“Well written and an interesting perspective.” Clan Rossi --- “Your article is too good about Japanese business pushing nuclear power.” Consulting Group --- “Thank you for the article. It was quite useful for me to wrap up things quickly and effectively.” Taylor Johnson, Credit Union Lobby Management --- “Great information! I love your blog! You always post interesting things!” Jonathan N.

Saturday, December 1, 2012

Bad PR and Bad Banking: BOA

How to do bad PR: Announce plans to raise fees effecting low-income customers, then pull back, wait a year, then announce such plans again, then pull back yet again. This sort of PR strategy gives rise to headlines such as, “Bank of America Backs Down on New Fees.” The Wall Street Journal could have added, “yet again.” Besides the obvious PR downside to announcing unpopular fees—and on one’s least well-off customers—is the implication of weakness or vulnerability in repeatedly backing down. In the animal kingdom, Bank of America would not exactly be the alpha male lion. Rather, the bank would be one of the other males, which may or may not get to reproduce.
The full essay is in Cases of Unethical Business, available in print and as an ebook at Amazon.com.  

Monday, November 26, 2012

The Filibuster: States' Rights or a Partisan Ploy?

Before 1917, senators could filibuster only by talking continuously on the U.S. Senate floor. There was no mechanism to stop them. Such filibusters were rare until entering World War I was debated. In 1917, the Senate passed its first “cloture” rule, whereby two-thirds of the Senate could cut off debate and force a final vote. Between that year and 1971, no two-year session of Congress had more than 10 such votes. Even so, in 1971 the rules were changed to allow other legislation to be taken up during a filibuster—relieving a senator of having to continuously talk to maintain one. Making it easier to filibuster quickly led to the predictable result of more filibusters. In the 93rd Congress (1973-74), the number of cloture motions jumped to 31, from an average in the 1917-1971 period of two per Congressional session. In 1975, the number of votes needed to stop a filibuster was lowered from 67 to 60. However, this change did not curtail the use of the device, as it is rare for a party to control 60 votes out of 100 in the U.S. Senate. By 2010, the average number of cloture motions per two-year session had risen to 129, which suggests that the filibuster had become more typical in how senate business was to be conducted. In effect, legislation and even executive business, such as confirming presidential nominations, needed a supermajority (60 out of 100) in the upper chamber of Congress.

The complete essay is at Essays on Two Federal Empires.

Non-Tariff Barriers to Trans-Atlantic Trade

Karel De Gucht, the E.U. trade commissioner, said in late November 2012, “There is now, for the first time in years, a serious drive towards an E.U.-U.S. free-trade agreement.” The office of his counterpart, Ron Kirk, the U.S. trade representative, indicated that a high-level working-group consisting of Europeans and Americans was working on “how best to increase U.S.-E.U. trade and investment.” The sticking point concerned non-tariff barriers, such as different regulatory standards.
Karel De Gucht, the E.U. Trade Commissioner, advocating a free-trade pact with the U.S.  (Reuters).

The complete essay is at Essays on Two Federal Empires.

Expansion at Volkswagen: Minimizing Risk in E.U.?

It is perhaps common among gigantic corporations, such as the major automobile manufacturers, to assume that current profitability is likely to be augmented by expansion. Economies of scale are presumed to outpace diseconomies as even a large company expands. At a more basic level, it is generally assumed that if a company is not expanding, it is necessarily facing its downfall. The notions of equilibrium and steady state are fundamentally at odds with the more, more, more mantra of mammon. Accordingly, it can be asked whether efforts to strengthen a company’s equilibrium are more in line with long-term profitability. The very expression, strengthening an equilibrium is étranger or foreign to business parlance.


                                                      A car is assembled in the E.U. in 2012, potentially countering austerity measures in some states.   AP

By the end of 2012, Volkswagen had announced plans to invest €50 billion ($65 billion) in the global operations over the next three years. Much of the money was directed to expand the company’s operations outside of Europe. Two other European auto companies, BMW and Daimler, were also engaged in record investment programs outside of Europe. Taking advantage of greater-than-expected auto sales in North America and China can be a good way to limit the recessionary impact of the European debt-crisis and the related “austerity” budget-cuts at the state level. I say “can be” because assessing the automobile market in China from Europe involves risk. The workings of the Chinese government are not exactly transparent and the Chinese culture is not necessarily well-understood by Europeans (or Americans), so the Chinese auto market could quickly shift in quantity and even desired type of cars being sought without European managers seeing it coming. Even so, shifting operations globally away from problematic countries is generally a benefit of being a multinational corporation in terms of reducing the recessionary head-winds facing the company. This requires that the “flaps” on “both wings” shift so the entire plane can turn decisively.
However, if the motive is expansion per se, the international strategy is not one primarily of hedging risk. That is, the hedging effect can be muted. In fact, there could be little impact on risk-exposure, or it could actually increase. Of the €50 billion oriented to international expansion at Volkswagen, €23 billion was to be directed, en fait, to modernizing and expanding plants as well as research and development sites in the E.U. While of benefit to the E.U. in countering the recessionary impact of budget cuts in some states (though expanding in the state of Germany while Greece and Spain continue to founder could further compromise European integration), expanding in the E.U. effectively undercuts the hedging function of expanding abroad. Moreover, the underlying motive can be said to be expansion rather than reducing risk.
Whereas reducing overall risk strengthens or reinforces a company’s equilibrium, expansion taken as an end in itself, going outward as if the spray shooting out of a shotgun, can actually increase the risk because more is at stake. Expansion, being inherently general, can obfuscate efforts to be strategic. Furthermore, once the economies of scale in being a major multinational corporation have been achieved, further expansion risks triggering diseconomies of scale outpacing any additional economies from a still-larger scale. So it might be worth pondering how an equilibrium can be strengthened in a way that does not simply feed the urge for more, more, more—an instinct that can be counter-productive in the long term.  

Vanessa Fuhrmans, “German Car Makers Hit Road,” The Wall Street Journal, November 25, 2012.

Sunday, November 25, 2012

Steve Jobs: The Sad Truth about Visionary Leadership

According to Joe Nocera, Steve Jobs was not a consensus-builder but a dictator. Lest it be objected that this disqualifies him from being admitted to the “true leader” hall of fame, Nocera hints at an explanation for why visionary leaders may not be all that touchy-feely after all. Nocera suggests that Jobs was a dictator because he “listened mainly to his own intuition.” He “never stopped relying on his singular instincts in making decisions” on Apple products. This makes complete sense, as his sense was singular. 
                               Steve Jobs at Apple. Is it the vision or charisma that accounts for the focus on such pictures?   Getty

The full essay has been incorporated into (or swallowed up by) On the Arrogance of False Entitlement: A Nietzschean Critique of Business Ethics and Management, available in print and as an ebook at Amazon.