We now have completed three weeks of the Federal make work summer jobs program that was part of the stimulus package. Frick and Frack, the original two hires, have both flown the coop. Frack stopped showing up last Monday. Frick waited until last Wednesday to let us know that he was quitting the program.
So we went back to the well, and requested two more summer hires. After all, the grant money has to be spent. Let’s call the two new guys Heckyl and Jeckyl.
Heckyl came in last Wednesday and worked one day. He then had some kind of family emergency, and called in to let us know that he was going to skip Thursday. For regular hires, missing your second day of work is not a prescription for long employment, but Heckyl is only a part time summer hire, so what the heck.
Jeckyl stopped in last Thursday for a quick orientation, and was told to report to work Monday morning.
Fast forward to Monday morning. Wonder of wonders, Heckyl actually came back to go to work. Alas, Jeckyl was a no show. He probably developed a vision problem over the weekend: he just couldn’t see coming in to work.
This program is supposed to be reserved for the economically disadvantaged, job seekers between the age of 18 to 24. It’s easy to see why these jacklegs are in the economically disadvantaged category. When you only work a few days before quitting a job, it’s hard to get ahead in life. Even with the Federal government guaranteeing their paycheck, these clowns can’t hold a job long enough to get any usable experience.
This whole experience so far illustrates one of my general rules for predicting behavior:
Everyone wants a paycheck. Most people want a job. Some people want to work for a living.
So, we’ve put in a request for a new Jeckyl. We’ll call him Jeckyl II. I’ve a sneaking suspicion that we’ll be on to Tweedledee and Tweedledum before the summer is over.
Monday, June 29, 2009
Monday, June 22, 2009
Summer Jobs II
Frick and Frack, the two summer temps hired through the stimulus package make-work jobs program, have finished their second week of employment.
We can already see differences between the two. We started out knowing that due to the lack of training and experience, they would be about half worthless. For Frick, however, the dial has slid over to about 95% worthless. In two weeks he has left early or come in late four times. If he was a regular hire, that alone would be enough to get him shown the door. But he also has a propensity to leave a job half done. When all you are asked to do is sweep out a warehouse, to do the job poorly doesn’t speak well to your energy or enthusiasm.
One of the supervisors in the plant suggested that by the end of week three, we would have to fire Frick. “But he’s free labor,” I protested. “You get what you pay for,” came the response.
Frack, on the other hand, seems to work hard at whatever task he is assigned. Unfortunately, he didn’t show up for work this morning. Nor did he call in. The combination of the two usually indicates that someone has voted with their feet, and has resigned their position. This is actually superior to the more common approach of quitting work, but continuing to show up and draw a paycheck.
Anyway, we called the agency administering the make-work summer jobs grant, and asked them to call Frack and verify whether he was coming back or not. If he has quit, they promised to find a replacement, because “we have to spend the money.”
If they are starting to worry about using all of the money from the grant, and it is only week three, do you think we’re the only workplace having trouble keeping these guys on the job? It makes you wonder what the hiring criteria were for this program.
Sometimes you get what you pay for. Sometimes you pay for something, and you get nothing in return.
We can already see differences between the two. We started out knowing that due to the lack of training and experience, they would be about half worthless. For Frick, however, the dial has slid over to about 95% worthless. In two weeks he has left early or come in late four times. If he was a regular hire, that alone would be enough to get him shown the door. But he also has a propensity to leave a job half done. When all you are asked to do is sweep out a warehouse, to do the job poorly doesn’t speak well to your energy or enthusiasm.
One of the supervisors in the plant suggested that by the end of week three, we would have to fire Frick. “But he’s free labor,” I protested. “You get what you pay for,” came the response.
Frack, on the other hand, seems to work hard at whatever task he is assigned. Unfortunately, he didn’t show up for work this morning. Nor did he call in. The combination of the two usually indicates that someone has voted with their feet, and has resigned their position. This is actually superior to the more common approach of quitting work, but continuing to show up and draw a paycheck.
Anyway, we called the agency administering the make-work summer jobs grant, and asked them to call Frack and verify whether he was coming back or not. If he has quit, they promised to find a replacement, because “we have to spend the money.”
If they are starting to worry about using all of the money from the grant, and it is only week three, do you think we’re the only workplace having trouble keeping these guys on the job? It makes you wonder what the hiring criteria were for this program.
Sometimes you get what you pay for. Sometimes you pay for something, and you get nothing in return.
Friday, June 19, 2009
Iran's "Election"
Iran held what was ostensibly an election for President last week. The two main candidates were Mahmoud Ahmadinejad, the incumbent, and Mir Hossein Mousavi, a more moderate politician. Mr. Ahmadinejad was declared the victor.
The thing is, Ahmadinejad was declared the victor before the vote count was finished. And the announced vote tallies show him winning by a landslide, drubbing Mr. Mousavi by a margin of two to one. This despite polling that shows Ahmadinejad being increasingly unpopular, and support for Mousavi growing in the run up to the election.
So it looks like the election was stolen. Violent street protests have ensued, with the security services not being shy about bludgeoning and even killing the protestors.
Now, from an American perspective, I’m not sure it really matters who the President of Iran is. In Iran’s theocracy, real power resides with the Revolutionary council, a group of twelve Islamic mullahs. The Council has to approve the candidates before they can even appear on the ballot. So in that sense, both Ahmadinejad and Mousavi are products of the system, tools of the ruling clerics.
Here’s what scares me about the situation. Iran is enriching uranium so that they can build atomic bombs. This is perceived by most Westerners as adverse to our interests and destabilizing to the Middle East. The US and our allies are trying to deter Iran from pursuing this policy of pursuing nuclear ambitions.
The problem is that all of our tools diplomacy, both hard and soft, assume that the Iran state has a government that acts as a rational player. They don’t have to be reasonable, but they have to be sane. Sane men will not knowingly pursue policies that damage their own interests, and will pursue policies that enhance their interests. All of the carrots and sticks in the international system are based on that principle.
If the government of Iran is not rational, that is very frightening. Give insane men plutonium, and anything could happen. It is very difficult to deter insane men.
This brings me back to their Presidential campaign. The Iranians staged a major election, with months of campaigning. Then on election day, the whole process was revealed to be a sham. The election wasn’t just stolen. It was blatently, obviously stolen. It was stolen in a way that enraged the opposition, and sparked violence in the streets.
Now, that’s just crazy.
The thing is, Ahmadinejad was declared the victor before the vote count was finished. And the announced vote tallies show him winning by a landslide, drubbing Mr. Mousavi by a margin of two to one. This despite polling that shows Ahmadinejad being increasingly unpopular, and support for Mousavi growing in the run up to the election.
So it looks like the election was stolen. Violent street protests have ensued, with the security services not being shy about bludgeoning and even killing the protestors.
Now, from an American perspective, I’m not sure it really matters who the President of Iran is. In Iran’s theocracy, real power resides with the Revolutionary council, a group of twelve Islamic mullahs. The Council has to approve the candidates before they can even appear on the ballot. So in that sense, both Ahmadinejad and Mousavi are products of the system, tools of the ruling clerics.
Here’s what scares me about the situation. Iran is enriching uranium so that they can build atomic bombs. This is perceived by most Westerners as adverse to our interests and destabilizing to the Middle East. The US and our allies are trying to deter Iran from pursuing this policy of pursuing nuclear ambitions.
The problem is that all of our tools diplomacy, both hard and soft, assume that the Iran state has a government that acts as a rational player. They don’t have to be reasonable, but they have to be sane. Sane men will not knowingly pursue policies that damage their own interests, and will pursue policies that enhance their interests. All of the carrots and sticks in the international system are based on that principle.
If the government of Iran is not rational, that is very frightening. Give insane men plutonium, and anything could happen. It is very difficult to deter insane men.
This brings me back to their Presidential campaign. The Iranians staged a major election, with months of campaigning. Then on election day, the whole process was revealed to be a sham. The election wasn’t just stolen. It was blatently, obviously stolen. It was stolen in a way that enraged the opposition, and sparked violence in the streets.
Now, that’s just crazy.
Tuesday, June 16, 2009
Health Care Assumptions
The Obama administration is getting ready to unveil their plan to massively restructure the delivery of health care in this country. One of the core rationales for this plan is to extend "access" to health care services. This argument overstates the case. I would argue that there is no problem with accessing health care in this country.
If you have a medical problem, you can go to any emergency room in the country. They must, by law, treat you without reference to your ability to pay. When you go to the emergency room, a doctor will (eventually) see you about your problem. If you are bleeding on the linoleum, you will move to the head of the line, guaranteed.
The problem is not that people want access to health care, and they can't get it. We already have universal access to health care. The problem is that people want unlimited access to medical care. The question is not whether everyone should have health care in this country. The question is whether everyone should have access to as much medical treatment as they want.
If we answer that question as a yes, then it leads inevitably to another question. how do we pay for it?
If you have a medical problem, you can go to any emergency room in the country. They must, by law, treat you without reference to your ability to pay. When you go to the emergency room, a doctor will (eventually) see you about your problem. If you are bleeding on the linoleum, you will move to the head of the line, guaranteed.
The problem is not that people want access to health care, and they can't get it. We already have universal access to health care. The problem is that people want unlimited access to medical care. The question is not whether everyone should have health care in this country. The question is whether everyone should have access to as much medical treatment as they want.
If we answer that question as a yes, then it leads inevitably to another question. how do we pay for it?
Friday, June 12, 2009
Summer Jobs
We picked up a couple of summer interns at my company this week. They came to us through a government program that is part of the Obama stimulus package. Basically, the government pays their wages and picks up their benefits (worker’s comp, FICA taxes), put they actually work for us.
Free labor. What’s not to like, right?
Actually, it is kind of a tricky prospect, trying to get useful output out of these guys. Business was slower earlier in the year when we signed on for this program, and we were working reduced hours. I had a concern that our regular workforce would perceive the summer workers as competing with them for work.
Fortunately, business has picked up from the low point last winter. But these guys (let’s call them Frick and Frack) know nothing about working in an industrial facility. Zip, zilch, nada. So to get any more output out of them than pushing a broom, they will have to be trained. I can’t even let them mop the floor after they’ve swept it without proper training. Oily mop water from an industrial facility has to be properly disposed of.
It is the classic investment problem. I have to invest resources into training Frick and Frack in order to turn them into usable resources in their own right (or, as I like to call them, interchangeable worker units). To train them I have to take my regular folks off their jobs to do the OJT. Too much training, and I can’t get my money back out of them by increased productivity, especially since they’re only here for the summer. Also, I have to keep regular work going while they are being trained.
Still, I want them to get more out of their summer job than just pushing a broom. So I’m looking for that balance point where we teach them enough for them to say they have learned something, but at the same time keep the training short enough to get some payback off the investment in training.
In a larger sense, I want Frick and Frack to come out of this experience with more skills than they went in because they aren’t really free labor. After all, the government is picking up the check. Spending money just to create make-work jobs is a terrible use of the government’s limited resources. Spending the same money to help develop the next generation workforce makes a lot more sense to me.
After all, it’s my tax dollars at work.
Free labor. What’s not to like, right?
Actually, it is kind of a tricky prospect, trying to get useful output out of these guys. Business was slower earlier in the year when we signed on for this program, and we were working reduced hours. I had a concern that our regular workforce would perceive the summer workers as competing with them for work.
Fortunately, business has picked up from the low point last winter. But these guys (let’s call them Frick and Frack) know nothing about working in an industrial facility. Zip, zilch, nada. So to get any more output out of them than pushing a broom, they will have to be trained. I can’t even let them mop the floor after they’ve swept it without proper training. Oily mop water from an industrial facility has to be properly disposed of.
It is the classic investment problem. I have to invest resources into training Frick and Frack in order to turn them into usable resources in their own right (or, as I like to call them, interchangeable worker units). To train them I have to take my regular folks off their jobs to do the OJT. Too much training, and I can’t get my money back out of them by increased productivity, especially since they’re only here for the summer. Also, I have to keep regular work going while they are being trained.
Still, I want them to get more out of their summer job than just pushing a broom. So I’m looking for that balance point where we teach them enough for them to say they have learned something, but at the same time keep the training short enough to get some payback off the investment in training.
In a larger sense, I want Frick and Frack to come out of this experience with more skills than they went in because they aren’t really free labor. After all, the government is picking up the check. Spending money just to create make-work jobs is a terrible use of the government’s limited resources. Spending the same money to help develop the next generation workforce makes a lot more sense to me.
After all, it’s my tax dollars at work.
Tuesday, June 9, 2009
Off Topic Post: Great Moments in "D'uh"
Breaking News! Adam Lambert, the runner up in this year's American Idol competition, has come out as a gay man. He made the announcement as part of an interview in this month's Rolling Stone magazine.
Really? Seriously? This is supposed to be news?
I mean, I watched all of about three minutes of American Idol this season, and I could have told you that Adam Lambert was gay.
All of you aspiring journalists out there, repeat after me: "Dog bites man, that's not news. Man bites dog, that's news."
Really? Seriously? This is supposed to be news?
I mean, I watched all of about three minutes of American Idol this season, and I could have told you that Adam Lambert was gay.
All of you aspiring journalists out there, repeat after me: "Dog bites man, that's not news. Man bites dog, that's news."
Monday, June 8, 2009
False Modesty
Last week’s big business story was the bankruptcy filing by General Motors. The Federal government will be taking the lion’s share of the reconstituted entity once it emerges from bankruptcy court. In exchange for the billions that the Feds have already loaned GM, plus providing the debtor-in-possession financing, the government will have 60% of the equity. The UAW will have about 20%, and the secured bondholders will have the balance.
Just as in the case of Chrysler, the secured bondholders are getting the short end of the stick. Under normal bankruptcy law, the secured creditors usually get the majority of the equity in the company that emerges. In the case of these two car companies, the unsecured health insurance and pension claims of the union have been moved up in seniority, compared to the bondholders. Of course, this wouldn’t have anything to do with the fact that the UAW has supported Democratic candidates almost exclusively, with resources of both money and manpower. No, no, there’s no payola at work here.
What I found interesting about the deal was the government’s protests that they did not want to own a part of General Motors, let alone the majority stake. Over and over, spokesmen for the administration kept claiming that they did not want to be responsible for managing operations at a car company.
That reticence confuses me a little bit. After all, these are the same guys who are proposing to take control of the entire US health care sector in the interest of providing universal coverage. One out of every six dollars in this country is spent on health care, but the administration is not being shy about planning a massive restructuring. That restructuring will include a government owned health insurance fund that will compete directly with private health insurance companies.
Or how about energy, another major industrial area of the economy? The Obama administration is putting the finishing touches on their plan to completely restructure how electricity is generated and distributed in this country. Those plans include bankrupting the entire coal mining industry, and making obsolete any coal-fired power plants.
These guys aren’t shy about directly injecting government control over huge swaths of what is now private industry. The outlier is the automotive industry. For some reason, they don’t want to be in charge of that.
Just everything else.
Just as in the case of Chrysler, the secured bondholders are getting the short end of the stick. Under normal bankruptcy law, the secured creditors usually get the majority of the equity in the company that emerges. In the case of these two car companies, the unsecured health insurance and pension claims of the union have been moved up in seniority, compared to the bondholders. Of course, this wouldn’t have anything to do with the fact that the UAW has supported Democratic candidates almost exclusively, with resources of both money and manpower. No, no, there’s no payola at work here.
What I found interesting about the deal was the government’s protests that they did not want to own a part of General Motors, let alone the majority stake. Over and over, spokesmen for the administration kept claiming that they did not want to be responsible for managing operations at a car company.
That reticence confuses me a little bit. After all, these are the same guys who are proposing to take control of the entire US health care sector in the interest of providing universal coverage. One out of every six dollars in this country is spent on health care, but the administration is not being shy about planning a massive restructuring. That restructuring will include a government owned health insurance fund that will compete directly with private health insurance companies.
Or how about energy, another major industrial area of the economy? The Obama administration is putting the finishing touches on their plan to completely restructure how electricity is generated and distributed in this country. Those plans include bankrupting the entire coal mining industry, and making obsolete any coal-fired power plants.
These guys aren’t shy about directly injecting government control over huge swaths of what is now private industry. The outlier is the automotive industry. For some reason, they don’t want to be in charge of that.
Just everything else.
Monday, June 1, 2009
"You can't handle the truth!"
I can’t figure out the appeal of California. As a former Floridian who has visited the Golden State several times, I thought the oranges tasted funny, the sunshine was the wrong color, and Disneyland was at best a prototype for the real theme park at Disney World.
On the down side, California suffers from earthquakes, mudslides, raging forest fires, occasional civil insurrection, and ridiculously expensive real estate. And the traffic is hellacious.
Now the state appears to be in complete meltdown. After the voters soundly rejected a mixed bag of referendums that raised taxes, redirected earmarked funds, and sold off assets, the state is announcing big cuts to try and balance the budget shortfall that approaches $24 billion. California may become the first state to declare bankruptcy.
In the middle of all this, the state’s finance director, Mike Genest, made the following extraordinary statement during a conference call with reporters last Friday:
“Government doesn’t provide services to rich people. It doesn’t even really provide services to the middle class.” He added: “You have to cut where the money is.”
Now, I’m sure Mr. Genest’s intention was to explain why the proposed budget cuts were hitting low income residents so hard. No doubt he was trying to answer a question along the lines of “Why do all of the cuts seem to target poor people?” or “Is this political payback because poor people tend to vote Democratic, and the governor is Republican?” Something like that.
As a middle class taxpayer, I interpret Mr. Genest’s statement a little differently:
“If you’re in the upper or middle class, you are not going to get your money’s worth from the state government. Never have, never will. Yeah, we’ve been screwing you out of your taxes right along. You got a problem with that?”
Kudos to Mr. Genest for his refreshing honesty, but if I was a California taxpayer I’d be a little bent right now.
On the down side, California suffers from earthquakes, mudslides, raging forest fires, occasional civil insurrection, and ridiculously expensive real estate. And the traffic is hellacious.
Now the state appears to be in complete meltdown. After the voters soundly rejected a mixed bag of referendums that raised taxes, redirected earmarked funds, and sold off assets, the state is announcing big cuts to try and balance the budget shortfall that approaches $24 billion. California may become the first state to declare bankruptcy.
In the middle of all this, the state’s finance director, Mike Genest, made the following extraordinary statement during a conference call with reporters last Friday:
“Government doesn’t provide services to rich people. It doesn’t even really provide services to the middle class.” He added: “You have to cut where the money is.”
Now, I’m sure Mr. Genest’s intention was to explain why the proposed budget cuts were hitting low income residents so hard. No doubt he was trying to answer a question along the lines of “Why do all of the cuts seem to target poor people?” or “Is this political payback because poor people tend to vote Democratic, and the governor is Republican?” Something like that.
As a middle class taxpayer, I interpret Mr. Genest’s statement a little differently:
“If you’re in the upper or middle class, you are not going to get your money’s worth from the state government. Never have, never will. Yeah, we’ve been screwing you out of your taxes right along. You got a problem with that?”
Kudos to Mr. Genest for his refreshing honesty, but if I was a California taxpayer I’d be a little bent right now.
Tuesday, May 26, 2009
Sonia Sotomayer
Sonia Sotomayer has been nominated to fill the position on the US Supreme Court left by the pending retirement of David Souter.
A graduate of Princeton and Yale Law School, Judge Sotomayer has been on the Federal Bench since 1992.
This one looks like a slam dunk. Her presence on the Court does not significantly alter the liberal-conservative dynamic, as Justice Souter usually voted with the liberal bloc. To vote against Sotomayer would be to vote against a woman and a Hispanic. Besides, even if all of the Republicans in the Senate voted against her, they don’t have the votes to stop her nomination. The Repubs know it, the Dems know it, so there will be plenty o’ grandstanding, which will change the end result not one iota.
Since this was a done deal, I wasn’t going to exert a lot of energy on it. Then I read that Judge Sotomayer said this: “I would hope that a wise Latina woman with the richness of her experiences would more often than not reach a better conclusion [as a judge] than a white male who hasn’t lived that life.”
Now, when I first read that, I thought “No way. That has got to be an Internet hoax in the making.”
Well, it turns out that she really did say that, as part of a speech she gave in 2001. Apparently the snippet is taken out of context. The full text of the speech can be found here.
Even if you accept her point that being a woman Hispanic makes her a better judge in areas of sexual and racial discrimination, and I’m not sure I do (after all, there’s a reason why the statue of justice is wearing a blindfold), it raises a question for me.
If being a woman and a Hispanic makes you a better judge in some types of cases, where does it make you a worse judge?
Now that’s a question I like to see asked.
A graduate of Princeton and Yale Law School, Judge Sotomayer has been on the Federal Bench since 1992.
This one looks like a slam dunk. Her presence on the Court does not significantly alter the liberal-conservative dynamic, as Justice Souter usually voted with the liberal bloc. To vote against Sotomayer would be to vote against a woman and a Hispanic. Besides, even if all of the Republicans in the Senate voted against her, they don’t have the votes to stop her nomination. The Repubs know it, the Dems know it, so there will be plenty o’ grandstanding, which will change the end result not one iota.
Since this was a done deal, I wasn’t going to exert a lot of energy on it. Then I read that Judge Sotomayer said this: “I would hope that a wise Latina woman with the richness of her experiences would more often than not reach a better conclusion [as a judge] than a white male who hasn’t lived that life.”
Now, when I first read that, I thought “No way. That has got to be an Internet hoax in the making.”
Well, it turns out that she really did say that, as part of a speech she gave in 2001. Apparently the snippet is taken out of context. The full text of the speech can be found here.
Even if you accept her point that being a woman Hispanic makes her a better judge in areas of sexual and racial discrimination, and I’m not sure I do (after all, there’s a reason why the statue of justice is wearing a blindfold), it raises a question for me.
If being a woman and a Hispanic makes you a better judge in some types of cases, where does it make you a worse judge?
Now that’s a question I like to see asked.
Thursday, May 21, 2009
Car Wars, Part III
In my previous posts regarding the Obama administration’s new automotive fuel economy standards, I have intimated why I do not think mandating a huge increase in mileage is a workable idea. In this post I want to counter one of the arguments that has been raised in favor of the idea.
I’m talking about the “national standard” argument. Basically, this argument goes that it is better that we now have a new federal standard, as opposed to a “patchwork” of different fuel efficiency standards in various areas of the country. With a single standard, manufacturers can focus all of their engineering efforts on meeting the Federal goals, rather than trying to develop different cars for different states.
This argument is crap. It’s hogwash. No, it’s hogwash on steroids.
A little history is in order. A few years back, California announced that in the interest of controlling pollution from automobiles, the state was going to come out with a mileage standard for cars sold in California. This mileage standard was considerably in excess of Federal standards at the time.
The car companies sued to halt this action, arguing that mileage standards were the business of the Federal government. The Bush administration agreed with them. What the car companies really objected to was that the new California mileage rules would force them to develop cars that few people wanted to buy, and abandon vehicles that people did want to buy. Since the California market is so large, you can’t afford not participate in it. A classic Catch 22: they don’t want to meet the California standard, but they can’t afford to give up the California market.
But the car companies could have chosen to embrace the California standards. And the mix of cars developed for the strictest mileage standards in the country would meet the requirements of every other region as well.
Fast forward to the present day. The Obama administration has preempted the California attempt to impose higher fuel economy. How did they do it? By adopting the California standard!
Now, call me crazy, but I don’t think there is much preemption in capitulation.
The Obama administration has basically turned over control of the fortunes of a large, strategically important industry to the pollution control bureaucrats of a single state.
It may be a new Federal standard, but these actions are a betrayal of the Federal system.
I’m talking about the “national standard” argument. Basically, this argument goes that it is better that we now have a new federal standard, as opposed to a “patchwork” of different fuel efficiency standards in various areas of the country. With a single standard, manufacturers can focus all of their engineering efforts on meeting the Federal goals, rather than trying to develop different cars for different states.
This argument is crap. It’s hogwash. No, it’s hogwash on steroids.
A little history is in order. A few years back, California announced that in the interest of controlling pollution from automobiles, the state was going to come out with a mileage standard for cars sold in California. This mileage standard was considerably in excess of Federal standards at the time.
The car companies sued to halt this action, arguing that mileage standards were the business of the Federal government. The Bush administration agreed with them. What the car companies really objected to was that the new California mileage rules would force them to develop cars that few people wanted to buy, and abandon vehicles that people did want to buy. Since the California market is so large, you can’t afford not participate in it. A classic Catch 22: they don’t want to meet the California standard, but they can’t afford to give up the California market.
But the car companies could have chosen to embrace the California standards. And the mix of cars developed for the strictest mileage standards in the country would meet the requirements of every other region as well.
Fast forward to the present day. The Obama administration has preempted the California attempt to impose higher fuel economy. How did they do it? By adopting the California standard!
Now, call me crazy, but I don’t think there is much preemption in capitulation.
The Obama administration has basically turned over control of the fortunes of a large, strategically important industry to the pollution control bureaucrats of a single state.
It may be a new Federal standard, but these actions are a betrayal of the Federal system.
Car Wars, Part II
I have a clarification on my previous post regarding the new Federal automotive fuel efficiency standards. The 35 mpg requirement is for passenger cars and light trucks combined. The requirement for passenger cars is that the corporate average hits 42 miles per gallon.
I was curious as to how many cars currently on the market meet that standard. So I visited the official EPA fuel efficiency website (www.fueleconomy.gov). They have a searchable database where you can look for cars that meet differing levels of fuel efficiency. Do a search at meet or exceed 40 mpg, and you come up with two, count ‘em two, models. If you want a car that meets the 2016 standard today, you can get a Toyota Prius or a Honda Civic Hybrid.
It kind of reminds me of Henry Ford’s old dictate regarding the Model T. “You can have it in any color you want, as long as it’s black.”
Typically, cars are developed in what’s called a platform. The platform includes the chassis, the suspension, the powertrain; basically, all of the guts and structure between the seats and the body panels. Usually, more than one model of car is built off of the platform. For example, the Honda CR-V is built off the Civic platform. The Ford Fusion and the Mercury Milan also share a platform.
Developing a new platform takes between three and five years. Not only does the platform have to be engineered, but a lot of the subassemblies will also be new designs. Then the tools to build the new parts have to be designed and built. Once the new parts are made, then the assembly processes to make the subassemblies have to be designed and built. I have seen times where getting just one part for a new automotive subassembly took over 18 months between the first quotation to delivery of production parts.
Because of the enormous cost of developing a new platform, particularly once you get to the stage of building production tools, car companies usually bring only one platform to market in any one year.
To arrive at the mandated targets will require new platform development for almost every platform over the next 8 years. If you listen carefully, you can hear faint screams of agony coming from all directions. Those are the screams of product planners and design engineers from all over the world being told about the new North American standards they will have to meet, and the timetable for meeting them.
I was curious as to how many cars currently on the market meet that standard. So I visited the official EPA fuel efficiency website (www.fueleconomy.gov). They have a searchable database where you can look for cars that meet differing levels of fuel efficiency. Do a search at meet or exceed 40 mpg, and you come up with two, count ‘em two, models. If you want a car that meets the 2016 standard today, you can get a Toyota Prius or a Honda Civic Hybrid.
It kind of reminds me of Henry Ford’s old dictate regarding the Model T. “You can have it in any color you want, as long as it’s black.”
Typically, cars are developed in what’s called a platform. The platform includes the chassis, the suspension, the powertrain; basically, all of the guts and structure between the seats and the body panels. Usually, more than one model of car is built off of the platform. For example, the Honda CR-V is built off the Civic platform. The Ford Fusion and the Mercury Milan also share a platform.
Developing a new platform takes between three and five years. Not only does the platform have to be engineered, but a lot of the subassemblies will also be new designs. Then the tools to build the new parts have to be designed and built. Once the new parts are made, then the assembly processes to make the subassemblies have to be designed and built. I have seen times where getting just one part for a new automotive subassembly took over 18 months between the first quotation to delivery of production parts.
Because of the enormous cost of developing a new platform, particularly once you get to the stage of building production tools, car companies usually bring only one platform to market in any one year.
To arrive at the mandated targets will require new platform development for almost every platform over the next 8 years. If you listen carefully, you can hear faint screams of agony coming from all directions. Those are the screams of product planners and design engineers from all over the world being told about the new North American standards they will have to meet, and the timetable for meeting them.
Tuesday, May 19, 2009
Car Wars
I have been hearing on the news today about the new deal to raise automotive fuel efficiency standards. The average passenger car mileage will increase from the current 27.5 miles per gallon to 35.5 miles per gallon in 2016. From the news coverage I’ve seen so far, it is not clear if that 35.5 mpg figure also applies to light trucks. Last year Congress passed a law requiring light trucks to hit fuel efficiency standards of 27.5 mpg by 2020, but that is now superceded by this new EPA rule.
For car makers, fuel efficiency is governed by a concept known by the acronym CAFÉ: Corporate Average Fuel Efficiency. The concept is pretty simple. The average fuel efficiency of all of the cars a manufacturer sells has to hit the government’s target. If you sell one Ford Fusion (26.5 mpg) and one Ford Fusion Hybrid (38.5 mpg), your CAFÉ rating is 32.5 mpg.
If you are Ford Motor, and you want to sell a muscle car like a Mustang (22 mpg) you have to sell another car that gets 49 miles to the gallon to hit the new standard. The latest version of the Toyota Prius only gets 44 mpg, so even that would have to increase by 11% to average out with a Mustang.
The new fuel efficiency standards represent a 30% increase over a seven year time period. To hit these targets, what all of the car companies are going to have to do is predictable. Cars are going to get (much) smaller, lighter, and less powerful. They are also going to become much more expensive.
A lot more cars are going to be hybrids. Since every hybrid has dual drive systems, one gas and one electric, there are a lot more components per car than a standard powertrain. More components, more cost.
For cars with more powerful engines, the prices will also go up. Why? Well, how else can the car companies convince you to buy a car that would lose a collision with a dog, when what you really want is a big honkin’ pickup truck? After all, the evidence of the marketplace is clear. Given a choice, Americans like to drive SUV’s and pickup trucks. In 2007, the top three best selling vehicles in North America were all full size trucks.
In the news coverage so far, everyone has been all smiley and happy, singing kumbaya over how great this is. So far, nobody has bothered to ask any automotive design engineers what they think about this. Those poor bastards are probably sitting in bars, trying to drink themselves into a catatonic stupor.
Tomorrow morning, they are going to have to wake up with a hangover, go in to work, and start trying to figure out how to retool 80% of the industry capacity to build small cars on lines configured to make big trucks and SUV’s. They have to do this during a major recession, with forecasted sales volume at 60% or less of what is was just a couple of years ago. And, oh yeah, the head of California’s pollution control board announced plans today to start work on the next major ratcheting up of fuel efficiency standards.
Work in the auto industry? I’d rather take on a career juggling chain saws. Flaming chain saws.
For car makers, fuel efficiency is governed by a concept known by the acronym CAFÉ: Corporate Average Fuel Efficiency. The concept is pretty simple. The average fuel efficiency of all of the cars a manufacturer sells has to hit the government’s target. If you sell one Ford Fusion (26.5 mpg) and one Ford Fusion Hybrid (38.5 mpg), your CAFÉ rating is 32.5 mpg.
If you are Ford Motor, and you want to sell a muscle car like a Mustang (22 mpg) you have to sell another car that gets 49 miles to the gallon to hit the new standard. The latest version of the Toyota Prius only gets 44 mpg, so even that would have to increase by 11% to average out with a Mustang.
The new fuel efficiency standards represent a 30% increase over a seven year time period. To hit these targets, what all of the car companies are going to have to do is predictable. Cars are going to get (much) smaller, lighter, and less powerful. They are also going to become much more expensive.
A lot more cars are going to be hybrids. Since every hybrid has dual drive systems, one gas and one electric, there are a lot more components per car than a standard powertrain. More components, more cost.
For cars with more powerful engines, the prices will also go up. Why? Well, how else can the car companies convince you to buy a car that would lose a collision with a dog, when what you really want is a big honkin’ pickup truck? After all, the evidence of the marketplace is clear. Given a choice, Americans like to drive SUV’s and pickup trucks. In 2007, the top three best selling vehicles in North America were all full size trucks.
In the news coverage so far, everyone has been all smiley and happy, singing kumbaya over how great this is. So far, nobody has bothered to ask any automotive design engineers what they think about this. Those poor bastards are probably sitting in bars, trying to drink themselves into a catatonic stupor.
Tomorrow morning, they are going to have to wake up with a hangover, go in to work, and start trying to figure out how to retool 80% of the industry capacity to build small cars on lines configured to make big trucks and SUV’s. They have to do this during a major recession, with forecasted sales volume at 60% or less of what is was just a couple of years ago. And, oh yeah, the head of California’s pollution control board announced plans today to start work on the next major ratcheting up of fuel efficiency standards.
Work in the auto industry? I’d rather take on a career juggling chain saws. Flaming chain saws.
Sunday, May 17, 2009
Third
How does Nancy Pelosi stay on as Speaker of the House? She's a pit bull partisan politico, schooled in old school urban machine politics. That extraordinary dedication to partisanship was obviously useful as House Minority Leader, making plans for her party to recapture control of the House of Representatives. But the Speaker of the House, isn't she at least nominally supposed to be for American interests, and not just the interests of the Democrats Party?
Last year, in passing the $700 billion bank bailout legislation, she had a chance to reach across the aisle and get bipartisan support. Whether you thought the bank bailout was a good idea or not, members of both parties thought it was a necessary action for the time. It was considered important to get bipartisan support for the commitment of so much money, so suddenly. So Speaker Nancy showed up to make a speech on the House floor in support of the legislation.
Now, I'm no speech writer, but if I was I would have put together a message somewhere along these lines:
"Ladies and gentlemen of the House. I have come before you today to speak in support of the legislation on the floor today. $700 billion dollars is a lot of money, but we are in the middle of an unprecedented economic crisis. Our banking system has seized up, and is in danger of collapsing. The experts we have consulted have agreed that if we do not do something to turn the situation around, our economy will undergo a calamity which will hurt all Americans.
"That is why I am asking all of you, both Republican and Democrat, to support this bill. As members of opposing political parties, we can have very real differences, both practical and philosophical, on a range of issues. But as Americans, we can put those differences aside, and work together when the chips are down to find solutions for the critical issues that this country faces. In this time of crisis, let us show a united face to the world."
She could have made a speech like that. Instead, we got this:
Now, after inveighing against the evil Republican Party for allowing war criminals to torture innocent civilians, it turns out that Speaker Pelosi had been repeatedly briefed by the CIA on what interrogation tchniques were planned for use, as well as what was actually being done to terrorists that had been captured. At the time, she never raised a note of protest.
When this information came to light, first she denied ever having this information. Then she agreed, yes, she did have the information, but only because a staffer had attended the briefing and had told her. Then, she said the CIA had lied about briefing her. Then she said the CIA misleads Congress all the time. She's got more twists and turns then a snake. Here's a news story on her press conference:
After watching this story, you have to believe that Nancy Pelosi has no commitment to the truth at all, only what she can spin to her political advantage. You know what the scary part of that is? She is third in line for the Presidency, right after Joe "Don't fly on airplanes, they're deathtraps!" Biden.
I really hope President Obama's stop smoking program is working.
Last year, in passing the $700 billion bank bailout legislation, she had a chance to reach across the aisle and get bipartisan support. Whether you thought the bank bailout was a good idea or not, members of both parties thought it was a necessary action for the time. It was considered important to get bipartisan support for the commitment of so much money, so suddenly. So Speaker Nancy showed up to make a speech on the House floor in support of the legislation.
Now, I'm no speech writer, but if I was I would have put together a message somewhere along these lines:
"Ladies and gentlemen of the House. I have come before you today to speak in support of the legislation on the floor today. $700 billion dollars is a lot of money, but we are in the middle of an unprecedented economic crisis. Our banking system has seized up, and is in danger of collapsing. The experts we have consulted have agreed that if we do not do something to turn the situation around, our economy will undergo a calamity which will hurt all Americans.
"That is why I am asking all of you, both Republican and Democrat, to support this bill. As members of opposing political parties, we can have very real differences, both practical and philosophical, on a range of issues. But as Americans, we can put those differences aside, and work together when the chips are down to find solutions for the critical issues that this country faces. In this time of crisis, let us show a united face to the world."
She could have made a speech like that. Instead, we got this:
Now, after inveighing against the evil Republican Party for allowing war criminals to torture innocent civilians, it turns out that Speaker Pelosi had been repeatedly briefed by the CIA on what interrogation tchniques were planned for use, as well as what was actually being done to terrorists that had been captured. At the time, she never raised a note of protest.
When this information came to light, first she denied ever having this information. Then she agreed, yes, she did have the information, but only because a staffer had attended the briefing and had told her. Then, she said the CIA had lied about briefing her. Then she said the CIA misleads Congress all the time. She's got more twists and turns then a snake. Here's a news story on her press conference:
After watching this story, you have to believe that Nancy Pelosi has no commitment to the truth at all, only what she can spin to her political advantage. You know what the scary part of that is? She is third in line for the Presidency, right after Joe "Don't fly on airplanes, they're deathtraps!" Biden.
I really hope President Obama's stop smoking program is working.
Thursday, May 14, 2009
Reserve Currency: I'll Reserve Judgement On That
Nouriel Roubini came out with an Op-Ed piece in the New York Times this week. In it, he raises a warning flag. The Chinese, who fund the US government deficit by being the biggest buyers of Treaury bonds, and who have a gigantic stockpile of dollars, are starting to make noises that they don’t want the dollar to be the world’s reserve currency anymore.
In the post-World War II economic system, the dollar became the world’s reserve currency. That means that for globally traded commodities, the deals are priced in terms of dollars. World oil prices are in dollars per barrel.
It also means that for a number of currencies, if you want to change over to another currency, you have to use dollars to complete the two halves of the transaction. For example, to convert Danish kronar into Thai baht, you first trade your kronar for dollars, then trade the dollars for baht.
If you want to be part of the world trading system, you have to keep a stockpile of dollars on hand to fund your buying and selling.
Because everybody has to have dollars, that keeps demand for greenbacks high. This allows the government to keep interest rates low in financing the deficit. It also allows American consumers to run up massive trade deficits, since exporting countries have to accept US currency. Our status as the world’s reserve currency keps the dollar strong, leading to low interest rates and inexpensive imports.
Mr. Roubini’s warning is that unless we get our fiscal house in order, the Chinese currency, the renminbi, will supplant the dollar over the next ten years. Historically, reserve currencies have always come from creditor nations, not borrower nations. If the renmenbi surplants the dollar, our currency will fall preciitously in value. This will cause a spike in interest rates as the government will have to entice investors into continuing to fund our deficits. Also, commodity prices will inevitably rise in dollar terms.
I hate to argue against anyone who is advocating more fiscal restraint, but I don’t find Mr. Roubini’s nightmare scenario to be particularly frightening.
First, to function as a reserve currency, the renminbi would have to be widely traded on currency markets, and before that could happen the Chinese would have to allow it to float, or move up and down in value, vis a vis other currencies. But the Chinese keep the value of their money pegged against the dollar. It is only in the last couple of years that even limited trading of the currency has been allowed.
It is precisely because the renminbi is pegged against the dollar that the US continues to run such a massive trade deficit with China. Otherwise the dollar would already have dropped in value against the renminbi, making Chinese imports more expensive. And the Chinese get something out of the deal. US demand for cheap Chinese imports is driving the extremely rapid industrialization of the Chinese economy.
In addition to the practical difficulties (many of which Mr. Roubini himself lists out), as a manufacturing manager I think the benefits of a falling dollar would vastly outwiegh the costs. Yes, commodity prices would increase. But for the last ten years the Chinese have used an artificially low currency to take market share from companies like mine. Instead of continuing to fight one long rear guard action against off-shore competitors, we could use our advantages of lower freight costs, higher productivity, and shorter lead time to take back business that has been lost. Maybe we could even expand into new markets and products.
If being the reserve currency has allowed Americans, both collectively and individually, to be irresponsible, than losing that status would be a change for the better. It is the difference between empowerment and enablement.
In the post-World War II economic system, the dollar became the world’s reserve currency. That means that for globally traded commodities, the deals are priced in terms of dollars. World oil prices are in dollars per barrel.
It also means that for a number of currencies, if you want to change over to another currency, you have to use dollars to complete the two halves of the transaction. For example, to convert Danish kronar into Thai baht, you first trade your kronar for dollars, then trade the dollars for baht.
If you want to be part of the world trading system, you have to keep a stockpile of dollars on hand to fund your buying and selling.
Because everybody has to have dollars, that keeps demand for greenbacks high. This allows the government to keep interest rates low in financing the deficit. It also allows American consumers to run up massive trade deficits, since exporting countries have to accept US currency. Our status as the world’s reserve currency keps the dollar strong, leading to low interest rates and inexpensive imports.
Mr. Roubini’s warning is that unless we get our fiscal house in order, the Chinese currency, the renminbi, will supplant the dollar over the next ten years. Historically, reserve currencies have always come from creditor nations, not borrower nations. If the renmenbi surplants the dollar, our currency will fall preciitously in value. This will cause a spike in interest rates as the government will have to entice investors into continuing to fund our deficits. Also, commodity prices will inevitably rise in dollar terms.
I hate to argue against anyone who is advocating more fiscal restraint, but I don’t find Mr. Roubini’s nightmare scenario to be particularly frightening.
First, to function as a reserve currency, the renminbi would have to be widely traded on currency markets, and before that could happen the Chinese would have to allow it to float, or move up and down in value, vis a vis other currencies. But the Chinese keep the value of their money pegged against the dollar. It is only in the last couple of years that even limited trading of the currency has been allowed.
It is precisely because the renminbi is pegged against the dollar that the US continues to run such a massive trade deficit with China. Otherwise the dollar would already have dropped in value against the renminbi, making Chinese imports more expensive. And the Chinese get something out of the deal. US demand for cheap Chinese imports is driving the extremely rapid industrialization of the Chinese economy.
In addition to the practical difficulties (many of which Mr. Roubini himself lists out), as a manufacturing manager I think the benefits of a falling dollar would vastly outwiegh the costs. Yes, commodity prices would increase. But for the last ten years the Chinese have used an artificially low currency to take market share from companies like mine. Instead of continuing to fight one long rear guard action against off-shore competitors, we could use our advantages of lower freight costs, higher productivity, and shorter lead time to take back business that has been lost. Maybe we could even expand into new markets and products.
If being the reserve currency has allowed Americans, both collectively and individually, to be irresponsible, than losing that status would be a change for the better. It is the difference between empowerment and enablement.
Monday, May 11, 2009
Pay Me Now or Pay Me Later
I hate slow pay. I hate it with a passion.
The world of business runs on a concept called trade credit. Trade credit basically means that you ship product to your customers before they actually pay for what they have bought. Similarly, if your suppliers extend trade credit, they let you have what you have ordered before money actually changes hands.
This is different then buying things with a credit card. When you use a credit card, the bank that issues the card transfers the money directly to the merchant, treating the balance due as an unsecured loan. The merchant gets paid right away, just as if you use cash, and therefore never takes on the risk of nonpayment. With trade credit, your vendors are supplying you with product solely based on your promise to pay up.
When I started in business, the standard terms for trade credit were Net 30 Days. That meant that one month after receiving product, you agreed to pay the net balance shown on the invoice. To manage your cash flow, you would hound your customers who went over the 30 day limit, knowing that you needed the money both to meet payroll and to keep your promises to your suppliers.
About ten years ago I started to see a change in these terms. Big companies started to demand extended terms. First sixty days, then 75 days, then even more then that. General Electric now has 120 day terms written into all of their contracts. Four months.
I think the move to extended terms was originally pushed by Wal Mart and the other big retailers, Lowe’s, Home Depot, Target and the like. Remember, the consumer pays for product before they take it out of the store. So if you turned your stock over fast enough, all of the cash required for your inventory was actually provided by the suppliers. For the big boys, it is a great idea. If you can get your vendors to pony up most of the working capital you need, that makes your return on equity look just a little bit better.
On the other hand, for a smaller company like the one I work for, this kind of trade credit policy puts you in a real bind. Our suppliers won’t extend 120 credit to us, either because they are so much bigger then us that we don’t have the leverage to force it, or because they are so much smaller that they couldn’t survive for that long.
For that matter, we don’t have enough cash to tie up four months worth of operating expenses in Accounts Receivable. So we are forced by our customers to borrow money for working capital.
I bring this up because our salesmen have heard rumors that next year GE is going to go to 150 days on their terms. They are a big enough customer that they will probably make it stick. After all, might makes right in situations like this.
But might does not necessarily make smart. By compelling their suppliers to focus on locating financing, and spending time keeping the bank placated, attention is necessarily shifted away from improving quality and delivery, and working on process improvements and product innovation. Not to mention, of course, that the interest charges you have to pay the bank reduce your profit margins.
But the real reason excessive slow pay is a bad idea is that it puts your supply chain in the hands of the bank. When you force your vendors to borrow money to meet payroll, the bank can shut your vendor down just by shutting off the line of credit.
Your vendor wants to keep you, the customer, happy. But your vendor’s bank does not care about you, the customer, at all. The bank cares about limiting its risk.
The more vendors you force to borrow money, and the more money you force them to borrow, the greater the odds that one of them will run into problems and be shut down. When your vendors shut down, you shut down.
Increasing leverage makes returns on equity look better, but it also increases systemic risk.
Isn’t that how the financial industry dug themselves into the hole?
The world of business runs on a concept called trade credit. Trade credit basically means that you ship product to your customers before they actually pay for what they have bought. Similarly, if your suppliers extend trade credit, they let you have what you have ordered before money actually changes hands.
This is different then buying things with a credit card. When you use a credit card, the bank that issues the card transfers the money directly to the merchant, treating the balance due as an unsecured loan. The merchant gets paid right away, just as if you use cash, and therefore never takes on the risk of nonpayment. With trade credit, your vendors are supplying you with product solely based on your promise to pay up.
When I started in business, the standard terms for trade credit were Net 30 Days. That meant that one month after receiving product, you agreed to pay the net balance shown on the invoice. To manage your cash flow, you would hound your customers who went over the 30 day limit, knowing that you needed the money both to meet payroll and to keep your promises to your suppliers.
About ten years ago I started to see a change in these terms. Big companies started to demand extended terms. First sixty days, then 75 days, then even more then that. General Electric now has 120 day terms written into all of their contracts. Four months.
I think the move to extended terms was originally pushed by Wal Mart and the other big retailers, Lowe’s, Home Depot, Target and the like. Remember, the consumer pays for product before they take it out of the store. So if you turned your stock over fast enough, all of the cash required for your inventory was actually provided by the suppliers. For the big boys, it is a great idea. If you can get your vendors to pony up most of the working capital you need, that makes your return on equity look just a little bit better.
On the other hand, for a smaller company like the one I work for, this kind of trade credit policy puts you in a real bind. Our suppliers won’t extend 120 credit to us, either because they are so much bigger then us that we don’t have the leverage to force it, or because they are so much smaller that they couldn’t survive for that long.
For that matter, we don’t have enough cash to tie up four months worth of operating expenses in Accounts Receivable. So we are forced by our customers to borrow money for working capital.
I bring this up because our salesmen have heard rumors that next year GE is going to go to 150 days on their terms. They are a big enough customer that they will probably make it stick. After all, might makes right in situations like this.
But might does not necessarily make smart. By compelling their suppliers to focus on locating financing, and spending time keeping the bank placated, attention is necessarily shifted away from improving quality and delivery, and working on process improvements and product innovation. Not to mention, of course, that the interest charges you have to pay the bank reduce your profit margins.
But the real reason excessive slow pay is a bad idea is that it puts your supply chain in the hands of the bank. When you force your vendors to borrow money to meet payroll, the bank can shut your vendor down just by shutting off the line of credit.
Your vendor wants to keep you, the customer, happy. But your vendor’s bank does not care about you, the customer, at all. The bank cares about limiting its risk.
The more vendors you force to borrow money, and the more money you force them to borrow, the greater the odds that one of them will run into problems and be shut down. When your vendors shut down, you shut down.
Increasing leverage makes returns on equity look better, but it also increases systemic risk.
Isn’t that how the financial industry dug themselves into the hole?
Monday, May 4, 2009
Mystery of the Week
The big business story this last week was Chrysler Corporation filing for Chapter 11 bankruptcy. The goal is to have a quick, “surgical” bankruptcy, and emerge from court in a matter of weeks, not months.
When they come out of Chapter 11, the rough outline of the ownership structure will be the UAW holding about 50%, the bondholders holding about 10%, Italy’s Gruppo Fiat having up to a 35% stake, and the US government holding the remainder.
Here’s my question: What is Fiat doing for their share of the equity? Two things Fiat isn’t doing is ponying up any cash up front, or guaranteeing any of Chrysler’s existing debt.
I haven’t researched the deal very deeply. But on the surface it looks like Fiat will pick up a big share of the reconstituted Chrysler in exchange for—nothing!
Nice work if you can get it.
When they come out of Chapter 11, the rough outline of the ownership structure will be the UAW holding about 50%, the bondholders holding about 10%, Italy’s Gruppo Fiat having up to a 35% stake, and the US government holding the remainder.
Here’s my question: What is Fiat doing for their share of the equity? Two things Fiat isn’t doing is ponying up any cash up front, or guaranteeing any of Chrysler’s existing debt.
I haven’t researched the deal very deeply. But on the surface it looks like Fiat will pick up a big share of the reconstituted Chrysler in exchange for—nothing!
Nice work if you can get it.
Thursday, April 30, 2009
The More Things Change...
Kenyan politics are a mess. The political parties are largely linked to tribal groups in the country, and partisanship is vastly fiercer than here. Last year arguments over a disputed election dissolved into violence that convulsed the country for weeks and left a number of people dead.
Eventually a coalition government was formed and the violence burned itself out. But the parties involved in the coalition are still squabbling, and there are fears that the tensions simmering under the surface could break out again.
In response to this situation, a number of women’s groups in Kenya have called for a one week sexual boycott. The idea is that until the men start talking to each other instead of fighting each other, their wives will withhold their favors.
Just thinking about this idea brings a smile to your face. The concept of women using their sexual power to bring the men in their lives to heel seems rife with comic possibilities. Maybe it has already been done. Wasn’t there a movie along those lines…?
Actually, the idea is much older than that. The same concept forms the plot of Lysistrata, an ancient Greek play, written by the playwright Aristophanes in the 411 BCE. In his version, the city-states of Sparta and Athens are at war. The women of both cities cut the men off until they agree to make peace. The play is, of course, a satire. By poking fun at the men and women of Sparta and Athens, Aristophanes points out the absurdity of our behavior in both sexual politics and state politics. At the heart of the story is an incongruous concept: sex makes us crazy, but that craziness can make us behave more sanely with regard to larger conflicts.
Twenty-four hundred years ago Aristophanes looked at people and politics, and came up with an idea that resonates through the ages, right up to the present day.
That is why I am a conservative. The raw material of society is people. The human animal. Our motivations and desires are the same as they were millennia ago. The institutions, mores, and practices that persist over time do so for a reason: they work. Why they work may not be obvious to us, but we hazard the foundations of society when we make ill-considered alterations to institutions that have developed and held up over long periods.
I believe the current mania for “change” is ill-considered. History is littered with the wreckage of attempted utopian schemes. Until you change people, you better be careful when trying to change society. It has been over two millennia, and we are still waiting.
Even with a filibuster proof majority in the Senate, you cannot repeal the Law of Unintended Consequences.
Eventually a coalition government was formed and the violence burned itself out. But the parties involved in the coalition are still squabbling, and there are fears that the tensions simmering under the surface could break out again.
In response to this situation, a number of women’s groups in Kenya have called for a one week sexual boycott. The idea is that until the men start talking to each other instead of fighting each other, their wives will withhold their favors.
Just thinking about this idea brings a smile to your face. The concept of women using their sexual power to bring the men in their lives to heel seems rife with comic possibilities. Maybe it has already been done. Wasn’t there a movie along those lines…?
Actually, the idea is much older than that. The same concept forms the plot of Lysistrata, an ancient Greek play, written by the playwright Aristophanes in the 411 BCE. In his version, the city-states of Sparta and Athens are at war. The women of both cities cut the men off until they agree to make peace. The play is, of course, a satire. By poking fun at the men and women of Sparta and Athens, Aristophanes points out the absurdity of our behavior in both sexual politics and state politics. At the heart of the story is an incongruous concept: sex makes us crazy, but that craziness can make us behave more sanely with regard to larger conflicts.
Twenty-four hundred years ago Aristophanes looked at people and politics, and came up with an idea that resonates through the ages, right up to the present day.
That is why I am a conservative. The raw material of society is people. The human animal. Our motivations and desires are the same as they were millennia ago. The institutions, mores, and practices that persist over time do so for a reason: they work. Why they work may not be obvious to us, but we hazard the foundations of society when we make ill-considered alterations to institutions that have developed and held up over long periods.
I believe the current mania for “change” is ill-considered. History is littered with the wreckage of attempted utopian schemes. Until you change people, you better be careful when trying to change society. It has been over two millennia, and we are still waiting.
Even with a filibuster proof majority in the Senate, you cannot repeal the Law of Unintended Consequences.
Tuesday, April 28, 2009
Waterboarding and other unpleasantness
Some thirty years ago, I was a cadet attending ROTC summer training camp in Ft. Benning, Georgia. One day of the training was dedicated to adventure training. Rappeling, zip lines, biting the heads off chickens. That sort of thing.
At one point during the day, a group of cadets sat down with one of the training sergeants, a grizzled old Viet Nam vet. Somehow the discussion turned to the subject of questioning prisoners of war. The sergeant said that during the war, they would take two blindfolded VC up in a helicopter and start questioning them. Then they would tie a rope around one of them and throw him out of the chopper. The other would hear the screams as the man was pushed out, which was enough to get him to start answering questions.
Then the veteran said “If you really want information, you take the 9 volt battery out of the walkie-talkie handset, and press both terminals against the man’s temple. Bzzt! When he gets finished singing God Bless America, he’ll tell you anything you want to know.”
At this point he stopped and looked at the group of college students surrounding him, and saw the absolutely shocked faces. It was silent for a moment. Then, with dead sincerity, the sergeant said “That’s not torture. That’s interrogation.”
With the current media pyrotechnics about the Bush administrations “advanced interrogation” policies, it is worth noting this is not the first time we, as a society, have attempted to define the issue of what constitutes torture, and what is merely tough questioning. I think the question does not lend itself to bright and shining boundaries.
Pulling someone’s fingernails off with pliers? Yes, that’s torture. Sleep deprivation? Maybe. Now we’re in the grey area. Making a suspect wear women’s underwear, or having a woman lead him around with a dog leash? Please, you pay extra for that in Vegas.
But in struggling with these issues as policy is set, I have a suggestion. A modest proposal. Call it a version of sauce for the gander.
Have your attorneys draft memos outlining the limits of what is acceptable. This is just what the Bush administration did. Then take those same attorneys and subject them to the same interrogation techniques they proposed. If they say waterboarding is legal, waterboard ‘em. If they say exposure to cold is legal, stick ‘em in a meat locker. At the end of the process, is they still sign off on the memos, you have your policy.
Think of it as a new version of the Golden Rule. Not, “Do unto others as you would have done to yourself.” Not, “Do unto others as they would do unto you, but do it first.” No, not even the classic, “Whoever has the gold makes the rules.”
This version of the Golden Rule is “Don’t do anything unto others that you wouldn’t be willing to have done to yourself.”
At one point during the day, a group of cadets sat down with one of the training sergeants, a grizzled old Viet Nam vet. Somehow the discussion turned to the subject of questioning prisoners of war. The sergeant said that during the war, they would take two blindfolded VC up in a helicopter and start questioning them. Then they would tie a rope around one of them and throw him out of the chopper. The other would hear the screams as the man was pushed out, which was enough to get him to start answering questions.
Then the veteran said “If you really want information, you take the 9 volt battery out of the walkie-talkie handset, and press both terminals against the man’s temple. Bzzt! When he gets finished singing God Bless America, he’ll tell you anything you want to know.”
At this point he stopped and looked at the group of college students surrounding him, and saw the absolutely shocked faces. It was silent for a moment. Then, with dead sincerity, the sergeant said “That’s not torture. That’s interrogation.”
With the current media pyrotechnics about the Bush administrations “advanced interrogation” policies, it is worth noting this is not the first time we, as a society, have attempted to define the issue of what constitutes torture, and what is merely tough questioning. I think the question does not lend itself to bright and shining boundaries.
Pulling someone’s fingernails off with pliers? Yes, that’s torture. Sleep deprivation? Maybe. Now we’re in the grey area. Making a suspect wear women’s underwear, or having a woman lead him around with a dog leash? Please, you pay extra for that in Vegas.
But in struggling with these issues as policy is set, I have a suggestion. A modest proposal. Call it a version of sauce for the gander.
Have your attorneys draft memos outlining the limits of what is acceptable. This is just what the Bush administration did. Then take those same attorneys and subject them to the same interrogation techniques they proposed. If they say waterboarding is legal, waterboard ‘em. If they say exposure to cold is legal, stick ‘em in a meat locker. At the end of the process, is they still sign off on the memos, you have your policy.
Think of it as a new version of the Golden Rule. Not, “Do unto others as you would have done to yourself.” Not, “Do unto others as they would do unto you, but do it first.” No, not even the classic, “Whoever has the gold makes the rules.”
This version of the Golden Rule is “Don’t do anything unto others that you wouldn’t be willing to have done to yourself.”
Tuesday, April 21, 2009
Green Shoots and Other Images
Last week, Fed Chairman Ben Bernanke said he detected “green shoots” among the economic indicators he tracks. A nice metaphor for seeing signs of recovery from the current economic malaise. Beautifully timed to coincide with the annual rebirth of springtime.
At my company, we are also seeing some “green shoots” of our own. After dropping to a level less than half of what it was a year ago, orders from customers have rebounded somewhat. March financial results put us into the black for the year to date, April’s results will be better still, and the sales forecast for May/June is comfortable, if not stupendous.
It is infinitely less stressful to be focused on how much profit we can make, as opposed to having concerns over whether the month will show a profit or a loss. We have shifted over to the positive problem of “How do we make shipments on time with the resources we have?” as opposed to the negative problem of “Who is the next person to get laid off?” I’ve even had to call a few people back off layoff.
My problem is that I can’t confine myself to the springtime “green shoots” metaphor. I come back to other metaphors. Grimmer metaphors.
“We’re not out of the woods yet.” “The other shoe has yet to drop.” “The light at the end of a tunnel is an oncoming train.” “The economy is executing a head fake. It gets you moving one way, then whammo, it turns and goes the other.” “It’s always darkest just before it really goes pitch black.”
My gut feeling is that we are going to hear more bad news before the economy really recovers. So I am keeping cost controls in place, eliminating unnecessary expenses, and watching every hour of overtime like a hawk. I would say “plan for the worst, and hope for the best,” but I think hope is for suckers.
Some say the glass if half full. Some say the glass is half empty. I say the glass has a crack, and the water is running out.
Maybe that's why I don't get invited out much.
At my company, we are also seeing some “green shoots” of our own. After dropping to a level less than half of what it was a year ago, orders from customers have rebounded somewhat. March financial results put us into the black for the year to date, April’s results will be better still, and the sales forecast for May/June is comfortable, if not stupendous.
It is infinitely less stressful to be focused on how much profit we can make, as opposed to having concerns over whether the month will show a profit or a loss. We have shifted over to the positive problem of “How do we make shipments on time with the resources we have?” as opposed to the negative problem of “Who is the next person to get laid off?” I’ve even had to call a few people back off layoff.
My problem is that I can’t confine myself to the springtime “green shoots” metaphor. I come back to other metaphors. Grimmer metaphors.
“We’re not out of the woods yet.” “The other shoe has yet to drop.” “The light at the end of a tunnel is an oncoming train.” “The economy is executing a head fake. It gets you moving one way, then whammo, it turns and goes the other.” “It’s always darkest just before it really goes pitch black.”
My gut feeling is that we are going to hear more bad news before the economy really recovers. So I am keeping cost controls in place, eliminating unnecessary expenses, and watching every hour of overtime like a hawk. I would say “plan for the worst, and hope for the best,” but I think hope is for suckers.
Some say the glass if half full. Some say the glass is half empty. I say the glass has a crack, and the water is running out.
Maybe that's why I don't get invited out much.
Sunday, April 19, 2009
General Growth Shrinks Down to Nothing
General Growth, the second largest shopping mall operator in America, filed for Chapter 11 bankruptcy last week. General Growth had grown through a series of acquisitions over the years. The largest of these was an $11 billion buyout of the Rouse Company in 2004.
GG had paid for these acquisitions through the mechanism of taking on ever increasing loads of debt. At the time of their bankruptcy filing, they had over $27 billion in outstanding loans.
The mall operator was taken down by two interlinked factors related to the recession. First, the current economic downturn has caused a shake out in the retailing industry. Merchants are closing stores, leaving blank fronts inside the malls. Unrented spaces mean that the cash flow available to pay debt is reduced.
The immediate cause of the bankruptcy was the general credit crunch. Banks were simply unwilling to roll over loans that had come due from the real estate operator. Faced with demands for cash, the management of General Growth threw up their hands and declared “Game Over.”
First of all, who lends money to a mall operator named General Growth? The mall industry has been shrinking for years. Malls are based on the concept that you park your car and stroll through the mall to do your shopping. Overweight Americans don’t want to stroll. They want to drive up to one store, get what they want (note the distinction between get what you want and get what you need), and then get back in the car and drive to the next big box retailer. “I had to drive around that parking lot four times before a good parking spot opened up. It’s a good thing gas prices have dropped since last year.”
I’m no retail genius, but even I know that the mall industry has been shrinking. It would be like loaning money to a company called Smoking Crack, Inc. “Sure, that sounds like a great investment!”
But it is even more amazing that the managers of the company bet the stockholder’s money on a strategy that included piling on debt until they were unable to get it refinanced. Without spectacular amounts of leverage, the returns in the mall business might not have been great, but they sure would have been better than being wiped out.
So, another company build on leverage bites the dust. And the trend for 2009 continues…
GG had paid for these acquisitions through the mechanism of taking on ever increasing loads of debt. At the time of their bankruptcy filing, they had over $27 billion in outstanding loans.
The mall operator was taken down by two interlinked factors related to the recession. First, the current economic downturn has caused a shake out in the retailing industry. Merchants are closing stores, leaving blank fronts inside the malls. Unrented spaces mean that the cash flow available to pay debt is reduced.
The immediate cause of the bankruptcy was the general credit crunch. Banks were simply unwilling to roll over loans that had come due from the real estate operator. Faced with demands for cash, the management of General Growth threw up their hands and declared “Game Over.”
First of all, who lends money to a mall operator named General Growth? The mall industry has been shrinking for years. Malls are based on the concept that you park your car and stroll through the mall to do your shopping. Overweight Americans don’t want to stroll. They want to drive up to one store, get what they want (note the distinction between get what you want and get what you need), and then get back in the car and drive to the next big box retailer. “I had to drive around that parking lot four times before a good parking spot opened up. It’s a good thing gas prices have dropped since last year.”
I’m no retail genius, but even I know that the mall industry has been shrinking. It would be like loaning money to a company called Smoking Crack, Inc. “Sure, that sounds like a great investment!”
But it is even more amazing that the managers of the company bet the stockholder’s money on a strategy that included piling on debt until they were unable to get it refinanced. Without spectacular amounts of leverage, the returns in the mall business might not have been great, but they sure would have been better than being wiped out.
So, another company build on leverage bites the dust. And the trend for 2009 continues…
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