Back to the Future, Again (I’ve read this chapter before)

It is amazing how folks of any generation or era believe they can get everything right because they are the smartest guys in the room and their predecessors didn’t have the depth of understanding that they do.   That attitude is manifesting itself now with the new administration in Washington with regard to their ability to deal with the economy.  They are like a bunch of teens yapping and bouncing all around saying
“let me have the keys to the car”; they are so confident they can drive it better than anyone else before them.   How many times in the last couple of months have you heard about how smart they all are.  They are intellectuals by their own account and plan to take a very data driven approach using empirical methods to determine the correct course of action for the future.   Do they really believe they are smarter than Alexander Hamilton or J. P. Morgan?   Their arrogance boggles the mind and is also frightening.  With their Blackberries or whatever and computer models they will divine the right steps to take if only we let them have those keys and run the economy as they direct.   As written yesterday they don’t want to referee the game in the free market but rather dictate the outcome of the game as not only referee but a participant.

This is not the first time that a new group of activists have descended on the White House.   It happened with FDR.  His administration was filled with Harvard and Yale types who truly believed they were the intellectual superior of their political foes and also that they knew better than the Average Joe what he wanted and what was good for him.   They created a lot of motion but damn little progress toward fixing the Great Depression.   Too many new ideas thrown willy nilly out into the market place by Governement fiats that skewed the functioning of the market.   Government intervention always skews the market.  There will  be some winners in that intervention if they are the ones properly connected to those in power in Washington.   The most recent example of that is Barney Frank intervening on behalf of the bank in Boston to make sure it got some of the TARP money.  He only suggested it would be a tragedy if that bank didn’t get help.   Well, how to you think the bureaucrats responded to that suggestion.   That is only one small example of how Government programs control the market.  I use it because it is current and hopefully people can relate to it.   Multiply that example by the thousands and you see the impact of Government in the market.  I have no idea if that particular bank deserved the money or not but rest assured it was going to get the  money regardless of merit.   The market does a wonderful job of separating the meritworthy from the fluff and failures.   Government picks friends and constitutients who fund campaigns and get out the vote i.e., the Big Three.

When Kennedy first came to office the same attitude prevailed in Washington about how bright and smart these guys were who would be running the administration.  They had learned all the latest techniques for outcome analysis.  They were driven by data and projections.   Yes, they all had wonderful academic backgrounds except for the Attorney General who qualified for the job because he was the President’s brother.  Robert McNamara was the Sec. of Defense for Kennedy and he was retained by Johnson.  He was the leading proponent of this cost analysis approach to everything and running the numbers and data and using scientific models to build the armed forces and for the employment of them.   Kennedy started the real conflict in Viet Nam.  Yes, I know the first troops sent there were under Eisenhower.  But that was only a few hundred and they were truly advisors, not active participants in the struggle with the North.   Comparing what Ike did to Kennedy is like comparing a Wren’s egg to an Emu’s egg.  They are both eggs but one weighs less than an ounce and the other weighs pounds.   As we sent troops to Viet Nam under Johnson by the hundreds of thousands McNamara and his boys were completely confident that they could control the conflict and win based on pure analysis and science.  Emotional factors like courage, loyalty and bravery were irrelevant to the outcome in their opinion.   There was even a book written about these folks you may have heard about–The Best and the Brightest.    Read it.   I don’t like much  about that book but read it.   War is somewhat like a large economy because there are so many little decisions by the thousands constantly being made that don’t match the prediction.  People can’t be pidgeon-holed that easily in conflict or in an economy.  The market can embrace the unpredictiable, such as TV,  and make it useful.   The market has a way of smoothing out those decisions over time.   An unenforceable consensus is reached in the market place about the right direction to take, what works and what doesn’t.  McNamara and company ignored the realities on the ground because it didn’t match their predictions.   How well did letting these smart people run the war work out for us?   War–the mission is to win and let the best ideas and leaders carry out the mission.  Economy–the mission is to prosper and we should have the Government there to make sure everyone has an equal chance in the game to prosper, but never to give mandates about how the economic game is to be played.  Let the players pick and choose their own strategy.  Those that are best will prevail and that is good for all of us.   Henry Ford, Microsoft, IBM,  and Google all came to the fore because they were allowed to develop there own game plan and employed hundreds of thousands of our citizens in the process.  Let’s hope that somehow we can overcome the intrusion of Government now and defend our right to succeed or fail and make our future economy better than before.   The problem with Government mandates is that it doesn’t affect only one company, it affects everyone.  When a mistake is made it hurts us all.  When a company makes a bad decison only it suffers; or at least that used to be true before we became Bailout Nation.

So often people can’t seem to get priorities straight.  Knowing what is more important than something else is key to success in any endeavor.  Like my uncle used to say “don’t worry about the mules, load the wagon”.

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1 Comment

Filed under Economics, history

One response to “Back to the Future, Again (I’ve read this chapter before)

  1. adam

    The smartest guy in the room is usually the quietest. Don’t EVER forget that young business people, especially if you are in sales. The smart people listen, think and then respond based on all information. Talkers are usually the dumbest, greediest and over ambitious. The most important aspect of selling a good idea is always listening first.

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