Quotes – It’s Lonely At The Top

Most captains have trouble with their ship’s people from time to time – on occasion it is a continual sullen covert war – and unless they make cronies of their first lieutenants, as some do, they have to chew it over alone. I do not wonder that so many of them grow strange or bloody-minded; or run melancholy mad, for that matter.

~Capt. Jack Aubrey, Patrick O’Brian

An Annotated Reading of Good Strategy/Bad Strategy

Strategy: discovering the critical factors in a situation and designing a way of coordinating and focusing actions to deal with those factors.

Role of leadership: identifying the biggest challenges to forward progress; devising a coherent approach to overcoming them.

A good strategy honestly acknowledges the challenges being faced and provides and approach to overcoming them.

A strategy that fails to define a variety of plausible and feasible immediate actions is missing a critical component.

Guiding policy is a signpost in reference to the diagnosis, shows the directional way forward.

Coherent actions are feasible coordinated policies, resource commitments and actions designed to carry out the guiding policy.

Can you identify what your competition is doing strategically that is valuable? From there can you devise a counter-strategic move that would increase your competitive position?

Most complex organizations spread rather than concentrate resources.

Good strategy itself is unexpected.

Having conflicting goals, dedicating resources to unconnected targets, and accommodating incompatible interests are the luxuries of the rich and powerful, but they make for bad strategy.

Good strategy requires leaders who are wiling and able to say no to a wide variety of actions and interests.

Consider the competition even when no one tells you to do it in advance.

Whenever an organization succeeds greatly, there is also, at the same time, either blocked or failed competition.

Integrated design: each part of the design is shaped and specialized to the others. The pieces are not interchangeable parts.

When analyzing and developing strategy, consider what is the “basic unit of management”, such as the Wal-Mart example where the network is the basic unit of management.

The oft-forgotten cost of decentralization is lost coordination across units.

Where are you strong? How do you apply this to your competitors’ weakness?

Strategy: what stands in the way of your goals?

Strategic objectives should address a specific process or accomplishment, such as halving the time it takes to respond to a customer, or getting work from several Fortune 500 corporations.

Motivation in context: The job of the leader is also to create the conditions that will make that [one last] push effective.

Discover the most promising opportunities for the business: internal, fixing bottlenecks or constraints in the way people work; external, look very closely at what is changing in your business.

Business competition is not just a battle of strength and wills; it is also a competition over insights and competencies.

To obtain higher performance, leaders must identify the critical obstacles to forward progress and then develop a coherent approach to overcoming them.

The cutting edge of any strategy is the set of strategic objectives (subgoals) it lays out.

Use the word “goal” to express overall values and desires and use the word “objective” to denote specific operational targets.

Strategize in steps: pick a “way forward” and then, as you make progress, new opportunities and challenges will present themselves.

If the leader’s strategic objectives are just as difficult to accomplish as the original challenge, there has been little value added by the strategy.

1.) Define the challenge; 2.) Explain why it exists.

Bad strategy is the active avoidance of the hard work of crafting a good strategy.

The value of debating a strategic thesis: disciplined conflict calls forth stronger evidence and reasoning.

Group irrationality is a central property of democratic voting; do not make decisions by democratic consensus.

The essential difficulty in creating strategy is not logical; it is choice itself. Strategy does not eliminate scarcity.

Universal buy-in usually signals the absence of choice.

Leadership inspires and motives self-sacrifice.

Strategy is the craft of figuring out which purposes are both worth pursuing and capable of being accomplished.

Ascribing the success of Ford and Apple to a vision, shared at all levels, rather than pockets of outstanding competence mixed with luck, is a radical distortion of history.

All strategic analysis starts with the consideration of what may happen, including unwelcome events.

A good diagnosis simplifies the often overwhelming complexity of reality by identifying certain aspects of the situation as critical.

A guiding policy is an overall approach chosen to cope with or overcome the obstacles identified in the diagnosis.

Coherent actions are steps that are coordinated with one another to work together in accomplishing the guiding policy.

In business, the challenge is usually dealing with change and competition. Before naming performance goals, diagnose the specific structure of the challenge. Then select a guiding policy that builds on or creates some type of leverage or advantage. Finally, design a configuration of actions and resource allocations that implement the guiding policy.

A strategic question of first importance: “What’s going on here?”

Defining the problem restricts the domain of the potential solution sets.

Diagnosis is a judgment about the meaning of facts.

Good guiding polices define a method of grappling with the situation and ruling out a vast array of possible actions.

A good guiding policy tackles the obstacles identified in the diagnosis by creating or drawing upon sources of advantage.

A guiding policy creates advantage by anticipating the actions and reactions of others, by reducing the complexity and ambiguity in the situation, by exploiting the leverage inherent in concentrating effort on a pivotal or decisive aspect of the situation, and by creating policies and actions that are coherent, each building on the other rather than cancelling one another out.

Seek simplicity for a strategic breakthrough.

Absent a good guiding policy, there is no principle of action to follow.

It is the hard craft of strategy to decide which priority shall take precedence; it requires letting go of optionality, perceived or otherwise.

Sometimes strategic solutions arrive in the form of shifting incentives to achieve cooperative goals.

A strategy coordinates action to address a specific challenge; unrelated operational actions may be good ideas but they’re not, therefore, “strategic”.

Strategic coordination is coherence imposed on a system by policy and design.

A powerful way to coordinate actions is by the specification of a proximate objective.

Decentralized decision-making cannot do everything. In particular, it may fail when either the costs or benefits of actions are not borne by the decentralized actors. The split may occur across organizational units or between the present and the future.

Coordinate in a few select, high leverage areas, otherwise decentralize.

Most strategic anticipation draws on the predictable “downstream” results of events that have already happened, from trends already at work, from predictable economic or social dynamics, or from the routines other agents follow that make aspects of their behavior predictable.

When there are threshold effects, it is prudent to limit objectives to those that can be affected by the resources at the strategist’s disposal.

The more dynamic the situation, the poorer your foresight will be. The more uncertain and dynamic the situation, the more proximate a strategic objective must be.

To concentrate on an objective — to make it a priority — necessarily assumes that many other important things will be taken care of.

When there is a weak link, a chain is not made stronger by strengthening other links.

Resources and tight coordination are partial substitutes for each other.

Unless you can buy companies for less than they are worth, or unless you are specially positioned to add more value to the target than anyone else can, no value is created by acquisition.

Corporate leaders seek growth for many reasons. They may (erroneously) believe that administrative costs will fall with size. Also, leaders of larger firms tend to be paid more.

Healthy growth is not engineered. It normally shows up as a gain in market share that is simultaneous with a superior rate of profit.

Advantage is rooted in differences. No one has advantage in everything.

Think about where you don’t have an advantage; and where you are actively disadvantaged.

Most advantages will only extend so far.

An investment or a strategic position is “interesting” when there is a way to deepen the advantages it possesses.

Standardization and efficiency are not the same as innovativeness. One must reexamine each aspect of product and process, casting aside the comfortable assumption that everyone knows what they are doing.

You can often benefit from putting corporate resources to use in other products or markets, but beware vaporous generalities such as believing that competitive strength lies in “transportation”, “branded consumer products” or “management.”

A brand’s value comes from guaranteeing certain characteristics of the product.

One way to grab the high ground is to exploit a wave of change.

You exploit a wave of change by understanding the likely evolution of the landscape and then channeling resources and innovation toward positions that will become high ground — become valuable and defensible — as the dynamics play out.

Most industries, most of the time, are fairly stable.

Historical perspective helps you make judgments about importance and significance.

The challenge is not forecasting but understanding the past and present.

When change occurs, most people focus on the main effects; you must dig beneath this surface reality to understand the forces underlying the main effect and develop a point of view about the second-order and derivative changes that have been set into motion.

To make good bets on how a wave of change will play out you must acquire enough expertise to question the experts.

To glimpse the future, consider what “area of excitement” currently exist in research-oriented institutions.

Sometimes restating a general question in specific terms can help clarify confusion and drive insight.

Increases in fixed costs often force industries to consolidate.

Regulated prices are almost always arranged to subsidize some buyers at the expense of sellers. Highly regulated companies do not know their own costs. When deregulation arrives, such companies can be expected to wind down some product lines that are actually profitable and continue to invest in some products and activities that offer no real returns.

Predictable biases in forecasting often exist. In durable products, there is an initial rapid expansion of sales when the product is first offered, but after a period of time everyone who is interested has acquired one, and sales can suffer a sharp drop. After that, sales track population growth and replacement demand.

Faced with a wave of change, the standard forecast will be for a “battle of the titans” however often it is a disruptive or new entrant who ends up taking the field.

In a time of transition, the standard advice offered by consultants and other analysts will be to adopt the strategies of those competitors that are currently the largest, the most profitable, or showing the largest rates of stock price appreciation. They predict that the future winners will be, or will look like, the current apparent winners. This is naive extrapolation of trend.

We expect incumbent firms to resist a transition that threatens to undermine the complex skills and valuable positions they have accumulated over time.

Attractor state: how the industry “should” work in the light of technological forces and the structure of demand; an evolution in the direction of efficiency.

The critical distinction between an attractor state and many corporate “visions” is that the attractor state is based on overall efficiency rather than a single company’s desire to capture most of the pie. In effect, ask yourself, “What will eliminate cost and margin?”

An accelerant toward this state is the demonstration effect, the impact of in-your-face evidence on buyer perceptions and behavior.

Ways to overcome organizational inertia: hiring managers from firms using better methods, acquiring a firm with superior methods, using consultants, or simply redesigning the firm’s routines; it will probably be necessary to replace people and reorganize business units around new patterns of information flow.

Inertia by proxy: when streams of profit exist because of their customers’ inertia. Many “disruptive” businesses grow rapidly until their example excites the incumbent’s customers enough that the incumbent is forced to change their behavior to retain them, at which point the disruptor’s growth stops or reverses and the incumbent arises from its slumber.

Use a hump chart to figure out at what point your cumulative gain to operating begins to trail off.

Entropy: Each quarter, each year, each decade, corporate leadership must work to maintain the coherence of the design. Without constant attention, the design decays.

If the design becomes obsolete, management’s job is to create a new way of coordinating efforts so that the competitive energy is directed outward instead of inward.

Growth is the outcome of a successful strategy.

Make a list of “things to do, now” rather than “things to worry about” forces us to resolve concerns into actions.

Being strategic is being less myopic.

In estimating the likelihood of an event, even experienced professionals exhibit predictable biases.

What the kernel does is remind us that a strategy is more than a localized insight; it leads from the facts on the ground to diagnosis, thence to an overall directive, thence to action.

Shift your attention from what is being done to why it is being done.

Don’t just go with your first strategic idea. Create a number of alternatives. A new alternative should flow from a reconsideration of the facts of the situation, and it should also address the weaknesses of any already developed alternatives. Try hard to “destroy” any existing alternatives, exposing their fault lines and internal contradictions.

Invoke a virtual panel of experts to judge and criticize your strategic ideas.

Good strategies are usually “corner solutions”, they emphasize focus over compromise, focusing on just one aspect of the situation that’s really critical.

Commit your judgments in writing to keep yourself honest and to have a record of your thought process and assumptions for later adjustment.

Choices, not products, have costs.

Notes on the Emergent eSports Industry

The eSports industry has been around for decades. Once thought of derisively as a feel-good appellation for fat nerds with repetitive-use wrist injuries hanging around in their parents’ basements, the competitive aspect of video gaming is developing clout as a wildly popular, professionally organized and truly skilled arena for yet another form of human excellence. And it’s beginning to attract serious athletes and serious money: Michael Jordan and the family office of David Rubenstein announced a $26M investment in aXiomatic in late 2018, and Mike Tyson announced an investment partnership with eSports organization Fade2Karma in May 2019.

With this as background, I recently attended the InvenGlobal eSports Conference 2019 at the University of California, Irvine, hoping to better understand the history, structure, trends and business and investment opportunities of this emergent and rapidly growing industry.

Keynote, Chris Hopper, RIOT Games, Head of ESports North America

The conference kicked off with an informative keynote address by Chris Hopper. Hopper is an integral part of Riot Games’s League of Legends (LoL) tournament organization. LoL is the largest competitive eSports game, going from a rather modest world championship event in 2011 to last year’s championship event which filled a World Cup-sized soccer stadium in South Korea with cheering spectators. The finals competition overall received over 100 million unique global viewers. Based near Los Angeles, Riot Games operates 20 global offices with over 3,000 people supporting regional LoL leagues and the global championship tournament.

One of the critical challenges for the industry according to Hopper is designing a “multi-decade game” ecosystem. The video game industry is notoriously faddish and driven by constant change in underlying computer hardware technology– each year brings upgraded computer capability which drives new design and graphical capabilities which in turn means that even a game with a solid core gameplay mechanic can be superseded by new releases that better utilize emergent technology. In Hopper’s mind, creating a multi-decade franchise means that industry participants can build eSports, media, community and merchandising infrastructure around a single IP, justifying long-term investment commitment.

Another significant challenge is how to harness traditional professional sports dynamics and fandom phenomena with eSports. In this regard, LoL and other popular eSports games have borrowed a lot from the “ESPN playbook”, adapting broadcast production strategies and even professional broadcasting talent from the physical sports world into the eSports broadcasting universe. This developing broadcast strategy unlocks the potential for advertising sponsorships and marketing partnerships with global corporate consumer product brands. For example, LoL partnered with Mastercard to allow fans to receive special game benefits by using a Mastercard to purchase tickets and other broadcast access to LoL events.

ESports organizers are also studying how to create a sustainable team and talent ecosystem. The institution of minimum salaries for LoL players allowed eSports athletes interested in participating as a full-time career to achieve economic security while committing to playing their favorite games for a living. As more players “go pro” and spend more hours playing games, there is also a need for applying sports medicine principles in the areas of sleep, psychology, nutrition and exercise to ensure that athletes do not suffer from burnout.

How to Embrace the Next Gen of eSports Pros

After the keynote I attended a panel about different parts of the player development infrastructure in eSports. One piece of player development revolves around creating an amateur, minor and collegiate league systems to better organize non-professional eSports. The impetus behind league development is not only to create a farm system that can train, identify and procure future professional athletes, but also to create more fans familiar with the competitive nature of eSports. Just like a person who played basketball in high school might become a fan of the NBA even if they don’t play in the NBA, the belief is that creating organized systems for competing at various skill or other demographic levels with video games will lead to more people interested in spectating and following eSports competitions.

Another area getting a lot of attention in player management is professional discipline and sports medicine. Many current eSports pros are young (high school and college age) and have not held professional 9-5 careers prior to their sudden emergence into professional eSports. The novelty of this responsibility combined with the unique physical demands of eSports which lack normal sports body feedback (ie, unsustainable heart rate) but still involve fatigue and overuse can result in the phenomenon known as “burnout”. Many eSports pros emerge onto the scene in a flash of blinding light and just as quickly disappear after a season or two finding the routine too hard to keep up with while living an imbalanced lifestyle.

To address this, sports medicine consultants in cooperation with eSports coaches and team managers have begun recommending specific guidelines for sustainable player development. These include things like daily playtime caps, weight training and other vigorous physical exercises outside or in purpose-built gyms, diet and nutritional standards and even mental health counseling and mindset training. As many eSports athletes are also students, some teams and organizations have taken to providing daily scholastic tutoring to support the players’ intellectual development and to ensure they have a safety net should their eSports ambitions fail to develop successfully.

Interestingly, while most major competitive sports have a farm system in place that necessarily passes through a collegiate competition phase with recognized school teams and pro drafting after school, eSports lacks this. The NCAA recently decided to delay further research into developing an official support structure for eSports, so it’s possible such a system never develops. This may be a unique feature of eSports in which emerging talent can go “straight to the pros”. Regardless, the industry currently lacks rigorous recruitment databases and centralized, authenticated play statistics for players across time and games.

What do eSports Casters Do All Day?

With many interesting panels on offer timed simultaneously, I had trouble picking a follow-up to the eSports development panel but ended up settling on a discussion offering background to the life and career of professional eSports broadcasters. One thing I noticed about the panel was that they were all young, mostly-single men in their early thirties. Not because I was concerned with sexual diversity in the industry (a known point of controversy for social activism panderers) but because it seems that the unique demands of this career track cater to young men who do not need to support other family members.

While eSports broadcasters may only be on air, video or audio podcast, a few hours a day, they all reported spending many hours offline reviewing older video game footage for ideas and inspirations on their broadcasts, taking notes on players and competitive details and even playing the games in question themselves to understand the mechanics and gameplay possibilities to better inform their narration.

As many eSports broadcasters are current or former pro or semi-pro players themselves, another interesting phenomena was the “always on” nature of their work. After turning in an 8 or 10 hour official day, they might stay up another 2-3 hours running their personal Twitch stream, playing the game for and bantering with their personal fans. This not only builds their market value for their “daytime” career but is a source of added revenue and passion.

Most of the panelists reported that the tournament scene is currently fragmented, with numerous operators of varying skill and organizational capabilities hiring broadcasters to help cover their events. The result is a need for a dynamic personality who can go with the flow and maintain professionalism in the face of limited or uncertain information and changing broadcast schedules and needs. It’s also an international scene, with many broadcasters flying all over the world in the course of a month to cover various events. Some broadcast partners with fixed or stationary league environments and infrastructures end up being the best to partner with because they also tend to have more talented production teams which leads to a better coordinated broadcast strategy for the announcer.

That being said, all broadcasters mentioned the dichotomy of knowledge gamer-broadcasters versus non-gamer producers which often creates mismatched knowledge sets and broadcast production hangups. Meanwhile, the unique nature of eSports as a “digitally native” and interactive medium and fan-base means that all broadcasters struggle with finding the right mix between providing knowledge analytics of gameplay developments and catering to the crowds incessant love for silly internet memes. 

Intersection of Traditional and eSports

A panel convened with representatives from the traditional professional sports world who are establishing footholds in eSports was especially informative. There is a lot of best practice sharing going on between the industries which are, at the moment, almost entirely separate. On the one hand, eSports is adopting a lot of ideas from traditional sports in the areas of team formation and management, brand development, sponsorship and engagement strategies, fan base dynamics, broadcast production and league and tournament structure. On the other hand, eSports is characterized by being made up of young players and fans, being online and international natively, whereas traditional sports have more mature players and fan bases, are based upon regional identities and are just now trying to develop strategies for international awareness and digital marketing and support. As a result, established pro leagues like the NBA are keen to learn what they can from eSports and even make integrations where possible.

One example is the Milwaukee Bucks, which sponsor an NBA2K video game franchise online league and team. The strategic vision for these kinds of partnerships is that a physical team like the Bucks will be able to cultivate younger fans, including those outside of the normal regional Bucks fan market, who like the NBA2K video game series but might be unfamiliar with spectating and supporting the physical Milwaukee Bucks franchise.

There are also some noteworthy dissimilarities between the physical and eSports variants of each sport. When it comes to borrowing production talent from live action sports, most experienced people are used to producing one type of event for one game or sport in the course of a day. In eSports, a single tournament or event day might feature numerous types of games and teams, which places a unique demand on the time and talent of production teams to support the nuances between games and their fan bases.

Another dissimilarity is rate and severity of change in game “meta”. In eSports, the “meta” or underlying rule set or programming rules of a video game can change rapidly and severly. Bug patches, new content and gameplay balance changes might be released weekly or monthly. In some cases these changes are so dramatic that previously dominant players lose their edge and new players adapt to the point of overcoming the previous pros. In live action sports, changes in rules and gameplay features happen at a glacial pace and are motivated by governing body decision-making rather than by game publisher or tournament organizers. Each respective industry has things to learn from the other here– for eSports, how to make competitive game environments stable and durable, and for live action sports, how to adopt iterative improvements to their game more quickly over time.

Cross-pollination is also occurring with regard to interaction with the fan base. Live action sports franchises purposefully cultivate the sense of “you can never get as close as you’d like” in their fans, whereas eSports fans are used to being able to engage directly with their favorite players, typically through their live Twitch feeds or message board postings.

As I listened to these examples of similarities and differences, I wondered about a technology like VR and what it promises for the eventual merging of these two industries. Besides being a small fraction of the overall video game industry, VR as of the present seems to have no real presence in the world of competitive eSports. Will there be a day where physically-fit live action athletes are competing online in VR-enabled eSports environments and having an advantage as a result?

The discussion related to the ways in which live action sports franchises are dipping their toes into eSports also led me to wonder about pro sports franchises developing eSports variants of their teams. This is already happening in limited ways (see this recent Bloomberg story on the Philadelphia Fusion) but as of right now it is not common for, say, the Boston Red Sox to also have an eSports baseball franchise. And will they also be the Boston Red Sox, or will they come up with a different team name and identity while being owned and operated by the live action team? Will an eSports franchise one day disrupt live action sports by buying out a struggling live action franchise team?

I missed a panel on the relationship between the Olympics and eSports but it’s easy enough to see the opportunity for integration there as well. We’re probably not too many years away from eSports, an all-weather, year-round competitive arena, taking up an event space in the physical Olympic celebrations. But where and when and what game will be the breakthrough?

One of the toughest questions for the long-term health of eSports is what is a long-term investment in the industry? The “shelf-life” of the average eSports game due to changing technology and faddish fans is 2-3 years, whereas the average career for professional athletes is ten years or more. This relative longevity means the brand value of players and teams can be developed over longer periods of time and thus support more sophisticated investment dollars and strategies.

Conclusion

The eSports industry is increasingly a serious business. Like the major live action sports franchises, the organization and structure of the sport is being developed to support the marketing platform business model. As much as the teams and leagues exist to develop and support the players and fans, they aim to create a valuable audience which can attract advertising and marketing sponsorship dollars. This is where the “real money” is and creating a sustainable ecosystem is key to winning the investment dollars necessary to then grab the marketing credibility. With the role of hype and fads in a technology-driven space creating short-termism, one valuable question to answer might be how one can sell “pickaxes and tents to miners” in this space. Until the industry fully matures, this might be the most lucrative, scalable and repeatable model.

SimState: The Myth Of Free-Market Singapore

When looking for case studies of free market societies throughout history Singapore, a polity built from scratch in 1965, is an oft-cited example of how enlightened political leadership can stand back and let the market build a prosperous community for all. But was Singapore really guided by free market thinking at the executive political level? And should the free market in Singapore get the praise (or the blame) for subsequent economic developments? In consulting the autobiography of Lee Kuan Yew, Singapore’s first and longest-serving executive politician, an autobiography which covers the life and career of both Lee and the modern country of Singapore itself, the answer seems to carry a bit of nuance.

Chapter 1 Going It Alone

Singapore was a former British colony and military base/trading depot. It had no “hinterland” economy. It was dependent upon British military subsidies, the bases on the island costing nearly GBP$100M and losing these subsidies early on was a major fear of Lee’s.

Lee’s Top 3 Concerns after independence:

  1. Get international and UN recognition
  2. Defense against Malaysian encroachment
  3. “how to make a living for our people”

Chapter 2 Building An Army from Scratch

Rebuilding the military was a jobs program and an opportunity to create loyal party adherents and factional interest groups. Utilized conscription to build national unity and, modeled on Israeli military, be able to field a large fighting force in a short amount of time.

One official lamented that, “The Spartan approach to life does not come about naturally in a community that lives by buying and selling.” [The need for a military was to protect the political system from foreign dominance, not the commercial system.] “we were building up our defense forces to protect our fledging state.”

“Those who enlisted in the SAF as a full-time career would be guaranteed hobs in the government, statutory boards, or the private sector when they left full-time service to go into the reserves.”

Perceived and actual political threats from Malaysia and Indonesia and a desire to racially and ideologically unify the Singaporean citizenry and re-educate Chinese cultural norms led LKY to build SAF w/ Israeli training and partnerships with “Western democracies” for practice

Chapter 3 Britain Pulls Out

Contribution of British bases to the economy of Singapore in 1966, 20% of GDP.

LKY referred to by a British official “as good a left-wing and democratic socialist as any in this room” and “the government of Singapore… is the only democratic socialist government… in Southeast Asia” and “his housing programme… defies challenge in anything that has been done in the most advanced social democratic communities.”

Later, LKY “attended a Socialist International conference in Stockholm to keep in touch with British and European socialist party leaders.”

Singaporean government lost lots of money on the devaluation of the British pound, in which many of their reserves were held, and feared the departure of British troops in mainland Asia would shake investor confidence, particularly investors in Hong Kong, resulting in a desire to have an arms buildup for credible defense.

Chapter 4 Surviving Without a Hinterland

Recommendations of Dutch economist Dr. Albert Winsemius in 1965:

  • common market agreement with Malaysia
  • resumption of barter trade with Indonesia
  • seek favorable entry for Singapore-manufactured goods into US, UK, Australia and New Zealand

Sent trade delegation to Africa to try to drum up business but failed. Fears of unemployment since 1959 led to desire to industrialize. Formed Singapore Tourist Promotion Board to try to address unemployment.

To promote industrialization, “we protected locally assembled cars, refrigerators, air conditioners, radios, television sets and tape-recorders, in the hope that they would later be partly manufactured locally. We encouraged our own businesspeople who set up small factories to manufacture vegetable oils, cosmetics, mosquito coils, hair cream, joss paper and even mothballs!

Spent “vast sums” on infrastructure only to find the “Jurong industrial estate” mostly empty. Formed an Economic Development Board which got into JVs to recycle paper products with a businessman with no manufacturing experience, as well as ceramics without technical know-how. Also JVed with a Japanese shipbuilder but it did not prove profitable versus ship-repair, which was labor intensive.

“I was convinced our people must never have an aid-dependent mentality” yet formed the Bases Economic Conversion Department whose job was “to retrain and redeploy redundant workers, take possession of land and other assets the British were vacating, put them to the best use, and negotiate mitigatory aid.” Resulted in 1968 agreement for GBP$50M aid package to be spent on British goods and services, 25% being grants and 75% being loans.

Generated S$4-5M in annual USN ship repair business for the Singaporean government. The Singaporean government formed private entities to manage shipyards which later transformed into public companies.

Sought to “leapfrog” regional economies to become trading partner with developed world (America, Europe, Japan) to attract manufacturers to export to developed countries.

Formed Development Bank of Singapore, “DBS helped finance our entrepreneurs who needed venture capital because our established banks had no experience outside trade financing and were too conservative and reluctant to lend to would-be manufacturers”, ie, subsidized a top-down manufacturing-centric policy.

Keng Swee, first chairman of the Economic Development Board, “every time he drove by a school and saw hundreds of children streaming out, he felt downhearted, wondering how to find jobs for them when they left school.”

“The government played a key role in attracting foreign investments; we built the infrastructure and provided well-planned industrial estates, equity participation in industries, fiscal incentives and export promotion. We established good labor relations and sound macroeconomic policies, the fundamentals that enable private enterprise to operate successfully.”

Also, by end of 1970 had “issued 390 pioneer certificates giving investors tax-free status for up to five years, extended to 10 years for those issued after 1975”

“During this period, China was in the mad throes of Mao’s Culturual Revolution. Most investors thought Taiwan and Hong Kong too close to China and headed for Singapore.”

“By the late 1970s we had left our old problems of unemployment and lack of investments behind us. The new problem was how to improve the quality of the new investments and with it the education and skill levels of our workers.”

“After several years the EDB finally convinced Rollei, the German camera manufactuer, to relocate in Singapore. High German wages had made them uncompetitive.”

“We left most of the picking of winners to the MNCs that brought them to Singapore. A few, such as ship-repairing, oil-refining and petro-chemicals, and banking and finance, were picked by the EDB or Sui Sen, our minister of finance, or myself personally. Our ministry of trade and industry believed there could be breakthroughs in biotechnology, computer products, specialty chemicals and telecommunications equipment and services. When we were unsure how new research and development would turn out, we spread out bets.”

“Our job was to plan the broad economic objectives and the target periods within which to achieve them.”

“We did not have a group of ready-made entrepreneurs such as Hong Kong gained in the Chinese industrialists and bankers who came fleeing from Shanghai, Canton and other cities when the Communists took over. Had we waited for our traders to learn to be industrialists we would have starved.”

“The government took the lead by starting new industries such as steel mills (National Iron and Steel Mills) and service industries such as a shipping line, Neptune Orient Lines (NOL), and an airline, Singapore Airlines (SIA).”

Development Bank of Singapore, Insurance Corporation of Singapore, Singapore Petroleum Company; Chartered Industries of Singapore (CIS), a mint and a factory for small ammunition. Pg 67, conversion of “successful” public monopolies into private companies.

With economic consultation from a Dutch academic, Singapore embarked on economic experimentation which involved at various times a combination of tariffs and no tariffs, tax concessions for new MNCs, extensive investment in infrastructure and at times direct government investment in “from scratch” national industries, which despite being successful and profitable were mysteriously privatized at points. The Singaporean government benefitted from political tailwinds created by economic chaos in other parts of the world, but also attracted FDI by pledging not to interfere in business affairs for those relocating to Singapore (1973 oil crisis being a good example).

Chapter 5 Creating a Financial Center

To become a world financial center, Singapore’s government realized it needed to lift foreign exchange control restrictions on all currency transactions between Singapore and territories outside the sterling area.

“I had decided in 1965… that Singapore should not have a central bank that could issue currency and create money. We were determined not to allow our currency to lose its value against the strong currencies of the big nations… so we retained our currency board which issued Singapore dollars only when backed by its equivalent value in foreign exhcange. The MAS has all the powers of a central bank except the authority to issue currency notes.”

Why did Singapore need its own currency if it had no plans to expand its issuance?

“We attracted international financial institutions by abolishing withholding tax on interest income earned by nonresident depositors. All Asian dollar deposits were exempted from statutory liquidity and reserve requirements.”

“The foundations for our financial center were the rule of law, an independent judiciary, and a stable, competent and honest government that pursued sound macroeconomic policies, with budget surpluses almost every year. This led to a strong and stable Singapore dollar, with exchange rates that dampened imported inflation.”

“To meet the competition from international banks, the MAS encouraged the four largest local banks (known as the “Big Four”) to acquire and merge with the smaller local banks to become bigger and stronger.”

1985 “The SES [Stock Exchange of Singapore] was closed for three days while MAS officials… worked around the clock with the Big Four banks to arrange an emergency “lifeboat” fund of S$180 million to rescue the stockbrokers.”

Government of Singapore Investment Corporation formed to manage the Central Provident Fund, Singapore’s pension scheme.

“For over three decades, I had supported Koh Beng Seng on restricting the access of foreign banks to the local market. Now I believed the time had come for the tough international players to force our Big Four to upgrade their services or lose market share… the MAS liberalized access to the domestic banking sector by allowing qualifying foreign full banks to open more branches and ATMs. It lifted limits on foreign ownership of local bank shares.”

Singapore sought to be a global financial center, becoming a key chronological link in the chain between markets in SF, Tokyo and Zurich. Singapore went without a central bank but did establish a “monetary authority” and currency board similar to HK. Special rules and taxes were established to attract foreign financial capital, but a primary attractor was stability in an unstable region. The government managed a pension scheme and sovereign wealth fund which somehow earned above market returns with a conservative stance. The banking sector was partially deregulated and globalized after a period of productive controls.

Chapter 6 Winning Over the Unions

“I started my political life fighting for the unions as their legal adviser and negotiator.”

“I owed my position as prime minister largely to the trade union movement.”

“We banned all strikes in certain essential services”

Britain’s withdrawal of military announcement in 1968 led to Employment Act, Industrial Relations (Amendment) Act and Trade Unions Act amendment, “These laws spelled out minimum employment conditions and placed limits on retrenchment benefits, overtime bonuses, and fringe benefits. They set out uniform provisions for rest days, public holidays, working days, annual leave, maternity leave and sick leave. They restored to management the right to hire and fire, to promote and transfer, functions the unions had encroached upon during the years of industrial strife… we made it illegal for a trade union to take strike or industrial action without a secret ballot.”

1972, sets up National Wages Council “with representatives from unions, management and government”

“The NTUC [National Trade Union Council] expanded into health services, child care, a broadcasting station, a seaside resort hotel for workers called Pasir Ris Resort, and a country club, the Orchid Country Club with a golf course by Seletar reservoir. It also developed quality condimuniums its members could buy… To make them affordable, the government provided state land at nominal prices.”

LKY’s political career began as a union consultant and advocate. But when he came to power, he threatened unions with treason if they striked. A series of reforms were put in place which reduced union power and enhanced company/management power, but it all takes place within a system of “managed relations” where the government is a “stakeholder”. For some reason, the national union organization has made conglomerated investments in semi-private for-profit businesses and co-ops aimed at worker welfare, which the government has helped subsidize.

Chapter 7 A Fair, Not Welfare, Society

“We believed in socialism, in fair shares for all. Later we learned that personal motivation and personal rewards were essential for a productive economy. However, because people are unequal in their abilities, if performance and rewards are determined by the marketplace, there will be a few big winners, many medium winners and a considerable number of losers. That would make for social tensions because a society’s sense of fairness is offended.” [set this up as the leading quote for the essay?]

“A competitive, winner-takes-all society, like colonial Hong Kong in the 1960s, would not be acceptable in Singapore. A colonial government did not have to face elections every five years; the Singapore government did. To even out the extreme results of free-market competition, we had to redistrivute the national income through subidies on things that improved the earning power of citizens, such as education. Housing and public health were also obviously desirable. But finding the correct solutions for personal medical care, pensions, or retirement benefits was not easy. We decided each matter in a pragmatic way, always mindful of possible abuse and waste. If we over-re-distributed by higher taxation, the high performers would cease to strive. Our difficulty was to strike the right balance.”

CPF policies imposed a total savings rate of 50 percent of wages.

“I further amended the law to give the government the power to acquire land for public purposes at its value on a date fixed at 30 November 1973. I saw no reason why private landowners should profit from an increase in land value brought about by economic development and the infrastructure paid for with public funds.”

On the development of HDB and resettling of farmers and squatters: “Compressing 30 years into a few pages makes it all appear simple and straightforward. There were enormous problems, especially in the early stages when we resettled farmers and others from almost rent-free wooden squatter huts with no water, power or modern sanitation, and therefore no utility bills, into high-rise dwellings with all these amenities but also a monthly bill to pay. It was a wrenching experience for them in personal, social and economics terms.”

“As incomes increased, fewer patients chose the lower-cost wards, which had the highest government subsidies, and opted for wards with more comfort but lower subsidies. We considered but rejected a means test to determine which wards patients were entitled to use; it would have been difficult to implement. Instead we encouraed people to upgrade to the ward they could afford by making clear differences in comfort between different types of wards. It was in effect a self-administed means test.” so is the market!

“Government expenditure has averaged 20 percent of GDP, compared to an average of 33 percent in the G7 economies. On the other hand, our development expenditure has consistently been much higher than that of the G7 countries.”

“Our aim is to have partial or total cost recovery for goods and services provided by the state. This checks overconsumption of subsidized public services and reduces distrotions in the allocation of resources.”

The Singapore government was dominated by one party, PAP, for its modern history. They very openly bought botes with their welfare programs. But they sought to make many of these programs less generous to ensure their solvency. The government forced high rates of saving on workers which it deployed to finance infrastructure spending and welfare housing. Lower tax rates compared to other developed countries helped Singapore remain competitive. LKY is very clearly NOT a fan of the free market in this chapter.

Chapter 8 The Communists Self-Destruct

On fighting Malayan National Liberation Front/communist guerrillas: “Could we have defeated them if we had allowed them habeas corpus and abjured the powers of detention without trial? I doubt it.”

Singapore had two major political factions, the Communists and the PAP. After a series of political blunders and internal turmoil, the communists formally exited the electoral scene leaving the PAP to run unopposed for 30 years, allowing them long and consistent control over policy-making. They used “ends justify the means” and subverted sound legal principles to obstruct and detain communists.

Chapter 9 Straddling the Middle Ground

“while overall sentiment and mood do matter, the crucial factors are institutional and organizational networks to muster support… in our HDB new towns, there is a network that leads from the RCs to the MCs and CCCs on to the prime minister’s office…”

“The PAP had countered the opposition’s ‘by-election’ strategy with the electoral carrot that priority for upgrading of public housing in a constituency would be in accord with the strength of voter support for the PAP in that constituency.”

The PAP faced no serious political opposition and turned to various patronage and vote-buying schemes to solidify support. It seems the HDB housing projects also allowed the PAP to corral supporters and have a physically defensivle political communications network. Many political opponents made claims of corruption only to be sued, sometimes into bankruptcy, by LKY. The few times his own PAP members were charged with libel, they settled out of court. LKY employes specious reasoning to defend this authoritarian legal approach on the grounds that to let the charges go unmolested would threaten his political power– he has a pure, unviolated record of ethics in a region known for corruption!

Chapter 10 Nurturing and Attracting Talent

“Traditional methods of choosing marriage partners had been ruptured by universal education: The government had to provide alternatives to the family matchmakers of old.”

“I gave special income tax concessions to married women”

Stop-at-Two policy of the 1960s “Without that policy, family planning might never have brought population growth down, and we would not have solved our unemployment and schooling problems.”

“Difficulties over our talent pool were aggravated when the rich Western countries changed their policies on Asian immigration… [the US] decided to accept Asian immigrants, reversing more than a century of its whites-only policy.”

The Singapore government was obsessed with population management, first trying to limit births on Malthusian grounds, then trying to promote the marriage and childraising of educated parents on the grounds of skewing the IQ or “talent” pool. Many subsidies Singapore granted to educate its citizenry was “leaked” as people immigrated to other countries to pursue opportunity, partly in response to changing immigration policies elsewhere (such as the US in the 1960s). Now it has taken to liberalizing immigration for high IQ emigres, especially those with jobs, to try to increase the “talent pool.”

Chapter 11 Many Tongues, One Language

LKY enforced language laws on the population in a desire to achieve social harmony and globally integrated economic progress. He encountered much popular resistance but believes these policies proved prescient given global events. It also allowed for a more homogenized culture.

Chapter 12 Keeping the Government Clean

“Human ingenuity is infinite when translating power and discretion into personal gain.”

Singapore got high marks for honesty of government in a region where corruption is an ingrained part of culture. LKY attributes this cultural success to the ideological rigor, invasive investigative authority given to the anti-corruption bureaus and the willingess of government to pay high salaries to public servants to attract them away from the private sector [distortion]. But who watched the anti-corruption officers to ensure they weren’t on the take? And why would this be a corruption issue if government didn’t have the power over the economy? LKY again admits that the PAP bought political favors with public resources by engaging in welfare spending once in office.

Chatper 13 Greening Singapore

“Hundreds, eventually thousands, of pirate taxis clogged our streets and destroyed bus services… only after 1971, when we had created many jobs, were we able to enforce the law and reclaim the streets.”

“It was immensely better that we competed to be the greenest and cleanest in Asia. I can think of many areas where competition could be harmful, even deadly.”

“We phased out the rearing of over 900,000 pigs on 8,000 farms because pig waste polluted our streams.”

“After we had persuaded and won over a majority, we legislated to punish the willful minority… if this is a ‘nanny state’, I am proud to have fostered one.”

Much in the vogue in the 1970s, LKY got swept up in environmentalism and made it a major policy priority to “green” Singapore; this included building public utility infrastructure to control waste and pollution, but also involved “nudge” legislation to change or ban cultural habits deemed offensive or a nuisance. Agricultural practices were changed as were retail practices (pirate taxis, street hawkers). LKY put great emphasis on the “morale” of greening and its affect on visiting dignitaries and VIPs. There is no discussion of the cost of these programs or whether there were alternative approaches to accomplishing the stated goals: he embraced charges of “nanny statism.”

Chapter 14 Managing the Media

“Our journalists are exposed to and influenced by the reporting stytles and political attitudes of the American media, always skeptical and cynical of authority. The Chinese and Malay press do not model themselves on newspapers in the West. Their cultural practice is for constructive support of policies they agree with, and criticism in measured terms when they do not.”

“My early experiences in Singapore and Malaya shaped my views about the claim of the press to be the defender of truth and freedom of speech. The freedom of the press was the freedom of its owners to advance their personal and class interests.”

“That was exactly what we had the right to do, to seek a mandate to deal firmly with foreign, in this case colonial, interests in the press. It was our declared policy that newspapers should not be owned by foreigners.”

“I needed the media ‘to reinforce, not to undermine, the cultural values and social attitudes being inculcated in our schools and universities. The mass media can create a mood in which people become keen to acquire the knowledge, skills and disciplines of advanced countries. Without these, we can never hope to raise the standards of living of our people… Freedom of the press, freedom of the news media, must be subordinated to the overriding needs of Singapore, and to the primacy of purpose of an elected government.'”

“A few years later, in 1977, we passed laws to prohibit any person or his or her nominee from holding more than 3 percent of the ordinary shares of a newspaper, and created a special category of shares called management shares. The minister had the authority to decide which shareholders would have management shares.”

“We decided in 1986 to enact a law to restrict the sale or distribution of foreign publications that had engaged in the domestic politics of Singapore.”

Freedom of the press is clearly not a cherished ideal in Singapore, in so far as PAP-controlled government is concerned. The law allows various forms of censorship used to control “foreign influence” of the press but there is no discussion of whether this was also used to control domestic press.

Chapter 15 Conductor of an Orchestra

LKY built a national airline, but insisted it make a profit. He engaged in enormous airport building projects without explanation for why they were necessary. He used the unions to pressure foreign politicians. LKY banned jury trials in Singapore, he appointed lawyers, many friends from his school days, to many important ministries related to commerce. He regulated the housing system and enforced desegregation quotas which he knew depressed the capitalization of the housing stock and went against the ethnic groups’ desires to segregate. Is this multi-cultural harmony, based on edict?

###

http://www.slate.com/articles/arts/culturebox/2003/08/cult_of_personalism.html

At one point, he brags that Uganda has more female hotel managers than any other country in Africa. “We have got four managers, and another two assistant managers.” This is a strange thing for the president of an entire country to worry about—but Amin seems to feel that he has to worry about it: Only if he controls everything, and only if he can keep the country in line, will Uganda prosper. Success, Amin seems to believe, is a matter of will and of heeding his good advice. People just need to work harder—women need to get up at “about 5 o’clock in the morning”—and love their leaders. If something’s wrong, then, it’s because a citizen has personally failed, not because the system is screwed up. Amin had no ideology. (“We are not following any policy at all,” he says at one point.) Like so many Third World tyrants, he was not a fascist or a Communist. His idea of the world was purely personalistic. He was an Amin-ist.

[similar to the # of car competition between LKY and indonesian leader; also, the rejection of ideology by LKY, following his own intuition]

A Primer On Ludwig von Mises’s “Socialism”

Why did Mises write this book?

Mises was attempting a scientific analysis of the socialist program. Much of the early writings on socialism concerned themselves with ideological critiques of the existing capitalist order rather than a scientific exposition of what socialism would put in its place. Mises wanted to explain: what is socialism? how does it compare to capitalism? what claims does socialism make about society? are they true? what can we expect the world to look like under a socialist order? and, is socialism possible?

 

What the heck is Mises saying?

Some people find Mises’s writing confusing. He uses big words (“panegyrists”) and archaic references, often in foreign or dead languages. Mises possessed a Classical education like many educated Europeans of his time and saw himself as part of a grand Western intellectual tradition that had taken over two millennia to develop, scientifically examining social phenomena by responding to particular people, schools or ideas which were well-known and publicly debated in his day. He was a systems-builder who started with a foundation and then added to it block-by-block, the end result being an intellectual skyscraper.

 

What are the biggest ideas in “Socialism” (Chapters 1-4)?

The word Capitalism expresses, for our age, the sum of all evil. Even the opponents of Socialism are dominated by socialist ideas.

To drink coffee I do not need to own a coffee plantation in Brazil, an ocean steamer, and a coffee roasting plant, though all these means of production must be used to bring a cup of coffee to my table. Sufficient that others own these means of production and employ them for me.

If the State takes the power of disposal from the owner piecemeal, by extending its influence over production… then the owner is left at last with nothing except the empty name of ownership, and property has passed into the hands of the State.

 

What is “Liberalism”?

Mises’s Liberalism stood for a social order built on respect for private property rights and contractual negotiation of social conflicts, which was once an intellectual project of thinkers of all nations and ethnicities participating in “Western civilization”. Today, Liberalism lives on most strongly in the ideas of the American Libertarian movement, which was kick-started in large part by the publication of Mises’s “Human Action” in 1949. Since then, Socialists have co-opted the Liberal name, having rightfully seen it as valuable due to its old popularity and intellectual prestige.

 

What is Socialism?

The essential idea is “a policy which aims at placing the means of production in the hands of the State.” It is the antithesis of the private property order of Mises’s much-cherished Liberalism, and diametrically opposed to the “consumer sovereignty” of the marketplace. Socialism is Utopian by nature, promising to deliver a perfect economic, political and social environment where all inequalities and disputes are resolved forever and the end of history, in the sense of a constantly-evolving, ever better social order, arrives.

 

Do Liberalism and Socialism have conflicting ends?

No! And this is the most fascinating part of the analysis. Socialist propaganda strives endlessly to create contrast between the goals of Liberalism and the goals of Socialism. The goal of both is to raise the material standard of living of humanity as a whole. The only thing that differs is the means chosen to secure those ends. But it is that choice which ultimately makes all the difference.

Notes – Human Action, Part I

Introduction

The introduction of the book is Mises’s explanation for why he wrote the book— to ground economics in the science of praxeology and to refute the various anti-economic philosophies. It seeks to answer the simple question, “Why did Mises write this book?”

 

  1. Economics and Praxeology

Economics is a young science. It introduced new knowledge about human society that did not fit into the existing disciplines of logic, mathematics, psychology, history or biology. It stood in opposition to earlier methodologies for explaining social phenomena, such as historicism, which focused on social aggregates and metaphysical supernaturalism. Other social philosophers focused on practically changing society through forms of social engineering, believing any kind of regularity to social relationships was non-existent and thus not worth considering in their schemes. The discovery of social regularities contained within economic study proved an intellectual revolution. But the revolution was limited in scope until a general theory of human choice (praxeology) could be developed.

 

  1. The Epistemological Problem of a General Theory of Human Action

Economic study suffered a serious early crisis during the “Methodenstreit” in which the epistemology of economics was argued between historicists (economic history), logical positivists (emulators of the natural sciences) and praxeologists (methodological individualists and deductive logic). These economic methodology debates quickly became radical in nature, leading to the first charges against rationalism in all of scientific debate which up to that point had accepted human logic as universal and immutable. Such criticisms bring into question ALL scientific findings, but they are really aimed only at economics specifically. Thus, Mises wants to ground economic theory in the general theory of human action to demonstrate it’s universality and defend it from polylogist and anti-rational criticisms.

 

  1. Economic Theory and the Practice of Human Action

Economics receives criticism as being an imperfect science. All science is imperfect, and is subject to change and improvement over time. One major school of criticism comes from naturalist scientists who blame economics for not adopting their own methodology— they suffer from a narrow focus and can not see the virtue in doing things any way but their own. The other major school of criticism is that economics hasn’t solved all social problems, so it must be barren. This perfectionist fallacy ignores the great progress economic theory in action has achieved so far, such as the “Industrial Revolution”, which was directly enabled by progress in economic thought applied to the political realm which freed the energies of entrepreneurs and creators. The modern era is characterized by ignorance and hatred toward economic science, it is also an era of social disintegration, wars and mass social calamities. The fate of civilization’s progress and the progress of economic science are directly intertwined.

 

  1. Resume

Mises wrote this book to situate economic theory within a wider body of human choice, known as praxeology. He did this to defend it from its critics, but also to expand the breadth and knowledge of the science to gain new insights on social phenomena. In that sense, Mises’s book is both reactionary, and revolutionary.

 

Part One, HUMAN ACTION, I. Acting Man

Human action is the study of means used to obtain certain ends. It does not study the ends themselves nor does it administer judgments about personal values. Human action is purposeful action, it is not animal action, instinct or reflex. And it does not concern itself with the reasons for ends being chosen. Within the framework of human action, all actions taken are either effective, or ineffective, they can never be judged as irrational or rational. For man to act, he must be aware of causal relationships that he believes he can influence. Human action demands methodological dualism— human action is assumed as an ultimate given, it is beyond the scope of praxeology to investigate causes antecedent to it. Human action is a necessary category of the life of man, he can not avoid choosing in the act of living, life itself being a choice over death. What man strives for in acting is to relieve felt uneasiness— some call this happiness but it is not an objective category and can best be thought of as an improvement in his position as judged by himself, though happiness is a commonplace referent for the concept. Positivism demands an experimental, inductive, natural sciences approach to knowledge of human action yet it tacitly accepts the methodological dualism of praxeology in appealing to man’s rational mind to consider an alternative way of performing economic science.

 

  1. Epistemological Problems of the Science of Human Action

Praxeology and history are the two main branches of the science of human action. History is a collection and systematic arrangement of data of human action experience in the past; it can not tell us anything that is valid for all human action and thus can not predict anything about the future, it can only tell what has taken place before. Complex phenomena with interlaced causal chains can not be used to validate an existing theory— the natural sciences require the ability to set constant all entities but one variable which is then tested. All human experience is filtered through human reason, which is a priori valid and universal to all individuals. It is the unique structure of the human mind and it is impossible to conceive of or interpret human experience other than through the logical structure of man’s mind. This gives rise to methodological apriorism, which means that it is impossible for man to conceive of a reality in which the fundamental logical relationships of his mind and his understand of causality do not hold. “Human knowledge is conditioned by the structure of the human mind.” Primitive man who is said to understand miracles is a man who has a difference of content of thought, not of the process of thought itself— the attribution of miracles to life phenomena was an early attempt at establishing causal relationships in the world around man. The concept of action implies belief that the means chosen are valid and that the end sought is valuable— it does not imply that the action is guided by a necessarily correct theory or appropriate technology for achieving the end sought. Action == reason, action is how man effects his reason in the world around him. All human experience must be filtered through pre-existing logical categories, for example, experience of money requires knowledge of the theory of medium of exchange to make sense of the data of money. “It is the meaning which acting individuals and all those who are touched by their action attribute to an action, that determines its character.” In this way, collective entities can have meaning for man’s actions even though methodological individualism holds, which implies that only individuals are capable of acting. “There is no social collective conceivable which is not operative in the actions of some individuals.” Methodological collectivism is revealed to be a false idol when considering the fact that there is a multiplicity of coexisting social units and mutual antagonisms— which social collective is “acting” in this case? Human action also follows methodological singularism, it is convened with concrete action of a definite person, at a definite date and a definite time, not action in general. Praxeology is causal-realist— what happens in acting? what does it mean to say that an individual did X, at Y place and Z time, and not A at B place and C time? What is the result of him choosing one thing and setting aside another? Human life is an unceasing sequence of individual actions, though these actions may be taken in the context of a larger project to which they belong. For example, “A cathedral is something other than a heap of stones joined together. But the only procedure for constructing a cathedral is to lay one stone upon another.” Historians must select which data are valuable to study by referencing a specific end or theory which they are using to make their choice. The historian seeks at “verstehen”, or understanding, he does not make up facts or interpret data as he likes but applies all his best knowledge of existing science in other branches to understand the “meaning” of the data he looks at— its implications and significance. However, this “understanding” is always limited by the current state of the underlying sciences he depends upon. Empirical data by itself is seen to be hollow when we acknowledge the recording of miracles and witchcraft by numerous human witnesses in past history— these events can not have logically occurred even if we have collected data of people verifying them in the past. Where the underlying science is unsettled, history may prove to be “open to interpretation” as to the significance of events recorded. There are no constant relations in the field of economics and so establishing things such as the “elasticity of demand” of a good are nothing more than historical facts, not future-predicting theories of human action. “Happiness” is not an inappropriate measure of human action due to technological limitations but because it is not objective and universal in its implications— it means different things to different people. Logic, mathematics and praxeology are universally valid for all humans capable of reason. “What counts for history is always the meaning of the men concerned.” All historical events are described and interpreted by means of ideal types, e.g., general, president, businessman, entrepreneur, doctor, tyrant. But ideal types belong only to history— human action concerns itself with real acting man as he is, which is the mistake made by the German Historical School or the American Institutional School, which built their theory around the “ideal type” of “homo economicus”. This was a make believe intellectual phantom with no connection to real, acting man. “Praxeological knowledge is within us” and is in this sense experience based, but it is something that belongs to everybody who is capable of human reason, and no amount of experience or description to an entity not capable of it could lead to their understanding. “The end of science is to know reality”, and we use our experience of daily life to decide what interests us and what we should explore, but not how we should explore it (theory building). Economic theory refers to practical problems simply because that is what man is concerned with understanding. Economics is necessarily politically contrarian because it serves to provide knowledge of the limitations of human action and thus the necessary restraints that exist for human legislators and warlords in their social engineering endeavors. Economics is holistic, special theories of economics must be encased in a greater framework which is itself consistent in order for special theory to be valid. Praxeology belongs only to man— superhuman entities capable of anything would not fit into a theory involving entities which have limited means of satisfying their ends.

 

III. Economics and the Revolt Against Reason

The classical economists destroyed all socialist theories and demonstrated their impracticality. Instead of admitting defeat because they could not construct a logical theory, the socialists turned to questioning the efficacy of human reason itself. They decided to substitute mystical intuition for universal logic (similar to divine right of kings for monarch). Marxian polylogism states that every social class has its own distinct logical structure within the mind. There is no biological support for this assertion and Marxists make no attempt to establish anything beyond this assertion. Marxian “ideology” is a doctrine which is incorrect from proletarian pure logic but which is beneficial to the class interests of the one who espouses it. Marxists provide no explanation for why minority policies which are deemed injurious to the wider social body nonetheless come to pass without the majority stopping them. “The fundamental logical relations and the categories of thought and action are the ultimate source of all human knowledge.” We can not even imagine a system that operates otherwise without referring to this logic in our inquiry, and we can not explain logic without using logic. This means logic is an ultimate given. Polylogism scan not explain why people of the same social class nonetheless arrive at different conclusions about the truth.

 

  1. A First Analysis of the Category of Action

Economics concerns itself with the way thinking man turns things into means by way of action. It is concerned with the meaning men give to things through their action and not what third parties think about such action. Man’s ends can be thought of as existing on a scale of values, which are ordinal. It is a simple rank of things he’d like more over things he’d like less, the satisfaction of which serve to remove felt uneasiness. These scales don’t exist in any real sense and are simply a tool used to understand the concept of action, and they are revealed definitely only through concrete action. The values that things have are within the person of whom action is taken, they are not intrinsic to the things themselves. Economics concerns itself with what man DOES do, not what he should or ought to do, e.g., prices of “sinful” goods must be explained from the way men value them, not how an ethical system claims they should. Action can be thought of as an exchange, where a less satisfactory set of conditions is given up for a more satisfactory set of conditions. Costs are the value of the next best thing given up. Profits are the excess of gains over costs. Anytime costs exceed gains, loss is incurred.

 

  1. Time

Change and time are two aspects of the same phenomenon. Thinking takes time and is itself an action. Action is always aimed at altering the events of the future because the present moment is fleeting. The present is an ideal boundary line separating the past and the future. The past is designated as the place where opportunity to consume or do has passed. The future is designated as the place where the opportunity to do or consume has not yet taken place. The present is the place in which it is too early to do some things and too late to do others. The uncertain nature of the future means that we have a vague notion at any given moment of how much of our action we can consider “now” or present. Time must be economized like any other good due to the fundamental nature of reality. Actions are never synchronous, they always are in a relation to one another of being sooner or later. Man’s values and thus actions can change over time. There is a difference between logical consistency, and praxeological constancy. Irrationality does not apply.

 

  1. Uncertainty

“To acting man the future is hidden”, it is possible in a metaphysical sense that events are entirely deterministic but this is not the experience that man himself faces; he faces an experience of choice. In matters of uncertainty, acting man faces two kinds of probability, class probability and case probability. In class probability, the actor knows all qualities of the class itself, but knows nothing of the character of any specific event which might take place within that class. In case probability, he knows some of the factors guiding the outcome of a specific event but not all of them and the outcome itself is unique and not categorizable with other “class” events. The case is characterized by its uniqueness, not its similarities, to other identical events. Human action is based upon case probability, where no safety or stability can be purchased or achieved— all human action is inherently speculative with regards to the likelihood of a given action achieving the aimed at end. Case probability can not be quantified because it would require the summing of non-identical items. And game theory is an inappropriate means to study human action because human action in the division of labor aims at benefitting all participants, not just sum (i.e., zero sum game). Competition has been wrongly characterized as a form of combat when really competitors win their customers by achieving excellence and preeminence. All allusions to military terminology or characteristics is purely metaphorical. Because praxeology studies multi-causal events, its prediction is necessarily qualitative and reliant on “understanding” (verstehen), it can never be quantifiable or mathematical in nature and there can never be any certainty with regards to its outcome.

 

VII. Action Within The World

Utility is that which has causal relevance to removing felt uneasiness. Subjective use-value utility is different than objective (or technological) use-vale utility. Objective use-value may be obscured, incorrectly utilized or multiplicitous in comparison to subjective use-value. Acting man does not choose between total supplies of various goods serving as means— he chooses only between the relative, discrete amounts for his purposes against other ends he could pursue. And because he satisfies his most urgent wants before his less urgent wants, he values the means “at the margin”, meaning in consideration of the value of the least urgent want he’d have to give up. The law of diminishing marginal utility is implied in the category of action. It is futile to attempt to calculate composite values of total supply based off of knowledge of partial supplies— this is not how acting man utilizes discrete amounts of supply. Supply itself is characterized by a set of homogenous goods which could equally satisfy a given want. Technological recipes are not part of supply, once known they are inexhaustible and can be used as many times as is desired— however, the action leading to their discovery does involve scarcity and supply. The law of returns simply states that for any combination of real factors of production there is an optimum in relation to the productive end desired with regards to most efficiently utilizing scarce resources. It can only tell us that there is an optimum. It can not tell us how to arrive at it— this is something that must be achieved through experience (technological vs. teleological knowledge). The law of returns applies to all branches of production equally. The indivisibility of certain means of production is what gives rise to the fact that often large-scale production is more efficient and therefore optimum than small scale variants. Labor is the employment of human physiological capacities as a means of obtaining desired ends. Leisure is preferred to labor and labor itself suffers from the law of diminishing marginal utility. Additionally, not all labor is equal in quantity and quality within an individual or population. “Men do not economize labor in general, but the particular kinds of labor available.” The supply of labor available is conditioned upon genetics, social conditioning and innate human subjective preferences for labor vs. leisure. The potential supply of labor for each kind of work necessarily exceeds the demand in the long run because labor can be shifted and retrained to perform new tasks. Labor is always more scarce than the material factors of production (land, capital). The substitution of “labor saving” machinery for human labor does not render labor abundant so long as there are still more material productive factors available to combine with the freed up labor to pursue additional human well-being. Activities which provide immediate gratification are not labor nor work but consumption goods themselves, of the first order.  Mises believes the creative genius is a special case which does not subscribe to the praxeological laws conditioning labor and is more equivalent to “manna from heaven” in that he toils under different conditions, for different reasons, and he can not be substituted, ordered/planned nor replaced. Production is not a creative act but one of rearrangement of already existent phenomena. Man is creative only in thinking, not rearranging the world according to his thoughts. Man’s capacity to work is a given much like the state of natural resources and animal substances. The material changes of man’s economy are due solely to the ideas he holds in his head about what is desirable. “Production is alteration of the given according to the designs of reason.”