American Consequences - January 2018

Men Without Work

Riding Around With the Repo Man

Invasion of the CGI

I D E A S T H A T M A T T E R E D I T E D B Y P . J . O ’ R O U R K E AMERICAN CONSEQUENCES

KISSING THE CLOUD Or Sucking Our Soul?

AS WE MOVE FROM THE INDUSTRIAL AGE TO THE DIGITAL AGE MORE AND MORE OF OUR ECONOMY BECOMES WINNER TAKE ALL

JANUARY 2 0 1 8

ADVERTORIAL

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Multi-millionaire Louis Navellier has an urgent message for anyone looking to “dip their toes” into the cryptocurrency markets.

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CONTENTS

JANUARY 2018 : ISSUE 7

LOST? CLICK HERE

6

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24

30

36

20

AMERICAN CONSEQUENCES

54  Two Ways to Profit From ‘The Transition’:

4 Inside This Issue

BY STEVEN LONGENECKER

The Obvious American Giant BY PORTER STANSBERRY

6 Letter From the Editor BY P.J. O’ROURKE 10 Pareto and His Principle BY P.J. O’ROURKE 12 What Moved the Market 14 What Could Possibly GoWrong? 16 From Our Inbox COMPUTERS SCREWUP... 20 THE MARKETS BY TURNEY DUFF 24 OUR BRAINS BY CHRISTINE ROSEN 30  POLITICS BY ANDY FERGUSON 36  OUR KIDS BY AMERICAN CONSEQUENCES EDITORIAL STAFF 40 THE MOVIES BY JOHN PODHORETZ

Editor in Chief: P.J. O’Rourke Editorial Director: Carli Flippen Managing Editor: Steven Longenecker Contributing Editors: Turney Duff, Nicholas Eberstadt Dr. David Eifrig, Andy Ferguson, John Podhoretz, Christine Rosen, Buck Sexton, Bill Shaw, Steve Sjuggerud,

57  Two Ways to Profit From ‘The Transition’: The Unknown Chinese Giant BY STEVE SJUGGERUD 60 Riding Around With the Repo Man BY BILL SHAW 66 One Rule You Must Follow in 2018 BY DR. DAVID EIFRIG 70 A Ray of Hope in the Contest Between Man and Machine BY P.J. O’ROURKE 74 Men Without Work BY NICHOLAS EBERSTADT 84 Read This 86 The Final Word BY BUCK SEXTON

Porter Stansberry Newswire Editors: Scott Garliss, John Gillin, Greg Diamond

Assistant Editor: Chris Gaarde Creative Director: Erica Wood Cartoon Director: Frank Stansberry Contributing Cartoonists: Hank Blaustein General Manager: Jamison Miller Advertising: Sam DeCroes, Jared Kelly, Jill Peterson Editorial feedback: feedback@ americanconsequences.com

46 DESIGN BY ERICAWOOD 48 READING : BY P.J. O’ROURKE

American Consequences 3

INSIDE THIS ISSUE

T his month, we’re talking The Transition ... how the Industrial Revolution led directly to the winner-take-all nature of the Digital Revolution... and what happens next. Editor in Chief P.J. O’Rourke shows how every economic transition benefits the few. But only some economic transitions benefit the many... Turney Duff shares how Wall Street has changed due to social media... Christine Rosen goes “inside the hive mind”... Andy Ferguson details how the Internet has made politics far worse... and movie critic John Podhoretz shows how CGI has invaded the movies. Our fantastic design director Erica Wood tries to get a computer to create this month’s magazine cover.

Bill Shaw looks at those who lose from a Transition, taking us on a ride around Baltimore with the repo man. And Dr. David Eifrig has one rule you must follow in 2018. Finally, we have an excerpt from Nicholas Eberstadt’ s fantastic book, Men Without Work , about America’s hidden crisis. And Buck Sexton looks at why everything for President Trump hinges on 2018. Enjoy the issue. And tell us what you think at feedback@americanconsequences.com . Regards, Steven Longenecker Managing Editor, American Consequences America is now home to an ever-growing army of jobless men no longer even looking for work – over 7 million between ages 25 and 55, the traditional prime of working life. Nicolas Eberstadt Plus, we share two ways to profit from The Transition... the “obvious” American giant way and the “unknown” Chinese giant. (You’d be up 60% or 100% if you had followed this advice, several times more than the broad market.)

Why rely on our puny individual brains when we had the vast resources of the collaborative hive mind to make us better, smarter, faster, and more meme-friendly?

Christine Rosen

4 January 2018

LETTER FROM THE EDITOR

From Editor in Chief P.J. O’Rourke

EVERY ECONOMIC TRANSITION BENEFITS THE FEW. ONLY SOME ECONOMIC TRANSITIONS BENEFIT THE MANY. CONOMIC TRAN

6 January 2018

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We wouldn’t want to do without economic progress, but not every economic transition is progress. The first major economic transition happened when the economy was still very primitive. Two million years ago, Homo erectus came down from the trees and stood up on two legs. (You can tell how primitive the economy was by the fact that Homo erectus never licensed his name to any of the pharmaceutical companies who advertise to men on Fox News.) Becoming bipedal was a splendid economic advance for our ancestors. It allowed them to walk to places where there were good things to eat and run back with their arms full. Unless they fell over. Which is what happened to the members of Homo erectus who aren’t our ancestors. I’m guessing there was what economists call a “Pareto distribution” – an 80%/20% split – among Homo erectus . ( More on Pareto and his principle on page 10 .) One out of five was walking around looking for good things to eat. Four out of five grunted, “Standing up is too hard.” They sat back down... and were eaten by saber-toothed tigers. At about the same time that we started to stand up, we also started to make stone tools. The “Paleolithic Age” was another major economic transition. Stone axes, stone knives, and stone spearheads allowed us to hit, stab, and poke things.

ITIONS

American Consequences 7

LETTER FROM THE EDITOR

But, again, I’m guessing that paleo-technology baffled many cavemen. Try it yourself: Make a sharp stone knife blade by knocking it against another. Having much luck? Me either. If you and I had been around back then, the things that got hit, stabbed, and poked would have been us. The next important economic transformation was around 12,000 years ago. During the “Neolithic Revolution,” agriculture began to replace hunting and gathering. This would seem to have been a win/win development for everyone – just sit there and watch the corn grow. Wheat, rye, and maize don’t kick or bite or charge you with big horns. They can’t run away. And they don’t try to fool you when you’re gathering them the way delicious- looking deadly nightshade berries do. But, as the prestigious British journal New Scientist says, “Decrease in physical stature and health in transition from hunter- gathering to agriculture is well-documented.” Turns out Neolithic farmers were smaller, weaker, less resistant to disease, and they died a lot more. Besides, where’s the fun in sitting there watching the corn grow? I’m for hunting some deer with my Remington .30-06 semi- auto. We’ll gather a few six-packs on the way home. Slavery also caused an economic transition, and how brilliant it must have seemed. You used to have to work. Now somebody else has to work. And it’s free. Well, almost. You’ve got to provide straw pallets, dole out thin gruel

once a day, and give the slaves an occasional break to drink out of a mud puddle. It was a brilliant innovation – unless you were a slave. And that was fairly likely. Historians estimate that, in the first century BC, between 35% and 40% of the people in Italy were slaves. And free slave labor also didn’t make things easier for the working-class Romans citizens, the plebeians. The Imperial Minimum Wage was, basically, 0. I suppose the plebs could have attempted to undercut that... “I’ll bring my own straw pallet, bowl of thin gruel, and mud puddle.” But... When the Roman Empire fell and the Middle Ages came along, the plebeians were economically transitioned into serfs, villeins, and other forms of peasantry. This at least got them outdoors and into the fresh air, delving and spanning on the large manors of feudal barons. Baronial manors were an efficient economic institution, at least compared to rapine and pillage, the other economic institutions of the era. The Medieval peasants, however, did not seem to have been very grateful for this economic efficiency. There were violent peasant uprisings in AD 841, 928, 1277, 1323, 1343, 1358, 1381, 1382, 1401, 1409, 1437, 1441, 1450, 1453, 1462, 1478, 1485, and 1498. The only economic good news for ordinary people during the Middle Ages was the Black Death. It did have adverse effects, killing between 30% and 60% of Europe’s population in the 1300s. But consider the benefits: Upward pressure on wage rates and

8 January 2018

benefit packages resulting from supply-side labor market shortfalls. The discovery of the New World meant a literal economic transition. The Spanish transitioned an estimated $530 billion in silver and gold from the Western Hemisphere to Europe. Since there were only about 90 million Europeans at the time, this meant that each of them got $5,888.88 apiece and everybody was rich... or so simple arithmetic would tell us. The ‘Industrial Revolution’ was great for everyone... everyone, that is, who was rich already. “ Simple arithmetic would also tell us that the people who lived in the New World lost $530 billion, and modern research indicates that European diseases killed as many as 90% of them. If you were a surviving Native American, you were a rounding error. And broke, too. But the “Industrial Revolution” was great for everyone... everyone, that is, who was rich already. They were selling the coal from their estates, boiling steam at their factories, and spinning cotton in their mills. We were mining the coal, shoveling it into boilers, and working as child laborers on the looms. Eventually, of course, the Industrial Revolution was great for everyone. Microwave ovens for rich and poor alike!

And the scientific knowledge and technical expertise that resulted from the Industrial Revolution led directly to The Transition we are experiencing now – the “Digital Revolution.” This may be the most significant economic transition since we came down from the trees. Will it benefit the few? Will it benefit the many? We’ll use me as an example of the many and Mark Zuckerberg as an example of the few. How have we been doing, comparatively? Let’s start in 1987. That was when Time named the Personal Computer its “Man of the Year.” We’ll count 1987 as the beginning of the Digital Revolution. In 1987, I was a freelance magazine writer with an uncertain income stream. I owned a small (mortgaged) house in the country. I had about $20,000 equity in the house, maybe $10,000 in the bank, and an old pickup truck. My net worth was about $31,500. In 1987, Mark Zuckerberg was three. I think we can calculate his net worth (assuming a piggy bank) to have been in the low one figures. The Digital Revolution has now been going on for 30 years. I am a freelance magazine editor with an uncertain income stream. I own a large (mortgaged) house in the country. I have three children in private schools and an old pickup truck. My net worth (adjusted for inflation) is... about $31,500. Mark Zuckerberg’s net worth is $72.3 billion.

American Consequences 9

PARETO AND HIS PRINCIPLE

N othing explains the “Winner Take All” nature of an economic transition like the Pareto principle . Vilfredo Federico Damaso Pareto (1849- 1923) was a man of many... names, for one thing... but also of many talents. Trained as an engineer, he once managed the largest ironworks in Italy. But in his 40s Pareto began to study economics. In 1893 he became chairman of the Department of Political Economy at the University of Lausanne in Switzerland. Pareto was also a philosopher, political theorist, and sociologist who wrote the first book on what we would call “behavioral economics,” The Mind and Society . And, for all I know, he made a killer pesto genovese , the specialty of his family’s home town, Genoa. However, what made Pareto famous is something he simply noticed, early in his career, while working as a civil engineer for the Italian railroad. Going over maps and deeds of right-of-way, Pareto realized that about 80% of land in Italy was owned by about 20% of Italian families. He did historical and international research and discovered that this 80/20 pattern of land ownership was prevalent around the world and through the ages. Global and historical income distribution also

followed the 80/20 approximation – 1/5 of people make 4/5s of the money. But what’s more surprising is that the 80/20 rule of thumb applies to many other phenomena. Farmers find that 20% of peapods produce 80% of the peas, 20% of the seed corn grows into 80% of the ears, and 20% of a cow’s weight turns into 80% of the prime beef cuts. It’s a general rule – 20% of causes result in 80% of effects. The rule applies to scientific experiments, computer programming, sports training, occupational health and safety, etc. It certainly applies to business – 20% of the customers provide 80% of the revenue, 20% of the employees do 80% of the work, and 20% of the senior executives make 80% of the pay. This 80/20 rough computation is known as the Pareto principle and the results of an 80/20 calculation are a Paretian distribution . The Pareto principle is not, however, a law. It doesn’t have to rule your life. Maybe you’ve got 20% of the cats in the neighborhood and they’re having 80% of the kittens. You can fix that. And sometimes the Pareto principle is just a bad idea. I once had the pleasure of being the M.C. at a convention of beer distributers. (And, yes, it was as much fun as it sounds.) Beer distributors are wonderful people. They

10 January 2018

get more wonderful as the evening goes along. They are very generous in urging you to sample their wares. Another thing about beer distributors is that they tend to be family businesses – often owned by the same family since Prohibition ended, with four, five, even six generations in the business. On the last evening, our keynote speaker was managerial genius Jack Welch, who’d just stepped down after 20 years as CEO of General Electric where he’d raised the value of the company by 4000%. Welch likes an “all Q&A” format. I called on members of the audience. The beer distributors had great questions. Jack had great answers. Everything was going well... until we came to Welch’s application of the Pareto principle to employees. Jack told the beer distributors that they should do annual performance reviews on their entire workforce and analyze that workforce on a 20/70/10 basis. Jack said that 20% of their workforce will be good, 70% of their workforce will be average, and 10% of their workforce will be bad. He said, “Every year you should reward the top 20%, retrain the middle 70%, and fire the bottom 10%.” The room went quiet. It took me a moment to realize what was wrong. Then I said, “Jack, what if the bottom 10% of your workforce is your brother-in-law?” The beer distributors broke up. Jack started to laugh too. Everything got back on track and we had a fabulous night. Of course, The Transition that we’re undergoing in our economy doesn’t have

much to do with your brother-in-law. Except to show that the Pareto principle is not a cause for universal despair. The digital transformation of our economy will mean a reapportionment of rewards – no doubt in a Paretian distribution. This doesn’t mean that you have an 80% chance of being a loser in The Transition. But it does mean that you have to re-think 80% of what you’re doing as a businessperson and investor. The Pareto principle is actually a message of opportunity. Gather 10 people into a room. (Myself, I’d pick a barroom – but room of your choice.) You are much better at something than eight of them. Even if you’re just better at drinking... Marry into one of the beer distributor families. But, statistically, the likelihood is high that you have some skill or technical ability that eight people don’t. Now use it . Failing that, make yourself better informed than 80% of people. That isn’t hard. Recently National Geographic and The Council on Foreign Relations conducted a poll of 1,203 young adults with college educations – 66% estimated the U.S. population to be between 750 million and 2 billion, 75% said English was the most common native language in the world, 75% couldn’t find Israel on a map, and 70% didn’t know which branch of government has the Constitutional power to declare war. And your brother-in-law? Maybe he makes a killer pesto genovese . P.J.O’R.

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American Consequences 11

WHAT MOVED THE MARKET THE BIGGEST STORIES THAT MATTERED FOR THE MARKET LAST MONTH...

Retail sales, new-home sales, and personal spending all exceeded expectations and provided the gravitas needed to sustain the current eight-year bull market.

BITCOIN PRICESWERE CUT IN HALF as regulatory rhetoric rose. The cryptocurrency lost as much as 52% as China and South Korea got behind efforts to clamp down on bitcoin trading. China wants to ban trading digital currencies altogether, while South Korea explored more regulatory control. The U.S. also said it was considering stricter regulatory measures. In developed markets, the S&P 500 Index was up 1.1% in December, capping a year in which it returned 21.8%. The Dow, Nasdaq, and Russell 2000 also made all-time highs during the month. Bonds also posted gains for the month of December. The yield curve continued to flatten and the 10-year yield decreased two basis points (bps) to 2.40%, even though the Federal Reserve raised the fed-funds target 25 bps to a range of 1.25-1.50%. The U.S. economy maintained its growth trajectory, and job gains continued to exceed the 200,000 level. The Institute of Supply Management and Purchasing Managers Index (PMI) stats were stellar, while the revised third- quarter GDP growth remained comfortably above 3%. The most significant development during the month was President Donald Trump signing into law the GOP’s tax cut and reform bill. This watershed event also helped investment

EDITORS

Scott Garliss

In summary...

John Gillin Greg Diamond

Global growth continued to rule the markets last month. China, Japan, the eurozone, and the U.S. all reported economic data confirming this trend. The tax-reform debate in the U.S. was again the biggest driver. As 2017 turned into 2018, there was talk that tax reform may have a larger economic benefit than originally thought. No statement was more poignant than that of Federal Reserve Bank of Cleveland President Loretta Mester who said that her estimate of 0.25 to 0.5 percentage points of growth over the next two years might be too low. Markets began the new year much as they finished the last – by setting new all-time highs. Currently, the biggest argument against owning the market is valuation. Pundits are worried that the market’s price to earnings (P/E) multiple is way ahead of itself. And who can blame them? According to LPL Financial, for the first time ever, the S&P 500’s total return was positive every month of the year. While it’s hard to argue against a near-term pullback, one must pay attention to the growth potential. Comments like the one made by Mester can’t be taken lightly. If the market is underestimating the growth benefit of the tax bill, that would imply the market’s P/E multiple is incorrect. Earnings estimates

psychology around future projects like infrastructure and regulatory reform.

12 January 2018

adamant about wanting to accomplish these two items. They are both part of their original growth agenda – the others being tax and health care reform. Both efforts are already underway and do not require congressional approval to accomplish. If the GOP can achieve these objectives, they will stimulate economic growth via increased jobs and cash flow. January 30 - February 4 China releases government and Caixin PMI data. January 31 The Federal Reserve announces its policy decision on interest rates. The markets will be looking for commentary on the path of rate hikes going forward, and also any changes to how the Fed plans to wind down the balance sheet. Expectations currently sit at three rate hikes this year. February 7 - 8 China releases export and import data. Exports are of interest China produces many of the goods the world consumes so its export data is a read on global economic health. February 15 U.S. Producer Price Index and industrial production data. Another key gauge on inflation and domestic demand.

would need to go higher, which would in turn drop the market’s P/E multiple. And as the P/E drops, the market suddenly becomes cheaper, leaving more room for a move higher. The next legs of the growth story remain an infrastructure bill and industry deregulation. TheWhite House and GOP have been January 23 The Bank of Japan announces its policy decision. Recent speculation in the yen has focused on members of the policymaking committee advocating a pullback on the amount of stimulus. Governor Haruhiko Kuroda has said they plan to maintain “powerful” stimulus for the foreseeable future. January 24 Markit releases preliminary manufacturing, services, and composite PMI data in the U.S. and the eurozone. This is a key gauge for judging the state of global growth. announcement. Watch commentary on stimulus withdrawal and the path of rate hikes. Recent speculation has centered on the central bank changing to a tightening path (raising rates) going forward. January 26 - 29 U.S. fourth-quarter GDP and Personal Consumption Expenditures. These are key measures for the Federal Reserve in terms of its policymaking decisions. They are indicators of economic health and inflation. January 25 European Central Bank policy

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American Consequences 13

WHAT COULD POSSIBLY GO WRONG?

Financial follies and disaster in the making

Nuclear ballistic missile scare in Hawaii...

Global conflict elsewhere intensifies...

In December, the president made the controversial decision to recognize Jerusalem as Israel’s capital. He also said that he plans to relocate the U.S. embassy there. The move angered much of the Muslim world – and several of our country’s allies. It’s a sensitive subject because in the decades- long Israeli-Palestinian conflict, both sides have claimed Jerusalem as their capital. For years, U.S. policy has been to encourage them to negotiate their own peace deal. Meanwhile, anti-government protests broke out in Iran... The demonstrations were the largest in the country in nearly a decade. Both the working and middle classes participated, along with student activists. The protests started on December 28 and ended about a week later

This week, a Hawaiian state worker clicked the wrong link on a painfully convoluted list of emergency alert options. It was a false alarm, but it triggered 38 minutes of panic that found many residents scrambling for bathtubs, closets, and even storm drains. Weeks prior, North Korean leader Kim Jong Un declared that his country had completed its nuclear-weapons program and had the technology to strike any point in the U.S. After Kim boasted about having a nuclear button on the desk in his office, President Donald Trump replied that he had a “much bigger” and “more powerful” button at his disposal. As the posturing on both sides continues, it’s becoming harder to see a peaceful outcome to this situation. What could possibly go wrong?

14 January 2018

with at least 450 arrests and 21 deaths. Iranians have become frustrated with the country’s lagging economy. The protestors are seeking an overhaul of the antiquated system of government. And despite an elected president and parliament, Iran’s Supreme Leader Ayatollah Ali Khamenei has the final say. We can’t know for sure how these situations will play out in the months and years ahead... But it’s more evidence that the smallest levels of tension could quickly erupt. Trump keeps his promise. Tax “reform” becomes law... In a rush to complete his campaign promise of tax reform before Christmas, President Trump hastily signed the GOP’s Tax Cuts and Jobs Act into law on December 22. As expected, the bill falls short of the dramatic improvements many had hoped for. Permanent cuts or not, the tax bill will add more than $1.4 trillion to the deficit.” It won’t simplify the tax code in any meaningful way. It won’t make it any less time-consuming or expensive for most folks to file their annual returns. And it won’t significantly ease the tax burden for most Americans over the long term. According to non-partisan think tank the Tax Policy Center (“TPC”), most Americans should expect to see a modest reduction in their tax bill next year. The TPC reports 143 million will pay lower federal income taxes in

2018, compared with just 8.5 million who will pay more. However, under the current bill, these individual tax cuts will expire in 2025. If no change is made before then, today’s tax cuts will become tomorrow’s tax hikes . And let’s not forget that permanent cuts or not, the bill will add more than $1.4 trillion to the deficit. As U.S. consumers ramped up spending over the holidays, many of them turned to credit cards. Consumer credit-card debt increased $11.2 billion in November, the largest monthly increase in a year, according to the latest Federal Reserve data. Consumers now own a mountain of credit-card debt in excess of $1 trillion – the highest level since before the 2008 financial crisis. Meanwhile, the savings rate for consumers dropped to just 2.9% as of November, versus nearly 6% just two years ago. The only time Americans have been saving less than today was 1929-1931 – during the peak of the Great Depression . In other words, Americans are borrowing more and saving less than virtually any time in history. How long can that last? In his new book, American Consequences contributor Porter Stansberry details how it’s all likely to play out... and explains exactly what concerned investors need to do to protect themselves and their savings. To learn more about his book, The American Jubilee , click here . Credit-card debt hits a new record...

American Consequences 15

FROM OUR INBOX

Re: Our Newest Readers Weigh In We’re a nation of angry, entitled, shallow, shiny object worshipers who’ve adopted a ‘me first’ outlook that does not include [caring] about our neighbor. Self-interest rules the day, idiots rule the news, newspapers and news gatherers are functioning with skeleton crews that leave no room for fact checking or investigation. As for those jobs? They aren’t coming back... By the year 2026, crime will be rampant and national morale at its lowest. The U.S. will be at war on at least three continents; most jobs previously held by the ‘unskilled’ and the former middle class will have been automated or eliminated; Social Security will be exhausted; foreclosures will be the norm; and the average citizen will (correctly) feel a sense of pointlessness, despair, and uselessness. – Al Muzer P.J. O’Rourke comment: Al, I hope you’re wrong. But I fear you’re right. I guess we all just have to try to do what we can to keep your – all-too-likely – vision of the future from coming true. Editing American Consequences is my small effort. Whether it makes a difference is not for me to judge. I’m betting there are also things you’re doing to keep your own predictions from happening. Our choices are to either weep in our beer or buy each other a round and hope for the best.

Re: The Death of Malls The loss of brick and mortar stores spells the end of an estimated 70% of all consumer packaged goods sales that are considered impulse buys versus shopping list must haves. Good luck with that. – Steve Throssel, former CEO Dodger Sportswear, former CEO Whink Products Co., now retired P.J. O’Rourke comment: Steve, that is an astute observation and one that is not often taken into account in discussions of the future of retailing. It’s also the reason I’m not allowed to do the grocery shopping. The last time I did, my “impulse buys” included five pounds of liverwurst, a large jar of pickled pig knuckles, and goat cheese that was so smelly that the dogs wouldn’t eat it and the trashman refused to cart it away. Perhaps these malls should look outside the box... I used to live in Duluth. Superior, Wisconsin was just over the bridge, and their mall was in dire straits. Most stores had closed and others soon were thinking about it too. Some horsey folks from the Twin Cities area who had a tack shop there decided to open one in the Superior mall. That store was extremely successful, and the next year opened into the empty store next door as their business expanded. There are a lot of horse people in the area and their customer

16 January 2018

Send us a message, question, or criticism at feedback@americanconsequences.com

called in economics an “agency problem.” The corporation has its own agenda. The union has its own agenda, too. What’s good for the agents of the corporation may not be good for the employees. But what’s good for the agents of the union may not be good for the employees either.

base was huge as there was not much for tack or western wear in the area. I do not knowwhat other kind of store would be successful to put in that mall to replace the closed ones, but perhaps there is a need if people look outside the box... Happy New Year to you. – Kay in Midland, TX P.J. O’Rourke comment: And Happy New Year to you, Kay. You make a very good point. My daughter is horsey herself and never buys her tack online. Riding boots and riding pants have to fit exactly right . Also, per Steve’s letter above, my daughter loves her “impulse buys.” Brick-and-mortar retailers need to focus on the things that people would rather not buy from strangers and things that people want to handle before they buy. For me, that would be shotguns! If I owned a mall, I’d be seeking an online goods provider to fill all or part of it as a distribution center. Then I’d hire lots old guys like me to deliver the boxes. UPS drivers screwed themselves into 200-package days by going Union. Union/ UPS business is like the government/ swamp fighting to maintain the status quo. – Rick Wendling P.J. O’Rourke comment: Rick, I’m no expert on the UPS labor situation, but I’m guessing that you’re right. Unions, like the corporations they sign contracts with, often have what’s

Re: Bitcoin and Cryptocurrencies

Enough about Bitcoin already. I thought your emails were going to be about sensible investment alternatives to Wall Street. Is Bitcoin your only suggestion? – Roy Axford P.J. O’Rourke comment: Not from me it isn’t! Bitcoin scares and mystifies me. How can I “invest” in a “business” that has no product and no tangible assets? It’s you and me against the world, Roy. I’ve been trying to open an account on Bitstamp, Polniex, Kraken and others for more than two weeks and have not been able to open a single one. They are all clogged, their verification of account systems are down or the spinning wheel of death comes on the screen and just spins endlessly. How the hell do you buy this stuff if the “big” exchanges don’t work? – Jody from Kona, Hawaii

American Consequences 17

FROM OUR INBOX

P.J. O’Rourke comment: Jody, see my reply to Roy above. Soon, you may be thanking your lucky stars that you weren’t able to buy Bitstamp, Polniex, and Kraken.

change to the serious was a real gut-punch. Our Christmases still have people coming in and out during the season, but the family Christmas around the tree is now down to three. I hadn’t realized how [many] people [who are] now gone, whether by distance or by death, were such a big part of my Christmas experience. The only solace is to think of how much I enjoyed having them in my life when they were around, rather than to dwell on how they’re missed, now that they’re not. – Otto Kunst Matt Labash comment: Otto, appreciate your letter. When it comes to getting older, I’ve always subscribed to Doris Day’s notion that “the really frightening thing about middle age is the knowledge that you’ll grow out of it.” I’ve not reached 71 yet, but with any luck, it’s coming. And the mounting losses of family and friends – those are coming, too. Our consolation prize, it seems, is that it’s better to harbor treasured memories of loved ones lost, than to have been afflicted by “loved” ones we’d rather forget. The void they leave serves as evidence of a life richly lived. As Thomas Lynch, a poet and working mortician, writes: “...mourning is a romance in reverse. And if you love, you grieve and there are no exceptions – only those who do it well, and those who don’t.”

Re: Taxes

Guess the corruption in the U.S. government and the insidious nature of the Fed pay raises means it is time to stop supporting Washington and concentrate on cleaning up our own state governments. We can keep track of them easier and save a lot of money to boot. With the citizens of the U.S. sending all their money to China on top of that, a boycott and a tax rebellion look to be in the offing. Happy New Year, keep up the good work. – David J Holmes, Sr. P.J. O’Rourke comment: David, you’re right about those state governments! The only problem we face (which Al notes in his rather gloomy letter above) is that state and local news coverage has gotten so thin on the ground that it’s very hard to keep track of what’s going on in statehouses around the country. And state and local government have often shown themselves to be more corrupt than the federal government. And that is a high bar!

Re: The War In Christmas

As a 71-year-old, after enjoying the humor of Matt Labash’s article, “The War in Christmas”, the last sentence’s immediate

18 January 2018

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American Consequences 19

THE MARKETS

COMPUTERS SCREW UP

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January 2018

CLICK HERE TO READ THEWEB VERSION

Information is the greatest commodity on Wall Street. It’s traded infinitely more than stocks and bonds. All investment decisions are made using it (I hope). Sure, there’s some gut instinct thrown in there for good measure. But overall, every buy and sell ticket has some information and analysis behind it. And the way in which information is being provided and consumed on Wall Street is ever-evolving.

By Turney Duff

Look no further than recent history to see how the use of technology has changed the flow of information in the financial industry. In the 1990s, the Internet was taking hold, and it brought with it both opportunity and fear. The world around Wall Street began to speed up. Trades that used to take five days were settled in three, and the ability to communicate and obtain information exploded. The advent of Internet technology and e-mail leveled the playing field for many investors. By 1999, AOL Instant Messenger (or “AIM”) was on almost every professional trader’s computer. It became the fastest way to pass information to a wide audience. And the technology was ahead of its time – texting, Facebook, and Twitter weren’t a thing yet. Its use was paramount if you wanted your finger on the market’s pulse. Trying to conduct business without AIM was like asking a surgeon to operate one-handed. If you

weren’t on AIM, you were two steps behind. Everyone was using it to collect and share information. For a brief period, Goldman Sachs forbade the use of AIM due to the impropriety risks. But that lasted for about a minute when the company saw how it was hurting commission totals. At first, the medium was an advantage for traders. But as AIM’s popularity increased, the playing field was leveled again. After almost a two-decade run, AIM was shut down for good on December 15, 2017. Over the last five to 10 years, we’ve seen a transition toward social media – Twitter in particular – and chat rooms as a major source of information for the financial markets.

American Consequences 21

THE MARKETS

COMPUTERS SCREW UP

Over the last five to 10 years, we’ve seen a transition toward social media – Twitter in particular – and chat rooms as a major source of information for the financial markets. Digital communities exist where like-minded traders and investors can interact with each other and share recommendations and ideas. Today, access to real-time updates and market news is an integral part of trading stocks. Social media has become a key element of the “mosaic theory” of investing, which involves collecting public and private data and information to determine the value of a security. I spoke with several investment professionals who told me they’d have a difficult time being as productive and effective without social media, but using it intelligently has become a necessary skill set.

But a trader’s use of social media doesn’t come without risk. The Internet is an open source, full of “experts” who tout their opinions and spread rumors. And very often the information is “managed” before it’s even delivered. The provider of information controls what – and how – content will be told. Depending on the size of the audience, misinformation can result in catastrophic losses. And when everyone is trading on the same information, there’s little money to be made. Some consider the role of social media in trading to still be in the early stages, but there’s no doubt that it’ll continue to be a primary source of information. It’s become widely accepted and considered a necessary part of the equation. Chat rooms have become a way for traders to find new information outside of the mainstream. They are often filled with market observations, rumors, and trading ideas... And an active chat room can sometimes have as many as 2,000 members. The information flows all day, every day. So whereas social media has played a major role in providing and spreading information, it also transcends it. Many hedge funds and savvy investment professionals mine the data on platforms like Twitter to forecast future stock prices. The collection of data is analyzed

Turney Duff is a former trader at one of the biggest hedge funds in the world, the Galleon Group, where its founder and several Galleon employees were found guilty of insider trading. Turney rose through the ranks and then fell prey to the trappings of Wall

Street: money, sex, drugs, alcohol, and power. Turney chronicles his spectacular rise and fall in his bestselling book, The Buy Side: AWall Street Trader’s Tale of Spectacular Excess .

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January 2018

and scrutinized to help predict market trends and movements. One of the major focuses of this type of analysis is to measure sentiment. The idea is to determine the market’s attitude on a particular product, stock, or asset. Additionally, it’s designed to alert market- moving events, such as breaking news, which could have an impact on a stock, sector, or the entire market. Alternative data research was once primarily associated with quantitative funds, but given the ultra-competitive nature of the industry, traditional hedge funds and investors have started paying attention. Some consider the role of social media in trading to still be in the early stages, but there’s no doubt that it’ll continue to be a primary source of information. It’s become widely accepted and considered a necessary part of the equation. And a new generation who has never lived without social media is entering the workforce. The way we trade securities and share information has changed dramatically over the years... And it will only continue. You can find a lot of good traders out there in any given market. In certain markets, technical analysis might work great. But for traders who were relying on it in 2008, it got ugly. Great traders can identify what kind of market they’re trading in and adapt. It’s a skill set not many have. It’s impossible to predict where the next wave of information flow will come from, but if you want a chance at succeeding, you better get up to speed – quick.

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2018: THE YEAR OF THE “ALT-COIN”

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American Consequences 23 American Consequences

OUR BRAINS

COMPUTERS SCREW UP

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January 2018

CLICK HERE TO READ THEWEB VERSION

By Christine Rosen

By now you’ve no doubt heard the warnings. The Internet is destroying our attention spans, making us lonely, spreading fake news, encouraging us to do stupid things, and otherwise destroying our minds.

Much of this is true. Loneliness and social isolation are on the rise. We’re more impatient. A survey conducted by Pew Research concluded that “the impact of networked living on today’s young will drive them to thirst for instant gratification, settle for quick choices, and lack patience.” And every day seems to bring a new story of an epic online fail by a business or an individual, usually a politician. And yet, until recently, the message from the creators of our digital nirvana has remained relentlessly positive. As smartphone use and social networking became ubiquitous during the past decade, so did the lofty promises of Silicon Valley’s technophiliacs. According to them, we would soon be riding around in self-driving cars, watching earnest documentaries on our virtual- reality goggles while a team of AI assistants efficiently answered our e-mails and texts. It was a networked future of crowd-sourced

intelligence and “frictionless sharing,” as Facebook founder Mark Zuckerberg described it. All was enthusiasm and possibility. Thoughtful skeptics of this utopian vision, such as Nicholas Carr, Sherry Turkle, Jaron Lanier, Evgeny Morozov, Matthew Crawford, and others, have warned us that our lemming-like enthusiasm for these Internet- enabled gadgets is turning us into a digital lumpenproletariat. Yet the tech elite dismiss them as cranky Luddites – people simply too unsophisticated to understand that the algorithms know best. Why rely on our puny individual brains when we had the vast resources of the collaborative hive mind to make us better, smarter, faster, and more meme-friendly?

American Consequences 25

OUR BRAINS

COMPUTERS SCREW UP

more addictive technologies were themselves practicing the age-old wisdom of the drug dealer: Never get high on your own supply. Then came a speech at Stanford University by one of Facebook’s first executives, Chamath Palihapitiya, a man who helped build the company into its current status as a global behemoth. Palihapitiya now says the social network “ literally is at a point now where I think we have created tools that are ripping apart the social fabric of how society works.” Facebook is “eroding the core foundations of how people behave by and between each other,” and he admitted he felt “tremendous guilt” for having helped create it. Another early investor in Facebook, Roger McNamee, was blunter, comparing the company’s techniques to those of infamous Nazi propagandist Joseph Goebbels. Some former Silicon Valley apostles even confessed that they no longer used their own creations. According to the Guardian, Justin Rosenstein, the guy who invented Gchat when he was employed by Google and helped develop Facebook’s Like button, “ tweaked his laptop’s operating system to block Reddit, banned himself from Snapchat, which he compares to heroin, and imposed limits on his use of Facebook.” Even the usually upbeat Mark Zuckerberg has reacted to these expressions of alarm. In a speech to Harvard’s graduating class of 2017, he noted, “But today, technology and automation are eliminating many jobs. Membership in communities is declining. Many people feel disconnected and depressed, and are trying to fill a void.” Zuckerberg’s solution was to embark on a much-publicized

After all, why rely on our puny individual brains when we had the vast resources of the collaborative hive mind to make us better, smarter, faster, and more meme-friendly? And yet, several years ago, when Eric Schmidt, then-chairman of Google, told the Financial Times , “Technology is now relevant to every single challenge in the world in some way, shape, or form,” we probably didn’t expect his wishful thinking to lead to a world where “digital assistants” like Amazon Echo and Alexa eagerly spy on us (as do our children’s Internet-connected toys and baby monitors). Or where our “smart” cars can easily be hacked, and where no one knows how to write in cursive or even memorize a phone number. We now spend more than 10 hours every day staring at screens (and have the obesity epidemic and sleep problems to prove it). Yes, the digital revolution has brought incredible breakthroughs – especially in consumer convenience – but it’s also given us a great many things we don’t need, such as YouTube celebrities and Soylent . Do the benefits of our online culture outweigh its drawbacks? And what is it doing to our ability to think critically about such questions? Recently, some of the digital revolution’s most successful revolutionaries have started to publicly question its impact, perhaps signaling a change in our culture’s enthusiasm for technological solutions to every problem. It started with a few stories about Silicon Valley executives enrolling their children in tech- free, neo-Luddite Waldorf Schools, which, as many news outlets noticed, suggests that the people getting rich off of selling us ever-

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January 2018

tour of every state in the U.S. to explore that void, popping into an African-American church in South Carolina to sing spirituals and awkwardly driving a tractor around a farm in Wisconsin. He clearly enjoyed seeing the faces of all those real people whose lives he farms for profit when they post about them on Facebook. And like all good Silicon Valley saviors, he still thinks he knows what’s best for them. “As I’ve traveled around, I’ve sat with children in juvenile detention and opioid addicts, who told me their lives could have turned out differently if they just had something to do, an after-school program or somewhere to go,” he said. “But it’s not enough to have purpose yourself. You have to create a sense of purpose for others.” The people getting rich off of selling us ever-more addictive technologies were themselves practicing the age-old wisdom of the drug dealer: Never get high off your own supply. But we are waking up to the fact that Silicon Valley’s purpose for our lives (profit-making) might not always square with our own hopes and dreams. Clearly the improvements our technologies have brought us in terms of speed and convenience haven’t coincided with improvements in our ability to make sound decisions like whether we should do some heart-healthy exercise or just binge-watch Stranger Things instead. Savvy users of social

media might acknowledge that they are the product, but they are still feeding the beast. Silicon Valley has attempted to address some of the public’s concerns about our collective digital overfeeding by creating new technologies to treat the addictions spawned by our use of old technologies. An array of self-control apps promise to deliver us from the evil of mindless digital consumption by asking us to consume even more digital content. There are now countless meditation and mindfulness apps available for download, as well as strict nanny-style programs that temporarily block access to the Internet when you’re trying to get real work done on the computer. There is even an app marketed as a mindfulness-facilitator, called WeCroak , that helpfully reminds you five times a day that you are going to die, along with a carefully curated quote such as “the grave has no sunny corners.” It’s supposed to encourage you to live life to the fullest but seems more likely to leave users reaching for a strong drink. And yet this is hardly enough to combat the powerful force these technologies have over our minds. Studies have found that even the presence of a smartphone can lead to reductions in cognitive ability – what researchers call “smartphone brain drain.” This is the challenge we’re less eager to face: the demand side, if you will, of the steady supply of digital heroin that Silicon Valley provides. The truth is, we love this stuff, regardless of what it does to our minds. That’s why we keep using it. Research shows that we touch our phones more than 2,000 times every day . The wealth of virtual temptations available taxes the self-control of even the most

American Consequences 27

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