Should you tip less in an Obama Administration?
Commenter gklyon in the previous post on PJTV makes a point in relation to going John Galt:
Despite this post, I often tip generously both because I have been a waitress and because I think it is important to reward people who work. However, if Obama gets in (and it is still an if), perhaps tipping less or not at all would be a good way to save money as a way of "going John Galt." Yet, is it fair to the person who is stiffed? What about a compromise, just tipping less? What do you think?
UPDATE: I've been thinking. If Obama is elected, maybe in lieu of a tip I should leave a note like the following:
HOPE AND CHANGE FOR AMERICA: Spreading the Wealth Around.
In lieu of a tip, $_____ has been donated to the Re-Elect Obama for President Campaign. Thank you for supporting the man and the movement that are bringing America together!
If enough people leave notes like this, I'm sure it will galvanize waitpeople everywhere in support of The One!
UPDATE II: As a commenter said, this post really seems to have hit a nerve. I am guessing that a number of lefty types are upset that their livelihood may be threatened. In Rules for Radicals
Saul Alinsky asks, "Does this particular end justify this particular means?" Perhaps for those of us who are right-leaning, the answer is "yes," perhaps it is "no," but it certainly worth exploring.
There is another aspect of pulling a Galt if the rich quit spending. Really scale back. People spend money more efficiently than the government. Thus people spending create more jobs.
The rich also employ people either directly as servants - maids, nannies, gardeners. These employees help the rich go out and produce more. If the rich scale back they will not need these people. And tipping, instead of tipping your server, tell her/him that you are going to redistribute his tip to the homeless guy outside the restaurant. If the rich reduce spending it will ripple through the economy and the people that supported Obama will be out of jobs.
Despite this post, I often tip generously both because I have been a waitress and because I think it is important to reward people who work. However, if Obama gets in (and it is still an if), perhaps tipping less or not at all would be a good way to save money as a way of "going John Galt." Yet, is it fair to the person who is stiffed? What about a compromise, just tipping less? What do you think?
UPDATE: I've been thinking. If Obama is elected, maybe in lieu of a tip I should leave a note like the following:
HOPE AND CHANGE FOR AMERICA: Spreading the Wealth Around.
In lieu of a tip, $_____ has been donated to the Re-Elect Obama for President Campaign. Thank you for supporting the man and the movement that are bringing America together!
If enough people leave notes like this, I'm sure it will galvanize waitpeople everywhere in support of The One!
UPDATE II: As a commenter said, this post really seems to have hit a nerve. I am guessing that a number of lefty types are upset that their livelihood may be threatened. In Rules for Radicals
Saul Alinsky asks, "Does this particular end justify this particular means?" Perhaps for those of us who are right-leaning, the answer is "yes," perhaps it is "no," but it certainly worth exploring.
Say what�?! Making strategy made simple
�Successful firms are characterized by maintaining bottom-up driven internal experimentation and selection processes while simultaneously maintaining top driven strategic intent� Stanford professor Robert Burgelman once wrote.
And I thought �What�?!�
What (on earth) might Robert mean with that? I don�t know but I am willing to take a guess. Let�s take the first part: �Bottom-up driven internal experimentation and selection processes�. You have to realise that Robert spent much of his academic life in Intel, studying how they developed strategy. And he found that for instance their big success � microprocessors � wasn�t the result of some planned analytical strategy-making process at all. Instead, Intel�s top management had allowed employees to work on some of their pet projects and technologies that these individuals were very enthusiastic about, but from which is was actually quite unclear if they would ever lead to anything useful (and profitable).
Many of these pet projects failed, some of them became reasonably successful (e.g. a product called EPROMS), but there was one which turned out to be this multi-billion dollar product called microprocessors. That�s the �experimentation� part of Robert�s statement (I think...).
Intel�s management did not only allow for this experimentation stuff to happen, it also made sure that at some point, a choice � i.e. a �selection� � would be made in terms of what (pet) products were going to receive priority and be continued, and which ones were going to get the chop. One such selection mechanism was a complex production capacity allocation formula which determined what was and what was not going to be manufactured. Another element concerned high levels of autonomy for middle managers, which made sure that those things most people thought were important for the future of the company would get done, but the things nobody quite believed in (anymore) would die out�
So that�s the �internal experimentation and selection processes� bit (I think). But what is this �maintaining top driven strategic intent��?
It would be a mistake to believe that companies � including Intel � can be successful without a clear strategic direction (or �intent�) and can just rely on some bottom-up experimentation stuff. If you have bottom-up experimentation without a clear strategic direction in your organisation, soon you will be all over the place. Hence, although these �experimentation and selection processes� are useful, top management will still need to develop a clear strategic course for the firm, to make sure they�re coherent and going somewhere.
Yet, just having a top-down strategy (without the bottom-up stuff) won�t work either; it will likely make you rigid, myopic and simply unsuccessful. You need the top-down strategic intent to give you direction, but you simultaneously need the bottom-up thing to get you the unpredictable, unforeseeable successes that you really can�t dream up as a lone top dog.
Hence, as Robert said (be is slightly awkwardly), you need both, at the same time.
And I thought �What�?!�
What (on earth) might Robert mean with that? I don�t know but I am willing to take a guess. Let�s take the first part: �Bottom-up driven internal experimentation and selection processes�. You have to realise that Robert spent much of his academic life in Intel, studying how they developed strategy. And he found that for instance their big success � microprocessors � wasn�t the result of some planned analytical strategy-making process at all. Instead, Intel�s top management had allowed employees to work on some of their pet projects and technologies that these individuals were very enthusiastic about, but from which is was actually quite unclear if they would ever lead to anything useful (and profitable).
Many of these pet projects failed, some of them became reasonably successful (e.g. a product called EPROMS), but there was one which turned out to be this multi-billion dollar product called microprocessors. That�s the �experimentation� part of Robert�s statement (I think...).
Intel�s management did not only allow for this experimentation stuff to happen, it also made sure that at some point, a choice � i.e. a �selection� � would be made in terms of what (pet) products were going to receive priority and be continued, and which ones were going to get the chop. One such selection mechanism was a complex production capacity allocation formula which determined what was and what was not going to be manufactured. Another element concerned high levels of autonomy for middle managers, which made sure that those things most people thought were important for the future of the company would get done, but the things nobody quite believed in (anymore) would die out�
So that�s the �internal experimentation and selection processes� bit (I think). But what is this �maintaining top driven strategic intent��?
It would be a mistake to believe that companies � including Intel � can be successful without a clear strategic direction (or �intent�) and can just rely on some bottom-up experimentation stuff. If you have bottom-up experimentation without a clear strategic direction in your organisation, soon you will be all over the place. Hence, although these �experimentation and selection processes� are useful, top management will still need to develop a clear strategic course for the firm, to make sure they�re coherent and going somewhere.
Yet, just having a top-down strategy (without the bottom-up stuff) won�t work either; it will likely make you rigid, myopic and simply unsuccessful. You need the top-down strategic intent to give you direction, but you simultaneously need the bottom-up thing to get you the unpredictable, unforeseeable successes that you really can�t dream up as a lone top dog.
Hence, as Robert said (be is slightly awkwardly), you need both, at the same time.
You can watch me on PJTV (Pajamas TV) with hosts Bill Whittle and Roger L. Simon discussing the various ways of "going John Galt" and "himbos." It was a lot of fun.
The process of making strategy (or just gibberish?)
�Strategy making in the emergent stage can be viewed as a social learning process in which managerial action and cognition are intrinsically intertwined�, Stanford professor Robert Burgelman once wrote.
And I thought �What�?!�
But the more times I read the sentence, and the more I thought about it, and the more I compared it to the strategy-making processes in the (successful) companies I have seen from up close, it actually started to make sense� (although I acknowledge that I have no confirmation that the interpretation I came up with, of Robert�s gibberish, is actually what he meant with it!)
1) In a strategy-making process �managerial action and cognition are intrinsically intertwined�; what the heck might he mean with that? Well, if I think about the companies I�ve analysed, in pretty much all cases, strategy was not the result of a one-time rational analytical process but there was quite a bit of trail-and-error to it.
The firm, for whatever reason, tries something new � a new product, service or process. Or they simply happen to run it to something by accident. For example, Hornby, when they outsourced production of their model trains to China, added additional detail and quality to their products. That�s the �action�.
Then, the firm receives feedback from the market. In Hornby�s case, for example, sales went up. People in the company then stop, take notice and try to understand what led to the result. People in Hornby, for example, discovered that it was now hobbyists and collectors buying their products, instead of children, and they concluded they were moving out of the toy market into the hobby market; that�s the element of �reflection�.
Subsequently, the decided to deliberately try more of this, and add detail and quality to some of their others products as well, refocus their marketing efforts on adults and see what happened (that�s another action). When they noticed that this campaign was a success, they gradually decided to make this market-shift the basis of their new strategy (another moment of reflection). My guess is that�s what Robert meant, with �action and reflection are intrinsically intertwined�.
2) But what did he mean with it is �a social learning process��? Well, my guess is that he meant a top manager doesn�t do this all by himself. It involves lots of people in the organisation � which is why it is a social process � and even from outside the firm. Hornby employees debated at length what was causing the surge in their sales, after outsourcing their production to China, and where it came from. They even explicitly involved their retailers in this discussion, to try and understand their view on what had happened to them.
3) Finally, what might Robert have meant with strategy making �in the emergent stage��? Well, all of this means that strategy isn�t necessarily planned, especially in the beginning; organisations try stuff, some of it fails, other things stick and some of them become big successes. As a result of these processes, strategy happens; it emerges from within a (good and effective) organisation, rather than that it is the result of some 100 percent rational model and process. In later stages, it may become more deliberate and planned, just like Hornby nowadays very carefully taylors its products to hobbyists.
And that�s not only a very realistic view of how strategy really happens, but perhaps also one that a good organisation should aspire to. Because purely rational, planned strategies are seldom the big break-through successes. Simply because life is more complex than that. Just like Robert�s language.
And I thought �What�?!�
But the more times I read the sentence, and the more I thought about it, and the more I compared it to the strategy-making processes in the (successful) companies I have seen from up close, it actually started to make sense� (although I acknowledge that I have no confirmation that the interpretation I came up with, of Robert�s gibberish, is actually what he meant with it!)
1) In a strategy-making process �managerial action and cognition are intrinsically intertwined�; what the heck might he mean with that? Well, if I think about the companies I�ve analysed, in pretty much all cases, strategy was not the result of a one-time rational analytical process but there was quite a bit of trail-and-error to it.
The firm, for whatever reason, tries something new � a new product, service or process. Or they simply happen to run it to something by accident. For example, Hornby, when they outsourced production of their model trains to China, added additional detail and quality to their products. That�s the �action�.
Then, the firm receives feedback from the market. In Hornby�s case, for example, sales went up. People in the company then stop, take notice and try to understand what led to the result. People in Hornby, for example, discovered that it was now hobbyists and collectors buying their products, instead of children, and they concluded they were moving out of the toy market into the hobby market; that�s the element of �reflection�.
Subsequently, the decided to deliberately try more of this, and add detail and quality to some of their others products as well, refocus their marketing efforts on adults and see what happened (that�s another action). When they noticed that this campaign was a success, they gradually decided to make this market-shift the basis of their new strategy (another moment of reflection). My guess is that�s what Robert meant, with �action and reflection are intrinsically intertwined�.
2) But what did he mean with it is �a social learning process��? Well, my guess is that he meant a top manager doesn�t do this all by himself. It involves lots of people in the organisation � which is why it is a social process � and even from outside the firm. Hornby employees debated at length what was causing the surge in their sales, after outsourcing their production to China, and where it came from. They even explicitly involved their retailers in this discussion, to try and understand their view on what had happened to them.
3) Finally, what might Robert have meant with strategy making �in the emergent stage��? Well, all of this means that strategy isn�t necessarily planned, especially in the beginning; organisations try stuff, some of it fails, other things stick and some of them become big successes. As a result of these processes, strategy happens; it emerges from within a (good and effective) organisation, rather than that it is the result of some 100 percent rational model and process. In later stages, it may become more deliberate and planned, just like Hornby nowadays very carefully taylors its products to hobbyists.
And that�s not only a very realistic view of how strategy really happens, but perhaps also one that a good organisation should aspire to. Because purely rational, planned strategies are seldom the big break-through successes. Simply because life is more complex than that. Just like Robert�s language.
Dean Barnett, a blogger at the Weekly Standard has died (via Instapundit). I recently read his story in a pamphlet he wrote entitled, "The Plucky Smart Kid with the Fatal Disease: A Life with Cystic Fibrosis." He will be missed greatly.
Hate speech against men in Dallas
Glenn Sacks has information on some very disturbing hate speech against husbands, fathers and even boys on the Dallas Area Rapid Transit (DART) buses.
Update: The Associated Press picks up the story. Thanks to all of you who called, emailed and wrote in to protest.
Update: The Associated Press picks up the story. Thanks to all of you who called, emailed and wrote in to protest.
Melanie Phillips: "As I have said before, I do not trust McCain; I think his judgment is erratic and impetuous, and sometimes wrong. But on the big picture, he gets it. He will defend America and the free world whereas Obama will undermine them and aid their enemies.....Here�s why. McCain believes in protecting and defending America as it is. Obama tells the world he is ashamed of America and wants to change it into something else."
Charles Krauthammer: "Today's economic crisis, like every other in our history, will in time pass. But the barbarians will still be at the gates. Whom do you want on the parapet? I'm for the guy who can tell the lion from the lamb."
Framing something as a threat or an opportunity dramatically alters what we choose
A famous experiment by Nobel Prize winner Daniel Kahneman and Amos Tversky went as follows:
Imagine that the US is preparing for an outbreak of an unusual Asian disease, which is expected to kill 600 people. Two alternative programmes to combat the disease have been proposed.
Assume that the exact scientific estimates of the consequences of the programmes are as follows:
If programme A is adopted, 200 will be saved.
If programme B is adopted, there is a one-third probability that 600 people will be saved and a two-thirds probability that no people will be saved.
Which one of the two programmes would you prefer?
Kahneman and Tversky found that a substantial majority of people would choose programme A.
Then they gave another group of people the assignment but with the following description of the (same) options:
If programme A is adopted, 400 people will die.
If programme B is adopted, there is a one-third probability that nobody will die and a two-thirds probability that 600 people will die.
They found that, in this case, a clear majority of respondents favoured programme B! But the programmes really are exactly the same in both cases�!? How come people�s preferences flip although they are confronted with the exact same set of choices (be it described slightly differently)?
It is due to what we call �framing effects�, and they greatly affect people�s preferences and decisions. For instance, In the first case, programme A is described in terms of the certainty of surviving (which people like), but in the second case it is described in terms of the certainty of dying (which people don�t like at all!). Therefore, people choose A when confronted with the first programme description, while in the second case they favour B, although the programmes are the same in both situations.
We also see this influence in strategic decision-making, for instance in terms of whether particular environmental developments are �framed� as opportunities (which we like) or threats (which we don�t like). A few years back, Clark Gilbert � at the time a professor at the Harvard Business School � analysed American newspapers� responses to the rise of on-line media in the mid-1990s.
He found that those newspapers that, in their internal communications and deliberations, described on-line media as an opportunity (e.g. �a new avenue for attracting advertising revenue�) coped quite well. In contrast, those newspapers that framed the exact same technological developments as a threat (e.g. �it will eat into our advertising market share�) didn�t cope very well at all. In light of the threat, they reduced investments in experimentation, adopted a more authoritarian organisation and management style, and focused more narrowly on their existing resources and activities. As a result, they basically ended up copying their physical newspaper onto the web; and that didn�t work at all. Many of them didn�t survive.
And this effect is quite omni-present. How you frame decision-situations to someone (e.g. your boss) is going to influence substantially what option he is going to favour. How the people who work for you frame a situation while presenting to you, is also going to determine what you will choose. And I guess that may be an opportunity (or a threat�) in and of itself.
Imagine that the US is preparing for an outbreak of an unusual Asian disease, which is expected to kill 600 people. Two alternative programmes to combat the disease have been proposed.
Assume that the exact scientific estimates of the consequences of the programmes are as follows:
If programme A is adopted, 200 will be saved.
If programme B is adopted, there is a one-third probability that 600 people will be saved and a two-thirds probability that no people will be saved.
Which one of the two programmes would you prefer?
Kahneman and Tversky found that a substantial majority of people would choose programme A.
Then they gave another group of people the assignment but with the following description of the (same) options:
If programme A is adopted, 400 people will die.
If programme B is adopted, there is a one-third probability that nobody will die and a two-thirds probability that 600 people will die.
They found that, in this case, a clear majority of respondents favoured programme B! But the programmes really are exactly the same in both cases�!? How come people�s preferences flip although they are confronted with the exact same set of choices (be it described slightly differently)?
It is due to what we call �framing effects�, and they greatly affect people�s preferences and decisions. For instance, In the first case, programme A is described in terms of the certainty of surviving (which people like), but in the second case it is described in terms of the certainty of dying (which people don�t like at all!). Therefore, people choose A when confronted with the first programme description, while in the second case they favour B, although the programmes are the same in both situations.
We also see this influence in strategic decision-making, for instance in terms of whether particular environmental developments are �framed� as opportunities (which we like) or threats (which we don�t like). A few years back, Clark Gilbert � at the time a professor at the Harvard Business School � analysed American newspapers� responses to the rise of on-line media in the mid-1990s.
He found that those newspapers that, in their internal communications and deliberations, described on-line media as an opportunity (e.g. �a new avenue for attracting advertising revenue�) coped quite well. In contrast, those newspapers that framed the exact same technological developments as a threat (e.g. �it will eat into our advertising market share�) didn�t cope very well at all. In light of the threat, they reduced investments in experimentation, adopted a more authoritarian organisation and management style, and focused more narrowly on their existing resources and activities. As a result, they basically ended up copying their physical newspaper onto the web; and that didn�t work at all. Many of them didn�t survive.
And this effect is quite omni-present. How you frame decision-situations to someone (e.g. your boss) is going to influence substantially what option he is going to favour. How the people who work for you frame a situation while presenting to you, is also going to determine what you will choose. And I guess that may be an opportunity (or a threat�) in and of itself.
Interview on Men's Issues
Bernard Chapin, author of Women: Theory and Practice and Escape from Gangsta Island: A School's Progressive Decline
has an interview up with me at Men's News Daily entitled The Apex Fallacy:
Go read the whole thing and pay attention to my answers to the questions on chivalry, they are worth noting.
has an interview up with me at Men's News Daily entitled The Apex Fallacy:I have conducted scores of interviews since 2003, but rarely did one alter my worldview. Yet that was precisely what occurred during my exchange with Dr. Helen Smith. Her answer to my second question led to my coming up with a new term for the fallacious way by which feminists comprehend the nature of our social structure. The phrase �Apex Fallacy� sprung to mind as it elucidates fully the inaccurate fashion by which they assess the status of women in America.
Go read the whole thing and pay attention to my answers to the questions on chivalry, they are worth noting.
Pay inequality � good or bad for team performance?
When you have a team of people working on a common task, who all fullfil a similar role in the team (like a football team, a string quartet, a team of engineers, etc.) should you pay them all pretty much the same, or would you be better off creating quite different levels of remuneration within the team?
This question can stir a fair bit of debate, and I have heard it been argued one way and the other. �You should pay them all the same� some loudly proclaim, �because they�re a team and you don�t want to create envy and inequality within the group!� Others will bellow in agony: �But you need to incentivize people � stupid!; equal pay kills their motivation; you should pay more to people who (seem to) contribute more, to keep them happy while stimulating the others to better themselves!!�.
And who knows whether it is one way or the other. The problem is, it is very difficult to research properly, and find a conclusive and reliable answer. You�d of course need information on the exact remuneration of all people in a team, their individual performance and their team performance, and have a whole bunch of identical teams to make meaningful comparisons. And that�s easier said than done.
Professor Matt Bloom, from the University of Notre Dame, decided to give it a try. And to make sure that he had a clean research sample, with a whole bunch of similar teams doing the same task, for which he could collect all the relevant info, he chose Major League Baseball.
And, although a bit unconventional, that�s perhaps not such a bad idea�! I don�t know much about baseball (and would prefer to keep it that way!) but I assume the rules are the same for everyone, the teams the same size, working on the same task, etc. Thus, Matt collected performance data on 1644 players in 29 teams, assessing their individual performance through batting runs, fielding runs, earned run averages, pitching runs, player ratings and all this (for me) abacadabra. For team performance, he measured a combination of on-field performance and financial performance, using game wins and revenue and valuation data. So, this gave him measures for team performance and the individual performance of each member of the team.
Then he measured player compensation; The newspaper USA Today apparently publishes salary and performance incentives for all players, so he used that. Finally, he created an indicator of �pay dispersion�, or how big are the differences in the levels of pay between the players on a team. Using this data, he computed whether clubs were better off equalising pay, or differentiating their team�s payment levels.
And, so it turned out, it�s the former: that is, baseball teams performed better if the salaries of the players were not too different from each other. The larger the payment differences, the lower the individual players� performance; mostly so � perhaps not surprisingly � for the players receiving the lowest payment. But � perhaps more surprisingly � also the players who found themselves pretty high in the payment pecking order, receiving an above-avarege salary package, saw their individual performance being negatively affected by the pay dispersion within the team.
Finally, team performance: Those teams with high pay differences among players had markedly poorer performance. It seems substantial differences in pay are more of a de-motivator than an incentive, even for the majority of people who end up in the high payment bracket! And the team suffers from it as a result.
This question can stir a fair bit of debate, and I have heard it been argued one way and the other. �You should pay them all the same� some loudly proclaim, �because they�re a team and you don�t want to create envy and inequality within the group!� Others will bellow in agony: �But you need to incentivize people � stupid!; equal pay kills their motivation; you should pay more to people who (seem to) contribute more, to keep them happy while stimulating the others to better themselves!!�.
And who knows whether it is one way or the other. The problem is, it is very difficult to research properly, and find a conclusive and reliable answer. You�d of course need information on the exact remuneration of all people in a team, their individual performance and their team performance, and have a whole bunch of identical teams to make meaningful comparisons. And that�s easier said than done.
Professor Matt Bloom, from the University of Notre Dame, decided to give it a try. And to make sure that he had a clean research sample, with a whole bunch of similar teams doing the same task, for which he could collect all the relevant info, he chose Major League Baseball.
And, although a bit unconventional, that�s perhaps not such a bad idea�! I don�t know much about baseball (and would prefer to keep it that way!) but I assume the rules are the same for everyone, the teams the same size, working on the same task, etc. Thus, Matt collected performance data on 1644 players in 29 teams, assessing their individual performance through batting runs, fielding runs, earned run averages, pitching runs, player ratings and all this (for me) abacadabra. For team performance, he measured a combination of on-field performance and financial performance, using game wins and revenue and valuation data. So, this gave him measures for team performance and the individual performance of each member of the team.
Then he measured player compensation; The newspaper USA Today apparently publishes salary and performance incentives for all players, so he used that. Finally, he created an indicator of �pay dispersion�, or how big are the differences in the levels of pay between the players on a team. Using this data, he computed whether clubs were better off equalising pay, or differentiating their team�s payment levels.
And, so it turned out, it�s the former: that is, baseball teams performed better if the salaries of the players were not too different from each other. The larger the payment differences, the lower the individual players� performance; mostly so � perhaps not surprisingly � for the players receiving the lowest payment. But � perhaps more surprisingly � also the players who found themselves pretty high in the payment pecking order, receiving an above-avarege salary package, saw their individual performance being negatively affected by the pay dispersion within the team.
Finally, team performance: Those teams with high pay differences among players had markedly poorer performance. It seems substantial differences in pay are more of a de-motivator than an incentive, even for the majority of people who end up in the high payment bracket! And the team suffers from it as a result.
What's wrong with being a "himbo?"
I was looking at my hotmail account and came across the ridiculous caption, "Is he a himbo?" at MSN. According to the urban dictionary, a himbo is the male version of a bimbo, whore, or slut. I stupidly clicked on the article (I know, I know, don't do it) and read the following:
So, let's get this straight. If women play the field, they are liberated. If men do the same, they are pigs with no self-respect. Give me a break. The guy who wrote the article is either jealous of these guys or has been so indoctrinated to telling females what they want to hear that he has to diss his own sex to make himself feel important. Either way, I say, if you're male, single, and upfront with the women you date, let your inner himbo shine if you're so inclined.
It's a good thing I was reading the tabloids at my doctor's office, because after looking at the latest Us Weekly and In Touch, I felt like I could use a heavy dose of antibiotics. I'm not sure when it hit me, but somewhere between the picture of Lance Armstrong holding hands with Kate Hudson (not long after he'd stopped canoodling with Ashley Olsen) and the snapshot of John Mayer catching some rays with Jennifer Aniston (mere months after telling Jessica Simpson he wanted to see other Wonderlands), I started to feel a little queasy.
I'm no stranger to the porcine habits of men, what with being one and all. But doesn't it seem like these guys are going a little beyond piggy lately?...
Or perhaps these guys should take a cue from Cary Grant: By all accounts, he was the Ho of Babylon, and yet his legacy is all rakish charm and sex appeal. It's a matter of style.
Maybe I give Cary Grant a pass cuz he made Notorious, while Matthew McConaughey made Failure to Launch. Whatever. I'm just saying, guys � have a little self-respect, OK? Seriously. Keep your shirts on. Live strong.
So, let's get this straight. If women play the field, they are liberated. If men do the same, they are pigs with no self-respect. Give me a break. The guy who wrote the article is either jealous of these guys or has been so indoctrinated to telling females what they want to hear that he has to diss his own sex to make himself feel important. Either way, I say, if you're male, single, and upfront with the women you date, let your inner himbo shine if you're so inclined.
"They'll continue to struggle to make it harder for many in our community"
I saw on the local news last night that Social Security benefits are going up 5.8%, rather than the typical 2.5%. What struck me is that some of the seniors were upset about it. Why? They might be pushed into a higher tax bracket or have to pay more for subsidized housing:
Have you noticed with government handouts and "entitlements" you can't win? If they pay too little, people complain, but when they go up, they do the same...
Update: Jason at Countercolumn has further thoughts on Social Security increases.
We spoke to several seniors who say this could end up costing them more money.
Nancy Walker, 87, lives in subsidized housing.
The additional $63 a month in Social Security will cause her to lose benefits.
"Means i'm gonna pay more for rent for one thing," Grace Lindsey says.
It will cost her rent to increase because her income's going up, her food stamps will decrease and she may not continue to receive 20% off Medicaid.
"They'll continue to struggle make it harder for many in our community," Walker told Volunteer TV News.
The yearly adjustment in Social Security checks is linked to government inflation figures.
But advocacy groups say it's far short of what retirees need to keep up with rising living costs.
Charles Stevens is retired from the Navy.
He says the extra monthly income will put him into another tax bracket.
"It means we've got to pay more taxes, but we're grateful for what we can get," Stevens says.
Have you noticed with government handouts and "entitlements" you can't win? If they pay too little, people complain, but when they go up, they do the same...
Update: Jason at Countercolumn has further thoughts on Social Security increases.
Dirty laundry: Who is hiding the bad stuff?
Are firms sometimes inclined to conceal negative information, for instance in their communication to shareholders?
Some years back, two researchers � Eric Abrahamson from Columbia Business School and Choelsoon Park, at the time at the London Business School � examined this question systematically. Their answer � perhaps not surprisingly � was �yes�.
Fortunately, however, they did not stop there. Because perhaps the more interesting question is, �who is concealing the bad stuff� or, put differently, which firms are inclined to hide their dirty laundry?
Eric and Choelsoon investigated so-called letters to shareholders of 1118 companies as published in these firms� annual reports. There is quite a bit of evidence that these letters to shareholders form one of the main communication devices of firms to their shareholders and that they have some real impact on companies� share price. Eric and Choelsoon, through computer analysis of the wording of these letters, made a measure of how much negative information was disclosed in them.
In addition, they collected information on a bunch of other variables, such as the firms� (subsequent) performance, the percentage of outside directors on their boards, shares held by those outside directors, institutional ownership of the companies, auditor reports, etc. And they uncovered some pretty gritty stuff.
So, their finding number one was: Company Presidents - who formally write these letters - are tempted to lie and hide their company�s bad news. I reckon that is only human. My guess is many of us might be tempted to tone down our failures (and play up our achievements a bit) in such very public statements, to not feel embarrassed and make ourselves look successful. But there are things that can be done, in terms of corporate governance, to stem their & our natural inclination to obscure the truth.
That brings me to finding number two: Eric and Choelsoon showed that having outside directors on the board made firms lie less. The more outside directors firms had the more forthcoming they were with their bad news. Similarly, having large institutional investors prompted firms to be more open about their failures in these letters to shareholders. Large institutional investors tend to monitor the firms they invest in quite closely, which apparently gives them less opportunity to conceal the negative stuff.
But then came finding number three: If we gave our outside directors shares in the company, the results flipped�! Firms that had outside directors who also were quite major shareholders were less forthcoming in disclosing their bad news. It seems that having an ownership stake in the company created a conflict of interest for these people which induced them to stimulate their firm to hide its dirty laundry rather than disclose it.
Moreover, having lots of small institutional investors � who don�t scrutinise companies as strictly � also made the results flip: Firms with lots of small institutional investors hid their bad news more often, probably because they were afraid these investors would run at the slightest hint of bad news (which they are indeed known to do), which could snowball and send the firm�s share price plummeting. To conclude, having outside directors may be a good thing, but only if they don�t have a lot of shares. Institutional investors may be a good thing too, but only if they do have a big stake.
By the way, interestingly, Eric and Choelsoon also found that those companies that did not disclose their bad news were exactly the companies whose top managers would quickly sell a whole bunch of their privately-held shares shortly after the release of the (overoptimistic) letter to shareholders. Guess corporate crooks don�t only lie; they also steal.
Some years back, two researchers � Eric Abrahamson from Columbia Business School and Choelsoon Park, at the time at the London Business School � examined this question systematically. Their answer � perhaps not surprisingly � was �yes�.
Fortunately, however, they did not stop there. Because perhaps the more interesting question is, �who is concealing the bad stuff� or, put differently, which firms are inclined to hide their dirty laundry?
Eric and Choelsoon investigated so-called letters to shareholders of 1118 companies as published in these firms� annual reports. There is quite a bit of evidence that these letters to shareholders form one of the main communication devices of firms to their shareholders and that they have some real impact on companies� share price. Eric and Choelsoon, through computer analysis of the wording of these letters, made a measure of how much negative information was disclosed in them.
In addition, they collected information on a bunch of other variables, such as the firms� (subsequent) performance, the percentage of outside directors on their boards, shares held by those outside directors, institutional ownership of the companies, auditor reports, etc. And they uncovered some pretty gritty stuff.
So, their finding number one was: Company Presidents - who formally write these letters - are tempted to lie and hide their company�s bad news. I reckon that is only human. My guess is many of us might be tempted to tone down our failures (and play up our achievements a bit) in such very public statements, to not feel embarrassed and make ourselves look successful. But there are things that can be done, in terms of corporate governance, to stem their & our natural inclination to obscure the truth.
That brings me to finding number two: Eric and Choelsoon showed that having outside directors on the board made firms lie less. The more outside directors firms had the more forthcoming they were with their bad news. Similarly, having large institutional investors prompted firms to be more open about their failures in these letters to shareholders. Large institutional investors tend to monitor the firms they invest in quite closely, which apparently gives them less opportunity to conceal the negative stuff.
But then came finding number three: If we gave our outside directors shares in the company, the results flipped�! Firms that had outside directors who also were quite major shareholders were less forthcoming in disclosing their bad news. It seems that having an ownership stake in the company created a conflict of interest for these people which induced them to stimulate their firm to hide its dirty laundry rather than disclose it.
Moreover, having lots of small institutional investors � who don�t scrutinise companies as strictly � also made the results flip: Firms with lots of small institutional investors hid their bad news more often, probably because they were afraid these investors would run at the slightest hint of bad news (which they are indeed known to do), which could snowball and send the firm�s share price plummeting. To conclude, having outside directors may be a good thing, but only if they don�t have a lot of shares. Institutional investors may be a good thing too, but only if they do have a big stake.
Interview: Brian Anderson on media freedom
Today, our guest is Brian C. Anderson, the editor of City Journal and author (along with Adam Thierer) of A Manifesto for Media Freedom.
Anderson discusses his new book, the mainstream media, the Fairness Doctrine, and what to do to produce a freer and healthier politics in the future. One thing Anderson said that struck me was that with an Obama presidency, we might see more media regulation by subterfuge--that is, local broadcasting and media stations could be affected by regulations that might put some conservative broadcasting under more subjective control by lefty pressure groups like Acorn. This is extremely troubling and should concern all of us who care about free speech and diversity of ideas in politics. What can we do? Listen to the podcast and find out.
You can listen to the podcast directly -- no downloading needed -- by going here and clicking on the gray Flash player. Or you can download it and listen at your leisure by clicking right here. Music is byJohn T. Baker.
Ask Dr. Helen: Is it time to "go John Galt?"
My PJM colum is up:
I found commenter's responses to my recent post on this topic fascinating and expanded it to include PJM readers. Take a look.
As Ayn Rand foresaw, productive Americans are fed up with supporting the unproductive and may not take it anymore.
I found commenter's responses to my recent post on this topic fascinating and expanded it to include PJM readers. Take a look.
"Reverse causality" � sorry, but life's not that simple
�In Search of Excellence�, �Built to Last�, �Profit from the Core�; you may have read some of these best-selling business books.
They usually follow a simple yet appealing formula. They look at a number of very successful companies, see what they have in common, and then conclude �this must be a good thing!� Yet, reality � and strategy research � is a bit trickier than that.
One conclusion many of these business books draw is that one should focus on a limited set of �core activities�. For example, �Profit from the Core� authors Chris Zook and James Allan find that 78% of the high-performing firms in their sample of 1,854 companies focus on just one set of core activities, while a mere 22% of the low-performing companies did. Hence, they conclude that companies should focus.* Simple isn't it? Yeah, but a bit too simple...
What this �advice� ignores is that often underperforming companies diversify into other businesses in order to try to find markets that are more rewarding for them. Thus, their �non-focus� is the result of poor performance, rather than the cause! In contrast, it�s very common that very successful companies narrow their strategic focus in order to concentrate on the business that brings them most success. Again, their focus is not the cause of their success; it is the result of it. Our best-selling-business-book-friends may be reversing cause and effect; recommending everybody to apply more focus may be dubious advice at best!
Similarly, many of these business books conclude that the high-performing companies they looked at all had very strong and homogeneous corporate cultures. Hence, they conclude: create a strong corporate culture! Seductively simple again... Unfortunately, not so sound.
It is a well-known effect in academic research that success may gradually start to create a homogeneous organisational culture. Again, the coherent culture is not the cause of the company�s success, but the result of it! What�s worse, a narrow, dogmatic corporate culture may be the foreboding of trouble. When the firm�s business environment changes � and all environments eventually do � it makes the company rigid and unable to adapt; a phenomenon known as the success trap.
Indeed, the authors of �In Search of Excellence� � Peters and Waterman � published in 1982, who analysed 43 of "the most excellent companies in the world", also concluded that a strong corporate culture was a necessity for business stardom. However, if you look at their list of 43 "most excellent companies� today, only three or four might still make the list (Johnson & Johnson, Intel, Wal-Mart, Mars); the remainder has gone down or disappeared altogether.
Hence, remember that �association is not causation�. For example, that successful companies are associated with a very focused set of business activities and strong corporate cultures does not mean that this is what caused their success. Importantly, trying to replicate these symptoms of success may actually prevent you from attaining it.
* For more insight into these type of effects, see for instance the work of Stanford Professor Jerker Denrell
They usually follow a simple yet appealing formula. They look at a number of very successful companies, see what they have in common, and then conclude �this must be a good thing!� Yet, reality � and strategy research � is a bit trickier than that.
One conclusion many of these business books draw is that one should focus on a limited set of �core activities�. For example, �Profit from the Core� authors Chris Zook and James Allan find that 78% of the high-performing firms in their sample of 1,854 companies focus on just one set of core activities, while a mere 22% of the low-performing companies did. Hence, they conclude that companies should focus.* Simple isn't it? Yeah, but a bit too simple...
What this �advice� ignores is that often underperforming companies diversify into other businesses in order to try to find markets that are more rewarding for them. Thus, their �non-focus� is the result of poor performance, rather than the cause! In contrast, it�s very common that very successful companies narrow their strategic focus in order to concentrate on the business that brings them most success. Again, their focus is not the cause of their success; it is the result of it. Our best-selling-business-book-friends may be reversing cause and effect; recommending everybody to apply more focus may be dubious advice at best!
Similarly, many of these business books conclude that the high-performing companies they looked at all had very strong and homogeneous corporate cultures. Hence, they conclude: create a strong corporate culture! Seductively simple again... Unfortunately, not so sound.
It is a well-known effect in academic research that success may gradually start to create a homogeneous organisational culture. Again, the coherent culture is not the cause of the company�s success, but the result of it! What�s worse, a narrow, dogmatic corporate culture may be the foreboding of trouble. When the firm�s business environment changes � and all environments eventually do � it makes the company rigid and unable to adapt; a phenomenon known as the success trap.
Indeed, the authors of �In Search of Excellence� � Peters and Waterman � published in 1982, who analysed 43 of "the most excellent companies in the world", also concluded that a strong corporate culture was a necessity for business stardom. However, if you look at their list of 43 "most excellent companies� today, only three or four might still make the list (Johnson & Johnson, Intel, Wal-Mart, Mars); the remainder has gone down or disappeared altogether.
Hence, remember that �association is not causation�. For example, that successful companies are associated with a very focused set of business activities and strong corporate cultures does not mean that this is what caused their success. Importantly, trying to replicate these symptoms of success may actually prevent you from attaining it.
* For more insight into these type of effects, see for instance the work of Stanford Professor Jerker Denrell
I was just looking at the Rasmussen polls and saw this report:
So basically, Democratic women are the ones most likely to support raising taxes on the top earners. That's probably good since they might possibly be the only ones left working after men and Republicans decide it's not worth the trouble to pay a good deal of their income for programs they don't want, should Obama be elected. Maybe all the feminists who want women to make more than men can finally do some good. If women--especially of the Democrat persuasion--make more money, then they can foot the bills and pay the taxes. Probably, though, like child support or alimony, they will complain so much if they have to pay that this tax will be easy to change.
A plurality of voters (47%) say Barack Obama�s plan to raise taxes on those who earn over $250,000 a year is good for the troubled U.S. economy, even though 51% still believe that lower taxes are the best way to spur economic growth.
Thirty-one percent (31%) disagree with Obama�s proposal, saying raising taxes on these upper-income earners will be bad for the economy, but 16% say the proposal will have no impact, according to a new Rasmussen Reports national telephone survey....
Men support Obama�s plan to raise taxes on upper-income earners by just four points, but women favor it more than two-to-one.
Only 19% of Republicans think it�s a good idea, compared to 70% of Democrats. Fifty-nine percent (59%) of GOP voters oppose the tax hike for those earning more than $250,000, versus just 11% of Democrats. Unaffiliated voters like the proposal 47% to 26%.
So basically, Democratic women are the ones most likely to support raising taxes on the top earners. That's probably good since they might possibly be the only ones left working after men and Republicans decide it's not worth the trouble to pay a good deal of their income for programs they don't want, should Obama be elected. Maybe all the feminists who want women to make more than men can finally do some good. If women--especially of the Democrat persuasion--make more money, then they can foot the bills and pay the taxes. Probably, though, like child support or alimony, they will complain so much if they have to pay that this tax will be easy to change.
Going John Galt
Do you ever wonder after dealing with all that is going on with the economy and the upcoming election if it's getting to be time to "go John Galt." For those of you who have never read Ayn Rand's Atlas Shrugged,
the basic theme is that John Galt and his allies take actions that include withdrawing their talents, 'stopping the motor of the world', and leading the 'strikers' (those who refuse to be exploited) against the 'looters' (the exploiters, backed by the government).
Perhaps the partisian politics we are dealing with now is really just a struggle between those of us who believe in productivity, personal responsibility, and keeping government interference to a minimum, and those who believe in the socialistic policies of taking from others, using the government as a watchdog, and rewarding those who overspend, underwork, or are just plain unproductive.
Obama talks about taking from those who are productive and redistributing to those who are not -- or who are not as successful. If success and productivity is to be punished, why bother? Perhaps it is time for those of us who make the money and pay the taxes to take it easy, live on less and let the looters of the world find their own way.
My question to readers is, what are some ways to "go John Galt" (legally, of course)--that is, should productive people cut back on what they need, make less money, and take it easy so that the government is starved for funds, or is there some other way of making a statement?
the basic theme is that John Galt and his allies take actions that include withdrawing their talents, 'stopping the motor of the world', and leading the 'strikers' (those who refuse to be exploited) against the 'looters' (the exploiters, backed by the government).Perhaps the partisian politics we are dealing with now is really just a struggle between those of us who believe in productivity, personal responsibility, and keeping government interference to a minimum, and those who believe in the socialistic policies of taking from others, using the government as a watchdog, and rewarding those who overspend, underwork, or are just plain unproductive.
Obama talks about taking from those who are productive and redistributing to those who are not -- or who are not as successful. If success and productivity is to be punished, why bother? Perhaps it is time for those of us who make the money and pay the taxes to take it easy, live on less and let the looters of the world find their own way.
My question to readers is, what are some ways to "go John Galt" (legally, of course)--that is, should productive people cut back on what they need, make less money, and take it easy so that the government is starved for funds, or is there some other way of making a statement?
Tips on coping with the market meltdown
Dr.Sanity has good advice on how to cope with stress and anxiety as the market melts down:
I was watching CNBC last night with the NYT's Paul Krugman on smirking about how the government needed to bail us out of the crisis. I could sense the glee in his voice when discussing how only government intervention would work. Even Larry Kudlow, a libertarian type was in agreement with him. The only sensible person on was some analyst who kept saying that throwing government regulation and money at the problem was like throwing heroin at an addict. He was the only one who seemed to have any sense although the rest were hardly giving him a chance to talk.
I think the financial crisis is reflective of the election in that we have socialist proposals that are being swallowed hook, line and sinker by the electorate because people are so terrified of standing on their own two feet these days. Everyone is a victim of some evil capitalist. Perhaps voters won't realize until it is too late that playing into the victim mentality could eventually cost them their money, their property, their freedom and their country as we now know it.
Rule #1: Don't be a victim. Rule #2: Don't wait to be rescued. Rescue yourself.
The attitude that we are all helpless victims of the �system� and that the all-powerful and all-good government is always there to help and protect us from ourselves and all the horrible capitalist oppressors out there is one popular way to look at the current mess. The same politicians who got us into this mess are now actively promising to make all the pain go away so that neither they nor you have to change your behavior at all!
This sensibility permeates the culture to such an extent that it grossly interferes with real psychological health and functional coping mechanisms. In fact, in my profession, it is this type of thinking that becomes the major impediment preventing patients with serious psychiatric and emotional problems from being able to take any sort of control over their own lives.
I was watching CNBC last night with the NYT's Paul Krugman on smirking about how the government needed to bail us out of the crisis. I could sense the glee in his voice when discussing how only government intervention would work. Even Larry Kudlow, a libertarian type was in agreement with him. The only sensible person on was some analyst who kept saying that throwing government regulation and money at the problem was like throwing heroin at an addict. He was the only one who seemed to have any sense although the rest were hardly giving him a chance to talk.
I think the financial crisis is reflective of the election in that we have socialist proposals that are being swallowed hook, line and sinker by the electorate because people are so terrified of standing on their own two feet these days. Everyone is a victim of some evil capitalist. Perhaps voters won't realize until it is too late that playing into the victim mentality could eventually cost them their money, their property, their freedom and their country as we now know it.
Media-Induced Depression
I went to the spa today to get a massage due to pain from RSI (repetitive strain injury) from computer overuse. While there, I got an earful from the massage therapist about the economics of the spa business. "This week has been really bad, three people have already cancelled due to the economy, they said they just couldn't afford to come in." The broke callers were booked for the whole day for services, she said, and now they were left with many openings. Good for me, since they got me in quickly, but bad for business. I wonder how much the news and media is affecting people, making them feel sick and depressed about the economy, which in turn, is leading them to stay home and eat macaroni (okay, I just ate cheap pasta out of a box for dinner, but at least I was at the spa helping people earn a living).
Anyway, do you think the news is exacerbating people's depression and fear about the economy? Do you have any examples in your own hometown of similar experiences where people are staying home, bailing out or just plain frightened of what is going on, way beyond what is called for? I really think the media is driving much of the bad news out there. People may be right to be frugal at the moment, but I wonder if Obama wins how long afterward the positive media spin on the economy will take. I recently read that more people are going to therapists over the economy etc. recently. If Obama gets elected, will it be like national Prozac for the media?
Anyway, do you think the news is exacerbating people's depression and fear about the economy? Do you have any examples in your own hometown of similar experiences where people are staying home, bailing out or just plain frightened of what is going on, way beyond what is called for? I really think the media is driving much of the bad news out there. People may be right to be frugal at the moment, but I wonder if Obama wins how long afterward the positive media spin on the economy will take. I recently read that more people are going to therapists over the economy etc. recently. If Obama gets elected, will it be like national Prozac for the media?
Should healthcare be a right?
Bill Whittle at Pajamas TV asks and answers the question: "Do we have a right to healthcare?" If you haven't seen PJTV yet, take a look. It is the future of media.
Successful managers � incompetent for sure
The world of business is risky. That�s inevitable. We can analyse all we want, plan, debate, gather information and think it through till it gives us a migraine, sometimes things just don�t work out and nobody could have foreseen it.
So what makes for a good risk manager? Well, it is someone who carefully chooses the best odds. He will sometimes win, and sometimes lose. But, always, he will make quite deliberate and careful trade-offs between his assessment of risk and return; the most expected return for the least risk. Sometimes good managers accept a low return when it is safe (like buying government bonds); sometimes they accept a lot more risk in return for a higher expected return (like investing in the stock market).
Bad managers are those people who just don�t get it. They accept worse average returns for higher risks. And this is where it gets tricky.
Because if they accept very high risks, in spite of lower average returns, every once in a while one of these morons will actually hit the jack-pot�*
That is, if we take the top 1 percent � and only this 1 percent � of top performers, they�re likely to be those people who don�t get it at all� but just got incredibly lucky!
The same is true � as Stanford�s Professor Jim March asserted � for CEOs. The ones that are the eye-catching top-performers are likely the ones who just don�t get it. The dangerous thing is that they are also the ones with the absolute highest return in their business. Therefore we naively believe that they �do get it� and, in fact, are quite brilliant. Moreover, that�s what they start to believe as well� (�I win again; I must be brilliant�!�). Yet, they got lucky once, the might get lucky twice, or three times (at which point we start to notice them) but eventually their luck will turn (the names of Bernard Tapie, Jeff Skilling, Cees van der Hoeven and Conrad Black come to mind).
The same is often true for fund managers, and other people who are trying to make money on the stock market. The top performing funds are not necessarily the best ones when it comes to ability.
For example, have you ever come across these competitions in which people receive a starting sum to �play the stock market� and after 6 months or so the person with the highest return gets the award or even a job? Stupid scheme by design: The person with the highest return is by definition the one that really did not have a clue. Because the only way to win such a �contest� is by making the most silly, illogical and risky allocation of funds, and get lucky. Skillful, careful players will not lose their money, and likely get a decent return, but won�t be the ones to come out on top.
And the issue is: some bloke will get lucky. Ninety-nine out of a hundred cases it will go wrong, but the ultimate winner is dumbo number one hundred. The contest by sheer design ends up picking a nit-wit.
Hence, watch out for �top performers�, in any business or situation which involves risk. The one coming out on top is likely to be a moron, who just got lucky.
* In statistical terms, good managers have a normal distribution around a relatively high average; bad managers have a lower average return but a distribution with �fat tails�. Consequently, because of the long right-hand tail, the top performers stem from the �bad managers� distribution/pool.
So what makes for a good risk manager? Well, it is someone who carefully chooses the best odds. He will sometimes win, and sometimes lose. But, always, he will make quite deliberate and careful trade-offs between his assessment of risk and return; the most expected return for the least risk. Sometimes good managers accept a low return when it is safe (like buying government bonds); sometimes they accept a lot more risk in return for a higher expected return (like investing in the stock market).
Bad managers are those people who just don�t get it. They accept worse average returns for higher risks. And this is where it gets tricky.
Because if they accept very high risks, in spite of lower average returns, every once in a while one of these morons will actually hit the jack-pot�*
That is, if we take the top 1 percent � and only this 1 percent � of top performers, they�re likely to be those people who don�t get it at all� but just got incredibly lucky!
The same is true � as Stanford�s Professor Jim March asserted � for CEOs. The ones that are the eye-catching top-performers are likely the ones who just don�t get it. The dangerous thing is that they are also the ones with the absolute highest return in their business. Therefore we naively believe that they �do get it� and, in fact, are quite brilliant. Moreover, that�s what they start to believe as well� (�I win again; I must be brilliant�!�). Yet, they got lucky once, the might get lucky twice, or three times (at which point we start to notice them) but eventually their luck will turn (the names of Bernard Tapie, Jeff Skilling, Cees van der Hoeven and Conrad Black come to mind).
The same is often true for fund managers, and other people who are trying to make money on the stock market. The top performing funds are not necessarily the best ones when it comes to ability.
For example, have you ever come across these competitions in which people receive a starting sum to �play the stock market� and after 6 months or so the person with the highest return gets the award or even a job? Stupid scheme by design: The person with the highest return is by definition the one that really did not have a clue. Because the only way to win such a �contest� is by making the most silly, illogical and risky allocation of funds, and get lucky. Skillful, careful players will not lose their money, and likely get a decent return, but won�t be the ones to come out on top.
And the issue is: some bloke will get lucky. Ninety-nine out of a hundred cases it will go wrong, but the ultimate winner is dumbo number one hundred. The contest by sheer design ends up picking a nit-wit.
Hence, watch out for �top performers�, in any business or situation which involves risk. The one coming out on top is likely to be a moron, who just got lucky.
* In statistical terms, good managers have a normal distribution around a relatively high average; bad managers have a lower average return but a distribution with �fat tails�. Consequently, because of the long right-hand tail, the top performers stem from the �bad managers� distribution/pool.
The hidden cost of equity
What�s all the noise about being a public company anyway? I recently asked the CEO of a FTSE 250 company �what�s the advantage of being listed?� She shrugged and said �I don�t know; it can give you access to some capital I guess but, apart from that��.
Of course it is rather �sexy� and exciting. Many CEOs don�t just want to be a CEO; they want to be the CEO of a public company. But what really are the advantages of having your company listed on the stock exchange? Naturally, selling equity is a source of money, but of course there are other sources of capital which could suffice for your investment plans. But, alright, I�ll give you that; it�s one potential source of money.
Yet, I would say this source comes at a cost. Investment bankers will be able to spell out to you � in much much, much detail... � what the advantages and disadvantages are of the various sources of capital, including equity. However, I think they�re forgetting one.
I recently spoke to Bill Allan; CEO of THUS (the former Scottish Telecom). Some years back, they all of a sudden were elevated into the FTSE 100. He admitted that, at once, he found himself having to spend the majority of his time dealing with fund managers, analysts, investors, the business press, etc. Of course this was a relatively unusual and extreme situation; the telecom bubble launched THUS into the FTSE 100 when they weren�t quite ready for it. However, all the CEOs of public companies that I have talked to, in private, will admit that they spend about 30 percent of their time dealing with �the stock market� (i.e. fund managers, analysts, institutional investors and the wider public). Simply put, they wouldn�t have to do this if they weren�t listed.
Think about it: that�s quite a cost. If you have a good company and you decide to float it (starting to sell equity on the stock market), all of a sudden, you lose 30 percent of your top management capacity!
Are you sure that�s worth it? That�s 30 percent which they could have spent on cultivating the organisation, motivating employees, thinking through opportunities for future growth, integrating acquisitions, etc.
Moreover, many CEOs end up not particularly liking the 30 percent� It is a lot of hassle, pressure and a bit of a pain, having to tell (and defend) your �story� over and over again, to people who really don�t have much in-depth knowledge about the company and its business, often haven�t received any training in developing or even understanding strategy, and occasionally may not have much talent for or affinity with it anyway!
How do you quantify this cost of being listed? I don�t know; it is difficult to put a number on such a thing (which is probably why we don�t pay much attention to it in the first place!). But I will assure you that many CEOs will privately tell you � be it while whispering behind the palm of their hand � that being listed isn�t so sexy and exciting after all. And, if they still had a choice, they would do without it.
Of course it is rather �sexy� and exciting. Many CEOs don�t just want to be a CEO; they want to be the CEO of a public company. But what really are the advantages of having your company listed on the stock exchange? Naturally, selling equity is a source of money, but of course there are other sources of capital which could suffice for your investment plans. But, alright, I�ll give you that; it�s one potential source of money.
Yet, I would say this source comes at a cost. Investment bankers will be able to spell out to you � in much much, much detail... � what the advantages and disadvantages are of the various sources of capital, including equity. However, I think they�re forgetting one.
I recently spoke to Bill Allan; CEO of THUS (the former Scottish Telecom). Some years back, they all of a sudden were elevated into the FTSE 100. He admitted that, at once, he found himself having to spend the majority of his time dealing with fund managers, analysts, investors, the business press, etc. Of course this was a relatively unusual and extreme situation; the telecom bubble launched THUS into the FTSE 100 when they weren�t quite ready for it. However, all the CEOs of public companies that I have talked to, in private, will admit that they spend about 30 percent of their time dealing with �the stock market� (i.e. fund managers, analysts, institutional investors and the wider public). Simply put, they wouldn�t have to do this if they weren�t listed.
Think about it: that�s quite a cost. If you have a good company and you decide to float it (starting to sell equity on the stock market), all of a sudden, you lose 30 percent of your top management capacity!
Are you sure that�s worth it? That�s 30 percent which they could have spent on cultivating the organisation, motivating employees, thinking through opportunities for future growth, integrating acquisitions, etc.
Moreover, many CEOs end up not particularly liking the 30 percent� It is a lot of hassle, pressure and a bit of a pain, having to tell (and defend) your �story� over and over again, to people who really don�t have much in-depth knowledge about the company and its business, often haven�t received any training in developing or even understanding strategy, and occasionally may not have much talent for or affinity with it anyway!
How do you quantify this cost of being listed? I don�t know; it is difficult to put a number on such a thing (which is probably why we don�t pay much attention to it in the first place!). But I will assure you that many CEOs will privately tell you � be it while whispering behind the palm of their hand � that being listed isn�t so sexy and exciting after all. And, if they still had a choice, they would do without it.
"What drives value, stock prices, inflation, employment and everything else that comprises our economy is PERCEPTION"
Steve Sturm has some insight into why the economy looks so bad at the moment (via Instapundit):
I agree that the financial crisis is in part psychologically induced by the media to assist getting Obama in office. Hopefully, after that it will be resolved with the media switch to world peace, economic prosperity and happiness for all (except Republicans) after Obama gets in. But there is also a chance that once started, people's economic fears may take a while to die down and the problems that were exacerbated by the media will take some time to resolve, or there is always the chance that the doom and gloom stories will backfire and those who would have invested and spent will still be wary to do so.
The stock market and the economy will be in the toilet until November 5, 2008, at which time both will slowly start to recover from what ails them, with the recovery accelerating on January 20, 2009...
Those dates are, for those few of you who need to be told, the date after Obama wins the Presidency and the date he takes office.
And why will the sun again start to shine on those dates?
Because once Obama wins, the MSM will no longer have an interest in shoving negative stories down our throats. And on the day he takes office, they'll have an interest in playing up how well things are now going.
I agree that the financial crisis is in part psychologically induced by the media to assist getting Obama in office. Hopefully, after that it will be resolved with the media switch to world peace, economic prosperity and happiness for all (except Republicans) after Obama gets in. But there is also a chance that once started, people's economic fears may take a while to die down and the problems that were exacerbated by the media will take some time to resolve, or there is always the chance that the doom and gloom stories will backfire and those who would have invested and spent will still be wary to do so.
Ask Dr. Helen: How do you deal with a Palin hater?
My PJM column is up:
Read the column about the Palin hater and let me know what you think.
When does political passion become obsessive and unhealthy?
Read the column about the Palin hater and let me know what you think.
Why I will no longer watch Suze Orman
Okay, last night was the last straw. I turned on the Suze Orman show to see if I could learn anything about better money management and what I learned was that Orman, for some reason has stopped hiding her utter contempt for men and the women who marry them. It used to be that she would try to hide this contempt, had ordinary men callers and gave advice that was at least fair. Now she seems to be playing the role of angry feminist to the unenlightened female masses who are stupid enough to stay married to any man who causes them financial trouble.
Orman was in luck last night. The woman who called in with a question about her husband's finances did not require any advice to leave him for poor money management--he was already dead. Instead of talking about how hard this would be (she likes to give a lot of emotional advice--people first, then money, then things!) she asked the woman how shocking it was that this man had dared leave her with $100,000 in debt.
The female caller said that they had separated their finances but that she was now running his business (it must have been worth something if she is keeping it going) and that he had left her $250,000 dollars in life insurance. No mention that this man had not left her high and dry, that even after paying the debt, she would have $150,000 plus the business if it made money to help out. It was a non-stop ME, ME, ME, fest between the caller and Orman with no compassion for the man who had died--just a constant barrage of this woman's needs and how awful it was for her that this man had left her this debt. I might have pointed out that he had the forethought to get a life insurance policy and had a business if I were Orman but she wasn't about to let a man off the hook, not even in death.
Another female caller let Suze know that she had gone bankrupt prior to meeting her husband. She then married her husband who was generous enough not to want a pre-nup and she did not work during the marriage. But now, the couple is having problems and the woman wants to leave. She has few job skills and with her bankruptcy in the background, says no one wants to hire her or give her an apartment--so she might stay with the husband. Orman needled the woman until she got a response that the woman wanted to leave the man with her daughter but was afraid. There was a lot of talk about "you have the power, girl" but no mention of what a loser she must have been to get herself in a position of bankruptcy in the first place and not to have learned anything from it except how to blame a man. Where was he when she went bankrupt in the first place? They weren't even married. If this woman is bad with money, it's obviously her own fault. No man is required.
Instead, Orman talks about how you can't let a man take care of you (true) even if he insists on it and gives alot of platitudes about empowerment but no real advice about how not to be an idiot and stop blaming others for your problems. Orman tends to blame men for women's problems but when the shoe is on the other foot, the man is generally held responsible and needs to "man up." Maybe if she wants to set an example of "empowerment" to her female viewers, she should quit blaming men for so much of their financial troubles. It encourages in women a sense of entitlement and a lack of personal responsibility--both undesirable traits on the way to financial responsibility, one of Orman's goals.
So, I assume most of you reading this do not watch Orman and could care less. Good for you, I will be joining you and forgetting this nonsense except every once in a while to write a blog post or column. It's kind of sad to me though because for a period there, she was rational and fair to both sexes.
Orman was in luck last night. The woman who called in with a question about her husband's finances did not require any advice to leave him for poor money management--he was already dead. Instead of talking about how hard this would be (she likes to give a lot of emotional advice--people first, then money, then things!) she asked the woman how shocking it was that this man had dared leave her with $100,000 in debt.
The female caller said that they had separated their finances but that she was now running his business (it must have been worth something if she is keeping it going) and that he had left her $250,000 dollars in life insurance. No mention that this man had not left her high and dry, that even after paying the debt, she would have $150,000 plus the business if it made money to help out. It was a non-stop ME, ME, ME, fest between the caller and Orman with no compassion for the man who had died--just a constant barrage of this woman's needs and how awful it was for her that this man had left her this debt. I might have pointed out that he had the forethought to get a life insurance policy and had a business if I were Orman but she wasn't about to let a man off the hook, not even in death.
Another female caller let Suze know that she had gone bankrupt prior to meeting her husband. She then married her husband who was generous enough not to want a pre-nup and she did not work during the marriage. But now, the couple is having problems and the woman wants to leave. She has few job skills and with her bankruptcy in the background, says no one wants to hire her or give her an apartment--so she might stay with the husband. Orman needled the woman until she got a response that the woman wanted to leave the man with her daughter but was afraid. There was a lot of talk about "you have the power, girl" but no mention of what a loser she must have been to get herself in a position of bankruptcy in the first place and not to have learned anything from it except how to blame a man. Where was he when she went bankrupt in the first place? They weren't even married. If this woman is bad with money, it's obviously her own fault. No man is required.
Instead, Orman talks about how you can't let a man take care of you (true) even if he insists on it and gives alot of platitudes about empowerment but no real advice about how not to be an idiot and stop blaming others for your problems. Orman tends to blame men for women's problems but when the shoe is on the other foot, the man is generally held responsible and needs to "man up." Maybe if she wants to set an example of "empowerment" to her female viewers, she should quit blaming men for so much of their financial troubles. It encourages in women a sense of entitlement and a lack of personal responsibility--both undesirable traits on the way to financial responsibility, one of Orman's goals.
So, I assume most of you reading this do not watch Orman and could care less. Good for you, I will be joining you and forgetting this nonsense except every once in a while to write a blog post or column. It's kind of sad to me though because for a period there, she was rational and fair to both sexes.
The Abilene Paradox
It is a well-known phenomenon from social psychology that people are reluctant to voice minority opinions. My guess is you may recognise this issue and feel it yourself sometimes; when a whole group of people seems to agree on something (a course of action, proposal, etc.) but you have doubts about it, there is a bit of a psychological hurdle to speak up against it. And if you do collect the courage to speak up against it, you do so reluctantly, ready to take the heat.
And we�re right to be reluctant to speak up. Research also shows that minority dissenters are often �punished�, in the sense that people in the majority group get irritated, will blame you for the deal falling apart, may even start to give you the cold shoulder if not spit in your tea when you�re not looking.
Therefore, quite often, people don�t speak up at all if they disagree with a particular course of action, if they feel they would likely be the only ones against it. Instead, they stay quiet.
And there is an interesting consequence to that. We only know that others disagree if they actually speak up. If they don�t speak up, we are inclined to conclude that they do not disagree! As a result, it may be that we stay quiet because we assume that everybody else is in favour while, in reality, lots of others are making the same erroneous assumption�! In social psychology, this phenomenon is known as pluralistic ignorance or the �Abilene Paradox�.
The first person to describe the Abilene Paradox was Professor Jerry Harvey, from the George Washington University. He describes a leisure trip which he and his wife and parents made in Texas in July, in his parents� un-airconditioned old Buick to a town called Abilene. It was a trip they had all agreed to but, as it later turned out, none of them had wanted to go on. �Here we were, four reasonably sensible people who, of our own volition, had just taken a 106-mile trip across a godforsaken desert in a furnace-like temperature through a cloud-like dust storm to eat unpalatable food at a hole-in-the-wall cafeteria in Abilene, when none of us had really wanted to go��
Of course, this phenomenon is not restricted to people in Texas. Actually, it happens in the world of business too. Professor Jim Westphal, from the University of Michigan, for example uncovered evidence of the Abilene Paradox among boards of directors.
He collected data on 228 boards of medium-sized American public companies using a variety of databases and questionnaires. He found out that outside directors often did not speak up against their company�s extant strategy, although they had serious concerns about it. At the same time, they greatly underestimated the extent to which their fellow directors shared these concerns! As a consequence, underperforming companies undertook fewer initiatives to change their strategy, and they persisted with their failing course of action.
That's the Abilene paradox: Nobody may think we�re sailing a good course, but if nobody is willing to rock the boat � thinking we�ll be the only one � we may end up continuing as is, until we all go under...
And we�re right to be reluctant to speak up. Research also shows that minority dissenters are often �punished�, in the sense that people in the majority group get irritated, will blame you for the deal falling apart, may even start to give you the cold shoulder if not spit in your tea when you�re not looking.
Therefore, quite often, people don�t speak up at all if they disagree with a particular course of action, if they feel they would likely be the only ones against it. Instead, they stay quiet.
And there is an interesting consequence to that. We only know that others disagree if they actually speak up. If they don�t speak up, we are inclined to conclude that they do not disagree! As a result, it may be that we stay quiet because we assume that everybody else is in favour while, in reality, lots of others are making the same erroneous assumption�! In social psychology, this phenomenon is known as pluralistic ignorance or the �Abilene Paradox�.
The first person to describe the Abilene Paradox was Professor Jerry Harvey, from the George Washington University. He describes a leisure trip which he and his wife and parents made in Texas in July, in his parents� un-airconditioned old Buick to a town called Abilene. It was a trip they had all agreed to but, as it later turned out, none of them had wanted to go on. �Here we were, four reasonably sensible people who, of our own volition, had just taken a 106-mile trip across a godforsaken desert in a furnace-like temperature through a cloud-like dust storm to eat unpalatable food at a hole-in-the-wall cafeteria in Abilene, when none of us had really wanted to go��
Of course, this phenomenon is not restricted to people in Texas. Actually, it happens in the world of business too. Professor Jim Westphal, from the University of Michigan, for example uncovered evidence of the Abilene Paradox among boards of directors.
He collected data on 228 boards of medium-sized American public companies using a variety of databases and questionnaires. He found out that outside directors often did not speak up against their company�s extant strategy, although they had serious concerns about it. At the same time, they greatly underestimated the extent to which their fellow directors shared these concerns! As a consequence, underperforming companies undertook fewer initiatives to change their strategy, and they persisted with their failing course of action.
That's the Abilene paradox: Nobody may think we�re sailing a good course, but if nobody is willing to rock the boat � thinking we�ll be the only one � we may end up continuing as is, until we all go under...
How much of the financial crisis is psychological?
Is your head spinning from all the doom and gloom being blasted from the media and Congress day and night about impending financial disaster? Mine is, and frankly, I sometimes wonder how much of the financial picture is accurate and how much is manufactured in order to get a Democrat elected. One has to ponder about the timing of all of this bad news.
Why the crescendo of economic collapse right before the election? Why didn't the media and congress act just as concerned some time ago or wait until sometime after the election to go into crisis mode? The timing of the current financial crisis seems too planned and calculating to be just a coincidence. Polls show that people's number one concern right now is the economy and that for the most part, voters believe Democrats are somewhat more likely to help with the economy. Could it be that the liberal media and those in Congress, knowing that, is blaring the bad economic news from the rooftops in order to manipulate voters into voting for a Democrat? If so, it won't be the first time.
Mark Penn, chief adviser to Clinton, acknowledged in his book Microtrends that people thought because of the media that the recession and economy prior to Clinton getting elected was worse than it was:
My guess is that if Obama gets elected, the true facts of the economy will come out. Suddenly, our economic outlook will look much brighter after November 5th. In the coming months and years after the election, we will be told how Obama has managed this crisis and overcome it, despite the fact that he and other Democrats had their hands in the Fannie Mae and Freddie Mac fiasco and caused some of it, but that's another story. But by then, it will be too late. Those who voted for Obama based on economic fear may realize too late that they may have buyer's remorse.
Why the crescendo of economic collapse right before the election? Why didn't the media and congress act just as concerned some time ago or wait until sometime after the election to go into crisis mode? The timing of the current financial crisis seems too planned and calculating to be just a coincidence. Polls show that people's number one concern right now is the economy and that for the most part, voters believe Democrats are somewhat more likely to help with the economy. Could it be that the liberal media and those in Congress, knowing that, is blaring the bad economic news from the rooftops in order to manipulate voters into voting for a Democrat? If so, it won't be the first time.
Mark Penn, chief adviser to Clinton, acknowledged in his book Microtrends that people thought because of the media that the recession and economy prior to Clinton getting elected was worse than it was:
I have found over the years that there is often a huge disconnect between belief about the economy and the true economic state of affairs. Until the statistics are actually published, people tend to assess the economy through the eyes of the national media. In 1992, when Bill Clinton won the presidency based on worries about the economy, the statistics that came out after the election showed that the period leading up to November had actually been a period of record growth. . . . In his 1996 State of the Union speech, President Clinton said we had the best economy in thirty years -- a statement that sent a flurry of reporters to check actual statistics rather than popular political movements and sweeping, politically motivated statements. The more people looked at the facts, the more they agreed, and six months later, there was near-unanimity that the economy was in good shape. Had the economy changed? No, what had changed was knowledge about the true facts of the economy.
My guess is that if Obama gets elected, the true facts of the economy will come out. Suddenly, our economic outlook will look much brighter after November 5th. In the coming months and years after the election, we will be told how Obama has managed this crisis and overcome it, despite the fact that he and other Democrats had their hands in the Fannie Mae and Freddie Mac fiasco and caused some of it, but that's another story. But by then, it will be too late. Those who voted for Obama based on economic fear may realize too late that they may have buyer's remorse.
Subscribe to:
Posts (Atom)