Hodak Value

This is amazing (not in a good way):

Your head will explode when you're done. Really.

From that fringe, left-wing cult--the Australian Broadcasting Corporation--telling the average Aussie kid that they should die at about 9 years old to make way for the "good" kids who don't use energy or have money. Where is the outrage? We'll check back.

HT: The awesome Coyote Blog

In the latest issue of Directorship, Amy Borrus of the Council for Institutional Investors says,

Additional sunlight is chasing some perks away at some companies. That's a good thing--perks are the polar opposite of pay-for-performance.

So is salary. Is CII advocating that CEOs be paid purely on variable compensation? That kind of runs counter to the oft-stated desire to bring down overall CEO pay. Surely, institutional investors can't expect CEOs going all-variable to forego extra compensation for the extra risk they must bear. Their investment clients certainly would accept such a trade-off. Who would? The "it's-not-pay-for-performance" critique of perks is too simplistic for an organization like CII.

There is only one good reason to cut perks: They look bad. It looks bad that a CEO who is making millions of dollars per year has the company paying $20,000 for a country club membership, or $15,000 for tax planning. It makes the CEO look grasping, when in fact these perks long preceded their accession from a time when they made perfect sense. It looks bad for the board because it makes them look like a bunch of stooges who can't say "no" to the smallest thing.

The fact is that most boards can say no. They're really not all incompetent or corrupt. They have been saying no for years. The fact is that these perks were generally good for the shareholders. They came about, admittedly in a more innocent age, because they represented tax-efficient ways to compensate their executives. If a board takes away $100,000 worth of perks that can legitimately be offered for business reasons, such as country club memberships (for business development), tax planning (to avoid personal financial issues, or fraud), or car and driver (for security), then the executive paying for those items with their own after-tax dollars would have to have their pay increased by about $200,000 to make them whole, especially if the board expected the CEO to retain many of these services.

But, since perks look bad, boards take them away, executives largely replace them at their own expense, and shareholders pick up the tab anyway, except twice over.

Barack Obama had flatly rejected the idea of being Clinton's VP during the primaries. I don't recall that Clinton has ever rejected the idea of being Obama's VP nominee, though most people had assumed during their battle that she wouldn't condescend to be anyone's VP.

In game theory, Obama's position would be considered to border on brinkmanship. "If you want me, you'd better vote me to the top of the ticket." Clinton's position would be considered as hedging. "I want to be the presidential nominee, but I won't rule out the second spot, just in case." In a sense, Clinton's position doesn't seem as strong; her hedge opened up the possibility of voters who are on the fence going for Obama; that way, they might get both.

On the other hand, Clinton has known for a while now that she was likely to lose the presidential nomination. She has been arguably playing for "rebound position" since Super Tuesday, where if the shot doesn't go into the basket, i.e., Obama has a serious slip up, or worse, she's ready with her sharp elbows to catch the rebound. Angling for the VP slot might simply be a continuation of the rebound positioning, which could continue right through an Obama presidency.

That might work better for Bill, too. I never believed that Bill was rooting for his wife in this campaign, no matter what he said or did. His multi-million dollar earning power would be lost for the most productive period of his life. Screw that. Bill would probably find being second-husband far less constraining than first-husband.

That headline contradicts most people's view of the history of Social Security, the most visible, surviving legacy of the New Deal. But it's true.

Roosevelt, of course, promoted and signed into law the original Social Security Act of 1935. But that law set up a forced savings/redistribution program for limited portion of the population (* details below the fold). It used the contributions from the participants to set up reserves, and it paid beneficiaries from those reserves. The plan was more or less self-contained. In 1943, President Roosevelt vetoed legislation that would turn Social Security from the forced savings/redistribution program it was set up to be into the pay-as-you-go program that, once his veto was overriden, we know today.

The 1943 debate on this law centered on governance. For Roosevelt, good governance meant continuing the Social Security program as it was originally envisioned--actuarially self-financing. To Arthur Vandenberg and other Republicans, it was clear that Congress was simply using the "reserve fund" as a cover to squander money on pet projects. In their minds, shutting down the "reserve" was just a way of restoring fiscal discipline.

The headline pops, and I'm trying to evaluate this statement well below the lede:

"None of the parties who entered into the settlement agreement has acknowledged any liability or wrongdoing and each made their contribution solely to facilitate a settlement," Cablevision senior vice president Charles Schueler told Reuters.

On the other hand, few if any backdating cases resulted in shareholder harm. And the law firm prosecuting this case is as known as Milberg Weiss for going after high-profile corporate cases, often after the same defendants, where the distinction between legitimate and nuisance lawsuits is very fuzzy.

Would a company pay out $34 million to make a high-profile lawsuit go away and eliminate the risk of a jury trial? Could happen. The point is, we don't know, but most of the readers of this headline would profess to have a certain knowledge.

Quick, quick. Congress has a choice between saving the world in 2020, or getting votes in 2008, what do they choose?

This is not a trick question. It's a sigh of relief.

I think a McCain-Obama roadshow is a great idea. The media will hate it because it greatly reduces their starring role, wherein they shake the candidates around and upside down in order to collect any sound-bites or "gotcha" moments that might fall out. What we'll get, instead, is a discussion. Heck, the networks may not even show up for that.

If they somehow end up in 10 traditional debates/sound-bite war, I will begin to campaign for choosing our president by lot. Seriously.

No, I'm not being facetious. Regular readers (thank you my fine few dozen!) would know that I am not a big fan of Congress's work. In fact, it's fair to say that if Congress passes legislation, I'm almost certain to think our country is worse off for it.

So why would I rationally and sincerely consider Congress a "well-oiled machine?" Because, as an institution, as unpopular and frighteningly wasteful as it seems to those of us on the outside, it is extremely functional at serving the values of those on the inside.

How can one reconcile this graph...

With this one?

One way is to view our Federal government as a broken business model that simply cannot go out of business.

Well, that was the headline, anyway. Actually, he is simply backing the "Say on Pay" bill, which will require a shareholder vote on CEO pay and severance. Because, you know, democracy works so well in producing optimal outcomes.

Here is an interesting idea: After a presidential election, each state gives its electoral votes to the person with the largest number of popular votes.

Several states have apparently already passed measures that would do this. These measures would kick in when a collection of states totaling over 270 electoral votes--the number needed to elect the president--have approved them.

The intended effect is to get candidates to campaign beyond the "swing" or "battleground" states. Today, candidates nearly completely avoid those states where polling shows a foregone conclusion. There is no point for Obama or McCain to spend much time in Illinois or Arizona before the general election. By promising to award one's electoral votes based on national results, the states would be encouraging the candidates to spend time in more states, which might also have the benefit of attracting more voters to the polls, for those who get a swell out of that sort of thing.

Every proposal draws its critics:

Gary Gregg II, director of the McConnell Center at the University of Louisville in Kentucky and a fan of the Electoral College, agrees that the National Popular Vote would change the way candidates campaign, but not in a good way. Candidates would go where most of the votes are, namely cities. “Rural areas would never see a presidential candidate. Small states would never see a presidential candidate,” he said.

Gregg also predicted chaos if there were a close election and candidates challenged the vote count. “You would have the [2000] Florida recount replayed across the country … It would be a very ugly situation.”

A critic from the Cato institute asks:

Do people in Maryland know under the National Popular Voter system, that their vote may go to someone who didn’t win their state?

Predictably, where many people stand on this proposal depends on where they sit. Republicans are against this if they believe that it will benefit Democrats, and vice versa. Some people, I am shocked to learn, care more about outcome than process.

I'm finally onto McCullough's 1776. One of the great things about this book is that it looks at the Revolution from both sides, quoting liberally both British and American soldiers who left a record. This gives the reader a bit more complete sense of what was driving the events.

Of course, a historical book can't win a Pulitzer if it doesn't tell a story, and this one is no exception. Having just read about the Battle of Brooklyn as a story, with intent leading to action, even with unpredictable outcomes, simply reminded me of how chaotically history can actually unfold.

...because they are being helped.

Here is a more recent example of getting what you pay for, in this case FEMA supporting Katrina victims (yes, they're still out there):

The scorching heat puts many at the Quality Inn poolside, but for Gwenester Malone, she chooses to beat the heat by setting her thermostat to sixty degrees. Malone's room for the past three months, along with three meals daily, have all been paid for by taxpayers.

"Do you work?" asked NBC 15's Andrea Ramey.

"No. I'm not working right now," said Malone.

Malone says she can't drive and it's too hot outside to find work within walking distance. "Since the storm, I haven't had any energy or pep to go get a job, but when push comes to shove, I will," said Malone.

HT - Instapundit

That was pretty much the bitter rejoinder on the Irish EU vote from the former Belgian prime minister, who helped draft the original EU constitution that went down in France and Holland.

The defeat of the original constitution led to the newer, slightly stripped down version that the Irish rejected on Friday. The main differences between the Lisbon Treaty and the previously rejected EU constitution appeared to be (a) changing the name from a "constitution" to a "treaty," and (b) preventing as best as possible its submission to a popular vote.

Unfortunately for the Eurocrats, the Irish constitution required such a vote, so at least their people had a voice in the matter.

Let's be clear about why the Lisbon Treaty went down in flames: The people couldn't understand it. The treaty comprised 356 amendments to the existing EU charter, as well as various other protocols, declarations, and other gobbledygook that made sense to no one outside of Brussels. So, the Irish people were forced to look to their leaders for an indication. But they couldn't--or wouldn't--explain what it meant. In fact, their leaders had not read it either. Instead, the people got an earful from their elected officials, and those from the rest of Europe, telling them how they had to vote. The people weighed their trust in these endorsements, and voted "No."

The vanity of politicians is that since the people vote for them, the people must like them and believe in them. They forget that most people regard elections as an unpalatable choice.

In 1776, McCullough creates an interesting portrait--snapshot, really-- of George Washington, drawn largely by the way he was viewed by his contemporaries. The book also illustrates was how remarkably difficult it is to judge leadership by any single measure, or even a collection of them.

In McCullough's story, Washington reveals a glaring weakness in military strategy, a weakness revealed both in the qualitative views of men who could observe him, as well as in poor results on the battlefield. Washington's main strength appears to be his luck, and the fact that he superbly, consciously, looked and acted the part of a leader. Today, few would put someone like Washington at the head of an army, and fewer yet would keep him there after the string of losses he suffered after Boston. Yet, Washington was the right man to lead the Revolution.

What McCullough left out (explained well in Flexner's book) was how tenuous was the faith in Washington held by the Continental Congress by the end of 1776. Washington, in fact, barely survived a political conspiracy to oust him. (He was extremely lucky that way, too.) Washington was thus able to keep his job, and generals like Nathanial Greene who shared Washington's dismal record on the battlefield. Greene would eventually prove instrumental in driving Cornwallis to his last stand at Yorktown, and Washington, of course, would lead that final siege to victory. Nobody could have predicted it.

Those were the words of Rep. Elijah E. Cummings (D-Md.) yesterday regarding the XM-Sirius plan to lease 4 percent of their radio spectrums, or 12 channels, for programming run by minorities and women. Congressman Cummings and the rest of the Black Caucus believes that number should be 20 percent. And where did they get that 20 percent figure from? The WaPo reporter helpfully explains:

[Rep. G.K.] Butterfield [(D-N.C.), chairman of the Congressional Black Caucus's working group on satellite radio] said he got the idea for the 20 percent set-aside for minority-owned companies from Georgetown Partners, a minority-run private-equity firm based in Bethesda, and its managing director, Chester Davenport.

The firm, which has invested in wireless and media companies, objected last year to the merger, arguing that a monopoly could limit opportunities for minority programming.

But Davenport said that if regulators give the marriage a green light, the combined company should be required to turn over some channels to a minority-controlled entity. He said he hoped Georgetown Partners would fill that role, making it a competitor to the merged company.

Lest anyone is naive enough to believe that Georgetown Partners is patiently waiting to jump on a major investment opportunity, grow up. Georgetown has already invested $420,000 where it counts-- in lobbying. Shortly after the XM-Sirius merger was announced, Georgetown began to ramp up its spending. They were the largest campaign donor to Cummings's Maryland colleague on the Black Caucus, Albert Wynn. Chester Davenport has personally spread $5,600 among Black Caucus members, including Chairman Butterfield, as well as over $28,500 to the Democratic Senatorial Campaign Committee, all in the last year.

Butterfield said that black caucus members planned to meet today with Karmazin and Nate Davis, chief executive of XM. "We're going to close the door and have a very honest and open dialogue about the merger," Butterfield said.

Bachelor congressman Anthony Weiner (D-NY) is prompting all manner of innuendo from his proposal to give fashion models a special visa category. The editors must have worked into the night to craft this line:

Weiner introduced his proposal in the House late last year which has not yet been scheduled for a vote, though it was recently referred to the Committee of the Whole, where less rigid rules allow bills to be passed quicker.

HT: Reason

In coming out against the Anheuser-Busch takeover by Belgian-based InBev, Senator Claire McCaskill (D-MO) clearly illustrated certain lessons about what it takes to be a Senator:

1) Homework is unnecessary:

Asked what specifically she could do to stop the sale, McCaskill said she wasn't sure yet.

2) Don't worry about giving shareholders the finger:

Quiz: What's the difference between

versus

Answer: In Medieval times, the person first had to have been convicted of something before suffering gratuitous humiliation

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I'm preparing for my next semester of "History of Scandal," and considering Rudy Giuliani's unique contribution to this history--the "perp walk." Today, a couple of other Wall Street desperadoes were handcuffed, and marched to the courthouse to face arraignment because, you know, they wouldn't have just driven there with their lawyers by appointment.

The WSJ Law Blog also raises the issue, and gets some very interesting comments. My favorite:

I thought the perp walk was low and thuggish when I was a prosecutor, and I think so now that I’m a defense attorney. In almost every one of these cases the defense lawyers know that the indictment may be coming and have offered to surrender their clients at a time and place of the prosecution’s request. Prosecutors who think that unnecessary arrest is a legitimate tool will ignore this. (In fact on a couple of occasions I’ve been able to learn of the issuance of the warrant and sneak my client in to the U.S. Marshal’s office in the courthouse to spoil the prosecutor’s little show.)

You’d be surprised at how low prosecutors and police will sink. My partner had a client who was to be arrested (naturally, on a Friday morning so they could keep him for the weekend.) The police and DA Investigator showed up at his house. They had tipped off the press, but the reporter and photographer were late, so they had already put the client in the police car. So they took the client out of the car, walked him back into his house, then turned around and walked him back into the car so the press could take pictures. Of course, the press never reported that — because a pathetic abuse of power by police is not newsworthy compared to juicy pictures.

A little town in Romania voted to re-elect their dead mayor. One often hears of democracy as a process that fools voters into believing that they can get whatever they want. This election was the ultimate test for these voters. "I know he died, but I don't want change," said a supporter of the former mayor. Presumably, keeping the old mayor would prevent any change, if one overlooked the inconvenient difference between life and death.

Talk about the advantage of incumbency!

Government climate scientists: policy advocates who may or may not have science credentials, such as PhDs in physics or chemistry

The USA Today headline was "Scientists: Weather extremes consistent with global warming." Wow. They're not exactly saying the weather extremes are actually caused by global warming, but that distinction is bound to be missed by headline readers, which is the likely intent of the headline writers. More to the point, they're implying that scientists are making this connection. So, you'd think that they were quoting scientists. They work at something called the U.S. Climate Science Change Program.

Folks, these people are not scientists, they are advocates. They may have scientific credentials, and may even conduct real science in other contexts, but in this context, they are advocates.

Science is a process of developing and testing models based on theoretical and empirical evidence. Models tell you the relationship between A and B. Concluding that B is bad and therefore we should do less of A is advocacy.

I won't get into whether the climate models behind the grand pronouncement of this headline has any merit or not (better persons than I have looked at this already). I will only suggest that once a scientist has signed up for "change" they are no longer doing science. They are doing advocacy.

Sometimes, the line can be blurred. Let's say that a scientist develops a model that says: "If you put tennis balls into a toilet, the world will blow up." If they release these findings, it may safely be implied that they are doing two things at once: they are explicitly illustrating a relationship between tennis balls in toilets and global destruction; and they are implicitly advocating against tennis balls in toilets. Although these things are happening at the same time, one can still distinguish between their science and advocacy.

When Einstein wrote and published his paper on Special Relativity, he was acting as a scientist. When he wrote a letter to FDR suggesting the possibility of developing a nuclear bomb, he was acting as an advocate. That's not to say that Einstein wasn't a scientist when he wrote that letter. The point is that the letter itself was advocacy, not science.

The line between science and advocacy is further blurred by high impact results with a low statistical significance. For example, statistics may indicate a less than one chance in 20 (a common standard in science) for the relationship between tennis balls and global destruction to be true. But the stakes are so high that a less than one-in-20 chance may still be alarming. In this case, it is clearer that a scientist publishing these results is acting as an advocate, but it's less clear that they are also acting as a scientist since their work has not met a common standard for scientific achievement.

People working in a "Climate Science Change Program" illustrate this blurred distinction. Scientists suggesting that industrialization creates global warming are acting as scientists as long as they are clear about the statistical significance, or lack thereof, of their findings. But scientists who know that the statistical significance of their findings are low, and parade the results anyway, and highlight the negative effects of global warming, or linking global warming to select events in order to portray it as bad, are simply advocates in white robes.

In the head of a utopian.

We said to ourselves ... what if we can create a city where there is no persistent underclass and where the children of the poor [are] achieving at a level that approximates the level of middle-income families? ... [T]hat's the mentality we have here -- that we want to say enough is enough," she told the Hartford Courant in 2001.

The Supreme Court said it was OK, as long as the city had a plan, even a dubious plan without any accountability to the taxpayers.

Like most utopian plans, this one is on it's way to failure. The distressed taxpayers, far from benefiting from their leaders' vision, have been left $78 million poorer.

At first, I thought their headline "Mugabe's remarkable comeback" was an Onion story. In fact, it was a BBC story that somehow managed to write about Mugabe's brutal suppression of democracy with a sense of awe.

It has been done with great brutality, but Robert Mugabe has achieved an extraordinary turnaround here.

I'm sure I could come up with numerous other parallels, but it wouldn't be long before I Godwin the post.

Yesterday, the Department of Justice announced a round-up 21 children who were being prostituted in the United States. Few things evoke more horror than the idea of children in sexual bondage, and few things worth celebrating more than their release from that horror. It seems rather petty after such a success to ask "at what cost?" But the question is not just about cost in dollars (answer: about a quarter million dollars per child saved), but a question of cost in credibility of our government.

In 2001, the State Department estimated that about 45,000 to 50,000 people were trafficked in the U.S., defined as the use of force or coercion—violent or psychological—to exploit a person for commercial sex or the recruitment, transportation, or provision of a person for any form of involuntary servitude, debt bondage, or slavery. This is horrific stuff, especially in the "land of the free." This report came out in the midst of one of those "white slavery" panics that has periodically gripped western nations.

By 2003, the State Department estimates had dropped to 18,000 to 20,000, later to be further revised to 14,000 to 17,500. The attorney general later grudgingly admitted that even those estimates were likely too high.

These continual downward revisions, where the government ends up with a new high that was below the prior low, is not because the government has ferreted out tens of thousands of cases. The total number of sexual slavery cases identified by the government since 2000 through the end of last year has been 1,362.

Given the increased incentives since 2000 for government agents, and for the sex workers themselves, to characterize individuals as "sex slaves," even this 1,362 number is cast into doubt.

After years of being the poster boy for greed, the whipping boy of the New York media and political establishment, for having the temerity to accept what he was paid by his bosses, Dick Grasso can finally smile. The New York Court of Appeals basically affirmed the business judgment rule by affirming the dismissal of four of the six charges against him originally brought by then-AG Elliott Spitzer. It's highly unlikely that the new AG, left to clean up his predecessor's mess, will be able to prevail on the remaining counts.

While some will no doubt grouse about fair pay, I will be wondering about the headlines that weren't written about this story on C1:

"Grasso Gets to Keep What He Was Paid"

"Court Dismisses Spitzer's 'Attempt to Circumvent Law'"

"We're Sorry For Sullying Grasso's Good Name"

Larry Ribstein, predicting this outcome, wrote:

It likely will be recognized as the bald-faced political gambit that it was.

A state's attorney can get away with "attempting to circumvent the law" with impunity. In fact, he can be rewarded for leading a crusade supported by shameless, moralistic enablers.

When Spitzer got tossed out of the Governor's mansion, it wasn't for doing something that should be illegal, but isn't; it was for something that shouldn't be illegal, but is.

Alas, most people are more bothered by the idea of sleaze in making a buck, even if that turns out not to be true, than they are about sleaze in winning high office, even when that turns out to be true.

Update: Now it's game, set, and match.

The movie was pretty good, despite having the most illogical premise ever.

I'm not talking about the robot love story, where machines go against their programming to acquire free will and human emotion. I grew up with Hanna-Barbera. I'm cool with smart-ass robot maids and rambunctious robot pets, so I have no qualms about robot romance. What bothered me is the inexplicable strategy of the humans in this film.

B'n'L, a rapacious corporation-cum-government, has taken consumerist pandering to such obscenely wasteful levels that the earth is no longer fit for habitation. (OK, Hollywood blames the Earth's environmental destruction on a monolithic corporation; nothing surprising there.) Then, as they deploy robots to clean up the planet, this same company has chosen to build a mammoth, luxury space liner, called Axiom, to transport the people away, with robot servants catering to their every whim. Think Starship Enterprise meets Royal Caribbean. Then, as B'n'L would, super-size it. And Axiom provides this luxury indefinitely, for centuries at a time, even though it was only designed for a five-year cruise.

Maybe I'm just a victim of my aerospace engineering training, here, but it seems obvious to me that a spaceship is a self-contained environment. It has to provide everything needed to sustain the basics of life, let alone its luxuries. It must have a permanently renewable source of energy. It has to be able to recycle everything--water, air, waste of every kind--otherwise this ark would eventually be depleted. (There is a moment where we see that the ship regularly ejects waste from a trash hold into space, but let's ignore that.)

So, if B'n'L could, and would, create this sustainable, self-contained haven as a space-borne habitat, why couldn't it have built it as a earth-bound biosphere? I mean, it could be as sealed off on Earth as it would have to be in space, except that it wouldn't need all that extra propulsion and navigation equipment. Ask Hilton; a land-based hotel is much less complicated and costly than a sea-borne one. At least some people would presumably prefer a hotel to a high-end prison, even if that hotel were on a spoiled Earth. (That was, in fact, a conclusion quickly reached by the humans in this film.)

I can abide retro notions of robots that don't (quite) take over the world, and Brave New World monopolies that do. I can laugh at human stupidity in a dystopian future, and at human kinkiness in a post-apocalyptic paradise. But I can't help but notice when people make totally uneconomic choices about technology right there in hand. That does not compute.

Michael Kinsley and Conor Clarke have opened up a discussion on Bill Gates's new, big idea: "creative capitalism." Kinsley tries to confer some intellectual heft upon these musings by labeling Gates "the most successful capitalist in the history of the world."

Bill Gates is arguably the most successful businessman in history, and he achieved his success in a largely capitalist system, so I suppose it's fair to refer to him as a successful capitalist.* But does that endow Gates with any special insight into the system of capitalism, i.e., the legal and social framework under which market-based economies function? In other words, does his great success as an economic agent make him a great economist? I don't think so, any more than my cat's ability to jump from the floor to the window sill without knocking over a vase makes her a great mathematician or physicist.

Gates is certainly more self aware of market and political processes than a cat is about angles and muscle reflex, but that doesn't get him anywhere close to being an expert on capitalism. In fact, one of the key features of economics is that you don't have to be an expert in anything except your space in the overall market in order to be a financial success. Ignorance of unrelated matters may even help, if it contributes to enhancing one's focus on one's own business.

All this is not to say that Gates has nothing to say about capitalism. His contributions, however, are far more likely to be empirical than theoretical. Unfortunately, I'm doubtful that he will be forthright about his achievements on the empirical front. I doubt we will hear about the virtues of vaporware in marketing, or how the vigorous attempt to monopolize via the network effect gave him a sustainable competitive advantage. I say this as one who was never bothered by Gates's ruthlessness in achieving market dominance. I actually supported Microsoft in their defense against federal anti-trust charges.

So, I don't think Gates will defend capitalism the way he practiced it, red in tooth and claw. It appears that he has joined the pursuit of a third way. That's a shame, because he does understand vanilla capitalism better than most, and the Gates Foundation is capable of doing much good short of saving the world. But the title of "world's most successful capitalist" makes him no more likely to develop a better approach capitalism than his ability to leap onto a big, new stage will enable him to develop a new proof in math or physics.

* I tend to think of a successful capitalist as one who made their pile as an investor rather than entrepreneur, but that's a minor quibble in this discussion.