artdiamondblog.com – Page 488 – Art Diamond's web log

Charlie Munger: Capitalist Ventures Do Good, While Philanthropies Are a Source of “So Much Folly and Stupidity”

We’d all be better off if Warren Buffett listened a little more to his old friend Charlie Munger, and a little less to his new friend, Bill Gates.

(p. 6A) Charlie Munger, the business partner of billionaire philanthropist Warren Buffett, said private investment may advance society more than charity.

“I believe Costco does more for civilization than the Rockefeller Foundation,” Munger, 86, told students in a discussion at the University of Michigan on Tuesday, according to a video posted on the Internet. “I think it’s a better place. You get a bunch of very intelligent people sitting around trying to do good, I immediately get kind of suspicious and squirm in my seat.”
Munger is a director at Costco Wholesale Corp., the largest U.S. warehouse-club chain, and has served as vice chairman of Buffett’s Berkshire Hathaway Inc. for more than three decades. Munger’s stake in Omaha-based Berkshire’s Class A shares is valued at more than $1.6 billion.
. . .
“I’ve seen so much folly and stupidity on the part of our major philanthropic groups, including the World Bank,” Munger said. “I really have more confidence in building up the more capitalistic ventures like Costco.”

For the full story, see:
Bloomberg News. “Costco beats charity, Munger Says.” Omaha World-Herald (Sat., September 16, 2010): 6A-7A.
(Note: ellipsis added.)
(Note: the online version of the article has the title “Munger: Costco beats charity.”)

Munger’s comments can be viewed online at: http://rossmedia.bus.umich.edu/rossmedia/SilverlightPlayer/Default.aspx?peid=4d215177cbe44b1e8e94d0dd68f5058f

The Dirt on Government Detergent Laws

“Elise Jones has noticed “a white dusty film” on her dishes and attributes it to reduced phosphates in dishwasher detergent.” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. 1) Some longtime users were furious.

“My dishes were dirtier than before they were washed,” one wrote last week in the review section of the Web site for the Cascade line of dishwasher detergents. “It was horrible, and I won’t buy it again.”
“This is the worst product ever made for use as a dishwashing detergent!” another consumer wrote.
Like every other major detergent for automatic dishwashers, Procter & Gamble’s Cascade line recently underwent a makeover. Responding to laws that went into effect in 17 states in July, the nation’s detergent makers reformulated their products to reduce what had been the crucial ingredient, phosphates, to just a trace.
. . .
(p. 4) Phosphorus in the form of phosphates suspends particles so they do not stick to dishes and softens water to allow suds to form.
Now that the content in dishwasher detergent has plummeted to 0.5 percent from as high as 8.7 percent, many consumers are just noticing the change in the wash cycle as they run out of the old product.
“Low-phosphate dish detergents are a waste of my money,” said Thena Reynolds, a 55-year-old homemaker from Van Zandt County, Tex., who said she ran her dishwasher twice a day for a family of five. Now she has to do a quick wash of the dishes before she puts them in the dishwasher to make sure they come out clean, she said. “If I’m using more water and detergent, is that saving anything?” Ms. Reynolds said. “There has to be a happy medium somewhere.”
. . .
. . . Jessica Fischburg, a commerce manager in Norwich, Conn., for CleaningProductsWorld.com, which sells janitorial supplies in bulk, said she was not surprised that many of her clients rejected products marketed as environmentally friendly.
“The reality of any green product is that they generally don’t work as well,” she said. “Our customers really don’t like them.”
. . .
. . . in its September issue, Consumer Reports reported that of 24 low- or phosphate-free dishwasher detergents it tested, including those from environmentally friendly product lines that have been on the market for years, none matched the performance of products with phosphates.

For the full story, see:
MIREYA NAVARRO. “Cleaner for the Environment, But the Dishes? Not So Shiny.” The New York Times, First Section (Sun., September 19, 2010): 1 & 4.
(Note: ellipses added.)
(Note: the online version of the article was dated September 18, 2010, and had the title “Cleaner for the Environment, Not for the Dishes.”)

Long and Unknown Incubation Time Sometimes Needed for Innovation

(p. 118) The incubation stage is the most mysterious of the three stages of divergent thinking. Sometimes it appears as if the problem-solving process has stopped altogether.

Incubation is the absolute opposite of the normal business processes of the operating organization. It is often totally unpredictable. But since it is also the heart of the creative process, it creates a dilemma for the business executive who wants to support innovation but has little patience for unfocused activity. In the incubation period, observations stew on the edge of consciousness until something clarifies. As Newton observed, “I keep the subject constantly before me, and wait until the first dawnings open slowly, little by little, into the full and clear light.”

There is no way to plan “enough” incubation time. What, then, can one do to improve the productivity of this period of incubation? One useful tool is what psychologists call “suspending disbelief–suspending judgment on data or observations that seem to make no sense. It allows time for the rearrangement of data, allowing one time to find new images that explain or illustrate how things might work. Suspending disbelief (p.119) is essential to avoiding premature closure on an issue, or entrenchment in existing ideas and approaches. Suspending disbelief helps to improve one’s chances of finding a fresh view of the universe. It is an unnatural act for an operating organization, but an essential trait for an innovative organization.
A second useful tool is to deconstruct the problem so that you can recombine elements of it and gain fresh insight. Sir James Black, Nobel Prize winner for the discovery of histamine antagonists, suggests that one “turn the question around.” Dr. Black prefers an “oblique attack” to a problem rather than a direct one.
One way to change context, Csikszentmihalyi observes, is to position yourself at the intersection of different cultures or disciplines: “where beliefs, lifestyles, and knowledge mingle and allow individuals to see new combinations of ideas with greater ease. In cultures that are uniform and rigid it takes a greater investment of attention to achieve new ways of thinking. In other words, creativity is more likely in places where new ideas require less effort to be perceived.”

Source:
Foster, Richard N., and Sarah Kaplan. Creative Destruction: Why Companies That Are Built to Last Underperform the Market—and How to Successfully Transform Them. New York: Currency Books, 2001.

What Cuba Must Do to Welcome Entrepreneurs

“Serafin Blanco is the owner of Ñooo! ¡Que Barato!, a huge discount store in Hialeah, Fla., where recent arrivals stock up on $1.99 flip-flops and other items for relatives to resell in Cuba.” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. A6) “Things move very slowly in Cuba be-(p. A9)cause they are very, very concerned about breaking the balance of power with economic reforms,” said Jorge Sanguinetty, president of the Association for the Study of the Cuban Economy, a research group. “This is the reality. They don’t want to emulate Gorbachev when he started making reforms in Russia and the whole thing came down.”

Mr. Sanguinetty, who served as a senior economic official with the Cuban government until he resigned in June 1966, said that Cuba might be just beginning the long, painstaking process of rebuilding the most basic economic relationships. He noted that Cuba even eliminated accounting schools in the first decade after the 1959 revolution because officials thought money would be unnecessary, and that many Cubans had no experience with credit cards, banks or checks. Now, he said, the government must move forward — with import-export licenses, with clearer communication about rules — if it hopes to make entrepreneurs a vital element of the economy.

For the full story, see:

DAMIEN CAVE. “Near to Cuba, Wary Kin Wait for Proof of a New Path.” The New York Times (Weds., September 22, 2010): A6 & A9.
(Note: the online version of the article is dated September 21, 2010 and has the slightly different title “Near Cuba, Wary Kin Wait for Proof of a New Path.”)

“A Novel Way to Extract CO2 from the Atmosphere”

(p. 96) UNDERSTANDING how the oceans absorb carbon dioxide is crucial to understanding the role of that gas in the climate. It is rather worrying, then, that something profound may be missing from that understanding. But if Jiao Nianzhi of Xiamen University in China is right, it is. For he suggests there is a lot of carbon floating in the oceans that has not previously been noticed. It is in the form of what is known as refractory dissolved organic matter and it has been put there by a hitherto little-regarded group of creatures called aerobic anoxygenic photoheterotrophic bacteria (AAPB). If Dr Jiao is right, a whole new “sink” for carbon dioxide from the atmosphere has been discovered.

. . .
. . . , Dr Jiao and his (p. 97) colleagues propose that AAPB, and possibly other, similar microbes, have a predominant role in pumping carbon into a pool of compounds that cannot be turned back into carbon dioxide by living creatures, thereby building up a large reservoir that keeps carbon out of the atmosphere. If that idea is confirmed, it will need to be incorporated into the computer models used to understand the Earth’s carbon cycle and its effect on the climate. But it also raises a more radical thought. The newly discovered microbial carbon pump could provide a novel way to extract CO2 from the atmosphere, should that ever be deemed necessary to combat climate change.

For the full story, see:
“Bacteria and climate change; Invisible carbon pumps; A group of oceanic micro-organisms just might prove a surprising ally in the fight against climate change.” The Economist (September 11, 2010): 96-97.
(Note: ellipses added.)
(Note: the online version of the article is dated September 9, 2010.)

Athiests Score Highest on Test of Religious Knowledge

Source of graph: online version of the NYT article quoted and cited below.

(p. A17) Americans are by all measures a deeply religious people, but they are also deeply ignorant about religion.

Researchers from the independent Pew Forum on Religion and Public Life phoned more than 3,400 Americans and asked them 32 questions about the Bible, Christianity and other world religions, famous religious figures and the constitutional principles governing religion in public life.
On average, people who took the survey answered half the questions incorrectly, and many flubbed even questions about their own faith.
Those who scored the highest were atheists and agnostics, as well as two religious minorities: Jews and Mormons. The results were the same even after the researchers controlled for factors like age and racial differences.
“Even after all these other factors, including education, are taken into account, atheists and agnostics, Jews and Mormons still outperform all the other religious groups in our survey,” said Greg Smith, a senior researcher at Pew.
That finding might surprise some, but not Dave Silverman, president of American Atheists, an advocacy group for nonbelievers that was founded by Madalyn Murray O’Hair.
“I have heard many times that atheists know more about religion than religious people,” Mr. Silverman said. “Atheism is an effect of that knowledge, not a lack of knowledge. I gave a Bible to my daughter. That’s how you make atheists.”

For the full story, see:
LAURIE GOODSTEIN. “Basic Religion Test Stumps Many Americans.” The New York Times (Tues., September 28, 2010): A17.

Forecasting Errors Increase in Complex Environments

(p. 54) There is a great deal of evidence that suggests that when people– for example, investors and managers–are taken out of a familiar environment–an environment of continuity–their ability to deal with the future deteriorates rapidly. John Sterman, J. Spencer Standish professor of management and director of the System Dynamics Group of MIT, who has studied the ability of managers to learn over long periods of time, says that in complex environments, the more experience people have the more poorly they perform. Here is a distillation of Sterman’s findings:

• “Even in perfectly functioning markets, modest levels of complexity cause large and systematic deviations from rational behavior.”
• “There is little evidence of adaptation of one’s ‘rules’ as the complexity of the task increases.” When the environment is complex, people seem to revert to simple rules that ignore time delays and feedback, leading to lowered performance.
• Individuals “forecast by averaging past values and extrapolating past trends. [They] actually spend less time making their decisions in the complex markets than in the simple ones.”
• The lowered performance people exhibit as a result of greater com-(p. 55)plexity does not improve with experience. People become “less responsive to critical variables and more vulnerable to forecasting errors–their learning hurts their ability to perform well in the complex conditions.”
• Most individuals do not learn how to improve their performance in complex conditions. In relatively simple conditions–without time delays or feedback–people “dramatically outperform the ‘do nothing’ rule, but in complex situations many people are bested by the ‘do nothing’ rule.” Attempts individuals make to control the system are counterproductive.

Markets that are undergoing rapid or discontinuous change are extremely complex. Economic systems are highly networked and involve substantial feedback. Given Professor Sterman’s findings, it is not surprising that forecasting deteriorates in the face of rapid change.

Obamacare Is Increasing Health Costs

Source of graph: online version of the WSJ article quoted and cited below.

(p. A7) The health-care overhaul enacted last spring won’t significantly change national health spending over the next decade compared with projections before the law was passed, according to government figures released Thursday.

The report by federal number-crunchers casts fresh doubt on Democrats’ argument that the health-care law would curb the sharp increase in costs over the long term, the second setback this week for one of the party’s biggest legislative achievements.
The Wall Street Journal reported Wednesday that insurance companies have proposed rate increases ranging from 1% to 9% nationwide that they attribute specifically to new health-law coverage mandates.

For the full story, see:
JANET ADAMY. “Health Outlays Still Seen Rising .” The Wall Street Journal (Thurs., SEPTEMBER 9, 2010): A7.
(Note: the online version of the graph has the date SEPTEMBER 8, 2010.)

Frank Sliney Defends His Lexus and His Big House

(p. D8) Frank Sliney, 75, former marine and chief executive of the 25-year-old Franmar Chemical (motto: “solutions from soybeans”), in Bloomington, Ill., which originally manufactured nontoxic soy-based cleaning products for industrial workers and has now expanded into green cleaning products for home use, replies: “My house is 4,800 square feet. I’m a rich guy. We lived in a little apartment, I worked for 20-plus years building this company. I drive a Lexus 460. I worked like hell all my life and paid my bills and never was on public aid.”

But isn’t your house too big for two people?
“Right,” he answered. “Why don’t we go out and bring in a family of 12 and adopt them? There are those who would prefer to plow golf courses under because of the water and chemicals they use. There’s no end to it. On a daily basis, I do more to save the earth than 10 people — I replace 32 tanker cars of mineral spirit with one tanker of soy. The soy will biodegrade in 28 days, the mineral spirits will go on a long time.”

Oops, Sorry, We Appear to Have Put
Mr. Sliney in the Wrong Section

“People who say, ‘We could grow our own fuel?’ that is really silly,” Mr. Sliney continues. “Call the American Soy Bean Board — you know how many gallons of fuel they’ll tell you you can get out of an acre of land? Three or four gallons per bushel per year. How many gallons of gasoline do we use in a day? Twenty-two million.”

Make That the Wrong Story

Mr. Sliney: “You know what I think? If you wake up in the morning and your biggest concern is trash cans or what kind of window sprays you’re using, you are having it good. There are people who wake up and their biggest concern is getting fed.”

For the full story, see:
JOYCE WADLER. “Green Guilt.” The New York Times (Thurs., September 30, 2010): D1 & D8.
(Note: the online version of the article is dated September 29, 2010 and has the title “Green, but Still Feeling Guilty.”)
(Note: sub-heads in original and bolded in original.)

Ayaan Hirsi Ali Risks Her Life to Speak Freely about Islam

Ayaan Hirsi Ali. Source of photo: online version of the NYT article quoted and cited below.

(p. 14) As a Somali native who was raised as a Muslim and grew up to become one of the most outspoken critics of Islam, you fled to Amsterdam and served in the Dutch Parliament before fleeing again, to America. What kind of security do you have here? ”
I don’t go from A to B without being escorted by people who are armed. But please, let’s not talk about my security.

In your new book, “Nomad: From Islam to America,” you urge American Christians to try to talk to American Muslims about the limitations of their faith.
We who don’t want radical Islam to spread must compete with the agents of radical Islam. I want to see what would happen if Christians, feminists and Enlightenment thinkers were to start proselytizing in the Muslim community.
That could be dangerous for the proselytizers. .
It may be, but in the United States we have a police force and the rule of law; we can’t just say something is dangerous and abstain from competing in the marketplace of ideas.

For the full interview, see:
DEBORAH SOLOMON. “Questions for Ayaan Hirsi Ali; The Feminist.” The New York Times, Magazine Section (Sun., May 23, 2010): 14.
(Note: bold in original versions, to indicate questions by Deborah Solomon.)
(Note: the online version of the article is dated May 21, 2010.)

Budgetless California Legislature Votes to Create “Motorcycle Awareness Month”

(p. A1) SACRAMENTO, Calif.–On the brink of insolvency, California may have to pay its bills with IOUs soon. A budget was due three months ago, and the legislature hasn’t passed one.

The lawmakers can, however, point to a list of other achievements this year. Awaiting Gov. Arnold Schwarzenegger’s signature, for example, is a bill that would bar the state from filming cows in New Zealand. It’s the fruit of five committee votes and eight legislative analyses.
California lawmakers also voted to form a lobster commission. They created “Motorcycle Awareness Month,” not to mention a “Cuss Free Week.”

For the full story, see:
STU WOO. “There’s No Budget, but California Is All Over the Foreign-Cow Issue; As Deficit Looms, Lawmakers Promulgate ‘Cuss Free Week,’ Defend the State Rock.” The Wall Street Journal (Tues., SEPTEMBER 28, 2010): A1 & A18.