California taxpayers will soon drop all support for theThe UCLA Anderson School of Business. The Financial times points out that "Thirty years ago, 10 percent of California's general budget was spent on the UC and California state higher education systems and 3 per cent went to prisons. Prison spending has since risen to 11 percent, while higher education's share has slipped to 7.5 percent." this is not the first but certainly a more visible step toward "freeing" the University from public oversight. What right do the legislature and taxpayers have to influence a university they don't pay to support? Ramifications will include: more out of State (and international) students who pay full fees, more research paid by private companies with their own agenda, but also more freedom to find money to keep valued faculty.
Will a UC that has to be self-sufficient keep as many graduate programs in Classics, allow philosphy graduate students to hang around for ten years if they are not paying tuition? For the few dollars the taxpayers continue to pay out of inertia, what will the UC agree to provide??? will the State Constitution get changed to diversify the Board of Regents selection if the taxpayers aren't paying the bills?
Tuesday, September 7, 2010
Finishing the JMT!
We FINALLY hiked over Pinchot Pass as the last segment of our ten-year "plan" to hike the John Muir Trail. Expansive granite vistas north and south of the pass. Going down Taboose Pass was not quite as grueling as seven years ago--certainly not because we were in better shape. It was easier to just accept the knee-jarring descent over talus the second time.
Friday, July 3, 2009
Health Care Financing and Reform Challenges
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.
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.
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?
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