The One Test to solve all our problems!

Philosophy deals with the realm of thoughts.

Psychology deals with the realm of motivation and drives.

Economics deals with the realm of action.

As the US is spiraling towards an inevitable recession- whenever the Fed’s Chairman denies anything you know it’s actually happening- people’s appreciation for economic theory should be at its height. On a day-to-day basis, as a professional on LinkedIn, economics rules your life without you even paying attention. That’s because thoughts and drives are hidden (though in CI we learn how to unmask some of them with a technique known as RBD, Reverse Behavior Decoding). But once a person or a company act, there are consequences. Economics studies actions and their consequences. (Public Choice Theory, a subset of economics, studies the consequences of action by some - the “ruling class” in its various forms- on the welfare (or misery) of many.)

On a day-to-day basis, as a professional on LinkedIn, economics rules your life without you even paying attention

Without judging actors’ values (moral philosophy) and goals (drive psychology), economic analysis’ sole focus on (logically predicable) consequences is the purest form of reasoning. Some people think economics is about money. But if you read the works of Ludwig von Mises and Friedrich Hayek you quickly realize it’s way broader: It’s about all actions and their logical, inevitable, unavoidable consequences.

No wonder economic theory is often maligned by those who can’t argue with the logic. It wins by default when the other side (on the Left or the Right) calls it “misinformation”, disinformation, racist, ignorant, liberal, right wingers, or enemy of the planet. When you warn your kid to wear a helmet you use economics- your son’s action can have unintended consequences. When people vote, on the other hand, they often don’t think about economic theory. Voting for many is an emotional issue. So far, the ability to think through consequences is not a legal requirement for voters.

Maybe one day we will have a test like the famous Turing test for intelligence, before people can vote. Call it Sowell test? Read his quotes in the link. One example: “People who pride themselves on their "complexity" and deride others for being "simplistic" should realize that the truth is often not very complicated. What gets complex is evading the truth.”

The Sowell Test is more powerful than the Turing Test for the future of Intelligent Life

First question on the Sowell right-to-vote test may be: When you malign, restrict and outright forbid oil and gas drilling in some areas, creating uncertainty for energy companies, the supply of oil and gas will

1.?????Increase a lot and quickly

2.?????Decrease?

3.?????There are 9000 permits not being used!

4.?????The unused permits represent non-viable drilling areas?

5.?????Changing regulations create certainty and build confidence!

6.?????Changing regulations create arbitrary business conditions

7.?????None of the above and all of the above depends on your IQ

8.?????It’s all Trump’s fault?

9.?????Who cares? I live in CA and I am happy to pay $7 a gallon!

10.??Vote Democrats, regardless

11.??What’s the question again?

Using an a-priori principle that people act according to their preferences and their incomplete and subjective perceptions of the situation is often sufficient to predict the most significant consequences. Managers ignore those at their peril. Politicians ignore those for a reason.

?Example One: The consequences of too many people paying taxes

Sowell is not the only mandatory reading for analysts of all kinds. Dan Mitchell (see link below), IMHO one of the most prominent voices in contemporary political economics, describes 12 Theorems of Government. Analyzing the recent failure of single-payer healthcare bill to pass in the bluest of the blue state of CA, he sums it up beautifully: “…people (sadly) are willing to use government as a tool to steal from their neighbors. But the message of the Twelfth Theorem is that they generally don’t like to steal from themselves.”

The power of true economics: People generally don’t like to steal from themselves.

The reason for the failure is that the consequence of passing this benevolent bill of a single payer system requires a (very) large increase in tax. Such a large increase will necessarily affect not only the (Obama-defined) “rich” but the middle class (if is still in existence in the Bluest of the Blue CA). Prediction: Such a bill will be more likely to be enacted when the percentage of people NOT paying taxes exceeds the percent of those who do.

At least on the Federal level (47% nontax payers?), that is not that far in the future. Of course, if you understand the unintended consequence of a single payer system beyond just stealing from yourself, it is a strong argument for a flat tax. But then values and drives come into play and people vote with their amygdala, not frontal cortex.

Example two: The consequences of most basic CI failure

In my new book, The Opposite of Noise, I discuss ATT’s desire to get rid of CNN. It’s simple economics: ATT needs to focus on its 5G, and CNN’s main asset, its reputation, has been shattered recently. Easy-peasy. The buyer turned out to be Discovery Networks, home of the Discovery Channel, TLC, the Oprah Winfrey Network and Animal Planet. Not a natural home for CNN (except for perhaps the last channel).

The more interesting bit here is the competitive intelligence failure of CNN’s former CEO, Jeff Zucker. A shrewd, seasoned, savvy executive he proved still an amateur when it came to insight (but I am sure he extolled DDD- data-driven decisions, or more accurately, Dummies Doing Data :).

If you need evidence Data-Driven Decisions are crock, read below

According to some sources, Zucker engineered the deal with TLC, by which Discovery buys Warner Media (CNN’s parent) from ATT, with his golf buddy, Discovery’s CEO, Zaslav. It sounds right- a lot of deals are made this way. The exact price may be subject to some more careful analysis by the CFO staffers, but the way deals happen in real life is still “a friend brings a friend.”

Why did Zucker wish his friend at Discovery to buy Warner Media? Because Warner Media’s Chairman, one Jason Kilar, apparently stripped his failing CEO Zucker of some of his responsibilities, as CNN’s ratings fell to less than half the ratings of Fox News. Bypassing his boss, Zucker scored a tactical victory by being the guy who brought the deal to ATT’s boss, one John Stankey, leaving Kilar out of the loop. Sweet revenge.

Victory to the shrewd CNN’s chief, right? Not so fast. Zucker failed in the most basic CI task- understand the perspective of who you are dealing with. Discovery’s largest shareholder, John Malone, publicly supported Fox News and is on the board of the Cato Institute, a leading, highly reputable thinking tank, and a huge thorn in the side of many amygdala-voting Democrats. ?

Talk about shooting yourself in the foot (or the golf club). Malone quickly ousted Zucker using a technicality (Warner Media’s own HR protocol regarding undisclosed relationships. How ironic- that’s how CNN’s star, Chris Cuomo was fired by Zucker). Malone then said about CNN : “I would like to see CNN evolve back to the kind of journalism that it started with, and actually have journalists, which would be unique and refreshing.”

I don’t think one can evolve back (otherwise “progressives” will be forcing us to the Bronze Age), but it is clear that actions have consequences. Often, unintended.

I use this simple principle to teach about flushing out blindspots.

Economics 101, CI 301 .

Alternative perspective: I don’t expect anyone to follow me (except buying The Opposite of Noise, erecting a shrine to it, using it as an Oracle, and reading a passage or two from it every week in a house of worship and to kids at bedtime). But here are two economists on LinkedIn that are definitely worth your following:

1.?????Dan Mitchell

2.?????Richard Ebeling

If their analysis makes you mad but you find yourself unable to contradict it, it’s your amygdala acting up again. Go meditate. Or join the Fed in being “surprised” at the magnitude of inflation.

If you are a CIP-II, or just tired of meaningless data collection, consider joining us for our elite level courses offered in Ft. Lauderdale (or by Zoom, your choice) in May 17-19 . The few, the proud, the fraternity of those who see through the fog of misinformation.