Re: David Faber Report : Putting 2 and 2 together

On Wed, 18 Feb 2009 12:35:54 -0600, John Galt wrote:

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.


won't do any good, msft has already been convicted of antitrust
violations (which were so blatantly obvious that despite the govt's best
efforts to look the other way there was just no way to avoid finding them
guilty) yet the gov't did nothing of any consequence to remedy the
situation, business as usual...



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.


you know, this discussion might come to a conclusion a lot sooner if
you'd stop trying to ascribe to me a position i'm not taking... (or it
might end because i get tired of repeating my position which is that i'm
not for taking anything away from anyone, only for preventing the
imbalances from occurring in the first place)



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."


on that point we agree, gates, imo, is by far the worst of the bunch, in
fact i'd say he pretty well encapsulates everything that's wrong with
corporate america... unfortunately, what he has done has raised a bar
that should have never been allowed to be lifted in terms of corporate
excesses and exploitation of the system (and for that i fault the gov't
regulators, not necessarily gates)



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.


yes, you do. you keep making arguments against things that have nothing
to do with my position.


You are generating a heavy amount of wrath
towards the most successful people in society for the quantity of riches
they have accumulated,


nothing whatsoever to do with anything i'm saying. which part of: "i
blame lack of adequate regulation" do you not understand?


so I assume that you have some sort of political
solution in mind,

stop assuming. you get it wrong every time you assume you know where i'm
coming from (despite my best attempts to make it clear).


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.


no, what happens is that the laws get put out there right after the
exploitation pendulum swings so far that public outrage against corporate
excesses rise to the point that politicians do what needs to be done to
limit the exploitation (like what's going on now). then over the
subsequent years/decades, the corporations begin to get the laws changed
to benefit themselves and the whole cycle starts over. and it's not
necessarily an all-encompassing thing either, the "pendulum cycle" occurs
in different industries at different times.




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.


"massive accumulation" is a relative thing. with regard to the pendulum
cycle describe above, "massive accumulation" is maximized right before
public outrage reaches sufficient level to drive the pendulum back the
other way (and much smaller right after).



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.


yes, but there's no need for it to be so "massive" that it eliminates the
middle class.



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.


99% of the population doesn't care if the pool is larger if their share
of it is smaller in absolute terms. in other words, the working class
doesn't care whether the billionaires have more or less $billions, they
only care about their own piece of the pie. and while we agree that
unregulated corporations will generate more profits, it's my position
that the additional profits come from further exploitation (because we're
talking about the additional profits obtained from removing the so-called
"profit limiting" regulations that were put there to prevent exploitation
in the first place) hence i fail to see the logic that shows how a bigger
pie translates into more $ for any but the wealthiest.





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.


there you go again, from one extreme to the other. my answer to this
(that i've said several times already) is that all the products &
services will get produced just the same and with just as many jobs
because for every black-hole billionaire running a company there are
others capable of accomplishing the same for a lot less. and before you
go accusing me of claiming that i'm equating top execs to workers, that's
not what i'm saying at all. geez, it only takes one other person with
the opportunity (as in not shut out by anti-competitive tactics) to
create sufficient competition in a market to start to squeeze out the
excess, and while that's an improvement, the ultimate goal is true
competition with lots of competitors which will completely eliminate
those $billionaire black-holes. don't see too many billionaires running
pizza shops now do you? (although that could change if one of these
chains gets large enough to put all the local shops out of biz, what do
you suppose the odds of that happening are without running afoul of some
antitrust laws? (well what difference would that make as they're not
enforced anyway...))






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?


and why would anyone think they were making less? if the system worked
as i'm describing there never would have been any billionaires in the
first place (and nobody would have thought there should have been any
either), but the top execs would still be making way more than workers
(just not the ludicrous discrepancies in pay that we have now). your
argument is basically saying that for all the goods & services available
we are reliant on people, some of which who will only do it if they are
compensated $billions and i'm saying we can have all the goods & services
with no $billionaires required.





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.


tell you what, decide what word you would like to use to refer to both
regulations and laws and we'll use that from now on.




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.


look, i'm the linux advocate here and i know exactly how that market is
divided and much as i'd like your claim to be true, it isn't.
corporations mainly use linux on servers and those units are vastly
outnumbered by desktops and the linux market share on desktops is very
small (much to my chagrin). microsoft has been using the linux excuse
for years to avoid being branded a monopoly, but at this point that's
still all it is, an excuse. now back to my original point, the fact of
the matter is almost all corporate desktop computers sold include the
cost of a windows license. you cannot order a PC from any of the major
computer companies and get the cost reduced by $100 by telling them you
don't want to pay for a windows license because you're going to put linux
on it. this is "lock in" by microsoft and it's highly anti-competitive
(i mean, come on you have to buy a license for an operating system you
don't even want, how messed up is that?), try to spin it however you
like... oh, and don't give me the bologna about some computer vendor
selling a linux model, dell's got probably 100,000 possible model/
configuration combinations and a subset of a couple of choices (which
constitutes .00002% of the product line) for pre-installed linux (that
cost as much as one with windows to boot) does not qualify as choice.





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?


just telling it like it is... what, you didn't like my snipe at the oil
companies? fine, i rescind it (kinda like when the judge says: "the jury
will disregard those remarks!")





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.


well once again let me attempt to pin down where you stand.

pick one:

1) against corporate regulations but for corporate laws

2) against both corporate regulations and corporate laws

3) for both corporate regulations and corporate laws

4) for corporate regulations and against corporate laws






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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