Across the Great Divide

Generous Owners Do Exist, but...

A Waukegan-based bearing manufacturer says, "the business has always been about family." The cliche ranks right up there with "people are our most important asset" — true, if at all, until the company is sold to the money men who arrive to start whacking jobs.

But this family sells its business and then dispenses $6.6 million in bonuses to 230 employees — and average of nearly $30,000.

"I know people who work for corporate America are not going to get treated like that. And most of the family-owned businesses are not going to treat you like that," said Dave Tiderman, who received $35,000. "This is something that just really doesn't happen."

It does happen, although often without fanfare, and when it happen, it seldom comes as a total shock, because the owners likely recognized the role of employees in creating the wealth all along. Although the numbers may be outsized, the payout is consistent with values that guided the business. Some of the most fiscally conservative owners may prove to be the most generous, because they set the needs of the business above their own.

Finding values-driven entrepreneurs isn't so unusual. For many, their business was never about financial rewards, but about fulfilling a creative impulse, combined with a competitive drive to win. They wanted to make something, but money was an after thought. 

I've known men who became lost millionaires after selling their businesses because it meant relinquishing their sense of purpose, as well as owners who lost big money and barely blinked because they still had something to prove.

Unfortunately, it's more difficult to run a values-based business when there are shareholders whose goals are typically financially focused. It becomes even harder when the new buyers are paying off the debt from the acquisition. And it's impossible when the only value involved is greed.

 

Change the World, Just not Me.

[In Leading Change: The Argument for Values-Based Leadership Professor James] O'Toole examines a number of cases in which a potentially beneficial institutional change was resisted and finds that the resistance occurs when a group perceives the change will challenge its "power, prestige, position, and satisfaction with who they are, that they believe, and what they cherish." [...] He asserts: "The major factor in our resistance to change is the desire not to have the will of others forced on us."
— How to Change the World, David Bornstein

This insight seems to apply to increasing taxes, regulating business, reforming schools, reducing oil consumption, bringing democracy to Iraq or cleaning up the environment.

Although Bornstein is not writing specifically about progressives, his insights certainly apply to those of us who expect obviously beneficial ideas to prevail on their own merits. Overcoming resistance to change requires a process, not just an argument.

Throughout history, even those who supported a "good change" may have continued to make an exception in their own, virtuous, case — arguing for abolition and owning slaves or decrying global warming from the seat of an SUV.

Thanksgiving, Underwear, and the Government We Deserve.

Heading into the first "official" shopping day of an uncertain season, I found in Charles Fishman's The Wal-Mart Effect a revealing observation about underwear sales. It seems pertinent to my study of consumerism, taxes and government.

A Hanes executive tells Fishman that his company saw big nationwide sales increases from its move into Wal-Mart stores. So big, that population growth and market share gains couldn't account for it all. As analysts dug into the numbers and saw increases across almost every category, one explanation seemed likely.

Consumers were buying more underwear.

The nickels they saved at Wal-Mart weren't "saved" at all. The money went into a drawer as another pair of socks or an extra package of boxers.

Sure, some Wal-Mart customers spent their savings on a can of soup or needed school supplies, but the overall sales numbers didn't lie. They also bought more stuff that they didn't actually need to get through the day.

Small government advocates usually make the argument that government should balance its budget over the kitchen table, like good old American families do. Maybe a few real families have an underwear line item and carefully manage their inventory to historic levels, but in aggregate, Wal-Mart's substantial cross-section of the nation buys more stuff than it needs.

It spends the money because it has the money.

If that were all, so what? The home sock surplus creates jobs for greeters and Thai knitting mills.

Writing about the recent economic shocks, Robert J. Samuelson speaks to the same barely noticed phenomenon.

The “wealth effect” refers to the tendency of people to adjust their spending as their wealth — concentrated heavily in housing and stocks — changes. When wealth rises, spending strengthens; when wealth falls, spending weakens. For the past quarter-century, higher stock prices and home values propelled the economy forward by inducing Americans to spend more of their incomes and to borrow more. In 1982, the personal saving rate was 11 percent of disposable income; by 2006, it was almost zero. The lowered saving rate added about $1 trillion annually to consumer spending — more shoes, laptops, books — out of a total of about $10 trillion. 

In other words, consumer behavior has exhibited an inability to restrain spending or reserve for a rainy day that looks remarkably like "tax and spend."

Happy Thanksgiving!

[Cross-posted from Growth and Justice Blog]

That's the Way the Money Flows.

Thomas Friedman is still ruminating over an article on Citigroup's role in the financial meltdown that I also cited the other day:

So many people were in on it: People who had no business buying a home, with nothing down and nothing to pay for two years; people who had no business pushing such mortgages, but made fortunes doing so; people who had no business bundling those loans into securities and selling them to third parties, as if they were AAA bonds, but made fortunes doing so; people who had no business rating those loans as AAA, but made a fortunes doing so; and people who had no business buying those bonds and putting them on their balance sheets so they could earn a little better yield, but made fortunes doing so.

Notice, except for those unqualified mortgage holders, the other colluders "made fortunes doing so." And now they appear to be the greatest beneficiaries of the bailout so far. The trickle has not traveled very far.

Meanwhile,

All told, the government has assumed at least $7 trillion in direct and indirect financial obligations in the form of Wall Street bailouts, emergency lending and government guarantees on bank deposits, inter-bank loans and home mortgages.

Naomi Klein was talking about the bailout as a multi-trillion-dollar crime scene when she described it 10 days ago.

Klein sees three areas of borderline illegality. The first is that rather than being used to get banks lending again, the bailout money "is instead going to bonuses, is instead going to dividends, going to salaries, going to mergers."

Without close oversight and accountability, that's the way the money flows through most any institution — especially one whose other sources of revenue are under stress. Giving the money to fix the problem to anyone in the lineup Friedman names is like expecting the snowfall in the Rockies to improve water quality in the Sea of Cortez.

The same thing happening at banks slurping up the new funds can happen in nonprofits when they receive a big grant.

The purpose of the money may be to save sea cows, but first, a portion goes to the sea cow program administrator's salary and to the executive director who supervises the administrator, and to the communication person who increases public awareness of sea cow endangerment — plus printing and design for the Save the Sea Cow posters and catering for the Sea Cow Volunteer of the Year Dinner. The office bean counter allocates some time to track the grant expenditures. Office space, phones, light and heat all need a slice of the sea cow bucks, too. Equipment rental for the next expedition to observe the sea cows, dollars to send out more fund raising appeals ...

Meanwhile, the sea cows are still out there getting run over by cigarette boats.

Klein again:

"The money has been given to the people who needed it least, and it’s going to be used to justify austerity measures imposed against those who need it most," Klein concluded. "It’s going to be used to justify cuts to food stamps. It’s going to be used to justify cuts to Social Security, to health care, let alone being used to justify why more ambitious plans for a national health care program, for green energy are not affordable. So people have to be ready for this. You know, the next shock is yet to come."

Obama Team Can Use Some Rivals.

A history professor is not impressed by President-elect Barack Obama's purported plan to appoint a Lincoln-like "team of rivals" to his Cabinet.

There is little doubt that Abraham Lincoln was a great president. But not much of what made him great can be discerned in his appointment of a contentious, envious and often dysfunctional collection of prima donnas to his Cabinet.
— James Oakes, "Assemble team of rivals; that's what you'll get"

Oakes gives examples of how members of Lincoln's cabinet schemed, grumbled and avoided meetings in favor of private access to the President. But he doesn't make the case this was bad for the country or how it compromised Lincoln's effectiveness as a leader.

Contentious or harmonious Cabinet meetings when the President is in the room aren't the point. Arriving at wise decisions for the nation is.

One would hope that rivals would hash out their differences in front of each other and that loyalists would always bring forward harsh truths for the leader's consideration, but that's not the way it often works. Reservations are often shared privately or through back channels. Group think and personal regard can result in soft-pedaling bad news.

It still remains for the chief executive to extract the required information and insight and to weigh appropriately whatever those methods surface.

In today's Star Tribune, you only have to turn the page from this New York Times analysis to find this truncated NYT story about how the CEO at Citigroup relied on the reassurances of a small group of executives about the well-being of its large position in mortgage-related assets. But the men charged with building the business, trading and overseeing risk were all close friends.

Their trust and faith in each other apparently led to ineffective oversight of the ailing financial giant's holdings. The boss didn't ask the right questions, and no one warned him.

Of course, it was also easy to overlook the spiraling risk, when Citigroup made up to $500 million in fees from the collateralized debt obligations business in a single year.

While the sheer size of Citigroup’s C.D.O. position caused concern among some around the trading desk, most say they kept their concerns to themselves.

“I just think senior managers got addicted to the revenues and arrogant about the risks they were running,” said one person who worked in the C.D.O. group. “As long as you could grow revenues, you could keep your bonus growing.”

With the nation facing grave challenges, Obama doesn't need Kumbaya Cabinet meetings. I think he knows what he's doing here.

Red Star or Death Star?

If this keeps up, Anti-Strib will need a name change.

Denny Hecker makes the front page with actual news instead of those annoying wallpaper ads for his car dealerships that until recently crawled across the Strib's home page. The troubles of Hecker's diversified financial empire cannot be good news for the slouching-toward-bankruptcy brain trust that owns the newspaper.

Meanwhile, the Star Tribune's comment threads — those not already suspended — have descended deeper into know-nothingism, and favorable reader "votes" tilt strongly toward ill-informed rants. Most in this cohort of readers claim to have canceled their subscriptions long ago. It's doubtful Katherine Kersten columns and Norm Coleman endorsements are going to inspire them to re-up.

They will insist on the myth of the Red Star even when the only thing red about it is the ink it produces for Avista Capital Partners.

If the Strib's core audience is abandoning the comment threads, can their newspaper subscriptions be far behind?

I hope not.

Fun with Voting.

 

MPR has a nice feature up that allows you to play election judge in the Franken-Coleman Senate recount.
It shows 11 disputed ballots and asks for your ruling. Then you can compare your judgment with others. More than 100,000 had weighed in on some of the ballots.

Catching Gramma Riding Dirty.

I just stumbled across this talent show audition video of a Baptist Church's senior hip hop choir.

It started out oh no!, went to hilarious, degraded to excruciating and finally left me feeling sorry for the participants and the ridicule they'd be subjected to because of an apparently clueless but persuasive choir director.

BBC Radio 1's Scott Mills had a similar reaction. The second version is his remix with commentary.

Watch one for a bit to form your own conclusions, before going to the comments for a footnote.

Planning and its Perils.

When I'd give sessions on strategic planning, I used to tell people the reason you do it is so you've already thought through all the issues when nothing goes as planned.

Jim has another take.

Just a few months ago, gas was $4, and the only person who believed $2 gas would ever again be a reality was noted camera-loving screwball Rep. Michele Bachmann (R - MN), though Bachmann's predictions invoked a mechanism different than what has actually happened. Interestingly, our oil consumption is falling off drastically even as we see multi-year lows in the price of consuming oil. Who would have guessed this outcome earlier this year? Who would have based actual plans on such a guess?

*****
On the family planning front, Margaret Talbot asks why so many evangelical teens become pregnant. [via Open Education]

[T]he reactions to [Bristol Palin's pregnancy] have exposed a cultural rift that mirrors America’s dominant political divide. Social liberals in the country’s “blue states” tend to support sex education and are not particularly troubled by the idea that many teen-agers have sex before marriage, but would regard a teen-age daughter’s pregnancy as devastating news. And the social conservatives in “red states” generally advocate abstinence-only education and denounce sex before marriage, but are relatively unruffled if a teen-ager becomes pregnant, as long as she doesn’t choose to have an abortion.

A sociologist who has studied teen sex "argues that religion is a good indicator of attitudes toward sex, but a poor one of sexual behavior, and that this gap is especially wide among teen-agers who identify themselves as evangelical."

The vast majority of white evangelical adolescents—seventy-four per cent—say that they believe in abstaining from sex before marriage. (Only half of mainline Protestants, and a quarter of Jews, say that they believe in abstinence.) Moreover, among the major religious groups, evangelical virgins are the least likely to anticipate that sex will be pleasurable, and the most likely to believe that having sex will cause their partners to lose respect for them.

I haven't read the study or the entire New Yorker article that quotes it, but I wonder why this should be surprising, since to my mind, extreme religion (take your pick) seems largely organized on behalf of men who couldn't get laid on their own merits.

If You Have to Ask...

The Star Tribune has shut down one of its under-performing publications.

What else is there besides Vita•Mn or maybe Buzz•Mn?

Well, there was MARQ magazine.

What's MARQ, you ask?

A bi-monthly magazine distributed free to “exclusive” high net worth individuals in the Twin Cities metro.

Oh.