The Zombie Political Economy

The welfare state breeds and fosters violence.

Daily Reckoning’s Bill Bonner explains, (bold emphasis mine)

In economic terms, a zombie is a parasite. He contributes less to the economy than he takes from it. He lives at the expense of others.

Almost any profession or career can be a nest for a zombie; an auto mechanic who rips off his customers, for example, is a zombie…at least in a sense. But most often, zombies are created, enabled, and supported by government. Government transfer payments create whole armies of zombies. Government bailouts turn whole industries into zombies. Government programs and government employment turn millions of otherwise reasonably honest and reasonably productive people into leeches. A guy who might have been a decent gardener, for example, becomes an SEC lawyer or a Homeland Security guard.

Politicians like zombies. Zombies are cheap. If you buy a vote from a man who is independently wealthy, it’s gonna cost you. And the bourgeoisie – which earns its money from honest toil and enterprise – is hard to buy. But zombie votes? They’re a dime a dozen. Just increase Social Security or Medicare; the zombies will line up to vote for you.

It’s relatively easy to turn people into zombies. And it’s fairly easy to support them when an economy is healthy and expanding. But when an economy goes into a contraction, you can no longer afford to give the zombies their meat. Then what?

Then, watch out. The zombies rise up.

Let me add that political economic parasitism has inherent limits, not only from the state of the economy, but most importantly, from the availability of supply of hosts.

Once parasites have grown extensively out of the proportion to the supply of hosts, the system collapses.

Political dependency, then, mutates into violence.

Self Development: Compounding Efforts as Way to Success

Agora Publishing's Bill Bonner has this outstanding article about “compound efforts over time”.

It’s basically about balancing one’s efforts using the principle of compound interest.

Here is Mr. Bonner. (bold highlights mine)

Malcolm Gladwell's book, Outliers, makes the point that there is no secret to success. Successful people just put in more hours than other people. Our point today is similar. Success is usually the product of compound effort over time. It takes time to develop contacts. It takes time to develop trust - both of your own team and outside clients/customers/associates. It takes time and experience to develop the hunches and instincts that are useful in real life. It takes time too to understand other people and learn how to work with them. It also takes time to build a foundation of human and financial capital that allows you to take advantage of the insights and opportunities that experience bring you.

Time does not work in a linear, mathematical way. As with compound interest, time pays off geometrically. As contacts, experiences, wisdom, innovations and intuition are added one to another, your opportunities multiply. A $100,000 deal that you might have done when you were 25 grows into a $1 million deal 5 years later. And instead of doing two deals a year...you might do 10 a year.

This is also why it is so important to put in lots of time. Gladwell refers to the Beatles, major league athletes and people such as Bill Gates. In every case, he found that the leading figures in their industries put in thousands of hours - usually far more than their competitors. They may appear to be 'gifted.' Their achievements may seem effortless. But they are almost always the product of time.

Not only that, but the time spent at the end is much more powerful than the time at the beginning. You can see this by looking at charts of compound interest. Starting from a low base, the first series of compound interest produce little difference. But at the end, the results are spectacular.

Start with a penny. Double it every day. At the end of a week you are still only adding 32 cents per day. By the end of the third week, however, you're adding more than $10,000 per day. So you see, the last increments of time are much more important than the first.

It doesn't exactly work that way in real life, of course. Hang around too long and you get tired...and the lessons you've learned might not be applicable to the new realities. Suppose, for example, that you had learned to make the perfect buggy whip, at age 55, in 1910! Or imagine that you were the leading expert on silent movies...just before the 'talkies' started. Or maybe you were cornering the classified advertising market...just as Craigslist and eBay made their appearance.

But aside from that kind of a setback, time compounds your advantages. At age 20, you may know less than everyone in your business. But then, you work 10 hours a day, while others only work 8 hours. In 20 years, you may know more than just about anyone. Then, who gets the new contracts? Who finds the new opportunities? Who has pricing power?

Who makes money?

Compound interest works because each addition is then put in service to earn another increment of gain. Compound effort works the same way. Every insight, innovation and useful contact helps bring on another, bigger and better one.

Remember, success is competitive. While you are adding to your business capital, your competitors tend to wear out...move on...or retire. Sticking to it is not easy. People tend to get distracted. They often want easier, simpler, faster opportunities. They give up their accumulated capital...and take up something new. That leaves you in a commanding position.

Stick to it.

Marketing guru Seth Godin shares the same thoughts (bold highlights mine)

Not everything you do actually gets a response. In fact, most of it doesn't. But each effort is a tiny brick in the wall of perception, even when it appears to be dumb and even senseless.

And as Albert Einstein once said, “The most powerful force in the universe is compound interest”. As shown above the concept of compound interest is not only about wealth generation but likewise applies to attaining excellence.

I found Mr. Bonner’s article so compelling that I sent them to my children. I hope that they don’t just read it but internalize or apply it.