The CEO President

Posted on July 28, 2008 | 3 comments

I’m a little late in writing this, but let’s at least get the thought down on paper (screen?) while Bush is still in office.

During his 2000 campaign and since, much attention has been paid to President Bush’s MBA from Harvard , and the fact that he would be our first “executive president.” This attention focused on the president as CEO, and on Bush’s time in business; in short, it focused on executive competence.

This is a fine idea in theory: management skills are nice in an executive, and it would be good for the president to manage and lead effectively. And it’s not unreasonable to assume that a CEO who is great in the board room might also be great in the White House. I imagine that many Americans would welcome Jack Welch as president.

But the thing is, not all CEOs are actually good at their job. Some are excellent and some suck. Some are terrible managers, or lack vision or strategic skills, or are simply not that bright. Anyone who has spent time in business has seen CEOs who probably shouldn’t have been in that role, but were promoted because they were great salesmen or played politics well or had the right connections.

I knew a bad CEO once. He was in over his head – too young, without enough experience to legitimately be in his position. He wasn’t able to manage the company’s fast-growing organization, let alone lead it. He didn’t have vision, and was unable to develop a strategy that made sense in a dynamic competitive environment.

He actually knew he was in over his head, but refused to admit it. Instead, he got defensive, digging in his heels and refusing any advice or suggestions, whether from employees or from outsiders. The company was essentially paralyzed by the CEO’s inability to manage it. We were unable to develop new products and eventually went bankrupt.

The parallels to President Bush are clear. He too is in over his head, and is defensive and dug in. He seems utterly immune to outside opinion and is making bad decisions as a result. Strategy appears beyond his capability, as does the ability to learn from mistakes. Even his reputed executive competence is a fiction, as Katrina and Iraq have demonstrated.

Using the term “CEO president” is meaningless. What matters in the White House is leadership and vision and competence, not whether someone has been a CEO or has an MBA.

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Why Are Taxpayers Helping Tomato Growers?

Posted on July 25, 2008 | Leave a comment

There was an article in today’s Wall Street Journal about how the tomato industry is asking for $100 million cash to make up for lost revenue during the recent salmonella scare, and Congressman Tim Mahoney, a Democrat from Florida, where many tomato growers are based, is introducing legislation to make it happen.

This is today’s example of privatizing profits while socializing losses. This is a topic I will return to many times since it features several of my pet peeves:

  1. Greed in the private sector
  2. Venal politicians
  3. A system which benefits the powerful and well-connected at the expense of the average taxpayer

To be honest, this is not the best example ever. A legitimate case could be made that since government shut down the tomato industry to protect the health of all Americans, all Americans should pay for the damages. I reject that case because the food industry has long rejected government efforts to improve safety. I further reject it because if the government had done something that temporarily increased tomato industry profits (eg. FDA announces that tomatoes cure obesity, and then takes it back) you can be certain that the industry would not return its windfall profits to the taxpayers.

With that case summarily dismissed, like so many Lotharios in so many bars, let’s turn to why this tomato cause vexes me so. Tomato farmers and packers are in business to make money, so their incentive to recover losses is understandable, especially since it appears that their product was not the salmonella vector. But on the other hand, theirs is a risky business. Produce is susceptible to weather, to bugs, to the whims of the market – should the taxpayers pay whenever something goes wrong? The food industry in the US has had ample opportunity to clean up its act, but has chosen instead to save money. And now, because the food industry caused disease, they expect us to pay. My view: this is the cost of doing business.

As for Congressman Mahoney, representing the tomato district of Florida, in the 2007-2008 election cycle he has received nearly $95,000 in campaign contributions from agricultural concerns, making them his fifth largest donor base. He has a national debt clock on the front page of his web site, showing $32,525 in debt per citizen as I write this, but that isn’t preventing him from giving $100 million of taxpayer money away to a few connected tomato producers who provide campaign contributions which allow him to remain in power. That’s what I call venal.

Part of the problem – beyond greedy people and venal politicians – is that the system encourages this behavior. The greedy people with significant capital at stake have heavy incentives to apply their resources toward a leverage point. The venal politician who wants campaign contributions is that leverage point. And the average taxpayer has no say in the matter. Until there is some stronger system of campaign finance reform, or an organization with major dollars to deploy on behalf of the common citizen, we are going to have to rely on corporations not being greedy or politicians not being venal and power hungry. Good luck with that.

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Deep Grief and Lost Keys

Posted on July 24, 2008 | Leave a comment

Recently I was reading a collection of religious writing and there was an essay by Patricia Monaghan called Physics and Grief about how she coped with the loss of her husband to cancer. A few months after he died, she misplaced her keys in her house, and was utterly unable to find them. She searched and searched, and finally giving up, she broke down and screamed, letting out all the accumulated grief, screaming at her husband, screaming at the universe. After, she regretted the scream, and particularly the subject: just a set of lost keys.

“If I were going to throw down the gauntlet to the universe…, couldn’t I have chosen something more important as proof? World peace? Personal economic security? A beatific vision?”

I’ve never lived through a tragedy like losing a spouse, and hope that I never do, but somehow screaming over lost keys seems entirely appropriate in a situation like hers. After suffering through something so meaningful and so horrific as a husband’s death, the least you might expect is that the little things in life would go well. I can fully see myself in her place yelling at the universe: “You took away my husband, now for fuck’s sake, at least give me my keys. You owe me that.”

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Posted in Philosophy, Religion

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The Everyday Social Contract

Posted on July 24, 2008 | Leave a comment

The concept of a social contract is not a new one. Theories of society as a collective agreement between its members have probably existed since people first began living in groups. Certainly Plato discussed society’s contract, and Rousseau’s biggest claim to fame is his 1762 book The Social Contract. The big social contract takes the form of following laws and voting and supporting the military and other major responsibilities of citizenship.

But we also enter into minicontracts every day, unspoken rules or little rituals and commitments whereby we all have to play our role to make the whole go smoothly. As an example, when you get on a city bus you effectively enter into an everyday social contract to cooperate with other passengers to make the ride work.

When you get on a city bus, you start looking for a seat. If the front seats are taken, you move to the back. If you see that all seats are taken, so you’ll have to stand, you should also move to the back. We all know this, and if we forget, we’re reminded by the driver, who continually yells “move to the back.” The only way a city bus can fill up to carry all the passengers who want to ride is for standers to keep moving back. But if even one person violates this everyday social contract, the system falls apart. If one person stands in the middle of the bus instead of the back, then nobody can get past that person, and the whole back of the aisle is empty. The back of the bus is bereft of standers, while a zillion people are crowded into the front half. How many times have you been on a bus like this, or even seen it pass by you, refusing to stop because the driver thinks it’s full, when you can see room for 10 more people in the back?

There are many other examples of everyday contracts: behavior on elevators, noise in apartment buildings, driving (go fast in the fast lane, etc.) and, of course, everyone’s hottest button, using cell phones in small spaces. In some ways, we can see the larger social contract of society as being made up of all these everyday contracts. And with these everyday contracts, one violator can cause problems for every other person who signs the contract. The question is how we keep people from violating the terms of their contract. Any ideas?

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Posted in Philosophy, Trends

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Eventually We’ll All Be Environmentalists

Posted on July 22, 2008 | 1 comment

Environmentalism is generally represented as some version of dichotomy: conservative v. liberal or business v. environmentalists or republican v. democrat. Probably the most common characterization is that corporate executives don’t want to spend money to clean up while liberals want businesses to be clean and green: in other words, profit v. the environment

This dichotomous presentation has historically made sense, and if you look at environmental battles in the past, this is how the lines have often been drawn. For examples, see loggers v. the spotted owl or coal mines v. health advocates.

Health advocates, however, are the crux of a coming change. As the environment degrades and as science discovers more links between pollution and health, environmentalism will be seen less as an earth and animal issue and more as a human health issue. Many companies are perfectly happy to prioritize profits above trees or animals or scenic views, but they are much less likely to put profits ahead of human lives.

As the science become clearer and activists get better at using that science, the link between corporate actions and human health will become more explicit. This will cause corporate chieftains to look at things differently: they are, for the most part, decent people, and they don’t want to kill or injure other humans. And even those chieftains who might choose profit over the lives of others (they’re the ones who make great movie villains) certainly don’t want to get caught valuing money over human lives – that would be bad for business.

To use a concrete example, coal mining creates pools of toxic sludge. In West Virginia, some of these pools sit near schools. One mine, owned by Massey Energy, has a 2.8 billion gallon sludge pool sitting 400 yards above an elementary school. If science were to demonstrate that the fumes from this pool are damaging to the health of the school kids, I reckon that Massey CEO Don Blankenship would look into doing something about it. Mr. Blankenship probably doesn’t want to kill kids, and he definitely doesn’t want the world to know if he does kill kids.

Moreover, as global warming become more widely accepted as fact, this problem will hit closer and closer to home for corporate chieftains. Because if the climate starts to change, it won’t be random kids being hurt; it will be the chieftains’ kids, or grandkids. And NOBODY wants to hurt their own grandkids.

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Posted in Business, Environment, Trends

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Adminstration Denials per Column Inch

Posted on July 21, 2008 | Leave a comment

Today’s Wall Street Journal had a page 2 article on the role of Vice President Cheney’s office in quashing any EPA action on greenhouse gases. The article was based on a report produced by a House committee chaired by Congressman Ed Markey (D-Mass).

The report (which to be fair, almost certainly has some political bias against Mr. Cheney) covers the same ground as other publications have, namely that the EPA was moving toward using the Clean Air Act to regulate greenhouse gases until Cheney’s office reached out and touched the EPA.

For me, the remarkable thing is not that Cheney did this – we all know about his meddling ways – but how blatantly the administration denies it. In fact, in the course of this single WSJ article (2 half page columns, 615 words according to my word processor), there are three blanket denials of something that has been reported repeatedly:

White House spokesman Tony Fratto: “Chairman Markey’s report is inaccurate to the point of being laughable.”

Cheney spokeswoman Megan Mitchell: “I don’t accept their premise.”

Energy Department spokeswoman Angela Hill: Energy Secretary Bodman “has not reversed course.”

That’s one denial every 205 words. Who takes these jobs as spokesmen and spokeswomen?

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Content is King, and Always Will Be

Posted on July 18, 2008 | 2 comments

Here in Silicon Valley, folks like to believe that technology demolishes all old business models. And if those old business models are based in New York or Los Angeles, then the Valley partisans love it even more.

Which is why we continue to hear talk about how the internet will destroy old media, with YouTube replacing television and record companies falling by the wayside. There is a modicum of truth to this talk: old media companies definitely have to change their business models, and some will be unable to adapt.

One thing the internet won’t change, and can’t change, is that content is king. Ultimately, people care about content. Music, video, the written word: in all cases, consumers care about the content itself, not the business model behind it, not the distribution technology, not even who owns it. Users want material that entertains or informs them; how it gets to them is purely a matter of convenience.

Take iTunes and the iPod, for example. Yes, they are wreaking havoc on the traditional music business. But if Apple had not convinced record companies to sell their music on iTunes, it wouldn’t have been successful. No matter how cool the iPod looks, and how easy iTunes is to use, they would have flopped if nobody could listen to their favorite music on them. An iPod without music is a white paperweight.

Or you might recall back in May 2000, when Time Warner, the cable company in New York, dropped ABC from the cable system in a dispute with Disney over money. Who backed down? Time Warner. Why? Because their customers went ballistic when they couldn’t watch the ABC show Who Wants To Be A Millionaire, which was the hot show back then. Viewers didn’t side with ABC or Time Warner – they just wanted to watch their show.

Even in user-generated content – the current revolution – my thesis holds true. On YouTube it is the funny or sexy or interesting videos that rise to the top. People watch that which entertains them. Likewise on blogs. The blogs that have grown from one guy’s ideas (i.e. this one) to actual media companies (i.e. DailyKos) did that because they were popular. Readers liked the content, shared it with friends, and boom – the blog is a hit. Nobody cares that it’s a blog per se, only that it’s interesting.

Digression: please note that this process of good bloggers rising to the top is not so different from the old media process. The classic career path in newspapers was that a writer would start at some small local paper, and if they were good, they might move to a larger paper, and then to a large market paper, and then to the NY Times or Washington Post or some other top paper. In that process, though, the promotion decisions were made by editors. In the blog world, promotion decisions are made by the readers.

What are the implications of content’s primacy? First, it means that the owners and producers of content have more leverage than Silicon Valley thinking gives them. The ability of distribution systems to restrict access to content is limited, whether the distribution system is cable companies, as in the example above, or telephone companies or Google. However, that is true only of content that users already know they want, like American Idol or the latest 50 Cent song. For undiscovered content, the story is different. Like a tree falling in the forest, content in some ways doesn’t even exist until people watch it (or hear it or read it). So for new content, a distribution network that can discover or promote appealing content has great leverage. This is what traditional TV networks do so well: find or create compelling content (CSI, Survivor, etc.) and introduce it to a wide audience.

This theory does not mean that great content is invincible. Fundamental business rules still apply, namely that your content must generate revenues greater than your cost of creating that content. Newspapers are an interesting case. People have clearly demonstrated that they want local news; although circulation is dropping, most newspapers are still widely read in their home towns, and newspapers’ internet sites are generally growing. Revenue streams, however, are disappearing, as internet players siphon off the lucrative classified ad business and major display advertisers (department stores, car dealers) suffer through their own problems. But the cost of producing that content – paying journalists, printing papers – is not going down at all. So even though readers want the newspaper content, the question is whether newspapers can generate sufficient revenue to cover the costs of collecting and distributing their news content. The head of McClatchy newspapers has laid out this dilemma best (full disclosure: I am friends with McClatchy’s CFO), but is still struggling to find a workable solution.

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Posted in Business, Technology, Trends

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Flip-flops and Long Pants

Posted on July 16, 2008 | 5 comments

I was driving the other day and saw a woman waiting to cross the street wearing work pants – slacks, or trousers, or whatever you want to call them – with flip-flops.

Her pants were long, so they dragged on the ground as she walked. This is not an uncommon sight; I see a woman similarly dressed several times a day here in downtown San Francisco. I asked my friend Lisa, who was in the car, to explain. “Well, long pants are very stylish for women right now. Of course, they need to be worn with high heels to look right. But high heels usually hurt like hell, so we wear flip-flops to and from work.”

That seemed logical, and Lisa is my definitive source on such matters. “But,” I queried Lisa, “I see that all the time, and it totally frays the pants. What do women do about that?” Lisa looked at me as if I were a moron (not the first time she gave me that pitying look, by the way) and declared “they get new pants.”

I had always been annoyed by the flip-flop with long pant look, but never really knew why. Maybe it was the discordance of combining beach wear with work wear. Maybe I’m just compulsive enough that the dragging hems vexed me. But during my conversation with Lisa, distaste crystallized into theory. I began to see this look as emblematic of something more than just fashion; I saw it embodying a troubling aspect of our society.

Allow me to explain. The woman I saw crossing the street – let’s call her Sarah – wants to be fashionable, so she wears long pants. But long pants demand high heels, which hurt. Yet Sarah wants to be comfortable too, so she switches out the high heels for flip-flops whenever possible. She wants fashion AND comfort. There is a cost to Sarah having her cake and eating it too: frayed pants. But that cost doesn’t faze Sarah, since she can always buy new pants.

Sarah is like America: she wants to look good and feel good, and damn the consequences of having it all. She refuses to suffer even a modicum of discomfort for her style, and solves her dilemma by overspending, throwing away pants that cost more than the entire wardrobe of much of the world.

In many ways beyond fashion, America wants to have it all. We want to drive giant SUVs yet not pay much for gas. We want our taxes cut yet our services increased. We want cheap and easy mortgages yet our bank deposits to be safe. I personally want to date supermodels who are also nuclear physicists. But in each case the reality is that we can’t have it all.

As a final little fillip to this flip-flop entry, yesterday’s Wall Street Journal had an article on a California legislator who is trying to ban helium-filled mylar balloons because they float away and can short out power lines or kill sea animals who swallow them. The party planning industry is fighting the ban. Says one party planner of her clients: “everybody wants something high-end and glitzy.” Exactly. They want their 10-year old’s birthday party to look like a celebrity wedding, even if it kills a sea otter or two.

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Posted in Pop culture, Trends, Uncategorized

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Offshore Drilling and Gas at $4 per Gallon

Posted on July 15, 2008 | 2 comments

President Bush held a press conference this morning [7.15.08] and among the topics he discussed was his recent removal of the executive order banning offshore drilling. He pressured Congress to remove its own ban on drilling, using the high current price of gasoline as a hammer, accusing Congress of ignoring the financial pain gas prices are causing Americans. Specifically, he said:

“Democratic leaders have been delaying action on offshore exploration, and now they have an opportunity to show that they finally heard the frustrations of the American people.”

Every analyst I’ve read states categorically that approving drilling now won’t bring oil online for 10-20 years; oil companies will have to research where to drill, satisfy environmental concerns, build drilling platforms and develop infrastructure to get the oil to market. And any economist will tell you that oil supply coming online 20 years hence will have zero impact on today’s gas prices.

Bush knows that current gas prices and offshore drilling are unrelated. But he’s saying that they are related – lying, basically – to make a political point. He is preying on American frustrations, using them to push Congress into the action he wants.

Offshore drilling very well might become part of energy policy going forward, since we’re probably going to demand that oil someday. But let’s engage in that discussion honestly, based on relevant facts, rather than using lies and the upcoming election to push congressmen into a particular vote.

Bush’s move today is a great example of the political games – lying, dissembling, conflating issues – that are steadily disillusioning the American public. As moderates give up on the process, their disillusionment making them too apathetic to vote, only the rabid partisans remain.

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Posted in Politics

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