Stupid President

I don't really dislike Barrack Obama. He's no Bill Clinton -- the best president in my life time I never voted for -- but he isn't (yet) Jimmy Carter, either. I'm all for an arrogant foreign policy but I do understand why the nation was ready for a break.

But Obama's habit of kowtowing (almost literally) to foreign prince's and potentate's is disgusting. And not just disgusting, but stupid. He's the American president. He's the head of state. HE IS THEIR EQUAL. He is their equal on principal, because that's what Americans believe, so no American should give Elizabeth or Abdullah or Emperor What-his-face-sama anything but a brief nod. But he's also their equal as a matter of mere protocol. The Administration just looks dumb when they do this and I wish they would stop it.

Um...Huh?

I enjoy reading Camille Paglia, who is also responsible for the post below this one. Her most recent Salon column viciously attacks Nancy Pelosi, national health care, Hillary Clinton and Richard Dawkins. What's not to like?

And then she says something like this:

What mal-education goes on at killer prices at the elite schools! Skyrocketing tuition costs are legalized piracy. It's a national scandal, which the mainstream media has shamefully neglected. A few weeks ago, I was bemused to discover the bill from my first semester (fall 1964) at Harpur College of the State University of New York at Binghamton. The tuition was $200, which was offset by my state scholarship for that amount. My shared room was $150; linen was $6.50. Board at the cafeteria was $225. The physical education fee was $2, and there was an activity fee of $17.50 and a general college fee of $12.50. The grand total my parents owed for the semester was $413.50 -- for which I received the superb education that is still the basis of my professional life as a teacher and writer. If only the billions upon billions that this country has thrown down the drain in Iraq and Afghanistan had been redirected to education and healthcare!

That someone as smart as Paglia doesn't understand that, not only have we thrown billions (probably trillions) of government dollars at higher education, but that those billions are the reason college costs so much today, is discouraging. Of course, Paglia, like me, feeds at the big ed/governmental trough, which can warp even the smartest observer.

The Second Time As Farce

Remember when the spat between Neil Young and Lynyrd Skynyrd was the battle between good and evil?

Place Holder

I'm feeling some internal pressure building up to blog (or maybe even write) about how Harvard Business School destroyed American business. Basically, it's a story of two post-war trends. First, a belief in planning -- the more massive the better -- as the answer to every problem. Second, the decision of the large foundations -- Ford, Carnegie and Rockefeller -- to pour money into management education so long as it looked "social scientific."

It turned out that these trends left management a little up in the air. Isn't wasn't quite clear what we should be teaching. As a result, a lot of schools hired psychologists and sociologists and focused on what we call micro management (yes, really). Basically, this was human resource management. The problem is that it's never been possible to convincingly (i.e., scientifically) show that any particular hr technique leads to better firm performance. Basically, hr (also called organizational behavior) focused on reducing absenteeism and turnover while increasing what's called "organizational citizenship behavior, which is doing things for your employer that aren't, technically, your job. For example, the person who takes it upon herself to empty and clean the lunch room refrigerator is demonstrating OCB. Frankly, it's all sort of a mess of warring medium-term theories and we can't even say with certainty that employee satisfaction is a good thing for the company.

This left Harvard with a problem. HBS does not see itself as being in the business of churning out middle managers and vice presidents of human resources. It sees itself as being in the business of turning out CEOs whose value is in their ability to lead their company to sustained high returns. Before the focus on planning and scientification, they did this by hiring retired CEOs to come in and tell war stories to the graduating MBA students. This is probably as good a way of teaching strategic management as any, and survives today in the Harvard case study method. But it's very ad hoc and highly unscientific.

The other problem facing Harvard was that there's no obvious place for economists in this new management education. Economists are social scientists, but they assume that over time there are no meaningful firm level differences. All firms, in the long run, are fungible in economic theory. So it's not just that economists don't have much to say about the proper strategy to pursue to obtain sustained high returns, it's that they don't think that there can be any such thing.

All this came to a head in the person of a economics student at HBS name Michael Porter. Porter was studying IO (industrial organization) economics, which is the branch of economics that advises policy makers on how the legal environment should be structured to promote competition within industries, and thus avoid sustained high returns. Porter, true to his training, accepted that firms within the industry would, in the long term, all look identical and thus there was no point on wasting time on firm strategy. But he turned IO economics on its head and started educating executives on how to use lobbying and industry-level devices (e.g., trade associations and collective bargaining agreements to reduce competition within the industry and block entry, allowing all of the established firms in the industry to share sustained high returns. Basically, the Porter school (Porter, by the way, would object to this as an overly simplified summary of his views) teaches that the most important strategic decision made in business is about what industry to enter, after which there isn't much any individual firm can do to set itself apart from its competition. After that, all you can do is work together with your "competition" to try to rig the game at the industry level.

Porter's success at Harvard, and Harvard's success at educating CEOs, seems to me to explain much of what we've witnessed over the last few decades. (Porter published his early and most influential work in the late 70s and early 80s.) The co-dependent corporate state and the corrupt bargains struck by management, labor and government owe quite a bit to the presence, at the top of the corporation, of CEOs educated to think that management consists of rigging the game.

Cupcake Bloggers Are The Unacknowledged Legislators Of The World

The Invigorating Sight Of New Non-Green Shoots Of Unhope

Poll: US belief in global warming is cooling (Dina Cappiello, AP, 10/21/09)

Americans seem to be cooling toward global warming.

Just 57 percent think there is solid evidence the world is getting warmer, down 20 points in just three years, a new poll says. And the share of people who believe pollution caused by humans is causing temperatures to rise has also taken a dip, even as the U.S. and world forums gear up for possible action against climate change.

I could get all wigged out about the AP's ignorance of the scientific consensus that "pollution" causes global cooling and part of whatever warming happened in the latter half of the 20th century was due to cleaning up the air. But why spoil this moment.

Dr. Duess

(WARNING: The following is not in any way nuanced, satirical or sophisticated. It is not an allegory for our times. There is no hidden meaning or moral, and those searching for one will be shot. The Proprietor)

Giants come,
Witches come,
Rumbling, bumbling giants come.
Slithering, dithering witches come.
How they run!
How they come!
They come to the house of Johnny Rum.

Johnny Rum is home in bed.
Johnny Rum with a cold in his head.
Laying in bed, cold in his head,
Johnny hears the giants run.
Mom is gone.
Dad is gone.
Billy and Jilly and Tilly are gone.

Johnny Rum grabs the phone,
Johnny Rum, home alone.
Johnny Rum calls 911.
"Witches, you say?"
"Giants, you say?"
"Please check your number and dial again,"

The Queen of the witches comes to the door,
The Queen of the witches chills to the core.
The biggest giant comes to the door,
The biggest giant, with the head of a boar.
Knock, goes the door,
Knock, goes the door.
"Who's there?," goes Johnny Rum.

A giant rumble comes to Johnny,
A witchy shrill grabs for Johnny,
"We've come for you," rumble the giants.
"We've come for you," shrill the witches.
"Abandon hope, Johnny Rum."

Johnny Rum knows the score.
Johnny Rum has learned the lore.
Johnny Rum opens the door.

A bucket of water pelts the Queen.
A bucket of water melts the Queen.
Melt, Queen.

The largest giant snorts and steams.
Johnny runs.
Johnny dashes.
The largest giant bends and bashes.
Johnny grabs his big shoe laces.

Johnny ties and knots and splices.
Johnny joins and knits the laces.
Johnny runs, the giant follows,
Down he goes into a hollow.
The earth shakes.
The ground quakes.
Bones break.
Mountains flake.
Thunder wakes.
In the mountains, a dam breaks, a lake quakes, a flood wakes.

All the witches scream in horror,
All the giants run in fright.
The ground shakes; the ground quakes.
A flood comes.
A rushing, gushing, shaking, quaking, moaning, groaning, frowning, drowning flood comes.

In the swirling waters, all the witches start to melt.
In the twirling waters, all the giants start to fall.
Giants run,
Witches run,
Rumbling, bumbling giants run.
Slithering, dithering witches run.
They run from the house of Johnny Rum.

Mom is home.
Dad is home.
Billy and Jilly and Tilly are home.
Johnny Rum is in his bed.
Johnny Rum, with a cold in the head.

Coase Gets His Second Nobel

Donna this morning mentioned that she heard on NPR that some American had been awarded the Nobel for his work on the boundaries of the firm. After making the mandatory Barrack Obama joke, I said that it must be Oliver Williamson, and I was right.

As it happens, I just spent a measurable portion of my summer reading Williamson and about Williamson. (I've pulled three of his books from the shelf, The Mechanisms of Goverance, The Economic Institutions of Capitalism, and The Nature of the Firm, and I highly recommend them. Williamson is an accessible writer and if you're interested in why some functions necessary to produce a product are in the firm and others aren't (and who isn't), Williamson makes for a good read.) The old saw is that an economist is anyone who calls himself an economist, but I think of Williamson as an organizational theorist. Org theory is a name more than a discipline -- psychologists, sociologists, anthropologists and economists all write org theory -- and the line between org theory and strategy (my field) is whisper-thin. If you look at organizing, you're an org theorist, unless you look at whether different ways of organizing effect performance, in which case you're in strategy.

As Prof. Williamson would be the first to admit, his work owes much to Ronald Coase. Coase first asked why organizational boundaries exist where they do? This is a more subtle question, and a more fundamental question, that first appears. The question really is why, if the market is so great at delivering the right product at the right price, does so much economic activity take place within the firm, where decisions are made bureaucratically by a hierarchy. Why have an HR department when the market could deliver the right worker for the right price? Why did Ford try to control the entire supply chain from mining the iron ore through selling the completed car, but buy it's tires from Firestone?

Coase's answer was that it must cost less to do it that way, at least in the long run. As Williamson says, "What is one to do with a 'gift' that is patently right, eludes analysis, and upsets foundations?" Essentially what org theory (and economics) did was ignore it for 50 years until Williamson based his career on building on Coase's analysis. His first book, and in some ways his best book, is Markets and Hierarchies (1975) which does a great job of combining work on information theory, organizational innovation, transaction costs and the behavioral theory of the firm.

Overall, Williamson's work allows us to make predictions about broad trends in org theory. Recent advances in information management and the collapsing costs of communicating across distances led to a predictable (and predicted) increase in outsourcing and vertical dis-integration. In other words, we're now in a period in which we should expect to see market mechanisms substituting for hierarchical/bureaucratic command and control mechanisms. Which is just another reason that the move to nationalize healthcare is a bad idea.

In fact, the work of both of this year's economic laureates suggests that nationalizing healthcare is a bad idea. (Elinor Ostrom's work suggests that the revealed preferences of local consumers does a better job of allocating scarce resources than diktats from national hierarchies.) Predictably this will be ignored by the very people who expect us to defer to the wisdom of the Peace Prize committee.

Next To The Nobel Committee Wearing Sashes Announcing "We're Racist Dupes And Hypocrits"

This news couldn't be any better.

I've been thinking over why I find this news so amusing and so gratifying. It comes down to a line from Deep Space Nine: "A true victory is to make your enemy see they were wrong to oppose you in the first place. To force them to acknowledge your greatness."

What we really want is for our intellectual opponents to come to us one day and admit that we were right all along to believe that they couldn't really believe the bilge that they were speaking. We were right; they were wrong; and they knew it at the time.

Of course, in real life that never happens, making this the next best thing.