From the Notebook

            Although this post has some to do with the State of the Union Address of President Obama, it mostly is about the mental state of the nation.

            The public reaction regarding the fates of Jay Leno and Conan O’Brian had been surprising.  It seems that the public reaction is basically raised from the way that the public projected themselves into their shoes. 

            It seems what triggered their reactions is the feeling of vulnerabilities.  As the economy is still in bad shape, especially in employment prospects, many people will long for stability and certainly, so that many would either express their fears, or frustrations in their reaction and side with the person who people perceived as unfairly treated as something that seem to be certain was taking away from him. 

            From certain prospect, this reaction did reflect the feeling of vulnerability which could lead to destructive and irrational behaviors.  However, as they are so readily express their frustrations, this might be a good sign that they still care, and they still did not lose hope.  Psychologically, express of anger seems to be the early stage of the problem.  If they feel that they are heard, and to be things will get better, they might be able to put themselves together.   

            The relationships of the individuals with the leaders are similar to the relationships of individuals with the society.  As individual agree to obey to law with the implicit expectation for protection and support offered by the society, people choosing leaders are not only in expectation of him (or her) to lead us in the right direction, but also for understanding and emotional support.  That is why “I will your pain” is popular.

            But people can be too demanding or even unreasonable.  To begin with, people possibly do expect miracles which are not reasonable.  And the most interesting contradiction is while almost all people are complaining about government as the problem, people do expect the government will ultimately solve problems for them.  It is quite obvious that even the historical evaluations of the presidencies are mostly based on the state of the economy while they were in office. 

            This means that despite what they said, people still instinctively believe that the government could make a difference.  The problem is in the execution.  For example, not only I believe that the President’s executive decisions are mostly sound, he did seem to have the right ideas to deal with some issues that have not be addressed for some time.  But in term of how to get things done, there are troubles.

            These troubles actually reflected the problems in each party, and the problem of the political system.  Take for example the health care reform.  I believe it is the right things to do.  But as democrat has been putting this issue as their agenda for several decades, when the actual debate progresses in the national stage, the Democrat party and/or the President are not very well prepared. 

            So much money had been raised and spent for political campaign, but not that much money had been spent on actual policy making (that is for research, discovery, and evaluation on the pro and con of the policies, the effects of the policies, not for lobbying).  Maybe I am being unfair, but it seems that some of my thoughts about health care reform are pretty much just as good as others with certain authority, but the difference is that I did not spend much time thinking about it, and certainly did not do any actual research on it, while some others have been working for the issues for a while, or have they?

            I think the special interests and the Republic party probable did become obstacles in health care reform, but the fact Democrats are not well prepared might have effects on the outcome of the current state of the legislation.  People can be manipulated if the facts are not clear to them, but if somewhat clearer answers are given to questions raised, then the room for manipulation will be limited.

            There is a reality show on TV called “shark tank”.  From this show and my own experience in witnessing and participating on fund raise process for new venture, there are some lesson to be learned that can be helpful for the health care reform process. 

            Obviously you are likely to have success in raising fund if you can address all the concerns you received regarding your venture, because you reduce the level of anxiety about uncertainty in the mind of the investor.  But most entrepreneurs will tell you that in hindsight, there is no actual steps that can be taken that can reduce the risk with reasonable certainty.  It is not just because that the devil is in the detail, it is also because that there will always be unpredictable factors, the element of surprise is always part of the game.  It is the task of the executives to be able to deal with the problems as it appears.

            From these experiences, it appears that although it might lack of persuasive power in some degree, the health care bill should be passed, because changes could be made in the future.  If the bills were to undergo significant changes or the process is slowed down, there are a few things that I will suggest to address the opposition from the Republic party, and the public about uncertainty, and the danger of government take over.

            To address uncertainty, a mechanism can be established to undergo a due diligent process of the possible policy proposal and the likely results.  Basically, it is to reduce the level of uncertainty, and provide valuable information for how the legislations should be made.

            To address the danger of government take over, my proposal of polling insurance funds together and transform the role of insurance companies into mostly administrative role should be considered.  I think the reason this proposal was not surfaced anywhere else or was ignored is due to the misbelieve that the administrative cost of the Medicare is much less than the private insurance companies.  It is a misconception.  There is a report indicating that false claims can cost the Medicare as much as 200 billion dollars per year, which is a huge hidden cost on administrative side, as significant portion of private insurance companies’ administrative cost are used for this purposes.

            The general idea that the government can not be trusted does have some merit.  It is related to the issue of separation of power, and check and balance.  If too many functions are provided by government administrative entities, the lives of the citizens could be affected, that freedom could be restricted. 

            For example, at least theoretically if insurance claims are wrongfully denied, the individuals can sue for damages.  But often government entities are immune from this type of liability, so as a matter of reality, it could eliminate some rights of the individuals.  The problem is that government in administrative capacity will often combine the role of adversary and the judiciary together, there will likely to some conflict of interests issues, so individuals could be damaged without reliable way to recover the damages (most likely the government would not be liable for negligence of the government employees (or even with showing of malice), so in many cases the individuals would be unfairly prejudiced against, not to mention recover damages (because it often prevent the individuals bring suits on contingency bases). 

            Therefore, as a general rule, if government could be playing the role of adversary and judiciary at the same time, measures should carefully be in place so that the individuals would not be easily biased against..  And for the most part, the separation of power principle should be respected (so the mechanism I suggested in my early post or similar measure should be considered).

            In the end, it is not a judgment about whether the government is evil, or the big business is evil.  As I mentioned in my earlier posts, it is basically wrong to judgment something as good or evil without any reference of the context.  Government can be evil if it is out of control (if there is no mechanism to control or adjust the power of the government, then sooner or later it will behave in the way that is evil).  The same analogy is also true for the big businesses (it usually would not be the case with small businesses, not because they are not capable of doing bad things, it is that they often would not have substantial power to do so).  Based on this reason, what was observed by some commentators about President Obama’s some pro business and some pro government policies (and protecting small businesses) could be a very reasonable one.

            It is a different matter with regard to policy making.  In policy making, as the government is setting rules that should apply to everyone, theoretically government is in neutral position (except the process in setting the rules could be influenced by the lobbyists).  So, the goal of policy making should be that it will be beneficial for the society and relatively fair to all parties involved (reducing collateral damages).

            This leads me to the financial reform issue.  I believe the financial reform is not only necessary, it is also reasonable.  Many of the regulations on financial industries are not only morally reasonable, but they are also sound in business principle. 

            For example, I cannot seem a reasonable explanation for mortgage practice that allow balloon payments.  Only two types of people would need to use this service, either they cannot afford the house they want to buy, or they are making speculative investments that will create bubbles.

            The flaws on charging credit card high interest rate are even more obvious.  Most people that have credit card debts because they don’t have the money to pay them back.  If the interest rate is raised a lot higher, it will only bankrupt them so the bank will lose money instead of getting more money back.  For those that do have money, they will pay the money back quickly, and probably would not come back again, so the bank will lose good customers forever without making much money.. 

            From the experience of the economic state of the country, the disconnection between main street and wall street is quite real.  But wall street would not exist without main street.  The problem with big business and wall street is that they often treat financial number as the only consideration.  In chasing the number in abstract, many often could sacrifice the strength and growth of the business in focusing on the balance sheet alone.   Financial numbers do not exist in vacuum, but many people often forget about this simple fact.

            Most of the financial crisis is caused by speculative investment.  Yet many people often make the argument as if these types of behaviors are untouchable.  Yes, speculative activities are the fast way for some one to become rich without making real efforts, so this will explain why many people will be against any regulation.  But speculative investments have to serve a useful purpose, especially because they often create problems.  The benefit will have to be carefully weight so that to keep them in check.  Speculative investments can exist in certain degree in order to assure the volatility of the market.  But as we can see, without stability, what actually happened is that many bad businesses will end up wasting large amounts of investments in high tide, and many potentially good businesses will not have sufficient fund to develop. 

            It seems that the better business practice is not to create this hyper cycle.  In order to prevent devastating low, we have to prevent artificial high.  Chasing the super boom mentality is pretty much like wall street (and the nation) is addicted on drugs.  In order to clean things up, there have to be some moment of pain to remain sober, and the fact that some of the super boom would not come back have to be accepted.  For the most part, the mental state of the nation often is not ready to face this reality. 

            It is human weakness to often want something out of nothing.  It seems in democratic society, the crowd effects often amplify rather correct this weakness.  This is actually what Plato warned about the weakness of the democracy. 

            The mentality of wall street is also caused by the misunderstanding of the modern culture.  Many treat rules of the machine age as the general rules of the development.  But bigger is not always better.  Internet and information age has started a trend of decentralization.  I believe this will be and should the trend of the future.  This is not only reflected by the growth of small businesses, but internal culture and structure will also be changed in large companies, as we see in some new companies, no just technology companies.  As human involvement and creativities are the most valuable assets, business decisions will have impacts far beyond numbers. 

            President Obama has been trying to reduce partisanship. although it was an uphill battle.  But this might be a problem he might not be able to solve without a lot more ground work or even culture changes.  Polarized politics is the reflection of narrow minds, which I believe is the results of “professionism”.  As human knowledge system are divided into seemly separated boxes, and each person are approaching the problem within the box, many will fail to notice the problems in the fundamental level.  Many will the qualified truth within their boxes as the absolute truth, so agreement would seem to be impossible

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