Sunday, November 13, 2011

Pareto's Principle: The mathematical law that shows why wealth flows to the 1%

What the protesters are fighting (consciously or unconsciously) is the 80/20 rule – variously called Pareto's principle, Zipf's law, the long tail or Benford's law, depending on what you are studying – a staple in scientific, economic and business textbooks, the go-to idea to show how the frequency of a set of natural events is not always what you might recognise as, well, natural.

The maths underlying the 80/20 rule, known as the power law distribution, is found in many natural systems over which no single human has much influence. Its concentration of the extremes seems built into the fabric of complex systems that depend on numerous factors that continually change over time.

The simplest version says that 80% of your company sales will come from 20% of your customers; that 80% of the world's internet traffic will go to 20% of the websites; 80% of the film industry's money gets made by 20% of its movies; 80% of the usage of the English language involves just 20% of its words. You get the picture.

Biden and Obama sought Corzine's advice.

Corzine's brokerage firm lost $600 million in client money betting on European bonds. His firm, MF Global is now bankrupt and its 1000 employees have been fired. Biden says he and Obama called "Jon Corzine first" for advice on the economy after winning the White House. I think this helps explain the inept stewardship of the U.S. economy by the Obama administration.

OWS induces some capitalism.

Jay-Z’s Company Sells Occupy Wall Street Shirts, Chooses Not To Give Any Money To, Y’Know, Occupy Wall Street

Obama chides American business for being 'lazy'

For the third time in as many months, Obama chided the United States for lack of effort in the competition for business. At the annual Asia Pacific Economic Cooperation meetings in Honolulu Saturday, the president said the U.S. has been “lazy” about attracting new investments to its shores:

“But we’ve been a little bit lazy, I think, over the last couple of decades. We’ve kind of taken for granted — well, people will want to come here and we aren’t out there hungry, selling America and trying to attract new business into America.”
...This coming from the most anti-business president in my lifetime.

Crony Capitalism

Obama Campaign Backers and Bundlers Rewarded With Green Grants and Loans
Peter Schweizer writing in Newsweek:

It would take an entire book to analyze every single grant and government-backed loan doled out since Barack Obama became president. But an examination of grants and guaranteed loans offered by just one stimulus program run by the Department of Energy, for alternative-energy projects, is stunning. The so-called 1705 Loan Guarantee Program and the 1603 Grant Program channeled billions of dollars to all sorts of energy companies. The grants were earmarked for alternative-fuel and green-power projects, so it would not be a surprise to learn that those industries were led by liberals. Furthermore, these were highly competitive grant and loan programs—not usually a hallmark of cronyism. Often fewer than 10 percent of applicants were deemed worthy.

Nevertheless, a large proportion of the winners were companies with Obama-campaign connections. Indeed, at least 10 members of Obama’s finance committee and more than a dozen of his campaign bundlers were big winners in getting your money. At the same time, several politicians who supported Obama managed to strike gold by launching alternative-energy companies and obtaining grants. How much did they get? According to the Department of Energy’s own numbers ... a lot. In the 1705 government-backed-loan program, for example, $16.4 billion of the $20.5 billion in loans granted as of Sept. 15 went to companies either run by or primarily owned by Obama financial backers—individuals who were bundlers, members of Obama’s National Finance Committee, or large donors to the Democratic Party.