The recent media barrage of Royal baby news coupled with recent legislative measures removing funding for food stamps and education inspired me to write this post. In it I examine social mobility in the United States.  Obviously we start off with a quote to make this diatribe seem “smarter”. John Rawls said, “If we ignore the inequalities in people’s prospects in life arising from these contingencies and let those inequalities work themselves out while failing to institute the regulations necessary to preserve background justice, we would not be taking seriously the idea of society as a fair system of co-operation between citizens as free and equal.”  Rawls knew that society would encompass the haves and the have not’s, but he believed that a society that fails to champion the rights of the poor and lower class, would ultimately lead to a failed society. John Rawls further noted that life prospects are deeply influenced by contingencies of birth, including inborn talents, social class and luck. Several studies have been made comparing social mobility between developed countries. One such study (“Do Poor Children Become Poor Adults?”) found that of nine developed countries, the United States and United Kingdom had the lowest intergenerational vertical social mobility with about half of the advantages of having a parent with a high income passed on to the next generation. Today in the U.S., according the a recent New York Times report, 42% of men who are born in the poorest 5^th percent stay there, while in the UK, only 30% stay there.  As we fawn over the royal family and an aristocratic society, we fail to realize that we have fallen behind England in social mobility. (Note: The social mobility in England ranks among the worst in Europe) Our current financial models and laws worship big banks and the wealthy, because let’s be honest, the wealthy dictate legislation. Without the green paperbacks, nothing gets done in this city. As I learned in my Securities Regulation course, unless Goldman Sachs is behind your project, it is hard to succeed in this country. (Ok that’s a slight overgeneralization, but those bastards at Goldman have their fingerprints on everything!) The Economist recently published an article entitled “Rich Rewards”.  The author wrote, “The people of Australia and Canada have twice the social mobility of their counterparts in America and Britain despite having Gini coefficients in the same ballpark.” America was once a beacon for hope and the American Dream. It was, and in some aspects, continues to be a place where hard work and determination can lead to prosperity.  Although the foundation of America was built upon this dream, today Congress enacts legislation that directly conflicts with our founding ideals.  Take food stamps for example.  According to the Economist, “It is hard to argue that food-stamp recipients are undeserving. About half of them are children, and another 8% are elderly. Only 14% of food-stamp households have incomes above the poverty line; 41% have incomes of half that level or less, and 18% have no income at all. The average participating family has only $101 in savings or valuables.”  Yet Congressional budget cuts have targeted the Food Stamp program.  Next let us examine education.  According to the Center on Budget and Policy Priorities, “States are spending $2,353 or 28 percent less per student on higher education, nationwide, in the current 2013 fiscal year than they did in 2008, when the recession hit.”  So whom do you think these cuts affect the most? If you guessed middle to lower income families, then ding ding ding you’re correct! We continue to spend billions on Wall Street bailouts, sucking up to hedge funds managers, unnecessary wars, and tax cuts for the super wealthy.  Further we continue to abandon the middle class and poor.  I wish the Royal baby hoopla would have lead to some greater debate on this issue, but as usual the media only focused on artificial matters.  I’ll end this post with a simple metaphor on how we should possibly think about remedying our current situation. Rawls wanted to find a way for societies to ensure that the financial privileges of one generation didn’t extend automatically into the next. He drew an analogy to the world of sport: “The draft rule in a professional sport such as basketball ranks teams in the opposite order from their standing in the league at the end of the season; championship teams go last in the draft of new players.”

Thought of the Day:

So here goes my existential thought of the day.  I hope you find it a quarter as profound as I think it is.  Recently, in preparing for future job interviews, I learned about the accounting term gross margin or gross marginal profit.  The formula is as follows: Gross Margin (%) = (Revenue – Cost of goods sold) / Revenue *100%.  Undoubtedly this is a foreign formula to most, but essentially the idea boils down to effectiveness and cost.  Every business follows this formula to determine future unit cost, and as a result increase productivity.  The purpose of determining Gross Margin Percentage is to determine the value of incremental sales, and to guide pricing and promotion decision. The idea being that unit profit should increase from one unit to the next. Units for example can be 2-liter Coke bottles or MacBook’s sold.  Companies from Apple to Mom and Pop corner stores take into account Gross Marginal Percentage. The all-important formula is calculated in every aspect of pricing and forecasting.  Now I’m sure you’re wondering when I’ll stop giving an accounting lecture and start with this “deep philosophical thought”.  Well here goes my attempt. The more I studied this formula the more I began to realize that in the attempts to become a more efficient and cost productive society, whether this be through rapid technology and complex formulaic algorithms, we in fact have become a society defined by pure capitalistic achievement.  What this means is that we have become a culture and society that champions the almighty dollar, and in return we receive a product of lower qualitative value.   Now before I continue, I want to make it clear that this rambling is in no way a critique of capitalism or any other form of economy.  In fact, this diatribe has nothing to do with any form of politics.  It simply explores how the idea of Gross Marginal Percentage has affected quality in all aspect of our lives.

To show you how expansive the effect of a society relying on gross marginal percentage, let’s begin with movies.  We all love movies right? Let’s first compare the top 5 grossing movies of 1990, they are as follows: 1) Home Alone 2) Ghost 3) Dances with Wolves 4) Pretty Woman 5) Teenage Mutant Ninja Turtles.  Now let’s see the top grossing movies for 2012: 1) Marvel’s the Avengers 2) The Dark Knight Rises 3) The Hunger Games 4) Skyfall 5) The Hobbit.  Notice a trend? Movie studios no longer seek to produce the lower budget classics like Home Alone or Ghost, but because of the idea of gross marginal percentage and increasing profit from one unit to the next, studios are now mainly banking on blockbuster action thrillers.  So a studio would rather shell out a quarter of a billion on Skyfall or the Hobbit and gain a marginal profit through a worldwide audience, while ignoring funding for smaller and some may argue more qualitative movies.  That is why today a movie like Silver Linings Playbook is an anomaly rather then a common occurrence. (Just for the record Silver Linings was 23^rd in top grossing pictures of 2012)  What this means is studio dollars will ignore these smaller indie films and shift dollars to large actions flicks with more bang for the buck.  As a result, we as an audience miss out on possibility of the next Ghost, Home Alone, or Pretty Woman.  We are now inundated with scenes with multiple explosions and car chases, while missing out on films with a deeper meaning or movies that transcend the industry or become classics. I for one could not imagine life without Home Alone.

Next, let us focus on the media as an example of when society based solely on gross marginal profit adversely affects its people.  Journalism was once an honorable profession, and still is in an unfortunately decreasing percentage. It was defined as profession with honor, dignity, and respect for what truly mattered.  Through the decades the media has become solely profit driven; and the creed of journalism begun to erode.  The idea that news shouldn’t be sexy is foreign to us. Rather we focus on the burning car on the side of the road, instead of delving into more important and deeper issues. As a result we are more ignorant and uninformed society.  Whether it be the New York Times articles, Fox News Polls, or the Huffington Post we are consistently inundated with ratings. Who won the ratings!?!? Honestly who cares? Well CNN, Fox, NBC, CBS, and ABC obviously do. Ratings equal more advertising revenue, which equals, you guessed it, more profits.  As a result very few of us know about the recent tragedy in Nigeria, flooding that devastated crops in South East Asia, or how the spread of GMO’s effect our food production.  Nope, we remain all too familiar with the latest NTSB press conference detailing the recent airline crash, and many of us can recite every detail of the Trayvon Martin case. Unfortunately the idea of gross marginal profit does not stop at pure news media, but infects all forms of media, including my much beloved sports media.  Last year Deadspin published an article entitled “How ESPN Ditched Journalism and Followed Skip Bayless To the Bottom: A Tim Tebow Story.” In the article author John Koblin explains how journalistic integrity has evaded ESPN, and we are thus left with news based on ratings and profits. Each segment must be more profitable then the previous!! (Remember unit cost) I remember a day when I could enjoy SportsCenter and learn about all the players on the back of my baseball cards.  Unfortunately if your deck doesn’t consist of Tim Tebow or other controversial superstars you miss out on an opportunities to learn about great stories of athletic achievement; or learn that random trivia fact about your favorite obscure player.

Finally I wanted to explore a specific instance, a microcosm, that I believe summarizes my point.  Recently the District of Columbia approved a budget that includes a cut in the sales tax while cementing a tradition of strong business regulation by giving an initial nod to a bill requiring some big-name retailers to pay a “super minimum wage.” Mind you this “super minimum wage” requires that retailers like Target or Wal-Mart pay their employees no less than $12.50 an hour.  MY GOD THE TRAVESTY! Well Wal-Mart being Wal-Mart decided that this “super minimum wage” (by the way I love the name super minimum wage) was too much for them.  How can a company with over $1 billions in gross profit last year afford to pay their workers in D.C. $12.50/hr!?! I’ll tell you how, it goes back to the idea of gross marginal profit.  Wal-Mart has decided that their unit cost for opening up D.C. stores would be less profitable then say a unit store in Alabama or Connecticut.  Thus making a business savvy decision they decided that it simply does not make economic sense to open any stores in the District.  Unfortunately for those on the lower economic scale or simply for those of us who need a cheap temporary fixture or any one of the random pieces of shit Wal-Mart sells, a cheaper alternative will now cease to exist.

The goal of society has always been progression.  The idea that you would be better off then the previous generation was a given.  Now I’m not talking simply in financial terms, I’m speaking more broadly.  We mistakenly think just because time has evolved society should as well. We were supposed to be the generation that would be exposed to more nuanced and fulfilling news, art, film, culture, living conditions, etc…Unfortunately we have become more of the “gross marginal profit society”, and as a result many of us in America will not do as well as our parents and grandparents hoped.  We are more obese, exposed to shittier stuff (see Honey BooBoo), expect unemployment, and see the American Dream as a fading entity. Obviously not all is bad. We still are an innovative society and for those of us who are willing to work a little harder, we can obtain great news, art, work, and fulfilling experiences.  So let me tie this thought of the day up with a cheesy idea.  I think we would be much better served if we were a society that exemplified a critically acclaimed Indie film at Sundance, produced through hard work and hustle, only to be discovered and loved by the masses. Don’t you think that society would be better than a society defined by the Hunger Games? (See what I did there) Anyway thoughts and disagreement are always welcomed!