At least three controversies have caught me by surprise while blogging: stimulus, climate change adaptation and dividend policy.

In each case I felt like I offered a pretty straightforward quasi-obvious take on an issue that was brushed aside in favor of a food fight.


I was obviously a non-player in the larger stimulus debate but the fact that no one echoed my sentiment seemed strange to me as it looked like the basic starting point for a conversation.

In late 2008, early 2009 the economy was crashing and lots of families, businesses and institutions were reporting serious cash flow concerns. Either they were running short or were afraid they would run short. Relatedly credit was rapidly drying up as collateral values were falling and unsecured credit was becoming very difficult to obtain.

So, here is an idea. Lets give people a bunch of cash. They say they’re afraid they won’t have enough cash. We have a cash making machine. Lets use our cash making machine to make cash and then give it to people.

If you care about the weeds of these type of things then I would have suggested that we suspend the payroll tax yet have the US Treasury issue IOUs to the Trust funds of roughly $1 Trillion to cover the approximate value of lost revenue. Everyone still gets their credits.

If you want to be horribly weeds-y then you can say we will have the Treasury deliver $1 Trillion in 13-week notes to the Federal Reserve. The Federal Reserve will then enter $1 Trillion into the Treasury’s account, which will then be used to clear transactions from the Treasury’s account to the account of banks processing payments from Treasury to vendors, employees, retirees, etc.

Yet, the core idea is pretty basic. We use our cash machine to print cash and then we give it to people.

I would expect someone to say: I hear where you are coming from Karl but . . . . and that would be worse than where we are now.

The closest someone came was when I brought it up to Peter Schiff on his radio show and he said “well if that’s such a great idea why not give people $1 million”

To which I replied, “ultimately that would create a lot of inflation”

To which he said, “well then won’t this plan?”

To which I said, “Yes, but 300 times less”

To which he said, “Oh so you think a little inflation is good. I happen to think no inflation is good”

And, that I think, was a conversation with a meaningful endpoint. Peter essentially argued that any inflation was worse than what we have now. I argued that some inflation would actually be better than what we have now.

Yet, most of the argument went like this: Saltwater! Freshwater! Multipliers! Keynesians! Liquidationists! Big Government! Dark Ages of Macro! Pretense of Knowledge! Trains, Yeah! Trains, Booh! Aggregate Demand! Regime Uncertainty! You’re an Idiot! You’re an Ass!

But, the core strategy of looking at a problem, taking the most obvious solution and then at a minimum trying to explain exactly why it won’t work was largely bypassed.

Even if you know the simple answer is a bad answer I think its worth going through this process just so everyone can be on the same page and be sure that they are in agreement as to why the simple answer won’t work.

People will say that this was an ideological problem, but I am skeptical as I’ll explain below.

Climate Change

One of the core ideas behind climate change is that if humans continue to burn fossil fuels then the earth will become warmer.

As it stands there are some places on earth that are so hot that no one wants to live there. There are also some places that are so cold that no one wants to live.

A baseline guesstimate might be that if the earth got warmer then the number of places that were too hot would expand and the number of places that were too cold would contract.

A possible strategy then would be for humans to move from the places that are newly too hot to the places that were formerly too cold.

Now this may very well be a horrible idea. In which case I would expect someone to say: I hear were you are coming from Karl but . . . . and that’s why that plan won’t work.

I’ve received a lot of email and tweets on this issue. I have tried to go through them all. So far I haven’t seen one that comes at it like that. Lots of folks mocked me. Some were kind enough to send along information on exactly how hot the too hot places might get and what the consequences of excess heat might be.

Yet, so far, nothing addressing why moving to cooler places won’t work.

Again, even if we are certain this won’t work its probably worth stepping through exactly why it won’t work. At least so everyone can be on the same page.

Dividend Policy

I’ve made what I assumed to be the banal observation that a key part of how firms compensate their owners is by transferring command of goods and services to those owners. In practice, that is to say, giving the owners cash.

At the same time Apple has sent repeated signals that it does not intend to transfer command of goods and services to its owners.

Now to the extent these signals are accurate I think they would cast some doubt on the potential for Apple’s owners to be compensated by Apple.

Now again you might say: I see where you are coming from Karl but . . . . and that’s how Apple’s owners will be compensated by Apple.

I even have some ideas on how this could happen.

Yet, and its still early, I believe not a single response has addressed this issue. Most have centered around estimates of my IQ. Some have addressed how Apple’s current owners could be compensated by future owners and a few have suggested that Apple is a great company because it does not intend to compensate its owners.

Again though, we haven’t stepped through exactly how the Apple compensation process might work. And, I think its worth doing so that at least everyone can be on the same page.


Now my take on this is that it extends from over-chunking. People try to take on ideas to aggressively rather than cutting them up into tiny pieces. I watch folks around me do this all the time. I even watch them get into bitter disputes over the answer. However, the larger the dispute gets the bigger chunks people try to take. They say, well you just don’t get XYZ where XYZ is some vastly complex set of ideas.

Rather, I would suggest we say ok, lets start with something everyone agree on. Then slowly, bit-by-bit, lets make our way to the point of disagreement. Once there we will often find that the nub of contention is quite small and that the answer is trivially obvious.

Indeed, this is so often the case, that my primary concern is making sure that once we get to the nub the obviousness of the answer does not serve as a source of pain and embarrassment for the person arguing the opposite.

There are a lot of ways to avoid this but one helpful technique is once you get close to the nub act as if the answer is going to be what the other person believes. Then act surprised to find that it’s the opposite and importantly don’t mention that this now proves your point. Simply continue on constructing the argument until the other person says, “You know actually I think you may have been right.” At which point you’ll want to change the subject as soon as convenient, so the other person will not have to ruminate on their wrongness.

There is always plenty of time later for pointing out how awesome and brilliant you are, but if you do it in the middle of a serous discussion it will only serve to hurt the other person’s feelings.