I’ve been trying to write this post for two weeks. No matter how many times I rewrite it, I don’t like it. So, I deleted everything and tried to write the highlights, and I gave myself a 15-minute limit, so whatever is done at that point gets posted.
HP Professional LCDs are crappy, based on two data points. Far worse, however, is their support. Their customer service organization (and the two or three subcontractors they seem to use) are a giant disaster. I have no idea how any major corporation can be this completely screwed up and still make money. I don’t care what CNET says, if you’re going to buy a new LCD, don’t buy it from HP, if you want it to work.
On Banker Bonuses
When I worked for an investment bank, I got a bonus. Without my bonus, I would have been underpaid. Demanding that nobody at investment banks get a bonus when they get bailout money, or that they shouldn’t be getting bonuses for failure makes no sense. Might as well demand that nobody in the investment banking business be paid at all. Bonuses are a given, and are a part of annual compensation. It’s how things work. Maybe that’s wrong, but try to tell me why a trading clerk who works 14 hours a day to clear trades, fetch lunch, and prepare reports for the next day doesn’t deserve their 2008 bonus. Or why the folks working in the back office, busting their balls to get a software product online, or to keep a system running don’t deserve their bonus.
Even for junior bankers, we’re talking about people with undergraduate degrees from top schools, masters degrees from top business programs. We’re talking about driven people who have studied, worked hard, gotten strong internships, and landed killer jobs. You cannot get these sorts of people cheap, especially in a business known for hiring, firing, and cutthroat competition. They work very hard, and expect to be rewarded. They have been doing their job, and they have been meeting goals directly aligned with their fiduciary duties to their shareholders. The vast majority of people involved in the financial industry have done nothing wrong.
Yes, some things got screwed up. Mortages, well, hard to say whether that’s the government’s fault or the financial industry. VaR? Yeah, it’s broken, but it’s the best we have. Credit derivatives? Structured credit? Monte Carlo models? 100-year events? Who the hell really knows. I still have no clue what “caused” the crisis, and I have the feeling that anybody who does is wrong.
Things were wrong. Mistakes were made. Huge depression-level mistakes. By people following the law, attempting to fulfill a fiduciary responsibility to their shareholders. By regulatory and government agencies attempting to do the right thing based on models of what is right and wrong. By pseudo-government agencies even less well regulated than corporations. By unions and shitty cars. It doesn’t really matter. Reactionary anger towards the system, full of people doing their jobs, is not going to fix things.
In the media there seems to be some vision of “the people that caused this.” Somewhere, surely, there is a cabal of evil degenerates that plotted to bring down the world, all for personal profit! Yeah, there are a handful of bad apples, but in general this sort of thinking is ignorant and counterproductive. Focusing on this stuff is dumb. Bad apples happen all the time, even when things are good, but the media loves a villain when things are pear-shaped.
Investment banks lubricate business as we know it. A lot of things would not be possible without them. I’m half convinced the average person has no clue how the day to day operations of a major company work. Without the financial system and all of the infrastructure provided by investment banks and other financial organizations, things cease to function as we know it. Yes, there are profiteers. In general, though, the vast majority of effort is devoted to business as usual and making things work.
Circling back, I don’t think senior bankers should be seeing massive bonuses for 2008. I’m not crazy. That said, focusing on the fact that they got a big bonus in 2007 or 2006 is ignorant. Stop it. It’s like when Connecticut’s moronic democratic party sent me anti-Shays literature that pointed out that Shays kept taking pay raises, even though our gas was over $4! Those pay raises came over the course of decades, and hadn’t happened in years. Point being, 2007 has nothing to do with 2008. Or 2009. Stop being stupid, the truth and facts are fascinating enough.
Getting out of the current financial crisis is going to require hard work from the financial industry. That hard work isn’t going to happen if we remove their incentives to fix things, at an individual level.
On a $500,000 Pay Cap
With all the risks and stress of being a top executive for a company (remember, they have to sign off on the books, under penalty of jail in the event of trouble), and functioning as the chief salesperson, I can’t imagine why anybody would want to be a CEO if there were a half million dollar cap. The type of talent, experience, acumen, and capability that is needed for a chief executive does not come cheap, and the top talent is needed to pull us out of this particular climate. Remember, these sorts of people could just run a hedge fund and make a killing and further weaken the economy. Am I pleading an argument based on some sort of weird Stockholm Syndrome thing? Maybe. Sure, I’d love to make a half million dollars a year, but you couldn’t pay me enough money to be a CEO of a big financial institution right now.
A CEO is a salesperson and a leader, the mix of which varies by company. Given the appropriate bonus structure, such that it would provide rewards appropriate with efforts, I’m sure we could find a CEO that could deliver peace in the middle east. The cost, however, is most likely prohibitive. And there’s a bit of a “you get what you wish for” sort of problem with most of these schemes. This analogy is not, however, helping my point.
My point is that this sort of cap scheme makes about as much sense as any sort of cap scheme. If this sort of measure is put in place, then supply and demand will adjust us into a far more fascinatingly fucked up situation.
On Corporate Jets
The greatest indignity of the modern business traveler is commercial air transport. Corporate jets try to mitigate the pains of this by allowing top executives to make it to meetings and sales opportunities on time, unstressed, and in top condition. Corporate jets help people generate more revenue for the company, or manage costs more effectively. For these folks, time is money. I’m not saying that their time is, personally, worth that much. But, from the company’s perspective, their time is worth quite a bit indeed. Another half day’s work, or actually making it to a meeting may be worth thousands. Millions. Who knows?
Having the fastest, most luxurious, or largest corporate jet doesn’t make much sense. Flying commercial, however, may in some situations make very little sense.
Obviously I’m not arguing that anybody should be getting the indirect compensation advantage of being able to fly to Bermuda on the company Gulfstream. That would be moronic, and this sort of perk is not something that makes sense right now.
Anecdotally, selling two planes to more than make up the cost to buy one new one, halving fleet size and utilization, increasing energy efficiency, and still having millions of dollars left over makes sense in my book. Call me crazy.
On Things In General
Gut reactions and black and white thinking are dangerous. Things are not simple. The current problems are not simple. Simple fixes aren’t.
Try to keep your wits about you. Capitalism is our economic policy, not socialism or communism. While the government is there to keep capitalism in check, protectionist rhetoric is foolish.