Prof tries out a socialistic grading system … with predictable results

Ken’s Take:  This story has been making the email rounds.  Even if it’s just an internet legend, it makes common sense.  Project it into current political rhetoric…  

* * * * *

An economics professor at Texas Tech said he had never failed a single student before but had, once, failed an entire class.

That class consensus was that socialism worked –  no one is  poor and no one is rich, a great equalizer.

The professor proposed an experiment on socialism for this class: All grades would be averaged and everyone would receive the same grade.

After the first test the grades were averaged and everyone got a B. The students who studied hard were upset and the students who studied little were happy.

But, as the second test rolled around, the students who studied little for the first test studied even less, and the ones who studied hard on the first test decided they wanted a free ride too; so they studied little.

The second test average was a D! No one was happy.

The average on the 3rd test  was an F. Ouch. To the students great surprise, all failed.

Test scores plummeted as bickering, blame, name calling caused hard feelings.  Finally, no one wanted to study for the benefit of anyone else.

The lesson:  socialism  ultimately fails because when the reward is great, the effort to succeed is great; but, when government takes all the reward away; no one will try or want to succeed.

Not very complicated, at all …

* * * * *

Thanks to Sammie A.  for forwarding …

Microsoft tries again … with Windows 7 @ intro prices

Ken’s Take: It’s almost incomprehensible that a company with Microsoft’s tech savvy and  heft could have blown it as badly as they did with Vista.  For their sake, Windows 7 had better be an acclaimed product. You can only shoot and miss so many times.

The intro pricing expense makes sense except the $10 discount is simply leaving money on the table.  Do they really think that it will motivate any incremental purchases?

* * * * *

Excerpted from WSJ, Microsoft Plans Lure for Windows 7, June 26, 2009

The product

Windows 7 is a critical test of whether Microsoft can polish the reputation of its operating system after Windows Vista suffered early technical problems.

While Windows remains by far the most dominant software for running PCs, Vista’s problems were exploited relentlessly by Apple  in marketing campaigns for Macintosh computers. Macs have gained market share steadily over the past few years.

So far, early reviews of test versions of Windows 7 have been favorable.

* * * * *

The pricing

Microsoft announced a plan to encourage pc users to move to a much anticipated new version of its operating system, Windows 7 …  scheduled for release in late October.

Until July 11, consumers can preorder an upgrade copy of Windows 7 Home Premium through retailers for $49.99.

Most new PCs coming out starting in October will have Windows 7 preinstalled.

Any consumers who buy new PCs running its current Windows Vista operating system from now until Jan. 31 will receive free upgrades to Windows 7. 

For consumers who bought PCs prior to the free upgrade program, Microsoft said it will charge $119.99 for Windows 7 Home Premium — expected to be the most popular version for consumers — instead of the $129.99 upgrade price for the comparable version of Windows Vista.

Full article:
http://online.wsj.com/article/SB124593802040653741.html#mod=testMod

* * * * *

Obama’s Presidential Approval Index down to minus 5 points …

Rasmussen Reports, Wednesday, July 08, 2009

The Rasmussen Reports daily Presidential Tracking Poll for Wednesday showed that 32% of the nation’s voters now Strongly Approve of the way that Barack Obama is performing his role as President.

The number who strongly disapprove inched up another point to 37%  — the highest level measured to date.

Obama’s Presidential Approval Index rating – the difference between strong approvers and strong disapprovers –  is minus 5 — the lowest level yet for Obama .

Obama’s total approval rating – the sum of strong and “somewhat” approvers – has dropped to 52% among likely voters.

 

http://www.rasmussenreports.com/public_content/politics/obama_administration/daily_presidential_tracking_poll

* * * * *

According to psycho-analysts, what do Obama, Sanford, and Palin have in common?

According to some political-psyche pundits and news reports: they’re all narcissists. 

Some have gone a step further and presumptuously diagnose them as having  Narcissistic Personality Disorder (NPD), which is also called pathological narcissism.  (Details below)

• Sampling of articles:
  http://www.faithfreedom.org/obama.html
  http://the-reaction.blogspot.com/2009/07/yes-its-probably-time-for-sanford-to-go.html
  http://www.doublex.com/section/news-politics/does-sarah-palin-have-narcissistic-personality-disorder

* * * * *

When I heard the term the second or third time, I got curious.

Initially, I thought that NPD was a made-up talk show slur.  But, I did some digging and discovered that Narcissistic Personality Disorder really does exist as a documented pathology. 

Below are its diagnostic criteria and the “so whats” of the pathology. 

Worth reading …

* * * * *

Pathological Narcissism: How do you know ?

People may be  clinically diagnosed as having Narcissistic Personality Disorder if they exhibit at least 5 of the following attitudes and behaviors:

1. Have an exaggerated sense of self-importance; obsess over appearance and image

2. Are preoccupied with fantasies of unlimited success, power, brilliance, beauty, or ideal love

3. Believe they are  “special” and can only be understood by other special or high-status people

4. Require excessive admiration; crave the spotlight; expect to be recognized as superior to others.

5. Have a sense of entitlement; expect special treatment and automatic compliance with their wishes

6. Selfishly take advantage of others to achieve their own ends; lie, deceive, and manipulate; believe rules of morality don’t apply to them

7. Lack empathy; fail to recognize or sympathize with other people’s feelings and needs.

8. Are often envious of others and believe that others are envious of them; covet others’ relationships and possessions.

9. “Act out”: present arrogant, patronizing, contemptuous, risky, self-destructive behaviors or attitudes; when caught and confronted, blame bad behavior on other people and burdensome circumstances, show little conscience or true remorse. 

Excerpted from:
http://www.halcyon.com/jmashmun/npd/dsm-iv.html

* * * * *

Pathological Narcissism: So what ? 

Most people are somewhat narcissistic.

A healthy level of narcissism is a mature, balanced love of oneself coupled with a stable sense of self-worth and self-esteem. A healthy narcissist has a proportionate and realistic appraisal of his achievements and traits, and respects interpersonal boundaries.

Pathological narcissism is marked by an immature or impaired sense of one’s “true self” and situational reality that is exaggerated into a fraudulent, compensatory self-image

Down deep, a  pathological narcissist is usually deficient in self-esteem or self-worth.  He draws esteem and worth from the attention and admiration of others  Hence, the pathological narcissist is in constant pursuit of recognition and adoration, relishes the spotlight, and habitually preys his environment for more dependable admirers

Pathological narcissism is often a reaction to abnormal environments and situations (e.g., abuse, trauma, smothering, etc.), the repression of overwhelming memories and experiences, and the suppression of inordinately strong negative feelings (e.g., hurt, envy, anger, or humiliation).

Pathological narcissism is addictive and dysfunctional.  Pathological narcissists are obsessed by delusions of grandeur, superiority, and perfection – in life and love. As a result, they present themselves as image-obsessed (flawlessness) and very competitive (win at all cost).  They want to be at center stage, and when others might be merely motivated, they are strongly compelled. They are driven, relentless, tireless, and ruthless. They strive and fight and learn and climb and create and think and devise and design and conspire. They need to be in control of their relationships and environments.

Pathological narcissists are prone to self-defeating and self-destructive behaviors. They often abandon their commitments, careers, and relationships in mid-stream – losing interest, giving up, moving on.

Sub-consciously, a pathological narcissist may masochistically frustrate his deepest desires and drives; obstruct his own efforts; alienate his friends and sponsors; provoke figures in authority; actively (but unconsciously) seek, submit and relish mistreatment;  incite anger or rejection; engage in risky and improper behavior — all without conscience or true remorse.

Pathological Narcissism: What’s the prognosis?

While Narcissistic Personality Disorder can sometimes be moderated with psycho-therapy. the “prognosis is generally not good”.  That is, the likelihood of recidivism (i.e. repeat behavior) is very high and progressive (i.e.  it gets worse}. 

Excerpted from:
http://www.mayoclinic.com/health/narcissistic-personality-disorder/DS00652/DSECTION=symptoms

* * * * *

Best online medical summary of NPD – from the Mayo Clinic:
http://www.mayoclinic.com/health/narcissistic-personality-disorder/DS00652

* * * * *

Final shots; Obama, Sanford and Palin may be narcissists, but pundits shouldn’t be throwing around the term “Narcissistic Personality Disorder “ lightly.  It’s a real pathology.  Not to be taken lightly.

* * * * *

Cool viewing: Playing for change …

These songs and videos have been making the rounds.
(Over 12 million Youtube views)

The theme: street singers around the world.

Worth a view when you need a pick-me-up.

   ==> click to play         

* * * * *

Take the loyalty test …

From the summer read:
Why Loyalty Matters, Keiningham & Aksoy, Benbella Books, 2009

in prior posts, I highlighted 25 notable nuggets from the book and recounted the 10 Relationship DNA Factors (i.e “styles”)..

Here’s an acid test of loyalty:

Do your friends believe without a doubt that you convincingly demonstrate your loyalty to them? Specifically, do you

1. Devote enough time to your relationships with them?
2. Stand up for them when it is uncomfortable to do so?
3. Celebrate their successes without envy?
4. Support them during difficult times?
5. Hold fast to information provided in confidence?
6. Make every effort to carry out commitments to them, even when it requires considerable self-sacrifice?

Being truly loyal isn’t easy to do. 

Virtually all of us fall short in delivering true and comp,ete loyalty to friends and family.

The good news: there is always room for improvement.  Get started.

* * * * *

When loans exceed posted collateral, borrowers walk away … is that new news ?

Takeaway: About half of all foreclosures are attributable to loans going underwater.  That is, the borrower could keep the loan commitment and keep paying, but chooses to simply stop making payments.  For the other half, about half lose their jobs and can’t make payments and almost 40% are simply deadbeats who shouldn’t have been given the loans in the first place.  Relatively few borrowers are forced into foreclosure by rate hikes – e.g expired teaser rates and ARMs.

The good news: looks like almost all of the air has be let out of the bubble, i.e. the bottom may be near.

* * * * *

Stanley Liebowitz — professor of economics at the University of Texas, Dallas – cranked through a database covering more than 30 million mortgages to determine the root causes of foreclosures.

 

His main conclusion:”Although the government is throwing money — almost $2 trillion and counting — at the mortgage markets with the intent of stabilizing house prices, its methods are poorly targeted”.”

Why?  Because “Zero money down, not subprime loans, led to the mortgage meltdown. The important factor is whether or not the homeowner currently has or ever had an important financial stake in the house. Yet merely because an individual has a home with negative equity does not imply that he or she cannot make mortgage payments so much as it implies that the borrower is more willing to walk away from the loan.”

The good news: “Housing prices are likely to stop falling fairly soon  … That’s because current prices are approaching their long-term, inflation-adjusted pre-bubble level. These pre-bubble prices appeared to be a long-term equilibrium, meaning that prices would be expected to return to those levels.”  

WSJ, New Evidence on the Foreclosure Crisis, July 3, 2009
http://online.wsj.com/article/SB124657539489189043.html#mod=djemEditorialPage

* * * * *

Cutting Prof. Leibowitz’s numbers another way: about half of all foreclosures are attributable to loans going underwater.  That is, the borrower could keep the loan commitment and keep paying, but chooses to simply stop making payments.  For the other half, about half lose their jobs and can’t make payments and almost 40% are simply deadbeats who shouldn’t have been given the loans in the first place.  Relatively few borrowers are forced into foreclosure by rate hikes – e.g expired teaser rates and ARMs.

 

* * * * *

Get out your wallet … states move to tax internet sales

Ken’s Take: I hate taxes.  Not because I’m not willing to pay my fair share, but because so much of tax revenue is wasted or applied to  questionable political missions. 

That said, if there have to be taxes, I’m a fan of user taxes (think toll bridges) and consumption taxes (think sales taxes).

So, it never made sense to me that internet sales should be sales tax free, except for sites that have a local physical presence (think Best Buy or Barnes & Noble). Of course, I take advantage of the rules and buy stuff over the internet.   But, why should states forego this revenue and why should retailers with a local physical presence be put at a disadvantage.  It just doesn’t make sense.

I expect many states to pit internet sales in the sales tax bullseye.

* * * * *

WSJ, Amazon Cuts North Carolina Affiliates to Avoid Tax,
June 27, 2009

North Carolina is in the process of passing a law that would force companies to collect the tax if they have in-state online-marketing affiliates — people who get a sales commission from links on their Web sites. To avoid getting caught by the law,

Amazon is dropping the affiliates. Amazon.com Inc. said it has ended business relationships with marketing affiliates in North Carolina to avoid collecting sales tax in the state. 

But the decision highlights mounting tensions between online retailers and cash-strapped states across the country. Other states are considering similar laws that would use affiliates as a way to force companies to collect a sales tax for online purchases. 

Consumers are technically supposed to pay a so-called use tax for online purchases on their own, but most don’t. Many e-commerce sites rely on the price advantage they have over traditional retailers because they don’t have to collect taxes. , and forcing them to collect the tax upfront could take away some of that advantage.

Full article:
http://online.wsj.com/article/SB124603593605261787.html#mod=testMod

* * * * *

Senate shifts focus to college football … I say: go get ‘em !

 Excerpted from WSJ, “College Football Goes Down the Hatch:,
July 7, 2009

Today the Senate antitrust subcommittee will hold hearings on the Bowl Championship Series (BCS). Like an earlier hearing in the House, this one will ask whether the system by which college football chooses its national champion is “fair.”

Specifically, the congressional look-see into college football has been led by Sen. Orrin Hatch (R., Utah) and Rep. Joe Barton (R., Texas). They have not been shy about the menace they see. Mr. Hatch calls the BCS “un-American.” Mr. Barton likens it to “communism.” The Texas Republican has even introduced legislation that would forbid the BCS from holding a “national championship game” unless that game was the result of playoffs.

Full article:
http://online.wsj.com/article/SB124692993074303505.html

* * * * *

Ken;s Take: Now, some may ask: why is the Senate wasting time on this issue instead of working on the economy, healthcare reform, cap & tax  … ?

I disagree with those people.  This is precisely the kind of issue I want filling Congressional agendas. .I figure that every minute they’re fretting over college football, is a minute that they’re not wastefully spending another $1 trillion of our money.

In fact, isn’t it about time that Congress reopened their baseball steroids investigation?  Or, what about hearings on the Designated Hitter rule? I say, keep ‘em distracted as long as possible.

P.S. Since I prefer controversy over clarity, I like the BCS

* * * * *

What is your relationship style?

From the summer read:
Why Loyalty Matters, Keiningham & Aksoy, Benbella Books, 2009

in a prior post, I highlighted 25 notable nuggets from the book.

In my opinion, the most useful part of the book was a relationship framework based on the notion that each of us has our own relationship DNA that serves as the code for how we interact with one another. 

While  no two people are identical in how they connect with others, all are made up of the same 10 basic building blocks:

1. Leadership
2. Reliance
3. Empathy
4. Security
5. Calculativeness
6. Connectedness
7. Independence
8. Traditionalism
9. Problem-focused coping
10. Emotion-focused coping

Being high or low on a particular factor does not imply good or bad, since each factor has the potential to have both the positive and negative impact on our relationships, regardless of where one falls on the factor.

People have their own idiosyncratic relationship styles. We are able to build strong, loyal relationships with one another precisely because each of us is different. It is our differences that allow us to enrich each other’s lives.

* * * * *

Leadership is the ability to influence others to follow you voluntarily. Leaders have a general sense that they are in control of themselves and their surroundings, are motivated to achieve success, attain a comfort level interacting with others, and are not afraid to take risks. The leaders competitive spirit fuels ambition. Some people see this fortitude as a blessing; it alienates other people who see it as being too competitive and too aggressive.

Reliance describes how well a person trusts and attaches to people around him. Reliant people have a support web that is based on openness and accountability. They are willing to ask for help when it’s needed. Reliant people tend to have “deep” and long-lasting friends. People low in reliance usually try to solve problems autonomously without depending on others. They often have difficulty building long-term relationships.

Empathy is the ability to identify and sympathize with others. Empathetic people tend to have a more flexible outlook and appreciate people for who they are. This brings with it more friendliness and is inviting to others. Empathetic people are compassionate, kindhearted, and understanding. They see problems through the eyes and hearts of others. People with  low empathy create distance between themselves and others.

Security is a general sense of stability and comfort with oneself and one’s environment. It’s a feeling that things are going well and there is no need to worry excessively or be anxious. This leads to life with a lower amount of stress and pressure, and prevents being needlessly encumbered by a sense of the impending. Secure people are able to manage anxiety and stress successfully. Insecure people often feel “on the edge”, and think that things are either wrong, or are going to go wrong. Insecurity leads to worry.

Calculativeness is an attempt to control and promote one’s self image and create an ideal environment for personal benefit. Calculating people place importance on showcasing themselves in the right way.  So, they have an air of formality in their interactions, selectively articulate themselves to others (versus “being themselves”), and tightly control their self-presentation. Calculating people are often viewed as contrived, less sincere, and less worthy of complete trust. They are often perceived by others as unemotional and manipulative.

Connectedness is how one interacts with others on a personal level  Close and tight relationships typify the crux of this dimension. The feeling of connection to others forms the basis in the bedrock of happiness. People low in connectedness may be loners, or may be surrounded with casual friends — lacking deep and intense bonds.

Independence is marked by autonomy, self-discipline, and thoroughness. On the upside, independent people are rarely disappointed by others, since they usually take matters into their own hands. But, they often miss out on valuable opportunities by failing to capitalize on other people’s ideas and strengths.

Traditionalism reflects a desire for consistency, normalcy, and regularity. Traditionalists like to operate within their comfort zone, and are cautious when approaching truly unfamiliar situations. Traditionalists rarely flaunt their successes, instead preferring humility. As a result, they may sometimes be underrated and underappreciated. Of course, traditionalists miss out on new experiences that could potentially provide novel perspectives and excitement.

Problem-focused coping is taking a planned, reasoned and rational approach to solving problems, meeting challenges, overcoming obstacles, making choices, and withstanding the consequences of decisions. Problem-focused people dissect issues and examine them from multiple angles. They are sometimes viewed as coldly analytical and callous in their decision-making.

Emotion-focused coping tries to suppress or manage the emotions surrounding a problem, rather than the problem itself. Often, advice and comfort is sought from others.

* * * * *

Next up: The “Are you loyal? “ checklist.

* * * * *

Spiking the ball on the 3 yard line …

Ken’s Take: As a “get it done” aficionado, I’m intrigued by Team Obama’s inability to make anything really happen. Banks are still holding toxic assets and foreclosing, the economy is still unstimulated, etc.  Their recipe: motivating rhetoric, passed legislation, a new web site, and a declaration of victory … followed by ginned up numbers that they don’t even believe. Below is a partial explanation …

* * * * *
NY Times, “Vince Lombardi Politics”, David Brooks, June 30, 2009 

There are two types of political pragmatism. There is legislative pragmatism — writing bills that can pass.

Then there is policy pragmatism — creating programs that work. These two pragmatisms are in tension, and in their current frame of mind, Democrats often put the former before the latter.

On the stimulus bill, the Democratic committee chairmen wrote a sprawling bill that incorporated the diverse wishes of hundreds of members and interest groups. But as they did so, the bill had less and less to do with stimulus. Only about 40 percent of the money in the bill was truly stimulative, and that money was not designed to be spent quickly.

For example, according to the Congressional Budget Office, only 11 percent of the discretionary spending in the stimulus will be disbursed by the end of the fiscal year. The bill passed, but it is not doing much to create jobs this year and it will not do nearly as much as it could to create jobs in 2010.

On cap and trade, the House chairmen took a relatively clean though politically difficult idea — auctioning off pollution permits — and they transformed it into a morass of corporate giveaways that make the stimulus bill look parsimonious. Permits would now be given to well-connected companies.

The bill passed the House, but would it actually reduce emissions? It’s impossible to know.  A few years ago the European Union passed a similar  cap-and-trade system, but because it was so shot through with special interest caveats, emissions actually rose.

The great paradox of the age is that Barack Obama, the most riveting of recent presidents, is leading us into an era of Congressional dominance. And Congressional governance is a haven for special interest pleading and venal logrolling.

When the executive branch is dominant you often get coherent proposals that may not pass. When Congress is dominant, as now, you get politically viable mishmashes that don’t necessarily make sense.

Full article:
http://www.nytimes.com/2009/06/30/opinion/30brooks.html?_r=2&ref=opinion

* * * * *

Summer read: Why Loyalty Matters

Why Loyalty Matters, Keiningham & Aksoy, Benbella Books, 2009

This book positions itself as presenting “the groundbreaking approach to rediscovering happiness, meaning, and lasting fulfillment in your life and work.”  While the book falls short of that tall order, it did contain some insightful material,.

The central thesis of the book:

Loyalty binds us together as people, grounds us on principle, and breeds happiness.

Though a lack of loyalty is one of the major causes of failure in every walk of life, our culture seems to have decided that loyalty is an old-fashioned and unimportant virtue.  That’s wrong and needs to be fixed — the sooner, the better.

Below are 25 nuggets that I highlighted in my reading.

* * * * *

Ken’s 25 Nuggets from Why Loyalty Matters

1. Being loyal is the manifestation of the deliberate choices we make in life.
2. Loyalties are signs of the type of person we choose to be. They are the foundation of our character. They demonstrate what we value, what we believe, and what we want our world to be.
3. Historically, loyalty was not optional. Ostracism represented the ultimate disgrace. A disloyal society was considered a selfish society.
4. The world has shifted from a society of many deep, long-term loyalties to a society of  fleeting transactional relationships and ephemeral contacts.
5. A Turkish proverb says “show me your friends, and I will show you who you are.”
6. Loyalty differentiates friends from acquaintances. Loyal friends won’t abandon us when our need is the greatest..
7. In a world of easily shifting loyalties, we are likely to find ourselves surrounded by a churning group of fair-weather friends.
8. “It’s easy to get people to come to a party.”
9. “A passion for the new quickly wears off, and the old shines through.”
10. Close, supportive, connected relationships make for happiness, and people have fewer of these relationships today.
11. Oprah says: “lots of people want to ride with you in the limo, but what you want is someone who will take the bus with you when the limo breaks down.”
12. Loyalty is the hallmark of strong relationships and demands sacrifices. Few people will admit that they are not loyal; fewer believe believe that they are surrounded by loyal friends. Typically, we believe we are far more loyal than the recipients of our loyalty believe us to be.
13. The dream of being a rebel who rejects the conventions of society will always hold some appeal in our imaginations.
14. Real  loyalty endures inconvenience, withstands temptation, and does not cringe under assault.
15. 25% of Americans report having no close friends in which they could confide things that are important to them. On average, a person has only 2 close confidants.
16. Friendship =  loyalty, honesty, respect, trust, perseverance, intimacy, help, support, shared experiences.
17. In this electronic age, some people build synthetic identities and environments. Their real lives and real friendships can’t compete with their fantasized virtual worlds. So, basic values and common humanity get diminished.
18. Challenges to our self-image make us uncomfortable. But, “you cannot see the picture when you are inside the frame.”
19. “Most of us remain ignorant of ourselves, because self-knowledge is painful and we prefer the pleasure of illusion.”
20. Society cannot function and relationships cannot last if betrayal is the readily selected, probable outcome to every perceived grievance, disappointment, and inconvenience.
21. Loyalty should never be unconditional. If your loyalty to a relationship influences you negatively, then the relationship is “toxic.” While it may be repairable, sustaining  in its current form will damage you.
22. There is a difference between self-worth and self-absorption. Narcissism causes some people to devalue loyalty, by conveniently defining supreme loyalty as being loyal to one’s self. That is not a virtue!
23. Loyalty requires a commitment to the future. When we fail, we must make every effort to restore what we have damaged.
24. To forgive is not to condone.  In the end, forgiveness  may be needed to preserve a relationship. 
25. Never, ever ignore your moral compass! Know the difference between right and wrong and adhere to it.

* * * * * *

Subsequent posts will ask the questions: what is your relationship style? And, are you loyal?

* * * * * *

Re: the economy … let’s take a Mulligan.

Note: “”Mulligan” is a golf term.  When a golfer hits a particularly bad shot, he may petition his buddies (usually fruitlessly)  for a 2nd try, a “do over”.  That’s called a Mulligan

* * * * *

Ken’s Take:  Washington has thrown trillions of dollars at this recession, including that famous $787 billion in more spending that was supposed to yield $1.50 in growth for every $1 spent.

The ’stimulus’ promised a jobless peak of 8%; it’s now 9.5%.

The defense: (1) We guessed wrong (Biden), (2) Less than 20% of the stimulus has hit the economy (wasn’t it an “emergency bill”  intended for this year?), (3) It’s Bush’s fault (remember him, from long ago?)

Since so little of the stimulus has been spent, let’s reclaim the dough and either bank it or do it right.

* * * * *

Extracted from WSJ, “Tilting at Windmill Jobs”, July 3, 2009

As always, a sustained expansion and job creation must come from private investment and risk-taking.

Yet as America’s entrepreneurs look at Washington they see uncertainty and higher costs from:

a $1 trillion health-care bill;

• higher energy costs from the cap-and-tax bill;
• new restraints on consumer lending in the financial reform bill;
• new tariffs and threats of trade protection;
• limits on compensation and banker baiting;
• the possibility of easier unionization, among numerous other Congressional brainstorms.

None of this inspires “animal spirits.”

The best thing Mr. Obama could do to create jobs would be to declare he’s dropping all of this and starting over.

http://online.wsj.com/article/SB124657739768489217.html

* * * * *

Is Twitter for serious marketers ? … Get serious.

Extracted from “Is Twitter for Serious Marketers?”,Tom Davenport The Next Big Thing, April 9, 2009

Do serious marketers spend a lot of time and energy on Twitter campaigns? I doubt it. Sure, go ahead and play around with it — it doesn’t cost much. But I defy you to do serious brand management in 140-character messages. I defy you to prove that Twitter users are your typical customer — unless you sell bubble tea or something similar — or that their tweets are a true reflection of their relationship with your company.

Let’s face it — Twitter is a fad. It has all the attributes of a fad, including the one that people like me don’t get its appeal. It has risen quickly and it will fall quickly. It’s this year’s Second Life — which, you may have noticed, nobody is talking much about anymore. One Daily Telegraph article that did talk about it noted, “While the site is still beloved by geeks and the socially awkward …  it has been virtually abandoned” by “normal” people and businesses.” Ouch!

I’m not as negative about the business and marketing potential of some other social media. For example, because Facebook offers the promise of monetizing social networks — though it hasn’t done so yet — they are not to be easily dismissed.

One conclusion I’ve come to is that we should unbundle the concept of “social media,” because some of its components are much more useful than others in a business and marketing context:

Facebook? I suspect it faces prosperity, over time. Second Life? On life support. Twitter? In the long run, not worth a tweet.

Full article:
http://blogs.harvardbusiness.org/davenport/2009/04/is_twitter_for_serious_marketer.html

According to Gallup, Obama’s approval ratings are …

I usually cite the Rasmussen poll numbers.  For the record, they now show Obama running a negative PAI (Presidential Approval Index).  That is, more people strongly disapprove of the job he’s doung as president than strongly approve.  In prior posts, I’ve argued why that’s a better indicator than the groos approval numbers usually reported in mainstream media, and I’ve highlighted the demographics (e.g. rock solid among blacks; double digit negative among whites).

Gallup is longer established than Rasmussen, more brand-recognized and its methodology is arguably more favorable to Obama since it samples more than “likely voters’. 

Well, there even seem to be some “issues’ cropping up in the Gallip numbers.

Gallup has made available Obama’s approval ratings over time, by demographic groups.  While his support is rockhard among some groups (Liberals, blacks, low income, Northeasterners), it is slipping among some demographic groups with approval majorities in those groups threatened.  More specifically,

Comparing the periods Jam.19 to 25 (the Inauguration) to the latest reporting period June 22 to 28:

Pres. Obama’s overall job approval rating is still high (60%), but that’s down 7 points

Disapproval has increased by 20 points, from 13% to 33%

Approval among folks earning $90,000 or more is down 14 points to 52%;

Among whites approval is down 11 points to 52%; 

in the South approval is down 10 points to 54%;

Among college grads w/o post-grad degrees approval is down 14 points to 55%;

Among marrieds approval is down 9 points to 52%;

Among weekly churchgoers approval is down 9 points to 49%.

Is the bloom coming off the rose ?

Source data:
http://www.gallup.com/poll/121199/Obama-Weekly-Job-Approval-Demographic-Groups.aspx

* * * * *

If you can’t trust Walmart, who can you trust?

Ken’s Take: Yesterday,  Walmart jumped on the Obamawagon and threw its support behind employer mandated healthcare insurance – the provision that layers additional taxes on any company that doesn’t offer its employees health insurance.

For sure, Walmart isn’t being altruistic.  This is a straightforward strategic-political gambit. 

Walmart already provides health insurance to the majority of its employees – essentially, all full-timers.  They might have to extend coverage to part-timers – or, they might be hoping that part-timers are outboarded from legislation — or, they just hire fewer part-timers (since their advantage over full-timers gets minimized)..

More important, few smaller retailers provide health benefits today.  All of these guys – Walmart’s competitors – will get slammed with higher taxes. In other words, their costs go up, theor margins go down, and Walmart gets a huge competitive advantage.  The small guys won’t be able to compete.

Also, there may be a quid pro quo for Walmart politically. 

Specifically,  if union “card check” gets passed, Walmart will have to be priority one for unionization.  That would be a way bigger problem than employer mandated healthcare insurance. 

My bet: Team Obama prizes the healthcare plan more than card check and cut a deal with Walmart to back off card check. 

Problem for Walmart: administration has a tendency to change rules and break promises.  Could backfire on Walmart.

* * * * *

Excerpted from WSJ, “ Everyday Low Politics” – Wal-Mart buys protection by selling out its competitors”. July 2, 2009

The employer-mandate endorsement falls into the self-interest department. A boost in the minimum wage helps Wal-Mart because most of its workers already earn well over the wage floor, and it hurts smaller, less-profitable competitors that can’t afford to pay more. On health care, an employer mandate will also reduce the margins of their rivals. This is especially true for businesses of a slightly smaller size that cannot insure on the same scale or currently don’t reach the 55% of the 1.4 million Wal-Mart employees who are insured through the company. (Another 40% or so are covered by spouses or the likes of Medicaid.)

The Wal-Mart-Stern-Podesta troika made sure to specify that “shared responsibility” must be “fair and broad in its coverage,” with an emphasis on the latter. The Mom & Pop stores that liberals accuse Wal-Mart of running out of town may get hit hardest. Democrats say they’ll exempt certain small businesses, size details to be determined. But if the mandate is limited to large employers, it won’t reduce the number of uninsured. According to the Kaiser Family Foundation, 99% of firms with more than 200 workers provide health benefits, only 62% of smaller firms.

Businesses are also largely indifferent whether compensation comes in the form of wages or benefits, so an employer mandate — an indirect tax on employment — may cause wages to rise more slowly. Or it may simply mean fewer jobs.

Full article:
http://online.wsj.com/article/SB124649408574683287.html

* * * * *

Things are tough all over … Queen of England running out of money (ouch).

This one speaks for itself … bailing out the Queen:

From the UK Guardian, “Queen running out of money for palace expenses”, June 29, 2009

The Queen’s reserve of public funds is set to run out by 2012, according to Buckingham Palace accounts published today, raising expectations that the government will be asked to increase the civil list, which pays for the running of the royal household.

The Queen has used up £6m from the cash reserve to boost the civil list. The amount is the largest ever drawn from the reserve of surplus cash from the list.

Palace officials have complained that they lack funds to properly maintain some royal residences. They once claimed that part of the facade of Buckingham Palace was in such bad repair that a chunk fell off, narrowly missing Princess Anne.

The total cost to the taxpayer of keeping the monarchy increased by £1.5m to £41.5m during the 2008-09 financial year – effectively 69p per British person last year and an increase of 3p on the previous year. The civil list was £13.9m last year, 43% of which came from the Queen’s reserve.

If she continues drawing on the reserve at the current rate, she will run out of funds by 2012 – the year of her diamond jubilee.

The fund has gone down from £35m to £21m over the last decade.

The current deal – in which the Queen gets £7.9m a year – was agreed by Sir John Major in 1990. The arrangement expires in 2010.

http://www.guardian.co.uk/uk/2009/jun/29/queen-civil-list-running-out

* * * *

Reward healthy lifestyles? … Dems say: NO WAY !

Ken’s Take: The Safeway healthcare program – loaded with insurance discounts for people who don’t smoke, watch their weight and cholesterol, and generally live healthier – has gotten mucho press coverage – since it works !

Nonetheless, proposed healthcare reform packages are either silent on healthy lifestyle incentives or explicitly deter them. I guess the logic is that they would discriminate against people who smoke, eat too much, and refuse to walk around the block. My view: those are choices and behaviors, not genetics.  Go ahead and do them, but don’t expect me to subsidize them.

On a related topic: all the proposed healthcare reforms include – explicitly or implicitly – a rationing of healthcare in an person’s final years.  First, how can regulators know when the game clock is about to expire?  Second, shouldn’t Sen. Kennedy – who, incidentally, is old, fat, and a notorious alcohol abuser – walk the talk and start refusing medical treatments ?

* * * * *

WSJ, “Reform Needs Healthy Life Incentives”, Garrington, June 29, 2009

Sen. Kennedy doesn’t want insurers to reward good behavior.

The House Democrat and Kennedy-Dodd proposals do all they can to prevent health-insurance premium rates and coverage terms from reflecting the health status — and thus health-related behavior — of any insured person. Health status would not be permitted to affect coverage decisions, terms or pricing.

Benefit design and marketing of coverage would be regulated in an attempt to keep insurers from rewarding healthier people. Retrospective “risk adjustment” would be employed to reallocate funds from insurers that experience lower medical costs to those with higher costs. If an insurer were to attract relatively more healthy people — or keep more people healthy — it would run the risk of paying some or all of the gains to competitors.

The proposals’ strong aversion to having insurance rates or coverage terms related to health status reflects the view that either the need for health care is immune from individual control, or that a person should not be financially responsible for behavior that contributes to poor health, or both. These views are difficult to reconcile with the consensus that unhealthy behavior contributes significantly to obesity, diabetes, heart disease and cancer, and thus accounts for a substantial proportion of health-care costs.

Regulation that seeks to divorce insurance rates and coverage terms from health status would deter potential innovation that might provide meaningful financial incentives for healthy behavior and lower costs.

Incentives for healthy behavior have traditionally been weak under employer-sponsored health insurance, in part due to federal and state regulation that constrains the ability to reward healthy behavior. Turnover among employees and policy holders also reduces incentives to make long-term investments to promote healthy behavior.

Health-care reform should seek to encourage rather than discourage private innovation to provide incentives for healthy behavior. Safeway’s program offering employee premium discounts related to tobacco use, weight control, blood pressure and cholesterol levels is a good example.

Financial incentives for healthy behavior have the potential to significantly reduce costs without reducing quality.

An aversion to having health-insurance rates and coverage linked to individual behavior may be on the verge of becoming national policy. If that happens, the unintended consequences could be very costly.

* * * * *
Mr. Harrington is professor of health-care management and insurance and risk management at the Wharton School of the University of Pennsylvania

Full article:
http://online.wsj.com/article/SB124623169143066199.html

* * * * *

Raise your hand if you want an appointment with a bad doctor … in a couple of months, that is.

Ken’s Take: An interesting irony – current proposals tax company provide health insurance benefits except for union members – and most plans involve paying doctors less – fewer reimbursable services and lower fees. I guess union autoworkers contribute more to society than doctors do.

Begs a couple of rhetorical questions: (1) will lower pay attract better or worse doctors ?  (2) would you rather be treated by a good doctor or a bad doctor ?  (3) how long are you willing to wait to see a bad doctor.

The shallowness of Washington thinking never ceases to amaze.

* * * * *
Prompted by: IBD, “Alice in Medical Care”, Sowell, June 30, 2009

Politicians may talk about “bringing down the cost of medical care,” but they seldom even attempt to bring down the costs. What they bring down is the price– which is to say, they refuse to pay the costs.

We can even refuse to pay for so many doctors. But that just means that we will have to wait longer to see a doctor– as people do in countries with government-run medical systems.

In Canada, 27 percent of the people who have surgery wait four months or more. In Britain, 38 percent wait that long. But only 5 percent of Americans wait that long for surgery.

Surgery may well cost less in countries with government-run medical systems– if you count only the money cost, and not the time the patients have to endure the ailments that require surgery, or the fact that some conditions become worse, or even fatal, while waiting.

A recent report from the Fraser Institute in Canada shows that patients there wait an average of ten weeks to get an MRI, just to find out what is wrong with them. A lot of bad things can happen in 10 weeks, ranging from suffering to death.

Anybody can refuse to pay any cost. But don’t be surprised if you get less when you pay less. None of this is rocket science. But it does require us to stop and think before jumping on a bandwagon.

Full article:
http://www.realclearpolitics.com/articles/2009/06/30/alice_in_medical_care_97231.html

* * * * *

Guaranteed lifetime employment … nice work if you can get it.

Ken’s Take: One of the reasons that college costs so much is that faculty salaries are the bulk of the costs, many (most) faculty positions are tenured – guaranteed lifetime employment, and many tenured faculty have throttled back or turned off the ignition completely.  Colleges have virtually no way to purge the slackers from the payroll – even in tough economic times. 
* * * * * 

Excerpted from WSJ, Tenure and Academic Freedom, June June 23, 2009

All over the country, colleges and universities are feeling the financial crunch: Endowments are down, students can’t afford to pay tuition, and some state legislatures are even trimming higher-education budgets.

Unfortunately, thanks to the recent ruling of a judge in Colorado, some college administrators have just lost one way to keep their costs under control.

Under the current system at most colleges, some professors many professors have a job for life – that’s “tenure”.  They can technically be fired for gross misbehavior or incompetence. But once they’ve been granted tenure, a university is generally stuck with these teachers. And paying the salaries of tenured professors can add up, especially when a professor may no longer be teaching many classes either because of laziness or lack of student interest in his or her field.

Tenured profs argue thatwithout tenure, they are subject to firing risk if administrator’s or trustee’s dislike for his teaching or research, or for positions taken on public issues. Courts have agreed that “the public interest is advanced more by tenure systems that favor academic freedom over systems that favor flexibility in hiring or firing … by its very nature, tenure promotes a system in which academic freedom is protected.”

But does tenure, as the judge argues, actually protect academic freedom?

To protect academics from arbitrary dismissal, as well as to attract smart people to the profession, schools offered a certain amount of job security.

Some of the courses taught by professors who have sued to protect tenure … are all fields of study (e.g. statistics) that have fairly definitive answers. Faculty members don’t really need the freedom to ask controversial questions in discussing them.

But what about those teachers who are pursuing higher truths? Has tenure really protected their ability to question and research freely? For the most part, no.

The truth is that tenure has served as an instrument of conformity since tenure votes are often glorified popularity contests. Those professors who want tenure and disagree with the prevailing trends in their field — or the political fashions outside of it — know that they must keep their mouths shut for at least the first seven years of their careers.

Harvard professor Harvey Mansfield once famously advised a conservative colleague to wait until he had tenure and only then to “hoist the Jolly Roger.” But few professors are getting around to hoisting the Jolly Roger at all. Either they don’t have a viewpoint that is different from their colleagues, or they’ve decided that if they are going to remain at one place for several decades, they’d rather just get along.

The fact that university professors donated to President Obama’s campaign over John McCain’s by a margin of eight to one is only the tip of the iceberg.

Is tenure to blame for the unanimity of thinking in American universities? It’s hard to tell. But shouldn’t the burden of proof be on the people who want jobs for life?

http://online.wsj.com/article/SB124571593663539265.html#mod=djemEditorialPage

* * * * *

Buoyed by low-earners, Obama’s PAI back to zero …

Sunday’s Rasmussen tracking poll showed Pres. Obama’s Presidential Approval Index at zero … 32% strongly approved of the job he’s doing as president; 32% strongly disapprove – netting to a zero.

 Things get more interesting when you dive down into the numbers.  Previously, I posted that virtually all blacks strongly approve; he runs about a 10 point PAI deficit among whites; and he roughly breaks even with all others.

By income, low earners (under $20,000 per year) give him a plus 34 PAI; folks earning $60,000 (about where income taxes kick in these days) to $100,000 give him double digit negatives; he breaks even among the rest.

TakeAway: nation is increasingly split by taxpayers staus – if you don’t pay income taxes (or are so rich that it doesn’t matter). Obama’s likely to be your man. 

http://www.rasmussenreports.com/public_content/politics/obama_administration/daily_presidential_tracking_poll

* * * * *

That thud you hear: the government toxic asset plan … see a pattern ?

Ken’s Take: The foreclosure program didn’t slow foreclosures, the stimulus program hasn’t stimulated anything, and the toxic asset program hasn’t bought any toxic assets.  Are these guys ever going to be held accountable for their free-spending and ineffective programs?

* * * * *

WSJ, “Wary Banks Hobble Toxic-Asset Plan”, June 29, 2009

The Obama administration’s plan to enable banks to dump troubled assets is facing troubles.

In March, Treasury Secretary Geithner announced  a two-pronged plan to offer favorable government financing to entice investors to buy bad loans and toxic securities from banks.
But that initiative — called the Public-Private Investment Program, or PPIP — has lost momentum.

Big banks worried about having to sell at fire-sale prices while small banks feared they would be shut out.

Potential buyers balked at the risk of doing business with the government, concerned that politicians might demonize them for making big profits.

Early this month, the Federal Deposit Insurance Corp. essentially shelved one arm of PPIP — the government-financed buying of bad bank loans.

Mr. Geithner recently said the other part — to facilitate the buying from banks of troubled securities, many backed by real-estate loans — could be scaled back because investors are “reluctant to participate.” This week, the government is expected to name investment firms to manage this securities-buying portion

Full article with lots of detail:
http://online.wsj.com/article/SB124622976702566007.html#mod=testMod

* * * * *

Gov’t Motors agrees to assume legal responsibility for defect-related injuries drivers suffer … well, kinda.

Ken’s Take: First, the gov’t tossed contract and bankruptcy laws out the window and screwed the secured creditor (i.e. bondholders) by subordinating their claims beneath unsecured UAW claims.

What I missed was that the gov’t was also tossing product liability claims out, too.  For example, if you’re driving a Chrysler car and the engine blows up because of a defect, your family gets zilch from the New Chrysler.

GM was trying to pull the same trick.  But, since GM is bigger and folks had time to think about the details of the gov’t orchestrated settlement, a ruckus broke out.

Now, the New GM will altruistically accept responsibility for claims that might arise from Old GM cars that are still on the road.  Big of them.

Question: why in the world would anybody buy a bond issued by New Chrysler and New GM, knowing that their security is, well, unsecured.

And, why would anybody take a chance buying a car from those companies.  You’ve gotta have a high risk tolerance, for sure.

* * * * *

Excerpted from WSJ, “GM to Take On Future Product-Liability Claims”, June 28, 2009

GM under pressure from state attorneys general, has agreed to assume legal responsibility for injuries drivers suffer from vehicle defects after the auto maker emerges from bankruptcy protection.

The concession means consumers who are injured in car accidents after GM emerges from Chapter 11 protection will be able to bring product-liability claims against the new government-owned auto maker.

Under GM’s original bankruptcy plan, the auto maker planned to leave such liabilities behind after selling its “good” assets to a “New GM” owned by the government. That meant future GM car-accident victims who believed faulty manufacturing caused their injuries would be unable to sue the New GM. Instead, they would have been treated as unsecured creditors, fighting over the remains of GM’s old bankruptcy estate.

In court papers, GM maintained it was not legally-required to take on the claims, saying “federal-preemption” meant the bankruptcy code overrode state laws governing the rights of car-accident victims to sue the new GM. It also noted that Chrysler, which recently emerged from bankruptcy in a deal with Fiat, would not be responsible for such claims.

But the auto maker said it agreed to take on future product-liability claims “to alleviate certain concerns that have been raised on behalf of consumers.”

Full article:
http://online.wsj.com/article/SB124614495545265019.html#mod=testMod

* * * * *

ABC’s loses on a sure bet … “The Philanthropist” and repeats outdraw the Obama healthcare infomercial (ouch!).

Ken’s Take: The mainstream media seems to be ignoring it, but virtually nobody watched the Obama healthcare  infomercial on ABC.  Hmmm.

Couple of observations:

(1) Maybe, just maybe, Obama yak-yak fatigue is finally setting in

(2) So, ABC took a hit to it’s journalistic reputation without even getting a swell of viewers,  That should teach the compliant networks a lesson.

(3) Imagine the ratings if Michael Jackson (may he RIP) had died a day earlier than he did

* * * *

From  The Live feed, “ABC’s White House special struggled for viewers”, June 25, 2009

President Obama’s town hall meeting on health care delivered a sickly rating Wednesday evening.

The one-hour ABC News special “Primetime: Questions for the President: Prescription for America” (4.7 million viewers, 1.1 preliminary adults 18-49 rating) had the fewest viewers in the 10 p.m. hour (against NBC’s “The Philanthropist” debut and a repeat of “CSI: NY” on CBS). The special tied some 8 p.m. comedy repeats as the lowest-rated program on a major broadcast network.

The special was shot at the White House and featured the president answering questions about his health care plan. The president’s primary message was that those who like their current insurance will be able to keep it and that taking no action will result in higher health care costs.

The special drew fire from Republican leadership after refusing to allow an official opposition response, or even a paid ad. ABC also interviewed Obama on “Good Morning America” to help promote the special.

ABC points out that “Questions for the President” continued after the local news during late night on “Nightline” (4.3 million) and helped boost the news program to pull more viewers than CBS’ “Late Show” and NBC’s “Tonight Show.”

Source:
http://www.thrfeed.com/2009/06/abcs-white-house-special-struggled-for-viewers.html

* * * * *

The eco-question: paper or plastic ? … not so fast!

TakeAway: Studies suggest that much maligned plastic bags aren’t so bad for the environment after all … as long as they get recycled.

* * * * *

Excerpted from WSJ, “ Paper or Plastic? A New Look at the Bag Scourge”, June 12, 2009

When plastic grocery bags were introduced some 30 years ago, they were touted as light, long-lasting and cheap. They caught on so well that hundreds of billions are dispensed each year, creating a modern menace that often winds up nestled in trees, stuck in sewers and drifting in oceans.

Faced with the growing blight, countries from Ireland to China and cities from San Francisco to Washington, D.C., have moved to ban or tax their use. A United Nations official called for outlawing them world-wide.

There is growing evidence that the production, use and disposal of plastic bags put less burden on natural resources than paper bags. Meanwhile, a knock against plastic bags — that they can’t be conveniently recycled — is becoming less persuasive as more cities start accepting plastic bags in curbside recycling programs.

Most American consumers .. go through five or 10 plastic bags each week.  More than 90% of Americans reuse their bags at least once … for lining wastebasket,  carrying lunches, or from or cleaning up after a dog.

Various studies have examined whether paper or plastic grocery bags are environmentally friendlier. Plastic bags consume less energy and water and produce less pollution, including greenhouse-gas emissions. But, plastic bags  are rarely recycled. But plastic bags are recycled at less than one-third the rate of paper bags.

Plastic bags are difficult to recycle for the same reasons they are convenient to use. They are so light they fly out of curbside recycling bins, which often lack lids. If they make it to a recycling plant, the bags tend to wrap themselves around machinery, gumming it up. So, most curbside recycling programs don’t accept them.

U.S. cities that accept the bags in their recycling bins typically ask residents to stuff a lot of bags inside one bag, sausage-like, to make the bags easier for recycling workers to handle. It’s what industry insiders call a “bag of bags.”

Virtually all studies say the environmentally friendliest option is to choose a reusable grocery bag, and to reuse it at least 4 times, regardless of what that bag is made of.

Full article:
http://online.wsj.com/article/SB124473522987806581.html?mod=djemalert

The 10 Commandments of Innovation & Entrepreneurship …

Ken’s Take: Kawasaki has a track record, so worth listening to. Note especially #1 re: mission statements and #5 re: rolling the DICEE

* * * * *

Knowledge@Wharton, “Ten Commandments from Entrepreneurial ‘Evangelist’ Guy Kawasaki”, June 10, 2009

Guy Kawasaki  became the second software “evangelist” at Apple Computer, where his job from 1983 to 1987 was to convince people to create software for the Macintosh. Kawasaki fondly recalls his colleagues at Apple as visionary, driven and “arguably the greatest collection of egomaniacs in the history of California — though the record has subsequently been broken by Google.”

Here are Kawasaki’s “Ten Commandments” for innovation and entrepreneurship:

1. Make meaning, not money. “Most companies founded on the concept of making money pretty much fail …  focus on making their product or service mean something beyond the sum of its components “.  Nike “turned $2.50 of raw materials into something that stands for efficacy and power and liberation.  Apple has done it with the Mac and the iPhone.

2. Make a mantra, not a mission statement. Bland, generic company mission statements — about “delivering superior-quality products and services for our customers and communities through leadership innovation and partnerships” — serve no one  …  keep it short and define yourself by what you want to mean to consumers. FedEx is about “peace of mind.” To get everyone internally and externally on the same page, explain why your organization exists and how it meets customers’ needs and desires.

3. Jump curves. Innovating is harder than just staying a little bit ahead of competitors on the same curve. “If you’re a daisy-wheel printer company, the goal is not to introduce Helvetica in another point size. The goal is to jump to laser printer”.

4. In product design, “roll the DICEE.” That’s an acronym. “D” is for deep, which to Kawasaki means thinking about features that go beyond the norm. One of his favorite “deep” ideas: Fanning Reef sandals, which have a bottle opener built into the sole. “I” is for intelligence, as seen in the design of Panasonic’s BF-104 flashlight, which uses batteries of three different sizes to accommodate the random mix of extra batteries many people have around the house. “C” is for complete — or being not just a product, but including support and service. The first “E” is for elegance: Beauty matters, according to Kawasaki. The second “E” is for emotive. “Great products generate strong emotions: Think Harley Davidson, Macintosh.”

5. Don’t worry, be “crappy.” This doesn’t mean ship a bad product, but “your innovation can have elements of crappiness to it,” Kawasaki said. Twitter has a litany of flaws, but it is changing people’s habits.

6. Polarize people. Try to be all things to all people and you often ship mediocrity. The boxy Toyota Scion xB looks ugly to some people but very cool to its devotees.

7. Let 100 flowers blossom. You never know where the flowers will emerge, so let them grow. Innovations may attract unexpected and unintended customers. Think of Avon Products’ Skin-so-Soft cream, which became popular as a mosquito repellent.  Learn who’s buying your product, ask them why and give them more reasons. “That’s a lot easier than asking people who aren’t interested ‘why not,’ and trying to change their minds.”

8. Churn, baby, churn. Always improve. Listen to customers for ideas. Once the product reaches the hands of customers, it’s time to start listening to their feedback.

9. Niche yourself. Find your place. A product or service does not need to be unique if it delivers extraordinary value to a select group.

10. Follow the 10-20-30 rule when pitching to venture capitalists. That means no more than 10 PowerPoint slides, a limit of 20 minutes for the pitch, and using a 30-point font size in the presentation (to keep it simple). The goal of such pitches isn’t to walk home with a check,  it’s to “not be eliminated” from consideration.

Full article:
http://knowledge.wharton.upenn.edu/article.cfm?articleid=2258

ESPN to sports fanatics: Get out your wallet … ESPN to advertisers: Get out your wallet, too.

Ken’s Take: It’s no secret that click through response rates to online ads) is miniscule.  A current hot topic is whether “engaged” or “attentive” site visitors are more ad responsive.  Conventional wisdom says ‘yes’.  If true, sites with engaged visitors should be able to command higher ad rates.

Couple that with longstanding wisdom that people take stuff more seriously when they pay for it. and you have a new formula for online profits: generate revenue by charging a subscription fee for site access, and sell advertisers on the notion that they should pay more for an engaged base of exposures.

Might work … if the content is powerful and the base of subscribers is big enough.

* * * * *

Excerpted from Business Week, “ESPN Bets Sports Fanatics Will Pay for Online”, June 4, 2009

ESPN The Magazine, the decade-old print offshoot of Walt Disney (DIS)’s wildly successful cable sports network, is about to begin charging $6.95 a month for access to its Web site.

At a time when many media companies are merely jawboning about demanding fees from online users, this magazine is doubling down on it.

More broadly, such a move by a well-known name will plumb whether a paying customer equals a more enthralled customer—the term in the trade is “engaged”—and a more valuable target for advertisers as well.

ESPN The Magazine is well placed to test these waters. Rabid sports fans have bottomless appetites for sports info and the universe of data, jargon, and inside jokes surrounding it. 

“There is an audience that just loves games” and flits on and off sports sites only to grab scores, says ESPN.com Editor-in-Chief Rob King. But others “love the in-between stuff—the predictive stuff that helps them be smarter fans.” They’re the people the company is banking on. It also helps that many like to wager on sports, though ESPN doesn’t say so: When information can be translated into currency, people pay for it. Insider’s most popular features include data, tools, and deep-dig analyses geared to fantasy-league players and other stat geeks, and “Rumor Central,” which gathers and comments on sports tidbits from other media, such as newspapers and local call-in radio shows.

“Why is it, in this business, we are apologetic when asking [consumers] to pay for what we give them online?”

There is a a case that a subscribing customer is more “engaged” and thus more valuable to marketers than one who hops from one free site to another.

But, industry observers warn that it’s not a sure thing that an obsessive fan’s focus on ESPN Insider also means “there is more engagement with advertising.” That’s a debate that ESPN will presumably take up later, should it persuade more readers to pay up online.

Full article:
http://www.businessweek.com/magazine/content/09_24/b4135072008154.htm?chan=magazine+channel_business+views

Summer Read: Bold Endeavors

Bold Endeavors: How Government Built America, and Why It Must Rebuild It Now by Felix Rohatyn

Background: Rohatyn was an investment banker with Lazard Freres before a second career in public service bailing out NYC from the brink of bankruptcy and serving as Ambassador to France under Clinton.

Central premise: “The nation is falling apart — literally. America’s roads and bridges, schools and hospitals, airports and railways, ports and dams, water lines and air control systems — the country’s entire infrastructure — is rapidly and dangerously deteriorating.

America needs to rebuild its infrastructure. It is a critical national priority, a costly long — term investment, and a visionary enterprise. It is a program that can provide tens of millions of much-needed jobs. 

It is an undertaking that can only succeed if it is directed, coordinated, and largely financed by the federal government.

And, contrary to the glib reaction for many contemporary ideological naysayers, large-scale public investments can work, and with remarkable long-term success.”

Consider 10 bold endeavors that were done by the Federal government and had a 

 

1. Louisiana Purchase (1803) … doubled the size of the country, and put the Port of New Orleans under US control
2. Erie Canal (1825) … linked the Atlantic Ocean to the Great lakes … established NYC as a major port and center of commerce
3. Transcontinental Railroad (1869) … enabled coast to coast travel
4. Land Grant Colleges (1862) … provided greater access to higher education
5. Homestead Act (1862) …  incentivized people to move west and settle the new frontiers
6. Panama Canal (1914) … shorten travel time from Atlantic to Pacific, economic and security benefits.
7. Rural Electrification Administration (1936) … brought electric power to sparsely populated rural areas
8. Reconstruction Finance Corporation (1936)  …  TARP v.1.0 … provided credit backstops and bailout funds to companies struggling out of the Depression.
9. G.I. Bill (1944) … provided education benefits, supplemental unemployment benefits to service people returning from WWIIto
10. interstate Highway System (1956) … provied “go anywhere” coverage for US citizens – in times of peace and war.

Bottom line:  The above is about all that you ever need, so save your money

The Safeway Rx for rising healthcare costs …

TakeAways: Safeway’s keys to containing healthcare costs (1) make sure everybody has some “skin in the game” – i.e.  focus on “out of pocket” costs — don’t eliminate them;(2) steep premium discounts for good behavior, e.g. not smoking, weight control; (3) a database of providers and costs so people can shop around.  Works for me …

* * * * *

Excerpted from WSJ, “Mr. Burd Goes to Washington Business will pay for government health care”, June 19, 2009

As recently as 2004, Safeway was suffocating under health-care costs growing at 10% a year. The company blew up the company’s existing health-care structure and replaced it with one that embodied market principles — choice, responsibility, competition and price.

Nearly 80% of the 30,000 nonunion Safeway workers who take part in the program rate it good, very good, or excellent.

The Safeway plan has two main parts that work in tandem.

The first involves giving employees a financial stake in the system. Employees have skin in the game. The company deposits $1,000 each year into a “health reimbursement account,” which workers can use to pay for care. The next $1,000 in expenses is the employee’s responsibility. After that, employees pay 20% of costs up to a $4,000 maximum.

Safeway workers these days treat that first $1,000 carefully, since anything beyond it comes out of their pockets. The company is alive with stories of people who no longer visit the emergency room for routine care but instead call around to doctors to ask prices, and swap information with colleagues. Employees  go on a Web site, punch in a zip code, and get a list of providers and costs. One discovery was that within 30 minutes of its California headquarters routine colonoscopy prices ranged from $700 to $7,000.

The second part of Safeway’s plan was an embrace of the obvious: Healthy people cost less: 75% of health-care costs are the result of four conditions — cardiovascular disease, cancer, diabetes and obesity. The majority of these are preventable. and, for example,an obese employee can require 10 times the number of doctor visits in a year than someone of healthy weight.

Under Safeway’s voluntary “Healthy Measures” program, employees are tested for smoking, weight, blood pressure and cholesterol. Every area they “pass” results in a reduction in their premium, of as much as $1,560 for a family, a year. Those who fail but prove progress can get refunds.

Today, Safeway’s smoking and obesity rates are roughly 70% the national average.

Full article:
http://online.wsj.com/article/SB124536722522229323.html

Netflix – Managing a still-hot business as its time runs out.

Summary: Business is booming for Netflix as people stay at home more during the recession. But, online streaming video is certain to overtake mailed DVDs eventually.  Netflix is trying to stay ahead of the curve.  Good luck.

* * * * *
Excerpted from WSJ, Netflix Boss Plots Life After the DVD, June 23, 2009 

Netflix is a standout in the recession. The DVD-rental company added more subscribers than ever during the first three months of the year.

But Netflix’s CEO Reed Hastings thinks his core business is doomed. As soon as four years from now, he predicts, the business that generates most of Netflix’s revenue today will begin to decline, as DVDs delivered by mail steadily lose ground to movies sent straight over the Internet. “As a capitalist, I’d rather have Blockbuster as my primary competitor than all those Internet companies,” Mr. Hastings says. So he is quickly trying to shift Netflix’s business — seeking to make more videos available online and cutting deals with electronics makers so consumers can play those movies on television sets.

Companies across the entertainment and technology landscape are struggling with how to profit from Internet video. There’s still significant risk that Netflix could falter or lose out to another company that figures out how to do it first. And having picked his battle, Netflix may risk missing other growth opportunities: – the company hasn’t yet expanded internationally or mounted a direct challenge to kiosks, such as Coinstar Inc.’s Redbox, that let customers pick up $1-a-night DVD rentals. It is considering expansion opportunities outside the U.S. and has no plans to open kiosks.

One of the biggest hurdles will be persuading Hollywood studios to give Netflix rights to show more and better movies through its Internet service at a time when many studios are protective of their DVD-sales revenues.

The company stumbled in an earlier effort to introduce a set-top box that would bring Internet video service into the living room. Netflix developed the hardware but then abandoned it after executives got cold feet.

Mr. Hastings, the CEO says he is a student of companies such as AOL that tripped up by failing to adapt to technology shifts.

Netflix’s big break came as a different industry leader failed to keep step. In the late ’90s, the home-video business was shifting to DVDs from VHS tapes, offered by rental giants such as Blockbuster Inc. Netflix emerged with warehouses that stocked larger selections of DVDs than Blockbuster’s rental outlets could, mailing them around the country in red envelopes. Netflix charged consumers a flat monthly rate to rent as many DVDs as they liked, eliminating the late fees charged by rental chains.

Blockbuster eventually started its own DVD rent-by-mail service, but scaled it back in late 2007 after consistently losing money on it.

Now, amid gathering signs of the DVD’s decline, the industry is poised to shift again.

Home-video sales, mostly from DVDs, last year dropped to $14.5 billion from $15.9 billion the previous year. Movie rentals remained flat over the period, at about $8.2 billion. The number of DVDs Netflix rents every year — about a half-billion in 2008 — is still growing, and Mr. Hastings predicts the company will still be shipping discs to consumers 20 years from now.

But he expects rental figures to begin to dwindle in four to nine years.

Anticipating the demise of DVDs almost from the beginning, the company’s name  didn’t reference discs or mailboxes and the company invested in software formulas to crunch data about its customers’ tastes so it could recommend DVDs to them, a technology that could carry over to an Internet movie service.

In January 2007, Netflix began letting subscribers stream video to their PCs from the company’s Web site, allowing users to watch video almost instantly without keeping permanent copies on their hard drives. The service featured only about 1,000 movies and television shows — about 1% of its DVD selection — but subscribers could use it for no extra charge.

Now more than 20% of Netflix members regularly use the service. The company says new users attracted by streamed movies have helped push its subscriber total up 25% to 10.3 million at the end of March from a year earlier.

The online model has another benefit for Netflix. The company currently pays about 80 cents to post a DVD to a customer’s home and back. Its bandwidth costs for streaming a typical two-hour movie: roughly a nickel.

Netflix’s biggest challenge in getting Hollywood to go along for the ride. Netflix’s selection of more than 100,000 DVD rental titles is made possible by the “first-sale doctrine” of U.S. copyright law, which permits buyers of DVDs to lend them out without studios’ consent.

In Netflix’s early days, its buying team would sometimes purchase DVDs at local Wal-Marts or Best Buys if it couldn’t get copies through studios.

In contrast, to deliver movies and television shows over the Internet, Netflix has to license them from studios. So far, it has gotten only about 12,000 titles, a hodgepodge of older films such as “Diehard,” episodes of popular TV shows including “30 Rock” and a smattering of new releases.

The main reason: Netflix must compete with television subscription services like Time Warner’s HBO, Viacom Showtime and others that gain exclusive rights to show studio movies on cable channels or through on-demand systems. These pay channels have bigger audiences than Netflix and a longer history of securing movie rights. Their lucrative deals can prevent Netflix from getting Internet rights for movies until years after they’re released on DVD.

If Netflix is to expand the titles on its Internet service, it will have to considerably boost its licensing spending, from roughly $100 million last year.

“Netflix has yet to show that it has the resources and profitability to be in the markets where licensing is the business policy.

Hollywood is “clearly conflicted” about the online service’s growth because it could help accelerate the decline of DVDs.

http://online.wsj.com/article/SB124570665631638633.html#mod=testMod

* * * * *

Goin’ negative … Obama’s PAI drops to minus 2.

 TakeAway: All major polls show that Obama’s approval rating is still over 50%, but showing significant recent slippage. 

For the first time, Obama’s Presidential Approval Index has gone negative.  Keep reading …

* * * * *

Rasmussen

Overall, 53% of voters say they at least somewhat approve of the President’s performance so far … 46% at least somewhat disapprove.

But, the Rasmussen Reports daily Presidential Tracking Poll for Sunday showed that 32% of the nation’s voters now Strongly Approve of the way that Barack Obama is performing his role as President … 34% Strongly Disapprove giving Obama a Presidential Approval Index rating of -2.

That’s the President’s lowest rating to date and the first time the Presidential Approval Index has fallen below zero for Obama.

Sorted by self-identified race, Obama’s PAI is plus 80 among blacks, minus 6 among whites, and minus 7 among all others.

By party affiliation, Obama is plus 56 among Dems, minus 50 among GOPs, and minus 6 among independents.

38% say we’re on the right track, 56% say we’re on the wrong track.

These results are consistent with recent Gallup and WSJ polls summarized below.

 

 
http://www.rasmussenreports.com/public_content/politics/obama_administration/daily_presidential_tracking_poll

 

Gallup

President Barack Obama’s job approval rating fell to 58% in Gallup Poll Daily tracking from June 16-18 — a new low for Obama in Gallup tracking.  In the past couple of weeks, Dem approval has remained unshakable; GOP has fallen by 8 points; Independent support has fallen by a whopping 11 points.

http://www.gallup.com/poll/121028/Obama-Job-Approval-Slips-58-First-Time.aspx

* * * * *

WSJ / NBC

Since Feb., approval is down 4 or 5 points – disapproval is up 8 points – as some “not sure” have become negatively “sure”

The simple math of healthcare “reform” …

There was sticker shock when the CBO estimated the cost of the proposed healthcare reform package at about $1.6 trillion (over 10 years).

My question: why the shock?  In fact, why any surprise at all?

Think about it …

Total healthcare costs are generally reported to be about $2.1 trillion annually.

The U.S. population is just a bit over 300 million …  so, per capita healthcare costs are about $7,000 per person (which is consistent with most reports).

It’s generally reported that there are approximately 45 million people in the U.S. without health insurance.

So, it follows arithmetically that it costs about $315 billion annually to cover those folks (45 million times $7,000 per person).

Assuming a quick ramp up of the coverage, that’s $3.15 trillion over 10 years (for simplicity, call it $3 billion).

It’s generally reported that about 1/3 of the 45 million uninsureds are not citizens. At the national average, their healthcare expenses would be 1/3 of the $3 trillion, or $1 trillion. 

Policy question:  Who’s in favor of paying higher taxes or boosting the national debt to cover this $1 trillion ?

Also, it’s generally reported that about 1/3 of the 45 million uninsureds are healthy young adults who have access to health insurance and earn enough to pay for it, but opt to self-insure.  Simple economics –  they expect that the insurance will cost them more than their out-of-pocket expenses if they pay their own way.  Of course, they’re gambling that they won’t have any catastrophic medical bills – but, that’s their choice.

Policy question: Should other taxpayers have to foot the bill the bill for these opt-outters?  I don’t think so. 

Policy question: Should the government make them buy insurance? I don’t care – that’s not my problem.

Policy question: Should the opt-otters get health insurance subsidized by other taxpayers?  I don’t think so – they can afford to pay the freight – they just choose not to.

So, what’s left is about 15 million uninsureds … with an associated annual cost of about $105 billion … or a little over $1 trillion for 10 years.

Policy question: Should these ininsureds be covered by other taxpayers?  Even with a hard heart, it’s easy to say yes.

Note: Many of these uninsureds are simply between jobs.  when they find a new job, they’ll have insutance again.

* * * * *

The CBO took a couple of weeks to get 17 million new insureds at a cost of about $1.6 trillion.  The above analysis took all of 10 minutes.  Hmmmm

To cut healthcare costs by 40%, Safeway applies the auto insurance model.

TakeAway: By providing employees with financial incentives to stop smoking, lose weight, and control cholesterol levels and blood pressure … Safeway has contained healthcare spending over the past couple of years. 

The principle: reward good behavior … and don’t subsidize bad behavior.

Ken’s Take: Maybe fat folks should pay higher airfares and health insurance premiums.  Hmmm.

* * * * *

Excerpted from WSJ, “How Safeway Is Cutting Health-Care Costs”, June 12, 2009 

Effective health-care reform must meet two objectives: 1) It must secure coverage for all Americans, and 2) it must dramatically lower the cost of health care.

At Safeway we believe that well-designed health-care reform, utilizing market-based solutions, can ultimately reduce our nation’s health-care bill by 40%. The key to achieving these savings is health-care plans that reward healthy behavior.

Safeway’s plan capitalizes on two key insights: (1) 70% of all health-care costs are the direct result of behavior; (2) 74% of all costs are confined to four chronic conditions — cardiovascular disease, cancer, diabetes and obesity … and, 80% of cardiovascular disease and diabetes is preventable, 60% of cancers are preventable, and more than 90% of obesity is preventable.

Safeway has done nothing more than borrow from the well-tested automobile insurance model. For decades, driving behavior has been correlated with accident risk and has therefore translated into premium differences among drivers. Bad driver premiums are not subsidized by the good driver premiums.

As with most employers, Safeway’s employees pay a portion of their own health care through premiums, co-pays and deductibles. The big difference between Safeway and most employers is that we have pronounced differences in premiums that reflect each covered member’s behaviors.  Currently we are focused on tobacco usage, healthy weight, blood pressure and cholesterol levels. Employees are tested for the four measures cited above and receive premium discounts off a “base level” premium for each test they pass. If they pass all four tests, annual premiums are reduced $780 for individuals and $1,560 for families.

At Safeway, we are building a culture of health and fitness.

While comprehensive health-care reform needs to address a number of other key issues, we believe that personal responsibility and financial incentives are the path to a healthier America. By our calculation, if the nation had adopted our approach in 2005, the nation’s direct health-care bill would be $550 billion less than it is today.

Full article:
http://online.wsj.com/article/SB124476804026308603.html#mod=djemEditorialPage

Dusting Facebook pages for “friendprints” …

Ken’s Take:  As I continue to learn about Facebook and other social networking sites, three things strike me: (1) they are great places to share pictures (2) some people don’t have enough to do (note: at least I can claim that I’m doing “research” for marketing strategy classes) (3) people post some pretty indiscriminate stuff – some of which can / will come back to haunt them. 

I’m most  intrigued by the increased use of “behavioral profiling”  and “friendprinting” .

Behavioral profiling mines posted nuggets for ‘triggers’ and ‘patterns’. 

For example, all of the free email sites sift through a person’s emails looking for key words that might signal a propensity towards a particular category of products.  A guy who constantly shares sports tidbits with friends may coincidentally (?) start seeing a lot of pop-ups for odds & scores sites.

Friendprints are analytical inferences drawn from a person’s posted friends and associations. 

For example, if friends are profiled as being grads of good colleges, then it’s a reasonable inference that the person travels with a good crowd.  So what?  Well, ‘good crowds’ may spend more on certain things and may be more credit worthy.  It’s not proof, but provides clues.

What if — for privacy — a person ‘hides’ their friends list.  Well, a logical inference is that they’re hiding something.  A red flag for credit raters, prospective employers. and friends & family. Hmmmm.

And, as more friends lists get hidden, the marketing value of social networking sites diminishes.  Double hmmmm.

Below are highlights from the article on the general topic of privacy in social networking that got me thinking.

* * * * *

From Knowledge@Wharton, “Leaving ‘Friendprints’: How Online Social Networks Are Redefining Privacy and Personal Security”, June 10, 2009

People [say] privacy [is] important to them, yet they engage in behaviors that indicate a remarkable lack of concern.

Privacy thresholds vary by individual and  those boundaries are being tested by social networking.

The information people post, when combined with new technologies for gathering and compiling data, can create a fingerprint (or “friendprints” -like pattern of behavior … that can be decoded for both legitimate and illegitimate purposes..

Third-party applications (e.g. think credit scoring systems)can take data outside of the friendly confines of a social networking site and combine it with data from other sources (e.g. inter-site linking) to piece together enough information to “define” a person.

For example, just a person’s name and birth date — routinely found on a Facebook profile — can be a useful starting point for an identity thief.

The line between professional networking on a site such as LinkedIn, and social networking on sites such as Facebook, has become very thin.  Many Facebook users might create a more casual persona for themselves on that site than they would on LinkedIn, where they would include nothing but professional information. But both sites can be seen by potential employers and clients

And what about the person you don’t really know who wants to be your friend because you have some friends in common?  That new friend may just be mining your social circle for information. As networks grow and more friends of friends (and their friends) are accepted by users, it’s unclear who can be trusted.

“Though it is not difficult to sign up under an alias, it is extraordinarily difficult to change one’s friends and family.”

Full article:
http://knowledge.wharton.upenn.edu/article.cfm?articleid=2262

Re: Healthcare … How many “uninsured” Americans are there? Answer: Not 47 million.

Ken’s Take: This isn’t new news, but it continues to be overlooked in the press and in Presidential speeches.  About 1/3 of “uninsureds” aren’t US citizens; about 1/3 are young and gainfully employed who choose to self-insure.  That leaves about 15 million who need to be taken care of.  Why aren’t “they” more truthful with the numbers?

* * * * *

Excerpted from IBD, “The Phantom Uninsured”, June 16, 2009

Team Obama uses the “46 million uninsured” as a reason to nationalize health care. But the Census Bureau says about a fifth of those aren’t U.S. citizens. In fact, a goodly number are illegal aliens.

According to “Income, Poverty, and Health Insurance Coverage in the United States,” a Census Bureau report published last August, of the 45.6 million persons in the U.S. that did not have health insurance at some point in 2007, 9.7 million, or about 21%, were not U.S. citizens.

Also among the uninsured are 17 million Americans who live in households where the annual income exceeds $50,000; 7 million of those without coverage have incomes of $75,000 a year or more. Many of the uninsured are young and healthy (40% are between ages 18 and 34) and at this point in their lives, particularly in this economy, choose to put their dollars elsewhere

“Why the lack of insurance (among people who own homes and computers)? One clue is that 60% reported being in excellent health or very good health.”

“For many, being uninsured is a transitory state, since most uninsured Americans are only without coverage for a short time.” In fact, a Census Bureau’s Survey of Income and Program Participation, found  that only 19 million Americans go without insurance for a full year.

Full article:
http://www.ibdeditorials.com/IBDArticles.aspx?id=330042258549199

* * * * *

Vital Friends: The People You Can’t Afford To Live Without.

From the summer reading pile.  I do it so you don’t have to …

Vital Friends: The People You Can’t Afford To Live Without, Tom Roth, Gallup Press, 2006

Ken’s Take: Below is all you need to know from the book. The “8 roles of vital friends” were pretty interesting. Which role(s) do you play?  Which do each of your vital friends play?

* * * * *

Summary

Each person needs a few very deep friendships to thrive — the magic number seems to be three or four.

What matters most is not the number of friends, but the quality of the friendships.

A vital friend is someone who measurably improve your life. Ask yourself: “if this person were no longer around, would my overall satisfaction with life decrease?”

We expect the other person in a relationship to meet our every need. We expect them to do several things to uphold his or her end of the relationship. We expect them to be able to do it all. Then, we’re disappointed when we discover that they do only a few things very well.

The trick is to focus on those things that our friend does well — the strengths that complement our weaknesses. Focus on the ways that your friends contribute to your life, not on the ways that they disappoint you.

There are eight vital roles that close friends might play. Some may play only one; few play several: none play them all. Ask yourself: what role does this friend play?  what role do you play for him / her?

1.  Builder
2.  Champion
3.  Collaborator
4.  Companion
5.  Connector
6.  Energizer
7.  Mind Opener
8.  Navigator

* * * * *

1. Builder

builders are great motivators,always pushing you towards the finish line. They continually invest in your development and genuinely want you to succeed — even if it means they have to go out on a limb for you. Builders are generous with their time as they help you see your strengths and use them productively. When you want to think about how you can do more of what you already do well, talk to a Builder. Much like the best coaches and managers, these are the friends who lead you to achieve more each day. And great Builders will not compete with you. They figure out how their talents can complement yours. If you need a catalyst for your personal or professional growth, stay close to a Builder.

 

2. Champion

Champions stand up for you and what you believe in. They are the friends who sing your praises. Every day, this makes a difference in your life. Not only do they praise you in your presence, the Champion also “has your back” — and will stand up for you when you’re not around. They accept you for the person you are, even in the face of resistance. Champions are loyal friends to whom you can share things in confidence. They have a low tolerance for dishonesty. You can count on them to accept what you say, without judging, even when others do not.  Champions are your best advocates. When you succeed, they are proud of you, and they share it with others. Champions thrive on your accomplishments and happiness. When he needs someone to promote your cause, look to Champion.

 

3. Collaborator

A Collaborator is a friend with similar interests — the basis for many great friendships. You might share a passion for sports, hobbies, religion, work, politics, food, Visa, movies, or books. In many cases, you belong to the same groups or share affiliations. When you talk with a Collaborator, you are on familiar ground, and this can serve as the foundation for lasting relationship. Indeed, in those conversations, you often find that you have similar ambitions in life. Looking for someone who can relate to your passions? Find a Collaborator.

 

4. Companion

A Companion is always there for you, whatever the circumstances. When something big happens in your life — good or bad — this is one of the first people you call. At times, a true companion will even sense where you are headed — your thoughts, feelings, and actions — before you know it yourself. Companions take pride in your relationship and they will sacrifice for your benefit. They are the friends for whom you might literally put your life on the line. If you’re searching for friendship that can last a lifetime, look no further than a Companion.

 

5. Connector

A Connector is a bridge builder will to get what you want. Connectors get to know you — and then introduce you to others. These are the people you socialize with regularly. Friends who play the role of a Connector are always inviting you to lunch, dinner, drinks, and other gatherings where you can meet new people. This extends your network dramatically and gives you access to newfound resources. When you need something — a job, doctor.. friend, or a date — a Connector points you in the right direction. They seem to know everyone. If you need to get out more or simply want to widen your circle of friends or business associates, a Connector can help.

 

6. Energizer

Energizers are your fun friends who will always give you a boost. You have more positive moments when you are with these friends. Energizers are quick to pick you up when you are down — and can make a good day great. They are always saying and doing things that make you feel better. Energizers have a remarkable ability to figure out what gets you going. When you’re around these friends, you smile a lot more. You’re more likely to laugh in the presence of an Energizer. If you want to relax and have a good time or need to get out of a rut, call an Energizer.

 

7. Mind Opener

Mind Openers are the friends who expand your horizons and encourage you to embrace new ideas, opportunities, cultures, and people. They challenge you to think in innovative ways and help you create positive change. Mind Openers know how to ask good questions, and this makes you more receptive to ideas. When you are around a Mind Opener you are unguarded and express opinions aloud, especially controversial ones that you might not be comfortable sharing with other friends. These friends broaden your perspective on life and make you a better person. If you need to challenge the conventional wisdom or shake up the status quote, spend a few hours talking with a Mind Opener.

 

8. Navigator

Navigators are the friends who give you advice and keep you headed in the right direction. You go to them when you need guidance, and they talk through the pros and cons with you until you find an answer. In a difficult situation, you need a Navigator by your side. They help you see a positive future and keep things grounded in reality. Any time you are at a crossroads and need help making a decision, you can look to a Navigator. They help you know who you are — and who you are not. They are the ideal friends to share your goals and dreams with, and when you do, you’ll continue to learn and grow. When you ask Navigators for direction they help you reach your destination.

* * * * *

Miscellaneous Tidbits

During her teenage years, we spend nearly 1/3 of our time with friends. For the rest of our lives the average time spent with friends is less than 10%.

If your best friend has a very healthy diet, where five times as likely to have a very healthy diet yourself.

Marital satisfaction is 5 times more dependent on the quality of a couple’s friendship than on physical intimacy.

* * * * *

Who pays for healthcare insurance? … Brush up on your economics before answering.

TakeAway: As healthcare costs increase, companies keep the lid on wages.  That’s why takehome pay has been stagnant for so long.  It’s basic economics.

* * * * *

Excerpted from WSJ, “Health Reform and Competitiveness”, June 17, 2009

Employers may write the checks to the insurance companies, but workers still pay for the coverage they get from those employers.

Why? Because the total cost of an employee is what matters to businesses, and fringe benefits are as much a part of compensation as cash wages.

When health costs rise, higher insurance premiums aren’t just lopped out of profits. Instead, nonhealth compensation drops to fund the higher premiums. Or wages rise more slowly than they otherwise would. [That’s why wages have been stagnant for so long.]

The White House Council of Economic Advisers notes exactly this point: If medical spending continues to accelerate, take-home pay will continue to stagnate.

The exceptions are heavily unionized businesses like auto makers that have locked themselves in to gold-plated coverage, especially for retirees. They have a harder time adjusting health costs and wages.

* * * * *

It’s certainly true that the U.S. employer-based insurance system can dampen entrepreneurial spirits. There’s the “job lock” phenomenon, in which employees fear leaving a less productive job because they’re afraid to lose their health benefits.

Another problem is that insurance costs more for small groups than the large risk pools that big corporations assemble, meaning that it’s harder to form new businesses that can offer policies.

Full article:
http://online.wsj.com/article/SB124520327436821723.html

Homeowners are fatter than renters … and other downsides of owning a home.

TakeAway: Now that the housing bubble has burst and owned homes have lost their luster as piggybanks, more attention is being placed on the non-financial aspects of owning a home. 

The obvious: more chores mean less time for socializing. 

The shocker: homeowners are, on average, fatter.   Hmmmm.

* * * * *

Excerpted from Knowledge @ Wharton, “You Think Owning a Home Will Make You Happy? Don’t Be Too Sure”, June 10, 2009

For generations, the conventional wisdom  is that owning a home is the cornerstone of the American Dream, the foundation for a happy family life and long-term financial security. “On average people like living in zip codes with a higher median housing value so they can live in reflected glory.”

Now, a new research paper challenges that conventional wisdom …   while homeowners do experience significant joy, they also face more aggravation, spend less time with friends and are even heavier than renters living in comparable homes.

Past research into the mood of homeowners showed that people felt a sense of pride and comfort in having their name on a deed. But, once the data are controlled for a range of variables, owning a home appears to deliver no more happiness than signing a monthly rent check.

“Our perception that homeowners are better off than renters might be fueled only by casual observations. The conventional wisdom might not hold up so well when you look at the data carefully.”

Obviously, the bursting of the housing bubble has led to a good deal of stress — both financial and psychological.

Even in a period of optimism about housing as a financial investment, homeownership does not necessarily represent the fulfillment of a dream. “Overall, there is little evidence that homeowners are happier by any of the following definitions: life satisfaction, overall mood, overall feeling, general moment-to-moment emotions and affect at home. The average homeowner, however, consistently derives more pain (but no more joy) from a house and home.”

The study focused on the intensity of 10 feelings : Impatient, Competent/Confident, Tense/Stressed, Happy, Depressed/Blue, Interested/Focused, Affectionate/Friendly, Calm/Relaxed, Irritated/Angry … and created a created a net measure of mood.  

It is clear that homeowners derive as much pain from their home that is similar in magnitude and significance to the joy they gain from homeownership.

Even after controls are applied for financial insecurity — often cited  as the main negative of homeownership — homeowners report more pain associated with their home … it is simply not true that homeowners are happier because they enjoy greater self-esteem and a greater sense of control in their lives.

The average homeowner tends to spend less time on active leisure or with friends, experiences more negative feelings during time spent with friends, derives less joy from love and relationships and is also less likely to enjoy being with people.  Average homeowners spend 4% to 6% less time interacting with friends and neighbors

Adding insult to injury, the average homeowner tended to be 12 pounds heavier.

Full article:
http://knowledge.wharton.upenn.edu/article.cfm?articleid=2257

Healthcare “reform” … cost adders are certain … keep your fingers crossed re: the savings

Ken’s Take: For sure, 45 million uninsureds  will get government coverage. That includes 15 million non-citizens and 15 million healthy young adults who choose to self-insure now, but will be “mandated” into the program. The cost of adding these folks is a certainty.

What’s far less certain is whether any of the pie-in-the-sky cost reductions – most of which have been tried and failed in the past – will generate offsetting savings.

Still, no talk of real structural changes – e.g. free gov’t run Minute Clinics, tort reform.  Just “evidence based” veils being thrown over healthcare rationing.

* * * * *

Excerpted from IBD, “Wrong-Way Health Care ‘Reform’ Could Actually Increase Spending”, June 12, 2009

Background

The central cause of runaway health spending is clear. Hospitals and doctors are paid mostly on a fee-for-service basis and reimbursed by insurance, either private or governmental.

The open-ended payment system encourages doctors and hospitals to provide more services — and patients to expect them. It also favors new medical technologies, which are made profitable by heavy use.

Unfortunately, what pleases providers and patients individually hurts the nation as a whole.

That’s the crux of the health care dilemma .

* * * * *

The Issue

No doubt the health program that Congress fashions will counter this reality by including some provisions intended to cut costs (”bundled payments” to hospitals, “evidence-based guidelines,” electronic record keeping).

But, the main aim of health care “reform” now being fashioned in Congress is to provide insurance to most of the 46 million uncovered Americans.

This is popular and seems the moral thing to do. After all, hardly anyone wants to be without insurance.

But the extra coverage might actually worsen the spending problem. How much healthier today’s uninsured would be with that coverage is unclear. They already receive health care — $116 billion worth in 2008.

Some is paid by the uninsured themselves (37%), some by government and charities (26%). The remaining “uncompensated care” is either absorbed by doctors and hospitals or shifted to higher private insurance premiums. Some uninsured would benefit from coverage, but others wouldn’t. Either they’re healthy (40% are between ages 18 and 34) or would receive ineffective care.

The one certain consequence of expanding insurance coverage is that it would raise spending. When people have insurance, they use more health services.

* * * * *

Some Stats

A new report from Obama’s own Council of Economic Advisers shows why controlling health costs is so important. If current spending growth continues, the CEA projects that:

Health spending, which was 5% of gross domestic product in 1960 and is reckoned at almost 18% today, would grow to 34% of GDP by 2040 — a third of the economy.

Medicare and Medicaid, the government insurance programs for the elderly and poor, would increase from 6% of GDP now to 15% in 2040 — roughly equal to three-quarters of present federal spending.

Employer-paid insurance premiums for family coverage, which grew 85% in inflation-adjusted terms from 1996 to $11,941 in 2006, would increase to $25,200 by 2025 and $45,000 in 2040.

Full article:
http://www.ibdeditorials.com/IBDArticles.aspx?id=329696969267196

What’s next, a tax on each sip of office coffee?

Ken’s Take: Taxing every dollar earned by the evil top 1% doesn’t come close to funding the current government spending spree.  First, it’ll be tax gimmicks like this; then higher rates – much higher rates – for the 49% of workers who pay income taxes.  It’s going to get ugly.

* * * * *

From the WSJ, “The IRS Phones Home”, June 15, 2009

With federal spending in 2009 at 28% of the economy and deficits heading north, Democrats are eyeing tax increases on everything from soft drinks to electricity to health benefits to charitable contributions. The IRS is even contemplating a new tax on the use of business cellphones.

The IRS believes that some percentage of the costs incurred by employees using company-provided wireless devices should count as a “fringe benefit” and thus be subject to taxation. Since workers inevitably end up taking personal calls or emails, the thinking goes, it’s only fair that they pay for the privilege. The IRS suggests that businesses automatically assign 25% of annual phone expenses as a taxable liability.

What’s next? Maybe a per-cup tax on office coffee, or targeting furtive visits to ESPN or Hulu on the office PC? Or maybe taxing use of the company washroom.”

Full article:
http://online.wsj.com/article/SB124501952511913563.html

Ken makes the big time: cited in Wikipedia … what can possibly be better than that?

It was pointed out to me (by a Homa Files reader in the U.K.) that my posts have earned the ultimate external validation: cited in Wikipedia as part of George W. Bush’s bio.  (Look under “economic policies” and check out footnote 79)

Here’s the link to the article.
http://en.wikipedia.org/wiki/George_W._Bush

After Wiki, all else will pale in comparison

At the DMV, don’t even think about smiling …

Summary:  A couple of weeks ago, Kathy ( my wife ) went to the Virginia DMV to get her driver’s license renewed. When she sat down to have her picture taken, the DMV person politely told her to wipe the smile off her face.

No joke. It is a new policy that is being enforced. To find out why, keep reading…

* * * * *

Excerpted from the Washington Post, “As if It Needed to, Virginia Bans Smiles at the DMV”,  May 28, 2009

Few places in Virginia are as draining to the soul and as numbing to the buttocks as the branch offices of the Department of Motor Vehicles. And yet, until recently, smiling was still permitted there.

No more. As part of the DMV’s effort to develop super-secure driver’s licenses and foolproof identification cards, the agency has issued a smile ban, directing customers to adopt a “neutral expression” in their portraits, thereby extinguishing whatever happiness comes with finally hearing one’s number called.

The driver’s license photo, it seems, is destined to look like a mug shot.

DMV officials say the smile ban is for a good cause. The agency would like to develop a facial recognition system that could compare customers’ photographs over time to prevent fraud and identity theft.

“The technology works best when the images are similar, so to prepare for the possibility of future security enhancements, we’re asking customers to maintain a neutral expression.”

 

As for DMV patrons in Virginia, there is further cause for disappointment beyond the anti-smile rule. With the new system, state residents can no longer get their licenses and identification cards on the same day as their visits.

Instead, licenses and identification cards are now processed at a central facility in the southern Virginia city of Danville, then mailed to the customer’s address a few days later. The new cards are loaded with security features, including tactile lettering, secondary photos and anti-tampering measures, and they will be phased in as state residents renew their licenses and ID cards.

Nationwide, 37 motor vehicle agencies use facial recognition technologies.

http://www.washingtonpost.com/wp-dyn/content/article/2009/05/27/AR2009052703627_pf.html

What’s a friend worth? … Not to you, to marketers, that is.

Ken’s Take: Part of my summer research, I’m trying to learn more about the the marketing power of search engines (i.e. Google) and social networking sites (e.g. Facebook, LinkedIn). As a proponent of the Customer Lifetime Value methodologies, I’m intrigued by the “value of a (networked) friend”. 

Below are highlights from a Business Week article on the subject.  Short on answers, but sets up the problem …

* * * * *

Excerpted from Business Week, “Learning, and Profiting, from Online Friendships”, May 21, 2009

Friendships aren’t what they used to be. Practically every hand we shake and every business card we exchange can lead to an invitation, sometimes within minutes, for a “friendship” on LinkedIn or Facebook.

What do these relationships say about us and the people in our networks? Companies armed with rich new data and powerful computers are beginning to explore these questions. They’re finding that digital friendships speak volumes about us as consumers and workers, and decoding the data can lead to profitable insights.

Companies are working fast to figure out how to make money from the wealth of data they’re beginning to have about our online friendships.Calculating the value of these relationships has become a defining challenge for marketers.  They’re finding that if our friends buy something, there’s a better-than-average chance we’ll buy it, too. It’s a simple insight but one that could lead to targeted messaging in an age of growing media clutter.

An immense new laboratory of human relations is taking shape. Millions of us are playing, working, flirting, and socializing online.  —. The network behavior of 295 million e-mailers and legions of the 200 million Facebook users is producing oceans of data, 

A critical finding: “The value of most information has collapsed to zero. The only scarce resource is attention.”   This has created what many call the “Attention Economy.”

The easiest way is to get tips from friends. They’re our trusted sources. At least a few of them know us better than any algorithm ever could. Little surprise, then, that the companies most eager to command our attention are studying which friends we listen to.

Statistically, friends tend to behave alike. A couple of years ago researchers at Yahoo found that if someone clicked on an online ad, the people on his or her instant chat buddy list, when served the same ad, were three to four times more likely than average to click on it. It makes sense. Friends share interests.

But it raised lots of questions. Which types of friends have the most meaningful correlations with each other? People have always confided in a small circle of intimates, often only two or three. They’ve also had wider circles of experts for specific advice, whether on cars or cooking. Then there’s a broader circle of acquaintances whose opinions count far less but who can still generate buzz about a new restaurant or senatorial candidate.

By studying patterns of interactions on networks, researchers are working to predict which friends we trust and which we pay attention to in each area of our lives. A research scientist at Facebook, has perhaps the greatest lab in history for studying friendship. He can study social media communications including wall posts, shared photos, pokes, and friend requests among 200 million people.

For all its popularity, Facebook has yet to prove itself as an advertising platform. Visitors, it seems, focus on their friends and pay scant attention to ads. Few click on them, and advertisers pay pennies for page views. Consequently, Facebook, with its estimated revenue of $300 million this year, brings in scarcely a dime a month per member.

An average Facebook user with 500 friends actively follows the news on only 40 of them, communicates with 20, and keeps in close touch with about 10. Those with smaller networks follow even fewer.

What can this teach advertisers? People don’t pay much attention to most of their online friends. By focusing campaigns on people who interact with each other, they’ll likely get better results.

In an industry where the majority of ads go unclicked, even a small boost can make a big difference. In one market test, tailoring offers based on friends’ responses helped lift the average click rate from 0.9% to 2.7%. Although 97.3% of the people surfed past the ads, the click rate still tripled.

All of networked humanity mingles in avast marketplace, trading information, creating alliances, doing favors. We may not think of our connections in such mercantile terms. But for business and individuals alike, the value in online friendship is a central focus.

Full article:
http://www.businessweek.com/magazine/content/09_22/b4133032573293.htm?chan=magazine+channel_in+depth

Jumping over the limbo bar …

Back on Feb. 16, I suggested a stake in the ground for measuring the success of Team Obama’s stimulus spending –- namely,  the 8% to 8.5% unemployment rate that economists were predicting under a “do nothing” scenario. 

Well, now that unemployment has blown past 9%, the “saved or created” math is getting pretty creative to say the least …  and the shaky argument “it would have been even worse” is taking center stage.

Below is a reprise of the original post.

* * * * *

Obama’s team sets the stimulus bar at limbo level …”,

Obama says the trillion dollar pork-laden, faux stimulative program will “save or create up to 4 million jobs”.

Last week, I pointed out that “up to” provides mucho definitional cover by itself, but that the serious wiggle room comes from “jobs saved” — a comparison against some fabricated “what if” number.

Well, the fabricated “what if” number is already being planted:

Austan Goolsbee, one of Obama’s chief economic advisers, says  he’ll consider the effort successful if the worst scenarios don’t come to pass, “if by the end of 2009 we aren’t looking at GDP numbers that are huge negatives, if unemployment rises to the 8% range rather than the 11% that some are predicting.”

I can’t find any non-Obama paid economist saying 11%.  Most economists are saying that the unemployment rate will peak in the range of 8 to 8.5% if we do nothing.  Apparently, Team Obama is prepared to declare success (i.e. claim millions of jobs saved) is the stimulus plan does about as well as doing nothing. The jobs saved will be calculated against a disaster scenario that they’ll specify, thank you.

In other words, a victory party is guaranteed …

* * * * *
Reference for Goolsbee quote:
http://money.cnn.com/2009/02/13/news/economy/easton_economicteam.fortune/index.htm?postversion=2009021310

Original post:
http://kenhoma.wordpress.com/2009/02/16/obamas-team-sets-the-stimulus-bar-at-limbo-level/

Brand equity moves to the fast lane … Penske buys Saturn

Ken’s Take:  I’ve posted a couple of times that I think GM made a huge mistake by failing to capitalize on the early brand success of Saturn … and that Government Motors blundered by ditching the brand  instead of using it as the umbrella brand for eco-cars. 

It will be interesting to see how well Penske is able to leverage the Saturn brand. 

My bet: Saturn will flourish, GM’s stable of passe brands will continue to fade.

* * * * *

Excerpted from Business Week, “Penske to Buy Saturn from GM”, June 5, 2009

Roger Penske , a legendary figure in auto racing, is about to take on a decidedly less racy piece of Detroit.  Penske will buy GM’s Saturn brand of passenger cars and SUVs .… The racing legend and car-dealership magnate – who owns 310 retail automotive franchises and 25 collision repair centers — will have other automakers build the vehicles while he handles sales, service, and marketing … the brand that 25 years ago was supposed to transform GM.

GM Chairman Roger Smith first unveiled the Saturn idea in November 1983, describing it as a revolutionary new way to build and sell small cars in America. But the project was slow to develop and the brand did not officially launch until 1990. It featured the well-known tagline: “A different kind of car company.”

GM hoped Saturn would lure younger buyers away from imports with smaller, hipper cars. The new factory in Spring Hill had more flexible work rules than traditional GM plants. But despite the cult-like following that grew up around Saturn, the brand never made money for GM. The factory stopped making Saturns in 2007 .

“This is still a good business and we are going to make it better,” Penske says.

Penske’s auto businesses run the gamut from exclusive distribution of the tiny Smart cars in the U.S. for Daimler-Benz to worldwide car and truck dealerships representing 40 different brands.

Despite boasting one of the most honored sedans on the road today, the Aura, and the highly acclaimed Outlook SUV, Saturn’s overall sales have been falling.

The unit has been a thorn in GM’s side for years. It started out with a bang, created from scratch in the 1980s to compete with Japanese small cars and inject entrepreneurial spirit into a lethargic company. Its cars were sold in upgraded dealerships that fostered a sense of community; thousands of customers would flock each year for a reunion at the Saturn factory in Spring Hill, Tenn.

But GM starved the brand of competitive new products throughout the 1990s. By the time management tried to reinvigorate Saturn with new car designs after 2000, the brand’s image had taken a huge hit.

“When Saturn launched in the 1980s, it was the new, new thing, with the best dealer service and no-haggle pricing that put customers at ease,  But in recent years, it has just been another GM division, operating the same as Chevy or Pontiac, with nothing to differentiate it and a marketing message that keeps changing, so that people haven’t been able to get a handle on what the brand is supposed to be.”

Saturn sales are down almost 60% this year, worse than most other brands. Consumer demand has waned, especially since GM made it clear earlier this year that it would sell the brand. At the current pace, fewer than 100,000 Saturns will sell this year. The brand, said Penske, should be able to rebound toward the 200,000 level it enjoyed, on average, during the last five years. 

Penske thinks he can change that. “We will be able to bring totally fresh and unique product to Saturn, and we can leverage what is still an excellent dealer network and the fact that we have no legacy costs to worry about”.

As romantic as owning a car company sounds, Penske rattled off more rational reasons for buying the business from GM. He pointed to the fact that some 3.5 million Saturn customers have vehicles on the road today, meaning that he can count on steady demand for parts. Also, Saturn’s more than 300 dealers have modern, up-to-date facilities and sell only Saturn vehicles. “It is incredibly valuable to have an established business like this without all the legacy costs GM had to worry about covering.” 

First off, he won’t own any manufacturing plants. All production will be outsourced.  Saturn will continue to buy today’s vehicles from GM for at least two years. Penske will talk to other auto manufacturers in Europe and Asia about supplying new products after that.   Auto companies have far more manufacturing capacity than they need, so all would be eager to add Saturn’s current sales volume to their factories. “Our success has been with handling the business that is closest to the customer, so I don’t want us to get into our own manufacturing business.”

As Penske looks to replace models … he will solicit designs from that company—or perhaps from a contracted design studio—for a plan that differentiates the vehicle from any the manufacturer is selling under its own name. 

Full article:
http://www.businessweek.com/bwdaily/dnflash/content/jun2009/db2009065_956038.htm?chan=top+news_top+news+index+-+temp_news+%2B+analysis

There is a precedent for Government Motors … AMTRAK

Summary: According to Rasmussen. only 26% of Americans applaud the GM bailout.  (For reference,  17% favor boycotting GM cars as a form of protest.}

Why the low level of support?  Perhaps because folks older than Obama remember a similar experience with Amtrak.  Amtrak was supposed to turn a tidy profit,  but taxpayers are still sinking billions of dollars into Amtrak—almost 40 years after buying it.

Economist James Langenfeld says the bailout of GM will be an even bigger disaster.

* * * * *

Excerpted from The daily Beast,  “Is GM the New Amtrak?”. James Langenfeld,  June 5, 2009

Both Congress and the Obama administration apparently believe a bailout is best for GM, and that “what’s good for General Motors” is still good for America. So we taxpayers appear to be on the brink of owning most of GM. Do we know what we are buying, how long we will own it, and what it will really cost? Perhaps we can learn some lessons from another government owned company, the National Rail Passenger Corporation—aka Amtrak. The Amtrak experience raises many issues about the future of GM.

In the 1960s, private railroads wanted to dump their unprofitable intercity passenger service and concentrate on their more-profitable freight service. So in 1971 the U.S. government obliged them by creating Amtrak.

The talk then was all about becoming profitable, but the reality has been anything but. Amtrak is now 38 years old, and shows no sign of moving out of the taxpayer’s house.

The government gives Amtrak about $1.5 billion per year, not including an additional $1.3 billion from the recently passed American Recovery and Reinvestment Act. These figures may seem small compared to the $50 billion recently plowed into GM, but Amtrak subsidies amount to $85,000 a year for each Amtrak employee, or about $35 every time Amtrak sells a ticket.

Bottom line: It costs taxpayers about $1.40 for every $1 of revenue Amtrak takes in.

President Obama and his administration seem to understand that creating another Amtrak is not promising. They speak in one voice about not wanting to run a car company, not planning on micromanaging the company, and selling the government’s stake as soon as possible. All good thoughts, but these same officials cannot provide any timetable for getting out the car business.

Moreover, there are early signs that GM may have many of the same problems that Amtrak has faced and we may very well end up with GMtrak. 

http://www.thedailybeast.com/blogs-and-stories/2009-06-05/is-gm-the-new-amtrak/?cid=bs:archive4
Dr. James Langenfeld is a director at the economics consulting firm LECG and teaches at Loyola University Chicago. Previously he was a senior economist at General Motors and an analyst at Amtrak.

Hmmm … Obama’s PAI goes from plus 10 to zero in a week

Last Monday, I posted that Rasmussen – the daily tracking poll that I follow – reported Obama’s PAI (Presidential Approval Index – the difference between likely voters who “strongly approve” and those who “strongly disapprove”) soared to +10,.  That is, 34% strongly approved, 24% strongly disapproved.  Pundits attributed the gain – up from low single digits – to a Sotomayer “bounce”.

Well, last Friday’s Rasmussen Report pegged Obama’s PAI at zero – 34% strongly approved, 34% strongly disapproved.  A huge change. 

While the polling data may just be statistical noise,  some pundits point to the GM deal – which is only favored by about 1 in 4 people – and, the President’s Mid East tour – which gave Iran the OK for “peaceful” nuclear development and, seemed to some, to throw Israel under the bus.

Over the weekend, Obama’s PAI bounced back a little to +3 – 35% to 32%.

The PAI’s underlying demographics are interesting (and under-reported):

Obama’s PAI is plus 66 among blacks (65% to 4%), plus 13 among “others” (38% to 25%), and minus 8 among whites (29% to 37%).

Obamas’ PAI among Dems is a sky-high plus 54 (64% to 10%), minus 11 among Independents (23% to 34%), and minus 47 among GOPers (10% to 67%).

Rasmussen pegs Obama’s overall approval – the sum of strongly and somewhat approve – at 53%.

Hmmmm …. Key groups to watch: the Independents and “others”

* * * * *

Statistical note: Rasmussen surveys “likely voters”.  Polls that broaden the sample to “registered voters” or “all adults” tend to be more favorable to President Obama.

http://www.rasmussenreports.com/public_content/politics/obama_administration/daily_presidential_tracking_poll

What if Team Obama is wrong about healthcare ?

Ken’s Take: I agree that all US citizens should have access to healthcare, and I agree that healthcare spending is out of control.  But,  I really don’t want DMV-like government workers determining what medical services I get, where I get them, and when I get them (if at all).

Below are headlines from a WSJ piece that questions the fundamental assumptions underlying the Obama plan.

Note that neither the Obama plan nor the WSJ ideas address structural change like free (or low charge) clinics to handle routine medical care, or tort reform to minimize frivolus malpractice claims and the redundant services that they induce.

* * * * *

Excerpted from WSJ, “Obama’s Health Cost Illusion”, June 8, 2009

The President’s main case for reform is rooted in false claims and little evidence.

The main White House argument for health-care reform goes something like this: If we spend now on a hugely expensive new insurance program for the middle class, we can save later by reducing overall U.S. health spending.

What if this particular theory turns out to be a political illusion? What if the speculative cost savings never report for duty, while the federal balance sheet is still swamped with new social obligations that will be impossible to repeal? The only possible outcome will be the nationalization of U.S. health markets, which will mean that almost all care will be rationed by politics.

* * *
Since Medicare was created in 1965, U.S. health spending has risen about 2.7% faster than the economy and on current trend would hit 20% of GDP within a decade.

Now the White House claims the magic key is the dramatic variations in per patient health spending among U.S. regions. Often there is no relationship between spending and the quality of care, according to a vast body of academic research.  

But, Richard Cooper, a professor of medicine at the University of Pennsylvania’s Wharton School, has studied regional variation in aggregate health spending, and found that the areas with the highest quality spend the most on medicine.

* * * * *

Obama’s ideas include more health information technology; emphasizing prevention and healthy living; rejiggering reimbursement policies so doctors and hospitals are paid more for quality care; and funding federal research that compares the effectiveness of medical treatments. There is scant evidence that any of them will ever save real money.

* * * * *

According to Team Obama:  “Future increases in spending could be moderated if costly new medical services were adopted more selectively in the future than they have been in the past and if the diffusion of existing costly services was slowed.”

But technological change is the most important driver of health spending. Modern medicine can do so much more than it could in the past, but this costs a lot even as it has bought a lot in extending and improving lives. In a 2001 study, the estimated benefits of lower infant mortality and better treatment of heart attacks “have been sufficiently great that they alone are about equal to the entire cost increase for medical care over time.”

* * * * *
A far better alternative is to increase individual responsibility for medical decisions.

In 1965, the average American paid more than half of his health care out of pocket. Spending has since increased sevenfold, but the amount that consumers pay directly hasn’t even doubled. When people aren’t exposed to the true cost of their care  — they consume more care.

Roughly half of the real increase in U.S. health spending between 1950 and 1990 is due to Medicare and the spread of third-party, first-dollar insurance.

Increasing cost-sharing would discipline the health spending curve and give it a more rational bent. The U.S. health cost “crisis” is that we spend so much without incentives to weigh the costs against the benefits.

Yet the entire Obama agenda is about increasing political, rather than individual, control of the health markets.

Full article http://online.wsj.com/article/SB124442772329993085.html

Higher MPGs, More Miles Driven … hmmm

Ken’s Take: A couple analyses I did last summer suggested that people drive more when they get higher MPG from their vehicles … largely (or completely) offsetting the efficiency gain.

http://online.wsj.com/article/SB124338431100556717.html?mod=djemalert

Here are a couple of articles citing studies going back to the 19th century that draw the same conclusion.

* * * * *

Excerpted from Heritage Foundation, “Why the Government’s CAFE Standards for Fuel Efficiency Should Be Repealed, not Increased”, July 11, 2001

Clearly, the CAFE program has failed to accomplish its purposes. Consumption has not decreased.

As fuel efficiency improves, consumers have generally increased their driving, offsetting nearly all the gains in fuel efficiency.

Advocates of higher CAFE standards argue that increasing miles per gallon will reduce gas consumption. What they fail to mention is the well-known “rebound effect”–greater energy efficiency leads to greater energy consumption.

As more fuel-efficient vehicle costs less to drive per mile, so vehicle mileage increases.

Since 1970, the United States has made cars almost 50% more efficient; in that period of time, the average number of miles a person drives has doubled.
http://www.heritage.org/Research/EnergyandEnvironment/BG1458.cfm

* * * * *

Interesting Historical Perspective

Excerpted from WSJ: “The rebound effect: Conservation Wastes Energy,”  May 17, 2001

Way back in the 19th century, English economist Stanley Jevons embarked on a study of coal and its consumption. He was intrigued by the introduction of James Watt’s new, efficient steam engine, which began replacing older, more energy-hungry engines.

Jevons found that in Scotland (Watt’s native land), coal consumption was initially reduced by one-third. But in the ensuing years of 1830 to 1863, there was a tenfold increase in consumption. Why? The engines were so much cheaper to run that people used them far more than they ever would have before. Greater efficiency had produced more energy use, not less.

The same arguments apply to government-mandated energy efficiencies today.

Since 1970, the U.S. has made cars almost 50% more efficient; in that period of time, the average number of miles a person drives has doubled. Studies show that when consumers buy more energy-efficient air conditioners, they run them longer because it still costs the same amount.

Consumers, in short, spend to the size of their billfolds.

And that is the failing of government-led demand reduction.

There is only one thing that convinces Americans that they should conserve — market prices. Only when gas prices start to pinch will Americans drive less or hunt for smaller cars.
http://www.opinionjournal.com/columnists/kstrassel/?id=95000484

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Dear friends networking on cheap phones … works for me.

Excerpted from WSJ, “Networking Sites Extend Reach:  Handset Makers Ramp Up Ways to Tap Broader Cellphone Market” by Amol Sharma and Jessica E. Vascellaro, May 28, 2009

Social-networking sites like Facebook and MySpace are popular services on high-end cellphones like the iPhone and the BlackBerry. But extending their reach to the broader wireless market has been challenging, because most basic phones tend to have clunky Web browsers and can’t support fancy software. Now, handset makers and wireless carriers are ramping up efforts to tap the mass market.

Manufacturers such as INQ Mobile Ltd. and Samsung Electronics Co. are rolling out midrange cellphones tailored to social-networking software, with some features of smart phones but lower prices.  Carriers including AT&T Inc. and Sprint Nextel Corp. are trying to improve access to the services by upgrading browsers on regular cellphones and integrating Web-based applications …they are trying to improve access to the services via the Web, which allows users to perform tasks they can’t perform with text messaging, such as viewing a friend’s profile. Sprint, for example, will soon begin selling the Samsung Exclaim, which will include one-click access to simplified, preloaded software applications for Facebook, MySpace and Twitter. It will sell in the U.S. for less than $100 after a rebate, the company said. AT&T is undertaking a project to overhaul its mobile home page, better integrate search and use an advanced browser…

Social networks, including MySpace and Facebook, are helping wireless carriers tailor their services to mass-market phones…

 

Edit by TJS

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Full Article:
http://online.wsj.com/article/SB124345957503159855.html

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Want more from the Homa Files?
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