Plan B, II

When we ran our Plan B contest last semester (choose the best country to live in while we await the decline and fall of the US empire), we never voted on a winner because our automated survey instrument broke down. But instead of voting, we should pick a winner from emigration patterns:

The Heritage Foundation suggests some more obvious choices in its 2009 Economic Freedom Index. Five English speaking — or at the very least English friendly — countries rank ahead of the United States (Hong Kong, Singapore, Australia, Ireland, and New Zealand). Right behind the U.S. is Canada, Denmark, Switzerland, the United Kingdom, and Chile. Should the U.S. continue its slouch towards socialism, all of these would be likely places for some of America’s best and brightest to land in the event of economic collapse.

It turns out that Costa Rica, one of the entries, doesn't look so good.

Costa Rica is ranked #46 on the Economic Freedom Index. Costa Rica already has national health care and is working towards being carbon neutral. While it has small government and lower taxes than the U.S., good luck opening a business or getting a hearing in court in a reasonable amount of time. Corruption is a big problem in Costa Rica, with Heritage proclaiming, “The government does not emphasize enforcement of anti-corruption laws, regulations, and penalties. Some foreign firms have complained of corruption in the administration of public tenders.”

If we zone for it, will they come?

Disturbed by the dearth of art cafes, book stores, and coffee shops, the Nashville Planning Commission is trying to get rid of used tire stores, pawn shops, and payday lenders.

..the zoning isn’t market-driven: On Gallatin Pike, the new zoning didn’t create a stampede of desired businesses [clamoring] to replace the title pawn stores and other undesirables.

This kind of command-and-control central planning seems to be making a comeback in Washington as well.

What do you do with a major in Cultural Anthropology?

Go to Iraq:

Human Terrain System [is] an attempt to bring cultural awareness to the military. When the United States is fighting counterinsurgencies in both Iraq and Afghanistan, such knowledge is priceless and indispensable. One has to win the population over, not kill them. Knowing the local customs is vital. Indeed, one of the lead advisers to Gen. David Petraeus was David Kilcullen, a former infantry-company commander with a Ph.D. in political anthropology.

If that doesn't work, I would advise enrolling in Vanderbilt's Summer Accelerator Program.

DISCLAIMER: I teach in the program.

Strangely timeless potest songs

Songwriter Bob Walkenhorst is making a comeback:

Give a man a free house and he’ll bust out the windows
Put his family on food stamps, now he’s a big spender
No food on the table and the bills ain’t paid
’cause he spent it on cigarettes and PGA
They’ll turn us all into beggars ’cause they’re easier to please
They’re feeding our people that government cheese
It’s the man in the White House, the man under the steeple
Passing out drugs to the American people.

NY encourages high income earners to move to TN

NY State plans new "temporary" income taxes, designed for the next three years:

The plan would raise $4 billion a year by creating two new tax brackets, the highest one affecting those who earn $500,000 or more. If approved by rank-and-file lawmakers in the Assembly and State Senate, the tax increases would be a major victory for unions and liberal advocacy groups and a signal of the new balance of power in Albany, where Democrats won control of both houses of the Legislature and the governor’s office in last year’s election.

Although the proposed tax has been called a “millionaires’ tax,” it would affect those with incomes starting at $300,000, who would be taxed at a rate of 7.85 percent. The highest bracket would carry a tax rate of 8.97 percent — the same as New Jersey’s current highest rate.

Tennessee has no income tax.

Stocks vs. Bonds: who wins?

In equilibrium, the risk premium that compensates investors for holding relatively risky stocks is about 2.5%. But, as the above graph of stock-bond returns shows, (from John Mauldin, Why Bother with Bonds), there are plenty of periods when bonds outperformed stocks. The period ending in 2008, is one such episode. Each of the horizontal lines denote periods where bonds outperformed stocks.

Related links:

• Market timers vs. asset allocators
• Jeremy Siegel, Stocks for the Long Run

Management Advice for Troubled Times

The latest issue of Business Week offers a series of articles on "breakthrough management ideas for a world in which the game will never be the same." One of the recurring themes is the need to move quickly.

John Chambers, Cisco CEO: "Without exception, all of my biggest mistakes occurred because I moved too slowly."

Ray Davis, CEO of regional bank, Umqua Holdings: "Standing still is how you kill the company."

What would happen if we let the banks go under?

New entrants would appear. Kroger now offers mortgages with your groceries

Loan Type	Rate	Points	APR* as of 03/24/2009
30 year fixed	4.875	0	4.914
15 year fixed	4.750	0	4.818
5/1 ARM	4.875	0	4.518
Jumbo 30 year fixed	5.625	0	5.637

Scotland is taking our best and brightest

From a serial entrepreneur who is moving his company to Scotland:

• We will reincorporate the company in Scotland- form a new Scottish entity and have it acquire 100% of the US entity.
• I will remain in the States, but we will pass all of the revenue through Scotland to avoid the higher US corporate taxes.
• The Scottish government has 35 'recruiters' on the ground in the States (10 in Boston, 5 in NYC, and 20 in Silicon Valley). Their purpose is to recruit entire companies or specific operations of existing companies to Scotland. They are doing a roaring business.
• Scotland has decided that they are going to create a knowledge-based workforce and economy. They have allocated a significant amount of grant money to attract companies to 'Silicon Glen'.
• We are qualified for $2+ million in grants. This is a prime reason for us to consider Scotland.
• Another reason is that Scotland's high tech expertise in display and voice recognition technology is ahead of the States. Both technologies are key to our product.
• Another reason is that the Scots allegedly have a much higher work ethic than the Americans do. I am extremely put off by the entitlement mentality that grips the upcoming generation of Amwerican workers. I don't want to hire any of them.
• Another reason is that the 'Card Check' legislation is very likely to pass. Moreover, the unions are planning to specifically target the high tech sector. I do not want to ever deal with that issue. It will kill many businesses - especially in the tech fields - where you have to be able to change strategy and direction quite quickly.
• Finally, our current administration is highly anti-business, which is the best reason for me not to bother starting a new company based in the States.

Wisdom from dead white guys

Winston Churchill:

“Socialism is a philosophy of failure, the creed of ignorance and the gospel of envy, its inherent value is the equal sharing of misery.”

Joseph Schumpeter (via former student John Tamny):

In his 1942 book, Capitalism, Socialism and Democracy, Schumpeter asked the essential question: “Can capitalism survive?” His unsettling answer was, “No. I do not think it can.” Schumpeter’s words were in no way meant to denigrate capitalism, instead he felt “its very success undermines the social institutions which protect it.”

...the commercial success wrought by the pursuit of profit has created an unproductive elite that lives off the very business profits that it regularly casts a skeptical eye on.

... Schumpeter was of course talking about a United States that he envisioned post World War II, but his fears then don’t stray too far from the concerns of many today. Indeed, he worried that as wars usually accrue to the power of the state, that heavy government spending “would likely evolve into total government control over investment.”