Archive for July, 2012
The great economist John Maynard Keynes predicted back in 1930 that someday it would be possible to produce enough for everybody and that, when that happened, we could all retire from the rat race and enjoy life. His best guess was that we’d reach this point when economic output was eight times as great as it was then.
Since then, economic output has increased fivefold in the Western world, at least by some measures, but we’re still working almost as hard as we did then. Or rather, just as in 1930, some of us are working hard and others are unemployed. Keynes’s argument has been revived by two Britishers named Robert and Edward Skidelsky in a much-discussed new book, How Much Is Enough? Money and the Good Life (which I haven’t read) and summarized in an article in the Chronicle of Higher Education. Here’s what they say:
If scarcity is always with us, then efficiency, the optimal use of scarce resources, and economics, the science that teaches us efficiency, will always be necessary. Yet in any common-sensical view of the matter, scarcity waxes and wanes. We know that famines are periods of extreme scarcity, and that good harvests produce relative plenty. Thomas Malthus understood that when population grows faster than food supplies, scarcity grows; and in the reverse case, it declines. Moreover, scarcity, as most people understand it, has diminished greatly in most societies over the last 200 years. People in rich and even medium-rich countries no longer starve to death. All this implies that the social importance of efficiency has declined, and with it the utility of economics.
The beginning of sanity in this matter is to think of scarcity in relation to needs, not wants. And this is how we do normally think of it. The man with three houses is not thought to be in dire straits, however urgent his desire for a fourth. “He has enough,” we say, meaning “enough to meet his needs.” Flagrant manifestations of insatiability—such as an uncontrollable desire to collect cats or dollhouses—are widely viewed as pathological, not normal. We are all, in principle, capable of limiting our wants to our needs; the problem is that a competitive, monetized economy puts us under continual pressure to want more and more. The “scarcity” discerned by economists is increasingly an artifact of this pressure. Considered in relation to our vital needs, our state is one not of scarcity but rather of extreme abundance.
The material conditions of the good life already exist, at least in the affluent parts of the world, but the blind pursuit of growth puts the good life continually out of reach. Under such circumstances, the aim of policy and other forms of collective action should be to secure an economic organization that places the good things of life—health, respect, friendship, leisure, and so on—within reach of all. Economic growth should be accepted as a residual, not something to be aimed at.
I’m highly sympathetic to their point of view. I love the leisure I enjoy in retirement, and I feel smug about being happy without needing the latest model of this or the most advanced version of that, a big-screen TV, a hand-held computer, an automatic dishwasher, all the gadgets that some of my acquaintances seem unable to do without.
But who am I kidding? What I own is wealth beyond the dreams of avarice not only compared to people who live in poor countries or poor people in the United States, but compared to the average person in Keynes’ time. When I was a boy in the 1940s, I was happy to ride the trolley-car, to shovel coal into a furnace and to talk on a party-line telephone. But I would be miserable now if I had to do without a private automobile, a thermostat-controlled gas furnace and access to the Internet and e-mail. And even the average American in the 1940s was rich by world standards. The world is full of peasant villagers who are happy just having sufficient food, clothing and shelter, and from a universal perspective they are probably living more worthy lives than mine, but I could not be happy living as they do.
If you take my material possessions as the benchmark for what everybody in the world ought to have, this is not going to be possible without many people working very hard. In fact, it may not be possible at all. As the nonrenewable resources are used up, and as energy becomes more expensive, we may face a hardscrabble future in which people have to work very hard (by my standards) to be able to get by at all.
I read two unfavorable reviews of How Much Is Enough? One reviewer argued that if we give up the struggle for money and material possessions, we will come face-to-face with the basic meaningless of life, and die of boredom. The other argued that the Skidelskys’ program involves an unacceptable amount of social engineering.
I don’t think that too much leisure will be a problem. None of my fellow retirees whom I know is bored or finds life meaningless. They are all involved with their families, with volunteer work and with varied other interests, although not necessarily highbrow culture as the Skidelskys urge. To the extent that this is a problem, it is a flaw in our societal values, which can be changed. To the extent that it is a problem, it is a sad commentary on our values. There is something wrong with a society in which people are incapable of simple happiness.
Some people who agree with the Skidelskys’ goals might not like their specific proposals—a guaranteed minimum income, advertising no longer tax deductible as a business expense, a progressive tax on consumption. Yes, this is social engineering. But the economic system as it exists today is not value-neutral. It is tilted toward making people want more and against being satisfied with what you have. I think their goal is a good one. Reasonable people can differ on what means are acceptable to reach that goal.
My idea of the ideal society would be one in which people worked as much as they wanted. People satisfied with a subsistence wage could work four hours a day; people who wanted luxuries could work eight hours a day; and people who were eaten up with ambition or who loved what they were doing could work 12 hours a day. Right now there is a mismatch between what people want and what they have. Surveys indicate that there are many Americans working part-time who would like to work full-time. But may others would accept lower wages in return for fewer hours if that were offered.
Click on In Praise of Leisure for the full article by Robert and Edward Skidelsky in the Chronicle of Higher Education.
Click on Economic Possibilities for Our Grandchildren for John Maynard Keynes’ classic 1930 essay.
Click on The Scourge of Overemployment for an article by sociologist Peter Frase, who makes the case that many people work longer hours than they need to or want to.
Click on How Much Is Enough? for Alasdair Palmer arguing in The Telegraph that the quest for money and possessions is necessary to save us from boredome.
Click on Self-Appointed Messiahs of the Nanny State for a reviewer who criticizes the means proposed by the Skidelskys to achieve a leisured society.
Christopher Hayes in his widely-discussed new book, TWILIGHT OF THE ELITES: America After Meritocracy, tries to connect three important things—increasing concentration of American wealth and power, diminishing opportunity for average Americans to rise into the elite, and the manifest and growing irresponsibility of people in elite positions.
What ties these three things together, Hayes wrote, is the notion of meritocracy—that people get into elite positions solely because of their superior ability and effort, and they therefore owe nothing to anyone else.
The problem, as I see it, is not with the concept of rewarding merit. Thomas Jefferson believed that the hereditary aristocracy of his time should be replaced by a “natural aristocracy” based on individual ability. His idea of the natural aristocracy was that it is good for society as a whole if important positions are held by people best qualified to hold them. Officerships in the British Army in the 18th century could be purchased by wealthy aristocrats; Jefferson’s idea was that you will have a better army if promotion is based on meritorious service.
What we have now is the idea that society should sort people into winners and losers, that both winners and losers by definition deserve what they get, and that the only consideration is that the contest be fair. You can’t have a good society on that basis.
An army couldn’t function if the officers believed that they were winners, the enlisted ranks were losers and nobody owed anything to anyone else. Officers are paid more because they exercise more responsibility, not because the enlisted ranks deserve to be punished for lacking the ability to become officers.
Of course the military is not and should not be a model for a free-enterprise economy, but the principle still holds true that competition should serve the good of the whole. In a well-functioning free enterprise system, entrepreneurs compete to determine which can best serve the needs and wants of the public, and the one who does best reaps the greatest reward. The trouble with the winners-and-losers model is that merit is measured solely by who accumulates the most money—whether the means are beneficial to society, irrelevant to society or harmful. The evil of the Hunger Games was not so much that the competition was unfair (although it was); it was that young people had to be subjected to this competition in the first place.
Hayes pointed out that people in elite positions, no matter how many advantages they have, manage to convince themselves that they did it all by themselves. Gov. Ann Richardson of Texas said of the first President Bush that he was born on third base, and thought he had hit a triple. Christopher Hayes thinks that is true of the elite generally. His book describes ways in which members of the economic and social elite tilt the system in their favor and that of their children. College admissions based on educational testing was supposed to provide a level playing field, but now there are many consultants who, for a fee, can teach you how to score higher on a test than your knowledge warrants. The playing field becomes increasingly tilted, but the winners retain their sense of entitlement.
Inequality in the United States has become what Hayes called “fractal.” Americans in the upper 10 percent income bracket get about half the national income, but the top 1 percent get half of everything the top 10 percent get; the top 1/10th of 1 percent get half of everything the top 1 percent get; and so on with the top 1/100th of 1 percent, which is a few hundred people. This makes income inequality is an issue for almost everybody, no matter what bracket they’re in. Hayes is encouraged by this. I’m not so sure myself. I think it is perfectly possible to resent those above you on the income scale while fearing those below you.
We Americans historically have believed that inequality is all right so long as there is a rough equality of opportunity. The problem with this, as Hayes pointed out, is that great inequality in wealth and income generates inequality of opportunity. We Americans think we have more opportunity to rise than Europeans with their welfare states, but statistics indicate that it is harder for us to rise out of the social class in which we’re born than it is for them.
Hayes thinks income inequality would be less if taxes were higher (total U.S. taxes from all sources are about 26 percent of GDP, he reported, down from about 30 percent in 2000) and if there were more public services, such as libraries and parks, that are open to all on a equal basis.
Twilight of the Elites has a chapter to what Hayes calls the “social distance” between the elites. Jacob Riis, writing at the turn of the previous century, remarked that “half the world doesn’t know how the other half lives.” Right now the upper 1 percent are so insulated they have no idea how 90 percent of the fellow Americans live. As a minor example, I read how Senator Richard Russell, a powerful leader in the 1950s and 1960s, loved baseball and would go to games and sit in the bleachers; nowadays somebody in his position would watch from a skybox provided by some lobbyist. Military service once brought men from all classes of society together. Now the upper crust shun military service.
I think that’s why the police can be so savage in clamping down on Occupy Wall Street and other protest groups. The upper crust hate and fear having their space invaded by the rabble. Hayes thinks things might be different if “social distance” were less.
The root of the problem, as I see it, is a moral and philosophical one—the false idea that whatever provides the highest financial return is best for society, and therefore the impersonal workings of the free market can be a substitute for individual ethics. The case for a competitive free market is that it is more efficient and less oppressive than central economic planning. It can never be a substitute for standards of ethics and professionalism. Today the most trusted institution in American society is the armed forces. The professionalism and code of honor of the military meritocracy is not measured by mere money.
If any form of society that is likely to exist, some people are going to have more wealth and power than other people. That would be true even if there were less inequality than there is now. The problem is when there is a lack of accountability—when members of the elite do not feel accountable to any internal or external standard for the way in which they exercise their power, and we the people do have have or use the means to hold them accountable.
Click on Why Elites Fail for an excerpt from Christopher Hayes’ book, which gives the essence of his argument in his own words.
Click on The Age of Illusion: an Interview with Chris Hayes for an interview of Hayes for Jacobin magazine.
Click on The Cult of Smartness: How Meritocracy Is Failing America for a critical review of the book by Conor Friedersdorf in The Atlantic.
Click on Trickle-Down Distress: How America’s Broken Meritocracy Drives Our Nation’s Anxiety Epidemic for an excellent article by Maura Kelly in The Atlantic about the harmfulness of believing that life is fair and that what you get is what you deserve.
The Four Corners investigative team of Australia’s ABC broadcasting network tried to retrace Julian Assange’s steps during the time he is accused of having abused two women in Sweden. They showed that there are many questionable things about the charges, and that there are good reasons why he fears being extradited to Sweden, although exactly what happened remains a mystery.
Click on Sex, Lies and Julian Assange for the video, a transcript and links to additional information. If you viewed the video above, I recommend you click on this link and then the link to the sidebar showing an interview with Claes Borgstrom, the lawyer for Anna Ardin and Sofia Wilen, the two alleged victims.
Click on Wikileaks: the Forgotten Man for the Four Corners report on the Bradley Manning case.
Click on The Wikileaks Interviews for Four Corners’ in-depth interviews with eight key figures in the Bradley Manning Case.
These Four Corners links have further links to further information and updates in the Julian Assange and Bradley Manning cases.
- Think about something you love. Imagine how you would feel if you lost it. Now be happy you have it. Research shows savoring has powerful affects on well-being.
- Take a nap. Studies show we can process negative thoughts just fine when we’re exhausted — but not the happy ones.
- Smile. Happy or not, just smile. Studies show it can trick your mind into thinking you feel good. And it has plenty of other benefits.
- Hug someone. Corny? Maybe. But it works.
- Share the best event of your day with your romantic partner and have them do the same.
- Work on a hard problem that makes you think. Studies show if your brain is dedicated to a mental chore, it can’t bother you as much with distressing emotions.
- Send someone a thank you email. Research shows gratitude is one of the most powerful keys to happiness.
I got this off the Barking up the wrong tree web log.
Hat tip to The Dish.
Here are recent additions my Articles menu. If you find my posts interesting, you probably will find these items equally interesting or more so.
Noam Chomsky and the endangered heritage of Magna Carta. Hat tip to Jack Clontz.
This is the text of a lecture given by Noam Chomsky, the distinguished linguist and radical political activist in June at the University of St. Andrews in Scotland, as part of its observance of its 600th anniversary. The Great Charter issued unwillingly by King John in 1215 is the basis for the tradition of rule of law in the English-speaking world. Chomsky noted that it has two parts: the Charter of Liberties, to protect the individual from the arbitrary power of the crown, and the Charter of the Forest, to protect the commons from the rapacious landed aristocracy. He traced the history of the expansion and contraction of the basic principles of Magna Carta and concluded that these principles are in eclipse today.
Barack, Mitt and Adam Smith. Hat tip to Bill Elwell.
Adam Gopnik in the New Yorker pointed out that Adam Smith, a classic defender of free enterprise and the founder of the modern discipline of economics, would not necessarily align with Mitt Romney or the Republican Party of today. Smith was critical of corporations; he favored high wages, public works, public education and provision for the poor; and he believed in the moral sentiments that allow you to imagine yourself in somebody else’s place. He did have more sympathy for enterprising merchants and manufacturers than for the landed aristocracy and chartered corporate monopolies. For him the free market was a means of limiting the power of businessmen and forcing them to serve the public interest. It is a stretch, though, to say that Smith would have been more in sympathy with Barack Obama. The issues of Smith’s day divided people along different lines than the issues of our day.
Vanity Fair ran this article in its August issue. Nicolas Shaxon describes legal and ethical grey areas in Mitt Romney’s sources of wealth and evasion of U.S. taxes, and shows his financial operations are still largely hidden from public view.
Andrew Levine in Counterpunch rebuts the argument that liberals should vote for Barack Obama, unsatisfactory as he is, because he is a lesser evil that Mitt Romney. Both candidates serve the interests of what Franklin Roosevelt called the “economic royalists,” he said, but the great evil of the Obama administration is that President Obama has co-opted the liberal opposition. Violations of basic human rights which would have outraged liberals under the Bush administration are accepted and even boasted about under Obama.
Diane Ravich, who writes for Education Week, tells public schools and private consultants boost student test scores through fraudulent methods. Her article reminds me of what I read about the old Soviet Union. Communist economic planners set high quotas which local managers could not realistically meet. The result, which should have been predictable, was that some managers cheated, and some managers technically met their quotas in ways that were counter-productive for the overall economy. I think the same dynamic is at work in the high-stakes testing in the federal No Child Left Behind and Race to the Top education programs.
The hollowing out of the U.S. economy is not limited to manufacturing industry. When I was a newspaper reporter, I used to console myself with the thought that I held a job that couldn’t be sent overseas. That isn’t true of today’s reporters for local newspapers.
If there is any principle of the Constitution that more imperatively calls for attachment than any other, it is the principle of free thought — not free thought for those who agree with us but freedom for the thought of those we hate.
==Oliver Wendell Holmes Jr.
Mayor Rahm Emanuel of Chicago said he will try to prevent the Chick-fil-A fast-food restaurant chain from expanding in their cities because they disapprove of the opinions of Chick-fil-A President Dan Cathy, a Southern Baptist who is strongly opposed to gay marriage.
A Chicago alderman, Joe Moreno, said he will try to prevent a Chick-fil-A restaurant from opening in his ward, and Mayor Emanuel said Moreno has his support. Boston Mayor Thomas Menino said Chick-fil-A is not welcome in Boston.
Nobody has accused Chick-fil-A of breaking any laws. Nobody has accused Chick-fil-A of discriminatory hiring practices. Nobody has accused Chick-fil-A of refusing service to customers. But Mayor Emanuel thinks he has the right to use the power of government to punish a business because its CEO expressed an opinion he doesn’t agree with.
People who favor gay marriage are not going to change anybody’s minds by trying to repress people with whom they disagree. Mayor Emanuel’s action serve only to harden battle lines and lock people into their previous positions. Opponents of gay marriage, including Mike Huckabee and Rick Santorum, have rallied to Dan Cathy’s support. Very likely Chick-fil-A, whose business is concentrated in the South, will have a net gain in business as a result of the uproar.
Now I don’t agree with Dan Cathy myself. I don’t think his opinions should go un-contradicted. And anybody who is offended by his views is free to patronize some other restaurant. That’s different from government persecution.
If you really believe in free speech, you believe in it for everyone. If you make exceptions based on your emotions, why should anybody take you seriously? If some mayor somewhere tries to close a business because its owner is for gay marriage, Rahm Emanuel gives him an excuse to accuse his opponents of being hypocrites.
Somebody pointed out that, until a few months ago, Barack Obama took the same position as Dan Cathy—that the marriage relationship only pertained to a man and a woman. Would President Obama have been unwelcome in Chicago and Boston?
Click on Rahm Emanuel’s dangerous free speech attack for a good post by Glenn Greenwald, a civil liberties lawyer who is gay himself.
Click on In Defense of Chick-Fil-A for a good post by Adam Serwer of Mother Jones. He quoted John Knight, director of the LGBT (lesbian gay bisexual transgendered) rights project at the Illinois branch of the American Civil Liberties Union, as saying, “We think there’s a constitutional problem with discriminating against someone based on the content of their speech.”
Click on Don’t Fil-A the First Amendment for the view of Scott Limieux of The American Prospect.
Click on My evolving position on gay marriage if you’re interested in my personal opinion on this subject.
When I was a newspaper reporter, I used to console myself with the thought that at least I had a job that could not be shipped overseas. This is no longer true. Some newspapers are outsourcing editing and even reporting of local news to countries such as India and the Philippines.
All this is made possible by the Internet. A lot of information is available on-line. You don’t have to walk to city hall or the county courthouse to get it. You don’t have to be in the same city to interview a local official by phone. Press releases are available on-line, and you can rewrite them as easily in one place as another. Some public meetings are televised and even available on YouTube; you don’t have to be at the meeting to summarize what was said.
What is lost is the background knowledge that comes from living in a community, which enables you to understand the significance and context of what you report. But this is not quantifiable. For certain newspaper executives, particularly executives of newspaper chains who spend only a few years in each place, what counts is cutting and improving the next quarter’s financial results. Longer-term consequences are somebody else’s problem.
Click on Now They’re Even Outsourcing “Local” Journalism for a report by Ryan Smith on Journatic and Blockshopper, two journalism outsourcing companies. He told how he worked for Journatic as a copy editor of articles written about local news in Chicago, Houston and other U.S. cities by far-distant reports in, among other places, the Philippines.
Click on Outsourcing Journalism for an older report on outsourcing local news editing and reporting to India.
Click on Media Outsourcing and Journatic: Hate the Player, Not the Game for a defense of news outsourcing. The argument is that by giving up the low-end side of reporting, you free up reporters for higher-value activities..
Click on Clayton Christensen for the home page of the man who wrote the book on what happens when you give up on the basic “low-end” work.
Many liberals who are dissatisfied with Barack Obama intend to vote for him anyway because they think Mitt Romney is worse. But is President Obama really the lesser of the two evils?
Both Barack Obama and Mitt Romney are committed to tearing up the Bill of Rights in the name of the so-called war on terror. Both are aligned with Wall Street financiers, and to continued war overseas. On the other hand, Obama is less extreme than Romney, probably will make better (or less bad) Supreme Court appointments and make be better on social-cultural questions that don’t threaten the wealthy and the powerful. But none of these things make him the lesser evil.
What the Obama administration has done, which the Bush administration did not do and the Romney administration probably would not be able to do, is to destroy the liberal opposition. Democrats in Congress defended Social Security against President Bush; they have not defended it against President Obama. They questioned President Bush’s claim of authority to imprison and torture people on his personal say-so; they have not questioned President Obama’s claim to kill people on his personal say-so. If President Romney started a war with Iran, I’d expect a certain number of Democrats to oppose him; if President Obama did the same thing, not so much.
Republicans in Congress have been justly criticized for partisan obstructionism, but on issues of civil liberties, waging war and protecting financiers, there is a remarkable bipartisan consensus. I would have thought Republicans would oppose President Obama’s assertion of unilateral power to commit acts of war, target people for killing and cloak his actions in secrecy, but on these issues they are at one with the Democrats.
I expect to vote either for Jill Stein, the candidate of the Green Party, or for ex-Gov. Gary Johnson of New Mexico, the candidate of the Libertarian Party. It doesn’t really matter, since it is a foregone conclusion that President Obama will carry New York, but I would not vote for Obama or Romney even if New York were a battleground state.
Click on Obama May Not Even Be the Lesser Evil for a good article by Andrew Levine in Counterpunch which makes this point.
According to this Al Jazeera English report, the world’s wealthiest people have more than $30 trillion stashed away in secret tax havens. That’s more than the annual combined gross domestic products of the United States and Japan.
Tax havens are worth looking at a time when governments are cutting back on basic public services because they supposedly can’t afford them. Maybe the Greek government wouldn’t be broke if the richest Greeks weren’t able to evade paying taxes.
Al Jazzeera has its own slant on the news, and I wouldn’t recommend anybody use it as their sole source of news, but I get information and ideas from Al Jazeera that I don’t get from the mainstream American TV networks, and I spend more time watching Al Jazeera on my computer than I spend watching news on TV from all sources combined.
Microsoft is a once-dominant company in its industry—like Sears Roebuck, like General Motors, like IBM, like Kodak—that is resting on its laurels while competitors forge ahead, Kurt Eichenwald reports in the current issue of Vanity Fair. Its stock price has barely budged in the past 10 years, while the price of Apple Computer’s stock has increased 10-fold. Just one Apple product, the i-Phone, brings in more revenue than Windows, Office, Xbox, Bing, Windows Phone and every other Microsoft product put together. Last week, after Vanity Fair went to press, Microsoft reported its first quarterly loss since it became a public company.
Eichenwald puts the responsibility on Bill Gates’ successor, Steve Ballmer. He indicts Ballmer for all the usual sins—too much bureaucracy, too much caution, short-term thinking—but he sees the heart of the problem as a management practice called “stack ranking,” which was pioneered by CEO Jack Welch of General Electric.
Every current and former Microsoft employee I interviewed—every one—cited stack ranking as the most destructive process inside of Microsoft, something that drove out untold numbers of employees. … …
“If you were on a team of 10 people, you walked in the first day knowing that, no matter how good everyone was, two people were going to get a great review, seven were going to get mediocre reviews, and one was going to get a terrible review,” said a former software developer. “It leads to employees focusing on competing with each other rather than competing with other companies.” … …
For that reason, executives said, a lot of Microsoft superstars did everything they could to avoid working alongside other top-notch developers, out of fear that they would be hurt in the rankings. And the reviews had real-world consequences: those at the top received bonuses and promotions, those at the bottom usually received no cash or were shown the door.
… … As a result, Microsoft employees not only had to do a good job, but also worked hard to make sure their colleagues did not.
“The behavior this engenders, people do everything they can to stay out of the bottom bucket,” one Microsoft engineer said. “People responsible for features will openly sabotage other people’s efforts. One of the most valuable things I learned was to give the appearance of being courteous while withholding just enough information from colleagues to make sure they didn’t get ahead of me in the rankings.”
Worse, because the reviews came every six months, employees and their supervisors—who were also ranked—focused on their short-term performance, rather than on longer efforts to innovate.
“The six-month reviews led to a lot of bad decision-making,” one software designer said. “People planned their days and their years around the reviews around the review, rather than around products. You really had to focus on that six-month performance rather than what was right for the company.”
It is as if you had a football team, in which the two best players would get huge bonuses and the worst player would be dropped after the end of the season, regardless of the team’s won-lost record for the season. How could they even function as a team? Each individual would focus not on the score, but on making himself look good, and his teammates look bad.
W. Edwards Deming, the father of Total Quality Management, strongly opposed performance reviews and merit ratings. Rank order is meaningless, he said, because, among any group of people, the differences are usually not statistically significant. Usually the whole group is doing well, or doing poorly, and it is usually for reasons that group members don’t understand or don’t control. The key to quality management, he said, is figure out what those reasons are.
It is true, Deming said, that sometimes there are people who are so outstandingly good at what they do that what they do is in a different category from all the rest, and there are other people who are completely unable to do their jobs. But it always will be obvious who these people are. It is not worth bothering about differences among people so minor that you have to do an evaluation process to determine what they are.
Deming thought most people have an innate desire to do work they can be proud of, and management’s desire is to show them how. His ideas were fashionable 30 years ago, but they are in eclipse now. The prevailing idea now is to sort people into winners and losers, reward the winners and punish the losers. to be rewarded. And anybody who, by some definition, is a loser is not worth bothering about or listening to. The result is a kind of Hunger Games society in which people are too concerned with surviving high-stakes competition to be able to think of whether there is a better way.
Click on Microsoft’s Downfall: Inside the Executive E-mails and Cannibalistic Culture That Felled a Tech Giant for Vanity Fair’s sample of the article and an interesting comment thread. You have to obtain the magazine to read the whole article. The article is well worth reading in full.
Click on Microsoft reports first quarterly loss as a public company for a report from the Washington Post on Microsoft’s latest financial results.
Click on Deming and the rise and fall of quality for an alternative philosophy of management.
This chart is from a review of a book entitled Tribal Leadership, whose subject how to bring an organization from the bottom Stage 1 (“Life Sucks”) to the top Stage 5 (“Life is Great”). But as I see it, most enterprises go in the opposite direction. They start at Stage 5 and gradually decline to Stage 1, and the chart is a great illustration of that devolution.
In the case of business, the great entrepreneurial pioneers start out by doing something new and important for the love of it, then figuring out how to make money from it. After the founders’ generation passes away, the enterprise eventually falls into the hands of people who care only about the money. If money is your only objective, it is hard to see why you should put the good of the enterprise ahead of your own personal ambition. That puts the organization in Stage 3 and on the way to Stages 4 and 5.
Ranking of employees for the purpose of reward and punishment, as is done at Microsoft, almost forces the employees to think of themselves first and the enterprise second. Of course this kind of devolution is not just limited to business. High-stakes testing in the public schools is another example.
Nicholas Shaxson gives a good glimpse of Mitt Romney’s secret financial empire in the current issue of Vanity Fair—a glimpse and not a full picture, because the bulk of Romney’s investments are still hidden from view.
It’s striking how much of Romney’s wealth is invested in foreign tax havens, outside the scrutiny of the Internal Revenue Service or anybody else. When Romney reluctantly made public his 2010 tax filing, it included 55 pages of reports on dealings with foreign entities. Maybe Romney believes in America, but he doesn’t keep his money here.
Offshore tax havens not only enable Americans such as Romney to shelter income from U.S. taxes, they provide a way for foreigners to invest in the United States while escaping the taxes, disclosure requirements and regulations to which they’d be subject if they invested directly. Shaxon reported that a filing from Mitt Romney’s first $37 million Bain Capital Fund in 1984 included $2 million from Robert Maxwell, the crooked British newspaper tycoon; $1.5 million from two anonymous companies that shared a Miami address with Eduardo Poma, a member of El Salvador’s murderous ruling oligarchy; $2.5 million from a Swiss corporation; $3 million from a Bahamas corporation; and three corporations from Panama, the money laundering center of Latin America.
Romney’s overall income tax rate was just under 15 percent, much less than most wealthy or even middle-class Americans pay. He used a tax loophole under which his payments from Bain Capital were defined as investment income (“carried interest”). That’s the same tax loophole that hedge fund managers use.
He has more than $100 million in his Individual Retirement Account, which is very good. The possible explanations are that Romney is a uniquely skillful and lucky investor, or that he used to subterfuge to undervalue his original investment.
Shaxson adds details to the off-told story of how Mitt Romney’s Bain Capital managed to profit whether the companies in which they invested did well or poorly. The basic story is that Bain Capital bought companies with borrowed money, then loaded the debt onto the companies themselves while Bain executives collected big fees and dividends. Sometimes the companies did well under Bain Capital management, sometimes they collapsed under the new burden of debt, but whether they did well or poorly, Romney and Bain Capital did well.
It is important to emphasize that none of this is necessarily illegal. Shaxson states repeatedly in the article that he has no evidence that Romney broke the law—only that, in many cases, if he did break the law, there would be no way to know. What Shaxon does show is that Romney is the common type of businessman who thinks that whatever is legal is ethical, and anything in a grey area is legal.
The Obama presidential campaign is making Romney’s finances a central issue. That’s legitimate, but I don’t know of anything the Obama administration has done or proposed to do about foreign tax havens or any of the other abuses the Obama campaign denounces. President Obama hasn’t even tried to close the “carried interest” tax loophole, which enables hedge fund managers to get preferential tax treatment. If what Governor Romney is doing is so wrong, what has President Obama done, tried to do or propose to do about it?
Buy the August issue of Vanity Fair or click on Mitt Romney’s Offshore Accounts, Tax Loopholes and Mysterious I.R.A. to read the full article. It’s well worth reading in full.
Click on George Romney and Mitt Romney for a contrast of Mitt Romney with a very different type of businessman.
Mass killings such as the one in Aurora, Colorado, are rare but horrible. They take place against a background of a declining U.S. overall murder rate and a declining U.S. violent crime rate. And the frequency of mass killings in the United States appears to have passed its peak.
Now I agree that statistics are no consolation if you or someone you love is a murder victim, and I know there are neighborhoods and communities in the United States where violence is a clear and ever-present danger. But average middle-class Americans are less in danger of violent crime than they’ve ever been.
Click on The Declining Culture of Guns and Violence in the United States on the Monkey Cage web site for the statistics on the declining murder and violent crime rate.
Click on Horrifying But Rare for an article on rampage killings by Grant Duwe, director of research for the Minnesota Department of Corrections and author of Mass Murder in the United States: a History.
Old Jules is the handle of a blogger who lives in the Texas hill country. In his Ask Old Jules blog, he answers questions from readers such as this one.
Old Jules, what can you tell me about how to treat a woman I care about?
I was only married 25 years, divorced 15 years ago. Still learning a lot, but I think there are some learnings I’ve gleaned from 45 years of intimate contacts with women.
- Be attentive and listen to what they say, even if you don’t agree or like what you hear. The person probably knows you better than anyone else on the planet. Knows things about you that you don’t even know about yourself. Listen and consider what’s said, ponder whether it’s true, or untrue. And ponder whether, if true, it’s something you respect in yourself and don’t wish to change, or something you’d like yourself better if you changed. Not for the woman you care about, but for yourself.
- Respect boundaries. Recognize the woman you care about is a human being with a life and desires unrelated to your own. Recognize for your own benefit and for hers that much of what goes on in her head, her heart, and her life is simply none of your business unless she chooses to tell you. Care enough about her to support her needs and goals even if they mean nothing to you.
- Don’t expect your woman, nor anyone else, to ‘make you happy’. That’s your responsibility. Not hers.
- Don’t use the phrase, “You make me feel [fill in the blank]”. Nobody ‘makes you feel’ any way. People behave the way they do and you choose how you will feel about it.
- Remember things you might consider unimportant if they are important to her. Valentines, anniversaries, birthdays and just simple hugs, hand-squeezes and touches mean a lot more to most women than they mean to many of us men. It’s a small thing to us, but frequently a big thing to them. Not doing it is nearly certain to result in frustration and tension.
- Remember to say “I love you” frequently if you want to keep the woman you care about feeling you are the man she cares about.
Click on Make a Girl Like Me? for another sample of Old Jules’ wisdom.
I find the information in this chart, which I came across on Angry Bear, to be highly interesting, but I’m at a loss to know how to interpret it. I can’t figure out what common factor, if any, distinguishes the countries at the top of the chart from the countries at the bottom of the chart.
Maybe there is no common factor. Maybe we Americans have a low median net worth because so many of us are in debt, and maybe the Swedes and Danes have a low median net worth because they can rely on their extensive welfare state for security in sickness or old age and don’t need to save as much. Somebody in a comment thread said Australians have a high average net worth because their housing bubble hasn’t collapsed yet. But how did Italians come to have such a high average net worth?
I would like to know what other people think about this.
Click on U.S. Trails at Least 15 OECD Countries in Median Wealth for the post I read on Angry Bear.
Click on Hardheaded Socialism Makes Canada Richer Than U.S. for opinion by Stephen Marche on Bloomberg Business News.
All these commentaries are responses to an article which appeared earlier this month in the Toronto Globe and Mail, but I haven’t been able to link to the original article.
Click on With apologies to Dr. Seuss for another “cat in the hat” parody.
David Boaz of the Cato Institute has combed through the statistics, and unearthed achievements in which President Obama can justly claim to have surpassed President Bush:
Most deportations. Despite his endorsement of the DREAM Act, President Obama has deported more illegal immigrants than any president in history. He’s been deporting about 400,000 people a year, about double the number in the George W. Bush administration.
Most leaks prosecutions. The Obama administration has been criticized for leaking classified information in a series of campaigns to portray the president as a tough, engaged commander-in-chief. But meanwhile the administration information has used the 1917 Espionage Act to target suspected leakers in twice as many cases as all previous presidential administrations combined.
Most troops in Afghanistan. The United States had about 30,000 troops in Afghanistan during 2008, the last year of President Bush’s term. By the end of 2010, President Obama had increased that number to almost 100,000. It’s down to about 88,000 now, which still might surprise people who recall candidate Obama’s ringing antiwar speeches of 2008.
Most medical marijuana raids … …
Most drone strikes. President Obama doesn’t like the way the Bush administration treated prisoners at Guantanamo, so he’s taking fewer prisoners. The Obama administration has carried out at least 308 covert drone strikes in Pakistan, more than five times the 44 approved under Bush.
Most fundraisers. All presidents spend a lot of their time fundraising. But President Obama leads the league. Political scientist Brendan J. Doherty, author of the new book The Rise of the President’s Permanent Campaign, reports that Obama had held 104 fundraisers by March 6, compared to 94 held by Presidents Jimmy Carter, Ronald Reagan, George Bush, Bill Clinton and George W. Bush combined [at the same point in the years they campaigned for reelection]. CBS News White House correspondent Mark Knoller noted that by June 12 Obama had done 160 re-election fundraisers, twice as many as Bush by the same point in 2004.
Click on Obama’s Accomplishments to read Boaz’s whole article. I don’t agree with Boaz that the failed recovery is because President Obama has weighed down the economy with taxes, spending and regulation. The total U.S. tax burden is at a low point, the Obama administration is looking at cutbacks in Social Security and Medicare and the big Wall Street and energy companies ought to be regulated more than they are. In these respects, too, the Obama and Bush administrations are more alike than they are different.
Click on George W. Obama? for an article about the Obama administration has followed in the footsteps of the Bush administration by David W. Bromwich of Yale. [Added 7/20/12]
Click on Obama May Not Even Be the Lesser Evil for a comparison of Barack Obama and Mitt Romney by Andrew Levine of Counterpunch.
Here in Rochester, N.Y., we have as many theories about the bankruptcy of Eastman Kodak Co. as there are about the decline and fall of the Roman Empire.
What accounts for the failure of companies such as Kodak, U.S. Steel, or General Motors Corp. that, at their zenith, seemed invincible? I found one good answer in a New Yorker article, profiling a business analyst named Clayton Christensen, which I read a couple of months ago and have been thinking about ever since.
The New Yorker writer called Christensen “the most influential business thinker on earth.” I’d never heard of him until I read the article, but after reading it, I would like to believe he is influential.
Christensen, who’s on the faculty of Harvard Business School, started to look into the question of business failure 20 years ago. The reason once-dominant businesses failed wasn’t because their managers were complacent and stupid, he thought; most of them were pretty bright, and in any case were cut from the same mold as when their companies were doing well. The reason wasn’t because dominant companies failed to keep up with the technology, he concluded; it was the big established companies that led the way in new technology. An example (mine, not his) is the Xerox Palo Alto Research Center which created the basic technologies of the personal computer, but helped Xerox not one bit.
No, Christensen found, once-dominant companies were defeated by upstart competitors who offer inferior but cheaper technology. The upstarts gained a foothold in the low end of the marketplace and gradually moved up until they also dominated the high end. The transistor radio is an example. The original transistor radios had terrible reception. Nobody but teenagers would prefer them to the big RCA or Zenith console models. But over time they became good enough to compete with the old vacuum tube models, and RCA and Zenith were too far behind on the transistor technology to catch up.
Why were companies such as RCA and Zenith caught off-guard? It was because of a prevailing business philosophy, taught in all the business schools, which I heard a lot when I reported on business in the 1980s and 1990s, that a corporation should concentrate on those lines of business that generated the highest profit margins, and let the rest go. Transistors weren’t profitable enough to interest RCA and Zenith, so they didn’t bother to compete in a market that didn’t seem worth bothering about.
Christensen traced similar patterns in the steel, disk drives and automobiles. Rebar steel is his favorite example. Rebar is steel used to reinforce concrete. Steel mini-mills, which made steel from scrap, sold their steel as rebar because their original product was of such low quality. The big integrated steel mills, which made sheet steel for use in automobiles and appliances, were willing to let this low-quality, low-profit segment of the market go. But starting around 1979 or so, the mini-mills started improving their product and moving upmarket. The integrated steel mills concentrated on higher-quality, higher-priced and higher-profit segment of the market. Until one day the cheap product had been improved to the point where it could appeal to the big companies’ customers.
A similar dynamic explained how cheap compact cars came to dominate the U.S. auto market, and cheaper disk drives displaced higher-quality disk drives. I suspect that when and if the electric car industry becomes profitable, it will be a result of the electric golf cart industry gradually moving up market.
The article doesn’t mention Kodak or Xerox, but similar stories could be told of them. In the 1970s, Kodak decided that its profit margins came from manufacture of film, not cameras, so management decided to stop manufacturing cameras. Their philosophy was: Sell razor blades, not razors. The problem with that was that makers of cameras controlled the film format. Kodak by giving up this low-profit business gave up control of the film market. In the same way Xerox neglected the market for cheap desktop copiers, preferring to concentrate on the xerographic printers.
I don’t think there is any one thing that is the key to business success. If there was, everyone would come to understand it, everyone would do it and their efforts would cancel out, and some other thing or combination of things would become the key. But I think Christensen has a lot to teach, and not just about business management.
Christensen studied health care costs, and concluded that part of the problem is that the health care industry concentrates on the high end and neglects the low end. Hospitals spent money to have the best of equipment and the most highly-trained specialists, whose cost is covered by insurance, but neglect low-cost clinics that could handle many routine medical problems. As medical science advances, he thinks, more and more problems can be handled routinely, with nurse practitioners playing a bigger role, with the high technology and specialist knowledge on call as needed.
In his personal life, Christensen concentrates on the basics rather than on what gives the biggest immediate payoff. He is a devout Mormon. He promised God he would not work on Sundays, and he promised his wife and family that he would spend Saturdays with them, and always be home in time for supper and to spend evenings with his five children. Keeping this commitment sometimes required him to start work at 3 a.m. He was a Scout leader for 25 years and his children’s basketball coach, but he participated with his children in low-end activities—painting, plastering, Sheetrocking and home canning—that most parents in his income bracket would outsource. His philosophy was that practical skills and good work habits would stand them in better stead in the long run than the supposedly higher-return cultural activities. His philosophy and example provides much food for thought.
Click on Clayton Christensen – Home for Clayton Christensen’s home page.
Click on Clayton Christensen’s Disruptive Innovations for a link to the New Yorker article. If you’re a subscriber, you can read the whole article; if not, you only get an executive summary. If you want to read the whole article and don’t want to subscribe, go to the periodical room of a public library and ask for the May 14 issue.
Click on How Will You Measure Your Life? for an excerpt from Clayton Christensen’s latest book.
Click on Clayton Christensen: the Survivor for a Forbes interview with Christensen and his family members about his personal philosophy, struggles with life-threatening illness and ideas about health care.
The map shows the counties that are on the U.S. Department of Agriculture’s fast track to receive emergency drought aid. They cover a larger area than in any previous U.S. drought on record. Corn and soybean harvests are in danger.
Click on Drought devastating 26 states is the largest natural disaster in U.S. history for details.
Bookmark US Drought Monitor for weekly updates on U.S. drought conditions.
It seems obvious to me that this is the result of a long-range warming of the planet, and that things are going to get worse before they get better, or even level off.
[Update] My Iowan friend Anne Tanner commented as follows.
I think this chart omits a lot, or perhaps the map is a bit outdated. Numerous counties in Iowa have been on the severe drought list for weeks, and our farmers are cutting down corn–can’t even make silage out of it. Wonder what the standards were for this map?
In response to her comment, I checked and found the following maps. She’s right. The top map does not tell the whole story.