Points for Honesty

As I'm sure many of you have already heard, AT&T is trying to buy T-Mobile from Deutsche Telekom.  Naturally, the antitrust goons have raised hell, along with Sprint who isn't real happy about the deal.  I'm sure that I have discussed on this blog how Antitrust laws are the Jim Crowe of business regulations.  They are the most unjust, indefensible business laws on the books.  Being indefensible, they have garnered a creative assortment of proposed justifications of the economic, moral, and social varieties.  The best one yet, the most honest and the most frightening, I heard a couple days ago while watching CNBC.

Steve Forbes was guest hosting, and they were interviewing one of Clinton's Fascist Communication Commission Chairmen by the name of Reed Hundt.  They were talking about this acquisition, and Forbes asked Hundt something like "Don't you think that antitrust is fairly obsolete in this case?  These aren't large manufacturing firms than can stifle competition.  Competition in this industry is incredibly fierce between the two major players."  Ignore the problems with that question for the time being.  Here was Hundt's answer, paraphrased:

"Well, I've been an antitrust lawyer all my life, so if antitrust is obsolete than I'm in a lot of trouble."

I think that boils antitrust legislation--and most regulation--down to its essence.  Antitrust is right because it's my job.  Love it!

Honda, Who Knew?

I needed to look up something about Honda's Indiana plant for work, and this popped up in front of me when I opened the indiana.honda.com website:

The Human Being is born as a free and unique individual with the capacity to think, reason, and create--and the ability to dream. "Respect for the Individual" calls on Honda to nurture and promote these characteristics in our company by respecting individual differences and trusting each other as equal partners.
-Honda Philosophy

It's always nice to see reason and individualism promoted by a large corporation, even if inconsistently.

Wise Words from Governor Daniels

A few days ago, I found myself trolling around the state of Indiana's website, and I discovered the transcript from the commencement speech Governor Mitch Daniels gave at Rose-Hulman Institute of Technology (In case you are unaware, this is one of the premier engineering schools.) I've often found that Daniels has a pretty good head on his shoulders, and when I met him he did express admiration for Ayn Rand and her works, occasional pragmatist though he is.

This commencement address surprised me, then, in its defense of talent, skill, production, and rationality, grossly uncharacteristic of a politician's speech. Here are a few of my favorite snippets:

"Amid grade inflation, dumbed-down SAT tests, and stagnant academic performance across most of American education, you chose the harder path. Your self-esteem was hard earned, not conferred as an exercise in social work. If any graduates in America today are ready for the tough world of a prolonged recession, you are."

"The Marines once had a recruiting slogan: "No one wants to fight, but somebody better know how." Today as never before, winning the world economic combat depends on someone knowing how to do the hard work of innovating, enhancing, designing and redesigning new goods and services, creating the kind of value some purchaser is willing to pay for."

"In case that's not already too heavy a load to lay on you, here's more. Even while you're designing, devising, and deploying the innovations that make tomorrow better, I hope you will make time to be active, vocal citizens. Our nation can no longer afford the luxury of its best scientific minds tending to their technical knitting and leaving major public decisions to the lawyers and career politicians.

The U.S. Congress contains eight times as many lawyers as scientists and engineers. In the Indiana General Assembly, only five of one hundred fifty members have a technical background. There is an endearing, but risky tendency for people of science and engineering to concentrate so passionately on the work of invention that they absent themselves from major debates on which their expertise is sorely needed.

I had a dream. A revolution erupted and the mob took all the most talented people to the guillotine. They put a banker in the stocks, but the blade didn't drop and, under the prevailing custom, they had to let him go free. Then they put a star athlete under the blade, but the same thing happened. Then they brought a Rose-Hulman graduate to the scaffold, and as he put his head beneath the knife he looked upward and said "Wait! I think I see your problem!"

We have passed the time when our best scientific minds can devote themselves solely to their chosen work, or to solving huge, avoidable problems after others have caused them. The issues that now face our country often require a technical understanding, or a grasp of statistics, or cost-benefit analysis, or an appreciation of the scientific method with which the general public is not equipped, and which our politicians neither understand nor particularly want to. People like those Rose-Hulman produces must increasingly challenge not just the design of the guillotine but the policies that would put it there in the first place."

Pretty nice, huh? Finally, he went on a screed about the pseudo-science behind global warming:

A relentless project has inundated Americans for years with the demand that we must drastically reduce the carbon dioxide we emit as a society. It is asserted that the earth is warming; that this warming would have negative rather than positive consequences; that the warming is man-made rather than natural; that radical changes in the American economy can make a material difference in this phenomenon; and that utility bills in Indiana must double because no better, less expensive alternative to this policy is discussable.

Well. All these contentions may be correct. It may be that they will all be borne out over the coming decades. But the average citizen has no way to be sure of that for now. Although there are scientists, and scientific studies, that are deeply skeptical of all these claims, they are rarely heard in what passes for public debate. The debate, so far, has been dominated by "experts" from the University of Hollywood and the P.C. Institute of Technology.

Joining this discussion will require more than technical competence; it will take courage, too. In what has become less a scientific than a theological argument, anyone raising a contrary viewpoint or even a challenging question is often subjected to vicious personal criticism. Any dissident voice is likely to be the target of a fatwa issued by one Alatollah or another of the climate change theocracy, branding the dissenter as a "denier" for refusing to bow down to the "scientific consensus."

Ayatollah Gore. I like it.

Croaking Class of Persons

Every now and then I read a quote that makes me want to shout out "Yes, that's exactly what I want to say, and damn does it sound good!" I've been reading historian Burton Folsom's book Entrepreneurs vs. The State (With a title like that, you know it's good. I think it's out of print now, but I think his The Myth of the Robber Barons is very similar if not the same). It's a very entertaining and enlightening read, and I recommend it if you get the chance.

Anyway, he has a chapter devoted to the founders of Scranton, PA. They were the Scranton brothers and their associates, who started the Lackawanna Iron and Coal Company as well as the Delaware, Lackawanna, and Western Railroad. Some of these men were great capitalists who amassed a fortune, as well as built and planned the city of Scranton.

In this chapter, Folsom discusses how the local farmers were not too keen on these city boys buying nearby land and building factories on it (although they did not complain about the easy freight access). They did not want "the 'machine' [to] transform their 'garden' into an industrial community." It's easy to see that these farmers were anti-capitalist Luddites of the oldest and most enduring breed. Folsom then presents the reader with a quote from a Lackawanna Valley historian, Horace Hollister, describing the farmers. No description would do justice to this quote, so just read:

There were then, as there are yet, and as there always will be, a debilitated, but croaking class of persons who by some hidden process manage to keep up a little animation in their useless bodies, who gathered in bar-room corners, and who, with peculiar wisdom belonging to this class while discussing weighty matters, gravely predicted that "the Scrantons must fail!"

Substitute "capitalism" for "the Scrantons" and you've got a description of every whiny, lazy, self-hating moocher now crowing for government to lead them and tell them what to do. "Croaking class of persons;" I love it!

Book Recommendation

I just finished reading P.J. O'Rourke's Eat the Rich, and I really enjoyed it. It's a humorous introduction to economics, complete with scenes from countries at all corners of the economic landscape. He discusses what makes Wall Street different from Albania (please, hold your snide jokes until the end), Sweden from Cuba, Hong Kong from Tanzania (You've heard of Hong Kong). O'Rourke's a free-market guy with a likeable cosmopolitan wit. And he hates the Clintons, to boot. Here's a couple of my favorite exerpts.

A belief in the free market means a belief that people have an innate right to the fruits of their endeavors, and the right to dispose of the fruit the way they see fit, as long as other people don't get pasted in the face with a rotten peach or something.

Accepting the free market allows us to avoid the political abuse and financial mismanagment inherent in trying to design an economy that's fair. It also allows us to see that economies can't be designed. Economics is the measurement of how human nature affects the material world. The market is "heartless." So are clocks and yardsticks. Saying that economic problems are the result of the free market's failure is like gaining twenty pounds and calling the bathroom scale a bum.

There's a bunch more comments like these throughout the book, but I won't spoil it for you. Go out and buy it! (Incidentally, I got my copy for a dollar at a library book sale. Being poor is fun.)

Could Not Have Said It Better Myself

The WSJ had a great quote in its "Notable and Quotable" section today. It is from The Times of London from 1846. What I want to know is, why don't newspapers write like this anymore?

The greatest tyranny has the smallest beginnings. From precedents overlooked, from remonstrances despised, from grievances treated with ridicule, from powerless men oppressed with impunity, and overbearing men tolerated with complaisance, springs the tyrannical usage which generations of wise and good men may hereafter perceive and lament and resist in vain.

At present, common minds no more see a crushing tyranny in a trivial unfairness or a ludicrous indignity, than the eye uninformed by reason can discern the oak in the acorn, or the utter desolation of winter in the first autumnal fall. Hence the necessity of denouncing with unwearied and even troublesome perseverance a single act of oppression. Let it alone, and it stands on record. The country has allowed it, and when it is at last provoked to a late indignation it finds itself gagged with the record of its own ill compliance.

Yep, I think that about sums it up. See, London was cool once.

I Can't Decide How I Feel About This Quote

I ran across this beauty while reluctantly reading my management text:

The things that make a good leader are being open-minded, having a willingness to really ask for and accept advice, showing a sense of humility, and putting the right people in the right seats. -Hank Paulson, CEO, Goldman Sachs (Prior to his stint as Treasury Secretary)

I'm not really sure what to think about this. Either he followed his own advice and failed anyway, which is funny, or he ignored his own advice and failed, which is funny too. All we can be sure of is that he failed. Some of this advice is valid, I think, especially the part about putting the right people in the right seats, which Paulson definitely didn't do. The part about humility is, well, you know. Businesspeople tend to use the word humility to refer to rationality and honesty in the face of unpleasant reality. If he's using it that way, he definitely didn't follow his own advice on that one.

The point of this is that Paulson is a douche, in case that wasn't apparent already.

Notable Quote

In the course of my research for my thesis on executive compensation in the banking industry, I stumbled across a quote I just couldn't exclude from my paper. The irony was too perfect. In his book, A Banker's Life, George S. Moore, the former president of Citibank, writes:

Speaking from a perspective of sixty years in banking and in business, I have to say that banking is the surest, safest, easiest business I have seen or known….If you’re not actually stupid or dishonest it’s hard not to make money in banking.

Now, a few preliminary comments about this quote. Moore ran Citibank in the 1960s, when banking, like most businesses, was considerably simpler. It was far more regulated, far less exciting, and consisted of, as my Money, Banking, and Capital Markets professor put it, "Fat men in suits playing golf." Since the 80s, banking has grown more interesting and more complex. Part of this can be tied to the proliferation of securitization of assets and the competition for financing. Nevertheless, even though the specifics of banking may have changed, the fundamentals are pretty much the same: Take in money, lend out money, take in more money, lend out more money.

Also, he is obviously understating the importance of intellect in banking. It is the "surest, safest, easiest business" if you have the business acumen to spy good investments. It seems easy to those who can do it.

That said, I find this quote hilarious for the obvious reason that so many bankers seemed to fall into the "stupid or dishonest" category in recent years. (Dishonest with themselves, and therefore stupid with their businesses) If I had to venture a guess as to the reason for the prevalent stupidity, I would blame the growing trend of business to align itself with the government at the upper level. For evidence, see Robert Rubin, the former Treasury Secretary who served on the board of Citigroup after his tenure in the Clinton administration until his recent resignation in disgrace. Also see Angelo Mozilo, the former CEO of Countrywide Financial who abetted Fannie Mae and Freddie Mac in their affordable housing binge in exchange for favors.

Putting government pull-peddlers at the tops of corporations sets the corporation up to serve the government, not its shareholders. That is exactly what happened in the mortgage crisis, and now the government, with its increased role in bank decision-making, is trying to repeat that catastrophe.

Lesson: If you want to run a business the way business is supposed to be run, don't stuff your boardroom or your corner office with "Men from Washington" whose only strategic advantage is that they have lots of "friends."