Dispatches from a Small Business
Archive for the ‘General Business’ Category.
Been doing research on grain elevators for my model railroad. Ran across this video that I thought was pretty interesting. I liked seeing the guy trying to keep the old technology working, and it was interesting to me to see this one guy do everything. In the city, OSHA and the DOL would probably require 6 different guys on the shift. The best part was seeing this older dude shoving a boxcar around by hand to position it for loading (around 8:40).
There was a great deal of back-and-forth in the left half of the blogosphere this weekend over employers who use FICO scores as a way of weeding out job candidates. In a sort of peculiarly American fashion, our nation seems to have decided that one’s credit history is a good proxy for one’s worth as a human being, and thus should be used to determine eligibility for everything from employment to excellent rates on car insurance.
I have no trouble believing that the FICO score is often a proxy for what some researchers call conscientiousness; I’ve certainly had roommates and others around me who had terrible credit because, well, they didn’t bother to pay their bills, and regarded rent as something optional that could be turned in if no more exciting commercial opportunities immediately presented themselves.
That said, it’s going to be at best a weak proxy. It’s also a proxy for things that, as a society, we may not want employers to consider, like a past history of depression. And for things that have nothing to do with your job performance, like a car accident that left you with huge medical bills and no job, or a sudden job loss. Looking at our national savings rate, lots and lots of Americans live very close to the edge of their paychecks; they can’t all be terrible employees.
I have never really even considered asking employees for their FICO score, in part because all small business people hate these scores as, even with perfect credit records, our scores tend to be smaller than people with similar income and history due to the constant credit checks made on us by vendors and other partners.
That being said, as someone who has 500 service employees working for me, I understand the insatiable desire for information on employee reliability and conscientiousness. A large number of our employees we hire who interview well tend to get released within 60 days of their hire. I can’t tell you how many people who seem totally normal and friendly turn out to be raving maniacs in stressful customer contact situations.
The elephant in the room that neither McArdle or folks like Kevin Drum mention is that businesses are starved for reliability information on potential employees. It used to be the best source was to check job references. Nowadays, though, very few employers will give a honest job reference, or will provide any information at all. I know I am guilty of that — my company does not allow any manager to give out performance data on past employees. I only needed to be sued once over somehow interfering with someone’s living by giving honest information about that employee’s reliability to change my behavior.
I understand that this is exactly what the Left is shooting for – an environment where the competent have no advantage over the incompetent. If employers are resorting to FICO scores, it just demonstrates how all the other reasonable avenues of obtaining information have been closed to them.
The only saving grace in this country is that employment is still mostly at-will, meaning we can fire our hiring mistakes and move on. Of course the Left wants a European-style system where it is impossible to fire anyone too — this is the system the post office has, and one can see how well it works out. If they are victorious on this final front, I will be forced into a game of Russian Roulette, where I can’t find out anything about those I hire, I can’t fire the incompetent people I do hire, and I am infinitely legally liable for any mistakes any of these employees make.
Apple’s response to their antenna / reception issues appears to be: the other guys started it. via Engadget
Update: I thought this was funny
Despite the issues, Mr. Jobs called the antenna design the “most advanced” ever on a smartphone. He said the rate of dropped calls for the iPhone 4 was only slightly more than on the previous version, the iPhone 3GS.
So the “most advanced” version performs worse than the old version. How are we using the term “advanced” here? No horse in this race personally, as I have a Motorola Droid.
As explained by Steven Pearlstein, who presumably has created so much economic value in his lifetime that he can cast stones from the high ground
And some of it, to be quite frank, Robert, is an appalling lack of imagination and guts on the part of these same CEOs who are complaining and pointing the finger at every else. You know, these guys are very good at cutting. They’re very good at blaming others. They’re a little less good at coming up with creative new products and services, and they’ve got a little flabby in that regard in the last few years where the focus has been on surviving and cutting, as it should had been. But they’re not the gutsiest group of people in the world.
And by the way, they get into this group think which you – you know, the fact that they all say it, it’s sort of like a notion that starts in the country club locker room, and everyone is nodding, and then the one passes it on to the other. And now, you know, this similarity of the comments betrays this sort of group think that is almost self-fulfilling at this point.
Mr. Pearlstein is absolutely right. As CEO of my company, I am out of creativity. I will give you an example. The new health care law appears (the implementation is still hazy) to impose a $2000 penalty per employee for not having a corporate health care plan (all my employees are retired, so they already have health care plans, but that does not affect the penalty). With a bit over 400 employees, that makes the penalty something north of $800,000 a year. This is larger than my annual net income. And Mr. Pearlstein is correct — I am absolutely at a loss as to how to deal with this, which just proves his point that all we CEO’s have an appalling lack of creativity.
Mr. Pearlstein seems to be holding an image of the Fortune 25 in his head, but in fact most job creation is by smaller companies. I wrote a while back on Forbes.com why CEO’s of smaller companies have be having their creativity diverted.
Postscript: On January 10, 2008, our company actually, shockingly, had a creative idea. Instead of refueling our boats at a lake in Ventura County, CA using zillions of 5 gallon gas carriers, lets put in a small double wall gas tank. It would save a ton of useless labor, it would greatly reduce fuel spills on the lake (the nozzle, unlike the 5 gallon cans, has overflow protection), it would save lots of trips into town to fill gas tanks — a winner all the way around. Granted this was a pretty small idea, but sometimes success in small business is a lot of bunts and singles.
After hundreds of manhours of effort, numerous checks written to the County and the state, and I don’t know how many forms filled out, on July 1, 2010, exactly 901 days after we got the creative idea, Ventura County gave us the last permit we needed to go forward.
If aggregate demand is so low, why are profits so high?
SmartFlix [TJIC's company] has show paper losses every year it’s been in existence … but I expect that this year it will show it’s first ever paper profit.
…which is not a sign of macroeconomic health, but is, in fact, a sign of my very poor expectations for the economy.
Ditto here. We will probably show our largest paper profit this year, but it is mainly because we have cut way back on investment in new projects. And this has nothing to do with demand – we are experiencing a boom, as the recession pushes Americans towards lower cost recreation of the type we operate, at the same time it cuts state budgets and makes them more amenable to our business model of private operation of public parks.
So why are we cutting back investment? I run a very low margin service business. Here is a simplified calculation: We make, say, 8% of revenues before taxes and accelerated depreciation. 50% of our costs are labor, and the new health care law may raise our labor costs by 8% or even more. A four percentage point cut in margins is not a big deal to Microsoft, but it is to us. Until we figure out how this all will play out, we are still investing but only in above-average opportunities.
When we invest in a new project, it hits that year’s income in two ways. First, we have accelerated depreciation on the new capital equipment. And second, we typically have a startup loss in the first year. In the last few years of rapid growth, we have had close to zero paper earnings because of these growth effects. Once we take our foot off the pedal this year, though, we will show a large positive income. For us, reduced growth and investment = higher short term reported profits.
As someone who once spent nearly a hundred hours to defeat a $20 Department of Labor claim, mainly to fight the precedent, I can sympathize 100% with Wal-Mart spending millions to fight a $7,000 OSHA claim. Note that despite all the OSHA wailing about not understanding why Wal-Mart is fighting so hard and causing them so much trouble, they admit at the end that they are trying to set a precedent for future actions.
For several years I worked for Emerson Electric, which among its many divisions owned a ladder manufacturer. If there ever was a product that simply is what it is, totally WYSIWYG, it’s a ladder. But it turns out in this age of personal responsibility that anyone who ever gets hurt using a ladder, usually doing something stupid, will sue the ladder manufacturer for his or her injury. Emerson fought every one, all the way to trial and sometimes appeal. Lawyers said they were crazy, that in any given case, it would be cheaper (considering legal fees) to just settle. But Chuck Knight (Emerson CEO) knew that these were not individual cases, they were multiple events in an ongoing “game,” and game theory gives a different answer. Fight enough of these, and tort lawyers looking for a quick buck with little work and cost will choose to spend their time elsewhere.
If it is one thing I have learned after reading “green” sites like this one, most greens don’t seem very thoughtful about parsing green claims. So this fairly outrageous ploy by hotels will probably work:
Guests checking into the Westin Kierland Resort and Spa or Sheraton Phoenix Downtown Hotel can do more than order breakfast or request privacy by hanging a card outside their door.
They can also decline daily housekeeping service.
The hotels are among a small but growing group who have taken their in-room “green” initiatives up a notch, adding the option of no cleaning on top of existing options to reuse towels and forego fresh sheets.
What a great idea! Redefine green as “not doing the basic job you are paying me to do.” This is amazing chutzpah, and at some level I tip my hat to them. Spot a market inefficiency — in this case the incredible gullibility of the greens — and exploit it.
Am I the only one who is wildly less likely to buy an Audi after Sunday? Advertising is often about image. Frankly, almost none of the ads yesterday addressed their product’s or service’s value propositions in any real way. They are trying to connect their product with images and emotions – Coke has always been great at that. Beer commercials always try to connect their product with, well, sex with hot women. This is pretty traditional for beer, though less so for ISP hosting until GoDaddy came along.
So now “Audi” has been permanently tied up in my mind with intrusive state control and loss of individual liberty. Perhaps they were trying to be funny, but I really got the impression they were more than half serious, maybe because several of the examples (composting, light bulbs) are real issues subject to state control even in parts of this country.
Update: Obama appointee expresses need for SWAT teams in neighborhoods to enforce energy efficiency.
Via the WSJ, on the Mortgage Banker’s Association (MBA) being underwater on their real estate loan:
On Friday, CoStar Group Inc., a provider of commercial real estate data, announced that it had agreed to buy the MBA’s 10-story headquarters building in Washington, D.C., for $41.3 million. The price is well below the $79 million the trade group says it paid for the glass-walled building in 2007, while it was still under construction. The price also falls short of the $75 million of financing that the MBA received from a group of banks led by PNC Financial Services Group Inc. for the purchase.
John Courson, chief executive officer of the trade group, declined in an interview Saturday to say whether the MBA would pay off the full loan amount. “We’re not going to discuss the financing,†he said. A spokeswoman for the MBA added that the MBA has reached “an agreement with all relevant parties†regarding the outstanding amount on that loan but declined to provide any details.
…In an interview late last year, Mr. Courson said he believed mortgage borrowers should keep paying their loans even if that no longer seemed to be in their economic interest. He said paying off a mortgage isn’t only a matter of personal interest. Defaults hurt neighborhoods by lowering property values, Mr. Courson said. “What about the message they will send to their family and their kids and their friends?†he asked.
A reader sent me this list at of salaries at BART (via here). The amazing thing is to sort the list by overtime. Pages and pages of people with $50-$100 thousand a year in overtime. This is just insane. Either put these guys on salary or, if it really is a job that is non-exempt and legitimately pays hourly, hire some more freaking people. I can’t in my wildest dreams imagine such overtime being paid in my company year in and year out. If it is not for isolated cases, it is a sign of poor management.
I have been kind of amazed at the backlash at Amazon over its showdown with Macmillan Publishing. As I understand it, Apple, with its new iPad, had adopted a strategy of wooing publishers by offering promises of higher retail prices, an offer Amazon basically refused to match. This dynamic (with retail discounters pleasing customers but ticking off manufacturers and product suppliers) is not at all new to retail. I am sure a lot of manufacturers wish Wal-Mart was never invented, but they have to try to play ball with them because Wal-Mart wields so much power with customers, in large part because of their pricing.
In this sense, I have always thought of Wal-Mart and Amazon as my agents, using the power of my and other consumer’s volume to pound manufacturers on price. They serve the same role as, and in fact are more effective than, a buying cooperative or consumers union.
So my agent, Amazon, had to go to the mattresses with a publisher on its pricing. This happens in all negotiations — if you are not willing to walk out the door, then at some point there is a limit to your bargaining power. I was ready to applaud them for it. Sure, they had selfish interests of their own, but who cares? That is how capitalism works — through the alignment of incentives, people who really don’t even know me or really care if I live or die work hard to create value for me (this is the opposite of big government, where people who claim to care about me deeply work really hard to destroy value).
Anyway, the clients that Amazon represents apparently lost faith quickly, and decided they were more freaked out by a couple day blackout than increased retail prices. Wimps.
Postscript: I understand the debate is a bit more subtle, with Macmillan arguing that they want price flexibility over a range from $6-$16 (or whatever) for e-books rather than a hard cap at $9.99. Trust me, though, any inference that this approach roughly averages Amazon’s approach is so much chin music. Most sales would be for new books at the high price, with low-volume books at the lower price (something, by the way, Amazon already does). The average sales price is higher in the Macmillan approach, and I don’t blame them for trying. And Apples is just trying to differentiate itself, and attempting to lock up publishers into exclusives or sweetheart arrangements fits their proprietary business model. So I am not crying foul, I simply was rooting for Amazon because I felt my interests as a consumer lay with them in this dispute. And I am wondering why so many people see it differently.
I had an idea, and I wondered if any of you were familiar with a program like this. I can provide a pretty decent internship job for a motivated high school student in the summer at my company. I have a motivated high school student who is my son. However, from a college admissions perspective, and frankly from an experience perspective, it would be better if my son worked for something other than the family business. I wondered if there might be an opportunity for a sort of entrepreneur’s internship swap, to exchange kids for the summer to work in each other’s businesses. I am toying with a website idea if such a thing does not exist.
As a follow-up bleg, our family’s philosophy is to try to have our son use his summers to test out potential interests to see if they are really something that interest him once he has seen the inside of it. To that extent, he is researching summer internships in three highly diverse (to say the least) areas:
Anyone who might be familiar with a summer program for incoming HS juniors is encouraged to comment or drop me a quick email with a pointer.
My brother-in-law’s book, “The Constant Contact Guide to Email Marketing,” is doing quite well on Amazon. After the early spam-crazy days, email marketing has really had to rebuild itself from the ground up. I am a big believer in it, and can highly recommend his company Constant Contact as a email service. I have several accounts and have set most of the non-profits I work with on it. In his book, Eric discusses email marketing in the context of both customer acquisition and loyalty. With Google clicks going for $2 or more, email remains a great value if done right.
Tiffany’s is (hypothetically) handing out coupons for 50% off diamond necklaces. This generates a lot of press, but you do not get a coupon. Are you, without a coupon, more likely to buy a necklace anyway given all the publicity? Or is your behavior unchanged, because you received no inventive? Or are you perhaps less likely to buy, with the full retail price you would be paying now seeming higher as compared to the 50% off others are getting?
This issue seems to be at the heart of the conflict between the Obama administration and Edmunds.com (what is it about this administration and picking battles with media companies?) In their analysis, Edmunds said that only about 250,000 of the auto sales during the cash-for-clunkers period were incremental. The White House says they are underestimating, because even people who did not qualify for the program bought more cars because of the program:
The White House said [totally great car-buying, car-selling, and all-around-awesome-info site for every goddamn great and awful car website] Edmunds based its analysis on the “implausible” assumption that “the market for cars that didn’t qualify for cash for clunkers was completely unaffected by this program. In other words, all the other cars were being sold on Mars, while the rest of the country was caught up in the excitement of the cash for clunkers program.”…
Edmunds stands by its analysis.
“Instead of shooting the messenger, government officials should take heart from the core message of the analysis: The fundamentals of the auto marketplace are improving faster than the current sales numbers suggest,” [Edmunds jefe Jeremy] Anwyl wrote.
The central issue, Anwyl said, “is how many of these sales would have occurred anyway. Apparently, the $24,000 figure caught many by surprise. It shouldn’t have. The truth is that consumer incentive programs are always hugely expensive when calculated by incremental sales — always in the tens of thousands of dollars.”
Edmunds rejected the White House suggestion that people got caught up in the excitement of the program and bought cars, even if they didn’t qualify. And it discarded the notion that automakers boosted production solely because of the program.
“No manufacturer increases production, a decision with long-term consequences, based on the 30-day sales blip triggered by an event like cash for clunkers,” Edmunds wrote.
Its an interesting question. I would tend to come down on Edmunds’ side from my own experience running promotions, but it is not totally cut and dried. I can think of at least two examples where a discount to person A yields more sales to person B, but neither are really applicable here
I think one could actually make the argument that people who did not get the clunker discount would be less likely to buy, as its really hard to buy something for X when you know all the people around you are getting it for (X-$3000)**. This isn’t an absolute rule – after all, people fly all the time next to folks who paid more or less for the same service. But I do think it is a psychological issue that would tend to offset the general excitement around the program. In the end, we won’t have to guess, once we get sales data for the rest of the year and we can see if clunkers merely moved sales forward a few months or generated incremental sales.
** As shown here, cash for clunkers amounted to about a $3000 subsidy per buyer, above and beyond the blue book value of the car turned in.
Tom Selling and Pat Walters are looking for participation in their survey on issues related to IFRS (international accounting rules) and their migration to the US. Folks knowledgeable about these issues, either from the accounting or management side, are encouraged to participate. Tom wrote this invitation:
This is a brief announcement of an online IFRS survey that I have prepared with Pat Walters of Fordham University.
I invited Pat to collaborate with me because we have divergent views on the questions being asked. Thus, I hope that together we have achieved a modicum of balance in the survey’s design–particularly in the phrasing of the questions and response choices offered. There are only 12 multiple-choice questions, and afterwards, I cordially invite you to express your own opinions regarding its design by posting a comment to this blog post.
We are also trying to reach many more stakeholders than any other survey has reached to-date on the IFRS adoption/convergence question. To that end, we hope you will choose to email the link at the bottom of this post to anyone else whom you think might have an interest in taking it.
Pat and I thank you in advance for clicking here to take the survey, or by pasting this ugly link in your web browser:
http://www.surveymonkey.com/s.aspx?sm=pF0E3UgdSV_2bHMQvdAnXv8w_3d_3d
I wondered aloud last week at the fact that I when I raised my annual health care deductible to $2500, my annual premium savings were over $3000. Which meant that from an economic standpoint, it was crazy to do anything but have a high-deductible health plan (even without considering the knock-on effects to the overall system of my now wanting to actually price shop for services).
TJIC offers one explanation that seems reasonable to me:
What kind of person is unwilling to pay the first $2,500 out of pocket? A person that intends to make lots of claims.
They know that they’re going to use much of that first $2.5k.
Question: between one person who has no intention of going to the doctor for every little thing, and another person who does, let’s assume that both get broken legs, which push them each to $5k in expenses … which one is going to demand more follow up visits, cancel and reschedule more often, demand an extension on their course of painkillers, etc. ?
The one who was intending to use lots of service down at the low end, I’d wager my middle nut.
Three other possible explanations:
This latter theory results from my experience at McKinsey & Co, a management consultant. When I joined, they offered a $5,000 one-year interest-free loan to cover relocation costs. As I became more senior and was responsible for hiring new consultants, some of them would come to me and say “that’s OK, I don’t need the money.” I would look at them and respond, “we aim to hire the best young business minds in the country. If you turn down an interest-free loan, we may have to rethink our hiring decision. Go sock it in a 12-month CD like I did.” My personal theory was the offer was really an IQ test, not a benefit.
I am a little behind on this, but Megan McArdle had this from Joe Wiesentahl, on the importance of loan down payments to prevent fraud and foreclosure:
The author, Michael Richardson, owned a Colorado mortgage company that was busted by HUD for processing too much fraudulent paperwork. This caused him to discover that unbeknownst to him his employees were (on their own) engaging in mortgage fraud, prompting him to write this book and try to warn the industry.
This alone is interesting — that even on the small-time level, there was an information problem (bosses not knowing what the underlings were doing) — and the book is rich with details about the nuts and bolts of mortgage fraud.
But beyond that, one point he makes clear — and remember, this is before 2005, so before the crash and before conservatives blamed government intervention in the housing market for the crash — is that the FHA’s subsidization of $0-down loans made it all possible.
If you make someone pay 10% or 20% of a house’s cost upfront, then there’s no way you can alter the paperwork enough to make an ineligible buyer buy a house for an inflated price. But once you drop that requirement, everything goes. You can sell any house to any buyer for any price as long as you put in the effort to falsify documents and go through the cumbersome legwork.
I thought this was pretty illuminating, from Tim Carney via Hit and Run. He is writing about lobbying efforts for and against an extension of cash for clunkers:
One lobbyist for this bill was Nucor Steel. In Cayuga County, N.Y., Nucor turns scrap steel into sheet metal and other steel products. The clunkers are now becoming a subsidized feedstock for Nucor, which helps explain why Sen. Chuck Schumer, D-N.Y., has led the push for $2 billion extra in clunker cash.
Then there’s Enterprise Rent-a-Car also backing the bill, supposedly out of solidarity with automakers. But Enterprise sells its rental cars after a few years. As a rental firm that buys its cars new, Enterprise benefits every time someone else scraps a used car.
On the other side of the lobbying debate were non-dealer auto-repair shops, whose businesses depend on used or older cars, which the owners don’t take to the dealer for repair. Also, the Automotive Aftermarket Industry Association opposed the bill.
These are the guys who can sell you the headlight for your 1998 Ford Taurus, or who rebuild an engine out of a junked car.
Shredding old cars saps both their clientele and their supply of old transmissions to rebuild.
Once I entered management-type jobs in corporate America, my life was dominated by making powerpoint charts. That made some sense – I was a staff planner, and that’s what they do. Ten years later I was Senior VP of Marketing for the $23 billion commercial aerospace division of a Fortune 50 company, and I was still spending a huge portion of my time making powerpoint slides.
I am sure other people have lots of sophisticated life goals for themselves, but two of my biggest goals in leaving large corporations were:
I have been succesful 100% on #2. Powerpoint is still a useful tool, so I not totally fulfilled goal #1, but my use is scaled way back, to about 4 presentations in 6 years (and one of these was for my climate work, not my real job).
It turns out the military has the same problem.
I had a question the other day: Why is closing dealerships a cost savings for Chrysler? My understanding is that dealers were independently-owned businesses that bought inventory from the manufacturer, and then sold and serviced the cars.
I came up with only two answers:
Megan McArdle provides her own answers to this question, some similar and some different:
A number of readers have asked a simple, obvious question: why do the dealers cost Chrysler so much money that they want to shut them down? I don’t have a complete answer to it, but here’s what I understand:
- Inventory: Chrysler often has to take back unsold inventory. A lot of dealers selling a little inventory is costly, because you have to ship a minimum number of cars to each dealer
- Financing: Chrysler helps many dealers float their purchases (though to be fair, those dealers also tap their own credit for things like advertising, expanding the company’s effective spending)
- Brand costs: Shabby, run-down dealerships don’t improve the image of the firm, and if they are the only game in town, drive users to other cars.
She follows with a good analysis of why independent dealers exist in the first place.
It will be interesting to see how this goes down. Frequent readers will know that I often have said that the power base of many small-medium size towns is made up of 1) the auto dealers, 2) the beverage wholesalers and 3) the owners of the local TV stations and newspapers. Auto dealers wield a lot of local political power – they are often the largest single financial supporter of local politicians and even some Congressional reps. They also wield power as typically the largest single advertiser in local media, so they get sympathetic coverage. Over the years, they have translated this into a lot of legislative help (such as limitations on Internet competition).
I couldn’t believe this when I read it:
General Motors is open to considering moving its headquarters from Detroit, selling off U.S. plants and even renegotiating parts of its restructuring plan with its major union, the new chief executive said Monday….
A move by GM to leave Detroit would represent another blow for the economy of a region already reeling from the bankruptcy of Chrysler and the sharp downturn in auto manufacturing.
GM purchased its glass-towered headquarter building known as Detroit’s Renaissance Center last year for $625 million.
The article moves on to other topics, but I was struck by this: A year ago, when bankruptcy was only months away (delayed only by injections of taxpayer money), with the real estate market teetering at its peak and just starting to fall off, with GM hemorraging cash, GM decides to … spend $625 million on Detroit commercial real estate.
This is outrageous. All the more so because GM’s fortunes and the value of downtown Detroit real estate have a beta coefficient that is probably well above 1. In other words, if GM decides it wants to sell the building, Detroit commercial real estate is going to tank on the news that GM is leaving Detroit, making the real estate virtually worthless. It is very dangerous to buy an asset for which you are the only possible buyer if there is any possibility you might want to sell it some day.
I understand that companies that have losing business models often find it more profitable to invest outside of their business**, but GM seems to have found the only investment on the planet worse than their own stock.
** Postscript: I am not a huge Roger Smith fan, but this was essentially his strategy — GM sucks as an investment, so I am going to invest outside of the auto industry. Though he caught a lot of grief for it, most of his investments outside of GM turned out to have a substantially higher return for shareholders than his (or his successors’) investments inside of GM. Wikipedia writes:
Smith’s purchases of EDS and Hughes were criticized as unwise diversions of resources at a time when GM could have invested more in its core automotive divisions.
But what if investments in your core business are even more unwise?
Over the years, I have developed a term “arrogant ignorance” to describe certain people we deal with from time to time.
We often get young and inexperienced contract managers assigned to one of our relationships. These folks will struggle, due to lack of experience and fragmentary training, to perform their duties, because they really don’t know what to do in many circumstances. We accept the fact that we often know more about our contract manager’s job than she knows herself, and try to help them get up to speed.
However, occasionally these folks, despite very obviously not knowing what they are doing, get hugely arrogant and refuse to admit they don’t know what they are doing. They fire off orders and decisions that not only are wrong, but simply make no sense, and then yell at us within seconds for not complying with their bizarre requirements. I have always scratched my head over this syndrome, and have assumed that it resulted from a combination of:
Well, I was thrilled today to find that the syndrome I call “arrogant ignorance” actually has a name. It was mentioned in this article by Simple Justice and is called the Dunning Kruger effect. Here is the first line from Wikipedia:
The Dunning–Kruger effect is an example of cognitive bias in which “people reach erroneous conclusions and make unfortunate choices, but their incompetence robs them of the metacognitive ability to realize it”[1]. They therefore suffer an illusory superiority, rating their own ability as above average.
This also helps to explain another phenomenon we tend to see — that the absolute worst, most incompetant, most clueless employees tend to be the first (and often only) ones who call me and threaten me with lawsuits over false termination. The article goes on:
- Incompetent individuals tend to overestimate their own level of skill.
- Incompetent individuals fail to recognize genuine skill in others.
- Incompetent individuals fail to recognize the extremity of their inadequacy.
But at least there is this ray of hope:
4. If they can be trained to substantially improve their own skill level, these individuals can recognize and acknowledge their own previous lack of skill.
Despite years and hundreds of millions of dollars of effort on electric vehicles, competitors are coming out of the woodwork to beat it to market with an all-electric sedan — and, from the specs, seem to be beating it on price and features as well.
Miles Electric has confirmed that it’s working on a family sedan-sized all electric car for release in North America sometime next year. The car — which will be released under a different, unknown brandname — will be a first for the company, which specializes in neighborhood cars that only go up to about 25 miles per hour. The sedan will have a top speed of around 80 miles per hour, and a 100 mile range. It will also require 8-12 hours to fully recharge its dead lithium-ion battery. Miles is currently running the vehicle though crash tests, and expects to see about 300 of them on the road in California sometime next year. The going rate for one of these? About $45,000.
Radical shifts in technology often obsolete first mover and scale advantages. The winners in the market for diesel electric locomotives (GM and GE) were totally different players from those who dominated the steam locomotive market (Alco, Baldwin, Lima and others). It will be interesting to see if such a change occurs in the auto market.
Megan McArdle outlines some of the latest terms of a GM creditor settlment. The interesting facts for me were:
McArdle argues that there are good reasons bankruptcy courts tend to give labor a good deal, and having argued all along to allow bankrupcy courts to sort this mess out following the usual rules, I am not going to reverse myself.
But is it really the case that, push come to shove, bondholders get a deal 10 times worse than employees? If this is the case, I am surprised people ever buy bonds in a company with a large employee retirement overhang.
Russel Roberts deconstructs Obama’s auto speech. Well worth the read.
I have worked with folks in the government for years. One of the common syndromes I see in government officials of all levels is something I call “arrogant ignorance.” I see a lot of it in this administration.
