A Late Epilogue to an Earlier Post on Greenbergs and Zuckerbergs

Last month, while reacting to a New York Times article, I wrote about the Greenbergs and Zuckerbers dropping out of college and following each other to entrepreneurship.

As I saw it, the story had two morals, not entirely unrelated. One was the corrput culture at Stanford – and, by extension, U.S. universities – which belittled education and encouraged students to drop out in pursuit of the money.

The other was the long-term effect of this phenomenon. I said imagine the kind of citizens the illiterate rich brats would make and the kind of society they would help build using their wealth.

Meanwhile, I had an exchange with a reader who questioned – or rather, wanted more elaboration on – my comments that finance capital shapes people’s conduct.

Here is the follow up to the story from this weekend’s Financial Times, under the heading Rising college drop-outs hope to learn a lesson from Zuckerberg and Gates:

Professors at MIT, Stanford and UC Berkeley, three universities with a strong tradition in as IT powerhouses, confirm an uptick in entrepreneurial dropouts as students seek to emulate the example of famously successful non-graduates such as Bill Gates at Microsoft, Steve Jobs at Apple and Mark Zuckerberg at Facebook.

About a dozen college dropouts interviewed by the Financial Times said that they knew others who had made a similar choice. All confirmed investor willingness to fund them. “They want to see you believe your story enough to risk everything for it,” said Julia Hu, who left MIT when she got funding to build her sleeping device company. “They don’t like to fund non-committed entrepreneurs.”

You want money? Then prove that you’re committed by dropping out of the school. That is the logical demand from an entity such as finance capital that at all times strives to protect itself. It even turns dropping out into a badge of honor, just like the way serving jail time is made into a badge of honor in the ghettos.

“The environment encourages students to leave,” said Andre Marquis, UC Berkeley’s director of the entrepreneurship center, who had three students drop out of his program last semester. “In Silicon Valley, it’s almost a badge of honour to have left school for your start-up,” Ms Hu said.

Then, in the the very same issue of the FT, on page 2, was this report:

Peter Thiel, a prominent Silicon Valley investor, said the emphasis in US society on having a college degree has created “a bubble in education,” in which the professional value doesn’t match the $200,000 price tag. He is countering that by giving $100,000 each to 24 people under 20, to pursue an entrepreneurial idea in Silicon Valley instead of going to college.”

“We need more innovation,” he said. “There’s a tremendous cost to have the most talented people in society take on enormous debt, then take well-paying but deal-end jobs to service those loans for the next 15 to 20 years of their lives.”

Look beyond Peter Thiel spreading $2,400,000 amongst 24 people in the expectation that one of them would strike gold; that is the standard venture capital model. Ignore his lie that he recruits “the most talented people in society” only to have them develop Facebook applications like Hug Me, Kiss Me and Pillow Fight.

The central point here is this: when a 4-year education costs $200,000, which you have to borrow and after which you’d have no guarantee or even a good prospect of landing a good job, then the appearance of Peter Thiels is natural, necessary and inevitable.

Martin Luther King often said that he knew people's [racist] behavior could not be legislated. But he pushed for anti-discriminatory laws because he wanted to control the conduct. Finance capital bridges that chasm. It shapes the law and the conduct in ways that those unaware of its dynamics could hardly notice or imagine.

Europeans Not Being Europeans: Now It Is Official

Last year, reading between the lines, I wrote that Europeans will be Europeans no more.

This past Tuesday, the European Commission agreed. Its “reform recommendations” for the 27-member union said pretty much the same thing. The Financial Times succintly capture the spirit of the report under the heading “EU sees vision of new Europe which is rather less European” :

The Europe recommended by the European Commission, the European Union’s executive branch … would look very different to the Europe of only a few years ago.

Pension system would see their retirement ages raised. Long-protected industries would be deregulated. Guaranteed wage increases negotiated long and hard by trade unions would be renegotiated.

In other words, the European economic model or models would look far less European.

I have said many times that just about any thing that is coming your way is reported in your local paper. All you need is to pay attention, which includes reading between the lines.

When a Nobel Prize Isn’t Enough

Last October I wrote about the three stooges who were given the Nobel Prize in economics for their “work” on labor and employment.

I did not mention it then, but one of those stooges was an MIT professor by the name of Peter Diamond. Before he became a Nobel laureate, President Obama had nominated him for a seat on the board of governors of the Federal Reserve. But his nomination got bogged down in the senate; for whatever reason, the Republicans, led by Shelby of Alabama, opposed him. This past Sunday, the professor wrote an Op-Ed piece in the New York Times to announce that he was withdrawing; he’d had it with Beltway politics. The title was When a Noble Prize Isn’t Enough. Take that, Southern hicks.

But I say we owe Shelby one. If nothing else, he provoked Diamond to write the Times piece. It is a document that can teach us a lot.

In Peter Diamond, you see, we have a man who has spent his entire adult life studying labor and employment; I traced one of his papers to 1966. He is a full time professor of economics at MIT, one of the premier institutions of higher learning in the West. And he received a Nobel Prize in recognition of his work and discoveries.

Wouldn’t you be curious to know what this man has learned/discovered in a half century of scholarly work? I would be, for sure. But there is more than one man’s knowledge involved here. According to the Financial Times which blasted Republications for torpedoing his nomination, “Mr Diamond is widely regarded as among the most brilliant economists of his time.”

And according to Paul Krugman, the New York Times columnist who called the Republicans stupid, Diamond “wrote the seminal paper on the whole subject” – the whole subject being the “hot topic” of “whether the apparent shift in the Beveridge curve signals a rise in structural unemployment.”

These are the Establishment voices. Their approval of, and admiration for, Peter Diamond is what got him nominated to the Federal Reserve Board in the first place. He is, in other words, “one of them”. So in learning about his ideas, we would learn about the mainstream views on joblessness in America – “mainstream” being precisely what is espoused by outlets such as the Financial Times and the New York Times which is now also the official view because they have a friend at the White House.

Let us go then, you and I, and see what this brilliant economist of our time has to offer by way of solution to the economic ills that have befallen his country:

“In reality, we need more spending on some programs and less spending on others, and we need more good regulations and fewer bad ones,” he wrote in the Times.

All articles in the opinion pages of the New York Times are edited by the professional editors, which is another way of saying that the thoughts in them are presented in the best possible light. So when you read drivel, it is not the writing but the thought.

Who would write “we need more good regulations and fewer bad regulations” or “we need more spending on some programs and less spending on others”?

Why, any 12-year old who had to meet the 500-word minimum requirement in his composition assignment knows the answer: someone who had nothing to say.

But how could a seventy-something Nobel laureate with a lifetime of research not have enough material of substance to fill a newspaper column?

The answer is that his lifelong research is junk, as exemplified by his “seminal paper on Beveridge curve”.

Formally, i.e., in terms of form (which is always mathematical), a Beveridge curve can sustain a university career. It lends itself to being studied in depth for its shape, equation, slope, upward and downward shift, rotation, tangents – you name it. Imagine the papers you could publish, seminars you could attend and prizes you could win.

But conceptually, there is nothing there; where the content ought to be, there is a vacuum. Look at what it is about the labor market that the man has been trying to understand:

“Understanding the labor market – and the process by which workers and jobs come together and separate – is critical to devising an effective monetary policy.”

The process by which workers and jobs come together. I mentioned in the Stooges post that these labor economists of our time think of employment as a dating game where jobs and workers “come together” and then this one – say, the worker – dumps the other for a better, higher paying relation. Or that one – the job – dumps the worker in favor of a cheaper worker in China. Just like couples do in real life.

How does one think such nonsense, you ask? How could a logical adult mind take the goings on in the dating scene and apply them to the labor market? Are these people fools?

Knaves?

While they might be either or both, the immediate cause of this nonsense is desperation rooted in the breakdown of one’s knowledge base; Greenspan called it the "the collapse of the whole intellectual edifice". When the theory you have spent your lifetime building and studying fails to explain the events taking place around you, you must either go back on what you have done and implicitly admit that you have wasted you life – or resort to drivel.

The latter is an easier option, especially if the people around you take the drivel as the sign of your brilliance and bestow prizes on you.

Observe:

“If much of the unemployment is related to business cycles – caused by a lack of adequate demand – the Fed can act to reduce it without touching off inflation. If instead the unemployment is primarily structural – caused by mismatch between the skills that companies need and the skills that workers have – aggressive Fed action to reduce it could be misguided”.

Our Nobel laureate thinks that there are two causes for unemployment. One is “business cycles”; the other, “structural”.

By business cycles, he means booms and busts; the fat years followed by the lean years. He thinks that they are caused by “inadequate demand”, which is correct in the same way that all the world’s problems could be said to be due to “human folly” and all plane crashes due to the gravity.

Why has housing collapsed in much of the West?

No adequate demand.

Why is the spread on the Greek sovereign debt rising?

No adequate demand.

Why are the sand dunes in the Sahara not expensive – in fact, worthless?

No adequate demand.

Why is the world annual passenger car production 60 million and not 60 billion?

Why, no adequate demand. If all the fishes drove cars, there would be no unemployed auto or steel workers. The tire companies around Akron would go on hiring binge.

This is the stuff Diamond teaches at MIT.

Why does demand drop – why does demand drop across all sectors at the same time, which is what recessions are all about and as a result of which the joblessness in the nation as a whole rises – does not interest him.

In the past several decades, though, something strange began to happen in the U.S. Corporations produced record profits. Demand across all the sectors seemed to be strong. Stock market boomed. And unemployment went up. A new expression entered the lexicon: jobless recovery. Commenting on it, I wrote here:

In the phrase “jobless recovery”, the news pertaining to the people is grim; there are no jobs to be had. Yet it contains “recovery”. So, what is it that is being recovered? The answer is: the agreeable rate of return of capital. The “data” measures the pulse and performance of capital, which the university professors study and comment about without ever understanding the larger issue surrounding it.

What was an unemployment expert to do? How could one explain that?

Enter the “structural” explanation, which Diamond defines as the “mismatch between the skills that companies need and the skills that workers have.” Any matchmaker would shake her head in agreement.

Where did the idea come from?

Here is the businessman of our time and a human lodestar to the American economists, opining in the Wall Street Journal last year:

If there is one great policy failure of this recession, it’s that we have not used the crisis to introduce structural reforms. For example, we have a gross mismatch of available skills and demonstrable needs. Businesses struggle to find the skills and talents that are needed to compete in this new world. Millions drawing the dole to sit around should be in training for the jobs of the future that require higher educational skills.

That is the foundation of Prof. Diamond’s “structuralism”.

He does not ask himself, Peter, you horse’s behind, how exactly does the word structural explain persistent joblessness? The word is an adjective. Its dictionary definition is “of, or relating to, structure”. What structure are you talking about when you say that the unemployment is structural? Are you talking about the structure of workers’ brain? The structure of the U.S. economy? If so, what does that mean?

A mind is a terrible thing to waste.

But no matter. Wasted minds have their uses. They make good stooges, a stooge being “a subordinate participant in a comic act”. They must only be presented as profound thinkers.

Peter Diamond would make a Fed governor.

High Frequency Trading and Flash Crash - Part 9: Concluding Remarks

Since this series began last October, we have established that:

• HFT is the latest mode, i.e., the form of movement, of speculative capital in markets. Like the previous forms such as derivatives and day trading, this form first appears in the most developed markets and then, having grazed the profit opportunities there, simultaneously creates, and migrates into, new, “emerging” markets. That is signature form of the expansion of speculative capital which I described in Vol. 1:

  After arbitrage opportunities in the home market have been grazed, speculative capital sets out to find virgin markets outside the original national boundaries. This excursion begins with more developed markets. That is partly because they can more easily accommodate the large size of speculative capital. Also, the primary tools of speculative capital–derivatives–are more likely to be found in these markets. Gradually, even in these markets, the profit opportunities are arbitraged away. So speculative capital sets out to seek even more virgin territories outside the developed markets and economies. When these markets are found, they become the “emerging markets.”

  From the Financial Times of April 13:

  Low market volumes and stiff competition have led to a sharp fall in “high frequency” trading as industry experts warn that the past two years of rapid growth may be coming to a halt. Instead, high-frequency traders are flocking to emerging markets such as Russia, Brazil and Mexico where exchanges are beginning to revamp their systems to attract such players.

• Because speculative capital dominates the markets in terms of tempo and trading volume, its modus operandi is the modus vivendi of markets. That means how markets functionally are, i.e., the way securities are traded in them. This state – how markets functionally are or the way securities are traded in them – is the result of a dialectical process and irreversible. There is no going back to the “quiet days” or “rational days” of yesteryears. The cogwheel that in practice prevents this process from going back is “efficiency”.
  

• HFT eliminates the specialist and market makers system from the U.S. equities market, as it must. Speculative capital is antithetical to regulation, having been born out of a legal/regulatory vacuum in the aftermath of the Bretton Woods regime. The result?:

  With the demise of old-fashioned floor broker and traditional market makers, new so-called high-frequency equity players, which include proprietary trading desks at investment banks, have become the main providers of liquidity for the overall US equity market.

Only that the “main providers of liquidity” have no obligation whatsoever to do so. There is, in other words, no one “in charge”.

• HFT mode of speculative capital is unstable. It constantly simulates the crash conditions and occasionally, as all simulations do, finds it. Hence, the progressively more frequent flash crashes, as the speed and the domain of the operation of speculative capital increase.

That is the situation we are currently in.

It is impossible to understand this situation without the Theory of Speculative Capital and the force that is speculative capital. In his doctrine of essence, Hegel reaches the concept of “force and manifestation of force”, as described by Stace in his Philosophy of Hegel:

Force not only does, but must, manifest itself. For it is nothing but its manifestation, and without its manifestation, it is nothing, merely non-existent. Force is not one thing and its manifestation another. They are the same thing. The force is unthinkable without its manifestation. And for this reason, too, it is absurd to say, as it is often said, that we can only know the manifestation of force but that what force is in itself must remain unknowable. It is only unknowable because there is nothing to know.

And naturally, see.

That is why various groups which investigated the flash crash of last May came out empty handed. The physicist who led the forensic study of the crash for the SEC told the New York Times that his report would “zero in on a specific sequence of events that preceded the crash and will tell a clear story about what happened in the markets on that stomach-churning day.” His report did all that but got no closer to understanding the cause of flash crash than the fellow investigation the hanging chad got to understanding Gore v. Bush presidential election controversy. “In the analysis of economic forms ... neither microscopes nor chemical reagents are of use. The force of abstraction must replace both.”

Naturally, then, in the same way that superstition grows out of ignorance of nature, Ms. O’Leary’s Cow’s school of explanation grows out of ignorance of finance: there was this broker somewhere in the Midwest and then it bought 71,000 E-Minis contracts and then kaboom – the market went bust. (To be fair, the official investigation exonerated Mrs. O’Learly’s cow in the Chicago Fire. The official flash crash investigation, by contrast, pointed the finger.)

The ignorance of theory also creates malaise. You “feel” or “sense” that there is something wrong but cannot put your finger on it, much less come up with a solution. “Theory delivers us from submissive acceptance of events just because they occur and allows us to interpret them within the body of a logically constructed system and, if need be, take action to influence them,” I wrote in Vol. 1

See this malaise in the writing of two influential U.S. senators in the New York Times of May 6, 2011:

America’s capital markets, once the envy of the world, have been transformed in the name of competition that was said to benefit investors. Instead, this has produced an almost lawless high-speed maze where prices can spiral out of control, spooking average investors and start-up entrepreneurs alike.

The flash crash should have sounded an alarm. Unfortunately, the regulators are still asleep.

Levin and Kaufman sense that something is wrong, as most people have. They refer to the “lawless high-speed maze where prices can spiral out of control”; we know exactly what they mean. They even take a potshot at the cherished American word, competition, which I said is one guise under which speculative capital self-destructs. But they do not know or understand what is happening. So they turn to regulators: regulators must have been asleep if all these terrible things happened.

But regulators are not asleep. They are in fact quite vigilant. That’s the good news. The bad news is that there is nothing they could do. They, too, must operate within the parameters set by speculative capital. All that the SEC chairwoman can do about last May’s flash crash is to express dismay:

Securities and Exchange Commission chairwoman Mary Schapiro has expressed dismay that active traders fled the stock market during the May 6 “flash crash.” … “The issue … is whether the firms that effectively act as market makers during normal times should have any obligation to support the market in reasonable ways in tough times,” Ms. Schapiro said in a speech earlier this month.

But there is no issue. It is rather the SEC chairwoman, missing the entire point of the specialist system being destroyed precisely in order for others to flee the market in tough times.

As for the destruction of “price discovery” or equities not being what they used to be?:

Mary Schaprio, SEC chairman, says: “This transformation of market structure has raised serious questions and concerns.”

She questions whether the quality of “price discovery” has deteriorated as a result of fragmentation and whether these changes to market structure could “undermine the fair and level playing field essential to investor protection, capital formation and vibrant capital markets generally”.

Well, yes, Ms. Schapiro, the quality of “price discovery” has deteriorated, and that undermines fair and level playing fields, etc., etc. What, exactly, are you going to do about it?

By way of answer, I know she does not have a word to throw at a dog.

That is where we stand now with high frequency trading and flash crash.

But where is it, this “where” we have arrived at, you might ask. Is there a way to grasp it or remember it without long concluding remarks?

I say there is. It is Kurosawa’s Ran. If you have not seen this masterpiece, I suggest you get it – buy it, rent it, download it, whatever – and watch it today. For the U.S. readers, it is a specially fitting movie in this patriotic weekend. Pay attention to the last few minutes. That is where “we” and the “markets” are in the age of HFT. The analogy is not exact – no analogy is – but I think the point will be made.

If you write back with comments, we will discuss them.

When Greenberg Does a Zuckerberg and Both Do (well in) America – or the Values That Stanford Business School Imbues

You must have heard of Charlie Wilson’s comment that what is good for GM is good for America. Wilson was the CEO of GM in the mid 1950s and there is some question as to what he actually said. But regardless, the statement caught on because it summed up a relation that defined a system. It was a goose-gander type relation with a bit of dark undertone. It implied that the U.S. government had to adopt policies favoring GM – which it did.

Dark undertone or not, the fact remained that you could go to work for GM after high school, like your father and uncle had done before you, and retire after 30 years with a decent pension and medical insurance. In the intervening years, you bought a house, several cars and supported your stay-at-home wife and three kids through high school and at times, college.

And it was not only the jobs. The modern American management system that conquered the world was a GM creation. MIT’s Sloan School of Management is named after Alfred Sloan, a long time GM chairman and CEO. The school was housed in a science and engineering university because GM thought of management as a scientific discipline; it could not be otherwise with an industrial conglomerate whose products manifested scientific and engineering principles.

That was then.

A couple of weeks ago, the New York Times ran an article on how the Stanford Business School became the hotbed of application development for Facebook. If you are a Times subscriber or have not yet exhausted your 20 articles per month ration, you can read the article here .

For the rest, I am quoting selective passages, starting with the “lesson” that students learned. I suppose you could call it the moral of the story:

By teaching students to build no-frills apps, distribute them quickly and worry about perfecting them later, the Facebook Class stumbled upon what has become standard operating procedure for a new generation of entrepreneurs and investors in Silicon Valley and beyond. For many, the long trek from idea to product to company has turned into a sprint.

So the message from the Stanford Business School which has now become the guideline in Silicon Valley and beyond is this: put together a crappy doodad – it doesn’t matter what, as long as you are first out of the gate. There is a lip service to “perfecting it later” but that merely shows what is really important. To wit:

“The students did an amazing job of getting stuff into the market very quickly,” says Michael Dearing, a consulting associate professor at the Institute of Design at Stanford, who now teaches a class based on similar, rapid prototyping ideas. “It was a huge success.”

Note the “stuff” – not software, not even app, but stuff. What the stuff is does not matter. And when the stuff itself does not matter, its quality cannot possibly be of any serious concern, as Johnny Hwin discovered for himself:

Johnny Hwin and his Stanford class team set out to build an app ... It never took off.

Seeing his classmates strike gold with simpler ideas proved to be a valuable lesson. In 2009, he began working on Damntheradio.com, a Facebook marketing tool that helped bands and musicians connect with fans online.

It opened last June and was acquired in January by FanBridge, where Mr. Hwin is now a vice president, for a few million dollars, he say ... “[Previously] we wanted to be perfect,” he says. With Damntheradio, he found his first clients by showing mockups of the product. “We were able to launch within weeks,” he says.

Seeing his classmates strike gold with simpler ideas, Johnny learned a valuable lesson at Stanford. “We wanted to be perfect,” says twenty-something Johnny with the air of a man recalling foolish youthful idealism. But Stanford made him grow up, wise up. He is now rich.

With America’s best and brightest simultaneously creating and being thrown into this entrepreneurial pressure-cooker, the school itself could not help but change:

“It really felt like an incubator,” says David Fetterman, a Facebook engineer who helped develop the applications platform.

“Incubator”, in case you are not in-the-know, is a facility that houses a group of start-up businesses which share the resources in order to minimize the expense. The incubator the Facebook engineer is talking about is the Stanford Business School.

Now, if your school is a business incubator and you felt you could survive on your own, you would have no reason to stay in it, would you now? For App-happy Danny and his daddy this was a no-brainer:

DAN GREENBERG was sitting at the kitchen table one night when he and another teaching assistant decided to get into the app game. Mr. Greenberg … hadn’t planned to get app-happy. But the students’ success whetted his appetite.

Four weeks into the quarter, he and his colleague, Rob Fan, set out to create an app that would let Facebook users send “hugs” to one another.

It took them all of five hours.

The app took off. So they moved on to apps for “kisses,” “pillow fights” and other digital interactions — 70 in all.

Their apps caught on with millions of people and were soon bringing in nearly $100,000 a month in ads. After the class ended, the two started a company, 750 Industries, named after the 750 Pub at Stanford where Mr. Greenberg and Mr. Fan where drinking when they decided to become business partners.

But juggling the business and schoolwork was too much for Mr. Greenberg, then 22. So he called his father.

“I said, ‘Dad, it is 10 p.m., and I’ve got so much stuff to do,’ ” Mr. Greenberg recalls. “ ‘We’re running this business, and I’ve got customers, and we are earning money, and we got financing and we have people to hire. But I have to write a paper tonight, and I just don’t have time for it.’”

His father advised him to pull a Mark Zuckerberg and drop out. The next day, Mr. Greenberg did just that.

Note the dialectical irony of an elite school teaching, fostering and imbuing values that negate school and education. In the age of speculative capital, speculative capital is not the only self-destructive entity around.

But, Nasser, aren’t you overreacting to the story? As long as there have been schools, there were students who dropped out. Bill Gates famously dropped out of Harvard more than 30 years go. Was that, too, a dialectical irony?! And isn’t the entire point of going to a business school making money? If so, what is wrong with a bit of early start? In fact, isn’t that what an elite business school supposed to do?

The answer is that Stanford’s “Facebook Class” is an institutionalized creation. It did not begin as an individual initiative. Nor did it spring in an ad hoc manner from the school’s Entrepreneurial Club. It was rather, funded, supported and nurtured as part of the formal curriculum of the Business School:

The Facebook Class was the brainchild of B. J. Fogg, who runs the Persuasive Technology Lab at Stanford. An energetic academic and an innovation guru, he focuses on how to harness technology and human psychology to influence people’s behavior.

Prof. Fogg no doubt thinks of himself as being on the cutting edge of “behavioral science”. But no matter how fancy his methods are, they are old hat; every Phoenician peddler of maritime goods would recognize his gig. Dale Carnegie would have smiled at his “harnessing technology and human psychology to influence people”. From the upcoming Vol. 4 of Speculative Capital:

[Selling] is the driver and creator of the culture, especially in the “Anglo-Saxon” U.S. and U.K., where the businessmen’s influence goes further than other nations. The culture in these countries is the salesmen’s culture, as it is shaped by the salesmen’s habits, sensibilities, tastes and priorities. The influence is in plain view in Dale Carnegie’s How to Win Friends and Influence People.

The book’s title is precise. Carnegie wants to win friends. Why? Because he wants to influence them. But he is not interested in showing people the righteous path and saving them. Carnegie is no religious zealot. He wants to influence people in order to sell to them. Friendship is a strategy, a means, towards that end. Note the word “win” – not finding friends or making friends but “winning” friends. The aim is to use them, after which “friends” become what they always were: people. It is a singularly cold-blooded and cynical title.

Dale Carnegie did not invent the ways of salesmanship. But he categorized them. His is the authentic voice of a salesman the way braying is the voice of a donkey.

What is being taught at Stanford is naked “pushing the product”, naked in the sense that intermediary steps of product development cycle, from the idea to production to marketing and sales, have been relegated to the back seat. The end result alone, conversion of product to money, has been made supreme, with the added benefit that there is not much of product to speak of; only junk Facebook apps. Give credit to Stanford B-School for truly cutting down to the chase in search of money, the way only speculative capital could.

But the intermediate steps, the means of getting money, are precisely the steps that require imagination and thinking. In doing away with them, the school has done away with teaching abstract thinking to its students. And that is precisely what sets apart a university from a vocational school. Abstract thinking is what “dissemination and assimilation of knowledge” is all about. Absent that, the destruction of the university that I spoke of.

The first victims of this academic retrogression are the students.

From the tone of the passages quoted here – and more clearly still if you read the entire article –you notice a remarkable absence of thinking on the part of the “Class”. The “attitudes” such as “curiosity, originality and integrity” that Webster defines as the essential in relation with the word “scholar” are just not there. Like rats looking for cheese in a maze, the students move and “stumble” – stumbling here, stumbling there – until they find money:

Three days before a presentation was due, Mr. De Lombaert accidentally deleted the computer code he was tinkering with. “We kind of freaked out,” he recalls.

Rebuilding the app would take too long. So, working around the clock over a weekend, they built another version, with a more rudimentary algorithm.

The stripped-down app took off. In five weeks, five million people signed up. When the team began placing ads on the app, the money poured in.

They had stumbled upon one of the themes of the class: make things simple, and perfect them later.

We kind of freaked out.

Here is a man in what is arguably one of the most competitive universities in the world. He no doubt had a perfect SAT score. He no doubt attended a good school and graduated with honors. He must be a reasonably intelligent fellow. Under the right circumstances and in a true institution of higher learning, he could have become a contender. He could have class. As is, he has become a moron, undisciplined, unorganized and with a thought process reflected in his speech that is indistinguishable from a Paris Hilton or Kim Kardashian. We kind of freaked out. He would not last a day in a GM assembly line.

They are all morons. Look at the name and function of their apps: hug me, kiss me, pillow fight. And you thought you could not get lower than Hollywood in producing “content” that could be fully telegraphed in a one or two-word name. They give the word low a bad name, these best and brightest of America. Maybe the love of money is the root of all evil.

My concern is with these morons’ value system. I know from Hegel that the thesis – their value system in question here – goes out of itself into its opposite and returns into itself in the synthesis. What is their value system and how does the dialectical process work in that regard?

Change the names in the article – Danny, Mark, Johnny – to Jamal, Lamont and Angel, change the location from Stanford Business School to any inner city ghetto of your choice, change the product from Facebook apps to drugs and change the role model and mentor from Prof. Fogg to neighborhood wholesale distributor and you will at once see the similarities of values in two camps.

The analogy is not exact.

Jamal, Lamont and Angel have no choice.

And “we” are “protected” from them by a flange of social and physical barriers. As I write in the upcoming Vol. 4:

The right-wing politicians blame “the rap singers” for the spread of profanities. But rap singers, mostly young black men in the ghettos, could have never had a cultural impact on suburban whites if the groundwork had not been prepared by the salesman – many of them suburban white men. The rappers simply followed a road that was paved for them by the real cultural trend setters.

Not so with the “Facebook millionaires”. By virtue of being rich, they become cultural trend setters and social movers and shakers. The media constantly promote them, reinforcing the message that wealth is wisdom. Think of Sage of Omaha; he is the man behind the Geico business model. Or the way a petulant fool like Mark Zuckerberg, a blind hen having stumbled on a kernel of corn if there ever was one, being constantly promoted as a visionary entrepreneur. (His business card read: “I am the CEO, bitch”.)

I returned to this two-week old article about Stanford app developers because in today's New York Times there was an article about how, through a maze of foundations, Bill Gates influences the education policy in the U.S. I have already written about the plans to privatize the public education in the U.S. It turns out that Bill Gates is one of main forces behind the initiative. A man who, at the tender age of 55, uses gee and gosh in his speech, sees himself fit to re-engineer the U.S. educational system. Here is a brief passage:

For years, Bill Gates focused his education philanthropy on overhauling large schools and opening small ones. His new strategy is more ambitious: overhauling the nation’s education policies. To that end, the foundation is financing educators to pose alternatives to union orthodoxies on issues like the seniority system and the use of student test scores to evaluate teachers.

Given the scale and scope of the largess, some worry that the foundation’s assertive philanthropy is squelching independent thought, while others express concerns about transparency. Few policy makers, reporters or members of the public who encounter advocates like Teach Plus or pundits like Frederick M. Hess of the American Enterprise Institute realize they are underwritten by the foundation.

“It’s Orwellian in the sense that through this vast funding they start to control even how we tacitly think about the problems facing public education,” said Bruce Fuller, an education professor at the University of California, Berkeley.

The Times also reported the happy news that in his endeavor, Bill Gates is receiving help from Eli Broad. Imagine: Bill Gate the engineer of the country's education system; Eli Broad, the arbiter of its culture.

That’s the good news.

The bad news is that Bill Gates is the grand daddy of successful college dropouts. Thanks to passage of time perhaps, he manages at times to be coherent.

Imagine now the near future with the Facebook millionaires. Imagine their view on social services, the country’s direction, value of education (they know from personal experience it is a bunk) and the lesson they have learned: that one has to aim low, not worry about perfection and money comes to people who get there first.

Imagine these people setting the country’s social agenda and having the means to push it through.

Imagine.

A Perfect World

In a perfect world, everyone produce something.

Farmers grow plants, feed chickens, fishermen catch fish, builder made homes etc. So we can sit together at night and enjoy a complete dinner in our nice homes. It was easy to know who is suppose to do what, who produces what.

When there are too many fish caught, it has to be sold out of town. The fisherman doesn't have time to travel that far. So a delivery boy is helping the fisherman. The fisherman save time, hence catch more fishes and therefore its worth him paying the delivery boy. It is a value added chain, so service has become a part of perfect world too where everyone produce something, everyone produce some values.

It gets a bit complicated cause service is not as easy to quantify as materials. But its still ok.

A $1 fish may cost $2 in out of town because there are delivery cost incurred.

Soon more delivery services are needed. It is not easy to decide which of the 100 delivery boys is most reliable. So a manager came and organize a delivery company. The fisherman no longer need to worry about delivery, the delivery company will handle and be 'responsible' for the delivery part. If any single delivery boy does not perform, the company will immediately replace with a better one. Fish still reach destination on time. The fisherman doesn't need to worry a thing. What the management provided is a service on a service, there is still value provided.

Now the fish is $3 in out of town. The manager needs to eat too.

The fisherman's business grow much larger thanks to the great leveraging techniques. One day, the fisherman's primary school friend drop by and have a nice chat with the fisherman, asking the fisherman to let him handle the delivery part. Because he is more trust worthy, that they have known each other for so long etc. The fisherman agreed, perhaps due to the drinks or due to the flowery talks.

The primary school friend simply take orders for the fisherman and pass to the delivery company. Jobs still get done as usual but while doing that, he has raised the fish price to $5 in out of town. He gets $1 just for the deal he made. The fisherman gets $1 extra simply by letting his primary school friend take over the delivery part. The delivery company has nothing to loose.

Now it gets really tricky.

What did the primary school friend produces ?

What value has he added ?

What service has he provided ?

You can't say he has done nothing. He is instead smart, creating something from nothing. Is creativity really worth nothing ? He capitalize his relationship into a real asset.

The fisherman gets more value ( money ), the primary school friend earn something, the delivery company didn't loose anything. So theoretically speaking, the primary school friend has added value to the fisherman and himself. So it doesn't really break the law of perfect world.

The smart you may have already spotted the difference.

But at whose price ? Out of town folks used to pay $3 for a fish. $1 for the fisherman, $1 for the manager to make sure fish reach them on time and $1 for the delivery boy. Now the fish is $5! What is the other $2 for ? Well, that has nothing to do with any value received by the people in out of town. That was just a deal made between a primary school friend and the fisherman. The fisherman and the friend gets the whole $2!

Smart yes, add value to one or two persons yes, nothing wrong was done yes .... but whatever the primary school friend did, should NOT be included in the formula of 'PERFECT WORLD'.

In a perfect world, everyone produce something

FOR EVERYBODY.

Sounds familiar yet ? If not, may be you haven't read about Malaysia's GST yet.

This article was suppose to be read in this sequence.

Malaysia's GST - a MAGIC !

Secrect of the MAGIC revealed !

a Perfect World !

What can we do ?

the Magic of GST - reveal !

The 2 sides of GST are shown earlier, one is generally the consumer side who say NO, the other is the government side who say it will be OK.

The "magic" highlighted is everyone pay less and yet the government can earn more, how is that possible ?

• Tax payers will pay less tax
• Industries will save money
• Government can earn more money

First of all, the trick in that statement is 'tax payers'. Malaysia has about 27 millions people, only 1 million is paying taxes. So the rest of the 26 millions people who are NOT paying taxes now will be affected once GST is on. Even your underage kid buy a candy tomorrow, GST would have been included (depends on at which level of the distribution channel). So you "MAY BE" paying less tax, but everyone else in your family will be paying GST. Thats why you pay less tax and yet government can collect more, from people around you.

Secondly, not ALL industries will save money. This is a lengthy strategical discussion but in short; industries who optimize and/or shorten their distribution channels will survive, while others who don't will be dead. ( assuming everyone play fair and nice ). So small boys will die off, big boys will take over their market. Who pay the government more money ? Yes, the big boys. So big boys grow bigger and government gets more $.

Lastly, government doesn't really earn more money, at least not now. You see, the biggest income of the country comes from petroleum and this natural resource is going to end soon ( in less than 10 years ? ) So where else can the government continue to get the money from ? Well, what is the biggest asset of a country ? Its people. So GST will diversify the country's income portfolio. In other words, a country that live on GST income is self sufficient ie. the people are keeping their own country alive. Sounds nice isn't it ? Again, assuming everyone play fair and nice ya.

The panic of general public is only valid if one day we lost the income from petroleum and the similar income is projected into GST directly. I haven't done any calculation yet but I wouldn't be surprise that will be equivalent to 80% GST. So what will happen in coming near future is the increase of GST almost exactly as how it has been done with our petrol prices. May be you will see a GST 95 and GST 97 story ?

Worry no more, the next article will share "what we could do" . . . but before that, we may have to talk about "a perfect world" in order to really understand "what we could do".



This article was suppose to be read in this sequence.

Malaysia's GST - a MAGIC !

Secrect of the MAGIC revealed !

a Perfect World !

What can we do ?