Posted by Marc Hodak on July 30, 2008 under Politics | 
OK, I know I said I would lay off the purely political comments, but I actually have a more-than-academic interest in Turkey.
The Turkish High Court has been deliberating the banning of the Justice and Development Party party currently in power. The ruling party is pro-Islamic, though they are nominally willing to abide by Turkey’s constitutional secularism. The flash point of the instant controversy was Justice and Development desire to lift the ban on women wearing head scarves at the universities. They saw this as a matter of personal freedom. This secularists went ballistic, seeing this as the camel’s nose under the tent, so to speak, i.e., the first step toward overthrowing the secular foundations of modern Turkey.
The Court decided against banning the J&D party, but instead cut off half their funding. I have no idea what their laws are–this ruling would seem quite arbitrary by American standards–but the outcome seems right. I think secularism is great, and countries with a populist instinct to the contrary need to be wary of encroachments on secular freedoms. On the other hand, I like a strict separation of church and state and freedom of speech, both of which seem in line with allowing women to wear head scarves if they wish. Furthermore, I would be wary of overthrowing an elected government. Democracy is not my highest ideal–if one could have expansive personal freedom without a democracy, I’d be fine with that. However, democracy serves as a safety valve for the majority when they’re feeling oppressed. If the majority feels it has lost its voice via the ballots, they will eventually, invariably resort to bullets.
This ruling seems to cut the baby in half. It allows the elected government to remain in power, thus validating the will of the people, while putting J&D on notice to watch itself. My assent, however, is based entirely on the premise that the court–clearly dominated by secularists– defended the law as it’s written. Both expansive personal freedom and democracy rely upon the rule of law.
I’m not sure that My Turkish partner, and one of my best friends in this life, would agree. He’s a pretty hard line secularist, and may claim that I am not well attuned to the slippery slope represented by the head scarves issue, and he may be right. Politics always seems easier from five thousand miles away. My friend, a somewhat conservative soul (in the American sense), loves Obama.
Posted by Marc Hodak on July 29, 2008 under Unintended consequences |
The nannies in L.A.’s city council are voting a moratorium on fast food restaurants in South L.A. Here’s their logic: People in South L.A. are fat. Fast food makes you fat. South L.A. is rife with fast food outlets. If we limit the number of fast food outlets there, people there will not get so fat. OK?
This is the same city council that outlawed plastic bags for environmental reasons.
The California Restaurant Association has come up with this response:
Fast food “is the only industry that wants to be in South LA,” said association spokesman Andrew Casana. “Sit-down restaurants don’t want to go in. If they did, they’d be there. This moratorium isn’t going to help them relocate.”
Wow, that’s pretty self-serving. Don’t these people get ENFIC?
Seriously, the council would, if they could, require “healthy, sit-down restaurants” to locate into that area. SInce they don’t quite have that power, not for lack of trying, they will instead use tax dollars to lure such restaurants there. When they aren’t trying to throttle development, of course.
In the mean time, economic logic suggests that:
(a) property values will go down since you’ve taken away one possible, and apparently popular, use for property in that area
(b) taxes will go up to fund this attempt at social engineering
(c) Incumbent restaurants will make more money due to the artificial constraint on competition
(d) Incumbent restaurants may need that extra revenue to defend themselves from a city council that is clearly out to get them…
(e) …making some lobbyists, and likely council members, wealthier
(f) You still won’t have healthy eating opportunities, because, as every nanny should know, punishing behaviors you don’t want never guarantees behaviors you do want.
Which, altogether, means that these people will be simply paying a little more to get fat.
Posted by Marc Hodak on July 28, 2008 under Self-promotion |
Forbes published this article about female CEO compensation. Markets often get a rap for being impersonal (it’s just about the money) but impersonal interactions, by definition, overcome discrimination. Women still suffer from discrimination in the work place, but relentless demand for better talent is arguably driving up their numbers in the C-suite.
My favorite part of the article, however, is their quote from “Mike Hodak.” No, my brother doesn’t even work with me. I suppose it’s natural to blame one’s parents for such things. After all, they felt compelled to name all their sons starting with “M.” Mike, Marc…an understandable confusion in a phone interview. Of course, the author of this story couldn’t have known that Mike exists, except that he thought it was me. Alas, I don’t mind sharing the limelight with my family.
Posted by Marc Hodak on July 27, 2008 under Practical definitions |
Randy Pausch of “Last Lecture” fame passed away at the end of last week. It was quite an exit.
I was inspired by Randy in many ways, not least by the number of people he had touched in his years as a teacher. Before his “Last Lecture,” Randy thought he would be best remembered on the Internet for his talk on time management. In that talk, he showed Covey’s matrix on prioritization. The key is to do what’s important, and leave off what’s not, regardless of urgency. If you do it right, the important stuff is less likely to become urgent.
The whole thing has made me rethink my priorities, including the value of daily entries on this blog. These things take time for me to write, time that arguably comes at the expense of things I’m actually paid to do, not to mention time with my family. I have toyed with simpler posts, but others have already cornered that market. I was hoping someone would join me to post material. A couple of people I thought would be great have, in fact, asked to contribute, but other things overtook them and they crapped out on me (you know who you are, you rats!).
So, I will likely drop down to a couple posts per week along these lines:
– Comments on executive compensation (for my clients, if not my fans)
– Catalogue of examples of perverse incentives, especially unintended consequences of well-intentioned policies, great and small (for a maybe future book)
– The occasional movie or book review (as little as I get out)
If there is news about corporate incentives, I will feel compelled to blog about it more promptly since that seems to get picked up by the major news outlets and sometimes leads to broader coverage. We’ll see.
In the meantime, Randy’s inspiration will remain with me so I might contribute anything like what he was able to in his too few years.
Posted by Marc Hodak on July 23, 2008 under Unintended consequences |
I can’t say the critics are groundless,” says Jung Jaesoo, 48 years old, who runs a consulting firm that advises Korean companies on how to qualify for credits. “But the Kyoto Protocol is a multilateral agreement. It is impossible to make only South Korea an exception now.”
—
As to whether it is sensible for his company to reap rewards for installing pollution-control technology in a highly industrial country like South Korea, Mr. Rosier says the rules of the U.N.’s system were set by the Kyoto negotiators.
And that’s that.
These quotes reference the legal, and oh so critical, distinction in the Kyoto Ptococol between developed nations, like those of the OECD that are expected to bring their emissions to below those of 1990, and “developing” nations for whom the 1990 targets would be even more wildly inappropriate. Without getting into the details, this legal distinction between country types creates a game-theoretic situation appreciated by all incentive experts: arbitrage across the boundary.
The boundary, in the case of Kyoto, occurs around Portugal, a “developed” nation whose economic growth plateaued around 1581, and South Korea, which was plausibly “developing” when Kyoto was negotiated in the mid-90s, but at the time was on a very different trajectory. South Korea’s GDP is now higher, and still faster-growing than Portugal’s. In fact, South Korea is now on par with most E.U. nations.
Still, because a treaty just had to be signed in 1997 so the politicians of the day could have something to show, and because one size so clearly did not fit all in the massive central planning experiment embedded in the treaty, a cut-off had to be made somewhere. All of the politicians back then knew that none of them would be in office to deal with any consequences of their mess.
Since then, businesspersons have studied the rules, just the way they were supposed to, and are now playing them the way they were written, just as they were expected to, though not necessarily with the intended outcomes. These companies were meant to come up with clever and powerful ways to reduce emissions, and they are, in fact, doing that. They just weren’t supposed to benefit so unevenly or unfairly from the treaty. You know that politicians were almost as obsessed about fairness when these discussions were going on as they were with simply getting something signed.
Alas, because the Kyoto Protocol was created by politicians instead of incentive experts, we are now starting to see stories about how completely this thing is going to be gamed. Sure, the experts were invited to Kyoto for some sake and visits to various shrines, but in the end, everyone was compelled to worship at the UNFC Temple of Climate Change.
OK, you want an unnecessary operation, go ahead. But as I always tell my relatives, sure, operations are expensive, but you still shouldn’t be performing them on each other. Hire a surgeon, for God’s sake.
Posted by Marc Hodak on July 21, 2008 under Movie reviews |
Awesome.
Christopher Nolan has convinced me that Batman is the only comic that has grown up into a mature movie, albeit by tapping into its original, dark roots. It has an arguably fuller story than Hulk or Spiderman, a mix of story characters with that perfect mixture of predictability and depth driving the action, gripping scenery that evokes a self-contained otherworld, and–the necessary element of every great film–a score that meshes perfectly with the rich imagery.
Spoilers from here:
Heath Ledger screws the other Gyllenhaal
I also liked that the Joker was an experimental economist. In the initial heist, he convinced each accomplice to kill the next in a well-timed string of murders that would leave him alone with the loot. Survivor is for wusses.
One of his next tests was telling three thugs that he was hiring only one of them, cracking a pool cue in half to create a spear, and tossing it into the middle of the three–a kind of gladiatorial job interview. Cold, man. Very effective sorting mechanism. Worth keeping in mind when I need to get rid of a surplus analyst.
Later, when the Joker forced the caped crusader to pick Dent or Dawes, he meant it. No Hollycrap saving of both. The willingness to sacrifice a key character is the sign of a great story.
Then, at the end of the film, those two groups, each with the power to blow up the other, and the promise that both would be blown up if neither acted by a certain time–what an awesome example of applied game theory.
A stickler might ask how the Joker could afford his obviously elaborate set-ups if he burned all his money just for yucks, or why he was madly touting chaos while executing diabolically intricate schemes that clearly required more planning than could fit in an architect’s portfolio. But mad people do that, sometimes, don’t they?
Everyone is gaga over Heath Ledger’s acting. The hype reflect reality, for a change. It drove home how we will all be missing a lifetime of great performances. Some people were less enthusiastic about Christian Bale’s Batman. I found him a bit wooden, but still captivating. I didn’t think a non-smoker could rasp his voice like that, but I guess it’s an effective part of his disguise. No one can blame him of being transparent, like Clark Kent, of whom my then-eight year old son once mentioned, “Uh, he’s just wearing glasses.” For my money, the only weak spot in the acting was Maggie Gyllenhaal. It might be me, but I just didn’t find her compelling as Rachel Dawes. Or maybe it was Dawes that was not compelling? Anyway, they needed a girl that I would be a little sorrier to see blown up. Sorry Maggie.
Posted by Marc Hodak on July 18, 2008 under Economics |
I often wonder what is going through the heads of auto executives. It’s a habit gained from my years of working with them. I don’t think they’re idiots. Idiocy can’t be that widespread or that sustained over such a prolonged period as the decline of U.S. auto companies. I have to think they are intelligent, educated people operating under perverse incentives. And then I see decisions like these:
1) Cutting revenues without due regard for what happens to costs. GM and Ford each tried to cutting sales to fleets in the late ’80s and early ’90s because those sales weren’t “profitable.” How did they know they weren’t? Because their cost accountants told them. They looked at the average revenues they got for the vehicles and subtracted the average costs and, voila, losses. What the cost accountants didn’t tell them was how many of those costs would remain after those revenues disappeared–the fixed costs of plant operations is remarkably high. Both companies reversed their decisions within a year after suffering what were then record losses. Now, the U.S. (but not Japanese) auto makers are again trying this management by the numbers experiment, led by Chrysler and their by-the-numbers chief. This time, the excuse is resale price maintenance, but the cash flow end will be the same. I guess sometimes the only way to know the stove is hot is to actually touch it.
2) Cutting costs without due regard for what happens to revenues. American manufacturers are the master of this. GM recently announced that they will cut $10 billion from their cost structure. That’s a lot of paper clips. The logical question, at least to a consultant with some finance savvy, is: “Why now?” If the $10 billion was there to cut, why wasn’t, say, three or four billion there to be cut last year? Or a few billion the year before? I’d be concerned about two possibilities. First, I’d wonder how much worse the cars will be after these cuts. GM cars have always seemed a little tinnier than Toyotas or Hondas. Even if the cuts don’t show up in the cars themselves, how much of this $10 billion is fat rather than muscle? Second, maybe the fat was there, but the attitude was “hey, we’re so screwed, what’s another few billion.” I’ve met many managers, and more than a few individuals outside of the business world, like this. Most of them met a bad end.
Posted by Marc Hodak on July 16, 2008 under Revealed preference |
OK, so the headline isn’t a shocker: “Utah NAACP President Still Opposes Vouchers.” But the reasoning never ceases to amaze me:
It would go back to the past (before) Brown v. Board of Education. There would be segregated schools. The ones that would not have been able to afford the schools would’ve been children of color.
Because, you know, the current system is working so well for black kids, especially in those inner city schools attended by a rainbow of peacefully, coexisting races, except of course for all those black kids you see in private schools.
Pleazze, lady. The schools that our poor kids are trapped in lend a whole new meaning to “compulsory education”–a meaning where only half of the words count. It prepares far too many of them for the incarceration they will face–more than one-in-ten black males. If white society had imposed this school system upon our African-American population, it would be an outrage rivaling Jim Crow.
For once, you’d think the political leaders would actually do it for the kids. Instead, leaders like this political stooge are willing to continue sacrificing their kids en-masse on the altar of public education, just to prevent a few extra middle class white kids from going to private school.
Does this:
prepare you for this:
Posted by Marc Hodak on under Collectivist instinct |
MMM shows she’s worth whatever Atlantic is paying her in this brilliant fisking of the Chicago ‘Gang of 100’ whine about the proposed Friedman Institute. Her money quote:
Their assessment of the effects of the “neoliberal global order” is forehead slapping, head shaking, did-they-really-say that? stupid. I haven’t heard such transparently wishful claptrap since my fifteen-year-old boyfriend tried to convince me that sex provided unparalleled aerobic exercise. If you put all 100 in a room with unlimited access to Lexis-Nexis and a mountain-sized peyote stash to bring their quasi-communist fantasy life into 3D technicolor, they still couldn’t name a country where neoliberalism has undermined a vibrant democracy.
It hardly gets any better than that.
Posted by Marc Hodak on July 15, 2008 under Stupid laws |
New South Wales quickly passed a law to limit protests against the Pope’s upcoming visit. Australia’s federal court just as quickly invalidated the law.
Legislatures feel bound to pass new laws. They don’t get rewarded for not passing laws. It’s especially easy when the target of those laws are unpopular groups. In Australia, a group of gays exercising their free speech rights regarding the the Church’s stance on homosexuality would qualify.
I often wonder about the necessity of an “anti-legislature,” a body devoted to eliminating unnecessary laws, to neutralize the worst effects of legislatures. It turns out that the most effective anti-legislature, if it ever awoke from its constitutional coma, would be a judiciary committed to upholding the principle of enumerated powers. This episode provides a lesson in how simple it would be to end this pointless deference to a legislature with a regulatory scheme. It takes this kind of smack-down to shame a legislature into controlling its unconstitutional impulses.
