An Extremely Nice Statistic
Another horrible headline was scanned by the friends; layoffs, downsizing, credit crunches and a litany of other perils too bleak and discouraging to mention. These calamities were exploding from print newspapers, web sites, radio and television broadcasts and thanks to the age of electronic loops, the cycle was never-ending and unforgiving. The soon-to-be graduating graduate students were just beginning their last semester within the same confines of the University and were looking out from the inside for just a few months longer. For the first time in their collective lives, they were seeing the final phases of their formal education fly by at an extremely pace and try as they might to ignore the brutal outside world, the reality-based pressure to achieve actual employment was looming. The current economic pressures were drastically reducing the on-campus recruiters and since they all were Economics graduate students, the main employer of banks, were especially scarce due to their own goulash of financial troubles. The upheaval in the lending institutions caused a great majority of the banks to start saving money, and that started with on-campus recruitment. The good times had screeched to a halt and as Economics fellows; they thought they had all the answers but couldn't figure out why they were so unlucky.
Peter Schutz was a competent student and enjoyed a good, practical understanding of Economics. While the advanced theories and formulas of Economic Theory provided some insights on the exotic and obscure discussions, the pure law of supply and demand was the king of all kingly theories. Peter believed in the pure and sometimes cruel components of supply and demand and the recent downturn in the markets showed its validity and common sense andjust because he (and everyone else) was nipple deep in the valley of dispair, he remained true to the fundementals of his beliefs. No one wanted to say they had seen the downturn coming but in hindsight, the combination of monetary gyrations, foolish lending practices and the inability of most countries to produce actual products made the entire foundation fall into itself in the middle of 2008.
"The one thing to remain in the front of one's mind," said Peter, "Is the absolute truth of supply and demand."
"Are you hauling out that dusty old saw, again?" said Danielle. She was his best friend and philosophical nemesis; her opinions consistently rang contrary to his and while it made for interesting academic theater, they both knew the days of opinion-based argument in college coffee shops would be quickly replaced by research papers and hard analytic recommendations to some future employer. Verbal counterpunching to kill time was not enough anymore as they would be very soon held accountable for their opinions so the exercise of countering each other's opinions was not healthy for their long-term success. Each knew the answer lie somewhere in the middle and the sooner they could align their critical thinking to something practical, the better.
"We have to break out of this 'you are right and I am wrong but I am really right' stuff." said Pete. "This 'conversational masturbation' isn't going to fly much longer once we get out."
"Agreed," said Danielle. "We need to figure this out; there has to be a hard answer somewhere in Economics."
"Okay, we need to sit down and come up with the new answer."
"Us? We are going to sit down somewhere, face to face, and come up with 'the answer' for Economics? The dismal sticky science of the unknown?"
"Yes. Most good ideas are created when two opposing views clash until a merged theory can replace them both. We know all the answers from books and we can pick apart most theories but if we are going to actually provide hard value for our chosen profession, we have to start making something tangible. Companies don't want two more research assistants with freshly minted Master's degrees, cutting and pasting economic theories out of Google and leaving them the hard work of actually making decisions. We need to come up with a new way of looking at economics which is simple, measurable and be able to be applied to any type of transaction."
"So, referencing Keynesian economics or Adam Smith or Jim Ignatowski isn't going to do anything except fill up the room with more words."
"So, what are you saying?"
"I don't know but we need to start with some absolute truth: no qualifications and no econo-babble. It has to have its own legs and be something we both agree with from concept to legitimate reality. An opportunity is laying out here, it might as well be us to put it into context and practice."
"Again, not to put too fine a point on this discussion, what do you mean? We are basically individuals with good memories of several dozen economic theories who are not afraid to debate and discuss the shortcomings of each one."
"If that is what we are," whispered Pete, "then we are just timid phonies. We sit around, regurgitating known facts and theories without the courage to achieve our own excellence. We need to start applying what we learned to this goal; start thinking like .... grown-ups."
"That seems a bit dramatic," said Danielle. "We are taught to understand the great economic theories."
"We understand them; now let's apply them to something useful. Those old farts were students once: there is no reason we cannot start the next revolution."
Danielle smiled, he was right. "Okay, okay, We need to find something complex and make it stunningly simple."
Pete smiled back, "Let's meet for breakfast tomorrow and I will tell you about the velocity of money and why that concept is worth discussing. That might be a good start for us."
The next day, Pete and Danielle met at a fairly empty coffee shop on the other side of campus. Danielle decided the night before to find a place with a minimum of distractions which provided an opportunity for in-depth conversation. They both realized they had to strip away all the academic double-talk and miscellaneous campus cacophonies to begin to craft a foundation of their new approach. They both ordered large coffees and wandered upstairs and sat in two large overstuffed chairs in the farthest corner. No one was going to bother them and more importantly, no one was going to find them as they argued their way to some valid and worthwhile truth. Both of them turned off their phones and as a collective sign of good faith, placed them in their bookbags and placed them on the ground.
"Okay," sighed Danielle. "We need to begin by stating absolute truths; facts in which no falsehoods lie."
"A nice eloquent beginning," responded Pete. "And, to start things moving, I will begin. The core of the new economic theory must lie with any economy's engine: human nature."
"What do you mean?"
"I mean that all activites and actions related to any economy begins with people. People want to buy things, people want to sell things, people want to become rich, people want to have money in their pockets to do what has to be done."
"So, a newer take on supply and demand?"
"No, an element more basic than supply and demand. Supply and demand is a concept which implies factory output and just-in-time fulfillment. I mean, the energy which emanates from a human being is the foundation. You reward, motivate, satisfy and react to individual demands. Conversely, you punish, demotivate, disappoint and ignore demands which run counter to ideas and requests you personally disagree."
"Agreed," said Danielle. "And here is my contribution to the foundation: the only remaining variable with opportunity to improve is time."
"Nice catch," said Pete over the first slurp of his coffee. "Now, how to we marry up the desire for saved time and what people truly want?"
"I don't know yet, but there has to be a few nice statistics in here somewhere."
Danielle seemed pleased; she hadn't yet written anything down but she was ready with several note pads, a variety of colored pens and her laptop open. When they began to talk, she was poised to draw, write or calculate but Pete's questions caused her to push the accouterments aside and to sit directly in front of him and to focus on the conversation. Pete had one almost-depleted notepad and a pencil: he always worked in pencil and today was no different.
Pete paused and said, "I agree but what do we know is always good and useful for people?"
Danielle said, "Money. Money can make many problems go away, provide good and services, acculumate wealth, reduce debt and makes people happier."
"I agree, and this is not the time to debate the money-happiness connection. But I generally agree that money is a real piece of the puzzle."
Danielle finally could write something. She turned her notepad horizontally and wrote MONEY in green ink.
"Not exactly the absolute truth but we are onto to something here."
"How does one receive money or like value?"
"Okay, one inherits it, earns it, steals it, finds it, borrows it, counterfeits it or barters for it."
"Let's skip counterfeiting but we are heading in the right direction. Also, nice expansion of 'money' to include things that represent value of some sort. Money, by its own argument, is of no value but it represents value just a check says, 'I am not worth anything, but you can bring me to a bank and the bank will give you something that will allow you get something of value.'"
"Agreed. Let's focus on why people want money just to tidy up that school of thought."
"Okay, people inherit -slash- earn-slash-steal-slash-find-slash-borrow or barter for it to receive payment in kind in the form of goods or services. If you work hard, you get money to buy things you want. Or, using the check analogy, you get closer to something you want as money just allows you to trade it in for the product or service which is your ultimate goal."
"You don't have to use the phrase 'inherit -slash-earn-slash-steal-slash-find-slash-borrow or barter anymore. I got the drift; let's use earn for the global shorthand."
"Okay, I agree again. Do you think that is the primary reason people work?"
"Yes. People work for many reasons but money has to be in the top three."
"Close enough. Money seems to make the world go around so we need to some love towards the power of money as we craft up this new manifesto."
Danielle finished her coffee and started waving her pen in an absent-minded manner, wanting to write something down but they had just started this adventure and she consciously placed the pen down on the table and said, "Time is the other piece. We need to show the power of money combining with the pure element of time."
"Cool," said Pete. "Time is the variable and money is the engine for human nature...and you can write that down if you wish."
Danielle smiled and wrote a few time-like scribbles near the MONEY phrase. "We need to start connecting these things together."
"Not yet," said Pete. "Let's determine why we are doing this exercise. Are we doing this for the glory or to find some magic key which drives commerce and pure growth?"
"I am mostly on the side of the magic key, but a little glory wouldn't hurt."
Pete smiled then paused for a few moments. He excused himself for an assumed bathroom break and went down the stairs and around the corner. Danielle kept doodling on her pad and tried to concentrate on the phrase "magic key which drives commerce and pure growth." While she wanted to incorporate the time element into her thoughts, but time just didn't seem an elegant fit at the moment. She kept writing "pure growth" over and over again....trying to figure out how a person or an entity could provide a valid spark, an accelerator or some assistance to allow the next worthwhile person a springboard to increased wealth, satisfaction and motivation. She was stuck but she knew she was close.
Pete returned and opened his mouth but Danielle raised her hand to silence him. Before he could ask why he was being asked not to say anything, she said, "How do you encourage someone to do something better for themselves, and in turn, for all?"
"I don't know, pay them?"
"I think we are close to something here. Would you agree that not all people are worthwhile for this commerce and opportunity for pure growth?"
Pete said, "You could convince me that our targeted group earned their way into the receiving role. You could convince me that some people don't want to help others by helping themselves. You could convince me that some people don't deserve their fair share and some folks deserve more than their fair share."
"So, is this you agreeing?"
"Yes. What do you have?"
"Nothing other than a notion: we want to incent hard-working people, doing valid work, to continue to do that work, by incentives of some sort."
Pete now playfully raised his hand, delaying Danielle's next point and asked, "Are you making a distinction from important work and valid work?"
"Yes, we need to allow waitresses, surgeons, garbage men or garbage women, landscapers and architects the same opportunity. If you are hungry, a waitress is more important to you than a surgeon so I felt the word 'valid' gave us some leeway here."
"Okay, put 'valid' on your money sheet."
"Did you write anything else?"
"Yes, I wrote 'tip people' two times. I think we need to start tipping larger amounts and to more people but I can't explain it just yet."
"Okay. Since you wrote it twice, it should stay."
"I don't know if we have to strip down the concept of money so as it treat it as an interim step to the ultimate value," said Danielle. "I know that money or gold has no real value, other than some gold-related manufacturing value but if I have some gold coins, I can trade them in for an automobile or a boat."
"I agree that money isn't the true value but more of a conduit to the real value so we can continually define the exceptions each time we use the phrase 'money' or we can possibly address that later. I don't think further clarification of money to differentiate fiat money, representative money, commodity money or credit money will add anything to our theory but just for simplicity, we can treat money, any type of money, as the ultimate connector from effort to reward or compensation."
"Fair enough. Now, let me tell you about the velocity of money."
"I know about the velocity of money."
"No, you know the book theory of money velocity. What I want to say focuses on the real live application of the theory."
"Okay, lay it on me."
"Okay, instead of relying on a stimulus package, basically funded by the rich and deficit spendng to help the middle to lower-middle class, why not allow people to give these people tips for their goods and services."
"So, give the waitress a fifty percent tip?"
"If the service and coffee are worthy, why not."
"I can't afford it."
"I know but if you were making a quarter of million dollars a year, and weren't getting any stimulus relief and were given the option of doing this versus paying more taxes, woud you tip higher to the people that deserve it?"
"I won't answer that because while I can see a rich guy giving a hard-working waitress a big tip and the waitress directly spending that money back into the economy, your theory starts to fall apart when that rich guy's house is burning down. Does he tip the fireman? What happens if the rich guy's house and the poor guy's house is burning down at the same time? Does the fire truck go to the rich person's house because they know they all will get some money?"
"I am not sure about fire trucks but I am sure that if a rich person had the option of using their exact amount of increased taxes to directly pay for outstanding service versus just sending it into the federal or state bureaucracy, they would do it."
"I am not disagreeing with you. And I like the human nature component of this interaction; so put it on the board."
The board began to sag with numerous components and while they were still making good progress, it was obvious to both of them that a time-out was in order. They agreed to meet for dinner at seven o'clock and left wth indentical summaries of the surviving board comments and observations.
It is fascinating what you see when you are not looking for anything in particular.
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