Wednesday, May 30, 2007

Chicago Matters, but does journalism?

I'm watching Chicago Tonight this evening, which is the nightly news program on our PBS station (nightly, that is, when they don't show WNBA games [??]). They have been featuring a series on immigration policy as their Chicago Matters topic, and tonight they got around to dealing with, well, I'll recreate their blurb:

The Skills Gap and H1B Visas
Airs Tuesday, May 29, 2007

The United States may be the world's business leader but, increasingly, American companies have to turn to the rest of the world to find the talent that's in short supply at home. We'll take a look at which Chicago area companies are looking abroad to find the employees they want and need and how an immigrant community of highly skilled professionals fits into the fabric of American life.
Am I the only one who reads this and feels that the conclusion has already been written? What we saw was not a dispassionate, objective look at a very important topic, but a story spooled directly off the pro-business press release factory. I wrote to their forum to toss in my thoughts, and I'll recreate that here:
This evening's story (Tuesday) was quite disappointing in that it fell into the standard A-B (small) - A - B (tiny) format of so many news stories. A lengthy initial part, telling us that companies are having trouble finding qualified workers and we need to jump on the H1-B train, was followed, not by statistics or industry groups, but by one fellow who has had trouble finding work. Then came more discussion of why it is vital to get overseas workers, finishing with one more comment by the same unfortunate fellow.

What I did not hear in this story was any mention of salaries, an examination of how the H1-B visa recipients are undercutting the labor price in these areas. Far too often, reporters allow the pro-business contingent to say, whether we're talking about skilled or unskilled labor, "they do the jobs that Americans won't or can't do." What is almost always omitted is the phrase, "at the price business wants to pay."

Between offshoring and the importation of labor, we are lowering salaries and, perhaps more importantly, suggesting to young people that there is no future in studying certain areas. If the company featured in your report wants to attract CS-EE workers (and there are plenty out there), they can do what has traditionally been the way to attract talent: they can compete for it by offering higher wages, better benefits, a better environment, and so forth.

But they don't want to do that, not while they can work the system to hire people who will work for less in return for migrating to this country. Who benefits from this is clear - less clear is the price that is paid in lower opportunities for citizens who have paid the requisite dues, and the future costs of the brain and experience drain that will accrue to other countries.
I'll finish by elaborating on the first paragraph. So many "in-depth" stories on the news have that format, or more commonly, the A-B-A format. It's prevalent in any story of any complexity, most often a medical story.

Say we have a three-minute story on how, say, soy milk reduces the incidence of cataracts. (I'm not suggesting that's true, of course, but it does fit into the stock [product/drug/treatment] [reduces/improves/eliminates] [affliction/disease/crippling self-esteem] story line that these all go by.) About 2:10 or so is spent on following an average patient as he/she describes the fear of cataracts, then the hopeful tag line by the reporter ("but there may be hope"), the interview with the doctor who decided to give this a try, another interview with the patient as he/she talks about how easy it is to drink soy milk, an interview with the Soy Council representative, and maybe another quick couple of sentences by the doctor. Then there is, perhaps, 20 or 25 seconds with the stick in the mud doctor who points out that there is no causative reality here and that years of clinical trials will have to be conducted. However, we finish with 20 - 30 seconds of the patient playing with his or her grandchildren or dog or golf clubs.

What interpretation will the oft-distracted viewer take away from this story? Chances are, it won't be the warnings by stick in the mud, but SOY MILK = FEWER CATARACTS.

And that is precisely the impression that the viewer will take away from the WTTW piece, that American business is desperate for workers that America simply can't produce, and if we want to stay strong ("the world's business leader"), we better make sure that we hang on to the superior people from other lands who will do that work (or, better yet, move the work to where they already are and bypass the whole ugly visa issue altogether).

Tuesday, May 29, 2007

Risk Transfer

I have stated before that I think the definition of civilization is the reduction of risk. The recent history of risk is quite interesting, especially as it relates to power in society and economics.

The Capital Asset Pricing Model of the early 1960s was a major step forward in the world of finance, allowing people to price assets while taking risk into account. Once this became socialized, largely through MBA programs, businesses had a useful tool to assist them in creating financial portfolios.

As an example of what could be done, consider a retail company. They pull in a huge amount of cash at Christmas time; if they are at all good at managing their supply, they won't pay that out until well into the folowing year. So they sit on a huge pile of money for several months, and they want, obviously, to get some return on that. They could put it all in a high-flying tech stock, but risk losing a good portion of it. They could put it in a bank CD, but get a lower return than necessary.

What they do is hire an MBA as CFO, someone who through modern portfolio management techniques can generate a safe and certain return. It will be more than the CD, and the risk will be managed virtually out of the cash.

A company like Wal-Mart has other ways of managing risk, largely due to their size. Their vaunted supply chain techniques, in which they sign hardball contracts with their suppliers, allows them to know quite accurately what their cost of goods will be, regardless of commodity price changes.

But these successes in managing risk proved very seductive to the people in charge. If you can manage financial risk and commodity risk, why can't you manage away every other sort of risk? How, then, can you create a company in which all risk factors are as close to 0 as possible?

The easiest way is to find methods of transferring the risk to others. This is similar to the way that farmers use the commodity exchanges to reduce their risk, by signing contracts to sell their goods at a future price - these contracts are put into the commodity market system where they are bought and sold. In other words, people who are willing to play the game can, while the farmer guarantees return for the year (I know I'm disregarding the supply risk to the farmer, whether from drought or pests, but that seems unavoidable except through technology).

Gambling works the same way. Those who are willing to take on risk, the players, who do so for entertainment value (and at least some hope of an unrealistic return), accept it, while the risk-averse casino owners (or lottery operators, etc.) make a steady profit.

Let's take a simple look at how business worked before, say, the 1980s. The entrepreneur took on the risk of starting a company; at some point the risk was shared by taking the company public, so stockholders assumed the risk; and some of the risk, a fairly small amount, was taken by customers and suppliers (though that risk was mitigated by various laws regulating business).

There was no sense that employees should have any particular risk for working at the company, other than occupational hazards (again mitigated by workplace safety laws) and some risk of job loss if the company went out of business.

Over the years, some companies would reduce their risk by shifting it to other entities. For example, some businesses would release toxins into the environment. They wouldn't have to deal with the cost, others would. Then came the EPA to assure the neighbors of factories and plants that they would not have to risk their health just because they lived downwind.

All of these risk-reducing laws and regualtions, laws concerning fraud, breach of contract, workplace safety, environmental regard, were seen by most people as a good thing. The occasional libertarian or business advocacy group would come along, point to a few cases where the regulators over-reached (sometimes hilariously - who remembers the publicized OSHA ladder regualtions?), and argue that business was being strangled.

Few people took any of this seriously. That someone, generally government, was looking out for the "little guy," was considered a mark of an improving society.

Then came Ronald, "The Great Communicator", "Government is bad," Reagan. His election in 1980 represented a major philosophical shift in the relationship citizens had to the government. This was the point at which risk became, not something to be reduced through collective action, but an unacceptable drag on the prosperity of the nation if assumed by corporations and government.

But the risk didn't disappear just because we refused to acknowledge it. Getting rid of workplace regulations didn't lower the risk of accident or dismemberment, it pushed it back on to the employees. A company that wanted to open a new plant didn't have to put up the money for it if they could talk government into financing it.

In fact, risk is pretty much constant in the short term. Oh, there are times when a medical or technological breakthrough might create a major jump in the reduction of risk. For the most part, though, risk is always there. The past 25 years has seen a major shift in risk from institutions to individuals.

If a company provides health insurance to its employees, it assumes the risk of rising costs. Now, every year brings a reduction in benefits, an increase in costs to the individual.

If a company guesses wrong on the next hot product, no problem, just lay off a few thousand employees, regardless of performance, and their bottom line will right itself.

If a company forgets how to make money in their industry, file for bankruptcy, blow away union contracts, destroy shareholder value, and emerge a leaner, stronger business, no matter how many people were hurt in the process.

The uneasiness that people feel right now, despite the so-called strong economy, results, I think, from the ever-increasing risk they are forced to take on. It isn't so much that corporate fat cats are well-compensated, it's that they are removing any possible risk from themselves (and their great-grandchildren) as they push it on the rest of us.

And it is unavoidable. There is no class you can take, no field of study, no industry you can get into that will insulate you from the uncertainty. Any job that depends on education can be outsourced to the lowest bidder or offshored to the lowest-wage country. There is no safe haven, and the average person knows this, and grows restless.

Tuesday, May 22, 2007

Basic Precepts [II]

I believe in democracy and the free market.

What I don't believe is that they are necessarily correlates, that is, unlike a lot of what is said today, they do not "naturally" go together. The basic idea that underlies democracy is "one person, one vote." Everyone, whether Bill Gates-rich or homeless-poor, gets (in theory) an equal right to have a say in our government. No one has more of an effect on choosing our leadership than anyone else.

Free-market capitalism, on the other hand, is "one dollar, one vote." Bill Gates gets 40 or so billion votes, I get a lot fewer. The goods and services available to me will have a lot more to do with what Bill wants than what I want.

So why are these two systems inevitably linked? Because in one area, that of individual choice, they are similar. We choose whom to elect, we choose what to buy. For people who pride themselves on having a right to choose, this is quite compelling.

But there are many differences between the two systems. In one vital area, rationing, they are completely different. Markets act as rationing devices, with price used as the mechanism (maximal profits occur at a certain price/production point; it is rare that that point allows enough production for everyone to "get one"). Democracy, at least in its classic formulation, is not rationed, not governed by price.

It would appear that if there are goods and services that we feel uncomfortable rationing, they shouldn't be subject to the market. Health care is a good example. There is a lot of talk about how Canada's system rations health care, leading to long waits for certain procedures. But the U.S. system just as surely rations, but conceals it within the cloak of market mechanisms.

We have two systems in the U.S., then, which are not entirely compatible. To determine where we might be heading in the future, it's natural to ask whether the two systems can get along, or whether one is on the rise at the expense of the other.

Need one ask? Attempts to inject some form of democracy into, say, corporate governance are almost inevitably beaten down. Politics, as has been chronicled everywhere, is infected with the influence of money and large corporate interests. Governments are filled with the spirit of privatization, in which elected leaders admit that they cannot properly manage the complexity of, for example, a parking garage, and turn it over to private companies that will utilize "relentless efficiency" to make parking a wonderland of fun (and give everyone a pony!).

When one system is forging ahead, it is natural to wonder if there's an inevitability to that; do people want the free market to take precedence over the ideals of democracy? Or are there powerful forces pushing us in this direction against the true preference of the American people?

For the past 25 or so years, the message has been, government is bad, the market is good. This is believed to have been originated by Ronald Reagan, but he just made it popular. (Always interesting how many people are eager to associate themselves with an institution that is so blitheringly incompetent, including Mr. Reagan himself.) We have a whole generation of citizens who have been inculcated with the idea that public works are doomed to failure from a cost-benefit standpoint, while private industry supplies us with all that is good.

But the goals of private industry are not always the goals that we would choose in a perfect society. CEOs do not even profess to be great leaders of the masses, confining themselves to the upward motion of profits (and, quite often, personal enrichment). It seems to me that much of the trouble that the average American sees in the future results from the idea that the market is king, and that democracy, as expressed so imperfectly by elected officials through government, is outmoded and unnecessary.

I don't think we know that's what we're doing, however, and that is what is so profoundly troubling about where we find ourselves.

Friday, May 18, 2007

Basic Precepts [I]

It would be unfair, I think, to jump in and start commenting on current events without giving you, Gentle Reader, some idea of what beliefs I have that underscore that commentary. So I plan a series of Basic Precepts posts in which I try to convey a sense of the ideas that inform my thinking.
Civilization is social order promoting cultural creation. Four elements constitute it: economic provision, political organization, moral traditions, and the pursuit of knowledge and the arts. It begins where chaos and insecurity end. For when fear is overcome, curiosity and constructiveness are free, and man passes by natural impulse towards the understanding and embellishment of life.
This is the first paragraph of The Story of Civilization by Will Durant. It is as good a summary of what man has been striving for over the last centuries, but it is long. For me, civilization is more succinctly defined as the actions and institutions we have created to reduce risk.

From earliest times, all of the most basic inventions of humankind have been designed to reduce risk, from the finding of permanent shelter to the reliable production of food to division of labor to the creation of communities and so forth. Society itself, and all its derivations, exist primarily to give a sense of security to all people who fall within the group (I am not unaware that the creation of weapons, to choose one example, increased the risk to outsiders - the notion of community as "common" is something we struggle with today).

Therefore, everything that we do today as a society that increases risk to sizable segments of that society needs to be examined closely. When an administration suggests putting Social Security at risk, making it market-based, we should question the wisdom of that thinking. When we go to war without a clear idea of our objectives. long- and short-term, it is fair to wonder why. When we allow jobs and careers to be sold to the lowest bidder without an understanding of what will replace them, it is necessary for us to identify what this increase in risk will accomplish.

The greatest single gift that has been bestowed upon us is the civilization that we inherit and the desire to increase it (and become more inclusive as to its application). It is a grave concern when we reject that gift.


Who is Androcass?

I am an American, Chicago-area, software developer.  I believe in the American system, but see how it has become corrupted and perverted by greed and stupidity.  I want the world to work the way I know it can, but am increasingly despairing of it getting there.

I don't want this blog to become a discussion of arcane details of television shows, or a link to my MySpace page where I try to sell you my new album, or odd ramblings about life in suburbia.  So I will try to confine myself to topics I deem important, and I will try to have something interesting to say about them.

I will try to negotiate the uneasy waters between writing for myself (thus making this blog a series of rant-y diary entries) and writing for a (possibly imaginary) audience.  I'm not sure how to do that, so that will be interesting for me.

If you are here, welcome.
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