Monthly Archives: October 2008

An economist is lying when he blames “greed”

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As a matter of public relations, no one has ever gone wrong blaming financial disasters on “greed.” But we all know that greed is the basic engine of capitalism. Greed may not be “good,” but it’s there, and we rely on it to power our modern economy. So the problem isn’t greed: greed, like the poor, will always be with us. The key to a thriving capitalist economy is channeling that greed in productive directions.

(That channeling, by the way, is called regulation.)

So when Alan Greenspan argues that the current meltdown is due to “greed” (Taking Hard New Look at a Greenspan Legacy, NYT), warning bells should go off that this guy is trying to get himself off the hook.

The whole point of regulating markets is to manage systemically what we cannot count individuals to do wisely. Mr. Greenspan is no fool. He knows that, and he knew it at the time when he was unscrewing the safety latches that prevented Wall Street from venting all that red-hot greed into the unprotected sectors of our economy. And in deregulating exotic derivatives, he stood by while Wall Street created a risk-laundering scheme of epic proportions.

Laundering risk: Wall Street’s mathematical money machine

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Conservative think-tank dead-enders keep insisting that the blame for the market and financial crisis lays at the feet of do-gooder efforts at Fannie Mae and Freddie Mac, all the way back to the Community Reinvestment Act of 1977, to help more Americans buy homes. I have never believed in the virtue of home ownership. But the facts simply don’t support the conspiracy theory, no matter how good it might feel to blame poor people for all of our woes.

If the CRA were the main cause of this crisis, we would have a bad, but manageable, collapse of one sector of the economy. An important and big one, yes, but not the entire banking system and everything around it. The real culprit lies with Wall Street’s numerous financial “innovations” over the past decade. We are in crisis not because of some bad loans, but because those bad loans (a) were sliced into so many little pieces that to find them all would be like picking out molecules of poison from a reservoir; and (b) they were leveraged so hard, so far beyond their reasonable limits, that small disruptions would cause enormous calamities.

It is as if an entire skyscraper were built on the foundation of a single matchstick. And the matchstick has burned.

I am waiting for a responsible investigative team to tell us the real story of this meltdown: how Wall Street laundered risk through a combination of opaque derivative products and sweetheart bond ratings to turn lead into gold. The story works quite a bit like disposing of stolen goods: first you need a way to disguise your source, then you need a fence willing to “certify” them as legit. The main difference is that the criminals in this story used fancy mathematics, not slim jims, to execute this massive heist.

Short People for Obama

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The New York Times’ “The Measure of a President” provides visual proof that shorter candidates suffer a remarkable handicap in winning the Presidency. Part of the blame surely lies with the media, which regularly taints their coverage with heightist phrases like “Despite his diminutive stature…” And don’t get started with the term “scrappy.”

It is little wonder that short people are tempted to vote for John McCain, at 5’7″ the shortest major party nominee since 1900. We are outraged by the heightism and discrimination spread by the mainstream media, and we are ready to fight back.

Yet we cannot allow our own justifiable outrage cloud our vision. George W. Bush beat a taller opponent in both 2000 and 2004, and look where our country is now. The last candidate to accomplish this feat was Richard Nixon in 1968 — enough said. Presidents Bush and Nixon were an embarrassment to the short community, and John McCain’s sadly stereotypical Napoleonic tendencies will do us little good in combating societal prejudice.

We look forward to a competent and qualified candidate of shorter stature who will earn our support. Change is coming: we already have one of the shortest Speakers of the House in recent history. Until that time, I am proud to be a Short Person for Obama.

CIO Insight on Obama technology

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Ed Cone of CIO Insight has published a series, “How the Obama Campaign is Using Technology to Change Elections on the Ground.” (Big ups to Baratunde for the tip). There’s a few tidbits here and there worth repeating:

“It’s the difference between open and closed source.” — Cyrus Krohn, director of the eCampain division of the Republican National Committee. Presumably, Obama = open source. I wonder if Krohn sees that as positive, negative or neutral? Certainly, my colleagues would agree that open source is a massive positive.

“The Ground Game: Open Source vs Closed“. This article largely discusses minimally-supported local teams and my.BarackObama.com (or “MyBO” for short). Cone observes, “The Republican’s answer to the vaunted MyBarackObama.com website, known as McCainSpace, did not go live until August, and the McCain campaign is generally seen as lagging on the technology and organizational fronts.” The article confirms that the Republicans continue to equate the Internet with “microtargeting” marketing and that the Obama campaign has “leapfrogged” them.

“Local Area Networks: How the Obama Campaign Works on the Ground” describes the pyramid-shaped MyBO system: users at the base of the pyramid have relatively fewer options than those at the top, which distinguishes MyBO from, for example, Facebook. Nonetheless, local volunteers can command teams of other volunteers to undertake impressive amounts of critical work like registering, identifying, and persuading voters. For anyone familiar with GOTV campaigns (if not, here’s my GOTV primer), what’s radically new is the possibility for such teams to self-organize, with minimal supervision from the campaign. This allows the campaign to aggressively leverage its paid organizing staff. The “force multiplier” power of good technology skews even further Obama’s decided ground-game advantage.

“Connecting the Compaign: How the Democrats Built Their Network” describes the Voter Activation Network (VAN) system, headquartered not too far from where I am, that has been the data backbone of the DNC. (All of the Democratic candidates had access to VAN during the primaries, in the interest of growing the pie for everyone, thought in the heat of battle that did lead to frictions that had to be resolved by segregating the data out. So here the commons lost some ground to self-interest). Any organizer, however technology-crippled, will tell you that databases are the key to winning campaigns. (Back in the day, they would use huge stacks of index cards and the like). Some key insights about social networking:

“Facebook is great for broadcasting yourself to friends, but it’s not very action oriented. There are few features at MyBO for broadcasting yourself in the abstract–instead it’s geared to getting people to take action.” [Jascha Franklin-Hodge of Blue State Digital]. In essence, MyBO redirects the energy of social networkers to specific, campaign-oriented tasks, such as canvassing neighborhoods. Ruffini [Bush-Cheney 2004 webmaster] agrees that the system has “morphed into a very useful tool.” A killer application, he says, is the group-building feature, which allows people to create connections to potential voters in their area, rather than just talking about their personal views of the campaign as they might on Facebook.

“Going Mobile: Texting and Twittering in the New Ground Game” identifies the VP selection text-message signup as a “watershed moment” for the campaign. It was a great way to collect thousands of phone numbers that are normally very difficult to acquire. Yet the technology also appears to be immature, with many who signed up failing to get the text message, as well as expensive.