Re: David Faber Report : Putting 2 and 2 together

Mike wrote:
On Tue, 17 Feb 2009 14:28:30 -0600, John Galt wrote:

Mike wrote:
On Tue, 17 Feb 2009 00:37:01 -0600, John Galt wrote:

Mike wrote:
On Mon, 16 Feb 2009 22:25:39 -0600, John Galt wrote:

Mike wrote:
So, they respect the industrialists, while we either ignore
(choosing to read People instead) or revile them. Forget all the
other stuff -- that's one of the main reasons why we may end up a
fifth rate economy in half a century. We (well, you) pretend that
the have no real skills that qualify them for those positions,
preferring the fantasy that their abilities are no different from
the guy on the shop floor. Success in business is now politically
incorrect.
that's the second time you've falsely claimed that it is my
position that workers are the equals of top execs. i've never
said anything of the sort. what i have said is that a top exec is
not worth $billions more than an average worker, which is a far cry
from saying that they are equals.
I'm pretty sure that I agreed with that. I just pointed out that
none of these guys are getting "billions" -- for the sake of
accuracy.
yes, they are getting $billions. i didn't say that was their annual
salary. but over a period of several years they get $billions.
They tend not to last that long. The billionaires are, in general, the
ones who found their companies and stay with it for decades. You don't
make that much money by going to work for somebody.

that never was my point. as i said, the billionaires use corporations
in a variety of ways to extract their $billions, founding them and
milking them over time, playing the strip & flip game of the corporate
raiders (or whatever they call them these days, private equity i guess)
or in the case of the recent banking crisis, as a source of nearly
unlimited debt which they invested and used the gains to pay themselves
$billions but lost the principle. but you'll never find a $billionaire
who provided products/services that wouldn't have been provided by
others who would have done it for a lot less had they not been shut out
by the anti- competitive practices of the $billionaires.
My point was that the billionaires are usually the founders of their
company. They become billionaires not by "extracting money", but by
virtue of the fact that they owned thousands of shares on the day they
went public, and the value of those shares increased as their company
succeeded over time. In this way, successful companies possibly creates
a billionaire, but also creates hundreds of millionaires for every
billionaire.


and you just want to ignore msft's 25 year track history

No, I don't want to ignore anything. I think they are a horribly behaved company, and I say that from the perspective of being both a supplier to them and a competitor against them at various times in my career. And if they are brought to charges for that behavior, I'll be with you on the sidelines, holding up the same signs you do.

HOWEVER, Gates owns personal property called "shares in his company", and according to the laws of the land, you cannot attach the personal property of an individual for the behavior of his corporation. Those laws exist because they are just, not because they lead to results that are necessarily popular.

So, I reiterate. Although you and I both agree that Gates really has accomplished nothing in life but being the most astute manipulator of the various "systems" be that from his acquisition of the original DOS assets, to the IBM dealmaking, to the plagarization of the Apple interface (which itself was plagarized from Xerox), it worked out for him, BUT THAT DOES NOT MEAN that he is typical of the "billionaire businessman."

of blatantly
violating just about every antitrust law on the books (and "innovating" a few new ways to violate antitrust along the way, like for one, lying to a federal judge about browsers not being separable from the operating system (apparently gates never heard of firefox...)) which is documented ad nauseum and everyone knows it (as in common knowledge) but since you've take the convenient position that "all regulation should be abolished" (although you cite regulations to support your arguments so apparently you only like regulation when it suits you). so maybe you're willing to ignore the entire history of msft's clearly established business strategy that relies almost exclusively on anti-competitive behavior, but the rest of the population is not so your position is somewhat limited in the number of people that support it and is becoming a smaller minority with each passing year as the majority get more and more sick and tired of getting screwed by corporate scams...

in the case of msft, your position is that of using monopoly "tax" revenue to create millionaires, that's brilliant, maybe obama will pick up on your idea and raise tax high enough so that the gov't can hire us all to make us all millionaires...

so how many of those hundreds of thousands of sales & clerks & cashiers at walmart became millionaires?

I doubt any, since WM was not a business that required the distribution of stock options to mitigate risk. But, in technology, tens of thousands of people who were not in upper management became millionaires because of timely entry into their companies, all the way down to secretarial and administrative personell. That is well known, but no longer occurs, since the government decided to force companies to expense all stock options.

let's see how many "millionaires" some of the more prominent robber barons were worth (in inflation adjusted dollars):

John D. Rockefeller 318B -> 318,000 millionaires

but that's not how many were created by JD, that's how many millionaires never got to be millionaires because of the great black financial hole of JD rockefeller...

here's some more:

Andrew Carnegie: 298B -> 298,000 millionaires (that never were)
Andrew W. Mellon: 188B -> 188,000 millionaires (that never were)

and the list goes on...

numbers from:
http://en.wikipedia.org/wiki/Richest_man_in_history


I don't see how that process, played over and over again during many
expansion cycles over the last 30 years, fits into your view of the
process, particularly with the term "extract", and I have no idea how
you are seeing the process as "anti-competitive", since it is actually a
VERY competitive process at its core.

A share of stock is owned property, and it is that stock that creates
the millionaire and, on occasion, the billionaire. Are you suggesting
that there should be some sort of ceiling on the value of a person's
personal property? If so, how do you square that with the concept of
personal property rights?


no, absolutely not, i've never said anything of the sort that there should be arbitrary "ceilings" on anything (income or wealth), that is just your misinterpretation of what i am saying which is that properly regulated capitalism will not produce such huge distortions in wealth distribution and that the main reason we currently have such distortions is because of the govt's failure to enforce regulation.

I am misinterpreting nothing. You are generating a heavy amount of wrath towards the most successful people in society for the quantity of riches they have accumulated, so I assume that you have some sort of political solution in mind, and am trying to get to it. You've now provided a bit of a framework (in the above paragraph) as to what you are thinking, although it's clear from history (which you've cited some of) that there (1) has never been any regulation -- or taxation structure -- that has prevented the massive accumulation of wealth, so (2) the problem cannot be the goverment's failure to enforce anything, since you can't fail to enforce something that has never existed.

Further, i have serious doubts about the ability of government to prevent massive accumulations of wealth in a global economy. In fact, I don't believe it is possible.
i don't know about your statement: "they tend not to last that long".
that may be true and if so it's probably because because they either
give the money to charity or to heirs (that never have the business
mind of the parent) who just lose/blow it.
No. THEY don't last that long. CEO's are not usually CEOs for long
periods of time. Founders may be, but for most CEOs who are hired or
rise through the ranks, they reach that position sometime in their 50's,
and so even if they avoid trouble and don't get fired, they maybe get a
decade in the position before they retire.


never said they did and the group i'm talking about is not limited to ceo's. i'm talking about $billionaire corporate robber barons in whatever form they exist to extract wealth from corporations. you've not not offered any other source of the great wealth obtained by the "world's richest billionaires" so apparently we agree that corporations are the source of the wealth, just disagree as to how well unregulated capitalism works at distributing the wealth.

Not even that. Unregulated capitalism will always wind up with a massive accumulation of wealth in the hands of the few. That's not controversial. That's pure Adam Smith.

to sum up our differences on this point if i may (another of my mini-
recaps):

you are satisfied that unregulated capitalism will fairly distribute wealth, my position is that unregulated capitalism will create a completely bipolar living standard where all the wealth is in the hands of a few corporate robber barons and all the workers are in poverty (and i know i'm repeating but it's the most important point i've been trying to make)

Nope. I said multiple iterations ago that unregulated capitalism is the best way to create massive amounts of wealth. That's good, becuase it gives government the largest pool of money possible form which to fund redistributive policies. Regulated capitalism results in pools of wealth which are less massive, and thus the redistributive policies must be more modest.



in the case of charity, people are
quick to give praise, but why should one person be in charge of
distributing to charity the wealth that was created by hundreds of
thousands of workers?
Because it's theirs.


only because they were able to exploit an unregulated capitalistic economy. my point is that with proper regulation the distortion of concentrated wealth into the hands of an individual would never have occurred in the first place.

And that helps the worker guy.....how? It doesn't help the worker a bit if the rich guy is less rich. He didn't get the money. It was never earned by the company in the first place, because of the regs.



and as to heirs, from a purely economic standpoint, there's no
justification for them to have it (not saying $billionaires don't have
a right to give it to their kids, they do. what i'm saying is that the
system is flawed that allows $billions to be accumulated by one person
in the first place)
And that's back to where we were above. How would you, in a society and
a system that is needs people to take risks and build companies, incent
them to do so if there exists a formal or informal deterrent from
profiting from it?


not recommending any deterrents, again that's your misinterpretation of what i'm saying, covered this above already.

Well, if they make less, that's a deterrent. :-) Given a choice between two jobs that in all other things are equivalent, would you choose the one that pays less?



I'm trying to get a grip on this. I form a company, hire some people,
it's key to the company's success to maintain a tight ceiling on
compensation so we survive and continue to grow. So, everyone gets stock
and the hope for future reward. We're successful. We go public. All my
employees profit nicely, some handsomely, some hugely, and I'm suddenly
a wealthy man. I continue to run the company, working hard, succeeding
against my competition. As a public company, I can't give away options
like I did before, because of the financial implications. I hire a lot
of people, I'm successful, the value of the stock goes up, I become a
very rich man, possibly a billionaire, if enough time goes by.

OK. At some point in that process, in your view, I magically transmuted
from a good guy to a bad guy. Why? How? What is the rational basis for
determining the transition?

all
billionaires come from involvement with corporations, either directly
or indirectly (inheritance), there's no other way to get that kind of
money. it comes in the form of salary, stock options & a host of
other avenues (if you want to get fancy we can talk about how private
equity firms extract wealth from corporations by a process called
"strip & flip") but it's all value extracted from the corporations
one way or another:

http://en.wikipedia.org/wiki/List_of_Americans_by_net_worth

dice the pie however you want, in the end corporate fat cats wind up
with all the $billions and workers get the scraps.
Eh. Cost of a constitutional democracy and free market system. A few
guys get big buckloads of money. Compared to that, even somebody
making 250K a year is "scraps."
The highest paid CEO in 07 (08 numbers aren't in yet) was Ellison of
Oracle. An annoying character who spends ostentatiously, chases
young chickybabes at work (rumor has it that they have an HR person
who follows Larry around all day, and if he's observed asking some
sweet young thing out, they quickly shift her job around so she's
not in a quid pro quo line of fire) who took in 192M last year.
Well, he started the damn company with nothing, so there's that, at
least.
#3 on above list, net worth $27 billion


10th was Simpson of XTO. 72M

20th was Berkley of Berkley (:-)) 54M

25th was Hess of Hess (see the pattern?) 47M

50th was Hassey of Allegheny Technologies. 32M

100th was Farrell of Dominion Resources 17M

(I don't what at what point you think comp is excessive. Personally,
when I see over 10M, it seems highly irrational, over 5M
irrational.)
i don't look at it like that. the wealth these people obtain is
incidental to the real problem which is that without proper gov't
regulation there is not a level playing field and the players take
advantage of that by attaining monopoly (or near monopoly) status at
which point they literally just coin money for themselves, their
cronies (which are the top execs that i was talking about before when
i said that half of them would be booted to cut costs to survive if
the company actually had to compete) and the stock investors, but
mostly for themselves.
Don't see it that way. All these companies are subject to major
competition, particularly from abroad. They are not monopolies in any
sense of the word I am familiar with.

it doesn't take being a monopoly (which is why i add "or near monopoly"
in many cases) to achieve sufficient market power to be able to strong
arm the competition (often in violation of antitrust which hasn't been
enforced in at least as long as bush was in, not that i've seen
anyways) such that market distortions occur and the playing field
becomes unbalanced and $billionaires start to form (sort of like black
holes forming in space -> $billionaires sucking money out of the
economy). as far as global competition goes, corporations are global
so it's not like it's strictly "us" against "them" and global "near
monopolies" are forming up as we speak.
I don't see it. Monopolies are bad because they destroy the pricing
power of competition. I see fierce competition in every business.


i can't seem to pin down your stand on this, which of these is it:

1) you don't accept one of the basic tenets of economics which is that corporations will evolve into monopolies in the absence of gov't regulation.

I fully acknowlege this.

or

2) regulations are an essential component of capitalism which prevent monopolies from forming (which conflicts with your stand that all regulation should be eliminated)

Perhaps you should stop thinking in terms of anti-monopolistic laws as being "regulations." They really aren't. Different animal.


They have to compete and win every
day. It is hardly a simple process of "coining money."

but it is (for the "near monopolies"). microsoft should really be a
division of the u.s. mint as every dollar they make is "coined" money.
they add no value whatsoever, spend years & tens of $billions to
produce a product nobody wants (vista) and if it wasn't for the
microsoft "tax" levied on the vast majority of PCs sold everywhere in
world, the company wouldn't be making a dime.
Good example. The consumer of the PC's has complete and total power over
MSFT. All they have to do is buy one of the many machines that comes
without MSFT. Dell offers systems with Ubuntu, all of the netbooks come
with Linux.

I don't see the problem. I have a Linux netbook sitting in my closet
that I travel with.

oh please, give me a break, msft has had the pc market locked up for two decades, and don't even think about trying to refute that claim until it's possible to order any model computer with any configuration from dell with no operating system installed for at least $100 less that the same model/config with windows on it.

Sorry, but that's not how monopoly laws work. They work by looking at market OPTIONS, not market BEHAVIOR (as a primary matter). There are hundreds of options out there if you don't want Windows, and entire corporations and even countries have standardized on Linux as their environment of choice. As long as multiple purchasing options can be listed, and multiple large organizations have availed themselves of those options, you don't have a monopoly situation.



the oil companies will be coining money again as soon as oil prices
start going back up, right now the only reason they're not coining
money is because of the massive recoil from the huge run up in oil
prices last summer, but when the market finally gets straightened out
oil prices will be going higher and they will be printing money again. and they won't be using the profits to increase oil production either
(as they haven't been doing for years).
But they provide value. Oil doesn't just jump up out the ground and say
"stick me in the barrel."


only said msft provides no value. oil companies provide value but they're no longer using the bulk of profits to expand supply, so at this point they're mostly just exploiting the market imbalances they've created by taking advantage of an inadequately regulated economy to line the pockets of the fat cats (the guy at the top & his cronies most of which are just corporate "pork"). it's almost funny to see the oil companies getting hammered as of late because the backlash from the scam run by wall street to manipulate oil prices (ie. the huge oil price drop) has thrown a serious monkey wrench in the scam the oil companies have going, but no worries, as i said before they'll be coining money soon enough when oil prices head back up...(and the oil robber barons know it or else you'd see those whiny idiots jumping ship faster than cockroaches run for cover when you turn the light on)

Boy, you see evil everywhere. :-) Do you even bother with evidence, or do you just fall back on that old tired "isn't it obvious" candard?



Ask the CEO of
Caterpillar if he thinks he has a "monopoly" with Terex and Deere and
Kubota and Mahindra running around the world.

i'm not saying there currently is a monopoly in every major industry,
that was just the logical outcome of the scenario of no regulation at
all.
Obviously, but free marketers acknowledge the need for government to
create a level playing field to insure adequate competition. That's not
in debate.


it is in debate if it is your position is that all regulation should be eliminated, well since i covered this above i'll wait for response as to your position before continuing...

Monopoly laws aren't regulations.



However, MOST regulations do not exist to disrupt monopolies.


ever heard of ANTITRUST regulations?

Regulations tell organizations how to conduct their daily operations. Antitrust laws set limits on their interactions with their competitors.

JG




and while it seems there currently is no regulation (because the
gov't stopped enforcing it) there was enforcement before (years ago) so
the market hasn't yet deteriorated into the complete monopoly scenario.
so, yes, there still are some competitive industries.



with your stand that corporations don't need to be
regulated, taken to it's logical conclusion, there will be a monopoly
in every major industry with all the wealth in the hands of a few
corporate robber barons and all the workers at poverty level.
If it wasn't for Taft Hartly and such laws, sure. Monopolies are
anathema to free markets, which is why we prevent them from forming.

well are you against all regulation or not? seems to me that your
above statement contradicts being against all regulation, i mean if
you're against it you can't use it to support a point you're trying to
make.
No free marketer supports monopolies, and acknowledges the role in the
government in preventing them to form.

JG


again the thing with not seeing where you stand with your position, will wait for response to above...





JG


177 was Valee of Avnet, making 10.2M. So, 177 CEO's behaving highly
irrationally. 301 was Martin of Pitney Bowes. 5.04M, so that many
CEO's behaving irrationally.

It's interesting to see who DOESN'T behave irrationally, although
they could if they chose to. Charles Schwab made 4.66M in 08, August
Busch of Aneuser Bush took 3.93M, Brock of CocaCola took a
relatively paltry 2.99M (makes me want to buy the stock), Blake of
Home Depot 2.41M (after the fiasco of the previous CEO, who is now
running Chrysler), Michael Dell 2M, Davis of US Bancorp 1.72M (one
of the largest regional banks who is noted for avoiding subprime
investing -- the guy performed, big time), Bezos of Amazon.com
1.28M, Eric Schmidt of Google 480,000, and Warren Buffet of course
fixes his own salary at 100K.

JG





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