Brian Gongol Show on WHO Radio - August 25, 2018
Please note: These show notes may be in various stages of completion -- ranging from brainstormed notes through to well-polished monologues. Please excuse anything that may seem rough around the edges, as it may only be a first draft of a thought and not be fully representative of what was said on the air.
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Segment 1: (11 min)
BUT FIRST: The opening essay
Live read: Smart speakers (hour 1)
21st Century conservatism
One of the concepts that has always made an impression on me is the effect that leadership or management has on setting the tone for an entire organization. The tone always comes from the top.
Now, there are certainly organizations where management pays lip service to the idea of listening to the "bottom of the pyramid" -- and there are even examples of smart organizations where they actually *do* pay serious attention to what front-line workers think and notice and do.
But even when that is the case, the tone that insists on listening to those workers, and on giving credence to what they say? It comes from the top. Every organization has a culture, and whether the organization and the culture survive depends on what happens at the highest levels.
As Charlie Munger once put it, "In my experience, the rate of failure at changing a corporate or organizational culture is 100%."
Culture comes from the top.
For all the emphasis that has been put, then, on President Trump's experience as a businessperson, the behavior of the people inside his organizations reflects the tone set at the top.
This week, a jury of his peers found Paul Manafort, who was President Trump's campaign chairman, guilty on eight charges of criminal financial fraud.
Not a special prosecutor. Not a judge. A jury of his peers.
The same day, Michael Cohen pleaded guilty to violating campaign finance laws and confessed to making illegal payments.
This was a guilty plea, not a charge or an allegation.
Nobody knows everything about what took place within the President's orbit. But tone comes from the top.
It remains my best guess that the President himself probably didn't initiate any criminal conduct. It sounds like he went along with some of it. And I am quite sure he tried to cover up a lot of it.
But it doesn't take a whole lot of imagination to believe that the way he operated his business interests, and the way he operated his campaign, created an environment in which breaking conventions, breaking rules, and breaking laws looked like behavior that was worth the risk.
Tone comes from the top.
As I said in December 2017: "[H]e should welcome the chance to have the bad apples culled from the bunch, through a rigorous investigation of any wrongdoing around his campaign and his administration. His incessant complaining only makes it look as though he wants to protect the crooked rather than purge them."
Instead, again this week, the President turned to Twitter and resumed his claims about a "witch hunt".
Mr. President: When you become aware of criminals in your orbit, you should welcome the chance to purge them. Purge them ruthlessly. Without compromise. Without excuse. Without mercy. Thank everyone who helps you clean house. Praise those who help you enforce the law. And set a tone that says further lawbreaking will not be forgiven.
That's the tone a lawful person would set from the top.
Segment 2: (8 min)
Live read: iHeartRadio app
Clean up after yourself
Sen. Elizabeth Warren has proposed what she calls the Accountable Capitalism Act.
In her own words:
- "The legislation aims to reverse the harmful trends over the last thirty years that have led to record corporate profits and rising worker productivity but stagnant wages."
- "American corporations with more than $1 billion in annual revenue must obtain a federal charter from a newly formed Office of United States Corporations at the Department of Commerce."
- "[A] United States corporation must ensure that no fewer than 40% of its directors are selected by the corporation's employees."
- "[P]rohibits directors and officers of United States corporations from selling company shares within five years of receiving them or within three years of a company stock buyback."
- "United States corporations must receive the approval of at least 75% of their shareholders and 75% of their directors before engaging in political expenditures."
- "Permits the federal government to revoke the charter of a United States corporation if the company has engaged in repeated and egregious illegal conduct"
Conceptual problems with this idea:
- Every problem does not require a national answer
- If you want to see things get overtly interventionist in a hurry, turn more power over to the Federal government
- Fails to delineate between publicly-traded and privately-held corporations -- why should Charles Koch turn over control of his business?
Nuggets of good buried in this idea:
- Disincentivizing short-term stock-based compensation (but why can't this simply be done by taxing short-term holdings?)
- Decoupling boards of directors from management (but why should it be the Department of Commerce's role to force this?)
Specific problems with this idea:
- It is arbitrary and capricious
- There's no real evidence that shoehorning "stakeholder" decision-making into the boards will result in better policy
- So much regulatory capture
- An artificial ceiling on company size
- The German model it's trying to copy isn't very responsive to change
- Entrenching the large doesn't benefit workers or consumers
- Instead of fat-fingered, ham-fisted intervention, how about paving an easier way for what you think would be better?
- America used to have a much stronger movement for mutualism -- credit unions, fraternal organizations, mutual insurance companies, and the like
- Don't make it harder to be large -- make it easier to build the things you want, but to let people do it voluntarily
In the words of Mary Katharine Ham, as popularized by Jonah Goldberg: "Complexity is a subsidy". In other words, the harder it is to exist within the rules, the more those rules end up "subsidizing" entrenched interests.
Take the case of credit unions, just for example:
- The original idea of credit unions was that people with something substantial in common (like farmers in a particular area, members of a church, or workers at a common employer) could pool their resources and perform their lending and borrowing with low overhead costs in the interest of mutual benefit: Borrowers could get lower rates than they could find elsewhere, and lenders could get higher rates on their savings, because the credit union would operate without a profit-making entity acting in the middle.
- But common-bond credit unions have been giving way to community-chartered credit unions, which still retain a non-profit and democratically-operated structure, but take a much broader view of what constitutes a common bond among members.
- Small credit unions chartered on the "common bond" principle have been squeezed by community charters and for-profit banks alike.
- Iowa had 190 credit unions in 2000 and has 87 today
- Who's forming new CUs? Nobody. Not a single one formed in Iowa in the last ten years.
- There are probably many reasons, but it's hard to escape two major root causes: Consolidation throughout the financial industry makes it hard to bear the risks of lending money while also affording the costs of compliance with rules, regulations, and implicitly high operating expenses, and the incumbency advantage of so many other options makes it hard for anyone to consider starting up a credit union to be worth the risk.
In the long run, the rules of the game determine the outcome -- or, if you prefer, "every system is perfectly designed to produce the results that come from it." So if what we want are more institutions that reflect the interests of many "stakeholders" rather than just "shareholders", it makes more sense to lay the groundwork to make it easier for people to create the next generation of mutual associations, cooperatives, and even "public-benefit corporations", rather than to take Sen. Warren's approach by ham-handedly attempting to kludge an entirely different model of capitalism onto businesses that emerged in a totally different environment.
Design the system -- holistically -- to create the desired outcomes. Don't try to retrofit a brand-new set of massively interventionist rules onto a vast existing system.
Segment 3: (14 min)
Iowa news: Cindy Axne interview
Segment 4: (5 min)
Segment 5: (11 min)
Guest: Jim Golby on civil/military relations
Segment 6: (8 min)
Live read: Smart speakers (hour 2)