On corporate America and innovation

In writing this post, I feel that it is necessary to first state that I have a pretty deep-rooted disdain of "Corporate America" in its traditional sense. I think that large corporations--especially those that are publicly traded--tend to lose sight of the things that made their businesses great to begin with, focusing on short-term profitability and several other often-misguided metrics at the expense of what is actually best for the company over the long term.

Meanwhile, employees are consistently minimized, deliberately made to feel as though they are replaceable cogs in the corporate machine, always with an emphasis on process over results. While I appreciate the economic benefits that large corporations with their economies of scale can provide, I think there are often devastating emotional and psychological costs to the employees (and often the customers) of those companies.

Furthermore, true innovation tends to suffer as large corporations gradually become risk-averse and afraid to be great, afflicted with the dreaded curse of mediocrity. This last point is what leads me to write today's post. In a brilliant post on his "Overcoming Bias" blog (which I will post in its entirety because it's short), economist Robin Hanson writes about one of the more insidious roles that large corporations play in our economy, often when we're not looking.

To run an airline, you need not only pilots, airplanes, and fuel, you also need landing rights at airports matching your planned routes and times. Today airlines must buy these rights one at a time via trades, and so risk ending up with mismatched slots that they cannot use.

Thirty years ago economists designed and tested package auctions to overcome this problem. In such auctions people can bid for the package of landing slots desired, and be assured of getting either all or none of the items in their desired package. Lab experiments have documented their efficiency advantages.

At a conference yesterday, someone said that the big airlines have consistently blocked attempts to field such auctions. The reason: because they buy more total slots, big airlines can more easily put together the packages they need. Big airlines oppose innovations that would make it easier for small airlines to compete with them.

This seems similar to how last year big movie studios got Congress to change laws to block the introduction of movie futures. Such futures would make it easier for small movie studios to get funding and to convince viewers that they had a product worth seeing.

Better economic institutions help people to better coordinate. But big firms suffer this problem less, because they can more easily coordinate in the absense of such institutions. Even in the US today, big firms (often with the assistance of law and government) block a great deal of institutional innovation, in order to retain this advantage.

As if there weren't already enough barriers to entry into many industries, it's clear that the largest corporations are also capable of using their political clout (due simply to their size) to squeeze out smaller competitors in ways like those documented here. Innovation (and the economic efficiency and prosperity that innovation could provide) often ends up as collateral damage in the process.

While Hanson uses two very apt analogies, I think there is no more devastating (and wide-reaching) example of this dynamic than the auto industry. The internal combustion engine that we continue to use is incredibly old technology, and we could all enjoy the benefits (both economically and, you know, from a foreign policy standpoint) of a push to kick our oil habit. But far too many (very large) companies have far too much at stake here, and true innovation in the auto space (say, something like this) has thus lagged generations behind our technological capability.

Unfortunately, it doesn't seem like any change in this "large corporations rule the world" dynamic is imminent. Mish Shedlock posted over the weekend about Illinois' schizophrenic and self-defeating stance with respect to corporations, one which does absolutely nothing but harm small business competitiveness. In a recession that has already been devastating to small business, Illinois somehow feels the need to give them yet another big middle finger. That's great for large publicly traded companies' bottom lines (and CEO paychecks), but it's not necessarily good for America or the economy. Such is the state of our current political environment.

While there are definitely several large companies who buck the innovation-blocking trend that Hanson has cited, and much of my personal disdain for corporate America is admittedly emotional based on personal experience (and the experiences of several close friends and relatives), any of us who have spent hours on the phone with a "customer service" representative who dryly recites corporate policy can certainly sympathize with my feelings. But until further notice, we'll probably just have to get used to it. Unless, of course, we all feel like trying to start our own businesses...

[Overcoming Bias]

Clip of the Week

Seems like I forgot to post Clip of the Week yesterday. Whoops. Also seems like Blogger has been very ornery today, and so I haven't been able to get this up until now. Double whoops.

At any rate, there were some good things this week. This video was oddly mesmerizing, this one cracked me up, and this one was just frightening. But I'm a sports nerd, and as you all know by now I'm a sucker for anything that mixes the athletic with the intellectual.

This video from the New York Times definitely qualifies, and while I might hate the Yankees, I have nothing but respect for their closer, Mariano Rivera. He is a once-in-a-lifetime talent, and I can say with near certainty that we will never see another pitcher quite like him again.

These stories are related...

... so I'll just post excerpts from both. First, from SportsBusiness Daily:

A U.S. District Court in California earlier this week dismissed a complaint against EA Sports in the Ed O'Bannon licensing case. The former UCLA star sued EA Sports, the NCAA and the Collegiate Licensing Company in '09 on the grounds they were using his image and likeness without his consent, and the suit later grew into a class action involving Basketball HOFer Oscar Robertson among several others.

Judge Claudia Wilken for the U.S. District Court for the Northern District of California dismissed the complaint against EA Sports, ruling, "This purported conspiracy involves Defendants' concerted action to require all current student-athletes to sign forms each year that purport to require each of them to relinquish all rights in perpetuity for use of their images, likenesses and/or names and to deny compensation 'through restrictions in the NCAA Bylaws.' The Consolidated Amended Complaint, however, does not contain any allegations to suggest that EA agreed to participate in this conspiracy."

For what it's worth, the judge did not grant similar motions from the NCAA to dismiss claims, so those cases are still pending. For now, it's just EA that gets a pass on the exploitation of athletes.

The related article is from the Los Angeles Times:

The soon-to-be Pacific 12 Conference has the richest television deal in college history. And that's no accident. 

Rights fees for televised sports keep climbing, even in a challenging economy. Proof came Wednesday as Pac-10 Commissioner Larry Scott confirmed a new 12-year deal with Fox and ESPN that is estimated to be worth $3 billion. 

Randy Freer, Fox Sports Networks president, said televised sports is getting to be the equal of entertainment programming. 

"I think we're all making a bet on the future where we believe college sports and sports in general is one of the leading lights of generating large audiences," he said.

Well, Randy, I think you're really all making a bet that college players will continue to allow their services to be exploited for BILLIONS OF DOLLARS simply because professional leagues are hiding behind anti-trust exemptions that force athletes to play for college teams without just compensation.

I've personally come a long way on this issue in the past few years. It used to be that I told the players to stop whining, that they were getting a (very valuable) college education for free, and that was compensation enough for their services. But two recent developments have challenged my original position, and I therefore no longer think that view applies.

One development is simply the explosion in revenues, and the fact that schools are now asking their athletes to do more and more to satisfy the networks who own their television rights. Thursday night football games, Tuesday night games, basketball "marathons", and more have continued to take students out of the classroom with increasing frequency, making it incredibly clear how low a priority the athletes' education actually is at these institutions. When students are never actually in the classroom, it's hard to argue that the "education" they're receiving actually has any value at all--they're there to play their sport, plain and simple.

But the second--and more important--development that has changed my mind is the forced nature of these players' efforts. Both the NBA and NFL have used technicalities within anti-trust exemptions to essentially require that athletes attend college before turning pro--the NFL's exemption was challenged multiple times, to no avail. College sports, then, are nothing but a forced apprenticeship, a way for the professional leagues to "protect their product" while the athletes have no choice but to spend years of their lives providing free labor to what has become a multi-billion dollar business. That's pretty close to slavery, and it simply wouldn't be allowed in any other industry.

Labor laws are extremely strict with regard to unpaid internships for most companies (banks, retailers, manufacturing companies, etc.), but the NCAA is able to exploit a strange loophole by claiming that the athletes are "students" (for what it's worth, banks also frequently take advantage of a labor law loophole by providing classroom credit for their unpaid internships, but that's another issue entirely).

Either way, whether or not the athletes actually WANT their college education (many of them have little interest in the classroom, and that should be their prerogative), it's the only compensation they're allowed to receive during those years. This, while ESPN, EA, Nike, Under Armour, the NCAA, and their schools and conferences (oh, not to mention their coaches, who are not pimps, as Nick Saban has so kindly reminded us) profit handsomely.

The higher these dollar amounts climb, the harder it becomes to justify the college sports system as it's currently set up. A breaking point is coming, and it won't be pretty when it does come. Just don't be surprised when dozens more incidents like these ones hit your newspapers--it's inevitable, and frankly justifiable given the current environment.

If I had to guess, the first thing to give way will be the leagues' ability to prevent players from bypassing the college game. If the NCAA won't step up, the courts eventually will. But it might take some time, and it will probably take a coordinated legal effort on the part of the players. We'll see what shakes out. Enjoy the gravy train while it lasts, Pac-12.

[SportsBusiness Daily]
[Los Angeles Times]

This is new

I've ranted here plenty about inflation, and by now I'm pretty much numb to the concept of the ever-depreciating dollar. But I've never seen this before (menu insert courtesy of Farmington Country Club):

Those are some pretty scary increases over a 90-day period, and they can't be explained away simply by referring to "unrest in the Middle East".

Yes, bad weather has played a role, as the insert makes clear, and the "manmade disasters" they refer to are I assume the continued after-effects of the Gulf oil spill, which has particularly impacted seafood prices. But a doubling in the price of iceberg lettuce? WTF? Yeah, I'm gonna throw that one in the "unstable politics" category of explanation.

I'm no math major, but an increase from $8 to $9.25 is 16%, in 3 months. Using compounding, that's an annual inflation rate of over 80%. Um... transitory?

Quote of the Week

On occasion, I'll cheat a little bit on Quote of the Week, using it as a weak excuse to post what is in fact a clip rather than just a quote. This is one of those times.

But what can I say--this clip is too good to save until Thursday, and it seems especially pertinent given the events of the past weekend. Many of you have probably watched Seth Meyers' amusing remarks at the White House Correspondents' Dinner. I enjoyed his standup, but I found the first few minutes of President Obama's remarks to be absolutely hysterical.

I fully recognize that many people are incapable of letting down their political guard to enjoy the humor of a situation--I am not one of them, but if you are, I apologize in advance. You won't find this funny. But it is. Without further ado...

This week's QUOTE OF THE WEEK

"As some of you heard, the state of Hawaii released my official long-form birth certificate. Hopefully, this puts all doubts to rest. But just in case there are any lingering questions, tonight I'm prepared to go a step further. Tonight, for the first time, I am releasing my official birth video."
                              - President Barack Obama

I highly recommend that you watch up until the 4:15 mark in this video. I haven't laughed so hard in a long time. 

Martin Luther King + Bin Laden + Internet = Confusion

I've written (and marveled) here before at the amazing rate at which information--even and especially bad information--can fly around the internet, being posted and re-posted and picked apart in a bizarre but rapid game of telephone that makes "light speed" seem like the slow boat to China.

This dynamic is particularly noticeable and relevant when major news items are breaking, so it should come as little surprise that it reared its ugly head in the aftermath of Osama bin Laden's death. In short, a line that wasn't spoken by Martin Luther King, Jr. became attributed to the civil rights hero, and all hell broke loose in trying to determine what had happened.

Megan McArdle of The Atlantic has the full details, and she should know them--she was intimately involved in the initial chaos.

Yesterday, I saw a quote from Martin Luther King Jr. fly across my twitter feed:  "I mourn the loss of thousands of precious lives, but I will not rejoice in the death of one, not even an enemy." - Martin Luther King, Jr".  I was about to retweet it, but I hesitated.  It didn't sound right.  After some googling, I determined that it was probably fake, which I blogged about last night...

It turns out I was far too uncharitable in my search for a motive behind the fake quote.  I assumed that someone had made it up on purpose.  Honi soit qui mal y pense.

Had I seen the quote on Facebook, rather than Twitter, I might have guessed at the truth. On the other hand, had I seen it on Facebook, I might not have realized it was fake, because it was appended to a long string of genuine speech from MLK Jr.  Here's the quote as most people on Facebook saw it:

I will mourn the loss of thousands of precious lives, but I will not rejoice in the death of one, not even an enemy. Returning hate for hate multiplies hate, adding deeper darkness to a night already devoid of stars. Darkness cannot drive out darkness; only light can do that. Hate cannot drive out hate, only love can do that.

Everything except the first sentence is found in King's book, Strength to Love, and seems to have been said originally in a 1957 sermon he gave on loving your enemies.  Unlike the first quotation, it does sound like King, and it was easy to assume that the whole thing came from him.

So how did they get mixed together?

Thanks to Jessica Dovey, a Facebook user, that's how.  And contrary to my initial assumption, it wasn't malicious.  Ms. Dovey, a 24-year old Penn State graduate who now teaches English to middle schoolers in Kobe, Japan, posted a very timely and moving thought on her Facebook status, and then followed it up with the Martin Luther King Jr. quote.  

I will mourn the loss of thousands of precious lives, but I will not rejoice in the death of one, not even an enemy. "Returning hate for hate multiplies hate, adding deeper darkness to a night already devoid of stars. Darkness cannot drive out darkness; only light can do that. Hate cannot drive out hate, only love can do that." MLK Jr.

At some point, someone cut and pasted the quote, and--for reasons that I, appropriately chastened, will not speculate on--stripped out the quotation marks.  The rest was internet history.  24 hours later, the quote brought back over 9,000 hits on Google.

Eventually, it made its way onto Twitter, and since the 140-character limit precluded quoting the whole thing, people stripped it down to the most timely and appropriate part: the fake quote. That's where I saw it.

The speed of dissemination is breathtaking: mangled to meme in less than two days.  Also remarkable is how defensive people got about the quote. The thread for my post now has over 600 comments, and by my rough estimate, at least a third of them are people posting that I need to print a retraction, because of the non-fake part of the quotation.  But I didn't quote that part; I was only interested in the too-timely bit I'd seen twittered.

Crazy. McArdle goes on to discuss just how heated the "yes, he said it", "no, he didn't" rhetoric got, with some people even going so far as to explain (obviously, incorrectly) exactly what he was speaking about and why.

It's strange (though increasingly common) to see a misunderstanding like this develop a life of its own via Facebook, Twitter, and various internet message boards. But I think there's interesting stuff here beyond just the usual "isn't the internet crazy?" musings.

Namely, why should the speaker of a phrase matter so much in our response to that phrase? Shouldn't the sentiment and meaning of words be the same, regardless of who in fact spoke them? Should we disregard statements or feelings regarding non-violence just because they weren't uttered by King or Gandhi? Would they be any less meaningful had they been written by an anonymous blogger, or more ironically, a vicious dictator?

The answer, of course, depends on who you ask. We all have a certain number of pre-determined biases with which we approach situations like these--just as we Americans are bound to respond differently to the Osama news than Pakistanis or Saudis, so too are different Americans from varying backgrounds likely to have different responses.

The power of a quotation like this, reputedly from Dr. King, is that it begs us all to drop our "us vs. them" biases and to begin thinking about things in more universal terms. The emotions of 9/11 and Osama bin Laden are very fresh in all of our minds, and that fact has a tendency to skew the way we think about things, and how we interpret outcomes. The civil rights movement, on the other hand, is more distant and historical. Enough time has passed that we can think about things with clear minds, and consider both sides of the situation more capably than if we were still in the midst of it.

Who spoke a phrase, then, is less important in terms of the meaning of the words, and more important in terms of how we frame them. When we see "MLK" attached to a quotation, we read it much differently--much more divorced from our inherent biases--than if we saw "Barack Obama" or "Sarah Palin" or even "Matt Damon" in MLK's place.

It's difficult for us to read any words, or hear any statements, without first passing them through a filter of our experiences--in fact, it's basic human nature to do exactly that. By attaching a different name onto the end then, all we are doing is placing a different lens or a different filter on the camera.

Words should carry the same meaning regardless of who spoke them, but our experiences and biases won't allow it to be so. That's what allows a controversy like this to take root in the first place. It may be difficult if not impossible for us to hear the bin Laden news without remembering the emotions of 9/11, but I think it's important for all of us to try.

[The Atlantic]

Why I didn't pop champagne last night

Last night was, by any measure, a remarkable night to be an American. Shortly before we were all set to turn in for the weekend (at least, those of us who weren't watching Celebrity Apprentice were), we all received the news that we had been awaiting for nearly a decade--Osama bin Laden, the architect of one of the most terrifying days in American history, had been killed.

Immediately, across the country, the celebrations began, and with good reason. Bin Laden was the head of one of the world's most dangerous and ruthless organizations, one which has claimed "credit" for countless instances of unfathomable death and destruction around the world. Regardless of your thoughts on American foreign policy pre- or post-9/11, there has never been and will never be any justification for the wanton murder of innocent civilians, no matter their national, political, or religious affiliation. The events of September 11, 2001 were then and remain today some of the most cowardly and despicable acts ever committed in human history--I will never forget the unspeakable terror, anger, and overall emotional confusion that I felt that day and in the subsequent weeks, nor do I want to. That day, for better or for worse, will in large part define the lives of multiple generations of American citizens.

Bin Laden was the bogeyman to end all bogeymen, and finally he has been removed from the earth. His death is a loud international reaffirmation of American strength (seriously, the guys who ultimately took him out are absolute badasses, and deserve whatever recognition we can bestow upon them), and it also represents the long-overdue resolution of what had been a significant source of American embarrassment. With all our intelligence-gathering resources and military might, for years we had been tragically, almost comically unable to find the one man we were actually looking for--that ended last night, to our enemies' dismay. In a nation that is increasingly desperate for good news, this certainly qualifies.

Why, then, did I find myself struggling to share in the excitement that seemingly every other American seemed to be oozing from every orifice?

For one, I must confess that I don't exactly feel any safer today than I did yesterday. While Osama was clearly the figurehead and primary inspiration for al Qaeda, and that organization is nowhere near as strong or as organized as it was a decade ago, I by no means think that the death of bin Laden represents the death of al Qaeda. On the contrary, the world is littered with loyalists who are sympathetic to the bin Laden cause (much as it was in 2001, when 19 of them proved just how far they were willing to go to support his vision), and I do worry at least somewhat of the possibility of a symbolic "counter-punch" in support of al Qaeda's now-martyred former leader. The US State Department acknowledged as much when it immediately issued a blanket travel alert for citizens heading overseas.

To paraphrase Winston Churchill, I don't think last night was the end, nor even the beginning of the end, but merely the end of the beginning. To treat bin Laden's death as though it in any way represents an end to terrorism or to the United States' complex relationship with al Qaeda is foolhardy at best, extremely dangerous at worst. Any celebration, then, must first recognize that last night's victory is one mostly of symbolic importance, not necessarily strategic importance. The semi-jingoistic cries of "justice" and "revenge" after Osama's bloodshed left me wondering whether this was in fact a consideration for many of last night's revelers.

But beyond that dynamic, I am most troubled by my nagging wonder/worry as to whether or not the ends (if last night was, in fact, an end) of the American response to 9/11 justified the means. America and its government rolled out an aggressive, multi-faceted response to the economic, diplomatic, and psychological shock of 9/11, and the decisions made in the attacks' aftermath (both immediate and distant) are still being felt today, for better or for worse. To summarize...

• In order to restore confidence in the economy and in financial markets, we eased our monetary policy to an unprecedented degree, holding interest rates artificially low for an extended period, and (perhaps inadvertently) in the process stoking a housing bubble that would eventually burst with devastating consequences.

• At the same time, we passed tax cut after tax cut under the guise of economic stimulus, which, when combined with our decision to pour hundreds of billions into wars in Iraq and Afghanistan, created a ballooning national debt and perpetual budget deficits that are now nearing nightmare proportions.

• By unilaterally attacking Afghanistan (and later Iraq) under the Bush Doctrine, we put significant strain on key diplomatic relationships, and black eyes like the Abu Ghraib incident and the waterboarding controversy tarnished our nation's image to a degree that we still may not fully appreciate. It may take decades or generations for our nation to recapture the moral and diplomatic high ground that we ceded in the aftermath of 9/11.

• Finally, we created a new department--Homeland Security--whose operatives at the TSA may indeed have made our airways safer, but who have done so at no trivial expense to our privacy and dignity when we fly. This invasion of privacy does not seem to be limited to air travel, as we have all learned that the recently-renewed Patriot Act is in fact incredibly expansive in scope.

Ultimately, as I sit here and assess the overall outcomes of the past 10 years, I can't help but wonder whether America is stronger or weaker than it was on September 10, 2001. Our unemployment is high, as is our national debt and budget deficit, the level of our political rhetoric has plunged to what seems like historic lows, we've lost thousands of young soldiers in pursuit of terrorists like bin Laden, and we've consistently sacrificed our personal freedoms, all in the name of preventing another day like September 11th. At which point, I can only sit back and ask myself--even in death, is it at least possible that bin Laden has the last laugh? In catching Osama, did the United States lose a bit of its soul, compromising many of the values and principles that made it great to begin with?

As a proud American, I certainly hope not.

In masterminding the 9/11 attacks, a key part of bin Laden's thesis was that the United States had become a paper tiger, a big, tough-talking, but complacent bully that couldn't take a punch. By capturing and killing bin Laden, our nation finally landed a significant counter-punch, albeit a decade delayed. But it is by no means a knockout, or even a knockdown--our nation still has much work left to do here at home. The best possible counter to the events of 9/11 is a real return to the traditional American unity and prosperity that has clearly eluded us in recent years; at the risk of sounding trite in these heady times, the best revenge against al Qaeda lies not in capturing its leader, but in living well.

It's time for all of us to step up and, one way or another, ensure that the costs we've endured and continue to endure in our pursuit of bin Laden do indeed prove to be "worth it". Last night was, as I've said, merely the end of the beginning. Today marks the beginning of the rest of the story. What can I do, what can you do, what can we all do to ensure that it's a happy ending for America? The real work starts now.