Cogs & Clockwork

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Will Truman

Will Truman is the Editor-in-Chief of Ordinary Times. He is also on Twitter.

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212 Responses

  1. Avatar Saul DeGraw
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    says:

    I remember hearing that the difference between American and Japanese/Asian companies that Americans go for short-term profits and gains and Asian companies go for the long game and imagine themselves decades in the future. This is obviously an exaggeration but it was used during an antitrust case during the 1980s.

    However based on all the stories I hear it does seem that there is an American tendency to focus on the here and now and double down and not care about the future. Treating employees like cogs might be feasible in many situations and it might be great in terms of short-term/quarterly profits but it will come back and bite you in the end as your stories point out.

    Now why American companies can’t seemingly figure this out is beyond me.Report

    • Avatar Kim in reply to Saul DeGraw
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      says:

      On Wall Street, 6 months is long term.Report

    • Avatar James Hanley in reply to Saul DeGraw
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      says:

      Asian companies go for the long game and imagine themselves decades in the future

      But as we found out, this can lead to a lot of companies that aren’t ever profitable because they’re always positioning themselves to be profitable decades from now.Report

      • Avatar Saul DeGraw in reply to James Hanley
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        says:

        Obviously focusing too much on the long game is also problematic for the reason you pointed out. But I think Americans do focus on the quarterly statement too much and there should be a middle ground between the long-game and just getting as much profits as possible in a quarter.Report

      • Avatar James Hanley in reply to James Hanley
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        But I think Americans do focus on the quarterly statement too much

        I hear this a lot, but mostly from other folks like me–that is, folks who don’t have the responsibility of running a business profitably.

        I suppose it could be true, but I don’t really know that it is.Report

      • Avatar Kim in reply to James Hanley
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        says:

        James,
        I think of Circuit City, and the entire Cancer Economy (build build build, who cares if it’ll ever be profitable! the more you build, the more of a growth company you are!), when I say things like that.

        In short, much more of a problem during the boom years.Report

      • Avatar Kim in reply to James Hanley
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        says:

        James,
        Can you cite some examples of Asian companies that aren’t ever profitable?
        I know for American companies, they tend to be penny-stock biotech, where you’re more speculating on future gain.Report

      • Avatar James Hanley in reply to James Hanley
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        says:

        Kim,

        Many of the keiretsu focused on increasing market share for their constituent firms, rather than making them profitable in the near term. This was done by continually getting loans from the banks, mire than they were able to repay due to their insufficient profitability. Legally or politically the banks were required to keep lending, until they really had nothing left to lend. This was a big part of Japan’s long-running recession.Report

      • Avatar Roger in reply to James Hanley
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        I spent way too much of my life in corporate boardrooms in boring meetings with the corporate president, CMO, CFO and/or CEO to buy into this short term nonsense.

        The meetings were always oriented on a balance of both.

        This is a myth which, like most myths, has a grain of truth in it. At times companies overreact for short term considerations. For example, during the recent downturn, the Fortune 500 company I was an officer in basically dismantled its new product development division. In general though, companies are managed to balance short and long term thinking. Those that do so well thrive and those that do so poorly shrivel up and die. Good riddance.

        Compare Amazon to Sears or Radio Shack.Report

      • Avatar Mo in reply to James Hanley
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        says:

        @james-hanley The difference between looking at quarterly and looking at long term exists in the US. Fidelity and Schwab work on different time horizons. Same with Hershey vs. Mars. Focusing on hitting quarterly numbers has a major impact because you will do things like offer big discounts at the end of quarters/years to hit revenue targets. Or structure contracts so they have funky revenue/expense recognition characteristics. I have seen these things done with my own eyes at US megacorps. If you are a private company, the difference between Dec 31 and Jan 1 is the exact same as the difference between Jan 1 and Jan 2 or July 14 and July 15.Report

      • NobAkimoto NobAkimoto in reply to James Hanley
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        says:

        Kim,
        Many of the keiretsu focused on increasing market share for their constituent firms, rather than making them profitable in the near term. This was done by continually getting loans from the banks, mire than they were able to repay due to their insufficient profitability. Legally or politically the banks were required to keep lending, until they really had nothing left to lend. This was a big part of Japan’s long-running recession.

        I’m way too tired to do this properly, but this isn’t technically correct. It wasn’t a political decision on the banks behalf, legally the Ministry of Finance doesn’t have that much influence. The Japanese economic story is a lot more about social networks and the very strange and incestuous way Japanese corporate relations work. It’s really bizarre, and would make a nice behavioral model analysis.

        But I’m way too tired to go into details now.Report

    • Avatar Mad Rocket Scientist in reply to Saul DeGraw
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      says:

      So, short term profits?

      The Dumbest Idea In The WorldReport

  2. Avatar Saul DeGraw
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    says:

    Thought: How much of this can be blamed on Taylorism and/or Henry Ford’s production line?Report

  3. Avatar Brooke
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    says:

    I know colleagues with similar complaints, and we’re not in a business where people can really be considered cogs. The job market in our sector hasn’t been very strong for the past few years, so people who feel like they’re being treated unfairly also feel like they don’t have any options. What can you do for people in this situation as a manager without the ability to approve compensation increases?Report

  4. Avatar Saul DeGraw
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    says:

    This book might interest you:

    http://www.amazon.com/Cubed-A-Secret-History-Workplace/dp/0385536577

    Interestingly the cubicle was originally called the Action Office and it was meant to liberate workers.Report

    • Avatar Will Truman in reply to Saul DeGraw
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      says:

      I think I wrote a post about that on Hit Coffee, but I can’t find it. I did find this post (from back when the site was more of a diary), which was the letter I wrote my then-boss that got me a bigger cubicle. Reminds me of what a great boss I had at that job.

      I do remember discussing the book with said boss. Basically that it’s funny how you can have this great idea and have it turned into something oppressive.

      That said, I actually think that cubicles are underrated.Report

      • Avatar Jaybird in reply to Will Truman
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        says:

        When I got into “the biz”, my first job was a cubicle that might have comfortably seated 4 that, instead, seated 8. (Oh, and 2nd shift seated a different 8. And 3rd shift seated a different 6… so you couldn’t put up pictures or anything.) Oh, and though many of us did do the “this is Jay’s workspace” thing, it wasn’t written in stone. If someone from a previous shift had to keep working for another 2 or 3 hours, everybody reshuffled themselves around him.

        When I got my first cubicle that was mine, all mine? Like, I could put up a Kipling poem on the wall?

        It felt like I finally had a grownup job.Report

      • Avatar Mo in reply to Will Truman
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        says:

        Nothing makes you pine for a cube like an open office plan.Report

      • Avatar Will Truman in reply to Will Truman
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        The cubicle I had was in the building of the picture associated with this post. It was too small, but made communication easier and helped with team-building.

        After that I was in a large cubicle with one other person. Which was good for the two of us, and appropriate for the job, but kind of just ended up coupling everybody off. Where if two people who were sharing a cubicle happened to be working on the same project it was convenient, but switching from one to the next when project teams changed became inconvenient.

        After that, I had a desk on a bench in a server room. Which was really the only way it could have worked, for that particular job. At the end they did give me a small office, but I couldn’t actually use it.Report

      • Avatar Mike Schilling in reply to Will Truman
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        many of us did do the “this is Jay’s workspace” thing

        That must have caused some confusion.Report

      • Avatar Jaybird in reply to Will Truman
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        Well, it was non-verbal mostly. Passive-aggressive sighs, huffing, that sort of thing.Report

      • Avatar Mike Dwyer in reply to Will Truman
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        I stopped personalizing my work space about 10 years ago when my company was going through a period of austerity and I wanted out SO BAD. I came up with something I called the ‘five-minute rule’ which was that I wanted a workspace that I could clear out of in five minutes if I ever decided “today is the day I have to leave before I lose my shit”. I even had a step-by-step list tucked in a drawer that told me everything I had to do before I walked out (1. Clear internet browsing history 2. Grab as many free pens as I could fit in my pockets 3. Copy all non-proprietary files that I wanted to take with me…etc) I still follow the same plan despite the fact that I mostly like my job now. I find that it gives me a certain amount of mental peace and a sense that I am in control of my situation, not my employer.Report

      • Avatar Mike Schilling in reply to Will Truman
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        says:

        You have to share that whole list with us sometime.Report

  5. Avatar Damon
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    My example isn’t as cut and dried but it still does point to the same issue. Our sales staff was given a base 50k salary and commissions based upon various factors. It seemed to make sense. What didn’t was the commission cap they put in place: 250K. Once you capped out in a year, you got no more commissions.
    Some of the top performers stopped working new leads/bringing in business in August. When I asked what they were doing, they responded “working on my January sales”. Almost 6 months of sales/revenue, etc. forgone because the company wouldn’t pay more than 250k. Stupid.
    Then there was the company that paid its merit increases as follows: Average rating = @ 1-1.5%. Top performer got 2%. Since the CEO had given an all hands meeting in our regional office and stated specifically that there was “no career advancement in ‘our town’”, corporate was in the mid west, I asked why anyone would rationally bust their ass for a top performance rating seeing as all they could expect in this office as a measly +.5% at best. Thus began the process of the company pushing me out the door.Report

    • Avatar Vikram Bath in reply to Damon
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      Yes, that is a big problem. Arguably a .5% per year compounded over a career can be a lot…someday, but it isn’t very motivating. They’d probably be better off just giving flat raises for everyone and giving up the pretense of rewarding high performers.Report

      • Avatar Damon in reply to Vikram Bath
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        Given the CPI at the time was well over 3+%, getting a 1.5% increase or 2% was highly annoying and insulting.Report

      • Avatar morat20 in reply to Vikram Bath
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        Doubly so when ‘performance raises’ weren’t even keeping up with, say, increasing health care costs.

        I appreciate the raise, but I take home less pay than I did last year and my health care is not noticeably better. Just more expensive.

        Let’s see– other fun shenanigans I’ve had happen.

        The ‘change to the way we calculate vacation benefits’ that coincidentally screwed every current worker out of a week of vacation pay, in a rather subtle way. See, used to be you accrued “next year’s” vacation working “this year” and they switched to “every month you accrue X days”.

        What that MEANT, in terms of pay, is that I spent, say — 2011 using the vacation I’d earned in 2010 and ‘earning’ vacation for 2012. But when 2012 rolled over, I was suddenly ‘earning’ 2012 vacation for that year.

        Except I never got the extra time (our vacation hours were ‘use it or lose it’) I earned in 2011 for 2012, nor did I get the equivalent in cash. I doubt more than a fraction of the employees noted that we all basically got shafted to the extent of a few weeks pay.

        Then there was ‘we’re up for a new contract, so we’re not going to give out the raises this year so our salary figures are 3% lower when we big. Except we’re still going to pocket the 3% our customer gave us this year, because the contract we’re currently on does add 3% a year for salary increases”.

        That one was fun.

        I think I’m most fond of “Average raise is X (call it 3%)”. On the 1 to 5 scale (three being ‘meeting all your expectations/average employee) the 3s get 3%. 4s and 5s earn more, 1s and 2s earn less. (A two generally has a manager following you for the next year, making sure whatever dinged you is getting fixed. A 1, out of nowhere, gets you monthly meetings and scrutiny, although generally it gets you fired because most people don’t go from 3 or 4 to 1 in a year, so they were already watching you).

        Except in practice: Anything under a 3 (even a 2.8) will get you — 0% raise. And 4s (which, because of the mathematically strict bell curving they force) will get you..3.5% and 5’s will get you 4%.

        Which means, because there must be an equal number of 1s to 5s and 2s to 4s, that the company pockets an awful lot of that yearly labor cost increases that are written into the contract.

        This is just stuff I’ve personally noticed, stuff so obvious that a random employee notes at random. I have no idea how many other games they play that aren’t visible from my desk.Report

    • Avatar Troublesome Frog in reply to Damon
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      I’ve seen that type of stuff before, and I could never figure it out. Presumably if you bring in a sale and I pay you commission on it, I get to keep the money that I don’t pay you in commission, so unless there’s some weird nonlinear scale where eventually commission exceeds revenue, I should be rooting for you to walk home with millions in commissions.

      As far as I can tell, the attitude is, “I get most of the money he brings in, but it really pisses me off that a worker bee is getting paid like he’s in my class of people.” That’s the only POV I can think of that makes any sense, and it seems to match pretty well with the notion that top executives can and should make unlimited money, but everybody below that should have a hard ceiling because they’re just cogs.Report

      • Avatar grumpy realist in reply to Troublesome Frog
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        Oh, I have a story about that. Was working in sales for a high-tech firm, selling large, expensive instruments. Long sales cycle. Was originally hired on flat salary. After a few months, upper management was getting restless because I hadn’t landed any sales yet (yes, we’re selling large expensive instruments to universities and government research labs, you’re expecting instant results?) and they decided to move me to an expenses + commission fee structure. My immediate boss, who DID have a background in sales, pointed out that at some point all the work I was doing would start paying off and then they’d have to stick with the changed contract. Oh, no worries, we’re perfectly fine with that.

        Well, in a month or so I was landing roughly one sale every month. Which meant quite a lot of money was walking out the door in my direction as commission. Upper management went ballistic. I was Making More Money Than The President Of The Company (obviously a Very Bad Thing.)

        A year later they tried to put me back on fixed salary…..I’ll spare you that fiasco. Needless to say, my boss left soon after and so did I.Report

      • Avatar Kolohe in reply to Troublesome Frog
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        says:

        Who knew that Glengary Glen Ross would eventually lowball fubarity?Report

      • Avatar veronica dire in reply to Troublesome Frog
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        It’s just absurd sometimes.

        I mean, I’ve never been the big boss or anything, nothing above team lead. But still, if I had some salesperson who was selling so much they were making more than me — because they were selling that much — I like to thing I could make peace with that.Report

      • Avatar Troublesome Frog in reply to Troublesome Frog
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        I was Making More Money Than The President Of The Company (obviously a Very Bad Thing.)

        This is it. It’s not about value. It’s about knowing your place. At my last employer, the top technical contributors (some of whom were PhD types at the top of their field worldwide) were always told that the good stuff was for managers and that should give them something to strive for. If you’re not an executive, you’re another class of organism who should aspire to being an executive, and anything that gives you any of the same comforts or clout as an executive is an affront to the natural order of things.

        The worst part is that salespeople have kind of an obviously measurable marginal product. If companies can’t get their heads around the value a salesperson is bringing in when that value is written out down to the cent on paper in front of them, what chance to the rest of the cogs have?Report

      • Avatar James Hanley in reply to Troublesome Frog
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        — I like to thing I could make peace with that.

        It sounds easy, until the ego business kicks in. “I’m the boss, my contribution must be the most important, but I’m not getting paid like I’m the most important.” It’s the signal that matters.

        It’s like sports salaries. Superstar Joe is judging whether he’s being properly appreciated by whether or not he’s making more than Superstar Bob. It’s not the extra million he lusts for as much as what it signals.

        You might be different. Some people are, so it might be you as much as someone else. But most people, I think, can’t get over the signal.Report

      • Avatar Will Truman in reply to Troublesome Frog
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        Interestingly, it is accepted practice for players to be paid more than their coaches.

        Physicians are also sometimes paid more than their superiors, depending on the management structure.Report

      • Avatar Barry in reply to Troublesome Frog
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        Yes. It’s really a class issue: ‘he’s not upper management; how *dare* he earn Big Bucks!’.Report

  6. Avatar Kazzy
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    My school is dealing with a similar issue. The new administrative team sees us teachers as replaceable cogs in a machine. Top teachers who’ve asked to be rewarded for their performance have been shown the door. New hires have trended toward very green teachers; they’re the cheapest, after all. The problem is, the negative effects of such an approach are starting to show. They are not as obvious as they might be in another industry, where sales can be objectively measured and compared. But parents aren’t happy. Enrollment is down. Fundraising is off. Admin is trying to spin this as the result of a slow economy and people putting off having children over the past 4-6 years. But the natives are getting restless. Similar to the situation above, a number of teachers don’t have other options. Many simply refuse to teach in public schools and we are the only independent school around. So admin leverages this. But they are overplaying their hand. As you note, the top teachers do have options. It might mean longer commutes, but none of us are tethering ourselves to a sinking ship. The penny-wise, pound-foolish nature of decisions being made show a CYA mentality rather than one aimed at realizing our stated mission.Report

    • Avatar Barry in reply to Kazzy
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      says:

      “But they are overplaying their hand. As you note, the top teachers do have options. It might mean longer commutes, but none of us are tethering ourselves to a sinking ship. The penny-wise, pound-foolish nature of decisions being made show a CYA mentality rather than one aimed at realizing our stated mission.”

      Please keep us posted. I imagine that most teacher hiring is driven by the school year, so these guys might find out that they’ve lost a whole bunch of people rather suddenly.Report

  7. Avatar Kim
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    says:

    Walmart, surprisingly, gets this. The people they can’t replace? They get paid gobs. The cogs get paid for sh!t, but what did you expect from a monopsony?Report

    • Avatar North in reply to Kim
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      If that last word was spelled right does it mean that there’s only one pony and everyone who wants a pony has to share it?
      If that was supposed to be spelled monopoly I struggle to understand how one could consider Walmart one.Report

      • Avatar James Hanley in reply to North
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        Monopsony means a single buyer. I assume Kim is trying to say Wal Mart is the only purchaser of labor in some places. She is, as always, wrong.Report

      • Avatar Kim in reply to North
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        James,
        Merely exaggerating, I assure you.
        http://cheapseatsecon.wordpress.com/2013/03/03/wal-mart-and-monopsony/

        Unless you’ve got sources to cite?Report

      • Avatar Kim in reply to North
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        James,
        I’m willing to credit a hospital as being a monopsony for ER nurses, if it’s the only hospital within a reasonable commute (an hour’s drive, say…).
        Given criteria like that, I shouldn’t be surprised if walmart doesn’t have the majority of low-end retail jobs in certain areas.Report

      • Avatar Saul DeGraw in reply to North
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        @james-hanley

        I heard that the Justice Department considers Amazon to be a purchaser/buyer and therefore generally good for consumers even if they can flex with publishers as they have shown in their recent spite with Hachette publishing.Report

      • Avatar James Hanley in reply to North
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        From your source, Kimmie, with the words you missed highlighted.

        According to the study conducted by Alessandro Bonanno and Rigoberto A. Lopez Wal-Mart has significant monopsony power only in the lowest wage markets in the US, which are the rural south and south-central regions. …However, in the majority of the United States, even the largest employer in the world doesn’t exercise monospony power.

        The question you should be asking now is not why Wal Mart pays so little in the South, but why the South has traditionally been so underdeveloped.Report

      • Avatar Kim in reply to North
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        James,
        The question you pose is an interesting one. I’ll pose a rather more pressing question to you in turn — what happens to these rural, southern communities when Walmart leaves?Report

      • Avatar James Hanley in reply to North
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        That’s the same question, Kim, if you only knew it.Report

      • Avatar Kim in reply to North
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        James,
        I must admit, perhaps you’re right. Thanks for the insight.Report

      • Avatar Brandon Berg in reply to North
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        It’s also worth noting that even having 100% share of the retail market (rather than the 60% or so that Walmart has in even the most extreme cases in that chart) does not equal monopsony power. Walmart’s potential workers are generally not highly specialized for work in retail, and still have access to jobs in other sectors.Report

      • Avatar Kim in reply to North
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        Brandon,
        yes, of course. You are also free to go dig for coke bottles in the local landfill.
        Please bear in mind, that’s considered a good job around those parts (rural PA, in case you care). Pay about $20,000 a year.Report

      • Avatar Vikram Bath in reply to North
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        The problem in Walmart’s case isn’t that it has so much power. It’s that their employees have so little.

        In Will’s example, the problem was the company was treating its employees as cogs when they were not. The result was the company getting screwed (which is often the result when a company’s view of reality differs from the actual reality). In Walmart’s case, their employees actually are readily replaceable (at least the ones who get the most media attention).Report

  8. Avatar veronica dire
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    says:

    In software we have the “death march” project, which is floundering and management get desperate and starts pushing deadlines and demanding late hours and things just start to look bad.

    And then the good engineers, those in demand, who get bugged by recruiters constantly, start heading for the door.

    Same dynamic.Report

    • Avatar Troublesome Frog in reply to veronica dire
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      says:

      The weirdest thing is when tech companies decide to downsize by attrition rather than dumping the lowest performers. If there was a better way of losing your top talent and holding on to people who are barely employable, I haven’t found it.Report

      • Avatar Barry in reply to Troublesome Frog
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        “The weirdest thing is when tech companies decide to downsize by attrition rather than dumping the lowest performers. If there was a better way of losing your top talent and holding on to people who are barely employable, I haven’t found it.”

        Yes, particularly since (at a guess) downsizing by attrition involves management working hard to simply make the place a worse place to work across the board.Report

      • Avatar James Hanley in reply to Troublesome Frog
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        @barry
        Yes, particularly since (at a guess) downsizing by attrition involves management working hard to simply make the place a worse place to work across the board.

        I doubt that happens much. There’s always turnover at any firm, so the attrition will hapoen naturally. And it cam be done by companies that want to avoid the hassles, and perhaps demoralizing effects, of firing people (or who are even just trying to be nice in their downsizing).

        What matters to what T-Frog is saying are the reasons people leave a firm. People leave for all sorts of personal reasons, but presumably the good employees and the bad ones are equally likely to leave because they got married and are moving to some other state, or hit retirement age, etc. But good employees are more likely to leave because they got a better job. So simple attrition should disproportionately reduce your number of good employees compared to your number of bad ones. But it’s even worse to the extent the downsizing is seen as evidence the firm’s in trouble, so that a growing number of employees start looking for greener pastures, an even larger proportion of good employees will move on, while the less competent will be more likely to be stuck in place.Report

      • Avatar Will Truman in reply to Troublesome Frog
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        says:

        I suspect that Barry is more right than wrong here. Not that there is necessarily an implicit “We need to drive people away” but there does become, in my experience, a sense that “We don’t need to try to keep them here…” which is on the same street.

        A long time back I wrote a marathon piece about how not to conduct layoffs, based on the mishandling of the events by the OP company. Not just the sales staff thing, but how when it was all over they seemed to go out of their way to talk about how expendable we all were and how lucky we should feel that they kept us on. This was in contrast to my supervisor, who took the different and more appropriate tact of saying “You’re all here because you are good at your jobs. Keep it up!”

        This isn’t about reduction-by-attrition, precisely, but is about the sort of attitude that does seem to take hold sometimes. The almost immediate taking of “They need us more than we need them” to the next level, oblivious to which ones need you how much more than you need them, and which ones don’t need you as much as you might think they do.Report

  9. Avatar Roger
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    says:

    “You can only treat employees like cogs when your company works like clockwork.”

    Here is the other side of the elephant…

    Managing employees, as with managing all resources and converting it into productive results deserving of a profit, is harder than hell. Different companies (indeed divisions, branches and departments within companies) have different strategies, and different relative success within that strategy.

    It behooves prospective employees to discover this about the company, branch or current head honcho and try to respond appropriately. In many cases this means that certain companies and divisions have great reputations and are in high demand. Others are the opposite.

    In a relatively free and competitive market, winning strategies and combinations will tend to outperform losing ones. That is what profit is. When companies do stupid things that hurt revenues more than they improve costs, it shows up in the good old bottom line. Over time companies either improve or they become Kmart, Pontiac and Wang.Report

    • Avatar James Hanley in reply to Roger
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      It’s easy to point to companies that have made ridiculous (at least in retrospect) mistakes, because a) humans are fallible, vain, and often short-sighted, and b) there are vastly more ways to do things badly than to do them well. The mistake many people make is to confuse these decisions with the market itself, pointing to the stupid decisions and treating them as a market outcome per se, rather than recognizing that they are factors that help produce market outcomes.

      It’s easy to be a stupid businessman, but it’s hard to make good money being a stupid businessman, at least consistently.Report

      • Avatar Roger in reply to James Hanley
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        says:

        Well said, as usual.Report

      • Avatar Roger in reply to James Hanley
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        says:

        By the way, does anybody disagree with this summary of the situation by James? I would love to hear an enlightened counter argument.Report

      • Avatar Kazzy in reply to James Hanley
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        says:

        I don’t disagree, though I’m not sure I understand this part:

        “The mistake many people make is to confuse these decisions with the market itself, pointing to the stupid decisions and treating them as a market outcome per se, rather than recognizing that they are factors that help produce market outcomes.”

        @james-hanley , do you mean that people will point at a bad business decision and its consequences and say, “The market failed”? And that they are wrong to do so?

        If that’s what you mean — if people do in fact do that — then my rudimentary understanding of economics and markets tells me that I agree with you and that they are wrongly conflating things that the market allows for with the market itself.Report

      • Avatar Kim in reply to James Hanley
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        roger,
        I can point to select situations where the “market as a whole” changed its valuation of particular companies, and this change in valuation led to the brink of disaster.

        That’s Health Insurance, by the way. As the market started to demand more growth in health insurance (insurance being somewhat uniquely vulnerable to stock price crashes, as their giant pot of money is their solvency, not capital assets), the companies responded by cracking down on actually paying out, and otherwise finangling to get money without actually being on the hook for anything.
        This got everyone all riled up against the Health Insurance Companies (which they have only partially managed to fix with Obamacare).

        I’m not saying that this is a rebuttal to James’ point, which is solid enough on its own. Just saying that “the market” can actually influence business decisions adversely.Report

      • Avatar veronica dire in reply to James Hanley
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        says:

        Well, I think it is one of those hard to measure things, so we get into semantics and articles of faith.

        I say this: the ways we run businesses are almost surely suboptimal, but I’m not sure if we naked apes can do much better — at least not hugely better. The reason I feel this way is this: as with all complex optimization problems, we surely are at some local maxima, some place that “looks right from here,” but just across the valley is a much better place. Or maybe not.

        As a rule, I assume management is doing the best they can and has basically good reasons to do what the do. But they’re never perfect. And what is the opportunity cost of not doing better?

        I do not assume the free market is going to provide some hyper-optimal solution all the time. The fitness landscape is far too bumpy and changes too fast. I advocate a sober view of these things.

        I can speak personally, I’m in the process of leaving my current position — working toward that goal — largely because I’m not happy with management. I’m the principle engineer on my current project, and honestly, I will be very hard to replace. (This is not empty bragging. It is very hard to find truly good software engineers. It is easy to fill a room with duds, but folks who can handle the hard stuff are rare.)

        I suspect my current company is going to suffer from bad management choices, as more engineers make the decision I am. Will the company go out of business? Not right away. We have a good product and are well-positioned. We’ll keep making money, for a while. Which maybe is enough, the ebb and flow and all of that. But they won’t excel, and sooner or later this will disappear, another tech has-been that once was great.

        Because the engineering talent scattered away.Report

      • Avatar veronica dire in reply to James Hanley
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        says:

        Plus arguing about the difference between a “market outcome” and “what happened when I worked in the market” seems like empty semantics. The “market” produced MBAs and theories of management and “agile methodologies” and on and on. And yes, stuff happens, but to me it is all one thing.Report

      • Avatar Brandon Berg in reply to James Hanley
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        says:

        The point is that the market culls inefficient firms, but it does not do so immediately or with 100% reliability. The fact that something bad happened in a market does not mean that the market has failed.Report

      • Avatar Mike Schilling in reply to James Hanley
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        says:

        The market giveth and the market taketh away. Blessed be the name of the market.Report

      • Avatar greginak in reply to James Hanley
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        says:

        The market may cull bad businesses most of the time and not immediately. But what that means is some bad businesses can make money for years or decades. So it is hard to tell whether the market is working and we just can’t see it in one generation or if the market isn’t working. Insert famous Keynes quote here about how long a market can be irrational.Report

      • Avatar Brandon Berg in reply to James Hanley
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        says:

        But what that means is some bad businesses can make money for years or decades.

        As opposed to government, which culls all its bad programs immediately?

        And stick to puns, Mike. You’re good at that.Report

      • Avatar Roger in reply to James Hanley
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        says:

        You make a jest, Mike, and I know I am accused of being some kind of market fundamentalist. I am not.

        Markets, like science, logic, math, and politics are problem solving systems. Each is appropriate in the right time and place for the right type of problem and inappropriate at others.

        Markets are good at solving problems related to the efficient creation and dissemination of solutions related to the problems of resource scarcity and human coordination in addressing it.

        I do not in any way believe markets solve all problems or most problems. I just believe they solve a particular class of problems extremely well, and that humanity would be better off if we recognize the distinctions.

        Markets yeah! Makes as much sense as Logic Yeah! Or Science Yeah! The real question is why in the hell would anyone be against a problem solving system. Math boo!Report

      • Avatar Roger in reply to James Hanley
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        says:

        I agree Veronica.Report

      • Avatar veronica dire in reply to James Hanley
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        says:

        Well, myself I don’t want to join either side of the chorus, one shouting “markets all good” and the other shouting “markets all bad.”

        Bah! Useless noise.

        Nor do I want to get swept up in a long-dumb discussion of what it means for markets to “fail.”

        As if these kinds of discussions really tell us much.

        What matters to me is what is happening, what could be happening (if things were better), and what my best choices are.

        Saying, “The market will correct for that” is a whatever dude response. What I care about is this: should I change jobs?

        What management should be asking is this: can we afford to lose (people like) Veronica?Report

      • Avatar James Hanley in reply to James Hanley
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        says:

        @kazzy
        @James Hanley, do you mean that people will point at a bad business decision and its consequences and say, “The market failed”? And that they are wrong to do so?

        I mean people are likely to assume markets in general don’t work. And some are likely to conclude therefore that government is necessarily better, without pausing to consider that human frailty and the problem of there being more ways to do things poorly than well applies in all domains: markets, government, engineering, arts, romance, blogging, etc.Report

      • Avatar James Hanley in reply to James Hanley
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        says:

        Veronica, I agree with you. I think your quibble is with my phrasing, but your comment sounds to me as though it’s congruent wity my point.Report

      • Avatar Kazzy in reply to James Hanley
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        says:

        Thanks, @james-hanley . I understand now and agree.

        The extent to which I do (or might?) disagree is that there are some things that are better left up to the government (in the abstract; not necessarily our current system of government), but which things those are can only be arrived at after various attempts at other solutions and all of them proving inferior to the government solution. One failed market-based solution doesn’t mean the market failed; all it means is that that particular solution failed (which itself doesn’t mean it was a bad solution; context matters as well).Report

      • Avatar greginak in reply to James Hanley
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        says:

        @brandon-berg Non-sequitur. I wasn’t talking about Gov but about markets. That Gov has faults doesn’t mean markets don’t. You are completely correct that markets may not weed out 100% of bad businesses nor is that immediate. I think markets are nifty for many things. But once we get to admitting they don’t do everything nor always quickly then we can talk about individual cases where a market may fail or not be the best tool for a job. To often market supporters use general arguments when looking at individual cases. Markets and Gov or whatever are just different tools that each work well or poorly in specific cases.Report

      • Avatar Roger in reply to James Hanley
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        says:

        Greg,

        The point is that we never know what the ultimate strategy is, and if we did, the knowledge would be expired as soon as we learned it.

        The role of profit and loss is basically a feedback mechanism. When managers treat employees stupidly and cause net productivity or revenue to go down greater than they gain in cost savings they are penalized via lower profit. Every major corporation makes millions of such calls each year. Over time, the markets provide both immediate (though opaque) feedback and over time those firms with bad track records lose to those with better records. Expanded over two hundred years across cooperative/competitive networks of billions of people and millions of firms, it leads to economic prosperity (which is superior to the alternative).*

        Where other systems are superior to markets at answering these questions, or providing this feedback, I am all for them.

        As an aside, a lot of the pushback on things like price and wage and regulatory interference from economists and liberals is that even well intentioned efforts can make the market learning system less efficient and effective. Regulatory interference reducing cumulative growth rates is almost sure to be suboptimal to our descendants.

        * and to clarify, worldwide prosperity is higher today than any time in history and growing especially fast in those countries needing growth the mostReport

      • Avatar James Hanley in reply to James Hanley
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        says:

        @kazzy–of course; as Roger says above, different means for solving different problems. Not everything actually is a nail.

        @greginak–Agreed. My beef is with those who see any imperfection in the market and immediately assume a government action would produce a superior outcome. A market failure does not in itself indicate good prospects for gov’t success (and vice versa). And while I’m sure nobody would consciously disagree, a great number of people regularly act as though they disagree.Report

      • Avatar veronica dire in reply to James Hanley
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        says:

        One thing I think that happens is this: we conflate two separate conversations. One conversation is about economic policy, such as capitalism versus socialism. The second conversation is about the theory of the firm, what are the best ways to conduct a business. They are related topics, but not the same.

        Here is what I see specifically: someone criticizes the activities of (many, most?) firms and is answered by, “Well, the market will correct for that.”

        Maybe. But right now I have to deal with this company doing this thing or even this entire industry going down this path.

        Assertion: large numbers of people can be very wrong about things for a long time, and it faith that says the market will correct every instance in every way. Stuff takes time. Bad ideas get entrenched. Good ideas get beat down by those in power who do not want to change. Not always, but real life is messy.

        And there is much lost opportunity to thrive.

        This is not to advocate socialism. (Although I do advocate a mixed economy with strong safety nets. But those mixed economies include markets.) Instead, this is to critique the firm, how it runs, its theories and practices, etc.Report

      • Avatar greginak in reply to James Hanley
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        says:

        Roger, yeah i know and i actually don’t disagree. But i think what that leaves out is the context specific discussion of issues. Do i trust the market to come to the best solution regarding developing a tasty crunchy cracker with all the great taste of beef AND watermelon yet with half the calories that actually sucks gluten out of our bodies. Hell yeah. But while i agree with what you said that is the kind of generic market boosterism that i don’t’ think goes anywhere. Markets are great for somethings but not others. If we are talking about whether there should be lead in paint or gas that is not something the market is likely to address since they are externalities that businesses really don’t want to deal with.

        There are some goals that aren’t defined by money or efficiency or markets, they are defined by other values and the world we want. Having an ozone layer was a thing people decided we liked so regulations were put in place to cut out CFC’s. The market wasn’t going to do it, but people decided it was a goal worthy of going for.Report

      • Avatar Will Truman in reply to James Hanley
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        says:

        A company can have stupid HR policies but, by virtue of having made great (or lucky) decisions elsewhere do quite well. Or vice-versa. And, of course, of all of the companies tend towards making the same mistakes, they can minimize the impact of those bad decisions.

        In the case of the above-mentioned employer, the HR policies were rather swamped by other market factors. They were most successful when they entered a key industry at a key time. Things fell apart due to industry issues (and perhaps a failure to sufficiently branch out). That doesn’t mean that HR policies were optimal, or weren’t stupid. Or that such policies were actually detrimental to the company.

        Of course, too often when we talk about these things we conflate “good HR” policies with those we like and are comfortable to us, and bad ones with ones that aren’t. I try to avoid this. There is one former employer I can tell all kinds of stories about. They’re one of the ten worst employers in the country as far as employee satisfaction goes. But I am actually reasonably convinced that their HR policy is quite good for the bottom line. Unlike the above-mentioned employer, they do run like clockwork. They found something that worked for them while above-mentioned was consistently wondering why employees wouldn’t “buy in” and whatnot.

        I should also add that above-mentioned employer also had detrimental policies that were too generous. They were, for example, way too slow to let go of bad employees. This was found out the hard way. A lot of people will read the above and think “The problem is that employers just don’t treat their employees well” and that’s my fault because it’s an incomplete point. Rather, the bigger issue was treating unequal employees more-or-less equally. Thinking in terms of the average employee as opposed to “Which employees will this leave us with?” The desire to treat the employees as interchangeable was actually overly generous to a lot of them. They were kept around until layoffs were required, then after the layoffs things improved dramatically in our department. Of course, unlike what they did in Sales, layoffs were targeted at the worst employees and while other department heads were trying to present the layoffs as a cautionary tale (“If you don’t want to be next, work harder.”) ours was handled better (“You’re still here because you’re good at your job, let’s keep doing the best we can.”)

        But anyway, I do think that systemic issues across businesses can occur. Not because markets suck, but because people do sometimes make mistakes collectively. I have bounced around from employer to employer and I’m convinced that one of the biggest areas where this is most likely to occur is HR. In part, because I’ve seen some companies not make these mistakes. The company where I worked after this one made a lot of decisions I consider to be dumb, but HR wasn’t really among them.Report

      • Avatar Roger in reply to James Hanley
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        says:

        Greg, I pretty much agree with the above.

        Veronica writes

        “Here is what I see specifically: someone criticizes the activities of (many, most?) firms and is answered by, “Well, the market will correct for that. Maybe. But right now I have to deal with this company doing this thing or even this entire industry going down this path. Assertion: large numbers of people can be very wrong about things for a long time, and it faith that says the market will correct every instance in every way. Stuff takes time. Bad ideas get entrenched. Good ideas get beat down by those in power who do not want to change. Not always, but real life is messy.”

        The problem I have with this is that it seems to assume someone knows the best answer. We cannot assume anyone knows. The manager doing the supposedly stupid thing probably thinks it is the best strategy as did the person writing the HR manual as did the person hiring the HR director who wrote the manual and approved the manager.

        Sometimes what employees see as stupid does make sense, they just do not see the whole picture. Sometimes vice versa. But in reality nobody knows the optimal long term strategy until after the game is actually played, and even here the answers we get are opaque as hell. Twenty years later someone one market share and someone lost. But explanations are at best feeble rationalizations. Markets, like evolution, are smarter than us at some things.Report

      • Avatar Roger in reply to James Hanley
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        says:

        I plus one Will’s comment.Report

      • Avatar greginak in reply to James Hanley
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        says:

        So i think we are mostly in agreement and moving towards a giant blog group hug. I would quibble with markets and evolution are smarter than us. Neither process is smart or dumb, they just are. They aren’t processes with a goal in mind or any end state. That is fine for many things. However evolution has shaped some organisms into things that couldn’t survive the next big change. Humans have some capacity for foresight ( some, maybe not a lot, but some) so we can prepare for things we see coming even if they aren’t here yet and we can also choose to go in certain directions. Evolution and markets, as thoughtless processes, don’t have foresight or make choices.Report

      • Avatar James Hanley in reply to James Hanley
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        says:

        Do i trust the market to come to the best solution regarding developing a tasty crunchy cracker with all the great taste of beef AND watermelon yet with half the calories that actually sucks gluten out of our bodies. Hell yeah. But while i agree with what you said that is the kind of generic market boosterism that i don’t’ think goes anywhere.

        If that’s all you think markets do, you radically misunderstand them, and it would go a long way toward explaining your rather grudging acceptance of them.

        The two most important things markets have done is create wealth and create freedom.

        Nothing creates wealth like markets, and wealth is fundamental to human well-being. It correlates with infant mortality, health, life expectancy, education, and the ability to make one’s own course in life. Markets may not do wealth distribution well, but that’s a secondar problem. Woe unto the society that lacks a wealth distribution problem because they’re all poor.

        Markets also create freedom. What broke down the feudal system of serf labor in England–where by law serfs were tied to their lord’s land–was the tight labor markets in the cities created by plague. The growing wealth produced by markets in Taiwan and South Korea led to demands for civil liberties and democracy. The correlation between the wealthiest countries in the world and the freeest us strong, and they are all market economies and democratic polities.

        You could fairly point out that there is variance in their distributive policies and social safety nets, and the U.S. ranks below them on that score, and I’d agree. And I could accept more safety net just as you accept a foundation of markets.

        But to see markets as only being good at producing yummy flavors is like seing Bach as just a guy who wrote songs for church. You miss the real story, and the real value.Report

      • Avatar Dave in reply to James Hanley
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        says:

        @greginak

        Roger, yeah i know and i actually don’t disagree. But i think what that leaves out is the context specific discussion of issues.

        I don’t get into discussions about markets from the 30,000 foot level for this very reason. I couldn’t care less about how appealing markets are in the abstract sense.

        On one hand, you’re not going to hear me complain certain kinds of markets failing. Markets can fail and that goes with the territory. However, when a market’s failure triggers system-wide risks like what was experienced in 2008, should we shrug our shoulders and say “hey that’s how our markets work” or look at the issue a little more carefully? I prefer the latter.

        As much as I agree with Roger in principle on certain market-related issues, my view of markets is colored by my capital markets perspective so I tend to feel as if I’m a bit closer to the ground so to speak.Report

      • Avatar Kim in reply to James Hanley
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        says:

        James,
        “Woe unto the society that lacks a wealth distribution problem because they’re all poor.”
        Could you cite some sources on societies that actually are managing the basics (say, at least food/water/shelter?)? [My limited experience suggests pacific islanders.]
        I’d be looking for cortisol levels myself, but I’m setting a relatively low bar for evidence that wealth itself is good overall.Report

      • Avatar James Hanley in reply to James Hanley
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        says:

        Roger wrote:
        Sometimes what employees see as stupid does make sense, they just do not see the whole picture.

        This is one of the most entrenched problems in all organizations. The bosses and the employees sit in different roles within the organization, so they see different things, and it’s very hard to get outside your role and see what the others see. Employees don’t have the big picture that bosses do, so they are unable to see the purpose and overall effect of certain decisions. Bosses often can’t see the details employees can, and overlook them in decision-making even though they matter.

        This breeds a lot of distrust and hostility between management and labor, with both sides thinking they’re a lot smarter than the other. I’ve rarely encountered an organization that really solved this problem.Report

      • Avatar Kim in reply to James Hanley
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        says:

        James,
        I wonder if even the smallest organizations solve that one.
        I suppose the philosophy of “no managers” (or at least giving
        a reasonable explanation up and down the chain) might help.Report

      • Avatar Kazzy in reply to James Hanley
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        says:

        Well said, @james-hanley . My current institution is particularly struggling with this because they don’t trust us grunts with the big picture. I’ll say, “X doesn’t make sense from where I sit. Can you explain why it’s the right course of action?” I’m often told that I should just trust them. Only they haven’t given me sufficient reason to trust their judgement. And the downward spiral continues.Report

      • Avatar James Hanley in reply to James Hanley
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        says:

        @kim,
        Here’s one overview.

        You might do google images searches for “gdp infant mortality rate” and “gdp and life expectancy.” (Those will give you graphs that actually use GDP per capita, which is really what matters.)Report

      • Avatar greginak in reply to James Hanley
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        says:

        @james-hanley Markets don’t’ just create 89 new types of crunchy snack crackers instead of curing cancer. I’m not grudging in my acceptance of markets. Markets are the bee’s knees for all sorts of things. I think liberal types like myself are a little ( well a lot) more cynical about markets for a few reasons. One is that making new types of snack cracker often seems more important than curing cancer. Of course that is why we have the NIH.

        The Black Plague did a great job of cutting down the workforce making labor more valuable. Markets creating wealth and freedom is a good thing. This discussion could go in a few ways, massive technological advances also created wealth and freedom. But that while partially due to desire for profit also was supported by government support of science. Or we could mention that the Western world has had a massive increase in quality of life over the last three centuries. Part of that is certainly due to market driven wealth and science but also due to imperialism and all the many evils that came with it. But it was also markets ( and govs) that often drove imperialism. Markets are certainly one of the things we need to have a happy society and planet. But they are just one part and will not solve all our problems and in cases need to restrained..Report

      • Avatar Chris in reply to James Hanley
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        says:

        To paraphrase MRS from the other thread, unfortunately, glaciers & markets operate on completely different time scales.Report

      • Avatar James Hanley in reply to James Hanley
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        says:

        I wonder if even the smallest organizations solve that one.

        Rarely, because it’s a problem that requires continuing attention; there’s no “fix it and forget it” solution.Report

      • Avatar James Hanley in reply to James Hanley
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        says:

        Markets are certainly one of the things we need to have a happy society and planet. But they are just one part and will not solve all our problems and in cases need to restrained..

        The way you say that, you’d almost think that there was anyone here arguing differently. It’s a lovely strawman, though, suitable for framing.Report

      • Avatar Roger in reply to James Hanley
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        says:

        Let’s not get back into the debate on the 2008 crash. Rest assured some of think we had a massively mis-regulated market failure.

        Still, I suspect routine recessions are a natural part of how markets work. Three steps up and one back beats ten thousand years of no steps anywhere. Right?Report

      • Avatar greginak in reply to James Hanley
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        says:

        James, Huh? Where did i suggest that? There a couple strawmen that get tossed around depending on which jersey people where: Liberals want to get rid of markets/ are socialists and libertarians want the market to do everything/want to eliminate all gov.

        Both are crap and haven’t actually seen anybody in this thread pushing either bit of straw.Report

      • Avatar zic in reply to James Hanley
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        says:

        It’s a lovely strawman, though, suitable for framing.

        Perhaps.

        But sometimes, and sometimes the elephant in the room painting a portrait of Happy Land.Report

      • Avatar James Hanley in reply to James Hanley
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        says:

        Then who were you talking to?

        Look, I responded to your actual words when I said you undervalued markets, by using finding good flavors as your example of what they do right, because that’s a trivial thing, and markets lead to fundamental improvements for humankind.

        So, to what were you responding when you pointed out that markets don’t solve all problems? Because it doesn’t look to me like you were responding to anyone here at all. And yet you’re talking to people here, so…Report

      • Avatar Roger in reply to James Hanley
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        says:

        Kazzy,

        I would suggest it may even be worse. Your manager probably doesn’t know the big picture either. If she does, she may very well not agree with it either. The real answer might be politics, various agency problems or just that she has something she would rather do with her time than explain an absurd policy.

        Large organizations gravitate toward dysfunctionality and sclerosis absent competition profit signals and creative destruction. Most firms are full of crap, but luckily the ones with the most crap fail first. If we are lucky some new relatively crap free firms enter the field.Report

      • Avatar greginak in reply to James Hanley
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        says:

        @james-hanley fwiw, my 1:47 tasty snack cracker comment, was directed at Roger. I didn’t @ him but i started with “Roger”.

        I hadn’t seen your 1:44 comment.

        It seems like we are all mostly aggressively agreeing with each other in general although we might disagree on specifics.Report

      • Avatar veronica dire in reply to James Hanley
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        says:

        Just curious, does anyone here read Venkat’s stuff? What do you think?Report

      • Avatar Kim in reply to James Hanley
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        says:

        James,
        hm. not as much of a variability as I’d have thought:
        http://www.indexmundi.com/g/correlation.aspx?v1=30&v2=67&y=2003&l=en
        (bear in mind that I’m discounting below the 62.49 as “probably related to warfare/other systemic problems” — if you have water quality issues, I’m going to discount your life expectancy, as my premise started from: when lower rungs of Maslow’s hierarchy are satisfied…)

        Still doing a “tilted in your favor” eyeballing gives a difference of around 10 years from the poorest country to the richest. That’s pretty big.Report

      • Avatar Roger in reply to James Hanley
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        says:

        For the record, profit and loss feedback is not glacial in time frame. It is pretty immediate, though often opaque (managers have trouble figuring out exactly why they lose or make money or they fail to account for secondary effects and externalities of their actions.) The desire for profit creates the incentive to build good narratives and explanations and penalizes bad explanations. Kind of like science, though also different.

        Solving economic problems is incredibly complex. Markets are possibly among the most complex entities in the universe. There are an infinite number of ways to do something sub-optimally. Profit and loss are immediate feedback, market share plays out on a larger scale and bankruptcy longer still.

        Where other systems allow faster feedback and quicker learning I am all for them.Report

      • Avatar LWA in reply to James Hanley
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        says:

        The argument that markets solve problems, and create wealth, and create freedom, is not controversial.
        They do.
        Expanding that argument, however, to “therefore we should strive for free markets” is assuming a lot of goals that are not shared by anyone but fellow libertarians.

        It requires us to be agnostic about outcomes- we have to accept that whatever outcome is created by a free market is, by definition, the Correct Outcome.

        Which is directly contrary to the view of society that virtually everyone else has. We can see empirically that almost all cultures have some sort of notion of what a Just Society, or a correct ordering of human affairs entails.

        One can argue with these visions, and they certainly are various and often contradictory.

        But they exist, and they can’t be swept away by “just so” tales of the marketplace.

        So the topic of the post is the attitude about work- that employees desire to see themselves as more than cogs.

        The market, however, is premised on the idea that the sale of labor is nothing more than a transaction between cogs, and whatever transaction two free individuals have is by definition the Correct Outcome. The cogs themselves are certainly not the object.

        This actually contradicts near-universal attitude about work- Here I cite the conservative argument about welfare cheats- that industriousness is itself a moral value, and indolence is not just inefficient, but a moral failing.

        The logical flip side is that failing to value industriousness as a goal in itself turns indolence into a goal to be pursued- if I can game a system so as to gain wealth without work, why not? How is it different than being shrewd enough to make a killing at the casino then retire early to a life of leisure?Report

      • Avatar Dave in reply to James Hanley
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        says:

        @roger

        Let’s not get back into the debate on the 2008 crash. Rest assured some of think we had a massively mis-regulated market failure.

        I wasn’t intending to go there. My point with respect to capital markets is that abstract discussions do not provide us with any kind of guidance to deal with the risks that have arisen in the financial markets as the markets have 1) gone global; 2) gotten increasingly sophisticated, especially with the proliferation of derivatives and pools of capital looking to profit from infinitesimal inefficiencies in the market and 3) have gotten even more decentralized. Exchanges may help to some degree but a lot of transactions are done over the counter. Add the fact that the incentive in financial markets is to withhold rather than disseminate information (a very good reason why securities law is the way it is today) that the ability of market participants and/or regulators to be able to identify a potentially dangerous build up in systemic risk is still impossible, even after what happened in 2008.

        Or even 1998. It was the aftermath of a default on Russian bonds that posed a systemic threat to the market. While Long Term Capital Management’s position was relatively small, it was very highly leveraged (although less leveraged than some of the Wall Street banks circa 2008) and had been a party to derivatives contracts totaling approximately $1 trillion in notional value (not bad for a $2.5 billion equity position). The markets were already volatile back then and the fear was that unwinding massive derivatives positions would have made things much worse. That’s why a consortium of Wall Street banks stepped in at the behest of the Fed.

        Financial markets are a unique animal because they have evolved to the point where market failures, on rare occasion (hopefully very rare), can spill over into the general economy. This can be triggered by a small number of private actors and no one would have an idea where it’s happening, how it’s happening or when the proverbial shit is going to hit the fan.

        Still, I suspect routine recessions are a natural part of how markets work. Three steps up and one back beats ten thousand years of no steps anywhere. Right?

        On a macroeconomic level, I agree with you. Again, this just shows how our perspectives differ because of our approaches.Report

      • Avatar Roger in reply to James Hanley
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        says:

        “I would quibble with markets and evolution are smarter than us. Neither process is smart or dumb, they just are. They aren’t processes with a goal in mind or any end state.”

        I quibble back. Certainly they don’t have anything in mind, because they do not have minds or goals as usually understood. But they are algorithms that solve problems under certain constraints. Evolution solves for persistence under a narrow set of constraints. Markets solve for the competitive/cooperative creation and allocation of resources.

        The phrase “evolution is smarter than us” comes up frequently when biologists discover a counter-intuitive explanation for how evolution sometimes solves certain problems in brilliant ways. It is of course a figure of speech though. Evolution isn’t really smart at all. The algorithm just creates brilliant solutions some times. Other times it is dumber than shit. See moths and flames. Fat people and twinkies.

        Markets do have rational agents, as does science. However, the collective wisdom of science isn’t just a factor of the intelligence of smart people in lab coats. Science itself is a problem solving process which taps into the minds and goals of scientists and channels them via institutional means into a form of creative and collective problem solving.

        Markets do something similar. Nobody is capable of computing what the clearing price of tin is next summer. The market, tapping into the collective decisions of seven billion people does the sums for us. It is a creative problem solving institution which itself was never fully designed. It too emerged and evolved (culturally).

        Science wasn’t really created by Bacon, economics wasn’t created by Smith, and evolution wasn’t created by Darwin (though Darwin was in fact inspired by Smith). At best they were early discoverers of problem solving systems.Report

      • Avatar Roger in reply to James Hanley
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        says:

        Thanks Dave. I value your insight.Report

      • Avatar Dave in reply to James Hanley
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        says:

        Roger,

        For the record, profit and loss feedback is not glacial in time frame. It is pretty immediate, though often opaque (managers have trouble figuring out exactly why they lose or make money or they fail to account for secondary effects and externalities of their actions.)

        With respect to publicly traded companies, I don’t think it’s opaque. If managers don’t have a story about it, the Wall Street analysts will grill them on a conference call. Even then, no matter what’s said on the quarterly earnings calls, the analysts that follow the companies will know what’s going on. They do ask questions and the questions they ask drives the narrative on the research reports they issue.Report

      • Avatar Dave in reply to James Hanley
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        says:

        Roger, your insight is valued as well.

        In my example, I think it’s almost impossible to come up with the appropriate regulatory regime to prevent systemic threats from emerging. To an extent, we know what happened in the past so we can (and have) incorporated that, but with the decentralized nature of markets, who knows what will happen?

        In that setting, I think the resolution authority under Dodd Frank or another mechanism that allows the Fed to step into markets that are encountering extreme volatility to the point of a near-meltdown is the best measure. It’s reactive but it’s going to end up that way anyway since markets tend to evolve faster than the regulator’s understanding of them.Report

      • Avatar Roger in reply to James Hanley
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        says:

        “The argument that markets solve problems, and create wealth, and create freedom, is not controversial. They do. Expanding that argument, however, to “therefore we should strive for free markets” is assuming a lot of goals that are not shared by anyone but fellow libertarians. It requires us to be agnostic about outcomes- we have to accept that whatever outcome is created by a free market is, by definition, the Correct Outcome.”

        Poppycock! I do not assume we should aspire for free markets. I simply offer that if you want to tap into the problem solving capacity and positive externalities of free markets that you need to use them. Just about everyone agrees that markets do solve problems and create positive externalities of a certain nature (you and Greg both agreed explicitly).

        I in no way assume that a market outcome is correct. Indeed, my expectation is that it is in the best cases only approaching an optimal state. It never actually finds it, and that is in best cases. Markets are feedback systems. But the feedback isn’t “perfect answer” it is more along the lines of “cold, warm, warmer…”

        In addition there are many values and needs which we have which are not solved at all by markets, and which markets can interfere with. I am pretty sure James agrees.

        Let me be explicit. Markets solve some problems and create some as well. At best we will use markets where appropriate to solve problems which they are well suited to. If you over-control markets they may very well not work as well as hoped, and this too can be a bad thing (impoverishment of humanity).Report

      • Avatar Roger in reply to James Hanley
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        says:

        Wall Street analysts demand narratives. This does not ensure they ever get a correct narrative, nor that anyone ever really knows the correct narrative. We strive for correct narratives, and mistakes can cost us dearly. But even in hindsight we are just creating explanations. Science can never prove absolute truth of a theory and market explanations similarly can never be sure of truth either.Report

      • Avatar James Hanley in reply to James Hanley
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        says:

        @greginak
        I’m asking about a quote from this comment, which began with “@James Hanley.”

        Not that I’m saying the “[markets] are just one part and will not solve all our problems” comment was directed at me personally. I’m just saying that I don’t think anyone here has suggested anything differently, so I’m not sure who the remark is directed at. I don’t think it’s actually directed at anyone here, which is why I think it’s a strawman.Report

      • Avatar greginak in reply to James Hanley
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        says:

        @james-hanley I reread my comment and i think i was clear i think markets are good and i didn’t ( although i dont’ think i did) suggest you were presenting as a libertarian strawman. Again, i think most of us in this sub-thread in a general agreement. We would disagree in specific cases of course, but i’m not really seeing much disagreement or strawmaning.Report

      • Avatar James Hanley in reply to James Hanley
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        says:

        @kim

        The best of the poorest countries appears to be Somalia (GDP per capita: 500) with a life expectancy of ~49. (Much better than twice as wealthy Mozambique (GDP per cap: 1200), at 31 years.)

        Once you hit a GDP per cita of 12,000 no country has a life expectancy below 70 years. That’s twice as much as your eyeball estimate, and that’s generously taking the single best off poor country, rather than looking at the average for poor countries.Report

      • Avatar James Hanley in reply to James Hanley
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        says:

        Expanding that argument, however, to “therefore we should strive for free markets” is assuming a lot of goals that are not shared by anyone but fellow libertarians.
        It requires us to be agnostic about outcomes- we have to accept that whatever outcome is created by a free market is, by definition, the Correct Outcome.

        @lwa, you’re nothing if not predictable in your ability to get us wrong. It must take a pretty serious case of Dunning-Kruger for you to still be so confident in your “understanding” of libertarianism.Report

      • Avatar LWA in reply to James Hanley
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        says:

        Isn’t it weird how whenever anyone challenges the tenets of libertarianism, they somehow “just don’t understand” the libertarian faith?

        The Correct Outcome is the notion that there exists a just ordering in the universe which is outside human decision, to which we must all obey.

        Even nonharmful actions, like eating human flesh, the wanton destruction of the natural world, or torture of animals, are considered by most cultures to be distasteful, or even evil. This isn’t a unique idea that exists in rare isolated cases- its pretty much the norm across all cultures everywhere.

        The libertarian argument that all actions are allowed unless they cause harm to others, rooted in an opposition to this idea.

        But in the off chance that I somehow have completely misread libertarians, can someone point me to a libertarian argument for a Correct Outcome, not based on freed markets and individual choice?Report

      • Avatar Jaybird in reply to James Hanley
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        says:

        can someone point me to a libertarian argument for a Correct Outcome

        Dude: nothing ever ends.

        This is why the Correct Action is to allow others to be Moral Agents in their own right, rather than to assume the role of their parents in the hopes that treating them like adolescents will turn them into adults.Report

      • Avatar Brandon Berg in reply to James Hanley
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        says:

        @greginak But once we get to admitting they don’t do everything nor always quickly then we can talk about individual cases where a market may fail or not be the best tool for a job.

        I agree with this in principle. An ideal government could come up with interventions that improve upon market outcomes. By “ideal,” I mean theoretically ideal: Perfect knowledge, pure benevolence, and not accountable to non-ideal voters. God, basically.

        The problem is that we get actual government, not ideal government. A real, democratic government doesn’t do a good job of selectively identifying these cases and coming up with good interventions. Instead we get bad interventions, often in cases where no intervention is justified at all.

        When comparing the results of actual markets to the results of actual governments, it’s pretty clear that on the margin we’re putting too many economic decisions under the control of the latter.Report

      • Avatar Brandon Berg in reply to James Hanley
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        says:

        One is that making new types of snack cracker often seems more important than curing cancer.

        Well, no. Making new types of snack cracker is easier than developing cancer. Failure to find a cure for cancer has not been for lack of trying; there are currently hundreds of active, industry-funded interventional trials for breast cancer alone.

        It probably doesn’t help that most first-world countries have driven down the potential cancer-cure bounty through heavy regulation of drug prices, or that there are constant calls for the US to follow suit, but the drug and biotech industries are still pouring huge amounts of time and money into trying to find a cure.Report

      • Avatar Brandon Berg in reply to James Hanley
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        says:

        Making new types of snack cracker is easier than developing cancer.

        That’s arguably still technically true, but I meant easier than developing a cure for cancer.Report

      • Avatar James Hanley in reply to James Hanley
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        says:

        Isn’t it weird how whenever anyone challenges the tenets of libertarianism, they somehow “just don’t understand” the libertarian faith?

        No, @lwa, the problem is that you keep mis-stating what libertarians believe. I know you’re very confident that you get it, but in every critique you make you manage to get it wrong.

        For example, in the comment I critiqued here you claimed that for libertarians market outcomes can mever be questioned. Specifically, you said:

        It requires us to be agnostic about outcomes- we have to accept that whatever outcome is created by a free market is, by definition, the Correct Outcome.

        But that’s incorrect. Libertarians favor markets because as a general rule free exchange makes each party to the exchange better off. Far from bring agnostic about the outcome, we are striving for that particular outcome.

        But if there’s fraud, so that one party isn’t better off as an outcome? Libertarians are not agnostic about that–they reject that as a legitimate market outcome.

        If there are negative externalities, so that third parties are harmed by an exchange? I agree some libertarians are too cavalier about this, but if you read the literature, you’ll see it’s an issue that’s taken seriously and recognized as an illegitimate outcome. Because it’s harm to an uncompensated party, libertarian theory requires that it be viewed as an illegitimate outcome–there’s no agnosticism there.

        The reason I keep telling you that you don’t understand is because you actually don’t. You only know the caricature of libertarianism–you have only a 2-dimensional understanding that lacks any depth.

        And there’s an important issue of honesty and integrity at play here. Are you the type to be a talking head on TV saying false things about your opponents to put them in a bad light? Or are you the type to engage in honest debate, where you actually understand your opponents’ positions even as you disagree with them?Report

      • Avatar James Hanley in reply to James Hanley
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        says:

        , can someone point me to a libertarian argument for a Correct Outcome, not based on freed markets and individual choice?

        This is amusing. You aren’t asking for a libertarian argument for the correct outcome, you’re asking for a libertarian argument grounded on non-libertarian principles; grounded in principles you find acceptable. You’ve rigged the game.

        But why should libertarians play your rigged game? Why should they try to justify libertarianism on your principles rather than on their own? It’s clear enough from numerous comments that you don’t value individual choice as much as libertarians do, and that’s a legitimate position, but libertarians think you’re wrong about that, every bit as much as you think they’re wrong. So why should they operate within your–wrong, in their eyes–framework?

        I’ll give it a try, though, if you lead the way. Make a liberal argument for a Correct Outcome not based on principles of social justice or the collective good.Report

      • Avatar veronica dire in reply to James Hanley
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        says:

        @james-hanley — How’s this: equitable social structures make me happy and inequitable social structures make me sad.

        🙂

        [tongue slightly in cheek.]Report

      • Avatar Brandon Berg in reply to James Hanley
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        says:

        LWA:
        It requires us to be agnostic about outcomes- we have to accept that whatever outcome is created by a free market is, by definition, the Correct Outcome.

        Which is directly contrary to the view of society that virtually everyone else has. We can see empirically that almost all cultures have some sort of notion of what a Just Society, or a correct ordering of human affairs entails.

        This gets to the heart of the difference between libertarians and everyone else. Market outcomes aren’t something that’s arbitrarily imposed on us by sheer chance or the forces of nature—they’re the sum of all the decisions we freely make as individuals about how to allocate the scarce goods and services we produce.

        The question, then, is not why libertarians respect market outcomes—the answer should be obvious from the definition above: we respect individual choice—but why the rest of you think that your personal preferences should be privileged.Report

      • Avatar Brandon Berg in reply to James Hanley
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        says:

        *All the usual caveats about externalities apply, of course. Real externalities (e.g. pollution), not the imaginary ones often posited to justify intervention (e.g. low wages).Report

      • Avatar LWA in reply to James Hanley
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        says:

        OK, so lets go with this-
        Libertarians DO have a moral philosophy, which undergirds their ideas.

        This moral philosophy is not necessarily utilitarian, and it isn’t objectively determined, but based on some sort of faith and intuitive sense of right and wrong.

        Is this correct so far?

        Because here is where we get to ask the same questions that non-libertarians have wrestled with for centuries:

        How do you know your moral vision is correct? Is there a mathematical formula somewhere, a logical argument, or is it just your gut feeling? What happens to dissenters?

        Is it universal, applicable to everyone, always and everywhere?

        Does this moral vision include ONLY the prohibition of harm, or can it include non-harmful acts?

        When is it acceptable to impose the libertarian moral vision upon non-consenting individuals?

        See, this is why I bring up non-harmful taboos- its very easy to just state that all actions are legitimate unless they cause harm- everyone already agrees on that. But most moral codes go beyond that, to assert universal declarations about action, even when harm is not involved.

        I know perfectly well that libertarians disagree- but I am not seeing really much work done anywhere to address the questions above- most libertarians seem satisfied to draw the line at demonstrable harm, and leave it at that.Report

      • Avatar Jaybird in reply to James Hanley
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        says:

        most libertarians seem satisfied to draw the line at demonstrable harm, and leave it at that

        For me, I know that there are matters of taste and matters of morality. If there is a matter of taste, it’s probably inappropriate of me to try to tell other folks how to live. “You shouldn’t put mayo on a burger! That’s disgusting!” is something that is all well and good for me to think but certainly not to legislate.

        There are also matters of morality out there. Murder, rape, horse thievery… that sort of thing. It’s downright appropriate for laws to say “don’t murder, don’t rape, don’t steal horses”.

        When it comes to the grey areas in the middle, where we don’t know whether something is a matter of taste or a matter of morality, it’s probably better to err on the whole “this is a matter of taste” thing, because, if you don’t freaking *KNOW*, it’s probably a matter of taste… and, on top of that, trying to use force to resolve differences of taste is likely to cause demonstrable harm than having moral issues that don’t result in demonstrable harm linger unresolved (by force or otherwise).

        So if there’s a rule, I’d say it’s “if you don’t know whether it’s a matter of taste or a matter of morality, look for such things as demonstrable harm. In the absence of demonstrable harm, it’s better to reach the conclusion that you’re dealing with a matter of taste than a matter of morality.”Report

      • Avatar LWA in reply to James Hanley
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        says:

        How do you KNOW it is wrong to murder? More importantly, how do you KNOW who possesses human rights and who doesn’t?

        Slave owners were scrupulous about respecting the rights of [those they considered to be] humans.

        What if we disagree over who possesses rights? Embryos, red haired people, chimpanzees?

        Can you even prove the existence of rights? Can you explain how I possess a set of rights but not a soul?Report

      • Avatar Jaybird in reply to James Hanley
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        says:

        I don’t. But I do know that The Silver Rule makes a hell of a lot more moral sense to me than “I have enough strength to do what I want and enough crew to sleep well at night.”

        I mean, it’s weird, we’re talking about where we draw the line and how libertarians are cool with drawing the line at “demonstrable harm”.

        I assume that that is much, much closer to “let’s not draw a line at all!” than to where you’d draw it… but the fact that we’re drawing one shouldn’t be *THAT* interesting to someone who, I presume, also draws one.

        I draw mine where I draw mine because of The Silver Rule and, to some degree, The Golden Rule (I will treat others as a moral agent in their own right because I wish to be treated as a moral agent in my own right).

        Why do you draw the line where you do? Would you be down with Prohibition in the 20’s? Sterilization of homosexuals in the 40’s? The drug war in the 80’s? Gay marriage bans in the 90’s?

        What will you oppose tomorrow?Report

      • Avatar James Hanley in reply to James Hanley
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        says:

        OK, so lets go with this-
        Libertarians DO have a moral philosophy, which undergirds their ideas.
        This moral philosophy is not necessarily utilitarian, and it isn’t objectively determined, but based on some sort of faith and intuitive sense of right and wrong.

        Is this correct so far?

        Better. More correctly, I’d say there are two competing moral theories, utilitarianism and natural rights (I think I said natural law before, but I think natural rights is more correct). I’m inclined to think of utilitarianism as not a moral theory, but my friends who are moral theorists tell me I’m wrong. I’m not a fan of natural rights theories myself, so I’m sympathetic to your claim that they’re “based on some sort of faith and intuitive sense of right and wrong,” but I think natural rights theorists–conservative, liberal, or libertarian, would dispute us.

        Bear in mind, the answer to that question is not about libertarianism per se, but is a question of moral theory. I’m no great expert in moral theory, as I find it a bit tedious, so we both need a bit of guidance there.

        Because here is where we get to ask the same questions that non-libertarians have wrestled with for centuries: How do you know your moral vision is correct?

        We know that no more than does anyone else. Conversely, no one else knows that any more than do we. And both we and they and they and we tend to be overly arrogant about our certainty.

        What happens to dissenters?

        We draw and quarter them, then eat them with some fava beans and a nice chianti.

        Is it universal, applicable to everyone, always and everywhere?

        I’m sure most think so. Don’t liberals have values they think are universal, applicable everyone, always and everywhere? Is equal protection under the law context-dependant for most liberals? For you?

        Does this moral vision include ONLY the prohibition of harm, or can it include non-harmful acts?

        I’d entertain examples, since I hesitate to declare an absolute, but overwhelmingly it is targeted to harmful acts. John Stuart Mill was influential here, in his essay On Liberty

        The object of this Essay is to assert one very simple principle, as entitled to govern absolutely the dealings of society with the individual in the way of compulsion and control… the only purpose for which power can be rightfully exercised over any member of a civilised community, against his will, is to prevent harm to others. His own good, either physical or moral, is not a sufficient warrant. He cannot rightfully be compelled to do or forbear because it will be better for him to do so, because it will make him happier, because, in the opinions of others, to do so would be wise, or even right. These are good reasons for remonstrating with him, or reasoning with him, or persuading him, or entreating him, but not for compelling him…the only part of the conduct of any one, for which he is amenable to society, is that which concerns others. In the part which merely concerns himself, his independence is, of right, absolute. Over himself, over his own body and mind, the individual is sovereign.

        Of course Mill was not himself a libertarian–the concept did not yet exist–but in this way he’s been very influential.

        When is it acceptable to impose the libertarian moral vision upon non-consenting individuals?

        I don’t really understand. How do we impose non-coercion on non-consenting individuals? We punish thieves, rapists and murderers for their rejection of non-coercion. Do you mean in a democratic society? We don’t, we just keep arguing for our position. If those libertarians advocating charter cities are ever successful in founding one, presumably they’ll do it constitutionally and by contract.

        The thing is, it’s your side (and conservatives, which I think you really still are at heart, just not in contemporary American political terms), who impose your values on libertarians. We aren’t imposing our values on you, and it would be damned hard to impose nom-coercion without resorting to coercion, so we’re rather more constrained than liberals and conservatives.

        Not that I’m a fan of Ayn Rand (who in fact was pretty damn coercive, at least on a personal level), but it is noteworthy that her hero John Galt did not try to impose his vision on society, but just retreated from it.

        The closest we come to imposition is voting for candidates who seem closest to our views. Which I’m pretty sure your side considers legitimate.

        See, this is why I bring up non-harmful taboos- its very easy to just state that all actions are legitimate unless they cause harm- everyone already agrees on that. But most moral codes go beyond that, to assert universal declarations about action, even when harm is not involved.

        Of course they do. Nobody’s arguing that. We’re just trying to persuade people they shouldn’t. That’s legitimate, isn’t it? To add our voices to the debate about what our moral codes should be? I asked this of you in my previous question, but you did not answer, so I would like an answer now, please.

        I know perfectly well that libertarians disagree- but I am not seeing really much work done anywhere to address the questions above-

        I don’t understand? What questions are not being addressed?

        most libertarians seem satisfied to draw the line at demonstrable harm, and leave it at that.

        That’s the answer to your questions, right?

        Now, I’ve patiently answered your questions, but you’ve ignored mine (and Rogers’).
        1. Is it legitimate for libertarians to participate in the debate about our society’s moral code, and to try to change it?

        2. How do we evaluate the justness of a society’s moral code, or is the fact that there’s concensus about it sufficient justification? What if the consensus favors slavery, or lack of suffrage for women?

        We’ve done this dance before where you ignore my questions and keep asking more of me. I’m asking you to not be that person this time.Report

      • Avatar James Hanley in reply to James Hanley
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        says:

        How do you KNOW it is wrong to murder?

        What an odd question to ask when you’re critiquing libertarians? Don’t liberals also say murder is wrong? How do they know? Don’t conservatives say murder is wrong? How do they know?

        This isn’t libertarianism you’re interrogating anymore, it’s moral theory as a whole.

        Do you think murder is wrong? How do you know? Is it only because our society’s moral code says so? Would you accept it if our society’s moral code said murder was not wrong? It seems like a silly question, an obviously unfair one. But so far you’ve given us no basis for values other than social consensus, so either there is a moral theory you’ve not yet expressed or your bound to accept a social consensus that says murder is not wrong.Report

      • Avatar LWA in reply to James Hanley
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        says:

        2. How do we evaluate the justness of a society’s moral code, or is the fact that there’s consensus about it sufficient justification? What if the consensus favors slavery, or lack of suffrage for women?

        How, indeed ! This is exactly what I have been driving at, all this time!

        The status quo is that we have established all sorts of rules about what can be argued, and how. Certain things are considered rights, changeable only by supermajorities, other things merely laws by simple majority.

        But in the end, it comes down to “We all agree….etc and so on.” Nothing more, nothing less.
        There isn’t some golden tablet, there isn’t an oracle we can consult, its just a bunch of people who reach rough agreement on what constitutes Good and Evil.

        This consensus model is a seriously flawed process, as both Hanley and Jaybird have shown.

        But its all we have.

        So this is where the question about Correct Outcome comes in-
        Someone here said that freedom leads to “better outcomes”- How would we know what such a thing is?

        Virtually all non-libertarians have a vision they can articulate, with terms like human dignity and fairness. We measure outcomes in terms of human dignity, a correct ordering of the universe, and so on.

        Not only do libertarians disagree on what a just outcome is, libertarian theory itself lacks the tools for even defining it. As you put it, you can “entertain examples” of non-harmful taboos, yet can’t articulate a line of logic for why your acceptance would be anything other than a personal preference.

        If you can’t frame a vision of what these abstract terms mean- Justice, Injustice, Good, Evil- then how can you possibly convince others that this addresses their desires for life and is suitable as a foundation for laws and societal organization?

        You make a ringing endorsement of Mill’s argument for the inherent rights of all men. Yet you can’t articulate why we have rights, or where they come from, or why it even matters.

        A slave owner and Nazi can logically claim to follow libertarian principles, since in their view, blacks and Jews are non-persons, therefore lacking in rights. If that sounds too inflammatory for you, witness the uncertainty in libertarian circles about abortion or animal rights. Can libertarian theory lead us to a consensus on what constitutes a “person”? Not that I have seen.

        So what good is a theory that can contain both an object (racism), and its polar opposite? That can hold for freedom of abortion, and the right to life of an embryo?

        This isn’t a “dis-proof” of libertarian ideas- its an explanation for why they are so weak, and unable to address important issues.

        You want to frame libertarianism as a moral force, based on faith, yet one without a central vision of who we are, and what we want from our existence.

        At the center is a huge gasping void of meaning- there is only doubt, uncertainty, and ambivalence.Report

      • Avatar Roger in reply to James Hanley
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        says:

        @lwa

        “At the center is a huge gasping void of meaning- there is only doubt, uncertainty, and ambivalence.”

        Oddly my answer to this and to your moral question “How do you know your moral vision is correct? ” is the same one I have been giving this entire post…

        To answer a question with other (rhetorical) questions….

        How do we know a technique to tie our laces is correct?

        How do we know a new product design, wage structure or pricing strategy is correct?

        How do we know a scientific explanation is correct?

        Hell, how do we know anything?

        All we ever really know is how well it compares consequentially with the alternatives based upon our goals. In other words we can never be sure, but we can learn just the same.

        Like James, I am no fan of natural rights thinking. I am simply a consequentialist who notices that to the extent people want different things or have opposing interests that we can interfere dramatically –even catastrophically — with each other. It is wise and rational therefore to minimize such conflict, interference and coercive harm, and/or to channel competition into forms with positive externalities.

        Thus it is pragmatic to try to organize institutions so as to:
        Minimize conflict and zero sum interactions.
        Optimize freedom, choice and value-creating cooperation.
        Channel competition into socially desirable outcomes. (Producers can compete to cooperate better with consumers, for example)

        Though I do not start with the assumptions of a libertarian, I certainly end somewhere broadly congruent with their recommendations.Report

      • Avatar Jaybird in reply to James Hanley
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        says:

        LWA, is it possible to use that exact same criticism against liberalism? It seems to me that it is (and, if it’s not, how and why it’s not).Report

      • Avatar James Hanley in reply to James Hanley
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        says:

        @lwa

        Jaybird’s question is right on target. As I said above, you’re not really interrogating libertarianism, you’re interrogating moral theory. And you yourself claim the impossibility of justifying any particular moral theory, so you can’t really single out libertarianism. The absolute best you have managed here is an argument that libertarianism will have a hard time persuading people to its side because it doesn’t make claims about which outcomes constitute “Correct” ones.

        But that’s not any kind of moral critique. It’s merely an empirical claim, and one I would agree is right. But it has no relevance at all to the question of whether libertarian values are morally superior or not.

        In fact by denying the impossibility of making determinations about duch questions, you have cut the ground out from your own feet–you have no grounds for a moral critique of libertarianism. You have denied the tools by which you might have morally critiqued it, and left yourself no basis for morally condemning it. All you can do is mock it for being a minority view,

        Which brings us back to a question you have not yet answered: if you were thrust into a society where murder and rape were not seen as wrong, where women were denied the vote…would you accept that as morally right? Would you just go along with the society?Report

      • Avatar James Hanley in reply to James Hanley
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        says:

        A slave owner and Nazi can logically claim to follow libertarian principles, since in their view, blacks and Jews are non-persons, therefore lacking in rights. If that sounds too inflammatory for you, witness the uncertainty in libertarian circles about abortion or animal rights. Can libertarian theory lead us to a consensus on what constitutes a “person”? Not that I have seen.

        You do understand that liberalism has the same problem? Liberalism does not give us a means for determining who us human or not. Liberals may collectively be pro-choice, but not because all liberals agree the fetus is not a person: some see it as a conflict of rights in which the mother prevails. If liberals were all confident fetuses were not persons, they would advocate making abortion safe and legal, but not safe, legal, and rare. Frequency wouldn’t matter if abortion was safe and the fetus clearly had no moral standing.

        (I just asked my wife, a liberal who has been kind enough to tolerate my slide toward libertarianism–which began some years after we’d married–if she thought liberals had consensus on the moral standing of the fetus, and she looked at me like I was crazy, and said, “Oh, hell, no.”)

        Peter Singer argues that killing disabled newborns is ethically allowable. I know a few other liberals who agree. But the vast majority of liberals I know abhor the idea. Liberalism does not provide a consensus on the issue.

        As to animal rights, are you seriously suggesting liberals have anything like concensus on animal rights? The field ranges from the “meat is murder” crowd to the “meat is tasty, what’s the problem?” crowd.

        Liberalism does not do what you seem to think it does. It does not have an internal rule for deciding those questions, any more than libertarianism does. And that’s not surprising, since the two theories have the same origins, are suspicious cousins sharing common ancestors.Report

      • Avatar LWA in reply to James Hanley
        Ignored
        says:

        “is it possible to use that exact same criticism against liberalism? ”

        No, it really isn’t.
        American liberal thought, circa 2014, is still premised on the underlying American cultural ethos, which is mostly based on the European Christian culture which itself is inclusive of the other Abrahamic traditions of Judeism and Islam.
        For that matter, even the Eastern traditions of Buddhism and Hinduism can coexist quite easily with the American liberal (and conservative!)- traditions.

        This is because all the basic notions of an orderly universe, the sanctity of humanity- the idea that these things pre-exist and lie outside of human definition are embedded within the American political psyche.

        Slavery was defended within this tradition, then attacked and expelled, using arguments internal to this culture- civil rights, feminism, and same sex marriage followed the same trajectory.

        Look at any argument in the past few centuries, and the side that can most credibly lay claim to being most in conformance with the just order usually wins.

        People of faith like me have long ago grown comfortable with the fundamental unprovability of our ideas.
        I’m not attacking the notion of basing law and society on unprovable ideas- on the contrary, I am defending it.

        In answer to the question, if I were in a culture where evil things were accepted by consensus, would I accept it? No, but I would base my definition of Good or Evil on my own personal faith. Which is really all anyone can do.
        Again, all you are establishing is that consensus is a flawed approach- but no one yet has offered a better model.

        We can’t know anything with certainty- but we can agree on a framework of moral values, which is exactly what our society has done, with which I agree.

        Coming full circle, what libertarianism does is assert the superiority of an organization based on freedom and choice, without bothering to tell us why this is superior.Report

      • Avatar Jaybird in reply to James Hanley
        Ignored
        says:

        American liberal thought, circa 2014, is still premised on the underlying American cultural ethos, which is mostly based on the European Christian culture which itself is inclusive of the other Abrahamic traditions of Judeism and Islam.

        Oh, so the fact that there is a God and you are tuned into What God Wants makes your belief system superior to libertarianism?

        Well, so long as you’ve got authoritative voices in your head, I can’t argue with those.

        Quick! Start passing laws!Report

      • Avatar Jaybird in reply to James Hanley
        Ignored
        says:

        Oh, crap. I just talked to God and He told me a message that He wanted me to give to you. It begins with Him telling me that you remind him of one of those Israelites who wasted his time bowing before Golden Calves because, hey, it’s there and you’re surrounded by similar folks. He says that that’s not Him you’re praying to.

        Also, the Lord God gave me this message for you and He told me to type it verbatim: “You’ve still not grasped the message I’ve been trying to tell you all these years. You’ll get there, but not if you sit back as complacently as you have been. Get off your golden ass and get to work. I Am The Lord.”

        Then He started rambling about love and crap and how He seems to think you’re no worse than… this can’t be right. He seems to think that you’re no worse than me. Huh.Report

      • Avatar James Hanley in reply to James Hanley
        Ignored
        says:

        Look at any argument in the past few centuries, and the side that can most credibly lay claim to being most in conformance with the just order usually wins.

        You’ve denied there’s any basis for judegement of values, argued that society’s moral values are irrational, and now you want to claim that one claim can be said to more credibly conform to a just order than another? Sorry, but you closed the door on that possibility several comments ago. Your own series of arguments here is internally contradictory.

        In answer to the question, if I were in a culture where evil things were accepted by consensus, would I accept it? No, but I would base my definition of Good or Evil on my own personal faith. Which is really all anyone can do.

        Funny, that’s what I as a libertarian do, yet you’ve condemned it because by your view it’s out of step with society’s collective values. So your argument involves special pleadingas well as being internally contradictory.

        Again, all you are establishing is that consensus is a flawed approach- but no one yet has offered a better model.

        Reading comprehension fail. I’ve said we libertarians are participating in the debates that build consensus and shift it over time.

        We can’t know anything with certainty- but we can agree on a framework of moral values, which is exactly what our society has done, with which I agree.

        We’ve agreed on some, but on many there’s nothing like agreement. Anortion, for one. The death penalty, for another. Drug use, homosexuality, spanking of children, and more. The social agreement is neither agreement on a complete set of moral values nor a fixed and unchanging one. We’re all involved in an on-going discussion of them, libertarians, liberals, and conservatives. You’ve made no arguments here that would disqualify libertarians from participating in this on-going debate.

        Coming full circle, what libertarianism does is assert the superiority of an organization based on freedom and choice, without bothering to tell us why this is superior.

        Yet again you’ve made a factual error about libertarianism. Not specifying particular outcomes is not the same as not arguing about why a particular method of organization is superior, and libertarians talk regularly about why freedom and choice is superior. Read the literature on spontaneous order, and you’ll see.

        I mean that. Read for god’s sake. Your insistence on talking about libertarianism from a position of ignorance about what libertarians actually say is bizarre. You have a thin cartoonish vision of it, but somehow you’ve persuaded yourself you have a full understanding, and no matter how often you’re caught out in errors, you never seem to pause to wonder if maybe, just maybe, you don’t really understand it very well after all: that just maybe not bothering to study the subject you’re talking about means there’s important information about it you’re unfamiliar with.Report

      • Avatar Roger in reply to James Hanley
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        says:

        LWA,

        So are your questions and concerns all answered to your satisfaction?Report

    • Avatar Roger in reply to Roger
      Ignored
      says:

      LWA,

      Just to add that I am all ears with your elaborations on whatever in the heck a “Correct Outcome” is. Google did not help me. Is this some libertarian thing?

      This thread basically had James and I presenting our arguments on, in my words, how markets can work as a problem solving mechanism in some circumstances.

      Stepping into another domain, I certainly would not say that the scientific method leads to the “correct explanation.” To say that it does is to misunderstand the topic. Science is the pursuit of better explanations, realizing that we can never be sure an even better one is available.

      You can extrapolate this same line of thinking to markets. Science and markets are institutional problem solving systems in different domains.

      In general, I wish you would argue with what we actually wrote rather than assuming we believe something.Report

      • Avatar Roger in reply to Roger
        Ignored
        says:

        Jaybird and James,

        Do you guys use this term? If so what do you mean by it?Report

      • Avatar Glyph in reply to Roger
        Ignored
        says:

        Reading LWA’s original comment:

        The Correct Outcome is the notion that there exists a just ordering in the universe which is outside human decision, to which we must all obey.

        …it appears to be a paraphrase of “God said it, I believe it, that settles it.”Report

      • Avatar Roger in reply to Roger
        Ignored
        says:

        So, the concept of Correct Outcome is a form of revealed mysticism? Am I supposed to be defending the idea? I really am not sure as I am no longer on the libertarian morning talking points distribution list.Report

      • Avatar Dave in reply to Roger
        Ignored
        says:

        @roger

        So, the concept of Correct Outcome is a form of revealed mysticism? Am I supposed to be defending the idea? I really am not sure as I am no longer on the libertarian morning talking points distribution list.

        I wouldn’t even address the concept. It has nothing to do with the way I view markets and anyone that can’t separate economics from moral philosophy isn’t worth talking to on this subject. I have almost 20 years of capital markets experience and we don’t waste our time with this form of intellectual masturbation.Report

      • Avatar James Hanley in reply to Roger
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        says:

        Roger,
        No, it’s not a phrase I use, and certainly not capitalized. I think LWA is using it as a term from his perspective, suggesting that some outcomes are intrinsically superior to others. E.g., enslaving someone is intrinsically a bad outcome, feeding a starving person is intrinsically a good outcome.

        But of course we all believe some outcomes are better than others, so the question becomes what standard we use to judge them. I agree with Alexander Bickell that “the highest morality is almost always the morality of process.” Not always, but as a first-pass estimate. So an outcome produced by a good process is generally going to be a “Correct Outcome,” as I would use the phrase (were I inclined to use it).

        Free exchange is generally a good process. There is nothing unethical at all about two parties making a voluntary (uncoerced) exchange of things they own (things they have a right to exchange), so the outcome is generally good. (This is why a libertarian state can happily include both radical individualists and communes.)

        We can quibble about how we determine who has such rights, and what counts as coercion, but those debates are about more precisely defining what counts as a good process; they reinforce the legitimacy if the basic. concept rather than undermine it. And using those refinements we can discern those cases when market outcomes are not good.

        LWA’s claim that we are “agnostic” about market outcomes is therefore incorrect. But if we modify his claim a bit, perhaps his point can be salvaged somewhat. If we say libertarians are agnostic about the outcomes of free exchanges that meet the standards of a good process (no coercion or fraud, no negative externalities, etc.), then that’s generally true.

        I think–and of course I could be wrong-that this is where the disconnect between LWA and libertarians comes in. I don’t think LWA would say that the outcome of the exchange as it pertains to the two parties is an “Incorrect Outcome,” but that the cumulative effects of such outcomes is incorrect. E.,g, it may not be intrinsically bad for me to sell my house to a white person instead of a black person when the white person offers me more money, but if the cumulative effect is segregated neighborhoods (and whatever subsequent social problems may extend from that), then it’s not–at the macro level–a “Correct Outcome.”

        To determine what are such “Correct Outcomes” requires a different standard than the process standard. And that’s fine–nobody can legitimately object that others have advocated a different standard–but it makes no sense to demand that libertarianism advocate a different standard.

        But of course as individuals, libertarians may and do temper their basic reliance on the process standard with other standards. The process (free exchange) standard is a general first pass, not an absolute. I doubt I’ve ever met a libertarian who was fully absolutist, although some are pretty good at deceiving themselves. So we also use additional standards, but they’re more individualized, not intrinsic to libertarianism.Report

      • Avatar LWA in reply to Roger
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        says:

        The Correct Outcome is just a belief that there is a definition of Good and Evil that we can reach a consensus on.
        I use such a neutral term for it, because it is known by different things around the world, but it is found in virtually every single religion and culture that we can find.

        Our laws and structures are premised on the idea that we can measure their effectiveness based on how close they come to the ideal of Good.

        So @james-hanley , you are correct, in that arguing for a Correct Outcome is itself impossible under libertarian principles.

        For example- according to libertarian principles, state prohibition of non-harmful taboos like animal cruelty or eating human flesh, is illegitimate, correct?

        There isn’t any logical or utilitarian argument against cannibalism or animal cruelty. Yet these things are taboo because they violate the most sacred principles of our society- libertarian arguments like the NAP don’t have the power needed to resolve these satisfactorily.

        Why, libertarians ask, should others be allowed to impose these irrational moral values upon non-consenting individuals?

        The answer from society- all societies, everywhere- is that individual choice is allowed only to a certain point- where individual choices violate sacred principles- like the sanctity of the human body, or extreme cruelty even to nonhumans- society has every right to impose its values, even coercively.

        Libertarianism DOES require us to be agnostic- agnosticism about moral values is the chief claim and pride of libertarians- you see it right in this thread.

        It asks us to refrain from imposing moral values upon others- so as long as the proper principles of voluntariness and freedom are observed, there isn’t any way under libertarian principles to object on anything other than utilitarian grounds.Report

      • Avatar Jaybird in reply to Roger
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        says:

        “Correct Outcome” is not really a term that I use, I don’t think.

        Maybe we can google it.
        Okay, for the site, it looks like there are four instances… and here they are.

        James Hanley’s “Hayek and the Socialist Calculation” includes the following sentence:
        There are too few constants in the economy, and too many variables, to use any set of equations to determine the correct outcome.

        Burt Likko’s “True Faith To Democracy” includes a comment from TVD:
        [I had one blowhard—a Barnett man, I think—bragging he’d get me on Loving, that originalism couldn’t get us to the desirable, “correct” outcome of the type that Stossel and you are willing to sacrifice principle for. Hah! The debate ended at my opening remarks.]

        Rose Woodhouse’s “Don’t Reduce Melise Muñoz or Her Fetus to a Slogan” includes a comment from Russell Saunders:
        Your comment implies that Rose is obligated to promote the pro-choice cause, rather than determine what is the morally correct outcome of the question at hand.

        Burt Likko’s “Be Proud Of The Double Jeopardy Clause” has Plinko leaving a comment:
        Juries reaching “wrong” conclusions is kind of a tautology, no? The jury decision is the decision, if we could know the correct outcome via other means, we wouldn’t have jury trials!

        All in all, I’d say that “correct outcome” isn’t used often at all and, in the one case where it is explicitly a libertarian making an argument about the economy, he’s saying that stuff is too complex to come up with a set of equations that will get us to one.

        I dunno about other places, but, for here, I’d say that “correct outcome” is not really a concept that we hammer on much.Report

      • Avatar James Hanley in reply to Roger
        Ignored
        says:

        @lwa
        The Correct Outcome is just a belief that there is a definition of Good and Evil that we can reach a consensus on.

        Consensus, eh? Then it will be a fairly minimal set. This also seems to assume that mere numbers determine correctness. A necessary conclusion seems to be that slavery was a Correct Outcome at some times and places.

        For example- according to libertarian principles, state prohibition of non-harmful taboos like animal cruelty or eating human flesh, is illegitimate, correct?

        Depends which libertarians you talk to. Try talking to a variety before you tell us what we think.

        There isn’t any logical or utilitarian argument against cannibalism or animal cruelty.

        1. Not all libertarians are utilitarians; in fact I suspect I’m in the minority fir being utilitarian rather than having a natural rights focus. Are you aware of those differences within libertarianism?

        2. No logical argument against animal cruelty? None? I’m sure my liberal friends who oppose dog and cock fighting are going to be unsettled by thst.

        3. No utilitarian argument against animal cruelty? Obviously you are not to date on the literature.

        Yet these things are taboo because they violate the most sacred principles of our society-

        Principles that, by your own admission above, cannot be defended logically? If society reaches concensus on an irrational set of principles, we’re just supposed to agree because it’s the concensus?

        And how did this concensus get reached? Was there lots of discussion and argument across generations about it? Does on-going debate lead to evolution in the principles on which we have consensus? If so, then are libertarians not just playing a part in all that? Would you have us stop playing that part? Must the current consensus be frozen and maintained unchanged? How would that be possible? On what basis so far articulated could we determine that it was desirable?

        Are you treating the consensus as unchallengeable? If so, that’s frightening, or requires a lot of faith (and rejection of emirical evidence) that the concensus will always be good. If not, you can’t reasonably critique libertarians for challenging it.

        libertarian arguments like the NAP don’t have the power needed to resolve these satisfactorily.

        What principle for choosing values have you put forth that would do so? All you’ve put forth is “the concensus,” which logically cannot itself be a means for resolving issues

        Why, libertarians ask, should others be allowed to impose these irrational moral values upon non-consenting individuals?

        Ah, you do agree they’re irrational, and yet you admire them. That’s a huge gulf between us.

        The answer from society- all societies, everywhere- is that individual choice is allowed only to a certain point- where individual choices violate sacred principles- like the sanctity of the human body, or extreme cruelty even to nonhumans- society has every right to impose its values, even coercively.

        Society said it, therefore it’s legitimate. You might want to trot diwn to the local CC and try that out on a philosophy prof.

        Libertarianism DOES require us to be agnostic- agnosticism about moral values is the chief claim and pride of libertarians- you see it right in this thread.

        Again, LWA, stop trying to tell libertarians what their beliefs are. You could not be more wrong. If there’s one foundational principle of libertarianism, it’s that the initiation of force is morally wrong.

        Or read this from the Stanford Encyclopedia of philosophy, which explicitly describes libertarianism as “a moral principle.”

        …there isn’t any way under libertarian principles to object on anything other than utilitarian grounds.

        And again, you are incorrect about libertarianism. I’m a utilitarian, but that’s just one strain of libertarianism. There’s also natural rights libertarianism (and I’m probably in the minority, as a strong skeptic of batural rights).

        TL/DR: LWA makes yet more inaccurate claims about libertarianism and about moral theorizing, and proposes a moral theory based on acceptance of irrational (his word) principles solely on the basis that there’s a social concensus on the, apparently disregarding how ugly social concensus can be.Report

      • Avatar Roger in reply to Roger
        Ignored
        says:

        LWA,

        If a society of people believed that the body was sacred and therefore all agreed we should never eat grandma, then you would approve. Right?

        If another society of people believes that the soul is immortal and that by eating grandma we can keep her spirit with us, Are you ok with them agreeing to a law requiring grandma eating? Why or why not?

        If even another society agrees that it is is evil to use coercion because it interferes with the ability of fellow humans to actualize their potential, are you are ok with that law too (a coercive law against coercion)? Why or why not?

        Finally, when all three societies start to interact how do you suggest they settle their differences? Vote? Persuasion?Report

      • Avatar Roger in reply to Roger
        Ignored
        says:

        Oh, and thanks to everyone else above for their answers and input.Report

    • Avatar Barry in reply to Roger
      Ignored
      says:

      “In a relatively free and competitive market, winning strategies and combinations will tend to outperform losing ones. That is what profit is. When companies do stupid things that hurt revenues more than they improve costs, it shows up in the good old bottom line. Over time companies either improve or they become Kmart, Pontiac and Wang.”

      On flat, open, well-roaded terrain in sunny, comfortable weather, this tactic is superior……..Report

      • Avatar James Hanley in reply to Barry
        Ignored
        says:

        Exactly, when markets are made relatively unfree and uncompetitive by foolish regulations, good business strategy may no longer outperform good rent-seeking strategies.Report

  10. Avatar Mad Rocket Scientist
    Ignored
    says:

    Giant Aerospace, where I used to work, had that problem in spades back in the 70’s & 80’s. I still does today, although not to the degree it once did. The result of such behavior was that employees would hoard information, refuse to write down & formalize procedures & process, and do a passive-aggressive thing when it came to training new hires. This prevented anyone from being fired, since everything the company needed was in heads, & not written down.

    Even now, though, decisions are made that are just thoughtless, like scrapping or relocating a department where 90% of the employees are set to retire in a few years. Just delay the action until the bulk have retired, then no one gets laid off or has to quit. But no, better to move now, screw the loyal employees, and bump the bottom line up 0.1%.Report

    • Avatar morat20 in reply to Mad Rocket Scientist
      Ignored
      says:

      Boeing’s a rather famous case in point. Let’s lay off our entire design division, people with decades of experience and expertise, and outsource the job.

      Did not work out well, and they had to go begging back to those laid off employees to get some help. (Which, I understand, said former employees gouged the snot out of them at contractor rates, probably with a ‘jerk’ tax add on top. I would have).

      *shrug*. I think part of it is that a lot of employees think the ‘company’ views them as a cost, not as an asset. (Costs are cut, assets are cultivated).

      We can debate management theories and reward structures and whether this action or that was good or appropriate until the cows come home, but if employees feel — rightly or wrongly — that they’re just disposable cogs the company only begrudgingly pays (and only until they can be replaced for something cheaper), it’s going to work out poorly.Report

      • Avatar Mad Rocket Scientist in reply to morat20
        Ignored
        says:

        I try not to say their name out loud, my wife still works for them.Report

      • Avatar morat20 in reply to morat20
        Ignored
        says:

        A friend of mine — a die-hard, gun-loving, Republican in the way only Texas can seem to make them — has one person who, running as a Republican, he would vote Democrat against. (And I’m pretty sure his list includes both Hitler and the Devil running on the GOP ticket).

        Carly Fiorina. (He worked at HP during her..tenure. Well, he worked during the start of her tenure and was part of some of the massive layoffs, and suffice it to say he is not a fan).

        That sort of thing can get personal. Really personal.Report

      • Avatar Damon in reply to morat20
        Ignored
        says:

        I worked at a company once where we had a contractor supporting a program for a US gov’t client. Every year, I had to get the contractor’s Purchase Order signed off by the VP of HR. Contractor was a former employee and internal policies required HR to sign off. The VP once commented to me, “oh yes, I remember that guy. I had to lay him off.”

        Motto: think twice before you lay off the guy who designed and coded the SW for the program you customer still is using.Report

      • Avatar morat20 in reply to morat20
        Ignored
        says:

        I turned down a job (with a 15% raise over my then salary) because a little digging showed:

        1) They’d laid off the coders who built it as soon as it was done, and hired consultants to do any routine maintenance. (A pattern for this company)
        2) The maintenance was getting pricey because the code was now aging and couldn’t do what management was insisting it do, so they were paying “on demand for critical failures” prices to do the bare minimum, routine upgrading of things like server software and patches.
        3) The proposed start date of my job was the day the maintenance contract totally ended, so in short I’d be taking full responsibility for aging, problematic code the second I walked in the door, with no in house expertise.
        4) They showed no concern about this when I pointed out that there would be a bit of a gap there, especially given no one on the team (myself included) was fully fluent in Objective C.

        15% wasn’t enough to take on that headache. Especially not when my ‘permanent job’ was going to be a two years and then laid off “Fix all our stuff so we can farm it back out to consultant and book your salary as ‘savings’ because maintenance contracts of that nature are on someone else’s budget.”Report

      • Avatar Roger in reply to morat20
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        says:

        And building on my little story below when the HR manager succeeds in getting the firm listed in Latina magazines ten best places for working mothers, don’t forget the CFO smiles, realizing he can now use that fact to negotiate with the board for an average wage increase for 2015 of 2.5 instead of 2.6 because of this honor.Report

      • Avatar Kim in reply to morat20
        Ignored
        says:

        Damon,
        except if they’ve written spaghetti code for job security (worse if it’s in assembly).
        Then fire them now, because it’s worth it to have maintainable code.Report

      • Avatar Kim in reply to morat20
        Ignored
        says:

        Roger,
        Just as a fwiw, if they actually did Good Things for their Employees to get that listing, it might not be a bad thing to give a slightly lower pay increase.

        That’s how our government gets its scientists, after all. They’ll take anyone who comes (always need more good ones), but they’ve actively worked to create a place where minority scientists feel happy, so their talent pool is abnormally good for what they pay.Report

      • Avatar Roger in reply to morat20
        Ignored
        says:

        In other words, wages is just a part of the appeal of a job. Wonder if this same concept applies to disparities by gender of wages?

        Never mind. Bad topic.Report

      • Avatar Kim in reply to morat20
        Ignored
        says:

        Roger,
        Most of the problem with gender based disparity appears to be a deliberate policy designed to encourage an opaque labor market, to the advantage of companies.

        NOW, if you really had a company which asked its employees, “We have received 5% of our women asking for milking stations, are you willing to support a 1% decrease in pay to offset our capital outlay for the space?” That would be acceptable. I would even be (very unhappily) okay if the women were the only people taking the paycut [and if subsequent women were told of the policy, and the decrease in pay from men.].

        That’s an open and fair “Here’s what we got, you like it?”
        Management never does shit like this, even where it would really make sense.
        (Note: never worked in a union. maybe unions actually do this).Report

    • Avatar Mike Schilling in reply to Mad Rocket Scientist
      Ignored
      says:

      But no, better to move now, screw the loyal employees, and bump the bottom line up 0.1%.

      If not screwing the loyal employees is of zero value to the decision makers, then it is better, because .1 > 0 .Report

      • Avatar morat20 in reply to Mike Schilling
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        says:

        I think Vulture Capitalist firms really did more to cement that image than anything else.

        I mean, sure, there’s enough stock CEO/Board ‘let’s improve the bottom line for the next three quarters at the expensive of five years from now to bump our stock and/or exercise our options’ to keep it ticking, but the ones that would really come in with the “six months, max” thinking were Vulture Capitalists who’d acquire your company, strip it to the bone, and sell it off for parts.

        And as celebrated as they were (and as much money as they made), it’s an image business is having a hard time shaking.Report

      • Avatar Brandon Berg in reply to Mike Schilling
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        says:

        If a company can be profitably purchased and sold for parts, it’s because the parts are worth more than the whole. If the parts are worth more than the whole, it should be sold for parts.Report

      • Avatar Brandon Berg in reply to Mike Schilling
        Ignored
        says:

        Note that this is one of the mechanisms by which inefficient firms are culled. I’m simultaneously seeing complaints that markets don’t do a good enough job of culling inefficient firms, and also that they do (although, to be fair, different people).Report

      • Avatar veronica dire in reply to Mike Schilling
        Ignored
        says:

        @brandon-berg — See, this is where these discussions fall apart. Sure, the managers believe the firm is worth more broken up than not. But you make no allowances for their being wrong.

        Funny thing, personally — and maybe this is just me — but I’m wrong sometimes. I mean professionally. I’m right very often. I’m actually quite good at what I do and I get paid rather well for it (thank you very much). The market, of which you speak so highly, values me quite a lot.

        So that must mean I am right quite a lot. And I am.

        But not always. And I learn much from these mistakes.

        (And this is true: I’m very good at owning my mistakes, not making excusing, saying “Yeah, that was me. I screwed up.” Which maybe is how I got to be good, by learning, and why I am trusted, because I stand behind what I do.)

        So anyway, breaking up a firm might be a good choice on the short term. Sure. But there is sometimes a tremendous human cost, broken lives, lost opportunities. They folks who make the decision to break up the firm don’t pay these costs. They make bank and then breeze out of town. They are accountable, I assume, to someone, but surely not to those who lost their jobs, those the market cast aside.

        Like maybe, for example, Detroit is just a worthless place full of worthless people. I mean, the market has spoken about Detroit. Or something.

        So, yeah, I’m pro market — by which I mean pro mixed economy with a generous safety net. I get that firms must come and go. I understand the arguments for efficiency.

        Really, I do. I read an econ 101 book once.

        But the bosses might be fucking up. And the workers are allowed to notice. And if income disparities become horrible, and folks find their place in the market unlivable, and if they can share the magnitude of this pain — well — we are also a democracy, and compromises exist between the pure market and pure socialism.

        Somewhere on that spectrum might be a better place. In fact, I think clearly it is.Report

      • Avatar Kim in reply to Mike Schilling
        Ignored
        says:

        Brandon,
        It is always easier to burn a company to the ground rather than to maintain it, even if in the long term you get more money by maintaining it.

        You are suggesting we should burn all our companies to the ground, as they’re worth more that way. [And they are, to stockholders who care about “how much money did I earn this week?”]Report

      • Avatar Dave in reply to Mike Schilling
        Ignored
        says:

        @veronica-dire

        See, this is where these discussions fall apart. Sure, the managers believe the firm is worth more broken up than not. But you make no allowances for their being wrong.

        How would you make those allowances? From my perspective, the only way to determine whether or not management is right or wrong about that is when they attempt to execute the exit strategy and completely divest themselves of the investment.

        So anyway, breaking up a firm might be a good choice on the short term. Sure. But there is sometimes a tremendous human cost, broken lives, lost opportunities. They folks who make the decision to break up the firm don’t pay these costs. They make bank and then breeze out of town. They are accountable, I assume, to someone, but surely not to those who lost their jobs, those the market cast aside.

        It’s important to note that a company that is worth more “dead than alive” is not a healthy company. The operating entity is trading at a significant discount to the separate value of the assets or business units. More likely than not, the company is not on the absolute verge of bankruptcy but it is understood by the market (read: investors) that the business is on an unsustainable path.

        Investors that buy distressed companies are high-risk investors (think private equity) so the only way that they can buy companies, turn them around and either divest of the valuable assets or exit the re-positioned company via an IPO is by purchasing companies in distress. If they went after viable businesses, they’d lose their asses because they’d likely buy the company at a premium to the value of the units.

        People can crap on private equity firms but they don’t just swoop in, bank their money and breeze out of town. What they do involves a lot of risk coming from a number of different areas including but not limited to business conditions, economic conditions, interest rates, the general capital markets, etc. Plus, there’s the risk associated with time. For investors to make the high returns required by the investors (more on this in a minute), based on the time value of money, private equity investors need to get out of an investment sooner rather than later. Time works against them.

        Two other points:

        They are accountable, I assume, to someone, but surely not to those who lost their jobs, those the market cast aside.

        They are accountable to the market. Private equity investors tap the institutional capital markets (life companies, pension funds, endowments, etc.) in order to line up investors. When they do, they disclose their investment objectives and return requirements. Investors invest accordingly. If a private equity fund fails to deliver, then the market would most certainly punish it by not providing capital for future funds.

        Last, with respect to the human costs, I don’t expect this point to make you feel any better (and it doesn’t make me feel any better), but the way I see private equity’s role in turning around companies is that the people that work for distressed companies are already working in an environment where are jobs are threatened. In most situations, it’s not a matter of “if” but a matter of “when”.Report

      • Avatar Dave in reply to Mike Schilling
        Ignored
        says:

        @kim

        You are suggesting we should burn all our companies to the ground, as they’re worth more that way. [And they are, to stockholders who care about “how much money did I earn this week?”]

        No he’s not and neither am I.

        This brand of folk economics is not particularly helpful in these kinds of discussions, especially when addressing people with a finance and capital markets background (me).

        You and I damn well know that your first sentence is blatantly false.Report

      • Avatar veronica dire in reply to Mike Schilling
        Ignored
        says:

        The thing about Brandon’s comment is not that he is totally wrong. There is some truth there, and were he in an argument against a full-on State Socialists or the “finance bad! never close a company ever!” crowd, sure, I agree. His points need to be made.

        But things are not so cut and dry. The financiers making the decisions — to whom are they accountable? What are their immediate motivations? Plus, how do we know these are good decision? Where did they get their models, their risk analysis, their discount rates on future profits? What definition of value are the even using? Do they consider the externalities of their choices, such as the effects on the community, lost tax base, poor schools, suicides?

        These things have an enormous cost, but the people who pay those costs are not the financiers who, on the day following the sale, are drinking brightly colored cocktails in some swank Tribeca bar.

        I’m not “anti market.” Nor am I interested in replaying that tired debate. God, please, no! But I want an honest view, not golly-gee cheerleading.Report

      • Avatar veronica dire in reply to Mike Schilling
        Ignored
        says:

        @dave — I basically agree with what you are saying. My point was more to counter @brandon-berg ’s easy-breezy “markets good” talking points, which I think overlook much of the detail of what happens to these companies and the people who work there.

        As a political frame, this is why I advocate the mixed economy with a generous safety net. The financiers will continue to play their games, and I don’t think things will improve if we try to stop them. But Joe and Jenny on the shop floor are people on the shop floor, and they’re probably doing the best they can with the life script they have available. And the financiers really can come strip the value from their lives, the things that matter, get wealthy, and leave them with nothing. And you can say, “Welp, that’s the market!” And yeah, sure is, but Joe and Jenny get to vote.Report

      • Avatar Roger in reply to Mike Schilling
        Ignored
        says:

        When I have been negatively affected by decisions made by someone above me in a corporation, do I wish they had consulted with me and let me override their decision? Damn straight!

        Do I think that, in general, it would be best to allow employees to override the decisions of those that they work for? No. This would be a foolish decision and would make the world a worse place to live with lower standards of living.

        Markets serve consumers (which is all of us within this role). Allowing employees (or managers) to override the decisions of the venture capitalists would most likely open a door to rent seeking and inefficient use of resources.

        The venture capitalists may very well be wrong. They have a theory and they test it. Limiting their ability to test their theories brings with it more harm than good.Report

      • Avatar morat20 in reply to Mike Schilling
        Ignored
        says:

        Brandon’s also neglected the actual business model of a vulture capitalist fund.

        They were the finance equivalent of ‘Flip this House’. They made leveraged buyouts aimed entirely at flipping the company — or asset stripping it — in a quick time frame.

        They explicitly did NOT aim at long-term profits. It was not part of their business plan. It didn’t matter to them if the company could be worth 10 times as much two years from now, because under no circumstances would they OWN the business in 2 years.

        Borrow money, flip the business, and thanks to heavy leverage — take a good chunk of profit.

        I make no judgements about the ‘goodness’ or ‘badness’ of it as a business model, nor of it’s morality or lack thereof. I simply point out that their entire business model precluded comparing short and long-term returns, so you can’t claim “If it was worth more in the long term, they wouldn’t have asset stripped it”. Yes, they would have, because their business model cared nothing for the long term beyond whether or not they should charge more for the parts now.

        Day traders, similarly, care little about the fundamentals of the companies whose stocks they trade — because it’s generally irrelevant information. Today’s news, market trends, and other short-term blips are high-impact — long term performance or return is immaterial.Report

      • Avatar Mad Rocket Scientist in reply to Mike Schilling
        Ignored
        says:

        @morat20

        As @dave explains quite clearly, your “Vulture Capitalists” aren’t targeting healthy companies. They are going after the sick ones, the ones that are already failing & are being devalued because management is doing a bad job, or the market has shifted & the business isn’t keeping pace.Report

      • Avatar Kim in reply to Mike Schilling
        Ignored
        says:

        Dave,
        Some stockholders want the mostest money the soonest. Others don’t. Some people invest in Costco, others invest in “growth industries.”

        About the only companies you can’t burn to the ground are the ones that aren’t profitable yet.

        Shall we take Hershey’s as an example? They’ve diluted their chocolate, reduced their brand differentiation, and overall cheapened their product. Selling on reputation alone. It’s a common tactic.

        Now, that’s not liquidate… but in a system where the middle class is a fast diminishing part of the market (NYTimes had a cite on this one), a lot of companies are focusing on quality degradation, particularly ones that depend on large demand to keep their economy of scale functional.

        I’m not super qualified to talk about whether the distribution of folks into “stable” industries that don’t do R&D and “startup” companies (like Maxwell) that aren’t profitable yet, is a good idea. Personally, I think Bell Labs had a bunch of cool things going… but I can’t quantify that.Report

      • Avatar Glyph in reply to Mike Schilling
        Ignored
        says:

        Ironically, “vulture” is often used pejoratively, but in nature they of course perform essential services.

        I’ll leave it to those in this discussion to fully-apply the metaphor here.Report

      • Avatar morat20 in reply to Mike Schilling
        Ignored
        says:

        “Sick” is dependent on circumstances, and that’s also still not quite true — Vulture Capitalist firms target businesses they can leverage a buyout on.

        Often that’s because the business is weak or mismanaged, but not always.

        Furthermore — and back to my point — the vulture firms don’t care if “sick” is a curable state, because they are not in it to own a company. “Sick” companies might be dying companies. They may also be companies struggling to meet increased demand, ride out a minor market or economic adjustment, or one who got hit by supply chain problems, etc.

        But what it comes down to is this: A vulture capitalist firm does not care if fixing the company will make 10 times more money over the next 5 years than asset stripping it now will, because the vulture capitalist firm did not buy the company to own it. They are not in the business of long-term investments, and will cheerfully gut a dying company just as fast as they will a highly profitable one because they are not investors looking for long-term returns.

        So again: One cannot say “Vulture capitalists stripped a company for assets because it was worth more that way”. That is true in the short term only.

        What do you think “pump and dump” means? 🙂Report

      • Avatar Dave in reply to Mike Schilling
        Ignored
        says:

        @veronica-dire

        Since you and I haven’t conversed much, please allow to get one thing out of the way:

        I’m not “anti market.” Nor am I interested in replaying that tired debate. God, please, no! But I want an honest view, not golly-gee cheerleading.

        If you and I disagree on something, I am not going to call you anti-market. I will chalk it up to being a good faith disagreement. In fact, in my personal opinion (and people are free to disagree), I don’t necessary know if I would call ANYONE here anti-market even if I strongly disagree with someone.

        I’m not a cheerleader. I’d look horrible in one of those skirts anyway so I think I’ll just stick to giving you my honest answers. I think I can do this.

        But things are not so cut and dry.

        Business is not cut and dry. Whether it’s a private equity firm engaged in a leveraged buyout or a WalMart opening two miles from a local downtown area that will likely be entirely vacant in a short period of time, there’s nothing cut and dry.

        The financiers making the decisions — to whom are they accountable?

        Primarily their investors, which in a lot of cases are major institutional investors (including public pension funds for public employees, teachers, fire and police as well as union pension funds). On a secondary basis, they are accountable to the capital markets as a whole because their success or lack thereof will impact the fund’s ability to raise future additional funds (i.e. can they raise a fund? can they raise a larger fund? etc.)

        What are their immediate motivations?

        To earn their promoted returns above and beyond what the investors get. That’s where the money is for the private equity managers. They get a disproportionate share of profits after certain return thresholds are met.

        Plus, how do we know these are good decision?

        We as in we collectively or we as in the fund managers? If they’re investing, they think it ‘s good.

        Where did they get their models, their risk analysis, their discount rates on future profits? What definition of value are the even using?

        I spent three years on an investment banking floor at Goldman Sachs from 2005-early 2008. Some of the people working on the private equity side/hedge fund side of the business are some of the most sophisticated out there, especially given the returns they have to acquire for their investors (this is 20% plus returns). Valuation models are all over the place. Their risk analysis would cover everything from market research to comparable companies to peer group analyses to knowing everything inside and out, forwards and backwards. Investment decisions are made my committee and if those investment memos don’t cover everything, no one moves.

        Valuations, discount rates, exit assumptions are all market-driven based on the opportunity that they’re analyzing. I can’t pin that down since I don’t have direct experience with M&A or leveraged buyouts but I understand the basic framework. This stuff they will have to know because investment committees will question every assumption.

        This is high-risk investing, and while there is a risk of being spectacularly wrong, a lot of upfront work is done.

        Do they consider the externalities of their choices, such as the effects on the community, lost tax base, poor schools, suicides?

        No

        These things have an enormous cost, but the people who pay those costs are not the financiers who, on the day following the sale, are drinking brightly colored cocktails in some swank Tribeca bar.

        Again, it’s also important to keep in mind that if the financiers are celebrating the way you describe it, then their investors, many of whom are institutional investors looking to invest to cover the retirement pensions of employees, teachers, etc., made money too. The fund managers would not be able to achieve these kinds of investment successes without the outside capital from the institutions.

        While it’s easy to criticize modern finance, especially areas like private equity and hedge funds, and understandably so, they have become increasingly prevalent over the past 10 or 15 years largely because of increased institutional interest. Life companies, pension funds, endowments, sovereign wealth funds and other larger institutional investors that seek investments on the higher risk/higher return end of the spectrum lack the expertise in house to do it. That’s where companies like Bain Capital or Blackstone come in.

        I’m not “anti market.” Nor am I interested in replaying that tired debate. God, please, no! But I want an honest view, not golly-gee cheerleading.Report

      • Avatar Kim in reply to Mike Schilling
        Ignored
        says:

        morat,
        What the other blokes are arguing is that folks like Versa Capital (actual long term venture capital) would be willing to pay more for the company than the vulture investors.

        Which is all well and good, but they’re ignoring a few points:
        1) Vulture Capitalism is easier than Venture Capital — and shows more percentage profit in the short term.
        2) There are an awful lot of companies, and it takes a while for Venture Capital to actually analyze and bid on a company (and why bid on one that someone else is already going after? ). Vultures can move faster (I’d think) because their requirements are less.

        Dave, these are hypotheses above — or at least feel free to treat them as such, and give me competing evidence in the form of vulture capitalists going bankrupt.Report

      • Avatar Brandon Berg in reply to Mike Schilling
        Ignored
        says:

        It didn’t matter to them if the company could be worth 10 times as much two years from now, because under no circumstances would they OWN the business in 2 years.

        Are you familiar with the concept of net present value and how it relates to current asset prices, @morat20? If so, how do you reconcile this line of argument with it?Report

      • Avatar Kim in reply to Mike Schilling
        Ignored
        says:

        And one other thing: the market is faddish.
        It’s quite possible for vulture capitalists to really be “hot”
        and be overinvested in (and therefore capable of pulling
        off trades they wouldn’t otherwise be able to make, due
        to lower capitalization).Report

      • Avatar Brandon Berg in reply to Mike Schilling
        Ignored
        says:

        By the way, it’s worth noting that the cost of buying firm will typically be determined by those who are most optimistic about its future. That is, if I think a firm is worth a billion dollars sold for parts, and you think it has an NPV of $2 billion if left intact, you’re going offer a bit over $1 billion, which is more than I’m willing to pay. If I’m able to buy a firm for $1 billion to sell for parts, it’s because no other potential investor thought it was worth more intact.

        If you’re right, it’s not just the takeover firm that was wrong—everyone else was, too.Report

      • Avatar Dave in reply to Mike Schilling
        Ignored
        says:

        @brandon-berg

        Are you familiar with the concept of net present value and how it relates to current asset prices, @morat20? If so, how do you reconcile this line of argument with it?

        The other issue I have with @morat20 ‘s comment is that private equity investors have to care about the long-term because to get maximum pricing, they have to sell the company as a stabilized entity to core institutional investors. They’ll have to convince those investors that the company has been re positioned in a long-term winner.

        Investors are already going to recognize when a private equity firm is trying to cash in so I would expect there to be considerable skepticism on their part. The long-term story has to carry the day.Report

      • Avatar Dave in reply to Mike Schilling
        Ignored
        says:

        Kim,

        Both vulture capitalism and venture capital involve high risk capital. If venture capital is harder, and I think it is, it’s because people are dealing with start ups. When a private equity firm looking to take a publicly traded company private does its research. There’s always an abundance of information they can access. It’s also possible that they have already done a lot of research due to their investment expertise within a certain sector.

        Vultures can move faster (I’d think) because their requirements are less.

        The vultures have to move fast because there are lots of vultures scouring the market for opportunities. I think they are also very capable of coming to decisions quickly and getting their arms around opportunities.Report

      • Avatar morat20 in reply to Mike Schilling
        Ignored
        says:

        As noted upthread: Vulture firms can move faster than venture firms, or investment firms. They have easier access to the cash needed for buyouts (because they’re leveraged, and because they only want it for the short term, meaning it’s cheaper).

        I’m afraid I simply lack the blind faith to assume that, for some reason, the long-term investors will ‘win’ — because, you know, the short-term guys have all the advantages. It’s a bit of a surprise to apparently be the cynical one in the room.

        I’m sure, somehow, the VC’s ruthlessly exploiting their short-term advantages will eventually fail. Maybe they won’t find a sucker this time (given the latest housing bubble, I’m thinking barring rising wealth inequality, that’s never gonna be a problem). I suppose then the VC firm will face the ultimate penalty for their short-term exploitation. Finally having been unable to ‘flip this business’, their investors will…seize their only assets (their latest acquisition, worth less than the loans) and then….nothing, really.

        I mean, all their profits are already out of the firm, the only assets are their current target. Their investors are screwed, but I’ve come to believe that “screwing the investors” is pretty much modern capitalism and why not? The titans of industry were out doing all the work, the investors are basically just parasites with more cash than they really deserve.Report

      • Avatar Kim in reply to Mike Schilling
        Ignored
        says:

        morat,
        Okay, so Dave you and I agree that there is a fundamental disparity between venture and vulture capitalists in their timeliness.

        Brandon’s making a solid point, though — the net worth of a company isn’t just it’s assets. It’s also what people think it will make in the future.

        This means that vulture capitalists have a strong incentive to propagandize against companies (it’s illegal to do insider trading, but I don’t think “bad propaganda” is actually illegal, is it?)Report

      • Avatar James Hanley in reply to Mike Schilling
        Ignored
        says:

        If I’m able to buy a firm for $1 billion to sell for parts, it’s because no other potential investor thought it was worth more intact.

        Brandon’s point is worth repeating. Despite the claim that valuable companies are being dismantled, the lack of higher bidders indicates that nobody who’s looked closely at them agrees. Those who don’t bear any risk say the firms are valuable, while those who could actually buy the firm, who would have to accept the risk, disagree.

        This relates to Morat’s argument that venture capitalists don’t care about whether the future value of the company could be greater if it was fixed. Brandon’s point about NPV is spot-on, but I would add that any failing company has the potential to be turned around. It may require radical changes in everything, even including what market it’s in, but it’s possible. But it isn’t necessarily probable–a great number of those effort would fail. And that’s the kind of thing investors have to take into account, whether their private equity funds or managers of public employees pension funds. Are we going to direct our money to an operation that profits more iften than not, or to an operation that always tries to rebuild a company, but isn’t successful as often?

        If the latter choice actually paid off better on average, that’s where you’d see the institutional investors put their money. If they’re not putting their money there, why would we have confidence it’s actually a better strategy?Report

      • Avatar James Hanley in reply to Mike Schilling
        Ignored
        says:

        @kim
        vulture capitalists have a strong incentive to propagandize against companies

        There’s a term for investors who listen to vulture capitalists’ propaganda instead of their own research: broke.Report

      • Avatar Kim in reply to Mike Schilling
        Ignored
        says:

        James,
        mph, Thought that was the term for the folks that listened to George W.Bush.Report

      • Avatar Brandon Berg in reply to Mike Schilling
        Ignored
        says:

        As noted upthread: Vulture firms can move faster than venture firms, or investment firms. They have easier access to the cash needed for buyouts (because they’re leveraged, and because they only want it for the short term, meaning it’s cheaper).

        I’m afraid I simply lack the blind faith to assume that, for some reason, the long-term investors will ‘win’ — because, you know, the short-term guys have all the advantages. It’s a bit of a surprise to apparently be the cynical one in the room.

        Even if the “vulture firm” gets to the buyout first (why do the current investors sell to them, if it’s worth more?), it would be crazy to strip it for parts if they think someone else is going to come along with a better offer. Their goal is to make money, not to liquidate a firm. Keep in mind that there are firms that do takeovers and flip the acquired firm intact, when they think it’s worth it.

        But enough theory. Since you lack the capacity for blind faith, you must be aware of evidence that takeover firms were routinely liquidating companies that were worth more intact. Could you enlighten us?Report

  11. Avatar Roger
    Ignored
    says:

    Let me add something to the discussion.

    You guys do realize that in pretty much every big company, the Senior President of HR comes in to the weekly executive meeting with a 58 page PowerPoint presentation on the importance of developing a better workforce…right?

    They show the latest comparison of wages, turnover, opinion surveys, exit interviews, diversity distributions, average raise vs gender comparison, etc etc. They then make their case for why we need more day care centers, better leave policies, and the importance of making this years Latina magazines’ best place to work for women list.

    The CFO counters with comparisons of cost per product per employee and brings up issues with pension funding challenges. The CEO then stands up and makes an emphatic speech about how employees are the heart of the company and how we need to do x and y and z, and fix the problems with w in so and so division.

    The next week this is repeated with new numbers and arguments.

    Balancing costs and benefits across thousands of managers and employees is not an easy job. No company does it perfectly or ever could. Some do it horribly. But all reasonable large firms try. They have to to survive, let alone thrive.Report

    • Avatar Kazzy in reply to Roger
      Ignored
      says:

      Isn’t this where a mission statement, strategic plan, or some such thing comes in handy?

      Should Acme raise wages? Well, that depends. Raising wages can cut into profits. Failing to do so can cost valued employees. What’s the right answer for Acme? Some sort of formal ordering of priorities would be very helpful.Report

      • Avatar Roger in reply to Kazzy
        Ignored
        says:

        And every big firm has a mission statement and various strategic plans. Only God knows the optimal balance and strategy though, and he isn’t sharing.Report

      • Avatar Kim in reply to Kazzy
        Ignored
        says:

        Mission statements (or our fun “values statements”) don’t tend to actually get into the reality of what the CEO is supposed to be doing.

        For companies like IBM, they never needed to say “our employees are our biggest asset” — everyone knew that. And for companies like Westinghouse? I doubt any mission statement would have helped (other than allow the board to strip the CEO of his position).Report

      • Avatar veronica dire in reply to Kazzy
        Ignored
        says:

        Yeah, I roll my eyes at “mission statements” but pay attention when concrete policies get announced.

        For example, my company pays lip service to “innovation,” but has constructed several major divisions to work strongly against those goals.

        And perhaps that is the correct choice. I don’t know. But when they talk of “innovation” it annoys me.Report

      • Avatar Kazzy in reply to Kazzy
        Ignored
        says:

        I agree, @veronica-dire . Which is why I included strategic plans and the like. Lofty, abstract mission statements are only so valuable. But if you put concrete objectives in place (e.g., We will raise the median faculty salary to the top 25% of schools within our three state region), now you’re talking.Report

      • Avatar veronica dire in reply to Kazzy
        Ignored
        says:

        @kazzy — Sure, but I’ve noticed over the years that you hear this noise much more when things aren’t working, and I’ve worked for some stinkers.

        I have this theory involving management and technology. It goes like this: for your average MBA type, making good technology decisions is basically going to be random. The reason for this is simple: there are no shortage of snake oil salesmen, that throw a good pitch, know how to hobnob on the golf course, use impressive sounding words like “agile” and “lean,” know to pitch Oracle and Microsoft — in other words all the things that get an MBA type to curl up his toes.

        And it’s all bullshit.

        (Note, I’m using “MBA type” to refer to that general class of business person who knows how to run a shop, can make a sale, balance the books, whatever, but who doesn’t really know shit about tech.)

        Anyway, so how does MBA guy choose? Well, he has to hire someone to tell him? But how does he choose who to hire?

        Here’s the rub: almost every software project is reported as a “success”; most were not.

        It’s opportunity cost. Tons of mediocre garbage gets put out, and most companies end up with mediocre results, behind budged, buggy, a never ending drag.

        Which is reported as a great success. On the golf course.

        Anyway, pick your CTO. Make your bet. Some of them are really good.

        (But why would you listen to me? I never even worked at Oracle.)Report

      • Avatar Kazzy in reply to Kazzy
        Ignored
        says:

        @veronica-dire

        You and I work in very different industries (I’m a PreK teacher, in case you don’t know), so our experiences with things like mission statements might be very different.

        I’m purpose-driven… arguably to a fault. If the question is, “Should we do X or Y?” I always respond with, “What are we trying to accomplish? Identify that and it will probably be obvious if we should do X or Y: whichever gets us closer to our goal.” So when the Kindergarten teacher says, “Should I put my block area here or there?” I say, “Well, if you put it here, you’ll encourage this type of play. If you put it there, you’ll encourage that type of play. Both are valuable. Which do you prefer?”

        When we have a mission statement… or strategic plan… or some identifiable vision/objective, it can serve as a guide when we have to make decisions.

        At least, that is how I wish it worked.Report

      • Avatar veronica dire in reply to Kazzy
        Ignored
        says:

        @kazzy — Well, right. I mean, our company has a plan, which is to grow and make more money.

        No, seriously, they have like 5 year projections and stuff. Big numbers. The suits get all excited during the quarterly meetings.

        But down in the trenches things are more direct. I usually have a good idea of what I need to achieve in the medium term: this software producing this outcome by such and such date, that sort of thing. Thing is, the team matters, the tools matter, the way you are treated in the day to day matters. Right now my company is screwing this stuff up really badly, at least in my division. Plus they seem to have very little concern for how this could all be better. Nor do they listen.

        Which, look, there is much I don’t know. I wouldn’t dare to tell the suits how to deal with Wall Street or what kinds of projections they should make. I accept their strategic goals, because they know that shit and I don’t. But the stuff I do know — I know it very well.

        So I’m moving on, maybe an internal transfer to a better division or maybe going outside.

        This girl has plans.Report

      • Avatar veronica dire in reply to Kazzy
        Ignored
        says:

        And by the way, I just got a job offer this morning. It’s kinda huge.Report

      • Avatar zic in reply to Kazzy
        Ignored
        says:

        Squeeeee!

        I hope it’s a tempting offer.Report

      • Avatar Mad Rocket Scientist in reply to Kazzy
        Ignored
        says:

        @veronica-dire

        Awesome! Congratulations!

        Here’s hoping it’s even better than you think it is.Report

      • Avatar veronica dire in reply to Kazzy
        Ignored
        says:

        Thanks. Yeah, I’m pretty much definitely going to take it unless something very weird happens.Report

    • Avatar Barry in reply to Roger
      Ignored
      says:

      “You guys do realize that in pretty much every big company, the Senior President of HR comes in to the weekly executive meeting with a 58 page PowerPoint presentation on the importance of developing a better workforce…right?”

      Do you understand that a fat PowerPoint deck doesn’t mean anything?
      That a chorus of ‘yes, sir!’ dosen’t mean anything?Report

  12. Avatar Chris
    Ignored
    says:

    The first time I had an office all to myself (as opposed to a multi-person grad student closet), I was doing 20-30 hours a week contract work for a multi-national consulting firm while in grad school. Remember that twenty hours a week part, because here’s what they did for me: they rented a house… a house, built an office set up in the master bedroom, with a full bath, including a fishin’ shower, and then put an admin. assistant, a fishin’ admin., in the living room. We had a full kitchen, another two bedrooms, another full bath, and a fenced-in yard in the back.

    I will never, ever have it that good again.Report

  13. Avatar Kim
    Ignored
    says:

    Jay,
    The silver rule is why the strong take from the weak. it is what they would have others do were the shoes reversed.Report

    • Avatar Jaybird in reply to Kim
      Ignored
      says:

      So the strong argue that, were they weak, they would want someone to take their stuff away?

      That’s counter-intuitive to me. I don’t suppose you have a link to something that has nothing to do with the claim, do you?Report

      • Avatar Kim in reply to Jaybird
        Ignored
        says:

        Jay, yeah that’s the gist of it. Happens all the time in business, you know? Strong companies thrive, weak companies wither — or get bought out.

        Besides, it’s not like a strong person to take Everything. Just to have more than You.Report

  14. Avatar Mad Rocket Scientist
    Ignored
    says:

    @james-hanley

    I just want to say, that picture, Epic Beard!Report

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