There was a town, of no small size, that was located by the sea. There were merchants, craftsmen, tradesmen, and, as you can imagine, a number of townsfolk who made their living by fishing, as had their ancestors.
Recently the economy underwent a change and many traditional jobs disappeared. Many of the people affected then decided to take up fishing as there always seemed to be plenty of ocean and plenty of fish.
They bought boats and equipment and usually sailed together as a fleet, not only for fellowship and presumed safety, but because they could always follow the boats of the gnarly older captains. This became their routine, and they watched quietly and followed what they saw.
Common sayings among them were, “If we keep doing what we’ve always done, we’ll keep getting what we’ve always gotten,” and “A rising tide lifts all boats.” They became confident. Very confidant.
One particular day, the tide ebbed stronger and faster than usual. This caught the newer fishermen by surprise. Most of their boats were left high and dry where they had been anchored, while the boats of the veteran captains managed to chart a rather meandering course through the channels revealed by the rapidly ebbing tide. These managed to reach open water, while those stranded high and dry were left to await the returning tide.
When the boats returned with the tide they were ladened with fish, but only enough for their obligations and the open market.
The new fishermen mumbled among themselves, “This isn’t fair. They must know something that we don’t know, and took advantage of us.” A few said, “What if it was something we should have known, or been prepared for?” but that drew a loud and sharp response from others, “If we say we might have played a part in this, then they’ll foist most of the blame on us!”
They approached some of the veteran captains and asked how they managed to navigate the morning’s ebb tide. One of the captains said, “You men know well that a rising tide lifts all boats, but you didn’t recognize the other half. You didn’t realize that an ebbing tide leaves high and dry the boats of fishermen who don’t know the channels. You anchored in very poor places.”
“What? That anchorage always worked for us before!”
“Yes, but this was a peculiarly strong tide. You couldn’t sail straight out to sea as you normally did.”
“What do you mean?”
“You were only paying attention to what you could see above the water, and missed what was below.”
The newer fishermen mumbled and quickly reached agreement that the successful captains were intentionally taking an unfair advantage of everyone else and ending up with many more fish.
They went to the town council and pressed for new ordinances: the veteran captains, they argued, should not be permitted to sail until all of the other boats had made it to open sea. In addition, they should be taxed more heavily on their catches, as well as a portion of their catches should be redistributed to the fishermen who weren’t successful.
Since there were many more voting families than successful captains, the council passed the ordinances.
The tide ebbed and flowed. The newer fishermen sailed as they always had, and caught what they always caught. And often enough strong tides left most of their boats high and dry.
But the veteran captains left for other ports. And as a result the fishing industry decayed just as the other industries had. And with it, so did the town.
If all of the obvious culprits and forces are eliminated, what remains? (The unseen, or the ignored);
If all of the obvious culprits and forces are just inanimate things, then what remains? (People);
We’ve just passed a significant revision of the Tax Code that will have a great impact. When I stop and consider this (and the discussions leading up to it), I am struck by observations and information that no one seems to have connected together and which subsequently lead to paradoxes. It seemed appropriate to consider these seemingly unconnected facts and draw some logical (I hope logical) conclusions pertaining to them:
- There is strong evidence that 80% of English speaking peoples cannot do ‘Math,’ especially finance. Either they scrupulously avoid it or just choose not to think about it. No doubt this results from education’s overemphasis on the word ‘Math’ to describe anything to do with numbers. This word should be relegated only to those times when the simple digits from 0 to 9 are replaced by dreaded symbols, (for instance, x, y, z, or a, b, c, and especially ax!) These are enough to scare anyone away. What people really need is comfort with simple arithmetic: plain old addition, subtraction, and occasionally multiplication and division. And a $ sign.
- It is also documented that ~67% of English speaking peoples cannot explain the compounded growth of money over time, that is, earning interest on interest in a saving account, CD, or other investment (no doubt due to fear of that ‘ax’ thingy).
- The impact of the above also means, and what is rarely recognized, that these same people also do not understand the possibility of the negative growth of their money, that is,
Debt will also increase exponentially over time because of interest on interest!
In essence, this is the silent, continuous creation of the deadweight of negative wealth. (This lack of understanding of this growth is also the basic driving force behind the proliferation of credit card offers, a force that rarely occurs to anyone except those in the industry. Since dollars cannot be in two places at once, one institution’s gain must be someone else’s (eventual) loss).
- Since all financial transactions (paychecks, taxes, purchases, bills) involve numbers (and a “$”), it follows that the 80% conclude there must be some ‘Math’ associated with these transactions and therefore they don’t pay enough attention to them.
- For a very long time, longer than I can remember, the political response to economic tough times is to pass a tax cut. Generally speaking, it is unclear whether these have ever provided any documentable impact on turning an economy around, i.e., they didn’t create a rising tide. In many cases it is unclear what identifiable factors did contribute to turning the economic tide, even years later after much academic study (here is Gap Theory in action again).
- Why politicians pursue a tax cut has one obvious reason: to act decisively in the short term in a way that will justify their jobs and get them reelected by a grateful, newly flush electorate. However, consider now the following two perspectives:
- Remember the old adage (yes, conveniently fluffed up by me here) –
Those who can, do;
Those who can’t, teach;
Those who can’t teach, administer;
Those who can’t administer, become politicians.
What this implies is that, if 80% of those who can “do” think they cannot do financial arithmetic or scrupulously avoid it, then three steps further down the incompetence adage you can be certain that ~100% of politicians can’t do financial arithmetic either! (This is borne out by politicians ignoring both the deficit and the financial impact calculations of think tanks, the GAO, and reactions from corporate CEOs: This Tax Bill Is A Trillion-Dollar Blunder, and America’s Inequality Machine).
- Which leads us to the puzzling paradox that any tax cut probably will be too small to overcome the financial difficulties of the majority of people who need help. It will be like telling them “We’ll pay 25% of your outstanding debt” and ignoring the fact that the remaining 75% debt will continue to grow exponentially! Or telling them, “We’re going to raise the tide! (But don’t worry about what comes afterwards.)” This is giving money to people who do not handle it well in hopes they will spend it, which just results in maintaining their situation. Treating the symptoms does not deal with the systematic issue underneath.
- Remember the old adage (yes, conveniently fluffed up by me here) –
- Rather than a tax cut, why not redirect the same amount of money into realistically dealing with people’s lack of confidence and/or understanding of financial arithmetic.
We did put a man on the moon, after all.
On another note, there is a second paradox contained in The Fisherman’s Dilemma. It goes like this,
- We uniformly agree that our children must get an education. In the past few years this has become the idea that everyone should go to college. (From my experience from years both in the seat and at the lectern, not everyone belongs in college. There are other ‘ways’ to obtain the education one needs to succeed with one’s skills identified and developed. In addition, I think that not everyone in the seat (or at the lectern, for that matter) understands the ‘what’ and ‘why’ he or she is there for. I hinted at this here, but a deeper discussion on education is for another post.)
- We probably also agree that we want our kids to be successful, and depending upon our own backgrounds, more successful than we were.
- But just not too successful, especially other people and their kids.
- When people get too successful, when they move too far away from our Cultural Mean, we react as if this were not possible without some subterfuge or scheming. It becomes a crisis, and we look to fix the blame. We jump into the Negative Sum Game and draw the conclusion that they therefore must have taken something that they didn’t have the right to take. It’s Gap Theory again. We quickly stick them with a negative character attribute or behavior to justify our reaction, rather than take the time to look carefully to see, first, what is their added value and if it warrants their success, and, second, if perhaps we ourselves aren’t missing something (such as understanding financial arithmetic) that would have otherwise benefitted us somehow. That’s avoiding the Repugnant Question so that we don’t have to deal with the Repugnant Conclusion. As a result, we have a strong tendency, nay, predilection, to blame the upper 1% (or 20%) when they are succeeding beyond what we deem acceptable, explainable, or understandable by our Cultural Mean.
- While there is indeed some truth to what we observe, that there are people who manage to get through life by being Takers (or, in an alternate terminology that has a nice ring to it, Extractors), this does not translate into punishing all who manage to be successful beyond a Cultural Mean. Takers are a small percentage of any group of people. Stretching this dollop of ‘truth’ into full condemnation appears to be the pastime of a sufficient number of people to keep this ‘conspiracy theory’ alive and in good health. It’s apparently also great clickbait.
Interestingly, these two paradoxes eventually merge together, but with a twist in understanding:
The vast majority of the 20% and the 1% are not Takers or Extractors. They understand enough about Added Value to be Participators in the economy, and they contribute and benefit (and sometimes lose) accordingly. There also is sufficient reason to propose that part of the widening income and wealth inequality gap has a component that is due to a lack of full participation by the 80%, which has a strong basis in a weakness in financial understanding.
The above implies a dual (but not necessarily equal) contribution, exactly what the Repulsive Question, if pursued, would reveal. However, being glued to an Either/Or mode of thinking (the blame either lies with them or me) precludes considering this idea. So does Political Correctness.
Overcoming the immediate gap takes us back, once again, to education, especially about financial arithmetic.
In considering other social and cultural gaps and if this dual contribution idea is true, which I think it is, it still leaves me with a larger, nagging question in explaining how this happens.
Much pondering for another post.