My energy prediction

Consider this...you are a electric company with several large coal plants and a desire to expand to meet growing demand. But given the current administration and congress's obsession with alternative fuels, its unclear what new laws, regulations, and research funding will effect the economic viability of a new plant. Would you want to start a multi-million dollar project, building a new electric power plant, when the outcome is so uncertain? What would you do? You could start research and investments in alternative fuels, but that return may be 20 years in the future. What about the increased demand in the next 5?

Here is my prediction. Current electric producers will underfund new development over the next 5 years because they are uncertain about the industry. Prices will begin a long rise. Politicians will react in predictable ways. They will cap energy prices. This will lead to shortages of energy leading to rolling brown outs and black outs (remember California?). Politicians will decry the "greediness" of energy companies and suggest higher taxes (like they did with the oil companies). And they will claim we need more incentives to switch to alternative fuels.

Just looking for investment opportunities.

Railroad Tycoon

Lately, my son and I have started playing Railroad Tycoon II. The business concepts are little too advanced for him, so we both get a little frustrated at times. He just wants to buy trains, load up any cargo he wants and then watch them run. That would be great, except the game is highly dependent on money. Its easy to be unprofitable if not careful. So I keep intervening to help him make a profit so he can keep playing. At this point, he understands the need to make money, but not how. He also needs help controlling the mouse as he doesn't have the dexterity to control it well enough yet.

I really like this game. The business concepts it covers sounds like the core curriculum in most business colleges - supply and demand (economics), logistics, operations management, accounting, finance, and strategic management. I've always been intrigued by computer games that could be used for education. Railroad Tycoon (and as far as I know the other two tycoon games - Zoo and Roller Coaster) would be an excellent for intro to business students. Wouldn't it be really cool to have to learn about business by running one in a game? It could be part of the class credit. In order to pass the class, you would have to grow your business to $20 million in 10 years.

Reading list

I'm finally finishing off the last of the books I received for gifts at Christmas and its time to pick some new books to read. Below is what I'm adding to my wish list.

Fiction
Harry Potter series
And Then there were None by Agatha Christie (I haven't read her since grade school, but have fond memories)
Death on the Nile by Agatha Christie

History
Communication in History: Technology, Culture, Society (5th Edition) by David Crowley and Paul Heyer
Dungeons and Desktops: The History of Computer Role-playing Games by Matt Barton
On the Edge: the Spectacular Rise and Fall of Commodore by Brian Bagnall
A Distant Mirror: The Calamitous 14th Century by Barbara W. Tuchman
A World Lit Only by Fire: The Medieval Mind and the Renaissance: Portrait of an Age by William Manchester

Technology
Web 2.0: A Strategy Guide: Business thinking and strategies behind successful Web 2.0 implementations.
Practical Web 2.0 Applications with PHP by Quentin Zervaas

Eduction and Parenting
Raising Your Spirited Child Rev Ed: A Guide for Parents Whose Child Is More Intense, Sensitive, Perceptive, Persistent, and Energetic by Mary Sheedy Kurcinka
Kids, Parents, and Power Struggles: Winning for a Lifetime by Mary Sheedy Kurcinka
The Well-Trained Mind: A Guide to Classical Education at Home by Jessie Wise

Why I love Drucker

In a previous post, I have recommend Peter Druker's The Practice of Management. In my opinion, he is by far the best business writer to have lived. One of the things I love about Drucker is his clarity. Take for instance his definition of business purpose:

"There is only one valid definition of business purpose: to create a customer. "

Whether or not you agree with this definition, there is no question what his definition is. In the next paragraph, he goes on to say:

"Markets are not created by God, nature, or economic forces but by businessmen. The want they satisfy may have been felt by the customer before he was offered the means of satisfying it. It may indeed, like the want for food in famine, have dominated the customer's life and filled all his waking moments. But it was a theoretical want before; only when the action of businessmen makes it effective demand is there a customer, a market."

Drucker directly ties the purpose of business to reality. His objectivity makes Drucker stand head and shoulders above the rest. He writes in a style similar to Ayn Rand. He makes bold statements, but proceeds to justify his statement with analysis of reality and identifying the essentials. He explores all the major options (God, nature, economic forces, and businessmen) and proceeds to explain why it must be businessmen that create markets, hence customers. It is the actions of businessmen, of creating products where none existed previously, that creates the market.

Beyond just the clarity of his writing, is the recurring message throughout his works that management requires reason. Take, for instance, his excellent summary of production:

"Production is not the application of tools to materials. It is the application of logic to work."

In this one sentence, Drucker challenges philosophers of the Marxist persuasion by relating the role of thinking managers to productivity. An unthinking brute swinging a sledge hammer is not being productive. They are merely swinging a sledge hammer. It takes a mind, applying logic to work, that transforms a chunk of metal into a V8 high performance engine.

While not perfect philosophically, Drucker has done more good for businessman than all of the Harvard MBAs of the last century. In the 1950s, he identified the need for management by objectives...a trend that caught on in the 1980s. By thinking in essentials and applying reason to observations of reality, Drucker became a visionary that executives like Andrew Grove (Former president of Intel) says "Peter Drucker is a guiding light to a whole lot of us. When I see an article of his I drop everything else and read it on the spot." Now that says a lot.

Stimulus bill will destroy medicine

via Gus van Horn, an article by Betsy McCaughey highlighting some provisions placed into the stimulus bill that will directly effect our health care.

Several aspects of this bill are particularly scary. According to Betsy:

"But the bill goes further. One new bureaucracy, the National Coordinator of Health Information Technology, will monitor treatments to make sure your doctor is doing what the federal government deems appropriate and cost effective."

My interpretation...no longer will a doctor be able to do what is in your best interest as his patient. Now the doctor must do what is in the best interest of the federal government. You may think that this will minimally affect your health. You would be wrong. Tom Daschle, who is strongly behind this part of the bill, wants to limit medical technology. Betsy states its all in Daschle's book.

"The stimulus bill does that, and calls it the Federal Coordinating Council for Comparative Effectiveness Research (190-192). The goal, Daschle’s book explained, is to slow the development and use of new medications and technologies because they are driving up costs. He praises Europeans for being more willing to accept “hopeless diagnoses” and “forgo experimental treatments,” and he chastises Americans for expecting too much from the health-care system." [Bold added]

What is so horrific is that most people will not directly see the effects. They will continue to go to their doctors and continue to see care, but they will not see the lost opportunities in medical breakthroughs, nor hear about the missed medical procedures that doctors are not allowed to do because our federal government does not deem it acceptable.

If you feel as strongly about these issues as I do, please contact your politicians and let them know what you think.

NY Times and the housing crisis

The housing crisis according to the NY Times.

It hurts the immigrants.

It hurts the elderly.

But how did it happen? Certainly there are numerous writers and editors at the NY Times, but the overall impression I received after reviewing articles for the past hour is that the Republicans are at fault for having lax oversight of Fannie Mae and Freddie Mac. In an editorial this past September, the Editorial Board felt it compelling to blame Bush and the Republicans for the current economic mess and gave the Democrats a complete pass.

Now, I have no love for the Republicans and agree with Professor Thompson on the decline of the party. They are no longer the small government leaning, protector of individual rights that they once were (or at least approached better than any other party). However, us to blame the Republicans for the entire housing bubble begs the question, what policies led to the crisis.

While I am no expert on the current crisis nor an expert in economics, I do understand the basics well enough to realize that cause and effect can be traced if you follow the bouncing ball (in this case the historic trail).

So what is the major problem today? Too many defaults on home loans. And as the number of defaults increase, the housing prices continue to fall. As housing prices fall, more home owners with low down payments realize their home values are lower than their mortgage. Some of these home owners go into default because they cannot afford to sell.

These risky loans were not always available. Traditionally, banks stayed away from these loans. What changed?

As many liberals argue, some reductions in banking regulation during Bush's administration caused changes in banking practices, which ultimately led to today's financial mess. However, this does not make sense. In all the history of business markets, I have never witnessed a total collapse of an industry due to deregulation. At worst, I have seen problems arise when its only a partial deregulation, causing conflicting pressures on industry that takes some years to figure out, as during the energy crisis in California a few years back. But never have I witnessed an industry collapse due to total deregulation. In fact I have seen just the opposite.

Did, in fact, the partial deregulation conflict with existing policies that perpetuated the financial collapse? The deregulation helped spur growth in banks initially, but the banks were still being pressured with policies established years earlier. What were they? The answer lies in the NY Times stories.

Fannie Mae Seeks to Ease Home Buying 1994
"President Clinton is tentatively scheduled to attend the announcement. The Administration is urging that loans be more broadly available to poor and lower-middle-income Americans."

Fannie Mae eases credit to aid mortgage lending 1999
"Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits."

Indeed, going back even further, the Community Reinvestment Act (CRA) of 1977 encouraged more lending to poor and minorities. Essentially, affirmative action for mortgages. NY Times has gone to bat for this act, and here, and here.

To be clear, I think it is stupid for banks to ignore qualified minorities and poor individuals from obtaining mortgages. Its the bank's mistake to make, but stupid none-the-less.

However, CRA pushed banks to make riskier loans than they normally do. It encouraged banks to make loans to applicants that did not meet minimal mortgage standards. And while there were safe guards established to limit the effects of this increased risk, the banking culture changed. Banks began taking greater and greater risks, with the thought that Fannie Mae and Freddie Mac would cover their butts if the housing market started to crumble. But that changed with the meltdown of Fannie Mae and Freddie Mac. Now the banks' saftey net was destroyed, and the risky loans they were habitated into taking starting eating them from the insides. And the rest is history.

The NY Times would like to claim that the Republicans are to blame for everything. They are wrong, although I will not give the Republicans a complete pass. They could have tried to overturn CRA. In the end, the fault lies with the failed philosophy of the politicians, a mixture of altruism, tribialism, and socialism. Both Republicans and Democrates fall victim to theses philosophies.

Productivity with kids

"The virtue of productiveness is the recognition of the fact that productive work is the process by which man's mind sustains his life, the process that sets man free of the necessity to adjust himself to his background, as all animals do, and gives him the power to adjust his background to himself." - Ayn Rand, The Virtue of Selfishness

For many years, I built my obsessive drive to be super productive into my norm for living. I worked 40-50 hours a week at a job, then came home and worked another 20-40 hours on side projects. When all of the work was done, I pursued intensive play. Rarely was there a dull moment.

With kids, this all changed. I still have that drive while I'm at work, but that's only 40 or so hours a week. But at home, I now find myself watching more TV, playing fewer games, and wondering what I can do to keep busy. I have even caught myself using the kids as an excuse not to do work around the house that needs to be done.

It is easy to fall into these patterns because kids do require lots of attention and the minute I decide to do something, my kids are immediately demanding attention. I can be sitting in the same room with them - saying nothing, doing nothing - but immediately after the phone rings or immediately after I step out of the room to do some work, they are following me and demanding attention. Sometimes they want to help with work, which is great, except they usually do not know how to do the work. Teaching them makes every job go much slower. And even if I teach them, they still have troubles completing jobs to my standards. So often I'm left thinking, "let me just do it myself." And since I can't do it myself when they are around, it waits until they go to bed or they start entertaining themselves in another room.

There is a different way of viewing productivity with children, however. I see it and am trying redirect my energies to see it to fruition. I still can be super productive, but what I'm being productive with has changed. It is no longer just the immediate goal at hand. With kids, there are now two end products. The first is the project itself - sweeping the floors, cleaning the dishes, building a birdhouse, raking the leaves, designing a garden, planting a garden, weeding a garden, etc. The second end is my child's growth into an autonomous man (or woman as the case may be) - to help them learn the skills and virtues necessary to live happy and successful lives. This new perspective on productivity is more akin to being a coach or manager.

As with managers and coaches, being productive does not mean doing the technical work yourself. Being productive as a manager or coach means working as hard as you can to give others the capabilities and opportunities to excel with the task at hand. An effective manager does not do all the work himself. Instead he delegates. If an employee does not know what to do, it is the managers job to ensure the employee learns the skills necessary by either showing them himself or sending the employee to training. If an employee does not have the necessary tools to do a job, its the managers job to acquire the tools. The manager must also review the work of the employee to ensure the objectives were met with the predefined quality standards. Occasionally a manager may have to settle disputes among employees, but an effective manager does it in a way that enables the employees to settle their own disputes in the future. The goal should be positive discipline.

As a parent, being super productive is very similar. A parent must work hard to give their children the capabilities and opportunities to excel at the child's only job. That job is to learn and grow into a self-sufficient, rational, productive, and happy adult. Being productive for a parent means not letting the background control your life, such as letting the care of your children stop you from the care of your house. Nor letting the current skills of your children stop you from encouraging them to learn new skills. Rather, being productive means changing the background - helping your children to grow in skills, to accomplish projects, to become more autonomous, and to develop into the self-sufficient, rational, productive, happy adults that all children have the potential to be. With this new vision of productivity, it is much easier for me to be satisified with my productivity at home by focusing on coaching and managing, rather than focusing on traditional ideas of productivity that have defined my life.

Put up or shut up?

Here is a man who is willing to stand, and eat, by his arguments. Ari Armstrong claims that the amount of money provided with food stamps is more than enough for a healthy diet. "Armstrong, who previously spent a month eating for $2.57 per day... will spend February 4-10 eating a highly nutritious, low-carb diet for less than food stamps provide. (Now at $4.74 per day)" [Bold added.] This diet will consist of mostly meats, vegetables, and fruits. No filler foods like pasta, potatoes, Ramon noodles, or the like.

Mr. Armstrong also offers to help evaluate family meal plans (for the first 5 interested) to achieve this goal.

Now this is a man I can admire. He decided to put up when challenged on his beliefs. He also rightly notes that government subsides do violate our property rights...stealing from one person to give to another. But the ludicrous assumption that we are not stealing enough from one person to give to another person so that other person can eat enough to live...well, its just flat wrong.

Happy Birthday!

A day to remember and honor Miss Ayn Rand (born February 2, 1905) Although I'm tempted to say this day should be a national holiday, the best tribute to Rand may actually entail being as rational and productive as possible on this day.

So in her honor, I will work my butt off today!