The American Challenge: Thiel, Tabarrok, and Servan-Schreiber

Ever since 2008 I have been thinking about a question and set of assumptions offered by Peter Thiel on the state of the economy, the future of innovation, and science in general. For those who know Thiel only as that guy on the movie "The Social Network", he is a Stanford grad, uber-libertarian, foil to higher education, founder of PayPal, venture capitalist, and on and on. In November 2008 he was interviewed on Uncommon Knowledge, where he was very critical of the US economy's ability to innovate and create. According to Thiel, our economic growth, in the aggregate and on a per-capita basis, has spectacularly under-performed expectations.

That charge sounds ridiculous on its face considering that I am typing this on a personal computer, with a second monitor, and have an iPhone and iPad within reach. But consider Thiel's charge from a Nov 2011 New Yorker article "No Death, No Taxes":

"The information age has made Thiel rich, but it has also been a disappointment to him. It hasn’t created enough jobs, and it hasn’t produced revolutionary improvements in manufacturing and productivity. The creation of virtual worlds turns out to be no substitute for advances in the physical world. “The Internet—I think it’s a net plus, but not a big one,” he said. “Apple is an innovative company, but I think it’s mostly a design innovator.” Twitter has a lot of users, but it doesn’t employ that many Americans: “Five hundred people will have job security for the next decade, but how much value does it create for the entire economy? It may not be enough to dramatically improve living standards in the U.S. over the next decade or two decades.” Facebook was, he said, “on balance positive,” because of the social disruptions it had created—it was radical enough to have been “outlawed in China.” That’s the most he will say for the celebrated era of social media."

Paying for Your Kid's College:The Principal-Agent problem

The financing of my daughter (3) and her sister's (due April 2012) education, and in particular college education is never too far from my mind. What is the best way to save and pay for college? This is a tough question given that there exists a lot of uncertainty. For starters I do not know IF either of them will decide to attend college. It is entirely possible that they may not have the aptitude or desire to continue studies beyond secondary school. Maybe they will seek a liberal arts education in the Marine Corps instead of at St. John's College. Even knowing what their career decisions will be at age 18, the saving-financing strategy is not very clear at all. Sure we could save but every dollar that gets put away for college is one less dollar for consumption today or for retirement tomorrow.

For a quick refresher as to why financing college is a difficult strategic task aside from the simple fact of scraping together a lot of money see The Atlantic article on how savers are punished when it comes to financial aid and a Fidelity website to assess the huge differential in cost between public versus private education. Then consult a CPA, a CFA, and an MBA.....run from an economist.

Not to dismiss those questions and issues but I think the more important question is "Should I pay for my kid's college?" and if so how much and in what way. The answer to those questions are fundamental and are prerequisites to untangling the mess above. This is where economics comes in handy.

Veteran's Day Thoughts

I like discounts and free stuff like anyone else but I felt like things got out of hand when I noticed recently on some US flights that airlines were allowing military personnel to board the aircraft first. In some cases it was for military in uniform, in other cases it was a general boarding priority to all US military personnel regardless if they were on official travel. Just to make this clear, military people were being given priority over families, elderly, disabled, and first class ticket-holders. While this policy was obviously well-intentioned it struck me as wrong and antithetical to the relationship between the military and society.

The soldier in uniform has responsibilities and duties in relation to the civilian-citizen and vice versa. Each has their role in defending the country and its interests. The civilian should pay his taxes, stay informed and vote for representatives who will act prudently with regards to resourcing and employing our military. The soldier, airmen, sailor and marine should be excellent stewards of the money and personnel of which they find themselves in charge and should execute to the best of their ability the directed war tasking. Our authorities are our politicians and ultimately our citizens. To place servants ahead of the master is to put the cart before the horse.