Author: ken

Getting It Right

Disney’s CEO, Robert Iger, is getting a lot of credit in the press for designating his eventual successor, even though the succession will not occur for 3 more years. That may be because his own ride to the top was so bumpy.

As James Stewart put it in the Business Section of The Times: “Mr. Iger’s predecessor, Michael Eisner, elevated and discarded some prominent candidates to succeed him — Jeffrey Katzenberg and Michael Ovitz, in particular — in a multiyear drama that eventually led to a shareholder revolt and Mr. Eisner’s ouster.” Eisner made a mess of it, and Iger may well have wanted to avoid that spectacle.

There are a lot of reasons for the process to be troubled, starting with the fact that the person leaving the top job can be ambivalent about giving up the powerful role. He may not want to leave, even if the must. Or more narcissistically, he may not want to be succeeded by someone who will be seen as better than he was.

David Larcker, a professor at the Stanford Graduate School of Business noted that “the track record for handpicked successors who follow highly successful chief executives isn’t encouraging. In a recent research paper, he found that the share price of companies run by chief executives who were selected by their predecessor tends to underperform the Standard & Poor’s 500, sometimes by large percentages.” (That’s how corporate boards assess success.)

The reason, he suggests, is what he calls the “Mini-Me syndrome,” the tendency of CEOs to prefer people like themselves. (Not as capable of being successful, like them, I suppose he means, but similar in a way that blinds their judgment.)

In this case, Thomas Staggs, Iger’s chosen successor sounds as if he could not be improved upon. According to The Times, Staggs “is very artist-friendly. He’s a musician. He’s warm and friendly, and he’s got a gorgeous family.” He “is also popular on Wall Street and was repeatedly named by Institutional Investor magazine as the entertainment industry’s top chief financial officer.”

What concerns me here is that is seems almost too perfect for the part.
The really important question, though, is he good enough for the job?
Absent in this account of succession is any attempt to characterize the
problems he will face or to assess the special qualities or strengths he
would need to bring to solving those problems.

Maybe because Disney is in the entertainment business, they think
primarily of casting the role, but the account in The Times lists a
multitude of issues he will face.

One man who worked closely with Staggs mused: “The problem, if there is one, is how big can Disney get? How do they keep the growth rate?” As The Times noted: earnings showed “a 19 percent increase over the previous year. . . . Last week, the stock hit a record high of $102, and it is up more than 30 percent over last year. . . . But the studio entertainment division’s 33 percent gain and the closely related consumer products earnings increase of 46 percent were even more impressive because of Disney’s remarkable series of hit feature films.”

Stock analysts and investors expect continuous growth, and that’s how Staggs will be measured.

Yet More Ominous Economic News

Awareness of our still growing income inequality has spread widely, and new accounts are accumulating weekly in the media. Last week, Oxfam issued a report, “Working for the Few,” and the economist Emanuel Saez just released a preliminary analysis of 2013 income figures showing: “so far all of the gains of the recovery have gone to the top 1 percent.”

Even the President, getting the message, referred to “middle class economics” in his SOTU speech.

But this growing consensus is now starting to obscure something even more ominous, the rise and influence of an oligarchy that has captured our political process to protect its outsized wealth. We’re not talking 1 percent, though. It’s more like .001 percent.

As Jeffrey Winter recently pointed out, in his extensively researched book Oligarchy, (published by the Cambridge University Press) oligarchs in the modern world do not exert control directly. Working though what he calls the “income defense industry,” they make sure that their wealth is protected by armies of lobbyists, lawyers, accountants, advisors and tax consultants who work on their behalf, protecting their wealth from taxation and inheritance levies.

In a modern democracy, Winters argues, oligarchs benefit from the legal power of the state, so they do not have to hire mercenaries to protect themselves and their wealth. Indeed, they virtually disappear among ordinary citizens and their well-established legal guarantees. That ensures their wealth will not be confiscated. And there are stable political processes they can manipulate to protect their interests. They do not have to be seen or, even, act on their own behalf. They seldom even run for office. Their money does all the work.

As Winters puts it: “Indeed, the absence of the more frontal and visible aspects of oligarchy leads to the mistaken impression that there are no longer any oligarchs.”

Moreover, in the west we have a very active celebrity culture that distracts the attention of the public and spares our oligarchs uncomfortable scrutiny. They do not have to play the role of nobility. To be sure, they get maximum attention when they endow hospitals, universities and concert halls. In fact, our society has come to feel dependent on their largess as public funds are increasingly unavailable to meet our large scale cultural and artistic needs.

We get to use these facilities and feel grateful of the donors’ largess, perhaps even admiring them for their generosity, usually unaware that the tax policies supporting them are also shifting the burden of essential services on to the middle class. What our oligarchs don’t pay in taxes to support new roads, medical care, law enforcement, defense, etc. etc. comes disproportionally out of middle class income.

Winters also makes the point that this arrangement is unlikely to change as our political process, underwritten by the campaign donations of our oligarchs, makes taxes unpopular. In fact, one might think that estate taxes that only affect the super rich could gain support among the many who are extremely unlikely to come close to ever having to pay them. But that has proven not to be the case.

Our oligarchs have done their job well, and it looks like they are here to stay.

Recovering Our Capacity to Think

Faced with yet another massacre of innocents, we all too readily think of it as “senseless” or “insane.” If the acts are horrifying we sometimes think of them as “evil;” if just random they seem crazy. But those responses ignore that in every case they were motivated and planned by people who usually believed in what they were doing.

The Columbia University economist Jeffrey Sachs recently reminded us that “in most cases, terrorism is not rooted in insanity.” Shocked, caught off guard, we may not grasp the logic of it, but we automatically put it beyond our capacity to understand, if we label it as “crazy” – and “evil” takes us no further to understanding why.

Dr. Sachs reminds us: “it is more often an act of war, albeit war by the weak rather than by organized states and their armies.”

“Islamist terrorism is a reflection, indeed an extension, of today’s wars in the Middle East. And with the meddling of outside powers, those wars are becoming a single regional war – one that is continually morphing, expanding, and becoming increasingly violent.”

Looked at that way, terrorism is a random or loosely coordinated series of retaliations against an overwhelming and relentless campaign by the west to assert its interests. Millions of Muslim lives have been lost, human rights have been trampled, communities and families decimated, and this not to mention the cost to us.

To say this is not to take sides, nor is it to accept or forgive. Even seeing terrorists acts as “evil” does not absolve us of the need to grasp their motivation and meaning. It is simply to try to look at reality. Without blaming our selves for past aggressions or old mistakes, Sachs concludes: “Ending the terror of radical Islam will require ending the West’s wars for control in the Middle East.”

However justified our actions in the past may have been by our need to protect our interests, the good news he sees is that they are now changing.

The Age of Oil is gradually coming to an end. “We should make that end come faster: climate safety will require that we leave most fossil-fuel resources in the ground. Nor do the other ancient motives for Western interference apply any longer. The UK no longer needs to protect its trade routes to colonial India, and the US no longer needs a ring of military bases to contain the Soviet Union.”

To be sure, we have investments to protect. But if we think of it that way, we might be open to more rational cost/benefit calculations, and new policies that steer clear of attempts to control the middle-east.

There are other meanings to terrorist acts, and Sach’s ideas may be far from the last word on the subject. But it fair to say that one of the worst casualties of terrorism is our capacity to think clearly. When we are terrified, we tend to panic, and when we panic we just want to get out of the way of danger — or strike back. That’s usually the full extent of the mental activity that goes into our actions.

We need to do better than that.

The Weaponization of Information

We have gotten used to authoritarian regimes imposing “reality” on their subjects. George Orwell satirized this in his novel, 1984, labeling the techniques employed by the “thought police” as “newspeak” and “double think.” But what’s happening now in Russian politics is a step beyond that.

Vladislav Surkov is the author of “the new Russian system,” as recounted recently in The Atlantic, based on such postmodern ideas as “the breakdown of grand narratives, the impossibility of truth, how everything is only ‘simulacrum’ and ‘simulacra’.” Put somewhat more vulgarly: “Everything is PR.”

So he creates political parties, orchestrates demonstrations and book burnings, meets regularly with the heads of television channels to plan the news, decide who should be promoted or banned, crafting the language to be used. Certain key words are endlessly repeated to characterize the Putin regime: “stability,” “effective managers.”
He and his cohorts see themselves as “political technologists,” old fashioned viziers and Rasputins crossed with modern advertising consultants.

Such sophistication is “both cynical and enlightened,” advanced because it is based on the understanding that reality is ultimately unknowable. At the same time it is designed to confuse and mystify. As Orwell would have appreciated, it allows Surkov’s boss, Putin, to play his enemies against each other as he advances his agenda of totalitarian control.

The brilliance of this new type of authoritarianism is that instead of simply oppressing the opposition, “it climbs inside all ideologies and movements, exploiting and rendering them absurd. One moment Surkov would fund civic forums and human-rights NGOs, the next he would quietly support nationalist movements that accuse the NGOs of being tools of the West. With a flourish he sponsored lavish arts festivals for the most provocative modern artists in Moscow, then supported Orthodox fundamentalists, dressed all in black and carrying crosses, who in turn attacked the modern-art exhibitions. The Kremlin’s idea is to own all forms of political discourse, to not let any independent movements develop outside of its walls. Its Moscow can feel like an oligarchy in the morning and a democracy in the afternoon, a monarchy for dinner and a totalitarian state by bedtime.

Commenting on this same phenomenon, Politico noted that for these technicians, Putin is “nothing more than a set of colored pixels on a screen, morphing as rapidly as a performance artist among his roles of soldier, lover, bare-chested hunter, business man, spy, tsar, superman. ‘The news is the incense by which we bless Putin’s actions, make him the president,’ [his] TV producers and spin-doctors liked to say.”

In the words of Russian media analyst Vassily Gatov: “If the 20th century was defined by the battle for freedom of information and against censorship, the 21st century will be defined by malevolent actors, states or corporations, abusing the right to freedom of information for quite other ends.”

The previous regime went to “great lengths to make their forgeries look convincing.” But “now the Kremlin doesn’t seem to care if it is caught: The aim is to confuse rather than convince, to trash the information space so the audience gives up looking for any truth amid the chaos.”

That means if a new George Orwell were to come along to skewer this latest attack on our capacity to think, we might not notice.

What Are Our Scores?

It’s no surprise that retailers are searching to find potential customers all the time, enticing the profitable ones, avoiding the deadbeats. But most of us are unaware of how relentlessly and extensively we are being watched and evaluated as consumers – and how dangerous our ignorance of that practice can be.

Over 400 companies are in the business of compiling consumer data, scoring us, ranking us, and arranging us in list. And we usually never know.

For example, we have “e-scores,” ranking our value as internet customers, and “churn scores” that predict loyalty to our phone carriers or cable companies? There are job security scores that evaluate our risk of unemployment, affecting our ability to pay back loans. There are even charitable donor scores that foundations use to assess the likelihood of our giving large gifts.

The World Privacy Forum recently published a report, “The Scoring of America,” alerting us to the widespread practice and it dangers: “Consumer scores with secret factors, secret sources, and secret algorithms can be obnoxious, unaccountable, untrustworthy, and unauditable.” More: “Secret scores can be wrong, but no one may be able to find out that they are wrong or what the truth is,” adding that they “can hide discrimination, unfairness, and bias.”

According to the report, such scores are largely “unregulated either by the Fair Credit Reporting Act or the Equal Credit Opportunity Act,” arousing “issues of secrecy, fairness of underlying factors, use of consumer information such as race and ethnicity in predictive scores, accuracy, and the uptake in both use and ubiquity of these scores.”

Unnerving as this can be, the major problem is their secrecy. There is no way for the average consumer to find out their e-scores or their frailty scores or any of the ways they are being judged. That means, of course, no way to correct mistakes or protest unfair or biased judgments.

Not until 2000 did the ubiquity of credit scores become widely known, though banks and credit agencies were using them to evaluate us for years, approving and denying applications for credit for what often seemed – and sometimes was — arbitrary reasons. The revelation of those credit scores – along with stories of frequent abuses — eventually led to government regulation, and that now means greater reliability as well as transparency.

Frank Pasquale, whose book The Black Box Society is being published by Harvard, notes how lists are being compiled as well as scores: “lists of victims of sexual assault, and lists of people with sexually transmitted diseases. Lists of people who have Alzheimer’s, dementia and AIDS. Lists of the impotent and the depressed. There are lists of ‘impulse buyers.’ Lists of suckers. . . And lists of those deemed commercially undesirable because they live in or near trailer parks or nursing homes. Not to mention lists of people who have been accused of wrongdoing, even if they were not charged or convicted.” Just a few dollars a name, but there is no way to assess their accuracy or even to find out what lists you may be on.

We may not know our scores or exactly what lists we are on, but I think we all sense that it is not just the NSA that knows all about us. Our email accounts are regularly hacked, credit cards stolen, passwords copied.

There is no privacy and no more secrets.