Guidepost Five: The Power of Strategy (Aka Episode 48)

In which my student and I dissect a strategy known as the Two Santa Claus Theory in order to help her write her economics paper, and are reminded that curiosity is more important than knowledge.

Photo by 傅甬 华 on Unsplash. FYI, the photographer is available for hire, and you have to love that grumpy cat face.

“Why the long face?” I asked as she sat down in front of me.

“I’m supposed to write a paper for my economics class. It’s forty percent of the final grade. I barely understand all the stupid graphs he keeps making us look at. It took me a week before I realized that one of his graphs was about strawberries. When the supply goes up, the cost goes down. When the supply goes down, the cost goes up. Seems easy when you realize they are talking about strawberries. Of course strawberries are cheaper in season because everybody wants to sell them before they go bad.”

I tried to hide my laugh, “So what is the paper supposed to be about?”

“He didn’t really say,” she said tossing her backpack on the table with a bang. “He didn’t give us a prompt. He didn’t give us a question. He just wants a paper about economics. I suppose that I can just write about strawberries.” She thumped down in her chair and stared at a corner of the room.

“Strawberries sound delicious, but boring,” I replied. “How about you write about something more interesting? Maybe the Two Santa Claus Theory. I’ve been meaning to tell you about the theory since last Christmas. It’s is all about economics, and it still gets debated to this day.”

“I might write about it, if I knew about it,” she countered.

“Shall we begin with a story?”

“Whatever.”

“The year was 1929. Huber Hoover was president. He came into office during the Roaring Twenties, when the United States economy for anyone who had money was fabulous. But on October 29, 1929, the stock market crashed, banks closed so people couldn’t access their savings, and the people who had invested in the stock market suddenly had little to nothing. They couldn’t employ their employees. Those employees soon lost their living and homes. They began to live in camps that they ironically called Hoovervilles.”

“And that’s when people elected Theodore Roosevelt,” she said sourly.

“Theodore Roosevelt?” I repeated back in shock. “Absolutely not! They elected Franklin Delano Roosevelt. Franklin and Theodore were fifth cousins, decades apart. They might have shared the same name, but they had very little in common when it came to governing. FDR created the New Deal, and in case you don’t know what that is, look it up.”

She grudgingly did so and found this:

The New Deal was a series of programs, public work projects, financial reforms, and regulations enacted by President Franklin D. Roosevelt in the United States between 1933 and 1938. Major federal programs and agencies, including the Civilian Conservation Corps (CCC), the Works Progress Administration (WPA), the Civil Works Administration (CWA), the Farm Security Administration (FSA), the National Industrial Recovery Act of 1933 (NIRA) and the Social Security Administration (SSA), provided support for farmers, the unemployed, youth, and the elderly. The New Deal included new constraints and safeguards on the banking industry and efforts to re-inflate the economy after prices had fallen sharply. New Deal programs included both laws passed by Congress as well as presidential executive orders during the first term of the presidency of Franklin D. Roosevelt.

Source: https://en.wikipedia.org/wiki/New_Deal

She focused in on the SSA part of the article. “So that’s where Social Security comes from? The New Deal?”

“Yes, Social Security was an agreement between those who had jobs, and those who couldn’t find jobs because there were no jobs at the time. It basically said that I will agree to loan the government a certain percentage of my income to help us lift ourselves up, create jobs, build the economy, supplement health care, and be sure our fellow citizens didn’t starve in a Hooverville. In exchange, when and if I am unable to work, the government will begin to return that loan so that I don’t end up in a Hooverville myself.”

“I’ve never heard it explained that way.”

“No, these days, Social Security is called an entitlement, because you know, only those who have paid into it for years are entitled to a repayment,” I snorted. “But that was only one part of the New Deal. FDR helped to create jobs. He got us through World War II. He was the only president to be elected four times, and when he passed away in office the whole country mourned him like family.”

“But Presidents can only serve two terms? How come he got four?”

“Because he was President before in 1951. It wasn’t until 1951 that Congress passed the Twenty-second Amendment, which term limits how long Presidents can hold office. In fact,” I half laughed. “It was probably because FDR had been elected four times that Congress decided to term limit the Presidency. They didn’t want one man to have power that long.”

“So what does that have to do with a Santa Claus Theory?”

“It’s called the Two Santa Claus Theory,” I corrected. “And it was proposed by dude named Jude Wanniski in 1976. He basically said that the Democratic Party had become so popular and unstoppable because it was perceived as Santa Claus, giving out gifts to those in need. He pointed out that Santa Claus was able to do all this giving by keeping taxes on the richest high. During WWII, the income rate for high income earners was 94 percent. During the the 1950s, 1960s, and 1970s, the top federal income tax rate never dipped below 70 percent. In his article, Jude Wanniski proposed a new strategy. He suggested that the Republican Party become a second Santa by offering to lower taxes. The Republican party ran with his strategy and soon the era of ‘No new taxes, trickle down economics, and compassionate capitalism’ was born. Those talking points helped put Reagan into power after a decade of Nixon, Ford, and Carter.” I looked into her confused face and added, “Hang on. J.P. Burnbach explains it better…”

“Hum,” she rumbled after watching. “Seems like a better subject for a political science class than my economics class.”

“Well, to be honest, even though Mr. Wanniski was a journalist and commentator, he was mostly known as a political economist. He studied how various economies affected politics, and how politics affected economies. You could write about that.” She still looked uncertain, so I added. “Or you could just write about how the supply and demand of strawberries influences the cost of strawberries. I mean, it is after all, only forty percent of your grade.”

She gave me the dirty look I deserved. “I suppose I could focus on how increasing taxes and decreasing taxes influences the economy,” she eventually admitted.

“Sounds like you might actually have to do some research and learn something,” I said, and got another well deserved dirty look.

“I don’t suppose you have a few places where I could begin,” she glared at me.

“Well, I do love a good pro/con paper. One where you state both sides of an argument without taking sides. Why don’t you start by actually reading Wanniski’s editorial? Then you could read a couple of articles in favor of his thesis and against his thesis. After you have done that, you can decide what you want to say about it in your paper, or decide if you need to do more research. I think that might be a good starting strategy.”

“I think it sounds like a lot of work,” she complained.

“Forty percent of your grade should require a bit of work,” I reminded. “Too many people start writing without knowing what they want to say. In the end, they say nothing new or worthwhile. Developing a strategy before you begin writing always takes time. That’s why it’s worth forty percent of your grade.”

“Give it a rest,” she informed me darkly. “I will do the research. I will write the paper. Doesn’t mean I have to enjoy it.”

“Makes me sad that you don’t enjoy it. Understanding how the world works around you should always be enjoyable.”

“These days it just makes my heard hurt.”

“That’s because you have been paying too much attention to your navigator, and not enough attention to your explorer.”

“What?” she looked up disgusted.

“The navigator is one part of your mind. It’s the logical, reasonable part of your mind that follows rules, write perfect reports, and keeps you on course. You also have an exploring part of your brain which often sends you down the wrong path because it’s job is to explore new paths, many of which lead nowhere. But every so often, they lead to something wonderful. Experts often call it your left brain and right brain; your ability to see logic versus your ability to create. But that is a misnomer. The two parts are not separate. They are intricately entwined. In order to function, you need to pay attention to both. I suspect that you have been neglecting one.”

“You’re talking about your four brothers, and your three headed man, aren’t you?”

“If you are referring to the four brothers in my first book, and the three headed character in my second book, you’re correct. And don’t give me any flack about my three headed man. I came to love that dude, and I think he explained the principles of strategy very well.”

“No, I liked him too. He was funny,” she almost smiled. “It’s just reminding me that this week we’re supposed to be focusing on strategy, and here I can’t even come up with a strategy for a stupid economics paper.”

“It’s like I said,” I jumped in. “You need to spend some time with your explorer. If you don’t like my idea about the Two Santa Claus Theory; fine don’t use it. Explore some things about economics that do interest you. Ask some questions and explore some answers. How did covid effect the economy? How did the stimulus checks effect the economy? What’s the difference between a socialist economy, a communist economy, or a capitalist economy? Shoot, you could even look at how artists like Taylor Swift can effect the economy. Or sports. How do sports effect the economy? I mean, your choices are only limited by your unwillingness to explore, and work only becomes boring when you don’t allow your curiosity and creativity a little room at the table.” I took a deep breath and added one last thing. “Once you have discovered an idea that actually arouses the explorer inside you to ask questions, you can let your navigator come in and edit your thoughts, but not before. Never before.”

We sat for a while as I let her take in my words, when she unexpectedly asked, “Did Einstein really say that imagination is more important than knowledge?”

It took me a while to realize what she was asking. “Yeah, he really did,” I finally nodded. “He also added, ‘For knowledge is limited, whereas imagination embraces the entire world.’ It was in a 1929 interview that he gave to George Sylvester Viereck for The Saturday Evening Post. The article was entitled, What Life Means to Einstein.”

“I suppose I have been focusing on how much I hate the class instead of what I can learn from it,” she finally admitted.

“Why did you even take the class?” I was suddenly curious.

“I filled a requirement and was the only thing that fit into my schedule.”

“Bad place to begin,” I said. “So what do you want to do now?”

“I suppose I need to start asking more questions.”