Tag Archives: politics

401K geek IRA math Mitt Romney Obama persuasion psychology

Will the leaked Romney video really sink his campaign? I doubt it.

Oh man, I really have to find something geekier to write about.

Recently a video of Mitt Romney speaking at a fundraiser has been all over the web. It’s gotten a lot of attention because of claims that 47% of Americans are with President Obama “no matter what” because they “believe that they are victims”, “believe the government has a responsibility to care for them”, and “these are people who pay no income tax.”

I’ve seen a lot of blog comments and the like saying how this video is a huge problem for Romney, how this will turn the election against him, etc. Supposedly this is the secret message to the millionaires that, once out, will turn the 99% against Romney.

I don’t think that’s the case at all.

I think Romney is playing a totally different game. In fact, I don’t think he really believes the “47 percent think they are victims” talk at all, and he knows that he can count on the votes of huge numbers of people who are dependent on government benefits.

This is easy to demonstrate. For example, here’s an article showing that 8 of the top 10 states by percentage paying no income taxes are so-called red states, which vote Republican. Here’s a cool interactive map that shows in more detail where government benefit recipients live, by percentage and benefit type. Clearly that map covers a lot of Romney country.

This New York Times article from earlier this year spells it out in detail: many, many people voting for candidates who promise to slash benefits are currently dependent those same benefits. How can this be?

Some of those votes can be explained by sheer ignorance, but I bet most are explained by human psychology. In Influence: The Psychology of Persuasion, Robert Cialdini writes about the most effective methods for influencing behavior – covering everything from how tupperware parties influence sales decisions to what convinced everyone to drink the koolaid in Jonestown.

One of the tools is called “liking”, specifically association. We want to link ourselves to positive events and disassociate from negative events. Cialdini’s examples mostly deal with the way people talk about sports teams (“we won” instead of “the team won”, etc.), but the same applied to political parties and other political groups. In fact, the more damage we feel to our self-image, the more likely we are to make these associations. So if a life-long Republican loses their job and is forced to live on unemployment, it makes sense if they stand in lock step with the party that’s demanding spending cuts, rather than changing their opinion.

Another related tool of persuasion is similarity. According to Cialdini’s research, we consistently like people who have similar opinions, background, etc. to ourselves, and we’re much more likely to be persuaded by someone we like. Salespeople are trained to find (or fake) similarities with their customers to get them to buy that car. What’s more, we don’t necessarily value objective similarities as much as similarities to who we think we are, or who we would like to be. If you want to change someone’s mind, appeal to their aspirational identity.

So I’m not sure that leaking this secret message to millionaires is that devastating to Romney’s campaign. In America, we are all millionaires who just happen to be facing some setbacks right now. In our heart of hearts, we’re all just one step away from being celebrities and rock stars.

When Romney is talking to millionaires, he knows he’s talking to a lot of thousandaires and nothingaires too. Are you “dependent upon government”? Do you believe you “are a victim”? Do you think you “are entitled to health care, to food, to housing, to you-name-it”? If you feel deeply that you aren’t that kind of person, then you’re mentally placing yourself in that room too, even if you can’t afford the $1000 donation (or whatever) to get in.

Note that I’m not saying that Mitt Romney, or the Republican party, has a monopoly on the use of these techniques, but I think it’s clear they are extremely good at using them, way better than the Democrats. It’s like watching the Harlem Globetrotters play against the Washington Generals.

I have my own political opinions, but my point with this blog post isn’t to convince you to vote one way or another. I just think this is a brilliant demonstration of how human psychology works, and how the psychology of persuasion is used to achieve very counterintuitive results in elections.

What do you think?

A little math on Mitt Romney’s IRA

I ran across this article on Mitt Romney’s $101-million IRA and it led me to comment on Google Plus. The max yearly contribution for an IRA is $5000 (with some caveats) so it’s hard to see how one could get from there to $101,000,000 without something a bit more creative going on.

I got a few comments to the effect that Romney could have rolled over 401Ks into his IRA without penalty, and that’s definitely true. But 401Ks also have limits, and in fact the government has had limits on total deferred compensations for quite some time.

So I decided to look up the total limits for IRA and 401K contributions and do a little math. You can see the spreadsheet here.

With just an IRA, making the max contribution since 1974, and assuming a 10% annual return, a diligent saver could have amassed around $730,000. Let’s say they were also contributing the max to their 40K since 1987 (I had a hard time finding numbers before then, not entirely sure when 401K started). Our super-saver then rolled over their 401K into their IRA right before running for president in 2012, reaching a total of about $1,700,000. That’s still two orders of magnitude lower than the number cited for Romney’s IRA.

We’re still missing something important – most companies contribute something to employee’s 401K plans as well. I could find some numbers on total deferred compensation limits since 1974, so I put those into a column in our spreadsheet, again with 10% annual return. So assuming between our saver’s and their company they completely maxed out 401K contributions, we could reach $13,000,000 or so. Still an order of magnitude too low.

Now of course none of these numbers are perfect, there’s “catch up” contributions you can add when you’re past a certain age, there may have been other limits over time, etc. I’m definitely not an expert on any of this, so feel free to point out glaring errors in the comments below. It’s also possible that the Reuters article is full of hooey.

But I’m a programmer, and one thing you learn as a programmer is to watch out when your numbers are an order of magnitude too low or too high.

I really doubt Mitt Romney has done anything illegal with his IRA. But it’s hard for me to see how Romney could get to such heights without something along the lines of putting in investment partnerships and setting their value low, as alluded to in the Reuters article. Which is great for him, and a nice clever trick to get around paying his taxes, but personally I don’t find it very impressive.

Not to get too political on this (mostly) geeky blog, but it seems like yet another one of those things you can do if you already have a ton of money / lawyers / accountants at your disposal. Of course, everybody goes through their deductions, puts in last-minute charitable contributions, etc. to try to bring their tax bill down, but not everyone can take it to this level and the people who can take it to this level need tax relief the least.

Let me pull this post back by putting it in the geekiest way possible: You ever play D&D with one of those guys who’s a total rules lawyer? Like, he has memorized every expansion of every edition since Gary Gygax threw a magic missile, and every encounter takes an eon as he pulls out every possible table, caveat, and vaguely-worded paragraph to ensure that his character never loses not even one hit point? Playing D&D with guys like that is excruciating, but it’s even less fun if they insist on starting the game 10 levels higher than everyone else too.

BTW, here’s the spreadsheet for your viewing pleasure. Like I said, feel free to point out everything I’ve gotten wrong, I’m sure there’s something.