Current Events « 800 CEO Read

November 14, 2011

Thoughts on “Generation Sell”

Filed under: Careers,Current Events,Finance and Economics,General Business,Innovation — dylan @ 9:09 pm

“The characteristic art form of our age may be the business plan.”

That quote comes from an intriguing opinion piece called Generation Sell that was published in the New York Times this weekend. It is a piece about a generation just coming of age and today’s youth culture. It really deserves to be read in its entirety, but I think that if one passage can sum up the basic argument of the article, it is this:

Today’s ideal social form is not the commune or the movement or even the individual creator as such; it’s the small business. Every artistic or moral aspiration—music, food, good works, what have you—is expressed in those terms.

Call it Generation Sell.

The piece was written by William Deresiewicz, and there is so much I agree with and so much I disagree with in it—and it’s all wound tightly together in a wonderful and entertaining piece of writing. I’m a member of the generation he’s writing about, “people born between the late ’70s and the mid-’90s, more or less,” so I probably took it more personally than others, more personally indeed than I should, but I do take issue with some of Deresiewicz’s characterizations.

The first issue I ran into was in what I think was an unnecessary or misguided attempt to say something about hip-hop, which has undoubtedly had an affect on the generation and merits mention, but the sentence Deresiewicz offers doesn’t do it justice. After describing the (counter)cultural characteristics of the beatniks, hippies and punks, he briefly offers this:

Hip-hop, punk’s younger brother, was all about rage and nihilism, too, at least until it turned to a vision of individual aggrandizement.

Because that’s all he offers us on the subject, I feel it would have been better to have left it out altogether. Because hip-hop, like jazz or rock-and-roll, shouldn’t be defined as a “youth-culture” in and of itself, but as an art form that influenced youth culture. And while some of its currents may have been “all about rage and nihilism,” it began as party music more predominantly wrapped up in a social conscience and commentary, cultural irreverence, and the urban art forms of dance, painting and poetry. There may have been a decent amount of rage there, but I don’t get the nihilism. To “punk’s younger brother” seems to miss its roots and how it ended up as part of the youth culture he’s critiquing. It would be more accurate to define it as a part of the millennial generation in the way he did with jazz and beatniks, of which he wrote:

Theirs was a culture of jazz, with its spontaneity; … of flight, on the road, to the West; of the quest for the perfect moment.

Something like this might have been more accurate:

Theirs was a culture of hip-hop, with its social conscience and cultural irreverence (and confusion); of finding a voice, of the city street; of the quest for personal invention and aggrandizement.

But, of course, that doesn’t ring true either, because it isn’t a culture defined solely by rap. The generation wasn’t defined by any single movement in music as much as previous generations have been—movements that the major record labels could latch onto and push out into the wider consciousness to become the soundtracks of their generations. I think, if anything, this generation was shaped by the demise of the major labels’ cultural influence, the proliferation of independent labels, and all the noise, cross-pollination, creativity and confusion that has spawned from that. The last real uprising or rebellious “movement” in popular music was the rise of grunge music in the ’90s. Since then, the only movement I can detect is one toward ever smaller, more focused independent labels. It is, as the author rightly notes, a movement to a new business model, and he’s right that “selling out” has largely left our lexicon since then:

It’s striking. Forty years ago, even 20 years ago, a young person’s first thought, or even second or third thought, was certainly not to start a business. That was selling out—an idea that has rather tellingly disappeared from our vocabulary.

But I think there’s a more important reason for that. “Selling out” used to mean that a band was abandoning one of the little labels so many cherished for a major. People were passionate about those labels—Dischord, Matador, Thrill Jockey, Touch & Go, etc.—and a move like that felt like an abandonment of something just on the verge of exploding and choosing a paycheck over principle. “Selling out” was also applied to those who sold a song for use in advertising, a move I don’t think many begrudge bands for anymore due to the paradigm shifts in the music industry. And I think the larger idea that starting a business 20 years ago was considered selling out is a misnomer. I doubt anyone accused Fugazi’s Ian MacKaye of selling out when he started Dischord in 1980, or told Aaron Rose he was selling out when he opened Alleged Gallery in the early ’90s. Selling out would have been signing with a major label or taking a job curating art at the The Met.

And this leads me to a the generalized character at the heart of the article—the “hipster” that the author feels is “a lot more representative [of the Millennial Generation] than most of them care to admit.” The definition is bandied about and applied to many people, but I’m still not sure what exactly a “hipster” is (though perhaps n+1‘s What Was the Hipster could help), and putting it in the same category as the counterculture figures that preceded it seems problematic to me. Beatniks, hippies and punks were all actively participating in larger countercultures, and defined themselves with those movements. The one predominant characteristic of a “hipster” is that nobody self-identifies with it. It’s always a label attached to others, and usually with a heavy dose of derision. As such, it’s not really a counterculture that anybody’s participating in or defining themselves with as much as it’s, if anything, an alternative lifestyle loosely defined. I do agree with the author that this lifestyle and its bohemian values were heavily influenced by the baby boomers and “Bobo in Paradise” parents that David Brooks wrote about a decade ago.

But outside of the skinny pants and fixed gear bicycles, the irony and the vanity, the defining character traits of the so-called “hipster” lifestyle—being young, urban, fashionable, artistic, and entrepreneurial—are mostly seen as positives. And I think the aversion to the label “hipster” is an aversion to labels and definitions in general. This generation hasn’t fully defined itself and doesn’t want to be defined by others—even their peers. Statistically, it’s more likely to switch jobs many times, move to new cities, to freelance, start a business of the their own or work for themselves. I don’t think of this as the end of history of counterculture in any major way, but as the rise of many independent yet interconnected subcultures that are entering the popular culture in a way that mirrors how previous countercultures were absorbed and watered down—except that today’s subcultures seem to be entering it with more artistic and economic control and largely on their own terms.

The characteristic art form of our age is not the business plan; it is do-it-yourself, independent local production, scale and control. Most people I know didn’t start with a business plan and still don’t have one. They started with a vision and are working every day to realize it. They made the decision to strike out on their own and practice their art, craft or trade—and hope people value their vision enough to pay for it. My wife, a self-employed photographer, began Ellagraph Studios. My friend dwellephant is a working artist. My friends Daniel and Maria run Ball & Biscuit, the best catering company in Milwaukee. My neighbors run Orchard Street Press, an eco-friendly printing company. I could go on and on, and wouldn’t be able to find a “hipster” in the bunch—just a lot of hard-working, creative and passionate people.

If I could sum up the generation, it would be with the once annoying labels “indie” or “underground” (which became so annoying simply by virtue of being such ubiquitous labels). The indie rock and the underground dance music and hip-hop that grew up in the ’80s and ’90s dominated the subcultures that we ourselves grew up in, and have since turned into more codified and sustainable (though possibly not very profitable) small business models. That simple yet profound change in how we learn about, purchase and consume (in the best sense of that word) the music that so shaped us during our formative years has fundamentally altered the cultural landscape. The “rockstars” of our generation were closer to us, more accessible, usually a part of our artistic communities. And alongside the independent music sprang up independent labels, music venues, galleries, coffee shops, screen printing operations, skate shops, DIY arts and crafts fairs. The internet then came along and kicked it all into overdrive.

The author says “the hipster ethos contains no element of rebellion, rejection or dissent.” But I think that that is what so defines the generation. It’s a rebellion of production, a commercial rejection and inner dissent. It’s a rejection of corporate principles and a simple consumer choice for the alternative. It’s a generation not fundamentally different in attitude than its predecessors, but in the solutions it offers. The heretics of today saw previous generations’ protests and rebellions crushed in the street, so they rented the abandoned buildings beside it and started trying to build something new inside them. It’s in some ways a return to mom-and-pop capitalism.

Sure, you can call it “generation sell,” but I think “selling” is a dirty word rather deliberately used. It could easily be called “generation create” or “generation present.” It does often seem as if everyone nowadays has something to present, advertise, market or “sell,” but by-and-large I think it was and is being done with good art, the right intention and decent manners. And if one of the results of that shift is that people fault this generation for being polite and pleasant, well… being the affable generation it is, I think they’d be okay with that.

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October 4, 2011

The Coming Jobs War

Filed under: Big Ideas,Blog,Book Reviews,Current Events — Jon @ 8:00 am

Right now, some of us are sitting in positions we’ve held for years, and looking forward to staying that way. Others are scrambling to prove their worth in a highly competitive market. Yet others still may have given up, after years of trying to find work, with no hope in site.

The new Gallup book The Coming Jobs War, by Jim Clifton, says the situation is going to get more intense for each of those groups. And while an entrepreneurial spirit is certainly important for individuals during this time, the book’s aim focuses on cities’ business leaders and philanthropists as the solution to the crisis.

In this case, Clifton argues, a war, as severe as it sounds, is warranted. “He states, “I don’t use the term ‘war’ lightly. This really has to be a war on job loss, on low workplace energy, on healthcare costs, on low graduation rates, on brain drain, and on community disengagement. Those things destroy cities, destroy job growth, and destroy city GDP. Every city requires its own master plan that is as serious as planning for war.”

While his research seems dire, his urgency and passion are an inspiring look at what America can and should do to turn around the marketplace, the economy, and our own personal survival. A compelling and important read.

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September 26, 2011

The Flaw and the Preface to Lost Decades

Filed under: Big Ideas,Current Events,Excerpts and Essays — dylan @ 12:36 pm

This will be the second year that 800-CEO-READ sponsors a film at the Milwaukee Film Festival.
Last year it was the David Hillman Curtis directed concert film of David Byrnes’s 2008/2009 tour, Ride, Rise, Roar. As a company full of musicians and music lovers, sponsoring the film seemed to fit our personality and culture. But this year we’re sponsoring a film whose issues relate more strongly to what we actually talk about and review here at 800-CEO-READ. The film we’re sponsoring (and seeing as a group tonight) is The Flaw, whose title comes from Alan Greenspan’s testimony before a congressional committee investigating the financial crisis in 2008:

I have found a flaw in the model that defines how the world works. I was shocked.

Directed by David Sington, The Flaw attempts to expose and explain the underlying causes of the financial crisis, interviewing victims of the crash, people who witnessed it from the ground, and some of the world’s brightest economists. One such economist is Joseph Stiglitz, who explains:

When you have growing inequality, typically your level of consumption goes down. In the United States we said to those whose income was not going anywhere, don’t worry, continue to spend as if your income was going up. But the only way you do that is through debt and that particular model has been broken.

Released last week, Lost Decades: The Making of America’s Debt Crisis and the Long Recovery also attempts to explain the underlying causes of the crisis, and it also comes to the issue of debt. In fact, the book’s authors, Menzie D. Chinn and Jeffry A. Frieden, define the financial crisis at its very core as a debt crisis. The debt is an issue that is in the news every day, and has Capitol Hill at loggerheads on seemingly every issue. From afar, it looks and sounds like a debate that is leaving the realms of reason. Hopefully the context, history, analysis and expertise that Lost Decades provides can help make sense of it all—if not in Washington, then at least in our own minds.

To help spread the word, I asked the good folks of W.W. Norton & Company for an excerpt I could share with you here on the blog, and they were kind enough to oblige.

Preface to Lost Decades BY MENZIE D. CHINN & JEFFRY A. FRIEDEN

The midterm elections were over, and the Republicans had made stunning advances. The GOP had picked up over seventy seats in the House of Representatives and seven seats in the Senate. Perhaps just as important, the Republicans had taken a number of crucial governorships from the Democrats, including the pivotal states of Michigan, Ohio, and Pennsylvania. The election was a dramatic reversal of the Democrats’ landslide victory two years earlier, and was a particular blow to the president, who had swept into office in the midst of a devastating economic crisis.

Certainly the Democrats could be satisfied with some major legislative accomplishments, passed with their previous majorities. But now, a disappointing economy and stubbornly high unemployment rate had brought back to life a Republican Party that had appeared moribund two years earlier. For the foreseeable future, the Republicans, together with allies among conservative Democrats, would be able to block or force changes in just about any initiative the president had in mind.

The year was 1938, and the economic recovery from the Great Depression was in deep trouble. Back in 1933, when Franklin D. Roosevelt became president, the country was in the fourth year of the deepest depression in its history. The Roosevelt administration had moved quickly and aggressively to try to bring the country’s economy back to life. Roosevelt and his fellow Democrats in Congress purged the nation’s banking system and imposed stringent new regulations. They created an ambitious array of federal programs to put the millions of unemployed to work. And they initiated the first serious federal social program in American history, Social Security.

By 1936 the economy was recovering. The unemployment rate had fallen to 14 percent, still high but down from where it was, 25 percent, when Roosevelt took office. Both national income and the stock market were rising rapidly. In light of the upturn, the Roosevelt administration resolved to tackle the federal government’s budget deficit, which in 1936 had reached nearly 5 percent of gross domestic product (GDP), a level unprecedented in peacetime. Delivering on promises to trim the deficit, the administration cut spending by 20 percent and raised taxes by even more; within a year the budget was practically back to balance. Meanwhile, the Federal Reserve tightened monetary policy, apparently to avoid a resurgence of inflation.

In the aftermath of the fiscal and monetary retrenchment, in the summer of 1937 the American economy collapsed into a steep recession. Industrial production dropped by one-third, the stock market plummeted more than 40 percent, and the unemployment rate shot back up to 19 percent. As the American economy slumped, the administration’s popularity faded rapidly. And the result of the 1938 midterm election reflected this loss of confidence in the federal government’s ability to bring the nation out of the Depression.

Today the United States and the world are slowly recovering from the most serious international economic crisis since the Great Depression of the 1930s. As was the case in the late 1930s, the causes and consequences of the crisis are hotly debated. And just as then, a great deal rides on an appropriate understanding of why and how the United States got to where it is today. How could the world’s richest economy go broke? How did the world’s most powerful banks collapse? Why would the most conservative government in modern American history nationalize enormous portions of the U.S. economy? Why did millions of American families lose their homes, and millions more their jobs? Whose fault is it all?

We have a unique perspective on these debates. We have spent, between the two of us, more than fifty years working on debt crises. We have lived through and studied financial and currency disasters in Europe, Latin America, Asia, and Russia. We have witnessed firsthand, and analyzed in detail, the human, social, and political wreckage of irresponsible borrowing. We have watched country after country lose decades of economic progress to the austere aftermath of financial crises. But we never feared that we would see a classic debt crisis in our own homeland. And we never imagined that our country could face the prospect of almost two decades lost to misguided policies, an unnecessary crisis, and a daunting task of economic reconstruction. Nonetheless, there is value in our ability to compare the current crisis to those we have known and investigated. As we examine the events of the past decade, and look toward the decade to come, we can draw on a wealth of comparative and historical experiences to guide our analysis.

The United States is in the midst of the greatest failure of economic policy, and of financial markets, of recent times. This is the story of how and why it got there, and of what the nation must do to repair a wounded economy.

The crisis

The most serious economic crisis of the past seventy-five years began as the summer of 2008 ended. In August and September, credit markets everywhere entered a downward spiral that spun faster and faster until, in the first two weeks of October, it seemed that the world economy might be coming to an immediate end. During those dark weeks and months, an international economic order that had inspired faith bordering on rapture around the world appeared to have turned on its creators and strongest supporters. The United States, the very center of economic globalization, was gripped in a panic that threatened to destroy the world economy. The collapse seemed to surge out of nothing and nowhere. One week there was mild concern about a sluggish housing market in the American Sunbelt, the next week the whole world was staring over a precipice into the end of global capitalism. The world’s strongest economy turned into the sick man of international capitalism. The American paragon of capitalist virtue, protector of the free-market faith, took over huge swaths of the private sector. What happened? How could this come to pass?

The United States borrowed and spent itself into a foreign debt crisis. Between 2001 and 2007, Americans borrowed trillions of dollars from abroad. The federal government borrowed to finance its budget deficit; households borrowed to allow them to consume beyond their means. As money flooded in from abroad, Americans spent some of it on hard goods, especially on cheap imports. They spent most of the rest on local goods and services, especially financial services and real estate. The result was a broad-based economic expansion. This expansion—especially in housing—eventually became a boom, then a bubble. The bubble burst, with disastrous effect, and the country was left to pick up the pieces.

The American economic disaster is simply the most recent example of a “capital flow cycle,” in which capital floods into a country, stimulates an economic boom, encourages high-flying financial and other activities, and eventually culminates in a crash. In broad outlines, the cycle describes the developing-country debt crisis of the early 1980s, the Mexican crisis of 1994, the East Asian crisis of 1997–1998, the Russian and Brazilian and Turkish and Argentine crises of the late 1990s and into 2000–2001—and, in fact, the German crisis of the early 1930s and the American crisis of the early 1890s. We can best, and most fully, understand the current debt crisis by understanding the dozens of debt crises that have come before it. What causes such crises? What can we learn from the paths to them, through them, and out of them?

To be sure, the most recent American version of a debt crisis was replete with its own particularities: an alphabet soup of bewildering new financial instruments, a myriad of regulatory complications, an unprecedented speed of contagion. Yet for all the unique features of contemporary events, in its essence this was a debt crisis. Its origins and course are of a piece with hundreds of episodes in the modern international economy.

For a century American policymakers and their allies in the commanding heights of the international financial system warned governments of the risks of excessive borrowing, unproductive spending, foolish tax policies, and unwarranted speculation. Then, in less than a decade, the United States proceeded to demonstrate precisely why such warnings were valid, pursuing virtually every dangerous policy it had advised others against.

Most analysts of the crisis miss this central point. Each of the many accounts published since 2008 has focused on one or another limited aspect of the crisis. Some follow the financial meltdown and response blow by blow, yielding vivid insights into the personalities and institutions involved. Other accounts emphasize the role of financial regulators in the collapse, documenting the influence of Wall Street over the deliberations in the halls of Washington, D.C. Yet others explain how the financial crisis caused so deep a global recession. Our analysis starts with the macroeconomic drivers of the experience, includes the political pressures, incorporates the regulatory enablers, and puts the crisis into a comparative and historical context, drawing parallels and lessons from the dozens of similar episodes from the past.

The American crisis immediately spread to the rest of the international economy. The world learned a valuable lesson about global markets: they transmit bad news as quickly as good news. The American borrowing binge had pulled much of the world along with it—drawing some countries (Great Britain, Ireland, Iceland, Spain, Greece) into a similar debt-financed boom, and tapping other countries (China, Japan, Saudi Arabia, Germany) for the money to make it possible. The collapse dragged financial markets everywhere over a cliff in a matter of weeks, with broad economic activity following within months.

Impact and implications

The global crisis raises the specter of global conflict. As governments scramble to protect their citizens, their actions can be costly to their neighbors: a bailout favors national over foreign firms, devaluation puts competitive pressures on trading partners, big deficits suck in capital from the rest of the world. The 1929 recession became a depression largely because of the collapse of international cooperation; the current crisis may head in that direction if international collaboration similarly fails.

With or without broader international complications, the United States faces hard times. The country lost the first decade of the twenty-first century to an ill-conceived boom and a subsequent bust. It is in danger of losing another decade to an incomplete recovery and economic stagnation.

In order to not lose the decade to come, the United States will have to bring order to financial disarray, gain control of a burgeoning burden of debt, and re-create the conditions for sound economic growth and social progress. None of this will be easy. The tasks are made more difficult by the fact, which we have learned to our alarm, that all too many policymakers and observers cling to the failed notions that got the country into such trouble in the first place. If Americans do not learn from this painful episode, and from others like it, they will condemn the nation to another lost decade.

Excerpted from Lost Decades: The Making of America’s Debt Crisis and the Long Recovery
Copyright © 2011 by Menzie D. Chinn and Jeffrey A. Friedan
All rights reserved
Reprinted with permission of the publisher, W. W. Norton & Company, Inc.

ABOUT THE AUTHORS
Menzie D. Chinn teaches at the University of Wisconsin, Madison, and coauthors the influential blog Econbrowser.

Jeffry A. Frieden teaches at Harvard University. He is the author of Global Capitalism: Its Fall and Rise in the Twentieth Century.

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September 12, 2011

Retirement Heist

Filed under: Book Reviews,Current Events — dylan @ 5:21 pm

Pabst Blue Ribbon has become a trendy beverage across the country. It has developed a blue collar, sub-culture friendly image. But while Pabst has been a huge part of Milwaukee’s history, its connections to the city today are limited to its branding, and there are still plenty of working class folks here who won’t touch it. That is because, on top of shuttering their Milwaukee factory in 1996, they reneged on their pension obligations to their former workers when they left. In this respect also, it seems Pabst was setting a trend.

Where they still exist, the pensions and health coverage earned by millions of workers in this country are being slashed. Like Wall Street did with people’s mortgages, companies have been using a heavy dose of financial engineering to turn worker’s retirement benefits into piggy banks—piggy banks they’re breaking. It is a story told by Wall Street Journal investigative reporter Ellen E. Schultz in Retirement Heist: How Companies Plunder and Profit From the Nest Eggs of American Workers, being released this week by Portfolio.

She begins by telling the story at GE.

In December 2010, General Electric held its Annual Outlook Investor Meeting at Rockefeller Center in New York City. At the meeting, chief executive Jeffrey Immelt stood on the Saturday Night Live stage and gave the gathered analyst’s and shareholders a rundown on the global conglomerate’s health. But in contrast to the iconic comedy show that is filmed at Rock Center each week, Immelt’s tone was solemn. Like many other CEOs at large companies Immelt pointed out that his firm’s pension plan was an ongoing problem. The “pension has been a drag for a decade,” he said, and it would cause the company to lose thirteen cents per share the next year. Regretfully, to rein in the costs, GE was going to close the pension plan to new employees.

The audience had every reason to believe him. An escalating chorus of bloggers, pundits, talk show hosts, and media stories bemoan the burgeoning pension-and-retirement crisis in America, and GE was just the latest of hundreds of companies, from IBM to Verizon, that have slashed pensions and medical benefits for millions of American retirees. To justify the cuts, companies complain that they’re victims of a “perfect storm” of uncontrollable economic forces—an aging workforce, entitles retirees, a stock market debacle, and an outmoded pension system that cripples their chances of competing against pensionless competitors and companies overseas.

What Immelt didn’t mention was that, far from being a burden, GE’s pension and retirement plan had contributed billions of dollars to the company’s bottom line over the past decade and a half, and were responsible for a chunk of the earnings that the executives had taken credit for. Nor were these retirement programs—even with GE’s 230,000 retirees—bleeding the company of cash. In fact, GE hadn’t contributed a cent to the workers’ pension plan since 1987 but still had enough money to cover all the current and future retirees.

[...] So a question remains: With its fully funded pension plan, why was GE closing its pensions?

It is a question the book does a great job of answering, investigating and exposing what has really happened to the pensions of American workers, and how accounting rules actually reward companies for cutting benefits.

With perfectly legal loopholes that enabled companies to tap pension plans like piggy banks, and accounting rules that rewarded employers for cutting benefits, retiree benefits plans soon morphed into profit centers, and populations of retirees essentially became portfolios of assets and debts, which passed from company to company in swirls of mergers, spin-offs, and acquisitions. And with each of these restructuring deals, the subsequent owner aimed to squeeze a profit from the portfolio, always at the expense of the retirees. The flexibility in the accounting rules, which gave employers enormous latitude to raise or lower their obligations by billions of dollars, also turned retiree plans into handy earnings-management tools.

Unfortunately for employees and retirees, these newfound tricks coincided with the trend of tying executive pay to performance. Thus, deliberate or not, the executives who green-lighted massive retiree cuts were indirectly boosting their own pay.

As their pay grew, managers and officers began diverting growing amounts into deferred-compensation plans, which are unfunded and therefore create a liability. Meanwhile, their supplemented executive pensions, which are based on pay, ballooned along with their compensation. Today, it’s common for a large company to owe its executives several billion dollars in pensions and deferred benefits.

Retirement Heist is an important book, excellently researched and well-written, and I hope finds a wide audience in both the general reading public and the halls of power.

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July 7, 2011

Stranger to Fiction

Filed under: Big Ideas,Book Reviews,Current Events — Jack @ 8:10 am

I read something in the industry newsletter Shelf Awareness recently that took me aback. It was from an interview Philip Roth did with Jan Dalley of the Financial Times.

The conversation I’d longed to have with him since I first read him many decades ago, a conversation about fiction itself, died an early death.

“I’ve stopped reading fiction. I don’t read it at all. I read other things: history, biography. I don’t have the same interest in fiction that I once did.”

How so?

“I don’t know. I wised up … ”

And with those three words he gave me a long look from those fierce eyes and then a significant glance at my notebook, as if to say: that’s what I want you to write down.

It was a remarkable quote from a man who not only writes fiction, but who has won pretty much every award there is in the field. In fact, the reason for the interview from which that was taken was that he won this year’s Man Booker International Prize, which is awarded for international achievement in fiction.

But the more I have thought about it, the more it makes sense to me. We all read because it provides context, whether it’s to a problem we’re trying to solve at work or to the larger life we’re living outside it. And I have largely left fiction, as well. As I get older, the psychological and emotional context that fiction provides doesn’t seem as urgent to me as the larger narratives of history. Whereas I once enjoyed a good page-turning, I-don’t-want-it-to-end novel, I am much more likely to dive into a good piece of non-fiction these days, the history and biography categories Roth mentions being at the top of the list.

It is this tendency that brought me to The Quest: Energy, Security, and the Remaking of the Modern World. The book’s author is Daniel Yergin, who was awarded the Pulitzer Prize for his previous book, The Prize. That book was about the “panoramic history” of energy, and The Quest continues that story.

This is a book about the energy world in which we depend so completely—how it came to be the way it is, how it works, the risks and challenges it portends, and how different it might be in the future. It explores how energy is constantly being reshaped by the interplay of technology and markets, by the bounty and forces of nature, and by politics and public opinion. It is the story of a quest—the quest for the energy on which society so completely relies, for the position and rewards that it can accrue to individuals and companies and nations, and for the security it requires. It is about our future way of life. It is also about the quest for power in the modern world.

What is remarkable about the book is that Yergin tells stories that, at least for me, capture the immediacy of the headlines while at the same time revealing the deeper narrative involving all the behind-the-scenes personalities and maneuvering. From The Caspian Sea to Nigeria, Venezuela to the Persian Gulf (with a healthy dose of China featured) The Quest is 700+ pages of fascinating stories and the latest reason I’ve too become a stranger to fiction. I am sure you’ll hear the same from other reviewers as we near the book’s release in September.

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April 21, 2011

Opportunism

Filed under: Book Reviews,Current Events — dylan @ 11:09 am

Opportunism is a bad word in our culture, and an excellent book released earlier this year by Farrar, Straus and Giroux.

To get a popular definition of the word, let’s turn to our society’s new reference of choice—Wikipedia. The entry on opportunism begins by describing it as “the conscious policy and practice of taking selfish advantage of circumstances, with little regard for principles.” Shraga F. Biran strives to change that perception and definition in Opportunism: How to Change the World—One Idea at a Time.

Biran argues that opportunity should be a right, and that “legal recognition of a new form of property could produce the infrastructure for the creative individual.” He therefore stresses “that opportunity is itself a form of property.” But lets move back for a second to the concept of opportunism:

Even though over the past two centuries opportunism has been stigmatized, it is essentially a positive concept.

Opportunism is an approach to life that seeks to combine the elements of time, place, and initiative so as to dismantle an already existing set of circumstances and reassemble them in a new way, or to combine them with new and hitherto unknown elements. Opportunism is fatalism’s opposite: it can generate unexpected results.

Opportunism is realistic and pragmatic. It assumes that a number of possibilities always exist and that the outcome is not determined by the so-called laws of history. Nor does it claim that history repeats itself or that progress is a permanent phenomenon. Opportunism rejects the doctrine of determinism, which sees events as subject to an inevitable process that makes the future predictable and minimizes the human role in history.

Biran injects heavy doses of philosophy and history to build his case, and he uses both to build a pragmatic framework for “a new economic and social era.” He believes, for instance, that as we move from an economy based on tangible material assets to a knowledge-based economy, the laws of the market must change as well—that “new ground rules must also enable those responsible for the creation of wealth to share equitably in the fruits of their own labor.” And as property rights have always been a bedrock of capitalism, he suggests the new “ground rules” of a knowledge-based economy will have to deal with intellectual property. It is an issue at the heart of the book.

Unfortunately, the battle over intellectual property rights is taking place on the fringes, with precious little common ground being built on the issue. Biran sums up the debate as follows:

Major players with old and new money are attempting to monopolize intellectual property. In most of the world, with the exception of Japan and Germany, the rights to an invention developed in the workplace do not belong to its creator but to his employer. Blocking individual ownership enables old capital to capture new ideas by using patents to transform them into property rights that block others from elaborating on intellectual discoveries. Opposing this system are movements with the battle cry “information wants to be free!”—contemporary Luddites who refuse to accept that ideas can become individual assets but belong to all. Each camp in its own way would stifle the opportunity for creativity and the profitable spread of innovation. The dilemma is that while ideas need to remain freely accessible to everyone, a system must be developed to guarantee rights to the creators if and when those ideas eventually become the generators of wealth, a process that can take decades.

To give you an idea of the book’s scope, the paragraph after the one quoted above goes into the Latin roots of the word “opportunity” in an effort to redeem its reputation so it can be placed back on “society’s agenda.” But Biran is not just trying to redefine the word, he is trying to reconstruct opportunism “as a theory of opportunities” out of which we “can make a more abundant life available to all by negotiating a more equitable ownership of the new intangible property,” property created by what Richard Florida has called the “creative class.”

The book covers a lot of ground, and introduces us to new concepts like social privatization—creating new property by freeing up undistributed assets currently in the hands of the state (for example giving those who live on public land, including in public housing, ownership of it). He discusses democracy, education, health care, regulation, property rights, copyright and patent law and more, exploring the ideas and history that shaped the modern world and economy. And he uses that scope to address current topics, like the Google settlement with the Author’s Guild over its digitization of books and the difficulty in shifting from old concepts of property to new ones.

It’s sometimes counter-intuitive, as in the quote above when he labels those trumpeting new technology and the freedom of information as “contemporary Luddites.” It’s an odd label that he doesn’t come back to until 86 pages later.

At first sight, describing as “Luddites” those who call for all ideas to be free of any restriction may seem confusing. After all, the Luddites if the early nineteenth century violently resisted technological change because they feared unemployment, while those who now support the unrestricted dissemination of ideas are ostensibly supporting the technological breakthroughs that enable people everywhere to access new ideas at the click of a button. However, even though on the face of it the call for ideas to be free appears to be progressive, it is in the final analysis an attempt to destroy. In this case their objective in not the destruction of advancing technology but the intellectual property rights of the creative class whose genius lies behind these very same advances.

I’m actually still trying to wrap my head around that one. Luckily, that argument is not central to Opportunism, but an example of one the many entertaining and informative digressions Biran takes us on.

The original edition of this book was published overseas before the economic crisis, but even in that edition he warned that “the capitalist system [has] developed internal contradictions that fundamentally undermined its stability.” But Biran sees a chance to remedy those contradictions, and in Opportunism, he lays out a new framework of property and offers a vision for a new capitalism based on real opportunity. As he writes, “In an age when the role of this new property and creativity has grown, the exploitation of opportunities is gradually supplanting the exploitation of human beings.”

Biran’s book does not offer any of the nuts and bolts you need to construct and maintain your current business. But, if fully realized, the ideas he presents in the book could become the nuts and bolts we use to build a new knowledge economy with, and could possibly change the way we do business entirely.

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April 19, 2011

The 2011 Pulitzer Prize – Is There No Justice?

Filed under: Book Awards,Current Events — dylan @ 8:42 am

Seth Godin wrote last October that, “If there’s justice, [Kevin Kelly's What Technology Wants] will win the Pulitzer Prize. And, while I think there remains some justice in the world regardless of the fact that it did not, we would agree that it deserved at least a nomination in the general nonfiction category (something another of our favorite books, Nicholas Carr’s The Shallows: What the Internet Is Doing to Our Brain, did happily receive). But, I’m sure that the book that won the category—Siddhartha Mukherjee’s The Emperor of All Maladies: A Biography of Cancer—is not at all undeserving. I haven’t read it myself, but I’ve heard good things. I also know that Jack was pleased to see one of his favorite biographies of the year, Ron Chernow’s Washington: A Life, take home the prize in its category.

Also of note, for the first time ever a Pulitzer Prize was awarded to a series that did not appear in print—ProPublica’s online series The Wall Street Money Machine by Jesse Eisinger and Jake Bernstein. It was given to them “for their exposure of questionable practices on Wall Street that contributed to the nation’s economic meltdown, using digital tools to help explain the complex subject to lay readers.” As The New York Times reported, “Corporate malfeasance was a theme in the awards this year.”

And, finally, we’d like to note and congratulate our hometown newspaper, The Milwaukee Journal-Sentinal, which took home the award for explanatory reporting “for their lucid examination of an epic effort to use genetic technology to save a 4-year-old boy imperiled by a mysterious disease.” In fact, congratulations to all the winners! If you’d like to read more or see a list of all the winners, head to The New York Times roundup or visit the Pulitzer Prize website.

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March 22, 2011

World Water Day and The Big Thirst

Filed under: Current Events,New Releases,Social Responsibilty — dylan @ 4:35 am

Designated by the United Nations General Assembly in 1993, World Water Day is held annually on March 22. It’s a day to focus attention on the importance of freshwater and sustainable management of water resources that grew out of the 1992 United Nations Conference on Environment and Development (UNCED) in Rio de Janeiro. With over half of the world’s population now living in cities, this year’s focus is understandably on water and urbanization, under the slogan “Water for cities: responding to the urban challenge.”

To observe the day, we’d like to share some sobering (yet mind-boggling) statistics that Charles Fishman, author of the upcoming The Big Thirst: The Secret Life and Turbulent Future of Water, was kind enough to share with us.

But first, a little background on Fishman. He has been a favorite of ours for years here at 800-CEO-READ. His previous book, The Wal-Mart Effect, was a New York Times, Wall Street Journal, and Business Week bestseller, a finalist for the Financial Times and Goldman Sachs Business Book of the Year Award, and a Jack Covert Selects in 2006. And we’ve used his 2007 article for Fast Company, Message in a Bottle, as an example of superb writing in our writing sessions at past author pow-wows (author gatherings we host every year).

The statistics and factoids below come from his new book, the aforementioned Big Thirst, being released on April 12 by Free Press.

➻ Water is the oldest substance you’ll ever come in contact with. The water coming from your kitchen faucet is about 4.3 billion years old.

➻ A typical American uses 99 gallons of actual water a day—for cooking, washing, and the #1 personal use in the U.S., toilet flushing.

➻ The average cost of water at home in the U.S.—for always-on, purified drinking water—is $1.12 per day, less than the cost of a single half liter of Evian at a convenience store.

➻ Americans spend almost as much each year on bottled water ($21 billion) as they do maintaining the nation’s entire water infrastructure ($29 billion).

➻ Microchip factories require water that is so clean it is considered dangerous to drink.

➻ The difference in price between home tap water and a half-liter bottle of water at the convenience store is a factor of 3,000—you could take the bottle of Poland Spring that you buy for $1.29 at the local 7-Eleven and refill it every day for 8 years before the cost of the tap water would equal that original price, $1.29.

➻ We often hear that “only” 2 percent of the water on Earth is fresh and available for human use, outside of the polar ice caps.

The “only” 2 percent comes to 1.5 billion liters of fresh water for each person on the planet. It’s 400 million gallons for every person alive. That’s a cube of fresh water for each us as long as a football field and as tall as a 30 story building.

➻ The U.S. uses more water in a single day than it uses oil in a year.

The U.S. uses more water in four days than the world uses oil in a year.

➻ Enough water leaks from aging water pipes in the U.S. each day to supply all the residents of any of 30 states.

➻ The city of London loses 25 percent of the water it pumps.

➻ Seventy-one percent of earth is covered with water, but water is small compared to earth. If Earth were the size of a minivan, all the water on Earth would fit in a half-liter bottle in a single cup holder.

➻ Not one of the 35 largest cities in India has 24-hour-a-day water service. Even the global brand-name cities like Hyderabad, Bangalore, Delhi and Mumbai offer water service only an hour or two a day.

➻ Treating diarrhea consumes 2 percent of the GDP of India. The nation spends $20 billion a year on diarrhea—$400 million a week—more than the total economies of half the nations in the world.

➻ A common statistic is the 1 billion people in the world—one in six—don’t have access to clean, safe drinking water.

But a less well-known statistic is equally stunning: 1.6 billion people in the world—one in four—have to walk at least 1 km each day to get water and carry it home, or depend on someone who does the water walk.

Just the basic water needs of a family of four—50 gallons total—means carrying (on your head) 400 pounds of water, walking 1 km or more, for as many trips as required, each day.

➻ Between 1900 and 1936, clean water in U.S. cities cut the rate of child deaths in half.

➻ Cooling water a typical U.S. nuclear power plan requires: 30 million gallons per hour

Water that New York City requires: 46 million gallons per hour

➻ Water required to maintain a typical Las Vegas golf course: 2,507 gallons for every 18-hole round of golf

Each hole of golf, for each golfer, requires 139 gallons of irrigation water.

➻ Average time a molecule of water spends in the atmosphere, after evaporating, before returning to Earth as rain or snow: 9 days

➻ Amount of water that falls on a single acre of ground when it receives 1 inch of rain: 27,154 gallons

This year’s official World Water Day ceremonies are being held in Cape Town, but there are events being held worldwide. To see if there is one in your area, visit the World Water Day website.

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February 15, 2011

How the West Was Lost – An Excerpt

Filed under: Current Events,Excerpts and Essays,New Releases — dylan @ 5:46 pm

Farrar, Straus and Giroux has some really great books on economics out right now, with more in the works and on the way. I will talk about Shraga F. Biran’s Opportunism on this blog soon, but I’d like to turn now to a book that’s being released today—New York Times bestselling author Dambisa Moyo’s How the West Was Lost.

In this story, Jimmy Stewart doesn’t get the girl and Gregory Peck never makes a dime gambling. The book is about the economic supremacy of the West, how it was achieved and why it is currently in decline. Unlike the many scare-mongers out there, however, Dambisa actually offers reasonable solutions to arrest that decline. In the excerpt below from the opening of the book, “Once Upon a Time In the West” (which does not even mention Henry Fonda or Charles Bronson), Ms. Moyo discusses “The Pillars of Growth,” the great possibilities at the confluence of capital, labor and technology, and why “an idea has a marginal cost of zero.”

◊◊◊◊◊◊◊◊◊◊◊◊◊◊◊◊◊◊

The Pillars of Growth BY DAMBISA MOYO

Much ado has been made of the seemingly inevitable economic decline of the industrialized West—the United States, in particular—and the ‘rise of the rest,’ led by China. While most of this debate has tended to centre on historical patterns of imperialism and strategic and military considerations, canonical models of economic growth also offer a framework that highlights just how the West continues to misallocate the key ingredients necessary for long-term sustainable economic success and growth, to its detriment.

The evolution of growth theory has been a fascinating one, and one that cannot adequately be expounded in the short space that this book allows. An earlier incarnation in the economics literature began with the Harrod-Domar idea, which identified growth as solely a
function of one input—capital.

In 1956, Vobert Solow, an American professor at the Massachussetts Institute of Technology, built on this one-input model by demonstrating that labour too played a crucial and determinate role in delivering growth. For “his contributions to the theory of economic growth,” Solow was awarded the Nobel Prize for Economics in 1987, and for a time the Solow model, which saw growth as determined by capital and labour, remained the backbone of the macroeconomic growth literature for many years.

However, it must have come as something of a surprise that when these seemingly logical explanations for growth were subjected to empirical scrutiny, they accounted for only 40 per cent of a country’s economic prosperity. There was a missing component; and a large one at that. This hitherto unidentified factor—the 60 per cent—has come to be known as total factor productivity, a catch-all phrase which encompasses technological development as well as anything not captured by the capital and labour inputs, such as culture and institutions. Thus canonical economic models point to three essential ingredients which determine economic growth: capital, labour, and total factor productivity. These are the pistons which drive the cylinders of economic growth. Finely tuned and working in unison, they motor an engine of near limitless power.

Perhaps nothing illustrates the might, the sheer potency, of these three components coming together better than the American moon landing in July 1969.The gauntlet thrown down by President Kennedy in 1961, to land a man on the moon by the end of the decade, could not have been more ambitious. Goaded by the seemingly more adept Russian space programme, which was first with an object—Sputnik-I (1957)mdash;first w th a living creature—Laika the dog (1957)and, of course, first with a man—Yuri Gagarin (1961)—Kennedy captured the spirit of the times in his famous words: “W e choose to go to the moon in this decade and do the other things not because they are easy, but because they are hard.”

The history of the Apollo programme, its personalities, its spirit of adventure, remains one of the most celebrated moments in American (and world) history, and rightly so. But it is also the supreme example of the confluence of capital, labour and technology, each at the height of its powers and all of them working as one. America had the capital, it had the labour, and, ultimately, it had the technology. The facts and figures speak volumes.

In terms of capital, the costs of the Apollo project were astronomical. The annual budget of the National Aeronautics and Space Administration (NASA) increased from US$500m in 1960 to a high point of US$5.2bn in 1965$mdash;representing 5.3 per cent of that year’s federal budget (5 per cent of today’s U S budget would be around US$125bn). As a reference point, the Vietnamese war is thought to have cost around US$111bn (US$686bn in 2008 dollars). A ll told, the final cost of the Apollo project was between US$20bn and US$25bn in 1969 dollars (or approximately US$135bn in 2005 dollars).

Cash was only one component of the Apollo challenge. To realize its goal America had to draw upon the two other essentials: labour and technology. Luckily for America, it could.

To this end, a huge army of personnel were enlisted. By 1966, NASA’s civil service list had grown to36,000 people from the 10,000 the agency employed in 1960. NASA’s space programme would also require that the agency call upon thousands upon thousands of outside technicians and scientists. From 1960 to 1965 individuals working on the programme increased by a factor of 10, from 36,000 to an astonishing 376,000. The more critical point here was not that NASA needed to find such a vast amount of talent, but rather that it could. And where the talent did not exist, NASA created it. Private industries, research institutions and universities provided the majority of these personnel. It was this labour force that would invent and build the technology which would catapult America to the forefront of the space race and put Neil A rm strong and Buzz Aldrin on the moon—an accomplishment often cited to this day as the greatest technological achievement in history.

The technological feats of the Apollo programme were truly awe-inspiring. While marveling at the wonder, the approximately one fifth of the world’s population that watched the live transmission of the first Apollo moon landing would have struggled to appreciate the phenomenal behind-the-scenes technological brilliance that had made this possible.

The idea of a lunar landing had been through ten years of trials, prototypes and numerous setbacks in order to make it a reality. From the huge Saturn rockets that had the power to lift a US destroyer into space, to the lunar module that landed two 150-pound men on the moon, and to each of the hundreds of thousands of components and parts that had to be researched, designed, built and tested, the apparatus of the Apollo was breathtaking in its vastness and complexity.

It did not stop there: the programme spurred advances in many areas of technology peripheral to rocketry and manned spaceflight, including avionics, telecommunications and computing, as well as in the fields of engineering, statistical methods, and civil, mechanical and electrical engineering. This is the power of ideas. Beyond the immediate machine or contraption the spill-over effects are the real gains of technology. And because once an idea is out it can be used and improved upon by anyone, anywhere, an idea has a marginal cost of zero.

Even if it had wished to, no country other than America had the capability—the capital, the labour, the technology—to plan, to develop and to execute the moon landing. Russia was not so far behind in space investment, hence the emergence of the Space Race, but over time it became clear that it would not be able to compete. The absence of any one of these elements would have meant that America couldn’t have achieved its lunar ambitions. The point is, with these three factors in place the implausible becomes possible; economies, and therefore countries, become forces to be reckoned with. Yet if they are misused, misallocated, a country’s economic decline is not just on the cards but accelerated.

What is clear, and what [How the West Was Lost] will demonstrate, is that deliberate (American public policies are m aking things worse, exacerbating this economic step down by weakening these three components.

America’s economic growth is not only less than it would otherwise have been, but its overall economic decline is undoubtedly faster and more acute than it would be with better policymaking.

[How the West Was Lost] is an exposition of how these three factors are individually and collectively contributing to the decline of the West. Further, two aspects are fundamental: their respective quantity and quality. To hammer home the point, it is not only the quantity of capital, the quantity of labour, the quantity of technology that is of concern; what has equal bearing in determining economic success or failure is their quality. That is to say, the manner in which the capital is allocated, the aptitude of the workforce and the nature of the technology.

Excerpted from How the West Was Lost: Fifty Years of Economic Folly—and the Stark Choices Ahead
Copyright © 2011 by Dambisa Moyo. All rights reserved.
Published in February 2011 by Farrar, Straus and Giroux, LLC.

ABOUT THE AUTHOR

Dambisa Moyo is an international economist who comments on the macroeconomy and global affairs. She is the author of the New York Times Bestseller Dead Aid: Why Aid is Not Working and How there is a Better Way for Africa.

In 2009 Ms. Moyo was named by TIME magazine as one of the “100 Most Influential People in the World,” and was nominated to the World Economic Forum’s Young Global Leaders Forum. Her writing regularly appears in economic and finance-related publications such as the Financial Times, The Economist and The Wall Street Journal.

She completed a PhD in Economics at Oxford University and holds a Masters degree from Harvard University. She completed an undergraduate degree in Chemistry and an MBA in Finance at the American University in Washington D.C.

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June 29, 2010

The Zeroes

Filed under: Book Reviews,Current Events — dylan @ 3:43 pm

Just when you think the stories of excess and insanity on Wall Street can’t get any more unseemly, along comes The Zeroes: My Misadventures in the Decade Wall Street Went Insane by Randall Lane, released today by Portfolio. In particular, there is the chapter entitled “Nails” about his business relationship with Lenny Dykstra. If you’ve never heard of Mr. Dykstra, let me introduce you…

“That’s my f*****’ ashtray money, bro, I don’t even know if I flew on their plane.”

—Lenny Dykstra

Apparently, Lenny should have transferred that money from his ashtray to his checking account because f*****’ ashtray money to him at the time was the $7,000 dollars Halycon Jets claimed he bounced a check to them for.

Lenny Dykstra earned the nickname “Nails” by smashing headlong into outfield walls and spitting profanity and tobacco juice on Major League baseball diamonds in the ’80s and ’90s. He was a member of two of the most excessive and raucous pennant winning teams in baseball history—the 1986 Mets and 1993 Phillies—so he fit right in when he retired into one of the most excessive and raucous cultures to ever exist on Wall Street. He was considered by Jim Cramer, who took him on as a columnist for TheStreet.com, as “one of the great ones” in investment advice. Cramer praised him as “a guy who is applying the same skills to money that he applied to sports.” And what skills did he bring to baseball, you might ask? Maybe it was his reckless abandon? As John Stewart joked last year, maybe “somebody gave him the sign to steal.”

Because, as detailed by Lane later in the book, Dykstra was not, in fact, “one of the great ones.” Cramer’s declaration on Dykstra was about as prescient as his defense of Bear Stearns’ position just before that once-great firm collapsed. It turns out the stock advice Lenny Dykstra was offering in his “Nails on the Numbers” column was taken from an professional marketing analyst, Richard Suttmeier, and written up by a ghostwriter. Lane also alleges in the book, and in a related article posted at The Daily Beast yesterday, that Dykstra accepted cash to hype stocks on TheStreet.com and in exchange for promised access to Cramer (though he goes out of his way to state that he’s sure Cramer had no knowledge of this). Lane ends his Daily Beast piece by stating that “Cramer … continues to draw hundreds of thousands of followers, via his CNBC show Mad Money—one of the few in the industry who managed to escape the past decade unscathed.” He must mean unscathed financially, because with his picks of Bear Stearns and Lenny Dykstra, you have to wonder… Is Jim Cramer dumb as Nails?

As for “Nails” himself, Leonard Kyle Dykstra has now exited his financial career the same way he exited his playing career—broken. When he was done with baseball, it was with a broken body. Broke financially, Dykstra claimed last year to be living in his car and hotel lobbies. With between $10 and $50 million worth of liabilities, he filed for Chapter 11 bankruptcy protection last July. I hope that he at least still has that money stashed in his ashtray.

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