Tag Archives: Business

What October Surprise can we expect for Trump?

The mainstream media, especially the New York Times, Washington Post, and CNN, has been getting more hysterical each day during Donald Trump’s campaign.  Their coverage has probably hurt Trump at the margins, though the returns to the manufactured outrage are diminishing.  The conservative “never-Trump” crowd is not much more credible or insightful.

There is no doubt that these outlets are investing heavily to dig up whatever they can, while the bar for outrage among persuadable voters grows higher and the MSM increasingly finds itself shouting inside an echo chamber inhabited by its already-virtuous anti-Trump readers.  What might they come up with?

We previously speculated that the media would pursue the tried-and-true strategy of linking Trump’s family to the Nazis, however dubious any connection might be.  No doubt they are soliciting any leaks they can find about Trump’s health and finances.

It’s astonishing that someone who has employed thousands of people over the years in the inherently rough-and-tumble realm of urban real estate development  hasn’t been tarred with claims of unlawful business practices.  (A few stories about the visa statuses of Melania Trump or models he’s engaged don’t amount to much.)  No alleged unpaid wages, illegal employees, discrimination, shady permits, safety code violations, or, the holy grail, sexual harassment by some Trump office manager?  At a minimum, no disgruntled former employees who will complain about what a horrible boss he is?   (The public seems to understand that a few lawsuits and bankruptcies among thousands of real-estate ventures are normal in America.)  In reality, all of the evidence suggests that Trump is an exemplary businessman and employer.

We are holding our breath awaiting whatever scurrilous charges the press comes up with.  Perhaps it will be the conservative media, which is less lazy and even more motivated to stop Trump than is the mainstream media, that strikes hardest.

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Another comedy of errors when government tries to play venture capitalist

This project, in which the federal government attempts to unilaterally create a manufacturing industry in Oregon to produce politically-correct streetcars, really has it all.

As reported in the Washington Post, politicians, including then-Transportation Secretary Ray LaHood and Rep. Peter DeFazio (D), descended on Portland to join executives at a politically connected company in DeFazio’s state of Oregon, United Streetcar, to launch a boondoggle “meant to show how federal backing could spark a rebirth in American manufacturing.”  Whoops.  The effort has been a predictable failure for all of the usual reasons.

Most obviously, none of the luminaries seemed to consider whether the business-unfriendly locale of Portland could viably house such a manufacturing endeavor.  The company even had the fantasy to export its machines.  According to LaHood, “These are the first streetcars to be manufactured in America in nearly 60 years.”  No one seemed to wonder why, and apparently David Ricardo was unavailable to advise on the concept of comparative advantage.

Sure enough, the company couldn’t seem to muster the engineering expertise to be able to compete with other domestic and foreign competitors.  It tried the time-honored tradition of spreading out the supply chain—to “300 suppliers in 32 states,” each of which with a Congressman to keep the money flowing—but it backfired.

The politicians’ assumptions about how many people would actually want to ride the trains were inflated (as they always are).  Their assumptions about how many cities would jump on the bandwagon to build streetcars were wildly optimistic.  Their dreams of obviating local buyers’ pesky diverse preferences weren’t realized.  Officials piled on the usual rhetoric about how such mass transit projects would spur economic development along their lines.  LaHood admitted that, thanks to the essentially unlimited flow of stimulus money, cities didn’t really have to worry about prioritizing or managing projects with any discipline:  “we didn’t have to pick and choose.”

Meanwhile, other cities simply ignored better bids from overseas manufacturers to “buy American.”

Another left-wing local Congressman, Earl Blumenauer (D), proposed to double-down on the central planning:  the federal government should just buy a bunch of the cars (from, presumably, the same company in his district that has donated to his campaigns) and then give them to cities.  He lamented, in the Post‘s words, that the Federal government “essentially ceded the market in light-rail cars to big foreign competitors.”  Every aspect of this endeavor has been based on political calculations as opposed to market forces, which is apparently Rep. Blumenauer’s preferred economic model.  The Soviet experiment didn’t teach him any lessons about the likely result.

This episode serves as a potent reminder that when government imposes its utopian vision for how city-dwellers should live, then tries to implement industrial policy to pick winning companies, with minimal resource constraints, the results are always disastrous.  LaHood laments that “maybe our calculations weren’t right.”  When have they ever been?

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What’s the real story behind the Bruce Levenson revelation?

Another scalp for the faux-outrage crowd.  We see nothing wrong with the e-mail that Atlanta Hawks’ owner Bruce Levenson sent to his colleagues:  he was calling for more diversity in the cheerleading team and arena music selection; citing the need to attract more affluent whites to the season ticket ranks; advancing a theory that perhaps some presumably racist white people are afraid to come to games and that the team should address their perception, while being careful to add that he didn’t personally share that perception (this second clause in his statement scurrilously left out of the Washington Post‘s coverage); and benchmarking other teams’ fan bases and marketing approaches.  Seems like normal business.

Cue the moronic template statement from the NBA commissioner:  “As Mr. Levenson acknowledged, the views he expressed are entirely unacceptable and are in stark contrast to the core principles of the National Basketball Association.”  This mechanical pablum with utterly no context could have been issued at any time, in any of these phony “scandals.”  If one didn’t know better, one would doubt its sincerity.

The interesting question is how the information came out.  He sent the e-mail in August 2012 and reportedly “voluntarily reported the email to the NBA” in July 2014, triggering an “independent investigation” by the league.  One wonders the circumstances of this reporting.  Why would Levenson report it?  Did he learn that some news was about to leak, and/or the NBA’s “investigation” was about to crucify him, prompting him to try to get out in front of it?  Presumably, during the Donald Sterling fracas, Silver put the other owners on notice that a witch-hunt was coming.  (Of course, the witch-hunt would be coming from the NBA itself, even though the commissioner is supposed to actually represent the owners not sell them out.)  Did Silver offer the owners some type of amnesty, in asking them to get anything potentially damaging out there, and then renege?

(As hackneyed as it is, we can play the usual thought experiment and switch the races in Levenson’s message, and realize that, had he said that the team needs to add more black-oriented music and black cheerleaders, attract more upscale blacks, and otherwise address blacks’ perceptions of the brand to make the environment more comfortable for them, he’d probably receive an award for promoting racial harmony.)

These are all troubling questions, coming soon, no doubt, to your employer too.

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Open letter to a professional considering a move to Qatar

Dear Professional Expatriate,

Congratulations! You are a Western mid-career or senior professional who has been offered a job in Qatar. As someone who has reached a high position for a non-Qatari in a Qatari company, I can offer you some advice to help you consider whether the life is for you.

1. Business values are not like what you are used to

Qatar society does not believe in the “golden rule.”  In America, you can assume that most people in business believe in integrity and fair play.  Of course there are exceptions, but, in general, business in the Western, especially Anglo-Saxon, world is based on shared values of mutual respect, egalitarianism, and a dedication to foundational ethics.  This is simply not true in the Gulf Arab countries.  Society is inherently opaque and corrupt (more on that later).  You will see this in the workplace every day.

Qatari society, like other eastern cultures, is insular, collectivist, and conformist.  You can see it in superficial ways, such as the way people dress and the cars that they drive, but these values will also manifest themselves in the workplace.  Whereas back home, your boss appreciates it if you challenge his conclusions or get him to think in new ways, this is not the norm in Qatar.  The concept of “face,” as in east Asian cultures, is paramount.

The society has difficulty in abstract thinking—expect blank stares when you present your proposed strategy or long-term business plan, but expect a lot of feedback once the product is produced and the owner demands changes that should have been addressed in the design phase.

2. The economy is driven by the state

Qatar practices a form of state capitalism, with the corresponding healthy dose of red tape.  Almost all economic activity falls into three realms.  In both extraction of petroleum and construction of infrastructure, the state joins with foreign companies and takes royalties and creates jobs for locals.  The third pillar is the service sector, characterized by highly uncompetitive companies with low productivity sapping up state-originated cash and credit to try to diversify the economy.  You will see that the economy basically consists of oil-and-gas money sloshing around on vanity projects, with healthy cuts taken by Qataris at every step in the value chain (such as it is).

There is almost no foreign direct investment in Qatar outside the petroleum industry, and Qatari companies hardly produce any other products or services that can be competitively exported.  However, to a greater extent than any Gulf country, Qatar’s petroleum reserves are practically unlimited, so there is a vast pool of money to be invested domestically.

This “investment” is probably why you were offered the job.  The elite class is smart enough to know that it needs foreign help, to a degree.  You will enter with some measure of respect from your bosses, but they will invariably remind you on occasion (implicitly and explicitly) that they are the bosses and that you are a guest in their country.  (Perhaps the West could learn from Qatar in how to manage immigration.)  Foreigners operate on the so-called sponsorship system, under which their sponsor (employer) must give permission to change employers, open a bank account, import personal effects, get a driving license or buy a car, or, most importantly, travel outside the country.  Your job will likely be “Qatarized” eventually, perhaps in abrupt manner.  All companies are mandated to hire Qataris, who will generally be unproductive because they are not held accountable for anything.

Due to all of these dynamics, one of the most important pieces of advice that I can give you is to not invest any of your own money in the country.  You will have no rights if you invest in a property or a commercial venture.  The stock market is completely rigged.  In fact, you should transfer most of your cash flow to a bank outside the country.  Cases of expatriates’ bank accounts being frozen, for accused malfeasance (which are often spuriously initiated by their bosses to distract from their own malfeasance, or to express their frustration at some other perceived grievance) or for no reason at all, are numerous and predictable.

3. Social ethics are not like what you are used to

You will also experience surprising cultural norms outside the workplace.  Experiencing how other cultures live should be one of the benefits of taking a job abroad, and you will find this one of the more intriguing parts of your experience should you move.  Qatar society is defined by Qatari culture, of course, though because Qataris make up only around 15% of the population, there are other influences too—imported largely from Iran, the Levant, and the Indian subcontinent.  There are many benefits of this cultural milieu, but unfortunately there are also many facets that will frustrate you as an American.  The social structure is crudely hierarchical; Qataris are at the top, naturally, though there is a hierarchy there, too, with a few elite families at the very top, followed by the middle which gets fewer privileges, and then Qataris with Iranian or African heritage, which is discernible from their names or skin color, often looked down upon and bestowed with fewer privileges from the government.  Next are Americans and other Westerners, who inherently benefit from positive prejudice in the job market as well as the marketplace for goods and services.  Arabs from Lebanon, Syria, and Jordan (though not if they are Shiites) enjoy high status economically and socially; many of your upscale business colleagues will be from there.  Egyptians followed by other North African Arabs tend to get fewer opportunities.  Filipinos are ubiquitous in retail and hospitality, but rarely in white-collar jobs.  Indians are a wild card—they can be CEOs or laborers or anything in between.  (In fact, Qatar culture is tied closely to that of India; Qatar used the Indian rupee as its currency until the 1960s.)  Most other South and Southeast Asians are represented much lower on the job scale.

Even worse is the social discrimination.  Friday is “family day” at the mall, which nominally means that no unaccompanied men are allowed.  In practice, this means “no Indians”—as an American, you will waltz right in.  You will encounter Nepali and other South Asian “security guards” all over—at office buildings, residential compounds, and parking lots, as well as by the door to the mall on Fridays.  Don’t worry, as an American you will just tell them that you are passing and then do so.

When people ask me to describe the culture in Qatar, the best word I can think of is “coarse.”  Qataris, as well as the rest of the culture, are generally impatient, aggressive, and discourteous.  They have a reputation for hospitality, which is well-deserved, but this is usually superficial and only prevalent on their turf.  In public, you will be shocked at the lack of respect that most people in Qatar show toward others—this is especially true when driving or parking, or standing in line at the ministry or the market.  If you stay in Qatar long enough, you, too, will become more impatient and aggressive.

This region, like all Arab Islamic cultures, does not value the pursuit of knowledge, the challenge of conventional thinking, or self-reflection in general.  You won’t find any bookstores like back home.  The annual book fair mostly features Korans.  The media, through self-censorship and strict regulation, only parrots the government line.  The internet is heavily filtered. I suggest that you bring your Kindle with you to Qatar.

4. There is no rule of law

You read the news, about the progress that Qatar seems to be making to develop its economy and please the world.  You have probably been offered a professional-looking employment contract.  Make no mistake—your chances of ever enforcing that contract in a court are nil.  The chances are even less if your adversary (employer) is a particularly influential Qatari.  There are entities to which you can turn—the Human Rights committee, Labor department, police—but engaging them will inevitably lead you to a black hole that will do you more professional harm than benefit.  The country is sensitive to its reputation these days, with all of the media reports about worker abuse leading up to the World Cup, but, fairly or not, a low-level laborer is more likely to get a remedy than a professional Westerner.  In any event, the legal system is not predictable at all.

Qatar is a corrupt country.  Most private wealth is generated by nepotism, inside dealing with the state, which basically controls all economic activity, or outright theft.  Every project takes much longer and costs much more than it should, or never gets completed at all.  You will be frustrated at your lack of ability to get things done in your job.  You can expect your Qatari boss to hire and give contracts to family and friends, or people connected with influential Qataris whom he wants to cultivate.  You can expect him to receive kickbacks from suppliers large and small; in some cases he will even force you to choose suppliers that he owns.  You may have the opportunity to reap such “benefits” yourself; I would of course discourage acceptance.

In dealing with the government, too, you will see corruption, though hopefully not directly, as your company will have a “fixer” to take care of the myriad licenses, permits, approvals, and inspections that your company must endure in order to operate.  There are no set rules behind any of these regulations, at least that are enforced uniformly.  Your company’s fixer will have a trunk full of prepaid phone cards, iPads, TVs, and smart phones to dole out to government functionaries—as if the generously overpaid Qatari at the ministry counter needs another one.  I think that they demand such gratuities as much to demonstrate their power as to enrich themselves.

5. It’s their money

Remember, it’s their money, so they can do whatever they want.  An owner of a private company has the prerogative to run the company any way he wants.  Indeed, I wish that our governments back home would impose fewer regulations on the conduct of a private organization toward its employees.  If an owner wants to operate in an unethical or non-commercial way, running the company for his short-term private benefit to the detriment of the enterprise, it’s his right.  (It gets murkier in a publicly-traded, widely-held, or state-owned enterprise, but not in Qatar.)

You can choose to take the job or not.  If you come to Qatar expecting to really make a difference with highly fulfilling work in a vigorous capitalist system, you will likely be disappointed.  If you want to earn a good salary and contribute a little bit to at least sleep at night knowing that you’re not cheating your employer, then there is a moderate chance that you will find such a situation.

Best of luck.  Please let me know if you decide to go!

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Surprisingly, the government is a poor venture capitalist

Once again, the government (state of Rhode Island this time) is poor at picking winners.  Every private venture capital firm passed, but the state said, where do I sign?!?

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The likely ripple effects of Penn State

Sadly, the bureaucratization of risk management that Harvey Silverglate fears will become more prevalent in higher education.

This happens in large companies, too.  Most companies have “risk” or “compliance” czars (not to mention the human resources, accounting, and tax bureaucrats who impose their own constraints) who have to monitor, in very intrusive ways, all business activities to understand the company’s exposure to various forms of liability that can literally destroy the company.

The problem is that these risks do not, for the most part, derive from market competition, but rather from government regulations and from the tort bar.  The worst part is, corporate executives generally side with the “compliance” bureaucracy over the business line if there is a conflict—when the bureaucrat says, “you can’t do that business deal for XYZ reason,” the business manager finds it hard to argue against this claim.  Blanket restrictions substitute for normal business considerations—like judgment, balance, and common sense.

One example of this from our background was a decision that the CEO of our large professional services firm made saying that, due to the Foreign Corrupt Practices Act, we would simply not do work in Indonesia.  Sure, Indonesia is a minefield, but isn’t it a bit draconian to simply ban the pursuit of all work in such an important market?  Surely a company comprised of such intelligent, seasoned businesspeople could use its judgment to pursue business there in a viable way?

This is a typical example of how conservative large companies have to be.  In fact, large organizations—be they corporations or universities—look awfully like government organizations.  This is no accident; and is another success by the left in transforming our society toward a government-centered one.

The next discrete step in this convergence of large companies and government is government ownership of some companies.  We could easily see “Big 4” accounting industry becoming nationalized the next time we see an Enron-type scandal:  these firms perform, the argument will go, an essentially public service—making sure that the investing public (including, by the way, many public or quasi-public investment funds)—so their functions should be provided by the wise, benevolent government.

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Thank heavens we have politicians to help us judge whether someone is a capable business executive

So a U.K. parliamentary committee—comprised, no doubt, of hacks who have never worked in the private sector in their lives—has determined that “Rupert Murdoch was not fit to run a major international company, which had shown ‘huge failings’ of corporate governance, and it raised questions about James Murdoch’s competence,” according to Reuters.

Let the committee investigate political issues, but they have no right to pass judgment about the qualifications of a private-sector executive—let alone one who has built a multi-billion dollar corporation.

This reminds us of Congressional hearings back in the late ‘90s about the proposed merger (ultimately scuttled) between US Airways and United.  Each member of a Congressional committee took preening turns offering his insight and analysis into the business sense of the merger.  After all, members of Congress travel a lot, so they are obviously experts on how to run an airline.

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