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Summer is for baseball… and Bernie Sanders. Like baseball, Bernie Sanders relies on the sweltering malaise (baseball and Bernie are both slow news cycle summer games), lack of competition (there are no other sports—or Democratic campaigns—on TV), and an illusory yearning for an older and simpler time (America’s past-time is fading like a middle class supported by manufacturing). While Bernie Sanders will, like baseball, never compete with the true titans of the fall, as Hillary bides her time to intervene, he is opening the pathway for a qualified compromise candidate to knock her off the mantel. Hillary Clinton has no shortage of vulnerabilities, despite having been in campaign mode for much of the past 25 years. But when it comes to her time as Secretary of State, her opponents continue to be distracted by details and not the underlying strategic failures (Benghazi and private servers are—largely irrelevant—details, Libyan intervention and the Arab Spring are—at least optically—blunders). While it is important to remember that foreign policy, at least since the Nixon Administration, has been increasingly conducted from the White House rather than the State Department, Hillary Clinton will remain accountable in the public eye for the international initiatives undertaken at President Obama's behest. Of the international conflagrations of Obama’s time in office, none should more worry Hillary than the, now infamous, “reset” with Russia.  Just press the button and everything will be back to (Soviet-era) normal! What needed to be reset?President Bush’s relationship with Russia—and its imperial despot, Vladimir Putin—began with great promise. After the fall of the Soviet Union, Russia undertook a rocky transition to democracy: gangsters fought in the streets for the remnants of denationalized industries, former satellites exploded into civil war, and the country defaulted on its debts in 1998. Following the bombing of an apartment complex in 1999 (an act that many conspiracy theorists, and scholars, believe to have been covertly orchestrated by the state), Putin acted decisively to punish the Chechen separatists assumed responsible and brought relative stability and security back to Russia. For President Bush, there was reason to believe that Putin was a competent leader with a moral compass—sage counsel advised Putin to emphasize his Christian roots in conversations with President Bush, leading Bush to declare that: "I looked the man in the eye. I was able to get a sense of his soul" However, despite the warmth of initial dialogue, the interests of the US and Russia diverged, and a spike in the price of oil (which accounts for ~52% of the Russian state’s revenues) emboldened Putin’s global ambitions.  The increase in oil prices made Russia flush with cash and confidence (source: Forbes) In response to an increasingly assertive Russia, President Bush pressed forward with plans to build a NATO antiballistic missile shield in Eastern Europe—specifically, a radar facility in the Czech Republic and 10 ground-based interceptors in Poland. While purportedly to counter Iran, and positively unable to intercept the barrage of nuclear warheads Russia could hurl at Western Europe, the NATO stations were important as the preface to extending the NATO response force to the boundaries of the alliance (rather than in Italy, Germany, and the UK where they are rather useless in propelling an initial ground attack, stationing US military personnel in the Czech Republic and Poland would raise the ante for Russia to conduct an initial incursion—the US can far more credibly commit to retaliate when its soldiers are killed). In August of 2008, Russia invaded Georgia—although the European Union later found that it had been initially provoked by Georgia—and US-Russia relations reached their lowest point since the fall of the Soviet Union. The push for a missile shield seemed as prescient as ever and Republican nominee John McCain declared, "Today we are all Georgians" (below)—it seems to have rang on dead ears. The resetThe Obama Administration, and by association Hillary Clinton, had grand ambitions for the hope and goodwill Obama inspired during the election. Whether it be removing troops from Iraq, nonproliferation, or pressuring regimes in North Korea and Iran, President Obama believed that a partner, or at least not an opponent, in Moscow would be necessary. But how could they reach an understanding? Obama and Clinton may have believed that by making concessions to Russian President Medvedev—Putin in 2008 had acquiesced to the Russian constitution and temporarily taken over as Prime Minister--and politically empowering him, the US could detach the puppet (Medvedev) from the master (Putin). They may have also discounted the risk of future Russian aggression after say, another rise in oil prices, in the belief that political turnover could change international dynamics and kick-start cascading disarmament and cooperation. Either way, Obama and his chief diplomat Hillary Clinton decided to “reset” relations with Russia and to open negotiations for a Strategic Arms Reduction Treaty (START) to reduce their respective nuclear arsenals. The policy shift showed signs of failure from the—pun intended—start. The reset failsIn a hasty attempt at symbolism, Hillary Clinton delivered a red reset button to the Russian Foreign Minister. Unfortunately, and as a ringing endorsement of American language abilities, instead of writing ‘reset’ on the button they wrote ‘overcharged’—the Russian words peregruzka and perezagruka are notably similar. Overcoming the initial gaffe, Clinton set out to negotiate the START treaty and generally renew ties.  Obama and Putin's puppet-President Medvedev signing the START treaty As the signed-START treaty was being pressed through the U.S. Senate, the Obama administration decided to scrap plans for the antiballistic missile shield in Eastern Europe in favor of a naval destroyer-based system stationed in the Mediterranean. While we may never know for certain, the optics and timing of the missile realignment make it look likely that the move was in part inspired as a quid pro quo for Russian cooperation on Iran and other international issues. So, what has come of Russian cooperation? START passed, but while cutting the number of deployed nuclear warheads is a step in the right reduction, it does not change any strategic calculations; both Russia and the US will still have more than 3,000 deployed nuclear warheads—more than enough to destroy the planet. The Russians cooperated in Afghanistan, permitting US supply chains to run through its airspace and sphere of influence—thus allowing Obama's troop surge and expansion of the war. This one is a real doozy: the US spent much of the 1980s financing an effort to bleed out Moscow in Afghanistan, just to turn around and pay for Moscow for the right to waste our money there. Like Iraq, Afghanistan will collapse shortly after our exit, as it has done throughout history, and revert to its natural state as a collection of warring fiefdoms. It is likely that we would have been better off without Russian cooperation on this one. In contrast, the Russians have reasonably cooperated on Iranian nuclear sanctions. This may have been genuinely beneficial to the US, as the collective financial pressure likely pushed Iran to the negotiating table. But was it really a concession? The Russians likely calculated that reducing their trade with Iran in the short-term would be well compensated by a corresponding rise in energy prices (as Iranian oil is sanctioned from the market). More recently, they have preempted the enactment of the Iranian disarmament treaty to renew their own trade with Iran—including the sale of sophisticated air-defense missiles. This is not to mention their shared bankrolling of the Syrian regime—although given the alternative, the West may now ultimately decide against pushing Assad out the door. Still worse, the Russian annexation of Crimea and ongoing proxy war in Eastern Ukraine have made the US commitment to Eastern Europe appear ever more hollow. Would NATO bases in Poland and the Czech Republic have altered Russian decision-making? You can never draw a straight line across history, nor will there ever be a sufficient counterfactual. However, there is without a doubt a growing consensus that a NATO military presence on Europe's Eastern periphery would be a highly valued deterrent--General Wesley Clark (a Democrat and former NATO supreme allied commander in Europe) and Radek Sikorsi (a former Polish Foreign Minister) have both called for one.  The iron curtain has been lifted for 25 years, but our troops sit a thousand miles from the window Back to HillaryAll of the US actions I have written about, rightly or wrongly, will be easily attributable to the tenure of Hillary Clinton as chief diplomat--asked recently, she sticks by the reset policy. It is interesting that Hillary has been hawkish on Iraq (which still haunts her), Libya (which should haunt her), and Afghanistan (which will haunter her), but initially dovish with a country, Russia, long known for its taste for realpolitik. These topics will certainly be broached should Hillary make it to the general election, but will they appear in the Democratic primary?
Bernie Sanders will certainly skewer Hillary on the Iraq invasion—he voted against the war authorization as a congressman. However, it is less clear if he has any incentive to attack foreign policy decisions that are also linked closely to President Obama. Nor is it likely that the next presumptive challenger, Vice President Biden, will be able to attack these decisions due to his own association with them (Biden supported the invasion of Iraq in 2003, but actually had the foresight to suggest outright partition of the country rather than the bloody and prolonged partition we are getting). Hillary’s diplomatic career may just be more writing on the wall for the same Democratic coalition that coalesced around Obama eight years ago. What should be an asset, her fluency in international relations, may be pinned up as yet another problem area where a practitioner's record is worse than a novice’s blank slate.
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Cause of death can vary widely across racial groups. According to the Centers for Disease Control, 7% of Hispanic deaths in 2010 were the result of accidents compared with only 4.2% for non-Hispanic blacks (maybe the result of occupational differences?). More worryingly, while homicides accounted for 0.3% of non-Hispanic white deaths in 2010, they accounted for 2.7% of non-Hispanic black deaths. While the overall homicide rate has been in major decline for the past two decades, these lingering racial disparities are proving resilient and there are troubling signs of a resurgence in violence.  The economy alone doesn't explain the decline in homicides (data from the World Bank) Why crime went downViolent crime peaked in the United States in 1991. Since that time, homicides are down 54% nationally and a once violent city like New York has seen them fall by 76% from a peak in 1985. Policymakers, academics, and special interest groups have offered an array of explanations for this precipitous decline— from imprisonment to less lead in paint. While establishing causality is incredibly difficult outside of a control trial, by examining policy variations over time and across states some insights can be extracted. So, what do we find? The Brennan Center at NYU Law School econometrically tested many of these theories in What Caused the Crime Decline and arrived at some ballpark estimates.  Figure from the Brennan Center for Justice The authors were able to estimate likely benefits from increased incarceration and policing, aging, income growth, decreased alcohol consumption, and fluctuations in unemployment. Notably, they were unable to estimate a non-zero impact for increased gun-carrying rights or use of the death penalty. In addition to the graphic above, the authors ran regressions on the data from 2000-2013 and found different explanations for the decline in crime—importantly, incarceration no longer played a significant role as its usefulness had apparently been saturated. A violent summerIt has undoubtably been a difficult year for law enforcement. The media's awakening to disproportionate violence in black communities has made local cooperation with police fraught with tension. In turn, police morale is down. Nowhere more starkly than in New York, where the NYPD very publicly turned their backs on Mayor de Blasio.  The cold shoulder (Image from US News) Although the summer months are always more violent—people are out on the streets and tempers flare with the heat—this summer appears to be a major step backwards for many cities. According to USA Today, crime rates in 2015 are up 19% in Chicago, 11% in New York, 18% in Washington D.C. and more than 33% in Baltimore, New Orleans, and St. Louis compared with this time last year. While it will be impossible to quantify the exact mechanisms, the post-Ferguson struggle for the future of urban policing is likely leading, unintentionally, to an increased loss of life. Why? As cooperation with and trust in law enforcement decline, the likelihood of witnesses to testify and for arrests to be made decline with them— altering the decision to commit homicide. As police feel greater scrutiny of their actions, they may have begun patrolling less or less effectively. As a narrative (rather than the longstanding reality) of overt discrimination and economic stagnation spreads, desperation may be leading to more violence. Time to buy a gun?The evidence against gun ownership is overwhelming. It is beyond rebuke that having fewer guns in your country drastically reduces the murder rate. In a country of guns, it has been a bit murkier whether an individual is incentivized to buy a gun. However, in a study published by the Annals of Internal Medicine, researchers found that, compared with their unarmed neighbors, gun owners in the United States are on average three times as likely to kill themselves and twice as likely to be the victim of homicide. While there is an inherent difficulty in estimating these figures, as owning a gun is likely correlated with other causal variables like occupation or a personal proclivity for violence, these findings have been replicated so many times now that one can feel confident in their findings. So with 122,000 gun deaths between 2007-2010, why would a rational person still buy a gun? Expected utility theory tells us that the rational choice for a typical consumer would be against purchasing a firearm. The gun has a (often high) cost to purchase, there is an overwhelming probability of never needing it, an infinitesimal chance of requiring it for life-saving protection, and a much greater chance of its unnecessary use resulting in your death. Weighing the probabilities results in a negative expected value and you not purchasing a gun. However, prospect theory, a much more accurate measure of human decision making, may make the decision less obvious.  Loss aversion, even for a minuscule probability, may alter your decision making Humans do not have the balanced view of expected outcomes that utility theory would have one believe. As anyone who has followed the news of a mass shooting (which have been markedly more common of late) knows, there is a great psychological weight associated with their imagery. The evoked emotion of helplessness in the face of indiscriminate danger, no matter how improbable, and only for those with a high risk aversion, outweighs the much higher (but seemingly controllable) probability of self harm and the financial cost of the gun. To state plainly, while you are three times more likely to use the gun for suicide and twice as likely to have it otherwise lead to your death (the expected gains of not owning a gun), the psychological perception of the loss is greater than the gains—only if the risk of accidental death were exponentially higher would you not buy the gun. Back to the current crime waveGun ownership is a classic tragedy of the commons—individuals acting rationally create massive problems for the public at large and by extension themselves. Because handguns can be easily concealed, police (and the public at large) experience elevated stress levels when in disputes. The associated fear (with an upward bias against racial minorities), and first-mover advantage (you don't want to be the second person to pull their gun), leads to many unnecessary deaths—to say nothing of the role of guns in intentional homicides.
In 2013, there were an estimated 14,196 murders of which 69% involved a firearm. While driving a media narrative against gun ownership might alter the individual calculation for gun ownership on the margin, because of the elevated risk aversion of most gun-owners, it is likely that only imposed regulation would substantially reduce the number of handguns. The cover price for the Harvard Business Review (HBR), a magazine fat on ads and thin on content, is a robust $16.95. But fret not; if you are the savvy business type with an appreciation for a long-term investment, you can save 56% by subscribing for two years and never miss a beat of the black-tie repartee. While being relatable at the cocktail party is certainly important, most business writing fails to provide actionable insight and instead either panders to celebrity CEOs or restates the obvious with slick narrative.  Most business books make better kindling I started thinking about shoddy business writing after reading an article by Benjamin Gomes-Casseres in the HBR entitled Making Mergers, Acquisitions, and Other Business Combinations Work. The author—who, from reading his resume, may in practice truly exhibit expertise—provides three rules for success in business combinations: First law: The combination must have the potential to create more value than the parties can alone. The first law asks these practical questions: How much more value can we create in the market together? What specific resources must we combine to create this value? Intuitive and simple heuristics are often enormously practical. In some fields, there exists truth and consistency in simple formulas. In this case, any director that is not acutely aware of these three laws and the accompanying considerations while developing their strategy should be canned. To be fair, this article acts as an executive summary for the author’s book, which likely, or hopefully, offers some quantitative insights (although, as I will explain later, I am dubious any exist), it is nonetheless symbolic of the reasons most business writing, and books, are a waste of time. What's the matter with business books?Business books create ex post facto narratives of successful and unsuccessful business ventures—creating an illusion of control that often unjustifiably trumps the unpredictability of markets, the significance of timing, and just straight luck. Sticking with an M&A example, the stock price for the acquiring company in a merger almost always drops in initial trading (no, a stock gaining isn't a harbinger of future success), meaning that the market in aggregate infers so much uncertainty in a merger, beyond company specific conditions, that it interprets the likely outcome as a loss in value.  Business books tend to excessively weight the talent of a CEO in predicting or explaining the success of a firm—to the contrary, experts think the correlation between a CEO’s ability and a firm’s success is at most 0.30 (Kahneman, 2011). This means that the strength (or weakness) of the CEO explains, at most, 30% of the variation in the firm’s outcomes. Similarly, the founders of successful companies are erroneously mythologized. Great CEOs are exceptional mostly in their luck. Once upon a time, Larry Page wanted to sell Google for $1.6 million and Bill Gates recommended another company produce IBM’s operating system. Finally, for here at least, business books expound general axioms and then pile on fluff to defend them—reading the first and last chapter will usually suffice. You (mostly) can't predict the futureDuke University conducts an annual survey of CFOs and asks for their predictions of the stock market in the following year. They perform woefully. In fact, there is a—albeit statistically insignificant—negative correlation between their prediction and market performance. That means, in the sample, the market is, on average, slightly more likely to go in the opposite direction of their prediction. This finding adds to the well-documented and atrocious record of market predictions by mutual fund managers, stocks brokers, and other investment advisors.  Like these hubristic sages, an author predicting the future value of a business based on easily articulated traits is likely to be throwing darts in the dark. In The Drunkard's Walk, Leonard Mlodinow explores the role of randomness in the movie industry and the inability of studio executives to evaluate commercial value years in advance of production. You don’t need to take Mlodinow’s data and arguments alone, he quotes the former-CEO of Paramount and Columbia pictures as saying: “If I had said yes to all the project I turned down, and no to all the other ones I took, it would have worked out about the same." Similarly, Mlodinow and Nobel Laureate Daniel Kahneman, among many others, question the relevance of expertise in highly variable environments. Mlodinow looks at publishers to illustrate the point: John Grisham’s A Time to Kill was rejected by 26 publishers, Harry Potter was rejected by 5, and The Diary of a Young Girl by Anne Frank was rejected multiple times and called “very dull” and “a dreary record of typical family bickering, petty annoyances and adolescent emotions.” These publishers spent thousands of hours reviewing books to identify commercial potential, but were nonetheless totally unable to spot a gem right in front of them. Kahneman spends a lot of time in his book Thinking, Fast and Slow detailing the dangers of overconfidence and the false power of a coherent narrative—the book is a masterpiece. For identifying when expert intuition and prediction matters, he identifies two rules of thumb: (1) a sufficiently similar reference case occurs regularly, (2) there are prolonged opportunities to learn these regularities through practice and feedback. Kahneman identifies far too many examples of false confidence in predictions because of optimism (a trait common in almost all leaders), a failure to consider competitors, and a feeling of exceptionality that ignores base rate probabilities (the outcomes of all reference cases). Then again, Kahneman acknowledges that entrepreneurs must possess these irrational qualities or they would never be foolish enough to start a business in the first place. Are there any good business books?In October of last year, the Schumpeter column in The Economist offered a profound tidbit of business advice. Noting the corporate fascination with teambuilding—where a CEO leads his colleagues on a whitewater-rafting trip to simulate guiding them through the rapids of the real world (likely a total waste of time and money)—Schumpeter instead suggests that the executive team lock themselves in a hotel for a day to read and discuss Plato. He has a point. You can master the skills specific to your business (programming, economics, engineering, etc.), but you can’t master the innate abilities of a charismatic leader, the predictive acumen of an oracle, or the nonexistent secrets to a successful business. There are just too many moving pieces, too much randomness, and too little control. Instead, occupying your time with books that teach you to think, be measured in your judgment, and be sufficiently humble, like Plato’s The Republic, will be far more profitable. A few other great books that pop to mind (in addition to Thinking, Fast and Slow and The Drunkard’s Walk) are Zero to One, The Black Swan (nothing to do with the movie), and The Last Lion: Winston Spencer Churchill (Volumes 1 & 2). I recommend The Last Lion for a slightly different reason than the others. Winston Churchill, although born to privilege, did not follow a linear ascent to glory. He failed over and over and over and was the beneficiary of extraordinary luck. Injuring his shoulder disembarking at the docks of Bombay as a young man, he was later in life unable to draw his sword and enter the intensely bloody fray outside of Khartoum—instead he remained in relative safety atop his horse. Escaping imprisonment during the Boer War and trekking through the enemy territory with a bounty on his head, Churchill happened blindly into a sympathetic miner’s encampment.
Apart from his death-defying forays abroad, Churchill defied assured forecasts of political death on multiple occasions at home. So, what does this have to do with business? Resilience in the face of calamity, the conviction to dust off and keep trying even after repeated failures, and an appreciation for the fickle hand of luck, are attributes common to almost everyone that achieves success, in business or anything else. The best interviews are rarely, if ever, brief. With a tight window, the interviewer is never able to establish a rapport with their subject. They are never able to coax their guest into believing, if only for just a moment, that there conversation is private, amongst friends. There is no breadth, no backstory, and the topic of the day is lost in staged soundbites and niceties. Of the interviewers who have earned a broadcasting format with the necessary time and structure to achieve great interviews, three standout to me for their excellence: Terry Gross, Howard Stern (if you have never listened to one of his interview, check out this one with film mogul Harvey Weinstein), and of course, Charlie Rose. Charlie Rose's interviews span film, current events, and science to dive deep into the world around us with guests at the apex of their fields. Using an all black backdrop that elicits the desired seriousness and intimacy with guests, Charlie Rose has the gravitas to almost always deliver the right questions. With that said, these are my top 5 favorite Charlie Rose interviews: Steven PinkerSteven Pinker is a prolific psychologist and linguist whose research into the origins of the human language, the mind, and evolution have made him both revered, and in some small-minded circles, reviled. His book The Blank Slate—named for the theory, which he duly strikes down, that the human mind is blank at birth and programmed in its entirety by exogenous culture—is brilliant and I highly recommend it. In this interview, Professor Pinker discusses his book The Better Angels of Our Nature in which he argues that we are living in the most peaceful period of human existence. Pinker is a genius and he doesn't disappoint here. Leonardo DiCaprioAs he begins this clip proclaiming, DiCaprio is loathe to give long form interviews because he believes it detracts from the audience's ability to detach the actor from the character. That he steps away from this reluctance is what makes this interview such a treat. I have seen virtually all of his films, but other than the tabloids about his understandable taste for supermodels, felt like I had never really heard him speak. You get a bit of it here and he is surprisingly eloquent. David Foster WallaceSeveral years after his suicide, Wallace is back in the news this summer with a new film depicting a few esoteric days in his life—I have yet to see it but the reviews have been quite good. This interview dates from 1997 and follows Wallace's ascent into the, relative, mainstream of literary culture with the success of Infinite Jest. In this interview, Wallace is visibly (and admittedly) uncomfortable, but also painfully himself, while he spouts his brilliant observations across literature, films, and life. Knowing how his life ends makes this interview all the more dramatic and tragic. Christopher HitchensChristopher Hitchens was one of the fortunate few to speak his mind and maintain his mantel as a public intellectual. Even when taking positions I wholeheartedly disagreed with—like initially supporting the Iraq war—his wit, intellect, and charm prevented me from thinking worse of him. His later book God Is Not Great is, for lack of a better word, holy to the secular movement and a must read for anyone (religious or not) that is interested in religious history or dogmatic implications. I could have picked any of Hitchens interviews on Charlie Rose, he did many and was it seems a good friend of Rose's, but landed on this timecapsule from 2001. Lee Kuan YewSitting like a weigh station in the Strait of Malacca, Singapore has long been of strategic importance to global commerce despite being geographically baron of any vital resources. Following an acrimonious rift with Malaysia, Lee Kuan Yew almost singlehandedly turned the Singaporean island into a prosperous city state that rivals only the Venice of yore. Forgiving his benevolent autocratic tendencies, Lee Kuan Yew—who passed away in March of this year—was one of the most brilliant political thinkers of the 20th century. This interview, even in his old age, gives you a brief taste of his wisdom.
An alternate (and very nerdy) theory to the war of five kingsFor fans of HBO’s Game of Thrones, it is commonly held that the controversy over royal succession, following the regicide of King Robert, was the main impetus for the series of wars that later ravaged Westeros. While this certainly fueled tensions amongst the lords with a claim to the iron throne, I believe that there was an underlying loss of confidence in the economy that: (1) led knowledgable insiders to believe that regicide was an optimal strategy, (2) reduced the benefits of union and decreased the cost for houses to rebel, and (3) created a social instability that made commoners more open to political upheaval.  The king's excesses require an ever larger horse King Robert's economic policiesKing Robert, like many medieval chieftains, was a profligate spender who indulged in the lavish and whimsically excessive. He had assumed the throne in King’s Landing at a time of budget surplus and ample gold reserves. However, by the time the show catches up to Robert, he had wasted away his treasure and was financing his vices through debt and dubious accounting. As a result of the financial mastery of Little Finger, revenues had increased about ten fold during King Robert’s reign. While we don’t know for sure, it is safe to say that the increased revenue was neither a result of exemplarily economic growth nor increased bureaucratic efficiency in tax collection. It is therefore likely that the resultant cash windfall was the result of higher taxes—and of course, debt. With winter coming and crop yields falling in the North, along with a likely fixed-sum tax (I assume a medieval society lacked the technical proficiency for progressive tax collection—i.e. a farmer owed X barrels of hay rather than X% of his production), the higher real rate of taxation would have lead to an increasing and disproportionate financial burden across the seven kingdoms (a farmer in the North was producing Y and being taxed X. In winter, he produces Y – W and is taxed X). Along with King Robert’s reckless fiscal policy, the monetary situation made things doubly bleak. We know that the Lannister gold mines had run dry and the economy was being flooded with creditor’s cash. It is a safe bet that Tywin Lannister was busy debasing the gold supply (diluting the amount of gold in a given coin)—to maintain the appearance of ample gold reserves and news of his exhausted mines quiet—and as a result destroying the currency as a unit of account in the marketplace—new coins are worth less than old coins because they contain less gold, and consumers, because of money illusion (people think of prices/wages in nominal rather than real terms), experience great difficulty in pricing goods and labor appropriately in the short run.  Inflation: it looks the same, but is worth less and less. The increased government demand for resources (for the lavish festivities, etc.), financed by debt and high taxation, and backed by a depleted gold supply, was likely driving up consumer prices and deflating the exchange value of the currency—making goods ever more expensive at home and cheap foreign alternatives ever more expensive to import. Stagflation in WesterosStagflation occurs when prices are going up and economic activity is going down. This is the dire situation likely faced in Westeros in the run-up to the War of the Five Kings. Why was economic activity likely going down? In feudal societies, the vast majority of workers are agrarian. Without increases in productivity, and we are aware of none on Westeros, farmworkers produce an amount that is constrained by their hours of labor and the weather conditions. Due to the coming of winter, we can assume that crop yields were down. We also know that farmers needed to give a fixed amount of their yield to their local lord. As farmers retained less of the yield of their production as profit, they would become less incentivized to supply their labor—as the opportunity cost of leisure was lessened by the substitution effect (keeping less of what you produce is in effect a decrease in wage, making work less attractive—within a set range of incomes). This would compound the weather’s effect on crop yields and lead to a dramatic reduction in economic activity. To make matters worse, the gold-backed currency was being debased to accommodate government spending. Why does this matter? With less being produced on the farms, the increase in money supply couldn't possibly be representing the underlying economic activity (there was too much money for too few crops!). This means that the price of goods was rising (inflation) and because people weren’t producing as much, their real (rather than nominal) wages were decreasing. To add to the misery, exchange in the cities would also likely be decreasing. The debasement of the currency would have led to arbitrary income redistribution across local debtors and creditors (old nominal debts can be paid back with “cheaper” new money) and made lenders increase the interest on their new loans— further diminishing economic activity through reduced investment. Inflation would have also made trading more complex as merchants lost faith in the value of the currency (how would the blacksmith set the value of a sword if he doesn’t know the value of the currency?). In all likelihood, merchants would resort to a barter economy, reducing taxable income, and further inflaming the fiscal crisis in King’s Landing. All in all, a dire situation that to any observant lord was unsustainable. Calculating RevoltWith farmers and merchants squeezed by falling output, increased prices, and increased taxes, the tension on the streets would have been palpable. In calculating the decision to revolt— beyond those who had a personal vanity in assuming their place on the throne—lords would have considered the following factors in deciding whether to go to war:  SWOT analysis for the decision to revolt Excluding the houses with a personal claim to the throne, which have a different calculus, the SWOT analysis, in my opinion, favors removing King Robert, and after his removal, going to war with the Lannisters.
Why would the Lannisters initiate the removal of King Robert and invite the likely rebellion that would follow? First-mover advantage. Sensing the impending economic disaster, and their own complicity as house of the queen, the Lannisters calculated that their best chance at continued survival was to remove King Robert and seize the levers of power (strategic bridges, city guard, royal fleet, etc.) before an opponent could— providing them with a strategic advantage. Watching a recent episode of Fareed Zakaria GPS— by eons the most substantive cable news program—I was horrified, but ultimately not surprised to hear the following: "Jordan, Saudi Arabia, the United Arab Emirates and Bahrain have all been involved in the campaign against ISIS in Syria but look at their contributions. The United States has carried out over 2,000 air strikes against ISIS in Syria, the military says. Meanwhile, the Arab allies have flown just over 100 strikes combined. Airwars.org estimates that Denmark, which has conducted missions against ISIS in Iraq, has flown as many air strikes as those Arab allies have flown in Syria combined. The Netherlands has conducted almost twice as many strikes against ISIS as the combined total of Arab strikes in Syria." That the Danes (FY15 military budget of ~$4.4 billion) and Dutch (FY15 military budget of ~$8.8 billion), are exerting greater direct military pressure to contain ISIS than the entirety of the Arab coalition (Saudi Arabia alone spent $80.8 billion in FY14) raises serious questions about the long-term effectiveness of the coalition. Fareed Zakaria suggests that the discrepancy in contributions, despite the supposed danger resulting from proximity to the caliphate, is the result of the free rider problem. The free rider problem states that those who benefit from an expenditure are not those who are paying for them (accounting for differences in ability to pay)— this problem can be solved, in theory, by restructuring incentives or by creating new mandates. Unfortunately, Zakaria doesn't include details on how we can alter the incentives to contribute militarily in this example.  Taking a road trip from Amsterdam to fight ISIS. (via Google Maps) The Defense Department has an awesome website!I plan to explore the respective national contributions to Operation Inherent Resolve—the coalition mission to degrade and ultimately destroy ISIS—and offer an alternative political explanation to Arab reluctance to confront ISIS, but was delayed in doing so after stumbling upon the Defense Department's "Targeted Operations Against ISIL Terrorists" website (the US Govt. prefers to call ISIS, ISIL). Beyond being aesthetically pleasing, it provides a remarkable amount of data on target destruction, costs, and bombings per day, as well as including 'photo essays', videos, and stories. The website includes an interactive map where you can learn about ongoing operations in Iraq and Syria, updated daily. For example, on August 5th, coalition military forces conducted 7 airstrikes in Syria and 22 airstrikes in Iraq. This information is further broken down by individual bombing. You can learn that near Fallujah in Iraq, 1 airstrike destroyed an ISIS excavator, or that near Mosul, 5 airstrikes destroyed six bunkers!  While I am a fervent proponent of government transparency, I am not sure how to feel about the website. Rather than solely providing the data for the public to parse, the website has a clear narrative which is documenting the mission's positive progress—without seeming to provide the necessary strategic context to what are obviously tactical strikes. Of course, if the website were a bleak and unattractive data dump of excel files, I would be far less likely to have explored them (thus my ambivalence).
Cruising the Wall Street Journal this morning, I was a little confused to see a headline suggesting that IMDB— the International Movie Data Base, a website to learn more about your favorite movies and actors— was implicated in a scandal at the highest level of Malaysian politics. As interesting as that story would be (I envisioned the intrigue and collusion at the palace in Kuala Lumpur to cut references to the Prime Minister of Malaysia from the popular comedy, Zoolander (see video below)—in fact, in many broadcasts this has already been done), in actuality, the story related to 1Malaysia Development Bhd with its strikingly similar acronym 1MDB (vs. IMDB). Briefly, there are allegations that 1MDB, a Malaysian state investment fund, funneled ~$700 million into the personal bank account of Prime Minister Najib Razak— whose party has ruled since independence in 1957. This, however, was not what I was presently interested in. Is IMDB trending because of 1MDB?It is a very real fear, if not one with a relatively negligible probability, that a person sharing your name will become famous or notorious. In the case of IMDB, and in a world of snap judgments and social media, I was curious if intrepid citizens were blowing the whistle on their favorite movie database. While there had been rumblings of the scandal mainly in the local Malaysian media in June, the story really gained traction internationally over the past week. I was curious, did the public’s desire to learn more about 1MDB lead to a spike in Google searches for IMDB in Southeast Asia?     Google Trends, which looks at relative search volume over time, does not give us any solitary or obviously related spikes for IMDB searches. However, it is possible that the volatility in the Southeast Asian charts, relative to the recurring day/night fluctuations of the U.S. chart, are indicative of erroneous searches. That is, rather than day highs and night lulls, in Southeast Asia, where people are more interested in the scandal, local media reports are causing unusual 'bumps' in the data. To the contrary, and while I would suspect that IMDB has fairly stable daily Internet traffic even in countries with fewer regular users, the volatility could be related to trendy film releases and movie star gossip. What about confusion on Twitter and in local papers?The Strait Times— Singapore’s highest-selling newspaper— was hip to the similarity, displaying this tweet and list of movie title gags with an apology to IMDB:  Murray Hiebert, the Chair for Southeast Asian studies at the prestigious Washington think-tank CSIS, had the following tweet yesterday:  A quick surf of Twitter reveals that Mr. Hiebert is not alone in his error—and a more formal examination of Twitter trends would likely find a substantial bounce for IMDB.
While IMDB hasn’t released a press release or issued a (hopefully comical) Twitter clarification, they may yet do so if the 1MDB continues to attract headline news. |
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