Outsourcing and the Decline of Critical Thought

When you throw away the books and the theory and look behind the curtain to see public and business strategy being implemented something becomes clear: most people have no idea what they are doing.  They may speak the language and look the part, but deep down most decision makers do what they think a person in their situation should do.

Last month Esther Kaplan published a phenomenal article in VQR titled Losing Sparta. In it, Kaplan reviews a recent decision by Philips to close an award winning light fixture manufacturing plant in Sparta, Tennessee. What’s fascinating and important about this story is that there was no business case to outsource the plant’s production. It had it all. It was a days ride from most U.S. markets. It had a brand new production line that could be switched and retooled in minutes. It was named one of the best factories in America by Industry Week. Yet by 2010 the plant was closed and all of the production was shipped to Monterrey, Mexico.  Now manufacturing lead times at the plant have ballooned from ten days to eight weeks. Phillips lost nearly a third of their market share  in the products previously produced in Sparta.

Why did Philips decide to outsource? The answer is quite simply a lack of critical thought at the executive level. Kaplan explains:

Continue reading

Things You Should Read – Clinton on LBJ

You don’t have to be a policy wonk to marvel at the political skill L.B.J. wielded to resuscitate a bill that seemed doomed to never get a vote on the floor of either chamber. Southern Democrats were masters at bottling up legislation they hated, particularly bills expanding civil rights for black Americans. Their skills at obstruction were so admired that the newly sworn-in Johnson was firmly counseled by an ally against using the political capital he’d inherited as a result of the assassination on such a hopeless cause.

According to Caro, Johnson responded, “Well, what the hell’s the presidency for?”

Read the full book review here

5 Articles You Must Read About Martin Luther King Jr

Today marks the 46th anniversary of the assassination of Rev. Martin Luther King Jr. If Thurgood Marshall was the tactical leader of the civil rights movement, King was its spiritual. It is hard to imagine anyone accomplishing more in his or her life than King, who lead non-violent protest across America and won the Nobel Prize abroad. Legacy wise, nearly every constituency has attached themselves to King, even conservatives. This is ironic since most conservatives would disown King if they knew about his opposition to Vietnam and his dream to unite the labor and civil rights movements. I’m sure today there will be hundreds of superficial articles published King, but very few will address the context of his life. I’ve gone ahead and curated five articles that do just that.

Continue reading

Thomas Piketty’s Inequality Wake Up Call

This post begins with me sitting in a conference room that overlooked the capital city of a developed country. The room was filled with a handful of Ivy League MBAs, a former officer at a major international bank and two high-level government officials. We were tasked with developing a strategy for the nation’s financial service industry. They viewed themselves as the next Dubai or Singapore, but lacked the infrastructure and history of success. Across from us sat an executive at the second largest corporation in the nation. Her job was to direct the company’s overall strategy. That morning we were there to ask ACME Corporation questions around the private sector’s views on the financial system.

Continue reading

How Growth Hacking Saved “Newsweek”

After a 14 month absence Newsweek returned to print with a splash. The 91 year old publication reported the identity of the creator of BitCoin, a new and somewhat controversial currency used by millions. The article sent shockwaves through the Internet, and propelled the alleged founder, Satoshi Nakamoto, and Newsweek to the forefront of the news cycle.

This is a far cry from seven months ago when Newsweek’s publisher left it for dead. “I wish I hadn’t bought Newsweek,” a disappointed Barry Diller told BusinessWeek, “it was a mistake.” Diller bought the publication in 2010 for $1 (He also assumed all existing liabilities) and promptly hired star editor Tina Brown to turn it around. The first thing she did was to drive the publication straight into a wall. In August 2013 Diller sold the company to IBT Media for a small sum.

In just seven months IBT Media tripled Newsweek’s online readership and felt confident enough to start the printing presses again. How did they do it?

Continue reading

Book Review: “Young Money” by Kevin Roose

For three years New York’s Kevin Roose followed the careers of eight young Wall Street workers to research Young Money. According to the book’s marketing materials Roose created “the story of how the financial crisis changed a generation–and remade Wall Street from the bottom up.” Released last month, the book is many things: a look at the culture of Wall Street through the eyes of those at the bottom, an exploration into the decline of the industry’s esteem, and an 8 person character study. It isn’t however, as some reviewers have suggested, a new Liar’s Poker.

It is a lazy cliché to compare any book remotely critical of Wall Street to Michael Lewis’ 1989 classic. Poker tells the story of an industry on crazy pills and absolutely shreds it. After majoring in Art History, Lewis get a job at Salomon Brothers and found himself handing out investment advice to seasoned investors despite not knowing a thing about the financial industry. “The whole thing still strikes me as preposterous,” he later wrote in a pseudo-epilogue.

I don’t think Roose set out to write the next Liar’s Poker. If he did he would have spent more time analyzing how the industry’s incentive structure turns good people into amoral technocrats. 1 He also would have called out the superficiality of many of the young analyst’s statements 2. Instead he crafted a narrative around the psychological impact of working in a toxic industry on eight young people. “I have never seen more people disgusted to get their hands dirty in my entire life,” a young analyst told Roose after her Bank of America class was tasked with doing routine yard work for a few charities.  “There were like two hundred kids just standing there, looking at their BlackBerrys and being like, ‘I really want to get back to the office.’ I was like, ‘Are you guys kidding me? Is this a joke? You’re out in the sun, doing something good for the community, and all you guys want to do is go back and sit at your desks?’”

That’s Wall Street culture in a nutshell. Given the chance to stay outside and help the community, they’d rather get back to their desks.

Bottom Line: Young Money does not offer an in-depth description of the financial services industry or a grand explanation for its failings. Rather, it is a light and breezy look at the impact of the finance culture on the lives of eight young people.

5 Articles That Explain the Ukrainian Revolution

The world has been on high alert since Russian President Vladimir Putin threw caution to the wind and sent military troops to occupy Ukraine’s Crimean Peninsula. This act of aggression coincided with the defection of Ukrainian naval leadership and the seizing of parliamentary buildings by forces loyal to Russia. Many columnist and analysts are predicting a massive global conflict and a potential return to the Cold War era. What we aren’t seeing is a coherent narrative about how the conflict got to this stage. I’ve gone ahead and curated 5 great sources that paint an accurate narrative of the historical, political and strategic framework of the 2014 Ukrainian revolution.

Continue reading

Could Too Big to Fail End With a Proxy Vote?

T

he four largest American banks are more bloated and complex today than they were in 2008. In fact, their combined assets exceed 97 percent of the U.S. GDP. According to Richard Fisher, president and CEO of the Federal Reserve Bank of Dallas, large United States banks, “represent not only a threat to financial stability” but “are the practitioners of crony capitalism.” Fisher is just one of many leading economists and policy makers who view “to big too fail” as a threat to the American economy. Simon Johnson argued that complicated rules and low political support turned the Dodd-Frank Act impotent.  Former Senator Ted Kaufman is even dourer, “[Dodd-Frank] has been so watered down that, whatever it looks like when the regulators release it in some final form, it will do nothing about [too big to fail].”

Reform is needed to end “too big to fail” but it lacks concrete political support. Could a shareholder proxy push the issue?

Continue reading

Classic Reads: Simon Johnson’s “The Quiet Coup”

In May 2009 The Atlantic Magazine published an article by Simon Johnson titled, “The Quiet Coup.” Today, “The Quiet Coup” stands as one of the watershed articles on the 2008 financial crisis. Johnson, the former Chief Economist of the IMF, argued that roots of the financial crisis was not interest rates or poor people taking out loans they could not afford, but that financially and politically the United States had more in common with Russia than Germany.  “Elite business interests,” he wrote, “played a central role in creating the [financial] crisis, making ever-larger gambles, with the implicit backing of the government, until the inevitable collapse. More alarming, they are now using their influence to prevent precisely the sorts of reforms that are needed…”

To put this in entertainment terms, the closest thing to Johnson’s pronouncement would be if Meryl Streep suddenly gave up serious acting and began producing hard-core pornography.

It is also the exact reason it is a classic article.

Continue reading