Posted by Marc Hodak on April 15, 2007 under Economics | 
That’s where I spent the latter part of last week. Here were some highlights:
Stanley O’Neal, Merrill Lynch’s CEO, spoke about his inspirational rise from a rural Alabama farm to the pinnacle of Wall Street, touching on different topics along the way. Regarding the fall of the Berlin Wall:
“Everyone said it would herald the spread of democracy around the world. I think the experts and pundits got it wrong. Democracy has made inroads, to be sure. But what really took off was the spread of capitalism. It was the opening of markets that has made the most difference to the most people, lifting millions out of poverty.”
Regarding the Wharton School itself:
“Joseph Wharton was a protectionist. He was appalled at the lack of sympathy from politicians for tariffs on the steel products he was trying to make and sell against vigorous foreign competition. He founded the Wharton School, in part, to create a learned basis of support for trade barriers.” Joe would have been alternately thrilled and horrified at the intellectual trends promoted by Wharton’s faculty over the next 125 years in regards to trade.
Rajit Gupta, head of global consulting powerhouse McKinsey & Co. was a little more disappointing. Like a good consultant, he identified a MECE* list of 10 trends that businessmen should be aware of. These trends fell under the general areas of macroeconomic, business, and social factors. Each of the three areas had three trends associated with it; mostly related to demographics and globalization. It would have looked sharp in a powerpoint, which he thankfully spared us.
OK, I know that three trends in each of three areas equals nine trends, and I said he identified ten. His capstone trend was the continued suspicion of business, which he felt was important to overcome. Although I agreed with his diagnosis, I quite disagreed with his prescription; he advocated that businesses should get more engaged with the public on social concerns. When I asked him how business should address a public as ignorant of market processes as they are distrustful of them, he responded:
“I don’t think the public needs to understand the mechanics of how markets work. They need to believe that business cares about them.”
Hmm.
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Posted by Marc Hodak on April 11, 2007 under Invisible trade-offs |
The assailant was District Attorney Mike Nifong. The victim was the lady with the blindfold and scales.
The accused Duke lacrosse players have finally been exonerated. For those of us who have been following this case, the dropping of these charges is long overdue. The players and their families have gone through hell, paid their lawyers over $2.5 million for the privilege, and lost a year of their young lives in the netherworld of an out of control prosecutor. Their coach lost his amazing job. Their teammates lost a great shot at the NCAA championships–the pinnacle of what most lacrosse players work their lives to achieve. The best coverage of this whole, sorry affair has been provided by KC Johnson. He will undoubtebly put it all together in a much-deserved bestseller.
My own interest in this affair stemmed from my son’s decision to apply for and accept Duke’s invitation to their Class of ’11. When I asked him about the lacrosse affair, he responded in his typical, mercenary fashion that he should probably send Nifong a thank you note for making it that much easier for him to get in to a great school. I suppose this was a year of reduced quantity of applications for Duke, and since the students would eventually be found innocent, it was a fair bet that the school’s reputation should more or less recover.
I would qualify these statements by mentioning the behavior of some of Duke’s administration, including President Jim “Throw ’em under the bus” Brodhead, and the politicized faction of their faculty that used their student’s plight to press their own agenda. In either of those regards, however, I don’t think my son would have fared better at any other elite university, except that Duke’s loony left may have been sufficiently spanked by the deservedly bad publicity to lay low for, perhaps, the next four or so years. I doubt it, though.
Of course, the long-term negative effects of this prosecution will be borne by future rape victims who will have a harder time having their voices heard. Among the outrageous enablers of this false prosecution were supposedly feminist advocates who played the victim’s siren song long after everyone else got tired of the screeching.
Posted by Marc Hodak on April 9, 2007 under Executive compensation |
Boy, the WSJ went to town on CEO pay today. Like most news stories, the writing suffers from a disturbing conflation of description and prescription. Descriptively, the rules on disclosure have changed and many companies are reacting to those changes in various ways. That’s interesting stuff for someone like me into executive compensation for professional reasons.
The prescriptive part was what you’d expect of journalists trying to rope in the non-professionals with a sensational story while pretending to offer simple answers to complex issues: a list of “Ten Things,” compiled from suggestions of various activists, experts and “daring” directors. Drum roll, please:
1. Don’t allow the board’s pay consultants to do other work for management
2. Don’t let outside CEO recruits monopolize the pay setting process
3. Don’t offer severance for anyone with a lot of equity or deferred pay
4. Make it easier to fire for cause
5. Be skeptical of “peer group” comparisons
6. Kill unjustifiable perquisites
7. Link long-term incentives with performance goals
8. Divulge precise measures for performance-based payouts
9. Conduct regular check-ups about pay practices
10. Give investors a voice in executive pay
Now, how hard could that be?
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Posted by Marc Hodak on April 8, 2007 under Invisible trade-offs |
I always thought it interesting that kids derive a lot of fun from biting off pieces of a chocolate bunny. I wondered what vegetarians thought about that.
Many people get squeamish about the death of animals, especially baby animals. All babies are cute in a way that’s somehow recognized across species. So, when the Discovery Channel showed a gaggle of furry goslings being gathered up by a hungry arctic fox, one felt a sense of relief when the geese parents came back to chase the predator away, making it drop everything. But when the fox sneaked around and grabbed a helpless gosling, and the geese parents looked distraught, one shared their distress. One felt their pain, until the fox reached its little kits with the bird. After the furry little kits shared their meal and were rolling and playing, one was grateful that their mom was able to provide for them.
That’s the way it is. We root for the subject animal. We boo the seals ominously swimming around the icy shores waiting for penguins to jump in. We’re told that the death of a penguin seeking food in the sea also means death to her baby penguin waiting for that food on shore. So, seals are vicious, blood-thirsty ocean creatures. That is, until the show is about seals. Then they’re cute, playful creatures trying not to be eaten by those vicious sharks. And when a polar bear attacks a walrus colony, one’s heart immediately goes out to the pudgy, old walruses. And when the walruses successfully evade predation and the polar bear eventually collapses from hunger, we see that the cost of avoided bloodshed was the death of a noble creature.
Fact is, nature is a bloody, violent place with every creature’s life hanging in the balance, in mortal competition with both their rivals and their prey. “Nature, red in tooth and claw,” as Tennyson put it, has always been difficult for ‘nature lovers’ to accept. But it demonstrates the inevitability of trade-offs in every part of the world. It means that when we see a cute little tiger cub waiting for it’s mom and think, “I hope Simba gets what his little tummy needs!” one has to accept the criticism of being against antelopes and gazelles. Predation is an unhappy fact of life for many. But what would the world look like without it?
Posted by Marc Hodak on April 5, 2007 under Unintended consequences |
The “war on drugs” is a fount of unintended consequences, on steroids. One example of the pain this war is causing us all is the literal pain it is causing millions of Americans who are having trouble getting proper treatment. Drug laws penalize doctors for prescribing high doses of medication to certain patients. The theory is that some patients are really addicts (making it illegal to treat addicts who happen to be in pain) or dealers who are just taking advantage of the medical system to make a buck. The problem is, doctors have a notoriously difficult time telling real patients from fake ones. That wasn’t a big section on the board exam. Listening to patients and caring for them was. Do such laws really chill the treatment of pain? Ask Dr. Hurwitz. As reported in the New York Times:
Dr. Hurwitz, depending on which side you listen to, is either the most infamous doctor-turned-drug-trafficker in America or a compassionate physician being persecuted because a few patients duped him.
When Dr. Hurwitz, who is now 62, was sent to prison in 2004 for 25 years on drug trafficking and other charges, the United States attorney for Eastern Virginia, Paul J. McNulty, called the conviction ���a major achievement in the government���s efforts to rid the pain management community of the tiny percentage of doctors who fail to follow the law and prescribe to known drug dealers and abusers.���
Yes, that was 25 years. For a doctor who didn’t directly profit from the sale of the drugs.
Dr. James N. Campbell, a Johns Hopkins University neurosurgeon specializing in pain, has this to say about this prosecution:
���Opioids were a revolution in pain treatment during the 1990s, but doctors are now more reluctant to use them,��� Dr. Campbell says. ���If a doctor perceives there���s a 1 in 5,000 chance that a prescription will lead to a D.E.A. inquiry ��� just an inquiry, not even an arrest ��� he���s not going to take the chance. So the victims are the patients.���
OK, let’s say that the actual deterrence threshold was a one-in-50 chance; this is still far from theoretical problem…
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Posted by Marc Hodak on April 3, 2007 under Collectivist instinct |
I’ve driven down to Maryland many, many times over the years. It’s where I’m from, and most of my family still lives there. At the Delaware border, there was a quaint sign saying “Welcome to Maryland – The Free State.”
Now, Maryland has a lot to recommend for it–lovely rivers, Chesapeake crabs, green hills as far as the eye can see. Freedom, not so much. Few states are bluer than Maryland. Marylanders love government, and not just because so many of them are federal workers. Their liberalism runs much deeper than that. For me,the only way to view the “Free State” motto on the welcome sign was with a sense of humor.
Well, the old motto is gone. Now the sign just says, “Maryland Welcomes You.” No pretense about freedom. In a way, the change represents a kind of truth in advertising. I just wonder if the bureaucrats who made the change were conscious of this truth?
