Category Archives: Economic Issues

The Fallacy of Composition

Last block, I took ‘managerial economics’, which was my last core class.  Even though I was an econ major for my undergrad, it was still pretty challenging.  One of the topics my professor briefly mentioned was called ‘the fallacy of composition’, which means that a solution for one individual does not necessarily work for a whole group.  Though he didn’t go into a lot of detail, I found this idea really interesting.

This logical fallacy applies to a lot of things.  For example, some might claim that we need to pay down the national debt at the same time, while others might worry that this effort would depress the economy and cause inflation.  Others might say that Obama’s proposal to provide free community college education to all Americans might increase opportunities in some areas, but create a higher unemployment rate due to a lack of high-skill jobs in another.  In one case, it might make sense to localize control of the public school curriculum, and in another, a school could fall behind due to a lack of standards to guide a child’s development.

I am really lucky to be in a field where I am literally paid to ponder the pros and cons to every decision.  Finding solutions to problems in data is my passion, and I have always been a numbers person.  But the kind of mental processing to which most people are accustomed is merely linear thinking.  By this, I mean assuming a direct connection between one thing and another.  When we are faced with a problem we don’t understand, we tend to take a mechanistic view to identifying a solution, breaking the problem down to its individual parts and assuming that every effect has a single cause.  I think this type of rationale is valid, but not complete.

In order to truly facilitate a better world, I think it will be necessary for more people to adopt a synthetic, non-linear way of thinking.  Before any course of action, more considerations need to be made about external effects.  This is bigger than conventional game theory.  It’s definitely not easy to understand that affecting one part could actually affect the system as a whole.  This goes against everything that dictates how I do my work: you must think hard about the potential effects that can come out of a decision, even when you don’t have the data to support it.  This capacity to predict effects beyond what you are directly affecting is difficult to master, but I think will likely be the key to addressing challenges over time.  Unilateral decisions are not going to fix global warming, poverty, income disparity, or public health issues.

Systemic change is not going to happen overnight, but I hope I live to see some kind of progress in my lifetime.  Relying on numbers and statistics is important, but not as important as deeply considering the chain of events that can occur from making one choice compared to another.  When making a decision about the best remedy for the most pressing social ills, be sure to take a step back and effectively consider how others will be affected.  We need to come up with structures for thought instead of building thoughtless structures.  We need to let go of our experiences that turned us into conditioned humans instead of letting ourselves represent the human condition we once were as children.  When we were small, we found joy in bringing others happiness, and as we ‘matured’ and were burned a few times, we became more selfish and defensive.  The more people who come to master this difficult way of thinking, the better off this world will be.  We have become less alive.

I am not at all saying that I have never taken stances on issues that were self-serving.  I know I have hurt people and made mistakes.  But I think that creating a better future starts with me, hopefully inspiring others to share the same attitude.  The more we look out for each other, and the less afraid we become about making changes in our lives in order to benefit others, the more better off we all will become.  Individuals can make a difference everyday by letting go of judgment, hatred, and anger – things that all prevent us from living a full life.  Don’t get caught up in the fallacy of composition or in the numbers.  They’re a great place to start, but what’s truly important will be justified by something more.

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Supply Chain

The International Longshore and Warehouse Union (ILWU) and Pacific Maritime Association (PMA) have failed to agree upon and sign a new contract for the last six months.  Since last month, demand planning and forecasting has been difficult, and I’ve had to raise prices to mitigate stock outs since many of our POs haven’t landed.  The ports of Los Angeles and Long Beach are congested and there are chassis shortages because the union refuses to work.  Some of my containers have been rerouted to Oakland, but ILWU workers walked off for three shifts there too, causing further delays.

I received an email just now saying that ocean carriers announced a $1,000 congestion surcharge per 40-foot container.  I have dozens of containers sitting in the ports right now, and many of my SKUs are going to stock out if this inventory doesn’t land in the next week.  I’ve already increased my prices to slow sales volume, but I can only do so much.  One of the SKUs that is going to stock out in the next couple of days is a Key SKU, meaning that this SKU alone drives about 10% of the revenue streams of my business.   Not to mention that Q4 is hands down the busiest time of the year in retail – The seemingly small scale disruption caused by the longshoremen’s attempt to apply pressure on management could potentially have a large negative impact on the economy and suppress sales during the holiday season.

In spite of how irritating this situation is, and the additional costs of time and money it is imposing on me and Overstock, I’m quite fascinated with these dynamics.  It’s kind of interesting how big of a ripple effect labor slowdowns and contract negotiations between unions and employers can have.  I can understand why businesses dislike labor unions, but I also see how important it is for labor unions to stand strong to negotiate better terms and conditions.  If it weren’t for unions, we wouldn’t have the standard 8-hour work days, or 40-hour work weeks.  We wouldn’t have family or medical leave, employer-based health coverage, or even weekends off.  Labor unions have accomplished a lot of things that many of us take for granted.

Supply chain is much more interesting than I thought. 🙂 There are many different levers I can pull to keep my business running smoothly, but this union’s tactics are making it quite the challenge.  I probably look like the biggest weirdo because I’m excited and jazzed up about something that is not necessarily a good thing for my business, haha but it’s really cool to see all these moving parts in action.  I probably won’t be pissed off about this whole thing until I’m impacted more directly. 😛 Nonetheless,  I hope that the ILWU and PMA are able to reach a compromise soon that benefits both parties.

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Ethical Compass

My first block in Westminster’s MBA program is drawing to a close, and it’s been an amazing experience so far.  It feels incredible to be back in school, and to learn new and exciting things everyday.  I’ve loved working through case studies with a room full of smart people and leaving each session feeling more enlightened.

One of the most amazing things I’m experiencing is that I am not just building my foundation of academic knowledge, but I am also learning more about who I am.  I remember starting my business ethics class thinking that I am Paul Krugman and John Cassidy’s protege, and that I am a liberal inside and out.  But realizing the ideas I was expressing during class discussions, I started to realize that I’m becoming somewhat conservative.

AAAAAH!  Somebody slap me and bring me to my senses, right?

Before I lose all my friends, I want to clarify that I am still a rational, well-meaning person, haha.  I just don’t think I’m as much of an advocate for a “socialist”-esque community like I was when I was in college.

One of our assignments for my ethics class required negotiating a social contract with the class by way of an online discussion board.  Following was my first post:

“At a high level, I believe the role of government should be to provide the freedom and empowerment necessary for individuals to pursue their goals.  This includes ensuring the protection of persons, property and human rights, promoting hard work and productivity, and providing incentives for the market to alleviate social ills.  It is definitely important to establish a society that is just and fair, ensuring opportunity and equality for all individuals.

I think this role can be fulfilled by a civilization built around John Rawls’ Theory of Justice.  Rawls reaches his conclusion from behind what he calls a “Veil of Ignorance”, meaning that he has no knowledge regarding what his situation will look like, and thus he cannot develop principles that favor his particular circumstances.  Without knowing what his position in life will be, he will be most likely to choose principles fairest to all.  This theory includes two principles:

1. Everyone is entitled to basic freedoms (e.g., freedom of speech, political liberty, pursuit of happiness, etc.)

2. Difference Principle: There can be inequality in any society as long as it makes the person in the worst situation better off.

Building upon his second principle, I think it’s important to control the level of inequality.  I definitely want to promote a “rising tide that lifts all boats,” but I think mechanisms should be put in place to ensure that a large disparity of social/income inequality does not exist.”

It literally took me three hours to determine the theory on which I would base my proposal.  It was no easy task to determine who would become the “winners” and “losers”, and I felt conflicted when putting this theory together.  But it just seemed to be the most justified and fair.

Surprisingly, I got very few comments on my proposal, but those who did comment on it agreed with me.  Even more shocking to me was that the recurring theme among a class full of MBA students was one what emphasized socialism – a heavily progressive tax system, an extended entitlement program for the elderly, disabled and unemployed, free education, free healthcare, free housing, even free grocery… Everyone was rallying behind a classmate named Viktoria, who was advocating for such a system.  It was very interesting to see that dynamic.  I definitely would love to see a world where everyone had open access to these necessities, but such a world cannot exist.  It is simply too expensive, and I don’t think that a system with socialist characteristics as well as the ability to progress technologically and economically would not be sustainable.

So the next post I made was:

“I agree with many of Viktoria’s points.  I especially love that her contract is primarily built upon a concern for the welfare of others, and places an emphasis on giving equal access to many of the resources conducive to a successful life.  I am 100% behind the protection of fundamental human rights.  However, I worry that a society built around her contract, namely the components relating to free education and healthcare, will be too costly and presents a high likelihood for wasted resources.

When resources are provided for “free”, there will always be free-riders who game the system at the expense of actual contributors.  I don’t feel entirely comfortable with a heavily progressive tax system, because I want to enter into a society that promotes hard work and [technological, academic, scientific] progress.  Though the Ayn Rand view appears to be controversial, I feel that it is truly representative of reality – many people are motivated by greed and profit, but many breakthroughs in medicine, science and technology–solutions to many of our country’s existing social problems–have come out of a desire to accumulate wealth and prosperity, as well as the liberty and resources to do so. I fear that the imposition of a larger proportion of taxes on high-income earners (hopefully the greater contributors in a society) would be a crutch to innovation.  The tax rate should be the same among all income levels – the wealthier will still be providing a larger portion of the government’s revenue, but at least it will be fair across all income-earners.

I think that Mike’s view is a much better approach to handling the “free education” portion of her contract.  I would love to advocate equal access to resources such as education and healthcare, but I worry that Viktoria’s approach may be too costly.  By admitting individuals into a specific level of study consistent with their likelihood to succeed in that subject are, we will be making the best use of our educational resources.  I also like that Mike sees excessive taxation as a form of harm – I mentioned in an earlier post that the government’s role should merely be to protect individuals, their property and their rights from harm, and excessive taxation can definitely cripple the economy from growing and negatively impact many people.

The bottom line is that everyone will enter the world with advantages and disadvantages.  Some people will need to work harder than others.  But my nirvana is a merit-based society that is constantly growing and innovating.  One where the government provides its citizens the freedom to do as they please so long as it doesn’t infringe on the freedoms of others, or inflict harm on others, and a society where the more privileged will do their part to alleviate social ills.  If more privileged individuals do not exercise their social responsibility to address social problems, the government should provide incentives for them to do so, but should not be the direct provider of any free public service.  The government should definitely step in when the rights and preservation of citizens are threatened, but overall I think individuals will need to make the best of the cards they are dealt in order to truly allow society to flourish and continue to progress.”

And, of course, I received even fewer comments on my second post than I did on my first.

I felt bad.  I felt like the ideas I was expressing were very different from what I’ve advocated in the past.  I just sat and thought, “Am I becoming one of them? Am I moving into the dark side!?”  But I realized that I’m not.  I am effectively applying ethical principles that seem like conventional Republican ideals to back policy decisions that a more moderate Democrat would advocate.  I’m still blue, but more of a baby blue than a royal blue.  It’s better to sit on the fence anyway – sitting at either end of the spectrum just starts too much trouble.  🙂

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A brighter future for immigrants

People come to the U.S. in search of a better life, bringing their children with them in hopes that they may enjoy the same level of opportunity and freedom as do all Americans. We truly need a system that allows children who were raised in the U.S., in spite of their undocumented status to easily transition into the system without fear of deportation.  The United States should be a country that can be viewed as a sanctuary, not one that requires people to jump through arbitrary hoops in search of a better life.

“I was released today because I am a low priority and not considered a threat,” Mr. Vargas said by telephone shortly after his release. “I would argue that the 11 million undocumented immigrants in this country are not a threat either.”

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Sewol

My heart is broken upon reading about the capsized ferry boat in South Korea.  The chances of something of this nature happening are so small, but the fact that things like this happen at all should be reason enough for us to appreciate everything we have.

I feel that over the last year I’ve developed a greater appreciation for things I often didn’t attach as much value as I should.  Every morning I thank God that I have all five senses, that I woke up in a comfortable bed next to my fluffy little dog, that I have something to eat for breakfast, that my life is filled with so many people who care about me…  I realize how lucky I am to be alive, and how incredibly fortunate I am to have healthy relationships with my loved ones.  But it’s events like this that further remind me of how much I have to be thankful for.

This story got me thinking: if I were in a life-threatening situation, what are the things I would wish I had with me?  What would be the things I would be deeply saddened about never seeing again?  It wouldn’t be any type of material things… it wouldn’t even be the successes and accomplishments I’ve made academically or career-wise – it would be my family.

My thoughts and prayers go out to those affected in this tragedy.  I feel that the reason God lets things like this happen is so that we will take a step back to appreciate how much we have and how incredibly blessed we truly are.

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Throwback: The Horatio-Alger Myth

The following is a blog I wrote on November 2nd, 2010. Oldie, but goodie. I think it’s pretty cool that we’ve pulled a good amount of troops out of the middle east almost two years since I wrote this. 🙂

 

The Horatio-Alger Myth emphasizes that with dedication and a little elbow grease, anyone can move up in life and achieve the American Dream. As Americans, we value our negative freedom to be left alone so that we can all do our own thing and live up to our own potential. This negative freedom coexists with “equal opportunity” or an equal playing field for all. Although Socialism is valued in many other countries, Americans see it as ‘the devil’ and believe that the government should stay out of our personal lives, because with their own hard work, any American can achieve anything they set their mind to.

I’m writing to proclaim that this myth is false. Although equal opportunity is a great idea to advocate, I think that equal outcomes are more important. What good is the right to an attorney when only a few people can afford to hire an attorney? What good is the right to a free and public education when the government keeps cutting the higher education budget, and more and more college students need to pull out loans? In these cases, only the wealthy and privileged “classes” (For lack of a better term) are truly able to enjoy these “equal opportunities” and live up to the Horatio-Alger Myth. In the words of George Orwell in his book, Animal Farm, “All animals are born equal, but some are more equal than others.”

In a country where the income gap between the rich and the poor is growing greater in disparity, it is important that we focus on these issues. Although I believe that hard work can create more opportunities for people to advance, I also see that there are some circumstances that inhibit a person from gaining equal access to a successful life.

In response to this problem, there should be more access to higher education for lower income students, whether if that be through increased funding for grants, loans, or scholarships. There are so many unbelievably gifted and intellectual people I have met in my lifetime who want to go to college, but never did because they couldn’t afford it. They shouldn’t be limited just because they don’t have the money. Although this looks like a sort of redistribution program I’m talking about, it’s not necessarily what I am advocating. I hate the welfare system, and I only feel that certain families with very strict qualifications should be entitled to assistance; but increasing funding for students to pursue a college career would definitely close the growing gap between the rich and the poor. It would be nice to know that our GDP growth is happening at all levels, and not just at the top.

This funding would not come from increasing taxes; rather I will bring up a more controversial idea that all the candidates running in our election today failed to mention.

Particularly the candidates for the Senate and the House addressed the ever-growing deficit, and how crucial it is for us to eliminate it. They address the crumbling education system, but how little funds we have for it. But they never once mention the war going on overseas. We’ve spent billions of dollars in the past 10 years fighting this war. For what reason—No one really knows anymore. I think it’s clear that we’re depleting our resources to afford this war, and it’s irrational for us to continue. A just war is one with a just cause; this war has no cause. A just war causes as much harm proportional to the amount of good that comes out of it; we’re clearly crippling our economy for this. It’s not right for us at home to live our daily lives as if thousands people are not perishing overseas. It’s not right for less than a fraction of a percent of the population to serve in the armed forces and fight this war, when polls show that a majority of them don’t even support the war. What are we trying to accomplish!? We haven’t made any progress. I think it’s time for this war to end, and for the revenues to go toward our internal affairs. I believe in just war; I don’t believe that this war is just.

The U.S. Education System: Reinforcing Ignorance

I just read an article talking about a new Arizona law banning Ethnic Studies classes in the public school system, particularly “Mexican-American Studies.” This kind of parallels to Utah’s failed attempt to ban sex education in primary education during this past legislative session. And it kind of also reminds me of that 1925 Scopes Trial when that high school teacher was tried for teaching evolution to his students.

The notion of schools intentionally excluding so-called ‘controversial topics’ from their curriculums sort of worries me. In a perfect world like North Korea, I guess you could say things are ‘peaceful’ when ideas are controlled and manipulated in such a way that ensures that everyone sees things the exact same way. If everyone had perfect access to the exact same information and formed the exact same opinions, there will be no room for disagreement or conflict. In theory, this is nice, but the real world isn’t like that.

The reasons behind laws like the one in Arizona and the attempt in Utah are that students shouldn’t be exposed to those types of information in school because that’s how they get ideas. Educators in Arizona believed that the radical ideas of Mexican youth to ‘rise up against the White man’ originate in their own classrooms and then influence their ‘troublesome’ behavior. Educators in Utah felt that sex education exposed them to unnecessary information that actually makes them curious and leads to increasing teen pregnancy rates.

I think that it’s more important for students to be aware of this type of information rather than sheltered from it. It can’t be proven that this information will inhibit behavior our society is trying to control, but it can’t be proven that it encourages it either. There are so many different forces that influence a person’s way of thinking and the actions that result from them, but cutting access to essential information really makes no difference. If anything, it hurts the child and makes them more ignorant like the rest of the country.

Growing up in Utah, I feel like I learned more from people’s Facebook statuses than in school. It’s so embarrassing that a lot of kids in my generation knew nothing about the LRA until the Kony 2012 movement on the internet. It’s also humiliating that kids my age don’t care about politics until it’s posted on Facebook or Twitter, including the SOPA and PIPA legislation.

Reinforcing ignorance in future generations isn’t going to help this country move forward. I don’t know why our culture is so terrified of new ideas and calls them ‘radical.’ People need to understand that progress can only happen if kids are encouraged to have an open mind. New ideas should be inspired while they are in school so that they can make positive use of those ideas; if they have to learn about new things from outside sources, it might be taken to mean that those ideas are bad and may then lead to deviant behavior. But if new ideas are taught carefully, thoroughly and properly in a classroom setting, the information will be given to the student in a way that won’t be harmful to their learning and to society as a whole.

Obviously, I don’t have a Ph.D in child development, but this is just what I think.

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On Education.

Utah is ranked 51st in the nation in education – dead last.

Because of the type of culture Utah has, our young population is growing at an enormous, almost unsustainable rate (kind of like federal entitlement spending, eh?), and this is why we have the largest class sizes in the nation. Large class sizes make it difficult for teachers to provide adequate instruction to each student, and this is reflected in our standardized exams. This problem is prevalent at all levels of public education – elementary, secondary and higher ed.

This really bothers me. Education has always been very important to me. I’ve always worked my hardest to excel in every subject, and I probably got so used to being an “over-achiever” that now that I’ve been thrown into the harsh, cruel nature of the real world, I’ve been really negative about myself and my mind’s been full of self-defeating thoughts. Anyhow, I promised myself this wouldn’t be another personal post, so I’ll push that thought aside.

Now education may not be as important to some people as it is to me, and that’s completely fine. But I think there needs to be more efforts to better the education system in Utah to support the growing population.

One of the things that is really frustrating me is the growing costs of tuition – and for what? My first semester at the U was $1500 for 12 credits. I was able to finish my degree in three years, and my last semester was $3200 for 12 credits – Jesus Christ. I was lucky to have scholarships and reimbursement benefits to cover my tuition costs, but increasing tuition prices become a huge barrier to entry for a lot of students. This is something that needs to be dealt with, because I think it’s really sad when kids who want to college can’t do so just because they can’t afford it. I would be more understanding if I knew this money was being invested in a positive way, but sometimes I feel skeptical.

The University of Utah has some exciting projects being built or close to completion. This includes the new Nursing building, and the other is that new fancy-schmancy business building, the name of which I don’t remember. These are really cool projects, but it frustrates me because they costs hundreds of millions of dollars. What’s going to happen to all the older buildings? There are already plenty of buildings on campus that have plenty of unused rooms at any given time where classes can be held, but they remain empty and unused and money is being used to build all these new buildings.

I just feel like it would be wiser to maybe renovate the older ones to cut costs, or else at least consider expanding the faculty so that they can accordingly increase class availability as well. I remember how frustrating it was to be unable to get into a class I needed because it was full, or to have such an inflexible and inconvenient schedule because that’s the only way I could get my classes I needed to fit together.

While a lot of my discussion involved higher education, it is still just as important to strengthen the education system at the primary and secondary levels as well. Another big hindrance to a quality education is resources. Schools should have enough textbooks for students along with computers and other tools essential for their academic enrichment. Programs should be put in place to give students an incentive to excel and actually have an interest in school. And the teachers should be just as motivated as the students to set goals and work toward them.

If there’s area I would like to ask the Utah state government to spend more in, it would be in education. It’s not just about the spending though – education reform should be closely overseen by the right people to ensure efficiency and in making sure the money is being spent in the right places. Utah really needs a better education system and it’s humiliating that our state has the poorest rated education system in the United States. The economy is doing well in Utah, but that may not be the case for my generation if our education remains as crippled as it is now. I know that a greater emphasis on the importance of education would be an investment that would yield benefits for everyone in the state in ways that we will never know unless things change.

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On Healthcare.

I knew delegates play an important role in the electoral process, but I didn’t realize how significant that role really was until I decided to get involved. It’s been really fun to be engaged and to have candidates reach out to me and want to talk about MY opinions. But being a delegate has coerced me to take a stance on issues that I honestly have a tough time deciding how I really feel about them. Issues that I normally just ignore reading about in the paper because they just aren’t something I’m that passionate about. Issues that I think are difficult to really choose a side on because I could see things either way.

One of them is healthcare. Personally, I have been lucky to have grown up with health insurance all my life. My dad is retired military, so we had Tricare until my mom started working at the University of Utah Hospital, and now we have Regence Blue Cross Blue Shield. If my mom ever heard me cough just once, she would freak out and immediately send me to the doctor. It was always nice not having to worry so much about how much a doctor’s visit would cost. But there were other times where I would get really sick and doctors would run multiple tests to figure out what was wrong. I would see the billing statements in the mail, and it would cost hundreds of dollars for one doctor’s visit – but since we had a good insurance plan, my parents wouldn’t have to pay very much at all.

That’s my experience with health insurance. But I’ve been relatively healthy all my life. I’ve never had surgery, let alone stitches. I’ve never had an IV or been taken to the ER or ICU. But not everyone is as lucky as me. Not everyone was born without a pre-existing condition beyond their control. And not everyone can afford to pay the rapidly increasing premiums and deductibles that the insurance companies demand. That’s why I think healthcare reform is important. Maybe the ACA isn’t perfect, but I think it’s a good start.

The New Yorker has a good article today highlighting some of the discussion taking place in the U.S.  Supreme Court review of the ACA’s constitutionality. Here’s a snippet of my favorite part:

The real justification for the A.C.A. is the same one that Congress has used  for virtually all economic regulation since the New Deal: the Commerce Clause of  Article I, Section 8 of the Constitution, giving Congress the power

To regulate Commerce with foreign Nations, and among the several  States, and with the Indian tribes.

Medicare, Medicaid, not to mention the minimum wage—all have been passed,  without constitutional controversy, under the authority of the Commerce Clause.  To me (and most others, I am willing to bet), the A.C.A. is fairly  straightforward and uncontroversial application of this longstanding power. To  rule the A.C.A. outside the power of Congress would be a dramatic change in the  powers of the federal government.

Read more http://www.newyorker.com/online/blogs/comment/2012/03/health-care-supreme-court.html#ixzz1qL5ZwpGO

I can see the burden that businesses are trying to avoid. It is already costly to run a company, and imposing additional costs of healthcare for each employee may be especially cumbersome. I also think it’s tough to have to deal with the HHS mandate in which businesses are ‘forced’ to include contraceptives, abortions and whatnot in their insurance coverage. I feel bad for people who have to deal with this, because I am pro-life. I personally try to be understanding of people’s situations when they choose to make that decision, but if I were a business owner and I had to actually subsidize the health insurance costs of procedures that include abortions, I’d be pretty upset.

So in other words, my views on this are pretty mixed up. I think it’s important that everyone who wants health insurance should be able to have access to it. I especially think it’s important to get health insurance when you’re young even if you have perfect health because emergencies and accidents do happen. And I was happy that something was finally being done about it now because this is something that the government has tried to tackle for several decades. And I hope the Supreme Court sees it the way I do. It’s a start, and it’s changing so many people’s lives for the better, and I think it’s something worth being happy for.

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