Risk Management with Known Risks: Volkswagen

One thing about the Volkswagen issue is that the executives seem to have been caught flat-footed on the whole thing. It is as if they never expected to get caught. I mean, even if you're not engaging in widespread corporate malfeasance, don't you have some sort of risk management plan in place?

You're not going to call it "Plan for when we get caught cheating on emissions tests" but that could be one of the conditionals that are planned for. It's just bad practice. Gaming possibilities is a policy decision that needs made. I was reading where even as of 1945 America and its allies were planning on contingencies for a possible German victory. And that was America, who can never lose. Man, these Germans never learn.

Market Skeptics: Akerlof and Shiller's "Phishing for Phools"

Akerlof and Shiller between them have as many Nobel-Branded Prizes as Marie Curie did, so each of them are half a Curie.

Basically, this book tries to take the biases that are built into humans and look at economics from the top-down with behavioral factors, instead of from the bottom up. It made me make a joke about behavioral economics without microfoundations.

The examples the authors use show how people take advantage of people’s not being poerfect economic actors and instead work against their best interests. They like using Cinnobon as an example of how this market works, in that someone would be out there with a similar product. You choose a fatty roll not because you have thought through the transaction, you have been Phished.

If you haven’t read much behavioral econ, it is a good start in spite of the goofy title. My only real complaint is that the chapters aren’t fleshed out. The content of the book is only like 175 pages and that covers like 13 sections. I should have checked out the almost 100 pages of notes plus index which makes the book feel more hefty - I was at the end when I realized i should have been reading the book like “Infinite Jest”.

Boards: Separate and Unequal

Should Board members be held to the same or higher ethical standards as employees and administrators?

Of course, everyone involved in your organization should be spotless from the most senior board member to the newest frontline hire.

Ultimately though, aren’t the board members of an organization secondary to staff? Unless they have acts of malfeasance and / or negligence in enacting their duties to your organization, then a misdeed of the member is more reflective on themselves as people, or their primary organization.

A recent example of this might be Bill Cosby. As the allegations against him rose in number, companies cut ties with him. What was really damaged was some hypothetical “Bill Cosby, INC.” as well as his ongoing legacy. He did have ties to various other organizations. The one I am most familiar with is that he has been a long time donor to Temple University.

Personally, I don’t feel like Temple University is at fault for Cosby’s transgressions (unless it comes out that someone aided or silenced accusers). It may be hypocritical, but board member’s oversight means that they are in charge of the organization, but not necessarily of it. On our letterhead, we list the board running down the side, but we also list their primary affiliations - “Joe Bloe, Board President: Peirce and Peirce Investments”.

Conversely, the exemplar and personification of the organization is the CEO. We saw this just today in the corporate world. Volkswagen has been gaming the emissions tests through deliberate programming of the car’s computers. I haven’t read too deeply into this situation, but there has been one immediate and undeniable result -- the CEO is resigning because in the public’s eye the CEO is the company, and this happened under his watch.  I haven’t heard anything about his board.

Diversity: Real and Imagined

I think that there are two senses of diversity.

The first is when you have some idealized group of people who visually can reflect all sorts of different visible easily identifiable ethnic groups. I’m thinking of the advertisements where the group of friends with one Asian, one Caucasian, one African-American, etc all sit down for the football game drinking all of their favorite domestic beer. This is also reflected in the children’s shows I grew up with in the 80s and 90s where each friend group has someone in a wheelchair.

I think that is a superficial diversity that might be hard to attain unless you’re casting a bunch of actors. Realistically, the diversity you have will be more a function of your mission, your location, and the community that you serve. I think that on some level the people who will look to work for your organization may be self-selecting as a group depending on these variables. I think the diversity you would want on your board is a diversity of skills in terms of finance and operations and program management and development potential.

For me, any diversity brought on by having a group of people with different cultural backgrounds would be secondary, but not unimportant. Maybe I say that because I am part of the leading edge of the millennial generation, maybe we take diversity for granted. This is not board related, but looking around the room when our organization meets is a rainbow of colors and ages, with a nice gender mix. Again, I think part of this may be self-selecting

The problem though is if you say that you are selecting for some “skill” is that you have the possibility of falling into a discriminatory practice known as disparate impact, though I am uncertain of how the civil rights act of 1964 applies to volunteer board members. With disparate impact, if you set bars that discriminatory even unintentionally, you could be in trouble. Even outside legal considerations, I have a feeling that you want to make sure that you don’t create the situation where your board is just a bunch of old white guys, no matter what your mission.

I’m a little touchy-feely. so I want to have all stakeholders have a voice in the organization. I think that it could help the running of the organization for all the stakeholders, but also help create buy-in from the people who depend on your services and make them potential advocates instead of just passive recipients of your service. That might lead to the place where you have a board where there are stakeholders involved. Again, there are legal issues that might disallow that exact set-up, so I am thinking that something like a parent’s committee might be useful. Something similar was brought up where I work recently, but it was shot down using the justification of past experience where the people who ended up joining the committees were the kind of people who were busy-bodies and thought that they controlled the organization. So ideally you want stakeholder input, but you also need balance.  

Nonprofits and the Entrepreneurial Spirit

Get Your Loaves, Get Your Fishes!

There is a sense in the economic situation that we have that if what the mission is is important in itself, the market will create it and support it with profits. On the other hand, if it is necessary but not market supported, then there is a void that the government should step in and fill (so called public goods). That leaves people in the third sector struggling for funding, and in doing so just justifying their existence. 

That I would rather not work in a place whose sole mission was the creation of surplus value for the owners is not a knock on me, but it has left me in a place where I thought that I could do other things. The problem is that the economic system is such that money is needed to support myself and the mission of the organizations I have worked for. At Saint Rita, that money came from tuition, and at CSS that money comes from the government. In fact, where CSS is at makes us more or less an arm of the government.

My worry is how you create something that exists that is important to the community but doesn’t have the profit motive behind it or has some sort of service that can be billed, either to parents or the government. I was just thinking earlier about how I could go about starting something to start a nonprofit here in Brookfield supporting the arts like poetry and theater. Who would I call? It makes me think of a conversation I had with a friend about a week ago. She was thinking about buying a property to house a Montessori school in and give the services to the community for free in back home in West Virginia. I talked to her, but I know more about the continuation of the nonprofit that has the infrastructure in place. Starting one seems to me to need even more entrepreneurial spirit that starting a business.

x

This Strange Machine: The One Percent and the Zero-Sum Economy

I know Kung Fu.

So the last will be first and the first last, for the called are many and the chosen ones are few.

~Matthew 20:16

I still remember a lot of my test scores.

I did pretty well, especially considering that I never really prepared for any of them. I always did well at standardized test, so why was there a need to prep for anything.

They reported those test in raw numbers, but also in terms of percentiles. Look, you did better than 99% of people who took this test or that test. It really didn’t mean much to me because I didn’t really feel like I worked for it.

For me learning was just looking at things that interested you and finding out what more about them. I learned a lot about airplanes after I was done with dinosaurs. Then it was sports and then girls and then everything was some sort of way to learn more about girls.

Those percentiles were huge for the educators whose work was judged on how well we did on those test. I never understood that. If it is based on percentiles, if everyone learns at the same rate, then there is no movement. If you increase your percentile over time, it means that there has to be someone who did less well relative to you. It’s a zero-sum game.

But it was still celebrated. I remember once my high school having a party, and the only people who could go to the party were those who had raised their percentiles. I was mad because as part of the one percent, I could not by definition raise my percentile. I ended up being able to go to the party when I pointed this out.

I was aware of my status, and that it was more or less unearned. I would be lying if I said that it was not part of my self-definition. My two best friends were also part of that elite club at our school. That meant with 700 kids at our school, there were only four others as smart as us (yes, yes, those tests are national or state-wide, so there could have been an uneven distribution of the top scores at some schools, but that’s neither here nor there. In fact, I used to be smug about it until I was shown what that really meant. In a country the size of America, you could take all the top one percent, and you would be able to create a city the size of Chicago. It was a humbling though, but it didn’t make me angry or feel any less special. In fact, It was a bit inspiring. I felt a bit lost growing up, but to think that there were scores of people just like me created  sense of community. Heck, I’d even talk to people just in the 2% and not feel bad about it.

I think that machine intelligence may be on the way, so that eliminates some of my perceived advantage. If you could download all the books and learn skills, it eliminates part of the specialness of being at the top, but it doesn’t diminish me in any way. One of the most interesting things about me is that I was on the quiz show “Jeopardy!”. I lost, but I blame the buzzer more than my faculties. I have always had a weird memory, more able to recall disconnected facts than the faces of someone I just met. I did well to get on the show, but I joke that being good at trivia is worthless in the age of Google. I will always be less accurate than web search for the rest of my life.

I don’t feel a loss from the rise of Google because I don’t feel like others having access to information is bad for me. I think there’s still emancipatory potential for humanity through technology and having all that knowledge at the tips of our fingers. We just have to get through the early adoption of cat pictures and listicles first. I don’t feel a loss because my mind, no matter how proud of it I am, is not something that I worked for. My aptitudes were set genetically, and fostered through having parents who guided my development and teachers who saw things in me and sought to teach me what they could, going out of their way oftentimes to challenge me more than the standard curriculum. I did work to fill it, and continue to do so, but that stuff in there is for sharing; this strange machine that weaves ideas and thoughts and can never come to a finite or concrete conclusion.

I have been thinking of my conceptualization of my mind and tried to turn it around economically to how people think about money. there have been several issues that have come up and made me wonder about people’s perceived diminishing when others are brought forth to some sort of power economically. The widest spread of these issues is the fight for 15, where there has been agitation amongst service workers for an increased minimum wage to fifteen dollars a hour. My reading is that the minimum wage was once enough to get someone to near the poverty line, which is in itself a flawed measure. Currently, a minimum wage job leaves you below the poverty line unless you are supporting only yourself, and again that leaves you highly in want.

So there have been two arguments against raising the minimum wage that are almost ad hominem attacks. First is the argument that they don’t deserve it because there are other, more deserving workers in which a raise to fifteen an hour would mean that those other workers would now labor at with a parity to the fast food service workers. This is a weird argument because it is not as if anyone is asking the paramedic to dig out of their pockets and directly subsidize the wage raises. No, “Sorry, Joe, but now you only get $8.50 an hour because of those folks at Arbys”. If anything there would be modest menu increases because labor is a significant portion of the expenses of your average restaurant.

The second argument is that they’re not really poor. Some workers are living as part of well-off households. But also look at how much money they have relative to poor people elsewhere. I’ve heard this argument and it befuddles me. The research seems to indicate that relative poverty is worse in terms of life outcomes and mental states than absolute poverty is. Now, I don’t wish absolute poverty on anyone and I am not volunteering to move to any of those countries that are victims of imperialist extraction without the occupier's leaving in place strong institutions. The bottom line is that not paying people survival wages in no way is good for the people who are not suffering from want - I recommend everyone read “The Spirit Level” - and is bad for society as a whole.

I think both sorts of arguments go back to an idea of some zero-sum game. If you pay someone else more, it diminishes me, especially if I am near the new level of pay that is being proposed. I think you see an analogue of this with the proposed drug testing of “welfare recipients,” where it the people most forcefully advocating this on a personal level have low-level jobs and are suffering from. if not conscious of, their own gross exploitation at their workplaces.  

But it’s not a right / left divide issue. There have been a couple of analogous things that have popped up in recent news that makes me think that people see success as some sort of zero-sum game where it is not. We can all succeed, and thrive, but there is a socialization that speaks against that idea at a young age. The first I’ve seen is with Zappos. I’ve been following them because they are at least trying to do some new things with the organization and how service is delivered. They recently reorganized how the entire company is run, where each employee is involved with self-management and management of the company as a whole in an idea called “Holacracy”. Employees were given the option to walk away with some buyout money. A significant portion did, and even more of the former managers, because it meant that they were no longer special.  

Another example was in the New York Times recently. This company's owners made everyone’s base salary $70,000, which is pretty awesome if you were a receptionist. But there was some backlash were a couple of employees quit even though they got raises. They were just mad that their raise wasn’t enough. I don’t understand either response. At Zappos or this other company or if you’re a paramedic, you lose nothing as others gain. People are angry at this because they can see the front-line workers and feel disdain for them and create a category and put them in that category and then compare themselves to that category. I don’t do that. I have been down on my luck, including two years unemployed after the great catastrophe of 2008, but since then I have worked at my education and at my workplace and not gotten sick or had other life disruptions. It means that they keep giving me more stuff to do with the commensurate salary increases. But here’s the thing - I want my coworkers to make more money. We are all underpaid.

Which comes back to the one percent, but this time it is not the one percent in terms of test-taking, but in terms of income and wealth. Like at my party, the one percent can’t get any more one-percentier. The difference between those tests and wealth is that there is no to bound. In the test, you can get all the answers correct. In terms of wealth, you can just keep adding questions. And add the one percent have. There are charts and graphs that you can look at, but the anger has been misdirected. If you can perceived of the economy as a zero-sum game, it is not the fast food workers that are the cause of low and stagnating wages. It is the higher corporate incomes and the lower return to labor compared to ever raising productivity. Where have those returns gone to? The CEOs and the large shareholders who have expropriated the surplus from all our labor. They are the ones who control the resources and the governments. They are the ones who make your median household income look like peanuts. Compared to them, we are all poor. The problem is that we just don’t see them.

Scrooge McDuck and Conceptions of Money: A Page-Turning Attempt at an Synthetic Understanding

It's the Pits.

I think that people’s conceptions of money are very important. I say this not as some groundbreaking understanding, but it seems to have some sort of play on the political visions you have of what is good and moral and proper. I can’t argue for causation here, but I think it matters.

To think about how it matters, I go back to the first time I knew a rich person. He was on my cartoons, and spoke in a Scottish accent and literally swam in money. Now, knowing what I know now, that was an incredibly inefficient store of wealth for Mr. McDuck, but I thought that was how all rich people stored their money. The gold in the money pit was strictly valuable as gold, and McDuck measured his wealth by tic-marks on the side of the money pit, right by the ladder.

In a way, when I was a kid, I knew we weren’t rich in part because my parents didn’t have a money pit. There was the shopping at Walmart thing and wearing non-name-branded shoes (the horror), but the lack of a money pit was a big.

Not that were were poor at all, in hindsight. My parents have been together my whole life and my father is a doctor. But the thing is that he is an ER doctor (I think the term of art now is an ED doctor, but that feels euphemistic about so many other things). So as an ER doc he was always an hourly employee for much of my life - he did a stint in the Army which is what deprived me of Reebok Pumps. As an hourly employee, your pay is dependent on the hour you work. And from what I gather from my father’s stories, it is a stressful job with a lot of responsibility and horrible hours.

So what I got from my father was a very distinct conception of money as part of an exchange mechanism. His labor was worth so much money, ergo anything purchased was a fraction of his time. Not that he was cheap, he has always been very generous with my family, but he didn’t let me forget that the bike or the computer was because of his labor.

This is a conception I took myself as I started in the wage labor force. I got my first job, must have been about 1997 or so, and the minimum wage had just been set at $5.15 an hour (I think it was still that in 2007, the last time I worked straight hourly, but I was making a kingly $8.50).  This meant that as my money was funneled away, I could count the time by the pizza ovens or the wood fire grills that I would need to replenish that money. It also meant that I hated to go to bars with covers. A five dollar cover! That’s an hour on my feet! With such a conception, you would think I wouldn’t have smoked as much as I did. But heck, back then I could my two-pack-a-day ration for about an hour’s work. What a deal.

The difference between working at a hospital (ok, one of the differences) is that there is a menu up above your head or in the diner’s hand that tells the costs of what you’re producing. There’s less direct interaction with regards to pricing at the ER (as of yet). So you have the money you’re paid and you see what you’re making and you see the amount of food you’re putting out, and you go, “Hey, there’s a disparity.” I remember one of my first jobs, as a cook at Burger King. They had a pie chart up to show where the money went and how narrow the profit margin was and this is why you can be fired for eating the trash. But not having an accounting class to learn about variable and fixed costs, it is easy to think to yourself: “If we sell a slice of pepperoni and two of cheese every hour, they cover my salary.” Start thinking like that and you begin to wonder where all the money’s going if you’re the one doing all the sweating. Then they move you up to management and you can see the labor costs are on the floor because what you sell is high margin. So you have self-worth and then what you’re paid, and you get angry at the guy making nine dollars an hour who’s not any better than you at the job but you feel ok because at least you have some ambition for your life. In the end though, no matter what literature you read, you’re still being valued at that rate they pay you and the only way to make more is to work more (or expropriate it for yourself, though that is not recommended).

As I’ve gotten older though, I’ve gotten away from conceptions of money in terms of straight material stuff or even direct labor. I’m not sure this is a good thing or a bad thing, actually. It gives me a level of freedom that all my bills are paid for. They’re all on recurring, and the money comes in and the money comes out and I almost never touch money. I don’t have to be hustling for extra shifts or arguing why I shouldn’t be the one to be cut early today because I was cut early on Sunday and I really need the money. I have a level of material success that means that I can afford to do what I want and buy name brand soda (gone whenever we have kids). But there’s a trade-off. Because I have that success in this country, it means that work is measured differently. It’s not work more to make more money, but work more because you’re a team player and you want the company to succeed. Work more because you want to keep working in the future. It may not be something that is conceptualized on a daily basis as you go about the work, but it is there for many people who have moved from wage labor to salaried labor. I’m not going to hunt the citation but there has been a turn in society recently. It used to be that the higher uo the socioeconomic scale you were, the fewer hours you worked. The working class was putting in the hours at the factory and the upper classes were taking long lunches and meetings on the golf course. This has reversed, and there’s the hint of precariousness that makes the exempt employees put in the time if it's necessary or not.  

I think all three conceptions are about how the social relations of your job and your social role shape your political persuasion. I started thinking about this issue reading the Wall Street Journal’s editorial page like I know I shouldn’t. They were complaining about Clinton’s proposed capital gains taxing plan. They were arguing that capital gains taxes should all go away because corporations that issue dividends are subject to the HIGHEST TAX RATES known to man in the history of ever. Then to tax dividends is unjust because that money was already taxed.

And I hate it when people complain about the double taxation. I mean, most financial transactions are taxed. That’s the reality of our system. It pays for society. It could be a little more simple and fair (more progressive, that is - people don’t seem to realize that money has diminishing value). But I’ve been trying to be fair. So I was thinking about this and trying to figure out how someone making that argument conceives money.

One of the fun things about money is that it is fungible. You might come across this idea, that one dollar is equal to another. A different Journal editorial arguing that Planned Parenthood should be defunded was based on just this - you have to take all their money away because giving them money to support women’s health care frees up funds for more abortions, and you know how much we hate abortions. I think that people that worry about double taxation have a completely different conception of their liquid assets than I do, one where money isn’t fungible. I was imagining a guy who thinks that he went alone to a virgin land, and dug up a bunch of gold. In my imagination, he’s walking around with a ball of hold about the size of a beach ball. Every market exchange he makes, he shaves off a bit for payment but there’s always Old Big Government wanting his slice too. In that framework, then it makes sense to shoo away the second representative of the government wanting another slice. But this only holds true if you conceive as the corporation’s assets and earnings part of your ball of gold. If not, then it was part of their ball, and then added to your ball of gold. (Many, corporations are a weird legal fiction, but we’ll leave that be.)

So there I was thinking about this guy holding this ball of gold, and I realized it was the same conception of money that McDuck has. As the owner of capital, money is just a thing for itself and the exchange mechanism is almost secondary. It is not that the other conceptions are better than the others. I think all three I looked at create an alienation from work and from the system in itself. Basically it comes down to ownership, direct labor, and indirect labor. For the time I’ve been around, the ownership conception has led the economic and political process, and for me that is the problem. I might be over-simplifying things, but I am glad to see direct labor fight for their own perceived value with the fight for 15. What I worry about is the alienation of indirect labor from the political process. In the teachers and social workers and all the office workers, you have a large mass of people who are well-educated but maybe only will have a voice if they’re part of the diminishing labor movement. I hate to be cynical, but how much of this was planned and shaped by the winners of the process?

But it seems that all three classes of labor have their feelings of helplessness.  If all three conceptions of labor create an alienation, maybe there’s something larger going on