Books in Queue
I’m a book lush. My reading aspirations, however, always outstrip my productivity.
Here are a couple of books that have my attention. I’d love to hear from anyone who’s read them.
Cheap: The High Cost of Discount Culture
From the shuttered factories of the rust belt to the look-alike strip malls of the sun belt—and almost everywhere in between—America has been transformed by its relentless fixation on low price. This pervasive yet little examined obsession is arguably the most powerful and devastating market force of our time—the engine of globalization, outsourcing, planned obsolescence, and economic instability in an increasingly unsettled world.
“Around the world, people are being forced to reconsider the very idea of prosperity, and to ask what kind of wealth matters most and can be sustained. Cheap appears at just the right moment to enrich this discussion. This history of discounting and bargain-mania will change the way shoppers think about their next trip to the mall. As an examination of the global effects of the quest for rock-bottom prices, Cheap an important addition to arguments about America’s economic future. This is a valuable book for a troubled time.” —James Fallows, author of Postcards from Tomorrow Square
“More stuff for less!—the American recipe for material well-being. Now Ellen Ruppel Shell takes a hard look at this apparently simple notion and finds it isn’t so simple after all. Cheap pulls apart the old economic verities and subjects the glib new promises of Wall Street and globalization to scrutiny. How did we find ourselves in our current mess? Shell finds part of the answer in our confused ideas about what, exactly, is a bargain price.” —Charles C. Mann, author of 1491
To Serve God and Wal-Mart
The world’s largest corporation has grown to prominence in America’s Sun Belt—the relatively recent seat of American radical agrarian populism—and amid a feverish antagonism to corporate monopoly. In the spirit of Thomas Frank’s What’s the Matter with Kansas? historian Moreton unearths the roots of the seeming anomaly of corporate populism, in a timely and penetrating analysis that situates the rise of Wal-Mart in a postwar confluence of forces, from federal redistribution of capital favoring the rural South and West to the family values symbolized by Sam Walton’s largely white, rural, female workforce (the basis of a new economic and ideological niche), the New Christian Right’s powerful probusiness and countercultural movement of the 1970s and ’80s and its harnessing of electoral power. Giving Max Weber’s Protestant ethic something of a late-20th-century update, Moreton shows how this confluence wedded Christianity to the free market. Moreton’s erudition and clear prose elucidate much in the area of recent labor and political history, while capturing the centrality of movement cultures in the evolving face of American populism. ~ Publisher’s Weekly
Global Defense Bonds?
I’m no weenie peacenik. Thugs must be taken out. But please, let’s rethink our military expenditures.
What if we killed two birds with one stone? First bird, the precarious US treasury. Second bird, the unsustainable global arms race. The stone? A global peacekeeping collective powered with the existing world’s arsenal, most of which the US built.
We built it, so I’m in favor of being compensated for it
The world needs a police force. But I’m not in favor of the ever-escalating arms race or the US being the de facto world’s police force.
What if we paid down our massive foreign debt by selling our portfolio of defense weapons to a global defense bond fund? I got the idea from a white paper published by the Prince’s Rainforest Project which I covered in the May blog. The basic logic of the proposed Rainforest bonds and my proposed global defense bonds is the same: those who add value must be compensated for what they bring to the table.
Rainforest bonds, hence global defense bonds
Here’s what I said about Rainforest bonds: Rainforests cool the planet, regulate the water cycle and provide a home to countless species. To preserve the world’s ecosystem functions and avoid catastrophic climate change, we must reduce tropical deforestation. The world should provide funding to Rainforest nations to help them address the drivers of deforestation and embark on alternative economic development paths. Since the rainforests provide “services” essential to planetary life, justice dictates that those services be compensated.
Similar argument for global defense bonds: The world needs the threat and capability to enforce swift justice to keep the wolves from devouring the lambs. The countries that have sacrificed mightily to build armaments (see graphic above) should be compensated by the beneficiaries — the entire world.
OK, maybe the bond mechanism isn’t ideal, but isn’t this a great conversation starter/brainstorming prompt?
Writing prompts for all professions:
I don’t claim to have the answers, but I thoroughly enjoy seeding the wellspring for your blogs, articles and newsletters:
- Financial analysts: what’s a fundamental analysis say about the efficiency a dollar invested in defense compared to other sectors? How would this change if there were a different marketplace for weaponry?
- Consultants: Technology transfers from weapons to medicine and IT (and visa versa). Do you know of any breakthroughs in medicine or elsewhere that would have come to light sooner if the threat of national security hadn’t kept a weapons technology classified?
- Finance professionals/venture capitalists: Speculate on what might happen if weapons technology was a global defense asset that followed the model in place with universities’ technology transfer programs. Is there a parallel?
- Environmental: Weapons sites decomissioned so far require significant environmental cleanup. Anticipate the impact to the environment of having fewer global weapons sites.
- Services: Reflect on how military bases and weapons plants have been repurposed so far what that portends on a global scale.
- EVERYONE: 1.26b is a lot of money. How would you reallocate it?
Compassion Fatigue
As a ghostwriter with financial services clients, I stay abreast of developments in their professional publications. Ran across an article in Investment News on consumer-focused financial planners’ mental health challenges during this Great Recession.
Hard to be a Zen Master during the Great Recession
The article says mental health professionals coined the phrase “compassion fatigue” to describe a syndrome experienced by caregivers of individuals facing a terminal illness. “Instead of empathizing or ‘feeling bad’ for someone, the caregiver essentially tunes out the patient in an effort to prevent himself or herself from being drawn into a pit of despair.”
The article goes on to say that “many advisers are experiencing a phenomenon known as ‘shared trauma,’ which develops when an adviser has been as victimized by the financial crisis as much as his or her clients” and says this causes some advisers to avoid client contact.”
Jeffrey Goldbert complained about that in an Atlantic Monthly article I blogged about — said he fired his broker because his broker had de facto fired him by not communicating. Perhaps his broker was suffering compassion fatigue or shared trauma, but the article gave me the impression that his broker had simply gone under a tidal wave of corporate compliance.
The Investment News article quoted Patricia Smith, the founder of the Compassion Fatigue Awareness Project in Mountain View, CA as saying advisers “need to start with the fact that [the bear market] isn’t their fault.”
Hmmm, I have mixed feelings on that point. No, it wasn’t entirely the fault of financial advisers, but most of them signed on to work in an environment where they’re expected to toe the company line, including pushing instruments at the direction of their firms. If I called my Merrill Lynch broker to ask about X fund, he would be obliged to tell me what his research department’s position is on it. Maybe his entire knowledge of fund X is limited to the firm’s position. Firms go to great lengths to assure compliant client communications.
Because it’s difficult to set up shop as an adviser without the broker dealer infrastructure, is the best conclusion that system really is rigged?
Writing Prompts: Financial Services
- With so many people trying to cast a wide net for blame, how much should be shouldered personally by advisers? Are advisers equal victims? Well-compensated pawns in the larger game?
- Should advisers pull on their big girl panties and consider this stress an occupational hazard for which they were pre-compensated during the boom?
- Do these findings give the investing public room to empathize with their advisers?
- What reforms do you anticipate between firms and their representatives?
- Will the ill will between client and adviser push investors to instruments like index funds?
Royal Whitepaper
When people take the time to read my b-card they’ll sometimes ask “What’s a whitepaper?” I quote the verbiage on my site, which turns on the lights for about 2% of people.
With Google-driven marketing everyone should know what a white paper is and how they can use one.
Follow treebanker on Twitter
I had an “aha moment” this morning. I decided to build a repository of white papers I like in different categories for general perusal. First up, The Prince’s Rainforests Project Report, which I thank my Twitter follower, Dan Tefft for bringing to my attention.
Three-purpose post
This post suggests changes to the paper that would make it more engaging, discusses its core idea of Rainforest Bonds, and then offers writing prompts for professionals in environmental and financial services.
Reading like an editor
Professionally, I prefer minimizing passive voice and maximizing design to help the reader navigate a dense document such as this (52 pages). Certain professions prefer passive voice (government and academia top the list) so I suppose a report on behalf of a Cambridge-educated Royal conforms to expectations.
The summary as written: “Reducing tropical deforestation will be vital if the world is to avoid catastrophic climate change and preserve important ecosystem functions. An Emergency Package is needed to provide substantial funding to Rainforest Nations to help them address the drivers of deforestation and embark on alternative economic development paths. Rainforests cool the planet, regulate the water cycle and provide a home to countless species; it is right and essential that the world pays for these services.”
I’d rewrite: Rainforests cool the planet, regulate the water cycle and provide a home to countless species. To preserve the world’s ecosystem functions and avoid catastrophic climate change, we must reduce tropical deforestation. The world should provide funding to Rainforest nations to help them address the drivers of deforestation and embark on alternative economic development paths. Since the rainforests provide “services” essential to planetary life, justice dictates that those services be compensated.
Writing Prompts for Environmental, Financial Services
The Prince’s Report outlines a plan for “Rainforest Bonds,” a fixed-income security, issued in private capital markets. Such bonds typically offer investors a fixed rate of return, normally an annual coupon, together with the repayment of the principal on maturity. Over US$400 billion of Sovereign, Supranational and Agency Bonds were issued in 2008. The Project has held discussions with pension funds and the insurance sector (through The Prince of Wales’ P8 and ClimateWise initiatives) which indicate that there would be significant demand for AAA-rated bonds with long-term maturities.
“Rainforest Bonds could be issued by the World Bank, or by an independent entity with support from the World Bank. The bonds would be guaranteed by developed country governments, which would be responsible for payment of the coupon and repayment of the principal.
“However, it may be possible to mitigate the financial calls on these governments, for example by channelling some of the money into green investments that would generate financial returns – this would have the added benefit of supporting broader clean development goals. Private sector bonds provide a way to raise large amounts of finance for tropical forests in the nearterm, while allowing underwriting governments the time to generate revenues for repayment from clean development investments, domestic carbon permit auctions or other schemes. The Prince’s Rainforests Project is working with the World Bank to develop this bond concept further.”
- Is the World Bank the right entity? Or the only entity?
- In light of current global financial priorities, how would these bonds perform financially?
- Environmentally, are these bonds a powerful incentive to change economic development and human behavior?
- Any better options on the table?
The System is Rigged
Cover Story May 2009
“Jane” is a Bank of America SVP and a friend of twenty years. I jumped at her invitation for a weekend on the North Carolina coast with her family. She drove while I read from May’s Atlantic Monthly, featuring a couple of excellent articles on the economy.
Any time we go on a road trip there’s about thirty pounds of reading material in the car “just in case.” Over breakfast she’ll grab one section of the paper and I another, or we’ll take different magazines and debrief each other when something gets our back up. We pass hours like this on the beach every summer. Everyone should have a Jane in their life — the mental stimulation will surely keep Alzheimer’s at bay.
In The Atlantic’s feature article, “Why I Fired My Broker” Jeffrey Goldberg got my attention right out of the gate with this statement “…my crucial mistake was believing that the brokers and wealth managers and cable-television oracles who make up the financial-services industrial complex actually had my best interests at heart.”
Jane and I are an interesting duo. I couldn’t be more committed to self-employment and she’s been committed to the same company her entire career. I tell her I love that phrase “financial-services industrial complex” and Jane shudders, then reminds me of a tour of duty she did in BofA’s credit card division after it acquired MBNA and how slimy it made her feel going to work everyday. My skin crawls. Jane doesn’t appreciate the potshots being taken at bankers these days, but she’s clear eyed about the evils of credit card marketing.
She says, “Keep reading.”
The article routinely skewers Merrill Lynch and other so-called financial advisors who really can’t give financial advice anymore. Jane, who had reason to believe until very recently that she could fund part of her childrens’ college educations through BofA stock options, couldn’t disagree with this observation by Larry Gellman:
“If the head of Merrill Lynch and every other investment firm had their way, no individual broker would ever recommend an individual stock or bond to a retail client again. They have essentially gotten out of the brokering-and-advising business and gone all in on the ‘wealth management’ business. The new model is to gather assets from wealthy people and then place those assets with a whole bunch of managers who will manage different pieces of it in diversified styles so you don’t lose it all at once. And by the way, people with less than $10 million need not apply. People like you are in a sort of purgatory because no one would ever come out and tell you that he doesn’t want your business anymore,” he said. “You had to figure that out by yourself.”
We chewed on that for a bit. Jane’s worked in just about every division of the bank, including wealth management. She’s a sort of corporate MacGyver who moves from implementation to implementation, always delivering on impossible deadlines and defying handwringers. She’s familiar with the next fellow interviewed, Seth Klarman, whom Goldberg says turned $27m into $14b, and quotes as saying “The average person can’t really trust anybody. They can’t trust a broker, because the broker is interested in churning commissions. They can’t trust a mutual fund, because the mutual fund is interested in gathering a lot of assets and keeping them. And now it’s even worse because even the most sophisticated people have no idea what’s going on.”
Jane snorts, “No shit.”
At a certain point in Goldberg’s article the expert who makes the most sense is a guy who runs a survivalist camp that teaches people to live off the grid. Cody Lundin says “ Wall Street has always been an illusion. Now it’s an illusion that’s crumbling. Wall Street is like someone who’s having heart trouble. It’s in constant need of resuscitation, but after a while, it just doesn’t work anymore. People think that Bernard Madoff was unique, that he was an illusion, but he’s just an extension of the same illusion, the same con game.”
Jane’s been quiet for awhile now, most unusual. So when I’m done with the article I don’t forge on to the next one as is our custom. I have people skills.
She sighs and says, “I’m gonna turn on the radio for awhile.” Game Over.
Financial Services Writing Prompts (aside from the obvious)
- Are people better off putting their money in an index fund than relying on the “financial-services industrial complex”?
- Will the deflated 529 plans lead to a different scheme for funding higher education?
- Where are all those financial advisors going to work now? All those financial mathematicians?
- At what point did you realize the (financial) emperor wasn’t wearing clothes? What steps did you take? Are you taking?
Krugman v Samuelson on Green
Krugman: We Need Green Investments
In today’s NYT, Nobel Laureate Paul Krugman weighs in on climate change with the terse observation that “just as denials that climate change is happening are junk science, predictions of economic disaster if we try to do anything about climate change are junk economics.”
“Right now, the biggest problem facing our economy is plunging business investment. Businesses see no reason to invest, since they’re awash in excess capacity, thanks to the housing bust and weak consumer demand.” Krugman outlines how a commitment to greenhouse gas reduction would give businesses a reason to invest in new equipment and facilities even in the face of excess capacity.
He concludes, “given the current state of the economy, that’s just what the doctor ordered.”
Samuelson: Re-run Your Scenarios
On the other side, reporter, author and Washington Post columnist Robert Samuelson says “The trouble is that these models embody wildly unrealistic assumptions: There are no business cycles; the economy is always at “full employment”; strong growth is assumed, based on past growth rates; the economy automatically accommodates major changes — if fossil fuel prices rise (as they would under anti-global-warming laws), consumers quickly use less and new supplies of “clean energy” magically materialize.”
Writing Prompts: Financial Services, Environmental
- What’s more important, getting started on a global climate change or getting the right global environmental policy in place?
- Krugman admits “Yes, limiting emissions would have its costs. As a card-carrying economist, I cringe when “green economy” enthusiasts insist that protecting the environment would be all gain, no pain.” Do green enthusiasts over-state their case?
- What about Krugman’s claims on overcapacity?
Green Investments and the US Labor Market
Soon-to-be-Relic?
A new white paper released by the Economic Policy Institute (EPI) reminds that the U.S. economy lost 5.1 million jobs over the past 15 months.
With a nod to the Obama administration’s commitment to a cap and trade plan for carbon emissions, the paper warns that, nevertheless, new federal investments are needed to provide economic benefits that “go beyond the primary one of emissions reduction.”
Promising Conclusions
The EPI concludes that a commitment of $100 billion annually in new public investments over the next decade would yield:
- Approximately $160 billion in additional output annually for the next two years, which translates into approximately1.1 million net new jobs created.
- An increase in the relative wages of those 70% of U.S. workers without a four-year college degree by almost 0.5% each year that the increased commitment to green investments persists. While modest, this amount does represent a wage increase for high school graduates that is roughly 40% as large as the entire increase this group has seen since 1979.
- An increase of approximately 100,000 in the number of unionized jobs in the United States (even in the unlikely case that all of the jobs supported through this new spending merely displaced currently existing jobs).
Writing Prompts: Financial, Environmental, Services, Consulting
- Respond to this EPI conclusion based on your own data and experience: “In the short run, any investment that can be done quickly to help meet the challenges of undertaking serious carbon emissions abatement will have welcome near-term macroeconomic impacts. And over the longer-term, these investments will provide a payoff in the form of climate change mitigation, energy independence, and economic gains from energy efficiency. In the longer run, dedicating more resources to ameliorating global climate change will actually lead to a mix of industry employment that nudges back against the forces that have generated ever-greater wage inequality for most of the past 30 years.”
- Support or refute this EPI claim: “Each dollar of infrastructure investment—broadly defined—provides on net about $1.59 in additional economic growth, making it about 33% more effective than generic tax cuts and literally 10-15 times more effective than most business tax cuts. In short, infrastructure spending, including ‘green’ investments, is about as good economic stimulus as there is.”
- This week the cap and trade debate drew comparisons to the earlier Acid Rain Trading Program, which was established in 1990 under the Clean Air Act. The administration said it “delivered huge benefits—to the tune of $120 billion a year—with an annual cost of only $3 billion a year. The acid rain program is a trading system comparable to a carbon cap-and-trade program.” If you were in business during that time, reflect on the similarities and differences between the Acid Rain Trading Program and cap and trade.
- A new project of the Sierra Club, National Resource Defense Council and others, called “The Reality Coalition,” takes on the premise that there is such a thing as clean coal. Is there such a thing as “clean coal”?
- Reflect on how the administration’s proposed Green Investments and cap and trade plans would directly affect your business or that of your customers.
Disassembly Line
Closed after 60+ years in operation
The April, 2009 edition of The Atlantic featured a two-page schematic on “The unbuilding of an auto plant” near the Hartsfield-Jackson airport in GA.
The story says, “Closing an auto plant is neither quick nor simple, and for a time, the very process of closure creates its own small economy; ultimately, closures can make way for new beginnings. Immediately after the Hapeville plant was formally idled, about 250 workers returned to begin deconstructing the site; more than two years later, demolition and environmental cleanup are still continuing.”
Don’t I know it. The story of course ties into raging headlines about the shrinking US automotive sector, but it also took me back to my recent past as an owner of an environmental cleaning company where I earned “blood money” closing down Carolinas-based textile plants. Blood money? Yes, according to dictionary.com it’s defined as “Money gained at the cost of another’s life or livelihood.”
I have to say, sometimes plants were at their most environmentally compliant during their final shutdowns. They often skimped on compliance when they were running full bore, but in order to get certificates of occupancy for the next tenants they had wind down the right way.
Writing Prompts: Financial, Consulting, Environmental, Services
- With uneven environmental regulations around the world, reflect on operations you’ve seen move to a less-regulated environment and the environmental degradation that ensued.
- If you are involved in any winding down operations now, how are prices holding up for machinery, equipment and scrap? Do the locations of the buyers say anything surprising about shifting capital across the globe?
- The Ford plant in this story will be replaced by a mix of retail and office space, with some airport parking and hotels. Is this usually the type of development that moves in? Should it be?
- What do you observe about the role of local tax and zoning incentives on 1) retaining businesses and 2) influencing re-development that occurs in situations like this in GA?
A Smarter Planet
One Planet, One People, One Grid?
In the tech section of the BBC news online, I found this interesting article by Brendon Riley, the CEO of IBM in the UK. In it, he makes the point that we can now “infuse intelligence into the way the world works.” He cites a case study from Malta and observes that their energy grid looks more like the internet.
Here’s an excerpt: “Critically, the digital and physical infrastructures of the world are converging. Computational power is being put into things we wouldn’t recognise as computers. It’s easy to embed sensors in all sorts of ecosystems, from hospitals to supply chains to natural systems like rivers. Almost anything can have a digital presence in a networked world.
“All of this instrumentation generates new data, which advanced analytics can turn into insight – so better decisions can be made in real time.
“This in turn leads to increased effectiveness – simply doing what works, faster.”
Writing Prompts:
Financial Services:
- What companies do you or your firm believe will lead the way in this green revolution? Does IBM have what it takes?
- Do you believe the claims Mr Riley makes about a smarter planet or is this just corporate boosterism?
- What public-private partnership models for the green revolution deserve emulation?
- Do you know of any studies estimating ROI for this type of initiative?
Environmental & Services:
- What other case studies deserve attention? IBM promotes the Maltese study because they know it best.
- Is there a downside to the approach being taken in Malta?
- Do you know of any studies estimating ROI for this type of initiative?
- Is it possible that less-developed countries have an advantage on, say, the G20 in implementing initiatives like this?
“Global Financial Hissy Fit”
One Planet, One People
A fellow Twitter-er sent a link to the best thing I’ve read all day: a blog called “Creative Spark” by Marc Garnault. In it, he perpetuates the term “Global Financial Hissy Fit” with proper attribution to its originator, Kim Sbarcea .
I selected just ONE extraordinary insight from this posting for writing prompts.
Marc’s Insight
“Everyone knows what everyone is doing now. There are no secrets, so if you’re doing evil you can expect to face some bad publicity. There’s also been a significant movement by us, the consumer, towards companies that have a compassionate backstory. We want sustainable materials, low carbon footprints and community involvement. It’s a major selling point. And, finally, you need good, creative, smart employees, and believe me, they’re not thick on the ground. It’s going to be a seller’s market on those skills, and these people are going to want their skills to go to worthy employers. If they feel like they’re going to be a cog in a corporate money making machine, well, there are nicer machines to be a cog in.
“It’s be wrong to be writing all this in the future tense, because if you look around you’ll see it happening right now. Newspapers are falling through the floor, but the online Huffington Post recently had a record valuation, online shopping is remaining steady but bricks-and-mortar retail is having it’s worst year since 1970, restaurant seating is going through the floor but sales of local organic produce are booming, no-one is buying DVDs but you’re sharing the average torrent you download with 30,000 other people, sales of premium priced Macs are doing fine, but all the generic PCs around them are feeling the pinch.”
Writing Prompts:
Consultants: What are your most progressive clients doing to take advantage of the rise of global inter-connectedness? What are they doing with their brands to connect with the “green” consciousness? For those not on board, what holds them back?
Environmental: Reflect on the state of greenwashing. Out the evildoers.
Services: What are you/your clients doing to retain and nurture the best and brightest? Are you holding on to talent that isn’t fully billable for the sake of the future of your business? How are you coping with a great talent pool in this time of retraction?
Financial: What companies will you encourage clients to buy because of their alignment with this new ethos?
