternity – a starting point I would have liked to have seen developed further.  My takeaway from Dave Gehring’s talk was the humanizing energy of self sacrifice, beautifully articulated in his quote from Winston Churchill “make a living by what you get, and a life by what you give away.”

But as I look back across the entire topic, and what is now entering our second month of debate, I find myself constructing my path forward from positions which are informed by the themes presented by the Fiddle team, but are built on the blocks put forward by the Poppycock team.  I agree with Kourosh Karimkhany that we have to channel the “greedy monkey” part of ourselves.  I don’t think we can fully suppress it, but I do think it can be directed.  I agree with Bambi Francisco that many, many wealthy people are disciplined contributors to society, that the individual has a role to play.

How does this all manifest in actual life and decision making?  Well, I don’t think it’s only higher taxes, or forced wealth distribution, or even simply more jobs per se that are needed.  I think it’s opportunities for contribution.  We need platforms upon which everyone, at their level of ability and energy, can continually contribute to society.  I believe the “man on the moon” challenge for the next 25 years is to create a perfectly efficient allocation of resources that gives everyone an opportunity to contribute to society.   I believe this will spread dignity and energy to all.

The fundamental “ah ha” of my study of macro economics was that until the world is perfect, and every problem is solved, there’s always something more to work on, so in essence the only reason there’s anything higher than zero unemployment is suboptimal resource allocation.  Are we effectively mapping global challenges to global resources?  Right now, I’d say we’re doing OK, but we could do a lot better.

For example, in places like parts of Africa, we have horrific alignment of challenges and resources.  My father made an interesting point along these lines, he asked me to look at what has happened in China and India in the last several decades, a mere blink of an eye in the grand scheme of things.  When I was a kid, and definitely when my parents were kids, the average person would have lumped Africa, India and China into what we would have called the “Third World” – places where essentially just getting food on the table for most of the population was the primarily challenge, let alone technological and financial market advancement.  Roll forward to today, two of the three are well on their way out of this category and China is considered by many as the primary global competitor to the U.S. – and now it turns out we owe them a lot of money!

When you align resources to problems effectively good things tend to happen.

I’m for spending heavily on the systems which create opportunities for contribution and spending equally heavily on the systems that get people ready to contribute.  In the online discussion Rich Heaps brought up education.  He’s on the right track.  Let’s spend, spend, spend – either through tax or gifts – on getting people ready to contribute.  The internet opens amazing possibilities here.  The problems of the future are going to be intellectually more demanding than the ones of the past, we need a society that is ready to meet them.

On the main blog of this debate I linked to Richard Wilkinson’s TED talk on the negative impacts of wealth inequality.  Were I to meet Wilkinson I think I’d ask him to dig deeper into the actual causes and effects here.  If I follow the Musgrovian School, it’s not the disparity of wealth but the disenfranchisement that’s the issue.  That, yes, high rates of unhappiness (defined broadly) appear to be correlated to wealth disparity, but the question is that the cause of the unhappiness.  I’d put the thesis on the table that it isn’t wealth disparity, but rather disenfranchisement and a lack of channels for meaningful contributions.  People sleep well at night when they labored on something meaningful that day.

If people increasingly own the means of production, if they have ever increasing talents and venues for putting those talents to work, I believe happiness will reign – even if some folks are just a heck of a lot richer than others.  We need to bridge the participation gap, not the wealth gap.

That said, I don’t think businesses should be required to keep employees they don’t need, but I do think they could think more widely about creating opportunities to put people to work.  If you can do so profitably, why not?  To quote a line the most recent Star Trek “it should be considered morally praiseworthy, but not morally obligatory.”  But contribution should be the objective, not just jobs, if you can’t get a job there should be a social system which rewards you for painting over graffiti, or fixing a fence, or whatever.  The world is far from perfect, let’s create a culture of contribution.

In places of complete desperation, where there just isn’t the opportunity to get to work, that’s where I think the government can help.  In the time and space where those among us are caught in a crushing economic downdraft the government should stimulate growth, build stuff, fix the streets, get people busy, and direct economies down a productive path.  If we can intervene in Afghanistan, we can intervene in Detroit.  But we should approach these projects with an equally aggressive set of objectives, and a well defined exit strategy.

But in the end, as Bambi said in her talk and as Bart says above, it comes down to the individual.  At the top of the economic ladder it’s the Wall Street banker not risking your savings on her overleveraged bet, at the bottom it’s the unemployed factory worker spending her morning fixing the fence at the school down the street, then spending the afternoon in an online job training course.    As Bart says, we need to rage against greed and sloth, at all rungs of the ladder.

We can’t tax or regulate solutions into being.  We have to create a belief in the greater good and set of social rewards for behaviors that enhance this good, and punishments for those that don’t.  I believe in peer pressure.

Disparities of wealth are going to be part of any free and competitive society, but what we can do is create a culture of support and contribution.

So to answer the question: What will I do with my billions?  Or will I even choose to accumulate them?

I don’t believe, in-and-of-themselves, billions will make me happy, and I don’t think I’ll keep them very long should I ever have them, but should the money come in faster than it can be responsibly deployed, I suppose it would accumulate.  The ultimate form however would be to create a life where the wealth never flows through me in the first place.  To have created organizations and platforms that intelligently distribute excess profits into the system in a way that continually builds and optimizes opportunities for an ever increasing number of people.   That’s the race I’d like to run.

I’ll use Bambi’s words to sum up my position “because in contributing, we serve a purpose, and purpose defines who we are.”

Thanks to everyone for participating, it was a wonderful opening discussion and I’m looking forward to many, many more.


Pictures from #1!

Lucia Comnes got things rolling with her fiddle.

Team Poppycock: Tim Musgrove, Kourosh Karimkhany, Bambi Francisco

Team Fiddle: Dave Gehring, Demian Entrekin, Toby Stuart





4 Responses to “Billions: Summary Perspective: One Problem and One Solution”

  1. Deman November 16, 2011 at 8:40 pm #

    I continue to mull these topics over and I am increasingly aware of the gap between a sharp debate strategy and a nuanced thinking framework.

    I will try to be short. To talk of state distribution of wealth as a yes or no equation is a false dichotomy, and such a frame is destined to mislead us all. The very institution we debated in, UCB, is a terrific example of wealth distribution. Who paidmto build that place? So are roads, bridges, elementary schools and the US Navy. The state distributes wealth and presides over the rules of the game. This is quite frankly a moot point. Let us move past this.

    The question is, How do we regulate the levers and how are the trends trending? A rural road in Somalia to get farmers’ products to market is a distribution of wealth. We need to rise above the delusional arguments of good and bad.

    I return to the core outcome we should be looking at. What is the trend for children? The trend for children, in particular other people’s children, tells us how much we care for the collective future and the innocents. If charitable giving is up but more children are living in poverty then we are failing.

    • Tim Musgrove (@tmusgrove) November 17, 2011 at 2:13 pm #

      As a yes/no question, gov’t redistribution of wealth is indeed a moot point (it’s inevitable that the gov’t spends some of it’s citizens money in a way that disproportionately benefits other citizens). But as a matter of *degree*, it is very much open to debate. Our debate could be cast as: How heavy a hand should the government take in redistributing wealth?

      No one at the UCB event was seriously proposing we end our progressive taxation system and go to a flat tax. We all accepted that a progressive system is here to stay. But Team Poppycock was saying, in effect, “Enough already, we’re as progressive as we need to be be,” while Team Fiddle was suggesting we need something much more radical (though they didn’t make really specific proposals).

      My arguments were suggesting that if the government is to take a heavier hand at all, it ought not to be in heavier taxation, but rather in incentives to corporations to keep increasing the extent to which they share ownership with employees. In combination with other things (like incentives for individuals to give more, sooner) this would align our collective business needs with our moral and social needs.

  2. bart November 30, 2011 at 9:38 am #

    This is really well put, Tim. I couldn’t agree with you more. What would that look? Would you be willing to enumerate a handful of incentives that could properly redistribute ownership amongst employees?

    Also, your post implies that you do see the devil in the details of this thing we call “life” as the growing disparity of wealth–the growing chasm between the “haves” and “have not’s”?

    Interestingly, Wired just posted this a few weeks back…

  3. Bart Garrett December 19, 2011 at 8:11 am #

    Here is an interesting alternative to simply increasing taxation. Levy taxation on after tax income that is greater than 36x the after tax income of the median household income in America.

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