Monday, May 25, 2015

Why do we do it?

As some readers know, I am a supporter of Norwich City, the football team from where I was born and grew up. Today was a momentous day for City, as they gained promotion back into the English Premier League by beating Middlesbrough 2-0 in the packed National Stadium at Wembley. The match was worth about 200 million dollars to the winner, the richest single game in all of football.

 I actually think we have a better team than when we were  in the Prem last year and so one can look forward to next season with some anticipation. As long as Liverpool don't re-hire Suarez we'll be OK (he scored 11 goals against us in 5 games).

But it was hard to enjoy the playoff final today, and most serious sports fans know what I mean. You see, it was just too important,  with too much riding on it. The result really mattered, and when that's the case it's difficult to relax enough to actually derive the slightest pleasure from viewing. Of course, the opposite; being miserable and depressed when they lose a big game; comes easy to the serious fan. Crazy. You wonder why we do it.

Saturday, May 23, 2015

Inheriting Merit

As someone from the sceptr'd isle that has suffered over millennia from the divine right of kings, I have a keen aversion to inherited privilege. Escaping that and jumping to the world's great maelstrom of equal opportunity seems as good a reason as any to move to the USA. Except that, according to a recent article in the Economist, the Great American Classless Meritocracy appears to be an illusion.

The USA is still a meritocracy. Indeed, income is tied more than ever to qualifications. But it's an hereditary meritocracy: the children of the rich and powerful become better qualified.  And while parental educational level has always been the best predictor for child success, now money is having an increasing influence. Several factors have led to this. Strangely, American public schools are funded according to the wealth of their catchment area. Also, expensive tuition fees have made parental wealth increasingly important in gaining access to college. Compounding that is favoritism in colleges selecting children of alumni and the non-meritocratic effects of affirmative action, which disfavors poor Caucasians and Asians.

What to do about it? Well, maybe I detect a weakness. Apparently, most of the recent increases in college tuition fees have gone to the country club elements: plush dorms, parking garages, climbing walls, student services etc, and not to  improving the quality of the education itself. Therefore, it makes sense for poorer students to seek colleges without these amenities;  where the costs are solely in providing an education. They'll then be competitive in what counts most for their futures: their qualifications. Anyone know a four-year college like this? That's a strategy for challenging the hereditary meritocracy.

Friday, May 15, 2015

Old Time Jam.. the LEAF Festival, Black Mountain NC, May 10th 2015. Yours truly is wearing the yellow tee-shirt.

Monday, May 11, 2015

Killing the Future

A recent article in the Harvard Business review by William Lazonick points out that from 2003 to 2013,  88% of the earnings of those 449 companies in the S&P index that were publicly listed were used for stock buybacks (51%; $2.4 trillion) or dividends (37%).  It's annoying for those of us trying to perform R&D. Pfizer, for example, spent 146% of its profits in those 10 years on buybacks and dividends. In other words, it dipped into its capital reserves to help fund them.

Buybacks drive up share prices artificially, thus lining the pockets of short-term investors and executives. Hence, the enormous recent stock market boom.

But this boom is artificially pumped up, based on thin air; an illusion. Crazy.

Corporations need to stop tying executive compensation to stock prices and stop open-market buybacks. Only when profits are turned into R&D investment will there be a future for the US economy.