Month: March 2014

Much More Than Hunger

Poverty calls to mind starvation and inadequate clothing, leaky roofs, no doctors or medications for illness. But David Brooks recently reminded us of something even more important. The primary effect of poverty is “raw fear.”

“People in many parts of the world simply live beyond the apparatus of law and order. The District of Columbia spends about $850 per person per year on police. In Bangladesh, the government spends less than $1.50 per person per year on police. The cops are just not there.

“In the United States, there is one prosecutor for every 12,000 citizens. In Malawi, there is one prosecutor for every 1.5 million citizens. The prosecutors are just not there.”

Most of us take civil order for granted. To be sure, crime and violence exist – but, generally, they are exceptions. When they occur to us, we are usually shocked. And we usually feel safe on the streets, unless we live in a crime-infested, drug-infused decaying urban area such as Detroit was until recently. But that level of security was achieved a relatively short time ago. In poor countries it still does not exist.

Brooks adds: “Even when there is some legal system in place, it’s not designed to impose law and order for the people. It is there to protect the regime from the people.” The wealthy and the established, by and large, are immune from prosecution, and corruption means that being ‘privileged’ means having the right to do what you want with impunity. (See, “The Republic of Fear.“)

He concludes: the “primary problem of politics is not creating growth. It’s creating order.”

Brooks does not specify this, but it is implicit that such legal order inevitably includes human rights. Having rights means that you are entitled to make choices about matters affecting your values and beliefs, your desires and convictions. You can have opinions and inclinations, likes and dislikes. Some ideas are worth dying for, but that should not be the acid test against which our everyday impulses and thoughts need be measured.

If “raw fear” is the result of lacking physical safety, so can it flow from knowing that someone more powerful feels free to assault you or take what you have. It also shades off into anxiety and shame when you know they might, that it just has not occurred to them yet.

Those of us who enjoy these privileges tend to take them for granted. That’s the point of having them, not needing to check them out constantly. We simply know they are there –until they are not.

We are allowed to live on the surface of life, but that is part of what it means to be human. For the most part, we are able to see things as they are, without being paranoid or haunted or guilty.
Brooks reminds us how easily we forget that dimension of life.

Things Disappear

We still don’t know where Malaysian Airlines flight 370 disappeared to, but most things disappear into the depths of the mind. That’s what happened to the radar operators who noticed a blip on their screens headed out over the Indian Ocean — but then didn’t notice it any more. When the tapes were reviewed, it was too late.

And that is what appeared to happen at GM when reports of repeated malfunctions on ignition switches were ignored. The defects were first noticed a few years ago – and then they disappeared. It happened at banks when risk managers noticed their over-leveraged debt, but then did nothing – and forgot about it.

It is worth reflecting on this in the age of big data and continuous surveillance in which we have so much more information than we ever thought possible. As Pico Iyer wrote in The New York Times: The disturbing truth is that “Whatever the field of our expertise, most of us realize that the more data we acquire, the less, very often, we know.”

It’s not just that we have too much data. We don’t know what to look for and we often don’t recognize it when it’s staring us in the face. “The universe is not a fixed sum, in which the amount you know subtracts from the amount you don’t.” The problem is finding meaning in the facts.

It takes a special kind of vigilance to monitor the unconscious, what you don’t particularly want to know – but do! That is what my blog is devoted to: www.keneisold.com. You need to notice anomalies and gaps, disparities and disconnects, repetitions and silences.

Starting this week, I will continue to post weekly, now regularly on Mondays, but I will also be adding occasional “Hints and Glimpses” of items in the news, intriguing stories that suggest more meaning beneath the surface.

What Research Reveals

“A long-held tenet of free market capitalism, is wrong,” writes Eduardo Porter, business reporter for The New York Times. Economists have long held to the belief was that income disparities in a market economy would eventually level out.

That did seem to happen in the mid 20th century, leading the economist Simon Kuznets to postulate a curve of income distribution. The “Kuznets curve,” showed a “widening in the early phases of economic growth . . . becoming stabilized for a while; and then narrowing in the later phases.”

Kuznets get it wrong because he focused on a period when, as Porter put it: “a depression, two world wars and high inflation destroyed a large chunk of the world’s capital stock.” Then, “fast growth after World War II and high taxes on the rich . . . flattened the distribution of income until the 1970s.” Kuznets generalized from these historical anomalies.

Porter noted that his “conclusion provided a huge moral lift to capitalism as the United States faced off with the Soviet Union. It suggested that the market economy could distribute its fruits equitably, without any heavy-handed intervention of the state.”

The Kuznets curve became a tenet of “economic orthodoxy that prevailed throughout the second half of the 20th century.” Holding sway today, “it more or less put an end to economists’ interest in the topic.”

It helped undermine the case for inheritance taxes, progressive income taxes and other ways governments had sought to help those at the lower end of the income scale. Clearly those policies served the interests of the wealthy, but because they were presented as economic laws, not political decisions, they seemed indispensible to managing the economy. As such, they could even be seen as benefitting the poor in the long run. They just had to wait longer.

Now, however, impressive scholarship by the French economist, Thomas Piketty, based on painstaking examination of income tax returns, suggests that “the dynamics of capitalism will not help.” Piketty’s conclusion: “income from wealth usually grows faster than wages.” As a result, “inherited wealth will grow faster than the economy, concentrating more and more into the hands of few.”

Porter concludes: “future inequality in the United States will be driven by two forces. A growing share of national income will go to the owners of capital. Of the remaining labor income, a growing share will also go to the top executives and highly compensated stars at the pinnacle of the earnings scale.” (See, “A Relentless Widening of Disparity in Wealth.”)

Back in the 50’s, Kuznets told investors what they wanted to hear. Piketty is now telling us what we have long suspected. The richest 10 percent of Americans take a larger slice of the economic pie than they did in 1913, at the peak of the Gilded Age.

Porter writes: “Progressive wealth taxes could reduce the after-tax return to capital so that it equaled the rate of economic growth.” But “holders of wealth, hardly a powerless bunch, will oppose any such move, even if that’s what is needed to preserve capitalism against the populist impulses of those left behind.”

My question: Are our minds free to think outside the boxes of what was conventional wisdom for so long, and is still embraced as economic law. How long will it take for Picketty’s discoveries to replace the old norms?

The Perspective of Porn

In the wake of the revelations that the NSA has been hacking our phones and collecting massive amounts of personal data, can we still think privacy is possible in our world? More and more our lives are open books.

For the most part, we seem to like it that way, constantly offering information about ourselves through social media sites. We register for professional networks. Information about our purchases are communicated instantly to anyone willing to pay for it. Google knows everything we have done. We want to be found.

Airport security routinely x-rays our bags and our persons. Cameras on the street photograph our every move. We may not always intend to “Send to All,” but we do. And it’s just because we have not bothered to learn how to hack, assuming you haven’t, we don’t yet “Receive All.”

So it is interesting to have the thoughts of a porn star who lives without a shield, constantly “out.” She quoted from a guideline for Adult Performers: “You cannot expect your legal name to remain a secret, and a stage name will not fool people who recognize you.”

She notes a seeming paradox: “I willingly engage in work that reduces me to a few sexual facets of myself but expect to be seen as a multifaceted person outside of that work. . . . But this same lack of context is something any of us can experience. It’s what happens when any ill-advised tweet or embarrassing Facebook picture goes viral.” To know anyone, then, you need multiple encounters. “Ten years ago, I would have judged people over the course of several conversations. Now I evaluate them based on a few snippets of their social media presence.”

Her solution, in other words, is to embrace transience and multiplicity. No one knows who you really are, including you, so try to accept that you are more than any one version of yourself. Whatever gets uncovered or exposed is just part of the truth. (See her comments in The New York Times, “Can We Learn About Privacy From Porn Stars?”)

Years ago, a friend asked, “Why do you need privacy if you have nothing to hide?” It’s a question worth pondering. You might want to be in control of intimate disclosures. You might want to spare yourself embarrassments. You might want to be able to deceive others, or just engineer your image. All celebrities – not just porn stars – face these tradeoffs. They get fame and money in exchange for being spied on and chased by swarms of paparazzi. What do we get?

Obviously we don’t want others to gain access to our banking codes, steal our money and our identities. Those are crimes, not insults or awkward facts. If a friend reports embarrassing information to another friend, that’s an ethical lapse, a reason to mistrust your “friend.” But, in that case, don’t you want to know it has happened?

Privacy hasn’t completely died, yet, but think about it! As we inexorably move closer to a world in which there are no secrets, it’s worth pondering how you feel about this relentless surveillance and the fact that there’s not much you can do about it.

A New Study Raises Questions

The CEOs of family businesses “worked 8% fewer hours than managers without genetic ties to their companies.” This conclusion was reached by a study of CEOs in India, but it “found similar disparities in Brazil, Britain, France, Germany, Italy and the U.S.,” according to an article in The Wall Street Journal.

But what to make of it? The incentives and risks that motivate professional CEOs to burn the midnight oil just might not be a factor for family CEOs, said Raffaella Sadun, a Harvard strategy professor and one of the study’s authors. But is that a problem? An advantage? Is it good for business or bad?

The conventional wisdom, of course, is that working less in a highly competitive world is bad. One CEO of a family business, who claimed he worked just as hard as any other CEO, noted that “a really unhealthy situation” is created when family members “are raised with the mind-set that they are entitled because of [what] their last name is.” Yes, but is that always true?

It can be that family CEOs find it easier to balance work and their personal lives: “Wesley Sine, a researcher at Cornell’s Graduate School of Management who studies entrepreneurship, said that executives who are more oriented toward family and establishing a legacy are more likely to favor leisure.”

“You have a perspective that life is more than money,” he said.

At the same time, such executives are often pressured by the fact that their success or failure impacts family members dependent on them. Moreover, they can be anxious or insecure about being judged by their parents.

The study conducted by professors at the Harvard and Columbia business schools as well as the London School of Economics, acknowledged that hours worked is a “very crude measure of effort.” A lot of work occurs informally, and family time is often rich with opportunities to communicate concerns and share ideas. (See, “Do CEOs of Family-Owned Businesses Work Less?”)

Can we conclude anything meaningful from the study? The Journal writes: “the jury is still out on whether family-owned businesses perform better or worse than firms with outside CEOs.” Given the complexity and variety of family dynamics, perhaps all the differences wash out in the end.

McKinsey has found: “Fewer than 30% of family businesses are still standing by the third generation of leadership.” On the other hand, a paper in the journal Family Business Review noted similar survival rates in nonfamily firms. Businesses don’t last, whether or not they are family owned.

But why do people expect family businesses to be any better or any worse? And what accounts for the variety of opinions on the subject?

I suspect it is because family businesses are insulated from the more virulent pressures of investor capitalism. Not owned by strangers who focus exclusively on “shareholder value,” they elicit envy on the part of executives often judged by market factors over which they have little control. On the other hand, they can elicit contempt from executives who believe family CEOs have an easier job.

Objective measures of comparative success are hard to find, but that hardly stops people from having strong opinions on the subject.