Pedro de Verona Rodrigues Pires Wins Ibrahim Prize for Achievement in African Leadership


“Pedro de Verona Rodrigues Pires” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. A10) MONROVIA, Liberia — Pedro de Verona Rodrigues Pires, the former president of Cape Verde, the desertlike archipelago about 300 miles off the coast of West Africa, has won one of the world’s major prizes, the $5 million Ibrahim Prize for Achievement in African Leadership.

The record of governing in Africa has been poor enough lately that the Mo Ibrahim Foundation decided not to award the prize for the past two years. In many African countries, leaders have refused to leave office after losing elections, tried to alter constitutions to ensure their continued tenure or gone back on pledges not to run for re-election.
. . .
Mr. Pires served two terms — 10 years — as president until stepping down last month. During that period, the foundation noted, Cape Verde became only the second African nation to move up from the United Nations’ “least developed” category. The foundation says the prize is given only to a democratically elected president who has stayed “within the limits set by the country’s constitution, has left office in the last three years and has demonstrated excellence in office.”

For the full story, see:
ADAM NOSSITER. “Ex-President of Cape Verde Wins Good-Government Prize.” The New York Times (Tues., October 11, 2011): A10.
(Note: ellipsis added.)
(Note: the online version of the article is dated October 10, 2011.)

Mackay Warned about Delusions, then Was Deluded by Bubble

(p. B1) Can you spot a bubble?
Ever since 1841, when a Scottish journalist named Charles Mackay published the book known today as “Extraordinary Popular Delusions and the Madness of Crowds,” the answer has seemed clear. If you watch carefully for signs of euphoria, you can sidestep the damage when markets go mad.
But bubble spotting isn’t as simple as Mackay made it sound–even, it turns out, for Mackay himself. Investors should always guard against the glib assertions of pundits who claim they can detect bubbles before they burst.
. . .
But new research tells the untold tale of Mackay’s own behavior in the face of a bubble–and it is a shocker. A mathematician and former cryptographer at Bell Labs named Andrew Odlyzko has spent much of the past decade researching a forgotten stock mania. One of its biggest boosters was none other than Charles Mackay.
A bubble in British railroad stocks began in 1844, only three years after Mackay published his book, and it didn’t start to collapse until late 1845. Even with the history of market folly fresh in his mind, Mackay urged British investors to pile into railway stocks, whose extravagant prices were based on absurdly unrealistic projections of future growth.
The most famous critic of bubbles who ever lived fell like a chump for a craze that was unfolding before his very eyes. On Oct. 2, 1845, Mackay wrote that “those who sound the alarm of an approaching railway crisis have somewhat exaggerated the danger.”
He went on to ridicule anyone who argued that “the Railway mania of the present day” was similar to the devastating bubbles he had described in his own book. “There is no reason whatever to fear” a crash, he concluded.
He couldn’t have been more wrong. From 1845 to the bottom in 1850, railway stocks fell by two-thirds–the equivalent of roughly $1 trillion of losses in today’s money. Mackay never fessed up to his own extraordinary delusion.

For the full commentary, see:
JASON ZWEIG. “THE INTELLIGENT INVESTOR; The Extraordinary Popular Delusion of Bubble Spotting.” The Wall Street Journal (Sat., NOVEMBER 5, 2011): B1.
(Note: ellipsis added.)

Few Banks Give S.B.A. Loans, They Take Two Years, and Have “Absolutely No Flexibility”

BlumenthalNeilEntrepreneur2011-11-14.jpg“Neil Blumenthal, one of the founders of Warby Parker, an online eyewear company, was invited to Washington in an initiative to encourage companies owned by members of the millennial generation.” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. B7) Mr. Blumenthal, 31, one of the founders of Warby Parker, an online eyewear company that sells designer frames for less than $100, was among 150 young chief executives invited to Washington by Our Time, a youth advocacy group, . . .
. . .
The following is a condensed version of a recent conversation in which Mr. Blumenthal spoke, among other things, about what politicians don’t understand about business, . . .
. . .
Q. What was it like trying to get an S.B.A. loan?
A. Finding a bank that did S.B.A.-term loans was a challenge. We were surprised that they needed two years and that banks had absolutely no flexibility. Many of the loan officers said we had a reputable business that was cash-flow positive and we had the most sophisticated business plan they’d ever seen, but they can’t provide loans to people who don’t have two years of tax returns.
Q. Isn’t that a reasonable request when you’re talking about using taxpayer dollars to guarantee a loan to a private company?
A. I understand where the banks are coming from. It probably was necessary to implement hard and fast rules to stop the bleeding when the crisis hit, but they should be looking at the policies and thinking: Does this make sense now?
Q. Was the application process difficult?
A. We had to sign so many documents that my hand hurt after I was done. I had to pledge not to open a zoo, swimming pool or aquarium. It struck me as strange. Yes, it’s the bank’s duty to do due diligence, but this was just a silly restriction.
Q. But there was a happy ending, right?
A. Yes, after being turned down by 15 banks, it was a personal relationship that introduced us to a regional bank in New Jersey that gave us a $200,000 loan.
Q. What reasons did the 15 banks give for turning you down?
A. They didn’t have the authority to bypass the rule that you have to have two years of tax returns.
Q. Was your company profitable at the time?
A. Yes, we were profitable and we had a ton of traction. We had higher customer satisfaction scores than Zappos or Apple. A rational bank should have wanted to support us, even though we were a more risky bet than a company that had been around longer.
Q. What did the bank that lent you money do differently? Did it demand collateral?
A. We came through a personal relationship at a very high level at a regional bank in New Jersey that didn’t have the draconian guidelines because their management was empowered to make decisions. For the $200,000 S.B.A.-backed loan that we got, the bank wanted $100,000 in collateral in either cash or marketable products. The reason they wanted so much collateral was that if we default, the regional bank is not going to go through the process of getting the money from the S.B.A. because it’s so onerous.
. . .
Q. Are you involved in the political process?
A. We have never met with politicians. I don’t know the first thing about how to get heard. My suspicion is that it’s to donate a lot of money.
. . .
Q. What do you make of the economic turmoil we’ve been experiencing?
A. It highlights that it might be too much to ask Washington to help with entrepreneurship when they can’t even get the basics right, like maintaining a decent credit rating.

For more of the conversation, see:
HANNAH SELIGSON. “SMALL BUSINESS; Young Entrepreneur Sees Little Help In Washington.” The Wall Street Journal (Thurs., August 18, 2011): C12.
(Note: ellipses added.)
(Note: the online version of the article is dated August 17, 2011.)

In 1800 the Life of a Peasant Was Not Pleasant

(p. 12) There are people today who think life was better in the past. They argue that there was not only a simplicity, tranquility, sociability and spirituality about life in the distant past that has been lost, but a virtue too. This rose-tinted nostalgia, please note, is generally confined to the wealthy. It is easier to wax elegiac for the life of a peasant when you do not have to use a long-drop toilet. Imagine that it is 1800, somewhere in Western Europe or eastern North America. The family is gathering around the hearth in the (p. 13) simple timber-framed house. Father reads aloud from the Bible while mother prepares to dish out a stew of beef and onions. The baby boy is being comforted by one of his sisters and the eldest lad is pouring water from a pitcher into the earthenware mugs on the table. His elder sister is feeding the horse in the stable. Outside there is no noise of traffic, there are no drug dealers and neither dioxins nor radioactive fall-out have been found in the cow’s milk. All is tranquil; a bird sings outside the window.
Oh please! Though this is one of the better-off families in the village, father’s Scripture reading is interrupted by a bronchitic cough that presages the pneumonia that will kill him at 53 – not helped by the wood smoke of the fire. (He is lucky: life expectancy even in England was less than 40 in 1800.) The baby will die of the smallpox that is now causing him to cry; his sister will soon be the chattel of a drunken husband. The water the son is pouring tastes of the cows that drink from the brook. Toothache tortures the mother. The neighbour’s lodger is getting the other girl pregnant in the hayshed even now and her child will be sent to an orphanage. The stew is grey and gristly yet meat is a rare change from gruel; there is no fruit or salad at this season. It is eaten with a wooden spoon from a wooden bowl. Candles cost too much, so firelight is all there is to see by. Nobody in the family has ever seen a play, painted a picture or heard a piano. School is a few years of dull Latin taught by a bigoted martinet at the vicarage. Father visited the city once, but the travel cost him a week’s wages and the others have never travelled more than fifteen miles from home. Each daughter owns two wool dresses, two linen shirts and one pair of shoes. Father’s jacket cost him a month’s wages but is now infested with lice. The children sleep two to a bed on straw mattresses on the floor. As for the bird outside the window, tomorrow it will be trapped and eaten by the boy.

Ridley, Matt. The Rational Optimist: How Prosperity Evolves. New York: Harper, 2010.

Newly Found Fossils Indicate Life Evolved Soon After the Late Heavy Bombardment


“A collection of tubular microfossils found in 3.4-billion-year-old sandstone from Western Australia.” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. A1) A team of Australian and British geologists have discovered fossilized, single-cell organisms that are 3.4 billion years old and that the scientists say are the oldest known fossils on earth.

Their assertion, if sustained, confirms the view that life evolved on earth surprisingly soon after the Late Heavy Bombardment, a reign of destruction in which waves of asteroids slammed into the primitive planet, heating the surface to molten rock and boiling the oceans into an incandescent mist. The bombardment, which ended around 3.85 billion years ago, would have sterilized the earth’s surface of any incipient life.
The claim is also a new volley in a long-running conflict over who has found the oldest fossil.
The new microfossils are described in Sunday’s issue of Nature Geoscience by a team led by David Wacey of the University of Western Australia and Martin D. Brasier of the University of Oxford. The fossils were found in sandstone at the base of the Strelley Pool rock formation in Western Australia.
The sandstone, 3.4 billion years ago, was a beach on one of the few islands that had started to (p. A3) appear above the ocean’s surface. Conditions were very different from those of today. The moon orbited far closer to earth, raising huge tides. The atmosphere was full of methane, since plants had not yet evolved to provide oxygen, and greenhouse warming from the methane had heated the oceans to the temperature of a hot bath.
It was in these conditions, the geologists believe, that organisms resembling today’s bacteria lived in the crevices between the pebbles on the beach. Examining thin slices of rock under the microscope, they have found structures that look like living cells, some in clusters that seem to show cell division.
Cell-like structures in ancient rocks can be deceiving — many have turned out to be artifacts formed by nonbiological processes. In this case, the geologists have gathered considerable circumstantial evidence that the structures they see are biological. With an advanced new technique, they have analyzed the composition of very small spots within the cell-like structures. “We can see carbon, sulfur, nitrogen and phosphorus, all within the cell walls,” Dr. Brasier said.

For the full story, see:
NICHOLAS WADE. “Team Claims It Has Found Oldest Fossils.” The New York Times (Mon., August 22, 2011): A1 & A3.
(Note: the online version of the article has the date August 21, 2011.)

Colleges Not Good at Producing Innovative Start-Up Entrepreneurs

(p. 5) I typed these words on a computer designed by Apple, co-founded by the college dropout Steve Jobs. The program I used to write it was created by Microsoft, started by the college dropouts Bill Gates and Paul Allen.
And as soon as it is published, I will share it with my friends via Twitter, co-founded by the college dropouts Jack Dorsey and Evan Williams and Biz Stone, and Facebook — invented, among others, by the college dropouts Mark Zuckerberg and Dustin Moskovitz, and nurtured by the degreeless Sean Parker.
American academia is good at producing writers, literary critics and historians. It is also good at producing professionals with degrees. But we don’t have a shortage of lawyers and professors. America has a shortage of job creators. And the people who create jobs aren’t traditional professionals, but start-up entrepreneurs.
In a recent speech promoting a jobs bill, President Obama told Congress, “Everyone here knows that small businesses are where most new jobs begin.”
Close, but not quite. In a detailed analysis, the National Bureau of Economic Research found that nearly all net job creation in America comes from start-up businesses, not small businesses per se. (Since most start-ups start small, we tend to conflate two variables — the size of a business and its age — and incorrectly assume the former was the relevant one, when in fact the latter is.)
If start-up activity is the true engine of job creation in America, one thing is clear: our current educational system is acting as the brakes. Simply put, from kindergarten through undergraduate and grad school, you learn very few skills or attitudes that would ever help you start a business. Skills like sales, networking, creativity and comfort with failure.
. . .
If I were betting on the engines of future job creation, I wouldn’t put my money on college students cramming for tests and writing papers with properly formatted M.L.A.-style citations in order to bolster their résumés for careers in traditional professions and middle-management jobs in large corporate and government bureaucracies.
I’d put my money on the kids who are dropping out of college to start new businesses. If we want to get out of the jobs mess we’re in, we should hope that more will follow in their footsteps.

For the full commentary, see:
MICHAEL ELLSBERG. “Will Dropouts Save America?.” The New York Times, SundayReview Section (Sun., October 23, 2011): 5.
(Note: ellipsis added.)
(Note: the online version of the article has the date October 22, 2011.)

The commentary above is in a spirit similar to Ellsberg’s book:
Ellsberg, Michael. The Education of Millionaires: It’s Not What You Think and It’s Not Too Late. New York: Portfolio Hardcover, 2011.

In State of Nature 15% of People Died Violently

MurderDeclineGraph2011-11-11.jpgSource of graph: online version of the WSJ article quoted and cited below.

(p. C1) For centuries, social theorists like Hobbes and Rousseau speculated from their armchairs about what life was like in a “state of nature.” Nowadays we can do better. Forensic archeology–a kind of “CSI: Paleolithic”–can estimate rates of violence from the proportion of skeletons in ancient sites with bashed-in skulls, decapitations or arrowheads embedded in bones. And ethnographers can tally the causes of death in tribal peoples that have recently lived outside of state control.

These investigations show that, on average, about 15% of people in prestate eras died violently, compared to about 3% of the citizens of the earliest states. Tribal violence commonly subsides when a state or empire imposes control over a territory, leading to the various “paxes” (Romana, Islamica, Brittanica and so on) that are familiar to readers of history.
It’s not that the first kings had a benevolent interest in the welfare of their citizens. Just as a farmer tries to prevent his livestock from killing one another, so a ruler will try to keep his subjects from cycles of raiding and feuding. From his point of view, such squabbling is a dead loss–forgone opportunities to extract taxes, tributes, soldiers and slaves.
. . .
(p. C2) We see evidence of the pacifying effects of government in the way that rates of killing declined following the expansion and consolidation of states in tribal societies and in medieval Europe. And we can watch the movie in reverse when violence erupts in zones of anarchy, such as the Wild West, failed states and neighborhoods controlled by mafias and street gangs, who can’t call 911 or file a lawsuit to resolve their disputes but have to administer their own rough justice.
Another pacifying force has been commerce, a game in which everybody can win. As technological progress allows the exchange of goods and ideas over longer distances and among larger groups of trading partners, other people become more valuable alive than dead. They switch from being targets of demonization and dehumanization to potential partners in reciprocal altruism.
For example, though the relationship today between America and China is far from warm, we are unlikely to declare war on them or vice versa. Morality aside, they make too much of our stuff, and we owe them too much money.
A third peacemaker has been cosmopolitanism–the expansion of people’s parochial little worlds through literacy, mobility, education, science, history, journalism and mass media. These forms of virtual reality can prompt people to take the perspective of people unlike themselves and to expand their circle of sympathy to embrace them.

For the full essay, see:
STEVEN PINKER. “Violence Vanquished; We believe our world is riddled with terror and war, but we may be living in the most peaceable era in human existence. Why brutality is declining and empathy is on the rise.” The New York Times (Weds., SEPTEMBER 24, 2011): C1-C2.
(Note: ellipsis added.)

The article quoted was adapted by Pinker from his book:
Pinker, Steven. The Better Angels of Our Nature: Why Violence Has Declined. New York: Viking Press, 2011.

WaningWarGraph2011-11-11.jpgSource of graph: online version of the WSJ article quoted and cited above.

The Kauffman Foundation’s Startup Act Would Encourage Entrepreneurs

The WSJ tells us the credentials of the authors of the following advice: “Mr. Muller is CEO of GenOn Energy. Mr. Zimpleman is president and CEO of the Principal Financial Group.”

(p. A15) In our view, there is no hope of giving consumers renewed confidence in America unless governments at all levels mount a vigorous effort to get rid of rules that discourage entrepreneurs from launching and growing new businesses.

The Kauffman Foundation recently proposed a way to do that with a set of ideas aptly called the Startup Act. Those ideas, which would cost the government virtually nothing, include:
• Letting in immigrant entrepreneurs who hire American workers.
• Reducing the cost of capital through capital gains tax relief for early stage investments.
• Reducing barriers to IPOs by allowing shareholders to opt out of Sarbanes-Oxley.
• Charging higher fees for patent applicants who want quick decisions to remove the backlog of applications at the Patent Office.
• Giving licensing freedom to academic entrepreneurs at universities to accelerate the commercialization of their ideas.
• Having the government provide data to permit rankings of startup friendliness of states and localities.
• Regular sunsets for regulations and a consistent policy of putting new ones in place only if their benefits exceed their costs.

For the full commentary, see:
EDWARD R. MULLER and LARRY ZIMPLEMAN. “OPINION; An Entrepreneurial Fix for the U.S. Economy; Several reforms can make it faster and easier for new business startups..” The Wall Street Journal (Mon., AUGUST 29, 2011): A15.

Ridley Argues that Our Future Can Be Bright


Source of book image:

Ridley’s book is very well-written, well-argued and well-documented. He takes on all the main arguments against a happy future for humans. I agree with most of what he writes. (One exception is that I think he underestimates the importance of patents in enabling a broader group of inventors to continue inventing.)
In the coming weeks, I will be quoting some of the more memorable, thought-provoking, or useful passages.

Book discussed:
Ridley, Matt. The Rational Optimist: How Prosperity Evolves. New York: Harper, 2010.