Heckyl, our summer intern, has, like Elvis, left the building. Although the original scope of the program called for working ten weeks over the summer, the bureaucrats administering the program ran out of money early. They cut the program off after seven weeks.
Heckyl made such a difference to our operations that it was three days before I noticed that he was gone. Put your hand into a pail of water, than pull your hand out. Does the water miss you?
His lack of impact was not his fault. Completely untrained and inexperienced workers cannot contribute a lot in any organization, and if they’re not going to be around for a long time, there is no point in giving them much training. I would have liked to provide Heckyl with more technical training while he was with us, but I didn’t push the issue with my staff. It would be fair to say that I had higher hopes, but not higher expectations.
What makes this interesting is that last week our HR manager went to a meeting where the speaker was with the Tennessee Career Center, the agency that administered the make work summer jobs program. Part of his talk was about the Summer Works program. (The title of the program was “Summer Works.” Who knew?)
Regarding the Summer Works program, the salient points of the briefing were:
1. Tennessee as a whole got $65 million.
2. Our slice of Tennessee (area #11), got $4.2 million.
3. Approximately 1000 youth in our area participated in the program.
4. Total impact in goods and services was over $6.5 million, according to a study by the University of Memphis.
A thousand people got jobs! The economic impact was a dollar and a half for every dollar spent! This must have been money well spent, right?
Hogwash.
If you look at these numbers with a more jaundiced eye, a different picture emerges. Let’s start with the 1000 people who got jobs. If you’re trying to make your numbers look good, you include everyone who you sent out to a job site. At our company, we tried out five people through the Summer Works program. One never showed up for the first day of work. One was late on the first day, then lied about the time he was told to show up, so we fired him before he began. Two started work and lasted less than two weeks. The last was Heckyl.
One data point does not make a trend, but if other companies’ experience is anywhere close to ours, the number of people who actually worked for the whole summer was only a fraction of what is reported.
But let’s assume that the 1000 jobs actually represents the number of full time equivalents for the length of the program, i.e. even with all the churning, 32,000 hours a week were actually clocked in for the duration of the program (program participants were limited to 32 hours a week). At $6.75/hour, and with a ten week duration, wages paid out would be $2.16 million. $4.2 million was allocated, but less than half of that actually went to the participants. Half the money was chewed up by overhead.
Finally, let’s look at the alleged $6.5 million dollar impact. I would love to see the methodology used to arrive at that number. I suspect they simply took the amount spent, and used a multiplier to arrive at the total amount of economic activity generated. The idea behind economic multipliers is that when you pay someone, they go out and spend their money, in this case the $4.2 million. It doesn’t stop there, however. The people you spend your money with then go out and spend their paychecks with other vendors who then pay their employees, and so on. Based a $6.5 million impact produced by $4.2 million in spending, the multiplier effect is about 1.5 for this program.
In terms of being effective or productive in a job, producing 1.5 times your wages is incredibly low. In manufacturing, the value of goods and services produced is normally a minimum of six times wages. The multiplier effect for this program is about the same as for consumption spending in general.
In other words, the estimated impact of the Summer Works program was no higher than it would be if they simply handed out the money to the applicants, without actually requiring them to show up at a job.
Frankly, based on my experience with the program, I tend to agree with the estimate.
Friday, July 31, 2009
Monday, July 27, 2009
Vaporware
In the computer industry, there is a term called vaporware. The idea behind vaporware is that sometimes a company will announce a new product and begin taking orders. The marketing for the new product will include the specifications, along with claims for what the product will do. The only problem is that the company hasn’t actually built the hardware or written the software yet. The new product they are taking orders for does not exist yet.
Of course, companies indulge in the practice of selling vaporware for all kinds of reasons. Maybe they want to line up customers and guarantee the market before committing resources to building a new product. Maybe they want to announce their intentions to competitors to preempt the competition from going head to head in a market segment.
The beautiful part of vaporware is that you can lock up support for your product before you have to do the hard work of building something that actually does what you say it will.
For me, the Obama administration’s proposals for health care reform contain a large element of vaporware. Specifically, the cost containment mechanism seems pretty fuzzy, from what I have seen so far. Other than vague promises from hospital and pharmaceutical industry spokesmen that prices will drop, nothing I’ve read has indicated how the total amount of resources devoted to health care in this country will decline if more people have unfettered access to the medical system.
I think that is way the Obamacare bill has stalled in committee. People are figuring out that “reform” of the health care system mostly means transferring an enormous amount of power to the government, and for most of us, there will be no discernable benefit.
Without a mechanism for controlling costs, extending coverage to the uninsured through a government subsidized plan doesn’t reform the system at all. You’ve merely created a constituency for a new government entitlement. Eventually, taxes on all of us are going to have to go up to pay for the beneficiaries of that entitlement program.
With vaporware, sometimes the product never does get developed, or when it does, it doesn’t meet the original specs. With Obamacare, we’re in for the same thing.
Of course, companies indulge in the practice of selling vaporware for all kinds of reasons. Maybe they want to line up customers and guarantee the market before committing resources to building a new product. Maybe they want to announce their intentions to competitors to preempt the competition from going head to head in a market segment.
The beautiful part of vaporware is that you can lock up support for your product before you have to do the hard work of building something that actually does what you say it will.
For me, the Obama administration’s proposals for health care reform contain a large element of vaporware. Specifically, the cost containment mechanism seems pretty fuzzy, from what I have seen so far. Other than vague promises from hospital and pharmaceutical industry spokesmen that prices will drop, nothing I’ve read has indicated how the total amount of resources devoted to health care in this country will decline if more people have unfettered access to the medical system.
I think that is way the Obamacare bill has stalled in committee. People are figuring out that “reform” of the health care system mostly means transferring an enormous amount of power to the government, and for most of us, there will be no discernable benefit.
Without a mechanism for controlling costs, extending coverage to the uninsured through a government subsidized plan doesn’t reform the system at all. You’ve merely created a constituency for a new government entitlement. Eventually, taxes on all of us are going to have to go up to pay for the beneficiaries of that entitlement program.
With vaporware, sometimes the product never does get developed, or when it does, it doesn’t meet the original specs. With Obamacare, we’re in for the same thing.
Friday, July 24, 2009
Henry Louis Gates
“Sir, do you know how fast you were going?”
What I want to say:
“Well, duh! Of course I know how fast I was going, you moron. My speedometer works just fine. Haven’t met your quota for the month yet? Is that why you pulled me over?”
What I actually say:
(With my hands in plain view, clamped on the steering wheel.) I’m not really sure, but I guess it was in excess of posted limits. I imagine you’re going to want to see my license and registration.”
“Excuse me sir, but did you know that it is illegal to own or shoot off fireworks in this county?”
What I want to say:
“Buddy, I see by your uniform that you are a city policeman. Guess what? You’re half a mile into the county at this address. You have no jurisdiction to come onto my property and tell me what to do. Besides, everybody else in this neighborhood is going to shoot off fireworks tonight. Why are you singling me out?”
What I actually say:
(Casting an eye at the thick bank of smoke slowly drifting towards the street.) “I’m sorry, officer. We won’t set off anymore fireworks. As soon as these sparklers I’m holding burn out, we’ll move the party indoors.”
I offer these examples up as a way of establishing that I have some expertise in interacting with law enforcement without getting arrested. So I feel qualified to offer some advice to Henry Louis Gates. Gates is the Harvard professor who was arrested after breaking into his own house earlier this week.
It is important to remember that Gates was not arrested for the break in. He was arrested for shouting at the top of his lungs at the cop.
Rule #1: Never forget that the policeman is the guy with the gun, the stick, and the handcuffs. The last thing I like to do after a long international flight is spend three or four hours waiting to be arraigned and then bailed out at the police station. Even with the charges dropped, it could not have been a pleasant experience. In the words of the John Cougar Mellancamp song: “I fight authority, authority always wins.”
Rule #2: Try and see the situation from the police perspective. In responding to a burglary call, the policeman cannot assume that just because someone says they live in the house, they really do live in the house, particularly when the front door is still standing open when they arrive. If there really is a burglary in progress, the bad guys will lie. And if there are two burglars, as the initial report stated, this could turn into a life threatening situation very quickly. So when the cop asks you if there is anyone else in the house, responding “that’s none of your business” is going to raise the suspicion level considerably.
From all accounts, it sounds to me like Professor Gates did nothing to defuse a potentially dangerous situation, and did everything to escalate the confrontation.
Of course, what do I know? In all of my interactions with the police, I’ve known from the get go that I was in the wrong. Then again, I’ve never been arrested either.
What I want to say:
“Well, duh! Of course I know how fast I was going, you moron. My speedometer works just fine. Haven’t met your quota for the month yet? Is that why you pulled me over?”
What I actually say:
(With my hands in plain view, clamped on the steering wheel.) I’m not really sure, but I guess it was in excess of posted limits. I imagine you’re going to want to see my license and registration.”
“Excuse me sir, but did you know that it is illegal to own or shoot off fireworks in this county?”
What I want to say:
“Buddy, I see by your uniform that you are a city policeman. Guess what? You’re half a mile into the county at this address. You have no jurisdiction to come onto my property and tell me what to do. Besides, everybody else in this neighborhood is going to shoot off fireworks tonight. Why are you singling me out?”
What I actually say:
(Casting an eye at the thick bank of smoke slowly drifting towards the street.) “I’m sorry, officer. We won’t set off anymore fireworks. As soon as these sparklers I’m holding burn out, we’ll move the party indoors.”
I offer these examples up as a way of establishing that I have some expertise in interacting with law enforcement without getting arrested. So I feel qualified to offer some advice to Henry Louis Gates. Gates is the Harvard professor who was arrested after breaking into his own house earlier this week.
It is important to remember that Gates was not arrested for the break in. He was arrested for shouting at the top of his lungs at the cop.
Rule #1: Never forget that the policeman is the guy with the gun, the stick, and the handcuffs. The last thing I like to do after a long international flight is spend three or four hours waiting to be arraigned and then bailed out at the police station. Even with the charges dropped, it could not have been a pleasant experience. In the words of the John Cougar Mellancamp song: “I fight authority, authority always wins.”
Rule #2: Try and see the situation from the police perspective. In responding to a burglary call, the policeman cannot assume that just because someone says they live in the house, they really do live in the house, particularly when the front door is still standing open when they arrive. If there really is a burglary in progress, the bad guys will lie. And if there are two burglars, as the initial report stated, this could turn into a life threatening situation very quickly. So when the cop asks you if there is anyone else in the house, responding “that’s none of your business” is going to raise the suspicion level considerably.
From all accounts, it sounds to me like Professor Gates did nothing to defuse a potentially dangerous situation, and did everything to escalate the confrontation.
Of course, what do I know? In all of my interactions with the police, I’ve known from the get go that I was in the wrong. Then again, I’ve never been arrested either.
Tuesday, July 21, 2009
Medical Care
The Obama administration is putting on a full court press to get their health care legislation passed before Congress goes into recess in August. Since the bill is about twelve hundred pages long, quick passage would mean that most of the Representatives and Senators voting on the bill would not have actually read it.
I understand the sense of urgency on the part of the administration. The longer the period of reflection and debate, the more time opponents of the President’s health care restructuring plan have to uncover flaws and mobilize opposition. Obama and his advisors want to enact their plan while they still have some momentum left from the election.
Political expediency does not make a rush to judgement a good idea, however. Since health care is currently about 16% of the American economy, such haste is a little scary to me.
The underlying assumption behind all the talk of universal coverage is the belief that all of the inhabitants of the United States have a right to unlimited medical care. You are entitled, solely by your residence in this country, to as much or as little health care as you feel you need. Hip replacement? Go wild. Dialysis three times a week? Knock yourself out.
I always thought I had a right to free speech and free assembly, that I could live where I wanted and how I wanted, without a lot of interference from the government. Apparently I missed the part where I was entitled to free medical care.
I wonder what other free stuff I’m owed as my birthright?
I understand the sense of urgency on the part of the administration. The longer the period of reflection and debate, the more time opponents of the President’s health care restructuring plan have to uncover flaws and mobilize opposition. Obama and his advisors want to enact their plan while they still have some momentum left from the election.
Political expediency does not make a rush to judgement a good idea, however. Since health care is currently about 16% of the American economy, such haste is a little scary to me.
The underlying assumption behind all the talk of universal coverage is the belief that all of the inhabitants of the United States have a right to unlimited medical care. You are entitled, solely by your residence in this country, to as much or as little health care as you feel you need. Hip replacement? Go wild. Dialysis three times a week? Knock yourself out.
I always thought I had a right to free speech and free assembly, that I could live where I wanted and how I wanted, without a lot of interference from the government. Apparently I missed the part where I was entitled to free medical care.
I wonder what other free stuff I’m owed as my birthright?
Wednesday, July 15, 2009
Summer Jobs IV
Our story thus far: My company took on two summer hires as part of a make work program, funded by the stimulus package. The original two, Frick and Frack, both quit within two weeks. Frack merely stopped showing up, and Frick quit after telling us that “we wanted too much work” out of him. We then brought in Heckyl and Jeckyl. Jeckyl was a no show on day one. Heckyl has stuck it out for three weeks so far.
When we called the agency administering the grant to ask for a Jeckyl (Mark II), we were told that they could not send anyone else out. The number of people working had already committed the money in the original grant. Given our results, I can only conclude that other employers were having an easier time holding on to their summer hires than we were. At some point I may seek some of the other employers out to find out what kind of results they were getting, and how their treatment of their summer hires differed from mine.
Meanwhile, Heckyl continues to clock in, somewhat to the surprise of the management team. He has only missed two days in three weeks, and he has called in both times. However, this week we did have the episode of the Morning Nap.
We ship our product in gaylords, big cardboard boxes about the size of a refrigerator box. This week we got some in that needed to be wiped down before we loaded product into them. So we tilted them over on their side, and Heckyl was assigned to wipe them out with a paper towels. Simple enough, right?
About twenty minutes later the regular employee who Heckyl is working with went looking for him. He couldn’t find Heckyl at first, until he spotted a foot emerging from the open end of the gaylord. Our guy went around to the open side, looked in and found Heckyl taking a nap at 10:30 in the morning. Our regular employee did what anybody would do in this circumstance: he pulled out a cell phone and snapped a picture of his napping coworker. Then he went and told his coworkers to check it out.
After about fifteen minutes, somebody went and found the Production Supervisor, Big T, and showed him. Big T did what anybody would do in this circumstance. He pulled out his cell phone and snapped a picture of Sleeping Beauty. Then Big T stepped back, had a forktruck fired up, and started shouting for someone to get the gaylords out of the area, while pounding his fist on the side of the cardboard box. Unsurprisingly, Heckyl emerged from the box, claiming that he was still working on this one.
Afterwards, Big T and I discussed what to do about it. Ordinarily, we would just escort Heckyl to the timeclock, watch him punch out, and wave bye-bye as he drove off into the sunset. Since he’s not on our payroll, however, we decided to let him off with a simple warning. I guess we’re no more careful with the taxpayer’s money than anybody else.
The funny thing about the whole situation is this: Heckyl has missed work twice, and been caught sleeping on the job in the middle of the morning. And of the five workforce program guys we’ve tried, he’s the star! No wonder these guys need the government to help them find a job.
When we called the agency administering the grant to ask for a Jeckyl (Mark II), we were told that they could not send anyone else out. The number of people working had already committed the money in the original grant. Given our results, I can only conclude that other employers were having an easier time holding on to their summer hires than we were. At some point I may seek some of the other employers out to find out what kind of results they were getting, and how their treatment of their summer hires differed from mine.
Meanwhile, Heckyl continues to clock in, somewhat to the surprise of the management team. He has only missed two days in three weeks, and he has called in both times. However, this week we did have the episode of the Morning Nap.
We ship our product in gaylords, big cardboard boxes about the size of a refrigerator box. This week we got some in that needed to be wiped down before we loaded product into them. So we tilted them over on their side, and Heckyl was assigned to wipe them out with a paper towels. Simple enough, right?
About twenty minutes later the regular employee who Heckyl is working with went looking for him. He couldn’t find Heckyl at first, until he spotted a foot emerging from the open end of the gaylord. Our guy went around to the open side, looked in and found Heckyl taking a nap at 10:30 in the morning. Our regular employee did what anybody would do in this circumstance: he pulled out a cell phone and snapped a picture of his napping coworker. Then he went and told his coworkers to check it out.
After about fifteen minutes, somebody went and found the Production Supervisor, Big T, and showed him. Big T did what anybody would do in this circumstance. He pulled out his cell phone and snapped a picture of Sleeping Beauty. Then Big T stepped back, had a forktruck fired up, and started shouting for someone to get the gaylords out of the area, while pounding his fist on the side of the cardboard box. Unsurprisingly, Heckyl emerged from the box, claiming that he was still working on this one.
Afterwards, Big T and I discussed what to do about it. Ordinarily, we would just escort Heckyl to the timeclock, watch him punch out, and wave bye-bye as he drove off into the sunset. Since he’s not on our payroll, however, we decided to let him off with a simple warning. I guess we’re no more careful with the taxpayer’s money than anybody else.
The funny thing about the whole situation is this: Heckyl has missed work twice, and been caught sleeping on the job in the middle of the morning. And of the five workforce program guys we’ve tried, he’s the star! No wonder these guys need the government to help them find a job.
Friday, July 10, 2009
What's in a name?
A deal was recently announced the Russian national oil and gas company, Gazprom, and NNCP, the Nigerian state oil company. The two entities are forming a joint venture to build a $2.5 billion pipeline in Africa.
The joint venture had to have a name, of course, so the executives in charge decided to form a name by smooshing together syllables from the names of the two parent companies. In a decision that will go down in the annals of bad branding history, the new company will be named Nigaz.
Nigaz in Africa. Oh. My. God!
Now, I know neither party in the deal is a native English speaker, but there are branding consultants who will check things like what your name sounds like in various languages, and clue you in about potential missteps before you issue the press release and get business cards printed. I guess the Russians didn’t talk to those guys.
Nigaz. That’s why I spend so much time reading the news. Reality is so much more entertaining than fiction.
You can’t make this stuff up.
The joint venture had to have a name, of course, so the executives in charge decided to form a name by smooshing together syllables from the names of the two parent companies. In a decision that will go down in the annals of bad branding history, the new company will be named Nigaz.
Nigaz in Africa. Oh. My. God!
Now, I know neither party in the deal is a native English speaker, but there are branding consultants who will check things like what your name sounds like in various languages, and clue you in about potential missteps before you issue the press release and get business cards printed. I guess the Russians didn’t talk to those guys.
Nigaz. That’s why I spend so much time reading the news. Reality is so much more entertaining than fiction.
You can’t make this stuff up.
Tuesday, July 7, 2009
Getting your stories straight
USA Today ran two finance stories today with sharply contradictory messages. On the front page, the headline above the fold reads BANKS GET STINGY ON CREDIT. The story reported is that for the first four months of this year the number of new credit cards issued declined 38% compared with the same four months in 2008. Also, credit limits are slightly lower on the new cards that are issued. The average credit limit of $4594 is 3% lower than last year.
The tone of this story is that the new restraint on the part of credit card issuers is a bad thing. Spending pumps up the economy. Easy access to credit leads to spending. Therefore limiting access to credit delays the economic recovery.
In the Money section of the same paper, there is a related story with a completely different slant. Here the headline is US DEBT SHRINKING AT GLACIAL PACE. Total household debt peaked at $13.9 trillion in the third quarter of 2008, almost doubling since 2007. It has declined to $13.8 trillion during the first quarter of 2009, about a 1% drop.
This story points out that the US has just begun to deleverage. In the mid-80’s, household debt was 65% of disposable income. At the peak in 2007, household debt was 133% of disposable income. The perspective underlying this story is that until a lot more debt is either paid off or written off, consumers will not have the available income to resume spending in a way that will lift the economy.
So which is it? Is more debt good for the economy, or bad for the economy? From my perspective, it is an obvious answer. The economy came crashing down because of excessive debt. People paid way too much for houses they couldn’t afford. Then, to furnish those houses, they maxed out their credit cards. This was followed by tapping home equity lines of credit to pay off credit cards, which were then run up to the limit again.
It was like the financial equivalent of a giant game of musical chairs. Eventually the music stopped. Only in this game, all of the chairs had been pulled away. The good news is that the savings rate has increased from a negative number to 6.9%. This is a sign that people have stopped digging themselves into ever deeper holes of debt. But backfilling those holes will take time. The last thing we need to do is go back onto a credit fueled spending spree. That only starts the digging process all over again.
What was most surprising to me about these two stories is how they could have such different slants on the situation, coming out on the same day in the same paper. Don’t the editors read what the reporters are writing?
The tone of this story is that the new restraint on the part of credit card issuers is a bad thing. Spending pumps up the economy. Easy access to credit leads to spending. Therefore limiting access to credit delays the economic recovery.
In the Money section of the same paper, there is a related story with a completely different slant. Here the headline is US DEBT SHRINKING AT GLACIAL PACE. Total household debt peaked at $13.9 trillion in the third quarter of 2008, almost doubling since 2007. It has declined to $13.8 trillion during the first quarter of 2009, about a 1% drop.
This story points out that the US has just begun to deleverage. In the mid-80’s, household debt was 65% of disposable income. At the peak in 2007, household debt was 133% of disposable income. The perspective underlying this story is that until a lot more debt is either paid off or written off, consumers will not have the available income to resume spending in a way that will lift the economy.
So which is it? Is more debt good for the economy, or bad for the economy? From my perspective, it is an obvious answer. The economy came crashing down because of excessive debt. People paid way too much for houses they couldn’t afford. Then, to furnish those houses, they maxed out their credit cards. This was followed by tapping home equity lines of credit to pay off credit cards, which were then run up to the limit again.
It was like the financial equivalent of a giant game of musical chairs. Eventually the music stopped. Only in this game, all of the chairs had been pulled away. The good news is that the savings rate has increased from a negative number to 6.9%. This is a sign that people have stopped digging themselves into ever deeper holes of debt. But backfilling those holes will take time. The last thing we need to do is go back onto a credit fueled spending spree. That only starts the digging process all over again.
What was most surprising to me about these two stories is how they could have such different slants on the situation, coming out on the same day in the same paper. Don’t the editors read what the reporters are writing?
Sunday, July 5, 2009
It's the Money, Stupid!
Sarah Palin announced her resignation from the governorship of Alaska just before the start of the holiday weekend. She will be leaving office 18 months early. From her prepared statement at the press conference where she made the announcement, it was not immediately apparent what her rationale was. The FBI has already issued a statement saying that Governor Palin was not the subject of any investigations, so a scandal concerning illegalities is a pretty remote prospect.
I can only come up with two possibilities.
First, she is leaving office in order to launch a full time bid for the Presidency. Alaska is too small a state, and too far away from the lower 48 to build a power base for a national office. To campaign effectively at teh national level, she will need to work full time, and relocate her base of operations.
If this is her reasoning, it is a dumb idea. Palin did so badly as a Vice-presidential candidate that her chances of winning the nomination were minimal to start with. You don't enhance your credentials for a higher office by quitting the lower office you currently hold.
Second, she has decided to hit the speaker circuit full time. Sarah Palin is a darling of the right, particularly the social conservatives who comprise so much of the base for the Republican party. Unencumbered by the demands and limits of holding office, she will be free to accept several engagements a week, exhorting the faithful at $30 thousand a pop.
To my mind, mercenary that I am, this seems a more plausible plan. After all, being a governor probably pays a couple hundred grand a year. She can make ten times that amount by using her celebrity. And once you've seen the bright lights of the big city, moving back to Fairbanks has got to be a big letdown.
Cashing in your chips while you've got the chance: it's the American Way, isn't it? Besides, she has all those mouths to feed!
I can only come up with two possibilities.
First, she is leaving office in order to launch a full time bid for the Presidency. Alaska is too small a state, and too far away from the lower 48 to build a power base for a national office. To campaign effectively at teh national level, she will need to work full time, and relocate her base of operations.
If this is her reasoning, it is a dumb idea. Palin did so badly as a Vice-presidential candidate that her chances of winning the nomination were minimal to start with. You don't enhance your credentials for a higher office by quitting the lower office you currently hold.
Second, she has decided to hit the speaker circuit full time. Sarah Palin is a darling of the right, particularly the social conservatives who comprise so much of the base for the Republican party. Unencumbered by the demands and limits of holding office, she will be free to accept several engagements a week, exhorting the faithful at $30 thousand a pop.
To my mind, mercenary that I am, this seems a more plausible plan. After all, being a governor probably pays a couple hundred grand a year. She can make ten times that amount by using her celebrity. And once you've seen the bright lights of the big city, moving back to Fairbanks has got to be a big letdown.
Cashing in your chips while you've got the chance: it's the American Way, isn't it? Besides, she has all those mouths to feed!
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