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The Strategy of No Strategy: Putting it together

N17 on Wall Street

This is the final part of my take on Karen Ho’s book, Liquidated- An Ethnography of Wall Street. I can’t do the book justice in a single blog post (it’s going to take at least four), I’m going to try to summarize some of what she is describing as the culture of Wall Street and how it is infiltrating our lives. I’m going to touch on four major themes in her book: “smartness”, “flexibility”, “shareholder value” and “the strategy of no strategy”. Check here Part1 on Smartness , Part2 on Flexibility and Part3 on Shareholder Value. I am going to try to tie Karen’s analysis of the culture of Wall Street to the pharmaceutical industry because having had a first person perspective, it is my belief that Big Pharma has felt the worst effects of Wall Street on its core business- discovering drugs.

This week, Bruce Booth of Forbes wrote an article about the culture of pharmaceutical R&D and how it has definitely taken a turn for the worse. Let me just say for the record that this is a culture that has developed over time and was forced on the labrats. We didn’t invent it in the lab because we know it would never work. (For more feedback and analysis from the labrats on this article, see this comment thread at In the Pipeline.) Over the years, I definitely got the feeling that our overlords thought of us as 1.)socially awkward nerds who 2.) didn’t know the value of a dollar and 3.) were completely unproductive if left to our own devices. But Booth sets the record straight in some respects. He takes on the ‘tyranny of the committee’ and risk aversion, which are related to one another and further exacerbated by, emphasis on shareholder value, FDA failure rate and class action lawsuits. Then he takes on what many first person labrats would say is the biggest problem with pharma today:

Organizational entropy’s negative impact. [entropy in this context means disorder] For most of Big Pharma, at least a few mega-mergers and their integrations have happened in the past decade. And for all of Big Pharma, there’s been the semi-annual reorganization around the latest fad in corporate design: matrix management, proliferating centers of excellence, end-to-end therapeutic area groups vs functional lines, disease area strategies rather than site strategies, etc… These cause constant organizational upheaval with levels of distraction that can’t be measured. Resumes fly through cyberspace as soon as a deal is announced. Organizations are frozen as these changes happen, fear of the unknown paralyzes entire project teams, and closures/layoffs happen without much regard to upgrading the talent and weeding out the deadwood. Drug R&D takes typically 10-15 years from start to approval; how can it stay on track with a cadence of change this fast? As I noted last summer, most new drugs approved today were discovered in the 1990s. Do you think those approvals would have happened faster if there weren’t so many mega-mergers and reorganizations in the meantime?

The answer to the last question is “yes, probably”. There’s no way to tell, really, but having survived multiple mergers over the past 2 decades, I can tell you that we vamped and put everything on hold for months and years on end while the executives had pissing matches and more local management engaged in political backstabbing. It was a horror show. Much valuable experimental time, money and talent was wasted in the aftermath of Wall Street engineered deals.

But Booth also makes the common mistake that presumes that if all of us just worked at smaller companies, we’ll be more innovative and save oodles of money! If that happens it would be the equivalent of putting a few dozen labrats on a desert island and telling them to build their own labs with the tools available. Yep, there will be some geniuses and amazingly well coordinated teams that will fashion robotics and gel electrophoresis devices from sand and seashells but it won’t necessarily be efficient nor will those labrats be able to purchase stuff they can’t find on the island. There’s a reason why medium sized corporate labs discovered all those drugs back in the 90s.

Nevertheless, this is the new model of drug discovery. You, the scientist are chucked out on your ass and some cocky asshole business class people just assume that you’re going to whip up the next Lipitor with some sleight of hand. We’re encouraged to become entrepreneurs but they seem to have forgotten that our severance packages didn’t consist of millions of dollars in stock options. For the most part, we have a lot of poor scientists with no place to practice their craft and a mountain of extremely hard work and expenses before a vulture capitalist signs on.

The Wall Street smarties never thought about any of this stuff when they made the M&A deals. Nor did they stop to reason out why so many labs were failing to produce new drugs in the wake of those deals. For the last decade, all we’ve heard is that it’s OUR fault. We’re lousy scientists or lazy or spendthrifts. And they probably won’t figure out that the small little islands they set us adrift on aren’t going to be as profitable as they had hoped. But it doesn’t really matter because as soon as they’ve extracted the last bit of wealth from the big pharmas for the shareholders, they’ll just abandon the industry and the American scientific infrastructure to its own fate and move on to some other industry where wealth can be extracted. That’s what they’re paid to do.

Likewise, they will continue to pressure governments to hand over every bit of wealth from their citizens, to adopt austerity measures and cause untold suffering because they are in the business of finance and making money and if you as a country took the loan, they will expect payment. They don’t need to reason out that they’d be better off structuring things so that economies would grow and so they would get a more reliable but unspectacular return over time. That’s your problem. Their problem is to make the biggest, fattest deals they can in the shortest amount of time with the maximum amount of profit. It’s an optimization problem, a Traveling Salesman problem, a Metropolis algorithm on a global scale with one optimization endpoint. How much money can you make? They are in it for the deals, making their numbers and retrieving the wealth and private property of the shareholders. They don’t have time or patience for whiners and losers. They don’t even have the time to worry about another Depression. All they care about is the deal.

Karen Ho describes the culmination of “smartness”, flexibility and shareholder value as a thing called The Strategy of No Strategy. This is where the normal world meets the weirdness of quantum finance. Regular people assume that there is a small evil group directing things for some specific purpose, some grand scheme, some particular worldview. But all that is mere icing on the cake if it happens. What the 1% are really into is how this moment in time is going to affect their bonuses. Their plot to take over the world doesn’t extend much further than that. That is the only cause and effect relationship that matters because other than the expectation of money at the end of the year, they have no other rights or expectations as employees. They’re valued only for their ability to make connections and extract money from other people, they expect to be laid off at any time and the working conditions are brutal. And all of the authoritarian, political crap that gets thrown in to the mix is simply to protect their right to that money. As a result, you, the target of their financial machinations, are expected to conform to their deals. You are expected to give up your job at a moment’s notice to satisfy shareholder value or work in less than optimal conditions because to complain is to be a loser. It even helps them if they don’t have too much contact with you because personal feelings might get in the way of doing what they need to do. If you get in the way of their bonuses, they will have a problem with you, nothing personal. If it ends up feeling very callous and cruel, well, better to decrease the surplus population.

Karen Ho describes how the Strategy of No Strategy drives and changes the world:

Given that the identities of investment banks are wrapped up in their ability to immediately induce change in their people via job insecurity and flexible compensation, it is not surprising that one of their primary strategies-their plans for the future based on their imaginings of “the world and the firm’s position in it”-is, simply, to have no long-term plans (Schoenberger 1997, 122). To actualize their central identity as being immediately responsive to their own changing relationships with the market (including employees, products, and so on), their strategy is, in a sense, to have no strategy. Ironically, having no long-term strategy is contradictory and potentially self-defeating in that investment banks often find themselves making drastic changes only to realize months or weeks later that those changes were unnecessary, premature, and extremely costly. For example, in chapter 5, I described how investment bankers, in part because of their access to “sensitive, proprietary information,” are not only fired in an instant, but must also leave the physical premises of the building within fifteen to thirty minutes. Given how crucial the control of knowledge and the protection of inside information are for Wall Street investment banks, it seems self-defeating that they do not place any premium on loyalty. Despite the fact that firms try above all to enforce secrecy, they accept and maintain this volatility and revolving-door policy.

At first glance, it seems not only improbable, but also “irrational” for investment banks to engage in such practices, for why would a business so focused on profitability and knowledge not engage in practices that always improve its bottom line and its control of information? As many anthropologists have demonstrated, capitalist organizations are not simply motivated by purely instrumentalist quests for profit or governed by perfect rational actors; they are sociocultural organizations with complex, contradictory worldviews and particular organizational practices (Yanagisako 1999, 2002). Profits may be claimed as one of investment banks’ primary ideals, but it is mediated, situated, and enacted-along with other values-through the social and cultural lenses of particular organizations, groups, and bankers. How profits are made, what constitute profits, and what amounts are considered “profitable” enough are also culturally, organizationally, and historically variable.

John Carlton, the seasoned investment banker and managing director from BT, described how Wall Street’s strategy is to operate without a long-term strategy:

“Again, it is a business where there is no tenure. There is no union protection. Basically, if things change, you could be out. That’s one reason why people are very flexible. So you need flexible people, and people who can deal with it every day. Some people would hate that. I don’t mind that. Some people can’t stand it. They can’t last. They say, “I like to know where I am going to be five years from now.” They like the idea of stability. It is not very stable. I think that is a characteristic. Probably most people you talk to would say that it is not a very stable environment. Most businesses have five-year plans-What are we going to be producing?-and have long product life cycles. [We] have very short product life cycles. How do you plan when you never know what the market is going to do?”

Although Carlton attributed the rationale for not having a plan to market unpredictability, my point is that not having a plan is central to the strategy and cultural identity of investment banks.

[…]

Underpinning the continual (re)creation of “instant” teams or product expertise is a corporate culture that values eagerness for change and expediency. The “build a new dam strategy” while the old dam overflows also prefigures waste and even decline. As I learned from informants throughout my fieldwork, these star hires and seven-figure offers are often abysmal failures: stories abound of senior bankers simply pocketing the cash and producing no results, of formerly successful teams that were separated and dislodged from the environments in which they had thrived.

In other words, reflection is not Wall Street’s strong suit.

This is the part of the book that kept me up at night. Here we have a bunch of “smart” people with no job security, driven by their own conditioning and the banks they work for, that see *themselves* as The Market. They are the ultimate precariats. They are no better than miners whose goal it is to take the top off the mountain. And they have asked and gotten more and more leeway to act as they please, without regard to rational expectations for the future of the things they act upon.

The pharmaceutical industry has been destroyed by Wall Street and now, it knows it. There won’t be a recovery for the gigantic monstrosities like Pfizer that merged so fast and furiously that it didn’t have time to structure its most valuable asset- its database of compound and assay information. They’ve jettisoned the most valuable parts of their organizations in order to feed the Wall Street beast and its spawn of corporate CEOs whose job tenure can be measured in less than a handful of years. It does not matter that there is a generation of scientists laid off who will never make the salaries they once had or can pay their taxes. It doesn’t matter that communities and states will feel the effects of hundreds of thousands of terminations. It doesn’t matter that millions of patients will now be left vulnerable to bacterial infections that can’t be stopped or cancer or schizophrenia. It doesn’t matter that once the labs have been dismantled and equipment sold off, there will be no one who will be ready to reconstitute the labs when or if our society wants to discover drugs again. It will not matter that they have retained the scientists who are the best salesmen- of themselves- and not necessarily the best experimentalists. All that mattered was the deal at the time it was made. And now, all that matters is getting in on the get-rich-quick deals that can be made from academic basic science and discoveries that are not quite ready for primetime and will be abandoned as soon as they do not generate the expected profits.

For society at large, the strategy of no strategy is behind the austerity measures pushed on all of us. For countries that took out loans, that money must be paid back regardless of the havoc it plays on the citizens or that more austerity makes recovery of that money even less likely. What matters is that the recovering the money is as optimal an exercise as possible as quickly as possible, to get the highest return in the shortest amount of time. It’s sort of like harvesting organs before the body can’t be kept alive any longer. Go read Never Let Me Go and you’ll know what I mean. So, Spain, Ireland, Greece, Great Britain and the US will continue to pay and pay and pay until no further profits can be extracted. Then, they will move on to a different hemisphere. What is surprising it how passive many countries have been in accepting this fate. How long will it take for western countries to rebel like the middle east has? Decades? Will we have to live with decades of austerity and growing authoritarianism?

And now we can see why our governments act the way they do. Back in 2007, when Hillary Clinton was the front runner. I remember talking to a colleague who had a friend who was once an investment banker on Wall Street who had insights into how the bankers were thinking in 2007. They knew there was trouble coming and were trying to thread the needle. A Republican candidate might cause another Depression with the wrong policies. No, they didn’t want the patient dead, well, not until they could recover themselves. Maybe a Democrat. But Hillary Clinton had a strong responsibility streak in her. Besides, she came from Yale and we know that the culture of smartness distrusts Yalies as being too liberal. Another New Deal might have been too much like rehab. So, they threw their weight behind the Harvard guy whose unchecked ambition and cool demeanor was more like the cut of their own jibs. Just like the undergrads they hire from Princeton and Harvard, it didn’t matter to them if he knew nothing about finance. They would teach him.

If you’ve ever wondered, like I have, why Obama careens from saving one institution  to another in negotiations behind closed doors and apparently without any guiding principles, like he was making it up as he goes along, now you know why. He is governing on a deal by deal basis, without a worldview and without a strategy. It’s his modus operandi and he does it with equal fluidity with the bankers, the auto industry, congress, health insurance companies and voters themselves. He’s playing Let’s Make a Deal with each individual entity and with everything on the table.  Flexibilty and the “culture of smartness” is important to him, which is why Geithner and Summers got so much face time with him.  Loyalty and planning not so much, which is why Christina Romer got the shaft.  All of the reports on the way the White House operates with the fast paced credit stealing and high profile tasks going to smart young men and the golf outings with “front office” guys, sounds a lot like Wall Street.  If it turns out that his team hadn’t thought about how Republicans would game the debt ceiling business or how the individual mandate without a public option would make employees *more* vulnerable to layoffs and loss of health benefits, well, this is what you have signed onto with Obama.  He doesn’t see his role as a long term policy maker or seasoned politician and it shows.  If you’ve never worked in a corporate environment, you might be forgiven for not recognizing how the schmoozer works the system but there’s no excuse the second time around.

All around the world, bankers had their way with government leaders, well, except for Iceland, whose decendents of marauding Vikings and new female prime minister told them to f&*( off.  I guess it takes pirates to know pirates.  But the rest of the world bowed quickly to the notion that recovery of the banking system was The. Most. Important. Thing. Everything else, their sovereignty, public welfare and future growth, was made secondary to the immediacy of keeping the paper flowing between the banks. The fear of a global meltdown made them cower. But there is no strategy to ever get out from under these conditions. There was no effort to reign in the bankers either. And they have a well oiled propaganda machine and know that when a population is under stress, it circles the wagons and becomes more conservative and nationalistic. Liberal policies look too risky and threatening. In next week’s vote in France, I would not be at all surprised if Nicolas Sarkozy managed to hang onto power, despite his unpopularity. The rational people of France may look to the right at Marine Le Pen’s crazy nationalists and fear that Le Pen’s faction will get enough votes to form a coalition with Sarkozy’s. Voting for the socialist candidate may look too risky. I hope I am surprised.

And what does it mean for this country? Well, I am not at all surprised that expectations have been set for Hillary in 2016. The press only sounds beneficent and contrite this time around, acknowledging that maybe they have regrets about what they and the party did to her in 2008. Bullshit. They know damn well that her chances of getting elected in 2016 are nearly zero. But pushing the timeline for her forward is an attempt to pacify the restless elements of the populace who see her as the only legitimate alternative to either Romney or Obama. At this point, it doesn’t even matter who wins the White House. Wall Street doesn’t see either of them as a threat.

In the meantime, they have just scored another victory in the JOBS bill where they can be less than transparent to investors who they hope to make new deals with. I think the idea behind this was to help small companies, like small biotechs, get investment capital. Small biotechs don’t really have a product to sell. They have ideas and beginnings of products. But development takes a lot of time and money and as the big pharmas have already found, you can sink billions of dollars into an idea and have it shot down by the FDA or siphoned off by a side effect that no one anticipated. So the risks are high. But that doesn’t matter. All that matters is the deal and in innovative industries like biotech, there are a lot of potential deals to be made.

And then there is correlation between bonuses and crashes. Ho says that record high bonuses on Wall Street frequently precede crashes. That’s not really surprising. It means that there is a frenzy of unchecked deal making and risk taking with large sums of money in some corner of the market where all of the investment bankers have been attracted like magpies to shiny things. All of the money has poured into this sector and bets have been placed for and against. Maybe the new rules will prevent overleveraging. Maybe they won’t. But there is one thing the bankers can count on- a steady stream of new funds from your 401K accounts to their hands that they can bet in a global casino. Pensions are so passe. 401Ks are the new black and you can be sure that there will be an even bigger push for the banks to get their hands on even more piles of money that are sitting around that no one seems to be using.

There is no goal. There is no plan. There is no strategy. It’s all, “What have you done for me since lunch?”.

The system is broken. Its entropic, unsustainable, moving at speed of fiber optic cables and out of control. The best thing we average Joe’s can do is to limit our own losses, get out while we can and sleep with the lights on.

Wednesday: Fines, jobs and influence

Does this crown make me look fat?

Podcasts and things that I found interesting:

1.) Yesterday’s Brian Lehrer show on WNYC was the first media presence that I have heard that picked up on the success of Germany in retaining its important industrial and research infrastructure.  When the recession hit, instead of laying off thousands of people with important skills, who might otherwise be sitting around idle and losing their skills, Germany implemented a plan to bump workers and researchers to part time status and then the government stepped in to augment their salaries.  The effect of this plan is that when the economy recovers, these workers and researchers will be able to step back into the workforce with relatively little transition cost.  Their skills have been kept fresh and the economy hasn’t been hit with a deflationary cycle that threatens to take more businesses with it.  Germany used to be like France where the unions protected jobs to such an extent that the workforce was inflexible.  In France, it is almost impossible to lay anyone off.  But when business slows down, you have a lot of extra people cooling their jets doing nothing but still getting paid for it.  In contrast, Americans have zero protection from market forces.  They are completely at the mercy of the quarterly earnings report.  Germany seems to have bridged the two extremes.  Ramping down instead of out preserves their infrastructure for another day while still giving them the flexibility to take it down a notch when the business environment calls for it.

Another advantage that Germany has over the US is that more of their companies are family owned businesses that are not subject to the volatility of the stock market or the pressures of the finance industry to meet quarterly goals for the benefit of the shareholders.  That gives them the latitude to focus on long term goals and quality, which in turn allows them to command higher prices for their products.  This reinforces what I have said before that part of the problem with the demise of American labor is that there is too much reliance on the 401K.  When we all become shareholders, we expect ever increasing returns on our investments.  But this only hurts ourselves as we drive businesses to cut jobs to meet earnings expectations.  It’s a vicious cycle that must be broken and cutting back on social security is exactly the wrong strategy.  What we should be doing is encouraging people to get out of the 401K system.  But the business community and bonus class will never go along with that without a lot of pressure that they aren’t going to get with this president and his lame Democrats.

Nevertheless, if there are going to be any tax cuts in the budget, I would much prefer that they go to the unemployed who have a lot of their money tied up in their 401K accounts.  Right now, that money can’t be removed from the 401K until retirement, which at this point, may be never, especially if social security and medicare is pushed farther and farther out.  Actually, this 401K scheme is looking more and more like the worst possible deal for under 55 year olds.  If you can’t use your pre-tax 401K savings until you retire so you can get a break on taxes at a lower salary because you have to work longer, when the heck are you ever going to get a break on this money???

Anyway, as I was saying, if you need to take money out of your 401K and you have not reached retirement age, you pay a huge tax penalty.  So, no matter how much you need it, to pay your mortgage or your health insurance, buy a new car so you go out and find a job or just feed your kids, you get socked with this amazingly humongous tax.  It is a disincentive to take the money out, which normally wouldn’t be a problem if we were all gainfully employed.  But we’re in a “lost decade (or two)” and there looks to be little chance of a new stimulus package, Obama having blown his one chance to pass one that would have been big enough.  If we need to stimulate the economy, why not let workers do it with their 401K money?  And if we’re going to give people tax cuts, why not let the unemployed go first?  Let them remove that money without penalty so they can spend it and put it back into the economy.  If it’s true that the 401K is not contributing much to the financial market, then it shouldn’t be a problem.  But, you say, what will people live on when they get older?  I dunno, but I suspect I could live on a lot less if I didn’t have a mortgage and could afford to put more money away for a rainy day when I finally do get a job again.  Oo, Oo!  And let’s make this tax break available to the Unemployed who are 55 years of age or younger.  That way we’re not forcing anyone who is nearing retirement to take money out of their 401K.  {{smirk}}

I like my plan.  It cuts a break to the people who need it most while at the same time is sufficiently disconnected from reality to make me a “serious person”.

2.) BBC History Magazine used to be a once monthly podcast, which always left me craving more.  Now, it’s weekly and while the podcast is shorter, there are more of them.  Yessss!  This week’s podcast featured a segment on King Henry III’s Fine Lists.  Wow, that’s pretty obscure, you say.  Not really.  Henry III was the son of King John, aka Lackland.  He’s called Lackland because he was a phenomenally bad king who managed to lose or forfeit just about all of his foreign property.  He was so bad that subsequent kings never took “John” as their monarchical name.  And then there was that whole excessive taxation and tyrannical behavior and double jeopardy and not handing over the body and before you know it, he had a bunch of very hairy, very pissed barons breathing down his neck making him an offer he couldn’t refuse.  So, Henry III was the son of the king who signed Magna Carta.

The project to translate Henry III’s fine lists has uncovered some interesting trends that followed Magna Carta.  A fine is not a punishment for illegal behavior in this context.  A fine was a payment made to the king for certain privileges or protections.  For example, if a town wanted to have a market day or fair, it would apply to the king for a license to hold one.  Or if a lord’s tennants needed protections from that lord’s mismanagement, they could also apply to the king for that.  Or for changes to an inheritance or a number of other things.  What historians have discovered is that during King John’s reign, the payments for the fines were extremely high, ungodly high, which probably partially lead to the baron’s rebellion.  But in Henry III’s day, the fines became much more reasonable.  Speculation is that this was a direct result of the signing of the Magna Carta.  The institution and standardization of common law and gradual introduction of a check on the King’s authority lead to less autocracy at the top.  And who would say there is a problem with that?  It took several more centuries for the king to be thoroughly reined in by Parliament but while the pace of change may have been slow, the evolution towards democracy from monarchy and the rentiers is rooted in the ability of a people to force accountability, laws and standards on their leaders and wealthy.  That’s something we tend to forget.  It’s not rocket science.

3.) Jay Rosen wrote a piece picked up in the Guardian about what Rupert Murdoch’s empire was really built to obtain- influence.  Here’s the money quotes:

Here’s my little theory: News Corp is not a news company at all, but a global media empire that employs its newspapers – and in the US, Fox News – as a lobbying arm. The logic of holding these “press” properties is to wield influence on behalf of the rest of the (much bigger and more profitable) media business and also to satisfy Murdoch’s own power urges.

However, this fact, fairly obvious to outside observers, is actually concealed from the company by its own culture. So here we find the source for the river of denial that runs through News Corp.

Fox News and the newspapers Murdoch owns are described by News Corp, and understood by most who work there as “normal” news organisations. But they aren’t, really. What makes them different is not that they have a more conservative take on the world – that’s the fiction in which opponents and supporters join – but rather: news is not their first business. Wielding influence is.

Scaring politicians into going along with News Corp’s plans. Building up an atmosphere of fear and paranoia, which then admits Rupert into the back door of 10 Downing Street.

But none of these facts can be admitted into company psychology, because the flag that its news-related properties fly, the legend on the licence, doesn’t say “lobbying arm of the Murdoch empire.” No. It says “First Amendment” or “Journalism” or “Public Service” or “news and information.”

In this sense the company is built on a lie, but a necessary lie to preserve certain fictions that matter to Murdoch and his heirs. And that, I believe, explains how it got itself into this phone hacking mess. All the other lies follow from that big one.

Rosen goes on to suggest that Murdoch and his heirs (and presumably other media moguls) know that the reason they’re in the news business is to influence governments but that the rank and file is still under the impression that they’re working for a news business.  While I’m pretty sure Rosen has it nailed about the influence motivation, I’m not sure the minions didn’t know what Murdoch and his crew were up to.  In a way, Murdoch’s “news” organization reminds me of how the Nazis operated in Germany in the years before World War II as described in Eric Larsen’s book In the Garden of Beasts.  Hitler kept getting away with stuff because no one called him on it but the minions were more than happy to go along with it because for many of the rising players in the Third Reich, they had power for the first time in their lives.  They weren’t motivated by their altruistic desire to save the Republic from the ravages of a punitive war reparations schedule.  They did what they did because they could and they liked the idea that they could.  Rebekah Brooks is reported to have adopted the culture and accoutrements of the English “Creative Class” when Tony Blair was in office and then ditched that garb for the Jodphurs and boots of the Horsey Set when David Cameron came into office.  She knew that what she was doing wasn’t news.  And what about Juan Williams?  If he wanted to do “news” and real journalism, he would have stayed with NPR (yes, yes, I know they’ve gone downhill in the past decade but don’t get distracted).  But no, Juan Williams jumped ship for Fox and permanently soiled his reputation as a journalist. And why was that?  Well, you get to reach and influence a lot more people through Fox than through NPR and the money is probably much better for doing it.  Some people are into power.  That’s what motivates them more than anything else.  I suspect that the journalists who flock to Fox and News Corp are those kinds of people just as the finance industry attracts compulsive gamblers and people who value money above everything else.

If pandering to the public’s baser instincts were not so rewarding and didn’t result in greater influence, these people wouldn’t be doing what they do.  The reason they are so successful at it is that there are very few rules in place to make them accountable for their actions.  There is no “fairness doctrine”, no penalties for lying and misleading the public and our laws to keep one person from owning as many media outlets as they like are laughable.

“Ohhhh”, the politicians cry, “There’s too much money in politics. We need to run campaigns constantly.  If we don’t solicit funding, whatever shall we do?  Bad, BAD corporations!”

Blaming the candy for being sweet is no excuse for indulging.

And if you don’t like the rules the rulemakers are writing, change the rulemakers.  It’s the only thing that has ever worked.  Ask the English.

4.) Now THIS is interesting.  Barack Obama is the number one recipient of News Corp donations of all time.  Hmmm, what are we to make of that?  Anyone got any ideas?  Raise your hands, don’t be shy.

5.) I found this at Freerangekids.com from The Onion.  If you ever wonder why Americans are overly fearful of everything and can’t estimate risk, you can blame news organizations like FOX that cranks irrational fear up to 11.  This clip is hillarious.

Wednesday: Americans pay too little in taxes?

I’ve heard this from Paul Krugman and Fareed Zakaria recently and now some new dude is claiming that Americans pay too little in taxes. From David Leonardt’s article this morning at the New York Times titled, “Why Taxes Will Rise” (NYTimes, limited free access), we get this:

Polls show that most Americans are opposed to raising the federal debt ceiling. Even when the Pew Research Center included the consequences in its question — a national default that would damage the economy — slightly more people were against raising the ceiling than were for it.

How could this be? Above all, I think it reflects a desire to return to the good old days. Not so long ago, nobody was talking about tax increases or Medicare cuts, and the federal budget seemed to be in fine shape. If only we could get back to the past — get spending under control, as the cliché goes — we’d be O.K. The debt ceiling, with its harsh finality, offers the chance.

Unfortunately, this nostalgic view depends on a misunderstanding of the budget. It imagines a budget in which the United States indefinitely has the world’s highest medical costs, its largest military, an aging population and, nonetheless, taxes that are among the world’s lowest. Economists have a name for that combination: a free lunch.

Free lunchism is ultimately the problem with the no-new-taxes pledge that so many politicians have adopted. A refusal to raise taxes, no matter how principled, cannot take us back to the good old days. It would instead lead to a very different American society. For taxes to remain where they are, Washington would need to end Medicare as we know it, end Social Security as we know it, severely shrink the military — or do some combination of the above.

Free lunchism?

Maybe he doesn’t have any friends or colleagues from France, Germany or Britain. My French colleague was astonished at the high taxes she paid here in the US. In her opinion, Americans pay a lot in taxes compared to the French. While salaries were more modest in France and taxes are high, the average worker there doesn’t have to pay sky-high health insurance premiums. In France, the government provides a stipend for new children, maternity benefits are generous and child care is high quality, plentiful and cheap. If you want to attend university after high school, tuition is about the same amount as a student activity fee in the US. You don’t graduate with debt the size of a mortgage on a starter home. Unions protect many jobs in France and while this makes it much more difficult to find a job there, once you have a job, it’s much harder to get rid of you. The government responds to workers and protects them in a way that we Americans can only dream about. But if you do manage to lose your job in France, chances are much greater that you will get a generous early retirement, if you’re old enough, or your unemployment benefits will last 2 years with something like 80% of your salary. Let’s say you make it to retirement age and the French version of Social Security. You can retire in France at age 62. Think about that. In a country that is experiencing high unemployment, retiring people at 62 frees up a lot of positions.

She said that what French workers take for granted, we Americans pay and pay and pay. Everything costs a lot of money here. That’s because instead of using the government’s economy of scale to purchase and regulate health insurance, for example, we are forced to buy it at inflated prices from for-profit insurance companies on the open market. Our mass transit system is a wreck, we pay outrageous bridge and turnpike tolls, our car insurance is ridiculous compared to that in France where suing for every little thing is unheard of and child care in the United States is so expensive that many young families live paycheck to paycheck to pay for it.

What do we get for our money? Well, we get two unnecessary and money sucking wars in Iraq and Afghanistan. Don’t get me wrong, I have relatives in the military and I don’t have any problem paying for military readiness. But did we really need to spend trillions of dollars in central Asia? We have a defense department budget that only a military contractor could love.

If we really want to reform Medicare, and let’s face it, it is a money pit, we need to regulate providers as well as consumers. I don’t have a problem looking at the cost of Medicare and making intelligent decisions about care as long as it doesn’t fall exclusively on the backs of senior citizens. The cost of Medicare, and health insurance in general, is so high because everyone sees health care as a profit making machine. But even pharma can be brought to heel with an in-depth look at what ailes the industry and good planning. It is possible for people to make a profit without that profit being insanely greedy and obscene. The question is, do we have the political will to look greedy people in the eye and tell them “Enough!”? Recent history says no but the era of unfettered greed and deregulation may be coming to an end.

And don’t even get me started with Social Security. It is one of our government’s crown jewels. It’s is run fantastically well with low overhead and provides millions of seniors with income to keep them from starving. The money seniors receive goes back into the economy through their purchases of goods and services. The idea that we would mess with success is just so insane most people I’ve talked to can’t believe that Democrats would even contemplate it. I really resent the idea that something I have paid into my entire working life to serve as my insurance policy in the event that something goes horribly wrong with my worklife is now considered a “free lunch”. What exactly would people like Leonardt have us do when we get old? Some of us don’t even have pensions and the 401K is a lousy way to save for retirement if everything hinges on a volatile stock market.

What I think we see here with Leonardt and Obama and the Steny Hoyer’s of this world is a profound disconnect from current reality. My theory is that they see Americans as separated into winners and losers in the socioeconomic market. If you are well educated, a professional or a member of the “creative class”, you don’t need the “entitlement” of social security. You can fend for yourself. Just be more prudent with your savings. If you’re in the “old coalition” and social security is your only refuge from poverty, then social security becomes more like a welfare program. We want to provide for the poor working class but Obama doesn’t see his base supporters *in* the poor working class. That explains why he keeps putting an emphasis on more education and more STEM jobs. He still sees that as the path to freedom from “entitlements”. But we aren’t creating those kinds of jobs here in the US. We are letting those jobs go to Europe where the highly educated workforce is protected or to Chindia where the highly educated workforce is exploited. Here in the US, the highly educated workforce is left to fend for itself and is no better off than the grocery store cashier, subject to the whims of a volatile free market supply and demand cycle and stupid MBAs.

This recession is different. In New Jersey, there are plenty of hard-working, dedicated professionals with armloads of advanced degrees who are now falling into that poor working class category. If the unemployment situation isn’t dealt with soon, there will be a lot more of us depending on social security in a couple of decades. The Republican and Obama administration policies are going to make the problem worse. And we’re not looking at social security as a free lunch. We’re looking at it as the insurance policy it was designed to be.

There’s a lot to be said about the surly French and their attitudes towards their work-life situation. They take long vacations throughout their lives and they don’t feel the optimal amount of stress on the job to make them compete. (heads up to those workers across the pond: when you get projects from your laid off American colleagues, that means that YOU are now responsible for figuring them out. Expecting the laid-off American to give you all the answers in advance is probably unrealistic.) Working in France is not all a bed of roses. But here in America, we’ve pegged the stress level to 11, produced like crazy and have bloody little to show for it. Our vacations are short, our family lives overwhelming, our social safety net non-existent and our taxes are *still* high because so much of what those taxes should be providing is now privatized and in the hands of greedy rent seekers.

So, please, Paul, Fareed and David, please don’t roll out that old chestnut about how low our taxes are compared to other countries. We’re getting reamed no matter how you slice it. The middle class wants something of value in exchange for the taxes we pay. The Republicans seem determined to deny us that and the Democrats are just fricking clueless. If taxes must rise, raise them on people making more than $250,000/year. *They’re* the ones who are making out like bandits and treating the US Treasury as their own personal revolving credit account.

One final thing struck me as oddly out of touch in Leonardt’s piece. It was about the mortgage interest deduction:

The mortgage interest deduction, for example, saves more than $5,000 a year for the typical household in the top 1 percent of earners. Most middle-income households don’t benefit from the deduction at all, because they instead claim the standard income tax deduction. And the mortgage deduction is the second-largest tax break for individuals, costing about $80 billion a year, more than the budgets for the Education Department and Justice Department combined.

Are you kidding me?? Everyone I know uses the mortgage interest deduction and I don’t know anyone in the top 1% bracket, or the top 5% for that matter. It’s the only thing that makes buying a house possible. If we don’t get a break on our mortgage interest we might as well rent and there goes the housing market. What would be the point of buying an expensive, money sucking house? How old is David Leonardt anyway? Does he know that the vast majority of Americans have discovered the internet and use PCs and can figure out how to use Turbo Tax to itemize and to import their W-2s and mortgage company’s tax statement for the previous year? Does he think we still do all that crap on paper with an adding machine or something so that it’s sooooo much easier to just do the short form? The mortgage interest deduction is practically the only break the middle class gets in taxes these days. Without that and the state tax deduction, we’d be descending on Washington right now. Don’t go there, David. Really.

Tuesday: There’s a shortage of scientists and engineers? Are you crazy??

Obama is pushing for education for high-tech jobs at a new jobs summit:

Cree and other businesses in the innovation hub of Research Triangle Park have a rich academic base to draw from for recruits with the University of North Carolina, Duke and North Carolina State University — the alma mater of Cree’s founders — so nearby, Obama said. As a whole, however, the country is not producing enough talent to fill the high-tech and highly skilled jobs that are available today. “Right now, there are more than four job-seekers for every job opening in America,” Obama said. “But when it comes to science and high-tech fields, the opposite is true. The businesses represented here tell me they’re having a hard time finding high-skilled workers to fill their job openings.”

Is this man *completely* out of touch??  It’s like a George Bush I trip to the supermarket where they have those scanner thingies.  If Research Triangle is having a hard time filling positions, I certainly haven’t heard about it.  Everyone I know, including myself, has either lost their job or is about to lose their job.  There are thousands of well trained, well educated, high-tech professional scientists and engineers out of work right now who could easily relocate.  Their jobs are going to China.  What do companies want more of them for?  They don’t seem willing to retain and pay the ones they already have.

Where has Obama been?

Amgen announces layoffs in Boulder, Colorado

Pfizer lays off 19,000 after merger with Wyeth

Astra-Zeneca plans to layoff 15,000 through 2013

That’s just the tip of the iceberg.  How much more education do you want us to get?  We’re already overeducated.  We’re not allowed to get stale in this business.  And the cuts are not all in sales.  Now, they’re getting to the bone with thousands of high-tech jobs relocating to India and China.  What’s weird about that is that not even China and India with their billions of people have enough high-tech workers to do high-tech research but that isn’t stopping companies from sending our jobs there.  The bottom line is the bottom line.

Want to know where a scientist can make a decent living and do research and where their skills and educations will be valued and rewarded and their jobs protected?  Try countries where the government is willing to intervene or where labor unions are strong.  Like Germany and France.

But don’t roll that old crap about how there aren’t enough of us to those of us in the trenches.  The last thing we need are more unpaid scientists on the job market.

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