As the faithful readers of this blog can attest I have been an ardent fan of Brazil and Brazilians before it was obvious that the country had "emerged." As I wrote in April 2007 in Is it Brazil’s Time? the running joke about Brazil had been that Brazil was the country of the future and would always be the country of the future. The evidence is now so clear that even the doubters can be heard to say that "O futuro e agora" — the future is now. So it is with some reservation that I offer my latest thoughts about the country on my way home from another wonderful visit.

Many things have not changed: The warmth of the people; the beauty of the beaches; the oily kick of the cachaca and the infernal traffic of Sao Paulo. However for the first time in 50 years of travels through Brazil I detected a faint tone of worry. While the general sense of optimism is still intact there is a distinct undertone that the exceptionalism of Brazil may be fading. Of course the recent official confirmation of a less than spectacular GDP growth of 2.7% in 2011 did not help nor did the year’s 20+ percent decline in the BOVESPA Index but the worries run deeper.

In numerous conversations with friends in the market they raised the sort of issues that one hears regularly in New York or London: Excessive taxation job-stiffling regulation a lack of skilled employees a broken education system a failure to make required investments in infrastructure etc. I did not interpret these complaints as signs that Brazil was returning to its bad old days of cycles of boom and bust — quite the contrary. It appears to me that Brazil has matured to the point that the challenges facing its government and business leaders are no longer run-away inflation risks to democracy or widespread labor unrest. Rather they are the everyday challenges of modern fully emerged economies — how to sustain growth finance desired social programs such as education and a minimum safety net all the while balancing populism and good policy in a robust democracy.

Some will lament this fall into normalcy and indeed some commentators have suggested that Brazil be kicked out of the "BRICs" grouping of high-growth markets. I think this is wrong on two scores. First most Brazilians themselves will admit that the country still has a long way to go to reduce poverty and crime eliminate official corruption streamline its tangled web of regulation and improve education — not to mention complete the stadiums and infrastructure needed to host successfully the 2014 World Cup and 2016 Olympics. Second I believe that Brazil will continue to grow at attractive rates compared to other Western markets. The ride will not always be a smooth one and the path may take its swings and roundabouts but the destination is not in doubt.

[Full disclosure: I have investments in and relating to Brazil that could benefit from positive investment sentiment towards the country.]

I have been making the trip to the not so quaint town of Davos Switzerland for over 10 years to attend the annual World Economic Forum and 2012 was no exception. Once again Mid-East peace was not achieved; global warming was not halted and the haves and have-nots were not reconciled. What was exceptional was the snow which lay round about so deep and crisp and even that even good King Wenceslas would have quit the stuffy Conference Center and put on skis. What also stood out for me was the (re-)emergence of Germany as a key political and not just economic power.

To recognize the importance of Germany is hardly original. Last century the nation emerged from two world wars and one long divisive cold war as a modern industrial power. However politically in recognition and self-conscious of this painful past Germany had tended to punch under its weight – in fact pulling its punches. While the country still balks at military engagement given its past Germany has been thrust on center stage by the Euro crisis. It is at least economically the last man standing. How fitting then that it is a woman who grew up in the former East Germany who is now leading the return to prominence of the united Germany. While she has attended past sessions of the WEF she and her country always seemed to prefer to leave the spotlight to flashier players including Sarkozy Putin and Blair. In 2012 Chancellor Merkel and Germany could no longer duck their leading role.

Having not met her in person before I was not sure what to expect of the Chancellor having heard contrasting views expressed about her from "boring haus frau" to "the most impressive leader in Europe." I came away from a small group meeting with her more in the latter camp. She speaks simply and directly and with a conviction which appears genuine. Merkel made two key points concerning the role of Germany in Europe and its financial crisis. First that the German nation had already contributed more than its fair share to preserve the Union and support its weakest members. Second that it was not stinginess on the part of the German Volk which held the government back from just writing one large check to bail out Greece but rather a well-reasoned economic policy aimed at securing the long-term fiscal health of Europe.

Chancellor Merkel’s core point more a pragmatic than a philosophical one was that Germany would be doing Europe no longer-term favor if it simply trashed its strong credit rating to bail out its profligate neighbors. So like the tough love that a parent shows in not bailing-out her irresponsible offspring after a late night drunken joyride so too must Germany preserve its firepower for the trial to come — not so much to teach a lesson as to retain the ability to support the family. She delivered these remarks in a matter-of-fact non-lecturing manner which already set her oratory apart from many of the politicians who flock to Davos.

Indeed the German model deserves a greater following not only for its economic soundness of preserving higher paying manufacturing jobs but also for its related political focus on preserving a large well-educated middle class. While the current Chancellor is now enjoying the political clout that accompanies a strong economy (viz. the Roman British and American empires) it is her predecessor Gerhard Schröder who also deserves credit for having courageously pushed through his Agenda 2010 economic plan including the unpopular Hartz I-IV labor reforms. I remember thinking at the time (2003) that such an elongated timetable lacked any great sense of urgency; however Schröder’s thanks from the German electorate for the policies which would eventually immunize it from the EU crisis was to be voted out of office in 2005. So while German politics may as elsewhere punish those who administer harsh medicine before the fever rises it is difficult not to admire what the country has achieved over the last half century.

Upon my return from Davos to New York I decided to put off the Mandarin lessons and learn German instead.

This post has been a long time in the making and for good reason. Don’t get me wrong; it did not take long to write as I believe firmly in these ideas and the words came easily but it took me a long time to overcome the many good reasons I have always come up with for not expressing myself publicly on the controversial topic of executive compensation.

My reasons for shying away from this topic have been numerous. First as the chief executive of a public company I have been on the receiving end of a large amount of executive compensation and therefore I have always believed that my thoughts on the subject would be viewed as inherently biased and perhaps they are. Second this issue has become so politicized that the sensible among us don’t wish to raise their heads above the parapet preferring to duck criticism stay under the radar and continue to collect pay. Finally while I believe that the free market allocates capital and labor more efficiently than any other system I worry that many western economies are hollowing-out their middle classes through policies which are creating a richer and smaller super class and a poorer and larger underclass; a highly paid executive class only exacerbates this trend.

So with these caveats in mind my central thesis is that attitudes on or regulation of executive pay are fundamentally political and not economic in nature and while there is nothing wrong with having a political approach to compensation few if any of the active voices on the subject admit that they oppose free market economics.

There is a market for executive talent just as there is a market for tomatoes or electricity. The market is less liquid and the supply seemingly less fungible but there is a market price established nonetheless and plenty of pay consultants willing to provide the data. While there is some valid criticism of the role of pay consultants and the board compensation committees they serve most objections to executive compensation boil down to three factors: (i) the excess quantum of pay (e.g. bankers in general); (ii) the context in which the pay package is awarded (e.g. "payment for failure" or payment despite a government bailout) and (iii) the form of compensation (e.g. stock options vs. performance-restricted stock or "bonus" rather than base pay (really factors (i) and (ii)) masquerading as (iii)). I will address each of these more mechanical issues below; however the core of the pay issue remains political for me — and there is nothing wrong with that if declared openly and applied consistently.

Let us imagine that there is a well ordered democratic society which has elected to protect and grow its middle class by constraining the distribution of income wealth and other resources among its citizens. And let us suppose further that in lawful democratic elections it has voted (directly or through the election of like-minded representatives) to limit the spread of income to a ratio 5 to 1 — I.e. the most highly compensated worker may not earn more than five times the least compensated one. Let us also assume that we can solve or at least ignore the myriad problems of calculating this ratio (e.g. compensation in cash vs. difficult-to-value securities full-time vs. part-time employment etc.). Finally let us make sure that these rules apply not just to managers in public companies but to private companies hedge funds and all other forms of collective enterprise and that we tax the inheritance of all forms of wealth as well at (say) 90%. Taken together these measures would narrow the distribution of income and wealth in this society. Perhaps surprisingly I support the right of any lawful democracy to choose such an honest and direct way to promote a more egalitarian society. Now a totally separate question in a world of free choice and labor mobility is whether I Tom Glocer would choose to live and work in this society or move to another country where the free market for labor and capital was less constrained. It would in fact be an interesting socio-economic experiment to conduct. Would this 5-to-1 limited nation produce any less GDP or would its citizens have any lower standard of living over time? There is one such experiment underway in a very big laboratory – – China — but they are going in the opposite direction (from communism to a more market-led economy) in an effort to stimulate sufficient growth to raise the living standards of their large population.

What I like about the foregoing example is that it lays bare the choice of income and wealth distribution as a legitimate political one without resort to the sort of demagoguery we hear from our politicians such as "saving capitalism from itself" and other misguided pious phrases. The genius of the free market is not that every distribution it makes is a "fair" one but that on balance it does make more "good" decisions (allocations of capital and labor) than "bad" ones. Let me be clear: I believe in free markets because I believe they create a bigger pie for society at large; however I also believe that there is a role for government to tax the beneficiaries of these free markets to provide a social safety net for the poor the elderly and the infirm and to promote quality education which enables social mobility.

Now let me turn to the criticisms of executive compensation I listed above.

(I) The Quantum of Pay — or just too much pay. I don’t really know how to react to this criticism other than the political choice I outline above it is an inherently political and non-economic argument. How much is too much? I used a 5 to 1 ratio in my example above but this is an arbitrary choice; it could be 7 or 10 to 1. If we believe in housing markets commodities markets and stock markets there is no inherent economic reason to object to the market for executive or other labor. I don’t like to pay more in the supermarket for tomatoes than the market price; I don’t want to overpay for executive talent either.

(ii) The Context of Pay —payment for failure etc. This again is a political consideration. The board of directors of a company sets a compensation policy in advance and negotiates to employ a given executive. Later on the environment changes and raises questions about the "appropriateness" of the bargain struck. Should we honor the contract? I don’t see why not. There is a very current and voluble example in the UK. Stephen Hester was hired by the board of The Royal Bank of Scotland to turn around the bank after the UK government had to acquire a majority of the equity in the bank to prevent its failure. Hester was not employed by RBS prior to its bail-out and appears to being doing a good job fulfilling the mission he was hired to perform. Yet the proposed payment of a sub £1m bonus to Hester (in RBS stock no less) was the subject of a two week government and media attack culminating in his waiver of the bonus. For this act of political fealty we can assume Mr. Hester will receive the knighthood that his predecessor Fred Goodwin has had rescinded but the whole episode smacks of scapegoatism and political theatre and is unlikely to motivate the next talented executive to take on such a difficult challenge.

(iii) The Form of Compensation — or we"ll tell you how. There are many examples of this. I will pick two. First there has been a strong line of attack in the RBS – Hester debate in the UK that a bonus should only be paid for truly extraordinary performance and that in all other cases of good or very good performance only the basic salary and benefits should be paid. While this may be a straightforward definition of the word "bonus" it does not fit the way in which banks all over the world have made their compensation a more variable expense typically by paying a smaller portion of overall compensation in the form of fixed salary and the remainder (often a multiple of base pay) in the form of a year end lump sum or "bonus." For a cyclical industry in which labor is the highest cost input this is a sensible way to set pay. Moreover now that many banks have been forced to raise base salaries and pay less in bonus they will need to fire more staff rather than trim the bonus pool in down markets and this appears to be taking place. There is a separate and valid criticism of bank bonus culture — that it may have contributed to the financial crisis by encouraging excess risk taking; however this can and is being addressed through mechanisms such as paying the bonus in the form of stock which needs to be held for several years and contractual clawbacks to recoup payments if the accounting was manipulated. In either case it is the Board acting through its remuneration or comp committee that should set the quantum and form of pay on the basis of a complete picture of the objectives of the bank the market for executive talent and the potential risks and rewards associated with various forms of compensation.

Second the corporate governance elite a high political priesthood if there ever was one has ordained that stock options are not to be included in executive comp packages unless subject to a special performance condition. First let me be clear that I do believe that outright stock grants should be subject to some performance condition other than just the executive remaining breathing at the stipulated vesting time because this pay mechanism constitutes a transfer of shareholder value equal to the full price of the stock on the date of grant plus it is hoped further appreciation. There are some exceptions when purely time-retricted stock are appropriate but I will skip over them here to stick with the central argument concerning options. By standard definition stock options only deliver value to the holder if the underlying common shares increase in value over the stated exercise price (typically the fair market value on the date of grant). Thus there is a built-in performance condition in options – namely that the share price go up. This is generally thought to be a good thing; however the corporate governance elite not apparently believing that good management has anything to do with the movement of share price now insists that an additional condition or trigger be met (e.g. that the Total Shareholder Return (capital gain and dividends) exceed some benchmark). While this appears innocent on its face it can lead to perverse results. Let us imagine that the market for a given executive indicates that I should pay $1 million to hire her and that I choose to allocate this sum $250k in salary; $250k in annual bonus; $250k in restricted stock (subject to a performance vesting condition such as ROIC or EPS growth) and $250k in stock options. If I am forced by prevailing corporate governance norms to impose an additional performance condition on her options standard Black-Scholes (or any other economically-sound) methodology tells me that the grant will now be worth less than $250k (because of the additional condition imposed) and I will now need to issue more pieces of paper (say $300k in nominal options) to deliver the same value to the employee. In my experience this is a lose-lose–lose as the employee is worse off (she values the options less because of the uncertainty associated with their vesting and the loss of the clear line of sight provided by the share price alone) the company is worse off (because of the complexity and cost of administration as well as the productivity loss from a less well motivated executive) and the shareholders are worse off (because of the equity dilution necessitated by the additional options). When it comes to executive compensation Einstein had it right: "Make everything as simple as possible but no simpler."

So my core message is that restraining executive pay (or football star pay or actress pay for that matter) is a perfectly sensible political decision for any democratic society to make but don’t confuse it with sound market economics. Pay should be based on performance and its quantum and form should be left to the board of directors to determine based on market supply and demand and the goals and strategy of the enterprise. If you don’t trust the Board to exercise this core function why trust them to spend shareholder money on large capital investments acquisitions or marketing? Vote them out of office if you doubt their competence; don’t try to do their jobs for them one step removed.

You can choose Karl Marx or Adam Smith but not both at the same time.

I find it amusing that the increasingly desperate Romney-chasers among the remaining US Republican presidential candidates are working overtime to attack the front-runner for his leadership of Bain Capital in the 1980s and 1990s. While not a blind supporter of the private equity industry I actually find Mitt’s business experience one of his more attractive attributes.

There is a serious debate to be had about the social utility of the private equity business and the tax incentives which encourage riskier PE capital structures in particular. However the attacks unleashed by Newt Gingrich Rick Perry and others have eschewed such policy-based criticism in favor of a more populist anti-free market attack. This is ironic given the Hayek-style belief in free market capitalism that has dominated Republican politics since the Reagan revolution of the 1980s. The core of the Gingrich/Perry attack is that private equity is all about firing American workers to line the pockets of "vulture capitalist" financiers like Mitt. While the job destruction or at least job export criticism merits critical analysis (not likely in this election cycle) the data I have seen suggest that for every job eliminated PE-backed companies create at least as many new jobs — and not menial ones. This is "creative destruction" as envisioned by Joseph Schumpeter in its most concentrated form.

What private equity firms (and for that matter all good investors) do pursue is the competitiveness and efficiency of their portfolio companies. This often includes reducing labor costs as a percentage of total revenues but as growth is achieved new jobs are also created. Indeed the central fallacy of the politicization of the PE debate is the insinuation that respectable firms like Bain somehow seek to ruin and bankrupt companies for the sheer pleasure and greed of the sport. This has not been my experience. What these firms are organized to deliver for their pension fund and other institutional investors as well as for their operating partners is the maximum return on investment achievable at an acceptable level of risk (more on this below). This core free market goal results in an efficient allocation of capital and labor – often more efficient than the internal allocation mechanisms that operate within large corporations. Thus a private equity buyout or significant equity participation often acts as a catalyst or concentrating force enhancing the economic performance of the enterprise.

Now all is not perfect in the PE universe. There are potential negative externalities – in particular the allocation of risks and rewards (abetted by US tax policy) that tends to favor greater risk taking and provide less margin for error in down markets. In brief private equity professionals typically have more to gain than lose financially from increasing the variability of returns from a given investment. Let’s see why. First as with most corporations PE-backed companies benefit from the deductibility of interest payments on indebtedness — this encourages more leveraged structures by lowering the cost of debt versus equity financing. Second income earned by PE sponsors in the form of a "carried interest" on the overall gains of their funds (typically 20% of total gains) is currently taxed at favorable capital gains not at ordinary income rates. While there has been a raging debate as to why US tax policy should favor this form of employment income over wages my goal here is limited to noting that this favorable tax treatment tends to amplify the incentive already created by the asymmetrical carried interest reward mechanism to seek the highest return on equity – typically but not exclusively by taking on the maximum debt lenders are prepared to commit. When a portfolio company goes bust the PE sponsors lose their often substantial personal invested capital in the deal alongside their limited partner investors and they earn no carry on that investment; however they do not pay a 20% "negative" carry to their investors. At most they risk having to give back the positive carry earned on prior winning investments and they potentially incur a repetitional hit which can hinder future fundraising. However when portfolio companies succeed and the overall fund achieves positive returns the sponsors earn their substantial carried interest (even taxed at a favorable rate as we have seen above). This asymmetrical reward structure resembles a call option on the upside of the investment portfolio and classical options pricing model tells us that the holder of an option benefits from increasing the variability of the returns on the underlying investment (I.e. the value of an equity call option increases as the beta of the underlying common stock rises).

I delve into this somewhat esoteric detail only to point out that there is a reasoned economic criticism that can be leveled against private equity. Namely that it tends to increase the riskiness of the economy by encouraging the substitution of debt for equity as a result of the asymmetric reward structure and tax advantages afforded this form of ownership. However the analysis must not stop there as private equity also enhances the efficiency of its portfolio companies and often provides badly needed growth capital when other more risk averse investors are unwilling to fund.

In withdrawing today from the race for the Republican nomination Jon Huntsman declared that the party must return to being the "party of ideas." All I can add is that this would be a welcome change.

I write at the end of a wonderful two week holiday with the family. I would be interested to hear from the readers of this blog as to whether any of you have ever had the following thought. When a long vacation begins I often feel like time has slowed down and that I have a seemingly limitless number of pleasure-filled days ahead of me. However lurking behind the fore-knowledge is already there that this holiday like the others before it will come to an end. As I pass the mid-point of the trip time seems to accelerate and I soon find myself on another airplane home. Is this not a metaphor for life itself?

I recognize how fortunate I am to be able to take a vacation with my family and any sadness I feel at trip’s end is tempered by a true sense of gratitude and privilege that we can afford such luxuries at a time when all too many parents struggle to keep a job and a home and to provide for their children. However because up to now I have had limited vacation time away from a demanding job the parallel between the length of a vacation and the span of a lifetime is an interesting one to me.

I see through my children’s eyes and recall my own feeling that time seemed to move very slowly through life’s first phases. However little by little as responsibilities multiplied and those small aches of middle-age set in the passage of time seemed to accelerate. The French Existentialists understood this and wrote in fiction and essay form of the way in which man’s knowledge of his mortality (and the arbitrariness and absurdity of this condition) changed the nature of the arc of life toward that end.

The goal I have always pursued in my life is not to pretend that I have an infinite time on earth (or on a far lesser scale that a nice holiday will last forever) but to not let the certainty of an ending compromise the quality of the experience in the meantime. Viewed in this way endings are not to be feared but rather add to the intensity of and appreciation for the time we have.

Debt and equity are common terms from the financial world but I argue below we should begin thinking of our politics in this way as well. Debt is commonly defined as an obligation (usually to repay money) owed by one party to another. As such its terms are usually fixed establishing a moral and legal obligation to repay a sum certain. Conceptually debt permits the borrower to anticipate future purchasing power in the present before it has actually been earned. Equity by contrast is a more free-form ownership claim on the residual value of an enterprise or asset. If the debts of a company are too great the company may go into default and breach its debt covenants; however the terms of its equity are not violated per se; the equity is just not worth anything.

As I have been arguing for several years in this blog and elsewhere the developed world has taken on way too much debt — too much current spending that has not yet been truly earned and will need to be funded somehow by our children. Our politics have been similarly ossified. The so-called Super Committee in the Unites States was given the mandate by Congress to find at least $1.2 trillion in savings by the Thanksgiving recess or mandatory budget cuts would automatically go into effect the following year. While painful but viable budget plans are available — most notably the $4.2 trillion plan that Erskine Bowles and Alan Simpson led — neither the Not-so Super Committee nor the greater Congress appears able to achieve any form of sensible compromise. In other words all the positions taken are debt-like in their rigidity.

The clearest example of this is the "No New Taxes" pledge made by many House Republicans and the similarly inviolate commitment made by many Democrats not to limit entitlement programs like Social Security or Medicare in any way. This is despite the fact that federal taxes are at their lowest levels in a generation on the one hand and that we are living longer (and therefore consuming more healthcare and pension benefits) on the other. These intransgent political positions take on the nature of debt obligations — even the campaign language speaks of "No Tax Pledges."

The public policy debate on non-economic issues is similarly ossified. The erudite lawyer and campaigner for the common good Phil Howard has argued that we have created so many legal rights (think debt obligations) that public officials are no longer able to act in the interest of the greatest common good (think pubic equity). Like a borrower hemmed in by its debts the current public servant school principal or judge has limited discretion to pursue the greater public good.

Europe is of course not immune to this phenomenon. I write this piece airborne (as usual) en route back from Brussels where the leaders of the Eurozone have once again failed to tackle the fundamental economic problems facing their 27 member states. A crisis has been brewing for years in Europe because the core members of the common currency have locked themselves into a one size fits none currency; taken on way too much sovereign debt (especially at the Southern periphery); and refused to countenance any form of debt relief or debt-for-equity swap. This is just the "balance sheet" problem. In addition rigid labor trade and other rules have sapped economic growth in the least flexible markets and not provided the ability to afford the level of ongoing social benefits (think debt-like present consumption entitlements) that politicians have promised for years.

Asia ex-Japan is the obvious exception to the debt straight jacket of the West and indeed much of the sovereign debt that does not sit recursively on the books of Western banks is owed to China and other new powers amassing huge foreign reserves. While certainly better off on a relative basis these emerging powers are not "decoupled" from the indebted economies and with rising wealth they are also feeling the pressure to begin social spending programs on health education and pensions.

To me there is only one long-term solution as opposed to the serial kicking of the can down the road so beloved of politicians (i.e. keep spending and let the person elected next term solve the problem). We need to return some equity-like flexibility to the system; to make more of what is now fixed variable; and to create the conditions for true economic growth (and concomitant job creation) that ultimately lifts standards of living. So when you hear the word "debt" think rigidity fixed entitlement and mortgaging our children’s future. And when you hear "equity" think freedom growth and allowing our children to enjoy the fruits of their own labor. I think Mariana and Walter deserve no less.

I’ve been thinking a lot lately about the following issue: Why does it seem so difficult to turn sound economic policy into political action (i.e. results) in the United States and other established democracies? There are many versions of this complaint. So for example why do American Congressmen insist on playing an adult variant of the game “Chicken” when addressing the national debt ceiling? Why has the EU been unable to get ahead of the markets in dealing with the Greek crisis? Why has such a rich and productive nation as Japan been unable to rekindle growth across two decades?

I have come to an uncomfortable conclusion. Democracy works a bit too well these days and we are receiving the government we deserve. For me this is linked to the parallel yet related phenomenon of why quality journalism at least in the form of broadsheet newspapers and broadcast news has been drowned in a murky sea of tabloid celebrity worship and “reality” television. Amid Dancing with the Stars Celebrity Apprentice and The Bachelor is it any wonder that democracies are being starved of the intellectual oxygen needed to create an informed electorate. It is not that serious journalism including I would argue that produced at Reuters News (but also at other organizations and by individual bloggers) does not exist but that these are being narrowcast to a small elite. We get the government we deserve in part because we get the media we deserve.

In The Politics Aristotle wrote that he did not fear for the State because the great and the good would always come forward to govern since they could not abide to be led by lesser men In our more selfish contemporary civilization I don’t believe we can count on this noble elitism nor should we. However we are then faced with the responsibility as citizens to inform ourselves sufficiently on the serious and complex matters of public policy so that we can exercise the vote effectively. Thus we have a choice: Revel in our couch potato ignorance and allow an educated elite directly or indirectly to govern. Or educate ourselves sufficiently to make wise political choices — principally by electing the right candidates for the right reasons.

Why does it appear that things have gotten suddenly worse? Why has the political paralysis gotten so bad of late in established democracies that serious liberal commentators sound downright wistful about the ability of the Chinese State to turn policy into action? I think there are two main reasons. First the longer we have allowed problems to build up the longer-term the solutions must be. This is always a challenge in a democracy as we must rely on our elected representatives to adopt policies which are likely to only yield returns beyond the next election. This is even more the case when as today current term sacrifices are required only to restore reasonable fiscal balance in the future. Second the amazing advances in technology over the past two decades (principally the internet) have further shortened the feedback loop and encouraged politicians to respond to shorter and shorter term influences. Finally while populism is hardly a new phenomenon among politicians the political elite (think UK civil service “mandarins”; US Senators and Cabinet officials: etc) is losing its ability to influence policy out of the glare of the “always on” You Tube digital media.

Returning to the role of the media it is fashionable to blame the mogul-owners for pandering to the lowest common denominator and thereby intentionally leading a downward spiral in public discourse. There may well be some truth to this and scandals such as phone-hacking in the UK add support to this argument. However I believe this unduly absolves us all of a collective and individual responsibilty we should have as citizens of the modern democracy. By and large media companies are pursuing a profit motive (especially when publicly owned) and thus are publishing and broadcasting the material they believe will sell to the broadest audience. This is particularly true in an advertising supported model. As such these companies are really holding a giant mirror up to the public at large. If we don’t like what we see in the mirror we should each do something about it; arguing that the person holding the mirror is aiming it downwards is an abdication of personal responsibility.

There is only one solution for better government: Demand the information needed to evaluate complex policy decisions and vote the pandering demagogues who only play sound bite politics out of office. We deserve no less.

Over the summer two seemingly unrelated developments caught my eye. First a collection of Continental European officials urged their governments to ban the short selling of securities. Second a member of Parliament called for the ban of Twitter and other social media to combat violent street protests. Am I the only one who detects a Luddite link?

I am no fan of falling securities prices (especially the stock of my company); however banning short selling will not stop market forces from reaching a new equilibrium valuation. If the goal is to protect against run-away algorithms or short-term order imbalances then a sensible policy response is to introduce market circuit breakers which halt trading in a class of securities or single instrument in the event pre-established boundary limits are reached.

As for Twitter the case is even stronger. Attempting to ban communications facilities just because they are new and potentially "scary" to neophytes is a similarly blunderbuss approach. Should we ban wireline telephony because it can be used to order an assassination? In the 19th Century a group of English textile workers who came to be know as the Luddites sought to ban the introduction of new wide frame textile looms because they threatened the old artisanal ways of weaving. Perhaps the world would be a more bucolic and leisure-filed place had they prevailed but we would also not have benefitted from 200 years of scientific advances in areas such as vaccines and transportation.

I do not mean to suggest that no regulatory limits on either technology or financial markets are ever appropriate. Sensible capital requirements disclosure rules and circuit breakers are well-established ways in which to channel capital markets and rules which ban texting while driving and wireless telephony over military frequencies are also in the public interest. However had Louis XIV outlawed the guillotine I doubt the French Revolution would have been any less bloody [Frederic points out below I should have cited Louis XVI instead].

There are enough real policy challenges to be tackled let’s not invent fanciful new ones.

Apologies for not having posted in a while — it’s been a busy summer. I did manage to spend time with the family play some decent tennis read a couple of good books (Feast of the Goat by Vargas Llosa and Cutting for Stone by Verghese) and watch the occasional film.

One of these films Woody Allen’s Midnight in Paris got me thinking beyond the pretty images of Paris. In the movie the principal characters look beyond the considerable charms of contemporary Paris to idealize an earlier "Golden Age" — either Paris in the 1920s Jazz Era or the 1890s Belle Epoque. They lament that they did not live in their chosen era.

It is of course not unusual for us to romanticize an earlier seemingly superior period. Just ask your parents. In this perfect past kids were better dressed and better behaved contemporary music did not sound like screaming Banshees and adults could make it through a meal without tweeting texting or updating their online status.

These ruminations on time and place reminded me of my first day in law school almost 30 years ago to the day. The then Dean Harry Wellington welcomed my new classmates and I to Yale Law School with a talk which ranged from the usual orientation logistics (where do we eat our meals; where do we buy our West textbooks) to an Allen-like meditation on the passing of a Golden Age.

Dean Wellington told us that very soon after we came to realize that we had not in fact been admitted to this prestigious law school by mistake we would quickly move on to bemoan our fate at having missed the Golden Age at Yale. Where had the former Lions of the Law all gone? Where were the Grant Gilmores Alex Bickels and Boris Bittkers? The truth he said was that each generation of students failed to appreciate that the young professors teaching their classes would one day be similarly revered. The class of 2014 starting classes this week will no doubt lament that they did not have the chance to study with Guido Calabresi Harold Koh or Geoff Hazard.

In our crisis-laden times we would all do well to remember the blessings of our present Golden Age. I have been writing for some time about the dangers of the over-indebted no growth western economies but I believe we are in only the early years of an Information Revolution which will outpace the Industrial Revolution. The threat of terrorism and regional violence remains real; however we have lived more than half a century without nuclear or world war. Finally we have global warming depleting natural resources and super bugs but infant mortality and life expectancy have improved in most parts of the world and we are poised for scientific breakthroughs in green energy and the fight against cancer.

These truly are the good old days.

As regular readers of this blog are only too well aware I am a passionate promoter of technology and internet-based businesses. However there is at least one dimension in which the elephantine memory of the internet can be a nuisance — incorrect information once loaded into databasQes or just freely available to search engines is difficult to revise. Protecting privacy is another and related dimension but I will save that for another day.

Many years ago a particularly humorous friend in the music business decided to tell a journalist that I had a secret talent for rap and that I enjoyed nothing more than to have a microphone thrust upon me in any large group setting so that I could show-off my talent.

America Has Talent — NOT.

I confess that I do like rap music but only when performed by professionals. While speeding around Central Park on my Specialized Roubaix S-Works (that’s a bicycle if you must ask) shamelessly wearing Team Thomson Reuters Lycra in orange and grey I often listen to a mix of Ludacris Eminem and Jay-Z. My 13 year-old daughter tells me this is the semi-modern equivalent of listening to Frank Sinatra and Lawrence Welk (generations in music having sped-up on internet time as much as hard disk drives and news aggregators) but I find the rhythms still get me up the 110th Street hill on lap 3 or 4. I do harbor some residual concern about the relentlessly misogynist and gun-obsessed lyrics but I don’t think my mom was crazy about Purple Haze Brown Sugar or Casey Jones either.

The point I was trying to make is that information right or wrong once resident in the cloud is very difficult to correct. I was reminded of this recently when a prominent New York civic leader came to see me and asked me whether I was "keeping-up" with my rapping. I knew immediately where her office had done its research Some years ago I had another embarrassing moment when at the end of a town hall meeting at our Bangkok software development center a couple of over-eager young engineers handed me a microphone and encouraged me to end the meeting with one of my "hallmark" raps. Never one to disappoint or offend local custom I managed to mutter my way through some rhyming couplets but The Notorious B.I.G. did not roll over in his grave in appreciation.

So when like every other uncool parent I advise my 11 and 13 year-olds not to post items on the internet that would embarrass them one day during their Senate confirmation hearings I know of what I speak. Leave that job to your friends.