I can't tell you how many times one of my girls has said, "But that's not fair."
My standard reply is, "Life's not fair. It's not fair that you're a double threat, cute and smart. It's not fair that your parents love you, care for you, and are well-off. It's not fair that you were born in the United States and live in a town that values education. You better hope that life never becomes fair."
One of the things that has made America such a great country is that it is not fair. Fairness sucks. Fairness breeds mediocrity.
Sure we may think it's OK that all the 1st graders get equal playing time on the soccer field, but I can assure you that the "fair" team will be mediocre versus the team that gives more playing time to its best players.
The world has largely developed because it was not fair. Those men and women with superior intelligence, skills, or just work ethic, created products and services that improved the living standards of all of those around them. From the first basic stone tools to arrows, and the wheel, these visionaries were celebrated and praised. Thank goodness our farmers have learned how to produce much more than they themselves can consume, imagine a world where we all got to grow our own crops. That would be fair, but stupid.
Can you imagine a world where those blessed with intelligence and vision had no incentive to use those talents. A world where they were treated just like everyone else, fairly. Just look at the great advances in health care and technology that have come out of Cuba, Venezuela, or Russia over the years.
Lets look at some of those 1 percenters that are being persecuted for not being "fair." Henry Ford didn't invent the automobile, but he did invent a way to make them affordable. He became wealthy, and we all saw our standard of living increase. Sam Walton didn't invent grocery stores, but he did invent a way to make groceries much more affordable for all of us. He became wealthy, and we all saw our standard of living increase. Bill Gates developed software that made the worlds businesses and households more productive. Steve Jobs has created so many products that have enhanced our lives in ways we've never dreamed of. Jobs was the antithesis of fair, he strived for perfection, not mediocrity.
The cell phone Gordon Gecko used in "Wall Street" retailed for $3,995 in the early '80's. I just purchased a new iPhone 3Gs for my daughter for $0.99. Is it "fair" that AT&T and Apple are generating enormous profits, am I better off today than I was in the early '80's?
Many people in our society seem troubled about the unfairness of economic success. They should watch what they wish for. Sure we could take more money from those who have been successful, via higher taxes on income and capital gains, but if we did, what new and exciting advances would there be in medicine, technology, and energy? These people want to penalize those blessed with talents, if they use them and become wealthy. What perverse incentive is that? When did the politics of envy ever advance a society?
Romney and Obama are both 1 percenters. Is it fair that they are smart, that they have exceptional speaking and political skills, and that they live in a country that generously rewards such skills. How a President so blessed by unfairness can run on a platform of fairness is mind boggling. Obama had better hope that life never becomes fair for him.
Many of us have suffered from unfairness. Our families have been touched with illnesses, untimely deaths, and unemployment. Life isn't fair, it has never been fair, and will never be fair. But let's not confuse life's inherent unfairness, with economic unfairness. Economic unfairness has done more to lift the world's standard of living than anything known to man. We shouldn't envy those blessed with talents, we should praise them and thank them, the world would be a much colder place without them.
Our Rapidly Approaching Fiscal Cliff:
This amazing quote came from Fed Chairman Bernanke this week, "The size of the Fiscal Cliff is such that there is NO chance that the Fed could or would have any ability whatsoever to offset that effect on the economy." Wow, that's saying something. When a man printing trillions says he can't help you, you had better hold on.
The Fiscal Cliff that we are faced with on January 1, 2013 is a combination of tax increases and spending cuts that could shave 2% off of GDP, and GDP is growing at just a tad over 2%. The extension of the Bush tax cuts expires at year end, as does the temporary cut in the payroll tax. The Alternative Minimum Tax also needs its annual adjustment to avoid a tax increase for millions of tax payers. Meanwhile, $1.2 trillion in spending cuts take effect at the end of the year, a result of last summers debt-ceiling debacle. We'll also have another debt-ceiling debacle this fall.
Obviously the elections will have a massive impact on how these issues get resolved, or not. Clearly investors will start to worry about these issues as the summer wears on, and it would not be unusual for stocks to sell-off. Markets hate uncertainty, and the second half of this year will be filled with uncertainty. Buckle up. The only positive about uncertainty, and a market sell-off is that it will turn the heat up in Washington to actually do something. We'll see, but prepare for a rough ride.
Shit Happens:
It's not often when economic humor can make me chuckle, here's a rare moment... dlvr.it/1V95XM
Be careful out there, and keep the lights on,
Chris Wiles, CFA
412-260-7917
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This article contains the current opinions of the author but not necessarily those of the Rockhaven Capital Management. The author’s opinions are subject to change without notice. This article is distributed for informational purposes only. Forecasts, estimates, and certain information contained herein are based upon proprietary research and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.
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