Farewell. The Flying Pig Has Left The Building.

Steve Hynd, August 16, 2012

After four years on the Typepad site, eight years total blogging, Newshoggers is closing it's doors today. We've been coasting the last year or so, with many of us moving on to bigger projects (Hey, Eric!) or simply running out of blogging enthusiasm, and it's time to give the old flying pig a rest.

We've done okay over those eight years, although never being quite PC enough to gain wider acceptance from the partisan "party right or wrong" crowds. We like to think we moved political conversations a little, on the ever-present wish to rush to war with Iran, on the need for a real Left that isn't licking corporatist Dem boots every cycle, on America's foreign misadventures in Afghanistan and Iraq. We like to think we made a small difference while writing under that flying pig banner. We did pretty good for a bunch with no ties to big-party apparatuses or think tanks.

Those eight years of blogging will still exist. Because we're ending this typepad account, we've been archiving the typepad blog here. And the original blogger archive is still here. There will still be new content from the old 'hoggers crew too. Ron writes for The Moderate Voice, I post at The Agonist and Eric Martin's lucid foreign policy thoughts can be read at Democracy Arsenal.

I'd like to thank all our regular commenters, readers and the other bloggers who regularly linked to our posts over the years to agree or disagree. You all made writing for 'hoggers an amazingly fun and stimulating experience.

Thank you very much.

Note: This is an archive copy of Newshoggers. Most of the pictures are gone but the words are all here. There may be some occasional new content, John may do some posts and Ron will cross post some of his contributions to The Moderate Voice so check back.


Friday, December 30, 2011

The Dumbest Idea in the World

By BJ Bjornson

Today�s recommended reading is this Forbes.com article from Steve Denning reviewing Roger L. Martin�s book, Fixing the Game, which notes that a lot of capitalism�s present problems come from incentives and laws that divert resources and talent away from the real market of producing goods and services for customers and making real profits and instead focus on the expectations market of the stock prices and �maximizing shareholder value� in the immediate short term. An analogy as excerpt:

�Imagine an NFL coach,� writes Roger Martin, Dean of the Rotman School of Management at the University of Toronto, in his important new book, Fixing the Game, �holding a press conference on Wednesday to announce that he predicts a win by 9 points on Sunday, and that bettors should recognize that the current spread of 6 points is too low. Or picture the team�s quarterback standing up in the postgame press conference and apologizing for having only won by 3 points when the final betting spread was 9 points in his team�s favor. While it�s laughable to imagine coaches or quarterbacks doing so, CEOs are expected to do both of these things.�

Imagine also, to extrapolate Martin�s analogy, that the coach and his top assistants were hugely compensated, not on whether they won games, but rather by whether they covered the point spread. If they beat the point spread, they would receive massive bonuses. But if they missed covering the point spread a couple of times, the salary cap of the team could be cut and key players would have to be released, regardless of whether the team won or lost its games.

There is more at the link, and while the article nor the book covers every problem our economy faces, the one it does cover is a biggie, and one that needs to be dealt with, sooner better than later.


  1. The equities markets which were the drivers of the US and world economy became the destructive force that will eventually bring them down. That's what happens when short sighted sociopaths get control. Many of us saw this happening 25+ years ago. That's about the time the "pure science" R&D labs at major corporations started being closed. I worked in one of the labs years ago. Only 5% of our projects turned into products but those products made the company a lot of money and why the US was the worlds innovator. Intel still does it but few others do.

  2. This is not a very good analogy, because coaches are fired for failing to meet short term goals. Grooming a newly drafted quarterback for future greatness will get him nothing, and he will be fired if he is not getting into the playoffs this year.
    So the difference between the NFL and modern corporate management is similar, in that both are focused on short term objectives, not only disregarding but sometimes sabotaging long term well being of the organization.

  3. Bill has a good point. It's easy to get lost in the details when matters of economics are being discussed.
    My own view may be overly simplistic, but the "real" economy has to do with supply and demand of goods and services, with rent-seeking along the way acting as a lubricant, ending at the top with really handsome results. (The reader who doesn't know what is meant by rent-seeking needs to look it up. I'm not referring to landlords but to the perfectly human impulse to get something for nothing. This is not a value judgement but an observation of everyday behavior.)But rent-seeking is to economics what mace is to nutmeg, always a minuscule byproduct.
    To explain this obscure analogy, the mace of a nutmeg is a lace-like net between the nut and the hull that must be peeled away separately with care. Mace has most of the qualities of nutmeg but more concentrated, so a little goes a long way. But because there will always be a big variance between supply and demand mace will always be more expensive. (There is a story that in Colonial times European traders sent word to the East to plant more mace trees and fewer nutmeg trees to keep prices better in line. Today's economics experts are not too far away from that same thinking.)
    But this discussion is less about goods and services than banking and investments.
    Pawn brokers operate the simplest of banking services with credit unions (doing business with a more credit-worthy population) next up the tree. After that the rent-seeking behavior becomes increasingly more pronounced until at the top end any pretext of real banking services is mostly inconsequential.
    Thanks to technology both the real economy and rent-seeking have soared to previously unimaginable heights. Unfortunately rent-seeking has outstripped the real economy in a way that may be unrecoverable. (I'm thinking of computer algorithms capable of thousands of transactions per minute, impossibly faster than any day-trader.) Investment schemes have become ever more impressive, but in the end have little or nothing to do with the real economy. They are like the magic tricks before live audiences where there is always a trick. No one can figure it out, but there is always a reason that the person in that box is not impaled by one of those swords thrust in from every angle. But we love the mystery and continue to pay the price of admission. In the case of entertainment there is still a real transaction.(Entertainment = service) But in the case of financial schemes built on getting money from other money Ponzi schemes are not far away. Bernie Madoff was not an outlier. He just had the misfortune to get caught.
    The days of mergers and acquisitions have been displaced by schemes built on ever-more fragile webs of financial arrangements having less and less to do with the origins of productivity. And as in the example when shareholder value outruns old-fashioned operational profitability the enterprise has graduated from productivity to rent-seeking.

  4. @Bill - The excerpted analogy is just the beginning of the article, not the whole thing, which runs several pages. The main point of the analogy is that the coaches and QBs are compensated and assessed based much more on their actual performance, whether or not they win the games and get into the playoffs, than whether or not they meet the gamblers� expectations on point spreads.
    No analogy is perfect, but the author makes the note that CEO compensation these days is heavily biased towards stock options, whose value can fluctuate greatly depending on the expectations of the market. Even worse to some extent, failure to meet expectations that tank the stock price can force a write down of real assets as a �goodwill impairment�, forcing CEOs to spend a lot of time managing said expectations.
    The result of all of this is much as you would expect, with so much compensation and �value� tied up in the gambling system that is the stock market, manipulation of stock prices and financial statements to meet expectations is common, as are the scandals and crashes that accompany such. There was a study (which I can�t find quickly) that came out a short while ago noting that a Benford analysis of the major companies� financial statements was showing a growing deviation from the expected outcomes, meaning there is a growing possibility that they are being deliberately manipulated, which only makes sense when you note that the compensation for the people in charge is based much more on meeting expectations rather than just running things well enough to make a profit.