16 September 2014 | By ken in Society | No Comments Yet

Or the Danger of Being a Professional Expert

Economists are beginning to question their jobs data. They had been focusing on the percentage of workers looking for work, and that news has gotten slightly better. But now they realize that the work force itself has been shrinking. That’s troubling and strange. It also changes their conclusions.

The “labor market economist, the Nobel laureate Peter A. Diamond, has . . . concluded that much of what he and others have written previously is misleading because the unemployment rate is no longer an accurate labor market gauge . . . . The percentage of prime-working-age Americans, those between 25 and 54, who are in the labor force fell to a 30-year low of 80.7 in July.”

Floyd Norris, the chief business reporter for The New York Times noted, somewhat acerbically: “You don’t need to be an economist to know when jobs are easy to get. The members of the Federal Open Market Committee would be better advised to watch the consumer confidence survey than to focus on the unemployment rate.”

But they don’t. Economists like many other professionals are stuck in their models, and they often look to each other before they check out reality. For many years they subscribed to the theory that people’s economic decisions are rational, based entirely on self-interest. Many of them also believed markets were “perfect,” that is they are the only reliable way to get at the true value of commodities. Taken to the extreme, that meant there could be no “bubbles,” no inflated values that are unsustainable, that would inevitably lead to busts or, worse, recessions.

Paul Krugman was scathing in his criticism of his colleagues complacency, their ‘widespread conviction . . . that such a crisis couldn’t happen. Underlying this complacency was the dominance of an idealized vision of capitalism, in which individuals are always rational and markets always function perfectly.”

But to be fair this is a fault with many professionals. They have their standard ways of gauging reality and they tend to form a strong fraternity of immovable convictions. It’s not so much that they are stubborn, as that it never occurs to them that the world operates in ways that deviate from what they, their mentors and colleagues have come to believe.

This true of all of us, to some degree, but it is more of a problem with professionals, those who are trained to use their judgment to navigate complex problems and to help people make decisions where much is at stake. Curiously, esoteric knowledge in specialized fields often goes hand in hand with this kind of intransigence. But why?

One reason is that they are subject to enormous pressure as so much attention is directed to their conclusions. We turn to them, as “experts,” for the truth behind the facts, the meaning of events, and that is a very seductive place to be. Any tendency to be self-important will be amplified by that attention. People in that position come to believe that they really know the truth.

Moreover, their own belief in their expertise is based on the consensus they establish among themselves, the certainty that comes from all subscribing to the same beliefs. That consensus requires courage and extraordinary conviction to challenge, and very few are up to that task. No doubt, Professor Diamond thought long and hard before he advanced his challenge to the conventional model.

But, obviously, we need such thinking outside the box if we are not to go on believing what’s obviously true – and wrong.


08 September 2014 | By ken in Society | No Comments Yet

The “Human” Resource

If you Google “Why companies don’t hire,” you get a flood of responses — and an interesting sidelight on the disappointing job news.

Prospective employees are “under-qualified,” because, as the Wall Street Journal noted, businesses no longer provide training. But, then, so many are “overqualified.” Other entries suggest companies also don’t want to hire the unemployed, or veterans, those over 40, or “jerks,” defined as those who don’t fit in.

Perhaps the large number of people seeking jobs makes companies choosey. That encourages them to raise standards, include more people in the process, cast wider nets, ask more questions. They delay and dither and, as they do, they generate more doubts: Is the person really committed? Will he get along with co-workers? Is she perhaps too aggressive? What about illness in the family?

But I suspect that this fussiness masks a deep underlying resistance to the very idea of hiring. Employees have accidents, get sick, misbehave, complain, fight, sue, unionize and in general display all the messy attributes of human beings.

The Wall Street Journal recently noted that the time it takes corporations to complete a hire has reached a record 58 working days, and it quotes one senior executive: “When there’s a larger pool out there you can make mistakes and there’s another one standing in the queue.” he says. He sums it up: “when you hire someone you want to make sure they’re the right one.”

But can you ever know for sure? Such hesitation is the very definition of ambivalence, the fear of getting it wrong.

So all the alternatives to hiring employees are being explored. The best, of course, is robots since they always stick to their tasks and can be scrapped or retooled as needed. Close to robots are automated functions like computerized answering systems, ATMs, gas pumps, and the like. Then, part-time workers are better than full-time, as they are easier to hire because they are also easier to fire; they involve less of a commitment. Another strategy is outsourcing work to other companies that carry the risk.

Over-working existing employees is another favorite strategy, adding hours of extra work each week or just cancelling vacations for those who already work for you. Even better is encouraging employees to cancel their vacations or simply forgo them because they are “indispensible.” There is a lot of evidence to suggest that this becoming more and more common: “Vacations in the U.S. are among the shortest in the world, and a quarter of American workers get no paid vacation leave at all,” according to John de Graaf, executive director of Take Back Your Time.)

It is a frightening picture because it suggests that we never get back to the “full employment” we remember and still officially hold as our goal. It also suggests a growing divide between levels of work, the jobs that require creative thinking and those that are routine and repetitive.

The jobs that demand innovative thinking are the ones that depend on messy people, who can’t always stay in the boxes to which they are assigned. But, then, how to decide whose messiness is worth tolerating? The “human” resource in HR is getting harder to find.


02 September 2014 | By ken in Society | No Comments Yet

Beyond Inequality

Inch by inch, bit by bit, the American dream has faded away.

To be sure, high degrees of inequality, along with injustice and discrimination, have never been uncommon in America. And our culture has frequently been marred by meanness, shallowness and violence. Despite those flaws, however, many of us felt an underlying buoyancy and optimism – a faith of sorts in what’s possible in America. But now that’s getting harder and harder to sustain as economic opportunity slips from our grasp.

Our middle class is falling behind, despite working harder and harder. A recent report noted: “the American worker toils, on average, 4.6 percent more hours than a Canadian worker, 21 percent more hours than a French worker and an astonishing 28 percent more hours than a German worker.”

Our life expectancy is now lower than Canadians and Europeans and our children more likely to die. Moreover, as Nicholas Kristof pointed out recently, “while our universities are still the best in the world, children in other industrialized countries, on average, get a better education than ours . . . . Most sobering of all: for people aged 16 to 24, Americans ranked last among rich countries in numeracy and technological proficiency.”

Inequality remains a problem, and Kristof brings that home to us with a few stunning facts:

“ The top 1 percent in America now own assets worth more than those held by the entire bottom 90 percent.

“ The six Walmart heirs are worth as much as the bottom 41 percent of American households put together.

“ The top six hedge fund managers and traders averaged more than $2 billion each in earnings last year.”

But our increasing awareness of income inequality is counterproductive, he argues, implying we blame the rich for their success, rather than focusing on the ability of others to succeed. More importantly, it distracts us from the more important issue, the drying up of opportunities to thrive. Without that, the middle class will become increasingly demoralized and weakened.

The Nobel Prize-wining economist, Michael Spence, writing for Project Syndicate commented on the kind of inequality that matters: “Inequality based on successful rent seeking and privileged access to resources and market opportunities is highly toxic with respect to social cohesion and stability – and hence growth-oriented policies.” In short, without the ability to grow we lose a safeties and securities of society.

Kristof concludes, “Unfortunately, equal opportunity is now a mirage. Indeed, researchers find that there is less economic mobility in America than in class-conscious Europe.”

Clearly, America, is still the most powerful nation in the world, and our economy is still number one. But those facts do not promote a sense of confidence and well-being when people feel stuck at the bottom of the economic ladder.

Lacking opportunity erodes the will to succeed. It also promotes cynicism about our system. Worse, it means that those who are bitter and frustrated with their lives will eventually seek outlets to express their resentment. This can lead to more extreme splinter groups, further polarizing our politics and incapacitating the ability of legislatures to introduce constructive policies and programs.

It can also encourage individual acts of violence and illegal activities.

Those are often the only “opportunities” that seem available to those without viable economic choices.


25 August 2014 | By ken in Society | 1 Comment

Stranded on the Margins of Consciousness?

We can usually handle two sets of opinions, without having to conclude that one is wrong. But what about two truths, two conflicting sets of facts?

We have started getting accustomed to two truths about unemployment: the official government statistics that count the people looking for work and, then, the “adjusted” figures that include the profoundly unsettling numbers if those who have given up looking. Much of the media – at least the liberal media – have noted the second set of figures when the official ones are released, but every time we have to be reminded that the story is worse than it first appears.

It’s not hard to image the motivation behind the persistence of this disparity. Among other things, we all prefer the more optimistic story – and government officials do too, as that makes them look better as well.

Now we are confronting two truths about corporate taxes, as Andrew Ross Sorkin reminds us. “For years, chief executives have complained bitterly about the United States corporate tax code, arguing that it is too complicated and that rates are too high . . . . It is a compelling narrative.” But, Sorkin mildly notes, “it may be wrong.”

The official tax rate for corporations is 35%, but Edward D. Kleinbard, a professor at the Gould School of Law at USC and a former chief of staff to the Congressional Joint Committee on Taxation, comments: “Whether one measures effective marginal or overall tax rates, sophisticated U.S. multinational firms are burdened by tax rates that are the envy of their international peers.”

“What?” exclaims Sorkin in mock astonishment, noting Kleinbard’s revised figures: “Companies paid, on average, 12.6 percent, according to the Government Accountability Office . . . by deliberately stashing piles of cash abroad.”

It’s not difficult to grasp why companies continue to complain about a system they have successfully gamed. By keeping up a barrage of attacks, they preempt efforts at reform that could lead to higher and more appropriate taxes. Moreover, since voters dislike taxes themselves, they tend to be sympathetic.

But, more interesting is why we keep two sets of records. My guess: Because two competing truths keep us befuddled, uncertain or confused, as a result of which we are more likely to dismiss the issue. It is difficult to get upset or take action about what we don’t clearly understand.

Those who issue the official figures are clearly not guilty of fraud. Facts are facts. To be sure, it’s not their job to provoke action of, even, stimulate discussion and debate. But they are unconsciously complicit in furthering confusion and inhibiting action. It is very clear that very few corporations, legislators, regulators or other officials want the tax system to change.

Kleinbart notes that our tax system “is highly distortive and inefficient.” That is how it “growed,” over the years, responsive to lobbyists, special interests, donations to congressional campaigns

But to whom, then, can we turn for the kind of understanding we need, the common sense grasp of economic issues that professional experts have little interest in providing?


19 August 2014 | By ken in Society | No Comments Yet

Avoiding Bankers

It’s a crude idea, an inelegant metaphor, but it makes a lot of sense.

At a time when the financial industry appears to have a lock on mergers and acquisitions, always looking for ways to increase the value of investments in stocks while skimming off profits for themselves, the technology industry is taking another path. And it is introducing a dose of common sense. Google’s Larry Page calls it the “tooth brush test.” In contemplating an acquisition, he asks: “Is it something you will use once or twice a day, and does it make your life better?”

Maybe it is because technology companies have confidence in their analytic skills and capacity to innovate, maybe it is because they are not intimidated by banks, maybe they just believe in the simple idea that value comes from things that work, from function, not perception, but, whatever, they are growing without the financial industry. “Mr. Page is looking for usefulness above profitability, and long-term potential over near-term financial gain,” reported The Times.

This is a refreshing idea in an age of “investor capitalism.” They are hiring their own financial analysts as needed, doing their own due diligence, finding their own partners. In the process, they are avoiding many of the pressures from intermediaries to make the deal work, as well as the risks of insider trading and manipulated prices that have been hallmarks of the financial industry.

“Amin Zoufonoun, Facebook’s vice president for corporate development, said some bankers would come in and pitch acquisition candidates . . . [But] instead of trying to swallow already established Internet brands, Facebook uses acquisitions to make big bets on the future and plug technical holes.”

When “big tech companies are looking to grow through acquisitions, it is the culture and vision, not the earnings and revenue, that are of paramount importance.” They are not looking to slash payrolls, break up functioning entities or plunder assets.

And it’s often cheaper. The Times noted “Cisco, which has acquired more than 170 companies, decided it was more efficient — and more economical — to hire its own full-time bankers rather than pay millions of dollars in fees each time it struck a deal.”

As a result of all these factors, “Deals with unadvised buyers are increasing rapidly. The acquiring company did not use an investment bank in 69 percent of American technology acquisitions worth more than $100 million this year, according to Dealogic. That number was 27 percent 10 years ago.”

News travels fast in Silicon Valley. Many people in technology start-ups know each other. It’s a smaller world. And, to be sure, many newcomers start companies with the goal of being bought out. But it seems that the truly important thing at the top is that the industry wants to grow and become more effective and powerful – not just make a buck.