Saturday, August 28, 2010

The economic crisis reveals clues to pushing the secret peace forward

I just finished reading The Big Short, Michael Lewis's account of the subprime mortgage crisis from the perspective of the few rare people who saw it coming and bet on it, shorting the market and eventually making lots of money. It is brilliantly written and fun to read, highly recommended. Listen to this passage, in which he describes one group of those rare investors starting their investigation:

"Typically when they entered a new market - because they'd found some potential accident waiting to happen that seemed worth betting on - they found an expert to serve as a jungle guide. This market was so far removed from their experience that it took them longer than usual to find help. ... Eventually they figured out that language served a different purpose inside the bond market than it did in the outside world. Bond market terminology was designed less to convey meaning than to bewilder outsiders. Overpriced bonds were not "expensive"; overpriced bonds were "rich", which almost made them sound like something you should buy. The floors of subprime mortgage bonds were not called floors - or anything else than might lead the bond buyer to form any sort of concrete image in his mind - but tranches. The bottom tranche - the risky ground floor - was not called the ground floor but the mezzanine, or the mezz, which made it sound less like a dangerous investment and more like a highly prized seat in a domed stadium. A CDO composed of nothing but the riskiest, mezzanine layer of subprime mortgages was not called a subprime-backed CDO but a "structured finance CDO." "There was so much confusion about the different terms," said Charlie. "In the course of trying to figure it out, we realize that there's a reason why it doesn't quite make sense to us. It's because it doesn't quite make sense." ... The subprime market had a special talent for obscuring what needed to be clarified."

If the secret peace were half of a vast historical Manichean struggle, that paragraph would be a perfect description of its evil dark half. In the book, I claim that the main force pushing civilization closer to peace is the snowballing spread of information. If that's true, then theoretically anything that hinders the free flow of information is detrimental to the cause of peace. And here we see a perfect example. The obfuscation described above was a huge contributing factor to the entire economic crisis.

Other examples abound. My wife and I are constantly surprised at how difficult it is to navigate the health insurance system; that's a sign that it was intentionally created that way. For the same reason, some stores make it hard to find prices on products, and some web sites make it hard to unsubscribe from newsletters. These are, sadly, often not accidents or signs of bad design; they are signs of skillful design, at least from the point of view of evil.

But the whole theory of the secret peace is that the good news is outweighing the bad. And that means there are more instances now of people sharing information and being transparent than in the past. So I'll leave you with two quick examples from the NY Times:

Sharing of Data Leads to Progress on Alzheimer’s
By Gina Kolata

"In 2003, a group of scientists and executives from the National Institutes of Health, the Food and Drug Administration, the drug and medical-imaging industries, universities and nonprofit groups joined in a project that experts say had no precedent: a collaborative effort to find the biological markers that show the progression of Alzheimer’s disease in the human brain. Now, the effort is bearing fruit with a wealth of recent scientific papers on the early diagnosis of Alzheimer’s using methods like PET scans and tests of spinal fluid. More than 100 studies are under way to test drugs that might slow or stop the disease. And the collaboration is already serving as a model for similar efforts against Parkinson’s disease."

In a Twist, Nonprofits Review Technology Failures
By Stephanie Strom

"Technology’s potential to bring about social good is widely extolled, but its failures, until now, have rarely been discussed by nonprofits who deploy it. The experience in Guyana might never have come to light without FailFaire, a recurring party whose participants revel in revealing technology’s shortcomings. ... Behind the events is a Manhattan-based nonprofit group, MobileActive, a network of people and organizations trying to improve the lives of the poor through technology. Its members hope light-hearted examinations of failures will turn into learning experiences — and prevent others from making the same mistakes."

Wednesday, August 18, 2010

Crime STILL dropping, despite recession

USA Today: the FBI announced that "violent crime dropped 5.5% last year despite a deep recession that has made millions desperate. It was the third such drop in a row and a continuation of the downward trend going on for almost 20 years. News coverage of the event was perfunctory, the political posturing minimal."

Common sense says that crime would go up when the economy's bad, right? But, "As the Great Recession demonstrates, losing a job doesn't suddenly turn law-abiding people into criminals." Violent crime has dropped more than 40 percent from its peak in the early 1990s.

This raises two questions: Why is crime so low? And, why don't people know it?

As to why crime is so low, there are many theories. From what I've read, I tend to think the three largest contributing factors (there are probably many) are better policing methods, better anti-crime technology (more video cameras, for example, and easier ways to find stolen cars), and more people in prison. Incarcerating a record number of people causes other problems, though, which I get into more in the Secret Peace book.

And why don't people know about the low crime rate? Why do some of mine and my wife's relatives still fear that when we walk around New York City at night, we are really walking around New York City circa 1975? Probably for the same reason everyone doesn't know other Secret Peace trends, too - they're gradual and less easily conceived of as compelling news stories. Here's hoping that word spreads, since having low crime but still living in fear is no fun at all, and diminishes the hard work that the police and others put into getting us here over the last few decades.

Sunday, August 15, 2010

Forty billionaires donate to charity instead of buying panda chairs

This weekend, while furniture shopping in SoHo for my friend, we saw a chair made out of stuffed panda toys. The price tag? $75,000. The rich really are different - and by different, I mean crazy.

But maybe not all of them. Last week, Warren Buffet announced that 40 wealthy individuals and families have signed on to the Giving Pledge, a project he started with Bill and Melinda Gates. This means those rich folks will be giving away more than 50 percent of their wealth (in some cases, much more.)

As this Daily Finance article describes, "Each person who chooses to pledge the bulk of their wealth to charitable causes will make this statement publicly, along with a letter explaining their decision. The Giving Pledge is a moral commitment to give, not a legal contract. It does not involve pooling money or supporting a particular set of causes or organizations. At an annual event, those who take the pledge will come together to share ideas and learn from each other."

The list includes Mayor Bloomberg, Pierre Omidyar, Ted Turner, Paul Allen, and Barry Diller (who is of special interest to me since I just started working for his company, IAC.)

Of course, some pundits must look at everything, even these charitable acts, through a polarized political spectrum. Evan Newmark ( suspects that Buffet is providing cover for President Obama to raise taxes (aka let the Bush tax cuts expire) by reminding us how rich the rich still are. This seems like a stretch. Steven Perlstein points out in The Washington Post that theoretically, these donations actually reinforce "trickle down" theories and make the case that private donations can be more effective than government spending. He thinks that those people donating should focus instead on just paying their full taxes, since the mega-rich often have an easier time dodging their fair share, and the money spent is also then (ideally) accountable to citizens.

But I did a lot of research into Buffet's and the Gates' charitable histories and motivations for my book, and I'm choosing to look at this a lot less cynically. Nothing is forcing these uber-rich people to donate; they could be wasting money on panda chairs. These billionaires all have their own individual reasons and made this commitment as a personal choice. Good for them, and hopefully this continues to set a great example for others.