“Nazi”. For over a generation, that’s been a word used to defame someone else, one of the worst things you could call someone. Regardless of where and how the name is used, by consensus a ‘Nazi’ represents a soulless monster, a person with no humanity in his heart, and a certain deliberate viciousness about his actions and intentions. The use of ‘Nazi’ as a pejorative has gone through several incarnations, from the literal accusation that someone was part of the infamous political party and its agenda, to claims that a person’s politics or behavior is compatible with Nazi dogma, to a generic denunciation of an action or policy as inhumane, to the present use where no valid criticism can be found to use against a target, so ‘nazi’ is used as a particularly offensive yet generic name to smear someone with, a word so loosely applied that defense against it is all but impossible, since no specific charge is even made. It should be noted that for the last eight years, it has been pretty much standard for self-anointed “progressives” to address the Bush Administration as “nazi” for just this reason.
Now enters Barack “Change” Obama. Obama claimed to respect the heroism of John McCain, his opponent in the general election, but in fact he did nothing to defend McCain against a flood of unworthy malice from Obama supporters. The O mumbled a few excuses about not being able to control his people, which should be troubling from a man claiming he can bridge the divide between the parties, including their extremist elements, and “get past the politics of division”. I saw the excuse as revealing. In any case, at some point the façade of credibility will fade for the Obama White House, if not crumble away, at which time we may expect a variety of criticisms to be launched Obama-wards. Seeing as his Narcissusness has never had to answer hard questions, especially from his supporters, this will be an intriguing stage of his young relationship with Reality. Since there will be scant evidence on which to indict his work so far, when Obama, as is inevitable, disappoints his minions, the criticism against him will necessarily be generic and non-specific. Will ‘nazi’ be used to describe ‘The One’, if he chooses not to cut and run from Iraq? If Obama decides that raising taxes is not a good idea, after all? If President Obama decides, say, that America’s interests are in fact more important than those of, say, Venezuela?
The word’s been used with less justification many times. It will be interesting to see if it shows up again in the new paradigm, and if not, what weasel word will replace it.
Saturday, December 27, 2008
Friday, December 26, 2008
Not Guilty
In reading about the bank, mortgage, auto, and employment crises in the media, I notice a common theme appearing over and over, specifically that everyone must share the guilt. The writers do this, I think, in anticipation of government actions which will, in the main, punish the public. While this may seem a utilitarian answer and therefore the most likely to be chosen, it is morally unacceptable and will likely lead to great resentment among the many millions of Americans who are in no way responsible for causing the problems or guilty of overindulgence.
I speak as one such citizen. My house is a modest one-story home bought for $150,000 in 2005, and my car is a 12-year-old sedan with 145,000 miles on it. My wife’s car is a 10-year old CRV. I pay the mortgage every month, right on time, and we paid off the cars long ago, foregoing flashy cars and luxury vehicles we could easily have bought but always put prudence ahead of ego. We pay the total balance on our credit cards each and every month, and have never spent money on anything that could be called an extravagance. What’s significant is, pretty much everyone in my subdivision could say the same – we work hard for our money and are careful not to buy things we cannot pay for, and we do not cheat anyone. We work hard and build for the future, the future we promised to our children. And I would dare to say we would resent the hell out of being expected to pay for the sins of others, since our children would end up suffering through no fault of their own. I will not help a thief, even and especially if he sits in a taxpayer-provided seat in Washington, D.C.
This is the hard nut at the center of the mortgage, banking, and auto crisis. There are people who took gambles, spent money they knew they did not have and who ignored every warning sign, confident that if everything fell apart, they could still cajole someone else to cover for them. People who buy homes they knew they could not pay for, should not be able to keep them. Companies which made deals they knew would cripple them without government help should simply not receive that bailout. Investors who bought financial instruments and now want someone else to eat the risk that came with their deal should be made to accept the consequences, the full consequences, of their own decision. People who have been careful and frugal should be rewarded, but frankly no one else. And at some point I think the message will be obvious – reward and protect the people who did the right thing, and put the cost on the ones who spent where there was no money, and chose to gamble instead of being careful in their savings and investments. No one has offered to pay me what I lost in stocks I own and I accept that as valid, since I took the risk along with the hope of gain when I bought those stocks. But if a politician plans to slam my kids because it’s a fix that will help him get re-elected, especially with special-interest groups that not only have no interest in changing their behavior or repaying for the damage they did, but who have shown no contrition in the first place for doing what they knew was wrong, well that politician, be he congressman, senator, or even president, is in for a world of hurt, because for all the hype, people can still tell right from wrong, and making innocent people pay for the sins of the guilty is something that should be rejected by all good people, and I think in the end it will be rejected, along with all the mandarins and con men in Washington trying to shill it off on us.
I speak as one such citizen. My house is a modest one-story home bought for $150,000 in 2005, and my car is a 12-year-old sedan with 145,000 miles on it. My wife’s car is a 10-year old CRV. I pay the mortgage every month, right on time, and we paid off the cars long ago, foregoing flashy cars and luxury vehicles we could easily have bought but always put prudence ahead of ego. We pay the total balance on our credit cards each and every month, and have never spent money on anything that could be called an extravagance. What’s significant is, pretty much everyone in my subdivision could say the same – we work hard for our money and are careful not to buy things we cannot pay for, and we do not cheat anyone. We work hard and build for the future, the future we promised to our children. And I would dare to say we would resent the hell out of being expected to pay for the sins of others, since our children would end up suffering through no fault of their own. I will not help a thief, even and especially if he sits in a taxpayer-provided seat in Washington, D.C.
This is the hard nut at the center of the mortgage, banking, and auto crisis. There are people who took gambles, spent money they knew they did not have and who ignored every warning sign, confident that if everything fell apart, they could still cajole someone else to cover for them. People who buy homes they knew they could not pay for, should not be able to keep them. Companies which made deals they knew would cripple them without government help should simply not receive that bailout. Investors who bought financial instruments and now want someone else to eat the risk that came with their deal should be made to accept the consequences, the full consequences, of their own decision. People who have been careful and frugal should be rewarded, but frankly no one else. And at some point I think the message will be obvious – reward and protect the people who did the right thing, and put the cost on the ones who spent where there was no money, and chose to gamble instead of being careful in their savings and investments. No one has offered to pay me what I lost in stocks I own and I accept that as valid, since I took the risk along with the hope of gain when I bought those stocks. But if a politician plans to slam my kids because it’s a fix that will help him get re-elected, especially with special-interest groups that not only have no interest in changing their behavior or repaying for the damage they did, but who have shown no contrition in the first place for doing what they knew was wrong, well that politician, be he congressman, senator, or even president, is in for a world of hurt, because for all the hype, people can still tell right from wrong, and making innocent people pay for the sins of the guilty is something that should be rejected by all good people, and I think in the end it will be rejected, along with all the mandarins and con men in Washington trying to shill it off on us.
Thursday, December 25, 2008
Wednesday, December 24, 2008
Grade Inflation
I finished the fall 2 for 2, two more A’s in the two classes I took. The GPA is now rolling along at 3.933 (I had a B and 2 A’s my first semester in 2006, during the time of my first cancer surgery, since then all A’s so I am pretty happy). Just great, I finally get grades worth bragging about in my graduate work, but no one cares about the GPA except during your baccalaureate work. There’s no ‘honor roll’ or ‘dean’s list’ for Master’s candidates, although I can hope for a bit of glory if my team places in the Case Competition this coming Spring.
Unfortunately, there’s another probem to deal with. I’ve worked hard to get good grades, but from what I see it’s not exceptionally hard to get good grades. Granted, there’s a floor of credentials to get into an MBA program, but even so it appears that depending on the professor, about 33-40% of any given class earns an A in the course, with about 50-55% earning a B and the rest generally earn C or worse. Obviously, at the graduate level a C is a warning, UHV for example kicks a candidate out of the program if they earn a C more then twice during the program, and any D or F ends the run right there. The problem with that, is that I think this makes the professors a bit reluctant to hand out anything below a B, even for those students who have really earned those grades. This means a kind of discount for the better students, by that I mean the ones who really do everything required for an A, who make up maybe 25% of a class but who see less qualified students receive the same grade. I have to admit that there were one or two classes where a sterner professor might have given me a B instead of an A (UHV does not use B+), but I have seen many more where I worked hard for an A only to see someone get the same grade for far less effort. I don’t want to sound like a snob, but I want the top students of my class to, you know, really be the top students. One thing you will have to consider, if you go back to school for an advanced degree, is what reputation the school will have in the business world for its difficulty and acumen gained by its graduates.
Unfortunately, there’s another probem to deal with. I’ve worked hard to get good grades, but from what I see it’s not exceptionally hard to get good grades. Granted, there’s a floor of credentials to get into an MBA program, but even so it appears that depending on the professor, about 33-40% of any given class earns an A in the course, with about 50-55% earning a B and the rest generally earn C or worse. Obviously, at the graduate level a C is a warning, UHV for example kicks a candidate out of the program if they earn a C more then twice during the program, and any D or F ends the run right there. The problem with that, is that I think this makes the professors a bit reluctant to hand out anything below a B, even for those students who have really earned those grades. This means a kind of discount for the better students, by that I mean the ones who really do everything required for an A, who make up maybe 25% of a class but who see less qualified students receive the same grade. I have to admit that there were one or two classes where a sterner professor might have given me a B instead of an A (UHV does not use B+), but I have seen many more where I worked hard for an A only to see someone get the same grade for far less effort. I don’t want to sound like a snob, but I want the top students of my class to, you know, really be the top students. One thing you will have to consider, if you go back to school for an advanced degree, is what reputation the school will have in the business world for its difficulty and acumen gained by its graduates.
Tuesday, December 23, 2008
Crisis Conspiracy
Over on another site, one of those well-meaning young men who thinks he has discovered secrets hidden from the rest of the world has announced that all governments and religions are owned by a single corporation, which apparently is set on evil tidings for us all. Like most conspiracy theories, it’s high on drama, empty on facts and the writer is unwilling to accept even the mildest criticism of his epiphany. He is convinced that he, and he alone, has uncovered some great secret that we should join in denouncing after, of course, applauding his courage and leadership, even though these are quite as imaginary as his villains.
I am being a bit harsh perhaps, but with so many real problems to address, it seems a bit annoying to have to trudge through the rhetorical muck of Chicken Little. And there are many such birds. The fictions of Global Warming, American Imperialism, Welfare, and such already drag down the business of the nation, and yet there are always more who are happy to pile on new delusions. The present mortgage crisis, for example, is complicated by the paranoia of those who see racist practices where stupidity and greed are quite sufficient to explain what has happened, and those who demand a diversity-focused approach to addressing failed mortgages, a tacit attempt at extortion for holding people responsible for buying a house they knew they could not afford, because demographically this practice was most common among minorities.
The resolution of this problem can be done rather simply and quickly, provided clear heads are in charge and the plans put in place attempt effective solutions, rather than politically correct actions. Most of the homes have real value, if not at the price originally charged, and banks should be enabled and encouraged to renegotiate the financing on those homes to address the principal in a workable fashion, provided the homeowner has reasonable equity in place and the ability to pay down the balance on schedule at the reduced rate. That’s one of the original purposes of the Congressional action already passed, after all. Those homes which cannot be addressed through simple refinancing, must be evaluated on a case-by-case basis, with the homeowner and bank both made aware that they will share responsibility for the lost value, for example if a house sold for $400,000 can now only be considered to be be worth $250,000. The reason this can work, is that homeowners with something to lose in the event of a foreclosure will be motivated to work with the bank, and a bank made aware that a deal will bring in more money than a foreclosed home will sell for, is also motivated to negotiate in good faith. Since the bank and homeowner are both already committed contractually in these situations, government intervention should frankly be minimized – they cannot really do anything to make the deal, and so should focus on situations where their action would save the home and minimize loss, for the taxpayer as much as anyone else. Unfortunately, few in Washington seem to share that opinion these days.
I am being a bit harsh perhaps, but with so many real problems to address, it seems a bit annoying to have to trudge through the rhetorical muck of Chicken Little. And there are many such birds. The fictions of Global Warming, American Imperialism, Welfare, and such already drag down the business of the nation, and yet there are always more who are happy to pile on new delusions. The present mortgage crisis, for example, is complicated by the paranoia of those who see racist practices where stupidity and greed are quite sufficient to explain what has happened, and those who demand a diversity-focused approach to addressing failed mortgages, a tacit attempt at extortion for holding people responsible for buying a house they knew they could not afford, because demographically this practice was most common among minorities.
The resolution of this problem can be done rather simply and quickly, provided clear heads are in charge and the plans put in place attempt effective solutions, rather than politically correct actions. Most of the homes have real value, if not at the price originally charged, and banks should be enabled and encouraged to renegotiate the financing on those homes to address the principal in a workable fashion, provided the homeowner has reasonable equity in place and the ability to pay down the balance on schedule at the reduced rate. That’s one of the original purposes of the Congressional action already passed, after all. Those homes which cannot be addressed through simple refinancing, must be evaluated on a case-by-case basis, with the homeowner and bank both made aware that they will share responsibility for the lost value, for example if a house sold for $400,000 can now only be considered to be be worth $250,000. The reason this can work, is that homeowners with something to lose in the event of a foreclosure will be motivated to work with the bank, and a bank made aware that a deal will bring in more money than a foreclosed home will sell for, is also motivated to negotiate in good faith. Since the bank and homeowner are both already committed contractually in these situations, government intervention should frankly be minimized – they cannot really do anything to make the deal, and so should focus on situations where their action would save the home and minimize loss, for the taxpayer as much as anyone else. Unfortunately, few in Washington seem to share that opinion these days.
Monday, December 22, 2008
The Law of Money
Nothing has value in a transaction unless all participating parties agree it has value. This is the first law of money, and the reason why bailouts in general are a bad idea. The nation is facing, effectively, four crises at the same time:
1. A general recession of the economy, which boils down to falling production of goods and services, indicating a collapse of consumer confidence;
2. A credit crisis in the banks, as banks are risk-averse to the point that they are making fewer loans and requiring much stricter terms, even from customers who should be considered worth the deal;
3. A mortgage crisis, with high risk of foreclosure and loan defaults; and
4. The major automakers’ crisis, as the three largest automakers plea for aid from Congress.
The last one is the real squirrel. It includes Ford, who claimed to need the money in order to survive, but which backed off once it saw the terms Congress would place on the deal, Chrysler which is still partly owned by Cerberus, a company best-known for sucking cash out of companies it owns and which could have infused needed cash into Chrysler but chose not to, and GM, which annual reports for the last three years’ running have include material changes of their accounting practices, a proven inability to make a profit off their core operations, and a demonstrated arrogance against admitting that their business model is not only insufficient to their needs, it is causing at least some of their most serious problems. Another point to analyzing these crises, is to understand that they are inter-related; you cannot solve them just one at a time, but on the other hand an effective solution for one of the four crises will improve conditions for resolving the others.
Which brings us back to the first law – something does not have value unless both the seller and buyer agree on that value. And that is the nut to be worked out in the whole mess. For mortgages, after all, part of the problem is that many of the homes in trouble simply cannot be sold for anything like the price of the mortgage. If the people who live in those homes now were to work out a way to pay off those mortgages, they would still lose money because the homes’ present value is less than the amount they paid. Similarly, an objective accounting of the true net value of the car companies would produce a number much lower than the billions they hope to receive from Congress over the next several years (because we all know at some level that this crisis will not be resolved quickly or cheaply, not even at the 50 billion dollar level tossed around not very long ago). The bottom line for both the mortgage and auto crisis, is that someone is going to have to take a large loss. Some want everyone to feel pain to some degree, and of course every special interest group puts out an argument that everyone but them should pay. And of course the most common argument is that the taxpayer should pay, simply because the most money is there, never mind that this argument would have innocents paying off crooks. The essential argument in front of Congress is how to spin this last option. It’s the easiest short-term fix, if also the least ethical.
1. A general recession of the economy, which boils down to falling production of goods and services, indicating a collapse of consumer confidence;
2. A credit crisis in the banks, as banks are risk-averse to the point that they are making fewer loans and requiring much stricter terms, even from customers who should be considered worth the deal;
3. A mortgage crisis, with high risk of foreclosure and loan defaults; and
4. The major automakers’ crisis, as the three largest automakers plea for aid from Congress.
The last one is the real squirrel. It includes Ford, who claimed to need the money in order to survive, but which backed off once it saw the terms Congress would place on the deal, Chrysler which is still partly owned by Cerberus, a company best-known for sucking cash out of companies it owns and which could have infused needed cash into Chrysler but chose not to, and GM, which annual reports for the last three years’ running have include material changes of their accounting practices, a proven inability to make a profit off their core operations, and a demonstrated arrogance against admitting that their business model is not only insufficient to their needs, it is causing at least some of their most serious problems. Another point to analyzing these crises, is to understand that they are inter-related; you cannot solve them just one at a time, but on the other hand an effective solution for one of the four crises will improve conditions for resolving the others.
Which brings us back to the first law – something does not have value unless both the seller and buyer agree on that value. And that is the nut to be worked out in the whole mess. For mortgages, after all, part of the problem is that many of the homes in trouble simply cannot be sold for anything like the price of the mortgage. If the people who live in those homes now were to work out a way to pay off those mortgages, they would still lose money because the homes’ present value is less than the amount they paid. Similarly, an objective accounting of the true net value of the car companies would produce a number much lower than the billions they hope to receive from Congress over the next several years (because we all know at some level that this crisis will not be resolved quickly or cheaply, not even at the 50 billion dollar level tossed around not very long ago). The bottom line for both the mortgage and auto crisis, is that someone is going to have to take a large loss. Some want everyone to feel pain to some degree, and of course every special interest group puts out an argument that everyone but them should pay. And of course the most common argument is that the taxpayer should pay, simply because the most money is there, never mind that this argument would have innocents paying off crooks. The essential argument in front of Congress is how to spin this last option. It’s the easiest short-term fix, if also the least ethical.
Sunday, December 21, 2008
Value of an MBA Part 3 – Business Needs MBA People
The recession and various related crises have scared a lot of businesses into kneejerk reactions, including production slowdowns and layoffs. That’s not to say these actions may not be necessary in some places, but in too many places these actions are not considered in the context of their need and effect, but as automatic measures. As a result, many companies are allowing themselves to be tossed about by events, out of control with relation to their environment. In far too many situations, companies allow themselves to lose revenue and miss opportunities for sales and growth, which could have been gained through effective management. Those management skills can best be found through acquisition of experienced managers with MBAs.
Frankly, if you earn an MBA you need to be picky about where you work. From my experience, at least half of those businesses which have 1,000 employees or more do not know how to make the best use of their MBA-caliber people. Instead, they rely on policy and formula, which has the advantages of clarity and consistency, but which discourages innovation and recognition of ability. While many of these companies will be glad to hire people who have earned MBAs, it is a bad career choice to take such as post, since you will be locked into a set routine that would not allow you to use all of your tools and ability. The person who earns an MBA should seek a company which not only offers a good salary and position, but which will make use of the full skill set of its MBA class.
How do you find such companies? A good MBA student can actually do this without too much trouble. One of the requirements of any decent MBA curriculum is regular production of research and analysis for all the different classes. Find the industry you want, narrow it down to the region and other particulars which suit your desired work conditions, then that should work it down to sets of private and public companies you would consider. For the public companies, look at the last three annual reports, especially the Management Analysis and Discussion, and see how they make use of their people. Look at trade journals and see who gets mentioned – if you only hear about the chief officers at a public company, that is a sign they are not paying attention or giving credit to their working talent, the phrase I use to describe the people who have experience and ability, but who are all too often neglected by the executives. What you want to see, is buzz about the performers who are making things happen, and you want to see evidence of innovation and development of their opportunities.
In considering private companies, information is harder to find but if you look at the local level, you will still find indicators. Media will discuss companies which are leaders in their industry, which is an indication that they are making good use of their management, and even though they do not release audited financials, there will also be financial data available through trade journals and you can pick up buzz through anecdotal discussions with people in the area.
The point for here, though, is that earning an MBA produces a specific skill set, one which only some companies will make effective use of, and so the candidate seeking a career position must do the same dedicated research in choosing a target company as he or she does in his classwork.
Frankly, if you earn an MBA you need to be picky about where you work. From my experience, at least half of those businesses which have 1,000 employees or more do not know how to make the best use of their MBA-caliber people. Instead, they rely on policy and formula, which has the advantages of clarity and consistency, but which discourages innovation and recognition of ability. While many of these companies will be glad to hire people who have earned MBAs, it is a bad career choice to take such as post, since you will be locked into a set routine that would not allow you to use all of your tools and ability. The person who earns an MBA should seek a company which not only offers a good salary and position, but which will make use of the full skill set of its MBA class.
How do you find such companies? A good MBA student can actually do this without too much trouble. One of the requirements of any decent MBA curriculum is regular production of research and analysis for all the different classes. Find the industry you want, narrow it down to the region and other particulars which suit your desired work conditions, then that should work it down to sets of private and public companies you would consider. For the public companies, look at the last three annual reports, especially the Management Analysis and Discussion, and see how they make use of their people. Look at trade journals and see who gets mentioned – if you only hear about the chief officers at a public company, that is a sign they are not paying attention or giving credit to their working talent, the phrase I use to describe the people who have experience and ability, but who are all too often neglected by the executives. What you want to see, is buzz about the performers who are making things happen, and you want to see evidence of innovation and development of their opportunities.
In considering private companies, information is harder to find but if you look at the local level, you will still find indicators. Media will discuss companies which are leaders in their industry, which is an indication that they are making good use of their management, and even though they do not release audited financials, there will also be financial data available through trade journals and you can pick up buzz through anecdotal discussions with people in the area.
The point for here, though, is that earning an MBA produces a specific skill set, one which only some companies will make effective use of, and so the candidate seeking a career position must do the same dedicated research in choosing a target company as he or she does in his classwork.
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