Monthly Archives: May 2009

The new austerity

Opposite William Safire’s On Language column in today’s New York Times Magazine, Bessemer Trust has a full-page ad. Normally I wouldn’t take a second glance at these kinds of tasteful, “wealth management” promotions. But the copywriters for Bessemer want to show these aren’t typical Wall Street types. 

Rarely in history have so many been so violated by so few. We understand. We’re as angry as you are, because the actions of those few have cast a pall of doubt and suspicion over everyone even remotely related to the financial industry… 

Our headquarters are on Fifth Avenue in New York, four miles from Wall Street. But our approach is a million miles away from what Wall Street has become known for. 

All sounds pretty good, and in tune with the times. The kicker for me is the small print at the bottom of the ad: “Minimum relationship $10 million.” Well, that’s truly in harmony with today’s austerity. 

The Sunday Times has a circulation of just under 1.5 million. What percentage of that circulation has $10 million in investable assets? It must be vanishingly small. And is there really anyone with $10 million or more to invest that is going to take their cues from an ad in a magazine?

In praise of old Nassau

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Kieran Healey reveals the truth:

It’s well known amongst alums that whereas the Princeton Sam Alito graduated from in 1972 was a bastion of civilized learning, the Princeton Sotomayor graduated summa cum laude from four or five years later was a hippie “learning cooperative” where minorities got a coupon book of “A” grades upon admission to use up as needed, were all given the Pyne Prize automatically, and the concept of truth was rigorously suppressed by the leftist faculty. 

Sotomayor was a couple of years ahead of me at Princeton. Her confirmation to the court could begin to erase the stain of Samuel Alito and Donald Rumsfeld, other Princetonians. Of course, Michelle Obama counts for a heck of a lot on the positive side of the ledger. 

Incidentally, I’m appreciative that my alma mater gets the correct form, alumna, to describe Sotomayor.

Unlucky in sports

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Richard Florida points to a map of US and Canadian cities and the record of their professional sports teams since 2000. Woe is me. I live next door to Oakland (31st out of 37), San Francisco is visible across the Bay (28th) and my hometown is Chicago (23rd). I can recall a conversation a while back with a Boston-based friend (2nd), who said his daughter only knew about winning teams. That would be nice. 

For the record, my local team when I lived in London was Crystal Palace, who have occasionally crept into the Premiership. This year they are finishing a grand 15th in the “Championship”.

Assorted links

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The Dollar Redesign Project. Yes, please. It might seem trivial, but I think a dose of clean modernism on our currency would be a catalyst for a raft of changes in public design. The Ministry of Type comments (with a word new to me — guilloche): 

There are only a few designs on there at the moment, some a bit jokey, but of the serious ideas I quite like the ones in the first set below. I can’t see any notes that deviate too far from the originals being successful, as there are so many cultural and linguistic associations with the ol’ greenback; it may seem tediously conservative, but notes that aren’t predominantly green just won’t feel like dollars. I hope the designs go further than the ‘stick a guilloche on it and call it a banknote’ idea – guilloches are beautiful things – I wrote about them before, here- but it takes more than a few of those to make a successful banknote.

Dickensian Denial. The Financial Times’ John Gapper writes about the Madoff/Merdle connection. Having recently watched the brilliant BBC series of Little Dorrit, I’m a sucker for any of these Dickensian connections. Gapper: 

So what is Dorrit? A victim (he loses all of his money to Merdle) or an accomplice (he introduces others to the fraud)? A similar ambiguity applies to some of those around Madoff. These modern William Dorrits, those closest to the “greatest Forger and greatest Thief that ever cheated the gallows,” are scrambling to defend themselves and to declare that they knew as little as anyone about the laconic sociopath. In 21st-century New York, as in Victorian London, that can be a tough story to sell.

The Master of Money. The master of telling financial tales, Michael Lewis, reviews Alice Schroeder’s The Snowball and reflects on Warren Buffett. His review almost makes me want to read her 838-page doorstop. 

Live-blogging the Eurovision Song Contest. Almost as good as watching this annual schlockfest. 

What I'm reading

Some valuable pieces you might have missed: 

On being the right shape. Fistful of Euro’s Ajay (a writer new to me) looks at the unfashionable subject of strategic geography and posits that Europe’s compactness may be a key advantage in a world where a millisecond’s delay can cost algorithmic traders lots of money: 

I think this could be one of the neglected advantages that geography gives Europe (along with all the others) – realtime, high-bandwidth data services are only going to expand in the future, and that means smaller delays will be at a premium. Shipping data off to cheap centres in India is all very well for some applications, but for fast interaction you need as close to co-location as you can get, and a European country with lots of cheap, clean electricity and lots of cold water to cool data centres with will do rather well. Possibly one for the Nordics to look at, when the oil starts to run out?

Saudi Arabia’s big bet on innovation and education. I’m very skeptical of “big bang” approaches to either innovation or institution building. But the facts behind Saudi Arabia’s nascent King Abdullah University of Science and Technology are astonishing. If it succeeds even partly, it could be a major influence in hauling the Arab world into better engagement with the leading forces of modernity.

In addition to its $11 billion dollar campus, KAUST was endowed on day one with $20 billion, making it one of the wealthiest universities in the world—only Harvard and Yale are in the same league. Relative to its expected size in students and faculty, KAUST will be the richest university in the world. Oxford and Cambridge are more than 900 years old. Harvard and Yale are more than 300 years old. Per student or per professor, however, the richest university in the world has not yet opened its doors.

Design aspects of software: maps as “thinking tools”. James Fallows has been on a real tear recently. His series of posts on the Chinese education system are key readings for understanding both China and some of the challenges facing American education as well. But I was particularly struck by his discursion on maps as thinking tools. He points to a great paper that deserves much more attention: 

The best article I have read on the subject is “Enhancing our Grasp of Complex Arguments,” by Monk and van Gelder, presented as a speech five years ago. They make a powerful point: if we recognize the need for graphic aids to help us keep track of mundane matters like street directions, might they not also be useful in keeping track of the much more consequential and complex arguments that go into major public and personal choices? This paper is very much worth considering by anyone interested in human intelligence, machine intelligence, public decision-making, and the potential and limits of public discourse. Seriously, I have thought about this paper often since reading it.

Those who don't tweet…

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Today’s Financial Times has an article with the promising headline, Should Twitter be confined to the marketing department? Sadly, the subeditor who wrote the headline clearly didn’t read the article since it’s entirely about whether or not the marketing department should tweet and not whether other parts of the corporation should think about it. 

There’s something else odd about the piece. It’s constructed as a series of comments by a variety of “experts”. Only one of those quoted, Don Tapscott, lists his Twitter address. He’s a very good tweeter, as well. As far as I can tell, only one of the other “experts” even has a presence on Twitter: Bernhard Warner has logged a grand total of 96 updates in his 13 months using the service. Not an appassionato, clearly. My nosing around didn’t reveal any Twitter identity for either Olivier Toubia or Richard Pinder, but the limitations of Twitter search might explain that. (I’ll guess as well that Pinder, who’s COO at Publicis Worldwide, had someone in the communications department write his contribution, but that’s another gripe.)

I recall the same thing from the early days of blogging. Once major media outlets figured out something was going on, they’d contact experts, none of whom blogged. Not that there’s anything wrong with that. I think people are entitled to viewpoints when they’re not practitioners. But if you have a column purporting to offer management advice, I think it is essential that the expert voices have direct experience of what they’re talking about.

Join the club

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Chris Blattman asks a question that has long bothered me: 

[On my recent flight to Colombia] I passed the same sight I see on every flight to and fro a developing country: a business class full of World Bank and (senior) UN peeps… I seldom fly business myself, even on Bank and UN consultancies, mostly to conserve my project funds for research assistants and survey expenses. My incentives are just right: money I spend on me comes out of money I’d spend making my research projects just a little better. Not so the rest of the agency?

I also hold back from business for another reason: $6000 for a single ticket? When the purpose of your trip is to contribute (however little) to ending poverty, something about that price tag just doesn’t seem right.

The Bankers and UNers have a good response: I’m only there for a week, and I’m much more productive if I can sleep on the plane.

To which I reply: your productivity for a 0.5% of your time is worth 4% of your annual salary?

In some cases, I might add: what development assistance exactly is achieved in a week?

In an age of diminishing aid and global belt-tightening, now seems an opportune time to change this little practice. Mr. Zoellick? Mr. Ki-Moon [sic]? 

I think Blattman’s question is not an easy one to resolve. I’d recommend looking at the generally very perceptive comments that his blog post produced.

My friend Philippe Sion picks up the argument and equates it to a one-time French communist he knew. It’s not quite the same, for me, as what in Britain is called champagne socialism. There’s no reason why wealthy people shouldn’t be in favor of greater social equality, perhaps through redistribution of wealth. That may be against their “class interest”, but people are often in favor of policies that run against their narrowly defined economic interest. There’s nothing hypocritical to me in a highly paid executive supporting progressive political policies. There are limits, however. I think progressive values should be offended by the multi-hundred multiple of average workers’ salaries that CEOs pull down these days (to say nothing of wildly overpaid financiers).

The issue with development agencies is more nuanced. They are, in one way or another, publicly funded. They are not for profit organizations. As Blattman points out, the money for business class airfares (and, in cases I’ve witnessed, first class airfares) comes at the expense of development programs themselves. I think an economy-only policy, or some kind of restriction, would be a salutary tonic that would help better align the efforts of development agencies with the desperately poor nations they are designed to help.

Where's Berkeley's hyperlocal site?

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I had one of my periodic lunches with Dave Winer, which — as always — was filled with insights into technology, the media and lots of amazing new tools for making sense of our world. We both are Berkeleyites of not quite five years standing, which makes us a bit more than newbies, but still well short of veterans. It’s an great city, thanks to the chemistry of a world-class university, the ideal climate, a long history of free-thinking, dissent and non-conformists, and the connection with San Francisco across the Bay and Silicon Valley just beyond. 

So where would you turn if you wanted to know everything about Berkeley? I don’t think there’s anywhere. The San Francisco Chronicle covers a much bigger patch, and it is in desperate shape commercially. We have two local papers, the Daily Planet and the Voice, but neither has really adapted to the web (although the Planet has improved its web presence in the last year). In any case, neither really satisfies my needs. The Planet works at being a good local paper, but it has a very definite political axe to grind (of course: it’s Berkeley). The Voice is the local arm of a bigger operation, the Contra Costa Times, and is pretty so-so. The university newspaper, The Daily Californian, is pretty good, but it understandably focuses on Cal, which isn’t all of Berkeley. There’s an amazing community gathered around the Berkeley Parents Network, but it’s not anything approaching a news source. 

So I think Berkeley provides a near-perfect test bed for a great hyperlocal site. Some of the elements might already be there. Home Girl (full disclosure: the creation of my wife) covers the real estate market and larger issues around the built environment in Berkeley. That could be a start. There is a staggering concentration of great bloggers and tweeters in Berkeley, even if many of them don’t concentrate on what’s happening on their home patch. Markos Moulitsas, the man behind Daily Kos, is a Berkeleyite. There’s Dave. Biz Stone, one of the Twitter founders, is in Berkeley. Econoblogger supreme Brad DeLong is here (even if he lives through the tunnel in Lafayette). Who knows how many great bloggers are here that I don’t know about? And there’s a great source of energy and ideas in the large student population. 

It’s become a cliché of our Great Recession that great ideas emerge from hardship. Perhaps this is an idea whose time has come?

Photo by ptufts from Flickr

Irony alert

My wife, who writes better headlines than I do, said most people wouldn’t understand my headline about Fiat. I wrote “Fiat plans for world domination: a sure thing“, thinking Davos Newbies readers would understand that the “sure thing” was failure, not success. 

I think it’s generally true that Americans aren’t strong on irony, although there are certainly exceptions. The British, on the other hand, excel at irony. I spent 27 years in Britain. Some of that atmosphere wore off on me. So please pay attention.

Fiat plans for world domination: a sure thing

As Fiat CEO Sergio Marchionne scurries from continent to continent, trying to knit together his ambitious plan to take over bankrupt Chrysler, merge with GM’s European operations and keep once-ailing Fiat motoring ahead, there’s one thing that is a near certainty. It won’t work.

The Financial Times tried to be diplomatic about this reality:

History is not on his side. Cross-border mergers of carmakers have a track record of losing money and ruining managers’ reputations, while European acquisitions of US car companies have done even more poorly.

Any one of the challenges Marchionne wants to take on would be a huge management stretch. He has proved he is enormously capable — few would have given him much chance in rescuing Fiat alone. But the added complexity and distraction of two acquisitions puts his plan into true management nightmare territory. It doesn’t matter that he would acquire Chrysler, Opel and Vauxhall for next to nothing. The smallest problems are the money problems.

As numerous studies have documented, most m&a activity destroys value. If you’ve ever been involved in a merger or acquisition, I’m sure you’ve seen what can go wrong. Cultures don’t mesh. Leadership is over-extended. Assumptions you made in one organization don’t apply at all in the other. If you do it across borders, the odds become even poorer for success. And if you do it in something as politically charged as the auto industry, forget about it.

So Marchionne should hope that the increasing number of obstacles that seem to be emerging in Germany to stymie his deal proves decisive. He’ll have more than enough to do with Chrysler — an auto industry basket case if there ever was one — alone. If somehow he does manage his ambitious triple play and create the world’s third largest automaker, and then succeeds with it, they’ll need to invent a new category of the Nobel prizes to honor him appropriately. But don’t bet on it.