Free Markets, Free People


Prediction time (Update)

If you haven’t read Karl Rove’s analysis of the election, you ought too. Yeah, I know, Rove is partisan and all of that, but, like Michael Barone (who, by the way, has predicted a Romney win), he knows election demographics.

Rove makes a point that seems to be missed by a lot of people or, perhaps, ignored instead:

He maintains a small but persistent polling edge. As of yesterday afternoon, there had been 31 national surveys in the previous seven days. Mr. Romney led in 19, President Obama in seven, and five were tied. Mr. Romney averaged 48.4%; Mr. Obama, 47.2%. The GOP challenger was at or above 50% in 10 polls, Mr. Obama in none.

The number that may matter the most is Mr. Obama’s 47.2% share. As the incumbent, he’s likely to find that number going into Election Day is a percentage point or so below what he gets.

Why is that significant?

For example, in 2004 President George W. Bush had 49% in the final Gallup likely-voter track; he received 50.7% on Election Day. In 1996, President Clinton was at 48% in the last Gallup; he got 49.2% at the polls. And in 1992, President George H.W. Bush was at 37% in the closing Gallup; he collected 37.5% in the balloting.

If you can’t get above 47%, and your challenger is running above that number, chances are you aren’t going to win.

Then there are the polling demographics. Remember when I said that if a poll has D+ anything, it is likely wrong? I stand by that:

One potentially dispositive question is what mix of Republicans and Democrats will show up this election. On Friday last week, Gallup hinted at the partisan makeup of the 2012 electorate with a small chart buried at the end of its daily tracking report. Based on all its October polling, Gallup suggested that this year’s turnout might be 36% Republican to 35% Democratic, compared with 39% Democratic and 29% Republican in 2008, and 39% Republican and 37% Democratic in 2004. If accurate, this would be real trouble for Mr. Obama, since Mr. Romney has consistently led among independents in most October surveys.

So, assuming Gallup is right, and it is R+1 as we’ve been saying is likely here, what does that mean for the polling that’s going on?

Take a look at this handy little chart from RCP:

The chart makes the point about how important it is for the polling company to get the mix correct and the probability that many of them haven’t. If they’re not properly skewed, you aren’t going to get valid results. We know there are still polls being run out there with D+5 and up to D+8. Those were legitimate in 2008.

This ain’t 2008 (and you have to ignore 2010 to believe it is) by a long shot.

Then there’s this:

Gallup delivered some additional bad news to Mr. Obama on early voting. Through Sunday, 15% of those surveyed said they had already cast a ballot either in person or absentee. They broke for Mr. Romney, 52% to 46%. The 63% who said they planned to vote on Election Day similarly supported Mr. Romney, 51% to 45%.

So, what is happening is the Democrats are getting their most motivated voters to the polls early and they’re still running behind the GOP.  If, in fact, that’s the case, then who will the Dems be trying to turn out on Tuesday and how successful will they be?  It all comes down to enthusiasm, doesn’t it?  And as measured, that too resides on the side of the GOP (well, except for the NYT poll, unsurprisingly):

Finally, while looking that that chart, remember that independents have been breaking large toward Romney. More than for any GOP candidate in recent history.  Add all the other demographics that have shifted significant support from Obama in the last election to Romney in this one, not to mention the atmospherics that simply aren’t there for the incumbent and it is difficult to believe that Obama will win.

So, all that said, I’ll predict a Romney win with slightly over 50% and around 279 electoral votes.  I’ll also predict that Nate Silver will be donating $1,000 to charity and David Axlerod’s mustache will be absent Wednesday of next week.

UPDATE: A reminder for all the doubters out there who want to dismiss Rove – In 2008 Karl Rove predicted an Obama win with 338 EVs (actual: 365)


The shape of things to come

Michael Wade sent me and email a few days ago asking me what purpose I thought banks served any more. That email led to a phone conversation, and that conversation led to this post. Because that simple question opened up a whole area of investigation about not just banking, but a whole universe of institutions that may be near the end of their purpose.

The modern era has been an age of institutions. Banks, unions, governments, corporations—a whole panoply of organizations whose sole purpose was to provide a central clearinghouse for goods and services, and the regulatory rules and legal framework under which they operated. But we are now seeing glimpses of a future in which institutions simply have no purpose, or, at the very least, will serve a different purpose than they do now. The era of institutions is passing, and is being replaced by the era of…something else. I think—I hope—it will be the era of the individual.

Let’s take the example of banks, first. Currently, banks take deposits from their customers, then loan those deposits out—less a reserve requirement—for mortgages, revolving credit, business loans, etc. They also offer their customers the convenience of access to their money on a moment’s notice, almost anywhere in the civilized world. 

Now, imagine a world where your money is stored on a personal biometric device. So, you no longer need an institution to store your money.  You can carry it with you—perhaps implanted in you—everywhere you go. Your entire stock of cash and savings are now truly yours, and in your personal possession at all times. So what happens to banks? Without depositors, there are no longer any deposits to loan out in credit cards or home purchases. What happens to banks, then? More importantly, what happens to credit then? Perhaps banks will have to change from depository institutions to investor-funded lenders. Or be replaced by them, as there are already web sites where potential creditors and debtors can engage in micro-lending.

We are on the cusp of really transformative technological change, and if you want to see what the implications are for institutions, you need look no further than the music industry, where the RIAA is in a fierce rear-guard battle to maintain their viability. The entire music industry is being destroyed, as an institution, by the new digital technologies that were created just a decade ago. It may be a shock for some of you younger readers, but there was, at one time in the recent past, a world in which there were record stores in every shopping center and mall.

It used to be that the recording industry controlled every aspect of commercial music.  They would underwrite the recording costs, would create the playable media and packaging, then pay for the distribution to music stores. If you wanted a piece of that pie, and hit it big in the music world, you had to scrape up enough money to make a demo tape, send it into Sony, BMG, RSO, etc., and hope that some executive was impressed enough to sign you to a contract to make your first album.

The world doesn’t work that way any more.  For less than $1000, you can turn your dingy studio apartment into a multi-track recording studio. You can get a web site, upload your MP3 files onto it, and sell them online. You don’t need a record company, a distribution channel, or marketing money. This is killing the record industry. The RIAA is actually trying to extort royalty money from bar owners who have live bands play, on the theory that they should get a piece of the bar’s profits from the music performance.  Good luck with that.

Digital publishing is starting to do the same thing to the publishing industry, as Amazon is making it possible for anyone to publish their book. Yes, a lot of less than stellar talents are publishing for the Kindle now, but some mainstream writers are now moving over to the Kindle platform. Publishing, as an institution, is in trouble.

Technology is now empowering individuals in ways that were undreamed of 20 years ago, and the pace of that change, and the vistas it’s opening up for individual empowerment is increasing every day.

Obviously, institutions, including governments, are going to become increasingly leery of this trend. After all, it is not in the best interests of institutions to allow individuals to be empowered. So there will be some sort of backlash at some point. Hopefully, that backlash will be as ineffective as the RIAA’s backlash against digital music has been. But some institutions have their own police and armies, and they have the potential to resist more strongly.

Of course, since we are now in the middle of what appears to be a huge test of government’s ability to manage the economy and currency—and government is not doing a very good job of demonstrating competence—maybe even that potential problem can be minimized.

We can only hope.

House Math

House math is decidedly more complex than Senate math if for no other reason than the number of House races.  All the seats are up for grabs every two years.

At present, the mix is 255/178 Dems (with two vacant I believe).  However, when you look at the races, and consider “safe seats”, the mix goes to 123/163 GOP.  That’s right, the GOP holds a 40 seat advantage in the “safe seat” category.

If we add “likely” for each of the parties, the mix becomes  148/176 GOP.  218 is the number needed for a majority.

That brings us to the “leans” either Dem or GOP category.  Assuming all those in the “likely” category  go to the designated party, “leans” is the first category where things could go either way.  While it is likely that it will go to the party in which the polls “lean”, it isn’t certain.

As it breaks down, there are 29 likely to go Dem and 48 likely to go GOP.  The difference is that of the 29 likely to go Dem, only 2 are seats presently held by Republicans.   However, on the other side, of the 48 seats leaning toward the GOP, 42 are seats presently held by Democrats – most of them Blue Dogs.

Here’s where you have to decide how many on each side will actually go to the party to which the district now leans.  In my case it comes down to a SWAG (Scientific Wild Assed Guess).  I’m saying 70% on each side.  That’s pretty conservative given the way I see this election shaping up.  However that brings our mix to 179/222 GOP (and a majority in the House for the Republicans).

That’s not even counting the 34 “toss up races”.  Of those 34 races, 32 involve incumbent Democrats while only 2 involve Republicans.   Again, going conservative, let’s say they split 50-50.   17 to each side.

The final mix?

196/239 GOP – a solid majority.  Not quite as robust as the existing Democratic majority now, but a huge swing.  And again, note that Republicans can win the majority in the House by winning 70% of the “lean GOP” races and without winning a single “toss up”.

So – my prediction? 

GOP picks up 61 seats.  That’s actually 6 more seats than I was figuring last week.