Economics and Prosperity for Our Children

Our Shrinking Economy

When I heard Warren Buffett say, "the pie is always growing," I thought to myself, "your pie is always growing." The middle-class economy has been shrinking for decades. The newspapers only tell us the Dow Jones Average or the S&P 500 or the GDP is increasing.

While running for the local school board in 2010 I ran across this included chart that shows the decline in average disposable income from 33% income to less than 2% over 40 years.

In my campaign I said we need to reduce the emphasis on teaching science and increase emphasis on teaching economics and finance.

Our children who are currently graduating from colleges and universities are having trouble finding jobs. We think it is just a temporary down-turn, but I believe there has also been a steady decline in jobs for the middle-class, a decline that has been going on for decades and has been hushed-up by the papers in the same way the local papers hush-up the decline in Plano schools.

Reliable and Useful Economic Data

The state of Texas needs to accumulate and analyze economic data so we are not dependent on the federal government for economic data and forecasting. After Greenspan let us down, we cannot rely on the Federal Reserve nor on the federal government for economic assessments.

We need data so we can understand what is happening and so we can spot opportunities. We need to be able to devise defensive financial strategies and to spot opportunities for growth.

Foreign Investment

We need data to help us plan investment opportunities for foreign capital to invest in Texas and in our neighboring states. We need data to help us plan capital investment into factories or into export businesses.

Our national economy is a wreck because Wall Street bankers could not or would not find capital investments in American factories for foreign capital. Instead, Wall Street bankers diverted foreign capital into Collateralized Debt Obligations.

If Wall Street bankers will not find good opportunities for foreign investors, then Texans must do so. For the sake of our children's future and the future of the world economy, Texans must do a better job creating good investment opportunities that lead to job creation in Texas.

If Texans fail to develop good investments, then eventually no one in international banking will want U.S. dollars, the dollar will plunge in value, and we will all be ruined. But if we succeed, then Texas will drive the American economy and our children, as well as the whole nation, will prosper.

Robert Canright

The Exploitation of Innovation

We need more focus on the exploitation of innovation than upon innovation and creativity. That is why I am glad U.T. Dallas has an Institute for Innovation & Entrepreneurship. It is entrepreneurship that turns innovation into products, jobs, and profits. And you cannot have entrepreneurship without the financial resources to turn inventions into products. Again we find that U.T. Dallas has a pertinent resource, it's Center for Finance Strategy Innovation. I look forward to the day when U.T. Dallas is a Tier One university. This university is a great resource for our community and for the state of Texas.

The story of PARC, the Palo Alto Research Center of Xerox, is a perfect example of how innovation is not always exploited correctly. The PARC developed windowing, but gave Steve Jobs a tour without getting him to sign contracts to protect the intellectual property of PARC. So Apple Computer exploited the technology Steve Jobs saw on his tour of the PARC. Besides windowing, he got to see bitmap graphics, a computer mouse, a laser printer, the graphical user interface (GUI), and WYSIWYG text editing: everything that made the Macintosh computer a successful product. The PARC also invented Ethernet, but it was 3Com that got rich from it. Microsoft later copied the idea of windowing from Apple, and Apple could not sue because Apple copied the idea from the PARC. Copying good ideas is an important business principle and we should put more emphasis on exploitation than on innovation.

It is better to be an exploiter than an innovator. You know who Bill Gates is, but who is Tim Paterson? Tim Paterson wrote QDOS (Quick and Dirty Operating System) for Seattle Computer Products. Bill Gates at Microsoft knew I.B.M. needed a disk operating system for their new PC, so he bought QDOS from Seattle Computer Products for $50,000 and licensed it to I.B.M. as MS-DOS. Whose fortune would you rather have, Tim Paterson's or Bill Gates? This is a perfect example of why it is better to be an exploiter than an innovator.

Our children's future prosperity will depend more on their exploitation of innovations than upon their own innovations. It is perhaps better to not get distracted with innovation, but to focus on the exploitation of other people's innovations. The public schools place too much emphasis on creativity and give out children a distorted perspective on the place of creativity within our business culture.

Having worked at high tech companies I can say that most high tech companies have more innovations than they know what to do with. Their problem is not a lack of innovation. A tech company has trouble sorting the winners from the losers, and figuring out how to turn a winning innovation into a home run. Seattle Computer Products could not turn QDOS into a home run, but Microsoft could. The challenge is exploitation, not innovation.

Innovation does not have to be complicated. This is an important lesson our children need to know. When I was working on super computer technology at Convex Computer I read the obituary of Baron Marcel Bich, the inventor of the Bic pen, Bic lighter, and the Bic disposable razor. Three simple products and he became a billionaire, was made a French baron, and was set for life. It is much harder to develop a super computer than a disposable razor. Convex Computer no longer exists, but you can still buy Bic products.

Steve Jobs figured out that technology based products are ephemeral. He gave up computers and turned to Pixar, developing products with long lasting sales: movies for kids. Our children need to know there are hard ways to make money, and easier ways to make money.

Our children need the best education they can get from PISD. They need to hear lessons that will help them prosper.

Robert Canright

To read more about PARC, try Fumbling the Future: How Xerox Invented, then Ignored, the First Personal Computer, by Douglas K. Smith

Texas Economic Forum

Action Plan

I was asked by a reader for an action plan to achieve a Texas Economic Forum, a coming together of minds to find a way to save the American middle-class from extinction.

One step to finding a solution is to create an Economics Institute in Texas with a mission to save the American middle-class. Every economics institute is narrowly focused. U.T. Dallas has a Institute for Urban Policy Research, which does not seem to take a national and global outlook. U.T. Dallas also has an Institute for Innovation and Entrepreneurship, which can contribute contribute to growth but does not try to look at the big picture. U.N.T. has an Institute of Applied Economics that could examine national and global economic patterns, but does not, judging from recent publications. Texas Tech University has a International Cotton Research Center. U.T. Austin, Texas A&M, and S.M.U. do not appear to have an economics institute associated with the university.

Working With Other States

If Texas can establish an economics institute either as a government agency or as a part of a university, then we can share our findings with neighboring states. If we can form a Heartland Union, then a broad coalition like that can put many minds together and martial resources that would exceed those of most nations.

Independent Economic Programs

With a Heartland Union and a coalition of economic institutes then we could formulate policies and apply broad resources to reverse the economic decline of the American middle-class. We cannot look to Washington for solutions because Washington is in the pocket of Wall Street financiers, and Wall Street is responsible for the decline of the middle-class.

Robert Canright

Texas and The American Economy

Summary: There is no single American economy. The middle-class pie is shrinking while the Wall Street pie grows. Texas needs to think for itself about national and international economic conditions and trends. If we cannot find a way to restart the middle-class economy then the middle-class will disappear and our children will suffer. If anybody is going to fix the problems facing America, it's going to be us Texans.

The American Economy

I remember hearing Warren Buffet discussing the economy and saying that "the pie is always growing" and thinking, "Whose pie?" A couple of minutes earlier he explained the unfairness of American tax law by telling us that the lady who empties the trash in his office pays a larger percentage of her income than he does. So we could say that America has different economies distinguished by the taxes paid by each sector of the economy. There is no single American economy.

Instead of saying, "the pie is always growing," Warren Buffet should have said his pie is always growing.

The Shrinking Middle-Class

People at the bottom of the middle-class have been falling out of the middle-class as their jobs have disappeared. The middle-class can barely pay it's bills. Dr. Elizabeth Warren explains in the Huffington Post article, America Without a Middle-Class, that expenses have been increasing faster than wages. If you look at the article, the 2nd chart compares expenses in red against income. You will see that in the decade of the 2000's that average income went up only 1.6% and yearly average income exceeds household expenses by only $794. This means that one bad car accident, a broken furnace or air-conditioner and the average middle-class family has to borrow money for necessities. The middle-class pie is shrinking while the Wall Street pie grows.

A Texas Economic Forum

If we want our children to have a future, we better wise-up fast about economics. If the TV tells us the American economy -- the Wall Street economy -- is booming, while the economy we live in is dying, then we cannot trust what TV news tells us about the economy and we need to find a better source of news about the economy.

Since the federal government allowed Wall Street to crash the economy, we cannot trust federal agencies to inform us on the state of the economy. We need to think for ourselves. A this time the World Economic Forum is meeting at Davos, Switzerland. Since international banking drove the entire nation of Iceland into bankruptcy, there is no international source of economic wisdom, so Davos is worthless.

Texas needs to think for itself about national and international economic conditions and trends. We need a Texas Economic Forum that focuses on a true understanding of economic realities. We should invite neighboring states to share the experience of examining economic data and planning to survive.

If we do not get smarter, we will continue to get fleeced. If we cannot find a way to restart the middle-class economy then the middle-class will disappear and our children will suffer.

We have to think to ourselves, "If anybody is going to fix the problems facing America, it's going to be us Texans."

Robert Canright

PS: I was asked by a reader to write an action plan, which is in this separate post: the Texas Economic Forum

The Heartland Union, Part 2

The Need for the Heartland Union

I mentioned in a previous post, The Heartland Union, that Texas needs to stand up for middle America because neither political party stands up for the middle class. America needs better leadership, and Texas needs to stand and deliver that leadership.

California, an Unexpected Ally

I had assumed that Texas needed to ally itself with states that share similar values. However, one of my readers pointed out that shared financial interests can substitute for shared values. My previous analysis of electoral college votes had no scenario where California would ally with us. However, both California and Texas have off-shore oil revenue that is siphoned off by the federal government.

The off-shore oil is off the coast lines of the states. The 10th amendment to the U.S. Constitution gives all rights to the states that have not delineated to the federal government. It is only by coercion that the feds take our money. But the mechanisms the feds use to take our money can be undone if we form a political alliance that gives us the power to undo these mechanisms.

California has 55 electoral votes, Texas has 34, and Florida has 27. That is 116 of the 270 needed for the Presidency. We all have off-shore oil and lots of votes.

Resource Issues

Oil is not the only resource issue. The federal government has meddled with mineral rights and access to resources in many states. It was also brought to my attention that the federal government shut down access to lumber in national forests, putting many people out of work, including Texans.

Leadership

With foresight and leadership, Texas can form an alliance with many states and wrestle power away from the crowd that is so badly mismanaged America that we should name the decade that just ended, from 2000 to 2009, the Decade of Failure.

America needs better leadership. Texas needs to stand and deliver that leadership, but we cannot do it alone. We need to create an alliance, a Heartland Union, to be the springboard for a better future.

Robert Canright