The New York Times Bests the Wall Street Journal at Business

 

We had a major winter storm in Omaha on Thurs., March 1st.  Schools were closed on Thursday and again on Friday.  Throughout the storm, the Omaha World-Herald got a paper delivered every day. 

The New York Times missed Thurs. and Fri., (there is no Saturday delivery).  The Wall Street Journal missed Thurs., Fri., and Sat.

The main difference is that in the end, the New York Times made good on eventually delivering me all the papers that I had paid for.

After a half hour wait to get through to a customer service person, the Wall Street Journal told me that they could not get me copies of the Thursday and Saturday papers.  They were all out, and I "should go to the library."  (During the long wait, every couple of minutes, an automated voice would come on to tell me how important my call was to them—if the call is so important, why don’t they hire enough people so that customers don’t have to wait for a half hour?)

The weather problem was not a secret.  Wouldn’t a good business anticipate publicly known problems, and have a contingency plan for dealing with them?  Wouldn’t they increase their production in order to be able to make good on the papers their logistical operation was incompetent to deliver?  Even if they did not have a clue at the beginning of the storm, couldn’t they have acquired a clue by Saturday, three days into the storm?

If the Omaha World-Herald can deliver, and the New York Times can make good when it can’t deliver, then the Wall Street Journal should be able, at least, to do as well as the New York Times.  The Wall Street Journal insults its customers when it tells them to "go to the library." 

It’s no way for the nation’s leading business newspaper to run its own business.

 

Mugabe’s Hyperinflation Destroys Zimbabwe Economy: More on Why Africa is Poor

 

The article excerpted below does a good job of sketching some of the effects of  hyperinflation on the people of Zimbabwe.  But it does little to illuminate the cause.  As Milton Friedman definitively demonstrated, inflation is caused by government printing too much money.  Mugabe and other tyrants are motivated to print too much money so they will have more money to spend, without having to raise taxes.  The ploy seems to work for a little while sometimes, but in the end it results in inflation.

Gideon Gono is the governor of Zimbabwe’s central bank.  Note Mr. Gono’s display of chutzpah in his blaming the people for inflation, and note the wonderful just symbolism of the power black out that cut off Mr. Gono’s speech. 

(It almost sounds like an outtake from Atlas Shrugged.)

 

(p. A1)  JOHANNESBURG, Feb. 6 — For close to seven years, Zimbabwe’s economy and quality of life have been in slow, uninterrupted decline. They are still declining this year, people there say, with one notable difference: the pace is no longer so slow.

Indeed, Zimbabwe’s economic descent has picked up so much speed that President Robert G. Mugabe, the nation’s leader for 27 years, is starting to lose support from parts of his own party.

In recent weeks, the national power authority has warned of a collapse of electrical service. A breakdown in water treatment has set off a new outbreak of cholera in the capital, Harare. All public services were cut off in Marondera, a regional capital of 50,000 in eastern Zimbabwe, after the city ran out of money to fix broken equipment. In Chitungwiza, just south of Harare, electricity is supplied only four days a week.

. . .

In the past eight months, “there’s been a huge collapse in living standards,” Iden Wetherell, the editor of the weekly newspaper Zimbabwe Independent said in a telephone interview, “and also a deterioration in the infrastructure — in standards of health care, in education. There’s a sort of sense that things are plunging.”

. . .

(p. A6)  The trigger of this crisis — hyperinflation — reached an annual rate of 1,281 percent this month, and has been near or over 1,000 percent since last April. Hyperinflation has bankrupted the government, left 8 in 10 citizens destitute and decimated the country’s factories and farms.

. . .

The central bank’s latest response to these problems, announced this week, was to declare inflation illegal.  From March 1 to June 30, anyone who raises prices or wages will be arrested and punished.  Only a “firm social contract” to end corruption and restructure the economy will bring an end to the crisis, said the reserve bank governor, Gideon Gono.

The speech by Mr. Gono, a favorite of Mr. Mugabe, was broadcast nationally.  In downtown Harare, the last half was blacked out by a power failure.

 

For the full story, see: 

MICHAEL WINES.  "As Inflation Soars, Zimbabwe Economy Plunges."  The New York Times  (Weds., February 7, 2007):  A1 & A6.

(Note:  ellipses in original.)

 

For a lot of evidence on what causes inflation, see:

Friedman, Milton, and Anna Jacobson Schwartz.  A Monetary History of the United States, 1867-1960. Princeton:  Princeton University Press, 1963.

 

German Brain Drain

   Engineer Benedikt Thoma is moving his family to Canada from Germany for a brighter future.  Source of photo:  online verion of the NYT article cited below.

 

ESCHBORN, Germany, Feb. 3 — Benedikt Thoma recalls the moment he began to think seriously about leaving Germany. It was in 2004, at a New Year’s Day reception in nearby Frankfurt, and the guest speaker, a prominent politician, was lamenting the fact that every year thousands of educated Germans turn their backs on their homeland.

“That struck me like a bolt of lightning,” said Mr. Thoma, 44, an engineer then running his family’s elevator company. “I asked myself, ‘Why should I stay here when the future is brighter someplace else?’ ”

In December, as his work with the company became an intolerable grind because of labor disputes, Mr. Thoma quit and made plans to move to Canada. In its wide-open spaces he hopes to find the future that he says is dwindling at home. As soon as he lands a job, Mr. Thoma, his wife, Petra, and their two teenage sons will join the ranks of Germany’s emigrants.

There has been a steady exodus over the years, but it has recently become Topic A in a land already saddled with one of the most rapidly aging and shrinking populations of any Western nation. With evidence that more professionals are leaving now than in past years, politicians and business executives warn about the loss of their country’s best and brightest.

. . .

. . . , there is plenty of anecdotal evidence that Germany has become less attractive for people in fields like medicine, academic research and engineering. Those who leave cite chronic unemployment, a rigid labor market, stifling bureaucracy, high taxes and the plodding economy — which, though better recently, still lags behind that of the United States.

. . .

In Mr. Thoma’s view, the root of the problem is [that] . . . Germany, . . . , has a “blockage” in its society.

“Germans are so complacent,” he said, sitting at the dining table in his neat-as-a-pin home here. “They don’t want to change anything. Everything is discussed endlessly without ever reaching a solution.”

As an example he cites the stalemate between his family’s firm and its 89 employees. After the firm became unionized, he said, the two sides began bickering over wages and working conditions.

With much of his 80-hour workweeks eaten up by those disputes, Mr. Thoma said he had developed high blood pressure and other ailments. He told his brothers he was burned out and ready to leave. 

 

For the full story, see:

MARK LANDLER.  "Germany Agonizes Over a Brain Drain."  The New York Times  (Tues., February 6, 2007):  A10.

(Note:  ellipses added.)

 

     Source of graphic:  online verion of the NYT article cited above.

 

Rock Icon Abandons France Because of High Taxes

   French rock icon Johnny Hallyday.  Source of photo: http://hosted.ap.org/photos/6/6b7deb53-a318-477d-90b7-fb5abe488774-big.jpg

 

In the dark of winter, the French rock ‘n’ roll icon Johnny Hallyday has abandoned France to settle in a snow-dusted mountain chalet, joining a scattered flock of superrich tax refugees in serene Switzerland.

Numbering about 3,700, according to Swiss statistics, these millionaire and billionaire exiles are variously coveted and resented in Switzerland, where local governments are competing in what critics scorn as a fierce race to the bottom to lure wealthy foreigners with individually negotiated tax breaks.

”I’m sick of paying, that’s all,” Mr. Hallyday, 63, said in a rebellious outburst to the celebrity magazine Paris Match, which devoted eight pages to his departure. ”I believe that after all the work I have done over nearly 50 years, my family should be able to live in some serenity. But 70 percent of everything I earn goes to taxes.”

The notion of a French symbol decamping to a newly renovated refuge in the town of Gstaad had an incendiary effect on French politics, prompting President Jacques Chirac to express restrained regrets about the rocker’s actions.

 

For the full story, see: 

DOREEN CARVAJAL.  "Swiss Tax Deals Lure the Superrich, but Are They Fair?"  The New York Times, Section 1  (Sun., January 14, 2007):   – B11.

 

 HallydaySwissChalet.jpg   Hallyday’s chalet in Gstaad, Switzerland.  Source of photo: http://www.20minutes.fr/articles/2006/12/20/20061220-people-A-Gstaad-le-chalet-de-Johnny-fait-etrique-pour-une-rock-star.php

 

“Market Research Rarely Reveals New Insights”

   Source of book image:   http://images-eu.amazon.com/images/P/1591396190.01.LZZZZZZZ.jpg

 

(p. 69)  Competition in an industry tends to converge not only on an accepted notion of the scope of its products and services but also on one of two possible bases of appeal.  Some industries compete (p. 70) principally on price and function largely on calculations of utility; their appeal is rational.  Other industries compete largely on feelings;  their appeal is emotional.

Yet the appeal of most products or services is rarely intrinsically one or the other.  Rather it is usually a result of the way companies have competed in the past, which has unconsciously educated consumers on what to expect.  Companies’ behavior affects buyers’ expectations in a reinforcing cycle.  Over time, functionally oriented industries become more functionally oriented; emotionally oriented industries become more emotionally oriented.  No wonder market research rarely reveals new insights into what attracts customers.  Industries have trained customers in what to expect.  When surveyed, they echo back:  more of the same for less.

 

Source:

Kim, W. Chan, and Renée Mauborgne. Blue Ocean Strategy: How to Create Uncontested Market Space and Make Competition Irrelevant. Boston: Harvard Business School Press, 2005.

 

 

 

Al Gore “Deserves a Gold Statue for Hypocrisy”


  Al Gore’s energy consuming mansion.  Source of photo: http://thelede.blogs.nytimes.com/2007/02/28/an-inconveniently-easy-headline-gores-electric-bills-spark-debate/

 

Here is the full text of a 2/26/07 press release from the Tennessee Center for Policy Research that has rightly received a lot of attention from the mainstream media and from the blogosphere:

 

Al Gore’s Personal Energy Use Is His Own “Inconvenient Truth”

Gore’s home uses more than 20 times the national average

Last night, Al Gore’s global-warming documentary, An Inconvenient Truth, collected an Oscar for best documentary feature, but the Tennessee Center for Policy Research has found that Gore deserves a gold statue for hypocrisy.

Gore’s mansion, located in the posh Belle Meade area of Nashville, consumes more electricity every month than the average American household uses in an entire year, according to the Nashville Electric Service (NES).

In his documentary, the former Vice President calls on Americans to conserve energy by reducing electricity consumption at home.

The average household in America consumes 10,656 kilowatt-hours (kWh) per year, according to the Department of Energy. In 2006, Gore devoured nearly 221,000 kWh—more than 20 times the national average.

Last August alone, Gore burned through 22,619 kWh—guzzling more than twice the electricity in one month than an average American family uses in an entire year. As a result of his energy consumption, Gore’s average monthly electric bill topped $1,359.

Since the release of An Inconvenient Truth, Gore’s energy consumption has increased from an average of 16,200 kWh per month in 2005, to 18,400 kWh per month in 2006.

Gore’s extravagant energy use does not stop at his electric bill. Natural gas bills for Gore’s mansion and guest house averaged $1,080 per month last year.

"As the spokesman of choice for the global warming movement, Al Gore has to be willing to walk the walk, not just talk the talk, when it comes to home energy use,” said Tennessee Center for Policy Research President Drew Johnson.

In total, Gore paid nearly $30,000 in combined electricity and natural gas bills for his Nashville estate in 2006.

 

Source of the press release:

http://www.tennesseepolicy.org/main/article.php?article_id=367

 

Listen to Ralph Raico on the Industrial Revolution

RaicoRalph.gif   Historian and libertarian Ralph Raico.  Source of photo:  http://en.wikipedia.org/wiki/Ralph_Raico

 

If you’re looking for a wise, witty, erudite, and thought-provoking discussion of a variety of historical issues from a broadly libertarian perspective, then Ralph Raico is your man.  (The flavor of libertarianism is neo-Austrian, but not dogmatically so.)

Several of his lectures can be purchased on CD or cassette from the Ludwig von Mises Institute.  Or you can listen to streaming versions on your computer for free. 

I particularly like his lecture on "The Industrial Revolution" in which he persuasively argues that ordinary people benefited from the Industrial Revolution, and that the benefit would have been clearer sooner, had it not been for the coincidental costs being imposed on ordinary people by the Napoleonic wars and by the corn laws.    

The link for the free streaming version of the lecture is: 

http://www.mises.org/media.aspx

 

Guns Deter Crime

 

Knoxville, Tenn.

IT’S a phenomenon that gives the term “gun control” a whole new meaning: community ordinances that encourage citizens to own guns.

Last month, Greenleaf, Idaho, adopted Ordinance 208, calling for its citizens to own guns and keep them ready in their homes in case of emergency. It’s not a response to high crime rates. As The Associated Press reported, “Greenleaf doesn’t really have crime … the most violent offense reported in the past two years was a fist fight.” Rather, it’s a statement about preparedness in the event of an emergency, and an effort to promote a culture of self-reliance.

. . .  

Criminals, unsurprisingly, would rather break into a house where they aren’t at risk of being shot. As David Kopel noted in a 2001 article in The Arizona Law Review, burglars report that they try to avoid homes where armed residents are likely to be present. We see this phenomenon internationally, too, with the United States having a lower proportion of “hot” burglaries — break-ins where the burglars know the home to be occupied — than countries with restrictive gun laws.

Likewise, in the event of disasters that leave law enforcement overwhelmed, armed citizens can play an important role in stanching crime. Armed neighborhood watches deterred looting in parts of Houston and New Orleans in the aftermath of Hurricanes Katrina and Rita.

 

For the full commentary, see:

GLENN REYNOLDS.  "A Rifle in Every Pot."  The New York Times  (Tues., January 16, 2007):  A31.

 

Glenn Reynolds is a professor of law at the University of Tennessee, and is the blogger of Instapundit.com.  In 2006, he published:

Reynolds, Glenn. An Army of Davids: How Markets and Technology Empower Ordinary People to Beat Big Media, Big Government, and Other Goliaths. Nashville, TN: Nelson Current, 2006.

 

    Source of book image:  http://ec1.images-amazon.com/images/P/1595550542.01._SS500_SCLZZZZZZZ_V1136930360_.jpg

 

Labor is “Responsible for the Consequences of Their Choice”

 

An early free-market economist claims that in a free-market economy, a worker’s happiness depends mainly on her own actions:

 

But whenever property is secure, industry free, and the public burdens moderate, the happiness or misery of the labouring classes depends almost wholly on themselves. Government has there done for them all that it should, and all in truth that it can do. It has given them security and freedom. But the use or abuse of these inestimable advantages is their own affair. They may be either provident or improvident, industrious or idle; and being free to choose, they are alone responsible for the consequences of their choice.

 

The passage was brought to my attention by an HES Posting from Michael Perelman.  The thread was continued by Torsten Schmidt, and the final information on the pages where the passage may be found, was added by Masazumi Wakatabe.

 

The reference for the source of the passage is:

McCulloch, J.R.  A Treatise on the Circumstances which Determine the Rate of Wages and the Condition of the Labouring Classes, second edition, corrected and improved, 1854, 16-17.

 

“Good to Great” is Good, but Not Quite Great

  Source of book image:  http://images.barnesandnoble.com/images/7770000/7775266.jpg

 

When Ameritrade founder Joe Ricketts spoke to my Executive MBA class a few years ago, I mentioned to him that I had heard from Bob Slezak that Ricketts was a fan of Clayton Christensen’s The Innovator’s Dilemma.  Ricketts said that was true, but that the recent business book that he was most enthused about was Jim Collin’s Good to Great.

Ricketts is not alone.  Good to Great has become a business classic since it came out.  Recently I finally got around to reading it.

Well, I think it’s good, but not quite great.  I like the empirical, inductive methodology mapped out at the beginning.  And some of the conclusions ring true.  For example the importance of facing the "brutal facts."  And the importance of developing a thought-out "hedgehog" concept.  And the importance of getting the right people on the bus.  And the importance of slowly, consistently building momentum.

But I’ve got some big bones to pick, too. 

Maybe the biggest "bone" is Collins’ assumption that our goal should be the survival and greatness of a firm.  Instead of almost viewing firms as ends in themselves, why can’t we view firms as vehicles for getting great things done? 

Maybe great things can be done through firms that last and are lastingly great.  Or maybe great things can be done by shooting star firms, that are glorious while they last, but don’t last long.  Collins says it must be the former.  But either way works for me.

A smaller "bone" is the conclusion that "level 5" leaders tend to be modest.  Well maybe.  But some of that conclusion is derived from Collins’ defining "great" in terms of high growth of stock value.  A modest leader will be unappreciated by Wall Street, and her company’s stock value will show higher growth when she succeeds.  But has she thereby accomplished more than if she had built exactly the same company, but been more transparent and enthused about the company’s future prospects, and hence generated more realistic expectations from Wall Street?  Remember, the value of a stock grows, not by the company doing well, but by it doing better than investors expected.  (On this issue, Collins should read the first couple of chapters of Christensen and Raynor’s The Innovator’s Solution.)

But don’t get me wrong:  this is a very good book.  Those interested in how the capitalist system works, should read it, as should those who want to manage well.

 

The book is:

Collins, Jim. Good to Great: Why Some Companies Make the Leap. And Others Don’t. New York: HarperCollins Publishers, Inc., 2001.

 

Paying for Congestion “with Time, Unreliability, Psychological Hell”

TrafficCostsGraph.gif   Source of graphic:  online version of the WSJ article cited below.

 

Congestion pricing "is a lot cheaper than the way we’re paying now … with time, unreliability, psychological hell," said Tyler Duvall, DOT’s assistant secretary for policy.

. . .

Even a 5% reduction in traffic jams can increase traffic speeds by as much as 50%, says Mr. Duvall. DOT officials figure a typical big-city traffic jam can be cleared with tolls of as little as $2 to $2.50 a day, if all lanes on a big highway are charged. But on some Southern California highways where fees are charged only for the former high-occupancy lanes, prices at the peak of rush hour have reached $8.50.

Congestion pricing has already taken hold in Europe, and the success of a congestion pricing system for London’s roads three years ago motivated U.S. officials and major businesses to consider the idea. Voters in Stockholm approved a similar plan in September, after a test run during the summer.

 

For the full story, see: 

JOHN D. MCKINNON.  "Bush Plays Traffic Cop in Budget Request; President Suggests ‘Congestion’ Tolls To Ease Rush Hour."  The Wall Street Journal  (Mon., February 5, 2007):  A6.

(Note:  the ellipsis in the Duvall quote was in the original; the other ellipsis was added.)