Special interests have more to lose than to gain from any shift in the tectonic plates that support the current approach to health care delivery in the United States. Machiavelli explained that those with something to lose are more highly motivated than those with something to gain from change. Machiavelli predated Adam Smith's economics explanation of the same phenomenon in terms of diminishing returns to scale: the marginal value of a loss is always greater than the marginal value of an equal quantity of gain.
In a perfect world, health care reform would start with eliminating subsidies for growing corn. Corn subsidies enable hydrogenated oils that are full of saturated fats and enable widespread use of corn syrup to sweeten nearly everything we eat or drink.
It wouldn't take much research to figure out that french fries, soda pop, and chips have added twenty pounds to the average American in the past forty years. Other fast foods added another ten to twenty pounds.
Step One: President Obama needs to select a charismatic Surgeon General to get Americans to eat at home, recognize the consequences of fried food, and promote alternatives to french fries and soda pop.
Step Two: President Obama needs to select a charismatic National Fitness Champion to promote healthy eating, exercise, and ways to pursue a more active lifestyle.
Step Three: Michelle Obama needs to get more attention for her efforts to grow vegetables, select raw ingrediants, and spend more time at home in meal preparation as part of a healthy life style.
Friday, July 3, 2009
Sunday, March 22, 2009
Create Foundation to Sue for return of Bonuses
The federal government is not going to get ill-gotten bonuses back. The investment bankers who got the bonuses bought Obama just as they have purchased his predecessors. Much of the bonus money was clearly based on phony profit projections. It took two or more people to create the fiction of profit. This is a basis for a conspiracy. We are not likely to win a conspiracy conviction in court as felonies are hard to prove and the federal judges are likely connected to the profiteers. Civil court suits showing the conspiracy have a better chance. Shareholders can bring the suits. The trick is to accumulate enough money to develop the strategy. The strategy needs to set the precedent that can be re-used against bonus profiteers one company at a time. Start with the bonuses for paper profits related to collateralized mortgages. The profits were based on accounting tricks, not actual revenues exceeding expenditures over time. The conspiracy involves the investment bankers, bond counsel, and others creating the fiction that the projected default rate on sub-prime mortages would be no greater than for conventional loans. In every other type of loan they readily agreed that higher interest rates were based on higher risk. But for some reason liar loans and 100 percent loans were not going to have more risk even though they had higher interest rates. The higher interest rates were the source of the projected higher profits over time on which bonuses could be justified today. Yep, take the bonus today for a projected profit that will occur in the future on a higher loan rate for a loan that isn't going to have a higher default than conventional loans. The conspiracy in this wink from the credit rating agency to the bond counsel to the investment banker is obvious. But someone with deep pockets needs to step forward, file suit, and win a court case. The victory will allow return of the profits from the lawyers, the accountants, and the individuals who pocketed the bonus checks.
Had such an effort to challenge preposterous assertions hidden in acccounting fiction occured ten years ago, we might have avoided some of the dot com disasters. The same tricksters were at work then as well: the bond counsel, the investment bankers, and the accounting firms.
Had such an effort to challenge preposterous assertions hidden in acccounting fiction occured ten years ago, we might have avoided some of the dot com disasters. The same tricksters were at work then as well: the bond counsel, the investment bankers, and the accounting firms.
Tuesday, March 10, 2009
Executive Bonuses tied to long-term performance
Economist William Baumol warned us what happens when the company managers are not the company owners. For over twenty years we have witnessed corporate management use short-term profits to justify outrageous bonuses. By the time the shareholders realize that the profits were contrived, it is too late and the company's share price, profitability, and competitiveness have diminished. Securities analysts argued that cash flow measured a firm's value. This encouraged managers to minimize research and development of new product. In the short-term, profits and free cash flow were higher but in the longer term the company fell behind the competition in innovation, quality, and competitiveness. This happened to virtually every industrial sector of our economy most notibly seen in the auto industry the past twenty years.
Investment banks allowed traders to take 8 and 9-figure bonuses for "profits" from trades in securitized mortgages. the profits were based on invalid calculation of likely default rates (see my blog entry on this conspiracy). Now that we know the profits do not exist in securitized mortgages, it is too late. Brokers have hundred million dollar windfalls and the taxpayers are looking at trillion dollar bailouts.
Company boards of directors have obediantly followed the recommendations made by the executive management to offer bonuses for short-term results. fiduciary responsibility has no consequence.
Shareholders today are not a well-organized small group of rich investors that have only one degree of separation between themselves and the corporate decision making. Today, shareholders are middle class employees with 401ks managed by mutual funds that are paid regardless of the investment performance. Worse, the individual investor may have an investment advisor who is also compensated on a percentage of the amount invested, not the performacne of the investment. this places at least three levels between the shareholding member of the middle class and the performance of the company: the investment advisor, the mutual fund manager, the public company manager. None are compensated based on long-term performance of the investment.
Going forward, management bonuses should be tied to five-year company performance. bonuses should be paid in stock that in turn has to be held for five years. this ensures that managers own actions have an eye on the longer term and that the manager has a commitment to succession planning: future managers are trained and selected based on their commitment to long term success because their predecessors are still dependent upon future success to realize their full bonus.
Investment banks allowed traders to take 8 and 9-figure bonuses for "profits" from trades in securitized mortgages. the profits were based on invalid calculation of likely default rates (see my blog entry on this conspiracy). Now that we know the profits do not exist in securitized mortgages, it is too late. Brokers have hundred million dollar windfalls and the taxpayers are looking at trillion dollar bailouts.
Company boards of directors have obediantly followed the recommendations made by the executive management to offer bonuses for short-term results. fiduciary responsibility has no consequence.
Shareholders today are not a well-organized small group of rich investors that have only one degree of separation between themselves and the corporate decision making. Today, shareholders are middle class employees with 401ks managed by mutual funds that are paid regardless of the investment performance. Worse, the individual investor may have an investment advisor who is also compensated on a percentage of the amount invested, not the performacne of the investment. this places at least three levels between the shareholding member of the middle class and the performance of the company: the investment advisor, the mutual fund manager, the public company manager. None are compensated based on long-term performance of the investment.
Going forward, management bonuses should be tied to five-year company performance. bonuses should be paid in stock that in turn has to be held for five years. this ensures that managers own actions have an eye on the longer term and that the manager has a commitment to succession planning: future managers are trained and selected based on their commitment to long term success because their predecessors are still dependent upon future success to realize their full bonus.
Monday, March 9, 2009
Make Baseball invest in its future!!!
Congress granted major league baseball an exemption from anti-trust laws to promote our national past-time. MLB owners and players have squandered their responsibility to the American people through player agents and Bud Selig.
Name one player in the last ten years that has contributed to baseball's enduring legacy who isn't tainted by drugs? Dizzy Dean, Babe Ruth, and Mickey Mantle abused alcohol. But no one ever accused them of using 3.2 to enhance their performance.
The Players' Union and the player agents have resisted drug testing. They were aided by the owners who viewed more homeruns putting more people in the seats and increasing profits.
But short-term profits come at the expense of public support and the integrity of the game. Baseball's integrity is critical to enable comparing statistics of players over time. And major league baseball is nothing if not statistics. What middle-aged male doesn't joke about an inability to remember their own social security number but can recite the scores of all seven games of the 1961 world series.
Players from Mantle's era subsist on pensions of a few thousand dollars a year but are the reason why seniors today take their grandchildren to a ball game. Which players of today's era is going to motivate the seniors of 2040 to take their grandkids to a ball game? Certainly not Barry Bonds, Mark McGuire or Sammy Sosa--all tainted with steroids.
Congress needs to re-establish the guidelines for major league baseball.
The players and owners are not taking steps to sustain the public's interest in the game of baseball. Congress can do so by calling for taking 25 percent of the total revenues and allocating the money to prep sports. Half the amount can be set aside for youth baseball and softball (let's not forget the girls) and the other half spread across sports programs targeted to lower income kids, especially those in inner cities. this half can go for soccer, swimming and anything but football and basketball.
You can already guess the next phase of the proposal: take a similar amount of profits from the NFL and NBA for youth sports and inner city programs.
Player salaries will drop by 25 percent. Good. A $20 million a year player will make $16 million. It is hard to imagine the adverse impact on that player's motivation, team chemistry, or the quality of play viewed by the fan in the stands.
More kids playing sports might have a small impact on the sales of $150 tennis shoes--when kids rediscover that shoes are for playing, not primping, there will be more cache in wearing scruffing sneakers rather than pimped out air jordans.
Owners will make less money on a year to year basis. maybe. but when was the last time that a major league franchise was sold for less than its purchase price, even allowing for inflation?
Name one player in the last ten years that has contributed to baseball's enduring legacy who isn't tainted by drugs? Dizzy Dean, Babe Ruth, and Mickey Mantle abused alcohol. But no one ever accused them of using 3.2 to enhance their performance.
The Players' Union and the player agents have resisted drug testing. They were aided by the owners who viewed more homeruns putting more people in the seats and increasing profits.
But short-term profits come at the expense of public support and the integrity of the game. Baseball's integrity is critical to enable comparing statistics of players over time. And major league baseball is nothing if not statistics. What middle-aged male doesn't joke about an inability to remember their own social security number but can recite the scores of all seven games of the 1961 world series.
Players from Mantle's era subsist on pensions of a few thousand dollars a year but are the reason why seniors today take their grandchildren to a ball game. Which players of today's era is going to motivate the seniors of 2040 to take their grandkids to a ball game? Certainly not Barry Bonds, Mark McGuire or Sammy Sosa--all tainted with steroids.
Congress needs to re-establish the guidelines for major league baseball.
The players and owners are not taking steps to sustain the public's interest in the game of baseball. Congress can do so by calling for taking 25 percent of the total revenues and allocating the money to prep sports. Half the amount can be set aside for youth baseball and softball (let's not forget the girls) and the other half spread across sports programs targeted to lower income kids, especially those in inner cities. this half can go for soccer, swimming and anything but football and basketball.
You can already guess the next phase of the proposal: take a similar amount of profits from the NFL and NBA for youth sports and inner city programs.
Player salaries will drop by 25 percent. Good. A $20 million a year player will make $16 million. It is hard to imagine the adverse impact on that player's motivation, team chemistry, or the quality of play viewed by the fan in the stands.
More kids playing sports might have a small impact on the sales of $150 tennis shoes--when kids rediscover that shoes are for playing, not primping, there will be more cache in wearing scruffing sneakers rather than pimped out air jordans.
Owners will make less money on a year to year basis. maybe. but when was the last time that a major league franchise was sold for less than its purchase price, even allowing for inflation?
Sunday, March 8, 2009
100,000 Technology Professionals will return to India
A friend predicted that 100,000 Indians will be forced to leave the United States due to jobs lost in information technology in the next 18 months. Foreign nationals with a H1B work permit must have continuous employment to remain in the United States. After six years, the foreign national can obtain a "green card" that permits staying in the US whether employed or not. With the economic downturn, employers are not renewing contracts with high tech body shops and even terminating employees. Without a job, many foreign nationals will have to return to their home country under terms of their work visa, even if they have money in the bank or relatives willing to help.
the increase in wealth and an expanding economy may allow many of these returning skilled workers to readily get jobs back in India.
When the US and world economy improve, these Indians will have the contacts and business knowledge to take advantage of the newly emerging and backlog of information technology work required by American companies. But the jobs may remain in India.
Yourdan wrote in 1990 about the Decline of the American Programmer. He predicted the gradual movement of technology jobs to India with its labor force of trained computer scientists and fluency in English. The trend has accelerated as American companies were forced to reduce labor costs. But many computing jobs stayed in America because of the importance of having staff who understood the unique processes and behaviors of the individual company.
When the economy rebounds, these same American companies will still have requirements for computer specialists who know the idiosyncrasies of the local processes and products. However, the specialist in local needs may have returned to India two years earlier. So rather than recruit for a technical specialist for $100,000 a year salary locally, companies will reach across the Pacific to former employees who can readily assemble a team of developers who will work for $30,000 a year. Shortcomings in the past of overseas developers lacking local insight will be undone by the return of 100,000 technical specialists to India.
Not all the repatriated professionals will have keen insights into the American company internal processes. But it only takes a few thousand with insight to serve as a local presence to provide the essential explanations and guidance to compatriots working at one-third the pay.
the increase in wealth and an expanding economy may allow many of these returning skilled workers to readily get jobs back in India.
When the US and world economy improve, these Indians will have the contacts and business knowledge to take advantage of the newly emerging and backlog of information technology work required by American companies. But the jobs may remain in India.
Yourdan wrote in 1990 about the Decline of the American Programmer. He predicted the gradual movement of technology jobs to India with its labor force of trained computer scientists and fluency in English. The trend has accelerated as American companies were forced to reduce labor costs. But many computing jobs stayed in America because of the importance of having staff who understood the unique processes and behaviors of the individual company.
When the economy rebounds, these same American companies will still have requirements for computer specialists who know the idiosyncrasies of the local processes and products. However, the specialist in local needs may have returned to India two years earlier. So rather than recruit for a technical specialist for $100,000 a year salary locally, companies will reach across the Pacific to former employees who can readily assemble a team of developers who will work for $30,000 a year. Shortcomings in the past of overseas developers lacking local insight will be undone by the return of 100,000 technical specialists to India.
Not all the repatriated professionals will have keen insights into the American company internal processes. But it only takes a few thousand with insight to serve as a local presence to provide the essential explanations and guidance to compatriots working at one-third the pay.
Reforming Personal Responsibility for Health Care
The fastest and biggest improvement to health care comes by taking individual responsibility for our own well-being. President Obama or his surrogates need to call for all citizens to take a walk around the block, around the fast food chain and not into it, and set a goal to do ten sit-ups by Independence Day.
the president doesn't need a fight with the fast-food industry. But he can speak to the merits of celery and carrots as an occasional alternative to chips and fries.
A family walk in the evening doesn't have to threaten McDonalds, Frito-Lay or CocaCola.
The irony of course is we could pay for health care reform with the subsidies currently going to the corn industry. The reduced consumption of high fructose corn syrup and hydrogenated vegetable oil would aid the average american in losing ten pounds of fat in the next 12 months.
the president doesn't need a fight with the fast-food industry. But he can speak to the merits of celery and carrots as an occasional alternative to chips and fries.
A family walk in the evening doesn't have to threaten McDonalds, Frito-Lay or CocaCola.
The irony of course is we could pay for health care reform with the subsidies currently going to the corn industry. The reduced consumption of high fructose corn syrup and hydrogenated vegetable oil would aid the average american in losing ten pounds of fat in the next 12 months.
Saving Africa
The International Monetary Fund, World Bank, and the vast bureaucracy of the United Nations have cost the United States hundreds of billions of dollars. A New Yorker article points out, "Poor countries have been receiving at least some foreign aid for thirty or forty years—a total of more than a trillion dollars, in one estimate".
Yet Africa still has dictators, insurmountable poverty, war upon war, and no hope of improvement.
The situation is so bad the even the Bush administration was able to make improvements in the fight against malaria. If Bush can make a difference, imagine what a concerted effort could achieve.
Shared investments such as the IMF, UN, and World Bank have NOT worked.
So let's have each nation pick a cause or a nation and say to the rest of the world, "we are going to work with this specific country and improve the roads, schools, universities, water supply, job skills, agricultural coops, and civil service system."
Each first world nation will have a quota of African nations to support. This is not the re-invention of colonialism. This is the application of accountability through visibility to achieve results. The existing agencies that pool money from industrial nations will be REPLACED with the one-on-one approach. There will be plenty of opportunities for corruption and inefficiency. If Sweden is matched with Zambia, we will no doubt see more volvos and saabs in the capital and a claim from Stockholm that millions have been invested to improve transportation in xxx. But this is not about the number of dollars spent.
How does accountability improve with individual nation assignments?
The people of the sponsoring nation, once they know their country is responsible on the world stage for another country, will ask more questions of their government.
The people will want to do better than the countries with whom they compare their own.
A practice that Denmark makes work in Zambia will lead to questions within Sweden about why continue failed practices in Ghana.
Accountability and visibility mean that we will establish a baseline measurement of the number of schools, number of students, literacy rate, gross national product, number of middle class families. the number of volvos Zambian army colonels drive on independence day parades doesn't matter. The world will receive an annual report on the increase in high school graduates, new exports, Zambian students in Swedish universities.
Country matches must recognize potential biases that some first world nations may have. The New Yorker article points out, "Sweden and other Scandinavian countries supported Julius Nyerere’s socialist regime in Tanzania, which almost destroyed the agricultural sector by dragooning scattered bushmen into collective farms."
More to come and your thoughts invited to explore the approach.
Yet Africa still has dictators, insurmountable poverty, war upon war, and no hope of improvement.
The situation is so bad the even the Bush administration was able to make improvements in the fight against malaria. If Bush can make a difference, imagine what a concerted effort could achieve.
Shared investments such as the IMF, UN, and World Bank have NOT worked.
So let's have each nation pick a cause or a nation and say to the rest of the world, "we are going to work with this specific country and improve the roads, schools, universities, water supply, job skills, agricultural coops, and civil service system."
Each first world nation will have a quota of African nations to support. This is not the re-invention of colonialism. This is the application of accountability through visibility to achieve results. The existing agencies that pool money from industrial nations will be REPLACED with the one-on-one approach. There will be plenty of opportunities for corruption and inefficiency. If Sweden is matched with Zambia, we will no doubt see more volvos and saabs in the capital and a claim from Stockholm that millions have been invested to improve transportation in xxx. But this is not about the number of dollars spent.
How does accountability improve with individual nation assignments?
The people of the sponsoring nation, once they know their country is responsible on the world stage for another country, will ask more questions of their government.
The people will want to do better than the countries with whom they compare their own.
A practice that Denmark makes work in Zambia will lead to questions within Sweden about why continue failed practices in Ghana.
Accountability and visibility mean that we will establish a baseline measurement of the number of schools, number of students, literacy rate, gross national product, number of middle class families. the number of volvos Zambian army colonels drive on independence day parades doesn't matter. The world will receive an annual report on the increase in high school graduates, new exports, Zambian students in Swedish universities.
Country matches must recognize potential biases that some first world nations may have. The New Yorker article points out, "Sweden and other Scandinavian countries supported Julius Nyerere’s socialist regime in Tanzania, which almost destroyed the agricultural sector by dragooning scattered bushmen into collective farms."
More to come and your thoughts invited to explore the approach.
Purpose and Use
Econochasm combines three forces: iconoclastic, economics, chaos, and the abyss into which our values/principles/personal integrity sink as a result of the Bush administration and the pathetic defense of the Democratic party in the first nine years of the 21st century. Get used to the idea there are more forces at work than stated.
We will make observations, predictions, rail against the ineffective response of our leaders and offer suggestions to move our country, individually and collectively, forward.
We will make observations, predictions, rail against the ineffective response of our leaders and offer suggestions to move our country, individually and collectively, forward.
Subscribe to:
Posts (Atom)
