My team did not win the Spring 2009 MBA Conference at UHV. I am not writing this out of bitterness, I think, but clarity and full disclosure before the rest of this article. That is, the reader should know about any reason I have for bias. This article examines the practice and assumptions of the Case Competition at UHV, and suggests improvements.
The Master of Business Administration degree (MBA) is a unique academic credential. Academic degrees verify that the student has demonstrated knowledge and comprehension of a subject material to the degree required by his college, but the MBA also certifies practical ability; the MBA holder has been authenticated as a problem-solver and business leader, a person capable of making his employer stronger and more successful. The degree was designed for the real world, not merely the one in theory. Consequently, the MBA course of study ought to include a capstone course which tests the candidates’ ability to address real-world strategic decisions.
The University of Houston system has fortunately grown up with an ingrained need to prove itself. The Houston metropolitan area offers many opportunities for college and university experience; institutions in the area include Rice University, Houston Baptist University, St. Thomas University, the University of Texas Medical Branch (UTMB), the Baylor College of Medicine, Houston Community College, Prairie View A&M, Texas Southern University, Texas Woman’s University, Tomball College, Lady of the Lake University, Sam Houston State University, a number of for-profit schools like the University of Phoenix or DeVry, and of course the University of Houston. But that’s not all. UH also has had to compete with major players at the state and regional level for attracting top students, like the University of Texas and Texas A&M. The University of Houston has done well for itself over the last few decades, especially the Bauer School of Business. UH has established itself as a solid business school, recognized for excellence in its MBA programs.
Of course, UH-Victoria cannot claim quite the same prestige as UH’s main business school, although its faculty is shared to some degree. However, UHV’s growth strategy over the past half-decade reflects an ambitious set of goals, including the school’s accreditation as a member of the AACSB, its expansion from a two-year school focusing largely on graduate students to a four-year university with dormitory space and a full-scale staff for a complete range of academic studies, and the development of three major MBA programs in six fields of concentration. UHV is well on its way to becoming a force to reckoned with among business schools in Texas. The key focus for UHV, however, is to be aware of its relative newness, which can work to its advantage or represent a threat to the school’s success. And that is where the Case Competition comes into the story.
The Strategic MBA is UH-Victoria’s mainstream MBA plan (the other programs are the Global MBA for international business, and the ‘bridge’ MBA for BBA students who want to fast-track to their MBA as well). The Strategic MBA requires a capstone course called Strategic Management. That course is designed to test the MBA candidates’ knowledge from the courses they have taken in their time at UHV, combining the knowledge and experience from class and work to research, analyze, and make strategic recommendations for a real-world company. This project is done in stages, both individually and in teams, and culminates in a formal presentation to a panel of judges at a case competition held at the end of the semester. The top three teams as voted by the judges are recognized with certificates and permanent citation on a school plaque. Since the MBA program does not recognize cum laude, magna cum laude, or summa cum laude accolades, nor is there an official class ranking for graduate students, winning the case competition is one of few ways for a student at this level to stand out. The other notable honor is selection to Gamma Beta Sigma, the business school honor society.
Having said so much to get to this point, I will try to focus on the key points from here on in to the matter. Our target company this semester was PetSmart, the leader in the Pet Supplies and Services industry. Our team did well in all aspects of our research and analysis, and our recommendations not only were effective and practical, but were also well in alignment with the strategic vision of the CEO and leadership team. Once we completed our research and analysis of the industry and company, its focus and issues were easy to determine. For example, the following points became obvious:
[] The pet supply and services industry has been growing at a faster pace each year than PetSmart
[] With the exception of long-term store leases, PetSmart has effectively no long-term debt
[] CEO Philip Francis has emphasized the reduction of capital expenditures each year, and has announced his intent that no more than 4 percent of gross revenue should be spent on any capital project, including new store openings, the reformatting of stores to emphasize services, and any additional promotions or projects
[] PetSmart maintains relatively large liquidity for its industry (33.6% of assets are current)
The combined effect of these observations means that PetSmart is very risk-averse, and the leadership team has repeatedly emphasized their intention to avoid expensive capital projects. Accordingly, any realistic recommendation to the PetSmart board would have to be paid from current expenses, and be incremental in nature to avoid significant risk. Keep that in mind, it becomes important in a little while.
My team also focused on PetSmart’s “worry list”, a 32-item list in the Annual Report which identified, in order, the top concerns for the company. Without going into too much detail here, those worries focused on the revenue from new stores, on growth for services offered at PetSmart stores, on retention and effective training of key employees, and on better control of the supply chain. This directly led to our team’s four recommendations:
1. Perform site surveys and use specific demographic data to determine specific sites for new store locations;
2. Promote services using a national campaign and the Petperks card;
3. Create the role of ‘PetStar’, for experienced and motivated employees with growth potential;
4. Expand supply lines to include local brands recommended by managers and requested by customers
What made us confident that we had a winning position, was that the recommendations neatly dove-tailed with the company’s stated goals and priorities, and were in perfect alignment with the issues identified through the analysis. We saw tremendously profitable projects, low-cost and low-risk, which could be incrementally put into practice, all of which addressed the key areas of PetSmart’s directors’ focus and aligned with the company’s vision.
The exposition of our recommendations went well, though it had a few hitches. First off, some of our team were uncomfortable with public speaking, and this diminished our presentation a bit, and also in the Q&A session. While our data was perfect and our recommendations better than anyone else’s (wait for it), this imbalance of presentation certainly cost us points. We also had a problem with one of the six panelists, a judge who all but demanded we pay for our projects with capital expenditures, even though we had determined early on that such an action was not only unnecessary for our projects, but in opposition to the clear intent of PetSmart’s directors. At the time we thought that judge’s resistance to current expense was strange, but it later revealed a more serious problem with the process.
We had to wait a week to find out the results, and even then the announcement was oddly subdued. It showed up on a school blog Friday evening, and eventually found its way to the SOBA website by Monday. As of yet, none of the teams have been told their scores, provided any detailed feedback from judges, or learned – officially anyway – what won the competition for the three recognized teams. Despite hard work which received a 99% grade from the professor for the overall project, my team did not place. There has been no announcement of how the eleven teams which did not win scored, so there is no official word on where anyone placed who was not one of the winners. All in all, a strange way to conclude the business, although both the class professor and the school’s dean had promised useful feedback from the judges. It remains to be seen what actual details will be made available to the contestants.
I have to be honest and admit that I believed my team should have taken one of the top slots, especially after we discussed the competition with members from other teams. While a comprehensive review is not possible unless the school decides to release the details from the judges’ notes and the competing teams’ presentations, informal chats with other students revealed that the chief basis for points in the competition was style far more than substance. The reason lies in two factors; the rubric used for scoring the presentation and the judges’ preparation for the competition. The rubric had six sections, with scores from 1 to 4 in each section, so each judge assigned a score ranging from 6 to 24 for each team, and with six judges that creates a range of 36-144 points total possible for a team. So far, easy to follow. A copy of the rubric can be found here.
Looking more closely at the rubric, certain additional information comes to light. For example, given the fact that the teams would have worked all semester on the project, it is unreasonable to me to imagine that any of the teams would fall into the ‘1’ grade for any of the sections except ‘audience response’, nor do I believe that even there would all of the judges be so harsh on the teams. With regard to the “Issues Definition” and “Business Analysis”, I do not even believe that any of the teams would fail to score anything but 3’s and 4’s in those areas from the judges. What this does is place heavy emphasis on the recommendations, organization, and audience response, with the strongest factor in play being style rather than function. That is, people who could speak well would have the advantage over those who were less relaxed and smooth, even if the smooth talkers presented impractical recommendations and the less relaxed team were perfect in their analysis and recommendations. The first mistake made was in constructing a rubric which counted the practicality of the recommendations to a lesser degree than the style of presentation. I certainly recognize the value of presenting your case well, but a solid recommendation presented with some rough spots should definitely be scored more highly than an unrealistic recommendation presented with flair. Otherwise, the results would be as absurd as scoring a math test on the basis of flourishes and calligraphy, discounting whether the answer is even correct. I will come back to this crucial point.
Second, the judges had not been fully briefed on PetSmart’s corporate strategy or vision. They were unaware that the company is very risk-averse, and so their board of directors would be resistant to any proposal involving increased capital expense, long-term commitment (such as buying out a rival or supplier) or significant deviation from the vision laid out by Philip Francis in 2003. The emphasis of the project was that teams would make proposals as if to the board at PetSmart, so the character and tenor of the actual board is integral to the validity of recommendations made, and the judges’ response to them. In the case competition, all of the winners made recommendations which – speaking bluntly – the real PetSmart board would have rejected because of their risk, heavy financial commitment and capital expense, that is, the need to take on debt in order to finance the projects anathema to PetSmart’s stated objectives and goals. That the judges did not challenge these recommendations for their variance from PetSmart’s position is bad enough; that these recommendations were rewarded as the best demonstrates a far more troubling consequence of the competition’s structure.
I said the need to make valid recommendations was crucial, and it is very much so. The MBA is certification that the individual, whether an employee or a consultant, is qualified to perform effective research and analysis and make recommendations which will improve a company’s strategic position and performance. This can only happen when the individual properly understands the company’s range of options, its corporate strategy and primary goals. The case competition is the final episode in the capstone course of the program of MBA certification; beyond that point the student receives their diploma and moves on to the real world, where reality is far less forgiving of an invalid recommendation, no matter how well it is delivered. The glib, the trendy, these things must have no place in the mind or focus of the true professional, and so it is the worst sort of consequence to penalize valid recommendations and reward invalid projects, no matter how polished. It may seem inconsequential, that a competition was decided more by judges’ moods and their subjective reaction to style than by the actual corporate strategy of the target company and the functional relevance of the specific recommendations, but this is an area where there is much work to be done. In future years, it would be very much to UHV’s advantage to make sure the judges were properly briefed on the nature of the target company, that actual business executives were included in the panels rather than just faculty and prior case winners, and that feedback both to and from the participating teams in the weeks following the competition should be much broader and detailed than the present practice. At the very least, the school could rest assured that their case winners would be properly equipped for the real world challenges they face so soon after graduation, and that their competition was as realistic as humanly possible to create.
Tuesday, May 19, 2009
Monday, May 18, 2009
Saturday, May 16, 2009
Case Competition Lessons
UHV finally released their winners of the Case Competition last night, and my team failed to place. Bit disappointing, that. That led me to some thought and analysis of our performance, and today’s post examines what I considered.
First off, congratulations to the winners. While Dr. Salazar told me that he thought our team had a “very good chance of winning”, that does not mean that we were the only team that worked hard and produced a strong result. Since the case competition counts as the final exam in the capstone course of the Strategic MBA program, it should be obvious that all of the competing teams will do their very best to produce a quality presentation. Those teams which won did do through a lot of work and some solid execution, which is the essence of the course.
Second, I admit to some doubts when I found out my team did not win. Did we make some major blunder that we never caught? Were we blind to some critical flaw? The answer to that comes not only from Dr. Salazar’s pre-conference praise that we were in a good position to win, but also from the 99% grade we received for the project. 99 percent is nearly perfect, and an A in the course (which I received and assumed everyone in my team received) is not handed out to someone who makes big mistakes. We simply were beaten out by better performance, but our own work was very good. I use that phrase, because several of the judges said that, precisely, after we finished our presentation last Saturday. I have to believe the judges meant what they said, so while we did not win I also believe we did well.
So how did we not win? At this point I have to admit I am competitive, and I wanted to believe we would win, as my team needed that confidence in itself. Looking back, that was probably our biggest problem area. We started as a four person team and added a fifth member whose own team fell apart close to the end of the semester. This meant coordinating five people to give the presentation, and trying to get everyone comfortable with speaking before the judges, which was a big issue. Three members of our team were not at all comfortable in public speaking, and that hurt us two ways. The rubric used for grading the presentation had six areas, for which teams could be issued a grade of 1 through 4 from the judges, for a range of 6 to 24 total, and with six panelists that meant a total score ranging from 36 to 144. I hope we will get back the detailed notes from the judges, so I can confirm what I am guessing now, but one of those six sections addressed the comfort level of the presenters, and looking back we certainly lost points there. Another section of the grading addressed the way questions from the judges were answered, and the way that three of our members hung back also had to have cost us.
I also think the room assignment hurt us. Four rooms were used for the competition, with different judges in each room. Two of the three winning teams presented in the same room, and our room produced none of the winning teams. This is important because two of the judges appeared to be far more critical of us than the others were. I could not sit in the room while other teams gave their presentation, but I could look in from the back window and those judges remained stern and hard-nosed for those other groups. At the time I believed this would not hurt us, since the judges were showing the same attitude towards each team, but I did not consider that judges in other rooms might have a different overall tone, and I suspect that was part of the situation. The life lesson there is that you do not always get a level playing field.
Beyond that, I’d have to see the judges’ notes to know what they might have thought beyond their comments, which were positive and complimentary. While the Q&A lasted the full 25 minutes, judges were generally pleased with our responses, nodding their heads and in most cases smiling when we provided answers. We had no ‘deer in the headlights’ moments where we could not answer a question, and I believe we defended our recommendations well. The only certain problem area was that almost all the talking in the Q&A was done by two members from our team, and that surely cost us.
On the whole, the competition was fun and a great experience, although UHV still has a lot of work to do to get it where it needs to be. We were originally told that the results would be announced Wednesday, then Friday, then I only found out through doing an Internet search on the key words; the school gave the winners less press than they did to the Swine Flu update, and that’s wrong. Also, it remains to be seen how the teams will receive feedback; since the course comes right before the graduation of many students, I suspect that many will never read the judges’ notes, and that is a failure of the school in my opinion – this is a tremendous opportunity missed. Also, the school is still a bit disorganized in the competition format. If asked, I could make a number of suggestions on how they could make this a much more successful enterprise, though I would surely have more clout if my team had won the thing.
Oh well.
First off, congratulations to the winners. While Dr. Salazar told me that he thought our team had a “very good chance of winning”, that does not mean that we were the only team that worked hard and produced a strong result. Since the case competition counts as the final exam in the capstone course of the Strategic MBA program, it should be obvious that all of the competing teams will do their very best to produce a quality presentation. Those teams which won did do through a lot of work and some solid execution, which is the essence of the course.
Second, I admit to some doubts when I found out my team did not win. Did we make some major blunder that we never caught? Were we blind to some critical flaw? The answer to that comes not only from Dr. Salazar’s pre-conference praise that we were in a good position to win, but also from the 99% grade we received for the project. 99 percent is nearly perfect, and an A in the course (which I received and assumed everyone in my team received) is not handed out to someone who makes big mistakes. We simply were beaten out by better performance, but our own work was very good. I use that phrase, because several of the judges said that, precisely, after we finished our presentation last Saturday. I have to believe the judges meant what they said, so while we did not win I also believe we did well.
So how did we not win? At this point I have to admit I am competitive, and I wanted to believe we would win, as my team needed that confidence in itself. Looking back, that was probably our biggest problem area. We started as a four person team and added a fifth member whose own team fell apart close to the end of the semester. This meant coordinating five people to give the presentation, and trying to get everyone comfortable with speaking before the judges, which was a big issue. Three members of our team were not at all comfortable in public speaking, and that hurt us two ways. The rubric used for grading the presentation had six areas, for which teams could be issued a grade of 1 through 4 from the judges, for a range of 6 to 24 total, and with six panelists that meant a total score ranging from 36 to 144. I hope we will get back the detailed notes from the judges, so I can confirm what I am guessing now, but one of those six sections addressed the comfort level of the presenters, and looking back we certainly lost points there. Another section of the grading addressed the way questions from the judges were answered, and the way that three of our members hung back also had to have cost us.
I also think the room assignment hurt us. Four rooms were used for the competition, with different judges in each room. Two of the three winning teams presented in the same room, and our room produced none of the winning teams. This is important because two of the judges appeared to be far more critical of us than the others were. I could not sit in the room while other teams gave their presentation, but I could look in from the back window and those judges remained stern and hard-nosed for those other groups. At the time I believed this would not hurt us, since the judges were showing the same attitude towards each team, but I did not consider that judges in other rooms might have a different overall tone, and I suspect that was part of the situation. The life lesson there is that you do not always get a level playing field.
Beyond that, I’d have to see the judges’ notes to know what they might have thought beyond their comments, which were positive and complimentary. While the Q&A lasted the full 25 minutes, judges were generally pleased with our responses, nodding their heads and in most cases smiling when we provided answers. We had no ‘deer in the headlights’ moments where we could not answer a question, and I believe we defended our recommendations well. The only certain problem area was that almost all the talking in the Q&A was done by two members from our team, and that surely cost us.
On the whole, the competition was fun and a great experience, although UHV still has a lot of work to do to get it where it needs to be. We were originally told that the results would be announced Wednesday, then Friday, then I only found out through doing an Internet search on the key words; the school gave the winners less press than they did to the Swine Flu update, and that’s wrong. Also, it remains to be seen how the teams will receive feedback; since the course comes right before the graduation of many students, I suspect that many will never read the judges’ notes, and that is a failure of the school in my opinion – this is a tremendous opportunity missed. Also, the school is still a bit disorganized in the competition format. If asked, I could make a number of suggestions on how they could make this a much more successful enterprise, though I would surely have more clout if my team had won the thing.
Oh well.
Friday, May 15, 2009
Post-Conference Thoughts
It’s been six days since the UHV Spring 2009 MBA Conference in Cinco Ranch, and we still are waiting for the winner announcements. I have been promised we will know today. The delay comes from the fact that grades have to be released prior to the announcement of winners, which makes sense on one level but is nonetheless a bit disappointing on another level. The case competition counts as the final exam for the capstone course, so it makes sense that the grade matters. On the other hand, the competition is separate from the course itself (per the Dean of the Business School), and the effect of the competition is a bit diluted to delay the results, especially since in past years the winners were announced the same day as the competition. I’m afraid that the delay will encourage participants to leave once they have given their presentation, rather than meet with other teams at the event and experience the competition for all its potential. We were given feedback forms the day of the competition, but I think it would be smart for the university to follow-up about two weeks following the case competition for the perspective from that distance.
My team got 99% for its project grade, which means we missed a perfect job but so far we have not seen the detailed feedback from the panel judges, nor in fact do I know for sure where we lost our point (though I have a guess or two). Hard to say if that point cost us the win.
The format for the competition itself was interesting. Over the course of the semester, we each produced three individual versions of a paper analyzing the pet supply and services industry and a company analysis of PetSmart, Inc. (the focus company assigned for the project). We then put our individual reports together to create a team report, which was eventually refined into the final report for the project. Our paper was 122 pages of text and charts, with another 9 pages of sources listed.
This paper was then distilled into a PowerPoint presentation, which in our case took 39 slides, and this in turn caused a problem for us. The heart of the presentation was the team’s set of recommendations, which is usually two or three but in our case four strategic actions. The reason the length was a problem, was because we would have 25 minutes to present our case, giving us less than 39 seconds per slide to make our case, and some of those slides would require a bit of talk to make them clear. So we faced the problem of speaking clearly and in detail, covering more than one slide a minute but without rushing. So we spent some time rehearsing and working out the tricky timing.
The other half of the presentation was the question and answer session. At the start of the semester, we expected to present our case to a panel of three judges. At the end of the semester, we saw that panel count climb to four. Accordingly, we printed and bound four copies of our presentation for the judges. When we walked into the room for the presentation, however, we found six judges waiting for us. Fortunately, they were willing to share with each other. The other big thing about having six judges, was that the question-and-answer session following our presentation was detailed and deep. We spent the full twenty-five minutes allotted for that session answering questions from the judges, everything from our reasoning behind our recommendations, to their cost, scope, payback, and so on.
It’s a little difficult to explain how hard the question-and-answer session is. On the one hand, a team should be able to anticipate most of the questions by examining their case critically, with team members role-playing skeptical judges to find places where questions would rise, but on the other almost half an hour or straight verbal questions from six different people, and meant to be answered by different team members, creates a bit of uncertainty on its own. Add to that the fact that no team can really practice for the spontaneity of panel questioning, and you have a situation that can be tense and throw you off your rhythm. Of course, it makes you feel better to consider that every team faces the same obstacles.
More to come.
My team got 99% for its project grade, which means we missed a perfect job but so far we have not seen the detailed feedback from the panel judges, nor in fact do I know for sure where we lost our point (though I have a guess or two). Hard to say if that point cost us the win.
The format for the competition itself was interesting. Over the course of the semester, we each produced three individual versions of a paper analyzing the pet supply and services industry and a company analysis of PetSmart, Inc. (the focus company assigned for the project). We then put our individual reports together to create a team report, which was eventually refined into the final report for the project. Our paper was 122 pages of text and charts, with another 9 pages of sources listed.
This paper was then distilled into a PowerPoint presentation, which in our case took 39 slides, and this in turn caused a problem for us. The heart of the presentation was the team’s set of recommendations, which is usually two or three but in our case four strategic actions. The reason the length was a problem, was because we would have 25 minutes to present our case, giving us less than 39 seconds per slide to make our case, and some of those slides would require a bit of talk to make them clear. So we faced the problem of speaking clearly and in detail, covering more than one slide a minute but without rushing. So we spent some time rehearsing and working out the tricky timing.
The other half of the presentation was the question and answer session. At the start of the semester, we expected to present our case to a panel of three judges. At the end of the semester, we saw that panel count climb to four. Accordingly, we printed and bound four copies of our presentation for the judges. When we walked into the room for the presentation, however, we found six judges waiting for us. Fortunately, they were willing to share with each other. The other big thing about having six judges, was that the question-and-answer session following our presentation was detailed and deep. We spent the full twenty-five minutes allotted for that session answering questions from the judges, everything from our reasoning behind our recommendations, to their cost, scope, payback, and so on.
It’s a little difficult to explain how hard the question-and-answer session is. On the one hand, a team should be able to anticipate most of the questions by examining their case critically, with team members role-playing skeptical judges to find places where questions would rise, but on the other almost half an hour or straight verbal questions from six different people, and meant to be answered by different team members, creates a bit of uncertainty on its own. Add to that the fact that no team can really practice for the spontaneity of panel questioning, and you have a situation that can be tense and throw you off your rhythm. Of course, it makes you feel better to consider that every team faces the same obstacles.
More to come.
Thursday, May 14, 2009
Credit
Nobody likes credit card companies. Never mind that they make our lives easier, by making our budgets more flexible and opening opportunities for financial control that our parents never dreamed of having, it’s the politically correct thing to trash them. Even the executives of those companies have been acting like they were lower on the moral value meter than companies selling liquor, tobacco, porn, or political advertising. This is not to say that credit card companies and the banks behind them have all been saints and model citizens, but throwing all the blame on them is not merely unreasonable, but a poor plan for improving the future of credit.
Credit is all about risk. Let’s say you have a buddy who wants you to loan him $50 until the next paycheck. If you do, you’re granting him credit. It’s not hard to understand that you will have different levels in mind. You might not mind giving money to your spouse and kids, you might agree to loan a buddy some money interest-free for a week or two, but outside that circle, you’d probably want something for your trouble, especially since the further away from center you get, the less you can trust that the borrower will pay you back quickly or in full … and in some cases, at all.
That’s why credit cards exist. You have the choice of carrying around a lot of cash, giving someone access to your bank account with a debit card or checking account, doing without because you don’t have the money for what you want (and sometimes need), or you carry a card that will bill you later for your purchases. What’s really sweet about credit cards is not only that you can buy all sorts of things with them, but that a credit card builds a history you can use to buy important things like a car or a house, and if you pay the balance in full each month it costs you only the annual fee to use the card. Credit cards build a reputation of financial responsibility, and they offer convenience and security that cash-alone cannot offer.
So why the hostility? Basically, human habits. We live in a society that often punishes success and forgives failures, and in some cases even protects failure by punishing those who would hold individuals to their commitments and the consequences of their decisions. A lot of people carry balances on their credit cards each month, and they resent having to pay the finance charges those cards require, even though in almost every case the individual was presented with the terms clearly and directly before they started using the card. Some folks pay their cards late, and resent the late fee they earn. The Obama Administration is playing on those immature attitudes, demanding the credit card companies be punished because people cannot manage to pay their bills in full or on time.
The problem for the credit card companies, is that the business model cuts both ways here. These companies chose to sign up people who in some cases were bad credit risks – I mean really, there are credit card companies which sign up people several times for the same card, without once collating the information to track the rising debt levels and default risk. Just stupid, and even more so to imagine that such people can be led to start practicing sound financial behavior just because they get into trouble with their cards. The profit model of credit card companies, after all, depends on people carrying a balance and paying finance charges. If everyone started paying all their bills on time and buying only what they could afford, the credit cards would not be able to operate as a going business. It’s the same reason that the government doesn’t really want people to stop smoking; it’s bad for their bank accounts.
The Obama Administration does not really want to go too far the other way, though. If credit cards were punished for their usurious tactics to the degree that the President’s rhetoric implies, many of the banks behind those cards would abandon the business altogether, as it would become a poor risk for their capital. Discretionary spending would plummet even more, as consumers’ desire to save would be accompanied by a dearth of credit providers for those still eager to splurge. Finding a steady and significant source for consumer credit would become more difficult than getting Obama to say ‘Bush was right’. It just would not happen.
So, enjoy the show but don’t expect much to change. Because when it’s all said and done, only you really care about your own financial health, so you’d better not trust it to a politician or a corporation.
Credit is all about risk. Let’s say you have a buddy who wants you to loan him $50 until the next paycheck. If you do, you’re granting him credit. It’s not hard to understand that you will have different levels in mind. You might not mind giving money to your spouse and kids, you might agree to loan a buddy some money interest-free for a week or two, but outside that circle, you’d probably want something for your trouble, especially since the further away from center you get, the less you can trust that the borrower will pay you back quickly or in full … and in some cases, at all.
That’s why credit cards exist. You have the choice of carrying around a lot of cash, giving someone access to your bank account with a debit card or checking account, doing without because you don’t have the money for what you want (and sometimes need), or you carry a card that will bill you later for your purchases. What’s really sweet about credit cards is not only that you can buy all sorts of things with them, but that a credit card builds a history you can use to buy important things like a car or a house, and if you pay the balance in full each month it costs you only the annual fee to use the card. Credit cards build a reputation of financial responsibility, and they offer convenience and security that cash-alone cannot offer.
So why the hostility? Basically, human habits. We live in a society that often punishes success and forgives failures, and in some cases even protects failure by punishing those who would hold individuals to their commitments and the consequences of their decisions. A lot of people carry balances on their credit cards each month, and they resent having to pay the finance charges those cards require, even though in almost every case the individual was presented with the terms clearly and directly before they started using the card. Some folks pay their cards late, and resent the late fee they earn. The Obama Administration is playing on those immature attitudes, demanding the credit card companies be punished because people cannot manage to pay their bills in full or on time.
The problem for the credit card companies, is that the business model cuts both ways here. These companies chose to sign up people who in some cases were bad credit risks – I mean really, there are credit card companies which sign up people several times for the same card, without once collating the information to track the rising debt levels and default risk. Just stupid, and even more so to imagine that such people can be led to start practicing sound financial behavior just because they get into trouble with their cards. The profit model of credit card companies, after all, depends on people carrying a balance and paying finance charges. If everyone started paying all their bills on time and buying only what they could afford, the credit cards would not be able to operate as a going business. It’s the same reason that the government doesn’t really want people to stop smoking; it’s bad for their bank accounts.
The Obama Administration does not really want to go too far the other way, though. If credit cards were punished for their usurious tactics to the degree that the President’s rhetoric implies, many of the banks behind those cards would abandon the business altogether, as it would become a poor risk for their capital. Discretionary spending would plummet even more, as consumers’ desire to save would be accompanied by a dearth of credit providers for those still eager to splurge. Finding a steady and significant source for consumer credit would become more difficult than getting Obama to say ‘Bush was right’. It just would not happen.
So, enjoy the show but don’t expect much to change. Because when it’s all said and done, only you really care about your own financial health, so you’d better not trust it to a politician or a corporation.
Wednesday, May 13, 2009
The Politics of Debt
Fear is the strongest negative impulse. While rage may burn more fiercely, it dies quickly and is usually recognized for the irrational force it is, while fear can persist for a lifetime, invading the deepest parts of the mind and heart, taking over judgment and influencing disaster through timidity, worry, and panic. And one of the strongest factors in fear is money, especially debt. The sense of debt has destroyed careers, companies, and marriages, has broken the integrity of many men who never thought they would abandon their principles. Debt works on the spirit as a combination of stress, shame, obligation, and confinement. Just because there are no more debtors’ prisons does not mean that people in debt do not fear the loss of freedom, their home, property, lifestyle, and reputation. After all, the Mafia has made great profit from emphasizing just those conditions to prospective clients.
This brings us, indirectly, to politics. Politics is essentially the art of persuasion, to gain power and influence through the consent of the public. And politics have been around at least as long as money, and therefore debt, has existed. Politicians succeed by manipulating emotion, often playing on fear. Whether Republican or Democrat, American, European or Asian, whether first-world or third-world, consent of the governed is an undeniable need for politicians, and fear is always a prominent focus.
The rest should be obvious.
This brings us, indirectly, to politics. Politics is essentially the art of persuasion, to gain power and influence through the consent of the public. And politics have been around at least as long as money, and therefore debt, has existed. Politicians succeed by manipulating emotion, often playing on fear. Whether Republican or Democrat, American, European or Asian, whether first-world or third-world, consent of the governed is an undeniable need for politicians, and fear is always a prominent focus.
The rest should be obvious.
Monday, May 11, 2009
Weeds
Once I had one of the best lawns in my neighborhood. Now it’s Weedapolooza. I mean, I counted six different, thriving, varieties of weed in my lawn yesterday. OK, I have been spending a lot of time at work and at school, but yikes! Only about 5% of my front lawn has genuine grass now, which means that I will be spending money and time fighting the dark side of green flora.
Friday, May 08, 2009
The Fiendish Plot of Popeye’s Chicken
Well, that or an incredibly stupid mismanagement of a major promotion. I am writing about the GM-like imbecility of KFC’s now-infamous “Oprah Coupon” promotion, begun less than a week ago yet destined to make a laughing stock of the one-proud chain of chicken restaurants.
KFC is a division of Yum! Brands, a corporation of restaurants and fast-food purveyors, and one of the weaker lines in recent years. To counter its lagging position, the guys at KFC came up with two ideas to revive KFC’s fortunes. First, the company decided to introduce non-fried entrees to the menu, calling them Kentucky Grilled Chicken. This was actually a pretty good idea, a way to attract health-conscious customers and expand the menu.
The second idea was born during the Super Bowl. Another restaurant chain, Denny’s, got folks to give them another try with a time-tested promotion – a free breakfast to anyone who wanted one. Denny’s promotion had significant risk and cost, but it paid off big-time, and the company’s sales have been much improved since the promotion.
The guys at KFC saw the success at Denny’s. and decided the best way for them to get the same results was to run a similar promotion. But rather than wait until the next Superbowl, KFC worked out a venture with the reigning Queen of daytime television, Oprah Winfrey. Winfrey talked up the chain on her show and announced the promotion; a coupon for a free two-piece chicken dinner. Oprah also posted a link on her website to the coupon printout. The coupons could be printed May 5 and 6, and could be redeemed anytime at any KFC through May 19, excepting Mother’s Day.
Up to that point, this sounds like a great plan. A new product, announced on national television by a popular icon, with coupons to boot. What could go wrong?
From that point on, actually, almost everything.
In the first place, people began complaining from the start that they could not get the coupons to print. It should be noted that KFC neither acknowledged this problem, nor made any effort to address it. Of course, that’s probably because they had much bigger problems staring them in the face.
The geniuses at KFC decided to run this promotion, but without any coordination with the local restaurants and franchises. What’s worse, no one considered the likely response to the promotion, and the restaurants quickly ran out of the grilled chicken.
As a result, instead of a wildly successful promotion that could have raised KFC’s stature and impressed new customers, KFC’s promotion resulted in millions of people standing in line only to find their coupons were denied, no explanations were available, and the overworked staff was hostile and rude.
This being America, denial of the previously unknown right to free chicken led to reports of violence. KFC denied these reports of course, but right about now their credibility is such that anything they say is likely to work against them. In the same statement denying violence or angry protests, a company spokeswoman for KFC still tried to claim the company was prepared for the promotion.
The head office for KFC shut down its customer service lines and instead issued a press release promising that rainchecks would be sent to those unable to redeem their coupons. There’s a few problems with that claim, though. In the first place, customers already angry about having stood in line to be denied are now being told to go back to the restaurants, not for the promised food but to fill out forms to receive another coupon that may or may not arrive in a couple months, which may or may not be accepted at the restaurants, which in any case is less than what was promised on the Oprah show, and by the way the restaurant people I talked to today, say they have no heard anything about rain checks and there are no forms to fill out, meaning that if a customer believes KFC this time and tries to get a form to send off for the raincheck, they are likely to get the same rude reception they got the first time they came in on the matter. In other words, KFC is doing the things that guarantee maximum brand damage to themselves.
The very idea that KFC would plan, execute, and respond so badly to this situation is corporate suicide, an action that only makes sense if the marketing department and upper management at KFC were quickly and quietly replaced by operatives from Popeye’s chicken. Because the two things I can confidently claim after speaking to customers who tried to participate in the promotion, is that KFC has driven away a lot of customers, current and potential, and these folks will still go out and get chicken, which benefits Popeye’s more than anyone else. El Pollo Loco has played on the hype, promising to honor the KFC coupons on Mother’s Day, but the chain is too small to have planned and carried out a plan on this scale. As for Church’s chicken, if you have tried any of their “specials” or watched any of their ads (I know what ‘boring‘ is), you would recognize that subverting the Colonel to advance their own market share is well beyond their capabilities.
Whatever it is, this whole campaign and collapse is just one more example of how poor planning and dependence on spin is eventually just self-destructive and futile.
KFC is a division of Yum! Brands, a corporation of restaurants and fast-food purveyors, and one of the weaker lines in recent years. To counter its lagging position, the guys at KFC came up with two ideas to revive KFC’s fortunes. First, the company decided to introduce non-fried entrees to the menu, calling them Kentucky Grilled Chicken. This was actually a pretty good idea, a way to attract health-conscious customers and expand the menu.
The second idea was born during the Super Bowl. Another restaurant chain, Denny’s, got folks to give them another try with a time-tested promotion – a free breakfast to anyone who wanted one. Denny’s promotion had significant risk and cost, but it paid off big-time, and the company’s sales have been much improved since the promotion.
The guys at KFC saw the success at Denny’s. and decided the best way for them to get the same results was to run a similar promotion. But rather than wait until the next Superbowl, KFC worked out a venture with the reigning Queen of daytime television, Oprah Winfrey. Winfrey talked up the chain on her show and announced the promotion; a coupon for a free two-piece chicken dinner. Oprah also posted a link on her website to the coupon printout. The coupons could be printed May 5 and 6, and could be redeemed anytime at any KFC through May 19, excepting Mother’s Day.
Up to that point, this sounds like a great plan. A new product, announced on national television by a popular icon, with coupons to boot. What could go wrong?
From that point on, actually, almost everything.
In the first place, people began complaining from the start that they could not get the coupons to print. It should be noted that KFC neither acknowledged this problem, nor made any effort to address it. Of course, that’s probably because they had much bigger problems staring them in the face.
The geniuses at KFC decided to run this promotion, but without any coordination with the local restaurants and franchises. What’s worse, no one considered the likely response to the promotion, and the restaurants quickly ran out of the grilled chicken.
As a result, instead of a wildly successful promotion that could have raised KFC’s stature and impressed new customers, KFC’s promotion resulted in millions of people standing in line only to find their coupons were denied, no explanations were available, and the overworked staff was hostile and rude.
This being America, denial of the previously unknown right to free chicken led to reports of violence. KFC denied these reports of course, but right about now their credibility is such that anything they say is likely to work against them. In the same statement denying violence or angry protests, a company spokeswoman for KFC still tried to claim the company was prepared for the promotion.
The head office for KFC shut down its customer service lines and instead issued a press release promising that rainchecks would be sent to those unable to redeem their coupons. There’s a few problems with that claim, though. In the first place, customers already angry about having stood in line to be denied are now being told to go back to the restaurants, not for the promised food but to fill out forms to receive another coupon that may or may not arrive in a couple months, which may or may not be accepted at the restaurants, which in any case is less than what was promised on the Oprah show, and by the way the restaurant people I talked to today, say they have no heard anything about rain checks and there are no forms to fill out, meaning that if a customer believes KFC this time and tries to get a form to send off for the raincheck, they are likely to get the same rude reception they got the first time they came in on the matter. In other words, KFC is doing the things that guarantee maximum brand damage to themselves.
The very idea that KFC would plan, execute, and respond so badly to this situation is corporate suicide, an action that only makes sense if the marketing department and upper management at KFC were quickly and quietly replaced by operatives from Popeye’s chicken. Because the two things I can confidently claim after speaking to customers who tried to participate in the promotion, is that KFC has driven away a lot of customers, current and potential, and these folks will still go out and get chicken, which benefits Popeye’s more than anyone else. El Pollo Loco has played on the hype, promising to honor the KFC coupons on Mother’s Day, but the chain is too small to have planned and carried out a plan on this scale. As for Church’s chicken, if you have tried any of their “specials” or watched any of their ads (I know what ‘boring‘ is), you would recognize that subverting the Colonel to advance their own market share is well beyond their capabilities.
Whatever it is, this whole campaign and collapse is just one more example of how poor planning and dependence on spin is eventually just self-destructive and futile.
Thursday, May 07, 2009
Case Competition 2 – Business Intel
This Saturday, my team will be competing in the UH-Victoria MBA Case Competition. It’s the culmination of the Strategic Management course, which is itself the capstone course of the program. Fourteen teams will be competing, presenting the results of fifteen weeks of research, analysis, and developed recommendations for company strategy. Along the way, our team has learned and reinforced some interesting lessons about the business world and people in general.
This semester’s target company is PetSmart, Inc., the leader for the pet product and services industry in the United States. I will be posting the results of the competition, and details of our analysis and recommendations on Stolen Thunder after the competition is over, but for now I want to note that the company was remarkable for its combination of smart moves and missed opportunities, of keen insights and odd missteps. This is generally because like all companies, PetSmart is made up of its people and is the combination of their talents, efforts, and inspiration. In their specific case, most of PetSmart’s strategic decisions reflect the fact that all of the senior management were hand-picked by CEO Philip Francis. When you do that, you get a group which is loyal, almost always in agreement, and committed to the CEO’s strategy, but you also lose the perspective of differing opinions and the chance to test assumptions, or in PetSmart’s case especially, the follow-through to make sure your strategy is fully effective. PetSmart is generally in good shape and is being run pretty well, but even so my team found several areas where the company could maximize its advantage or avoid potentially critical problems – and in most cases these opportunities seemed obvious to us from the company and industry environment and resources available.
Sometimes it comes from a proprietary way of thinking, a desire to make sure that a company keeps control of its plans and operations, so that open discussion is lost in the interest of protecting company strategy. Other times, though, it’s an unfortunate exercise of human pique, of refusing to consider alternatives or suggestions in the misguided belief that no additional perspective is needed or useful. And that attitude is mighty common. What amazes me after studying business at the macro level for a couple years, is not that some businesses get into trouble, but that every business will sooner or later face a crisis that was largely avoidable, or miss an opportunity that could have significantly improved its financial health. This does not happen through lack of ability, but is the result of strategic choices made but not revisited.
People outside business often imagine that they understand the theory and practice of high-level corporate strategy, or at least they believe the talking heads in government and the media who tell them that they understand business better than people with decades of industry experience and top-level education in the field. This is just one reason why Op-Eds and government plans are generally not able to effectively resolve business strategy problems; they are making assumptions and jumping to conclusions. This of course would give the reader pause when considering my own column, as this would reasonably challenge my own statements and judgments, which brings me to my general recommendation for businessmen and anyone interested in financial health, whether for an individual, a company, or for the nation. Use your own mind and experience in making decisions, but it’s generally important to consider as many relevant contributions as you can find. The common factor in the situations at GM, Chrysler, AIG, Merrill Lynch, and so many other companies which have run into serious trouble of late, is an insular culture that self-promotes, increasing confidence in its own strategies but ignoring potentially vital warning signs and alternatives that a simple Deming loop process could have provided. Come to that, such behavior is all too common, and the results from such assumptions all but unavoidable.
This semester’s target company is PetSmart, Inc., the leader for the pet product and services industry in the United States. I will be posting the results of the competition, and details of our analysis and recommendations on Stolen Thunder after the competition is over, but for now I want to note that the company was remarkable for its combination of smart moves and missed opportunities, of keen insights and odd missteps. This is generally because like all companies, PetSmart is made up of its people and is the combination of their talents, efforts, and inspiration. In their specific case, most of PetSmart’s strategic decisions reflect the fact that all of the senior management were hand-picked by CEO Philip Francis. When you do that, you get a group which is loyal, almost always in agreement, and committed to the CEO’s strategy, but you also lose the perspective of differing opinions and the chance to test assumptions, or in PetSmart’s case especially, the follow-through to make sure your strategy is fully effective. PetSmart is generally in good shape and is being run pretty well, but even so my team found several areas where the company could maximize its advantage or avoid potentially critical problems – and in most cases these opportunities seemed obvious to us from the company and industry environment and resources available.
Sometimes it comes from a proprietary way of thinking, a desire to make sure that a company keeps control of its plans and operations, so that open discussion is lost in the interest of protecting company strategy. Other times, though, it’s an unfortunate exercise of human pique, of refusing to consider alternatives or suggestions in the misguided belief that no additional perspective is needed or useful. And that attitude is mighty common. What amazes me after studying business at the macro level for a couple years, is not that some businesses get into trouble, but that every business will sooner or later face a crisis that was largely avoidable, or miss an opportunity that could have significantly improved its financial health. This does not happen through lack of ability, but is the result of strategic choices made but not revisited.
People outside business often imagine that they understand the theory and practice of high-level corporate strategy, or at least they believe the talking heads in government and the media who tell them that they understand business better than people with decades of industry experience and top-level education in the field. This is just one reason why Op-Eds and government plans are generally not able to effectively resolve business strategy problems; they are making assumptions and jumping to conclusions. This of course would give the reader pause when considering my own column, as this would reasonably challenge my own statements and judgments, which brings me to my general recommendation for businessmen and anyone interested in financial health, whether for an individual, a company, or for the nation. Use your own mind and experience in making decisions, but it’s generally important to consider as many relevant contributions as you can find. The common factor in the situations at GM, Chrysler, AIG, Merrill Lynch, and so many other companies which have run into serious trouble of late, is an insular culture that self-promotes, increasing confidence in its own strategies but ignoring potentially vital warning signs and alternatives that a simple Deming loop process could have provided. Come to that, such behavior is all too common, and the results from such assumptions all but unavoidable.
Wednesday, May 06, 2009
Case Competition
If you read my blog regularly, you know that lately I have been posting IR-regularly. That’s largely due to a few things at work, and the case competition at UHV. That competition concludes this Saturday, just three days from today. I will be writing about that competition and its results, so I may be even less relevant than usual for some people. If you are interested in the MBA process, however, or have an interest in the case competition process, this might be worth a read.
The Masters of Business Administration (MBA) is different from most Masters degree programs, in that the MBA is intended to be a functional, real-world degree. So, rather than write up and defend a treatise in front of an academic panel, many business schools demand that MBA candidates demonstrate their knowledge and accumulated resources in a practical application of their combined skills. The case competition is an ideal way for this exhibition to be performed. At UHV, the capstone course for the “Strategic MBA” is called “Strategic Management”, and that course culminates in the case competition. The competition is open only to MBA students who have completed all or almost all of the other courses necessary for graduation, and is judged by a panel of professors from the business school, and senior officers from businesses interested in participating. The specific business officers who take part as judges is a carefully guarded secret, but it offers an additional appeal to the competing teams – performing well in the competition could not only produce a good grade in the final course, but also possibly lead to interest from a major company. Hey, the plaque is nice but who doesn’t like to improve their career profile?
The course itself is a bit sneaky, if you are not careful to pay attention. For instance, the capstone course eats up a lot of time and resources, so it’s not advisable to take the course at the same time as more than one other course. I noticed that about 15 students have dropped the course this semester, from the original group of 70. Also, the course at UHV is offered in three sections, and you choose your team from students in your own section, forming a team during the first days of the class. Careless or slow selection can be a critical mistake!
The course this semester covered 104 days, or just short of 15 weeks. Of that time, the first individual report was not due until February 21, almost a month into the semester. The second individual report was not due until March 14, and the third individual report was due March 24, representing a gradual increase in pace. The group’s first report was due April 4, the second April 18, the group’s final presentation was due May 2 and the group final paper was due May 3. The competition itself, of course, is May 9. So, the first paper was due on day 27, the second on day 48, the third on day 58, the fourth on day 69, the fifth on day 83, the sixth on day 97, the seventh on day 98, and the case competition takes place on day 105. When added to the regular course requirements of assignments and quizzes, this means that the pace increases as you approach the deadline, which is similar to real-world conditions for many companies.
There are four formal phases to the competition – first each student prepares individual analyses of the target company’s industry and the company itself. This semester the target company is PetSmart, Inc. the industry leader based in Phoenix, Arizona. The first paper examines the industry, the second refines that analysis and adds the company analysis, and the third refines the industry and company analysis and produces and issue statement – that is, a point or points on which the company needs to address a critical problem or can take advantage of a unique opportunity. The second phase comes up at that point, where the teams each meet and discuss their individual results, and reach consensus on a group opinion of these analyses and issues. The team’s first paper then presents analysis of the industry and company, in much greater depth than the individual reports, and also includes the first exhibition of the group’s recommendations. For comparison, my third individual paper was 67 pages while my group’s first paper was over a hundred pages, with ten pages of single-spaced source citations. The group’s second and third paper refine and defend the paper and recommendations; our final work was 131 pages long. We worked hard not only to cover all the bases, but also to cut out extraneous material, which is to say 131 pages was the lean version of our work. The third phase is development of the PowerPoint presentation. Since we would be presenting that work in the span of 25 minutes allotted to us, it became important to have enough slides to present the full picture of the industry, company, and recommendations, but also avoid to many words and clutter, and to be sure we finished on time but without rushing. The key there is to present relevant charts and figures, but stay away from text except where absolutely necessary. It also means a lot of discussion and rehearsal.
The fourth phase is the question and answer session, which immediately follows the presentation. This is what trips up a lot of teams, who work hard on their paper and delivery, but who do not prepare for likely questions. These questions cannot all be predicted ahead of time, but generally they are based on justifying the recommendations, explaining their selection and implementation and defending their cost and payoff.
There is, I think, a fifth and sixth phase that most students do not notice. The fifth phase is that you should communicate with your team early on – the professor mentioned from the start that you could work cooperatively with your team while producing your individual analyses, as long as your work was your own. That is, it’s OK to discuss your opinions from your analysis with your team, and develop an early consensus on some points (although with my team, it led us to examine assumptions and reconsider initial analyses), but you have to do your work and defend your conclusions with hard numbers and support. My group had several phone conferences and meetings, and well over five hundred postings on a private discussion board set up by the professor for the teams. And of course there is also the sixth phase, where you find a thread running through the industry, company, issues, and your recommendations tying everything together. Your recommendations will be strong if they make sense on every level, including alignment with the company’s leadership and direction. If you find yourself selling recommendations which are in conflict with industry conditions or the company’s present business strategy, you will have to explain to the judges why it is necessary for the company to abandon its present course.
At this time, all of the participating groups have submitted their final presentations and papers, and so all that is left is the actual competition, which means giving our presentations before the judges and answering questions. Of the initial 18 teams, 4 dropped out from students quitting the class, and it looks like three teams took in an additional member from one of the teams which dissolved, which is what our team did, so that we now have five members rather than the standard four. This has problems and advantages. Problems, because a late addition to your team can be disruptive and make roles unclear, but also advantages, because if you add a strong individual you can end up with a stronger team. We were fortunate in that respect, because the student who joined our team has strong marketing skills and is better than the rest of us at graphics. So, we are breaking up our presentation five ways rather than four, and we have all been working on our parts to be clear and confident.
More after the competition.
The Masters of Business Administration (MBA) is different from most Masters degree programs, in that the MBA is intended to be a functional, real-world degree. So, rather than write up and defend a treatise in front of an academic panel, many business schools demand that MBA candidates demonstrate their knowledge and accumulated resources in a practical application of their combined skills. The case competition is an ideal way for this exhibition to be performed. At UHV, the capstone course for the “Strategic MBA” is called “Strategic Management”, and that course culminates in the case competition. The competition is open only to MBA students who have completed all or almost all of the other courses necessary for graduation, and is judged by a panel of professors from the business school, and senior officers from businesses interested in participating. The specific business officers who take part as judges is a carefully guarded secret, but it offers an additional appeal to the competing teams – performing well in the competition could not only produce a good grade in the final course, but also possibly lead to interest from a major company. Hey, the plaque is nice but who doesn’t like to improve their career profile?
The course itself is a bit sneaky, if you are not careful to pay attention. For instance, the capstone course eats up a lot of time and resources, so it’s not advisable to take the course at the same time as more than one other course. I noticed that about 15 students have dropped the course this semester, from the original group of 70. Also, the course at UHV is offered in three sections, and you choose your team from students in your own section, forming a team during the first days of the class. Careless or slow selection can be a critical mistake!
The course this semester covered 104 days, or just short of 15 weeks. Of that time, the first individual report was not due until February 21, almost a month into the semester. The second individual report was not due until March 14, and the third individual report was due March 24, representing a gradual increase in pace. The group’s first report was due April 4, the second April 18, the group’s final presentation was due May 2 and the group final paper was due May 3. The competition itself, of course, is May 9. So, the first paper was due on day 27, the second on day 48, the third on day 58, the fourth on day 69, the fifth on day 83, the sixth on day 97, the seventh on day 98, and the case competition takes place on day 105. When added to the regular course requirements of assignments and quizzes, this means that the pace increases as you approach the deadline, which is similar to real-world conditions for many companies.
There are four formal phases to the competition – first each student prepares individual analyses of the target company’s industry and the company itself. This semester the target company is PetSmart, Inc. the industry leader based in Phoenix, Arizona. The first paper examines the industry, the second refines that analysis and adds the company analysis, and the third refines the industry and company analysis and produces and issue statement – that is, a point or points on which the company needs to address a critical problem or can take advantage of a unique opportunity. The second phase comes up at that point, where the teams each meet and discuss their individual results, and reach consensus on a group opinion of these analyses and issues. The team’s first paper then presents analysis of the industry and company, in much greater depth than the individual reports, and also includes the first exhibition of the group’s recommendations. For comparison, my third individual paper was 67 pages while my group’s first paper was over a hundred pages, with ten pages of single-spaced source citations. The group’s second and third paper refine and defend the paper and recommendations; our final work was 131 pages long. We worked hard not only to cover all the bases, but also to cut out extraneous material, which is to say 131 pages was the lean version of our work. The third phase is development of the PowerPoint presentation. Since we would be presenting that work in the span of 25 minutes allotted to us, it became important to have enough slides to present the full picture of the industry, company, and recommendations, but also avoid to many words and clutter, and to be sure we finished on time but without rushing. The key there is to present relevant charts and figures, but stay away from text except where absolutely necessary. It also means a lot of discussion and rehearsal.
The fourth phase is the question and answer session, which immediately follows the presentation. This is what trips up a lot of teams, who work hard on their paper and delivery, but who do not prepare for likely questions. These questions cannot all be predicted ahead of time, but generally they are based on justifying the recommendations, explaining their selection and implementation and defending their cost and payoff.
There is, I think, a fifth and sixth phase that most students do not notice. The fifth phase is that you should communicate with your team early on – the professor mentioned from the start that you could work cooperatively with your team while producing your individual analyses, as long as your work was your own. That is, it’s OK to discuss your opinions from your analysis with your team, and develop an early consensus on some points (although with my team, it led us to examine assumptions and reconsider initial analyses), but you have to do your work and defend your conclusions with hard numbers and support. My group had several phone conferences and meetings, and well over five hundred postings on a private discussion board set up by the professor for the teams. And of course there is also the sixth phase, where you find a thread running through the industry, company, issues, and your recommendations tying everything together. Your recommendations will be strong if they make sense on every level, including alignment with the company’s leadership and direction. If you find yourself selling recommendations which are in conflict with industry conditions or the company’s present business strategy, you will have to explain to the judges why it is necessary for the company to abandon its present course.
At this time, all of the participating groups have submitted their final presentations and papers, and so all that is left is the actual competition, which means giving our presentations before the judges and answering questions. Of the initial 18 teams, 4 dropped out from students quitting the class, and it looks like three teams took in an additional member from one of the teams which dissolved, which is what our team did, so that we now have five members rather than the standard four. This has problems and advantages. Problems, because a late addition to your team can be disruptive and make roles unclear, but also advantages, because if you add a strong individual you can end up with a stronger team. We were fortunate in that respect, because the student who joined our team has strong marketing skills and is better than the rest of us at graphics. So, we are breaking up our presentation five ways rather than four, and we have all been working on our parts to be clear and confident.
More after the competition.
Thursday, April 30, 2009
Democrats and Leadership
Barack Obama, like Bill Clinton some years ago, tries to lead by sticking a finger into the wind.
The only difference is which finger Obama sticks up.
The only difference is which finger Obama sticks up.
Monday, April 27, 2009
Emotion Is Sometimes The Enemy of Effectiveness
When I was young, I used to take part in various events meant to change the world. None of them did, though. Later I realized that this was never the real intention, anyway – the people who set up such events are trying to make themselves feel relevant, without actually doing the work to really make a difference for the better. The protests,Earth Day rallies, and cultish devotion to an insipid narcissist who cannot fathom economics or history but speaks well and wears nice suits, all of these speak to a focus entirely on image, with no concern for substance.
A suitable example of this façade-based thinking is the recent ‘earth hour’ fad. The idea was for everyone to sit in the dark, without lights or AC or power of any kind for one hour. The idea was – supposedly – to “raise awareness”, which is lib-code for ‘no freaking idea why we’re doing this but they said it’s important’, with the sub-text being that saving power for one hour would show what commitment would do, commitment in this case apparently meaning ‘let’s live like prehistoric people, except that they had fire and common sense’. So, let’s see what they saved.
Counting all of the participants collectively, the aggregate total money and power saved through the ‘earth hour’ campaign was … zero savings.
Actually, the real total would be a net waste, due to the power and money spent planning and promoting the event, and the media resources used to cover it. All told, millions of dollars were simply thrown away, which could have been used to really help people or the environment in ways that were not considered hip and trendy, but which could have actually made a real difference.
The problem, you see, is a fundamental inability to understand the basic way power is generated, distributed, and used. Power generation is performed at plants worldwide, in each case the electricity is generated according to load specifications, and sent along distribution lines to the end users. Because humans generally behave in predictable manners, use can be predicted to a certain degree, and a certain amount of power is generated for that anticipated need, plus a certain amount of extra load for a safety zone. That safety zone avoids brownouts from unexpected surges, and also protects the equipment the same way you want to maintain an even speed rather than wear your engine with a lot of sudden accelerations.
The largest amount of load is committed to commercial and industrial use, and to large public use facilities. Residential use is collectively large but dispersed over a large geographic area, which is managed through grid and sector distribution. In an event like the ‘earth hour’ promotion, electricity consumption as a portion of the whole is negligible, unless major industries also shut down, which not only did not happen, in most cases it could not happen without major damage or cost. This may be compared to bringing a large ship to a complete stop, sitting for an hour, then starting again – it will take a lot more energy to do that than it would to simply keep the engines running. The laws of physics are not sympathetic to the propagandists selling ‘earth hour’ promotions.
But let’s say that every person in a home shut off their lights, AC, TV, and so on for an hour. Impressive yes? Actually no not at all. The power has already been generated, and unlike other commodities, unused energy is not storeable, so it just gets lost. The plants cannot scale back their production ahead of shifts in demand, they must instead respond to actual changes in usage and one hour is not long enough for the shift production to be altered. The whole ‘earth hour’ promotion was based on false assumptions and ignorance of how things really work.
But it “raised awareness”, right? Again, no. Given the need to save money, most people already want to save energy anywhere they reasonably can do that, but it’s very foolish to suggest that darkness, deprivation, and discomfort are feasible options for a lifestyle. It not only connects their political message with its inherent naivete, most people will only accept a limited amount of personal discomfort before moving on to find a plan which allows them some comfort. So ‘earth hour’ came across to many people for what it really was, a self-serving insult from arrogant morons who failed to understand basic science and economic principles.
Emotion can be important, especially in personal relationships, movies, and sporting events. But it gets in the way of clear thinking all too often.
A suitable example of this façade-based thinking is the recent ‘earth hour’ fad. The idea was for everyone to sit in the dark, without lights or AC or power of any kind for one hour. The idea was – supposedly – to “raise awareness”, which is lib-code for ‘no freaking idea why we’re doing this but they said it’s important’, with the sub-text being that saving power for one hour would show what commitment would do, commitment in this case apparently meaning ‘let’s live like prehistoric people, except that they had fire and common sense’. So, let’s see what they saved.
Counting all of the participants collectively, the aggregate total money and power saved through the ‘earth hour’ campaign was … zero savings.
Actually, the real total would be a net waste, due to the power and money spent planning and promoting the event, and the media resources used to cover it. All told, millions of dollars were simply thrown away, which could have been used to really help people or the environment in ways that were not considered hip and trendy, but which could have actually made a real difference.
The problem, you see, is a fundamental inability to understand the basic way power is generated, distributed, and used. Power generation is performed at plants worldwide, in each case the electricity is generated according to load specifications, and sent along distribution lines to the end users. Because humans generally behave in predictable manners, use can be predicted to a certain degree, and a certain amount of power is generated for that anticipated need, plus a certain amount of extra load for a safety zone. That safety zone avoids brownouts from unexpected surges, and also protects the equipment the same way you want to maintain an even speed rather than wear your engine with a lot of sudden accelerations.
The largest amount of load is committed to commercial and industrial use, and to large public use facilities. Residential use is collectively large but dispersed over a large geographic area, which is managed through grid and sector distribution. In an event like the ‘earth hour’ promotion, electricity consumption as a portion of the whole is negligible, unless major industries also shut down, which not only did not happen, in most cases it could not happen without major damage or cost. This may be compared to bringing a large ship to a complete stop, sitting for an hour, then starting again – it will take a lot more energy to do that than it would to simply keep the engines running. The laws of physics are not sympathetic to the propagandists selling ‘earth hour’ promotions.
But let’s say that every person in a home shut off their lights, AC, TV, and so on for an hour. Impressive yes? Actually no not at all. The power has already been generated, and unlike other commodities, unused energy is not storeable, so it just gets lost. The plants cannot scale back their production ahead of shifts in demand, they must instead respond to actual changes in usage and one hour is not long enough for the shift production to be altered. The whole ‘earth hour’ promotion was based on false assumptions and ignorance of how things really work.
But it “raised awareness”, right? Again, no. Given the need to save money, most people already want to save energy anywhere they reasonably can do that, but it’s very foolish to suggest that darkness, deprivation, and discomfort are feasible options for a lifestyle. It not only connects their political message with its inherent naivete, most people will only accept a limited amount of personal discomfort before moving on to find a plan which allows them some comfort. So ‘earth hour’ came across to many people for what it really was, a self-serving insult from arrogant morons who failed to understand basic science and economic principles.
Emotion can be important, especially in personal relationships, movies, and sporting events. But it gets in the way of clear thinking all too often.
Thursday, April 23, 2009
Moral Limits
Jesus never condemned torture. Search the Bible all you like, there is not a single instance where the Messiah pointed out an instance of torture and rebuked it. The opposite case can be made, actually, as Jesus several times described the torments of hell in a manner which implied He thought the suffering was just, if terrible. Even faced with His own crucifixion, Jesus neither condemned His killers nor the method. When He spoke with the thief on the cross, Jesus made no mention that the suffering they endured was wrong or unjust.
That’s not to say, of course, that Christ approved of torture. It merely notes an absence of specific denunciation. One might wonder why. In the end, consideration of the matter leads people to one of only two valid conclusions:
1. Torture is so heinous that denouncing it is not necessary; it is evil on its face.
2. The specific moral quality of an action sometimes depends on details which may not be available or clear; what is torture from one perspective may be valid behavior from another.
Obviously, the first answer is clear and simple, while the second answer risks being used to justify atrocities. Few people indeed would accept the second answer as reasonable, yet in the end it must be included in any honest evaluation.
Consider Khalid Sheihk Mohammed. This is a man who, beyond any dispute by now, masterminded the 9/11 attacks, and if anything was disappointed he could not kill more innocents than he did. KSM was a monster’s mentor, guiding Osama bin Laden in the ways of murder and pain, a man greatly experienced in his vocation of making people suffer. KSM was hardened to police interrogation, and he knew how to play the system. I mention this for the simple obvious reason that this is how terrorists operate – they perform asynchronous combat, using rules which protect themselves to attack their victims with protection from their own enemies. When the terrorists attacked the World Trade Center in 1993 they failed, but they used the U.S. court system to collect and transfer critical data about the target which they incorporated into the successful 2001 attack. There’s no way around the fact that granting legal protections and privileges to the 1993 attackers helped them murder thousands more.
People who demand that terrorists be tried as criminals and given the legal rights and protections granted to any ordinary suspect, must accept that in doing so they are contributing to the suffering and death of innocent people. Terrorists are by their nature sub-human, not a lower class of person because of race or creed, but because of a choice of action which requires commensurate consequences. Throughout history the actions of terrorists, whether they are called hashashin, thuggees, the Black Hand, or any other name, have been ended only by the use of force to whatever degree is needed. Terrorists deal in fear and brutality, and know only that language. They stop at nothing, and are only stopped by greater force than they possess themselves.
This may appear to condone torture as a matter of practical realpolitik a ‘do whatever it takes’ approach which allows someone to do whatever they please, provided the proper argument is made. But if those who wish to protect terrorists must understand that by doing so they are helping harm and murder uncounted numbers of innocents in later attacks, those who are willing to use torture to defeat terrorists must accept that we are condoning torture. Waterboarding is torture. Not in the legal sense, for reasons I am not bringing up here because this is not the legal argument. But waterboarding someone is to cause deliberate suffering to that person, for the purpose of coercion. The question can be asked as to whether the torture is appropriate or necessary or defensible, but there can be no question that the line is crossed, and for a clear purpose – the terrorist believes that the western system of rights protects him from serious harm, and that belief must be obliterated. So the decision to act in a manner beyond what the terrorist considers possible is the lever by which his resolve may be undone and produce cooperation with the authorities. It would be false to pretend, however, that such a step can be taken without jeopardizing the precepts on which this nation and culture were built. And if the scale on which such actions are taken is large enough, the use of torture on innocents becomes increasingly likely to occur, which is unacceptable to the great majority of Americans. It’s one thing to torture Khalid Sheihk Mohammed, but quite another to – even accidentally – torture an ordinary person guilty of no crime.
Back in 1949, Justice Robert Jackson issued a dissenting decision in the case of Terminiello v. City of Chicago, in which he stated “There is danger that, if the court does not temper its doctrinaire logic with a little practical wisdom, it will convert the constitutional Bill of Rights into a suicide pact”. And in 1963, in the case of Kennedy v. Mendoza-Martinez, Justice Goldberg wrote that while “the Constitution protects against invasions of individual rights, it is not a suicide pact”.
These judges clearly stated that moral arguments have practical limits. This truth can also be seen in the way war is now waged. Some people argue that the use of torture would sully our nation, making us equal to the terrorists, but this is plainly false. That is, a person who takes pleasure in the suffering of others, who carries out violence and chaos for the principal reason of causing pain and misery, would be the same as a terrorist, but this is not the character or spirit of the American soldier or intelligence agent, no matter how the media and the enemy may claim. The men who carry out the nation’s missions can and do maintain personal standards of morality while performing violent actions, even the deliberate harm to the enemy. The liars in the media seem to be able to honor our military only when they are dead, and our intelligence agents only when they attack their President. In actual fact, many honorable actions involve doing great harm to the enemy. In the old days we honored men like Sergeant York and Audie Murphy, who were able to fight a long, violent war then return home and live decent, quiet lives. Those men still exist and we still depend on them, although it’s no longer acceptable in some quarters to honor them for taking on the duties and costs of modern warfare. We are not obliged to play by the terms dictated by those who would murder our children, although far too few people today are willing to pay the price.
If you started reading this article expecting or hoping for a clear argument for or against the use of torture, you will be unsatisfied by this piece. My point for here, is that we all have the moral obligation to consider that our comfortable personal moralities all have boundaries, and those boundaries are protected by those who do what we cannot or will not do for ourselves. We all, whatever our opinion, have the duty to think carefully about this issue, to respect the limits of our knowledge and personal authority, and to consider the debt we owe those who have endured those burdens we were unwilling to carry ourselves.
That’s not to say, of course, that Christ approved of torture. It merely notes an absence of specific denunciation. One might wonder why. In the end, consideration of the matter leads people to one of only two valid conclusions:
1. Torture is so heinous that denouncing it is not necessary; it is evil on its face.
2. The specific moral quality of an action sometimes depends on details which may not be available or clear; what is torture from one perspective may be valid behavior from another.
Obviously, the first answer is clear and simple, while the second answer risks being used to justify atrocities. Few people indeed would accept the second answer as reasonable, yet in the end it must be included in any honest evaluation.
Consider Khalid Sheihk Mohammed. This is a man who, beyond any dispute by now, masterminded the 9/11 attacks, and if anything was disappointed he could not kill more innocents than he did. KSM was a monster’s mentor, guiding Osama bin Laden in the ways of murder and pain, a man greatly experienced in his vocation of making people suffer. KSM was hardened to police interrogation, and he knew how to play the system. I mention this for the simple obvious reason that this is how terrorists operate – they perform asynchronous combat, using rules which protect themselves to attack their victims with protection from their own enemies. When the terrorists attacked the World Trade Center in 1993 they failed, but they used the U.S. court system to collect and transfer critical data about the target which they incorporated into the successful 2001 attack. There’s no way around the fact that granting legal protections and privileges to the 1993 attackers helped them murder thousands more.
People who demand that terrorists be tried as criminals and given the legal rights and protections granted to any ordinary suspect, must accept that in doing so they are contributing to the suffering and death of innocent people. Terrorists are by their nature sub-human, not a lower class of person because of race or creed, but because of a choice of action which requires commensurate consequences. Throughout history the actions of terrorists, whether they are called hashashin, thuggees, the Black Hand, or any other name, have been ended only by the use of force to whatever degree is needed. Terrorists deal in fear and brutality, and know only that language. They stop at nothing, and are only stopped by greater force than they possess themselves.
This may appear to condone torture as a matter of practical realpolitik a ‘do whatever it takes’ approach which allows someone to do whatever they please, provided the proper argument is made. But if those who wish to protect terrorists must understand that by doing so they are helping harm and murder uncounted numbers of innocents in later attacks, those who are willing to use torture to defeat terrorists must accept that we are condoning torture. Waterboarding is torture. Not in the legal sense, for reasons I am not bringing up here because this is not the legal argument. But waterboarding someone is to cause deliberate suffering to that person, for the purpose of coercion. The question can be asked as to whether the torture is appropriate or necessary or defensible, but there can be no question that the line is crossed, and for a clear purpose – the terrorist believes that the western system of rights protects him from serious harm, and that belief must be obliterated. So the decision to act in a manner beyond what the terrorist considers possible is the lever by which his resolve may be undone and produce cooperation with the authorities. It would be false to pretend, however, that such a step can be taken without jeopardizing the precepts on which this nation and culture were built. And if the scale on which such actions are taken is large enough, the use of torture on innocents becomes increasingly likely to occur, which is unacceptable to the great majority of Americans. It’s one thing to torture Khalid Sheihk Mohammed, but quite another to – even accidentally – torture an ordinary person guilty of no crime.
Back in 1949, Justice Robert Jackson issued a dissenting decision in the case of Terminiello v. City of Chicago, in which he stated “There is danger that, if the court does not temper its doctrinaire logic with a little practical wisdom, it will convert the constitutional Bill of Rights into a suicide pact”. And in 1963, in the case of Kennedy v. Mendoza-Martinez, Justice Goldberg wrote that while “the Constitution protects against invasions of individual rights, it is not a suicide pact”.
These judges clearly stated that moral arguments have practical limits. This truth can also be seen in the way war is now waged. Some people argue that the use of torture would sully our nation, making us equal to the terrorists, but this is plainly false. That is, a person who takes pleasure in the suffering of others, who carries out violence and chaos for the principal reason of causing pain and misery, would be the same as a terrorist, but this is not the character or spirit of the American soldier or intelligence agent, no matter how the media and the enemy may claim. The men who carry out the nation’s missions can and do maintain personal standards of morality while performing violent actions, even the deliberate harm to the enemy. The liars in the media seem to be able to honor our military only when they are dead, and our intelligence agents only when they attack their President. In actual fact, many honorable actions involve doing great harm to the enemy. In the old days we honored men like Sergeant York and Audie Murphy, who were able to fight a long, violent war then return home and live decent, quiet lives. Those men still exist and we still depend on them, although it’s no longer acceptable in some quarters to honor them for taking on the duties and costs of modern warfare. We are not obliged to play by the terms dictated by those who would murder our children, although far too few people today are willing to pay the price.
If you started reading this article expecting or hoping for a clear argument for or against the use of torture, you will be unsatisfied by this piece. My point for here, is that we all have the moral obligation to consider that our comfortable personal moralities all have boundaries, and those boundaries are protected by those who do what we cannot or will not do for ourselves. We all, whatever our opinion, have the duty to think carefully about this issue, to respect the limits of our knowledge and personal authority, and to consider the debt we owe those who have endured those burdens we were unwilling to carry ourselves.
Wednesday, April 22, 2009
The Lie of Magic Budgets
Government taxes people to support itself. This is a basic, undeniable fact of life going back as far as there have ever been governments. Call it fees, patronage, tribute, whatever you will, it always comes down to the fact that if you have a group of people representing the city, state or nation, you will be paying taxes to support them.
People do not like taxes. Sometimes people resent paying for government at all, but more often people resent paying for things they find morally wrong. Politicians using public money to build monuments to themselves, to advance agendas that the public never voted to support, or to pursue personal interests that conflict with their duty to the nation and the limits of their constitutional powers, are likely to be opposed as autocrats and crooks.
So, government lies to the public about taxes and spending. Useless and selfish acts that are likely to get called out, instead get linked to unrelated acts which have broad public support, are given misleading names like ‘stimulus’ to hide their porcine nature, or are otherwise hidden or mislabeled. The problems are these; first, for all the belief that government officials have that they have fooled the public, over time the public begins to sense that they have been lied to, and this degrades trust in the government as an honest steward of the public’s welfare, which mistrust builds cumulatively through time. The politicians who do this lying, however, generally face no consequences in the short term, and so expand the practice in scope and quantity, especially when the politician in question believes his political seat is secure, especially when his party is in power.
This brings us to the magic budget. Moving money around to hide fraud is an old and popular practice, and to prevent this and make detection of crime easier, accountants created what are called Generally Accepted Accounting Principles, or GAAP. The US Government has enacted laws which require public businesses to operate by GAAP, as defined by the Securities and Exchange Commission, which in turn requests guidance from the Financial Accounting Standards Board, or FASB. GAAP can seem complex, but it is determined on the basis of nine fundamental principles:
• Principle of regularity: Conformity to enforced rules and laws.
• Principle of consistency: Apply the same methods and procedures from period to period.
• Principle of sincerity: The accounting unit should reflect in good faith the reality of the company's financial status.
• Principle of the permanence of methods: Aims at allowing the coherence and comparison of the financial information published by the company.
• Principle of non-compensation: Show the full details of the financial information and not seek to compensate a debt with an asset, a revenue with an expense, etc.
• Principle of prudence: Show the reality "as is" Typically, a revenue should be recorded only when it is certain and a provision should be entered for an expense which is probable.
• Principle of continuity: When stating financial information, one should assume that the business will not be interrupted. This principle mitigates the principle of prudence: assets do not have to be accounted at their disposable value, but it is accepted that they are at their historical value (see depreciation).
• Principle of periodicity: Each accounting entry should be allocated to a given period, and split accordingly if it covers several periods. If a client pre-pays a subscription (or lease, etc.), the given revenue should be split to the entire time-span and not counted for entirely on the date of the transaction.
• Principle of Full Disclosure/Materiality: All information and values pertaining to the financial position of a business must be disclosed in the records.
(principles outline courtesy of wikipedia)
The major provisions of the Sarbanes-Oxley Act of 2002, for example, are built on these principles. The Congress of the United States, however, does not use GAAP in its budget determination. Presidents, Congressmen and Senators regular play fast and loose with the numbers to say whatever they want to say. I must emphasize that this is neither a Republican nor Democrat ploy, the practice going back for almost two centuries. Explaining difficult transactions and getting around statutory limits is a common motive for politicians to play games with the facts. Thomas Jefferson did as much in justifying the Louisiana Purchase, and every President since has done the same to justify his actions or just hide the cost when he thought it would be hard to explain. World Wars 1 and 2 cost a lot more than the government admitted while fighting them, as did Social Security and Medicare – take a look sometime at what the government projected their costs to be, and compare those numbers with later reports once those entitlements were in place. And remember that “surplus” from the Clinton Administration? While certain liars like to claim that the subsequent administration spent or wasted that ‘surplus’, in actual fact no such surplus ever existed, the numbers were created by manipulating projections of future revenue and spending to project an optimal budgetary condition which had in fact never existed in the history of the United States, about as realistic as a personal budget that assumes no discretionary spending of any kind for four years. That’s not to say the Bush Administration did not also play budget games; many costs of the Iraq War were buried in non-related department budgets to conceal the costs. The government demands that public corporations comply with GAAP, but the government has never even tried to do so much, let alone hold itself accountable.
So along comes Barack Obama, a man whose resume was built on snake oil and manipulation. Is it really any wonder that this guy actually believes he could load the taxpayer with trillions of dollars in new spending, yet pretend that his plan will somehow reduce the deficit? That he can payoff special interest buddies with tax money, yet claim that it’s all to restart the economy? That he could load up his cabinet with tax cheats and paranoid radicals, yet imagine he could sell it as a model of ethical propriety? Obama is simply a savvier version of Blagojevich, a crook who thinks he knows what he can and cannot get away with, and he plays his cards accordingly.
Republicans imagine that they can catch out President Obama, but they forget that the public is tired of the game by both sides. The Democrats are the party of William Jefferson and Barney Frank, but the Republicans are the party of Larry Craig and Arlen Specter. And where the deficits, pork, and slime are concerned, the GOP is delusional if they believe they can claim moral high ground on this matter. The time is perfect for a genuine leader, someone with the moral honesty and intellectual capacity to understand when a point of no return is approaching. That’s not to say that some kind of violent revolution is coming. Rather, something of the opposite is already underway, a response of non-compliance in an expanding variety of ways. At some point, government officials need to understand that control is an illusion if the people do not accept their leadership, that the principles under which an official is entrusted with an office require accountability and honesty, without which the officials’ authority is as fictitious as the accounting of his spending.
People do not like taxes. Sometimes people resent paying for government at all, but more often people resent paying for things they find morally wrong. Politicians using public money to build monuments to themselves, to advance agendas that the public never voted to support, or to pursue personal interests that conflict with their duty to the nation and the limits of their constitutional powers, are likely to be opposed as autocrats and crooks.
So, government lies to the public about taxes and spending. Useless and selfish acts that are likely to get called out, instead get linked to unrelated acts which have broad public support, are given misleading names like ‘stimulus’ to hide their porcine nature, or are otherwise hidden or mislabeled. The problems are these; first, for all the belief that government officials have that they have fooled the public, over time the public begins to sense that they have been lied to, and this degrades trust in the government as an honest steward of the public’s welfare, which mistrust builds cumulatively through time. The politicians who do this lying, however, generally face no consequences in the short term, and so expand the practice in scope and quantity, especially when the politician in question believes his political seat is secure, especially when his party is in power.
This brings us to the magic budget. Moving money around to hide fraud is an old and popular practice, and to prevent this and make detection of crime easier, accountants created what are called Generally Accepted Accounting Principles, or GAAP. The US Government has enacted laws which require public businesses to operate by GAAP, as defined by the Securities and Exchange Commission, which in turn requests guidance from the Financial Accounting Standards Board, or FASB. GAAP can seem complex, but it is determined on the basis of nine fundamental principles:
• Principle of regularity: Conformity to enforced rules and laws.
• Principle of consistency: Apply the same methods and procedures from period to period.
• Principle of sincerity: The accounting unit should reflect in good faith the reality of the company's financial status.
• Principle of the permanence of methods: Aims at allowing the coherence and comparison of the financial information published by the company.
• Principle of non-compensation: Show the full details of the financial information and not seek to compensate a debt with an asset, a revenue with an expense, etc.
• Principle of prudence: Show the reality "as is" Typically, a revenue should be recorded only when it is certain and a provision should be entered for an expense which is probable.
• Principle of continuity: When stating financial information, one should assume that the business will not be interrupted. This principle mitigates the principle of prudence: assets do not have to be accounted at their disposable value, but it is accepted that they are at their historical value (see depreciation).
• Principle of periodicity: Each accounting entry should be allocated to a given period, and split accordingly if it covers several periods. If a client pre-pays a subscription (or lease, etc.), the given revenue should be split to the entire time-span and not counted for entirely on the date of the transaction.
• Principle of Full Disclosure/Materiality: All information and values pertaining to the financial position of a business must be disclosed in the records.
(principles outline courtesy of wikipedia)
The major provisions of the Sarbanes-Oxley Act of 2002, for example, are built on these principles. The Congress of the United States, however, does not use GAAP in its budget determination. Presidents, Congressmen and Senators regular play fast and loose with the numbers to say whatever they want to say. I must emphasize that this is neither a Republican nor Democrat ploy, the practice going back for almost two centuries. Explaining difficult transactions and getting around statutory limits is a common motive for politicians to play games with the facts. Thomas Jefferson did as much in justifying the Louisiana Purchase, and every President since has done the same to justify his actions or just hide the cost when he thought it would be hard to explain. World Wars 1 and 2 cost a lot more than the government admitted while fighting them, as did Social Security and Medicare – take a look sometime at what the government projected their costs to be, and compare those numbers with later reports once those entitlements were in place. And remember that “surplus” from the Clinton Administration? While certain liars like to claim that the subsequent administration spent or wasted that ‘surplus’, in actual fact no such surplus ever existed, the numbers were created by manipulating projections of future revenue and spending to project an optimal budgetary condition which had in fact never existed in the history of the United States, about as realistic as a personal budget that assumes no discretionary spending of any kind for four years. That’s not to say the Bush Administration did not also play budget games; many costs of the Iraq War were buried in non-related department budgets to conceal the costs. The government demands that public corporations comply with GAAP, but the government has never even tried to do so much, let alone hold itself accountable.
So along comes Barack Obama, a man whose resume was built on snake oil and manipulation. Is it really any wonder that this guy actually believes he could load the taxpayer with trillions of dollars in new spending, yet pretend that his plan will somehow reduce the deficit? That he can payoff special interest buddies with tax money, yet claim that it’s all to restart the economy? That he could load up his cabinet with tax cheats and paranoid radicals, yet imagine he could sell it as a model of ethical propriety? Obama is simply a savvier version of Blagojevich, a crook who thinks he knows what he can and cannot get away with, and he plays his cards accordingly.
Republicans imagine that they can catch out President Obama, but they forget that the public is tired of the game by both sides. The Democrats are the party of William Jefferson and Barney Frank, but the Republicans are the party of Larry Craig and Arlen Specter. And where the deficits, pork, and slime are concerned, the GOP is delusional if they believe they can claim moral high ground on this matter. The time is perfect for a genuine leader, someone with the moral honesty and intellectual capacity to understand when a point of no return is approaching. That’s not to say that some kind of violent revolution is coming. Rather, something of the opposite is already underway, a response of non-compliance in an expanding variety of ways. At some point, government officials need to understand that control is an illusion if the people do not accept their leadership, that the principles under which an official is entrusted with an office require accountability and honesty, without which the officials’ authority is as fictitious as the accounting of his spending.
Tuesday, April 21, 2009
Not Much Posting, I Know
Sorry, case competition is in 18 days, much to do much to do, no time for posting ...
but I will try to have something soon anyway.
but I will try to have something soon anyway.
Thursday, April 16, 2009
My Tax Rant
I have to admit that I did not attend one of the many “tea” parties being held across the nation. Oh, I certainly agree with the main contentions, that our present tax system is not only absurd but allows government to act in a very reckless manner. While liberals and democrats might consider this mere whining at the moment, since the government is firmly in their hands, they might do well to consider how they felt when the other side ran things not so long ago, and both liberals and conservatives, democrats and republicans alike might do well to consider how seldom government is really accountable and responsible in its conduct. Should we accept threats from individuals elected to represent the people, who now do as they please with the warning that if we get in their way, things might get nasty? Is our best hope merely that we do not end up with ‘someone worse’, which has been the sub rosa message from both parties for quite a while now. The TEA is supposed to mean ‘Taxed Enough Already’, but for many of us I believe the real message was ‘Tricked Enough Already’, maybe taunted, maybe we should say our politicians are ‘Tainted Enough Already’. We are all of us sick of the hypocrisy, the blatant lies and backroom deals. Don’t tell me only party ‘x’ does this, we’ve seen it across the board for most of our lives. I do believe the republicans do this less often than the democrats, but that hardly means it’s something to tolerate, much less encourage, just because “our side” is doing it. I admire and respect George W. Bush because, mistakes and all, we had an honest man in the office. Democrats claim the same thing about Barack Obama (while denying it about Bush), which I do not see, but at least we can agree that what we seek is transparency and integrity. Once we start looking at Congress, it gets difficult to find integrity. It’s there all right with some members of the House and Senate, but it’s clearly an endangered species on the Hill.
And that brings us back to the Tea Parties. Whether or not you think the programs included in the Stimulus and the bailouts were good or not, the plain fact is we citizens were steamrolled by them; no one really asked the people what we thought or were willing to pay for. Now, trillions of dollars have been committed to things that, good or not, do not really do a single thing to help folks save their homes, help banks offer loans more freely, or save jobs at major companies. The plans were nothing more, in practice, than politicians using crisis to advance their personal ambition and help their buddies. And that fact should really make you angry. You’ve been lied to and robbed, and only a great fool would pretend otherwise. That’s what the protests were all about.
So why didn’t I join in? First off, I’m not one to waste time on spilled milk. That money is spent, its not coming back, and history tells me that there are better ways to work for effective change than hold a rally and make noise that the politicians will either ignore or pretend is aimed at someone else. Second, it will sound cynical to say so, but there are a great many fools in the world today, willing to fall for a shiny promise or a scary story. The only way to change things is to educate people, and that is a one-on-one thing, and it takes time, patience, and a willing student. Frankly, a lot of folks are not ready for that lesson. And third, the bad thing about these protests is that folks do them and then go home and think they’ve done something, that they can get back to normal. You can win football games that way, but you cannot change the nation that way. This is a long fight, and we’d better be ready for what it takes to win, because right now the other side has a powerful system and a lot of force at its disposal. How many politicians are serious about tax reform? How many Senators really grasp what it means to balance raising your family, paying for your home, your kids’ college, and still saving something significant for your retirement, in an environment where ‘job security’ is fiction, where ‘financial planning’ is a faraway ideal, and where ‘accountable government’ is an oxymoron.
My country, my money, my rights. I will defend them because I want them to be around for my children. What about you?
And that brings us back to the Tea Parties. Whether or not you think the programs included in the Stimulus and the bailouts were good or not, the plain fact is we citizens were steamrolled by them; no one really asked the people what we thought or were willing to pay for. Now, trillions of dollars have been committed to things that, good or not, do not really do a single thing to help folks save their homes, help banks offer loans more freely, or save jobs at major companies. The plans were nothing more, in practice, than politicians using crisis to advance their personal ambition and help their buddies. And that fact should really make you angry. You’ve been lied to and robbed, and only a great fool would pretend otherwise. That’s what the protests were all about.
So why didn’t I join in? First off, I’m not one to waste time on spilled milk. That money is spent, its not coming back, and history tells me that there are better ways to work for effective change than hold a rally and make noise that the politicians will either ignore or pretend is aimed at someone else. Second, it will sound cynical to say so, but there are a great many fools in the world today, willing to fall for a shiny promise or a scary story. The only way to change things is to educate people, and that is a one-on-one thing, and it takes time, patience, and a willing student. Frankly, a lot of folks are not ready for that lesson. And third, the bad thing about these protests is that folks do them and then go home and think they’ve done something, that they can get back to normal. You can win football games that way, but you cannot change the nation that way. This is a long fight, and we’d better be ready for what it takes to win, because right now the other side has a powerful system and a lot of force at its disposal. How many politicians are serious about tax reform? How many Senators really grasp what it means to balance raising your family, paying for your home, your kids’ college, and still saving something significant for your retirement, in an environment where ‘job security’ is fiction, where ‘financial planning’ is a faraway ideal, and where ‘accountable government’ is an oxymoron.
My country, my money, my rights. I will defend them because I want them to be around for my children. What about you?
Monday, April 13, 2009
True Heroes
12:03 AM, Easter Sunday, Southeast Houston – The 911 call was like many that came before it and which would follow; a simple but dangerous house fire. Station 26 dispatched two trucks, as normal.
12:07 AM – A four-minute trip and the firemen arrive at a single-story brick home at Oak Vista and De Leon streets, among them Captain James Harlow and rookie firefighter Damion Hobbs, recently returned to the US from serving a tour in Iraq with the US Army.
12:15 AM - As firefighters battled the blaze, the flames subsided quickly and it appeared the fight would be an easy one. Captain Harlow, speaking with neighbors, learns that two elderly people live in the house and were not seen to leave, so he and some other firefighters enter the still-burning house to search for them.
12:25 AM – Winds suddenly become much stronger, and the flames revive, bursting through the roof and moving quickly across the frame. Witnesses later said the flames shot up as high as 50 feet. Because of the intense heat and unpredictable behavior, firefighters are ordered to fall back. As they emerge from the house, the firemen are counted.
12:30 AM – A second roll call confirms that Captain Harlow and Probationary Firefighter Hobbs are still in the house. The flames remain too intense and the winds too high for firefighters to re-enter the home to search for their comrades. The couple who live in the house are found safe outside, having escaped before the fire department arrived. They did not know that firemen had been looking for them.
1:10 AM – Firefighters are finally able to enter the home and search for the missing men.
1:20 AM – The bodies of James Harlow and Damion Hobbs are found and brought outside. CPR is attempted on the lawn, but is fruitless. Firemen form a ‘wall of honor’ as the bodies are carried to ambulances.
2:00 AM – Mayor Bill White arrives and speaks to firemen. The crew of Station 26 finishes clean-up of the area and works out the rst of their shift without incident.
You may notice the word ‘hero’ used a lot in various ways. It’s often used by politicians and media people to describe celebrities and sports figures. I submit that the word should be reserved for someone who daily puts everything on the line in order to make a difference for others. Medals and honors may be awarded for all sorts of actions, but there are few true heroes. Sadly, many real heroes are distinguished by the cost of their valor. A neighbor at the scene of the fire sadly observed that she never thought the firemen could be in danger, she said everyone ”sort of thought they were invincible … we never imagined this could happen”. Captain Harlow served nearly three decades as a fireman, and Firefighter Hobbs served his country in war before completing his fire academy training to serve his community in this most demanding vocation. These are true heroes, against whose example few men can measure. May God grant their families peace and comfort for their loss, and indeed we are poorer for having lost such men, though richer to have been blessed that such men would give their best talent and devotion to service.
Friday, April 10, 2009
Thursday, April 09, 2009
Boundaries
There are many differences between Liberals and Conservatives, and frankly sometimes these differences are important to the health of Society. Traditionally, Conservatives speak for the rights of the majority and for mainstream values, while Liberals stand up for minority opinions and positions of social outcasts; both voices matter in a functioning civilization, especially in a leading culture in the world. There is, however, a limit to the range of opinions which may be held without cost. After a certain point, assuming certain things incurs a cost, even a penalty, and to some degree represents a growing threat to the society making the assumption. The present piracy problem off the coast of Somalia is an example where certain boundaries have been crossed, and conditions have changed under which effective measures may be utilized. In short, pirates are terrorists and should not be confused with common criminals, nor treated as such.
In yesterday’s discussion, some readers chose to describe the Somali pirates in distinctly gentle tones, trying to get readers to consider the lack of economic opportunity in Somalia, or the oppressive conditions in that part of the world which could induce young men to follow illicit courses of enterprise. These readers chose to portray the pirates as criminals, deserving of some punishment certainly, but also as individuals to be considered in the light of their circumstances. This is an argument seen commonly in sociology classrooms, as well as various opinion pieces on news channels. America, after all, is expected to be more restrained in the use of our force, and more considerate of the conditions and rationale of our enemies.
As you may have guessed, I regard these as specious arguments. While studying environmental influences in a life decision may be valid and useful in a forensic sense, the salient question is what to do to punish unacceptable acts and prevent their recurrence. To that question, the most effective strategy in history has been to bring overwhelming force against the perpetrator, to completely eradicate any group which acts in a manner outside tolerable boundaries. Therefore, boundaries need to be discussed here.
Suppose someone robs a business, and in that crime takes hostages. Clearly, this situation has escalated beyond common criminal behavior. Also, the situation has a series of thresholds. Weapons and their type, whether anyone has been injured, and whether anyone has been killed all factor into the way that authorities address the situation. That a crime has been committed is not in dispute; the question is the way the situation is addressed. A domestic dispute where a man holds his wife hostage with a handgun is dangerous, but on a much different level from a hostage situation involving a group of radicals using automatic weapons and bombs, who have already killed a hostage as a sign of their determination. When certain events happen, the situation irrevocably changes.
With that in mind, let’s consider the way the Royal Navy dealt with pirates. Summary execution, folks. The British, you may recall, are quite the paragon for order and respecting rights, and a long history of long court cases, but where pirates were concerned, the Brits wouldn’t mess about for a moment, it was get a rope and hang ‘em high. That’s even more striking when you consider what it did for future pirates considering surrender – why surrender if you’d be executed, anyway? The British hated piracy so much that they established a fierce rule for such acts. Regardless of what you may have seen in ’Pirates of the Caribbean’, pirates were considered the worst of the worst; even the Americans at the start of the Nineteenth Century regarded piracy as an evil to be obliterated; remember that line in the Marine Hym about the ‘shores of Tripoli’? That’s when President Jefferson sent them into Libya to rout out the pirates there. Even though relations between the U.S. and the U.K. were not nearly comfortable after the War of 1812, by 1823 American and British navies were cooperating in sweeps of Caribbean and Atlantic waters to find and destroy nests of pirates. It was that important to both nations, and it should be so today.
The argument has been made that the pirates from Somalia are just trying to survive their economic conditions. That argument ignores history – many places in the world and throughout the ages have endured deprivation and suffered from want, but their people did not turn to violent crime to support themselves. Chinese immigrants throughout history, for example, have been remarkable for both their industry and their ability to conform to local conditions. No less can be said for the Jews, who despite persecution for more than a thousand years in almost every nation where they settled, have flourished and grown everywhere. The same for Italians, the Irish, the Russians, et cetera – you don’t hear many pirates named O’Reilly or Battaglia, hmm? Come to that, the historical model for pirates is often men who have some education, ambition, and experience as sailors. Since Somalia does not have a navy or coast guard and no universities to speak of, the strongest likelihood is that the bozos carrying out these attacks are recruited by men from other parts of Africa who see the region as an enterprise zone of sorts. So, we see from this a need to address two levels of pirate activity, those who commit the direct attacks and those who plan and support them.
It comes down to making them choose life or death. That is, whenever a pirate attacks a vessel and crew, armed forces respond in force, killing anyone who resists. Those who wish to surrender will be given the opportunity to give up the identity and location of their sponsors. Refusal to do so will result in immediate execution, those few who agree will be given life sentences. The locations of the “mother ships” will be reconnoitered, and once confirmed will be destroyed without delay. Planners and organizers will be hunted down by Marines and confronted – those who resist will be killed, those who surrender will be given trial by military tribunal.
Sound harsh? That’s the idea. Piracy was nearly extirpated in the 19th century, because the message was made very clear that any pirate anywhere would be hunted down and killed, period. Make it that undesirable and no one will even think about it.
Pirates do not have civil rights. Pirates do not have a right to counsel, or a trial by jury or a plea bargain. Each and every one of them chose to commit violence on the open sea, and so brings upon himself the full fury of any authority with the backbone to defend its flag.
In yesterday’s discussion, some readers chose to describe the Somali pirates in distinctly gentle tones, trying to get readers to consider the lack of economic opportunity in Somalia, or the oppressive conditions in that part of the world which could induce young men to follow illicit courses of enterprise. These readers chose to portray the pirates as criminals, deserving of some punishment certainly, but also as individuals to be considered in the light of their circumstances. This is an argument seen commonly in sociology classrooms, as well as various opinion pieces on news channels. America, after all, is expected to be more restrained in the use of our force, and more considerate of the conditions and rationale of our enemies.
As you may have guessed, I regard these as specious arguments. While studying environmental influences in a life decision may be valid and useful in a forensic sense, the salient question is what to do to punish unacceptable acts and prevent their recurrence. To that question, the most effective strategy in history has been to bring overwhelming force against the perpetrator, to completely eradicate any group which acts in a manner outside tolerable boundaries. Therefore, boundaries need to be discussed here.
Suppose someone robs a business, and in that crime takes hostages. Clearly, this situation has escalated beyond common criminal behavior. Also, the situation has a series of thresholds. Weapons and their type, whether anyone has been injured, and whether anyone has been killed all factor into the way that authorities address the situation. That a crime has been committed is not in dispute; the question is the way the situation is addressed. A domestic dispute where a man holds his wife hostage with a handgun is dangerous, but on a much different level from a hostage situation involving a group of radicals using automatic weapons and bombs, who have already killed a hostage as a sign of their determination. When certain events happen, the situation irrevocably changes.
With that in mind, let’s consider the way the Royal Navy dealt with pirates. Summary execution, folks. The British, you may recall, are quite the paragon for order and respecting rights, and a long history of long court cases, but where pirates were concerned, the Brits wouldn’t mess about for a moment, it was get a rope and hang ‘em high. That’s even more striking when you consider what it did for future pirates considering surrender – why surrender if you’d be executed, anyway? The British hated piracy so much that they established a fierce rule for such acts. Regardless of what you may have seen in ’Pirates of the Caribbean’, pirates were considered the worst of the worst; even the Americans at the start of the Nineteenth Century regarded piracy as an evil to be obliterated; remember that line in the Marine Hym about the ‘shores of Tripoli’? That’s when President Jefferson sent them into Libya to rout out the pirates there. Even though relations between the U.S. and the U.K. were not nearly comfortable after the War of 1812, by 1823 American and British navies were cooperating in sweeps of Caribbean and Atlantic waters to find and destroy nests of pirates. It was that important to both nations, and it should be so today.
The argument has been made that the pirates from Somalia are just trying to survive their economic conditions. That argument ignores history – many places in the world and throughout the ages have endured deprivation and suffered from want, but their people did not turn to violent crime to support themselves. Chinese immigrants throughout history, for example, have been remarkable for both their industry and their ability to conform to local conditions. No less can be said for the Jews, who despite persecution for more than a thousand years in almost every nation where they settled, have flourished and grown everywhere. The same for Italians, the Irish, the Russians, et cetera – you don’t hear many pirates named O’Reilly or Battaglia, hmm? Come to that, the historical model for pirates is often men who have some education, ambition, and experience as sailors. Since Somalia does not have a navy or coast guard and no universities to speak of, the strongest likelihood is that the bozos carrying out these attacks are recruited by men from other parts of Africa who see the region as an enterprise zone of sorts. So, we see from this a need to address two levels of pirate activity, those who commit the direct attacks and those who plan and support them.
It comes down to making them choose life or death. That is, whenever a pirate attacks a vessel and crew, armed forces respond in force, killing anyone who resists. Those who wish to surrender will be given the opportunity to give up the identity and location of their sponsors. Refusal to do so will result in immediate execution, those few who agree will be given life sentences. The locations of the “mother ships” will be reconnoitered, and once confirmed will be destroyed without delay. Planners and organizers will be hunted down by Marines and confronted – those who resist will be killed, those who surrender will be given trial by military tribunal.
Sound harsh? That’s the idea. Piracy was nearly extirpated in the 19th century, because the message was made very clear that any pirate anywhere would be hunted down and killed, period. Make it that undesirable and no one will even think about it.
Pirates do not have civil rights. Pirates do not have a right to counsel, or a trial by jury or a plea bargain. Each and every one of them chose to commit violence on the open sea, and so brings upon himself the full fury of any authority with the backbone to defend its flag.
Wednesday, April 08, 2009
This Is A Test
About two hundred miles off the coast of Somalia, a U.S.-flagged freighter has been seized by pirates, in the fifteenth recorded instance of high seas piracy since March 1.
The situation would appear to be a simple one for the American commander in chief – the vessel and crew are American, they were attacked without provocation in international waters, and the attackers are non-aligned with any nation in the world. It would seem a simple matter for Obama to order the Navy and Marines into the area to do the world a favor and eliminate these pirates, and in so doing confirm the precedent that America will defend its own. Less than a week ago, President Obama clearly stated that rules exist for a reason, and North Korea’s launch of a ballistic missile required “severe consequences”. Certainly a direct attack on a U.S.-flagged vessel and American citizens deserves as much as a missile test which sent the rocket into the Sea of Japan.
It remains to be seen how President Obama will answer this test.
The situation would appear to be a simple one for the American commander in chief – the vessel and crew are American, they were attacked without provocation in international waters, and the attackers are non-aligned with any nation in the world. It would seem a simple matter for Obama to order the Navy and Marines into the area to do the world a favor and eliminate these pirates, and in so doing confirm the precedent that America will defend its own. Less than a week ago, President Obama clearly stated that rules exist for a reason, and North Korea’s launch of a ballistic missile required “severe consequences”. Certainly a direct attack on a U.S.-flagged vessel and American citizens deserves as much as a missile test which sent the rocket into the Sea of Japan.
It remains to be seen how President Obama will answer this test.
Monday, April 06, 2009
The American Right to Be Rich
I don’t know who first started the phrase ‘there’s two kinds of people …’, but it really gets on my nerves. It’s oversimplifying things, and what’s worse, it encourages people to generalize and broadbrush. And then these people are surprised when groups take such behavior further and begin acting like mobs, often racist and xenophobic in their mood.
Imagine that.
I start with that obnoxious twaddle, because it reflects a rather nasty sort of groupthink. And as happens all too often, that kind of mob mentality plays out in politics. It is the bane of democracy, when an emotional swell carries the people to a mad decision. And in the current climate, it’s that recurring poison of class warfare and hatred of success in others. In recent weeks we have seen public attacks of a most unreasonable vituperance against executives of public corporations, banks, and a wide range of successful individuals. While the targeting has been selective – no one seems to ask why it is reasonable to challenge AIG executives for receiving bonuses that they can prove they earned, while ignoring, say, the millions of dollars paid to Freddie Mac and Fannie executives. No one seems to consider it just a tad hypocritical for wealthy politicians like Ted Kennedy and Harry Reid to complain about the wealth of people who actually worked for their money.
And then there is our President, Barack Obama. Obama made $22 million dollars writing books, and somehow believes that qualifies him to tell the rest of us that we’re greedy. Madness is when people start telling us that this is an appropriate moral position, especially when the man telling us how bad it is to be rich, takes such pains to protect his own wealth and make sure his own comforts are provided. I wonder if he’s tweaked the thermometer at the White House down to the levels he told the rest of us to set, yet? Not likely.
Let’s be clear – the problem is not that Obama is rich, it’s that the President of the United States thinks its only OK for some people to be rich, and on that point he is not only wrong, but walking down a morally corrupt path. And he leads a mob of self-righteous morons, who neither comprehend nor care about the moral iniquity of their hatred.
I have a right to be rich. I am not rich, so far as money is concerned, but if I ever become rich, no one has the right to deny me my wealth. You have that same right, to have and hold what is your own, the same as every man. It has been played down as a mean source of motivation to say so, but the American Revolution was fought, in part, to protect wealth from being stolen by men who did nothing to earn it. ’No taxation without representation’, at its heart, is defense of individual wealth. To pretend that our nation’s forefathers fought and died for the right to create progressive tax rates, set a maximum wage, or for politicians to harass honest individuals simply for personal success is to lie, and there’s no denying it.
That is not to say that I should be miserly, or count it a virtue if I am cold to the needs of others. But virtue comes from choice, just as does evil. What you choose to do defines you, and your worth comes from your deliberate effort. Someone who claims another person should pay his debt is of no account, and so too a man who pays for his dreams with the work and wealth of other people compelled to pay against their will is a thief. It is necessary for government to levy taxes to pay for those needs to which the public has agreed, and to meet those responsibilities specified in the Constitution, but it is theft to take money for advancing a personal agenda and the special interests of one party. If it was even marginally valid to argue morally against the cost of the war in Iraq, then it is many times more imperative to stand against crippling our children’s future in order to give ACORN and the AFL-CIO a stranglehold on industry and the election system. And for government to even hint that someone is morally wrong for financial success is so foul in spirit that it beggars the imagination to come up with strong enough condemnation.
I started by condemning the stratification of whole demographics, and now I return to it. While there are legitimate means of studying group dynamics and cultural mores at work influencing behavior and social interactions, it must be understood that every person is an individual, and their personal condition is the result of both environment and choice; to deny one force is to invalidate the conclusion of your analysis before it starts. Polarization of wealth-hate is in like fashion an exercise of fascism, because the government is commonly brought to bear on a targeted class through no offense of their character. In practice such actions are no different from racially-based or religious persecution, and history offers an appalling record on how deep and vicious such pogroms can become.
Imagine that.
I start with that obnoxious twaddle, because it reflects a rather nasty sort of groupthink. And as happens all too often, that kind of mob mentality plays out in politics. It is the bane of democracy, when an emotional swell carries the people to a mad decision. And in the current climate, it’s that recurring poison of class warfare and hatred of success in others. In recent weeks we have seen public attacks of a most unreasonable vituperance against executives of public corporations, banks, and a wide range of successful individuals. While the targeting has been selective – no one seems to ask why it is reasonable to challenge AIG executives for receiving bonuses that they can prove they earned, while ignoring, say, the millions of dollars paid to Freddie Mac and Fannie executives. No one seems to consider it just a tad hypocritical for wealthy politicians like Ted Kennedy and Harry Reid to complain about the wealth of people who actually worked for their money.
And then there is our President, Barack Obama. Obama made $22 million dollars writing books, and somehow believes that qualifies him to tell the rest of us that we’re greedy. Madness is when people start telling us that this is an appropriate moral position, especially when the man telling us how bad it is to be rich, takes such pains to protect his own wealth and make sure his own comforts are provided. I wonder if he’s tweaked the thermometer at the White House down to the levels he told the rest of us to set, yet? Not likely.
Let’s be clear – the problem is not that Obama is rich, it’s that the President of the United States thinks its only OK for some people to be rich, and on that point he is not only wrong, but walking down a morally corrupt path. And he leads a mob of self-righteous morons, who neither comprehend nor care about the moral iniquity of their hatred.
I have a right to be rich. I am not rich, so far as money is concerned, but if I ever become rich, no one has the right to deny me my wealth. You have that same right, to have and hold what is your own, the same as every man. It has been played down as a mean source of motivation to say so, but the American Revolution was fought, in part, to protect wealth from being stolen by men who did nothing to earn it. ’No taxation without representation’, at its heart, is defense of individual wealth. To pretend that our nation’s forefathers fought and died for the right to create progressive tax rates, set a maximum wage, or for politicians to harass honest individuals simply for personal success is to lie, and there’s no denying it.
That is not to say that I should be miserly, or count it a virtue if I am cold to the needs of others. But virtue comes from choice, just as does evil. What you choose to do defines you, and your worth comes from your deliberate effort. Someone who claims another person should pay his debt is of no account, and so too a man who pays for his dreams with the work and wealth of other people compelled to pay against their will is a thief. It is necessary for government to levy taxes to pay for those needs to which the public has agreed, and to meet those responsibilities specified in the Constitution, but it is theft to take money for advancing a personal agenda and the special interests of one party. If it was even marginally valid to argue morally against the cost of the war in Iraq, then it is many times more imperative to stand against crippling our children’s future in order to give ACORN and the AFL-CIO a stranglehold on industry and the election system. And for government to even hint that someone is morally wrong for financial success is so foul in spirit that it beggars the imagination to come up with strong enough condemnation.
I started by condemning the stratification of whole demographics, and now I return to it. While there are legitimate means of studying group dynamics and cultural mores at work influencing behavior and social interactions, it must be understood that every person is an individual, and their personal condition is the result of both environment and choice; to deny one force is to invalidate the conclusion of your analysis before it starts. Polarization of wealth-hate is in like fashion an exercise of fascism, because the government is commonly brought to bear on a targeted class through no offense of their character. In practice such actions are no different from racially-based or religious persecution, and history offers an appalling record on how deep and vicious such pogroms can become.
Wednesday, April 01, 2009
“W was Right”, Says Obama
London – President Barack Obama stunned the convened heads of state at the G-20 conference today, by announcing that his predecessor, George W. Bush, was “right in just about every one of his major policy decisions”, and promised that U.S. military and economic policy would be “a continuation of Bush in all essentials”.
President Obama promised to continue the mission in Iraq and Afghanistan, and in an unexpected change of heart, not only plans to keep the Guantanamo base open but expand its operations. Obama promised to cut taxes “for all tax-payers”, to rescind his earlier budget proposals and pressed for an inquiry into the conduct of key Congressional leaders in allowing the Fannie Mae and Freddie Mac disasters.
A stunned Associated Press correspondent spoke for most media representatives, when he asked the President, “Didn’t you run on a promise of ‘change’? And didn’t you say electing John McCain would have led to ‘Bush III’?”
President Obama agreed. “Yes, I said those things, but” - he shrugged - “I was wrong. Now that I have had a chance to see how things are working and to see who truly understands the values and history of this nation, I would have to say – at least for now – that I respect the work of my predecessor, so much so that his administration will be my template for the forseeable future.”
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april fool
President Obama promised to continue the mission in Iraq and Afghanistan, and in an unexpected change of heart, not only plans to keep the Guantanamo base open but expand its operations. Obama promised to cut taxes “for all tax-payers”, to rescind his earlier budget proposals and pressed for an inquiry into the conduct of key Congressional leaders in allowing the Fannie Mae and Freddie Mac disasters.
A stunned Associated Press correspondent spoke for most media representatives, when he asked the President, “Didn’t you run on a promise of ‘change’? And didn’t you say electing John McCain would have led to ‘Bush III’?”
President Obama agreed. “Yes, I said those things, but” - he shrugged - “I was wrong. Now that I have had a chance to see how things are working and to see who truly understands the values and history of this nation, I would have to say – at least for now – that I respect the work of my predecessor, so much so that his administration will be my template for the forseeable future.”
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april fool
Friday, March 27, 2009
Since You Asked ...
President Obama has done a dismal job his first few weeks. His lack of executive experience and competence has become painfully obvious around the world, even to many of those people who elected him in the forlorn hope that Obama would make things better rather than worse. Because Denial is the first stage in the way many people deal with Obama’s true level of performance, many on the Left desperately hope that his idiocy will somehow work out, even prove to be brilliantly successful. As it becomes increasingly obvious that President Obama’s plans are ill-considered and frankly damaging to the nation, however, that dismal hope has shifted to bitter accusations that Obama’s critics have not submitted alternative suggestions; every post I publish which point out Obama’s blunders will be met with at least one challenge from the Left to present my own plan.
First off, it needs to be noted that Republicans in Congress have offered a number of substantive plans – the problem there, is that Pelosi and Reid have shut down the traditional lanes of dialogue between parties to debate bills and propose alternatives. The stimulus bill and bailout packages were essentially rammed through the chambers; debate was killed from the outset. Next, while I consider myself reasonably intelligent and informed on the issues, one would expect that the President of the United States, having a staff of economic experts convened for his benefit and advice and the faculties of his office, would be able to produce a far more detailed, effective, and comprehensive program than any individual citizen; it seems to admit the unfortunate limits of the man to match President Obama with an ordinary run of the mill blogger. That is to say, there is no downside for me to fail in matching up with President Obama, seeing as he is the one who promised solutions and answers, indeed he all but promised miracles and he has all the tools and resources to address the issue, while speaking for myself I made no promises and have only my own experience and intellect to answer the questions. Should I prove to be at least the equal to President Obama in my resolutions, the reader will be compelled either to grant that I am an ideal candidate for POTUS myself, or that the man occupying the office is not nearly equal to the task.
So, to the issues. My approach is simple; Economics boils down to two essential ingredients – contracts and confidence. Every financial action amounts to a contract, whether it is hiring an employee, buying supplies to make the product, a customer purchasing the product or service, or whatever. It involves at least two parties making an agreement satisfactory to them both. And the satisfaction of that agreement depends on confidence. When confidence is strong, a company, business, or worker sees more revenue and activity, but when confidence fails, business falls off and times get tough. Call it a downturn, recession, or even a depression, at the heart of it the rough times all involve a collapse of confidence by the public in the economy. Therefore, the first cause of recovery from such a condition is the rebuilding and restoration of confidence. This is also one of the few areas where the President can have direct and beneficial influence, or he can screw things up and make the situation worse. The president can recommend actions to Congress and the Federal Reserve which increase the flow of money and credit. This action risks increasing inflation, but most economists regard moderately higher inflation an acceptable cost for lowering unemployment and reviving consumer confidence. Therefore, tax breaks for companies which hire significant numbers of new employees, especially by returning core operations and headquarters to the United States, are the historically preferred means for rewarding desired behavior and improving the domestic economy and stabilizing long-term confidence. Actions which demoralize industry, such as punitive taxes or public antagonism by political leaders, deter growth and recovery, which is one reason why things have simply gotten worse under Obama.
It should be noted, at this point, that both parties are guilty of hyperbole in referring to the present economic condition in dire tones. Democrats have falsely compared the present condition to the Great Depression of the 1930s, in hopes of blaming the Bush Administration for the crisis, while Republicans have done so in hopes of blaming President Obama for turning a mild recession into a catastrophe. Neither comparison is valid, and the behavior only worsens the matter, since few sources in the media or the government are acting responsibly in describing the causes or effects of the situation. Whether inflation, unemployment, housing foreclosures, bank failures, or any other major metric of economic condition is considered, it is plainly dishonest to pretend that the current situation is at all comparable to the Great Depression. In this respect, what a President should do is call out the naysayers and pessimists, emphasizing the core strength of the nation and its workers, validating his own credentials by affirming the nation’s most essential treasure – it’s workers, investors, and yes it’s executives. Obama’s penchant for harassing the top brass at convenient target companies, even when the guys attacked came in to fix the problems caused by someone else, shows character and/or comprehension flaws that do him no credit and make the task of restoring confidence in the economy that much harder. I am not saying that I would lavish praise indiscriminately, but at the same time Obama’s habit of attacking whole demographic segments with general disdain is more characteristic of class warfare than sound understanding of economics. It may sound trite, but ‘praise in public, criticize in private’ also applies to public figures, as much or more so than anyone else.
In the matter of the AIG executive bonuses, for example, President Obama foolishly led a mob of outrage, only to be confronted with evidence that he had not bothered to find out the facts. It turns out that at least some of those AIG executives were brought in after things blew up there – they not only were not responsible for the company’s crisis, they were brought in specifically to set things right. Kind of like blaming firemen for the fire they are trying to put out. Next, it turns out that some of those AIG execs agreed to take only one dollar a year in salary; the “bonuses” were there to serve as actual compensation for their work, and those payments were tied to actual accomplishment of specified metrics. Once those facts became known, the moral thing for President Obama to do was to admit he was wrong and apologize, but being who and what he is, the President chose to switch gears and pretend he had never said what is plainly on the record.
With those AIG “bonuses” and executive compensation in mind, let’s take a look at the new trend among hystero-liberals like Barack “Panic” Obama – tossing out the idea of maximum pay for executives. To understand why this idea is incredibly stupid, let’s imagine for a minute that you buy a lotto ticket, and it wins. Let’s say you get a Cash Option ticket and after taxes it’s, hmm, let’s say 50 million dollars. Set for life, right? Well, there is talk about limiting pay under certain circumstances to a million dollars a year. Using that logic, the government would be telling you that you’d have to wait forty-nine more years to get all of your lottery winnings, even though the government would be sure to grab its take from the top. How many folks would buy lotto tickets if the payout was maximized per year? Not many, the whole system would collapse as demand folded, which is why no one has even suggested trying this stunt on state lotteries and scratch-off tickets. Lotto winners are just lucky, they don’t invest time in education and training and work to get where they are, like professional athletes, rock stars … and corporation executives. Not only that, lotto winnings are paid out of public money, while those executives everyone loves to hate so much are paid out of the company’s money. And yes, the government gave AIG more than a hundred billion dollars, but they not only did not prohibit bonuses which it turns out are both legal and appropriate, the bill which handed over the money specifically assured those payments. Once again, we have to decide whether President Obama is a lazy politician who does not understand economics, or a dishonest charlatan trying to create false outrage in order to advance an agenda he knows to be unconstitutional and which even his own party would shoot down in short order, were they to consider the submissions in clear and ordered debate. Had I been in Obama’s chair when the AIG story broke, I would have begun by getting my facts straight, and by protecting the fundamental priorities of the nation, in this case confidence in the corrections being exercised to right the ship. I would have used the influence that Obama so casually enjoys, to restrain members of my part from starting up witch-hunts or whipping up hysteria in the public forums.
Anyway, on to the core subjects – Economics, Trade, Finance, and Taxation. That’s what this all comes down to, you know, the fundamental forces and their effects on the public. I wrote earlier that consumer confidence is a critical component to recovering from this recession, so that’s our starting point. Any competent President knows better that to play on people’s fears, as Obama has done – it invariably causes greater long-term harm which does not justify the short-term political opportunities which Obama chose to pursue instead of the nation’s interests. I have said it before but it bears repeating; when Obama tries to sell his “stimulus” as virtuous and sure to spur the economy simply because he’s spending so many trillions of tax dollars, he betrays either a dishonest character or a horrible miscomprehension of economics. It is very much possible to simply be wasting money, no matter how much is spent, if the money is not spent in addressing the vital needs of the nation. To spend almost a trillion dollars without creating private-sector jobs, without assisting even one mortgage going through foreclosure at the moment, or establishing a method for restoring confidence in the finance industry, is the government equivalent of taking the mortgage money and spending it on hookers.
There is no painless solution; the key decision is who should pay, and how can the damage be controlled to affect the fewest innocent parties? Protecting jobs is paramount – wealth comes into companies because of working employees, wealth comes to families through wages, and taxes are paid through successful jobs and successful companies. Corporate taxes need to be lowered during a recession, because that rewards increased productivity which only happens by keeping employees and hiring more. Individuals should also not see taxes raised during a recession, because so many of them own and run companies and will lay off people if their taxes go up at a time when their revenues are already suffering. Also, investments in companies depend on individuals with the means and inclination to buy stock, fund ventures, and otherwise put their money where their confidence is. Raising taxes is necessary at time, but doing so during a recession is poisoning the patient.
As to who pays, there is no such thing as “too big to fail”. Take a look at the largest companies in America in 1850, 1900, and 1950. Some really big names went out of business, and harsh as it sounds that’s how the world works. No one gets to hang around just because they have a history. If there is anyplace where evolution works, its in business. Look at phone deregulation. Sure, it was a mess in places, but without it no one would have really developed cell phones, much less the variety of plans available today, in almost every country. Sorry GM, but your business model is a rotting corpse. Sorry AIG, but there is no right to make taxpayers keep you going. Bankruptcy courts exist for the same reasons you got into trouble.
Then there are the investment banks. No one can explain why speculation should be protected, because there is just no way to defend that argument. No one’s offering to pay me all the money my 401k lost in the last 6 months, no one has guaranteed my employer will stay in business, but these investment banks think they should be propped up for rotten judgment and a rather annoying lack of transparency about their practices and promises. Let the crooks go to prison, and let the bad banks fail. And make sure everyone knows which congressmen backed those banks.
Money should be spent, but wisely and with absolutely no sense or appearance of political gaming. Mortgages, for example, are a sound investment and it makes sense for the government to back problem areas provided it gets a take of the return. Enough good mortgages (mortgages with working families who want to keep and pay off their home) exist to cover the losses of the relatively few bad mortgages that will fail. And the return for the government could end up repaying a substantial portion of the program’s cost, in addition to preventing the mortgage company from being rewarded for risky behavior – if the government accepts risk, they must be paid according to the return.
As to trade, we must stop trying to solve everyone else’s problems, or deny that American businesses are the reasonable first focus of business. But protectionist policies do more harm than good, that’s the history of trade, and in any case protecting inefficiency and poor performance is plain stupid. Reward R&D, reward strategic industries, but stop pretending that a pickup truck will decide the fate of America’s economy.
Finance is a fancy word for figuring out how to pay for things. We had loans and credit as far back as the pharaohs, along with variations on bankruptcy, bad debt, and alternative payments. After several thousand years, we know the basics – everything has to be paid for, risk never completely goes away, and the possibility that something bad will happen means that sooner or later it will happen. There are laws on the books about transparency and accountability. Time to enforce them. Do that and folks will trust banks again.
As to taxes, it’s even more simple – reward people who pay taxes, not those who do not pay taxes. If you can’t handle that concept, there’s simply no hope you could understand anything more complex, and if you do understand that concept, you will also realize that tax reform has been overdue for more than a generation. Rates and specific deductions are symptoms, not the fundamental problem.
First off, it needs to be noted that Republicans in Congress have offered a number of substantive plans – the problem there, is that Pelosi and Reid have shut down the traditional lanes of dialogue between parties to debate bills and propose alternatives. The stimulus bill and bailout packages were essentially rammed through the chambers; debate was killed from the outset. Next, while I consider myself reasonably intelligent and informed on the issues, one would expect that the President of the United States, having a staff of economic experts convened for his benefit and advice and the faculties of his office, would be able to produce a far more detailed, effective, and comprehensive program than any individual citizen; it seems to admit the unfortunate limits of the man to match President Obama with an ordinary run of the mill blogger. That is to say, there is no downside for me to fail in matching up with President Obama, seeing as he is the one who promised solutions and answers, indeed he all but promised miracles and he has all the tools and resources to address the issue, while speaking for myself I made no promises and have only my own experience and intellect to answer the questions. Should I prove to be at least the equal to President Obama in my resolutions, the reader will be compelled either to grant that I am an ideal candidate for POTUS myself, or that the man occupying the office is not nearly equal to the task.
So, to the issues. My approach is simple; Economics boils down to two essential ingredients – contracts and confidence. Every financial action amounts to a contract, whether it is hiring an employee, buying supplies to make the product, a customer purchasing the product or service, or whatever. It involves at least two parties making an agreement satisfactory to them both. And the satisfaction of that agreement depends on confidence. When confidence is strong, a company, business, or worker sees more revenue and activity, but when confidence fails, business falls off and times get tough. Call it a downturn, recession, or even a depression, at the heart of it the rough times all involve a collapse of confidence by the public in the economy. Therefore, the first cause of recovery from such a condition is the rebuilding and restoration of confidence. This is also one of the few areas where the President can have direct and beneficial influence, or he can screw things up and make the situation worse. The president can recommend actions to Congress and the Federal Reserve which increase the flow of money and credit. This action risks increasing inflation, but most economists regard moderately higher inflation an acceptable cost for lowering unemployment and reviving consumer confidence. Therefore, tax breaks for companies which hire significant numbers of new employees, especially by returning core operations and headquarters to the United States, are the historically preferred means for rewarding desired behavior and improving the domestic economy and stabilizing long-term confidence. Actions which demoralize industry, such as punitive taxes or public antagonism by political leaders, deter growth and recovery, which is one reason why things have simply gotten worse under Obama.
It should be noted, at this point, that both parties are guilty of hyperbole in referring to the present economic condition in dire tones. Democrats have falsely compared the present condition to the Great Depression of the 1930s, in hopes of blaming the Bush Administration for the crisis, while Republicans have done so in hopes of blaming President Obama for turning a mild recession into a catastrophe. Neither comparison is valid, and the behavior only worsens the matter, since few sources in the media or the government are acting responsibly in describing the causes or effects of the situation. Whether inflation, unemployment, housing foreclosures, bank failures, or any other major metric of economic condition is considered, it is plainly dishonest to pretend that the current situation is at all comparable to the Great Depression. In this respect, what a President should do is call out the naysayers and pessimists, emphasizing the core strength of the nation and its workers, validating his own credentials by affirming the nation’s most essential treasure – it’s workers, investors, and yes it’s executives. Obama’s penchant for harassing the top brass at convenient target companies, even when the guys attacked came in to fix the problems caused by someone else, shows character and/or comprehension flaws that do him no credit and make the task of restoring confidence in the economy that much harder. I am not saying that I would lavish praise indiscriminately, but at the same time Obama’s habit of attacking whole demographic segments with general disdain is more characteristic of class warfare than sound understanding of economics. It may sound trite, but ‘praise in public, criticize in private’ also applies to public figures, as much or more so than anyone else.
In the matter of the AIG executive bonuses, for example, President Obama foolishly led a mob of outrage, only to be confronted with evidence that he had not bothered to find out the facts. It turns out that at least some of those AIG executives were brought in after things blew up there – they not only were not responsible for the company’s crisis, they were brought in specifically to set things right. Kind of like blaming firemen for the fire they are trying to put out. Next, it turns out that some of those AIG execs agreed to take only one dollar a year in salary; the “bonuses” were there to serve as actual compensation for their work, and those payments were tied to actual accomplishment of specified metrics. Once those facts became known, the moral thing for President Obama to do was to admit he was wrong and apologize, but being who and what he is, the President chose to switch gears and pretend he had never said what is plainly on the record.
With those AIG “bonuses” and executive compensation in mind, let’s take a look at the new trend among hystero-liberals like Barack “Panic” Obama – tossing out the idea of maximum pay for executives. To understand why this idea is incredibly stupid, let’s imagine for a minute that you buy a lotto ticket, and it wins. Let’s say you get a Cash Option ticket and after taxes it’s, hmm, let’s say 50 million dollars. Set for life, right? Well, there is talk about limiting pay under certain circumstances to a million dollars a year. Using that logic, the government would be telling you that you’d have to wait forty-nine more years to get all of your lottery winnings, even though the government would be sure to grab its take from the top. How many folks would buy lotto tickets if the payout was maximized per year? Not many, the whole system would collapse as demand folded, which is why no one has even suggested trying this stunt on state lotteries and scratch-off tickets. Lotto winners are just lucky, they don’t invest time in education and training and work to get where they are, like professional athletes, rock stars … and corporation executives. Not only that, lotto winnings are paid out of public money, while those executives everyone loves to hate so much are paid out of the company’s money. And yes, the government gave AIG more than a hundred billion dollars, but they not only did not prohibit bonuses which it turns out are both legal and appropriate, the bill which handed over the money specifically assured those payments. Once again, we have to decide whether President Obama is a lazy politician who does not understand economics, or a dishonest charlatan trying to create false outrage in order to advance an agenda he knows to be unconstitutional and which even his own party would shoot down in short order, were they to consider the submissions in clear and ordered debate. Had I been in Obama’s chair when the AIG story broke, I would have begun by getting my facts straight, and by protecting the fundamental priorities of the nation, in this case confidence in the corrections being exercised to right the ship. I would have used the influence that Obama so casually enjoys, to restrain members of my part from starting up witch-hunts or whipping up hysteria in the public forums.
Anyway, on to the core subjects – Economics, Trade, Finance, and Taxation. That’s what this all comes down to, you know, the fundamental forces and their effects on the public. I wrote earlier that consumer confidence is a critical component to recovering from this recession, so that’s our starting point. Any competent President knows better that to play on people’s fears, as Obama has done – it invariably causes greater long-term harm which does not justify the short-term political opportunities which Obama chose to pursue instead of the nation’s interests. I have said it before but it bears repeating; when Obama tries to sell his “stimulus” as virtuous and sure to spur the economy simply because he’s spending so many trillions of tax dollars, he betrays either a dishonest character or a horrible miscomprehension of economics. It is very much possible to simply be wasting money, no matter how much is spent, if the money is not spent in addressing the vital needs of the nation. To spend almost a trillion dollars without creating private-sector jobs, without assisting even one mortgage going through foreclosure at the moment, or establishing a method for restoring confidence in the finance industry, is the government equivalent of taking the mortgage money and spending it on hookers.
There is no painless solution; the key decision is who should pay, and how can the damage be controlled to affect the fewest innocent parties? Protecting jobs is paramount – wealth comes into companies because of working employees, wealth comes to families through wages, and taxes are paid through successful jobs and successful companies. Corporate taxes need to be lowered during a recession, because that rewards increased productivity which only happens by keeping employees and hiring more. Individuals should also not see taxes raised during a recession, because so many of them own and run companies and will lay off people if their taxes go up at a time when their revenues are already suffering. Also, investments in companies depend on individuals with the means and inclination to buy stock, fund ventures, and otherwise put their money where their confidence is. Raising taxes is necessary at time, but doing so during a recession is poisoning the patient.
As to who pays, there is no such thing as “too big to fail”. Take a look at the largest companies in America in 1850, 1900, and 1950. Some really big names went out of business, and harsh as it sounds that’s how the world works. No one gets to hang around just because they have a history. If there is anyplace where evolution works, its in business. Look at phone deregulation. Sure, it was a mess in places, but without it no one would have really developed cell phones, much less the variety of plans available today, in almost every country. Sorry GM, but your business model is a rotting corpse. Sorry AIG, but there is no right to make taxpayers keep you going. Bankruptcy courts exist for the same reasons you got into trouble.
Then there are the investment banks. No one can explain why speculation should be protected, because there is just no way to defend that argument. No one’s offering to pay me all the money my 401k lost in the last 6 months, no one has guaranteed my employer will stay in business, but these investment banks think they should be propped up for rotten judgment and a rather annoying lack of transparency about their practices and promises. Let the crooks go to prison, and let the bad banks fail. And make sure everyone knows which congressmen backed those banks.
Money should be spent, but wisely and with absolutely no sense or appearance of political gaming. Mortgages, for example, are a sound investment and it makes sense for the government to back problem areas provided it gets a take of the return. Enough good mortgages (mortgages with working families who want to keep and pay off their home) exist to cover the losses of the relatively few bad mortgages that will fail. And the return for the government could end up repaying a substantial portion of the program’s cost, in addition to preventing the mortgage company from being rewarded for risky behavior – if the government accepts risk, they must be paid according to the return.
As to trade, we must stop trying to solve everyone else’s problems, or deny that American businesses are the reasonable first focus of business. But protectionist policies do more harm than good, that’s the history of trade, and in any case protecting inefficiency and poor performance is plain stupid. Reward R&D, reward strategic industries, but stop pretending that a pickup truck will decide the fate of America’s economy.
Finance is a fancy word for figuring out how to pay for things. We had loans and credit as far back as the pharaohs, along with variations on bankruptcy, bad debt, and alternative payments. After several thousand years, we know the basics – everything has to be paid for, risk never completely goes away, and the possibility that something bad will happen means that sooner or later it will happen. There are laws on the books about transparency and accountability. Time to enforce them. Do that and folks will trust banks again.
As to taxes, it’s even more simple – reward people who pay taxes, not those who do not pay taxes. If you can’t handle that concept, there’s simply no hope you could understand anything more complex, and if you do understand that concept, you will also realize that tax reform has been overdue for more than a generation. Rates and specific deductions are symptoms, not the fundamental problem.
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