Capitalism – Page 19 – artdiamondblog.com

Charlie Munger: Capitalist Ventures Do Good, While Philanthropies Are a Source of “So Much Folly and Stupidity”

We’d all be better off if Warren Buffett listened a little more to his old friend Charlie Munger, and a little less to his new friend, Bill Gates.

(p. 6A) Charlie Munger, the business partner of billionaire philanthropist Warren Buffett, said private investment may advance society more than charity.

“I believe Costco does more for civilization than the Rockefeller Foundation,” Munger, 86, told students in a discussion at the University of Michigan on Tuesday, according to a video posted on the Internet. “I think it’s a better place. You get a bunch of very intelligent people sitting around trying to do good, I immediately get kind of suspicious and squirm in my seat.”
Munger is a director at Costco Wholesale Corp., the largest U.S. warehouse-club chain, and has served as vice chairman of Buffett’s Berkshire Hathaway Inc. for more than three decades. Munger’s stake in Omaha-based Berkshire’s Class A shares is valued at more than $1.6 billion.
. . .
“I’ve seen so much folly and stupidity on the part of our major philanthropic groups, including the World Bank,” Munger said. “I really have more confidence in building up the more capitalistic ventures like Costco.”

For the full story, see:
Bloomberg News. “Costco beats charity, Munger Says.” Omaha World-Herald (Sat., September 16, 2010): 6A-7A.
(Note: ellipsis added.)
(Note: the online version of the article has the title “Munger: Costco beats charity.”)

Munger’s comments can be viewed online at: http://rossmedia.bus.umich.edu/rossmedia/SilverlightPlayer/Default.aspx?peid=4d215177cbe44b1e8e94d0dd68f5058f

Air Conditioning as “the Antithesis of Passive Resignation”

In the passage quoted below, Severgnini captures something of the truth. Americans, at their best, have sought to control nature in order to make life longer and happier.
But Severgnini does not see that there is a difference between seeking to control nature and seeking to control other people. At its best, America excels at the former, and refrains from the latter.

(p. W9) A few years ago, Italian journalist Beppe Severgnini recounted his adventures in the U.S. in the book “Ciao, America!” in which he offered up humorous musings on many of the standard European complaints about the American way of living. Mr. Severgnini allows that he rather admires the Yankee “urge to control the outside world,” whether that means sending planes off an aircraft carrier or sending out technicians from Carrier.

He notes that the refusal to suffer the sweaty indignity of equatorial heat is “the antithesis of passive resignation,” and thus a perfect expression of the can-do American character. “In America, air-conditioning is not simply a way of cooling down a room,” Mr. Severgnini writes. “It is an affirmation of supremacy.”

For the full commentary, see:
ERIC FELTEN. “DE GUSTIBUS; The Big Chill: Giving AC the Cold Shoulder.” The Wall Street Journal (Fri., July 23, 2010): W9.

Lux et Veritas

Source of photo: http://earthobservatory.nasa.gov/Features/EarthPerspectives/

What is the extended island-country on the right side of the photo above?
OK, if you got that one, here’s a harder question: What is the smaller island-country to the left of the extended island-country?
Stumped? Well it’s a trick question. The island-country to the left is South Korea.
But, you say, South Korea is no island.
You are right. (But then ponder why it looks like an island.)

Credits:
I first saw a version of the above photo, and heard a version of the above interpretation, in a wonderful presentation by Tony Woodlief at the MBM University at Wichita in July 2010.
The photo is a satellite composite from NASA.
“Lux et Veritas” is the motto of Yale University and is Latin for “Light and Truth.” (Three years of high school Latin pay off again—thank you Miss Noble and Miss Rohrer!)

Capitalism is Not a Zero-Sum Game

The Wall Street Journal on 7/12/2010 ran the above photo on the top of its front page and referred to articles inside on the final game of the 2010 World Cup. Their caption was: “120 minutes, a record 13 yellow cards and a single goal: Andrés Iniesta, right, celebrates scoring to beat the Netherlands in the World Cup; Dutch player Gergory van der Wiel, left, buries his face.” Source of photo: http://www.zumapress.com/images/SIGMA/IMAGES312/20100711_zaf_d20_347.pre (sic)

What a beautiful picture for illustrating a zero-sum game. Football (or soccer) is a zero-sum game—Spain can only win, if the Netherlands lose.
Capitalism is sometimes compared to sports, because both involve competition. In the short-run competition of capitalism, sometimes one “team” wins and another “team” loses. But in the longer run, the essential fact about capitalism is not competition, but innovation. And in the longer run triumph of innovation, all can win.
When Ghiberti and Brunelleschi competed to build the Gates of Paradise, Ghiberti ended up building the doors. But it would be a mistake to see him as the winner and Brunelleschi as the loser. Brunelleschi moved on to build the Duomo, and everyone won.

Former French Student Protest Leader: “We’ve Decided that We Can’t Expect Everything from the State”

Source of graph: online version of the WSJ article quoted and cited below.

(p. A16) “The euro was supposed to achieve higher productivity and growth by bringing about a deeper integration between economies,” says Simon Tilford, chief economist at the Centre for European Reform, a London think tank. “Instead, integration is slowing. The lack of flexibility in labor and product markets raises serious questions about the likelihood of the euro delivering on its potential.”

Structural changes are the last great hope in part because euro zone members have few other levers for lifting their economies. Individual members can’t tweak interest rates to encourage lending, because those policies are set by the zone’s central bank. The shared euro means countries don’t have a sovereign currency to devalue, a move that would make exports cheaper and boost receipts abroad.
The remaining prescription, many economists say: chip away at the cherished “social model.” That means limiting pensions and benefits to those who really need them, ensuring the able-bodied are working rather than living off the state, and eliminating business and labor laws that deter entrepreneurship and job creation.
That path suits Carlos Bock. The business-studies graduate from Bavaria spent months navigating Germany’s dense bureaucracy in order to open a computer store and Internet café in 2004. Before he could offer a Web-surfing customer a mug of filter coffee, he said, he had to obtain a license to run a “gastronomic enterprise.” One of its 38 requirements compelled Mr. Bock to attend a course on the hygienic handling of mincemeat.
Mr. Bock closed his store in 2008. Germany’s strict regulations and social protections favor established businesses and workers over young ones, he said. He also struggled against German consumers’ reluctance to spend, a problem economists blame in part on steep payroll taxes that cut into workers’ takehome pay, and on high savings rates among Germans who are worried the country’s pension system is unsustainable.
“If markets were freer, there might be chaos to begin with,” Mr. Bock said. “But over time we’d reach a better economic level.”
Even in France, some erstwhile opponents of reforms are changing their tune. Julie Coudry became a French household name four years ago when she helped organize huge student protests against a law introducing short-term contracts for young workers, a move the government believed would put unemployed youths to work.
With her blonde locks and signature beret, Ms. Coudry gave fiery speeches on television, arguing that young people deserved the cradle-to-grave contracts that older employees enjoy at most French companies. Critics in France and abroad saw the protests as a shocking sign that twentysomethings were among the strongest opponents of efforts to modernize the European economy. The measure was eventually repealed.
Today, the now 31-year-old Ms. Coudry runs a nonprofit organization that encourages French corporations to hire more university graduates. Ms. Coudry, while not repudiating her activism, says she realizes that past job protections are untenable.
“The state has huge debt, 25% of young people are jobless, and so I am part of a new generation that has decided to take matters into our own hands,” she says. “We’ve decided that we can’t expect everything from the state.”

For the full story, see:
MARCUS WALKER And ALESSANDRA GALLONI. “Europe’s Choice: Growth or Safety Net.” The Wall Street Journal (Thurs., MARCH 25, 2010): A1 & A16.

Underwater Power Cables Maximize Profits and Improve Environment

“Laying line in San Francisco for the Trans Bay Cable project, which submerged 33 miles of cable.” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. B1) Generating 20 percent of America’s electricity with wind, as recent studies proposed, would require building up to 22,000 miles of new high-voltage transmission lines. But the huge towers and unsightly tree-cutting that these projects require have provoked intense public opposition.

Recently, though, some companies are finding a remarkably simple answer to that political problem. They are putting power lines under water, in a string of projects that has so far provoked only token opposition from environmentalists and virtually no reaction from the larger public.
. . .
(p. B7) . . . , the underwater approach solves some intractable problems. In San Francisco, for example, old power plants that burn natural gas are about to be retired because a new transmission company has succeeded in running a line 33 miles across the San Francisco Bay.
Mr. Stern said his company’s Neptune Cable, which runs from Sayreville, N.J., to Levittown, N.Y., on Long Island, now carries 22 percent of Long Island’s electricity. His company is trying to complete a deal for a cable that would run from Ridgefield, N.J., to a Consolidated Edison substation on West 49th Street in Manhattan.
Those two cables were not motivated primarily by environmental goals — they are meant to connect cheap generation to areas where power prices are high. Mr. Stern’s company, PowerBridge, is now considering two renewable energy projects, however. One cable would connect proposed wind farms on the Hawaiian islands of Molokai and Lanai to the urban center on Oahu, and another would bring wind power from Maine along the Atlantic coast to Boston.

For the full story, see:
MATTHEW L. WALD. “A Power Line Runs Through It; Underwater Cable an Alternative to Electrical Towers.” The New York Times (Weds., March 17, 2010): B1 & B7.
(Note: ellipses added.)
(Note: the online version is dated March 16, 2010 and has the shorter title “Underwater Cable an Alternative to Electrical Towers.”)

Entrepreneur Pleases Dwarfs; Critics Are Appalled

“Yang Jinlu, 18, left, and Zhang Yinghua, 37.” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. A10) KUNMING, China — Chen Mingjing’s entrepreneurial instincts vaulted him from a peasant upbringing to undreamed-of wealth, acquired in ventures ranging from making electric meters to investing in real estate. But when he was 44, the allure of making money for money’s sake began to wane. He wanted to run a business that accomplished some good.

And so last September, Mr. Chen did what any socially aware entrepreneur might do: He opened a theme park of dwarfs, charging tourists about $9 a head to watch dozens of dwarfs in pink tutus perform a slapstick version of “Swan Lake” along with other skits.
Mr. Chen has big plans for his Kingdom of the Little People. Imagine a $115 million universe in miniature, set amid 13,000 acres of rolling hills and peaceful lakes in southern China’s Yunnan Province, with tiny dogs, tiny fruit trees, a 230-foot-high performance hall that looks like the stump of a prehistoric tree and standard-size guest cabins.
Also, a black BMW modified to resemble a flying saucer, from which dwarfs will spill forth to begin their performances.
“It will be like a fairy tale,” Mr. Chen said. “Everything here I have designed myself.”
. . .
Critics say displaying dwarfs is at best misguided and at worst immoral, a throwback to times when freak shows pandered to people’s morbid curiosity.
“Are they just going there to look at curious objects?” asked Yu Haibo, who leads a volunteer organization for the disabled in Jilin Province in the northeast.
“I think it is horrible,” said Gary Arnold, the spokesman for Little People of America Inc., a dwarfism support group based in California. “What is the difference between it and a zoo?” Even the term “dwarf” is offensive to some; his organization prefers “person of short stature.”
. . .
But there is another view, and Mr. Chen and some of his short-statured workers present it forcefully. One hundred permanently employed dwarfs, they contend, is better than 100 dwarfs scrounging for odd jobs. They insist that the audiences who see the dwarfs sing, dance and perform comic routines leave impressed by their skills and courage.
Many performers said they enjoyed being part of a community where everyone shares the same challenges, like the height of a sink. “Before, when we were at home, we didn’t know anyone our size. When we hang out together with normal-size people, we can not really do the same things,” said Wu Zhihong, 20. “So I really felt lonely sometimes.”
. . .
Supporters and critics agree on one point: the fact that the park is awash in job applications shows the disturbing dearth of opportunities for the disabled in China. Cao Yu, Mr. Chen’s assistant, says she receives three or four job inquiries a week.
“Under the current social situation in China, they really will not be able to find a better employment situation,” she said.
. . .
Mr. Chen said his employees had gained self-respect and self-sufficiency. “It doesn’t really matter to me what other people say,” he said. “The question is whether meeting me has changed their lives.”

For the full story, see:

SHARON LaFRANIERE. “Kunming Journal; A Miniature World Magnifies Dwarf Life.” The New York Times (Thurs., March 4, 2010): A10.
(Note: ellipses added.)
(Note: the online version of the article is dated March 3, 2010.)

“Workers relaxed in the dormitories.” Source of caption and photo: online version of the NYT article quoted and cited above.

Chamber’s Donohue Promotes Free Enterprise

Chamber of Commerce President Tom Donohoe. Source of caricature: online version of the WSJ article quoted and cited below.

(p. A13) The White House’s war on the Chamber has come just as the group is launching a new $100 million campaign promoting free enterprise.

“We want to encourage and promote and educate and get a bunch of enthusiasm behind . . . the free enterprise system with free capital markets and free trade and the ability to fail and fall right on your ass and get up and do it again!” he says.
The belief in that system, Mr. Donohue says, has been eroded by the recession and subsequent criticism of the free market. “The purpose of this is to get out of the doldrums! Quit sulking and worrying.” He hopes the campaign will remind Americans that “We created 20 million jobs in the ’90s, we can do it again. We don’t have to do it exactly like that–Adam Smith didn’t have a BlackBerry–but we ought to pay attention to what made it work.”

For the full interview, see:
KIMBERLEY A. STRASSEL. “OPINION: THE WEEKEND INTERVIEW with Tom Donohue; Business Fights Back; His organization under attack by the White House, the president of the Chamber of Commerce stands by his defense of free enterprise.” The Wall Street Journal (Sat., October 24, 2009): A13.
(Note: the online version of the article has the date October 23, 2009.)
(Note: ellipsis in original.)

The Decline of Motive Power in Socialist Venezuela

“In Venezuela, which faces power shortages, blackouts have spurred protests like this demonstration in Caracas.” Source of caption and photo: online version of the WSJ article quoted and cited below.

(p. A11) CARACAS — Venezuela, a country with vast reserves of oil and natural gas, as well as massive rushing waterways that cut through its immense rain forests, strangely finds itself teetering on the verge of an energy crisis.
. . .
The government has forced draconian electricity rationing on certain sectors, which could make matters worse for an economy already racked by recession. Critics say the socialist government is trying to snuff out capitalist-driven sectors with the rationing, while allowing government-favored industries in good standing to continue with business as usual.
Shopping malls, which analysts say use less than 1% of the power consumed in Venezuela, have nonetheless been a main focus for the government.
Malls have been told most stores can only be open between 11 a.m. and 9 p.m.
“In a certain way, Chávez is attacking capitalism with the orders on shopping malls,” said Emilio Grateron, mayor of Caracas’s Chacao municipality, a bastion of those opposed to Mr. Chávez. “By limiting the hours we can go to malls, he is trying to slowly take away liberties, to create absolute control over things such as shopping.”
In Venezuela, whose capital Caracas is consistently ranked among the world’s most dangerous cities, residents see shopping malls as one of few havens in the country.
The government’s rationing efforts are also hitting metal producers. Their production has already been cut as much as 40%. Mr. Rodriguez, the electricity minister, said they may have to be completely closed to save more electricity.

For the full story, see:
DAN MOLINSKI. “Energy-Rich Venezuela Faces Power Crisis.” The Wall Street Journal (Fri., JANUARY 8, 2009): A11.
(Note: ellipsis added.)

Entrepreneurial Innovation Comes from Diverse Outsiders Rather than Establishments

(p. 113) Firms that win by the curve of mind often abandon it when they establish themselves in the world of matter. They fight to preserve the value of their material investments in plant and equipment that embody the ideas and experience of their early years of success. They begin to exalt expertise and old knowledge, rights and reputation, over the constant learning and experience of innovative capitalism. They get fat.

A fat cat drifting off the curve, however, is a sitting duck for new nations and companies getting on it. The curve of mind thus tends to favor outsiders over establishments of all kinds. At the capitalist ball, the blood is seldom blue or the money rarely seasoned. Microcosmic technologies are no exception. Capitalism’s most lavish display, the microcosm, is no respecter of persons.
The United States did not enter the microcosm through the portals of the Ivy League, with Brooks Brothers suits, gentleman Cs, and warbling society wives. Few people who think they are in already can summon the energies to break in. From immigrants and outcasts, street toughs and science wonks, nerds and boffins, the bearded and the beer-bellied, the tacky and uptight, and sometimes weird, the born again and born yesterday, with Adam’s apples bobbing, psyches (p. 114) throbbing, and acne galore, the fraternity of the pizza breakfast, the Ferrari dream, the silicon truth, the midnight modem, and the seventy-hour week, from dirt farms and redneck shanties, trailer parks and Levittowns, in a rainbow parade of all colors and wavelengths, of the hyperneat and the sty high, the crewcut and khaki, the pony-tailed and punk, accented from Britain and Madras, from Israel and Malaya, from Paris and Parris Island, from Iowa and Havana, from Brooklyn and Boise and Belgrade and Vienna and Vietnam, from the coarse fanaticism and desperation, ambition and hunger, genius and sweat of the outsider, the downtrodden, the banished, and the bullied come most of the progress in the world and in Silicon Valley.

Source:

Gilder, George. Microcosm: The Quantum Revolution in Economics and Technology. Paperback ed. New York: Touchstone, 1990.

“When the Sons of the Communists Themselves Wanted to Become Capitalists and Entrepreneurs”

“Josef Janicek, 61, was on the keyboard for a concert in Prague last week by the band Plastic People of the Universe.” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. A10) PRAGUE — It has been called the Velvet Revolution, a revolution so velvety that not a single bullet was fired.

But the largely peaceful overthrow of four decades of Communism in Czechoslovakia that kicked off on Nov. 17, 1989, can also be linked decades earlier to a Velvet Underground-inspired rock band called the Plastic People of the Universe. Band members donned satin togas, painted their faces with lurid colors and wrote wild, sometimes angry, incendiary songs.
It was their refusal to cut their long, dank hair; their willingness to brave prison cells rather than alter their darkly subversive lyrics (“peace, peace, peace, just like toilet paper!”); and their talent for tapping into a generation’s collective despair that helped change the future direction of a nation.
“We were unwilling heroes who just wanted to play rock ‘n’ roll,” said Josef Janicek, 61, the band’s doughy-faced keyboard player, who bears a striking resemblance to John Lennon and still sports the grungy look that once helped get him arrested. “The Bolsheviks understood that culture and music has a strong influence on people, and our refusal to compromise drove them insane.”
. . .
In 1970, the Communist government revoked the license for the Plastics to perform in public, forcing the band to go underground. In February 1976, the Plastic People organized a music festival in the small town of Bojanovice — dubbed “Magor’s Wedding” — featuring 13 other bands. One month later, the police set out to silence the musical rebels, arresting dozens. Mr. Janicek was jailed for six months; Mr. Jirous and other band members got longer sentences.
Mr. Havel, already a leading dissident, was irate. The trial of the Plastic People that soon followed became a cause célèbre.
Looking back on the Velvet Revolution they helped inspire, however indirectly, Mr. Janicek recalled that on Nov. 17, 1989, the day of mass demonstrations, he was in a pub nursing a beer. He argued that the revolution had been an evolution, fomented by the loosening of Communism’s grip under Mikhail Gorbachev and the overwhelming frustration of ordinary people with their grim, everyday lives. “The Bolsheviks knew the game was up,” he said, “when the sons of the Communists themselves wanted to become capitalists and entrepreneurs.”

For the full story, see:
DAN BILEFSKY. “Czechs’ Velvet Revolution Paved by Plastic People.” The New York Times (Mon., November 16, 2009): A10.
(Note: the online version of the article is dated November 15, 2009.)
(Note: ellipsis added.)