The reparations question

I have noticed that the accusations people make often tell more about themselves than about those whom they accuse. This comes to mind as I read about the various liberal groups proposing reparations for the descendants of black slaves.

If the proposal were to pay reparation to the slaves themselves I would understand it and support it wholeheartedly. But why should the decendents of slaves, several generations later, be entitled to reparations? And why just to blacks? What about others who have faced systematic discrimination in our society like women, Jews, immigrants, Asians, the Irish, Native Americans, the handicapped, the poor, etc. etc? Indeed, almost all of us have ancestors who suffered discrimination and exploitation somewhere.

No, what I see here is clearly racism from the very people who are so quick to accuse anyone else who doesn’t agree with them of racism.  And it couldn’t be more clearly a racist proposal – it proposes to offer reparations explicitly on the basis of race, and exclusively to one race – how much more racist could one get?

Recommended: Fleet Tactics and Coastal Combat, 2nd Edition

This is a recommendation, for those sufficiently interested in military matters, for Wayne Hughes’ 2003 book Fleet Tactics and Coastal Combat, 2^nd Edition, which is a revision of his 1986 first edition, which was profoundly influential in naval circles. Why this book?

Of the four nations which currently threaten to cause serious trouble in the world, Russia, Iran, North Korea and China, it seems to me only China is a real threat to the US. North Korea and Iran are mostly focused on regime survival, and Russia is a shadow of the old Soviet empire, able to cause trouble along its immediate borders but not much else. China, on the other hand, is addressing its serious internal problems by stoking aggressive nationalism, building up its navy, and might eventually try some military exploits in the China Sea, like invading Taiwan. So if we get into a dust-up with China, it will undoubtedly be a naval engagement in the seas bordering China, and probably within the first island chain.  

Now what is important, as Hughes points out, is that naval warfare has changed dramatically since World War II.  The advent of long-range precision weapons – ballistic and cruise missiles and now hypersonic missiles – has replaced not only the big guns of warships, but has even changed the role of naval aviation.  Ships at sea are now at risk from missile attacks from many hundreds of miles away, and even from shore and inland missile installations. But missiles are expensive and large, and ships which used to carry thousands of rounds of shells can only carry dozens or perhaps low hundreds of missiles, which suggests tactics which encourage ships and shore installations to empty their missile magazines too early. Moreover, precision missiles attacking moving targets require precision targeting, from airplanes, drones, space, or even submarines, which again changes tactics.

All of which means a rethinking of what a modern naval fleet ought to look like. Are carrier battle groups still effective against a near-peer opponent, or are they just compact targets for swarms of precision missiles? Should we build a few big expensive warships or distribute our power among larger fleets of smaller, more expendable ships? Can surface ships even survive a modern naval battle, or should we emphasize stealthy submarines more?  Where should we put our limited defense funds most effectively? These are important questions that need an understanding of naval tactics to evaluate.

Hence the recommendation for Hughes’ book.  It is academic in nature, though quite readable, so it takes some commitment to study more than read. But I have found it worthwhile.

He has, by the way, written, coauthored or edited several other good books along the same lines, including Fleet Tactic and Naval Operations, 3^rd Ed (2018), Fleet Tactics: Theory and Practice (1986), and U.S. Naval Institute on Naval Tactics (2015).

 

Biden’s Infrastructure bill

There is no question that the nation needs to put more money into its crumbling infrastructure. The American Society of Civil Engineers (ASCE) estimated in 2017 that the U.S. needed to invest about $2 trillion just to bring the current infrastructure back up to satisfactory condition (ie – bridges aren’t falling down).  Economists have estimated that every dollar invested in infrastructure adds about $3 to the nation’s GDP, so it is a good investment.

The Trump administration made a lot of promises about this, but in effect didn’t do much if anything. So it is promising that the Biden administration is proposing to do something meaningful about infrastructure.  The problem is that this isn’t really an infrastructure bill – it is a massive liberal wish list pasted onto a token infrastructure investment to give it political cover.  

The bill totals about $2 trillion, about what the ASCE estimated would be needed just to bring our current infrastructure up to par. But in fact only about half of this bill is really about infrastructure.

Here is how it breaks down in the current proposal:

·         $621 billion for transportation (roads, bridges, ports, airports, trains)

·         $111 billion for water (replace lead pipes, improve drinking water quality)

·         $200 billion for broadband and electric power improvements

For a total of $932 billion in real infrastructure improvement

Another $764 billion goes for housing, education, child care facilities, and the like, with a final $180 billion for research and development.

I’m all for the investment in infrastructure (though some of the efforts proposed, like re-activating the wildly-expensive California high-speed rail project, are highly questionable). And certainly some of the non-infrastructure items are worth talking about, though it is not clear that these should be the federal government’s responsibility, especially if they are being funded with yet more federal debt.

And that brings up the question of just how this will be funded. Biden proposes to fund it by taxing corporations and the rich more. Lots of luck with that! Big corporations can afford to hire masses of lawyers and accountants to find every legal loophole that a compliant Congress has given them over the decades in return for their campaign contributions, which is why many of the largest corporation (Nike, Amazon, Hewlett Packard, FedEx, etc) pay no taxes at all, whatever the corporate tax rate is supposed to be. And the really wealthy do the same.

So in the end, whatever the promises made, this will no doubt be funded by yet more federal deficit. It might make sense to fund the real infrastructure portion with federal debt, despite the risks of pushing the already massive debt yet higher. But funding the rest of the liberal wish-list with debt? That seems imprudent, though no doubt politically popular.

 

Meaningless activitry

Three news items caught my eye this week. One reported that China just cracked down on an esports (electronic sports) cheating ring, seizing $76 million along with luxury cars and other ill-gotten gains. For those who haven’t been keeping up, esports, or competitive video game playing for prizes, and the gambling that accompanies it, has become a big business. Clearly, if cheaters can amass $76 million and change doing it. The largest competition, the International, offered a bit over $34 million in prizes in 2019, and had 90 players in 18 teams competing for that money. The games played are usually relatively violent first-person shooter games like Fortnite or Dota 2, in which very quick reflexes matter.

Drexel University and Northwestern University in the U.S. even offer an undergraduate business degree in e-sports business, and there is a whole class of investors who invest in it for profit. Major competitions are even broadcast.  The global market for esports in 2019 was about $700 million, and growing rapidly.

The second news item reported that there will continue to be a shortage of video cards (GPUs), because amateur bitcoin miners are buying them all up to build home bitcoin mining systems. Again, for those who perhaps haven’t been keeping up, bitcoins are a pseudo-currency which has recently reached astronomical heights ($60,000+ per coin at its most recent peak) of a flurry of speculative trading.  Bitcoins are “created” by building huge computer banks to solve a difficult but otherwise meaningless mathematical equation – in essence guessing very large random numbers, though the actual mathematics are a bit more complex than that.  

The point is that bitcoin mining has also become a big business, with major investors building massive bitcoin mining systems based on thousands of specially-designed microchips and drawing immense amounts of power. As of January, 2021, bitcoin miners were drawing more power than the entire nation of Argentina, about 130-150 terawatt hours per year and growing rapidly.

The third news item reported that high-speed trading firms in the stock market were shifting to hollow-core fiber cable to connect their trading sites to the market computers because it gains them 1-2 nanoseconds more speed in making their trades. Apparently some firms intend to replace hundreds or even thousands of miles of perfectly good fiber cable with the new cable, just to gain a nansecond or two advantage over their rivals. Once again, for those who might not have been following this field, high-speed trading firms make their money by having computers that take advantage of tiny (microsecond or even nanosecond) delays in the market that create momentary imbalances in prices between locations.

What connects these three disparate news items? They all involve massive investments in money and resources and talent in essentially meaningless activity. I suppose one could make a weak argument for the value of esports as entertainment, no different than football or basketball or movies.  I don’t see any comparable argument for the value of high-speed trading or bitcoin mining. Nothing is actually created or built, no useful service is delivered to the nation, no useful knowledge is added to civilization. It is just, I would argue, a massive waste of money, resources, fossil fuel, and bright minds.

I have always thought that gambling had an essential nature; it is a sucker game. That is, in almost all gambling what is involved is someone making money out of fleecing suckers. Casinos don’t really care who wins or loses from moment to moment, because they take their percentage on every play the suckers make. The stock market operates largely the same way, though it is marginally more socially acceptable.  But in fact, most daily market activity is people betting against one another – will this stock rise or fall? If it is high right now, can I find some sucker to sell it to before it begins to fall?

It seems to me the three things I discussed above, esports, bitcoin trading, and high-speed market trading, are essentially sucker games in which a few people are willing to make a big investment because there are so many suckers waiting to be fleeced. Clearly they are right, because a few people are making millions or even billions from these activities.

I can’t help but worry about the state of the nation if this is what some of our best and brightest minds are drawn to, and if we are wasting our resources on such meaningless activities.         

 

Waves vs deep currents

The surface of the ocean is covered with waves, sometimes in storms even spectacular waves. It is the waves that draw and hold our attention when by the ocean. Yet in fact waves are nothing more than water molecules moving up and down, and hardly going anywhere. Mostly nothing really significant is happening. Deep within the ocean, on the other hand, are massive currents that transfer heat from one part of the planet to another and make a very significant difference, keeping England warm for example.

This is a good metaphor for the political world. On the surface are endless fads, crises, and one-day emotional issues. People get outraged about this or that, the media goes wild over it, and a month or two later it is forgotten in the rush to be outraged over some new issue. Like the waves, this is essentially meaningless, even if it captures our attention and emotions for the moment. But underneath this there are deep and powerful currents that will shape the world of the future.  The trick is to try to ignore the waves and focus on trying to discern the deep currents.

The partisan battles over Trump’s policies and behavior, and now over Biden’s policies and behavior, are in the long run just waves, even if some media pundits try hard to convince us that there are existential issues at stake. The daily press attacks on one side or the other, and the endless largely childish attempts to spin the political narrative toward one side or the other, are equally insignificant in the long run, as are the inevitable scandals. It is easy to get emotionally drawn into these battles and issues and scandals and movements, but mostly it is a waste of time and energy. Who even remembers most of the issues that so outraged and exercised us a year ago, let alone ten years ago?

And for all the vitriol between the US political parties these days, in truth both are fundamentally almost the same, equally right or wrong on (or, perhaps more likely, oblivious of) most of the truly consequential issues, equally beholden to wealthy individual and corporate patrons. And both are largely staffed and funded by the wealthy elites, and therefore remarkably disconnected from the lives and issues of the majority of the voters they claim to represent, so although watching the Washington political street fights may be entertaining and emotionally engrossing, I would argue it too is largely a waste of our time and energy.

The deep political, cultural, and social currents are what ought to really warrant our attention. It is of course much harder to see the deep currents than the surface waves, and some of them won’t be obvious until years after the fact, if then. But it is worth trying to discern them.

So what deep currents might one identify at the moment, currents that are worth paying attention to? Let me suggest some possibilities that I see:

Among the first tier, those likely to have the most profound effects worldwide, two stand out:

1)      The precipitous drop in the birthrate worldwide. As the UN’s demographic charts demonstrate, many nations, including major states like China, Russia, Japan, Germany, and France, are in the process of rapidly depopulating themselves, almost or already past the point where their birthrate can recover because too large a proportion of their population is past the childbearing age. This will have major effects over the coming decades in all sorts of places, including at least trade patterns, international balances of power, and the internal political and economic stability of many nations.

2)      The ongoing climate change. Change is occurring, and for a number of reasons it seems to me highly unlikely that governments and populations worldwide will be able to make the very expensive, painful, and culturally difficult changes in time to actually halt this process, let alone reverse it. The eventual climate changes may in fact turn out not be as profound as some alarmists claim, but they are already enough to begin to shift weather and rainfall patterns, and hence to disrupt agriculture around the world. Since much of the world has a precarious food supply anyway, this will have a large effect, potentially producing widespread famines and massive migrations.

Among the second tier, perhaps somewhat less profound and/or more localized than those in the first tier, but nevertheless highly significant, two more stand out:

1)      Universal connectivity. Although the roots of this go back at least to the invention of radio, and perhaps even to the invention of the telegraph, it has accelerated greatly with the invention of the internet and the widespread availability of cell phones. The fact that humans everywhere on the planet can now be connected almost instantaneously with each other and with vast quantities of information and misinformation has produced a mass of new uses and abuses. This is in the process of substantially changing the nature of commerce, warfare, education, crime, government and politics, among other things, and it is still really in its infancy. In the long run this will probably be seen as a step function in civilization as significant as the invention of the printing press in 1450.

2)      The biotech revolution. The “green revolution” of the 1960s which so vastly increased the world’s food supply, especially in third-world nations, is perhaps the leading edge of this current. But recent advances in manipulating the chemistry of the basic life processes opens up an immense potential for new uses and abuses. Not only may it eventually produce substantial changes in the world’s food and energy supply, it may also eventually extend the productive life of humans, which would have profound demographic effects, and perhaps produce profound new ethical dilemmas.

One might identify a third tier, of even more local currents that might perhaps have a significant shorter-term effect over, say, the next few decades or the next century. In that tier I would suggest:

1)      The withdrawal of the Pax Americana.  In process since at least the Clinton administration, and driven by the demise of the unifying Soviet threat and the turning inward of the American voter, the slow withdrawal of America from the role of the world’s policeman (despite political rhetoric to the contrary) has the potential to revert the world to its much more normal state of endless local conflicts, and bring to an end the (relatively) peaceful world in place since the end of World War II.

2)      The dissolution of the Russian and/or Chinese empires. One or both of these nations may not in the end dissolve, but demographics alone suggest it is highly probably they will over the next decade or so, and both face other existential threats as well. The disappearance of either or both as potential rivals to US dominance would change not only the US political calculus, but the attitudes and alliances and trade patterns of many other nations as well.    

Three more possibilities, which in time may or may not turn out to be significant in the long run are:

1)      The move to space.  The burgeoning business of using earth orbiting satellites is really just an extension of existing technology, though certainly a useful one. But the move to extend the human species to other planets would be another substantial step function in human civilization, much more significant even than the expansion of European civilization into the new world in 1492. But this is an extremely difficult step involving among other things mind-bending distances, and while we have landed humans on the moon and we may eventually be able to put a token human presence on other nearby planets for a few weeks, it is not yet clear we can really plant a self-sustaining colony on other worlds or in deep-space habitats. But if we can, this would certainly be a very significant deep current.  

2)      Artificial intelligence. This too is a field still in its infancy, so it is still far too soon to tell how significant it will be in the long run. But it has the potential to produce something like intelligence – at least in limited domains – that far exceed that of humans. If this proves to be so, it could have profound effects on civilization.

3)      Fusion energy. Commercially viable fusion energy is said by some to be at least 40 years away, and has been 40 years away for the last 50 years. But there are promising advances, and if in the end it proves commercially feasible to produce energy by fusion, that would make a profound difference in a number of areas, not least in perhaps slowing the rate of climate change.

I would argue that it is a far better use of our time, attention and energy to focus on areas such as these, the “deep currents” of civilization, than to waste those resources on the “waves”, the daily noise spewed every day by the media, emotionally engrossing as that noise may be.

On "being stupid"

The geopolitical strategist George Friedman (author, most recently, of The Storm Before the Calm) has a short (14 minute) piece on YouTube here, part of a panel in December 2020 in Korea. It is well worth listening to. He is discussing China, and the popular media perception that China is a growing power and will eventually displace the U.S.  In that context he talks about teaching his research staff to “be stupid”. In other words, not to get all wound up in sophisticated analysis, but just look at the implications of the plain facts before them.

That certainly applies to China. The media and the professional talking heads love to wave the China bogyman around, and many are apparently gullible enough to buy Chinese propaganda about its growing might. Yet in fact, as Peter Zeihan, Stephen Kotkin, Ian Brenner and other geopolitical experts keep reminding us, China is where it is today only because of the US, because we provide a vast export market to feed their economy and worldwide security to ship their products anywhere. If the US walks away from that, China is in deep trouble. And as far as a military threat, China depends heavily on oil shipped thousands of miles by the ocean from the Middle East, in waters dominated by India, Japan, South Korea, Taiwan, Australia (all U.S. allies) and the U.S. Start a war and we cut that on day one and by day 10 China can’t fuel their ships and planes, let alone keep the lights on at home.*  And of course the US export market which undergirds their entire economy would disappear.

But it seems to me this idea of “being stupid” – not getting lost in elegant analysis or listening to media “experts”, but just looking at the plain facts in front of us – applies in many other fields as well. The excellent 2015 movie The Big Short, based on a real-life story, which I discussed in several posts back in October of last year, is another example. Anyone who was ”stupid” enough to just look at the craziness in the housing market could have seen the danger that eventually brought on the 2008 market crash.

And so I wonder what “being stupid” right now might suggest.

Bitcoin, a virtual currency with absolutely nothing backing up its value, has risen from less than $1000 to $60,000 per coin recently. Median home prices in San Francisco are about $1.6 million, and a 500 square foot studio condo rents for about $4000 a month. Amateur day traders are taking out loans on their houses to play the market and try to outsmart the professional hedge funds. The stock market has risen to astronomical heights, with a price-to-earnings ratio (~40) more than double the historical average (~15). There are companies floating IPOs that make them worth (on paper) more than General Motors, yet have never yet produced a product.

And in the midst of this the federal government is falling all over itself (for the best of reasons, to be sure) to pass one multi-trillion dollar “stimulus package” after another, all with borrowed money, while the national debt as a percent of GDP is now higher than as it was during World War II. The fed is pumping new money into the system at a great rate (35% of the money in circulation has been “created” in the last 12 months), which ought to bring on inflation, yet inflation (thus far) remains low and the economic experts freely admit that they have no idea why it isn’t behaving as they think it should.

If I were sufficiently “stupid” I would think that this can’t last, that this is all a series of bubbles waiting to pop, and someday, probably soon, there is going to be a very painful “readjustment”. I keep remembering the story that Joe Kennedy in 1929 decided to sell off his holdings in the market when a shoeshine boy started giving him market tips. I wonder if we haven’t reached that stage today.        

------

* China currently consumes about 14 million barrels of oil a day in peacetime. In wartime that would vastly increase. China’s domestic production is about 4 million barrels a day, so even in peacetime it has to import about 10 million barrels a day (about 5 supertankers per day), almost all by sea from the Middle East. There is an overland oil pipeline from Kazakhstan, but at maximum flow it supplies only a relatively small amount, about 120,000 barrels a day.