(Hat tip: Andrew Sullivan)
Friday, February 27, 2009
Sunday, February 22, 2009
One Benefit of the Financial Crisis
A couple years ago, at the height of the market, some new companies entered into my industry (the fantasy sports industry). They were funded by investment (I think venture capital money), and they spent a whole bunch of it hiring people and marketing themselves. They made a nice splash at the conventions because they'd sponsor events and they'd spend money on advertising with other companies. Sure, they had a business plan of sorts, but not a realistic one given the amount of people they hired and the amount of money they were burning through.
Having seen a number of these outfits come and go, it occurred to me that in a good economy, one where there's plenty of extra money lying around, all it really all it takes is someone who is good at pitching investors to create these pseudo businesses. They raise money, throw it around, act like big shots, spend their way into a modicum of market share, then, if the economy's still good, ask for more money; if it isn't, they fold.
One beneficial side effect of a bad market is the elimination of these kinds of entities. It might seem like an industry is losing jobs or productivity, but it's not. I wonder how much of the loss in GDP in a recession is really just the elimination of this kind of bogus activity.
Having seen a number of these outfits come and go, it occurred to me that in a good economy, one where there's plenty of extra money lying around, all it really all it takes is someone who is good at pitching investors to create these pseudo businesses. They raise money, throw it around, act like big shots, spend their way into a modicum of market share, then, if the economy's still good, ask for more money; if it isn't, they fold.
One beneficial side effect of a bad market is the elimination of these kinds of entities. It might seem like an industry is losing jobs or productivity, but it's not. I wonder how much of the loss in GDP in a recession is really just the elimination of this kind of bogus activity.
Why the Bailout Doesn't Matter
I was getting worked up earlier about the idea that we're bailing out these incompetent scumbag bankers, auto company managers and delinquent home owners, but now I realize that it's much ado about nothing.
No money is coming out of my pocket presently, and the inflation created by the bailouts is not going to be a problem any time soon. So the real issue is that we, the taxpayers, are going to owe all of this on the back end. Just as Wall Street had its pyramid scheme which wound up with homeowners and banks holding the bag while the execs drained out all the money, we're just adding another layer to the pyramid with the taxpayers taking over for the banks. No problem, when we're asked to pay, we'll just do what the banks did - throw up our hands and say we're unable. At that point, there won't be anyone left to borrow from, and so the government and the world order will simply collapse. Which is what would probably happen now if we didn't give our money to the banks.
So we're buying a little extra time, pretending we can actually guarantee all that debt. Might as well enjoy it while it lasts. Because after the collapse - who the hell knows?
No money is coming out of my pocket presently, and the inflation created by the bailouts is not going to be a problem any time soon. So the real issue is that we, the taxpayers, are going to owe all of this on the back end. Just as Wall Street had its pyramid scheme which wound up with homeowners and banks holding the bag while the execs drained out all the money, we're just adding another layer to the pyramid with the taxpayers taking over for the banks. No problem, when we're asked to pay, we'll just do what the banks did - throw up our hands and say we're unable. At that point, there won't be anyone left to borrow from, and so the government and the world order will simply collapse. Which is what would probably happen now if we didn't give our money to the banks.
So we're buying a little extra time, pretending we can actually guarantee all that debt. Might as well enjoy it while it lasts. Because after the collapse - who the hell knows?
Thursday, February 19, 2009
Talk Radio Viruses
I just caught most of Right America: Feeling Wronged, and what struck me most was that the people were repeating talking points they had obviously heard somewhere - most likely on the radio. But not just repeating, but doing so with genuine emotion attached, and believing what they were saying as if it were the most obvious truth.
And it got me thinking that Rush Limbaugh, Sean Hannity and the rest were able to infiltrate these people's beliefs by mimicking their thought patterns, speaking to their common fears and grievances, articulating actual feelings they have, then once hooked, steering them to a particular narrative, e.g., Obama's a socialist.
It's like a virus that tricks your immune system by mimicking it. Limbaugh will mimic the listeners' thought patterns, and once their attention and trust is hijacked use whatever normal skeptical and critical faculties they have against those speaking the truth. So if you say to one of his believers - actually, Obama's a capitalist and his tax plan just differs in terms of what bracket pays what, their skepticism, i.e., their immune system against falsehood, will immediately kick in and dismiss it. Instead of the healthy skepticism fighting bullshit, it's been subverted to fight the truth.
I don't know the long-term consequences of having 10s of millions of people with inverted critical faculties - in the near term it was Bush/Cheney/Rumsfeld/Alberto Gonzalez, etc. - but I doubt they're good.
And it got me thinking that Rush Limbaugh, Sean Hannity and the rest were able to infiltrate these people's beliefs by mimicking their thought patterns, speaking to their common fears and grievances, articulating actual feelings they have, then once hooked, steering them to a particular narrative, e.g., Obama's a socialist.
It's like a virus that tricks your immune system by mimicking it. Limbaugh will mimic the listeners' thought patterns, and once their attention and trust is hijacked use whatever normal skeptical and critical faculties they have against those speaking the truth. So if you say to one of his believers - actually, Obama's a capitalist and his tax plan just differs in terms of what bracket pays what, their skepticism, i.e., their immune system against falsehood, will immediately kick in and dismiss it. Instead of the healthy skepticism fighting bullshit, it's been subverted to fight the truth.
I don't know the long-term consequences of having 10s of millions of people with inverted critical faculties - in the near term it was Bush/Cheney/Rumsfeld/Alberto Gonzalez, etc. - but I doubt they're good.
Friday, February 6, 2009
Kellogg Drops Michael Phelps
Kellogg, the maker of Pop Tarts, Frosted Flakes and a hundred other high-fructose corn-syrup snacks and pseudo foods marketed to children amidst an epidemic of childhood obesity and diabetes and out of control national health care costs, is dropping Phelps? If the executives at Kellog were as good at their jobs as Phelps is at his, every child in America would be obese, and not just the one third that's the case today.
Thursday, February 5, 2009
Saving the Newspaper Business
In the New York Times Opinion section today, there's an article discussing the possibility of micropayments as a source of revenue for newspapers.
Essentially, you'd pay a penny for an article or a nickel for an hour of access to a web site, or something like that, and over time that $30 per month you'd spend would fund that paper's journalistic endeavors. But who's got an extra $30 or $50 or $100 a month to pay for that stuff these days? Not enough people to support all but niche subscription sites.
The key to making the micropayment work is to get the payment from the ISP, not the user. Think about it: Cable companies pay millions of dollars to their content providers like ESPN or the Discovery Channel so that they have those channels to to offer subscribers. Why would we be paying both our ISP AND for the content we can get by getting online?
Since our shortsighted and stupid ISPs would never do this (remember, these were the greedy morons who wanted to charge extra for optimal web surfing speeds), what needs to happen is this:
Google realizes that its quest to organize all the world's information is compromised by a lack of quality investigative reporting and journalism. It also realizes that the current ISPs are greedy and shortsighted. So it commissions (with the blessing of the Obama administration) a nationwide network of high speed wireless service *for free*. At this point, everyone paying $30-$60 per month for high speed access now has extra money to be charged a micropayment calculated by Google.
If you scroll down in the Times article above, you'll see that the primary objection to micropayments is that the user will have to go through the trouble to decide whether a given article or link is worth two cents. That wouldn't be an issue if Google added it up for you and sent you the bill - likely $20-$25 per month, less than you're currently paying for access. Google would also sell far more ads and would be hugely profitable. (In the interest of avoiding a Google monopoly, perhaps another company (Microsoft or someone else could offer wireless access in many areas as well).
Problem solved - Newpapers get their revenue, users still pay the same or less for high speed access, and Google/Microsoft/Yahoo get their cut for administrating it and also by selling ads.
The big loses are the telecom companies, no longer charging us for use of their "pipes".
But they had it coming.
Essentially, you'd pay a penny for an article or a nickel for an hour of access to a web site, or something like that, and over time that $30 per month you'd spend would fund that paper's journalistic endeavors. But who's got an extra $30 or $50 or $100 a month to pay for that stuff these days? Not enough people to support all but niche subscription sites.
The key to making the micropayment work is to get the payment from the ISP, not the user. Think about it: Cable companies pay millions of dollars to their content providers like ESPN or the Discovery Channel so that they have those channels to to offer subscribers. Why would we be paying both our ISP AND for the content we can get by getting online?
Since our shortsighted and stupid ISPs would never do this (remember, these were the greedy morons who wanted to charge extra for optimal web surfing speeds), what needs to happen is this:
Google realizes that its quest to organize all the world's information is compromised by a lack of quality investigative reporting and journalism. It also realizes that the current ISPs are greedy and shortsighted. So it commissions (with the blessing of the Obama administration) a nationwide network of high speed wireless service *for free*. At this point, everyone paying $30-$60 per month for high speed access now has extra money to be charged a micropayment calculated by Google.
If you scroll down in the Times article above, you'll see that the primary objection to micropayments is that the user will have to go through the trouble to decide whether a given article or link is worth two cents. That wouldn't be an issue if Google added it up for you and sent you the bill - likely $20-$25 per month, less than you're currently paying for access. Google would also sell far more ads and would be hugely profitable. (In the interest of avoiding a Google monopoly, perhaps another company (Microsoft or someone else could offer wireless access in many areas as well).
Problem solved - Newpapers get their revenue, users still pay the same or less for high speed access, and Google/Microsoft/Yahoo get their cut for administrating it and also by selling ads.
The big loses are the telecom companies, no longer charging us for use of their "pipes".
But they had it coming.
Can the Problem of Executive Pay Be Reduced to a Logical Fallacy?
It's well known that executive pay has gone up dramatically relative to the wages of ordinary workers the last 20-30 years, but that in and of itself doesn't mean our current system is wrong. It might be politically problematic, and it might seem unfair, but that's a separate question from whether those executives, particularly the CEOs, deserve their comparatively enormous salaries based on value and merit.
It seems the most basic argument in favor of CEOs receiving outsized paychecks is the "but for" one. But for my being here, the company wouldn't have made x billion dollars in profits. If the last CEO were here, it would have made y billion. So I should get a significant share in x-y billion dollars.
First off, it's hard to know for sure what the former CEO would have done, or more pertinently, an average CEO. But assuming the current CEO were correct, and the company made $8 billion instead of $4 billion that year, shouldn't he be entitled to a bonus of some percentage of the $4 billion extra, say 5 percent? If that were the case, he'd be making an extra $200 million.
Assuming for a moment that the company's profits were sustainable, and the CEO's efforts helped foster long-term growth and not merely growth on paper to boost the annual numbers, I'd still argue that the CEO likely does not deserve such a large cut even if the average CEO would have only produced $4 billion in profits.
That's because the CEO is merely a "but for" cause of the company's enhanced earnings, and not by any means the sole or even primary cause. The company was obviously poised to post phenomenal earnings given proper leadership, and the CEO provided that leadership. But had the company not been amenable to such improved growth, the CEO wouldn't have been able to make the difference.
To use a sports analogy - some teams will win a title only if you hire a great coach. And some won't no matter who is coaching. That a great coach takes a capable team to the title doesn't mean the coach is solely responsible. He is a but for cause. Accordingly, while the coach deserves credit and higher pay than a mediocre one, the team he inherited must also be taken into account.
The idea that a particular executive is worth whatever they have to pay him because without him the company would be doing far worse is a false one. The executive would also be doing far worse without a company amenable to such tremendous growth.
It seems the most basic argument in favor of CEOs receiving outsized paychecks is the "but for" one. But for my being here, the company wouldn't have made x billion dollars in profits. If the last CEO were here, it would have made y billion. So I should get a significant share in x-y billion dollars.
First off, it's hard to know for sure what the former CEO would have done, or more pertinently, an average CEO. But assuming the current CEO were correct, and the company made $8 billion instead of $4 billion that year, shouldn't he be entitled to a bonus of some percentage of the $4 billion extra, say 5 percent? If that were the case, he'd be making an extra $200 million.
Assuming for a moment that the company's profits were sustainable, and the CEO's efforts helped foster long-term growth and not merely growth on paper to boost the annual numbers, I'd still argue that the CEO likely does not deserve such a large cut even if the average CEO would have only produced $4 billion in profits.
That's because the CEO is merely a "but for" cause of the company's enhanced earnings, and not by any means the sole or even primary cause. The company was obviously poised to post phenomenal earnings given proper leadership, and the CEO provided that leadership. But had the company not been amenable to such improved growth, the CEO wouldn't have been able to make the difference.
To use a sports analogy - some teams will win a title only if you hire a great coach. And some won't no matter who is coaching. That a great coach takes a capable team to the title doesn't mean the coach is solely responsible. He is a but for cause. Accordingly, while the coach deserves credit and higher pay than a mediocre one, the team he inherited must also be taken into account.
The idea that a particular executive is worth whatever they have to pay him because without him the company would be doing far worse is a false one. The executive would also be doing far worse without a company amenable to such tremendous growth.
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