Archive for the ‘Inspired by a Book’ Category

Neiderhoffer and Nassim: Two People All Investment-Banker-Hopefuls Should Know

Sunday, May 23rd, 2010

A promiment Harvard undergraduate blogger once lamented about how all of her close and smartest friends “wanted to be investment bankers.”

Today, quantiative finance is one of the most popular majors amongst undergrads. Professors capable of teaching and breeding “Quants” – those who study and master the enigmatic mathematical models of quantiative finance – earn a comparatively larger dole than their counterparts who teach other majors.

There is little surprise that investment banking has become so popular in recent years: it is by far one of the most intellectually challenging and lucrative careers available.

In Japan, an increasing number of undergraduates are pursuing careers in “gaishi-kei” companies: that is, foreign companies based in Japan. Domestic firms and government jobs are becoming less-and-less popular as the international clout of Japan gradually but surely erodes. In light of this, many undergraduates (in particular, Japanese polyglots) have set their binoculars on “gaishi-kei” companies that will, in their eyes, provide them with a a brighter future.

Needless to say, that makes foreign investment banks one of the most sought-after jobs in Japan.

But of course, there is a catch.
Japanese undergraduates have very little idea of what the world of finance is all about.

The world of finance is, in short, the intangible world that governs the economy. Though Lenin identifies key industries such as steel, coal, railways, etc. as the “Commanding Heights” of the economy, there is little doubt that in today’s world, the reins of the world economy is held firmly in the hands of the finance industry.

Of course, the description I’ve given above is ambiguous at best and completely unhelpful at worst. But the reality is that there always remains a great divide in opinion whenever it comes to financial parlay.

Take, for instance, two financial titans: Victor Neiderhoffer and Nassim Taleb. They’re both incredibly successful financiers.

Yet the two could not be any further apart.

Neiderhoffer has founded and run several hedge funs, which usually generate astronomical annual earnings, even by hedge-fund standards.

Nassim Taleb, the author of several bestselling books including “Fooled by Randomness” (now a must-read for financial experts) and “The Black Swan,” runs a hedge fund as well. On most days – in fact, just about every single day, it loses money.

But once in a while, Neiderhoffer loses a fortune, while Nassim basks in newfound wealth.

What’s different about Neiderhoffer and Nassim is how they position themselves in the market. Neiderhoffer, after rigorous statistical and mathematical analysis, makes bets that, as far as track records are concerned, are usually right. In other words, in information economic parlance, Neiderhoffer uses information asymmetry to his advantage: he takes his time to gather superior information, which is how he repeatedly makes a killing.

Nassim positions himself completely differently: he bets that he doesn’t know anything at all. To make a complicated story short, he bets on market irregularities; he bets on the kind of things no one predicts will happen: like Sept. 11th and the global financial crisis.

That means on most day Nassim’s hedge fund will be bleeding. But every once in a while, on those days when every trader’s hands are flailing and clawing in despair (including Neiderhoffer), Nassim will be smiling.

Speaking of his hedge fund (which has become enormously successful thanks to the financial crisis) at a conference following the launch of his now much-acclaimed book The Black Swan, Nassim said: “We have billions under management now [...] and we still know nothing.”

The story of investors has a very long history. In fact, tulip futures had been bought and sold in the Netherlands centuries ago. Today, the world of finance is much more complicated, but the rules of the game are largely the same: for every investor’s position, there is an investor taking the opposite position and that only means one thing – someone’s betting on exactly the opposite thing you’re betting on.

And when investors nowadays have MBA’s and Ph.D’s from the most prestigious academic institutions in the world, when investors think they’re smarter than everyone else, when the only person left to out-smart is the genius next door, that only means one thing: get out while you’re still ahead.


The Fall of the Iron Curtain and the Battle of Ideologies

Friday, May 14th, 2010

Some time ago, Francis Fukuyama famously proclaimed that “the end of history” was upon us; with the fall of the Soviet Union, the battle over people’s hearts and minds had finally been settled.

Capitalism had won.
Or so it seemed.

The world today is run by different governments, each with their own unique economic agenda. Before the fall of the Soviet Union, the world was largely divided between two ideological camps: the Soviet-led Communist bloc (central planning, state-ownership, scientific socialism) and the West (free-market capitalism, private ownership, innovation.)

According to Fukuyama, we were to see the dawn of an era where American capitalism would envelop the world. Furthering Fukuyama’s thesis, Thomas Friedman, a journalist for the New York Times, proclaimed that this new paradigm, coupled with the advent and proliferation of IT, would bring about a “flattening of the playing field.”

Both Fukuyama and Friedman envisioned a world where the world would be governed by very similar sets of economic and political policies.

But do we live in an era where the economic policies of each country are largely the same? Do we live in an era where travelers face the same consumption tax anywhere in the world? Do we live in an era where the income tax is the same across the board?

The answer to all of the questions above is, quite obviously, no.

If anything, the battle of ideologies has become far more complicated than ever before. The fall of Soviet-Russia had created a large ideological void that would span half the world. We see today the gradualist, central-planning of China, the fiscal-stimulus obsessed Keynesian policies of Japan, and even the birth of resource-nationalism of the OPEC states.

With the fall of the ideological schism has come a new time in which it’s become far more complicated to differentiate one set of ideas from another. What, exactly, is socialism? What, exactly, is a democratic country? When every sociologist has his own pet-plan that he brands as a new form of socialism, and where both China and America openly proclaim to be democratic countries, we see the rise of great paradoxes and the nullification of meaning in socioeconomic terminology.

The iron curtain has fallen, but now in its wake many new curtains of different shades and variety lie fluttering in every pane.


Japanese Housewives and Why They Rule the World

Sunday, May 9th, 2010

Perhaps when one talks of “the financial world,” it may evoke images of powerful finance ministers pulling the strings behind closed doors. Perhaps it conjures the image of the nondescript building of Goldman Sachs. Or, perhaps, it doesn’t really call to mind very much at all.

The truth of the matter is, if the financial world is a boat in rough waters, then at the helm are Japanese housewives.

For years, both the central banks of Japan and America have been boggled by why their monetary policies seem to have very little effect on the marketplace. Alan Greenspan, former chairman of the FED, famously proclaimed that this new world in which central banks no longer hold very much authority a “conundrum.”

In other words, the big dogs (i.e. the government and the savvy investment banks) were no longer calling the shots in the world of finance.

So who took over? Who is this enigmatic man that has suddenly taken the reins of power?

The answer may be surprising. This man, against historical convention, isn’t Caucasian. In fact, he isn’t very much of a man at all.

He is, in fact, a she, and she is none other than what The Economist now calls “Mrs. Watanabe:” the amalgam of Japanese housewives that have at their disposable nearly all of Japan’s household savings.

This reality is perhaps best expressed in David Smick’s book The World is Curved.

Smick, a famous financial consultant, observes:
“the Japanese system, once brilliant at controlling bureaucratic image and substance, is today facing its own fragile world that is curved. Now millions of [Japanese] housewives and other market decision-makers care little about bureaucratic image and power. They care about information-facts and insights that reflect future rates of return and risk. They care little about bureaucratic power because, in today’s brave new world, they collectively now are the power.”

“by the beginning of the twenty-first century, the frustrated housewives (and/or herads of households) had had enough of the economy’s poor performance, particularly its poor returns on savings account investments […] the housewives, taking financial matters into their own hands, began to hunt for a greater return on their savings.”


And here, perhaps, is where the changing landscape is best expressed:

In the world of currency trading, a common question lately has become: “what are the [Japanese] housewives investing in these days?”

Today, in a world where liquid capital is scarce and where Japan holds a great amount of the world’s reserves, Japanese housewives are the key players in deciding where future investments will be made.

If you want to know where best to invest your 401k, your best consultant is the apron-clad housewife walking her dog in Japan.


The Dilemma of the Liberals

Monday, April 12th, 2010

Just recently, under his contagious clarion call “Yes we can,” President Barack Obama successfully managed to pass his Health Care Reform Bill.

The House vote was far, however, from a landslide victory for Obama, with the final tally coming out to 219-212. What’s worthy of mentioning here is the complete absence of Republican approval votes, underscoring the bipartisan politics of modern-day America.

Today, politics has become so polarized that it’s hard for political parties to find common ground. Aside from the smearing and trash-talking emanating from both parties, political polarization has deep economic repercussions.

In short, an increase in political polarization causes a rise in economic inequality.


For one thing, without basic agreement on fundamental values-in other words-without a common vision that transcends bipartisanship, economic commonality is infeasible.

In his book The Conscience of a Liberal, Paul Krugman notes:

history suggests that there is a kind of ‘dance’ in which economic inequality and political polarization move as one [...] an erosion of the social norms and institutions that used to promote equality, ultimately driven by the rightward shift of American politics, has played a crucial role in surging inequality.

He then observes the social ramifications of political polarization:

the increase in U.S. inequality has no counterpart anywhere else in the advanced world. During the Thatcher years Britain experienced a sharp rise in income disparities, but not nearly as large as the rise in inequality here, and inequality has risen modestly if at all in continental Europe and Japan.

This political polarization is fueled in no small part by an ideological schism between modern-day neoliberals and liberals. The neoliberals advocate the right of self-ownership (and thus denounce taxes), while the liberals promote socioeconomic equality (and thus are in favor of taxes.)

The clash between liberals and conservatives is ultimately the clash between freedom and equality. While both freedom and equality are fundamental human rights that should and are rightly fought over, one is essentially garnered at the expense of the other.

It is thus of little surprise that there has been much academic debate arguing for freedom on one hand and equality on the other.

The neoliberals have two erudite titans on their side, namely Milton Friedman and Robert Nozick.

The late Milton Friedman, a Chicago-based economist, argued in his book Capitalism and Freedom (1962) that an economy unfettered by government intervention is the fairest, most efficient way of managing an economy. Despite Friedman’s conservative stance, he continues to be viewed with deference by economists on both sides of the political spectrum for his contributions to economic academia.

Friedman’s book Capitalism and Freedom offers conservatives the basis for an economic policy which advocates a lessening of taxes. In particular, Friedman’s work can provide the logical backbone to weaken the progressive tax system. Thus  quite naturally, the demographic of most conservatives are generally in the upper-income strata, people who would benefit directly from less taxes.

Robert Nozick furthered the neoliberal/conservative/libertarian philosophy in his book Anarchy, State, and Utopia (1974). Like Friedman, Nozick arrives at the conclusion that society is at its best when the government is at its smallest.

Nozick provides the rightist camp with the political philosophy that would support their political persuasion. He argues that in a hypothetical situation of an “initial state,” a state in which society has yet to be created, no one would agree to have their right of self-ownership infringed upon.

In other words, no one would agree to let others (such as the government) take hold of their liberty, their fundamental right as a human being. If one were to let the government tax their income, then they would technically be enslaved by the government. For instance, if one’s income was taxed at 30%, then 30% of the total time he works in a day would be time worked for the government, which, Nozick argues, is no different from slavery.

To put it succinctly, rightists believe that the sweat of a man’s brow belongs to himself.

Interestingly, John Rawls, the political philosopher who leftists (liberals/egalitarians) seek to validate their claims, also hypothesizes an “initial state” to analyze whether people would advance freedom or equality.

John Rawls envisions a hypothetical situation in which on one hand there is society in its “initial state,” and people must choose amongst themselves what kind of laws they would agree upon behind a “veil of ignorance.” In other words, people will be assigned their sex and post arbitrarily and will not know in advance what kind of social status they will occupy.

Rawls argues that as a form of safety/insurance, people would undoubtedly choose a society with some kind of social safety net. The risk of anyone being assigned to a low-paying job, Rawls argues, would make people agree in an “initial state” for a society in which the government provides some kind of income redistribution.

We now see that while both Nozick and Rawls create similar hypothetical arguments, they arrive at conclusions which are polar opposites of each other.

In the sphere of academics, the battle of ideologies is fought over with logos, ethos, and pathos.

But in politics, it’s fought over with campaign money. After all, raising or lowering taxes has a direct impact on people’s lives.

The year 2009 was marked by a democratic victory in both America and Japan. The inauguration of President Obama of the United States and Prime Minister Hatoyama of Japan into office has brought the Bush-Koizumi neoliberal reform policies to a grinding halt.

What caused such an abrupt change? The answer, perhaps, can be found in Robert Reich’s Supercapitalism, which shows that American-style capitalism has gone too far in advanced neoliberal capitalist economies. When the top CEO’s of American companies were beginning to earn over 300 times the income of the average worker, when investment bankers were reeling in millions in bonuses, and when Walmart’s atrociously low wages and health insurance skimping became rampant, people had finally decided that enough was enough.

But how had the conservatives advanced their agenda for so long? How had the Thacherites of Britain, the Post-Reagan administrations of the US, and the Tanaka cabinet onwards of Japan plow through their reform without resistance from the left?

The truth is that there was resistance from the left. But liberals, unlike conservatives, are an eclectic demographic, and the liberal intelligentsia are small in number. And here’s the real kicker: unlike conservatives, liberals don’t have the kind of lavish funding for their political campaign runners.

2009 marked a time when people who were usually disillusioned with politics rallied behind the liberal cause in an effort to halt the encroaching inequalities brought about by conservative reform.

But already, both President Obama and Prime Minister Hatoyama face renewed resistance from an increasingly audacious and well-funded right. The enigmatic and lucrative wildlands of Wall Street remain unscathed by legal reform too: death bonds and catastrophe bonds have replaced the once-savvy subprime mortgage bonds.

Is the liberal wind going to push us forward to a more equal society? Or will we slowly digress back towards a path of inequality?

Only time will tell.


Capitalism: A Not-so-Lovely Story

Wednesday, April 7th, 2010

She’s undecisive, a shopaholic, and takes forever to make up her mind.

This isn’t a harrowing roller-coaster story about a former ex.
This is a story about capitalism.

For the the better or for the worse, capitalism has become the de facto socioeconomic paradigm of the modern world and it looks like it’s here to stay. While we now see different forms of capitalism throughout the world, like “American capitalism” marked by meritocratic wage differentials, an infinitesimal social safety net, and poor public services in essential areas such as education and medical care to alternative forms like the “welfare-state capitalism” of the Northern Europe nation-states marked by more government intervention in the market, the key foundation of the capitalist paradigm remains universal.

Lately we tend to forget that capitalism used to have a antithetical counterpart: communism.
The interesting thing to mention here is that Karl Marx, undoubtedly a man who studied capitalism in earnest, viewed communism as the next rational evolutionary step as a means of production. In other words, communism would, Marx argued, suceed capitalism as a better socioeconomic paradigm.

However, history indicates that when communism is put to use, it has several fatal flaws. First, the government interferes far too much in the market which leads to the establishment of inefficient industries. Second, the government itself tends to become repressive, particularly when social capital begins to erode. Third, the lack of incentives for diligence and the lack of the profit-motive slows or even halts innovation.

Obviously, communism thus far has proven to be far from a utopian mode of production. It did not, contrary to what Marx had envisioned, become a sort of utopian “association of free men.”

This does not mean that we can write communism off, declare capitalism victor, and indulge ourselves in a capitalist society. Capitalism too has its flaws, which I believe are equally unsavory.

Modern-day capitalism has advanced to such a degree that we engage in what I would like to tentatively call “symbolic consumerism.” 

Take cigarettes for instance. Why do people smoke? Do they smoke for the nicotine high? In The Tipping Point, pop-sociology author Malcolm Gladwell tells us no. People smoke, he argues, because smoking “overwhelmingly [is] associated with the same thing to nearly everyone: [...] the ultimate expression of adolescent rebellion, risk-taking, impulsivity, indifference to others, and precocity.”

Ah, so people aren’t smoking because they like charring their lungs. I’d bet my dollar that smokers don’t want to be diagnosed with lung cancer either. But when cigarette warning labels became mandatory on cigarette packages, sales actually increased. Why?

The reason is because today, in this form of matured capitalism, people engage in “symbolic consumerism.” In other words, people are buying symbols. Smoking cigarettes makes you badass. Driving around in a Prius makes you an environmentally conscious citizen. Touting a Louis Vuitton bag suggests to people you’re a sophisticated lady. The list goes on and on.

When symbolic consumerism is at its nascency, cigarretes will still be carcinogenic and will still contain nicotine. But as the consumption of symbols is furthered, people will still buy cigarretes even if they become, say, e-cigarettes. E-cigarettes are “cigarettes” which are basically plastic cigarettes with LED tips. No smoke. No nicotine. No carcinogens.

In Japan, “alcohol-free alcohol” is now a hit product, another sign of symbolic consumerism taking hold in advanced capitalist economies.

So what effect does this have on the public sphere and society as a whole? In his book Buyology, Martin Lindstrom examines cigarettes and observes:

“Cigarette warnings […] had in fact stimulated an area of the smokers’ brains called the nucleus accumbens, otherwise known as the ‘craving spot’ [...] those same cigarette warning labels intended to curb smoking, reduce cancer, and save lives had instead become a killer marketing tool for the tobacco industry.”

In other words, we will now begin to crave products not for their actual properties but for what they represent to us as symbols. Our individuality will be expressed more and more by what we buy.

A visceral gut feelings tells me that a society where the pursuit of the accumulation of material wealth and the expression of the individual through symbolic consumerism as the defining characteristics of daily life lacks the kind of strong human bonds so vital to a healthy union of people.

Of course, I don’t think communism provides a sound alternative. But perhaps communitarianism, a resurgent form of communism with communism’s biggest flaws ironed out, may provide a good antithesis to modern-day capitalism. This year’s Nobel Prize in Economics laureate Elinor Ostrom wrote extensively about The Commons, which are tight-knit communities that provide not just essential goods and services to its members but also strong emotional ties as well.

Capitalism’s flaw lies in how the accumulation of material wealth doesn’t necessarily equate to happiness. The anonymous story The Fisherman and the Investment Banker is quite telling of capitalism’s inherent flaws:

The American investment banker was at the pier of a small coastal Mexican village when a small boat with just one fisherman docked. Inside the small boat were several large yellow fin tuna. The American complimented the Mexican on the quality of his fish and asked how long it took to catch them.

The fisherman replied, only a little while.

The American then asked why didn’t he stay out longer and catch more fish?

The Mexican said he had enough to support his family’s immediate needs.

The American then asked, “but what do you do with the rest of your time?”

The Mexican fisherman said, “I sleep late, fish a little, play with my children, take siesta with my wife, Maria, stroll into the village each evening where I sip wine and play guitar with my amigos, I have a full and busy life.”

The American scoffed, “I am a Harvard MBA and could help you. You should spend more time fishing and with the proceeds, buy a bigger boat with the proceeds from the bigger boat you could buy several boats, eventually you would have a fleet of fishing boats. Instead of selling your catch to a middleman you would sell directly to the processor, eventually opening your own cannery. You would control the product, processing and distribution. You would need to leave this small coastal fishing village and move to Mexico City, then LA and eventually NYC where you will run your expanding enterprise.”

The Mexican fisherman asked, “But, how long will this all take?”

To which the American replied, “15-20 years.” “But what then?”

The American laughed and said that’s the best part. “When the time is right you would announce an IPO and sell your company stock to the public and become very rich, you would make millions.”

“Millions.. Then what?”

The American said, “Then you would retire. Move to a small coastal fishing village where you would sleep late, fish a little, play with your kids, take siesta with your wife, stroll to the village in the evenings where you could sip wine and play your guitar with your amigos.”

Perhaps the clash between the ideals of modern-day capitalism and communatianism will sublate to form a new socioeconomic basis: one that allows for more humane social relationships while still retaining the innovative energies of capitalism.


Japan: From Egalitarianism to Plutocracy

Friday, March 26th, 2010

“ichiokusouchuuryuu(一億総中流)” or “100 million middle class [citizenry]” was the pride and glory of Japan following its mesmerizing growth which lasted a solid two decades from roughly 1955~1975. Over 87% of respondents during the late 1980′s identified themselves as middle class, and Japan became the first and remains the only country that achieved compatibility between high economic growth without exacerbating wage-differentials for an extended period of time.

As Harvard sociologist professor Ezra Vogel states in his book Japan as Number One, Japan’s “ichiokusouchuuryuu” was made possible by “the success in income distribution […] from a booming economy with full employment […] in national polls about ninety percent of the Japanese public consider themselves to be middle class.” (Vogel, 1979)

The key words that Vogel uses here are “success in income distribution” and “booming economy with full employment.” In other words, Japan’s export-driven GDP growth was climbing so rapidly that those in primary sectors (the agricultural sector) were siphoned into secondary (industrial) and tertiary (service) sectors in large numbers. With exports booming, demand for labor was consistently high, allowing what we now identify as characteristic of Japan’s management style: a seniority-based wage system, lifetime employment, company-based labor unions, and lavish corporate welfare/benefits.

These four proved critical in maintaining full employment and keeping wage-differentials down. I’ll examine each one in detail below:

A seniority-based wage system: Wages were initially low upon entering a company, but everyone’s wages rose in direct correlation to their years of service. Any differences in wage between coworkers on the same “wage rung” was purely a a sign from the company to the employee to get his act together.
Miniscule wage-differentials was made possible by a corporate mentality of a “family” or “clan.” For example, Mitsubishi employees were said to have characteristics of a “Mitsubishi person” and Matsushita employees were said to have characteristics of a “Matsushita person.” Corporate flags, banners, and slogans strengthened the unity between employees and their employers.

Lifetime employment: Played a critical role in maintaining full employment. Needless to say, lifetime employment was made possible by consistent growth, atypical of a “normal” economy. Japan was priviledged to benefit from its geopolitical location as the bastion of democracy in the Far East; if America didn’t consider Japan an ally, America would not have provided the necessary groundworks (i.e. continued demand for Japanese goods and services) for re-industrialization.

Company-based labor unions: The name itself is rather misleading; company-based labor unions are characterized by amicable relationships between employees and employers. This is why many identify Japanese corporations as socialist in nature. Without company-based labor unions, there would have been the possibility of industry-wide strikes, which would have choked Japan’s export-driven economy.

Lavish corporate welfare/benefits: Provided the means for an egalitarian society. The Japanese government was never a “big government” to begin with, and corporations provided the bulk of social welfare in the form of corporate housing and corporate health insurance.
The lack of government intervention can be measured by Gini coefficient terms-Japan is the second most egalitarian country of the OECD nations before government redistribution, but the third most unequal nation after the US and Great Britain after income distribution has taken place. (Miura, Karyuu Shakai, 2005)

Today, the landscape has changed. Japan’s economy has “normalized” and experiences peaks and troughs, making the abovementioned Japanese management style infeasible. We now see a more meritocratic wage-system, no guarantees of lifetime employment for part-time workers, a lack of interest in unions by employees, and a shrinking of corporate welfare/benefits.

Without heavy corporate intervention in the provision of a social safety net, Japan will continue to lose its egalitarian nature. Unlike the welfare nation-states of Nothern Europe, the Japanese government continues to provide very little to its citizens. This is a recipe for disaster: Japan’s social fabric is being worn away, which, in the long term, will cause the Japanese economy to tank.

Japan’s relative povery levels (relative poverty: those who earn less than 1/2 the average income of a particular country) has been steadily rising ever since there has been an increase in liquidity in the labor market.

The cause? An Increase in the number of part-time workers.

Part-time workers are hired contractually; they are given no guarantees of lifetime employment. They are also excluded from corporate welfare and earn about half as much as their full-time counterparts. As of 2009, part-time workers exceeded over 40% of Japan’s labor force.

This wouldn’t be problematic if the Japanese government took an active role in retraining part-time workers (most of whom have no specialized skills) and provided unemployment benefits. Without a “bigger government,” Japan’s social capital will continue to erode.

CitiBank recently wrote an article about how Japan was becoming a plutocracy, a system in which power is vested in those with the fattest wallets. The etymology of the word plutocracy can be traced to the Greek words ploutos for wealth, and kratia for power.

We are seeing the setting of Japan’s egalitarian sun, and the dawn of a society where the few with money are the few that rule.


A Succinct, Scathing Critique of “Zangyou” and “Karoshi” From the Standpoint of Karl Marx

Tuesday, March 23rd, 2010

Capital, a 3 volume piece jointly published by the late Karl Marx and Friedrick Engels, has won notoriety for both its length and its application in communist states. An interesting thing to note is that Capital Volume 1 is posterior to the original and incomplete drafts of Volumes 2 and 3. The last two volumes were later edited, finalized, and published by Marx’s lifetime friend, Friedrick Engels. This makes Volume 1 the most “up-to-date” with the ideas of Marx in his later years.

It also provides a wonderful excuse for not reading Volumes 2 and 3.

Contrary to public misconception, Marx strove to analyze capitalism in an objective and strictly scientific way. This makes Capital a meaningful book to read, since the entire world has been brought to its heels by the Capitalist-world-order.

Of course, capitalism provides a plethora of commodities and encourages innovation. On the surface, it seems like our Quality of Life is rising.

But is it really? Are you truly happy? Do you enjoy being surrounded by things things things?

Let’s begin by thinking about the value of an object. The value of an object has long been contemplated by man’s greatest thinkers – including Aristotle. In Nichomachean Ethics, Aristotle argues that the value of an object lies relative to another object. For example, 1 house = 5 beds. However, he fails to see that the value of an object, atleast insofar as society is concerned, lies in the amount of expended human labor. The notion that the value of an object lies in labor was advanced by William Petty, who wrote “labor is the father of material wealth, the earth is its mother” in his work A Treatise of Taxes and Contributions.

Now we can see that any object that holds monetary worth does so because socially recognized human labor has been expended upon it. This, however, doesn’t explain how surplus value is created. In other words, why is corn flakes so much more expensive than a bushel of corn?

Marx enlightens us through his observation, “the formation of surplus value by surplus labor is no secret” Capital Vol. 1, p.352. Ahh, this makes sense, corn flakes is more expensive than a bushel of corn because surplus labor has been expended to create the surplus value.

Let me explain, in brief, what surplus labor and surplus value is. Say the amount of money to make a box of corn flakes costs the capitalist $2.00, but he can sell it on the market for $4.00. Well then, where is extra $2.00 coming from? According to vulgar economists, it is “magical” – the magic of capitalism!

A closer observation reveals that this isn’t magic at all- but the work of exploitation. After all, “nil posse creari de nihilo” (out of nothing, nothing can be created), De rerum Natura, Bk I, verses 156-157, Lucretius.

In summation: Profit is created through surplus labor, which is basically exploitation.

Now that we’ve covered Marx, let me say something downright baffling: Japanese salarymen love being exploited. They do. They absolutely, undeniably do.

The French wrote woefully in their Economic White Paper in 1981 that they can’t possibly compete against Japanese imports, because the Japanese are obsessed with working. The Japanese live in rabbit holes, do “zangyou” – work extra hours, and even die from “karoshi” – death from overwork. Holy smokes. That’s too much competition for a Frenchman – he wants to stay alive!

Little has changed since 1981. The interesting thing, though, is how long exploitation has been continuing.

Take, for instance, this newspaper headline: “Death from simple over-work”
When do you think this newspaper was published? 1970? 1960? You’re off by a century.

It was actually published in the London daily papers in June of 1863, which shocked Britons with the death of a certain Mary Anne Walkley, who worked on average 16.5 hours a day. She died from, as the Japanese call it, “karoshi.”

Ahh! So “karoshi” is death from overwork, and it has been around ever since the industrial revolution! We now see that overworking employees is a characteristic of capitalism.

The Japanese seem to find little wrong with “zangyou,” or putting in extra hours of unpaid concentration. They offer their unwavering loyalty and deference to their “kaisha” or corporation, and many literally work to death.

One cannot help but wonder why.

On the whole, looking at Japan through a historical lens, the Japanese idolize selfless / self-mutilating acts to advance the common good (think suicides during WWII.) In this particular case, Japanese salarymen (the foot-soldiers of the Japanese economy) risk their health to advance the interests of their companys’ corporate agenda.

Does he not realize that his health deteriorates? Does he not realize that the company is not what life should be all about in the first place? Does he not realize that he must also be a loving father and a loving husband?

I mean, here’s some stunning statistics. Of the OECD countries, men spend an average of 2 hours a day child-rearing. Japanese men spend an average of just 36 minutes a day looking after their children. Japanese women spend 8.6 times as much per day than their male counterparts in child-rearing. No wonder so many Japanese women hesitate getting married.

“Zangyou,” apart from the risk it harbors of leading to “karoshi,” also prevents the creating of a cultured man and a warm household.

Luckily, things are beginning to change. In Japan, being self-employed is finally taking hold as an alternative to working for a company. This is, as Marx envisioned, “an association of free men,” Capital, Vol. 1. An example of said association would be “sasaeai awayama,” a community-based association that provides jobs, goods and services for its community.

The number of those in an “association” has risen to 60,000 in Japan.
Let’s hope this brings a healthy alternative to toiling for a Japanese company.


The Japanese media and its Orwellian nature

Monday, March 22nd, 2010

The year was 1948- and Mr.George Orwell had just finished writing his magnum opus, a distopian fiction novel depicting a society where Big Brother rules the people with an iron fist. Published in 1949 (this is why most people overlook the fact that “1984″ was really just a play on 1948- when the book was written), the book has since been a must-read in secondary education.

In “1984,” one of Big Brother’s primary objectives is to minimalize the vocabulary of the people. For instance, you wouldn’t need words like “great” or “excellent” if you could take a rather generic word “good” and simply change it to “doublegood” or “doubleplusgood.” In this manner, the ministry that oversees the shortening of the dictionary (and thus the peoples’ vocabulary), systematically and deliberately impedes the ability for people to express sophisticated ideas. This was instrumental towards achieving a more complete dictatorship, for what better to enslave the mind of man by stripping him of his mode of expression?

So, what does Big Brother in “1984″ and the Japanese media have in common? They are both the culprits in preventing people from attaining higher forms of verbal expression. Japanese television, apart from being unhealthily obsessed with the trivial, sensational, scandalous, and irrelevant, plays part in making certain words and phrases “stick” (using Malcolm Gladwell’s terminology here.)

This is no more evident in how overused the word “kawaii” is today amongst the younger generation of Japanese women. “Kawaii,” a word which means “cute,” is used to describe a dog, a man, an object, you name it. Well, that doesn’t seem very problematic, until one realizes that the ability of the word “kawaii” to describe, say, a dog and a man at the same time is evidence of mental laziness.

Let me clarify. Say a girl sees an adorable, heartwarming little poodle with round, curious eyes. This poodle is “kawaii.” Later on in the day, she sees in a fashion magazine a young, idolized Japanese male star with the whole feminine-unisex-guy thing going on. He too is “kawaii.”

Ahh. Now we see here that “kawaii” is an all-encompassing form of expression. If she likes it, it is “kawaii.” There is little incentive for young women to pick up, say, a classic Japanese novel and delve in its rich forms of expression because all of the people they look up to, who just-so-happen to be idols they see on TV, use the word “kawaii” so rampantly that if a device was created to pick up its use in Japan, it would have quite simply overheated.

Of course, not every woman is glued to the TV. In addition, watching TV is not morally untenable. But whatever happened to picking up a book? Whatever happened to going to a cafe and letting your mind explore the worlds created by the great writers that our society had birthed? Whatever happened to the freedom envisioned by Locke, where men would engage in public discourse and debate the common good?

Japan is, if it hasn’t already, descending into a state of mobocracy, a low-brow union of citizens concerned only with the trivial, sensational, scandalous, and irrelevant. These four that I’ve justed enumerated are all things that the Japanese media spew out and saturate Japan’s citizens with daily.

Looks like the agenda of that of  Big Brother and the Japanese media are the same in regards to peoples’ vocabulary:

truncate. truncate. truncate.

What room is left for a better polis, when the media, in all its notorious glory, has eroded any vestiges of a public sphere? How can there be an enriched public discourse when all you see on TV are one-hit-wonder comedians doing some 30-second skit, flailing their arms for a few extra months of prime-time viewing? How can the men and women of Japan be encouraged to open books, when the media encourages them to duplicate the immaculate looks of the people on TV who literally have their own hairdressers, nutritionists, and the works?

I find the Japanese media to be the one to blame for the impoverished public discourse in Japan. This, I believe, is morally reprehensible, for the media has a role to play as the organ that voices how sophisticated and cultured a nation is.

Et tu, Brutus?