Saturday, February 28, 2009

Can You Feel the Hope? Part 2

Last night on Fox Business Network's "Happy Hour" host Sandra Smith was interviewing a financial adviser from Pittsburgh.

The man was visiting New York and hanging out at the "Bull and Bear," the bar/restaurant from which the show is broadcast.

Since this adviser specialized in retirement planning, Smith asked him what he was telling his clients these days. His response: maintain a diversified portfolio and ride it out.

So here we have a small piece of evidence supporting the point I made in my post of February 22. The marked is being driven down by excessive hope.

The Dow has lost half its value. That means that if you could get a return of 8% on your investments it would take 9 years to get it back. And that is a very rosy scenario.

In response this adviser was optimistic and upbeat. To add insult to injury he was mouthing a formula that was conventional wisdom before the bear market began in earnest.

I hope his attitude was not influenced by pharmaceutical agents, but it was certainly disconnected from reality. If his clients are not enraged, they certainly should be. Financial advisers who talk as though nothing has happened do not deserve to stay in the business.

In the current environment, discussions between clients and advisers should dispense with the talk about restructuring portfolios and redefining goals. The first question should be: What happened? And that should be accompanied by an admission that the adviser did not see it coming, and that he too has been hurt by the market.

A financial adviser is not in the business of trying to calm frazzled nerves and tell his clients to ride it out. He should listen to what his clients are telling him and to take it seriously. If people are frightened and angry, they are not upset about nothing.

It would be nice if Happy Hour could do a follow up with the adviser from Pittsburgh. Then it would be able to plot the market decline by the look on his face. A true low will be achieved when the smile has been wiped off his face and he is quivering with dread.

Of course, there is more to market analysis than sentiment indicators. Ultimately, you need to be able to determine the value of what you are buying.

Anyone who is tempted to ride it out, or who is ready to believe that the next rally will mark the end of the bear market, should read John Mauldin's excellent analysis in his eletter, "Frontline Thoughts." Today's is entitled "Buy and Hope." Link here.

I would add that Mauldin sends these out weekly to anyone who is willing to give him their email address. Dare I say that this is an excellent value.

Friday, February 27, 2009

The Sexual Marketplace

Call it the sexual marketplace or the dating scene or just plain courtship... no matter what you call it, it is undergoing a massive transformation. Or better, a reversion to the mean.

Young men who are jobless or bonusless are less likely to date and less likely to mate. And they can hardly be expected to shower the objects of their affections with limitless gifts.

So, what is the new dating scene going to look like?

After markets go to extremes, they tend to revert to the mean. At least, that is the theory. But when it comes to dating, what is the mean?

Different ideas have been put forth. Writers in the Washington Post and the Atlantic Monthly have written cogently on the issues involved. Link here and here.

Some have suggested that the mean is a feminist version of gender equity. Most of the jobs lost have been held by men, and this might lead more men to stay home and become nurturers while more women become sole breadwinners. This would obviously affect the sexual marketplace, perhaps leading women to look for more nurturing men and men to look for more dynamic, career-oriented women.

But Emily Bazelon, writing in, has thrown doubt on this outcome. Link here.

Bazelon suggests that since men react much worse to unemployment than women do, many women might decide to leave the workforce to open up jobs for their husbands, roughly as happened after World War II.

If the mean is not the advent of a gynocracy, then perhaps it will be a more Darwinian world where gender roles are more strictly defined and where sexuality reverts to its traditional role in a calculus of fertility and reproduction.

This would not, however, be as radical a change as it first appears. The excesses that characterized certain segments of the dating scene seem to have been produced by Darwin on steroids.

For several years now the New York sexual marketplace has been defined by the mega bonuses that young investment bankers, hedge fund traders, and financial advisers were using to impress young women.

Think what you will about this ostentatious display of wealth, it signified an ability to provide for a wife and children in the great cosmopolitan metropolis.

All things considered, you needed something like a Wall Street bonus to afford a co-op in a good neighborhood. Add to that the cost of private school, and you had to be in either finance or real estate to bring up a family in New York City.

Spending thousands of dollars on a date showed that the man in question could provide a New York lifestyle for himself, his wife, and his children.

Unfortunately, the women who were receiving all of that largess were often at pains to reciprocate. And they often felt like they were being bought and sold. If they yielded to temptation and married the men with the massive bonuses, their simmering resentment often led to marital misery and divorce.

But that world is over. And it is not coming back any time soon. Thus, the male status hierarchy that had been skewed by the overemphasis on money is adjusting to a new reality. Men who have prestige, but perhaps not fortunes, are becoming more desirable than unemployed financiers.

The previous dating culture was something like a free-for-all where everyone was laboring under the assumption that they could have it all.

As we know, serious money forgave some seriously bad behavior.

Now women will perhaps become less tolerant of bad behavior and men will work on developing other qualities that will make them desirable in the sexual marketplace. A good place to start would be: making money the old fashioned way, by earning it.

Thursday, February 26, 2009

The Best and the Brightest

First, it was David Brooks. Then, it was Sen. Robert Byrd, of all people. Their worry: that the Obama administration is concentrating power in a few bright aides and czars who are operating out of the White House. Link here.

Clearly, the administration was elected to take charge of the financial crisis. It is trying to do so. But concentrating power in the hands of a few-- which the ancients called oligarchy-- rarely benefits anyone but the few.

What can we look forward to?

The best and the brightest:

1. Know better than you and I.

2. Want to impose their superior vision on an inferior world.

3. Refuse to allow their work to be judged by reality.

4. Blame others when their policies appear to fail.

5. Work tirelessly to maintain themselves in power.

To do this, the best and the brightest:

1. Demean the intelligence of anyone who does not accept their claim to superior wisdom.

2. Refuse to negotiate with people who disagree with them or to compromise with reality. They make grandiose promises that cannot possibly be kept. Examples: the administration is going to give more people more and better health care for less than it costs now. And: the administration is going to solve the energy crisis by building more windmills. (Apparently, the best and the brightest never read "Don Quixote.")

3. Proclaim that their approach is working even if it is not. For this it helps to have a well-oiled propaganda machine.

4. Select a group of possible scapegoats that can be blamed when anything appears to go wrong. Among them will be George Bush, George Bush, and George Bush. Also, Herbert Hoover, Margaret Hoover, Ronald Reagan, Nancy Reagan, Republicans, the vast right wing conspiracy, and the Mossad.

5. Stay in power, no matter what. If that requires fiddling with the census, so be it. If their vision has not lead to Heaven on earth, we will be told that our faith in the great leader is being tested. To pass the test we must give him more power.

David Brooks may be right to say that if the Obama program fails it will discredit liberalism and lead to a revival of conservatism.

But that was not what happened during the New Deal. And if it worked for FDR why wouldn't work for Obama.

Let's hope Holman Jenkins was prophetic when he wrote in the Wall Street Journal a couple of days ago: Obama "kids himself if he believes that he will be allowed to preside over a depression without being politically blamed for it. The public is different now-- the world is different-- and he will own the 'Obama depression' sooner than he thinks."

Wednesday, February 25, 2009

How Do You Self-Motivate?

The other day Addakula Balakrishna wrote to Jack and Suzy Welch via Business Week. Remarking that the Welches often talk about how a leader can motivate others, Balakrishna asked: "But how do leaders motivate themselves, especially in challenging times." Link here.

The Welches' response is excellent, and I want to review it in detail.

First, they show that fear of failure motivates better than a desire for success. You can come to terms with different degrees of success, but you cannot negotiate with failure.

The Welches recommend that a leader look in the mirror and say: "I am not going to be the one who lets this place fail."

This may not look like a confidence-building measure, but it is. It moves you to do your best and to do everything in your power to succeed, or, at least, to survive. It prevents you from slacking off or giving up. Better yet, you can try it at home.

Knowing that if you fail you will be letting down a large number of people will shift your focus from yourself to others.

Second, the Welches say, a leader can sustain personal pride and confidence by identifying with the corporate mission, what I have been calling the company's high concept.

A leader knows where the company has been and what it has accomplished. He must also know what it is about. Has it prospered by providing good service or quality products or exception value or the lowest prices?

A company's larger concept should also involve its role in the nation's economic life.

Dov Seidman once wrote that there is a great difference between the bricklayer who thinks of his job as laying bricks and the one who sees himself building a cathedral.

If you extend the thought, a leader must communicate to his staff the place that the cathedral has in a community and how it will serve the spiritual needs of individuals.

Third, the Welches point out that in time of trouble and trauma a leader's first impulse is to withdraw from close contact with his staff. He will naturally not want to get too close to people whom he might fire and whom he might let down. Their succinct advice: "Don't do it."

They remark that a leader gains intellectual and moral sustenance by interacting with people, by listening to their observations and concerns, and using the information to set better policy. You cannot manage a company if you are detached and fearful.

Fourth, they suggest that a leader should see his challenge "not as an intractable problem, but as an exciting puzzle to solve." As I understand it, this means that a leader does not see himself directing a play or a movie, but as playing a game.

People who see the world as a narrative drama tend to act as though outcomes are inevitable. There is little the director or the audience can do to change the outcome of Macbeth.

If you see yourself playing a baseball game that has gotten to the third inning, then you will see yourself having the power to influence the outcome, both for you and your employees.

Finally, the Welches debunk the notion that the leader is lonely at the top. As they put it: "The old saw 'It's lonely at the top' is pablum. It's only as lonely as you let it be"

Well said. A leader should never get so absorbed in his job that he forgets that he has friends, neighbors, family members, who are supportive, who believe in him, and whose good opinion can motivate and sustain him.

A leader who makes good use of the human resources that are part of his life outside the office will be better prepared to set the right example for his staff.

Tuesday, February 24, 2009

The Perils of Mental Health

Most people agree that we were not prepared for 9/11 because no one had imagined that it could happen. You cannot prepare for something you cannot imagine.

Perhaps we do not prepare for these "black swans" because it is not the most efficient use of our mental resources. If we spent all our time trying to imagine the worst, we would never get anything done.

But no one ever suggested that we spend our working time thinking up future "black swans."

The task can be accomplished by a few, sufficiently paranoid individuals. Note the accent on "paranoid." How many of us, given the choice, would rather be wrong and mentally healthy than right and paranoid?

We are all proud of our mental health. We have worked long and hard to achieve it. We are not going to give up this new status symbol for the dubious achievement of predicting a catastrophe.

Mental health involves a positive attitude, a glass-half-full state of mind. Along that road true happiness lies. When people are mentally healthy, they do not spend their time forecasting calamity. They dismiss end-of-the-world scenarios as paranoid, the stuff of psychiatric wards.

To remain a member in good standing of the therapy culture you need to express appropriate emotions appropriately. You should not admit to thoughts that involve scenarios of great destruction and calamity. If you do, you will immediately be accused of having unresolved issues. Don't we all agree that emotional extremes are symptomatic?

As for the current financial crisis, we did indeed have soothsayers in our midst who predicted it. You know the names: Nassim Taleb, James Grant, and Nouriel Roubini.

Of course, very few people actually respected their views. They were more often discredited as cranks: bizarre, weird, strange, and melancholic.

When we label a negative forecast as a function of a melancholic disposition, we are ignoring the reality that it reflects.

Don't we all believe that emotional excess is a pathological symptom that must be suppressed by medication or talk therapy? Our culture has told us that extreme anxiety and deep despair cannot possibly reflect real events in the real world. An overwhelming emotion must express unresolved past traumas or defective brain chemistry.

Most psychiatrists work hard to distinguish between emotions based in reality and emotions based in fantasy. Clearly, there are emotional states that have biochemical origins.

Nonetheless, it is much easier to write a prescription than to formulate and execute a plan of action that will overcome a real external threat.

Sometimes it is normal to be very afraid or very depressed. Often these emotions are telling us something about the state of the world and our place in it. The real issues are: first, how we can recognize what the emotions are trying to tell us; and second, what we can do to rectify the situation.

If we choose the right course of action, we will often improve our state of mind too.

And think about this: when you are told that a person with a good attitude should see the glass as half-full, not half-empty, keep in mind that in both cases, you will still have something to drink.

If we change the metaphor just a bit and ask whether you see the swimming pool as half-full or half-empty... either way you would do best not to jump in.

Sunday, February 22, 2009

Can You Feel the Hope?

Sometimes hope is the problem, not the solution. So says any analysis that is based on contrary opinion.

Good contrarians who want the market to rally are waiting for more people to lose hope, and thus to give up on stocks and the stock market.

It may look bad out there-- and it is bad out there-- but too few of us have accepted the new reality. Too many of us are holding on, keeping our spirits afloat on an irrational tide of hope.

Bill Clinton notwithstanding, we do not need uplifting rhetoric from President Obama. We need more despair.

But, you will say, Obama has been talking down the economy from the beginning of his presidency. That is not the whole story.

Within Obama's ostensibly downbeat rhetoric is a message of hope. When Obama says that things are bad, he is trying to help people to keep on hoping, despite the evidence. Obama is telling us how bad things are because he is promoting his gospel of hope as the cure for the horrors perpetrated by his predecessor. He is peddling an odd mixture of blame-shifting and false hope.

In the real estate market-- as I have been hearing-- false hope means that people set unreasonably high prices on their homes and refuse to negotiate when a low offer comes in.

False hope tells us that if we wait long enough and if we believe fervently enough, then the good times will come roaring back.

But presidents are not cheerleaders. A president effects policies that will or will not work to solve the financial crisis. If his policies are wrong, he can either change them, or start selling hope.

Reality-- that is, the markets-- have not expressed any confidence in the Obama program or the Obama administration.

As many of our best thinkers proclaim disbelief in the markets, the markets will have the last word.

The question is not whether you believe in the markets, but whether the markets believe in you. Only the most arrogant and insolent among us imagine that the markets care whether or not we believe in them.

So, while investors have been dumping stock, I suspect that the general population is still hanging on. Having bought the dream and the vision of Obama, and having voted for his saviorship, they are not ready to give up.

In the latest Newsweek Jonathan Alter does his best to induce people to keep on hoping. Calling Obama the nation's shrink, Alter declares that this fine and intelligent man will return our confidence and our animal spirits. Link here.

It is strange that Alter conflates the role of president with that of shrink. But not that strange. I have long suspected that the overuse of psychoactive medications has prevented us from feeling despair, and from respecting it sufficiently to learn how to deal with it effectively and constructively.

Despair is not always the wrong emotion. There are times when not feeling despair means that you are out of touch with reality.

When people give up on the economy, when they abandon hope, stocks will become so cheap that they will become irresistible. Then, and only then, will the market mount a significant advance.

As long as people cling to hope, we are not close to the end of the bear market.

Friday, February 20, 2009

What, No Fruits and Vegetables

She served him filet mignon, lobster tails, and chocolate. In return, he ripped off her best friend's face. Will mysteries never cease.

Of course, I am talking about Travis, the celebrity chimp and his owner Sandra Herold.

When I first heard this story, I thought it was yet another instance of life imitating art. Surely, the event echoes Edgar Allan Poe's "Murders in the Rue Morgue."

Yet, the mauling of Charla Nash is not a whodunit. For Sandra Herold the mystery is: how could he have done it?

Is Herold overcome by the discovery that a chimpanzee is not a social construct? Or that treating a chimp like a child does not make him a child? Or that you can take the chimp out of the jungle but you can't take the jungle out of the chimp?

Was Herold roused from her postmodern delirium by the discovery that her chimp suffered from what Ann Althouse correctly called: chimpanzeeness? Link here. As Freud might have put it, sometimes a chimpanzee is just a chimpanzee.

The words of the befuddled Sandra Herold are frightening and pathetic. She brought him up from the time he was a baby; he sat at the dinner table; he drank wine from wine glasses; he could drive a car and use a computer; he rode shotgun in her Corvette; he slept in her bed.

She treated him so well. How could he have done this?

Perhaps it is not that mysterious. Filet mignon, lobster tails, chocolate, and wine are not chimp food. Chimps eat bananas in the jungle. They do not sit at the dinner table. Could it be that Travis mistook the blond Charla Nash for a banana and tried to peel her.

Last night, on The O'Reilly Factor, I saw pictures of Travis the chimp and Sandra in happier times. Travis was sitting next to Sandra on the stoop, his left arm affectionately draped around her shoulder. They were like boyfriend and girlfriend. In the next picture Sandra and Travis were kissing each other on the mouth.

Where did anyone ever get the idea that if only we are sufficiently humane to animals they will naturally return our love. Perhaps it repeats the way some people think of evil human actors.

Remember convicted murderer Jack Henry Abbott. An inmate in a Utah prison Abbott convinced the New York literati that he was a talented writer. Led by Norman Mailer they banded together and got him released on parole. After all, if he could write coherent sentences that meant that he was rehabilitated.

Six weeks later Abbott stabbed a man to death on a street in New York. Sometimes a murderer is just a murderer.

Thursday, February 19, 2009

Needed: Leadership

Jack and Suzy Welch are not impressed by our new administration's first attempts at leadership. They are hardly alone. The markets have not been thrilled either. Link here.

Whether or not the president takes their advice, we can study it to learn something about effective and successful leadership.

Here is their perspective on problem-solving.

When a leader confronts a problem he solicits advice from his advisers. He does not want an abundance of data; he wants to hear different policy proposals. After studying them, he decides on one.

If he finds the situation confusing, he does not share his feelings.

Once he has made a decision, he announces the new plan with confidence. He acts as though he is committed to it and believes that it will succeed.

If he has doubts, he keeps them to himself.

A capable leader will inspire his staff to implement his plan effectively. He cannot inspire them if he is trying to evoke their sympathy. Thus, he does not confess how tough his job is, how bad things really are, and how it might all go wrong.

A leader does not look backward at the cause of the problem. He does not explain how his plan might fail. He looks forward toward a future made brighter by the successful execution of his plan.

Thus, a competent leader is focused on the task at hand and looks forward to success.

Beyond this Jack and Suzy Welch want leaders to understand that the way they present themselves, the way they make make decisions, the way that they communicate confidence, the way that they envision the future...will all be emulated by their staff.

If a leader is confused, the staff will lose focus. If the leader is looking to the past, the staff will have trouble looking to the future. If the leader sounds like he is planning for possible failure, the staff will be less motivated to succeed.

A leader must keep his personal feelings to himself. He will be most in control if he thinks of the example he is setting. He must ask himself how well his company will function if everyone behaves as he does.

Wednesday, February 18, 2009

Virtual Virtues

On Valentine's Day I offered a quotation from Theodore Roosevelt. Its gist was that success comes to those who know how to get along with other people.

It sounds a lot easier than it is. There are many reasons why people have trouble connecting, but today I want to emphasize one in particular. It involves a situation where someone feels that he is connecting, only he is not. He has established a virtual connection, not a real one.

By that I mean that some people do not understand what it is to connect with another person. They believe that when they care about that person they have made a meaningful connection.

The problem is: caring is not a real virtue. It does not really connect your with another person. I am calling it a virtual virtue, a short-cut that makes you feel you are connected when you are not. Better yet, when someone calls you out on your failure to connect you can trot out your virtual virtue and fill the room with your protestations about how deeply deeply you care.

Take a man who feels oceans of love for his wife; he cares about her more than about life itself. Then, he forgets their anniversary; he ignores her birthday and Valentine's Day. In short, he never makes the kinds of small gestures that really connect people.

Were he to remember her birthday and celebrate it properly, that would constitute a real virtue. And if he took a few extra minutes to make her coffee in the morning, that would also be a real virtue.

Or take this example. One day you send a gift to a friend. The friend is so overwhelmed with gratitude that he forgets to send a thank-you note. Should we say that he is grateful? Not at all. He feels virtual gratitude. Real gratitude occurs when the emotion is transformed into a social gesture. Raw emotion-- whether it is care or gratitude or love-- is always virtual.

Perhaps you believe that offering a bunch of flowers cheapens your feelings. Surely I am not suggesting that a consumerist gesture would properly express true love. Actually, I am. If you cannot even be bothered to make the smallest gesture, then your feelings are more virtual than real.

How did we get to this point? Here's one hypothesis. A century or so ago Freud invented a form of psychotherapy that forbid any and all real connection between patient and therapist. He created psychoanalysis as a hotbed, or hotcouch, of virtual virtues.

Psychotherapy that has suffered Freud's influence has spawned its share of virtual connections which have led to virtual relationships which have occasionally ended in real divorces. I think we all know that there are better ways to get in touch with reality.

The moral of the story: it is not enough to feel loving care or even caring love. It is not even close to to being enough. If you want to improve your relationships, get along better with people, abandon your faith in virtual virtues and start cultivating some real ones.

Tuesday, February 17, 2009

Let Us Now Praise Stanley Fish

What is freedom? Does it mean that we are fully responsible for the consequences of our choices or does it mean that we can do as we please without having to suffer any consequences?

When Isaiah Berlin drew this distinction he was surely thinking that the concept of freedom is confusing because we use one word to refer to two principles.

Clearly, having a free choice is not the same as getting something for free. The one confers responsibility; the other says that we can do as we please.

For the past two weeks Professor and New York Times blogger Stanley Fish has been examining this issue as it relates to academic freedom. Links here and here.

Does academic freedom mean that a tenured physics professor can decide that he will teach radical political theory in his physics class and give everyone an A+? And if he so chooses, should be fired for dereliction of duty?

In this case Stanley Fish takes the side of the university. He sees no risk to meaningful academic freedom in firing the physics professor.

The institution made him a physics professor; thus he has a responsibility to the institution... to teach courses, to show up to class on time, to grade his students fairly and impartially. If a future employer receives a copy of a student transcript, authorized by the university, that shows a student having taken a course in physics and having received an A+, that employer must be able to trust in the credibility of that claim.

Let's ask another question. Do those who feel some kind of moral duty to teach radical politics in place of the subject matter they have agreed to teach grant their students the freedom to disagree with them?

If they do not, their invocation of the lofty ideal of academic freedom is pure sophistry. That is what Fish argues, correctly.

Of course, the physics professor who is giving everyone an A+ would not penalize those students who do not accept his politics. And yet, in that case students are being bribed with good grades. They receive a great grade for allowing themselves to suffer this teacher's efforts to indoctrinate them.

Teachers have a right to express their opinions in the classroom. They do not have the right to use their position to enlist students in a political cause. Nor do they have the right to assume that those who disagree with them are mentally deficient.

Considering how much power teachers can wield in a child's life, this is not an impertinent inquiry. You may think that media barons are powerful figures who use their television stations and newspapers to slant the news and to influence your thought.

Yet, their power is nothing compared with that of the high school teacher who makes clear to a class that good grades will only be given to those who accept certain dogmas as incontestable truths.

Obviously, most schoolteachers have never even imagined using their position to indoctrinate impressionable and vulnerable youths. The problem is: some certainly have. In this case, some is way too many.

Monday, February 16, 2009

The Return to Uniformity

I may be getting a little ahead of the curve, but it would surely be a good thing if people in the business world went back to dressing professionally every day.

Thus, I happily second Lucy Kellaway's analysis in today's Financial Times. Link here.

Kellaway observes that business people in London are dressing more formally. As she says: "The casual look, which we used to celebrate as a sign of egalitarianism and unstuffiness, now looks sloppy."

And sloppy dress might well denote sloppy thought. Or worse. Kellaway explains how casual dress was discredited: "...we are starting to suspect that a man who is casual with his clothes may be casual with our money."

Kellway also suspects that people adopted casual dress because they thought it was going to fire up their creativity. Or make them into Bill Gates.

Surely, this fetishization of creativity is a vestige of the 1960s counterculture. I suspect that it was immolated on the altar of phrases like: creative accounting.

Aren't we in trouble now because bankers were creating something out of nothing? Isn't that the ultimate form of human creativity?

People adopted casual dress because it was a way to rebel against militarism. Men's suits, for example, derive from military uniforms. And uniforms denote a position on a status hierarchy and membership in a group. They were rejected because they did not enhance anyone's feelings of being a unique, autonomous individual.

In the process we became a more fragmented society, one where the good of the individual trumped the good of the group. For some people this offered the freedom to write lyric poetry; for others it meant that they could go out and do what they pleased, even, and especially, with other people's money.

And yet, in time of trouble, when we need to band together to overcome our problems, we do not need more artists and pot throwers; we need serious people who are dedicated to the survival of our institutions.

I would add that the return to more formal dress will, at the least, cure a strange form of cultural dissonance.

Wasn't it strange that Mom and Dad were going to work dressed casually while their children were being sent to school neatly dressed in uniforms?

Parents who insisted that their children wear uniforms-- because it made the educational experience more serious-- might have applied the same principle to their own daily work.

Sunday, February 15, 2009

More Leadership Lessons

Now we can add David Brooks to the list of people who are in despair about our chances for recovering our "animal spirits." (See my posts of Jan. 3, Feb 2 and 6.)

Brooks is rightly worried that President Obama has risked his presidency and the nation's economy on mathematical models that have a poor record of predicting human behavior. Link here.

The issue is how to motivate people, how to impel them to take action. Today I want to consider it in terms of executive leadership.

How does a great executive bring out the best in his team? At the least, he gives each employee the opportunity to take initiatives, to shoulder responsibility, and to exercise authority... within the parameters of job description and company policy. (See Dov Seidman's book "How" for a fuller analysis of this issue.)

When an executive lords it over his staff, asserting his authority by telling everyone what to do, he will be draining their initiative and motivation. He will end up with a staff that will do the minimum required, and will never take the extra steps required to bring his company to greatness.

How do leaders motivate? First and foremost by setting an example. If the boss takes initiatives, accepts responsibility, and exercises authority within the parameters of his job, then it is reasonable that his staff will do as much.

Humans are natural-born imitators. If you want to encourage people to behave a certain way, start by doing it yourself.

The same applies to our nation. Is our new president leading us by his example to a brighter tomorrow filled with hope and initiative, to say nothing of revived animal spirits.

Of course, it is not entirely a fair question. President Obama has been on the job for just a few weeks. This is his first executive job of any kind. Before he became president he did not even have the chance to spend much time walking through the corridors of power.

It is unfair to expect that he would instantly be able to provide presidential leadership, especially in a time of crisis.

When I say that Obama and his point man on the financial crisis, Timothy Geithner, look like the junior varsity, I mean that they have yet to grow into their jobs.

Last week, for example, Obama touted Geithner's plan to solve the banking crisis. But when Geithner stepped forth and delivered his much-awaited speech, he was instantly dismissed as vague and inconsequential. By failing to be clear and detailed, Geithner showed that the was not in charge. He took an initiative that was empty of substance. The market sold off on the news.

But President Obama has also been having trouble wearing the mantle of leadership.

First, Obama outsourced the writing of his signature stimulus bill to Congressional Democrats. This shows superior followership, but no real leadership.

Second, Obama objected to the protectionist language in the first version of the bill. Congress left them in anyway, with a slight modification.

Third, Obama disagreed with the bill's provision about limiting the pay of bank executives. He sent Larry Summers and Tim Geithner to persuade Senate Democrats to remove it. They left it in.

Fourth, after insisting that his administration would allow Congresspeople to take the time to read and study the bill before voting on it, he changed his mind and insisted that it be voted on before anyone could read it.

The unseemly rush to legislate bespeaks panic. Strangely so, since most of the bill's provisions do not take effect on the day after tomorrow anyway.

With the Democratic party in complete control of one house of Congress and in virtual control of the other, what did Obama imagine was going to happen if our representatives had taken a few days or weeks to study the bill?

Out of his depth in the oval office, Obama then decided to go on the road. He set up town hall meetings and campaign rallies... to attack the big, bad Republicans whose support he was pretending to enlist.

This divisiveness, coupled with the fractious attitude of Congressional Democrats, ensured that only three Republicans in Congress voted for the stimulus bill.

Obama had offered to usher in an era of post-partisanship. An excellent idea. Yet, in his actions and the example he set, he introduced further partisan division.

By failing to negotiate with Republicans, or simply by not knowing how, Obama missed the opportunity to make his stimulus into an American bill. He allowed it to remain a Democratic bill.

This is not the way to revive anyone's animal spirits. Remember the old line: "A house divided against itself cannot stand."

If Republicans and Democrats are spending their considerable energies attacking each other, they will have precious little left to attack the nation's problems. Their only goal will be: shifting the blame.

Every executive knows that when he decides on a policy, he must negotiate with those who have offered different proposals. Otherwise they will not do their best to execute the policy.

In my February 6 post I suggested that World War II revived the nation's spirits because the nation was unified. Only a group united in common cause and common purpose will work effectively.

Some mentally-challenged individuals have praised Obama for having gotten the stimulus bill passed. But leadership is not about showing who is boss. If you have to resort to bullying to ensure that you get your way, you will alienate a large part of the citizenry and will not be able to inspire hope, to motivate action, or to revive anyone's animal spirits.

Saturday, February 14, 2009

A Quotation for Today

You do not need to be told that in times of stress it is difficult to keep things in focus. In times when failure is either present or looming over everyone we know, it is difficult to focus on success.

And yet, we should keep reminding ourselves that success is built gradually, out of character, judgment, and hard work. No one is born successful. No one is entitled to it.

Today is Valentine's Day and I wish everyone a healthy and happy one. Surely, there is much to be said for setting aside one day to celebrate love. It is frankly silly to think otherwise.

And yet, those of us who come from the Rodney King school of human relationships know that success is not a function of true love, but of just getting along. Theodore Roosevelt expressed it well: "The most important single ingredient in the formula of success is knowing how to get along with people."

Let us emphasize this point. While true love is reserved for one person, success involves a myriad of social connections. Conducting a full social life is so complex that it often taxes the soul.

Often enough, just getting along with people feels like a compromise of your best, most loving self. Worse yet, it often does not even feel natural; it feels like hard work. It is easy enough to remember to send flowers on Valentine's Day. But it is far more difficult to engage in the day-to-day labor that is required to manage many different relationships with varying degrees of intimacy.

Sometimes true love feels like a reprieve from the work of just getting along. And yet, knowing how to get along with the one you love is the best way to ensure that you will continue to be with that person.

Friday, February 13, 2009

A Therapist Speaks

Maybe it's something in the water. Maybe its the way the planets are aligned. Whatever it is, we now have a third article in less than a week about psychotherapists who are treating the human casualties of the Wall Street meltdown.

For links to the first two, and my critiques of same, scroll down to my posts entitled: "HELP!" and "Reverse Sexism in the Wall Street Journal."

For a different critique, see Dr. Helen Smith's article at Pajamas Media. Link here.

Yesterday's article is from Tina Brown's site: The Daily Beast. Link here.

It was written by a therapist, not a journalist. In it we can hear the therapist's glee at the misfortune that has befallen his patients.

Glibly, he asserts: "while the recession hasn't been good to most of them, it's been good for them. When your world has just imploded this is cold comfort indeed.

Since this therapist is a man of science, he must offer a diagnosis. His financier patients are, surprise: "narcissistic."

How did these narcissists react to the crisis? He tells us: "So when the recession hit their bank balances lots of my patients plunged into depression, coupled with deep feelings of shame...."

Hardly an emotional mix that should be taken lightly. The therapist, who has wisely chosen to write anonymously, cannot control his pent-up resentment, so he adds a snide aside: "There's also the humiliation that they can no longer afford annual vacations to St. Bart's."

If you thought that was an accident, he adds another condescending remark later in his post: "it is possible to feel good about yourself even when you can no longer afford the Mercedes, and what's more, it's healthy."

As you read this you are probably asking yourself whether these patients feel an extra dose of humiliation at the hands of their contemptuous therapist. How do you expect them to rebuild their self-respect when their therapist is laughing at their misfortune. And don't imagine for an instant that these patients cannot read his attitude.

I would also ask this: if these patients do not know how to deal with shame, what exactly have they been doing in therapy? Isn't their therapist responsible for guiding them to more constructive behaviors? Apparently, this therapist has not been doing a very good job dealing with his patients' narcissism.

Now he seems to be telling them that losing a job, a lifestyle, a circle of friends, a place in a community... is really a blessing in disguise. Theologians call it: felix culpa, the fortunate fall.

When a therapist says that you can now discover what really matters in life, he means that you have to go out and do penance for your sins. Especially the therapist's favorite sin: pride, a.k.a. narcissism.

This resembles religion more than science, acculturation more than treatment.

For today, however, I also want to examine a different angle. At a time when the country, especially our politicians, are happily scapegoating Wall Street bankers, will these bankers, if they are being treated by such a therapist, know how to defend his honor and integrity or will they learn to just take their punishment.

While it is true that financial professionals made the most money from the bubble, they also lost the most in the collapse. And besides if you listened to the Congressional hearings on the subject earlier this week, weren't you impressed by how little our Congresspeople knew about finance.

Say what you want about Jamie Dimon, Ken Lewis, Lloyd Blankfein, and company, would you rather have the banking system run by Barney Frank and Maxine Waters?

Besides, the Congresspeople who worked themselves into high dudgeon over the predations of the bankers had fought tooth and nail to protect Fannie Mae and Freddie Mac a few years ago. Are they not somewhat complicit in the debacle?

Similarly, are therapists somewhat responsible for the fact that their patients are narcissistic and unable to deal with failure?

A commenter named Thom wrote this on Dr. Helen's blog: "Remember how it's not healthy for children to fail? We must always build their self-esteem rather than hold them to standards....After force-feeding them that crap for two decades, should we be surprised if they are unprepared to deal with actual failure. They have no coping mechanism. And when they do reach out for help they get kicked in the teeth by the very people who took away their chance to develop coping mechanisms." Link to Dr. Helen's blog here. (Seen comments on her Feb. 10 post.)

Thursday, February 12, 2009

Looking for Work?

If you are out of work and want a job, the first step is to act as though you have one already.

It is not the time to feel needy. It is not the time to lounge around in your pajamas watching the Food Network. You should not see your current state as a vacation when you can catch up on your reading. As I and others have said, looking for a job is a job, and should be approached as such.

Even if you have enough money to coast, it is better to attack the problem with severe dedication. Hunt down jobs; do not wait for them to materialize out of thin air.

Next, wrap your mind around the new reality. In normal times you would be selective about what job you would accept. These are not normal times.

Given that so many people are looking for work, it is better not to play coy. Especially when others will jump at the opportunity. Coy does not enhance your value; it makes you look self-absorbed and indecisive.

Today's imperfect job can morph into something better. Offices where people behaved badly in the past are becoming places that value courtesy and collegiality. Recessions have a way of making psychodrama feel empty and gratuitous.

It is always easier to get a job when you have a job. Having a suboptimal job might make it easier for you to get another job. Having something is always better than having nothing.

But, won't your reputation suffer for being associated with an inferior company? Yes and no. If your work enhances the value of the company, you will look very good indeed. And besides, having a job looks better on your resume than the blank space describing the time when you were out of work.

Define your attitude and approach by a slogan I offered in other posts: Don't sell yourself. Buy them.

Know about the company you are approaching. When you are interviewed show them how much you admire what they are doing. Show that you know their culture, their history, and the value of their work.

Do not brag about how great you are. If they want a reference they are not going to call on you.

Let your achievements speak for themselves. Have a chart or a graph or a scrapbook or a series of reports that show what you have accomplished and how it has affected the bottom line.

Beyond your value lies your values. Act with decorum and courtesy at every stage of the interview process. In that way you will show that you are respectful and considerate. Thus, that you expect to be treated accordingly.

Above all banish the phrase-- What about my needs?-- from your mind and your conversation.

The kind of self-puffery that has been relentlessly promoted by the self-esteem mavens is the surest way I know to consign you to permanent unemployment.

No one wants to deal with people who are seething with resentments about their unfulfilled needs. There are people who you can hire to deal with your needs. A company is hiring you to deal with their needs.

By helping a company to grow and prosper, you will gain enjoyment. If you start out trying to negotiate your vacation days, they will understand where your priorities lie and will most likely respect them... by offering someone else the job.

Wednesday, February 11, 2009

A Quotation for Today

Today, not just one, but two quotations about a timely topic: hope. Both are attempting to warn people of the dangers of investing too much energy in hoping for things to happen... as opposed to doing something that might make them happen. However good it is to have a positive vision of the future, if that is all you have, you do not have very much. If you want to make that vision a reality you need to make a plan and to take action.

So, in no special order, a word from Aristotle on how hope is so attractive, and ultimately, so deceptive, to young people. "Youth is easily deceived because it is quick to hope." The philosopher does not say why young people are so quick to grab on to hope; perhaps it relates to an optimistic nature that has not yet been tested by reality. Or perhaps, it refers to a naive willingness to blind oneself to the lessons of reality. Aristotle wants young people to understand that when you allow yourself to be drawn to the siren song of hope you become easy prey.

After all, the art of seduction involves exploiting people's hopes. You hope that he or she loves you so you act as though that were a fact. It is a good way to suffer deception and betrayal. Not for lack of hope or even faith, but for lack of judgment.

Add that a comment by Benjamin Franklin: "He that lives upon hope will die fasting." There is nothing wrong with sustaining some hope for the future. But if that is your sole source of sustenance, you are not merely going to be deceived, you are going to starve.

So, a few less-than-optimistic thoughts about hope. By thinkers whose claim to wisdom is unimpeachable.

Tuesday, February 10, 2009

Confidence Men

There is a terrific piece on dealing with stress in the current financial crisis in the new issue of "The Investment Professional." The article is entitled: "Confidence Men." Link here.

Reverse Sexism in the Wall Street Journal

Psychotherapists may be short on practical experience, but they are supposed to be masters of empathy. If you have been traumatized, they will be at-the-ready to feel your pain, to offer you comfort and consolation.

Unless you happen to be a man who is out of work, whose thirty-year career has just vanished, who is lost and adrift, suffering both a loss of income and a blow to his identity.

In that case, as I mentioned in my post yesterday, many therapists will tell you that your anguish comes from a reality that is judging you for having worked too hard. Beyond that, it is telling you that you must face your unresolved issues.

In today's Wall Street Journal Kevin Helliker writes that the sad sacks who have lost their careers, their income, their social status, and their identities are suffering because they were "addicted to success" and were over-identifying with their work. Link here.

This is guilt tripping at its best. Dripping with contempt Helliker analyzes their anguish: "The deepening recession is exacting punishment for a psychological vice that masquerades as a virtue for many working people: the unmitigated identification of self with occupation, accomplishment, and professional status."

Whether he knows it or not, Helliker is engaging in cultural warfare. He has joined the legions who are using the current crisis to undermine the role of the male breadwinner.

To which you might respond: Did the financial system implode because people were working too hard or because they were not working hard enough?

Helliker withstanding, there is not wrong wrong with identifying yourself by occupation, accomplishments, and professional status. Everyone does it to one extent or another.

When you lose your job, you are losing income, many of your daily routines, friends and colleagues, your place in the social group, and on and on. Even if your investment was not "unmitigated" these are essential to your being. The man who does not feel traumatized when he wakes up one morning and realizes that a major part of his social environment has vanished is simply abnormal.

To demonstrate his inability to grasp social structures, Helliker offers the story of veteran correspondent and editor Michael Precker. After Precker took a buyout from the Dallas Morning News, he was worried about the loss of status.

But, Helliker offers, he did not need to worry. He bounced back and found a new job as manager of a high end strip club. No kidding.

Do you think that he has not suffered a loss of status? Do you believe that his wife and children are as proud of him now as they were when he was working on the newspaper?

Now that you have seen the way psychologists want their male patients to process trauma, imagine these empathy-mongers facing a woman who had been sexually harrassed. Would they tell her that she was suffering because she had over-identified with her sexual being? Would they declare that she is suffering because she had not spent enough time with her family? Or would they declare that her anguish is simply evoking unprocessed childhood traumas?

Not for an instant. Any therapist who suggested such a thing would be drummed out of the profession and driven out of town.

Monday, February 9, 2009


The financial crisis has sent more and more people into counseling. That makes it a good time to ask: Is the help you're getting the help you need?

Paul Sullivan addressed the question last week in the New York Times. His article was entitled: "It's Not Just the Money; It's the Mind-Set." Link here.

Strangely enough, Sullivan makes the words of a New York psychoanalyst the centerpiece of his article. If you were wondering why psychoanalysis is on life support, this analyst's comments will show you.

Demonstrating his superior insight and empathy, the analyst gets to the root cause of his patients' anguish: "As their net worth shrinks, their self-worth shrinks."

Notice the clever use of a word that has traditionally been used to describe the mental health profession. Do you think it is an accident that therapists of all stripes have been called "shrinks?" And ask yourself why your already shrunken self-worth needs to shrink some more.

Almost sounding like a psychoanalyst himself author Sullivan sums up the analytic approach: "The cure is to get them to understand what money means to them. Why do their feel their lives won't have meaning if they can't buy expensive clothes, own ever-larger homes, and jet around the world on a whim? The answers are no surprise: childhood traumas, feelings of inadequacy, a desire to make your success widely known."

To which the psychoanalyst adds: "The problem is not the economy. It's the stuff it's stirring up."

Let's see: you have just lost your job and your savings. The world you have known has crashed around you. The mental health professional says that it is not really the economy. Current events have simply stirred up all of your unresolved issues. This is a fancy way of saying that it's all in your mind-set.

Think about it. This analyst is assuming that if his patients had not been using money to cover up feelings of inadequacy, and if they had not defined their self-worth monetarily... they would not be suffering anguish and depression.

The truth is: if you are in dire circumstances and are not suffering, then you simply do not get it.

This article shows us that psychoanalysis caricatures people's lives to fit its own theoretical expectations. Worse yet, it imagines that by merely rearranging some mental furniture it will make them feel better.

Having no sense of people as social beings, psychoanalysis completely ignores the way the current crisis is disrupting people's lives. It does not understand that the problem is not in a depleted bank account, but in no longer belonging to a community.

Take the parents who are trying to explain to their children that they will no longer be going to private school, that their social worlds will be thrown into turmoil, that they will be losing friends and teachers... because their father or mother, whom they looked up to, whom they admired and loved, who was the beacon of their existence... failed.

If you think that these people are having problems because they mistakenly identified their self-worth with their financial security, you are insulting them.

You may not sympathize with the fact that some of them can no longer afford country club dues or weekend trips to the beach, but consider that it means that they can no longer participate in their community. They will feel like outcasts, like pariahs, marked by failure. And they will feel an even greater distress for the loss of place and status that is being visited on their children.

To imagine that you can feel better about it all by rearranging your mental furniture is insensitive to an extreme. It shows a manifest failure to understand what human life is about. You do not overcome public shame by having more picnics in the park and less golf.

While no one has a great deal of sympathy for profligate spending, it does signify status in a community and active participation in the nation's economy.

It is easy to trash people who take expensive trips, but once they stop, so do the jobs of countless others.

I would suggest that the person who has lost a significant amount of his capital might well some empathy for those people he is going to fire. Certainly, he will have more feeling for them than his psychoanalyst has for him.

And the person whose wealth is depleted will feel badly for not having more disposable income to invest in job-creating enterprise or to lend to businesses that need it.

Therapists who have trained in psychoanalysis will want people to get used to their new circumstances. But it is more constructive to help them to rebuild their lives, to get back into a community, and to make their children proud.

Until the new order arrives your pride and the pride of those near and dear to you depends on your status and your membership in community. Miss that point and you are not going to be offering the kind of help that people need and deserve.

Sunday, February 8, 2009

A Quotation for Today

When I was writing my February 5th post about ideological conformity I had a quotation in the back of my mind. It did not make the final cut, and perhaps that means that it is worth its own post.

The quote is from Aristotle: "It is the mark of an educated mind to entertain a thought without accepting it."

When faced with a new thought, an educated mind will show it full consideration and respect. The same would apply to thoughts that contradict deeply held beliefs.

An educated mind does not dismiss certain thoughts as heresy or blasphemy. It does not launch ad hominem attacks on the person who has presented the thoughts.

But what does it mean to entertain a thought? I would guess that it means the same thing as to entertain a person.

You invite a thought over for drinks, you engage it in conversation, you listen attentively to its argument, and then you decide whether you want it to stay for dinner or even to sleep over.

Before you decide to disagree, you show the thought the proper hospitality.

If you do not, then you have an arrogant and grandiose confidence in your own mind. For Aristotle this would have classed you among the uneducated.

Without respect for differing opinions you cannot have a "free trade in ideas."

As its author, Justice Oliver Wendell Holmes defined this concept: "But when men have realized that time has upset many fighting faiths, they may come to believe ... that the ultimate good desired is best reached by the free trade in ideas... that the best test of truth is the power of the thought to get itself accepted in the competition of the market...."

If we have decided to oppose protectionist trade policies, we should also oppose protectionism when it concerns the free trade in ideas. If you need to protect your ideas from competition, they are probably not worth their keep.

Saturday, February 7, 2009

The New Old Virtues

Sometimes, in time of trauma, people turn to religion. Sometimes they try to rediscover what matters in life. No one can object to these efforts, but for today I want to emphasize the importance of using a trauma to relearn some old lessons and to reacquire some old virtues.

I am thinking of dormant civic virtues like humility and discipline. If you like slogans, let's say that to solve our problems-- be they national or personal-- we need more character and less self-esteem, more reality-testing and less mindless optimism.

We could take one step in the right direction by recognizing that character is forged in the crucible of reality, most especially in the unforgiving reality of the markets.

If the current financial crisis does not mean that, it does not mean anything.

I offer this preamble to introduce an important blog post by trading coach Brett Steenbarger. Link here.

Here is the way Steenbarger expresses it: "Too often confidence is treated as if it is a simple matter of visualizing positive outcomes and sending oneself ego-enhancing messages."

Our culture's psychological bromides are misleading, he is saying. If you want to build character, you have to earn it through hard work. By which Steenbarger means, through trial and error, and especially by learning from mistakes. In his words: "No psycho-babble can substitute for the lived reality of making mistakes, correcting them, discovering strengths, and building them."

Hard work, discipline, humility... Steenbarger is pointing us to the correct cultural lesson: we need to rediscover the old virtues, and not just to rediscover them, but to start working on building them in us.

But Steenbarger is a trading coach-- thus the emphasis on markets-- and he writes for people who trade for a living. And yet, he adds that these same rules apply to other areas of life. Civic virtue is not just useful to give you a competitive edge in the trading pit... except in the sense that life is often like a trading pit.

If you have overcome the tendency to think that self-puffery will give you confidence, you will appreciate the way that humility leads to true confidence. By which I mean, confidence that has been earned.

As Steenbarger explains it: humility means respecting the reality of the markets, and the reality outside the markets. For example: "Truly confident rock climbers... trust in their skills, but also respect the mountain and the elements, never taking safety for granted."

Humility sounds like ancient wisdom. But perhaps it is time that we started drawing on the sources of ancient wisdom. It would help us to overcome the irrational exuberance that lulled us into believing that we could recreate ourselves and reinvent reality as we saw fit. Hopefully, the days when anyone would take that seriously are over.

Friday, February 6, 2009

Animal Spirits, Part 3

"Once more unto the breach, dear friends...."

That's Shakespearean for: here I go again with animal spirits.

The nation is debating how best to revive the animal spirits that will drive us to shop and spend, thus saving us from the ravages of deflation.

Today, the estimable Jim Jubak offers his opinion that the New Deal did work, up to a point, but that it did not work as well as World War II. The latter really rescued us from the Depression because it provided the economy with a gargantuan level of stimulus. Link here.

That fiscal stimulus gave the economy a real and sustainable boost. More than that, Jubak declares, surprisingly, that the wartime stimulus produced economic growth for decades to come. "The momentum built up by the war years carried the economy for decades."

So, the best way to revive our animal spirits is the throw enormous amounts of money at them. This presupposes that we must always respond to fiscal stimulus-- a rather simplified view of human motivation.

So, I want to offer some simple observations, to show that, socioculturally speaking, there is more to warfare than fiscal stimulus.

First, the war did eliminate unemployment, through the miracle of conscription. And surely chronic, intractable unemployment made the option of a job with the military desirable.

Second, the war did not immediately revive consumer spending, mostly because it imposed strict rationing. Perhaps the years of limited consumption created pent-up demand, but you cannot credit the war with reviving those animal spirits.

Third, the war brought us together as a nation. It united the populace by giving everyone's daily activity a sense of overarching purpose. During the war, no one was running around asking: "What about my needs?"

Fourth, the war succeed eight years of depression. Was it because of the protracted depression that everyone was more than willing to engage in the war effort?

Fifth, the war restored a spirit of cooperation and competition. We forged alliances with our allies and competed in a struggle to the death against our enemies. Competition in a high-risk environment always tends to focus the mind.

Sixth, wars center the nation around the military. It makes soldiers, not celebrities, into heroes and fosters admiration for a social organization that has strict rules and roles, where everyone knows his or her place, and his or her duty.

Seventh, during the war civic virtues ruled. The war built character. During a war people identify with their nation. There are no citizens of the world during a war. Values like patriotism, loyalty, duty, responsibility, and obedience were elevated while values that involved self-indulgent complaining were reduced.

Eighth, we won. The nation won the war. And victory, especially victory against long odds, fosters confidence. Moreover, it was a victory for the nation, not for a leader or a party.

Ninth, success breeds success. The work habits, the good character, the patriotism and loyalty that had been inculcated during the war did not go away after the war. They were transferred into other economic activity.

If you are looking for what drives the "animal spirits," these sociocultural factors may also claim pride of place.

Thursday, February 5, 2009

Conformity Redux

America is becoming more polarized. Not by race and religion, but around ideology. Too often, belonging to a community that people think the same thoughts, feel the same feelings, and act accordingly. Groupthink reigns in today's America.

Shankar Vedantam draws this conclusion in the Washington Post. Link here.

Ideological conformity is enforced by ostracism. If you are a Democrat in a community of Republicans or a Republican in a community of Democrats you will be made to feel like you do not belong, like you are an outsider.

The virus of political correctness, having first infected the educational and media worlds, has now mutated into a form that undermines our identity as Americans.

The phenomenon undermines the practice of free and open debate in a democratic society.

As Vedantam put it, people do not merely disagree with those who hold different opinions. They despise them. People who think differently are not fellow citizens; they are traitors, heretics, environmental criminals, mass murderers, or worse.

If your opponents are subhuman, you do not have to negotiate a compromise. You can simply ostracize them and wait for them to move away.

And yet, as any experienced witch hunter can tell you, it is very difficult to know what people really think and feel. If words can deceive, then you will need to look more closely at their actions. How better to police thought than by insisting on behaviors that demonstrate an ideologically correct attitude.

It is not about disagreements, and it is not about policy. As Venentam says: "It is not about taxes or terrorism. The yoga people simply can't stand what the lawn-chemical people represent, and vice versa."

The personal has now become politicized, to the detriment of the marketplace of ideas.

At a time when we all need to come together to solve our problems, we have increasingly become a nation of true believers, unable and unwilling to fashion anything resembling a compromise.

Wednesday, February 4, 2009

Leadership Lessons

If the New Deal did not work the first time, why does anyone want to try it again. Thus asks Amity Shlaes in a Washington Post column that applies a theme she outlined in her book, "The Forgotten Man." Link to column here.

A good question, somewhat compromised when she says that even though FDR's policies aggravated the Depression, he was still a great leader because he gave great speeches that inspired everyone to hope.

But, great speeches do not make a great leader. In some parts of the world eloquence is disparaged because it is often used to mask failings.

Which would you prefer: an inarticulate leader whose policies got you back to work or an articulate leader whose policies prolonged a depression? Or, ask the question this way:Who did more for China, the inarticulate Deng Xiaoping of the eloquent and poetic Mao Tsetsung?

Good leadership involves formulating and executing policies that can by judged by the outcomes. As William James famously put it: "Truth is what works."

Sometimes a mythic figure becomes so powerful that a fact-based evaluation of his presidency is impossible. Such is the case of Franklin Roosevelt. The author of a failed policy that arguably aggravated the worst economic crisis in American history is lionized as one of our greatest presidents.

So, even if the New Deal did not work in the sense that Shlaes means, it still worked its magic politically.

The New Deal helped to make Franklin Roosevelt into an idol, a demigod, a political success the likes of which we have not seen since. His policies might not have rescued the economy, but they did get him elected president four times.

Roosevelt was the master of leadership as the will-to-power.

I did not invent this concept. The philosopher who did, Nietzsche, believed that it was the basis for all human motivation.

Those who have a less pragmatic bent or who have learned deconstructive thinking believe that the will-to-power is the truth, and that policies should be judged by what works, but by what maintains the person in power.

When a politician goes back on all of his campaign promises, it is not a sign of hypocrisy, but an expression of the will-to-power.

Politicians who live and die by will-to-power want to gain and hold power, regardless of what they have to say and to do to get and keep it. They do not care about results, except that reality often forces them to enlist the support of legions of historians, journalists, and propagandists who can demonstrate that good things are to their credit and that bad things are the fault of those who do not love them enough.

If you were wondering why the intelligentsia so often flock to failed leaders, the reason is simple: failed leaders make them feel more needed and more important.

Risks and Rewards

What if you take a creature that has been programmed to deal with scarcity and surround it with abundant resources?

According to Philip Pearlman you get a collective cognitive dissonance. Link here.

Pearlman offered this thought in response to the work of Nobel-prize winning psychologist Daniel Kahneman. Where Kahneman demonstrated that people often avoid risks when it would be more rational to take them, Pearlman responds that if we look at the larger evolutionary picture, we see that our psycho-biological make-up was formed to deal with scarcity. In time of scarcity it is rational to avoid risk.

And yet, when resources are abundant we become more confident and more willing to take on risks. Obviously, abundance increases the chances that we will be able to recover losses.

In the last decades we got used to abundance and took on far too much risk. And this, Pearlman posits, has bred complacency and has made us psychologically ill-equipped to adapt to our new era of scarcity.

As it happens, yesterday I also received via email a link to a discussion that Daniel Kahneman had with Nassim Taleb in Munich last week. (Taleb invented "black swan" theory. See yesterday's post.)

If you are not familiar with the work of either man, this conversation provides a useful introduction. Here is the link. Scroll down a bit to find the video.

Tuesday, February 3, 2009

John Thain and the Inner Sanctum

In a matter of months John Thain went from the hero who had saved Merrill Lynch to the poster-boy for Wall Street arrogance. Surely, Thain was fired for many good reasons. Yet, in the mind of the public, he will now be known as the man who marked the financial crisis by spending $1,200,000 redecorating his office.

Any time anyone tells you that you should follow your bliss or your creative individual and should ignore how it looks to other people, think of John Thain.

Thain's error was thinking that the good old days were going to come marching back, because, after all, they always had.

Evidently, he had never read Nassim Taleb's book on black swans. There and in later writings Taleb argues that bankers got themselves into the current mess by assuming that the past can guide their actions in the future.

We feel confident and in control when we think that we know what is going to happen in the future. When unpredicted and unpredictable events occur, we find ourselves completely at a loss to understand what is happening or to know what to do about them.

The models that economists invent and the stories that we all tell ourselves draw us away from the reality of these black swans.

Monday, February 2, 2009

Animal Spirits, Part 2

When last we looked, our greatest economists were out in the woods beating their drums in a vain attempt to revive our animal spirits. (See my post of January 30.)

They want us all to buy and invest, the better to forestall the movement toward deflation and depression. Their theory says that we are not doing so because we have become traumatized into economic inactivity. Their solution: we need to get in touch with our animal spirits.

As I said, I am not sure why, beyond their love of Keynes, they need to evoke animal spirits. When animals are threatened, they can choose between fighting, fleeing, or playing dead.

By assuming that our animal spirits will provoke the right kinds of actions, Keynes and Co. has confused the issue. Evoking animal spirits does not tell us what we should do.

There is no reason to believe that animal spirits are more likely to tell us to run out to Walmart than to lounge around the house in pajamas.

Besides, when trauma victims follow their urges, they most often act in ways that make the problem worse.

Last Friday the Wall Street Journal ran op-ed by Peter Berkowitz that cogently corrects the argument from "animal spirits." Link here.

According to Berkowitz, we are having trouble dealing with the crisis because our political culture has become a breeding ground for immoderate passions, to the detriment of free and rational decision-making.

We are so overwhelmed by passions, so caught up in myths... that we are simply not thinking straight any more.

As Berkowitz put it, a large segment of our political culture glorifies the irrational and makes intense emotion the gauge of truth. Such a culture can only hinder our ability to make rational choices and to do the right thing.

The intemperate passions, as Berkowitz sees it, involve the deranged hatred that certain segments of the population visited on George Bush, and the irrational exuberance these same people are now showing for Barack Obama.

It is as though a clan were sacrificing a person who has been scapegoated as the cause of all ill, and then worshipping another figure as a tutelary animal spirit, a totem.

This is primitivism run wild. Unfortunately, as Berkowitz shows, our media gurus and educators have been teaching us that the stronger our emotions, the closer we are to the truth.

As Berkowitz puts it, they have taught us that "hatred and euphoria reflect political wisdom."

If the way out of the crisis requires rational thought and free choice, then we should not be encouraged to see large segments of the population transformed into cult followers who think that their excessive passion makes them enlightened.

Grand passions may inhibit actions, but they most often incite people to do the wrong thing. Especially when they tell people to obey their urges.

Overcoming trauma, as Berkowitz suggests, means learning how to exercise freedom. If a trauma victim allows the trauma to define what he can or cannot do, whom he can or cannot see, where he can or cannot go, then the trauma has limited his freedom.

To exit that mindset the victim must decide to take actions that run counter to what his emotions and his urges are telling him. And he must trust his rational faculty enough to act accordingly.

A culture that is based on emotional excess prevents us from acting rationally and freely because it promotes magical thinking and tells us that we should trust animal spirits.

When people believe that they have eliminated the scapegoat that has caused them pain and have found a redeemer who will deliver them from evil, they will think that they have done all they need to do. Now they just need to sit back and await redemption.

Deprived of their reason and their freedom, they can only hope that the animal spirits will carry them away.

The Era of Mangled Syntax is Over

Lovers of the English language had special reason to cheer the arrival of a new administration that would afford proper respect to our mother tongue. And they were similarly thrilled at the prospect that the Obama administration would restore moral probity to our foreign policy.

They did not have to wait very long.

From atop the moral high ground, our new Secretary of State, Hillary Clinton, has managed in a single sentence to return us to both eloquence and rectitude. Describing how people around the world reacted to the arrival of Obama, she declared: "There is a great exhalation of breath going on in the world."

Sunday, February 1, 2009

Quotation of the Day

Today is a national holiday, Super Bowl Sunday, and I want to keep with the festive spirit. Thus, I offer a line by a world-renowned humorist, Groucho Marx: "Politics is the art of looking for trouble, finding it everywhere, diagnosing it incorrectly, and applying the wrong remedies."