Why I am Supporting Barack Obama

Why I am Supporting Barack Obama

I decided to write a note about why I am supporting Barack Obama. I do so, in part, to start a conversation with the rare person that happens to read my writings, but also because I genuinely am not completely certain why I support him. Writing has always helped me clarify and communicate my thoughts, though feedback from anyone reading this would be most appreciated.

Why am I supporting Barack Obama?

I could say that I'm supporting him because his story is mine.

On October 3, 2007, Barack Obama was hitting the stump in Iowa. As he was fielding questions on policy and the economy, one question was asked that was particularly unusual. An audience member asked, "What would you say is the most painful and character-building experience of your life that puts you in a position to make important decisions of life and death and the well being of our country?”

As reported by the NYTimes, he paused for a couple seconds, then said: "It's a terrific question."

He answered:

“I would say the fact that I grew up without a father in the home. What that meant was that I had to learn very early on to figure out what was important and what wasn’t, and exercise my own judgment and in some ways to raise myself.

"My mother was wonderful and was a foundation of love for me, but as a young man growing up, I didn’t have a lot of role models and I made a lot of mistakes, but I learned to figure out that there are certain values that were important to me that I had to be true to.

"Nobody was going to force me to be honest. Nobody was going to force me to work hard. Nobody was going to force me to have drive and ambition. Nobody was going to force me to have empathy for other people. But if I really thought those values were important, I had to live them out.

"That’s why it’s so important for me now, both as a United States senator and as a president candidate, but also as a father and a husband to wake up every morning and ask myself, am I living up to those values that I say are important? Because if I’m not, then I shouldn’t be president.”

Some of you may know that my father is bipolar. He has been so for the last 22 years. t I harbor mingled sadness and anger about the absence of a father at home, and the complexities the disorder brings to our relationship.

But I think many Americans, even those who grew up with fathers, even with fathers cared for them, laughed with them, and taught them what it was to be a man - even these young and graying male Americans are today, tragically often, wandering around lost, whether in the Los Angeles ghettos or Manhattan law firms.

One of the successes of modern society is that many middle class men have no existential battles to fight. We have not had a draft that required us to serve our country. We don't have the training and team-building that come with team sports. And that transition from brute strength and hierarchy to more nuanced articulations of power and progress leave us frustrated, confused - in a word, emasculated.

Why else does Fight Club resonate so well with today's audiences and readers? Why else does Rebel Without A Cause continue to strike a cord in our fatherless, landless hearts?

But I'm not supporting him because he is a role model for a man who overcame growing up without a father.

I could support him because of his wonderful speech on race last Tuesday.

In that speech, he articulated the need for Americans to have a conversation about race, to realize that there are broad perceptual differences between blacks and whites in society. (And, no doubt, Latinos and Asians - much has been made about whether or not members of either ethnic group would support a black candidate.)

Race does matter, even for non-racists. It mattered when a cross was burned on my undergraduate campus. It mattered when I was told to take my "goddamn Jap self and goddamn Jap car back home" when I was stuck on the side of the road in Enfield, NY.

In a broader sense, psychological tests (and empirical evidence from salespeople) have shown that similarity between individuals facilitates cooperation and compliance. Even dating handbooks advise frustrated singles to mirror their date's gestures to communicate interest and agreement, and facilitate a more welcoming atmosphere.

Those of us of minority ethnic status frequently do not have the clear role models, the hero figures, the leaders we would like to emulate.

An example: prominent contemporary Asian-American role models include John Yoo (enabler of Cheney's push to expand presidential powers during his time in the DoJ Office of Legal Council), Daniel Dae Kim (supporting actor in Lost), and John Cho (Harold from Harold and Kumar). In an earlier time, there was Gedde Watanabe (Long Duk Dong in Sixteen Candles) and Mickey Rooney - sort of (he donned yellowface to play Japanese landlord/pervert Mr. Yunioshi in Breakfast at Tiffany's).

Fabulous.

Many have hailed Obama's address as a landmark speech. A few, especially in right-wing radio and television, panned his binary use of teleprompters and considered it a poorly written/recited speech.

There is no way this compares to the fine sermons of Dr. Martin Luther King, or the poetry of the Kennedys. At least one UK commentator compared his speech to those of Lincoln - our friends across the Atlantic can be forgiven for their hyperbole, and understood for their desperation for "something else" from America.

Mr. Obama had the benefit of two teleprompters and safety when he delivered his speech - Bobby Kennedy had neither as he addressed supporters in Indianapolis to inform them that Dr. King had been shot. Somehow, he made Aeschylus resonate with a poor, urban audience, and saved that city from the riots that burned every other major American city that night.

Obama's speech didn't need to be a sermon. His path, and the path so many of us now tread, had been blazed by others. Our passage on this ship of state has, too often, been paid in the blood of our ancestors. This is not the dawn of a revolution in race relations - the revolution came and went over some centuries. This speech was a call for reformation, though still important in its efforts to build upon the partial successes of the past.

In no other nation is his story possible. My story might be, but I'm not about to push my luck and leave to find out.

So I could support him because of his speech on race - and it may have tipped the balance - but it's not the main reason.

I am also definitely not supporting him based on his plans for the space program.

For those whose professions and megalomaniacal predilections concern human spaceflight, we noted that Obama was planning on postponing Constellation a few years and using that money to fund federal science education programs. In the last couple months, he reversed course.

Maybe he did it because of pressure from space advocates. Maybe someone informed his campaign that large-scale engineering projects can't and don't work that way (especially since NASA's boomer workforce will be - or should be - retiring soon). Maybe he did it because that additional "gap" would mean additional hundreds of millions of dollars going to Russian (maybe European?) space agencies to ferry American astronauts to and from low-earth orbit.

Maybe he decided he needed to win Florida.

In any case, this instance, as well as the failure of a staffer to name his significant accomplishments in the Senate on national television, revealed that he and his team have much growing to do. This is not necessarily a bad thing. Yet it does explain why Clinton has - with mixed success - used experience as a hammer/can opener against Prince Charming's suit of armor, hoping to show that the emperor wears no clothes.

So it's not space policy, or experience.

And, just in case you're wondering, I'm not a misogynist, or at least am trying, through the efforts and wisdom of my wonderful female colleagues, to be less of one. I'm also not plagued terribly by "white guilt".

So why am I supporting Barack Obama?

I'm supporting him because one of the (un)intended consequences of the Bush administration was to take Americans' existing skepticism about their government and further erode our confidence in the necessity and goodness of government. In case you doubt this, consider that one presidential candidate accrued an active, intelligent and articulate group of supporters based of a platform of eliminating the IRS and personal income taxes.

It is true - we are stuck between Iraq and a hard place. But more fundamentally, we're stuck between depending upon a government we don't trust/have confidence in, and depending upon a private sector that appears unable to police itself, define the limits of the market, or embark upon the collective action needed to address externalities like global warming, long-term energy policy, and affordable healthcare.

In times of uncertainty and frustration, I turn to history as both guide and inspiration. On one thing I can agree with the talking heads - it is useful to consider JFK in evaluating Barack Obama and the spirit of the time.

Kennedy's gift was not his brilliant insight into the state of the world - he won on a lie about the missile gap.

Nor was his gift experience. McNamara initially refused to join as Secretary of Defense, claiming he didn't know anything about the DoD. Kennedy replied that there was no school for learning how to be President - they would both learn as they went along.

Kennedy's gifts were charisma and oratory, and the confidence that came with them. That was Reagan's gift in 1985. Churchill's gift in 1940. Elizabeth I's gift in 1588.

I don't exonerate either Kennedy or Reagan from their respective policy blunders and liberal use of the CIA to destabilize legitimate democratic governments around the world. The cynical part of me says to not expect Obama to refrain from using the CIA to defend the American Empire; at this point, it is part of the job description.

But I think that restoring confidence in America - the confidence of Americans and all citizens of the world - is the key that will open all our present locks, and keep us safe - for at least a few years. Nations and individuals have typically traipsed from crisis to crisis. But there are reasons that indicate that these coming years might be different, might be critically important for our world.

I have tremendous respect for Hillary Clinton. I am cognizant, albeit imperfectly, of the challenges Ms. Clinton has faced during the last 15 years. And I understand the method to her tactics. Her drive to win is both frightening and inspiring; I believe she embodies what policy expert Chris Chyba described as "the ability to see the world as it is."

I have read both Why Courage Matters and Faith of My Fathers, and am tremendously impressed by John McCain's sense of honor. His books have reminded me, time and again, what it means to serve, to strive, and to reach within to find the courage to overcome fear, and the principles and values that are the bedrock and substance of character. And there is a part of me that wonders whether either Democratic candidate might seriously pull out of Iraq without considering the probability and implications of a regional war.

In truth, I feel that, for the first time in a very long time, I feel confident that either would make a good President.

But of the three major candidates, Obama, and Obama alone, has the ability to inspire, at once, a generation that lost its heart in 1968, and a generation coming into its own in 2008. As Robert Kennedy once said, "Like it or not we live in times of danger and uncertainty. But these are the times that lend themselves most to the creative efforts of men."

For all of Hillary Clinton's intelligence, connections, toughness, and experience, she has not been able to do that.

And for all of McCain's honor and leadership, he has not been able to do that.

Obama will not offer us anything new - he cannot. The source of change comes from us, through local efforts and the hundred or so personal connections we maintain in our lives. Our mental hardware has limited upgrade capabilities, though it's always a good idea to update the software (as we did in 1865, 1935, 1964, and, one hopes, 2008).

Our fate in Iraq may be sealed. Our economic struggles will likely persist for years - and if there is an earlier recovery, that will only facilitate the forgetfulness that leads to new bubbles and lax oversight. And no man has found a way to stop time, to forestall the aging and changing nature of our population, as demographic changes redraw the face we and the world see as representing America.

But these challenges, new and old, avoidable or not, will demand leadership, confidence, and an ability to attract brilliant minds capable of candor and analysis into public service. Obama can do this better than anyone else in the field, and perhaps better than any other pretender to the throne in the last 40 years.

So I do support Barack Obama for the presidency.

But I also worry. I worry that too many of us - myself included - expect too much from one man. To the vast majority of Obama supporters out there, I have an inconvenient truth:

Barack Obama doesn't know who you are, and he doesn't really care about you.

He knows you through story, through analogy, through the vast, sweeping narrative of confusion and woe that rises like a spring tide in deep summer nights. He cares about you as Americans, as human beings struggling to make sense of it all, to feed your families, to find love, to find something worth believing, worth fighting for, or at least discussing over coffee.

But he is not going to fix all the crap in your life or mine, the crap we helped create, the baggage we carry and refuse to let go because it's easier to bear what we know than risk the uncertainty of change, real change.

What if change means, for the first time, we realize the extent to which we, individually, are the source of so much of our own misery?

What if change means accepting that if God Almighty will not give us peace of mind we have not worked to deserve, prosperity we have not earned, or love we have not sought, then we should not expect our first African-American president to deliver us from our variegated and vague evil?

What if change means taking a cold, hard look at what we do and do not need, and how far we are willing to go to preserve our privileged place in the world, and having to tear down the image we have constructed for ourselves of benevolence? What if, in the final analysis, change means choosing to embrace our empire and the identity of imperialism?

Change may not be good. It may not be pretty. But it looks like it's on the way. All we can do is choose - now - to be ready or not, proactive or reactive.

So I support him, but I warn fellow supporters. You must not look to outsource your duty, your commitment to self-improvement, to the improvement of those around you, to the change you must bring about in your own corner of the world, far from the glory and glamor of marble monuments and pressed suits. For there will be no peace internationally while there remains poison at home, frayed relationships, broken lives.

And once we fix what can be fixed, at home, our labors cannot cease. For no man, even Barack Obama, can do it all himself. From obscure corners, in anonymous cleanrooms and classrooms and boardrooms, we must work hard, with compasison, and vision, and tenacity, in teams and networks that bear little resemblance to traditional hierarchies, but do not dilute responsibility even as they diffuse power. For the promise, and the peril, of our future comes from a trillion tiny choices and decisions, and the collective action of so many individuals - now violent, now industrious, now afraid and easy to govern, now hopeful.

Until we take our many roles seriously, especially those of parent, teacher, and citizen - and until we learn to check our egos at the door - it won't matter what gladiator we champion. We are Rome no matter who emerges victorious. We have many hungry hearts to feed in our own lives, and many sins to atone for and make amends, far from the eyes of the press, far from the calamities of the past, far from the comforting guiding hand of a father that may never be.

Belief in the good is the beginning of good, but only the beginning.

But do believe. And now these three remain: faith, hope and love. But the greatest of these is... hope.

Judge Ra'id Al-Saedi, Chief Investigative Judge of Iraq High Tribunal

Today I attended a lectured delivered by Judge Ra'id Al-Saedi, Chief Investigative Judge of the Iraqi High Tribunal that tried and convicted Saddam Hussein.

He spoke of the technical and legal challenges of forming the Iraqi High Tribunal and building a case of genocide against Saddam Hussein and his partners.

The Tribunal used the existing Iraqi Penal Law 111 (1969) and the Iraqi Criminal Law 203 (1971). They also drew upon the experiences of Rwanda, Bosnia, and Sierra Leone, and made use of experts that had participated in the war crimes tribunals involving those nations. However, one distinction is that those tribunals were created by an action from the UN Security Council. Given French, Russian, and Chinese opposition to the 2003 invasion, the case fell to domestic courts.

Judge Al-Saedi discussed four challenges in building the case:
1. Establishing the numbers of victims
2. Processing and identifying relevant documents
3. Excavating victims from mass graves
4. Finding witnesses to testify

Victims

He stated approximately 100,000 Kurdish civilians were killed in 1988, and 200,000 Shi'a civilians in 1991 in the uprising following Desert Storm.

Logistics were a nightmare. Initially, the IHT started with one office in Baghdad, at which they received hundreds of survivors and witnesses each day. They decided to create three additional offices, two in the north, and one in the south.

Processing Documents

Some of the documents actually came from the United States. The US acquired some of these documents during Desert Storm, and after 1991 received a stream of files from Kurds in northern Iraq.

The IHT began with 10 tons of documents. Al-Saedi hired 100 individuals and divided them into four groups. The first group separated the documents between legal and non-legal, and kept the former. The second group reviewed the legal documents and retained only the important files. The third group separated evidence from non-evidence, and the fourth group split the evidence across the 14 cases that were in preparation.

With 24 investigative judges and 100 paralegals, the tribunal scanned and examined over 6 million documents using an electronic database.

Mass Graves

While the documents were being processed, another group examined the mass graves. According to him, there were about 250 mass grave sites identified in Iraq. Each site consisted of 10 to 50 graves, and each grave contained about 80-100 victims. Taking these numbers as is, this implies anywhere from 200,000 to 1.25 million victims. Given his earlier comments, the lower of the two seems more reasonable.

The cost to excavate and examine a mass grave ranged from a minimum of $5-10 million to a maximum of $25-50 million. Some of the funding came from the Iraqi government, while many of the logistics were provided by the US and British armed forces. Some human rights organizations also provided assistance. Because of the expense, five graves were chosen for excavation.

These locations were frequently remote, requiring transport by helicopter. Al-Saedi described the process as building "a city in the desert". The graves were surrounded by a security cordon. Each location required residential facilities and communications - presumably by satellite. He mentioned that two sets of refrigerators were needed - one for food, and one for exhumed bodies. The bodies were flown by helicopter to Baghdad, where experts analyzed the remains. (For security and logistical reasons, the experts remained in Baghdad and were not located at the mass graves.)

Witnesses

Witnesses were important, not only for the hearing, but to establish the identity of the victims. If a witness confirmed that a mass grave was created prior to 1990, the victims were likely Kurdish. If it was created after 1990, the victims were likely Shi'a.


In addition to the four technical/legal issues, Judge Al-Saedi mentioned two human complications: the defendants and the politicians.

Anyone who has seen video of Saddam's ranting during the trial knows that the defendants could be defiant and disruptive. Iraqis watching the proceedings may have been nonplussed by the "rule of law". In the end, the tribunal decided that the best way to deal with defendant characteristics was to permit them to ramble and rant, and to inject questions in the middle of their tirades. In so doing, the defendants made mistakes and incriminated themselves. (I thought this was an ingenious tactic.)

In addition, the judges were under pressure from various politicians looking to push and defend their diverse agendas. Al-Saedi did not have much time to go into this, but merely said that the IHT's chief goals were to send the following messages:

1. No one is above the law, and the law serves the citizens of Iraq.
2. Judges, lawyers, and other legal professionals must bear the burden of responsibility for their country's future.
3. Politicians must accept the rule of law if Iraq is to be a real country.

Al-Saedi answered two questions, and clarified some minor points.

He was staunchly opposed to amnesty for Iraqi leaders who had committed international crimes.

Mr. Al-Saedi spoke English fairly well, though with an accent and frequent pauses. However, there was one point at which it was clear that he did not have to reach for words. A student wearing a skullcap commended his courage and character, and asked him what personal trials he endured during this process.

Mr. Al-Saedi graciously and eloquently thanked the student for his kind words, and said, without pause or qualification, that in order to do the job correctly, he and his peers had to put aside personal problems and concerns. Their obligations to their families was dwarfed by the immense responsibility to build a functioning legal system in Iraq. He said that the trials cost much, in money and in blood, and indeed, there was danger for all involved. But he compared his position to the position of the law student's father - "Your father is tremendously proud of you for being here, studying law at Cornell." In a similar way, he felt that his legacy to his children, and how he best stood for them and the people of Iraq, was to focus on building the legal system.

There is something impressive and moving about a man who works with such conviction to help build a new nation.

The task in Iraq looks more daunting than even that faced by the Founding Fathers. I recall Stephen Biddle's lecture here last summer, and wonder whether fear of genocide - perhaps legitimate - would perpetuate the political deadlock, preclude the efforts to secure the country, and destroy the possibility of the rule of law. It is easy to hope, and easier to be pessimistic. But it is hard, hard to do something tangible and concrete, or at least hard because it may be unfamiliar and risky.

But his lesson, and the lesson of the ghosts of history, is to first and foremost do your duty, with courage and candor and deed. A lesson for us all, though our challenges be minor by comparison.

Nationalization of US Banking System?

Interesting and informative post on the blurry line between debt and equity:
http://www.interfluidity.com/posts/1204920896.shtml

Ann Druyan speaks to COMM 566 students

I feel terrible today, probably for many reasons.

I may feel poorly because I stayed up all Monday night to reduce some data, and have yet to fully recover.

I may feel badly because it is snowing.

But perhaps the reason I feel most terribly is that, today, I feel I put an impressive individual's feet to the fire.

Ann Druyan, an accomplished co-producer of Cosmos, an author, and Carl Sagan's widow, spoke to our science communication class. She gave a moving testimonial and excellent example of how science can inspire.

My intention was to ask a question about what scientists can do to improve themselves, both as scientists and citizens, independent of the perennial outreach issue. But it seemed like that question was interpreted and restated on both our parts as a science-religion question. She was gracious in her response, and afterward I did my best to apologize for any pointedness, real or perceived, on my end.

But the issue remains, and I will do my best to articulate it here.

My contention was, and remains, that "outreach" implicitly sets a dividing line between scientists and non-scientists. This in itself isn't harmful - differences do exist in terms of knowledge, training, and experience that make such a distinction real and critically important if education is the goal. What is potentially harmful is a frame in which the broader society is viewed as an entity to be changed, and the scientists are the change agents.

I believe Ann, and most scientists, recognize that this is a gross simplification. Being a heterogeneous, complicated, and fundamentally human community, we fall prey to any number of biases -- the availability heuristic being a particularly pernicious one. (This means that what's familiar is more salient, and we make judgments weighted more heavily on our own experience and memory instead of data.) And yet the stakes are so high that I would say that before we focus exclusively on outreach, a measure of inreach is necessary.

I know, to varying levels of certainty, that the individuals in my department have experienced depression, anxiety, familial problems, financial difficulties, and health issues. But I also know they are amazing, strong individuals who, as Jim Bell once said, "draw strength from their ghosts". Before we have any pretensions to being a "scientific community", we may do well to see how well either of those words describe who we are.

Ann, on the off chance you read this, I want to reiterate my comments in our conversation after class. You are an amazing individual who has "it" - the ability to persuade and inspire, the communicator's dream, and the scientist's gold standard. Neil deGrasse Tyson mentioned that the path for science communicators, like himself, was blazed by Carl, and that he paid for it.

In a way, Carl Sagan's story echoes Ben Franklin's - worked his way from humble origins to fame, fortune and international renown, but remained rejected by the very countrymen who benefitted the most from his meteoric rise and visionary work. Ben Franklin was the first American scientist, and the first American scientist to push strongly for changing American higher education from a Latin-based curriculum to an English-based one, opening the doors to public education.

Perhaps, if I had met enough Ann Druyan's in my life, I would not be leaving astronomy... perhaps not. What is clear is that the demands for the 21st century citizen, and the 21st century scientist, are substantial. My time here has shown I am not equal to the former, but I will devote my remaining time to working on the latter.

Ann mentioned that February 20, 1961 was a snow day. She spent it listening, along with her family, to Kennedy's First Inaugural. Two weeks ago, I went to Arlington National Cemetery and knelt by JFK's grave, and read the excerpts of his First Inaugural Address, and cried.

Now, I turn, as I so often do, to the words of his younger brother, Robert.

"Our future may lie beyond our vision, but it is not completely beyond our control. It is the shaping influence of America that neither fate, nor nature, nor the irresistible tides of human history, but the work of our own hands, matched to reason and principle, that will determine our destiny. There is pride in that, even arrogance, but there is also experience and truth. In any event, it is the only way we can live."

Neither fate (religion), nor nature (science) alone will determine our destiny. It will be the fruit of our present labor and indolence, wisdom and ignorance, ambition and contentedness. Our destiny is a hundred-pointed caltrop, dangerous to the touch, painful to grasp, but necessary to bear for a time, towards the future that must be.

And in that effort, we grow to become stronger, nobler individuals, more amazing and impressive than we could have ever hoped, yet recognizable in the mirror as simple, ordinary individuals who found something beyond themselves towards which we strive as best we can, with those who can and will.

I think Ann Druyan is a critical part of that future -- as is Neil deGrasse Tyson, Bruce Lewenstein, the members of the Science Communication class, and the astronomy graduate students I have had the privilege of working with. I don't know when "too late" is, or how one would measure it, so I will work best knowing that, for all times and for all civilizations, there are always challenges that will require the brilliance, talent, and vision of citizens everywhere.

So "let it go forth that a torch has been passed to a new generation." And let us not drop it, or be burned by it.

Personal Finance: Four Calculations That Will Save You At Least $2.5 Million

In recent months, I've been spending my time reading up on personal finance and investing. It's not a new interest-- I was introduced to stocks at the age of 8 by a family friend. Although I had no money to invest, and no real knowledge of how the market worked, I remember periodically following stocks in middle school, listing the closing prices of twenty large-cap companies. My interest it stock cooled somewhat, when through a miscommunication with my mother, I encouraged her to buy the Palm IPO. Well, as it turns out, we bought at about 100, and sold at 3. Fortunately, we didn't put the farm on the investment, but it led to both of us distrusting my financial prowess. (My mom continues to bring up the Palm plunge whenever I encourage her to do something remotely related to personal finance.)


Many of us probably wouldn't be surprised that the average American man lives about 78 years, and that the average American woman will live 83. (The weakness associated with the Y chromosome, and scientific evidence for the eventual "extinction" of men, c. 122000 CE, will appear in a later post.) But it surprised the hell out of me that this translates into 28,470 days for men, and 30,295 days for women. There's a finite finality about those numbers.


These numbers got me to thinking: am I really getting a good return on all this reading? I decided to run some numbers.


I found the following:


1. Reading on saving a fair fraction (~10-15%) of my income probably paid off. ($811,421)

2. Reading on tax-advantaged accounts (IRA) probably paid off. ($850,740)

3. Reading on index funds paid off. ($824,283)

4. Time spent researching/trading individual stocks will likely NOT pay off.

Detailed explanations follow.

A word of caution before we start:

All of the examples below assume about a 10 percent average annual compounded return, based on historical S&P 500 data. However, as Warren Buffet mentions in his 2006 letter to shareholders, there may be reason to suspect that investors should NOT expect that average return. This has implications for the value of actively managed funds, and equity investing in general.

Now, back to the four points.

1. Reading on saving a fair fraction (~10-15%) of my income probably paid off.

This should be a no-brainer. But as evidenced by a negative savings rate in this country, it shouldn't be taken for granted.

Take for instance the example of the "latte millionaire".

Let's say you drink a latte every morning right before work (or in the afternoon). Let's also assume you spend about $5 for each latte, that you drink one a day, five days a week, fifty weeks a year. That translates into $1250 a year. Let's say you kept up your latte habit until you retired 40 years from now.

But wait, there's more! Let's also say you used the compound annual growth rate (CAGR) of 10.4 percent, including inflation, which according to Warren Buffet in his 2006 letter to shareholders is the average rate of return in the stock market. I'm going to simplify this and estimate 10 percent. For this analysis, let's also ignore inflation (roughly 3.2 percent) because it's irrelevant for the purposes of this analysis. (Also, latte prices would also inflate, meaning it wouldn't be a huge factor.)

How much would that latte money be worth in, say, 40 years?
As it turns out, it would be worth $609,815.

Note that this isn't counting taxes - if you wanted, you could probably make a pre-tax contribution into a traditional IRA instead of a post-tax contribution to your local Starbucks. Then the figures go up to $717425 for a $1470.58 pre-tax annual contribution (corresponding to a 15% income tax bracket), $813,088 ($1,666.67 pre-tax annual contribution).

A picture says a thousand words.



The morals of this story are

(1) Think twice about quitting if your company has a communal espresso machine.
(2) Compounded savings do matter.

Potential savings after 40 years: $811,421
At $10/hr (my current salary), worth it if I spent < 81,142 hours on this (= 3381 days, or 9.2 years)

2. Reading on tax-advantaged accounts

Yes, I'd say this helped me. Automatically, I potentially increased my rate of return by 15-25% by avoiding federal taxes. Including state taxes, I've probably avoided an additional 6%. Assuming I didn't spend an ungodly amount of time getting it through my thick skull that I am not morally bound to pay taxes above and beyond my strict legal requirement, then this was worthwhile.

Again, a table to illustrate. I assume I've somehow squirreled away about $4,000 pre-tax in savings.



Additional Notes:

1. Traditional IRAs tend to win if you expect to be taxed at a lower rate after retirement. Roth IRAs win if you expect to be taxed at a comparable or higher rate after retirement.

2. The 2008 contribution limits for both traditional and Roth IRAs is $5,000, not $4000. The maximum contribution limits for both traditional and Roth IRAs are indexed to inflation, and rise in $500 increments. The limits are the same, meaning you can get additional compounded earnings if you can invest after-tax the maximum amount allowed in your Roth IRA.

Potential savings: $ 850,740 (more factoring in increasing contribution limits)
At $10/hr, worth it if I spent < 85,074 hours to learn this (= 3545 days, or 9.7 years)

Note: This post does not cover other interesting tax-advantaged accounts, like 529 plans (for college), health savings accounts (for medical expenses), and of course, your company's 401(k)/403(b), nor does it cover the other nine or so IRAs that exist.

3. Reading on index funds

This, too, has paid off. According to Motley Fool, the average actively managed fund tends to underperform the S&P 500 by about 2%. How much does this matter?



The reasons behind this are many, including management fees and tax inefficiency (buying and selling securities costs money, and also generates capital gains, which are taxed. Index funds tend to have much lower turnover - a lower fraction of portfolio being bought and sold over a given time period - and therefore generate less taxable capital gains).

Potential gain in 40 years: $824,283
At $10/hr (my current salary), a good deal if I spent < 82,428 hours (= 3435 days, or 9.4 years)

4. Investing

At about this time, you might be asking yourself, What if I don't like being a passive investor? What if I think I can pick stocks, and outperform the S&P 500? What about becoming an active investor?

Obviously, it depends on how good you I am at beating the market.

If you've read Malkiel's A Random Walk Down Wall Street, or more generally subscribe to the idea that the market is efficient -- that is, prices reflect all known information. Note that this isn't quite the same thing as saying that prices will randomly fluctuate around a fair value. Nor is it to say that news doesn't affect stock prices. In fact, given what I'm reading about behavioral economics (and in particular, behavioral finance), there are a lot of features that don't jibe completely with a strong form of the efficient market hypothesis.

But all of that is somewhat academic. Let's stick with a simple question.

Let's say I spend anywhere from 10 to 500 hours a year managing my portfolio (10 corresponds to about 1 hour a month, while 500 corresponds to about 10 hours a week.) How much would I have to beat the market by in order to make it worthwhile? Let's calculate:









Wow. This means that if you are a full-time trader with a $250k portfolio, you need to outperform the S&P 500 (or your index fund of choice) by about 8 percent in order to do better than a $10/hr job. Of course, if you can do that on an annual basis, you could probably make money doing it professionally, while managing even larger amounts of money.

Key Points:

1. The decision between active and passive investing depends on portfolio size. Therefore, if you don't have much, sock it away in an index fund, or an actively managed fund that you are convinced will outperform, even after fees and tax considerations.

2. As your portfolio grows, it might be worthwhile to check in once in a while (say, annually) to readjust your portfolio. This is especially more important as you age, since you will be less able to recover from a sharp decline in the years before you retire.

3. That said, frequent checking can actually be detrimental to your portfolio performance. An interesting study by Benartzi and Thaler explores reasons for the "equity premium puzzle" - that is, why, when the stock market consistently outperforms bonds, would institutional investors, pension fund managers, and endowment managers consistently choose a roughly equal balance of stocks and bonds. (The reason, they suggest, is that these managers, like you and me, are subject to annual reviews, which skews their timeframe and their risk tolerance.) Long-term investors - know yourself, and know BEFORE you invest whether you'll be tempted to pull out of the market when faced with a 20-30% short-term decline (NOT an academic point in 2008).

4. These calculations DO NOT include trading costs and capital gains taxes. Therefore, these figures are conservative - you would have to outperform by a larger percentage than listed in order to make it worth your while.

5. If you like investing for fun, do it, but do it with money you can afford to lose, and with time you can afford to spend.

6. If money is really important to you, and you aren't born rich (with a large portfolio at your disposal), you're best off working hard in a high-earning profession. Be a doctor, a corporate lawyer, or an effective businessperson. If it's less important, but you want to be comfortable in retirement, go do what you like, but start saving now.

A final thought:

There's a hell of a lot more to life than money. In a later post I will comment on the other properties of a person's life that may make him or her happy, powerful, or otherwise important. But money is powerful in that it is a fungible, widely accepted form of power and value. It is important to know how to manage it, and what our time and comfort costs us, at least in monetary terms.

If you've read this in an hour, and follow the above advice, you may have saved about $2.5 million over your lifetime. Please consider making a donation to yours truly for providing you with this information (all of which I got for free from the Internet).

I hope to post at some point about estate taxes, another potential source of financial and personal grief.

Cornell International Affairs Review Panel Discussion on Europe

I was fortunate enough to attend the Cornell International Affairs Review inaugural event. Peter Katzenstein and Hubert Zimmermann discussed their thoughts on regionalism in the 21st century - in particular, the European Union vis a vis the United States.

The two wise Germans both cautioned against overexuberance, though Hubert the Younger did show more enthusiasm and hope for a deeper, more proactive Europe than Peter the Elder. Both were very clear, insightful, and a joy to listen to.

As always, I was also struck by the tremendous charm and intelligence of the undergraduate population here. They are more than drunks on Wednesday nights, or vain trust fund babies snorting away their fortunes and heritage one line at a time. These individuals, of varying strengths and weaknesses, are the flower of youth, the idealized embodiment of why we fight. Yes, the men were handsome and the women breathtakingly beautiful. But more than that, there was a quiet optimism that I had forgotten - that here, in the presence of some of the greatest minds in the world, there would emerge, if not answers, the beginnings of the right questions.

It is this issue that I tried, and failed, to articulate in my question. Each new generation faces a challenge, brought about by competition and technology and biology, to redefine itself, frequently in opposition to its predecessors. How then, given demographic trends, would an Old Europe deal with the natural tensions involving changing of the guard, compounded with the fact that the youth would, increasingly, consist of immigrant Muslims from the Middle East and North Africa? Similarly, how would the United States redefine itself as the Hispanic population grows, and the American WASP ceases to become the face of Main Street?

Hubert responded by suggesting that the European Muslim population was much smaller than was often supposed - 20 million out of roughly 500 million total citizens, or on the order of 4 percent. This, by the way, is roughly the proportion of total US population that is of Asian descent - for this reason, and many others, I contend that he underplays the importance of this demographic shift, in conjunction with declining populations in absolute numbers of white Europeans.

Peter suggested that the key issue is what system would be better equipped to embrace the change and use what he calls the "positive cultural capital" of immigrants to advance in the 21st century. He argued that European identity, while secular, is culturally rooted in Christianity. The discussions concerning the expansion of Europe, and what would happen to Yugoslavia after Tito focused on Croatia being Catholic, but Serbia being Orthodox and therefore "outside" of Europe. By contrast, he felt that the United States has been, and will continue to be, more comfortable with multiculturalism than Europe, and therefore will be able to capitalize on the demographic shift more readily.

Ceteris paribus, my ultra-simple, assumption-ridden equation for economic power is output = population x productivity. American population grows because of immigration. That, our less comprehensive social safety net, lower taxes, higher productivity gains, and other socioeconomic/cultural features (real and constructed) help explain the difference in growth trajectories between the EU and US.

The CIAR Executive Vice-President made allusions to The Audacity of Hope, Barack Obama's memoir. Peter Katzenstein also suggested that Obama represented the face of America's future. I have not yet endorsed a candidate for the presidency, but do have some thoughts to share on the expectations associated with the 2008 election.

Hope is indeed audacious. For hope, as it is often branded by pretenders to the throne, is fundamentally a willingness to break with the past, to tell the older generations that their ways were at best good enough for their time, or, more typically, that they had brought ruin and destruction. It is to say to the old, "You are guilty of political and economic Alzheimer's, which struck too early for you to be wise, and too late for you to be harmless."

It is also incredibly seductive to we young, relatively powerless students who have always chafed with impatience under authority and tradition. (I highly recommend Stanley Milgram's classic text, Obedience to Authority, to anyone seeking to understand the fragility of our lauded civilization, and the recipes for both obedience and revolt. History tells us that we need not substitute one pied piper for another who plays melodies more harmonious. (This is not being quite fair to the candidates, but bear with me.) Rather, the inconvenient truth of what it is to be an adult, women and men in every sense of the word, is that we must give away some of the toys of youth, and realize that no government ever known on Earth can absolve us of our individual responsibility as human beings to do well and do good.

"When I was a child, I talked like a child, I thought like a child, I reasoned like a child. When I became a man, I put childish ways behind me." (1 Cor 13:11)

Europe struggles to define itself. America struggles with our identity and place in the world. The struggles are, in practice, led by the educated, the powerful, and the charismatic, with not much input from anyone else. I think it's fair to say that a careful analysis of both sides of the Atlantic reveal plenty of the oft-muttered "democratic deficit".

But at its best, the struggles represent the struggle of individuals in each nation/region. We define ourselves through our art, our commerce, our votes, our travel. But all of these are surface - the substance is the struggle with rough-hewn stone to build our character and multifaceted identity.

Peter made an important comment that Barack Obama represented in some ways the face of America's future. I believe he was referring specifically to the fact that he is African-American, but let me extend the thought a bit further.

On October 3, 2007, Barack Obama was hitting the stump in Iowa. As he was fielding questions on policy and the economy, one question was asked that was particularly unusual. An audience member asked, "What would you say is the most painful and character-building experience of your life that puts you in a position to make important decisions of life and death and the well being of our country?”

As reported by the NYTimes, he paused for a couple seconds, then said: "It's a terrific question."

His answer, as reported by the NYTimes:


“I would say the fact that I grew up without a father in the home. What that meant was that I had to learn very early on to figure out what was important and what wasn’t, and exercise my own judgment and in some ways to raise myself.

My mother was wonderful and was a foundation of love for me, but as a young man growing up, I didn’t have a lot of role models and I made a lot of mistakes, but I learned to figure out that there are certain values that were important to me that I had to be true to.

Nobody was going to force me to be honest. Nobody was going to force me to work hard. Nobody was going to force me to have drive and ambition. Nobody was going to force me to have empathy for other people. But if I really thought those values were important, I had to live them out.

That’s why it’s so important for me now, both as a United States senator and as a president candidate, but also as a father and a husband to wake up every morning and ask myself, am I living up to those values that I say are important? Because if I’m not, then I shouldn’t be president.”


Europe will not build itself. Nor will America. Nor will China emerge democratic and free without individual action, individual responsibility, and individual character. It matters not that we had no father to guide us. We have living examples in Barack Obama and, less visibly, Harry Reid, of men who recognized the value and necessity for us to transcend what we are given - in this case, the fathers we have - , and become stronger, more just, more wise, though the world tells us to go home, give up, and embrace a somnambulant stupor that is a half-life.

Progress, and civilization itself, depends upon the desire and ability to do better. For this effort, we rightly look toward Peter and Hubert for guidance. For the hands that will build this new world, we must look to our own, and our peers in every walk of life.

On the eve of Valentine's Day, I can say that no woman ever broke my heart as badly as America has. But hearts will mend, through many stitches, softer words, and time.

Better get started.