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All Money I$ Monopoly Money

5/18/2010

           There is this notion of unlimited wealth that gets tossed around in financial circles. There is an unlimited amount of money to be made, all we have to do is make it. Really successful rich entrepreneur types like to say it’s like the money is out on the ground and all they have to do is pick it up.

        Well that may very well be true, but there has to be a Yang to that limitless Yin. Money comes from somewhere, and I don’t mean a mint.

        Money is an abstract concept that attempts to quantify value. Money is a mathematical unit of measurement, just like kilometers, seconds, watts, joules, BTUs, mpg and psi. Shopping, buying, purchasing, whatever you call it, is really just a trade or swapping of a good or service for a symbolic representation of the value thereof (money). Currency is the symbolic representation of that value.

            Way back in ancient times before money was invented, people bartered. If you had sheep you’d trade a sheep to the guy who had wood, or fruit or any other thing you didn’t have because he didn’t have any sheep and was in the mood for nice big plate of mutton.

           As societies developed with rules and kingdoms, kings had to have armies. If you’re an ancient king, how do you get people to fight for you? You take care of them in exchange for them doing your dirty work for you. In those times that meant giving each soldier a daily ration of grain or meat or barely or whatever the staple food was of the society. The notion was the king would take care of his troops. Well sometimes the weather wouldn’t cooperate and there were floods and droughts, and there was no staple food to pay off the soldiers. So someone got the bright idea to give the soldiers something they could trade for food, since the king didn’t have any food to give them himself. Money was born. Maybe it was a nice shiny rock, maybe it was a royal IOU. At any rate the King got out of the catering business and just issued money to his soldiers and said, sorry I’m out of food, so here take this and go see if someone will trade you some food for it.

           So it’s clear to see the original if not the true notion of money is as a place holder for “goods or services due.” And “goods or services due” means a debt. For every Dollar, Euro, ruble, peso, or yen issued a debt for the same or more is also created. This gives us the following formula:

                                           Wealth = Debt

           Wealth is an accumulation of monetary value which means an uneven trade occurs at some point. In a regular purchase an item is assessed to be of a given value and then is traded for the symbolic representation of that value in currency. In a fair trade value does not change hands only the form in which that value is stored. One of the ways value is stored is as a debt. In fact, money used to be nothing but a debt for gold. Now that we have abandoned the gold standard, money is a debt for value. In order to generate wealth, a debt must be created. At some point an uneven exchange must occur, otherwise in a fair trade both sides acquire the same amount of value of which they surrendered.

            The most obvious method of an uneven exchange (note that uneven does not necessarily mean unfair) resulting in a debt is interest. In order to borrow $100 at 10% interest from the bank, you have to pay them back $110. The bank accumulates $10 in wealth from the deal, while you incur a debt of $10 beyond the value of the original loan sum of $100 (more on the implications of the interplay of debt and wealth in a later post). Notice that the bank is not generating new wealth it is merely accumulating, or consolidating it from you and the rest of its lendees. Now it’s up to you to somehow take that $100 and convince someone else that its value is actually $110. This is possible because value is subjective. And as money is a symbolic representation of value, it is subjective and abstract.

So what does all this tell us?
   It explains snobbery. Rich people are snobby because they realize their accumulation of wealth is really an accumulation of value, ergo they feel they are more valuable than the rest of us.

        It not only explains why a country as decadently rich in resources like the USA can be 13 trillion in debt, it actually presupposes it has to be so in order for other countries to prosper. Debt is kind of the way we share the wealth.

        It explains how a dollar is a dollar is a dollar is not always a dollar. Monetary Wealth cannot be created or destroyed by producing more or less currency; it can only be accumulated and consolidated from many hands into one, through the process of debt. However value, as a subjective abstraction, is ultimately a psychological construct that can increase or decrease relative to an individual.

        Economics is not a hard science. Markets are not governed by universal laws like physics. Yes, markets are influenced by supply and demand, but not exclusively. Markets are not closed systems impervious to external factors. Economic development is psychological warfare. Were this not so there would be no need for salesmen, stockbrokers, or advertising. Value only truly exists in the mind; ergo money is a psychological manipulation imposed on humanity generation upon generation.

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All that Glitters...

5/11/2010

1 Comment

Gold, Gold, What is it good for?

           Once upon a time you could go out and dig for gold and every speck or nugget was adding to the world’s supply of currency.

           Unlike paper currency, gold has some kind of intrinsic value. Why is this so?? After all it’s pretty much useless for any kind of industrial purpose. It’s too soft and weak of a metal to be used as any kind of tool. It has no useful chemical reactive properties.   It’s shiny, pretty and rare and therefore has always been used to decorate Kings and Lords as a symbol of royalty and divinity. So maybe it’s the prestige of possessing gold that people value so highly. At any rate people value gold, meaning they are willing to trade almost anything for it. As such it was only natural that it would become the symbolic unit of equitable exchange across the world.

           It’s funny that we think of gold now in terms of its currency value or the price you can sell it for. Back when we were on the gold standard people would wonder “how much stuff can I get for this nugget of gold?” This is really no different than walking into McDonalds and wondering what’s new on the dollar menu. The fact is, back then gold was currency, even though we printed paper currency, it was really just a coupon, or bank check or an IOU for X amount of gold. We did this because it’s much easier to carry some slips of paper in one’s pocket than a bunch of gold nuggets. We also did it because we knew ultimately gold is a finite resource. There is only so much of it to go around! How could we have unlimited wealth with a finite supply of currency?

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Superstardom

5/2/2010

2 Comments

ThinkTank Panel Note: This is sort of a Continuation of the Brandon Jennings Post. The ThinkTank Panel recommends reading the Jennings Post first. It may make more sense that way.

          Being a superstar has broad implications. One implication for the player, as backwards as it may seem, is now that he owns the team he is somewhat immune to responsibility for its failings. Remember the player took ownership by everyone concluding that the team’s best chance for success is that player doing what he does best. Ergo any non-success must be the fault of something inhibiting that player from doing so. And most often it is the coach who gets the blame.

          A perfect example of this is Skiles with the Bulls. As mentioned in the Brandon Jennings post Skiles took the Bulls to the 2nd round, but traded his authority to Ben Gordon when he didn’t have to (the bulls swept the 1st round series with the defending champion Heat. Gordon played well but was not pivotal to winning a sweep. They lost to the Piston in round 2.) The next season the bulls got off to a slow start. Skiles had lost his authority to the new superstar Gordon. Skiles and Gordon clashed over Gordon’s role on the team. Gordon as superstar dictated that Gordon has to be Gordon for the Bulls to win. The perception was that Skiles kept Gordon from being Gordon and that was why the Bulls were losing. Skiles was fired. Of course most people, especially in Chicago would say in hindsight they should have kept Skiles as coach and gotten rid of Gordon back then. Such is the luxury of being superstar.

          This explains why NBA teams and pro teams in general go through coaches so quickly compared to college coaches who seem to have longer tenures. The reason is simple. In college if you sacrifice your authority to a player, most likely he goes pro and is gone the next year. The turnover of athletes in colleges means a coach rarely is owned, and if so it is very short lived. No school is going to choose a coach who could remain at the school for decades with a player who can only remain four years maximum. But rest assured even the hardest most notorious dictators in college basketball have been owned at one time or another come tournament time. But owning your coach in the final four usually means becoming a high draft pick so there is no aftermath in the college game.

         In the pros coaches are generally about 1/3rd the cost of a superstar player. Also fan loyalty tends to be to players first before coaches. So as an owner you’ll most likely side with a player over a coach, because it’s better for the bottom line.

          Now thus far I’ve given the impression that superstardom is synonymous with players who are full of themselves or uncoachable. That is not the case. In fact the vast majority of superstar players are very coachable, which is an attribute that contributes to their greatness as superstars. However the ugly truth is, they still own their coaches.

          The vast majority of superstar players in all sports own their coaches but willfully submit to the coach’s authority. They do this for a number of reasons, as an example to the rest of the team, to share the burden of responsibility for winning, and because they realize that owned or not the coach is vital to a team’s success. So it’s true that great players and great coaches win championships together. But they are not equals. The coach is there because the superstar allows him to be.

          Case in point is Michael Jordan and Phil Jackson. Phil is undoubtedly the Greatest NBA coach of the current era, maybe of all time excluding Red Aurbach alone (but not for the reason you think, more on that in a future post). But Michael Jordan owned Phil because the best way to win any given basketball game is to put the ball in Jordan’s hands and let Mike be like Mike. But as a great player Michael Jordan recognized he needed Phil to win a championship, and it was Phil Jackson alone who convinced Michael of this. Together the Bulls won 6 rings, but if at any time a choice had to be made between the 2, not only would Jordan be the Bulls choice, it would be Jordan’s choice to make. Jordan owned Phil, the Bulls, the City of Chicago, the NBA and the world.

         But just because Phil needed Michael to allow him to coach does not in any way diminish the fact that Michael needed Phil to win. This fact, along with the fact that Jordan owned Phil was proven by your defending NBA Champion LA Lakers and Kobe Bryant.

         In 2004 the Lakers had to pick between keeping Shaq and Phil Jackson or Kobe Bryant. They chose Bryant. Enough said.

         Perhaps the best way to explain the superstar phenomenon is to give an example where it could have happened but did not.

         In 2001 Vince Carter helped engineer what may be the ultimate Superstardom opportunity of all time. Carter was already a star by promotion. He had won rookie of the year, the NBA Dunk contest in spectacular fashion and lead his Toronto Raptors to the 2nd round of the playoffs where they were deadlocked in a game 7 with the 76ers. This is the infamous “graduation day” game where Carter had attended his College graduation ceremony at Chapel Hill NC that morning and then hopped a charter flight to Philly to make tipoff. The Bottom-line is Carter’s 18ft jumper at the buzzer came up short and the Raptors lost by 1 point. Had Carter made that shot he would have ascended from his sport celebrity status to Superstardom. He would have owned not only the Raptors, basketball fans, and the sports world but educators and the stay in school movement would have made him their superstar/champion as well.
         But Vince missed. Ergo, none of his teammates believed Carter alone constituted their best chance to win, his coach was not indebted to him,   and he did not get the strange but ubiquitous free pass on blame for the teams short comings in the near future. In fact Carter got all of them very quickly. He wilted under the criticism and scrutiny and eventually got shipped out of Toronto labeled as a selfish, lazy, malcontent who could not be trusted. Where a superstar is created by capitalizing on the faith of his coach, team, and fans, Carter’s vilification was a collective loss of faith created by a missed shot.

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Big Day For Brandon Jennings?

5/2/2010

3 Comments

Today is a big day for Brandon Jennings. His Milwaukee Bucks Play the Atlanta Hawks in a series deciding game 7 today. Game 7 provides a rare opportunity. The rookie point guard has a chance to become a superstar over night. With a big-time performance today in front of a national audience Jennings could win the hearts of millions of fans, establish his reputation among players in the league, and most importantly win control of his own locker-room.

Some would argue the real prize Jennings could win is the favor of NBA commissioner David Stern and that would be the real key to achieving superstardom. I would agree in as much as Stern determines the TV schedules and grant Jennings and the Bucks international exposure if he so chooses. But that exposure doesn’t matter if Jennings doesn’t own the Bucks first. The dirty little not-so-secret secret about superstars is that their head coaches are indebted to them. While following a coach’s instruction can make you a star, it is only by usurping the coach’s authority that a player becomes a superstar.

So how can Jennings possibly usurp the authority of a disciplinarian like Scott Skiles? By seizing the opportune moment.

That opportune moment could arise in game 7. At some point the game, and the series will ultimately have to be decided by the players, not the coach. At some point the coach may have to concede this. At that point a player has to step up and claim victory or defeat, for himself, for the team, for the coach and for the city. As the point guard, and (with Andrew Bogut injured) the best player on the team, and the only player with any kind of national following outside of Milwaukee, Jennings is the best position to seize that moment.

Now a lot has to go right for the scenario to play out where Skiles has to hand over the keys to Jennings. Most likely it has to be a tight game. Jennings performance has to be superlative to the rest of the players on the court, and most importantly, Jennings performance has to be signature Jennings, not signature Skiles. Otherwise Skiles is not putting faith in Jennings he is merely putting faith in himself and his coaching abilities as he imparted the right way to play to Jennings. But if circumstances do necessitate a player’s takeover, and Jennings does seize that moment and leads the Bucks to victory and into the 2nd round, he will own Skiles, and the rest of the Bucks organization.

Seizing the opportune moment is somewhere between an Oedipus Complex and Mutiny, in so far as a subordinate surpasses a superior in authority. It’s a “The Student has become the teacher”, kind of thing.

The Euphemistic way of putting it is to say that the coach puts faith in his player and the player rewards that faith, so the coach grows to trust the player on the court. But the truth is the coach trades his authority for a win. In this particular case a victory and a trip to the 2nd round would validate Skiles as a legitimate coach, having advanced in the playoffs with 2 separate teams. The good news for Jennings is Skiles has a history of trading his authority for a win. He traded his authority to Ben Gordon last time he advanced with the Chicago Bulls. The bad news is he didn’t have to because Gordon didn’t overtly seize the moment, he just took the trade Skile’s offered and the deal eventually ruined a promising Bulls team, and cost Skile’s his job there.

If the cards fall Jennings way and he delivers a signature Jennings performance (which most likely means an array of seemingly miraculous rainbow fall-away pull up jumpers) on the national stage when it counts most, everyone in that Bucks locker-room including Coach Skiles will have to admit that their best chance for success as a team has been proven, trial by fire on the court, to be Brandon Jennings being Brandon Jennings. At that moment it will be his team. And like I said at the beginning, being a superstar doesn’t matter unless the player has ownership of his team.

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All Money I$ Monopoly Money

All that Glitters...

Superstardom

Big Day For Brandon Jennings?

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