Fear and uncertainty in the time of prosperity

By most measures these are the best of times. We live longer, healthier lives than ever before. Our average income, standards of living and quality of life have improved across the board. Unemployment is at a record low. Inflation is low. Times have clearly been good in the US.

Yet, somehow, Americans are feeling gloomy. Not only are we worried about the future, but don’t seem to value the amazing prosperity we have had in the recent past. To some extent things are not as bad as they seem: the majority of people are pessimistic about the US economic direction, yet optimistic about their own economic opportunities. Nonetheless something is affecting our mindset.

The early thinking on the topic was that the economic prosperity that has accompanied globalization was displacing more people than ever before. However, a recent study of the US labor market shows that the probability of an individual to suffer a 50% or more drop in income in any given year is not greater today than at any time in the past 50 years. As the two congressmen who commissioned the report expecting to show an increase in displacement said: “The US labor market has always been a force of creative destruction”.

John Hacker, Professor of Political Science at Yale and author of “The Great Risk Shift”, believes he has found the answer. While the probability of suffering a 50% drop in your income has not increased over the past few years, if it does happen, you are much worse off than you would have been before as more and more risk has been transferred from corporations and the government onto you. For instance, corporations have moved from defined benefit plans to defined contribution plans and are scaling back on health care benefits expecting us to bear more of the burden.

I had the pleasure to meet John Hacker last Wednesday at a New America Foundation luncheon. While he has been accused of giving personal responsibility a bad name, he did not make a moral judgment against the risk shift. He just said it happened, implied than in many cases it is actually a good thing, but that has people bear more risk, the consequences of losing their job or being sick can become devastating and this latent fear is affecting our national mood.

The idea has merit. The good news is that there are a number of relatively inexpensive ways to address those fears. As an upcoming series of posts on reforming our political economic system will argue, the time has come for a new paradigm where we ditch ideology in favor of focusing on the outcomes we seek and on delivering those outcomes. I will posit that we can all agree that we want to create an environment conducive to economic growth and innovation while helping those in need. I will then argue that we have the economic tools at our disposal to achieve those goals in every field including education, health care, immigration and taxation.

For instance, to address some of the fears mentioned by John Hacker, one could imagine that individuals could have to buy market provided mandatory health care insurance, focusing on preventive care and catastrophic care where the insurance costs are paid by the individual directly for those who can afford it with partial or full payments by the government for those who cannot afford it on a means tested level. Note that the government’s share of the payment would decrease slowly as income increased not to discourage people from making more money (in other words if you earn $1 extra, the government should decrease how much it covers by much less than $1).

True to form, I remain an optimist. While we personally bear more risk than we ever have before, we have the wherewithal to mitigate those risks while pursuing opportunities our forefathers could not even dream of.

Vaclav Havel’s To the Castle and Back is both absurdly funny and informative

Last Wednesday, I had the pleasure of attending the book launch party organized by the Czech Center. The party included a fascinating reading of the book, an extremely funny preview of an upcoming documentary on Havel’s life, and a question and answer session with Paul Wilson, who translated the book in English, and Martin Palous, Ambassador of the Czech Republic to the United Nations.

The book is extremely unusual. It is a non-chronological collage of three overlapping parts: extended answers to the Czech political journalist who questioned him for a book-length interview 20 years ago, extracts from office memos to his staff when he was president of Czechoslovakia (1989-92) and the Czech Republic after its separation from Slovakia (1993-2003) and entries to his diary written during his stay in DC in 2005.

As Havel said himself in a video interview on the book, he had no aspiration to write a ponderous book as Kissinger had. However, as an absurd playwright and political prisoner before becoming his country’s first Communist president, Havel is very aware of the irony and absurdity of the position he was put in. His book, while seemingly disorganized, clearly communicates that. It also highlights his strength of character and the effectiveness moral authority, pragmatism and candor can have in politics when the times are right.

Surprisingly given the importance of the events the book covers, it is sometimes incredibly funny. The book includes many seemingly random and trivial notes and comments by Havel on everything and anything: Americans, his search for salt in the US to accompany his meals, his introduction of smoking in the White House and the Kremlin and numerous funny memos to his staff covering trivialities from removing the bat in the closet to lengthening a garden hose. Those are only made funnier by their juxtaposition with serious musings and observations.

Read the book! It will entertain you, enlighten you on the dismantling of the Warsaw Pact (which was one of Havel’s key accomplishments), and actually show what it means to be a President on a daily basis.

You can buy the book at:

Top 10 ways to make better decisions

As much as we think of ourselves as extremely rational and intelligent beings, there is a growing body of evidence that suggests otherwise. We are easily primed by things we hear or read. The decisions we take can also easily be influenced by our emotional state, peer pressure or even simply the way the options are framed.

A recent issue of New Scientist went through the 10 things you can do to make better decisions. Like many of the tips on happiness, once read they appear self-evident, but they have empirically been proven to help:

  1. Don’t fear the consequences: if things go wrong it won’t be as bad as you think it will be and you will adapt accordingly
  2. Go with your gut instincts
  3. Consider your emotions
  4. Play the devil’s advocate
  5. Keep your eye on the ball: try not to succumb to the anchoring effect
  6. Don’t cry over spilt milk: focus on future costs and benefits, sunk costs are a think of the past
  7. Look at it another way: pose the question differently to avoid the framing effect
  8. Beware social pressure
  9. Limit your options
  10. Have someone else choose

I love New York!

To some extent most of the large cities around the world are the same: cosmopolitan, diverse, offering tons of potential activities and a rich art scene. However, there is something quite special about New York. There is magical energy in the air that pushes you to want to be and do more!

Last night, I had the privilege of being invited by my good friend Mark Gerson to attend the Alexander Hamilton Award dinner organized by the Manhattan Institute. The Alexander Hamilton Award was created to celebrate New York and honor those individuals helping to revitalize this great city. This year’s award went to Edward Koch, 105th Mayor of New York, and Rupert Murdoch, Chairman and CEO of News Corp.

Ed Koch, ever the brilliant orator, gave a fascinating and funny acceptance speech. The crowd cheered as he explained how a liberal politician like himself could accept an award from a conservative organization like the Manhattan Institute. As he put it: “I am a liberal, but I am a liberal with sanity”. He went on to explain how he became sane.

Rupert Murdoch drew laughs with a “fake joke” that started with “Two rich guys walked into the Wall Street Journal… I forget how the rest of the story goes, but it ends well!” He then gave a cautionary tale for New York not to rest on its laurels and especially not to overtax and overspend in light of global competition.
Just as importantly both speakers repeatedly emphasized that it was the people of New York who truly make this city a special place. They praised their fellow New Yorkers for their amazing courage, resilience and vision.

I was truly moved. Now as much as ever, I am proud to be a New Yorker!

New York: I love you!

Ship of Gold in the Deep Blue Sea is great: thrilling and informative at the same time

Ship of Gold in the Deep Blue Sea manages a rare feat – it’s a non-fiction story that reads like a thriller! It documents both the story of the SS Central America on its journey from Panama to New York with a shipment of gold and passengers coming back from the Gold Rush, the boat’s demise, and the amazing story of Tommy Thompson’s modern day recovery efforts.

Tommy contradicts any stereotype one might have about treasure hunters. He is a scientist and uses a highly analytical approach to finding where the boat might lie. He personally built or oversaw the development of most of the technology for the recovery – building deep see equipment that no one thought could be possible. He also did his outmost to preserve as much of the history of the SS Central America as he could.

Any entrepreneur will recognize himself in Tommy as you hear the skepticism he encounters from “experts”, his difficulties in raising money, the ongoing competitive threat and legal challenges.
Read this book, it’s not only fun and informative; you might actually learn a thing or two about perseverance, passion and how to manage a startup.

You can buy the book at:

Only in France!

I just came across a book written about a 45 year old Frenchman. He owns a large studio with a beautiful view on a garden. He owns an Alfa Romeo and leads a simple and pleasant life. His job: unemployed professional. He has been receiving unemployment benefits for 22 years. He’s happy. He loves France. The book includes hilarious letters he wrote to scare away any potential employers recommended to him by the unemployment agency.

Vive la France! 🙂

You can buy the book at:

Learning from Steve Case

I had the pleasure to listen to Steve Case speak at a General Catalyst event in Boston. It was interesting to hear about his early struggles and the importance of perseverance. The first startup he joined was selling modems and online downloads for the Atari game console in 1983. It sold so few pieces during the Christmas shopping season the Kleiner guy on the board reviewing the numbers in January said: “I expected that more than these would be shoplifted!” While that startup failed it allowed Steve to meet a lot of the people that would become instrumental in making AOL a huge success.

It’s also interesting to note that AOL took a long time to mature. At first modems were sold as peripherals to a very small subset of PC users. It was not until 1989 that IBM started shipping internal modems and 1992 before it became legal for AOL to interconnect to the Internet – which was previously reserved to academia and the government. In other words, it took a good 8-10 years for AOL to really hit its stride. As a result he suggested many entrepreneurs and VCs should try to stick it out instead of building companies for a quick flip because by exiting too early they are passing on the opportunity to build a $100 billion company. He suggested more of us should swing for the fences and have the tenacity, grit, courage and passion to see it through!

He also described what he’s doing with Revolution Health. As we all know and as Steve experienced with his brother’s Dan brain cancer and his various encounters with the health care system, health care is broken in this country. Consumers are not the decision makers, there is no consumer brand in health care and getting information and services is extremely inconvenient. He intends to change that.

His multi-prompt approach includes launching RevolutionHealth.com, a consumer facing health portal launched 12 days ago, and through an investment in health care facilities providing health care in Walmart, Walgreens and others 7 days a week for extended hours (10-11 pm at night at most places).

It’s a step in the right direction and I hope he will navigate the healthcare minefield that has had so many casualties (remember the hype around Healtheon?).

Fingers crossed!

Cognitive Behavioral Therapy (CBT): Positive Psychology in Action

The advent of positive psychology, as mentioned in my recent posts on happiness, is leading to a revolution in psychological counseling. As depression, anxiety and other ills seem to be largely caused by negative thoughts, psychologists have turned to cognitive behavioral therapy to teach patients how to focus on the positive and prevent negative thoughts from creeping into their minds.

Even better, patients rapidly show dramatic improvement and sessions typically end after 10 to 25 visits. CBT has been shown to work, often better than drugs, for depression, anxiety, insomnia and hypochondria. It seems to quell insomnia better than Ambien over the long term. It is as effective as Paxil for moderate to severe depression. Moreover, only 31% of CBT patients had a relapse versus 76% who stopped taking Paxil.