FUNDAMENTAL TRUTH #74: “When negotiating it’s important to understand the ‘time value’ of promises. The longer out in time something is promised the less likely that promise will be kept.” -Old Pithy

Posted by PITHOCRATES - July 12th, 2011

A Swath of Broken Promises

Mothers aren’t stupid.  They won’t let their kids have dessert until they eat their peas.  They don’t fall for the old, “I promise to eat my peas after I eat my dessert” line because she knows it won’t happen.  For the same reason kids have to clean their rooms first before they go out and play.  Mothers are on to their kids.  These sneaky little bastards will say or promise anything to get what they want now with no intention of keeping that promise later.  Especially when that promise is due light years into the future.  Like an hour or more later.

For kids are a lot like men.  Who also have a singular focus.  They want only one thing while dating.  And will say and promise anything to get that one thing.  They’ll say, “I love you.”  They’ll promise that their love will be everlasting.  That he will never leave her.  That he’ll be true and faithful.  Never love another.  Never could love another.  For their love is special.  Unique.  And greater than all other loves.  Combined.  If only she will just give it up to prove her love to him.  Which she eventually does, unable to resist his charms.  Or maybe it was all that binge drinking.  Next thing she knows she’s pregnant.  She bumps into her best friend at the clinic where their doctors coincidentally diagnose them with the same venereal disease.  And spends the next 18 years as a single mother chasing down that deadbeat dad for child support.

Of course, not all romances turn out this way.  Some men and women marry and live happily ever after.  Despite leaving a swath of broken promises in their wake.  A promise to watch sports with him on Sunday afternoons.  And a promise to keep going out dancing after getting married.  Even promising to take ballroom dancing lessons.  A promise to have sex as often as he wants to.  And a promise that sex won’t be just the 10 minutes between Sports Center and sleep.  A promise that her mother wouldn’t spend much time in their house filling her head with new ways to criticize him.  And a promise to pee in the toilet.  Not around it.  And to always leave with the seat down.

The Time Value of Promises

A lot of us make these promises with no intentions to break them.  We just do.  Because we wanted something at the time of the promise.  And making the promise just proved expedient.  But sometimes we make promises we have no intention of keeping.  Or know full well that in time we forget a lot of promises.  Such as manufacturers using mail-in rebates to entice us to buy their products. 

Manufacturers could give you a coupon for the savings.  But everyone gets their discount at the register with a coupon.  Which means everyone buying because of that coupon will get those savings.  But a rebate requires a lot of work after the purchase.  Bar codes to cut off.  Envelopes to address.  Stamps to buy.  It takes time.  At a most inopportune time.  You just want to play with your new toy.  Not do paperwork.  So people procrastinate.  And a lot of them forget about that rebate.  As the promise of those savings get pushed out further in time more people will forget.  And not get those savings.  So only a small percentage of people who buy because of a rebate get their savings.  Unlike the coupon user.

Businesses understand the time value of promises.  A future promise (a rebate) is less costly than present promise (a coupon).  It’s similar for compensation.  During difficult economic times employers prefer bonuses over raises.  They’ll promise a raise later when things get better.  But things may not get better.  You may not get that raise.  And if you don’t get another bonus next year you’ll be taking a pay cut.  That’s why unions are dead set against merit pay or profit sharing in lieu of pay raises.  Pay raises are forever.  Profit sharing is not.  Especially if they do some creating accounting that limits their income taxes.  Which ‘inadvertently’ reduces your share of the profits.  Lots of things happen before money becomes profits.  A lot of bookkeeping.  And unless you’re a CPA you haven’t a clue what it all means.  With gross, though, it’s a different story.  What you see is what you get.  That’s why the big movie stars get a share of the gross.  There’s little time to devalue that promise.  If ticket sales are good the movie star’s pay is good.  Simple.

Broken Promises are just a Diplomacy Tool for the Dictator

And then there are those who promise only to buy time.  Or improve their position.  These people have no intention of keeping their promises.  Like dictators.  Hitler promised Chamberlain that the Sudetenland was his last territorial ambition.  So Chamberlain gave him part of Czechoslovakia.   To get “peace in our time.”  Hitler then took the rest.  To protect his right flank for a future territorial ambition.  East Prussia.  Across the Danzig corridor.  But before he attacked Poland he needed to make a deal to protect the back door.

There were few things Hitler hated as much as Jews.  Except, perhaps, Russians.  And Soviet Communism.  The NaziCommunist hatred went back years.  There were political rivals in Germany between the wars, each vying for power.  Hitler finally put an end to the rivalry when he torched the Reichstag and blamed it on the communists.  But before he attacked Poland he needed to make nice-nice with Joseph Stalin.  Which he did.  They made a non-aggression pact.  Agreed they would not attack each other.  Then they conquered Poland (the Nazis from the west and the Soviets from the east).  And partitioned it between them. 

That promise with the Soviets gave Hitler time to invade Denmark & Norway.  And France.  And after obtaining Atlantic ports for his U-boats, airbases within striking distance of the UK and securing his western border, he was ready to do what he always wanted to do.  Attack the Soviet Union.  Break that promise with Stalin.  For he no longer needed him.  And Stalin had something he wanted.  Lebensraum.  Living space.  With lots of grain.  And oil.  Everything an empire needs.  So through a series of broken promises he was going to expand Germany at the expense of the Soviet Union.  Using the time value of promises to his advantage.  Getting what he needed when he needed it.  And making his enemies wait a long time to get what they wanted.  Peace.  Which proved to be a promise not worth holding on to.

A lot of things happen between Tax Hikes and the Spending Cuts

Politicians make a lot of promises, too.  Most of which they break.  For they are professional liars.  But in a way they are worse than Hitler.  Hitler raped and pillaged other countries.  Politicians rape and pillage their own constituents.  They promise the moon to get their vote knowing full well they can deliver little of what they promised.   And then to add insult to injury, their policies just impoverish their constituents.  With higher taxes.  Or costly regulations that increase consumer costs.

But politician on politician lying is some of the worse lying out there.  And the king of all liars is the liberal Democrat.  Who want to tax and spend and change the way you live your life.  Things that don’t help you win elections.  So they lie during elections.  And lie during political debates.  Because being tax and spend liberals, they need high tax rates.  And fat benefits programs.  In fact, their favorite tactic is to deliver the benefits first and then try to find a way to pay for it.  Usually by browbeating Republicans to be ‘responsible’ and increase taxes.  When they resist the liberals belittle them and say they want to kill old people and starve children.  Of course, spending money they didn’t have in the first place is not really the model of responsibility.  But that’s different.  I don’t know how it is.  But in the liberal Democrat world it just is.

And then the negotiations begin.  Yes, everyone agrees the government needs to balance its books.  That they can’t spend money they don’t have.  The Democrats want to fix that problem by increasing taxes.  Whereas the Republicans want to cut spending.  Then the Democrats, being the devious little bastards they are, fall back on an old favorite.  They use the time value of promises to screw Republicans.  They offer spending cuts in exchange for tax hikes.  Often in 2-1 or a 3-1 ratio.  For every new dollar in taxes they’ll make $3 in spending cuts.  But these are a special kind of tax cuts.  They call them ‘future’ tax cuts.  And they happen at some mystical time far out in the future.  Where all responsible government apparently lies. 

Because they often make these deals during a crisis, they need to implement the tax hikes right away so the government can mail those Social Security checks.  And pay their soldiers.  But with the people suffering from the bad economy, they’ll ease the spending cuts in later to ease their pain.  Because they ‘care’ about the people.  That’s why they are always ‘future’ tax cuts.  Of course, a lot of things happen between those tax hikes and future spending cuts.  They write new budgets every year.  And there are Congressional elections every 2 years.  And a lot of the time the new Congress people just write those spending cuts out of the budget.  Especially if the Democrats pick up a lot of seats.  Which is why Democrats are quick to offer this deal.  Because they get what they want when they want.  And a lot of time to renege on those spending cuts promises.

It’s amazing how often the Republicans fall for this trick.  Then again, poor old Charlie Brown will forever try to kick that football.  Unwisely trusting Lucy, his devious sister.  Who no doubt will grow up one day to become a registered Democrat.

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LESSONS LEARNED #33: “The Founding Fathers weren’t perfect but they were closer than most.” -Old Pithy

Posted by PITHOCRATES - September 30th, 2010

Anarchy Averted

Washington men didn’t live long.  And George Washington thought about that.  A lot.  He loved his Mount Vernon.  His garden.  And he longed to retire there to spend out his years in peace under his vine and fig tree.  But he gave up that dream when he accepted command of the Continental Army.  He was already at that age when a lot of Washington men died.  So when he left, no doubt he thought he may not return.

The Revolutionary War lasted 8 long years.  And Washington spent those years with the army.  In the field.  He was at Valley Forge.  He didn’t leave to go home to see Martha.  No.  His wife came to Valley Forge to see him.

Washington was a wealthy man.  He didn’t need to make these sacrifices.  A lot of wealthy men didn’t.  But he did.  And he sacrificed a lot.  Even his eyesight.  When the army officer’s wanted to mutiny over a long list of failed promises (pay, pensions, etc.), Washington pleaded with them.  To not throw away the thing they’ve fought so long and hard for.  As poorly as the Continental Army was treated, those words did not move them much.  Then Washington pulled out a letter from a congressman to read to them.  But couldn’t.  After stumbling over a couple of words, he stopped.  He then pulled out a pair of spectacles.  No one had ever seen the great George Washington in such a public display of weakness.

“Gentlemen, you must pardon me,” he said.  “I have grown gray in the service of my country, and now find myself growing blind.”

Some cried for the old man who had given so much.  When he no doubt had so few years left to live.  If their commanding general could make such sacrifices, so could they.  So there would be no Caesar.  No Cromwell.  No armies would march to the seat of power.  This republic would not collapse into anarchy as history often scripted her republics.

The Most Powerful Man in America Surrenders His Power         

But would he be king?  He could have.  Easily.  He had the power.  And the love and adoration of the people.  In fact, some were begging him to become king.  Others, though, questioned his intentions.  They looked at the army with a nervous unease.  They were, after all, a nation built primarily from English stock.  And they knew their English history.  Of Oliver Cromwell.  The New Model Army.  Just what were his intentions?

He still stayed in touch with his officers (and later would go on to be the first president of the Society of the Cincinnati).  This seemed a bit ominous to some.  This is why once the war was over, people tried to forget about and disband the army as quickly as possible.  To renege on the promises they made to these veterans.  They just wanted these soldiers to go away.  There were too many bad memories of standing armies in their midst.  Whether they wore a red coat or a rag, they just wanted them gone.

Even King George questioned his intentions.  Few give up power.  If he did, it would place him in the pantheon of greats.  But would he?  Yes.  He would.  And did.  Washington would be a Lucius Quinctius Cincinnatus, the Roman farmer who walked away from his plow to assume dictatorial powers to help save his nation.  When the threat was past, he returned power to the Senate and returned to his plow.  And so did Washington.

Answering the Call of Duty.  Again.

Then the nation called for their Cincinnatus once again.  There were problems with the Confederate Congress.  It was having difficulty governing the peace.  There were state rivalries.  Their finances were in a mess.  And there was no national identity.  There used to be.  British.  And the European nations treated with that singular entity.  Great Britain.  Now that the mother country was gone, there was no singular entity.  No unity.  Everyone was for themselves.  And the European powers had to make multiple treaties with the multiple states.  If they wanted to go through that headache.  And many did not.

Some called for a revision to the Articles of Confederation.  But it was difficult to get the states on board.  A weak confederacy favored the individual states.  And the individual states liked that.  But it also limited their potential as a nation.  Some feared the inter-state rivalries would balkanize the nation.  Make the New World a repeat of the Old World.  To bring the nation together would take an extraordinary effort.  Or an extraordinary man.  George Washington.  Who agreed to attend the Philadelphia Convention in 1787. 

After a long and hot summer, the Philadelphia delegates produced a constitution.  With James Madison being the primary architect.  They then sent it to the states for ratification.  At which time James Madison and Alexander Hamilton began a writing campaign to urge its ratification.  (John Jay contributed to this campaign, too, but not as much as Madison and Hamilton).  Once ratified, it came time to populate the new government.  Some competed with each other for some positions.  But for one of the positions there was unanimity.    There was but one man the people would trust with the most powerful office in the land.  Their Cincinnatus.  George Washington.  But would he do it?  Would he leave his blissful retirement beneath his vine and fig tree?

Yes.  Not because he wanted to.  More than 10 years had passed since this old man had agreed to command the Continental Army.  He had outlived many Washington men.  The way he saw it, he was living on borrowed time as it was.  And there was another consideration.  Against the greatest of odds, he did NOT lose the Revolutionary War.  He had made mistakes in his life, but his name was safe for posterity.  But if he took a risk now he could lose the good name he built.  And if there was anything soldiers (and politicians) worry about, it’s their legacy.  (That’s why they write memoirs.)

Another Long 8 Years

When it was clear that he was, in fact, the indispensable one, he sacrificed his personal want for the public need.  Again.  And again, serving a second term as president.  He was ready (and looking forward to) retirement after one term.  But the party politics were threatening to tear apart the new nation.  The rift between Jefferson and Hamilton had grown.  It was splitting the government into two camps.  The Federalists (led by Hamilton) and the anti-Federalists (led by Jefferson).  They pleaded for Washington to serve a second term as he was the only one who could hold them together.  He consented.

That second term was particularly unpleasant for Washington.  Party attacks turned into personal attacks.  Even against Washington.  And the ugliness got really ugly over the Jay Treaty.  Many wanted war with Great Britain.  But having actually fought a war with Great Britain, Washington favored peace.  Yes, the treaty favored Great Britain.  And, yes, it tied American interests to Great Britain, not her war time ally.  France.  The Jeffersonians unleashed an unfettered vitriol on the Federalists.  Including Washington.  But Washington bet on the right horse.  Great Britain proved to be the dominant European power.  And her Royal Navy came in handy protecting U.S. trade with her.  Over a decade of peace and prosperity followed. 

After 8 years, though, there was no persuading Washington for another 4-year term.  He had grown ever older in the continued service of his country.  Now he felt it more than ever that his days were few.  Rarely did he know happiness like he felt at the inauguration of the 2nd president, his vice president, John Adams.  Adams wrote that after he took the oath of office, Washington said, “Ay! I am fairly out and you fairly in!  See which of us will be happiest!”  He may not have actually said this but he no doubt felt the sentiment.  And with that, he returned to his plow.  Cincinnatus had come home.  Where he would happily live out his remaining years.  All two of them.

Where is Our Cincinnatus?

Today it’s about money and power.  Not duty.  Today, people want to be full-time politicians.  For the money and power.  And the elitist status.  People get into Congress and they just don’t want to leave.  Should we vote them out of office, they have a tantrum.  They call their constituents stupid for not knowing who the better candidate was.  And they won’t go quietly.  Some will change parties.  Or run as an independent.  Or as a write-in candidate.  Anything to stay in Washington.  To hold on to their power.  To stay among the elite.

The nation has deviated far from the path of disinterested public service of the Founding Fathers.  The anti-Federalists would be shocked to see what became of the government they helped create.  Even the Federalists.  Even Hamilton.  Not even he, the champion of a strong federal government, would approve of the federal government today.  His mercantilist polices had the goal of making the nation rich and powerful.  Not to suck the wealth out from the private sector.  Which began in earnest with Wilson.  Then picked with FDR.  Then ramped up further with LBJ/Nixon/Ford/Carter.  Had Hamilton lived in the 20th century, he would have earnestly campaigned for Ronald Reagan.  To put an end to the public sector’s pillage of the private sector.

And now we find our nation adrift again.  But who will step in and stop it today?  Who is out there?  Willing to put down their plow for disinterested public service.  And by ‘plow’ I mean any real job.  Worked by someone who is not part of the Washington establishment.  Where is our George Washington?

www.PITHOCRATES.com

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