Home

The West’s Killer Apps

September 19, 2011

This Niall Ferguson Ted Talk is worth watching. He contends that the West became the West because of:

(1) Competition,

(2) The Scientific Revolution,

(3) Property rights,

(4) Modern medicine,

(5) The consumer society and,

(6) The work ethic.

The US:China per capita income was about equal in the 1500s. The UK:India per capital income was about equal in 1500. In the 1970s UK:India ratio was about 10 and the US:China ratio about twenty.

His conclusion: the Great Divergence is over, but the West is not necessarily on an imminent path to becoming a has-been.

Buy things on sale

August 17, 2011

It seems that all the pundits have piled on the “bash the US” bus over the past two or three years.

Unquestionably America has, in the words of Warren Buffet, experienced the economic version of Pearl Harbor. It has been hit hard.

The profligate spending of consumers and government is going to take several years to unwind. While business indicators are generally trending positively, Jane and John Doe are feeling poorer. It’s no surprise given the erosion of paper wealth created when the housing bubble popped.

For those of you who know me you know me to be a resolute fan of the US. Yes, everyone is excited about China and its prospects. I am under no illusion about the positive impact China’s growth with have on the world’s prosperity. I am excited about the possibilities of more than a billion middle class consumers looking for things like toasters, DVD players and microwave ovens.

But I believe that the entrepreneurial spirit, free enterprise system, rule of law, stable democracy and the protection of intellectual and real property rights will always keep America on the leading edge.

Warren Buffet spends fifty minutes with Charlie Rose talking about business, the economy, the US, China, Berkshire Hathaway, succession and the role of government.

I highly recommend watching the interview. But in case you don’t have time then I’ve summarized his main points under the YouTube box below.

(1) People must have confidence that their government can work. This confidence comes from avoiding promises that cannot be kept and by making realistic and achievable plans.

(2) McGraw Hill owns S&P, it’s likely that McGraw has a lot of its money in US T-bills. The US can and will always pay its bills. The downgrade shouldn’t have happened.

(3) China’s criticism of the US is self interested. It owns more than $1 trillion in USD and gets worried about that investment being devalued (through printing more money).

(4) The economy is improving. Across Berkshire’s 70 businesses almost all of them have been growing. Only those related to the housing sector are struggling.

(5) The US has to work off the excess housing created during the binge last decade. It is happening. It will take time because growth in population is baked into the system (people have kids and people immigrate).

(6) In 1779 the population of China was 290 million, Europe 50 million and the US 4 million.  Americans weren’t smarter, they didn’t work harder and they didn’t have better natural resources. They had a system that worked. Chinese were smart back then too, but now they’re learning and employing the system that works.

(7) The world economy is not a zero sum game. It is good for everyone if countries like China and the US prosper. One does not necessarily do it at the expense of the other.

(8) Approximately 19% of revenue comes from taxes and the government can spend 21% if the economy and country continues to grow. What can’t happen is for that 2% deficit (of GDP) to grow as a percentage of income or growth.

(9) A bit tongue-in-cheek, but a good way to get the attention of legislators is to require that unless the deficit is reduced to 3% of GDP (now 10% of GDP) then they are not eligible for reelection.

(10) It’s nonsensical that 60 million people live in households that earn less than $21,000. But through entitlements people like Warren Buffet get a $32,000 per year social security benefit. Entitlements are a problem.

(11) The market system works. Incentives and equality of opportunity being key. The lucky ones prosper disproportionately. A rich society like the US should think about those 60 million people and how to help them.

(12) Two things are needed to keep the financial system from going crazy: (a) limits on leverage and (b) proper incentives for people at the top of important financial institutions.

(13) Buy things on sale. Berkshire spent more money buying stock this past Monday than any other day in 2011. Berkshire has spent $7 billion on capital investment almost all of which is in the US. This is $1 billion more than at any other time in its history.

(14) Seventeen countries joined the European economic union and in so doing gave up their right to print money. The US doesn’t have this problem.

HST

July 5, 2011

I have mailed in my ballot to vote against extinguishing the HST. There are myriad reasons why it’s a better path for British Columbians. But I can’t tell the story nearly as well as Chris Thompson does in this video. It’s worth the time.

Regardless of how you vote, just be sure to vote.

Day 155

June 4, 2010

It’s day 155 of 2010 and tomorrow is Tax Freedom Day.  This means that tomorrow is the first day that we in Canada start working for ourselves, and not our government.

This vignette, which appears to now be an annual production for the Fraser Institute (one of Canada’s most prominent think tanks), tells the story.  It’s a fun rap!

The European Crisis

June 3, 2010

This is a terrific vignette that simply sums up Europe’s challenges.

It’s worth spending a couple of minutes watching.  Enjoy!

Venture investors look for investment opportunities that show “hockey stick” patterns of growth.  In other words, a period of relatively flat growth succeeded by a very rapid and substantial growth in revenue/market share/profit etc.

According to this entertaining presentation of statistics on average incomes, population and life expectancies India and China are well along the path of their own socio-economic hockey stick.

If you have an interest in the economies of Asia and the western world then this Ted talk is worth fifteen minutes of your time.