Coyote Blog

This is a reprise of a much older post, but it struck me as fairly timely.

I had a conversation the other day with a person I can best describe as a well-meaning technocrat.  Though I am not sure he would put it this baldly, he tends to support a government by smart people imposing superior solutions on the sub-optimizing masses.  He was lamenting that allowing a company like GM to die is dumb, and that a little bit of intelligent management would save all those GM jobs and assets.  Though we did not discuss specifics, I presume in his model the government would have some role in this new intelligent design (I guess like it had in Amtrak?)

There are lots of sophisticated academic models for the corporation.  I have even studied a few.  Here is my simple one:

A corporation has physical plant (like factories) and workers of various skill levels who have productive potential.  These physical and human assets are overlaid with what we generally shortcut as "management" but which includes not just the actual humans currently managing the company but the organization approach, the culture, the management processes, its systems, the traditions, its contracts, its unions, the intellectual property, etc. etc.  In fact, by calling all this summed together "management", we falsely create the impression that it can easily be changed out, by firing the overpaid bums and getting new smarter guys.  This is not the case - Just ask Ross Perot.  You could fire the top 20 guys at GM and replace them all with the consensus all-brilliant team and I still am not sure they could fix it.

All these management factors, from the managers themselves to process to history to culture could better be called the corporate DNA*.  And DNA is very hard to change.  Walmart may be freaking brilliant at what they do, but demand that they change tomorrow to an upscale retailer marketing fashion products to teenage girls, and I don't think they would ever get there.  Its just too much change in the DNA.  Yeah, you could hire some ex Merry-go-round** executives, but you still have a culture aimed at big box low prices, a logistics system and infrastructure aimed at doing same, absolutely no history or knowledge of fashion, etc. etc.  I would bet you any amount of money I could get to the GAP faster starting from scratch than starting from Walmart.  For example, many folks (like me) greatly prefer Target over Walmart because Target is a slightly nicer, more relaxing place to shop.  And even this small difference may ultimately confound Walmart.  Even this very incremental need to add some aesthetics to their experience may overtax their DNA.

Corporate DNA acts as a value multiplier.  The best corporate DNA has a multiplier greater than one, meaning that it increases the value of the people and physical assets in the corporation.  When I was at a company called Emerson Electric (an industrial conglomerate, not the consumer electronics guys) they were famous in the business world for having a corporate DNA that added value to certain types of industrial companies through cost reduction and intelligent investment.  Emerson's management, though, was always aware of the limits of their DNA, and paid careful attention to where their DNA would have a multiplier effect and where it would not.  Every company that has ever grown rapidly has had a DNA that provided a multiplier greater than one... for a while.

But things change.  Sometimes that change is slow, like a creeping climate change, or sometimes it is rapid, like the dinosaur-killing comet.  DNA that was robust no longer matches what the market needs, or some other entity with better DNA comes along and out-competes you.  When this happens, when a corporation becomes senescent, when its DNA is out of date, then its multiplier slips below one.  The corporation is killing the value of its assets.  Smart people are made stupid by a bad organization and systems and culture.  In the case of GM, hordes of brilliant engineers teamed with highly-skilled production workers and modern robotic manufacturing plants are turning out cars no one wants, at prices no one wants to pay.

Changing your DNA is tough.  It is sometimes possible, with the right managers and a crisis mentality, to evolve DNA over a period of 20-30 years.  One could argue that GE did this, avoiding becoming an old-industry dinosaur.  GM has had a 30 year window (dating from the mid-seventies oil price rise and influx of imported cars) to make a change, and it has not been enough.  GM's DNA was programmed to make big, ugly (IMO) cars, and that is what it has continued to do.  If its leaders were not able or willing to change its DNA over the last 30 years, no one, no matter how brilliant, is going to do it in the next 2-3.

So what if GM dies?  Letting the GM's of the world die is one of the best possible things we can do for our economy and the wealth of our nation.  Assuming GM's DNA has a less than one multiplier, then releasing GM's assets from GM's control actually increases value.  Talented engineers, after some admittedly painful personal dislocation, find jobs designing things people want and value.  Their output has more value, which in the long run helps everyone, including themselves.

The alternative to not letting GM die is, well, Europe (and Japan).  A LOT of Europe's productive assets are locked up in a few very large corporations with close ties to the state which are not allowed to fail, which are subsidized, protected from competition, etc.  In conjunction with European laws that limit labor mobility, protecting corporate dinosaurs has locked all of Europe's most productive human and physical assets into organizations with DNA multipliers less than one.

I don't know if GM will fail (but a lot of other people have opinions) but if it does, I am confident that the end result will be positive for America.

* Those who accuse me of being more influenced by Neal Stephenson's Snow Crash than Harvard Business School may be correct.
** Gratuitous reference aimed at forty-somethings who used to hang out at the mall.  In my town, Merry-go-round was the place teenage girls went if they wanted to dress like, uh, teenage girls.  I am pretty sure the store went bust a while back.

I think the incentives issue has been beaten to death pretty well, but there is another problem with bailout:  They leave the productive assets of the failed company in essentially the same hands that failed to make good use of them previously.  Sure, the management has changed, but a few guys at the top of these large companies don't really mean squat.  To this point:

A corporation has physical plant (like factories) and workers of
various skill levels who have productive potential.  These physical and
human assets are overlaid with what we generally shortcut as
"management" but which includes not just the actual humans currently
managing the company but the organization approach, the culture, the
management processes, its systems, the traditions, its contracts, its
unions, the intellectual property, etc. etc.  In fact, by calling all
this summed together "management", we falsely create the impression
that it can easily be changed out, by firing the overpaid bums and
getting new smarter guys.  This is not the case - Just ask Ross Perot.
You could fire the top 20 guys at GM and replace them all with the
consensus all-brilliant team and I still am not sure they could fix
it. 

All these management factors, from the managers themselves to
process to history to culture could better be called the corporate
DNA*.  And DNA is very hard to change.  Walmart may be freaking
brilliant at what they do, but demand that they change tomorrow to an
upscale retailer marketing fashion products to teenage girls, and I
don't think they would ever get there.  Its just too much change in the
DNA.  Yeah, you could hire some ex Merry-go-round** executives, but you
still have a culture aimed at big box low prices, a logistics system
and infrastructure aimed at doing same, absolutely no history or
knowledge of fashion, etc. etc.  I would bet you any amount of money I
could get to the GAP faster starting from scratch than starting from
Walmart.  For example, many folks (like me) greatly prefer Target over
Walmart because Target is a slightly nicer, more relaxing place to
shop.  And even this small difference may ultimately confound Walmart.
Even this very incremental need to add some aesthetics to their
experience may overtax their DNA.

David Leonhart (via Carpe Diem) argues that this was exactly the long-term downside of the Chrysler bailout:

Barry Ritholtz "” who runs an equity research firm in New York and writes The Big Picture,
one of the best-read economics blogs "” is going to publish a book soon
making the case that the bailout actually helped cause the decline. The
book is called, "Bailout Nation." In it, Mr. Ritholtz sketches out an
intriguing alternative history of Chrysler and Detroit.

If
Chrysler had collapsed, he argues, vulture investors might have swooped
in and reconstituted the company as a smaller automaker less tied to
the failed strategies of Detroit's Big Three and their unions. "If
Chrysler goes belly up," he says, "it also might have forced some deep
introspection at Ford and G.M. and might have changed their attitude
toward fuel efficiency and manufacturing quality." Some of the
bailout's opponents "” from free-market conservatives to Senator Gary
Hart, then a rising Democrat "” were making similar arguments three
decades ago.

Instead, the bailout and import quotas fooled the
automakers into thinking they could keep doing business as usual. In
1980, Detroit sold about 80% of all new vehicles in this country.
Today, it sells just 45%.

As I wrote about GM:

Changing your DNA is tough.  It is sometimes possible, with the
right managers and a crisis mentality, to evolve DNA over a period of
20-30 years.  One could argue that GE did this, avoiding becoming an
old-industry dinosaur.  GM has had a 30 year window (dating from the
mid-seventies oil price rise and influx of imported cars) to make a
change, and it has not been enough.  GM's DNA was programmed to make
big, ugly (IMO) cars, and that is what it has continued to do.  If its
leaders were not able or willing to change its DNA over the last 30
years, no one, no matter how brilliant, is going to do it in the next
2-3.

So what if GM dies?  Letting the GM's of the world die is one of the
best possible things we can do for our economy and the wealth of our
nation.  Assuming GM's DNA has a less than one multiplier, then
releasing GM's assets from GM's control actually increases value.
Talented engineers, after some admittedly painful personal dislocation,
find jobs designing things people want and value.  Their output has
more value, which in the long run helps everyone, including themselves.

This is a reprise of a much older post, but since I have limited time for blogging, I thought it might be timely to reprise it:

I had a conversation the other day with a person I can best describe
as a well-meaning technocrat.  Though I am not sure he would put it
this baldly, he tends to support a government by smart people imposing
superior solutions on the sub-optimizing masses.  He was lamenting that
allowing a company like GM to die is dumb, and that a little bit of
intelligent management would save all those GM jobs and assets.  Though
we did not discuss specifics, I presume in his model the government
would have some role in this new intelligent design (I guess like it
had in Amtrak?)

There are lots of sophisticated academic models for the corporation.  I have even studied a few.  Here is my simple one:

A corporation has physical plant (like factories) and workers of
various skill levels who have productive potential.  These physical and
human assets are overlaid with what we generally shortcut as
"management" but which includes not just the actual humans currently
managing the company but the organization approach, the culture, the
management processes, its systems, the traditions, its contracts, its
unions, the intellectual property, etc. etc.  In fact, by calling all
this summed together "management", we falsely create the impression
that it can easily be changed out, by firing the overpaid bums and
getting new smarter guys.  This is not the case - Just ask Ross Perot.
You could fire the top 20 guys at GM and replace them all with the
consensus all-brilliant team and I still am not sure they could fix
it. 

All these management factors, from the managers themselves to
process to history to culture could better be called the corporate
DNA*.  And DNA is very hard to change.  Walmart may be freaking
brilliant at what they do, but demand that they change tomorrow to an
upscale retailer marketing fashion products to teenage girls, and I
don't think they would ever get there.  Its just too much change in the
DNA.  Yeah, you could hire some ex Merry-go-round** executives, but you
still have a culture aimed at big box low prices, a logistics system
and infrastructure aimed at doing same, absolutely no history or
knowledge of fashion, etc. etc.  I would bet you any amount of money I
could get to the GAP faster starting from scratch than starting from
Walmart.  For example, many folks (like me) greatly prefer Target over
Walmart because Target is a slightly nicer, more relaxing place to
shop.  And even this small difference may ultimately confound Walmart.
Even this very incremental need to add some aesthetics to their
experience may overtax their DNA.

Corporate DNA acts as a value multiplier.  The best corporate DNA
has a multiplier greater than one, meaning that it increases the value
of the people and physical assets in the corporation.  When I was at a
company called Emerson Electric (an industrial conglomerate, not the
consumer electronics guys) they were famous in the business world for
having a corporate DNA that added value to certain types of industrial
companies through cost reduction and intelligent investment.  Emerson's
management, though, was always aware of the limits of their DNA, and
paid careful attention to where their DNA would have a multiplier
effect and where it would not.  Every company that has ever grown
rapidly has had a DNA that provided a multiplier greater than one...
for a while.

But things change.  Sometimes that change is slow, like a creeping
climate change, or sometimes it is rapid, like the dinosaur-killing
comet.  DNA that was robust no longer matches what the market needs, or
some other entity with better DNA comes along and out-competes you.
When this happens, when a corporation becomes senescent, when its DNA
is out of date, then its multiplier slips below one.  The corporation
is killing the value of its assets.  Smart people are made stupid by a
bad organization and systems and culture.  In the case of GM, hordes of
brilliant engineers teamed with highly-skilled production workers and
modern robotic manufacturing plants are turning out cars no one wants,
at prices no one wants to pay.

Changing your DNA is tough.  It is sometimes possible, with the
right managers and a crisis mentality, to evolve DNA over a period of
20-30 years.  One could argue that GE did this, avoiding becoming an
old-industry dinosaur.  GM has had a 30 year window (dating from the
mid-seventies oil price rise and influx of imported cars) to make a
change, and it has not been enough.  GM's DNA was programmed to make
big, ugly (IMO) cars, and that is what it has continued to do.  If its
leaders were not able or willing to change its DNA over the last 30
years, no one, no matter how brilliant, is going to do it in the next
2-3.

So what if GM dies?  Letting the GM's of the world die is one of the
best possible things we can do for our economy and the wealth of our
nation.  Assuming GM's DNA has a less than one multiplier, then
releasing GM's assets from GM's control actually increases value.
Talented engineers, after some admittedly painful personal dislocation,
find jobs designing things people want and value.  Their output has
more value, which in the long run helps everyone, including themselves.

The alternative to not letting GM die is, well, Europe (and Japan).
A LOT of Europe's productive assets are locked up in a few very large
corporations with close ties to the state which are not allowed to
fail, which are subsidized, protected from competition, etc.  In
conjunction with European laws that limit labor mobility, protecting
corporate dinosaurs has locked all of Europe's most productive human
and physical assets into organizations with DNA multipliers less than
one. 

I don't know if GM will fail (but a lot of other people have opinions) but if it does, I am confident that the end result will be positive for America.

* Those who accuse me of being more influenced by Neal Stephenson's Snow Crash than Harvard Business School may be correct.
**
Gratuitous reference aimed at forty-somethings who used to hang out at
the mall.  In my town, Merry-go-round was the place teenage girls went
if they wanted to dress like, uh, teenage girls.  I am pretty sure the
store went bust a while back.

Via Kevin Drum, Mark S. Tucker and Kevin Toch make the argument, if I understand it right, that school districts and state education organizations simply don't have the expertise or the capacity to handle the changes required to meet the standards that are being applied by efforts like NCLB (they also argue the tests themselves suck, but I am not going to address that issue).  By the way, you know I'm going to get worked up when the title of an article is "The secret to making Bush's school reform law work? More bureaucrats"

...we need a long-term solution, which can only lie in building
the capacity of the states, districts, and schools to reach the kinds
of goals contemplated by the framers of NCLB. This is not a simple
matter, but a vast, man-to-the-Moon kind of challenge. It means finding
people with the data management experience to build and administer the
very complex systems called for by the law. It means recruiting experts
who can help create truly world class curriculum standards so that
teachers will know what they are supposed to teach and students will be
able to reach the standards. It means identifying and training
thousands of educators who have succeeded in improving their schools to
provide on-site assistance at other failing schools, and recruiting
still others who can take those schools over if the current staff
cannot or will not rise to the challenge. It means creating and
expanding networks of talent-laden organizations--universities, think
tanks, for-profit and non-profit school companies--that have the skill,
experience, and management capacity to turn around individual schools
and entire districts. And it means greatly strengthening the
capabilities of the agencies that will coordinate this massive effort:
state departments of education.

Wow!  It's hard to even know where to start, but I guess my first thought is : What the f*ck have public schools been doing in the last 100 years?  Why, after an absolutely enormous spending growth over the last several decades, do districts still not have the ability to create world class curricula?  Why don't teachers know what they are supposed to teach?   Why is the system so talent poor, despite a huge increase in the number of administrators with various advanced education degrees at all levels of the system?  It's as if the highway department announced today that they didn't have the ability to design roads.

The first and last resort of every technocrat is to complain that the system is great, if only the right "smart" people could get put in charge.  These folks are making this same argument yet again.  Our public schools are fine, if we could just get the right experts in charge. 

Bullshit.

The issue is not the lack of expertise.  The issue is one of incentives and senescence in the system itself.  In this context,  NCLB is completely off the mark.   I work with government employees all the time.  There is a very clear difference between the incentives they see and the incentives I see in the market.  For government employees, the biggest incentive is to avoid missing some bureaucratic check box.  They are much more concerned that they not be found later in some audit to have missed a procedure or a required approval authority than with actual performance or productivity.  NOT, I want to emphasize, because they are bad or misguided people, but because that is how their incentive system is set up.  Their actions are entirely rational in the context of their incentive structure, but the results are no less disastrous.

For example, government managers of recreation facilities get almost no credit for improving the customer experience, a metric my company lives and dies for.  I have seen a government park manager do a great job obtaining funds from private sources to add a new facility to their park that pleased guests, only to get criticized for having the slope of an access ramp be 1/4 degree off ADA standards and have a grievance filed by the union that park visitation had gone up, creating more work for the government employees.  I spent an evening having a beer with that manager, and you can bet they are never going to try to actually improve the customer experience again.  As another example, I went in to my government landlord last week and just blasted them for their lack of customer service focus, for the fact that they are blocking me from making improvements customers are begging for.  They yawned, gave me no response,  and handed me a notice that they were missing some of our water testing paperwork and please get it to them ASAP.

NCLB just gives government schools another government wammy to be managed and avoided.  The authors will probably get their wish, and huge bureaucracies will rise up to manage the numbers and reports without anything being done to really improve education.  The authors lament that the California state education department has "only" 1452 employees.  I have every confidence that this "problem" will soon get fixed by California, and the number will balloon up nicely, long before children see any better education.

A while back I wrote a plea to just let GM die.  I said:

A corporation has physical plant (like factories) and workers of
various skill levels who have productive potential.  These physical and
human assets are overlaid with what we generally shortcut as
"management" but which includes not just the actual humans currently
managing the company but the organization approach, the culture, the
management processes, its systems, the traditions, its contracts, its
unions, the intellectual property, etc. etc.  In fact, by calling all
this summed together "management", we falsely create the impression
that it can easily be changed out, by firing the overpaid bums and
getting new smarter guys.  This is not the case - Just ask Ross Perot.
You could fire the top 20 guys at GM and replace them all with the
consensus all-brilliant team and I still am not sure they could fix
it. 

All these management factors, from the managers themselves to
process to history to culture could better be called the corporate
DNA*.  And DNA is very hard to change.  Walmart may be freaking
brilliant at what they do, but demand that they change tomorrow to an
upscale retailer marketing fashion products to teenage girls, and I
don't think they would ever get there.  Its just too much change in the
DNA.  Yeah, you could hire some ex Merry-go-round** executives, but you
still have a culture aimed at big box low prices, a logistics system
and infrastructure aimed at doing same, absolutely no history or
knowledge of fashion, etc. etc.  I would bet you any amount of money I
could get to the GAP faster starting from scratch than starting from
Walmart.  For example, many folks (like me) greatly prefer Target over
Walmart because Target is a slightly nicer, more relaxing place to
shop.  And even this small difference may ultimately confound Walmart.
Even this very incremental need to add some aesthetics to their
experience may overtax their DNA....

Changing your DNA is tough.  It is sometimes possible, with the right
managers and a crisis mentality, to evolve DNA over a period of 20-30
years.  One could argue that GE did this, avoiding becoming an
old-industry dinosaur.  GM has had a 30 year window (dating from the
mid-seventies oil price rise and influx of imported cars) to make a
change, and it has not been enough.  GM's DNA was programmed to make
big, ugly (IMO) cars, and that is what it has continued to do.  If its
leaders were not able or willing to change its DNA over the last 30
years, no one, no matter how brilliant, is going to do it in the next
2-3.

I would say the exact same thing is true of public schools: Their DNA is senescent.  Most are the equivalent of alcoholics who keep falling off the wagon and keep asking for more chances.  At some point, you just have to give up.  At some point, it is easier to just start from scratch.  After 30 years of trying, Sears still can't change itself so there is Wal-Mart.  After 30 years of trying, GM still can't change itself so there is Toyota.  After 30 years of trying, United Airlines still can't change itself so there is Southwest.

The only difference in education is that the government has to date suppressed the emergence of Toyota and Wal-Mart and Southwest because, well, because it can.  I am sure that United Airlines would have liked to ban competition from Southwest, but it does not have the coercive power of government.  Fortunately, in most industries other than education, the public gets a choice of offerings, and companies that customers don't prefer tend to die.

It's time to give school choice a chance, and radically shift the incentives for public schools in a way that the government can't with bureaucracy-based programs like NCLB.  Some public schools will thrive, and many will die in favor of private options, but our kids will be far better off either way.  It's time to stop doubling down on failure.  It's time to stop giving the alcoholic one more chance.

Postscript:  One of the reasons that competition is important is in the very definition of "expertise."  An expert is someone who presumably has been succesful at a certain activity when others have been less so.  We call Herb Kelleher an expert on airlines and customer service because he designed a model that kicked everyone else's butt.  But would you have called him an expert in 1972, before Southwest took off?  Probably not.  He was just one of many voices with diverse, untested opinions of what would make a better airline.  What eventually made him an expert, and the others less so, is he went out and applied his ideas and they were succesful.

So the author's want to send more "expertise" to the schools.  OK, who are the experts?  Nearly every public school is using the same version of the same failed model.  Some succeed more than others, but these differences tend to be incremental rather than radical, like the difference between Sears and Montgomery Ward rather than between Sears and Wal-Mart (or even Amazon.com).  So how can you even know who the experts are within the same failed system, where no one is really allowed to go out and fully test their ideas in practice?  What happens, in reality, is that "experts" in education are the ones that can best enthrall academics and politicians and think tanks with grandiose or politically correct visions.  I would argue that as of this moment there are no experts in education in the US and we have no hope of identifying them until we let entrepreneurs go out and start testing various new models.

Via Kevin Drum, Mark S. Tucker and Kevin Toch make the argument, if I understand it right, that school districts and state education organizations simply don't have the expertise or the capacity to handle the changes required to meet the standards that are being applied by efforts like NCLB (they also argue the tests themselves suck, but I am not going to address that issue).  By the way, you know I'm going to get worked up when the title of an article is "The secret to making Bush's school reform law work? More bureaucrats"

...we need a long-term solution, which can only lie in building
the capacity of the states, districts, and schools to reach the kinds
of goals contemplated by the framers of NCLB. This is not a simple
matter, but a vast, man-to-the-Moon kind of challenge. It means finding
people with the data management experience to build and administer the
very complex systems called for by the law. It means recruiting experts
who can help create truly world class curriculum standards so that
teachers will know what they are supposed to teach and students will be
able to reach the standards. It means identifying and training
thousands of educators who have succeeded in improving their schools to
provide on-site assistance at other failing schools, and recruiting
still others who can take those schools over if the current staff
cannot or will not rise to the challenge. It means creating and
expanding networks of talent-laden organizations--universities, think
tanks, for-profit and non-profit school companies--that have the skill,
experience, and management capacity to turn around individual schools
and entire districts. And it means greatly strengthening the
capabilities of the agencies that will coordinate this massive effort:
state departments of education.

Wow!  It's hard to even know where to start, but I guess my first thought is : What the f*ck have public schools been doing in the last 100 years?  Why, after an absolutely enormous spending growth over the last several decades, do districts still not have the ability to create world class curricula?  Why don't teachers know what they are supposed to teach?   Why is the system so talent poor, despite a huge increase in the number of administrators with various advanced education degrees at all levels of the system?  It's as if the highway department announced today that they didn't have the ability to design roads.

The first and last resort of every technocrat is to complain that the system is great, if only the right "smart" people could get put in charge.  These folks are making this same argument yet again.  Our public schools are fine, if we could just get the right experts in charge. 

Bullshit.

The issue is not the lack of expertise.  The issue is one of incentives and senescence in the system itself.  In this context,  NCLB is completely off the mark.   I work with government employees all the time.  There is a very clear difference between the incentives they see and the incentives I see in the market.  For government employees, the biggest incentive is to avoid missing some bureaucratic check box.  They are much more concerned that they not be found later in some audit to have missed a procedure or a required approval authority than with actual performance or productivity.  NOT, I want to emphasize, because they are bad or misguided people, but because that is how their incentive system is set up.  Their actions are entirely rational in the context of their incentive structure, but the results are no less disastrous.

For example, government managers of recreation facilities get almost no credit for improving the customer experience, a metric my company lives and dies for.  I have seen a government park manager do a great job obtaining funds from private sources to add a new facility to their park that pleased guests, only to get criticized for having the slope of an access ramp be 1/4 degree off ADA standards and have a grievance filed by the union that park visitation had gone up, creating more work for the government employees.  I spent an evening having a beer with that manager, and you can bet they are never going to try to actually improve the customer experience again.  As another example, I went in to my government landlord last week and just blasted them for their lack of customer service focus, for the fact that they are blocking me from making improvements customers are begging for.  They yawned, gave me no response,  and handed me a notice that they were missing some of our water testing paperwork and please get it to them ASAP.

NCLB just gives government schools another government wammy to be managed and avoided.  The authors will probably get their wish, and huge bureaucracies will rise up to manage the numbers and reports without anything being done to really improve education.  The authors lament that the California state education department has "only" 1452 employees.  I have every confidence that this "problem" will soon get fixed by California, and the number will balloon up nicely, long before children see any better education.

A while back I wrote a plea to just let GM die.  I said:

A corporation has physical plant (like factories) and workers of
various skill levels who have productive potential.  These physical and
human assets are overlaid with what we generally shortcut as
"management" but which includes not just the actual humans currently
managing the company but the organization approach, the culture, the
management processes, its systems, the traditions, its contracts, its
unions, the intellectual property, etc. etc.  In fact, by calling all
this summed together "management", we falsely create the impression
that it can easily be changed out, by firing the overpaid bums and
getting new smarter guys.  This is not the case - Just ask Ross Perot.
You could fire the top 20 guys at GM and replace them all with the
consensus all-brilliant team and I still am not sure they could fix
it. 

All these management factors, from the managers themselves to
process to history to culture could better be called the corporate
DNA*.  And DNA is very hard to change.  Walmart may be freaking
brilliant at what they do, but demand that they change tomorrow to an
upscale retailer marketing fashion products to teenage girls, and I
don't think they would ever get there.  Its just too much change in the
DNA.  Yeah, you could hire some ex Merry-go-round** executives, but you
still have a culture aimed at big box low prices, a logistics system
and infrastructure aimed at doing same, absolutely no history or
knowledge of fashion, etc. etc.  I would bet you any amount of money I
could get to the GAP faster starting from scratch than starting from
Walmart.  For example, many folks (like me) greatly prefer Target over
Walmart because Target is a slightly nicer, more relaxing place to
shop.  And even this small difference may ultimately confound Walmart.
Even this very incremental need to add some aesthetics to their
experience may overtax their DNA....

Changing your DNA is tough.  It is sometimes possible, with the right
managers and a crisis mentality, to evolve DNA over a period of 20-30
years.  One could argue that GE did this, avoiding becoming an
old-industry dinosaur.  GM has had a 30 year window (dating from the
mid-seventies oil price rise and influx of imported cars) to make a
change, and it has not been enough.  GM's DNA was programmed to make
big, ugly (IMO) cars, and that is what it has continued to do.  If its
leaders were not able or willing to change its DNA over the last 30
years, no one, no matter how brilliant, is going to do it in the next
2-3.

I would say the exact same thing is true of public schools: Their DNA is senescent.  Most are the equivalent of alcoholics who keep falling off the wagon and keep asking for more chances.  At some point, you just have to give up.  At some point, it is easier to just start from scratch.  After 30 years of trying, Sears still can't change itself so there is Wal-Mart.  After 30 years of trying, GM still can't change itself so there is Toyota.  After 30 years of trying, United Airlines still can't change itself so there is Southwest.

The only difference in education is that the government has to date suppressed the emergence of Toyota and Wal-Mart and Southwest because, well, because it can.  I am sure that United Airlines would have liked to ban competition from Southwest, but it does not have the coercive power of government.  Fortunately, in most industries other than education, the public gets a choice of offerings, and companies that customers don't prefer tend to die.

It's time to give school choice a chance, and radically shift the incentives for public schools in a way that the government can't with bureaucracy-based programs like NCLB.  Some public schools will thrive, and many will die in favor of private options, but our kids will be far better off either way.  It's time to stop doubling down on failure.  It's time to stop giving the alcoholic one more chance.

Postscript:  One of the reasons that competition is important is in the very definition of "expertise."  An expert is someone who presumably has been succesful at a certain activity when others have been less so.  We call Herb Kelleher an expert on airlines and customer service because he designed a model that kicked everyone else's butt.  But would you have called him an expert in 1972, before Southwest took off?  Probably not.  He was just one of many voices with diverse, untested opinions of what would make a better airline.  What eventually made him an expert, and the others less so, is he went out and applied his ideas and they were succesful.

So the author's want to send more "expertise" to the schools.  OK, who are the experts?  Nearly every public school is using the same version of the same failed model.  Some succeed more than others, but these differences tend to be incremental rather than radical, like the difference between Sears and Montgomery Ward rather than between Sears and Wal-Mart (or even Amazon.com).  So how can you even know who the experts are within the same failed system, where no one is really allowed to go out and fully test their ideas in practice?  What happens, in reality, is that "experts" in education are the ones that can best enthrall academics and politicians and think tanks with grandiose or politically correct visions.  I would argue that as of this moment there are no experts in education in the US and we have no hope of identifying them until we let entrepreneurs go out and start testing various new models.

I value many of the same things - open space, wilderness, wildlife - that environmental activists value.  The difference is that I do not wish to achieve my goals by force.  For years I have donated money to various environmental funds that focus on using private funds to buy land for preservation (the Nature Conservancy being the most famous of these, though it has had some problems of late).  I particularly eschewed donating to groups who used most of their funds for lobbying.  These groups are using their funds to try to buy government coercion to back whatever goals they are seeking, often including taking more money from me by force and limiting my rights to manage my own property as I see fit.  I hate that.

Which is why I am very disappointed in the recent actions of Bill Gates.  To date, Gates has dumped billions of his own money into trying to improve public schools.  I personally think that to be useless**, that the management and incentives of government monopoly schools are broken and no amount of money can fix them.  However, it was his money and God bless him for trying.

However, it appears Gates is tired of the slow progress, and is taking the great second-rater escape clause, using his money now not to fund improvement programs but to lobby the government to spend more of my money:

Eli Broad and Bill Gates, two of the most important philanthropists in
American public education, have pumped more than $2 billion into
improving schools. But now, dissatisfied with the pace of change, they
are joining forces for a $60 million foray into politics in an effort
to vault education high onto the agenda of the 2008 presidential race.

** I have written several times about the dynamics of organizations and management, but it is my belief that there comes a time when certain managements and cultures are beyond saving, and the only solution is for the market to let them fail and have their assets and people be taken in by more dynamic organizations.  I wrote about this in the most depth in the context of GM, in a post on corporate DNA and value creation:

A corporation has physical plant (like factories) and workers of
various skill levels who have productive potential.  These physical and
human assets are overlaid with what we generally shortcut as
"management" but which includes not just the actual humans currently
managing the company but the organization approach, the culture, the
management processes, its systems, the traditions, its contracts, its
unions, the intellectual property, etc. etc.  In fact, by calling all
this summed together "management", we falsely create the impression
that it can easily be changed out, by firing the overpaid bums and
getting new smarter guys.  This is not the case - Just ask Ross Perot.
You could fire the top 20 guys at GM and replace them all with the
consensus all-brilliant team and I still am not sure they could fix
it. 

All these management factors, from the managers themselves to
process to history to culture could better be called the corporate
DNA.  And DNA is very hard to change.  Walmart may be freaking
brilliant at what they do, but demand that they change tomorrow to an
upscale retailer marketing fashion products to teenage girls, and I
don't think they would ever get there.  Its just too much change in the
DNA.  Yeah, you could hire some ex Merry-go-round executives, but you
still have a culture aimed at big box low prices, a logistics system
and infrastructure aimed at doing same, absolutely no history or
knowledge of fashion, etc. etc.  I would bet you any amount of money I
could get to the GAP or the Limited faster starting from scratch than starting from
Walmart.  For example, many folks (like me) greatly prefer Target over
Walmart because Target is a slightly nicer, more relaxing place to
shop.  And even this small difference may ultimately confound Walmart.
Even this very incremental need to add some aesthetics to their
experience may overtax their DNA.

Corporate DNA acts as a value multiplier.  The best corporate DNA
has a multiplier greater than one, meaning that it increases the value
of the people and physical assets in the corporation.  When I was at a
company called Emerson Electric (an industrial conglomerate, not the
consumer electronics guys) they were famous in the business world for
having a corporate DNA that added value to certain types of industrial
companies through cost reduction and intelligent investment.  Emerson's
management, though, was always aware of the limits of their DNA, and
paid careful attention to where their DNA would have a multiplier
effect and where it would not.  Every company that has ever grown
rapidly has had a DNA that provided a multiplier greater than one...
for a while.

But things change.  Sometimes that change is slow, like a creeping
climate change, or sometimes it is rapid, like the dinosaur-killing
comet.  DNA that was robust no longer matches what the market needs, or
some other entity with better DNA comes along and out-competes you.
When this happens, when a corporation becomes senescent, when its DNA
is out of date, then its multiplier slips below one.  The corporation
is killing the value of its assets.  Smart people are made stupid by a
bad organization and systems and culture.  In the case of GM, hordes of
brilliant engineers teamed with highly-skilled production workers and
modern robotic manufacturing plants are turning out cars no one wants,
at prices no one wants to pay.

Changing your DNA is tough.  It is sometimes possible, with the
right managers and a crisis mentality, to evolve DNA over a period of
20-30 years.  One could argue that GE did this, avoiding becoming an
old-industry dinosaur.  GM has had a 30 year window (dating from the
mid-seventies oil price rise and influx of imported cars) to make a
change, and it has not been enough.  GM's DNA was programmed to make
big, ugly (IMO) cars, and that is what it has continued to do.  If its
leaders were not able or willing to change its DNA over the last 30
years, no one, no matter how brilliant, is going to do it in the next
2-3.

Here's the deal:  We need a gender-neutral third person pronoun.  I am tired of all the awkward constructions I have to concoct to use his or her in a grammatically correct and gender neutral fashion. 

I fully support the use of "they" and "their" as singular third-person pronouns, as in "Each person should bring their pencil" rather than "Each person should bring his or her pencil."  Unfortunately, this is not correct grammar today, so I just spent a few hours purging they's and their's from a draft novel.  However, English is a language that has always been open-source and bottom-up (in contrast to French).  Usages such as this tend to work their way into the language, as dictionary writers for the English language have generally considered themselves catalogers of the English-that-is rather than dictators of the English-that-should-be  (the book the Professor and the Madman is highly recommended).

XKCD took on this topic a while back.

Al Gore says that current global temperatures are the highest they have been in 1000 years.  A new study by the Institute of Astronomy in Zurich says that the "sun is more active now than it has been at anytime in the previous 1,000 years."  Related? 

Sunspots have been monitored on the Sun since 1610,
shortly after the invention of the telescope. They provide the
longest-running direct measurement of our star's activity.

The variation in sunspot numbers has revealed the Sun's 11-year cycle of activity as well as other, longer-term changes.

In particular, it has been noted that between about 1645 and 1715, few sunspots were seen on the Sun's surface.

This period is called the Maunder Minimum after the English astronomer who studied it.

It coincided with a spell of prolonged cold weather
often referred to as the "Little Ice Age". Solar scientists strongly
suspect there is a link between the two events - but the exact
mechanism remains elusive....

But the most striking feature, he says, is that
looking at the past 1,150 years the Sun has never been as active as it
has been during the past 60 years.

Over the past few hundred years, there has been a steady
increase in the numbers of sunspots, a trend that has accelerated in
the past century, just at the time when the Earth has been getting
warmer.

The data suggests that changing solar activity is influencing in some way the global climate causing the world to get warmer.

Of course, these poor scientists know that they could lose their jobs and be called Holocaust deniers if they don't acknowledge anthropomorphic global warming, so they do say:

Over the past 20 years, however, the number of
sunspots has remained roughly constant, yet the average temperature of
the Earth has continued to increase.

This is put down to a human-produced greenhouse effect caused by the combustion of fossil fuels.             (HT:  TJIC)

Which may actually be the case, but it is interesting that astronomers feel the need to say this without any evidence of such in their own study just to protect themselves from ostracism by the climate religionists.

However, even if the two are working in concert, the fact that solar activity explains some of the 20th century warming means that current climate models are WAY overestimating the impact of anthropomorphic warming. 

For example, the climate models in the current 2007 IPCC report assume that the world would have experienced no warming in the 20th century without man.  This is from Section 8, actual is the black line, the models without man are in blue, the models with man are in red:

In other words, the IPCC models completely ignore the increasing solar activity and assume 100% of 20th century warming was due to man-made effects, even the substantial warming before 1940 (and before the onset of truly heavy world-wide fossil fuel use).

Already, the models used by the IPCC tend to overestimate past warming even if all past warming is attributable to anthropomorphic causes.  If anthropomorphic effects explain only a fraction of past warming, then the current models are vastly overstated, good for stampeding the populous into otherwise unpopular political control over the economy, but of diminished scientific value.

Postscript: I cannot prove this, but I am willing to make a bet based on my long, long history of modeling (computers, not fashion).  My guess is that the blue band, representing climate without man-made effects, was not based on any real science but was instead a plug.  In other words, they took their models and actual temperatures and then said "what would the climate without man have to look like for our models to be correct."  There are at least four reasons I strongly suspect this to be true:

1. Every computer modeler in history has tried this trick to make their models of the future seem more credible.  I don't think the climate guys are immune.
2. There is no way their models, with our current state of knowledge about the climate, match reality that well. 
3. The first time they ran their models vs. history, they did not match at all.  This current close match is the result of a bunch of tweaking that has little impact on the model's predictive ability but forces it to match history better.  For example, early runs had the forecast run right up from the 1940 peak to temperatures way above what we see today.
4. The blue line totally ignores any of our other understandings about the changing climate, including the changing intensity of the sun.  It is conveniently exactly what is necessary to make the pink line match history.  In fact, against all evidence, note the blue band falls over the century.  This is because the models were pushing the temperature up faster than we have seen it rise historically, so the modelers needed a negative plug to make the numbers look nice.

From Kevin Drum, who I consider one of the smarter folks on the left (but not this time):

A few days ago, during an email exchange with a
friend, I mentioned that I don't usually tout cost savings as a big
argument in favor of universal healthcare. It's true that a national
healthcare plan would almost certainly save money compared to our
current Rube Goldberg system, but I suspect the savings would be
modest. Rather, the real advantages of national healthcare are related
to things like access (getting everyone covered), efficiency (cutting down on useless -- or even deliberately counterproductive -- administrative bureaucracies), choice
(allowing people to choose and keep a family doctor instead of being
jerked around everytime their employer decides to switch health
providers), and social justice (providing decent, hassle-free healthcare for the poor).

Name one industry the government has taken over in a monopolistic fashion and subsequently increased efficiency or individual choice?  Anyone?  Buehler?  In fact, I am not sure I can name one government program that even provides the poor with decent, hassle-free services. 

Lets take the most ubiquitous government monopoly, that on K-12 education. 

• Efficiency?  My kid's for-profit secular private school has a administrator to student ratio of at least 1:15.  How many assistant principals does your public school have?  Many public schools are approaching 1 administrator for every 1 teacher.
• Choice?  That's a laugh.  The government and its unions fight choice in education tooth and nail.  In fact, in the context of education, Drum and others have effectively argued that choice is the enemy of his last point, social justice, so it is absurd to argue that government monopolistic health care will optimize both.  Yes, people may be frustrated their insurance company does not cover X procedure, but this will only get worse when the government is making the choices for us.  Oh, and by the way, about the evils of those employers running our health plans?  They do so only because of WWII wage controls and decades of federal tax policy that have provided them strong incentive to do so. 
• Decent, hassle-free service?  Ask a concerned black family in an inner-city school how good their kid's government-provided education is.  In fact, I will bet that most inner city parents get healthcare of better quality today despite the admittedly Rube Goldberg system we have (courtesy of years of silly government interventions) than the quality of education they receive from the government education monopoly.  After all, most of them walk out of the hospital today with their life, while many of their kids are walking out of worthless government schools with no life.

As to the claim that national health care would "almost certainly save money," that is hard to argue with for this reason:  The government, once in charge of health care choices, can simply start denying procedures and care ("rationing").  This is in fact how costs are managed in most socialist medical systems.  So while this statement is technically true, it would be very hard for anyone to really believe that for the same quality and quantity of care, the government could do it cheaper.

When the Democrats lost control of Congress in such dramatic fashion in 1992, many thought it would be a wake-up call for the party, forcing it to check some of its premises.  In fact, the Democrats never really changed much after 1992 and really have only recovered power because the Republicans have done such a fine job of blowing their own foot off.

Likewise, the Republicans after losing power in 2006 are showing absolutely no hints of dealing with the issues that got them tossed out of office.  In fact, they seem hell-bent on purging their brightest reformers, announcing recently that Jeff Flake will be stripped of his judiciary committee post.  Sorry Jeff, but you are still Coyote Blog's favorite Congressman.  Why?  Here is a sample:

Reason: What policies could a GOP-run Congress enact that would appeal to libertarians?

Flake: At this late date? Adjournment.

You gotta love the reliably liberal Tucson Citizen, which bends over backwards to (almost) blame Flake for his own dismissal because, well, because his uncle Jake*, a prominent state politician, once did the same thing to someone else.  Think about all your uncles and aunts -- would you want to be held accountable for all their actions?

*For an Arizonan, the elder Flake is best known as "Jake Flake from Snowflake" if you can believe it.

Kevin Drum opines:

What happens when you combine "fast track" procurement, minimal
oversight, pork-based contracting, and a comprehensive lack of
responsibility for results? Well, you get the Bush administration, of
course. More specifically, you get the Coast Guard's disastrous
Deepwater program. Nadezhda runs through the grim details.

This is perhaps the single greatest fallacy that props up big government.  Specifically, the notion that corruption, inefficiency, and stupidity are failures in government related to certain individuals.  The implication is that if only "our party" was in control, big government would be great.  Except that both parties have had their chances in alternating fashion for 70 years (what I would call the era of really big government) and government has been a mess regardless of who has been in control. 

People like Hayek and Friedman have written who books about it, so I want try to elucidate the whole theory, except to summarize that the nature of incentives in government, particularly the big sacrifice-one-group-for-another government we have today, will ALWAYS lead to massive failures.  Period.

I wrote over a year ago that statism always comes back to bite its creators, because no matter how beautiful the machinery of government control, you can never control for the human beings who get behind the levers.  At that time I pointed to three fallacies, of which the third is particularly relevant to this post:

• You don't have the right to make decisions for other people.
  Period.  No matter how high-minded and idealistic you want to portray
  it, at the end of the day you are proposing to use force to coerce
  another man into doing your will.  You may stop them from using force
  or fraud against others, but an adult may make decisions for
  themselves, even if they are bad.  I am reminded of a great line from
  the HBO show Deadwood, "Can you let me go to hell the way I want to?"

• You can't make better decisions for other people, even if you
  are smarter, because every person has different wants, needs, values,
  etc., and thus make trade-offs differently.  Tedy Bruschi of the
  Patriots is willing to take post-stroke risks by playing pro football again I would never take, but that doesn't mean its a incorrect decision for him.

• Technocratic idealists ALWAYS lose control of the game.  It may
  feel good at first when the trains start running on time, but the
  technocrats are soon swept away by the thugs, and the patina of
  idealism is swept away, and only fascism is left.  Interestingly, the
  technocrats always cry "our only mistake was letting those other guys
  take control".  No, the mistake was accepting the right to use force on
  another man.  Everything after that was inevitable.

Apparently, my wife has some kind of event tomorrow she needs to look fabulous for, so we went through our usual ritual of her modeling a variety of outfits and soliciting my opinion of their relative merits.  This is hard for me for a couple of reasons.  First, I have no fashion sense (I was an engineer for god sakes).  Second, I have terrible visual memory.   I absolutely dread going to the eye doctor because I can't do those "which is clearer, A or B" tests.  The moment I see B, my mind totally purges what A looked like.  I have the same problem with helping my wife.  If I say I like an outfit, she'll ask if its better than the green outfit I saw a while back.  She might as well ask me the name of my 2nd grade PE teacher. 

Anyway, at the end I eventually say -- yeah, that's definitely the one.  Which is something I learned from golf.

Golf is the most mental of all games.  I can prove that in a simple way - in what other professional sport is every athlete accompanied by a paid psychologist (called a "caddy")?  Caddies will often discuss A or B choices with their golfers.  The golfer might say he wants to hit a soft 7-iron and the caddy will reply that he favors a hard-8.  Anyway, once a good caddy realizes his player has decided on the soft-7, he is supposed to go into support mode:  "That's it.  That's exactly the right club.  Put a good swing on it."

My error tonight was relating this golf caddy analogy to my wife during our discussion of whether she should wear the bustier and the fishnet stockings or the leather outfit with the bare midriff (just kidding, these were unfortunately not the choices I was presented with).  When I finally told her that she definitely had the right outfit, that she had made the right choice, etc., she seems to have lost some confidence in my opinion.  The bright side is that this may be yet another victory for the learned-male-helplessness task-avoidance strategy.

Via Liz Lightfoot in the Telegraph:

Nearly 60 per cent of girls aged 12 to 15 described themselves as
overweight when only 15 per cent met the medical criteria for excess
body fat.

The findings prompted the Schools Health Education Unit, which carries
out the annual survey, to issue an appeal for an end to the "obsession"
with skeletal body shapes in the media and fashion industry.

Yeah, I know this is the UK, but I bet you would get similar results in the states.  While the article points the finger at the media and fashion industry, how about government and academic know-it-alls who with their recent obsession on teenage obesity are reinforcing this message?  For example, remember this previous post about the Arkansas governor's new program:

I get email and comments from time to time that my language deriding
government's intervention into every aspect of our lives is overblown
and exaggerated.  My answer:  Oh yeah, well how about this:

Mike Huckabee, the Governor of Arkansas, now
requires annual fat reports. These are sent to the parents of every
single child aged between 5 and 17; a response, he says, to "an
absolutely epidemic issue that we could not ignore" in the 1,139
schools for which he is responsible.

I
just cannot craft any reasonable theory of government where this is the
state's job.   The "obesity" crisis in this country just amazes me.
"Experts" every few years broaden the definition of who is overweight
or obese, and suddenly (surprise!) there are more people defined as
overweight.  Even presuming it is the state's job to optimize our body
weights, is it really the right approach to tell everyone they are too
fat?  Having known several people who were anorexic, including at least
one young woman who died of its complications, is it really a net
benefit to get young people more obsessed with looks and body style?
And what about the kids that are genetically programmed to be
overweight?  Does this mean that years of taunting and bullying by
their peers is not enough, that the state's governor wants to pile on
now?

It is interesting to note that governor Huckabee apparently started
this initiative after his own personal battle with weight loss:

[Huckabee] lost 110lb after being warned that his
weight, more than 280lb after a life of southern fried food, was a
death sentence. A chair even collapsed under him as he was about to
preside over a meeting of state officials in Little Rock.

We
all have friends who have lost weight or gotten into homeopathy or
became a vegan and simply cannot stop trying to convert their friends
now that they see the light.  Now we have the spectacle of elected
officials doing the same thing, but on a broader scale and with the
force of law, rather than  just mere irritation, on their side.  One
can only imagine what report cards kids would be carrying home if
Huckabee had instead had a successful experience with penis
enlargement.  What's next, negative reports for kids with bad acne?
For women whose breasts are too small?  For kids who are unattractive?

A while back I lamented that so few people actually strive to maintain a consistent personal philosophy, rather than a hodge-podge of isolated political views.  In this context, I thought the profile of "progressive" Markos Moulitsas Zuniga (the Daily Kos) by the sympathetic progressive-liberal Washington Monthly was interesting.  For example:

The younger-than-35 liberal professionals who account for most of his
audience seem an ideologically satisfied group, with no fundamental
paradigm"”changing demands to make of the Democratic Party. They don't
believe strongly, as successive generations of progressives have, that
the Democratic Party must develop more government programs to help the
poor, or that racial and ethnic minorities are wildly underrepresented,
or that the party is in need of a fundamental reform towards the
pragmatic center"”or at least they don't believe so in any kind of
consistent or organized manner. As this generation begins to move into
positions of power within the progressive movement and the Democratic
Party, they don't pose much of a challenge on issues or substance. So
the tactical critique takes center stage.
Moulitsas's sensibility suits his generation perfectly. But it also
comes with a built-in cost. Moulitsas is just basically uninterested in
the intellectual and philosophical debates that lie behind the daily
political trench warfare. By his own admission, he just doesn't care
about policy. It's here that the correlation between sports and
politics breaks down. In sports, as Vince Lombardi is said to have put
it, "Winning isn't everything, it's the only thing." When the season is
over, you hang up your cleats and wait for the next season. But in
politics, that's not the case"”you have to govern, and if you don't
govern well, you won't get reelected. So while tactics and message are
crucial, most voters will ultimately demand from politicians ideas that
give them a sense of what a party is going to do once in power. Wanting
to win very badly is an admirable and necessary quality in politics,
and Moulitsas is right that Democrats have needed it in greater
quantity. But it is not really a political philosophy.

This article tends to reinforce a notion I have had of late, that is a trend toward political party as fashion statement.  For example, I get the impression that many of Kos's audience call themselves Democrats more because of the statement they think it makes about themselves rather than a thought-out comparison of the various party's positions and how they stack up vs. their own thought-out philosophy.  I am starting to sense that people choose parties for their brand-image rather than for the actual positions or people who represent them.  Democrat might mean "I am smarter than you", "I am with-it and cool", "I am dynamic" while Republican might mean "I am patriotic", "I am moral", "I am level-headed".  By the way, don't send me mail for the wrong reasons -- I am not saying the parties actually consistently meet these images, I am just saying that a large number of people seem to adopt their party to make these kind of statements about themselves.

Postscript:  If you think I am exaggerating, then someone needs to explain to me how a Democratic president can send us to war in Bosnia with Republicans opposing and then have a Republican president send us to war in Iraq with Democrats opposing when at the 40,000 foot level they are the same freaking war (US intervention to unseat a genocidal dictator with at best unclear UN mandate and opposition from key European nations).  I keep coming back to the simplistic explanation that the default political position is "I got my guy's back no matter what, and you guys suck no matter what", which I admit effectively compares the current political discourse to the chants at a Michigan-Ohio State football game, but I'm going to go with it.

PPS-  As a good libertarian, though, I am happy to know that young progressives are not necessarily pushing for more state control.

I had a conversation the other day with a person I can best describe as a well-meaning technocrat.  Though I am not sure he would put it this baldly, he tends to support a government by smart people imposing superior solutions on the sub-optimizing masses.  He was lamenting that allowing a company like GM to die is dumb, and that a little bit of intelligent management would save all those GM jobs and assets.  Though we did not discuss specifics, I presume in his model the government would have some role in this new intelligent design (I guess like it had in Amtrak?)

There are lots of sophisticated academic models for the corporation.  I have even studied a few.  Here is my simple one:

A corporation has physical plant (like factories) and workers of various skill levels who have productive potential.  These physical and human assets are overlaid with what we generally shortcut as "management" but which includes not just the actual humans currently managing the company but the organization approach, the culture, the management processes, its systems, the traditions, its contracts, its unions, the intellectual property, etc. etc.  In fact, by calling all this summed together "management", we falsely create the impression that it can easily be changed out, by firing the overpaid bums and getting new smarter guys.  This is not the case - Just ask Ross Perot.  You could fire the top 20 guys at GM and replace them all with the consensus all-brilliant team and I still am not sure they could fix it. 

All these management factors, from the managers themselves to process to history to culture could better be called the corporate DNA*.  And DNA is very hard to change.  Walmart may be freaking brilliant at what they do, but demand that they change tomorrow to an upscale retailer marketing fashion products to teenage girls, and I don't think they would ever get there.  Its just too much change in the DNA.  Yeah, you could hire some ex Merry-go-round** executives, but you still have a culture aimed at big box low prices, a logistics system and infrastructure aimed at doing same, absolutely no history or knowledge of fashion, etc. etc.  I would bet you any amount of money I could get to the GAP faster starting from scratch than starting from Walmart.  For example, many folks (like me) greatly prefer Target over Walmart because Target is a slightly nicer, more relaxing place to shop.  And even this small difference may ultimately confound Walmart.  Even this very incremental need to add some aesthetics to their experience may overtax their DNA.

Corporate DNA acts as a value multiplier.  The best corporate DNA has a multiplier greater than one, meaning that it increases the value of the people and physical assets in the corporation.  When I was at a company called Emerson Electric (an industrial conglomerate, not the consumer electronics guys) they were famous in the business world for having a corporate DNA that added value to certain types of industrial companies through cost reduction and intelligent investment.  Emerson's management, though, was always aware of the limits of their DNA, and paid careful attention to where their DNA would have a multiplier effect and where it would not.  Every company that has ever grown rapidly has had a DNA that provided a multiplier greater than one... for a while.

But things change.  Sometimes that change is slow, like a creeping climate change, or sometimes it is rapid, like the dinosaur-killing comet.  DNA that was robust no longer matches what the market needs, or some other entity with better DNA comes along and out-competes you.  When this happens, when a corporation becomes senescent, when its DNA is out of date, then its multiplier slips below one.  The corporation is killing the value of its assets.  Smart people are made stupid by a bad organization and systems and culture.  In the case of GM, hordes of brilliant engineers teamed with highly-skilled production workers and modern robotic manufacturing plants are turning out cars no one wants, at prices no one wants to pay.

Changing your DNA is tough.  It is sometimes possible, with the right managers and a crisis mentality, to evolve DNA over a period of 20-30 years.  One could argue that GE did this, avoiding becoming an old-industry dinosaur.  GM has had a 30 year window (dating from the mid-seventies oil price rise and influx of imported cars) to make a change, and it has not been enough.  GM's DNA was programmed to make big, ugly (IMO) cars, and that is what it has continued to do.  If its leaders were not able or willing to change its DNA over the last 30 years, no one, no matter how brilliant, is going to do it in the next 2-3.

So what if GM dies?  Letting the GM's of the world die is one of the best possible things we can do for our economy and the wealth of our nation.  Assuming GM's DNA has a less than one multiplier, then releasing GM's assets from GM's control actually increases value.  Talented engineers, after some admittedly painful personal dislocation, find jobs designing things people want and value.  Their output has more value, which in the long run helps everyone, including themselves.

The alternative to not letting GM die is, well, Europe (and Japan).  A LOT of Europe's productive assets are locked up in a few very large corporations with close ties to the state which are not allowed to fail, which are subsidized, protected from competition, etc.  In conjunction with European laws that limit labor mobility, protecting corporate dinosaurs has locked all of Europe's most productive human and physical assets into organizations with DNA multipliers less than one. 

I don't know if GM will fail (but a lot of other people have opinions) but if it does, I am confident that the end result will be positive for America.

* Those who accuse me of being more influenced by Neal Stephenson's Snow Crash than Harvard Business School may be correct.
** Gratuitous reference aimed at forty-somethings who used to hang out at the mall.  In my town, Merry-go-round was the place teenage girls went if they wanted to dress like, uh, teenage girls.  I am pretty sure the store went bust a while back.

Eat your heart out Glenn Reynolds.

Update:  The #1 biggest issue my wife is trying to deal with is how to ramp up her business to larger scale production.  Nordstroms and Nieman-Marcus are interested in her bags, but its just a whole 'nother level of volume.  Turns out one of our Coyote readers addresses the issue of growing fashion businesses and manufacturing with her own blog here.

I tried to warn you to buy one of my wife's designer handbags before she got famous.  It may be too late.  Next week she will be a finalist in the Phoenix Rising Star Fashion Awards:

Phoenix may not be an international center of fashion, but it is a hotbed of design.

The Valley brims with independent designers who make everything from
purses to baby clothes to yoga wear, all available at local boutiques
and/or online.

Three promising Valley designers will receive Rising Star awards on Thursday, given by the Phoenix chapter of Fashion Group International,
a networking organization for fashion professionals. Awards are given
in three categories: clothing, accessory and interior design.

(click image to enlarge)

Sorry, newspaper photos really don't scan very well.  They just had to use the chick with the guitar for the online article, so my wife's photo didn't make the online edition.  Many of her funky handbag designs are online, and I posted here about the last exposure of her designer purses in Yes Magazine.

Technorati Tags:  fashion, knitting

Like a smoker trying to quit for the twenty-seventh time, I have tried really, really hard to limit the number tort-related rants in my blog lately.  I sometimes go for weeks without falling off the wagon,and then something comes along that is so insane, I can't resist.

Via Overlawyered.com comes this site from attorney Lewis Laska dedicated to outlining all the ways people too bored or incompetent to make money the old fashion way can try to support their lifestyles by suing Walmart.  Don't miss this page, where the attorney will sell you packets of information for how to sue for various occurrences, such as:

Parking Lots- Uneven Surface and Protrusions (16 items, $135)

Parking Lots- Improper Parking Lot Design or Marking (11 items, $90)

Entering the Store - Entranceway Floors and Floormats (21 items, $160)

Entering the Store - Doors and Doorways - Tracked-in Water (32 items,
$200)

Aisle Ways - In-Store Consumable Food on Floor (18 items, $160)

Aisle Ways - Out-of-Store Consumable Food on Floor (14 items, $120)

Aisle Ways - Unknown Substance on Floor (59 items, $200)

Aisle Ways - Packaged Product on Floor (14 items, $110)

Aisle Ways - Unpackaged Product on Floor (13 items, $100)

Merchandise - Merchandise Protruding (1 item, $15)

Shelving and Racks and Displays - Vegetable Produce Displays (1 item,
$15)

Shelving and Racks and Displays - Water/Condensation From
Vegetable/Refrigeration/Freezer Displays (6 items, $55)

Shopping Carts - Overloaded (4 items, $45)

Shopping Carts - Defective (4 items, $45)

This is only a very short sample of the whole list.  I especially like the packaged product on floor.  Get your friend to drop a box of Wheaties on the floor, and then you follow him and sue.  And how the heck is Wal-Mart at fault if you overload your own shopping cart?  Anyway, I am going to order one to see what I get.

By the way, I especially liked this whopper, I guess because he is trying to portray himself as the brave man taking on huge odds:

Most lawyers are not interested in filing suits against Wal-Mart.
The company is reluctant to settle cases promptly and fairly and almost
seems eager to take cases to trial. One of the goals of the Wal-Mart Litigation
Project is to identify lawyers who are ready, willing and able to sue the
company where a case has merit.

I hardly know where to start.  First, if lawyers are so reluctant to sue Wal-Mart, why does Wal-Mart have like 20,000 suits pending against it? (note the numbers in this article, and it is 4 years old) Second, you gotta love the part about the attorney put out because Wal-Mart won't play the part of the victim like other companies and actually demands their right to a trial.  In this one statement, you see exactly how the plaintiff's bar works - they don't really want to go to a trial.  They want to force a fast settlement that requires little of their own time and move on with their 30+% of the take.

Since I just completed a three part series on buying a business, which starts here, it seems appropriate to link to this article on selling your business from Entrepreneur.com via the Entrepreneurial Mind.

The amount of disclosure that buyers require can be mind-boggling. Putting it all together in a reasonable fashion is just one reason to consider hiring outside help. An intermediary, such as a business broker or an investment banker, can relieve you of some of the work while also keeping the buyer engaged. "We always recommend that a third-party intermediary represent you," says Minor.

yes.