The objective economic data supporting those facts is solid and has been well documented. The graphic below is based on data provided by the non-partisan Congressional Budget Office. My objective is to explain why this is happening and show how to identify the policies that make this happen so we can do something about it – ultimately at the ballot box.

To download a pdf file of this position paper, please click here.

(To view a video and subtitles of this text, see the video below. Otherwise, keep reading.)

These trends are the result of policies that originate from a “survival-of-the-fittest” philosophy and a system that requires individuals to be increasingly exceptional in order to achieve prosperity. Independently of the current economic climate, the rules of the game have become more difficult over time making it not only harder to win but also costlier to not be in the winning 1% of the population. Increasingly, in America fewer people win but winning means winning big. However, if you don’t win, the consequences are dark. It’s also harder than ever it’s to break the cycle of loss and begin with a clean slate. Losing begets more losing in today’s America.

An economic system rooted in behavioral psychology?
(I know but stick with me).

Psychologists discovered long ago that the most effective way to obtain a desired behavior is to reinforce that behavior with intermittent rewards on a variable schedule.

I’ll explain.

Let’s say you have a monkey in a cage and you want to teach that monkey to press a button (psychologists actually do this to study learned behavior). First, you wait for the monkey to press the button by accident or happenstance and then immediately you reward the monkey with some food. Soon, the monkey learns that by purposefully pressing the button he can avoid hunger. Press the button. Get a peanut.

The problem is that as quickly as the monkey learns the behavior he can unlearn it. Stop rewarding the button-pressing and the monkey will cease pressing the button. However, if you start making the reward intermittent (a peanut only after every 3 presses, for example), the monkey will quickly learn that the reward only comes after a certain interval. If at that point you stop rewarding the behavior, it will take little longer for the monkey to unlearn it than in the continuous reinforcement example. But, the behavior still soon goes away.

However, if you really want that learning to stick, you have to change the rewards to a variable ratio. Sometimes you give the peanut after every three button-presses. Sometimes you give it after every five and sometimes you even increase it to ten presses or more before you give up the food. In fact, over time you can increase the interval to over a hundred button-presses. When the monkey can’t predict how many times he will have to press the button before getting a reward, he will continue to press and it will take a long time to unlearn the behavior. The monkey just keeps working.

Each time you increase the interval, you’ve made the rules more difficult for the monkey. Each time, he has to work harder to achieve the same result. Yet, the monkey willingly works harder. He learns that his hard work isn’t consistently rewarded. He learns that if he keeps at it long enough, doing what he’s learned is supposed to work; eventually he will get his just reward.

These kinds of experiments work with insects, reptiles, rodents, primates and yes, with humans too. This is all well documented in psychology research. You can easily research it yourself.

America’s policy makers know this to be true and even if each individual politician is not consciously aware of this, the big political think tanks (e.g. The Heritage Foundation and the Brookings Institution and scores of others) are keenly tuned into this fact. They know that as long as our rules still make it possible for someone who starts at the bottom to wind up on top, the idea of the American promise is alive.

Going back to our experiment, if you have a limited supply of peanuts and you want the monkey to deliver the maximum number of presses, the smart thing to do would be to find the point of maximum return. You want to optimize the monkey’s output. What is the least number of peanuts you can give to the monkey without discouraging the monkey to the point the behavior slows down? In other words, how do you keep getting the button pressed and avoid making the monkey so frustrated that he stops pressing the button?

“Occupy Wall Street” is not just about Americans who can’t find work. It’s about the fact that even when they can find work, the rules have gotten so difficult; the deck has been so stacked against them that there just aren’t enough rewards in the game to make it seem worthwhile. By trying to optimize the output of our workforce to the breaking point and by keeping too many peanuts for themselves, the 1% has created this situation – with the help of our politicians they support with their political contributions.

It’s not about unions. It’s not about government spending. It’s not about collective bargaining. It’s not even about our nation’s debt. It’s about the erosion, little by little, of the ability of the working person in this country to control their destiny. It is still possible to be very successful in America. Equality of opportunity is still alive. The problem is that it takes more hard work, more good luck and a greater degree of being exceptionally good at what you do to become wealthy or to even do as well as your parents did just a generation ago.

There are far too many policies to enumerate that have created this situation to fit into this short position piece. Both parties have contributed to this. But in all fairness, one has and continues to far more then the other. When you take a debate with someone on the right to the underlying philosophy behind their policy proposals; I mean, when you break through the surface issues about them being against Welfare, Medicaid, Medicare, Obamacare, Social Security, higher taxes for the wealthy, diminished workers’ rights etc. It boils down to a basic belief that it’s about survival of the fittest with a “winner-take-most” strategy and that that’s the best way to create a competitive and prosperous society. They believe in giving workers just enough to keep them producing in what they believe is a completely optimized economy. They want to get the maximum economic return not only from workers but also from our crumbling infrastructure and even from the money that was earned by workers and set aside in corporate pension funds – which was given to Wall Street to invest, thereby optimizing that money.

Is there anything wrong with believing in maximum optimization? It’s really just a fundamental belief they have about where we should take the country. You may agree. That’s OK. You just have to know fundamentally what you’re agreeing with. If you are not in the top 1%, you are among those being optimized. And you need to understand that when you vote.

Look, I’m an entrepreneur. I believe that the one of the roles of business is indeed to get the maximum return on investments. But I also believe that when you extrapolate that to try to run a country as if it were a business and you treat humans as a resource that should be squeezed to extract its maximum output, you disregard inherent but non-measurable values like quality of life, fulfillment and dignity. When you deprive people of those things they actually are less productive, less creative and actually less optimized. Life for the individual becomes more about the pursuit and less about the happiness and when the pursuit isn’t getting us closer to our hopes and dreams for our children, and ourselves we get frustrated, angry and filled with resentment. And I just can’t get on board with that, despite the fact that I aspire to and work hard toward my own prosperity. And I make no apology for that.

I believe in the American principle of higher advancement to those willing to leverage their natural talents, educate themselves, work hard and create value. But I do not believe in a winner-take-all system where if you’re not contributing the most, you receive next to nothing.

I believe in a system in which everyone can avoid poverty and even achieve the American dream by simply working hard and being honest. If you want more than that, I think you should work harder, be more and yes, it should be competitive. I do not believe in a system, like the one we have created, where politicians tell you that if you’re not making ends meet you’re simply not working hard enough.

It shouldn’t take more than a hard day’s honest work to make more than peanuts.

And that’s what the “Occupy Wall Street” movement means to me.

Please reflect on this. Please vote.

After taking some video (below) I decided to put my iPad to good use and made a little sign. The sign was a big hit and my picture must have been taken a thousand times (no exaggeration). Some people who came a bit later mentioned they’d seen me on the news before heading down. Funny.

Below is some of the video I shot. It really transmits what it was like to be in the crowd.

On Tuesday February 15th, I’ll be discussing some of my entrepreneurial failures publicly here in New York City. If you’d like to attend just click here and you’re good to go.

As Music Xray is defining 21st century A&R, the vision behind Music Xray didn’t start at Music Xray. My first attempt to lower risk when investing in the promotion and marketing of music began at Polyphonic HMI and the service I launched there called Hit Song Science (HSS).

Ultimately, I had a falling out with my business partners and I failed to persuade them that I could get the job done. That failure resulted in me loosing two years in bringing my vision to market and to Polyphonic changing their name twice, hiring two new CEO’s and spending a rumored 13 millions dollars pursuing their own strategy to tepid results, at least so far. If I had not failed in that persuasion, I may have been able to prevent those terrible results for all involved.

My efforts to introduce HSS into the traditional music industry are the subject of a very popular Harvard Business School case study that is taught at the world’s top business schools. The concept of computerized hit prediction fascinated the media and was even written into the screen plays of network television shows like Numb3rs and Studio 60.

Today, I am a different entrepreneur than I was just a few years ago and some of that comes from learning from my mistakes. I’m going to be sharing some of those lessons publicly a week from tonight, on February 15th here in New York City and I’d like to invite anyone interested to come along, hear a few tales of failure and hopefully learn how to avoid them. I’ll be answering questions and hanging out after the event as well. I’d love to see you there.

Here’s the link again: http://www.meetup.com/foundersatfail/events/16069282/

Anyway, no matter how tired I am, I have a ritual I follow and it usually leaves me feeling like new. Regardless of whether I arrive home in New York or in Barcelona my ritual is about the same. I check email, I handle anything work-related that has come up while I’ve been out-of-pocket. Then, I put on shorts, a T-shirt and shoes and I go for a run. I can do that any time of year in Barcelona. I admit my ritual has failed or been substituted for the gym in New York a time or two due to weather conditions.

I just got back from my Barcelona run and it was great! This is one of the most beautiful cities in the world and June is one of its better months. I run uphill to Montjüic Park and around the back of the Olympic Stadium and the Palau Sant Jordi Arena (where I used to work), and then back down and home. That route is only about 4 miles but half of it is uphill so it’s still a pretty good workout.

I’ve always loved to run and have been doing it pretty regularly since my early teenage years. With age my knees hurt if I do it too many days in a row and the last few years I’ve been gaining weight so it’s not as easy as it used to be. But, like in the song “Heavy Fuel” by Dire Straights; when my ugly big car won’t climb this hill I’ll write a suicide note on a hundred dollar bill.

Anyway, one of the best parts of living in two cities is no matter which direction I’m heading I always get to arrive to the comforts of home. That’s a really great feeling.

I suppose they’re used to that.

Immediately after the December 7, 1941 bombing of Pearl Harbor Edward Hopper began painting Nighthawks, one of the most recognizable paintings in American art. After this event there was a widespread feeling of gloominess across the country, a feeling that is portrayed in the painting. The urban street is empty outside the diner, and inside none of the three patrons is apparently looking or talking to the others; all are lost in their own thoughts. Two are a couple, while the third is a man sitting alone, with his back to the viewer. The couple’s noses resemble beaks, perhaps a reference to the title. The diner’s sole attendant, looking up from his work, appears to be peering out the window past the customers. His age is indeterminate.

Every morning on my way to the gym, about 100 yards out my front door, I walk past the empty lot where Phillies once stood on the corner of 7th Avenue and Greenwich Avenue here in Manhattan and I think of Hopper’s painting. The site is now called Mulry Square. Not many people know this. Even people who live in the neighborhood are often unaware of the infamy of the corner – which in recent times has become famous again for the “Tiles For America”.

Wikipedia says:

“Currently owned by the NYC Metropolitan Transit Authority, Mulry Square is a triangular parking lot at the southwest corner of Greenwich Avenue and Seventh Avenue South which was formerly the site of a wedge-shaped diner that was the inspiration for Edward Hopper’s famous painting Nighthawks. The diner’s tiling can still be seen on the one remaining wall. The parking lot’s fencing supports Tiles for America, a September 11 memorial consisting of some 6,000 tiles created across the country.”

Close-up of Tiles for America

Speaking of “hey look at me!” posts… early last year I thought I wanted to do a series of video podcasts that featured (rather, sort of compared and contrasted) Barcelona and New York. I go back and forth quite a bit so I thought I could get plenty of fresh footage on an ongoing basis and I was having all these ideas about how the two cities could be juxtaposed.

I was going to do the whole series in Catalan (so, obviously not directed at an English speaking audience). In the end, I just couldn’t get it together to make more than the first installment so I never posted it. I just had too much on my plate and I wasn’t getting any strong indicators that there would be a lot of interest. For what it’s worth, here it is.

For you non-Catalan speakers, what I’m pointing out in the video is that New York is beautiful and imposing as seen from above or from a distance but when you get down into the city it’s a bit gritty, industrial and it could use a makeover. Barcelona in contrast, isn’t so pretty as seen from above but when you get down into the city it’s one of the most beautiful cities in the world with great infrastructure and manicured public spaces. I make a few other comparisons and contrasts as well. You get the point.

I don’t foresee making any more of these.

A principis de l’any passat vaig voler fer una sèrie de vídeos curts que comparaven i contrastaven Barcelona i Nova York. Ja que vaig i vinc sovint, pensava que sempre tindria suficient metratge i no deixava de tenir idees de com relacionar les dues ciutats.

Entre una cosa i l’altra només vaig fer el primer episodi. Vaig començar a tenir massa feina i no detectava que hi hauria prou interès com per justificar la continuació. De totes formes, aquí tenim el vídeo que sí que vaig acabar. No crec que en faci més però si us agrada passeu-lo. A veure que us sembla.

Salut!

I was just reading in today’s New York Times about Spain’s growing and worse than expected jobless rate. I spend about a third of my time in Spain and the strange thing is that the bad economy isn’t nearly as noticeable in day to day life as it is where I spend the rest of my time here in New York City.

While real estate prices in Barcelona have really taken a hit and people are losing jobs in the construction and tourism sectors, people seem to be making it work. Of course, as you can read in this article, the government is getting stretched pretty thin as they try to hold the social net in place. The system may break before recovery can start to pick up the slack. Additionally, being tied to the Euro, Spain does not have the ability to print its own currency like we can in the US to stimulate growth. And the rest of Europe, although struggling, is doing a lot better than Spain is right now. So, Spain’s economy is likely going to take longer to recover and European policies aren’t going to cater very much to only one of its member countries. In short, Spain is going to have to sort out much of its own mess.

As you know, in the US we don’t have the same kind of social net. We rely a lot more on charitable organizations and volunteer-ism to take care of our needy. But that seems a lot less dependable than a government-backed program to insure people don’t fall through the cracks.

Today, we volunteered in one of Manhattan’s largest soup kitchens. One of the most surprising aspects was how many people who came through looked just like you and me. Sure, there was a fair amount of homeless-looking people. I didn’t see any families but I did see plenty of people I could pass on the street or see in a subway car and never think they might be needy. I got the impression that there are a lot of people with a white-knuckled fear grip on keeping their lives together.

Soup Kitchen

“Every year, the city has been getting hungrier. The New York City Coalition Against Hunger estimates that 1.3 million New Yorkers can’t afford to buy enough food for themselves and their families all the time. That works out to about one person of every six in the city.”

That is an amazing statistic to me and it generates all sorts of thoughts about volunteer-ism vs. government help. That’s a topic for another day. For now, here’s to 2010 being a year of recovery across the board!

Most of the time I lose perspective on what would be interesting to someone who doesn’t live here. Things I used to find curious now don’t even get my attention. This snowman however, would have gotten my attention anywhere. It was just especially out of place on the 2nd Avenue sidewalk near 30th Street.

Snowman on 2nd Avenue - Christmas 2009