Must reads.

REALPOLITIK

Here's a pragmatic argument by the Atlantic's Jeffrey Goldberg for continuing U.S. and world support of some tyrants targeted in the "Arab Spring," while happily watching dictators of countries not strategic to the West get run out of town. (In case you've been wondering about the contrast between the West's treatment of Gadaffi and his equally kleptocratic counterparts in Bahrain, a satellite of a Saudi Arabia the West is not inclined to mess with.) It's a cynical argument, to be sure, but it also happens to have been de facto Western foreign policy since forever, and we might as well understand its intellectual foundations before questioning them and the amorality of it all. Recall that of the odious Somoza regime in Guatemala, FDR, no less, said: "I know he's a bastard. But he's our bastard."

Some see [U.S. Secretary of State Hillary] Clinton as a wild-eyed [former U.S. deputy defense secretary Paul] Wolfowitz. 'Oh no, not that!' she said. 'Call me wild-eyed, but not that.'

SOARING HEALTH CARE COSTS

Frances Woolley, Carleton economist who blogs at Worthwhile Canadian Initiative, surfaces a prescient 1910 essay by John A. Hobson warning of how "this new priesthood" of doctors is going to drive society into penury:

So long as it is more profitable to keep ill than to cure, and so long as the confidence or credulity of the lay public can be maintained, the less scrupulous members of the profession will be impelled to evolve new methods of attractive and expensive treatment, which fashion and imitation will carry far and wide, to the detriment of the public health and the enfeeblement of the public purse.

How many new and ever more costly treatments? In a succinct commencement address at Stanford's School of Medicine in June 2010, surgeon-reformer Atul Gawande, a New Yorker contributor and must read in the Obama WH, revealed the stunning answer:

Half a century ago, medicine was neither costly nor effective. Since then, however, science has combatted our ignorance. It has enumerated and identified, according to the disease-classification system, more than 13,600 diagnoses - 13,600 different ways our bodies can fail. And for each one we've discovered beneficial remedies - remedies that can reduce suffering, extend lives, and sometimes stop a disease altogether. But those remedies now include more than 6,000 drugs and 4,000 medical and surgical procedures. Our job in medicine is to make sure that all of this capability is deployed, town by town, in the right way at the right time, without harm or waste of resources. And we're struggling. There is no industry in the world with 13,600 different service lines to deliver.

If anything, Gawande understates the case. The drug sector alone strong-arms physicians into prescribing drugs for "off-label" uses - ones for which the drugs were not created, but might have some efficacy in certain patients. That compounds the societal malaise of overworked docs prescribing medication all too quickly, rather than the cost-and side-effect-free remedies of fitness and improved diet and other common-sense treatments that require a GP to know his or her patients better than is now commonly the case.

A VAST ANTI-MIDDLE CLASS CONSPIRACY

A new (to me) angle on the disconnect between Wall Street and Main Street appears in this glowing review by Paul Krugman and Robin Wells in The New York Review of Books of author Jeff Madrick's Age of Greed: The Triumph of Finance and the Decline of America, 1970 to the Present:

We have argued elsewhere (and are not unique in doing so) that white backlash - especially Southern white backlash - against the civil rights movement transformed American politics, creating the opportunity for a major push to undermine the New Deal. Also, it's hard to make sense of the growing ability of bankers to get the rules rewritten in their favor without talking about the role of money in politics, and how that role has mestastasized over the past 30 years...

What we have experienced is, in a very real sense, the triumph of Wall Street and the decline of America. Despite what some academics (primarily in business schools) claimed, the vast sums of money channeled through Wall Stret did not improve America's productive capacity by "efficiently allocating capital to its best use." Instead, it diminished the country's productivity by directing capital on the basis of financial chicanery, outrageous compensation packages, and bubble-infected stock price valuations.

In my 30-year experience as a financial journalist, Krugman and Wells, like Gawande, understate matters, perhaps in a bid not to appear to be engaging in class warfare. (The slur applied to those of us enraged by the growing gap between rich and poor, who agitate for a more just sharing of social wealth.) For instance, the decline of unions is not entirely accidental, as the business academy would have you believe. America remains prodigious as a manufacturing nation - yes, Virginia, they do still make things in America - but the Southern "right to work" laws (i.e. anti-union laws) have much to do with the decline of the Midwest unionized industrialized workforce, though blaming it all on China is convenient. No less a contributing factor to the growing income inequality crisis is the post-Reagan transformation of the Democrats into a business-friendly force, scared of their own shadow when contemplating social-justice advances. Krugman and Wells give us a delightful romp on the proven intellectual fraudulence of Reagan, Milton Friedman and Alan Greenspan.

A POX ON 'STAR' PERFORMERS

In a brief tour-de-force in the Harvard Business Review, "Great people are over-rated," author and Fast Company cofounder Bill Taylor explains how our obsession with "star" CEOs and other business executives works against the teamwork essential in the sustainable success of any enterprise. For that matter, teamwork is essential in education, art-gallery and symphony management, and, as Taylor notes, sports:

Recently the Economist published a brilliant little essay on the 'management secrets' of FC Barcelona, universally considered one of the best soccer teams in the world, perhaps of all time. 'How has a club that is based in one of Europe's unemployment blackspots turned itself into the ruling power in the world's most popular sport?' the magazine asked. 'An obvious answer is that Barca plays as a team in a sport that has far too many prima donnas...Barca has provided a distinctive solution to some of the most contentious problems in management theory. What is the right balance between stars and the rest of mankind?'

Star-gazing entrepreneurs who are reluctant to look to sports for lessons in the limits of individual talent might instead look to Wall Street, and the research of Harvard Business School professor Boris Groysberg, captured in Chasing Stars.

Here's how Groysberg's publisher distills his insights: 'After examining the careers of more than 1,000 star analysts at Wall Street investment banks, and conducting more than 200 frank interviews. Groysberg comes to a striking conclusion: star analysts who change firms suffer an immediate and lasting decline in performance. Their earlier excellence appears to have depended heavily on their former firms' general and proprietary resources, organizational cultures, networks, and colleagues. There are a few exceptions, such as stars that move with their teams and stars that switch to better firms. Female stars also perform better after changing jobs than their male counterparts do. But most stars who switch firms turn out to be meteors, quickly losing luster in their new settings.'

There's just too much everyday evidence of this for it not to be true. Perhaps most famously, high-ranking executives plucked from GE do not 'travel well,' their success at General Electric having much more to do with the immense resources and advantageous market leadership of GE than themselves. At any level of an organization, 'star' recruits incur resentment that lowers performance in an entire department. Except, that is, when stars wisely cloak themselves in humility and befriend their colleagues - when they submit to being team members. The star CEO phenomenon began in the 1970s when boards of directors seemingly became star-struck all at once. Yet in the past two decades, star CEOs have chronically failed, at Hewlett-Packard, Motorola, Xerox, Nortel Networks, Sunbeam, Home Depot, Boeing - just as a hapless sports franchise's recruitment of an outrageously paid star seldom lifts a lousy club out of the cellar.

So why do it? Because it's quick and easy, almost a no-brainer solution for those doing the hiring. If the new, star CEOs fails, the board can say, 'Well, she was brilliant at Acme Metals Co.' Yet outsider "star" CEOs usually disappoint if not fail spectacularly, while CEOs drawn from within the ranks have the highest chance of success. Veterans have been around long enough to know precisely what's wrong. To know which key managers to promote and redeploy, and which to shed. And which pet projects of favoured higher ups to abandon or champion, including the shedding of laggard product lines that been kept around only out of misplaced loyalty to a sainted former CEO. Xerox and Avon were each circling the drain until their boards finally wearied of firing failed star CEOs recruited from outside, and went with internal leaders - women, as it happens, in both cases.

 

Comments

[Darwin O'Connor]

As a computer programmed at least 50% of my success is based on how well I understand the specifics of what my employer does and how they do it.

For a CEO I expect it is higher, like 80%. That means when a CEO moves to a new company, and especially to a new industry, 80% of what they know won't help them in their new job. If they are too arrogant to learn what they need to know at their new company disaster is all but certain.

[Red Wing Black]

I like the writing structure of your blog and it does a pretty decent job of presenting the material.