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The Strategy of No Strategy: Shareholder Value

This is a continuation 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 and Part2 on Flexibility.  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 post is about Shareholders vs Stakeholders.  In Wall Street culture, nothing is more important that enhancing “shareholder value”.  But why is it that shareholder value is more important than anything else, including the health of our modern economy and the companies that drive that economy?  Let’s talk about what it’s like to be a corporate stakeholder.

I used to work on a beautiful tree lined campus.  It looked like the science section of a university. Right about now, when it’s Take Your Children to Work month, the trees that were planted by the staff in honor of previous Earth Days would be in full bloom.  Pretty soon, the sidewalks would be edged in fragrant purple lavender.  I have pictures of myself and Brooke under a tree on a Take Your Children to Work Day, the tree abundant with clusters of white flowers and in the background, lots of kids working off energy with hula hoops and jump ropes before another tour of the labs after lunch.  My site also had a gym and after a hard session of spin or pilates in the evening, I would walk back to my office to finish a few things before heading home.  While I strolled back, I thought about how lucky I was to have the job I’d always wanted.  My life at work was like being a perpetual student, learning new things about biology and nature and never having to dress up.

As scientists, we make an unspoken deal with the corporation we work for: it provides the labs and resources we need to make discoveries and we sign those discoveries over to the company for a token amount.  They paid me well.  I have no complaints.  I would have never made the big bucks that I might have if I’d worked on Wall Street, but I was able to pay my bills, put some money aside for my retirement and college funds, and occasionally, I had money to splurge on a Royal Caribbean Cruise or to feed my gadget addiction.  Believe it or not, that was enough for me.  I was just delighted to be there.  No, seriously.

When I tell people that we sign our patents over to our companies for a buck, they can’t believe that we don’t feel cheated.  But you know, discovering drugs is an expensive proposition.  I could never do it by myself, and neither can most scientists, as we are finding out.  But it’s not the money that’s important.  For example, I used to work with the guy who invented Effexor, Morris Husbands.  His invention made the company, Wyeth, billions of dollars, though he never saw more than his own salary and a generous bonus/prize.  It was still a teeny fraction of the profits but that was Ok.  What Morris got that the rest of us envied was letters.  He got letters from patients who thanked him for helping them turn their lives around.  Yes, I know that Effexor isn’t the right drug for everyone but some people genuinely couldn’t pull out of depression without it.  And these patients were so relieved that they went out of their way to track down who this guy was and they wrote to him.  Morris was a lucky man but there’s a cautionary tale about the discovery of Effexor that I’ll get to at the end.

So, what does this have to do with shareholder value?  Bear with me on this because I only took two economics/business courses in college and my knowledge of this is a little rusty.  This was the most difficult part of the book for me to get through because it has to do with the history and philosophy of capitalism.

Here’s the part that I get: In modern capitalism, a corporation consists of many stakeholders.  Shareholders are stakeholders.  But so are managers, employees, vendors, government and the community, among others.  Stakeholders are dependent on the success of the corporation so it is in their interest that the corporation succeeds.  Ho describes a sort of golden age of the corporation post World War II where corporations took their responsibilities to the community and employees seriously.  Maybe it was just a temporal thing that had to do with the proximity to the Great Depression and all that that entailed to the society and economy at large.  This is not to say that corporations always had a rosy relationship with their employees.   But there was an understanding that managers and employees worked together in what was naturally an adversarial relationship to find solutions that would work for everyone.

Then, right around the early sixties, the shareholder contingent got the notion that they were being ripped off.  This was also a time of conglomeration, or what we called mergers and acquisitions before they got to be sexy.  In some cases, the conglomerate was created by the accretion of corporations that were not related to each other.  The conglomerate was sometimes big and unwieldy and not terribly profitable.  In other cases, CEOs were just not eeking out every dollar of profit from the corporation to the satisfaction of the shareholders.  Or they were sharing the profits with employees without a lot of shareholder input.  You know, pensions, health care, union contracts.  Shareholders began to feel like an aggrieved party.  They didn’t feel that lifting all boats on a rising tide was their responsibility.  They wanted a bigger share of the profits.  But how to do it without looking like greedy assholes and how would Wall Street arrange it so it would get a substantial cut?

Enter Adam Smith.  Here’s where Karen Ho describes the neoclassical capitalism as laid out by Smith and how it didn’t evolve to take the modern corporation into consideration and how shareholders took advantage of that lapse.  Ho writes:

The dominant theoretical perspective on the goals and values of corporations has arisen out of the discipline of economics, which in turn has been dominated by the neoclassical tradition (Schrader 1993).

To understand the history and persuasiveness of shareholder value, it is crucial to understand the ideological assumptions which render it natural and legitimate. The most obvious problem with neoclassical economic theory is simply that its core premises are significantly different from, and clash with, any understanding of the firm as a social organization. Neoclassical theories are derived from the “classical” worldviews of Adam Smith in the eighteenth century, built upon and reconfigured by the “neoclassicists” of the nineteenth and early twentieth centuries-all before the modern corporation was established as the major organizational form through which business in the United States is conducted. Even contemporary iterations of neoclassical theory bear the marks of their precorporate origins, having never attempted to take into account the corporation as a social institution and refusing to acknowledge how its multiplicity could change the very foundations of economic theory and business norms. David Schrader (1993, 2) has characterized neoclassical theory as “woefully inadequate to the task of providing a sound understanding of the managerial corporation.” Instead, corporations have been continually made to operate according to neoclassical values, however ill the fit.

At the center of Adam Smith’s The Wealth of Nations, the founding text of classical economics, is the notion that individual acts of economic self-interest combine, through the “invisible hand” of market forces, to further the best interests of society at large. Smith, like many classical economists who followed, centered his theories on the single individual, the notion of an entrepreneur who both owned a small, private enterprise and managed it. The dominant neoclassical assumptions in economics and mainstream business today are certainly grounded in these worldviews, though many pivotal additions and reworkings were necessary. Even after the modern corporation came to be the dominant form of economic organization in the early twentieth century and the “visible hands” of multiple constituents and managers became apparent, neoclassical theories maintained the centrality of the individual entrepreneur.

In fact, throughout the twentieth century, in the face of a completely new socioeconomic phenomenon, entire schools of economists, notably from the University of Chicago, “steadfastly maintained that all important work in economic theory could be carried on from the perspective of an individualistic analysis with an assumption of perfectly competitive markets” (Schrader 1993, 67). The resurgence of shareholder value in the 198os, then, can be read as part of a long line of neoclassically inspired worldviews attempting to collapse and treat the corporation as a single profit-maximizing individual in the market. Championed by Wall Street financial institutions and brought to prominence during the leveraged buyout movement, the shareholder value movement became, arguably, the culmination and most effective demonstration of neoclassical values in the history of American business. Specifically, neoclassical capitalist worldviews recognize the presence of two entities: the individual owner and private property, understood as an exclusive unit. The individual and his private property are the only two inputs into the equation;3 other actors or claimants cannot wedge themselves into this limited space.

Moreover, Adam Smith imagined that the individual owner-entrepreneur would necessarily manage his own enterprise, and as such, he would be solely entitled to all the fruits of his property, the profits. It is precisely because the owner controls the enterprise and gets to “own” the profit that he, driven by self-interest, is compelled to use his industrial property and labor “efficiently” and grow for the strict purpose of accumulating more profit. This pivotal sequence-ownership, control, full access to profits, efficiency-constitutes the neoclassical, logical order of the relationship between individuals and private property. The glue stringing this causal chain together is the concept of self-interest as motive and the invisible hand as automatic market mechanism. For the capitalist world to be aligned properly, capitalist owners must have full access to the profits through complete control over their private property (Berle and Means iggi).

So, shareholders consider themselves the primary owners and stakeholders of the corporation and all other stakeholders get relegated to interloper status.  Nevermind that modern corporations do not operate strictly by neoclassical principles.  The rights of ownership trump any other claims on profits.  And the shareholders found further justification for their views from Smith himself:

Adam Smith himself, who believed that the managerial corporation would inevitably fail because its very structure negated his assumptions about the interests and motivations of owners and managers:

“The directors of [joint-stock] companies, however, being the managers rather of other people’s money than of their own, it cannot well be expected, that they should watch over it with the same anxious vigilance with which the partners in a private copartnery frequently watch over their own. Like the stewards of a rich man, they are apt to consider attention to small matters as not for their master’s honour, and very easily give themselves a dispensation from having it. Negligence and profusion, therefore, must always prevail … in the management of the affairs of such a company. It is upon this account that joint stock companies … have seldom been able to maintain the competition against private adventurers. They have, accordingly, very seldom succeeded without an exclusive privilege; and frequently have not succeeded with one. (A. Smith zooo, 800)”

To fit into this theoretical legacy, large, public companies had to be understood as if they were merely the creations and appendages of individual entrepreneurs.

(Karen Ho. Liquidated: An Ethnography of Wall Street Kindle Edition.)

I think we can see the problems with this view and the solutions that shareholders would impose.  For one thing, a corporation with many shareholders whose interest in a company can be reduced to trading those shares for greater value than they bought them is hardly the kind of owner that Adam Smith envisioned when he wrote the quote above.  Smith lived in a pre-industrial culture where owners were more closely associated with their businesses and where the rule of law was still in its infancy.  It made sense in the 18th century for an owner of a company to keep a close eye on his managers.  Those managers were his stewards but without a proprietary stake in the company itself, were not going to go bankrupt if the company failed.  In the 18th century, the owners bore the primary responsibility for the fate of the corporation so they were most likely to also profit by it.  Their hands were more in the pie so they were more justified in calling the shots and taking their share.  In the 20th century,  ownership is distributed among many thousands of individuals.  This should limit their ability to interfere with the way the corporation is run.  But if they feel they’re not getting their cut, they might start exercising control in different ways.

For example, if the manager CEO did not have the proper attitude of responsibility towards the owners and continued distributing the profits to stakeholders instead of shareholders, then the shareholders would instill that sense of obligation by making the CEO an owner.  Mid-century salaries for corporate managers were generous but modest by today’s standards.  Now, with much of the CEOs compensation in stock, the manager now sees the value of the stock as important to his own wealth so he’s motivated to maximize the value of the stock.  Note that I did not say he is motivated to maximize the value of the corporation.  With ownership as the incentive, money becomes the object.  Other shareholders, such as institutional investors, demand more of the profits as well and eventually, more of the corporations resources are used to pay the shareholders at the expense of the other stakeholders.

I don’t think any of this is new to anyone who has been paying attention in the past couple of decades.  But it’s interesting to know what shareholders have been using as a rationale for their rapacious behavior.  Owners are entitled to their private property.  As far as they’re concerned, everything that is produced by the corporation is theirs and does not need to be distributed to anyone else.  If you were employed by the corporation and stupid enough to buy into the idea that it owed you a pension after 30 years of service, that’s your problem.  The shareholders didn’t authorize that pension plan.  The corporate managers did, probably without consulting the shareholders as to whether they were in favor of such a long term commitment.  Not only that but since shareholders are changing all of the time, how is it possible to entail one’s private property to stakeholders who are not actually owners?  You can see how this logic as slowly infiltrated our culture and our politics.  Remember George W. Bush’s “Ownership Society”?  Not just a slogan, it was a philosophy that really didn’t include the vast majority of us.

In big pharma, we have seen an accelerating dismantling of the corporation and shedding of stakeholders.  It first started during the merger and acquisition frenzy of the late 80s and through the 90s.  With every merger and acquisition, the Wall Street firms that set up the deal would profit greatly, as would the CEOs with a lot of outstanding compensation in stock.  With those early mergers, it was the sales force and other executives that were laid off.  They generally didn’t have a problem landing jobs elsewhere.  There were also some therapeutic areas that were shuttered and the staff either reabsorbed elsewhere or laid off.  But since this was a relatively small number of scientists, it wasn’t alarming at first.  But then there were a couple of high profile deals in the 90s where a whole company’s research division was laid off.  A number of pharmaceutical companies  located in the midwest were shuttered after deals and some staff relocated to the east coast.  Sometimes, this was just the personal preference of the CEOs who didn’t want to live in the midwest.  Brand new labs were mothballed and families displaced.  But still, there was no panic.

It wasn’t until the last decade that the strategy of going “weightless” became clear.  Little by little, therapeutic areas were closed and certain scientific fields relocated to China and India.  Chemists, in particular, have been especially hard hit.  And since 2007, the bottom has completely fallen out of the research industry.  Research is very expensive so corporations aren’t doing it anymore.  They are contracting out everything, leaving former stakeholders on our own.  Without the support of the corporate lab, we can’t afford to do research.  Now, we are hobbling along, hoping we get far enough in a project to sell our patents to a corporation that is waiting, like vultures, for a small company to get out from under it’s R&D debts.  (Those of you who are concerned with the provisions of the JOBS bill that have to do with transparency with investors should take note.  I think there is an important connection here where Wall Street acts as a middle man.) Those companies will end up selling the patents for more than a buck but not anywhere near as much to keep their operations stable.  And in the meantime, the corporate owners, incentivized by ability to shed any obligations to share their wealth with stakeholders, continue to dismantle their infrastructure.  Before long, a corporation will consist of a pool of investors who own patents from which they will derive their wealth and have very light operational costs that are associated with the “smartest” scientists and engineers who will direct the outsourcing and CRO contracts.  R&D will become a commodity and the people who engage in it completely exposed to the free market.

There’s a big problem with this scenario.  Well, there are several, actually.  It turns out that the barrier to conducting research in this environment is too much for many scientists.  It’s not that they’re not business people.  There’s nothing we can’t learn if we put our minds to it.  It’s that startup costs are so astronomical and the amount of work to be done on a project indefinite and not easily quantified, that the probability of losing all your money greatly outweighs the likelihood of striking it rich.  So, scientists are getting out – of science.  In this environment, it’s strictly for the young and unencumbered.  Science will do better in Europe than here in America because European governments typically protect their scientific industries better and labor unions are stronger there.  The stakeholders are more thoroughly grounded.  And corporations will look to Asia for their non-proprietary science.  PhD chemists in China and India are cheap and plentiful.  They’ll do the knock offs and the synthetic work.

Effexor: The one that almost got away

But the other thing that is problematic with this scenario is that serendipity is much less likely to occur.  The corporation is only going to get exactly what it contracted for and nothing more.  Which brings me back to Morris and Effexor.  Morris was the junior PhD on the project and legend has it that the senior chemist called the shots.  Morris was synthesizing a bunch of compounds for testing and wanted to make one that the senior chemist discouraged him from making.  The senior chemist thought they had synthesized enough at that point.  But Morris had the lab and the resources and the time so he synthesized it anyway and that was the one that made Wyeth billions of dollars of shareholder value.

Under the new system, Morris would be working for a CRO and he wouldn’t be paid to make any extra compounds.  He wouldn’t be getting letters and people wouldn’t be getting better and no one would be getting rich.

Oh well.


66 Responses

  1. My sister and I redid my office this weekend. It’s all freshly painted and I gave away a couple big boxes of books. But I’m still stuck with this ungodly uncomfortable office chair (it’s really just an armchair from an old dining room set). If someone has a recommendation for a cheap, comfortable armchair that doesn’t look like the captain’s command throne from a Vogon intergalactic transport vessel, let me know.
    I tried the Ikea chairs. What wasn’t black and ugly was hard as a rock. I love the white version of this one from West Elm (very comfy) but it’s about $250.00 over my budget.

  2. Shareholders and Stake holders includes many state pension fund managers. The long term ballistics of state pension funds don’t add up. People work from 20 to 30 years, then get a pension that in at least some instances is equivalent to 100% to 120% of the highest yearly income they achieved during their 20 to 30 years of work, and then they get that pension for the next 20 to 30 years if I am not mistaken.

    One pension “trick” that was used to maximize the overall pension due was to rotate yearly overtime to ensure that every year perhaps 10% of the workforce got most of the overtime, thus artificially inflating one year’s worth of income upon which their entire annual pension could be based upon!

    Now, if a person works lets say 25 years, retires, and is retired for 25 years, then basically, they work one year for one additional year of salary. So when they retire, and they are replaced, there are now TWO state employee mouths to feed where before there was one.

    We’re talking a potential FIFTY YEAR CYCLE in which the second 25 years tears apart the very fabric of the entire state budget planning. This ticking pension fund time bomb has been kicked down the road several times?

    Pension fund managers learned to BE AGGRESSIVE in the stock market. Use the money paid in by state employees, MAXIMIZE that profit, and everybody is happy, short term.

    The bitter irony is, to MAXIMIZE the pension fund investment, those funds are sent OFFSHORE where higher profit margins are attained via child labor and lower pay rates for the adults, and usually a poorer quality of product as well.

    The pension fund doomsday was once again kicked down the road by the double digit returns. But then a really bad thing happens, offshore businesses that were funded by state pension funds eventually start delivering product to the U.S. at severely reduced prices.

    Local commerce has to switch to importing rather than local creation to survive. Suddenly the ports begin top priority, along with building mass freeway systems to get those imports rapidly into all parts of the U.S.

    Additionally, the pension fund investments resulted in successful offshore businesses that now had money to come to america and buy american homes, falsely propping up home values even as people who have lived in america all of their lives could no longer afford a home, but because they already owned a home, were quite pleased at the huge increase in the value of their home.

    Sadly, many people based their affordable debt back in 2008 on how much home equity the owned. After american homeowners lost between 7 to 10 trillion dollars in home equity since 2006, the ratio of high interest rate credit card debt became a hungry giant eating away at existing equity at a suddenly too fast rate.

    If a homeowner with a paid off 500,000 dollar home borrows 100,000 dollars for college tuition and necessary home maintenance, and then suddenly their home is only worth 300,000, that 100,000 dollars just became a much bigger debt based on their total worth.

    To unkick the can down the road, the following should happen, credit card debt and student loan debt should be incentivized by offering literally zero percent interest to anyone who is reducing their monthly overall student and credit card debts.

    Each state should have a state bank that reinvests locally, and state pension fund managers should be investing locally, not internationally.

    I think only one state in the country has a state bank, and they have had the most stable economic climate over the past 5 years of all fifty states, and that is North Dakota.

    Yes, North Dakota has oil, but it was not oil alone that created their economic stability, it was reinvesting state funds locally that was the additional difference maker. http://www.yesmagazine.org/new-economy/the-north-dakota-miracle-not-all-about-oil

    And finally, There needs to be an honest discussion about what percentage of the state budget should be allocated to both payroll for new employees along with pension fund money for retirees, and there needs to be a new payroll standard that is closer to what social security pays out from a salary percentage point of view.

    State jobs generally pay better than private sector jobs, so if someone on social security is receiving anywhere from 33% to 66% of what they made in their best income producing year, How about state pension funds get closer to that range, they can still be a bit higher, how about 75%? As it stands now, there are people on state pensions who may be making 200% over what they made in a typical, non overtime bloated year.

    • 1.) If someone promised you a pension, ie deferred compensation, it doesn’t matter whether it was a state or private company that deferred that compensation. You are still basing your retirement and future on that promise. Your whole saving and spending strategy is premised on that deferred compensation. Not only that but the economy is counting on a steady flow of income and taxes.
      2.) The only reason state and federal pensions look so generous compared to private retirement funds is because most private companies stopped defined benefit pension plans in favor of cash balance accounts and 401Ks. With 401Ks, the employee assumes all of the risk, which, IMHO, is a pretty shitty deal. I’d much rather have the defined benefit plan.
      3.) If Ho’s book is correct, private companies don’t want to pay you anything for your retirement. You aren’t an owner of any consequence, therefore you are not entitled to anything additional than compensation for your work at the time you perform it. The shareholders do not want to be tethered to a commitment that they did not make. If that means you can’t retire, tough titties. Not their problem. If there is a pension fund, you can bet your sweet ass that the owners will try to find a way to take it.
      This is the society we were tricked into over the past 40 years. What’s theirs is theirs and what’s yours is theirs. And if it’s Ok with you that we just keep making people poorer by shorting state workers of their deferred compensation, then don’t expect the country to ever recover from this crappy economy. At some point, you have to stop blaming the workers who managed to hold on to what everyone else used to have. They’re our examples. We should hold them up and say, “We have a right to retire with dignity and owners need to be held to their promises to give us our deferred compensation even if they didn’t make those promises.” Otherwise, the only people who have any rights are owners and shareholders and working people will be the only people who the law will hold responsible for fulfulling our obligations.
      Is that what you want? I think I would prefer people look beyond their own personal grievances to the bigger picture. I pay a shitload of taxes to local government. If you don’t live in NJ, you’ve got it easy. But I’d rather those public servants get paid and compensated than not because otherwise, they aren’t able to keep their share of the economy going. We need them to be employed, spending and paying taxes or retired, spending and paying taxes.
      BTW, I notice that newsmakers take the most egregious examples of pension overreach and act like everyone who gets a government pension is taking taxpayers to the cleaners. I think that is a gross exaggeration that makes ordinary people feel like they’re being abused. But it’s typical. It’s like the legendary welfare queens that were driving around in cadillacs. It’s funny how we don’t get purple with outrage at the way our companies have been raided by rich assholes who fly around in private jets and act like only little people have to pay taxes.

      • I think it may be corrosive thinking to say somebody promised something a long time ago and that promise must be honored or the system sucks.

        Nobody promised an internet, and that one thing alone has both enabled almost anyone to learn about anything at any time, and the internet has also forced down the prices of everything because of transparency. So less monthly residual income can still be stretched into more.

        Example. 30 years, someone bought a car with a 40% mark up because they weren’t going to drive all over the state to look at prices.
        With the internet, the competition to sell a new car is so fierce I sincerely doubt the profit margins are anywhere near what they used to be.

        State pension funds are really just about simple math. What percentage of the yearly state budget should go to pensions, yet Nobody frames the question that way.

        Ironically, aligning a certain percentage of a state’s yearly funds to the pension system could be called socialism, but suddenly, the unions and the democrats won’t accept the socialistic concept that there MUST be a certain threshold percentage of the state budget that CANNOT be exceeded by pension fund obligations.

        If state jobs already pay more than regular jobs, and if some state employees gamed the system by having ONE year where they worked a TON of overtime out of their 20 to 25 years of working, and that ONE bloated year was then used to calculate their pension for the next 20 years, isn’t that a form of theft?

        It’s at the very least, dishonest and gaming the system, and it’s possible that every year 5% to 10% of the state employees within a union got that huge overtime bump, and then every year others did the same thing until almost the entire workforce had that one magical year where they made a TON in overtime before they retired.

        If state pensions are already at the top of the heap, then why should people making LESS money in the private sector continue to oversubsidize an overpromised pension system via higher state income, property, and sales taxes?

        In the state of California, FOUR MILLION middle aged families LEFT California for other states over the past two decades, I would suggest not being able to save money was a key reason.

        If everybody stopped saying mine, mine, mine, aka (the millionaires, the unions, the student loan debt owners, the credit card companies and the banking foreclosure mills, and simply stated what they are willing to give back, the economic sync hole we are currently in would cease to be.

      • Where the heck did that 100%- 120% statistic come from, it sure isn’t reality! Here’s the reality- unless you are in the legislature, federal employees max out at 25 years employment at around 50% of their income (got that from the horses mouth too- friend working at middle management level at a federal agency). I’m a local government employee, and our pay is actually significantly lower than the private sector, or federal government sector for the same jobs- it takes 15 years to retire at 50% pension, 20 years to get health insurance, and 28 years to retire with a full pension of 80% of your paycheck. (and remember that I already told you we get paid less that in the private sector or the federal government for the same/similar type jobs) Most government employees do not make big salaries, especially those middle management or lower.

        The real crime is what we government employee get is actually the bare minimum everyone should get. It’s the 1% that has taken that away from everyone they easily could and are now targeting government employees. One should look at what the greed of those at the top and go after them- which is what FDR did. Those making 1 million and above should be taxed the FDR-Eisenhower rate of, at minimum 80%- I’m all for the WWII rate of 94% for millionaires… Go after their grotesque pensions and benefits too, that includes members of the legislature…

        • I would LOVE to see numbers. The numbers get gamed in a variety of ways. In California, everything I cited is accurate, however, it may be different in other states.

          There is a big debate as to whether or not teachers get paid more or less than private sector jobs. The numbers get played with in various ways.

          One side will state, “Teachers get almost three months of vacation during the summer”. Teachers will respond “that they do a lot of extra curricular work outside of the classroom that is conveniently left out of these calculations”.

          Vacation pay is another sticking point. There are a lot of paid vacation days in some states for state employees. I have had difficulty finding numbers online, even posted anonymously.

          Nor can I find figures about what percentage of state budgets goes towards state employee pensions and what percentage goes towards current state employment. Are those percentages increasing year after year?

          These are real questions that need to be asked and answered.

  3. Here’s a desk chair from Pottery Barn that is a bit above my range but it’s on sale. I don’t know though, it’s wood and I kinda prefer the lightness and sleekness of chrome or steel. Any opinions on this?

  4. This one is from CB2. It’s got a lot going for it. It’s the right price, it’s shiny and it’s acid green, which appeals to my rebellious streak. But one of the reviews said it’s not quite as comfy as anticipated.

    Hmmm, the West Elm is starting to win. Now, just need to figure out how to shoplift it out of the store…

  5. This one from Crate and Barrel reminds me of the West Elm chair but is significantly less expensive.

    Not crazy about the arms though.

    • Maybe it’s being a child of divorce of a mom who spent her early childhood growing up in the Great Depression- but I never bother with what I consider overpriced stores like Pottery Barn, C&B, etc… I go to discount retail stores just like my mom did (even when she was married to my dad, who made a upper middle class income) to buy not just clothes but furniture too. I have a computer chair I bought at a discount retail store a few years ago that is still holding up just fine and looks a lot more comfortable to me than most of the chairs you’ve posted. You might look at your local K-mart, Meijers, or Big Lots for a chair.

      • I might but if all I want is cheap, I could grab the office chair in the basement that I bought at Ikea. I can’t sit in it for more than a few minutes. I also don’t want something so stuffed that I feel too cozy. Those big overstuffed leather montrosities are too bulky and constricting. I think I know what would make me comfortable and if it could be had at Walmart, I would have bought it by now.
        The west elm chair that I lust after is not nearly as expensive as the steel case and Herman miller chairs we had at work. I sampled it last time there was a reason to visit west elm and it’s both comfortable and stylish. If I still had a job, I’d buy it with no reservations.

        • I got my Aeron chair deeply discounted at one of the “dead office furniture stores” that sold dot.com stuff after the penultimate bust. So many offices shut down, and the ones with Aeron chairs for all were particularly prone to collapse. Maybe you can find your office chair at a furniture liquidator.

  6. Unemployment rate for new chemistry graduates is almost 11%. ACS wants turn all of them into “entrepreneurs”:


    When the scientists get out of science, where do they go?

    • Margaritaville. I thought we went over this once before. 😉
      Teaching, woodworking, back to school for an MBA or biology. I’ve been thinking about going back for a biology degree, though it won’t help if there aren’t any jobs. I just like biology.
      My former supervisor is thinking about the Peace Corps. At least they pay for your health care. Once Brooke is in college, I’ll be free to take up that kind of stuff.

      Hey, this 2 buck Chuck Chard is as good as wines at twice the price.

      • Starting a craft distillery and making high quality moonshine is a worthy endeavor. Hard-core, and you can get to put that fractional distillation/boiling pt/vapor pressure knowledge to good use.

        A few could work in archeology or art conservation, I suppose.

        The Peace Corps…I guess a few could move to Nepal and work for the Dalai Lama. It seems he wants to modernize some aspects of Tibetan medicine–use HPLCs to improve the purity of the medicinal compounds, etc.

        Hey, this 2 buck Chuck Chard is as good as wines at twice the price.

        So it’s as “four buck Chuck”, then?

        • I would *Love* to work on a dig. Turkey is my dream destination. That would be so cool. Of course, I would have to take a bath in sunblock but so worth it.

          • The U.S. Antarctic Service Program is something a few ex-pharma scientists might have an interest in as well…

        • The Tibetan gov-in-exile is in Dharamsala, India, not Nepal. My niece was working on a project for it last summer, and I visited. I was about about eight feet from HH the DL, first row, bowing, as he walked the short distance from his compound to the temple for the transfer of power ceremony. An Indian policeman with a big club diivided the crowd, shouting for us to bow down. I was amazes to find myself so close and with an unobstructed view.

    • BTW, I attended one of the ACS entrepreneurship seminars about a year ago. The prospects are not good. First, they tell you to get funding from “family, friends and fools”, then they tell you that once venture capitalists get involved, you’ll be lucky to keep 1% of any future profits you make. And you’re always going to be one quarter away from laying off your entire staff.
      And 80% of the companies die.
      But other than that, it’s great! Plus, that’s all there is soooooo, you know, what are your options?
      I think the ACS has really let us down. They’re into protecting their journal business and that’s about it. Have they been lobbying for us? Not that I can see.
      BTW, that 11% unemployment estimate is conservative. Everyone I know has been laid off.

      • I suspected those seminars were something like that. Not realistic. Bottom line, becoming a businessman is not a realistic option for most scientists (most people, really). The movie “Extraordinary Measures” brings up a lot of the barriers that scientists come up against when they make the switch from science to business. Beyond that, being a good businessman requires that you be a good actor/actress. You have to take on a lot of different roles, and you have to play those roles *as if* you were acting that part in a play. Encouraging scientists to take some theatrical courses that would help them become better actors might not be a bad idea.

        • No matter how well you can act, the research itself is always going to take more money than you have access to.
          That’s just the truth.
          If corporations can’t discover and market a drug after throwing a billion at research, what makes us think that a small company can do it? I’m sure that there are companies out there that will succeed, that 20%. But the examples the ACS used as success stories weren’t drugs. They were tangentially related to the pharma business. Real pharma research requires a lot of money. Even if you said, ok, we’re going to economize and only spend 10% of what a big company spends, that means millions. And it also means you will have to limit the number of experiments you do and how many resources you can use. It’s just bloody expensive. On top of it all, the scientist-entrepreneur has to divide his/her time between the lab and the conference table. When is this person supposed to sleep and when the funds from “family, friends and fools” are exhausted, what are they supposed to use for money to pay salaries?
          I talked to a vendor about a month ago who says that the modelers she has spoken to are getting out of science altogether. They’re just leaving. There’s only so much you should be expected to sacrifice and for a PhD who waited until they were 30+ to make a decent salary, it’s just too much to expect them to go back and live on subsistence wages doing really hard work. Might as well do something that doesn’t require so much responsibility in a low cost of living state.

          • If corporations can’t discover and market a drug after throwing a billion at research, what makes us think that a small company can do it?…But the examples the ACS used as success stories weren’t drugs. They were tangentially related to the pharma business.

            Like “tool-making” or “diagnostic” companies, for example? The companies that sell the pick and shovel to the gold miners?

          • Being a successful entrepreneur is very, very tough. It really is not for everybody. Everything you say about the money is absolutely true. And above and beyond that, there’s the whole “being able to act” part. And the “knowing when and where to hype the project, and when and where not to” part. And the “knowing when and how to exit and liquidate your position without being sentimental” part. Etc. Etc. Etc. Getting the money means being able to do all of this, and even if you do, if the timing is not right, you still don’t get the money (or not enough).

            The ACS should be more forthcoming about these facts.

          • Being an unsuccessful entrepreneur, OTOH, is very easy, and very, very common. The ACS should also be more forthcoming about this.

          • Well, the ACS is not exactly talking to people who are as dumb as a box of rocks, although they did go into science. So, you know, most of us had this all figured out anyway. If you want to go into business doing biotech, you can’t do it in Jersey where it’s expensive to live here and your family actually needs to be fed and housed.

          • I hear the Socialist Republic of Vietnam is a good place to do a biotech startup, and the cost-of-living is most reasonable, even in Saig…er, I mean, Ho Chi Minh City.

  7. Do you ever get the feeling that you’ve written a long, involved essay that no one ever reads or will admit to reading or will not link to? Not that it will stop me from being a hypergraphic pain in the ass but, you know, I’ve been directed to read stuff that I thought was a lot less interesting. You’d think there was a house on fire or something and then you get there and it’s like, “That’s it? Kos has to take down a spliced Rush video? I don’t get it.” But when you try to link all of the pieces of a complicated puzzle together using your own observations because it really is that important, even if it happened to a hated industry being crushed by another hated industry, it’s crickets.
    It could have been something cute and fuzzy. Lemme see, how is the stuffed animal industry doing these days? But no, it’s pharma and no matter how many times I say, “It’s not like what you think, really” people just want to hate us.
    or maybe it’s the PUMA thing, even though we pretty much nailed the Obama thing.
    Oh, well…

    • The topic really IS that important, but you need to change the format. It’s too dry for most people. Think about putting this in a manga or anime format. For example:

      • Too dry??? You’ve got to be kidding. I had to read Ho’s book. I’m giving the reader’s digest version.

        • Well, there’s dry, and then there’s DRY. Ho’s book may be an example of the latter.

          I still say you need to change the format. It needs a much stronger visual component. Packaged as art. Like manga or anime.

          • Not really my style. Others can give it a go if they want. Of course, they will need to read the book first which may be a rate limiting step.

          • Not really my style.

            Understood. What can I say, though? “Edu-tainment” is now the way things are. It has full-spectrum dominance over all of existence.

            Think about your 8:24 pm comment (starting with “No matter how well you can act…”) reformatted as “Quantitative Easing Explained” with the talking teddy bears. It could really drive the point home about how ridiculous the ACS seminars are, and do in a very, very funny way…

            You’d get a lot more links to it.

            Guaranteed. 🙂

          • Teddy Bear A: The American Chemical Society recommended that I attend one of their Entrepreneurial Seminars.

            Teddy Bear B: What is The Entrepreneurial Seminar?

            Teddy Bear A: The Entrepreneurial Seminar is…”

            [writing the rest of the anime is left as an exercise for the reader] 🙂

          • If I’m going to do a silly talking teddy animation, I might as well go the full monty and write satire. I can do satire. But that’s going to be a Kurt Vonnegut length novel and by the time I’m finished, the markets will have imploded and we’ll all be battling back hordes of neighbors turned zombies who want our brains or survivalist stashes in the basement.

          • …I might as well go the full monty and write satire. I can do satire. But that’s going to be a Kurt Vonnegut length nove…

            Now we’re getting somewhere!

    • There’s any number of non-bloggers reading this article. If you mean “bloggers” reading it and linking to it, that is something I am totally unqualified to address, of course.

      I wonder to what extent Adam Smith his own self even believed all this “hyper-individualistic owner-proprietor” material that is attributed to him. He supposedly wrote aNOTHer book . . . a sort of companion to On The Wealth Of Nations . . . called On Moral Sentiment, which I have never read, of course. It is supposed to contain all kinds of caveats and objections to and about the ethics of predatory bussiness graspers. One wonders to what extent the so-called “neoclassical” economists are Snith-jackers, if you will.

      • Oh, no question that the “neoclassicists” are Smith-jackers. They just want the money and they found an excuse to grab it. I think Smith might have been right about corporate structures in his own time. The whole idea of a corporation just wasn’t as well developed, didn’t benefit from changes to the law or technology or innovative concepts of how a corporation operated. I think he was just limited by his own experience. He was on the cutting edge.

  8. BTW, I really need help with the office chair thing. Anyone have a preference?

    • Hit your local craigslist for a Steelcase Leap chair. You should be able to pick up a clean cloth upholstered one in great shape for a couple hundred bucks. Your back will be saying thank you for years to come.

      Oh yeah, and the R&D flu is hitting/will hit all of U.S. science/engineering/technology. I don’t have the heart to break it to my friends who are all so proud of their bright, ambitious, geeky kids, having harshed their Obama mellow 4 years ago.

      • The country is being run by sociopaths who don’t care what happens to this generation of smart, geeky kids, no matter what their major. If you vote for either major party candidate, the decline will continue.
        Reality sucks.

      • Wow — they’re nice!

      • Yeah, well, the ones available from Craigslist in my area are hideous and would make Baby Jesus cry if I put it in my office.

        • I didn’t look in craigslist — I was looking at the Good stuff on their website. There are some on Ebay but no pairs … and I need two.

      • If your friends’ kids must go into science, encourage them to go into clinical medicine (as in, becoming a doctor, or a nurse, or optometrist), or combining a science degree with an MBA or law degree. If the family is not independently wealthy, and already connected into the science research establishment, steer them away from R&D.

        • Wow, doesn’t that sound ominous? We have gone from Space Race to out and out destruction of research in one generation.
          But I think it will all be over soon. Unless there is going to be a new way to do research that doesn’t involve interested parties talking to each other without a secrecy agreement, I just don’t know how it’s going to get done. At some point, the devastation is going to be too obvious to ignore. Then the country will have to make a decision: will they cede research and technology to other nations or will they make a commitment to reviving research in this country? And THAT depends on whether or not Wall Street is held responsible for the devastation. If it’s not, research will never come back. It will just go on in Germany or France or a corridor in Cambridge where scientists flit from one insecure job to another. So, it won’t happen here.

          • There will still be some applied research happening in the U.S., primarily in the military and aeronautical sectors, and there will always be a certain amount of basic research going on in the universities in all fields, but the bulk of research activity is, or soon will be, gone for good. Contraction is the future of R&D in the U.S. Science (as in being a scientist) is just not going to be a viable career option for anyone whose family is not in the top 10% income group. This doesn’t mean that others should not get a bachelor’s degree in one of the sciences, but they should not use it as a springboard to a Ph.D. (a research degree). They should use it as a springboard into one of the traditional professions (medicine, law, engineering, the military, the clergy), or to something else (artist, musician, forest ranger…).

          • So, we’re back to the days where Michael Faraday couldn’t get no respect for much of his career, right? If only the well connected and wealthy can make a career of science, we’ve gone back further than the 50’s. Now, we’ve gone all the way back to the 18th century.

          • I think that’s where things will end up, RD. Being a scientist will be something that the top 10% will have as a career option. Everyone else will have career options that *use* well-established science within the work routine (artillery officers using Newtonian physics to determine ballistics trajectories, doctors using known biology to treat disease, etc.). While this will not necessarily be the case in every other industrialized nation, it will be the case in the U.S. Honestly, I think it’s baked-in-the-cake, at this point.

  9. Hi RD, I’m having one of those short-attention-span days (boring interruptions all day long) and am still reading it — But, it looks good. And I just realized I haven’t posted anything to Facebook (which gets echoed to Twitter) all day. (sorry!)

    • Oh, and the chair thing is interesting — we’re looking for comfy office chairs too!!

      • Do you have a recommendation? I’m looking for something that will not make my lower back scream out in pain.

      • Paleo dinner tonight: baked pork chops with a seasoned rub, baked sweet potato drizzled lightly with pumpkin seed oil and smoked paprika, romaine salad with garlicky vinaigrette.
        2 buck chuck chard. Almost as good as a fine boxed merlot.

        • I’ve only had one glass and I’m already fairly incoherent. What’s up with that?

          • I thought about having a nice (Trader Joe’s) Port with my dinner but, decided I’d like to stay awake a little longer. So I’ll have a glass around 10-ish. Sad, really.

  10. Captain’s throne from Vogon intergalactic transport vessel found on Craigslist:

    • Are you able to go try out the chair in person? If not, is it so cheap that you can afford to buy it and try it? If it turns out to be comfortable and lower-back-supporting, this chair could help put you in touch with your inner Vogon.

  11. Vogon First Mate’s chair:

    • I’m no interior decorator but an afternoon on Craigslist always makes me feel better about my own taste. I’m not talking about office chairs. Obviously, if you are a guy and you want to be comfortable, it wouldn’t be a shock to get a ginormous, honking, black leather(ish) office chair. I just want something a little more modern and streamlined.

      No, I’m talking about the truly hideous living room ensembles and coffee tables. I think to myself, do people really buy that new? {{shiver}}

  12. It appears that tonight the neighborhood cats have decided to have an orgy outside my office window.

    • Is it really an orgy ? Or are they fighting, as it is so hard to tell with cats
      based on the noises they make. Many democratic politicians are like this too.

  13. Having followed your site from the beginning, RD, I always knew that you genuinely loved what you were doing, and that you were among the fortunate that had chosen their true vocation in life. The fortunate that love their/our work to the degree that we never loathe the mere thought of Monday mornings.

    I used to advocate that: to not look at future job opportunities when choosing an education but go for what you would love the most to do – maybe for the rest of your working carreer. Unfortunately that’s not how things are anymore. Today you have to be so much more calculating, when choosing your education. Go with you brains rather than your heart. Very unfortunate.

    As for this and other long posts of yours, you’re often ‘way above my paygrade’ but that doesn’t mean that I don’t read and aren’t influenced. And I for one certainly wouldn’t want you to make your posts into ”Pixie Book” versions or cartoons. I would much rather not be able to follow your thoughts but still take you seriously – even when I don’t agree with you. Just saying./ Speaking for me only./ IMO./ Just my 2cents. 🙂

    And re the office chairs have you been checking into ergonomic chairs?

    • Holy hemiola! Is this really that hard to follow? I tried to make it easier and just hit the high points. I’m no expert in this stuff.

      • Nah … but maybe I misunderstood you? Thought you were wondering why no one seemed to want to discuss your post, so I gave my personal explanation for not engaging: That it’s ‘above my paygrade’. As in: ‘Not my field; not really within my interest; have nothing to add; but will still read and learn’.

        Didn’t say I am or feel dumb as a rock. Don’t quite know if that’s what you just implied? But … whatever.

        • Heck, no. All the readers here impress me with their fine minds. I was worried that I might not be writing about this clearly. It’s a comment about my lazy writing. It’s me, not you

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