I lived in NYC for 18 years, then in Madrid, Spain for 17 years and as of three weeks ago I have been back in New York City.  While I started my life as the middle class son of a university professor, I was lucky enough to become a serial entrepreneur in the telco, internet and alternative energy sectors, and enjoy a life that I would not have dreamed of when I was a student at Columbia University.

This has put me in a privileged position to observe the life of my successful peers on both sides of the ocean, people who are well off, otherwise known as “the rich.”  And while the rich are frequently disliked in the USA they are many times simply hated in Europe.  In the beginning of my life in Europe, I thought this was because equality is highly valued in Europe, not only equality of opportunity as in the USA, but also equality of results.  But upon my return to the USA, I have come to realize that this is only part of the reason why rich people in Europe face disdain from the public. That when you look into how the rich behave in Europe vis-a-vis their peers and society in general, you realize that there are more reasons to dislike the rich in Europe. Especially in continental Europe, where rich people rarely lead public lives, are reclusive and only occasionally generous when it comes to sharing their wealth to improve the world.

Old wealth

Many wealthy people in Europe come from old money, so they’ve never had to face the difficulties that the average person on the street faces. These people often don’t realize how privileged they are. They frequently have no living relatives who can recall tough times. They can only remember wealth.  And this old wealth, the wealthy German, Italian, French and Spanish families for example, families that I have come to know in my business dealings and social life, behave differently from their American counterparts who are more commonly self-made and greatly aware of the precariousness of their condition as wealthy.

New wealth

In contrast, the rich in the US, the majority who are many times self-made, are much more sensitive to the realities faced by the rest of society. For a lot of them, life was tough just a few years ago. Or because they are more commonly risk takers, they also identify with loss in the sense that they see that they too could be broke in the future should business prospects go seriously wrong.

This awareness of risk, and recent memory of adversity, makes the wealthy in the US more sensitive, and more willing to share – from making more charitable donations to sharing wealth with friends and acquaintances. Since we moved from Madrid to New York, we have experienced this largesse first-hand. My wife and I have received invitations to wonderful vacations, as well as offers to share planes, homes and yachts. This is something that I rarely experienced in Europe where splitting bills is very common even among the very rich.

The result is that in America the rich are more often admired and emulated than in Europe.  Take Warren Buffet and Bill Gates, for example, and their pledge to donate half of their wealth in a program known as The Giving Pledge and see all the American billionaires who have gone along with this pledge. These men are very wealthy but at the same time sensitive to the serendipitous nature of their economic success. I’m not sure I could name their European counterparts. Amancio Ortega for example, the fifth wealthiest person in the world with a net worth of $37 billion, is unknown around the world in part because he has avoided philanthropy.

Is the hatred of the European rich justified?

Oftentimes, yes. In Europe, people are used to dealing with rich people who are self-absorbed, insensitive and out of touch with reality. They see rich people who bask in their wealth, but do little to improve the world – philanthropy is rare in Europe, especially when compared to the USA. And as I mentioned before, Europe has huge egalitarian aspirations, so having wealth and not sharing it in any way does create animosity. What people in Europe want to see is a new crop of wealthy people who care about the world, and are willing to share their wealth beyond their immediate families.

 

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Map showing ethnic and religious diversity amo...

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I am Jewish and I can’t understand why attacking Iran over the threat of nuclear is a great idea. It’s not that I believe what Iran says. Of course they will develop nuclear weapons, but also Pakistan has nuclear weapons. And Pakistan is a very unstable country and we live with them and their weapons. And India, a country which most of us find easier to live with, has had to live with Pakistan, their weapons and their terrorists.

Pakistan is a country ruled by people who like us but populated by people who mostly hate us, and I don’t mean hate Jews, but the whole West, India and China. Polls show that in the mid 00s most Pakistanis liked Bin Laden as a leader. And some clearly liked him enough to give him shelter for so many years. And this is a country has nuclear weapons and we tolerate it. And Israel and maybe EU and USA are planning to go to war with Iran because they may have nuclear weapons and be where Pakistan is today. Going to war with a country because it will have nuclear weapons is hardly a way to increase world security. Why didn’t USA go to war with USSR when they developed nuclear weapons? Why didnt we go to war with North Korea whose lunatic leadership is far worse than the Iranian leadership. In each of those circumstances we estimated the cost of war to be greater than the cost of preventing nuclear proliferation. North Korea for example, could already wipe out a third of South Korea with conventional artillery, in the face of that threat, we let them go nuclear. I am sure the South Koreans would prefer another neighbor, but they do what they can given the circumstances. Even after a nuclear Iran, Israel’s situation won’t be as bad as that of South Korea at war with a nation that borders it and can destroy it with conventional and nuclear weapons and threatens to do so very frequently. Plus Iran is a threat to Israel already through its proxy armies of Hezbollah and Hamas. But Syria was partners with Iran and another serious threat to Israel under the leadership of Bashar Al Assad and look at where he is now, exterminating his own people, hated by his own people. Qaddafi said there was going to be a Middle East without Israel and we ended having a Libya without Qaddafi. I think there is enough evidence that Iran is going in the same direction. Preventive warfare is flawed. It’s a doctrine that says that because you may not like war in the future you start a war now. We squandered trillions of dollars of USA and EU money with this doctrine, and precious human lives, and achieved nothing. Anyone doubts that Saddam Hussein would have survived the Arab uprisings? If we intervene we should so so to tip the balance, not to go as an invasive force trying to conquer, police and rebuild a nation for a decade. It’s wrong and we can’t afford it.

Nuclear weapons have this weirdly positive aspect to them that their utilization is so serious, so incredibly harmful, that those who have them so far in history have stayed put. It’s as if their owners developed a deep sense of nausea just about having them. The only exception in history, is of course USA, who whether we like it or not, was the only nation brutal enough to overcome their nausea and use them. Probably because nobody had used them before and the images of Hiroshima and Nagasaki were not on anyone’s minds.

I think that we should all put more hope in the people of Iran. Iran is the opposite of Pakistan, a country ruled by people who hate us but populated by people who are fed up with them and like us and our lifestyle. Every protest in Iran seems to be about people who want to be free and a government who puts them down. So we should not give these freedom seeking people who almost overthrew Ahmadinejad, a real reason to hate us. And let’s remember that under attack everyone becomes a nationalist and sides with whoever is the dictator who rules the country. From a Jewish point of view, now that the Muslim world is finally focused on their problems attacking Iran would be to go for the limelight at the worse possible moment.

We should accept that this situation is ugly, confusing, tough to deal with and there no easy answers. And for Israel attacking Iran a country of 80 million people that is twice as big as France and far away is a daunting task, nothing like the Operation Babylon of 1981. Israel, USA, EU, should continue with covert operations and other tactics that are short of war, and put all sorts of pressures to show how great life would be for all if Iran stops. But at the same time we have to learn to live with our fears, accept that Iran may go nuclear, and focus on promoting a change of leadership that is more aligned with the Iranian people and our interests.

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I wonder what many wonder, and that is whether Angela Merkel’s insistence with austerity is wise. I think that what Southern Europe needs is not to reduce the overall level of spending. Doing so it risks to make the economy shrink and budget deficits expand without end in sight. What we need to do instead is to keep the level of spending and investment but change its nature. We have to tweak with the economy, not kill the economy. Focus on what works, kill what slows us down.

I agree that in the South of Europe there was a lack of reform and a great deal of waste. In Greece, Italy, Spain, Portugal a lot of privileges were given to people who did not deserve them, growth was built on credit, and the economies collapsed as a result. There was and there is corruption in most of Southern Europe, more than in the North, and many white elephants were built, airports that are not used, high speed train lines that are not needed.

But a drastic stop to a lot of economic activity without reasonable alternatives to generate growth will only exacerbate the problem. This is happening in Spain right now. We are cutting spending, we are not focusing on intelligent credit creation and we are making many viable businesses suffer or die of credit starvation. We need to create emergency credit lines for all businesses who are hiring. We have to find the pockets of growth and support them. We can’t indiscriminately cut spending.We have to move workers from dying industries to growing industries, we have to reeducate the population for the globalized economy of this century.  The challenges of evolving from an industrialized economy to a service economy are not new, but now we have to deal with the challenges of evolving from the service economy to the digital economy.  None of these problems are financial or monetary, they are real and require real intervention.  Fiscal tightening is akin to chemotherapy, we can’t kill all cells because some are bad. We have to have a smart bullet approach to economic intervention.  Which if you think about it this is what Germany did to itself.  Because Germany is making the same mistake as the large shareholders of the IMF did.  They applied for themselves much more elaborate and detailed growth policies that worked and ask Latin America to implement simplistic, “chemo” type policies.  The results were disastrous.

Germany is doing to Southern Europe what the IMF did to Latin America for decades and this is dangerous for Germany and Southern Europe. In Latin America by preaching austerity at all cost the IMF created failed policies and a decade of stagnation. Moreover as its failure became apparent the IMF ended up being mostly hated by Latin Americans and around the world. Germany could end up in the same spot. This would be sad because in the end we all know that Germany means well, it is just applying the wrong economic model as the IMF did.  The USA, closely associated with the IMF lost most of Latin America sympathy in the last 15 years. It is sad to see how many Latin Americans now think that China is a better country and economic model than USA and have emulated China with regimes such as that of Venezuela, Nicaragua, Ecuador and Bolivia. Same could happen to Germany and the German model if it insists in implementing wrong policies. The European Union could fall apart and Southern Europe could end up experimenting with populist political regimes that only make the whole situation for Europe much worse.

There’s an active debate on this post in Google+ you may want to comment here.

I belong to the tech world. But also to the real world. And the disconnect has never been greater. The tech world is one piece of good news after another. The real world is falling apart. Especially in Southern Europe where I live. But even in NYC where I am now the talk is of gloom and doom.

I believe that the Greek economy is a tumor in the EU economy. I don’t believe all of the EU is as sick and I don’t think we should bail Greece out. Instead for their own good and ours we should let Greeks go back to their old currency, devalue and default. Then we should focus on saving the banks (but not the shareholders of the banks) who lent money to Greece or bought their bonds.

Now what confuses people is that they think that sovereign default means a country not paying its debts at all. That is not really how it generally works. What we saw with Argentina for example is that a substantial part of the debt was paid. And this will be the case of Greece. They will probably end up paying 60% of their debt. That’s what they need to move on. Not a debt forgiveness but a significant debt reduction to say the levels of Portugal, Italy and Spain or around 1 time GDP (Spain is less but it’s getting there). Now interestingly I tried to find out how much Greek sovereign debt was trading for and it is trading for around half of its value. So the markets also believe Greece will default but pay half of its debt.

Oil prices are collapsing. I see this as a mixed blessing. On one side I am happy that oil exporters get to make less money doing nothing. On the other side I am concerned about more CO2 emissions around the world and a slower shift to alternative energy. So what I would love to see is for the US and EU governments to leave gasoline prices as they are now and as oil prices go down to keep the differences in taxes. This would reduce their gigantic deficits, help alternative energy, reduce the oil import bill and reduce CO2 emissions.

I am debating with too many people on Twitter. I give up. Most people seem to believe that EU and USA went to war in the Arab countries, Iraq, Afghanistan, Pakistan and now Libya because somehow we are making money doing so. They don’t get it that Europe and USA lost trillions in these wars. That their people, their economies… lost trillions and a horrible sacrifice of human lives on all sides. That yes there are some minor beneficiaries of this disasters like some people in the military industry and military contracting but that for the economies of USA, UK and some EU countries have been wasting $3 trillion only in Iraq as you can see here. And this is madness. Most on my twitter stream believe that somehow we will get paid back. How? Stealing their oil? Well that will never happen and should not happen. Did Saddam or Gaddafi not want to sell oil? Because now we get somebody else to sell us oil at $107 per barrel is that enough reason to invade Iraq? If all we wanted was to buy oil we would not go to war. We went to war because of some idiotic reasoning in the case of Iraq and some smarter reasoning in the case of Libya (where we invested much much less, worked with Libyans and got what seems to be like a good outcome). We went to war because we believed that toppling people who kill their people and sometimes foreigners with oil money don’t deserve to be in power. But the Iraqi money and human lives spent in the Iraq War are gone for good. We should have done nothing in Iraq, Saddam had nothing to do with Al Qaeda and he would have fallen like Gaddafi did, at a much smaller cost if we had waited a decade.

Libyans look like they are in horrible shape, and as they finish their civil war they are. And we are all happy Gaddafi, while still at large, is not in power. But unlike anything you can imagine, Libyan finances are not that bad. Libya is no Egypt. They have over $200bn in assets of which $165bn are abroad. They are only 6 million people and have no national debt. As a result each Libyan has assets of $30K. Americans instead have around $50K of debt per capita and Europeans $30K. But Americans and Europeans, paid dearly for the liberation of Libyans, not as much of course as the failed wars of Iraq and Afghanistan but still significant. Should us in EU and USA stop fighting other people’s wars and focus on rebuilding our economies? I think so. We should emulate George W Bush who had everyone contribute to the cost of the Gulf War and as a result it was short and relatively inexpensive as described in the first link. My view is that from now on, if we deal with wealthy nations like Libya I think we should only intervene only to tilt the balance and only if we get repaid. And in cases in which true humanitarian reasons are at stake we should do this together with many nations and sharing the costs.

Yesterday I spent three and a half hours brainstorming on how to turn Spain around with presidential candidate Alfredo Rubalcaba. He understands that the answer to unemployment is entrepreneurship. I appreciated that he listened carefully to my ideas for increasing employment. Spain has the highest unemployment rates of all OECD nations (20%) and this problem was the focus of our meeting.

Spanish citizens have 3 choices this November. To go with Rajoy, to go with Rubalcaba, or to vote for lesser parties and hope one day they become meaningful actors in Spanish politics. What I decided to do is to promote one simple and I believe powerful idea to grow employment to both Rajoy and Rubalcaba. I started with Rubalcaba today, the candidates with less chances to win. The plan is that during 2012 the Spanish government does not demand that companies pay social charges for all employees hired beyond the level of employment they had in 2011. It is an incentive to grow employment, to promote new and increased hiring only for 2012. It’s a jump start for the economy. The idea is explained in Spanish below. I believe this measure will make the difference that may make entrepreneurs start businesses and grow existing businesses. Rubalcaba reacted well to it and said his economists would study it.

Here is the plan https://spanish.martinvarsavsky.net/general/plan-para-aumentar-empleo-que-presentare-manana-a-rubalcaba.html

I know most Spaniards believe there is no hope that Rubalcaba will get us out of the crisis. Most Spaniards however also believe that there is little hope that his rival Rajoy will get us out of the crisis. But personally I believe that there’s nothing that is so wrong with Spain that cannot be fixed by what is right in Spain. I am more optimistic than most.

On Rubalcaba himself I can say, after having met Felipe Gonzalez, Aznar, Zapatero, Rajoy and him, that he is different from the other politicians. He is the only one trained as a scientist and educator. He is more of an administrator and thinker. He is a Chemistry professor and it shows. Would I wish Spain had other choices for President? Of course I would. I recently met with embattled David Cameron and in spite of his dubious choice of friends and poor handling of the riots he is a more impressive global leader. I never met Angela Merkel but I got a sense from what I see about her that Rubalcaba is more like her in terms of personality. But a government is not just a president, it’s a president and a team. And even though I find Rajoy an unimpressive candidate I could still end up favoring if he announces a better team than Rubalcaba before the election.

Now Rubalcaba speaks English and that is more than can be said about anyone else who’s run this country. In the end a President has to be the number one promoter of the country. Both Rajoy and Rubalcaba are Spanish characters not particularly appealing to foreign leaders or investors. None of them are like Jordi Pujol for example who was amazing at promoting Catalunya around the world. But between the two, Rubalcaba is slightly better as he can communicate without an interpreter and is more aware of what makes a country succeed in a globalized world. Rubalcaba seems a pragmatist, a person willing to try and fail hoping to get policies right in the end. I identify with that. People expect politicians to get things right but if in business being successful involves being right only slightly more frequently than being wrong I don’t see why decision making should be different in politics. In general when I confronted Rubalcaba with obvious mistakes of the Socialist Party, like the Ley Sinde, he did not try to defend the indefensible. Indeed he agreed to my proposal of bringing some of the tech entrepreneurs who were heavily involved in the 15M movement that brought millions out to the street protesting against the incompetence of all politicians himself included. In that sense he is very different from dogmatic Aznar who still thinks that invading Iraq was a great plan.

What really and concretely happened to this country is that it went from building 800K new homes a year to building 100K and around 12% of the labor force ended up unemployed. That explains 80% of what is wrong here. The rest of the industries were hurt in this crisis but not as badly as the construction industry. Spain can be turned around if we focus on growing the rest of the economy. So far what happened here is that the growth of Spain was fake, based on increasing debt and not sustainable sectors of the economy. My plan promotes employment in whatever sector may end up hiring without having government try to guess exactly how to grow the economy.

I am happy that Rubalcaba said he would have an economist specialized in tax revenues study my plan. Common sense tells me that my plan is a net revenue generator for the government from day one. Why?

Because it only applies to new employees and only on businesses that increase their work force compared to 2011.

Because there is a pool of 5 million unemployed and net job increases must come to a great percentage from this pool.

Because government stops paying the unemployed the moment they join a business and this produces immediate savings.

Because even if the government does not immediately get social charges they will get social charges over time and anyone making financial projections on tax revenue collections will have this into account. As a result rating agencies will see positive trends on tax collections and ratings will improve, this will lower the cost of borrowing for Spain. Shirking the debt premium produces enormous savings.

Because as soon as somebody is employed this person starts consuming and pay VAT and all sort of consumption taxes, gasoline etc that help tax revenues.

Because my plan provides an opportunity for the millions in Spain who work illegally to negotiate a transition to legality that will cost nothing to the employer during the first year and some will emerge from the underground economy in a way similar to a tax amnesty. It is an attack on the underground economy based on incentives that could be more successful than the failed Socialist Party plan based on increased fines that was put in place.

Now one way in which this plan would cost the government money is if ONLY those employers who were going to hire anyway hire, nobody else is attracted by the incentive and then the government loses 2 and a half years of social charges and some severance packages. But from an informal survey to my entrepreneur friends and the question, would you start a business or grow a business further if during 2012 you don’t have to pay social charges and if the business fails you don’t have to pay severance packages the answer from everyone was a resounding yes.

Note: if you feel that this article lacks content you are right 🙂 While with Rubalcaba I agreed not to disclose a lot of the ideas that were part of the brainstorming.

Shit shit shit if you are German, fuck fuck fuck if you are American, vagina vagina vagina if you are Spanish (coño).

It is interesting how many cultures curse and obsess with different part of the body or bodily functions/actions.

This article in Vanity Fair tries to explain how German banks squandered a significant amount of the savings of the German people lending it to crooks in a Freudian way without ever citing Freud. It’s all about shit it argues.

I found the article bad but still worth sharing. If anything it says more about the American writer.

Yes, it is true that the German language is full of expressions related to shit and they give examples. And it is also true that Germans love cleanliness and are very organized. But this does not explain why they work so much better than most other Europeans and waste their savings lending to all sorts of weird schemes. Why they believe the Greeks when they tell them they will balance the budget or why they lent to so many subprime schemes in USA. Maybe a lot of that has to do with the fact that the people who run their banks are incompetent and not so much with shit shit.

To me US bankers are insanely greedy and German bankers are just incompetent at assessing foreign risk and they should just stay mostly at home. But Germany, as well as Japan historically and now China, has the problem of nations who work hard, save a lot and then can’t find uses for these savings locally and tend to end up either making bad investments abroad or lending to debt-addicted cultures until they go bust.

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