Clarity of Thought

One of the most alluring features of our free society is the liberty to create new and altogether original realities. There are boundaries, of course, and a few statutory protections that guard against the hazards of demagoguery, fanaticism, and destructive deviant behavior. But in general our imaginations can roam unfettered. We meander from entertainment to escape, and browse pleasantly woven scenes that have a threadlike connection to our familiar, less textured routines. The internet allows us to experiment with a kaleidoscopic array of virtual identities, and to live glorious digital lives filled with love, honor, and treasure.

In contrast to ill-advised statements from White House subalterns about their imperious ability to blur reality and lies, not even Olympus can sustain (or politically survive) the assault of sharp analysis and clear thinking. Postpone, yes. Deny, yes. They can even transmogrify one war into another. But even the friendly facts bite back, and Potemkin storefronts, a concept that preceded Second Life by decades, inevitably crumble. Today, the harshest truths of all are is that we do not as a nation have an adequate, never mind cohering, approach to the wars on terror and in Iraq, and we don’t have an effective or sustainable energy policy. Our future is highly leveraged against our collective response to those challenges, not by the travails of Survivor.

Sadly, only nostalgic shards remain of Kennedy’s “ask what you can do” government, the same leadership that brought us civil rights, expanded health care access, and successful resolution of the Cuban missile crisis. The numbing decline into the make-believe violence of professional wrestling or the schadenfreude of reality TV naturally exaggerate the anxiety that we have reached the tipping point of permanent X-box driven delusion. It is hard, but worthwhile, to maintain a disciplined distinction between entertainment and information, and to remain optimistic that others eventually will too.

Eventually, and hopefully soon, the United States will take more constructive steps on the winding road towards authentic cultural understanding and peaceful conflict resolution. This is not some utopian dream of dough faced liberalism. Influential non-governmental institutions that promote equal opportunity, basic health care, transparent justice, technical innovation, and environmental protection are relatively new forces in political affairs. And many citizens now slowly accept the premise of economic growth as the bedrock of safety and security, even if the detailed policy implementation remains largely abstract and vague, or, in some cases, unrealistic.

For now we remain firmly caught in the trap that Niebuhr aptly described six decades ago, when he warned against actions that place us above reproach in the global competition of political creed and its concomitant interpretations of moral purity, and, by implication, dominion over what is real. The reckless disregard of that danger, and shameful loss of the slowly accreted benefits of restraint and persuasion, will take a generation or more to recover. By then, the discarded maintenance of even the centrist domestic policy agenda – primarily education, health care, alternative energy production and fiscal restraint – may well have brought us into a dangerously weakened economic position, utterly bereft of whatever high ground may be then available to us. [Author’s remark: I wrote this two years before the economic crisis of 2009.]

The churlish message of the political left, a grand “I told you so”, while perhaps intellectually satisfying or even emotionally validating, does little at this point to forge a new consensus of what to do with the gargantuan mess: debilitating indebtedness at home, lethal insurgency in Mesopotamia, and squandered stature everywhere else. “Yes,” the conservative supporters and believers of preventative war must now admit, “you were correct this time: the leadership of Iraq, as heinous as they were, had no weapons of mass destruction, no operative affiliation with Al Qaeda, and we had no plan once Sadam was in prison and his sons were dead”. Somehow “you win” doesn’t quite say it.

The effectiveness of outwardly projected of military strength, the sine qua non of conservative foreign policy, was dealt a severe blow by Bill Clinton’s brilliant but soft-spoken first secretary of state, Warren Christopher, who had the courage and clarity to solicit opinions, advice, and perspective far outside of the Capitol Beltway. He simply wanted a peek through the Looking Glass, knowing full well it couldn’t possibly be a wide angled, or even high resolution, snapshot. Rather than admire his cool reserve, what supporters naturally interpreted as the quiet confidence of a foreign minister who had little to prove, his critics feared, or themselves ascribed, behaviors they (insincerely, never mind inaccurately) portrayed as weak, compliant, and soft headed. They mercilessly ridiculed his clean assessments of the new realities immediately following fall of the Soviet Union. But it was the Clinton Administration, not fils Bush, that launched targeted rocket attacks against the mastermind of September 11.

The moral sanctimony of the right found some vindication in the Starr Report and the impeachment hearings, and the domestic agenda suffered according to the squandered political capital of a freshly re-exposed philanderer. Indeed, absent Clinton’s personal indiscretions, Al Gore would have likely been elected president in 2000. Completely lost and now forgotten in the censorious welter – not really vast so much as relentless – is that the foreign policy of an admittedly inexperienced player effectively worked. In retrospect, what appeared dithering and indecisive only a decade ago is far superior, in its execution and its guiding principles, then the ideological certainty of unconstrained, and from the international perspective, illegitimate war.

No hologram of completed military missions, no sham trials of former dictators, will provide a meaningful answer to the hard questions we face. Reality for America today is bankruptcy at Hummer, death struggle at Ford, and the ubiquity of imported hybrids. Reality for America are the nearly three thousand coalition soldiers who have died in Iraq. Reality is gasoline once, and soon again, at $3.00 per gallon. And, yes, reality is that not just a few of us escape into TV, computer games, and obsessive email relationships.

The proliferation of amateur video clips, synthetic sport, and the soothing comforts of virtual living can lead to the perception of unhealthy national addiction or, worse, permanent detachment. But not even the president of the United States can create a misty reality impervious to the onslaught of one billion people with convenient internet access, or two billion people with cell phones.

Post script: 24 months later, Barak Obama was elected president.

]]> http://peterlevin.wordpress.com/2009/02/15/clarity-of-thought/feed/ 0 peterlevin http://peterlevin.wordpress.com/2009/02/15/life-and-death-at-the-brandenburg-gate/ http://peterlevin.wordpress.com/2009/02/15/life-and-death-at-the-brandenburg-gate/#comments Sun, 15 Feb 2009 16:35:44 +0000 peterlevin http://www.peter-blog.com/?p=71 ]]>

On Saturday, August 2nd, 2008, my son Gabriel was Bar Mitzvah’d in the village of Baumgarten, approximately 45 minutes north of Berlin.

The previous evening, on Friday, my wife and I organized a special event.  We walked, with family, friends, and invited guests, under and through the Brandenburg Gate.  What follows is an explanation of the symbolic importance of that monument in our lives.

My mother’s parents, Rudolf and Gretl (Rosenthal) Meyerfeld were driven from Germany on Krystalnacht, November 9, 1938.  They were among the fortunate few who escaped, though among the survivors of Nazi terror their story is sadly unremarkable.

Rudy’s father, my great-grandfather Max Meyerfeld, was a veteran of the first world war, and a successful trader in Cologne.  Like so many secular Jews of his time, he discounted and disbelieved the then-threatening storm of violence.  Indeed, he persisted in his denial even after Rudy’s sister, Lotte, for whom I am named (my second name is Lawrence) was murdered with her husband in Prague for belonging to the resistance.  Rudy was the only surviving member of his large extended clan.

Gretl’s family was more fortunate. Her brothers had already sought their fortunes outside Germany;  one brother landed in Buenos Aires, the other, Kurt, in Pittsburgh.  Kurt changed his name from Rosenthal to Rose, joined the American Army during the second world war, and subsequently made his living as an artisan of prosthetics.  I followed him to Pittsburgh, aged eighteen in 1979, nearly fifty years after he first arrived, to study at Carnegie Mellon University.  I went there because his son, Andy, who is Gabriel’s godfather, and my “big brother”, went there.

My mother was born on December 1, 1938, just two weeks after my grandparents narrow nighttime departure, as they watched Hamburg burn behind them, and a few days after they cleared Ellis Island to begin a hardscrabble life in New York City.  Her first language was German, which she spoke exclusively until she began public school, and which she spoke with her parents and siblings at home.  Unfortunately, she never spoke it to me.  The German I know was learned as a young adult in Munich, while I was working for Prof. Dr. Hans Steinbigler, who has been my mentor and friend for twenty years.

In 1988 I completed my studies at CMU, and was invited by Prof. Steinbigler for my post-doctoral training at the Technical University of Munich.  I immediately accepted his offer because at that time, forty years after the end of the Third Reich and the beginning of stable social democracy in Germany, I believed – as I to still today – that it was imperative upon my generation to actively create open connections between Jews and Germans.  And so I arrived in Munich in February, much to the chagrin and anxiety of my parents, family, and my Jewish community.  Already this decision ruptured several relationships among kinsmen who, still, can not reconcile themselves to the reality of modern Germany.  Nonetheless, it was a profoundly important and positive choice.

In April of 1988, during my post-doc in Munich, my mother joined me for a ten day visit in Germany, and we took our first-ever trip to Berlin, then still artificially divided by the concrete slabs of the “protective” wall.  Together, we crossed to East Berlin, and walked to the Brandenburg Gate, Unter den Linden, absorbing occasional cross words and hostile looks of the border guards.  As we approached the structure from the east, she turned to me, and in uncharacteristic statement of political defiance, promised me that she would one day “walk all the way through”. Twenty years ago, in the springtime of 1988, when she was not yet 50 years old, this seemed an unlikely proposition.

But her prediction was more prescient, and more poignant, than even professional diplomats and foreign policy experts could have possibly known;  hardly nineteen months later the wall came down, and her geopolitically impossible dream was, in principle, feasible and realistic.  She only had to go back to Berlin.

And in early 1993 my mother did return to the city, then for the second time.  She was on a business trip to recruit young university students to teach as native speaking instructors in a German-language elementary school in Kansas City Missouri; she had become their principal just a few months before.  Near the end of her visit, on March 21, she woke up early for the short drive, from the President Hotel near the 17th of June Strasse, to the west side of the Brandenburg Gate, intending to walk to the spot where we had stood together on the east side five years before.

She did not complete her journey.  My mother, Evelyn Ann Levin, died suddenly of a heart attack, with my sister at her side, across the street from the monument.  She was 54 years old.

By then I was married to Klaudia Lechner, the daughter of a German foot soldier, who I met during my first stay in Munich.   Her father, Hans, to whom I became very close, fought with General Rommel in the deserts of Egypt, and was captured and held in dire conditions as a prisoner of war.  He was one of the lucky ones (his brother had already died on the Eastern Front) – he was sent to Canada, where he lived in a camp for nearly seven years before returning home to Ansbach in 1947, where he married Margaret Beck, and raised a family of six children.

Klaudia and I have two children, Jakob and Gabriel, who we have raised according to Jewish customs and social values.  Gabriel, born in Germany during my sabbatical year as a Humboldt Fellow at the Technical University of Darmstadt, turned 13 last year, and, as I mentioned above, was welcomed according to tradition as an adult into our community on the morning of August 2, 2008.

The evening before, on Friday August 1, in a symbol of continued reconciliation between the German Diaspora and modern Germany, in memory of the millions of families who did not escape the brutal regime, and, last but not least, in honor of my mother’s unfilled journey under the monument of now-fulfilled hope, we organized a brief candlelight ceremony, and walked across the street, under and through the Brandenburg gate.

—

The next day, we held the ceremony in a renovated barn in the small village of Baumgarten.  Here is the message I gave to Gabriel that day:

Baumgarten, August 2, 2008

My dear son, Gabriel,

Today we celebrate together, as our ancestors before us, the once-ordinary ceremony that marks the natural transition from child to adult. Our family and close friends have gathered in your honor, to welcome and encourage you in the first steps of your adult life.

Of course our ceremony today is anything but ordinary. In living memory of many people who join us are the echoes of a dark and brutal time, when life was not precious, and when civil justice was arbitrary, prejudiced, and unimaginably harsh. A Bar Mitzvah in Germany, only sixty years later, even sixty years later, is like new growth in the forest after a wildfire. With this unconventional celebration, we make an abiding statement of solidarity with our common history, our shared faith, and our unshakable confidence in your future. The peaceful exercise of our freedom is today the fragile privilege of this place. You are the beautiful new life. We are all blessed.

Some may ask “how can this be”? How can a child whose mother is not Jewish become a Bar Mitzvah? How can we welcome this young boy of thirteen into the Jewish community in such an unconventional way, without perfect adherence to the holy laws of the Torah, in a barn and not a synagogue, primarily in German, and with half the children of Bonn? We have talked about these questions many times. (At least dinner will be Kosher.)

You know what we believe: to be Jewish is to find your own path to truth, of learning and knowledge, of compassion and strength. Judaism is about reverence for books and study, about integrity and tolerance, and about staying on that path against all challenges, crises, and hazards. The Jewish tradition is a tradition of courage, of facing lethal danger without flinching, of clarity of thought and purpose, and of unrelenting focus.

On second thought: I should be careful about advising you to be “unrelenting” about anything. Never mind that one. This won’t be an issue for you. Just keep working on the focus part. It’ll be good enough.

Many people have come to your Bar Mitzvah who you’ve never met before, or don’t know very well. Why is that? Of course, there aren’t as many Bar Mitzvahs in Berlin as there are in Boston, and the structure, ritual, and message of the service is universally attractive – in English we’d say “little c catholic”. And there aren’t many examples of parties that people have thrown non-stop for almost six thousand years. The ancient history of the Bar Mitzvah is alone so interesting, and so important, that people outside the religion want to learn more about it, and to see it once for themselves.

But I think there’s more to it.

Our country, the United States, has made some terrible mistakes recently, mistakes we should have been able to avoid if we had better understood other people’s history, beliefs, and their legitimate ambitions. We would have avoided these mistakes if we had done a better job of attending to the forest of freedom, liberty, and choice, and not the desert of ideology, superstition, ignorance, and lies.

One day, the thirteen year old boy who today lives in Iraq, or Afghanistan, who looks like you and whose parents and brother love him as much as we do you, who is as smart, as funny, as gifted, and as hopeful as you are, one day he will welcome his son, like we welcome you, into a world of opportunity and fantastic challenge. His child, like mine, will have access to fresh food and water, secular education, modern medicines, and impartial justice. But today he lives in a dangerous place, denied of all what we would consider ordinary and normal.

Not long ago, Germany was that place. And this is why we return to Baumgarten: not to reclaim what was taken by force of violence, but to reclaim what is ours by strength of spirit.

There are many people here today who have flown across an ocean for you and only for you. Many of them, our family – David and Eliot, the Leopolds – and people who are like family – Per, Gert and Marzenna, Al and Kate, the Serebrenikovs – have never or only rarely been to Germany. And they would have come anywhere in the world to be at your Bar Mitzvah. The Lechner clan, of course, would have eagerly joined us in Jerusalem or in Jakarta, as well as many of our friends for whom Berlin was a long car ride away.

But there are some friends in attendance who don’t know you that well, and who are to participate in this strong statement of connection. They, like us, are not responsible for what happened in Germany during the Nazi reign of terror. They, like us, cannot stop today’s war, feed today’s hungry, save millions from ignorance, poverty, and civil violence. And, still, it was important for them to come. Why?

I believe they came because coming to a Bar Mitzvah enables them to reclaim, too, what was lost to Germany many years ago: the rich tradition, the magnificent culture, and, yes, the loud personality of Judaism. By being here they say, “yes, there is hope for reconciliation, hope for tolerance, hope for peace”. Sometimes words are not enough. By coming here they say to you, Gabriel, “don’t take this freedom for granted”. Know that one day it will be your responsibility to share in its protection, and to teach it to your children.

How will you do that? Only G-d knows.

Perhaps one day you will have the opportunity to travel to Afghanistan and Iraq as I have travelled to Germany and Vietnam, and meet the boy who is today thirteen in those countries. And maybe you will be part of the next generation that brings peace and understanding to places that today are torn by war and intolerance, and maybe you will do that by having your son’s Bar Mitzvah there.

Thanks again for schlepping out at 6:30 on Sunday morning and speaking with me instead of being at home to welcome the day with your wife and kids.  Your care and nurture of our relationship – now 25 years – is remarkable. I don’t take it for granted.  I well remember our first encounters, how naturally we were attracted to each other, and the easy way we could communicate then, just as we do today.

My life is blessed with hundreds of friendships that are as truthful and authentic as ours, but there are very few I enjoy more.  That sounds, perhaps even is, a sentimental statement that distracts from the more fundamental message I want to convey to you now.  Indulge me, please.  Substance lies within.

One of the reasons I think we value our connection is that, besides many years of data and observation, the underlying integrity of our professional advice (Can some outrageous goal be accomplished?  Should I continue along my career trajectory?  How do we cajole agenda-driven individuals into “doing the right thing?”) is based on an unusual transparency into our personal lives.  One can’t plan this.  It just happens.

We have both been in the position where we’ve had to come to the other with bad news, or, more delicately, had to say, “do you remember when I told you about [fill in the blank]?  Well, it ends up that ranks with the stupidest things I’ve ever done or said, and it is wrong, and here’s why”.  And the other guy knows he was just told something important and true; we don’t waste time on credibility or recrimination, and can focus instead on the data, yes, even if the data proves to be wrong or inconsistent or disappointing.

Why do I begin a letter to you like this? Because our discussion at dawn about your next steps, and the large changes you are contemplating, touched upon the colossal issues of fairness and trust, and I feel – with all appropriate disclaimers – I may see something about you that you don’t see well yourself.  I am instinctively (and protectively) compelled to say something to you about it.

To wit:  your frustration and boredom with your professional duties, and your intuitive desire to find another way to contribute is overdue. I hope you’re next step will be a humongous leap.  There’s no spreadsheet model for that.

The first statement is clear as stands, but the second requires a little more explanation.

I am not advocating recklessness.  You have a special needs child whose support will require care and planning as you get older, and there are economic constraints that I understand in only the most superficial way.  Indeed, when I speak of impact and legacy, I don’t mean “how do we get you more money” or even the stability of that cash flow.  I mention it here in a clumsy but no less heartfelt way so that you know I know this, and am mindful of it.

The message – of my ambition and hope for you – transcends the household decisions we both make every day, and where I abstractly recognize that yours are more difficult than mine, at least when it comes to one of your children.  But given how far you’ve come, my unbending faith in your intellect, your clarity, and your potential, it is – as I said over coffee – perhaps not inappropriate to share a fresh perspective.

So much for the disclaimer.

I’ve heard you many times lament the inevitable inefficiencies of the large company you work for, the internecine battles and injustices, and, today, the billion dollar (my hands shake as I write this) bonfire of your company’s investment vanities.  Less qualified (thoughtful, honest, intelligent, creative, committed, loyal) individuals have seen their careers grow while yours – and I say this back to you, not because I know or even 100% believe it – has stagnated.  Okay, let’s explore that for a minute.

My reaction Sunday morning was, effectively, you don’t market yourself very well.  Here I am on more stable footing, because not only do I know you, I know a lot about your professional roots, the culture that nurtured us both, and the sometimes harsh conflict between the desire to be recognized and the humility and patience we need to wait for others to do so.  How, really, do we know if our achievements are even large enough to be worthy of the accolades we wish for, and, even if we convince ourselves they are, how can we promote and catalyze the outcome without sounding immodest or, worse, narcissistic?

No clue.  I just have an intuitive sense that you’re doing it poorly.  Absent the possibility of listening to your conversations with colleagues and superiors, the best I can offer in this letter is, maybe, a more constructive framework or context for you to have those dialogs, and a few words about ambition, dignity, and hope.

I strongly sense you’re hedging too much, and that your large and present need for stability and security (for all that does for any of us) may have influenced, even compromised, your similarly large and abstract need for “something else”.  Don’t look for something else. Look for something better.  Much better.

Over the years, but especially recently, I’ve listened to your thoughtful analysis – the corporate force diagram if you will – of what is wrong with your current environment and what you would do to fix it.  Dissembling colleagues, selfish teammates, thoughtless strategies well implemented, creative strategies botched in practice.  But you have also enjoyed the excitement of living near border of your institutional domain, which is anyway were all the interesting stuff happens.  Don’t underestimate the privilege or the value of that. You’ve harvested the sweet fruits of a truly diversified portfolio, in both the literal sense (the holdings you’ve created) and figurative sense (the number of people  who admire you and new ideas you’ve been exposed to).

To a certain extent, my strong advocacy that you join me is selfish – I think you would turbo-charge my team – but also risky, because you would be narrowing your attention to one thing instead of many.  Essentially, your economic reward will be proportional to where you land on the diversification curve.  It is certainly capped (not to say uncomfortable) where you are now.  If you become a credentialed expert in financial services, you’ll make even more money, along a parallel but similarly shaped arc.

My point is that your impact will still be limited, and that is the diluted outcome I want (both of us) to avoid.  I don’t believe in it, not because it is undignified, but because tremendous success in that world optimizes only income, is largely stochastic, and all this at the not-small cost of meager creative contribution.  The safer road leads to safer places; choosing it is prudent, and potentially lucrative, assuming that the capital markets are someday restored to health.  But transport yourself forward twenty, or even thirty years from now.  What, really, do you want the second half of your career to look like?  What do you want it to mean?

As you well know, the odds against newly formed start-ups are steep, and I have never once worked for a company that actually turned a large profit, though many of them were astonishingly successful in other ways.  But I keep on trying, well satisfied in the knowledge that the battle is worth the ferocious fight, and that the daunting setbacks are there – as Randy Pausch so aptly put it – to deter the other guys.  If the apocryphal ratio of ten tries for every hit is true, then the trick becomes to live long enough, or at least manage well enough, to take ten swings.  History is replete with examples of brave men and women who simply never gave up, and whose track record measured against any reasonable standard was, diplomatically, undistinguished . . . right up until the minute they changed everything.  My Friend, this is the essential knowledge I cling to with vice-grips.

One of the best features of American culture is that it celebrates the storied attempt, and, in contrast to most other places, expects defeated warriors to stand up, clean up, and get back into the battle?  As tempting as it sometimes is to marginalize people who didn’t “make it” –  projecting as we do the shame and weakness of our own insecurities, our own vulnerabilities, and our own failures – reality is that persistence and durability matter more than intellect and status.  Life on earth evolved to avoid and ruthlessly punish unnecessary risk, protect itself against mutations, and ostracize the troublemakers.  You can see where survival leads to a certain set of assumptions, conclusions, and behaviors.  But look at what happens when society plays to the imbalance: at any scale, (ephemeral) surety trumps progress. Better the devil you know, I suppose.  But the costs of such punctuated equilibria are much higher than most people realize.

By now you see where I am heading:  assuming a bare minimum threshold of analytic ability, creativity, and perspective, the difference between living to break even (however you define it) and living to optimize adventure and impact (however you define it) is never giving up, learning from past mistakes, and impenetrable armor against the parochial expectations to conform and blend in.  Again, I am not advocating recklessness.  I am advocating large, vivid, life-changing ambition.

Look, life has generally worked out for both of us so far.  Even with our collective zoo of dragons and demons, we two still among the most fortunate people I know, if only for the weapons we have to fight the monsters.  Things could be much, much worse.

I am delighted that you are thinking about new ways to confront them.  My primary intention here is to remind you of the arsenal at your disposal, acknowledge that the fight is bloody and painful, and encourage you to not resort to an appeasing diplomatic compromise that only postpones the inevitable or settles for the familiar but unsatisfying status quo.  There’s a time and place for discussion and debate.  I know it is almost always better to use soft force.

But some situations call for deeper, less nuanced expressions of power.  Yes, even in the New Age of Obama, I think this is one.

Your friend,

Peter

< ><–>

Once again Intelligent Design has raised its gorgonic, lipstick-smeared head.  Fundamentalists candidates and the Discovery Institute, a self-proclaimed policy think tank that has elevated the outrageous sham of ID to a stratospheric heights (and middle-earth respectability),  would have us believe that prejudice against creationism, yes even social oppression of its adherents, is best evidenced by the “one-sided” debate of public school curriculum and discriminatory Labyrinth of academic tenure.  Top marks for an impressive twist of public relation acrobatics; now ID isn’t the aggressor, but the victim.

The most distressing message of their published jetsam is that rived spirituality and scientific discovery (note even the sneakiness of their name, which hides behind the original “big tent” curiosity driven research) are locked in mortal combat, with only one winner possible.  Known for obfuscation and a gentle, patronizing brand of religious sanctimony, the Discovery Institute throws its full weight behind superstition and tautology, and deliberately mangles the meaning of “debate” and “theory” to suit an overt, and fundamentally wrong, ideological mission.

There simply is no “appearance of design in the universe” by any accepted scientific standard, and to demand explanation, never mind one that “each finds most satisfying” is a crude and vulgar violation of the scientific method.  It presumes a common understanding that there is a deliberate design, and casts mutation and evolution into middens of the unsaved.  The dire implications of a godless planet and natural selection are devastating only to those who have somehow chained their moral identity to a monotheistic Judeo-Christian-Islamic creed.

In America, happily, people are still free to do so.  But they are not free to impose their faith on others, and they will encounter harsh words (never mind career changing decisions, like tenure denied) if they try to erect an artificial edifice whose hollow claims to unbending science are polluted by faith and ideology.

Draping the technique that has brought civilization life-saving antibiotics and life-enhancing telecommunications – just to name two proliferated amenities of modern life, and two things I don’t want to give back – in the unflattering language of “rhetoric”, “controversy”, and “mindlessness” is a turgid parlor trick.  That kind of thinking leads directly to literal interpretation of the bible, all of it, including the less savory parts about slavery, misogyny, and righteous murder.

Scientific knowledge – reproducible knowledge about physics, chemistry, biology, mathematics, and astronomy: the grand magisteria of all we can truly test and learn – is not an accidental component of our public policy.  It is the essential ingredient of our understanding: of ourselves, our neighbors, and our planet.

We know beyond any doubt or debate, for example, that the earth is billions of years old, that it rotates and revolves around the sun, and that its resources are large but finite.  But not that long ago, the second most prevalent and infallible faith tortured anyone who dared challenge the orthodoxy of flat earth geocentism.  People killed other people with official sanction for hapless indiscretions, like believing in Copernican orbits.  Many superstitions from the Middle Ages, and many from the millennia that preceded it, can still provoke violence and sectarian hatred.

Every instant we waste on propagating this meaningless debate is lost to true discovery of cures, sustainability, and the deeply spiritual questions of meaning and purpose.  Every dollar misappropriated to the Discovery Institute, or the Templeton Foundation, or a self-serving televangelist can be better spent, and our minds can be better applied, to stem cell research, renewable energy, and peacemaking.

Better risk-adjusted returns than T-bills?

The system collapsed because the group on the right in the picture above – the residential borrowers – defaulted on their loans at a (predictably) unprecedented rate, which grew suddenly from the historic average of 1-2% to almost 50% by the time the practice of sub-prime lending ended.  The question is not “how did this happen?”, but “why did it take so long to stop?”.  Alas, like every financial collapse since the Dutch tulips, everybody was so busy passing a buck, and extracting their commission, that nobody bothered to check if the transactions made sense.  Why give your money to Alan Greenspan when some stranger you never met will pay you five or six times his rate?  All you had to do was ask.

In the quadrennial silly season of presidential elections, and with the public market indices  swinging like pendulums attached to loose nails, public uproar over the gross mismanagement at, say, the SEC, or abiding suspicions that the fat cats found yet another way to fleece the rest of us are making headlines.  It’s an easy story.  Everybody understands anger, greed, and deception.  And they are all easy to find in the mortgage crisis.  As I write this, government officials are spending yet another weekend working on the mother of all bail-outs, a new “trust” corporation that will accept – really, absorb – all the bad loans from the market for the purpose of cleansing the system of the dirt we collectively allowed in the pipeline.

The real culprit, though, is something called a NINA loan.  NINA stands for “no income no asset”.  If the public officials want to rebuild the economic levies, that is the place to start.  In the post-Reagan/Gramm era of deregulation, NINAs were perfectly legal, even ordinary.  If willing parties agreed a voluntary contract with the risks laid bare and the costs clear, the government agreed to get out of their way.  The assumption, false on the face of it, was that if the contract didn’t perform, the parties wouldn’t come running back to the government seeking help or redress.

Which isn’t how things worked out at all.  Instead of DIVERSIFYING their risk, the investors (on the left side of the picture, the guys with deep pockets) were unknowingly ACCUMULATING their exposure.

Only the names were diversified: Bear, Lehman, Merrill

All this happened below the radar because the folks who measure and assign risk (Moody’s, Standard and Poors, and Fitch) were using historical data based on NINA-free loans.  Furthermore, the investment banks, mortgage banks, and their respective brokers became rich off the transaction fees – so they had no reason to question the underlying process – and people who would have previously never qualified for large bank loans got the money and drove up the prices because there were suddenly so many of them chasing so few homes.

Winding the spring

This particular vicious circle was driven by the enormous supply of fresh capital from overseas (Americans aren’t saving much these days) and the large pool of newly created borrowers that appeared when the credit standards went from difficult (prove your income can support payment) to easy (promise with your signature that you’ll pay).  It was accelerated by the lenders who brokered loans to individuals, and then bundled the mortgages up by the hundreds and thousands and “sold” them en masse to the large investors.  Everybody was happy for a while, because the historical data was stable and strong.

The problem was a) there was zero diversification in their risk (all the loans were effectively the same) and b) the only barrier to unscrupulous brokers and euphoric borrowers was the the economic reality of “what happens later”, well after the commissions were paid and the new home “owners” tucked snugly in their new beds.  In other words, the incentives were wrong and the relaxed standards were dumb to the point of, well, criminal.

Today we know that the investors were either negligent or naive about the quality – the anticipated default rate – of the new loans.  Either they didn’t know or didn’t care that the standards had been so diluted.  We also know that the guys they paid to assess the risk were similarly cavalier;  “good as money” assets became worthless because the demand from new buyers disappeared almost suddenly as it had been created by the chicanery of NINA and her cousins.  Finally, the brokers and their customers engaged faith-based lending on an unprecedented scale, each of them playing with somebody else’s money, sometimes by manipulation, sometimes by exploitation, and in any case by the millions.  Faith was broken when a slew of new customers started missing payments, mostly because of built-in rate changes they should have known about but didn’t.  It unraveled quickly from there.

There are two easy ways to avoid this catastrophe in the future:  restructure the incentives properly, and adjust lending standards so that common-sense (never mind actuarial) judgment would restore confidence in repayment.  The commissions paid to mortgage brokers should be based on actual performance of the loan, not just the transaction itself.  A car salesman, for example, is an agent of the manufacturer, and makes no representation back to the factory about the credit worthiness of his customer.  He gets paid when the car is sold.  Lenders, on the other hand, sell their loans to underwriters based on exactly that assessment (effectively as agents of the borrowers), and they are well paid to do so.  The number of bad loans would have been dramatically reduced if brokers had to wait, like the investors themselves, if their recommendations were correct (or honest) and the loans performed.

The second means to avert this tragedy is to not lend more money to people than they can obviously repay, an inherently subjective judgment that has been horribly abused in the past (because of race, gender, or lifestyle).  This is a slippery slope, but somewhere between atavistic prejudice and exploitation is a fair if imperfect balance.  In the words of Barney Frank, chair of the House Banking Committee, this may be something we can “agree to do together”.