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Saturday, December 24, 2011

Toward a Definition for Ethical Leadership: Disabusing the Pessimists

One consultant suggests that “the definition of leadership ethics is still unclear; its scope is broadening, making it a moving target.” This is not good news for the topic. Fortunately, the field may be making the task of definition unduly arduous. Scholarship is needed to ferret through the debris so a concept of ethical leadership can be constructed that is both academically rigorous and of use to practitioners, whether in advising and “doing” ethical leadership.

The complete essay is at "Toward a Definition for Ethical Leadership"

Bureaucratizing Leadership into Management

Fuqua/COLE surveyed 205 executives of public- and private-sector companies. In this essay, my task is to provide a critique that is hopefully beyond the ordinary variety. In particular, my aim is to make transparent some of the questionable assumptions that might otherwise be taken as valid by practitioners, whether leadership advisors or leaders themselves.

The survey found “that most senior executives spend less than 25 percent of their time on leadership development.” The relevant survey question assumes that leadership development is a discrete task. Alternatively, leadership development could be likened to Burns’ concept of transformational leadership, in which the content of a leader’s vision includes or otherwise implies the development of followers. While such development is akin to Maslow’s notion of self-actualization, that can be narrowed to “becoming leaders in turn.” For instance, a transformational leader’s vision could include a federal or decentralized power-arrangement and a principle of subsidiarity (locating authority on a competency as “low” as possible). To say that leadership development is a particular task of a senior executive is to assume that a leader confines the formulation and selling of his or her vision to a particular task—rather than being a leader. In other words, a leader does not turn on and off leadership as if it were one among several tasks. Therefore, I question the concept itself of “leadership development” taken as a task. Such a construal tries to squeeze leadership into management terms.

Relatedly, the survey refers to organizational positions in addition to the chief executive that are involved in leadership development: namely, a “chief learning officer” and a “head of leader development.” Such a bureaucratizing of leadership, wherein it is even separated from the leaders themselves, is also part of the managerializing tendency wherein leadership is treated as (or reduced to) a skill within the purview of management. “Chief learning officer” doesn’t even make sense outside of an educational institution. Moreover, the title itself can be taken as an indication that someone believes that “organizational learning” is an actual phenomenon. I take it that learning beyond the confines of a corporeal animal (including human beings) involves projection (and anthropomorphism, as in the “legal person” legal doctrine).

Where the survey finds a positive correlation between the amount of time spent on leadership development by the chief of leadership development or the chief learning officer and the firm’s reported financial performance, it is wise to remember David Hume’s naturalistic fallacy wherein correlation is taken as causation. Hume’s skepticism on what we think we know of causation is very much needed today, where even mere correlation is often questionably taken as evidence of causation. In the case of the survey’s result, which claims that the positive correlation means that a CLD or CLO “spending more time” on leadership “translates into bottom line results,” it could be that firms already in solid financial shape are in a position to add some slack in their CLD and CLO offices. This does not mean that the activities of the CLD and CLO (whatever they are in actuality—“leadership” probably being bent any such way) cause higher profits. The higher profits could be a result of the already-favorable condition or context of the organization.

As an aside, this example is no doubt one of many wherein the naturalistic fallacy is unknowingly committed. This is one reason why I prefer to view the leadership topic as properly belonging to the humanities rather than to empirical social science. The latter has erred enormously, in my view, by trying to emulate the natural sciences methodologically, when the content is actually closer to that of the humanities. The modern value placed ironically on “fact” over “value” and the related empirical emphasis are probably among the culprits—being a usual suspect where societal blind-spots are concerned.

Therefore, readers of the survey would be wise to return the “tasks” of leadership to the leader, rather than advocate delegating some such “tasks” to a CLD (as if “learning” were leadership) or CLO. I’m not even convinced that a CLD and CLO have anything to do with leadership. The CLO could be returned to being understood as the head of corporate training, rather than gilding the lily of leadership. In other words, we can give marketing a rest when it comes to “upgrading” training. Also, we need not conflate learning with leadership—this concept is not so pliable as some might suppose (or profit by in consulting). Indeed, I suspect a rather unholy alliance between leadership consultants and empirical surveys exists at the expense of both learning and leadership.

Click to add a question or comment on the bureaucratization of leadership and the faults of the empirical survey on the topic of leadership.

Source:
Linda Fisher Thorton, “Leadership Ethics Training: Why Is It So Hard to Get It Right?” T+D, September 2009. http://lindafisherthornton.files.wordpress.com/2009/09/article-pdf-sep-t-d-journal1.pdf






Friday, December 23, 2011

Nature’s Caste System: Character-Based Clusters

Pushing good characters down for no good reason in a sort of “collective judgment” that applies to an entire group of people—as in the case of the untouchables in the caste system in India—and accepting the false entitlement of “professionals” to membership in the highest caste simply because they tend to be wealthy—as in the case of lawyers and physicians in America—violates the clusters that naturally cohere—like gases that form distinct planets having their own separated orbits—on the basis of character. Being “on one planet,” it is immediately obvious that someone else is on another. In this essay, I attempt to sketch some of the basic mechanisms by which nature’s caste system is sustained and articulate the nature of the differences that occasion there being appreciable distance between the clusters.

When a stranger is so rude or presumptuous that all you can do is turn and walk away in utter disbelief, for example, you have run into an alien from one of the outer planets. There are many such creatures communicating with us through Craigslist.

A quick read through the housing section (e.g., room shares, apartments for rent) and many “drama-free” private individuals—self-described “professionals”—can be found making demands right off the bat as they seek to attract (?) a future tenant. In actuality, such people are neither “drama-free” nor “professionals.” Both claims are immediately belied by the manner and content of the writing itself. Such people inhabit a sort of low-class society in which they presume themselves as the elite, or rulers. Astonishingly, the presumption is quite without any hint of second-guessing or shame. “YOU MUST . . . ” written in just this way as an advertisement points to the lack of control they have over their urge to dominate from weakness. Furthermore, they are convinced that they cannot be wrong. Some ask for age and others even bring up religion even though doing so is illegal. “No it’s not!” they would undoubtedly reply. They cannot be wrong. As if by sheer reflex, they must surely take any resistance to their presumption as an insult, even an attack, while they continue to hold themselves as blameless. How could they be otherwise? This rock-hard mentality naturally exists in its own “low class” caste in part because it is immune from being corrected or healed. The only thing a healthy person can do is keep reading—avoiding contact at any cost. This reaction is natural; it is thus one of the principal means by which nature enforces the clusters based on character.

Although I have met some really very nice people on twitter, that “universe” sometimes resembles a low-caste society of sorts that is populated, unfortunately, by creatures who seem dominated by an innate urge or proclivity to grant themselves the entitlement of being a self-certified expert. This seems particularly the case in religious or political topics. Opinions are routinely declared as if facts. “X is Y.” Seldom is it asked, “Perhaps X can be Y?” Although certainly not everyone who tweets on leadership does so, some of the so-called leadership “coaches” like to declare their opinions as if knowledge. It is like watching a little populist democracy of self-invented theory that presumes itself to be fully valid upon being tweeted!

I have in mind the “coaches” or “experts” who declare “Leadership is X” without even having bothered to read the academic (i.e. not “how to”) literature on the topic. In fact, these “coaches,” or cockroaches as they are otherwise known, even dismiss that literature, confusing their own self-informed (grade-wise?) declaration, “Leadership can’t be taught in a classroom!” (whereas leadership can be taught in a daylong “seminar” or “workshop” held in a hotel ballroom for a nice fee) with the fact that leadership can be understood. That was an actual tweet, by the way—by an “expert.” It does not matter that such “experts” are not scholars; they presume they know better what is possible in a classroom. Their presumption is thus of an encroaching nature, without any limit of restraint. Such creatures tend to presume on a regular basis that they 1) know what they actually do not know, and 2) cannot be wrong about it. They must be from a small, very rocky planet somewhere out past Neptune (a similar species populates my “small” hometown, including its little “professional” elite—an elite that is viewed as such only because a mere 21% of the adult population holds a college degree). Low caste, or class, it turns out, is not necessarily of a low socio-economic (or racial) demographic. This is where the historical Hindu caste system really got it wrong.

Worlds away from “low class” know-it-all attitude—which instantly (and naturally!) relegates a person to a low caste much more than does even the ignorance itself—are the more humble and genuine, flying at a much higher altitude. Such people are open to what they might not know and perhaps they are kind to strangers as a kind of natural default of politeness. If you have been fortunate to have been touched by such a person, you have been touched by a being from a planet closer to the sun. The rest of us do not deserve to be so touched, and we know this. Accordingly, as Nietzsche posits, there is a natural distance that arises between people who differ in terms of character-strength—what he calls noble strength. This is the power of a will that willingly takes on resistance, even and especially within—in self-overcoming.

In Nietzsche’s terms, having the will (and will-power!) to self-overcome one’s own most intransigent internal obstacle—a powerful instinct—proffers the most intense (or powerful) pleasure of power. Having the will and strength to perform such a task on a regular basis (i.e., self-overcoming) naturally builds character (noble strength). In so doing, it naturally separates one from people who take an easier path through life, whether through lack of will, or weakness. In other words, strength of character, an innate quality that I believe a person can strengthen or choose to compromise by will, differs among human beings (no doubt at least in part from upbringing). Such differences constitute the vacuums that inevitably exist between the natural castes that naturally form in the human condition. All other castes, or classes, are dogmatic in the sense that they are arbitrary to that condition.

In expunging the artificial sort such as the Hindu caste system, we should not ignore or dismiss the natural array of castes that we know on a daily basis by means of our natural sentiments of approbation and disapprobation. In fact, David Hume held that such sentiments constitute our recognition of “moral” and “immoral.” Perhaps these terms are but part of a more general sense we naturally have of the subjective distance that exists between natural, character-driven, castes or levels of being human, all too human. We moderns hate to think of humanity in such terms, yet I wager we know it on an all-too-daily basis, as we inexorably interact with others—realizing that some people are naturally closer while insisting that others acknowledge the distance that is—and must be—there.

Even a mere essay reflects and reinforces the natural affinities and distances that account for there being distinct clusters, or castes, in any given human social context. Nietzsche wrote in his Genealogy of Morals that it is not meant to be understood by everyone. Breaching the natural distance as if it were somehow “immoral” could sicken, or infect, the innately stronger. Many of the self-certified “coaches” (i.e., “experts” on leadership), for example, have already dismissed this essay in its entirety, mistaking disdain for disagreement (and ultimately weakness for strength). Sustaining that distance is not only the odious smell of arrogant ignorance; the cockroaches themselves fear being “outed” as phonies by a pest-control guy whom they sense can spray them with the disinfectant of (other-certified) knowledge. The arrogance of cockroaches does not permit them to scatter in the transparency of knowledge, so they tend to naturally keep their distance in the first place.

Far more interesting than the presumption of false entitlement by supercilious “professionals” and the ignorant opinion certifying itself as knowledge by the “coaches” is the notion that differences in the duration and timing of genes that trigger other genes can (along with environmental factors) eventuate in human interaction manifesting as distinct clusters based on something as intangible as character—and much of it without intention! We naturally cohere with some people as though in invisible stickiness were involved, and we just as naturally keep our distance from others as if doing so were simply by instinct. I must admit I have tended not to pay sufficient attention to natural distance and have wound up having to enforce what should have been natural. As imperfect as nature’s caste system is, the historical Hindu attempt to systematize it by group and presumably for all ages to come shows just how far ahead nature is to human intention. Try as we might, we cannot bottle it! For unlike the Hindu variety, natural law does not depend on religious, political and economic institutions for enforcement.

Click to add a question or comment on nature’s character-based caste system.

Sources:
Lydia Polgreen, “Scaling Caste Walls With Capitalism’s Ladders,” The New York Times, December 22, 2011. http://www.nytimes.com/2011/12/22/world/asia/indias-boom-creates-openings-for untouchables.html?_r=1&scp=1&sq=Lydia%20Polgreen,%20%E2%80%9CScaling%20Caste%20Walls%20With%20Capitalism%E2%80%99s%20Ladders&st=cse

Friedrich Nietzsche, Genealogy of Morals, in Basic Writings of Nietzsche, Walter Kaufmann, trans. and ed. (New York: Modern Library, 2000).

Capitalism & Caste: Melting Untouchability in India

In what has become known as India, the caste system of Hinduism has for millennia served as the template for the socio-economic ordering of people into family-based groups. By the end of the first decade of the twenty-first century, the economic liberalization policy put in place in 1991 to replace the stagnant “import-substitution” domestic-favoring model of economic development had enabled some people in the lower castes to vault into social acceptability by virtue of what the New York Times calls “the newest god in the Indian pantheon: money.” Given the advent of the prosperity gospel in Christianity and the associated eclipse of the “camel getting through the eye of a needle” much-earlier-hegemonic association of wealth with greed, a similar statement could be made with regard to the Trinity (see “Godliness and Greed”).

Gandhi is said to have remarked, “I used to think that truth was God. I have realized that God is truth.” This is a very profound statement, which must be unpacked to be understood and appreciated. “God” refers here to what in the Abrahamic religions (Judaism, Christianity and Islam) is called revelation (God revealing itself through scripture). In Hinduism, the basic scriptures are known as the Vedas—the commentary thereof is known as the Upanisads (which are quite rich in terms of religious philosophy). The Vedas contain directions for social practices, such as concern widows (e.g., Sati (throwing oneself on the burning funeral pire of one’s husband) or going into a widows home, which often involved prostitution) and Dalits, or “untouchables” (e.g., not permitted to worship in the temple, or use public drinking fountains—sound familiar?).

Gandhi was saying that he used to accept all that was in revelation—including social practices concerning widows and untouchables—as truth (i.e., as unquestionably valid, or sacred). Observing the suffering of widows and untouchables, he came to realize that to be valid, revelation must itself “pass the truth test.” Suffering of the innocent (Christians may recall the suffering servant motif) as a direct and sole result of a directive in scripture could not be of truth, Gandhi concluded. Truth, in other words, has a higher calling than does revelation. In other words, what humans record as their revelations of the divine should be subject to truth itself, rather than defining (i.e., limiting) it. Even if what the religions record as revelation is informed by a divine source or field, the “informing” must pass through the imperfect (i.e., distortive) atmosphere of the human instruments that do the writing and copying. Therefore, “God is truth” means that truth is rightfully a criterion to be applied to revelation.  That which doesn’t pass the “smell test” can rightfully be ignored (I would include a conflict-of-interest criterion to the “smell test”).

The constitution of modern India forbids the old, rather sordid institutional prejudice against widows and the Dalit (which as of this writing number about 200 million). For example, the practice of physical untouchability, which confined Dalits to low-status jobs and social exclusion, is outlawed. Except in some remote areas, Dalits can walk on the same streets as upper-caste Indians, look them in the eye, and drink from the same wells and water fountains.

Even so, as anyone who has stayed in a Motel 6 or Holiday Inn Express owned or operated by a Patel knows, vocational groupings continue to reflect family groupings, or castes. According to the New York Times, “(s)ocial and economic mobility are limited, a product of India’s layers of cultural legacies: the Hindu caste system, the feudal and sometimes racial hierarchies . . ., and the imperial bureaucracy imposed by Britain.” For many Indians still, you do what your father did. The Times reports that “(k)nowledge-based businesses like information technology have attracted large numbers of Brahmins, the traditional learned caste. The business castes tended to focus more on retail and wholesale trade than manufacturing. Messy industries like construction are closer to the traditional occupations of the lowest castes.” That the historical caste of scholars and priests (i.e., the Brahmins) has turned to information technology reflects the new “high priests” in terms of modern Indian values, yet I doubt that contemporary Brahmin scholars and priests view a computer programmer as being at all equivalent. The caste system itself has been truncated by a certain reductionism to business (i.e., oriented to business), given the societal hegemony of business in modern India.

As a brief digression, I want to translate the Hindu caste system into Western society. A learned caste exists in the West, even if that caste has been eclipsed in popular culture by the “professional” sub-caste in the business caste. Even so, scholars and priests in the West correspond to the Indian Brahmin caste. The political caste contains (in decreasing order) imperial, kingdom/state, province/region/county, and local offices. This is so in both India and the West. The business caste in the West contains its own hierarchy, from professionals (physicians, CPA’s and lawyers) to the people who work in the financial services and information technology, and on down to retail managers and finally manufacturers. The worker caste (foreign farm workers being at its bottom) is below the “managerial” sub-caste of the business caste, and the “welfare” or “homeless” caste is perhaps the Western equivalent of the untouchables in India. As in India, the business caste—in particular the professional and managerial sub-castes—has in practice vaulted to being the de facto highest caste in terms of contemporary values. That the Brahmin caste, in having scriptures or treatises as referents that contradict or relativize whatever happens to be the flavor of the month (e.g., “being a professional”), self-consciously transcends or repudiates “professional” values suggests that a basic learned—politics—business order of status (and even class) exists in spite of the apparent societal hegemony of the professionals (in which, not coincidentally, the next-lower business sub-caste, that of the business executive/manager, has claimed membership). Indeed, practically every working adult American who is not a student claims to be a professional (just look at the housing postings on Craigslist). In the U.S., everyone gets to classify oneself as being in the highest sub-caste of business, which in turn is presumed to be the highest caste in the entire system. It is not simply because physicians, public accountants and lawyers can be wealthy; “professional” now conveys a high-class sort of status. So, it would appear there are two new gods in the American pantheon.

In modern India, the “Dalit problem” may reduce in a practical sense to the task of reducing a rather extreme economic inequality, which in itself is dangerous to a representative democracy. Thanks in part to an affirmative action program by the government, Dalits and tribal people have gained in getting an education and procuring government jobs. This is only part of the story, however. Although widening “the gulf between rich and poor,” the economic expansion brought about by the post-1991 liberalization policy allowing foreign direct investment and expanding trade has enabled some Dalits to become wealthy as business practitioners. As a result of both the affirmative action and liberalization policies, the wage gap between other castes and Dalits decreased from 36 percent in 1983 to 21 percent in 2011 (and the education gap has been halved). Twenty-one percent is less than the gap between Caucasian and Black men in the United States in 2011. The social status of Dalits has risen as well. “With their new wealth they have also won a measure of social acceptance,” according to the Times.

According to Chandra Bhan Prasad, a Dalit activist and proponent of capitalism for untouchables, “(b)ecause of the new market economy, material markers are replacing social markers.” This can be generalized to include the self-vaunting of the business caste to the head of the line from third in terms of popular understanding both in India and the West. Prasad implicitly likens India to the West, in fact, by making the following observation: “India is moving from a caste-based to a class-based society, where if you have all the goodies in life and your bank account is booming, you are acceptable.” What of the Brahmin priest or scholar of philosophy who sees through all the vanities in life and appreciates timeless gems that don’t necessary pay a monetary dividend? Is the modern professional society in actuality without class, yet still very hierarchical and unequal? It is indeed part of the role of the scholar and priest to hold this mirror up to the “professionals,” whose niggardly caste does not permit donations to such “lost” causes as that of truth. Am I understood?

As Nietzsche theorizes, the strong can be hoodwinked by the weak who seek to dominate beyond their native pith and ken (e.g., those with an undergraduate degree in Law or Medicine claiming nonetheless a false entitlement to the doctorate—the J.S.D. or D.Sci.M. rather than the LLB/JD or MD prerequisite degrees). Pith, or strength, and ken, or knowledge, may come down in the end to character, out of which real castes naturally form in human relations. What physician is going to party with a scholar who reminds him that his MD is actually an undergraduate degree in a Medical school?—the doctorate being a terminal (highest possible, so not a prerequisite for another degree in the same school/discipline) degree that includes comprehensive (not board) exams and a dissertation-length defended body of original research. What scholar is going to respect a lawyer who cannot be wrong about the LLB (the JD is just another name for that degree) being a doctorate because he or she also has a BA in English? It was student dissatisfaction at around 1900 with the “two B’s” (LLB and BA) that prompted the three lawyers who started new University of Chicago Law School to re-label the LLB program as “JD” (this “D” does not stand for doctorate). In typically American fashion, the marketing gimmick was inexorably taken for substance (because of the convenience) and the misnomer quite understandably became the default rather than recognized as a stubborn category mistake. Substantively, a year or two of basic survey courses and the same time in senior seminars (without even a major!) in the discipline of law does not a doctorate make. Yet this misnomer, and the related one in American medical schools, helped fuel the ascendancy of the “professional” sub-caste of business to the top of the heap, aided by the perennial non-virgin goddess of money.

I contend that the self-vaunting of the “professional” sub-caste in the West is just as squalid (and without foundation) as the historical discrimination against the Dalit in what is now India. Both trajectories violate the ethical principle of desert (i.e., what is deserved) which is related to the principle of fairness. Both “mis-casteings” involve the presumption of knowing more than is actually known in the assigning (and enforcement) of roles. In other words, both are dogmatic, or arbitrary, relative to nature. Rather than looking to capitalism or democracy here, the real lesson is in terms of nature relative to human contrivance. The ancient Greek marble pillars might have been majestic in service to Athena or Poseidon, but green vines would have the last say, as per the painting of the Romantics in the nineteenth century.

Whereas governmental preference and capitalism have enabled an increasing number of Dalits to “join the club” of social acceptance, business and government in the West reinforce the hegemony of the “doctored” professionals who in actuality typically have one (Europe) or two (America) undergraduate degrees. Indeed, kings (raj) and businessmen (as well as Brahmin priests!) in historical India played salient roles in keeping the Dalit in their place as (literally) outcastes. So the value of capitalism and a preferential policy of government should not be over-esteemed in themselves simply because they contributed the upward mobility of some (or many) in the Dalit caste. In the end, above particular economic and political systems as well as historical and even modern societal caste or class systems in which some benefit unduly at the expense of others, lies human character, out of which a rather different, distinctly invisible order of castes naturally unfolds without relying on human intention.

Part II: "Nature’s Caste System: Character-Based Clusters"

Click to read Rahul Deodhar's excellent comment (and my reply that attempts to do his essay justice) or to add a question or comment on my essay on the Hindu caste system and the plight of the untouchables being mitigated by capitalism.

Source:
Lydia Polgreen, “Scaling Caste Walls With Capitalism’s Ladders,” The New York Times, December 22, 2011. http://www.nytimes.com/2011/12/22/world/asia/indias-boom-creates-openings-for-untouchables.html?_r=1&scp=1&sq=Lydia%20Polgreen,%20%E2%80%9CScaling%20Caste%20Walls%20With%20Capitalism%E2%80%99s%20Ladders&st=cse












Thursday, December 22, 2011

ECB Loans: A Backdoor Bailout?

On December 8, 2011, the ECB announced that it would loan 489.2 billion euros (c. $640 billion) at 1% interest to 523 E.U. banks for a three-year term. Carl Weinberg, chief economist at a consulting firm, said that by making the move, the ECB had “shown a path toward averting catastrophic collapse in Europe.” The move has been likened to that of the Federal Reserve after the collapse of Lehman Brothers in 2008. It was hoped that the E.U. banks would use the money to buy state bonds—particularly those of Spain and Italy, which were not able to “directly tap” ECB funds. According to Investor’s Business Daily, however, early signs pointed to bank declining to purchase the riskier debt. While understandable given Angela Merkel’s objections to the ECB serving as a backdoor bailout of profligate states over their heads in debt, the ECB’s refusal to put conditions on how the loans could be used may have undercut the central bank’s effort to relieve bank liquidity (and state debt) problems in the E.U.

Even the safer bonds of states in better financial shape could be seen as too risky, “especially if they lost value and had to be marked down immediately,” according to Tony Crescenzi, a manager at Pimco. That banks intended to swap shorter-term ECB debt for longer-term money suggests the actual lending would be less than half of $640 billion. Furthermore, Sal Guatieri, an economist at BMO Capital Markets, argued that it “could be that banks sit on excess reserves for months or a year or two.” In fear of rainy days ahead, banks could even park the new loans at the ECB as additional reserves even though the overnight deposit facility returns less than one percent. It would be an insurance premium, Crescenzi noted.

Without strings, the banks receiving the low-cost loans could be expected to use the money in a way that maximizes profit. In the context of a debt crisis and associated recession, one could also expect the banks to put a premium on avoiding risk. The high-yield state bonds aside, allowing the bankers to use the funds as they see fit may be sufficient to evade a collapse of the financial system. “This is exactly what happened in the United States with the Fed in 2008,” Weinberg said. The New York Times explains that by “buying up bad loans and other impaired assets, and lending money to the banks, government officials in the United States were able to buy time for American banks to strengthen their depleted balance sheets.” Actually, the $800 billion in TARP funds was dwarfed by the $7.7 trillion infused into the banks by the Federal Reserve.

In the E.U., the state governments were still strong at the federal level in 2011 so the government of a rich state (e.g., Germany) could block a TARP program and even pressure the ECB not to require that the loaned money be used to purchase Italian or Spanish state bonds in a “backdoor” bailout. Even so, in refusing to apply strings, the ECB could have staved off financial collapse in adopting a strategy similar to that of the Federal Reserve—which by law could not bailout the sovereign debt of California or Illinois. That the ECB could have required a portion at least of the loans to be used by banks to purchase high-risk state debt (a condition justified by the low interest rate) makes the point that the ECB should have gone beyond the Fed in forestalling not only financial collapse of a financial system, but also default of a state or two comparable to California or Illinois.

Click to add a question or comment on the ECB low-interest loans to E.U. banks.

Sources:

Jason Ma, “ECB Lends $640 Bil, But Italian Yields Rise,” Investor’s Business Daily, December 22, 2011. http://news.investors.com/Article/595469/201112211545/ecb-loans-640-bil-italy-debt-yields-rise.htm

Nelson Schwartz and David Jolly, “European Banks in Strong Move to Loosen Credit,” The New York Times, December 22, 2011. http://www.nytimes.com/2011/12/22/business/global/demand-for-ecb-loans-surpasses-expectations.html


Vertical and Horizontal M&A: A Bias in Antitrust Policy?

The Obama Justice Department developed a track record in challenging horizontal mergers and acquisitions—those in which a company buys a direct competitor—in industries that are already highly concentrated. In deals that are not between direct rivals, such as those that occur in vertical integration, the Obama administration determined to approve the deals, albeit with the imposition of legally binding restrictions on the acquirer’s ability to use its “in house” supplier to engage in unfair competition.

As one example of unfair competition through the use of a purchased distributor, Standard Oil under John D. Rockefeller bought a company that owned and operated pipelines through which oil was transported. Besides using the company to obtain competitive information, he made sure that higher rates were charged to competitors—even though who had no other means of transport available. Where practicable, going by pipeline was preferable to barges and railroads from a cost standpoint—although Rockefeller obtained substantial rebates from the railroads (from his volume or market power—this point is subject to debate). In addition, the railroads granted Standard Oil drawbacks—a cut from the railroad’s business in servicing other customers, including competitors of Standard. Given Standard’s sheer volume, the rationale went, trains being used to haul others’ product were not available for Standard and thus represented a cost in terms of foregone volume transported. Even so, from the ethical standpoint of fairness, both the rebates and especially the drawbacks were subject to substantial critique—especially that of Ida Tarbell, whose text (History of the Standard Oil Company, 1904) on Rockefeller’s helmship of Standard was scathing.

More than a century later, the Obama Justice Department allowed Comcast to take control of NBC Universal and Google to buy travel software maker ITA Software. The government’s rationale is that companies can save money from synergies and thus lower prices for consumers (or increase salaries, retained earnings or dividends). Even in a competitive market, however, the “lower prices” scenario seems to have doubtful validity, given tacit collusion on price, non-price means of competing, and executive managers’ interests in increasing their compensation and keeping investors happy.  Similarly, by the way, reducing companies to being “job creators” is not only reductionistic; it also demonstrates an ignorance of what businesses are designed to do (i.e., earn profit by selling widgets—jobs being merely a means).

                                                                                WSJ

Moreover, the assumption that “legally binding restrictions on the acquirer’s ability to use its prize to unfairly harm competitors” are a sufficient means of checking or thwarting baleful consequences from what is an institutional or structural conflict of interest seems to be highly tenuous, in my opinion. Just as water in a stream “seeks” ways to go downstream even when temporarily blocked (and a cat obstructed from food laid out continuously seeks ways to get around the obstacles), the managers of company A that owns company B, which acts as a supplier or distributor for competitors of company A, will doubtlessly (and inevitably) seek ways around the restrictions. In the parlance of trade, such ways are known as “non-tariff barriers.” They are notoriously difficult to stop (think: stop the cat).

In conclusion, the Obama administration’s differential treatments of vertical and horizontal mergers and acquisitions evince a bias caused by understating the strength of a structural conflict of interest that is inherent in one company buying a distributor or supplier that services competitors of said company. Perhaps the underlying culprit is an understating of the more sordid aspects of human nature combined with an overstating of the efficacy of government regulation. If highly concentrated, massive stocks of capital, such as are evinced in banks or companies that are too big to fail, represent a risk both to competitive markets and to representative democracy, then not only should both vertical and horizontal mergers and acquisitions be subject to higher hurdles, but also existing companies that are too big to fail should be broken up, as the U.S. Supreme Court broke up Standard Oil a century ago.


Source:
Thomas Catan and Brent Kendall, “After AT&T: The New Antitrust Era,” The Wall Street Journal, December 21, 2011. http://online.wsj.com/article/SB10001424052970204058404577110963826534228.html?mod=rss_whats_news_us


Decadent Management: Burger King Dethroned

When a major company like Borders or Pan American declares it is going out of business—bankruptcy being all too often just a way to force creditors and unions to renegotiate—the public is often stunned. Indeed even a week before such an announcement, managers can assure customers under the veneer of an expressionless face or even a comforting smile—that the company is focused on “driving strong expansion in its many markets around the world” and will “strongly position” its brand. Driving expansion? Strongly positioning? An astute person will instinctively detect the scripted, vacuous jargon as the patina of a rather strange, if conformist, mentality that presumes to invent or misuse words with impunity, as if from a superior position in society. The quoted expressions are from Miguel Piedra, a spokesperson of Burger King, reported in a Wall Street Journal piece on Wendy’s being “positioned” to replace “the King” as number two in sales. If Piedra’s bureaucratic response is not enough of a red-flag, a visit to a Burger King restaurant might give the impression of a company that—absent the cushions of name recognition and capital—is on the verge of going out of business.


                                                                 Patrick Conlon/WSJ

First, we have to get the standard case study numbers-approach out of the way, for otherwise this essay will not be deemed a credible analysis in the business world. According to the Wall Street Journal, Wendy’s American store sales were forecasted to rise 1.1% (let’s call it 1% just among friends) in 2011, with Burger King’s comparable figure being a drop of 3.9% (let’s call it 4%, still friends). In percentage terms, that’s roughly a 5 percent difference. In 2010, sales per store in the U.S. were $1.4 million for Wendy’s and $1.2 million for Burger King. Even Burger King has more stores with which to capture the common overhead (e.g., headquarters)—7,200 to Wendy’s 5,800—the trend-lines clearly point to something going on.

The Wall Street Journal reports that analysts have pointed to Burger King’s “series of management and ownership changes, a lack of menu development and an over-reliance on young adult customers at a time when high unemployment hit that market hard.” Miguel Piedra—no doubt in a newly-purchased grizzled suit from Sears—replied that his company was driving and positioning (as if it were in the transportation or logistics business). The response itself suggests a status quo managerial mentality, supported or enabled by a loose franchise arrangement wherein franchisees regularly cut corners behind the scenes while grudgingly going along with company specials. Having it both ways is essentially low-class management.  If I am correct, this is what will ultimately deprive the “king” of his crown.

In mid-2011, Burger King was running a special: two whoppers for the price of one. I really like the taste of whoppers. Not wanting to gain weight (or wreck a perfectly good heart), I rarely eat them (or fast food). Even so, I decided to buy the special. Just from observing the manager, who looked as if he could use a shave, haircut, and shower (and a diet, “stat”) as well as a new pair of glasses (or at least a lense-cleaning kit), I suspected that he might have instructed his sandwich makers regarding that deal to shirk on the ingredients so the customers would not get too good of a deal (or the store would not lose too much money from a special the manager no doubt had to observe, as per the franchise agreement). In spite of such a stipulation, a manager with a small mentality can inevitably see a way around obstacles (just as companies can get around government regulations).

I was not at all surprised when I arrived home to find one sandwich with the bare essentials and the other insufficiently dressed with just on tomato slice and a bit of lettuce. I had been to a Burger King the year before to buy two chicken sandwiches and had found the same thing then—only that both sandwiches were missing ingredients. Although it could be a coincidence, enough of the indicators pointed to bad, or what I would call “low class” management at the store level for me to say farewell to the king of burgers.

From the two experiences, I was not at all surprised to read that Wendy’s had gone ahead of  Burger King, although I was surprised that the percentage difference was not more than five. I suspect that the sheer inertia that comes with being a major (i.e., recognizable) company can detract from the accountability that is theoretically possible from voting with one’s wallet or pocket-book. In short, shirking on specials in order to have it both ways—rather than have it your way—should be punished in the marketplace, but this does not seem to be the case. Too many customers, I suspect, simply blow off the shirking and return for more, even to the same restaurant.  Convenience or force of habit has a lot of gravity in human nature, and store managers at Burger King can extend the life of their respective stores and the company itself as a result. Too few customers, I suspect, act as enforcers rather than enablers.

In early April 2012, the Wall Street Journal reported that Burger King was McDonalds in renovating stores and diversifying the menu into healthier items in order to reach beyond the young male demographic to include women, children and families. According to Darren Tristano at a market-research firm, the company was merely “following a me-too strategy.” Such a strategy does not leverage a company’s unique basis of competitive advantage; rather another company’s is copied in the hope that there is enough market demand for two. It is like the political candidate who lets the opponent define the debate and assumes to have the better position.  Such a candidate, or company, is bound to fail over the long run.

Drew Houston, Dropbox’s chief executive, has said that companies die not from being outdone by their competitors, but, rather, from self-inflicted wounds. “They don’t have discipline. Their best people get frustrated. They chase all these shiny objects that aren’t core to the business. They become complacent because of their early success.” The “core” of a business is that basis of value that a company has or can do uniquely. Not having discipline and losing the best people are signs of having sunk to the lowest common denominator of manager in a company.

Unless Burger King’s upper echelon management engages in a wholesale expunging of mediocre middle- and lower-level managers (especially store managers), its reaction to McDonalds can only be old wine in new bottles. If the American consumers are sufficiently superficial in their tastes and languid in holding companies accountable by voting with their dollars, the old wine might be taken for new and the inertia could be enough for Burger King to continue as a going concern for some time. This would not be a vindication of the competitive market mechanism. Perhaps the question is whether it is enough that a stingy and deceitful managerial mentality can harm a company similar to how ocean waves wear down limestone rocks. In my view, such “accountability” is insufficient. Accordingly, I contend that a flaw exists in the competitive market mechanism. For lack of a better phrase, I would call it “low-class management.” If I am correct, this is what will deprive the “king” of his crown.

A few weeks ago, Burger King was running a special: two whoppers for the price of one. Now, I love whoppers. I rarely eat them (or fast food) because I don’t want to gain weight—too many of the women who read my essays would be downtrodden and might even decide that life is no longer worth living. Knowing the risks involved, I partook of the special—just once ladies!—with a certain loyalty to the king of burgers (as I could have done better pricewise). Just from observing the manager, who looked as if he could use a shave, haircut, and shower (and a diet, “stat”) as well as a new pair of glasses (or at least a lense-cleaning kit), I suspected that he might have instructed his sandwich makers regarding that deal to shirk on the ingredients so the customers would not get too good of a deal (or the store would not lose too much money from a special the manager no doubt had to observe, as per the franchise agreement). In spite of such a stipulation, a manager with a small mentality can inevitably see a way around obstacles (just as companies can get around government regulations).

Accordingly, I was not at all surprised when I arrived home to find one sandwich with the bare essentials and the other insufficiently dressed with just on tomato slice and a bit of lettuce. I had been to a Burger King the year before after noticing a special (on a healthier sandwich) and had found the same thing then—only that both sandwiches were missing ingredients. Although it could be a coincidence, enough of the indicators pointed to bad, or what I would call “low class,” management at the store level (and thus insufficient controls or checks on up the ladder). In spite of being a fan of the whopper, I think it unlikely that I will patronize Burger King again. Something tells me that this is not what specials are designed to do; the idea is to bring in new customers or get existing customers to buy more.

Therefore, I am not at all surprised at the report on Wendy’s and Burger King in the Wall Street Journal, although I am surprised that the percentage difference is not more than five. In other words, the sheer inertia that comes with being a major (i.e., recognizable) company is troubling, both from the standpoint of how competitive markets are supposed to work (ferret out weakness) and of business ethics (shirking should be punished in the marketplace). The fast food industry has sufficient competition to give customers a way to bypass Burger King, though the sheer number of stores may mean that convenience is a factor. Too many customers, I fear, would simply blow off the shirking and return to even the same restaurant, through convenience or force of habit. Too few customers, I suspect, act as enforcers by voting with their purses and wallets.

Similarly, with Congress at a paltry 11% approval rate (reported at the time of the article), fifty-five percent of the electorate favored re-electing the particular incumbent then in office. The whole beyond an aggregate of the parts is thus beyond being checked by the voters. Congress as an institution (e.g., how the House as a whole is operating) apparently does not register in a voter’s decision on whether his or her representative should be re-elected. Given the low turnout, particularly when the presidency is not in the mix, I’m not even sure that districts say yea or nay on their own representatives (aside from special interests, including community groups, unions, etc.). Both in the case a competitive market place and a representative democracy, We the People have an enforcement role to play through our individual decisions, whether in voting with money or by marking an X on a ballot. Otherwise, the ensconced vested interests will go right on perpetuating (and ingratiating) themselves at our expense. How is this for a business case study? It is beyond the numbers, to be sure, but they are perhaps more often than not merely pointers to what is an undetected decadence in corporate and company culture, which is really just a particular character-type informing custom and mores. Beyond education and training, the question regards the type of person hired (and by whom) to run a store (or even a shift).

Even if Burger King copies McDonalds in renovating stores and diversifying the menu, such strategies evince only a patina of good taste. Unless Burger King’s upper echelon management engages in a wholesale expunging of middle- and lower-level managers (especially the store managers), it would be old wine in new bottles. If the American consumers are sufficiently superficial in their tastes and languid in holding companies accountable, the old wine might be taken for new and the inertia would be enough for Burger King to continue as a going concern. If I were working at Burger King, I would not count on this, however, and I would definitely not be surprised to read someday of Burger King going out of business. It would not be a sad day.

Click to add a question or comment on Burger King or short-sighted management in general.

See related essay:  weakness in the franchise arrangement itself.

Sources:
Julie Jargon, “Wendy’s Stages a Palace Coup,” The Wall Street Journal, December 21, 2011. http://online.wsj.com/article/SB10001424052970203733304577102972533796622.html

Ian Berry and Mark Peters, “Burger King Expands Menu,” The Wall Street Journal, April 3, 2012. http://online.wsj.com/article/SB10001424052702304023504577319194158403070.html

Geoffrey Fowler and Jessica Vascellaro, “Hype Hangs Over Dropbox,” The Wall Street Journal, April 3, 2012. http://online.wsj.com/article/SB10001424052702303404704577307760274571178.html




Leadership vs. Management: Change vs. Constancy?

In the “leadership vs. management” dichotomy, “management focuses on getting work done on time, on budget, and on target — in other words, steady execution and control — while leadership focuses on change and innovation.” However, Hill and Lineback screwed up in contrasting implementation with innovation. What about the implementation of innovation, when the actual change takes place? Is that leadership or management?

Abstractly speaking, a category mistake may be involved in this false dichotomy. Change would be occurring in the execution of an innovative vision. In the realm of change alone, formulating and selling it can be distinguished from making the change. Therefore, the “leadership vs. management” distinction does not reduce to “change vs. status quo."

It could be observed that viewing leadership as the idea stage is bound to result in over-valuing it at the expense of the running of the organization (be it a government, church, or business). Accordingly, Hill and Lineback write that “being a leader has taken on a shiny, romantic aura these days while management has been given an undertone of grubby practicality. Leaders are superior beings who inspire the rest of us to greatness while managers are dull business functionaries obsessed with budgets, schedules, policies, and procedures.” Yet in asserting the necessity of both, Hill and Lineback fall back on their “change vs. status quo” dichotomy: “all groups and businesses must simultaneously change in some ways and remain the same in others. They must execute and innovate, stay the course and foster change.”

So it was apparently not leadership when President Reagan campaigned on “stay the course” in 1984, whereas he had been leading in 1980 when he urged a fundamental “government is the problem” shift from Carter’s policies. Both of Reagan’s messages evince a vision. Indeed, they evince the same vision. Is continuing to sell one’s vision not leadership because changing one’s vision is necessary for leadership? Put another way, is “staying the course” on “morning in America” somehow tantamount to execution? In characterizing managers as stewards of continuity, Hill and Lineback cannot account for Reagan’s 1984 campaign.

Leadership as formulating and selling a social reality may indeed be overrated, especially when it is claimed by people within an organization (e.g., department heads). Valuing a leader over the content of his or her vision—even diverting one’s attention from vision to the person—can be viewed as an overrating of leadership. The root problem would not be an over-estimation of change over continuity. Rather, the respective issues are 1) whether vision has value in “bottom line” terms and 2) whether the person of the leader deserves to be valued because of the value of the content of his or her vision. As I treat the second issue in “Cult of the Leader,” I address only the first here.

In business, the “bottom line” means long-run profits. It is easier to relate “budgets, schedules, policies, and procedures” than a leader’s vision. In government, the “bottom line” means a better society, stronger economy, and a more transparent government. Law, as well as particular policies, is more easily related to these than is a governing philosophy that organizes policies. The vital question is whether vision can be instantiated in laws, which in turn can have tangible impacts on society.

Click to add a question or comment on whether leadership is change and management is the status quo.

Source:
Linda Hill and Kent Lineback, “How I Stopped Romanticizing Leadership and Learned to be a Manager,” Business Insider, December 14, 2011. http://www.businessinsider.com/how-i-stopped-romanticizing-leadership-and-learned-to-be-a-manager-2011-12?utm_source=twbutton&utm_medium=social&utm_campaign=warroom-contributor


Wednesday, December 21, 2011

Cult of the Leader: The Case of North Korea

Baudrillard writes of "hyper-reality," which arises when productions—perhaps created by publicists and other spin doctors—become the reality that is taken seriously at the expense of the originals.  The modern art of Andy Warhal provides an analogy. His portraits are not exactly pure "copies" of the originals, so his way of depicting reality should not be identified as the definitive truth. Such “hyper-reality” can become the stuff of leadership. DePree (1989, p.19) writes that the first responsibility of a leader is to define reality. According to Nanus (1992, p.61), “leaders create realities through the force of vision.” The reality envisioned is a social reality. Although it can include the leader, the content of the vision is usually distinguished from the messenger.


How can the cult of leadership be explained? The New York Times reports that a “day after North Korea announced the death of its longtime ruler, Kim Jong-il, televised video and photographs distributed by the reclusive state . . . showed scenes of mass hysteria and grief among citizens and soldiers across the capital.” The Times suggests that the images carefully selected by the state Korean Central News Agency “appeared to be part of an official campaign to build support” for Kim’s son as the designated successor.

Although “convulsive sobbing, fist pounding and body-shaking bawling” are an accepted part of Korean culture at funerals of the famous and not famous in both Koreas, the culture of mourning in the North “has been magnified by a cult of personality in which the country’s leader is considered every North Korean’s father.” So it is ironic that Kim’s own son showed barely any emotion at all when viewing his father’s corpse on display. Can we trust the extreme emotion displayed after the passing of a vicarious father?

If citizen-mourners falling apart emotionally was artfully staged by the state, the extent of the acting, emotionally speaking, is itself cause for bewilderment, if not wonder at the real underlying emotional state that would put forth such a performance. In other words, even if forced to be sad by a party or state boss, why go over the top? The acting itself, specifically in being done to such an extreme, tacitly points to an underlying pathology that pretends to represent human nature at its most sincere and vulnerable.

If the citizens shown publically mourning were really feeling the emotion suggested by their external demeanor, again one might wonder whether those citizens aren’t, well, nuts. Even if manifesting such extreme emotion is culturally sanctioned in the Koreas, the “cult of the leader” might lure in a certain pre-disposed pathology among certain followers. To be sure, the social reality expressed in a leader’s vision can satisfy basic instincts for things to make sense and to have something to believe in. Where significance is placed on the leader because he or she is the instrument or messenger of the meaning and values envisioned, the cult of the leader can arise. To be sure, a leader can be salient in the content of the vision, but, even so, the integrity of the social reality itself does not necessarily hinge on the leader (even as represented in the content of the vision).

Therefore, getting so emotionally invested in a leader that one wails as if one’s own parent has died (even as the parent’s own son shows practically no emotion publically) is at best an over-reaction. Theoretically, mourning a leader as though one knows him or her personally involves a category mistake in leadership—conflating the messenger for the social reality that is the content of the leader’s  vision. Even as people pay attention to a leader as he or she enunciates a vision, the value of the meaning being portrayed in the social reality can and should be distinguished from the leader. In other words, just because we value leadership does not mean that extreme emotion is somehow valid or even healthy psychologically in mourning the loss of a leader.

As another example, consider all the Nazi soldiers who committed suicide themselves after Hitler did so. Consider the warped perspective that life in a post-Nazi Germany would not be worth living. Göbbels’s wife is said to have held that view as he killed her young children and then herself (with her husband). Both the warped perspective in Nazi Germany and the exaggerated emotions in North Korea suggest that some followers of a leader can manifest an underlying pathology that gets wrapped around the significance of a leader. Obviously, devious leaders can utilize this pathology for their own purposes.

As beneficial as leadership can be to a society (and in satisfying certain human instincts), a downside to the phenomenon itself should not be ignored. Mischaracterizing leadership as saccharine “feel good” platitudes such as, “empowering followers, “being a winner” and “reaching your potential,” is vacuous because such renderings make the concept as an ideological vehicle or nearly tautological; more importantly for our purposes here, the biased approach is also dangerous because it enables the sort of denial that can perpetuate the “dark side of the force.”

Click to add a question or comment on how pathology can be associated with leadership.

Sources:

Baudrillard, J. "Mass Media Culture," in Revenge of the Crystal, J. Baudrillard, ed. (London: Pluto Press, 1974), pp. 63-97.

Choe Sang-Hun and Norimitsu Onishi, “North Korea’s Tears: A Blend of Cult, Culture and Coercion,” The New York Times, December 21, 2011. http://www.nytimes.com/2011/12/21/world/asia/north-korean-mourning-blends-emotion-and-coercion.html

DePree, M. Leadership is an Art (Doubleday, New York, 1989).

Nanus, B.: 1992, Visionary Leadership: Creating a Compelling Sense of Direction For Your Organization (Jossey-Bass: San Francisco).


Monday, December 19, 2011

U.S. Visa Fast-Track For Rich Investors

The New York Times reported in December 2011 that affluent foreigners had been rushing to take advantage of a U.S. immigration program. The foreign applicants must invest at least $500,000 in construction projects within the United States. The number of applicants had nearly doubled since the end of 2008 to more than 3,800 in the 2011 fiscal year. The intent of the program is to spur economic development at a time of high unemployment. Yet the program has also been characterized as a cash-for-visas scheme. Besides the question of whether the program’s rules have been stretched in New York City to qualify projects in prosperous areas for special concessions, an ethical question can be raised concerning who should get a visa.

Obviously, the program’s designers must have known that only wealthy people could qualify. A public-interest ethical argument could be made that they deserve a green card because they contribute to economic development out of which jobs for Americans can ensue. Indeed, to the extent that the additional investment results in more economic activity, the visitors making the investment in 2011 could have been helping to forestall a double-dip recession. This was a distinct possibility at the time, given the E.U. debt crisis.

The ethical issue is in the exclusion of people who are not wealthy. The principle of fairness would seem to mandate that just as many non-rich foreigners be granted green cards above the ordinary limit. However, this would seem to be rather artificial—a sort of tit for tat—as in “we’ll accept your tax cut if you accept ours.” Moreover, in the context of high unemployment, any such increase in visas should not add to the supply of labor.

John Rawls suggested that in designing such a system as applying for a green card, a veil of ignorance as to whether one will be rich or poor should be utilized. Rawls’ thinking was that if the designers cannot know whether they or their friends will be rich or poor, then the proposed system design will be fair (i.e., there would be the chance that one’s friends are poor foreigners unable to get a green card). While fair in itself, this ethical device may not adequately take into account the public interest that could be satisfied by only one segment (e.g., the rich). Should the U.S. renounce the possibility of more economic development, particularly at a time of high unemployment, just because poor and middle-class foreigners cannot participate?

Related to the matter of income and wealth, it can be asked from both the public interest and ethical standpoints whether capital investment is more valuable economically than highly skilled and educated foreigners. To be sure, the latter ought not crowd out citizens and existing residents who have comparable skills and knowledge, and it is presumably possible to further train and educate existing citizens and residents.

For example, the very same issue of the New York Times containing the story of the green cards for foreign investors reported that M.I.T. was announcing an expanded program that would still allow anyone anywhere to take M.I.T. courses online free of charge, but would add online labs, self-assessments and student-to-student discussion. Also, for a small charge, a certificate can be obtained. At the time, the university’s free OpenCourseWare included nearly 2,100 courses and had been used by more than 100 million people. Rafael Reif, the provost, gave the following as the operating assumption: “There are many people who would love to augment their education by having access to M.I.T. content, people who are very capable to earn a certificate from M.I.T.” To be sure, a certificate would not be a degree, but in terms of non-professional jobs the former may be sufficient. “The most important thing is that it’ll be a certificate that will clearly state that a body sanctioned by M.I.T. says you have gained mastery,” Reif added. The notion that cost (and debt) ought not be an obstacle to a natural drive to learn more, whether in terms of skills or knowledge, is foreign in the United States (and increasingly in Europe as well).

Yet from the standpoint of economic development as well as jobs, viewing education as an investment rather than as a purchased product would likely pay substantial dividends. Where such an approach to vocational training and higher education falls short for citizens and residents, welcoming the best and the brightest from abroad—even training and educating them at online programs such as M.I.T’s—may be an investment policy even more beneficial than that of attracting additional capital investment in construction projects.

Click to add a question or comment on U.S. visa programs in relation to ethics, training and education.

Sources:
Tamar Lewin, “M.I.T. Plans to Expand Its Free Online Courses,” The New York Times, December 19, 2011. http://www.nytimes.com/2011/12/19/education/mit-expands-free-online-courses-offering-certificates.html

Patrick McGeehan and Kirk Semple, “Rules Stretched as Green Cards Go to Investors,” The New York Times, December 19, 2011. http://www.nytimes.com/2011/12/19/nyregion/new-york-developers-take-advantage-of-financing-for-visas-program.html