Pro Commerce

Poll results

The latest Gallop poll results show four things: (1) the recall election is being driven by the body politic. (2) Two-thirds of the voters know that it is being driven by the body politic and know that the Republicans didn't create the recall initiative, (3) the greatest force for the recall is in the Central Valley and (4) the numbers I gave in my blog of July 26th for the defeat of Davis and the margin of victory for Arnold are correct.

Most importantly, I am now predicting that the TV debate with Arnold was the most watched political debate in TV history. The numbers are so high that it will register on the level of national prime time programming listed in next Monday's NYTimes.

The turnout for the election will eclipse any election turnout in the past forty years.

Bold predictions but I am known to be bold and willing to be wrong.

Body politic

I am always looking for mechanisms that evince the body politic at work.

For the record, drivers have a group behavior that suggests a common understanding.

On the Golden Gate Bridge there are signs that say: "Double fine for exceeding 45 mph". This worked. Drivers on the GG bridge go 45 mph.

About six months after this sign was put up on the Golden Gate, the Bay Bridge put up the same sign with the limit at 50 mph.

Drivers did not respond to the new threat of punishment on the Bay Bridge.

My conclusion. Drivers could see that the two-way traffic on the Golden Gate posed a safety hazard and that the 45 mph limit was a reasonable solution to head-on crashes.

The Bay Bridge is one-way on each level. There is no potential for head-on crashes and drivers see no safety reason for obeying the law or responding to the feeble threat.

The body politic is always pretty smart.

Farming is not business

Again for the record, I've never seen anyone mention that running a farm is not a business.

Over the past thirty years I have been a consultant to over 1,000 businesses, probably over 1,500. Giant corporations, one person operations, and many in between.

Twice I have been begged to consult with farmers. I did. That is where I realized that farming was not a business.

Why? Business is about minimizing risk. Please, ignore the stupid bullshit that entrepreneurs are bold gamblers on new visions. Every competent businessperson who ever lived did everything possible to reduce the risk of failure to as close to zero as possible. That is just reality. I have no interest in some counter-example. I just told you, I've consulted over a thousand businesses; I know from the deepest empirical place.

Farmers total lives are based on unbearable, unfathomable risk. The weather can destroy a crop, several crops and crops for several years in a row. So can insects and disease. That is the kind of risk that no business mind can live with.

Farming is not business. It is mystical, religious or voodoo. You pick.

National observatory

Time for the National Social Science Observatory.

The proposal was made more than fifty years ago that we have such an observatory. The plan was to have a sample of locations in the U.S. where an observer would make regular and periodic records of everything on their block. Like how many Christmas decorations were on the outside of the houses. Like how many cars parked in front of their garage the previous night. Like, the number of window boxes planted with floors.

Over time, social scientists would have a data base of actual behavior on a reasonable scale to begin understanding social phenomenon.

The time has come.

By my rough calculation, the Internet has made the cost of such an observatory feasible. We could have 1,000 randomly selected addresses, chosen to be observers. We would pay each observer $20 every two weeks to fill in a questionnaire online. The questionnaire would have about 40 questions, 36 that don't change unless the data changes (like the number of cars parked in front of their garage). The administrative cost would be about $.5 million a year for a total cost of $1 million.

Within two years, the observatory would be paying for itself by selling parts of the data to commercial market research firms.

Lefty converts to Hamiltonianism

In the past few years more and more Lefties have concluded that Lefty Fundamentalism is bereft of any coherent ideas. As a consequence, the Lefties with original minds are jumping ship and leaving the other lefties behind. The following is my short current list. I know there are a few more but I can't come up with their names at the moment.

Send suggestions. The definition of a convert is: a full fledged public Lefty who has openly renounced his past and is espousing a new position.

Anne Applebaum Paul Berman Pascal Bruckner Ian Buruma Andre Glucksman Chistopher Hitchens Bernard Henri Levy

Excuse me

Excuse me for my ignorance. It turns out that I know little or nothing about the human lymphatic system.

My readers know that I am interested in the body-politic.

I asked myself the question: "Does the body-politic read newspapers or watch television?" In response I came up with the metaphor: the body-politic is like the lymph system, a major byway of communication that is largely invisible.

I then concluded that the body-politic doesn't follow the news directly, but it has readers and watchers of news and the readers and watchers (like the lymph nodes that create anti-bodies) pass along information only when it is reliable. For example, all the people who personally know Gray Davis have passed along horrid descriptions of Davis to the rest of the body-politic.

The exception to the body-politic not following the news is going to be tonight -- the California Recall debate on TV. I expect the body-politic to watch the debate. Maybe 3-5 million Californians will watch, just to make sure that the next governor, Arnold, is an OK guy. Arnold takes office on October 8th, one day after the election.

Imagine the chaos at the Governor's Mansion and the Governor's Office with only one day to move out before Arnold moves in. Of course Arnold will be polite, he doesn't need to be in a hurry.

Back to my ignorance. After coming up with the metaphor of the body-politic having a communication system like the human lymph system, I had to read the Encyclopedia Britannica section on the lymph system.

The lymph system weighs about as much as the liver; it is distributed all over the body. Every day half the proteins in the bloodstream leak out and the lymph system returns them to the blood. Lymph is colorless, and almost the same composition as plasma. The exception to colorlessness is that lymph is white when it is transporting cholesterol, which is the main way fat moves about the body. The lymph nodes are the main locus of bacterial combat, where the anti-body system is initiated. Lymphocytes are in every organ, are self generating and can be found concentrated in bone marrow and the thymus.

Before I looked it up I knew that the lymph system brings garlic to the skin surface, so you can smell it on someone else and does the same with sperm odor, transporting it from the vagina. to the skin surface.

The Britannica entry on the lymph system has more "recently discovered" and "is currently unknown" phrases than any other entry I've seen in the Britannica. The lymph system was discovered nearly four hundred years ago. It is still much of a mystery, but better understood than the body-politic. So far, we haven't even discovered the body-politic, which remains an imaginary entity.

I have already written my blog to post the night before the election. It tells blog readers what the body politic is going to do on election day.

Jefferson-Hamilton

My friend Alex, who's business blog is listed on the left, suggests that the current debate in the USA is not left-right but fits the more traditional American dichotomy -- Hamilton-Jefferson.(Jefferson is on the left)

Hamilton favored a strong central government with policies directed toward supporting commerce and a commercial America. He created a national bank, believed deeply in the rule of law and strongly opposed embargoes of foreign goods. Hamilton, was a New Yorker, was a bastard son and married into a wealthy family. Hamilton was a key thinker in designing our Constitution, our divided government, and giving the judiciary strong powers. Hamilton disliked France.

Jefferson was an agrarian philosophe. He believed that a democracy based on landowning farmers was the closest political idea to perfection. Farmers were Jefferson's idea of moral, upright clear-headed philosopher-kings. Jefferson, like most agrarian American's, hated corrupt sin-filled cities like New York, and demanded that the US capitol be in the rural South. He got his wish with the District of Columbia.
Jefferson wanted the States to dominate all government matters except foreign affairs. He loved France.

In future blogs I will come back to the Hamilton-Jefferson dichotomy.

For now it is sufficient to note that AG Ashcroft in his policy of standardizing the conditions for capital punishment and plea bargains is Hamiltonian.

AG Ashcroft is also aware that US Supreme Court decisions are increasingly overturning cases where different standards of justice are used in different states for Federal matters.

Republican convention

The California Republican convention closed last Sunday night without endorsing either Republican candidate.

I should have seen apologies from all the media in the country and the tens of thousands of Democrats and Lefty Fundamentalists who have been saying the Recall 'is a Republican conspiracy to steal the election from a duly elected governor'.

How can a party that runs a 'conspiracy' fail to endorse a candidate for the soon to be vacant office?

Palace of Fine Arts

The issues of urban ecology are not easy to see. I saw one issue at the Palace of Fine Arts because I used to do my morning run nearby. I noticed beautiful white goslings one morning. I'd never seen gosslings in the previous twenty years. I went to investigate and found that the goslings and their mother were living in a fenced off construction area that had been up for about three months.

What happened? Geese are always flying over this area, which was once a breeding ground. When they saw the isolated area, safe from predators, inside a cyclone fence, they landed and delivered their offspring.

Who are the urban predators off goslings: cats and dogs. Cats and dogs keep us from having much more beautiful wildlife in the city.

Peace lists

Three months ago I notified all the peace lists that I'm on to "Take me off your list".

One group ignored my directive. I sent a stronger message.

I recommend that everyone take their names off of peace lists. It's serious. You are jeopardizing your chances to visit several important countries. The countries that now refuse visas for peaceniks and will often turn peaceniks away at the border are Israel, Russia, Cuba, China, India and South Korea.

These are all countries I want to be able to visit. The problem started when peaceniks sided wholly with the Palestinians in Gaza and the West Bank, but the problem has been spreading as it becomes clear that peaceniks are very ideological and never protect people on both sides of a conflict.

The scattered groups of peaceniks have never confronted the problems of a terrorist age.

Earlier Blog

In an earlier blog, 9/18, I chided the San Francisco anti-Starbucks crowd for the damage they have done in chasing out major businesses. The anti-Starbucks gang usually dislikes big business so much they are almost gleeful to see big business leave the city.

Now a Chamber of Commerce Small Business report gives us some figures:

"San Francisco small businesses find strength in their numbers, accounting for 99 percent of all private sector businesses in the city, according to a study released Thursday.

Local merchants appeared on the steps of City Hall to tout their contributions to San Francisco's economy, pointing to the 108,373 small businesses that generated 52 percent of the city's jobs in 2000, as revealed in the study.

Commissioned by Scott Hauge, founder of the Small Business Advocates, a political action group, the study showed that small businesses had a collective annual payroll of $15.8 billion in 2000. They also created 19,202 new jobs that same year, representing 2.6 percent of all jobs in San Francisco."

There is another way to read these numbers. Invert the numbers in this report and what we have is that businesses with over 100 employees comprise less than one percent of all companies, roughly 1,000 companies. The 1,000 companies with more than 100 employees provide jobs for 50% of the working people, or 365,000 jobs.

It is those 365,000 jobs that the anti-Starbucks crowd feels comfortable messing around with.

Upside down pyramid

My local lefty fundamentalist friends daily bemoan the draconian government of George W. Bush.

I find brain damage in their pleas. Their pyramid is upside down. The State of California is in much worse shape than the U.S. The U.S. has had continual economic growth since 1991 without a single quarter of negative GDP growth. Now the GDP is growing at a level above the 1990s average.

California, on the other hand, has gone from AAA bond rating to B, junk bond status for government bonds. Californians now have to pay $1 billion a year in extra taxes on bond interest because of the junk bond rating.

San Francisco is in the worst possible shape. In the past two years, 40,000 professional workers left San Francisco after the Internet market shrank. Many would have stayed in San Francisco if rental rates had been more reasonable. Rental rates weren't reasonable because San Francisco placed every possible barrier in the way of building new "loft" style apartments, creating more "in-law" apartments and making more condominiums possible.

For the past two decades San Francisco has driven out every single large business. The litany of large headquartered companies that left and took employment with them is shocking.

Bank of America
Wells Fargo
Pacific Bell
Pacific Gas & Electric
Southern Pacific Railway
Crown Zellerbach
Dole

That exodus took a lot of jobs and a large tax base. We also lost charitable contributions and luxury purchases.

Only one new company has come here, Lucas Films. Several business that started and grew here are already moving out: Gap and Charles Schwab.

We are left with Levi's.

Thanks City Hall, political do gooders, Willie Brown, the Labor Council and John Burton.

Fix the Senate

Get rid of some senators

The U.S. Senate over-represents rural and farm interests. One Wyoming bartender's vote can outweigh 58 Oakland bar patron's votes in the U.S. Senate. This adversely effects our foreign policy and our foreign aid. The maldistribution of Senate power creates other problems, but the harmful effects on third world farmers is sufficient to warrant a change.

How do we bring about a change?

The Congress (House and Senate) can decide by majority vote how many people constitute a state. The Congress created all but the first 13 states, by a simple vote.

I propose that any state that has a population below the population of the two smallest of the original 13 states reverts to territory status.

Vermont and Delaware are the two smallest original states with an average population in 2000 of 700,000

Congress could get rid of three states with six senators: North Dakota with 662,000 people, Wyoming with 525,000 people and Alaska with 650,000 people.

'Will reducing the number of Senators really make a difference?' you might ask. The answer is that the moment a bill is introduced in the House and Senate to turn three states into three territories, the dynamics of Senate voting will be forever changed, for the better.

With their heads in a noose, it will be clear to many senators that they can be heavily outvoted by urban representatives on the one issue that matters to them, their own survival in the Senate. From the moment such a return-to-territories bill is introduced most farm state Senators will be much more willing to negotiate on issues that they now treat as sacrosanct.

Farm subsidies will be treated as serious business with $30-$50 billion being given as a gift to a third of one percent of the population, most of whom don't actually live in farm states.

Homeless innumeracy

We've got an innumeracy problem in San Francisco. This billboard is advertising a local initiative that is supposed to help the homeless. The words are: "169 homeless died in San Francisco last year"-- presumably from being homeless in a city that treats them cruelly.

I have been disturbed, since working on the S.F. Emergency Services Council, to find that homeless, crap-in-the-pants-filthy drunks consume nearly half the resources of our San Francisco emergency services. They get far more resources and do far more damage to the goodwill of our emergency personnel than I think is warranted.

I wondered how many homeless would have died if they were living safe happy satisfied lives in Kansas City. The answer is in the mortality tables on the web.

Homeless advocates say there are 10,000 homeless in San Francisco. 169 of them would have died living safely and happily in Kansas City if the average age were 55 and they were mostly male smokers.

Someone should tell the homeless advocates that living on the streets of San Francisco, drunk and filthy, is good for longevity.

Affirmative Action

Its beginning to look like Proposition 54, that will be on the October 7th California ballot, will be defeated. Prop 54 prohibits State and local agencies from collecting data on race, ethnicity, color or national origin. The initiative was created by Ward Connerly who succeeded in banning affirmative action in California State colleges and universities.

I want to offer guidance to the many journalists and commentators who will try to analyze the defeat of this initiative after it happens.

According to the Field Poll of September 3-7 the majority of Independents will vote against the proposition. The Independents are the rebels who are driving this recall election as I've pointed out in an earlier July 23rd blog.

Independents are expressing a very clear position here. There is a legacy of unequal opportunity in our society for blacks as a by-product of slavery. Independents believe in equal opportunity in education because education is the gateway to the work force. Independents are also concerned about outcomes. Proposition 54 would make it hard to measure the outcomes of all efforts to create equal opportunity in education.

Californians have voted in the past to keep the State from using programs to create equal educational opportunity that involve lowering requirements for blacks below the requirements for whites.

These two positions are not in conflict. They lead to the simple conclusion that racial inequality in education must be eliminated and not by lowering the standards for blacks. Programs and funds to raise black educational skills are wholly acceptable.

I have personally worked in the field of black civil rights since 1955 and brought the first large successful lawsuit to integrate the banking industry in 1971. I have followed the issue very closely and always been on the front lines.

Comaraderie

San Francisco has long been a city of comaraderie.

My morning swim has reminded me that a vital part of San Francisco has been lost. I swim in the Koret Center which houses the Swig Pavilion, a large space with several large basketball courts. The Koret and the Swig are on the University of San Francisco campus.

I customarily see and hear San Franciscans standing in line, turn to strangers and say "Isn't George Bush an idiot?". The assumption is that Lefty Fundamentalists have complete suzerainty in this city. They do. I don't know where the mean spiritedness comes from, but I know that the City has lost a wonderful part of itself.

In the 1950's personal identity was based on religion. You were a Protestant, Catholic or Jew (sometimes a Hebrew). Today your identity is gender, skin color and sexual preference.

Throughout the '50's a large group of ecumenical San Franciscans had a social lunch every week. There was great warmth and comraderie. Friends would reach across religious lines to help each other. That is the story.

Koret and Swig were self-made San Francisco Jews, part of the 1950's social luncheons. Koret and Swig gave millions to the University of San Francisco a Jesuit university. That was the comaraderie of San Francisco.

Free phone service

Most of my friends have no idea of what I do as an expert witness for the Greenlining Institute.

Free phones for poor people is an example of what we have done together.

Greenlining is a true Rainbow Coalition made up of every minority organization in California. Greenlining is interested in urban minority economic issues. I am Greenlining's main expert witness in formal proceedings. I am an expert on everything to do with business, finance, management, business ethics and corporate governance.

A few years ago, I read in my morning paper that Pacific Bell was proposing to sell off its wireless service and licenses to a newly formed separate company. The ostensible reason was to get the wireless part of the business out from under public regulatory control. I was outraged. No one would have considered it reasonable for IBM to create a separate company where the separate company would have all of IBM's future technology.

There was no opposition to PacBell.

The Greenlining Institute and I organized opposition over a six month period including having me testify before the California Senate and the California Public Utility Commission. On the final day of the Utilities Commission hearings I had many friends come to join us in learning the outcome of the decision. The printed decision was handed out and there were four pages of findings against us. We all went over to a coffee shop to commiserate. A lawyer in our group went back to the hearing room to pick up some files and returned to join us. He had the fifth page of the decision which was not handed to us or the press. The fifth page included findings that found in our favor and required PacBell to reach a settlement with Greenlining before PacBell could create a new separate corporation.

The settlement we reached is called the Brownline Settlement. Under the settlement, anyone in the PacBell territory who has had their phone service disconnected because of failure to pay phone bills or bad credit can get a brownline phone. The brownline phone allows all incoming calls and allows outgoing calls to 911 and 800 numbers. It is free. With a prepaid phone card, brownline phone callers can phone anyone.

We got free phones for everyone who has bad credit of unpaid phone bills. I'm proud of that settlement. Greenlining has made sure that every poor person in in the PacBell territory knows their right to a free brownline phone.

The service is called brownline because a disconnected phone is refered to as a blackline. Actual phone lines to a house are never taken down.

Solving the Executive Pay Problem

The issue of excessive executive compensation never seems to go away. Every day's news has a worse story about outrageous CEO pay.

Part of this problem arises from the current hysteria among the Corporate Executive Peer Group. An executive's pay, bonuses, profit sharing, pension and perks are a small percentage of any particular corporation's net profits. The consequence is that no responsible member of the Corporate Executive Peer Group has suggested reasonable bounds for executive compensation. What can you suggest: 1%, 5% of net profit? A percentage doesn't have any logic to it so there are no restraints.

The hysteria will end when logic prevails. Logic says that the harm from excessive executive compensation should be weighed any tangible benefits of better performance.

There are four known harmful effects of excessive executive compensation. None of the material offered to contemporary corporate Boards of Directors or shareholders provides any useful information on any of these four known harmful effects.

The four harmful effects of excessive executive compensation are:

Wage Creep. When executives receive increases in compensation, top management, middle management and all other salaried employees expect and often demand comparable adjustments. The net effect of increases in executive compensation is to raise the cost structure of the corporation. When executive compensation is excessive, the cost structure for the whole corporation can become excessive.

Buyout Vulnerability. When executive compensation is excessive, the corporation becomes more susceptible to being bought out by another corporation.

The reason that excessive executive compensation is an inducement to other businesses and corporate raiders to buy out the company is that the new post-merged company can fire the overpaid executives and immediately have a significant cost saving. This is particularly true in the case where the buying company is foreign and excessive American compensation is easily recognized. The buyout of Chrysler Corporation by Daimler-Benz is an example of this type of wage saving buyout.

Promotes bad employee behavior. When executive compensation is excessive, the corporate executives fail in their leadership role and occasionally employees, suppliers and customers become lax in their own moral behavior. Lower morale is associated with lower productivity, increased in-house fraud and poor work practices.

One authority on the subject of appropriate executive compensation and appropriate employee behavior is the President of the United States who said:

"Everyone in a company should live up to high standards. But the burden of leadership rightly belongs to the chief executive officer. CEOs set the ethical direction for their companies. They set a moral tone by the decisions they make, the respect they show their employees, and their willingness to be held accountable for their actions.

... [O]ne of the principal ways that CEOs set an ethical tone is through their compensation. The pay package sends a clear signal whether a business leader is committed to teamwork or personal enrichment. It tells you whether his principal goal is the creation of wealth for shareholders, or the accumulation of wealth for himself." (July 9, 2002).

Bad form for bad times. Excessive executive compensation sets a bad precedent for employee cooperation in bad times. Almost all businesses experience volatility in their profitability. This is particularly true when the corporation is affected by national business cycles. The example of American Airlines is the best and most recent case. American Airlines had experienced severe reduction in revenue due to industry-wide problems and a business cycle downturn. The management of American had succeeded in reaching agreements with employees to reduce staff and wages ... until the employees learned of deceptive practices involving excessive executive compensation. The staff and wage reductions were then not possible without the resignation of the CEO. Many observers believe the ill will in the American Airlines case will take many years to recover.

Each and all of the four types of harmful effects of excessive executive compensation can be detrimental to the operation and management of a corporation.

There are availabe methods to measure the harm of excessive executive compensation. It is time to start using them.

Implementing metrics: audit groups can rate any corporate executive compensation on a scale from 1 to 10 for each of the four harmful effects.

Strictly as an example, the audit group might determine that Corporation X has a high risk of Type 1 Harmful Effect of Executive Compensation (Wage Creep) with a rating of 8 on a 1-10 scale, but has a lower risk of Type 3 Harmful Effect of Executive Compensation (Promotes Bad Employee Behavior) with a rating of 3 on a 1-10 scale. A combined four category rating can be used to set an executives pay package.

WSJ and Brookings

A WSJ article this morning berates Bush for increasing the government payroll based on Brookings (Democratic Party home address) findings. The numbers are right.

Trouble is the Times and Brookings got it all wrong. Bush has decreased the number of direct Federal staffers and increased the number of government contract workers.

Hey guys, that is what everyone for a hundred years has tried to do. Bush succeeded. Getting workers off the civil service dole and into jobs where they can be fired and where productivity counts is what the whole new game is about.

The big three events

The big three events of the next three months.

1) Prime minister Junichiro Koizumi faces an election for the presidency of his Liberal Democratic Party in September 2003. The next general election is expected to take place in November. The two largest opposition parties, Democrats and Liberals, have recently agreed to merge their parties in an attempt to capture power from the LDP.

The issue is whether the pacifist sentiments that defeated the 50 year old LDP in 1992 over peacekeepers in Cambodia will rise up again. Neither China nor S. Korea have protested the 5,000 armed Japanese troops going to Iraq. The threat of a nuclear N. Korea may have changed Japanese public sentiment and the dynamics in Asia. Keep your eyes open.

2) Arnold's victory in California the second week in October (counting may be slow) will have stunning repercussions. It will be the second step in the independent revolt, Jesse Ventura was the first. I will stun everyone in politics. Every politico will have been wrong in analyzing the issue. The Republicans will get a breath of new life in California, especially if exit polls show 50% of Latino's voting for Arnold.

The image is Arnold's hands on a plaque outside the S.F. Planet Hollywood door. Sure to disappear soon.

3) The survival of the WTO, a favorite organization of mine, is in the hands of Congress. The WTO has ruled three times that the U.S. is in breach because of a $5 billion tax subsidy to (mostly) Boeing and Microsoft. If the Congress doesn't honestly remedy this in the next few months the WTO is dead.

Don't abort the numbers

I wrote a blog on 8/19 about the relevance of the Leavitt et al material on abortion and the decline in crime twenty years after abortion became available. The abortion movement ignores this startling finding.

I got an e-mail from Steven Sailor about his debate on this issue in Slate.

I've read Sailor's material and find that Sailor doesn't make his point successfully. Leavitt et al showed three different ways that there was a direct correlation between national, state and county increases in abortion and a decline in each of the same areas' crime data twenty years later. Correlation and causality.

The issue of finding the mechanism for this correlation is what is being debated now. Sailor fails to see that the data is rigorous and stands firm. The mechanisms for bringing about the correlation remain debatable.

Army Deck of Cards

The woman at the table next to me at my morning coffee shop loudly asked: "Is anybody else offended by this?"

I leaned over her table to see what she was talking about. There was a picture of an Iraqi that had been captured and his photo came from the famous deck of cards. "Don't you find that offensive?" she asked again.

"No. I am a soldier (I was thirty years ago) and I would have thrown away any book of photos but I would keep the deck of cards."

"This is the first war where we defeated the enemy army and the enemy disappeared into the landscape. We need new and innovative ways to cope with G.I. Joe and his need to find enemy leaders."

I think the cards were a brilliant and speedy invention.