Gambling, Risks, and Bail Outs

Whenever I get together with my in-laws the guys wind up playing poker. It's strictly a fun game with no money involved. We divide up the chips, and if someone runs low someone who has more will give him some. At the end of the game the chips all go back into the box, and we really can't tell who did well and who did poorly. I find that in these games I am much more likely to stay in a hand I shouldn't, or I'll ride a hand much longer than I should just in case something good happens. I'm not above chasing an inside straight. Every once in a while I pull a hand out of the trash, but mostly I end up donating my chips to one of my in-laws. It's all in fun, I've got nothing to lose.


On the few occasions I've played poker for money I play very differently. I'm much quicker to fold a bad hand, or even a fair hand if people are raising. There have been times I've folded hands I would have won had I stayed in, but for the most part if I stay in the hand I either win or come close to doing so (the most expensive poker hand is always the second-best one). In short, when I play for no stakes I don't do well, but when I have a stake in the game I generally come away at the end of the evening with more money than I started with.


Businesses work the same way, they make decisions based upon risk and reward. A poor decision can end up costing a company lots of money and may even cause the company to go out of business, therefore companies spend a lot of time and effort in analyzing risks and weighing them against potential rewards. Successful companies do this well, less successful ones are the ones for whom stock certificates are now collectables instead of having value as a share in the now non-existant company. This system mostly works.


The balance gets thrown off when a company is deemed "too big to fail". Those companies are just playing for chips, if they win they reap the rewards, if they fail they get bailed out at taxpayer expense, so they'll take much bigger risks than they otherwise might. If there's no consequence for failure there's no sense expending the effort to analyze the risks, just try it and see what happens.


The funny things is, just as in my poker example above, paying more attention to the risk/reward balance leads to more success, not less. If a company is truly too big to be allowed to fail it's also too big to be permitted to risk such failure, and the only way to ensure they don't fail is to maintain failure as a possibility. I know, that seems counter-intuitive, but removing potential failure from the possible outcomes makes ultimate failure that much more likely.


So let's stop bailing out companies. Let's let them go bankrupt, they (or whoever buys up their assets) will come back stronger and better afterward. The alternative is a nation full of unsuccessful companies supported by taxpayer money.

What Government Is

I'm sometimes asked why I take exception to government controlling, well, just about anything. This question generally comes from people who hold a very different view of what government is than I do, so from their standpoint it's not an unreasonable question. To offer my view of what government is, allow me to quote someone who was much wiser than I could ever hope to be: “Government is not reason; it is not eloquence. It is force. And force, like fire, is a dangerous servant and a fearful master.” That was the view of the very first person to hold the title of President of the United States, George Washington.

Don't believe me? Let me offer you a scenario: Suppose I decide (with no input from you) that you owe me a sum of money each year, let's say $12,000 for a nice round number. I send you a letter to the effect that you much remit to me $3,000 each quarter, by a date I determine. If you fail to do so I begin collection proceedings against you, taking your savings, your paycheck, or taking over ownership of your home. If you resist I send a group of heavily armed men to your home in the middle of the night, they break in your door, kill your dog if you have one, tie you up, drag you from your home and lock you in a cage until such time as you agree to pay the amount in question, with penalties for late payment. If you resist this intrusion into your home you will be shot and likely killed. If I did such a thing I would be thrown in jail for (at the very least) breaking into your home, assault, and kidnapping if not murder.

Try not paying your property taxes sometime and see what happens.

Government maintains a monopoly on the proactive use of violence to enforce its will. No matter how reasonable the government's request, no matter how eloquently the request is delivered, that request is backed up by the iron fist of force. As far as I'm concerned the fewer aspects of my life government is permitted to bring that force to bear upon, the most comfortable I am.