Trophic Cascades

The attached video explains Keystone species and Trophic Cascades. It is a fascinating testimony to the importance of biodiversity to ecological balance. Most importantly it exemplifies the premise that everything within a “defined universe” is connected with varying degrees of strength and influence. Conservationists are becoming much more in tune with these dynamics and retooling some very outdated myths and misconceptions. 

I enjoy the study of economics, particularly the writings of Ludwig Von Mises, Friedrich Hayek, and Milton Friedman. They have written works that I consider “pure genius”. And yet, I don't think there’s any example that teaches us about economics better than this short video about nature. 

In my article titled “Snake Oil” I spoke of balance, cause and effect. In this video titled “Trophic Cascades” the removal of “risk” (wolves) caused a species (deer) to unnaturally proliferate. Over time, the deer would have physically and mentally atrophied to a point of extinction. In that process, and in fairly short order, they would have destroyed most of that to which they were ecologically related.

I hear so much talk today about the greedy and evil 1-percenters. Granted, within this small group there are some “bad guys”, but in general they are law-abiding, generous, and play by the rules that our political system dictates. They typically have two overpowering allegiances: their stockholders and their employees (in varying order). Isn’t it funny how an executive responsible for 50,000 shareholders and 100,000 employees who makes $10 million in salary and bonuses is evil. No one ever criticizes the actor being paid $20 million for a movie, or the athletes with average performances getting 5-year, $60 million contracts. No one seems upset that Jay-Z makes hundreds of $millions on a product that most consider disgusting.

The Great American Wolf

Be careful about jumping on the bandwagon to “exterminate the wolves”. The effect thereof could be far more devastating than you could ever imagine, especially if you’re one of the the “deer”.   

Next time, we’ll be talking about money.… who has it and what they do with it.

As always, your comments are welcome.

Scott Sangalli

Snake Oil

Snake oil is an expression that originally referred to fraudulent health products or unproven medicine but has come to refer to any product with questionable or unverifiable quality or benefit. By extension, a snake oil salesman is someone who knowingly sells fraudulent goods or who is themselves a fraud, quack, charlatan, or the like.

Let’s start out with two of my favorite axioms in life:

1. Virtually all politicians embrace, if not “live by”, the adage that “it’s easier to get forgiveness than permission”. (I must confess that as a kid, this worked pretty well with Mom, but rarely, or really ever, with Dad.) 
2. For every action there’s an opposite and equal reaction.

Now, have you noticed that the political rhetoric du jour always mirrors the media’s previous day’s breaking news. They are called “talking points”.  We are expertly guided to believe that the sky is about to fall and that the cause thereof just happened. One day we’re talking about climate change and ice that’s supposed to be melting, a heat wave in Arizona, a cold wave in Wisconsin, fewer minnows this year in some remote mud puddle, or too many mosquitoes in Minnesota. But we wake up the next day and the sky is still there. So we move on to student loans and how our poor kids are indenturing themselves for life just to pay for that 6-year advanced degree in the Evolution of Post-Depression Urban Expressionism. How will Jimmie and Sarah survive? They are doomed. How will our economy survive? How can we live with this terrible tragedy? We must do something now… right now!

Last week, everyone was in a tizzy because Oreo Cookies was opening a plant in Mexico, something Donald said, the apparent shortage of transgender bathrooms, the name of a football team....and so on and so on. 

But rest assured… there’s always a politician on his white horse galloping to our rescue. First and foremost he’ll always start by telling us that it’s the other political party’s fault. Next he’ll tell us that he’s been warning everyone about this for years. And lastly and most importantly, he’ll promise that once in office, this problem will become his first priority. 

However, once elected, his priorities will move on to a matter far more important and pressing - his next reelection. And though he knowingly lied, he has mastered the art of Axiom #1. More than likely (as evidenced by history) we will reelect him. Why? Because he knows something dark and sinister about us that we refuse to admit. He knows that there’s this little secret thing that we fear far more than we fear a liar. It’s called CHANGE. 

Most of us know that today’s urgent issues didn’t just appear. They’ve been brewing for years, if not decades. We know also that 95% of these problems were created and/or magnified by politicians who were eager to pour a quick dose of their snake oil on the “hot topic” du jour. 

The size and scope of a problem is almost always directly proportional to the term of its existence. To reiterate, big problems rarely spring up during the night. Sadly though, enduring solutions often take much longer than anticipated because of Axiom #2. Real solutions come with a big price, a lot of time, and assuredly with unintended consequences. The remedy, as did the problem, will evolve slowly; and only if that remedy is administered with caution, patience, and for the right reasons. 

Any politician who professes anything different is pandering to your fear. And without remorse, he will knowingly, if not deliberately, fail to keep his promises. But he lives his life by Axiom #1... his “Liquid Paper” of life and career (so to speak). 

Do not confuse action with progress. In my business career, I had a few guidelines that rarely, if ever, failed me. So often I would see my managers feverishly putting out fires. Their boundless energy was stimulating, but despite their efforts, something was always ablaze. Why? Because most fires can be extinguished in fairly short order. The key, though, is to insure that the fire doesn't rekindle. Therein resides where the majority of diligence is needed. Finding out how the fire started, when and why it started, and ultimately who's carrying the "matches" is rarely, if ever, a quick and easy process, However, it's mandatory. Quick fixes never work. 

Big problems are big for a reason. They always have a distinct life and history of their own, and they  didn't get big overnight. Consequently, solutions to big problems require great patience because the components of the cure must be dispensed in slow and measurable doses. Realistically, and expectedly, each corrective application will typically morph into consequences unforeseen.  (I am reminded of Shultz's Law which simply states that "Murphy is an optimist"). 

Unmonitored and uncorrected, inattention can be catastrophic, regardless of intention. Axiom #2 is a physical law of nature, but it is important to note that the reaction, though anticipated, will not necessarily be that which was intended. Also note that for each reaction there is a re-reaction, and on and on. 

When learning to fly an airplane, it is very easy to unknowingly veer off course. Good instructors understand this and within the rules of safety they’ll let you dig a “nice hole”. Eventually patience will expire and the instructor will issue a no-nonsense reprimand. Upon realizing the error, the typical student-pilot’s reaction is a quick jerk on the yoke and/or a stomp on the rudder. This novice knee-jerk reaction(s) is then immediately followed by “ass chewing” number two. 

But over time you learn to make course corrections with thoughtful deliberation and in small, if not slight, increments. In so doing you are mastering the critical component within the only reliable form of “problem solving”. The process of assessing the effectiveness (both good and bad) of each administered dose must be accomplished throughout the entire process. In the short term, this approach will take much longer and it won’t be as easy. But over time, this methodology will invariably prevail because the solution is lasting. Most importantly, by removing the danger from CHANGE, we are able to eliminate the fear of CHANGE.

Where does all of the above leave us? Know this.... any politician mounted atop his lofty steed and waving a one-size-fits-all instant solution in one hand usually has a bottle of snake oil in the other. Don’t fall for it. Do your homework. Learn the true history (and both sides) of the issue…i.e. when, who, how, and why. Only then can you assess the thoughtfulness (or lack thereof) of the pundit’s remedy. Make the effort and in no time at all, you’ll become a snake oil hound dog. 

On Thursday, I will attach a fascinating video that exemplifies all of the above and more. It’s fairly short, well scripted, and beautiful to watch. 

These are serious times. We can make a difference only if we are “informed” voters. Isn’t that the very least we can do? 

Your comments are always welcome. Thanks for listening.

Scott Sangalli

The Great Divide's Opening Day

The Great Divide

In less than fourteen short months we will be required to elect a new president, and re-elect or replace 435 members of the House and 34 Senators. Business as usual, right? Not really. The faces in the House and Senate will look much the same on the day after the election as they did the day before. But… there will be a new president, and a new agenda, and a new direction. That’s “big stuff” and shouldn’t be taken lightly. 

Though the finish line in Washington is miles away, the races are in full swing. And in my 65 short years, I cannot recall when the philosophical lines of division were so far from each other. But, that’s not the Great Divide to which the title is referring. The driving “Divide” is the mental makeup, involvement, and energy of the voters. And why is it important to understand this? Great businesses all do one thing very well. They know their customers. They know where they live, what they eat, where and when they shop, how often they go to church, and how many dogs they have. 

Politicians suffer under the delusion that their individual messages are so overwhelmingly powerful as to make their brand appealing to virtually everyone. Of course, successful businesses are always looking for new customers, but the first commandment is to keep the customers you have. Repeat business is lifeblood. 

Ok, let’s apply this politically. The Great Divide refers to the two distinct types of individuals that compose the American populace. Understand that there are “degrees” of separation relative to individuals within each class, but for simplicity, let’s start out slowly and look at a very big picture. Later we can address the finer points of segregation and a more pinpoint market approach, but for now let’s paint some very broad strokes.

Disclaimer: Before I begin offending my readers by categorizing you into one of two categories, let me say that I have no disdain for either side. Life is a balance and in this case, one side cannot exist without the other. Both serve an equal purpose in the grand scheme. Also note that in this first “macro” approach, I am not talking about anything other than “mindset”. Wealth and/or success, ethnicity, gender, education, religion, occupation, etc. are all subsets within the two groups and relate to the “pinpoint market” approach. Today, we’re just laying the groundwork for future discussions.

Group 1: Mountain Climbers

These people don’t really like working for someone else, though most do. They are the risk takers. In their hearts they would prefer to run their own show. They are confident in their individual abilities and though most aren’t business owners, they have graduated to positions that largely satisfy their need for personal independence. And for those within this group who are temporarily stalled and haven't obtained a station of independence, their quest to obtain such never ceases. 

The Mountain Climbers are easy to spot. They cautiously embrace change and won’t run from it without a good “look and see”. They value their own opinions (and typically have them), and rarely do they believe that anyone’s opinion is better than their’s. They are comfortable and confident making decisions and abhor being excluded from the process. As a note, any good businessman knows that to retain these people, you have to give them “rope” and an opportunity to reach the status to which they aspire. 

Group 2: Long-Distance Runners

These are  the “Steady Eddies”. They are very good at knowing their limits and do best when allowed to function within very clear boundaries. If something appears to be working reasonably well or has existed for a long period without any major catastrophe, they are not about to fix it. “Change” is out of the question without absolute guarantees. Conformity is also very appealing though they can be led “by example”. They don’t really relish the big-decision process and are comfortable relenting authority to others. 

The Long Distance Runners have a great sense of justice and a utopian desire for tranquility. They limit their scope of involvement to that which is comfortable. They occupy a significant portion of many companies’ workforces as they flourish at much-needed jobs that require consistent repetition. Those businesses that recognize their value do well as long they don’t violate this group’s perception of fair play.

In the above two groups, there is very little crossover. And certainly there has yet to be a politician powerful enough, or smart enough to change the DNA of the public. Yet they all try. In the meantime, they violate the first commandment of business. They loose existing customers.

On election day in 2012, Mitt Romney was unable to garner slightly more that 60 percent of his existing customer base. He lost the election by a couple points when more than a third of his professed team stayed on the bench.

Ford and GMC don’t target the marketing of their trucks to the families who currently own a Volvo SUV with aspirations of buying a Tesla. Yet today’s politician thinks that everyone wants to buy what they’re selling.  It’s a terrible mistake and destined to fail.

Think about it.

More later,

Scott Sangalli