Benazir Bhutto has been murdered, and I am sorry for her nation's loss.
I saw her as the best hope for Pakistan. Whatever was going to happen, how likely were the nutbars to fall in with a woman prime minister?
She was previously charged with corruption, but somehow the charges never held up under objective scrutiny; when the courts were not being managed by the army, her conviction was overturned.
Now we have a country that is a nuclear power, can't keep control of its own forces and is descending into political chaos.
Benazir Bhutto has been murdered, and the world is so much the worse for it.
Friday, December 28, 2007
Wednesday, December 5, 2007
Nothing But Upside
The Wall Street Journal and the San Francisco Chronicle agree: anything that looks like a mortgage bailout is a bad idea. Both articles draw comparisons with the Japanese banking crisis of the nineties, wherein bad loans were carried on the books, avoiding the recognition they were bad, until they became completely atrocious. Both authors question how admission to the lifeboat will be determined, and both point out the moral hazards. Both articles empathize with the homeowners who have kept current on their mortgages.
However, soon there should be an awakening, because even the homeowners who have been dutifully paying their mortgages have something to lose here: todays foreclosure is tomorrows comp. The popularity of sites like Zillow demonstrate that all the homeowners have one eye on their valuations. Once the homeowning public sniffs out the threat of a large-scale devaluation accelerated by defaults, opinions will swing round in favor of a bailout. It's too good an opportunity to vote ourselves rich.
However, soon there should be an awakening, because even the homeowners who have been dutifully paying their mortgages have something to lose here: todays foreclosure is tomorrows comp. The popularity of sites like Zillow demonstrate that all the homeowners have one eye on their valuations. Once the homeowning public sniffs out the threat of a large-scale devaluation accelerated by defaults, opinions will swing round in favor of a bailout. It's too good an opportunity to vote ourselves rich.
Thursday, November 29, 2007
The Other Shoe
There will be plenty of discussion on health care reform in the next eleven months (only 341 more shopping days until election!), and I believe that a single payer system is inevitable. Yet changes to who pays are only the first and less threatening of the health care problems looming before us. Much worse will be what happens when health care eats the economy, and a single payer system poses risks of accelerating that.
Today our system provides some people a varied baseline level of care in a crazy-quilt matrix of rules, provider networks and payment structures. Access to this level of care is based on employment, preferably with a mid-size or larger employer. There is a social safety net in the form of medicare, which providers hate because the government is fashionably late with the payments.
Providers typically enter into contracts with insurers where the provider will perform services at less than list price. In addition to the business management problems this causes for providers, this leads to ridiculous situations where the only people paying full price for medical services are the uninsured.
Many individuals have no idea how much of the cost of coverage their employer is eating until they have to go out and get their own coverage. People who are self-employed or whose employer does not provide coverage are left twisting in the wind.
Access to coverage in excess of the baseline has been rationed by ability to pay. Is this fair? Compared to what? Here we can meaningfully divide the problem in two: fairness of the baseline and fairness of rationing of care beyond the baseline. A consistent baseline would be more fair. The government thought it had the back-door key to achieving this in the forties, when the current employer-provided system was being worked out. Back then, the economy was all about big companies, and it was assumed that most people would be employed by one. But those assumptions have all gone by the wayside in the past twenty-five years.
A system that offered everyone the same baseline care could address the injustices described by Malcolm Gladwell in his 2005 article. However, the first problem will be locating the baseline. In 1991 Oregon sought permission from the feds to overhaul its health care system (it was denied). The state wanted to broaden access, while at the same time restricting coverage under certain conditions. One change they wanted to make was to refuse to pay for liver transplants for alcoholics. Alcoholics are, in fact, protected under the 1990 Americans with Disabilities Act (ADA), and it is doubtful that it would be legally permissible to refuse to pay for their liver transplants.
The liver transplant example illustrates the moral hazard that Gladwell rails against in his article. His examples are illustrations of the unevenness of the baseline, but the question becomes, where would the baseline be set? The issue is not just one of mean-spiritedness toward the sick; someone has to pay for all this. Creating one giant risk pool of all American citizens and having everyone pay for everyone else increases the likelihood that we will vote ourselves healthy, especially as the baby boomers advance through their sunset years. This is the moral hazard lurking behind health care reform. The hazard is not that poor people will get to have their teeth fixed; it's that a teenager can freely start smoking because society will pay for his lung overhaul in his later years.
Health care will, in an economic sense, always be rationed because it is another domain, like money and time, where resources are limited and wants are not. How do you allocate access to leading-edge cancer treatments that are very expensive? Rationing based on ability to pay is, at least, impersonal and therefore comprehensible. In other forms of rationing, who decides who gets to live and who has to die? Do candidates have to demonstrate need? Worthiness? And by what standard will these be evaluated?
Health care already represents more than 15% of gross domestic product (GDP), and climbing. Despite the sweet seductions of macroeconomics, every dollar of GDP does not represent an equal amount of wealth produced. Two apples are twice as good as one apple. Apples continue being desirable until you approach satiation, where diminishing marginal utility sets in. But health care doesn't work like that. Health care is not a good in the same sense that apples, iPods, back rubs and gallons of gasoline are goods. Health care does not produce wealth the same way that apple farming or gasoline refining produces wealth. Health care also does not increase your standard of living the way a massage does. Doctors, nurses, lab techs and other practitioners certainly earn their money, but if you've had one brain tumor removed very competently, you aren't going to hope to have another so you can experience it a second time.
There is a theoretical upper limit to the portion of the economy that health care can occupy before the economy actually begins to contract, because health care remediates problems more than it increases aggregate wealth (as is also true with auto repairmen and divorce lawyers). Therefore, cost containment is critical to the delivery of more health care to more people, as many proponents of health care reform recognize.
Here is a page authored by two MDs, who recognize "the tendency of bureaucracy to reproduce and amplify itself." Despite making the assertions that "National health insurance could solve the cost-vs-access conflict by slashing bureaucratic waste," the authors offer no specifics of how the risk of bureaucratic expansion would be mitigated.
The current system of health care coverage is a failure. It imposes additional costs on every person employed, reducing job growth, and creates perverse incentives that do not align with the behaviors we want out of economic agents. It needs attention at a national level. But do not lose sight of the need for cost containment, because the problem is waiting right around the corner.
Today our system provides some people a varied baseline level of care in a crazy-quilt matrix of rules, provider networks and payment structures. Access to this level of care is based on employment, preferably with a mid-size or larger employer. There is a social safety net in the form of medicare, which providers hate because the government is fashionably late with the payments.
Providers typically enter into contracts with insurers where the provider will perform services at less than list price. In addition to the business management problems this causes for providers, this leads to ridiculous situations where the only people paying full price for medical services are the uninsured.
Many individuals have no idea how much of the cost of coverage their employer is eating until they have to go out and get their own coverage. People who are self-employed or whose employer does not provide coverage are left twisting in the wind.
Access to coverage in excess of the baseline has been rationed by ability to pay. Is this fair? Compared to what? Here we can meaningfully divide the problem in two: fairness of the baseline and fairness of rationing of care beyond the baseline. A consistent baseline would be more fair. The government thought it had the back-door key to achieving this in the forties, when the current employer-provided system was being worked out. Back then, the economy was all about big companies, and it was assumed that most people would be employed by one. But those assumptions have all gone by the wayside in the past twenty-five years.
A system that offered everyone the same baseline care could address the injustices described by Malcolm Gladwell in his 2005 article. However, the first problem will be locating the baseline. In 1991 Oregon sought permission from the feds to overhaul its health care system (it was denied). The state wanted to broaden access, while at the same time restricting coverage under certain conditions. One change they wanted to make was to refuse to pay for liver transplants for alcoholics. Alcoholics are, in fact, protected under the 1990 Americans with Disabilities Act (ADA), and it is doubtful that it would be legally permissible to refuse to pay for their liver transplants.
The liver transplant example illustrates the moral hazard that Gladwell rails against in his article. His examples are illustrations of the unevenness of the baseline, but the question becomes, where would the baseline be set? The issue is not just one of mean-spiritedness toward the sick; someone has to pay for all this. Creating one giant risk pool of all American citizens and having everyone pay for everyone else increases the likelihood that we will vote ourselves healthy, especially as the baby boomers advance through their sunset years. This is the moral hazard lurking behind health care reform. The hazard is not that poor people will get to have their teeth fixed; it's that a teenager can freely start smoking because society will pay for his lung overhaul in his later years.
Health care will, in an economic sense, always be rationed because it is another domain, like money and time, where resources are limited and wants are not. How do you allocate access to leading-edge cancer treatments that are very expensive? Rationing based on ability to pay is, at least, impersonal and therefore comprehensible. In other forms of rationing, who decides who gets to live and who has to die? Do candidates have to demonstrate need? Worthiness? And by what standard will these be evaluated?
Health care already represents more than 15% of gross domestic product (GDP), and climbing. Despite the sweet seductions of macroeconomics, every dollar of GDP does not represent an equal amount of wealth produced. Two apples are twice as good as one apple. Apples continue being desirable until you approach satiation, where diminishing marginal utility sets in. But health care doesn't work like that. Health care is not a good in the same sense that apples, iPods, back rubs and gallons of gasoline are goods. Health care does not produce wealth the same way that apple farming or gasoline refining produces wealth. Health care also does not increase your standard of living the way a massage does. Doctors, nurses, lab techs and other practitioners certainly earn their money, but if you've had one brain tumor removed very competently, you aren't going to hope to have another so you can experience it a second time.
There is a theoretical upper limit to the portion of the economy that health care can occupy before the economy actually begins to contract, because health care remediates problems more than it increases aggregate wealth (as is also true with auto repairmen and divorce lawyers). Therefore, cost containment is critical to the delivery of more health care to more people, as many proponents of health care reform recognize.
Here is a page authored by two MDs, who recognize "the tendency of bureaucracy to reproduce and amplify itself." Despite making the assertions that "National health insurance could solve the cost-vs-access conflict by slashing bureaucratic waste," the authors offer no specifics of how the risk of bureaucratic expansion would be mitigated.
The current system of health care coverage is a failure. It imposes additional costs on every person employed, reducing job growth, and creates perverse incentives that do not align with the behaviors we want out of economic agents. It needs attention at a national level. But do not lose sight of the need for cost containment, because the problem is waiting right around the corner.
Tuesday, November 27, 2007
I Told You Once
I once worked with a software development manager; let's call him Ralph. He was highly placed within the company, not a mere supervisor. Among Ralph's many endearing habits, he would send emails with terse answers to questions.
Want to know where a detailed description of a program was living? "That's in the most recent project ABC functional overview." It's your problem to find where that lives. Off you go to the shared drive. Here is a copy of the project ABC functional overview from five months ago. Is this the most recent? Don't ask Ralph; he just won't reply. In his world, if you look in the right place, which is the place he would put the document, it will be obvious. But don't get it wrong either, because Ralph will let you know how incompetent you are in front of whomever happens to be in the meeting.
Compounding this, he often began sentences with "Again, ..." Everyone in the room felt like he was saying, "Why is it necessary for me to tell you a second time, you blithering idiot?"
Ralph was not just a middle manager, he was also the Lord High Fixer for a lot of the company software. The Lord High Fixer needs an unbroken block of time to concentrate on the nasty problem only he can solve. At the same time, everyone knows to go to the Lord High Fixer to get information, much of which is not publicly available because the Lord High Fixer hoarded it. So the Lord High Fixer develops coping strategies to avoid having his job turn into Chief Answer Person, and making the experience of asking him a question entirely unpleasant is an oft-traveled route (And why, you ask, is a middle manager also doing hands-on work himself? Ah, that's a subject for another post).
Having a software background myself, I can also say there's something appealing about packing as much information into as few words as possible. I have fallen into this error myself, and it drives the Princess of Darkness batshit insane when I do. It really irritates me when an intellegent person, such as Princess, doesn't pick up my meaning. But when you're on the receiving end of this, you feel like you're being told you're stupid. I resolve today to cease this behavior.
Yes, it's tiresome when you are trying to solve a technical problem and you get bombed with requests for information. It is also tiresome when you have a client breathing down your neck for information and some dipwad expects you to parse his statements and retrace all the steps he took to find it rather than just make it easy for you to get the answer.
So how about this compromise: the people asking for information will make a reasonable attempt to look it up before bothering other people, and the person having information will, when asked, be patient and reasonably detailed in giving an answer or a pointer to an answer.
There are enough people outside of the company who can make your workday suck. We don't need co-workers making it worse.
Want to know where a detailed description of a program was living? "That's in the most recent project ABC functional overview." It's your problem to find where that lives. Off you go to the shared drive. Here is a copy of the project ABC functional overview from five months ago. Is this the most recent? Don't ask Ralph; he just won't reply. In his world, if you look in the right place, which is the place he would put the document, it will be obvious. But don't get it wrong either, because Ralph will let you know how incompetent you are in front of whomever happens to be in the meeting.
Compounding this, he often began sentences with "Again, ..." Everyone in the room felt like he was saying, "Why is it necessary for me to tell you a second time, you blithering idiot?"
Ralph was not just a middle manager, he was also the Lord High Fixer for a lot of the company software. The Lord High Fixer needs an unbroken block of time to concentrate on the nasty problem only he can solve. At the same time, everyone knows to go to the Lord High Fixer to get information, much of which is not publicly available because the Lord High Fixer hoarded it. So the Lord High Fixer develops coping strategies to avoid having his job turn into Chief Answer Person, and making the experience of asking him a question entirely unpleasant is an oft-traveled route (And why, you ask, is a middle manager also doing hands-on work himself? Ah, that's a subject for another post).
Having a software background myself, I can also say there's something appealing about packing as much information into as few words as possible. I have fallen into this error myself, and it drives the Princess of Darkness batshit insane when I do. It really irritates me when an intellegent person, such as Princess, doesn't pick up my meaning. But when you're on the receiving end of this, you feel like you're being told you're stupid. I resolve today to cease this behavior.
Yes, it's tiresome when you are trying to solve a technical problem and you get bombed with requests for information. It is also tiresome when you have a client breathing down your neck for information and some dipwad expects you to parse his statements and retrace all the steps he took to find it rather than just make it easy for you to get the answer.
So how about this compromise: the people asking for information will make a reasonable attempt to look it up before bothering other people, and the person having information will, when asked, be patient and reasonably detailed in giving an answer or a pointer to an answer.
There are enough people outside of the company who can make your workday suck. We don't need co-workers making it worse.
Monday, November 26, 2007
Life Imitates Art (Badly)
Sunday morning is filled with political discussion shows. Sure, now that there are all the news channels of various stripes on cable, you can get your fix 24/7. But Sunday morning is when the shows reign. While you're there, you can watch the experts handicapping the field.
Sunday afternoon and evening, in the fall, are all about pro football. You can learn about the strategies and the lives of the players. Now that ESPN has made Monday Night Football primarily an outlet to flog Disney content, Sunday is where football is at. While you're there, you can watch the experts handicapping the field.
It's an easy transition from political coverage to sports coverage, because they are performed so similarly. Discussions of strategies and tactics, life stories, who has momentum. Keith Olbermann slides effortlessly from one to the other.
Whatever this contributes to football, sports are a form of entertainment. Politics, however, is more than that. Politics is how we make decisions as a people, and it's hard to see the kind of data made available being informative to the citizenry.
The choice a candidate makes whether or not to advocate immigration reform is analyzed in the same way as the choice a head coach makes whether or not to go into the cover two: What are it's strengths, it's weaknesses? What voters does the position attract? Whom will it alienate? It's all about the tactics, and nothing about the ethics.
Olbermann and others like him attempt to address this in their shows, but by giving us pre-formed opinions. They'll make up your mind for you. That's not what I want.
I want to understand the issues, not hear influential people's opinions on the issues. I'm not interested in the tradeoffs between voting blocs, but the tradeoffs between consequences. I'm more interested in how a candidate will govern than how a candidate will win.
The commentators are knowledgeable enough to tell us when a president is being sent legislation as veto bait or when a candidate is trying to paint his opponent an unpopular color. They could just as easily use their knowledge to defuse these tactics, to call them out for what they are.
We can't afford to have politics viewed as another form of entertainment. It's not just a game. It's where the rules are made by which we live our lives.
Sunday afternoon and evening, in the fall, are all about pro football. You can learn about the strategies and the lives of the players. Now that ESPN has made Monday Night Football primarily an outlet to flog Disney content, Sunday is where football is at. While you're there, you can watch the experts handicapping the field.
It's an easy transition from political coverage to sports coverage, because they are performed so similarly. Discussions of strategies and tactics, life stories, who has momentum. Keith Olbermann slides effortlessly from one to the other.
Whatever this contributes to football, sports are a form of entertainment. Politics, however, is more than that. Politics is how we make decisions as a people, and it's hard to see the kind of data made available being informative to the citizenry.
The choice a candidate makes whether or not to advocate immigration reform is analyzed in the same way as the choice a head coach makes whether or not to go into the cover two: What are it's strengths, it's weaknesses? What voters does the position attract? Whom will it alienate? It's all about the tactics, and nothing about the ethics.
Olbermann and others like him attempt to address this in their shows, but by giving us pre-formed opinions. They'll make up your mind for you. That's not what I want.
I want to understand the issues, not hear influential people's opinions on the issues. I'm not interested in the tradeoffs between voting blocs, but the tradeoffs between consequences. I'm more interested in how a candidate will govern than how a candidate will win.
The commentators are knowledgeable enough to tell us when a president is being sent legislation as veto bait or when a candidate is trying to paint his opponent an unpopular color. They could just as easily use their knowledge to defuse these tactics, to call them out for what they are.
We can't afford to have politics viewed as another form of entertainment. It's not just a game. It's where the rules are made by which we live our lives.
Thursday, November 22, 2007
A Special Providence
"A special Providence protects fools, drunkards, small children and the United States of America." — Otto, Prince of Bismarck
It's true, and if you don't believe it, here's an example: President Franklin Roosevelt was a sick man in 1944. He held on for another year, and we got Harry Truman. Had he died in 1944, we would have been looking at Henry Wallace, admirer of the Soviet Union, as president.
We live in a nation that is rich enough for people to worry about bullshit like how animals feel about being killed and eaten. I doubt they like it. But in nations where people are living hand-to-mouth, no one cares about how the animals feel.
The Soviet Union had to build walls to keep people from leaving. Some US citizens want to build walls to keep people from coming here. We should be embarrassed about building a wall across the Mexican border, but it is also a powerful statement that so many people want to come here.
We are the beneficiaries of the traditions of England: rule of law, empiricism, property, contracts, government accountability. It is our traditions, not land, population or resources, that make our economy what it is. We can sow today and reasonably expect to reap tomorrow.
Sure, we have our share of unfairness and futility. We have people coasting and other people carrying them. We have people who work hard and live in poverty. We have people who suffer through no fault of their own. Everybody does.
We have a total inability to have a logical public discussion of ideas without lapsing into ad hominem attacks and abuse. But, whatever side of the political divide you're on, you don't have to worry about the secret police coming to your door the way my father did.
If you live in this country, you don't expect to see the inside of a working concentration camp. Neither do you expect famine or to bury a child of your own.
We have troops in foreign lands, dying for causes you may or may not agree with. But they die at a lower rate than soldiers of other countries, because we are rich enough to substitute technology and firepower for people.
The nutbars of the world hate us because we're here. It's convenient for them to blame all their shortcomings on us. Their hate means nothing; consider the source. For a lot of other people in the world, we are the City on the Hill.
We have limitations, and we need to take these limitations seriously. Most of the entries in this blog will include discussions of current problems. This entry is to give thanks for living in the United States of America.
It's true, and if you don't believe it, here's an example: President Franklin Roosevelt was a sick man in 1944. He held on for another year, and we got Harry Truman. Had he died in 1944, we would have been looking at Henry Wallace, admirer of the Soviet Union, as president.
We live in a nation that is rich enough for people to worry about bullshit like how animals feel about being killed and eaten. I doubt they like it. But in nations where people are living hand-to-mouth, no one cares about how the animals feel.
The Soviet Union had to build walls to keep people from leaving. Some US citizens want to build walls to keep people from coming here. We should be embarrassed about building a wall across the Mexican border, but it is also a powerful statement that so many people want to come here.
We are the beneficiaries of the traditions of England: rule of law, empiricism, property, contracts, government accountability. It is our traditions, not land, population or resources, that make our economy what it is. We can sow today and reasonably expect to reap tomorrow.
Sure, we have our share of unfairness and futility. We have people coasting and other people carrying them. We have people who work hard and live in poverty. We have people who suffer through no fault of their own. Everybody does.
We have a total inability to have a logical public discussion of ideas without lapsing into ad hominem attacks and abuse. But, whatever side of the political divide you're on, you don't have to worry about the secret police coming to your door the way my father did.
If you live in this country, you don't expect to see the inside of a working concentration camp. Neither do you expect famine or to bury a child of your own.
We have troops in foreign lands, dying for causes you may or may not agree with. But they die at a lower rate than soldiers of other countries, because we are rich enough to substitute technology and firepower for people.
The nutbars of the world hate us because we're here. It's convenient for them to blame all their shortcomings on us. Their hate means nothing; consider the source. For a lot of other people in the world, we are the City on the Hill.
We have limitations, and we need to take these limitations seriously. Most of the entries in this blog will include discussions of current problems. This entry is to give thanks for living in the United States of America.
Thursday, November 15, 2007
First Penguin
"It's good to poke the fire with someone else's hand" — Yiddish proverb
In previous times, I worked for a company that paid at least 10% of your compensation as a year-end bonus, with more at risk as you went up the ladder. This company also had a quarterly conference call with all locations, led by the CEO.
So in the fourth quarter conference call, being the person I am, I asked if we were still on track to get our bonuses. The answer was yes. I didn't really expect any other answer; I asked the question so that our host would know that someone cared enough about bonuses actually being distributed to ask.
After the call, a co-worker approached me. Let's call her Kathy. She had many more years with the company than I. Apparently she had an experience where the company had met the goals, but — no bonus! Kathy said, "You asked the wrong question. You should have asked whether bonuses would be paid for this year."
My first thought was: what was the likelihood that the CEO would tie himself to the mast and forego the motivational opportunity to have a big end-of-year push to get the bonus? "Hey, let's coast; the CEO committed to paying bonuses!" The question I asked allowed for a backloaded annual forecast, which I am sure we had. I had put considerable care into how I worded it.
But it was my second thought that I went with. "Kathy, you've got a tongue in your mouth. Why didn't you ask?"
Kathy wanted no part of sticking her neck out in public. But she felt free to egg someone else on.
When a group of penguins approaches the sea, they don't know if a shark is waiting for them. So they push one of their own number in first. If the unlucky penguin doesn't get eaten, everyone else knows it's safe to go in the water.
Leadership includes voicing what no one else will, and I have no problem with that. But I'm not into being used by cowards whose policy is to hang to the rear on every issue. I don't want to volunteer to be the first penguin anymore.
In previous times, I worked for a company that paid at least 10% of your compensation as a year-end bonus, with more at risk as you went up the ladder. This company also had a quarterly conference call with all locations, led by the CEO.
So in the fourth quarter conference call, being the person I am, I asked if we were still on track to get our bonuses. The answer was yes. I didn't really expect any other answer; I asked the question so that our host would know that someone cared enough about bonuses actually being distributed to ask.
After the call, a co-worker approached me. Let's call her Kathy. She had many more years with the company than I. Apparently she had an experience where the company had met the goals, but — no bonus! Kathy said, "You asked the wrong question. You should have asked whether bonuses would be paid for this year."
My first thought was: what was the likelihood that the CEO would tie himself to the mast and forego the motivational opportunity to have a big end-of-year push to get the bonus? "Hey, let's coast; the CEO committed to paying bonuses!" The question I asked allowed for a backloaded annual forecast, which I am sure we had. I had put considerable care into how I worded it.
But it was my second thought that I went with. "Kathy, you've got a tongue in your mouth. Why didn't you ask?"
Kathy wanted no part of sticking her neck out in public. But she felt free to egg someone else on.
When a group of penguins approaches the sea, they don't know if a shark is waiting for them. So they push one of their own number in first. If the unlucky penguin doesn't get eaten, everyone else knows it's safe to go in the water.
Leadership includes voicing what no one else will, and I have no problem with that. But I'm not into being used by cowards whose policy is to hang to the rear on every issue. I don't want to volunteer to be the first penguin anymore.
Monday, November 12, 2007
The Curse of Competence
It seems so simple. One person hires others to break off specialized tasks so that the group that is formed can do more than one person alone. Why does it have to make so many people ready for rubber rooms?
I had a long conversation yesterday with the Princess of Darkness about how hard it is to get stuff done in Corporate America. She can't stand it, and scaled back her participation rather than continue to subject herself to the mind games. She was taking things like due dates and organizational goals seriously and expecting others she worked with to do likewise (and, needless to say, a woman pushing on men to get stuff done goes over really well).
The Princess talks often about what she calls "the curse of competence": when you're compentent, you get punished by the people who aren't. You get more work to do, and you get all kinds of pushback when you expect competence out of others.
Sometimes it seems as if an implicit deal is being offered: I won't call you on your failings if you will overlook mine. It's very comfortable, good for everyone's self-esteem and everyone gets paid. Unfortunately, it is the recipe for a has-been economy.
C. Northcote Parkinson, who is famous for having said, "work expands to fill the time allowed for it's completion," also described an organizational condition he called Injelititis, and defined as five parts incompetence and three parts jealousy. His prescribed remedy was a stiff dose of intolerance before it's too late. Not the kind of intolerance directed against people who are different, but an intolerance for the shoddy, the half-assed and the indifferent.
I don't think we need to get back to the time when managers docked their employees for the mistakes they made. This would be management through fear and the limitations of this are well-documented. But we need some kind of standards and accountability. We need the people who really pull the weight to get rewarded. We need fewer places for empty suits to hide.
I had a long conversation yesterday with the Princess of Darkness about how hard it is to get stuff done in Corporate America. She can't stand it, and scaled back her participation rather than continue to subject herself to the mind games. She was taking things like due dates and organizational goals seriously and expecting others she worked with to do likewise (and, needless to say, a woman pushing on men to get stuff done goes over really well).
The Princess talks often about what she calls "the curse of competence": when you're compentent, you get punished by the people who aren't. You get more work to do, and you get all kinds of pushback when you expect competence out of others.
Sometimes it seems as if an implicit deal is being offered: I won't call you on your failings if you will overlook mine. It's very comfortable, good for everyone's self-esteem and everyone gets paid. Unfortunately, it is the recipe for a has-been economy.
C. Northcote Parkinson, who is famous for having said, "work expands to fill the time allowed for it's completion," also described an organizational condition he called Injelititis, and defined as five parts incompetence and three parts jealousy. His prescribed remedy was a stiff dose of intolerance before it's too late. Not the kind of intolerance directed against people who are different, but an intolerance for the shoddy, the half-assed and the indifferent.
I don't think we need to get back to the time when managers docked their employees for the mistakes they made. This would be management through fear and the limitations of this are well-documented. But we need some kind of standards and accountability. We need the people who really pull the weight to get rewarded. We need fewer places for empty suits to hide.
Monday, November 5, 2007
No Fair!
Todays question of the day in the Wall Street Journal: How much do home prices in your neighborhood need to fall before they are fair. I had thought better of the Journal than to ask an economic question using the word "fair". Is this the footprint of the Murdoch regime?
What is "fair" beats my pair of jacks, but what is affordable is clearly measurable. Here is a link to data collected by demographia.com showing change in affordability in major markets from 1995 to 2005. It's a simple metric based on the ability of a household earning the median income for a metro area to afford the median house in the same metro area.
Look, for example, at Milwaukee. In 1995, the median home price was 1.9 times the median income. A household at the median income can qualify for a mortgage for 1.9 times income with the minimum down. By 2005, the median home prices is 4.2 times the median income. Few conventional lenders are going to lend 4.2 times income.
The subprime upchuck is but a taste of what is to come here. Conventional wisdom says that house prices will always be going up because the number of people is increasing and the amount of land is not. However, this is based on the implicit assumption that the increasing number of people can qualify for financing. Once this ceases to be true, the conventional wisdom no longer works.
If you can only sell to people who are walking around with either high incomes or substantial down payments, that is a much smaller buyer population to compete for the same property. And this implies a lot of people with their noses pressed to the glass.
What does this mean? It depends on what kind of nation you want to have. This Christmas, while watching It's a Wonderful Life, notice the implicit assumptions about the kind of community you get when people are homeowners as contrasted with the community of renters.
What is "fair" beats my pair of jacks, but what is affordable is clearly measurable. Here is a link to data collected by demographia.com showing change in affordability in major markets from 1995 to 2005. It's a simple metric based on the ability of a household earning the median income for a metro area to afford the median house in the same metro area.
Look, for example, at Milwaukee. In 1995, the median home price was 1.9 times the median income. A household at the median income can qualify for a mortgage for 1.9 times income with the minimum down. By 2005, the median home prices is 4.2 times the median income. Few conventional lenders are going to lend 4.2 times income.
The subprime upchuck is but a taste of what is to come here. Conventional wisdom says that house prices will always be going up because the number of people is increasing and the amount of land is not. However, this is based on the implicit assumption that the increasing number of people can qualify for financing. Once this ceases to be true, the conventional wisdom no longer works.
If you can only sell to people who are walking around with either high incomes or substantial down payments, that is a much smaller buyer population to compete for the same property. And this implies a lot of people with their noses pressed to the glass.
What does this mean? It depends on what kind of nation you want to have. This Christmas, while watching It's a Wonderful Life, notice the implicit assumptions about the kind of community you get when people are homeowners as contrasted with the community of renters.
Friday, November 2, 2007
What to Do about Iraq?
The Princess of Darkness, who is also my wife, has a simple solution for Iraq: make it a big smoking hole in the ground. Fortunately, I took the keys to the nukes away from her. Still, I understand her frustration. There seems to be no light at the end of the tunnel. Our troops are dying to stabilize their country, while their leaders go on vacation.
I believe the majority of people who live over there just want to get on with their lives. More than coincidentally, they are not the people with the guns. The people with the guns want to make trouble for everyone else because it beats working. The Sunnis with the guns had years of experience doing this and they don't propose to stop now. The Shi'a with the guns had years of being on the receiving end and now they want their payback. The Kurds with the guns want to gather up the Kurds next door, which has Turkey freaking out.
Iraq is not a nation. It is an arbitrary piece of sand marked off after the First World War to balance British and French spheres of influence. Most people have more allegiance to their clan and, except for the Kurds, their sect of Islam than toward the Iraqi state.
Iraq has no rule of law: power flows from the barrel of a gun. For over twenty years they were ruled by a murderous kleptocracy that could only stay in power by keeping the loot flowing. When the Baath regime had exhausted its opportunities to shake down its own citizens, it turned its attention to the neighbors.
We should have knocked Saddam Hussein over after the First Gulf War. He was a destabilizing influence, and it is not in our interest to have instability in the world. We didn't because we knew it was going to turn out something like this. But by failing to act back in 1991, we guaranteed it would be worse when the eventual day of reckoning rolled around.
As reported in Frontline, Paul Bremer came in and, steered by Paul Wolfowitz and Douglas Feith, promptly started screwing up. He issued orders for de-Ba'athification and demobilization. So now we have a whole bunch of people, upwards of 50,000, that we've frozen out of our plans for Iraqi society and they have gone home with their guns. It was as if we had given Robert Morgenthau free rein in Germany in '45.
Now we're probably well past the point where we can reasonably expect to put Humpty Dumpty back together again and make a nation out of this. We can't partition it because then Iran wins and the Turks will lose their shit. We have soldiers dying because a bunch of people hate us for not letting them kill each other. If we pull out, we will leave behind a petri dish of bad news gangs eager to export trouble all over the region. What do we do?
We make Iraq an American protectorate. Just like the Philippines in 1899, and with considerably more empirical evidence to support it, the people here are not ready for self-government. It is harmful to American interests to have an anarchy in the middle of the region. So we need to run the place for them, indefinitely.
Yes, there will be all kinds of uproar. Many Moslems will claim that we planned this all along, to expropriate the oil. Let them say it. Most of them hate us anyway, and will interpret everything we do in the worst possible light. Fine. We are what you thought we were.
Our national embarrassment, Jimmy Carter, will give us a scolding. Have another Nobel Prize, President Carter. Now, with all due respect, shut up.
There was a time in our history when we didn't get our boxers in a bunch just because someone else might not like what we did. We need to reconnect with that state of mind.
I believe the majority of people who live over there just want to get on with their lives. More than coincidentally, they are not the people with the guns. The people with the guns want to make trouble for everyone else because it beats working. The Sunnis with the guns had years of experience doing this and they don't propose to stop now. The Shi'a with the guns had years of being on the receiving end and now they want their payback. The Kurds with the guns want to gather up the Kurds next door, which has Turkey freaking out.
Iraq is not a nation. It is an arbitrary piece of sand marked off after the First World War to balance British and French spheres of influence. Most people have more allegiance to their clan and, except for the Kurds, their sect of Islam than toward the Iraqi state.
Iraq has no rule of law: power flows from the barrel of a gun. For over twenty years they were ruled by a murderous kleptocracy that could only stay in power by keeping the loot flowing. When the Baath regime had exhausted its opportunities to shake down its own citizens, it turned its attention to the neighbors.
We should have knocked Saddam Hussein over after the First Gulf War. He was a destabilizing influence, and it is not in our interest to have instability in the world. We didn't because we knew it was going to turn out something like this. But by failing to act back in 1991, we guaranteed it would be worse when the eventual day of reckoning rolled around.
As reported in Frontline, Paul Bremer came in and, steered by Paul Wolfowitz and Douglas Feith, promptly started screwing up. He issued orders for de-Ba'athification and demobilization. So now we have a whole bunch of people, upwards of 50,000, that we've frozen out of our plans for Iraqi society and they have gone home with their guns. It was as if we had given Robert Morgenthau free rein in Germany in '45.
Now we're probably well past the point where we can reasonably expect to put Humpty Dumpty back together again and make a nation out of this. We can't partition it because then Iran wins and the Turks will lose their shit. We have soldiers dying because a bunch of people hate us for not letting them kill each other. If we pull out, we will leave behind a petri dish of bad news gangs eager to export trouble all over the region. What do we do?
We make Iraq an American protectorate. Just like the Philippines in 1899, and with considerably more empirical evidence to support it, the people here are not ready for self-government. It is harmful to American interests to have an anarchy in the middle of the region. So we need to run the place for them, indefinitely.
Yes, there will be all kinds of uproar. Many Moslems will claim that we planned this all along, to expropriate the oil. Let them say it. Most of them hate us anyway, and will interpret everything we do in the worst possible light. Fine. We are what you thought we were.
Our national embarrassment, Jimmy Carter, will give us a scolding. Have another Nobel Prize, President Carter. Now, with all due respect, shut up.
There was a time in our history when we didn't get our boxers in a bunch just because someone else might not like what we did. We need to reconnect with that state of mind.
Thursday, November 1, 2007
Litte Green Pieces of Paper
"The best way to destroy the capitalist system is to debauch the currency." — V. Lenin
There are only three ways to finance government:
Borrowing can only be taken so far. Debt service hovers around 16% of government outlays. It's non-discretionary — or, technically, you can only choose not to pay it once.
Printing is subtle. For a while, it works — until people start getting wise and building price increases into their plans. This is what happened in the seventies.
Printing creates winners and losers just like taxation does. Different populations of winners and losers, to be sure. People on fixed incomes lose. People holding assets that are not dollar-denominated, such as real estate, win. Hmm, real estate ...
The US government has printed its way out of every debt since the Civil War. Every Treasury Secretary and Federal Reserve Chairman has to walk a line, being careful not to create expectations of inflation, which would turn the world financial markets upside down, while constantly testing the waters to see how much inflation the financial system is prepared to tolerate.
A direct bailout to solve the real estate mess is a political non-starter. While it would be painted as an effort to help Manny and Maria, who just bought a house with a subprime mortgage, keep a roof over their heads, everyone with any sense knows the primary beneficiaries would be real estate speculators who overdosed on "Flip This House." But if you just inflate the currency enough, the asset value of the property goes up while the liability value of the mortgage stays the same. So now we have a new class of winners, in addition to the feds, who have a stake in seeing the currency inflated.
When the Democrats win in 2008, expect to see real pressure on the Fed to conduct open market operations to expand the monetary base [= print money].
Yeah, if I ran an oil-producing nation, I'd want to be paid in euros, too.
There are only three ways to finance government:
- Taxation
- Borrowing
- Printing
Borrowing can only be taken so far. Debt service hovers around 16% of government outlays. It's non-discretionary — or, technically, you can only choose not to pay it once.
Printing is subtle. For a while, it works — until people start getting wise and building price increases into their plans. This is what happened in the seventies.
Printing creates winners and losers just like taxation does. Different populations of winners and losers, to be sure. People on fixed incomes lose. People holding assets that are not dollar-denominated, such as real estate, win. Hmm, real estate ...
The US government has printed its way out of every debt since the Civil War. Every Treasury Secretary and Federal Reserve Chairman has to walk a line, being careful not to create expectations of inflation, which would turn the world financial markets upside down, while constantly testing the waters to see how much inflation the financial system is prepared to tolerate.
A direct bailout to solve the real estate mess is a political non-starter. While it would be painted as an effort to help Manny and Maria, who just bought a house with a subprime mortgage, keep a roof over their heads, everyone with any sense knows the primary beneficiaries would be real estate speculators who overdosed on "Flip This House." But if you just inflate the currency enough, the asset value of the property goes up while the liability value of the mortgage stays the same. So now we have a new class of winners, in addition to the feds, who have a stake in seeing the currency inflated.
When the Democrats win in 2008, expect to see real pressure on the Fed to conduct open market operations to expand the monetary base [= print money].
Yeah, if I ran an oil-producing nation, I'd want to be paid in euros, too.
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