Why the AIG bonuses seriously piss me off

There is only one way in which "wealth" and material value is created: something of an inferior utility is converted by labor and human creativity into something of greater utility. Rocks are smelted into metals; dirt is turned into food and wood; fibers are turned into cloth. Scale and combination give us cars and computers, bars and banks, networks and notepads, all of the material of modern life.

Along the way of creating this modern world, we discovered some important and interesting things about the way people who make stuff get inspired to make more stuff. A whole industry grew up around codifying the value of one's work, of making that codification highly portable, transferrable, and even manipulable in its own right. We discovered money.

But money is only a codification of value, a representation of what others value. The entire point of an investment culture is an ability to say,

I have made things of value, and have been rewarded. I see you make things of value, and I would like to reward you ahead of time in the hopes of encouraging and empowering you to make more, faster, by alleviating your financial burdens and enabling you to hire helpers now, rather than later. If we make this agreement then you agree to return to me some ongoing fraction of your later reward as my reward for having made this investment.

The entire point is to reward smart risk-takers and punish stupid ones, all the while enabling an investment culture that harnesses human creativity into creating more value.

One value people cans seek out is efficiency improvements in this investment system. One of the less obvious places is, say, mortgages: banks give people a vehicle for investment, their own homes, and get a return on their own investment in that vehicle, the mortgage. The assumption is that these homeowners, having a home, are happier than renters, and therefore are more productive. (This assumption has yet to be proven.)

AIG is supposed to be at the forefront of this particular enterprise: their purpose was not to necessarily create wealth so much as to figure out how to reduce inefficiency, to make sure less wealth was lost to the friction of the market. Instead, they slicked the floors with snake oil and pretended they'd not only reduced the friction, they'd figured out how to make things go faster: they'd increased the velocity of money themselves, yet somehow did this without actually creating value.

(Huh... why did I never think of that before? Why did no one else think of it before? Is that some kind of warning signal: can we create an upper limit on the velocity of money, a light-speed barrier so to speak, and when an institution claims to have broken it, can we call bullshit on it? I suspect the actual velocity of money between producers and investors would be hard to quantify in a way that makes monitoring the intra-investor velocity impossible.)

What pisses people off, most notably those of us who don't watch CNBC, those of us who look at our portfolios once a year, make index moves based on the last year's performance, is that AIG is delivering bonuses to departments responsible for this crisis.

AIG is set to deliver over $780 million dollars in "retention" bonuses-- dollars of taxpayer money to the very people who created the need for a bailout. Most of us are still happy to have a job. Some of us are being required to take unpaid leave, and many of us are making concessions to our employers so that they can stay afloat.

Yes, this is a nation of laws. And we can't retroactively break the contracts AIG has with its employees. But why wasn't AIG forced into bankruptcy court so a court panel could review the contracts, as permitted by law? I can't believe the laws as they stand aren't going to change in the next three years, and probably for the worse. And you can bet those who know they're the target of fraud investigations are going to squirrel away their cash somehow as fast as they possibly can.

The anger just grows as you watch the AIG Financial Products Division, the derivatives trading group that helped wreck the world's economy, walk off with $400 million in "bonuses." For what? What are they getting paid for? And why "retain" people who were so obviously reckless?

Man, I'm this close to the pitch and the feathers, I really am.

Brains: Small Print Edition

The Seattle Post-Intelligencer Will Close Up Shop Tomorrow

The Seattle Post-Intelligencer, which has chronicled the news of the city since logs slid down its steep streets to the harbor and miners caroused in its bars before heading north to Alaska's gold fields, will print its final edition Tuesday.

Hearst Corp., which owns the 146-year-old P-I, said Monday that it failed to find a buyer for the newspaper, which it put up for a 60-day sale in January after years of losing money. Now the P-I will shift entirely to the Web.

Clay Shirky on why newspapers are doomed

If you want to know what happened to the P-I, and what will happen to the Seattle Times soon enough, Clay Shirky gives us an obituary.

When reality is labeled unthinkable, it creates a kind of sickness in an industry. Leadership becomes faith-based, while employees who have the temerity to suggest that what seems to be happening is in fact happening are herded into Innovation Departments, where they can be ignored en masse. This shunting aside of the realists in favor of the fabulists has different effects on different industries at different times. One of the effects on the newspapers is that many of their most passionate defenders are unable, even now, to plan for a world in which the industry they knew is visibly going away.

It's long, but I recommend you read it all. Novelists are more threatened by the time pressures (and ADHD inducement) of other media than they are by the price of copying, and they don't suffer from the spatial amortization effect the Internet has on newspapers (why would so much local newsprint be dedicated to national and international news? We can get better sources on-line; what we need is local news, local sports, local weather), but it's still got a lot to think about for those of us who write.

We're doomed! Doomed, I tell you!

I, for one, am ready to reach out and shake the hands our new cybernetic overlords. Really. It's not going to take much to slim down those components an addition 15%, cover her in prosthetic-quality neoskin, and, well, it'll be all over after that. The human race is doomed.

Up next: The Panasonix DX Supervillain Personal Assistant.

I get notes from school

I got this notice today:

This is to verify that the school volunteer shown below has cleared the Washington State Patrol check through WATCH (Washington Access to Criminal History).

Below was my name and Yamaraashi-chan's school and such. I have to wonder just how effective the whole process is. I remember reading that in some school districts in the UK the volunteering process is so onerous, and the media so hysterical, that any man willing to go through the whole thing and get cleared to volunteer is viewed with suspicion. After all, if a man is willing to go through that much trouble, he must have an ulterior motive, right?

I did not know that.

Today, I took Yamaraashi-chan out to one of the two middle schools that we're looking at for next year, and while we were walking around the sciences classroom I picked up the "health and well-being" textbook. It was named simply Health, and it was that garish, 16-pt, thick paper with illustrations bordered in bright primary colors layout so popular with middle school publishers and administrators.

The book had three essential sections: Exercise and nutrition, reproductive health, and substance abuse. The section on reproductive health was hilarious. The one thing that stood out at me was a photograph filling a quarter of the page of a naked young man, from the navel up, covered in suds, in front of a tiled background. The caption underneath read, "Frequent bathing is one of the best ways to take care of your reproductive system."

Uh, yeah. When I was a middle-schooler, frequent showers were a way of, er, inspecting the hardware and ensuring that it was fully functional. Must have drained the water heater more than once doing the double-check.

The irony overwhelms me

One of the middle schools in my district is named "Sylvester," named after some local luminary of times past. The school is ruggedly built and only slightly delapidated, a fairly depressing and typical example of the architecture of forging children into productive adults. I went there recently to survey the place and get my impressions of it and the other middle schools in my district.

I looked in the library. The collection was woefully small, and in the "nonfiction" section someone had donated an awful lot of bibles and other works on Christianity. I was looking for any hints of intelligent design or other forms of woo on the shelves.

On one wall was a poster about "Know what's right, and what's wrong, about copying!" There was a stack of pamphlets from the Recording Industry Association of America explaining to young minds how illegal copying takes food out of the mouths of the hungry children of recording engineers.

And yet on every wall, and on some of the school's handouts-- including the map of the premises-- there was a certain cartoon character, often badly painted, peering out at me. He was everywhere, in posters six feet high sometimes, dozens of copies, framed, pinned taped or sometimes just painted directly onto walls and doors. And absolutely nowhere was there a ™, a © or an ® followed by the name of a certain studio.

I am torn by the notion that one does not do well by suing one's fans. And I'm delighted by the contrast between the IP maximalism of the library and the egregious trademark violations going on everywhere else.